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| 8-K - FORM 8-K - POPULAR, INC. | d337568d8k.htm |
 Financial
Results Financial Results
First Quarter 2012
First Quarter 2012
Exhibit 99.1 |
 Forward Looking
Statements 1
The information contained in this presentation includes forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995. These
forward-looking statements are based on management’s current expectations and involve risks
and uncertainties that may cause the Company's actual results to differ materially from any
future results expressed or implied by such forward-looking statements. Factors
that may cause such a difference include, but are not limited to (i) the rate of growth in
the economy and employment levels, as well as general business and economic conditions; (ii)
changes in interest rates, as well as the magnitude of such changes; (iii) the fiscal
and monetary policies of the federal government and its agencies; (iv) changes in
federal bank regulatory and supervisory policies, including required levels of capital; (v)
the relative strength or weakness of the consumer and commercial credit sectors and of
the real estate markets in Puerto Rico and the other markets in which borrowers are
located; (vi) the performance of the stock and bond markets; (vii) competition in the
financial services industry; (viii) possible legislative, tax or regulatory changes;
(ix) the impact of the Dodd-Frank Act on our businesses, business practice and cost of
operations; and (x) additional Federal Deposit Insurance Corporation assessments. Other than
to the extent required by applicable law, the Company undertakes no obligation to
publicly update or revise any forward-looking statement. Please refer to our Annual
Report on Form 10-K for the year ended December 31, 2011 and other SEC reports for a
discussion of those factors that could impact our future results. The financial
information included in this presentation for the quarter ended March 31, 2012 is based on
preliminary unaudited data and is subject to change. |
 Q1 2012
Highlights •
Net income for the quarter amounted to $48.4 million; our fifth consecutive profitable
quarter
•
Continued improvement in credit quality trends in non-covered portfolio
NPLs declined by $56 million
NPL inflows (commercial and construction) declined by 21%
Net charge-offs decreased by $18 million
•
Provision for non-covered loans declined by $41.4 million
•
Newly created Commercial Credit Administration Group consolidates several divisions
performing commercial credit management and administrative functions
•
Maintained strong revenue generation, robust margins and further
strengthened
capital ratios
2 |
 Financial
Results 3
¹
Unaudited
$ in thousands (except per share data)
Q1 2012
1
Q4 2011
1
Variance
Net interest income
$337,582
$344,780
($7,198)
Service fees & other oper. income
129,710
113,848
15,862
Gain on sale of investments, loans & trading profits
9,453
18,064
(8,611)
Total revenues before FDIC (expense) income
476,745
476,692
53
FDIC loss-share (expense) income
(15,255)
17,447
(32,702)
Gross revenues
461,490
494,139
(32,649)
Provision
for
loan
losses
-
non
covered
loans
82,514
123,908
(41,394)
Provision
for
loan
losses
-
covered
loans
18,209
55,900
(37,691)
Total provision for loan losses
100,723
179,808
(79,085)
Net revenues
360,767
314,331
46,436
Personnel costs
121,491
124,547
(3,056)
Other operating expenses
174,676
186,546
(11,870)
Total operating expenses
296,167
311,093
(14,926)
Income before Tax
64,600
3,238
61,362
Income Tax
16,192
263
15,929
Net income
$48,408
$2,975
$45,433
Financial Ratios
EPS
$0.05
$0.00
$0.05
NIM
4.27%
4.30%
-0.03% |
 4
¹
Unaudited
Significant Quarterly Variances
(1)
Net interest income
($7,198)
Service fees & other
oper. income
15,862
FDIC loss-share income
(expense)
(32,702)
Provision for loan losses
-
non covered loans
(41,394)
Provision for loan losses-
covered loans
(37,691)
Personnel costs
(3,056)
Other operating expenses
(11,870)
Due to lower provisioning requirements
Driven by lower pension costs and salaries, mostly due to the
retirement window but partially offset by payroll taxes, incentives
and other benefits
Driven
by
lower
business
promotion
($6.4
million)
and
a
benefit
from
lower provision for unfunded credit commitments ($9.5 million),
partially offset by higher OREO expenses ($4.3 million)
$25.2 million principally due to 80% mirror accounting from the
decrease in provision for loan losses of covered loans
$13.6 million from the covered portfolio related to certain pools of
mortgage loans with lower interest accretion in Q1 (extended average
life estimates) offset by lower interest expense on deposits and
repayment of FDIC note ($6.3 million)
$9.5 million higher other income mainly due to valuation in
investments accounted for under the equity method and $5.9 million
in other service fees (MSR valuation $11.5 million)
$17.9 million lower net charge offs and $25.3 million attributed to
the revision of the ALLL methodology for commercial and
construction (US $17.8 million & PR $7.5 million) |
 Capital
Ratios 5
1
Peers include: CMA, HBAN, ZION, FNFG, PBCT, SNV, FHN, BOKF, ASBC & FBP
2
See the earnings press release for reconciliation of Common Stockholders Equity
(GAAP) to Tier 1 Common Equity (Non-GAAP)
3
Minimum Regulatory Requirements for Well Capitalized
4
Peer & CCAR ratios are as of December 31, 2011
•
Strong capital ratios above CCAR banks and peers
(1) (4)
5%
3
6%
3
10
3
2
Tier 1 Common
Tier 1 Capital
Total Capital
Tangible Common Equity
Popular Q1 2012
Peers Average
CCAR Average
12.53
16.51
17.79
8.83
11.18
13.76
16.24
9.15
10.65
12.98
15.70
7.01 |
 6
Consolidated Credit Summary (Excluding Covered Loans)
•
Total
Loans
remained
relatively
flat
•
NPLs
decreased
for
the
second
consecutive
quarter driven primarily by lower levels in all
portfolios
•
US construction
$32 million
•
PR commercial
$10 million
•
PR mortgage
$16 million
•
NCOs declined
due to positive variances in
commercial and construction, offset in part
by increases in mortgage
•
Reduction in NCO ratio from 2.46% in
Q4 2011 to 2.13% in Q1 2012
•
Provision
for
loan
losses
in
Q1
2012
was
down
33%
compared
to
the
Q4
2011
•
Allowance
to
loans
&
allowance
coverage
ratio remained relatively
flat
$ in millions
Q1 12
Q4 11
Q1 12 vs
Q4 11
Q1 11
Q1 12 vs
Q1 11
Loans Held to Maturity (HTM)
$20,479
$20,602
-0.60%
$20,677
-0.96%
Loans Held for Sale
362
363
-0.28%
570
-36.49%
Total Non Covered Loans
20,841
20,965
0.60%
21,247
-1.91%
Non-performing loans (NPLs)
$1,682
$1,738
-3.21%
$1,614
4.21%
Commercial
$819
$830
-1.33%
$700
17.00%
Construction
$70
$96
-27.08%
$127
-44.88%
Legacy
$79
$76
3.95%
$150
-47.33%
Mortgage
$667
$687
-2.91%
$578
15.40%
Consumer
$47
$49
-4.08%
$59
-20.34%
NPLs HTM to loans HTM
8.21%
8.44%
-0.23%
7.80%
0.41%
Net charge-offs (NCOs)
108
126
-14.29%
139
-22.30%
Commercial
$54
$71
-23.94%
$56
-3.57%
Construction
$0
$5
-100.00%
$9
-100.00%
Legacy
$4
$6
-33.33%
$20
-80.00%
Mortgage
$17
$9
88.89%
$8
112.50%
Consumer
$33
$35
-5.71%
$46
-28.26%
NCOs to average loans HTM
2.13%
2.46%
-0.33%
2.74%
-0.61%
Provision for loan losses (PLL)
83
124
-33.06%
60
38.33%
PLL to total loans HTM
1.62%
2.41%
-0.79%
1.16%
0.46%
PLL to NCOs
0.76x
0.98x
-0.22x
0.43x
0.33x
Allowance for loan losses (ALL)
665
690
-3.62%
727
-8.53%
ALL to loans (excl. LHFS)
3.25%
3.35%
-0.10%
3.52%
-0.27%
ALL to NPLs HTM
39.53%
39.73%
-0.20%
45.07%
-5.54% |
 Commercial &
Construction NPL Inflows Credit Quality Overview -
•
Total commercial and construction NPL
inflows decreased
by $37 million or 21%
driven
by
decreases
in
both
PR
and
the
US
In PR, commercial and construction NPL inflows
decreased by $8 million or 8%
In the US, commercial and construction NPL
inflows decreased by $29 million or 38%
7
Selected Portfolios
Total
PR
Mortgage
Exposure
–
Owned
+
Recourse
•
Total PR mortgage exposure includes both:
On-balance sheet mortgage loans
Loans sold with recourse
•
Portfolio key statistics:
Recourse balance is
down $1.1 billion or 26%
since 4Q 2009
90+ days past due
percentage delinquency has
decreased
by
14%
from
its
peak
in
Q3
2010 |
 General
Reserve-
ASC
450
(FAS
5)
+
Specific
Reserve-
ASC
310
(FAS
114)
=
Total
ALLL
•
Revised to a more granular segmentation based on credit-risk characteristics
-
Enhances homogeneity of portfolios
•
Changed trend factor to 12 months for commercial and construction portfolios
-
Improves the methodology’s ability to calibrate the impact of current loss trends
•
Implementation resulted in a net reduction of approximately $25 million in ALLL balance
(mostly in the US)
Allowance for Loan and Lease Losses (ALLL)
•
Base loss -
36-month average net charge-offs for commercial/construction portfolios and
18-month average net charge-offs for consumer/mortgage portfolios
•
Trend
factor-
Replaces base-loss period with 6-month average net charge-off when it is
higher than base loss (up to determined cap)
•
Environmental factor -
Captures certain credit / economic trends and factors not
considered in the base losses
•
General reserve -
Based on historical losses adjusted for a recent trendfactor+
8
Changes
Implemented
ASC 450
Methodology
environmental factor
•
Specific reserve -
Attributed to loans deemed impaired (mostly commercial loans
over $1mm) |
 Coverage Ratio
1
Allowance to Loan Losses / Non-performing Loans
2
Allowance to Loan Losses + Lifetime Charge-offs / Non-performing
Loans 3
Includes Legacy loans
•The coverage ratio of 39.5% does not
take into account the high percentage of individually analyzed loans and
lifetime charge-offs Total NPLs
$1,682
Individually Analyzed
$849
Coverage
Ratio
(CR)
:
3%
Adjusted
Coverage
Ratio
(ACR)
:
33%
Collectively Analyzed
$833
Coverage Ratio (CR)
:
76%
Adjusted Coverage Ratio (ACR)
:
104%
$ in millions
9
3
3
1
2
Mort.
Comm.
Const.
Cons.
Mort.
Comm.
3
Const.
3
Cons.
NPLs
$239
$510
$90
$9
$428
$358
$9
$39
Lifetime NCOs
$4
$166
$80
$0
$84
$130
$18
$0
Reserve
$16
$11
$1
$1
$109
$349
$17
$161
CR
7%
2%
1%
15%
26%
97%
198%
414%
ACR
8%
35%
90%
15%
45%
133%
410%
414%
1
2 |
 Summary &
Outlook 10
2012 Strategy
•
Further improve credit risk profile
•
Add low-risk assets
•
Continue efficiency efforts
•
Continue improvement at BPNA
Well positioned to deliver results in 2012
•
Reaffirming 2012 target range net income of $185 million to $200
million
•
Improvement in credit trends
•
Strong capital position
•
Favorable stress-test results in exercise similar to CCAR, with
capital ratios higher than peers and CCAR banks |
 Appendix
Appendix |
 P.R. &
US Business 12
1
Excludes covered loans
$ in millions (Unaudited)
Q1 12
Q4 11
Variance
Q1 12
Q4 11
Variance
Net Interest Income
$290
$299
($9)
$74
$73
$1
Non Interest Income
114
136
(22)
16
21
(5)
Gross Revenues
404
435
(31)
90
94
(4)
Provision (non-covered)
68
88
(20)
15
36
(21)
Provision (covered WB)
18
56
(38)
-
-
-
Provision for loan losses
86
144
(58)
15
36
(21)
Expenses
234
253
(19)
65
60
5
Tax Expense
17
4
13
1
1
(0)
Net Income (Loss)
$67
$34
$33
$9
($3)
$12
NPLs (HTM) ¹
$1,343
$1,371
($28)
$338
$366
($28)
NPLs (HTM + HFS) ¹
1,570
1,620
(50)
344
379
(35)
Loan loss reserve
586
578
8
217
237
(20)
Assets
$28,027
$28,423
($396)
$8,665
$8,581
$84
Loans (HTM)
19,053
19,159
(106)
5,618
5,762
(144)
Loans (HTM + HFS)
19,406
19,507
(101)
5,626
5,778
(152)
Deposits
21,040
21,850
(810)
6,247
6,168
79
NIM
4.90%
4.97%
-0.07%
3.78%
3.68%
0.10%
PR
US |
 Credit Ratings
Update •
Our senior unsecured ratings have been gradually improving since
2010:
Moody’s:
Ba1
Negative Outlook
S&P:
B+
Stable Outlook
Fitch:
B+
Positive Outlook
•
April 2012: Moody’s placing most of the PR banks under review with the
possibility of downgrades, due to the state of the Puerto Rico economy
•
January 2012: Fitch raised BPOPs outlook to positive
•
December 2011: S&P raised its ratings on BPPR to BB from BB-
and changed
outlook to stable given revised bank criteria to Regional banks
•
July 2011: S&P raised our senior unsecured rating by one notch to B+
•
As the P.R. economy stabilizes and our credit metrics improve, we should see
upward pressure on the ratings
13 |
 Financial
Results Financial Results
First Quarter 2012
First Quarter 2012 |