Popular (BPOP) 8-K Regulation FD Disclosure

Financial Results

Financial Results

Fourth Quarter 2011

Fourth Quarter 2011

Exhibit  99.1

Forward Looking Statements

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,

2010

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

December

31,

2011

is

based

on

preliminary

unaudited

data

and

is

subject

to

change.

1

2011 Highlights

•

Net Income for the year amounted to $151 million

Strong NIM of 4.34%

Provision for loan losses down 43% from prior year

•

Net income of $3 million in Q4; fourth consecutive profitable quarter

Results include a one-time expense of $15.6 million due to employee retirement

window

Improved credit quality trends

–

Provision for non-covered loans fell $26.8 million to $123.9 million on linked-quarter

basis

–

PR commercial/construction NPL inflows declined 52% in Q4; credit review of the

portfolio was completed

–

Net charge offs of non-covered loans in Q4 were down 7% to $126 million

•

Ended the year with strong capital and well positioned for improved results in 2012

2

Financial Results

3

¹

Unaudited

Q4 vs. Q3 2011 Adjusted Variances (in millions)

4

($In millions)

Q4 vs. Q3 variance as reported

(30)

$ 

Adjustments

Gain on sale of securites Q3

8

Gain on sale of securites Q4

3

Variance

5

Retirement window Q4

16

Adjusted negative variance

(9)

$    

Covered loans

(17)

$   

Mortgage loans

(8)

(25)

FDIC loss share increase:

Accretion of indemnification asset

2

ASC 310-20 and provision-mirror acct.

21

23

Other Income:

Serv charges & other fees

(3)

Gain on sale & indemnity reserves

2

Other operating income

10

9

43

Covered loans

(30)

US

(16)

(3)

Other Expenses

(13)

Detailed variances

(9)

$   

Provision:

Provision BPPR - non-covered

Lower net interest income:

Explanation

Variance in pre-tax income

10.94%

14.52%

15.79%

7.99%

12.10%

15.97%

17.25%

8.62%

Tier 1 Common

Tier 1 Capital

Total Capital

Tangible Common Equity

Capital Ratios

5

1

See

the

earnings

press

release

for

reconciliation

of

Common

Stockholders

Equity

(GAAP)

to

Tier

1

Common

Equity (Non-GAAP).

2

Minimum Regulatory Requirements for Well Capitalized

Q3 

2011

Q2

2011

Q3

2010

1

•

There is no specific plan at this time for TARP repayment nor any obligation to accelerate a total or partial

payment

•

Any repayment of TARP will be done in a manner that protects shareholder value and will be subject to

regulatory approval

•

As of year end, the unamortized TARP discount amounted to $466 million

•

Including the discount amortization, the effective cost of TARP capital in Q4 was 16% of the accreting  book

value, or 7.8% of the par amount of $935 million

•

Interest expense  for 2011: $72.5 million

coupon $46.8 million

discount amortization $25.7 million

•

Strong capital ratios

Q4

2010

Q4

2011

Q4 

2010

Q4

2011

Q4

2011

Q4 

2010

5%²

6%²

10%²

Q4

2011

Q4 

2010

6

Consolidated Credit Summary

•

NPAs

have

decreased

since

Q4

10

principally

driven

by

the

sale

of

non-performing

loans

•

NCOs

slightly

declined

in

the

fourth

quarter,

although

experiencing

variability

within

the

portfolios

•

Provision

for

loan

losses

for

2011

was

down

43%

vs

2010

•

Allowance

&

allowance

to

loans

coverage

ratio

remained

relatively

flat

Excluding covered loans

$ in millions

Q4 11

Q3 11

Q4 11 vs 

Q3 11

Q4 10

Q4 11 vs 

Q4 10

Loans Held to Maturity (HTM)

$20,602

$20,674

-0.35%

$20,728

-0.61%

Loans Held for Sale

363

369

-1.63%

894

-59.40%

Total Non Covered Loans

$20,965

$21,043

-0.37%

$21,622

-3.04%

Non-performing assets (inc OREO)

$2,173

$2,158

0.70%

$2,405

-9.65%

NPLs HTM to loans HTM

8.44%

8.38%

0.06%

7.58%

0.86%

Net charge-offs

$126

$135

-6.67%

$478

-73.64%

Net charge-offs to average loans HTM

2.46%

2.64%

-0.18%

8.82%

-6.36%

Provision for loan losses

$124

$151

-17.88%

$354

-64.97%

Provision to total loans HTM

2.41%

2.92%

-0.51%

6.83%

-4.42%

Provision for loan losses to net charge-offs

0.98x

1.11x

-0.13x

0.74x

0.24x

Allowance for loan losses

$690

$693

-0.43%

$793

-12.99%

Allowance for loan losses to loans (excl. LHFS)

3.35%

3.35%

0.00%

3.83%

-0.48%

Allowance for loan losses to NPLs HTM

39.73%

39.99%

-0.26%

50.46%

-10.73%

Non-Performing Loans-

Popular, Inc.

Commercial & Construction NPL Inflows

Credit Quality Overview-

•

NPLs increased by $6 million in Q4 driven by higher PR

mortgage offset by reductions in construction. The

increase in Q3 was $107 million.

•

NCO ratio for Q4 was 2.46% ($126 million) vs. 2.64%

($135 million) in Q3, driven by PR C&I and consumer

portfolio

•

Inflow of NPLs in the PR commercial & construction

portfolios are lower ($111 million) given completion of

the credit review

•

For the year total NPL inflows for the commercial &

construction portfolios are down 22%

7

Excludes Covered Loans & LHFS

Net Charge Offs-Popular, Inc. ¹

1

Excludes net charge-offs of $210 million in commercial and construction loans as a result of charging-off

collateral dependent loans more promptly in Q4 10.

2011 Highlights

•

First year of operational profitability

since 2006

Further expanded strong margin

Reduced credit cost by 43% from

2010

Strengthened capital position

Executed on asset acquisitions

•

Improved credit profile

Completed NPL asset sales in PR

and US

Registered improvement in

credit trends in PR

Experienced substantial

improvement in US

Summary & Outlook

8

2012 Strategy

•

Further improve credit risk profile

•

Add low-risk assets

•

Expand efficiency efforts

•

Continue improvement at BPNA

Well positioned to improve results in 2012

•

2012 target range net income of $185

million to $200 million

Driven primarily by a reduction in

the provision expense

Appendix

Appendix

2005/2006

•

Aggressive diversification

consisting of Puerto Rico, the

U.S. and the Caribbean;

revenue diversification

through EVERTEC

•

Focused on growing U.S.

banking and mortgage

businesses  (PFH & ELOAN )

2007/2008

•Reorganized U.S. operation

to exit high-risk businesses

•Shut down U.S. consumer

finance businesses (PFH &

ELOAN) & Texas region

•Acquisition of P.R. Citibank

retail business

2009/2010

•

Focused  on ensuring

capital and BHC liquidity 

adequacy and participating

in the P.R. banking

consolidation

•

Raised common equity,

completed EVERTEC sale &

Westernbank transaction

2005

2006

2007

2008

2009

2010

Net Income (Loss)

$541M

$358M

($64M)

($1,244M)

($574M)

$137M

Tier 1 Common

7.98%

7.73%

7.08%

3.19%

6.39%

10.95%

NPL/Loans

1 .77%

2.24%

2.75%

4.67%

9.60%

7.58% ¹

FTEs

13,210

12,508

12,303

10,587

9,407

8,277

Where We Are Coming From

10

Strategy

Financials

2011/2012

•

Focused on:

Puerto Rico

Credit risk profile

improvement

Efficiency

Asset acquisition

United States

•Repositioning as

community bank

•Continued attention

to asset quality and

efficiency

¹

Excludes covered loans

P.R.  & US Business

11

1

Excludes covered loans

$ in millions (Unaudited)

Q4 11

Q3 11

Variance

Q4 11

Q3 11

Variance

Net Interest Income

$299

$321

($22)

$73

$73

($0)

Non Interest Income

136

118

18

21

18

3

Gross Revenues

435

439

(4)

94

91

3

Provision (non-covered)

(88)

(131)

43

(36)

(20)

(16)

Provision (covered WB)

(56)

(26)

(30)

           -

           -

              -

Provision for loan losses

(144)

(157)

13

(36)

(20)

(16)

Expenses

(253)

(221)

(32)

(60)

(61)

1

Tax (Expense) Benefit

(4)

(7)

3

(1)

(1)

(0)

Net Income (Loss)

$34

$54

($20)

($3)

$9

($12)

NPLs  (HTM) ¹

$1,371

$1,337

$34

$367

$395

($28)

NPLs  (HTM + HFS) ¹

1,620

1,597

23

380

395

         (15)

Loan loss reserve

578

524

            54

237

249

         (12)

Assets

$28,423

$29,202

($779)

$8,581

$8,720

($139)

Loans  (HTM)

19,159

19,210

(51)

5,762

5,946

       (184)

Loans  (HTM + HFS)

19,507

19,575

(68)

5,778

5,949

       (171)

Deposits

21,850

21,727

123

6,168

6,292

(124)

NIM

4.97%

5.15%

-0.18%

3.68%

3.62%

0.06%

PR

US

Credit Ratings Update

•

Our senior unsecured ratings have been gradually improving

since 2010:

Moodys:

Ba1

Negative Outlook

S&P:

B+

Stable Outlook

Fitch:

B+

Positive Outlook

•

Feb, 2011:  Fitch raised our senior unsecured rating by one

notch to B+

•

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

12

TARP Capital Accounting Overview

•

In 2009, we exchanged $935 million in perpetual preferred shares

we issued to the US Treasury in

2008, for perpetual trust-preferred securities (“Trups”) with the same terms and conditions

The coupon remained unchanged at 5%, stepping up to 9% in 12-2013

•

Under GAAP, the Trups were marked to market resulting in a gain of approximately $485.3 million

million which was taken into retained earnings in 8-2009

the discount rate assumed for the valuation was 16%

the book value of the Trups was written down to approximately $416M million

The discount is being amortized throughout a 30-year period using the level-yield method to result

in an effective cost of 16% of book value

•

In  2011, the interest expense booked related to the Trups was $72.5 million:

Coupon payment of $46.8 million

Discount amortization of $25.7 million

The effective cost was 16% of the average book value, or 7.8% of

the par amount of $935 million

The outstanding discount as of 12-31-2011, was approximately $466 million

13

Financial Results

Financial Results

Fourth Quarter 2011

Fourth Quarter 2011