Popular, Inc. Announces Third Quarter Financial Results

The dial-in phone number in the next to last paragraph of text should read: 1-877-415-3183 (sted 877-515-3183 or 857-244-7326).

The corrected release reads: 

POPULAR, INC. ANNOUNCES THIRD QUARTER FINANCIAL RESULTS

Popular, Inc. (the “Corporation” or “Popular”) (NASDAQ:BPOP) reported net income of $229.1 million for the quarter ended September 30, 2013, compared to net income of $327.5 million for the quarter ended June 30, 2013.

Mr. Richard L. Carrión, Chairman of the Board and Chief Executive Officer, said: “We continue to generate strong revenues from our core businesses with a net interest margin and capital levels above peer averages. Credit metrics continue to improve, reaching new lows despite the sluggish environment on the island. As a result of our strong capital position, improved asset quality and solid financial performance, I am pleased to mention that we have filed an application to repay TARP. While we are hopeful our application will be approved, we cannot speculate on the timing or the conditionality, if any, of an approval.”
                 
Earnings Highlights
(Unaudited)
    Quarters ended Nine months ended
(Dollars in thousands, except per share information)   30-Sep-13   30-Jun-13   30-Sep-12 30-Sep-13   30-Sep-12
Net interest income $ 354,206 $ 355,719 $ 344,439 $ 1,056,238 $ 1,025,216
Provision for loan losses – non-covered loans 55,230 223,908 83,589 485,438 247,846
Provision for loan losses – covered loans [1]   17,433     25,500     22,619   60,489     78,284  
Net interest income after provision for loan losses 281,543 106,311 238,231 510,311 699,086
FDIC loss share expense (14,866 ) (3,755 ) (6,707 ) (44,887 ) (19,387 )
Other non-interest income [2] 306,825 297,118 138,081 664,266 400,119
Operating expenses [2]   326,599     309,586     307,033   969,883     964,800  
Income before income tax 246,903 90,088 62,572 159,807 115,018
Income tax expense (benefit)   17,768     (237,380 )   15,384   (276,489 )   (46,317 )
Net income   $ 229,135     $ 327,468     $ 47,188   $ 436,296     $ 161,335  
Net income applicable to common stock   $ 228,204     $ 326,537     $ 46,257   $ 433,504     $ 158,543  
Net income per common share - basic   $ 2.22     $ 3.18     $ 0.45   $ 4.22     $ 1.55  
Net income per common share - diluted   $ 2.22     $ 3.17     $ 0.45   $ 4.21     $ 1.55  
 
[1] Covered loans represent loans acquired in the Westernbank FDIC-assisted transaction that are covered under FDIC loss sharing agreements.
[2] During the second quarter of 2013, the Corporation discontinued the elimination of its proportionate ownership share of intercompany transactions with EVERTEC from their respective revenue and expense categories to reflect them as an equity pick-up adjustment in Other Operating Income. This results in a gross up of operating expenses with a corresponding increase in other operating income. The results of operations for all periods presented have been adjusted to reflect this change.
 

Recent significant events

  • On September 18, 2013, EVERTEC, Inc. (“EVERTEC”) completed a secondary public offering (“SPO”) of 20.0 million shares of common stock to the public at $22.50 per share. Apollo Global Management LLC (“Apollo”) sold 10,808,759 shares and Popular sold 9,057,000 shares of EVERTEC, retaining respective stakes after the sale of 14.9% and 21.3%.

As a result of this transaction, Popular recognized an after-tax gain of approximately $167.8 million during the third quarter of 2013 and received proceeds of approximately $197 million. As of September 30, 2013, Popular’s investment in EVERTEC had a remaining book value of $42.4 million.

The following tables reflect the results of operations for the third and second quarters of 2013, with adjustments to exclude the impact of certain significant events. Adjustments for the third quarter of 2013 include the effect of the gain related to EVERTEC’s SPO. Adjustments for the second quarter of 2013 include: 1) the effect of the bulk sales of NPLs during the second quarter 2) the effect of the gain recorded related to EVERTEC’s IPO during the second quarter, 3) the impact of the Puerto Rico Tax Reform enacted during the second quarter which resulted in an additional expense for gross receipts tax and a net benefit from the increase in the deferred tax asset, offset by an increase in the current tax expense, as the corporate tax rate was changed from 30% to 39% and 4) the adjustment in the tax rate on distributions from EVERTEC from 15% to 4% and an adjustment to the deferred tax liability related to the covered loan portfolio.
 
    Quarter ended
(Unaudited) 30-Sep-13
(In thousands)  

Actual Results(US GAAP)
 

Impact ofEVERTEC'sSPO
 

Adjusted Results(Non-GAAP)
Net interest income $ 354,206   $ -   $ 354,206
Provision for loan losses – non-covered loans 55,230 - 55,230
Provision for loan losses – covered loans [1]     17,433       -     17,433  
Net interest income after provision for loan losses     281,543       -     281,543  
Service charges on deposit accounts and other service fees 101,680 - 101,680
Mortgage banking activities 18,896 - 18,896
Net gain (loss) and valuation adjustments on investment securities - - -
Trading account loss (6,607 ) - (6,607 )
Net gain on sale of loans, including valuation adjustments on loans held-for-sale 3,454 - 3,454
Adjustments (expense) to indemnity reserves on loans sold (2,387 ) - (2,387 )
FDIC loss share expense (14,866 ) - (14,866 )
Other non-interest income     191,789       175,867     15,922  
Total non-interest income     291,959       175,867     116,092  
Other taxes 17,749 - 17,749
Professional fees 72,039 250 71,789
OREO expense 17,175 - 17,175
Other operating expenses     219,636       -     219,636  
Total operating expenses     326,599       250     326,349  
Income before income tax 246,903 175,617 71,286
Income tax expense     17,768       7,789     9,979  
Net income   $ 229,135     $ 167,828   $ 61,307  
[1] Covered loans represent loans acquired in the Westernbank FDIC-assisted transaction that are covered under FDIC loss sharing agreements.
 

 
    Quarter ended
(Unaudited) 30-Jun-13
(In thousands)  

Actual Results(US GAAP)
 

Impact of Saleof NPLs
 

Impact ofEVERTEC'sIPO
 

Income TaxAdjustment[2] [3]
 

Adjusted Results(Non-GAAP)
Net interest income $ 355,719   $ -   $ 1,502   $ -   $ 354,217
Provision for loan losses – non-covered loans 223,908 169,248 - - 54,660
Provision for loan losses – covered loans [1]     25,500       -       -     -       25,500  
Net interest income after provision for loan losses     106,311       (169,248 )     1,502     -       274,057  
Service charges on deposit accounts and other service fees 102,819 - - - 102,819
Mortgage banking activities 18,085 - - - 18,085
Net gain and valuation adjustments on investment securities 5,856 - 5,856 - -
Trading account loss (4,345 ) - - - (4,345 )
Net gain (loss) on sale of loans, including valuation adjustments on loans held-for-sale 4,733 (3,865 ) - - 8,598
Adjustments (expense) to indemnity reserves on loans sold (11,632 ) (3,047 ) - - (8,585 )
FDIC loss share expense (3,755 ) - - - (3,755 )
Other non-interest income     181,602       -       162,091     -       19,511  
Total non-interest income     293,363       (6,912 )     167,947     -       132,328  
Other taxes 15,288 - - 1,656 13,632
Professional fees 69,964 - 856 - 69,108
OREO expense 5,762 - - - 5,762
Other operating expenses     218,572       -       -     -       218,572  
Total operating expenses     309,586       -       856     1,656       307,074  
Income (loss) before income tax 90,088 (176,160 ) 168,593 (1,656 ) 99,311
Income tax (benefit) expense     (237,380 )     (68,987 )     11,988     (211,588 )     31,207  
Net income (loss)   $ 327,468     $ (107,173 )   $ 156,605   $ 209,932     $ 68,104  
[1] Covered loans represent loans acquired in the Westernbank FDIC-assisted transaction that are covered under FDIC loss sharing agreements.
[2] Represents the impact of the gross receipt tax corresponding to the first quarter 2013, recorded during the second quarter after enactment.
[3] Represents the net benefit of $215.6 million for the increase on the net deferred tax asset from the change of the corporate tax rate from 30% to 39%, $7.9 million resulting from the adjustment in tax rate for distributions from EVERTEC from 15% to 4%, offset by an adjustment of $11.9 million on the deferred tax liability related to the covered loans portfolio.
 

 
    Quarters ended
(Unaudited) Adjusted Results Non-GAAP
(In thousands)   30-Sep-13   30-Jun-13   Variance
Net interest income $ 354,206   $ 354,217   $ (11 )
Provision for loan losses – non-covered loans 55,230 54,660 570
Provision for loan losses – covered loans [1]     17,433       25,500       (8,067 )
Net interest income after provision for loan losses     281,543       274,057       7,486  
Service charges on deposit accounts and other service fees 101,680 102,819 (1,139 )
Mortgage banking activities 18,896 18,085 811
Net gain and valuation adjustments on investment securities - - -
Trading account loss (6,607 ) (4,345 ) (2,262 )
Net gain on sale of loans, including valuation adjustments on loans held-for-sale 3,454 8,598 (5,144 )
Adjustments (expense) to indemnity reserves on loans sold (2,387 ) (8,585 ) 6,198
FDIC loss share expense (14,866 ) (3,755 ) (11,111 )
Other non-interest income     15,922       19,511       (3,589 )
Total non-interest income     116,092       132,328       (16,236 )
Other taxes 17,749 13,632 4,117
Professional fees 71,789 69,108 2,681
OREO expense 17,175 5,762 11,413
Other operating expenses     219,636       218,572       1,064  
Total operating expenses     326,349       307,074       19,275  
Income before income tax 71,286 99,311 (28,025 )
Income tax expense     9,979       31,207       (21,228 )
Net income   $ 61,307     $ 68,104     $ (6,797 )
[1] Covered loans represent loans acquired in the Westernbank FDIC-assisted transaction that are covered under FDIC loss sharing agreements.
 

Net interest income

Net interest margin for the third quarter of 2013 increased three basis points to 4.49% when compared with the second quarter of 2013. Net interest income for the quarter was $354.2 million, decreasing slightly by $1.5 million from the previous quarter. During the third quarter the Corporation reversed interest income of approximately $5.9 million related to a portion of a portfolio of reverse mortgages at BPPR for which interest had been accrued in excess of the amount insured by FHA. Excluding the impact of this adjustment, the net interest margin would have been 4.56%. The main drivers of the increase in the adjusted net interest margin are:
  • An increase in the interest income from commercial loans of $3.2 million, or four basis points, due to higher yields mainly driven by the partial prepayment of one large commercial relationship at BPNA, as well as higher volume of originations at higher yields during the quarter at BPPR.
  • Interest from covered loans increased by $1.5 million, or fifty three basis points, due to an increase in yield to 9.13% upon Q3 recasting mainly as a result of higher expected cash flows which are reflected in the accretable yield and recognized over the life of the loans, partially offset by lower levels as the portfolio continues to run-off.
  • Interest expense on deposits decreased by $4.0 million, or seven basis points, due mainly to the lower cost of certificates of deposits and money market accounts and lower levels of brokered and non-brokered certificates of deposits.

These positive variances were partially offset by:
  • A decrease of $2.7 million, or twelve basis points, on money market, trading and investment securities due to lower average volumes and reinvestments in a lower interest rate scenario.
  • A decrease of $3.6 million in mortgage interest income, excluding the reversal of $5.9 million related to reverse mortgages, due to lower origination and purchase activity in the quarter at BPPR.
  • BPPR’s net interest margin remained flat from the previous quarter at 5.26%. Net interest income amounted to $309.9 million for the quarter ended September 30, 2013, compared with $314.7 million for the previous quarter. Excluding the reversal of $5.9 million of interest from reverse mortgages, the net interest margin would have been 5.36%, or ten basis points higher than the previous quarter driven by the impact of the sale of non-performing assets during the second quarter. The net interest income, excluding the adjustment mentioned above, would have been $315.8 million, remaining relatively flat to the previous quarter. BPPR reflected lower income from investment securities due to reinvestments at lower interest rates and lower volumes, lower income from mortgage loans mostly due to lower volumes, offset by higher income from commercial loans and from covered loans and lower cost of deposits.
  • BPNA earned $73.2 million in net interest income for the quarter ended September 30, 2013, compared with $67.8 million in the previous quarter. The increase in the net interest margin of twenty three basis points to 3.66% was mainly related to higher income from commercial loans due to the partial prepayment of one large relationship and collections from loans in non-accrual status, higher levels of mortgage loans and lower cost of interest bearing deposits.

Non-interest income

Non-interest income decreased by $1.4 million compared with the second quarter of 2013. Excluding the impact of the previously outlined significant events, non-interest income decreased by $16.2 million compared with the second quarter of 2013, driven primarily by the following items:
  • An increase of $11.1 million in FDIC loss-share expense mainly due to lower mirror accounting on credit impairment losses, higher recoveries on covered assets, including rental income, on OREOs of $5.6 million, 80% of which are reimbursed to the FDIC and the impact of fair value adjustments in the true-up payment obligation, offset by higher mirror accounting on reimbursable expenses. See additional details about covered portfolio and FDIC indemnity asset in Table O.
  • Higher trading account loss by $2.3 million mainly at BPPR segment due to higher losses on Puerto Rico government obligations and closed-end funds by $6.4 million, offset by the net impact of activities on the trading mortgage backed securities portfolio.
  • Lower net gain on sale of loans, including valuation adjustments on loans held-for-sale, of $5.1 million is mostly due to lower gains on sale of loans at BPPR and BPNA segments, related to workout activity and sales of non-performing loans.
  • Lower other operating income of $3.6 million is mainly due to lower net earnings on the portfolio of investments under the equity method and lower fees related to a consulting agreement with EVERTEC which was terminated during the second quarter.

These decreases were partially offset by:
  • Lower adjustments (expenses) to indemnity reserves on loans sold by $6.2 million mainly due to reserves release at BPNA and BPPR segments resulting from the portfolio amortization and revisions to the loss assumptions in the reserve models.

Refer to table B for further details.
   
Financial Impact of FDIC-Assisted Transaction
 
(Unaudited)   Quarters ended

(In thousands)
  30-Sep-13   30-Jun-13   30-Sep-12
 

Income Statement
Interest income on covered loans $ 71,631 $ 70,136 $ 70,584
Total FDIC loss share (expense) income (14,866 ) (3,755 ) (6,707 )
Other non-interest income 109 242 310
Provision for loan losses     17,433       25,500       22,619  
Total revenues less provision for loan losses   $ 39,441     $ 41,123     $ 41,568  
 

Balance Sheet
Loans covered under loss-sharing agreements with FDIC $ 3,076,009 $ 3,199,998 $ 3,903,867
FDIC loss share asset 1,324,711 1,379,342 1,559,057
FDIC true-up payment obligation     124,092       118,770       103,189  
 

See additional details on accounting for FDIC-Assisted transaction in Table O.

Operating expenses

Operating expenses increased by $17.0 million when compared with the second quarter of 2013. Excluding the impact of the significant events previously outlined, operating expenses increased by $19.3 million versus the second quarter of 2013, driven primarily by:
  • Higher personnel cost by $2.2 million mostly at BPPR due to higher salaries, health and life insurance expenses and lower deferred salaries due to lower mortgage loan origination volumes at BPPR.
  • Higher other taxes by $4.1 million principally as a result of the gross receipts tax enacted earlier in the year in Puerto Rico, imposed as one percent of gross revenues, as defined, with a corresponding income tax credit of one half percent. During the third quarter the Corporation reclassified the year to date income tax credit from the operating expenses line to income taxes.
  • Higher professional services by $2.7 million due to legal fees at BPPR and higher consulting service fees at the Corporate segment related to regulatory compliance matters.
  • Higher loss on early extinguishment of debt of $3.4 million as a result of an early cancellation of $233.2 million in senior notes during the third quarter.
  • Higher other real estate owned (OREO) expenses by $11.4 million due mainly to higher fair value adjustments of $8.5 million related to commercial and construction OREO, consisting primarily of covered assets which are subject to 80% reimbursement from the FDIC, and lower net gains on sale of mortgage properties at BPPR.

These increases were partially offset by:
  • A decrease in FDIC deposit insurance expenses by $3.4 million, driven by the reduced volume of higher risk assets as a result of the sale of non-performing loans during the second quarter.

Non-personnel credit-related costs, which include collections, appraisals, credit related fees, and OREO expenses, amounted to $25.2 million for the third quarter of 2013, compared with $14.6 million for the second quarter of 2013. The increase was principally due to the increase in covered OREO expenses mentioned above, partially offset by a decrease in appraisals and collection costs by $0.8 million.

Full-time equivalent employees (“FTEs”) were 8,094 as of September 30, 2013, compared with 8,117 as of June 30, 2013, and 8,074 as of September 30, 2012. The decrease of 23 FTEs from the second quarter of 2013 is mainly related to the operations of Tranred Venezuela which were sold during this quarter.

For a breakdown of operating expenses by category refer to table B.

Income taxes

Excluding the effect of the sale of EVERTEC shares discussed above, the income tax expense amounted to approximately $10.0 million compared to $31.2 million for the second quarter. During the third quarter, the Corporation recorded a favorable adjustment of approximately $7.7 million in connection with filing its tax returns for the year 2012 during the quarter, mainly related to the distributions received from EVERTEC. The Corporation reclassified $3.3 million of income tax credit related to the gross receipt tax enacted earlier in the year from the operating expenses line to income taxes. Also, the Corporation reversed approximately $7.7 million for uncertain tax positions due to the expiration of the statute of limitations in the Puerto Rico operations. Excluding these adjustments, the income tax expense would have been $28.7 million, for an effective tax rate of approximately 40%.

Credit Quality

The following table presents non-performing assets information:
     
Non-Performing Assets
(Unaudited)
(In thousands)   30-Sep-13   30-Jun-13   30-Sep-12
Total non-performing loans held-in-portfolio, excluding covered loans $ 617,573 $ 613,867 $ 1,550,500
Non-performing loans held-for-sale 2,099 10,697 108,886
Other real estate owned (“OREO”), excluding covered OREO     135,502       158,920       252,024  
Total non-performing assets, excluding covered assets 755,174 783,484 1,911,410
Covered loans and OREO     188,353       208,993       208,235  
Total non-performing assets   $ 943,527     $ 992,477     $ 2,119,645  
Net charge-offs for the quarter (excluding covered loans)[1]   $ 57,892     $ 79,145     $ 95,791  
[1] Excludes write-downs of $199,502 of loans sold during the quarter ended June 30, 2013.
 
Ratios (excluding covered loans):            
Non-performing loans held-in-portfolio to loans held-in-portfolio 2.88 % 2.85 % 7.47 %
Allowance for loan losses to loans held-in-portfolio 2.46 2.46 3.07
Allowance for loan losses to non-performing loans, excluding loans held-for-sale     85.19       86.14       41.04  
 
                     
Provision for Loan Losses
 
(Unaudited)                   Quarters ended
(In thousands)                   30-Sep-13   30-Jun-13   30-Sep-12
Provision (reversal) for loan losses - non-covered loans:
BPPR $ 50,475 $ 230,464 $ 69,738
BPNA                     4,755     (6,556 )     13,851
Total provision for loan losses - non-covered loans                     55,230     223,908       83,589
Provision for loan losses - covered loans                     17,433     25,500       22,619
Total provision for loan losses                   $ 72,663   $ 249,408     $ 106,208
 

While continuing to operate in a challenging economic environment, overall asset quality continued to improve during the third quarter of 2013, as non-performing assets and net charge-offs were at their lowest in over five years. This steady progress is reflective of the Corporation’s efforts to reduce its high risk assets and improve the risk profile of its portfolios. The following presents credit quality performance for the third quarter of 2013 for the Corporation’s non-covered portfolio.

  • Non-performing assets decreased by $28.3 million, or 3.6%, from the second quarter of 2013, primarily driven by OREO reductions of $23.4 million, or 14.7%, mainly in the BPPR segment, reflective of continued disposition of properties.
  • Non-performing loans held-in-portfolio increased slightly by $3.7 million from the previous quarter, mainly due to mortgage loans at BPPR due to the lower starting balance of the mortgage NPLs resulting from the bulk sale completed in the second quarter leading to reduced levels of outflows, partly offset by improvements in all BPNA segment portfolios and in the construction portfolio of the BPPR segment. NPLs have decreased 74% from its peak in the third quarter of 2010, primarily driven by NPA sales, distressed assets resolution, and lower inflows to NPLs.
  • Inflows of NPLs held-in-portfolio, excluding consumer loans, decreased by $24.1 million, or 12.9%, from the previous quarter, principally led by improvements in the commercial and residential mortgage NPL inflows in the BPPR segment. NPL inflows are down 83% from $943 million peak in the second quarter of 2009.
  • Net charge-offs for the third quarter amounted to $57.9 million, or 1.08% on an annualized basis, of average non-covered loans held-in portfolio, compared to $79.1 million, or 1.47% of average loans held-in-portfolio in the second quarter 2013, the lowest level since the third quarter of 2007, mainly driven by the commercial portfolios in both, BPPR and BPNA segments. Refer to Table J for further information on net charge-offs and related ratios.
  • The allowance for loan losses decreased by $2.7 million from the second quarter of 2013, mainly driven by overall improvements in the BPNA segment. The general and specific reserves related to non-covered loans totaled $418.0 million and $108.1 million, respectively, at quarter-end, compared with $422.7 million and $106.1 million, respectively, as of June 30, 2013. The ratio of the allowance for loan losses to loans held-in-portfolio stood at 2.46% in the third quarter of 2013, unchanged from the previous quarter.
  • The ratio of allowance for loan losses to non-performing loans held-in-portfolio remained stable at 85.2% from the previous quarter.
  • The provision for loan losses for the third quarter of 2013 amounted to $55.2 million, decreasing by $168.7 million versus the previous quarter. The second quarter included an incremental provision of $169.2 million related to the sale of non-performing residential mortgage loans. Excluding the impact of the sale, the provision for the third quarter remained relatively flat from the second quarter.

BPPR Segment

  • Total NPLs held-in-portfolio increased by $21.8 million, or 5.2%, from the second quarter of 2013, largely driven by higher residential mortgage NPLs of $33.1 million, in part offset by a decrease of $16.0 million in construction NPLs. Although mortgage NPL inflows have decreased, the net increase from the previous quarter stems from the lower starting balance of the mortgage NPLs resulting from the bulk sale completed in the second quarter leading to reduced levels of outflows. Mortgage NPLs had fallen to their lowest levels in the credit cycle as a result of the bulk sale. Construction NPLs decrease is due to the resolution of a significant borrower.
  • Inflows of NPLs held-in-portfolio, excluding consumer loans, decreased by $22.3 million, or 14.1%, from the second quarter of 2013, reflecting improvements in the commercial and mortgage inflows of $19.5 million and $4.8 million, respectively.
  • Net charge-offs decreased by $16.7 million, or 27.2%, from the second quarter of 2013 driven by improvements in commercial net charge-offs of $13.8 million. The ratio of net charge-offs to average loans held-in-portfolio fell to 1.15% on an annualized basis, from 1.55% in the previous quarter.
  • The allowance for loan losses increased by $5.8 million from the second quarter of 2013. The increase in the ALLL was mostly influenced by environmental factors in the allowance methodology considering economic conditions in Puerto Rico, despite improvements in the portfolio’s credit quality trends. The allowance for loan losses as a percentage of loans held-in-portfolio increased to 2.55% from 2.51% in the second quarter of 2013.
  • The ratio of allowance for loan losses to non-performing loans held-in-portfolio remained relatively stable at 90.5%, compared to 93.8% in the previous quarter.
  • The provision for loan losses for the third quarter of 2013 amounted to $50.5 million, decreasing by $180.0 million from the previous quarter. Excluding the impact of the sale, the provision for the third quarter decreased by $10.8 million, mainly due to lower commercial loan net charge-offs.

BPNA Segment
  • Total non-performing loans held-in-portfolio decreased by $18.1 million, or 9.3%, from the second quarter of 2013, reflecting improved credit performance and loan resolutions. Total inflows of non-performing loans held-in-portfolio, excluding consumer loans, decreased slightly by $1.8 million, or 6.3%, from the second quarter of 2013.
  • Net charge-offs decreased by $4.5 million, or 25.5%, from the second quarter of 2013. The ratio of net charge-offs to average loans held-in-portfolio was 0.91% on an annualized basis, compared to 1.24% in the previous quarter.
  • The allowance for loan losses as a percentage of loans held-in-portfolio decreased to 2.20% from 2.32% in the second quarter of 2013. The decline in the allowance for loan losses reflects the sustained improvement in the overall quality of the loan portfolios.
  • The provision for loan losses in the third quarter of 2013 increased by $11.3 million due to the negative provision of $6.6 million in the previous quarter. The provision for the second quarter of 2013 was impacted by a reserve release associated with the enhancements to the allowance for loan losses methodology.

         
Financial Condition Highlights
   
(Unaudited)    
(In thousands)   30-Sep-13     30-Jun-13     30-Sep-12
Total loans held-in-portfolio (net) $ 23,860,264 $ 24,086,438 $ 23,896,548
Total assets 36,052,116 36,684,594 36,503,366
Deposits 26,395,054 26,759,428 26,319,499
Borrowings 4,164,104 4,694,671 5,017,141
Total liabilities 31,658,231 32,489,558 32,434,382
Stockholders’ equity     4,393,885       4,195,036       4,068,984
 

Total assets decreased by approximately $632.5 million from June 30, 2013 driven by:
  • A $94.5 million decrease in non-covered loans held-in-portfolio mainly due to the early repayment of one large commercial relationship for approximately $74.3 million coupled with a decrease in mortgage loan purchase and origination activity in BPPR.
  • Non-covered loans held-for sale decreased by $66.3 million due mainly to decreased originations of mortgage loans for sale in the secondary market in BPPR.
  • The covered loan portfolio balance decreased by approximately $124.0 million due to the continuation of loan resolutions and the normal portfolio run-off.
  • Other assets decreased by $131.9 million due mainly to $74.6 million in accounts receivable for unsettled trade transactions.

Total liabilities decreased by $831.3 million from June 30, 2013, driven by:
  • A decrease of $364.4 million in deposits, primarily due to demand deposits, brokered and non-brokered certificates of deposits, offset by an increase in savings accounts. Refer to Table G for details of deposit accounts.
  • A decrease in notes payable and other short-term borrowings of $651.1 million, mainly due to a decrease in advances from the Federal Home Loan Bank of NY and a prepayment of $233.2 million in senior notes.

These decreases were partially offset by:
  • An increase in repurchase agreements of $120.5 million, part of the Corporation’s normal funding activities.
  • An increase of $63.6 million in other liabilities mainly due to unsettled purchases of trading securities.

Stockholders’ equity increased by $198.8 million from June 30, 2013, mainly as a result of the net income for the quarter of $229.1 million, offset by a change of $29.5 million from net unrealized gains to net unrealized losses on investment securities available-for-sale. Refer to Table A for capital ratios.

Refer to Table C for the Statements of Financial Condition.

Forward-Looking Statements

The 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 and the impact of proposed capital standards on our capital ratios; (v) the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act on our businesses, business practices and cost of operations; (vi) regulatory approvals that may be necessary to undertake certain actions or consummate strategic transactions such as acquisitions and dispositions; (vii) 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; (viii) the performance of the stock and bond markets; (ix) competition in the financial services industry; (x) additional Federal Deposit Insurance Corporation assessments; and (xi) possible legislative, tax or regulatory changes. 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, 2012, 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.

Founded in 1893, Popular, Inc. is the leading banking institution by both assets and deposits in Puerto Rico and ranks 36th by assets among U.S. banks. In the United States, Popular has established a community-banking franchise, doing business as Popular Community Bank, providing a broad range of financial services and products with branches in New York, New Jersey, Illinois, Florida and California.

An electronic version of this press release can be found at the Corporation’s website: www.popular.com.

Popular will hold a conference call to discuss the financial results today Wednesday, October 23, 2013 at 10:00 a.m. Eastern time. The call will be broadcast live over the Internet and can be accessed through the investor relations section of the Corporation’s website: www.popular.com.

Listeners are recommended to go to the website at least 15 minutes prior to the call to download and install any necessary audio software. The call may also be accessed through a dial-in telephone number 1-877-415-3183. The conference code is 27118445.

A replay of the webcast will be archived in Popular’s website. A telephone replay will be available from 12:00 p.m. on Wednesday, October 23, 2013 to 11:59 p.m. on Wednesday, October 30, 2013, at 888-286-8010 or 617-801-6888. The replay passcode is 60477997.

Popular, Inc.
Financial Supplement to Third Quarter 2013 Earnings Release
 
Table A - Selected Ratios and Other Information
 
Table B - Consolidated Statement of Operations
 
Table C - Consolidated Statement of Financial Condition
 
Table D - Consolidated Average Balances and Yield / Rate Analysis - QUARTER
 
Table E - Consolidated Average Balances and Yield / Rate Analysis - YEAR-TO-DATE
 
Table F - Mortgage Banking Activities and Other Service Fees
 
Table G - Loans and Deposits
 
Table H - Non-Performing Assets
 
Table I - Activity in Non-Performing Loans
 
Table J - Allowance for Credit Losses, Net Charge-offs and Related Ratios
 
Table K - Allowance for Loan Losses - Breakdown of General and Specific Reserves - CONSOLIDATED
 
Table L - Allowance for Loan Losses - Breakdown of General and Specific Reserves - PUERTO RICO OPERATIONS
 
Table M - Allowance for Loan Losses - Breakdown of General and Specific Reserves - U.S. MAINLAND OPERATIONS
 
Table N - Reconciliation to GAAP Financial Measures
 
Table O - Financial Information - Westernbank Covered Loans

 
POPULAR, INC.
Financial Supplement to Third Quarter 2013 Earnings Release
Table A - Selected Ratios and Other Information
(Unaudited)
         
             
Quarters ended Nine months ended
    30-Sep-13   30-Jun-13   30-Sep-12   30-Sep-13   30-Sep-12
Net income per common share:
Basic $ 2.22 $ 3.18 $ 0.45 $ 4.22 $ 1.55
Diluted $ 2.22 $ 3.17 $ 0.45 $ 4.21 $ 1.55
Average common shares outstanding 102,714,262 102,620,295 102,451,410 102,666,570 102,363,099
Average common shares outstanding - assuming dilution 103,017,443 102,917,347 102,484,960 103,014,674 102,545,474
Common shares outstanding at end of period 103,327,146 103,276,131 103,097,143 103,327,146 103,097,143
 
Market value per common share $ 26.25 $ 30.37 $ 17.45 $ 26.25 $ 17.45
 
Market capitalization - (In millions) $ 2,712 $ 3,136 $ 1,799 $ 2,712 $ 1,799
 
Return on average assets 2.51 % 3.60 % 0.52 % 1.60 % 0.59 %
 
Return on average common equity 21.64 % 32.77 % 4.81 % 14.38 % 5.63 %
 
Net interest margin [2] 4.49 % 4.46 % 4.38 % 4.45 % 4.33 %
 
Common equity per share $ 42.04 $ 40.13 $ 38.98 $ 42.04 $ 38.98
 
Tangible common book value per common share (non-GAAP) [1] $ 35.32 $ 33.38 $ 32.15 $ 35.32 $ 32.15
 
Tangible common equity to tangible assets (non-GAAP) [1] 10.32 % 9.58 % 9.26 % 10.32 % 9.26 %
 
Tier 1 risk-based capital [3] 18.54 % 17.30 % 16.81 % 18.54 % 16.81 %
 
Total risk-based capital [3] 19.82 % 18.58 % 18.09 % 19.82 % 18.09 %
 
Tier 1 leverage [3] 12.26 % 11.46 % 11.40 % 12.26 % 11.40 %
 
Tier 1 common equity to risk-weighted assets (non-GAAP) [1] [3]     14.20 %     13.04 %     12.72 %     14.20 %     12.72 %
[1] Refer to Table N for Non-GAAP reconciliations.
[2] Not on a taxable equivalent basis.
[3] Capital ratios for the current quarter are estimated.
 

 
POPULAR, INC.
Financial Supplement to Third Quarter 2013 Earnings Release
Table B - Consolidated Statement of Operations
(Unaudited)
    Quarters ended   Variance   Quarter ended   Variance   Nine months ended
(In thousands, except per share information)   30-Sep-13   30-Jun-13  

Q3 2013vs.Q2 2013
  30-Sep-12  

Q3 2013vs.Q3 2012
  30-Sep-13   30-Sep-12
Interest income:    
Loans $ 392,195 $ 394,925 $ (2,730 ) $ 387,949 $ 4,246 $ 1,173,046 $ 1,166,393
Money market investments 848 829 19 862 (14 ) 2,632 2,774
Investment securities 33,561 36,106 (2,545 ) 40,412 (6,851 ) 107,490 130,212
  Trading account securities     5,242       5,456       (214 )     5,815       (573 )     16,212       17,669  
  Total interest income     431,846       437,316       (5,470 )     435,038       (3,192 )     1,299,380       1,317,048  
Interest expense:
Deposits 31,848 35,764 (3,916 ) 43,022 (11,174 ) 105,968 143,297
Short-term borrowings 9,564 9,767 (203 ) 9,876 (312 ) 29,113 36,503
  Long-term debt     36,228       36,066       162       37,701       (1,473 )     108,061       112,032  
  Total interest expense     77,640       81,597       (3,957 )     90,599       (12,959 )     243,142       291,832  
Net interest income 354,206 355,719 (1,513 ) 344,439 9,767 1,056,238 1,025,216
Provision for loan losses - non-covered loans 55,230 223,908 (168,678 ) 83,589 (28,359 ) 485,438 247,846
Provision for loan losses - covered loans     17,433       25,500       (8,067 )     22,619       (5,186 )     60,489       78,284  
Net interest income after provision for loan losses     281,543       106,311       175,232       238,231       43,312       510,311       699,086  
Service charges on deposit accounts 43,096 43,937 (841 ) 45,858 (2,762 ) 130,755 138,577
Other service fees 58,584 58,882 (298 ) 57,954 630 173,559 172,582
Mortgage banking activities 18,896 18,085 811 21,847 (2,951 ) 57,281 60,418
Net gain (loss) and valuation adjustments on investment securities - 5,856 (5,856 ) 64 (64 ) 5,856 (285 )
Trading account (loss) profit (6,607 ) (4,345 ) (2,262 ) 5,443 (12,050 ) (11,936 ) 6,040
Net gain (loss) on sale of loans, including valuation adjustments on loans held-for-sale 3,454 4,733 (1,279 ) (1,205 ) 4,659 (54,532 ) (30,459 )
Adjustments (expense) to indemnity reserves on loans sold (2,387 ) (11,632 ) 9,245 (8,717 ) 6,330 (30,162 ) (17,990 )
FDIC loss share (expense) income (14,866 ) (3,755 ) (11,111 ) (6,707 ) (8,159 ) (44,887 ) (19,387 )
Other operating income     191,789       181,602       10,187       16,837       174,952       393,445       71,236  
  Total non-interest income     291,959       293,363       (1,404 )     131,374       160,585       619,379       380,732  
Operating expenses:
Personnel costs
Salaries 76,735 74,392 2,343 74,339 2,396 224,472 227,119
Commissions, incentives and other bonuses 14,457 15,540 (1,083 ) 12,800 1,657 45,472 39,885
Pension, postretirement and medical insurance 14,724 14,748 (24 ) 15,984 (1,260 ) 44,710 50,523
  Other personnel costs, including payroll taxes     10,923       9,999       924       8,427       2,496       32,853       31,850  
Total personnel costs 116,839 114,679 2,160 111,550 5,289 347,507 349,377
Net occupancy expenses 24,711 24,108 603 23,615 1,096 72,292 71,143
Equipment expenses 11,768 11,843 (75 ) 11,447 321 35,561 33,688
Other taxes 17,749 15,288 2,461 12,666 5,083 44,623 38,178
Professional fees 72,039 69,964 2,075 70,952 1,087 212,500 206,692
Communications 6,558 6,644 (86 ) 6,500 58 20,034 20,276
Business promotion 14,982 15,562 (580 ) 14,924 58 43,461 44,754
FDIC deposit insurance 16,100 19,503 (3,403 ) 24,173 (8,073 ) 44,883 72,006
Loss on early extinguishment of debt 3,388 - 3,388 43 3,345 3,388 25,184
Other real estate owned (OREO) expenses 17,175 5,762 11,413 5,896 11,279 69,678 22,441
Credit and debit card processing, volume, interchange and other expenses 5,076 5,352 (276 ) 5,442 (366 ) 15,403 15,083
Other operating expenses 17,746 18,414 (668 ) 17,344 402 53,150 58,373
Amortization of intangibles     2,468       2,467       1       2,481       (13 )     7,403       7,605  
  Total operating expenses     326,599       309,586       17,013       307,033       19,566       969,883       964,800  
Income before income tax 246,903 90,088 156,815 62,572 184,331 159,807 115,018
Income tax expense (benefit)     17,768       (237,380 )     255,148       15,384       2,384       (276,489 )     (46,317 )
Net income   $ 229,135     $ 327,468     $ (98,333 )   $ 47,188     $ 181,947     $ 436,296     $ 161,335  
Net income applicable to common stock   $ 228,204     $ 326,537     $ (98,333 )   $ 46,257     $ 181,947     $ 433,504     $ 158,543  
Net income per common share - basic   $ 2.22     $ 3.18     $ (0.96 )   $ 0.45     $ 1.77     $ 4.22     $ 1.55  
Net income per common share - diluted   $ 2.22     $ 3.17     $ (0.95 )   $ 0.45     $ 1.77     $ 4.21     $ 1.55  
 

 
Popular, Inc.
Financial Supplement to Third Quarter 2013 Earnings Release
Table C - Consolidated Statement of Financial Condition
(Unaudited)
            Variance
Q3 2013 vs.
(In thousands)   30-Sep-13   30-Jun-13   30-Sep-12   Q2 2013
Assets:
Cash and due from banks $ 368,590 $ 388,041 $ 477,342 $ (19,451 )
Money market investments 961,788 1,071,939 925,663 (110,151 )
Trading account securities, at fair value 338,848 294,082 226,918 44,766
Investment securities available-for-sale, at fair value 5,136,618 5,114,636 5,120,301 21,982
Investment securities held-to-maturity, at amortized cost 140,355 141,632 122,072 (1,277 )
Other investment securities, at lower of cost or realizable value 198,864 218,582 213,389 (19,718 )
Loans held-for-sale, at lower of cost or fair value 124,532 190,852 337,049 (66,320 )
Loans held-in-portfolio:
Loans not covered under loss sharing agreements with the FDIC 21,520,054 21,615,754 20,851,108 (95,700 )
Loans covered under loss sharing agreements with the FDIC 3,076,009 3,199,998 3,903,867 (123,989 )
Less: Unearned income 92,871 94,095 97,255 (1,224 )
    Allowance for loan losses     642,928       635,219       761,172       7,709  
    Total loans held-in-portfolio, net     23,860,264       24,086,438       23,896,548       (226,174 )
FDIC loss share asset 1,324,711 1,379,342 1,559,057 (54,631 )
Premises and equipment, net 519,623 527,014 525,733 (7,391 )
Other real estate not covered under loss sharing agreements with the FDIC 135,502 158,920 252,024 (23,418 )
Other real estate covered under loss sharing agreements with the FDIC 159,968 183,225 125,514 (23,257 )
Accrued income receivable 122,881 143,905 133,943 (21,024 )
Mortgage servicing assets, at fair value 161,445 153,444 158,367 8,001
Other assets 1,803,478 1,935,426 1,724,927 (131,948 )
Goodwill 647,757 647,757 647,757 -
Other intangible assets     46,892       49,359       56,762       (2,467 )
Total assets   $ 36,052,116     $ 36,684,594     $ 36,503,366     $ (632,478 )
Liabilities and Stockholders’ Equity:
Liabilities:
Deposits:
Non-interest bearing $ 5,762,554 $ 5,856,066 $ 5,404,470 $ (93,512 )
    Interest bearing     20,632,500       20,903,362       20,915,029       (270,862 )
    Total deposits     26,395,054       26,759,428       26,319,499       (364,374 )
Federal funds purchased and assets sold under agreements to repurchase 1,793,208 1,672,705 1,944,564 120,503
Other short-term borrowings 826,200 1,226,200 1,206,200 (400,000 )
Notes payable 1,544,696 1,795,766 1,866,377 (251,070 )
Other liabilities     1,099,073       1,035,459       1,097,742       63,614  
Total liabilities     31,658,231       32,489,558       32,434,382       (831,327 )
Stockholders’ equity:
Preferred stock 50,160 50,160 50,160 -
Common stock 1,034 1,033 1,031 1
Surplus 4,155,244 4,153,525 4,131,681 1,719
Retained earnings 445,330 217,126 (54,183 ) 228,204
Treasury stock (877 ) (769 ) (270 ) (108 )
Accumulated other comprehensive loss     (257,006 )     (226,039 )     (59,435 )     (30,967 )
    Total stockholders’ equity     4,393,885       4,195,036       4,068,984       198,849  
Total liabilities and stockholders’ equity   $ 36,052,116     $ 36,684,594     $ 36,503,366     $ (632,478 )
 

 
Popular, Inc.
Financial Supplement to Third Quarter 2013 Earnings Release
Table D - Consolidated Average Balances and Yield / Rate Analysis - QUARTER
(Unaudited)
                                 
Quarter ended Quarter ended Quarter ended Variance Variance
($ amounts in millions; yields not on a taxable equivalent basis) 30-Sep-13 30-Jun-13 30-Sep-12 Q3 2013 vs. Q2 2013 Q3 2013 vs. Q3 2012
  Average balance  

Income/ Expense
 

Yield/ Rate
Average balance  

Income/ Expense
 

Yield/ Rate
Average balance  

Income/ Expense
 

Yield/ Rate
Average balance  

Income/ Expense
 

Yield/ Rate
Average balance  

Income/ Expense
 

Yield/ Rate
Assets:
Interest earning assets:
Money market, trading and investment securities $6,813     $39.7   2.32 % $6,943     $42.4   2.44 % $6,625     $47.1   2.84 % ($130 )   ($2.7 )   (0.12 ) % $188     ($7.4 )   (0.52 ) %
 
Loans not covered under loss sharing agreements with the FDIC:
Commercial 10,107 126.0 4.95 10,022 122.8 4.91 10,024 123.7 4.91 85 3.2 0.04 83 2.3 0.04
Construction 319 4.3 5.30 316 3.6 4.62 435 3.3 3.02 3 0.7 0.68 (116 ) 1.0 2.28
Mortgage 6,633 81.7 4.93 7,019 91.2 5.20 5,915 80.7 5.46 (386 ) (9.5 ) (0.27 ) 718 1.0 (0.53 )
Consumer 3,906 97.6 9.91 3,849 96.3 10.03 3,855 97.9 10.10 57 1.3 (0.12 ) 51 (0.3 ) (0.19 )
Lease financing 537     10.9   8.08 542     10.9   8.02 540     11.7   8.67 (5 )   -     0.06   (3 )   (0.8 )   (0.59 )
Total loans not covered under loss sharing agreements with the FDIC 21,502 320.5 5.93 21,748 324.8 5.98 20,769 317.3 6.09 (246 ) (4.3 ) (0.05 ) 733 3.2 (0.16 )
Loans covered under loss sharing agreements with the FDIC 3,119     71.6   9.13 3,269     70.1   8.60 3,952     70.6   7.12 (150 )   1.5     0.53   (833 )   1.0     2.01  
Total loans 24,621     392.1   6.33 25,017     394.9   6.33 24,721     387.9   6.25 (396 )   (2.8 )   -   (100 )   4.2     0.08  
Total interest earning assets 31,434     $431.8   5.47 % 31,960     $437.3   5.48 % 31,346     $435.0   5.53 % (526 )   ($5.5 )   (0.01 ) % 88     ($3.2 )   (0.06 ) %
Allowance for loan losses (632 ) (673 ) (757 ) 41 125
Other non-interest earning assets 5,372   5,215   5,396   157   (24 )
Total average assets $36,174   $36,502   $35,985   ($328 ) $189  
 
 
Liabilities and Stockholders' Equity:
Interest bearing deposits:
NOW and money market $5,766 $4.1 0.29 % $5,838 $5.2 0.36 % $5,709 $6.2 0.43 % ($72 ) ($1.1 ) (0.07 ) % $57 ($2.1 ) (0.14 ) %
Savings 6,828 3.7 0.21 6,748 4.2 0.25 6,561 4.5 0.27 80 (0.5 ) (0.04 ) 267 (0.8 ) (0.06 )
Time deposits 8,231     24.0   1.16 8,619     26.4   1.23 9,003     32.3   1.43 (388 )   (2.4 )   (0.07 ) (772 )   (8.3 )   (0.27 )
Total interest bearing deposits 20,825 31.8 0.61 21,205 35.8 0.68 21,273 43.0 0.80 (380 ) (4.0 ) (0.07 ) (448 ) (11.2 ) (0.19 )
Borrowings 4,404     45.8   4.15 4,488     45.8   4.09 4,426     47.6   4.29 (84 )   -     0.06   (22 )   (1.8 )   (0.14 )
Total interest bearing liabilities 25,229     77.6   1.23 25,693     81.6   1.27 25,699     90.6   1.41 (464 )   (4.0 )   (0.04 ) (470 )   (13.0 )   (0.18 )
Net interest spread 4.24 % 4.21 % 4.12 % 0.03

%

 

0.12

%

 
Non-interest bearing deposits 5,741 5,749 5,319 (8 ) 422
Other liabilities 969 1,013 1,091 (44 ) (122 )
Stockholders' equity 4,235   4,047   3,876   188   359  
Total average liabilities and stockholders' equity $36,174   $36,502   $35,985   ($328 ) $189  
 
Net interest income / margin non-taxable equivalent basis $354.2   4.49 % $355.7   4.46 % $344.4   4.38 % ($1.5 )   0.03

%

 
$9.8     0.11

%

 
 

 
Popular, Inc.
Financial Supplement to Third Quarter 2013 Earnings Release
Table E - Consolidated Average Balances and Yield / Rate Analysis - YEAR-TO-DATE
(Unaudited)
                     
Nine months ended Nine months ended
30-Sep-13 30-Sep-12 Variance

($ amounts in millions; yields not on ataxable equivalent basis)
Average

Income/

Yield/
Average

Income/

Yield/
Average

Income/

Yield/
  balance   Expense   Rate balance   Expense   Rate balance   Expense   Rate
Assets:
Interest earning assets:
Money market, trading and investment securities $6,908     $126.3   2.44 % $6,735     $150.7   2.98 % $173     ($24.4 )   (0.54 ) %
Loans not covered under loss sharing agreements with the FDIC:
Commercial 10,070 368.7 4.90 10,234 377.6 4.93 (164 ) (8.9 ) (0.03 )
Construction 334 11.5 4.58 484 13.3 3.66 (150 ) (1.8 ) 0.92
Mortgage 6,688 256.2 5.11 5,698 233.9 5.47 990 22.3 (0.36 )
Consumer 3,870 289.6 10.01 3,719 281.6 10.11 151 8.0 (0.10 )
Lease financing 541     33.1   8.16 547     35.5   8.66 (6 )   (2.4 )   (0.50 )
Total loans not covered under loss sharing agreements with the FDIC 21,503 959.1 5.96 20,682 941.9 6.08 821 17.2 (0.12 )
Loans covered under loss sharing agreements with the FDIC 3,299     214.0   8.67 4,124     224.4   7.27 (825 )   (10.4 )   1.40  
Total loans 24,802     1,173.1   6.32 24,806     1,166.3   6.28 (4 )   6.8     0.04  
Total interest earning assets 31,710     $1,299.4   5.47 % 31,541     $1,317.0   5.57 % 169     ($17.6 )   (0.10 ) %
Allowance for loan losses (654 ) (779 ) 125
Other non-interest earning assets 5,289   5,490   (201 )
Total average assets $36,345   $36,252   $93  
 
Liabilities and Stockholders' Equity:
Interest bearing deposits:
NOW and money market $5,767 $15.2 0.35 % $5,504 $18.5 0.45 % $263 ($3.3 ) (0.10 ) %
Savings 6,765 12.2 0.24 6,543 17.0 0.35 222 (4.8 ) (0.11 )
Time deposits 8,559     78.6   1.23 9,680     107.8   1.49 (1,121 )   (29.2 )   (0.26 )
Total interest bearing deposits 21,091 106.0 0.67 21,727 143.3 0.88 (636 ) (37.3 ) (0.21 )
Borrowings 4,461     137.2   4.10 4,319     148.5   4.59 142     (11.3 )   (0.49 )
Total interest bearing liabilities 25,552     243.2   1.27 26,046     291.8   1.50 (494 )   (48.6 )   (0.23 )
Net interest spread 4.20 % 4.07 % 0.13   %
Non-interest bearing deposits 5,694 5,281 413
Other liabilities 1,018 1,113 (95 )
Stockholders' equity 4,081   3,812   269  
Total average liabilities and stockholders' equity $36,345   $36,252   $93  
 
Net interest income / margin non-taxable equivalent basis $1,056.2   4.45 % $1,025.2   4.33 % $31.0     0.12   %
 

               
Popular, Inc.
Financial Supplement to Third Quarter 2013 Earnings Release
Table F - Mortgage Banking Activities and Other Service Fees
(Unaudited)
 
Mortgage Banking Activities Variance
Quarters ended Q3 2013 vs. Q3 2013 vs. Nine months ended Variance
(In thousands)   30-Sep-13   30-Jun-13   30-Sep-12   Q2 2013   Q3 2012   30-Sep-13   30-Sep-12   2013 vs. 2012
Mortgage servicing fees, net of fair value adjustments:
Mortgage servicing fees $ 11,547 $ 11,317 $ 12,282 $ 230 $ (735 ) $ 34,110 $ 36,339 $ (2,229 )
  Mortgage servicing rights fair value adjustments     3,879       (5,126 )     (2,426 )     9,005       6,305       (6,862 )     (7,217 )     355  
Total mortgage servicing fees, net of fair value adjustments     15,426       6,191       9,856       9,235       5,570       27,248       29,122       (1,874 )
Net gain (loss) on sale of loans, including valuation on loans     3,559       (351 )     19,700       3,910       (16,141 )     16,968       49,028       (32,060 )
Trading account profit (loss):
Unrealized gain (losses) on outstanding derivative positions (865 ) 622 (58 ) (1,487 ) (807 ) (265 ) (154 ) (111 )
  Realized gain (losses) on closed derivative positions     776       11,623       (7,651 )     (10,847 )     8,427       13,330       (17,578 )     30,908  
Total trading account (loss) profit     (89 )     12,245       (7,709 )     (12,334 )     7,620       13,065       (17,732 )     30,797  
Total mortgage banking activities   $ 18,896     $ 18,085     $ 21,847     $ 811     $ (2,951 )   $ 57,281     $ 60,418     $ (3,137 )
 
 
Other Service Fees Variance
Quarters ended Q3 2013 vs. Q3 2013 vs. Nine months ended Variance
(In thousands)   30-Sep-13   30-Jun-13   30-Sep-12   Q2 2013   Q3 2012   30-Sep-13   30-Sep-12   2013 vs. 2012
Other service fees:
Debit card fees $ 11,005 $ 10,736 $ 10,752 $ 269 $ 253 $ 32,138 $ 33,223 $ (1,085 )
Insurance fees 13,255 12,465 12,322 790 933 37,793 36,775 1,018
Credit card fees 16,890 16,406 15,623 484 1,267 48,981 44,383 4,598
Sale and administration of investment products 8,981 10,243 9,511 (1,262 ) (530 ) 27,941 28,045 (104 )
Trust fees 4,148 4,154 3,977 (6 ) 171 12,760 12,127 633
Processing fees - - 1,406 - (1,406 ) - 4,819 (4,819 )
  Other fees     4,305       4,878       4,363       (573 )     (58 )     13,946       13,210       736  
Total other service fees   $ 58,584     $ 58,882     $ 57,954     $ (298 )   $ 630     $ 173,559     $ 172,582     $ 977  
 

         
Popular, Inc.
Financial Supplement to Third Quarter 2013 Earnings Release
Table G - Loans and Deposits
(Unaudited)
 
Loans - Ending Balances
Variance
(In thousands)   30-Sep-13   30-Jun-13   30-Sep-12  

Q3 2013 vs.Q2 2013
 

Q3 2013 vs.Q3 2012
Loans not covered under FDIC loss sharing agreements:
Commercial $ 9,845,477 $ 9,917,840 $ 9,628,631 $ (72,363 ) $ 216,846
Construction 293,220 297,010 258,453 (3,790 ) 34,767
Legacy [1] 235,645 262,228 465,848 (26,583 ) (230,203 )
Lease financing 539,290 538,348 538,014 942 1,276
Mortgage 6,613,133 6,603,587 6,022,422 9,546 590,711
Consumer     3,900,418     3,902,646     3,840,485     (2,228 )     59,933  
Total non-covered loans held-in-portfolio $ 21,427,183 $ 21,521,659 $ 20,753,853 $ (94,476 ) $ 673,330
Loans covered under FDIC loss sharing agreements     3,076,009     3,199,998     3,903,867     (123,989 )     (827,858 )
Total loans held-in-portfolio   $ 24,503,192   $ 24,721,657   $ 24,657,720   $ (218,465 )   $ (154,528 )
Loans held-for-sale:
Commercial $ - $ 2,594 $ 17,696 $ (2,594 ) $ (17,696 )
Construction - - 88,030 - (88,030 )
Legacy [1] 1,680 1,680 3,107 - (1,427 )
Mortgage     122,852     186,578     228,216     (63,726 )     (105,364 )
Total loans held-for-sale   $ 124,532   $ 190,852   $ 337,049   $ (66,320 )   $ (212,517 )
Total loans   $ 24,627,724   $ 24,912,509   $ 24,994,769   $ (284,785 )   $ (367,045 )
[1] The legacy portfolio is comprised of commercial loans, construction loans and lease financings related to certain lending products exited by the Corporation as part of restructuring efforts carried out in prior years at the BPNA segment.
 
Deposits - Ending Balances
Variance
(In thousands)   30-Sep-13   30-Jun-13   30-Sep-12  

Q3 2013 vs.Q2 2013
 

Q3 2013 vs.Q3 2012
Demand deposits [1] $ 6,410,458 $ 6,655,895 $ 6,091,400 $ (245,437 ) $ 319,058
Savings, NOW and money market deposits (non-brokered) 11,335,441 11,253,707 11,046,595 81,734 288,846
Savings, NOW and money market deposits (brokered) 552,053 509,415 455,309 42,638 96,744
Time deposits (non-brokered) 6,181,676 6,299,760 6,614,153 (118,084 ) (432,477 )
Time deposits (brokered CDs)     1,915,426     2,040,651     2,112,042     (125,225 )     (196,616 )
Total deposits   $ 26,395,054   $ 26,759,428   $ 26,319,499   $ (364,374 )   $ 75,555  
[1] Includes interest and non-interest demand bearing deposits.
 

 
Popular, Inc.
Financial Supplement to Third Quarter 2013 Earnings Release
Table H - Non-Performing Assets
(Unaudited)
        Variance
(Dollars in thousands)   30-Sep-13   As a % of loans HIP by category     30-Jun-13   As a % of loans HIP by category     30-Sep-12   As a % of loans HIP by category    

Q3 2013 vs.Q2 2013
 

Q3 2013 vs.Q3 2012
Non-accrual loans:  
Commercial $ 316,040 3.2 % $ 323,155 3.3 % $ 772,217 8.0 % $ (7,115 ) $ (456,177 )
Construction 28,782 9.8 44,878 15.1 49,933 19.3 (16,096 ) (21,151 )
Legacy [1] 24,206 10.3 28,434 10.8 48,735 10.5 (4,228 ) (24,529 )
Lease financing 3,716 0.7 4,511 0.8 4,837 0.9 (795 ) (1,121 )
Mortgage 203,208 3.1 171,822 2.6 632,052 10.5 31,386 (428,844 )
Consumer     41,621   1.1       41,067   1.1       42,726   1.1       554       (1,105 )

Total non-performing loans held-in-portfolio, excluding covered loans
617,573 2.9 % 613,867 2.9 % 1,550,500 7.5 % 3,706 (932,927 )

Non-performing loans held-for-sale [2]
2,099 10,697 108,886 (8,598 ) (106,787 )

Other real estate owned (“OREO”), excluding covered OREO
    135,502           158,920           252,024           (23,418 )     (116,522 )

Total non-performing assets, excluding covered assets
755,174 783,484 1,911,410 (28,310 ) (1,156,236 )
Covered loans and OREO     188,353           208,993           208,235           (20,640 )     (19,882 )
Total non-performing assets   $ 943,527         $ 992,477         $ 2,119,645         $ (48,950 )   $ (1,176,118 )
Accruing loans past due 90 days or more [3]   $ 414,189         $ 414,055         $ 379,051         $ 134     $ 35,138  
Ratios excluding covered loans:

Non-performing loans held-in-portfolio to loans held-in-portfolio
2.88

%

 
2.85

%

 
7.47

%

 

Allowance for loan losses to loans held-in-portfolio
2.46 2.46 3.07

Allowance for loan losses to non-performing loans, excluding loans held-for-sale
    85.19           86.14           41.04              
Ratios including covered loans:
Non-performing assets to total assets 2.62

%

 
2.71

%

 
5.81

%

 

Non-performing loans held-in-portfolio to loans held-in-portfolio
2.64 2.59 6.63

Allowance for loan losses to loans held-in-portfolio
2.62 2.57 3.09

Allowance for loan losses to non-performing loans, excluding loans held-for-sale
    99.53           99.31           46.61              
[1] The legacy portfolio is comprised of commercial loans, construction loans and lease financings related to certain lending products exited by the Corporation as part of restructuring efforts carried out in prior years at the BPNA segment.
[2] Non-performing loans held-for-sale as of September 30, 2013 consisted of $1.7 million in legacy loans and $0.4 million in mortgage loans (June 30, 2013 - $3 million in commercial loans, $2 million in legacy loans and $6 million in mortgage loans; September 30, 2012 - $88 million in construction loans, $18 million in commercial loans, $3 million in legacy loans and $53 thousand in mortgage loans).
[3] It is the Corporation’s policy to report delinquent residential mortgage loans insured by FHA or guaranteed by the VA as accruing loans past due 90 days or more as opposed to nonperforming since the principal repayment is insured. These balances include $113 million of residential mortgage loans insured by FHA or guaranteed by the VA that are no longer accruing interest as of September 30, 2013.
 

 
Popular, Inc.
Financial Supplement to Third Quarter 2013 Earnings Release
Table I - Activity in Non-Performing Loans
(Unaudited)
             
Commercial loans held-in-portfolio:
Quarter ended Quarter ended
30-Sep-13   30-Jun-13
(In thousands)   BPPR   BPNA   Popular, Inc.   BPPR   BPNA   Popular, Inc.
Beginning balance NPLs $ 199,720 $ 123,435 $ 323,155 $ 186,808 $ 133,979 $ 320,787
Plus:
New non-performing loans 40,257 17,898 58,155 59,736 15,763 75,499
Advances on existing non-performing loans - 304 304 - 1,226 1,226
Other - - - - 4,310 4,310
Less:
Non-performing loans transferred to OREO (811 ) (1,036 ) (1,847 ) (2,191 ) (532 ) (2,723 )
Non-performing loans charged-off (17,773 ) (9,572 ) (27,345 ) (32,511 ) (9,890 ) (42,401 )
Loans returned to accrual status / loan collections (16,824 ) (19,073 ) (35,897 ) (12,122 ) (18,827 ) (30,949 )
  Loans transferred to held-for-sale     -       (485 )     (485 )     -       (2,594 )     (2,594 )
Ending balance NPLs   $ 204,569     $ 111,471     $ 316,040     $ 199,720     $ 123,435     $ 323,155  
 
Construction loans held-in-portfolio:
Quarter ended Quarter ended
30-Sep-13   30-Jun-13
(In thousands)   BPPR   BPNA   Popular, Inc.   BPPR   BPNA   Popular, Inc.
Beginning balance NPLs $ 39,044 $ 5,834 $ 44,878 $ 45,036 $ 5,884 $ 50,920
Plus:
New non-performing loans 2,000 - 2,000 - - -
Less:
Non-performing loans transferred to OREO (775 ) - (775 ) - - -
Non-performing loans charged-off (1,442 ) - (1,442 ) (2,175 ) - (2,175 )
  Loans returned to accrual status / loan collections     (15,808 )     (71 )     (15,879 )     (3,817 )     (50 )     (3,867 )
Ending balance NPLs   $ 23,019     $ 5,763     $ 28,782     $ 39,044     $ 5,834     $ 44,878  
 

             
Mortgage loans held-in-portfolio:
Quarter ended Quarter ended
30-Sep-13   30-Jun-13
(In thousands)   BPPR   BPNA   Popular, Inc.   BPPR   BPNA   Popular, Inc.
Beginning balance NPLs $ 144,717 $ 27,105 $ 171,822 $ 572,731 $ 27,993 $ 600,724
Plus:
New non-performing loans 93,867 5,265 99,132 98,682 6,888 105,570
Less:
Non-performing loans transferred to OREO (3,161 ) (1,236 ) (4,397 ) (19,800 ) (1,106 ) (20,906 )
Non-performing loans charged-off (5,539 ) (1,791 ) (7,330 ) (6,365 ) (2,653 ) (9,018 )
Loans returned to accrual status / loan collections (52,049 ) (3,970 ) (56,019 ) (50,956 ) (4,017 ) (54,973 )
Loans transferred to held-for-sale - - - (14,968 ) - (14,968 )
  Non-performing loans sold[1]     -       -       -       (434,607 )     -       (434,607 )
Ending balance NPLs   $ 177,835     $ 25,373     $ 203,208     $ 144,717     $ 27,105     $ 171,822  
[1] Includes write-downs of $199,502 of loans sold at BPPR during the quarter ended June 30, 2013.
 
Legacy loans held-in-portfolio:
Quarter ended Quarter ended
30-Sep-13   30-Jun-13
(In thousands)   BPPR   BPNA   Popular, Inc.   BPPR   BPNA   Popular, Inc.
Beginning balance NPLs $ - $ 28,434 $ 28,434 $ - $ 35,830 $ 35,830
Plus:
New non-performing loans - 3,168 3,168 - 4,640 4,640
Advances on existing non-performing loans - 97 97 - 4 4
Less:
Non-performing loans charged-off - (5,013 ) (5,013 ) - (5,358 ) (5,358 )
Loans returned to accrual status / loan collections - (2,480 ) (2,480 ) - (2,373 ) (2,373 )
  Other     -       -       -       -       (4,309 )     (4,309 )
Ending balance NPLs   $ -     $ 24,206     $ 24,206     $ -     $ 28,434     $ 28,434  
 

             
Total non-performing loans held-in-portfolio (excluding consumer loans):
Quarter ended Quarter ended
30-Sep-13   30-Jun-13
(In thousands)   BPPR   BPNA   Popular, Inc.   BPPR   BPNA   Popular, Inc.
Beginning balance NPLs $ 383,481 $ 184,808 $ 568,289 $ 804,575 $ 203,686 $ 1,008,261
Plus:
New non-performing loans 136,124 26,331 162,455 158,418 27,291 185,709
Advances on existing non-performing loans - 401 401 - 1,230 1,230
Other - - - - 4,310 4,310
Less:
Non-performing loans transferred to OREO (4,747 ) (2,272 ) (7,019 ) (21,991 ) (1,638 ) (23,629 )
Non-performing loans charged-off (24,754 ) (16,376 ) (41,130 ) (41,051 ) (17,901 ) (58,952 )
Loans returned to accrual status / loan collections (84,681 ) (25,594 ) (110,275 ) (66,895 ) (25,267 ) (92,162 )
Loans transferred to held-for-sale - (485 ) (485 ) (14,968 ) (2,594 ) (17,562 )
Non-performing loans sold[1] - - - (434,607 ) - (434,607 )
  Other     -       -       -       -       (4,309 )     (4,309 )
Ending balance NPLs   $ 405,423     $ 166,813     $ 572,236     $ 383,481     $ 184,808     $ 568,289  
[1] Includes write-downs of $199,502 of loans sold at BPPR during the quarter ended June 30, 2013.
 

 
Popular, Inc.
Financial Supplement to Third Quarter 2013 Earnings Release
Table J - Allowance for Credit Losses, Net Charge-offs and Related Ratios
(Unaudited)
                         
 
Quarter ended Quarter ended Quarter ended
    30-Sep-13     30-Jun-13     30-Sep-12  
(Dollars in thousands)   Non-covered loans    

Covered loans
  Total     Non-covered loans     Covered loans   Total     Non-covered loans     Covered loans   Total  
Balance at beginning of period $ 528,762 $ 106,457 $ 635,219 $ 583,501 $ 99,867 $ 683,368 $ 648,535 $ 117,495 $ 766,030
Provision for loan losses     55,230         17,433     72,663         223,908         25,500       249,408         83,589         22,619     106,208    
      583,992         123,890     707,882         807,409         125,367       932,776         732,124         140,114     872,238    
Net loans charged-off (recovered):
BPPR
Commercial 16,145 2,533 18,678 29,968 1,108 31,076 37,019 7,013 44,032
Construction (4,906 ) 2,893 (2,013 ) (2,294 ) 15,702 13,408 (527 ) 7,483 6,956
Lease financing 470 - 470 1,213 - 1,213 265 - 265
Mortgage 11,393 1,579 12,972 12,589 2,255 14,844 12,431 736 13,167
Consumer     21,576         57     21,633         19,928         (155 )     19,773         21,853         9     21,862    
Total BPPR     44,678         7,062     51,740         61,404         18,910       80,314         71,041         15,241     86,282    
 
BPNA
Commercial 4,543 - 4,543 9,808 - 9,808 9,611 - 9,611
Legacy [1] 2,321 - 2,321 (917 ) - (917 ) 3,952 - 3,952
Mortgage 1,334 - 1,334 3,018 - 3,018 3,541 - 3,541
Consumer     5,016         -     5,016         5,832         -       5,832         7,646         -     7,646    
Total BPNA     13,214         -     13,214         17,741         -       17,741         24,750         -     24,750    
Total loans charged-off (recovered) - Popular, Inc.     57,892         7,062     64,954         79,145         18,910       98,055         95,791         15,241     111,032    
Net write-downs [3]     -         -     -         (199,502 )       -       (199,502 )       (34 )       -     (34 )  
Balance at end of period   $ 526,100       $ 116,828   $ 642,928       $ 528,762       $ 106,457     $ 635,219       $ 636,299       $ 124,873   $ 761,172    
 
POPULAR, INC.
Annualized net charge-offs to average loans held-in-portfolio 1.08

%

 
1.06

%

 
1.47

%

 
1.58

%

 
1.87

%

 
1.82

%

 
Provision for loan losses to net charge-offs [2] 0.95

x

 
1.12

x

 
0.69

x

 
0.82

x

 
0.87

x

 
0.96

x

 
 
BPPR
Annualized net charge-offs to average loans held-in-portfolio 1.15

%

 
1.11

%

 
1.55

%

 
1.68

%

 
1.92

%

 
1.84

%

 
Provision for loan losses to net charge-offs [2] 1.13

x

 
1.31

x

 
1.00

x

 
1.08

x

 
0.98

x

 
1.07

x

 
 
BPNA
Annualized net charge-offs to average loans held-in-portfolio 0.91

%

 
1.24

%

 
1.74

%

 
Provision (reversal) for loan losses to net charge-offs               0.36

x

 
              (0.37 ) x               0.56

x

 
[1] The legacy portfolio is comprised of commercial loans, construction loans and lease financings related to certain lending products exited by the Corporation as part of restructuring efforts carried out in prior years at the BPNA segment.
[2] Excluding provision for loan losses and net write-down related to the asset sale during the quarter ended June 30, 2013.
[3] Net write-downs for the quarter ended June 30, 2013 are related to loans sold.
 

 
Popular, Inc.
Financial Supplement to Third Quarter 2013 Earnings Release
Table K - Allowance for Loan Losses - Breakdown of General and Specific Reserves - CONSOLIDATED
(Unaudited)
             
                                             
30-Sep-13
(Dollars in thousands)     Commercial     Construction     Legacy [3]     Mortgage     Lease financing     Consumer    

Total [2]
Specific ALLL $ 20,836 $ 588 $ - $ 53,782 $ 1,197 $ 31,662 $ 108,065
Impaired loans [1] $ 338,829 $ 27,492 $ 11,597 $ 443,186 $ 3,159 $ 129,859 $ 954,122
Specific ALLL to impaired loans [1]   6.15 %   2.14 %   - %   12.14 %   37.89 %   24.38 %   11.33 %
General ALLL $ 136,476 $ 9,032 $ 16,696 $ 107,941 $ 9,494 $ 138,396 $ 418,035
Loans held-in-portfolio, excluding impaired loans [1] $ 9,506,648 $ 265,728 $ 224,048 $ 6,169,947 $ 536,131 $ 3,770,559 $ 20,473,061
General ALLL to loans held-in-portfolio, excluding impaired loans [1]   1.44 %   3.40 %   7.45 %   1.75 %   1.77 %   3.67 %   2.04 %
Total ALLL $ 157,312 $ 9,620 $ 16,696 $ 161,723 $ 10,691 $ 170,058 $ 526,100
Total non-covered loans held-in-portfolio [1] $ 9,845,477 $ 293,220 $ 235,645 $ 6,613,133 $ 539,290 $ 3,900,418 $ 21,427,183
ALLL to loans held-in-portfolio [1]   1.60 %   3.28 %   7.09 %   2.45 %   1.98 %   4.36 %   2.46 %
[1] Excludes covered loans acquired on the Westernbank FDIC-assisted transaction.
[2] Excludes covered loans acquired on the Westernbank FDIC-assisted transaction. As of September 30, 2013, the general allowance on the covered loans amounted to $113 million, while the specific reserve amounted to $4 million.
[3] The legacy portfolio is comprised of commercial loans, construction loans and lease financings related to certain lending products exited by the Corporation as part of restructuring efforts carried out in prior years at the BPNA reportable segment.
                                             
30-Jun-13
(Dollars in thousands)     Commercial     Construction     Legacy [3]     Mortgage     Lease financing     Consumer    

Total [2]
Specific ALLL $ 18,719 $ 1,401 $ - $ 53,278 $ 1,399 $ 31,254 $ 106,051
Impaired loans [1] $ 334,861 $ 45,376 $ 13,368 $ 435,205 $ 3,818 $ 130,166 $ 962,794
Specific ALLL to impaired loans [1]   5.59 %   3.09 %   - %   12.24 %   36.64 %   24.01 %   11.01 %
General ALLL $ 145,762 $ 8,009 $ 19,978 $ 102,702 $ 7,524 $ 138,736 $ 422,711
Loans held-in-portfolio, excluding impaired loans [1] $ 9,582,979 $ 251,634 $ 248,860 $ 6,168,382 $ 534,530 $ 3,772,480 $ 20,558,865
General ALLL to loans held-in-portfolio, excluding impaired loans [1]   1.52 %   3.18 %   8.03 %   1.66 %   1.41 %   3.68 %   2.06 %
Total ALLL $ 164,481 $ 9,410 $ 19,978 $ 155,980 $ 8,923 $ 169,990 $ 528,762
Total non-covered loans held-in-portfolio [1] $ 9,917,840 $ 297,010 $ 262,228 $ 6,603,587 $ 538,348 $ 3,902,646 $ 21,521,659
ALLL to loans held-in-portfolio [1]   1.66 %   3.17 %   7.62 %   2.36 %   1.66 %   4.36 %   2.46 %
[1] Excludes covered loans acquired on the Westernbank FDIC-assisted transaction.
[2] Excludes covered loans acquired on the Westernbank FDIC-assisted transaction. As of June 30, 2013, the general allowance on the covered loans amounted to $103 million, while the specific reserve amounted to $3 million.
[3] The legacy portfolio is comprised of commercial loans, construction loans and lease financings related to certain lending products exited by the Corporation as part of restructuring efforts carried out in prior years at the BPNA reportable segment.
 
             
                             
Variance
(Dollars in thousands)   Commercial   Construction   Legacy   Mortgage   Lease financing   Consumer   Total
Specific ALLL $ 2,117 $ (813 ) $ - $ 504 $ (202 ) $ 408 $ 2,014
Impaired loans   $ 3,968     $ (17,884 )   $ (1,771 )   $ 7,981   $ (659 )   $ (307 )   $ (8,672 )
General ALLL $ (9,286 ) $ 1,023 $ (3,282 ) $ 5,239 $ 1,970 $ (340 ) $ (4,676 )
Loans held-in-portfolio, excluding impaired loans   $ (76,331 )   $ 14,094     $ (24,812 )   $ 1,565   $ 1,601     $ (1,921 )   $ (85,804 )
Total ALLL $ (7,169 ) $ 210 $ (3,282 ) $ 5,743 $ 1,768 $ 68 $ (2,662 )
Total non-covered loans held-in-portfolio   $ (72,363 )   $ (3,790 )   $ (26,583 )   $ 9,546   $ 942     $ (2,228 )   $ (94,476 )

 
Popular, Inc.
Financial Supplement to Third Quarter 2013 Earnings Release
Table L - Allowance for Loan Losses - Breakdown of General and Specific Reserves - PUERTO RICO OPERATIONS
(Unaudited)
             
30-Sep-13
Puerto Rico
(In thousands)   Commercial   Construction   Mortgage   Lease financing   Consumer   Total
Allowance for credit losses:
Specific ALLL non-covered loans $ 20,836 $ 588 $ 36,227 $ 1,197 $ 31,338 $ 90,186
  General ALLL non-covered loans   82,468     8,718     95,668     9,494     112,839     309,187  
ALLL - non-covered loans   103,304     9,306     131,895     10,691     144,177     399,373  
Specific ALLL covered loans 1,683 1,944 - - - 3,627
  General ALLL covered loans   56,813     16,674     32,175     -     7,539     113,201  
ALLL - covered loans   58,496     18,618     32,175     -     7,539     116,828  
Total ALLL   $ 161,800     $ 27,924     $ 164,070     $ 10,691     $ 151,716     $ 516,201  
Loans held-in-portfolio:
Impaired non-covered loans $ 276,824 $ 21,729 $ 390,319 $ 3,159 $ 127,389 $ 819,420
  Non-covered loans held-in-portfolio, excluding impaired loans   5,978,200     230,141     4,953,363     536,131     3,147,132     14,844,967  
Non-covered loans held-in-portfolio   6,255,024     251,870     5,343,682     539,290     3,274,521     15,664,387  
Impaired covered loans 35,264 - - - - 35,264
  Covered loans held-in-portfolio, excluding impaired loans   1,818,587     201,437     965,779     -     54,942     3,040,745  
Covered loans held-in-portfolio   1,853,851     201,437     965,779     -     54,942     3,076,009  
Total loans held-in-portfolio   $ 8,108,875     $ 453,307     $ 6,309,461     $ 539,290     $ 3,329,463     $ 18,740,396  
 
 
30-Jun-13
Puerto Rico
(In thousands)   Commercial   Construction   Mortgage   Lease financing   Consumer   Total
Allowance for credit losses:
Specific ALLL non-covered loans $ 18,719 $ 1,401 $ 35,715 $ 1,399 $ 30,904 $ 88,138
  General ALLL non-covered loans   93,433     7,671     87,200     7,524     109,610     305,438  
ALLL - non-covered loans   112,152     9,072     122,915     8,923     140,514     393,576  
Specific ALLL covered loans 1,981 750 - - - 2,731
  General ALLL covered loans   63,576     6,603     27,001     -     6,546     103,726  
ALLL - covered loans   65,557     7,353     27,001     -     6,546     106,457  
Total ALLL   $ 177,709     $ 16,425     $ 149,916     $ 8,923     $ 147,060     $ 500,033  
Loans held-in-portfolio:
Impaired non-covered loans $ 271,177 $ 39,542 $ 382,398 $ 3,818 $ 127,643 $ 824,578
  Non-covered loans held-in-portfolio, excluding impaired loans   6,052,606     216,960     4,931,072     534,530     3,131,734     14,866,902  
Non-covered loans held-in-portfolio   6,323,783     256,502     5,313,470     538,348     3,259,377     15,691,480  
Impaired covered loans 25,092 - - - - 25,092
  Covered loans held-in-portfolio, excluding impaired loans   1,875,378     240,365     999,578     -     59,585     3,174,906  
Covered loans held-in-portfolio   1,900,470     240,365     999,578     -     59,585     3,199,998  
Total loans held-in-portfolio   $ 8,224,253     $ 496,867     $ 6,313,048     $ 538,348     $ 3,318,962     $ 18,891,478  
 
                           
Variance
(In thousands)   Commercial   Construction   Mortgage   Lease financing   Consumer   Total
Allowance for credit losses:
Specific ALLL non-covered loans $ 2,117 $ (813 ) $ 512 $ (202 ) $ 434 $ 2,048
  General ALLL non-covered loans   (10,965 )   1,047     8,468     1,970     3,229     3,749  
ALLL - non-covered loans   (8,848 )   234     8,980     1,768     3,663     5,797  
Specific ALLL covered loans (298 ) 1,194 - - - 896
  General ALLL covered loans   (6,763 )   10,071     5,174     -     993     9,475  
ALLL - covered loans   (7,061 )   11,265     5,174     -     993     10,371  
Total ALLL   $ (15,909 )   $ 11,499     $ 14,154     $ 1,768     $ 4,656     $ 16,168  
Loans held-in-portfolio:
Impaired non-covered loans $ 5,647 $ (17,813 ) $ 7,921 $ (659 ) $ (254 ) $ (5,158 )
  Non-covered loans held-in-portfolio, excluding impaired loans   (74,406 )   13,181     22,291     1,601     15,398     (21,935 )
Non-covered loans held-in-portfolio   (68,759 )   (4,632 )   30,212     942     15,144     (27,093 )
Impaired covered loans 10,172 - - - - 10,172
  Covered loans held-in-portfolio, excluding impaired loans   (56,791 )   (38,928 )   (33,799 )   -     (4,643 )   (134,161 )
Covered loans held-in-portfolio   (46,619 )   (38,928 )   (33,799 )   -     (4,643 )   (123,989 )
Total loans held-in-portfolio   $ (115,378 )   $ (43,560 )   $ (3,587 )   $ 942     $ 10,501     $ (151,082 )
 

 
Popular, Inc.
Financial Supplement to Third Quarter 2013 Earnings Release
Table M - Allowance for Loan Losses - Breakdown of General and Specific Reserves - U.S. MAINLAND OPERATIONS
(Unaudited)
             
30-Sep-13
U.S. Mainland
(In thousands)   Commercial   Construction   Legacy   Mortgage   Consumer   Total
Allowance for credit losses:
Specific ALLL $ - $ - $ - $ 17,555 $ 324 $ 17,879
  General ALLL   54,008     314     16,696     12,273     25,557     108,848  
Total ALLL   $ 54,008     $ 314     $ 16,696     $ 29,828     $ 25,881     $ 126,727  
Loans held-in-portfolio:
Impaired loans $ 62,005 $ 5,763 $ 11,597 $ 52,867 $ 2,470 $ 134,702
  Loans held-in-portfolio, excluding impaired loans   3,528,448     35,587     224,048     1,216,584     623,427     5,628,094  
Total loans held-in-portfolio   $ 3,590,453     $ 41,350     $ 235,645     $ 1,269,451     $ 625,897     $ 5,762,796  
 
 
30-Jun-13
U.S. Mainland
(In thousands)   Commercial   Construction   Legacy   Mortgage   Consumer   Total
Allowance for credit losses:
Specific ALLL $ - $ - $ - $ 17,563 $ 350 $ 17,913
  General ALLL   52,329     338     19,978     15,502     29,126     117,273  
Total ALLL   $ 52,329     $ 338     $ 19,978     $ 33,065     $ 29,476     $ 135,186  
Loans held-in-portfolio:
Impaired loans $ 63,684 $ 5,834 $ 13,368 $ 52,807 $ 2,523 $ 138,216
  Loans held-in-portfolio, excluding impaired loans   3,530,373     34,674     248,860     1,237,310     640,746     5,691,963  
Total loans held-in-portfolio   $ 3,594,057     $ 40,508     $ 262,228     $ 1,290,117     $ 643,269     $ 5,830,179  
 
                           
Variance
(In thousands)   Commercial   Construction   Legacy   Mortgage   Consumer   Total
Allowance for credit losses:
Specific ALLL $ - $ - $ - $ (8 ) $ (26 ) $ (34 )
  General ALLL   1,679     (24 )   (3,282 )   (3,229 )   (3,569 )   (8,425 )
Total ALLL   $ 1,679     $ (24 )   $ (3,282 )   $ (3,237 )   $ (3,595 )   $ (8,459 )
Loans held-in-portfolio:
Impaired loans $ (1,679 ) $ (71 ) $ (1,771 ) $ 60 $ (53 ) $ (3,514 )
  Loans held-in-portfolio, excluding impaired loans   (1,925 )   913     (24,812 )   (20,726 )   (17,319 )   (63,869 )
Total loans held-in-portfolio   $ (3,604 )   $ 842     $ (26,583 )   $ (20,666 )   $ (17,372 )   $ (67,383 )
 

     
Popular, Inc.
Financial Supplement to Third Quarter 2013 Earnings Release
Table N - Reconciliation to GAAP Financial Measures
(Unaudited)
 
 
(In thousands, except share or per share information)   30-Sep-13     30-Jun-13     30-Sep-12  
Total stockholders’ equity $ 4,393,885 $ 4,195,036 $ 4,068,984
Less: Preferred stock (50,160 ) (50,160 ) (50,160 )
Less: Goodwill (647,757 ) (647,757 ) (647,757 )
Less: Other intangibles   (46,892 )     (49,359 )     (56,762 )  
Total tangible common equity   $ 3,649,076       $ 3,447,760       $ 3,314,305    
Total assets $ 36,052,116 $ 36,684,594 $ 36,503,366
Less: Goodwill (647,757 ) (647,757 ) (647,757 )
Less: Other intangibles   (46,892 )     (49,359 )     (56,762 )  
Total tangible assets   $ 35,357,467       $ 35,987,478       $ 35,798,847    
Tangible common equity to tangible assets 10.32 % 9.58 % 9.26 %
Common shares outstanding at end of period 103,327,146 103,276,131 103,097,143
Tangible book value per common share   $ 35.32       $ 33.38       $ 32.15    
 
 
 
(In thousands)   30-Sep-13     30-Jun-13     30-Sep-12  
Common stockholders’ equity $ 4,343,725 $ 4,144,876 $ 4,018,824
Less: Unrealized losses (gains) on available-for-sale securities, net of tax[1] 5,514 (23,990 ) (175,769 )
Less: Disallowed deferred tax assets[2] (643,716 ) (647,010 ) (365,954 )
Less: Disallowed goodwill and other intangible assets (646,464 ) (650,452 ) (666,166 )
Less: Aggregate adjusted carrying value of all non-financial equity investments (1,398 ) (1,357 ) (1,154 )

Add: Pension liability adjustment, net of tax and accumulated net gains (losses) on cash flow hedges[3]
  216,274       216,823       205,309    
Total Tier 1 common equity   $ 3,273,935       $ 3,038,890       $ 3,015,090    
Tier 1 common equity to risk-weighted assets   14.20 %   13.04 %   12.72 %
 
[1] In accordance with regulatory risk-based capital guidelines, Tier 1 capital excludes net unrealized gains (losses) on available-for-sale debt securities and net unrealized gains on available-for-sale equity securities with readily determinable fair values. In arriving at Tier 1 capital, institutions are required to deduct net unrealized losses on available-for-sale equity securities with readily determinable fair values, net of tax.
 
[2] Approximately $160 million of the Corporation’s $844 million of net deferred tax assets at September 30, 2013 (June 30, 2013 - $178 million and $864 million, respectively; September 30, 2012 - $153 million and $546 million, respectively), were included without limitation in regulatory capital pursuant to the risk-based capital guidelines, while approximately $644 million of such assets at September 30, 2013 (June 30, 2013 - $647 million; September 30, 2012 - $366 million) exceeded the limitation imposed by these guidelines and, as “disallowed deferred tax assets”, were deducted in arriving at Tier 1 capital. The remaining $40 million of the Corporation’s other net deferred tax assets at September 30, 2013 (June 30, 2013 - $39 million; September 30, 2012 - $27 million) represented primarily the following items (a) the deferred tax effects of unrealized gains and losses on available-for-sale debt securities, which are permitted to be excluded prior to deriving the amount of net deferred tax assets subject to limitation under the guidelines; (b) the deferred tax asset corresponding to the pension liability adjustment recorded as part of accumulated other comprehensive income; and (c) the deferred tax liability associated with goodwill and other intangibles.
 
[3] The Federal Reserve Bank has granted interim capital relief for the impact of pension liability adjustment.
 

       
Popular, Inc.
Financial Supplement to Third Quarter 2013 Earnings Release
Table O - Financial Information - Westernbank Covered Loans
(Unaudited)
 
 

Revenues
Quarters ended
(In thousands)   30-Sep-13   30-Jun-13   Variance
Interest income on covered loans   $ 71,631     $ 70,136     $ 1,495  
FDIC loss share expense:
Amortization of indemnification asset (37,681 ) (38,557 ) 876
80% mirror accounting on credit impairment losses [1] 13,946 25,338 (11,392 )
80% mirror accounting on discount accretion on unfunded commitments (87 ) (193 ) 106
80% mirror accounting on reimbursable expenses 25,641 12,131 13,510

80% mirror accounting on recoveries on covered assets, including rental income on OREOs, subject to reimbursement to the FDIC
(11,533 ) (2,168 ) (9,365 )
Change in true-up payment obligation (5,322 ) (476 ) (4,846 )
Other     170       170       -  
  Total FDIC loss share expense     (14,866 )     (3,755 )     (11,111 )
Other non-interest income     109       242       (133 )
Total revenues     56,874       66,623       (9,749 )
Provision for loan losses     17,433       25,500       (8,067 )
Total revenues less provision for loan losses   $ 39,441     $ 41,123     $ (1,682 )
[1] Reductions in expected cash flows for ASC 310-30 loans, which may impact the provision for loan losses, may consider reductions in both principal and interest cash flow expectations. The amount covered under the FDIC loss sharing agreements for interest not collected from borrowers is limited under the agreements (approximately 90 days); accordingly, these amounts are not subject fully to the 80% mirror accounting.
 

Quarterly average assets
Quarters ended
(In millions)   30-Sep-13   30-Jun-13   Variance
Covered loans $ 3,119 $ 3,269 $ (150 )
FDIC loss share asset     1,348       1,376       (28 )
 

Activity in the carrying amount and accretable yield of covered loans accounted for under ASC 310-30
Quarters ended
      30-Sep-13   30-Jun-13
(In thousands)   Accretable yield  

Carrying amountof loans
  Accretable yield  

Carrying amountof loans
Beginning balance $ 1,379,612 $ 3,012,866 $ 1,372,135 $ 3,157,663
Accretion (68,529 ) 68,529 (62,536 ) 62,536
Changes in expected cash flows (1,465 ) - 70,013 -
Collections / charge-offs     -       (190,346 )     -       (207,333 )
Ending balance 1,309,618 2,891,049 1,379,612 3,012,866
  Allowance for loan losses - ASC 310-30 covered loans     -       (108,874 )     -       (91,195 )
Ending balance, net of allowance for loan losses   $ 1,309,618     $ 2,782,175     $ 1,379,612     $ 2,921,671  
 
 

Activity in the carrying amount of the FDIC indemnity asset
Quarters ended
(In thousands)       30-Sep-13       30-Jun-13
Balance at beginning of period $ 1,379,342 $ 1,380,592
Amortization (37,681 ) (38,557 )
Credit impairment losses to be covered under loss sharing agreements 13,946 25,338
Decrease due to reciprocal accounting on the discount accretion on unfunded commitments (87 ) (193 )
Reimbursable expenses to be covered under loss sharing agreements 25,641 12,131
Net payments to (from) FDIC under loss sharing agreements (52,865 ) -
Other adjustments attributable to FDIC loss sharing agreements         (3,585 )         31  
Balance at end of period       $ 1,324,711         $ 1,379,342  
 
 

Activity in the remaining FDIC loss share asset amortization
 
Quarters ended
(In thousands)       30-Sep-13       30-Jun-13
Balance at beginning of period $ 122,124 $ 128,682
Amortization (37,681 ) (38,557 )
Impact of lower projected losses         38,053           31,999  
Balance at end of period       $ 122,496         $ 122,124  
 

Copyright Business Wire 2010

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