February 20, 2014
Ms. Suzanne Hayes
Assistant Director
Division of Corporation Finance
U.S. Securities and Exchange Commission
100 F. Street, NE
Washington, D.C. 20549
Re: Popular, Inc.
Form 10-K for Fiscal Year Ended December 31, 2012
Filed February 28, 2013
Form 10-Q for Fiscal Quarter Ended June 30, 2013
Filed August 9, 2013
File No. 001-34084
Dear Ms. Hayes:
Reference is made to our response dated November 20, 2013 (the “November 20 Submission”) to your letter dated October 29, 2013, and to the comments of the Staff (the “Staff”) of the Securities and Exchange Commission (the “Commission”) regarding Popular, Inc.’s (the “Corporation”) Form 10-K for the year ended December 31, 2012 filed on February 28, 2013 (the “2012 Form 10-K”), and Form 10-Q for the quarter ended June 30, 2013 filed on August 9, 2013 (the “Form 10-Q”).
As per our telephone conference held on February 18, 2014, we are providing the additional responses below as a supplementary addendum to our November 20 Submission.
At December 31, 2013, only caps associated with the auto loan portfolio were triggered in our allowance for loans and leases (ALLL) methodology. As of 4Q13, the auto loan portfolio’s net charge-off (NCO) trend drove the Trend Factor (TF) to exceed the predetermined cap for this loan segment. Given that the current TF cap, established as of YE 2012, may not have fully reflected the effects of the 2013 NCO trends, a $217K Additional Reserve was incorporated based on the difference between the ALLL for this segment with the current cap and without the cap. Although immaterial, the effect of the consumer caps was assessed through the review of Qualitative Factors and addressed through Additional Reserves in this particular case.
Ms. Suzanne Hayes
Assistant Director
U.S. Securities and Exchange Commission
February 20, 2014
Page 2
Dec. 31, 2013 | ALLL (no caps) | Effect of Caps | Additional Reserves to address Caps | ALLL as Reported | Final Effect of Caps | |||||||||||||||||
| Leasing | 10,622 | — | — | 10,622 | — | |||||||||||||||||
PR Region | Consumer | 152,579 | (217 | ) | 217 | 152,579 | — | |||||||||||||||
| Mortgage | 130,330 | — | — | 130,330 | — | |||||||||||||||||
| Leasing | — | — | — | — | — | |||||||||||||||||
US Region | Consumer | 24,306 | — | — | 24,306 | — | ||||||||||||||||
| Mortgage | 26,599 | — | — | 26,599 | — | |||||||||||||||||
| Leasing | 10,622 | — | — | 10,622 | — | |||||||||||||||||
Popular, Inc. | Consumer | 176,885 | (217 | ) | 217 | 176,885 | — | |||||||||||||||
| Mortgage | 156,929 | — | — | 156,929 | — | |||||||||||||||||
At December 31, 2012, the effect of the mortgage caps was assessed through the review of Qualitative Factors and addressed through Additional Reserves. In reviewing the adequacy of the year-end 2012 Puerto Rico (PR) Mortgage ALLL, Management considered the Corporation’s revised charge-off policy. During the first quarter of 2012, the Corporation enhanced its charge-off policy for the residential mortgage loan portfolio by including historical losses on recent other real estate owned (“OREO”) sales to determine the net realizable value to assess charge-offs once a loan becomes 180 days past due. Previously, this was only done once the loan was foreclosed. This revision resulted in higher NCO trends for this portfolio as it considered a lower net realizable value based on current OREO disposition trends and selling costs.
Although the ALLL methodology’s Trend Factor fully captured the NCO trends by year-end 2012, the PR Mortgage Trend Factor caps did not fully reflect current NCO trends as they were last updated during the ALLL validation completed in 2011. As such, Management based the additional reserve for the mortgage portfolio on the elimination of the Trend Factor caps for this portfolio.
The effect of the consumer TF cap at December 31, 2012 was assessed and deemed immaterial for adjustment.
Dec. 31, 2012 | ALLL (no caps) | Effect of Caps | Additional Reserves to address Caps | ALLL as Reported | Final Effect of Caps | |||||||||||||||||
| Leasing | 2,894 | — | — | 2,894 | — | |||||||||||||||||
PR Region | Consumer | 100,120 | (221 | ) | — | 99,899 | 221 | |||||||||||||||
| Mortgage | 119,028 | (3,959 | ) | 3,959 | 119,028 | — | ||||||||||||||||
| Leasing | — | — | — | — | — | |||||||||||||||||
US Region | Consumer | 31,322 | (2 | ) | — | 31,320 | 2 | |||||||||||||||
| Mortgage | 30,348 | — | — | 30,348 | — | |||||||||||||||||
| Leasing | 2,894 | — | — | 2,894 | — | |||||||||||||||||
Popular, Inc. | Consumer | 131,442 | (223 | ) | — | 131,219 | 223 | |||||||||||||||
| Mortgage | 149,376 | (3,959 | ) | 3,959 | 149,376 | — | ||||||||||||||||
Ms. Suzanne Hayes
Assistant Director
U.S. Securities and Exchange Commission
February 20, 2014
Page 3
At December 31, 2011, the effect of the consumer TF cap was assessed and deemed immaterial for adjustment while at December 31, 2010, the TF cap was not triggered in the ALLL methodology.
Dec. 31, 2011 | ALLL (no caps) | Effect of Caps | Additional Reserves to address Caps | ALLL as Reported | Final Effect of Caps | |||||||||||||||||
| Leasing | 4,651 | — | — | 4,651 | — | |||||||||||||||||
PR Region | Consumer | 115,675 | (549 | ) | — | 115,126 | 549 | |||||||||||||||
| Mortgage | 72,322 | — | — | 72,322 | — | |||||||||||||||||
| Leasing | 240 | — | — | 240 | — | |||||||||||||||||
US Region | Consumer | 44,277 | (94 | ) | — | 44,183 | 94 | |||||||||||||||
| Mortgage | 29,940 | — | — | 29,940 | — | |||||||||||||||||
| Leasing | 4,891 | — | — | 4,891 | — | |||||||||||||||||
Popular, Inc. | Consumer | 159,953 | (643 | ) | — | 159,310 | 643 | |||||||||||||||
| Mortgage | 102,262 | — | — | 102,262 | — | |||||||||||||||||
Dec. 31, 2010 | ALLL (no caps) | Effect of Caps | Additional Reserves to address Caps | ALLL as Reported | Final Effect of Caps | |||||||||||||||||
| Leasing | 7,153 | — | — | 7,153 | — | |||||||||||||||||
PR Region | Consumer | 133,529 | — | — | 133,529 | — | ||||||||||||||||
| Mortgage | 42,030 | — | — | 42,030 | — | |||||||||||||||||
| Leasing | 6,000 | — | — | 6,000 | — | |||||||||||||||||
US Region | Consumer | 65,558 | — | — | 65,558 | — | ||||||||||||||||
| Mortgage | 28,840 | — | — | 28,840 | — | |||||||||||||||||
| Leasing | 13,153 | — | — | 13,153 | — | |||||||||||||||||
Popular, Inc. | Consumer | 199,087 | — | — | 199,087 | — | ||||||||||||||||
| Mortgage | 70,871 | — | — | 70,871 | — | |||||||||||||||||
*****
If you have any further questions or require any additional information, please do not hesitate to contact the undersigned at787-756-3982 or Jorge J. García, Senior Vice President and Corporate Comptroller, at 787-765-9800 ext. 506101.
Sincerely,
/s/ Carlos J. Vázquez
Carlos J. Vázquez
Executive Vice President and
Chief Financial Officer
