FORM 10-Q
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Form 10-Q

 

 

 

x Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2012

Commission File Number: 001-34084

 

 

POPULAR, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Puerto Rico   66-0667416

(State or other jurisdiction of

Incorporation or organization)

 

(IRS Employer

Identification Number)

Popular Center Building

209 Muñoz Rivera Avenue

Hato Rey, Puerto Rico

  00918
(Address of principal executive offices)   (Zip code)

(787) 765-9800

(Registrant’s telephone number, including area code)

NOT APPLICABLE

(Former name, former address and former fiscal year, if changed since last report)

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    x  Yes    ¨  No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     x  Yes    ¨  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “accelerated filer, large accelerated filer and smaller reporting company” in Rule 12b-2 of the Exchange Act:

 

Large accelerated filer   x    Accelerated filer   ¨
Non-accelerated filer   ¨  (Do not check if a smaller reporting company)    Smaller reporting company   ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ¨  Yes    x  No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: Common Stock, $0.01 par value, 102,856,169 shares outstanding as of July 31, 2012.

 

 

 


Table of Contents

POPULAR, INC .

INDEX

 

      Page  

Part I—Financial Information

  

Item 1. Financial Statements

  

Unaudited Consolidated Statements of Financial Condition at June 30, 2012 and December 31, 2011

     4   

Unaudited Consolidated Statements of Operations for the quarters and six months ended June  30, 2012 and 2011

     5   

Unaudited Consolidated Statements of Comprehensive Income for the quarters and six months ended June  30, 2012 and 2011

     6   

Unaudited Consolidated Statements of Changes in Stockholders’ Equity for the six months ended June 30, 2012 and 2011

     7   

Unaudited Consolidated Statements of Cash Flows for the six months ended June 30, 2012 and 2011

     8   

Notes to Unaudited Consolidated Financial Statements

     9   

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

     126   

Item 3. Quantitative and Qualitative Disclosures about Market Risk

     194   

Item 4. Controls and Procedures

     194   

Part II—Other Information

  

Item 1. Legal Proceedings

     194   

Item 1A. Risk Factors

     194   

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

     195   

Item 6. Exhibits

  

Signatures

     196   

 

2


Table of Contents

Forward-Looking Information

The information included in this Form 10-Q contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may relate to Popular, Inc.’s (the “Corporation”, “Popular”, “we, “us”, “our”) financial condition, results of operations, plans, objectives, future performance and business, including, but not limited to, statements with respect to the adequacy of the allowance for loan losses, delinquency trends, market risk and the impact of interest rate changes, capital markets conditions, capital adequacy and liquidity, and the effect of legal proceedings and new accounting standards on the Corporation’s financial condition and results of operations. All statements contained herein that are not clearly historical in nature are forward-looking, and the words “anticipate,” “believe,” “continues,” “expect,” “estimate,” “intend,” “project” and similar expressions and future or conditional verbs such as “will,” “would,” “should,” “could,” “might,” “can,” “may,” or similar expressions are generally intended to identify forward-looking statements.

These statements are not guarantees of future performance and involve certain risks, uncertainties, estimates and assumptions by management that are difficult to predict.

Various factors, some of which are beyond Popular’s control, could cause actual results to differ materially from those expressed in, or implied by, such forward-looking statements. Factors that might cause such a difference include, but are not limited to:

 

   

the rate of growth in the economy and employment levels, as well as general business and economic conditions;

 

   

changes in interest rates, as well as the magnitude of such changes;

 

   

the fiscal and monetary policies of the federal government and its agencies;

 

   

changes in federal bank regulatory and supervisory policies, including required levels of capital and the impact of proposed capital standards on our capital ratios;

 

   

the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) on our businesses, business practices and cost of operations;

 

   

regulatory approvals that may be necessary to undertake certain actions or consummate strategic transactions such as acquisitions and dispositions;

 

   

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;

 

   

the performance of the stock and bond markets;

 

   

competition in the financial services industry;

 

   

additional Federal Deposit Insurance Corporation (“FDIC”) assessments; and

 

   

possible legislative, tax or regulatory changes.

Other possible events or factors that could cause results or performance to differ materially from those expressed in these forward-looking statements include the following: negative economic conditions that adversely affect the general economy, housing prices, the job market, consumer confidence and spending habits which may affect, among other things, the level of non-performing assets, charge-offs and provision expense; changes in interest rates and market liquidity which may reduce interest margins, impact funding sources and affect our ability to originate and distribute financial products in the primary and secondary markets; adverse movements and volatility in debt and equity capital markets; changes in market rates and prices which may adversely impact the value of financial assets and liabilities; liabilities resulting from litigation and regulatory investigations; changes in accounting standards, rules and interpretations; increased competition; our ability to grow our core businesses; decisions to downsize, sell or close units or otherwise change our business mix; and management’s ability to identify and manage these and other risks. Moreover, the outcome of legal proceedings, as discussed in “Part II, Item I. Legal Proceedings,” is inherently uncertain and depends on judicial interpretations of law and the findings of regulators, judges and juries. Investors should refer to the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2011 as well as “Part II, Item 1A” of this Form 10-Q for a discussion of such factors and certain risks and uncertainties to which the Corporation is subject.

All forward-looking statements included in this document are based upon information available to the Corporation as of the date of this document, and other than as required by law, including the requirements of applicable securities laws, we assume no obligation to update or revise any such forward-looking statements to reflect occurrences or unanticipated events or circumstances after the date of such statements.

 

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Table of Contents

POPULAR, INC.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(UNAUDITED)

 

(In thousands, except share information)

   June 30, 2012     December 31, 2011  

Assets:

    

Cash and due from banks

   $ 515,338     $ 535,282  
  

 

 

   

 

 

 

Money market investments:

    

Federal funds sold

     5,455       75,000  

Securities purchased under agreements to resell

     234,738       252,668  

Time deposits with other banks

     709,635       1,048,506  
  

 

 

   

 

 

 

Total money market investments

     949,828       1,376,174  
  

 

 

   

 

 

 

Trading account securities, at fair value:

    

Pledged securities with creditors’ right to repledge

     356,624       402,591  

Other trading securities

     60,845       33,740  

Investment securities available-for-sale, at fair value:

    

Pledged securities with creditors’ right to repledge

     939,286       1,737,868  

Other investment securities available-for-sale

     4,137,511       3,271,955  

Investment securities held-to-maturity, at amortized cost (fair value at June 30, 2012— $126,523; December 31, 2011—$125,254)

     124,646       125,383  

Other investment securities, at lower of cost or realizable value (realizable value at June 30, 2012 - $175,948; December 31, 2011—$181,583)

     174,287       179,880  

Loans held-for-sale, at lower of cost or fair value

     364,537       363,093  
  

 

 

   

 

 

 

Loans held-in-portfolio:

    

Loans not covered under loss sharing agreements with the FDIC

     20,763,610       20,703,192  

Loans covered under loss sharing agreements with the FDIC

     4,016,330       4,348,703  

Less—Unearned income

     97,801       100,596  

Allowance for loan losses

     766,030       815,308  
  

 

 

   

 

 

 

Total loans held-in-portfolio, net

     23,916,109       24,135,991  
  

 

 

   

 

 

 

FDIC loss share asset

     1,631,594       1,915,128  

Premises and equipment, net

     527,027       538,486  

Other real estate not covered under loss sharing agreements with the FDIC

     226,629       172,497  

Other real estate covered under loss sharing agreements with the FDIC

     125,093       109,135  

Accrued income receivable

     122,320       125,209  

Mortgage servicing assets, at fair value

     155,711       151,323  

Other assets

     1,577,794       1,462,393  

Goodwill

     647,757       648,350  

Other intangible assets

     59,243       63,954  
  

 

 

   

 

 

 

Total assets

   $ 36,612,179     $ 37,348,432  
  

 

 

   

 

 

 

Liabilities and Stockholders’ Equity

    

Liabilities:

    

Deposits:

    

Non-interest bearing

   $ 5,578,487     $ 5,655,474  

Interest bearing

     21,836,293       22,286,653  
  

 

 

   

 

 

 

Total deposits

     27,414,780       27,942,127  
  

 

 

   

 

 

 

Assets sold under agreements to repurchase

     1,426,636       2,141,097  

Other short-term borrowings

     316,200       296,200  

Notes payable

     1,877,583       1,856,372  

Other liabilities

     1,555,743       1,193,883  
  

 

 

   

 

 

 

Total liabilities

     32,590,942       33,429,679  
  

 

 

   

 

 

 

Commitments and contingencies (See Note 19)

    

Stockholders’ equity:

    

Preferred stock, 30,000,000 shares authorized; 2,006,391 shares issued and outstanding

     50,160       50,160  

Common stock, $0.01 par value; 170,000,000 shares authorized; 102,832,457 shares issued at June 30, 2012 (December 31, 2011—102,634,640) and 102,824,323 shares outstanding (December 31, 2011—102,590,457)

     1,028       1,026  

Surplus

     4,127,216       4,123,898  

Accumulated deficit

     (100,440     (212,726

Treasury stock—at cost, 8,134 shares at June 30, 2012 (December 31, 2011—44,183)

     (144     (1,057

Accumulated other comprehensive loss, net of tax

     (56,583     (42,548
  

 

 

   

 

 

 

Total stockholders’ equity

     4,021,237       3,918,753  
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 36,612,179     $ 37,348,432  
  

 

 

   

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

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Table of Contents

POPULAR, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

 

     Quarter ended June 30,     Six months ended June 30,  

(In thousands, except per share information)

   2012     2011     2012     2011  

Interest income:

        

Loans

   $ 389,342     $ 442,460     $ 777,284     $ 865,835  

Money market investments

     964       926       1,912       1,873  

Investment securities

     43,813       53,723       88,883       106,098  

Trading account securities

     5,963       9,790       11,854       18,544  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total interest income

     440,082       506,899       879,933       992,350  
  

 

 

   

 

 

   

 

 

   

 

 

 

Interest expense:

        

Deposits

     48,514       70,672       100,193       147,551  

Short-term borrowings

     13,044       13,719       26,627       27,734  

Long-term debt

     37,324       47,966       74,331       99,164  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total interest expense

     98,882       132,357       201,151       274,449  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income

     341,200       374,542       678,782       717,901  

Provision for loan losses—non-covered loans

     81,743       95,712       164,257       155,474  

Provision for loan losses—covered loans

     37,456       48,605       55,665       64,162  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income after provision for loan losses

     222,001       230,225       458,860       498,265  
  

 

 

   

 

 

   

 

 

   

 

 

 

Service charges on deposit accounts

     46,130       46,802       92,719       92,432  

Other service fees

     62,027       58,307       128,066       116,959  

Net loss on sale and valuation adjustments of investment securities

     (349     (90     (349     (90

Trading account (loss) profit

     (7,283     874       (9,426     375  

Net (loss) gain on sale of loans, including valuation adjustments on loans held-for-sale

     (15,397     (12,782     74       (5,538

Adjustments (expense) to indemnity reserves on loans sold

     (5,398     (9,454     (9,273     (19,302

FDIC loss share income (expense)

     2,575       38,670       (12,680     54,705  

Fair value change in equity appreciation instrument

     —          578       —          8,323  

Other operating income

     11,419       1,255       28,501       40,664  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total non-interest income

     93,724       124,160       217,632       288,528  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

        

Personnel costs

     116,336       110,959       237,827       217,099  

Net occupancy expenses

     24,963       25,957       49,125       50,543  

Equipment expenses

     10,900       10,761       22,241       22,797  

Other taxes

     12,074       14,623       25,512       26,595  

Professional fees

     52,127       49,479       100,232       96,167  

Communications

     6,645       7,188       13,776       14,398  

Business promotion

     16,980       11,332       29,830       21,192  

FDIC deposit insurance

     22,907       27,682       47,833       45,355  

Loss on early extinguishment of debt

     25,072       289       25,141       8,528  

Other real estate owned (OREO) expenses

     2,380       6,440       16,545       8,651  

Other operating expenses

     34,964       14,835       50,860       41,014  

Amortization of intangibles

     2,531       2,255       5,124       4,510  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     327,879       281,800       624,046       556,849  
  

 

 

   

 

 

   

 

 

   

 

 

 

(Loss) income before income tax

     (12,154     72,585       52,446       229,944  

Income tax (benefit) expense

     (77,893     (38,100     (61,701     109,127  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Income

   $ 65,739     $ 110,685     $ 114,147     $ 120,817  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Income Applicable to Common Stock

   $ 64,809     $ 109,754     $ 112,286     $ 118,956  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Income per Common Share—Basic

   $ 0.63     $ 1.07     $ 1.10     $ 1.16  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Income per Common Share—Diluted

   $ 0.63     $ 1.07     $ 1.10     $ 1.16  
  

 

 

   

 

 

   

 

 

   

 

 

 

Dividends Declared per Common Share

     —          —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

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Table of Contents

POPULAR, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

 

    

Quarter ended,

June 30,

    Six months ended,
June 30,
 

(In thousands)

   2012     2011     2012     2011  

Net income

   $ 65,739     $ 110,685     $ 114,147     $ 120,817  
  

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive (loss) income before tax:

        

Foreign currency translation adjustment

     (860     (1,137     (946     (1,728

Reclassification adjustment for losses included in net income

     —          —          —          10,084  

Adjustment of pension and postretirement benefit plans

     —          —          —          —     

Amortization of net losses

     6,290       3,245       12,579       6,487  

Amortization of prior service cost

     (50     (240     (100     (480

Unrealized holding (losses) gains on securities available-for-sale arising during the period

     (18,573     50,779       (26,455     30,801  

Reclassification adjustment for losses included in net income

     349       90       349       90  

Unrealized net (losses) gains on cash flow hedges

     (1,408     485       (1,698     434  

Reclassification adjustment for net losses (gains) included in net income

     290       51       1,347       (884
  

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive (loss) income before tax

     (13,962     53,273       (14,924     44,804  

Income tax benefit (expense)

     1,164       (5,500     889       (4,072
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other comprehensive (loss) income, net of tax

     (12,798     47,773       (14,035     40,732  
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income, net of tax

   $ 52,941     $ 158,458     $ 100,112     $ 161,549  
  

 

 

   

 

 

   

 

 

   

 

 

 

Tax effect allocated to each component of other comprehensive (loss) income:

 

                                               
    

Quarter ended

June 30,

    Six months ended,
June 30,
 

(In thousands)

   2012     2011     2012     2011  

Underfunding of pension and postretirement benefit plans

   $ —        $ —        $ —        $ —     

Amortization of net losses

     (1,710     (822     (3,420     (1,643

Amortization of prior service cost

     (15     (72     (30     (144

Unrealized holding (losses) gains on securities available-for-sale arising during the period

     2,554       (4,431     4,235       (2,490

Reclassification adjustment for losses included in net income

     —          (14     —          (14

Unrealized net (losses) gains on cash flow hedges

     422       (146     509       (131

Reclassification adjustment for net losses (gains) included in net income

     (87     (15     (405     350  
  

 

 

   

 

 

   

 

 

   

 

 

 

Income tax benefit (expense)

   $ 1,164     $ (5,500   $ 889     $ (4,072
  

 

 

   

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

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Table of Contents

POPULAR, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(UNAUDITED)

 

(In thousands)

   Common
stock
    Preferred
stock
    Surplus     Accumulated
deficit
    Treasury stock     Accumulated other
comprehensive
income (loss)
    Total  

Balance at December 31, 2010

   $ 1,023      $ 50,160      $ 4,103,211      $ (347,328   $ (574   $ (5,961 )     $ 3,800,531   

Net income

           120,817           120,817   

Issuance of stock

     1          3,916              3,917   

Dividends declared:

              

Preferred stock

           (1,861         (1,861 )  

Common stock purchases

             (68       (68 )  

Other comprehensive income, net of tax

               40,732        40,732   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at June 30, 2011

   $ 1,024      $ 50,160      $ 4,107,127      $ (228,372   $ (642   $ 34,771      $ 3,964,068   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at December 31, 2011

   $ 1,026      $ 50,160      $ 4,123,898      $ (212,726   $ (1,057   $ (42,548 )     $ 3,918,753   

Net income

           114,147           114,147   

Issuance of stock

              3,318              3,320   

Dividends declared:

              

Preferred stock

           (1,861         (1,861 )  

Common stock purchases

             (150       (150 )  

Common stock reissuance

             1,063         1,063   

Other comprehensive loss, net of tax

               (14,035 )       (14,035 )  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at June 30, 2012

   $ 1,028      $ 50,160      $ 4,127,216      $ (100,440   $ (144   $ (56,583 )     $ 4,021,237   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
Disclosure of changes in number of shares:     June 30, 2012     December 31, 2011     June 30, 2011  

Preferred Stock:

              

Balance at beginning and end of period

             2,006,391       2,006,391        2,006,391   
          

 

 

   

 

 

   

 

 

 

Common Stock—Issued:

              

Balance at beginning of year

             102,634,640       102,292,916        102,292,916   

Issuance of stock

             197,817       341,724        127,227   
          

 

 

   

 

 

   

 

 

 

Balance at end of the period

             102,832,457       102,634,640        102,420,143   

Treasury stock

             (8,134     (44,183 )       (22,353 )  
          

 

 

   

 

 

   

 

 

 

Common Stock—Outstanding

             102,824,323       102,590,457        102,397,790   
          

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

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POPULAR, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

     Six months ended June 30,  

(In thousands)

   2012     2011  

Cash flows from operating activities:

    

Net income

   $ 114,147     $ 120,817  
  

 

 

   

 

 

 

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

    

Provision for loan losses

     219,922       219,636  

Amortization of intangibles

     5,124       4,510  

Depreciation and amortization of premises and equipment

     23,282       23,450  

Net accretion of discounts and amortization of premiums and deferred fees

     (15,677     (64,498

Impairment losses on net assets to be disposed of

     —          8,743  

Fair value adjustments on mortgage servicing rights

     4,791       16,249  

Fair value change in equity appreciation instrument

     —          (8,323

FDIC loss share expense (income)

     12,680       (54,705

FDIC deposit insurance expense

     47,833       45,355  

Adjustments (expense) to indemnity reserves on loans sold

     9,273       19,302  

Losses from investments under the equity method

     4,217       218  

Deferred income tax (benefit) expense

     (154,686     21,755  

(Gain) loss on:

    

Disposition of premises and equipment

     (6,864     (1,992

Early extinguishment of debt

     24,950       —     

Sale and valuation adjustments of investment securities

     349       90  

Sale of loans, including valuation adjustments on loans held-for-sale

     (74     5,538  

Sale of equity method investment

     —          (16,907

Sale of other assets

     (2,545     —     

Acquisitions of loans held-for-sale

     (174,632     (173,549

Proceeds from sale of loans held-for-sale

     145,588       65,667  

Net disbursements on loans held-for-sale

     (542,282     (417,220

Net (increase) decrease in:

    

Trading securities

     543,077       319,024  

Accrued income receivable

     2,889       8,676  

Other assets

     10,553       (32,659

Net increase (decrease) in:

    

Interest payable

     (4,499     (949

Pension and other postretirement benefit obligation

     16,165       (123,084

Other liabilities

     11,364       (65,383
  

 

 

   

 

 

 

Total adjustments

     180,798       (201,056
  

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     294,945       (80,239
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Net decrease (increase) in money market investments

     426,346       (404,598

Purchases of investment securities:

    

Available-for-sale

     (890,777     (856,543

Held-to-maturity

     (250     (64,358

Other

     (76,033     (69,504

Proceeds from calls, paydowns, maturities and redemptions of investment securities:

    

Available-for-sale

     780,832       707,567  

Held-to-maturity

     1,548       52,073  

Other

     81,626       56,162  

Proceeds from sale of investment securities:

    

Available-for-sale

     —          19,143  

Other

     —          2,294  

Net repayments on loans

     539,177       779,606  

Proceeds from sale of loans

     41,476       225,698  

Acquisition of loan portfolios

     (705,819     (744,390

Payments received from FDIC under loss sharing agreements

     262,807       15,694  

Net proceeds from sale of equity method investment

     —          31,503  

Mortgage servicing rights purchased

     (1,018     (860

Acquisition of premises and equipment

     (21,927     (25,548

Proceeds from sale of:

    

Premises and equipment

     15,610       9,847  

Other productive assets

     1,026       —     

Foreclosed assets

     93,480       94,759  
  

 

 

   

 

 

 

Net cash provided by (used in) investing activities

     548,104       (171,455
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Net increase (decrease) in:

    

Deposits

     (528,508     1,198,252  

Federal funds purchased and assets sold under agreements to repurchase

     (363,354     157,772  

Other short-term borrowings

     20,000       (212,920

Payments of notes payable

     (22,552     (1,177,306

Proceeds from issuance of notes payable

     29,802       419,500  

Proceeds from issuance of common stock

     3,320       3,917  

Dividends paid

     (1,551     (1,861

Treasury stock acquired

     (150     (68
  

 

 

   

 

 

 

Net cash (used in) provided by financing activities

     (862,993     387,286  
  

 

 

   

 

 

 

Net (decrease) increase in cash and due from banks

     (19,944     135,592  

Cash and due from banks at beginning of period

     535,282       452,373  
  

 

 

   

 

 

 

Cash and due from banks at end of period

   $ 515,338     $ 587,965  
  

 

 

   

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

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Notes to Consolidated Financial

Statements (Unaudited)

 

Note 1 -

  

Organization, consolidation and basis of presentation

   10

Note 2 -

  

New accounting pronouncements

   10

Note 3 -

  

Restrictions on cash and due from banks and certain securities

   13

Note 4 -

  

Pledged assets

   14

Note 5 -

  

Investment securities available-for-sale

   15

Note 6 -

  

Investment securities held-to-maturity

   19

Note 7 -

  

Loans

   20

Note 8 -

  

Allowance for loan losses

   30

Note 9 -

  

FDIC loss share asset and true-up payment obligation

   51

Note 10 -

  

Transfers of financial assets and mortgage servicing assets

   53

Note 11 -

  

Other assets

   56

Note 12 -

  

Goodwill and other intangible assets

   57

Note 13 -

  

Deposits

   59

Note 14 -

  

Borrowings

   60

Note 15 -

  

Trust preferred securities

   62

Note 16 -

  

Stockholders’ equity

   63

Note 17 -

  

Accumulated other comprehensive income (loss)

   64

Note 18 -

  

Guarantees

   64

Note 19 -

  

Commitments and contingencies

   67

Note 20 -

  

Non-consolidated variable interest entities

   72

Note 21 -

  

Related party transactions with affiliated company / joint venture

   75

Note 22 -

  

Fair value measurement

   78

Note 23 -

  

Fair value of financial instruments

   88

Note 24 -

  

Net income per common share

   93

Note 25 -

  

Other service fees

   94

Note 26 -

  

FDIC loss share income (expense)

   94

Note 27 -

  

Pension and postretirement benefits

   95

Note 28 -

  

Stock-based compensation

   96

Note 29 -

  

Income taxes

   98

Note 30 -

  

Supplemental disclosure on the consolidated statements of cash flows

   102

Note 31 -

  

Segment reporting

   102

Note 32 -

  

Subsequent events

   109

Note 33 -

  

Condensed consolidating financial information of guarantor and issuers of registered guaranteed securities

   109

 

9


Table of Contents

Note 1—Organization, consolidation and basis of presentation

Nature of Operations

Popular, Inc. (the “Corporation”) is a diversified, publicly-owned financial holding company subject to the supervision and regulation of the Board of Governors of the Federal Reserve System. The Corporation has operations in Puerto Rico, the United States, the Caribbean and Latin America. In Puerto Rico, the Corporation provides retail and commercial banking services through its principal banking subsidiary, Banco Popular de Puerto Rico (“BPPR”), as well as mortgage banking, investment banking, broker-dealer, auto and equipment leasing and financing, and insurance services through specialized subsidiaries. In the U.S. mainland, the Corporation operates Banco Popular North America (“BPNA”), including its wholly-owned subsidiary E-LOAN. BPNA focuses efforts and resources on the core community banking business. BPNA operates branches in New York, California, Illinois, New Jersey and Florida. E-LOAN markets deposit accounts under its name for the benefit of BPNA. The BPNA branches operate under the name of Popular Community Bank. Note 31 to the consolidated financial statements presents information about the Corporation’s business segments.

Principles of Consolidation and Basis of Presentation

The consolidated interim financial statements have been prepared without audit. The consolidated statement of financial condition data at December 31, 2011 was derived from audited financial statements. The unaudited interim financial statements are, in the opinion of management, a fair statement of the results for the periods reported and include all necessary adjustments, all of a normal recurring nature, for a fair statement of such results.

Certain reclassifications have been made to the 2011 consolidated financial statements and notes to the financial statements to conform with the 2012 presentation.

On May 29, 2012, the Corporation effected a 1-for-10 reverse split of its common stock. The reverse split is described further in Note 16 to these consolidated financial statements. All share and per share information in the consolidated financial statements and accompanying notes have been adjusted to retroactively reflect the 1-for-10 reverse stock split.

Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted from the unaudited financial statements pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, these financial statements should be read in conjunction with the audited consolidated financial statements of the Corporation for the year ended December 31, 2011, included in the Corporation’s 2011 Annual Report (the “2011 Annual Report”). Operating results for the interim periods disclosed herein are not necessarily indicative of the results that may be expected for a full year or any future period.

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Note 2—New accounting pronouncements

FASB Accounting Standards Update 2012-02, Intangibles-Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment (“ASU 2012-02”)

The FASB issued ASU 2012-02 in July 2012. ASU 2012-02 is intended to simplify how entities test indefinite-lived intangible assets for impairment. ASU 2012-02 permits an entity the option to first assess qualitative factors to determine whether it is “more likely than not” that an indefinite-lived intangible asset is impaired as a basis for determining whether it is necessary to perform the quantitative impairment test in accordance with ASC Subtopic 350-30, Intangibles-Goodwill and Other-General Intangibles Other than Goodwill. The more-likely-than-not threshold is defined as having a likelihood of more than 50%. This guidance results in guidance that is similar to the goodwill impairment testing guidance in ASU 2011-08. The previous guidance under ASC Subtopic 350-30 required an entity to test indefinite-lived intangible assets for impairment on at least an annual basis by comparing an asset’s fair value with its carrying amount and recording an impairment loss for an amount equal to the excess of the asset’s carrying amount over its fair value. Under the amendments in this ASU, an entity is not required to calculate the fair value of an indefinite-lived intangible asset if the entity determines that it is not more likely than not that the asset is impaired. In addition the new qualitative indicators replace those currently used to determine whether indefinite-lived intangible assets should be tested for impairment on an interim basis.

 

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Table of Contents

ASU 2012-12 is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted, including for annual or interim goodwill impairment tests performed as of a date before July 27, 2012, as long as the financial statements have not yet been issued. The Corporation did not elect to adopt early the provisions of this ASU.

The provisions of this guidance simplify how entities test for indefinite-lived assets impairment and will not have an impact on the Corporation’s consolidated financial statements.

FASB Accounting Standards Update 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income (“ASU 2011-05”) and FASB Accounting Standards Update 2011-12, Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05 (“ASU 2011-12”)

The FASB issued ASU 2011-05 in June 2011. The amendment of this ASU allows an entity the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. ASU 2011-05 eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. The amendments to the Codification in this ASU do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. This ASU also does not change the option for an entity to present components of other comprehensive income either net of related tax effects or before related tax effects, with one amount shown for the aggregate income tax expense or benefit related to the total of other comprehensive income items.

In December 2011, the FASB issued ASU 2011-12, which defers indefinitely the new requirement in ASU 2011-05 to present components of reclassification adjustments out of accumulated other comprehensive income on the face of the income statement by income statement line item.

The Corporation adopted the provisions of these two guidance in the first quarter of 2012. The guidance impacts presentation disclosure only and did not have an impact on the Corporation’s financial condition or results of operations.

FASB Accounting Standards Update 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities (“ASU 2011-11”)

The FASB issued ASU 2011-11 in December 2011. The amendments in this ASU require an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. To meet this objective, entities with financial instruments and derivatives that are either offset on the balance sheet or subject to a master netting arrangement or similar arrangement shall disclose the following quantitative information separately for assets and liabilities in tabular format: a) gross amounts of recognized assets and liabilities; b) amounts offset to determine the net amount presented in the balance sheet; c) net amounts presented in the balance sheet; d) amounts subject to an enforceable master netting agreement or similar arrangement not otherwise included in (b), including: amounts related to recognized financial instruments and other derivatives instruments if either management makes an accounting election not to offset or the amounts do not meet the guidance in ASC Section 210-20-45 or ASC Section 815-10-45, and also amounts related to financial collateral (including cash collateral); and e) the net amount after deducting the amounts in (d) from the amounts in (c).

In addition to these tabular disclosures, entities are required to provide a description of the setoff rights associated with assets and liabilities subject to an enforceable master netting arrangement.

An entity is required to apply the amendments for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. An entity should provide the disclosures required by those amendments retrospectively for all comparative periods presented.

The provisions of this guidance impact presentation disclosure only and will not have an impact on the Corporation’s financial condition or results of operations.

 

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FASB Accounting Standards Update 2011-10, Property, Plant, and Equipment (Topic 360): Derecognition of in Substance Real Estate-a Scope Clarification (“ASU 2011-10”)

The FASB issued ASU 2011-10 in December 2011. The objective of this ASU is to resolve the diversity in practice about whether the guidance in ASC Subtopic 360-20, “Property, Plant, and Equipment Real Estate Sales” applies to a parent that ceases to have a controlling financial interest in a subsidiary that is in substance real estate as a result of default on the subsidiary’s nonrecourse debt. ASU 2011-10 provides that when a parent (reporting entity) ceases to have a controlling financial interest in a subsidiary that is in substance real estate as a result of default on the subsidiary’s nonrecourse debt, the reporting entity should apply the guidance in ASC Subtopic 360-20 to determine whether it should derecognize the in substance real estate. Generally, a reporting entity would not satisfy the requirements to derecognize the in substance real estate before the legal transfer of the real estate to the lender and the extinguishment of the related nonrecourse indebtedness. That is, even if the reporting entity ceases to have a controlling financial interest under ASC Subtopic 810-10, the reporting entity would continue to include the real estate, debt, and the results of the subsidiary’s operations in its consolidated financial statements until legal title to the real estate is transferred to legally satisfy the debt.

ASU 2011-10 should be applied on a prospective basis to deconsolidation events occurring after the effective date; with prior periods not adjusted even if the reporting entity has continuing involvement with previously derecognized in substance real estate entities. For public entities, ASU 2011-10 is effective for fiscal years, and interim periods within those years, beginning on or after June 15, 2012. Early adoption is permitted; however, the Corporation is not early adopting this ASU.

The adoption of this guidance is not expected to have a material effect on the Corporation’s consolidated financial statements.

FASB Accounting Standards Update 2011-08, Intangibles-Goodwill and Other (Topic 350): Testing Goodwill for Impairment (“ASU 2011-08”)

The FASB issued Accounting Standards Update (“ASU”) No. 2011-08 in September 2011. ASU 2011-08 is intended to simplify how entities test goodwill for impairment. ASU 2011-08 permits an entity the option to first assess qualitative factors to determine whether it is “more likely than not” that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in ASC Topic 350, Intangibles-Goodwill and Other. The more-likely-than-not threshold is defined as having a likelihood of more than 50%. The previous guidance under ASC Topic 350 required an entity to test goodwill for impairment, on at least an annual basis, by comparing the fair value of a reporting unit with its carrying amount, including goodwill (step one). If the fair value of a reporting unit is less than its carrying amount, then the second step of the test must be performed to measure the amount of the impairment loss, if any. Under the amendments in this ASU, an entity is not required to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that its fair value is less than its carrying amount.

This ASU also removes the guidance that permitted the entities to carry forward the calculation of the fair value of the reporting unit from one year to the next if certain conditions are met. In addition, the new qualitative indicators replace those currently used to determine whether an interim goodwill impairment test is required. These indicators are also applicable for assessing whether to perform step two for reporting units with zero or negative carrying amounts.

ASU 2011-08 was effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption was permitted, including for annual and interim goodwill impairment tests performed as of a date before September 15, 2011, if an entity’s financial statements for the most recent annual or interim period had not yet been issued. The Corporation did not elect to adopt early the provisions of this ASU.

The Corporation adopted this guidance on January 1, 2012. The provisions of this guidance simplify how entities test for goodwill impairment and it has not impacted the Corporation’s consolidated financial statements as of June 30, 2012.

FASB Accounting Standards Update 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS (“ASU 2011-04”)

The FASB issued ASU 2011-04 in May 2011. The amendment of this ASU provides a consistent definition of fair value between U.S. GAAP and International Financial Reporting Standards (“IFRS”). The ASU modifies some fair value measurement principles and disclosure requirements including the application of the highest and best use and valuation premise concepts, measuring the fair value of an instrument classified in a reporting entity’s shareholders’ equity, measuring the fair value of financial instruments that are managed within a portfolio, application of premiums and discounts in a fair value measurement, disclosing quantitative information about unobservable inputs used in Level 3 fair value measurements, and other additional disclosures about fair value measurements.

 

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Table of Contents

The new guidance was effective for interim or annual periods beginning on or after December 15, 2011. The guidance should be applied prospectively and early application was not permitted.

The Corporation adopted this guidance on the first quarter of 2012. It has not had a material impact on the Corporation’s consolidated financial statements as of June 30, 2012. Refer to Notes 22 and 23 for additional fair value disclosures included for the quarter and six months ended June 30, 2012.

FASB Accounting Standards Update 2011-03, Transfers and Servicing (Topic 860): Reconsideration of Effective Control for Repurchase Agreements (“ASU 2011-03”)

The FASB issued ASU 2011-03 in April 2011. The amendment of this ASU affects all entities that enter into agreements to transfer financial assets that both entitle and obligate the transferor to repurchase or redeem the financial assets before their maturity. The ASU modifies the criteria for determining when these transactions would be accounted for as financings (secured borrowings / lending agreements) as opposed to sales (purchases) with commitments to repurchase (resell). This ASU does not affect other transfers of financial assets. ASC Topic 860 prescribes when an entity may or may not recognize a sale upon the transfer of financial assets subject to repurchase agreements. That determination is based, in part, on whether the entity has maintained effective control over transferred financial assets.

Specifically, the amendments in this ASU remove from the assessment of effective control (1) the criterion requiring the transferor to have the ability to repurchase or redeem the financial assets on substantially the agreed terms, even in the event of default by the transferee, and (2) the requirement to demonstrate that the transferor possesses adequate collateral to fund substantially all the cost of purchasing replacement financial assets.

The new guidance was effective for interim or annual periods beginning on or after December 15, 2011. The guidance should be applied prospectively to transactions or modifications of existing transactions that occur on or after the effective date. Early application was not permitted.

The Corporation adopted this guidance on January 1, 2012. It has not had an impact on the Corporation’s consolidated financial statements as of June 30, 2012.

Note 3—Restrictions on cash and due from banks and certain securities

The Corporation’s banking subsidiaries, BPPR and BPNA, are required by federal and state regulatory agencies to maintain average reserve balances with the Federal Reserve Bank of New York (the “Fed”) or other banks. Those required average reserve balances amounted to $888 million at June 30, 2012 (December 31, 2011—$838 million). Cash and due from banks, as well as other short-term, highly liquid securities, are used to cover the required average reserve balances.

At June 30, 2012 and December 31, 2011, the Corporation held $36 million in restricted assets in the form of cash and funds deposited in money market accounts.

 

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Table of Contents

Note 4—Pledged assets

Certain securities and loans were pledged to secure public and trust deposits, assets sold under agreements to repurchase, other borrowings and credit facilities available, derivative positions, and loan servicing agreements. The classification and carrying amount of the Corporation’s pledged assets, in which the secured parties are not permitted to sell or repledge the collateral, were as follows:

 

(In thousands)

   June 30,
2012
     December 31,
2011
 

Investment securities available-for-sale, at fair value

   $ 2,006,552      $ 1,894,651  

Investment securities held-to-maturity, at amortized cost

     25,000        25,000  

Loans held-for-sale measured at lower of cost or fair value

     —           5,286  

Loans held-in-portfolio covered under loss sharing agreements with the FDIC

     501,640        —     

Loans held-in-portfolio not covered under loss sharing agreements with the FDIC

     8,643,391        8,571,268  
  

 

 

    

 

 

 

Total pledged assets

   $ 11,176,583      $ 10,496,205  
  

 

 

    

 

 

 

Pledged securities and loans that the creditor has the right by custom or contract to repledge are presented separately on the consolidated statements of financial condition.

At June 30, 2012, the Corporation had $1.5 billion in investment securities available-for-sale and $0.3 billion in loans that served as collateral to secure public funds (December 31, 2011—$1.4 billion and $0.4 billion, respectively).

At June 30, 2012, the Corporation’s banking subsidiaries had short-term and long-term credit facilities authorized with the Federal Home Loan Bank system (the “FHLB”) aggregating $2.8 billion (December 31, 2011—$2.0 billion). Refer to Note 14 to the consolidated financial statements for borrowings outstanding under these credit facilities. At June 30, 2012, the credit facilities authorized with the FHLB were collateralized by $4.1 billion in loans held-in-portfolio (December 31, 2011—$3.2 billion). Also, the Corporation’s banking subsidiaries had a borrowing capacity at the Federal Reserve (“Fed”) discount window of $4.4 billion (December 31, 2011—$2.6 billion), which remained unused as of such date. The amount available under these credit facilities with the Fed is dependent upon the balance of loans and securities pledged as collateral. At June 30, 2012, the credit facilities with the Fed discount window were collateralized by $4.8 billion in loans held-in-portfolio (December 31, 2011—$4.0 billion). These pledged assets are included in the above table and were not reclassified and separately reported in the consolidated statements of financial condition.

In addition, at June 30, 2012 trades receivables from brokers and counterparties amounting to $73 million were pledged to secure repurchase agreements (December 31, 2011—$68 million).

 

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Table of Contents

Note 5—Investment securities available-for-sale

The following tables present the amortized cost, gross unrealized gains and losses, approximate fair value, weighted average yield and contractual maturities of investment securities available-for-sale.

 

     At June 30, 2012  

(In thousands)

   Amortized
cost
     Gross
unrealized
gains
     Gross
unrealized
losses
     Fair
value
     Weighted
average
yield
 

U.S. Treasury securities

              

Within 1 year

   $ 7,014      $ 64      $ —         $ 7,078        1.50

After 1 to 5 years

     27,609        3,241        —           30,850        3.82  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total U.S. Treasury securities

     34,623        3,305        —           37,928        3.35  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Obligations of U.S. Government sponsored entities

              

Within 1 year

     539,045        16,168        —           555,213        3.84  

After 1 to 5 years

     190,538        2,646        7        193,177        1.81  

After 5 to 10 years

     280,596        3,206        166        283,636        1.98  

After 10 years

     7,083        289        —           7,372        5.41  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total obligations of U.S. Government sponsored entities

     1,017,262        22,309        173        1,039,398        2.96  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Obligations of Puerto Rico, States and political subdivisions

              

Within 1 year

     5,000        54        —           5,054        2.99  

After 1 to 5 years

     6,592        199        34        6,757        4.67  

After 10 years

     37,290        808        —           38,098        5.38  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total obligations of Puerto Rico, States and political subdivisions

     48,882        1,061        34        49,909        5.04  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Collateralized mortgage obligations—federal agencies

              

After 1 to 5 years

     6,130        62        —           6,192        1.52  

After 5 to 10 years

     37,137        1,580        —           38,717        2.85  

After 10 years

     1,909,363        47,628        318        1,956,673        2.53  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total collateralized mortgage obligations—federal agencies

     1,952,630        49,270        318        2,001,582        2.53  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Collateralized mortgage obligations—private label

              

After 5 to 10 years

     41        2        —           43        4.95  

After 10 years

     42,722        43        2,474        40,291        2.70  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total collateralized mortgage obligations—private label

     42,763        45        2,474        40,334        2.70  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Mortgage-backed securities

              

Within 1 year

     689        26        —           715        3.79  

After 1 to 5 years

     4,880        228        —           5,108        3.93  

After 5 to 10 years

     95,331        7,272        —           102,603        4.68  

After 10 years

     1,645,570        121,764        34        1,767,300        4.24  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total mortgage-backed securities

     1,746,470        129,290        34        1,875,726        4.26  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Equity securities (without contractual maturity)

     6,595        565        138        7,022        3.05  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Other

              

After 5 to 10 years

     18,025        1,838        —           19,863        10.99  

After 10 years

     4,907        128        —           5,035        3.62  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total other

     22,932        1,966        —           24,898        9.41  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total investment securities available-for-sale

   $ 4,872,157      $ 207,811      $ 3,171      $ 5,076,797        3.31
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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Table of Contents
     At December 31, 2011  

(In thousands)

   Amortized
cost
     Gross
unrealized
gains
     Gross
unrealized
losses
     Fair
value
     Weighted
average
yield
 

U.S. Treasury securities

              

After 1 to 5 years

   $ 34,980      $ 3,688      $ —         $ 38,668        3.35
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total U.S. Treasury securities

     34,980        3,688        —           38,668        3.35  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Obligations of U.S. Government sponsored entities

              

Within 1 year

     94,492        2,382        —           96,874        3.45  

After 1 to 5 years

     655,625        25,860        —           681,485        3.38  

After 5 to 10 years

     171,633        2,969        —           174,602        2.94  

After 10 years

     32,086        499        —           32,585        3.20  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total obligations of U.S. Government sponsored entities

     953,836        31,710        —           985,546        3.30  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Obligations of Puerto Rico, States and political subdivisions

              

Within 1 year

     765        9        —           774        4.97  

After 1 to 5 years

     14,824        283        31        15,076        4.07  

After 5 to 10 years

     4,595        54        —           4,649        5.33  

After 10 years

     37,320        909        —           38,229        5.38  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total obligations of Puerto Rico, States and political subdivisions

     57,504        1,255        31        58,728        5.03  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Collateralized mortgage obligations—federal agencies

              

After 1 to 5 years

     2,424        49        —           2,473        3.28  

After 5 to 10 years

     55,096        1,446        —           56,542        2.64  

After 10 years

     1,589,373        49,462        208        1,638,627        2.84  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total collateralized mortgage obligations—federal agencies

     1,646,893        50,957        208        1,697,642        2.83  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Collateralized mortgage obligations—private label

              

After 5 to 10 years

     5,653        1        181        5,473        0.81  

After 10 years

     59,460        —           7,141        52,319        2.44  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total collateralized mortgage obligations—private label

     65,113        1        7,322        57,792        2.30  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Mortgage-backed securities

              

Within 1 year

     57        1        —           58        3.91  

After 1 to 5 years

     7,564        328        —           7,892        3.86  

After 5 to 10 years

     111,639        8,020        1        119,658        4.66  

After 10 years

     1,870,736        141,274        49        2,011,961        4.25  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total mortgage-backed securities

     1,989,996        149,623        50        2,139,569        4.27  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Equity securities (without contractual maturity)

     6,594        426        104        6,916        2.96  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Other

              

After 5 to 10 years

     17,850        700        —           18,550        10.99  

After 10 years

     6,311        101        —           6,412        3.61  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total other

     24,161        801        —           24,962        9.06  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total investment securities available-for-sale

   $ 4,779,077      $ 238,461      $ 7,715      $ 5,009,823        3.58
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

The weighted average yield on investment securities available-for-sale is based on amortized cost; therefore, it does not give effect to changes in fair value.

Securities not due on a single contractual maturity date, such as mortgage-backed securities and collateralized mortgage obligations, are classified in the period of final contractual maturity. The expected maturities of collateralized mortgage obligations, mortgage-backed securities and certain other securities may differ from their contractual maturities because they may be subject to prepayments or may be called by the issuer.

 

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There were no proceeds from the sale of investment securities available-for-sale for the six months ended June 30, 2012 since the transactions traded in June 2012, but settled in July 2012 (June 30, 2011—$19.1 million). Proceeds received in July 2012 related to these sale transactions amounted to $8.0 million. Gross realized gains and losses on the sale of investment securities available-for-sale were as follows:

 

     For the quarter ended June 30,     Six months ended June 30,  

(In thousands)

   2012     2011     2012     2011  

Gross realized gains

   $ —        $ 6     $ —        $ 6  

Gross realized losses

     (349     (96     (349     (96
  

 

 

   

 

 

   

 

 

   

 

 

 

Net realized gains (losses) on sale of investment securities available-for-sale

   $ (349   $ (90   $ (349   $ (90
  

 

 

   

 

 

   

 

 

   

 

 

 

The following tables present the Corporation’s fair value and gross unrealized losses of investment securities available-for-sale, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position.

 

     At June 30, 2012  
     Less than 12 months      12 months or more      Total  

(In thousands)

   Fair value      Gross
unrealized
losses
     Fair value      Gross
unrealized
losses
     Fair value      Gross
unrealized
losses
 

Obligations of U.S. Government sponsored entities

   $ 31,912      $ 173      $ —         $ —         $ 31,912      $ 173  

Obligations of Puerto Rico, States and political subdivisions

     2,798        34        —           —           2,798        34  

Collateralized mortgage obligations—federal agencies

     88,198        314        2,762        4        90,960        318  

Collateralized mortgage obligations—private label

     —           —           35,826        2,474        35,826        2,474  

Mortgage-backed securities

     205        4        801        30        1,006        34  

Equity securities

     5,164        130        3        8        5,167        138  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total investment securities available-for-sale in an unrealized loss position

   $ 128,277      $ 655      $ 39,392      $ 2,516      $ 167,669      $ 3,171  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

     At December 31, 2011  
     Less than 12 months      12 months or more      Total  

(In thousands)

   Fair value      Gross
unrealized
losses
     Fair value      Gross
unrealized
losses
     Fair value      Gross
unrealized
losses
 

Obligations of Puerto Rico, States and political subdivisions

   $ 7,817      $ 28      $ 191      $ 3      $ 8,008      $ 31  

Collateralized mortgage obligations—federal agencies

     90,543        208        —           —           90,543        208  

Collateralized mortgage obligations—private label

     13,595        539        44,148        6,783        57,743        7,322  

Mortgage-backed securities

     5,577        14        1,466        36        7,043        50  

Equity securities

     5,199        95        2        9        5,201        104  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total investment securities available-for-sale in an unrealized loss position

   $ 122,731      $ 884      $ 45,807      $ 6,831      $ 168,538      $ 7,715  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Management evaluates investment securities for other-than-temporary (“OTTI”) declines in fair value on a quarterly basis. Once a decline in value is determined to be other-than-temporary, the value of a debt security is reduced and a corresponding charge to earnings is recognized for anticipated credit losses. Also, for equity securities that are considered other-than-temporarily impaired, the excess of the security’s carrying value over its fair value at the evaluation date is accounted for as a loss in the results of operations. The OTTI analysis requires management to consider various factors, which include, but are not limited to: (1) the length of time and the extent to which fair value has been less than the amortized cost basis, (2) the financial condition of the issuer or

 

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issuers, (3) actual collateral attributes, (4) the payment structure of the debt security and the likelihood of the issuer being able to make payments, (5) any rating changes by a rating agency, (6) adverse conditions specifically related to the security, industry, or a geographic area, and (7) management’s intent to sell the debt security or whether it is more likely than not that the Corporation would be required to sell the debt security before a forecasted recovery occurs.

At June 30, 2012, management performed its quarterly analysis of all debt securities in an unrealized loss position. Based on the analyses performed, management concluded that no individual debt security was other-than-temporarily impaired as of such date. At June 30, 2012, the Corporation did not have the intent to sell debt securities in an unrealized loss position and it is not more likely than not that the Corporation will have to sell the investment securities prior to recovery of their amortized cost basis. Also, management evaluated the Corporation’s portfolio of equity securities at June 30, 2012. No other-than-temporary impairment losses on equity securities were recorded during the quarters and six months ended June 30, 2012 and 2011. Management has the intent and ability to hold the investments in equity securities that are at a loss position at June 30, 2012, for a reasonable period of time for a forecasted recovery of fair value up to (or beyond) the cost of these investments.

The unrealized losses associated with “Collateralized mortgage obligations – private label” (“private-label CMO”) are primarily related to securities backed by residential mortgages. In addition to verifying the credit ratings for the private-label CMOs, management analyzed the underlying mortgage loan collateral for these bonds. Various statistics or metrics were reviewed for each private-label CMO, including among others, the weighted average loan-to-value, FICO score, and delinquency and foreclosure rates of the underlying assets in the securities. At June 30, 2012, there were no “sub-prime” securities in the Corporation’s private-label CMOs portfolios. For private-label CMOs with unrealized losses at June 30, 2012, credit impairment was assessed using a cash flow model that estimates the cash flows on the underlying mortgages, using the security-specific collateral and transaction structure. The model estimates cash flows from the underlying mortgage loans and distributes those cash flows to various tranches of securities, considering the transaction structure and any subordination and credit enhancements that exist in that structure. The cash flow model incorporates actual cash flows through the current period and then projects the expected cash flows using a number of assumptions, including default rates, loss severity and prepayment rates. Management’s assessment also considered tests using more stressful parameters. Based on the assessments, management concluded that the tranches of the private-label CMOs held by the Corporation were not other-than-temporarily impaired at June 30, 2012, thus management expects to recover the amortized cost basis of the securities.

The following table states the name of issuers, and the aggregate amortized cost and fair value of the securities of such issuer (includes available-for-sale and held-to-maturity securities), in which the aggregate amortized cost of such securities exceeds 10% of stockholders’ equity. This information excludes securities backed by the full faith and credit of the U.S. Government. Investments in obligations issued by a state of the U.S. and its political subdivisions and agencies, which are payable and secured by the same source of revenue or taxing authority, other than the U.S. Government, are considered securities of a single issuer.

 

     June 30, 2012      December 31, 2011  

(In thousands)

   Amortized cost      Fair value      Amortized cost      Fair value  

FNMA

   $ 1,234,776      $ 1,273,616      $ 1,049,315      $ 1,089,069  

FHLB

     538,854        555,078        553,940        578,617  

Freddie Mac

     1,123,166        1,147,089        984,270        1,010,669  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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Table of Contents

Note 6—Investment securities held-to-maturity

The following tables present the amortized cost, gross unrealized gains and losses, approximate fair value, weighted average yield and contractual maturities of investment securities held-to-maturity.

 

     At June 30, 2012  

(In thousands)

   Amortized
cost
     Gross
unrealized
gains
     Gross
unrealized
losses
     Fair value      Weighted
average
yield
 

Obligations of Puerto Rico, States and political subdivisions

              

Within 1 year

   $ 7,375      $ 18      $ —         $ 7,393        2.31

After 1 to 5 years

     11,649        579        —           12,228        5.83  

After 5 to 10 years

     19,301        960        13        20,248        6.00  

After 10 years

     59,674        704        405        59,973        4.00  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total obligations of Puerto Rico, States and political subdivisions

     97,999        2,261        418        99,842        4.48  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Collateralized mortgage obligations—federal agencies

              

After 10 years

     147        5        —           152        5.45  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total collateralized mortgage obligations—federal agencies

     147        5        —           152        5.45  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Other

              

After 1 to 5 years

     26,500        29        —           26,529        3.38  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total other

     26,500        29        —           26,529        3.38  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total investment securities held-to-maturity

   $ 124,646      $ 2,295      $ 418      $ 126,523        4.25
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

     At December 31, 2011  

(In thousands)

   Amortized
cost
     Gross
unrealized
gains
     Gross
unrealized
losses
     Fair value      Weighted
average
yield
 

Obligations of Puerto Rico, States and political subdivisions

              

Within 1 year

   $ 7,275      $ 6      $ —         $ 7,281        2.24

After 1 to 5 years

     11,174        430        —           11,604        5.80  

After 5 to 10 years

     18,512        266        90        18,688        5.99  

After 10 years

     62,012        40        855        61,197        4.11  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total obligations of Puerto Rico, States and political subdivisions

     98,973        742        945        98,770        4.51  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Collateralized mortgage obligations—private label

              

After 10 years

     160        —           9        151        5.45  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total collateralized mortgage obligations—private label

     160        —           9        151        5.45  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Other

              

After 1 to 5 years

     26,250        83        —           26,333        3.41  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total other

     26,250        83        —           26,333        3.41  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total investment securities held-to-maturity

   $ 125,383      $ 825      $ 954      $ 125,254        4.28
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Securities not due on a single contractual maturity date, such as collateralized mortgage obligations, are classified in the period of final contractual maturity. The expected maturities of collateralized mortgage obligations and certain other securities may differ from their contractual maturities because they may be subject to prepayments or may be called by the issuer.

The following tables present the Corporation’s fair value and gross unrealized losses of investment securities held-to-maturity, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at June 30, 2012 and December 31, 2011.

 

     At June 30, 2012  
     Less than 12 months      12 months or more      Total  

(In thousands)

   Fair
value
     Gross
unrealized
losses
     Fair
value
     Gross
unrealized
losses
     Fair
value
     Gross
unrealized
losses
 

Obligations of Puerto Rico, States and political subdivisions

   $ 91      $ 1      $ 22,147      $ 417      $ 22,238      $ 418  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total investment securities held-to-maturity in an unrealized loss position

   $ 91      $ 1      $ 22,147      $ 417      $ 22,238      $ 418  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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Table of Contents
     At December 31, 2011  
     Less than 12 months      12 months or more      Total  

(In thousands)

   Fair
value
     Gross
unrealized
losses
     Fair
value
     Gross
unrealized
losses
     Fair
value
     Gross
unrealized
losses
 

Obligations of Puerto Rico, States and political subdivisions

   $ 10,323      $ 92      $ 31,062      $ 853      $ 41,385      $ 945  

Collateralized mortgage obligations—private label

     —           —           151        9        151        9  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total investment securities held-to-maturity in an unrealized loss position

   $ 10,323      $ 92      $ 31,213      $ 862      $ 41,536      $ 954  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

As indicated in Note 5 to these consolidated financial statements, management evaluates investment securities for OTTI declines in fair value on a quarterly basis.

The “Obligations of Puerto Rico, States and political subdivisions” classified as held-to-maturity at June 30, 2012 are primarily associated with securities issued by municipalities of Puerto Rico and are generally not rated by a credit rating agency. The Corporation performs periodic credit quality reviews on these issuers. The decline in fair value at June 30, 2012 was attributable to changes in interest rates and not credit quality, thus no other-than-temporary decline in value was necessary to be recorded in these held-to-maturity securities at June 30, 2012. At June 30, 2012, the Corporation does not have the intent to sell securities held-to-maturity and it is not more likely than not that the Corporation will have to sell these investment securities prior to recovery of their amortized cost basis.

Note 7—Loans

Covered loans acquired in the Westernbank FDIC-assisted transaction, except for lines of credit with revolving privileges, are accounted for by the Corporation in accordance with ASC Subtopic 310-30. Under ASC Subtopic 310-30, the acquired loans were aggregated into pools based on similar characteristics. Each loan pool is accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows. The covered loans which are accounted for under ASC Subtopic 310-30 by the Corporation are not considered non-performing and will continue to have an accretable yield as long as there is a reasonable expectation about the timing and amount of cash flows expected to be collected. The Corporation measures additional losses for this portfolio when it is probable the Corporation will be unable to collect all cash flows expected at acquisition plus additional cash flows expected to be collected arising from changes in estimates after acquisition. Lines of credit with revolving privileges that were acquired as part of the Westernbank FDIC-assisted transaction are accounted for under the guidance of ASC Subtopic 310-20, which requires that any differences between the contractually required loan payment receivable in excess of the Corporation’s initial investment in the loans be accreted into interest income. Loans accounted for under ASC Subtopic 310-20 are placed in non-accrual status when past due in accordance with the Corporation’s non-accruing policy and any accretion of discount is discontinued.

The risks on loans acquired in the FDIC-assisted transaction are significantly different from the risks on loans not covered under the FDIC loss sharing agreements because of the loss protection provided by the FDIC. Accordingly, the Corporation presents loans subject to the loss sharing agreements as “covered loans” in the information below and loans that are not subject to the FDIC loss sharing agreements as “non-covered loans”.

For a summary of the accounting policy related to loans, interest recognition and allowance for loan losses refer to the summary of significant accounting policies included in Note 2 to the consolidated financial statements included in the 2011 Annual Report. Also, refer to Note 8 for a description of enhancements to the Corporation’s methodology for determining the allowance for loan losses which were effective on March 31, 2012.

 

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Table of Contents

The following table presents the composition of non-covered loans held-in-portfolio (“HIP”), net of unearned income, at June 30, 2012 and December 31, 2011.

 

     Non-covered loans      Non-covered loans  

(In thousands)

   HIP at June 30, 2012      HIP at December 31, 2011  

Commercial multi-family

   $ 871,924      $ 808,933  

Commercial real estate non-owner occupied

     2,625,014        2,665,499  

Commercial real estate owner occupied

     2,636,039        2,817,266  

Commercial and industrial

     3,469,838        3,681,629  

Construction

     249,743        239,939  

Mortgage

     5,899,973        5,518,460  

Leasing

     537,917        548,706  

Legacy[2]

     509,829        648,409  

Consumer:

     

Credit cards

     1,209,868        1,230,029  

Home equity lines of credit

     525,093        557,894  

Personal

     1,352,993        1,130,593  

Auto

     539,899        518,476  

Other

     237,679        236,763  
  

 

 

    

 

 

 

Total loans held-in-portfolio[1]

   $ 20,665,809      $ 20,602,596  
  

 

 

    

 

 

 

 

[1] Non-covered loans held-in-portfolio at June 30, 2012 are net of $98 million in unearned income and exclude $365 million in loans held-for-sale. (December 31, 2011—$101 million in unearned income and $363 million in loans held-for-sale.)
[2] 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.

 

 

The following table presents the composition of covered loans at June 30, 2012 and December 31, 2011.

 

     Covered loans at      Covered loans at  

(In thousands)

   June 30, 2012      December 31, 2011  

Commercial real estate

   $ 2,145,055      $ 2,271,295  

Commercial and industrial

     186,121        241,447  

Construction

     469,765        546,826  

Mortgage

     1,116,476        1,172,954  

Consumer

     98,913        116,181  
  

 

 

    

 

 

 

Total loans held-in-portfolio

   $ 4,016,330      $ 4,348,703  
  

 

 

    

 

 

 

The following table provides a breakdown of loans held-for-sale (“LHFS”) at June 30, 2012 and December 31, 2011 by main categories.

 

      Non-covered loans  

(In thousands)

   June 30, 2012      December 31, 2011  

Commercial

   $ 18,072      $ 25,730  

Construction

     160,102        236,045  

Legacy

     425        468  

Mortgage

     185,938        100,850  
  

 

 

    

 

 

 

Total

   $ 364,537      $ 363,093  
  

 

 

    

 

 

 

During the quarter and six months ended June 30, 2012, the Corporation recorded purchases of mortgage loans amounting to $336 million and $551 million, respectively (June 30, 2011—$479 million and $918 million, respectively). Also, the Corporation recorded purchases of $230 in consumer loans during the quarter and six months ended June 30, 2012. In addition, during the six months ended June 30, 2012, the Corporation recorded purchases of construction loans amounting to $1 million. There were no purchases of construction loans during the second quarter of 2012 and six months ended June 30, 2011. There were no purchases of commercial loans during the quarters and six months ended June 30, 2012 and 2011.

 

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Table of Contents

The Corporation performed whole-loan sales involving approximately $80 million and $130 million of residential mortgage loans during the quarter and six months ended June 30, 2012, respectively (June 30, 2011- $67 million and $302 million, respectively). Also, the Corporation securitized approximately $205 million and $395 million of mortgage loans into Government National Mortgage Association (“GNMA”) mortgage-backed securities during the quarter and six months ended June 30, 2012, respectively (June 30, 2011—$217 million and $473 million, respectively). Furthermore, the Corporation securitized approximately $71 million and $131 million of mortgage loans into Federal National Mortgage Association (“FNMA”) mortgage-backed securities during the quarter and six months ended June 30, 2012, respectively (June 30, 2011- $48 million and $121 million, respectively). The Corporation sold commercial and construction loans with a book value of approximately $19 million and $39 million during the quarter and six months ended June 30, 2012, respectively (June 30, 2011- $12 million and $14 million, respectively).

Non-covered loans

The following tables present non-covered loans held-in-portfolio by loan class that are in non-performing status or are accruing interest but are past due 90 days or more at June 30, 2012 and December 31, 2011. Accruing loans past due 90 days or more consist primarily of credit cards, FHA / VA and other insured mortgage loans, and delinquent mortgage loans which are included in the Corporation’s financial statements pursuant to GNMA’s buy-back option program. Servicers of loans underlying GNMA mortgage-backed securities must report as their own assets the defaulted loans that they have the option (but not the obligation) to repurchase, even when they elect not to exercise that option. Also, accruing loans past due 90 days or more include residential conventional loans purchased from another financial institution that, although delinquent, the Corporation has received timely payment from the seller / servicer, and, in some instances, have partial guarantees under recourse agreements. However, residential conventional loans purchased from another financial institution, which are in the process of foreclosure, are classified as non-performing mortgage loans.

 

At June 30, 2012

 
     Puerto Rico      U.S. mainland      Popular, Inc.  
     Non-covered loans                              

(In thousands)

   Non-accrual
loans
     Accruing
loans past-due
90 days  or more
     Non-accrual
loans
     Accruing
loans past-due
90 days or more
     Non-accrual
loans
     Accruing
loans past-due
90 days or more
 

Commercial multi-family

   $ 14,268      $ —         $ 22,488      $ —         $ 36,756      $ —     

Commercial real estate non-owner occupied

     62,163        —           90,958        —           153,121        —     

Commercial real estate owner occupied

     358,498        —           40,270        —           398,768        —     

Commercial and industrial

     156,863        585        22,431        —           179,294        585  

Construction

     55,534        —           12,004        —           67,538        —     

Mortgage

     600,082        296,264        32,818        —           632,900        296,264  

Leasing

     5,045        —           —           —           5,045        —     

Legacy

     —           —           54,730        —           54,730        —     

Consumer:

                 

Credit cards

     —           22,889        401        —           401        22,889  

Home equity lines of credit

     —           230        8,693        —           8,693        230  

Personal

     15,989        —           1,671        —           17,660        —     

Auto

     6,055        —           44        —           6,099        —     

Other

     1,796        520        15        —           1,811        520  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total[1]

   $ 1,276,293      $ 320,488      $ 286,523      $ —         $ 1,562,816      $ 320,488  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

[1] For purposes of this table non-performing loans exclude $179 million in non-performing loans held-for-sale.

 

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Table of Contents

At December 31, 2011

 
     Puerto Rico      U.S. mainland      Popular, Inc.  
     Non-covered loans                              

(In thousands)

   Non-accrual
loans
     Accruing
loans past-due
90 days or more
     Non-accrual
loans
     Accruing
loans past-due
90 days or more
     Non-accrual
loans
     Accruing
loans past-due
90 days or more
 

Commercial multi-family

   $ 15,396      $ —         $ 13,935      $ —         $ 29,331      $ —     

Commercial real estate non-owner occupied

     51,013        —           80,820        —           131,833        —     

Commercial real estate owner occupied

     385,303        —           59,726        —           445,029        —     

Commercial and industrial

     179,459        675        44,440        —           223,899        675  

Construction

     53,859        —           42,427        —           96,286        —     

Mortgage

     649,279        280,912        37,223        —           686,502        280,912  

Leasing

     5,642        —           —           —           5,642        —     

Legacy

     —           —           75,660        —           75,660        —     

Consumer:

                 

Credit cards

     —           25,748        735        —           735        25,748  

Home equity lines of credit

     —           157        10,065        —           10,065        157  

Personal

     19,317        —           1,516        —           20,833        —     

Auto

     6,830        —           34        —           6,864        —     

Other

     5,144        468        27        —           5,171        468  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total[1]

   $ 1,371,242      $ 307,960      $ 366,608      $ —         $ 1,737,850      $ 307,960  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

[1] For purposes of this table non-performing loans exclude $262 million in non-performing loans held-for-sale.

 

 

The following tables present loans by past due status at June 30, 2012 and December 31, 2011 for non-covered loans held-in-portfolio (net of unearned income).

 

June 30, 2012

 

Puerto Rico

 

Non- covered loans

 
     Past due             Non–covered  

(In thousands)

   30-59
days
     60-89
days
     90 days or
more
     Total
past due
     Current      loans HIP
Puerto Rico
 

Commercial multi-family

   $ 5,850      $ —         $ 14,268      $ 20,118      $ 96,126      $ 116,244  

Commercial real estate non-owner occupied

     3,983        717        62,163        66,863        1,212,645        1,279,508  

Commercial real estate owner occupied

     24,007        16,654        358,498        399,159        1,677,317        2,076,476  

Commercial and industrial

     35,694        23,465        157,448        216,607        2,474,445        2,691,052  

Construction

     73        2,495        55,534        58,102        143,662        201,764  

Mortgage

     233,466        108,754        896,346        1,238,566        3,575,655        4,814,221  

Leasing

     6,864        1,520        5,045        13,429        524,488        537,917  

Consumer:

                 

Credit cards

     13,961        10,354        22,889        47,204        1,148,930        1,196,134  

Home equity lines of credit

     54        169        230        453        18,128        18,581  

Personal

     13,624        9,303        15,989        38,916        1,170,516        1,209,432  

Auto

     21,896        6,422        6,055        34,373        504,282        538,655  

Other

     1,391        466        2,316        4,173        232,074        236,247  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 360,863      $ 180,319      $ 1,596,781      $ 2,137,963      $ 12,778,268      $ 14,916,231  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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Table of Contents

June 30, 2012

 

U.S. mainland

 
     Past due                

(In thousands)

   30-59
days
     60-89
days
     90 days
or more
     Total
past due
     Current      Loans HIP
U.S. mainland
 

Commercial multi-family

   $ 1,102      $ 1,092      $ 22,488      $ 24,682      $ 730,998      $ 755,680  

Commercial real estate non-owner occupied

     19,316        994        90,958        111,268        1,234,238        1,345,506  

Commercial real estate owner occupied

     3,520        540        40,270        44,330        515,233        559,563  

Commercial and industrial

     9,313        1,906        22,431        33,650        745,136        778,786  

Construction

     —           —           12,004        12,004        35,975        47,979  

Mortgage

     15,572        11,208        32,818        59,598        1,026,154        1,085,752  

Legacy

     6,679        5,040        54,730        66,449        443,380        509,829  

Consumer:

                 

Credit cards

     295        143        401        839        12,895        13,734  

Home equity lines of credit

     4,780        2,659        8,693        16,132        490,380        506,512  

Personal

     461        1,470        1,671        3,602        139,959        143,561  

Auto

     50        8        44        102        1,142        1,244  

Other

     —           9        15        24        1,408        1,432  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 61,088      $ 25,069      $ 286,523      $ 372,680      $ 5,376,898      $ 5,749,578  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

June 30, 2012

 

Popular, Inc.

 

Non-covered loans

 
     Past due             Non-covered  

(In thousands)

   30-59
days
     60-89
days
     90 days
or more
     Total
past due
     Current      loans HIP
Popular, Inc.
 

Commercial multi-family

   $ 6,952      $ 1,092      $ 36,756      $ 44,800      $ 827,124      $ 871,924  

Commercial real estate non-owner occupied

     23,299        1,711        153,121        178,131        2,446,883        2,625,014  

Commercial real estate owner occupied

     27,527        17,194        398,768        443,489        2,192,550        2,636,039  

Commercial and industrial

     45,007        25,371        179,879        250,257        3,219,581        3,469,838  

Construction

     73        2,495        67,538        70,106        179,637        249,743  

Mortgage

     249,038        119,962        929,164        1,298,164        4,601,809        5,899,973  

Leasing

     6,864        1,520        5,045        13,429        524,488        537,917  

Legacy

     6,679        5,040        54,730        66,449        443,380        509,829  

Consumer:

                 

Credit cards

     14,256        10,497        23,290        48,043        1,161,825        1,209,868  

Home equity lines of credit

     4,834        2,828        8,923        16,585        508,508        525,093  

Personal

     14,085        10,773        17,660        42,518        1,310,475        1,352,993  

Auto

     21,946        6,430        6,099        34,475        505,424        539,899  

Other

     1,391        475        2,331        4,197        233,482        237,679  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 421,951      $ 205,388      $ 1,883,304      $ 2,510,643      $ 18,155,166      $ 20,665,809  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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Table of Contents

December 31, 2011

 

Puerto Rico

 

Non-covered loans

 
     Past due      Current      Non-covered
loans HIP
Puerto Rico
 

(In thousands)

   30-59
days
     60-89
days
     90 days
or more
     Total
past due
       

Commercial multi-family

   $ 435      $ 121      $ 15,396      $ 15,952      $ 107,164      $ 123,116  

Commercial real estate non-owner occupied

     16,584        462        51,013        68,059        1,193,447        1,261,506  

Commercial real estate owner occupied

     39,578        21,003        385,303        445,884        1,785,542        2,231,426  

Commercial and industrial

     46,013        17,233        180,134        243,380        2,611,154        2,854,534  

Construction

     608        21,055        53,859        75,522        85,419        160,941  

Mortgage

     202,072        98,565        930,191        1,230,828        3,458,655        4,689,483  

Leasing

     7,927        2,301        5,642        15,870        532,836        548,706  

Consumer:

                 

Credit cards

     14,507        11,479        25,748        51,734        1,164,086        1,215,820  

Home equity lines of credit

     155        395        157        707        19,344        20,051  

Personal

     17,583        10,434        19,317        47,334        935,854        983,188  

Auto

     22,677        5,883        6,830        35,390        480,874        516,264  

Other

     1,740        1,442        5,612        8,794        226,310        235,104  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 369,879      $ 190,373      $ 1,679,202      $ 2,239,454      $ 12,600,685      $ 14,840,139  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

December 31, 2011

 

U.S. mainland

 
     Past due      Current      Loans HIP
U.S.
mainland
 

(In thousands)

   30-59
days
     60-89
days
     90 days or
more
     Total past
due
       

Commercial multi-family

   $ 14,582      $ —         $ 13,935      $ 28,517      $ 657,300      $ 685,817  

Commercial real estate non-owner occupied

     15,794        3,168        80,820        99,782        1,304,211        1,403,993  

Commercial real estate owner occupied

     14,004        449        59,726        74,179        511,661        585,840  

Commercial and industrial

     22,545        3,791        44,440        70,776        756,319        827,095  

Construction

     —           —           42,427        42,427        36,571        78,998  

Mortgage

     30,594        13,190        37,223        81,007        747,970        828,977  

Legacy

     30,712        7,536        75,660        113,908        534,501        648,409  

Consumer:

                 

Credit cards

     314        229        735        1,278        12,931        14,209  

Home equity lines of credit

     7,090        3,587        10,065        20,742        517,101        537,843  

Personal

     3,574        2,107        1,516        7,197        140,208        147,405  

Auto

     106        37        34        177        2,035        2,212  

Other

     29        10        27        66        1,593        1,659  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 139,344      $ 34,104      $ 366,608      $ 540,056      $ 5,222,401      $ 5,762,457  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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Table of Contents

December 31, 2011

 

Popular, Inc.

 

Non-covered loans

 
      Past due      Current      Non-covered
loans HIP
Popular, Inc.
 

(In thousands)

   30-59 days      60-89 days      90 days
or more
     Total
past due