BPPR Reportable Segment
- The provision for loan losses for non-covered loans of the BPPR reportable segment totaled $66.4 million, or 98.55% of net charge-offs, for the second quarter of 2012, relatively unchanged when compared with $67.8 million for the first quarter of 2012. The provision for loan losses for the quarter ended June 30, 2012 reflected lower net-charge offs and reductions in the allowance for loans losses for the commercial and consumer loan portfolios, when compared with the first quarter of 2012. These favorable variances were in part offset by higher loss trends for the residential mortgage portfolio and a lower reserve release, compared to the first quarter of 2012, as the first quarter included a net benefit of $7.1 million from the enhancements to the Corporation’s allowance for loan losses methodology.
- Net charge-offs related to non-covered loans amounted to $67.4 million, or 1.85% of annualized net charge-offs to average non-covered loans held-in-portfolio for the quarter ended June 30, 2012, compared to $73.7 million or 2.01%, respectively, for the quarter ended March 31, 2012. This decrease was principally driven by lower net charge-offs from the commercial loan portfolio of $9.0 million attributed to lower levels of problem loans. This favorable variance in net charge-offs was partly offset by an increase of $2.6 million from the residential mortgage loan portfolio, primarily due to the revised charge-off policy implemented during the first quarter of 2012.
- Non-performing loans held-in-portfolio of the BPPR reportable segment, excluding covered loans, decreased by $68 million as of June 30, 2012, when compared with March 31, 2012. The decrease in non-performing loans at the BPPR reportable segment was mainly driven by a reduction in the commercial and mortgage loan portfolios by $30 million and $33 million, respectively. The reduction in the commercial non-performing loans was mainly associated with problem loan resolutions and a decline in the inflows to non-performing status. The decrease in the non-performing residential mortgage loans was mainly due to higher levels of TDRs returning to accrual status, after complying with six months of satisfactory payment.
- At June 30, 2012, the allowance for loan losses for non-covered loans of the BPPR reportable segment totaled $447 million or 2.99% of non-covered loans held–in-portfolio, essentially at the same level as the first quarter of 2012. The allowance for loan losses reflected a decrease in the general reserve component, mainly due to lower loss trends in the commercial and consumer loan portfolios. This improvement was offset by higher reserve requirements for the residential mortgage loan portfolio due to a higher net charge-off trend, coupled with higher specific reserves for loans restructured under loss mitigation programs. Refer to Table L for information on the allowance for loan losses of the Corporation’s Puerto Rico operations.
BPNA Reportable Segment
- The provision for loan losses for the BPNA reportable segment amounted to $15.3 million, or 50.08% of net charge-offs, for the second quarter of 2012, compared with $14.7 million or 42.74% of net charge-offs for the first quarter of 2012. The provision for loan losses remained relatively flat, as the effect of lower net charge offs for the second quarter of 2012 was offset by a lower reserve release, compared with the first quarter of 2012, as the first quarter included the positive impact of $17.7 million of the enhancements to the Corporation’s allowance for loan losses methodology.
- Net charge-offs for the quarter ended June 30, 2012 decreased by $3.9 million, when compared with the quarter ended March 31, 2012. Annualized net charge-offs to average loans held-in-portfolio decreased 28 basis points, from 2.43% for the quarter ended March 31, 2012 to 2.15% for the quarter ended June 30, 2012. As previously mentioned, the decrease in net charge-offs was mainly observed in the commercial loan portfolio, prompted by higher recoveries during the quarter and by the continued credit stabilization at the BPNA reportable segment.
- Non-performing loans held-in-portfolio at the BPNA reportable segment amounted to $287 million as of June 30, 2012, a decrease of $52 million compared with March 31, 2012. The decrease was mainly driven by reductions in the commercial and legacy loan portfolios of $22 million and $24 million, respectively. This decrease in non-performing loans was the result of problem loan resolutions, loan sales, a reduction in the inflows of non-performing loans, and charge-offs.
- At June 30, 2012, the allowance for loan losses for the BPNA reportable segment totaled $202 million or 3.51% of loans held-in-portfolio, compared with $217 million or 3.87% of loans held- in-portfolio at March 31, 2012. The decline in the allowance for loan losses was primarily driven by a reduction of $15 million in the general reserve component, when compared to March 31, 2012 mainly due to lower loss trends, as the U.S. mainland continues to reflect improved credit performance. Refer to Table M for information on the allowance for loan losses of the BPNA reportable segment.
Financial Condition Highlights – June 30, 2012 compared to March 31, 2012
- Total assets amounted to $36.6 billion as of June 30, 2012, compared with $37.0 billion as of March 31, 2012. Refer to Table C for a detailed presentation of the Corporation’s Consolidated Statements of Condition.
- Total loans held-in-portfolio amounted to $24.7 billion as of June 30, 2012 and March 31, 2012. Refer to Table G for a breakdown by loan categories. The decrease of $265 million in non-covered commercial loans held-in-portfolio from March 31, 2012 to June 30, 2012 was mostly associated with the cancellation and repayment of certain commercial lines of credit in Puerto Rico and charge-offs during the current quarter. The decrease in the commercial loan portfolio was offset in part by an increase in mortgage loans held-in-portfolio principally due to (i) mortgage loan purchases at BPNA during the second quarter of 2012 of approximately $273 million (unpaid principal balance), and (ii) loans purchased and originated at the Corporation’s Puerto Rico operations. The increase in consumer loans held-in-portfolio of $231 million from March 31, 2012 to June 30, 2012 was mainly due to a purchase of consumer loans by BPPR for approximately $225 million (unpaid principal balance). The decline in total covered loans of $205 million was principally due to collections and to charge-offs in the second quarter of 2012 of $58.5 million.
- Deposits amounted to $27.4 billion as of June 30, 2012, compared with $27.2 billion as of March 31, 2012. Table G presents a breakdown of deposits by major categories. The increase in demand deposits from March 31, 2012 to June 30, 2012 of $366 million was principally related to public funds. The decrease in non-brokered time deposits of $237 million was primarily from retail certificates of deposit. Total brokered deposits amounted to $3.1 billion as of June 30, 2012, compared with $2.9 billion as of March 31, 2012.
- The Corporation’s borrowings amounted to $3.6 billion as of June 30, 2012, compared with $4.7 billion as of March 31, 2012. The decrease in borrowings was principally in repos by approximately $0.7 billion mostly associated with the previously mentioned early extinguishment of debt and use of available funds to repay short-term debt.
- Stockholders’ equity was $4.0 billion as of June 30, 2012 and March 31, 2012. Refer to Table A for capital ratios and Table N for Non-GAAP reconciliations.
Forward-Looking StatementsThe information included in this news release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management’s current expectations and involve certain risks and uncertainties that may cause actual results to differ materially from those expressed in forward-looking statements. Factors that might cause such a difference include, but are not limited to (i) the rate of growth in the economy and employment levels, as well as general business and economic conditions; (ii) changes in interest rates, as well as the magnitude of such changes; (iii) the fiscal and monetary policies of the federal government and its agencies; (iv) changes in federal bank regulatory and supervisory policies, including required levels of capital; (v) the relative strength or weakness of the consumer and commercial credit sectors and of the real estate markets in Puerto Rico and the other markets in which borrowers are located; (vi) the performance of the stock and bond markets; (vii) competition in the financial services industry; (viii) possible legislative, tax or regulatory changes; (ix) the impact of the Dodd-Frank Act on our businesses, business practice and cost of operations; and (x) additional Federal Deposit Insurance Corporation assessments. For a discussion of such factors and certain risks and uncertainties to which the Corporation is subject, see the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2011, as well as its filings with the U.S. Securities and Exchange Commission. Other than to the extent required by applicable law, including the requirements of applicable securities laws, the Corporation assumes no obligation to update any forward-looking statements to reflect occurrences or unanticipated events or circumstances after the date of such statements.
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