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Press release from Business Wire

Popular, Inc. Announces Second Quarter Financial Results

<ul> <li class='bwlistitemmargb'> <b>Reports net income of $327.5 million for the quarter ended June 30, 2013; Net interest margin of 4.46% in Q2 2013, vs. 4.40% in Q1 2013</b> <ul> <li class='bwlistitemmargb'> <b>Adjusted net income of $68.1 million, excluding the effect of the bulk sale of non-performing loans, EVERTEC's IPO and the impact of the Puerto Rico Tax Reform</b> </li> <li class='bwlistitemmargb'> <b>Completed the sale of non-performing mortgage loans with book value of $434.6 million, resulting in an after-tax loss of $107.1 million</b> </li> <li class='bwlistitemmargb'> <b>EVERTEC completed its initial public offering and repayment of debt to Popular, resulting in an after-tax gain of $156.6 million for Popular</b> </li> </ul> </li> <li class='bwlistitemmargb'> <b>Continued progress in credit quality (excluding covered loans):</b> <ul> <li class='bwlistitemmargb'> <b>After the impact of the bulk loan sale:</b> <ul> <li class='bwlistitemmargb'> <b>Non-performing assets declined by $439.3 million, or 36%, quarter over quarter;</b> </li> <li class='bwlistitemmargb'> <b>Non-performing loans held-in-portfolio reached their lowest level since 2006, declining by $436.7 million, or 42%, from Q1 2013, and down 74% from the Q3 2010 peak.</b> </li> <li class='bwlistitemmargb'> <b>The ratio of non-performing loans held-in-portfolio to loans held-in-portfolio declined to 2.85% from 4.86% in Q1 2013</b> </li> </ul> </li> <li class='bwlistitemmargb'> <b>Excluding the impact of the bulk loan sale:</b> <ul> <li class='bwlistitemmargb'> <b>Non-performing loans held-in-portfolio slightly declined by $2.1 million from Q1 2013;</b> </li> <li class='bwlistitemmargb'> <b>Net charge-offs decreased by $2.2 million from Q1 2013; NCO ratio decreased to 1.47% from 1.55% in Q1 2013, reaching lowest level since 2008;</b> </li> </ul> </li> </ul> </li> <li class='bwlistitemmargb'> <b>Common Equity Tier 1 ratio of 13.1% and Tangible Book Value per Share of $33.38 at June 30, 2013; capital exceeds well-capitalized threshold by $1.9 billion</b> </li> </ul>

Thursday, July 18, 2013

Popular, Inc. Announces Second Quarter Financial Results

08:00 EDT Thursday, July 18, 2013

SAN JUAN, Puerto Rico (Business Wire) -- Popular, Inc. (the “Corporation” or “Popular”) (NASDAQ:BPOP) reported net income of $327.5 million for the quarter ended June 30, 2013, compared to a net loss of $120.3 million for the quarter ended March 31, 2013.

Mr. Richard L. Carrión, Chairman of the Board and Chief Executive Officer, said: “The quarter reflects two notable sources of strength: capital and revenue-generating capacity. Our capital base and revenues have continued to grow while we have aggressively reduced our non-performing assets to pre-crisis levels. We continue to increase our financial flexibility and to leverage the strengths of our leading Puerto Rico franchise to drive shareholder value.”

Earnings Highlights
 
    Quarters ended   Six months ended
(Dollars in thousands, except per share information)   30-Jun-13   31-Mar-13   30-Jun-12 30-Jun-13   30-Jun-12
Net interest income   $ 355,719   $ 346,313   $ 342,179 $ 702,032   $ 680,777
Provision for loan losses – non-covered loans 223,908 206,300 81,743 430,208 164,257
Provision for loan losses – covered loans [1]   25,500     17,556       37,456     43,056       55,665  
Net interest income after provision for loan losses 106,311 122,457 222,980 228,768 460,855
FDIC loss share (expense) income (3,755 ) (26,266 ) 2,575 (30,021 ) (12,680 )
Other non-interest income [2] 297,118 60,323 106,857 357,441 262,038
Operating expenses [2]   309,586     333,698       344,566     643,284       657,767  
Income (loss) before income tax 90,088 (177,184 ) (12,154 ) (87,096 ) 52,446
Income tax (benefit)   (237,380 )   (56,877 )     (77,893 )   (294,257 )     (61,701 )
Net income (loss)   $ 327,468     $ (120,307 )   $ 65,739   $ 207,161     $ 114,147  
Net income (loss) applicable to common stock   $ 326,537     $ (121,237 )   $ 64,809   $ 205,300     $ 112,286  
Net income (loss) per common share - basic and diluted   $ 3.18     $ (1.18 )   $ 0.63   $ 2.00     $ 1.10  
   
[1] Covered loans represent loans acquired in the Westernbank FDIC-assisted transaction that are covered under FDIC loss sharing agreements.
[2] During the second quarter, the Corporation discontinued the elimination of its proportionate ownership share of intercompany transactions with EVERTEC from their respective revenue and expense categories to reflect them as an equity pick-up adjustment in Other Operating Income. This results in a gross up of operating expenses with a corresponding increase in other operating income. The results of operations for all periods presented have been adjusted to reflect this change.

Recent significant events

  • On April 12, 2013, EVERTEC, Inc. (“EVERTEC”) completed an initial public offering (“IPO”) of 28.8 million shares of common stock, generating proceeds of approximately $575.8 million. In connection with the IPO, EVERTEC sold 6.3 million shares of newly issued common stock and Apollo Global Management LLC (“Apollo”) and Popular sold 13.7 million and 8.8 million shares of EVERTEC retaining stakes of 29.1% and 33.5%, respectively. As of quarter-end, Popular's stake in EVERTEC was reduced to 32.4% due to exercise by EVERTEC's management of certain stock options that became fully vested as a result of the IPO. A portion of the proceeds received by EVERTEC from the IPO was used to repay and refinance its outstanding debt. In connection with the refinancing, Popular received payment in full for its portion of the EVERTEC debt held by it at that time.

As a result of these transactions, Popular recognized an after-tax gain of approximately $156.6 million during the second quarter of 2013. As of June 30, 2013, Popular's investment in EVERTEC has a book value of $63.6 million.

  • On June 28, 2013, Banco Popular de Puerto Rico (“Banco Popular” or ‘BPPR') completed the sale of a portfolio of non-performing residential mortgage loans with a book value and unpaid principal balance of approximately $434.6 million and $510.7 million, respectively. Banco Popular did not retain any beneficial interest in the pool of mortgage loans sold and no seller financing was provided in connection with the transaction.

The purchase price for the loans was approximately $244 million, or 47.75% of the unpaid principal balance. As a result of the all cash transaction, Popular recognized an after-tax loss of approximately $107.2 million during the second quarter of 2013.

  • During the second quarter of 2013, the Puerto Rico Government approved an amendment to the Internal Revenue Code which, among other things, increased the corporate income tax rate from 30% to 39%. This resulted in a benefit of approximately $215.6 million from the increase in the net deferred tax asset.

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

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

Actual Results

(US GAAP)

 

Impact of Sale

of NPAs

 

Impact of

EVERTEC's

IPO

  Income Tax

Adjustment [2] [3]

 

Adjusted Results

(Non GAAP)

Net interest income $ 355,719   $ -   $ 1,502   $ -   $ 354,217
Provision for loan losses – non-covered loans 223,908 169,248 - - 54,660
Provision for loan losses – covered loans [1]   25,500   -   -   -   25,500
Net interest income after provision for loan losses   106,311   (169,248)   1,502   -   274,057
Net (loss) gain on sale of loans, including valuation adjustments on loans held-for-sale 4,382 (3,865) - - 8,247
FDIC loss share expense (3,755) - - - (3,755)
Other non-interest income   292,736   (3,047)   167,947   -   127,836
Total non-interest income   293,363   (6,912)   167,947   -   132,328
Other taxes 15,288 - - 1,656 13,632
Professional fees 69,964 - 856 - 69,108
OREO expense 5,762 - - - 5,762
Other operating expenses   218,572   -   -   -   218,572
Total operating expenses   309,586   -   856   1,656   307,074
Income (loss) before income tax 90,088 (176,160) 168,593 (1,656) 99,311
Income tax (benefit) expense   (237,380)   (68,987)   11,988   (211,588)   31,207
Net income (loss)   $ 327,468   $ (107,173)   $ 156,605   $ 209,932   $ 68,104
[1] Covered loans represent loans acquired in the Westernbank FDIC-assisted transaction that are covered under FDIC loss sharing agreements.
[2] Represents the impact of the gross receipt tax corresponding to the first quarter 2013, recorded during the second quarter after enactment.
[3] Represents the net benefit of $215.6 million for the increase on the net deferred tax asset from the change of the corporate tax rate from 30% to 39%, $7.9 million resulting from the adjustment in tax rate for distributions from EVERTEC from 15% to 4%, offset by an adjustment of $11.9 million on the deferred tax liability related to the covered loans portfolio.

 

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

Actual Results

(US GAAP)

 

Impact of Sale of

NPAs [2]

 

Adjusted Results

(Non GAAP)

Net interest income $ 346,313   $ -   346,313
Provision for loan losses – non-covered loans 206,300 148,823 57,477
Provision for loan losses – covered loans [1]   17,556   -   17,556
Net interest income after provision for loan losses   122,457   (148,823)   271,280
Net (loss) gain on sale of loans, including valuation adjustments on loans held-for-sale (48,959) (61,387) 12,428
FDIC loss share expense (26,266) - (26,266)
Other non-interest income   109,282   (10,700)   119,982
Total non-interest income   34,057   (72,087)   106,144
Other taxes 11,586 - 11,586
Professional fees 70,497 5 70,492
OREO expense 46,741 37,046 9,695
Other operating expenses   204,874   -   204,874
Total operating expenses   333,698   37,051   296,647
(Loss) income before income tax (177,184) (257,961) 80,777
Income tax (benefit) expense   (56,877)   (77,388)   20,511
Net (loss) income   $ (120,307)   $ (180,573)   $ 60,266
[1] Covered loans represent loans acquired in the Westernbank FDIC-assisted transaction that are covered under FDIC loss sharing agreements.
[2] Net (loss) gain on sale of loans, includes $8.8 million of negative valuation adjustments on loans held for sale which were transferred to held-in-portfolio subsequent to the sale.

    Quarters ended
(Unaudited) Adjusted results Non-GAAP
(In thousands)   30-Jun-13   31-Mar-13   Variance
Net interest income $ 354,217   $ 346,313   7,904
Provision for loan losses – non-covered loans 54,660 57,477 (2,817)
Provision for loan losses – covered loans [1]   25,500   17,556   7,944
Net interest income after provision for loan losses   274,057   271,280   2,777
Net (loss) gain on sale of loans, including valuation adjustments on loans held-for-sale 8,247 12,428 (4,181)
FDIC loss share expense (3,755) (26,266) 22,511
Other non-interest income   127,836   119,982   7,854
Total non-interest income   132,328   106,144   26,184
Other taxes 13,632 11,586 2,046
Professional fees 69,108 70,492 (1,384)
OREO expense 5,762 9,695 (3,933)
Other operating expenses   218,572   204,874   13,698
Total operating expenses   307,074   296,647   10,427
Income before income tax 99,311 80,777 18,534
Income tax expense   31,207   20,511   10,696
Net income   $ 68,104   $ 60,266   $ 7,838
[1] Covered loans represent loans acquired in the Westernbank FDIC-assisted transaction that are covered under FDIC loss sharing agreements.

Net interest income

Net interest margin for the second quarter of 2013 increased 6 basis points to 4.46% when compared with the first quarter of 2013. Net interest income reached $355.7 million, an increase of $9.4 million from the previous quarter. The main drivers of the increase in net interest margin are:

  • Approximately $2.5 million of the increase in net interest income was due to the impact of having one more day in the second quarter of 2013 than the first quarter of the year.
  • An increase in the interest income from commercial loans of $3.0 million, or 9 basis points, due to higher yields mainly driven by lower levels of non-performing loans at BPPR after the bulk sale of non-performing assets near the end of the first quarter and one additional day of interest in the quarter ended June 30, 2013.
  • An increase of $8.0 million, or 1 basis point, in interest income from mortgage loans due to higher average volume of loans mainly at BPPR, attributed to the purchases completed near the end of the first quarter.
  • Interest expense on deposits decreased by $2.5 million, or 5 basis points, due mainly to the lower levels of time deposits, mainly brokered deposits and lower cost related to re-pricing of deposits at lower prevailing rates, partially offset by an additional day of interest cost in the quarter.
  • These positive variances were partially offset by a decrease in interest income from investment securities of $1.9 million, or 11 basis points, mostly due to lower yields upon prepayments and reinvestment at lower current rates.
  • Interest from covered loans decreased by $2.1 million due to lower levels as the portfolio continues to run-off, partially offset by a 29 basis points increase in yields to 8.60% upon Q2 recasting mainly as a result of higher expected cash flows which are reflected in the accretable yield and recognized over the life of the loans.

Excluding the effect of the EVERTEC debt repayment in connection with the IPO, the net interest margin for the second quarter would have been 4.44%. Refer to Tables D and E for yield/ rate analysis.

  • BPPR's net interest margin increased eight basis points from the previous quarter to 5.26%. Net interest income amounted to $314.7 million for the quarter ended June 30, 2013, compared with $305.0 million for the previous quarter. The increase is mostly due to the above mentioned purchases of mortgage loans completed near the end of the first quarter, lower level of non-performing commercial loans and lower cost of deposits. Also positively affecting the Bank's net interest income is one additional day of interest during the second quarter of 2013. These positive variances were offset by a decrease in interest income from investments mainly due to lower yields and lower income from the covered portfolio as discussed above.
  • Banco Popular North America (BPNA), our U.S. banking subsidiary doing business as Popular Community Bank, earned $67.8 million in net interest income for the quarter ended June 30, 2013, compared with $68.0 million in the previous quarter. The decrease in the net interest margin of five basis points to 3.43% was mainly related to lower income from commercial loans and higher volume of mortgage loans purchases, which carry a lower yield, partially offset by lower cost of interest bearing deposits.

Non-interest income

Non-interest income increased by $259.3 million compared with the first quarter of 2013. Excluding the impact of the significant events outlined above, non-interest income increased by $26.2 million compared with the first quarter of 2013, driven primarily by the following items:

  • A decrease of $22.5 million in FDIC loss-share expense mainly due to higher mirror accounting on credit impairment losses and reimbursable expenses, and the impact of fair value adjustments in the true-up payment obligation. See additional details about covered portfolio and FDIC indemnity asset in Table O.
  • Higher trading account profit by $8.0 million as a result of higher gains on closed derivative positions which were used to hedge securitization transactions reflected in the Net gain (loss) on sale of loans line item, partially offset by higher unrealized losses on outstanding mortgage-backed securities.
  • An increase of $3.3 million in other service fees, mainly related to higher commission income received from the sale of investment products by the retail division of Popular Securities, higher credit card fees due to higher interchange fees from increased customer purchasing activity and the impact of fair value adjustments on mortgage servicing rights.

These increases were partially offset by:

  • A decrease in net gain (loss) on sale of loans, including valuation adjustments on loans held-for-sale, of $4.2 million which was principally driven by lower gains on mortgage loans securitized by BPPR, partially offset by higher gains on the sale of commercial loans at BPNA.
  • Higher adjustments to indemnity reserves on loans sold by $3.1 million corresponding mostly to recourse repurchase related activity in the BPPR reportable segment.

Refer to table B for further details.

Financial Impact of FDIC-Assisted Transaction
(Unaudited)  
      Quarters ended
(In thousands)   30-Jun-13   31-Mar-13   30-Jun-12
   

Income Statement

Interest income on covered loans $ 70,136 $ 72,184 $ 79,094

Total FDIC loss share income (expense)

(3,755 ) (26,266 ) 2,575
Other non-interest income 242 242 310
Provision for loan losses     25,500       17,556       37,456
Total revenues less provision for loan losses   $ 41,123     $ 28,604     $ 44,523
 

Balance Sheet

Loans covered under loss-sharing agreements with FDIC $ 3,199,998 $ 3,362,446 $ 4,016,330
FDIC loss share asset 1,379,342 1,380,592 1,631,594
FDIC true-up payment obligation     118,770       118,294       100,198

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

Operating expenses

Operating expenses decreased by $24.1 million when compared with the first quarter of 2013. Excluding the impact of the significant events outlined above, operating expenses increased by $10.4 million versus the first quarter of 2013, driven primarily by:

  • Higher FDIC deposit insurance expenses by $10.2 million, driven mainly by the assessment credit of $11.3 million recognized during the first quarter of 2013 as a result of revisions in the deposit-insurance premium calculation.
  • Higher business promotion expenses by $2.6 million due mainly to costs from customer affinity and credit card reward programs in Puerto Rico.
  • Higher other taxes by $2.0 million principally as a result of the recently enacted gross receipts tax imposed on financial and non-financial institutions in Puerto Rico.

These increases were partially offset by:

  • A decrease in other real estate owned (OREO) expenses of $3.9 million due mainly to lower subsequent fair value adjustments at BPPR and BPNA.

Non-personnel credit-related costs, which include collections, appraisals, credit related fees, and OREO expenses, amounted to $14.6 million for the second quarter of 2013, compared with $20.3 million for the first quarter of 2013. The decrease was principally due to the decrease in OREO expenses mentioned above and lower appraisals and collection costs of $1.8 million.

Full-time equivalent employees (“FTEs”) were 8,117 as of June 30, 2013, compared with 8,144 as of March 31, 2013, and 8,093 as of June 30, 2012. The decrease of 27 FTEs from the first quarter of 2013 is mainly related to higher voluntary turnover in the U.S. mainland.

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

Income taxes

During the quarter ended June 30, 2013, the Corporation recorded an income tax benefit of $237.4 million. This reflects the $215.6 million benefit from the increase in the deferred tax asset for the change in the corporate tax rate from 30% to 39%, a benefit of $7.9 million resulting from the change in tax rate for distributions from EVERTEC from 15% to 4%, pursuant to the provisions of the certain economic incentive legislation in Puerto Rico, offset by an adjustment of $11.9 million on the deferred tax liability related to the covered loans portfolio.

Excluding the effect of these and other events discussed above, the income tax expense amounted to $31.2 million, reflecting an effective tax rate of approximately 31% for the second quarter of 2013.

Credit Quality

The following table presents non-performing assets information:

Non-Performing Assets      
(Unaudited)            
(In thousands)   30-Jun-13   31-Mar-13   30-Jun-12
Total non-performing loans held-in-portfolio, excluding covered loans $ 613,867 $ 1,050,608 $ 1,562,818
Non-performing loans held-for-sale 10,697 17,463 178,652
Other real estate owned (“OREO”), excluding covered OREO   158,920   154,699   226,629
Total non-performing assets, excluding covered assets 783,484 1,222,770 1,968,099
Covered loans and OREO   208,993   196,717   209,793
Total non-performing assets   $ 992,477   $ 1,419,487   $ 2,177,892
Net charge-offs for the quarter (excluding covered loans)[1]   $ 79,145   $ 81,357   $ 97,976
[1] Excludes write-downs of $199,502 of loans sold during the quarter ended June 30, 2013 and $163,143 of loans sold during the quarter ended March 31, 2013.
 
Ratios (excluding covered loans):            
Non-performing loans held-in-portfolio to loans held-in-portfolio 2.85% 4.86% 7.56%
Allowance for loan losses to loans held-in-portfolio 2.46 2.70 3.14
Allowance for loan losses to non-performing loans, excluding loans held-for-sale   86.14   55.54   41.50
Provision for Loan Losses      
 
    Quarters ended
(In thousands)   30-Jun-13   31-Mar-13   30-Jun-12
Provision (reversal) for loan losses - non-covered loans:
BPPR $ 230,464 $ 204,289 $ 66,443
BPNA     (6,556 )     2,011     15,300
Total provision for loan losses - non-covered loans     223,908       206,300     81,743
Provision for loan losses - covered loans     25,500       17,556     37,456
Total provision for loan losses   $ 249,408     $ 223,856   $ 119,199

Credit quality continued to improve aided by the mortgage non-performing loans (NPL) bulk sale completed during the quarter. The Corporation continued to execute key strategies to reduce non-performing loans and improve the risk profile of its portfolios. The following presents credit quality performance for the second quarter of 2013 for the Corporation's non-covered portfolio.

  • Non-performing loans held-in-portfolio decreased by $436.7 million, or 42%, from the first quarter of 2013, and 74% from peak levels in the third quarter of 2010. This reduction reflects the impact of the sale of mortgage NPLs completed during the second quarter with a book value of approximately $434.6 million. Excluding the impact of the bulk sale, NPLs decreased by $2.1 million.
  • Inflows of NPLs held-in-portfolio, excluding consumer loans, increased slightly by $3.4 million, or 2%, from the previous quarter. This increase was principally attributed to higher commercial NPL inflows in Puerto Rico.
  • Net charge-offs for the second quarter of $278.6 million include charge-offs associated with the bulk loan sale of $199.5 million. Excluding the impact of the sale, net charge-offs declined slightly to $79.1 million, or 1.47% of average non-covered loans held-in portfolio, compared to $81.4 million, or 1.55% of average loans in the first quarter 2013. Refer to Table J for further information on net charge-offs and related ratios.
  • The ratio of the allowance for loan losses to loans held-in-portfolio stood at 2.46% as of June 30, 2013, compared with 2.70% as of March 31, 2013. The general and specific reserves related to non-covered loans totaled $422.9 million and $105.9 million, respectively, at quarter-end, compared with $459.8 million and $123.7 million, respectively, as of March 31, 2013. The reduction in the allowance for loan losses was primarily due to the combined effect of the release related to the mortgage NPL sale, continued improvements in credit quality and economic trends, offset by revisions in the allowance for loan losses methodology.
  • In the second quarter of 2013, the Corporation implemented enhancements to the general reserve estimation process which mainly consisted of the following: (i) incorporated risk ratings to the commercial, construction and legacy loan segmentation, and (ii) updated and enhanced the framework utilized to quantify and establish environmental factors adjustments. The net effect of these changes resulted in a reserve increase of $22.6 million for the BPPR segment and a decrease of $10.8 million for BPNA, for a net increase of $11.8 million to the allowance for loan losses.
  • The ratio of allowance for loan losses to non-performing loans held-in-portfolio increased to 86.0% from 55.5% in the previous quarter mainly due to the effect of the NPL bulk sale.
  • The provision for loan losses for the second quarter of 2013 increased by $17.6 million from the previous quarter. The first and second quarter of 2013 included an incremental provision of $148.8 million and $169.2 million, respectively, related to the NPL bulk sales. Excluding the impact of the sales, the provision for the second quarter decreased by $2.8 million, reflecting the net effect of continuous improvements in credit quality offset by the impact of the enhancements to the allowance for loan losses methodology.

BPPR Segment

  • Total NPLs held-in-portfolio decreased by $418.5 million, or 50%, from the first quarter of 2013, primarily led by the mortgage NPL sale. Excluding the impact of the sale, NPLs increased by $16.1 million, mainly driven by an increase of $12.9 million in commercial NPLs mainly due to two significant relationships placed into non-performing status during the quarter. Inflows of NPLs held-in-portfolio, excluding consumer loans, were steady for the second quarter of 2013, reflecting higher commercial inflows of $12.0 million, offset by a decrease in mortgage loans NPLs of $11.1 million. Overall NPLs continue to show favorable trends.
  • Net charge-offs amounted to $260.9 million for the second quarter of 2013, principally related to incremental charge-offs of $199.5 million associated with the bulk loan sale. Excluding the impact of the sale, net charge-offs were $61.4 million or 1.55% of average loans held-in portfolio, compared to $62.4 million, or 1.64%, in the previous quarter. Slight decrease is the result of lower mortgage and construction net charge-offs of $4.2 million and $2.6 million, offset by higher commercial net charge-offs of $5.7 million. Commercial net charge-offs were impacted by $14.0 million in charge-offs related to two particular credits for which specific reserves had been recorded in the previous quarter.
  • The allowance for loan losses decreased by $30.4 million from the previous quarter. The allowance for loan losses as a percentage of loans held-in-portfolio decreased to 2.51% from 2.66% in the first quarter of 2013. Excluding the reserve release of $30.3 million related to the mortgage NPL sale, the allowance for loan losses remained unchanged, reflecting improvements in credit quality trends, offset by a $22.6 million increase arising from the enhancements to the allowance for loan losses methodology.
  • The ratio of allowance for loan losses to non-performing loans held-in-portfolio increased to 93.8% from 50.6% in the previous quarter mainly due to the effect of the NPL sale.
  • The provision for loan losses increased by $26.2 million from the first quarter of 2013. Excluding the impact of the NPL sales, the provision for the second quarter of 2013 increased by $5.8 million, mainly driven by the revisions to the allowance for loan losses framework, influenced favorably by the positive trends in credit quality.

BPNA Segment

  • Total non-performing loans held-in-portfolio decreased by $18.2 million, or 8.6%, from the first quarter of 2013, reflecting improved credit performance and loan resolutions. Total inflows of non-performing loans held-in-portfolio, excluding consumer loans, increase slightly by $2.5 million from the first quarter of 2013.
  • Net charge-offs decreased by $1.2 million from the first quarter of 2013. The ratio of net charge-offs to average loans held-in-portfolio was 1.24% on an annualized basis, down from 1.33% in the previous quarter.
  • The provision for loan losses in the second quarter of 2013 decreased by $8.6 million. The allowance for loan losses as a percentage of loans held-in-portfolio decreased to 2.32% from 2.80% in the first quarter of 2013. The decrease in the allowance for loan losses stems from sustained improvements in credit quality and economic trends, and the effect of the enhancements to the allowance for loan losses methodology. The combined effect of these enhancements resulted in a $10.8 million reserve decrease.
Financial Condition Highlights  
(Unaudited)
     
(In thousands)   30-Jun-13   31-Mar-13   30-Jun-12
Total assets $ 36,684,594   $ 36,942,714   $ 36,612,179
Total loans held-in-portfolio (net) 24,086,438 24,312,823 23,916,109
Deposits 26,759,428 27,013,217 27,414,780
Borrowings 4,694,671 4,969,344 3,620,419
Stockholders' equity     4,195,036     3,971,143     4,021,237

Total assets decreased by approximately $258.1 million from March 31, 2013 driven by:

  • A $206.6 million decrease in investment securities available-for-sale, mainly due to portfolio declines in market value in line with underlying market conditions, US Agency maturities, MBS prepayments and the prepayment of $22.8 million of EVERTEC's debenture as part of their IPO and debt repayment during the quarter.
  • A $112.1 million decrease in non-covered loans held-in-portfolio mainly due to the bulk sale of non-performing mortgage loans with a book value of $434.6 million. Excluding the effect of the bulk sale, non-covered loans held-in-portfolio would have increased by $322.5 million driven mainly by mortgage loans originations and purchases in both BPPR and BPNA.
  • The covered loan portfolio balance decreased by approximately $162.4 million due to the continuous resolution efforts and the normal portfolio run-off.

These decreases were partially offset by:

  • An increase in other assets of $284.2 million mainly due to the deferred tax asset related to the loss on the sale of non-performing mortgage loans and the impact of the increase in the corporate tax rate from 30% to 39% during the second quarter.

Total liabilities decreased by $482.0 million from March 31, 2013, driven by:

  • A decrease of $253.8 million in deposits, primarily due to brokered and non-brokered certificates of deposits and savings accounts, partially offset by an increase in demand deposits.
  • A decrease in repurchase agreements of $593.0 million as part of the Corporation's funding strategies.

These decreases were partially offset by:

  • An increase of $318.3 million in other borrowings mainly due to FHLB of NY advances as part of the aforementioned strategies.
  • An increase of $46.4 million in other liabilities mainly due to $34.9 million in unsettled purchases of trading securities.

Stockholders' equity increased by $223.9 million from March 31, 2013, mainly as a result of the net income for the quarter of $327.5 million, offset by a decrease of $106.6 million in unrealized gains on investment securities available-for-sale. Refer to Table A for capital ratios.

Refer to Table C for the Statements of Financial Condition.

Forward-Looking Statements

The information included in this news release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and involve certain risks and uncertainties that may cause actual results to differ materially from those expressed in forward-looking statements. Factors that might cause such a difference include, but are not limited to (i) the rate of growth in the economy and employment levels, as well as general business and economic conditions; (ii) changes in interest rates, as well as the magnitude of such changes; (iii) the fiscal and monetary policies of the federal government and its agencies; (iv) changes in federal bank regulatory and supervisory policies, including required levels of capital and the impact of proposed capital standards on our capital ratios; (v) the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act on our businesses, business practices and cost of operations; (vi) regulatory approvals that may be necessary to undertake certain actions or consummate strategic transactions such as acquisitions and dispositions; (vii) the relative strength or weakness of the consumer and commercial credit sectors and of the real estate markets in Puerto Rico and the other markets in which borrowers are located; (viii) the performance of the stock and bond markets; (ix) competition in the financial services industry; (x) additional Federal Deposit Insurance Corporation assessments; and (xi) possible legislative, tax or regulatory changes. For a discussion of such factors and certain risks and uncertainties to which the Corporation is subject, see the Corporation's Annual Report on Form 10-K for the year ended December 31, 2012, as well as its filings with the U.S. Securities and Exchange Commission. Other than to the extent required by applicable law, including the requirements of applicable securities laws, the Corporation assumes no obligation to update any forward-looking statements to reflect occurrences or unanticipated events or circumstances after the date of such statements.

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

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

Popular will hold a conference call to discuss the financial results today Thursday, July 18, 2013 at 2:00 p.m. Eastern time. The call will be broadcast live over the Internet and can be accessed through the investor relations section of the Corporation's website: www.popular.com.

Listeners are recommended to go to the website at least 15 minutes prior to the call to download and install any necessary audio software. The call may also be accessed through a dial-in telephone number 877-546-5019 or 857-244-7551. The conference code is 50966493.

A replay of the webcast will be archived in Popular's website. A telephone replay will be available from 4:00 p.m. on Thursday, July 18, 2013 to 11:59 p.m. on Thursday, July 25, 2013, at 888-286-8010 or 617-801-6888. The replay passcode is 15552864.

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

POPULAR, INC.
Financial Supplement to Second Quarter 2013 Earnings Release
Table A - Selected Ratios and Other Information
(Unaudited)
 
             
  Quarters ended   Six months ended
    30-Jun-13   31-Mar-13   30-Jun-12   30-Jun-13   30-Jun-12
Net (loss) income per common share:      
Basic and diluted $3.18 ($1.18) $0.63 $2.00 $1.10
 
Average common shares outstanding 102,620,295 102,664,608 102,295,113 102,642,329 102,318,459
Average common shares outstanding - assuming dilution 102,917,347 103,013,204 102,410,618 102,957,736 102,479,530
Common shares outstanding at end of period 103,276,131 103,228,615 102,824,323 103,276,131 102,824,323
 
Market value per common share $30.37 $27.60 $16.61 $30.37 $16.61
 
Market capitalization - (In millions) $3,136 $2,849 $1,708 $3,136 $1,708
 
Return on average assets 3.60% (1.34)% 0.73% 1.15% 0.63%
 
Return on average common equity 32.77% (12.58)% 6.94% 10.47% 6.05%
 
Net interest margin [2] 4.46% 4.40% 4.35% 4.44% 4.32%
 
Common equity per share $40.13 $37.98 $38.62 $40.13 $38.62
 
Tangible common book value per common share (non-GAAP) [1] $33.38 $31.21 $31.74 $33.38 $31.74
 
Tangible common equity to tangible assets (non-GAAP) [1] 9.58% 8.89% 9.09% 9.58% 9.09%
 
Tier 1 risk-based capital [3] 17.31% 16.52% 16.31% 17.31% 16.31%
 
Total risk-based capital [3] 18.58% 17.80% 17.59% 18.58% 17.59%
 
Tier 1 leverage [3] 11.46% 11.07% 11.09% 11.46% 11.09%
 
Tier 1 common equity to risk-weighted assets (non-GAAP) [1] [3]   13.05%   12.36%   12.29%   13.05%   12.29%
[1] Refer to Table N for Non-GAAP reconciliations
[2] Not on a taxable equivalent basis.
[3] Capital ratios for the current quarter are estimated.

POPULAR, INC.
Financial Supplement to Second Quarter 2013 Earnings Release
Table B - Consolidated Statement of Operations
(Unaudited)
    Quarters ended   Variance  

Quarter ended

  Variance   Six months ended
(In thousands, except per share information)   30-Jun-13   31-Mar-13  

Q2 2013

vs.Q1 2013

  30-Jun-12  

Q2 2013

vs.Q2 2012

  30-Jun-13   30-Jun-12
Interest income:    
Loans $ 394,925 $ 385,926 $ 8,999 $ 389,904 $ 5,021 $ 780,851 $ 778,444
Money market investments 829 955 (126) 964 (135) 1,784 1,912
Investment securities 36,106 37,823 (1,717) 44,258 (8,152) 73,929 89,800
  Trading account securities   5,456   5,514   (58)   5,963   (507)   10,970   11,854
  Total interest income   437,316   430,218   7,098   441,089   (3,773)   867,534   882,010
Interest expense:
Deposits 35,764 38,356 (2,592) 48,542 (12,778) 74,120 100,275
Short-term borrowings 9,767 9,782 (15) 13,044 (3,277) 19,549 26,627
  Long-term debt   36,066   35,767   299   37,324   (1,258)   71,833   74,331
  Total interest expense   81,597   83,905   (2,308)   98,910   (17,313)   165,502   201,233
Net interest income 355,719 346,313 9,406 342,179 13,540 702,032 680,777
Provision for loan losses - non-covered loans 223,908 206,300 17,608 81,743 142,165 430,208 164,257
Provision for loan losses - covered loans   25,500   17,556   7,944   37,456   (11,956)   43,056   55,665
Net interest income after provision for loan losses   106,311   122,457   (16,146)   222,980   (116,669)   228,768   460,855
Service charges on deposit accounts 43,937 43,722 215 46,130 (2,193) 87,659 92,719
Other service fees 65,073 61,724 3,349 64,987 86 126,797 133,894
Net gain (loss) and valuation adjustments on investment securities 5,856 - 5,856 (349) 6,205 5,856 (349)
Trading account profit (loss) 7,900 (75) 7,975 (7,283) 15,183 7,825 (9,426)
Net gain (loss) on sale of loans, including valuation adjustments on loans held-for-sale 4,382 (48,959) 53,341 (15,397) 19,779 (44,577) 74
Adjustments (expense) to indemnity reserves on loans sold (11,632) (16,143) 4,511 (5,398) (6,234) (27,775) (9,273)
FDIC loss share (expense) income (3,755) (26,266) 22,511 2,575 (6,330) (30,021) (12,680)
Other operating income   181,602   20,054   161,548   24,167   157,435   201,656   54,399
  Total non-interest income   293,363   34,057   259,306   109,432   183,931   327,420   249,358
Operating expenses:
Personnel costs
Salaries 74,392 73,345 1,047 75,881 (1,489) 147,737 152,780
Commissions, incentives and other bonuses 15,540 15,475 65 14,359 1,181 31,015 27,085
Pension, postretirement and medical insurance 14,748 15,238 (490) 16,114 (1,366) 29,986 34,539
  Other personnel costs, including payroll taxes   9,999   11,931   (1,932)   9,982   17   21,930   23,423
Total personnel costs 114,679 115,989 (1,310) 116,336 (1,657) 230,668 237,827
Net occupancy expenses 24,108 23,473 635 24,190 (82) 47,581 47,528
Equipment expenses 11,843 11,950 (107) 10,900 943 23,793 22,241
Other taxes 15,288 11,586 3,702 12,074 3,214 26,874 25,512
Professional fees 69,964 70,497 (533) 69,672 292 140,461 135,740
Communications 6,644 6,832 (188) 6,645 (1) 13,476 13,776
Business promotion 15,562 12,917 2,645 16,980 (1,418) 28,479 29,830
FDIC deposit insurance 19,503 9,280 10,223 22,907 (3,404) 28,783 47,833
Loss on early extinguishment of debt - - - 25,072 (25,072) - 25,141
Other real estate owned (OREO) expenses 5,762 46,741 (40,979) 2,380 3,382 52,503 16,545
Credit and debit card processing, volume, interchange and other expenses 5,352 4,975 377 4,960 392 10,327 9,641
Other operating expenses 18,414 16,990 1,424 29,919 (11,505) 35,404 41,029
Amortization of intangibles   2,467   2,468   (1)   2,531   (64)   4,935   5,124
  Total operating expenses   309,586   333,698   (24,112)   344,566   (34,980)   643,284   657,767
Income (loss) before income tax 90,088 (177,184) 267,272 (12,154) 102,242 (87,096) 52,446
Income tax benefit   (237,380)   (56,877)   (180,503)   (77,893)   (159,487)   (294,257)   (61,701)

Net income (loss)

  $ 327,468   $ (120,307)   $ 447,775   $ 65,739   $ 261,729   $ 207,161   $ 114,147
Net income (loss) applicable to common stock   $ 326,537   $ (121,237)   $ 447,774   $ 64,809   $ 261,728   $ 205,300   $ 112,286
Net income (loss) per common share - basic   $ 3.18   $ (1.18)   $ 4.36   $ 0.63   $ 2.55   $ 2.00   $ 1.10
Net income (loss) per common share - diluted   $ 3.18   $ (1.18)   $ 4.36   $ 0.63   $ 2.55   $ 2.00   $ 1.10

The results of operations for all periods presented have been adjusted for the discontinued eliminations of intercompany transactions with EVERTEC.

Popular, Inc.
Financial Supplement to Second Quarter 2013 Earnings Release
Table C - Consolidated Statement of Financial Condition
(Unaudited)
            Variance
Q2 2013 vs.
(In thousands)   30-Jun-13   31-Mar-13   30-Jun-12   Q1 2013
Assets:
Cash and due from banks $ 388,041 $ 242,290 $ 515,338 $ 145,751
Money market investments 1,071,939 1,344,244 949,828 (272,305)
Trading account securities, at fair value 294,082 299,773 417,469 (5,691)
Investment securities available-for-sale, at fair value 5,114,636 5,321,231 5,076,797 (206,595)
Investment securities held-to-maturity, at amortized cost 141,632 141,518 124,646 114
Other investment securities, at lower of cost or realizable value 218,582 198,577 174,287 20,005
Loans held-for-sale, at lower of cost or fair value 190,852 201,495 364,537 (10,643)
Loans held-in-portfolio:
Loans not covered under loss sharing agreements with the FDIC 21,615,754 21,729,882 20,763,610 (114,128)
Loans covered under loss sharing agreements with the FDIC 3,199,998 3,362,446 4,016,330 (162,448)
Less: Unearned income 94,095 96,137 97,801 (2,042)
    Allowance for loan losses   635,219   683,368   766,030   (48,149)
    Total loans held-in-portfolio, net   24,086,438   24,312,823   23,916,109   (226,385)
FDIC loss share asset 1,379,342 1,380,592 1,631,594 (1,250)
Premises and equipment, net 527,014 532,785 527,027 (5,771)
Other real estate not covered under loss sharing agreements with the FDIC 158,920 154,699 226,629 4,221
Other real estate covered under loss sharing agreements with the FDIC 183,225 172,378 125,093 10,847
Accrued income receivable 143,905 135,542 122,320 8,363
Mortgage servicing assets, at fair value 153,444 153,949 155,711 (505)
Other assets 1,935,426 1,651,234 1,577,794 284,192
Goodwill 647,757 647,757 647,757 -
Other intangible assets   49,359   51,827   59,243   (2,468)
Total assets   $ 36,684,594   $ 36,942,714   $ 36,612,179   $ (258,120)
Liabilities and Stockholders' Equity:
Liabilities:
Deposits:
Non-interest bearing $ 5,856,066 $ 5,613,701 $ 5,578,487 $ 242,365
    Interest bearing   20,903,362   21,399,516   21,836,293   (496,154)
    Total deposits   26,759,428   27,013,217   27,414,780   (253,789)
Assets sold under agreements to repurchase 1,672,705 2,265,675 1,426,636 (592,970)
Other short-term borrowings 1,226,200 951,200 316,200 275,000
Notes payable 1,795,766 1,752,469 1,877,583 43,297
Other liabilities   1,035,459   989,010   1,555,743   46,449
Total liabilities   32,489,558   32,971,571   32,590,942   (482,013)
Stockholders' equity:
Preferred stock 50,160 50,160 50,160 -
Common stock 1,033 1,033 1,028 -
Surplus 4,153,525 4,151,838 4,127,216 1,687
Retained earnings (accumulated deficit) 217,126 (109,411) (100,440) 326,537
Treasury stock (769) (469) (144) (300)
Accumulated other comprehensive loss   (226,039)   (122,008)   (56,583)   (104,031)
    Total stockholders' equity   4,195,036   3,971,143   4,021,237   223,893
Total liabilities and stockholders' equity   $ 36,684,594   $ 36,942,714   $ 36,612,179   $ (258,120)

Popular, Inc.
Financial Supplement to Second Quarter 2013 Earnings Release
Table D - Consolidated Average Balances and Yield / Rate Analysis - QUARTER
(Unaudited)
 
      Quarter ended Quarter ended Quarter ended Variance Variance
30-Jun-13 31-Mar-13 30-Jun-12 Q2 2013 vs. Q1 2013 Q2 2013 vs. Q2 2012
($ amounts in millions; yields not on a taxable equivalent basis)   Average balance  

Income /

Expense

 

Yield /

Rate

Average balance  

Income /

Expense

 

Yield /

Rate

Average balance  

Income /

Expense

 

Yield /

Rate

Average balance  

Income /

Expense

 

Yield /

Rate

Average balance  

Income /

Expense

 

Yield /

Rate

Assets:                    
Interest earning assets:
Money market, trading and investment securities $6,943   $42.4   2.44 % $6,971   $44.3   2.55 % $6,819   $51.2   3.01 % ($28)   ($1.9)   (0.11) % $124   ($8.8)   (0.57) %
Loans not covered under loss sharing agreements with the FDIC:
Commercial 10,022 122.8 4.91 10,078 119.8 4.82 10,238 126.7 4.98 (56) 3.0 0.09 (216) (3.9) (0.07)
Construction 316 3.6 4.62 369 3.6 3.92 494 3.4 2.78 (53) - 0.70 (178) 0.2 1.84
Mortgage 7,019 91.2 5.20 6,410 83.2 5.19 5,713 77.8 5.44 609 8.0 0.01 1,306 13.4 (0.24)
Consumer 3,849 96.3 10.03 3,853 95.8 10.08 3,640 91.1 10.07 (4) 0.5 (0.05) 209 5.2 (0.04)
Lease financing 542   10.9   8.02 543   11.3   8.36 546   11.8   8.65 (1)   (0.4)   (0.34) (4)   (0.9)   (0.63)
Total loans not covered under loss sharing agreements with the FDIC 21,748 324.8 5.98 21,253 313.7 5.96 20,631 310.8 6.05 495 11.1 0.02 1,117 14.0 (0.07)
Loans covered under loss sharing agreements with the FDIC 3,269   70.1   8.60 3,514   72.2   8.31 4,129   79.1   7.69 (245)   (2.1)   0.29 (860)   (9.0)   0.91
Total loans 25,017   394.9   6.33 24,767   385.9   6.29 24,760   389.9   6.32 250   9.0   0.04   257   5.0   0.01
Total interest earning assets 31,960   $437.3   5.48 % 31,738   $430.2   5.47 % 31,579   $441.1   5.61 % 222   $7.1   0.01 % 381   ($3.8)   (0.13) %
Allowance for loan losses (673) (659) (777) (14) 104
Other non-interest earning assets 5,215 5,283 5,415 (68) (200)
Total average assets $36,502 $36,362 $36,217 $140 $285
 
Liabilities and Stockholders' Equity:
Interest bearing deposits:
NOW and money market $5,838 $5.2 0.36 % $5,696 $5.8 0.41 % $5,555 $6.2 0.45 % $142 ($0.6) (0.05) % $283 ($1.0) (0.09) %
Savings 6,748 4.2 0.25 6,718 4.3 0.26 6,562 6.2 0.38 30 (0.1) (0.01) 186 (2.0) (0.13)
Time deposits 8,619   26.4   1.23 8,832   28.2   1.30 9,752   36.1   1.49 (213)   (1.8)   (0.07) (1,133)   (9.7)   (0.26)
Total interest bearing deposits 21,205 35.8 0.68 21,246 38.3 0.73 21,869 48.5 0.89 (41) (2.5) (0.05) (664) (12.7) (0.21)
Borrowings 4,488   45.8   4.09 4,492   45.6   4.07 4,165   50.4   4.85 (4)   0.2   0.02 323   (4.6)   (0.76)
Total interest bearing liabilities 25,693   81.6   1.27 25,738   83.9   1.32 26,034   98.9   1.53 (45)   (2.3)   (0.05) (341)   (17.3)   (0.26)
Net interest spread 4.21 % 4.15 % 4.08 % 0.06 % 0.13 %
Non-interest bearing deposits 5,749 5,591 5,309 158 440
Other liabilities 1,013 1,074 1,067 (61) (54)
Stockholders' equity 4,047 3,959 3,807 88 240
Total average liabilities and stockholders' equity $36,502 $36,362 $36,217 $140 $285
 
Net interest income / margin non-taxable equivalent basis $355.7   4.46 % $346.3   4.40 % $342.2   4.35 % $9.4   0.06 % $13.5   0.11 %

Popular, Inc.
Financial Supplement to Second Quarter 2013 Earnings Release
Table E - Consolidated Average Balances and Yield / Rate Analysis - YEAR-TO-DATE
(Unaudited)
 
      Six months ended Six months ended    
30-Jun-13 30-Jun-12 Variance
Average   Income /   Yield / Average   Income /   Yield / Average Income / Yield /
($ amounts in millions; yields not on a taxable equivalent basis) balance   Expense   Rate balance   Expense   Rate balance   Expense   Rate
Assets:
Interest earning assets:
Money market, trading and investment securities $6,957   $86.7   2.50 % $6,790   $103.6   3.05 % $167   ($16.9)   (0.55) %
Loans not covered under loss sharing agreements with the FDIC:
Commercial 10,051 242.6 4.87 10,340 253.8 4.94 (289) (11.2) (0.07)
Construction 342 7.2 4.25 509 10.0 3.94 (167) (2.8) 0.31
Mortgage 6,716 174.5 5.20 5,589 153.2 5.48 1,127 21.3 (0.28)
Consumer 3,851 192.0 10.06 3,650 183.7 10.12 201 8.3 (0.06)
Lease financing 542   22.2   8.19 550   23.8   8.66 (8)   (1.6)   (0.47)
Total loans not covered under loss sharing agreements with the FDIC 21,502 638.5 5.97 20,638 624.5 6.08 864 14.0 (0.11)
Loans covered under loss sharing agreements with the FDIC 3,391   142.3   8.45 4,211   153.9   7.34 (820)   (11.6)   1.11
Total loans 24,893   780.8   6.31 24,849   778.4   6.29 44   2.4   0.02
Total interest earning assets 31,850 $867.5 5.48 % 31,639 $882.0 5.60 % 211 ($14.5) (0.12) %
Allowance for loan losses (666) (789) 123
Other non-interest earning assets 5,248 5,536 (288)
Total average assets $36,432 36,386 $46
 
Liabilities and Stockholders' Equity:
Interest bearing deposits:
NOW and money market $5,767 $11.0 0.39 % $5,400 $12.3 0.46 % $367 ($1.3) (0.07) %
Savings 6,733 8.5 0.26 6,535 12.5 0.39 198 (4.0) (0.13)
Time deposits 8,726   54.6   1.26 10,022   75.5   1.51 (1,296)   (20.9)   (0.25)
Total interest bearing deposits 21,226 74.1 0.70 21,957 100.3 0.92 (731) (26.2) (0.22)
Borrowings 4,489   91.4   4.08 4,264   100.9   4.74 225   (9.5)   (0.66)
Total interest bearing liabilities 25,715   165.5   1.29 26,221   201.2   1.54 (506)   (35.7)   (0.25)
Net interest spread 4.19 % 4.06 % 0.13 %
Non-interest bearing deposits 5,671 5,261 410
Other liabilities 1,043 1,124 (81)
Stockholders' equity 4,003 3,780 223
Total average liabilities and stockholders' equity $36,432 $36,386 $46
 
Net interest income / margin non-taxable equivalent basis $702.0   4.44 % $680.8   4.32 % $21.2   0.12 %

Popular, Inc.          
Financial Supplement to Second Quarter 2013 Earnings Release
Table F - Other Service Fees
(Unaudited)
 
Variance
Quarters ended Q2 2013 vs. Q2 2013 vs.
(In thousands)   30-Jun-13   31-Mar-13   30-Jun-12   Q1 2013   Q2 2012
Other service fees:
  Debit card fees $ 10,736 $ 10,397 $ 11,332 $ 339 $ (596)
Insurance fees 12,465 12,073 12,063 392 402
Credit card fees 16,406 15,685 15,307 721 1,099
Sale and administration of investment products 10,243 8,717 9,645 1,526 598
Mortgage servicing fees, net of fair value adjustments 6,191 5,631 6,335 560 (144)
Trust fees 4,154 4,458 4,069 (304) 85
Processing fees - - 1,639 - (1,639)
  Other fees   4,878   4,763   4,597   115   281
Total other service fees   $ 65,073   $ 61,724   $ 64,987   $ 3,349   $ 86
 
 
 
 
Six months ended Variance
(In thousands)   30-Jun-13   30-Jun-12   2013 vs. 2012
Other service fees:
Debit card fees $ 21,133 $ 22,471 $ (1,338)
Insurance fees 24,538 24,453 85
Credit card fees 32,091 28,760 3,331
Sale and administration of investment products 18,960 18,534 426
Mortgage servicing fees, net of fair value adjustments 11,822 19,266 (7,444)
Trust fees 8,612 8,150 462
Processing fees - 3,413 (3,413)
  Other fees   9,641   8,847   794
Total other service fees   $ 126,797   $ 133,894   $ (7,097)

Popular, Inc.          
Financial Supplement to Second Quarter 2013 Earnings Release
Table G - Loans and Deposits
(Unaudited)
 
Loans - Ending Balances
Variance
(In thousands)   30-Jun-13   31-Mar-13   30-Jun-12  

Q2 2013 vs.

Q1 2013

 

Q2 2013 vs.

Q2 2012

Loans not covered under FDIC loss sharing agreements:
Commercial $ 9,917,840 $ 9,750,428 $ 9,602,815 $ 167,412 $ 315,025
Construction 297,010 271,498 249,743 25,512 47,267
Legacy [1] 262,228 352,512 509,829 (90,284) (247,601)
Lease financing 538,348 543,572 537,917 (5,224) 431
Mortgage 6,603,587 6,873,910 5,899,973 (270,323) 703,614
Consumer   3,902,646   3,841,825   3,865,532   60,821   37,114
Total non-covered loans held-in-portfolio $ 21,521,659 $ 21,633,745 $ 20,665,809 $ (112,086) $ 855,850
Loans covered under FDIC loss sharing agreements   3,199,998   3,362,446   4,016,330   (162,448)   (816,332)
Total loans held-in-portfolio   $ 24,721,657   $ 24,996,191   $ 24,682,139   $ (274,534)   $ 39,518
Loans held-for-sale:
Commercial $ 2,594 $ - $ 18,072 $ 2,594 $ (15,478)
Construction - - 160,102 - (160,102)
Legacy [1] 1,680 1,681 425 (1) 1,255
Mortgage   186,578   199,814   185,938   (13,236)   640
Total loans held-for-sale   190,852   201,495   364,537   (10,643)   (173,685)
Total loans   $ 24,912,509   $ 25,197,686   $ 25,046,676   $ (285,177)   $ (134,167)
[1] The legacy portfolio is comprised of commercial loans, construction loans and lease financings related to certain lending products exited by the Corporation as part of restructuring efforts carried out in prior years at the BPNA reportable segment.
 
Deposits - Ending Balances
Variance
(In thousands)   30-Jun-13   31-Mar-13   30-Jun-12   Q2 2013 vs. Q1 2013   Q2 2013 vs. Q2 2012
Demand deposits [1] $ 6,655,895 $ 6,265,796 $ 6,379,289 $ 390,099 $ 276,606
Savings, NOW and money market deposits (non-brokered) 11,253,707 11,357,130 11,031,476 (103,423) 222,231
Savings, NOW and money market deposits (brokered) 509,415 498,833 433,694 10,582 75,721
Time deposits (non-brokered) 6,299,760 6,427,320 6,950,063 (127,560) (650,303)
Time deposits (brokered CDs)   2,040,651   2,464,138   2,620,258   (423,487)   (579,607)
Total deposits   $ 26,759,428   $ 27,013,217   $ 27,414,780   $ (253,789)   $ (655,352)
[1] Includes interest and non-interest demand bearing deposits.                

Popular, Inc.
Financial Supplement to Second Quarter 2013 Earnings Release
Table H - Non-Performing Assets
(Unaudited)
        Variance
(Dollars in thousands)   30-Jun-13  

As a % of

loans HIP by

category

  31-Mar-13  

As a % of

loans HIP by

category

  30-Jun-12  

As a % of

loans HIP by

category

 

Q2 2013 vs.

Q1 2013

 

Q2 2013 vs.

Q2 2012

Non-accrual loans:  
Commercial $ 323,155 3.3 % $ 320,787 3.3 % $ 767,940 8.0 % $ 2,368 $ (444,785)
Construction 44,878 15.1 50,920 18.8 67,538 27.0 (6,042) (22,660)
Legacy [1] 28,434 10.8 35,830 10.2 54,730 10.7 (7,396) (26,296)
Lease financing 4,511 0.8 4,005 0.7 5,046 0.9 506 (535)
Mortgage 171,822 2.6 600,724 8.7 632,899 10.7 (428,902) (461,077)
Consumer   41,067   1.1   38,342   1.0   34,665   0.9   2,725   6,402
Total non-performing loans held-in-
portfolio, excluding covered loans 613,867 2.9 % 1,050,608 4.9 % 1,562,818 7.6 % (436,741) (948,951)
Non-performing loans held-for-sale [2] 10,697 17,463 178,652 (6,766) (167,955)
Other real estate owned (“OREO”),
excluding covered OREO   158,920       154,699       226,629       4,221   (67,709)
Total non-performing assets,
excluding covered assets 783,484 1,222,770 1,968,099 (439,286) (1,184,615)
Covered loans and OREO   208,993       196,717       209,793       12,276   (800)
Total non-performing assets   $ 992,477       $ 1,419,487       $ 2,177,892       $ (427,010)   $ (1,185,415)
Accruing loans past due 90 days or more [3]   $ 414,055       $ 410,065       $ 322,893       $ 3,990   $ 91,162
Ratios excluding covered loans:
Non-performing loans held-in-portfolio
to loans held-in-portfolio 2.85 % 4.86 % 7.56 %
Allowance for loan losses to loans
held-in-portfolio 2.46 2.70 3.14
Allowance for loan losses to
non-performing loans, excluding
held-for-sale   86.14       55.54       41.50            
Ratios including covered loans:
Non-performing assets to total assets 2.71 % 3.84 % 5.95 %
Non-performing loans held-in-portfolio
to loans held-in-portfolio 2.59 4.30 6.67
Allowance for loan losses to loans
held-in-portfolio 2.57 2.73 3.10
Allowance for loan losses to
non-performing loans, excluding held-for-sale   99.31       63.57       46.50            
[1] The legacy portfolio is comprised of commercial loans, construction loans and lease financings related to certain lending products exited by the Corporation as part of restructuring efforts carried out in prior years at the BPNA reportable segment.
[2] Non-performing loans held-for-sale as of June 30, 2013 consisted of $3 million in commercial loans, $2 million in legacy loans and $6 million in mortgage loans (March 31, 2013- $1 million in legacy loans and $16 million in mortgage loans; June 30, 2012 - $160 million in construction loans, $18 million in commercial loans, $425 thousand in legacy loans and $53 thousand in mortgage loans).
[3] It is the Corporation's policy to report delinquent residential mortgage loans insured by FHA or guaranteed by the VA as accruing loans past due 90 days or more as opposed to nonperforming since the principal repayment is insured. These balances include $101 million of residential mortgage loans insured by FHA or guaranteed by the VA that are no longer accruing interest as of June 30, 2013.

Popular, Inc.
Financial Supplement to Second Quarter 2013 Earnings Release
Table I - Activity in Non-Performing Loans
(Unaudited)
 
Commercial loans held-in-portfolio:
    Quarter ended   Quarter ended
30-Jun-13 31-Mar-13
(In thousands)   BPPR   BPNA   Popular, Inc.   BPPR   BPNA   Popular, Inc.
Beginning balance NPLs $ 186,808   $ 133,979   $ 320,787 $ 522,733   $ 142,556   $ 665,289
Plus:
New non-performing loans 59,736 15,763 75,499 47,735 15,111 62,846
Advances on existing non-performing loans - 1,226 1,226 - - -
Loans transferred from held-for-sale - - - 790 - 790
Other - 4,310 4,310 - - -
Less:
Non-performing loans transferred to OREO (2,191) (532) (2,723) (9,198) (1,558) (10,756)
Non-performing loans charged-off (32,511) (9,890) (42,401) (28,850) (9,881) (38,731)
Loans returned to accrual status / loan collections (12,122) (18,827) (30,949) (17,134) (12,249) (29,383)
Loans transferred to held-for-sale - (2,594) (2,594) - - -
  Non-performing loans sold[1]   -   -   -   (329,268)   -   (329,268)
Ending balance NPLs   $ 199,720   $ 123,435   $ 323,155   $ 186,808   $ 133,979   $ 320,787
[1] Includes write-downs of $161,297 of loans sold during the quarter ended March 31, 2013.
 
Construction loans held-in-portfolio:
Quarter ended Quarter ended
30-Jun-13   31-Mar-13
(In thousands)   BPPR   BPNA   Popular, Inc.   BPPR   BPNA   Popular, Inc.
Beginning balance NPLs $ 45,036 $ 5,884 $ 50,920 $ 37,390 $ 5,960 $ 43,350
Plus:
Loans transferred from held-for-sale - - - 14,152 - 14,152
Less:
Non-performing loans charged-off (2,175) - (2,175) (1,082) - (1,082)
Loans returned to accrual status / loan collections (3,817) (50) (3,867) (1,940) (76) (2,016)
  Non-performing loans sold[1]   -   -   -   (3,484)   -   (3,484)
Ending balance NPLs   $ 39,044   $ 5,834   $ 44,878   $ 45,036   $ 5,884   $ 50,920
[1] Includes write-downs of $1,846 of loans sold during the quarter ended March 31, 2013.
             
Mortgage loans held-in-portfolio:
Quarter ended Quarter ended
30-Jun-13   31-Mar-13
(In thousands)   BPPR   BPNA   Popular, Inc.   BPPR   BPNA   Popular, Inc.
Beginning balance NPLs $ 572,731 $ 27,993 $ 600,724 $ 596,106 $ 34,024 $ 630,130
Plus:
New non-performing loans 98,682 6,888 105,570 109,816 4,507 114,323
Less:
Non-performing loans transferred to OREO (19,800) (1,106) (20,906) (18,110) (747) (18,857)
Non-performing loans charged-off (6,365) (2,653) (9,018) (14,608) (3,093) (17,701)
Loans returned to accrual status / loan collections (50,956) (4,017) (54,973) (100,473) (6,698) (107,171)
Loans transferred to held-for-sale (14,968) - (14,968) - - -
  Non-performing loans sold[1]   (434,607)   -   (434,607)   -   -   -
Ending balance NPLs   $ 144,717   $ 27,105   $ 171,822   $ 572,731   $ 27,993   $ 600,724
[1] Includes write-downs of $199,502 of loans sold during the quarter ended June 30, 2013.
 
Legacy loans held-in-portfolio:
Quarter ended Quarter ended
30-Jun-13   31-Mar-13
(In thousands)   BPPR   BPNA   Popular, Inc.   BPPR   BPNA   Popular, Inc.
Beginning balance NPLs $ - $ 35,830 $ 35,830 $ - $ 40,741 $ 40,741
Plus:
New non-performing loans - 4,640 4,640 - 6,388 6,388
Advances on existing non-performing loans - 4 4 - 4 4
Loans transferred to held-for-sale - - - - 400 400
Less:
Non-performing loans charged-off - (5,358) (5,358) - (5,315) (5,315)
Loans returned to accrual status / loan collections - (2,373) (2,373) - (6,388) (6,388)
  Other   -   (4,309)   (4,309)   -   -   -
Ending balance NPLs   $ -   $ 28,434   $ 28,434   $ -   $ 35,830   $ 35,830
             
Total non-performing loans held-in-portfolio (excluding consumer loans):
Quarter ended Quarter ended
30-Jun-13 31-Mar-13
(In thousands)   BPPR   BPNA   Popular, Inc.   BPPR   BPNA   Popular, Inc.
Beginning balance NPLs $ 804,575 $ 203,686 $ 1,008,261 $ 1,156,229 $ 223,281 $ 1,379,510
Plus:
New non-performing loans 158,418 27,291 185,709 157,551 26,006 183,557
Advances on existing non-performing loans - 1,230 1,230 - 4 4
Loans transferred from held-for-sale - - - 14,942 400 15,342
Other - 4,310 4,310 - - -
Less:
Non-performing loans transferred to OREO (21,991) (1,638) (23,629) (27,308) (2,305) (29,613)
Non-performing loans charged-off (41,051) (17,901) (58,952) (44,540) (18,289) (62,829)
Loans returned to accrual status / loan collections (66,895) (25,267) (92,162) (119,547) (25,411) (144,958)
Loans transferred to held-for-sale (14,968) (2,594) (17,562) - - -
Other - (4,309) (4,309) - - -
  Non-performing loans sold[1]   (434,607)   -   (434,607)   (332,752)   -   (332,752)
Ending balance NPLs   $ 383,481   $ 184,808   $ 568,289   $ 804,575   $ 203,686   $ 1,008,261
[1] Includes write-downs of $199,502 and $163,143 of loans sold during the quarters ended June 30, 2013 and March 31, 2013, respectively.

Popular, Inc.
Financial Supplement to Second Quarter 2013 Earnings Release
Table J - Allowance for Credit Losses, Net Charge-offs and Related Ratios
(Unaudited)
       
 
Quarter ended Quarter ended Quarter ended
(Dollars in thousands) 30-Jun-13   31-Mar-13   30-Jun-12  
    Non-covered loans   Covered loans   Total   Non-covered loans   Covered loans   Total   Non-covered loans   Covered loans   Total  
Balance at beginning of period $ 583,501 $ 99,867 $ 683,368 $ 621,701 $ 108,906 $ 730,607 $ 664,768 $ 138,496 $ 803,264
Provision for loan losses   223,908   25,500   249,408   206,300   17,556   223,856   81,743   37,456   119,199  
    807,409   125,367   932,776   828,001   126,462   954,463   746,511   175,952   922,463  
Net loans charged-off (recovered):
BPPR
Commercial 29,968 1,108 31,076 24,311 10,535 34,846 28,564 34,652 63,216
Construction (2,294) 15,702 13,408 355 9,445 9,800 985 15,187 16,172
Lease financing 1,213 - 1,213 984 - 984 8 - 8
Mortgage 12,589 2,255 14,844 16,773 2,051 18,824 14,810 4,085 18,895
Consumer   19,928   (155)   19,773   20,001   4,564   24,565   23,055   4,533   27,588
Total BPPR   61,404   18,910   80,314   62,424   26,595   89,019   67,422   58,457   125,879
 
BPNA
Commercial 9,808 - 9,808 8,104 - 8,104 11,132 - 11,132
Construction - - - - - - (4) - (4)
Legacy [1] (917) - (917) 1,886 - 1,886 5,459 - 5,459
Mortgage 3,018 - 3,018 2,790 - 2,790 3,371 - 3,371
Consumer   5,832   -   5,832   6,153   -   6,153   10,596   -   10,596  
Total BPNA   17,741   -   17,741   18,933   -   18,933   30,554   -   30,554  
Total loans charged-off (recovered) - Popular, Inc.   79,145   18,910   98,055   81,357   26,595   107,952   97,976   58,457   156,433  
Net write-downs related to loans sold   (199,502)   -   (199,502)   (163,143)   -   (163,143)   -   -   -  
Balance at end of period   $ 528,762   $ 106,457   $ 635,219   $ 583,501   $ 99,867   $ 683,368   $ 648,535   $ 117,495   $ 766,030  
 
POPULAR, INC.
Annualized net charge-offs to average loans held-in-portfolio 1.47 % 1.58 % 1.55 % 1.76 % 1.93 % 2.56 %
Provision for loan losses to net charge-offs [2] 0.69 x 0.82 x 0.71 x 0.70 x 0.83 x 0.76 x
 
BPPR
Annualized net charge-offs to average loans held-in-portfolio 1.55 % 1.68 % 1.64 % 1.90 % 1.85 % 2.69 %
Provision for loan losses to net charge-offs [2] 1.00 x 1.08 x 0.89 x 0.82 x 0.99 x 0.83 x
 
BPNA
Annualized net charge-offs to average loans held-in-portfolio 1.24 % 1.33 % 2.15 %
Provision (reversal) for loan losses to net charge-offs           (0.37) x         0.11 x         0.50 x
[1] The legacy portfolio is comprised of commercial loans, construction loans and lease financings related to certain lending products exited by the Corporation as part of restructuring efforts carried out in prior years at the BPNA reportable segment.
[2] Excluding provision for loan losses and net write-down related to the asset sale during the quarters ended June 30, 2013 and March 31, 2013.

Popular, Inc.
Financial Supplement to Second Quarter 2013 Earnings Release
Table K - Allowance for Loan Losses - Breakdown of General and Specific Reserves - CONSOLIDATED
(Unaudited)
 
 
30-Jun-13
(Dollars in thousands)   Commercial   Construction   Legacy [3]   Mortgage   Lease financing   Consumer   Total [2]
Specific ALLL $ 18,719 $ 1,401 $ - $ 53,278 $ 1,399 $ 31,254 $ 106,051
Impaired loans [1] $ 334,861 $ 45,376 $ 13,368 $ 435,205 $ 3,818 $ 130,166 $ 962,794
Specific ALLL to impaired loans [1] 5.59 % 3.09 % - % 12.24 % 36.64 % 24.01 % 11.01 %
General ALLL $ 145,762 $ 8,009 $ 19,978 $ 102,702 $ 7,524 $ 138,736 $ 422,711
Loans held-in-portfolio, excluding impaired loans [1] $ 9,582,979 $ 251,634 $ 248,860 $ 6,168,382 $ 534,530 $ 3,772,480 $ 20,558,865
General ALLL to loans held-in-portfolio, excluding impaired loans [1] 1.52 % 3.18 % 8.03 % 1.66 % 1.41 % 3.68 % 2.06 %
Total ALLL $ 164,481 $ 9,410 $ 19,978 $ 155,980 $ 8,923 $ 169,990 $ 528,762
Total non-covered loans held-in-portfolio [1] $ 9,917,840 $ 297,010 $ 262,228 $ 6,603,587 $ 538,348 $ 3,902,646 $ 21,521,659
ALLL to loans held-in-portfolio [1] 1.66 % 3.17 % 7.62 % 2.36 % 1.66 % 4.36 % 2.46 %
[1] Excludes covered loans acquired on the Westernbank FDIC-assisted transaction.
[2] Excludes covered loans acquired on the Westernbank FDIC-assisted transaction. As of June 30, 2013, the general allowance on the covered loans amounted to $103 million, while the specific reserve amounted to $3 million.
[3] The legacy portfolio is comprised of commercial loans, construction loans and lease financings related to certain lending products exited by the Corporation as part of restructuring efforts carried out in prior years at the BPNA reportable segment.
 
31-Mar-13
(Dollars in thousands)   Commercial   Construction   Legacy [3]   Mortgage   Lease financing   Consumer   Total [2]
Specific ALLL $ 21,776 $ 135 $ - $ 75,697 $ 1,662 $ 24,472 $ 123,742
Impaired loans [1] $ 301,939 $ 49,398 $ 15,031 $ 631,663 $ 4,358 $ 112,394 $ 1,114,783
Specific ALLL to impaired loans [1] 7.21 % 0.27 % - % 11.98 % 38.14 % 21.77 % 11.10 %
General ALLL $ 207,094 $ 7,304 $ 30,777 $ 86,248 $ 2,233 $ 126,103 $ 459,759
Loans held-in-portfolio, excluding impaired loans [1] $ 9,448,489 $ 222,100 $ 337,481 $ 6,242,247 $ 539,214 $ 3,729,431 $ 20,518,962
General ALLL to loans held-in-portfolio, excluding impaired loans [1] 2.19 % 3.29 % 9.12 % 1.38 % 0.41 % 3.38 % 2.24 %
Total ALLL $ 228,870 $ 7,439 $ 30,777 $ 161,945 $ 3,895 $ 150,575 $ 583,501
Total non-covered loans held-in-portfolio [1] $ 9,750,428 $ 271,498 $ 352,512 $ 6,873,910 $ 543,572 $ 3,841,825 $ 21,633,745
ALLL to loans held-in-portfolio [1] 2.35 % 2.74 % 8.73 % 2.36 % 0.72 % 3.92 % 2.70 %
[1] Excludes covered loans acquired on the Westernbank FDIC-assisted transaction.
[2] Excludes covered loans acquired on the Westernbank FDIC-assisted transaction. As of March 31, 2013, the general allowance on the covered loans amounted to $98 million, while the specific reserve amounted to $1 million.
[3] The legacy portfolio is comprised of commercial loans, construction loans and lease financings related to certain lending products exited by the Corporation as part of restructuring efforts carried out in prior years at the BPNA reportable segment.
 
Variance
(Dollars in thousands)   Commercial   Construction   Legacy   Mortgage   Lease financing   Consumer   Total
Specific ALLL   $ (3,057)   $ 1,266   $ -   $ (22,419)   $ (263)   $ 6,782   $ (17,691)
Impaired loans   $ 32,922   $ (4,022)   $ (1,663)   $ (196,458)   $ (540)   $ 17,772   $ (151,989)
General ALLL $ (61,332) $ 705 $ (10,799) $ 16,454 $ 5,291 $ 12,633 $ (37,048)
Loans held-in-portfolio, excluding impaired loans   $ 134,490   $ 29,534   $ (88,621)   $ (73,865)   $ (4,684)   $ 43,049   $ 39,903
Total ALLL $ (64,389) $ 1,971 $ (10,799) $ (5,965) $ 5,028 $ 19,415 $ (54,739)
Total non-covered loans held-in-portfolio   $ 167,412   $ 25,512   $ (90,284)   $ (270,323)   $ (5,224)   $ 60,821   $ (112,086)

Popular, Inc.
Financial Supplement to Second Quarter 2013 Earnings Release
Table L - Allowance for Loan Losses - Breakdown of General and Specific Reserves - PUERTO RICO OPERATIONS
(Unaudited)
 
30-Jun-13
Puerto Rico
(In thousands)   Commercial   Construction   Mortgage   Lease financing   Consumer   Total
Allowance for credit losses:            
  Specific ALLL non-covered loans $ 18,719 $ 1,401 $ 35,715 $ 1,399 $ 30,904 $ 88,138
  General ALLL non-covered loans   93,433   7,671   87,200   7,524   109,610   305,438
ALLL - non-covered loans   112,152   9,072   122,915   8,923   140,514   393,576
Specific ALLL covered loans 1,981 750 - - - 2,731
  General ALLL covered loans   63,576   6,603   27,001   -   6,546   103,726
ALLL - covered loans   65,557   7,353   27,001   -   6,546   106,457
Total ALLL   $ 177,709   $ 16,425   $ 149,916   $ 8,923   $ 147,060   $ 500,033
Loans held-in-portfolio:
Impaired non-covered loans $ 271,177 $ 39,542 $ 382,398 $ 3,818 $ 127,643 $ 824,578
  Non-covered loans held-in-portfolio, excluding impaired loans   6,052,606   216,960   4,931,072   534,530   3,131,734   14,866,902
Non-covered loans held-in-portfolio   6,323,783   256,502   5,313,470   538,348   3,259,377   15,691,480
Impaired covered loans 25,092 - - - - 25,092
  Covered loans held-in-portfolio, excluding impaired loans   1,875,378   240,365   999,578   -   59,585   3,174,906
Covered loans held-in-portfolio   1,900,470   240,365   999,578   -   59,585   3,199,998
Total loans held-in-portfolio   $ 8,224,253   $ 496,867   $ 6,313,048   $ 538,348   $ 3,318,962   $ 18,891,478
 
 
31-Mar-13
Puerto Rico
(In thousands)   Commercial   Construction   Mortgage   Lease financing   Consumer   Total
Allowance for credit losses:
Specific ALLL non-covered loans $ 21,770 $ 135 $ 58,206 $ 1,662 $ 24,379 $ 106,152
  General ALLL non-covered loans   139,113   6,268   72,260   2,233   97,995   317,869
ALLL - non-covered loans   160,883   6,403   130,466   3,895   122,374   424,021
Specific ALLL covered loans 1,417 - - - - 1,417
  General ALLL covered loans   66,264   6,293   20,673   -   5,220   98,450
ALLL - covered loans   67,681   6,293   20,673   -   5,220   99,867
Total ALLL $ 228,564 $ 12,696 $ 151,139 $ 3,895 $ 127,594 $ 523,888
Loans held-in-portfolio:
Impaired non-covered loans $ 231,986 $ 43,514 $ 578,471 $ 4,358 $ 109,718 $ 968,047
  Non-covered loans held-in-portfolio, excluding impaired loans   5,968,604   197,773   5,158,122   539,214   3,113,816   14,977,529
Non-covered loans held-in-portfolio   6,200,590   241,287   5,736,593   543,572   3,223,534   15,945,576
Impaired covered loans 23,412 - - - - 23,412
  Covered loans held-in-portfolio, excluding impaired loans   1,921,397   306,550   1,045,564   -   65,523   3,339,034
Covered loans held-in-portfolio   1,944,809   306,550   1,045,564   -   65,523   3,362,446
Total loans held-in-portfolio   $ 8,145,399   $ 547,837   $ 6,782,157   $ 543,572   $ 3,289,057   $ 19,308,022
 
                           
Variance
(In thousands)   Commercial   Construction   Mortgage   Lease financing   Consumer   Total
Allowance for credit losses:
Specific ALLL non-covered loans $ (3,051) $ 1,266 $ (22,491) $ (263) $ 6,525 $ (18,014)
  General ALLL non-covered loans   (45,680)   1,403   14,940   5,291   11,615   (12,431)
ALLL - non-covered loans   (48,731)   2,669   (7,551)   5,028   18,140   (30,445)
Specific ALLL covered loans   564   750   -   -   -   1,314
  General ALLL covered loans   (2,688)   310   6,328   -   1,326   5,276
ALLL - covered loans   (2,124)   1,060   6,328   -   1,326   6,590
Total ALLL   $ (50,855)   $ 3,729   $ (1,223)   $ 5,028   $ 19,466   $ (23,855)
Loans held-in-portfolio:
Impaired non-covered loans $ 39,191 $ (3,972) $ (196,073) $ (540) $ 17,925 $ (143,469)
  Non-covered loans held-in-portfolio, excluding impaired loans   84,002   19,187   (227,050)   (4,684)   17,918   (110,627)
Non-covered loans held-in-portfolio   123,193   15,215   (423,123)   (5,224)   35,843   (254,096)
Impaired covered loans 1,680 - - - - 1,680
  Covered loans held-in-portfolio, excluding impaired loans   (46,019)   (66,185)   (45,986)   -   (5,938)   (164,128)
Covered loans held-in-portfolio   (44,339)   (66,185)   (45,986)   -   (5,938)   (162,448)
Total loans held-in-portfolio   $ 78,854   $ (50,970)   $ (469,109)   $ (5,224)   $ 29,905   $ (416,544)
Popular, Inc.
Financial Supplement to Second Quarter 2013 Earnings Release
Table M - Allowance for Loan Losses - Breakdown of General and Specific Reserves - U.S. MAINLAND OPERATIONS
(Unaudited)
 
30-Jun-13
U.S. Mainland
(In thousands)   Commercial   Construction   Legacy   Mortgage   Consumer   Total
Allowance for credit losses:            
  Specific ALLL $ - $ - $ - $ 17,563 $ 350 $ 17,913
  General ALLL   52,329   338   19,978   15,502   29,126   117,273
Total ALLL   $ 52,329   $ 338   $ 19,978   $ 33,065   $ 29,476   $ 135,186
Loans held-in-portfolio:
Impaired loans $ 63,684 $ 5,834 $ 13,368 $ 52,807 $ 2,523 $ 138,216
  Loans held-in-portfolio, excluding impaired loans   3,530,373   34,674   248,860   1,237,310   640,746   5,691,963
Total loans held-in-portfolio   $ 3,594,057   $ 40,508   $ 262,228   $ 1,290,117   $ 643,269   $ 5,830,179
 
 
31-Mar-13
U.S. Mainland
(In thousands)   Commercial   Construction   Legacy   Mortgage   Consumer   Total
Allowance for credit losses:
Specific ALLL $ 6 $ - $ - $ 17,491 $ 93 $ 17,590
  General ALLL   67,981   1,036   30,777   13,988   28,108   141,890
Total ALLL   $ 67,987   $ 1,036   $ 30,777   $ 31,479   $ 28,201   $ 159,480
Loans held-in-portfolio:
Impaired loans $ 69,953 $ 5,884 $ 15,031 $ 53,192 $ 2,676 $ 146,736
  Loans held-in-portfolio, excluding impaired loans   3,479,885   24,327   337,481   1,084,125   615,615   5,541,433
Total loans held-in-portfolio   $ 3,549,838   $ 30,211   $ 352,512   $ 1,137,317   $ 618,291   $ 5,688,169
 
                           
Variance
(In thousands)   Commercial   Construction   Legacy   Mortgage   Consumer   Total
Allowance for credit losses:
Specific ALLL $ (6) $ - $ - $ 72 $ 257 $ 323
  General ALLL   (15,652)   (698)   (10,799)   1,514   1,018   (24,617)
Total ALLL   $ (15,658)   $ (698)   $ (10,799)   $ 1,586   $ 1,275   $ (24,294)
Loans held-in-portfolio:
Impaired loans $ (6,269) $ (50) $ (1,663) $ (385) $ (153) $ (8,520)
  Loans held-in-portfolio, excluding impaired loans   50,488   10,347   (88,621)   153,185   25,131   150,530
Total loans held-in-portfolio   $ 44,219   $ 10,297   $ (90,284)   $ 152,800   $ 24,978   $ 142,010

Popular, Inc.  
Financial Supplement to Second Quarter 2013 Earnings Release
Table N - Reconciliation to GAAP Financial Measures
(Unaudited)
 
 
(In thousands, except share or per share information)   30-Jun-13   31-Mar-13   30-Jun-12  
Total stockholders' equity $ 4,195,036 $ 3,971,143 $ 4,021,237
Less: Preferred stock (50,160) (50,160) (50,160)
Less: Goodwill (647,757) (647,757) (647,757)
Less: Other intangibles   (49,359)   (51,827)   (59,243)  
Total tangible common equity   $ 3,447,760   $ 3,221,399   $ 3,264,077  
Total assets $ 36,684,594 $ 36,942,714 $ 36,612,179
Less: Goodwill (647,757) (647,757) (647,757)
Less: Other intangibles   (49,359)   (51,827)   (59,243)  
Total tangible assets   $ 35,987,478   $ 36,243,130   $ 35,905,179  
Tangible common equity to tangible assets 9.58 % 8.89 % 9.09 %
Common shares outstanding at end of period 103,276,131 103,228,615 102,824,323
Tangible book value per common share   $ 33.38   $ 31.21   $ 31.74  
 
 
 
(In thousands)   30-Jun-13   31-Mar-13   30-Jun-12  
Common stockholders' equity $ 4,144,876 $ 3,920,983 $ 3,971,077
Less: Unrealized gains on available-for-sale securities, net of tax[1] (23,990) (130,562) (181,207)
Less: Disallowed deferred tax assets[2] (647,010) (433,543) (392,960)
Less: Intangible assets:
Goodwill (647,757) (647,757) (647,757)
Other disallowed intangibles (2,695) (10,626) (22,241)
Less: Aggregate adjusted carrying value of non-financial equity investments (1,357) (1,331) (1,256)
Add: Pension liability adjustment, net of tax and accumulated net gains
(losses) on cash flow hedges[3]   216,823   222,016   208,015  
Total Tier 1 common equity   $ 3,038,890   $ 2,919,180   $ 2,933,671  
Tier 1 common equity to risk-weighted assets   13.05 % 12.36 % 12.29 %
[1] In accordance with regulatory risk-based capital guidelines, Tier 1 capital excludes net unrealized gains (losses) on available-for-sale debt securities and net unrealized gains on available-for-sale equity securities with readily determinable fair values. In arriving at Tier 1 capital, institutions are required to deduct net unrealized losses on available-for-sale equity securities with readily determinable fair values, net of tax.
 
[2] Approximately $178 million of the Corporation's $864 million of net deferred tax assets at June 30, 2013 (March 31, 2013 - $135 million and $608 million, respectively; June 30, 2012 - $151 million and $573 million, respectively), were included without limitation in regulatory capital pursuant to the risk-based capital guidelines, while approximately $647 million of such assets at June 30, 2013 (March 31, 2013 - $434 million; June 30, 2012 - $393 million) exceeded the limitation imposed by these guidelines and, as “disallowed deferred tax assets”, were deducted in arriving at Tier 1 capital. The remaining $39 million of the Corporation's other net deferred tax assets at June 30, 2013 (March 31, 2013 - $39 million; June 30, 2012 - $29 million) represented primarily the following items (a) the deferred tax effects of unrealized gains and losses on available-for-sale debt securities, which are permitted to be excluded prior to deriving the amount of net deferred tax assets subject to limitation under the guidelines; (b) the deferred tax asset corresponding to the pension liability adjustment recorded as part of accumulated other comprehensive income; and (c) the deferred tax liability associated with goodwill and other intangibles.
 
[3] The Federal Reserve Bank has granted interim capital relief for the impact of pension liability adjustment.  

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

Revenues

Quarters ended
(In thousands)   30-Jun-13   31-Mar-13   Variance
Interest income on covered loans   $ 70,136   $ 72,184   $ (2,048)
FDIC loss share expense:
Amortization of indemnification asset (38,557) (40,204) 1,647
80% mirror accounting on credit impairment losses [1] 25,338 14,045 11,293
80% mirror accounting on discount accretion on unfunded commitments (193) (193) -
80% mirror accounting on reimbursable expenses 12,131 7,783 4,348
Change in true-up payment obligation (476) (6,775) 6,299
Other   (1,998)   (922)   (1,076)
  Total FDIC loss share expense   (3,755)   (26,266)   22,511
Other non-interest income   242   242   -
Total revenues   66,623   46,160   20,463
Provision for loan losses   25,500   17,556   7,944
Total revenues less provision for loan losses $ 41,123   $ 28,604   $ 12,519
[1] Reductions in expected cash flows for ASC 310-30 loans, which may impact the provision for loan losses, may consider reductions in both principal and interest cash flow expectations. The amount covered under the FDIC loss sharing agreements for interest not collected from borrowers is limited under the agreements (approximately 90 days); accordingly, these amounts are not subject fully to the 80% mirror accounting.
 

Quarterly average assets

Quarters ended
(In millions)   30-Jun-13   31-Mar-13   Variance
Covered loans $ 3,269 $ 3,514 $ (245)
FDIC loss share asset   1,376   1,394   (18)
 
 

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

 
Quarters ended
      30-Jun-13   31-Mar-13
(In thousands)   Accretable yield   Carrying amount of loans   Accretable yield   Carrying amount of loans
Beginning balance $ 1,372,135 $ 3,157,663 $ 1,451,669 $ 3,491,759
Accretion (62,536) 62,536 (64,990) 64,990
Changes in expected cash flows 13,974 - (14,544) -
Collections / charge-offs   -   (207,333)   -   (399,086)
Ending balance 1,323,573 3,012,866 1,372,135 3,157,663
  Allowance for loan losses - ASC 310-30 covered loans   -   (91,195)   -   (91,573)
Ending balance, net of allowance for loan losses   $ 1,323,573   $ 2,921,671   $ 1,372,135   $ 3,066,090
 
 

Activity in the carrying amount of the FDIC indemnity asset

 
Quarters ended
(In thousands)       30-Jun-13       31-Mar-13
Balance at beginning of period $ 1,380,592 $ 1,399,098
Amortization (38,557) (40,204)
Credit impairment losses to be covered under loss sharing agreements 25,338 14,045
Decrease due to reciprocal accounting on the discount accretion on unfunded commitments (193) (193)
Reimbursable expenses to be covered under loss sharing agreements 12,131 7,783
Net payments to (from) FDIC under loss sharing agreements - 107
Other adjustments attributable to FDIC loss sharing agreements       31       (44)
Balance at end of period       $ 1,379,342       $ 1,380,592
 
 

Activity in the remaining FDIC loss share asset amortization

 
Quarters ended
(In thousands)       30-Jun-13       31-Mar-13
Balance at beginning of period $ 128,682 $ 141,800
Amortization (38,557) (40,204)
Impact of lower projected losses       31,999       27,086
Balance at end of period       $ 122,124       $ 128,682

Popular, Inc.
Investor Relations:
Carlos J. Vázquez, 787-756-3982
Chief Financial Officer, Executive Vice President
or
Media Relations:
Teruca Rullán, 787-281-5170 or 917-679-3596/mobile
Senior Vice President, Corporate Communications

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