POPULAR, INC.BPOP
POPULAR, INC. Fair Value Disclosure
Note 27 – Fair value measurement
ASC Subtopic 820-10 “Fair Value Measurements and Disclosures” establishes a fair value hierarchy that prioritizes the inputs to
valuation techniques used to measure fair value into three levels in order to increase consistency and comparability in fair value
measurements and disclosures. The hierarchy is broken down into three levels based on the reliability of inputs as follows:
●
Level 1
- Unadjusted quoted prices in active markets for identical assets or liabilities that the Corporation has the ability to
access at the measurement date. Valuation on these instruments does not necessitate a significant degree of judgment
since valuations are based on quoted prices that are readily available in an active market.
●
Level 2
- Quoted prices other than those included in Level 1 that are observable either directly or indirectly. Level 2 inputs
include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or
liabilities in markets that are not active, or other inputs that are observable or that can be corroborated by observable
market data for substantially the full term of the financial instrument.
●
Level 3
- Inputs are unobservable and significant to the fair value measurement. Unobservable inputs reflect the
Corporation’s own judgements about assumptions that market participants would use in pricing the asset or liability.
The Corporation maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the
observable inputs be used when available. Fair value is based upon quoted market prices when available. If listed prices or quotes
are not available, the Corporation employs internally-developed models that primarily use market-based inputs including yield
curves, interest rates, volatilities, and credit curves, among others. Valuation adjustments are limited to those necessary to ensure
that the financial instrument’s fair value is adequately representative of the price that would be received or paid in the marketplace.
These adjustments include amounts that reflect counterparty credit quality, the Corporation’s credit standing, constraints on liquidity
and unobservable parameters that are applied consistently.
The estimated fair value may be subjective in nature and may involve uncertainties and matters of significant judgment for certain
financial instruments. Changes in the underlying assumptions used in calculating fair value could significantly affect the results.
Fair Value on a Recurring and Nonrecurring Basis
The following fair value hierarchy tables present information about the Corporation’s assets and liabilities measured at fair value on
a recurring basis at December 31, 2025 and 2024:
At December 31, 2025
(In thousands)
Level 1
Level 2
Level 3
Measured at NAV
Total
RECURRING FAIR VALUE MEASUREMENTS
Assets
Debt securities available-for-sale:
U.S. Treasury securities
$
6,576,313
$
9,147,141
$
-
$
-
$
15,723,454
Collateralized mortgage obligations - federal
agencies
-
100,241
-
-
100,241
Mortgage-backed securities
-
4,750,122
405
-
4,750,527
Other
-
-
750
-
750
Total debt securities available-for-sale
$
6,576,313
$
13,997,504
$
1,155
$
-
$
20,574,972
Trading account debt securities, excluding
derivatives:
U.S. Treasury securities
$
12,450
$
10
$
-
$
-
$
12,460
Obligations of Puerto Rico, States and political
subdivisions
-
45
-
-
45
Collateralized mortgage obligations
-
567
-
-
567
Mortgage-backed securities
-
23,314
84
-
23,398
Other
-
-
99
-
99
Total trading account debt securities, excluding
derivatives
$
12,450
$
23,936
$
183
$
-
$
36,569
Equity securities
$
-
$
50,632
$
-
$
852
$
51,484
Mortgage servicing rights
-
-
96,356
-
96,356
Loans held-for-sale
-
9,998
-
-
9,998
Derivatives
-
27,913
-
-
27,913
Total assets measured at fair value on a
recurring basis
$
6,588,763
$
14,109,983
$
97,694
$
852
$
20,797,292
Liabilities
Derivatives
$
-
$
(25,740)
$
-
$
-
$
(25,740)
Total liabilities measured at fair value on a
recurring basis
$
-
$
(25,740)
$
-
$
-
$
(25,740)
At December 31, 2024
(In thousands)
Level 1
Level 2
Level 3
Measured at NAV
Total
RECURRING FAIR VALUE MEASUREMENTS
Assets
Debt securities available-for-sale:
U.S. Treasury securities
$
7,512,171
$
5,482,939
$
-
$
-
$
12,995,110
Collateralized mortgage obligations - federal
agencies
-
120,284
-
-
120,284
Mortgage-backed securities
-
5,127,775
484
-
5,128,259
Other
-
-
2,250
-
2,250
Total debt securities available-for-sale
$
7,512,171
$
10,730,998
$
2,734
$
-
$
18,245,903
Trading account debt securities, excluding
derivatives:
U.S. Treasury securities
$
2,814
$
10
$
-
$
-
$
2,824
Obligations of Puerto Rico, States and political
subdivisions
-
55
-
-
55
Collateralized mortgage obligations
-
655
-
-
655
Mortgage-backed securities
-
29,032
84
-
29,116
Other
-
-
133
-
133
Total trading account debt securities, excluding
derivatives
$
2,814
$
29,752
$
217
$
-
$
32,783
Equity securities
$
-
$
45,664
$
-
$
381
$
46,045
Mortgage servicing rights
-
-
108,103
-
108,103
Loans held-for-sale
-
5,423
-
-
5,423
Derivatives
-
26,023
-
-
26,023
Total assets measured at fair value on a
recurring basis
$
7,514,985
$
10,837,860
$
111,054
$
381
$
18,464,280
Liabilities
Derivatives
$
-
$
(22,832)
$
-
$
-
$
(22,832)
Total liabilities measured at fair value on a
recurring basis
$
-
$
(22,832)
$
-
$
-
$
(22,832)
Loans held-for-sale measured at fair value
Loans held-for-sale measured at fair value were priced based on secondary market prices. These loans are classified as Level 2.
The following tables summarize the difference between the aggregate fair value and the aggregate unpaid principal balance for
mortgage loans originated as held-for-sale measured at fair value as of December 31, 2025 and December 31, 2024.
(In thousands)
December 31, 2025
Aggregate Unpaid
Fair Value
Principal Balance
Difference
Loans held for sale
$
9,998
$
9,839
$
159
(In thousands)
December 31, 2024
Aggregate Unpaid
Fair Value
Principal Balance
Difference
Loans held for sale
$
5,423
$
5,436
$
(13)
No
The fair value information included in the following tables is not as of period end, but as of the date that the fair value measurement
was recorded during the years ended December 31, 2025, 2024 and 2023 and excludes nonrecurring fair value measurements of
assets no longer outstanding as of the reporting date.
Year ended December 31, 2025
(In thousands)
Level 1
Level 2
Level 3
Total
NONRECURRING FAIR VALUE MEASUREMENTS
Assets
Write-downs
Loans
[1]
$
-
$
-
$
3,800
$
3,800
$
(424)
Other real estate owned
[2]
-
-
4,228
4,228
(1,532)
Other foreclosed assets
[2]
-
-
125
125
(53)
Total assets measured at fair value on a nonrecurring basis
$
-
$
-
$
8,153
$
8,153
$
(2,009)
[1] Relates mainly to certain impaired collateral dependent loans. The impairment was measured based on the fair value of the collateral, which is
derived from appraisals that take into consideration prices in observed transactions involving similar assets in similar locations. Costs to sell are
excluded from the reported fair value amount.
[2] Represents the fair value of foreclosed real estate and other collateral owned that were written down to their fair value. Costs to sell are
excluded from the reported fair value amount.
Year ended December 31, 2024
(In thousands)
Level 1
Level 2
Level 3
Total
NONRECURRING FAIR VALUE MEASUREMENTS
Assets
Write-downs
Loans
[1]
$
-
$
-
$
6,808
$
6,808
$
(939)
Other real estate owned
[2]
-
-
6,050
6,050
(1,934)
Other foreclosed assets
[2]
-
-
134
134
(55)
Total assets measured at fair value on a nonrecurring basis
$
-
$
-
$
12,992
$
12,992
$
(2,928)
[1] Relates mainly to certain impaired collateral dependent loans. The impairment was measured based on the fair value of the collateral, which is
derived from appraisals that take into consideration prices in observed transactions involving similar assets in similar locations. Costs to sell are
excluded from the reported fair value amount.
[2] Represents the fair value of foreclosed real estate and other collateral owned that were written down to their fair value. Costs to sell are
excluded from the reported fair value amount.
Year ended December 31, 2023
(In thousands)
Level 1
Level 2
Level 3
Total
NONRECURRING FAIR VALUE MEASUREMENTS
Assets
Write-downs
Loans
[1]
$
-
$
-
$
10,091
$
10,091
$
(3,157)
Other real estate owned
[2]
-
-
6,560
6,560
(1,516)
Other foreclosed assets
[2]
-
-
102
102
(28)
Total assets measured at fair value on a nonrecurring basis
$
-
$
-
$
16,753
$
16,753
$
(4,701)
[1] Relates mostly to certain impaired collateral dependent loans. The impairment was measured based on the fair value of the collateral, which
is derived from appraisals that take into consideration prices in observed transactions involving similar assets in similar locations. Costs to sell are
excluded from the reported fair value amount.
[2] Represents the fair value of foreclosed real estate and other collateral owned that were written down to their fair value. Costs to sell are
excluded from the reported fair value amount.
The following tables present the changes in Level 3 assets and liabilities measured at fair value on a recurring basis for the years
ended December 31, 2025, 2024, and 2023.
Year ended December 31, 2025
MBS
Other
classified
classified
CMOs
MBS
Other
as debt
as debt
classified
classified
securities
securities
securities
as trading
as trading
classified as
Mortgage
available-
available-
account debt
account debt
trading account
servicing
Total
(In thousands)
for-sale
for-sale
securities
securities
debt securities
rights
assets
Balance at January 1, 2025
$
484
$
2,250
$
-
$
84
$
133
$
108,103
$
111,054
Gains (losses) included in earnings
-
-
-
-
(34)
(12,880)
(12,914)
Gains (losses) included in OCI
(4)
-
-
-
-
-
(4)
Additions
-
-
-
-
-
1,133
1,133
Settlements
(75)
-
-
-
-
-
(75)
Transfers out of Level 3
-
(1,500)
-
-
-
-
(1,500)
Balance at December 31, 2025
$
405
$
750
$
-
$
84
$
99
$
96,356
$
97,694
Changes in unrealized gains (losses)
included in earnings relating to assets
still held at December 31, 2025
$
-
$
-
$
-
$
(1)
$
18
$
(3,786)
$
(3,769)
Year ended December 31, 2024
MBS
Other
Other
classified
classified
CMOs
MBS
securities
as debt
as debt
classified
classified
classified
securities
securities
as trading
as trading
as trading
Mortgage
available-
available-
account debt
account debt
account debt
servicing
Total
(In thousands)
for-sale
for-sale
securities
securities
securities
rights
assets
Balance at January 1, 2024
$
606
$
2,500
$
5
$
112
$
167
$
118,109
$
121,499
Gains (losses) included in earnings
-
(500)
-
-
(34)
(11,370)
(11,904)
Gains (losses) included in OCI
3
-
-
-
-
-
3
Additions
-
-
-
-
-
1,364
1,364
Sales
-
250
-
-
-
-
250
Settlements
(125)
-
(5)
(28)
-
-
(158)
Balance at December 31, 2024
$
484
$
2,250
$
-
$
84
$
133
$
108,103
$
111,054
Changes in unrealized gains (losses)
included in earnings relating to assets
still held at December 31, 2024
$
-
$
-
$
-
$
1
$
7
$
(2,120)
$
(2,112)
Year ended December 31, 2023
MBS
Other
Other
classified
classified
CMOs
MBS
securities
as debt
as debt
classified
classified as
classified
securities
securities
as trading
trading
as trading
Mortgage
available-
available-
account debt
account debt
account debt
servicing
Total
(In thousands)
for-sale
for-sale
securities
securities
securities
rights
assets
Balance at January 1, 2023
$
711
$
1,000
$
113
$
215
$
207
$
128,350
$
130,596
Gains (losses) included in earnings
-
-
-
(2)
(40)
(11,589)
(11,631)
Gains (losses) included in OCI
(5)
-
-
-
-
-
(5)
Additions
-
1,500
4
-
-
2,097
3,601
Sales
-
-
-
-
-
(1,269)
(1,269)
Settlements
(100)
-
(112)
(101)
-
520
207
Balance at December 31, 2023
$
606
$
2,500
$
5
$
112
$
167
$
118,109
$
121,499
Changes in unrealized gains (losses)
included in earnings relating to
assets still held at December 31,
2023
$
-
$
-
$
-
$
(1)
$
18
$
(529)
$
(512)
Gains and losses (realized and unrealized) included in earnings for the years ended December 31, 2025, 2024, and 2023 for Level
3 assets and liabilities included in the previous tables are reported in the consolidated statement of operations as follows:
2025
2024
2023
Total
Changes in
unrealized
Total
Changes in
unrealized
Total
Changes in
unrealized
gains (losses)
gains (losses)
gains (losses)
gains (losses)
gains (losses)
gains (losses)
included
relating to assets still
included
relating to assets still
included
relating to assets still
(In thousands)
in earnings
held at reporting date
in earnings
held at reporting date
in earnings
held at reporting date
Mortgage banking activities
$
(12,880)
$
(3,786)
$
(11,370)
$
(2,120)
$
(11,589)
$
(529)
Trading account (loss) profit
(34)
17
(34)
8
(42)
17
Provision for credit losses
-
-
(500)
-
-
-
Total
$
(12,914)
$
(3,769)
$
(11,904)
$
(2,112)
$
(11,631)
$
(512)
The following tables include quantitative information about significant unobservable inputs used to derive the fair value of Level 3
instruments, excluding those instruments for which the unobservable inputs were not developed by the Corporation such as prices
of prior transactions and/or unadjusted third-party pricing sources at December 31, 2025 and 2024.
Fair value at
(In thousands)
2025
Valuation technique
Unobservable inputs
Weighted average (range) [1]
Other - trading
$
99
Discounted cash flow model
Weighted average life
2
Yield
12
.0%
Prepayment speed
10.8
%
Loans held-in-portfolio
$
3,800
[2]
External appraisal
Haircut applied on
external appraisals
5.0
%
Other real estate owned
$
34
[2]
External appraisal
Haircut applied on
external appraisals
20
%
[1]
Weighted average of significant unobservable inputs used to develop Level 3 fair value measurements were calculated by relative fair value.
[2]
Loans held-in-portfolio in which haircuts were not applied to external appraisals were excluded from this table.
[2]
Other real estate owned in which haircuts were not applied to external appraisals were excluded from this table.
Fair value at
(In thousands)
2024
Valuation technique
Unobservable inputs
Weighted average (range) [1]
Other - trading
$
133
Discounted cash flow model
Weighted average life
2
Yield
12
.0%
Prepayment speed
10.8
%
Loans held-in-portfolio
$
6,808
[2]
External appraisal
Haircut applied on
external appraisals
6.6
% (
5
.0% -
10
.0%)
Other real estate owned
$
53
[3]
External appraisal
Haircut applied on
external appraisals
60.1
% (
35
.0% -
65.6
%)
[1]
Weighted average of significant unobservable inputs used to develop Level 3 fair value measurements were calculated by relative fair value.
[2]
Loans held-in-portfolio in which haircuts were not applied to external appraisals were excluded from this table.
[3]
Other real estate owned in which haircuts were not applied to external appraisals were excluded from this table.
The significant unobservable inputs used in the fair value measurement of the Corporation’s collateralized mortgage obligations and
interest-only collateralized mortgage obligation (reported as “other”), which are classified in the “trading” category, are yield,
constant prepayment rate, and weighted average life. Significant increases (decreases) in any of those inputs in isolation would
result in significantly lower (higher) fair value measurement. Generally, a change in the assumption used for the constant
prepayment rate will generate a directionally opposite change in the weighted average life. For example, as the average life is
reduced by a higher constant prepayment rate, a lower yield will be realized, and when there is a reduction in the constant
prepayment rate, the average life of these collateralized mortgage obligations will extend, thus resulting in a higher yield. The
significant unobservable inputs used in the fair value measurement of the Corporation’s mortgage servicing rights are constant
prepayment rates and discount rates. Increases in interest rates may result in lower prepayments. Discount rates vary according to
products and / or portfolios depending on the perceived risk. Increases in discount rates result in a lower fair value measurement.
Following is a description of the Corporation’s valuation methodologies used for assets and liabilities measured at fair value. The
disclosure requirements exclude certain financial instruments and all non-financial instruments. Accordingly, the aggregate fair value
amounts of the financial instruments disclosed do not represent management’s estimate of the underlying value of the Corporation.
Trading account debt securities and debt securities available-for-sale
●
maturity treasury curve. These securities are classified as Level 2. U.S. Treasury bills are classified as Level 1 given the
high volume of trades and pricing based on those trades.
●
agency securities, which fair value is based on an active exchange market and on quoted market prices for similar
securities. The U.S. agency securities are classified as Level 2.
●
include municipal bonds. The bonds are segregated and the like characteristics divided into specific sectors. Market
inputs used in the evaluation process include all or some of the following: trades, bid price or spread, two sided markets,
quotes, benchmark curves including but not limited to Treasury benchmarks and swap curves, market data feeds such as
those obtained from municipal market sources, discount and capital rates, and trustee reports. The municipal bonds are
classified as Level 2.
●
value derived from similar bonds defined by credit quality and market sector. Their fair value incorporates an option
adjusted spread. The agency MBS are classified as Level 2. Other agency MBS such as GNMA Puerto Rico Serials are
priced using an internally-prepared pricing matrix with quoted prices from local brokers dealers. These particular MBS are
classified as Level 3.
●
theoretical value derived from similar bonds defined by credit quality and market sector and for which fair value
incorporates an option adjusted spread. The option adjusted spread model includes prepayment and volatility
assumptions, ratings (whole loans collateral) and spread adjustments. These CMOs are classified as Level 2. Other
CMOs, due to their limited liquidity, are classified as Level 3 due to the insufficiency of inputs such as executed trades,
credit information and cash flows.
●
instruments, these securities are classified as Level 2.
●
corporate securities, quoted prices for these security types are obtained from broker dealers. Given that the quoted prices
are for similar instruments or do not trade in highly liquid markets, these securities are classified as Level 2. Given that the
fair value was estimated based on a discounted cash flow model using unobservable inputs, interest-only strips are
classified as Level 3.
Equity securities
Equity securities are comprised principally of shares in closed-ended and open-ended mutual funds and other equity securities.
Closed-end funds are traded on the secondary market at the shares’ market value. Open-ended funds are considered to be liquid,
as investors can sell their shares continually to the fund and are priced at NAV. Mutual funds are classified as Level 2. Other equity
securities that do not trade in highly liquid markets are also classified as Level 2, except for one equity security that do not have
readily determinable fair value and is under an investment company is measured at NAV.
Mortgage servicing rights
Mortgage servicing rights (“MSRs”) do not trade in an active market with readily observable prices. MSRs are priced using a
discounted cash flow model valuation performed by a third party. The discounted cash flow model incorporates assumptions that
market participants would use in estimating future net servicing income, including portfolio characteristics, prepayments
assumptions, discount rates, delinquency and foreclosure rates, late charges, other ancillary revenues, cost to service and other
economic factors. Prepayment speeds are adjusted for the loans’ characteristics and portfolio behavior. Due to the unobservable
nature of certain valuation inputs, the MSRs are classified as Level 3.
Derivatives
Interest rate caps and indexed options are traded in over-the-counter active markets. These derivatives are indexed to an
observable interest rate benchmark, such as LIBOR or equity indexes, and are priced using an income approach based on present
value and option pricing models using observable inputs. Other derivatives are liquid and have quoted prices, such as forward
contracts or “to be announced securities” (“TBAs”). All of these derivatives are classified as Level 2. The non-performance risk is
determined using internally-developed models that consider the collateral held, the remaining term, and the creditworthiness of the
entity that bears the risk, and uses available public data or internally-developed data related to current spreads that denote their
probability of default.
Loans held-in-portfolio that are collateral dependent
The impairment is measured based on the fair value of the collateral, which is derived from appraisals that take into consideration
prices in observed transactions involving similar assets in similar locations and which could be subject to internal adjustments.
These collateral dependent loans are classified as Level 3.
Loans measured at fair value or measured at the lower of cost or market
Loans held-for-sale measured at fair value or measured at the lower of cost or market were priced based on secondary market
prices. These loans are classified as Level 2.
Other real estate owned and other foreclosed assets
Other real estate owned includes real estate properties securing mortgage, consumer, and commercial loans. Other foreclosed
assets include primarily automobiles securing auto loans. The fair value of foreclosed assets may be determined using an external
appraisal, broker price opinion, or an internal valuation. These foreclosed assets are classified as Level 3 since they are subject to
internal adjustments.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 2, 2026 | Showing above |
| 2024 | Mar 3, 2025 | |
| 2023 | Feb 29, 2024 | |
| 2022 | Mar 1, 2023 | |
| 2021 | Mar 1, 2022 | |
| 2020 | Mar 1, 2021 | |
| 2019 | Mar 2, 2020 | |
| 2018 | Mar 1, 2019 | |
| 2017 | Mar 1, 2018 | |
| 2016 | Mar 1, 2017 | |
| 2015 | Feb 29, 2016 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.