Popular, Inc. Announces Fourth Quarter Financial Results

  • Reports net income of $163.0 million for the quarter ended December 31, 2013; Net interest margin of 4.74% in Q4 2013, vs. 4.49% in Q3 2013
    • Sale of EVERTEC shares in connection with their Q4 2013 secondary public offering, resulted in an after-tax gain of $99.4 million for Popular
    • Adjusted net income of $74.6 million, excluding the effect of the EVERTEC secondary public offering
  • Net income for the year ended December 31, 2013 was $599.3 million
  • Continued progress in credit quality (excluding covered loans):
    • Non-performing assets declined by $20.6 million, or 2.7%, compared to Q3 2013; and $1.1 billion, or 58.9%, year over year;
    • Non-performing loans held-in-portfolio declined by $19.6 million, or 3.2%, compared to Q3 2013; and $827.2 million, or 58.0%, year over year;
    • Inflows of non-performing loans held-in-portfolio, excluding consumer loans, for Q4 2013 declined by $20.5 million, or 12.6%, from Q3 2013, and down $492.3 million, or 42.1%, year over year;
    • Net charge-offs decreased by $22.5 million, or 38.9%, from Q3 2013; NCO ratio decreased to 0.66% from 1.08% in Q3 2013, lowest level in over seven years;
    • Net charge-offs, excluding the impact of the bulk loan sales, declined $149.0 million, or 37.0%, year over year.
  • Common Equity Tier 1 ratio of 15.0% and Tangible Book Value per Share of $37.56 at December 31, 2013; capital exceeds well-capitalized threshold by $2.3 billion

Business Wire

SAN JUAN, Puerto Rico--(BUSINESS WIRE)--

Popular, Inc. (the “Corporation” or “Popular”) (BPOP) reported net income of $163.0 million for the quarter ended December 31, 2013, compared to net income of $229.1 million for the quarter ended September 30, 2013.

Mr. Richard L. Carrión, Chairman of the Board and Chief Executive Officer, said: “The earnings for the fourth quarter demonstrate how the strength of our franchise continues to produce positive results even in a challenging operating environment. Over the last few years, we have executed a number of strategic initiatives that have improved our operational and financial metrics and will position us to further increase profitability once the economy in Puerto Rico begins to improve.”

Earnings Highlights                      
(Unaudited)
    Quarters ended     Years ended
(Dollars in thousands, except per share information)   31-Dec-13   30-Sep-13   31-Dec-12     31-Dec-13   31-Dec-12
Net interest income $ 376,342 $ 354,206 $ 351,417 $ 1,432,580 $ 1,376,633
Provision for loan losses – non-covered loans 47,729 55,230 86,256 533,167 334,102
Provision (reversal) for loan losses – covered loans [1]   8,907   17,433   (3,445)     69,396   74,839
Net interest income after provision for loan losses 319,706 281,543 268,606 830,017 967,692
FDIC loss share expense (37,164) (14,866) (36,824) (82,051) (56,211)
Other non-interest income 228,354 306,825 187,304 892,620 587,423
Operating expenses   322,703   326,599   315,232     1,292,586   1,280,032
Income before income tax 188,193 246,903 103,854 348,000 218,872
Income tax expense (benefit)   25,162   17,768   19,914     (251,327)   (26,403)
Net income   $ 163,031   $ 229,135   $ 83,940     $ 599,327   $ 245,275
Net income applicable to common stock   $ 162,100   $ 228,204   $ 83,009     $ 595,604   $ 241,552
Net income per common share - basic   $ 1.58   $ 2.22   $ 0.81       $ 5.80   $ 2.36
Net income per common share - diluted   $ 1.57   $ 2.22   $ 0.81       $ 5.78   $ 2.35
 
[1] Covered loans represent loans acquired in the Westernbank FDIC-assisted transaction that are covered under FDIC loss sharing agreements.

Recent significant events

  • On December 13, 2013, the Corporation completed the sale of 5,800,000 shares of common stock of EVERTEC, resulting in an after-tax gain of $99.4 million. The shares were sold to the public as part of an underwritten public offering of 15,233,273 shares of EVERTEC’s common stock at a price of $20.60 per share. The selling stockholders included an affiliate of Apollo Global Management, LLC (“Apollo”), Popular, Inc., and certain officers and employees of EVERTEC. Apollo sold 9,205,743 shares of EVERTEC, with the offering. Following the sale, Popular retained a stake of 14.9% in EVERTEC.

As part of the transaction, EVERTEC repurchased from the underwriters 3,690,036 shares of its common stock being sold by the selling stockholders in the offering, resulting in a reduction in its capital of approximately $75.0 million. Popular’s share of approximately $11.0 million was reflected as a reduction in its investment in EVERTEC.

Total cash proceeds received by Popular from the sale of the shares were approximately $117.9 million, net of underwriting discounts. The combined effect of the sale of shares by Popular and the repurchase of shares by EVERTEC resulted in a net after tax gain of approximately $88.4 million during the fourth quarter of 2013.

The following tables reflect the results of operations for the fourth and third quarters of 2013, excluding the effect of the gains related to EVERTEC’s secondary public offerings.

    Quarter ended
(Unaudited)   31-Dec-13
(In thousands)  

Actual Results

(US GAAP)

 

Impact of

EVERTEC's

SPO

 

Adjusted Results

(Non-GAAP)

Net interest income $ 376,342   $ -   $ 376,342
Provision for loan losses – non-covered loans 47,729 - 47,729
Provision for loan losses – covered loans [1]     8,907       -     8,907  
Net interest income after provision for loan losses 319,706 - 319,706
FDIC loss share income (expense) (37,164 ) - (37,164 )
Other non-interest income 228,354 92,358 135,996
Operating expenses     322,703       -     322,703  
Income before income tax 188,193 92,358 95,835
Income tax expense     25,162       3,945     21,217  
Net income   $ 163,031     $ 88,413   $ 74,618  

[1] Covered loans represent loans acquired in the Westernbank FDIC-assisted transaction that are covered under FDIC loss sharing agreements.

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

Actual Results

(US GAAP)

 

Impact of

EVERTEC's

SPO

 

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
FDIC loss share income (expense) (14,866 ) - (14,866 )
Other non-interest income 306,825 175,867 130,958
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.
 

 

  Quarters ended
(Unaudited)   Adjusted Results Non-GAAP
(In thousands)   31-Dec-13   30-Sep-13   Variance
Net interest income $ 376,342   $ 354,206   $ 22,136
Provision for loan losses – non-covered loans 47,729 55,230 (7,501 )
Provision for loan losses – covered loans [1]     8,907       17,433       (8,526 )
Net interest income after provision for loan losses 319,706 281,543 38,163
FDIC loss share expense (37,164 ) (14,866 ) (22,298 )
Other non-interest income 135,996 130,958 5,038
Operating expenses     322,703       326,349       (3,646 )
Income before income tax 95,835 71,286 24,549
Income tax expense     21,217       9,979       11,238  
Net income   $ 74,618     $ 61,307     $ 13,311  
[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 fourth quarter of 2013 increased 25 basis points to 4.74% when compared with the third quarter of 2013. Net interest income for the quarter was $376.3 million, an increase of $22.1 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. The main drivers of the increase in the net interest margin were:

  • An increase in interest from covered loans of $15.2 million, or 230 basis points, due to an increase in the portfolio yield to 11.43% mainly as a result of certain construction loan pools for which the estimated timing of cash flows was accelerated to reflect actual and expected resolution of the loans, and higher expected cash flows which are reflected in the accretable yield and recognized over the life of the loans, partially offset by lower loan balances as the portfolio continues to run-off.
  • An increase in interest income from residential mortgage loans of $5.4 million due to the above mentioned reversal of $5.9 million in interest income from reverse mortgages recorded during the third quarter.
  • A decrease in interest expense from borrowings of $4.5 million due to the early repayment of $233.2 million in senior notes during the third quarter, at the Corporate level, and lower levels of borrowings.

These positive variances were partially offset by:

  • A decrease in interest income from commercial loans of $3.4 million due to the partial repayment of a large commercial relationship at BPNA during the third quarter.
  • BPPR’s net interest margin was 5.59%, an increase of 33 basis points from the previous quarter. Net interest income amounted to $330.8 million for the quarter ended December 31, 2013, compared with $309.9 million for the previous quarter. The increase in the net interest income was mainly due to the above mentioned increase in the yield from the covered portfolio, higher income from residential mortgage loans and lower cost of borrowings due to decreased levels.
  • BPNA earned $71.2 million in net interest income for the quarter ended December 31, 2013, compared with $73.2 million in the previous quarter. The decrease in the net interest margin of 11 basis points to 3.55% was mainly related to lower income from commercial loans due to the partial repayment of one large relationship, partially offset by lower cost of funds.

Non-interest income

Non-interest income decreased by $100.8 million compared with the third quarter of 2013. Excluding the impact of the gain on sale of EVERTEC shares mentioned above, non-interest income decreased by $17.3 million quarter over quarter, driven primarily by the following items:

  • An increase of $22.3 million in FDIC loss-share expense mainly due to lower mirror accounting on reimbursable expenses and credit impairment losses, higher amortization of the FDIC loss share asset due to a decrease in expected losses, offset by lower recoveries on covered assets, including rental income on OREOs, 80% of which are reimbursed to the FDIC and the impact of fair value adjustments in the true-up payment obligation. See additional details about covered portfolio and FDIC indemnity asset in Table O.
  • Lower income from mortgage banking activities by $4.5 million due to a negative variance of $8.4 million in the fair value adjustments of mortgage servicing rights, and higher trading account losses by $2.1 million from derivative positions, partially offset by securitization activity resulting in higher gain on sale of loans by $6.2 million. See additional details about mortgage banking activities in Table F.
  • Higher provision related to indemnity reserves on loans sold by $4.5 million mainly due to reserves release at the BPNA and BPPR segments due to the portfolio amortization and revisions to the loss assumptions in the reserve models during the third quarter, which did not occur in the fourth quarter of 2013.

These negative variances were partially offset by:

  • Lower trading account loss by $5.1 million mainly at the BPPR segment due to losses recorded on Puerto Rico government obligations during the third quarter of 2013.
  • Higher other service fees by $3.0 million mainly due to higher contingent insurance commission revenue, which is realized during the fourth quarter.
  • Higher other operating income by $2.9 million mainly due to higher net earnings on the portfolio of investments under the equity method.
  • Higher net gain on sale of loans, including valuation adjustments on loans held-for-sale, by $1.9 million mostly due to workout activity and sales of non-performing loans resulting in higher gains at the BPNA segment.

Refer to table B for further details.

Financial Impact of FDIC-Assisted Transaction        
 
(Unaudited)     Quarters ended   Years ended
(In thousands)   31-Dec-13   30-Sep-13   31-Dec-12   31-Dec-13   31-Dec-12
 

Income Statement

Interest income on covered loans $ 86,794 $ 71,631 $ 76,998 $ 300,746 $ 301,441
Total FDIC loss share (expense) income (37,164 ) (14,866 ) (36,824 ) (82,051 ) (56,211 )
Other non-interest income - 109 281 593 1,211
Provision for loan losses     8,907       17,433       (3,445 )     69,397       74,839  
Total revenues less provision for loan losses   $ 40,723     $ 39,441     $ 43,900     $ 149,891     $ 171,602  
 

Balance Sheet

Loans covered under loss-sharing agreements with FDIC $ 2,984,427 $ 3,076,009 $ 3,755,972
FDIC loss share asset 948,608 1,324,711 1,399,098
FDIC true-up payment obligation     127,513       124,092       111,519  
 

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

Operating expenses

Excluding the impact of professional services expenses incurred in connection with the sale of EVERTEC’s shares during the third quarter, operating expenses decreased by $3.6 million when compared with the third quarter of 2013, driven primarily by:

  • Lower other real estate owned (OREO) expenses by $6.6 million due mainly to lower fair value adjustments related to commercial and construction OREO, consisting primarily of covered assets which are subject to 80% reimbursement from the FDIC, partially offset by higher net losses on sale of commercial and construction OREO’s.
  • Lower other taxes by $4.1 million related to the 1% gross receipts tax enacted earlier in the year in Puerto Rico, 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.
  • Lower 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.
  • Lower personnel costs by $2.5 million due to lower incentive compensation at BPPR, higher deferred salaries mainly at BPNA due to higher commercial loan originations and lower health and life insurance expenses at both reportable segments due to lower claims activity.

These decreases were partially offset by:

  • Higher professional services by $5.0 million mainly at BPPR due to higher technology consulting and programming services by $1.6 million, higher legal expenses primarily for the restructuring of covered loans, subject to 80% reimbursement from the FDIC, expenses related to the ongoing arbitration proceedings related to certain loss-share claims under the commercial loss share agreement with the FDIC and higher collection expenses.
  • Higher other operating expenses by $3.8 million mostly due to higher provision for unused commitments and sundry losses at BPPR.
  • Higher net occupancy expenses by $2.3 million due to an adjustment related to rent expense reserves at BPNA.
  • Higher business promotion by $2.0 million mainly at BPPR principally related to various institutional campaigns and customer relationship activities during the holiday season.

Non-personnel credit-related costs, which include collections, appraisals, credit related fees, and OREO expenses, amounted to $20.8 million for the fourth quarter of 2013, compared with $25.2 million for the third quarter of 2013. The decrease was principally due to lower covered OREO expenses as mentioned above.

Full-time equivalent employees (“FTEs”) were 8,059 as of December 31, 2013, compared with 8,094 as of September 30, 2013, and 8,072 as of December 31, 2012. The decrease of 35 FTE’s from the third quarter of 2013 was mainly at the BPPR Retail Banking Division.

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 $21.2 million, for an effective tax rate of 22%, compared to $10.0 million for the third quarter. During the third quarter, 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, during the third quarter the Corporation recorded favorable adjustments which had a combined effect of approximately $15.4 million related to the treatment in its tax return of distributions received from EVERTEC during 2012 and the reversal of uncertain tax positions due to the expiration of the statute of limitations in the Puerto Rico operations. Excluding the impact of these adjustments, the income tax expense for the third quarter would have been $28.7 million, for an effective tax rate of 40%.

Excluding the impact of the adjustments amounting to $15.4 million during the third quarter, the effective tax rate for the year ended December 31, 2013, considering the adjusted pre-tax income as detailed in Table P, was 30%.

Credit Quality

The following table presents non-performing assets information:

Non-Performing Assets      
(Unaudited)            
(In thousands)   31-Dec-13   30-Sep-13   31-Dec-12
Total non-performing loans held-in-portfolio, excluding covered loans $ 597,948 $ 617,573 $ 1,425,133
Non-performing loans held-for-sale 1,092 2,099 96,320
Other real estate owned (“OREO”), excluding covered OREO     135,501       135,502       266,844  
Total non-performing assets, excluding covered assets 734,541 755,174 1,788,297
Covered loans and OREO     187,261       188,353       213,469  
Total non-performing assets   $ 921,802     $ 943,527     $ 2,001,766  
Net charge-offs for the quarter (excluding covered loans)   $ 35,366     $ 57,892     $ 100,854  
 
 
Ratios (excluding covered loans):            
Non-performing loans held-in-portfolio to loans held-in-portfolio 2.77 % 2.88 % 6.79 %
Allowance for loan losses to loans held-in-portfolio 2.49 2.46 2.96
Allowance for loan losses to non-performing loans, excluding loans held-for-sale     90.05       85.19       43.62  
 
Refer to Table H for additional information.
 
Provision for Loan Losses        
 
(Unaudited)   Quarters ended Years ended
(In thousands)   31-Dec-13   30-Sep-13   31-Dec-12 31-Dec-13 31-Dec-12
Provision (reversal) for loan losses - non-covered loans:
BPPR $ 62,658 $ 50,475 $ 78,092 $ 547,886 $ 282,061
BPNA     (14,929 )     4,755     8,164     (14,719 )   52,041
Total provision for loan losses - non-covered loans     47,729       55,230     86,256       533,167     334,102
Provision (reversal) for loan losses - covered loans     8,907       17,433     (3,445 )   69,396     74,839
Total provision for loan losses   $ 56,636     $ 72,663   $ 82,811   $ 602,563   $ 408,941
 

Asset quality continued to steadily improve during the fourth quarter of 2013, including further decreases in non-performing loans and net charge-offs, both of which reached new record lows in over five years. These improvements are particularly driven by the US portfolios, as the overall credit quality of the portfolios in the BPPR segment remained stable. The following presents credit quality performance for the fourth quarter of 2013 for the Corporation’s non-covered portfolio.

  • Non-performing loans held-in-portfolio decreased by $19.6 million, or 3.2%, from the previous quarter, led by declines in the commercial, legacy and construction NPLs, partially offset by higher mortgage NPLs in the BPPR segment. The mortgage NPL increase at BPPR mainly arises from the significant reduction in NPL balances as a result of the bulk sale completed in the second quarter of 2013, which has led to reduced levels of outflows.
  • Inflows of NPLs held-in-portfolio, excluding consumer loans, decreased by $20.5 million, or 12.6%, from the previous quarter, principally driven by improvements in the commercial NPL inflows at both the BPPR and BPNA segments. Mortgage NPL inflows remained flat quarter over quarter.
  • Net charge-offs for the fourth quarter amounted to $35.4 million, or 0.66% of average non-covered loans held-in-portfolio (on an annualized basis), compared to $57.9 million, or 1.08% in the third quarter 2013. The decrease of $22.5 million is mainly driven by higher recoveries of $16.5 million, which include an $8.9 million recovery associated with an opportunistic sale of a portfolio of previously charged-off credit cards and personal loans in the BPPR segment. Excluding the effect of the previously charged-off consumer loans in BPPR, the net charge-offs ratio was 0.83%, an improvement of 25 basis points compared to the third quarter. Refer to Table J for further information on net charge-offs and related ratios.
  • The allowance for loan losses increased by $12.4 million from the third quarter of 2013, mainly driven by higher reserves in the BPPR segment. The general and specific reserves related to non-covered loans totaled $435.0 million and $103.5 million, respectively, at quarter-end, compared with $418.0 million and $108.1 million, respectively, as of September 30, 2013. The ratio of the allowance for loan losses to loans held-in-portfolio stood at 2.49% in the fourth quarter of 2013, compared to 2.46% on the previous quarter.
  • The ratio of allowance for loan losses to non-performing loans held-in-portfolio increased to 90.1% from 85.2% in the previous quarter.
  • The provision for loan losses for the fourth quarter of 2013 declined by $7.5 million, or 13.6%, versus the previous quarter mainly driven by the continued improvements in the credit quality of the US portfolios.
Credit Quality by Segment      
(Unaudited)
(In thousands) Quarters ended
BPPR   31-Dec-13   30-Sep-13   31-Dec-12
Provision for loan losses $ 62,658 $ 50,475 $ 78,092
Net charge-offs (excludes NPLs sale) 35,256 44,678 78,050
Total non-performing loans held-in-portfolio,
excluding covered loans 447,255 441,253 1,191,982
Allowance/ non-covered loans held-in-portfolio     2.69 %     2.55 %     2.92 %
 
  Quarters ended
BPNA   31-Dec-13   30-Sep-13   31-Dec-12
Provision for loan losses (reversal of provision) $ (14,929 ) $ 4,755 $ 8,164
Net charge-offs 110 13,214 22,804
Total non-performing loans held-in-portfolio,
excluding covered loans 150,693 176,320 233,151
Allowance/ non-covered loans held-in-portfolio     1.95 %     2.20 %     3.07 %
 

BPPR Segment

  • Total NPLs held-in-portfolio increased by $6.0 million from the third quarter of 2013, largely driven by higher residential mortgage NPLs of $28.6 million, offset in part by reductions in the commercial and construction NPLs of $18.5 million and $4.9 million, respectively. Although mortgage NPL inflows remained flat, the NPL upward trend stems from reduced level of outflows, reflective of the significant reduction in the NPL balances, which fell to their lowest level in the credit cycle as a result of the bulk sale during the second quarter of 2013.
  • Inflows of NPLs held-in-portfolio, excluding consumer loans, decreased by $9.8 million, or 7.2%, from the third quarter of 2013, driven by improvements in the commercial inflows, as the portfolio continues to show improving credit trends.
  • Net charge-offs decreased by $9.4 million, or 21.1%, from the third quarter of 2013 primarily related to recoveries associated with the sale during the fourth quarter of 2013 of a portfolio of previously charged-off credit cards and personal loans. The ratio of net charge-offs to average loans held-in-portfolio fell to 0.90% on an annualized basis, from 1.15% in the previous quarter. Excluding the effect of the sale, the net charge-off ratio decreased slightly to 1.12% during the fourth quarter.
  • The allowance for loan losses increased by $27.4 million from the third quarter of 2013. The increase in the ALLL was mostly influenced by the environmental factors adjustment in the allowance methodology considering prevailing economic conditions in Puerto Rico. The allowance for loan losses as a percentage of loans held-in-portfolio increased to 2.69% from 2.55% in the third quarter of 2013.
  • The ratio of allowance for loan losses to non-performing loans held-in-portfolio increased to 95.4% from 90.5% in the previous quarter.
  • The provision for loan losses for the fourth quarter of 2013 amounted to $62.7 million, increasing by $12.2 million from the previous quarter.

BPNA Segment

  • Total NPLs loans held-in-portfolio decreased by $25.6 million, or 14.5%, from the third quarter of 2013, reflective of sustained improvements in credit performance and loan resolutions. Total inflows of non-performing loans held-in-portfolio, excluding consumer loans, decreased by $10.7 million, or 40.2%, from the third quarter of 2013.
  • Net charge-offs decreased by $13.1 million, or 99.2%, from the previous quarter of 2013, primarily due to lower gross charge-offs in all loan categories, coupled with an increase in recoveries of $7.6 million, or 52.3%, from the third quarter of 2013, both most significantly in the commercial and legacy portfolios. The ratio of net charge-offs to average loans held-in-portfolio dipped to 0.01% on an annualized basis, compared to 0.91% in the previous quarter.
  • The allowance for loan losses decreased by $15.0 million from the third quarter of 2013 driven by continued credit quality improvements. The allowance for loan losses as a percentage of loans held-in-portfolio decreased to 1.95% from 2.20% in the third quarter of 2013. In light of these improvements, the provision for loan losses in the third quarter of 2013 resulted in a provision release of $14.9 million, resulting in a lower provision by $19.7 million compared to the previous quarter.
Financial Condition Highlights      
 
(Unaudited)        
(In thousands)   31-Dec-13   30-Sep-13   31-Dec-12
Total loans held-in-portfolio (net) $ 23,955,738 $ 23,860,264 $ 24,008,557
Total assets 35,749,298 36,052,116 36,507,535
Deposits 26,711,145 26,395,054 27,000,613
Borrowings 3,645,246 4,164,104 4,430,673
Total liabilities 31,123,093 31,658,231 32,397,535
Stockholders’ equity     4,626,205     4,393,885     4,110,000
 

Total assets decreased by approximately $302.8 million from the third quarter of 2013 driven by:

  • A decrease in the covered loan portfolio balance of $91.6 million due to the continuation of loan resolutions and the normal portfolio run-off.
  • A decrease in the FDIC loss share asset of $376.1 million mainly due to collections and the amortization of the asset, reflecting a decrease in estimated losses during the quarter.
  • Other assets decreased by $116.0 million due mainly to a reduction in the deferred tax asset of $101.2 million largely related to a positive adjustment in the pension plan liability and a $22.4 million decrease in the investment in EVERTEC, reflecting the impact of their previously mentioned secondary offering during the month of December .

These decreases were partially offset by:

  • An increase of $158.2 million in investment securities available for sale, primarily due to the purchase of US Agency positions at both BPPR and BPNA, offset by a decrease in CMOs and mortgage backed securities, mainly due to prepayments.
  • An increase of $183.2 million in non-covered loans held-in-portfolio mainly due to commercial and mortgage loans, offset by a decrease in construction loans at BPPR.

Total liabilities decreased by $535.1 million from the third quarter of 2013, driven by:

  • A decrease in repurchase agreements and other short-term borrowings of $558.9 million, as part of the Corporation’s normal funding activities.
  • A decrease of $332.4 million in other liabilities mainly due to $157.9 million in unsettled purchases of trading securities and a decrease of approximately $139.6 million in the pension plan liability resulting from a positive actuarial valuation adjustment.

These decreases were partially offset by:

  • An increase of $316.1 million in deposits, primarily due to non-brokered time deposits and demand deposits, offset by a decrease in savings and brokered certificates of deposits. Refer to Table G for details of deposit accounts.

Stockholders’ equity increased by $232.3 million from the third quarter of 2013, mainly as a result of the net income for the quarter of $163.0 million and a decrease of $68.3 million in other comprehensive loss due to the net effect of the above mentioned decrease in the pension plan liability, partially offset by 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 among the 40 largest U.S. banks by assets. 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 Thursday, January 23, 2014 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 866-202-3048 or 617-213-8843. The conference code is 59936852.

A replay of the webcast will be archived in Popular’s website. A telephone replay will be available from 4:00 p.m. on Thursday, January 23, 2014 to 11:59 p.m. on Thursday, January 30, 2014, at 888-286-8010 or 617-801-6888. The replay passcode is 48357719.

Popular, Inc.
Financial Supplement to Fourth 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
 
Table P - Adjusted Consolidated Statement of Operations for the Year Ended December 31, 2013 (Non-GAAP)
 
POPULAR, INC.
Financial Supplement to Fourth Quarter 2013 Earnings Release
Table A - Selected Ratios and Other Information
(Unaudited)
 
 
Quarters ended   Years ended
  31-Dec-13   30-Sep-13   31-Dec-12   31-Dec-13   31-Dec-12
Net income per common share:      
 
Basic $ 1.58 $ 2.22 $ 0.81 $ 5.80 $ 2.36
 
Diluted $ 1.57 $ 2.22 $ 0.81 $ 5.78 $ 2.35
 
Average common shares outstanding 102,774,144 102,714,262 102,628,274 102,693,685 102,429,755
 
Average common shares outstanding - assuming dilution 103,081,417 103,017,443 102,801,581 103,061,475 102,653,610
 
Common shares outstanding at end of period 103,397,699 103,327,146 103,169,806 103,397,699 103,169,806
 
Market value per common share $ 28.73 $ 26.25 $ 20.79 $ 28.73 $ 20.79
 
Market capitalization - (In millions) $ 2,971 $ 2,712 $ 2,145 $ 2,971 $ 2,145
 
Return on average assets 1.79 % 2.51 % 0.92 % 1.65 % 0.68 %
 
Return on average common equity 14.59 % 21.64 % 8.50 % 14.43 % 6.37 %
 
Net interest margin [2] 4.74 % 4.49 % 4.42 % 4.52 % 4.36 %
 
Common equity per share $ 44.26 $ 42.04 $ 39.35 $ 44.26 $ 39.35
 
Tangible common book value per common share (non-GAAP) [1] $ 37.56 $ 35.32 $ 32.55 $ 37.56 $ 32.55
 
Tangible common equity to tangible assets (non-GAAP) [1] 11.08 % 10.32 % 9.38 % 11.08 % 9.38 %
 
Tier 1 risk-based capital [3] 19.41 % 18.54 % 17.35 % 19.41 % 17.35 %
 
Total risk-based capital [3] 20.69 % 19.82 % 18.63 % 20.69 % 18.63 %
 
Tier 1 leverage [3] 12.85 % 12.26 % 11.52 % 12.85 % 11.52 %
 
Tier 1 common equity to risk-weighted assets (non-GAAP) [1] [3]   15.03 %     14.20 %     13.18 %     15.03 %     13.18 %
[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 Fourth Quarter 2013 Earnings Release
Table B - Consolidated Statement of Operations
(Unaudited)
    Quarters ended   Variance   Quarter ended   Variance   Years ended
(In thousands, except per share information)   31-Dec-13   30-Sep-13  

Q4 2013

vs.Q3 2013

  31-Dec-12  

Q4 2013

vs.Q4 2012

  31-Dec-13   31-Dec-12
Interest income:    
Loans $ 408,566 $ 392,195 $ 16,371 $ 394,294 $ 14,272 $ 1,581,612 $ 1,560,687
Money market investments 832 848 (16 ) 929 (97 ) 3,464 3,703
Investment securities 34,317 33,561 756 38,420 (4,103 ) 141,807 168,632
  Trading account securities     5,361       5,242       119       5,155       206       21,573       22,824  
  Total interest income     449,076       431,846       17,230       438,798       10,278       1,748,456       1,755,846  
Interest expense:
Deposits 31,396 31,848 (452 ) 40,919 (9,523 ) 137,364 184,216
Short-term borrowings 9,320 9,564 (244 ) 10,302 (982 ) 38,433 46,805
  Long-term debt     32,018       36,228       (4,210 )     36,160       (4,142 )     140,079       148,192  
  Total interest expense     72,734       77,640       (4,906 )     87,381       (14,647 )     315,876       379,213  
Net interest income 376,342 354,206 22,136 351,417 24,925 1,432,580 1,376,633
Provision for loan losses - non-covered loans 47,729 55,230 (7,501 ) 86,256 (38,527 ) 533,167 334,102
Provision for loan losses - covered loans     8,907       17,433       (8,526 )     (3,445 )     12,352       69,396       74,839  
Net interest income after provision for loan losses     319,706       281,543       38,163       268,606       51,100       830,017       967,692  
Service charges on deposit accounts 42,154 43,096 (942 ) 44,449 (2,295 ) 172,909 183,026
Other service fees 61,566 58,584 2,982 65,283 (3,717 ) 235,125 237,865
Mortgage banking activities 14,392 18,896 (4,504 ) 24,373 (9,981 ) 71,673 84,791
Net gain (loss) and valuation adjustments on investment securities 2,110 - 2,110 (1,422 ) 3,532 7,966 (1,707 )
Trading account (loss) profit (1,547 ) (6,607 ) 5,060 (1,562 ) 15 (13,483 ) 4,478
Net gain (loss) on sale of loans, including valuation adjustments on loans held-for-sale 5,402 3,454 1,948 3,043 2,359 (49,130 ) (27,416 )
Adjustments (expense) to indemnity reserves on loans sold (6,892 ) (2,387 ) (4,505 ) (3,208 ) (3,684 ) (37,054 ) (21,198 )
FDIC loss share (expense) income (37,164 ) (14,866 ) (22,298 ) (36,824 ) (340 ) (82,051 ) (56,211 )
Other operating income     111,169       191,789       (80,620 )     56,348       54,821       504,614       127,584  
  Total non-interest income     191,190       291,959       (100,769 )     150,480       40,710       810,569       531,212  
Operating expenses:
Personnel costs
Salaries 75,310 76,735 (1,425 ) 74,846 464 299,782 301,965
Commissions, incentives and other bonuses 13,965 14,457 (492 ) 14,817 (852 ) 59,437 54,702
Pension, postretirement and medical insurance 13,948 14,724 (776 ) 16,453 (2,505 ) 58,658 66,976
  Other personnel costs, including payroll taxes     11,137       10,923       214       10,209       928       43,990       42,059  
Total personnel costs 114,360 116,839 (2,479 ) 116,325 (1,965 ) 461,867 465,702
... Net occupancy expenses 27,039 24,711 2,328 26,116 923 99,331 97,259
Equipment expenses 11,922 11,768 154 11,602 320 47,483 45,290
Other taxes 13,663 17,749 (4,086 ) 11,942 1,721 58,286 50,120
Professional fees 76,780 72,039 4,741 77,633 (853 ) 289,280 284,325
Communications 6,260 6,558 (298 ) 6,558 (298 ) 26,294 26,834
Business promotion 17,015 14,982 2,033 16,822 193 60,476 61,576
FDIC deposit insurance 15,630 16,100 (470 ) 13,691 1,939 60,513 85,697
Loss on early extinguishment of debt - 3,388 (3,388 ) 12 (12 ) 3,388 25,196
Other real estate owned (OREO) expenses 10,558 17,175 (6,617 ) 1,079 9,479 80,236 23,520
Credit and debit card processing, volume, interchange and other expenses 5,409 5,076 333 4,646 763 20,812 19,729
Other operating expenses 21,587 17,746 3,841 26,339 (4,752 ) 74,737 84,712
Amortization of intangibles     2,480       2,468       12       2,467       13       9,883       10,072  
  Total operating expenses     322,703       326,599       (3,896 )     315,232       7,471       1,292,586       1,280,032  
Income before income tax 188,193 246,903 (58,710 ) 103,854 84,339 348,000 218,872
Income tax expense (benefit)     25,162       17,768       7,394       19,914       5,248       (251,327 )     (26,403 )
Net income   $ 163,031     $ 229,135     $ (66,104 )   $ 83,940     $ 79,091     $ 599,327     $ 245,275  
Net income applicable to common stock   $ 162,100     $ 228,204     $ (66,104 )   $ 83,009     $ 79,091     $ 595,604     $ 241,552  
Net income per common share - basic   $ 1.58     $ 2.22     $ (0.64 )   $ 0.81     $ 0.77     $ 5.80     $ 2.36  
Net income per common share - diluted   $ 1.57     $ 2.22     $ (0.65 )   $ 0.81     $ 0.76     $ 5.78     $ 2.35  
 
Popular, Inc.
Financial Supplement to Fourth Quarter 2013 Earnings Release
Table C - Consolidated Statement of Financial Condition
(Unaudited)
            Variance
Q4 2013 vs.
(In thousands)   31-Dec-13   30-Sep-13   31-Dec-12   Q3 2013
Assets:
Cash and due from banks $ 423,211 $ 368,590 $ 439,363 $ 54,621
Money market investments 858,453 961,788 1,085,580 (103,335 )
Trading account securities, at fair value 339,743 338,848 314,525 895
Investment securities available-for-sale, at fair value 5,294,800 5,136,618 5,084,201 158,182
Investment securities held-to-maturity, at amortized cost 140,496 140,355 142,817 141
Other investment securities, at lower of cost or realizable value 181,752 198,864 185,443 (17,112 )
Loans held-for-sale, at lower of cost or fair value 110,426 124,532 354,468 (14,106 )
Loans held-in-portfolio:
Loans not covered under loss sharing agreements with the FDIC 21,704,010 21,520,054 21,080,005 183,956
Loans covered under loss sharing agreements with the FDIC 2,984,427 3,076,009 3,755,972 (91,582 )
Less: Unearned income 92,144 92,871 96,813 (727 )
    Allowance for loan losses     640,555       642,928       730,607       (2,373 )
    Total loans held-in-portfolio, net     23,955,738       23,860,264       24,008,557       95,474  
FDIC loss share asset 948,608 1,324,711 1,399,098 (376,103 )
Premises and equipment, net 519,516 519,623 535,793 (107 )
Other real estate not covered under loss sharing agreements with the FDIC 135,501 135,502 266,844 (1 )
Other real estate covered under loss sharing agreements with the FDIC 168,007 159,968 139,058 8,039
Accrued income receivable 131,536 122,881 125,728 8,655
Mortgage servicing assets, at fair value 161,099 161,445 154,430 (346 )
Other assets 1,687,523 1,803,478 1,569,578 (115,955 )
Goodwill 647,757 647,757 647,757 -
Other intangible assets     45,132       46,892       54,295       (1,760 )
Total assets   $ 35,749,298     $ 36,052,116     $ 36,507,535     $ (302,818 )
Liabilities and Stockholders’ Equity:
Liabilities:
Deposits:
Non-interest bearing $ 5,922,682 $ 5,762,554 $ 5,794,629 $ 160,128
    Interest bearing     20,788,463       20,632,500       21,205,984       155,963  
    Total deposits     26,711,145       26,395,054       27,000,613       316,091  
Federal funds purchased and assets sold under agreements to repurchase 1,659,292 1,793,208 2,016,752 (133,916 )
Other short-term borrowings 401,200 826,200 636,200 (425,000 )
Notes payable 1,584,754 1,544,696 1,777,721 40,058
Other liabilities     766,702       1,099,073       966,249       (332,371 )
Total liabilities     31,123,093       31,658,231       32,397,535       (535,138 )
Stockholders’ equity:
Preferred stock 50,160 50,160 50,160 -
Common stock 1,034 1,034 1,032 -
Surplus 4,170,152 4,155,244 4,150,294 14,908
Retained earnings 594,430 445,330 11,826 149,100
Treasury stock (880 ) (877 ) (444 ) (3 )
Accumulated other comprehensive loss     (188,691 )     (257,006 )     (102,868 )     68,315  
    Total stockholders’ equity     4,626,205       4,393,885       4,110,000       232,320  
Total liabilities and stockholders’ equity   $ 35,749,298     $ 36,052,116     $ 36,507,535     $ (302,818 )
 
Popular, Inc.
Financial Supplement to Fourth Quarter 2013 Earnings Release
Table D - Consolidated Average Balances and Yield / Rate Analysis - QUARTER
(Unaudited)
                                           
Quarter ended Quarter ended Quarter ended Variance Variance
31-Dec-13 30-Sep-13 31-Dec-12 Q4 2013 vs. Q3 2013 Q4 2013 vs. Q4 2012
($ amounts in millions; yields not on a taxable equivalent basis)   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 $7,038   $40.5   2.30 % $6,813   $39.7   2.32 % $6,693   $44.5   2.66 % $225   $0.8   (0.02) % $345   ($4.0)   (0.36) %
Loans not covered under loss sharing agreements with the FDIC:
Commercial 10,097 122.6 4.82 10,107 126.0 4.95 10,200 124.1 4.84 (10) (3.4) (0.13) (103) (1.5) (0.02)
Construction 291 4.8 6.58 319 4.3 5.30 386 3.3 3.44 (28) 0.5 1.28 (95) 1.5 3.14
Mortgage 6,688 87.1 5.21 6,633 81.7 4.93 6,169 81.0 5.25 55 5.4 0.28 519 6.1 (0.04)
Consumer 3,906 96.7 9.82 3,906 97.6 9.91 3,835 97.5 10.11 - (0.9) (0.09) 71 (0.8) (0.29)
Lease financing 538   10.5   7.79 537   10.9   8.08 540   11.4   8.48 1   (0.4)   (0.29) (2)   (0.9)   (0.69)
Total loans not covered under loss sharing agreements with the FDIC 21,520 321.7 5.95 21,502 320.5 5.93 21,130 317.3 5.98 18 1.2 0.02 390 4.4 (0.03)
Loans covered under loss sharing agreements with the FDIC 3,017   86.8   11.43 3,119   71.6   9.13 3,832   77.0   8.01 (102)   15.2   2.30 (815)   9.8   3.42
Total loans 24,537   408.5   6.62 24,621   392.1   6.33 24,962   394.3   6.29 (84)   16.4   0.29 (425) 14.2 0.33
Total interest earning assets 31,575   $449.0   5.66 % 31,434   $431.8   5.47 % 31,655   $438.8   5.52 % 141   $17.2   0.19 % (80)   $10.2   0.14 %
Allowance for loan losses (632) (632) (754) - 122
Other non-interest earning assets 5,092 5,372 5,400 (280) (308)
Total average assets $36,035 $36,174 $36,301 ($139) ($266)
 
Liabilities and Stockholders' Equity:
Interest bearing deposits:
NOW and money market $5,653 $4.4 0.31 % $5,766 $4.1 0.29 % $5,707 $6.1 0.43 % ($113) $0.3 0.02 % ($54) ($1.7) (0.12) %
Savings 6,872 3.8 0.22 6,828 3.7 0.21 6,654 4.8 0.29 44 0.1 0.01 218 (1.0) (0.07)
Time deposits 8,381   23.2   1.10 8,231   24.0   1.16 8,650   30.0   1.38 150   (0.8)   (0.06) (269) (6.8) (0.28)
Total interest bearing deposits 20,906 31.4 0.60 20,825 31.8 0.61 21,011 40.9 0.77 81 (0.4) (0.01) (105) (9.5) (0.17)
Borrowings 3,795   41.3   4.35 4,404   45.8   4.15 4,704   46.5   3.94 (609)   (4.5)   0.20 (909) (5.2) 0.41
Total interest bearing liabilities 24,701   72.7   1.17 25,229   77.6   1.23 25,715   87.4   1.35 (528)   (4.9)   (0.06) (1,014)   (14.7)   (0.18)
Net interest spread 4.49 % 4.24 % 4.17 % 0.25 % 0.32 %
Non-interest bearing deposits 5,829 5,741 5,583 88 246
Other liabilities 1,046 969 1,067 77 (21)
Stockholders' equity 4,459 4,235 3,936 224 523
Total average liabilities and stockholders' equity $36,035 $36,174 $36,301 ($139) ($266)
 
Net interest income / margin non-taxable equivalent basis $376.3 4.74 % $354.2   4.49 % $351.4   4.42 % $22.1   0.25 % $24.9   0.32   %
 
Popular, Inc.
Financial Supplement to Fourth Quarter 2013 Earnings Release
Table E - Consolidated Average Balances and Yield / Rate Analysis - YEAR-TO-DATE
(Unaudited)
 
      Year ended     Year ended          
31-Dec-13 31-Dec-12 Variance
Average   Income /   Yield / Average   Income /   Yield / Average Income / Yield /
($ amounts in millions; yields not on a taxable equivalent basis)   balance   Expense   Rate       balance   Expense   Rate       balance   Expense   Rate
Assets:
Interest earning assets:
Money market, trading and investment securities $6,941   $166.8   2.40 % $6,724   $195.1   2.90 % $217   ($28.3)   (0.50) %
Loans not covered under loss sharing agreements with the FDIC:
Commercial 10,077 491.5 4.88 10,226 501.7 4.91 (149) (10.2) (0.03)
Construction 323 16.3 5.04 459 16.6 3.61 (136) (0.3) 1.43
Mortgage 6,688 343.4 5.13 5,817 314.9 5.41 871 28.5 (0.28)
Consumer 3,879 386.3 9.96 3,749 379.1 10.11 130 7.2 (0.15)
Lease financing 540   43.5   8.07 545   47.0   8.62 (5)   (3.5)   (0.55)
Total loans not covered under loss sharing agreements with the FDIC 21,507 1,281.0 5.96 20,796 1,259.3 6.06 711 21.7 (0.10)
Loans covered under loss sharing agreements with the FDIC 3,228   300.7   9.32 4,050   301.4   7.44 (822)   (0.7)   1.88
Total loans 24,735   1,581.7   6.39 24,846   1,560.7   6.28 (111)   21.0   0.11
Total interest earning assets 31,676   $1,748.5   5.52 % 31,570   $1,755.8   5.56 % 106   ($7.3)   (0.04) %
Allowance for loan losses (649) (772) 123
Other non-interest earning assets 5,240 5,466 (226)
Total average assets $36,267 $36,264 $3
 
Liabilities and Stockholders' Equity:
Interest bearing deposits:
NOW and money market $5,738 $19.5 0.34 % $5,555 $24.6 0.44 % $183 ($5.1) (0.10) %
Savings 6,792 16.0 0.24 6,571 21.8 0.33 221 (5.8) (0.09)
Time deposits 8,514   101.9   1.20 9,421   137.8   1.46 (907)   (35.9)   (0.26)
Total interest bearing deposits 21,044 137.4 0.65 21,547 184.2 0.85 (503) (46.8) (0.20)
Borrowings 4,293   178.5   4.16 4,416   195.0   4.42 (123)   (16.5)   (0.26)
Total interest bearing liabilities 25,337   315.9   1.25 25,963   379.2   1.46 (626)   (63.3)   (0.21)
Net interest spread 4.27 % 4.10 % 0.17 %
Non-interest bearing deposits 5,728 5,357 371
Other liabilities 1,026 1,100 (74)
Stockholders' equity 4,176 3,844 332
Total average liabilities and stockholders' equity $36,267 $36,264 $3
 
Net interest income / margin non-taxable equivalent basis $1,432.6   4.52 % $1,376.6   4.36 % $56.0   0.16 %
 
Popular, Inc.                  
Financial Supplement to Fourth Quarter 2013 Earnings Release
Table F - Mortgage Banking Activities and Other Service Fees
(Unaudited)
 
Mortgage Banking Activities Variance
Quarters ended Q4 2013 vs. Q4 2013 vs. Years ended Variance
(In thousands)     31-Dec-13   30-Sep-13   31-Dec-12   Q3 2013   Q4 2012   31-Dec-13   31-Dec-12  

2013 vs.

2012

Mortgage servicing fees, net of fair value adjustments:
Mortgage servicing fees $ 11,371 $ 11,547 $ 11,837 $ (176) $ (466) $ 45,481 $ 48,176 $ (2,695)
  Mortgage servicing rights fair value adjustments     (4,541)   3,879   (10,189)   (8,420)   5,648   (11,403)   (17,406)   6,003
Total mortgage servicing fees, net of fair value adjustments     6,830   15,426   1,648   (8,596)   5,182   34,078   30,770   3,308
Net gain (loss) on sale of loans, including valuation on loans     9,751   3,559   27,153   6,192   (17,402)   26,719   76,181   (49,462)
Trading account (loss) profit:
Unrealized gain (losses) on outstanding derivative positions 1,011 (865) 458 1,876 553 746 304 442
  Realized gain (losses) on closed derivative positions     (3,200)   776   (4,886)   (3,976)   1,686   10,130   (22,464)   32,594
Total trading account (loss) profit     (2,189)   (89)   (4,428)   (2,100)   2,239   10,876   (22,160)   33,036
Total mortgage banking activities     $ 14,392   $ 18,896   $ 24,373   $ (4,504)   $ (9,981)   $ 71,673   $ 84,791   $ (13,118)
 
 
Other Service Fees Variance
Quarters ended Q4 2013 vs. Q4 2013 vs. Years ended Variance
(In thousands)     31-Dec-13   30-Sep-13   31-Dec-12   Q3 2013   Q4 2012   31-Dec-13   31-Dec-12  

2013 vs.

2012

Other service fees:
Debit card fees $ 11,124 $ 11,005 $ 11,629 $ 119 $ (505) $ 43,262 $ 44,852 $ (1,590)
Insurance fees 17,530 13,255 17,050 4,275 480 55,323 53,825 1,498
Credit card fees 17,328 16,890 17,193 438 135 66,309 61,576 4,733
Sale and administration of investment products 7,331 8,981 9,721 (1,650) (2,390) 35,272 37,766 (2,494)
Trust fees 4,525 4,148 4,226 377 299 17,285 16,353 932
Processing fees - - 1,511 - (1,511) - 6,330 (6,330)
  Other fees     3,728   4,305   3,953   (577)   (225)   17,674   17,163   511
Total other service fees     $ 61,566   $ 58,584   $ 65,283   $ 2,982   $ (3,717)   $ 235,125   $ 237,865   $ (2,740)
 
Popular, Inc.          
Financial Supplement to Fourth Quarter 2013 Earnings Release
Table G - Loans and Deposits
(Unaudited)
 
Loans - Ending Balances
Variance
(In thousands)   31-Dec-13   30-Sep-13   31-Dec-12  

Q4 2013 vs.

Q3 2013

 

Q4 2013 vs.

Q4 2012

Loans not covered under FDIC loss sharing agreements:
Commercial $ 10,037,184 $ 9,845,477 $ 9,858,202 $ 191,707 $ 178,982
Construction 206,084 293,220 252,857 (87,136) (46,773)
Legacy [1] 211,135 235,645 384,217 (24,510) (173,082)
Lease financing 543,761 539,290 540,523 4,471 3,238
Mortgage 6,681,476 6,613,133 6,078,507 68,343 602,969
Consumer   3,932,226   3,900,418   3,868,886   31,808   63,340
Total non-covered loans held-in-portfolio $ 21,611,866 $ 21,427,183 $ 20,983,192 $ 184,683 $ 628,674
Loans covered under FDIC loss sharing agreements   2,984,427   3,076,009   3,755,972   (91,582)   (771,545)
Total loans held-in-portfolio   $ 24,596,293   $ 24,503,192   $ 24,739,164   $ 93,101   $ (142,871)
Loans held-for-sale:
Commercial $ 603 $ - $ 16,047 $ 603 $ (15,444)
Construction - - 78,140 - (78,140)
Legacy [1] - 1,680 2,080 (1,680) (2,080)
Mortgage   109,823   122,852   258,201   (13,029)   (148,378)
Total loans held-for-sale   $ 110,426   $ 124,532   $ 354,468   $ (14,106)   $ (244,042)
Total loans   $ 24,706,719   $ 24,627,724   $ 25,093,632   $ 78,995   $ (386,913)
[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)   31-Dec-13   30-Sep-13   31-Dec-12  

Q4 2013 vs.

Q3 2013

 

Q4 2013 vs.

Q4 2012

Demand deposits [1] $ 6,590,963 $ 6,410,458 $ 6,442,739 $ 180,505 $ 148,224
Savings, NOW and money market deposits (non-brokered) 11,255,309 11,335,441 11,190,335 (80,132) 64,974
Savings, NOW and money market deposits (brokered) 553,521 552,053 456,830 1,468 96,691
Time deposits (non-brokered) 6,478,103 6,181,676 6,541,660 296,427 (63,557)
Time deposits (brokered CDs)   1,833,249   1,915,426   2,369,049   (82,177)   (535,800)
Total deposits   $ 26,711,145   $ 26,395,054   $ 27,000,613   $ 316,091   $ (289,468)
[1] Includes interest and non-interest demand bearing deposits.                
 
Popular, Inc.
Financial Supplement to Fourth Quarter 2013 Earnings Release
Table H - Non-Performing Assets
(Unaudited)
                    Variance
(Dollars in thousands)   31-Dec-13  

As a % of

loans HIP by

category

      30-Sep-13  

As a % of

loans HIP by

category

      31-Dec-12  

As a % of

loans HIP by

category

     

Q4 2013 vs.

Q3 2013

 

Q4 2013 vs.

Q4 2012

Non-accrual loans:  
Commercial $ 279,053 2.8 % $ 316,040 3.2 % $ 665,289 6.7 % $ (36,987) $ (386,236)
Construction 23,771 11.5 28,782 9.8 43,350 17.1 (5,011) (19,579)
Legacy [1] 15,050 7.1 24,206 10.3 40,741 10.6 (9,156) (25,691)
Lease financing 3,495 0.6 3,716 0.7 4,865

0.9

(221) (1,370)
Mortgage 232,681 3.5 203,208 3.1 630,130 10.4 29,473 (397,449)
Consumer   43,898   1.1       41,621   1.1       40,758   1.1       2,277   3,140
Total non-performing loans held-in-
portfolio, excluding covered loans 597,948 2.8 % 617,573 2.9 % 1,425,133 6.8 % (19,625) (827,185)
Non-performing loans held-for-sale [2] 1,092 2,099 96,320 (1,007) (95,228)
Other real estate owned (“OREO”),
excluding covered OREO   135,501           135,502           266,844           (1)   (131,343)
Total non-performing assets,
excluding covered assets 734,541 755,174 1,788,297 (20,633) (1,053,756)
Covered loans and OREO   187,261           188,353           213,469           (1,092)   (26,208)
Total non-performing assets   $ 921,802           $ 943,527           $ 2,001,766           $ (21,725)   $ (1,079,964)
Accruing loans past due 90 days or more [3]   $ 418,028           $ 414,189           $ 388,712           $ 3,839   $ 29,316
Ratios excluding covered loans:
Non-performing loans held-in-portfolio
to loans held-in-portfolio 2.77 % 2.88 % 6.79 %
Allowance for loan losses to loans
held-in-portfolio 2.49 2.46 2.96
Allowance for loan losses to
non-performing loans, excluding loans
held-for-sale   90.05           85.19           43.62                
Ratios including covered loans:
Non-performing assets to total assets 2.58 % 2.62 % 5.48 %
Non-performing loans held-in-portfolio
to loans held-in-portfolio 2.51 2.64 6.06
Allowance for loan losses to loans
held-in-portfolio 2.60 2.62 2.95
Allowance for loan losses to non-performing
loans, excluding loans held-for-sale   103.78           99.53           48.72                
[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 December 31, 2013 consisted of $603 thousand in commercial loans and $489 thousand in mortgage loans (September 30, 2013 - $1.7 million in legacy loans and $0.4 million in mortgage loans; December 31, 2012 - $78 million in construction loans, $16 million in commercial loans, $2 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 $111 million of residential mortgage loans insured by FHA or guaranteed by the VA that are no longer accruing interest as of December 31, 2013.
 
Popular, Inc.
Financial Supplement to Fourth Quarter 2013 Earnings Release
Table I - Activity in Non-Performing Loans
(Unaudited)
 
Commercial loans held-in-portfolio:
    Quarter ended   Quarter ended
31-Dec-13 30-Sep-13
(In thousands)   BPPR   BPNA   Popular, Inc.   BPPR   BPNA   Popular, Inc.
Beginning balance NPLs $ 204,569   $ 111,471   $ 316,040 $ 199,720   $ 123,435   $ 323,155
Plus:
New non-performing loans 31,649 7,905 39,554 40,257 17,898 58,155
Advances on existing non-performing loans - 5 5 - 304 304
Less:
Non-performing loans transferred to OREO (4,800) (505) (5,305) (811) (1,036) (1,847)
Non-performing loans charged-off (21,548) (10,359) (31,907) (17,773) (9,572) (27,345)
Loans returned to accrual status / loan collections (23,773) (14,682) (38,455) (16,824) (19,073) (35,897)
Loans transferred to held-for-sale   -   (879)   (879)   -   (485)   (485)
Ending balance NPLs   $ 186,097   $ 92,956   $ 279,053   $ 204,569   $ 111,471   $ 316,040
 
Construction loans held-in-portfolio:
Quarter ended Quarter ended
31-Dec-13   30-Sep-13
(In thousands)   BPPR   BPNA   Popular, Inc.   BPPR   BPNA   Popular, Inc.
Beginning balance NPLs $ 23,019 $ 5,763 $ 28,782 $ 39,044 $ 5,834 $ 44,878
Plus:
New non-performing loans - - - 2,000 - 2,000
Less:
Non-performing loans transferred to OREO - - - (775) - (775)
Non-performing loans charged-off (1,511) - (1,511) (1,442) - (1,442)
Loans returned to accrual status / loan collections   (3,400)   (100)   (3,500)   (15,808)   (71)   (15,879)
Ending balance NPLs   $ 18,108   $ 5,663   $ 23,771   $ 23,019   $ 5,763   $ 28,782
 
Mortgage loans held-in-portfolio:
Quarter ended Quarter ended
31-Dec-13   30-Sep-13
(In thousands)   BPPR   BPNA   Popular, Inc.   BPPR   BPNA   Popular, Inc.
Beginning balance NPLs $ 177,835 $ 25,373 $ 203,208 $ 144,717 $ 27,105 $ 171,822
Plus:
New non-performing loans 94,721 5,593 100,314 93,867 5,265 99,132
Less:
Non-performing loans transferred to OREO (3,691) (710) (4,401) (3,161) (1,236) (4,397)
Non-performing loans charged-off (5,787) (825) (6,612) (5,539) (1,791) (7,330)
Loans returned to accrual status / loan collections   (56,689)   (3,139)   (59,828)   (52,049)   (3,970)   (56,019)
Ending balance NPLs   $ 206,389   $ 26,292   $ 232,681   $ 177,835   $ 25,373   $ 203,208

 

Legacy loans held-in-portfolio:
Quarter ended Quarter ended
31-Dec-13   30-Sep-13
(In thousands)   BPPR   BPNA   Popular, Inc.   BPPR   BPNA   Popular, Inc.
Beginning balance NPLs $ - $ 24,206 $ 24,206 $ - $ 28,434 $ 28,434
Plus:
New non-performing loans - 2,449 2,449 - 3,168 3,168
Advances on existing non-performing loans - 45 45 - 97 97
Less:
Non-performing loans charged-off - (3,740) (3,740) - (5,013) (5,013)
Loans returned to accrual status / loan collections   -   (7,910)   (7,910)   -   (2,480)   (2,480)
Ending balance NPLs   $ -   $ 15,050   $ 15,050   $ -   $ 24,206   $ 24,206
 
Total non-performing loans held-in-portfolio (excluding consumer loans):
Quarter ended Quarter ended
31-Dec-13   30-Sep-13
(In thousands)   BPPR   BPNA   Popular, Inc.   BPPR   BPNA   Popular, Inc.
Beginning balance NPLs $ 405,423 $ 166,813 $ 572,236 $ 383,481 $ 184,808 $ 568,289
Plus:
New non-performing loans 126,370 15,947 142,317 136,124 26,331 162,455
Advances on existing non-performing loans - 50 50 - 401 401
Less:
Non-performing loans transferred to OREO (8,491) (1,215) (9,706) (4,747) (2,272) (7,019)
Non-performing loans charged-off (28,846) (14,924) (43,770) (24,754) (16,376) (41,130)
Loans returned to accrual status / loan collections (83,862) (25,831) (109,693) (84,681) (25,594) (110,275)
Loans transferred to held-for-sale   -   (879)   (879)   -   (485)   (485)
Ending balance NPLs   $ 410,594   $ 139,961   $ 550,555   $ 405,423   $ 166,813   $ 572,236
 
Popular, Inc.
Financial Supplement to Fourth Quarter 2013 Earnings Release
Table J - Allowance for Credit Losses, Net Charge-offs and Related Ratios
(Unaudited)
       
 
Quarter ended Quarter ended Quarter ended
    31-Dec-13   30-Sep-13   31-Dec-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 $ 526,100 $ 116,828 $ 642,928 $ 528,762 $ 106,457 $ 635,219 $ 636,299 $ 124,873 $ 761,172
Provision for loan losses   47,729   8,907   56,636   55,230   17,433   72,663   86,256   (3,445)   82,811  
    573,829   125,735   699,564   583,992   123,890   707,882   722,555   121,428   843,983  
Net loans charged-off (recovered):
BPPR
Commercial 15,177 13,433 28,610 16,145 2,533 18,678 41,540 492 42,032
Construction (1,796) 6,067 4,271 (4,906) 2,893 (2,013) (2,371) 7,561 5,190
Lease financing 838 - 838 470 - 470 516 - 516
Mortgage 6,981 4,729 11,710 11,393 1,579 12,972 17,310 885 18,195
Consumer   14,056   (586)   13,470   21,576   57   21,633   21,055   3,584   24,639
Total BPPR   35,256   23,643   58,899   44,678   7,062   51,740   78,050   12,522   90,572
 
BPNA
Commercial 159 - 159 4,543 - 4,543 7,044 - 7,044
Construction - - - - - - 239 - 239
Legacy [1] (5,118) - (5,118) 2,321 - 2,321 3,369 - 3,369
Mortgage 660 - 660 1,334 - 1,334 3,023 - 3,023
Consumer   4,409   -   4,409   5,016   -   5,016   9,129   -   9,129  
Total BPNA   110   -   110   13,214   -   13,214   22,804   -   22,804  
Total loans charged-off (recovered) - Popular, Inc.   35,366   23,643   59,009   57,892   7,062   64,954   100,854   12,522   113,376  
Balance at end of period   $ 538,463   $ 102,092   $ 640,555   $ 526,100   $ 116,828   $ 642,928   $ 621,701   $ 108,906   $ 730,607  
 
POPULAR, INC.
Annualized net charge-offs to average loans held-in-portfolio 0.66 % 0.97 % 1.08 % 1.06 % 1.94 % 1.84 %
Provision for loan losses to net charge-offs [2] 1.35 x 0.96 x 0.95 x 1.12 x 0.86 x 0.73 x
 
BPPR
Annualized net charge-offs to average loans held-in-portfolio 0.90 % 1.26 % 1.15 % 1.11 % 2.07 % 1.91 %
Provision for loan losses to net charge-offs [2] 1.78 x 1.22 x 1.13 x 1.31 x 1.00 x 0.82 x
 
BPNA
Annualized net charge-offs to average loans held-in-portfolio 0.01 % 0.91 % 1.60 %
Provision (reversal) for loan losses to net charge-offs           (135.72) x         0.36 x         0.36 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.
 
 
Year ended Year ended
(Dollars in thousands) 31-Dec-13   31-Dec-12  
   

Non-covered

loans

  Covered loans   Total  

Non-covered

loans

  Covered loans   Total  
Balance at beginning of period $ 621,701 $ 108,906 $ 730,607 $ 690,363 $ 124,945 $ 815,308
Provision for loan losses   533,167   69,396   602,563   334,102   74,839   408,941  
    1,154,868   178,302   1,333,170   1,024,465   199,784   1,224,249  
BPPR
Commercial 85,601 27,607 113,208 144,640 46,259 190,899
Construction (8,642) 34,108 25,466 (2,283) 30,495 28,212
Lease financing 3,506 - 3,506 943 - 943
Mortgage 47,736 10,614 58,350 56,777 5,909 62,686
Consumer   75,560   3,881   79,441   90,095   8,215   98,310  
Total BPPR   203,761   76,210   279,971   290,172   90,878   381,050  
 
BPNA
Commercial 23,368 - 23,368 44,653 - 44,653
Construction - - - 400 - 400
Legacy [1] (2,583) - (2,583) 16,338 - 16,338
Mortgage 7,803 - 7,803 15,163 - 15,163
Consumer   21,411   -   21,411   36,004   -   36,004  
Total BPNA   49,999   -   49,999   112,558   -   112,558  
Total loans charged-off (recovered) - Popular, Inc.   253,760   76,210   329,970   402,730   90,878   493,608  
Net write-downs [3]   (362,645)   -   (362,645)   (34)   -   (34)  
Balance at end of period   $ 538,463   $ 102,092   $ 640,555   $ 621,701   $ 108,906   $ 730,607  
 
POPULAR, INC.
Annualized net charge-offs to average loans held-in-portfolio 1.19 % 1.34 % 1.97 % 2.01 %
Provision for loan losses to net charge-offs [2] 0.85 x 0.86 x 0.83 x 0.83 x
 
BPPR
Annualized net charge-offs to average loans held-in-portfolio 1.30 % 1.49 % 1.96 % 2.02 %
Provision for loan losses to net charge-offs [2] 1.13 x 1.07 x 0.97 x 0.94 x
 
BPNA
Annualized net charge-offs to average loans held-in-portfolio 0.87 % 1.98 %
Provision (reversal) for loan losses to net charge-offs           (0.29) x         0.46 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 year ended December 31, 2013.
 
[3] Net write-downs for the year ended December 31, 2013 are related to loans sold.
 
Popular, Inc.
Financial Supplement to Fourth Quarter 2013 Earnings Release
Table K - Allowance for Loan Losses - Breakdown of General and Specific Reserves - CONSOLIDATED
(Unaudited)
 
                               
31-Dec-13
(Dollars in thousands)   Commercial   Construction   Legacy [3]   Mortgage   Lease financing   Consumer   Total [2]
Specific ALLL $ 16,409 $ 177 $ - $ 55,667 $ 1,053 $ 30,200 $ 103,506
Impaired loans [1] $ 297,516 $ 22,486 $ 6,045 $ 452,073 $ 2,893 $ 127,703 $ 908,716
Specific ALLL to impaired loans [1] 5.52 % 0.79 % - % 12.31 % 36.40 % 23.65 % 11.39 %
General ALLL $ 158,573 $ 5,165 $ 13,704 $ 101,262 $ 9,569 $ 146,684 $ 434,957
Loans held-in-portfolio, excluding impaired loans [1] $ 9,739,669 $ 183,598 $ 205,090 $ 6,229,403 $ 540,868 $ 3,804,523 $ 20,703,151
General ALLL to loans held-in-portfolio, excluding impaired loans [1] 1.63 % 2.81 % 6.68 % 1.63 % 1.77 % 3.86 % 2.10 %
Total ALLL $ 174,982 $ 5,342 $ 13,704 $ 156,929 $ 10,622 $ 176,884 $ 538,463
Total non-covered loans held-in-portfolio [1] $ 10,037,185 $ 206,084 $ 211,135 $ 6,681,476 $ 543,761 $ 3,932,226 $ 21,611,867
ALLL to loans held-in-portfolio [1] 1.74 % 2.59 % 6.49 % 2.35 % 1.95 % 4.50 % 2.49 %
[1] Excludes covered loans acquired on the Westernbank FDIC-assisted transaction.
 
[2] Excludes covered loans acquired on the Westernbank FDIC-assisted transaction. As of December 31, 2013 the general allowance on the covered loans amounted to $101.8 million, while the specific reserve amounted to $0.3 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.
                               
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.
 
             
                             
Variance
(Dollars in thousands)   Commercial   Construction   Legacy   Mortgage  

Lease

financing

  Consumer   Total
Specific ALLL $ (4,427) $ (411) $ - $ 1,885 $ (144) $ (1,462) $ (4,559)
Impaired loans   $ (41,313)   $ (5,006)   $ (5,552)   $ 8,887   $ (266)   $ (2,156)   $ (45,406)
General ALLL $ 22,097 $ (3,867) $ (2,992) $ (6,679) $ 75 $ 8,288 $ 16,922
Loans held-in-portfolio, excluding impaired loans   $ 233,021   $ (82,130)   $ (18,958)   $ 59,456   $ 4,737   $ 33,964   $ 230,090
Total ALLL $ 17,670 $ (4,278) $ (2,992) $ (4,794) $ (69) $ 6,826 $ 12,363
Total non-covered loans held-in-portfolio   $ 191,708   $ (87,136)   $ (24,510)   $ 68,343   $ 4,471   $ 31,808   $ 184,684
 
Popular, Inc.
Financial Supplement to Fourth Quarter 2013 Earnings Release
Table L - Allowance for Loan Losses - Breakdown of General and Specific Reserves - PUERTO RICO OPERATIONS
(Unaudited)
             
31-Dec-13
Puerto Rico
(In thousands)   Commercial   Construction   Mortgage   Lease financing   Consumer   Total
Allowance for credit losses:
Specific ALLL non-covered loans $ 16,409 $ 177 $ 38,034 $ 1,053 $ 29,920 $ 85,593
  General ALLL non-covered loans   111,741   4,918   92,296   9,569   122,658   341,182
ALLL - non-covered loans   128,150   5,095   130,330   10,622   152,578   426,775
Specific ALLL covered loans 153 140 - - - 293
  General ALLL covered loans   42,045   19,351   36,006   -   4,397   101,799
ALLL - covered loans   42,198   19,491   36,006   -   4,397   102,092
Total ALLL   $ 170,348   $ 24,586   $ 166,336   $ 10,622   $ 156,975   $ 528,867
Loans held-in-portfolio:
Impaired non-covered loans $ 245,380 $ 16,823 $ 399,347 $ 2,893 $ 125,342 $ 789,785
  Non-covered loans held-in-portfolio, excluding impaired loans   6,220,210   144,348   5,001,332   540,868   3,191,296   15,098,054
Non-covered loans held-in-portfolio   6,465,590   161,171   5,400,679   543,761   3,316,638   15,887,839
Impaired covered loans 27,342 - - - - 27,342
  Covered loans held-in-portfolio, excluding impaired loans   1,785,462   190,127   934,373   -   47,123   2,957,085
Covered loans held-in-portfolio   1,812,804   190,127   934,373   -   47,123   2,984,427
Total loans held-in-portfolio   $ 8,278,394   $ 351,298   $ 6,335,052   $ 543,761   $ 3,363,761   $ 18,872,266
 
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
 
                           
Variance
(In thousands)   Commercial   Construction   Mortgage   Lease financing   Consumer   Total
Allowance for credit losses:
Specific ALLL non-covered loans $ (4,427) $ (411) $ 1,807 $ (144) $ (1,418) $ (4,593)
  General ALLL non-covered loans   29,273   (3,800)   (3,372)   75   9,819   31,995
ALLL - non-covered loans   24,846   (4,211)   (1,565)   (69)   8,401   27,402
Specific ALLL covered loans (1,530) (1,804) - - - (3,334)
  General ALLL covered loans   (14,768)   2,677   3,831   -   (3,142)   (11,402)
ALLL - covered loans   (16,298)   873   3,831   -   (3,142)   (14,736)
Total ALLL   $ 8,548   $ (3,338)   $ 2,266   $ (69)   $ 5,259   $ 12,666
Loans held-in-portfolio:
Impaired non-covered loans $ (31,444) $ (4,906) $ 9,028 $ (266) $ (2,047) $ (29,635)
  Non-covered loans held-in-portfolio, excluding impaired loans   242,010   (85,793)   47,969   4,737   44,164   253,087
Non-covered loans held-in-portfolio   210,566   (90,699)   56,997   4,471   42,117   223,452
Impaired covered loans (7,922) - - - - (7,922)
  Covered loans held-in-portfolio, excluding impaired loans   (33,125)   (11,310)   (31,406)   -   (7,819)   (83,660)
Covered loans held-in-portfolio   (41,047)   (11,310)   (31,406)   -   (7,819)   (91,582)
Total loans held-in-portfolio   $ 169,519   $ (102,009)   $ 25,591   $ 4,471   $ 34,298   $ 131,870
 
Popular, Inc.
Financial Supplement to Fourth Quarter 2013 Earnings Release
Table M - Allowance for Loan Losses - Breakdown of General and Specific Reserves - U.S. MAINLAND OPERATIONS
(Unaudited)
             
31-Dec-13
U.S. Mainland
(In thousands)   Commercial   Construction   Legacy   Mortgage   Consumer   Total
Allowance for credit losses:
Specific ALLL $ - $ - $ - $ 17,633 $ 280 $ 17,913
  General ALLL   46,832   247   13,704   8,966   24,026   93,775
Total ALLL   $ 46,832   $ 247   $ 13,704   $ 26,599   $ 24,306   $ 111,688
Loans held-in-portfolio:
Impaired loans $ 52,136 $ 5,663 $ 6,045 $ 52,726 $ 2,361 $ 118,931
  Loans held-in-portfolio, excluding impaired loans   3,519,459   39,250   205,090   1,228,071   613,227   5,605,097
Total loans held-in-portfolio   $ 3,571,595   $ 44,913   $ 211,135   $ 1,280,797   $ 615,588   $ 5,724,028
 
 
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
 
                           
Variance
(In thousands)   Commercial   Construction   Legacy   Mortgage   Consumer   Total
Allowance for credit losses:
Specific ALLL $ - $ - $ - $ 78 $ (44) $ 34
  General ALLL   (7,176)   (67)   (2,992)   (3,307)   (1,531)   (15,073)
Total ALLL   $ (7,176)   $ (67)   $ (2,992)   $ (3,229)   $ (1,575)   $ (15,039)
Loans held-in-portfolio:
Impaired loans $ (9,869) $ (100) $ (5,552) $ (141) $ (109) $ (15,771)
  Loans held-in-portfolio, excluding impaired loans   (8,989)   3,663   (18,958)   11,487   (10,200)   (22,997)
Total loans held-in-portfolio   $ (18,858)   $ 3,563   $ (24,510)   $ 11,346   $ (10,309)   $ (38,768)
 
Popular, Inc.            
Financial Supplement to Fourth Quarter 2013 Earnings Release
Table N - Reconciliation to GAAP Financial Measures
(Unaudited)
 
 
(In thousands, except share or per share information)   31-Dec-13       30-Sep-13       31-Dec-12    
Total stockholders’ equity $ 4,626,205 $ 4,393,885 $ 4,110,000
Less: Preferred stock (50,160) (50,160) (50,160)
Less: Goodwill (647,757) (647,757) (647,757)
Less: Other intangibles   (45,132)       (46,892)       (54,295)    
Total tangible common equity   $ 3,883,156       $ 3,649,076       $ 3,357,788    
Total assets $ 35,749,298 $ 36,052,116 $ 36,507,535
Less: Goodwill (647,757) (647,757) (647,757)
Less: Other intangibles   (45,132)       (46,892)       (54,295)    
Total tangible assets   $ 35,056,409       $ 35,357,467       $ 35,805,483    
Tangible common equity to tangible assets 11.08 % 10.32 % 9.38 %
Common shares outstanding at end of period 103,397,699 103,327,146 103,169,806
Tangible book value per common share   $ 37.56       $ 35.32       $ 32.55    
 
 
 
(In thousands)   31-Dec-13       30-Sep-13       31-Dec-12    
Common stockholders’ equity $ 4,576,045 $ 4,343,725 $ 4,059,840
Less: Unrealized losses (gains) on available-for-sale securities, net of tax[1] 48,344 5,514 (154,568)
Less: Disallowed deferred tax assets[2] (626,570) (643,716) (385,060)
Less: Disallowed goodwill and other intangible assets (643,185) (646,464) (662,201)
Less: Aggregate adjusted carrying value of all non-financial equity investments (1,442) (1,398) (1,160)
Add: Pension liability adjustment, net of tax and accumulated net gains
(losses) on cash flow hedges[3]   104,248       216,274       226,159    
Total Tier 1 common equity   $ 3,457,440       $ 3,273,935       $ 3,083,010    
Tier 1 common equity to risk-weighted assets   15.03   %   14.20   %   13.18   %
[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 $167 million of the Corporation’s $762 million of net deferred tax assets at December 31, 2013 (September 30, 2013 - $160 million and $844 million, respectively; December 31, 2012 - $118 million and $541 million, respectively), were included without limitation in regulatory capital pursuant to the risk-based capital guidelines, while approximately $627 million of such assets at December 31, 2013 (September 30, 2013 - $644 million; December 31, 2012 - $385 million) exceeded the limitation imposed by these guidelines and, as “disallowed deferred tax assets”, were deducted in arriving at Tier 1 capital. The remaining $(32) million of the Corporation’s other net deferred tax components at December 31, 2013 (September 30, 2013 - $40 million; December 31, 2012 - $38 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 Fourth Quarter 2013 Earnings Release
Table O - Financial Information - Westernbank Covered Loans
(Unaudited)
 
 

Revenues

Quarters ended
(In thousands)   31-Dec-13   30-Sep-13   Variance
Interest income on covered loans   $ 86,794   $ 71,631   $ 15,163
FDIC loss share expense:
Amortization of indemnification asset (45,193) (37,681) (7,512)
80% mirror accounting on credit impairment losses [1] 7,125 13,946 (6,821)
80% mirror accounting on discount accretion on unfunded commitments - (87) 87
80% mirror accounting on reimbursable expenses 5,430 25,641 (20,211)

80% mirror accounting on recoveries on covered assets, including rental income on OREOs, subject to reimbursement to the FDIC

(1,255) (11,533) 10,278
Change in true-up payment obligation (3,420) (5,322) 1,902
Other   149   170   (21)
  Total FDIC loss share expense   (37,164)   (14,866)   (22,298)
Other non-interest income   -   109   (109)
Total revenues   49,630   56,874   (7,244)
Provision for loan losses   8,907   17,433   (8,526)
Total revenues less provision for loan losses   $ 40,723   $ 39,441   $ 1,282
[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.
 
 

Non-personnel operating expenses

Quarters ended
(In thousands)   31-Dec-13   30-Sep-13   Variance
Professional fees $ 5,865 $ 4,043 $ 1,822
OREO expenses 4,206 10,983 (6,777)
Other operating expenses   2,679   3,266   (587)
Total operating expenses   $ 12,750   $ 18,292   $ (5,542)
Expense reimbursements from the FDIC may be recorded with a time lag, since these are claimed upon the event of loss or charge-off of the loans which may occur in a subsequent period.
 
 

Quarterly average assets

Quarters ended
(In millions)   31-Dec-13   30-Sep-13   Variance
Covered loans $ 3,017 $ 3,119 $ (102)
FDIC loss share asset   1,123   1,348   (225)

 

 

 

Activity in the carrying amount and accretable yield of covered loans accounted for under ASC 310-30

 
Quarters ended
      31-Dec-13   30-Sep-13
(In thousands)   Accretable yield  

Carrying amount

of loans

 

Accretable yield

 

Carrying amount

of loans

Beginning balance $ 1,309,618 $ 2,891,049 $ 1,379,612 $ 3,012,866
Accretion (83,653) 83,653 (68,529) 68,529
Changes in expected cash flows 83,240 - (1,465) -
Collections / charge-offs   -   (146,755)   -   (190,346)
Ending balance 1,309,205 2,827,947 1,309,618 2,891,049
  Allowance for loan losses - ASC 310-30 covered loans   -   (93,915)   -   (108,874)
Ending balance, net of allowance for loan losses   $ 1,309,205   $ 2,734,032   $ 1,309,618   $ 2,782,175
 
 

Activity in the carrying amount of the FDIC indemnity asset

 
Quarters ended
(In thousands)       31-Dec-13       30-Sep-13
Balance at beginning of period $ 1,324,711 $ 1,379,342
Amortization (45,193) (37,681)
Credit impairment losses to be covered under loss sharing agreements 7,125 13,946
Decrease due to reciprocal accounting on the discount accretion on unfunded commitments - (87)
Reimbursable expenses to be covered under loss sharing agreements 5,430 25,641
Net payments to (from) FDIC under loss sharing agreements (343,465) (52,865)
Other adjustments attributable to FDIC loss sharing agreements       -       (3,585)
Balance at end of period       $ 948,608       $ 1,324,711
 
 

Activity in the remaining FDIC loss share asset amortization

 
Quarters ended
(In thousands)       31-Dec-13       30-Sep-13
Balance at beginning of period $ 122,496 $ 122,124
Amortization (45,193) (37,681)
Impact of lower projected losses       26,388       38,053
Balance at end of period       $ 103,691       $ 122,496
 

Popular, Inc.

Financial Supplement to Fourth Quarter 2013 Earnings Release          
Table P - Adjusted Consolidated Statement of Operations for the Year Ended December 31, 2013 (Non-GAAP)
(Unaudited)      
 
    Year ended
    31-Dec-13
        1st QTR   2nd QTR   3rd QTR   4th QTR    
(In thousands)  

Actual Results

(US GAAP)

 

Impact of Sale of

NPAs [2]

 

Impact of Sale

of NPLs

 

Impact of

EVERTEC's

IPO

 

Income Tax

Adjustment [3]

 

Impact of

EVERTEC's

SPO

 

Impact of

EVERTEC's

SPO

 

Adjusted

Results

(Non-GAAP)

Net interest income $ 1,432,580 $ - $ - $ 1,502 $ - $ - $ - $ 1,431,078
Provision for loan losses – non-covered loans 533,167 148,823 169,248 - - - - 215,096
Provision for loan losses – covered loans [1]   69,396   -   -   -   -   -   -   69,396
Net interest income after provision for loan losses   830,017   (148,823)   (169,248)   1,502   -   -   -   1,146,586
Service charges on deposit accounts and other service fees 408,034 - - - - - - 408,034
Mortgage banking activities 71,673 - - - - - - 71,673
Net gain and valuation adjustments on investments securities 7,966 - - 5,856 - - - 2,110
Trading account loss (13,483) - - - - - - (13,483)
Net (loss) gain on sale of loans, including valuation adjustments on loans held-for-sale (49,130) (61,387) (3,865) - - - - 16,122
Adjustments (expense) to indemnity reserves on loans sold (37,054) (10,700) (3,047) - - - - (23,307)
FDIC loss share expense (82,051) - - - - - - (82,051)
Other non-interest income   504,614   -   -   162,091   -   175,867   92,358   74,298
Total non-interest income   810,569   (72,087)   (6,912)   167,947   -   175,867   92,358   453,396
Other taxes 58,286 - - - - - 58,286
Professional fees 289,280 5 - 856 - 250 - 288,169
OREO expense 80,236 37,046 - - - - - 43,190
Other operating expenses   864,784   -   -   -   -   -   -   864,784
Total operating expenses   1,292,586   37,051   -   856   -   250   -   1,254,429
Income (loss) before income tax 348,000 (257,961) (176,160) 168,593 - 175,617 92,358 345,553
Income tax (benefit) expense   (251,327)   (77,388)   (68,987)   11,988   (218,035)   7,789   3,945   89,361
Net income (loss)   $ 599,327   $ (180,573)   $ (107,173)   $ 156,605   $ 218,035   $ 167,828   $ 88,413   $ 256,192
[1] Covered loans represent loans acquired in the Westernbank FDIC-assisted transaction that are covered under FDIC loss sharing agreements.
 
[2] Net (loss) gain on sale of loans for the first quarter includes $8.8 million of negative valuation adjustments on loans held for sale which were transferred to held-in-portfolio subsequent to the sale.
 
[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 $5.5 million on the deferred tax liability related to the covered loans portfolio.
 

Contact:
Popular, Inc.
Investor Relations:
Brett Scheiner, 212-417-6721
Investor Relations Officer
or
Media Relations:
Teruca Rullán, 787-281-5170 or Mobile: 917-679-3596
Senior Vice President, Corporate Communications

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