Popular, Inc. (the “Corporation” or “Popular”) (NASDAQ:BPOP) reported net income of $86.4 million for the quarter ended March 31, 2014, compared to net income of $163.0 million for the quarter ended December 31, 2013.

Mr. Richard L. Carrión, Chairman of the Board and Chief Executive Officer, said: "This quarter we are reporting solid financial results as well as announcing an important initiative to restructure our U.S. business. The payment of a dividend from PCB is also an important step in more effectively managing our capital structure. Although the business environment in our home market is challenging, we expect to continue to make progress in our capital management initiatives as the P.R. economy stabilizes."

Earnings Highlights      
 
(Unaudited)   Quarters ended
(Dollars in thousands, except per share information)   31-Mar-14   31-Dec-13   31-Mar-13
Net interest income $ 372,967 $ 376,342 $ 346,313
Provision for loan losses – non-covered loans 47,358 47,729 206,300
Provision for loan losses – covered loans [1]     25,714       8,907       17,556  
Net interest income after provision for loan losses 299,895 319,706 122,457
FDIC loss share expense (24,206 ) (37,164 ) (26,266 )
Other non-interest income 130,771 228,354 60,323
Operating expenses     296,787       322,703       333,698  
Income (loss) before income tax 109,673 188,193 (177,184 )
Income tax expense (benefit)     23,264       25,162       (56,877 )
Net income (loss)   $ 86,409     $ 163,031     $ (120,307 )
Net income (loss) applicable to common stock   $ 85,478     $ 162,100     $ (121,237 )
Net income (loss) per common share - basic   $ 0.83     $ 1.58     $ (1.18 )
Net income (loss) per common share - diluted   $ 0.83     $ 1.57     $ (1.18 )
[1] Covered loans represent loans acquired in the Westernbank FDIC-assisted transaction that are covered under FDIC loss sharing agreements.
 

Significant events

On April 23, 2014, the Corporation issued a press release announcing that it had entered into definitive agreements to sell its regional operations in California, Illinois and Central Florida to three different buyers and centralize certain back office operations in Puerto Rico and New York. The transactions will result in net premium of approximately $25 million and an estimated noncash goodwill write-down of approximately $160 million. An estimated restructuring charge of approximately $53 million will be taken by PCB, and annual operating expenses will be prospectively reduced by an estimated $45 million after the reorganization is complete. This decrease in expenses offsets a reduction in revenues that results from the sale of the regional operations.

The following tables reflect the results of operations for the first quarter of 2014 compared to the results of the fourth quarter of 2013, excluding the effect of the gain related to EVERTEC’s secondary public offering discussed below.

    Quarters ended
(Unaudited)    

Adjusted Results
Non-GAAP

 
(In thousands)   31-Mar-14   31-Dec-13   Variance
Net interest income $ 372,967 $ 376,342 $ (3,375 )
Provision for loan losses – non-covered loans 47,358 47,729 (371 )
Provision for loan losses – covered loans [1]     25,714       8,907       16,807  
Net interest income after provision for loan losses 299,895 319,706 (19,811 )
FDIC loss share expense (24,206 ) (37,164 ) 12,958
Other non-interest income 130,771 135,996 (5,225 )
Operating expenses     296,787       322,703       (25,916 )
Income before income tax 109,673 95,835 13,838
Income tax expense     23,264       21,217       2,047  
Net income   $ 86,409     $ 74,618     $ 11,791  
[1] Covered loans represent loans acquired in the Westernbank FDIC-assisted transaction that are covered under FDIC loss sharing agreements.
 

The results for the fourth quarter of 2013 exclude the after-tax gain of $88.4 million resulting from the Corporation’s sale of EVERTEC shares in connection with its public offering, net of the impact of $11 million from EVERTEC’s reduction in capital due to its repurchase of shares. The following table reflects the adjusted results for the fourth quarter of 2013.

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

Actual Results
(US GAAP)

 

Impact of
EVERTEC's
SPO

 

Adjusted Results
(Non-GAAP)

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

Net interest income

Net interest margin for the first quarter of 2014 decreased four basis points to 4.70%, when compared with the fourth quarter of 2013. Net interest income was $373.0 million, a decrease of $3.4 million from the previous quarter, which is largely attributed to the impact of having two fewer days in the first quarter of 2014 than in the fourth quarter of 2013. The main drivers of the decrease in the net interest income were:

  • A decrease of $5.7 million, or twenty five basis points, on income from the covered portfolio due to lower average balance of the portfolio, lower yield due to a positive impact recorded during the fourth quarter of 2013 related to certain construction loan pools for which the estimated timing of cash flows was accelerated to reflect actual and expected resolution of the loans; and the effect of having two fewer days during the first quarter of 2014 as compared to the last quarter of 2013, all of these effects partially offset by loan resolutions during the quarter.
  • Lower interest income by $0.9 million, or six basis points, from the non-covered loan portfolio due mainly to the impact of two fewer days during the first quarter of 2014, partially offset by higher yields from the commercial and construction portfolios mostly related to interest collected on loans previously in non accruing status mostly in the U.S.

These negative variances were partially offset by:

  • A decrease of $2.0 million, or three basis points, in interest expense on deposits due to re-pricing at lower rates during the quarter, coupled with lower average volumes of brokered certificates of deposits and the impact of two fewer days during the quarter.
  • An increase of $0.9 million, or eleven basis points, on income from investment securities due mainly to higher average volumes of Agency securities and higher yield on CMOs.
  • BPPR’s net interest margin was 5.49%, a decrease of ten basis points from the previous quarter. Net interest income amounted to $327.9 million for the quarter ended March 31, 2014, compared with $330.8 million for the previous quarter. The decrease in the net interest income was mainly due to the above mentioned impact of two fewer days during the first quarter of 2014 and lower income from the covered portfolio, partially offset by lower cost of deposits.
  • BPNA earned $73.2 million in net interest income for the quarter ended March 31, 2014, compared with $71.2 million in the previous quarter. The increase in the net interest margin of sixteen basis points to 3.71% was mainly related to higher yields related to collections from commercial and construction loans previously in non accruing status, coupled with lower cost of deposits and borrowings.

Non-interest income

Non-interest income decreased by $84.6 million compared with the fourth quarter of 2013. Excluding the impact of the gain on sale of EVERTEC shares during the fourth quarter of 2013, non-interest income decreased by $7.7 million quarter over quarter, driven primarily by the following items:

  • Lower income from mortgage banking activities by $10.7 million due to a negative variance of $3.6 million in the fair value adjustments of mortgage servicing rights, higher trading account losses by $4.0 million from derivative positions and lower gain on sale of mortgage loans by $2.6 million from securitization activities during the quarter. See additional details about mortgage banking activities in Table F.
  • Lower other service fees by $7.5 million mainly due to contingent insurance commission revenue realized during the fourth quarter of 2013, in addition to lower credit card fees during this quarter due to lower credit card transactions when compared to the fourth quarter’s holiday season. See additional details about other service fees in Table F.
  • Higher provision for indemnity reserves by $3.5 million at BPPR related primarily to loans subject to credit recourse agreements, partially offset by a partial release of the reserve for the indemnification provision related to the sale of non-performing assets completed during the first quarter of 2013.

These negative variances were partially offset by:

  • Lower FDIC loss-share expense by $13.0 million mainly due to higher mirror accounting on credit impairment losses and reimbursable expenses, as well as the impact of fair value adjustments in the true-up payment obligation, partially offset by higher amortization of the FDIC loss share asset due to a decrease in expected losses and higher recoveries on covered assets to be reimbursed to the FDIC. See additional details about covered portfolio and FDIC indemnity asset in Table O.
  • Higher net gain on sale of loans, including valuation adjustments on loans held-for-sale by $6.4 million, mainly at BPNA due to a higher volume of sales of non-performing commercial loans.
  • Positive variance in trading account profit / (loss) by $3.5 million mainly at the BPPR segment due to realized and unrealized gains in the trading mortgage-backed securities portfolio.
  • Higher other operating income by $9.6 million (excluding the effect of the $92.4 million gain related to the EVERTEC’s secondary public offering during the fourth quarter of 2013) mainly due to higher net earnings on the portfolio of investments under the equity method, primarily due to the net gain of $6.5 million recorded as a result of an acquisition completed during the quarter by Centro Financiero BHD, the Corporation’s equity method investee based in the Dominican Republic, of another financial institution.

Refer to table B for further details.

Financial Impact of FDIC-Assisted Transaction    
 
(Unaudited)   Quarters ended
(In thousands)   31-Mar-14   31-Dec-13   31-Mar-13
 

Income Statement

Interest income on covered loans $ 81,098 $ 86,794 $ 72,184
Total FDIC loss share expense (24,206 ) (37,164 ) (26,266 )
Other non-interest income - - 242
Provision for loan losses     25,714       8,907       17,556  
Total revenues less provision for loan losses   $ 31,178     $ 40,723     $ 28,604  
 

Balance Sheet

Loans covered under loss-sharing agreements with FDIC $ 2,870,054 $ 2,984,427 $ 3,362,446
FDIC loss share asset 833,721 948,608 1,380,592
FDIC true-up payment obligation     126,345       127,513       118,294  
 

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

Operating expenses

Operating expenses decreased by $25.9 million when compared with the fourth quarter of 2013, driven primarily by:

  • Lower personnel costs by $1.2 million mostly due to lower pension and postretirement expenses mainly due to changes to actuarial assumptions in BPPR’s pension obligations, partially offset by higher payroll taxes and social security expenses at BPPR and BPNA as a result of less salaries subject to payroll taxes during the fourth quarter of 2013 due to applicable maximum limits fulfilled earlier in the year.
  • Lower net occupancy expenses by $1.3 million mainly at BPPR segment due to lower real property taxes and lower electricity expenses.
  • Lower professional fees by $7.0 million mostly at BPPR due to lower technology consulting and programming services by $2.7 million, and lower loan restructuring and collections expenses by $2.4 million, mainly for covered loans (these are subject to 80% reimbursement from the FDIC).
  • Lower business promotion expenses by $5.3 million due to fourth quarter seasonal promotional campaigns and customer activities during the fourth quarter of 2013.
  • Lower FDIC deposit insurance expense by $3.7 million mainly driven by improvements in the assets quality and earnings trends.
  • Lower other real estate owned (OREO) expenses by $4.4 million mainly due to higher gains on sale of construction OREO’s at the BPPR segment.
  • Lower other operating expenses by $3.7 million mostly at BPPR due to lower provision for unused commitments by $5.5 million, partially offset by higher sundry losses at BPNA mostly related to an accrual for a legal settlement.

Non-personnel credit-related costs, which include collections, appraisals, credit related fees, and OREO expenses, amounted to $13.6 million for the first quarter of 2014, compared with $20.8 million for the fourth quarter of 2013. The decrease was principally due to lower restructuring and collections expenses, mainly for covered loans, and higher gains on sales of OREO’s at BPPR.

Full-time equivalent employees (“FTEs”) were 8,053 as of March 31, 2014, compared with 8,059 as of December 31, 2013, and 8,144 as of March 31, 2013.

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

Income taxes

Income tax expense for the first quarter of 2014 amounted to $23.3 million, for an effective tax rate of 21%, compared to $25.2 million for the fourth quarter of 2013. Excluding the effect of the sale of EVERTEC shares discussed above, the income tax expense for the fourth quarter of 2013 amounted to $21.2 million, for an effective tax rate of 22%.

Credit Quality

The following table presents non-performing assets information:

Non-Performing Assets      
(Unaudited)            
(In thousands)   31-Mar-14   31-Dec-13   31-Mar-13
Total non-performing loans held-in-portfolio, excluding covered loans $ 635,334 $ 597,948 $ 1,050,608
Non-performing loans held-for-sale 789 1,092 17,463
Other real estate owned (“OREO”), excluding covered OREO     136,965     135,501     154,699
Total non-performing assets, excluding covered assets 773,088 734,541 1,222,770
Covered loans and OREO     182,659     197,388     198,870
Total non-performing assets   $ 955,747   $ 931,929   $ 1,421,640
Net charge-offs for the quarter (excluding covered loans)   $ 43,246   $ 35,366   $ 81,357
 

     
Ratios (excluding covered loans):            
Non-performing loans held-in-portfolio to loans held-in-portfolio 2.94 % 2.77 % 4.86 %
Allowance for loan losses to loans held-in-portfolio 2.51 2.49 2.70

Allowance for loan losses to non-performing loans,
excluding loans held-for-sale

  85.40     90.05     55.54  
 
Refer to Table H for additional information.
 
Provision for Loan Losses      
 
(Unaudited)   Quarters ended
(In thousands)   31-Mar-14   31-Dec-13   31-Mar-13
Provision (reversal) for loan losses - non-covered loans:
BPPR $ 53,915 $ 62,658 $ 204,289
BPNA     (6,557 )     (14,929 )     2,011
Total provision for loan losses - non-covered loans     47,358       47,729       206,300
Provision for loan losses - covered loans     25,714       8,907       17,556
Total provision for loan losses   $ 73,072     $ 56,636     $ 223,856
 

Credit Quality

Significant items influenced credit quality results for the first quarter of 2014. Adjusting for these items, overall credit trends remained stable during the quarter, particularly driven by strong credit quality results in the BPNA segment. Nevertheless, the Corporation continues to closely monitor macroeconomic conditions in Puerto Rico which continue to be challenging. The following presents credit quality performance for the first quarter of 2014 for the Corporation’s non-covered portfolio.

  • Inflows of NPLs held-in-portfolio, excluding consumer loans, increased by $63.6 million, or 44.7%, from the previous quarter, primarily due to additions from the BPPR commercial portfolio, of which $51.6 million results from one particular credit relationship. Mortgage NPL inflows decreased by $7.3 million quarter over quarter.
  • Non-performing loans held-in-portfolio increased by $37.4 million, or 6.3%, from the previous quarter, led by higher commercial and mortgage NPLs in the BPPR segment, as the BPNA segment reflected NPL reductions across all its portfolios. Commercial NPL increase results from higher inflows for the quarter, driven by the previously mentioned single commercial credit relationship. However, despite improving inflows, mortgage NPLs continued to increase at BPPR due to lower level of outflows.
  • Net charge-offs for the first quarter of 2014 amounted to $43.1 million, or an annualized 0.80% of average non-covered loans held-in-portfolio, compared to $35.4 million, or 0.66% in the fourth quarter of 2013. The increase of $7.9 million is mostly due to a recovery of $8.9 million associated with an opportunistic sale of a portfolio of previously charged-off credit cards and personal loans in the BPPR segment during the fourth quarter of 2013. Excluding this item, the net charge-offs ratio in the prior quarter would have been 0.83%, resulting in a slight improvement of 3 basis points for the first quarter of 2014. Refer to Table J for further information on net charge-offs and related ratios.
  • The allowance for loan losses increased slightly by $4.1 million from the fourth quarter of 2013, mainly driven by higher reserves for the BPPR segment, offset in part by lower reserves in BPNA driven by the continuous improvement in the overall credit quality of the BPNA portfolios. The general and specific reserves related to non-covered loans totaled $427.5 million and $115.1 million, respectively, at quarter-end, compared with $435.0 million and $103.5 million, respectively, as of December 31, 2013. The ratio of the allowance for loan losses to loans held-in-portfolio stood at 2.51% in the first quarter of 2014, compared to 2.49% in the previous quarter.
  • The provision for loan losses for the first quarter of 2014 amounted to $47.4 million, relatively flat when compared to the fourth quarter of 2013.

Credit Quality by Segment      
(Unaudited)
(In thousands) Quarters ended
BPPR   31-Mar-14   31-Dec-13   31-Mar-13
Provision for loan losses $ 53,915 $ 62,658 $ 204,289
Net charge-offs 45,950 35,256 62,424 [1]
Total non-performing loans held-in-portfolio,
excluding covered loans 532,223 447,255 837,943
Allowance / non-covered loans held-in-portfolio     2.72 %     2.69 %     2.66 %
[1] For the quarter ended March 31, 2013, excludes net write-downs of $163.1 million related to the NPL’s bulk sale.
 
  Quarters ended
BPNA   31-Mar-14   31-Dec-13   31-Mar-13
Provision for loan losses (reversal of provision) $ (6,557 ) $ (14,929 ) $ 2,011
Net charge-offs (recoveries) (2,704 ) 110 18,933
Total non-performing loans held-in-portfolio,
excluding covered loans 103,111 150,693 212,665
Allowance / non-covered loans held-in-portfolio     1.91 %     1.95 %     2.80 %

BPPR Segment

  • Inflows of NPLs held-in-portfolio, excluding consumer loans, increased by $56.8 million, or 44.9%, from the fourth quarter of 2013, mainly driven by higher commercial and construction loan inflows of $54.4 million and $8.0 million, respectively. These results primarily reflect $51.6 million in additions associated with one particular relationship, as mortgage NPL inflows improved by $5.6 million from the previous quarter.
  • Total NPLs held-in-portfolio increased by $85.0 million from the fourth quarter of 2013, largely driven by increases in the commercial and mortgage NPLs of $59.8 million and $23.4 million, respectively. Commercial NPL increase is predominantly driven by the previously mentioned $51.6 million single credit relationship. Although mortgage NPL inflows declined, the NPL upward trend stems from reduced outflows.
  • Net charge-offs were $46.0 million, increasing by $10.7 million, or 30.3%, from the fourth quarter of 2013, primarily related to $8.9 million in recoveries associated with the sale during the fourth quarter of 2013 of a portfolio of previously charged-off credit cards and personal loans. The ratio of net charge-offs to average loans held-in-portfolio increased to 1.16% on an annualized basis, from 0.90% in the previous quarter. Excluding the recoveries from the loan sale in the prior quarter, net charge-offs remained stable during the first quarter of 2014.
  • The allowance for loan losses increased by $8.0 million from the fourth quarter of 2013. The increase in the allowance was mostly influenced by environmental factors considering prevailing economic conditions in Puerto Rico. The allowance for loan losses as a percentage of loans held-in-portfolio of 2.72% increased slightly from 2.69% in the fourth quarter of 2013.
  • The provision for loan losses for the first quarter of 2014 amounted to $53.9 million, decreasing by $8.7 million from the previous quarter.

BPNA Segment

  • Total NPLs held-in-portfolio decreased by $47.6 million, or 31.6%, from the fourth quarter of 2013, mostly driven by a $32.0 million reduction in the commercial NPLs, reflective of sustained improvements in credit performance, loan resolutions and sales. Total inflows of non-performing loans held-in-portfolio, excluding consumer loans, increased by $6.8 million, or 42.7%, from the fourth quarter of 2013, particularly driven by a $10.0 million commercial credit inflow which was also sold during the quarter.
  • Net charge-offs decreased by $2.8 million from the previous quarter of 2013, positively impacted by significant recoveries in the commercial and legacy portfolios. The ratio of net charge-offs to average loans held-in-portfolio was a recovery of 19 basis points on an annualized basis, compared to a charge-off of one basis point in the previous quarter.

  • The allowance for loan losses decreased by $3.9 million from the fourth quarter of 2013 reflective of favorable credit quality trends. The allowance for loan losses as a percentage of loans held-in-portfolio decreased to 1.91% from 1.95% in the fourth quarter of 2013. In light of these improvements, the provision for loan losses in the first quarter of 2014 resulted in a provision release of $6.6 million.
Financial Condition Highlights      
 
(Unaudited)    
(In thousands)   31-Mar-14   31-Dec-13   31-Mar-13
Money market, trading and investment securities $ 8,056,145 $ 6,815,244 $ 7,305,343
Loans not covered under loss sharing agreements with the FDIC 21,611,777 21,611,866 21,633,745
Loans covered under loss sharing agreements with the FDIC 2,870,054 2,984,427 3,362,446
Total assets 36,744,162 35,749,333 36,942,714
Deposits 27,265,651 26,711,145 27,013,217
Borrowings 3,715,821 3,645,246 4,969,344
Total liabilities 31,998,415 31,123,183 32,971,571
Stockholders’ equity     4,745,747     4,626,150     3,971,143
 

Total assets increased by approximately $994.8 million from the fourth quarter of 2013 driven by:

  • An increase in money market investments by $764.0 million due mainly to $492.2 million in funds held at the end of the quarter related to the Puerto Rico Government’s $3.5 billion debt issuance, temporarily deposited in a trust account and in process to be disbursed to pay bondholders.
  • An increase of $474.1 million in investment securities available-for-sale, mainly due to purchase of agency obligations in BPPR.
  • An increase in other assets by $60.1 million mainly due to an increase in the funding position of employee benefits plans and an increase in the value of the investment in Centro Financiero BHD from the equity pick up, which included the pre-tax net gain of $6.5 million from the merger transaction discussed above.

These decreases were partially offset by:

  • A decrease by $114.9 million in FDIC loss share asset mainly due to collections and the amortization of the asset.
  • A decrease in cover loans portfolio balance of $114.4 million due to the continuation of loan resolutions and the normal portfolio run-off.

Total liabilities increased by $875.2 million from the fourth quarter of 2013, driven by:

  • An increase in deposits by $554.5 million primarily due to deposits in trust, as mentioned above, included within the demand deposits category. Refer to Table G for details of deposit accounts.
  • An increase in federal funds purchased and assets sold under agreement to repurchase by $548.9 million, offset by a decrease in other short term borrowings and notes payables by $478.3 million, as part of the Corporation’s funding strategies.
  • An increase by $250.2 million in other liabilities mainly due to an increase in unsettled trades payable of $218.7 million.

Stockholders’ equity increased by $119.6 million from the fourth quarter of 2013, mainly as a result of the net income for the quarter of $86.4 million and a decrease of $26.1 million in net unrealized losses on investment securities available-for-sale. Refer to Table A for capital ratios.

Refer to Table C for the Statements of Financial Condition.

Regulatory Capital

Popular’s regulatory capital ratios and that of its banking subsidiaries remained in excess of “well capitalized” regulatory requirements at March 31, 2014. The estimated common equity Tier 1 (“CET1”) ratio increased to 15.07% at March 31, 2014 compared to 14.83% at December 31, 2013 driven mainly by the impact of the current quarter’s earnings.

On April 22, 2014 the Corporation’s U.S. bank subsidiary (“PCB”) declared a $250 million cash dividend to the Bank Holding Company (“BHC”), $100 million of which was contributed as additional common equity by the BHC to the Puerto Rico banking subsidiary (“BPPR”). After giving effect to the impact of rebalancing capital among the banking subsidiaries and the BHC, the pro forma ratios would be as follows:

                  Estimated               Pro-forma 31-Mar-14
(Unaudited)                 31-Mar-14               after capital rebalancing
BPPR
Tier 1 / CET1 13.68% 14.24%
Total Capital 14.96% 15.52%
Total Leverage 9.38% 9.76%
 
PCB
Tier 1 / CET1 25.12% 20.54%
Total Capital 26.38% 21.80%
Total Leverage 16.37% 13.38%
                                     
 
BHC
Tier 1 19.35%
CET1 15.07%
Total Capital 20.62%
  Total Leverage                 13.07%

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, 2013, as well as its filings with the U.S. Securities and Exchange Commission. Other than to the extent required by applicable law, including the requirements of applicable securities laws, the Corporation assumes no obligation to update any forward-looking statements to reflect occurrences or unanticipated events or circumstances after the date of such statements.

Founded in 1893, Popular, Inc. is the leading banking institution by both assets and deposits in Puerto Rico and ranks among the top 50 U.S. banks by assets. In the United States, Popular has established a community-banking franchise providing a broad range of financial services and products with branches in New York, New Jersey, Illinois, Florida and California.

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

Popular will hold a conference call to discuss the financial results today Wednesday, April 23, 2014 at 11 a.m. Eastern Standard Time. The call will be broadcast live over the Internet and can be accessed through the investor relations section of the Corporation’s website: www.popular.com.

Listeners are recommended to go to the website at least 15 minutes prior to the call to download and install any necessary audio software. The call may also be accessed through a dial-in telephone number 1-888-317-6016 or 1-412-317-6016.

A replay of the webcast will be archived in Popular’s website. A telephone replay will be available one hour after the end of the conference call through Thursday, May 1, 2014 at 9:00 a.m. Eastern Standard Time, at 1-877-344-7529 or 1-412-317-0088. The replay passcode is 10043016.

Popular, Inc.
Financial Supplement to First Quarter 2014 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 - Intentionally Left Blank (Consolidated Average Balances and Yield / Rate Analysis - YTD)
 
Table F - Mortgage Banking Activities & 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 First Quarter 2014 Earnings Release
Table A - Selected Ratios and Other Information
(Unaudited)
     
     
Quarters ended
    31-Mar-14   31-Dec-13   31-Mar-13
Net income (loss) per common share:
Basic $ 0.83 $ 1.58 ($1.18 )
Diluted $ 0.83 $ 1.57 ($1.18 )
Average common shares outstanding 102,799,752 102,774,144 102,664,608
Average common shares outstanding - assuming dilution 103,198,102 103,081,417 103,013,204
Common shares outstanding at end of period 103,455,535 103,397,699 103,228,615
 
Market value per common share $ 30.99 $ 28.73 $ 27.60
 
Market capitalization - (In millions) $ 3,206 $ 2,971 $ 2,849
 
Return on average assets 0.97 % 1.79 % (1.34 )%
 
Return on average common equity 7.39 % 14.59 % (12.58 )%
 
Net interest margin [2] 4.70 % 4.74 % 4.40 %
 
Common equity per share $ 45.39 $ 44.26 $ 37.98
 
Tangible common book value per common share (non-GAAP) [1] $ 38.71 $ 37.56 $ 31.21
 
Tangible common equity to tangible assets (non-GAAP) [1] 11.11 % 11.08 % 8.89 %
 
Tier 1 risk-based capital [3] 19.35 % 19.15 % 16.52 %
 
Total risk-based capital [3] 20.62 % 20.42 % 17.80 %
 
Tier 1 leverage [3] 13.07 % 12.85 % 11.07 %
 
Tier 1 common equity to risk-weighted assets (non-GAAP) [1] [3]     15.07 %     14.83 %     12.36 %
[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 First Quarter 2014 Earnings Release
Table B - Consolidated Statement of Operations
(Unaudited)
    Quarters ended   Variance   Quarter ended   Variance
(In thousands, except per share information)   31-Mar-14   31-Dec-13  

Q1 2014
vs. Q4 2013

  31-Mar-13  

Q1 2014
vs. Q1 2013

Interest income:  
Loans $ 401,933 $ 408,566 $ (6,633 ) $ 385,926 $ 16,007
Money market investments 973 832 141 955 18
Investment securities 35,127 34,317 810 37,823 (2,696 )
  Trading account securities     5,257       5,361       (104 )     5,514       (257 )
  Total interest income     443,290       449,076       (5,786 )     430,218       13,072  
Interest expense:
Deposits 29,392 31,396 (2,004 ) 38,356 (8,964 )
Short-term borrowings 9,041 9,320 (279 ) 9,782 (741 )
  Long-term debt     31,890       32,018       (128 )     35,767       (3,877 )
  Total interest expense     70,323       72,734       (2,411 )     83,905       (13,582 )
Net interest income 372,967 376,342 (3,375 ) 346,313 26,654
Provision for loan losses - non-covered loans 47,358 47,729 (371 ) 206,300 (158,942 )
Provision for loan losses - covered loans     25,714       8,907       16,807       17,556       8,158  
Net interest income after provision for loan losses     299,895       319,706       (19,811 )     122,457       177,438  
Service charges on deposit accounts 41,250 42,154 (904 ) 43,722 (2,472 )
Other service fees 54,043 61,566 (7,523 ) 56,093 (2,050 )
Mortgage banking activities 3,681 14,392 (10,711 ) 20,300 (16,619 )
Net gain and valuation adjustments on investment securities - 2,110 (2,110 ) - -
Trading account profit (loss) 1,977 (1,547 ) 3,524 (984 ) 2,961
Net gain (loss) on sale of loans, including valuation adjustments on loans held-for-sale 11,776 5,402 6,374 (62,719 ) 74,495
Adjustments (expense) to indemnity reserves on loans sold (10,347 ) (6,892 ) (3,455 ) (16,143 ) 5,796
FDIC loss share (expense) income (24,206 ) (37,164 ) 12,958 (26,266 ) 2,060
Other operating income     28,391       111,169       (82,778 )     20,054       8,337  
  Total non-interest income     106,565       191,190       (84,625 )     34,057       72,508  
Operating expenses:
Personnel costs
Salaries 75,122 75,310 (188 ) 73,345 1,777
Commissions, incentives and other bonuses 13,658 13,965 (307 ) 15,475 (1,817 )
Pension, postretirement and medical insurance 9,771 13,948 (4,177 ) 15,238 (5,467 )
  Other personnel costs, including payroll taxes     14,603       11,137       3,466       11,931       2,672  
Total personnel costs 113,154 114,360 (1,206 ) 115,989 (2,835 )
Net occupancy expenses 25,691 27,039 (1,348 ) 23,473 2,218
Equipment expenses 11,782 11,922 (140 ) 11,950 (168 )
Other taxes 13,724 13,663 61 11,586 2,138
Professional fees 69,792 76,780 (6,988 ) 70,497 (705 )
Communications 6,934 6,260 674 6,832 102
Business promotion 11,682 17,015 (5,333 ) 12,917 (1,235 )
FDIC deposit insurance 11,973 15,630 (3,657 ) 9,280 2,693
Other real estate owned (OREO) expenses 6,187 10,558 (4,371 ) 46,741 (40,554 )
Credit and debit card processing, volume, interchange and other expenses 5,445 5,409 36 4,975 470
Other operating expenses 17,919 21,587 (3,668 ) 16,990 929
Amortization of intangibles     2,504       2,480       24       2,468       36  
  Total operating expenses     296,787       322,703       (25,916 )     333,698       (36,911 )
Income (loss) before income tax 109,673 188,193 (78,520 ) (177,184 ) 286,857
Income tax expense (benefit)     23,264       25,162       (1,898 )     (56,877 )     80,141  
Net income (loss)   $ 86,409     $ 163,031     $ (76,622 )   $ (120,307 )   $ 206,716  
Net income (loss) applicable to common stock   $ 85,478     $ 162,100     $ (76,622 )   $ (121,237 )   $ 206,715  
Net income (loss) per common share - basic   $ 0.83     $ 1.58     $ (0.75 )   $ (1.18 )   $ 2.01  
Net income (loss) per common share - diluted   $ 0.83     $ 1.57     $ (0.74 )   $ (1.18 )   $ 2.01  
 

Popular, Inc.
Financial Supplement to First Quarter 2014 Earnings Release
Table C - Consolidated Statement of Financial Condition
(Unaudited)
            Variance
Q1 2014 vs.
(In thousands)   31-Mar-14   31-Dec-13   31-Mar-13   Q4 2013
Assets:
Cash and due from banks $ 387,917 $ 423,211 $ 242,290 $ (35,294 )
Money market investments 1,622,433 858,453 1,344,244 763,980
Trading account securities, at fair value 359,247 339,743 299,773 19,504
Investment securities available-for-sale, at fair value 5,768,890 5,294,800 5,321,231 474,090
Investment securities held-to-maturity, at amortized cost 139,019 140,496 141,518 (1,477 )
Other investment securities, at lower of cost or realizable value 166,556 181,752 198,577 (15,196 )
Loans held-for-sale, at lower of cost or fair value 94,877 110,426 201,495 (15,549 )
Loans held-in-portfolio:
Loans not covered under loss sharing agreements with the FDIC 21,703,050 21,704,010 21,729,882 (960 )
Loans covered under loss sharing agreements with the FDIC 2,870,054 2,984,427 3,362,446 (114,373 )
Less: Unearned income 91,273 92,144 96,137 (871 )
    Allowance for loan losses     640,348       640,555       683,368       (207 )
    Total loans held-in-portfolio, net     23,841,483       23,955,738       24,312,823       (114,255 )
FDIC loss share asset 833,721 948,608 1,380,592 (114,887 )
Premises and equipment, net 513,855 519,516 532,785 (5,661 )
Other real estate not covered under loss sharing agreements with the FDIC 136,965 135,501 154,699 1,464
Other real estate covered under loss sharing agreements with the FDIC 158,747 168,007 172,378 (9,260 )
Accrued income receivable 125,895 131,536 135,542 (5,641 )
Mortgage servicing assets, at fair value 156,529 161,099 153,949 (4,570 )
Other assets 1,747,646 1,687,558 1,651,234 60,088
Goodwill 647,757 647,757 647,757 -
Other intangible assets     42,625       45,132       51,827       (2,507 )
Total assets   $ 36,744,162     $ 35,749,333     $ 36,942,714     $ 994,829  
Liabilities and Stockholders’ Equity:
Liabilities:
Deposits:
Non-interest bearing $ 6,326,596 $ 5,922,682 $ 5,613,701 $ 403,914
    Interest bearing     20,939,055       20,788,463       21,399,516       150,592  
    Total deposits     27,265,651       26,711,145       27,013,217       554,506  
Federal funds purchased and assets sold under agreements to repurchase 2,208,213 1,659,292 2,265,675 548,921
Other short-term borrowings 1,200 401,200 951,200 (400,000 )
Notes payable 1,506,408 1,584,754 1,752,469 (78,346 )
Other liabilities     1,016,943       766,792       989,010       250,151  
Total liabilities     31,998,415       31,123,183       32,971,571       875,232  
Stockholders’ equity:
Preferred stock 50,160 50,160 50,160 -
Common stock 1,035 1,034 1,033 1
Surplus 4,171,817 4,170,152 4,151,838 1,665
Retained earnings (accumulated deficit) 679,908 594,430 (109,411 ) 85,478
Treasury stock (898 ) (881 ) (469 ) (17 )
Accumulated other comprehensive loss     (156,275 )     (188,745 )     (122,008 )     32,470  
    Total stockholders’ equity     4,745,747       4,626,150       3,971,143       119,597  
Total liabilities and stockholders’ equity   $ 36,744,162     $ 35,749,333     $ 36,942,714     $ 994,829  
 

Popular, Inc.
Financial Supplement to First Quarter 2014 Earnings Release
Table D - Consolidated Average Balances and Yield / Rate Analysis - QUARTER
(Unaudited)
                                 
Quarter ended Quarter ended Quarter ended Variance Variance
31-Mar-14 31-Dec-13 31-Mar-13 Q1 2014 vs. Q4 2013 Q1 2014 vs. Q1 2013
($ amounts in millions; yields not on a taxable equivalent basis)  

Average balance

 

Income/
Expense

 

Yield/
Rate

Average balance  

Income/
Expense

 

Yield/
Rate

Average balance  

Income/
Expense

 

Yield/
Rate

Average balance  

Income/
Expense

 

Yield/
Rate

Average balance  

Income/
Expense

 

Yield/
Rate

Assets:
Interest earning assets:
Money market, trading and investment securities $7,566   $41.4   2.19 % $7,038   $40.5   2.30 % $6,971   $44.3   2.55 % $528   $0.9   (0.11) % $595   ($2.9)   (0.36) %
Loans not covered under loss sharing agreements with the FDIC:
Commercial 10,211 122.8 4.88 10,097 122.6 4.82 10,078 119.8 4.82 114 0.2 0.06 133 3.0 0.06
Construction 191 4.9 10.40 291 4.8 6.58 369 3.6 3.92 (100) 0.1 3.82 (178) 1.3 6.48
Mortgage 6,691 86.9 5.20 6,688 87.1 5.21 6,410 83.2 5.19 3 (0.2) (0.01) 281 3.7 0.01
Consumer 3,925 95.9 9.90 3,906 96.7 9.82 3,853 95.8 10.08 19 (0.8) 0.08 72 0.1 (0.18)
Lease financing 544   10.3   7.57 538   10.5   7.79 543   11.3   8.36 6   (0.2)   (0.22) 1   (1.0)   (0.79)
Total loans not covered under loss sharing agreements with the FDIC 21,562 320.8 6.01 21,520 321.7 5.95 21,253 313.7 5.96 42 (0.9) 0.06 309 7.1 0.05
Loans covered under loss sharing agreements with the FDIC 2,934   81.1   11.18 3,017   86.8   11.43 3,514   72.2   8.31 (83)   (5.7)   (0.25) (580)   8.9   2.87
Total loans 24,496   401.9   6.63 24,537   408.5   6.62 24,767   385.9   6.29 (41)   (6.6)   0.01 (271)   16.0   0.34
Total interest earning assets 32,062   $443.3   5.58 % 31,575   $449.0   5.66 % 31,738   $430.2   5.47 % 487   ($5.7)   (0.08) % 324   $13.1   0.11 %
Allowance for loan losses (647) (632) (659) (15) 12
Other non-interest earning assets 4,781 5,092 5,283 (311) (502)
Total average assets $36,196 $36,035 $36,362 $161 ($166)
 
Liabilities and Stockholders' Equity:
Interest bearing deposits:
NOW and money market $5,730 $4.4 0.31 % $5,653 $4.4 0.31 % $5,696 $5.8 0.41 % $77 $0.0 - % $34 ($1.4) (0.10) %
Savings 6,905 3.7 0.22 6,872 3.8 0.22 6,718 4.3 0.26 33 (0.1) - 187 (0.6) (0.04)
Time deposits 8,122   21.3   1.07 8,381   23.2   1.10 8,832   28.2   1.30 (259)   (1.9)   (0.03) (710)   (6.9)   (0.23)
Total interest bearing deposits 20,757 29.4 0.57 20,906 31.4 0.60 21,246 38.3 0.73 (149) (2.0) (0.03) (489) (8.9) (0.16)
Borrowings 3,870   40.9   4.25 3,795   41.3   4.35 4,492   45.6   4.07 75   (0.4)   (0.10) (622)   (4.7)   0.18
Total interest bearing liabilities 24,627   70.3   1.15 24,701   72.7   1.17 25,738   83.9   1.32 (74)   (2.4)   (0.02) (1,111)   (13.6)   (0.17)
Net interest spread 4.43 % 4.49 % 4.15 % (0.06) % 0.28 %
Non-interest bearing deposits 5,931 5,829 5,591 102 340
Other liabilities 899 1,046 1,074 (147) (175)
Stockholders' equity 4,739 4,459 3,959 280 780
Total average liabilities and stockholders' equity $36,196 $36,035 $36,362 $161 ($166)
 
Net interest income / margin non-taxable equivalent basis $373.0   4.70 % $376.3   4.74 % $346.3   4.40 % ($3.3)   (0.04) % $26.7   0.30 %
 

Popular, Inc.          
Financial Supplement to First Quarter 2014 Earnings Release
Table F - Mortgage Banking Activities and Other Service Fees
(Unaudited)
 
Mortgage Banking Activities Variance
Quarters ended Q1 2014 vs. Q1 2014 vs.
(In thousands)   31-Mar-14   31-Dec-13   31-Mar-13   Q4 2013   Q1 2013
Mortgage servicing fees, net of fair value adjustments:
Mortgage servicing fees $ 10,751 $ 11,371 $ 11,246 $ (620 ) $ (495 )
  Mortgage servicing rights fair value adjustments     (8,096 )     (4,541 )     (5,615 )     (3,555 )     (2,481 )
Total mortgage servicing fees, net of fair value adjustments     2,655       6,830       5,631       (4,175 )     (2,976 )
Net gain on sale of loans, including valuation on loans held-for-sale     7,176       9,751       13,760       (2,575 )     (6,584 )
Trading account (loss) profit:
Unrealized (losses) gains on outstanding derivative positions (760 ) 1,011 (22 ) (1,771 ) (738 )
  Realized (losses) gains on closed derivative positions     (5,390 )     (3,200 )     931       (2,190 )     (6,321 )
Total trading account profit     (6,150 )     (2,189 )     909       (3,961 )     (7,059 )
Total mortgage banking activities   $ 3,681     $ 14,392     $ 20,300     $ (10,711 )   $ (16,619 )
 
 
Other Service Fees Variance
Quarters ended Q1 2014 vs. Q1 2014 vs.
(In thousands)   31-Mar-14   31-Dec-13   31-Mar-13   Q4 2013   Q1 2013
Other service fees:
Debit card fees $ 10,875 $ 11,124 $ 10,397 $ (249 ) $ 478
Insurance fees 12,296 17,530 12,073 (5,234 ) 223
Credit card fees 16,221 17,328 15,685 (1,107 ) 536
Sale and administration of investment products 6,457 7,331 8,717 (874 ) (2,260 )
Trust fees 4,463 4,525 4,458 (62 ) 5
  Other fees     3,731       3,728       4,763       3       (1,032 )
Total other service fees   $ 54,043     $ 61,566     $ 56,093     $ (7,523 )   $ (2,050 )
 

Popular, Inc.          
Financial Supplement to First Quarter 2014 Earnings Release
Table G - Loans and Deposits
(Unaudited)
 
Loans - Ending Balances
Variance
Q1 2014 vs. Q1 2014 vs.
(In thousands)   31-Mar-14   31-Dec-13   31-Mar-13   Q4 2013   Q1 2013
Loans not covered under FDIC loss sharing agreements:
Commercial $ 10,014,721 $ 10,037,184 $ 9,750,428 $ (22,463 ) $ 264,293
Construction 176,766 206,084 271,498 (29,318 ) (94,732 )
Legacy [1] 197,164 211,135 352,512 (13,971 ) (155,348 )
Lease financing 546,880 543,761 543,572 3,119 3,308
Mortgage 6,669,376 6,681,476 6,873,910 (12,100 ) (204,534 )
Consumer     4,006,870     3,932,226     3,841,825     74,644       165,045  
Total non-covered loans held-in-portfolio $ 21,611,777 $ 21,611,866 $ 21,633,745 $ (89 ) $ (21,968 )
Loans covered under FDIC loss sharing agreements     2,870,054     2,984,427     3,362,446     (114,373 )     (492,392 )
Total loans held-in-portfolio   $ 24,481,831   $ 24,596,293   $ 24,996,191   $ (114,462 )   $ (514,360 )
Loans held-for-sale:
Commercial $ - $ 603 $ - $ (603 ) $ -
Legacy [1] - - 1,681 - (1,681 )
Mortgage     94,877     109,823     199,814     (14,946 )     (104,937 )
Total loans held-for-sale   $ 94,877   $ 110,426   $ 201,495   $ (15,549 )   $ (106,618 )
Total loans   $ 24,576,708   $ 24,706,719   $ 25,197,686   $ (130,011 )   $ (620,978 )
[1] The legacy portfolio is comprised of commercial loans, construction loans and lease financings related to certain lending products exited by the Corporation as part of restructuring efforts carried out in prior years at the BPNA segment.
 
Deposits - Ending Balances
Variance
Q1 2014 vs. Q1 2014 vs.
(In thousands)   31-Mar-14   31-Dec-13   31-Mar-13   Q4 2013   Q1 2013
Demand deposits [1] $ 7,020,844 $ 6,590,963 $ 6,265,796 $ 429,881 $ 755,048
Savings, NOW and money market deposits (non-brokered) 11,420,642 11,255,309 11,357,130 165,333 63,512
Savings, NOW and money market deposits (brokered) 581,562 553,521 498,833 28,041 82,729
Time deposits (non-brokered) 6,474,430 6,478,103 6,427,320 (3,673 ) 47,110
Time deposits (brokered CDs)     1,768,173     1,833,249     2,464,138     (65,076 )     (695,965 )
Total deposits   $ 27,265,651   $ 26,711,145   $ 27,013,217   $ 554,506     $ 252,434  
[1] Includes interest and non-interest demand bearing deposits.
 

Popular, Inc.
Financial Supplement to First Quarter 2014 Earnings Release
Table H - Non-Performing Assets
(Unaudited)
        Variance
(Dollars in thousands)   31-Mar-14  

As a % of
loans HIP by
category

    31-Dec-13  

As a % of
loans HIP by
category

    31-Mar-13  

As a % of
loans HIP by
category

   

Q1 2014 vs.
Q4 2013

 

Q1 2014 vs.
Q1 2013

Non-accrual loans:  
Commercial $ 306,929 3.1 % $ 279,053 2.8 % $ 320,787 3.3 % $ 27,876 $ (13,858)
Construction 22,464 12.7 23,771 11.5 50,920 18.8 (1,307) (28,456)
Legacy [1] 11,608 5.9 15,050 7.1 35,830 10.2 (3,442) (24,222)
Lease financing 3,050 0.6 3,495 0.6 4,005 0.7 (445) (955)
Mortgage 252,021 3.8 232,681 3.5 600,724 8.7 19,340 (348,703)
Consumer   39,262   1.0     43,898   1.1     38,342   1.0     (4,636)   920

Total non-performing loans held-in-portfolio, excluding covered loans

635,334 2.9 % 597,948 2.8 % 1,050,608 4.9 % 37,386 (415,274)
Non-performing loans held-for-sale [2] 789 1,092 17,463 (303) (16,674)
Other real estate owned (“OREO”), excluding covered OREO
  136,965         135,501         154,699         1,464   (17,734)
Total non-performing assets, excluding covered assets
773,088 734,541 1,222,770 38,547 (449,682)
Covered loans and OREO   182,659         197,388         198,870         (14,729)   (16,211)
Total non-performing assets   $ 955,747         $ 931,929         $ 1,421,640         $ 23,818   $ (465,893)
Accruing loans past due 90 days or more [3]   $ 409,460         $ 418,028         $ 410,065         $ (8,568)   $ (605)
Ratios excluding covered loans:
Non-performing loans held-in-portfolio to loans held-in-portfolio
2.94

%

 

2.77

%

 

4.86

%

 

Allowance for loan losses to loans held-in-portfolio
2.51 2.49 2.70

Allowance for loan losses to non-performing loans, excluding loans held-for-sale

 
  85.40         90.05         55.54              
Ratios including covered loans:
Non-performing assets to total assets 2.60

%

 

2.61

%

 

3.85

%

 

Non-performing loans held-in-portfolio to loans held-in-portfolio
2.69 2.55 4.31
Allowance for loan losses to loans held-in-portfolio
2.62 2.60 2.73
Allowance for loan losses to non-performing loans, excluding loans held-for-sale
  97.13         102.11         63.45              
[1] The legacy portfolio is comprised of commercial loans, construction loans and lease financings related to certain lending products exited by the Corporation as part of restructuring efforts carried out in prior years at the BPNA segment.
 
[2] Non-performing loans held-for-sale as of March 31, 2014 consisted of $789 thousand in mortgage loans (December 31, 2013 - $603 thousand in commercial loans and $489 thousand in mortgage loans; March 31, 2013 - $1 million in legacy loans and $16 million 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 $117 million of residential mortgage loans insured by FHA or guaranteed by the VA that are no longer accruing interest as of March 31, 2014 (December 31, 2013 - $115 million; March 31, 2013 - $99 million).
 

Popular, Inc.
Financial Supplement to First Quarter 2014 Earnings Release
Table I - Activity in Non-Performing Loans
(Unaudited)
             
Commercial loans held-in-portfolio:
Quarter ended Quarter ended
31-Mar-14   31-Dec-13
(In thousands)   BPPR   BPNA   Popular, Inc.   BPPR   BPNA   Popular, Inc.
Beginning balance NPLs $ 186,097 $ 92,956 $ 279,053 $ 204,569 $ 111,471 $ 316,040
Plus:
New non-performing loans 86,045 17,156 103,201 31,649 7,905 39,554
Advances on existing non-performing loans - 6 6 - 5 5
Less:
Non-performing loans transferred to OREO (3,700 ) - (3,700 ) (4,800 ) (505 ) (5,305 )
Non-performing loans charged-off (10,278 ) (4,092 ) (14,370 ) (21,548 ) (10,359 ) (31,907 )
Loans returned to accrual status / loan collections (12,233 ) (14,934 ) (27,167 ) (23,773 ) (14,682 ) (38,455 )
  Loans transferred to held-for-sale     -       (30,094 )     (30,094 )     -       (879 )     (879 )
Ending balance NPLs   $ 245,931     $ 60,998     $ 306,929     $ 186,097     $ 92,956     $ 279,053  
 
Construction loans held-in-portfolio:
Quarter ended Quarter ended
31-Mar-14   31-Dec-13
(In thousands)   BPPR   BPNA   Popular, Inc.   BPPR   BPNA   Popular, Inc.
Beginning balance NPLs $ 18,108 $ 5,663 $ 23,771 $ 23,019 $ 5,763 $ 28,782
Plus:
New non-performing loans 7,960 - 7,960 - - -
Less:
Non-performing loans charged-off (416 ) - (416 ) (1,511 ) - (1,511 )
  Loans returned to accrual status / loan collections     (3,188 )     (5,663 )     (8,851 )     (3,400 )     (100 )     (3,500 )
Ending balance NPLs   $ 22,464     $ -     $ 22,464     $ 18,108     $ 5,663     $ 23,771  
 
Mortgage loans held-in-portfolio:
Quarter ended Quarter ended
31-Mar-14   31-Dec-13
(In thousands)   BPPR   BPNA   Popular, Inc.   BPPR   BPNA   Popular, Inc.
Beginning balance NPLs $ 206,389 $ 26,292 $ 232,681 $ 177,835 $ 25,373 $ 203,208
Plus:
New non-performing loans 89,142 3,920 93,062 94,721 5,593 100,314
Less:
Non-performing loans transferred to OREO (1,751 ) (1,195 ) (2,946 ) (3,691 ) (710 ) (4,401 )
Non-performing loans charged-off (6,693 ) (867 ) (7,560 ) (5,787 ) (825 ) (6,612 )
  Loans returned to accrual status / loan collections     (57,286 )     (5,930 )     (63,216 )     (56,689 )     (3,139 )     (59,828 )
Ending balance NPLs   $ 229,801     $ 22,220     $ 252,021     $ 206,389     $ 26,292     $ 232,681  
 

Legacy loans held-in-portfolio:
    Quarter ended   Quarter ended
31-Mar-14   31-Dec-13
(In thousands)   BPPR   BPNA   Popular, Inc.   BPPR   BPNA   Popular, Inc.
Beginning balance NPLs $ -   $ 15,050   $ 15,050 $ -   $ 24,206   $ 24,206
Plus:
New non-performing loans - 1,738 1,738 - 2,449 2,449
Advances on existing non-performing loans - 5 5 - 45 45
Less:
Non-performing loans charged-off - (2,568 ) (2,568 ) - (3,740 ) (3,740 )
  Loans returned to accrual status / loan collections     -       (2,617 )     (2,617 )     -       (7,910 )     (7,910 )
Ending balance NPLs   $ -     $ 11,608     $ 11,608     $ -     $ 15,050     $ 15,050  
 
Total non-performing loans held-in-portfolio (excluding consumer loans):
Quarter ended Quarter ended
31-Mar-14   31-Dec-13
(In thousands)   BPPR   BPNA   Popular, Inc.   BPPR   BPNA   Popular, Inc.
Beginning balance NPLs $ 410,594 $ 139,961 $ 550,555 $ 405,423 $ 166,813 $ 572,236
Plus:
New non-performing loans 183,147 22,814 205,961 126,370 15,947 142,317
Advances on existing non-performing loans - 11 11 - 50 50
Less:
Non-performing loans transferred to OREO (5,451 ) (1,195 ) (6,646 ) (8,491 ) (1,215 ) (9,706 )
Non-performing loans charged-off (17,387 ) (7,527 ) (24,914 ) (28,846 ) (14,924 ) (43,770 )
Loans returned to accrual status / loan collections (72,707 ) (29,144 ) (101,851 ) (83,862 ) (25,831 ) (109,693 )
  Loans transferred to held-for-sale     -       (30,094 )     (30,094 )     -       (879 )     (879 )
Ending balance NPLs   $ 498,196     $ 94,826     $ 593,022     $ 410,594     $ 139,961     $ 550,555  
 

Popular, Inc.
Financial Supplement to First Quarter 2014 Earnings Release
Table J - Allowance for Credit Losses, Net Charge-offs and Related Ratios
(Unaudited)
       
 
Quarter ended Quarter ended Quarter ended
    31-Mar-14   31-Dec-13   31-Mar-13  
(Dollars in thousands)  

Non-covered
loans

 

Covered
loans

  Total  

Non-covered
loans

 

Covered
loans

  Total  

Non-covered
loans

 

Covered
loans

  Total  
Balance at beginning of period $ 538,463 $ 102,092 $ 640,555 $ 526,100 $ 116,828 $ 642,928 $ 621,701 $ 108,906 $ 730,607
Provision for loan losses     47,358       25,714       73,072       47,729       8,907       56,636       206,300       17,556     223,856    
      585,821       127,806       713,627       573,829       125,735       699,564       828,001       126,462     954,463    
Net loans charged-off (recovered):
BPPR
Commercial 15,173 7,648 22,821 15,177 13,433 28,610 24,311 10,535 34,846
Construction (1,378 ) 21,092 19,714 (1,796 ) 6,067 4,271 355 9,445 9,800
Lease financing 656 - 656 838 - 838 984 - 984
Mortgage 8,516 1,656 10,172 6,981 4,729 11,710 16,773 2,051 18,824
Consumer     22,983       (363 )     22,620       14,056       (586 )     13,470       20,001       4,564     24,565    
Total BPPR     45,950       30,033       75,983       35,256       23,643       58,899       62,424       26,595     89,019    
 
BPNA
Commercial (3,691 ) - (3,691 ) 159 - 159 8,104 - 8,104
Construction (176 ) - (176 ) - - - - - -
Legacy [1] (4,882 ) - (4,882 ) (5,118 ) - (5,118 ) 1,886 - 1,886
Mortgage 870 - 870 660 - 660 2,790 - 2,790
Consumer     5,175       -       5,175       4,409       -       4,409       6,153       -     6,153    
Total BPNA     (2,704 )     -       (2,704 )     110       -       110       18,933       -     18,933    
Total loans charged-off (recovered) - Popular, Inc.     43,246       30,033       73,279       35,366       23,643       59,009       81,357       26,595     107,952    
Net write-downs [3]     -       -       -       -       -       -       (163,143 )     -     (163,143 )  
Balance at end of period   $ 542,575     $ 97,773     $ 640,348     $ 538,463     $ 102,092     $ 640,555     $ 583,501     $ 99,867  

$

683,368    
 
POPULAR, INC.
Annualized net charge-offs to average loans held-in-portfolio 0.80 % 1.20 % 0.66 % 0.97 % 1.55 % 1.76 %
Provision for loan losses to net charge-offs [2] 1.10 x 1.00 x 1.35 x 0.96 x 0.71 x 0.70 x
 
BPPR
Annualized net charge-offs to average loans held-in-portfolio 1.16 % 1.62 % 0.90 % 1.26 % 1.64 % 1.90 %
Provision for loan losses to net charge-offs [2] 1.17 x 1.05 x 1.78 x 1.22 x 0.89 x 0.82 x
 
BPNA
Annualized net charge-offs (recoveries) to average loans held-in-portfolio (0.19) % 0.01 % 1.33 %
Provision for loan losses to net charge-offs           N.M.           N.M.             0.11 x
[1] The legacy portfolio is comprised of commercial loans, construction loans and lease financings related to certain lending products exited by the Corporation as part of restructuring efforts carried out in prior years at the BPNA segment.
 
[2] Excluding provision for loan losses and net write-down related to the asset sale during the quarter ended March 31, 2013.
 

[3] Net write-downs for the quarter ended March 31, 2013 are related to loans sold.

 

N.M. - Not meaningful.

 

Popular, Inc.
Financial Supplement to First Quarter 2014 Earnings Release
Table K - Allowance for Loan Losses - Breakdown of General and Specific Reserves - CONSOLIDATED
(Unaudited)
 
                                 
31-Mar-14
(Dollars in thousands)     Commercial   Construction   Legacy [3]   Mortgage  

Lease
financing

  Consumer   Total [2]
Specific ALLL $ 30,892 $ 243 $ - $ 53,916 $ 672 $ 29,413 $ 115,136
Impaired loans [1] $ 334,975 $ 22,011 $ 3,710 $ 458,513 $ 2,455 $ 124,836 $ 946,500
Specific ALLL to impaired loans [1]   9.22 % 1.10 % - % 11.76 % 27.37 % 23.56 % 12.16 %
General ALLL $ 141,122 $ 5,059 $ 13,272 $ 109,047 $ 9,811 $ 149,128 $ 427,439
Loans held-in-portfolio, excluding impaired loans [1] $ 9,679,746 $ 154,755 $ 193,454 $ 6,210,863 $ 544,425 $ 3,882,034 $ 20,665,277
General ALLL to loans held-in-portfolio, excluding impaired loans [1]   1.46 % 3.27 % 6.86 % 1.76 % 1.80 % 3.84 % 2.07 %
Total ALLL $ 172,014 $ 5,302 $ 13,272 $ 162,963 $ 10,483 $ 178,541 $ 542,575
Total non-covered loans held-in-portfolio [1] $ 10,014,721 $ 176,766 $ 197,164 $ 6,669,376 $ 546,880 $ 4,006,870 $ 21,611,777
ALLL to loans held-in-portfolio [1]   1.72 % 3.00 % 6.73 % 2.44 % 1.92 % 4.46 % 2.51 %
[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, 2014 the general allowance on the covered loans amounted to $97.7 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-Dec-13
(Dollars in thousands)     Commercial   Construction   Legacy [3]   Mortgage  

Lease
financing

  Consumer   Total [2]
Specific ALLL $ 16,409 $ 177 $ - $ 55,667 $ 1,053 $ 30,200 $ 103,506
Impaired loans [1] $ 297,516 $ 22,486 $ 6,045 $ 452,073 $ 2,893 $ 127,703 $ 908,716
Specific ALLL to impaired loans [1]   5.52 % 0.79 % - % 12.31 % 36.40 % 23.65 % 11.39 %
General ALLL $ 158,573 $ 5,165 $ 13,704 $ 101,262 $ 9,569 $ 146,684 $ 434,957
Loans held-in-portfolio, excluding impaired loans [1] $ 9,739,669 $ 183,598 $ 205,090 $ 6,229,403 $ 540,868 $ 3,804,523 $ 20,703,151
General ALLL to loans held-in-portfolio, excluding impaired loans [1]   1.63 % 2.81 % 6.68 % 1.63 % 1.77 % 3.86 % 2.10 %
Total ALLL $ 174,982 $ 5,342 $ 13,704 $ 156,929 $ 10,622 $ 176,884 $ 538,463
Total non-covered loans held-in-portfolio [1] $ 10,037,185 $ 206,084 $ 211,135 $ 6,681,476 $ 543,761 $ 3,932,226 $ 21,611,867
ALLL to loans held-in-portfolio [1]   1.74 % 2.59 % 6.49 % 2.35 % 1.95 % 4.50 % 2.49 %
[1] Excludes covered loans acquired on the Westernbank FDIC-assisted transaction.
 
[2] Excludes covered loans acquired on the Westernbank FDIC-assisted transaction. As of December 31, 2013 the general allowance on the covered loans amounted to $101.8 million, while the specific reserve amounted to $0.3 million.
 
[3] The legacy portfolio is comprised of commercial loans, construction loans and lease financings related to certain lending products exited by the Corporation as part of restructuring efforts carried out in prior years at the BPNA reportable segment.
 

                                   
Variance
(Dollars in thousands)         Commercial   Construction   Legacy   Mortgage  

Lease
financing

  Consumer   Total
Specific ALLL         $ 14,483   $ 66   $ -   $ (1,751)   $ (381)   $ (787)   $ 11,630
Impaired loans         $ 37,459   $ (475)   $ (2,335)   $ 6,440   $ (438)   $ (2,867)   $ 37,784
General ALLL $ (17,451) $ (106) $ (432) $ 7,785 $ 242 $ 2,444 $ (7,518)
Loans held-in-portfolio, excluding impaired loans         $ (59,923)   $ (28,843)   $ (11,636)   $ (18,540)   $ 3,557   $ 77,511   $ (37,874)
Total ALLL $ (2,968) $ (40) $ (432) $ 6,034 $ (139) $ 1,657 $ 4,112
Total non-covered loans held-in-portfolio         $ (22,464)   $ (29,318)   $ (13,971)   $ (12,100)   $ 3,119   $ 74,644   $ (90)
 

Popular, Inc.
Financial Supplement to First Quarter 2014 Earnings Release
Table L - Allowance for Loan Losses - Breakdown of General and Specific Reserves - PUERTO RICO OPERATIONS
(Unaudited)
             
31-Mar-14
Puerto Rico
(In thousands)   Commercial   Construction   Mortgage  

Lease
financing

  Consumer   Total
Allowance for credit losses:
Specific ALLL non-covered loans $ 30,892 $ 243 $ 36,322 $ 672 $ 29,170 $ 97,299
  General ALLL non-covered loans   93,242   4,836   101,474   9,811   128,078   337,441
ALLL - non-covered loans   124,134   5,079   137,796   10,483   157,248   434,740
Specific ALLL covered loans - - - - - -
  General ALLL covered loans   38,589   15,966   38,848   -   4,370   97,773
ALLL - covered loans   38,589   15,966   38,848   -   4,370   97,773
Total ALLL   $ 162,723   $ 21,045   $ 176,644   $ 10,483   $ 161,618   $ 532,513
Loans held-in-portfolio:
Impaired non-covered loans $ 304,531 $ 22,011 $ 406,053 $ 2,455 $ 122,291 $ 857,341
  Non-covered loans held-in-portfolio, excluding impaired loans   6,138,467   119,592   5,018,808   544,425   3,284,286   15,105,578
Non-covered loans held-in-portfolio   6,442,998   141,603   5,424,861   546,880   3,406,577   15,962,919
Impaired covered loans 5,540 - - - - 5,540
  Covered loans held-in-portfolio, excluding impaired loans   1,786,145   127,444   907,069   -   43,856   2,864,514
Covered loans held-in-portfolio   1,791,685   127,444   907,069   -   43,856   2,870,054
Total loans held-in-portfolio   $ 8,234,683   $ 269,047   $ 6,331,930   $ 546,880   $ 3,450,433   $ 18,832,973
 
31-Dec-13
Puerto Rico
(In thousands)   Commercial   Construction   Mortgage  

Lease
financing

  Consumer   Total
Allowance for credit losses:
Specific ALLL non-covered loans $ 16,409 $ 177 $ 38,034 $ 1,053 $ 29,920 $ 85,593
  General ALLL non-covered loans   111,741   4,918   92,296   9,569   122,658   341,182
ALLL - non-covered loans   128,150   5,095   130,330   10,622   152,578   426,775
Specific ALLL covered loans 153 140 - - - 293
  General ALLL covered loans   42,045   19,351   36,006   -   4,397   101,799
ALLL - covered loans   42,198   19,491   36,006   -   4,397   102,092
Total ALLL   $ 170,348   $ 24,586   $ 166,336   $ 10,622   $ 156,975   $ 528,867
Loans held-in-portfolio:
Impaired non-covered loans $ 245,380 $ 16,823 $ 399,347 $ 2,893 $ 125,342 $ 789,785
  Non-covered loans held-in-portfolio, excluding impaired loans   6,220,210   144,348   5,001,332   540,868   3,191,296   15,098,054
Non-covered loans held-in-portfolio   6,465,590   161,171   5,400,679   543,761   3,316,638   15,887,839
Impaired covered loans 20,945 - - - - 20,945
  Covered loans held-in-portfolio, excluding impaired loans   1,791,859   190,127   934,373   -   47,123   2,963,482
Covered loans held-in-portfolio   1,812,804   190,127   934,373   -   47,123   2,984,427
Total loans held-in-portfolio   $ 8,278,394   $ 351,298   $ 6,335,052   $ 543,761   $ 3,363,761   $ 18,872,266
 
                           
Variance
(In thousands)   Commercial   Construction   Mortgage  

Lease
financing

  Consumer   Total
Allowance for credit losses:
Specific ALLL non-covered loans $ 14,483 $ 66 $ (1,712) $ (381) $ (750) $ 11,706
  General ALLL non-covered loans   (18,499)   (82)   9,178   242   5,420   (3,741)
ALLL - non-covered loans   (4,016)   (16)   7,466   (139)   4,670   7,965
Specific ALLL covered loans (153) (140) - - - (293)
  General ALLL covered loans   (3,456)   (3,385)   2,842   -   (27)   (4,026)
ALLL - covered loans   (3,609)   (3,525)   2,842   -   (27)   (4,319)
Total ALLL   $ (7,625)   $ (3,541)   $ 10,308   $ (139)   $ 4,643   $ 3,646
Loans held-in-portfolio:
Impaired non-covered loans $ 59,151 $ 5,188 $ 6,706 $ (438) $ (3,051) $ 67,556
  Non-covered loans held-in-portfolio, excluding impaired loans   (81,743)   (24,756)   17,476   3,557   92,990   7,524
Non-covered loans held-in-portfolio   (22,592)   (19,568)   24,182   3,119   89,939   75,080
Impaired covered loans (15,405) - - - - (15,405)
  Covered loans held-in-portfolio, excluding impaired loans   (5,714)   (62,683)   (27,304)   -   (3,267)   (98,968)
Covered loans held-in-portfolio   (21,119)   (62,683)   (27,304)   -   (3,267)   (114,373)
Total loans held-in-portfolio   $ (43,711)   $ (82,251)   $ (3,122)   $ 3,119   $ 86,672   $ (39,293)
 

Popular, Inc.
Financial Supplement to First Quarter 2014 Earnings Release
Table M - Allowance for Loan Losses - Breakdown of General and Specific Reserves - U.S. MAINLAND OPERATIONS
(Unaudited)
             
31-Mar-14
U.S. Mainland
(In thousands)   Commercial   Construction   Legacy   Mortgage   Consumer   Total
Allowance for credit losses:
Specific ALLL $ - $ - $ - $ 17,594 $ 243 $ 17,837
  General ALLL   47,880   223   13,272   7,573   21,050   89,998
Total ALLL   $ 47,880   $ 223   $ 13,272   $ 25,167   $ 21,293   $ 107,835
Loans held-in-portfolio:
Impaired loans $ 30,444 $ - $ 3,710 $ 52,460 $ 2,545 $ 89,159
  Loans held-in-portfolio, excluding impaired loans   3,541,279   35,163   193,454   1,192,055   597,748   5,559,699
Total loans held-in-portfolio   $ 3,571,723   $ 35,163   $ 197,164   $ 1,244,515   $ 600,293   $ 5,648,858
 
 
31-Dec-13
U.S. Mainland
(In thousands)   Commercial   Construction   Legacy   Mortgage   Consumer   Total
Allowance for credit losses:
Specific ALLL $ - $ - $ - $ 17,633 $ 280 $ 17,913
  General ALLL   46,832   247   13,704   8,966   24,026   93,775
Total ALLL   $ 46,832   $ 247   $ 13,704   $ 26,599   $ 24,306   $ 111,688
Loans held-in-portfolio:
Impaired loans $ 52,136 $ 5,663 $ 6,045 $ 52,726 $ 2,361 $ 118,931
  Loans held-in-portfolio, excluding impaired loans   3,519,459   39,250   205,090   1,228,071   613,227   5,605,097
Total loans held-in-portfolio   $ 3,571,595   $ 44,913   $ 211,135   $ 1,280,797   $ 615,588   $ 5,724,028
 
                           
Variance
(In thousands)   Commercial   Construction   Legacy   Mortgage   Consumer   Total
Allowance for credit losses:
Specific ALLL $ - $ - $ - $ (39) $ (37) $ (76)
  General ALLL   1,048   (24)   (432)   (1,393)   (2,976)   (3,777)
Total ALLL   $ 1,048   $ (24)   $ (432)   $ (1,432)   $ (3,013)   $ (3,853)
Loans held-in-portfolio:
Impaired loans $ (21,692) $ (5,663) $ (2,335) $ (266) $ 184 $ (29,772)
  Loans held-in-portfolio, excluding impaired loans   21,820   (4,087)   (11,636)   (36,016)   (15,479)   (45,398)
Total loans held-in-portfolio   $ 128   $ (9,750)   $ (13,971)   $ (36,282)   $ (15,295)   $ (75,170)
 

Popular, Inc.  
Financial Supplement to First Quarter 2014 Earnings Release
Table N - Reconciliation to GAAP Financial Measures
(Unaudited)
 
 
(In thousands, except share or per share information)   31-Mar-14   31-Dec-13   31-Mar-13  
Total stockholders’ equity $ 4,745,747 $ 4,626,150 $ 3,971,143
Less: Preferred stock (50,160) (50,160) (50,160)
Less: Goodwill (647,757) (647,757) (647,757)
Less: Other intangibles   (42,625)   (45,132)   (51,827)  
Total tangible common equity   $ 4,005,205   $ 3,883,101   $ 3,221,399  
Total assets $ 36,744,162 $ 35,749,333 $ 36,942,714
Less: Goodwill (647,757) (647,757) (647,757)
Less: Other intangibles   (42,625)   (45,132)   (51,827)  
Total tangible assets   $ 36,053,780   $ 35,056,444   $ 36,243,130  
Tangible common equity to tangible assets 11.11 % 11.08 % 8.89 %
Common shares outstanding at end of period 103,455,535 103,397,699 103,228,615
Tangible book value per common share   $ 38.71   $ 37.56   $ 31.21  
 
 
 
(In thousands)   31-Mar-14   31-Dec-13   31-Mar-13  
Common stockholders’ equity $ 4,695,587 $ 4,575,990 $ 3,920,983
Less: Unrealized losses (gains) on available-for-sale securities, net of tax[1] 22,255 48,344 (130,562)
Less: Disallowed deferred tax assets[2] (624,364) (626,570) (433,543)
Less: Disallowed goodwill and other intangible assets (639,158) (643,185) (658,383)
Less: Aggregate adjusted carrying value of all non-financial equity investments (1,499) (1,442) (1,331)
Add: Pension liability adjustment, net of tax and accumulated net gains (losses) on cash flow hedges[3]
  103,524   104,302   222,016  
Total Tier 1 common equity   $ 3,556,345   $ 3,457,439   $ 2,919,180  
Tier 1 common equity to risk-weighted assets   15.07 % 14.83 % 12.36 %
 
[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 $154 million of the Corporation’s $774 million of net deferred tax assets classified as other assets at March 31, 2014 (December 31, 2013 - $167 million and $762 million, respectively; March 31, 2013 - $135 million and $608 million, respectively), were included without limitation in regulatory capital pursuant to the risk-based capital guidelines, while approximately $624 million of such assets at March 31, 2014 (December 31, 2013 - $627 million; March 31, 2013 - $434 million) exceeded the limitation imposed by these guidelines and, as “disallowed deferred tax assets”, were deducted in arriving at Tier 1 capital. The remaining $(4) million of the Corporation’s other net deferred tax components at March 31, 2014 (December 31, 2013 - $(32) million; March 31, 2013 - $39 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 First Quarter 2014 Earnings Release
Table O - Financial Information - Westernbank Covered Loans
(Unaudited)
 
 

Revenues

Quarters ended
(In thousands)   31-Mar-14   31-Dec-13   Variance
Interest income on covered loans   $ 81,098   $ 86,794   $ (5,696)
FDIC loss share expense:
Amortization of indemnification asset (48,946) (45,193) (3,753)
80% mirror accounting on credit impairment losses [1] 15,090 7,125 7,965
80% mirror accounting on reimbursable expenses 12,745 5,430 7,315

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

(4,392) (1,255) (3,137)
Change in true-up payment obligation 1,168 (3,420) 4,588
Other   129   149   (20)
Total FDIC loss share expense   (24,206)   (37,164)   12,958
Total revenues   56,892   49,630   7,262
Provision for loan losses   25,714   8,907   16,807
Total revenues less provision for loan losses   $ 31,178   $ 40,723   $ (9,545)

[1] Reductions in expected cash flows for ASC 310-30 loans, which may impact the provision for loan losses, may consider reductions in both principal and interest cash flow expectations. The amount covered under the FDIC loss sharing agreements for interest not collected from borrowers is limited under the agreements (approximately 90 days); accordingly, these amounts are not subject fully to the 80% mirror accounting.

 
 

Non-personnel operating expenses

Quarters ended
(In thousands)   31-Mar-14   31-Dec-13   Variance
Professional fees $ 4,198 $ 5,865 $ (1,667)
OREO expenses 4,029 4,206 (177)
Other operating expenses   4,796   2,679   2,117
Total operating expenses   $ 13,023   $ 12,750   $ 273
Expense reimbursements from the FDIC may be recorded with a time lag, since these are claimed upon the event of loss or charge-off of the loans which may occur in a subsequent period.
 
 

Quarterly average assets

Quarters ended
(In millions)   31-Mar-14   31-Dec-13   Variance
Covered loans $ 2,934 $ 3,017 $ (83)
FDIC loss share asset   899   1,123   (224)

         

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

 
Quarters ended
      31-Mar-14   31-Dec-13
(In thousands)   Accretable yield  

Carrying amount
of loans

  Accretable yield  

Carrying amount
of loans

Beginning balance $ 1,309,205 $ 2,827,947 $ 1,309,618 $ 2,891,049
Accretion (79,118) 79,118 (83,653) 83,653
Changes in expected cash flows (11,875) - 83,240 -
Collections / charge-offs   -   (173,943)   -   (146,755)
Ending balance 1,218,212 2,733,122 1,309,205 2,827,947
  Allowance for loan losses - ASC 310-30 covered loans   -   (90,371)   -   (93,915)
Ending balance, net of allowance for loan losses   $ 1,218,212   $ 2,642,751   $ 1,309,205   $ 2,734,032
 
 

Activity in the carrying amount of the FDIC indemnity asset

 
Quarters ended
(In thousands)       31-Mar-14       31-Dec-13
Balance at beginning of period $ 948,608 $ 1,324,711
Amortization (48,946) (45,193)
Credit impairment losses to be covered under loss sharing agreements 15,090 7,125
Reimbursable expenses to be covered under loss sharing agreements 12,745 5,430
Net payments to (from) FDIC under loss sharing agreements       (93,776)       (343,465)
Balance at end of period       $ 833,721       $ 948,608
 
 

Activity in the remaining FDIC loss share asset amortization

 
Quarters ended
(In thousands)       31-Mar-14       31-Dec-13
Balance at beginning of period $ 103,691 $ 122,496
Amortization (48,946) (45,193)
Impact of lower projected losses       16,889       26,388
Balance at end of period       $ 71,634       $ 103,691