UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
x | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended March 31,June 30, 2016
Commission File Number: 001-34084
POPULAR, INC.
(Exact name of registrant as specified in its charter)
Puerto Rico | 66-0667416 | |
(State or other jurisdiction of Incorporation or organization) | (IRS Employer Identification Number) | |
Popular Center Building 209 Muñoz Rivera Avenue Hato Rey, Puerto Rico | 00918 | |
(Address of principal executive offices) | (Zip code) |
(787) 765-9800
(Registrant’s telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes ¨ No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes ¨ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “accelerated filer”, “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer | x | Accelerated filer | ¨ | |||
Non-accelerated filer | ¨ (Do not check if a smaller reporting company) | Smaller reporting company | ¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨ Yes x No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: Common Stock, $0.01 par value, 103,704,084103,738,891 shares outstanding as of May 4,August 3, 2016.
POPULAR, INC.
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Part I – Financial Information | ||||
Item 1. Financial Statements | ||||
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10 | ||||
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | ||||
Item 3. Quantitative and Qualitative Disclosures about Market Risk | ||||
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | ||||
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Forward-Looking Information
The information included in this Form 10-Q contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may relate to Popular, Inc.’s (the “Corporation”, “Popular”, “we”, “us”, “our”) financial condition, results of operations, plans, objectives, future performance and business, including, but not limited to, statements with respect to the adequacy of the allowance for loan losses, delinquency trends, market risk and the impact of interest rate changes, capital markets conditions, capital adequacy and liquidity, and the effect of legal proceedings and new accounting standards on the Corporation’s financial condition and results of operations. All statements contained herein that are not clearly historical in nature are forward-looking, and the words “anticipate”, “believe”, “continues”, “expect”, “estimate”, “intend”, “project” and similar expressions and future or conditional verbs such as “will”, “would”, “should”, “could”, “might”, “can”, “may” or similar expressions are generally intended to identify forward-looking statements.
These statements are not guarantees of future performance and involve certain risks, uncertainties, estimates and assumptions by management that are difficult to predict.
Various factors, some of which are beyond Popular’s control, could cause actual results to differ materially from those expressed in, or implied by, such forward-looking statements. Factors that might cause such a difference include, but are not limited to:
Other possible events or factors that could cause results or performance to differ materially from those expressed in these forward-looking statements include the following:
Moreover, the outcome of legal proceedings, as discussed in “Part II, Item I. Legal Proceedings,” is inherently uncertain and depends on judicial interpretations of law and the findings of regulators, judges juries and arbitrators.juries. Investors should refer to the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2015 as well as “Part II, Item 1A” of this Form 10-Q for a discussion of such factors and certain risks and uncertainties to which the Corporation is subject.
All forward-looking statements included in this Form 10-Q are based upon information available to Popular as of the date of this Form 10-Q, and other than as required by law, including the requirements of applicable securities laws, we assume no obligation to update or revise any such forward-looking statements to reflect occurrences or unanticipated events or circumstances after the date of such statements.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
March 31, | December 31, | |||||||||||||||
(In thousands, except share information) | 2016 | 2015 | June 30, 2016 | December 31, 2015 | ||||||||||||
Assets: | ||||||||||||||||
Cash and due from banks | $ | 409,623 | $ | 363,674 | $ | 365,308 | $ | 363,674 | ||||||||
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Money market investments: | ||||||||||||||||
Securities purchased under agreements to resell | 97,830 | 96,338 | 86,328 | 96,338 | ||||||||||||
Time deposits with other banks | 1,819,630 | 2,083,754 | 2,699,172 | 2,083,754 | ||||||||||||
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Total money market investments | 1,917,460 | 2,180,092 | 2,785,500 | 2,180,092 | ||||||||||||
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Trading account securities, at fair value: | ||||||||||||||||
Pledged securities with creditors’ right to repledge | 20,085 | 19,506 | 11,088 | 19,506 | ||||||||||||
Other trading securities | 51,199 | 52,153 | 61,442 | 52,153 | ||||||||||||
Investment securities available-for-sale, at fair value: | ||||||||||||||||
Pledged securities with creditors’ right to repledge | 734,168 | 739,045 | 863,594 | 739,045 | ||||||||||||
Other investment securities available-for-sale | 5,915,662 | 5,323,947 | 6,379,082 | 5,323,947 | ||||||||||||
Investment securities held-to-maturity, at amortized cost (fair value 2016—$80,914; 2015—$82,889) | 99,216 | 100,903 | ||||||||||||||
Other investment securities, at lower of cost or realizable value (realizable value 2016—$167,111; 2015—$175,291) | 164,024 | 172,248 | ||||||||||||||
Investment securities held-to-maturity, at amortized cost (fair value 2016 - $81,469; 2015 - $82,889) | 99,525 | 100,903 | ||||||||||||||
Other investment securities, at lower of cost or realizable value (realizable value 2016 - $171,569; 2015 - $175,291) | 168,563 | 172,248 | ||||||||||||||
Loans held-for-sale, at lower of cost or fair value | 125,315 | 137,000 | 122,338 | 137,000 | ||||||||||||
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Loans held-in-portfolio: | ||||||||||||||||
Loans not covered under loss-sharing agreements with the FDIC | 22,618,488 | 22,453,813 | 22,655,877 | 22,453,813 | ||||||||||||
Loans covered under loss-sharing agreements with the FDIC | 625,130 | 646,115 | 607,170 | 646,115 | ||||||||||||
Less–Unearned income | 110,751 | 107,698 | ||||||||||||||
Less – Unearned income | 115,216 | 107,698 | ||||||||||||||
Allowance for loan losses | 538,472 | 537,111 | 548,720 | 537,111 | ||||||||||||
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Total loans held-in-portfolio, net | 22,594,395 | 22,455,119 | 22,599,111 | 22,455,119 | ||||||||||||
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FDIC loss-share asset | 219,448 | 310,221 | 214,029 | 310,221 | ||||||||||||
Premises and equipment, net | 527,493 | 502,611 | 535,865 | 502,611 | ||||||||||||
Other real estate not covered under loss-sharing agreements with the FDIC | 165,960 | 155,231 | 177,025 | 155,231 | ||||||||||||
Other real estate covered under loss-sharing agreements with the FDIC | 36,397 | 36,685 | 37,984 | 36,685 | ||||||||||||
Accrued income receivable | 120,308 | 124,234 | 120,979 | 124,234 | ||||||||||||
Mortgage servicing assets, at fair value | 205,051 | 211,405 | 203,577 | 211,405 | ||||||||||||
Other assets | 2,156,030 | 2,193,162 | 2,179,060 | 2,193,162 | ||||||||||||
Goodwill | 631,095 | 626,388 | 631,095 | 626,388 | ||||||||||||
Other intangible assets | 54,080 | 58,109 | 50,983 | 58,109 | ||||||||||||
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Total assets | $ | 36,147,009 | $ | 35,761,733 | $ | 37,606,148 | $ | 35,761,733 | ||||||||
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Liabilities and Stockholders’ Equity | ||||||||||||||||
Liabilities: | ||||||||||||||||
Deposits: | ||||||||||||||||
Non-interest bearing | $ | 6,384,093 | $ | 6,401,515 | $ | 6,531,108 | $ | 6,401,515 | ||||||||
Interest bearing | 21,142,500 | 20,808,208 | 22,206,748 | 20,808,208 | ||||||||||||
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Total deposits | 27,526,593 | 27,209,723 | 28,737,856 | 27,209,723 | ||||||||||||
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Federal funds purchased and assets sold under agreements to repurchase | 760,154 | 762,145 | 821,604 | 762,145 | ||||||||||||
Other short-term borrowings | 6,370 | 1,200 | 31,200 | 1,200 | ||||||||||||
Notes payable | 1,583,468 | 1,662,508 | 1,575,948 | 1,662,508 | ||||||||||||
Other liabilities | 1,018,309 | 1,019,018 | 1,077,894 | 1,019,018 | ||||||||||||
Liabilities from discontinued operations (Refer to Note 4) | 1,815 | 1,815 | 1,815 | 1,815 | ||||||||||||
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Total liabilities | 30,896,709 | 30,656,409 | 32,246,317 | 30,656,409 | ||||||||||||
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Commitments and contingencies (Refer to Note 23) | ||||||||||||||||
Stockholders’ equity: | ||||||||||||||||
Preferred stock, 30,000,000 shares authorized; 2,006,391shares issued and outstanding | 50,160 | 50,160 | 50,160 | 50,160 | ||||||||||||
Common stock, $0.01 par value; 170,000,000 shares authorized; | ||||||||||||||||
103,895,642 shares issued (2015—103,816,185) and 103,670,005 shares outstanding (2015—103,618,976) | 1,039 | 1,038 | ||||||||||||||
103,952,715 shares issued (2015 - 103,816,185) and 103,703,041 shares outstanding (2015 - 103,618,976) | 1,039 | 1,038 | ||||||||||||||
Surplus | 4,231,233 | 4,229,156 | 4,232,835 | 4,229,156 | ||||||||||||
Retained earnings | 1,156,476 | 1,087,957 | 1,228,979 | 1,087,957 | ||||||||||||
Treasury stock—at cost, 225,637 shares (2015—197,209) | (6,858 | ) | (6,101 | ) | ||||||||||||
Treasury stock - at cost, 249,674 shares (2015 - 197,209) | (7,570 | ) | (6,101 | ) | ||||||||||||
Accumulated other comprehensive loss, net of tax | (181,750 | ) | (256,886 | ) | (145,612 | ) | (256,886 | ) | ||||||||
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Total stockholders’ equity | 5,250,300 | 5,105,324 | 5,359,831 | 5,105,324 | ||||||||||||
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Total liabilities and stockholders’ equity | $ | 36,147,009 | $ | 35,761,733 | $ | 37,606,148 | $ | 35,761,733 | ||||||||
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The accompanying notes are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Quarters ended March 31, | Quarters ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
(In thousands, except per share information) | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | ||||||||||||||||||
Interest income: | ||||||||||||||||||||||||
Loans | $ | 363,197 | $ | 355,631 | $ | 369,721 | $ | 374,133 | $ | 732,918 | $ | 729,764 | ||||||||||||
Money market investments | 2,863 | 1,446 | 3,889 | 1,845 | 6,752 | 3,291 | ||||||||||||||||||
Investment securities | 36,271 | 30,301 | 36,725 | 31,297 | 72,996 | 61,598 | ||||||||||||||||||
Trading account securities | 1,689 | 2,696 | 1,875 | 3,026 | 3,564 | 5,722 | ||||||||||||||||||
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Total interest income | 404,020 | 390,074 | 412,210 | 410,301 | 816,230 | 800,375 | ||||||||||||||||||
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Interest expense: | ||||||||||||||||||||||||
Deposits | 29,874 | 25,864 | 30,599 | 26,258 | 60,473 | 52,122 | ||||||||||||||||||
Short-term borrowings | 1,861 | 1,734 | 2,058 | 1,863 | 3,919 | 3,597 | ||||||||||||||||||
Long-term debt | 19,873 | 19,281 | 19,002 | 19,627 | 38,875 | 38,908 | ||||||||||||||||||
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Total interest expense | 51,608 | 46,879 | 51,659 | 47,748 | 103,267 | 94,627 | ||||||||||||||||||
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Net interest income | 352,412 | 343,195 | 360,551 | 362,553 | 712,963 | 705,748 | ||||||||||||||||||
Provision for loan losses—non-covered loans | 47,940 | 29,711 | ||||||||||||||||||||||
Provision (reversal) for loan losses—covered loans | (3,105 | ) | 10,324 | |||||||||||||||||||||
Provision for loan losses - non-covered loans | 39,668 | 60,468 | 87,608 | 90,179 | ||||||||||||||||||||
Provision (reversal) for loan losses - covered loans | 804 | 15,766 | (2,301 | ) | 26,090 | |||||||||||||||||||
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Net interest income after provision for loan losses | 307,577 | 303,160 | 320,079 | 286,319 | 627,656 | 589,479 | ||||||||||||||||||
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Service charges on deposit accounts | 39,862 | 39,017 | 40,296 | 40,138 | 80,158 | 79,155 | ||||||||||||||||||
Other service fees (Refer to Note 29) | 53,382 | 53,626 | 56,945 | 59,421 | 110,327 | 113,047 | ||||||||||||||||||
Mortgage banking activities (Refer to Note 12) | 10,551 | 12,852 | 16,227 | 21,325 | 26,778 | 34,177 | ||||||||||||||||||
Trading account (loss) profit | (162 | ) | 414 | |||||||||||||||||||||
Net loss on sale of loans, including valuation adjustments on loans held-for-sale | (304 | ) | (79 | ) | ||||||||||||||||||||
Net gain on sale of investment securities | 1,583 | 5 | 1,583 | 5 | ||||||||||||||||||||
Other-than-temporary impairment losses on investment securities | (209 | ) | (14,445 | ) | (209 | ) | (14,445 | ) | ||||||||||||||||
Trading account profit (loss) | 1,117 | (3,108 | ) | 955 | (2,694 | ) | ||||||||||||||||||
Net gain (loss) on sale of loans, including valuation adjustments on loans held-for-sale | — | 681 | (304 | ) | 602 | |||||||||||||||||||
Adjustments (expense) to indemnity reserves on loans sold | (4,098 | ) | (4,526 | ) | (5,746 | ) | 419 | (9,844 | ) | (4,107 | ) | |||||||||||||
FDIC loss share (expense) income (Refer to Note 30) | (3,146 | ) | 4,139 | |||||||||||||||||||||
FDIC loss-share (expense) income (Refer to Note 30) | (12,576 | ) | 19,075 | (15,722 | ) | 23,214 | ||||||||||||||||||
Other operating income | 15,545 | 9,792 | 12,866 | 17,248 | 28,411 | 27,040 | ||||||||||||||||||
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Total non-interest income | 111,630 | 115,235 | 110,503 | 140,759 | 222,133 | 255,994 | ||||||||||||||||||
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Operating expenses: | ||||||||||||||||||||||||
Personnel costs | 127,091 | 116,458 | 116,708 | 120,977 | 243,799 | 237,435 | ||||||||||||||||||
Net occupancy expenses | 20,430 | 21,709 | 21,714 | 23,286 | 42,144 | 44,995 | ||||||||||||||||||
Equipment expenses | 14,548 | 13,411 | 15,261 | 15,925 | 29,809 | 29,336 | ||||||||||||||||||
Other taxes | 10,195 | 8,574 | 10,170 | 11,113 | 20,365 | 19,687 | ||||||||||||||||||
Professional fees | 75,459 | 75,528 | 80,625 | 78,449 | 156,084 | 153,977 | ||||||||||||||||||
Communications | 6,320 | 6,176 | 6,012 | 6,153 | 12,332 | 12,329 | ||||||||||||||||||
Business promotion | 11,110 | 10,813 | 13,705 | 13,776 | 24,815 | 24,589 | ||||||||||||||||||
FDIC deposit insurance | 7,370 | 6,398 | 5,362 | 8,542 | 12,732 | 14,940 | ||||||||||||||||||
Other real estate owned (OREO) expenses | 9,141 | 23,069 | 12,980 | 44,816 | 22,121 | 67,885 | ||||||||||||||||||
Other operating expenses | 17,165 | 17,349 | 23,515 | 31,082 | 40,680 | 48,430 | ||||||||||||||||||
Amortization of intangibles | 3,114 | 2,104 | 3,097 | 2,881 | 6,211 | 4,985 | ||||||||||||||||||
Restructuring costs | — | 10,753 | ||||||||||||||||||||||
Restructuring costs (Refer to Note 4) | — | 6,174 | — | 16,927 | ||||||||||||||||||||
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Total operating expenses | 301,943 | 312,342 | 309,149 | 363,174 | 611,092 | 675,515 | ||||||||||||||||||
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Income from continuing operations before income tax | 117,264 | 106,053 | 121,433 | 63,904 | 238,697 | 169,958 | ||||||||||||||||||
Income tax expense | 32,265 | 32,568 | ||||||||||||||||||||||
Income tax expense (benefit) | 32,446 | (533,533 | ) | 64,711 | (500,964 | ) | ||||||||||||||||||
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Income from continuing operations | 84,999 | 73,485 | 88,987 | 597,437 | 173,986 | 670,922 | ||||||||||||||||||
Income from discontinued operations, net of tax | — | 1,341 | ||||||||||||||||||||||
Income from discontinued operations, net of tax (Refer to Note 4) | — | 15 | — | 1,356 | ||||||||||||||||||||
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Net Income | $ | 84,999 | $ | 74,826 | $ | 88,987 | $ | 597,452 | $ | 173,986 | $ | 672,278 | ||||||||||||
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Net Income Applicable to Common Stock | $ | 84,068 | $ | 73,896 | $ | 88,056 | $ | 596,521 | $ | 172,124 | $ | 670,417 | ||||||||||||
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Net Income per Common Share – Basic | ||||||||||||||||||||||||
Net income from continuing operations | 0.81 | 0.71 | $ | 0.85 | $ | 5.80 | $ | 1.67 | $ | 6.51 | ||||||||||||||
Net income from discontinued operations | — | 0.01 | — | — | — | 0.01 | ||||||||||||||||||
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Net Income per Common Share – Basic | $ | 0.81 | $ | 0.72 | $ | 0.85 | $ | 5.80 | $ | 1.67 | $ | 6.52 | ||||||||||||
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Net Income per Common Share – Diluted | ||||||||||||||||||||||||
Net income from continuing operations | 0.81 | 0.71 | $ | 0.85 | $ | 5.79 | $ | 1.67 | $ | 6.49 | ||||||||||||||
Net income from discontinued operations | — | 0.01 | — | — | — | 0.01 | ||||||||||||||||||
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Net Income per Common Share – Diluted | $ | 0.81 | $ | 0.72 | $ | 0.85 | $ | 5.79 | $ | 1.67 | $ | 6.50 | ||||||||||||
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Dividends Declared per Common Share | $ | 0.15 | $ | — | $ | 0.15 | $ | — | $ | 0.30 | $ | — | ||||||||||||
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The accompanying notes are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
Quarters ended, | Six months ended, | |||||||||||||||||||||||
Quarters ended March 31, | June 30, | June 30, | ||||||||||||||||||||||
(In thousands) | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | ||||||||||||||||||
Net income | $ | 84,999 | $ | 74,826 | $ | 88,987 | $ | 597,452 | $ | 173,986 | $ | 672,278 | ||||||||||||
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Other comprehensive income before tax: | ||||||||||||||||||||||||
Other comprehensive income (loss) before tax: | ||||||||||||||||||||||||
Foreign currency translation adjustment | (705 | ) | (581 | ) | (1,435 | ) | (1,092 | ) | (2,140 | ) | (1,673 | ) | ||||||||||||
Amortization of net losses on pension and postretirement benefit plans | 5,486 | 5,025 | ||||||||||||||||||||||
Amortization of net losses of pension and postretirement benefit plans | 5,487 | 5,025 | 10,973 | 10,050 | ||||||||||||||||||||
Amortization of prior service cost of pension and postretirement benefit plans | (950 | ) | (950 | ) | (950 | ) | (950 | ) | (1,900 | ) | (1,900 | ) | ||||||||||||
Unrealized holding gains on investments arising during the period | 76,236 | 35,342 | ||||||||||||||||||||||
Unrealized net losses on cash flow hedges | (2,000 | ) | (2,535 | ) | ||||||||||||||||||||
Unrealized holding gains (losses) on investments arising during the period | 38,092 | (41,191 | ) | 114,328 | (5,849 | ) | ||||||||||||||||||
Other-than-temporary impairment included in net income | 209 | 14,445 | 209 | 14,445 | ||||||||||||||||||||
Reclassification adjustment for gains included in net income | — | (5 | ) | — | (5 | ) | ||||||||||||||||||
Unrealized net (losses) gains on cash flow hedges | (1,539 | ) | 1,004 | (3,539 | ) | (1,530 | ) | |||||||||||||||||
Reclassification adjustment for net losses included in net income | 1,545 | 1,358 | 1,271 | 951 | 2,816 | 2,309 | ||||||||||||||||||
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Other comprehensive income before tax | 79,612 | 37,659 | ||||||||||||||||||||||
Other comprehensive income (loss) before tax | 41,135 | (21,813 | ) | 120,747 | 15,847 | |||||||||||||||||||
Income tax expense | (4,476 | ) | (2,187 | ) | (4,997 | ) | (2,818 | ) | (9,473 | ) | (5,006 | ) | ||||||||||||
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Total other comprehensive income, net of tax | 75,136 | 35,472 | ||||||||||||||||||||||
Total other comprehensive income (loss) , net of tax | 36,138 | (24,631 | ) | 111,274 | 10,841 | |||||||||||||||||||
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Comprehensive income, net of tax | $ | 160,135 | $ | 110,298 | $ | 125,125 | $ | 572,821 | $ | 285,260 | $ | 683,119 | ||||||||||||
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Tax effect allocated to each component of other comprehensive income: | Quarters ended March 31, | |||||||||||||||||||||||
Tax effect allocated to each component of other comprehensive income (loss): | Tax effect allocated to each component of other comprehensive income (loss): | |||||||||||||||||||||||
Quarters ended | Six months ended, | |||||||||||||||||||||||
June 30, | June 30, | |||||||||||||||||||||||
(In thousands) | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | ||||||||||||||||||
Amortization of net losses on pension and postretirement benefit plans | $ | (2,140 | ) | $ | (1,960 | ) | ||||||||||||||||||
Amortization of net losses of pension and postretirement benefit plans | $ | (2,140 | ) | $ | (1,960 | ) | $ | (4,280 | ) | $ | (3,920 | ) | ||||||||||||
Amortization of prior service cost of pension and postretirement benefit plans | 370 | 371 | 370 | 371 | 740 | 742 | ||||||||||||||||||
Unrealized holding gains on investments arising during the period | (2,885 | ) | (1,057 | ) | ||||||||||||||||||||
Unrealized net losses on cash flow hedges | 781 | 989 | ||||||||||||||||||||||
Unrealized holding gains (losses) on investments arising during the period | (3,289 | ) | 2,019 | (6,174 | ) | 962 | ||||||||||||||||||
Other-than-temporary impairment included in net income | (42 | ) | (2,486 | ) | (42 | ) | (2,486 | ) | ||||||||||||||||
Reclassification adjustment for gains included in net income | — | 1 | — | 1 | ||||||||||||||||||||
Unrealized net (losses) gains on cash flow hedges | 600 | (392 | ) | 1,381 | 597 | |||||||||||||||||||
Reclassification adjustment for net losses included in net income | (602 | ) | (530 | ) | (496 | ) | (371 | ) | (1,098 | ) | (902 | ) | ||||||||||||
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Income tax expense | $ | (4,476 | ) | $ | (2,187 | ) | $ | (4,997 | ) | $ | (2,818 | ) | $ | (9,473 | ) | $ | (5,006 | ) | ||||||
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The accompanying notes are an integral part of thesethe consolidated financial statements.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(UNAUDITED)
Accumulated | Accumulated | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
other | other | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common | Preferred | Retained | Treasury | comprehensive | Common | Preferred | Retained | Treasury | comprehensive | |||||||||||||||||||||||||||||||||||||||||||||||
(In thousands) | stock | stock | Surplus | earnings | stock | loss | Total | stock | stock | Surplus | earnings | stock | loss | Total | ||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2014 | $ | 1,036 | $ | 50,160 | $ | 4,196,458 | $ | 253,717 | $ | (4,117 | ) | $ | (229,872 | ) | $ | 4,267,382 | $ | 1,036 | $ | 50,160 | $ | 4,196,458 | $ | 253,717 | $ | (4,117 | ) | $ | (229,872 | ) | $ | 4,267,382 | ||||||||||||||||||||||||
Net income | 74,826 | 74,826 | 672,278 | 672,278 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of stock | 1 | 1,405 | 1,406 | 1 | 2,536 | 2,537 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Tax windfall benefit on vesting of restricted stock | 69 | 69 | 171 | 171 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends declared: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Preferred stock | (930 | ) | (930 | ) | (1,861 | ) | (1,861 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
Common stock purchases | (1,123 | ) | (1,123 | ) | (1,741 | ) | (1,741 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
Common stock reissuance | 18 | 18 | 46 | 46 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income, net of tax | 35,472 | 35,472 | 10,841 | 10,841 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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Balance at March 31, 2015 | $ | 1,037 | $ | 50,160 | $ | 4,197,932 | $ | 327,613 | $ | (5,222 | ) | $ | (194,400 | ) | $ | 4,377,120 | ||||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2015 | $ | 1,037 | $ | 50,160 | $ | 4,199,165 | $ | 924,134 | $ | (5,812 | ) | $ | (219,031 | ) | $ | 4,949,653 | ||||||||||||||||||||||||||||||||||||||||
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Balance at December 31, 2015 | $ | 1,038 | $ | 50,160 | $ | 4,229,156 | $ | 1,087,957 | $ | (6,101 | ) | $ | (256,886 | ) | $ | 5,105,324 | $ | 1,038 | $ | 50,160 | $ | 4,229,156 | $ | 1,087,957 | $ | (6,101 | ) | $ | (256,886 | ) | $ | 5,105,324 | ||||||||||||||||||||||||
Net income | 84,999 | 84,999 | 173,986 | 173,986 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of stock | 1 | 2,108 | 2,109 | 1 | 3,708 | 3,709 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Tax shortfall expense on vesting of restricted stock | (31 | ) | (31 | ) | (29 | ) | (29 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
Dividends declared: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common stock | (15,549 | ) | (15,549 | ) | (31,102 | ) | (31,102 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
Preferred stock | (931 | ) | (931 | ) | (1,862 | ) | (1,862 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
Common stock purchases | (764 | ) | (764 | ) | (1,476 | ) | (1,476 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
Common stock reissuance | 7 | 7 | 7 | 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income, net of tax | 75,136 | 75,136 | 111,274 | 111,274 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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Balance at March 31, 2016 | $ | 1,039 | $ | 50,160 | $ | 4,231,233 | $ | 1,156,476 | $ | (6,858 | ) | $ | (181,750 | ) | $ | 5,250,300 | ||||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2016 | $ | 1,039 | $ | 50,160 | $ | 4,232,835 | $ | 1,228,979 | $ | (7,570 | ) | $ | (145,612 | ) | $ | 5,359,831 | ||||||||||||||||||||||||||||||||||||||||
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March 31, | March 31, | June 30, | June 30, | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of changes in number of shares: | 2016 | 2015 | 2016 | 2015 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Preferred Stock: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at beginning and end of period | 2,006,391 | 2,006,391 | 2,006,391 | 2,006,391 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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Common Stock – Issued: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at beginning of period | 103,816,185 | 103,614,553 | 103,816,185 | 103,614,553 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of stock | 79,457 | 42,621 | 136,530 | 76,206 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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Balance at end of the period | 103,895,642 | 103,657,174 | 103,952,715 | 103,690,759 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Treasury stock | (225,637 | ) | (170,247 | ) | (249,674 | ) | (187,745 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
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Common Stock – Outstanding | 103,670,005 | 103,486,927 | 103,703,041 | 103,503,014 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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The accompanying notes are an integral part of these consolidated financial statements.
POPULAR, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Quarter ended March 31, | Six months ended June 30, | |||||||||||||||
(In thousands) | 2016 | 2015 | 2016 | 2015 | ||||||||||||
Cash flows from operating activities: | ||||||||||||||||
Net income | $ | 84,999 | $ | 74,826 | $ | 173,986 | $ | 672,278 | ||||||||
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Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||||||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||||
Provision for loan losses | 44,835 | 40,035 | 85,307 | 116,269 | ||||||||||||
Amortization of intangibles | 3,114 | 2,104 | 6,211 | 4,985 | ||||||||||||
Depreciation and amortization of premises and equipment | 11,707 | 11,919 | 23,141 | 23,949 | ||||||||||||
Net accretion of discounts and amortization of premiums and deferred fees | (11,158 | ) | (19,100 | ) | (24,724 | ) | (42,167 | ) | ||||||||
Other-than-temporary impairment on investment securities | 209 | 14,445 | ||||||||||||||
Fair value adjustments on mortgage servicing rights | 8,477 | 4,929 | 12,817 | 6,846 | ||||||||||||
FDIC loss share expense (income) | 3,146 | (4,139 | ) | 15,722 | (23,214 | ) | ||||||||||
Adjustments (expense) to indemnity reserves on loans sold | 4,098 | 4,526 | 9,844 | 4,107 | ||||||||||||
Earnings from investments under the equity method | (7,089 | ) | (2,301 | ) | (13,681 | ) | (9,806 | ) | ||||||||
Deferred income tax expense | 23,218 | 23,380 | ||||||||||||||
(Gain) loss on: | ||||||||||||||||
Deferred income tax expense (benefit) | 49,316 | (511,128 | ) | |||||||||||||
Loss (gain) on: | ||||||||||||||||
Disposition of premises and equipment and other productive assets | (1,946 | ) | (978 | ) | 2,424 | (1,429 | ) | |||||||||
Sale and valuation adjustments of investment securities | (1,583 | ) | (5 | ) | ||||||||||||
Sale of loans, including valuation adjustments on loans held-for-sale and mortgage banking activities | (7,101 | ) | (7,222 | ) | (15,577 | ) | (15,034 | ) | ||||||||
Sale of foreclosed assets, including write-downs | 2,802 | 14,851 | 9,571 | 54,711 | ||||||||||||
Acquisitions of loans held-for-sale | (66,451 | ) | (121,929 | ) | (148,725 | ) | (249,059 | ) | ||||||||
Proceeds from sale of loans held-for-sale | 22,253 | 27,547 | 43,110 | 51,062 | ||||||||||||
Net originations on loans held-for-sale | (110,528 | ) | (179,604 | ) | (247,287 | ) | (379,264 | ) | ||||||||
Net decrease (increase) in: | ||||||||||||||||
Trading securities | 176,598 | 177,942 | 393,178 | 481,271 | ||||||||||||
Accrued income receivable | 3,926 | (13 | ) | 3,255 | (656 | ) | ||||||||||
Other assets | 20,996 | (28,027 | ) | (21,351 | ) | 33,552 | ||||||||||
Net (decrease) increase in: | ||||||||||||||||
Interest payable | (12,261 | ) | (10,216 | ) | (1,208 | ) | 475 | |||||||||
Pension and other postretirement benefits obligation | 1,536 | 1,019 | 2,300 | 1,641 | ||||||||||||
Other liabilities | (17,010 | ) | (19,377 | ) | 6,310 | (41,438 | ) | |||||||||
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Total adjustments | 93,162 | (84,654 | ) | 188,579 | (479,887 | ) | ||||||||||
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Net cash provided by (used in) operating activities | 178,161 | (9,828 | ) | |||||||||||||
Net cash provided by operating activities | 362,565 | 192,391 | ||||||||||||||
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Cash flows from investing activities: | ||||||||||||||||
Net decrease (increase) in money market investments | 262,632 | (484,829 | ) | |||||||||||||
Net increase in money market investments | (605,407 | ) | (1,432,552 | ) | ||||||||||||
Purchases of investment securities: | ||||||||||||||||
Available-for-sale | (742,859 | ) | (411,189 | ) | (1,682,199 | ) | (985,427 | ) | ||||||||
Held-to-maturity | — | (250 | ) | — | (250 | ) | ||||||||||
Other | (59,786 | ) | (2,520 | ) | (70,302 | ) | (12,805 | ) | ||||||||
Proceeds from calls, paydowns, maturities and redemptions of investment securities: | ||||||||||||||||
Available-for-sale | 239,399 | 385,672 | 632,284 | 867,168 | ||||||||||||
Held-to-maturity | 2,108 | 2,231 | 2,209 | 2,389 | ||||||||||||
Other | 41,664 | 30,785 | 47,859 | 31,592 | ||||||||||||
Proceeds from sale of investment securities: | ||||||||||||||||
Available-for-sale | — | 70,005 | ||||||||||||||
Other | 26,346 | 1,388 | 27,710 | 8,399 | ||||||||||||
Net repayments on loans | 13,335 | 154,794 | ||||||||||||||
Net (disbursements) repayments on loans | (61,199 | ) | 374,224 | |||||||||||||
Proceeds from sale of loans | 1,128 | 19,127 | 95,940 | 27,780 | ||||||||||||
Acquisition of loan portfolios | (212,798 | ) | (49,510 | ) | (308,949 | ) | (140,671 | ) | ||||||||
Net payments from FDIC under loss sharing agreements | 88,588 | 132,265 | 88,588 | 164,423 | ||||||||||||
Net cash received and acquired from business combination | — | 711,051 | — | 738,296 | ||||||||||||
Acquisition of servicing advances | — | (3,897 | ) | |||||||||||||
Cash paid related to business acquisition | — | (17,250 | ) | |||||||||||||
Return of capital from equity method investments | 206 | — | 324 | — | ||||||||||||
Mortgage servicing rights purchased | — | (2,400 | ) | — | (2,400 | ) | ||||||||||
Acquisition of premises and equipment | (38,819 | ) | (10,231 | ) | (60,744 | ) | (30,817 | ) | ||||||||
Proceeds from sale of: | ||||||||||||||||
Premises and equipment and other productive assets | 5,092 | 3,093 | 2,839 | 7,901 | ||||||||||||
Foreclosed assets | 14,513 | 40,161 | 28,895 | 98,287 | ||||||||||||
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Net cash (used in) provided by investing activities | (359,251 | ) | 519,638 | |||||||||||||
Net cash used in investing activities | (1,862,152 | ) | (235,605 | ) | ||||||||||||
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Cash flows from financing activities: | ||||||||||||||||
Net increase (decrease) in: | ||||||||||||||||
Deposits | 318,550 | 265,906 | 1,530,091 | 745,787 | ||||||||||||
Federal funds purchased and assets sold under agreements to repurchase | (1,991 | ) | (139,013 | ) | 59,460 | (150,413 | ) | |||||||||
Other short-term borrowings | 5,170 | (148,215 | ) | 30,000 | (48,215 | ) | ||||||||||
Payments of notes payable | (108,452 | ) | (419,487 | ) | (216,501 | ) | (430,003 | ) | ||||||||
Proceeds from issuance of notes payable | 28,883 | 46,000 | 128,883 | 103,231 | ||||||||||||
Proceeds from issuance of common stock | 2,109 | 1,405 | 3,710 | 2,536 | ||||||||||||
Dividends paid | (16,473 | ) | (620 | ) | (32,953 | ) | (1,861 | ) | ||||||||
Net payments for repurchase of common stock | (757 | ) | (1,105 | ) | (1,469 | ) | (1,695 | ) | ||||||||
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Net cash provided by (used in) financing activities | 227,039 | (395,129 | ) | |||||||||||||
Net cash provided by financing activities | 1,501,221 | 219,367 | ||||||||||||||
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Net increase in cash and due from banks | 45,949 | 114,681 | 1,634 | 176,153 | ||||||||||||
Cash and due from banks at beginning of period | 363,674 | 381,095 | 363,674 | 381,095 | ||||||||||||
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Cash and due from banks at the end of the period | $ | 409,623 | $ | 495,776 | $ | 365,308 | $ | 557,248 | ||||||||
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The accompanying notes are an integral part of these consolidated financial statements.
During the quartersix months ended March 31,June 30, 2016 there have not been any cash flows associated with discontinued operations. The Consolidated Statement of Cash Flows for the quartersix months ended March 31,June 30, 2015 includes the cash flows from operating, investing and financing activities associated with discontinued operations.
Notes to Consolidated Financial
Statements (Unaudited)
11 | ||||||
Basis of presentation and summary of significant accounting policies | 12 | |||||
13 | ||||||
16 | ||||||
17 | ||||||
Restrictions on cash and due from banks and certain securities | 19 | |||||
20 | ||||||
24 | ||||||
26 | ||||||
36 | ||||||
Supplemental disclosure on the consolidated statements of cash flows | ||||||
Popular, Inc. (the “Corporation”) is a diversified, publicly-owned financial holding company subject to the supervision and regulation of the Board of Governors of the Federal Reserve System. The Corporation has operations in Puerto Rico, the United States and the Caribbean. In Puerto Rico, the Corporation provides retail, mortgage, and commercial banking services through its principal banking subsidiary, Banco Popular de Puerto Rico (“BPPR”), as well as investment banking, broker-dealer, auto and equipment leasing and financing, and insurance services through specialized subsidiaries. In the U.S. mainland, the Corporation operates Banco Popular North America (“BPNA”), including its wholly-owned subsidiary E-LOAN.. BPNA focuses efforts and resources on the core community banking business. BPNA operates branches in New York, New Jersey and South Florida under the name of Popular Community Bank. E-LOAN markets deposit accounts under its name for the benefit of BPNA. Refer to Note 4 for discussion of the sales of the California, Illinois and Central Florida regional operations during 2014. Note 35 to the consolidated financial statements presents information about the Corporation’s business segments.
On February 27, 2015, BPPR, in an alliance with other bidders, including BPNA, acquired certain assets and all deposits (other than certain brokered deposits) of former Doral Bank (“Doral”) from the Federal Deposit Insurance Corporation (FDIC), as receiver (the “Doral Bank Transaction”). Under the FDIC’s bidding format, BPPR was the lead bidder and party to the purchase and assumption agreement with the FDIC covering all assets and deposits acquired by it and its alliance co-bidders. BPPR entered into back to back purchase and assumption agreements with the alliance co-bidders for the transfer of certain assets and deposits. The other co-bidders that formed part of the alliance led by BPPR were First Bank Puerto Rico, Centennial Bank, and a vehicle formed by J.C. Flowers III L.P. BPPR entered into transition service agreements with each of the alliance co-bidders. Refer to Note 5 for further details on the Doral Bank Transaction.
Note 2 – Basis of Presentation and Summary of Significant Accounting Policies
Principles of Consolidation and Basis of Presentation
The consolidated interim financial statements have been prepared without audit. The consolidated statement of financial condition data at December 31, 2015 was derived from audited financial statements. The unaudited interim financial statements are, in the opinion of management, a fair statement of the results for the periods reported and include all necessary adjustments, all of a normal recurring nature, for a fair statement of such results.
Certain reclassifications have been made to the 2015 consolidated financial statements and notes to the financial statements to conform with the 2016 presentation.
Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted from the unaudited financial statements pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, these financial statements should be read in conjunction with the audited consolidated financial statements of the Corporation for the year ended December 31, 2015, included in the Corporation’s 2015 Form 10-K. Operating results for the interim periods disclosed herein are not necessarily indicative of the results that may be expected for a full year or any future period.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Note 3 – New accounting pronouncements
Recently AdoptedIssued Accounting Standards Updates
FASB Accounting Standards Update 2015-03, Interest(“ASU”) 2016-13, Financial Instruments – ImputationCredit Losses (Topic 326): Measurement of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”)Credit Losses on Financial Instruments
The FASB issued ASU 2015-032016-13 in April 2015,June 2016, which simplifiedreplaces the presentationincurred loss model with a current expected credit loss (“CECL”) model. The CECL model applies to financial assets subject to credit losses and measured at amortized cost and certain off-balance sheet exposures. Under current U.S. GAAP, an entity reflects credit losses on financial assets measured on an amortized cost basis only when losses are probable or have been incurred, generally considering only past events and current conditions in making these determinations. ASU 2016-13 prospectively replaces this approach with a forward-looking methodology that reflects the expected credit losses over the lives of debt issuance costs. The amendments in thisfinancial assets, starting when such assets are first acquired. Under the revised methodology, credit losses will be measured based on past events, current conditions and reasonable and supportable forecasts that affect the collectability of financial assets. ASU require2016-13 also revises the approach to recognizing credit losses for available-for-sale securities by replacing the direct write-down approach with the allowance approach and limiting the allowance to the amount at which the security’s fair value is less than the amortized cost. In addition, ASU 2016-13 provides that debt issuance costs relatedthe initial allowance for credit losses on purchased credit impaired financial assets will be recorded as an increase to a recognized debt liability be presented in the balance sheetpurchase price, with subsequent changes to the allowance recorded as a direct reduction fromcredit loss expense.
ASU 2016-13 also expands disclosure requirements regarding an entity’s assumptions, models and methods for estimating the carrying amount of that debt liability.allowance for credit losses.
The amendments of this Update which are required to be applied on a retrospective basis, are effective for financial statements issued for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015.2019. Early adoption is permitted as of January 1, 2019.
SinceThe Corporation is currently evaluating the Corporation‘s policy was to record debt issuance costs as a deferred asset, it reclassified $7.3 million (December 31, 2015—$7.8 million) of debt issuance costs as a result ofimpact that the adoption of this accounting pronouncement duringguidance will have on its consolidated statements of financial condition, results of operations, and presentation and disclosures.
FASB Accounting Standards Update (“ASU”) 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients
The FASB issued ASU 2016-12 in May 2016. The amendments in this update, among other things, clarify the first quarterobjective of 2016the collectability criterion, provide guidance on noncash and adjusted priorvariable consideration, provide a practical expedient for contract modifications at transition, and clarify the meaning of a completed contract for purposes of transition.
The amendments of this Update are effective for fiscal years, and interim periods accordingly.within those fiscal years, beginning after December 15, 2017.
Additionally,The Corporation is currently evaluating the impact that the adoption of the following standards effective during the first quarterthis guidance will have on its results of 2016 did not have a significant impact on theoperations and presentation and disclosures in its consolidated financial statements:
Recently Issued Accounting Standards Updatesstatements.
FASB Accounting Standards Update (“ASU”) 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing
The FASB issued ASU 2016-10 in April 2016 which clarifies two aspects of Topic 606, in particular, the identification of performance obligations. Among other things, an entity is not required to assess whether promised goods or services are performance obligations if they are immaterial in the context of the contract with the customer. In addition, in determining whether promises to transfer goods or services are separately identifiable, an entity should determine whether the nature of its promise in the contract is to transfer each of the goods or services or whether the promise is to transfer a combined item (or items) to which the promised goods and/or services are inputs.
The amendments of this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017 (same effective date as ASU 2015-14).2017.
The Corporation is currently evaluating the impact that the adoption of this guidance will have on its results of operations and presentation and disclosures in its consolidated financial statements.
FASB Accounting Standards Update (“ASU”) 2016-09, Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting
The FASB issued ASU 2016-09 in March 2016 which simplifies multiple aspects of the accounting for share-based payment transactions, including the recognition of excess tax benefits and deficiencies as an income tax benefit or expense in the income statement and classification in the statement of cash flows as an operating activity, allowing entities to elect as an accounting policy to account for forfeitures when they occur, permitting entities to withhold up to the maximum individual statutory rate without classifying the awards as a liability, and requiring that the cash paid to satisfy the statutory income tax withholding obligation be classified as a financing activity.
The amendments of this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted.
The Corporation does not anticipate that the adoption of this accounting pronouncement will have a material effect on its consolidated statements of financial condition, results of operations, cash flows or presentation and disclosures.
FASB Accounting Standards Update (“ASU”) 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)
The FASB issued ASU 2016-08 in March 2016, which amends the implementation guidance in ASU 2014-09 by clarifying, among other things, that an entity should determine the nature of the goods or services provided to the customer and whether it controls each specified good or service before it is transferred to the customer, that an entity can be a principal for some goods or services and an agent for others with the same contract, and that an entity is a principal if it controls the goods or services before transferring them to the customer.
The amendments of this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017 (same effective date as ASU 2015-14).2017.
The Corporation is currently evaluating the impact that the adoption of this guidance will have on its consolidated statements of financial condition or results of operations.
FASB Accounting Standards Update (“ASU”) 2016-07, Investments – Equity Method and Joint Ventures (Topic 323): Simplifying the Transition to the Equity Method of Accounting
The FASB issued ASU 2016-07 in March 2016, which eliminates the requirement to retroactively adopt the equity method of accounting. Therefore, as of the date the investment becomes qualified for equity method accounting, an entity should add the cost of acquiring the additional interest in the investee to the current basis of its previously held interest. For available-for-sale securities, an entity should recognize through earnings the unrealized holding gains/losses in accumulated other comprehensive income/loss as of that date.
The amendments of this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted.
The Corporation does not anticipate that the adoption of this accounting pronouncement will have a material effect on its consolidated statements of financial condition or results of operations.
FASB Accounting Standards Update (“ASU”) 2016-06, Derivatives and Hedging (Topic 815): Contingent Put and Call Options in Debt Instruments
The FASB issued ASU 2016-06 in March 2016, which clarifies that in assessing whether an embedded contingent put or call option is not clearly and closely related to the debt instrument, which is part of the assessment made to determine whether an embedded
derivative must be bifurcated from the host contract, an entity is required to perform only the four step decision sequence. The four-step decision sequence requires an entity to consider whether (1) the payoff is adjusted based on changes in an index, (2) the payoff is indexed to an underlying other than interest rates or credit risk, (3) the debt involves a substantial premium or discount and (4) the put or call option is contingently exercisable. It does not have to separately assess whether the event that triggers its ability to exercise the contingent option itself is indexed only to interest rates and credit risk.
The amendments of this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted.
The Corporation does not anticipate that the adoption of this accounting pronouncement will have a material effect on its consolidated statements of financial condition or results of operations.
FASB Accounting Standards Update (“ASU”) 2016-05, Derivatives and Hedging (Topic 815): Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships
The FASB issued ASU 2016-05 in March 2016, which clarifies that a novation, or a change in the counterparty to the derivative instrument that has been designated as a hedging instrument under Topic 815 does not, in and of itself, require de-designation of that hedging relationship, and therefore discontinuance of the application of hedge accounting, provided that all other hedge accounting criteria continue to be met.
The amendments of this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted.
The Corporation does not anticipate that the adoption of this accounting pronouncement will have a material effect on its consolidated statements of financial condition or results of operations.
For recently issued Accounting Standards Updates not yet effective, refer to Note 3 to the consolidated financial statements included in the 2015 Form 10-K.
Note 4 – Discontinued operations and restructuring plan
During the year ended December 31, 2014, the Corporation completed the sale of its California, Illinois and Central Florida regional operations and relocated certain back office operations to Puerto Rico and New York.
As defined in ASC 805-10-55, the regional operations sold constituted a business, and for financial reporting purposes, the results of the discontinued operations are presented as “Assets / Liabilities from discontinued operations” in the consolidated statement of condition and “(Loss) income from discontinued operations, net of tax” in the consolidated statement of operations.
As of March 31,June 30, 2016 and December 31, 2015, there were no assets held within the discontinued operations and liabilities within discontinued operations amounted to approximately $1.8 million, mainly comprised of the indemnity reserve related to the California regional sale.
There were no activities from the discontinued operations forduring the quartersix month period ended March 31,June 30, 2016. Net income from the discontinued operations amounted to $1.3$1.4 million for the quartersix months ended March 31,June 30, 2015.
Also, in connection with the sale, the Corporation has undertaken a restructuring plan (the “PCB Restructuring Plan”) which has been completed as of Marchby December 31, 2016. The2015, for which the Corporation incurred restructuring charges of $45.1 million. During the quartersix month period ended March 31,June 30, 2015, the Corporation incurred $10.8$16.9 million in restructuring costs, mostly comprised of $9.4$12.2 million in personnel costs.
The following table presents the activity in the reserve for the restructuring costs associated with the PCB Restructuring Plan:
Quarters ended March 31, | Six months ended June 30, | |||||||||||||||
(In thousands) | 2016 | 2015 | 2016 | 2015 | ||||||||||||
Beginning balance | $ | 620 | $ | 13,536 | $ | 620 | $ | 13,536 | ||||||||
Charges expensed during the period | — | 6,297 | — | 8,312 | ||||||||||||
Payments made during the period | (263 | ) | (9,030 | ) | (367 | ) | (18,759 | ) | ||||||||
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|
| |||||||||||||
Ending balance | $ | 357 | $ | 10,803 | $ | 253 | $ | 3,089 | ||||||||
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|
|
On February 27, 2015, BPPR, in an alliance with co-bidders, including BPNA, acquired certain assets and all deposits (other than certain brokered deposits) of former Doral Bank from the FDIC, as receiver. Under the FDIC’s bidding format, BPPR was the lead bidder and party to the purchase and assumption agreement with the FDIC covering all assets and deposits acquired by it and its alliance co-bidders. BPPR entered into back to back purchase and assumption agreements with the alliance co-bidders for the transfer of certain assets and deposits. BPPR entered into transition service agreements with each of the alliance co-bidders. There is no loss-sharing arrangement with the FDIC on the acquired assets.
The following table presents the fair values of major classes of identifiable assets acquired and liabilities assumed by the Corporation as of February 27, 2015.
(In thousands) | Book value prior to purchase accounting adjustments | Fair value adjustments | Additional consideration[1] | As recorded by Popular, Inc. | ||||||||||||
Assets: | ||||||||||||||||
Cash and due from banks | $ | 339,633 | $ | — | $ | — | $ | 339,633 | ||||||||
Investment in available-for-sale securities | 172,706 | — | — | 172,706 | ||||||||||||
Investments in FHLB stock | 30,785 | — | — | 30,785 | ||||||||||||
Loans | 1,679,792 | (165,925 | ) | — | 1,513,867 | |||||||||||
Accrued income receivable | 7,808 | — | — | 7,808 | ||||||||||||
Receivable from the FDIC | — | — | 480,137 | 480,137 | ||||||||||||
Core deposit intangible | 23,572 | (10,762 | ) | — | 12,810 | |||||||||||
Other assets | 67,676 | 7,569 | — | 75,245 | ||||||||||||
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| |||||||||
Total assets | $ | 2,321,972 | $ | (169,118 | ) | $ | 480,137 | $ | 2,632,991 | |||||||
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| |||||||||
Liabilities: | ||||||||||||||||
Deposits | $ | 2,193,404 | $ | 9,987 | $ | — | $ | 2,203,391 | ||||||||
Advances from the Federal Home Loan Bank | 542,000 | 5,187 | — | 547,187 | ||||||||||||
Other liabilities | 50,728 | (511 | ) | — | 50,217 | |||||||||||
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| |||||||||
Total liabilities | $ | 2,786,132 | $ | 14,663 | $ | — | $ | 2,800,795 | ||||||||
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| |||||||||
Excess of liabilities assumed over assets acquired | $ | 464,160 | ||||||||||||||
Aggregate fair value adjustments | $ | (183,781 | ) | |||||||||||||
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Additional consideration | $ | 480,137 | ||||||||||||||
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| |||||||||||||
Goodwill on acquisition | $ | 167,804 | ||||||||||||||
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[1] | The additional consideration represents the cash to be received from the FDIC for the difference between the net liabilities assumed and the net premium paid on the transaction. |
In accordance with ASC Topic 805, the fair values assigned to the assets acquired and liabilities assumed are subject to refinement up to one year after the closing date of the acquisition as new information relative to closing date fair values become available, and thus the recognized goodwill may increase or decrease. During the second and third quarters of 2015, retrospective adjustments were made to the estimated fair values of certain assets acquired and liabilities assumed as part of the Doral Bank Transaction to reflect new information obtained about facts and circumstances that existed as of the acquisition date. The retrospective adjustments resulted in a decrease of $2.1 million to the initial fair value estimate of the mortgage servicing rights, a decrease in other liabilities assumed of $0.5 million and, an increase of $2.6 million in the receivable from the FDIC related to the acquisition cost of deposits, all of which were adjusted against goodwill.
During the fourth quarter of 2015 the Corporation early adopted ASU 2015-16 “Business Combination”. Accordingly, adjustments to the initial fair value estimates identified during the measurement period were recognized in the reporting period in which the adjustment amounts were determined. Pursuant to ASU 2015-16, adjustments were made effective in the fourth quarter of 2015 to the estimated fair values of assets and liabilities assumed with the Doral Bank Transaction to reflect new information obtained during the measurement period about facts and circumstances that existed as of the acquisition date that, if known, would have affected the acquisition-date fair value measurements.
During the quarter ended March 31, 2016, the Corporation recorded adjustments to its initial fair value estimates in connection with the Doral Bank Transaction. As a result, the discount on the loans increased by $4.7 million with a corresponding increase to goodwill.
The following table presents the principal changes in fair value and the revised amounts recorded during the measurement period.
(In thousands) | February 27, 2015 As recasted[a] | February 27, 2015 As previously reported[b] | Change | |||||||||
Assets: | ||||||||||||
Loans | $ | 1,513,867 | $ | 1,665,756 | $ | (151,889 | ) | |||||
Goodwill | 167,804 | 41,633 | 126,171 | |||||||||
Core deposit intangible | 12,810 | 23,572 | (10,762 | ) | ||||||||
Receivable from the FDIC | 480,137 | 441,721 | 38,416 | |||||||||
Other assets | 626,177 | 626,177 | — | |||||||||
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|
|
| |||||||
Total assets | $ | 2,800,795 | $ | 2,798,859 | $ | 1,936 | ||||||
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| |||||||
Liabilities: | ||||||||||||
Deposits | $ | 2,203,391 | $ | 2,201,455 | $ | 1,936 | ||||||
Advances from the Federal Home Loan Bank | 547,187 | 547,187 | — | |||||||||
Other liabilities | 50,217 | 50,217 | — | |||||||||
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| |||||||
Total liabilities | $ | 2,800,795 | $ | 2,798,859 | $ | 1,936 | ||||||
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|
[a] | Amounts reported include retrospective adjustments during the measurement period, in accordance with U.S. GAAP, related to the Doral Bank Transaction. |
[b] | Amounts are presented as previously reported as of September 30, 2015. |
The impact in the results of operations for the quarter and the six months ended March 31,June 30, 2015 as a result of the recasting was an increase in net income of approximately $0.6$2.7 million and $3.4 million, respectively, as detailed in the following table:
Quarter ended March 31, 2015 | ||||||||||||
(In thousands) | As recasted | As reported | Difference | |||||||||
Net Interest Income | $ | 10,306 | $ | 9,768 | $ | 538 | ||||||
Non-Interest Income | 4,262 | 4,262 | — | |||||||||
Operating Expenses | 14,398 | 14,488 | (90 | ) | ||||||||
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| |||||||
Income Before Taxes | $ | 170 | $ | (458 | ) | $ | 628 | |||||
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Quarter ended June 30, 2015 | Six months ended June 30, 2015 | |||||||||||||||||||||||
(In thousands) | As recasted | As reported | Difference | As recasted | As reported | Difference | ||||||||||||||||||
Net Interest Income | $ | 29,629 | $ | 27,164 | $ | 2,465 | $ | 39,935 | $ | 36,932 | $ | 3,003 | ||||||||||||
Non-Interest Income | 7,210 | 7,210 | — | 11,472 | 11,472 | — | ||||||||||||||||||
Operating Expenses | 26,506 | 26,775 | (269 | ) | 40,903 | 41,262 | (359 | ) | ||||||||||||||||
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Income Before Taxes | $ | 10,333 | $ | 7,599 | $ | 2,734 | $ | 10,504 | $ | 7,142 | $ | 3,362 | ||||||||||||
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Note 6 –- Restrictions on cash and due from banks and certain securities
The Corporation’s banking subsidiaries, BPPR and BPNA, are required by federal and state regulatory agencies to maintain average reserve balances with the Federal Reserve Bank of New York (the “Fed”) or other banks. Those required average reserve balances amounted to $ 1.1 billion at March 31,June 30, 2016 (December 31, 2015—2015 - $ 1.1 billion). Cash and due from banks, as well as other short-term, highly liquid securities, are used to cover the required average reserve balances.
At March 31,June 30, 2016, the Corporation held $52$23 million in restricted assets in the form of funds deposited in money market accounts, trading account securities and investment securities available for sale (December 31, 2015—$442015 - $44 million). The amounts held in trading account securities and investment securities available for sale consist primarily of restricted assets held for the Corporation’s non-qualified retirement plans and fund deposits guaranteeing possible liens or encumbrances over the title of insured properties.
Note 7 – Investment securities available-for-sale
The following tables present the amortized cost, gross unrealized gains and losses, approximate fair value, weighted average yield and contractual maturities of investment securities available-for-sale at March 31,June 30, 2016 and December 31, 2015.
At March 31, 2016 | At June 30, 2016 | |||||||||||||||||||||||||||||||||||||||
(In thousands) | Amortized cost | Gross unrealized gains | Gross unrealized losses | Fair value | Weighted average yield | Amortized cost | Gross unrealized gains | Gross unrealized losses | Fair value | Weighted average yield | ||||||||||||||||||||||||||||||
U.S. Treasury securities | ||||||||||||||||||||||||||||||||||||||||
Within 1 year | $ | 24,665 | $ | 143 | $ | — | $ | 24,808 | 4.92 | % | $ | 45,014 | $ | 90 | $ | — | $ | 45,104 | 0.72 | % | ||||||||||||||||||||
After 1 to 5 years | 1,281,481 | 6,792 | — | 1,288,273 | 1.03 | 1,557,118 | 12,141 | — | 1,569,259 | 1.05 | ||||||||||||||||||||||||||||||
After 5 to 10 years | 9,939 | 332 | — | 10,271 | 1.99 | 9,942 | 471 | — | 10,413 | 1.99 | ||||||||||||||||||||||||||||||
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Total U.S. Treasury securities | 1,316,085 | 7,267 | — | 1,323,352 | 1.11 | 1,612,074 | 12,702 | — | 1,624,776 | 1.05 | ||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||
Obligations of U.S. Government sponsored entities | ||||||||||||||||||||||||||||||||||||||||
Within 1 year | 50,045 | 150 | — | 50,195 | 0.90 | |||||||||||||||||||||||||||||||||||
After 1 to 5 years | 904,631 | 5,221 | 109 | 909,743 | 1.33 | 716,459 | 7,026 | 90 | 723,395 | 1.36 | ||||||||||||||||||||||||||||||
After 5 to 10 years | 250 | 3 | — | 253 | 5.64 | 250 | 1 | — | 251 | 5.64 | ||||||||||||||||||||||||||||||
After 10 years | 23,000 | — | 58 | 22,942 | 3.24 | |||||||||||||||||||||||||||||||||||
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Total obligations of U.S. Government sponsored entities | 927,881 | 5,224 | 167 | 932,938 | 1.38 | 766,754 | 7,177 | 90 | 773,841 | 1.33 | ||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||
Obligations of Puerto Rico, States and political subdivisions | ||||||||||||||||||||||||||||||||||||||||
After 1 to 5 years | 7,292 | — | 176 | 7,116 | 3.88 | 7,150 | 17 | — | 7,167 | 4.27 | ||||||||||||||||||||||||||||||
After 5 to 10 years | 5,925 | 1 | 1,963 | 3,963 | 4.02 | 5,915 | 1 | 1,562 | 4,354 | 4.02 | ||||||||||||||||||||||||||||||
After 10 years | 18,604 | 1 | 5,954 | 12,651 | 6.99 | 18,614 | 1 | 4,501 | 14,114 | 6.99 | ||||||||||||||||||||||||||||||
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Total obligations of Puerto Rico, States and political subdivisions | 31,821 | 2 | 8,093 | 23,730 | 5.72 | 31,679 | 19 | 6,063 | 25,635 | 5.82 | ||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||
Collateralized mortgage obligations—federal agencies | ||||||||||||||||||||||||||||||||||||||||
Collateralized mortgage obligations - federal agencies | ||||||||||||||||||||||||||||||||||||||||
Within 1 year | 282 | — | — | 282 | 0.95 | 159 | — | — | 159 | 0.97 | ||||||||||||||||||||||||||||||
After 1 to 5 years | 20,257 | 918 | — | 21,175 | 2.86 | 19,667 | 972 | — | 20,639 | 2.86 | ||||||||||||||||||||||||||||||
After 5 to 10 years | 41,078 | 818 | — | 41,896 | 2.86 | 36,988 | 771 | — | 37,759 | 2.86 | ||||||||||||||||||||||||||||||
After 10 years | 1,447,516 | 14,027 | 11,325 | 1,450,218 | 1.98 | 1,369,388 | 17,599 | 6,823 | 1,380,164 | 1.98 | ||||||||||||||||||||||||||||||
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Total collateralized mortgage obligations—federal agencies | 1,509,133 | 15,763 | 11,325 | 1,513,571 | 2.01 | |||||||||||||||||||||||||||||||||||
Total collateralized mortgage obligations - federal agencies | 1,426,202 | 19,342 | 6,823 | 1,438,721 | 2.01 | |||||||||||||||||||||||||||||||||||
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Mortgage-backed securities | ||||||||||||||||||||||||||||||||||||||||
Within 1 year | 25 | — | — | 25 | 4.80 | 18 | — | — | 18 | 4.72 | ||||||||||||||||||||||||||||||
After 1 to 5 years | 20,808 | 990 | 6 | 21,792 | 4.64 | 19,790 | 872 | 9 | 20,653 | 4.50 | ||||||||||||||||||||||||||||||
After 5 to 10 years | 281,359 | 6,195 | 2 | 287,552 | 2.43 | 268,493 | 7,414 | 184 | 275,723 | 2.41 | ||||||||||||||||||||||||||||||
After 10 years | 2,485,109 | 50,510 | 1,282 | 2,534,337 | 2.76 | 3,002,023 | 69,496 | 670 | 3,070,849 | 2.63 | ||||||||||||||||||||||||||||||
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Total mortgage-backed securities | 2,787,301 | 57,695 | 1,290 | 2,843,706 | 2.74 | 3,290,324 | 77,782 | 863 | 3,367,243 | 2.63 | ||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||
Equity securities (without contractual maturity) | 1,351 | 1,090 | 2 | 2,439 | 7.82 | 1,351 | 1,169 | — | 2,520 | 7.86 | ||||||||||||||||||||||||||||||
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Other | ||||||||||||||||||||||||||||||||||||||||
After 1 to 5 years | 8,819 | 10 | — | 8,829 | 1.72 | 8,725 | 35 | — | 8,760 | 1.73 | ||||||||||||||||||||||||||||||
After 5 to 10 years | 1,220 | 45 | — | 1,265 | 3.62 | 1,136 | 44 | — | 1,180 | 3.62 | ||||||||||||||||||||||||||||||
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Total other | 10,039 | 55 | — | 10,094 | 1.95 | 9,861 | 79 | — | 9,940 | 1.95 | ||||||||||||||||||||||||||||||
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Total investment securities available-for-sale[1] | $ | 6,583,611 | $ | 87,096 | $ | 20,877 | $ | 6,649,830 | 2.07 | % | $ | 7,138,245 | $ | 118,270 | $ | 13,839 | $ | 7,242,676 | 2.02 | % | ||||||||||||||||||||
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[1] | Includes |
At December 31, 2015 | At December 31, 2015 | |||||||||||||||||||||||||||||||||||||||
(In thousands) | Amortized cost | Gross unrealized gains | Gross unrealized losses | Fair value | Weighted average yield | Amortized cost | Gross unrealized gains | Gross unrealized losses | Fair value | Weighted average yield | ||||||||||||||||||||||||||||||
U.S. Treasury securities | ||||||||||||||||||||||||||||||||||||||||
Within 1 year | $ | 24,861 | $ | 335 | $ | — | $ | 25,196 | 4.31 | % | $ | 24,861 | $ | 335 | $ | — | $ | 25,196 | 4.31 | % | ||||||||||||||||||||
After 1 to 5 years | 1,149,807 | 365 | 1,999 | 1,148,173 | 1.03 | 1,149,807 | 365 | 1,999 | 1,148,173 | 1.03 | ||||||||||||||||||||||||||||||
After 5 to 10 years | 9,937 | 22 | — | 9,959 | 1.99 | 9,937 | 22 | — | 9,959 | 1.99 | ||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||
Total U.S. Treasury securities | 1,184,605 | 722 | 1,999 | 1,183,328 | 1.11 | 1,184,605 | 722 | 1,999 | 1,183,328 | 1.11 | ||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||
Obligations of U.S. Government sponsored entities | ||||||||||||||||||||||||||||||||||||||||
After 1 to 5 years | 919,819 | 1,337 | 4,808 | 916,348 | 1.33 | 919,819 | 1,337 | 4,808 | 916,348 | 1.33 | ||||||||||||||||||||||||||||||
After 5 to 10 years | 250 | 1 | — | 251 | 5.64 | 250 | 1 | — | 251 | 5.64 | ||||||||||||||||||||||||||||||
After 10 years | 23,000 | 42 | — | 23,042 | 3.22 | 23,000 | 42 | — | 23,042 | 3.22 | ||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||
Total obligations of U.S. Government sponsored entities | 943,069 | 1,380 | 4,808 | 939,641 | 1.38 | 943,069 | 1,380 | 4,808 | 939,641 | 1.38 | ||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||
Obligations of Puerto Rico, States and political subdivisions | ||||||||||||||||||||||||||||||||||||||||
After 1 to 5 years | 7,227 | — | 199 | 7,028 | 3.94 | 7,227 | — | 199 | 7,028 | 3.94 | ||||||||||||||||||||||||||||||
After 5 to 10 years | 5,925 | — | 2,200 | 3,725 | 4.02 | 5,925 | — | 2,200 | 3,725 | 4.02 | ||||||||||||||||||||||||||||||
After 10 years | 18,585 | — | 6,979 | 11,606 | 6.99 | 18,585 | — | 6,979 | 11,606 | 6.99 | ||||||||||||||||||||||||||||||
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Total obligations of Puerto Rico, States and political subdivisions | 31,737 | — | 9,378 | 22,359 | 5.74 | 31,737 | — | 9,378 | 22,359 | 5.74 | ||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||
Collateralized mortgage obligations—federal agencies | ||||||||||||||||||||||||||||||||||||||||
Collateralized mortgage obligations - federal agencies | ||||||||||||||||||||||||||||||||||||||||
After 1 to 5 years | 21,446 | 594 | 37 | 22,003 | 2.81 | 21,446 | 594 | 37 | 22,003 | 2.81 | ||||||||||||||||||||||||||||||
After 5 to 10 years | 44,585 | 733 | — | 45,318 | 2.85 | 44,585 | 733 | — | 45,318 | 2.85 | ||||||||||||||||||||||||||||||
After 10 years | 1,518,662 | 8,137 | 33,283 | 1,493,516 | 1.99 | 1,518,662 | 8,137 | 33,283 | 1,493,516 | 1.99 | ||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||
Total collateralized mortgage obligations—federal agencies | 1,584,693 | 9,464 | 33,320 | 1,560,837 | 2.02 | |||||||||||||||||||||||||||||||||||
Total collateralized mortgage obligations - federal agencies | 1,584,693 | 9,464 | 33,320 | 1,560,837 | 2.02 | |||||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||
Mortgage-backed securities | ||||||||||||||||||||||||||||||||||||||||
After 1 to 5 years | 22,015 | 987 | 8 | 22,994 | 4.65 | 22,015 | 987 | 8 | 22,994 | 4.65 | ||||||||||||||||||||||||||||||
After 5 to 10 years | 256,097 | 4,866 | 1,197 | 259,766 | 2.51 | 256,097 | 4,866 | 1,197 | 259,766 | 2.51 | ||||||||||||||||||||||||||||||
After 10 years | 2,039,217 | 34,839 | 12,620 | 2,061,436 | 2.83 | 2,039,217 | 34,839 | 12,620 | 2,061,436 | 2.83 | ||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||
Total mortgage-backed securities | 2,317,329 | 40,692 | 13,825 | 2,344,196 | 2.81 | 2,317,329 | 40,692 | 13,825 | 2,344,196 | 2.81 | ||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||
Equity securities (without contractual maturity) | 1,350 | 1,053 | 5 | 2,398 | 7.92 | 1,350 | 1,053 | 5 | 2,398 | 7.92 | ||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||
Other | ||||||||||||||||||||||||||||||||||||||||
After 1 to 5 years | 8,911 | — | 28 | 8,883 | 1.71 | 8,911 | — | 28 | 8,883 | 1.71 | ||||||||||||||||||||||||||||||
After 5 to 10 years | 1,311 | 39 | — | 1,350 | 3.62 | 1,311 | 39 | — | 1,350 | 3.62 | ||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||
Total other | 10,222 | 39 | 28 | 10,233 | 1.95 | 10,222 | 39 | 28 | 10,233 | 1.95 | ||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||
Total investment securities available-for-sale[1] | $ | 6,073,005 | $ | 53,350 | $ | 63,363 | $ | 6,062,992 | 2.07 | % | $ | 6,073,005 | $ | 53,350 | $ | 63,363 | $ | 6,062,992 | 2.07 | % | ||||||||||||||||||||
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[1] | Includes $2.4 billion pledged to secure public and trust deposits, assets sold under agreements to repurchase, credit facilities and loan servicing agreements that the secured parties are not permitted to sell or repledge the collateral, of which $1.5 billion serve as collateral for public funds. |
The weighted average yield on investment securities available-for-sale is based on amortized cost; therefore, it does not give effect to changes in fair value.
Securities not due on a single contractual maturity date, such as mortgage-backed securities and collateralized mortgage obligations, are classified in the period of final contractual maturity. The expected maturities of collateralized mortgage obligations, mortgage-backed securities and certain other securities may differ from their contractual maturities because they may be subject to prepayments or may be called by the issuer.
There were no securities sold during the quartersquarter and six months ended March 31, 2016 and 2015.June 30, 2016. During the six months ended June 30, 2015, the Corporation sold U.S. agency securities with a carrying amount of $70 million at the BPPR segment, resulting in a realized gain of $5 thousand.
The following tables present the Corporation’s fair value and gross unrealized losses of investment securities available-for-sale, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at March 31,June 30, 2016 and December 31, 2015.
At March 31, 2016 | At June 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||
Less than 12 months | 12 months or more | Total | Less than 12 months | 12 months or more | Total | |||||||||||||||||||||||||||||||||||||||||||
(In thousands) | Fair value | Gross unrealized losses | Fair value | Gross unrealized losses | Fair value | Gross unrealized losses | Fair value | Gross unrealized losses | Fair value | Gross unrealized losses | Fair value | Gross unrealized losses | ||||||||||||||||||||||||||||||||||||
Obligations of U.S. Government sponsored entities | $ | 73,342 | $ | 113 | $ | 19,376 | $ | 54 | $ | 92,718 | $ | 167 | $ | 24,110 | $ | 63 | $ | 1,301 | $ | 27 | $ | 25,411 | $ | 90 | ||||||||||||||||||||||||
Obligations of Puerto Rico, States and political subdivisions | 6,229 | 10 | 15,515 | 8,083 | 21,744 | 8,093 | — | — | 16,501 | 6,063 | 16,501 | 6,063 | ||||||||||||||||||||||||||||||||||||
Collateralized mortgage obligations—federal agencies | — | — | 656,971 | 11,325 | 656,971 | 11,325 | ||||||||||||||||||||||||||||||||||||||||||
Collateralized mortgage obligations - federal agencies | — | — | 405,082 | 6,823 | 405,082 | 6,823 | ||||||||||||||||||||||||||||||||||||||||||
Mortgage-backed securities | 231,705 | 816 | 80,005 | 474 | 311,710 | 1,290 | 114,735 | 829 | 9,662 | 34 | 124,397 | 863 | ||||||||||||||||||||||||||||||||||||
Equity securities | 48 | 2 | — | — | 48 | 2 | ||||||||||||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||||||||
Total investment securities available-for-sale in an unrealized loss position | $ | 311,324 | $ | 941 | $ | 771,867 | $ | 19,936 | $ | 1,083,191 | $ | 20,877 | $ | 138,845 | $ | 892 | $ | 432,546 | $ | 12,947 | $ | 571,391 | $ | 13,839 | ||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||||||||
At December 31, 2015 | At December 31, 2015 | |||||||||||||||||||||||||||||||||||||||||||||||
Less than 12 months | 12 months or more | Total | Less than 12 months | 12 months or more | Total | |||||||||||||||||||||||||||||||||||||||||||
(In thousands) | Fair value | Gross unrealized losses | Fair value | Gross unrealized losses | Fair value | Gross unrealized losses | Fair value | Gross unrealized losses | Fair value | Gross unrealized losses | Fair value | Gross unrealized losses | ||||||||||||||||||||||||||||||||||||
U.S. Treasury securities | $ | 589,689 | $ | 1,999 | $ | — | $ | — | $ | 589,689 | $ | 1,999 | $ | 589,689 | $ | 1,999 | $ | — | $ | — | $ | 589,689 | $ | 1,999 | ||||||||||||||||||||||||
Obligations of U.S. Government sponsored entities | 390,319 | 2,128 | 181,744 | 2,680 | 572,063 | 4,808 | 390,319 | 2,128 | 181,744 | 2,680 | 572,063 | 4,808 | ||||||||||||||||||||||||||||||||||||
Obligations of Puerto Rico, States and political subdivisions | 884 | 164 | 19,490 | 9,214 | 20,374 | 9,378 | 884 | 164 | 19,490 | 9,214 | 20,374 | 9,378 | ||||||||||||||||||||||||||||||||||||
Collateralized mortgage obligations—federal agencies | 331,501 | 4,446 | 814,195 | 28,874 | 1,145,696 | 33,320 | ||||||||||||||||||||||||||||||||||||||||||
Collateralized mortgage obligations - federal agencies | 331,501 | 4,446 | 814,195 | 28,874 | 1,145,696 | 33,320 | ||||||||||||||||||||||||||||||||||||||||||
Mortgage-backed securities | 1,641,663 | 12,992 | 22,362 | 833 | 1,664,025 | 13,825 | 1,641,663 | 12,992 | 22,362 | 833 | 1,664,025 | 13,825 | ||||||||||||||||||||||||||||||||||||
Equity securities | 45 | 5 | — | — | 45 | 5 | 45 | 5 | — | — | 45 | 5 | ||||||||||||||||||||||||||||||||||||
Other | 8,883 | 28 | — | — | 8,883 | 28 | 8,883 | 28 | — | — | 8,883 | 28 | ||||||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||||||||
Total investment securities available-for-sale in an unrealized loss position | $ | 2,962,984 | $ | 21,762 | $ | 1,037,791 | $ | 41,601 | $ | 4,000,775 | $ | 63,363 | $ | 2,962,984 | $ | 21,762 | $ | 1,037,791 | $ | 41,601 | $ | 4,000,775 | $ | 63,363 | ||||||||||||||||||||||||
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As of March 31,June 30, 2016, the available-for-sale investment portfolio reflects gross unrealized losses of approximately $21$14 million, driven by U.S. Agency collateralized mortgage obligations mortgage-backed securities and obligationsObligations of the Puerto Rico Government and its political subdivisions. As part of its analysis for all U.S. Agencies’ securities, management considers the U.S. Agency guarantee. The portfolio of obligations of the Puerto Rico Government is mostly comprised of securities with specific sources of income or revenues identified for repayments. The Corporation performs periodic credit quality reviews on these issuers.
Management evaluates investment securities for other-than-temporary (“OTTI”) declines in fair value on a quarterly basis. Once a decline in value is determined to be other-than-temporary, the value of a debt security is reduced and a corresponding charge to earnings is recognized for anticipated credit losses. Also, for equity securities that are considered other-than-temporarily impaired, the excess of the security’s carrying value over its fair value at the evaluation date is accounted for as a loss in the results of operations. The OTTI analysis requires management to consider various factors, which include, but are not limited to: (1) the length of time and the extent to which fair value has been less than the amortized cost basis, (2) the financial condition of the issuer or issuers, (3) actual collateral attributes, (4) the payment structure of the debt security and the likelihood of the issuer being able to make payments, (5) any rating changes by a rating agency, (6) adverse conditions specifically related to the security, industry, or a geographic area, and (7) management’s intent to sell the debt security or whether it is more likely than not that the Corporation would be required to sell the debt security before a forecasted recovery occurs.
At March 31, 2016, management performed its quarterly analysisDuring the second quarter of all debt securities in an unrealized loss position. Based on the analyses performed, management concluded that no individual debt security was other-than-temporarily impaired as of such date. However, further negative evidence impacting the factors described above with respect to the “Obligations of Puerto Rico, States and political subdivisions”, could result in a charge to earnings to recognize estimated credit losses determined to be other-than-temporary. At March 31, 2016, the Corporation did not haverecognized an other-than-temporary impairment charge of $209 thousand on an investment security available-for-sale classified as obligations from the intentPuerto Rico government and its political subdivisions. At June 30, 2016 this security was rated Caa2 and CC by Moody’s and S&P, respectively. Puerto Rico’s fiscal and economic situation, together with, among other factors, the recent moratorium declared on the payment of principal and interest on obligations for certain Puerto Rico government securities, including those issued or guaranteed by the Commonwealth, led management to sell debt securities in anconclude that the unrealized losses on this security was other-than-temporary. The Corporation determined that the entire balance of the unrealized loss positioncarried by this security was attributed to estimated credit losses. Accordingly, the other-than-temporary impairment was recognized in its entirety in the accompanying consolidated statement of operations and it is more likely than not thatno amount remained recognized in the accompanying statement of other comprehensive income related to this specific security.
In the second quarter of 2015, the Corporation will not have to sell therecognized an other-than-temporary impairment charge of $14.4 million on its portfolio of investment securities prior to recovery of their amortized cost basis.available-for-sale classified as obligations from the Puerto Rico government and its political subdivisions. At June 30, 2015 these securities were rated Caa2 and CCC- by Moody’s and S&P, respectively.
The following table states the name of issuers, and the aggregate amortized cost and fair value of the securities of such issuer (includes available-for-sale and held-to-maturity securities), in which the aggregate amortized cost of such securities exceeds 10% of stockholders’ equity. This information excludes securities backed by the full faith and credit of the U.S. Government. Investments in obligations issued by a state of the U.S. and its political subdivisions and agencies, which are payable and secured by the same source of revenue or taxing authority, other than the U.S. Government, are considered securities of a single issuer.
March 31, 2016 | December 31, 2015 | June 30, 2016 | December 31, 2015 | |||||||||||||||||||||||||||||
(In thousands) | Amortized cost | Fair value | Amortized cost | Fair value | Amortized cost | Fair value | Amortized cost | Fair value | ||||||||||||||||||||||||
FNMA | $ | 2,799,998 | $ | 2,824,458 | $ | 2,649,860 | $ | 2,633,899 | $ | 2,820,595 | $ | 2,863,151 | $ | 2,649,860 | $ | 2,633,899 | ||||||||||||||||
FHLB | 329,822 | 331,546 | 340,119 | 338,700 | 286,449 | 289,572 | 340,119 | 338,700 | ||||||||||||||||||||||||
Freddie Mac | 1,221,128 | 1,228,096 | 1,088,691 | 1,079,956 | 1,377,651 | 1,390,990 | 1,088,691 | 1,079,956 |
Note 8 – Investment securities held-to-maturity
The following tables present the amortized cost, gross unrealized gains and losses, approximate fair value, weighted average yield and contractual maturities of investment securities held-to-maturity at March 31,June 30, 2016 and December 31, 2015.
At March 31, 2016 | At June 30, 2016 | |||||||||||||||||||||||||||||||||||||||
Gross | Gross | Weighted | Gross | Gross | Weighted | |||||||||||||||||||||||||||||||||||
Amortized | unrealized | unrealized | Fair | average | Amortized | unrealized | unrealized | Fair | average | |||||||||||||||||||||||||||||||
(In thousands) | cost | gains | losses | value | yield | cost | gains | losses | value | yield | ||||||||||||||||||||||||||||||
Obligations of Puerto Rico, States and political subdivisions | ||||||||||||||||||||||||||||||||||||||||
Within 1 year | $ | 3,050 | $ | — | $ | 1,601 | $ | 1,449 | 5.91 | % | $ | 3,050 | $ | — | $ | 227 | $ | 2,823 | 5.91 | % | ||||||||||||||||||||
After 1 to 5 years | 14,270 | — | 5,910 | 8,360 | 6.00 | 14,270 | — | 5,757 | 8,513 | 6.00 | ||||||||||||||||||||||||||||||
After 5 to 10 years | 18,930 | — | 7,716 | 11,214 | 6.17 | 18,930 | — | 7,561 | 11,369 | 6.17 | ||||||||||||||||||||||||||||||
After 10 years | 60,880 | 5,266 | 8,320 | 57,826 | 1.99 | 61,194 | 3,325 | 7,805 | 56,714 | 1.97 | ||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||
Total obligations of Puerto Rico, States and political subdivisions | 97,130 | 5,266 | 23,547 | 78,849 | 3.52 | 97,444 | 3,325 | 21,350 | 79,419 | 3.50 | ||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||
Collateralized mortgage obligations—federal agencies | ||||||||||||||||||||||||||||||||||||||||
Collateralized mortgage obligations - federal agencies | ||||||||||||||||||||||||||||||||||||||||
After 5 to 10 years | 86 | 5 | — | 91 | 5.45 | 81 | 4 | — | 85 | 5.45 | ||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||
Total collateralized mortgage obligations—federal agencies | 86 | 5 | — | 91 | 5.45 | |||||||||||||||||||||||||||||||||||
Total collateralized mortgage obligations - federal agencies | 81 | 4 | — | 85 | 5.45 | |||||||||||||||||||||||||||||||||||
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Other | ||||||||||||||||||||||||||||||||||||||||
After 1 to 5 years | 2,000 | — | 26 | 1,974 | 1.81 | 2,000 | — | 35 | 1,965 | 1.81 | ||||||||||||||||||||||||||||||
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Total other | 2,000 | — | 26 | 1,974 | 1.81 | 2,000 | — | 35 | 1,965 | 1.81 | ||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||
Total investment securities held-to-maturity[1] | $ | 99,216 | $ | 5,271 | $ | 23,573 | $ | 80,914 | 3.49 | % | $ | 99,525 | $ | 3,329 | $ | 21,385 | $ | 81,469 | 3.47 | % | ||||||||||||||||||||
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[1] | Includes |
At December 31, 2015 | At December 31, 2015 | |||||||||||||||||||||||||||||||||||||||
Gross | Gross | Weighted | Gross | Gross | Weighted | |||||||||||||||||||||||||||||||||||
Amortized | unrealized | unrealized | Fair | average | Amortized | unrealized | unrealized | Fair | average | |||||||||||||||||||||||||||||||
(In thousands) | cost | gains | losses | value | yield | cost | gains | losses | value | yield | ||||||||||||||||||||||||||||||
Obligations of Puerto Rico, States and political subdivisions | ||||||||||||||||||||||||||||||||||||||||
Within 1 year | $ | 2,920 | $ | — | $ | 291 | $ | 2,629 | 5.90 | % | $ | 2,920 | $ | — | $ | 291 | $ | 2,629 | 5.90 | % | ||||||||||||||||||||
After 1 to 5 years | 13,655 | — | 5,015 | 8,640 | 5.98 | 13,655 | — | 5,015 | 8,640 | 5.98 | ||||||||||||||||||||||||||||||
After 5 to 10 years | 20,020 | — | 8,020 | 12,000 | 6.14 | 20,020 | — | 8,020 | 12,000 | 6.14 | ||||||||||||||||||||||||||||||
After 10 years | 62,222 | 3,604 | 8,280 | 57,546 | 2.08 | 62,222 | 3,604 | 8,280 | 57,546 | 2.08 | ||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||
Total obligations of Puerto Rico, States and political subdivisions | 98,817 | 3,604 | 21,606 | 80,815 | 3.55 | 98,817 | 3,604 | 21,606 | 80,815 | 3.55 | ||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||
Collateralized mortgage obligations—federal agencies | ||||||||||||||||||||||||||||||||||||||||
Collateralized mortgage obligations - federal agencies | ||||||||||||||||||||||||||||||||||||||||
After 5 to 10 years | 86 | 5 | — | 91 | 5.45 | 86 | 5 | — | 91 | 5.45 | ||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||
Total collateralized mortgage obligations—federal agencies | 86 | 5 | — | 91 | 5.45 | |||||||||||||||||||||||||||||||||||
Total collateralized mortgage obligations - federal agencies | 86 | 5 | — | 91 | 5.45 | |||||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||
Other | ||||||||||||||||||||||||||||||||||||||||
After 1 to 5 years | 2,000 | — | 17 | 1,983 | 1.81 | 2,000 | — | 17 | 1,983 | 1.81 | ||||||||||||||||||||||||||||||
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Total other | 2,000 | — | 17 | 1,983 | 1.81 | 2,000 | — | 17 | 1,983 | 1.81 | ||||||||||||||||||||||||||||||
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Total investment securities held-to-maturity[1] | $ | 100,903 | $ | 3,609 | $ | 21,623 | $ | 82,889 | 3.52 | % | $ | 100,903 | $ | 3,609 | $ | 21,623 | $ | 82,889 | 3.52 | % | ||||||||||||||||||||
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[1] | Includes $57.2 million pledged to secure public and trust deposits that the secured parties are not permitted to sell or repledge the collateral. |
Securities not due on a single contractual maturity date, such as collateralized mortgage obligations, are classified in the period of final contractual maturity. The expected maturities of collateralized mortgage obligations and certain other securities may differ from their contractual maturities because they may be subject to prepayments or may be called by the issuer.
The following tables present the Corporation’s fair value and gross unrealized losses of investment securities held-to-maturity, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at March 31,June 30, 2016 and December 31, 2015.
(In thousands) Obligations of Puerto Rico, States and political subdivisions Other Total investment securities held-to-maturity in an unrealized loss position At March 31, 2016 Less than 12 months 12 months or more Total Gross Gross Gross Fair unrealized Fair unrealized Fair unrealized value losses value losses value losses $ — $ — $ 31,393 $ 23,547 $ 31,393 $ 23,547 1,724 26 — — 1,724 26 $ 1,724 $ 26 $ 31,393 $ 23,547 $ 33,117 $ 23,573
At December 31, 2015 | At June 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||
Less than 12 months | 12 months or more | Total | Less than 12 months | 12 months or more | Total | |||||||||||||||||||||||||||||||||||||||||||
Gross | Gross | Gross | Gross | Gross | Gross | |||||||||||||||||||||||||||||||||||||||||||
Fair | unrealized | Fair | unrealized | Fair | unrealized | Fair | unrealized | Fair | unrealized | Fair | unrealized | |||||||||||||||||||||||||||||||||||||
(In thousands) | value | losses | value | losses | value | losses | value | losses | value | losses | value | losses | ||||||||||||||||||||||||||||||||||||
Obligations of Puerto Rico, States and political subdivisions | $ | — | $ | — | $ | 33,334 | $ | 21,606 | $ | 33,334 | $ | 21,606 | $ | — | $ | — | $ | 32,650 | $ | 21,350 | $ | 32,650 | $ | 21,350 | ||||||||||||||||||||||||
Other | 1,483 | 17 | — | — | 1,483 | 17 | 720 | 30 | 995 | 5 | 1,715 | 35 | ||||||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||||||||
Total investment securities held-to-maturity in an unrealized loss position | $ | 1,483 | $ | 17 | $ | 33,334 | $ | 21,606 | $ | 34,817 | $ | 21,623 | $ | 720 | $ | 30 | $ | 33,645 | $ | 21,355 | $ | 34,365 | $ | 21,385 | ||||||||||||||||||||||||
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|
At December 31, 2015 | ||||||||||||||||||||||||
Less than 12 months | 12 months or more | Total | ||||||||||||||||||||||
Gross | Gross | Gross | ||||||||||||||||||||||
Fair | unrealized | Fair | unrealized | Fair | unrealized | |||||||||||||||||||
(In thousands) | value | losses | value | losses | value | losses | ||||||||||||||||||
Obligations of Puerto Rico, States and political subdivisions | $ | — | $ | — | $ | 33,334 | $ | 21,606 | $ | 33,334 | $ | 21,606 | ||||||||||||
Other | 1,483 | 17 | — | — | 1,483 | 17 | ||||||||||||||||||
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Total investment securities held-to-maturity in an unrealized loss position | $ | 1,483 | $ | 17 | $ | 33,334 | $ | 21,606 | $ | 34,817 | $ | 21,623 | ||||||||||||
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As indicated in Note 7 to these consolidated financial statements, management evaluates investment securities for OTTI declines in fair value on a quarterly basis.
The “Obligations of Puerto Rico, States and political subdivisions” classified as held-to-maturity at March 31,June 30, 2016 are primarily associated with securities issued by municipalities of Puerto Rico and are generally not rated by a credit rating agency. This includes $55 million of securities issued by three municipalities of Puerto Rico that are payable from the real and personal property taxes collected within such municipalities. These bonds have seniority to the payment of operating cost and expenses of the municipality. The portfolio also includes approximately $42$43 million in securities for which the underlying source of payment is not the central government, but in which it provides a guarantee in the event of default.
The Corporation performs periodic credit quality reviews on these issuers. Based on the quarterly analysis performed, management concluded that no individual debt security was other-than-temporarily impaired at March 31,June 30, 2016. Further deterioration of the fiscal crisis of the Government of Puerto Rico could further affect the value of these securities, resulting in losses to the Corporation. The Corporation does not have the intent to sell securities held-to-maturity and it is more likely than not that the Corporation will not have to sell these investment securities prior to recovery of their amortized cost basis.
Loans acquired in the Westernbank FDIC-assisted transaction, except for lines of credit with revolving privileges, are accounted for by the Corporation in accordance with ASC Subtopic 310-30. Under ASC Subtopic 310-30, the acquired loans were aggregated into pools based on similar characteristics. Each loan pool is accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows. The loans which are accounted for under ASC Subtopic 310-30 by the Corporation are not considered non-performing and will continue to have an accretable yield as long as there is a reasonable expectation about the timing and amount of cash flows expected to be collected. The Corporation measures additional losses for this portfolio when it is probable the Corporation will be unable to collect all cash flows expected at acquisition plus additional cash flows expected to be collected arising from changes in estimates after acquisition. Lines of credit with revolving privileges that were acquired as part of the Westernbank FDIC-assisted transaction are accounted for under the guidance of ASC Subtopic 310-20, which requires that any differences between the contractually required loan payment receivable in excess of the Corporation’s initial investment in the loans be accreted into interest income. Loans accounted for under ASC Subtopic 310-20 are placed in non-accrual status when past due in accordance with the Corporation’s non-accruing policy and any accretion of discount is discontinued.
The risks on loans acquired in the FDIC-assisted transaction are significantly different from the risks on loans not covered under the FDIC loss sharing agreements because of the loss protection provided by the FDIC. Accordingly, the Corporation presents loans subject to the loss sharing agreements as “covered loans” in the information below and loans that are not subject to the FDIC loss sharing agreements as “non-covered loans”. The FDIC loss sharing agreements expired on June 30, 2015 for commercial (including construction) and consumer loans, and expires on June 30, 2020 for single-family residential mortgage loans, as explained in Note 11.
For a summary of the accounting policies related to loans, interest recognition and allowance for loan losses refer to Note 2—2 - Summary of significant accounting policies, of the 2015 Form 10-K.
During the quarter and six months ended March 31,June 30, 2016, the Corporation recorded purchases (including repurchases) of mortgage loans amounting to $122$118 million and $240 million, respectively; consumer loans of $106$58 million and $164 million, respectively; and commercial loans amounting to $51 million.million during the six months ended June 30, 2016. Excluding the impact of the Doral Bank Transaction, during the quarter and six months ended March 31,June 30, 2015, the Corporation recorded purchases (including repurchases) of mortgage loans amounting to $169 million. Refer to Note 5 for information on$213 million and $382 million, respectively.
Excluding the bulk sale of Westernbank loans acquired as partwith a carrying value of approximately $100 million, the Doral Bank Transaction.
Corporation sold commercial and construction loans with a carrying value of approximately $1 million during the six months ended June 30, 2016 (during the quarter and six months ended June 30, 2015 - $8 million and $9 million). The Corporation performed whole-loan sales involvingsold approximately $21$19 million and $40 million of residential mortgage loans (on a whole loan basis) during the quarter and six months ended March 31,June 30, 2016, (March 31, 2015—$39 million)respectively (June 30, 2015 - $25 million and $65 million, respectively). Also, during the quarter ended March 31, 2016, the Corporation securitized approximately $134$ 170 million and $ 304 million of mortgage loans into Government National Mortgage Association (“GNMA”) mortgage-backed securities during the quarter and $36six months ended June 30, 2016, respectively (June 30, 2015 - $ 243 million and $ 400 million, respectively). Furthermore, the Corporation securitized approximately $ 43 million and $ 79 million of mortgage loans into Federal National Mortgage Association (“FNMA”) mortgage-backed securities compared to $156 million and $47 million, respectively, during the quarter and six months ended March 31, 2015.June 30, 2016, respectively (June 30, 2015 - $ 70 million and $ 117 million, respectively).
Non-covered loans
The following table presents the composition of non-covered loans held-in-portfolio (“HIP”), net of unearned income, by past due status at March 31,June 30, 2016 and December 31, 2015, including loans previously covered by the commercial FDIC loss sharing agreements.
June 30, 2016 | ||||||||||||||||||||||||
Puerto Rico | ||||||||||||||||||||||||
Past due | Non-covered | |||||||||||||||||||||||
30-59 | 60-89 | 90 days | Total | loans HIP | ||||||||||||||||||||
(In thousands) | days | days | or more | past due | Current | Puerto Rico | ||||||||||||||||||
Commercial multi-family | $ | 359 | $ | 63 | $ | 1,004 | $ | 1,426 | $ | 174,085 | $ | 175,511 | ||||||||||||
Commercial real estate non-owner occupied | 98,373 | 6,624 | 57,017 | 162,014 | 2,436,617 | 2,598,631 | ||||||||||||||||||
Commercial real estate owner occupied | 9,570 | 4,969 | 122,337 | 136,876 | 1,679,956 | 1,816,832 | ||||||||||||||||||
Commercial and industrial | 8,286 | 2,348 | 34,944 | 45,578 | 2,580,500 | 2,626,078 | ||||||||||||||||||
Construction | — | — | 4,848 | 4,848 | 98,794 | 103,642 | ||||||||||||||||||
Mortgage | 292,558 | 159,972 | 802,407 | 1,254,937 | 4,765,625 | 6,020,562 | ||||||||||||||||||
Leasing | 6,611 | 1,034 | 3,019 | 10,664 | 653,430 | 664,094 | ||||||||||||||||||
Consumer: | ||||||||||||||||||||||||
Credit cards | 11,024 | 8,109 | 17,225 | 36,358 | 1,078,082 | 1,114,440 | ||||||||||||||||||
Home equity lines of credit | 49 | 206 | 293 | 548 | 8,945 | 9,493 | ||||||||||||||||||
Personal | 13,660 | 7,510 | 20,349 | 41,519 | 1,146,847 | 1,188,366 | ||||||||||||||||||
Auto | 32,909 | 6,925 | 11,117 | 50,951 | 778,906 | 829,857 | ||||||||||||||||||
Other | 512 | 255 | 18,158 | 18,925 | 160,601 | 179,526 | ||||||||||||||||||
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Total | $ | 473,911 | $ | 198,015 | $ | 1,092,718 | $ | 1,764,644 | $ | 15,562,388 | $ | 17,327,032 | ||||||||||||
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June 30, 2016 | ||||||||||||||||||||||||
U.S. mainland | ||||||||||||||||||||||||
Past due | ||||||||||||||||||||||||
30-59 | 60-89 | 90 days | Total | Loans HIP | ||||||||||||||||||||
(In thousands) | days | days | or more | past due | Current | U.S. mainland | ||||||||||||||||||
Commercial multi-family | $ | — | $ | — | $ | 375 | $ | 375 | $ | 888,457 | $ | 888,832 | ||||||||||||
Commercial real estate non-owner occupied | 251 | 375 | 317 | 943 | 1,092,910 | 1,093,853 | ||||||||||||||||||
Commercial real estate owner occupied | 2,072 | 97 | 746 | 2,915 | 279,637 | 282,552 | ||||||||||||||||||
Commercial and industrial | 1,800 | 7,786 | 80,312 | 89,898 | 787,628 | 877,526 | ||||||||||||||||||
Construction | — | — | 100 | 100 | 613,590 | 613,690 | ||||||||||||||||||
Mortgage | 1,381 | 5,009 | 14,390 | 20,780 | 822,776 | 843,556 | ||||||||||||||||||
Legacy | 623 | 176 | 3,839 | 4,638 | 45,071 | 49,709 | ||||||||||||||||||
Consumer: | ||||||||||||||||||||||||
Credit cards | 19 | 83 | 535 | 637 | — | 637 | ||||||||||||||||||
Home equity lines of credit | 2,684 | 674 | 3,861 | 7,219 | 272,232 | 279,451 | ||||||||||||||||||
Personal | 1,299 | 1,098 | 1,351 | 3,748 | 279,788 | 283,536 | ||||||||||||||||||
Auto | — | — | — | — | 15 | 15 | ||||||||||||||||||
Other | 4 | — | — | 4 | 268 | 272 | ||||||||||||||||||
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Total | $ | 10,133 | $ | 15,298 | $ | 105,826 | $ | 131,257 | $ | 5,082,372 | $ | 5,213,629 | ||||||||||||
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March 31, 2016 Puerto Rico (In thousands) Commercial multi-family Commercial real estate non-owner occupied Commercial real estate owner occupied Commercial and industrial Construction Mortgage Leasing Consumer: Credit cards Home equity lines of credit Personal Auto Other Total March 31, 2016 U.S. mainland (In thousands) Commercial multi-family Commercial real estate non-owner occupied Commercial real estate owner occupied Commercial and industrial Construction Mortgage Legacy Consumer: Credit cards Home equity lines of credit Personal Auto Other Total Past due Non-covered 30-59 60-89 90 days Total loans HIP days days or more past due Current Puerto Rico $ 652 $ 168 $ 1,418 $ 2,238 $ 172,413 $ 174,651 46,119 3,102 103,719 152,940 2,506,513 2,659,453 16,339 6,608 141,443 164,390 1,703,399 1,867,789 7,267 4,297 39,529 51,093 2,615,305 2,666,398 678 372 13,133 14,183 90,961 105,144 352,313 134,842 823,440 1,310,595 4,789,164 6,099,759 7,209 1,598 3,419 12,226 630,916 643,142 10,915 7,159 18,864 36,938 1,061,845 1,098,783 82 141 280 503 9,126 9,629 12,963 7,693 20,495 41,151 1,150,239 1,191,390 32,638 6,029 10,844 49,511 776,794 826,305 1,337 282 19,220 20,839 162,145 182,984 $ 488,512 $ 172,291 $ 1,195,804 $ 1,856,607 $ 15,668,820 $ 17,525,427 Past due 30-59 60-89 90 days Total Loans HIP days days or more past due Current U.S. mainland $ 32 $ — $ 246 $ 278 $ 762,276 $ 762,554 9,556 — 11,155 20,711 969,937 990,648 3,817 — 193 4,010 219,791 223,801 16,935 156 84,086 101,177 781,918 883,095 15,091 — 671 15,762 613,952 629,714 18,877 514 12,069 31,460 847,982 879,442 3,119 400 4,046 7,565 53,479 61,044 187 157 382 726 12,292 13,018 1,701 845 4,309 6,855 287,405 294,260 1,624 639 1,429 3,692 240,722 244,414 — — 6 6 18 24 — — 10 10 286 296 $ 70,939 $ 2,711 $ 118,602 $ 192,252 $ 4,790,058 $ 4,982,310
March 31, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||
June 30, 2016 | June 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||
Popular, Inc. | Popular, Inc. | Popular, Inc. | ||||||||||||||||||||||||||||||||||||||||||||||
Past due | Non-covered | Past due | Non-covered | |||||||||||||||||||||||||||||||||||||||||||||
30-59 | 60-89 | 90 days | Total | loans HIP | 30-59 | 60-89 | 90 days | Total | loans HIP | |||||||||||||||||||||||||||||||||||||||
(In thousands) | days | days | or more | past due | Current | Popular, Inc.[1] [2] | days | days | or more | past due | Current | Popular, Inc.[1] [2] | ||||||||||||||||||||||||||||||||||||
Commercial multi-family | $ | 684 | $ | 168 | $ | 1,664 | $ | 2,516 | $ | 934,689 | $ | 937,205 | $ | 359 | $ | 63 | $ | 1,379 | $ | 1,801 | $ | 1,062,542 | $ | 1,064,343 | ||||||||||||||||||||||||
Commercial real estate non-owner occupied | 55,675 | 3,102 | 114,874 | 173,651 | 3,476,450 | 3,650,101 | 98,624 | 6,999 | 57,334 | 162,957 | 3,529,527 | 3,692,484 | ||||||||||||||||||||||||||||||||||||
Commercial real estate owner occupied | 20,156 | 6,608 | 141,636 | 168,400 | 1,923,190 | 2,091,590 | 11,642 | 5,066 | 123,083 | 139,791 | 1,959,593 | 2,099,384 | ||||||||||||||||||||||||||||||||||||
Commercial and industrial | 24,202 | 4,453 | 123,615 | 152,270 | 3,397,223 | 3,549,493 | 10,086 | 10,134 | 115,256 | 135,476 | 3,368,128 | 3,503,604 | ||||||||||||||||||||||||||||||||||||
Construction | 15,769 | 372 | 13,804 | 29,945 | 704,913 | 734,858 | — | — | 4,948 | 4,948 | 712,384 | 717,332 | ||||||||||||||||||||||||||||||||||||
Mortgage | 371,190 | 135,356 | 835,509 | 1,342,055 | 5,637,146 | 6,979,201 | 293,939 | 164,981 | 816,797 | 1,275,717 | 5,588,401 | 6,864,118 | ||||||||||||||||||||||||||||||||||||
Leasing | 7,209 | 1,598 | 3,419 | 12,226 | 630,916 | 643,142 | 6,611 | 1,034 | 3,019 | 10,664 | 653,430 | 664,094 | ||||||||||||||||||||||||||||||||||||
Legacy[3] | 3,119 | 400 | 4,046 | 7,565 | 53,479 | 61,044 | 623 | 176 | 3,839 | 4,638 | 45,071 | 49,709 | ||||||||||||||||||||||||||||||||||||
Consumer: | ||||||||||||||||||||||||||||||||||||||||||||||||
Credit cards | 11,102 | 7,316 | 19,246 | 37,664 | 1,074,137 | 1,111,801 | 11,043 | 8,192 | 17,760 | 36,995 | 1,078,082 | 1,115,077 | ||||||||||||||||||||||||||||||||||||
Home equity lines of credit | 1,783 | 986 | 4,589 | 7,358 | 296,531 | 303,889 | 2,733 | 880 | 4,154 | 7,767 | 281,177 | 288,944 | ||||||||||||||||||||||||||||||||||||
Personal | 14,587 | 8,332 | 21,924 | 44,843 | 1,390,961 | 1,435,804 | 14,959 | 8,608 | 21,700 | 45,267 | 1,426,635 | 1,471,902 | ||||||||||||||||||||||||||||||||||||
Auto | 32,638 | 6,029 | 10,850 | 49,517 | 776,812 | 826,329 | 32,909 | 6,925 | 11,117 | 50,951 | 778,921 | 829,872 | ||||||||||||||||||||||||||||||||||||
Other | 1,337 | 282 | 19,230 | 20,849 | 162,431 | 183,280 | 516 | 255 | 18,158 | 18,929 | 160,869 | 179,798 | ||||||||||||||||||||||||||||||||||||
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Total | $ | 559,451 | $ | 175,002 | $ | 1,314,406 | $ | 2,048,859 | $ | 20,458,878 | $ | 22,507,737 | $ | 484,044 | $ | 213,313 | $ | 1,198,544 | $ | 1,895,901 | $ | 20,644,760 | $ | 22,540,661 | ||||||||||||||||||||||||
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[1] | Non-covered loans held-in-portfolio are net of |
[2] | Includes |
[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 segment. |
December 31, 2015 | December 31, 2015 | December 31, 2015 | ||||||||||||||||||||||||||||||||||||||||||||||
Puerto Rico | Puerto Rico | Puerto Rico | ||||||||||||||||||||||||||||||||||||||||||||||
Past due | Non-covered | Past due | Non-covered | |||||||||||||||||||||||||||||||||||||||||||||
30-59 | 60-89 | 90 days | Total | loans HIP | 30-59 | 60-89 | 90 days | Total | loans HIP | |||||||||||||||||||||||||||||||||||||||
(In thousands) | days | days | or more | past due | Current | Puerto Rico | days | days | or more | past due | Current | Puerto Rico | ||||||||||||||||||||||||||||||||||||
Commercial multi-family | $ | 459 | $ | 217 | $ | 1,316 | $ | 1,992 | $ | 130,154 | $ | 132,146 | $ | 459 | $ | 217 | $ | 1,316 | $ | 1,992 | $ | 130,154 | $ | 132,146 | ||||||||||||||||||||||||
Commercial real estate non-owner occupied | 166,732 | 12,520 | 84,982 | 264,234 | 2,404,858 | 2,669,092 | 166,732 | 12,520 | 84,982 | 264,234 | 2,404,858 | 2,669,092 | ||||||||||||||||||||||||||||||||||||
Commercial real estate owner occupied | 14,245 | 5,624 | 138,778 | 158,647 | 1,750,597 | 1,909,244 | 14,245 | 5,624 | 138,778 | 158,647 | 1,750,597 | 1,909,244 | ||||||||||||||||||||||||||||||||||||
Commercial and industrial | 6,010 | 6,059 | 38,464 | 50,533 | 2,607,204 | 2,657,737 | 6,010 | 6,059 | 38,464 | 50,533 | 2,607,204 | 2,657,737 | ||||||||||||||||||||||||||||||||||||
Construction | 238 | 253 | 13,738 | 14,229 | 86,719 | 100,948 | 238 | 253 | 13,738 | 14,229 | 86,719 | 100,948 | ||||||||||||||||||||||||||||||||||||
Mortgage | 344,858 | 162,341 | 863,869 | 1,371,068 | 4,756,423 | 6,127,491 | 344,858 | 162,341 | 863,869 | 1,371,068 | 4,756,423 | 6,127,491 | ||||||||||||||||||||||||||||||||||||
Leasing | 7,844 | 1,630 | 3,009 | 12,483 | 615,167 | 627,650 | 7,844 | 1,630 | 3,009 | 12,483 | 615,167 | 627,650 | ||||||||||||||||||||||||||||||||||||
Consumer: | ||||||||||||||||||||||||||||||||||||||||||||||||
Credit cards | 11,078 | 9,414 | 19,098 | 39,590 | 1,088,755 | 1,128,345 | 11,078 | 9,414 | 19,098 | 39,590 | 1,088,755 | 1,128,345 | ||||||||||||||||||||||||||||||||||||
Home equity lines of credit | 186 | 292 | 394 | 872 | 9,816 | 10,688 | 186 | 292 | 394 | 872 | 9,816 | 10,688 | ||||||||||||||||||||||||||||||||||||
Personal | 13,756 | 7,889 | 22,625 | 44,270 | 1,158,565 | 1,202,835 | 13,756 | 7,889 | 22,625 | 44,270 | 1,158,565 | 1,202,835 | ||||||||||||||||||||||||||||||||||||
Auto | 33,554 | 7,500 | 11,640 | 52,694 | 763,256 | 815,950 | 33,554 | 7,500 | 11,640 | 52,694 | 763,256 | 815,950 | ||||||||||||||||||||||||||||||||||||
Other | 1,069 | 298 | 19,232 | 20,599 | 167,885 | 188,484 | 1,069 | 298 | 19,232 | 20,599 | 167,885 | 188,484 | ||||||||||||||||||||||||||||||||||||
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Total | $ | 600,029 | $ | 214,037 | $ | 1,217,145 | $ | 2,031,211 | $ | 15,539,399 | $ | 17,570,610 | $ | 600,029 | $ | 214,037 | $ | 1,217,145 | $ | 2,031,211 | $ | 15,539,399 | $ | 17,570,610 | ||||||||||||||||||||||||
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December 31, 2015 | December 31, 2015 | December 31, 2015 | ||||||||||||||||||||||||||||||||||||||||||||||
U.S. mainland | U.S. mainland | U.S. mainland | ||||||||||||||||||||||||||||||||||||||||||||||
Past due | ||||||||||||||||||||||||||||||||||||||||||||||||
30-59 | 60-89 | 90 days | Total | Loans HIP | Past due | Current | Loans HIP U.S. mainland | |||||||||||||||||||||||||||||||||||||||||
(In thousands) | days | days | or more | past due | Current | U.S. mainland | 30-59 days | 60-89 days | 90 days or more | Total past due | ||||||||||||||||||||||||||||||||||||||
Commercial multi-family | $ | 33 | $ | 253 | $ | — | $ | 286 | $ | 693,647 | $ | 693,933 | $ | 33 | $ | 253 | $ | — | $ | 286 | $ | 693,647 | $ | 693,933 | ||||||||||||||||||||||||
Commercial real estate non-owner occupied | 160 | — | 253 | 413 | 962,610 | 963,023 | 160 | — | 253 | 413 | 962,610 | 963,023 | ||||||||||||||||||||||||||||||||||||
Commercial real estate owner occupied | 1,490 | 429 | 221 | 2,140 | 200,204 | 202,344 | 1,490 | 429 | 221 | 2,140 | 200,204 | 202,344 | ||||||||||||||||||||||||||||||||||||
Commercial and industrial | 13,647 | 1,526 | 75,575 | 90,748 | 780,896 | 871,644 | 13,647 | 1,526 | 75,575 | 90,748 | 780,896 | 871,644 | ||||||||||||||||||||||||||||||||||||
Construction | — | — | — | — | 580,158 | 580,158 | — | — | — | — | 580,158 | 580,158 | ||||||||||||||||||||||||||||||||||||
Mortgage | 18,957 | 3,424 | 13,538 | 35,919 | 872,671 | 908,590 | 18,957 | 3,424 | 13,538 | 35,919 | 872,671 | 908,590 | ||||||||||||||||||||||||||||||||||||
Legacy | 1,160 | 662 | 3,649 | 5,471 | 58,965 | 64,436 | 1,160 | 662 | 3,649 | 5,471 | 58,965 | 64,436 | ||||||||||||||||||||||||||||||||||||
Consumer: | ||||||||||||||||||||||||||||||||||||||||||||||||
Credit cards | 327 | 134 | 437 | 898 | 13,037 | 13,935 | 327 | 134 | 437 | 898 | 13,037 | 13,935 | ||||||||||||||||||||||||||||||||||||
Home equity lines of credit | 3,149 | 1,114 | 4,176 | 8,439 | 296,045 | 304,484 | 3,149 | 1,114 | 4,176 | 8,439 | 296,045 | 304,484 | ||||||||||||||||||||||||||||||||||||
Personal | 1,836 | 690 | 1,240 | 3,766 | 168,860 | 172,626 | 1,836 | 690 | 1,240 | 3,766 | 168,860 | 172,626 | ||||||||||||||||||||||||||||||||||||
Auto | — | — | 6 | 6 | 22 | 28 | — | — | 6 | 6 | 22 | 28 | ||||||||||||||||||||||||||||||||||||
Other | — | 10 | 5 | 15 | 289 | 304 | — | 10 | 5 | 15 | 289 | 304 | ||||||||||||||||||||||||||||||||||||
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Total | $ | 40,759 | $ | 8,242 | $ | 99,100 | $ | 148,101 | $ | 4,627,404 | $ | 4,775,505 | $ | 40,759 | $ | 8,242 | $ | 99,100 | $ | 148,101 | $ | 4,627,404 | $ | 4,775,505 | ||||||||||||||||||||||||
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December 31, 2015 | ||||||||||||||||||||||||||||||||||||||||||||||||
Popular, Inc. | ||||||||||||||||||||||||||||||||||||||||||||||||
Past due | Non-covered | |||||||||||||||||||||||||||||||||||||||||||||||
30-59 | 60-89 | 90 days | Total | loans HIP | ||||||||||||||||||||||||||||||||||||||||||||
(In thousands) | days | days | or more | past due | Current | Popular, Inc.[1] [2] | ||||||||||||||||||||||||||||||||||||||||||
Commercial multi-family | $ | 492 | $ | 470 | $ | 1,316 | $ | 2,278 | $ | 823,801 | $ | 826,079 | ||||||||||||||||||||||||||||||||||||
Commercial real estate non-owner occupied | 166,892 | 12,520 | 85,235 | 264,647 | 3,367,468 | 3,632,115 | ||||||||||||||||||||||||||||||||||||||||||
Commercial real estate owner occupied | 15,735 | 6,053 | 138,999 | 160,787 | 1,950,801 | 2,111,588 | ||||||||||||||||||||||||||||||||||||||||||
Commercial and industrial | 19,657 | 7,585 | 114,039 | 141,281 | 3,388,100 | 3,529,381 | ||||||||||||||||||||||||||||||||||||||||||
Construction | 238 | 253 | 13,738 | 14,229 | 666,877 | 681,106 | ||||||||||||||||||||||||||||||||||||||||||
Mortgage | 363,815 | 165,765 | 877,407 | 1,406,987 | 5,629,094 | 7,036,081 | ||||||||||||||||||||||||||||||||||||||||||
Leasing | 7,844 | 1,630 | 3,009 | 12,483 | 615,167 | 627,650 | ||||||||||||||||||||||||||||||||||||||||||
Legacy[3] | 1,160 | 662 | 3,649 | 5,471 | 58,965 | 64,436 | ||||||||||||||||||||||||||||||||||||||||||
Consumer: | ||||||||||||||||||||||||||||||||||||||||||||||||
Credit cards | 11,405 | 9,548 | 19,535 | 40,488 | 1,101,792 | 1,142,280 | ||||||||||||||||||||||||||||||||||||||||||
Home equity lines of credit | 3,335 | 1,406 | 4,570 | 9,311 | 305,861 | 315,172 | ||||||||||||||||||||||||||||||||||||||||||
Personal | 15,592 | 8,579 | 23,865 | 48,036 | 1,327,425 | 1,375,461 | ||||||||||||||||||||||||||||||||||||||||||
Auto | 33,554 | 7,500 | 11,646 | 52,700 | 763,278 | 815,978 | ||||||||||||||||||||||||||||||||||||||||||
Other | 1,069 | 308 | 19,237 | 20,614 | 168,174 | 188,788 | ||||||||||||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||||||||||||||
Total | $ | 640,788 | $ | 222,279 | $ | 1,316,245 | $ | 2,179,312 | $ | 20,166,803 | $ | 22,346,115 | ||||||||||||||||||||||||||||||||||||
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December 31, 2015 | ||||||||||||||||||||||||
Popular, Inc. | ||||||||||||||||||||||||
Past due | Current | Non-covered loans HIP Popular, Inc.[1] [2] | ||||||||||||||||||||||
(In thousands) | 30-59 days | 60-89 days | 90 days or more | Total past due | ||||||||||||||||||||
Commercial multi-family | $ | 492 | $ | 470 | $ | 1,316 | $ | 2,278 | $ | 823,801 | $ | 826,079 | ||||||||||||
Commercial real estate non-owner occupied | 166,892 | 12,520 | 85,235 | 264,647 | 3,367,468 | 3,632,115 | ||||||||||||||||||
Commercial real estate owner occupied | 15,735 | 6,053 | 138,999 | 160,787 | 1,950,801 | 2,111,588 | ||||||||||||||||||
Commercial and industrial | 19,657 | 7,585 | 114,039 | 141,281 | 3,388,100 | 3,529,381 | ||||||||||||||||||
Construction | 238 | 253 | 13,738 | 14,229 | 666,877 | 681,106 | ||||||||||||||||||
Mortgage | 363,815 | 165,765 | 877,407 | 1,406,987 | 5,629,094 | 7,036,081 | ||||||||||||||||||
Leasing | 7,844 | 1,630 | 3,009 | 12,483 | 615,167 | 627,650 | ||||||||||||||||||
Legacy[3] | 1,160 | 662 | 3,649 | 5,471 | 58,965 | 64,436 | ||||||||||||||||||
Consumer: | ||||||||||||||||||||||||
Credit cards | 11,405 | 9,548 | 19,535 | 40,488 | 1,101,792 | 1,142,280 | ||||||||||||||||||
Home equity lines of credit | 3,335 | 1,406 | 4,570 | 9,311 | 305,861 | 315,172 | ||||||||||||||||||
Personal | 15,592 | 8,579 | 23,865 | 48,036 | 1,327,425 | 1,375,461 | ||||||||||||||||||
Auto | 33,554 | 7,500 | 11,646 | 52,700 | 763,278 | 815,978 | ||||||||||||||||||
Other | 1,069 | 308 | 19,237 | 20,614 | 168,174 | 188,788 | ||||||||||||||||||
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| |||||||||||||
Total | $ | 640,788 | $ | 222,279 | $ | 1,316,245 | $ | 2,179,312 | $ | 20,166,803 | $ | 22,346,115 | ||||||||||||
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[1] | Non-covered loans held-in-portfolio are net of $108 million in unearned income and exclude $137 million in loans held-for-sale. |
[2] | Includes $7.3 billion pledged to secure credit facilities and public funds that the secured parties are not permitted to sell or repledge the collateral, of which $4.3 billion were pledged at the FHLB as collateral for borrowings, $2.5 billion at the FRB for discount window borrowings and $0.5 billion serve as collateral for public funds. |
[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 segment. |
The following tables present non-covered loans held-in-portfolio by loan class that are in non-performing status or are accruing interest but are past due 90 days or more at March 31,June 30, 2016 and December 31, 2015. Accruing loans past due 90 days or more consist primarily of credit cards, FHA / VA and other insured mortgage loans, and delinquent mortgage loans which are included in the Corporation’s financial statements pursuant to GNMA’s buy-back option program. Servicers of loans underlying GNMA mortgage-backed securities must report as their own assets the defaulted loans that they have the option (but not the obligation) to repurchase, even when they elect not to exercise that option.
At March 31, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||
Puerto Rico | U.S. mainland | Popular, Inc. | ||||||||||||||||||||||||||||||||||||||||||||||
Accruing loans | Accruing loans | Accruing loans | ||||||||||||||||||||||||||||||||||||||||||||||
At June 30, 2016 | At June 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||
Non-accrual | past-due 90 | Non-accrual | past-due 90 | Non-accrual | past-due 90 | Puerto Rico | U.S. mainland | Popular, Inc. | ||||||||||||||||||||||||||||||||||||||||
(In thousands) | loans | days or more [1] | loans | days or more [1] | loans | days or more [1] | Non-accrual loans | Accruing loans past-due 90 days or more [1] | Non-accrual loans | Accruing loans past-due 90 days or more [1] | Non-accrual loans | Accruing loans past-due 90 days or more [1] | ||||||||||||||||||||||||||||||||||||
Commercial multi-family | $ | 1,178 | $ | — | $ | 246 | $ | — | $ | 1,424 | $ | — | $ | 1,004 | $ | — | $ | 375 | $ | — | $ | 1,379 | $ | — | ||||||||||||||||||||||||
Commercial real estate non-owner occupied | 32,310 | — | 11,155 | — | 43,465 | — | 25,348 | — | 317 | — | 25,665 | — | ||||||||||||||||||||||||||||||||||||
Commercial real estate owner occupied | 110,972 | — | 193 | — | 111,165 | — | 111,713 | — | 746 | — | 112,459 | — | ||||||||||||||||||||||||||||||||||||
Commercial and industrial | 38,179 | 332 | 3,398 | — | 41,577 | 332 | 34,519 | 270 | 1,593 | — | 36,112 | 270 | ||||||||||||||||||||||||||||||||||||
Construction | 3,270 | — | 671 | — | 3,941 | — | 2,423 | — | 100 | — | 2,523 | — | ||||||||||||||||||||||||||||||||||||
Mortgage[3] | 322,838 | 406,327 | 12,069 | — | 334,907 | 406,327 | 323,658 | 394,936 | 14,390 | — | 338,048 | 394,936 | ||||||||||||||||||||||||||||||||||||
Leasing | 3,419 | — | — | — | 3,419 | — | 3,019 | — | — | — | 3,019 | — | ||||||||||||||||||||||||||||||||||||
Legacy | — | — | 4,046 | — | 4,046 | — | — | — | 3,839 | — | 3,839 | — | ||||||||||||||||||||||||||||||||||||
Consumer: | ||||||||||||||||||||||||||||||||||||||||||||||||
Credit cards | — | 18,864 | 382 | — | 382 | 18,864 | — | 17,225 | 535 | — | 535 | 17,225 | ||||||||||||||||||||||||||||||||||||
Home equity lines of credit | — | 280 | 4,309 | — | 4,309 | 280 | — | 293 | 3,861 | — | 3,861 | 293 | ||||||||||||||||||||||||||||||||||||
Personal | 20,023 | 46 | 1,429 | — | 21,452 | 46 | 20,271 | 13 | 1,351 | — | 21,622 | 13 | ||||||||||||||||||||||||||||||||||||
Auto | 10,844 | — | 6 | — | 10,850 | — | 11,117 | — | — | — | 11,117 | — | ||||||||||||||||||||||||||||||||||||
Other | 18,579 | 588 | 10 | — | 18,589 | 588 | 17,560 | 582 | — | — | 17,560 | 582 | ||||||||||||||||||||||||||||||||||||
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Total[2] | $ | 561,612 | $ | 426,437 | $ | 37,914 | $ | — | $ | 599,526 | $ | 426,437 | $ | 550,632 | $ | 413,319 | $ | 27,107 | $ | — | $ | 577,739 | $ | 413,319 | ||||||||||||||||||||||||
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[1] | Non-covered loans of |
[2] | For purposes of this table non-performing loans exclude $ |
[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 non-performing since the principal repayment is insured. These balances include |
At December 31, 2015 | At December 31, 2015 | At December 31, 2015 | ||||||||||||||||||||||||||||||||||||||||||||||
Puerto Rico | U.S. mainland | Popular, Inc. | ||||||||||||||||||||||||||||||||||||||||||||||
Accruing loans | Accruing loans | Accruing loans | ||||||||||||||||||||||||||||||||||||||||||||||
Non-accrual | past-due 90 | Non-accrual | past-due 90 | Non-accrual | past-due 90 | Puerto Rico | U.S. mainland | Popular, Inc. | ||||||||||||||||||||||||||||||||||||||||
(In thousands) | loans | days or more [1] | loans | days or more [1] | loans | days or more [1] | Non-accrual loans | Accruing loans past-due 90 days or more [1] | Non-accrual loans | Accruing loans past-due 90 days or more [1] | Non-accrual loans | Accruing loans past-due 90 days or more [1] | ||||||||||||||||||||||||||||||||||||
Commercial multi-family | $ | 1,062 | $ | — | $ | — | $ | — | $ | 1,062 | $ | — | $ | 1,062 | $ | — | $ | — | $ | — | $ | 1,062 | $ | — | ||||||||||||||||||||||||
Commercial real estate non-owner occupied | 33,720 | — | 253 | — | 33,973 | — | 33,720 | — | 253 | — | 33,973 | — | ||||||||||||||||||||||||||||||||||||
Commercial real estate owner occupied | 106,449 | — | 221 | — | 106,670 | — | 106,449 | — | 221 | — | 106,670 | — | ||||||||||||||||||||||||||||||||||||
Commercial and industrial | 36,671 | 555 | 3,440 | — | 40,111 | 555 | 36,671 | 555 | 3,440 | — | 40,111 | 555 | ||||||||||||||||||||||||||||||||||||
Construction | 3,550 | — | — | — | 3,550 | — | 3,550 | — | — | — | 3,550 | — | ||||||||||||||||||||||||||||||||||||
Mortgage[3] | 337,933 | 426,094 | 13,538 | — | 351,471 | 426,094 | 337,933 | 426,094 | 13,538 | — | 351,471 | 426,094 | ||||||||||||||||||||||||||||||||||||
Leasing | 3,009 | — | — | — | 3,009 | — | 3,009 | — | — | — | 3,009 | — | ||||||||||||||||||||||||||||||||||||
Legacy | — | — | 3,649 | — | 3,649 | — | — | — | 3,649 | — | 3,649 | — | ||||||||||||||||||||||||||||||||||||
Consumer: | ||||||||||||||||||||||||||||||||||||||||||||||||
Credit cards | — | 19,098 | 437 | — | 437 | 19,098 | — | 19,098 | 437 | — | 437 | 19,098 | ||||||||||||||||||||||||||||||||||||
Home equity lines of credit | — | 394 | 4,176 | — | 4,176 | 394 | — | 394 | 4,176 | — | 4,176 | 394 | ||||||||||||||||||||||||||||||||||||
Personal | 22,102 | 523 | 1,240 | — | 23,342 | 523 | 22,102 | 523 | 1,240 | — | 23,342 | 523 | ||||||||||||||||||||||||||||||||||||
Auto | 11,640 | — | 6 | — | 11,646 | — | 11,640 | — | 6 | — | 11,646 | — | ||||||||||||||||||||||||||||||||||||
Other | 18,698 | 61 | 5 | — | 18,703 | 61 | 18,698 | 61 | 5 | — | 18,703 | 61 | ||||||||||||||||||||||||||||||||||||
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Total[2] | $ | 574,834 | $ | 446,725 | $ | 26,965 | $ | — | $ | 601,799 | $ | 446,725 | $ | 574,834 | $ | 446,725 | $ | 26,965 | $ | — | $ | 601,799 | $ | 446,725 | ||||||||||||||||||||||||
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[1] | Non-covered loans by $268 million accounted for under ASC Subtopic 310-30 are excluded from the above table as they are considered to be performing due to the application of the accretion method, in which these loans will accrete interest income over the remaining life of the loans using estimated cash flow analysis. |
[2] | For purposes of this table non-performing loans exclude $ 45 million in non-performing loans held-for-sale. |
[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 non-performing since the principal repayment is insured. These balances include $164 million of residential mortgage loans in Puerto Rico insured by FHA or guaranteed by the VA that are no longer accruing interest as of December 31, 2015. Furthermore, the Corporation has approximately $70 million in reverse mortgage loans in Puerto Rico which are guaranteed by FHA, but which are currently not accruing interest. Due to the guaranteed nature of the loans, it is the Corporation’s policy to exclude these balances from non-performing assets. |
The following table provides a breakdown of loans held-for-sale (“LHFS”) at March 31,June 30, 2016 and December 31, 2015 by main categories.
(In thousands) | March 31, 2016 | December 31, 2015 | June 30, 2016 | December 31, 2015 | ||||||||||||
Commercial | $ | 42,771 | $ | 45,074 | $ | 39,544 | $ | 45,074 | ||||||||
Construction | 2 | 95 | — | 95 | ||||||||||||
Mortgage | 82,542 | 91,831 | 82,794 | 91,831 | ||||||||||||
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Total loans held-for-sale | $ | 125,315 | $ | 137,000 | $ | 122,338 | $ | 137,000 | ||||||||
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The following table provides a breakdown of loans held-for-sale (“LHFS”) in non-performing status at March 31,June 30, 2016 and December 31, 2015 by main categories.
(In thousands) | March 31, 2016 | December 31, 2015 | June 30, 2016 | December 31, 2015 | ||||||||||||
Commercial | $ | 42,741 | $ | 45,074 | $ | 39,544 | $ | 45,074 | ||||||||
Construction | 2 | 95 | — | 95 | ||||||||||||
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Total | $ | 42,743 | $ | 45,169 | $ | 39,544 | $ | 45,169 | ||||||||
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The following table presents loans acquired as part of the Doral Bank Transaction accounted for under ASC subtopic 310-20 as of the February 27, 2015 acquisition date:
(In thousands) | ||||||||
Fair value of loans accounted under ASC Subtopic 310-20 | $ | 1,178,543 | $ | 1,178,543 | ||||
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Gross contractual amounts receivable (principal and interest) | $ | 1,666,695 | $ | 1,666,695 | ||||
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Estimate of contractual cash flows not expected to be collected | $ | 34,646 | $ | 34,646 | ||||
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Covered loans
The following tables present the composition of loans by past due status at March 31,June 30, 2016 and December 31, 2015 for covered loans held-in-portfolio. The information considers covered loans accounted for under ASC Subtopic 310-20 and ASC Subtopic 310-30.
March 31, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||
Past due | ||||||||||||||||||||||||||||||||||||||||||||||||
June 30, 2016 | June 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||
30-59 | 60-89 | 90 days | Total | Covered | Past due | Current | Covered loans HIP [1] | |||||||||||||||||||||||||||||||||||||||||
(In thousands) | days | days | or more | past due | Current | loans HIP [1] | 30-59 days | 60-89 days | 90 days or more | Total past due | ||||||||||||||||||||||||||||||||||||||
Mortgage | $ | 29,539 | $ | 15,953 | $ | 77,968 | $ | 123,460 | $ | 483,251 | $ | 606,711 | $ | 30,197 | $ | 15,806 | $ | 74,541 | $ | 120,544 | $ | 468,712 | $ | 589,256 | ||||||||||||||||||||||||
Consumer | 1,108 | 324 | 1,389 | 2,821 | 15,598 | 18,419 | 905 | 396 | 1,680 | 2,981 | 14,933 | 17,914 | ||||||||||||||||||||||||||||||||||||
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Total covered loans | $ | 30,647 | $ | 16,277 | $ | 79,357 | $ | 126,281 | $ | 498,849 | $ | 625,130 | $ | 31,102 | $ | 16,202 | $ | 76,221 | $ | 123,525 | $ | 483,645 | $ | 607,170 | ||||||||||||||||||||||||
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[1] | Includes |
December 31, 2015 | December 31, 2015 | December 31, 2015 | ||||||||||||||||||||||||||||||||||||||||||||||
Past due | ||||||||||||||||||||||||||||||||||||||||||||||||
30-59 | 60-89 | 90 days | Total | Covered | Past due | Current | Covered loans HIP [1] | |||||||||||||||||||||||||||||||||||||||||
(In thousands) | days | days | or more | past due | Current | loans HIP [1] | 30-59 days | 60-89 days | 90 days or more | Total past due | ||||||||||||||||||||||||||||||||||||||
Mortgage | $ | 31,413 | $ | 16,593 | $ | 83,132 | $ | 131,138 | $ | 495,964 | $ | 627,102 | $ | 31,413 | $ | 16,593 | $ | 83,132 | $ | 131,138 | $ | 495,964 | $ | 627,102 | ||||||||||||||||||||||||
Consumer | 1,246 | 444 | 1,283 | 2,973 | 16,040 | 19,013 | 1,246 | 444 | 1,283 | 2,973 | 16,040 | 19,013 | ||||||||||||||||||||||||||||||||||||
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Total covered loans | $ | 32,659 | $ | 17,037 | $ | 84,415 | $ | 134,111 | $ | 512,004 | $ | 646,115 | $ | 32,659 | $ | 17,037 | $ | 84,415 | $ | 134,111 | $ | 512,004 | $ | 646,115 | ||||||||||||||||||||||||
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[1] | Includes $386 million pledged to secure credit facilities at the FHLB which are not permitted to sell or repledge the collateral. |
The following table presents covered loans in non-performing status and accruing loans past-due 90 days or more by loan class at March 31,June 30, 2016 and December 31, 2015.
March 31, 2016 | December 31, 2015 | |||||||||||||||||||||||||||||||
Non-accrual | Accruing loans past | Non-accrual | Accruing loans past | June 30, 2016 | December 31, 2015 | |||||||||||||||||||||||||||
(In thousands) | loans | due 90 days or more | loans | due 90 days or more | Non-accrual loans | Accruing loans past due 90 days or more | Non-accrual loans | Accruing loans past due 90 days or more | ||||||||||||||||||||||||
Mortgage | $ | 3,408 | $ | — | $ | 3,790 | $ | — | $ | 3,335 | $ | — | $ | 3,790 | $ | — | ||||||||||||||||
Consumer | 111 | — | 97 | — | 147 | — | 97 | — | ||||||||||||||||||||||||
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Total[1] | $ | 3,519 | $ | — | $ | 3,887 | $ | — | $ | 3,482 | $ | — | $ | 3,887 | $ | — | ||||||||||||||||
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[1] | Covered loans accounted for under ASC Subtopic 310-30 are excluded from the above table as they are considered to be performing due to the application of the accretion method, in which these loans will accrete interest income over the remaining life of the loans using estimated cash flow analyses. |
The Corporation accounts for lines of credit with revolving privileges under the accounting guidance of ASC Subtopic 310-20, which requires that any differences between the contractually required loans payment receivable in excess of the initial investment in the loans be accreted into interest income over the life of the loans, if the loan is accruing interest. Covered loans accounted for under ASC Subtopic 310-20 amounted to $10 million at March 31,June 30, 2016 (December 31, 2015—$102015 - $10 million).
Loans acquired with deteriorated credit quality accounted for under ASC 310-30
The following provides information of loans acquired with evidence of credit deterioration as of the acquisition date, accounted for under the guidance of ASC 310-30.
Loans acquired from Westernbank as part of an FDIC-assisted transaction
The carrying amount of the Westernbank loans consisted of loans determined to be impaired at the time of acquisition, which are accounted for in accordance with ASC Subtopic 310-30 (“credit impaired loans”), and loans that were considered to be performing at the acquisition date, accounted for by analogy to ASC Subtopic 310-30 (“non-credit impaired loans”), as detailed in the following table.
March 31, 2016 [1] | December 31, 2015 [1] | June 30, 2016 [1] | December 31, 2015 [1] | |||||||||||||||||||||||||||||||||||||||||||||
Carrying amount | Carrying amount | Carrying amount | Carrying amount | |||||||||||||||||||||||||||||||||||||||||||||
(In thousands) | Non-credit impaired loans | Credit impaired loans | Total | Non-credit impaired loans | Credit impaired loans | Total | Non-credit impaired loans | Credit impaired loans | Total | Non-credit impaired loans | Credit impaired loans | Total | ||||||||||||||||||||||||||||||||||||
Commercial real estate | $ | 1,104,257 | $ | 30,090 | $ | 1,134,347 | $ | 1,114,368 | $ | 35,393 | $ | 1,149,761 | $ | 1,028,516 | $ | 14,844 | $ | 1,043,360 | $ | 1,114,368 | $ | 35,393 | $ | 1,149,761 | ||||||||||||||||||||||||
Commercial and industrial | 83,267 | 519 | 83,786 | 84,765 | 519 | 85,284 | 80,040 | — | 80,040 | 84,765 | 519 | 85,284 | ||||||||||||||||||||||||||||||||||||
Construction | 8,479 | 6,026 | 14,505 | 8,943 | 6,027 | 14,970 | 4,723 | 1,723 | 6,446 | 8,943 | 6,027 | 14,970 | ||||||||||||||||||||||||||||||||||||
Mortgage | 647,739 | 31,627 | 679,366 | 667,023 | 33,090 | 700,113 | 621,229 | 27,181 | 648,410 | 667,023 | 33,090 | 700,113 | ||||||||||||||||||||||||||||||||||||
Consumer | 22,198 | 1,239 | 23,437 | 23,047 | 1,326 | 24,373 | 20,105 | 1,582 | 21,687 | 23,047 | 1,326 | 24,373 | ||||||||||||||||||||||||||||||||||||
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Carrying amount | 1,865,940 | 69,501 | 1,935,441 | 1,898,146 | 76,355 | 1,974,501 | 1,754,613 | 45,330 | 1,799,943 | 1,898,146 | 76,355 | 1,974,501 | ||||||||||||||||||||||||||||||||||||
Allowance for loan losses | (58,703 | ) | (4,264 | ) | (62,967 | ) | (59,753 | ) | (3,810 | ) | (63,563 | ) | (57,895 | ) | (9,100 | ) | (66,995 | ) | (59,753 | ) | (3,810 | ) | (63,563 | ) | ||||||||||||||||||||||||
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Carrying amount, net of allowance | $ | 1,807,237 | $ | 65,237 | $ | 1,872,474 | $ | 1,838,393 | $ | 72,545 | $ | 1,910,938 | $ | 1,696,718 | $ | 36,230 | $ | 1,732,948 | $ | 1,838,393 | $ | 72,545 | $ | 1,910,938 | ||||||||||||||||||||||||
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[1] | The carrying amount of loans acquired from Westernbank and accounted for under ASC 310-30 which remains subject to the loss sharing agreement with the FDIC amounted to approximately |
The outstanding principal balance of Westernbank loans accounted pursuant to ASC Subtopic 310-30, amounted to $2.4$2.2 billion at March 31,June 30, 2016 (December 31, 2015—$2.42015 - $2.4 billion). At March 31,June 30, 2016, none of the acquired loans from the Westernbank FDIC-assisted transaction accounted for under ASC Subtopic 310-30 were considered non-performing loans. Therefore, interest income, through accretion of the difference between the carrying amount of the loans and the expected cash flows, was recognized on all acquired loans.
Changes in the carrying amount and the accretable yield for the Westernbank loans accounted pursuant to the ASC Subtopic 310-30, for the quarters and six months ended March 31,June 30, 2016 and 2015, were as follows:
Activity in the accretable yield | ||||||||||||||||||||||||||||||||||||||||||||||||
Westernbank loans ASC 310-30 | Activity in the accretable yield | |||||||||||||||||||||||||||||||||||||||||||||||
For the quarters ended | Westernbank loans ASC 310-30 | |||||||||||||||||||||||||||||||||||||||||||||||
March 31, 2016 | March 31, 2015 | For the quarters ended | ||||||||||||||||||||||||||||||||||||||||||||||
Non-credit | Credit | Non-credit | Credit | June 30, 2016 | Total | June 30, 2015 | Total | |||||||||||||||||||||||||||||||||||||||||
(In thousands) | impaired loans | impaired loans | Total | impaired loans | impaired loans | Total | Non-credit impaired loans | Credit impaired loans | Non-credit impaired loans | Credit impaired loans | ||||||||||||||||||||||||||||||||||||||
Beginning balance | $ | 1,105,732 | $ | 6,726 | $ | 1,112,458 | $ | 1,265,752 | $ | 5,585 | $ | 1,271,337 | $ | 1,118,276 | $ | 10,532 | $ | 1,128,808 | $ | 1,254,249 | $ | 4,699 | $ | 1,258,948 | ||||||||||||||||||||||||
Accretion | (42,000 | ) | (1,533 | ) | (43,533 | ) | (53,776 | ) | (1,921 | ) | (55,697 | ) | (45,137 | ) | (3,339 | ) | (48,476 | ) | (50,228 | ) | (3,766 | ) | (53,994 | ) | ||||||||||||||||||||||||
Change in expected cash flows | 54,544 | 5,339 | 59,883 | 42,273 | 1,035 | 43,308 | (11,168 | ) | 2,516 | (8,652 | ) | 35,755 | 5,215 | 40,970 | ||||||||||||||||||||||||||||||||||
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Ending balance | $ | 1,118,276 | $ | 10,532 | $ | 1,128,808 | $ | 1,254,249 | $ | 4,699 | $ | 1,258,948 | $ | 1,061,971 | $ | 9,709 | $ | 1,071,680 | $ | 1,239,776 | $ | 6,148 | $ | 1,245,924 | ||||||||||||||||||||||||
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Activity in the accretable yield | ||||||||||||||||||||||||
Westernbank loans ASC 310-30 | ||||||||||||||||||||||||
For the six months ended | ||||||||||||||||||||||||
June 30, 2016 | Total | June 30, 2015 | Total | |||||||||||||||||||||
(In thousands) | Non-credit impaired loans | Credit impaired loans | Non-credit impaired loans | Credit impaired loans | ||||||||||||||||||||
Beginning balance | $ | 1,105,732 | $ | 6,726 | $ | 1,112,458 | $ | 1,265,752 | $ | 5,585 | $ | 1,271,337 | ||||||||||||
Accretion | (87,137 | ) | (4,872 | ) | (92,009 | ) | (104,004 | ) | (5,687 | ) | (109,691 | ) | ||||||||||||
Change in expected cash flows | 43,376 | 7,855 | 51,231 | 78,028 | 6,250 | 84,278 | ||||||||||||||||||
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Ending balance | $ | 1,061,971 | $ | 9,709 | $ | 1,071,680 | $ | 1,239,776 | $ | 6,148 | $ | 1,245,924 | ||||||||||||
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Carrying amount of Westernbank loans accounted for pursuant to ASC 310-30 | ||||||||||||||||||||||||||||||||||||||||||||||||
For the quarters ended | Carrying amount of Westernbank loans accounted for pursuant to ASC 310-30 | |||||||||||||||||||||||||||||||||||||||||||||||
March 31, 2016 [1] | March 31, 2015 | For the quarters ended | ||||||||||||||||||||||||||||||||||||||||||||||
Non-credit | Credit | Non-credit | Credit | June 30, 2016 [1] | Total | June 30, 2015 | Total | |||||||||||||||||||||||||||||||||||||||||
(In thousands) | impaired loans | impaired loans | Total | impaired loans | impaired loans | Total | Non-credit impaired loans | Credit impaired loans | Non-credit impaired loans | Credit impaired loans | ||||||||||||||||||||||||||||||||||||||
Beginning balance | $ | 1,898,146 | $ | 76,355 | $ | 1,974,501 | $ | 2,272,142 | $ | 172,030 | $ | 2,444,172 | $ | 1,865,940 | $ | 69,501 | $ | 1,935,441 | $ | 2,211,781 | $ | 155,315 | $ | 2,367,096 | ||||||||||||||||||||||||
Accretion | 42,000 | 1,533 | 43,533 | 53,776 | 1,921 | 55,697 | 45,137 | 3,339 | 48,476 | 50,228 | 3,766 | 53,994 | ||||||||||||||||||||||||||||||||||||
Collections and charge-offs | (74,206 | ) | (8,387 | ) | (82,593 | ) | (114,137 | ) | (18,636 | ) | (132,773 | ) | ||||||||||||||||||||||||||||||||||||
Collections/loan sales/charge-offs[2] | (156,464 | ) | (27,510 | ) | (183,974 | ) | (239,516 | ) | (44,496 | ) | (284,012 | ) | ||||||||||||||||||||||||||||||||||||
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Ending balance | $ | 1,865,940 | $ | 69,501 | $ | 1,935,441 | $ | 2,211,781 | $ | 155,315 | $ | 2,367,096 | $ | 1,754,613 | $ | 45,330 | $ | 1,799,943 | $ | 2,022,493 | $ | 114,585 | $ | 2,137,078 | ||||||||||||||||||||||||
Allowance for loan losses ASC 310-30 Westernbank loans | (58,703 | ) | (4,264 | ) | (62,967 | ) | (49,750 | ) | (18,636 | ) | (68,386 | ) | ||||||||||||||||||||||||||||||||||||
Allowance for loan losses | ||||||||||||||||||||||||||||||||||||||||||||||||
ASC 310-30 Westernbank loans | (57,895 | ) | (9,100 | ) | (66,995 | ) | (42,503 | ) | (4,546 | ) | (47,049 | ) | ||||||||||||||||||||||||||||||||||||
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Ending balance, net of ALLL | $ | 1,807,237 | $ | 65,237 | $ | 1,872,474 | $ | 2,162,031 | $ | 136,679 | $ | 2,298,710 | $ | 1,696,718 | $ | 36,230 | $ | 1,732,948 | $ | 1,979,990 | $ | 110,039 | $ | 2,090,029 | ||||||||||||||||||||||||
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[1] | The carrying amount of loans acquired from Westernbank and accounted for under ASC 310-30 which remain subject to the loss sharing agreement with the FDIC amounted to approximately $ |
[2] | For the quarter ended June 30, 2016, includes the impact of the bulk sale of loans with a carrying value of approximately $99 million. |
(In thousands) Beginning balance Accretion Collections/loan sales/charge-offs[2] Ending balance Allowance for loan losses ASC 310-30 Westernbank loans Ending balance, net of ALLL Carrying amount of Westernbank loans accounted for pursuant to ASC 310-30 For the six months ended June 30, 2016 [1] June 30, 2015 Non-credit Credit Non-credit Credit impaired impaired impaired impaired loans loans Total loans loans Total $ 1,898,146 $ 76,355 $ 1,974,501 $ 2,272,142 $ 172,030 $ 2,444,172 87,137 4,872 92,009 104,004 5,687 109,691 (230,670 ) (35,897 ) (266,567 ) (353,653 ) (63,132 ) (416,785 ) $ 1,754,613 $ 45,330 $ 1,799,943 $ 2,022,493 $ 114,585 $ 2,137,078 (57,895 ) (9,100 ) (66,995 ) (42,503 ) (4,546 ) (47,049 ) $ 1,696,718 $ 36,230 $ 1,732,948 $ 1,979,990 $ 110,039 $ 2,090,029
[1] | The carrying amount of loans acquired from Westernbank and accounted for under ASC 310-30 which remain subject to the loss sharing agreement with the FDIC amounted to approximately $597 million as of June 30, 2016. |
[2] | For the quarter ended June 30, 2016, includes the impact of the bulk sale of loans with a carrying value of approximately $99 million. |
Other loans acquired with deteriorated credit quality
The outstanding principal balance of other acquired loans accounted pursuant to ASC Subtopic 310-30, amounted to $713$710 million at March 31,June 30, 2016 (December 31, 2015—$7102015 - $710 million). At March 31,June 30, 2016, none of the other acquired loans accounted under ASC Subtopic 310-30 were considered non-performing loans. Therefore, interest income, through accretion of the difference between the carrying amount of the loans and the expected cash flows, was recognized on all acquired loans.
Changes in the carrying amount and the accretable yield for the other acquired loans accounted pursuant to the ASC Subtopic 310-30, for the quarters and six months ended March 31,June 30, 2016 and 2015 were as follows:
Activity in the accretable yield - Other acquired loans ASC 310-30 | ||||||||||||||||
Activity in the accretable yield - other acquired loans ASC 310-30 | Activity in the accretable yield - other acquired loans ASC 310-30 | |||||||||||||||
For the quarters ended | For the quarter ended | For the quarter ended | ||||||||||||||
(In thousands) | March 31, 2016 | March 31, 2015 | June 30, 2016 | June 30, 2015 | ||||||||||||
Beginning balance | $ | 221,128 | $ | 116,304 | $ | 267,768 | $ | 158,424 | ||||||||
Additions | 4,340 | 50,662 | 4,171 | 5,406 | ||||||||||||
Accretion | (8,555 | ) | (3,223 | ) | (8,730 | ) | (4,633 | ) | ||||||||
Change in expected cash flows | 50,855 | (5,319 | ) | 9,400 | 2,962 | |||||||||||
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Ending balance | $ | 267,768 | $ | 158,424 | $ | 272,609 | $ | 162,159 | ||||||||
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Carrying amount of other acquired loans accounted for pursuant to ASC 310-30 | ||||||||||||||||
Activity in the accretable yield - other acquired loans ASC 310-30 | Activity in the accretable yield - other acquired loans ASC 310-30 | |||||||||||||||
For the quarters ended | For the six months ended | For the six months ended | ||||||||||||||
(In thousands) | March 31, 2016 | March 31, 2015 | June 30, 2016 | June 30, 2015 | ||||||||||||
Beginning balance | $ | 564,050 | $ | 212,763 | $ | 221,128 | $ | 116,304 | ||||||||
Purchase accounting adjustments related to the Doral Bank Transaction (Refer to Note 5) | (4,707 | ) | — | |||||||||||||
Additions | 10,051 | 157,091 | 8,511 | 56,068 | ||||||||||||
Accretion | 8,555 | 3,223 | (17,285 | ) | (7,856 | ) | ||||||||||
Collections and charge-offs | (15,226 | ) | (9,980 | ) | ||||||||||||
Change in expected cash flows | 60,255 | (2,357 | ) | |||||||||||||
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Ending balance | $ | 562,723 | $ | 363,097 | $ | 272,609 | $ | 162,159 | ||||||||
Allowance for loan losses ASC 310-30 non-covered loans | (15,258 | ) | (16,092 | ) | ||||||||||||
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Ending balance, net of allowance for loan losses | $ | 547,465 | $ | 347,005 | ||||||||||||
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Carrying amount of other acquired loans accounted for pursuant to ASC 310-30 (In thousands) Beginning balance Additions Accretion Collections and charge-offs Ending balance Allowance for loan losses ASC 310-30 other acquired loans Ending balance, net of ALLL Carrying amount of other acquired loans accounted for pursuant to ASC 310-30 (In thousands) Beginning balance Purchase accounting adjustments related to the Doral Bank Transaction (Refer to Note 5) Additions Accretion Collections and charge-offs Ending balance Allowance for loan losses ASC 310-30 other acquired loans Ending balance, net of ALLL For the quarter ended For the quarter ended June 30, 2016 June 30, 2015 $ 562,723 363,097 8,354 17,089 8,730 4,633 (17,062 ) (16,532 ) $ 562,745 $ 368,287 (16,059 ) (16,842 ) $ 546,686 $ 351,445 For the six months ended For the six months ended June 30, 2016 June 30, 2015 $ 564,050 $ 212,763 (4,707 ) — 18,405 174,180 17,285 7,856 (32,288 ) (26,512 ) $ 562,745 $ 368,287 (16,059 ) (16,842 ) $ 546,686 $ 351,445
The following table presents loans acquired as part of the Doral Bank Transaction accounted for pursuant to ASC Subtopic 310-30 at the February 27, 2015 acquisition date.
(In thousands) | ||||
Contractually-required principal and interest | $ | 560,833 | ||
Non-accretable difference | 112,153 | |||
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Cash flows expected to be collected | 448,680 | |||
Accretable yield | 113,977 | |||
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Fair value of loans accounted for under ASC Subtopic 310-30 | $ | 334,703 | ||
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Note 10 – Allowance for loan losses
The Corporation follows a systematic methodology to establish and evaluate the adequacy of the allowance for loan losses to provide for inherent losses in the loan portfolio. This methodology includes the consideration of factors such as current economic conditions, portfolio risk characteristics, prior loss experience and results of periodic credit reviews of individual loans. The provision for loan losses charged to current operations is based on this methodology. Loan losses are charged and recoveries are credited to the allowance for loan losses.
The Corporation’s assessment of the allowance for loan losses is determined in accordance with the guidance of loss contingencies in ASC Subtopic 450-20 and loan impairment guidance in ASC Section 310-10-35. Also, the Corporation determines the allowance for loan losses on purchased impaired loans and purchased loans accounted for under ASC Subtopic 310-30, by evaluating decreases in expected cash flows after the acquisition date.
The accounting guidance provides for the recognition of a loss allowance for groups of homogeneous loans. The determination for general reserves of the allowance for loan losses includes the following principal factors:
For the period ended March 31,June 30, 2016, 44% (March 31, 2015–59%51% (June 30, 2015 - 32%) of the ALLL for non-covered BPPR segment loan portfolios utilized the recent loss trend adjustment instead of the base loss. The effect of replacing the base loss with the recent loss trend adjustment was mainly concentrated in the other consumer, mortgage, commercial multi-family and commercial and industrial and commercial multi-family loan portfolios for 2016, and in the consumercommercial multi-family, commercial and mortgageindustrial, personal and auto loan portfolios for 2015.
For the period ended March 31,June 30, 2016, 2% (March 31, 2015—13%1% (June 30, 2015 - 19%) of the ALLL for BPNA segment loan portfolios utilized the recent loss trend adjustment instead of the base loss. The effect of replacing the base loss with the recent loss trend adjustment was concentrated in the consumer loan portfolio for 2016 and in the consumercommercial and industrial loan portfolio for 2015.
The following tables present the changes in the allowance for loan losses, loan ending balances and whether such loans and the allowance pertain to loans individually or collectively evaluated for impairment for the quarters and six months ended March 31,June 30, 2016 and 2015.
For the quarter ended March 31, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||
For the quarter ended June 30, 2016 | For the quarter ended June 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||
Puerto Rico - Non-covered loans | Puerto Rico - Non-covered loans | Puerto Rico - Non-covered loans | ||||||||||||||||||||||||||||||||||||||||||||||
(In thousands) | Commercial | Construction | Mortgage | Leasing | Consumer | Total | Commercial | Construction | Mortgage | Leasing | Consumer | Total | ||||||||||||||||||||||||||||||||||||
Allowance for credit losses: | ||||||||||||||||||||||||||||||||||||||||||||||||
Beginning balance | $ | 186,925 | $ | 4,957 | $ | 128,327 | $ | 10,993 | $ | 138,721 | $ | 469,923 | $ | 197,590 | $ | 4,237 | $ | 124,500 | $ | 11,035 | $ | 135,785 | $ | 473,147 | ||||||||||||||||||||||||
Provision (reversal of provision) | 13,369 | (409 | ) | 10,869 | 1,680 | 18,362 | 43,871 | 3,515 | (4,772 | ) | 25,688 | (507 | ) | 14,427 | 38,351 | |||||||||||||||||||||||||||||||||
Charge-offs | (8,968 | ) | (544 | ) | (15,972 | ) | (2,127 | ) | (27,379 | ) | (54,990 | ) | (24,489 | ) | (1,531 | ) | (13,950 | ) | (879 | ) | (26,011 | ) | (66,860 | ) | ||||||||||||||||||||||||
Recoveries | 6,264 | 233 | 1,276 | 489 | 6,081 | 14,343 | 18,842 | 4,757 | 486 | 445 | 6,108 | 30,638 | ||||||||||||||||||||||||||||||||||||
Net recoveries (write-downs) | 4,369 | 914 | — | — | 162 | 5,445 | ||||||||||||||||||||||||||||||||||||||||||
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Ending balance | $ | 197,590 | $ | 4,237 | $ | 124,500 | $ | 11,035 | $ | 135,785 | $ | 473,147 | $ | 199,827 | $ | 3,605 | $ | 136,724 | $ | 10,094 | $ | 130,471 | $ | 480,721 | ||||||||||||||||||||||||
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Specific ALLL | $ | 55,098 | $ | 172 | $ | 41,660 | $ | 608 | $ | 24,326 | $ | 121,864 | $ | 53,350 | $ | 116 | $ | 42,106 | $ | 548 | $ | 24,167 | $ | 120,287 | ||||||||||||||||||||||||
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General ALLL | $ | 142,492 | $ | 4,065 | $ | 82,840 | $ | 10,427 | $ | 111,459 | $ | 351,283 | $ | 146,477 | $ | 3,489 | $ | 94,618 | $ | 9,546 | $ | 106,304 | $ | 360,434 | ||||||||||||||||||||||||
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Loans held-in-portfolio: | ||||||||||||||||||||||||||||||||||||||||||||||||
Impaired non-covered loans | $ | 338,980 | $ | 2,020 | $ | 471,183 | $ | 2,391 | $ | 109,920 | $ | 924,494 | $ | 335,881 | $ | 1,036 | $ | 476,161 | $ | 2,110 | $ | 109,130 | $ | 924,318 | ||||||||||||||||||||||||
Non-covered loans held-in-portfolio excluding impaired loans | 7,029,311 | 103,124 | 5,628,576 | 640,751 | 3,199,171 | 16,600,933 | 6,881,171 | 102,606 | 5,544,401 | 661,984 | 3,212,552 | 16,402,714 | ||||||||||||||||||||||||||||||||||||
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Total non-covered loans held-in-portfolio | $ | 7,368,291 | $ | 105,144 | $ | 6,099,759 | $ | 643,142 | $ | 3,309,091 | $ | 17,525,427 | $ | 7,217,052 | $ | 103,642 | $ | 6,020,562 | $ | 664,094 | $ | 3,321,682 | $ | 17,327,032 | ||||||||||||||||||||||||
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For the quarter ended March 31, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||
For the quarter ended June 30, 2016 | For the quarter ended June 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||
Puerto Rico - Covered loans | Puerto Rico - Covered loans | Puerto Rico - Covered loans | ||||||||||||||||||||||||||||||||||||||||||||||
(In thousands) | Commercial | Construction | Mortgage | Leasing | Consumer | Total | Commercial | Construction | Mortgage | Leasing | Consumer | Total | ||||||||||||||||||||||||||||||||||||
Allowance for credit losses: | ||||||||||||||||||||||||||||||||||||||||||||||||
Beginning balance | $ | — | $ | — | $ | 33,967 | $ | — | $ | 209 | $ | 34,176 | $ | — | $ | — | $ | 29,822 | $ | — | $ | 223 | $ | 30,045 | ||||||||||||||||||||||||
Provision (reversal of provision) | — | — | (3,149 | ) | — | 44 | (3,105 | ) | — | — | 828 | — | (24 | ) | 804 | |||||||||||||||||||||||||||||||||
Charge-offs | — | — | (1,221 | ) | — | (33 | ) | (1,254 | ) | — | — | (884 | ) | — | 427 | (457 | ) | |||||||||||||||||||||||||||||||
Recoveries | — | — | 225 | — | 3 | 228 | — | — | 185 | — | 4 | 189 | ||||||||||||||||||||||||||||||||||||
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Ending balance | $ | — | $ | — | $ | 29,822 | $ | — | $ | 223 | $ | 30,045 | $ | — | $ | — | $ | 29,951 | $ | — | $ | 630 | $ | 30,581 | ||||||||||||||||||||||||
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Specific ALLL | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||||||||
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General ALLL | $ | — | $ | — | $ | 29,822 | $ | — | $ | 223 | $ | 30,045 | $ | — | $ | — | $ | 29,951 | $ | — | $ | 630 | $ | 30,581 | ||||||||||||||||||||||||
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Loans held-in-portfolio: | ||||||||||||||||||||||||||||||||||||||||||||||||
Impaired covered loans | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||||||||
Covered loans held-in-portfolio excluding impaired loans | — | — | 606,711 | — | 18,419 | 625,130 | — | — | 589,256 | — | 17,914 | 607,170 | ||||||||||||||||||||||||||||||||||||
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Total covered loans held-in-portfolio | $ | — | $ | — | $ | 606,711 | $ | — | $ | 18,419 | $ | 625,130 | $ | — | $ | — | $ | 589,256 | $ | — | $ | 17,914 | $ | 607,170 | ||||||||||||||||||||||||
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For the quarter ended March 31, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||
For the quarter ended June 30, 2016 | For the quarter ended June 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||
U.S. Mainland | U.S. Mainland | U.S. Mainland | ||||||||||||||||||||||||||||||||||||||||||||||
(In thousands) | Commercial | Construction | Mortgage | Legacy | Consumer | Total | Commercial | Construction | Mortgage | Legacy | Consumer | Total | ||||||||||||||||||||||||||||||||||||
Allowance for credit losses: | ||||||||||||||||||||||||||||||||||||||||||||||||
Beginning balance | $ | 9,908 | $ | 3,912 | $ | 4,985 | $ | 2,687 | $ | 11,520 | $ | 33,012 | $ | 9,587 | $ | 4,739 | $ | 5,099 | $ | 2,484 | $ | 13,371 | $ | 35,280 | ||||||||||||||||||||||||
Provision (reversal of provision) | (116 | ) | 827 | 344 | (450 | ) | 3,464 | 4,069 | (998 | ) | 2,721 | (321 | ) | (1,525 | ) | 1,440 | 1,317 | |||||||||||||||||||||||||||||||
Charge-offs | (495 | ) | — | (441 | ) | (109 | ) | (2,648 | ) | (3,693 | ) | (390 | ) | — | (132 | ) | (134 | ) | (2,662 | ) | (3,318 | ) | ||||||||||||||||||||||||||
Recoveries | 290 | — | 211 | 356 | 1,035 | 1,892 | 1,655 | — | 116 | 1,027 | 1,341 | 4,139 | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
Ending balance | $ | 9,587 | $ | 4,739 | $ | 5,099 | $ | 2,484 | $ | 13,371 | $ | 35,280 | $ | 9,854 | $ | 7,460 | $ | 4,762 | $ | 1,852 | $ | 13,490 | $ | 37,418 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
Specific ALLL | $ | — | $ | — | $ | 1,592 | $ | — | $ | 581 | $ | 2,173 | $ | — | $ | — | $ | 1,803 | $ | — | $ | 731 | $ | 2,534 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
General ALLL | $ | 9,587 | $ | 4,739 | $ | 3,507 | $ | 2,484 | $ | 12,790 | $ | 33,107 | $ | 9,854 | $ | 7,460 | $ | 2,959 | $ | 1,852 | $ | 12,759 | $ | 34,884 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
Loans held-in-portfolio: | ||||||||||||||||||||||||||||||||||||||||||||||||
Impaired loans | $ | — | $ | — | $ | 7,909 | $ | — | $ | 2,247 | $ | 10,156 | $ | — | $ | — | $ | 8,564 | $ | — | $ | 2,480 | $ | 11,044 | ||||||||||||||||||||||||
Loans held-in-portfolio excluding impaired loans | 2,860,098 | 629,714 | 871,533 | 61,044 | 549,765 | 4,972,154 | 3,142,763 | 613,690 | 834,992 | 49,709 | 561,431 | 5,202,585 | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
Total loans held-in-portfolio | $ | 2,860,098 | $ | 629,714 | $ | 879,442 | $ | 61,044 | $ | 552,012 | $ | 4,982,310 | $ | 3,142,763 | $ | 613,690 | $ | 843,556 | $ | 49,709 | $ | 563,911 | $ | 5,213,629 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
For the quarter ended March 31, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
For the quarter ended June 30, 2016 | For the quarter ended June 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Popular, Inc. | Popular, Inc. | Popular, Inc. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
(In thousands) | Commercial | Construction | Mortgage | Legacy | Leasing | Consumer | Total | Commercial | Construction | Mortgage | Legacy | Leasing | Consumer | Total | ||||||||||||||||||||||||||||||||||||||||||
Allowance for credit losses: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Beginning balance | $ | 196,833 | $ | 8,869 | $ | 167,279 | $ | 2,687 | $ | 10,993 | $ | 150,450 | $ | 537,111 | $ | 207,177 | $ | 8,976 | $ | 159,421 | $ | 2,484 | $ | 11,035 | $ | 149,379 | $ | 538,472 | ||||||||||||||||||||||||||||
Provision (reversal of provision) | 13,253 | 418 | 8,064 | (450 | ) | 1,680 | 21,870 | 44,835 | 2,517 | (2,051 | ) | 26,195 | (1,525 | ) | (507 | ) | 15,843 | 40,472 | ||||||||||||||||||||||||||||||||||||||
Charge-offs | (9,463 | ) | (544 | ) | (17,634 | ) | (109 | ) | (2,127 | ) | (30,060 | ) | (59,937 | ) | (24,879 | ) | (1,531 | ) | (14,966 | ) | (134 | ) | (879 | ) | (28,246 | ) | (70,635 | ) | ||||||||||||||||||||||||||||
Recoveries | 6,554 | 233 | 1,712 | 356 | 489 | 7,119 | 16,463 | 20,497 | 4,757 | 787 | 1,027 | 445 | 7,453 | 34,966 | ||||||||||||||||||||||||||||||||||||||||||
Net recoveries (write-downs) | 4,369 | 914 | — | — | — | 162 | 5,445 | |||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||
Ending balance | $ | 207,177 | $ | 8,976 | $ | 159,421 | $ | 2,484 | $ | 11,035 | $ | 149,379 | $ | 538,472 | $ | 209,681 | $ | 11,065 | $ | 171,437 | $ | 1,852 | $ | 10,094 | $ | 144,591 | $ | 548,720 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||
Specific ALLL | $ | 55,098 | $ | 172 | $ | 43,252 | $ | — | $ | 608 | $ | 24,907 | $ | 124,037 | $ | 53,350 | $ | 116 | $ | 43,909 | $ | — | $ | 548 | $ | 24,898 | $ | 122,821 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||
General ALLL | $ | 152,079 | $ | 8,804 | $ | 116,169 | $ | 2,484 | $ | 10,427 | $ | 124,472 | $ | 414,435 | $ | 156,331 | $ | 10,949 | $ | 127,528 | $ | 1,852 | $ | 9,546 | $ | 119,693 | $ | 425,899 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||
Loans held-in-portfolio: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Impaired loans | $ | 338,980 | $ | 2,020 | $ | 479,092 | $ | — | $ | 2,391 | $ | 112,167 | $ | 934,650 | $ | 335,881 | $ | 1,036 | $ | 484,725 | $ | — | $ | 2,110 | $ | 111,610 | $ | 935,362 | ||||||||||||||||||||||||||||
Loans held-in-portfolio excluding impaired loans | 9,889,409 | 732,838 | 7,106,820 | 61,044 | 640,751 | 3,767,355 | 22,198,217 | 10,023,934 | 716,296 | 6,968,649 | 49,709 | 661,984 | 3,791,897 | 22,212,469 | ||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||
Total loans held-in-portfolio | $ | 10,228,389 | $ | 734,858 | $ | 7,585,912 | $ | 61,044 | $ | 643,142 | $ | 3,879,522 | $ | 23,132,867 | $ | 10,359,815 | $ | 717,332 | $ | 7,453,374 | $ | 49,709 | $ | 664,094 | $ | 3,903,507 | $ | 23,147,831 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the quarter ended March 31, 2015 | ||||||||||||||||||||||||||||||||||||||||||||||||
For the six months ended June 30, 2016 | For the six months ended June 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||
Puerto Rico - Non-covered loans | Puerto Rico - Non-covered loans | Puerto Rico - Non-covered loans | ||||||||||||||||||||||||||||||||||||||||||||||
(In thousands) | Commercial | Construction | Mortgage | Leasing | Consumer | Total | Commercial | Construction | Mortgage | Leasing | Consumer | Total | ||||||||||||||||||||||||||||||||||||
Allowance for credit losses: | ||||||||||||||||||||||||||||||||||||||||||||||||
Beginning balance | $ | 201,589 | $ | 5,483 | $ | 120,860 | $ | 7,131 | $ | 154,072 | $ | 489,135 | $ | 186,925 | $ | 4,957 | $ | 128,327 | $ | 10,993 | $ | 138,721 | $ | 469,923 | ||||||||||||||||||||||||
Provision (reversal of provision) | (1,321 | ) | (6,813 | ) | 16,192 | 846 | 23,009 | 31,913 | 16,884 | (5,181 | ) | 36,557 | 1,173 | 32,789 | 82,222 | |||||||||||||||||||||||||||||||||
Charge-offs | (9,572 | ) | — | (10,973 | ) | (1,237 | ) | (29,699 | ) | (51,481 | ) | (33,457 | ) | (2,075 | ) | (29,922 | ) | (3,006 | ) | (53,390 | ) | (121,850 | ) | |||||||||||||||||||||||||
Recoveries | 4,770 | 2,925 | 500 | 468 | 6,046 | 14,709 | 25,106 | 4,990 | 1,762 | 934 | 12,189 | 44,981 | ||||||||||||||||||||||||||||||||||||
Net recoveries (write-downs) | 4,369 | 914 | — | — | 162 | 5,445 | ||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
Ending balance | $ | 195,466 | $ | 1,595 | $ | 126,579 | $ | 7,208 | $ | 153,428 | $ | 484,276 | $ | 199,827 | $ | 3,605 | $ | 136,724 | $ | 10,094 | $ | 130,471 | $ | 480,721 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
Specific ALLL | $ | 69,946 | $ | 158 | $ | 42,229 | $ | 687 | $ | 25,223 | $ | 138,243 | $ | 53,350 | $ | 116 | $ | 42,106 | $ | 548 | $ | 24,167 | $ | 120,287 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
General ALLL | $ | 125,520 | $ | 1,437 | $ | 84,350 | $ | 6,521 | $ | 128,205 | $ | 346,033 | $ | 146,477 | $ | 3,489 | $ | 94,618 | $ | 9,546 | $ | 106,304 | $ | 360,434 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
Loans held-in-portfolio: | ||||||||||||||||||||||||||||||||||||||||||||||||
Impaired non-covered loans | $ | 417,377 | $ | 9,838 | $ | 445,506 | $ | 2,924 | $ | 114,416 | $ | 990,061 | $ | 335,881 | $ | 1,036 | $ | 476,161 | $ | 2,110 | $ | 109,130 | $ | 924,318 | ||||||||||||||||||||||||
Non-covered loans held-in-portfolio excluding impaired loans | 5,984,132 | 88,868 | 5,725,741 | 578,195 | 3,237,790 | 15,614,726 | 6,881,171 | 102,606 | 5,544,401 | 661,984 | 3,212,552 | 16,402,714 | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
Total non-covered loans held-in-portfolio | $ | 6,401,509 | $ | 98,706 | $ | 6,171,247 | $ | 581,119 | $ | 3,352,206 | $ | 16,604,787 | $ | 7,217,052 | $ | 103,642 | $ | 6,020,562 | $ | 664,094 | $ | 3,321,682 | $ | 17,327,032 | ||||||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
For the quarter ended March 31, 2015 | ||||||||||||||||||||||||||||||||||||||||||||||||
Puerto Rico - Covered Loans | ||||||||||||||||||||||||||||||||||||||||||||||||
For the six months ended June 30, 2016 | For the six months ended June 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||
Puerto Rico - Covered loans | Puerto Rico - Covered loans | |||||||||||||||||||||||||||||||||||||||||||||||
(In thousands) | Commercial | Construction | Mortgage | Leasing | Consumer | Total | Commercial | Construction | Mortgage | Leasing | Consumer | Total | ||||||||||||||||||||||||||||||||||||
Allowance for credit losses: | ||||||||||||||||||||||||||||||||||||||||||||||||
Beginning balance | $ | 30,871 | $ | 7,202 | $ | 40,948 | $ | — | $ | 3,052 | $ | 82,073 | $ | — | $ | — | $ | 33,967 | $ | — | $ | 209 | $ | 34,176 | ||||||||||||||||||||||||
Provision (reversal of provision) | 1,995 | 6,276 | 2,802 | — | (749 | ) | 10,324 | — | — | (2,321 | ) | — | 20 | (2,301 | ) | |||||||||||||||||||||||||||||||||
Charge-offs | (14,239 | ) | (9,046 | ) | (3,386 | ) | — | — | (26,671 | ) | — | — | (2,105 | ) | — | 394 | (1,711 | ) | ||||||||||||||||||||||||||||||
Recoveries | 2,640 | 3,275 | 105 | — | 727 | 6,747 | — | — | 410 | — | 7 | 417 | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
Ending balance | $ | 21,267 | $ | 7,707 | $ | 40,469 | $ | — | $ | 3,030 | $ | 72,473 | $ | — | $ | — | $ | 29,951 | $ | — | $ | 630 | $ | 30,581 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
Specific ALLL | $ | 1,473 | $ | — | $ | — | $ | — | $ | — | $ | 1,473 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
General ALLL | $ | 19,794 | $ | 7,707 | $ | 40,469 | $ | — | $ | 3,030 | $ | 71,000 | $ | — | $ | — | $ | 29,951 | $ | — | $ | 630 | $ | 30,581 | ||||||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
Loans held-in-portfolio: | ||||||||||||||||||||||||||||||||||||||||||||||||
Impaired covered loans | $ | 8,394 | $ | 2,336 | $ | — | $ | — | $ | — | $ | 10,730 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||||||||
Covered loans held-in-portfolio excluding impaired loans | 1,562,753 | 55,489 | 795,477 | — | 32,103 | 2,445,822 | — | — | 589,256 | — | 17,914 | 607,170 | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
Total covered loans held-in-portfolio | $ | 1,571,147 | $ | 57,825 | $ | 795,477 | $ | — | $ | 32,103 | $ | 2,456,552 | $ | — | $ | — | $ | 589,256 | $ | — | $ | 17,914 | $ | 607,170 | ||||||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
For the quarter ended March 31, 2015 | ||||||||||||||||||||||||||||||||||||||||||||||||
For the six months ended June 30, 2016 | For the six months ended June 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||
U.S. Mainland - Continuing Operations | U.S. Mainland - Continuing Operations | U.S. Mainland - Continuing Operations | ||||||||||||||||||||||||||||||||||||||||||||||
(In thousands) | Commercial | Construction | Mortgage | Legacy | Consumer | Total | Commercial | Construction | Mortgage | Legacy | Consumer | Total | ||||||||||||||||||||||||||||||||||||
Allowance for credit losses: | ||||||||||||||||||||||||||||||||||||||||||||||||
Beginning balance | $ | 9,648 | $ | 1,187 | $ | 2,462 | $ | 2,944 | $ | 14,343 | $ | 30,584 | $ | 9,908 | $ | 3,912 | $ | 4,985 | $ | 2,687 | $ | 11,520 | $ | 33,012 | ||||||||||||||||||||||||
Provision (reversal of provision) | 299 | 662 | (6,127 | ) | (1,810 | ) | 4,774 | (2,202 | ) | (1,114 | ) | 3,548 | 23 | (1,975 | ) | 4,904 | 5,386 | |||||||||||||||||||||||||||||||
Charge-offs | (450 | ) | — | (221 | ) | (474 | ) | (2,518 | ) | (3,663 | ) | (885 | ) | — | (573 | ) | (243 | ) | (5,310 | ) | (7,011 | ) | ||||||||||||||||||||||||||
Recoveries | 929 | — | 67 | 2,302 | 1,251 | 4,549 | 1,945 | — | 327 | 1,383 | 2,376 | 6,031 | ||||||||||||||||||||||||||||||||||||
Net recoveries (write-down) | — | — | 6,081 | — | (3,401 | ) | 2,680 | |||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
Ending balance | $ | 10,426 | $ | 1,849 | $ | 2,262 | $ | 2,962 | $ | 14,449 | $ | 31,948 | $ | 9,854 | $ | 7,460 | $ | 4,762 | $ | 1,852 | $ | 13,490 | $ | 37,418 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
Specific ALLL | $ | — | $ | — | $ | 341 | $ | — | $ | 381 | $ | 722 | $ | — | $ | — | $ | 1,803 | $ | — | $ | 731 | $ | 2,534 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
General ALLL | $ | 10,426 | $ | 1,849 | $ | 1,921 | $ | 2,962 | $ | 14,068 | $ | 31,226 | $ | 9,854 | $ | 7,460 | $ | 2,959 | $ | 1,852 | $ | 12,759 | $ | 34,884 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
Loans held-in-portfolio: | ||||||||||||||||||||||||||||||||||||||||||||||||
Impaired loans | $ | — | $ | — | $ | 5,106 | $ | — | $ | 2,048 | $ | 7,154 | $ | — | $ | — | $ | 8,564 | $ | — | $ | 2,480 | $ | 11,044 | ||||||||||||||||||||||||
Loans held-in-portfolio excluding impaired loans | 2,252,052 | 592,022 | 1,012,874 | 77,675 | 466,366 | 4,400,989 | 3,142,763 | 613,690 | 834,992 | 49,709 | 561,431 | 5,202,585 | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
Total loans held-in-portfolio | $ | 2,252,052 | $ | 592,022 | $ | 1,017,980 | $ | 77,675 | $ | 468,414 | $ | 4,408,143 | $ | 3,142,763 | $ | 613,690 | $ | 843,556 | $ | 49,709 | $ | 563,911 | $ | 5,213,629 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
For the quarter ended March 31, 2015 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
For the six months ended June 30, 2016 | For the six months ended June 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Popular, Inc. | Popular, Inc. | Popular, Inc. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
(In thousands) | Commercial | Construction | Mortgage | Legacy | Leasing | Consumer | Total | Commercial | Construction | Mortgage | Legacy | Leasing | Consumer | Total | ||||||||||||||||||||||||||||||||||||||||||
Allowance for credit losses: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Beginning balance | $ | 242,108 | $ | 13,872 | $ | 164,270 | $ | 2,944 | $ | 7,131 | $ | 171,467 | $ | 601,792 | $ | 196,833 | $ | 8,869 | $ | 167,279 | $ | 2,687 | $ | 10,993 | $ | 150,450 | $ | 537,111 | ||||||||||||||||||||||||||||
Provision (reversal of provision) | 973 | 125 | 12,867 | (1,810 | ) | 846 | 27,034 | 40,035 | 15,770 | (1,633 | ) | 34,259 | (1,975 | ) | 1,173 | 37,713 | 85,307 | |||||||||||||||||||||||||||||||||||||||
Charge-offs | (24,261 | ) | (9,046 | ) | (14,580 | ) | (474 | ) | (1,237 | ) | (32,217 | ) | (81,815 | ) | (34,342 | ) | (2,075 | ) | (32,600 | ) | (243 | ) | (3,006 | ) | (58,306 | ) | (130,572 | ) | ||||||||||||||||||||||||||||
Recoveries | 8,339 | 6,200 | 672 | 2,302 | 468 | 8,024 | 26,005 | 27,051 | 4,990 | 2,499 | 1,383 | 934 | 14,572 | 51,429 | ||||||||||||||||||||||||||||||||||||||||||
Net recoveries (write-down) | — | — | 6,081 | — | — | (3,401 | ) | 2,680 | ||||||||||||||||||||||||||||||||||||||||||||||||
Net recoveries (write-downs) | 4,369 | 914 | — | — | — | 162 | 5,445 | |||||||||||||||||||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||||||||||||||
Ending balance | $ | 227,159 | $ | 11,151 | $ | 169,310 | $ | 2,962 | $ | 7,208 | $ | 170,907 | $ | 588,697 | $ | 209,681 | $ | 11,065 | $ | 171,437 | $ | 1,852 | $ | 10,094 | $ | 144,591 | $ | 548,720 | ||||||||||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||
Specific ALLL | $ | 71,419 | $ | 158 | $ | 42,570 | $ | — | $ | 687 | $ | 25,604 | $ | 140,438 | $ | 53,350 | $ | 116 | $ | 43,909 | $ | — | $ | 548 | $ | 24,898 | $ | 122,821 | ||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||||||||||||||
General ALLL | $ | 155,740 | $ | 10,993 | $ | 126,740 | $ | 2,962 | $ | 6,521 | $ | 145,303 | $ | 448,259 | $ | 156,331 | $ | 10,949 | $ | 127,528 | $ | 1,852 | $ | 9,546 | $ | 119,693 | $ | 425,899 | ||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||||||||||||||
Loans held-in-portfolio: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Impaired loans | $ | 425,771 | $ | 12,174 | $ | 450,612 | $ | — | $ | 2,924 | $ | 116,464 | $ | 1,007,945 | $ | 335,881 | $ | 1,036 | $ | 484,725 | $ | — | $ | 2,110 | $ | 111,610 | $ | 935,362 | ||||||||||||||||||||||||||||
Loans held-in-portfolio excluding impaired loans | 9,798,937 | 736,379 | 7,534,092 | 77,675 | 578,195 | 3,736,259 | 22,461,537 | 10,023,934 | 716,296 | 6,968,649 | 49,709 | 661,984 | 3,791,897 | 22,212,469 | ||||||||||||||||||||||||||||||||||||||||||
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Total loans held-in-portfolio | $ | 10,224,708 | $ | 748,553 | $ | 7,984,704 | $ | 77,675 | $ | 581,119 | $ | 3,852,723 | $ | 23,469,482 | $ | 10,359,815 | $ | 717,332 | $ | 7,453,374 | $ | 49,709 | $ | 664,094 | $ | 3,903,507 | $ | 23,147,831 | ||||||||||||||||||||||||||||
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For the quarter ended June 30, 2015 | ||||||||||||||||||||||||
Puerto Rico - Non-covered loans | ||||||||||||||||||||||||
(In thousands) | Commercial | Construction | Mortgage | Leasing | Consumer | Total | ||||||||||||||||||
Allowance for credit losses: | ||||||||||||||||||||||||
Beginning balance | $ | 195,466 | $ | 1,595 | $ | 126,579 | $ | 7,208 | $ | 153,428 | $ | 484,276 | ||||||||||||
Provision (reversal of provision) | 50,231 | 5,260 | 9,755 | 2,925 | (7,642 | ) | 60,529 | |||||||||||||||||
Charge-offs | (23,323 | ) | (2,194 | ) | (11,361 | ) | (1,693 | ) | (24,182 | ) | (62,753 | ) | ||||||||||||
Recoveries | 6,264 | 473 | 622 | 720 | 9,528 | 17,607 | ||||||||||||||||||
Net write-down related to loans transferred to held-for-sale | (29,996 | ) | — | — | — | — | (29,996 | ) | ||||||||||||||||
Allowance transferred from covered loans | 8,453 | 1,424 | 582 | — | 2,578 | 13,037 | ||||||||||||||||||
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|
|
|
|
|
|
|
|
|
| |||||||||||||
Ending balance | $ | 207,095 | $ | 6,558 | $ | 126,177 | $ | 9,160 | $ | 133,710 | $ | 482,700 | ||||||||||||
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|
|
|
|
|
|
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|
| |||||||||||||
Specific ALLL | $ | 68,456 | $ | 725 | $ | 43,749 | $ | 607 | $ | 24,615 | $ | 138,152 | ||||||||||||
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|
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| |||||||||||||
General ALLL | $ | 138,639 | $ | 5,833 | $ | 82,428 | $ | 8,553 | $ | 109,095 | $ | 344,548 | ||||||||||||
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| |||||||||||||
Loans held-in-portfolio: | ||||||||||||||||||||||||
Impaired non-covered loans | $ | 337,577 | $ | 3,627 | $ | 450,789 | $ | 2,554 | $ | 112,733 | $ | 907,280 | ||||||||||||
Non-covered loans held-in-portfolio excluding impaired loans | 7,231,433 | 109,819 | 5,793,594 | 590,262 | 3,282,292 | 17,007,400 | ||||||||||||||||||
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Total non-covered loans held-in-portfolio | $ | 7,569,010 | $ | 113,446 | $ | 6,244,383 | $ | 592,816 | $ | 3,395,025 | $ | 17,914,680 | ||||||||||||
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For the quarter ended June 30, 2015 Puerto Rico - Covered Loans (In thousands) Allowance for credit losses: Beginning balance Provision (reversal of provision) Charge-offs Recoveries Net recovery (write-down) related to loans transferred to held-for-sale Allowance transferred to non-covered loans Ending balance Specific ALLL General ALLL Loans held-in-portfolio: Impaired covered loans Covered loans held-in-portfolio excluding impaired loans Total covered loans held-in-portfolio For the quarter ended June 30, 2015 U.S. Mainland - Continuing Operations (In thousands) Allowance for credit losses: Beginning balance Provision (reversal of provision) Charge-offs Recoveries Net recovery (write-down) related to loans transferred to held-for-sale Ending balance Specific ALLL General ALLL Loans held-in-portfolio: Impaired loans Loans held-in-portfolio excluding impaired loans Total loans held-in-portfolio Commercial Construction Mortgage Leasing Consumer Total $ 21,267 $ 7,707 $ 40,469 $ — $ 3,030 $ 72,473 8,120 8,874 (1,734 ) — 506 15,766 (23,697 ) (16,040 ) (520 ) — (767 ) (41,024 ) 3,864 1,425 342 — 88 5,719 (1,101 ) (542 ) (160 ) — (20 ) (1,823 ) (8,453 ) (1,424 ) (582 ) — (2,578 ) (13,037 ) $ — $ — $ 37,815 $ — $ 259 $ 38,074 $ — $ — $ — $ — $ — $ — $ — $ — $ 37,815 $ — $ 259 $ 38,074 $ — $ — $ — $ — $ — $ — 3 — 671,074 — 18,573 689,650 $ 3 $ — $ 671,074 $ — $ 18,573 $ 689,650 Commercial Construction Mortgage Legacy Consumer Total $ 10,426 $ 1,849 $ 2,262 $ 2,962 $ 14,449 $ 31,948 (2,680 ) 580 2,236 383 (580 ) (61 ) (432 ) — (340 ) (480 ) (2,974 ) (4,226 ) 1,311 — 164 450 1,005 2,930 — — (552 ) — — (552 ) $ 8,625 $ 2,429 $ 3,770 $ 3,315 $ 11,900 $ 30,039 $ — $ — $ 413 $ 34 $ 412 $ 859 $ 8,625 $ 2,429 $ 3,357 $ 3,281 $ 11,488 $ 29,180 $ — $ — $ 5,045 $ 1,357 $ 2,144 $ 8,546 2,435,706 582,564 976,395 71,145 446,109 4,511,919 $ 2,435,706 $ 582,564 $ 981,440 $ 72,502 $ 448,253 $ 4,520,465
For the quarter ended June 30, 2015 Popular, Inc. (In thousands) Allowance for credit losses: Beginning balance Provision (reversal of provision) Charge-offs Recoveries Net recovery (write-down) related to loans transferred to held-for-sale Ending balance Specific ALLL General ALLL Loans held-in-portfolio: Impaired loans Loans held-in-portfolio excluding impaired loans Total loans held-in-portfolio Commercial Construction Mortgage Legacy Leasing Consumer Total $ 227,159 $ 11,151 $ 169,310 $ 2,962 $ 7,208 $ 170,907 $ 588,697 55,671 14,714 10,257 383 2,925 (7,716 ) 76,234 (47,452 ) (18,234 ) (12,221 ) (480 ) (1,693 ) (27,923 ) (108,003 ) 11,439 1,898 1,128 450 720 10,621 26,256 (31,097 ) (542 ) (712 ) — — (20 ) (32,371 ) $ 215,720 $ 8,987 $ 167,762 $ 3,315 $ 9,160 $ 145,869 $ 550,813 $ 68,456 $ 725 $ 44,162 $ 34 $ 607 $ 25,027 $ 139,011 $ 147,264 $ 8,262 $ 123,600 $ 3,281 $ 8,553 $ 120,842 $ 411,802 $ 337,577 $ 3,627 $ 455,834 $ 1,357 $ 2,554 $ 114,877 $ 915,826 9,667,142 692,383 7,441,063 71,145 590,262 3,746,974 22,208,969 $ 10,004,719 $ 696,010 $ 7,896,897 $ 72,502 $ 592,816 $ 3,861,851 $ 23,124,795
For the six months ended June 30, 2015 | ||||||||||||||||||||||||
Puerto Rico - Non-covered loans | ||||||||||||||||||||||||
(In thousands) | Commercial | Construction | Mortgage | Leasing | Consumer | Total | ||||||||||||||||||
Allowance for credit losses: | ||||||||||||||||||||||||
Beginning balance | $ | 201,589 | $ | 5,483 | $ | 120,860 | $ | 7,131 | $ | 154,072 | $ | 489,135 | ||||||||||||
Provision (reversal of provision) | 48,910 | (1,553 | ) | 25,947 | 3,771 | 15,367 | 92,442 | |||||||||||||||||
Charge-offs | (32,895 | ) | (2,194 | ) | (22,334 | ) | (2,930 | ) | (53,881 | ) | (114,234 | ) | ||||||||||||
Recoveries | 11,034 | 3,398 | 1,122 | 1,188 | 15,574 | 32,316 | ||||||||||||||||||
Net write-downs related to transferred to held-for-sale | (29,996 | ) | — | — | — | — | (29,996 | ) | ||||||||||||||||
Allowance transferred from covered loans | 8,453 | 1,424 | 582 | — | 2,578 | 13,037 | ||||||||||||||||||
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| |||||||||||||
Ending balance | $ | 207,095 | $ | 6,558 | $ | 126,177 | $ | 9,160 | $ | 133,710 | $ | 482,700 | ||||||||||||
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|
|
|
|
|
|
|
| |||||||||||||
Specific ALLL | $ | 68,456 | $ | 725 | $ | 43,749 | $ | 607 | $ | 24,615 | $ | 138,152 | ||||||||||||
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|
|
|
|
|
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|
|
| |||||||||||||
General ALLL | $ | 138,639 | $ | 5,833 | $ | 82,428 | $ | 8,553 | $ | 109,095 | $ | 344,548 | ||||||||||||
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|
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| |||||||||||||
Loans held-in-portfolio: | ||||||||||||||||||||||||
Impaired non-covered loans | $ | 337,577 | $ | 3,627 | $ | 450,789 | $ | 2,554 | $ | 112,733 | $ | 907,280 | ||||||||||||
Non-covered loans held-in-portfolio excluding impaired loans | 7,231,433 | 109,819 | 5,793,594 | 590,262 | 3,282,292 | 17,007,400 | ||||||||||||||||||
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| |||||||||||||
Total non-covered loans held-in-portfolio | $ | 7,569,010 | $ | 113,446 | $ | 6,244,383 | $ | 592,816 | $ | 3,395,025 | $ | 17,914,680 | ||||||||||||
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For the six months ended June 30, 2015 Puerto Rico - Covered Loans (In thousands) Allowance for credit losses: Beginning balance Provision (reversal of provision) Charge-offs Recoveries Net write-down related to loans transferred to held-for-sale Allowance transferred to non-covered loans Ending balance Specific ALLL General ALLL Loans held-in-portfolio: Impaired covered loans Covered loans held-in-portfolio excluding impaired loans Total covered loans held-in-portfolio For the six months ended June 30, 2015 U.S. Mainland - Continuing Operations (In thousands) Allowance for credit losses: Beginning balance Provision (reversal of provision) Charge-offs Recoveries Net (write-down) recovery related to loans transferred to held-for-sale Ending balance Specific ALLL General ALLL Loans held-in-portfolio: Impaired loans Loans held-in-portfolio excluding impaired loans Total loans held-in-portfolio Commercial Construction Mortgage Leasing Consumer Total $ 30,871 $ 7,202 $ 40,948 $ — $ 3,052 $ 82,073 10,115 15,150 1,068 — (243 ) 26,090 (37,936 ) (25,086 ) (3,906 ) — (767 ) (67,695 ) 6,504 4,700 447 — 815 12,466 (1,101 ) (542 ) (160 ) — (20 ) (1,823 ) (8,453 ) (1,424 ) (582 ) — (2,578 ) (13,037 ) $ — $ — $ 37,815 $ — $ 259 $ 38,074 $ — $ — $ — $ — $ — $ — $ — $ — $ 37,815 $ — $ 259 $ 38,074 $ — $ — $ — $ — $ — $ — 3 — 671,074 — 18,573 689,650 $ 3 $ — $ 671,074 $ — $ 18,573 $ 689,650 Commercial Construction Mortgage Legacy Consumer Total $ 9,648 $ 1,187 $ 2,462 $ 2,944 $ 14,343 $ 30,584 (2,381 ) 1,242 (3,891 ) (1,427 ) 4,194 (2,263 ) (882 ) �� — (561 ) (954 ) (5,492 ) (7,889 ) 2,240 — 231 2,752 2,256 7,479 — — 5,529 — (3,401 ) 2,128 $ 8,625 $ 2,429 $ 3,770 $ 3,315 $ 11,900 $ 30,039 $ — $ — $ 413 $ 34 $ 412 $ 859 $ 8,625 $ 2,429 $ 3,357 $ 3,281 $ 11,488 $ 29,180 $ — $ — $ 5,045 $ 1,357 $ 2,144 $ 8,546 2,435,706 582,564 976,395 71,145 446,109 4,511,919 $ 2,435,706 $ 582,564 $ 981,440 $ 72,502 $ 448,253 $ 4,520,465
For the six months ended June 30, 2015 Popular, Inc. (In thousands) Allowance for credit losses: Beginning balance Provision (reversal of provision) Charge-offs Recoveries Net write-down related to loans transferred to held-for-sale Ending balance Specific ALLL General ALLL Loans held-in-portfolio: Impaired loans Loans held-in-portfolio excluding impaired loans Total loans held-in-portfolio Commercial Construction Mortgage Legacy Leasing Consumer Total $ 242,108 $ 13,872 $ 164,270 $ 2,944 $ 7,131 $ 171,467 $ 601,792 56,644 14,839 23,124 (1,427 ) 3,771 19,318 116,269 (71,713 ) (27,280 ) (26,801 ) (954 ) (2,930 ) (60,140 ) (189,818 ) 19,778 8,098 1,800 2,752 1,188 18,645 52,261 (31,097 ) (542 ) 5,369 — — (3,421 ) (29,691 ) $ 215,720 $ 8,987 $ 167,762 $ 3,315 $ 9,160 $ 145,869 $ 550,813 $ 68,456 $ 725 $ 44,162 $ 34 $ 607 $ 25,027 $ 139,011 $ 147,264 $ 8,262 $ 123,600 $ 3,281 $ 8,553 $ 120,842 $ 411,802 $ 337,577 $ 3,627 $ 455,834 $ 1,357 $ 2,554 $ 114,877 $ 915,826 9,667,142 692,383 7,441,063 71,145 590,262 3,746,974 22,208,969 $ 10,004,719 $ 696,010 $ 7,896,897 $ 72,502 $ 592,816 $ 3,861,851 $ 23,124,795
The following table provides the activity in the allowance for loan losses related to Westernbank loans accounted for pursuant to ASC Subtopic 310-30.
ASC 310-30 Westernbank loans | ||||||||
For the quarters ended | ||||||||
(In thousands) | March 31, 2016 | March 31, 2015 | ||||||
Balance at beginning of period | $ | 63,563 | $ | 78,846 | ||||
Provision for loan losses | 1,791 | 8,601 | ||||||
Net charge-offs | (2,387 | ) | (19,061 | ) | ||||
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| |||||
Balance at end of period | $ | 62,967 | $ | 68,386 | ||||
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(In thousands) Balance at beginning of period Provision (reversal of provision) Net recoveries (charge-offs) Balance at end of period ASC 310-30 For the quarters ended For the six months ended June 30, 2016 June 30, 2015 June 30, 2016 June 30, 2015 $ 62,967 $ 68,386 $ 63,563 $ 78,846 (5,861 ) 12,269 (4,070 ) 20,870 9,889 (33,606 ) 7,502 (52,667 ) $ 66,995 $ 47,049 $ 66,995 $ 47,049
Impaired loans
The following tables present loans individually evaluated for impairment at March 31,June 30, 2016 and December 31, 2015.
March 31, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
June 30, 2016 | June 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Puerto Rico | Puerto Rico | Puerto Rico | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Impaired Loans – With an | Impaired Loans | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Allowance | With No Allowance | Impaired Loans - Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unpaid | Unpaid | Unpaid | Impaired Loans – With an | Impaired Loans | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Recorded | principal | Related | Recorded | principal | Recorded | principal | Related | Allowance | With No Allowance | Impaired Loans - Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
(In thousands) | investment | balance | allowance | investment | balance | investment | balance | allowance | Recorded investment | Unpaid principal balance | Related allowance | Recorded investment | Unpaid principal balance | Recorded investment | Unpaid principal balance | Related allowance | ||||||||||||||||||||||||||||||||||||||||||||||||
Commercial real estate non-owner occupied | $ | 107,706 | $ | 112,100 | $ | 37,638 | $ | 13,636 | $ | 23,754 | $ | 121,342 | $ | 135,854 | $ | 37,638 | $ | 143,454 | $ | 147,109 | $ | 37,312 | $ | 15,024 | $ | 29,354 | $ | 158,478 | $ | 176,463 | $ | 37,312 | ||||||||||||||||||||||||||||||||
Commercial real estate owner occupied | 120,121 | 139,841 | 10,888 | 38,763 | 63,165 | 158,884 | 203,006 | 10,888 | 82,242 | 103,397 | 10,315 | 38,317 | 61,639 | 120,559 | 165,036 | 10,315 | ||||||||||||||||||||||||||||||||||||||||||||||||
Commercial and industrial | 39,347 | 40,849 | 6,572 | 19,407 | 21,525 | 58,754 | 62,374 | 6,572 | 38,738 | 40,042 | 5,723 | 18,106 | 21,756 | 56,844 | 61,798 | 5,723 | ||||||||||||||||||||||||||||||||||||||||||||||||
Construction | 2,020 | 5,472 | 172 | — | — | 2,020 | 5,472 | 172 | 1,036 | 4,495 | 116 | — | — | 1,036 | 4,495 | 116 | ||||||||||||||||||||||||||||||||||||||||||||||||
Mortgage | 418,321 | 460,813 | 41,660 | 52,862 | 62,090 | 471,183 | 522,903 | 41,660 | 419,474 | 462,461 | 42,106 | 56,687 | 66,846 | 476,161 | 529,307 | 42,106 | ||||||||||||||||||||||||||||||||||||||||||||||||
Leasing | 2,391 | 2,391 | 608 | — | — | 2,391 | 2,391 | 608 | 2,110 | 2,110 | 548 | — | — | 2,110 | 2,110 | 548 | ||||||||||||||||||||||||||||||||||||||||||||||||
Consumer: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Credit cards | 37,778 | 37,778 | 5,963 | — | — | 37,778 | 37,778 | 5,963 | 38,377 | 38,377 | 6,045 | — | — | 38,377 | 38,377 | 6,045 | ||||||||||||||||||||||||||||||||||||||||||||||||
Personal | 67,834 | 67,834 | 17,517 | — | — | 67,834 | 67,834 | 17,517 | 67,449 | 67,449 | 17,455 | — | — | 67,449 | 67,449 | 17,455 | ||||||||||||||||||||||||||||||||||||||||||||||||
Auto | 3,863 | 3,863 | 771 | — | — | 3,863 | 3,863 | 771 | 2,879 | 2,879 | 597 | — | — | 2,879 | 2,879 | 597 | ||||||||||||||||||||||||||||||||||||||||||||||||
Other | 445 | 445 | 75 | — | — | 445 | 445 | 75 | 425 | 425 | 70 | — | — | 425 | 425 | 70 | ||||||||||||||||||||||||||||||||||||||||||||||||
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Total Puerto Rico | $ | 799,826 | $ | 871,386 | $ | 121,864 | $ | 124,668 | $ | 170,534 | $ | 924,494 | $ | 1,041,920 | $ | 121,864 | $ | 796,184 | $ | 868,744 | $ | 120,287 | $ | 128,134 | $ | 179,595 | $ | 924,318 | $ | 1,048,339 | $ | 120,287 | ||||||||||||||||||||||||||||||||
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March 31, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
U.S. mainland | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Impaired Loans – With an | Impaired Loans | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Allowance | With No Allowance | Impaired Loans - Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unpaid | Unpaid | Unpaid | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Recorded | principal | Related | Recorded | principal | Recorded | principal | Related | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(In thousands) | investment | balance | allowance | investment | balance | investment | balance | allowance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mortgage | $ | 4,774 | $ | 5,487 | $ | 1,592 | $ | 3,135 | $ | 3,903 | $ | 7,909 | $ | 9,390 | $ | 1,592 | ||||||||||||||||||||||||||||||||||||||||||||||||
Consumer: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
HELOCs | 921 | 921 | 352 | 715 | 715 | 1,636 | 1,636 | 352 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Personal | 530 | 530 | 229 | 81 | 81 | 611 | 611 | 229 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Total U.S. mainland | $ | 6,225 | $ | 6,938 | $ | 2,173 | $ | 3,931 | $ | 4,699 | $ | 10,156 | $ | 11,637 | $ | 2,173 | ||||||||||||||||||||||||||||||||||||||||||||||||
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March 31, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Popular, Inc. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Impaired Loans – With an | Impaired Loans | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Allowance | With No Allowance | Impaired Loans - Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unpaid | Unpaid | Unpaid | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Recorded | principal | Related | Recorded | principal | Recorded | principal | Related | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(In thousands) | investment | balance | allowance | investment | balance | investment | balance | allowance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial real estate non-owner occupied | $ | 107,706 | $ | 112,100 | $ | 37,638 | $ | 13,636 | $ | 23,754 | $ | 121,342 | $ | 135,854 | $ | 37,638 | ||||||||||||||||||||||||||||||||||||||||||||||||
Commercial real estate owner occupied | 120,121 | 139,841 | 10,888 | 38,763 | 63,165 | 158,884 | 203,006 | 10,888 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial and industrial | 39,347 | 40,849 | 6,572 | 19,407 | 21,525 | 58,754 | 62,374 | 6,572 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Construction | 2,020 | 5,472 | 172 | — | — | 2,020 | 5,472 | 172 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mortgage | 423,095 | 466,300 | 43,252 | 55,997 | 65,993 | 479,092 | 532,293 | 43,252 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leasing | 2,391 | 2,391 | 608 | — | — | 2,391 | 2,391 | 608 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Consumer: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Credit Cards | 37,778 | 37,778 | 5,963 | — | — | 37,778 | 37,778 | 5,963 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
HELOCs | 921 | 921 | 352 | 715 | 715 | 1,636 | 1,636 | 352 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Personal | 68,364 | 68,364 | 17,746 | 81 | 81 | 68,445 | 68,445 | 17,746 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Auto | 3,863 | 3,863 | 771 | — | — | 3,863 | 3,863 | 771 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other | 445 | 445 | 75 | — | — | 445 | 445 | 75 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total Popular, Inc. | $ | 806,051 | $ | 878,324 | $ | 124,037 | $ | 128,599 | $ | 175,233 | $ | 934,650 | $ | 1,053,557 | $ | 124,037 | ||||||||||||||||||||||||||||||||||||||||||||||||
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June 30, 2016 | June 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
U.S. mainland | U.S. mainland | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Impaired Loans – With an | Impaired Loans | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Allowance | With No Allowance | Impaired Loans - Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(In thousands) | Recorded investment | Unpaid principal balance | Related allowance | Recorded investment | Unpaid principal balance | Recorded investment | Unpaid principal balance | Related allowance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mortgage | $ | 5,067 | $ | 5,993 | $ | 1,803 | $ | 3,497 | $ | 4,492 | $ | 8,564 | $ | 10,485 | $ | 1,803 | ||||||||||||||||||||||||||||||||||||||||||||||||
Consumer: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
HELOCs | 1,174 | 1,195 | 501 | 713 | 713 | 1,887 | 1,908 | 501 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Personal | 593 | 593 | 230 | — | — | 593 | 593 | 230 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total U.S. mainland | $ | 6,834 | $ | 7,781 | $ | 2,534 | $ | 4,210 | $ | 5,205 | $ | 11,044 | $ | 12,986 | $ | 2,534 | ||||||||||||||||||||||||||||||||||||||||||||||||
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June 30, 2016 | June 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Popular, Inc. | Popular, Inc. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Impaired Loans – With an | Impaired Loans | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Allowance | With No Allowance | Impaired Loans - Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(In thousands) | Recorded investment | Unpaid principal balance | Related allowance | Recorded investment | Unpaid principal balance | Recorded investment | Unpaid principal balance | Related allowance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial real estate non-owner occupied | $ | 143,454 | $ | 147,109 | $ | 37,312 | $ | 15,024 | $ | 29,354 | $ | 158,478 | $ | 176,463 | $ | 37,312 | ||||||||||||||||||||||||||||||||||||||||||||||||
Commercial real estate owner occupied | 82,242 | 103,397 | 10,315 | 38,317 | 61,639 | 120,559 | 165,036 | 10,315 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial and industrial | 38,738 | 40,042 | 5,723 | 18,106 | 21,756 | 56,844 | 61,798 | 5,723 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Construction | 1,036 | 4,495 | 116 | — | — | 1,036 | 4,495 | 116 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mortgage | 424,541 | 468,454 | 43,909 | 60,184 | 71,338 | 484,725 | 539,792 | 43,909 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leasing | 2,110 | 2,110 | 548 | — | — | 2,110 | 2,110 | 548 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Consumer: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Credit Cards | 38,377 | 38,377 | 6,045 | — | — | 38,377 | 38,377 | 6,045 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
HELOCs | 1,174 | 1,195 | 501 | 713 | 713 | 1,887 | 1,908 | 501 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Personal | 68,042 | 68,042 | 17,685 | — | — | 68,042 | 68,042 | 17,685 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Auto | 2,879 | 2,879 | 597 | — | — | 2,879 | 2,879 | 597 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other | 425 | 425 | 70 | — | — | 425 | 425 | 70 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Total Popular, Inc. | $ | 803,018 | $ | 876,525 | $ | 122,821 | $ | 132,344 | $ | 184,800 | $ | 935,362 | $ | 1,061,325 | $ | 122,821 | ||||||||||||||||||||||||||||||||||||||||||||||||
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December 31, 2015 | December 31, 2015 | December 31, 2015 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Puerto Rico | Puerto Rico | Puerto Rico | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Impaired Loans – With an | Impaired Loans | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Allowance | With No Allowance | Impaired Loans - Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unpaid | Unpaid | Unpaid | Impaired Loans – With an | Impaired Loans | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Recorded | principal | Related | Recorded | principal | Recorded | principal | Related | Allowance | With No Allowance | Impaired Loans - Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
(In thousands) | investment | balance | allowance | investment | balance | investment | balance | allowance | Recorded investment | Unpaid principal balance | Related allowance | Recorded investment | Unpaid principal balance | Recorded investment | Unpaid principal balance | Related allowance | ||||||||||||||||||||||||||||||||||||||||||||||||
Commercial real estate non-owner occupied | $ | 102,199 | $ | 106,466 | $ | 30,980 | $ | 13,779 | $ | 23,896 | $ | 115,978 | $ | 130,362 | $ | 30,980 | $ | 102,199 | $ | 106,466 | $ | 30,980 | $ | 13,779 | $ | 23,896 | $ | 115,978 | $ | 130,362 | $ | 30,980 | ||||||||||||||||||||||||||||||||
Commercial real estate owner occupied | 118,253 | 137,193 | 12,564 | 38,955 | 63,383 | 157,208 | 200,576 | 12,564 | 118,253 | 137,193 | 12,564 | 38,955 | 63,383 | 157,208 | 200,576 | 12,564 | ||||||||||||||||||||||||||||||||||||||||||||||||
Commercial and industrial | 42,043 | 43,629 | 5,699 | 21,904 | 32,922 | 63,947 | 76,551 | 5,699 | 42,043 | 43,629 | 5,699 | 21,904 | 32,922 | 63,947 | 76,551 | 5,699 | ||||||||||||||||||||||||||||||||||||||||||||||||
Construction | 2,481 | 7,878 | 264 | — | — | 2,481 | 7,878 | 264 | 2,481 | 7,878 | 264 | — | — | 2,481 | 7,878 | 264 | ||||||||||||||||||||||||||||||||||||||||||||||||
Mortgage | 424,885 | 468,240 | 42,965 | 40,232 | 45,881 | 465,117 | 514,121 | 42,965 | 424,885 | 468,240 | 42,965 | 40,232 | 45,881 | 465,117 | 514,121 | 42,965 | ||||||||||||||||||||||||||||||||||||||||||||||||
Leasing | 2,404 | 2,404 | 573 | — | — | 2,404 | 2,404 | 573 | 2,404 | 2,404 | 573 | — | — | 2,404 | 2,404 | 573 | ||||||||||||||||||||||||||||||||||||||||||||||||
Consumer: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Credit cards | 38,734 | 38,734 | 6,675 | — | — | 38,734 | 38,734 | 6,675 | 38,734 | 38,734 | 6,675 | — | — | 38,734 | 38,734 | 6,675 | ||||||||||||||||||||||||||||||||||||||||||||||||
Personal | 68,509 | 68,509 | 16,365 | — | — | 68,509 | 68,509 | 16,365 | 68,509 | 68,509 | 16,365 | — | — | 68,509 | 68,509 | 16,365 | ||||||||||||||||||||||||||||||||||||||||||||||||
Auto | 1,893 | 1,893 | 338 | — | — | 1,893 | 1,893 | 338 | 1,893 | 1,893 | 338 | — | — | 1,893 | 1,893 | 338 | ||||||||||||||||||||||||||||||||||||||||||||||||
Other | 524 | 525 | 100 | — | — | 524 | 525 | 100 | 524 | 525 | 100 | — | — | 524 | 525 | 100 | ||||||||||||||||||||||||||||||||||||||||||||||||
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Total Puerto Rico | $ | 801,925 | $ | 875,471 | $ | 116,523 | $ | 114,870 | $ | 166,082 | $ | 916,795 | $ | 1,041,553 | $ | 116,523 | $ | 801,925 | $ | 875,471 | $ | 116,523 | $ | 114,870 | $ | 166,082 | $ | 916,795 | $ | 1,041,553 | $ | 116,523 | ||||||||||||||||||||||||||||||||
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December 31, 2015 | December 31, 2015 | December 31, 2015 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
U.S. mainland | U.S. mainland | U.S. mainland | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Impaired Loans – With an | Impaired Loans | Impaired Loans – With an | Impaired Loans | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Allowance | With No Allowance | Impaired Loans - Total | Allowance | With No Allowance | Impaired Loans - Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unpaid | Unpaid | Unpaid | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Recorded | principal | Related | Recorded | principal | Recorded | principal | Related | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(In thousands) | investment | balance | allowance | investment | balance | investment | balance | allowance | Recorded investment | Unpaid principal balance | Related allowance | Recorded investment | Unpaid principal balance | Recorded investment | Unpaid principal balance | Related allowance | ||||||||||||||||||||||||||||||||||||||||||||||||
Mortgage | $ | 4,143 | $ | 5,018 | $ | 1,064 | $ | 2,672 | $ | 3,574 | $ | 6,815 | $ | 8,592 | $ | 1,064 | $ | 4,143 | $ | 5,018 | $ | 1,064 | $ | 2,672 | $ | 3,574 | $ | 6,815 | $ | 8,592 | $ | 1,064 | ||||||||||||||||||||||||||||||||
Consumer: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
HELOCs | 778 | 796 | 259 | 783 | 783 | 1,561 | 1,579 | 259 | 778 | 796 | 259 | 783 | 783 | 1,561 | 1,579 | 259 | ||||||||||||||||||||||||||||||||||||||||||||||||
Personal | 534 | 534 | 226 | 81 | 81 | 615 | 615 | 226 | 534 | 534 | 226 | 81 | 81 | 615 | 615 | 226 | ||||||||||||||||||||||||||||||||||||||||||||||||
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Total U.S. mainland | $ | 5,455 | $ | 6,348 | $ | 1,549 | $ | 3,536 | $ | 4,438 | $ | 8,991 | $ | 10,786 | $ | 1,549 | $ | 5,455 | $ | 6,348 | $ | 1,549 | $ | 3,536 | $ | 4,438 | $ | 8,991 | $ | 10,786 | $ | 1,549 | ||||||||||||||||||||||||||||||||
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December 31, 2015 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Popular, Inc. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Impaired Loans – With an | Impaired Loans | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Allowance | With No Allowance | Impaired Loans - Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unpaid | Unpaid | Unpaid | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Recorded | principal | Related | Recorded | principal | Recorded | principal | Related | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(In thousands) | investment | balance | allowance | investment | balance | investment | balance | allowance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial real estate non-owner occupied | $ | 102,199 | $ | 106,466 | $ | 30,980 | $ | 13,779 | $ | 23,896 | $ | 115,978 | $ | 130,362 | $ | 30,980 | ||||||||||||||||||||||||||||||||||||||||||||||||
Commercial real estate owner occupied | 118,253 | 137,193 | 12,564 | 38,955 | 63,383 | 157,208 | 200,576 | 12,564 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial and industrial | 42,043 | 43,629 | 5,699 | 21,904 | 32,922 | 63,947 | 76,551 | 5,699 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Construction | 2,481 | 7,878 | 264 | — | — | 2,481 | 7,878 | 264 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mortgage | 429,028 | 473,258 | 44,029 | 42,904 | 49,455 | 471,932 | 522,713 | 44,029 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leasing | 2,404 | 2,404 | 573 | — | — | 2,404 | 2,404 | 573 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Consumer: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Credit Cards | 38,734 | 38,734 | 6,675 | — | — | 38,734 | 38,734 | 6,675 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
HELOCs | 778 | 796 | 259 | 783 | 783 | 1,561 | 1,579 | 259 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Personal | 69,043 | 69,043 | 16,591 | 81 | 81 | 69,124 | 69,124 | 16,591 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Auto | 1,893 | 1,893 | 338 | — | — | 1,893 | 1,893 | 338 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other | 524 | 525 | 100 | — | — | 524 | 525 | 100 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Total Popular, Inc. | $ | 807,380 | $ | 881,819 | $ | 118,072 | $ | 118,406 | $ | 170,520 | $ | 925,786 | $ | 1,052,339 | $ | 118,072 | ||||||||||||||||||||||||||||||||||||||||||||||||
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December 31, 2015 Popular, Inc. (In thousands) Commercial real estate non-owner occupied Commercial real estate owner occupied Commercial and industrial Construction Mortgage Leasing Consumer: Credit Cards HELOCs Personal Auto Other Total Popular, Inc. Impaired Loans – With an Impaired Loans Allowance With No Allowance Impaired Loans - Total Recorded
investment Unpaid
principal
balance Related
allowance Recorded
investment Unpaid
principal
balance Recorded
investment Unpaid
principal
balance Related
allowance $ 102,199 $ 106,466 $ 30,980 $ 13,779 $ 23,896 $ 115,978 $ 130,362 $ 30,980 118,253 137,193 12,564 38,955 63,383 157,208 200,576 12,564 42,043 43,629 5,699 21,904 32,922 63,947 76,551 5,699 2,481 7,878 264 — — 2,481 7,878 264 429,028 473,258 44,029 42,904 49,455 471,932 522,713 44,029 2,404 2,404 573 — — 2,404 2,404 573 38,734 38,734 6,675 — — 38,734 38,734 6,675 778 796 259 783 783 1,561 1,579 259 69,043 69,043 16,591 81 81 69,124 69,124 16,591 1,893 1,893 338 — — 1,893 1,893 338 524 525 100 — — 524 525 100 $ 807,380 $ 881,819 $ 118,072 $ 118,406 $ 170,520 $ 925,786 $ 1,052,339 $ 118,072
The following tables present the average recorded investment and interest income recognized on impaired loans for the quartersquarter and six months ended March 31,June 30, 2016 and 2015.
For the quarter ended March 31, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||
Puerto Rico | U.S. Mainland | Popular, Inc. | ||||||||||||||||||||||||||||||||||||||||||||||
Average | Interest | Average | Interest | Average | Interest | |||||||||||||||||||||||||||||||||||||||||||
For the quarter ended June 30, 2016 | For the quarter ended June 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||
recorded | income | recorded | income | recorded | income | Puerto Rico | U.S. Mainland | Popular, Inc. | ||||||||||||||||||||||||||||||||||||||||
(In thousands) | investment | recognized | investment | recognized | investment | recognized | Average recorded investment | Interest income recognized | Average recorded investment | Interest income recognized | Average recorded investment | Interest income recognized | ||||||||||||||||||||||||||||||||||||
Commercial real estate non-owner occupied | $ | 118,660 | $ | 1,159 | $ | — | $ | — | $ | 118,660 | $ | 1,159 | $ | 139,910 | $ | 1,362 | $ | — | $ | — | $ | 139,910 | $ | 1,362 | ||||||||||||||||||||||||
Commercial real estate owner occupied | 158,046 | 1,393 | — | — | 158,046 | 1,393 | 139,722 | 1,316 | — | — | 139,722 | 1,316 | ||||||||||||||||||||||||||||||||||||
Commercial and industrial | 61,351 | 516 | — | — | 61,351 | 516 | 57,799 | 491 | — | — | 57,799 | 491 | ||||||||||||||||||||||||||||||||||||
Construction | 2,251 | 21 | — | — | 2,251 | 21 | 1,528 | 14 | — | — | 1,528 | 14 | ||||||||||||||||||||||||||||||||||||
Mortgage | 468,150 | 3,387 | 7,362 | — | 475,512 | 3,387 | 473,672 | 3,385 | 8,237 | 64,913 | 481,909 | 68,298 | ||||||||||||||||||||||||||||||||||||
Leasing | 2,398 | — | — | — | 2,398 | — | 2,251 | — | — | — | 2,251 | — | ||||||||||||||||||||||||||||||||||||
Consumer: | ||||||||||||||||||||||||||||||||||||||||||||||||
Credit cards | 38,256 | — | — | — | 38,256 | — | 38,078 | — | — | — | 38,078 | — | ||||||||||||||||||||||||||||||||||||
Helocs | — | — | 1,599 | — | 1,599 | — | — | — | 1,762 | — | 1,762 | — | ||||||||||||||||||||||||||||||||||||
Personal | 68,172 | — | 613 | — | 68,785 | — | 67,642 | — | 602 | — | 68,244 | — | ||||||||||||||||||||||||||||||||||||
Auto | 2,878 | — | — | — | 2,878 | — | 3,371 | — | — | — | 3,371 | — | ||||||||||||||||||||||||||||||||||||
Other | 485 | — | — | — | 485 | — | 435 | — | — | — | 435 | — | ||||||||||||||||||||||||||||||||||||
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Total Popular, Inc. | $ | 920,647 | $ | 6,476 | $ | 9,574 | $ | — | $ | 930,221 | $ | 6,476 | $ | 924,408 | $ | 6,568 | $ | 10,601 | $ | 64,913 | $ | 935,009 | $ | 71,481 | ||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||||||||
For the quarter ended March 31, 2015 | ||||||||||||||||||||||||||||||||||||||||||||||||
Puerto Rico | U.S. Mainland | Popular, Inc. | ||||||||||||||||||||||||||||||||||||||||||||||
Average | Interest | Average | Interest | Average | Interest | |||||||||||||||||||||||||||||||||||||||||||
For the quarter ended June 30, 2015 | For the quarter ended June 30, 2015 | |||||||||||||||||||||||||||||||||||||||||||||||
recorded | income | recorded | income | recorded | income | Puerto Rico | U.S. Mainland | Popular, Inc. | ||||||||||||||||||||||||||||||||||||||||
(In thousands) | investment | recognized | investment | recognized | investment | recognized | Average recorded investment | Interest income recognized | Average recorded investment | Interest income recognized | Average recorded investment | Interest income recognized | ||||||||||||||||||||||||||||||||||||
Commercial multi-family | $ | 276 | $ | — | $ | — | $ | — | $ | 276 | $ | — | $ | 325 | $ | — | $ | — | $ | — | $ | 325 | $ | — | ||||||||||||||||||||||||
Commercial real estate non-owner occupied | 88,773 | 1,140 | — | — | 88,773 | 1,140 | 118,663 | 1,307 | — | — | 118,663 | 1,307 | ||||||||||||||||||||||||||||||||||||
Commercial real estate owner occupied | 127,969 | 2,166 | — | — | 127,969 | 2,166 | 123,656 | 1,211 | — | — | 123,656 | 1,211 | ||||||||||||||||||||||||||||||||||||
Commercial and industrial | 170,127 | 4,432 | 125 | — | 170,252 | 4,432 | 134,834 | 2,369 | — | — | 134,834 | 2,369 | ||||||||||||||||||||||||||||||||||||
Construction | 11,553 | — | — | — | 11,553 | — | 6,733 | — | — | — | 6,733 | — | ||||||||||||||||||||||||||||||||||||
Mortgage | 438,538 | 4,453 | 4,681 | 13 | 443,219 | 4,466 | 448,148 | 4,112 | 5,076 | 16 | 453,224 | 4,128 | ||||||||||||||||||||||||||||||||||||
Legacy | — | — | 679 | — | 679 | — | ||||||||||||||||||||||||||||||||||||||||||
Leasing | 2,974 | — | — | — | 2,974 | — | 2,739 | — | — | — | 2,739 | — | ||||||||||||||||||||||||||||||||||||
Consumer: | ||||||||||||||||||||||||||||||||||||||||||||||||
Credit cards | 41,337 | — | — | — | 41,337 | — | 40,598 | — | — | — | 40,598 | — | ||||||||||||||||||||||||||||||||||||
Helocs | — | — | 1,762 | — | 1,762 | — | — | — | 1,645 | — | 1,645 | — | ||||||||||||||||||||||||||||||||||||
Personal | 71,241 | — | 206 | — | 71,447 | — | 70,309 | — | 452 | — | 70,761 | — | ||||||||||||||||||||||||||||||||||||
Auto | 1,984 | — | — | — | 1,984 | — | 2,079 | — | — | — | 2,079 | — | ||||||||||||||||||||||||||||||||||||
Other | 526 | — | 44 | — | 570 | — | 590 | — | — | — | 590 | — | ||||||||||||||||||||||||||||||||||||
Covered loans | 8,818 | 35 | — | — | 8,818 | 35 | 5,365 | 74 | — | — | 5,365 | 74 | ||||||||||||||||||||||||||||||||||||
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Total Popular, Inc. | $ | 964,116 | $ | 12,226 | $ | 6,818 | $ | 13 | $ | 970,934 | $ | 12,239 | $ | 954,039 | $ | 9,073 | $ | 7,852 | $ | 16 | $ | 961,891 | $ | 9,089 | ||||||||||||||||||||||||
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For the six months ended June 30, 2016 (In thousands) Commercial real estate non-owner occupied Commercial real estate owner occupied Commercial and industrial Construction Mortgage Leasing Consumer: Credit cards HELOCs Personal Auto Other Total Popular, Inc. For the six months ended June 30, 2015 (In thousands) Commercial multi-family Commercial real estate non-owner occupied Commercial real estate owner occupied Commercial and industrial Construction Mortgage Legacy Leasing Consumer: Credit cards HELOCs Personal Auto Other Covered loans Total Popular, Inc. Puerto Rico U.S. Mainland Popular, Inc. Average
recorded
investment Interest
income
recognized Average
recorded
investment Interest
income
recognized Average
recorded
investment Interest
income
recognized $ 131,933 $ 2,591 $ — $ — $ 131,933 $ 2,591 145,550 2,767 — — 145,550 2,767 59,848 1,001 — — 59,848 1,001 1,846 35 — — 1,846 35 470,820 6,773 7,763 65,243 478,583 72,016 2,302 — — — 2,302 — 38,296 — — — 38,296 — — — 1,695 — 1,695 — 67,931 — 606 — 68,537 — 2,878 — — — 2,878 — 465 — — — 465 — $ 921,869 $ 13,167 $ 10,064 $ 65,243 $ 931,933 $ 78,410 Puerto Rico U.S. Mainland Popular, Inc. Average
recorded
investment Interest
income
recognized Average
recorded
investment Interest
income
recognized Average
recorded
investment Interest
income
recognized $ 217 $ — $ — $ — $ 217 $ — 98,526 2,582 — — 98,526 2,582 125,457 2,422 — — 125,457 2,422 146,422 4,749 83 — 146,505 4,749 8,911 — — — 8,911 — 442,621 8,565 4,802 29 447,423 8,594 — — 452 — 452 — 2,834 — — — 2,834 — 40,891 — — — 40,891 — — — 1,725 — 1,725 — 70,814 — 301 — 71,115 — 2,030 — — — 2,030 — 568 — 29 — 597 — 5,879 153 — — 5,879 153 $ 945,170 $ 18,471 $ 7,392 $ 29 $ 952,562 $ 18,500
Modifications
Troubled debt restructurings related to non-covered loan portfolios amounted to $ 1.2 billion at March 31,June 30, 2016 (December 31, 2015—2015 - $ 1.2 billion). The amount of outstanding commitments to lend additional funds to debtors owing receivables whose terms have been modified in troubled debt restructurings amounted $9$8 million related to the commercial loan portfolio at March 31,June 30, 2016 (December 31, 2015—$112015 - $11 million).
A modification of a loan constitutes a troubled debt restructuring (“TDR”) when a borrower is experiencing financial difficulty and the modification constitutes a concession. For a summary of the accounting policy related to TDRs, refer to the summary of significant accounting policies included in Note 2 of the 2015 Form 10-K.
The following tables present the non-covered and covered loans classified as TDRs according to their accruing status at March 31,June 30, 2016 and December 31, 2015.
Popular, Inc. | Popular, Inc. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Non-Covered Loans | Non-Covered Loans | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
March 31, 2016 | December 31, 2015 | June 30, 2016 | December 31, 2015 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(In thousands) | Accruing | Non-Accruing | Total | Related Allowance | Accruing | Non-Accruing | Total | Related Allowance | Accruing | Non-Accruing | Total | Related Allowance | Accruing | Non-Accruing | Total | Related Allowance | ||||||||||||||||||||||||||||||||||||||||||||||||
Commercial | $ | 170,534 | $ | 87,841 | $ | 258,375 | $ | 47,571 | $ | 166,415 | $ | 88,117 | $ | 254,532 | $ | 37,355 | $ | 167,202 | $ | 86,784 | $ | 253,986 | $ | 44,667 | $ | 166,415 | $ | 88,117 | $ | 254,532 | $ | 37,355 | ||||||||||||||||||||||||||||||||
Construction | 194 | 1,826 | 2,020 | 172 | 221 | 2,259 | 2,480 | 264 | 167 | 868 | 1,035 | 116 | 221 | 2,259 | 2,480 | 264 | ||||||||||||||||||||||||||||||||||||||||||||||||
Mortgage | 679,719 | 120,694 | 800,413 | 43,252 | 644,013 | 130,483 | 774,496 | 44,029 | 708,140 | 117,475 | 825,615 | 43,909 | 644,013 | 130,483 | 774,496 | 44,029 | ||||||||||||||||||||||||||||||||||||||||||||||||
Leases | 1,749 | 642 | 2,391 | 608 | 1,791 | 609 | 2,400 | 573 | 1,532 | 576 | 2,108 | 548 | 1,791 | 609 | 2,400 | 573 | ||||||||||||||||||||||||||||||||||||||||||||||||
Consumer | 104,133 | 12,576 | 116,709 | 24,907 | 104,630 | 12,805 | 117,435 | 23,963 | 102,528 | 13,254 | 115,782 | 24,898 | 104,630 | 12,805 | 117,435 | 23,963 | ||||||||||||||||||||||||||||||||||||||||||||||||
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Total | $ | 956,329 | $ | 223,579 | $ | 1,179,908 | $ | 116,510 | $ | 917,070 | $ | 234,273 | $ | 1,151,343 | $ | 106,184 | $ | 979,569 | $ | 218,957 | $ | 1,198,526 | $ | 114,138 | $ | 917,070 | $ | 234,273 | $ | 1,151,343 | $ | 106,184 | ||||||||||||||||||||||||||||||||
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Popular, Inc. | Popular, Inc. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Covered Loans | Covered Loans | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
March 31, 2016 | December 31, 2015 | June 30, 2016 | December 31, 2015 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(In thousands) | Accruing | Non-Accruing | Total | Related Allowance | Accruing | Non-Accruing | Total | Related Allowance | Accruing | Non-Accruing | Total | Related Allowance | Accruing | Non-Accruing | Total | Related Allowance | ||||||||||||||||||||||||||||||||||||||||||||||||
Mortgage | $ | 2,958 | $ | 2,500 | $ | 5,458 | $ | — | $ | 3,328 | $ | 3,268 | $ | 6,596 | $ | — | $ | 3,121 | $ | 2,432 | $ | 5,553 | $ | — | $ | 3,328 | $ | 3,268 | $ | 6,596 | $ | — | ||||||||||||||||||||||||||||||||
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Total | $ | 2,958 | $ | 2,500 | $ | 5,458 | $ | — | $ | 3,328 | $ | 3,268 | $ | 6,596 | $ | — | $ | 3,121 | $ | 2,432 | $ | 5,553 | $ | — | $ | 3,328 | $ | 3,268 | $ | 6,596 | $ | — | ||||||||||||||||||||||||||||||||
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The following tables present the loan count by type of modification for those loans modified in a TDR during the quarters and six months ended March 31,June 30, 2016 and 2015.
Puerto Rico | ||||||||||||||||||||||||||||||||||||||||||||||||
For the quarter ended March 31, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||
Puerto Rico | ||||||||||||||||||||||||||||||||||||||||||||||||
For the quarter ended June 30, 2016 | For the six months ended June 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||
Reduction in interest rate | Extension of maturity date | Combination of reduction in interest rate and extension of maturity date | Other | Reduction in interest rate | Extension of maturity date | Combination of reduction in interest rate and extension of maturity date | Other | Reduction in interest rate | Extension of maturity date | Combination of reduction in interest rate and extension of maturity date | Other | |||||||||||||||||||||||||||||||||||||
Commercial real estate non-owner occupied | 1 | 1 | — | — | 1 | — | — | — | 2 | 1 | — | — | ||||||||||||||||||||||||||||||||||||
Commercial real estate owner occupied | 16 | 1 | — | — | 13 | 4 | — | — | 29 | 5 | — | — | ||||||||||||||||||||||||||||||||||||
Commercial and industrial | 6 | — | — | — | 8 | 1 | — | — | 14 | 1 | — | — | ||||||||||||||||||||||||||||||||||||
Mortgage | 20 | 10 | 112 | 54 | 18 | 24 | 112 | 35 | 38 | 34 | 224 | 89 | ||||||||||||||||||||||||||||||||||||
Consumer: | ||||||||||||||||||||||||||||||||||||||||||||||||
Credit cards | 175 | — | — | 174 | 210 | — | — | 199 | 385 | — | — | 373 | ||||||||||||||||||||||||||||||||||||
Personal | 261 | 5 | — | — | 259 | 5 | — | 1 | 520 | 10 | — | 1 | ||||||||||||||||||||||||||||||||||||
Auto | — | 2 | 2 | — | — | 5 | 2 | — | — | 7 | 4 | — | ||||||||||||||||||||||||||||||||||||
Other | 10 | — | — | — | 11 | — | — | — | 21 | — | — | — | ||||||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||||||||
Total | 489 | 19 | 114 | 228 | 520 | 39 | 114 | 235 | 1,009 | 58 | 228 | 463 | ||||||||||||||||||||||||||||||||||||
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U.S. mainland | ||||||||||||||||||||||||||||||||||||||||||||||||
For the quarter ended March 31, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||
U.S. Mainland | ||||||||||||||||||||||||||||||||||||||||||||||||
For the quarter ended June 30, 2016 | For the six months ended June 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||
Reduction in interest rate | Extension of maturity date | Combination of reduction in interest rate and extension of maturity date | Other | Reduction in interest rate | Extension of maturity date | Combination of reduction in interest rate and extension of maturity date | Other | Reduction in interest rate | Extension of maturity date | Combination of reduction in interest rate and extension of maturity date | Other | |||||||||||||||||||||||||||||||||||||
Mortgage | — | — | 11 | 1 | — | — | 7 | — | — | — | 18 | 1 | ||||||||||||||||||||||||||||||||||||
Consumer: | ||||||||||||||||||||||||||||||||||||||||||||||||
HELOCs | — | — | 1 | — | — | — | 1 | 1 | — | — | 2 | 1 | ||||||||||||||||||||||||||||||||||||
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Total | — | — | 12 | 1 | — | — | 8 | 1 | — | — | 20 | 2 | ||||||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||||||||
Popular, Inc. | ||||||||||||||||||||||||||||||||||||||||||||||||
For the quarter ended March 31, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||
Popular, Inc. | ||||||||||||||||||||||||||||||||||||||||||||||||
For the quarter ended June 30, 2016 | For the six months ended June 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||
Reduction in interest rate | Extension of maturity date | Combination of reduction in interest rate and extension of maturity date | Other | Reduction in interest rate | Extension of maturity date | Combination of reduction in interest rate and extension of maturity date | Other | Reduction in interest rate | Extension of maturity date | Combination of reduction in interest rate and extension of maturity date | Other | |||||||||||||||||||||||||||||||||||||
Commercial real estate non-owner occupied | 1 | 1 | — | — | 1 | — | — | — | 2 | 1 | — | — | ||||||||||||||||||||||||||||||||||||
Commercial real estate owner occupied | 16 | 1 | — | — | 13 | 4 | — | — | 29 | 5 | — | — | ||||||||||||||||||||||||||||||||||||
Commercial and industrial | 6 | — | — | — | 8 | 1 | — | — | 14 | 1 | — | — | ||||||||||||||||||||||||||||||||||||
Mortgage | 20 | 10 | 123 | 55 | 18 | 24 | 119 | 35 | 38 | 34 | 242 | 90 | ||||||||||||||||||||||||||||||||||||
Leasing | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
Consumer: | ||||||||||||||||||||||||||||||||||||||||||||||||
Credit cards | 175 | — | — | 174 | 210 | — | — | 199 | 385 | — | — | 373 | ||||||||||||||||||||||||||||||||||||
HELOCs | — | — | 1 | — | — | — | 1 | 1 | — | — | 2 | 1 | ||||||||||||||||||||||||||||||||||||
Personal | 261 | 5 | — | — | 259 | 5 | — | 1 | 520 | 10 | — | 1 | ||||||||||||||||||||||||||||||||||||
Auto | — | 2 | 2 | — | — | 5 | 2 | — | — | 7 | 4 | — | ||||||||||||||||||||||||||||||||||||
Other | 10 | — | — | — | 11 | — | — | — | 21 | — | — | — | ||||||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||||||||
Total | 489 | 19 | 126 | 229 | 520 | 39 | 122 | 236 | 1,009 | 58 | 248 | 465 | ||||||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||||||||
Puerto Rico | ||||||||||||||||||||||||||||||||||||||||||||||||
For the quarter ended March 31, 2015 | ||||||||||||||||||||||||||||||||||||||||||||||||
Puerto Rico | ||||||||||||||||||||||||||||||||||||||||||||||||
For the quarter ended June 30, 2015 | For the six months ended June 30, 2015 | |||||||||||||||||||||||||||||||||||||||||||||||
Reduction in interest rate | Extension of maturity date | Combination of reduction in interest rate and extension of maturity date | Other | Reduction in interest rate | Extension of maturity date | Combination of reduction in interest rate and extension of maturity date | Other | Reduction in interest rate | Extension of maturity date | Combination of reduction in interest rate and extension of maturity date | Other | |||||||||||||||||||||||||||||||||||||
Commercial multi-family | — | 2 | — | — | — | — | — | — | — | 2 | — | — | ||||||||||||||||||||||||||||||||||||
Commercial real estate non-owner occupied | 2 | 1 | — | — | 3 | 7 | — | — | 5 | 8 | — | — | ||||||||||||||||||||||||||||||||||||
Commercial real estate owner occupied | 2 | 3 | — | — | 8 | 6 | — | — | 10 | 9 | — | — | ||||||||||||||||||||||||||||||||||||
Commercial and industrial | 5 | 5 | — | — | 6 | 6 | — | — | 11 | 11 | — | — | ||||||||||||||||||||||||||||||||||||
Construction | 1 | — | — | — | — | — | — | — | 1 | — | — | — | ||||||||||||||||||||||||||||||||||||
Mortgage | 13 | 19 | 98 | 15 | 16 | 11 | 83 | 23 | 29 | 30 | 181 | 38 | ||||||||||||||||||||||||||||||||||||
Leasing | — | 1 | 12 | — | — | 1 | 2 | — | — | 2 | 14 | — | ||||||||||||||||||||||||||||||||||||
Consumer: | ||||||||||||||||||||||||||||||||||||||||||||||||
Credit cards | 228 | — | — | 187 | 194 | — | — | 164 | 422 | — | — | 351 | ||||||||||||||||||||||||||||||||||||
Personal | 228 | 14 | — | — | 274 | 4 | — | — | 502 | 18 | — | — | ||||||||||||||||||||||||||||||||||||
Auto | — | 2 | 2 | — | — | 3 | 1 | — | — | 5 | 3 | — | ||||||||||||||||||||||||||||||||||||
Other | 11 | — | — | — | 11 | — | — | — | 22 | — | — | — | ||||||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||||||||
Total | 490 | 47 | 112 | 202 | 512 | 38 | 86 | 187 | 1,002 | 85 | 198 | 389 | ||||||||||||||||||||||||||||||||||||
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U.S. mainland For the quarter ended March 31, 2015 Mortgage Consumer: HELOCs Total Popular, Inc. For the quarter ended March 31, 2015 Commercial multi-family Commercial real estate non-owner occupied Commercial real estate owner occupied Commercial and industrial Construction Mortgage Leasing Consumer: Credit cards HELOCs Personal Auto Other Total Mortgage Consumer: HELOCs Personal Total Reduction in
interest rate Extension of
maturity date Combination of
reduction in interest
rate and extension
of maturity date Other — 1 8 — — — — 1 — 1 8 1 Reduction in
interest rate Extension of
maturity date Combination of
reduction in interest
rate and extension
of maturity date Other — 2 — — 2 1 — — 2 3 — — 5 5 — — 1 — — — 13 20 106 15 — 1 12 — 228 — — 187 — — — 1 228 14 — — — 2 2 — 11 — — — 490 48 120 203 U.S. Mainland For the quarter ended June 30, 2015 For the six months ended June 30, 2015 Reduction in
interest rate Extension of
maturity date Combination of
reduction in
interest rate and
extension of
maturity date Other Reduction in
interest rate Extension of
maturity date Combination of
reduction in
interest rate and
extension of
maturity date Other — — 2 — — 1 10 — — 1 — 1 — 1 — 2 — 2 — — — 2 — — — 3 2 1 — 4 10 2
Popular, Inc. | ||||||||||||||||||||||||||||||||
For the quarter ended June 30, 2015 | For the six months ended June 30, 2015 | |||||||||||||||||||||||||||||||
Reduction in interest rate | Extension of maturity date | Combination of reduction in interest rate and extension of maturity date | Other | Reduction in interest rate | Extension of maturity date | Combination of reduction in interest rate and extension of maturity date | Other | |||||||||||||||||||||||||
Commercial multi-family | — | — | — | — | — | 2 | — | — | ||||||||||||||||||||||||
Commercial real estate non-owner occupied | 3 | 7 | — | — | 5 | 8 | — | — | ||||||||||||||||||||||||
Commercial real estate owner occupied | 8 | 6 | — | — | 10 | 9 | — | — | ||||||||||||||||||||||||
Commercial and industrial | 6 | 6 | — | — | 11 | 11 | — | — | ||||||||||||||||||||||||
Construction | — | — | — | — | 1 | — | — | — | ||||||||||||||||||||||||
Mortgage | 16 | 11 | 85 | 23 | 29 | 31 | 191 | 38 | ||||||||||||||||||||||||
Leasing | — | 1 | 2 | — | — | 2 | 14 | — | ||||||||||||||||||||||||
Consumer: | ||||||||||||||||||||||||||||||||
Credit cards | 194 | — | — | 164 | 422 | — | — | 351 | ||||||||||||||||||||||||
HELOCs | — | 1 | — | 1 | — | 1 | — | 2 | ||||||||||||||||||||||||
Personal | 274 | 6 | — | — | 502 | 20 | — | — | ||||||||||||||||||||||||
Auto | — | 3 | 1 | — | — | 5 | 3 | — | ||||||||||||||||||||||||
Other | 11 | — | — | — | 22 | — | — | — | ||||||||||||||||||||||||
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| |||||||||||||||||
Total | 512 | 41 | 88 | 188 | 1,002 | 89 | 208 | 391 | ||||||||||||||||||||||||
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The following tables present by class, quantitative information related to loans modified as TDRs during the quarters and six months ended March 31,June 30, 2016 and 2015.
Puerto Rico | Puerto Rico | Puerto Rico | ||||||||||||||||||||||||||||||
For the quarter ended March 31, 2016 | ||||||||||||||||||||||||||||||||
For the quarter ended June 30, 2016 | For the quarter ended June 30, 2016 | |||||||||||||||||||||||||||||||
(Dollars in thousands) | Loan count | Pre-modification outstanding recorded investment | Post-modification outstanding recorded investment | Increase (decrease) in the allowance for loan losses as a result of modification | Loan count | Pre-modification outstanding recorded investment | Post-modification outstanding recorded investment | Increase (decrease) in the allowance for loan losses as a result of modification | ||||||||||||||||||||||||
Commercial real estate non-owner occupied | 2 | $ | 6,323 | $ | 6,307 | $ | 4,163 | 1 | $ | 197 | $ | 197 | $ | 7 | ||||||||||||||||||
Commercial real estate owner occupied | 17 | 3,095 | 3,149 | 136 | 17 | 7,755 | 6,625 | 201 | ||||||||||||||||||||||||
Commercial and industrial | 6 | 2,529 | 2,527 | 5 | 9 | 1,057 | 1,056 | (25 | ) | |||||||||||||||||||||||
Mortgage | 196 | 24,405 | 23,244 | 1,806 | 189 | 17,970 | 17,714 | 1,188 | ||||||||||||||||||||||||
Consumer: | ||||||||||||||||||||||||||||||||
Credit cards | 349 | 3,256 | 3,665 | 576 | 409 | 3,775 | 4,388 | 651 | ||||||||||||||||||||||||
Personal | 266 | 4,413 | 4,411 | 887 | 265 | 4,195 | 4,237 | 1,044 | ||||||||||||||||||||||||
Auto | 4 | 72 | 76 | 12 | 7 | 61 | 64 | 13 | ||||||||||||||||||||||||
Other | 10 | 23 | 24 | 4 | 11 | 32 | 33 | 5 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Total | 850 | $ | 44,116 | $ | 43,403 | $ | 7,589 | 908 | $ | 35,042 | $ | 34,314 | $ | 3,084 | ||||||||||||||||||
|
|
|
|
|
|
|
|
U.S. Mainland For the quarter ended March 31, 2016 (Dollars in thousands) Mortgage Consumer: HELOCs Total Popular, Inc. For the quarter ended March 31, 2016 (Dollars in thousands) Commercial real estate non-owner occupied Commercial real estate owner occupied Commercial and industrial Mortgage Consumer: Credit cards HELOCs Personal Auto Other Total Puerto Rico For the quarter ended March 31, 2015 (Dollars in thousands) Commercial multi-family Commercial real estate non-owner occupied Commercial real estate owner occupied Commercial and industrial Construction Mortgage Leasing Consumer: Credit cards Personal Auto Other Total U.S. Mainland For the quarter ended March 31, 2015 (Dollars in thousands) Mortgage Consumer: HELOCs Total U.S. Mainland For the quarter ended June 30, 2016 (Dollars in thousands) Mortgage Consumer: HELOCs Total Loan count Pre-modification
outstanding recorded
investment Post-modification
outstanding recorded
investment Increase (decrease) in the
allowance for loan losses
as a result of modification 12 $ 1,167 $ 1,230 $ 423 1 147 147 77 13 $ 1,314 $ 1,377 $ 500 Loan count Pre-modification
outstanding recorded
investment Post-modification
outstanding recorded
investment Increase (decrease) in the
allowance for loan losses
as a result of modification 2 $ 6,323 $ 6,307 $ 4,163 17 3,095 3,149 136 6 2,529 2,527 5 208 25,572 24,474 2,229 349 3,256 3,665 576 1 147 147 77 266 4,413 4,411 887 4 72 76 12 10 23 24 4 863 $ 45,430 $ 44,780 $ 8,089 Loan count Pre-modification
outstanding recorded
investment Post-modification
outstanding recorded
investment Increase (decrease) in the
allowance for loan losses
as a result of modification 2 $ 551 $ 551 $ 2 3 18,000 17,998 2,986 5 4,759 4,552 171 10 5,534 5,889 224 1 268 259 (166 ) 145 15,902 16,766 1,339 13 323 325 73 415 3,617 4,066 629 242 4,502 4,500 967 4 — 51 8 11 29 29 5 851 $ 53,485 $ 54,986 $ 6,238 Loan count Pre-modification
outstanding recorded
investment Post-modification
outstanding recorded
investment Increase (decrease) in the
allowance for loan losses
as a result of modification 9 $ 468 $ 1,465 $ 82 1 — 92 9 10 $ 468 $ 1,557 $ 91 Loan count Pre-modification outstanding
recorded investment Post-modification
outstanding recorded
investment Increase (decrease) in the
allowance for loan losses as
a result of modification 7 $ 794 $ 833 $ 210 2 208 251 139 9 $ 1,002 $ 1,084 $ 349
Popular, Inc. | ||||||||||||||||
For the quarter ended June 30, 2016 | ||||||||||||||||
(Dollars in thousands) | Loan count | Pre-modification outstanding recorded investment | Post-modification outstanding recorded investment | Increase (decrease) in the allowance for loan losses as a result of modification | ||||||||||||
Commercial real estate non-owner occupied | 1 | $ | 197 | $ | 197 | $ | 7 | |||||||||
Commercial real estate owner occupied | 17 | 7,755 | 6,625 | 201 | ||||||||||||
Commercial and industrial | 9 | 1,057 | 1,056 | (25 | ) | |||||||||||
Mortgage | 196 | 18,764 | 18,547 | 1,398 | ||||||||||||
Consumer: | ||||||||||||||||
Credit cards | 409 | 3,775 | 4,388 | 651 | ||||||||||||
HELOCs | 2 | 208 | 251 | 139 | ||||||||||||
Personal | 265 | 4,195 | 4,237 | 1,044 | ||||||||||||
Auto | 7 | 61 | 64 | 13 | ||||||||||||
Other | 11 | 32 | 33 | 5 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | 917 | $ | 36,044 | $ | 35,398 | $ | 3,433 | |||||||||
|
|
|
|
|
|
|
|
Puerto Rico | ||||||||||||||||
For the quarter ended June 30, 2015 | ||||||||||||||||
(Dollars in thousands) | Loan count | Pre-modification outstanding recorded investment | Post-modification outstanding recorded investment | Increase (decrease) in the allowance for loan losses as a result of modification | ||||||||||||
Commercial real estate non-owner occupied | 10 | $ | 48,719 | $ | 48,868 | $ | 10,682 | |||||||||
Commercial real estate owner occupied | 14 | 5,031 | 4,484 | 162 | ||||||||||||
Commercial and industrial | 12 | 6,834 | 6,997 | 439 | ||||||||||||
Mortgage | 133 | 8,284 | 13,146 | 957 | ||||||||||||
Leasing | 3 | 99 | 99 | 23 | ||||||||||||
Consumer: | ||||||||||||||||
Credit cards | 358 | 3,265 | 3,687 | 568 | ||||||||||||
Personal | 278 | 4,751 | 4,749 | 1,009 | ||||||||||||
Auto | 4 | 60 | 62 | 9 | ||||||||||||
Other | 11 | 27 | 38 | 5 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | 823 | $ | 77,070 | $ | 82,130 | $ | 13,854 | |||||||||
|
|
|
|
|
|
|
|
U.S. Mainland | ||||||||||||||||
For the quarter ended June 30, 2015 | ||||||||||||||||
(Dollars in thousands) | Loan count | Pre-modification outstanding recorded investment | Post-modification outstanding recorded investment | Increase (decrease) in the allowance for loan losses as a result of modification | ||||||||||||
Mortgage | 2 | $ | 187 | $ | 193 | $ | 97 | |||||||||
Consumer: | ||||||||||||||||
HELOCs | 2 | 74 | 75 | 16 | ||||||||||||
Personal | 2 | 30 | 30 | 3 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | 6 | $ | 291 | $ | 298 | $ | 116 | |||||||||
|
|
|
|
|
|
|
|
Popular, Inc. | Popular, Inc. | Popular, Inc. | ||||||||||||||||||||||||||||||
For the quarter ended March 31, 2015 | ||||||||||||||||||||||||||||||||
For the quarter ended June 30, 2015 | For the quarter ended June 30, 2015 | |||||||||||||||||||||||||||||||
(Dollars in thousands) | Loan count | Pre-modification outstanding recorded investment | Post-modification outstanding recorded investment | Increase (decrease) in the allowance for loan losses as a result of modification | Loan count | Pre-modification outstanding recorded investment | Post-modification outstanding recorded investment | Increase (decrease) in the allowance for loan losses as a result of modification | ||||||||||||||||||||||||
Commercial multi-family | 2 | $ | 551 | $ | 551 | $ | 2 | |||||||||||||||||||||||||
Commercial real estate non-owner occupied | 3 | 18,000 | 17,998 | 2,986 | 10 | $ | 48,719 | $ | 48,868 | $ | 10,682 | |||||||||||||||||||||
Commercial real estate owner occupied | 5 | 4,759 | 4,552 | 171 | 14 | 5,031 | 4,484 | 162 | ||||||||||||||||||||||||
Commercial and industrial | 10 | 5,534 | 5,889 | 224 | 12 | 6,834 | 6,997 | 439 | ||||||||||||||||||||||||
Construction | 1 | 268 | 259 | (166 | ) | |||||||||||||||||||||||||||
Mortgage | 154 | 16,370 | 18,231 | 1,421 | 135 | 8,471 | 13,339 | 1,054 | ||||||||||||||||||||||||
Leasing | 13 | 323 | 325 | 73 | 3 | 99 | 99 | 23 | ||||||||||||||||||||||||
Consumer: | ||||||||||||||||||||||||||||||||
Credit cards | 415 | 3,617 | 4,066 | 629 | 358 | 3,265 | 3,687 | 568 | ||||||||||||||||||||||||
HELOCs | 1 | — | 92 | 9 | 2 | 74 | 75 | 16 | ||||||||||||||||||||||||
Personal | 242 | 4,502 | 4,500 | 967 | 280 | 4,781 | 4,779 | 1,012 | ||||||||||||||||||||||||
Auto | 4 | — | 51 | 8 | 4 | 60 | 62 | 9 | ||||||||||||||||||||||||
Other | 11 | 29 | 29 | 5 | 11 | 27 | 38 | 5 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Total | 861 | $ | 53,953 | $ | 56,543 | $ | 6,329 | 829 | $ | 77,361 | $ | 82,428 | $ | 13,970 | ||||||||||||||||||
|
|
|
|
|
|
|
|
Puerto Rico | ||||||||||||||||
For the six months ended June 30, 2016 | ||||||||||||||||
(Dollars in thousands) | Loan count | Pre-modification outstanding recorded investment | Post-modification outstanding recorded investment | Increase (decrease) in the allowance for loan losses as a result of modification | ||||||||||||
Commercial real estate non-owner occupied | 3 | $ | 6,520 | $ | 6,504 | $ | 4,169 | |||||||||
Commercial real estate owner occupied | 34 | 10,850 | 9,774 | 337 | ||||||||||||
Commercial and industrial | 15 | 3,586 | 3,583 | (20 | ) | |||||||||||
Mortgage | 385 | 42,375 | 40,958 | 2,994 | ||||||||||||
Consumer: | ||||||||||||||||
Credit cards | 758 | 7,031 | 8,053 | 1,227 | ||||||||||||
Personal | 531 | 8,608 | 8,648 | 1,931 | ||||||||||||
Auto | 11 | 133 | 140 | 25 | ||||||||||||
Other | 21 | 55 | 57 | 10 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | 1,758 | $ | 79,158 | $ | 77,717 | $ | 10,673 | |||||||||
|
|
|
|
|
|
|
|
U.S. mainland | ||||||||||||||||
For the six months ended June 30, 2016 | ||||||||||||||||
(Dollars in thousands) | Loan count | Pre-modification outstanding recorded investment | Post-modification outstanding recorded investment | Increase (decrease) in the allowance for loan losses as a result of modification | ||||||||||||
Mortgage | 19 | $ | 1,961 | $ | 2,063 | $ | 633 | |||||||||
Consumer: | ||||||||||||||||
HELOCs | 3 | 355 | 398 | 216 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | 22 | $ | 2,316 | $ | 2,461 | $ | 849 | |||||||||
|
|
|
|
|
|
|
|
Popular, Inc. For the six months ended June 30, 2016 (Dollars in thousands) Commercial real estate non-owner occupied Commercial real estate owner occupied Commercial and industrial Mortgage Consumer: Credit cards HELOCs Personal Auto Other Total Loan count Pre-modification
outstanding recorded
investment Post-modification
outstanding recorded
investment Increase (decrease) in the
allowance for loan losses as
a result of modification 3 $ 6,520 $ 6,504 $ 4,169 34 10,850 9,774 337 15 3,586 3,583 (20 ) 404 44,336 43,021 3,627 758 7,031 8,053 1,227 3 355 398 216 531 8,608 8,648 1,931 11 133 140 25 21 55 57 10 1,780 $ 81,474 $ 80,178 $ 11,522
Puerto Rico | ||||||||||||||||
For the six months ended June 30, 2015 | ||||||||||||||||
(Dollars in thousands) | Loan count | Pre-modification outstanding recorded investment | Post-modification outstanding recorded investment | Increase (decrease) in the allowance for loan losses as a result of modification | ||||||||||||
Commercial multi-family | 2 | $ | 551 | $ | 551 | $ | 2 | |||||||||
Commercial real estate non-owner occupied | 13 | 66,719 | 66,866 | 13,668 | ||||||||||||
Commercial real estate owner occupied | 19 | 9,790 | 9,036 | 333 | ||||||||||||
Commercial and industrial | 22 | 12,367 | 12,886 | 662 | ||||||||||||
Construction | 1 | 268 | 259 | (166 | ) | |||||||||||
Mortgage | 278 | 24,186 | 29,912 | 2,296 | ||||||||||||
Leasing | 16 | 422 | 424 | 97 | ||||||||||||
Consumer: | ||||||||||||||||
Credit cards | 773 | 6,882 | 7,753 | 1,197 | ||||||||||||
Personal | 520 | 9,253 | 9,249 | 1,976 | ||||||||||||
Auto | 8 | 60 | 113 | 17 | ||||||||||||
Other | 22 | 56 | 67 | 9 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | 1,674 | $ | 130,554 | $ | 137,116 | $ | 20,091 | |||||||||
|
|
|
|
|
|
|
|
U.S. mainland | ||||||||||||||||
For the six months ended June 30, 2015 | ||||||||||||||||
(Dollars in thousands) | Loan count | Pre-modification outstanding recorded investment | Post-modification outstanding recorded investment | Increase (decrease) in the allowance for loan losses as a result of modification | ||||||||||||
Mortgage | 11 | $ | 655 | $ | 1,657 | $ | 179 | |||||||||
Consumer: | ||||||||||||||||
HELOCs | 3 | 74 | 167 | 25 | ||||||||||||
Personal | 2 | 30 | 30 | 3 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | 16 | $ | 759 | $ | 1,854 | $ | 207 | |||||||||
|
|
|
|
|
|
|
|
Popular, Inc. For the six months ended June 30, 2015 (Dollars in thousands) Commercial multi-family Commercial real estate non-owner occupied Commercial real estate owner occupied Commercial and industrial Construction Mortgage Leasing Consumer: Credit cards HELOCs Personal Auto Other Total Loan count Pre-modification
outstanding recorded
investment Post-modification
outstanding recorded
investment Increase (decrease) in the
allowance for loan losses as
a result of modification 2 $ 551 $ 551 $ 2 13 66,719 66,866 13,668 19 9,790 9,036 333 22 12,367 12,886 662 1 268 259 (166 ) 289 24,841 31,569 2,475 16 422 424 97 773 6,882 7,753 1,197 3 74 167 25 522 9,283 9,279 1,979 8 60 113 17 22 56 67 9 1,690 $ 131,313 $ 138,970 $ 20,298
The following tables present by class, TDRs that were subject to payment default and that had been modified as a TDR during the twelve months preceding the default date. Payment default is defined as a restructured loan becoming 90 days past due after being modified, foreclosed or charged-off, whichever occurs first. The recorded investment at March 31,June 30, 2016 is inclusive of all partial paydowns and charge-offs since the modification date. Loans modified as a TDR that were fully paid down, charged-off or foreclosed upon by period end are not reported.
Puerto Rico | ||||||||
Defaulted during the quarter ended March 31, 2016 | ||||||||
(Dollars in thousands) | Loan count | Recorded investment as of first default date | ||||||
Commercial real estate non-owner occupied | 2 | $ | 327 | |||||
Commercial real estate owner occupied | 6 | 2,456 | ||||||
Mortgage | 27 | 3,235 | ||||||
Consumer: | ||||||||
Credit cards | 106 | 1,122 | ||||||
Personal | 43 | 1,139 | ||||||
Auto | 1 | 17 | ||||||
Other | 1 | 4 | ||||||
|
|
|
| |||||
Total [1] | 186 | $ | 8,300 | |||||
|
|
|
|
Puerto Rico (Dollars in thousands) Commercial real estate non-owner occupied Commercial real estate owner occupied Commercial and industrial Mortgage Leasing Consumer: Credit cards Personal Auto Total Defaulted during the quarter ended June 30,
2016 Defaulted during the six months ended June 30,
2016 Loan count Recorded investment as of first
default date Loan count Recorded investment as of first
default date — $ — 2 $ 327 1 47 7 2,503 2 27 2 27 55 5,501 82 8,734 1 32 5 63 56 594 171 1,758 37 711 64 1,473 1 16 2 33 153 $ 6,928 335 $ 14,918
During the quarter and six months ended March 31,June 30, 2016, there were no U.S. mainland TDRs that were subject to payment default and that had been modified as a TDR during the twelve months preceding the default date.
Popular, Inc. (Dollars in thousands) Commercial real estate non-owner occupied Commercial real estate owner occupied Commercial and industrial Mortgage Leasing Consumer: Credit cards Personal Auto Total Defaulted during the quarter ended June 30,
2016 Defaulted during the six months ended June 30,
2016 Loan count Recorded
investment as of
first default date Loan count Recorded
investment as of
first default date — $ — 2 $ 327 1 47 7 2,503 2 27 2 27 55 5,501 82 8,734 1 32 5 63 56 594 171 1,758 37 711 64 1,473 1 16 2 33 153 $ 6,928 335 $ 14,918
Popular, Inc. | ||||||||
Defaulted during the quarter ended March 31, 2016 | ||||||||
(Dollars In thousands) | Loan count | Recorded investment as of first default date | ||||||
Commercial real estate non-owner occupied | 2 | $ | 327 | |||||
Commercial real estate owner occupied | 6 | 2,456 | ||||||
Mortgage | 27 | 3,235 | ||||||
Consumer: | ||||||||
Credit cards | 106 | 1,122 | ||||||
Personal | 43 | 1,139 | ||||||
Auto | 1 | 17 | ||||||
Other | 1 | 4 | ||||||
|
|
|
| |||||
Total | 186 | $ | 8,300 | |||||
|
|
|
| |||||
Puerto Rico | ||||||||
Defaulted during the quarter ended March 31, 2015 | ||||||||
(Dollars In thousands) | Loan count | Recorded investment as of first default date | ||||||
Commercial real estate owner occupied | 1 | $ | 291 | |||||
Commercial and industrial | 1 | 90 | ||||||
Construction | 2 | 1,192 | ||||||
Mortgage | 22 | 1,695 | ||||||
Consumer: | ||||||||
Credit cards | 153 | 1,792 | ||||||
Personal | 22 | 178 | ||||||
Auto | 5 | 96 | ||||||
Other | 2 | 2 | ||||||
|
|
|
| |||||
Total [1] | 208 | $ | 5,336 | |||||
|
|
|
|
Puerto Rico | ||||||||||||||||
Defaulted during the quarter ended June 30, 2015 | Defaulted during the six months ended June 30, 2015 | |||||||||||||||
(Dollars in thousands) | Loan count | Recorded investment as of first default date | Loan count | Recorded investment as of first default date | ||||||||||||
Commercial real estate owner occupied | — | $ | — | 1 | $ | 291 | ||||||||||
Commercial and industrial | 1 | 64 | 2 | 154 | ||||||||||||
Construction | — | — | 2 | 1,192 | ||||||||||||
Mortgage | 48 | 5,941 | 126 | 16,042 | ||||||||||||
Leasing | 4 | 36 | 5 | 43 | ||||||||||||
Consumer: | ||||||||||||||||
Credit cards | 138 | 1,225 | 240 | 2,341 | ||||||||||||
Personal | 31 | 474 | 50 | 692 | ||||||||||||
Auto | — | — | 4 | 78 | ||||||||||||
Other | 1 | 1 | 2 | 2 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | 223 | $ | 7,741 | 432 | $ | 20,835 | ||||||||||
|
|
|
|
|
|
|
|
During the quarter and six months ended March 31,June 30, 2015, there were no U.S. mainland TDRs that were subject to payment default and that had been modified as a TDR during the twelve months preceding the default date.
Popular, Inc. | Popular, Inc. | Popular, Inc. | ||||||||||||||||||||||
Defaulted during the quarter ended March 31, 2015 | ||||||||||||||||||||||||
(Dollars In thousands) | Loan count | Recorded investment as of first default date | ||||||||||||||||||||||
Defaulted during the quarter ended June 30, 2015 | Defaulted during the six months ended June 30, 2015 | |||||||||||||||||||||||
(Dollars in thousands) | Loan count | Recorded investment as of first default date | Loan count | Recorded investment as of first default date | ||||||||||||||||||||
Commercial real estate owner occupied | 1 | $ | 291 | — | $ | — | 1 | $ | 291 | |||||||||||||||
Commercial and industrial | 1 | 90 | 1 | 64 | 2 | 154 | ||||||||||||||||||
Construction | 2 | 1,192 | — | — | 2 | 1,192 | ||||||||||||||||||
Mortgage | 22 | 1,695 | 48 | 5,941 | 126 | 16,042 | ||||||||||||||||||
Leasing | 4 | 36 | 5 | 43 | ||||||||||||||||||||
Consumer: | ||||||||||||||||||||||||
Credit cards | 153 | 1,792 | 138 | 1,225 | 240 | 2,341 | ||||||||||||||||||
Personal | 22 | 178 | 31 | 474 | 50 | 692 | ||||||||||||||||||
Auto | 5 | 96 | — | — | 4 | 78 | ||||||||||||||||||
Other | 2 | 2 | 1 | 1 | 2 | 2 | ||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Total | 208 | $ | 5,336 | 223 | $ | 7,741 | 432 | $ | 20,835 | |||||||||||||||
|
|
|
|
|
|
Commercial, consumer and mortgage loans modified in a TDR are closely monitored for delinquency as an early indicator of possible future default. If loans modified in a TDR subsequently default, the Corporation evaluates the loan for possible further impairment. The allowance for loan losses may be increased or partial charge-offs may be taken to further write-down the carrying value of the loan.
Credit Quality
The following table presents the outstanding balance, net of unearned income, of non-covered loans held-in-portfolio based on the Corporation’s assignment of obligor risk ratings as defined at March 31,June 30, 2016 and December 31, 2015.
March 31, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Special | Pass/ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
June 30, 2016 | June 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(In thousands) | Watch | Mention | Substandard | Doubtful | Loss | Sub-total | Unrated | Total | Watch | Special Mention | Substandard | Doubtful | Loss | Sub-total | Pass/ Unrated | Total | ||||||||||||||||||||||||||||||||||||||||||||||||
Puerto Rico[1] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial multi-family | $ | 2,899 | $ | 1,021 | $ | 6,917 | $ | — | $ | — | $ | 10,837 | $ | 163,814 | $ | 174,651 | $ | 2,790 | $ | 1,087 | $ | 6,481 | $ | — | $ | — | $ | 10,358 | $ | 165,153 | $ | 175,511 | ||||||||||||||||||||||||||||||||
Commercial real estate non-owner occupied | 320,015 | 417,911 | 389,243 | — | — | 1,127,169 | 1,532,284 | 2,659,453 | 310,305 | 387,592 | 372,370 | — | — | 1,070,267 | 1,528,364 | 2,598,631 | ||||||||||||||||||||||||||||||||||||||||||||||||
Commercial real estate owner occupied | 355,306 | 145,492 | 431,370 | 2,056 | — | 934,224 | 933,565 | 1,867,789 | 320,190 | 156,828 | 388,037 | 1,962 | — | 867,017 | 949,815 | 1,816,832 | ||||||||||||||||||||||||||||||||||||||||||||||||
Commercial and industrial | 174,205 | 135,002 | 247,095 | 635 | 45 | 556,982 | 2,109,416 | 2,666,398 | 129,988 | 149,177 | 230,046 | 605 | 40 | 509,856 | 2,116,222 | 2,626,078 | ||||||||||||||||||||||||||||||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||
Total Commercial | 852,425 | 699,426 | 1,074,625 | 2,691 | 45 | 2,629,212 | 4,739,079 | 7,368,291 | 763,273 | 694,684 | 996,934 | 2,567 | 40 | 2,457,498 | 4,759,554 | 7,217,052 | ||||||||||||||||||||||||||||||||||||||||||||||||
Construction | 4,015 | 6,028 | 18,165 | — | — | 28,208 | 76,936 | 105,144 | 1,992 | 13,377 | 9,266 | — | — | 24,635 | 79,007 | 103,642 | ||||||||||||||||||||||||||||||||||||||||||||||||
Mortgage | 4,566 | 3,337 | 218,542 | — | — | 226,445 | 5,873,314 | 6,099,759 | 3,621 | 3,300 | 206,948 | — | — | 213,869 | 5,806,693 | 6,020,562 | ||||||||||||||||||||||||||||||||||||||||||||||||
Leasing | — | — | 3,399 | — | 20 | 3,419 | 639,723 | 643,142 | — | — | 2,930 | — | 89 | 3,019 | 661,075 | 664,094 | ||||||||||||||||||||||||||||||||||||||||||||||||
Consumer: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Credit cards | — | — | 18,864 | — | — | 18,864 | 1,079,919 | 1,098,783 | — | — | 17,225 | — | — | 17,225 | 1,097,215 | 1,114,440 | ||||||||||||||||||||||||||||||||||||||||||||||||
HELOCs | — | — | 280 | — | — | 280 | 9,349 | 9,629 | — | — | 293 | — | — | 293 | 9,200 | 9,493 | ||||||||||||||||||||||||||||||||||||||||||||||||
Personal | 1,668 | 1,066 | 21,013 | — | — | 23,747 | 1,167,643 | 1,191,390 | 1,118 | 1,332 | 20,891 | — | — | 23,341 | 1,165,025 | 1,188,366 | ||||||||||||||||||||||||||||||||||||||||||||||||
Auto | — | — | 10,811 | — | 33 | 10,844 | 815,461 | 826,305 | — | — | 11,048 | — | 70 | 11,118 | 818,739 | 829,857 | ||||||||||||||||||||||||||||||||||||||||||||||||
Other | — | — | 18,727 | — | 440 | 19,167 | 163,817 | 182,984 | — | — | 17,391 | — | 731 | 18,122 | 161,404 | 179,526 | ||||||||||||||||||||||||||||||||||||||||||||||||
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Total Consumer | 1,668 | 1,066 | 69,695 | — | 473 | 72,902 | 3,236,189 | 3,309,091 | 1,118 | 1,332 | 66,848 | — | 801 | 70,099 | 3,251,583 | 3,321,682 | ||||||||||||||||||||||||||||||||||||||||||||||||
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Total Puerto Rico | $ | 862,674 | $ | 709,857 | $ | 1,384,426 | $ | 2,691 | $ | 538 | $ | 2,960,186 | $ | 14,565,241 | $ | 17,525,427 | $ | 770,004 | $ | 712,693 | $ | 1,282,926 | $ | 2,567 | $ | 930 | $ | 2,769,120 | $ | 14,557,912 | $ | 17,327,032 | ||||||||||||||||||||||||||||||||
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U.S. mainland | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial multi-family | $ | 12,264 | $ | 7,147 | $ | 985 | $ | — | $ | — | $ | 20,396 | $ | 742,158 | $ | 762,554 | $ | 12,600 | $ | 7,104 | $ | 1,422 | $ | — | $ | — | $ | 21,126 | $ | 867,706 | $ | 888,832 | ||||||||||||||||||||||||||||||||
Commercial real estate non-owner occupied | 38,732 | 4,054 | 25,414 | — | — | 68,200 | 922,448 | 990,648 | 34,514 | 198 | 15,428 | — | — | 50,140 | 1,043,713 | 1,093,853 | ||||||||||||||||||||||||||||||||||||||||||||||||
Commercial real estate owner occupied | 7,386 | 204 | 3,882 | — | — | 11,472 | 212,329 | 223,801 | 13,532 | 196 | 3,653 | — | — | 17,381 | 265,171 | 282,552 | ||||||||||||||||||||||||||||||||||||||||||||||||
Commercial and industrial | 9,671 | 3,759 | 131,844 | — | — | 145,274 | 737,821 | 883,095 | 4,423 | 971 | 150,035 | — | — | 155,429 | 722,097 | 877,526 | ||||||||||||||||||||||||||||||||||||||||||||||||
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Total Commercial | 68,053 | 15,164 | 162,125 | — | — | 245,342 | 2,614,756 | 2,860,098 | 65,069 | 8,469 | 170,538 | — | — | 244,076 | 2,898,687 | 3,142,763 | ||||||||||||||||||||||||||||||||||||||||||||||||
Construction | — | 32,041 | 22,456 | — | — | 54,497 | 575,217 | 629,714 | — | 19,632 | 39,098 | — | — | 58,730 | 554,960 | 613,690 | ||||||||||||||||||||||||||||||||||||||||||||||||
Mortgage | — | — | 12,068 | — | — | 12,068 | 867,374 | 879,442 | — | — | 14,389 | — | — | 14,389 | 829,167 | 843,556 | ||||||||||||||||||||||||||||||||||||||||||||||||
Legacy | 1,678 | 1,186 | 6,200 | — | — | 9,064 | 51,980 | 61,044 | 1,061 | 679 | 5,318 | — | — | 7,058 | 42,651 | 49,709 | ||||||||||||||||||||||||||||||||||||||||||||||||
Consumer: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Credit cards | — | — | 382 | — | — | 382 | 12,636 | 13,018 | — | — | 535 | — | — | 535 | 102 | 637 | ||||||||||||||||||||||||||||||||||||||||||||||||
HELOCs | — | — | 2,013 | — | 2,296 | 4,309 | 289,951 | 294,260 | — | — | 1,428 | — | 2,433 | 3,861 | 275,590 | 279,451 | ||||||||||||||||||||||||||||||||||||||||||||||||
Personal | — | — | 689 | — | 740 | 1,429 | 242,985 | 244,414 | — | — | 540 | — | 804 | 1,344 | 282,192 | 283,536 | ||||||||||||||||||||||||||||||||||||||||||||||||
Auto | — | — | 6 | — | — | 6 | 18 | 24 | — | — | — | — | — | — | 15 | 15 | ||||||||||||||||||||||||||||||||||||||||||||||||
Other | — | — | — | — | 10 | 10 | 286 | 296 | — | — | — | — | — | — | 272 | 272 | ||||||||||||||||||||||||||||||||||||||||||||||||
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Total Consumer | — | — | 3,090 | — | 3,046 | 6,136 | 545,876 | 552,012 | — | — | 2,503 | — | 3,237 | 5,740 | 558,171 | 563,911 | ||||||||||||||||||||||||||||||||||||||||||||||||
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Total U.S. mainland | $ | 69,731 | $ | 48,391 | $ | 205,939 | $ | — | $ | 3,046 | $ | 327,107 | $ | 4,655,203 | $ | 4,982,310 | $ | 66,130 | $ | 28,780 | $ | 231,846 | $ | — | $ | 3,237 | $ | 329,993 | $ | 4,883,636 | $ | 5,213,629 | ||||||||||||||||||||||||||||||||
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Popular, Inc. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial multi-family | $ | 15,163 | $ | 8,168 | $ | 7,902 | $ | — | $ | — | $ | 31,233 | $ | 905,972 | $ | 937,205 | $ | 15,390 | $ | 8,191 | $ | 7,903 | $ | — | $ | — | $ | 31,484 | $ | 1,032,859 | $ | 1,064,343 | ||||||||||||||||||||||||||||||||
Commercial real estate non-owner occupied | 358,747 | 421,965 | 414,657 | — | — | 1,195,369 | 2,454,732 | 3,650,101 | 344,819 | 387,790 | 387,798 | — | — | 1,120,407 | 2,572,077 | 3,692,484 | ||||||||||||||||||||||||||||||||||||||||||||||||
Commercial real estate owner occupied | 362,692 | 145,696 | 435,252 | 2,056 | — | 945,696 | 1,145,894 | 2,091,590 | 333,722 | 157,024 | 391,690 | 1,962 | — | 884,398 | 1,214,986 | 2,099,384 | ||||||||||||||||||||||||||||||||||||||||||||||||
Commercial and industrial | 183,876 | 138,761 | 378,939 | 635 | 45 | 702,256 | 2,847,237 | 3,549,493 | 134,411 | 150,148 | 380,081 | 605 | 40 | 665,285 | 2,838,319 | 3,503,604 | ||||||||||||||||||||||||||||||||||||||||||||||||
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Total Commercial | 920,478 | 714,590 | 1,236,750 | 2,691 | 45 | 2,874,554 | 7,353,835 | 10,228,389 | 828,342 | 703,153 | 1,167,472 | 2,567 | 40 | 2,701,574 | 7,658,241 | 10,359,815 | ||||||||||||||||||||||||||||||||||||||||||||||||
Construction | 4,015 | 38,069 | 40,621 | — | — | 82,705 | 652,153 | 734,858 | 1,992 | 33,009 | 48,364 | — | — | 83,365 | 633,967 | 717,332 | ||||||||||||||||||||||||||||||||||||||||||||||||
Mortgage | 4,566 | 3,337 | 230,610 | — | — | 238,513 | 6,740,688 | 6,979,201 | 3,621 | 3,300 | 221,337 | — | — | 228,258 | 6,635,860 | 6,864,118 | ||||||||||||||||||||||||||||||||||||||||||||||||
Legacy | 1,678 | 1,186 | 6,200 | — | — | 9,064 | 51,980 | 61,044 | 1,061 | 679 | 5,318 | — | — | 7,058 | 42,651 | 49,709 | ||||||||||||||||||||||||||||||||||||||||||||||||
Leasing | — | — | 3,399 | — | 20 | 3,419 | 639,723 | 643,142 | — | — | 2,930 | — | 89 | 3,019 | 661,075 | 664,094 | ||||||||||||||||||||||||||||||||||||||||||||||||
Consumer: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Credit cards | — | — | 19,246 | — | — | 19,246 | 1,092,555 | 1,111,801 | — | — | 17,760 | — | — | 17,760 | 1,097,317 | 1,115,077 | ||||||||||||||||||||||||||||||||||||||||||||||||
HELOCs | — | — | 2,293 | — | 2,296 | 4,589 | 299,300 | 303,889 | — | — | 1,721 | — | 2,433 | 4,154 | 284,790 | 288,944 | ||||||||||||||||||||||||||||||||||||||||||||||||
Personal | 1,668 | 1,066 | 21,702 | — | 740 | 25,176 | 1,410,628 | 1,435,804 | 1,118 | 1,332 | 21,431 | — | 804 | 24,685 | 1,447,217 | 1,471,902 | ||||||||||||||||||||||||||||||||||||||||||||||||
Auto | — | — | 10,817 | — | 33 | 10,850 | 815,479 | 826,329 | �� | — | — | 11,048 | — | 70 | 11,118 | 818,754 | 829,872 | |||||||||||||||||||||||||||||||||||||||||||||||
Other | — | — | 18,727 | — | 450 | 19,177 | 164,103 | 183,280 | — | — | 17,391 | — | 731 | 18,122 | 161,676 | 179,798 | ||||||||||||||||||||||||||||||||||||||||||||||||
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Total Consumer | 1,668 | 1,066 | 72,785 | — | 3,519 | 79,038 | 3,782,065 | 3,861,103 | 1,118 | 1,332 | 69,351 | — | 4,038 | 75,839 | 3,809,754 | 3,885,593 | ||||||||||||||||||||||||||||||||||||||||||||||||
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Total Popular, Inc. | $ | 932,405 | $ | 758,248 | $ | 1,590,365 | $ | 2,691 | $ | 3,584 | $ | 3,287,293 | $ | 19,220,444 | $ | 22,507,737 | $ | 836,134 | $ | 741,473 | $ | 1,514,772 | $ | 2,567 | $ | 4,167 | $ | 3,099,113 | $ | 19,441,548 | $ | 22,540,661 | ||||||||||||||||||||||||||||||||
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The following table presents the weighted average obligor risk rating at March 31,June 30, 2016 for those classifications that consider a range of rating scales.
Weighted average obligor risk rating | (Scales 11 and 12) | (Scales 1 through 8) | ||||||||||||||
Puerto Rico:[1] | Substandard | Pass | ||||||||||||||
Weighted average obligor risk rating Puerto Rico:[1] | (Scales 11 and 12) Substandard | (Scales 1 through 8) Pass | ||||||||||||||
Commercial multi-family | 11.17 | 6.04 | 11.15 | 6.12 | ||||||||||||
Commercial real estate non-owner occupied | 11.08 | 6.67 | 11.07 | 6.84 | ||||||||||||
Commercial real estate owner occupied | 11.25 | 7.05 | 11.28 | 7.06 | ||||||||||||
Commercial and industrial | 11.14 | 7.10 | 11.15 | 7.02 | ||||||||||||
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Total Commercial | 11.16 | 6.93 | 11.17 | 6.95 | ||||||||||||
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Construction | 11.18 | 7.50 | 11.26 | 7.49 | ||||||||||||
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U.S. mainland: | Substandard | Pass | Substandard | Pass | ||||||||||||
Commercial multi-family | 11.25 | 7.15 | 11.26 | 7.27 | ||||||||||||
Commercial real estate non-owner occupied | 11.44 | 6.98 | 11.02 | 6.86 | ||||||||||||
Commercial real estate owner occupied | 11.05 | 6.94 | 11.20 | 7.05 | ||||||||||||
Commercial and industrial | 11.63 | 6.16 | 11.53 | 6.10 | ||||||||||||
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Total Commercial | 11.59 | 6.80 | 11.48 | 6.81 | ||||||||||||
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Construction | 11.03 | 7.76 | 11.00 | 7.80 | ||||||||||||
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Legacy | 11.18 | 7.78 | 11.15 | 7.85 | ||||||||||||
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[1] | Excludes covered loans acquired in the Westernbank FDIC-assisted transaction. |
December 31, 2015 | December 31, 2015 | December 31, 2015 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Special | Pass/ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(In thousands) | Watch | Mention | Substandard | Doubtful | Loss | Sub-total | Unrated | Total | Watch | Special Mention | Substandard | Doubtful | Loss | Sub-total | Pass/ Unrated | Total | ||||||||||||||||||||||||||||||||||||||||||||||||
Puerto Rico[1] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial multi-family | $ | 1,750 | $ | 1,280 | $ | 8,103 | $ | — | $ | — | $ | 11,133 | $ | 121,013 | $ | 132,146 | $ | 1,750 | $ | 1,280 | $ | 8,103 | $ | — | $ | — | $ | 11,133 | $ | 121,013 | $ | 132,146 | ||||||||||||||||||||||||||||||||
Commercial real estate non-owner occupied | 319,564 | 423,095 | 399,076 | — | — | 1,141,735 | 1,527,357 | 2,669,092 | 319,564 | 423,095 | 399,076 | — | — | 1,141,735 | 1,527,357 | 2,669,092 | ||||||||||||||||||||||||||||||||||||||||||||||||
Commercial real estate owner occupied | 316,079 | 162,395 | 436,442 | 1,915 | — | 916,831 | 992,413 | 1,909,244 | 316,079 | 162,395 | 436,442 | 1,915 | — | 916,831 | 992,413 | 1,909,244 | ||||||||||||||||||||||||||||||||||||||||||||||||
Commercial and industrial | 187,620 | 146,216 | 256,821 | 690 | 29 | 591,376 | 2,066,361 | 2,657,737 | 187,620 | 146,216 | 256,821 | 690 | 29 | 591,376 | 2,066,361 | 2,657,737 | ||||||||||||||||||||||||||||||||||||||||||||||||
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Total Commercial | 825,013 | 732,986 | 1,100,442 | 2,605 | 29 | 2,661,075 | 4,707,144 | 7,368,219 | 825,013 | 732,986 | 1,100,442 | 2,605 | 29 | 2,661,075 | 4,707,144 | 7,368,219 | ||||||||||||||||||||||||||||||||||||||||||||||||
Construction | 7,269 | 5,522 | 19,806 | — | — | 32,597 | 68,351 | 100,948 | 7,269 | 5,522 | 19,806 | — | — | 32,597 | 68,351 | 100,948 | ||||||||||||||||||||||||||||||||||||||||||||||||
Mortgage | 4,810 | 2,794 | 238,002 | — | — | 245,606 | 5,881,885 | 6,127,491 | 4,810 | 2,794 | 238,002 | — | — | 245,606 | 5,881,885 | 6,127,491 | ||||||||||||||||||||||||||||||||||||||||||||||||
Leasing | — | — | 3,009 | — | — | 3,009 | 624,641 | 627,650 | — | — | 3,009 | — | — | 3,009 | 624,641 | 627,650 | ||||||||||||||||||||||||||||||||||||||||||||||||
Consumer: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Credit cards | — | — | 19,098 | — | — | 19,098 | 1,109,247 | 1,128,345 | — | — | 19,098 | — | — | 19,098 | 1,109,247 | 1,128,345 | ||||||||||||||||||||||||||||||||||||||||||||||||
HELOCs | — | — | 394 | — | — | 394 | 10,294 | 10,688 | — | — | 394 | — | — | 394 | 10,294 | 10,688 | ||||||||||||||||||||||||||||||||||||||||||||||||
Personal | 1,606 | 1,448 | 23,116 | — | — | 26,170 | 1,176,665 | 1,202,835 | 1,606 | 1,448 | 23,116 | — | — | 26,170 | 1,176,665 | 1,202,835 | ||||||||||||||||||||||||||||||||||||||||||||||||
Auto | — | — | 11,609 | — | 30 | 11,639 | 804,311 | 815,950 | — | — | 11,609 | — | 30 | 11,639 | 804,311 | 815,950 | ||||||||||||||||||||||||||||||||||||||||||||||||
Other | — | — | 18,656 | — | 575 | 19,231 | 169,253 | 188,484 | — | — | 18,656 | — | 575 | 19,231 | 169,253 | 188,484 | ||||||||||||||||||||||||||||||||||||||||||||||||
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Total Consumer | 1,606 | 1,448 | 72,873 | — | 605 | 76,532 | 3,269,770 | 3,346,302 | 1,606 | 1,448 | 72,873 | — | 605 | 76,532 | 3,269,770 | 3,346,302 | ||||||||||||||||||||||||||||||||||||||||||||||||
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Total Puerto Rico | $ | 838,698 | $ | 742,750 | $ | 1,434,132 | $ | 2,605 | $ | 634 | $ | 3,018,819 | $ | 14,551,791 | $ | 17,570,610 | $ | 838,698 | $ | 742,750 | $ | 1,434,132 | $ | 2,605 | $ | 634 | $ | 3,018,819 | $ | 14,551,791 | $ | 17,570,610 | ||||||||||||||||||||||||||||||||
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U.S. mainland | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial multi-family | $ | 14,129 | $ | 7,189 | $ | 427 | $ | — | $ | — | $ | 21,745 | $ | 672,188 | $ | 693,933 | $ | 14,129 | $ | 7,189 | $ | 427 | $ | — | $ | — | $ | 21,745 | $ | 672,188 | $ | 693,933 | ||||||||||||||||||||||||||||||||
Commercial real estate non-owner occupied | 57,450 | 6,741 | 16,646 | — | — | 80,837 | 882,186 | 963,023 | 57,450 | 6,741 | 16,646 | — | — | 80,837 | 882,186 | 963,023 | ||||||||||||||||||||||||||||||||||||||||||||||||
Commercial real estate owner occupied | 11,978 | 1,074 | 2,967 | — | — | 16,019 | 186,325 | 202,344 | 11,978 | 1,074 | 2,967 | — | — | 16,019 | 186,325 | 202,344 | ||||||||||||||||||||||||||||||||||||||||||||||||
Commercial and industrial | 10,827 | 5,344 | 131,933 | — | — | 148,104 | 723,540 | 871,644 | 10,827 | 5,344 | 131,933 | — | — | 148,104 | 723,540 | 871,644 | ||||||||||||||||||||||||||||||||||||||||||||||||
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Total Commercial | 94,384 | 20,348 | 151,973 | — | — | 266,705 | 2,464,239 | 2,730,944 | 94,384 | 20,348 | 151,973 | — | — | 266,705 | 2,464,239 | 2,730,944 | ||||||||||||||||||||||||||||||||||||||||||||||||
Construction | 15,091 | 16,948 | 18,856 | — | — | 50,895 | 529,263 | 580,158 | 15,091 | 16,948 | 18,856 | — | — | 50,895 | 529,263 | 580,158 | ||||||||||||||||||||||||||||||||||||||||||||||||
Mortgage | — | — | 13,537 | — | — | 13,537 | 895,053 | 908,590 | — | — | 13,537 | — | — | 13,537 | 895,053 | 908,590 | ||||||||||||||||||||||||||||||||||||||||||||||||
Legacy | 1,823 | 1,973 | 6,134 | — | — | 9,930 | 54,506 | 64,436 | 1,823 | 1,973 | 6,134 | — | — | 9,930 | 54,506 | 64,436 | ||||||||||||||||||||||||||||||||||||||||||||||||
Consumer: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Credit cards | — | — | — | — | — | — | 13,935 | 13,935 | — | — | — | — | — | — | 13,935 | 13,935 | ||||||||||||||||||||||||||||||||||||||||||||||||
HELOCs | — | — | 1,550 | — | 2,626 | 4,176 | 300,308 | 304,484 | — | — | 1,550 | — | 2,626 | 4,176 | 300,308 | 304,484 | ||||||||||||||||||||||||||||||||||||||||||||||||
Personal | — | — | 637 | — | 603 | 1,240 | 171,386 | 172,626 | — | — | 637 | — | 603 | 1,240 | 171,386 | 172,626 | ||||||||||||||||||||||||||||||||||||||||||||||||
Auto | — | — | — | — | — | — | 28 | 28 | — | — | — | — | — | — | 28 | 28 | ||||||||||||||||||||||||||||||||||||||||||||||||
Other | — | — | — | — | 5 | 5 | 299 | 304 | — | — | — | — | 5 | 5 | 299 | 304 | ||||||||||||||||||||||||||||||||||||||||||||||||
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Total Consumer | — | — | 2,187 | — | 3,234 | 5,421 | 485,956 | 491,377 | — | — | 2,187 | — | 3,234 | 5,421 | 485,956 | 491,377 | ||||||||||||||||||||||||||||||||||||||||||||||||
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Total U.S. mainland | $ | 111,298 | $ | 39,269 | $ | 192,687 | $ | — | $ | 3,234 | $ | 346,488 | $ | 4,429,017 | $ | 4,775,505 | $ | 111,298 | $ | 39,269 | $ | 192,687 | $ | — | $ | 3,234 | $ | 346,488 | $ | 4,429,017 | $ | 4,775,505 | ||||||||||||||||||||||||||||||||
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Popular, Inc. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial multi-family | $ | 15,879 | $ | 8,469 | $ | 8,530 | $ | — | $ | — | $ | 32,878 | $ | 793,201 | $ | 826,079 | $ | 15,879 | $ | 8,469 | $ | 8,530 | $ | — | $ | — | $ | 32,878 | $ | 793,201 | $ | 826,079 | ||||||||||||||||||||||||||||||||
Commercial real estate non-owner occupied | 377,014 | 429,836 | 415,722 | — | — | 1,222,572 | 2,409,543 | 3,632,115 | 377,014 | 429,836 | 415,722 | — | — | 1,222,572 | 2,409,543 | 3,632,115 | ||||||||||||||||||||||||||||||||||||||||||||||||
Commercial real estate owner occupied | 328,057 | 163,469 | 439,409 | 1,915 | — | 932,850 | 1,178,738 | 2,111,588 | 328,057 | 163,469 | 439,409 | 1,915 | — | 932,850 | 1,178,738 | 2,111,588 | ||||||||||||||||||||||||||||||||||||||||||||||||
Commercial and industrial | 198,447 | 151,560 | 388,754 | 690 | 29 | 739,480 | 2,789,901 | 3,529,381 | 198,447 | 151,560 | 388,754 | 690 | 29 | 739,480 | 2,789,901 | 3,529,381 | ||||||||||||||||||||||||||||||||||||||||||||||||
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Total Commercial | 919,397 | 753,334 | 1,252,415 | 2,605 | 29 | 2,927,780 | 7,171,383 | 10,099,163 | 919,397 | 753,334 | 1,252,415 | 2,605 | 29 | 2,927,780 | 7,171,383 | 10,099,163 | ||||||||||||||||||||||||||||||||||||||||||||||||
Construction | 22,360 | 22,470 | 38,662 | — | — | 83,492 | 597,614 | 681,106 | 22,360 | 22,470 | 38,662 | — | — | 83,492 | 597,614 | 681,106 | ||||||||||||||||||||||||||||||||||||||||||||||||
Mortgage | 4,810 | 2,794 | 251,539 | — | — | 259,143 | 6,776,938 | 7,036,081 | 4,810 | 2,794 | 251,539 | — | — | 259,143 | 6,776,938 | 7,036,081 | ||||||||||||||||||||||||||||||||||||||||||||||||
Legacy | 1,823 | 1,973 | 6,134 | — | — | 9,930 | 54,506 | 64,436 | 1,823 | 1,973 | 6,134 | — | — | 9,930 | 54,506 | 64,436 | ||||||||||||||||||||||||||||||||||||||||||||||||
Leasing | — | — | 3,009 | — | — | 3,009 | 624,641 | 627,650 | — | — | 3,009 | — | — | 3,009 | 624,641 | 627,650 | ||||||||||||||||||||||||||||||||||||||||||||||||
Consumer: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Credit cards | — | — | 19,098 | — | — | 19,098 | 1,123,182 | 1,142,280 | — | — | 19,098 | — | — | 19,098 | 1,123,182 | 1,142,280 | ||||||||||||||||||||||||||||||||||||||||||||||||
HELOCs | — | — | 1,944 | — | 2,626 | 4,570 | 310,602 | 315,172 | — | — | 1,944 | — | 2,626 | 4,570 | 310,602 | 315,172 | ||||||||||||||||||||||||||||||||||||||||||||||||
Personal | 1,606 | 1,448 | 23,753 | — | 603 | 27,410 | 1,348,051 | 1,375,461 | 1,606 | 1,448 | 23,753 | — | 603 | 27,410 | 1,348,051 | 1,375,461 | ||||||||||||||||||||||||||||||||||||||||||||||||
Auto | — | — | 11,609 | — | 30 | 11,639 | 804,339 | 815,978 | — | — | 11,609 | — | 30 | 11,639 | 804,339 | 815,978 | ||||||||||||||||||||||||||||||||||||||||||||||||
Other | — | — | 18,656 | — | 580 | 19,236 | 169,552 | 188,788 | — | — | 18,656 | — | 580 | 19,236 | 169,552 | 188,788 | ||||||||||||||||||||||||||||||||||||||||||||||||
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Total Consumer | 1,606 | 1,448 | 75,060 | — | 3,839 | 81,953 | 3,755,726 | 3,837,679 | 1,606 | 1,448 | 75,060 | — | 3,839 | 81,953 | 3,755,726 | 3,837,679 | ||||||||||||||||||||||||||||||||||||||||||||||||
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Total Popular, Inc. | $ | 949,996 | $ | 782,019 | $ | 1,626,819 | $ | 2,605 | $ | 3,868 | $ | 3,365,307 | $ | 18,980,808 | $ | 22,346,115 | $ | 949,996 | $ | 782,019 | $ | 1,626,819 | $ | 2,605 | $ | 3,868 | $ | 3,365,307 | $ | 18,980,808 | $ | 22,346,115 | ||||||||||||||||||||||||||||||||
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The following table presents the weighted average obligor risk rating at December 31, 2015 for those classifications that consider a range of rating scales.
Weighted average obligor risk rating | (Scales 11 and 12) | (Scales 1 through 8) | ||||||||||||||
Puerto Rico:[1] | Substandard | Pass | ||||||||||||||
Weighted average obligor risk rating Puerto Rico:[1] | (Scales 11 and 12) Substandard | (Scales 1 through 8) Pass | ||||||||||||||
Commercial multi-family | 11.13 | 6.04 | 11.13 | 6.04 | ||||||||||||
Commercial real estate non-owner occupied | 11.09 | 6.67 | 11.09 | 6.67 | ||||||||||||
Commercial real estate owner occupied | 11.23 | 7.08 | 11.23 | 7.08 | ||||||||||||
Commercial and industrial | 11.15 | 7.13 | 11.15 | 7.13 | ||||||||||||
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Total Commercial | 11.16 | 6.95 | 11.16 | 6.95 | ||||||||||||
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Construction | 11.18 | 7.56 | 11.18 | 7.56 | ||||||||||||
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U.S. mainland: | Substandard | Pass | Substandard | Pass | ||||||||||||
Commercial multi-family | 11.00 | 7.15 | 11.00 | 7.15 | ||||||||||||
Commercial real estate non-owner occupied | 11.02 | 6.92 | 11.02 | 6.92 | ||||||||||||
Commercial real estate owner occupied | 11.07 | 7.23 | 11.07 | 7.23 | ||||||||||||
Commercial and industrial | 11.57 | 6.24 | 11.57 | 6.24 | ||||||||||||
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| |||||||||||||
Total Commercial | 11.50 | 6.81 | 11.50 | 6.81 | ||||||||||||
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Construction | 11.00 | 7.79 | 11.00 | 7.79 | ||||||||||||
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Legacy | 11.11 | 7.78 | 11.11 | 7.78 | ||||||||||||
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[1] | Excludes covered loans acquired in the Westernbank FDIC-assisted transaction. |
Note 11– FDIC loss-share asset and true-up payment obligation
In connection with the Westernbank FDIC-assisted transaction, BPPR entered into loss-share arrangements with the FDIC with respect to the covered loans and other real estate owned. Pursuant to the terms of the loss-share arrangements, the FDIC’s obligation to reimburse BPPR for losses with respect to covered assets begins with the first dollar of loss incurred. The FDIC reimburses BPPR for 80% of losses with respect to covered assets, and BPPR reimburses the FDIC for 80% of recoveries with respect to losses for which the FDIC paid 80% reimbursement under loss-share arrangements. The loss-share agreement applicable to single-family residential mortgage loans provides for FDIC loss and recoveries sharing for ten years expiring at the end of the quarter ending June 30, 2020.
The following table sets forth the activity in the FDIC loss-share asset for the periods presented.
�� | Quarters ended June 30, | Six months ended June 30, | ||||||||||||||
(In thousands) | 2016 | 2015 | 2016 | 2015 | ||||||||||||
Balance at beginning of period | $ | 219,448 | $ | 409,844 | $ | 310,221 | $ | 542,454 | ||||||||
Amortization of loss-share indemnification asset | (4,036 | ) | (31,065 | ) | (8,078 | ) | (58,381 | ) | ||||||||
Credit impairment losses (reversal) to be covered under loss-sharing agreements | 475 | 7,647 | (1,618 | ) | 15,893 | |||||||||||
Reimbursable expenses | 2,235 | 42,730 | 6,185 | 64,275 | ||||||||||||
Recoveries reimbursable to the FDIC | (4,093 | ) | — | (4,093 | ) | — | ||||||||||
Net payments from FDIC under loss-sharing agreements | — | (32,158 | ) | (88,588 | ) | (164,423 | ) | |||||||||
Other adjustments attributable to FDIC loss-sharing agreements | — | (4,051 | ) | — | (6,871 | ) | ||||||||||
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Balance at end of period | $ | 214,029 | $ | 392,947 | $ | 214,029 | $ | 392,947 | ||||||||
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The loss-share arrangements applicable to commercial (including construction) and consumer loans expired during the quarter ended June 30, 2015 and provide for reimbursement to the FDIC through the quarter ending June 30, 2018.
The following table sets forth For the activityquarter ended June 30, 2016, these recoveries amounted to $4.1 million as detailed in the FDIC loss-share asset for the periods presented.table above.
Quarters ended March 31, | ||||||||
(In thousands) | 2016 | 2015 | ||||||
Balance at beginning of period | $ | 310,221 | $ | 542,454 | ||||
Amortization of loss share indemnification asset | (4,042 | ) | (27,316 | ) | ||||
Credit impairment losses (reversal) to be covered under loss-sharing agreements | (2,093 | ) | 8,246 | |||||
Reimbursable expenses | 3,950 | 21,545 | ||||||
Net payments from FDIC under loss-sharing agreements | (88,588 | ) | (132,265 | ) | ||||
Other adjustments attributable to FDIC loss-sharing agreements | — | (2,820 | ) | |||||
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Balance at end of period | $ | 219,448 | $ | 409,844 | ||||
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As a result of the expiration of the shared-loss arrangement underJune 30, 2016, BPPR had unreimbursed loss claims related to the commercial loss-share agreement on June 30, 2015, loans with a carrying amount at June 30, 2015 of approximately $248.7 million, which were reclassified to “non-covered” in the accompanying statement of financial condition, are subject to the resolution of several arbitration proceedings currently ongoing with the FDIC related primarily to (i) the FDIC’s denial of reimbursements for certain charge-offs claimed by BPPR with respect to certain loans and the treatment of those loans as “shared-loss assets” under the commercial loss-share agreement; and (ii) the denial by the FDIC of portfolio sale proposals submitted by BPPR pursuant to the applicable commercial shared-loss agreement provision governing portfolio sales. Until the disputes described above are finally resolved, the terms of the commercial loss-share agreement will remain in effect with respect to any such items under dispute. As of March 31, 2016, lossesloss-sharing arrangement amounting to $149$142 million, related to these assets are reflected in the FDIC indemnification asset as a receivable from the FDIC. ReferFDIC, which are subject to additional information of these disputesthe arbitration proceedings described on Note 23, Commitments and Contingencies.
The weighted average life of the single family loan portfolio accounted for under ASC 310-30 subject to the FDIC loss-sharing agreement at March 31,June 30, 2016 is 7.927.80 years.
As part of the loss-share agreements, BPPR has agreed to make a true-up payment to the FDIC on the date that is 45 days following the last day (such day, the “true-up measurement date”) of the final shared-loss month, or upon the final disposition of all covered assets under the loss-share agreements, in the event losses on the loss-share agreements fail to reach expected levels. The estimated fair value of such true-up payment obligation is recorded as contingent consideration, which is included in the caption of other liabilities in the consolidated statements of financial condition. Under the loss sharing agreements, BPPR will pay to the FDIC 50% of the excess, if any, of: (i) 20% of the intrinsic loss estimate of $4.6 billion (or $925 million) (as determined by the FDIC) less (ii) the sum of: (A) 25% of the asset discount (per bid) (or ($1.1 billion)); plus (B) 25% of the cumulative shared-loss payments (defined as the aggregate of all of the payments made or payable to BPPR minus the aggregate of all of the payments made or payable to the FDIC); plus (C) the sum of the period servicing amounts for every consecutive twelve-month period prior to and ending on the true-up measurement date in respect of each of the loss-sharing agreements during which the loss-sharing provisions of the applicable loss-sharing agreement is in effect (defined as the product of the simple average of the principal amount of shared- loss loans and shared-loss assets at the beginning and end of such period times 1%).
Of the four components used to estimate the true-up payment obligation (intrinsic loss estimate, asset discount, cumulative shared-loss payments, and period servicing amounts) only the cumulative shared-loss payments and the period servicing amounts will change on a quarterly basis. These two variables are the main drivers of changes in the undiscounted true-up payment obligation. In order to estimate the true-up obligation, actual and expected portfolio performance for loans under both the commercial and residential loss sharing agreement are contemplated. The cumulative shared loss payments and cumulative servicing amounts are derived from our quarterly loss reassessment process for covered loans accounted for under ASC 310-30.
Once the undiscounted true-up payment obligation is determined, the fair value is estimated based on the contractual remaining term to settle the obligation and a discount rate that is composed of the sum of the interpolated U.S. Treasury Note (“T Note”), defined by the remaining term of the true-up payment obligation, and a risk premium determined by the spread of the Corporation’s outstanding senior unsecured debt over the equivalent T Note.
The following table provides the fair value and the undiscounted amount of the true-up payment obligation at March 31,June 30, 2016 and December 31, 2015.
(In thousands) | March 31, 2016 | December 31, 2015 | June 30, 2016 | December 31, 2015 | ||||||||||||
Carrying amount (fair value) | $ | 120,188 | $ | 119,745 | $ | 127,876 | $ | 119,745 | ||||||||
Undiscounted amount | $ | 168,525 | $ | 168,692 | $ | 169,396 | $ | 168,692 |
The increase in the fair value of the true-up payment obligation was principally driven by the regular accretion of the instrument, which was partially offset by an increasea decrease in the discount rate, from 7.64% in 2015 to 7.98%7.05% in 2016. An enhancement2016 due to a decrease in the methodology used to calculate the discount rate, incorporating a volume weighted adjusted price, was the driver of the increase in the discount rate.equivalent T Note.
The loss-share agreements contain specific terms and conditions regarding the management of the covered assets that BPPR must follow in order to receive reimbursement on losses from the FDIC. Under the loss-share agreements, BPPR must:
Refer to Note 23, Commitment and Contingencies, for additional information on the settlement of the arbitration proceedings with the FDIC regarding the commercial loss-share agreement.
Note 12 – Mortgage banking activities
Income from mortgage banking activities includes mortgage servicing fees earned in connection with administering residential mortgage loans and valuation adjustments on mortgage servicing rights. It also includes gain on sales and securitizations of residential mortgage loans and trading gains and losses on derivative contracts used to hedge the Corporation’s securitization activities. In addition, lower-of-cost-or-market valuation adjustments to residential mortgage loans held for sale, if any, are recorded as part of the mortgage banking activities.
The following table presents the components of mortgage banking activities:
Quarters ended March 31, | Quarters ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
(In thousands) | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | ||||||||||||||||||
Mortgage servicing fees, net of fair value adjustments: | ||||||||||||||||||||||||
Mortgage servicing fees | $ | 14,802 | $ | 12,248 | $ | 14,675 | $ | 14,689 | $ | 29,477 | $ | 26,937 | ||||||||||||
Mortgage servicing rights fair value adjustments | (8,477 | ) | (4,929 | ) | (4,340 | ) | (1,917 | ) | (12,817 | ) | (6,846 | ) | ||||||||||||
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Total mortgage servicing fees, net of fair value adjustments | 6,325 | 7,319 | 10,335 | 12,772 | 16,660 | 20,091 | ||||||||||||||||||
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Net gain on sale of loans, including valuation on loans | 7,110 | 7,280 | ||||||||||||||||||||||
Net gain on sale of loans, including valuation on loans held-for-sale | 8,474 | 8,022 | 15,584 | 15,302 | ||||||||||||||||||||
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Trading account (loss): | ||||||||||||||||||||||||
Trading account (loss) profit: | ||||||||||||||||||||||||
Unrealized (losses) gains on outstanding derivative positions | (80 | ) | 17 | (59 | ) | 42 | (139 | ) | 59 | |||||||||||||||
Realized losses on closed derivative positions | (2,804 | ) | (1,764 | ) | ||||||||||||||||||||
Realized (losses) gains on closed derivative positions | (2,523 | ) | 489 | (5,327 | ) | (1,275 | ) | |||||||||||||||||
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Total trading account loss | (2,884 | ) | (1,747 | ) | ||||||||||||||||||||
Total trading account (loss) profit | (2,582 | ) | 531 | (5,466 | ) | (1,216 | ) | |||||||||||||||||
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Total mortgage banking activities | $ | 10,551 | $ | 12,852 | $ | 16,227 | $ | 21,325 | $ | 26,778 | $ | 34,177 | ||||||||||||
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Note 13 – Transfers of financial assets and mortgage servicing assets
The Corporation typically transfers conforming residential mortgage loans in conjunction with GNMA and FNMA securitization transactions whereby the loans are exchanged for cash or securities and servicing rights. The securities issued through these transactions are guaranteed by the corresponding agency and, as such, under seller/service agreements the Corporation is required to service the loans in accordance with the agencies’ servicing guidelines and standards. Substantially all mortgage loans securitized by the Corporation in GNMA and FNMA securities have fixed rates and represent conforming loans. As seller, the Corporation has made certain representations and warranties with respect to the originally transferred loans and, in some instances,the past, has sold certain loans with credit recourse to a government-sponsored entity, namely FNMA. Refer to Note 22 to the consolidated financial statements for a description of such arrangements.
No liabilities were incurred as a result of these securitizations during the quarters and six months ended March 31,June 30, 2016 and 2015 because they did not contain any credit recourse arrangements. During the quarter ended March 31,June 30, 2016, the Corporation recorded a net gain of $6.4$7.8 million (March 31, 2015—$6.4(June 30, 2015 - $7.2 million) related to the residential mortgage loans securitized. During the six months ended June 30, 2016, the Corporation recorded a net gain of $14.2 million (June 30, 2015 - $13.7 million) related to the residential mortgage loans securitized.
The following tables present the initial fair value of the assets obtained as proceeds from residential mortgage loans securitized during the quarters and six months ended March 31,June 30, 2016 and 2015.2015:
Proceeds Obtained During the Quarter Ended March 31, 2016 | Proceeds Obtained During the Quarter Ended June 30, 2016 | |||||||||||||||||||||||||||||||
(In thousands) | Level 1 | Level 2 | Level 3 | Initial Fair Value | Level 1 | Level 2 | Level 3 | Initial Fair Value | ||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||
Trading account securities: | ||||||||||||||||||||||||||||||||
Mortgage-backed securities—GNMA | $ | — | $ | 134,012 | $ | — | $ | 134,012 | ||||||||||||||||||||||||
Mortgage-backed securities—FNMA | — | 36,236 | — | 36,236 | ||||||||||||||||||||||||||||
Mortgage-backed securities - GNMA | $ | — | $ | 170,115 | $ | — | $ | 170,115 | ||||||||||||||||||||||||
Mortgage-backed securities - FNMA | — | 43,078 | — | 43,078 | ||||||||||||||||||||||||||||
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Total trading account securities | $ | — | $ | 170,248 | $ | — | $ | 170,248 | $ | — | $ | 213,193 | $ | — | $ | 213,193 | ||||||||||||||||
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Mortgage servicing rights | $ | — | $ | — | $ | 1,870 | $ | 1,870 | $ | — | $ | — | $ | 2,670 | $ | 2,670 | ||||||||||||||||
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| |||||||||||||||||||||||||
Total | $ | — | $ | 170,248 | $ | 1,870 | $ | 172,118 | $ | — | $ | 213,193 | $ | 2,670 | $ | 215,863 | ||||||||||||||||
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| |||||||||||||||||||||||||
Proceeds Obtained During the Six Months Ended June 30, 2016 | ||||||||||||||||||||||||||||||||
(In thousands) | Level 1 | Level 2 | Level 3 | Initial Fair Value | ||||||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||
Trading account securities: | ||||||||||||||||||||||||||||||||
Mortgage-backed securities - GNMA | $ | — | $ | 304,127 | $ | — | $ | 304,127 | ||||||||||||||||||||||||
Mortgage-backed securities - FNMA | — | 79,314 | — | 79,314 | ||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||
Total trading account securities | $ | — | $ | 383,441 | $ | — | $ | 383,441 | ||||||||||||||||||||||||
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Mortgage servicing rights | $ | — | $ | — | $ | 4,540 | $ | 4,540 | ||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||
Total | $ | — | $ | 383,441 | $ | 4,540 | $ | 387,981 | ||||||||||||||||||||||||
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|
Proceeds Obtained During the Quarter Ended March 31, 2015 | Proceeds Obtained During the Quarter Ended June 30, 2015 | |||||||||||||||||||||||||||||||
(In thousands) | Level 1 | Level 2 | Level 3 | Initial Fair Value | Level 1 | Level 2 | Level 3 | Initial Fair Value | ||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||
Trading account securities: | ||||||||||||||||||||||||||||||||
Mortgage-backed securities—GNMA | $ | — | $ | 156,456 | $ | — | $ | 156,456 | ||||||||||||||||||||||||
Mortgage-backed securities—FNMA | — | 46,958 | — | 46,958 | ||||||||||||||||||||||||||||
Mortgage-backed securities - GNMA | $ | — | $ | 243,374 | $ | — | $ | 243,374 | ||||||||||||||||||||||||
Mortgage-backed securities - FNMA | — | 70,477 | — | 70,477 | ||||||||||||||||||||||||||||
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Total trading account securities | $ | — | $ | 203,414 | $ | — | $ | 203,414 | $ | — | $ | 313,851 | $ | — | $ | 313,851 | ||||||||||||||||
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Mortgage servicing rights | $ | — | $ | — | $ | 2,562 | $ | 2,562 | $ | — | $ | — | $ | 4,207 | $ | 4,207 | ||||||||||||||||
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|
| |||||||||||||||||||||||||
Total | $ | — | $ | 203,414 | $ | 2,562 | $ | 205,976 | $ | — | $ | 313,851 | $ | 4,207 | $ | 318,058 | ||||||||||||||||
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| |||||||||||||||||||||||||
Proceeds Obtained During the Six Months Ended June 30, 2015 | ||||||||||||||||||||||||||||||||
(In thousands) | Level 1 | Level 2 | Level 3 | Initial Fair Value | ||||||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||
Trading account securities: | ||||||||||||||||||||||||||||||||
Mortgage-backed securities - GNMA | $ | — | $ | 399,830 | $ | — | $ | 399,830 | ||||||||||||||||||||||||
Mortgage-backed securities - FNMA | — | 117,435 | — | 117,435 | ||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||
Total trading account securities | $ | — | $ | 517,265 | $ | — | $ | 517,265 | ||||||||||||||||||||||||
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Mortgage servicing rights | $ | — | $ | — | $ | 6,769 | $ | 6,769 | ||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||
Total | $ | — | $ | 517,265 | $ | 6,769 | $ | 524,034 | ||||||||||||||||||||||||
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During the quartersix months ended March 31,June 30, 2016, the Corporation retained servicing rights on whole loan sales involving approximately $18.5$34 million in principal balance outstanding (March 31, 2015—$22(June 30, 2015 - $41 million), with realized gains of approximately $0.7$1.4 million (March 31, 2015—(June 30, 2015 - gains of $1.0$1.7 million). All loan sales performed during the quarterssix months ended March 31,June 30, 2016 and 2015 were without credit recourse agreements.
The Corporation recognizes as assets the rights to service loans for others, whether these rights are purchased or result from asset transfers such as sales and securitizations. These mortgage servicing rights (“MSRs”) are measured at fair value.
The Corporation uses a discounted cash flow model to estimate the fair value of MSRs. The discounted cash flow model incorporates assumptions that market participants would use in estimating future net servicing income, including estimates of prepayment speeds, discount rate, cost to service, escrow account earnings, contractual servicing fee income, prepayment and late fees, among other considerations. Prepayment speeds are adjusted for the Corporation’s loan characteristics and portfolio behavior.
The following table presents the changes in MSRs measured using the fair value method for the quarterssix months ended March 31,June 30, 2016 and 2015.
Residential MSRs | Residential MSRs | Residential MSRs | ||||||||||||||
(In thousands) | March 31, 2016 | March 31, 2015 | June 30, 2016 | June 30, 2015 | ||||||||||||
Fair value at beginning of period | $ | 211,405 | $ | 148,694 | $ | 211,405 | $ | 148,694 | ||||||||
Additions | 2,123 | 5,259 | 4,989 | 64,509 | ||||||||||||
Changes due to payments on loans[1] | (4,254 | ) | (3,789 | ) | (8,850 | ) | (8,850 | ) | ||||||||
Reduction due to loan repurchases | (357 | ) | (456 | ) | (734 | ) | (1,321 | ) | ||||||||
Changes in fair value due to changes in valuation model inputs or assumptions | (3,866 | ) | (684 | ) | (3,233 | ) | 3,325 | |||||||||
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Fair value at end of period | $ | 205,051 | $ | 149,024 | $ | 203,577 | $ | 206,357 | ||||||||
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[1] | Represents |
MortgageAdditions to mortgage servicing rights as of March 31, 2016for the quarter ended June 30, 2015 include those acquired as part of the Doral Bank Transaction.
Residential mortgage loans serviced for others were $20.3$20.0 billion at March 31,June 30, 2016 (December 31, 2015—$20.62015 - $20.6 billion).
Net mortgage servicing fees, a component of mortgage banking activities in the consolidated statements of operations, include the changes from period to period in the fair value of the MSRs, including changes due to collection / realization of expected cash flows. Mortgage servicing fees, excluding fair value adjustments, for the quarter and six months ended March 31,June 30, 2016 amounted to $14.8$14.7 million (March 31, 2015—$12.2 million)and $29.5 million, respectively (June 30, 2015 - $14.7 million and $26.9 million, respectively). The banking subsidiaries receive servicing fees based on a percentage of the outstanding loan balance. At March 31,June 30, 2016, those weighted average mortgage servicing fees were 0.29% (March 31,(June 30, 2015 – 0.26%0.29%). Under these servicing agreements, the banking subsidiaries do not generally earn significant prepayment penalty fees on the underlying loans serviced.
The section below includes information on assumptions used in the valuation model of the MSRs, originated and purchased.
Key economic assumptions used in measuring the servicing rights derived from loans securitized or sold by the Corporation during the quarters and six months ended March 31,June 30, 2016 and 2015 were as follows:
Quarters ended | Quarters ended | Six months ended | ||||||||||||||||||||||
March 31, 2016 | March 31, 2015 | June 30, 2016 | June 30, 2015 | June 30, 2016 | June 30, 2015 | |||||||||||||||||||
Prepayment speed | 5.4 | % | 7.3 | % | 5.7 | % | 6.9 | % | 5.5 | % | 7.1 | % | ||||||||||||
Weighted average life | 10.0 | years | 13.7 | years | 9.7 years | 8.7 years | 9.9 years | 8.8 years | ||||||||||||||||
Discount rate (annual rate) | 11.1 | % | 10.9 | % | 11.0 | % | 10.8 | % | 11.0 | % | 10.9 | % |
Key economic assumptions used to estimate the fair value of MSRs derived from sales and securitizations of mortgage loans performed by the banking subsidiaries and the sensitivity to immediate changes in those assumptions were as follows as of the end of the periods reported:
Originated MSRs | ||||||||
(In thousands) | June 30, 2016 | December 31, 2015 | ||||||
Fair value of servicing rights | $ | 92,950 | $ | 98,648 | ||||
Weighted average life | 7.5 years | 7.3 years | ||||||
Weighted average prepayment speed (annual rate) | 5.4 | % | 6.0 | % | ||||
Impact on fair value of 10% adverse change | $ | (2,225 | ) | $ | (2,488 | ) | ||
Impact on fair value of 20% adverse change | $ | (4,600 | ) | $ | (5,241 | ) | ||
Weighted average discount rate (annual rate) | 11.5 | % | 11.5 | % | ||||
Impact on fair value of 10% adverse change | $ | (4,062 | ) | $ | (4,083 | ) | ||
Impact on fair value of 20% adverse change | $ | (8,024 | ) | $ | (8,206 | ) |
(In thousands) Fair value of servicing rights Weighted average life Weighted average prepayment speed (annual rate) Impact on fair value of 10% adverse change Impact on fair value of 20% adverse change Weighted average discount rate (annual rate) Impact on fair value of 10% adverse change Impact on fair value of 20% adverse changeOriginated MSRs March 31, 2016 December 31, 2015 $ 95,043 $ 98,648 7.3 years 7.3 years 6.0 % 6.0 % $ (2,376 ) $ (2,488 ) $ (4,982 ) $ (5,241 ) 11.5 % 11.5 % $ (3,853 ) $ (4,083 ) $ (7,723 ) $ (8,206 )
The banking subsidiaries also own servicing rights purchased from other financial institutions. The fair value of purchased MSRs, their related valuation assumptions and the sensitivity to immediate changes in those assumptions were as follows as of the end of the periods reported:
Purchased MSRs | Purchased MSRs | Purchased MSRs | ||||||||||||||
(In thousands) | March 31, 2016 | December 31, 2015 | June 30, 2016 | December 31, 2015 | ||||||||||||
Fair value of servicing rights | $ | 110,008 | $ | 112,757 | $ | 110,627 | $ | 112,757 | ||||||||
Weighted average life | 6.2 | years | 6.2 | years | 6.5 years | 6.2 years | ||||||||||
Weighted average prepayment speed (annual rate) | 6.7 | % | 6.9 | % | 5.9 | % | 6.9 | % | ||||||||
Impact on fair value of 10% adverse change | $ | (2,795 | ) | $ | (2,871 | ) | $ | (2,648 | ) | $ | (2,871 | ) | ||||
Impact on fair value of 20% adverse change | $ | (5,842 | ) | $ | (6,034 | ) | $ | (5,459 | ) | $ | (6,034 | ) | ||||
Weighted average discount rate (annual rate) | 11.0 | % | 11.0 | % | 11.0 | % | 11.0 | % | ||||||||
Impact on fair value of 10% adverse change | $ | (4,077 | ) | $ | (4,211 | ) | $ | (4,483 | ) | $ | (4,211 | ) | ||||
Impact on fair value of 20% adverse change | $ | (8,221 | ) | $ | (8,525 | ) | $ | (8,891 | ) | $ | (8,525 | ) |
The sensitivity analyses presented in the tables above for servicing rights are hypothetical and should be used with caution. As the figures indicate, changes in fair value based on a 10 and 20 percent variation in assumptions generally cannot be extrapolated because the relationship of the change in assumption to the change in fair value may not be linear. Also, in the sensitivity tables included herein, the effect of a variation in a particular assumption on the fair value of the retained interest is calculated without changing any other assumption. In reality, changes in one factor may result in changes in another (for example, increases in market interest rates may result in lower prepayments and increased credit losses), which might magnify or counteract the sensitivities.
At March 31,June 30, 2016, the Corporation serviced $1.8 billion (December 31, 2015—$1.92015 - $1.9 billion) in residential mortgage loans with credit recourse to the Corporation.
Under the GNMA securitizations, the Corporation, as servicer, has the right to repurchase (but not the obligation), at its option and without GNMA’s prior authorization, any loan that is collateral for a GNMA guaranteed mortgage-backed security when certain delinquency criteria are met. At the time that individual loans meet GNMA’s specified delinquency criteria and are eligible for repurchase, the Corporation is deemed to have regained effective control over these loans if the Corporation was the pool issuer. At March 31,June 30, 2016, the Corporation had recorded $146$156 million in mortgage loans on its consolidated statements of financial condition related to this buy-back option program (December 31, 2015—$1402015 - $140 million). As long as the Corporation continues to service the loans that continue to be collateral in a GNMA guaranteed mortgage-backed security, the MSR is recognized by the Corporation. During the quartersix months ended March 31,June 30, 2016, the Corporation repurchased approximately $ 1739 million (March 31, 2015—$24(June 30, 2015 - $60 million) of mortgage loans under the GNMA buy-back option program. The determination to repurchase these loans was based on the economic benefits of the transaction, which results in a reduction of the servicing costs for these severely delinquent loans, mostly related to principal and interest advances. Furthermore, due to their guaranteed nature, the risk associated with the loans is minimal. The Corporation places these loans under its loss mitigation programs and once brought back to current status, these may be either retained in portfolio or re-sold in the secondary market.
Note 14 – Other real estate owned
The following tables present the activity related to Other Real Estate Owned (“OREO”), for the quarters and six months ended March 31,June 30, 2016 and 2015. During the second quarter of 2015, the corporation completed a bulk sale of $37 million of covered OREOs.
For the quarter ended March 31, 2016 | For the quarter ended June 30, 2016 | |||||||||||||||||||||||||||||||
Non-covered | Non-covered | Covered | Non-covered | Non-covered | Covered | |||||||||||||||||||||||||||
OREO | OREO | OREO | OREO | OREO | OREO | |||||||||||||||||||||||||||
(In thousands) | Commercial/ Construction | Mortgage | Mortgage | Total | Commercial/ Construction | Mortgage | Mortgage | Total | ||||||||||||||||||||||||
Balance at beginning of period | $ | 32,471 | $ | 122,760 | $ | 36,685 | $ | 191,916 | $ | 30,354 | $ | 135,606 | $ | 36,397 | $ | 202,357 | ||||||||||||||||
Write-downs in value | (1,717 | ) | (2,016 | ) | (500 | ) | (4,233 | ) | (561 | ) | (1,621 | ) | (366 | ) | (2,548 | ) | ||||||||||||||||
Additions | 1,810 | 24,276 | 4,483 | 30,569 | 1,302 | 31,624 | 5,240 | 38,166 | ||||||||||||||||||||||||
Sales | (1,595 | ) | (8,500 | ) | (3,649 | ) | (13,744 | ) | (6,985 | ) | (12,403 | ) | (3,307 | ) | (22,695 | ) | ||||||||||||||||
Other adjustments | (615 | ) | (914 | ) | (622 | ) | (2,151 | ) | — | (291 | ) | 20 | (271 | ) | ||||||||||||||||||
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Ending balance | $ | 30,354 | $ | 135,606 | $ | 36,397 | $ | 202,357 | $ | 24,110 | $ | 152,915 | $ | 37,984 | $ | 215,009 | ||||||||||||||||
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For the six months ended June 30, 2016 | ||||||||||||||||||||||||||||||||
Non-covered | Non-covered | Covered | ||||||||||||||||||||||||||||||
OREO | OREO | OREO | ||||||||||||||||||||||||||||||
(In thousands) | Commercial/ Construction | Mortgage | Mortgage | .Total | ||||||||||||||||||||||||||||
Balance at beginning of period | $ | 32,471 | $ | 122,760 | $ | 36,685 | $ | 191,916 | ||||||||||||||||||||||||
Write-downs in value | (2,278 | ) | (3,630 | ) | (866 | ) | (6,774 | ) | ||||||||||||||||||||||||
Additions | 3,112 | 55,900 | 9,723 | 68,735 | ||||||||||||||||||||||||||||
Sales | (8,580 | ) | (20,903 | ) | (6,956 | ) | (36,439 | ) | ||||||||||||||||||||||||
Other adjustments | (615 | ) | (1,212 | ) | (602 | ) | (2,429 | ) | ||||||||||||||||||||||||
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Ending balance | $ | 24,110 | $ | 152,915 | $ | 37,984 | $ | 215,009 | ||||||||||||||||||||||||
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For the quarter ended March 31, 2015 | For the quarter ended June 30, 2015 | |||||||||||||||||||||||||||||||||||||||
Non-covered | Non-covered | Covered | Covered | Non-covered | Non-covered | Covered | Covered | |||||||||||||||||||||||||||||||||
OREO | OREO | OREO | OREO | OREO | OREO | OREO | OREO | |||||||||||||||||||||||||||||||||
(In thousands) | Commercial/ Construction | Mortgage | Commercial/ Construction | Mortgage | Total | Commercial/ Construction | Mortgage | Commercial/ Construction | Mortgage | Total | ||||||||||||||||||||||||||||||
Balance at beginning of period | $ | 38,983 | $ | 96,517 | $ | 85,394 | $ | 44,872 | $ | 265,766 | $ | 25,608 | $ | 102,562 | $ | 70,573 | $ | 42,984 | $ | 241,727 | ||||||||||||||||||||
Write-downs in value | (5,887 | ) | (1,372 | ) | (9,395 | ) | (1,282 | ) | (17,936 | ) | (4,162 | ) | (2,463 | ) | (10,955 | ) | (1,393 | ) | (18,973 | ) | ||||||||||||||||||||
Additions | 2,035 | 21,075 | 4,038 | 5,381 | 32,529 | 2,793 | 18,532 | 5,623 | 8,879 | 35,827 | ||||||||||||||||||||||||||||||
Sales | (9,427 | ) | (13,086 | ) | (9,464 | ) | (5,822 | ) | (37,799 | ) | (4,868 | ) | (14,243 | ) | (50,285 | ) | (13,806 | ) | (83,202 | ) | ||||||||||||||||||||
Other adjustments | (96 | ) | (572 | ) | — | (165 | ) | (833 | ) | 850 | 50 | (452 | ) | (68 | ) | 380 | ||||||||||||||||||||||||
Transfer to non-covered status[1] | 14,504 | 3,092 | (14,504 | ) | (3,092 | ) | — | |||||||||||||||||||||||||||||||||
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Ending balance | $ | 25,608 | $ | 102,562 | $ | 70,573 | $ | 42,984 | $ | 241,727 | $ | 34,725 | $ | 107,530 | $ | — | $ | 33,504 | $ | 175,759 | ||||||||||||||||||||
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[1] | Represents the reclassification of OREOs to the non-covered category, pursuant to the expiration of the commercial and consumer shared-loss arrangement with the FDIC related to loans acquired from Westernbank, on June 30, 2015. |
For the six months ended June 30, 2015 | ||||||||||||||||||||
Non-covered | Non-covered | Covered | Covered | |||||||||||||||||
OREO | OREO | OREO | OREO | |||||||||||||||||
(In thousands) | Commercial/ Construction | Mortgage | Commercial/ Construction | Mortgage | Total | |||||||||||||||
Balance at beginning of period | $ | 38,983 | $ | 96,517 | $ | 85,394 | $ | 44,872 | $ | 265,766 | ||||||||||
Write-downs in value | (10,049 | ) | (3,835 | ) | (20,350 | ) | (2,675 | ) | (36,909 | ) | ||||||||||
Additions | 4,828 | 39,607 | 9,661 | 14,260 | 68,356 | |||||||||||||||
Sales | (14,295 | ) | (27,329 | ) | (59,749 | ) | (19,628 | ) | (121,001 | ) | ||||||||||
Other adjustments | 754 | (522 | ) | (452 | ) | (233 | ) | (453 | ) | |||||||||||
Transfer to non-covered status[1] | 14,504 | 3,092 | (14,504 | ) | (3,092 | ) | — | |||||||||||||
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Ending balance | $ | 34,725 | $ | 107,530 | $ | — | $ | 33,504 | $ | 175,759 | ||||||||||
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[1] | Represents the reclassification of OREOs to the non-covered category, pursuant to the expiration of the commercial and consumer shared-loss arrangement with the FDIC related to loans acquired from Westernbank, on June 30, 2015. |
The caption of other assets in the consolidated statements of financial condition consists of the following major categories:
(In thousands) | March 31, 2016 | December 31, 2015 | June 30, 2016 | December 31, 2015 | ||||||||||||
Net deferred tax assets (net of valuation allowance) | $ | 1,275,017 | $ | 1,302,452 | $ | 1,243,783 | $ | 1,302,452 | ||||||||
Investments under the equity method | 216,076 | 212,838 | 206,300 | 212,838 | ||||||||||||
Prepaid taxes | 174,558 | 180,969 | 185,021 | 180,969 | ||||||||||||
Other prepaid expenses | 81,300 | 79,215 | 79,324 | 79,215 | ||||||||||||
Derivative assets | 15,012 | 16,959 | 13,154 | 16,959 | ||||||||||||
Trades receivable from brokers and counterparties | 87,590 | 78,759 | 78,994 | 78,759 | ||||||||||||
Principal, interest and escrow servicing advances | 74,950 | 79,862 | ||||||||||||||
Guaranteed mortgage loan claims receivable | 139,151 | 101,628 | ||||||||||||||
Others | 306,477 | 321,970 | 158,383 | 140,480 | ||||||||||||
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Total other assets | $ | 2,156,030 | $ | 2,193,162 | $ | 2,179,060 | $ | 2,193,162 | ||||||||
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Note 16 – Goodwill and other intangible assets
Goodwill
The changes in the carrying amount of goodwill for the quarterssix months ended March 31,June 30, 2016 and 2015, allocated by reportable segments, were as follows (refer to Note 35 for the definition of the Corporation’s reportable segments):
2016 | ||||||||||||||||
Purchase | ||||||||||||||||
Balance at | Goodwill on | accounting | Balance at | |||||||||||||
(In thousands) | January 1, 2016 | acquisition | adjustments | March 31, 2016 | ||||||||||||
Banco Popular de Puerto Rico | $ | 280,221 | $ | — | $ | — | $ | 280,221 | ||||||||
Banco Popular North America | 346,167 | — | 4,707 | 350,874 | ||||||||||||
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Total Popular, Inc. | $ | 626,388 | $ | — | $ | 4,707 | $ | 631,095 | ||||||||
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2016 | 2016 | |||||||||||||||||||||||||||||||
Purchase | ||||||||||||||||||||||||||||||||
Balance at | Goodwill on | accounting | Balance at | |||||||||||||||||||||||||||||
(In thousands) | January 1, 2016 | acquisition | adjustments | June 30, 2016 | ||||||||||||||||||||||||||||
Banco Popular de Puerto Rico | $ | 280,221 | $ | — | $ | — | $ | 280,221 | ||||||||||||||||||||||||
Banco Popular North America | 346,167 | — | 4,707 | 350,874 | ||||||||||||||||||||||||||||
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Total Popular, Inc. | $ | 626,388 | $ | — | $ | 4,707 | $ | 631,095 | ||||||||||||||||||||||||
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2015 | 2015 | 2015 | ||||||||||||||||||||||||||||||
Purchase | Purchase | |||||||||||||||||||||||||||||||
Balance at | Goodwill on | accounting | Balance at | Balance at | Goodwill on | accounting | Balance at | |||||||||||||||||||||||||
(In thousands) | January 1, 2015 | acquisition | adjustments | March 31, 2015 | January 1, 2015 | acquisition | adjustments | June 30, 2015 | ||||||||||||||||||||||||
Banco Popular de Puerto Rico | $ | 250,109 | $ | 3,899 | $ | — | $ | 254,008 | $ | 250,109 | $ | 3,899 | $ | (2,875 | ) | $ | 251,133 | |||||||||||||||
Banco Popular North America | 215,567 | 38,735 | — | 254,302 | 215,567 | 38,735 | — | 254,302 | ||||||||||||||||||||||||
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Total Popular, Inc. | $ | 465,676 | $ | 42,634 | $ | — | $ | 508,310 | $ | 465,676 | $ | 42,634 | $ | (2,875 | ) | $ | 505,435 | |||||||||||||||
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During the first quarter ended March 31,of 2016, the Corporation recorded adjustments to its initial fair value estimates in connection with the Doral Bank Transaction. As a result, the discount on the loans increased by $4.7 million with a corresponding increase to goodwill.
The goodwill recorded during the first quarter of 2015 was related to the Doral Bank Transaction. ReferThe Corporation recorded purchase accounting adjustments during 2015 of $0.5 million related to Note 5, Business Combination, for additional information.the Doral Bank Transaction and of $2.4 million related to the acquisition of an insurance benefits business during 2014.
The following tables present the gross amount of goodwill and accumulated impairment losses by reportable segments.
March 31, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||
June 30, 2016 | June 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||
Balance at | Balance at | Balance at | Balance at | Balance at | Balance at | Balance at | Balance at | |||||||||||||||||||||||||||||||||||||||||
January 1, | Accumulated | January 1, | March 31, | Accumulated | March 31, | January 1, | Accumulated | January 1, | June 30, | Accumulated | June 30, | |||||||||||||||||||||||||||||||||||||
2016 | impairment | 2016 | 2016 | impairment | 2016 | 2016 | impairment | 2016 | 2016 | impairment | 2016 | |||||||||||||||||||||||||||||||||||||
(In thousands) | (gross amounts) | losses | (net amounts) | (gross amounts) | losses | (net amounts) | (gross amounts) | losses | (net amounts) | (gross amounts) | losses | (net amounts) | ||||||||||||||||||||||||||||||||||||
Banco Popular de Puerto Rico | $ | 280,221 | $ | — | $ | 280,221 | $ | 280,221 | $ | — | $ | 280,221 | $ | 280,221 | $ | — | $ | 280,221 | $ | 280,221 | $ | — | $ | 280,221 | ||||||||||||||||||||||||
Banco Popular North America | 510,578 | 164,411 | 346,167 | 515,285 | 164,411 | 350,874 | 510,578 | 164,411 | 346,167 | 515,285 | 164,411 | 350,874 | ||||||||||||||||||||||||||||||||||||
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Total Popular, Inc. | $ | 790,799 | $ | 164,411 | $ | 626,388 | $ | 795,506 | $ | 164,411 | $ | 631,095 | $ | 790,799 | $ | 164,411 | $ | 626,388 | $ | 795,506 | $ | 164,411 | $ | 631,095 | ||||||||||||||||||||||||
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December 31, 2015 | December 31, 2015 | December 31, 2015 | ||||||||||||||||||||||||||||||||||||||||||||||
Balance at | Balance at | Balance at | Balance at | |||||||||||||||||||||||||||||||||||||||||||||
January 1, | Accumulated | January 1, | December 31, | Accumulated | December 31, | |||||||||||||||||||||||||||||||||||||||||||
2015 | impairment | 2015 | 2015 | impairment | 2015 | |||||||||||||||||||||||||||||||||||||||||||
(In thousands) | (gross amounts) | losses | (net amounts) | (gross amounts) | losses | (net amounts) | Balance at January 1, 2015 (gross amounts) | Accumulated impairment losses | Balance at January 1, 2015 (net amounts) | Balance at December 31, 2015 (gross amounts) | Accumulated impairment losses | Balance at December 31, 2015 (net amounts) | ||||||||||||||||||||||||||||||||||||
Banco Popular de Puerto Rico | $ | 250,109 | $ | — | $ | 250,109 | $ | 280,221 | $ | — | $ | 280,221 | $ | 250,109 | $ | — | $ | 250,109 | $ | 280,221 | $ | — | $ | 280,221 | ||||||||||||||||||||||||
Banco Popular North America | 379,978 | 164,411 | 215,567 | 510,578 | 164,411 | 346,167 | 379,978 | 164,411 | 215,567 | 510,578 | 164,411 | 346,167 | ||||||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||||||||
Total Popular, Inc. | $ | 630,087 | $ | 164,411 | $ | 465,676 | $ | 790,799 | $ | 164,411 | $ | 626,388 | $ | 630,087 | $ | 164,411 | $ | 465,676 | $ | 790,799 | $ | 164,411 | $ | 626,388 | ||||||||||||||||||||||||
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Other Intangible Assets
At March 31,June 30, 2016 and December 31, 2015, the Corporation had $ 6.1 million of identifiable intangible assets, with indefinite useful lives, mostly associated with E-LOAN’s trademark.
The following table reflects the components of other intangible assets subject to amortization:
Gross | Net | |||||||||||||||||||||||
Carrying | Accumulated | Carrying | ||||||||||||||||||||||
(In thousands) | Amount | Amortization | Value | Gross Carrying Amount | Accumulated Amortization | Net Carrying Value | ||||||||||||||||||
March 31, 2016 | ||||||||||||||||||||||||
June 30, 2016 | ||||||||||||||||||||||||
Core deposits | $ | 63,539 | $ | 40,132 | $ | 23,407 | $ | 63,539 | $ | 41,800 | $ | 21,739 | ||||||||||||
Other customer relationships | 36,786 | 12,227 | 24,559 | 36,751 | 13,621 | 23,130 | ||||||||||||||||||
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|
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| |||||||||||||||||||
Total other intangible assets | $ | 100,325 | $ | 52,359 | $ | 47,966 | $ | 100,290 | $ | 55,421 | $ | 44,869 | ||||||||||||
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| |||||||||||||||||||
December 31, 2015 | ||||||||||||||||||||||||
Core deposits | $ | 63,539 | $ | 38,464 | $ | 25,075 | $ | 63,539 | $ | 38,464 | $ | 25,075 | ||||||||||||
Other customer relationships | 37,665 | 10,745 | 26,920 | 37,665 | 10,745 | 26,920 | ||||||||||||||||||
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Total other intangible assets | $ | 101,204 | $ | 49,209 | $ | 51,995 | $ | 101,204 | $ | 49,209 | $ | 51,995 | ||||||||||||
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During the quarter ended March 31,June 30, 2016, the Corporation recognized $ 3.1 million in amortization expense related to other intangible assets with definite useful lives (March 31, 2015—(June 30, 2015 - $ 2.12.9 million). During the six months ended June 30, 2016, the Corporation recognized $ 6.2 million in amortization related to other intangible assets with definite useful lives (June 30, 2015 - $ 5.0 million).
The following table presents the estimated amortization of the intangible assets with definite useful lives for each of the following periods:
(In thousands) | ||||||||
Remaining 2016 | $ | 9,030 | $ | 5,933 | ||||
Year 2017 | 9,378 | 9,378 | ||||||
Year 2018 | 9,286 | 9,286 | ||||||
Year 2019 | 9,042 | 9,042 | ||||||
Year 2020 | 4,967 | 4,967 | ||||||
Year 2021 | 2,157 | 2,157 |
Total interest bearing deposits as of the end of the periods presented consisted of:
(In thousands) | March 31, 2016 | December 31, 2015 | June 30, 2016 | December 31, 2015 | ||||||||||||
Savings accounts | $ | 7,307,272 | $ | 7,010,391 | $ | 7,361,128 | $ | 7,010,391 | ||||||||
NOW, money market and other interest bearing demand deposits | 5,957,465 | 5,632,449 | 6,890,874 | 5,632,449 | ||||||||||||
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| |||||||||||||
Total savings, NOW, money market and other interest bearing demand deposits | 13,264,737 | 12,642,840 | 14,252,002 | 12,642,840 | ||||||||||||
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| |||||||||||||
Certificates of deposit: | ||||||||||||||||
Under $100,000 | 3,798,028 | 4,014,359 | 3,722,510 | 4,014,359 | ||||||||||||
$100,000 and over | 4,079,735 | 4,151,009 | 4,232,236 | 4,151,009 | ||||||||||||
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|
| |||||||||||||
Total certificates of deposit | 7,877,763 | 8,165,368 | 7,954,746 | 8,165,368 | ||||||||||||
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|
| |||||||||||||
Total interest bearing deposits | $ | 21,142,500 | $ | 20,808,208 | $ | 22,206,748 | $ | 20,808,208 | ||||||||
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A summary of certificates of deposit by maturity at March 31,June 30, 2016 follows:
(In thousands) | ||||||||
2016 | $ | 3,780,813 | $ | 3,004,445 | ||||
2017 | 1,452,245 | 1,820,840 | ||||||
2018 | 800,872 | 962,140 | ||||||
2019 | 517,844 | 630,107 | ||||||
2020 | 974,612 | 944,251 | ||||||
2021 and thereafter | 351,377 | 592,963 | ||||||
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| |||||||
Total certificates of deposit | $ | 7,877,763 | $ | 7,954,746 | ||||
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At March 31,June 30, 2016, the Corporation had brokered deposits amounting to $ 0.90.8 billion (December 31, 2015—2015 - $ 1.3 billion).
The aggregate amount of overdrafts in demand deposit accounts that were reclassified to loans was $9$8 million at March 31,June 30, 2016 (December 31, 2015—$112015 - $11 million).
The following table presents the composition of fed funds purchased and assets sold under agreements to repurchase at March 31,June 30, 2016 and December 31, 2015.
(In thousands) | March 31, 2016 | December 31, 2015 | June 30, 2016 | December 31, 2015 | ||||||||||||
Federal funds purchased | $ | 50,000 | $ | 50,000 | $ | — | $ | 50,000 | ||||||||
Assets sold under agreements to repurchase | 710,154 | 712,145 | 821,604 | 712,145 | ||||||||||||
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|
|
| |||||||||||||
Total federal funds purchased and assets sold under agreements to repurchase | $ | 760,154 | $ | 762,145 | $ | 821,604 | $ | 762,145 | ||||||||
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The following table presents information related to the Corporation’s repurchase transactions accounted for as secured borrowings that are collateralized with investment securities available-for-sale, other assets held-for-trading purposes or which have been obtained under agreements to resell. It is the Corporation’s policy to maintain effective control over assets sold under agreements to repurchase; accordingly, such securities continue to be carried on the consolidated statements of financial condition.
Repurchase agreements accounted for as secured borrowings
March 31, 2016 | December 31, 2015 | |||||||||||||||
Repurchase | Repurchase | June 30, 2016 | December 31, 2015 | |||||||||||||
(In thousands) | liability | liability | Repurchase liability | Repurchase liability | ||||||||||||
U.S. Treasury Securities | ||||||||||||||||
After 90 days | $ | 82,003 | $ | — | ||||||||||||
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| |||||||||||||||
Total U.S. Treasury Securities | 82,003 | — | ||||||||||||||
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| |||||||||||||||
Obligations of U.S. government sponsored entities | ||||||||||||||||
Within 30 days | $ | 87,809 | $ | 243,708 | 109,248 | 243,708 | ||||||||||
After 30 to 90 days | 54,361 | — | 84,993 | — | ||||||||||||
After 90 days | 192,238 | 23,366 | 169,851 | 23,366 | ||||||||||||
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|
| |||||||||||||
Total obligations of U.S. government sponsored entities | 334,408 | 267,074 | 364,092 | 267,074 | ||||||||||||
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|
| |||||||||||||
Mortgage-backed securities | ||||||||||||||||
Within 30 days | 28,340 | 124,878 | 31,117 | 124,878 | ||||||||||||
After 30 to 90 days | 57,224 | 154,582 | 81,489 | 154,582 | ||||||||||||
After 90 days | 264,321 | 142,441 | 238,091 | 142,441 | ||||||||||||
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|
| |||||||||||||
Total mortgage-backed securities | 349,885 | 421,901 | 350,697 | 421,901 | ||||||||||||
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|
|
| |||||||||||||
Collateralized mortgage obligations | ||||||||||||||||
Within 30 days | 10,458 | 10,298 | 9,991 | 10,298 | ||||||||||||
After 30 to 90 days | — | 12,872 | — | 12,872 | ||||||||||||
After 90 days | 15,403 | — | 14,821 | — | ||||||||||||
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|
|
| |||||||||||||
Total collateralized mortgage obligations | 25,861 | 23,170 | 24,812 | 23,170 | ||||||||||||
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|
|
| |||||||||||||
Total | $ | 710,154 | $ | 712,145 | $ | 821,604 | $ | 712,145 | ||||||||
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|
|
Repurchase agreements in portfolio are generally short-term, often overnight and Popular acts as borrowers transferring assets to the counterparty. As such our risk is very limited. We manage the liquidity risks arising from secured funding by sourcing funding globally from a diverse group of counterparties, providing a range of securities collateral and pursuing longer durations, when appropriate.
The following table presents the composition of other short-term borrowings at March 31,June 30, 2016 and December 31, 2015.
(In thousands) | March 31, 2016 | December 31, 2015 | June 30, 2016 | December 31, 2015 | ||||||||||||
Securities sold not yet purchased | $ | 5,170 | $ | — | ||||||||||||
Advances with the FHLB paying interest at maturity, at fixed rate of 0.59% | $ | 30,000 | $ | — | ||||||||||||
Others | 1,200 | 1,200 | 1,200 | 1,200 | ||||||||||||
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|
| |||||||||||||
Total other short-term borrowings | $ | 6,370 | $ | 1,200 | $ | 31,200 | $ | 1,200 | ||||||||
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|
|
Note: Refer to the Corporation’s 2015 Form 10-K for rates information at December 31, 2015.
The following table presents the composition of notes payable at March 31,June 30, 2016 and December 31, 2015.
(In thousands) | March 31, 2016 | December 31, 2015 | June 30, 2016 | December 31, 2015 | ||||||||||||
Advances with the FHLB with maturities ranging from 2016 through 2029 paying interest at monthly fixed rates ranging from 0.71% to 4.19 % (2015—0.45% to 4.19%) | $ | 638,848 | $ | 747,072 | ||||||||||||
Advances with the FHLB with maturities ranging from 2016 through 2029 paying interest at monthly fixed rates ranging from 0.71% to 4.19 % (2015 - 0.41% to 4.19%) | $ | 631,029 | $ | 747,072 | ||||||||||||
Advances with the FHLB maturing on 2019 paying interest monthly at a floating rate of 0.34% over the 1 month LIBOR | 13,000 | — | 13,000 | — | ||||||||||||
Advances with the FHLB with maturities ranging from 2017 through 2019 paying interest quarterly at a floating rate from 0.01% to 0.24% over the 3 month LIBOR | 30,313 | 14,429 | ||||||||||||||
Unsecured senior debt securities maturing on 2019 paying interest semiannually at a fixed rate of 7.00%, net of debt issuance costs of $6,775 (2015—$7,296) | 443,225 | 442,704 | ||||||||||||||
Junior subordinated deferrable interest debentures (related to trust preferred securities) with maturities ranging from 2027 to 2034 with fixed interest rates ranging from 6.125% to 8.327%, net of debt issuance costs of $497 (2015—$505) | 439,303 | 439,295 | ||||||||||||||
Advances with the FHLB with maturities ranging from 2017 through 2019 paying interest quarterly at a floating rate from (0.12)% to 0.24% over the 3 month LIBOR | 30,313 | 14,429 | ||||||||||||||
Unsecured senior debt securities maturing on 2019 paying interest semiannually at a fixed rate of 7.00%, net of debt issuance costs of $6,254 (2015 - $7,296) | 443,747 | 442,704 | ||||||||||||||
Junior subordinated deferrable interest debentures (related to trust preferred securities) with maturities ranging from 2027 to 2034 with fixed interest rates ranging from 6.125% to 8.327%, net of debt issuance costs of $490 (2015 - $505) | 439,309 | 439,295 | ||||||||||||||
Others | 18,779 | 19,008 | 18,550 | 19,008 | ||||||||||||
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|
| |||||||||||||
Total notes payable | $ | 1,583,468 | $ | 1,662,508 | $ | 1,575,948 | $ | 1,662,508 | ||||||||
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|
Note: Refer to the Corporation’s 2015 Form 10-K for rates information at December 31, 2015.
At March 31,June 30, 2016, the Corporation’s banking subsidiaries had credit facilities authorized with the FHLB and the Federal Reserve discount window aggregating to $4.1 billion and $1.3 billion (December 31, 2015—$3.92015 - $3.9 billion and $1.3 billion, respectively), which were collateralized by loans held-in-portfolio. At March 31,June 30, 2016, the Corporation used $922$929 million of the available credit facility with the FHLB (December 31, 2015—$7622015 - $762 million), which includes $240$225 million used for a municipal letter of credit to secure deposits, while the borrowing capacity at the discount window remains unused.
A breakdown of borrowings by contractual maturities at March 31,June 30, 2016 is included in the table below.
Fed funds purchased | ||||||||||||||||||||||||||||||||
and assets sold under | Short-term | |||||||||||||||||||||||||||||||
(In thousands) | agreements to repurchase | borrowings | Notes payable | Total | Fed funds purchased and assets sold under agreements to repurchase | Short-term borrowings | Notes payable | Total | ||||||||||||||||||||||||
Year | ||||||||||||||||||||||||||||||||
2016 | $ | 760,154 | $ | 6,370 | $ | 145,402 | $ | 911,926 | $ | 692,703 | $ | 31,200 | $ | 37,673 | $ | 761,576 | ||||||||||||||||
2017 | — | — | 90,939 | 90,939 | 128,901 | — | 90,939 | 219,840 | ||||||||||||||||||||||||
2018 | — | — | 144,503 | 144,503 | — | — | 184,407 | 184,407 | ||||||||||||||||||||||||
2019 | — | — | 551,314 | 551,314 | — | — | 591,686 | 591,686 | ||||||||||||||||||||||||
2020 | — | — | 92,529 | 92,529 | — | — | 112,456 | 112,456 | ||||||||||||||||||||||||
Later years | — | — | 558,781 | 558,781 | — | — | 558,787 | 558,787 | ||||||||||||||||||||||||
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|
|
|
|
| |||||||||||||||||||||||||
Total borrowings | $ | 760,154 | $ | 6,370 | $ | 1,583,468 | $ | 2,349,992 | $ | 821,604 | $ | 31,200 | $ | 1,575,948 | $ | 2,428,752 | ||||||||||||||||
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Note 19 – Offsetting of financial assets and liabilities
The following tables present the potential effect of rights of setoff associated with the Corporation’s recognized financial assets and liabilities at March 31,June 30, 2016 and December 31, 2015.
As of March 31, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
As of June 30, 2016 | As of June 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Gross Amounts Not Offset in the Statement of Financial Position | Gross Amounts Not Offset in the Statement of Financial Position | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
(In thousands) | Gross Amount of Recognized Assets | Gross Amounts Offset in the Statement of Financial Position | Net Amounts of Assets Presented in the Statement of Financial Position | Financial Instruments | Securities Collateral Received | Cash Collateral Received | Net Amount | Gross Amount of Recognized Assets | Gross Amounts Offset in the Statement of Financial Position | Net Amounts of Assets Presented in the Statement of Financial Position | Financial Instruments | Securities Collateral Received | Cash Collateral Received | Net Amount | ||||||||||||||||||||||||||||||||||||||||||
Derivatives | $ | 15,012 | $ | — | $ | 15,012 | $ | 35 | $ | — | $ | — | $ | 14,977 | $ | 13,154 | $ | — | $ | 13,154 | $ | 286 | $ | — | $ | — | $ | 12,868 | ||||||||||||||||||||||||||||
Reverse repurchase agreements | 97,830 | — | 97,830 | — | 97,830 | — | — | 86,328 | — | 86,328 | — | 86,328 | — | — | ||||||||||||||||||||||||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||
Total | $ | 112,842 | $ | — | $ | 112,842 | $ | 35 | $ | 97,830 | $ | — | $ | 14,977 | $ | 99,482 | $ | — | $ | 99,482 | $ | 286 | $ | 86,328 | $ | — | $ | 12,868 | ||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||||||||||||||
As of March 31, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Gross Amounts Not Offset in the Statement of Financial Position | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(In thousands) | Gross Amount of Recognized Liabilities | Gross Amounts Offset in the Statement of Financial Position | Net Amounts of Liabilities Presented in the Statement of Financial Position | Financial Instruments | Securities Collateral Pledged | Cash Collateral Pledged | Net Amount | |||||||||||||||||||||||||||||||||||||||||||||||||
Derivatives | $ | 12,068 | $ | — | $ | 12,068 | $ | 35 | $ | 3,153 | $ | — | $ | 8,880 | ||||||||||||||||||||||||||||||||||||||||||
Repurchase agreements | 710,154 | — | 710,154 | — | 710,154 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||
Total | $ | 722,222 | $ | — | $ | 722,222 | $ | 35 | $ | 713,307 | $ | — | $ | 8,880 | ||||||||||||||||||||||||||||||||||||||||||
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| ||||||||||||||||||||||||||||||||||||||||||||||||||
As of December 31, 2015 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Gross Amounts Not Offset in the Statement of Financial Position | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(In thousands) | Gross Amount of Recognized Assets | Gross Amounts Offset in the Statement of Financial Position | Net Amounts of Assets Presented in the Statement of Financial Position | Financial Instruments | Securities Collateral Received | Cash Collateral Received | Net Amount | |||||||||||||||||||||||||||||||||||||||||||||||||
Derivatives | $ | 16,959 | $ | — | $ | 16,959 | $ | 114 | $ | — | $ | — | $ | 16,845 | ||||||||||||||||||||||||||||||||||||||||||
Reverse repurchase agreements | 96,338 | — | 96,338 | — | 96,338 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||
Total | $ | 113,297 | $ | — | $ | 113,297 | $ | 114 | $ | 96,338 | $ | — | $ | 16,845 | ||||||||||||||||||||||||||||||||||||||||||
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|
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|
|
As of June 30, 2016 | ||||||||||||||||||||||||||||
Gross Amounts Not Offset in the Statement of Financial Position | ||||||||||||||||||||||||||||
(In thousands) | Gross Amount of Recognized Liabilities | Gross Amounts Offset in the Statement of Financial Position | Net Amounts of Liabilities Presented in the Statement of Financial Position | Financial Instruments | Securities Collateral Pledged | Cash Collateral Pledged | Net Amount | |||||||||||||||||||||
Derivatives | $ | 11,879 | $ | — | $ | 11,879 | $ | 286 | $ | 2,351 | $ | — | $ | 9,242 | ||||||||||||||
Repurchase agreements | 821,604 | — | 821,604 | — | 821,604 | — | — | |||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | $ | 833,483 | $ | — | $ | 833,483 | $ | 286 | $ | 823,955 | $ | — | $ | 9,242 | ||||||||||||||
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|
|
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|
As of December 31, 2015 | ||||||||||||||||||||||||||||
Gross Amounts Not Offset in the Statement of Financial Position | ||||||||||||||||||||||||||||
(In thousands) | Gross Amount of Recognized Assets | Gross Amounts Offset in the Statement of Financial Position | Net Amounts of Assets Presented in the Statement of Financial Position | Financial Instruments | Securities Collateral Received | Cash Collateral Received | Net Amount | |||||||||||||||||||||
Derivatives | $ | 16,959 | $ | — | $ | 16,959 | $ | 114 | $ | — | $ | — | $ | 16,845 | ||||||||||||||
Reverse repurchase agreements | 96,338 | — | 96,338 | — | 96,338 | — | — | |||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | $ | 113,297 | $ | — | $ | 113,297 | $ | 114 | $ | 96,338 | $ | — | $ | 16,845 | ||||||||||||||
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|
|
As of December 31, 2015 | As of December 31, 2015 | As of December 31, 2015 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Gross Amounts Not Offset in the Statement of Financial Position | Gross Amounts Not Offset in the Statement of Financial Position | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
(In thousands) | Gross Amount of Recognized Liabilities | Gross Amounts Offset in the Statement of Financial Position | Net Amounts of Liabilities Presented in the Statement of Financial Position | Financial Instruments | Securities Collateral Pledged | Cash Collateral Received | Net Amount | Gross Amount of Recognized Liabilities | Gross Amounts Offset in the Statement of Financial Position | Net Amounts of Liabilities Presented in the Statement of Financial Position | Financial Instruments | Securities Collateral Pledged | Cash Collateral Received | Net Amount | ||||||||||||||||||||||||||||||||||||||||||
Derivatives | $ | 14,343 | $ | — | $ | 14,343 | $ | 114 | $ | 4,050 | $ | — | $ | 10,179 | $ | 14,343 | $ | — | $ | 14,343 | $ | 114 | $ | 4,050 | $ | — | $ | 10,179 | ||||||||||||||||||||||||||||
Repurchase agreements | 712,145 | — | 712,145 | — | 712,145 | — | — | 712,145 | — | 712,145 | — | 712,145 | — | — | ||||||||||||||||||||||||||||||||||||||||||
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|
|
|
|
|
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|
|
| |||||||||||||||||||||||||||||||||||||||||||
Total | $ | 726,488 | $ | — | $ | 726,488 | $ | 114 | $ | 716,195 | $ | — | $ | 10,179 | $ | 726,488 | $ | — | $ | 726,488 | $ | 114 | $ | 716,195 | $ | — | $ | 10,179 | ||||||||||||||||||||||||||||
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The Corporation’s derivatives are subject to agreements which allow a right of set-off with each respective counterparty. In addition, the Corporation’s Repurchase Agreements and Reverse Repurchase Agreements have a right of set-off with the respective counterparty under the supplemental terms of the Master Repurchase Agreements. In an event of default each party has a right of set-off against the other party for amounts owed in the related agreement and any other amount or obligation owed in respect of any other agreement or transaction between them.
Note 20 – Stockholders’ equity
During the quartersix months ended March 31,June 30, 2016, the Corporation declared a cash dividendquarterly dividends on its common stock of $0.15 per share, on its outstanding common stock, which was paid on April 1, 2016for a total of $ 31.1 million. The quarterly dividend declared to shareholders of record atas of the close of business on March 11,June 10, 2016, which amounted to $15.6 million, was paid on July 1, 2016. This represents a payout of approximately $15.5 million.
BPPR statutory reserve
The Banking Act of the Commonwealth of Puerto Rico requires that a minimum of 10% of BPPR’s net income for the year be transferred to a statutory reserve account until such statutory reserve equals the total of paid-in capital on common and preferred stock. Any losses incurred by a bank must first be charged to retained earnings and then to the reserve fund. Amounts credited to the reserve fund may not be used to pay dividends without the prior consent of the Puerto Rico Commissioner of Financial Institutions. The failure to maintain sufficient statutory reserves would preclude BPPR from paying dividends. BPPR’s statutory reserve fund amounted to $495 million at March 31,June 30, 2016 (December 31, 2015—$4952015 - $495 million). There were no transfers between the statutory reserve account and the retained earnings account during the quarters and six months ended March 31,June 30, 2016 and March 31,June 30, 2015.
Note 21 – Other comprehensive loss
The following table presents changes in accumulated other comprehensive loss by component for the quarters and six months ended March 31,June 30, 2016 and 2015.
Changes in Accumulated Other Comprehensive Loss by Component [1] | ||||||||||||||||||||||||||||
Changes in Accumulated Other Comprehensive Loss by Component [1] | Quarters ended | Six months ended | ||||||||||||||||||||||||||
Quarters ended March 31, | June 30, | June 30, | ||||||||||||||||||||||||||
(In thousands) | 2016 | 2015 | (In thousands) | 2016 | 2015 | 2016 | 2015 | |||||||||||||||||||||
Foreign currency translation | Beginning Balance | $ | (35,930 | ) | $ | (32,832 | ) | Beginning Balance | $ | (36,635 | ) | $ | (33,413 | ) | $ | (35,930 | ) | $ | (32,832 | ) | ||||||||
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| |||||||||||||||||||||||||||
Other comprehensive loss before reclassifications | (705 | ) | (581 | ) |
|
|
|
| ||||||||||||||||||||
Amounts reclassified from accumulated other comprehensive loss | — | — | Other comprehensive loss before reclassifications | (1,435 | ) | (1,092 | ) | (2,140 | ) | (1,673 | ) | |||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||
Net change | (705 | ) | (581 | ) | Net change | (1,435 | ) | (1,092 | ) | (2,140 | ) | (1,673 | ) | |||||||||||||||
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|
|
|
|
| |||||||||||||||||||||||
Ending balance | $ | (36,635 | ) | $ | (33,413 | ) | Ending balance | $ | (38,070 | ) | $ | (34,505 | ) | $ | (38,070 | ) | $ | (34,505 | ) | |||||||||
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|
|
|
|
| |||||||||||||||||||||||
Adjustment of pension and postretirement benefit plans | Beginning Balance | $ | (211,276 | ) | $ | (205,187 | ) | Beginning Balance | $ | (208,510 | ) | $ | (202,701 | ) | $ | (211,276 | ) | $ | (205,187 | ) | ||||||||
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|
|
|
|
| |||||||||||||||||||||||
Amounts reclassified from accumulated other comprehensive loss for amortization of net losses | 3,346 | 3,065 | Amounts reclassified from accumulated other comprehensive loss for amortization of net losses | 3,347 | 3,065 | 6,693 | 6,130 | |||||||||||||||||||||
Amounts reclassified from accumulated other comprehensive loss for amortization of prior service cost | (580 | ) | (579 | ) | Amounts reclassified from accumulated other comprehensive loss for amortization of prior service cost | (580 | ) | (579 | ) | (1,160 | ) | (1,158 | ) | |||||||||||||||
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|
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|
|
| |||||||||||||||||||||||
Net change | 2,766 | 2,486 | Net change | 2,767 | 2,486 | 5,533 | 4,972 | |||||||||||||||||||||
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|
|
|
|
| |||||||||||||||||||||||
Ending balance | $ | (208,510 | ) | $ | (202,701 | ) | Ending balance | $ | (205,743 | ) | $ | (200,215 | ) | $ | (205,743 | ) | $ | (200,215 | ) | |||||||||
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|
|
| |||||||||||||||||||||||
Unrealized net holding gains on investments | Beginning Balance | $ | (9,560 | ) | $ | 8,465 | ||||||||||||||||||||||
Unrealized holding gains (losses) on investments | Beginning Balance | $ | 63,791 | $ | 42,750 | $ | (9,560 | ) | $ | 8,465 | ||||||||||||||||||
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|
|
|
|
| |||||||||||||||||||||||
Other comprehensive income before reclassifications | 73,351 | 34,285 | Other comprehensive income (loss) before reclassifications | 34,803 | (39,172 | ) | 108,154 | (4,887 | ) | |||||||||||||||||||
|
| Other-than-temporary impairment amount reclassified from accumulated other comprehensive income | 167 | 11,959 | 167 | 11,959 | ||||||||||||||||||||||
Net change | 73,351 | 34,285 | Amounts reclassified from accumulated other comprehensive income for gains on securities | — | (4 | ) | — | (4 | ) | |||||||||||||||||||
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Ending balance | $ | 63,791 | $ | 42,750 | Net change | 34,970 | (27,217 | ) | 108,321 | 7,068 | ||||||||||||||||||
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Unrealized net losses on cash flow hedges | Beginning Balance | $ | (120 | ) | $ | (318 | ) | |||||||||||||||||||||
Ending balance | $ | 98,761 | $ | 15,533 | $ | 98,761 | $ | 15,533 | ||||||||||||||||||||
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|
|
| |||||||||||||||||||||||||
Unrealized net (losses) gains on cash flow hedges | Beginning Balance | $ | (396 | ) | $ | (1,036 | ) | $ | (120 | ) | $ | (318 | ) | |||||||||||||||
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|
| |||||||||||||||||||||||
Other comprehensive loss before reclassifications | (1,219 | ) | (1,546 | ) | Other comprehensive (loss) income before reclassifications | (939 | ) | 612 | (2,158 | ) | (933 | ) | ||||||||||||||||
Amounts reclassified from other accumulated other comprehensive loss | 943 | 828 | Amounts reclassified from accumulated other comprehensive (loss) income | 775 | 580 | 1,718 | 1,407 | |||||||||||||||||||||
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|
|
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|
| |||||||||||||||||||||||
Net change | (276 | ) | (718 | ) | Net change | (164 | ) | 1,192 | (440 | ) | 474 | |||||||||||||||||
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|
| |||||||||||||||||||||||
Ending balance | $ | (396 | ) | $ | (1,036 | ) | Ending balance | $ | (560 | ) | $ | 156 | $ | (560 | ) | $ | 156 | |||||||||||
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| |||||||||||||||||||||||
Total | $ | (181,750 | ) | $ | (194,400 | ) | Total | $ | (145,612 | ) | $ | (219,031 | ) | $ | (145,612 | ) | $ | (219,031 | ) | |||||||||
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|
[1] | All amounts presented are net of tax. |
The following table presents the amounts reclassified out of each component of accumulated other comprehensive loss during the quarters and six months ended March 31,June 30, 2016 and 2015.
Reclassifications Out of Accumulated Other Comprehensive Loss | ||||||||||||||||||||||||||||
Reclassifications Out of Accumulated Other Comprehensive Loss | Quarters ended | Six months ended | ||||||||||||||||||||||||||
Affected Line Item in the | Quarters ended March 31, | Affected Line Item in the | June 30, | June 30, | ||||||||||||||||||||||||
(In thousands) | Consolidated Statements of Operations | 2016 | 2015 | Consolidated Statements of Operations | 2016 | 2015 | 2016 | 2015 | ||||||||||||||||||||
Adjustment of pension and postretirement benefit plans | ||||||||||||||||||||||||||||
Amortization of net losses | Personnel costs | $ | (5,486 | ) | $ | (5,025 | ) | Personnel costs | $ | (5,487 | ) | $ | (5,025 | ) | $ | (10,973 | ) | $ | (10,050 | ) | ||||||||
Amortization of prior service cost | Personnel costs | 950 | 950 | Personnel costs | 950 | 950 | 1,900 | 1,900 | ||||||||||||||||||||
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|
| |||||||||||||||||||||||
Total before tax | (4,536 | ) | (4,075 | ) | Total before tax | (4,537 | ) | (4,075 | ) | (9,073 | ) | (8,150 | ) | |||||||||||||||
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|
|
|
|
| |||||||||||||||||||||||
Income tax benefit | 1,770 | 1,589 | Income tax benefit | 1,770 | 1,589 | 3,540 | 3,178 | |||||||||||||||||||||
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|
|
|
| |||||||||||||||||||||||
Total net of tax | $ | (2,766 | ) | $ | (2,486 | ) | Total net of tax | $ | (2,767 | ) | $ | (2,486 | ) | $ | (5,533 | ) | $ | (4,972 | ) | |||||||||
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|
|
|
|
| |||||||||||||||||||||||
Unrealized net losses on cash flow hedges | ||||||||||||||||||||||||||||
Unrealized holding gains (losses) on investments | ||||||||||||||||||||||||||||
Other-than-temporary impairment | Other-than-temporary impairment losses on available-for-sale debt securities | $ | (209 | ) | $ | (14,445 | ) | $ | (209 | ) | $ | (14,445 | ) | |||||||||||||||
Realized gains on sale of securities | Net gain and valuation adjustments on investment securities | — | 5 | — | 5 | |||||||||||||||||||||||
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|
|
| |||||||||||||||||||||||||
Total before tax | (209 | ) | (14,440 | ) | (209 | ) | (14,440 | ) | ||||||||||||||||||||
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|
|
| |||||||||||||||||||||||||
Income tax benefit | 42 | 2,485 | 42 | 2,485 | ||||||||||||||||||||||||
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|
|
| |||||||||||||||||||||||||
Total net of tax | $ | (167 | ) | $ | (11,955 | ) | $ | (167 | ) | $ | (11,955 | ) | ||||||||||||||||
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|
|
| |||||||||||||||||||||||||
Unrealized net (losses) gains on cash flow hedges | ||||||||||||||||||||||||||||
Forward contracts | Mortgage banking activities | $ | (1,545 | ) | $ | (1,358 | ) | Mortgage banking activities | $ | (1,271 | ) | $ | (951 | ) | $ | (2,816 | ) | $ | (2,309 | ) | ||||||||
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|
|
|
|
| |||||||||||||||||||||||
Total before tax | (1,545 | ) | (1,358 | ) | Total before tax | (1,271 | ) | (951 | ) | (2,816 | ) | (2,309 | ) | |||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||
Income tax benefit | 602 | 530 | Income tax benefit | 496 | 371 | 1,098 | 902 | |||||||||||||||||||||
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|
|
|
|
| |||||||||||||||||||||||
Total net of tax | $ | (943 | ) | $ | (828 | ) | Total net of tax | $ | (775 | ) | $ | (580 | ) | $ | (1,718 | ) | $ | (1,407 | ) | |||||||||
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|
|
| |||||||||||||||||||||||
Total reclassification adjustments, net of tax | $ | (3,709 | ) | $ | (3,314 | ) | Total reclassification adjustments, net of tax | $ | (3,709 | ) | $ | (15,021 | ) | $ | (7,418 | ) | $ | (18,334 | ) | |||||||||
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At March 31,June 30, 2016, the Corporation recorded a liability of $0.7$0.6 million (December 31, 2015—$0.52015 - $0.5 million), which represents the unamortized balance of the obligations undertaken in issuing the guarantees under the standby letters of credit. Management does not anticipate any material losses related to these instruments.
From time to time, the Corporation securitized mortgage loans into guaranteed mortgage-backed securities subject to limited, and in certain instances, lifetime credit recourse on the loans that serve as collateral for the mortgage-backed securities. The Corporation has not sold any mortgage loans subject to credit recourse since 2009. At March 31,June 30, 2016, the Corporation serviced $1.8$ 1.8 billion (December 31, 2015—2015 - $1.9 billion) in residential mortgage loans subject to credit recourse provisions, principally loans associated with FNMA and FHLMC residential mortgage loan securitization programs. In the event of any customer default, pursuant to the credit recourse provided, the Corporation is required to repurchase the loan or reimburse the third party investor for the incurred loss. The maximum potential amount of future payments that the Corporation would be required to make under the recourse arrangements in the event of nonperformance by the borrowers is equivalent to the total outstanding balance of the residential mortgage loans serviced with recourse and interest, if applicable. During the quarter and six months ended March 31,June 30, 2016, the Corporation repurchased approximately $ 1310 million and $ 23 million, respectively, of unpaid principal balance in mortgage loans subject to the credit recourse provisions (March 31,(June 30, 2015—-$ 16 million)14 million and $ 30 million, respectively). In the event of nonperformance by the borrower, the Corporation has rights to the underlying collateral securing the mortgage loan. The Corporation suffers ultimate losses on these loans when the proceeds from a foreclosure sale of the property underlying a defaulted mortgage loan are less than the outstanding principal balance of the loan plus any uncollected interest advanced and the costs of holding and disposing the related property. At March 31,June 30, 2016, the Corporation’s liability established to cover the estimated credit loss exposure related to loans sold or serviced with credit recourse amounted to $ 5857 million (December 31, 2015—2015 - $ 59 million).
The following table shows the changes in the Corporation’s liability of estimated losses related to loans serviced with credit recourse provisions during the quarters and six month periods ended March 31,June 30, 2016 and 2015.
March 31, | Quarters ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
(In thousands) | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | ||||||||||||||||||
Balance as of beginning of period | $ | 58,663 | $ | 59,438 | $ | 57,994 | $ | 59,385 | $ | 58,663 | $ | 59,438 | ||||||||||||
Provision for recourse liability | 3,920 | 6,500 | 3,607 | 4,368 | 7,527 | 10,868 | ||||||||||||||||||
Net charge-offs | (4,589 | ) | (6,553 | ) | (4,670 | ) | (6,164 | ) | (9,259 | ) | (12,717 | ) | ||||||||||||
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|
|
| |||||||||||||||||||
Balance as of end of period | $ | 57,994 | $ | 59,385 | $ | 56,931 | $ | 57,589 | $ | 56,931 | $ | 57,589 | ||||||||||||
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When the Corporation sells or securitizes mortgage loans, it generally makes customary representations and warranties regarding the characteristics of the loans sold. To the extentextend the loans do not meet specified characteristics, the Corporation may be required to repurchase such loans or indemnify for losses and bear any subsequent loss related to the loans. During the quarterssix months period ended March 31,June 30, 2016, and March 31, 2015, BPPR did not repurchase loans under representation and warranty arrangements. Repurchases during the six months ended June 30, 2015 were minimal. A substantial amount of these loans reinstate to performing status or have mortgage insurance, and thus the ultimate losses on the loans are not deemed significant.
From time to time, the Corporation sells loans and agrees to indemnify the purchaser for credit losses or any breach of certain representations and warranties made in connection with the sale. The following table presents the changes in the Corporation’s liability for estimated losses associated with indemnifications and representations and warranties related to loans sold by BPPR for the quarters and six months ended March 31,June 30, 2016 and 2015.
Quarters ended June 30, | Six months ended June 30, | |||||||||||||||
(In thousands) | 2016 | 2015 | 2016 | 2015 | ||||||||||||
Balance as of beginning of period | $ | 8,002 | $ | 14,044 | $ | 8,087 | $ | 15,959 | ||||||||
Provision (reversal) for representation and warranties | 2,695 | (5,707 | ) | 2,801 | (7,608 | ) | ||||||||||
Net recoveries (charge-offs) | 5 | (25 | ) | (186 | ) | (39 | ) | |||||||||
Settlements paid | — | (2,250 | ) | — | (2,250 | ) | ||||||||||
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| |||||||||
Balance as of end of period | $ | 10,702 | $ | 6,062 | $ | 10,702 | $ | 6,062 | ||||||||
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|
|
(In thousands) Balance as of beginning of period Provision (reversal) for representation and warranties Net charge-offs Balance as of end of period 2016 2015 $ 8,087 $ 15,959 106 (1,901 ) (191 ) (14 ) $ 8,002 $ 14,044
In addition, at March 31, 2016, the Corporation has reserves for customary representations and warranties related to loans sold by its U.S. subsidiary E-LOAN prior to 2009. These loans were sold to investors on a servicing released basis subject to certain representation and warranties. Although the risk of loss or default was generally assumed by the investors, the Corporation made certain representations relating to borrower creditworthiness, loan documentation and collateral,2009, which if not correct, may result in requiring the Corporation to repurchase the loans or indemnify investors for any related losses associated with these loans. At March 31, 2016, the Corporation’s reserve for estimated losses from such representation and warranty arrangements amounted to $ 4 million which was included as part of other liabilities in the consolidated statement of financial conditionat June 30, 2016 (December 31, 2015—2015 - $ 4 million). E-LOAN is no longer originating and selling loans since the subsidiary ceased these activities in 2008 and most of the outstanding agreements with major counterparties were settled during 2010 and 2011.loans.
Servicing agreements relating to the mortgage-backed securities programs of FNMA and GNMA, and to mortgage loans sold or serviced to certain other investors, including FHLMC, require the Corporation to advance funds to make scheduled payments of principal, interest, taxes and insurance, if such payments have not been received from the borrowers. At March 31,June 30, 2016, the Corporation serviced $20.3$20.0 billion in mortgage loans for third-parties, including the loans serviced with credit recourse (December 31, 2015—$20.62015 - $20.6 billion). The Corporation generally recovers funds advanced pursuant to these arrangements from the mortgage owner, from liquidation proceeds when the mortgage loan is foreclosed or, in the case of FHA/VA loans, under the applicable FHA and VA insurance and guarantees programs. However, in the meantime, the Corporation must absorb the cost of the funds it advances during the time the advance is outstanding. The Corporation must also bear the costs of attempting to collect on delinquent and defaulted mortgage loans. In addition, if a defaulted loan is not cured, the mortgage loan would be canceled as part of the foreclosure proceedings and the Corporation would not receive any future servicing income with respect to that loan. At March 31,June 30, 2016, the outstanding balance of funds advanced by the Corporation under such mortgage loan servicing agreements was approximately $76$75 million, including advances on the portfolio acquired from Doral Bank (March(December 31, 2015—$312015 - $80 million). To the extent the mortgage loans underlying the Corporation’s servicing portfolio experience increased delinquencies, the Corporation would be required to dedicate additional cash resources to comply with its obligation to advance funds as well as incur additional administrative costs related to increases in collection efforts.
Popular, Inc. Holding Company (“PIHC”) fully and unconditionally guarantees certain borrowing obligations issued by certain of its wholly-owned consolidated subsidiaries amounting to $ 0.2 billion149 million at March 31,June 30, 2016 (December 31, 2015—2015 - $ 0.2 billion)149 million). In addition, at March 31,June 30, 2016 and December 31, 2015, PIHC fully and unconditionally guaranteed on a subordinated basis $ 0.4 billion427 million and $ 0.4 billion,427 million, respectively, of capital securities (trust preferred securities) issued by wholly-owned issuing trust entities to the extent set forth in the applicable guarantee agreement.
Note 23 – Commitments and contingencies
Off-balance sheet risk
The Corporation is a party to financial instruments with off-balance sheet credit risk in the normal course of business to meet the financial needs of its customers. These financial instruments include loan commitments, letters of credit, and standby letters of credit. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated statements of financial condition.
The Corporation’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit, standby letters of credit and financial guarantees written is represented by the contractual notional amounts of those instruments. The Corporation uses the same credit policies in making these commitments and conditional obligations as it does for those reflected on the consolidated statements of financial condition.
Financial instruments with off-balance sheet credit risk, whose contract amounts represent potential credit risk as of the end of the periods presented were as follows:
(In thousands) | March 31, 2016 | December 31, 2015 | June 30, 2016 | December 31, 2015 | ||||||||||||
Commitments to extend credit: | ||||||||||||||||
Credit card lines | $ | 4,562,439 | $ | 4,552,331 | $ | 4,572,786 | $ | 4,552,331 | ||||||||
Commercial and construction lines of credit | 2,711,061 | 2,619,092 | 2,490,300 | 2,619,092 | ||||||||||||
Other consumer unused credit commitments | 259,134 | 262,685 | 259,613 | 262,685 | ||||||||||||
Commercial letters of credit | 1,560 | 2,040 | 1,709 | 2,040 | ||||||||||||
Standby letters of credit | 36,252 | 49,670 | 34,821 | 49,670 | ||||||||||||
Commitments to originate or fund mortgage loans | 25,079 | 21,311 | 24,941 | 21,311 |
At March 31,June 30, 2016 and December 31, 2015, the Corporation maintained a reserve of approximately $9 million and $10 million, respectively, for potential losses associated with unfunded loan commitments related to commercial and consumer lines of credit.
Other commitments
At March 31,June 30, 2016 and December 31, 2015, the Corporation also maintained other non-credit commitments for approximately $372 thousand and $9 million, respectively, primarily for the acquisition of other investments.
Business concentration
Since the Corporation’s business activities are currently concentrated primarily in Puerto Rico, its results of operations and financial condition are dependent upon the general trends of the Puerto Rico economy and, in particular, the residential and commercial real estate markets. The concentration of the Corporation’s operations in Puerto Rico exposes it to greater risk than other banking companies with a wider geographic base. Its asset and revenue composition by geographical area is presented in Note 35 to the consolidated financial statements.
Since February 2014, the three principal rating agencies (Moody’s, S&P and Fitch) have lowered their ratings on the General Obligation bonds of the Commonwealth and the bonds of several other Commonwealth instrumentalities to non-investment grade ratings. In connection with their rating actions, the rating agencies noted various factors, including high levels of public debt, the lack of a clear economic growth catalyst, recurring fiscal budget deficits, the financial condition of the public sector employee pension plans and, more recently, liquidity concerns regarding the Commonwealth and the GDB and their ability to access the capital markets. Currently, the Commonwealth’s general obligation ratings are as follows: S&P, ‘CC’, Moody’s, ‘Caa3’, and Fitch, ‘CC’.
At March 31,June 30, 2016, the Corporation’s direct exposure to the Puerto Rico government and its instrumentalities and municipalities amounted to $ 656609 million, of which approximately $ 565582 million is outstanding ($669 million and $ 578 million, respectively, at December 31, 2015). Of the amount outstanding, $ 490505 million consists of loans and $ 7577 million are securities ($ 502 million and $ 76 million at December 31, 2015). Also, of the amount outstanding, $ 6162 million represents obligations from the Government of Puerto Rico and public corporations that have a specific source of income or revenues identified for their repayment ($ 76 million at December 31, 2015). Some of these obligations consist of senior and subordinated loans to public corporations that obtain
revenues from rates charged for services or products, such as public utilities. Public corporations have varying degrees of
independence from the central Government and many receive appropriations or other payments from it. At June 30, 2016, BPPR is a lender in a syndicated credit facility to PREPA and its exposure was of $39.5 million. The facility is classified as held-for-sale as BPPR has the ability and intent to sell the loan. The remaining $ 504520 million outstanding represents obligations from various municipalities in Puerto Rico for which, in most cases, the good faith, credit and unlimited taxing power of the applicable municipality has been pledged to their repayment ($ 502 million at December 31, 2015). These municipalities are required by law to levy special property taxes in such amounts as shall be required for the payment of all of its general obligation bonds and loans. These loans have seniority to the payment of operating cost and expenses of the municipality. Further deterioration of the fiscal crisis of the Government of Puerto Rico could further affect the value of these loans and securities, resulting in losses to us. At March 31, 2016, BPPR is a lender in a syndicated credit facility to PREPA and its exposure was of $40.9 million. The facility is classified as held-for-sale as BPPR has the ability and intent to sell the loan. The following table details the loans and investments representing the Corporation’s direct exposure to the Puerto Rico government according to their maturities:
(In thousands) | Investment Portfolio | Loans | Total Outstanding | Total Exposure | Investment Portfolio | Loans | Total Outstanding | Total Exposure | ||||||||||||||||||||||||
Central Government | ||||||||||||||||||||||||||||||||
Within 1 year | $ | — | $ | — | $ | — | $ | 50,794 | ||||||||||||||||||||||||
After 1 to 5 years | 887 | — | 887 | 887 | $ | 851 | $ | — | $ | 851 | $ | 851 | ||||||||||||||||||||
After 5 to 10 years | 3,044 | — | 3,044 | 3,044 | 3,480 | — | 3,480 | 3,480 | ||||||||||||||||||||||||
After 10 years | 13,688 | — | 13,688 | 13,688 | 15,265 | — | 15,265 | 15,265 | ||||||||||||||||||||||||
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|
| |||||||||||||||||||||||||
Total Central Government | 17,619 | — | 17,619 | 68,413 | 19,596 | — | 19,596 | 19,596 | ||||||||||||||||||||||||
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Government Development Bank (GDB) | ||||||||||||||||||||||||||||||||
Within 1 year | 3 | — | 3 | 3 | 3 | — | 3 | 3 | ||||||||||||||||||||||||
After 1 to 5 years | 1,092 | — | 1,092 | 1,092 | 1,675 | — | 1,675 | 1,675 | ||||||||||||||||||||||||
After 5 to 10 years | 360 | — | 360 | 360 | 48 | — | 48 | 48 | ||||||||||||||||||||||||
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| |||||||||||||||||||||||||
Total Government Development Bank (GDB) | 1,455 | — | 1,455 | 1,455 | 1,726 | — | 1,726 | 1,726 | ||||||||||||||||||||||||
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Public Corporations: | ||||||||||||||||||||||||||||||||
Puerto Rico Aqueduct and Sewer Authority | ||||||||||||||||||||||||||||||||
Within 1 year | — | — | — | 27,186 | — | — | — | 27,186 | ||||||||||||||||||||||||
After 10 years | 464 | — | 464 | 464 | 480 | — | 480 | 480 | ||||||||||||||||||||||||
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| |||||||||||||||||||||||||
Total Puerto Rico Aqueduct and Sewer Authority | 464 | — | 464 | 27,650 | 480 | — | 480 | 27,666 | ||||||||||||||||||||||||
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Puerto Rico Electric Power Authority | ||||||||||||||||||||||||||||||||
Within 1 year | — | 40,914 | 40,914 | 40,914 | — | 39,544 | 39,544 | 39,544 | ||||||||||||||||||||||||
After 10 years | 22 | — | 22 | 22 | 23 | — | 23 | 23 | ||||||||||||||||||||||||
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Total Puerto Rico Electric Power Authority | 22 | 40,914 | 40,936 | 40,936 | 23 | 39,544 | 39,567 | 39,567 | ||||||||||||||||||||||||
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Puerto Rico Highways and Transportation Authority | ||||||||||||||||||||||||||||||||
After 5 to 10 years | 4 | — | 4 | 4 | 4 | — | 4 | 4 | ||||||||||||||||||||||||
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Total Puerto Rico Highways and Transportation Authority | 4 | — | 4 | 4 | 4 | — | 4 | 4 | ||||||||||||||||||||||||
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Municipalities | ||||||||||||||||||||||||||||||||
Within 1 year | 3,050 | 56,956 | 60,006 | 73,324 | 3,050 | 23,747 | 26,797 | 26,797 | ||||||||||||||||||||||||
After 1 to 5 years | 14,270 | 130,935 | 145,205 | 145,205 | 14,270 | 130,935 | 145,205 | 145,205 | ||||||||||||||||||||||||
After 5 to 10 years | 18,930 | 138,187 | 157,117 | 157,117 | 18,930 | 146,762 | 165,692 | 165,692 | ||||||||||||||||||||||||
After 10 years | 18,690 | 123,371 | 142,061 | 142,061 | 18,690 | 163,756 | 182,446 | 182,446 | ||||||||||||||||||||||||
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Total Municipalities | 54,940 | 449,449 | 504,389 | 517,707 | 54,940 | 465,200 | 520,140 | 520,140 | ||||||||||||||||||||||||
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Total Direct Government Exposure | $ | 74,504 | $ | 490,363 | $ | 564,867 | $ | 656,165 | $ | 76,769 | $ | 504,744 | $ | 581,513 | $ | 608,699 | ||||||||||||||||
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In addition, at March 31,June 30, 2016, the Corporation had $417$418 million in indirect exposure to loans or securities that are payable by non-governmental entities, but which carry a government guarantee to cover any shortfall in collateral in the event of borrower default ($394 million at December 31, 2015). These included $339$334 million in residential mortgage loans that are guaranteed by the Puerto Rico Housing Finance Authority (December 31, 2015—$3162015 - $316 million). These mortgage loans are secured by the underlying properties and the guarantees serve to cover shortfalls in collateral in the event of a borrower default. Under recently enacted legislation, the Governor is authorized to impose a temporary moratorium on the financial obligations of Puerto Housing Finance Authority. Also, the Corporation had $51 million in Puerto Rico pass-through housing bonds backed by FNMA, GNMA or residential loans CMO’s, and $27$33 million of commercial real estate notes ($50 million and $28 million at December 31, 2015, respectively).
Other contingencies
As indicated in Note 11 to the consolidated financial statements, as part of the loss sharing agreements related to the Westernbank FDIC-assisted transaction, the Corporation agreed to make a true-up payment to the FDIC on the date that is 45 days following the last day of the final shared loss month, or upon the final disposition of all covered assets under the loss sharing agreements in the event losses on the loss sharing agreements fail to reach expected levels. The fair value of the true-up payment obligation was estimated at $ 120128 million at March 31,June 30, 2016 (December 31, 2015—2015 - $ 120 million). For additional information refer to Note 11.
Legal Proceedings
The nature of Popular’s business ordinarily results in a certain number of claims, litigation, investigations, and legal and administrative cases and proceedings. When the Corporation determines that it has meritorious defenses to the claims asserted, it vigorously defends itself. The Corporation will consider the settlement of cases (including cases where it has meritorious defenses) when, in management’s judgment, it is in the best interest of both the Corporation and its shareholders to do so.
On at least a quarterly basis, Popular assesses its liabilities and contingencies in connection with outstanding legal proceedings utilizing the latest information available. For matters where it is probable that the Corporation will incur a material loss and the amount can be reasonably estimated, the Corporation establishes an accrual for the loss. Once established, the accrual is adjusted on at least a quarterly basis as appropriate to reflect any relevant developments. For matters where a material loss is not probable or the amount of the loss cannot be estimated, no accrual is established.
In certain cases, exposure to loss exists in excess of the accrual to the extent such loss is reasonably possible, but not probable. Management believes and estimates that the aggregate range of reasonably possible losses (with respect to those matters where such limits may be determined, in excess of amounts accrued), for current legal proceedings ranges from $0 to approximately $37.3$37.6 million as of March 31,June 30, 2016. For certain other cases, management cannot reasonably estimate the possible loss at this time. Any estimate involves significant judgment, given the varying stages of the proceedings (including the fact that many of them are currently in preliminary stages), the existence of multiple defendants in several of the current proceedings whose share of liability has yet to be determined, the numerous unresolved issues in many of the proceedings, and the inherent uncertainty of the various potential outcomes of such proceedings. Accordingly, management’s estimate will change from time-to-time, and actual losses may be more or less than the current estimate.
While the final outcome of legal proceedings is inherently uncertain, based on information currently available, advice of counsel, and available insurance coverage, management believes that the amount it has already accrued is adequate and any incremental liability arising from the Corporation’s legal proceedings will not have a material adverse effect on the Corporation’s consolidated financial position as a whole. However, in the event of unexpected future developments, it is possible that the ultimate resolution of these matters, if unfavorable, may be material to the Corporation’s consolidated financial position in a particular period.
Set forth below are descriptions of the Corporation’s material legal proceedings.
PCB has been named a defendant in a putative class action complaint captionedJosefina Valle, et al. v. Popular Community Bank,filed in November 2012 in the New York State Supreme Court (New York County). Plaintiffs, PCB customers, allege among other things that PCB has engaged in unfair and deceptive acts and trade practices in connection with the assessment of overdraft fees and payment processing on consumer deposit accounts. The complaint further alleges that PCB improperly disclosed its consumer overdraft policies and, additionally, that the overdraft rates and fees assessed by PCB violate New York’s usury laws. The complaint seeks unspecified damages, including punitive damages, interest, disbursements, and attorneys’ fees and costs.
PCB removed the case to federal court (SDNY) and plaintiffs subsequently filed a motion to remand the action to state court, which the Court granted on August 6, 2013. A motion to dismiss was filed on September 9, 2013. On October 25, 2013, plaintiffs filed an amended complaint seeking to limit the putative class to New York account holders. A motion to dismiss the amended complaint was filed in February 2014. In August 2014, the Court entered an order granting in part PCB’s motion to dismiss. The sole surviving claim relates to PCB’s item processing policy. On September 10, 2014, plaintiffs filed a motion for leave to file a second amended complaint to correct certain deficiencies noted in the court’s decision and order. PCB subsequently filed a motion in opposition to
plaintiff’s motion for leave to amend and further sought to compel arbitration. In June 2015, this matter was reassigned to a new
judge and on July 22, 2015, such Court denied PCB’s motion to compel arbitration and granted plaintiffs’ motion for leave to amend the complaint to replead certain claims based on item processing reordering, misstatement of balance information and failure to notify customers in advance of potential overdrafts. The Court did not, however, allow plaintiffs to replead their claim for the alleged breach of the implied covenant of good faith and fair dealing. On August 12, 2015, the Plaintiffs filed a second amended complaint. On August 24, 2015, PCB filed a Notice of Appeal as to the order granting leave to file the second amended complaint and on September 17, 2015, it filed a motion to dismiss the second amended complaint. On February 18, 2016, the Court granted in part and denied in part PCB’s pending motion to dismiss. The Court dismissed plaintiffs’ unfair and deceptive acts and trade practices claim to the extent it sought to recover overdraft fees incurred prior to September 2011. On March 28, 2016, PCB filed an answer to second amended complaint and on April 7, 2016, it filed a notice of appeal the partial denial of PCB’s motion to dismiss. Plaintiffs are to file a motion requesting class certification by August 19, 2016. Discovery is ongoing.
BPPR has been named a defendant in a putative class action complaint captionedNeysha Quiles et al. v. Banco Popular de Puerto Rico et al., filed in December 2013 in the United States District Court for the District of Puerto Rico (USDC-PR). Plaintiffs essentially allege that they and others, who have been employed by the Defendants as “bank tellers” and other similarly titled positions, have been paid only for scheduled work time, rather than time actually worked. The complaint seeks to maintain a collective action under the Fair Labor Standards Act (“FLSA”) on behalf of all individuals formerly or currently employed by BPPR in Puerto Rico and the Virgin Islands as hourly paid, non-exempt, bank tellers or other similarly titled positions at any time during the past three years. Specifically, the complaint alleges that BPPR violated FLSA by willfully failing to pay overtime premiums. Similar claims were brought under Puerto Rico law. On January 31, 2014, the Popular defendants filed an answer to the complaint. On January 9, 2015, plaintiffs submitted a motion for conditional class certification, which BPPR opposed. On February 18, 2015, the Court entered an order whereby it granted plaintiffs’ request for conditional certification of the FLSA action. Following the Court’s order, plaintiffs sent out notices to all purported class members with instructions for opting into the class. Approximately sixty potential class members opted into the class prior to the expiration of the opt-in period. On June 25, 2015, the Court denied with prejudice plaintiffs’ motion for class certification under Rule 23 of the Federal Rules of Civil Procedure. On October 20, 2015, the parties reached an agreement in principle to resolve the referenced action for an immaterial amount, subject to their reaching an agreement on the payment of reasonable attorneys’ fees. The parties submitted briefing to the Court on this issue and are currently awaiting the Court’s final determination.
BPPR and Popular Securities have also been named defendants in a putative class action complaint captionedNora Fernandez, et al. v. UBS, et al., filed in the United States District Court for the Southern District of New York (SDNY) on May 5, 2014 on behalf of investors in 23 Puerto Rico closed-end investment companies. UBS Financial Services Incorporated of Puerto Rico, another named defendant, is the sponsor and co-sponsor of all 23 funds, while BPPR was co-sponsor, together with UBS, of nine (9) of those funds. Plaintiffs allege breach of fiduciary duty and breach of contract against Popular Securities, aiding and abetting breach of fiduciary duty against BPPR, and similar claims against the UBS entities. The complaint seeks unspecified damages, including disgorgement of fees and attorneys’ fees. On May 30, 2014, plaintiffs voluntarily dismissed their class action in the SDNY and on that same date, they filed a virtually identical complaint in the USDC-PR and requested that the case be consolidated with the matter ofIn re: UBS Financial Services Securities Litigation, a class action currently pending before the USDC-PR in which neither BPPR nor Popular Securities are parties. The UBS defendants filed an opposition to the consolidation request and moved to transfer the case back to the SDNY on the ground that the relevant agreements between the parties contain a choice of forum clause, with New York as the selected forum. The Popular defendants joined thisthe opposition and motion.motion filed by UBS. By order dated January 30, 2015, the court denied the plaintiffs’ motion to consolidate. By order dated March 30, 2015, the court granted defendants’ motion to transfer. On May 8, 2015, plaintiffs filed an amended complaint in the SDNY containing virtually identical allegations with respect to Popular Securities and BPPR. Defendants filed motions to dismiss the amended complaint on June 18, 2015. Those motions remainare pending to date.the Court’s determination.
BPPR has beenwas named a defendant in a putative class action complaint titledIn re 2014 RadioShack ERISA Litigation, filed in U.S. District Court for the Northern District of Texas. The complaint alleges that certain employees of RadioShack incurred losses in their 401(k) plans because various fiduciaries elected to retain RadioShack’s company stock in the portfolio of potential investment options. The complaint further asserts that once RadioShack’s financial situation began to deteriorate in 2011, the fiduciaries of the RadioShack 401(k) Plan and the RadioShack Puerto Rico 1165(e) Plan (collectively, “the Plans”) should have removed RadioShack company stock from the portfolio of potential investment options.
Popular was a directed trustee, and therefore a fiduciary, of the RadioShack Puerto Rico 1165(e) Plan (“PR Plan”). Even though the PR Plan directed BPPR to retain RadioShack company stock within the portfolio of investment options, the complaint alleges that a
trustee’s duty of prudence requires it to disregard plan documents or directives that it knows or reasonably should know would lead to an imprudent result or would otherwise harm plan participants or beneficiaries. It further alleges that BPPR breached its fiduciary duties by (i) failing to take any meaningful steps to protect plan participants from losses that it knew would occur; (ii) failing to divest the PR Plan of company stock; and (iii) participating in the decisions of another trustee (Wells Fargo) to protect the Plans from inevitable losses.
On November 23, 2015, the parties attended a mediation session, as a result of which the parties agreed to settle this matter for an immaterial amount, with BPPR contributing approximately $45,000. On February 22, 2016, the RadioShack defendants submitted an opposition to the bar provisions of BPPR’s proposed settlement whereby they conditioned such settlement to BPPR’s agreement to a proportional methodology to any subsequent settlement. Under this scenario, BPPR could remainhave remained potentially liable for an additional proportional amount, should plaintiffs appeal the dismissal of their claim and win on appeal. AOn July 18, 2016, the court held a settlement fairness hearing has been set for July 18, 2016.whereby it accepted the parties’ settlement agreement in all relevant respects concluding this matter with respect to BPPR.
Other Matters
The volatility in prices and declines in value that Puerto Rico municipal bonds and closed-end investment companies that invest primarily in Puerto Rico municipal bonds have experienced since August 2013 have led to regulatory inquiries, customer complaints and arbitrations for most broker-dealers in Puerto Rico, including Popular Securities, a wholly owned subsidiary of the Corporation.Securities. Popular Securities has received customer complaints and is named as a respondent (among other broker-dealers) in 5658 arbitration proceedings with aggregate claimed damages of approximately $136$140 million, including one arbitration with claimed damages of $78 million in which one other Puerto Rico broker-dealer is a co-defendant. The proceedings are in their early stages and it is the view of the Corporation that Popular Securities has meritorious defenses to the claims asserted. The Government’s recent announcements regardingdefaults on its ability to pay its debt, and its intention to pursue a comprehensive debt restructuring, including specifically its decision on May 2, 2016decisions to declare a moratorium on certain principal payments on bonds including those issued by Government Development Bank for Puerto Rico (the “GDB”), may increase the number of customer complaints (and claimed damages) against Popular Securities concerning Puerto Rico bonds, including bonds issued by GDB, and closed-end investment companies that invest primarily in Puerto Rico bonds. An adverse result in the matters described above or a significant increase in customer complaints could have a material adverse effect on Popular.
As mortgage lenders, the Corporation and its subsidiaries from time to time receive requests for information from departments of the U.S. government that investigate mortgage-related conduct. In particular, the BPPR has received subpoenas and other requests for information from the Federal Housing Finance Agency’s Office of the Inspector General, the Civil Division of the Department of Justice and the Special Inspector General for the Troubled Asset Relief Program mainly concerning mortgages and real estate appraisals in Puerto Rico. The Corporation is cooperating with these requests.
Other Significant Proceedings
As described under “Note 11 – FDIC loss share asset and true-up payment obligation”, in connection with the Westernbank FDIC-assisted transaction, on April 30, 2010, BPPR entered into loss share agreements with the FDIC, as receiver, with respect to the covered loans and other real estate owned “(OREO”) that it acquired in the transaction. Pursuant to the terms of the loss share agreements, the FDIC’s obligation to reimburse BPPR for losses with respect to covered assets begins with the first dollar of loss incurred. The FDIC reimburses BPPR for 80% of losses with respect to covered assets, and BPPR reimburses the FDIC for 80% of recoveries with respect to losses for which the FDIC paid 80% reimbursement under those loss share agreements. The loss share agreements contain specific terms and conditions regarding the management of the covered assets that BPPR must follow in order to receive reimbursement for losses from the FDIC. BPPR believes that it has complied with such terms and conditions. The loss share agreement applicable to the covered commercial and OREO described below provides for loss sharing by the FDIC through the quarter ending June 30, 2015 and for reimbursement to the FDIC for recoveries through the quarter ending June 30, 2018.
For the quarters ended June 30, 2010 through March 31, 2012, BPPR received reimbursement for loss-share claims submitted to the FDIC, including charge-offs for certain commercial late stage real-estate-collateral-dependent loans and OREO calculated in accordance with BPPR’s charge-off policy for non-covered assets. When BPPR submitted its shared-loss claim in connection with the June 30, 2012 quarter, however, the FDIC refused to reimburse BPPR for a portion of the claim because of a difference related to the methodology for the computation of charge-offs for certain commercial late stage real-estate-collateral-dependent loans and
OREO. In accordance with the terms of the commercial loss share agreement, BPPR applied a methodology for charge-offs for late stage real-estate-collateral-dependent loans that conforms to its regulatory supervisory criteria and is calculated in accordance with BPPR’s charge-off policy for non-covered assets. The FDIC stated that it believed that BPPR should use a different methodology for those charge-offs. Notwithstanding the FDIC’s refusal to reimburse BPPR for certain shared-loss claims, BPPR had continued to calculate shared-loss claims for quarters subsequent to June 30, 2012 in accordance with its charge-off policy for non-covered assets.
BPPR’s loss share agreements with the FDIC specify that disputes can be submitted to arbitration before a review board under the commercial arbitration rules of the American Arbitration Association. On July 31, 2013, BPPR filed a statement of claim with the American Arbitration Association requesting that a review board determine certain matters relating to the loss-share claims under its commercial loss share agreement with the FDIC, including that the review board award BPPR the amounts owed under its unpaid quarterly certificates. The statement of claim also included requests for reimbursement of certain valuation adjustments for discounts to appraised values, costs to sell troubled assets and other items. The review board was comprised of one arbitrator appointed by BPPR, one arbitrator appointed by the FDIC and a third arbitrator selected by agreement of those arbitrators.
On October 17, 2014, BPPR and the FDIC settled all claims and counterclaims that had been submitted to the review board. The settlement provides for an agreed valuation methodology for reimbursement of charge-offs for late stage real-estate-collateral-dependent loans and resulting OREO. BPPR applied this valuation methodology to charge-offs claimed on late stage real-estate-collateral-dependent loans and resulting OREO during the remaining term of the commercial loss-sharing agreement which expired on June 30, 2015.
On November 25, 2014, the FDIC notified BPPR that it (a) would not reimburse BPPR under the commercial loss share agreement for a $66.6 million loss claim on eight related real estate loans that BPPR restructured and consolidated (collectively, the “Disputed Asset”), and (b) would no longer treat the Disputed Asset as a “Shared-Loss Asset” under the commercial loss share agreement. The FDIC alleged that BPPR’s restructure and modification of the underlying loans did not constitute a “Permitted Amendment” under the commercial loss share agreement, thereby causing the bank to breach Article III of the commercial loss share agreement. BPPR disagrees with the FDIC’s determinations relating to the Disputed Asset, and accordingly, on December 19, 2014, delivered to the FDIC a notice of dispute under the commercial loss share agreement.
On March 19, 2015, BPPR filed a statement of claim with the American Arbitration Association requesting that a review board determine BPPR and the FDIC’s disputes concerning the Disputed Asset. The statement of claim requests a declaration that the Disputed Asset is a “Shared-Loss Asset” under the commercial loss share agreement, a declaration that the restructuring is a “Permitted Amendment” under the commercial loss share agreement, and an order that the FDIC reimburse the bank for approximately $53.3 million for the Charge-Off of the Disputed Asset, plus interest at the applicable rate. On April 1, 2015, the FDIC notified BPPR that it was clawing back approximately $1.7 million in reimbursable expenses relating to the Disputed Asset that the FDIC had previously paid to BPPR. Thus, on April 13, 2015, BPPR notified the American Arbitration Association and the FDIC of an increase in the amount of its damages by approximately $1.7 million. The review board in the arbitration concerning the Disputed Asset is comprised of one arbitrator appointed by BPPR, one arbitrator appointed by the FDIC and a third arbitrator selected by agreement of those arbitrators. The arbitration hearing has been scheduled for August 2016.
In addition, in November and December 2014, BPPR proposed separate portfolio sales of Shared-Loss Assets to the FDIC. The FDIC refused to consent to either sale, stating that those sales did not represent best efforts to maximize collections on Shared-Loss Assets under the commercial loss share agreement. In March 2015, BPPR proposed a third portfolio sale to the FDIC, and in May 2015, BPPR proposed a fourth portfolio sale to the FDIC.
BPPR disagrees with the FDIC’s characterization of the November and December 2014 portfolio sale proposals and with the FDIC’s interpretation of the commercial loss share agreement provision governing portfolio sales. Accordingly, on March 13, 2015, BPPR delivered to the FDIC a notice of dispute under the commercial loss share agreement. On June 8, 2015, BPPR filed a statement of claim with the American Arbitration Association requesting that a review board resolve the disputes concerning those proposed portfolio sales. On June 15, 2015, BPPR amended its statement of claim to include a claim for the FDIC-R’s refusal to timely concur in the third sale proposed in March 2015. On June 29, 2015, the FDIC informed BPPR that it would reimburse the bank for losses arising from the primary portfolio of the third proposed sale, but only subject to conditions to which BPPR objected. The FDIC also informed BPPR that it would not concur in the sale of the remainder (the “secondary portfolio”) of the third proposed sale or in the fourth proposed sale. On September 4, 2015, BPPR filed a second amended statement of claim concerning the FDIC’s refusal to
concur in the third and fourth portfolio sales as proposed by BPPR.
On November 25, 2015, BPPR conducted an auctioncompleted the sale of the loans in the primary portfolio of the third proposed sale, and intends to submitsubsequently submitted a claim for reimbursement for a portion of theits losses arising from that sale.sale, which the FDIC partially reimbursed on July 18, 2016. On June 30, 2016, BPPR completed the sales of the remaining loans included in the proposed portfolio sales.
In connection with the arbitration concerning the proposed portfolio sales, BPPR is seeking damages in the amount of $88.5 million plus interest. The FDIC has filed a counterclaim for recoveries allegedly lost on six loans included in the third proposed sale and on the loans and related assets included in the subsequent sales. The review board in the arbitration concerning the proposed portfolio sales is comprised of one arbitrator appointed by BPPR, one arbitrator appointed by the FDIC and a third arbitrator selected by agreement of those arbitrators. The arbitration hearing is scheduled to be held in the fall of 2016. The FDIC’s counterclaim will be adjudicated by the review board after it issues an award on the other issues in the portfolio sales arbitration.
On November 12, 2015, the FDIC notified BPPR that it (a) would deny certain claims included in BPPR’s Second Quarter 2015 Quarterly Certificate and (b) withhold payment of approximately $5.5 million attributed to the $6.9 million in losses claimed under the denied claims. In support of its denial, the FDIC alleged that BPPR did not comply with its obligation under the commercial loss share agreement, including compliance with certain provisions of GAAP, acting in accordance with prudent banking practices, managing Shared-Loss Assets in the same manner as BPPR’s non-Shared-Loss Assets, and using best efforts to maximize collections on the Shared-Loss Assets. BPPR disagrees with the FDIC’s allegations relating to the denied claims included in BPPR’s Second Quarter 2015 Quarterly Certificate, and accordingly, on January 27, 2016 delivered to the FDIC a notice of dispute under the commercial loss share agreement. On May 20, 2016, BPPR filed a demand for arbitration with the American Arbitration Association requesting that a review board resolve the disputes arising from BPPR’s filing of the Second Quarter 2015 Quarterly Certificate and award BPPR damages in the amount of $4.9 million. On June 29, 2016, the FDIC filed its answering statement and counterclaim, seeking a declaration that the FDIC properly denied a portion of the bank’s shared-loss claim for one of the subject assets. The review board in the arbitration concerning the proposed portfolio sales is comprised of one arbitrator appointed by BPPR, one arbitrator appointed by the FDIC and a third arbitrator to be selected by agreement of those arbitrators. The arbitration hearing has not yet been scheduled.
The commercial shared-loss arrangement described above expired on June 30, 2015.2015, when the three year recovery period commenced. As of March 31,June 30, 2016, BPPR had unreimbursed loss claims related to the commercial loss-sharingthis arrangement amounting to approximately $149$142 million, reflected in the FDIC indemnification asset as a receivable from the FDIC, which are subject to the arbitration proceedings described above. This figure may continue to increase to the extent that the assets that are the subject of the portfolio sales arbitration further decline in value. Until these disputes are finally resolved, the terms of the commercial loss share agreement will remain in effect with respect to any such items under dispute. No assurance can be given that we will receive reimbursement from the FDIC with respect to the foregoing items, which could require us to make a material adjustment to the value of our loss share asset and the related true uptrue-up payment obligation to the FDIC and could have a material adverse effect on our financial results for the period in which such adjustment is taken.
The loss sharing agreement applicable to single-family residential mortgage loans provides for FDIC loss sharing and BPPR reimbursement to the FDIC for ten years (ending on June 30, 2020), and the loss sharing agreement applicable to commercial and other assets provides for FDIC loss sharing and BPPR reimbursement to the FDIC for five years (which ended on. As of June 30, 2015), with additional recovery sharing for three years thereafter. As of March 31, 2016, the carrying value of covered loans approximated $625$607 million, mainly comprised of single-family residential mortgage loans. To the extent that estimated losses on covered loans are not realized before the expiration of the applicable loss sharing agreement, such losses would not be subject to reimbursement from the FDIC and, accordingly, would require us to make a material adjustment in the value of our loss share asset and the related true up payment obligation to the FDIC and could have a material adverse effect on our financial results for the period in which such adjustment is taken.
Note 24 – Non-consolidated variable interest entities
The Corporation is involved with four statutory trusts which it established to issue trust preferred securities to the public. These trusts are deemed to be variable interest entities (“VIEs”) since the equity investors at risk have no substantial decision-making rights. The Corporation does not hold any variable interest in the trusts, and therefore, cannot be the trusts’ primary beneficiary. Furthermore, the Corporation concluded that it did not hold a controlling financial interest in these trusts since the decisions of the trusts are predetermined through the trust documents and the guarantee of the trust preferred securities is irrelevant since in substance the sponsor is guaranteeing its own debt.
Also, the Corporation is involved with various special purpose entities mainly in guaranteed mortgage securitization transactions, including GNMA and FNMA. These special purpose entities are deemed to be VIEs since they lack equity investments at risk. The Corporation’s continuing involvement in these guaranteed loan securitizations includes owning certain beneficial interests in the form of securities as well as the servicing rights retained. The Corporation is not required to provide additional financial support to any of the variable interest entities to which it has transferred the financial assets. The mortgage-backed securities, to the extent retained, are classified in the Corporation’s consolidated statements of financial condition as available-for-sale or trading securities. The Corporation concluded that, essentially, these entities (FNMA and GNMA) control the design of their respective VIEs, dictate the quality and nature of the collateral, require the underlying insurance, set the servicing standards via the servicing guides and can change them at will, and can remove a primary servicer with cause, and without cause in the case of FNMA. Moreover, through their guarantee obligations, agencies (FNMA and GNMA) have the obligation to absorb losses that could be potentially significant to the VIE.
ASU 2009-17 requires that an ongoing primary beneficiary assessment should be made to determine whether the Corporation is the primary beneficiary of any of the VIEs it is involved with. The conclusion on the assessment of these trusts and guaranteed mortgage securitization transactions has not changed since their initial evaluation. The Corporation concluded that it is still not the primary beneficiary of these VIEs, and therefore, these VIEs are not required to be consolidated in the Corporation’s financial statements at March 31,June 30, 2016.
The Corporation holds variable interests in these VIEs in the form of agency mortgage-backed securities and collateralized mortgage obligations, including those securities originated by the Corporation and those acquired from third parties. Additionally, the Corporation holds agency mortgage-backed securities, agency collateralized mortgage obligations and private label collateralized mortgage obligations issued by third party VIEs in which it has no other form of continuing involvement. Refer to Note 26 to the consolidated financial statements for additional information on the debt securities outstanding at March 31,June 30, 2016 and December 31, 2015, which are classified as available-for-sale and trading securities in the Corporation’s consolidated statements of financial condition. In addition, the Corporation may retain the right to service the transferred loans in those government-sponsored special purpose entities (“SPEs”) and may also purchase the right to service loans in other government-sponsored SPEs that were transferred to those SPEs by a third-party. Pursuant to ASC Subtopic 810-10, the servicing fees that the Corporation receives for its servicing role are considered variable interests in the VIEs since the servicing fees are subordinated to the principal and interest that first needs to be paid to the mortgage-backed securities’ investors and to the guaranty fees that need to be paid to the federal agencies.
The following table presents the carrying amount and classification of the assets related to the Corporation’s variable interests in non-consolidated VIEs and the maximum exposure to loss as a result of the Corporation’s involvement as servicer with non-consolidated VIEs at March 31,June 30, 2016 and December 31, 2015.
(In thousands) | March 31, 2016 | December 31, 2015 | June 30, 2016 | December 31, 2015 | ||||||||||||
Assets | ||||||||||||||||
Servicing assets: | ||||||||||||||||
Mortgage servicing rights | $ | 156,250 | $ | 163,224 | $ | 160,384 | $ | 163,224 | ||||||||
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Total servicing assets | $ | 156,250 | $ | 163,224 | $ | 160,384 | $ | 163,224 | ||||||||
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Other assets: | ||||||||||||||||
Servicing advances | $ | 21,941 | $ | 24,431 | $ | 21,753 | $ | 24,431 | ||||||||
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Total other assets | $ | 21,941 | $ | 24,431 | $ | 21,753 | $ | 24,431 | ||||||||
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Total assets | $ | 178,191 | $ | 187,655 | $ | 182,137 | $ | 187,655 | ||||||||
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Maximum exposure to loss | $ | 178,191 | $ | 187,655 | $ | 182,137 | $ | 187,655 | ||||||||
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The size of the non-consolidated VIEs, in which the Corporation has a variable interest in the form of servicing fees, measured as the total unpaid principal balance of the loans, amounted to $12.7$12.6 billion at March 31,June 30, 2016 (December 31, 2015—$12.82015 - $12.8 billion).
Maximum exposure to loss represents the maximum loss, under a worst case scenario, that would be incurred by the Corporation, as servicer for the VIEs, assuming all loans serviced are delinquent and that the value of the Corporation’s interests and any associated collateral declines to zero, without any consideration of recovery. The Corporation determined that the maximum exposure to loss includes the fair value of the MSRs and the assumption that the servicing advances at March 31,June 30, 2016 and December 31, 2015, will not be recovered. The agency debt securities are not included as part of the maximum exposure to loss since they are guaranteed by the related agencies.
In September of 2011, BPPR sold construction and commercial real estate loans with a fair value of $148 million, and most of which were non-performing, to a newly created joint venture, PRLP 2011 Holdings, LLC. The joint venture was created for the limited purpose of acquiring the loans from BPPR; servicing the loans through a third-party servicer; ultimately working out, resolving and/or foreclosing the loans; and indirectly owning, operating, constructing, developing, leasing and selling any real properties acquired by the joint venture through deed in lieu of foreclosure, foreclosure, or by resolution of any loan.
BPPR provided financing to the joint venture for the acquisition of the loans in an amount equal to the sum of 57 %57% of the purchase price of the loans, or $84 million, and $2 million of closing costs, for a total acquisition loan of $86 million (the “acquisition loan”). The acquisition loan has a 5-year maturity and bears a variable interest at 30-day LIBOR plus 300 basis points and is secured by a pledge of all of the acquiring entity’s assets. In addition, BPPR provided the joint venture with a non-revolving advance facility (the “advance facility”) of $68.5 million to cover unfunded commitments and costs-to-complete related to certain construction projects, and a revolving working capital line (the “working capital line”) of $20 million to fund certain operating expenses of the joint venture. Cash proceeds received by the joint venture are first used to cover debt service payments for the acquisition loan, advance facility, and the working capital line described above which must be paid in full before proceeds can be used for other purposes. The distributable cash proceeds are determined based on a pro-rata basis in accordance with the respective equity ownership percentages. BPPR’s equity interest in the joint venture ranks pari-passu with those of other parties involved. As part of the transaction executed in September 2011, BPPR received $ 48 million in cash and a 24.9 %24.9% equity interest in the joint venture. The Corporation is not required to provide any other financial support to the joint venture.
BPPR accounted for this transaction as a true sale pursuant to ASC Subtopic 860-10 and thus recognized the cash received, its equity investment in the joint venture, and the acquisition loan provided to the joint venture and derecognized the loans sold.
The Corporation has determined that PRLP 2011 Holdings, LLC is a VIE but it is not the primary beneficiary. All decisions are made by Caribbean Property Group (“CPG”) (or an affiliate thereof) (the “Manager”), except for certain limited material decisions which would require the unanimous consent of all members. The Manager is authorized to execute and deliver on behalf of the joint venture any and all documents, contracts, certificates, agreements and instruments, and to take any action deemed necessary in the benefit of the joint venture.
The Corporation holds variable interests in this VIE in the form of the 24.9 %24.9% equity interest (the “Investment in PRLP 2011 Holdings, LLC”) and the financing provided to the joint venture. The equity interest is accounted for under the equity method of accounting pursuant to ASC Subtopic 323-10.
The initial fair value of the Corporation’s equity interest in the joint venture was determined based on the fair value of the loans and real estate owned transferred to the joint venture of $148 million which represented the purchase price of the loans agreed by the
parties and was an arm’s-length transaction between market participants in accordance with ASC Topic 820, reduced by the acquisition loan provided by BPPR to the joint venture, for a total net equity of $63 million. Accordingly, the 24.9% equity interest held by the Corporation was valued at $16 million. Thus, the fair value of the equity interest is considered a Level 2 fair value measurement since the inputs were based on observable market inputs.
The following table presents the carrying amount and classification of the assets and liabilities related to the Corporation’s variable interests in the non-consolidated VIE, PRLP 2011 Holdings, LLC, and its maximum exposure to loss at March 31,June 30, 2016 and December 31, 2015.
(In thousands) | March 31, 2016 | December 31, 2015 | June 30, 2016 | December 31, 2015 | ||||||||||||
Assets | ||||||||||||||||
Loans held-in-portfolio: | ||||||||||||||||
Advances under the working capital line | $ | — | $ | 579 | $ | — | $ | 579 | ||||||||
Advances under the advance facility | — | 401 | — | 401 | ||||||||||||
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Total loans held-in-portfolio | $ | — | $ | 980 | $ | — | $ | 980 | ||||||||
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|
|
| |||||||||||||
Accrued interest receivable | $ | — | $ | 10 | $ | — | $ | 10 | ||||||||
Other assets: | ||||||||||||||||
Investment in PRLP 2011 Holdings LLC | $ | 10,749 | $ | 13,069 | $ | 9,076 | $ | 13,069 | ||||||||
|
|
|
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Total assets | $ | 10,749 | $ | 14,059 | $ | 9,076 | $ | 14,059 | ||||||||
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|
|
| |||||||||||||
Deposits | $ | (3,347 | ) | $ | (18,808 | ) | $ | (2,806 | ) | $ | (18,808 | ) | ||||
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| |||||||||||||
Total liabilities | $ | (3,347 | ) | $ | (18,808 | ) | $ | (2,806 | ) | $ | (18,808 | ) | ||||
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| |||||||||||||
Total net assets (liabilities) | $ | 7,402 | $ | (4,749 | ) | $ | 6,270 | $ | (4,749 | ) | ||||||
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Maximum exposure to loss | $ | 7,402 | $ | — | $ | 6,270 | $ | — | ||||||||
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The Corporation determined that the maximum exposure to loss under a worst case scenario at March 31,June 30, 2016 would be not recovering the equity interest held by the Corporation, net of the deposits.
On March 25, 2013, BPPR completed a sale of assets with a book value of $509.0 million, of which $500.6 million were in non-performing status, comprised of commercial and construction loans, and commercial and single family real estate owned, with a combined unpaid principal balance on loans and appraised value of other real estate owned of approximately $987.0 million to a newly created joint venture, PR Asset Portfolio 2013-1. The joint venture was created for the limited purpose of acquiring the loans from BPPR; servicing the loans through a third-party servicer; ultimately working out, resolving and/or foreclosing the loans; and indirectly owning, operating, constructing, developing, leasing and selling any real properties acquired by the joint venture through deed in lieu of foreclosure, foreclosure, or by resolution of any loan.
BPPR provided financing to the joint venture for the acquisition of the assets in an amount equal to the sum of 57 %57% of the purchase price of the assets, and closing costs, for a total acquisition loan of $182.4 million (the “acquisition loan”). The acquisition loan has a 5-year maturity and bears a variable interest at 30-day LIBOR plus 300 basis points and is secured by a pledge of all of the acquiring entity’s assets. In addition, BPPR provided the joint venture with a non-revolving advance facility (the “advance facility”) of $35.0 million to cover unfunded commitments and costs-to-complete related to certain construction projects, and a revolving working capital line (the “working capital line”) of $30.0 million to fund certain operating expenses of the joint venture. Cash proceeds received by the joint venture are first used to cover debt service payments for the acquisition loan, advance facility, and the working capital line described above which must be paid in full before proceeds can be used for other purposes. The distributable cash proceeds are determined based on a pro-rata basis in accordance with the respective equity ownership percentages. BPPR’s equity interest in the joint venture ranks pari-passu with those of other parties involved. As part of the transaction executed in March 2013, BPPR received $92.3 million in cash and a 24.9 %24.9% equity interest in the joint venture. The Corporation is not required to provide any other financial support to the joint venture.
BPPR accounted for this transaction as a true sale pursuant to ASC Subtopic 860-10 and thus recognized the cash received, its equity investment in the joint venture, and the acquisition loan provided to the joint venture and derecognized the loans and real estate owned sold.
The Corporation has determined that PR Asset Portfolio 2013-1 International, LLC is a VIE but the Corporation is not the primary beneficiary. All decisions are made by CPG (or an affiliate thereof) (the “Manager”), except for certain limited material decisions which would require the unanimous consent of all members. The Manager is authorized to execute and deliver on behalf of the joint venture any and all documents, contracts, certificates, agreements and instruments, and to take any action deemed necessary in the benefit of the joint venture. Also, the Manager delegates the day-to-day management and servicing of the loans to PR Asset Portfolio Servicing International, LLC, an affiliate of CPG.
The initial fair value of the Corporation’s equity interest in the joint venture was determined based on the fair value of the loans and real estate owned transferred to the joint venture of $306 million which represented the purchase price of the loans agreed by the parties and was an arm’s-length transaction between market participants in accordance with ASC Topic 820, reduced by the acquisition loan provided by BPPR to the joint venture, for a total net equity of $124 million. Accordingly, the 24.9% equity interest held by the Corporation was valued at $31 million. Thus, the fair value of the equity interest is considered a Level 2 fair value measurement since the inputs were based on observable market inputs.
The Corporation holds variable interests in this VIE in the form of the 24.9 %24.9% equity interest (the “Investment in PR Asset Portfolio 2013-1 International, LLC”) and the financing provided to the joint venture. The equity interest is accounted for under the equity method of accounting pursuant to ASC Subtopic 323-10.
The following table presents the carrying amount and classification of the assets and liabilities related to the Corporation’s variable interests in the non-consolidated VIE, PR Asset Portfolio 2013-1 International, LLC, and its maximum exposure to loss at March 31,June 30, 2016 and December 31, 2015.
(In thousands) | March 31, 2016 | December 31, 2015 | June 30, 2016 | December 31, 2015 | ||||||||||||
Assets | Assets |
| ||||||||||||||
Loans held-in-portfolio: | ||||||||||||||||
Acquisition loan | $ | 9,932 | $ | 35,121 | $ | — | $ | 35,121 | ||||||||
Advances under the working capital line | 829 | 885 | 794 | 885 | ||||||||||||
Advances under the advance facility | 24,267 | 22,296 | 24,649 | 22,296 | ||||||||||||
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| |||||||||||||
Total loans held-in-portfolio | $ | 35,028 | $ | 58,302 | $ | 25,443 | $ | 58,302 | ||||||||
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Accrued interest receivable | $ | 130 | �� | $ | 169 | $ | 82 | $ | 169 | |||||||
Other assets: | ||||||||||||||||
Investment in PR Asset Portfolio 2013-1 International, LLC | $ | 24,572 | $ | 25,094 | $ | 24,771 | $ | 25,094 | ||||||||
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Total assets | $ | 59,730 | $ | 83,565 | $ | 50,296 | $ | 83,565 | ||||||||
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Deposits | $ | (10,360 | ) | $ | (11,772 | ) | $ | (10,558 | ) | $ | (11,772 | ) | ||||
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| |||||||||||||
Total liabilities | $ | (10,360 | ) | $ | (11,772 | ) | $ | (10,558 | ) | $ | (11,772 | ) | ||||
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Total net assets | $ | 49,370 | $ | 71,793 | $ | 39,738 | $ | 71,793 | ||||||||
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Maximum exposure to loss | $ | 49,370 | $ | 71,793 | $ | 39,738 | $ | 71,793 | ||||||||
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|
The Corporation determined that the maximum exposure to loss under a worst case scenario at March 31,June 30, 2016 would be not recovering the carrying amount of the acquisition loan, the advances on the advance facility, andthe working capital line, if any, and the equity interest held by the Corporation, net of the deposits.
Note 25 – Related party transactions
EVERTEC
The Corporation has an investment in EVERTEC, Inc. (“EVERTEC”), which provides various processing and information technology services to the Corporation and its subsidiaries and gives BPPR access to the ATH network owned and operated by EVERTEC. As of March 31,June 30, 2016, the Corporation’s stake in EVERTEC was 15.58%15.74%.The Corporation continues to have significant influence over EVERTEC. Accordingly, the investment in EVERTEC is accounted for under the equity method and is evaluated for impairment if events or circumstances indicate that a decrease in value of the investment has occurred that is other than temporary.
As disclosed inOn May 26, 2016, EVERTEC, Inc. filed its recent SEC filings, EVERTEC has announced that it will restate its financial statements as ofAnnual Report on Form 10-K for the year ended December 31, 2015, which included restated audited results for the years ended December 31, 2014 and 2013, correcting certain errors involved with the accounting for tax positions taken by EVERTEC in the 2010 tax year and for the three year period ending in December 31, 2014 and asother miscellaneous accounting adjustments. The Corporation’s proportionate share of the endcumulative impact of EVERTEC’s restatement and for each quarterly period in 2014 and 2015. Specifically, EVERTEC identified an accounting position that required reevaluation with respectother corrective adjustments to a net operating loss pertaining to certain 2010 expenditures. These expenditures resulted in a deferred tax asset of approximately $14 million as of December 31, 2010 which is being reevaluated along with any additional related tax liabilities and the impact in subsequent periods. As of the date of this filing, EVERTEC has not completed its restatement of its financial statements was approximately $2.2 million and therefore Popular’s results for the first quarteris reflected as part of 2016 do not include the impact of any related adjustments, which would be limited to our 15.58% ownership stake. Popular does not expect that the impact of these adjustments will have a material effect on its financial statements.other non-interest income.
The Corporation received $ 1.22.3 million in dividend distributions during the quartersix months ended March 31,June 30, 2016 from its investments in EVERTEC’s holding company (March 31, 2015—(June 30, 2015 - $ 1.22.3 million). The Corporation’s equity in EVERTEC is presented in the table which follows and is included as part of “other assets” in the consolidated statements of financial condition.
(In thousands) | March 31, 2016 | December 31, 2015 | June 30, 2016 | December 31, 2015 | ||||||||||||
Equity investment in EVERTEC | $ | 35,162 | $ | 33,590 | $ | 35,073 | $ | 33,590 | ||||||||
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|
The Corporation had the following financial condition balances outstanding with EVERTEC at March 31,June 30, 2016 and December 31, 2015. Items that represent liabilities to the Corporation are presented with parenthesis.
(In thousands) | March 31, 2016 | December 31, 2015 | June 30, 2016 | December 31, 2015 | ||||||||||||
Accounts receivable (Other assets) | $ | 2,980 | $ | 3,148 | $ | 2,909 | $ | 3,148 | ||||||||
Deposits | (21,322 | ) | (23,973 | ) | (15,660 | ) | (23,973 | ) | ||||||||
Accounts payable (Other liabilities) | (17,480 | ) | (16,192 | ) | (17,308 | ) | (16,192 | ) | ||||||||
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|
| |||||||||||||
Net total | $ | (35,822 | ) | $ | (37,017 | ) | $ | (30,059 | ) | $ | (37,017 | ) | ||||
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|
|
The Corporation’s proportionate share of income or loss from EVERTEC is included in other operating income in the consolidated statements of operations. The following table presents the Corporation’s proportionate share of EVERTEC’s income (loss) and changes in stockholders’ equity was immaterial for the quarters and six months ended March 31,June 30, 2016 and 2015.
Quarter ended | Six months ended | |||||||
(In thousands) | June 30, 2016 | June 30, 2016 | ||||||
Share of income from the investment in EVERTEC | $ | 3,185 | $ | 6,199 | ||||
Share of other changes in EVERTEC’s stockholders’ equity | (1,537 | ) | (1,325 | ) | ||||
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| |||||
Share of EVERTEC’s changes in equity recognized in income | $ | 1,648 | $ | 4,874 | ||||
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Quarter ended | Six months ended | |||||||
(In thousands) | June 30, 2015 | June 30, 2015 | ||||||
Share of income from the investment in EVERTEC | $ | 3,046 | $ | 5,915 | ||||
Share of other changes in EVERTEC’s stockholders’ equity | 214 | 565 | ||||||
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| |||||
Share of EVERTEC’s changes in equity recognized in income | $ | 3,260 | $ | 6,480 | ||||
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The following tables present the impact of transactions and service payments between the Corporation and EVERTEC (as an affiliate) and their impact on the results of operations for the quarters and six months ended March 31,June 30, 2016 and 2015. Items that represent expenses to the Corporation are presented with parenthesis.
Quarters ended March 31, | Quarter ended | Six months ended | ||||||||||||||||||||
(In thousands) | 2016 | 2015 | Category | June 30, 2016 | June 30, 2016 | Category | ||||||||||||||||
Interest expense on deposits | $ | (19 | ) | $ | (11 | ) | Interest expense | $ | (17 | ) | $ | (36 | ) | Interest expense | ||||||||
ATH and credit cards interchange income from services to EVERTEC | 6,918 | 6,487 | Other service fees | 7,497 | 14,415 | Other service fees | ||||||||||||||||
Rental income charged to EVERTEC | 1,736 | 1,724 | Net occupancy | 1,736 | 3,472 | Net occupancy | ||||||||||||||||
Processing fees on services provided by EVERTEC | (43,516 | ) | (39,504 | ) | Professional fees | (43,262 | ) | (86,778 | ) | Professional fees | ||||||||||||
Other services provided to EVERTEC | 256 | 324 | Other operating expenses | 258 | 514 | Other operating expenses | ||||||||||||||||
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Total | $ | (34,625 | ) | $ | (30,980 | ) | $ | (33,788 | ) | $ | (68,413 | ) | ||||||||||
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Quarter ended | Six months ended | |||||||||||||||||||||
(In thousands) | June 30, 2015 | June 30, 2015 | Category | |||||||||||||||||||
Interest expense on deposits | $ | (15 | ) | $ | (26 | ) | Interest expense | |||||||||||||||
ATH and credit cards interchange income from services to EVERTEC | 7,166 | 13,653 | Other service fees | |||||||||||||||||||
Rental income charged to EVERTEC | 1,723 | 3,447 | Net occupancy | |||||||||||||||||||
Processing fees on services provided by EVERTEC | (41,946 | ) | (81,450 | ) | Professional fees | |||||||||||||||||
Other services provided to EVERTEC | 384 | 708 | Other operating expenses | |||||||||||||||||||
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Total | $ | (32,688 | ) | $ | (63,668 | ) | ||||||||||||||||
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EVERTEC had a letter of credit issued by BPPR, for anthe amount of $ 4.2 million at December 31, 2015, which expired on February 10, 2016.
PRLP 2011 Holdings LLC
As indicated in Note 24 to the consolidated financial statements, the Corporation holds a 24.9 %24.9% equity interest in PRLP 2011 Holdings LLC and currently holds certain deposits from the entity.
The Corporation’s equity in PRLP 2011 Holdings, LLC is presented in the table which follows and is included as part of “other assets” in the consolidated statements of financial condition.
(In thousands) | March 31, 2016 | December 31, 2015 | June 30, 2016 | December 31, 2015 | ||||||||||||
Equity investment in PRLP 2011 Holdings, LLC | $ | 10,749 | $ | 13,069 | $ | 9,076 | $ | 13,069 |
The Corporation had the following financial condition balances outstanding with PRLP 2011 Holdings, LLC at March 31,June 30, 2016 and December 31, 2015.
(In thousands) | March 31, 2016 | December 31, 2015 | June 30, 2016 | December 31, 2015 | ||||||||||||
Loans | $ | — | $ | 980 | $ | — | $ | 980 | ||||||||
Accrued interest receivable | — | 10 | — | 10 | ||||||||||||
Deposits (non-interest bearing) | (3,347 | ) | (18,808 | ) | (2,806 | ) | (18,808 | ) | ||||||||
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Net total | $ | (3,347 | ) | $ | (17,818 | ) | $ | (2,806 | ) | $ | (17,818 | ) | ||||
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The Corporation’s proportionate share of income or loss from PRLP 2011 Holdings, LLC is included in other operating income in the consolidated statements of operations. The following table presents the Corporation’s proportionate share of income (loss) from PRLP 2011 Holdings, LLC for the quarters and six months ended March 31,June 30, 2016 and 2015.
Quarters ended March 31, | ||||||||
(In thousands) | 2016 | 2015 | ||||||
Share of (loss) income from the equity investment in PRLP 2011 Holdings, LLC | $ | (542 | ) | $ | 1,033 | |||
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(In thousands) Share of loss from the equity investment in PRLP 2011 Holdings, LLC (In thousands) Share of loss from the equity investment in PRLP 2011 Holdings, LLC Quarter ended Six months ended June 30, 2016 June 30, 2016 $ (52 ) $ (594 ) Quarter ended Six months ended June 30, 2015 June 30, 2015 $ (2,863 ) $ (1,830 )
The following table presents transactions between the Corporation and PRLP 2011 Holdings, LLC and their impact on the Corporation’s results of operations for the quarters and six months ended March 31,June 30, 2016 and 2015.
Quarters ended March 31, | Quarter ended | Six months ended | ||||||||||||||||||||
(In thousands) | 2016 | 2015 | Category | June 30, 2016 | June 30, 2016 | Category | ||||||||||||||||
Interest income on loan to PRLP 2011 Holdings, LLC | $ | 11 | $ | 62 | Interest income | $ | — | $ | 11 | Interest income |
Quarter ended | Six months ended | |||||||||
(In thousands) | June 30, 2015 | June 30, 2015 | Category | |||||||
Interest income on loan to PRLP 2011 Holdings, LLC | $ | 51 | $ | 113 | Interest income |
PR Asset Portfolio 2013-1 International, LLC
As indicated in Note 24 to the consolidated financial statements, effective March 2013 the Corporation holds a 24.9 %24.9% equity interest in PR Asset Portfolio 2013-1 International, LLC and currently provides certain financing to the joint venture as well as holds certain deposits from the entity.
The Corporation’s equity in PR Asset Portfolio 2013-1 International, LLC is presented in the table which follows and is included as part of “other assets” in the consolidated statements of financial condition.
(In thousands) | March 31, 2016 | December 31, 2015 | June 30, 2016 | December 31, 2015 | ||||||||||||
Equity investment in PR Asset Portfolio 2013-1 International, LLC | $ | 24,572 | $ | 25,094 | $ | 24,771 | $ | 25,094 |
The Corporation had the following financial condition balances outstanding with PR Asset Portfolio 2013-1 International, LLC, at March 31,June 30, 2016 and December 31, 2015.
(In thousands) | March 31, 2016 | December 31, 2015 | June 30, 2016 | December 31, 2015 | ||||||||||||
Loans | $ | 35,028 | $ | 58,302 | $ | 25,443 | $ | 58,302 | ||||||||
Accrued interest receivable | 130 | 169 | 82 | 169 | ||||||||||||
Deposits | (10,360 | ) | (11,772 | ) | (10,558 | ) | (11,772 | ) | ||||||||
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| |||||||||||||
Net total | $ | 24,798 | $ | 46,699 | $ | 14,967 | $ | 46,699 | ||||||||
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|
The Corporation’s proportionate share of income or loss from PR Asset Portfolio 2013-1 International, LLC is included in other operating income in the consolidated statements of operations. The following table presents the Corporation’s proportionate share of lossincome (loss) from PR Asset Portfolio 2013-1 International, LLC for the quarters and six months ended March 31,June 30, 2016 and 2015.
Quarter ended | Six months ended | |||||||||||||||
(In thousands) | June 30, 2016 | June 30, 2016 | ||||||||||||||
Share of income (loss) from the equity investment in PR Asset Portfolio 2013-1 International, LLC | $ | 199 | $ | (323 | ) | |||||||||||
Quarters ended March 31, | Quarter ended | Six months ended | ||||||||||||||
(In thousands) | 2016 | 2015 | June 30, 2015 | June 30, 2015 | ||||||||||||
Share of loss from the equity investment in PR Asset Portfolio 2013-1 International, LLC | $ | (522 | ) | $ | (4,335 | ) | $ | (133 | ) | $ | (4,468 | ) |
The following table presents transactions between the Corporation and PR Asset Portfolio 2013-1 International, LLC and their impact on the Corporation’s results of operations for the quarters and six months ended March 31,June 30, 2016 and 2015.
Quarters ended March 31, | Quarter ended | Six months ended | ||||||||||||||||||||||
(In thousands) | 2016 | 2015 | Category | June 30, 2016 | June 30, 2016 | Category | ||||||||||||||||||
Interest income on loan to PR Asset Portfolio 2013-1 International, LLC | $ | 445 | $ | 866 | Interest income | $ | 289 | $ | 734 | Interest income | ||||||||||||||
Interest expense on deposits | (1 | ) | — | Interest expense | (1 | ) | (2 | ) | Interest expense | |||||||||||||||
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Total | $ | 444 | $ | 866 | $ | 288 | $ | 732 | ||||||||||||||||
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Quarter ended | Six months ended | |||||||||||||||||||||||
(In thousands) | June 30, 2015 | June 30, 2015 | Category | |||||||||||||||||||||
Interest income on loan to PR Asset Portfolio 2013-1 International, LLC | $ | 747 | $ | 1,613 | Interest income | |||||||||||||||||||
Servicing fee paid by PR Asset Portfolio 2013-1 International, LLC | (1 | ) | (1 | ) | Other service fees | |||||||||||||||||||
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Total | $ | 746 | $ | 1,612 | ||||||||||||||||||||
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Note 26 – Fair value measurement
ASC Subtopic 820-10 “Fair Value Measurements and Disclosures” establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels in order to increase consistency and comparability in fair value measurements and disclosures. The hierarchy is broken down into three levels based on the reliability of inputs as follows:
• | Level 1- Unadjusted quoted prices in active markets for identical assets or liabilities that the Corporation has the ability to access at the measurement date. Valuation on these instruments does not necessitate a significant degree of judgment since valuations are based on quoted prices that are readily available in an active market. |
• | Level 2- Quoted prices other than those included in Level 1 that are observable either directly or indirectly. Level 2 inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or that can be corroborated by observable market data for substantially the full term of the financial instrument. |
• | Level 3- Inputs are unobservable and significant to the fair value measurement. Unobservable inputs reflect the Corporation’s own assumptions about assumptions that market participants would use in pricing the asset or liability. |
The Corporation maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the observable inputs be used when available. Fair value is based upon quoted market prices when available. If listed prices or quotes are not available, the Corporation employs internally-developed models that primarily use market-based inputs including yield curves, interest rates, volatilities, and credit curves, among others. Valuation adjustments are limited to those necessary to ensure that the financial instrument’s fair value is adequately representative of the price that would be received or paid in the marketplace. These adjustments include amounts that reflect counterparty credit quality, the Corporation’s credit standing, constraints on liquidity and unobservable parameters that are applied consistently. There have been no changes in the Corporation’s methodologies used to estimate the fair value of assets and liabilities from those disclosed in the 2015 Form 10-K.
The estimated fair value may be subjective in nature and may involve uncertainties and matters of significant judgment for certain financial instruments. Changes in the underlying assumptions used in calculating fair value could significantly affect the results.
Fair Value on a Recurring and Nonrecurring Basis
The following fair value hierarchy tables present information about the Corporation’s assets and liabilities measured at fair value on a recurring basis at March 31,June 30, 2016 and December 31, 2015:
At March 31, 2016 | ||||||||||||||||||||||||||||||||
At June 30, 2016 | At June 30, 2016 | |||||||||||||||||||||||||||||||
(In thousands) | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||
RECURRING FAIR VALUE MEASUREMENTS | ||||||||||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||
Investment securities available-for-sale: | ||||||||||||||||||||||||||||||||
U.S. Treasury securities | $ | — | $ | 1,323,352 | $ | — | $ | 1,323,352 | $ | — | $ | 1,624,776 | $ | — | $ | 1,624,776 | ||||||||||||||||
Obligations of U.S. Government sponsored entities | — | 932,938 | — | 932,938 | — | 773,841 | — | 773,841 | ||||||||||||||||||||||||
Obligations of Puerto Rico, States and political subdivisions | — | 23,730 | — | 23,730 | — | 25,635 | — | 25,635 | ||||||||||||||||||||||||
Collateralized mortgage obligations—federal agencies | — | 1,513,571 | — | 1,513,571 | ||||||||||||||||||||||||||||
Collateralized mortgage obligations - federal agencies | — | 1,438,721 | — | 1,438,721 | ||||||||||||||||||||||||||||
Mortgage-backed securities | — | 2,842,284 | 1,422 | 2,843,706 | — | 3,365,845 | 1,398 | 3,367,243 | ||||||||||||||||||||||||
Equity securities | 285 | 2,154 | — | 2,439 | 399 | 2,121 | — | 2,520 | ||||||||||||||||||||||||
Other | — | 10,094 | — | 10,094 | — | 9,940 | — | 9,940 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Total investment securities available-for-sale | $ | 285 | $ | 6,648,123 | $ | 1,422 | $ | 6,649,830 | $ | 399 | $ | 7,240,879 | $ | 1,398 | $ | 7,242,676 | ||||||||||||||||
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|
|
|
|
|
|
| |||||||||||||||||||||||||
Trading account securities, excluding derivatives: | ||||||||||||||||||||||||||||||||
Obligations of Puerto Rico, States and political subdivisions | $ | — | $ | 4,307 | $ | — | $ | 4,307 | $ | — | $ | 4,815 | $ | — | $ | 4,815 | ||||||||||||||||
Collateralized mortgage obligations | — | 217 | 1,783 | 2,000 | — | — | 1,399 | 1,399 | ||||||||||||||||||||||||
Mortgage-backed securities—federal agencies | — | 46,716 | 5,397 | 52,113 | ||||||||||||||||||||||||||||
Mortgage-backed securities - federal agencies | — | 47,006 | 5,364 | 52,370 | ||||||||||||||||||||||||||||
Other | — | 12,201 | 663 | 12,864 | — | 13,306 | 640 | 13,946 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Total trading account securities | $ | — | $ | 63,441 | $ | 7,843 | $ | 71,284 | $ | — | $ | 65,127 | $ | 7,403 | $ | 72,530 | ||||||||||||||||
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|
|
|
|
|
|
| |||||||||||||||||||||||||
Mortgage servicing rights | $ | — | $ | — | $ | 205,051 | $ | 205,051 | $ | — | $ | — | $ | 203,577 | $ | 203,577 | ||||||||||||||||
Derivatives | — | 15,012 | — | 15,012 | — | 13,154 | — | 13,154 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Total assets measured at fair value on a recurring basis | $ | 285 | $ | 6,726,576 | $ | 214,316 | $ | 6,941,177 | $ | 399 | $ | 7,319,160 | $ | 212,378 | $ | 7,531,937 | ||||||||||||||||
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|
|
|
|
|
|
| |||||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||||||
Derivatives | $ | — | $ | (12,068 | ) | $ | — | $ | (12,068 | ) | $ | — | $ | (11,879 | ) | $ | — | $ | (11,879 | ) | ||||||||||||
Contingent consideration | — | — | (120,823 | ) | (120,823 | ) | — | — | (128,511 | ) | (128,511 | ) | ||||||||||||||||||||
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|
|
|
|
|
|
| |||||||||||||||||||||||||
Total liabilities measured at fair value on a recurring basis | $ | — | $ | (12,068 | ) | $ | (120,823 | ) | $ | (132,891 | ) | $ | — | $ | (11,879 | ) | $ | (128,511 | ) | $ | (140,390 | ) | ||||||||||
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|
|
At December 31, 2015 | At December 31, 2015 | At December 31, 2015 | ||||||||||||||||||||||||||||||
(In thousands) | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||
RECURRING FAIR VALUE MEASUREMENTS | ||||||||||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||
Investment securities available-for-sale: | ||||||||||||||||||||||||||||||||
U.S. Treasury securities | $ | — | $ | 1,183,328 | $ | — | $ | 1,183,328 | $ | — | $ | 1,183,328 | $ | — | $ | 1,183,328 | ||||||||||||||||
Obligations of U.S. Government sponsored entities | — | 939,641 | — | 939,641 | — | 939,641 | — | 939,641 | ||||||||||||||||||||||||
Obligations of Puerto Rico, States and political subdivisions | — | 22,359 | — | 22,359 | — | 22,359 | — | 22,359 | ||||||||||||||||||||||||
Collateralized mortgage obligations—federal agencies | — | 1,560,837 | — | 1,560,837 | ||||||||||||||||||||||||||||
Collateralized mortgage obligations - federal agencies | — | 1,560,837 | — | 1,560,837 | ||||||||||||||||||||||||||||
Mortgage-backed securities | — | 2,342,762 | 1,434 | 2,344,196 | — | 2,342,762 | 1,434 | 2,344,196 | ||||||||||||||||||||||||
Equity securities | 276 | 2,122 | — | 2,398 | 276 | 2,122 | — | 2,398 | ||||||||||||||||||||||||
Other | — | 10,233 | — | 10,233 | — | 10,233 | — | 10,233 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Total investment securities available-for-sale | $ | 276 | $ | 6,061,282 | $ | 1,434 | $ | 6,062,992 | $ | 276 | $ | 6,061,282 | $ | 1,434 | $ | 6,062,992 | ||||||||||||||||
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|
|
|
|
|
| |||||||||||||||||||||||||
Trading account securities, excluding derivatives: | ||||||||||||||||||||||||||||||||
Obligations of Puerto Rico, States and political subdivisions | $ | — | $ | 4,590 | $ | — | $ | 4,590 | $ | — | $ | 4,590 | $ | — | $ | 4,590 | ||||||||||||||||
Collateralized mortgage obligations | — | 223 | 1,831 | 2,054 | — | 223 | 1,831 | 2,054 | ||||||||||||||||||||||||
Mortgage-backed securities—federal agencies | — | 44,701 | 6,454 | 51,155 | ||||||||||||||||||||||||||||
Mortgage-backed securities - federal agencies | — | 44,701 | 6,454 | 51,155 | ||||||||||||||||||||||||||||
Other | — | 13,173 | 687 | 13,860 | — | 13,173 | 687 | 13,860 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Total trading account securities | $ | — | $ | 62,687 | $ | 8,972 | $ | 71,659 | $ | — | $ | 62,687 | $ | 8,972 | $ | 71,659 | ||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Mortgage servicing rights | $ | — | $ | — | $ | 211,405 | $ | 211,405 | $ | — | $ | — | $ | 211,405 | $ | 211,405 | ||||||||||||||||
Derivatives | — | 16,959 | — | 16,959 | — | 16,959 | — | 16,959 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Total assets measured at fair value on a recurring basis | $ | 276 | $ | 6,140,928 | $ | 221,811 | $ | 6,363,015 | $ | 276 | $ | 6,140,928 | $ | 221,811 | $ | 6,363,015 | ||||||||||||||||
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|
|
|
|
|
|
| |||||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||||||
Derivatives | $ | — | $ | (14,343 | ) | $ | — | $ | (14,343 | ) | $ | — | $ | (14,343 | ) | $ | — | $ | (14,343 | ) | ||||||||||||
Contingent consideration | — | — | (120,380 | ) | (120,380 | ) | — | — | (120,380 | ) | (120,380 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Total liabilities measured at fair value on a recurring basis | $ | — | $ | (14,343 | ) | $ | (120,380 | ) | $ | (134,723 | ) | $ | — | $ | (14,343 | ) | $ | (120,380 | ) | $ | (134,723 | ) | ||||||||||
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|
The fair value information included in the following tabletables is not as of period end, but as of the date that the fair value measurement was recorded during the quarterssix months ended March 31,June 30, 2016 and 2015 and excludes nonrecurring fair value measurements of assets no longer held byoutstanding as of the Corporation.reporting date.
Quarter ended March 31, 2016 | ||||||||||||||||||||||||||||||||||||||||
Six months ended June 30, 2016 | Six months ended June 30, 2016 | |||||||||||||||||||||||||||||||||||||||
(In thousands) | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||||||||||
NONRECURRING FAIR VALUE MEASUREMENTS | ||||||||||||||||||||||||||||||||||||||||
Assets | Write-downs | Write-downs | ||||||||||||||||||||||||||||||||||||||
Loans[1] | $ | — | $ | — | $ | 30,785 | $ | 30,785 | $ | (22,850 | ) | $ | — | $ | — | $ | 30,221 | $ | 30,221 | $ | (18,844 | ) | ||||||||||||||||||
Loans held-for-sale[2] | — | — | 1,829 | 1,829 | (296 | ) | ||||||||||||||||||||||||||||||||||
Other real estate owned[3] | — | — | 18,592 | 18,592 | (3,920 | ) | ||||||||||||||||||||||||||||||||||
Other foreclosed assets[3] | — | — | 66 | 66 | (11 | ) | ||||||||||||||||||||||||||||||||||
Other real estate owned[2] | — | — | 31,803 | 31,803 | (6,197 | ) | ||||||||||||||||||||||||||||||||||
Other foreclosed assets[2] | — | — | 55 | 55 | (2 | ) | ||||||||||||||||||||||||||||||||||
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|
|
|
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|
|
| |||||||||||||||||||||||||||||||
Total assets measured at fair value on a nonrecurring basis | $ | — | $ | — | $ | 51,272 | $ | 51,272 | $ | (27,077 | ) | $ | — | $ | — | $ | 62,079 | $ | 62,079 | $ | (25,043 | ) | ||||||||||||||||||
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[1] | Relates mostly to certain impaired collateral dependent loans. The impairment was measured based on the fair value of the collateral, which is derived from appraisals that take into consideration prices in observed transactions involving similar assets in similar locations, in accordance with the provisions of ASC Section 310-10-35. Costs to sell are excluded from the reported fair value amount. |
[2] | Represents the fair value of foreclosed real estate and other collateral owned that were written down to their fair value. Costs to sell are excluded from the reported fair value amount. |
Six months ended June 30, 2015 (In thousands) NONRECURRING FAIR VALUE MEASUREMENTS Assets Loans[1] Loans held-for-sale[2] Other real estate owned[3] Other foreclosed assets[3] Total assets measured at fair value on a nonrecurring basis Level 1 Level 2 Level 3 Total Write-downs $ — $ — $ 156,607 $ 156,607 $ (80,643 ) — — 214 214 (35 ) — 438 46,954 47,392 (36,909 ) — — 73 73 (799 ) $ — $ 438 $ 203,848 $ 204,286 $ (118,386 )
[1] | Relates mostly to certain impaired collateral dependent loans. The impairment was measured based on the fair value of the collateral, which is derived from appraisals that take into consideration prices in observed transactions involving similar assets in similar locations, in accordance with the provisions of ASC Section 310-10-35. Costs to sell are excluded from the reported fair value amount. |
[2] | Relates to lower of cost or fair value adjustments on loans held-for-sale and loans transferred from loans held-in-portfolio to loans held-for-sale. Costs to sell are excluded from the reported fair value amount. |
[3] | Represents the fair value of foreclosed real estate and other collateral owned that were written down to their fair value. Costs to sell are excluded from the reported fair value amount. |
Quarter ended March 31, 2015 (In thousands) NONRECURRING FAIR VALUE MEASUREMENTS Assets Loans[1] Other real estate owned[3] Other foreclosed assets[3] Total assets measured at fair value on a nonrecurring basis Level 1 Level 2 Level 3 Total Write-downs $ — $ — $ 132,007 $ 132,007 $ (26,817 ) — 6,098 30,304 36,402 (17,936 ) — 20 131 151 (608 ) $ — $ 6,118 $ 162,442 $ 168,560 $ (45,361 )
The following tables present the changes in Level 3 assets and liabilities measured at fair value on a recurring basis for the quarters and six months ended March 31,June 30, 2016 and 2015.
Quarter ended March 31, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Quarter ended June 30, 2016 | Quarter ended June 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
MBS | Other | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
classified | CMOs | securities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
as investment | classified | MBS | classified | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
securities | as trading | classified as | as trading | Mortgage | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
available- | account | trading account | account | servicing | Total | Contingent | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(In thousands) | MBS classified as investment securities available- for-sale | CMOs classified as trading account securities | MBS classified as trading account securities | Other securities classified as trading account securities | Mortgage servicing rights | Total assets | Contingent consideration | Total liabilities | for-sale | securities | securities | securities | rights | assets | consideration | liabilities | ||||||||||||||||||||||||||||||||||||||||||||||||
Balance at January 1, 2016 | $ | 1,434 | $ | 1,831 | $ | 6,454 | $ | 687 | $ | 211,405 | $ | 221,811 | $ | (120,380 | ) | $ | (120,380 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Balance at March 31, 2016 | $ | 1,422 | $ | 1,783 | $ | 5,397 | $ | 663 | $ | 205,051 | $ | 214,316 | $ | (120,823 | ) | $ | (120,823 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Gains (losses) included in earnings | (2 | ) | (6 | ) | 89 | (24 | ) | (8,477 | ) | (8,420 | ) | (443 | ) | (443 | ) | — | (7 | ) | 28 | (23 | ) | (4,340 | ) | (4,342 | ) | (7,688 | ) | (7,688 | ) | |||||||||||||||||||||||||||||||||||
Gains (losses) included in OCI | 15 | — | — | — | — | 15 | — | — | 1 | — | — | — | — | 1 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
Additions | — | 174 | 338 | — | 2,123 | 2,635 | — | — | — | 35 | 610 | — | 2,866 | 3,511 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
Sales | — | (106 | ) | (1,120 | ) | — | — | (1,226 | ) | — | — | — | (202 | ) | (596 | ) | — | — | (798 | ) | — | — | ||||||||||||||||||||||||||||||||||||||||||
Settlements | (25 | ) | (110 | ) | (364 | ) | — | — | (499 | ) | — | — | (25 | ) | (210 | ) | (75 | ) | — | — | (310 | ) | — | — | ||||||||||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||||||||||||||||||||
Balance at March 31, 2016 | $ | 1,422 | $ | 1,783 | $ | 5,397 | $ | 663 | $ | 205,051 | $ | 214,316 | $ | (120,823 | ) | $ | (120,823 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2016 | $ | 1,398 | $ | 1,399 | $ | 5,364 | $ | 640 | $ | 203,577 | $ | 212,378 | $ | (128,511 | ) | $ | (128,511 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||||||||||||||||||||
Changes in unrealized gains (losses) included in earnings relating to assets still held at March 31, 2016 | $ | — | $ | (3 | ) | $ | 86 | $ | 11 | $ | (3,866 | ) | $ | (3,772 | ) | $ | (443 | ) | $ | (443 | ) | |||||||||||||||||||||||||||||||||||||||||||
Changes in unrealized gains (losses) included in earnings relating to assets still held at June 30, 2016 | $ | — | $ | (3 | ) | $ | 15 | $ | 10 | $ | 632 | $ | 654 | $ | (7,688 | ) | $ | (7,688 | ) | |||||||||||||||||||||||||||||||||||||||||||||
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Six months ended June 30, 2016 | ||||||||||||||||||||||||||||||||
MBS | Other | |||||||||||||||||||||||||||||||
classified | CMOs | securities | ||||||||||||||||||||||||||||||
as investment | classified | MBS | classified | |||||||||||||||||||||||||||||
securities | as trading | classified as | as trading | Mortgage | ||||||||||||||||||||||||||||
available- | account | trading account | account | servicing | Total | Contingent | Total | |||||||||||||||||||||||||
(In thousands) | for-sale | securities | securities | securities | rights | assets | consideration | liabilities | ||||||||||||||||||||||||
Balance at January 1, 2016 | $ | 1,434 | $ | 1,831 | $ | 6,454 | $ | 687 | $ | 211,405 | $ | 221,811 | $ | (120,380 | ) | $ | (120,380 | ) | ||||||||||||||
Gains (losses) included in earnings | (2 | ) | (13 | ) | 117 | (47 | ) | (12,817 | ) | (12,762 | ) | (8,131 | ) | (8,131 | ) | |||||||||||||||||
Gains (losses) included in OCI | 16 | — | — | — | — | 16 | — | — | ||||||||||||||||||||||||
Additions | — | 209 | 948 | — | 4,989 | 6,146 | — | — | ||||||||||||||||||||||||
Sales | — | (308 | ) | (1,716 | ) | — | — | (2,024 | ) | — | — | |||||||||||||||||||||
Settlements | (50 | ) | (320 | ) | (439 | ) | — | — | (809 | ) | — | — | ||||||||||||||||||||
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| |||||||||||||||||
Balance at June 30, 2016 | $ | 1,398 | $ | 1,399 | $ | 5,364 | $ | 640 | $ | 203,577 | $ | 212,378 | $ | (128,511 | ) | $ | (128,511 | ) | ||||||||||||||
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| |||||||||||||||||
Changes in unrealized gains (losses) included in earnings relating to assets still held at June 30, 2016 | $ | — | $ | (6 | ) | $ | 101 | $ | 21 | $ | (3,233 | ) | $ | (3,117 | ) | $ | (8,131 | ) | $ | (8,131 | ) | |||||||||||
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(In thousands) Balance at January 1, 2015 Gains (losses) included in earnings Additions Sales Settlements Balance at March 31, 2015 Changes in unrealized gains (losses) included in earnings relating to assets still held at March 31, 2015 Quarter ended March 31, 2015 MBS
classified as
securities
available-
for-sale CMOs
classified as
trading
account
securities MBS
classified as
trading
account
securities Other
securities
classified
as trading
account
securities Mortgage
servicing
rights Total
assets Contingent
consideration Total
liabilities $ 1,325 $ 1,375 $ 6,229 $ 1,563 $ 148,694 $ 159,186 $ (133,634 ) $ (133,634 ) (8 ) (2 ) 16 (19 ) (4,929 ) (4,942 ) 4,164 4,164 118 — 130 — 5,259 5,507 — — — (44 ) (80 ) — — (124 ) — — — (87 ) (74 ) — — (161 ) — — $ 1,435 $ 1,242 $ 6,221 $ 1,544 $ 149,024 $ 159,466 $ (129,470 ) $ (129,470 ) $ — $ (2 ) $ 18 $ 23 $ (684 ) $ (645 ) $ 4,164 $ 4,164
Quarter ended June 30, 2015 | ||||||||||||||||||||||||||||||||
MBS | Other | |||||||||||||||||||||||||||||||
classified | CMOs | securities | ||||||||||||||||||||||||||||||
as investment | classified | MBS | classified | |||||||||||||||||||||||||||||
securities | as trading | classified as | as trading | Mortgage | ||||||||||||||||||||||||||||
available- | account | trading account | account | servicing | Total | Contingent | Total | |||||||||||||||||||||||||
(In thousands) | for-sale | securities | securities | securities | rights | assets | consideration | liabilities | ||||||||||||||||||||||||
Balance at March 31, 2015 | $ | 1,435 | $ | 1,242 | $ | 6,221 | $ | 1,544 | $ | 149,024 | $ | 159,466 | $ | (129,470 | ) | $ | (129,470 | ) | ||||||||||||||
Gains (losses) included in earnings | — | (2 | ) | (3 | ) | 75 | (1,917 | ) | (1,847 | ) | 3,671 | 3,671 | ||||||||||||||||||||
Gains (losses) included in OCI | 10 | — | — | — | — | 10 | — | — | ||||||||||||||||||||||||
Additions | — | 37 | 128 | — | 59,312 | 59,477 | — | — | ||||||||||||||||||||||||
Settlements | — | (85 | ) | (300 | ) | — | (62 | ) | (447 | ) | — | — | ||||||||||||||||||||
Adjustments | — | — | — | — | — | — | 962 | 962 | ||||||||||||||||||||||||
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| |||||||||||||||||
Balance at June 30, 2015 | $ | 1,445 | $ | 1,192 | $ | 6,046 | $ | 1,619 | $ | 206,357 | $ | 216,659 | $ | (124,837 | ) | $ | (124,837 | ) | ||||||||||||||
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|
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| |||||||||||||||||
Changes in unrealized gains (losses) included in earnings relating to assets still held at June 30, 2015 | $ | — | $ | — | $ | 6 | $ | 119 | $ | 2,570 | $ | 2,695 | $ | 3,671 | $ | 3,671 | ||||||||||||||||
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Six months ended June 30, 2015 | ||||||||||||||||||||||||||||||||
MBS | Other | |||||||||||||||||||||||||||||||
classified | CMOs | securities | ||||||||||||||||||||||||||||||
as investment | classified | MBS | classified | |||||||||||||||||||||||||||||
securities | as trading | classified as | as trading | Mortgage | ||||||||||||||||||||||||||||
available- | account | trading account | account | servicing | Total | Contingent | Total | |||||||||||||||||||||||||
(In thousands) | for-sale | securities | securities | securities | rights | assets | consideration | liabilities | ||||||||||||||||||||||||
Balance at January 1, 2015 | $ | 1,325 | $ | 1,375 | $ | 6,229 | $ | 1,563 | $ | 148,694 | $ | 159,186 | $ | (133,634 | ) | $ | (133,634 | ) | ||||||||||||||
Gains (losses) included in earnings | — | (4 | ) | 14 | 56 | (6,846 | ) | (6,780 | ) | 7,835 | 7,835 | |||||||||||||||||||||
Gains (losses) included in OCI | 2 | — | — | — | — | 2 | — | — | ||||||||||||||||||||||||
Additions | 118 | 37 | 258 | — | 64,571 | 64,984 | — | — | ||||||||||||||||||||||||
Sales | — | (44 | ) | (80 | ) | — | — | (124 | ) | — | — | |||||||||||||||||||||
Settlements | — | (172 | ) | (375 | ) | — | (62 | ) | (609 | ) | — | — | ||||||||||||||||||||
Adjustments | — | — | — | — | — | — | 962 | 962 | ||||||||||||||||||||||||
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Balance at June 30, 2015 | $ | 1,445 | $ | 1,192 | $ | 6,046 | $ | 1,619 | $ | 206,357 | $ | 216,659 | $ | (124,837 | ) | $ | (124,837 | ) | ||||||||||||||
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Changes in unrealized gains (losses) included in earnings relating to assets still held at June 30, 2015 | $ | — | $ | (1 | ) | $ | 25 | $ | 142 | $ | 1,886 | $ | 2,052 | $ | 7,835 | $ | 7,835 | |||||||||||||||
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There were no transfers in and/and / or out of Level 1, Level 2, or Level 3 for financial instruments measured at fair value on a recurring basis during the quarters and six months ended March 31,June 30, 2016 and 2015.
Gains and losses (realized and unrealized) included in earnings for the quarters and six months ended March 31,June 30, 2016 and 2015 for Level 3 assets and liabilities included in the previous tables are reported in the consolidated statementsstatement of operations as follows:
Quarter ended June 30, 2016 | Six months ended June 30, 2016 | |||||||||||||||||||||||||||||||
Changes in unrealized | Changes in unrealized | |||||||||||||||||||||||||||||||
Total gains | gains (losses) relating to | Total gains | gains (losses) relating to | |||||||||||||||||||||||||||||
Quarter ended March 31, 2016 | Quarter ended March 31, 2015 | (losses) included | assets still held at | (losses) included | assets still held at | |||||||||||||||||||||||||||
(In thousands) | Total gains (losses) included in earnings | Changes in unrealized gains (losses) relating to assets still held at reporting date | Total gains (losses) included in earnings | Changes in unrealized gains (losses) relating to assets still held at reporting date | in earnings | reporting date | in earnings | reporting date | ||||||||||||||||||||||||
Interest income | $ | (2 | ) | $ | — | $ | (8 | ) | $ | — | $ | — | $ | — | $ | (2 | ) | $ | — | |||||||||||||
FDIC loss share (expense) income | (443 | ) | (443 | ) | 4,164 | 4,164 | (7,688 | ) | (7,688 | ) | (8,131 | ) | (8,131 | ) | ||||||||||||||||||
Other service fees | (8,477 | ) | (3,866 | ) | (4,929 | ) | (684 | ) | ||||||||||||||||||||||||
Trading account (loss) profit | 59 | 94 | (5 | ) | 39 | |||||||||||||||||||||||||||
Mortgage banking activities | (4,340 | ) | 632 | (12,817 | ) | (3,233 | ) | |||||||||||||||||||||||||
Trading account profit (loss) | (2 | ) | 22 | 57 | 116 | |||||||||||||||||||||||||||
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Total | $ | (8,863 | ) | $ | (4,215 | ) | $ | (778 | ) | $ | 3,519 | $ | (12,030 | ) | $ | (7,034 | ) | $ | (20,893 | ) | $ | (11,248 | ) | |||||||||
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(In thousands) FDIC loss share (expense) income Mortgage banking activities Trading account profit (loss) Total Quarter ended June 30, 2015 Six months ended June 30, 2015 Changes in unrealized Changes in unrealized Total gains gains (losses) relating to Total gains gains (losses) relating to (losses) included assets still held at (losses) included assets still held at in earnings reporting date in earnings reporting date $ 3,671 $ 3,671 $ 7,835 $ 7,835 (1,917 ) 2,570 (6,846 ) 1,886 70 125 66 166 $ 1,824 $ 6,366 $ 1,055 $ 9,887
The following table includes quantitative information about significant unobservable inputs used to derive the fair value of Level 3 instruments, excluding those instruments for which the unobservable inputs were not developed by the Corporation such as prices of prior transactions and/or unadjusted third-party pricing sources.
Fair value | ||||||||||||||||||||||||
Fair value at March 31, | at June 30, | |||||||||||||||||||||||
(In thousands) | 2016 | Valuation technique | Unobservable inputs | Weighted average (range) | 2016 | Valuation technique | Unobservable inputs | Weighted average (range) | ||||||||||||||||
CMO’s - trading | $ | 1,783 | Discounted cash flow model | Weighted average life | 2.9 years (0.4 - 4.6 years) | $ | 1,399 | Discounted cash flow model | Weighted average life | 3.0 years (0.3 - 4.4 years) | ||||||||||||||
Yield | 3.8% (1.1% - 4.7%) | Yield | 3.8% (1.0% - 4.7%) | |||||||||||||||||||||
Prepayment speed | 20.8% (18.0% - 24.1%) | Prepayment speed | 20.5% (18.0% - 24.9%) | |||||||||||||||||||||
Other - trading | $ | 663 | Discounted cash flow model | Weighted average life | 5.4 | years | $ | 640 | Discounted cash flow model | Weighted average life | 5.3 years | |||||||||||||
Yield | 12.2% | Yield | 11.7% | |||||||||||||||||||||
Prepayment speed | 10.8% | Prepayment speed | 10.8% | |||||||||||||||||||||
Mortgage servicing rights | $ | 205,051 | Discounted cash flow model | Prepayment speed | 6.4% (0.2% - 12.0%) | $ | 203,577 | Discounted cash flow model | Prepayment speed | 5.7% (0.2% - 11.8%) | ||||||||||||||
Weighted average life | 6.6 years (0.1 - 15.8 years) | Weighted average life | 6.9 years (0.1 - 17.3 years) | |||||||||||||||||||||
Discount rate | 11.2% (9.5% - 15.0%) | Discount rate | 11.2% (9.5% - 15.0%) | |||||||||||||||||||||
Contingent consideration | $ | (120,188 | ) | Discounted cash flow model | Credit loss rate on covered loans | 2.9% (0.0% - 100.0%) | $ | (127,876 | ) | Discounted cash flow model | Credit loss rate on covered loans | 2.9% (0.0% - 100.0%) | ||||||||||||
Risk premium component | Risk premium component of discount rate | 6.2% | ||||||||||||||||||||||
of discount rate | 6.9% | |||||||||||||||||||||||
Loans held-in-portfolio | $ | 30,785 | [1] | External appraisal | Haircut applied on | $ | 30,169 | [1] | External appraisal | Haircut applied on external appraisals | 39.9% (38.9% - 40.0%) | |||||||||||||
external appraisals | 40.0% (39.7% - 40.0%) | |||||||||||||||||||||||
Other real estate owned | $ | 18,368 | [2] | External appraisal | Haircut applied on | $ | 30,938 | [2] | External appraisal | Haircut applied on external appraisals | 20.9% (10.0% - 40.0%) | |||||||||||||
external appraisals | 20.1% (10.0% - 40.0%) |
[1] | Loans held-in-portfolio in which haircuts were not applied to external appraisals were excluded from this table. |
[2] | Other real estate owned in which haircuts were not applied to external appraisals were excluded from this table. |
The significant unobservable inputs used in the fair value measurement of the Corporation’s collateralized mortgage obligations and interest-only collateralized mortgage obligation (reported as “other”), which are classified in the “trading” category, are yield, constant prepayment rate, and weighted average life. Significant increases (decreases) in any of those inputs in isolation would result in significantly lower (higher) fair value measurement. Generally, a change in the assumption used for the constant prepayment rate will generate a directionally opposite change in the weighted average life. For example, as the average life is reduced by a higher constant prepayment rate, a lower yield will be realized, and when there is a reduction in the constant prepayment rate, the average life of these collateralized mortgage obligations will extend, thus resulting in a higher yield. These particular financial instruments are valued internally by the Corporation’s investment banking and broker-dealer unit utilizing internal valuation techniques. The unobservable inputs incorporated into the internal discounted cash flow models used to derive the fair value of collateralized mortgage obligations and interest-only collateralized mortgage obligation (reported as “other”), which are classified in the “trading” category, are reviewed by the Corporation’s Corporate Treasury unit on a quarterly basis. In the case of Level 3 financial instruments which fair value is based on broker quotes, the Corporation’s Corporate Treasury unit reviews the inputs used by the broker-dealers for reasonableness utilizing information available from other published sources and validates that the fair value measurements were developed in accordance with ASC Topic 820. The Corporate Treasury unit also substantiates the inputs used by validating the prices with other broker-dealers, whenever possible.
The significant unobservable inputs used in the fair value measurement of the Corporation’s mortgage servicing rights are constant prepayment rates and discount rates. Increases in interest rates may result in lower prepayments. Discount rates vary according to products and / or portfolios depending on the perceived risk. Increases in discount rates result in a lower fair value measurement. The Corporation’s Corporate Comptroller’s unit is responsible for determining the fair value of MSRs, which is based on discounted
cash flow methods based on assumptions developed by an external service provider, except for prepayment speeds, which are adjusted internally for the local market based on historical experience. The Corporation’s Corporate Treasury unit validates the economic assumptions developed by the external service provider on a quarterly basis. In addition, an analytical review of prepayment speeds is performed quarterly by the Corporate Comptroller’s unit. The Corporation’s MSR Committee analyzes changes in fair value measurements of MSRs and approves the valuation assumptions at each reporting period. Changes in valuation assumptions must also be approved by the MSR Committee. The fair value of MSRs are compared with those of the external service provider on a quarterly basis in order to validate if the fair values are within the materiality thresholds established by management to monitor and investigate material deviations. Back-testing is performed to compare projected cash flows with actual historical data to ascertain the reasonability of the projected net cash flow results.
Note 27 – Fair value of financial instruments
The fair value of financial instruments is the amount at which an assets or obligations could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. For those financial instruments with no quoted market prices available, fair values have been estimated using present value calculations or other valuation techniques, as well as management’s best judgment with respect to current economic conditions, including discount rates, estimates of future cash flows, and prepayment assumptions. Many of these estimates involve various assumptions and may vary significantly from amounts that could be realized in actual transactions.
The fair values reflected herein have been determined based on the prevailing rate environment at March 31,June 30, 2016 and December 31, 2015, as applicable. In different interest rate environments, fair value estimates can differ significantly, especially for certain fixed rate financial instruments. In addition, the fair values presented do not attempt to estimate the value of the Corporation’s fee generating businesses and anticipated future business activities, that is, they do not represent the Corporation’s value as a going concern.
The following tables present the carrying amount, or notional amounts, as applicable, and estimated fair values of financial instruments with their corresponding level in the fair value hierarchy. The aggregate fair value amounts of the financial instruments disclosed do not represent management’s estimate of the underlying value of the Corporation.
June 30, 2016 | ||||||||||||||||||||||||||||||||||||||||
March 31, 2016 | Carrying | |||||||||||||||||||||||||||||||||||||||
(In thousands) | Carrying amount | Level 1 | Level 2 | Level 3 | Fair value | amount | Level 1 | Level 2 | Level 3 | Fair value | ||||||||||||||||||||||||||||||
Financial Assets: | ||||||||||||||||||||||||||||||||||||||||
Cash and due from banks | $ | 409,623 | $ | 409,623 | $ | — | $ | — | $ | 409,623 | $ | 365,308 | $ | 365,308 | $ | — | $ | — | $ | 365,308 | ||||||||||||||||||||
Money market investments | 1,917,460 | 1,808,513 | 108,947 | — | 1,917,460 | 2,785,500 | 2,687,458 | 98,042 | — | 2,785,500 | ||||||||||||||||||||||||||||||
Trading account securities, excluding derivatives[1] | 71,284 | — | 63,441 | 7,843 | 71,284 | 72,530 | — | 65,127 | 7,403 | 72,530 | ||||||||||||||||||||||||||||||
Investment securities available-for-sale[1] | 6,649,830 | 285 | 6,648,123 | 1,422 | 6,649,830 | 7,242,676 | 399 | 7,240,879 | 1,398 | 7,242,676 | ||||||||||||||||||||||||||||||
Investment securities held-to-maturity: | ||||||||||||||||||||||||||||||||||||||||
Obligations of Puerto Rico, States and political subdivisions | $ | 97,130 | $ | — | $ | — | $ | 78,849 | $ | 78,849 | $ | 97,444 | $ | — | $ | — | $ | 79,419 | $ | 79,419 | ||||||||||||||||||||
Collateralized mortgage obligation-federal agency | 86 | — | — | 91 | 91 | 81 | — | — | 85 | 85 | ||||||||||||||||||||||||||||||
Other | 2,000 | — | 1,736 | 238 | 1,974 | 2,000 | — | 1,744 | 221 | 1,965 | ||||||||||||||||||||||||||||||
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Total investment securities held-to-maturity | $ | 99,216 | $ | — | $ | 1,736 | $ | 79,178 | $ | 80,914 | $ | 99,525 | $ | — | $ | 1,744 | $ | 79,725 | $ | 81,469 | ||||||||||||||||||||
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Other investment securities: | ||||||||||||||||||||||||||||||||||||||||
FHLB stock | $ | 55,817 | $ | — | $ | 55,817 | $ | — | $ | 55,817 | $ | 59,459 | $ | — | $ | 59,459 | $ | — | $ | 59,459 | ||||||||||||||||||||
FRB stock | 93,086 | — | 93,086 | — | 93,086 | 93,983 | — | 93,983 | — | 93,983 | ||||||||||||||||||||||||||||||
Trust preferred securities | 13,198 | — | 13,198 | — | 13,198 | 13,198 | — | 13,198 | — | 13,198 | ||||||||||||||||||||||||||||||
Other investments | 1,923 | — | — | 5,010 | 5,010 | 1,923 | — | — | 4,929 | 4,929 | ||||||||||||||||||||||||||||||
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Total other investment securities | $ | 164,024 | $ | — | $ | 162,101 | $ | 5,010 | $ | 167,111 | $ | 168,563 | $ | — | $ | 166,640 | $ | 4,929 | $ | 171,569 | ||||||||||||||||||||
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Loans held-for-sale | $ | 125,315 | $ | — | $ | — | $ | 126,872 | $ | 126,872 | $ | 122,338 | $ | — | $ | 469 | $ | 124,526 | $ | 124,995 | ||||||||||||||||||||
Loans not covered under loss sharing agreement with the FDIC | 21,999,310 | — | — | 20,633,219 | 20,633,219 | 22,022,522 | — | — | 20,405,987 | 20,405,987 | ||||||||||||||||||||||||||||||
Loans covered under loss sharing agreements with the FDIC | 595,085 | — | — | 553,280 | 553,280 | 576,589 | — | — | 570,791 | 570,791 | ||||||||||||||||||||||||||||||
FDIC loss share asset | 219,448 | — | — | 235,943 | 235,943 | 214,029 | — | — | 228,561 | 228,561 | ||||||||||||||||||||||||||||||
Mortgage servicing rights | 205,051 | — | — | 205,051 | 205,051 | 203,577 | — | — | 203,577 | 203,577 | ||||||||||||||||||||||||||||||
Derivatives | 15,012 | — | 15,012 | — | 15,012 | 13,154 | — | 13,154 | — | 13,154 | ||||||||||||||||||||||||||||||
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(In thousands) Financial Liabilities: Deposits: Demand deposits Time deposits Total deposits Federal funds purchased and assets sold under agreements to repurchase Other short-term borrowings[2] Notes payable: FHLB advances Unsecured senior debt securities Junior subordinated deferrable interest debentures (related to trust preferred securities) Others Total notes payable Derivatives Contingent consideration Commitments to extend credit Letters of credit March 31, 2016 Carrying
amount Level 1 Level 2 Level 3 Fair value $ 19,648,830 $ — $ 19,648,830 $ — $ 19,648,830 7,877,763 — 7,855,406 — 7,855,406 $ 27,526,593 $ — $ 27,504,236 $ — $ 27,504,236 $ 760,154 $ — $ 762,053 $ — $ 762,053 $ 6,370 $ — $ 6,370 $ — $ 6,370 $ 682,161 $ — $ 708,394 $ — $ 708,394 443,225 — 421,463 — 421,463 439,303 — 351,345 — 351,345 18,779 — — 18,779 18,779 $ 1,583,468 $ — $ 1,481,202 $ 18,779 $ 1,499,981 $ 12,068 $ — $ 12,068 $ — $ 12,068 $ 120,823 $ — $ — $ 120,823 $ 120,823 (In thousands) Notional
amount Level 1 Level 2 Level 3 Fair value $ 7,532,634 $ — $ — $ 518 $ 518 37,812 — — 767 767
(In thousands) Financial Assets: Cash and due from banks Money market investments Trading account securities, excluding derivatives[1] Investment securities available-for-sale[1] Investment securities held-to-maturity: Obligations of Puerto Rico, States and political subdivisions Collateralized mortgage obligation-federal agency Other Total investment securities held-to-maturity Other investment securities: FHLB stock FRB stock Trust preferred securities Other investments Total other investment securities Loans held-for-sale Loans not covered under loss sharing agreement with the FDIC Loans covered under loss sharing agreements with the FDIC FDIC loss share asset Mortgage servicing rights Derivatives (In thousands) Financial Liabilities: Deposits: Demand deposits Time deposits Total deposits Federal funds purchased and assets sold under agreements to repurchase Other short-term borrowings[2] Notes payable: FHLB advances Unsecured senior debt Junior subordinated deferrable interest debentures (related to trust preferred securities) Others Total notes payable Derivatives Contingent consideration December 31, 2015 Carrying amount Level 1 Level 2 Level 3 Fair value $ 363,674 $ 363,674 $ — $ — $ 363,674 2,180,092 2,083,839 96,253 — 2,180,092 71,659 — 62,687 8,972 71,659 6,062,992 276 6,061,282 1,434 6,062,992 98,817 — — 80,815 80,815 86 — — 91 91 2,000 — 1,740 243 1,983 $ 100,903 $ — $ 1,740 $ 81,149 $ 82,889 $ 59,387 $ — $ 59,387 $ — $ 59,387 97,740 — 97,740 — 97,740 13,198 — 13,198 — 13,198 1,923 — — 4,966 4,966 $ 172,248 $ — $ 170,325 $ 4,966 $ 175,291 $ 137,000 $ — $ 1,364 $ 138,031 $ 139,395 21,843,180 — — 20,849,150 20,849,150 611,939 — — 593,002 593,002 310,221 — — 313,224 313,224 211,405 — — 211,405 211,405 16,959 — 16,959 — 16,959 December 31, 2015 Carrying amount Level 1 Level 2 Level 3 Fair value $ 19,044,355 $ — $ 19,044,355 $ — $ 19,044,355 8,165,368 — 8,134,029 — 8,134,029 $ 27,209,723 $ — $ 27,178,384 $ — $ 27,178,384 $ 762,145 $ — $ 764,599 $ — $ 764,599 $ 1,200 $ — $ 1,200 $ — $ 1,200 761,501 — 780,411 — 780,411 442,704 — 435,186 — 435,186 439,295 — 352,673 — 352,673 19,008 — — 19,008 19,008 $ 1,662,508 $ — $ 1,568,270 $ 19,008 $ 1,587,278 $ 14,343 $ — $ 14,343 $ — $ 14,343 $ 120,380 $ — $ — $ 120,380 $ 120,380
June 30, 2016 | ||||||||||||||||||||||||||||||||||||||||
Carrying | ||||||||||||||||||||||||||||||||||||||||
(In thousands) | amount | Level 1 | Level 2 | Level 3 | Fair value | |||||||||||||||||||||||||||||||||||
Financial Liabilities: | ||||||||||||||||||||||||||||||||||||||||
Deposits: | ||||||||||||||||||||||||||||||||||||||||
Demand deposits | $ | 20,783,110 | $ | — | $ | 20,783,110 | $ | — | $ | 20,783,110 | ||||||||||||||||||||||||||||||
Time deposits | 7,954,746 | — | 7,943,768 | — | 7,943,768 | |||||||||||||||||||||||||||||||||||
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Total deposits | $ | 28,737,856 | $ | — | $ | 28,726,878 | $ | — | $ | 28,726,878 | ||||||||||||||||||||||||||||||
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Federal funds purchased and assets sold under agreements to repurchase | $ | 821,604 | $ | — | $ | 823,288 | $ | — | $ | 823,288 | ||||||||||||||||||||||||||||||
Other short-term borrowings[2] | $ | 31,200 | $ | — | $ | 31,200 | $ | — | $ | 31,200 | ||||||||||||||||||||||||||||||
Notes payable: | ||||||||||||||||||||||||||||||||||||||||
FHLB advances | $ | 674,342 | $ | — | $ | 717,262 | $ | — | $ | 717,262 | ||||||||||||||||||||||||||||||
Unsecured senior debt securities | 443,747 | — | 444,191 | — | 444,191 | |||||||||||||||||||||||||||||||||||
Junior subordinated deferrable interest debentures (related to trust preferred securities) | 439,309 | — | 379,349 | — | 379,349 | |||||||||||||||||||||||||||||||||||
Others | 18,550 | — | — | 18,550 | 18,550 | |||||||||||||||||||||||||||||||||||
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Total notes payable | $ | 1,575,948 | $ | — | $ | 1,540,802 | $ | 18,550 | $ | 1,559,352 | ||||||||||||||||||||||||||||||
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Derivatives | $ | 11,879 | $ | — | $ | 11,879 | $ | — | $ | 11,879 | ||||||||||||||||||||||||||||||
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Contingent consideration | $ | 128,511 | $ | — | $ | — | $ | 128,511 | $ | 128,511 | ||||||||||||||||||||||||||||||
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(In thousands) | Notional amount | Level 1 | Level 2 | Level 3 | Fair value | Notional amount | Level 1 | Level 2 | Level 3 | Fair value | ||||||||||||||||||||||||||||||
Commitments to extend credit | $ | 7,434,108 | $ | — | $ | — | $ | 1,080 | $ | 1,080 | $ | 7,322,699 | $ | — | $ | — | $ | 554 | $ | 554 | ||||||||||||||||||||
Letters of credit | 51,710 | — | — | 572 | 572 | 36,530 | — | — | 611 | 611 | ||||||||||||||||||||||||||||||
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[1] | Refer to Note 26 to the consolidated financial statements for the fair value by class of financial asset and its hierarchy level. |
[2] | Refer to Note 18 to the consolidated financial statements for the composition of other short-term borrowings. |
(In thousands) Financial Assets: Cash and due from banks Money market investments Trading account securities, excluding derivatives[1] Investment securities available-for-sale[1] Investment securities held-to-maturity: Obligations of Puerto Rico, States and political subdivisions Collateralized mortgage obligation-federal agency Other Total investment securities held-to-maturity Other investment securities: FHLB stock FRB stock Trust preferred securities Other investments Total other investment securities Loans held-for-sale Loans not covered under loss sharing agreement with the FDIC Loans covered under loss sharing agreements with the FDIC FDIC loss share asset Mortgage servicing rights Derivatives December 31, 2015 Carrying amount Level 1 Level 2 Level 3 Fair value $ 363,674 $ 363,674 $ — $ — $ 363,674 2,180,092 2,083,839 96,253 — 2,180,092 71,659 — 62,687 8,972 71,659 6,062,992 276 6,061,282 1,434 6,062,992 98,817 — — 80,815 80,815 86 — — 91 91 2,000 — 1,740 243 1,983 $ 100,903 $ — $ 1,740 $ 81,149 $ 82,889 $ 59,387 $ — $ 59,387 $ — $ 59,387 97,740 — 97,740 — 97,740 13,198 — 13,198 — 13,198 1,923 — — 4,966 4,966 $ 172,248 $ — $ 170,325 $ 4,966 $ 175,291 $ 137,000 $ — $ 1,364 $ 138,031 $ 139,395 21,843,180 — — 20,849,150 20,849,150 611,939 — — 593,002 593,002 310,221 — — 313,224 313,224 211,405 — — 211,405 211,405 16,959 — 16,959 — 16,959
(In thousands) Financial Liabilities: Deposits: Demand deposits Time deposits Total deposits Federal funds purchased and assets sold under agreements to repurchase Other short-term borrowings[2] Notes payable: FHLB advances Unsecured senior debt Junior subordinated deferrable interest debentures (related to trust preferred securities) Others Total notes payable Derivatives Contingent consideration (In thousands) Commitments to extend credit Letters of credit December 31, 2015 Carrying amount Level 1 Level 2 Level 3 Fair value $ 19,044,355 $ — $ 19,044,355 $ — $ 19,044,355 8,165,368 — 8,134,029 — 8,134,029 $ 27,209,723 $ — $ 27,178,384 $ — $ 27,178,384 $ 762,145 $ — $ 764,599 $ — $ 764,599 $ 1,200 $ — $ 1,200 $ — $ 1,200 761,501 — 780,411 — 780,411 442,704 — 435,186 — 435,186 439,295 — 352,673 — 352,673 19,008 — — 19,008 19,008 $ 1,662,508 $ — $ 1,568,270 $ 19,008 $ 1,587,278 $ 14,343 $ — $ 14,343 $ — $ 14,343 $ 120,380 $ — $ — $ 120,380 $ 120,380 Notional
amount Level 1 Level 2 Level 3 Fair value $ 7,434,108 $ — $ — $ 1,080 $ 1,080 51,710 — — 572 572
[1] | Refer to Note 26 to the consolidated financial statements for the fair value by class of financial asset and its hierarchy level. |
[2] | Refer to Note 18 to the consolidated financial statements for the composition of other short-term borrowings. |
Following is a description of the Corporation’s valuation methodologies and inputs used to estimate the fair values for each class of financial assets and liabilities not measured at fair value, but for which the fair value is disclosed.
Cash and due from banks
Cash and due from banks include cash on hand, cash items in process of collection, and non-interest bearing deposits due from other financial institutions. The carrying amount of cash and due from banks is a reasonable estimate of its fair value. Cash and due from banks are classified as Level 1.
Money market investments
Investments in money market instruments include highly liquid instruments with an average maturity of three months or less. For this reason, they carry a low risk of changes in value as a result of changes in interest rates, and the carrying amount approximates their fair value. Money market investments include federal funds sold, securities purchased under agreements to resell, time deposits with other banks, and cash balances, including those held at the Federal Reserve. These money market investments are classified as Level 2, except for cash balances which generate interest, including those held at the Federal Reserve, which are classified as Level 1.
Investment securities held-to-maturity
Obligations of Puerto Rico, States and political subdivisions: Municipal bonds include Puerto Rico public municipalities debt and bonds collateralized by second mortgages under the Home Purchase Stimulus Program. Puerto Rico public municipalities debt was valued internally based on benchmark treasury notes and a credit spread derived from comparable Puerto Rico government trades and recent issuances. Puerto Rico public municipalities debt is classified as Level 3. Given that the fair value of municipal bonds collateralized by second mortgages was based on internal yield and prepayment speed assumptions, these municipal bonds are classified as Level 3.
municipalities debt was valued internally based on benchmark treasury notes and a credit spread derived from comparable Puerto Rico government trades and recent issuances. Puerto Rico public municipalities debt is classified as Level 3. Given that the fair value of municipal bonds collateralized by second mortgages was based on internal yield and prepayment speed assumptions, these municipal bonds are classified as Level 3. |
Other investment securities
Loans held-for-sale
For loans held-for-sale originated with the intent to sell in the secondary market, its fair value was determined using similar characteristics of loans and secondary market prices assuming the conversion to mortgage-backed securities. Given that the valuation methodology uses internal assumptions based on loan level data, these loans are classified as Level 3. The fair value of certain other loans held-for-sale is based on bids received from potential buyers; binding offers; or external appraisals, net of internal adjustments and estimated costs to sell. Loans held-for-sale based on binding offers are classified as Level 2. Loans held-for-sale based on indicative offers and/or external appraisals are classified as Level 3.
Loans held-in-portfolio
The fair values of the loans held-in-portfolio have been determined for groups of loans with similar characteristics. Loans were segregated by type such as commercial, construction, residential mortgage, consumer, and credit cards. Each loan category was further segmented based on loan characteristics, including interest rate terms, credit quality and vintage. Generally, fair values were estimated based on an exit price by discounting expected cash flows for the segmented groups of loans using a discount rate that considers interest, credit and expected return by market participant under current market conditions. Additionally, prepayment, default and recovery assumptions have been applied in the mortgage loan portfolio valuations. Generally accepted accounting principles do not require a fair valuation of the lease financing portfolio, therefore it is included in the loans total at its carrying amount. Loans held-in-portfolio are classified as Level 3.
FDIC loss share asset
Fair value of the FDIC loss share asset was estimated using projected net losses related to the loss sharing agreements, which are expected to be reimbursed by the FDIC. The projected net losses were discounted using the U.S. Government agency curve. The loss share asset is classified as Level 3.
Deposits
Assets sold under agreements to repurchase
Other short-term borrowings
The carrying amount of other short-term borrowings approximate fair value because of the short-term maturity of those instruments or because they carry interest rates which approximate market. Thus, these other short-term borrowings are classified as Level 2.
Notes payable
Commitments to extend credit and letters of credit
Commitments to extend credit were valued using the fees currently charged to enter into similar agreements. For those commitments where a future stream of fees is charged, the fair value was estimated by discounting the projected cash flows of fees on commitments. Since the fair value of commitments to extend credit varies depending on the undrawn amount of the credit facility,
fees are subject to constant change, and cash flows are dependent on the creditworthiness of borrowers, commitments to extend credit are classified as Level 3. The fair value of letters of credit was based on fees currently charged on similar agreements. Given that the fair value of letters of credit constantly vary due to fees being subject to constant change and whether the fees are received depends on the creditworthiness of the account parties, letters of credit are classified as Level 3.
Note 28 – Net income per common share
The following table sets forth the computation of net income per common share (“EPS”), basic and diluted, for the quarters and six months ended March 31,June 30, 2016 and 2015:
Quarters ended March 31, | Quarters ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
(In thousands, except per share information) | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | ||||||||||||||||||
Net income from continuing operations | $ | 84,999 | $ | 73,485 | $ | 88,987 | $ | 597,437 | $ | 173,986 | $ | 670,922 | ||||||||||||
Net income from discontinued operations | — | 1,341 | — | 15 | — | 1,356 | ||||||||||||||||||
Preferred stock dividends | (931 | ) | (930 | ) | (931 | ) | (931 | ) | (1,862 | ) | (1,861 | ) | ||||||||||||
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Net income applicable to common stock | $ | 84,068 | $ | 73,896 | $ | 88,056 | $ | 596,521 | $ | 172,124 | $ | 670,417 | ||||||||||||
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Average common shares outstanding | 103,188,815 | 102,939,928 | 103,245,717 | 102,859,591 | 103,217,266 | 102,899,537 | ||||||||||||||||||
Average potential dilutive common shares | 80,998 | 196,381 | 97,769 | 243,127 | 80,441 | 213,743 | ||||||||||||||||||
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Average common shares outstanding—assuming dilution | 103,269,813 | 103,136,309 | ||||||||||||||||||||||
Average common shares outstanding - assuming dilution | 103,343,486 | 103,102,718 | 103,297,707 | 103,113,280 | ||||||||||||||||||||
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Basic EPS from continuing operations | $ | 0.81 | $ | 0.71 | $ | 0.85 | $ | 5.80 | $ | 1.67 | $ | 6.51 | ||||||||||||
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Basic EPS from discontinued operations | $ | — | $ | 0.01 | $ | — | $ | — | $ | — | $ | 0.01 | ||||||||||||
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Total Basic EPS | $ | 0.81 | $ | 0.72 | $ | 0.85 | $ | 5.80 | $ | 1.67 | $ | 6.52 | ||||||||||||
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Diluted EPS from continuing operations | $ | 0.81 | $ | 0.71 | $ | 0.85 | $ | 5.79 | $ | 1.67 | $ | 6.49 | ||||||||||||
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Diluted EPS from discontinued operations | $ | — | $ | 0.01 | $ | — | $ | — | $ | — | $ | 0.01 | ||||||||||||
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Total Diluted EPS | $ | 0.81 | $ | 0.72 | $ | 0.85 | $ | 5.79 | $ | 1.67 | $ | 6.50 | ||||||||||||
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For the quarter and six months ended March 31,June 30, 2016 the Corporation calculated the impact of potential dilutive common shares under the treasury method, consistent with the method used for the preparation of the financial statements for the year ended December, 31 2015. For a discussion of the calculation under the treasury stock method, refer to Note 37 of the consolidated financial statements included in the 2015 Form 10-K.
For the quarters and six months ended March 31,June 30, 2016 and 2015, there were no stock options outstanding.
The caption of other services fees in the consolidated statements of operations consists of the following major categories:
Quarters ended March 31, | Quarters ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
(In thousands) | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | ||||||||||||||||||
Debit card fees | $ | 11,382 | $ | 11,995 | $ | 22,669 | $ | 23,120 | ||||||||||||||||
Insurance fees | $ | 12,850 | $ | 12,041 | 13,885 | 13,606 | 26,735 | 25,647 | ||||||||||||||||
Credit card fees | 16,858 | 16,149 | 17,700 | 17,611 | 34,558 | 33,760 | �� | |||||||||||||||||
Debit card fees | 11,287 | 11,125 | ||||||||||||||||||||||
Sale and administration of investment products | 4,839 | 5,930 | 5,417 | 6,601 | 10,256 | 12,531 | ||||||||||||||||||
Trust fees | 4,235 | 4,602 | 4,827 | 4,914 | 9,063 | 9,516 | ||||||||||||||||||
Other fees | 3,313 | 3,779 | 3,734 | 4,694 | 7,046 | 8,473 | ||||||||||||||||||
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Total other service fees | $ | 53,382 | $ | 53,626 | ||||||||||||||||||||
Total other services fees | $ | 56,945 | $ | 59,421 | $ | 110,327 | $ | 113,047 | ||||||||||||||||
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Note 30 – FDIC loss share (expense) income
The caption of FDIC loss-share (expense) income in the consolidated statements of operations consists of the following major categories:
Quarters ended March 31, | Quarters ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
(In thousands) | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | ||||||||||||||||||
Amortization of loss share indemnification asset | $ | (4,042 | ) | $ | (27,316 | ) | ||||||||||||||||||
Amortization of loss-share indemnification asset | $ | (4,036 | ) | $ | (31,065 | ) | $ | (8,078 | ) | $ | (58,381 | ) | ||||||||||||
80% mirror accounting on credit impairment losses (reversal)[1] | (2,093 | ) | 8,246 | 475 | 7,647 | (1,618 | ) | 15,893 | ||||||||||||||||
80% mirror accounting on reimbursable expenses | 3,950 | 21,545 | 2,235 | 42,730 | 6,185 | 64,275 | ||||||||||||||||||
80% mirror accounting on recoveries on covered assets, including rental income on OREOs, subject to reimbursement to the FDIC | (645 | ) | (2,619 | ) | (3,956 | ) | (5,203 | ) | (4,601 | ) | (7,822 | ) | ||||||||||||
Change in true-up payment obligation | (443 | ) | 4,164 | (7,688 | ) | 3,672 | (8,131 | ) | 7,836 | |||||||||||||||
Other | 127 | 119 | 394 | 1,294 | 521 | 1,413 | ||||||||||||||||||
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Total FDIC loss share (expense) income | $ | (3,146 | ) | $ | 4,139 | |||||||||||||||||||
Total FDIC loss-share (expense) income | $ | (12,576 | ) | $ | 19,075 | $ | (15,722 | ) | $ | 23,214 | ||||||||||||||
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[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 |
Note 31 – Pension and postretirement benefits
The Corporation has a non-contributory defined benefit pension plan and supplementary pension benefit restoration plans for regular employees of certain of its subsidiaries. The accrual of benefits under the plans is frozen to all participants.
The components of net periodic pension cost for the periods presented were as follows:
Pension Plan | Benefit Restoration Plans | Pension Plan | Benefit Restoration Plans | |||||||||||||||||||||||||||||
Quarters ended March 31, | Quarters ended March 31, | Quarters ended June 30, | Quarters ended June 30, | |||||||||||||||||||||||||||||
(In thousands) | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | ||||||||||||||||||||||||
Interest cost | $ | 6,291 | $ | 7,403 | $ | 348 | $ | 407 | $ | 6,291 | $ | 7,403 | $ | 348 | $ | 407 | ||||||||||||||||
Expected return on plan assets | (9,623 | ) | (11,056 | ) | (538 | ) | (589 | ) | (9,623 | ) | (11,056 | ) | (538 | ) | (589 | ) | ||||||||||||||||
Amortization of net loss | 4,880 | 4,465 | 331 | 311 | 4,880 | 4,465 | 332 | 311 | ||||||||||||||||||||||||
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Total net periodic pension cost (benefit) | $ | 1,548 | $ | 812 | $ | 141 | $ | 129 | $ | 1,548 | $ | 812 | $ | 142 | $ | 129 | ||||||||||||||||
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Pension Plans | Benefit Restoration Plans | |||||||||||||||||||||||||||||||
Six months ended June 30, | Six months ended June 30, | |||||||||||||||||||||||||||||||
(In thousands) | 2016 | 2015 | 2016 | 2015 | ||||||||||||||||||||||||||||
Interest Cost | $ | 12,583 | $ | 14,806 | $ | 696 | $ | 814 | ||||||||||||||||||||||||
Expected return on plan assets | (19,246 | ) | (22,112 | ) | (1,076 | ) | (1,178 | ) | ||||||||||||||||||||||||
Amortization of net loss | 9,760 | 8,930 | 663 | 622 | ||||||||||||||||||||||||||||
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Total net periodic pension cost (benefit) | $ | 3,097 | $ | 1,624 | $ | 283 | $ | 258 | ||||||||||||||||||||||||
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During the quarter ended March 31,June 30, 2016 the Corporation made a contribution to the benefit restoration plans of $43 thousand. The total contributions expected to be paid during the year 2016 for the pension and benefit restoration plans amount to approximately $173 thousand.$45.2 million.
The Corporation also provides certain postretirement health care benefits for retired employees of certain subsidiaries. The table that follows presents the components of net periodic postretirement benefit cost.
Postretirement Benefit Plan | ||||||||||||||||||||||||
Quarters ended March 31, | Quarters ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
(In thousands) | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | ||||||||||||||||||
Service cost | $ | 289 | $ | 368 | $ | 289 | $ | 368 | $ | 578 | $ | 735 | ||||||||||||
Interest cost | 1,505 | 1,589 | 1,505 | 1,589 | 3,010 | 3,178 | ||||||||||||||||||
Amortization of prior service cost | (950 | ) | (950 | ) | (950 | ) | (950 | ) | (1,900 | ) | (1,900 | ) | ||||||||||||
Amortization of net loss | 275 | 249 | 275 | 249 | 550 | 498 | ||||||||||||||||||
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Total postretirement cost | $ | 1,119 | $ | 1,256 | ||||||||||||||||||||
Total net periodic postretirement benefit cost | $ | 1,119 | $ | 1,256 | $ | 2,238 | $ | 2,511 | ||||||||||||||||
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Contributions made to the postretirement benefit plan for the quarter ended March 31,June 30, 2016 amounted to approximately $1.6$1.8 million. The total contributions expected to be paid during the year 2016 for the postretirement benefit plan amount to approximately $6.4 million.
Note 32 –- Stock-based compensation
The Corporation maintained a Stock Option Plan (the “Stock Option Plan”), which permitted the granting of incentive awards in the form of qualified stock options, incentive stock options, or non-statutory stock options of the Corporation. In April 2004, the Corporation’s shareholders adopted the Popular, Inc. 2004 Omnibus Incentive Plan (the “Incentive Plan”), which replaced and superseded the Stock Option Plan. The adoption of the Incentive Plan did not alter the original terms of the grants made under the Stock Option Plan prior to the adoption of the Incentive Plan.
Stock Option Plan
Employees and directors of the Corporation or any of its subsidiaries were eligible to participate in the Stock Option Plan. The Board of Directors or the Compensation Committee of the Board had the absolute discretion to determine the individuals that were eligible to participate in the Stock Option Plan. This plan provided for the issuance of Popular, Inc.’s common stock at a price equal to its fair market value at the grant date, subject to certain plan provisions. The shares are to be made available from authorized but unissued shares of common stock or treasury stock. The Corporation’s policy has been to use authorized but unissued shares of common stock to cover each grant. The maximum option term is ten years from the date of grant. Unless an option agreement provides otherwise, all options granted are 20% exercisable after the first year and an additional 20% is exercisable after each subsequent year, subject to an acceleration clause at termination of employment due to retirement.
As of March 31,June 30, 2016 there were no stock options outstanding. During the first quarter ended March 31,of 2015, all stock options outstanding which amounted to 44,797 with a weighted average exercise price of $ 272 expired.
Incentive Plan
The Incentive Plan permits the granting of incentive awards in the form of Annual Incentive Awards, Long-term Performance Unit Awards, Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Units or Performance Shares. Participants in the Incentive Plan are designated by the Compensation Committee of the Board of Directors (or its delegate as determined by the Board). Employees and directors of the Corporation and/or any of its subsidiaries are eligible to participate in the Incentive Plan.
Under the Incentive Plan, the Corporation has issued restricted shares, which become vested based on the employees’ continued service with Popular. Unless otherwise stated in an agreement, the compensation cost associated with the shares of restricted stock is determined based on a two-prong vesting schedule. The first part is vested ratably over five years commencing at the date of grant and the second part is vested at termination of employment after attainment of 55 years of age and 10 years of service. The five-year vesting part is accelerated at termination of employment after attaining 55 years of age and 10 years of service. The vesting schedule for restricted shares granted on or after 2014 and thereafter was modified as follows, the first part ratably over four years commencing at the date of the grant and the second part is vested at termination of employment after attainment ofattaining the earlier of 55 years of age and 10 years of service or 60 years of age and 5 years of service. The four year vesting part is accelerated at termination of employment after attaining the earlier of 55 years of age and 10 years of service or 60 years of age and 5 years of service. The restricted shares granted consistent with the requirements of the TARP Interim Final Rule vest in two years from grant date.
The following table summarizes the restricted stock and performance shares activity under the Incentive Plan for members of management.
(Not in thousands) | Shares | Weighted-Average Grant Date Fair Value | Shares | Weighted-Average Grant Date Fair Value | ||||||||||||
Non-vested at December 31, 2014 | 628,009 | $ | 27.13 | 628,009 | $ | 27.13 | ||||||||||
Granted | 323,814 | 33.37 | 323,814 | 33.37 | ||||||||||||
Vested | (430,646 | ) | 30.45 | (430,646 | ) | 30.45 | ||||||||||
Forfeited | (25,446 | ) | 28.65 | (25,446 | ) | 28.65 | ||||||||||
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Non-vested at December 31, 2015 | 495,731 | $ | 28.25 | 495,731 | $ | 28.25 | ||||||||||
Granted | 226,098 | 24.05 | 344,488 | 25.86 | ||||||||||||
Quantity adjusted by TSR factor | (8,914 | ) | 28.47 | 10,315 | 26.45 | |||||||||||
Vested | (256,501 | ) | 25.90 | (403,654 | ) | 27.09 | ||||||||||
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Non-vested at March 31, 2016 | 456,414 | $ | 27.12 | |||||||||||||
Non-vested at June 30, 2016 | 446,880 | $ | 26.86 | |||||||||||||
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During the quarter ended March 31,June 30, 2016 161,500118,390 shares of restricted stock (June 30, 2015 – 231,830) were awarded to management under the Incentive Plan. DuringFor the quartersix-month period ended March 31, 2015, noJune 30, 2016, 279,890 shares of restricted stock (June 30, 2015 – 231,830) were awarded to management. Nomanagement under the Incentive Plan, from which no shares were awarded to management consistent with the requirements of the TARP Interim Final Rule for the quarters ended March 31, 2016 and 2015.Rule.
Beginning in 2015, the Corporation authorized the issuance of performance shares, in addition to restricted shares, under the Incentive Plan. The performance share awards consist of the opportunity to receive shares of Popular, Inc.’s common stock provided that the Corporation achieves certain goals during a three-year performance cycle. The goals will be based on two metrics weighted equally: the Relative Total Shareholder Return (“TSR”) and the Absolute Earnings per Share (“EPS”) goals. The TSR metric is considered to be a market condition under ASC 718. For equity settled awards based on a market condition, the fair value is determined as of the grant date and is not subsequently revised based on actual performance. The EPS performance metric is considered to be a performance condition under ASC 718. The fair value is determined based on the probability of achieving the EPS goal as of each reporting period. The TSR and EPS metrics are equally weighted and work independently. The number of shares that will ultimately vest ranges from 50% to a 150% of target based on both market (TSR) and performance (EPS) conditions. The performance shares vest at the end of the three-year performance cycle. The vesting is accelerated at termination of employment after attaining the earlier of 55 years of age and 10 years of service or 60 years of age and 5 years of service. For the quarter ended March 31,June 30, 2016 64,598 (June 30, 2015 - 91,984) performance shares were granted. For the six-month period ended June 30, 2016, 64,598 (June 30, 2015 - 91,984) performance shares were granted under this plan.
During the quarter ended March 31,June 30, 2016, the Corporation recognized $ 3.71.9 million of restricted stock expense related to management incentive awards, with a tax benefit of $ 0.50.4 million (March 31, 2015—(June 30, 2015 - $ 2.05.5 million, with a tax benefit of $ 0.30.8 million). For the quartersix-month period ended March 31,June 30, 2016, the Corporation recognized $ 5.6 million of restricted stock expense related to management incentive awards, with a tax benefit of $ 1.0 million (June 30, 2015 - $ 7.4 million, with a tax benefit of $ 1.1 million). For the six-month period ended June 30, 2016, the fair market value of the restricted stock vested was $3.6$6.8 million at grant date and $3.3$6.5 million at vesting date. This triggers a shortfall of $0.1 million of which $31$30 thousand was recorded against theas a windfall pool in additional paid in capital. No additional shortfallwindfall pool was recorded for the remaining $79$87 thousand due to the valuation allowance of the deferred tax asset. ForDuring the quarter ended March 31,June 30, 2016 the Corporation recognized $1.0$0.1 million of performance shares expense, with a tax benefit of $11 thousand (June 30, 2015 - $2.0 million, with a tax benefit of $0.2 million). For the six-month period ended June 30, 2016, the Corporation recognized $1.2 million of performance shares expense, with a tax benefit of $0.1 million.million (June 30, 2015 - $2.0 million, with a tax benefit of $0.2 million). The total unrecognized compensation cost related to non-vested restricted stock awards and performance shares to members of management at March 31,June 30, 2016 was $ 8.29.7 million and is expected to be recognized over a weighted-average period of 2.32.4 years.
The following table summarizes the restricted stock activity under the Incentive Plan for members of the Board of Directors:
(Not in thousands) | Restricted Stock | Weighted-Average Grant Date Fair Value | Restricted Stock | Weighted-Average Grant Date Fair Value | ||||||||||||
Non-vested at December 31, 2014 | — | $ | — | — | $ | — | ||||||||||
Granted | 22,119 | 32.29 | 22,119 | 32.29 | ||||||||||||
Vested | (22,119 | ) | 32.29 | (22,119 | ) | 32.29 | ||||||||||
Forfeited | — | — | — | — | ||||||||||||
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Non-vested at December 31, 2015 | — | $ | — | — | $ | — | ||||||||||
Granted | 2,338 | 23.95 | 40,517 | 29.77 | ||||||||||||
Vested | (2,338 | ) | 23.95 | (40,517 | ) | 29.77 | ||||||||||
Forfeited | — | — | — | — | ||||||||||||
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Non-vested at March 31, 2016 | — | $ | — | |||||||||||||
Non-vested at June 30, 2016 | — | $ | — | |||||||||||||
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During the quarter ended March 31,June 30, 2016, the Corporation granted 2,33838,179 shares of restricted stock to members of the Board of Directors of Popular, Inc., which became vested at grant date (March 31,(June 30, 2015 – 2,643)15,386). During this period, the Corporation recognized $0.1$0.3 million of restricted stock expense related to these restricted stock grants, with a tax benefit of $15$32 thousand (March 31, 2015—$0.1(June 30, 2015 - $0.1 million, with a tax benefit of $16$18 thousand). For the six-month period ended June 30, 2016, the Corporation granted 40,517 shares of restricted stock to members of the Board of Directors of Popular, Inc., which became vested at grant date (June 30, 2015 – 18,029). During this period, the Corporation recognized $0.5 million of restricted stock expense related to these restricted stock grants, with a tax benefit of $53 thousand (June 30, 2015 - $0.3 million, with a tax benefit of $34 thousand). The fair value at vesting date of the restricted stock vested during the quartersix months ended March 31,June 30, 2016 for directors was $ 56 thousand.1.2 million.
The reason for the difference between the income tax expense applicable to income before provision for income taxes and the amount computed by applying the statutory tax rate in Puerto Rico, were as follows:
Quarters ended | Quarters ended | |||||||||||||||||||||||||||||||
March 31, 2016 | March 31, 2015 | June 30, 2016 | June 30, 2015 | |||||||||||||||||||||||||||||
(In thousands) | Amount | % of pre-tax income | Amount | % of pre-tax income | Amount | % of pre-tax income | Amount | % of pre-tax income | ||||||||||||||||||||||||
Computed income tax expense at statutory rates | $ | 45,733 | 39 | % | $ | 41,361 | 39 | % | $ | 47,359 | 39 | % | $ | 24,923 | 39 | % | ||||||||||||||||
Net benefit of tax exempt interest income | (15,584 | ) | (13 | ) | (15,027 | ) | (14 | ) | (15,890 | ) | (13 | ) | (16,141 | ) | (25 | ) | ||||||||||||||||
Deferred tax asset valuation allowance | 5,273 | 5 | 5,639 | 5 | 3,436 | 3 | (542,706 | ) | (849 | ) | ||||||||||||||||||||||
Difference in tax rates due to multiple jurisdictions | (864 | ) | (1 | ) | (275 | ) | — | (1,113 | ) | (1 | ) | (542 | ) | — | ||||||||||||||||||
Effect of income subject to preferential tax rate | (3,414 | ) | (3 | ) | (2,471 | ) | (2 | ) | (4,722 | ) | (4 | ) | 593 | 1 | ||||||||||||||||||
State and local taxes | 2,927 | 3 | 1,331 | 1 | 2,158 | 2 | 1,388 | 2 | ||||||||||||||||||||||||
Others | (1,806 | ) | (2 | ) | 2,010 | 2 | 1,218 | 1 | (1,048 | ) | (2 | ) | ||||||||||||||||||||
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Income tax expense | $ | 32,265 | 28 | % | $ | 32,568 | 31 | % | ||||||||||||||||||||||||
Income tax expense (benefit) | $ | 32,446 | 27 | % | $ | (533,533 | ) | (834 | )% | |||||||||||||||||||||||
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June 30, 2016 | June 30, 2015 | |||||||||||||||||||||||||||||||
(In thousands) | Amount | % of pre-tax income | Amount | % of pre-tax income | ||||||||||||||||||||||||||||
Computed income tax expense at statutory rates | $ | 93,092 | 39 | % | $ | 66,283 | 39 | % | ||||||||||||||||||||||||
Net benefit of tax exempt interest income | (31,474 | ) | (13 | ) | (31,169 | ) | (18 | ) | ||||||||||||||||||||||||
Deferred tax asset valuation allowance | 8,709 | 3 | (537,067 | ) | (316 | ) | ||||||||||||||||||||||||||
Difference in tax rates due to multiple jurisdictions | (1,977 | ) | (1 | ) | (817 | ) | (1 | ) | ||||||||||||||||||||||||
Effect of income subject to preferential tax rate | (8,136 | ) | (3 | ) | (1,878 | ) | (1 | ) | ||||||||||||||||||||||||
State and local taxes | 5,085 | 2 | 2,719 | 1 | ||||||||||||||||||||||||||||
Others | (588 | ) | — | 965 | 1 | |||||||||||||||||||||||||||
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Income tax expense (benefit) | $ | 64,711 | 27 | % | $ | (500,964 | ) | (295 | )% | |||||||||||||||||||||||
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Income tax expense amounted to $32.4 million for the quarter ended June 30, 2016, compared with an income tax benefit of $533.5 million for the same quarter of 2015. During the second quarter of 2015, the Corporation recorded a partial reversal of the valuation allowance on the deferred tax asset from the U.S. operations amounting to $544.9 million.
The following table presents a breakdown of the significant components of the Corporation’s deferred tax assets and liabilities.
(In thousands) | March 31, 2016 | December 31, 2015 | June 30, 2016 | December 31, 2015 | ||||||||||||
Deferred tax assets: | ||||||||||||||||
Tax credits available for carryforward | $ | 13,651 | $ | 13,651 | $ | 13,651 | $ | 13,651 | ||||||||
Net operating loss and other carryforward available | 1,264,077 | 1,262,197 | 1,254,304 | 1,262,197 | ||||||||||||
Postretirement and pension benefits | 114,866 | 116,036 | 113,395 | 116,036 | ||||||||||||
Deferred loan origination fees | 6,063 | 6,420 | 5,944 | 6,420 | ||||||||||||
Allowance for loan losses | 658,220 | 670,592 | 649,374 | 670,592 | ||||||||||||
Deferred gains | 5,688 | 5,966 | 5,410 | 5,966 | ||||||||||||
Accelerated depreciation | 8,209 | 8,335 | 8,092 | 8,335 | ||||||||||||
Intercompany deferred gains | 2,492 | 2,743 | 2,421 | 2,743 | ||||||||||||
Difference in outside basis from pass-through entities | 11,889 | 12,684 | 10,972 | 12,684 | ||||||||||||
Other temporary differences | 30,348 | 29,208 | 31,614 | 29,208 | ||||||||||||
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Total gross deferred tax assets | 2,115,503 | 2,127,832 | 2,095,177 | 2,127,832 | ||||||||||||
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Deferred tax liabilities: | ||||||||||||||||
FDIC-assisted transaction | 92,156 | 90,778 | 92,321 | 90,778 | ||||||||||||
Indefinite-lived intangibles | 66,175 | 63,573 | 68,775 | 63,573 | ||||||||||||
Unrealized net gain on trading and available-for-sale securities | 37,662 | 22,281 | 44,633 | 22,281 | ||||||||||||
Other temporary differences | 7,232 | 6,670 | 7,647 | 6,670 | ||||||||||||
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Total gross deferred tax liabilities | 203,225 | 183,302 | 213,376 | 183,302 | ||||||||||||
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Valuation allowance | 637,911 | 642,727 | 638,791 | 642,727 | ||||||||||||
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Net deferred tax asset | $ | 1,274,367 | $ | 1,301,803 | $ | 1,243,010 | $ | 1,301,803 | ||||||||
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The net deferred tax asset shown in the table above at March 31,June 30, 2016 is reflected in the consolidated statements of financial condition as $1.3$1.2 billion in net deferred tax assets in the “Other assets” caption (December 31, 2015—$1.32015 - $1.3 billion) and $649$772 thousand in deferred tax liabilities in the “Other liabilities” caption (December 31, 2015—$6492015 - $649 thousand), reflecting the aggregate deferred tax assets or liabilities of individual tax-paying subsidiaries of the Corporation.
A deferred tax asset should be reduced by a valuation allowance if based on the weight of all available evidence, it is more likely than not (a likelihood of more than 50%) that some portion or the entire deferred tax asset will not be realized. The valuation allowance should be sufficient to reduce the deferred tax asset to the amount that is more likely than not to be realized. The
determination of whether a deferred tax asset is realizable is based on weighting all available evidence, including both positive and negative evidence. The realization of deferred tax assets, including carryforwards and deductible temporary differences, depends upon the existence of sufficient taxable income of the same character during the carryback or carryforward period. The analysis considers all sources of taxable income available to realize the deferred tax asset, including the future reversal of existing taxable temporary differences, future taxable income exclusive of reversing temporary differences and carryforwards, taxable income in prior carryback years and tax-planning strategies.
During the year ended December 31, 2015, after weighting all positive and negative evidence, the Corporation concluded that it is more likely than not that a portion of the total deferred tax asset from the U.S. operations, amounting to $1.2$1.1 billion and comprised mainly of net operating losses, will be realized. The Corporation based this determination on its estimated earnings for the remaining carryforward period of eighteen years beginning with the 2016 fiscal year, available to utilize the deferred tax asset, to reduce its income tax obligations. The recent historical level of book income adjusted by permanent differences, together with the estimated earnings after the reorganization of the U.S. operations and additional estimated earnings from the Doral Bank Transaction were objective positive evidence considered by the Corporation. As of March 31,June 30, 2016 the U.S. operations are not in a three year cumulative loss position, taking into account taxable income exclusive of reversing temporary differences. All of these factors lead management to conclude that it is more likely than not that a portion of the deferred tax asset from its U.S. operations will be realized. Management will continue to evaluate the realization of the deferred tax asset each quarter and adjust as deemed necessary. At March 31,June 30, 2016 a valuation allowance is recorded on the deferred tax asset of the U.S. operation in the amount of $602$600 million.
At March 31,June 30, 2016, the Corporation’s net deferred tax assets related to its Puerto Rico operations amounted to $730$706 million.
The Corporation’s Puerto Rico Banking operation is not in a cumulative three year loss position, taking into account taxable income exclusive of reversing temporary differences, and has sustained profitability for the three year period ended March 31,June 30, 2016. This is considered a strong piece of objectively verifiable positive evidence that outweights any negative evidence considered by management in the evaluation of the realization of the deferred tax asset. Based on this evidence and management’s estimate of future taxable income, the Corporation has concluded that it is more likely than not that such net deferred tax asset of the Puerto Rico Banking operations will be realized.
The Holding Company operation is not in a cumulative loss taking into account taxable income exclusive of reversing temporary differences, for the three year period ended March 31,June 30, 2016. However, it has sustained losses for year ended December 31, 2015 and the period ended March 31,June 30, 2016. Management expect these losses will be a trend in early future years. The losses in recent periods together with the expected losses in future years is considered by management a strong negative evidence that will suggest that income in future years will be insufficient to support the realization of all deferred tax asset. After weighting of all positive and negative evidence management concluded, as of the reporting date, that it is more likely than not that the Holding Company will not be able to realize any portion of the deferred tax assets, considering the criteria of ASC Topic 740. Accordingly, a full valuation allowance is recorded on the deferred tax asset at the Holding Company, which amounted to $36$39 million as of March 31,June 30, 2016.
The reconciliation of unrecognized tax benefits was as follows:
(In millions) | 2016 | 2015 | 2016 | 2015 | ||||||||||||
Balance at January 1 | $ | 9.0 | $ | 8.0 | $ | 9.0 | $ | 8.0 | ||||||||
Additions for tax positions - January through March | 0.4 | 0.3 | 0.4 | 0.3 | ||||||||||||
Reduction as a result of settlements - January through March | — | (0.5 | ) | — | (0.5 | ) | ||||||||||
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Balance at March 31 | $ | 9.4 | $ | 7.8 | $ | 9.4 | $ | 7.8 | ||||||||
Additions for tax positions - April through June | 0.3 | 0.3 | ||||||||||||||
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Balance at June 30 | $ | 9.7 | $ | 8.1 | ||||||||||||
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At March 31,June 30, 2016, the total amount of interest recognized in the statement of financial condition approximated $3.7$3.9 million (December 31, 2015—$3.22015 - $3.2 million). The total interest expense recognized at March 31,June 30, 2016 was $485$694 thousand (December 31, 2015—$572015 - $57 thousand). Management determined that at March 31,June 30, 2016 and December 31, 2015 there was no need to accrue for the payment of penalties. The Corporation’s policy is to report interest related to unrecognized tax benefits in income tax expense, whiles the penalties, if any, are reported in other operating expenses in the consolidated statements of operations.
After consideration of the effect on U.S. federal tax of unrecognized U.S. state tax benefits, the total amount of unrecognized tax benefits, including U.S. and Puerto Rico, that if recognized, would affect the Corporation’s effective tax rate, was approximately $12.0$12.5 million at March 31,June 30, 2016 (December 31, 2015—$11.22015 - $11.2 million).
The amount of unrecognized tax benefits may increase or decrease in the future for various reasons including adding amounts for current tax year positions, expiration of open income tax returns due to the statutes of limitation, changes in management’s judgment about the level of uncertainty, status of examinations, litigation and legislative activity and the addition or elimination of uncertain tax positions.
The Corporation and its subsidiaries file income tax returns in Puerto Rico, the U.S. federal jurisdiction, various U.S. states and political subdivisions, and foreign jurisdictions. At March 31,June 30, 2016, the following years remain subject to examination in the U.S. Federal jurisdiction: 2012 and thereafter; and in the Puerto Rico jurisdiction, 2010 and thereafter. The Corporation anticipates a reduction in the total amount of unrecognized tax benefits within the next 12 months, which could amount to approximately $3.3 million.
Note 34 – Supplemental–Supplemental disclosure on the consolidated statements of cash flows
Additional disclosures on cash flow information and non-cash activities for the quarterssix months ended March 31,June 30, 2016 and March 31,June 30, 2015 are listed in the following table:
(In thousands) | March 31, 2016 | March 31, 2015 | June 30, 2016 | June 30, 2015 | ||||||||||||
Non-cash activities: | ||||||||||||||||
Loans transferred to other real estate | $ | 26,919 | $ | 30,802 | $ | 62,409 | $ | 67,199 | ||||||||
Loans transferred to other property | 7,693 | 8,979 | 15,442 | 19,103 | ||||||||||||
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Total loans transferred to foreclosed assets | 34,612 | 39,781 | 77,851 | 86,302 | ||||||||||||
Transfers from loans held-in-portfolio to loans held-for-sale | — | 10,839 | — | 61,290 | ||||||||||||
Transfers from loans held-for-sale to loans held-in-portfolio | 3,821 | 4,858 | 4,220 | 8,523 | ||||||||||||
Account receivable from sale of loan | 14,477 | — | ||||||||||||||
Transfers from trading securities to available-for-sale securities | — | 5,523 | ||||||||||||||
Loans securitized into investment securities[1] | 170,248 | 203,414 | 383,441 | 517,265 | ||||||||||||
Trades receivable from brokers and counterparties | 87,590 | 112,287 | 78,994 | 111,964 | ||||||||||||
Trades payable to brokers and counterparties | 32,774 | 19,097 | 43,142 | 73,155 | ||||||||||||
Recognition of mortgage servicing rights on securitizations or asset transfers | 2,136 | 2,859 | 5,023 | 7,302 |
[1] | Includes loans securitized into trading securities and subsequently sold before quarter end. |
As previously disclosed in Note 5, Business Combination, on February 27, 2015, the Corporation’s Puerto Rico banking subsidiary, BPPR, in an alliance with co-bidders, including the Corporation’s U.S. mainland banking subsidiary, BPNA, acquired certain assets and all deposits (other than certain brokered deposits) of Doral Bank from the FDIC as receiver. As part of this transaction, BPPR received during the quarter ended March 31,as of June 30, 2015 net cash proceeds of approximately $ 711738 million for consideration of the assets and liabilities acquired.
The Corporation’s corporate structure consists of two reportable segments – Banco Popular de Puerto Rico and Banco Popular North America. These reportable segments pertain only to the continuing operations of Popular, Inc. As previously indicated in Note 4 to the consolidated financial statements, the regional operations in California, Illinois and Central Florida were classified as discontinued operations and sold during 2014.
Management determined the reportable segments based on the internal reporting used to evaluate performance and to assess where to allocate resources. The segments were determined based on the organizational structure, which focuses primarily on the markets the segments serve, as well as on the products and services offered by the segments.
Banco Popular de Puerto Rico:
Given that Banco Popular de Puerto Rico constitutes a significant portion of the Corporation’s results of operations and total assets at March 31,June 30, 2016, additional disclosures are provided for the business areas included in this reportable segment, as described below:
Banco Popular North America:
Banco Popular North America’s reportable segment consists of the banking operations of BPNA, E-LOAN, Popular Equipment Finance, Inc. and Popular Insurance Agency, U.S.A. BPNA operates through a retail branch network in the U.S. mainland under the name of Popular Community Bank, while E-LOAN supports BPNA’s deposit gathering through its online platform. All direct lending activities at E-LOAN were ceased during 2008. During the third quarter of 2015, BPNA and E-LOAN completed an asset purchase and sale transaction in which E-LOAN sold to BPNA all of its outstanding loan portfolio, including residential mortgage loans and home equity lines of credit, which had a carrying value of approximately $213 million. Prior to this transaction, the Corporation provided additional disclosures for the BPNA reportable segment related to E-LOAN. After the close of the above mentioned asset purchase and sale transaction, additional disclosures with respect to E-LOAN are no longer considered relevant to the financial statements and accordingly are not presented. Popular Equipment Finance, Inc. also holds a running-off loan portfolio as this subsidiary ceased originating loans during 2009. Popular Insurance Agency, U.S.A. offers investment and insurance services across the BPNA branch network.
The Corporate group consists primarily of the holding companies: Popular, Inc., Popular North America, Popular International Bank and certain of the Corporation’s investments accounted for under the equity method, including EVERTEC and Centro Financiero BHD, S.A.Leon. The Corporate group also includes the expenses of certain corporate areas that are identified as critical to the organization: Finance, Risk Management and Legal.
The accounting policies of the individual operating segments are the same as those of the Corporation. Transactions between reportable segments are primarily conducted at market rates, resulting in profits that are eliminated for reporting consolidated results of operations.
The tables that follow present the results of operations and total assets by reportable segments:
2016
For the quarter ended March 31, 2016 | ||||||||||||||||||||||||
Banco Popular | Banco Popular | Intersegment | ||||||||||||||||||||||
For the quarter ended June 30, 2016 | For the quarter ended June 30, 2016 | |||||||||||||||||||||||
(In thousands) | de Puerto Rico | North America | Eliminations | Banco Popular de Puerto Rico | Banco Popular North America | Intersegment Eliminations | ||||||||||||||||||
Net interest income | $ | 305,350 | $ | 62,257 | $ | — | $ | 310,361 | $ | 65,505 | $ | — | ||||||||||||
Provision for loan losses | 40,800 | 4,069 | — | 39,123 | 1,317 | — | ||||||||||||||||||
Non-interest income | 98,566 | 4,950 | — | 98,241 | 5,250 | — | ||||||||||||||||||
Amortization of intangibles | 2,948 | 166 | — | 2,931 | 166 | — | ||||||||||||||||||
Depreciation expense | 10,197 | 1,333 | — | 9,915 | 1,344 | — | ||||||||||||||||||
Other operating expenses | 224,669 | 41,331 | — | 234,704 | 44,398 | — | ||||||||||||||||||
Income tax expense | 31,877 | 8,456 | — | 31,295 | 11,103 | — | ||||||||||||||||||
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Net income | $ | 93,425 | $ | 11,852 | $ | — | $ | 90,634 | $ | 12,427 | $ | — | ||||||||||||
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Segment assets | $ | 28,108,702 | $ | 7,880,357 | $ | (52,740 | ) | $ | 29,190,397 | $ | 8,223,781 | $ | (15,239 | ) | ||||||||||
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For the quarter ended March 31, 2016 | ||||||||||||||||||||||||||||||||
For the quarter ended June 30, 2016 | For the quarter ended June 30, 2016 | |||||||||||||||||||||||||||||||
(In thousands) | Reportable Segments | Corporate | Eliminations | Total Popular, Inc. | Reportable Segments | Corporate | Eliminations | Total Popular, Inc. | ||||||||||||||||||||||||
Net interest income (expense) | $ | 367,607 | $ | (15,195 | ) | $ | — | $ | 352,412 | $ | 375,866 | $ | (15,202 | ) | $ | (113 | ) | $ | 360,551 | |||||||||||||
Provision (reversal of provision) for loan losses | 44,869 | (34 | ) | — | 44,835 | |||||||||||||||||||||||||||
Provision for loan losses | 40,440 | 32 | — | 40,472 | ||||||||||||||||||||||||||||
Non-interest income | 103,516 | 8,177 | (63 | ) | 111,630 | 103,491 | 8,062 | (1,050 | ) | 110,503 | ||||||||||||||||||||||
Amortization of intangibles | 3,114 | — | — | 3,114 | 3,097 | — | — | 3,097 | ||||||||||||||||||||||||
Depreciation expense | 11,530 | 177 | — | 11,707 | 11,259 | 176 | — | 11,435 | ||||||||||||||||||||||||
Other operating expenses | 266,000 | 21,731 | (609 | ) | 287,122 | 279,102 | 16,717 | (1,202 | ) | 294,617 | ||||||||||||||||||||||
Income tax expense (benefit) | 40,333 | (8,281 | ) | 213 | 32,265 | 42,398 | (9,979 | ) | 27 | 32,446 | ||||||||||||||||||||||
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Net income (loss) | $ | 105,277 | $ | (20,611 | ) | $ | 333 | $ | 84,999 | $ | 103,061 | $ | (14,086 | ) | $ | 12 | $ | 88,987 | ||||||||||||||
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Segment assets | $ | 35,936,319 | $ | 4,938,750 | $ | (4,728,060 | ) | $ | 36,147,009 | $ | 37,398,939 | $ | 4,953,432 | $ | (4,746,223 | ) | $ | 37,606,148 | ||||||||||||||
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For the six months ended June 30, 2016 | ||||||||||||
(In thousands) | Banco Popular de Puerto Rico | Banco Popular North America | Intersegment Eliminations | |||||||||
Net interest income | $ | 615,711 | $ | 127,762 | $ | — | ||||||
Provision for loan losses | 79,924 | 5,386 | — | |||||||||
Non-interest income | 196,808 | 10,200 | — | |||||||||
Amortization of intangibles | 5,879 | 332 | — | |||||||||
Depreciation expense | 20,111 | 2,677 | — | |||||||||
Other operating expenses | 459,373 | 85,728 | — | |||||||||
Income tax expense | 63,172 | 19,560 | — | |||||||||
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Net income | $ | 184,060 | $ | 24,279 | $ | — | ||||||
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Segment assets | $ | 29,190,397 | $ | 8,223,781 | $ | (15,239 | ) | |||||
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For the six months ended June 30, 2016 | ||||||||||||||||
(In thousands) | Reportable Segments | Corporate | Eliminations | Total Popular, Inc. | ||||||||||||
Net interest income (expense) | $ | 743,473 | $ | (30,397 | ) | $ | (113 | ) | $ | 712,963 | ||||||
Provision (reversal fof provision) for loan losses | 85,310 | (3 | ) | — | 85,307 | |||||||||||
Non-interest income | 207,008 | 16,239 | (1,114 | ) | 222,133 | |||||||||||
Amortization of intangibles | 6,211 | — | — | 6,211 | ||||||||||||
Depreciation expense | 22,788 | 353 | — | 23,141 | ||||||||||||
Other operating expenses | 545,101 | 38,449 | (1,810 | ) | 581,740 | |||||||||||
Income tax expense (benefit) | 82,732 | (18,260 | ) | 239 | 64,711 | |||||||||||
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Net income (loss) | $ | 208,339 | $ | (34,697 | ) | $ | 344 | $ | 173,986 | |||||||
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Segment assets | $ | 37,398,939 | $ | 4,953,432 | (4,746,223 | ) | $ | 37,606,148 | ||||||||
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2015
For the quarter ended March 31, 2015 | ||||||||||||||||||||||||
Banco Popular | Banco Popular | Intersegment | ||||||||||||||||||||||
For the quarter ended June 30, 2015 | For the quarter ended June 30, 2015 | |||||||||||||||||||||||
(In thousands) | de Puerto Rico | North America | Eliminations | Banco Popular de Puerto Rico | Banco Popular North America | Intersegment Eliminations | ||||||||||||||||||
Net interest income | $ | 306,611 | $ | 52,101 | $ | — | $ | 316,085 | $ | 61,932 | $ | — | ||||||||||||
Provision (reversal of provision) for loan losses | 42,237 | (2,202 | ) | — | 76,068 | (61 | ) | — | ||||||||||||||||
Non-interest income | 103,529 | 6,167 | — | 125,735 | 5,670 | 125 | ||||||||||||||||||
Amortization of intangibles | 1,998 | 106 | — | 2,563 | 318 | — | ||||||||||||||||||
Depreciation expense | 10,108 | 1,617 | — | 10,103 | 1,746 | — | ||||||||||||||||||
Other operating expenses | 227,576 | 54,484 | — | 279,887 | 48,472 | — | ||||||||||||||||||
Income tax expense | 37,448 | 937 | — | |||||||||||||||||||||
Income tax expense (benefit) | 17,312 | (543,833 | ) | — | ||||||||||||||||||||
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Net income | $ | 90,773 | $ | 3,326 | $ | — | $ | 55,887 | $ | 560,960 | $ | 125 | ||||||||||||
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Segment assets | $ | 28,803,521 | $ | 6,717,758 | $ | (128,481 | ) | $ | 29,669,355 | $ | 7,458,709 | $ | (589,902 | ) | ||||||||||
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For the quarter ended March 31, 2015 | ||||||||||||||||||||||||||||||||
Reportable | ||||||||||||||||||||||||||||||||
For the quarter ended June 30, 2015 | For the quarter ended June 30, 2015 | |||||||||||||||||||||||||||||||
(In thousands) | Segments | Corporate | Eliminations | Total Popular, Inc. | Reportable Segments | Corporate | Eliminations | Total Popular, Inc. | ||||||||||||||||||||||||
Net interest income (expense) | $ | 358,712 | $ | (15,517 | ) | $ | — | $ | 343,195 | $ | 378,017 | $ | (15,464 | ) | $ | — | $ | 362,553 | ||||||||||||||
Provision for loan losses | 40,035 | — | — | 40,035 | 76,007 | 227 | — | 76,234 | ||||||||||||||||||||||||
Non-interest income | 109,696 | 5,643 | (104 | ) | 115,235 | 131,530 | 10,483 | (1,254 | ) | 140,759 | ||||||||||||||||||||||
Amortization of intangibles | 2,104 | — | — | 2,104 | 2,881 | — | — | 2,881 | ||||||||||||||||||||||||
Depreciation expense | 11,725 | 194 | — | 11,919 | 11,849 | 181 | — | 12,030 | ||||||||||||||||||||||||
Other operating expenses | 282,061 | 16,990 | (732 | ) | 298,319 | 328,359 | 20,604 | (700 | ) | 348,263 | ||||||||||||||||||||||
Income tax expense (benefit) | 38,385 | (6,062 | ) | 245 | 32,568 | |||||||||||||||||||||||||||
Income tax benefit | (526,521 | ) | (6,796 | ) | (216 | ) | (533,533 | ) | ||||||||||||||||||||||||
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Net income (loss) | $ | 94,098 | $ | (20,996 | ) | $ | 383 | $ | 73,485 | $ | 616,972 | $ | (19,197 | ) | $ | (338 | ) | $ | 597,437 | |||||||||||||
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Segment assets | $ | 35,392,798 | $ | 4,896,192 | $ | (4,673,543 | ) | $ | 35,615,447 | $ | 36,538,162 | $ | 4,909,006 | $ | (4,697,055 | ) | $ | 36,750,113 | ||||||||||||||
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For the six months ended June 30, 2015 | ||||||||||||
(In thousands) | Banco Popular de Puerto Rico | Banco Popular North America | Intersegment Eliminations | |||||||||
Net interest income | $ | 622,696 | $ | 114,033 | $ | — | ||||||
Provision (reversal of provision) for loan losses | 118,305 | (2,263 | ) | — | ||||||||
Non-interest income | 229,265 | 11,836 | 125 | |||||||||
Amortization of intangibles | 4,562 | 423 | — | |||||||||
Depreciation expense | 20,211 | 3,363 | — | |||||||||
Other operating expenses | 507,463 | 102,957 | — | |||||||||
Income tax expense (benefit) | 54,761 | (542,896 | ) | — | ||||||||
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Net income | $ | 146,659 | $ | 564,285 | $ | 125 | ||||||
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Segment assets | 29,669,355 | 7,458,709 | (589,902 | ) | ||||||||
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For the six months ended June 30, 2015 | ||||||||||||||||
(In thousands) | Reportable Segments | Corporate | Eliminations | Total Popular, Inc. | ||||||||||||
Net interest income (expense) | $ | 736,729 | $ | (30,981 | ) | $ | — | $ | 705,748 | |||||||
Provision for loan losses | 116,042 | 227 | — | 116,269 | ||||||||||||
Non-interest income | 241,226 | 16,125 | (1,357 | ) | 255,994 | |||||||||||
Amortization of intangibles | 4,985 | — | — | 4,985 | ||||||||||||
Depreciation expense | 23,574 | 375 | — | 23,949 | ||||||||||||
Other operating expenses | 610,420 | 37,592 | (1,431 | ) | 646,581 | |||||||||||
Income tax benefit | (488,135 | ) | (12,858 | ) | 29 | (500,964 | ) | |||||||||
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Net income (loss) | $ | 711,069 | $ | (40,192 | ) | $ | 45 | $ | 670,922 | |||||||
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Segment assets | 36,538,162 | 4,909,006 | (4,697,055 | ) | 36,750,113 | |||||||||||
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Additional disclosures with respect to the Banco Popular de Puerto Rico reportable segment are as follows:
2016
For the quarter ended March 31, 2016 | ||||||||||||||||||||||||||||||||||||||||
For the quarter ended June 30, 2016 | For the quarter ended June 30, 2016 | |||||||||||||||||||||||||||||||||||||||
Banco Popular de Puerto Rico | Banco Popular de Puerto Rico | Banco Popular de Puerto Rico | ||||||||||||||||||||||||||||||||||||||
Consumer | Other | Total Banco | ||||||||||||||||||||||||||||||||||||||
Commercial | and Retail | Financial | Popular de | |||||||||||||||||||||||||||||||||||||
(In thousands) | Banking | Banking | Services | Eliminations | Puerto Rico | Commercial Banking | Consumer and Retail Banking | Other Financial Services | Eliminations | Total Banco Popular de Puerto Rico | ||||||||||||||||||||||||||||||
Net interest income | $ | 114,903 | $ | 187,195 | $ | 1,615 | $ | 1,637 | $ | 305,350 | $ | 122,430 | $ | 185,216 | $ | 1,680 | $ | 1,035 | $ | 310,361 | ||||||||||||||||||||
Provision for loan losses | 14,908 | 25,892 | — | — | 40,800 | (1,669 | ) | 40,792 | — | — | 39,123 | |||||||||||||||||||||||||||||
Non-interest income | 21,731 | 55,608 | 21,311 | (84 | ) | 98,566 | 17,598 | 55,606 | 25,128 | (91 | ) | 98,241 | ||||||||||||||||||||||||||||
Amortization of intangibles | 22 | 1,836 | 1,090 | — | 2,948 | 49 | 1,810 | 1,072 | — | 2,931 | ||||||||||||||||||||||||||||||
Depreciation expense | 4,275 | 5,691 | 231 | — | 10,197 | 4,245 | 5,447 | 223 | — | 9,915 | ||||||||||||||||||||||||||||||
Other operating expenses | 57,232 | 150,212 | 17,309 | (84 | ) | 224,669 | 63,919 | 154,036 | 16,840 | (91 | ) | 234,704 | ||||||||||||||||||||||||||||
Income tax expense | 18,169 | 12,379 | 1,329 | — | 31,877 | 23,228 | 5,137 | 2,930 | — | 31,295 | ||||||||||||||||||||||||||||||
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Net income | $ | 42,028 | $ | 46,793 | $ | 2,967 | $ | 1,637 | $ | 93,425 | $ | 50,256 | $ | 33,600 | $ | 5,743 | $ | 1,035 | $ | 90,634 | ||||||||||||||||||||
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Segment assets | $ | 11,273,486 | $ | 17,090,030 | $ | 342,867 | $ | (597,681 | ) | $ | 28,108,702 | $ | 12,894,262 | $ | 17,664,592 | $ | 474,482 | $ | (1,842,939 | ) | $ | 29,190,397 | ||||||||||||||||||
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For the six months ended June 30, 2016 Banco Popular de Puerto Rico (In thousands) Net interest income Provision for loan losses Non-interest income Amortization of intangibles Depreciation expense Other operating expenses Income tax expense Net income Segment assets Commercial
Banking Consumer
and Retail
Banking Other
Financial
Services Eliminations Total Banco
Popular de
Puerto Rico $ 237,333 $ 372,411 $ 3,295 $ 2,672 $ 615,711 13,240 66,684 — — 79,924 39,330 111,214 46,439 (175 ) 196,808 71 3,646 2,162 — 5,879 8,520 11,138 453 — 20,111 121,151 304,248 34,149 (175 ) 459,373 41,397 17,516 4,259 — 63,172 $ 92,284 $ 80,393 $ 8,711 $ 2,672 $ 184,060 $ 12,894,262 $ 17,664,592 $ 474,482 $ (1,842,939 ) $ 29,190,397
2015
For the quarter ended March 31, 2015 | ||||||||||||||||||||||||||||||||||||||||
For the quarter ended June 30, 2015 | For the quarter ended June 30, 2015 | |||||||||||||||||||||||||||||||||||||||
Banco Popular de Puerto Rico | Banco Popular de Puerto Rico | Banco Popular de Puerto Rico | ||||||||||||||||||||||||||||||||||||||
Consumer | Other | Total Banco | ||||||||||||||||||||||||||||||||||||||
Commercial | and Retail | Financial | Popular de | |||||||||||||||||||||||||||||||||||||
(In thousands) | Banking | Banking | Services | Eliminations | Puerto Rico | Commercial Banking | Consumer and Retail Banking | Other Financial Services | Eliminations | Total Banco Popular de Puerto Rico | ||||||||||||||||||||||||||||||
Net interest income | $ | 118,475 | $ | 186,252 | $ | 1,880 | $ | 4 | $ | 306,611 | $ | 119,205 | $ | 194,737 | $ | 2,143 | $ | — | $ | 316,085 | ||||||||||||||||||||
(Reversal of provision) provision for loan losses | (3,556 | ) | 45,793 | — | — | 42,237 | ||||||||||||||||||||||||||||||||||
Provision for loan losses | 66,792 | 9,276 | — | — | 76,068 | |||||||||||||||||||||||||||||||||||
Non-interest income | 27,150 | 56,004 | 20,470 | (95 | ) | 103,529 | 35,992 | 66,436 | 23,407 | (100 | ) | 125,735 | ||||||||||||||||||||||||||||
Amortization of intangibles | 29 | 1,772 | 197 | — | 1,998 | (23 | ) | 1,912 | 674 | — | 2,563 | |||||||||||||||||||||||||||||
Depreciation expense | 4,320 | 5,512 | 276 | — | 10,108 | 4,703 | 5,104 | 296 | — | 10,103 | ||||||||||||||||||||||||||||||
Other operating expenses | 65,856 | 145,068 | 16,747 | (95 | ) | 227,576 | 101,717 | 160,871 | 17,399 | (100 | ) | 279,887 | ||||||||||||||||||||||||||||
Income tax expense | 26,053 | 9,778 | 1,617 | — | 37,448 | |||||||||||||||||||||||||||||||||||
Income tax (benefit) expense | (13,395 | ) | 27,530 | 3,177 | — | 17,312 | ||||||||||||||||||||||||||||||||||
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Net income | $ | 52,923 | $ | 34,333 | $ | 3,513 | $ | 4 | $ | 90,773 | ||||||||||||||||||||||||||||||
Net (loss) income | $ | (4,597 | ) | $ | 56,480 | $ | 4,004 | $ | — | $ | 55,887 | |||||||||||||||||||||||||||||
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Segment assets | $ | 10,056,505 | $ | 20,053,145 | $ | 486,998 | $ | (1,793,127 | ) | $ | 28,803,521 | $ | 10,038,389 | $ | 19,853,299 | $ | 744,519 | $ | (966,852 | ) | $ | 29,669,355 | ||||||||||||||||||
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For the six months ended June 30, 2015 Banco Popular de Puerto Rico (In thousands) Net interest income Provision for loan losses Non-interest income Amortization of intangibles Depreciation expense Other operating expenses Income tax expense Net income Segment assets Commercial
Banking Consumer
and Retail
Banking Other
Financial
Services Eliminations Total Banco
Popular de
Puerto Rico $ 237,680 $ 380,989 $ 4,023 $ 4 $ 622,696 63,236 55,069 — — 118,305 63,142 122,440 43,878 (195 ) 229,265 6 3,684 872 — 4,562 9,023 10,616 572 — 20,211 167,573 305,939 34,146 (195 ) 507,463 12,658 37,308 4,795 — 54,761 $ 48,326 $ 90,813 $ 7,516 $ 4 $ 146,659 $ 10,038,389 $ 19,853,299 $ 744,519 $ (966,852 ) $ 29,669,355
Geographic Information
Quarter ended | Quarter ended | Six months ended | ||||||||||||||||||||||
(In thousands) | March 31, 2016 | March 31, 2015 | ||||||||||||||||||||||
Revenues:[1] | ||||||||||||||||||||||||
(in thousands) | June 30, 2016 | June 30, 2015 | June 30, 2016 | June 30, 2015 | ||||||||||||||||||||
Revenues: | ||||||||||||||||||||||||
Puerto Rico | $ | 380,036 | $ | 385,054 | $ | 384,902 | $ | 415,972 | $ | 764,938 | $ | 801,026 | ||||||||||||
United States | 64,640 | 56,710 | 67,543 | 67,235 | 132,183 | 123,945 | ||||||||||||||||||
Other | 19,366 | 16,666 | 18,609 | 20,105 | 37,975 | 36,771 | ||||||||||||||||||
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Total consolidated revenues | $ | 464,042 | $ | 458,430 | $ | 471,054 | $ | 503,312 | $ | 935,096 | $ | 961,742 | ||||||||||||
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[1] | Total revenues include net interest income (expense), service charges on deposit accounts, other service fees, mortgage banking activities, net gain (loss) and valuation adjustments on investment securities, trading account (loss) profit, net (loss) gain on sale of loans and valuation adjustments on loans held-for-sale, adjustments to indemnity reserves on loans sold, FDIC loss share (expense) income and other operating income. |
Selected Balance Sheet Information:
(In thousands) | March 31, 2016 | December 31, 2015 | June 30, 2016 | December 31, 2015 | ||||||||||||
Puerto Rico | ||||||||||||||||
Total assets | $ | 27,150,601 | $ | 26,764,184 | $ | 28,210,388 | $ | 26,764,184 | ||||||||
Loans | 17,370,172 | 17,477,070 | 17,126,140 | 17,477,070 | ||||||||||||
Deposits | 21,015,800 | 20,893,232 | 22,124,865 | 20,893,232 | ||||||||||||
United States | ||||||||||||||||
Total assets | $ | 8,063,912 | $ | 7,859,217 | $ | 8,491,277 | $ | 7,859,217 | ||||||||
Loans | 5,121,648 | 4,873,504 | 5,397,679 | 4,873,504 | ||||||||||||
Deposits | 5,445,760 | 5,288,886 | 5,503,937 | 5,288,886 | ||||||||||||
Other | ||||||||||||||||
Total assets | $ | 932,496 | $ | 1,138,332 | $ | 904,483 | $ | 1,138,332 | ||||||||
Loans | 766,362 | 778,656 | 746,350 | 778,656 | ||||||||||||
Deposits[1] | 1,065,033 | 1,027,605 | 1,109,054 | 1,027,605 | ||||||||||||
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[1] | Represents deposits from BPPR operations located in the U.S. and British Virgin Islands. |
Note 36 – Condensed consolidating financial information of guarantor and issuers of registered guaranteed securities
The following condensed consolidating financial information presents the financial position of Popular, Inc. Holding Company (“PIHC”) (parent only), Popular North America, Inc. (“PNA”) and all other subsidiaries of the Corporation at March 31,June 30, 2016 and December 31, 2015, and the results of their operations and cash flows for periods ended March 31,June 30, 2016 and December 31, 2015.
PNA is an operating, wholly-owned subsidiary of PIHC and is the holding company of its wholly-owned subsidiaries: Equity One, Inc. and Banco Popular North America (“BPNA”), including BPNA’s wholly-owned subsidiaries Popular Equipment Finance, Inc., Popular Insurance Agency, U.S.A., and E-LOAN, Inc.
PIHC fully and unconditionally guarantees all registered debt securities issued by PNA.
Condensed Consolidating Statement of Financial Condition (Unaudited)
At March 31, 2016 | ||||||||||||||||||||||||||||||||||||||||
At June 30, 2016 | At June 30, 2016 | |||||||||||||||||||||||||||||||||||||||
All other | All other | |||||||||||||||||||||||||||||||||||||||
Popular Inc. | PNA | subsidiaries and | Elimination | Popular, Inc. | Popular Inc. | PNA | subsidiaries and | Elimination | Popular, Inc. | |||||||||||||||||||||||||||||||
(In thousands) | Holding Co. | Holding Co. | eliminations | entries | Consolidated | Holding Co. | Holding Co. | eliminations | entries | Consolidated | ||||||||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||||||||||||||||
Cash and due from banks | $ | 21,133 | $ | 598 | $ | 409,315 | $ | (21,423 | ) | $ | 409,623 | $ | 37,306 | $ | 595 | $ | 365,034 | $ | (37,627 | ) | $ | 365,308 | ||||||||||||||||||
Money market investments | 255,251 | 18,519 | 1,917,209 | (273,519 | ) | 1,917,460 | 262,285 | 18,488 | 2,785,215 | (280,488 | ) | 2,785,500 | ||||||||||||||||||||||||||||
Trading account securities, at fair value | 2,121 | — | 69,163 | — | 71,284 | 2,271 | — | 70,349 | (90 | ) | 72,530 | |||||||||||||||||||||||||||||
Investment securities available-for-sale, at fair value | 227 | — | 6,649,603 | — | 6,649,830 | 258 | — | 7,242,418 | — | 7,242,676 | ||||||||||||||||||||||||||||||
Investment securities held-to-maturity, at amortized cost | — | — | 99,216 | — | 99,216 | — | — | 99,525 | — | 99,525 | ||||||||||||||||||||||||||||||
Other investment securities, at lower of cost or realizable value | 9,850 | 4,492 | 149,682 | — | 164,024 | 9,850 | 4,492 | 154,221 | — | 168,563 | ||||||||||||||||||||||||||||||
Investment in subsidiaries | 5,679,385 | 1,819,384 | — | (7,498,769 | ) | — | 5,775,328 | 1,838,488 | — | (7,613,816 | ) | — | ||||||||||||||||||||||||||||
Loans held-for-sale, at lower of cost or fair value | — | — | 125,315 | — | 125,315 | — | — | 122,338 | — | 122,338 | ||||||||||||||||||||||||||||||
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Loans held-in-portfolio: | ||||||||||||||||||||||||||||||||||||||||
Loans not covered under loss-sharing agreements with the FDIC | 1,167 | — | 22,617,321 | — | 22,618,488 | 1,159 | — | 22,654,718 | — | 22,655,877 | ||||||||||||||||||||||||||||||
Loans covered under loss-sharing agreements with the FDIC | — | — | 625,130 | — | 625,130 | — | — | 607,170 | — | 607,170 | ||||||||||||||||||||||||||||||
Less—Unearned income | — | — | 110,751 | — | 110,751 | |||||||||||||||||||||||||||||||||||
Less - Unearned income | — | — | 115,216 | — | 115,216 | |||||||||||||||||||||||||||||||||||
Allowance for loan losses | 2 | — | 538,470 | — | 538,472 | 34 | — | 548,686 | — | 548,720 | ||||||||||||||||||||||||||||||
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Total loans held-in-portfolio, net | 1,165 | — | 22,593,230 | — | 22,594,395 | 1,125 | — | 22,597,986 | — | 22,599,111 | ||||||||||||||||||||||||||||||
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FDIC loss-share asset | — | — | 219,448 | — | 219,448 | — | — | 214,029 | — | 214,029 | ||||||||||||||||||||||||||||||
Premises and equipment, net | 2,999 | — | 524,494 | — | 527,493 | 3,077 | — | 532,788 | — | 535,865 | ||||||||||||||||||||||||||||||
Other real estate not covered under loss-sharing agreements with the FDIC | 566 | — | 165,394 | — | 165,960 | 283 | — | 176,742 | — | 177,025 | ||||||||||||||||||||||||||||||
Other real estate covered under loss-sharing agreements with the FDIC | — | — | 36,397 | — | 36,397 | — | — | 37,984 | — | 37,984 | ||||||||||||||||||||||||||||||
Accrued income receivable | 73 | 36 | 120,229 | (30 | ) | 120,308 | 103 | 145 | 120,819 | (88 | ) | 120,979 | ||||||||||||||||||||||||||||
Mortgage servicing assets, at fair value | — | — | 205,051 | — | 205,051 | — | — | 203,577 | — | 203,577 | ||||||||||||||||||||||||||||||
Other assets | 57,670 | 23,453 | 2,091,857 | (16,950 | ) | 2,156,030 | 57,937 | 23,292 | 2,113,461 | (15,630 | ) | 2,179,060 | ||||||||||||||||||||||||||||
Goodwill | — | — | 631,095 | — | 631,095 | — | — | 631,095 | — | 631,095 | ||||||||||||||||||||||||||||||
Other intangible assets | 553 | — | 53,527 | — | 54,080 | 554 | — | 50,429 | — | 50,983 | ||||||||||||||||||||||||||||||
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Total assets | $ | 6,030,993 | $ | 1,866,482 | $ | 36,060,225 | $ | (7,810,691 | ) | $ | 36,147,009 | $ | 6,150,377 | $ | 1,885,500 | $ | 37,518,010 | $ | (7,947,739 | ) | $ | 37,606,148 | ||||||||||||||||||
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Liabilities and Stockholders’ Equity | ||||||||||||||||||||||||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||||||||||||||||||
Deposits: | ||||||||||||||||||||||||||||||||||||||||
Non-interest bearing | $ | — | $ | — | $ | 6,405,516 | $ | (21,423 | ) | $ | 6,384,093 | $ | — | $ | — | $ | 6,568,735 | $ | (37,627 | ) | $ | 6,531,108 | ||||||||||||||||||
Interest bearing | — | — | 21,416,019 | (273,519 | ) | 21,142,500 | — | — | 22,487,236 | (280,488 | ) | 22,206,748 | ||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||
Total deposits | — | — | 27,821,535 | (294,942 | ) | 27,526,593 | — | — | 29,055,971 | (318,115 | ) | 28,737,856 | ||||||||||||||||||||||||||||
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Federal funds purchased and assets sold under agreements to repurchase | — | — | 760,154 | — | 760,154 | — | — | 821,604 | — | 821,604 | ||||||||||||||||||||||||||||||
Other short-term borrowings | — | — | 6,370 | — | 6,370 | — | — | 31,200 | — | 31,200 | ||||||||||||||||||||||||||||||
Notes payable | 734,036 | 148,492 | 700,940 | — | 1,583,468 | 734,557 | 148,498 | 692,893 | — | 1,575,948 | ||||||||||||||||||||||||||||||
Other liabilities | 46,657 | 3,591 | 985,598 | (17,537 | ) | 1,018,309 | 55,898 | 6,262 | 1,031,686 | (15,952 | ) | 1,077,894 | ||||||||||||||||||||||||||||
Liabilities from discontinued operations | — | — | 1,815 | — | 1,815 | — | — | 1,815 | — | 1,815 | ||||||||||||||||||||||||||||||
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Total liabilities | 780,693 | 152,083 | 30,276,412 | (312,479 | ) | 30,896,709 | 790,455 | 154,760 | 31,635,169 | (334,067 | ) | 32,246,317 | ||||||||||||||||||||||||||||
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Stockholders’ equity: | ||||||||||||||||||||||||||||||||||||||||
Preferred stock | 50,160 | — | — | — | 50,160 | 50,160 | — | — | — | 50,160 | ||||||||||||||||||||||||||||||
Common stock | 1,039 | 2 | 56,307 | (56,309 | ) | 1,039 | 1,040 | 2 | 56,306 | (56,309 | ) | 1,039 | ||||||||||||||||||||||||||||
Surplus | 4,222,706 | 4,111,208 | 5,712,604 | (9,815,285 | ) | 4,231,233 | 4,224,309 | 4,111,207 | 5,698,606 | (9,801,287 | ) | 4,232,835 | ||||||||||||||||||||||||||||
Retained earnings (accumulated deficit) | 1,165,003 | (2,409,905 | ) | 195,181 | 2,206,197 | 1,156,476 | 1,237,505 | (2,400,493 | ) | 271,530 | 2,120,437 | 1,228,979 | ||||||||||||||||||||||||||||
Treasury stock, at cost | (6,858 | ) | — | — | — | (6,858 | ) | (7,480 | ) | — | — | (90 | ) | (7,570 | ) | |||||||||||||||||||||||||
Accumulated other comprehensive loss, net of tax | (181,750 | ) | 13,094 | (180,279 | ) | 167,185 | (181,750 | ) | ||||||||||||||||||||||||||||||||
Accumulated other comprehensive loss,net of tax | (145,612 | ) | 20,024 | (143,601 | ) | 123,577 | (145,612 | ) | ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Total stockholders’ equity | 5,250,300 | 1,714,399 | 5,783,813 | (7,498,212 | ) | 5,250,300 | 5,359,922 | 1,730,740 | 5,882,841 | (7,613,672 | ) | 5,359,831 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Total liabilities and stockholders’ equity | $ | 6,030,993 | $ | 1,866,482 | $ | 36,060,225 | $ | (7,810,691 | ) | $ | 36,147,009 | $ | 6,150,377 | $ | 1,885,500 | $ | 37,518,010 | $ | (7,947,739 | ) | $ | 37,606,148 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statement of Financial Condition (Unaudited)
At December 31, 2015 | ||||||||||||||||||||||||||||||||||||||||
At December 31, 2015 | At December 31, 2015 | |||||||||||||||||||||||||||||||||||||||
All other | All other | |||||||||||||||||||||||||||||||||||||||
Popular, Inc. | PNA | subsidiaries and | Elimination | Popular, Inc. | Popular, Inc. | PNA | subsidiaries and | Elimination | Popular, Inc. | |||||||||||||||||||||||||||||||
(In thousands) | Holding Co. | Holding Co. | eliminations | entries | Consolidated | Holding Co. | Holding Co. | eliminations | entries | Consolidated | ||||||||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||||||||||||||||
Cash and due from banks | $ | 24,298 | $ | 600 | $ | 363,620 | $ | (24,844 | ) | $ | 363,674 | $ | 24,298 | $ | 600 | $ | 363,620 | $ | (24,844 | ) | $ | 363,674 | ||||||||||||||||||
Money market investments | 262,204 | 23,931 | 2,179,887 | (285,930 | ) | 2,180,092 | 262,204 | 23,931 | 2,179,887 | (285,930 | ) | 2,180,092 | ||||||||||||||||||||||||||||
Trading account securities, at fair value | 2,020 | — | 69,639 | — | 71,659 | 2,020 | — | 69,639 | — | 71,659 | ||||||||||||||||||||||||||||||
Investment securities available-for-sale, at fair value | 216 | — | 6,062,776 | — | 6,062,992 | 216 | — | 6,062,776 | — | 6,062,992 | ||||||||||||||||||||||||||||||
Investment securities held-to-maturity, at amortized cost | — | — | 100,903 | — | 100,903 | — | — | 100,903 | — | 100,903 | ||||||||||||||||||||||||||||||
Other investment securities, at lower of cost or realizable value | 9,850 | 4,492 | 157,906 | — | 172,248 | 9,850 | 4,492 | 157,906 | — | 172,248 | ||||||||||||||||||||||||||||||
Investment in subsidiaries | 5,539,325 | 1,789,512 | — | (7,328,837 | ) | — | 5,539,325 | 1,789,512 | — | (7,328,837 | ) | — | ||||||||||||||||||||||||||||
Loans held-for-sale, at lower of cost or fair value | — | — | 137,000 | — | 137,000 | — | — | 137,000 | — | 137,000 | ||||||||||||||||||||||||||||||
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|
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|
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| |||||||||||||||||||||||||||||||
Loans held-in-portfolio: | ||||||||||||||||||||||||||||||||||||||||
Loans not covered under loss-sharing agreements with the FDIC | 1,176 | — | 22,452,637 | — | 22,453,813 | 1,176 | — | 22,452,637 | — | 22,453,813 | ||||||||||||||||||||||||||||||
Loans covered under loss-sharing agreements with the FDIC | — | — | 646,115 | — | 646,115 | — | — | 646,115 | — | 646,115 | ||||||||||||||||||||||||||||||
Less—Unearned income | — | — | 107,698 | — | 107,698 | |||||||||||||||||||||||||||||||||||
Less - Unearned income | — | — | 107,698 | — | 107,698 | |||||||||||||||||||||||||||||||||||
Allowance for loan losses | 3 | — | 537,108 | — | 537,111 | 3 | — | 537,108 | — | 537,111 | ||||||||||||||||||||||||||||||
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|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Total loans held-in-portfolio, net | 1,173 | — | 22,453,946 | — | 22,455,119 | 1,173 | — | 22,453,946 | — | 22,455,119 | ||||||||||||||||||||||||||||||
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|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
FDIC loss-share asset | — | — | 310,221 | — | 310,221 | — | — | 310,221 | — | 310,221 | ||||||||||||||||||||||||||||||
Premises and equipment, net | 2,823 | — | 499,788 | — | 502,611 | 2,823 | — | 499,788 | — | 502,611 | ||||||||||||||||||||||||||||||
Other real estate not covered under loss-sharing agreements with the FDIC | 532 | — | 154,699 | — | 155,231 | 532 | — | 154,699 | — | 155,231 | ||||||||||||||||||||||||||||||
Other real estate covered under loss- sharing agreements with the FDIC | — | — | 36,685 | — | 36,685 | |||||||||||||||||||||||||||||||||||
Other real estate covered under loss-sharing agreements with the FDIC | — | — | 36,685 | — | 36,685 | |||||||||||||||||||||||||||||||||||
Accrued income receivable | 85 | 115 | 124,070 | (36 | ) | 124,234 | 85 | 115 | 124,070 | (36 | ) | 124,234 | ||||||||||||||||||||||||||||
Mortgage servicing assets, at fair value | — | — | 211,405 | — | 211,405 | — | — | 211,405 | — | 211,405 | ||||||||||||||||||||||||||||||
Other assets | 54,908 | 23,596 | 2,132,616 | (17,958 | ) | 2,193,162 | 54,908 | 23,596 | 2,132,616 | (17,958 | ) | 2,193,162 | ||||||||||||||||||||||||||||
Goodwill | — | — | 626,388 | — | 626,388 | — | — | 626,388 | — | 626,388 | ||||||||||||||||||||||||||||||
Other intangible assets | 554 | — | 57,555 | — | 58,109 | 554 | — | 57,555 | — | 58,109 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Total assets | $ | 5,897,988 | $ | 1,842,246 | $ | 35,679,104 | $ | (7,657,605 | ) | $ | 35,761,733 | $ | 5,897,988 | $ | 1,842,246 | $ | 35,679,104 | $ | (7,657,605 | ) | $ | 35,761,733 | ||||||||||||||||||
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|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Liabilities and Stockholders’ Equity | ||||||||||||||||||||||||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||||||||||||||||||
Deposits: | ||||||||||||||||||||||||||||||||||||||||
Non-interest bearing | $ | — | $ | — | $ | 6,426,359 | $ | (24,844 | ) | $ | 6,401,515 | $ | — | $ | — | $ | 6,426,359 | $ | (24,844 | ) | $ | 6,401,515 | ||||||||||||||||||
Interest bearing | — | — | 21,094,138 | (285,930 | ) | 20,808,208 | — | — | 21,094,138 | (285,930 | ) | 20,808,208 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Total deposits | — | — | 27,520,497 | (310,774 | ) | 27,209,723 | — | — | 27,520,497 | (310,774 | ) | 27,209,723 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Federal funds purchased and assets sold under agreements to repurchase | — | — | 762,145 | — | 762,145 | — | — | 762,145 | — | 762,145 | ||||||||||||||||||||||||||||||
Other short-term borrowings | — | — | 1,200 | — | 1,200 | — | — | 1,200 | — | 1,200 | ||||||||||||||||||||||||||||||
Notes payable | 733,516 | 148,483 | 780,509 | — | 1,662,508 | 733,516 | 148,483 | 780,509 | — | 1,662,508 | ||||||||||||||||||||||||||||||
Other liabilities | 59,148 | 6,659 | 971,429 | (18,218 | ) | 1,019,018 | 59,148 | 6,659 | 971,429 | (18,218 | ) | 1,019,018 | ||||||||||||||||||||||||||||
Liabilities from discontinued operations | — | — | 1,815 | — | 1,815 | — | — | 1,815 | — | 1,815 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Total liabilities | 792,664 | 155,142 | 30,037,595 | (328,992 | ) | 30,656,409 | 792,664 | 155,142 | 30,037,595 | (328,992 | ) | 30,656,409 | ||||||||||||||||||||||||||||
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|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Stockholders’ equity: | ||||||||||||||||||||||||||||||||||||||||
Preferred stock | 50,160 | — | — | — | 50,160 | 50,160 | — | — | — | 50,160 | ||||||||||||||||||||||||||||||
Common stock | 1,038 | 2 | 56,307 | (56,309 | ) | 1,038 | 1,038 | 2 | 56,307 | (56,309 | ) | 1,038 | ||||||||||||||||||||||||||||
Surplus | 4,220,629 | 4,111,208 | 5,712,635 | (9,815,316 | ) | 4,229,156 | 4,220,629 | 4,111,208 | 5,712,635 | (9,815,316 | ) | 4,229,156 | ||||||||||||||||||||||||||||
Retained earnings (accumulated deficit) | 1,096,484 | (2,416,251 | ) | 128,459 | 2,279,265 | 1,087,957 | 1,096,484 | (2,416,251 | ) | 128,459 | 2,279,265 | 1,087,957 | ||||||||||||||||||||||||||||
Treasury stock, at cost | (6,101 | ) | — | — | — | (6,101 | ) | (6,101 | ) | — | — | — | (6,101 | ) | ||||||||||||||||||||||||||
Accumulated other comprehensive loss, net of tax | (256,886 | ) | (7,855 | ) | (255,892 | ) | 263,747 | (256,886 | ) | (256,886 | ) | (7,855 | ) | (255,892 | ) | 263,747 | (256,886 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Total stockholders’ equity | 5,105,324 | 1,687,104 | 5,641,509 | (7,328,613 | ) | 5,105,324 | 5,105,324 | 1,687,104 | 5,641,509 | (7,328,613 | ) | 5,105,324 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Total liabilities and stockholders’ equity | $ | 5,897,988 | $ | 1,842,246 | $ | 35,679,104 | $ | (7,657,605 | ) | $ | 35,761,733 | $ | 5,897,988 | $ | 1,842,246 | $ | 35,679,104 | $ | (7,657,605 | ) | $ | 35,761,733 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statement of Operations (Unaudited)
Quarter ended March 31, 2016 | ||||||||||||||||||||||||||||||||||||||||
Quarter ended June 30, 2016 | Quarter ended June 30, 2016 | |||||||||||||||||||||||||||||||||||||||
All other | All other | |||||||||||||||||||||||||||||||||||||||
Popular, Inc. | PNA | subsidiaries and | Elimination | Popular, Inc. | Popular, Inc. | PNA | subsidiaries and | Elimination | Popular, Inc. | |||||||||||||||||||||||||||||||
(In thousands) | Holding Co. | Holding Co. | eliminations | entries | Consolidated | Holding Co. | Holding Co. | eliminations | entries | Consolidated | ||||||||||||||||||||||||||||||
Interest and dividend income: | ||||||||||||||||||||||||||||||||||||||||
Dividend income from subsidiaries | $ | 29,700 | $ | — | $ | — | $ | (29,700 | ) | $ | — | $ | 24,200 | $ | — | $ | — | $ | (24,200 | ) | $ | — | ||||||||||||||||||
Loans | 19 | — | 363,178 | — | 363,197 | 20 | — | 369,701 | — | 369,721 | ||||||||||||||||||||||||||||||
Money market investments | 255 | 21 | 2,863 | (276 | ) | 2,863 | 323 | 30 | 3,889 | (353 | ) | 3,889 | ||||||||||||||||||||||||||||
Investment securities | 238 | 80 | 35,953 | — | 36,271 | 143 | 81 | 36,501 | — | 36,725 | ||||||||||||||||||||||||||||||
Trading account securities | — | — | 1,689 | — | 1,689 | — | — | 1,875 | — | 1,875 | ||||||||||||||||||||||||||||||
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|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Total interest and dividend income | 30,212 | 101 | 403,683 | (29,976 | ) | 404,020 | 24,686 | 111 | 411,966 | (24,553 | ) | 412,210 | ||||||||||||||||||||||||||||
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|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Interest expense: | ||||||||||||||||||||||||||||||||||||||||
Deposits | — | — | 30,150 | (276 | ) | 29,874 | — | — | 30,952 | (353 | ) | 30,599 | ||||||||||||||||||||||||||||
Short-term borrowings | — | — | 1,861 | — | 1,861 | — | — | 2,058 | — | 2,058 | ||||||||||||||||||||||||||||||
Long-term debt | 13,117 | 2,693 | 4,063 | — | 19,873 | 13,118 | 2,692 | 3,192 | — | 19,002 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Total interest expense | 13,117 | 2,693 | 36,074 | (276 | ) | 51,608 | 13,118 | 2,692 | 36,202 | (353 | ) | 51,659 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Net interest income (expense) | 17,095 | (2,592 | ) | 367,609 | (29,700 | ) | 352,412 | 11,568 | (2,581 | ) | 375,764 | (24,200 | ) | 360,551 | ||||||||||||||||||||||||||
Provision (reversal) for loan losses- non-covered loans | (34 | ) | — | 47,974 | — | 47,940 | ||||||||||||||||||||||||||||||||||
Provision (reversal) for loan losses- covered loans | — | — | (3,105 | ) | — | (3,105 | ) | |||||||||||||||||||||||||||||||||
Provision for loan losses- non-covered loans | 31 | — | 39,637 | — | 39,668 | |||||||||||||||||||||||||||||||||||
Provision for loan losses- covered loans | — | — | 804 | — | 804 | |||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Net interest income (expense) after provision for loan losses | 17,129 | (2,592 | ) | 322,740 | (29,700 | ) | 307,577 | 11,537 | (2,581 | ) | 335,323 | (24,200 | ) | 320,079 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Service charges on deposit accounts | — | — | 39,862 | — | 39,862 | — | — | 40,296 | — | 40,296 | ||||||||||||||||||||||||||||||
Other service fees | — | — | 53,439 | (57 | ) | 53,382 | — | — | 58,224 | (1,279 | ) | 56,945 | ||||||||||||||||||||||||||||
Mortgage banking activities | — | — | 10,551 | — | 10,551 | — | — | 16,227 | — | 16,227 | ||||||||||||||||||||||||||||||
Trading account profit (loss) | 24 | — | (186 | ) | — | (162 | ) | |||||||||||||||||||||||||||||||||
Net loss on sale of loans, including valuation adjustments on loans held-for-sale | — | — | (304 | ) | — | (304 | ) | |||||||||||||||||||||||||||||||||
Net gain on sale of investment securities | 1,583 | — | — | — | 1,583 | |||||||||||||||||||||||||||||||||||
Other-than-temporary impairment losses on investment securities | — | — | (209 | ) | — | (209 | ) | |||||||||||||||||||||||||||||||||
Trading account profit | 35 | — | 1,082 | — | 1,117 | |||||||||||||||||||||||||||||||||||
Adjustments (expense) to indemnity reserves on loans sold | — | — | (4,098 | ) | — | (4,098 | ) | — | — | (5,746 | ) | — | (5,746 | ) | ||||||||||||||||||||||||||
FDIC loss-share expense | — | — | (3,146 | ) | — | (3,146 | ) | — | — | (12,576 | ) | — | (12,576 | ) | ||||||||||||||||||||||||||
Other operating income | 3,256 | (1,303 | ) | 13,599 | (7 | ) | 15,545 | 1,812 | (1,636 | ) | 12,701 | (11 | ) | 12,866 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Total non-interest income | 3,280 | (1,303 | ) | 109,717 | (64 | ) | 111,630 | 3,430 | (1,636 | ) | 109,999 | (1,290 | ) | 110,503 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||||||||||||||||
Personnel costs | 15,421 | — | 111,670 | — | 127,091 | 10,634 | — | 106,074 | — | 116,708 | ||||||||||||||||||||||||||||||
Net occupancy expenses | 916 | — | 19,514 | — | 20,430 | 845 | — | 20,869 | — | 21,714 | ||||||||||||||||||||||||||||||
Equipment expenses | 445 | — | 14,103 | — | 14,548 | 643 | — | 14,618 | — | 15,261 | ||||||||||||||||||||||||||||||
Other taxes | 47 | — | 10,148 | — | 10,195 | 47 | — | 10,123 | — | 10,170 | ||||||||||||||||||||||||||||||
Professional fees | 2,881 | 30 | 72,605 | (57 | ) | 75,459 | 2,331 | 30 | 78,491 | (227 | ) | 80,625 | ||||||||||||||||||||||||||||
Communications | 137 | — | 6,183 | — | 6,320 | 140 | — | 5,872 | — | 6,012 | ||||||||||||||||||||||||||||||
Business promotion | 465 | — | 10,645 | — | 11,110 | 486 | — | 13,219 | — | 13,705 | ||||||||||||||||||||||||||||||
FDIC deposit insurance | — | — | 7,370 | — | 7,370 | — | — | 5,362 | — | 5,362 | ||||||||||||||||||||||||||||||
Other real estate owned (OREO) expenses | — | — | 9,141 | — | 9,141 | 68 | — | 12,912 | — | 12,980 | ||||||||||||||||||||||||||||||
Other operating expenses | (20,428 | ) | 39 | 38,106 | (552 | ) | 17,165 | (15,950 | ) | 4 | 39,998 | (537 | ) | 23,515 | ||||||||||||||||||||||||||
Amortization of intangibles | — | — | 3,114 | — | 3,114 | — | — | 3,097 | — | 3,097 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Total operating expenses | (116 | ) | 69 | 302,599 | (609 | ) | 301,943 | (756 | ) | 34 | 310,635 | (764 | ) | 309,149 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Income (loss) before income tax and equity in earnings of subsidiaries | 20,525 | (3,964 | ) | 129,858 | (29,155 | ) | 117,264 | 15,723 | (4,251 | ) | 134,687 | (24,726 | ) | 121,433 | ||||||||||||||||||||||||||
Income tax expense (benefit) | 3 | (1,387 | ) | 33,436 | 213 | 32,265 | ||||||||||||||||||||||||||||||||||
Income tax (benefit) expense | — | (1,488 | ) | 34,140 | (206 | ) | 32,446 | |||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Income (loss) before equity in earnings of subsidiaries | 20,522 | (2,577 | ) | 96,422 | (29,368 | ) | 84,999 | 15,723 | (2,763 | ) | 100,547 | (24,520 | ) | 88,987 | ||||||||||||||||||||||||||
Equity in undistributed earnings of subsidiaries | 64,477 | 8,923 | — | (73,400 | ) | — | ||||||||||||||||||||||||||||||||||
Equity in undistributed earnings ofsubsidiaries | 73,264 | 12,176 | — | (85,440 | ) | — | ||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Net Income | $ | 84,999 | $ | 6,346 | $ | 96,422 | $ | (102,768 | ) | $ | 84,999 | $ | 88,987 | $ | 9,413 | $ | 100,547 | $ | (109,960 | ) | $ | 88,987 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Comprehensive income, net of tax | $ | 160,135 | $ | 27,295 | $ | 172,035 | $ | (199,330 | ) | $ | 160,135 | $ | 125,125 | $ | 16,343 | $ | 137,225 | $ | (153,568 | ) | $ | 125,125 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statement of Operations (Unaudited)
Quarter ended March 31, 2015 | ||||||||||||||||||||||||||||||||||||||||
Six months ended June 30, 2016 | Six months ended June 30, 2016 | |||||||||||||||||||||||||||||||||||||||
All other | All other | |||||||||||||||||||||||||||||||||||||||
Popular, Inc. | PNA | subsidiaries and | Elimination | Popular, Inc. | Popular, Inc. | PNA | subsidiaries and | Elimination | Popular, Inc. | |||||||||||||||||||||||||||||||
(In thousands) | Holding Co. | Holding Co. | eliminations | entries | Consolidated | Holding Co. | Holding Co. | eliminations | entries | Consolidated | ||||||||||||||||||||||||||||||
Interest income: | ||||||||||||||||||||||||||||||||||||||||
Interest and dividend income: | ||||||||||||||||||||||||||||||||||||||||
Dividend income from subsidiaries | $ | 1,500 | $ | — | $ | — | $ | (1,500 | ) | $ | — | $ | 53,900 | $ | — | $ | — | $ | (53,900 | ) | $ | — | ||||||||||||||||||
Loans | 140 | — | 355,613 | (122 | ) | 355,631 | 39 | — | 732,879 | — | 732,918 | |||||||||||||||||||||||||||||
Money market investments | 2 | 2 | 1,444 | (2 | ) | 1,446 | 578 | 51 | 6,752 | (629 | ) | 6,752 | ||||||||||||||||||||||||||||
Investment securities | 143 | 81 | 30,077 | — | 30,301 | 381 | 161 | 72,454 | — | 72,996 | ||||||||||||||||||||||||||||||
Trading account securities | — | — | 2,696 | — | 2,696 | — | — | 3,564 | — | 3,564 | ||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||
Total interest income | 1,785 | 83 | 389,830 | (1,624 | ) | 390,074 | ||||||||||||||||||||||||||||||||||
Total interest and dividend income | 54,898 | 212 | 815,649 | (54,529 | ) | 816,230 | ||||||||||||||||||||||||||||||||||
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Interest expense: | ||||||||||||||||||||||||||||||||||||||||
Deposits | — | — | 25,866 | (2 | ) | 25,864 | — | — | 61,102 | (629 | ) | 60,473 | ||||||||||||||||||||||||||||
Short-term borrowings | — | 101 | 1,755 | (122 | ) | 1,734 | — | — | 3,919 | — | 3,919 | |||||||||||||||||||||||||||||
Long-term debt | 13,118 | 2,695 | 3,468 | — | 19,281 | 26,235 | 5,385 | 7,255 | — | 38,875 | ||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||
Total interest expense | 13,118 | 2,796 | 31,089 | (124 | ) | 46,879 | 26,235 | 5,385 | 72,276 | (629 | ) | 103,267 | ||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||
Net interest (expense) income | (11,333 | ) | (2,713 | ) | 358,741 | (1,500 | ) | 343,195 | ||||||||||||||||||||||||||||||||
Net interest income (expense) | 28,663 | (5,173 | ) | 743,373 | (53,900 | ) | 712,963 | |||||||||||||||||||||||||||||||||
Provision for loan losses- non-covered loans | — | — | 29,711 | — | 29,711 | (3 | ) | — | 87,611 | — | 87,608 | |||||||||||||||||||||||||||||
Provision for loan losses- covered loans | — | — | 10,324 | — | 10,324 | — | — | (2,301 | ) | — | (2,301 | ) | ||||||||||||||||||||||||||||
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Net interest (expense) income after provision for loan losses | (11,333 | ) | (2,713 | ) | 318,706 | (1,500 | ) | 303,160 | ||||||||||||||||||||||||||||||||
Net interest income (expense) after provision for loan losses | 28,666 | (5,173 | ) | 658,063 | (53,900 | ) | 627,656 | |||||||||||||||||||||||||||||||||
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Service charges on deposit accounts | — | — | 39,017 | — | 39,017 | — | — | 80,158 | — | 80,158 | ||||||||||||||||||||||||||||||
Other service fees | — | — | 53,714 | (88 | ) | 53,626 | — | — | 111,663 | (1,336 | ) | 110,327 | ||||||||||||||||||||||||||||
Mortgage banking activities | — | — | 12,852 | — | 12,852 | — | — | 26,778 | — | 26,778 | ||||||||||||||||||||||||||||||
Net gain on sale of investment securities | 1,583 | — | — | — | 1,583 | |||||||||||||||||||||||||||||||||||
Other-than-temporary impairment losses on investment securities | — | — | (209 | ) | — | (209 | ) | |||||||||||||||||||||||||||||||||
Trading account profit | 40 | — | 374 | — | 414 | 59 | — | 896 | — | 955 | ||||||||||||||||||||||||||||||
Net loss on sale of loans, including valuation adjustments on loans held-for-sale | — | — | (79 | ) | — | (79 | ) | — | — | (304 | ) | — | (304 | ) | ||||||||||||||||||||||||||
Adjustments (expense) to indemnity reserves on loans sold | — | — | (4,526 | ) | — | (4,526 | ) | — | — | (9,844 | ) | — | (9,844 | ) | ||||||||||||||||||||||||||
FDIC loss-share income | — | — | 4,139 | — | 4,139 | |||||||||||||||||||||||||||||||||||
FDIC loss-share expense | — | — | (15,722 | ) | — | (15,722 | ) | |||||||||||||||||||||||||||||||||
Other operating income | 2,968 | (828 | ) | 7,668 | (16 | ) | 9,792 | 5,068 | (2,939 | ) | 26,300 | (18 | ) | 28,411 | ||||||||||||||||||||||||||
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Total non-interest income | 3,008 | (828 | ) | 113,159 | (104 | ) | 115,235 | 6,710 | (2,939 | ) | 219,716 | (1,354 | ) | 222,133 | ||||||||||||||||||||||||||
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Operating expenses: | ||||||||||||||||||||||||||||||||||||||||
Personnel costs | 11,908 | — | 104,550 | — | 116,458 | 26,055 | — | 217,744 | — | 243,799 | ||||||||||||||||||||||||||||||
Net occupancy expenses | 980 | — | 20,729 | — | 21,709 | 1,761 | — | 40,383 | — | 42,144 | ||||||||||||||||||||||||||||||
Equipment expenses | 545 | — | 12,866 | — | 13,411 | 1,088 | — | 28,721 | — | 29,809 | ||||||||||||||||||||||||||||||
Other taxes | (1,458 | ) | — | 10,032 | — | 8,574 | 94 | — | 20,271 | — | 20,365 | |||||||||||||||||||||||||||||
Professional fees | 2,774 | 410 | 72,432 | (88 | ) | 75,528 | 5,212 | 60 | 151,096 | (284 | ) | 156,084 | ||||||||||||||||||||||||||||
Communications | 117 | — | 6,059 | — | 6,176 | 277 | — | 12,055 | — | 12,332 | ||||||||||||||||||||||||||||||
Business promotion | 436 | — | 10,377 | — | 10,813 | 951 | — | 23,864 | — | 24,815 | ||||||||||||||||||||||||||||||
FDIC deposit insurance | — | — | 6,398 | — | 6,398 | — | — | 12,732 | — | 12,732 | ||||||||||||||||||||||||||||||
Other real estate owned (OREO) expenses | — | — | 23,069 | — | 23,069 | 68 | — | 22,053 | — | 22,121 | ||||||||||||||||||||||||||||||
Other operating expenses | (16,935 | ) | 109 | 34,819 | (644 | ) | 17,349 | (36,378 | ) | 43 | 78,104 | (1,089 | ) | 40,680 | ||||||||||||||||||||||||||
Amortization of intangibles | — | — | 2,104 | — | 2,104 | — | — | 6,211 | — | 6,211 | ||||||||||||||||||||||||||||||
Restructuring cost | — | — | 10,753 | — | 10,753 | |||||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||
Total operating expenses | (1,633 | ) | 519 | 314,188 | (732 | ) | 312,342 | (872 | ) | 103 | 613,234 | (1,373 | ) | 611,092 | ||||||||||||||||||||||||||
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(Loss) income before income tax and equity in earnings of subsidiaries | (6,692 | ) | (4,060 | ) | 117,677 | (872 | ) | 106,053 | ||||||||||||||||||||||||||||||||
Income tax expense | 47 | — | 32,276 | 245 | 32,568 | |||||||||||||||||||||||||||||||||||
Income (loss) before income tax and equity in earnings of subsidiaries | 36,248 | (8,215 | ) | 264,545 | (53,881 | ) | 238,697 | |||||||||||||||||||||||||||||||||
Income tax expense (benefit) | 3 | (2,875 | ) | 67,576 | 7 | 64,711 | ||||||||||||||||||||||||||||||||||
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(Loss) income before equity in earnings of subsidiaries | (6,739 | ) | (4,060 | ) | 85,401 | (1,117 | ) | 73,485 | ||||||||||||||||||||||||||||||||
Income (loss) before equity in | ||||||||||||||||||||||||||||||||||||||||
earnings of subsidiaries | 36,245 | (5,340 | ) | 196,969 | (53,888 | ) | 173,986 | |||||||||||||||||||||||||||||||||
Equity in undistributed earnings of subsidiaries | 80,224 | 1,269 | — | (81,493 | ) | — | 137,741 | 21,099 | — | (158,840 | ) | — | ||||||||||||||||||||||||||||
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Income (loss) from continuing operations | 73,485 | (2,791 | ) | 85,401 | (82,610 | ) | 73,485 | |||||||||||||||||||||||||||||||||
Income from discontinued operations, net of tax | — | — | 1,341 | — | 1,341 | |||||||||||||||||||||||||||||||||||
Equity in undistributed earnings of discontinued operations | 1,341 | 1,341 | — | (2,682 | ) | — | ||||||||||||||||||||||||||||||||||
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Net Income (loss) | $ | 74,826 | $ | (1,450 | ) | $ | 86,742 | $ | (85,292 | ) | $ | 74,826 | ||||||||||||||||||||||||||||
Net Income | $ | 173,986 | $ | 15,759 | $ | 196,969 | $ | (212,728 | ) | $ | 173,986 | |||||||||||||||||||||||||||||
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Comprehensive income, net of tax | $ | 110,298 | $ | 11,841 | $ | 122,078 | $ | (133,919 | ) | $ | 110,298 | $ | 285,260 | $ | 43,638 | $ | 309,260 | (352,898 | ) | $ | 285,260 | |||||||||||||||||||
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Condensed Consolidating Statement of Operations (Unaudited)
Quarter ended June 30, 2015 | ||||||||||||||||||||
(In thousands) | Popular, Inc. Holding Co. | PNA Holding Co. | All other subsidiaries and eliminations | Elimination entries | Popular, Inc. Consolidated | |||||||||||||||
Interest and dividend income: | ||||||||||||||||||||
Dividend income from subsidiaries | $ | 1,500 | $ | — | $ | — | $ | (1,500 | ) | $ | — | |||||||||
Loans | 169 | 2 | 374,109 | (147 | ) | 374,133 | ||||||||||||||
Money market investments | 2 | 1 | 1,844 | (2 | ) | 1,845 | ||||||||||||||
Investment securities | 190 | 80 | 31,027 | — | 31,297 | |||||||||||||||
Trading account securities | — | — | 3,026 | — | 3,026 | |||||||||||||||
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Total interest and dividend income | 1,861 | 83 | 410,006 | (1,649 | ) | 410,301 | ||||||||||||||
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Interest expense: | ||||||||||||||||||||
Deposits | — | — | 26,260 | (2 | ) | 26,258 | ||||||||||||||
Short-term borrowings | — | 127 | 1,883 | (147 | ) | 1,863 | ||||||||||||||
Long-term debt | 13,117 | 2,695 | 3,815 | — | 19,627 | |||||||||||||||
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Total interest expense | 13,117 | 2,822 | 31,958 | (149 | ) | 47,748 | ||||||||||||||
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| |||||||||||
Net interest (expense) income | (11,256 | ) | (2,739 | ) | 378,048 | (1,500 | ) | 362,553 | ||||||||||||
Provision for loan losses- non-covered loans | 227 | — | 60,241 | — | 60,468 | |||||||||||||||
Provision for loan losses- covered loans | — | — | 15,766 | — | 15,766 | |||||||||||||||
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Net interest (expense) income after provision for loan losses | (11,483 | ) | (2,739 | ) | 302,041 | (1,500 | ) | 286,319 | ||||||||||||
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Service charges on deposit accounts | — | — | 40,138 | — | 40,138 | |||||||||||||||
Other service fees | — | — | 60,661 | (1,240 | ) | 59,421 | ||||||||||||||
Mortgage banking activities | — | — | 21,325 | — | 21,325 | |||||||||||||||
Net gain on sale of investment securities | — | — | 5 | — | 5 | |||||||||||||||
Other-than-temporary impairment losses on investment securities | — | — | (14,445 | ) | — | (14,445 | ) | |||||||||||||
Trading account loss | (18 | ) | — | (3,090 | ) | — | (3,108 | ) | ||||||||||||
Net gain on sale of loans, including valuation adjustments on loans held-for-sale | — | — | 681 | — | 681 | |||||||||||||||
Adjustments (expense) to indemnity reserves on loans sold | — | — | 419 | — | 419 | |||||||||||||||
FDIC loss-share income | — | — | 19,075 | — | 19,075 | |||||||||||||||
Other operating income | 3,423 | 524 | 13,315 | (14 | ) | 17,248 | ||||||||||||||
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Total non-interest income | 3,405 | 524 | 138,084 | (1,254 | ) | 140,759 | ||||||||||||||
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Operating expenses: | ||||||||||||||||||||
Personnel costs | 14,470 | — | 106,507 | — | 120,977 | |||||||||||||||
Net occupancy expenses | 787 | — | 22,499 | — | 23,286 | |||||||||||||||
Equipment expenses | 472 | — | 15,453 | — | 15,925 | |||||||||||||||
Other taxes | 652 | — | 10,461 | — | 11,113 | |||||||||||||||
Professional fees | 2,323 | 32 | 76,154 | (60 | ) | 78,449 | ||||||||||||||
Communications | 108 | — | 6,045 | — | 6,153 | |||||||||||||||
Business promotion | 408 | — | 13,368 | — | 13,776 | |||||||||||||||
FDIC deposit insurance | — | — | 8,542 | — | 8,542 | |||||||||||||||
Other real estate owned (OREO) expenses | — | — | 44,816 | — | 44,816 | |||||||||||||||
Other operating expenses | (15,184 | ) | 109 | 46,795 | (638 | ) | 31,082 | |||||||||||||
Amortization of intangibles | — | — | 2,881 | — | 2,881 | |||||||||||||||
Restructuring cost | — | — | 6,174 | — | 6,174 | |||||||||||||||
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Total operating expenses | 4,036 | 141 | 359,695 | (698 | ) | 363,174 | ||||||||||||||
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(Loss) income before income tax and equity in earnings of subsidiaries | (12,114 | ) | (2,356 | ) | 80,430 | (2,056 | ) | 63,904 | ||||||||||||
Income tax benefit | (47 | ) | — | (533,270 | ) | (216 | ) | (533,533 | ) | |||||||||||
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(Loss) income before equity in earnings of subsidiaries | (12,067 | ) | (2,356 | ) | 613,700 | (1,840 | ) | 597,437 | ||||||||||||
Equity in undistributed earnings of subsidiaries | 609,504 | 559,026 | — | (1,168,530 | ) | — | ||||||||||||||
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Income from continuing operations | 597,437 | 556,670 | 613,700 | (1,170,370 | ) | 597,437 | ||||||||||||||
Income from discontinued operations, net of tax | — | — | 15 | — | 15 | |||||||||||||||
Equity in undistributed earnings of discontinued operations | 15 | 15 | — | (30 | ) | — | ||||||||||||||
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Net Income | $ | 597,452 | $ | 556,685 | $ | 613,715 | $ | (1,170,400 | ) | $ | 597,452 | |||||||||
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Comprehensive income, net of tax | $ | 572,821 | $ | 545,987 | $ | 589,116 | $ | (1,135,103 | ) | $ | 572,821 | |||||||||
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Condensed Consolidating Statement of Operations (Unaudited)
Six months ended June 30, 2015 | ||||||||||||||||||||
(In thousands) | Popular, Inc. Holding Co. | PNA Holding Co. | All other subsidiaries and eliminations | Elimination entries | Popular, Inc. Consolidated | |||||||||||||||
Interest and dividend income: | ||||||||||||||||||||
Dividend income from subsidiaries | $ | 3,000 | $ | — | $ | — | $ | (3,000 | ) | $ | — | |||||||||
Loans | 309 | 2 | 729,722 | (269 | ) | 729,764 | ||||||||||||||
Money market investments | 4 | 3 | 3,288 | (4 | ) | 3,291 | ||||||||||||||
Investment securities | 333 | 161 | 61,104 | — | 61,598 | |||||||||||||||
Trading account securities | — | — | 5,722 | — | 5,722 | |||||||||||||||
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| |||||||||||
Total interest and dividend income | 3,646 | 166 | 799,836 | (3,273 | ) | 800,375 | ||||||||||||||
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| |||||||||||
Interest expense: | ||||||||||||||||||||
Deposits | — | — | 52,126 | (4 | ) | 52,122 | ||||||||||||||
Short-term borrowings | — | 228 | 3,638 | (269 | ) | 3,597 | ||||||||||||||
Long-term debt | 26,235 | 5,390 | 7,283 | — | 38,908 | |||||||||||||||
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| |||||||||||
Total interest expense | 26,235 | 5,618 | 63,047 | (273 | ) | 94,627 | ||||||||||||||
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|
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| |||||||||||
Net interest (expense) income | (22,589 | ) | (5,452 | ) | 736,789 | (3,000 | ) | 705,748 | ||||||||||||
Provision for loan losses- non-covered loans | 227 | — | 89,952 | — | 90,179 | |||||||||||||||
Provision for loan losses- covered loans | — | — | 26,090 | — | 26,090 | |||||||||||||||
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| |||||||||||
Net interest (expense) income after provision for loan losses | (22,816 | ) | (5,452 | ) | 620,747 | (3,000 | ) | 589,479 | ||||||||||||
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| |||||||||||
Service charges on deposit accounts | — | — | 79,155 | — | 79,155 | |||||||||||||||
Other service fees | — | — | 114,375 | (1,328 | ) | 113,047 | ||||||||||||||
Mortgage banking activities | — | — | 34,177 | — | 34,177 | |||||||||||||||
Net gain on sale of investment securities | — | — | 5 | — | 5 | |||||||||||||||
Other-than temporary impairment losses on | ||||||||||||||||||||
investment securities | — | — | (14,445 | ) | — | (14,445 | ) | |||||||||||||
Trading account profit (loss) | 22 | — | (2,716 | ) | — | (2,694 | ) | |||||||||||||
Net gain on sale of loans, including valuation adjustments on loans held-for-sale | — | — | 602 | — | 602 | |||||||||||||||
Adjustments (expense) to indemnity reserves on loans sold | — | — | (4,107 | ) | — | (4,107 | ) | |||||||||||||
FDIC loss-share expense | — | — | 23,214 | — | 23,214 | |||||||||||||||
Other operating income (loss) | 6,391 | (305 | ) | 20,984 | (30 | ) | 27,040 | |||||||||||||
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|
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| |||||||||||
Total non-interest income (loss) | 6,413 | (305 | ) | 251,244 | (1,358 | ) | 255,994 | |||||||||||||
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| |||||||||||
Operating expenses: | ||||||||||||||||||||
Personnel costs | 26,378 | — | 211,057 | — | �� | 237,435 | ||||||||||||||
Net occupancy expenses | 1,767 | — | 43,228 | — | 44,995 | |||||||||||||||
Equipment expenses | 1,017 | — | 28,319 | — | 29,336 | |||||||||||||||
Other taxes | (806 | ) | — | 20,493 | — | 19,687 | ||||||||||||||
Professional fees | 5,097 | 442 | 148,586 | (148 | ) | 153,977 | ||||||||||||||
Communications | 225 | — | 12,104 | — | 12,329 | |||||||||||||||
Business promotion | 844 | — | 23,745 | — | 24,589 | |||||||||||||||
FDIC deposit insurance | — | — | 14,940 | — | 14,940 | |||||||||||||||
Other real estate owned (OREO) expenses | — | — | 67,885 | — | 67,885 | |||||||||||||||
Other operating expenses | (32,119 | ) | 218 | 81,614 | (1,283 | ) | 48,430 | |||||||||||||
Amortization of intangibles | — | — | 4,985 | — | 4,985 | |||||||||||||||
Restructuring costs | — | — | 16,927 | — | 16,927 | |||||||||||||||
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|
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|
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|
|
| |||||||||||
Total operating expenses | 2,403 | 660 | 673,883 | (1,431 | ) | 675,515 | ||||||||||||||
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|
|
|
|
|
| |||||||||||
(Loss) income before income tax and equity in earnings of subsidiaries | (18,806 | ) | (6,417 | ) | 198,108 | (2,927 | ) | 169,958 | ||||||||||||
Income tax (benefit) expense | — | — | (500,993 | ) | 29 | (500,964 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
(Loss) income before equity in earnings of subsidiaries | (18,806 | ) | (6,417 | ) | 699,101 | (2,956 | ) | 670,922 | ||||||||||||
Equity in undistributed earnings of subsidiaries | 689,728 | 560,295 | — | (1,250,023 | ) | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Income from continuing operations | 670,922 | 553,878 | 699,101 | (1,252,979 | ) | 670,922 | ||||||||||||||
Income from discontinued operations, net of tax | — | — | 1,356 | — | 1,356 | |||||||||||||||
Equity in undistributed earnings of discontinued operations | 1,356 | 1,356 | — | (2,712 | ) | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net Income | $ | 672,278 | $ | 555,234 | $ | 700,457 | $ | (1,255,691 | ) | $ | 672,278 | |||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Comprehensive income, net of tax | $ | 683,119 | $ | 557,827 | 711,194 | $ | (1,269,021 | ) | $ | 683,119 | ||||||||||
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statement of Cash Flows (Unaudited)
Quarter ended March 31,2016 | ||||||||||||||||||||||||||||||||||||||||
All other | ||||||||||||||||||||||||||||||||||||||||
Popular, Inc. | PNA | subsidiaries | Elimination | Popular, Inc. | Six months ended June 30, 2016 | |||||||||||||||||||||||||||||||||||
(In thousands) | Holding Co. | Holding Co. | and eliminations | entries | Consolidated | Popular, Inc. Holding Co. | PNA Holding Co. | All other subsidiaries and eliminations | Elimination entries | Popular, Inc. Consolidated | ||||||||||||||||||||||||||||||
Cash flows from operating activities: | ||||||||||||||||||||||||||||||||||||||||
Net income | $ | 84,999 | $ | 6,346 | $ | 96,422 | $ | (102,768 | ) | $ | 84,999 | $ | 173,986 | $ | 15,759 | $ | 196,969 | $ | (212,728 | ) | $ | 173,986 | ||||||||||||||||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||||||||||||||||||||||||||||||||||||
|
|
|
|
| ||||||||||||||||||||||||||||||||||||
Adjustments to reconcile net income to net cash (used in) provided by operating activities: | ||||||||||||||||||||||||||||||||||||||||
Equity in undistributed earnings of subsidiaries | (64,477 | ) | (8,923 | ) | — | 73,400 | — | (137,741 | ) | (21,099 | ) | — | 158,840 | — | ||||||||||||||||||||||||||
Provision (reversal) for loan losses | (34 | ) | — | 44,869 | — | 44,835 | (3 | ) | — | 85,310 | — | 85,307 | ||||||||||||||||||||||||||||
Amortization of intangibles | — | — | 3,114 | — | 3,114 | — | — | 6,211 | — | 6,211 | ||||||||||||||||||||||||||||||
Depreciation and amortization of premises and equipment | 177 | — | 11,530 | — | 11,707 | 353 | — | 22,788 | — | 23,141 | ||||||||||||||||||||||||||||||
Net accretion of discounts and amortization of premiums and deferred fees | 521 | 8 | (11,687 | ) | — | (11,158 | ) | 1,043 | 15 | (25,782 | ) | — | (24,724 | ) | ||||||||||||||||||||||||||
Other-than-temporary impairment on investment securities | — | — | 209 | — | 209 | |||||||||||||||||||||||||||||||||||
Fair value adjustments on mortgage servicing rights | — | — | 8,477 | — | 8,477 | — | — | 12,817 | — | 12,817 | ||||||||||||||||||||||||||||||
FDIC loss-share income | — | — | 3,146 | — | 3,146 | |||||||||||||||||||||||||||||||||||
FDIC loss-share expense | — | — | 15,722 | — | 15,722 | |||||||||||||||||||||||||||||||||||
Adjustments (expense) to indemnity reserves on loans sold | — | — | 4,098 | — | 4,098 | — | — | 9,844 | — | 9,844 | ||||||||||||||||||||||||||||||
(Earnings) losses from investments under the equity method | (3,256 | ) | 1,303 | (5,136 | ) | — | (7,089 | ) | (5,069 | ) | 2,939 | (11,551 | ) | — | (13,681 | ) | ||||||||||||||||||||||||
Deferred income tax expense (benefit) | 3 | (1,387 | ) | 24,389 | 213 | 23,218 | 3 | (2,875 | ) | 52,180 | 8 | 49,316 | ||||||||||||||||||||||||||||
(Gain) loss on: | ||||||||||||||||||||||||||||||||||||||||
Disposition of premises and equipment and other productive assets | — | — | (1,946 | ) | — | (1,946 | ) | (1 | ) | — | 2,425 | — | 2,424 | |||||||||||||||||||||||||||
Sale and valuation adjustments of investment securities | (1,583 | ) | — | — | — | (1,583 | ) | |||||||||||||||||||||||||||||||||
Sale of loans, including valuation adjustments on loans held for sale and mortgage banking activities | — | — | (7,101 | ) | — | (7,101 | ) | — | — | (15,577 | ) | — | (15,577 | ) | ||||||||||||||||||||||||||
Sale of foreclosed assets, including write-downs | — | — | 2,802 | — | 2,802 | 68 | — | 9,503 | — | 9,571 | ||||||||||||||||||||||||||||||
Acquisitions of loans held-for-sale | — | — | (66,451 | ) | — | (66,451 | ) | — | — | (148,725 | ) | — | (148,725 | ) | ||||||||||||||||||||||||||
Proceeds from sale of loans held-for-sale | — | — | 22,253 | — | 22,253 | — | — | 43,110 | — | 43,110 | ||||||||||||||||||||||||||||||
Net originations on loans held-for-sale | — | — | (110,528 | ) | — | (110,528 | ) | — | — | (247,287 | ) | — | (247,287 | ) | ||||||||||||||||||||||||||
Net (increase) decrease in: | ||||||||||||||||||||||||||||||||||||||||
Trading securities | (101 | ) | — | 176,699 | — | 176,598 | (251 | ) | — | 393,339 | 90 | 393,178 | ||||||||||||||||||||||||||||
Accrued income receivable | 12 | 79 | 3,842 | (7 | ) | 3,926 | (17 | ) | (30 | ) | 3,252 | 50 | 3,255 | |||||||||||||||||||||||||||
Other assets | 1 | 21 | 22,194 | (1,220 | ) | 20,996 | 839 | 35 | (19,889 | ) | (2,336 | ) | (21,351 | ) | ||||||||||||||||||||||||||
Net (decrease) increase in: | ||||||||||||||||||||||||||||||||||||||||
Interest payable | (7,875 | ) | (2,685 | ) | (1,708 | ) | 7 | (12,261 | ) | — | — | (1,158 | ) | (50 | ) | (1,208 | ) | |||||||||||||||||||||||
Pension and other postretirement benefits obligations | — | — | 1,536 | — | 1,536 | — | — | 2,300 | — | 2,300 | ||||||||||||||||||||||||||||||
Other liabilities | (4,622 | ) | (382 | ) | (12,681 | ) | 675 | (17,010 | ) | (3,244 | ) | (397 | ) | 7,635 | 2,316 | 6,310 | ||||||||||||||||||||||||
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|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Total adjustments | (79,651 | ) | (11,966 | ) | 111,711 | 73,068 | 93,162 | (145,603 | ) | (21,412 | ) | 196,676 | 158,918 | 188,579 | ||||||||||||||||||||||||||
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|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Net cash provided by (used in) operating activities | 5,348 | (5,620 | ) | 208,133 | (29,700 | ) | 178,161 | 28,383 | (5,653 | ) | 393,645 | (53,810 | ) | 362,565 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Cash flows from investing activities: | ||||||||||||||||||||||||||||||||||||||||
Net decrease in money market investments | 6,952 | 5,412 | 262,679 | (12,411 | ) | 262,632 | ||||||||||||||||||||||||||||||||||
Net (increase) decrease in money market investments | (82 | ) | 5,442 | (605,325 | ) | (5,442 | ) | (605,407 | ) | |||||||||||||||||||||||||||||||
Purchases of investment securities: | ||||||||||||||||||||||||||||||||||||||||
Available-for-sale | — | — | (742,859 | ) | — | (742,859 | ) | — | — | (1,682,199 | ) | — | (1,682,199 | ) | ||||||||||||||||||||||||||
Other | — | — | (59,786 | ) | — | (59,786 | ) | — | — | (70,302 | ) | — | (70,302 | ) | ||||||||||||||||||||||||||
Proceeds from calls, paydowns, maturities and redemptions of investment securities: | ||||||||||||||||||||||||||||||||||||||||
Available-for-sale | — | — | 239,399 | — | 239,399 | — | — | 632,284 | — | 632,284 | ||||||||||||||||||||||||||||||
Held-to-maturity | — | — | 2,108 | — | 2,108 | — | — | 2,209 | — | 2,209 | ||||||||||||||||||||||||||||||
Other | — | — | 41,664 | — | 41,664 | — | — | 47,859 | — | 47,859 | ||||||||||||||||||||||||||||||
Proceeds from sale of investment securities: | ||||||||||||||||||||||||||||||||||||||||
Other | — | — | 26,346 | — | 26,346 | 1,583 | — | 26,127 | — | 27,710 | ||||||||||||||||||||||||||||||
Net repayments on loans | 8 | — | 13,327 | — | 13,335 | |||||||||||||||||||||||||||||||||||
Net repayments (disbursements) on loans | 17 | — | (61,216 | ) | — | (61,199 | ) | |||||||||||||||||||||||||||||||||
Proceeds from sale of loans | — | — | 1,128 | — | 1,128 | — | — | 95,940 | — | 95,940 | ||||||||||||||||||||||||||||||
Acquisition of loan portfolios | — | — | (212,798 | ) | — | (212,798 | ) | — | — | (308,949 | ) | — | (308,949 | ) | ||||||||||||||||||||||||||
Net payments from FDIC under loss-sharing | ||||||||||||||||||||||||||||||||||||||||
agreements | — | — | 88,588 | — | 88,588 | |||||||||||||||||||||||||||||||||||
Net payments from FDIC under loss-sharing agreements | — | — | 88,588 | — | 88,588 | |||||||||||||||||||||||||||||||||||
Return of capital from equity method investments | — | 206 | — | — | 206 | 118 | 206 | — | — | 324 | ||||||||||||||||||||||||||||||
Return of capital from wholly-owned subsidiaries | 14,000 | — | — | (14,000 | ) | — | ||||||||||||||||||||||||||||||||||
Acquisition of premises and equipment | (398 | ) | — | (38,421 | ) | — | (38,819 | ) | (651 | ) | — | (60,093 | ) | — | (60,744 | ) | ||||||||||||||||||||||||
Proceeds from sale of: | ||||||||||||||||||||||||||||||||||||||||
Premises and equipment and other productive assets | 46 | — | 5,046 | — | 5,092 | 46 | — | 2,793 | — | 2,839 | ||||||||||||||||||||||||||||||
Foreclosed assets | — | — | 14,513 | — | 14,513 | 216 | — | 28,679 | — | 28,895 | ||||||||||||||||||||||||||||||
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|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Net cash provided by (used in) investing activities | 6,608 | 5,618 | (359,066 | ) | (12,411 | ) | (359,251 | ) | 15,247 | 5,648 | (1,863,605 | ) | (19,442 | ) | (1,862,152 | ) | ||||||||||||||||||||||||
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|
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| |||||||||||||||||||||||||||||||
Cash flows from financing activities: | ||||||||||||||||||||||||||||||||||||||||
Net increase (decrease) in: | ||||||||||||||||||||||||||||||||||||||||
Deposits | — | — | 302,718 | 15,832 | 318,550 | — | — | 1,537,432 | (7,341 | ) | 1,530,091 | |||||||||||||||||||||||||||||
Federal funds purchased and assets sold under agreements to repurchase | — | — | (1,991 | ) | — | (1,991 | ) | — | — | 59,460 | — | 59,460 | ||||||||||||||||||||||||||||
Other short-term borrowings | — | — | 5,170 | — | 5,170 | — | — | 30,000 | — | 30,000 | ||||||||||||||||||||||||||||||
Payments of notes payable | — | — | (108,452 | ) | — | (108,452 | ) | — | — | (216,501 | ) | — | (216,501 | ) | ||||||||||||||||||||||||||
Proceeds from issuance of notes payable | — | — | 28,883 | — | 28,883 | — | — | 128,883 | — | 128,883 | ||||||||||||||||||||||||||||||
Proceeds from issuance of common stock | 2,109 | — | — | — | 2,109 | 3,710 | — | — | — | 3,710 | ||||||||||||||||||||||||||||||
Dividends paid to parent company | — | — | (29,700 | ) | 29,700 | — | — | — | (53,900 | ) | 53,900 | — | ||||||||||||||||||||||||||||
Dividends paid | (16,473 | ) | — | — | — | (16,473 | ) | (32,953 | ) | — | — | — | (32,953 | ) | ||||||||||||||||||||||||||
Net payments for repurchase of common stock | (757 | ) | — | — | — | (757 | ) | (1,379 | ) | — | — | (90 | ) | (1,469 | ) | |||||||||||||||||||||||||
Return of capital to parent company | — | — | (14,000 | ) | 14,000 | — | ||||||||||||||||||||||||||||||||||
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|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Net cash (used in) provided by financing activities | (15,121 | ) | — | 196,628 | 45,532 | 227,039 | (30,622 | ) | — | 1,471,374 | 60,469 | 1,501,221 | ||||||||||||||||||||||||||||
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|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Net (decrease) increase in cash and due from banks | (3,165 | ) | (2 | ) | 45,695 | 3,421 | 45,949 | |||||||||||||||||||||||||||||||||
Net increase (decrease) in cash and due from banks | 13,008 | (5 | ) | 1,414 | (12,783 | ) | 1,634 | |||||||||||||||||||||||||||||||||
Cash and due from banks at beginning of period | 24,298 | 600 | 363,620 | (24,844 | ) | 363,674 | 24,298 | 600 | 363,620 | (24,844 | ) | 363,674 | ||||||||||||||||||||||||||||
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|
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| |||||||||||||||||||||||||||||||
Cash and due from banks at end of period | $ | 21,133 | $ | 598 | $ | 409,315 | $ | (21,423 | ) | $ | 409,623 | $ | 37,306 | $ | 595 | $ | 365,034 | $ | (37,627 | ) | $ | 365,308 | ||||||||||||||||||
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|
|
During the quartersix months ended March 31,June 30, 2016 there have not been any cash flows associated with discontinued operations.
Condensed Consolidating Statement of Cash Flows (Unaudited)
Quarter ended March 31, 2015 | Six months ended June 30, 2015 | |||||||||||||||||||||||||||||||||||||||
All other | All other | |||||||||||||||||||||||||||||||||||||||
Popular, Inc. | PNA | subsidiaries | Elimination | Popular, Inc. | Popular, Inc. | PNA | subsidiaries | Elimination | Popular, Inc. | |||||||||||||||||||||||||||||||
(In thousands) | Holding Co. | Holding Co. | and eliminations | entries | Consolidated | Holding Co. | Holding Co. | and eliminations | entries | Consolidated | ||||||||||||||||||||||||||||||
Cash flows from operating activities: | ||||||||||||||||||||||||||||||||||||||||
Net income (loss) | $ | 74,826 | $ | (1,450 | ) | $ | 86,742 | $ | (85,292 | ) | $ | 74,826 | ||||||||||||||||||||||||||||
Net income | $ | 672,278 | $ | 555,234 | $ | 700,457 | $ | (1,255,691 | ) | $ | 672,278 | |||||||||||||||||||||||||||||
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|
|
|
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| |||||||||||||||||||||||||||||||
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities: | ||||||||||||||||||||||||||||||||||||||||
Equity in undistributed (earnings) losses of subsidiaries | (81,565 | ) | (2,610 | ) | — | 84,175 | — | |||||||||||||||||||||||||||||||||
Adjustments to reconcile net income to net cash (used in) provided by operating activities: | ||||||||||||||||||||||||||||||||||||||||
Equity in undistributed earnings of subsidiaries | (691,084 | ) | (561,651 | ) | — | 1,252,735 | — | |||||||||||||||||||||||||||||||||
Provision for loan losses | — | — | 40,035 | — | 40,035 | 227 | — | 116,042 | — | 116,269 | ||||||||||||||||||||||||||||||
Amortization of intangibles | — | — | 2,104 | — | 2,104 | — | — | 4,985 | — | 4,985 | ||||||||||||||||||||||||||||||
Depreciation and amortization of premises and equipment | 194 | — | 11,725 | — | 11,919 | 374 | — | 23,575 | — | 23,949 | ||||||||||||||||||||||||||||||
Net accretion of discounts and amortization of premiums and deferred fees | — | — | (19,100 | ) | — | (19,100 | ) | — | — | (42,167 | ) | — | (42,167 | ) | ||||||||||||||||||||||||||
Other-than-temporary impairment on investment securities | — | — | 14,445 | — | 14,445 | |||||||||||||||||||||||||||||||||||
Fair value adjustments on mortgage servicing rights | — | — | 4,929 | — | 4,929 | — | — | 6,846 | — | 6,846 | ||||||||||||||||||||||||||||||
FDIC loss-share income | — | — | (4,139 | ) | — | (4,139 | ) | — | — | (23,214 | ) | — | (23,214 | ) | ||||||||||||||||||||||||||
Adjustments (expense) to indemnity reserves on loans sold | — | — | 4,526 | — | 4,526 | — | — | 4,107 | — | 4,107 | ||||||||||||||||||||||||||||||
Earnings from investments under the equity method | (2,968 | ) | 828 | (161 | ) | — | (2,301 | ) | ||||||||||||||||||||||||||||||||
Deferred income tax expense | — | — | 23,135 | 245 | 23,380 | |||||||||||||||||||||||||||||||||||
(Earnings) losses from investments under the equity method | (6,391 | ) | 305 | (3,720 | ) | — | (9,806 | ) | ||||||||||||||||||||||||||||||||
Deferred income tax benefit | — | — | (511,157 | ) | 29 | (511,128 | ) | |||||||||||||||||||||||||||||||||
(Gain) loss on: | ||||||||||||||||||||||||||||||||||||||||
Disposition of premises and equipment | — | — | (978 | ) | — | (978 | ) | (1 | ) | — | (1,428 | ) | — | (1,429 | ) | |||||||||||||||||||||||||
Sale and valuation adjustments of investment securities | — | — | (5 | ) | — | (5 | ) | |||||||||||||||||||||||||||||||||
Sale of loans, including valuation adjustments on loans held for sale and mortgage banking activities | — | — | (7,222 | ) | — | (7,222 | ) | — | — | (15,034 | ) | — | (15,034 | ) | ||||||||||||||||||||||||||
Sale of foreclosed assets, including write-downs | — | — | 14,851 | — | 14,851 | — | — | 54,711 | — | 54,711 | ||||||||||||||||||||||||||||||
Acquisitions of loans held-for-sale | — | — | (121,929 | ) | — | (121,929 | ) | — | — | (249,059 | ) | — | (249,059 | ) | ||||||||||||||||||||||||||
Proceeds from sale of loans held-for-sale | — | — | 27,547 | — | 27,547 | — | — | 51,062 | — | 51,062 | ||||||||||||||||||||||||||||||
Net originations on loans held-for-sale | — | — | (179,604 | ) | — | (179,604 | ) | — | — | (379,264 | ) | — | (379,264 | ) | ||||||||||||||||||||||||||
Net (increase) decrease in: | ||||||||||||||||||||||||||||||||||||||||
Trading securities | (126 | ) | — | 178,068 | — | 177,942 | (117 | ) | — | 481,388 | — | 481,271 | ||||||||||||||||||||||||||||
Accrued income receivable | (56 | ) | 81 | (94 | ) | 56 | (13 | ) | (183 | ) | (1 | ) | (655 | ) | 183 | (656 | ) | |||||||||||||||||||||||
Other assets | 3,716 | 28 | (27,900 | ) | (3,871 | ) | (28,027 | ) | 2,298 | 55 | 31,314 | (115 | ) | 33,552 | ||||||||||||||||||||||||||
Net (decrease) increase in: | ||||||||||||||||||||||||||||||||||||||||
Net increase (decrease) in: | ||||||||||||||||||||||||||||||||||||||||
Interest payable | (7,875 | ) | (2,629 | ) | 344 | (56 | ) | (10,216 | ) | — | 183 | 475 | (183 | ) | 475 | |||||||||||||||||||||||||
Pension and other postretirement benefits obligations | — | — | 1,019 | — | 1,019 | — | — | 1,641 | — | 1,641 | ||||||||||||||||||||||||||||||
Other liabilities | (12,816 | ) | (7 | ) | (9,797 | ) | 3,243 | (19,377 | ) | (10,443 | ) | (61 | ) | (30,976 | ) | 42 | (41,438 | ) | ||||||||||||||||||||||
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|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Total adjustments | (101,496 | ) | (4,309 | ) | (62,641 | ) | 83,792 | (84,654 | ) | (705,320 | ) | (561,170 | ) | (466,088 | ) | 1,252,691 | (479,887 | ) | ||||||||||||||||||||||
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|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Net cash (used in) provided by operating activities | (26,670 | ) | (5,759 | ) | 24,101 | (1,500 | ) | (9,828 | ) | (33,042 | ) | (5,936 | ) | 234,369 | (3,000 | ) | 192,391 | |||||||||||||||||||||||
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|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Cash flows from investing activities: | ||||||||||||||||||||||||||||||||||||||||
Net (increase) decrease in money market investments | (38 | ) | (1,457 | ) | (484,791 | ) | 1,457 | (484,829 | ) | |||||||||||||||||||||||||||||||
Net decrease (increase) in money market investments | 18,481 | (933 | ) | (1,451,033 | ) | 933 | (1,432,552 | ) | ||||||||||||||||||||||||||||||||
Purchases of investment securities: | ||||||||||||||||||||||||||||||||||||||||
Available-for-sale | — | — | (411,189 | ) | — | (411,189 | ) | — | — | (985,427 | ) | — | (985,427 | ) | ||||||||||||||||||||||||||
Held-to-maturity | — | — | (250 | ) | — | (250 | ) | — | — | (250 | ) | — | (250 | ) | ||||||||||||||||||||||||||
Other | — | — | (2,520 | ) | — | (2,520 | ) | — | — | (12,805 | ) | — | (12,805 | ) | ||||||||||||||||||||||||||
Proceeds from calls, paydowns, maturities and redemptions of investment securities: | ||||||||||||||||||||||||||||||||||||||||
Available-for-sale | — | — | 385,672 | — | 385,672 | — | — | 867,168 | — | 867,168 | ||||||||||||||||||||||||||||||
Held-to-maturity | — | — | 2,231 | — | 2,231 | — | — | 2,389 | — | 2,389 | ||||||||||||||||||||||||||||||
Other | — | — | 30,785 | — | 30,785 | — | — | 31,592 | — | 31,592 | ||||||||||||||||||||||||||||||
Proceeds from sale of investment securities: | ||||||||||||||||||||||||||||||||||||||||
Available for sale | — | — | 70,005 | — | 70,005 | |||||||||||||||||||||||||||||||||||
Other | — | — | 1,388 | — | 1,388 | — | — | 8,399 | — | 8,399 | ||||||||||||||||||||||||||||||
Net repayments on loans | 10,392 | — | 154,788 | (10,386 | ) | 154,794 | 22,400 | 1 | 374,209 | (22,386 | ) | 374,224 | ||||||||||||||||||||||||||||
Proceeds from sale of loans | — | — | 19,127 | — | 19,127 | — | — | 27,780 | — | 27,780 | ||||||||||||||||||||||||||||||
Acquisition of loan portfolios | — | — | (49,510 | ) | — | (49,510 | ) | — | (350 | ) | (140,492 | ) | 171 | (140,671 | ) | |||||||||||||||||||||||||
Net payments from FDIC under loss-sharing agreements | — | — | 132,265 | — | 132,265 | — | — | 164,423 | — | 164,423 | ||||||||||||||||||||||||||||||
Net cash received and acquired from business combination | — | — | 711,051 | — | 711,051 | — | — | 738,296 | — | 738,296 | ||||||||||||||||||||||||||||||
Acquisition of servicing assets | — | — | (3,897 | ) | — | (3,897 | ) | |||||||||||||||||||||||||||||||||
Cash paid related to business acquisitions | — | — | (17,250 | ) | — | (17,250 | ) | |||||||||||||||||||||||||||||||||
Mortgage servicing rights purchased | — | — | (2,400 | ) | — | (2,400 | ) | — | — | (2,400 | ) | — | (2,400 | ) | ||||||||||||||||||||||||||
Acquisition of premises and equipment | (242 | ) | — | (9,989 | ) | — | (10,231 | ) | (677 | ) | — | (30,140 | ) | — | (30,817 | ) | ||||||||||||||||||||||||
Proceeds from sale of: | ||||||||||||||||||||||||||||||||||||||||
Premises and equipment | 3 | — | 3,090 | — | 3,093 | 4 | — | 7,897 | — | 7,901 | ||||||||||||||||||||||||||||||
Foreclosed assets | — | — | 40,161 | — | 40,161 | — | — | 98,287 | — | 98,287 | ||||||||||||||||||||||||||||||
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Net cash provided by (used in) investing activities | 10,115 | (1,457 | ) | 519,909 | (8,929 | ) | 519,638 | 40,208 | (1,282 | ) | (253,249 | ) | (21,282 | ) | (235,605 | ) | ||||||||||||||||||||||||
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Cash flows from financing activities: | ||||||||||||||||||||||||||||||||||||||||
Net increase (decrease) in: | ||||||||||||||||||||||||||||||||||||||||
Deposits | — | — | 250,582 | 15,324 | 265,906 | — | — | 752,959 | (7,172 | ) | 745,787 | |||||||||||||||||||||||||||||
Federal funds purchased and assets sold under agreements to repurchase | — | — | (139,013 | ) | — | (139,013 | ) | — | — | (150,413 | ) | — | (150,413 | ) | ||||||||||||||||||||||||||
Other short-term borrowings | — | 7,214 | (165,815 | ) | 10,386 | (148,215 | ) | — | 7,214 | (77,815 | ) | 22,386 | (48,215 | ) | ||||||||||||||||||||||||||
Payments of notes payable | — | — | (419,487 | ) | — | (419,487 | ) | — | — | (430,003 | ) | — | (430,003 | ) | ||||||||||||||||||||||||||
Proceeds from issuance of notes payable | — | — | 46,000 | — | 46,000 | — | — | 103,231 | — | 103,231 | ||||||||||||||||||||||||||||||
Proceeds from issuance of common stock | 1,405 | — | — | — | 1,405 | 2,536 | — | — | — | 2,536 | ||||||||||||||||||||||||||||||
Dividends paid to parent company | — | — | (1,500 | ) | 1,500 | — | — | — | (3,000 | ) | 3,000 | — | ||||||||||||||||||||||||||||
Dividends paid | (620 | ) | — | — | — | (620 | ) | (1,861 | ) | — | — | — | (1,861 | ) | ||||||||||||||||||||||||||
Net payments for repurchase of common stock | (1,105 | ) | — | — | — | (1,105 | ) | (1,696 | ) | — | 1 | — | (1,695 | ) | ||||||||||||||||||||||||||
Return of capital to parent company | — | — | 171 | (171 | ) | — | ||||||||||||||||||||||||||||||||||
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Net cash (used in) provided by financing activities | (320 | ) | 7,214 | (429,233 | ) | 27,210 | (395,129 | ) | (1,021 | ) | 7,214 | 195,131 | 18,043 | 219,367 | ||||||||||||||||||||||||||
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Net (decrease) increase in cash and due from banks | (16,875 | ) | (2 | ) | 114,777 | 16,781 | 114,681 | |||||||||||||||||||||||||||||||||
Net increase (decrease) in cash and due from banks | 6,145 | (4 | ) | 176,251 | (6,239 | ) | 176,153 | |||||||||||||||||||||||||||||||||
Cash and due from banks at beginning of period | 20,448 | 608 | 380,890 | (20,851 | ) | 381,095 | 20,448 | 608 | 380,890 | (20,851 | ) | 381,095 | ||||||||||||||||||||||||||||
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Cash and due from banks at end of period | $ | 3,573 | $ | 606 | $ | 495,667 | $ | (4,070 | ) | $ | 495,776 | $ | 26,593 | $ | 604 | $ | 557,141 | $ | (27,090 | ) | $ | 557,248 | ||||||||||||||||||
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The Condensed Consolidating Statements of Cash Flows include the cash flows from operating, investing and financing activities associated with discontinued operations.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
This report includes management’s discussion and analysis (“MD&A”) of the consolidated financial position and financial performance of Popular, Inc. (the “Corporation” or “Popular”). All accompanying tables, financial statements and notes included elsewhere in this report should be considered an integral part of this analysis.
The Corporation is a diversified, publicly-owned financial holding company subject to the supervision and regulation of the Board of Governors of the Federal Reserve System. The Corporation has operations in Puerto Rico, the United States (“U.S.”) mainland, and the U.S. and British Virgin Islands. In Puerto Rico, the Corporation provides retail, including residential mortgage loan originations, and commercial banking services through its principal banking subsidiary, Banco Popular de Puerto Rico (“BPPR”), as well as investment banking, broker-dealer, auto and equipment leasing and financing, and insurance services through specialized subsidiaries. In the U.S. mainland, the Corporation operates Banco Popular North America (“BPNA”), including its wholly-owned subsidiary E-LOAN.. BPNA focuses efforts and resources on the core community banking business. BPNA, under the name Popular Community Bank (“PCB”), operates branches in New York, New Jersey and Southern Florida under the name of Popular Community Bank (“PCB”). E-LOAN markets deposit accounts under its name for the benefit of BPNA.Florida. Note 35 to the consolidated financial statements presents information about the Corporation’s business segments. As of March 31,June 30, 2016, the Corporation had a 15.58%15.74% interest in the holding company of EVERTEC, which provides transaction processing services throughout the Caribbean and Latin America, including servicing many of the Corporation’s system infrastructures and transaction processing businesses. At March 31,During the quarter ended June 30, 2016 the Corporation’sCorporation recorded $1.6 million in earnings from its investment in EVERTEC which had a carrying amount of $35.2 million.$35.1 million as of the end of the quarter. Also, the Corporation had a 15.84% stake in Centro Financiero BHD Leon, S.A. (“BHD Leon”), one of the largest banking and financial services groups in the Dominican Republic. During the quarter ended March 31,June 30, 2016 the Corporation recorded $6.2$6.3 million in earnings from its investment in BHD Leon, which had a carrying amount of $122.6$116.0 million, as of the end of the quarter.
QUARTERLY HIGHLIGHTS
OVERVIEW
For the quarter ended March 31, 2016, the Corporation recorded net income of $85.0 million, compared to a net income of $74.8 million for the same quarter of the previous year. The increase of $10.2 million in net income was driven by higher net interest income and lower operating expenses, partially offset by a higher provision for loan losses and lower non-interest income.
Table 1 provides selected financial data and performance indicators for the quarters and six months ended March 31,June 30, 2016 and 2015.
Table 1—1 - Financial highlightsHighlights
Financial Condition Highlights
Financial Condition Highlights | Average for the First Quarter | |||||||||||||||||||||||
(In thousands) | March 31, 2016 | December 31, 2015 | Variance | March 31, 2016 | March 31, 2015 | Variance | ||||||||||||||||||
Money market investments | $ | 1,917,460 | $ | 2,180,092 | $ | (262,632 | ) | $ | 2,186,771 | $ | 1,930,393 | $ | 256,378 | |||||||||||
Investment and trading securities | 6,984,354 | 6,407,802 | 576,552 | 6,764,453 | 5,836,371 | 928,082 | ||||||||||||||||||
Loans | 23,258,182 | 23,129,230 | 128,952 | 22,985,578 | 22,504,974 | 480,604 | ||||||||||||||||||
Earning assets | 32,159,996 | 31,717,124 | 442,872 | 31,936,802 | 30,271,738 | 1,665,064 | ||||||||||||||||||
Total assets | 36,147,009 | 35,761,733 | 385,276 | 35,891,768 | 33,806,058 | 2,085,710 | ||||||||||||||||||
Deposits | 27,526,593 | 27,209,723 | 316,870 | 27,337,586 | 25,585,108 | 1,752,478 | ||||||||||||||||||
Borrowings | 2,349,992 | 2,425,853 | (75,861 | ) | 2,440,979 | 2,876,718 | (435,739 | ) | ||||||||||||||||
Stockholders’ equity | 5,250,300 | 5,105,324 | 144,976 | 5,191,395 | 4,321,095 | 870,300 | ||||||||||||||||||
Liabilities from discontinued operations | 1,815 | 1,815 | — | 1,815 | 2,894 | (1,079 | ) |
Operating Highlights (In thousands, except per share information) Net interest income Provision for loan losses—non-covered loans Provision for loan losses—covered loans Non-interest income Operating expenses Income from continuing operations before income tax Income tax expense Income from continuing operations Income from discontinued operations, net of tax Net income Net income applicable to common stock Net income from continuing operations Net income from discontinued operations Net income per common share—Basic Net income from continuing operations Net income from discontinued operations Net income per common share—Diluted Dividends declared per common share—Basic Financial Condition Highlights (In thousands) Money market investments Investment and trading securities Loans Earning assets Total assets Deposits* Borrowings Stockholders’ equity Liabilities from discontinued operations First Quarter 2016 2015 Variance $ 352,412 $ 343,195 $ 9,217 47,940 29,711 18,229 (3,105 ) 10,324 (13,429 ) 111,630 115,235 (3,605 ) 301,943 312,342 (10,399 ) 117,264 106,053 11,211 32,265 32,568 (303 ) $ 84,999 $ 73,485 $ 11,514 — 1,341 (1,341 ) $ 84,999 $ 74,826 $ 10,173 $ 84,068 $ 73,896 $ 10,172 $ 0.81 $ 0.71 $ 0.10 $ — $ 0.01 $ (0.01 ) $ 0.81 $ 0.72 $ 0.09 $ 0.81 $ 0.71 $ 0.10 $ — $ 0.01 $ (0.01 ) $ 0.81 $ 0.72 $ 0.09 $ 0.15 $ — $ 0.15 Ending balances at Average for the six months ended June 30, 2016 December 31, 2015 Variance June 30, 2016 June 30, 2015 Variance $ 2,785,500 $ 2,180,092 $ 605,408 $ 2,594,697 $ 2,231,909 $ 362,788 7,583,294 6,407,802 1,175,492 7,024,039 5,941,278 1,082,761 23,270,169 23,129,230 140,939 23,064,939 22,949,753 115,186 33,638,963 31,717,124 1,921,839 32,683,676 31,122,940 1,560,736 37,606,148 35,761,733 1,844,415 36,629,755 34,696,180 1,933,575 28,737,856 27,209,723 1,528,133 28,093,043 26,459,216 1,633,827 2,428,752 2,425,853 2,899 2,374,022 2,866,035 (492,013 ) 5,359,831 5,105,324 254,507 5,226,895 4,363,634 863,261 1,815 1,815 — 1,815 2,384 (569 )
First Quarter | ||||||||
Selected Statistical Information | 2016 | 2015 | ||||||
Common Stock Data | ||||||||
Market price | ||||||||
High | $ | 28.80 | $ | 35.58 | ||||
Low | 22.62 | 30.52 | ||||||
End | 28.61 | 34.39 | ||||||
Book value per common share at period end | 50.16 | 41.81 | ||||||
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Profitability Ratios | ||||||||
Return on assets | 0.95 | % | 0.90 | % | ||||
Return on common equity | 6.58 | 7.02 | ||||||
Net interest spread (taxable equivalent) | 4.47 | 4.64 | ||||||
Net interest margin (taxable equivalent) | 4.70 | 4.85 | ||||||
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Capitalization Ratios | ||||||||
Average equity to average assets | 14.46 | % | 12.78 | % | ||||
Common equity Tier 1 capital | 15.79 | 15.74 | ||||||
Tier I capital | 15.79 | 16.11 | ||||||
Total capital | 18.78 | 18.71 | ||||||
Tier 1 leverage | 11.46 | 11.80 | ||||||
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* | Average deposits exclude average derivatives. |
Operating Highlights | Quarters ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
(In thousands, except per share information) | 2016 | 2015 | Variance | 2016 | 2015 | Variance | ||||||||||||||||||
Net interest income | $ | 360,551 | $ | 362,553 | $ | (2,002 | ) | $ | 712,963 | $ | 705,748 | $ | 7,215 | |||||||||||
Provision for loan losses - non-covered loans | 39,668 | 60,468 | (20,800 | ) | 87,608 | 90,179 | (2,571 | ) | ||||||||||||||||
Provision (reversal) for loan losses - covered loans | 804 | 15,766 | (14,962 | ) | (2,301 | ) | 26,090 | (28,391 | ) | |||||||||||||||
Non-interest income | 110,503 | 140,759 | (30,256 | ) | 222,133 | 255,994 | (33,861 | ) | ||||||||||||||||
Operating expenses | 309,149 | 363,174 | (54,025 | ) | 611,092 | 675,515 | (64,423 | ) | ||||||||||||||||
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Income from continuing operations before income tax | 121,433 | 63,904 | 57,529 | 238,697 | 169,958 | 68,739 | ||||||||||||||||||
Income tax expense (benefit) | 32,446 | (533,533 | ) | 565,979 | 64,711 | (500,964 | ) | 565,675 | ||||||||||||||||
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Income from continuing operations | $ | 88,987 | $ | 597,437 | $ | (508,450 | ) | $ | 173,986 | $ | 670,922 | $ | (496,936 | ) | ||||||||||
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Income from discontinued operations, net of tax | — | 15 | (15 | ) | — | 1,356 | (1,356 | ) | ||||||||||||||||
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Net income | $ | 88,987 | $ | 597,452 | $ | (508,465 | ) | $ | 173,986 | $ | 672,278 | $ | (498,292 | ) | ||||||||||
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Net income applicable to commonstock | $ | 88,056 | $ | 596,521 | $ | (508,465 | ) | $ | 172,124 | $ | 670,417 | $ | (498,293 | ) | ||||||||||
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Net income from continuing operations | $ | 0.85 | $ | 5.80 | $ | (4.95 | ) | $ | 1.67 | $ | 6.51 | $ | (4.84 | ) | ||||||||||
Net income from discontinued operations | $ | — | $ | — | $ | — | $ | — | $ | 0.01 | $ | (0.01 | ) | |||||||||||
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Net income per Common Share – Basic | $ | $ 0.85 | $ | 5.80 | (4.95 | ) | $ | 1.67 | $ | 6.52 | $ | (4.85 | ) | |||||||||||
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Net income from continuing operations | $ | 0.85 | $ | 5.79 | $ | (4.94 | ) | $ | 1.67 | $ | 6.49 | $ | (4.82 | ) | ||||||||||
Net income from discontinued operations | $ | — | $ | — | $ | — | $ | — | $ | 0.01 | $ | (0.01 | ) | |||||||||||
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Net income per Common Share –Diluted | $ | 0.85 | $ | 5.79 | $ | (4.94 | ) | $ | 1.67 | $ | 6.50 | $ | (4.83 | ) | ||||||||||
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Selected Statistical Information Common Stock Data Market price High Low End Book value per common share at period end Profitability Ratios Return on assets Return on common equity Net interest spread (taxable equivalent) - Non-GAAP Net interest margin (taxable equivalent) - Non-GAAP Capitalization Ratios Average equity to average assets Tier I capital Total capital Tier 1 leverage Quarters ended June 30, Six months ended June 30, 2016 2015 2016 2015 $ 31.34 $ 35.45 $ 31.34 $ 35.58 26.66 28.86 22.62 28.86 29.30 28.86 29.30 28.86 51.20 47.34 51.52 47.34 0.96 % 6.74 % 0.96 % 3.91 % 6.80 54.93 6.69 31.34 4.35 4.60 4.41 4.62 4.57 4.80 4.64 4.83 14.08 % 12.38 % 14.27 % 12.58 % 16.29 15.93 16.29 15.93 19.29 18.50 19.29 18.50 11.29 11.59 11.29 11.59
Adjusted results of operations – Non-GAAP financial measure
The Corporation prepares its Consolidated Financial Statements using accounting principles generally accepted in the U.S. (“U.S. GAAP”), or the (“reported basis”). In addition to analyzing the Corporation’s results on a reported basis, management monitors the performance of the Corporation on an “adjusted basis” and excludes the impact of certain transactions on the results of its operations. Throughout this MD&A, the Corporation presents a discussion of its financial results excluding the impact of these events to arrive at the “adjusted results”. Management believes that the “adjusted results” provide meaningful information about the underlying performance of the Corporation’s ongoing operations. The “adjusted results” are a Non-GAAP financial measure. Refer to tables 40 and 4142 to 47 for a reconciliation of the reported results for the quarter and six months ended March 31,June 30, 2016 and June 30, 2015. No adjustments are included
Net interest income on a taxable equivalent basis-Non-GAAP financial measure
Net interest income, on a taxable equivalent basis, is presented with its different components on Tables 2 and 3 for the quarter and six-months ended March 31, 2016.June 30, 2016 as compared with the same periods in 2015, segregated by major categories of interest earning assets and interest bearing liabilities.
The interest earning assets include investment securities and loans that are exempt from income tax, principally in Puerto Rico. The main sources of tax-exempt interest income are certain investments in obligations of the U.S. Government, its agencies and sponsored entities, and certain obligations of the Commonwealth of Puerto Rico and its agencies and assets held by the Corporation’s international banking entities. To facilitate the comparison of all interest related to these assets, the interest income has been converted to a taxable equivalent basis, using the applicable statutory income tax rates for each period. The taxable equivalent computation considers the interest expense and other related expense disallowances required by the Puerto Rico tax law. Under this law, the exempt interest can be deducted up to the amount of taxable income. Net interest income on a taxable equivalent basis is a non-GAAP financial measure. Management believes that this presentation provides meaningful information since it facilitates the comparison of revenues arising from taxable and exempt sources.
Non-GAAP financial measures used by the Corporation may not be comparable to similarly named non-GAAPNon-GAAP financial measures used by other companies.
Financial highlights for the quarter ended March 31,June 30, 2016
Refer to the Financial Condition Analysis section of this MD&A for additional information.
As a financial services company, the Corporation’s earnings are significantly affected by general business and economic conditions. Lending and deposit activities and fee income generation are influenced by the level of business spending and investment, consumer income, spending and savings, capital market activities, competition, customer preferences, interest rate conditions and prevailing market rates on competing products.
The Corporation continuously monitors general business and economic conditions, industry-related indicators and trends, competition, interest rate volatility, credit quality indicators, loan and deposit demand, operational and systems efficiencies, revenue enhancements and changes in the regulation of financial services companies.
The Corporation operates in a highly regulated environment and may be adversely affected by changes in federal and local laws and regulations. Also, competition with other financial institutions could adversely affect its profitability.
The description of the Corporation’s business contained in Item 1 of the Corporation’s 2015 Form 10-K, while not all inclusive, discusses additional information about the business of the Corporation and risk factors, many beyond the Corporation’s control that, in addition to the other information in this Form 10-Q, readers should consider.
The Corporation’s common stock is traded on the NASDAQ Global Select Market under the symbol BPOP.
CRITICAL ACCOUNTING POLICIES / ESTIMATES
The accounting and reporting policies followed by the Corporation and its subsidiaries conform to generally accepted accounting principles in the United States of America and general practices within the financial services industry. Various elements of the Corporation’s accounting policies, by their nature, are inherently subject to estimation techniques, valuation assumptions and other subjective assessments. These estimates are made under facts and circumstances at a point in time and changes in those facts and circumstances could produce actual results that differ from those estimates.
Management has discussed the development and selection of the critical accounting policies and estimates with the Corporation’s Audit Committee. The Corporation has identified as critical accounting policies those related to: (i) Fair Value Measurement of Financial Instruments; (ii) Loans and Allowance for Loan Losses; (iii) Acquisition Accounting for Loans and Related Indemnification Asset; (iv) Income Taxes; (v) Goodwill, and (vi) Pension and Postretirement Benefit Obligations. For a summary of these critical accounting policies and estimates, refer to that particular section in the MD&A included in Popular, Inc.’s 2015 Form 10-K. Also, refer to Note 2 to the consolidated financial statements included in the 2015 Form 10-K for a summary of the Corporation’s significant accounting policies.
OPERATING RESULTS ANALYSIS
Net interest income
Net interest income on a taxable equivalent basis-Non-GAAP financial measure
Net interest income, on a taxable equivalent basis, is presented with its different components on Table 2 for the quarter ended March 31, 2016 as compared with the same period in 2015, segregated by major categories of interest earning assets and interest bearing liabilities.
The interest earning assets include investment securities and loans that are exempt from income tax, principally in Puerto Rico. The main sources of tax-exempt interest income are certain investments in obligations of the U.S. Government, its agencies and sponsored entities, and certain obligations of the Commonwealth of Puerto Rico and its agencies and assets held by the Corporation’s international banking entities. To facilitate the comparison of all interest related to these assets, the interest income has been converted to a taxable equivalent basis, using the applicable statutory income tax rates for each period. The taxable
equivalent computation considers the interest expense and other related expense disallowances required by the Puerto Rico tax law. Under this law, the exempt interest can be deducted up to the amount of taxable income. Net interest income on a taxable equivalent basis is a non-GAAP financial measure. Management believes that this presentation provides meaningful information since it facilitates the comparison of revenues arising from taxable and exempt sources.NET INTEREST INCOME
Average outstanding securities balances are based on amortized cost excluding any unrealized gains or losses on securities available-for-sale. Non-accrual loans have been included in the respective average loans and leases categories. Loan fees collected and costs incurred in the origination of loans are deferred and amortized over the term of the loan as an adjustment to interest yield. Prepayment penalties, late fees collected and the amortization of premiums / discounts on purchased loans are also included as part of the loan yield. Interest income for the quarter ended March 31, 2016 included a favorable impact, excludingExcluding the discount accretion on covered loans accounted for under Subtopic ASC 310-30, interest income for the quarter and six-months ended June 30, 2016 included a favorable impact for the amortization of $4.8these items, of $3.4 million related to those items,and $8.2 million, respectively, compared with a favorable impact of $1.6$4.9 million and $6.5 million in the same periodperiods in 2015;2015.
Taxable equivalent net interest income was $382.5 million for the increase is driven bysecond quarter of 2016, compared to $382.7 million for the amortizations related to Doral acquired loans.
same quarter of the previous year. Net interest margin, on a taxable equivalent basis, for the firstsecond quarter of 2016 was 4.70%4.59%, compared to 4.85% in4.80% for the same quarter of 2015,2015.
Excluding the impact of the $2.1 million in income related to the bulk loan sale, net interest income on a taxable equivalent basis was $380.4 million for the second quarter of 2016, a decrease of 15 basis points. Net interest income increased by $9.7$2.3 million when compared to the $382.7 million for same quarter in the previous year.of 2015. The main drivers of the increase in net interest income and decrease inadjusted net interest margin are:for the second quarter of 2016 was 4.57%, a decrease of 23 basis points when compared to the 4.80% for the same quarter of 2015. The main reasons for the decrease are described below:
Positive variances:
These negative variances were partially offset by:
Table 2 - Analysis of Levels & Yields on a Taxable Equivalent Basis for Continuing Operations
Quarters ended June 30,
Variance | ||||||||||||||||||||||||||||||||||||||||||||
Average Volume | Average Yields /Costs | Interest | Attributable to | |||||||||||||||||||||||||||||||||||||||||
2016 | 2015 | Variance | 2016 | 2015 | Variance | 2016 | 2015 | Variance | Rate | Volume | ||||||||||||||||||||||||||||||||||
($ in millions) | (In thousands) | |||||||||||||||||||||||||||||||||||||||||||
$ | 3,003 | $ | 2,530 | $ | 473 | 0.52 | % | 0.29 | % | 0.23 | % | Money market investments | $ | 3,889 | $ | 1,845 | $ | 2,044 | $ | 1,767 | $ | 277 | ||||||||||||||||||||||
7,147 | 5,812 | 1,335 | 2.72 | 2.66 | 0.06 | Investment securities | 48,661 | 38,591 | 10,070 | (794 | ) | 10,864 | ||||||||||||||||||||||||||||||||
136 | 233 | (97 | ) | 7.13 | 6.25 | 0.88 | Trading securities | 2,415 | 3,635 | (1,220 | ) | 447 | (1,667 | ) | ||||||||||||||||||||||||||||||
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10,286 | 8,575 | 1,711 | 2.14 | 2.06 | 0.08 | Total money market, investment and trading securities | 54,965 | 44,071 | 10,894 | 1,420 | 9,474 | |||||||||||||||||||||||||||||||||
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Loans: | ||||||||||||||||||||||||||||||||||||||||||||
9,150 | 8,776 | 374 | 5.05 | 5.19 | (0.14 | ) | Commercial | 114,925 | 113,515 | 1,410 | (3,346 | ) | 4,756 | |||||||||||||||||||||||||||||||
723 | 682 | 41 | 5.43 | 6.02 | (0.59 | ) | Construction | 9,747 | 10,247 | (500 | ) | (1,084 | ) | 584 | ||||||||||||||||||||||||||||||
651 | 583 | 68 | 6.73 | 6.93 | (0.20 | ) | Leasing | 10,951 | 10,100 | 851 | (302 | ) | 1,153 | |||||||||||||||||||||||||||||||
6,743 | 7,175 | (432 | ) | 5.53 | 5.44 | 0.09 | Mortgage | 93,145 | 97,561 | (4,416 | ) | 1,534 | (5,950 | ) | ||||||||||||||||||||||||||||||
3,865 | 3,823 | 42 | 10.47 | 10.45 | 0.02 | Consumer | 100,628 | 99,587 | 1,041 | (481 | ) | 1,522 | ||||||||||||||||||||||||||||||||
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21,132 | 21,039 | 93 | 6.26 | 6.30 | (0.04 | ) | Sub-total loans | 329,396 | 331,010 | (1,614 | ) | (3,679 | ) | 2,065 | ||||||||||||||||||||||||||||||
2,013 | 2,350 | (337 | ) | 9.53 | 9.44 | 0.09 | WB loans [1] | 47,737 | 55,335 | (7,598 | ) | (12 | ) | (7,586 | ) | |||||||||||||||||||||||||||||
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23,145 | 23,389 | (244 | ) | 6.54 | 6.62 | (0.08 | ) | Total loans | 377,133 | 386,345 | (9,212 | ) | (3,691 | ) | (5,521 | ) | ||||||||||||||||||||||||||||
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$ | 33,431 | $ | 31,964 | $ | 1,467 | 5.19 | % | 5.40 | % | (0.21 | )% | Total earning assets | $ | 432,098 | $ | 430,416 | $ | 1,682 | $ | (2,271 | ) | $ | 3,953 | |||||||||||||||||||||
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Interest bearing deposits: | ||||||||||||||||||||||||||||||||||||||||||||
$ | 7,023 | $ | 5,507 | $ | 1,516 | 0.38 | % | 0.36 | % | 0.02 | % | NOW and money market [2] | $ | 6,596 | $ | 4,911 | $ | 1,685 | $ | 720 | $ | 965 | ||||||||||||||||||||||
7,487 | 7,040 | 447 | 0.24 | 0.23 | 0.01 | Savings | 4,447 | 4,102 | 345 | (5 | ) | 350 | ||||||||||||||||||||||||||||||||
7,866 | 8,530 | (664 | ) | 1.00 | 0.81 | 0.19 | Time deposits | 19,556 | 17,245 | 2,311 | 3,373 | (1,062 | ) | |||||||||||||||||||||||||||||||
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22,376 | 21,077 | 1,299 | 0.55 | 0.50 | 0.05 | Total deposits | 30,599 | 26,258 | 4,341 | 4,088 | 253 | |||||||||||||||||||||||||||||||||
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801 | 1,052 | (251 | ) | 1.03 | 0.71 | 0.32 | Short-term borrowings | 2,058 | 1,864 | 194 | 647 | (453 | ) | |||||||||||||||||||||||||||||||
1,506 | 1,803 | (297 | ) | 5.07 | 4.36 | 0.71 | Other medium and long-term debt | 19,002 | 19,626 | (624 | ) | 1,412 | (2,036 | ) | ||||||||||||||||||||||||||||||
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24,683 | 23,932 | 751 | 0.84 | 0.80 | 0.04 | Total interest bearing liabilities | 51,659 | 47,748 | 3,911 | 6,147 | (2,236 | ) | ||||||||||||||||||||||||||||||||
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6,481 | 6,247 | 234 | Non-interest bearing demand deposits | |||||||||||||||||||||||||||||||||||||||||
2,267 | 1,785 | 482 | Other sources of funds | |||||||||||||||||||||||||||||||||||||||||
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$ | 33,431 | $ | 31,964 | $ | 1,467 | 0.62 | % | 0.60 | % | 0.02 | % | Total source of funds | 51,659 | 47,748 | 3,911 | 6,147 | (2,236 | ) | ||||||||||||||||||||||||||
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4.57 | % | 4.80 | % | (0.23 | )% | Adjusted net interest margin/income on a taxable equivalent basis | 380,439 | 382,668 | (2,229 | ) | $ | (8,418 | ) | $ | 6,189 | |||||||||||||||||||||||||||||
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4.35 | % | 4.60 | % | (0.25 | )% | Adjusted net interest spread | ||||||||||||||||||||||||||||||||||||||
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Impact of bulk loan sale | 2,057 | — | 2,057 | |||||||||||||||||||||||||||||||||||||||||
4.59 | % | 4.80 | % | (0.21 | )% | Net interest margin/ income on a taxable equivalent basis | $ | 382,496 | $ | 382,668 | $ | (172 | ) | |||||||||||||||||||||||||||||||
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Taxable equivalent adjustment | 21,945 | 20,115 | 1,830 | |||||||||||||||||||||||||||||||||||||||||
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Net interest income | $ | 360,551 | $ | 362,553 | $ | (2,002 | ) | |||||||||||||||||||||||||||||||||||||
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Note: The changes that are not due solely to volume or rate are allocated to volume and rate based on the proportion of the change in each category.
[1] | Including the impact of the WB loans bulk sale, the yield for WB loans would have been 9.94%. |
[2] | Includes interest bearing demand deposits corresponding to certain government entities in Puerto Rico. |
Taxable equivalent net interest income was $756.4 million for the six-month period ended June 30, 2016, compared to $746.9 million for the same period of 2015. Net interest margin for the six-month period ended June 30, 2016 was 4.65%, compared to 4.83% for the same period of the previous year.
Excluding the impact of the $2.1 million in income related to the acquisitionbulk loan sale, net interest income on a taxable equivalent basis was $754.4 million for the six-month period ended June 30, 2016, an increase of Doral Bank in February 27, 2015$7.5 million when compared to the $746.9 million for the same period of 2015. The adjusted net interest margin for the six-month period ended June 30, 2016 was 4.64%, a decrease of 19 basis points when compared to the 4.83% for the same period of 2015. The main reasons for the increase are described below:
These positive variances were partially offset by:
Table 2—3 - Analysis of Levels & Yields on a Taxable Equivalent Basis forfrom Continuing Operations (Non-GAAP)
QuartersSix months ended March 31,June 30,
Variance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Average Volume | Average Volume | Average Yields / Costs | Interest | Attributable to | Average Volume | Average Yields /Costs | Interest | Attributable to | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2016 | 2016 | 2015 | Variance | 2016 | 2015 | Variance | 2016 | 2015 | Variance | Rate | Volume | 2016 | 2015 | Variance | 2016 | 2015 | Variance | 2016 | 2015 | Variance | Rate | Volume | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
($ in millions) | (In thousands) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(In millions) | (In millions) | (In thousands) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
$ | 2,187 | $ | 1,930 | $ | 257 | 0.53 | % | 0.30 | % | 0.23 | % | Money market investments | $ | 2,863 | $ | 1,447 | $ | 1,416 | $ | 1,332 | $ | 84 | 2,595 | $ | 2,232 | $ | 363 | 0.52 | % | 0.30 | % | 0.22 | % | Money market investments | $ | 6,752 | $ | 3,291 | $ | 3,461 | $ | 3,105 | $ | 356 | ||||||||||||||||||||||||||||||||||||||||||||
6,641 | 5,637 | 1,004 | 2.90 | 2.67 | 0.23 | Investment securities | 48,117 | 37,643 | 10,474 | 175 | 10,299 | 6,894 | 5,724 | 1,170 | 2.81 | 2.67 | 0.14 | Investment securities | 96,778 | 76,234 | 20,544 | (541 | ) | 21,085 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
123 | 200 | (77 | ) | 7.08 | 6.77 | 0.31 | Trading securities | 2,172 | 3,344 | (1,172 | ) | 176 | (1,348 | ) | 130 | 217 | (87 | ) | 7.11 | 6.49 | 0.62 | Trading securities | 4,586 | 6,979 | (2,393 | ) | 631 | (3,024 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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8,951 | 7,767 | 1,184 | 2.38 | 2.19 | 0.19 | Total money market, investment and trading securities | 53,152 | 42,434 | 10,718 | 1,683 | 9,035 | 9,619 | 8,173 | 1,446 | 2.25 | 2.12 | 0.13 | Total money market, investment and trading securities | 108,116 | 86,504 | 21,612 | 3,195 | 18,417 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Loans: | Loans: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
8,957 | 8,383 | 574 | 5.12 | 5.17 | (0.05 | ) | Commercial | 114,091 | 106,887 | 7,204 | (97 | ) | 7,301 | 9,054 | 8,581 | 473 | 5.09 | 5.18 | (0.09 | ) | Commercial | 229,016 | 220,402 | 8,614 | (3,379 | ) | 11,993 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
704 | 435 | 269 | 5.30 | 5.67 | (0.37 | ) | Construction | 9,288 | 6,076 | 3,212 | (361 | ) | 3,573 | 713 | 559 | 154 | 5.37 | 5.89 | (0.52 | ) | Construction | 19,035 | 16,324 | 2,711 | (1,498 | ) | 4,209 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
630 | 569 | 61 | 6.78 | 7.01 | (0.23 | ) | Leasing | 10,675 | 9,974 | 701 | (339 | ) | 1,040 | 641 | 576 | 65 | 6.75 | 6.97 | (0.22 | ) | Leasing | 21,626 | 20,074 | 1,552 | (640 | ) | 2,192 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
6,830 | 6,733 | 97 | 5.50 | 5.35 | 0.15 | Mortgage | 93,895 | 90,042 | 3,853 | 2,543 | 1,310 | 6,786 | 6,955 | (169 | ) | 5.51 | 5.39 | 0.12 | Mortgage | 187,041 | 187,602 | (561 | ) | 4,042 | (4,603 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
3,807 | 3,845 | (38 | ) | 10.51 | 10.36 | 0.15 | Consumer | 99,520 | 98,249 | 1,271 | 1,786 | (515 | ) | 3,836 | 3,834 | 2 | 10.49 | 10.41 | 0.08 | Consumer | 200,148 | 197,837 | 2,311 | 1,271 | 1,040 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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20,928 | 19,965 | 963 | 6.28 | 6.29 | (0.01 | ) | Sub-total loans | 327,469 | 311,228 | 16,241 | 3,532 | 12,709 | 21,030 | 20,505 | 525 | 6.27 | 6.30 | (0.03 | ) | Sub-total loans | 656,866 | 642,239 | 14,627 | (204 | ) | 14,831 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2,058 | 2,540 | (482 | ) | 8.76 | 9.14 | (0.38 | ) | WB loans | 44,904 | 57,431 | (12,527 | ) | (1,780 | ) | (10,747 | ) | 2,035 | 2,445 | (410 | ) | 9.14 | 9.29 | (0.15 | ) | WB loans [1] | 92,641 | 112,765 | (20,124 | ) | 4,769 | (24,893 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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22,986 | 22,505 | 481 | 6.50 | 6.62 | (0.12 | ) | Total loans | 372,373 | 368,659 | 3,714 | 1,752 | 1,962 | 23,065 | 22,950 | 115 | 6.52 | 6.62 | (0.10 | ) | Total loans | 749,507 | 755,004 | (5,497 | ) | 4,565 | (10,062 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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$ | 31,937 | $ | 30,272 | $ | 1,665 | 5.35 | % | 5.48 | % | (0.13 | )% | Total earning assets | $ | 425,525 | $ | 411,093 | $ | 14,432 | $ | 3,435 | $ | 10,997 | 32,684 | $ | 31,123 | $ | 1,561 | 5.27 | % | 5.44 | % | (0.17 | )% | Total earning assets | $ | 857,623 | $ | 841,508 | $ | 16,115 | $ | 7,760 | $ | 8,355 | ||||||||||||||||||||||||||||||||||||||||||||
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Interest bearing deposits: | Interest bearing deposits: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
$ | 5,712 | $ | 4,983 | $ | 729 | 0.39 | % | 0.34 | % | 0.05 | % | NOW and money market [1] | $ | 5,607 | $ | 4,219 | $ | 1,388 | $ | 602 | $ | 786 | 6,367 | $ | 5,246 | $ | 1,121 | 0.39 | % | 0.35 | % | 0.04 | % | NOW and money market [2] | $ | 12,203 | $ | 9,130 | $ | 3,073 | $ | 1,374 | $ | 1,699 | ||||||||||||||||||||||||||||||||||||||||||||
7,275 | 6,892 | 383 | 0.23 | 0.23 | — | Savings | 4,248 | 3,924 | 324 | 43 | 281 | 7,381 | 6,966 | 415 | 0.24 | 0.23 | 0.01 | Savings | 8,695 | 8,026 | 669 | 40 | 629 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
8,058 | 7,747 | 311 | 1.00 | 0.93 | 0.07 | Time deposits | 20,019 | 17,721 | 2,298 | 1,081 | 1,217 | 7,962 | 8,141 | (179 | ) | 1.00 | 0.87 | 0.13 | Time deposits | 39,575 | 34,966 | 4,609 | 5,314 | (705 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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21,045 | 19,622 | 1,423 | 0.57 | 0.53 | 0.04 | Total deposits | 29,874 | 25,864 | 4,010 | 1,726 | 2,284 | 21,710 | 20,353 | 1,357 | 0.56 | 0.52 | 0.04 | Total deposits | 60,473 | 52,122 | 8,351 | 6,728 | 1,623 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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812 | 1,114 | (302 | ) | 0.92 | 0.63 | 0.29 | Short-term borrowings | 1,861 | 1,734 | 127 | 767 | (640 | ) | 807 | 1,083 | (276 | ) | 0.98 | 0.67 | 0.31 | Short-term borrowings | 3,919 | 3,597 | 322 | 1,453 | (1,131 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
1,629 | 1,763 | (134 | ) | 4.90 | 4.39 | 0.51 | Other medium and long-term debt | 19,873 | 19,281 | 592 | 1,551 | (959 | ) | 1,567 | 1,783 | (216 | ) | 4.97 | 4.37 | 0.60 | Other medium and long-term debt | 38,875 | 38,908 | (33 | ) | 2,744 | (2,777 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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23,486 | 22,499 | 987 | 0.88 | 0.84 | 0.04 | Total interest bearing liabilities | 51,608 | 46,879 | 4,729 | 4,044 | 685 | 24,084 | 23,219 | 865 | 0.86 | 0.82 | 0.04 | Total interest bearing liabilities | 103,267 | 94,627 | 8,640 | 10,925 | (2,285 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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6,293 | 5,963 | 330 | Non-interest bearing demand deposits | 6,387 | 6,106 | 281 | Demand deposits | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2,158 | 1,810 | 348 | Other sources of funds | 2,213 | 1,798 | 415 | Other sources of funds | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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$ | 31,937 | $ | 30,272 | $ | 1,665 | 0.65 | % | 0.63 | % | 0.02 | % | Total source of funds | 51,608 | 46,879 | 4,729 | 4,044 | 685 | 32,684 | $ | 31,123 | $ | 1,561 | 0.63 | % | 0.61 | % | 0.02 | % | Total source of funds | 103,267 | 94,627 | 8,640 | 10,925 | (2,285 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
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4.70 | % | 4.85 | % | (0.15 | )% | Net interest margin | 4.64 | % | 4.83 | % | (0.19 | )% | Adjusted net interest margin/ income on a taxable equivalent basis | 754,356 | 746,881 | 7,475 | $ | (3,165 | ) | $ | 10,640 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Net interest income on a taxable equivalent basis | 373,917 | 364,214 | 9,703 | $ | (609 | ) | $ | 10,312 | 4.41 | % | 4.62 | % | (0.21 | )% | Adjusted net interest spread | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
4.47 | % | 4.64 | % | (0.17 | )% | Net interest spread |
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| Impact of bulk loan sale | 2,057 | — | 2,057 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Taxable equivalent adjustment | 21,505 | 21,019 | 486 | 4.65 | % | 4.83 | % | (0.18 | )% | Net interest margin/ income on a taxable equivalent basis | $ | 756,413 | $ | 746,881 | $ | 9,532 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net interest income | $ | 352,412 | $ | 343,195 | $ | 9,217 |
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| Taxable equivalent adjustment | 43,450 | 41,133 | 2,317 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Net interest income | $ | 712,963 | $ | 705,748 | $ | 7,215 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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