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3. Popular, Inc.

Shares of Popular, Inc. (BPOP) of Hato Rey, Puerto Rico, closed at $2.05 Wednesday, down 16% from a week earlier and declining 35% year-to-date.

The shares traded for 0.7 times tangible book value as of Wednesday's market close, according to SNL Financial.

Popular reported second-quarter net income applicable to common stock of $109.8 million, or 11 cents a share, compared to $9.2 million, or a penny a share, in the first quarter, and a net loss of $236.2 million, or 28 cents a share, for the second quarter of 2010.

The results for the second quarter of 2010 reflected the company's capital raise that quarter, which was initially a preferred issue, but was later converted to common shares after shareholder approval to increase the common share count. Upon conversion, the company recorded one-time $192 million dividend on preferred shares during the second quarter.

Second-quarter results were boosted by "a tax benefit of $59.6 million related to the timing of loan charge-offs for tax purposes." Popular had agreed with Puerto Rico's Department of the Treasury to defer tax deductions related to loan charge-offs that occurred in 2009 and 2010 to 2013 through 2016. The company said that "As a result of the agreement, the Corporation made a payment of $89.4 million to the P.R. Treasury and recorded a tax benefit on its financial statements of $143 million, or $53.6 net of the payment made" to the Puerto Rico Treasury."

Popular's second-quarter net interest income totaled $374.5 million, increasing by $31.2 million from the previous quarter, reflecting improved yields on loans acquired when the company purchased the failed Westernbank Puerto Rico from the FDIC in April 2010 increased, and the company's second-quarter purchase of $282 million "performing mortgage loans in Puerto Rico."

Popular has a tendency to report "busy quarters" as the company transforms its business, continues to digest the Westernbank transaction, and deals with FDIC loss-share accounting and tax issues.

Following "another messy quarter due to a tax benefit and loss share accounting noise," Derek Hewitt of KBW reiterated his "Outperform" rating for Popular, with a $4.50 price target, saying that the company's "higher accretable yield, lower funding costs and some opportunistic portfolio purchases drove higher spread revenue," and that its capital continued to grow.

The shares trade for just over six times the consensus 2012 earnings estimate of 37 cents a share, among analysts polled by FactSet.

Four out of five analysts covering Popular rate the shares a buy, while the remaining analyst has a neutral rating.

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