BPOPO Popular Inc (PK)

Popular’s Corporate Governance Guidelines provide that at least two-thirds of the Board shall consist of directors who the Board has determined have no material relationship with Popular and who are otherwise “independent” under the director independence standards of NASDAQ. The Board, with the assistance of the Corporate Governance and Nominating Committee, conducts an annual review of any relevant relationships that each director may have with Popular and whether each director meets the independence standards of NASDAQ. The Board has determined that all of its directors and nominees, except for Mr. Carrión, who is our former CEO and Executive Chairman, and Mr. Alvarez, who is our current President and CEO, meet the independence standards of NASDAQ.

As part of the process to determine director independence, the Board considered payments made by Popular in the ordinary course of business to various entities indirectly related to Ms. Ferré in connection with call center services and marketing and advertising activities of Popular and its affiliates. In the case of Mr. Carrady, it also considered payments made and received by Popular in the ordinary course of business in connection with property lease transactions with entities related to him. None of the payments made to the entities related to Ms. Ferré or entities related to Mr. Carrady were for the provision of professional or other services by a professional services firm. Applying the independence standards of NASDAQ, the Board determined that these business relationships are not material and do not impair the ability of either Ms. Ferré or Mr. Carrady to act independently.

Each year, the Board evaluates whether Popular’s leadership structure is in the best interest of Popular. The Board does not have a policy on whether the Chairman and CEO positions should be separate or combined. Currently, Mr. Carrión serves as the Chairman of the Board of Directors and Mr. Alvarez serves as President and CEO of Popular. The Board could in the future decide to consolidate these positions if it determines that doing so would serve the best interests of Popular.

The Board believes that the present structure provides Popular and the Board with strong and objective leadership, effective engagement with and oversight of management, and continuity of experience. As a

highly regulated financial services provider, Popular and our shareholders benefit from having a Chairman with deep experience and leadership in and knowledge of the financial services industry, our company, its businesses, and our markets.

The independent members of the Board elect amongst themselves a Lead Independent Director, a position occupied by Mr. Diercksen since January 2020. Popular’s Corporate Governance Guidelines require the designation of a Lead Independent Director when the Chairman of the Board is not an independent director. The Corporate Governance Guidelines provide that the Lead Independent Director has the following responsibilities:

The Board met 12 times during 2022. Each director attended 93% or more meetings of the Board and the meetings of committees of the Board on which each such director served. Directors also are kept informed of our business through meetings and direct communications with the Chairman and the CEO regarding matters of interest to Popular and our shareholders. While Popular has not adopted a formal policy with respect to directors’ attendance at the meetings of shareholders, Popular encourages directors to attend all meetings of shareholders. All of our directors attended the 2022 annual

meeting of shareholders. The Corporate Governance Guidelines provide that the non-management directors will meet in executive sessions once every in-person regularly scheduled Board meeting and the independent directors will also meet in executive sessions as frequently as determined by the independent directors, but not less frequently than twice a year. During 2022, non-management directors met in executive sessions without Popular’s management at each regularly scheduled Board meeting. The independent directors met 11 times during 2022.

Our Board conducts an annual self-assessment that is intended to determine whether the Board, its committees and each individual director are functioning effectively and provides them with the opportunity to evaluate, reflect and improve processes, performance and effectiveness. As part of such assessment, each director is provided a written questionnaire that is designed to gather suggestions for improving Board and committee effectiveness and solicit feedback on a wide range of issues, including, among others:

Each of the five standing committees of the Board is also required to conduct its own written annual self-assessment, which generally evaluates matters such as: (i) responsibilities and organization of the committee, including adequacy of its charter; (ii) operations of the committee; (iii) the adequacy of meeting materials and information provided; and (iv) assessment of the committee’s performance of its assigned duties, among others. Each director also participates in an individual director self-assessment where directors evaluate their own performance and effectiveness and identify areas for improvement. Additionally, our Corporate Governance Guidelines provide that the Corporate Governance and Nominating Committee shall retain, at least every three years, an independent consultant to facilitate the Board’s

performance evaluation. The most recent Board evaluation facilitated by an independent consultant was performed as part of the 2021 Board evaluation process.

The Corporate Governance and Nominating Committee oversees the annual self-evaluation process with the input from the Chairman and the Lead Independent Director. Responses to the Board and committee self-assessments, including written comments, are tabulated to show trends compared to prior years.

Responses are not attributed to individual directors in order to promote openness, discussion and collegiality. The Board and Committee self-assessment results are discussed in the Corporate Governance and Nominating Committee, and the Chair of the Corporate Governance and Nominating Committee leads the discussion with the full Board. The committee self-assessment results are also discussed at each committee, followed by a discussion of the results with the full Board led by each Committee Chair. The results of the individual director self-assessments are shared with the Chairman and Lead Independent Director which then engage on one-on-one conversations with the individual directors to obtain their assessment and provide feedback, as needed. Following the discussions of the results of the evaluations, appropriate actions plans are developed and executed in partnership with management.

The Corporate Governance and Nominating Committee annually reviews the format and process to be used to carry out the Board, committee and individual director self-assessment, as well as evaluates potential enhancements to the process.

The following summarizes the 2022 Board’s self-assessment process:

Director continuing education enhances the skills and knowledge necessary to fulfill director responsibilities. Popular provides an orientation process for new directors, including background material on Popular, its business and strategic plan, risk profile and meetings with senior management. Periodically, we also provide in-boardroom educational sessions to all directors on emerging issues and matters relevant to the Corporation. Additionally, we encourage directors to participate in external continuing director education programs. To assist the Board in

remaining current with its duties, committee responsibilities and the many important developments impacting our business, Popular participates in the National Association of Corporate Directors’ (NACD) Continuing Education Program. This program offers our directors access to a wide range of in-person, peer-based and webinar educational programs on a variety of topics, including, strategic oversight, corporate governance, committee duties, succession planning, cyber and information security, board leadership and industry developments.

Popular’s Board recognizes that one of its most important duties is to ensure senior leadership continuity by overseeing the development of executive talent and planning for the efficient succession of the CEO and other executive officers. The Board has delegated primary responsibility for succession planning to the Talent and Compensation Committee. The Talent and Compensation Committee reviews annually a management succession plan, developed by the CEO, and reports annually to the Board on the management succession plan. The principal components of this plan are: (i) a proposed plan for

emergency CEO succession, (ii) a proposed plan for CEO succession in the ordinary course of business, and (iii) the CEO’s plan for management succession for the other policy-making officers of Popular. The succession plan includes an assessment of the experience, performance, skills and planned career paths for possible candidates within the senior management team. Development initiatives supporting the succession plan include job enhancements and rotations, the Popular Leadership Academy, specialized external trainings and competency assessments.

Our Corporate Governance Guidelines prohibit executive officers and directors of Popular from engaging in hedging or monetization transactions with respect to Popular’s securities. Such prohibited transactions include, but are not limited to, zero-cost collars, equity swaps, and forward sale contracts since they are considered speculative as they allow the shareholder to lock in the value of his or her stock holdings, often in exchange for all or part of the potential for upside appreciation in the stock. This allows the

holder to continue to own the underlying securities without the full rewards and risks of ownership. In addition, pledging of Popular’s securities, including restricted stock and restricted stock units granted as compensation, by executive officers and directors is also prohibited under the Corporate Governance Guidelines. This prohibition includes securities pledged as collateral for margin accounts, as well as securities pledged as collateral for loans.

The Board has adopted a Code of Ethics to be followed by Popular’s employees, officers and directors. The Code of Ethics reaffirms Popular’s high standards of ethics, integrity and honesty, and provides the general rules to be followed in order to act in accordance with our ethical principles. Directors, NEOs, other executive officers and employees are required to read and comply with the Code of Ethics. Popular offers trainings on its Code of Ethics to all new employees shortly after their start date and also provides periodic Code of Ethics training to all employees. The Code of Ethics training is available in both English and Spanish. Moreover, on an annual basis employees must certify that they have read the Code of Ethics and must complete a Declaration on Code of Ethics, Anti-Corruption Policy and Possible Conflicts of Interest. In addition, suppliers,

including vendors, service providers, consultants and contractors, among others, are subject to the Code of Ethics for Popular Suppliers.

Overall responsibility for interpreting and applying the Code of Ethics rests with the Corporate Ethics Officer, whose work is overseen by Popular’s Chief Legal Officer and the Board. At least once a year, the Corporate Ethics Officer reports to the Board on the status of the Code of Ethics, ethics training and other ethics-related matters. Our Board of Directors plays an essential oversight role over ethics related matters of the Corporation, by among others:

The Code of Ethics provides that any waivers of its terms granted to NEOs, other executive officers or directors may be made only by the independent members of the Board. Any such waivers must be promptly disclosed to the shareholders.

During 2022, Popular did not receive or grant any request from directors, NEOs or other executive officers for waivers under the provisions of the Code of Ethics. The Code of Ethics was last revised on September 30, 2022 and is

available on the Corporate Governance section of Popular’s website in English at investor.popular.com/eng/corporate-governance/ and in Spanish at investor.popular.com/esp/regencia-corporativa/. Popular posts on its website any amendments to the Code of Ethics and any waivers granted to the President and CEO, the CFO, the Corporate Comptroller or directors.

Popular expects employees to report behavior that concerns them or that may represent a violation of the Code of Ethics. Popular offers several channels by which employees may raise an issue or concern, including any actual or potential violations of the Code of Ethics. One such method is EthicsPoint, a website and telephone hotline that is available 24/7. EthicsPoint reports can be submitted anonymously.

As a financial institution operating for 130 years, we are keenly aware that our impact goes far beyond the financial services we provide. At Popular we are committed to elevating the social and economic well-being of our employees, customers and communities, through our core service offerings and responsible business practices. To fulfill our commitment, we have developed environmental, social and governance (“ESG”) practices that include transparently communicating our journey and progress. To highlight our goals and the progress achieved during 2022

in ESG matters, we expect to publish our 2022 Corporate Sustainability Report during the second quarter of 2023.

To learn more about Popular’s commitment to sustainability, please visit https://www.popular.com/ en/corporate-sustainability/. The information contained in our Corporate Sustainability Reports and on our website is not incorporated by reference in this Proxy Statement or considered to be a part of this document.

The Corporate Governance and Nominating Committee Charter provides that, in nominating candidates, the Committee will take into consideration such factors as it deems appropriate, which may include judgment, skill, diversity, experience with business and other organizations, the interplay of the candidate’s experience with the experience of the existing Board members, and the extent to which the candidate would be a desirable addition to the Board and any committees of the Board.

The Corporate Governance and Nominating Committee will consider candidates for director who are recommended by its members, by other Board members, by management, by shareholders, by contacts in the communities we serve, and by third-party search firms. The Corporate Governance and Nominating Committee has the authority to engage a third-party search firm or consultant to identify and provide information on potential candidates for review, based on the criteria described in this section.

There are no differences in the manner in which the Corporate Governance and Nominating Committee will

evaluate nominees for director in the event the nominee is recommended by a shareholder.

Shareholders who wish to submit nominees for director for consideration by the Corporate Governance and Nominating Committee for election at Popular’s 2024 annual meeting of shareholders may do so as set forth under “General Information About the Meeting—Shareholder Proposals.”

There were no nominees for director recommended by shareholders for consideration by the Corporate Governance and Nominating Committee for election at the 2023 annual meeting of shareholders.

Under Popular’s Corporate Governance Guidelines, the Board should, based on the recommendations of the Corporate Governance and Nominating Committee, select nominees for the position of independent director by considering the following criteria.

We may be party to transactions, arrangements or relationships with our directors, director nominees, executive officers, shareholders owning more than 5% of the Corporation’s voting securities, or their immediate family members (each, a “Related Party”). We have adopted a written Policy on Related Party Transactions (the “Related Party Policy”) to identify and evaluate potential conflicts of interest, independence factors and disclosure obligations arising out of transactions, arrangements or relationships between Related Parties and us.

Transactions covered by the Related Party Policy may also be subject to restrictions pursuant to the Federal Reserve Board’s regulation on Loans to Executive Officers, Directors, and Principal Shareholders of Member Banks (Regulation O), which is the subject of a separate policy.

The Related Party Policy governs the review, approval or ratification of transactions, arrangements or relationships: (i) in which Popular or any of its subsidiaries is a participant; (ii) the aggregate amount involved will or may be expected to exceed $120,000; and (iii) a Related Party has or will have a direct or indirect material interest. These transactions must be submitted to the Audit Committee for their review, evaluation and approval, unless pre-approved under the Related Party Policy.

Directors and executive officers must notify the CLO of any related party transaction in which they, or their immediate family members, have a material interest. Any unit or division proposing a related party transaction must also notify the CLO, the Corporate Comptroller and the General Auditor by completing a Related Party Transaction Request Form. After review by the CLO, the form is submitted for consideration and approval of the Audit Committee. The form must contain, among other things, a description of the proposed transaction, its benefits to Popular and an assessment of whether the proposed related party transaction is on terms that are comparable to the terms available to an unrelated third party or to employees generally. Only disinterested members of the Audit Committee participate in the review and determination of whether a related party transaction is approved. The Audit Committee will approve or ratify transactions with Related Parties when the transaction is deemed to be in, or is not inconsistent with, the best interest of Popular.

In accordance with the terms of the Related Party Policy, certain types of transactions are pre-approved and certain recurring transactions are approved annually, without the

need to submit the corresponding form to the Audit Committee. Pre-approved transactions include certain banking-related services and transactions in the ordinary course of business involving financial products and services provided by, or to, Popular, including loans, provided such transactions comply with the Sarbanes-Oxley Act of 2002, Regulation O and other applicable laws and regulations. Other pre-approved instances include transactions in which the rate or charges involved in the transaction are determined by competitive bids. In the event Popular becomes aware of a transaction with a Related Party that has not been approved under the terms of the Related Party Policy, the Audit Committee considers all relevant facts and circumstances regarding the transaction with the Related Party and evaluates all options available to Popular, including ratification, revision or termination. The Audit Committee also examines the facts and circumstances pertaining to the failure of reporting such related party transaction to the Audit Committee, as required by the Related Party Policy, and may take such actions as it deems appropriate.

In 2022, Popular and its subsidiaries contributed approximately $1.1 million to Fundación Banco Popular, Inc. (the “BPPR Foundation”) through the matching of employee contributions. During 2022, Popular also contributed to the BPPR Foundation (i) $2.5 million to ensure its long term operation, (ii) $600,000 to support its relief efforts related to Hurricane Fiona, which affected Puerto Rico during September 2022, and (iii) $75,000 from the proceeds of the BPPR’s Holiday Special. An additional donation of $100,000 was made to the Employee Emergency Fund, a BPPR Foundation program, to help Popular employees affected by Hurricane Fiona. Popular also provides human and operational resources to support the activities of the BPPR Foundation, which during 2022 amounted to approximately $1.5 million, including maintenance and the amortization of leasehold improvements for the BPPR Foundation’s headquarters. BPPR and the Puerto Rico employees of Popular, through voluntary personal donations, are a significant source of funds for the BPPR Foundation. The BPPR Foundation is a Puerto Rico not-for-profit corporation created to improve the quality of life in Puerto Rico. As BPPR’s philanthropic arm, it provides a scholarship fund for employees’ children and supports education and community development projects. The Board of Trustees of the BPPR Foundation

appoints its eleven members. Mr. Carrión is the Chairman, while Messrs. Alvarez, Negrón and Ms. Burckhart are members, of the Board of Trustees of the BPPR Foundation.

During 2022, Popular Bank contributed approximately $184,000 to the Popular Foundation through the matching of employee contributions and made additional contributions of approximately $169,000. In addition, Popular provides human resources to support the activities of the Popular Foundation, which during 2022 amounted to approximately $86,000. Popular Bank and its employees, through voluntary personal donations, are the main source of funds of the Popular Foundation. The Popular Foundation, a New York not-for-profit corporation, was created to strengthen the social and economic well-being of the communities served by Popular Bank. As Popular Bank’s philanthropic arm, it provides support to charitable organizations with a focus on community development and education. Mr. Carrión is the Chairman, while Messrs. Alvarez, Vázquez, Chinea and Negrón are members, of the Board of Directors of the Popular Foundation.

A daughter of Mr. Alvarez is employed as a Counsel in the Legal Division of the Corporation. She received total compensation of approximately $128,000 during fiscal year 2022 and participated in the Corporation’s general benefit plans available to all employees. Her compensation was established in accordance with the Corporation’s employment and compensation practices applicable to employees with similar qualifications and responsibilities or holding similar positions. Her compensation was approved and ratified by the Audit Committee under the Related Party Policy.

In September 2022, an entity indirectly owned by Ms. Ferré Rangel and her siblings (the “Contracted Entity”) entered into a one-year contract (renewable for subsequent one-year periods) with BPPR to provide call center services in Puerto Rico to the Customer Contact Center Division of BPPR. The total amount of the contract for the initial one-year term is estimated to be approximately $970,000. BPPR conducted a request for proposal for the call center services and obtained proposals from three different service providers, including the Contracted Entity. After evaluating the proposals, the Customer Contact Center Division of BPPR selected the Contracted Entity based on its service experience in Puerto Rico, system capabilities, experience with the financial services industry and the cost structure of the proposal. In June 2022, the Audit Committee approved the transaction with the Contracted Entity in accordance with the Related Party Policy. During 2022, BPPR paid the Contracted Entity approximately $62,000 for the services rendered under the contract.

BPPR has loan transactions with Popular’s directors and officers, and other Related Persons, and intends to continue such transactions in the ordinary course of its business, on substantially the same terms, including interest rates and collateral, as those prevailing for

comparable loan transactions with third parties. Except as discussed below, the extensions of credit have not involved and do not currently involve more than the normal risks of collection or present other unfavorable features or otherwise require disclosure under Item 404 of Regulation S-K of the Securities and Exchange Commission:

In April 2010, a sister-in-law of Mr. Unanue and an unrelated private trust, as co-borrowers, obtained a $200,000 mortgage loan from Popular Mortgage, then a subsidiary of BPPR, secured by a residential property. The loan was a fully amortizing 40-year mortgage loan with a fixed annual rate of 2.99% for the first 5 years and, thereafter, an annual rate of 5.875%. From March to August 2020, the borrowers participated in the COVID-19 forbearance program offered by BPPR to all qualifying mortgage customers in response to the coronavirus (COVID-19) pandemic. In August 2020, after the expiration of the forbearance period, the borrowers failed to make scheduled payments under the loan for the months of September and October 2020, thereby defaulting on the indebtedness. In November 2020, the borrowers requested and were granted an additional 3-month loan payment forbearance pursuant to BPPR’s ordinary course loss mitigation program, which expired in January 2021. After the expiration of this 3-month loan payment forbearance, the borrowers failed to make the monthly loan payments when due. From November 2021 to July 2022, borrowers made partial payments under the loan as part of a loan modification alternative under BPPR’s ordinary course loss mitigation program. Thereafter, borrowers ceased making payments on the loan. In November 2022, borrowers made a payment of approximately $205,990 to pay off the outstanding balance of the loan, which included approximately $180,005 in principal, $17,067 in interests, and $8,917 in other charges and fees. Including the payment made to pay off the loan, during 2022, borrowers paid BPPR approximately $180,774 in principal, $20,479 in interest, and $8,917 in other charges and fees. The outstanding balance of the loan on the date of its cancelation was approximately $205,990, which also represented the largest outstanding balance of the loan during 2022.

Related Parties of Mr. Ballester have outstanding loans made prior to the borrowers on such loans having become Related Parties of Mr. Ballester. These loans—five commercial loans made to entities that are wholly-owned by one brother-in-law of Mr. Ballester—were acquired by BPPR in 2010 as part of the Westernbank FDIC-assisted transaction. The loans are secured by real estate and personally guaranteed by the brother-in-law of Mr. Ballester. The loans were originated by Westerbank between 2001 and 2005 and had an aggregate outstanding principal balance of approximately $33.5 million when they

were acquired by BPPR. Between 2011 and 2014, the loans were restructured to consist of: (i) five notes with an aggregate outstanding principal balance of $19.8 million with a 6% annual interest rate (“Notes A”) and (ii) five notes with an aggregate outstanding balance of $13.5 million with a 1% annual interest rate, to be paid upon maturity (“Notes B”). The restructured notes had an original maturity of September 30, 2016 and, thereafter, various interim renewals were approved to allow for the negotiation of a longer-term extension. The last of these interim renewals, among other things, extended the maturity date until April 2022, decreased the interest rate applicable to the Notes A to 4.25% and maintained the Notes B at an interest rate of 1%. In March and July 2022, the Audit Committee authorized two separate 90-day interim maturity extensions to provide additional time for the Bank to analyze and negotiate the terms and conditions for a longer-term renewal of the credit facilities. In November 2022, BPPR and the Related Parties of Mr. Ballester entered into a three-year extension of the loans, until November 2025, which, among other things: (i) increased the interest rate applicable to Notes A to 5.25% and maintained the Notes B at an interest rate of 1% and (ii) established a principal repayment schedule for Notes A, including a $700,000 mandatory prepayment. The three-year extension of the loans was approved by the Audit Committee in accordance with the Related Party Policy. The aggregate outstanding balance on the loans as of December 31, 2022 was approximately $29.3 million, of which approximately $15.8 million corresponded to Notes A and approximately $13.5 million to Notes B. During 2022, the borrower paid approximately $1.4 million and $691,000 in principal and interest, respectively. The largest outstanding balance of the loans during 2022 was approximately $30.6 million, of which approximately $17.1 million corresponded to Notes A and approximately $13.5 million to Notes B.

Mr. Carrión is President of and owns, together with his siblings, an entity which in turn owns 35% of a corporation that is the owner of a commercial building

in Puerto Rico. In addition, Mr. Carrión’s sister and brother-in-law are owners of an entity that has a participation of 21.5% in the same corporation. In June 2001, this corporation obtained a $30.4 million commercial loan from Doral Bank to provide financing for the development of the commercial building. In March 2007, Westernbank acquired the loan from Doral Bank and increased the loan amount to $40.5 million through additional borrowings. The loan had a 40-year amortization schedule, an interest rate of LIBOR plus 1.40% and a maturity date of March 2017. The loan was secured by the commercial building developed with the proceeds of the loan and guaranteed by the owners of the borrower. The loan was acquired by BPPR in 2010 as part of the Westernbank FDIC-assisted transaction. In February 2017, the loan was extended by BPPR until June 2017 under the same terms and conditions and, in May 2017, the loan was sold by BPPR to the Corporation, which in June 2017 renewed the loan for an additional three months. In August 2017, the Corporation refinanced the then-current $37.9 million principal balance of the loan at an interest rate of 5.15%, a maturity date of February 2019 and a 30-year amortization schedule. In February 2019, the loan was renewed for a period of 36-months at an interest rate of 5.75% and a 30-year amortization schedule. On December 28, 2021, after receiving the approval of the Audit Committee under the Related Party Policy, the Corporation refinanced the then-current $36.0 million principal balance of the loan at an interest rate of 4.50%, a maturity date of December 2026 and a 20-year amortization schedule. During 2021, after the closing of the refinancing, the borrower made prepayments totaling approximately $1.2 million. Payments of principal and interest of approximately $1.2 million and $1.5 million, respectively, were made during 2022. The largest outstanding balance of the loan during 2022 was approximately $34.8 million. As of December 31, 2022, the outstanding balance of the loan was approximately $33.6 million. The borrower is current on its payments.

As seen in the following graphs, performance-based short- and long-term incentives represent the majority of our NEOs’ target total compensation opportunity (80% for the President and CEO and 61%-64% for the other NEOs).

A breakdown of the target incentive elements is provided in the “2022 Executive Compensation Program and Pay Decisions” section of this Proxy Statement.

Performance grants were made in February 2022 at target, since vesting is determined based on future (i.e., 3-year) performance. Restricted stock awards were also granted in February 2022, at target level for the CEO and above target level for the other NEOs, recognizing each NEO’s contribution to Popular’s solid performance in 2021 and strong leadership.