Popular, Inc. Announces Fourth Quarter Financial Results

  • Reports net income of $52.9 million for the quarter; from continuing operations net income of $43.8 million and adjusted net income of $80.8 million
  • Net loss of $309.5 million for the year ended December 31, 2014; from continuing operations net loss of $186.5 million and adjusted net income of $304.8 million
  • Adjusted net interest margin of 4.70% in Q4 2014 vs. 4.64% in Q3 2014
  • Credit Quality (excluding covered loans):
    • Non-performing loans held-in-portfolio (NPLs) increased slightly by $3.4 million, or 0.6% from Q3 2014; NPLs to loans ratio remained unchanged at 3.2% in Q4 2014;
    • Net charge-offs (NCOs) were 1.04% of average loans held-in-portfolio vs. 0.83% in Q3 2014; NCOs increased by $9.7 million quarter over quarter;
    • Allowance for loan losses of $519.7 million vs. $521.7 million in Q3 2014; Allowance for loan losses to loans held-in-portfolio at 2.68% vs. 2.69% in Q3 2014.
  • Completed the sale of its California operations
  • Common Equity Tier 1 ratio of 15.92% and Tangible Book Value per Share of $35.93 at December 31, 2014

SAN JUAN, Puerto Rico--()--Popular, Inc. (the “Corporation” or “Popular”) (NASDAQ:BPOP) reported net income of $52.9 million for the quarter. Net income for continued operations of $43.8 million and adjusted net income of $80.8 million for the quarter ended December 31, 2014, compared to net income from continuing operations of $32.8 million and adjusted net income of $81.7 million for the quarter ended September 30, 2014.

Mr. Richard L. Carrión, Chairman of the Board and Chief Executive Officer, said, "While there were a number of significant transactions that impacted these results, we are satisfied that our top line remains strong and our credit metrics continue to head in the right direction in spite of the challenging economic conditions in our principal market. The sale of our California operations in the period caps a transformational year for the Corporation which included the restructuring of our US operations and the repayment of our TARP funds without issuing additional equity. We continue to focus on improving our operational and financial metrics and are well positioned for an eventual improvement in the Puerto Rico economy."

Earnings Highlights
         
(Unaudited)   Quarters ended Years ended
(Dollars in thousands, except per share information)   31-Dec-14   30-Sep-14   31-Dec-13 31-Dec-14   31-Dec-13
Net interest income $ 326,861 $ 326,421 $ 354,507 $ 945,072 $ 1,344,574
Provision for loan losses – non-covered loans 51,637 68,166 49,927 223,999 536,710
Provision (reversal of provision) for loan losses – covered loans [1]     (3,646 )     12,463       8,907     46,135       69,396  
Net interest income after provision for loan losses 278,870 245,792 295,673 674,938 738,468
FDIC loss share expense (18,693 ) (4,864 ) (37,164 ) (103,024 ) (82,051 )
Other non-interest income 128,588 129,194 222,440 496,070 873,064
Operating expenses     330,006       310,640       304,609     1,193,684       1,221,990  
Income (loss) from continuing operations before income tax 58,759 59,482 176,340 (125,700 ) 307,491
Income tax expense (benefit)     14,995       26,667       25,162     60,802       (251,327 )
Income (loss) from continuing operations   $ 43,764     $ 32,815     $ 151,178   $ (186,502 )   $ 558,818  
Income (loss) from discontinued operations, net of tax   $ 9,086     $ 29,758     $ 11,853   $ (122,980 )   $ 40,509  
Net income (loss)   $ 52,850     $ 62,573     $ 163,031   $ (309,482 )   $ 599,327  
Net income (loss) applicable to common stock   $ 51,919     $ 61,643     $ 162,100   $ (313,205 )   $ 595,604  
Net income (loss) per common share from continuing operations - Basic   $ 0.41     $ 0.31     $ 1.46   $ (1.85 )   $ 5.41  
Net income (loss) per common share from continuing operations - Diluted   $ 0.41     $ 0.31     $ 1.46   $ (1.85 )   $ 5.39  
Net income (loss) per common share from discontinued operations - Basic   $ 0.09     $ 0.29     $ 0.12   $ (1.20 )   $ 0.39  
Net income (loss) per common share from discontinued operations - Diluted   $ 0.09     $ 0.29     $ 0.11   $ (1.20 )   $ 0.39  
 
[1] Covered loans represent loans acquired in the Westernbank FDIC-assisted transaction that are covered under FDIC loss sharing agreements.
 

Significant events

  • During the fourth quarter of 2014, the Corporation completed the previously announced sale of its California regional operations, which resulted in a gain of $8.1 million, net of transaction costs.

The Corporation continues its strategy of relocating certain back office operations of BPNA to Puerto Rico and New York. The Corporation incurred $13.9 million in restructuring charges during the fourth quarter of 2014 and a total of $26.7 million during the year ended December 31, 2014. Additional restructuring charges amounting to approximately $22.0 million are expected to be incurred in the year 2015, comprised of $13.0 million in personnel related costs and $9.0 million in lease cancelations and other restructuring costs.

During the third quarter of 2014, the Corporation refinanced approximately $638 million in long term structured repos in the U.S. with a yield of 4.41% and replaced them with lower cost short term repos of a similar amount. As previously disclosed, the fees associated with the refinancing of these repos were $39.7 million, of which $20.7 million were recorded as interest expense during the third quarter of 2014, and approximately $19.0 million were recorded during the fourth quarter of 2014.

The decision to sell three of its U.S. regional operations resulted in the discontinuance of each of these respective operations. As required by US GAAP, current and prior periods presented in the consolidated statement of operations as well as financial information covering income and expense amounts presented in this earnings release has been retrospectively adjusted for the impact of the discontinued operations for comparative purposes. The consolidated statement of financial condition and related financial information for prior periods included in this earnings release do not reflect the reclassification of BPNA’s assets and liabilities to discontinued operations. Refer to Table P for a detail of the net loss, assets and liabilities from the discontinued operations. Also, refer to Table Q for details of the restructuring charges incurred during the quarter ended December 31, 2014.

       
    Quarter ended
(Unaudited) 31-Dec-14
(In thousands)  

Actual Results (US GAAP)

  BPNA Reorganization [2]   Other Adjustments   Adjusted Results (Non-GAAP)
Net interest income $ 326,861 $ (18,591 ) $ - $ 345,452
Provision for loan losses – non-covered loans 51,637 878 - 50,759
Provision (reversal of provision) for loan losses – covered loans [1]     (3,646 )     -       -       (3,646 )
Net interest income (expense) after provision for loan losses 278,870 (19,469 ) - 298,339
Net gain (loss) on sale of loans, including valuation adjustments on loans held-for-sale 10,946 1,684 - 9,262
FDIC loss share expense (18,693 ) - - (18,693 )
Other non-interest income 117,642 - - 117,642
Personnel costs 110,736 -

 

2,974[3]

107,762
Net occupancy expenses 23,877

 

1,895[4]

21,982
Loss on early extinguishment of debt 532 532 - -
Restructuring costs 13,861 13,861 - -
Other operating expenses     181,000       -       -       181,000  
Income (loss) from continuing operations before income tax 58,759 (32,178 ) (4,869 ) 95,806
Income tax expense     14,995       -       -       14,995  
Income (loss) from continuing operations   $ 43,764     $ (32,178 )   $ (4,869 )   $ 80,811  
 
[1] Covered loans represent loans acquired in the Westernbank FDIC-assisted transaction that are covered under FDIC loss sharing agreements.
[2] Includes loss on the refinancing of structured repos for $18.6 million recorded as interest expense, impact on provision for loan losses related to NPL sales of $878 thousand, gain on bulk sales of NPLs of $1.7 million and restructuring cost of $13.9 million.
[3] Represents the impact of the compensation package granted upon separation of an officer of the Corporation equal to approximately $3.0 million.
[4] Represents the net loss on the early cancellation of a lease at BPNA of $1.9 million.
 

         
    Quarter ended
(Unaudited) 30-Sep-14
(In thousands)   Actual Results (US GAAP)   BPNA Reorganization [2]   Income Tax Adjustments [3]   Indemnification Asset Adjustment [4]   Adjusted Results (Non-GAAP)
Net interest (expense) income $ 326,421 $ (20,663 ) $ - $ - $ 347,084
Provision for loan losses – non-covered loans 68,166 11,950 - - 56,216
Provision for loan losses – covered loans [1]     12,463       -       -       -     12,463  
Net interest (expense) income after provision for loan losses 245,792 (32,613 ) - - 278,405
Net gain (loss) on sale of loans, including valuation adjustments on loans held-for-sale 15,593 - - - 15,593
FDIC loss share expense (4,864 ) - - 15,046 (19,910 )
Other non-interest income 113,601 - - - 113,601
Personnel costs 104,542 - 104,542
Net occupancy expenses 21,203 - 21,203
Loss on early extinguishment of debt - - - - -
Restructuring costs 8,290 8,290 - - -
Other operating expenses     176,605       -       -       -     176,605  
Income (loss) from continuing operations before income tax 59,482 (40,903 ) - 15,046 85,339
Income tax (benefit) expense     26,667       -       20,048       3,009     3,610  
Income (loss) from continuing operations   $ 32,815     $ (40,903 )   $ (20,048 )   $ 12,037   $ 81,729  
 
[1] Covered loans represent loans acquired in the Westernbank FDIC-assisted transaction that are covered under FDIC loss sharing agreements.
[2] Includes losses on bulk sales and reclassifications to loans held-for-sale of classified and legacy loans for an aggregated net loss $12.0 million, loss on the refinancing of structured repos for $20.7 million recorded as interest expense and restructuring cost of $8.3 million.
[3] On July 1, 2014, the Government of Puerto Rico approved an amendment to the Internal Revenue Code, which, among other things, changed the income tax rate for capital gains from 15% to 20%. As a result, the Corporation recognized an income tax expense of $20.0 million, mainly related to the deferred tax liability associated with the portfolio acquired from Westernbank.
[4] The FDIC indemnity asset amortization included a positive adjustment of $15.0 million to reverse the impact of accelerated amortization expense recorded in prior periods.
 

 
    Quarters ended
(Unaudited) Adjusted Results Non-GAAP  
(In thousands)   31-Dec-14   30-Sep-14   Variance
Net interest income $ 345,452   $ 347,084 $ (1,632 )
Provision for loan losses – non-covered loans 50,759 56,216 (5,457 )
Provision (reversal of provision) for loan losses – covered loans [1]     (3,646 )     12,463       (16,109 )
Net interest income after provision for loan losses 298,339 278,405 19,934
Net gain (loss) on sale of loans, including valuation adjustments on loans held-for-sale 9,262 15,593 (6,331 )
FDIC loss share expense (18,693 ) (19,910 ) 1,217
Other non-interest income 117,642 113,601 4,041
Personnel costs 107,762 104,542 3,220
Net occupancy expenses 21,982 21,203 779
Loss on early extinguishment of debt - - -
Restructuring costs - - -
Other operating expenses     181,000       176,605       4,395  
Income from continuing operations before income tax 95,806 85,339 10,467
Income tax expense     14,995       3,610       11,385  
Income from continuing operations   $ 80,811     $ 81,729     $ (918 )
 
[1] Covered loans represent loans acquired in the Westernbank FDIC-assisted transaction that are covered under FDIC loss sharing agreements.
 

Net interest income

For the quarter ended December 31, 2014, the Corporation had a net interest income of $326.9 million. Excluding the impact of the $18.6 million expense related to the refinancing of structured repos, the adjusted net interest income was $345.5 million compared to an adjusted net interest income of $347.1 million for the previous quarter. Net interest margin was 4.45% for the fourth quarter of 2014. The adjusted net interest margin was 4.70%, compared to an adjusted net interest margin of 4.64% for the third quarter of 2014. While net interest income decreased $1.6 million, the net interest margin reflects an increase of six basis points. The increase in net interest margin is mainly related to:

  • Cost of total borrowings decreased by twenty six basis points mainly driven by the refinancing of $638 million in structured repos at a 4.41% rate to short term, lower cost repos at the end of the third quarter of 2014.
  • An increase of twelve basis points in commercial loans yield, mainly in the Puerto Rico operations due to originations of higher yielding assets during the fourth quarter.
  • Interest bearing deposits costs dropped by two basis points coupled with a lower volume of interest bearing deposits and a higher volume of non interest bearing deposits.

These positive variances in net interest margin were offset in part by:

  • A decrease in volume and yield of the covered loans portfolio, mainly driven by the portfolio amortization, loan resolutions and the impact of the quarterly recast process. Refer to Table O for schedule of the accretable yield for covered loans accounted for under ASC 310-30.

BPPR’s net interest margin was 5.15%, a decrease of ten basis points from the previous quarter. Net interest income amounted to $311.2 million for the quarter ended December 31, 2014, compared with $315.7 million for the previous quarter. The decrease in the net interest income was mainly due to the above mentioned decrease in interest income from covered loans and lower interest income from investment securities, partially offset by higher income from commercial loans.

BPNA earned $31.2 million in net interest income for the quarter ended December 31, 2014. Excluding the impact of the structured repos refinancing, the net interest income was $49.8 million, compared with an adjusted net interest income of $47.1 million in the previous quarter. The net interest margin was 2.40% for the quarter. The adjusted net interest margin, excluding the impact of the structured repos refinancing, for the quarter was 3.82%, compared to an adjusted net interest margin of 3.23% in the previous quarter. The increase in net interest income was mostly the result of a lower cost of borrowings due to the refinancing of structured repos, discussed above, partially offset by lower income from investment securities.

Non-interest income

Non-interest income was $109.9 million for the fourth quarter of 2014, a decrease of $14.4 million when compared with the third quarter. Excluding the $1.7 million impact of the gain on bulk sales of NPLs during the fourth quarter as part of the BPNA reorganization, and the effect of the FDIC indemnity asset amortization adjustment of $15.0 million during the third quarter, non-interest income decreased by $1.1 million when compared to the third quarter of 2014, driven primarily by the following:

  • Lower service charges on deposit accounts by $1.1 million mostly at BPPR due to lower volume on Public Sector accounts.
  • Lower mortgage banking activities income by $5.7 million mainly due to higher unfavorable valuation adjustments on mortgage servicing rights of $3.7 million at the BPPR segment. Refer to Table F for additional details on mortgage banking activities.
  • Lower net gain on sale of loans, including valuation adjustments on loans held-for-sale by $6.3 million due to lower commercial NPLs sales, as part of workout activities.

These negative variances were partially offset by:

  • Higher other service fees by $6.3 million mostly due to higher contingent insurance commission revenues, which are realized during the fourth quarter. Refer to Table F for a breakdown of other service fees.
  • Positive variance in net gains/(losses) on investment securities by $2.7 million mainly due to the third quarter loss of $1.8 million related to the sale of $94.2 million in available-for-sale securities at BPNA.
  • Lower provision for loans sold with credit recourse by $2.7 million.
  • Lower FDIC loss-share expense by $1.2 million, driven by lower amortization of the FDIC indemnification asset by $13.6 million, and higher mirror accounting on reimbursable expenses by $3.2 million, offset by a negative variance in the mirror accounting on credit impairment losses of $13.2 million due to reserve releases and a negative variance in the change in fair value of the true up payment obligation of $3.9 million. See additional details about covered portfolio and FDIC indemnity asset in Table O.

Refer to Table B for further details.

Financial Impact of FDIC-Assisted Transaction
         
(Unaudited)   Quarters ended Years ended
(In thousands)   31-Dec-14   30-Sep-14   31-Dec-13 31-Dec-14   31-Dec-13
 

Income Statement

Interest income on covered loans $ 61,285 $ 68,251 $ 86,794 $ 293,609 $ 300,745
Total FDIC loss share expense (18,693 ) (4,864 ) (37,164 ) (103,024 ) (82,051 )
Other non-interest income - - - - 593
Provision for loan losses     (3,646 )     12,463       8,907     46,135       69,396  
Total revenues less provision for loan losses   $ 46,238     $ 50,924     $ 40,723   $ 144,450     $ 149,891  
 

Balance Sheet

Loans covered under loss-sharing agreements with FDIC $ 2,542,662 $ 2,654,263 $ 2,984,427
FDIC loss share asset 542,454 681,106 948,608
FDIC true-up payment obligation     129,304       126,473       127,513  
 

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

Operating expenses

Operating expenses increased by $19.4 million when compared with the third quarter. Excluding the impact of the significant events detailed in the Adjusted Results (Non-GAAP) tables above, operating expenses increased by $8.4 million compared to the third quarter of 2014, driven primarily by:

  • Higher professional fees by $12.7 million, mainly at BPPR due to higher legal fees by $5.7 million mostly as a result of the FDIC arbitration proceedings and other corporate matters completed during the quarter, an increase in technology services by $3.9 million, an increase in consulting and other professional services by $1.9 million and an increase in collection expenses by $1.1 million.
  • Higher personnel cost by $3.2 million, mainly due to salaries expense as a result of bonus and incentives compensation.
  • Higher net occupancy expense by $0.8 million, mainly at BPNA due to increase in property taxes.

These increases were partially offset by:

  • Lower other operating expenses by $7.8 million, mainly due to lower provision for unused commitments.
  • Lower other operating taxes by $1.0 million, mainly due to lower personal property taxes at BPPR.

Non-personnel credit-related costs, which include collections, appraisals, credit related fees, and OREO expenses, amounted to $27.2 million for the fourth quarter of 2014, compared with $25.8 million for the third quarter of 2014. The increase was principally due to higher collections expenses at BPPR.

Full-time equivalent employees (“FTEs”), including discontinued operations, were 7,752 as of December 31, 2014, compared with 7,848 as of September 30, 2014, and 8,059 as of December 31, 2013.

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

Income taxes

Income tax expense amounted to $15.0 million for the fourth quarter of 2014, compared to $26.7 million, or $3.6 million on an adjusted basis, for the previous quarter. The effective income tax rate for the fourth quarter of 2014, on an adjusted basis, was 16%. Refer to earnings highlights section above for a description of adjusted results.

On July 1, 2014, the Government of Puerto Rico approved an amendment to the Internal Revenue Code, which, among other things, changed the income tax rate for capital gains from 15% to 20%. As a result, the Corporation recognized an income tax expense of approximately $20.0 million during the third quarter of 2014, mainly related to the deferred tax liability associated with the portfolio acquired from Westernbank.

During the third quarter of 2014, the Corporation recorded a favorable adjustment of approximately $6.1 million in connection with filing its tax returns for the year 2013. Also, the Corporation reversed approximately $3.6 million of reserves for uncertain tax positions due to the expiration of the statute of limitations in the Puerto Rico operations. Excluding these adjustments, the adjusted income tax expense would have been $13.3 million, for an effective tax rate of approximately 16% on the adjusted pre-tax income.

Credit Quality

The following table presents non-performing assets information:

Non-Performing Assets
     
(Unaudited)
(In thousands)   31-Dec-14   30-Sep-14   31-Dec-13
Total non-performing loans held-in-portfolio, excluding covered loans $ 625,338 $ 621,945 $ 597,948
Non-performing loans held-for-sale 18,899 19,728 1,092
Other real estate owned (“OREO”), excluding covered OREO     135,500       135,256       135,501  
Total non-performing assets, excluding covered assets 779,737 776,929 734,541
Covered loans and OREO    

148,099

      166,533       197,388  
Total non-performing assets   $

927,836

    $ 943,462     $ 931,929  
Net charge-offs for the quarter (excluding covered loans)   $ 50,187     $ 40,469     $ 35,366  
 
 
Ratios (excluding covered loans):
Non-covered loans held-in-portfolio (1) $ 19,404,451 $ 19,359,216 $ 21,611,866
Non-performing loans held-in-portfolio to loans held-in-portfolio (1) 3.22 % 3.21 % 2.77 %
Allowance for loan losses to loans held-in-portfolio 2.68 2.69 2.49
Allowance for loan losses to non-performing loans, excluding loans held-for-sale     83.11       83.88       90.05  
[1] During the quarter ended June 30, 2014 approximately $1.8 billion in loans held-in-portfolio were reclassified to the discontinued operations, of which $48 thousand were in non-performing status as of September 30, 2014.
 
Refer to Table H for additional information.
         
Provision for Loan Losses
 
(Unaudited)   Quarters ended Years ended
(In thousands)   31-Dec-14   30-Sep-14   31-Dec-13 31-Dec-14   31-Dec-13
Provision (reversal) for loan losses - non-covered loans:
BPPR $ 52,206 $ 61,868 $ 62,658 $ 242,849 $ 547,886
BPNA     (569 )     6,298     (12,731 )   (18,850 )     (11,176 )
Total provision for loan losses - non-covered loans     51,637       68,166     49,927     223,999       536,710  
Provision for loan losses - covered loans     (3,646 )     12,463     8,907     46,135       69,396  
Total provision for loan losses   $ 47,991     $ 80,629   $ 58,834   $ 270,134     $ 606,106  
 

Credit Quality

The Corporation’s credit quality trends during the fourth quarter of 2014 were stable with the US regions exhibiting continued improvements and the Puerto Rico region remaining in line with the prior quarter. The BPNA segment continued to reflect strong performance led by the improved risk profile of its loan portfolios, further strengthened by the sale of certain non-performing and legacy assets. Notwithstanding, Puerto Rico’s fiscal and economic conditions continue to present a challenging operating environment.

The following presents credit quality performance for the fourth quarter of 2014 for the Corporation’s non-covered portfolios:

  • Inflows of NPLs held-in-portfolio, excluding consumer loans, increased by $83.4 million, or 65.2%, from the previous quarter, primarily due to additions from the BPPR commercial portfolio, of which $75.0 million results from one particular public sector borrower.
  • Non-performing loans held-in-portfolio increased slightly by $3.4 million, or 0.6%, during the quarter ended December 31, 2014, mainly driven by a $14.0 million increase in the BPPR segment, largely reflective of higher commercial inflows related to the aforementioned $75.0 million public sector borrower, offset by the return to accrual status of a previously disclosed $51.4 million addition during the first quarter of 2014. This increase was in part offset by a decline of $10.6 million in the BPNA segment, mostly related to commercial NPL resolutions and to the sale of certain mortgage non-performing loans as part of the ongoing US operations reorganization. At December 31, 2014, NPLs represented 3.2% of total loans held-in-portfolio, flat when compared to September 30, 2014.
  • Net charge-offs, excluding write-downs, totaled $50.2 million, or an annualized 1.04% of average non-covered loans held-in-portfolio in the fourth quarter of 2014, compared to $40.5 million, or 0.83%, in the third quarter of 2014. The increase of $9.7 million was primarily driven by a $13.8 million increase in the BPPR segment, in part due to higher commercial recoveries during the third quarter of 2014. For the fourth quarter of 2014, total write-downs amounted to $3.4 million, of which $1.4 million resulted from the sale of approximately $28.2 million of U.S. non-performing and legacy bulk loan sales. Refer to Table J for further information on net charge-offs and related ratios.
  • The allowance for loan losses remained essentially flat decreasing slightly by $2.0 million from the third quarter of 2014, prompted by a decline in the BPNA segment, primarily due to the aforementioned write-downs related to the sale of certain portfolios. The general and specific reserves related to non-covered loans totaled $379.6 million and $140.1 million, respectively, at quarter-end, compared with $389.7 million and $132.0 million, respectively, as of September 30, 2014. The ratio of the allowance for loan losses to loans held-in-portfolio stood at 2.68% in the fourth quarter of 2014, compared to 2.69% in the previous quarter.
  • The ratio of the allowance for loan losses to NPLs held-in-portfolio stood at 83.1%, compared to 83.9% in the previous quarter.
  • The provision for loan losses for the fourth quarter of 2014 totaled $51.6 million, decreasing by $16.5 million from the third quarter of 2014, due to reductions of $9.7 million and $6.9 million in the BPPR and the BPNA segments, respectively. The above mentioned write-downs of $3.4 million required a provision of $2.0 million, of which $0.9 million were associated with U.S. non-performing and legacy bulk loan sales.
     
Credit Quality by Segment
 
(Unaudited)
(In thousands)   Quarters ended
BPPR   31-Dec-14   30-Sep-14   31-Dec-13
Provision for loan losses $ 52,206 $ 61,868 $ 62,658
Net charge-offs 52,523 38,682

 

35,256

Total non-performing loans held-in-portfolio, excluding covered loans 606,238 592,229 447,255
Allowance / non-covered loans held-in-portfolio     3.07 %     3.09 %     2.69 %
 
    Quarters ended
BPNA   31-Dec-14   30-Sep-14   31-Dec-13
Provision for loan losses (reversal of provision) - Continuing operations $ (569 ) $ 6,298 $ (12,731 )
Provision for loan losses (reversal of provision) - Discontinued operations - - (2,198 )
Net charge-offs (recoveries) - Continuing operations (2,336 ) 1,787 (603 )
Net charge-offs (recoveries) - Discontinued operations - - 713
Total non-performing loans held-in-portfolio 19,100 29,716 150,693
Allowance / non-covered loans held-in-portfolio     0.88 %     0.91 %     1.95 %
 

BPPR Segment

  • Inflows of NPLs held-in-portfolio, excluding consumer loans, increased by $83.0 million, or 70.0%, from the third quarter of 2014, mostly driven by higher commercial inflows of $88.7 million, primarily associated with the addition of a $75.0 million public sector borrower, as mortgage NPL inflows declined by $6.2 million from the previous quarter.
  • Total non-performing loans held-in-portfolio increased by $14.0 million, or 2.4%, from the third quarter of 2014, mainly driven by higher commercial and mortgage NPLs of $12.8 million and $7.7 million, respectively, partially offset by a construction NPL decline of $5.3 million. As mentioned above, the commercial NPL increase was mainly driven by a $75.0 million public sector borrower, offset by the return to accrual status of the previously disclosed $51.4 million addition during the first quarter of 2014. At December 31, 2014, NPLs represented 3.8% of total loans held-in-portfolio, compared to 3.7% in the third quarter.
  • Net charge-offs were $52.5 million, increasing by $13.8 million from the third quarter of 2014, primarily reflecting higher commercial NCOs of $12.9 million. The uptick in commercial net charge-offs derived from an increase in charge-offs of $8.0 million primarily related to a discounted pay-off transaction, and from higher recoveries of $4.9 million during the third quarter of 2014. The ratio of net charge-offs to average loans held-in-portfolio increased to 1.33% on an annualized basis from 0.98% in the previous quarter.
  • The allowance for loan losses remained flat at $489.1 million, or 3.1%, as a percentage of loans held-in-portfolio. The ratio of the allowance for loan losses to NPLs held-in-portfolio stood at 80.7%, compared to 82.6% in the previous quarter.
  • The provision for loan losses for the fourth quarter of 2014 amounted to $52.2 million, or 99% of net charge offs, decreasing by $9.7 million from the previous quarter. This decrease was predominantly driven by a higher quarter over quarter reserve increase during the third quarter of 2014, combined with the aforementioned NCO activity.

BPNA Segment

  • Total NPLs held-in-portfolio decreased by $10.6 million, or 35.7%, from the third quarter of 2014. This decrease was primarily driven by a reduction in commercial and legacy NPLs of $5.6 million and $4.1 million, respectively, mainly as a result of loan resolutions. Mortgage NPLs decreased by $2.4 million, mainly as a result of the previously mentioned non-performing bulk loan sales. At December 31, 2014, NPLs represented 0.55% of total loans held-in-portfolio, compared to 0.84% in the third quarter.
  • Excluding the $3.4 million write-downs of which $1.4 million were related to US non-performing and legacy assets, net charge-offs (recoveries) amounted to recoveries of $2.3 million, decreasing by $4.1 million from the previous quarter of 2014. The ratio of net charge-offs to average loans held-in-portfolio was a recovery of 27 basis points on an annualized basis, compared to 19 basis points in the previous quarter.
  • The allowance for loan losses decreased by $1.7 million to $30.6 million from the third quarter of 2014, mainly due to the write-down related to the loans sold. The allowance for loan losses as a percentage of loans held-in-portfolio decreased to 0.88% from 0.91% in the previous quarter, reflective of the low risk profile of the portfolios. The ratio of allowance for loan losses to NPLs held-in-portfolio stood at 160.1%, compared to 108.5% in the previous quarter.
  • The provision for loan losses in the fourth quarter of 2014 amounted to a provision release of approximately $0.6 million, decreasing by $6.9 million from the previous quarter. The above mentioned write-downs required a provision of $2.0 million of which $0.9 million were associated with U.S. non-performing and legacy bulk loan sales, compared to $12 million in the previous quarter.
     
Financial Condition Highlights
 
(Unaudited)
(In thousands)   31-Dec-14   30-Sep-14   31-Dec-13
Money market, trading and investment securities $ 7,475,232 $ 7,200,291 $ 6,815,244
Loans not covered under loss sharing agreements with the FDIC 19,404,451 19,359,216 21,611,866
Loans covered under loss sharing agreements with the FDIC 2,542,662 2,654,263 2,984,427
Assets from discontinued operations - 1,129,053 -
Total assets 33,094,172 34,099,095 35,749,333
Deposits 24,807,535 24,466,105 26,711,145
Borrowings 3,004,685 3,375,485 3,645,246
Liabilities from discontinued operations 5,064 1,106,762 -
Total liabilities 28,822,782 29,800,703 31,123,183
Stockholders’ equity     4,271,390     4,298,392     4,626,150
 

Total assets decreased by $1.0 billion from the third quarter of 2014, driven by:

  • A decrease of $1.1 billion in assets from discontinued operations as the Corporation completed the sale of the California regional operations. Refer to Table P.
  • A decrease of $412.6 million in investment securities available for sale, of which $271.3 million was at BPNA mainly from CMO’s and MBS, while BPPR decreased $138.3 million mainly from $234.8 million in US government securities, which was partially offset by an increase of $107.3 million in US treasury securities.
  • A decrease of $138.7 million in FDIC loss share asset mainly due to collections and the amortization of the asset, as detailed in Table O.
  • A decrease of $71.9 million in loans held for sale, mainly at BPNA driven by bulk sales of loans as part of its reorganization strategy.
  • A decrease of $111.6 million in covered loans held-in-portfolio due to the normal run-off of the portfolio.
  • A decrease of $20.9 million in other real estate due to the resolution non-performing assets.

These decreases were partially offset by:

  • An increase in money market investments of $703.3 million, mainly due to lower trading activities on investment securities available for sale, as discussed above.

Total liabilities decreased by $1.0 billion from the third quarter of 2014, driven by:

  • A decrease of $1.1 billion in liabilities from discontinued operations as the corporation completed the sale of the California regional operations. Refer to Table P.
  • A decrease of $379.1 million in federal funds purchased and assets sold under agreements to repurchase due to a decrease of $479.0 million in repos mainly at BPNA, offset by an increase at BPPR of $100.0 million in federal funds purchased.

These decreases were partially offset by:

  • An increase of $341.4 million in total deposits, mainly due to an increase of $324.0 million in time deposits and an increase of $279.8 million in demand deposits due to deposits in trust received at BPPR for the payment of debt instruments on behalf of the local government, which was partially offset by a decrease of $331.5 million in brokered deposits. Refer to Table G for the composition of deposits.
  • An increase in other liabilities of $153.1 million driven by an increase of approximately $120.7 million in the minimum pension liability due to adjustments to the mortality table and the impact of using a lower discount rate.

Stockholders’ equity decreased by $27.0 million from the third quarter of 2014, mainly as a result of an increase of $79.8 million in accumulated other comprehensive loss, which was partially offset by net income for the quarter of $52.9 million. The other comprehensive loss includes an increase of approximately $103.0 million in the adjustment of pension and post retirement plans, net of tax, which was partially offset by an increase in unrealized gains from securities available for sale of $25.3 million. Refer to Table A for capital ratios.

The following table presents the preliminary regulatory capital ratios based on the current Basel I regulatory capital framework and under the Basel III Transitional Capital Rules for non-advanced approach banking organizations in effect as of January 1, 2015.

Ratios as of December 31, 2014   Basel I   Basel III   Variance

Tier 1 risk-based capital

 

18.17

%  

16.90

%  

(1.27)

%
Total risk-based capital

19.45

%

19.58

%

0.13

%
Tier 1 leverage

11.96

%

11.78

% (0.18) %
Common equity tier 1 ratio  

15.92

%  

16.51

%  

0.59

%
 

The reduction of 127 basis points in Tier 1 risk-based capital under Basel III relates mainly to the impact of the phase-out provisions of the New Capital Rules on the Corporation’s $427 million in trust preferred securities. Under Basel III, only 25% of the outstanding balance of these securities is allowed as Tier 1, with the remaining balance included in Total risk-based capital.

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, 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 and Florida.

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

Popular will hold a conference call to discuss the financial results today Thursday, January 22, 2015, at 10:00 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 1-866-235-1201 or 1-412-902-4127.

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 Friday, January 30, 2015. The replay dial in is 1-877-344-7529 or 1-412-317-0088. The replay passcode is 10058189.

Popular, Inc.
Financial Supplement to Fourth 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 - Consolidated Average Balances and Yield / Rate Analysis - YEAR-TO-DATE
 
Table F - Mortgage Banking Activities and Other Service Fees
 
Table G - Loans and Deposits
 
Table H - Non-Performing Assets
 
Table I - Activity in Non-Performing Loans
 
Table J - Allowance for Credit Losses, Net Charge-offs and Related Ratios
 
Table K - Allowance for Loan Losses - Breakdown of General and Specific Reserves - CONSOLIDATED
 
Table L - Allowance for Loan Losses - Breakdown of General and Specific Reserves - PUERTO RICO OPERATIONS
 
Table M - Allowance for Loan Losses - Breakdown of General and Specific Reserves - U.S. MAINLAND OPERATIONS
 
Table N - Reconciliation to GAAP Financial Measures
 
Table O - Financial Information - Westernbank Covered Loans
 
Table P - Financial Information from Discontinued Operations
 
Table Q - Restructuring Charges
 
Table R - Adjusted Consolidated Statement of Operations for the Year Ended December 31, 2014 (Non-GAAP)

         
POPULAR, INC.
Financial Supplement to Fourth Quarter 2014 Earnings Release
Table A - Selected Ratios and Other Information
(Unaudited)
 
                                         
Quarters ended Years ended
    31-Dec-14   30-Sep-14   31-Dec-13   31-Dec-14   31-Dec-13
Basic EPS from continuing operations $ 0.41 $ 0.31 $ 1.46 $ (1.85 ) $ 5.41
Basic EPS from discontinued operations $ 0.09 $ 0.29 $ 0.12 $ (1.20 ) $ 0.39
Total Basic EPS $ 0.50 $ 0.60 $ 1.58 $ (3.05 ) $ 5.80
Diluted EPS from continuing operations $ 0.41 $ 0.31 $ 1.46 $ (1.85 ) $ 5.39
Diluted EPS from discontinued operations $ 0.09 $ 0.29 $ 0.11 $ (1.20 ) $ 0.39
Total Diluted EPS $ 0.50 $ 0.60 $ 1.57 $ (3.05 ) $ 5.78
Average common shares outstanding 102,859,416 102,953,328 102,774,144 102,848,792 102,693,685

Average common shares outstanding - assuming dilution

103,166,349

103,152,916 103,081,417 102,848,792 103,061,475
Common shares outstanding at end of period 103,476,847 103,448,206 103,397,699 103,476,847 103,397,699
Market value per common share $ 34.05 $ 29.44 $ 28.73 $ 34.05 $ 28.73
Market capitalization - (In millions) $ 3,523 $ 3,046 $ 2,971 $ 3,523 $ 2,971
Return on average assets 0.63 % 0.71 % 1.79 % (0.88 )% 1.65 %
Return on average common equity 4.78 % 5.75 % 14.59 % (6.95 )% 14.43 %
Net interest margin [2] 4.70 % 4.64 % 4.75 % 4.67 % 4.52 %
Common equity per share $ 40.79 $ 41.07 $ 44.26 $ 40.79 $ 44.26
Tangible common book value per common share (non-GAAP) [1] $ 35.93 $ 36.24 $ 37.56 $ 35.93 $ 37.56
Tangible common equity to tangible assets (non-GAAP) [1] 11.41 % 11.16 % 11.08 % 11.41 % 11.08 %
Tier 1 risk-based capital [3]

18.17

% 16.86 % 19.15 %

18.17

% 19.15 %
Total risk-based capital [3]

19.45

% 18.14 % 20.42 %

19.45

% 20.42 %
Tier 1 leverage [3] 11.96 % 11.14 % 12.85 % 11.96 % 12.85 %
Tier 1 common equity to risk-weighted assets (non-GAAP) [1] [3]    

15.92

%     14.74 %     14.83 %    

15.92

%     14.83 %
 
[1] Refer to Table N for Non-GAAP reconciliations.
[2] Not on a taxable equivalent basis. For the quarter ended December 31, 2014 and September 30, 2014, excludes the impact of $18.6 million and $20.7 million fees, respectively, related to repos refinancing. US GAAP Net interest margin was 4.45% for the fourth quarter, compared to 4.36% for the previous quarter. For the year ended December 31, 2014, excludes the impact of $39.2 million and $414.1 million, respectively, related to repos refinancing and the accelerated amortization of the TARP discount. The US GAAP Net interest margin was 3.16% for the year ended December 31, 2014. Refer to Tables D & E for reconciliation.
[3] Capital ratios for the current quarter are preliminary.
 

             
POPULAR, INC.
Financial Supplement to Fourth Quarter 2014 Earnings Release
Table B - Consolidated Statement of Operations
(Unaudited)
 
Quarters ended Variance Quarter ended Variance Years ended
(In thousands, except per share information)   31-Dec-14   30-Sep-14  

Q4 2014 vs. Q3 2014

  31-Dec-13  

Q4 2014 vs. Q4 2013

  31-Dec-14   31-Dec-13
Interest income:
Loans $ 357,570 $ 362,592 $ (5,022 ) $ 384,015 $ (26,445 ) $ 1,478,750 $ 1,481,096
Money market investments 1,113 1,007 106 832 281 4,224 3,464
Investment securities 30,361 33,154 (2,793 ) 34,317 (3,956 ) 132,631 141,807
Trading account securities     2,891       4,446       (1,555 )     5,361       (2,470 )     17,938       21,573  
Total interest income     391,935       401,199       (9,264 )     424,525       (32,590 )     1,633,543       1,647,940  
Interest expense:
Deposits 25,473 26,533 (1,060 ) 28,681 (3,208 ) 105,087 124,857
Short-term borrowings 20,489 28,955 (8,466 ) 9,319 11,170 67,376 38,430
Long-term debt     19,112       19,290       (178 )     32,018       (12,906 )     516,008       140,079  
Total interest expense     65,074       74,778       (9,704 )     70,018       (4,944 )     688,471       303,366  
Net interest income (expense) 326,861 326,421 440 354,507 (27,646 ) 945,072 1,344,574
Provision for loan losses - non-covered loans 51,637 68,166 (16,529 ) 49,927 1,710 223,999 536,710
Provision (recovery of provision) for loan losses - covered loans     (3,646 )     12,463       (16,109 )     8,907       (12,553 )     46,135       69,396  
Net interest income (expense) after provision for loan losses     278,870       245,792       33,078       295,673       (16,803 )     674,938       738,468  
Service charges on deposit accounts 39,456 40,585 (1,129 ) 39,814 (358 ) 158,637 162,870
Other service fees 61,140 54,839 6,301 60,087 1,053 225,265 229,351
Mortgage banking activities 8,747 14,402 (5,655 ) 14,387 (5,640 ) 30,615 71,657
Net (loss) gain and valuation adjustments on investment securities 893 (1,763 ) 2,656 2,110 (1,217 ) (870 ) 7,966
Trading account profit (loss) 586 740 (154 ) (1,547 ) 2,133 4,358 (13,483 )
Net gain (loss) on sale of loans, including valuation adjustments on loans held-for-sale 10,946 15,593 (4,647 ) 3,346 7,600 40,591 (52,708 )
Adjustments (expense) to indemnity reserves on loans sold (6,817 ) (9,480 ) 2,663 (6,892 ) 75 (34,098 ) (37,054 )
FDIC loss share (expense) income (18,693 ) (4,864 ) (13,829 ) (37,164 ) 18,471 (103,024 ) (82,051 )
Other operating income     13,637       14,278       (641 )     111,135       (97,498 )     71,572       504,465  
Total non-interest income     109,895       124,330       (14,435 )     185,276       (75,381 )     393,046       791,013  
Operating expenses:
Personnel costs
Salaries 71,899 71,166 733 69,391 2,508 281,252 276,072
Commissions, incentives and other bonuses 18,439 14,738 3,701 13,523 4,916 59,138 57,060
Pension, postretirement and medical insurance 6,901 9,282 (2,381 ) 13,138 (6,237 ) 32,416 55,106
Other personnel costs, including payroll taxes     13,497       9,356       4,141       10,353       3,144       45,873       40,459  
Total personnel costs 110,736 104,542 6,194 106,405 4,331 418,679 428,697
Net occupancy expenses 23,877 21,203 2,674 23,714 163 86,707 86,651
Equipment expenses 13,091 12,370 721 11,536 1,555 48,917 46,028
Other taxes 14,343 15,369 (1,026 ) 13,595 748 56,918 58,028
Professional fees 80,383 67,649 12,734 74,138 6,245 282,055 278,127
Communications 6,119 6,455 (336 ) 6,149 (30 ) 25,684 25,385
Business promotion 13,530 13,062 468 16,702 (3,172 ) 54,016 59,453
FDIC deposit insurance 9,338 9,511 (173 ) 14,672 (5,334 ) 40,307 56,728
Loss on early extinguishment of debt 532 - 532 - 532 532 3,388
Other real estate owned (OREO) expenses 20,016 19,745 271 9,502 10,514 49,611 79,658
Credit and debit card processing, volume, interchange and other expenses 5,093 5,659 (566 ) 5,284 (191 ) 21,588 19,901
Other operating expenses 17,004 24,759 (7,755 ) 20,910 (3,906 ) 73,785 71,975
Amortization of intangibles 2,083 2,026 57 2,002 81 8,160 7,971
Restructuring costs     13,861       8,290       5,571       -       13,861       26,725       -  
Total operating expenses     330,006       310,640       19,366       304,609       25,397       1,193,684       1,221,990  
Income (loss) from continuing operations before income tax 58,759 59,482 (723 ) 176,340 (117,581 ) (125,700 ) 307,491
Income tax expense (benefit)     14,995       26,667       (11,672 )     25,162       (10,167 )     60,802       (251,327 )
Income (loss) from continuing operations 43,764 32,815 10,949 151,178 (107,414 ) (186,502 ) 558,818
Income (loss) from discontinued operations, net of tax     9,086       29,758       (20,672 )     11,853       (2,767 )     (122,980 )     40,509  
Net income (loss)   $ 52,850     $ 62,573     $ (9,723 )   $ 163,031     $ (110,181 )   $ (309,482 )   $ 599,327  
Net income (loss) applicable to common stock   $ 51,919     $ 61,643     $ (9,724 )   $ 162,100     $ (110,181 )   $ (313,205 )   $ 595,604  
Net income (loss) per common share - basic:
Net income (loss) from continuing operations $ 0.41 $ 0.31 $ 0.10 $ 1.46 $ (1.05 ) $ (1.85 ) $ 5.41
Net income (loss) from discontinued operations   $ 0.09     $ 0.29     $ (0.20 )   $ 0.12     $ (0.03 )   $ (1.20 )   $ 0.39  
Net income (loss) per common share - basic   $ 0.50     $ 0.60     $ (0.10 )   $ 1.58     $ (1.08 )   $ (3.05 )   $ 5.80  
Net income (loss) per common share - diluted:
Net income (loss) from continuing operations $ 0.41 $ 0.31 $ 0.10 $ 1.46 $ (1.05 ) $ (1.85 ) $ 5.39
Net income (loss) from discontinued operations   $ 0.09     $ 0.29     $ (0.20 )   $ 0.11     $ (0.02 )   $ (1.20 )   $ 0.39  
Net income (loss) per common share - diluted   $ 0.50     $ 0.60     $ (0.10 )   $ 1.57     $ (1.07 )   $ (3.05 )   $ 5.78  
 

       
Popular, Inc.
Financial Supplement to Fourth Quarter 2014 Earnings Release
Table C - Consolidated Statement of Financial Condition
(Unaudited)
 
Variance
Q4 2014 vs.
(In thousands)   31-Dec-14   30-Sep-14   31-Dec-13   Q3 2014
Assets:
Cash and due from banks $ 447,011 $ 321,914 $ 423,211 $ 125,097
Money market investments 1,756,470 1,053,121 858,453 703,349
Trading account securities, at fair value 138,527 145,343 339,743 (6,816 )
Investment securities available-for-sale, at fair value 5,315,159 5,727,766 5,294,800 (412,607 )
Investment securities held-to-maturity, at amortized cost 103,170 112,893 140,496 (9,723 )
Other investment securities, at lower of cost or realizable value 161,906 161,168 181,752 738
Loans held-for-sale, at lower of cost or fair value 106,104 178,008 110,426 (71,904 )
Loans held-in-portfolio:
Loans not covered under loss sharing agreements with the FDIC 19,498,286 19,450,677 21,704,010 47,609
Loans covered under loss sharing agreements with the FDIC 2,542,662 2,654,263 2,984,427 (111,601 )
Less: Unearned income 93,835 91,461 92,144 2,374
Allowance for loan losses     601,792       611,375       640,555       (9,583 )
Total loans held-in-portfolio, net     21,345,321       21,402,104       23,955,738       (56,783 )
FDIC loss share asset 542,454 681,106 948,608 (138,652 )
Premises and equipment, net 494,581 497,111 519,516 (2,530 )
Other real estate not covered under loss sharing agreements with the FDIC 135,500 135,256 135,501 244
Other real estate covered under loss sharing agreements with the FDIC 130,266 151,382 168,007 (21,116 )
Accrued income receivable 121,818 116,746 131,536 5,072
Mortgage servicing assets, at fair value 148,694 152,282 161,099 (3,588 )
Other assets 1,643,920 1,634,819 1,687,558 9,101
Goodwill 465,676 461,246 647,757 4,430
Other intangible assets 37,595 37,777 45,132 (182 )
Assets from discontinued operations     -       1,129,053       -       (1,129,053 )
Total assets   $ 33,094,172     $ 34,099,095     $ 35,749,333     $ (1,004,923 )
Liabilities and Stockholders’ Equity:
Liabilities:
Deposits:
Non-interest bearing $ 5,783,748 $ 5,521,415 $ 5,922,682 $ 262,333
Interest bearing     19,023,787       18,944,690       20,788,463       79,097  
Total deposits     24,807,535       24,466,105       26,711,145       341,430  
Federal funds purchased and assets sold under agreements to repurchase 1,271,657 1,650,712 1,659,292 (379,055 )
Other short-term borrowings 21,200 1,200 401,200 20,000
Notes payable 1,711,828 1,723,573 1,584,754 (11,745 )
Other liabilities 1,005,498 852,351 766,792 153,147
Liabilities from discontinued operations     5,064       1,106,762       -       (1,101,698 )
Total liabilities     28,822,782       29,800,703       31,123,183       (977,921 )
Stockholders’ equity:
Preferred stock 50,160 50,160 50,160 -
Common stock 1,036 1,036 1,034 -
Surplus 4,196,458 4,171,890 4,170,152 24,568
Retained earnings 257,725 229,306 594,430 28,419
Treasury stock (4,117 ) (3,933 ) (881 ) (184 )
Accumulated other comprehensive loss     (229,872 )     (150,067 )     (188,745 )     (79,805 )
Total stockholders’ equity     4,271,390       4,298,392       4,626,150       (27,002 )
Total liabilities and stockholders’ equity   $ 33,094,172     $ 34,099,095     $ 35,749,333     $ (1,004,923 )
 

                             
Popular, Inc.
Financial Supplement to Fourth Quarter 2014 Earnings Release
Table D - Consolidated Average Balances and Yield / Rate Analysis - QUARTER
(Unaudited)
 
Quarter ended Quarter ended Quarter ended Variance Variance
31-Dec-14 30-Sep-14 31-Dec-13 Q4 2014 vs. Q3 2014 Q4 2014 vs. Q4 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 $ 7,220     $ 34.4   1.90 % $ 7,501     $ 38.6   2.06 % $ 7,038     $ 40.5   2.30 %   ($281 )     ($4.2 )   (0.16 )% $ 182       ($6.1 )   (0.40 )%
Loans not covered under loss sharing agreements with the FDIC:
Commercial 8,219 101.9 4.92 8,239 99.6 4.80 8,356 100.7 4.78 (20 ) 2.3 0.12 (137 ) 1.2 0.14
Construction 233 3.8 6.41 201 2.5 4.86 285 4.4 6.15 32 1.3 1.55 (52 ) (0.6 ) 0.26
Mortgage 6,538 84.1 5.15 6,646 84.0 5.05 6,688 87.1 5.21 (108 ) 0.1 0.10 (150 ) (3.0 ) (0.06 )
Consumer 3,884 96.6 9.86 3,905 98.4 10.00 3,742 94.5 10.02 (21 ) (1.8 ) (0.14 ) 142 2.1 (0.16 )
Lease financing   555       9.9   7.11     545       9.8   7.20     538       10.5   7.79     10       0.1     (0.09 )   17       (0.6 )   (0.68 )
Total loans not covered under loss sharing agreements with the FDIC 19,429 296.3 6.07 19,536 294.3 5.99 19,609 297.2 6.03 (107 ) 2.0 0.08 (180 ) (0.9 ) 0.04
Loans covered under loss sharing agreements with the FDIC   2,615       61.3   9.31     2,727       68.3   9.95     3,017       86.8   11.43     (112 )     (7.0 )   (0.64 )   (402 )     (25.5 )   (2.12 )
Total loans   22,044       357.6   6.45     22,263       362.6   6.48     22,626       384.0   6.75     (219 )     (5.0 )   (0.03 )   (582 )     (26.4 )   (0.30 )
Total interest earning assets   29,264     $ 392.0   5.33 %   29,764     $ 401.2   5.36 %   29,664     $ 424.5   5.69 %   (500 )     ($9.2 )   (0.03 )%   (400 )     ($32.5 )   (0.36 )%
Allowance for loan losses (618 ) (629 ) (602 ) 11 (16 )
Other non-interest earning assets 4,171 4,416 4,997 (245 ) (826 )
Assets from discontinued operations   491     1,473     1,976     (982 )   (1,485 )
Total average assets $ 33,308   $ 35,024   $ 36,035   $ (1,716 ) $ (2,727 )
 
Liabilities and Stockholders' Equity:
Interest bearing deposits:
NOW and money market $ 4,788 $ 4.0 0.33 % $ 4,876 $ 3.9 0.32 % $ 4,629 $ 3.7 0.32 % $ (88 ) $ 0.1 0.01 % $ 159 $ 0.3 0.01 %
Savings 6,788 3.8 0.22 6,740 3.7 0.22 6,663 3.7 0.22 48 0.1 - 125 0.1 -
Time deposits   7,409       17.7   0.95     7,569       18.9   0.99     7,790       21.3   1.08     (160 )     (1.2 )   (0.04 )   (381 )     (3.6 )   (0.13 )
Total interest bearing deposits 18,985 25.5 0.53 19,185 26.5 0.55 19,082 28.7 0.60 (200 ) (1.0 ) (0.02 ) (97 ) (3.2 ) (0.07 )
Borrowings[1]   2,992       21.0   2.80     3,591       27.6   3.06     3,794       41.3   4.35     (599 )     (6.6 )   (0.26 )   (802 )     (20.3 )   (1.55 )
Total interest bearing liabilities   21,977       46.5   0.84     22,776       54.1   0.94     22,876       70.0   1.22     (799 )     (7.6 )   (0.10 )   (899 )     (23.5 )   (0.38 )
Net interest spread 4.49 % 4.42 % 4.47 % 0.07 % 0.02 %
Non-interest bearing deposits 5,636 5,464 5,468 172 168
Other liabilities 849 860 1,039 (11 ) (190 )
Liabilities from discontinued operations 486 1,618

2,193

(1,132 )

(1,707

)
Stockholders' equity   4,360     4,306    

4,459

    54    

(99

)

Total average liabilities and stockholders' equity $ 33,308   $ 35,024   $ 36,035   $ (1,716 ) $ (2,727 )
 
Adjusted net interest income / margin non-taxable equivalent basis $ 345.5   4.70 % $ 347.1   4.64 % $ 354.5   4.75 %   ($1.6 )   0.06 %   ($9.0 )   (0.05 )%
Impact of fees related to repos refinancing $ 18.6 $ 20.7
Net interest income (expense)/margin non-taxable equivalent basis $ 326.9   4.45 % $ 326.4   4.36 % $ 354.5   4.75 %
 
(1) Borrowing expense for the fourth and third quarters, including the fees related to repos refinancing, was 5.27% and 5.34%, respectively.
 

                 
Popular, Inc.
Financial Supplement to Fourth Quarter 2014 Earnings Release
Table E - Consolidated Average Balances and Yield / Rate Analysis - YEAR-TO-DATE
(Unaudited)
 
Year ended Year ended
31-Dec-14 31-Dec-13 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 $ 7,530     $ 154.8   2.06 % $ 6,941     $ 166.8   2.40 % $ 589       ($12.0 )   (0.34 )%
Loans not covered under loss sharing agreements with the FDIC:
Commercial 8,347 404.4 4.85 8,284 399.3 4.82 63 5.1 0.03
Construction 199 13.5 6.78 319 15.1 4.73 (120 ) (1.6 ) 2.05
Mortgage 6,641 340.4 5.12 6,688 343.3 5.13 (47 ) (2.9 ) (0.01 )
Consumer 3,861 386.7 10.01 3,741 379.2 10.13 120 7.5 (0.12 )
Lease financing   548       40.1   7.33     540       43.5   8.07     8       (3.4 )   (0.74 )
Total loans not covered under loss sharing agreements with the FDIC 19,596 1,185.1 6.05 19,572 1,180.4 6.03 24 4.7 0.02
Loans covered under loss sharing agreements with the FDIC   2,771       293.6   10.60     3,228       300.7   9.32     (457 )     (7.1 )   1.28  
Total loans   22,367       1,478.7   6.61     22,800       1,481.1   6.50     (433 )     (2.4 )   0.11  
Total interest earning assets   29,897     $ 1,633.5   5.46 %   29,741     $ 1,647.9   5.54 %   156       ($14.4 )   (0.08 )%
Allowance for loan losses (623 ) (610 ) (13 )
Other non-interest earning assets 4,466 5,139 (673 )
Assets from discontinued operations   1,442     1,997     (555 )
Total average assets $ 35,182   $ 36,267     ($1,085 )
 
Liabilities and Stockholders' Equity:
Interest bearing deposits:
NOW and money market $ 4,824 $ 15.5 0.32 % $ 4,658 $ 15.7 0.34 % $ 166 ($0.2 ) (0.02 )%
Savings 6,733 14.7 0.22 6,585 15.4 0.23 148 (0.7 ) (0.01 )
Time deposits   7,556       74.9   0.99     7,957       93.8   1.18     (401 )     (18.9 )   (0.19 )
Total interest bearing deposits 19,113 105.1 0.55 19,200 124.9 0.65 (87 ) (19.8 ) (0.10 )
Borrowings [1]   3,514       130.0   3.70     4,292       178.5   4.16     (778 )     (48.5 )   (0.46 )
Total interest bearing liabilities   22,627       235.1   1.04     23,492       303.4   1.29     (865 )     (68.3 )   (0.25 )
Net interest spread 4.42 % 4.25 % 0.17 %
Non-interest bearing deposits 5,534 5,371 163
Other liabilities 879 1,019 (140 )
Liabilities from discontinued operations 1,586

2,209

(623

)
Stockholders' equity   4,556    

4,176

   

380

 
Total average liabilities and stockholders' equity $ 35,182   $ 36,267     ($1,085 )
 
Adjusted net interest income / margin non-taxable equivalent basis $ 1,398.4   4.67 % $ 1,344.5   4.52 % $ 53.9     0.15 %
Impact of fees related to repos refinancing $ 39.2
Accelerated amortization of TARP discount and related deferred costs 414.1
Net interest income/margin non-taxable equivalent basis $ 945.1   3.16 %
 
(1) Borrowing expense including the fees related to repos refinancing and the impact of the accelerated TARP amortization was 16.60%.
 

             
Popular, Inc.
Financial Supplement to Fourth Quarter 2014 Earnings Release
Table F - Mortgage Banking Activities and Other Service Fees
(Unaudited)
 

Mortgage Banking Activities

Variance

Quarters ended Q4 2014 vs. Q4 2014 vs. Years ended Variance
(In thousands)   31-Dec-14   30-Sep-14   31-Dec-13   Q3 2014   Q4 2013   31-Dec-14   31-Dec-13   2014 vs. 2013
Mortgage servicing fees, net of fair value adjustments:
Mortgage servicing fees $ 9,364 $ 11,091 $ 11,366 $ (1,727 ) $ (2,002 ) $ 41,761 $ 45,465 $ (3,704 )
Mortgage servicing rights fair value adjustments     (6,259 )     (2,588 )     (4,541 )     (3,671 )     (1,718 )     (24,683 )     (11,403 )     (13,280 )
Total mortgage servicing fees, net of fair value adjustments     3,105       8,503       6,825       (5,398 )     (3,720 )     17,078       34,062       (16,984 )
Net gain on sale of loans, including valuation on loans held-for-sale     8,382       7,466       9,751       916       (1,369 )     31,213       26,719       4,494  
Trading account (loss) profit:
Unrealized (losses) gains on outstanding derivative positions (1 ) 13 1,011 (14 ) (1,012 ) (726 ) 746 (1,472 )
Realized (losses) gains on closed derivative positions     (2,739 )     (1,580 )     (3,200 )     (1,159 )     461       (16,950 )     10,130       (27,080 )
Total trading account (loss) profit     (2,740 )     (1,567 )     (2,189 )     (1,173 )     (551 )     (17,676 )     10,876       (28,552 )
Total mortgage banking activities   $ 8,747     $ 14,402     $ 14,387     $ (5,655 )   $ (5,640 )   $ 30,615     $ 71,657     $ (41,042 )
 
               
Other Service Fees Variance
Quarters ended Q4 2014 vs. Q4 2014 vs. Years ended Variance
(In thousands)   31-Dec-14   30-Sep-14   31-Dec-13   Q3 2014   Q4 2013   31-Dec-14   31-Dec-13   2014 vs. 2013
Other service fees:
Debit card fees $ 10,929 $ 10,673 $ 10,785 $ 256 $ 144 $ 43,146 $ 41,912 $ 1,234
Insurance fees 17,711 12,322 16,743 5,389 968 54,158 52,309 1,849
Credit card fees 17,493 17,078 17,174 415 319 67,639 65,727 1,912
Sale and administration of investment products 7,193 6,605 7,331 588 (138 ) 27,711 35,272 (7,561 )
Trust fees 4,469 4,711 4,525 (242 ) (56 ) 18,209 17,285 924
Other fees     3,345     3,450     3,529     (105 )     (184 )     14,402     16,846     (2,444 )
Total other service fees   $ 61,140   $ 54,839   $ 60,087   $ 6,301     $ 1,053     $ 225,265   $ 229,351   $ (4,086 )
 

         
Popular, Inc.
Financial Supplement to Fourth Quarter 2014 Earnings Release
Table G - Loans and Deposits
(Unaudited)
 
Loans - Ending Balances
Variance
(In thousands)   31-Dec-14   30-Sep-14   31-Dec-13  

Q4 2014 vs.
Q3 2014

 

Q4 2014 vs.
Q4 2013

Loans not covered under FDIC loss sharing agreements:
Commercial $ 8,134,267 $ 8,058,714 $ 10,037,184 $ 75,553 $ (1,902,917 )
Construction 251,820 211,850 206,084 39,970 45,736
Legacy [1] 80,818 91,015 211,135 (10,197 ) (130,317 )
Lease financing 564,389 550,514 543,761 13,875 20,628
Mortgage 6,502,886 6,555,337 6,681,476 (52,451 ) (178,590 )
Consumer     3,870,271     3,891,786     3,932,226     (21,515 )     (61,955 )
Total non-covered loans held-in-portfolio $ 19,404,451 $ 19,359,216 $ 21,611,866 $ 45,235 $ (2,207,415 )
Loans covered under FDIC loss sharing agreements     2,542,662     2,654,263     2,984,427     (111,601 )     (441,765 )
Total loans held-in-portfolio   $ 21,947,113   $ 22,013,479   $ 24,596,293   $ (66,366 )   $ (2,649,180 )
Loans held-for-sale:
Commercial $ 309 $ 33,658 $ 603 $ (33,349 ) $ (294 )
Legacy [1] 319 31,823 - (31,504 ) 319
Mortgage 100,166 106,832 109,823 (6,666 ) (9,657 )
Consumer     5,310     5,695     -     (385 )     5,310  
Total loans held-for-sale   $ 106,104   $ 178,008   $ 110,426   $ (71,904 )   $ (4,322 )
Total loans   $ 22,053,217   $ 22,191,487   $ 24,706,719   $ (138,270 )   $ (2,653,502 )
 
[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.
Note: Loans from discontinued operations as of September 30,2014 are presented as part of “Assets from discontinued operations” in the Consolidated Statement of Financial Condition.
 
Deposits - Ending Balances
Variance
(In thousands)   31-Dec-14   30-Sep-14   31-Dec-13  

Q4 2014 vs.
Q3 2014

 

Q4 2014 vs.
Q4 2013

Demand deposits [1] $ 6,606,060 $ 6,326,220 $ 6,590,963 $ 279,840 $ 15,097
Savings, NOW and money market deposits (non-brokered) 10,320,782 10,251,602 11,255,309 69,180 (934,527 )
Savings, NOW and money market deposits (brokered) 406,248 386,573 553,521 19,675 (147,273 )
Time deposits (non-brokered) 5,960,401 5,636,443 6,478,103 323,958 (517,702 )
Time deposits (brokered CDs)     1,514,044     1,865,267     1,833,249     (351,223 )     (319,205 )
Total deposits   $ 24,807,535   $ 24,466,105   $ 26,711,145   $ 341,430     $ (1,903,610 )
 
[1] Includes interest and non-interest demand bearing deposits.
Note: Deposits from discontinued operations as of September 30, 2014 are presented as part of “Liabilities from discontinued operations” in the Consolidated Statement of Financial Condition.
 

               
Popular, Inc.
Financial Supplement to Fourth Quarter 2014 Earnings Release
Table H - Non-Performing Assets
(Unaudited)
 
Variance
(Dollars in thousands)   31-Dec-14   As a % of loans HIP by category   30-Sep-14   As a % of loans HIP by category   31-Dec-13   As a % of loans HIP by category  

Q4 2014 vs.
Q3 2014

 

Q4 2014 vs.
Q4 2013

Non-accrual loans:
Commercial $ 259,527 3.2 % $ 252,331 3.1 % $ 279,053 2.8 % $ 7,196 $ (19,526 )
Construction 13,812 5.5 19,148 9.0 23,771 11.5 (5,336 ) (9,959 )
Legacy [1] 1,545 1.9 5,648 6.2 15,050 7.1 (4,103 ) (13,505 )
Lease financing 3,102 0.5 3,168 0.6 3,495 0.6 (66 ) (393 )
Mortgage 300,466 4.6 295,125 4.5 232,681 3.5 5,341 67,785
Consumer     46,886     1.2       46,525     1.2       43,898     1.1       361       2,988  

Total non-performing loans held-in-portfolio, excluding covered loans [2]

625,338 3.2 % 621,945 3.2 % 597,948 2.8 % 3,393 27,390
Non-performing loans held-for-sale [3] 18,899 19,728 1,092 (829 ) 17,807

Other real estate owned (“OREO”), excluding covered OREO

135,500 135,256 135,501 244 (1 )

Total non-performing assets, excluding covered assets

779,737 776,929 734,541 2,808 45,196
Covered loans and OREO    

148,099

            166,533             197,388            

(18,434

)    

(49,289

)
Total non-performing assets   $

927,836

          $ 943,462           $ 931,929           $

(15,626

)   $

(4,093

)
Accruing loans past due 90 days or more [4]   $ 447,990           $ 426,459           $ 418,028           $ 21,531     $ 29,962  
Ratios excluding covered loans:

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

3.22

%

 

3.21

%

 

2.77

%

 

Allowance for loan losses to loans held-in-portfolio

2.68 2.69 2.49

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

    83.11             83.88             90.05                        
Ratios including covered loans:
Non-performing assets to total assets

2.80

%

 

2.77

%

 

2.61

%

 

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

2.93 2.89 2.55

Allowance for loan losses to loans held-in-portfolio

2.74 2.78 2.60

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

   

93.57

            95.96             102.11                        
 
[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] Total non-performing loans held-in-portfolio, excluding covered loans, excludes $48 thousand in discontinued operations as of September 30, 2014.

[3] Non-performing loans held-for-sale as of December 31, 2014, consisted of $14.0 million in mortgage loans, $309 thousand in commercial loans and $4.5 million in consumer loans (September 30, 2014 - consisted of $14.7 million in mortgage loans, $427 thousand in commercial loans and $4.6 million in consumer loans and $10 thousand in legacy loans; December 31, 2013 - $603 thousand in legacy loans and $489 thousand in mortgage loans).

[4] 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 non-performing since the principal repayment is insured. These balances include $125 million of residential mortgage loans insured by FHA or guaranteed by the VA that are no longer accruing interest as of December 31, 2014 (September 30, 2014 - $125 million; December 31, 2013 - $115 million).
 

           
Popular, Inc.
Financial Supplement to Fourth Quarter 2014 Earnings Release
Table I - Activity in Non-Performing Loans
(Unaudited)
 
 
Commercial loans held-in-portfolio:
Quarter ended Quarter ended
31-Dec-14 30-Sep-14
(In thousands)   BPPR   BPNA   Popular, Inc.   BPPR   BPNA   Popular, Inc.
Beginning balance NPLs $ 244,425 $ 7,906 $ 252,331 $ 253,552 $ 24,581 $ 278,133
Plus:
New non-performing loans 112,071 1,245 113,316 23,410 4,541 27,951
Less:
Non-performing loans transferred to OREO (2,072 ) - (2,072 ) (2,706 ) - (2,706 )
Non-performing loans charged-off (17,492 ) (1,298 ) (18,790 ) (10,085 ) (3,103 ) (13,188 )
Loans returned to accrual status / loan collections (79,720 ) (2,895 ) (82,615 ) (19,746 ) (2,649 ) (22,395 )
Loans transferred to held-for-sale - (3,025 ) (3,025 ) - (22,967 ) (22,967 )
Non-performing loans transferred from (to) discontinued operations     -       382       382       -       7,503       7,503  
Ending balance NPLs   $ 257,212     $ 2,315     $ 259,527     $ 244,425     $ 7,906     $ 252,331  
 
 
Construction loans held-in-portfolio:
Quarter ended Quarter ended
31-Dec-14   30-Sep-14
(In thousands)   BPPR   BPNA   Popular, Inc.   BPPR   BPNA   Popular, Inc.
Beginning balance NPLs $ 19,148 $ - $ 19,148 $ 21,456 $ - $ 21,456
Plus:
New non-performing loans 573 - 573 - - -
Less:
Non-performing loans charged-off (244 ) - (244 ) (985 ) - (985 )
Loans returned to accrual status / loan collections     (5,665 )     -       (5,665 )     (1,323 )     -       (1,323 )
Ending balance NPLs   $ 13,812     $ -     $ 13,812     $ 19,148     $ -     $ 19,148  
 
 
Mortgage loans held-in-portfolio:
Quarter ended Quarter ended
31-Dec-14   30-Sep-14
(In thousands)   BPPR   BPNA   Popular, Inc.   BPPR   BPNA   Popular, Inc.
Beginning balance NPLs $ 283,433 $ 11,692 $ 295,125 $ 262,356 $ 23,964 $ 286,320
Plus:
New non-performing loans 88,983 8,159 97,142 95,207 2,802 98,009
Less:
Non-performing loans transferred to OREO (1,051 ) - (1,051 ) (3,062 ) (870 ) (3,932 )
Non-performing loans charged-off (8,951 ) (96 ) (9,047 ) (11,309 ) (395 ) (11,704 )
Loans returned to accrual status / loan collections (71,232 ) (4,309 ) (75,541 ) (53,003 ) (686 ) (53,689 )
Loans transferred to held-for-sale - (6,162 ) (6,162 ) - (13,123 ) (13,123 )
Reclassification to consumer loans     -       -       -       (6,756 )     -       (6,756 )
Ending balance NPLs   $ 291,182     $ 9,284     $ 300,466     $ 283,433     $ 11,692     $ 295,125  
 
 
Legacy loans held-in-portfolio:
Quarter ended Quarter ended
31-Dec-14   30-Sep-14
(In thousands)   BPPR   BPNA   Popular, Inc.   BPPR   BPNA   Popular, Inc.
Beginning balance NPLs $ - $ 5,648 $ 5,648 $ - $ 8,323 $ 8,323
Plus:
New non-performing loans - 213 213 - 1,852 1,852
Advances on existing non-performing loans - 97 97 - 149 149
Less:
Non-performing loans transferred to OREO - - - - (189 ) (189 )
Non-performing loans charged-off - (744 ) (744 ) - (2,109 ) (2,109 )
Loans returned to accrual status / loan collections - (2,791 ) (2,791 ) - (975 ) (975 )
Loans transferred to held-for-sale - (878 ) (878 ) - (2,529 ) (2,529 )
Non-performing loans transferred from (to) discontinued operations     -       -       -       -       1,126       1,126  
Ending balance NPLs   $ -     $ 1,545     $ 1,545     $ -     $ 5,648     $ 5,648  
 
 
Total non-performing loans held-in-portfolio (excluding consumer loans):
Quarter ended Quarter ended
31-Dec-14   30-Sep-14
(In thousands)   BPPR   BPNA   Popular, Inc.   BPPR   BPNA   Popular, Inc.
Beginning balance NPLs $ 547,006 $ 25,246 $ 572,252 $ 537,364 $ 56,868 $ 594,232
Plus:
New non-performing loans 201,627 9,617 211,244 118,617 9,195 127,812
Advances on existing non-performing loans - 97 97 - 149 149
Less:
Non-performing loans transferred to OREO (3,123 ) - (3,123 ) (5,768 ) (1,059 ) (6,827 )
Non-performing loans charged-off (26,687 ) (2,138 ) (28,825 ) (22,379 ) (5,607 ) (27,986 )
Loans returned to accrual status / loan collections (156,617 ) (9,995 ) (166,612 ) (74,072 ) (4,310 ) (78,382 )
Loans transferred to held-for-sale - (10,065 ) (10,065 ) - (38,619 ) (38,619 )
Non-performing loans transferred from (to) discontinued operations - 382 382 - 8,629 8,629
Reclassification to consumer loans     -       -       -       (6,756 )     -       (6,756 )
Ending balance NPLs   $ 562,206     $ 13,144     $ 575,350     $ 547,006     $ 25,246     $ 572,252  
 

                 
Popular, Inc.
Financial Supplement to Fourth Quarter 2014 Earnings Release
Table J - Allowance for Credit Losses, Net Charge-offs and Related Ratios
(Unaudited)
 
 
Quarter ended Quarter ended Quarter ended
    31-Dec-14   30-Sep-14   31-Dec-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 $ 521,687 $ 89,688 $ 611,375 $ 526,246 $ 98,665 $ 624,911 $ 526,100 $ 116,828 $ 642,928
Provision for loan losses - Continuing operations 51,637 (3,646 ) 47,991 68,166 12,463 80,629 49,927 8,907 58,834
Provision for loan losses - Discontinued operations     -       -       -       -       -       -       (2,198 )     -       (2,198 )
      573,324       86,042       659,366       594,412       111,128       705,540       573,829       125,735       699,564  
Net loans charged-off (recovered):
BPPR
Commercial

13,890

3,230

17,120

1,011 16,590 17,601 15,177 13,433 28,610
Construction

(279

) (1,172 )

(1,451

) (1,237 ) 4,066 2,829 (1,796 ) 6,067 4,271
Lease financing

751

(6 )

745

1,410 (1 ) 1,409 838 - 838
Mortgage 12,228 2,725 14,953 13,330 1,809 15,139 6,981 4,729 11,710
Consumer     25,933       (808 )     25,125       24,168       (1,024 )     23,144       14,056       (586 )     13,470  
Total BPPR     52,523       3,969       56,492       38,682       21,440       60,122       35,256       23,643       58,899  
 
BPNA
Commercial (900 ) - (900 ) (893 ) - (893 ) 1,089 - 1,089
Construction (2 ) - (2 ) (59 ) - (59 ) - - -
Legacy [1] (3,877 ) - (3,877 ) 221 - 221 (5,817 ) - (5,817 )
Mortgage (93 ) - (93 ) 26 - 26 660 - 660
Consumer 2,536 - 2,536 2,492 - 2,492 3,465 - 3,465
Discontinued operations     -       -       -       -       -       -       713       -       713  
Total BPNA     (2,336 )     -       (2,336 )     1,787       -       1,787       110       -       110  
Total loans charged-off (recovered) - Popular, Inc.     50,187       3,969       54,156       40,469       21,440       61,909       35,366       23,643       59,009  
Net write-downs [3]     (3,418 )     -       (3,418 )     (32,256 )     -       (32,256 )     -       -       -  
Net write-downs related to loans transferred to discontinued operations     -       -       -       -       -       -       -       -       -  
Balance at end of period   $ 519,719     $ 82,073     $ 601,792     $ 521,687     $ 89,688     $ 611,375     $ 538,463     $ 102,092     $ 640,555  
 
POPULAR, INC.
Annualized net charge-offs to average loans held-in-portfolio 1.04 % 0.99 % 0.83 % 1.12 % 0.66 % 0.97 %
Provision for loan losses to net charge-offs [2]

 

0.99x

 

0.85x

 

1.39x

 

1.11x

 

1.35x

 

0.96x

 
BPPR
Annualized net charge-offs to average loans held-in-portfolio 1.33 % 1.22 % 0.98 % 1.30 % 0.90 % 1.26 %
Provision for loan losses to net charge-offs [2]

 

0.99x

 

0.86x

 

1.60x

 

1.24x

 

1.78x

 

1.22x

 
BPNA
Annualized net charge-offs (recoveries) to average loans held-in-portfolio (0.27 )% 0.19 % 0.01 %
Provision for loan losses to net charge-offs                  

 

N.M.

                   

 

N.M.

                   

 

(135.72)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 loans sold or reclassified to held-for-sale during the quarter ended December 31, 2014 and September 30, 2014.

[3] Net write-downs for the quarters ended December 31, 2014 and September 30, 2014 are related to loans sold or reclassified to held-for-sale.

N.M. - Not meaningful.
 

           
Year ended Year ended
(Dollars in thousands)   31-Dec-14   31-Dec-13
    Non-covered loans   Covered loans   Total   Non-covered loans   Covered loans   Total
Balance at beginning of period $ 538,463 $ 102,092 $ 640,555 $ 621,701 $ 108,906 $ 730,607
Provision for loan losses - Continuing operations 223,999 46,135 270,134 536,710 69,396 606,106
Provision for loan losses - Discontinued operations     (6,764 )     -       (6,764 )     (3,543 )     -     (3,543 )
      755,698       148,227       903,925       1,154,868       178,302     1,333,170  
Net loans charged-off (recovered):
BPPR
Commercial

39,382

32,906

72,288

85,601 27,607 113,208
Construction

(3,509

) 27,686

24,177

(8,642 ) 34,108 25,466
Lease financing

3,961

(7 )

3,954

3,506 - 3,506
Mortgage 44,000 8,442 52,442 47,736 10,614 58,350
Consumer     96,655       (2,873 )     93,782       75,560       3,881     79,441  
Total BPPR     180,489       66,154       246,643       203,761       76,210     279,971  
 
BPNA
Commercial 1,105 - 1,105 9,184 - 9,184
Construction (237 ) - (237 ) - - -
Legacy [1] (9,070 ) - (9,070 ) (3,897 ) - (3,897 )
Mortgage 1,196 - 1,196 7,803 - 7,803
Consumer 12,165 - 12,165 18,004 - 18,004
Discontinued operations     (5,545 )     -       (5,545 )     18,905       -     18,905  
Total BPNA     (386 )     -       (386 )     49,999       -     49,999  
Total loans charged-off (recovered) - Popular, Inc.     180,103       66,154       246,257       253,760       76,210     329,970  
Net write-downs [3]     (35,674 )     -       (35,674 )     (362,645 )     -     (362,645 )
Net write-downs related to loans transferred to discontinued operations     (20,202 )     -       (20,202 )     -       -     -  
Balance at end of period   $ 519,719     $ 82,073     $ 601,792     $ 538,463     $ 102,092   $ 640,555  
 
POPULAR, INC.
Annualized net charge-offs to average loans held-in-portfolio 0.92 % 1.10 % 1.19 % 1.34 %
Provision for loan losses to net charge-offs [2]

 

1.17x

 

1.04x

 

0.85x

 

0.86x

 
BPPR
Annualized net charge-offs to average loans held-in-portfolio 1.14 % 1.33 % 1.30 % 1.49 %
Provision for loan losses to net charge-offs [2]

 

1.38x

 

1.20x

 

1.13x

 

1.07x

 
BPNA
Annualized net charge-offs to average loans held-in-portfolio (0.01 )% 0.87 %
Provision (reversal) for loan losses to net charge-offs                  

 

102.57x

                 

 

(0.29)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 loans sold or reclassified to held-for-sale during the quarter ended December 31, 2014 and December 31, 2013.

[3] Net write-downs for the year ended December 31, 2014 and 2013 are related to loans sold or reclassified to held-for-sale.

 

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

Total [2]

Specific ALLL $ 64,736 $ 363 $ - $ 46,111 $ 770 $ 28,161 $ 140,141
Impaired loans [1] $ 357,161 $ 13,268 $ - $ 435,824 $ 3,023 $ 117,732 $ 927,008
Specific ALLL to impaired loans [1]     18.13 %     2.74 %     - %     10.58 %     25.47 %     23.92 %     15.12 %
General ALLL $ 146,501 $ 6,307 $ 2,944 $ 77,211 $ 6,361 $ 140,254 $ 379,578
Loans held-in-portfolio, excluding impaired loans [1] $ 7,777,106 $ 238,552 $ 80,818 $ 6,067,062 $ 561,366 $ 3,752,539 $ 18,477,443
General ALLL to loans held-in-portfolio, excluding impaired loans [1]     1.88 %     2.64 %     3.64 %     1.27 %     1.13 %     3.74 %     2.05 %
Total ALLL $ 211,237 $ 6,670 $ 2,944 $ 123,322 $ 7,131 $ 168,415 $ 519,719
Total non-covered loans held-in-portfolio [1] $ 8,134,267 $ 251,820 $ 80,818 $ 6,502,886 $ 564,389 $ 3,870,271 $ 19,404,451
ALLL to loans held-in-portfolio [1]     2.60 %     2.65 %     3.64 %     1.90 %     1.26 %     4.35 %     2.68 %
 
[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, 2014 the general allowance on the covered loans amounted to $82.1 million, while the specific reserve amounted to $5 thousand.
[3] The legacy portfolio is comprised of commercial loans, construction loans and lease financings related to certain lending products exited by the Corporation as part of restructuring efforts carried out in prior years at the BPNA reportable segment.
 
30-Sep-14
(Dollars in thousands)     Commercial   Construction   Legacy [3]   Mortgage   Lease financing   Consumer  

Total [2]

Specific ALLL $ 64,750 $ 133 $ - $ 38,207 $ 698 $ 28,166 $ 131,954
Impaired loans [1] $ 373,501 $ 18,894 $ 2,311 $ 431,720 $ 2,709 $ 116,830 $ 945,965
Specific ALLL to impaired loans [1]     17.34 %     0.70 %     - %     8.85 %     25.77 %     24.11 %     13.95 %
General ALLL $ 151,681 $ 6,375 $ 4,001 $ 83,314 $ 6,673 $ 137,689 $ 389,733
Loans held-in-portfolio, excluding impaired loans [1] $ 7,685,213 $ 192,956 $ 88,704 $ 6,123,617 $ 547,805 $ 3,774,956 $ 18,413,251
General ALLL to loans held-in-portfolio, excluding impaired loans [1]     1.97 %     3.30 %     4.51 %     1.36 %     1.22 %     3.65 %     2.12 %
Total ALLL $ 216,431 $ 6,508 $ 4,001 $ 121,521 $ 7,371 $ 165,855 $ 521,687
Total non-covered loans held-in-portfolio [1] $ 8,058,714 $ 211,850 $ 91,015 $ 6,555,337 $ 550,514 $ 3,891,786 $ 19,359,216
ALLL to loans held-in-portfolio [1]     2.69 %     3.07 %     4.40 %     1.85 %     1.34 %     4.26 %     2.69 %
 
[1] Excludes covered loans acquired on the Westernbank FDIC-assisted transaction.
[2] Excludes covered loans acquired on the Westernbank FDIC-assisted transaction. As of September 30, 2014 the general allowance on the covered loans amounted to $89.7 million, while the specific reserve amounted to $4 thousand.
[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 )   $ 230   $ -   $ 7,904   $ 72   $ (5 )   $ 8,187
Impaired loans   $ (16,340 )   $ (5,626 )   $ (2,311 )   $ 4,104     $ 314     $ 902     $ (18,957 )
General ALLL $ (5,180 ) $ (68 ) $ (1,057 ) $ (6,103 ) $ (312 ) $ 2,565 $ (10,155 )
Loans held-in-portfolio, excluding impaired loans   $ 91,893     $ 45,596     $ (7,886 )   $ (56,555 )   $ 13,561     $ (22,417 )   $ 64,192  
Total ALLL $ (5,194 ) $ 162 $ (1,057 ) $ 1,801 $ (240 ) $ 2,560 $ (1,968 )
Total non-covered loans held-in-portfolio   $ 75,553     $ 39,970     $ (10,197 )   $ (52,451 )   $ 13,875     $ (21,515 )   $ 45,235  
 

           
Popular, Inc.
Financial Supplement to Fourth Quarter 2014 Earnings Release
Table L - Allowance for Loan Losses - Breakdown of General and Specific Reserves - PUERTO RICO OPERATIONS
(Unaudited)
 
31-Dec-14
Puerto Rico
(In thousands)   Commercial   Construction   Mortgage   Lease financing   Consumer   Total
Allowance for credit losses:
Specific ALLL non-covered loans $ 64,736 $ 363 $ 45,838 $ 770 $ 27,796 $ 139,503
General ALLL non-covered loans     136,853       5,120       75,022       6,361       126,276       349,632  
ALLL - non-covered loans     201,589       5,483       120,860       7,131       154,072       489,135  
Specific ALLL covered loans 5 - - - - 5
General ALLL covered loans     30,866       7,202       40,948       -       3,052       82,068  
ALLL - covered loans     30,871       7,202       40,948       -       3,052       82,073  
Total ALLL   $ 232,460     $ 12,685     $ 161,808     $ 7,131     $ 157,124     $ 571,208  
Loans held-in-portfolio:
Impaired non-covered loans $ 356,911 $ 13,268 $ 431,569 $ 3,023 $ 115,759 $ 920,530
Non-covered loans held-in-portfolio, excluding impaired loans     6,017,892       146,116       5,018,932       561,366       3,273,278       15,017,584  
Non-covered loans held-in-portfolio     6,374,803       159,384       5,450,501       564,389       3,389,037       15,938,114  
Impaired covered loans 4,487 2,419 - - - 6,906
Covered loans held-in-portfolio, excluding impaired loans     1,610,294       67,917       822,986       -       34,559       2,535,756  
Covered loans held-in-portfolio     1,614,781       70,336       822,986       -       34,559       2,542,662  
Total loans held-in-portfolio   $ 7,989,584     $ 229,720     $ 6,273,487     $ 564,389     $ 3,423,596     $ 18,480,776  
 
 
30-Sep-14
Puerto Rico
(In thousands)   Commercial   Construction   Mortgage   Lease financing   Consumer   Total
Allowance for credit losses:
Specific ALLL non-covered loans $ 64,750 $ 133 $ 37,491 $ 698 $ 27,723 $ 130,795
General ALLL non-covered loans     140,906       5,534       81,728       6,673       123,816       358,657  
ALLL - non-covered loans