Popular (BPOP) 8-K Popular, Inc. Releases its 2015 Dodd-Frank Act Stress Test Results

2015 Annual Stress Test Disclosure

Dodd-Frank Act Stress Test Results

Supervisory Severely Adverse Scenario

June 2015

Exhibit 99.2

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

Corporation's

actual

results

to

differ

materially

from

any

future

results

expressed

or

implied

by

such

forward-looking

statements.

Other

than

to

the

extent

required

by

applicable

law,

the

Corporation

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,

2014

and

other

SEC

reports

for

a

discussion

of

those

factors

that

could

impact

our

future

results.

Index

2

2015 Supervisory Severely Adverse Scenario Results

3

Page

Risk Methodologies

8

Macro-Economic  Scenario                                                                                  

13

Overview

3

Popular,

Inc.

(“Popular”

or

the

“Corporation”)

is

the

leading

financial

services

provider

in

Puerto

Rico

(“PR”)

and

ranks

among

the

50

largest

bank

holding

companies

by

assets

in

the

United

States

(“U.S.”),

with

consolidated

assets

of

$35.6

billion

as

of

March

31,

2015.

Popular

operates

234

branches

across

its

principal

markets,

Puerto

Rico,

the

U.S.

mainland

and

the

Virgin

Islands.

In

Puerto

Rico,

Popular

provides

retail,

commercial,

and

mortgage

banking

services

through

its

principal

banking

subsidiary

Banco

Popular

de

Puerto

Rico

(“BPPR”),

as

well

as

auto

and

equipment

leasing

and

financing,

investment

banking,

broker-dealer,

and

insurance

services

through

specialized

subsidiaries.

BPPR

represented

approximately

80%

of

the

Corporation’s

total

assets

as

of

March

31,

2015.

In

the

U.S.

mainland,

the

Corporation

operates

Banco

Popular

North

America

(“BPNA”)

under

the

trade

name

of

Popular

Community

Bank

(“PCB”).

Currently,

PCB

operates

in

New

York,

New

Jersey,

and

South

Florida,

providing

a

broad

range

of

financial

services

and

products.

According

to

the

Dodd-Frank

Wall

Street

Reform

and

Consumer

Protection

Act

(the

“Dodd-Frank

Act”),

as

a

bank

holding

company

and

a

state

member

bank

with

average

total

assets

of

between

$10

billion

and

$50

billion,

Popular

and

BPPR

are

required

to

submit

an

annual

company-run

stress

test

(“DFAST”)

based

on

certain

hypothetical

economic

scenarios

(in

addition

to

Puerto

Rico

specific

economic

scenarios

developed

internally).

The

DFAST

is

meant

as

a

process

to

assess

the

potential

impact

of

hypothetical

macro-economic

and

financial

market

scenarios

on

the

consolidated

earnings,

losses,

and

capital

of

the

organization

over

a

defined

planning

horizon.

The

DFAST

requires

nine-quarter

forecasted

results

under

a

base,

adverse,

and

severely

adverse

economic

scenarios,

starting

in

the

fourth

quarter

of

2014

and

extending

through

the

fourth

quarter

of

2016.

These

hypothetical

scenarios

are

prescribed

by

the

Board

of

Governors

of

the

Federal

Reserve

System

(“Federal

Reserve”).

Under

the

Federal

Reserve’s

regulations

implementing

the

stress

testing

requirements

of

the

Dodd-Frank

Act,

bank

holding

companies

such

as

the

Corporation

must

assume

a

standard

set

of

capital

actions

over

the

forecast

horizon.

Accordingly,

the

Corporation

includes

as

the

only

capital

action

during

the

nine-quarter

planning

horizon,

the

continuation

of

the

current

practice

of

paying

regular

dividends

on

outstanding

preferred

stock

amounting

to

$3.7

million

annually.

These

dividends

are

currently

funded

through

new

stock

issuance

under

the

Corporation’s

savings

and

investment

plans.

These

assumed

capital

actions

may

not

represent

the

actual

capital

actions

that

may

be

taken

under

severely

adverse

conditions

or

specific

capital

actions

the

Corporation

may

have

requested

as

part

of

its

capital

plan.

The

2015

DFAST

results

also

do

not

include

approximately

$1.7

billion

in

loans

acquired

and

$2.2

billion

in

deposits

assumed

from

the

FDIC

as

receiver

of

Doral

Bank

on

February

27,

2015.

Federal

Reserve

regulation

requires

the

disclosure

of

summary

stress

test

results

under

the

Federal

Reserve’s

Supervisory

Severely

Adverse

Scenario.

The

disclosure

in

this

presentation,

including

projections

of

our

financial

results

and

condition,

are

not

intended

to

be

our

forecast

of

expected

future

economic

or

financial

conditions

or

our

forecast

of

the

Corporation’s

or

BPPR’s

expected

future

financial

results

or

condition,

but

rather

reflect

possible

results

under

the

prescribed

hypothetical,

severely

adverse

scenario.

Our

future

financial

results

and

condition

will

be

influenced

by

actual

economic

and

financial

conditions

and

various

other

factors

as

described

in

our

reports

filed

with

the

Securities

and

Exchange

Commission

and

available

at

www.sec.gov.

Capital and RWA Projections (Severely Adverse Scenario)

4

Projected stressed capital ratios

Projected risk-weighted assets ¹

1

Projected risk weighted assets were calculated using Basel I risk weightings for 2014 and the Basel III  standardized approach from 2015 through 2016.

2

Popular

risk

weighted

assets

at

Q3

2014

include

discontinued

assets

pertaining

to

BPNA’s

California

Region.

These

assets

were

sold

during

Q4

2014

and

excluded

from

the

analysis

for

the

subsequent

quarters.

1

Common equity tier 1 ("CET 1") capital ratio for Q3 2014 reflects the tier 1 common capital ratio calculated by Popular considering Basel I criteria. Popular was not subject to the Basel III CET 1   

ratio for Q3 2014 and Q4 2014.

2

Ratios for Q1 2015 through Q4 2016 are based on Basel III regulatory framework.

3

Lowest level during the nine-quarter planning period.

Q4 2016

Lowest

Level

3

Common Equity Tier 1 Capital ¹

14.7%

11.4%

11.4%

6.5%

Tier 1 Risk-Based Capital

16.9%

11.4%

11.4%

8.0%

Total Risk-Based Capital

18.1%

14.5%

14.5%

10.0%

Tier 1 Leverage

11.1%

8.9%

8.9%

5.0%

15.1%

11.9%

11.9%

6.5%

Tier 1 Risk-Based Capital

15.1%

11.9%

11.9%

8.0%

Total Risk-Based Capital

16.4%

13.1%

13.1%

10.0%

Tier 1 Leverage

10.3%

9.2%

9.2%

5.0%

Severely Adverse Capital Ratios

2

Regulatory Well

Capitalized

Minimums

Actual

Q3 2014

Popular, Inc.

2

22,414

22,918

BPPR

17,616

19,072

Actual Q3 2014

(Basel I)

Projected Q4 2016

(Basel III)

(in millions)

Common Equity Tier 1 Capital ¹

Profit & Loss Projections (Severely Adverse Scenario)

5

Nine-quarter cumulative provision for loan and lease losses, PPNR, and net income (Q4 2014-Q4 2016)

Nine-quarter cumulative projected loan losses (Q4 2014-Q4 2016)

Total Losses

$2,209

10.4%

$2,005

11.3%

(in millions)

Popular, Inc.

9-Qtr

Cumulative

Loss

Cumulative

Portfolio

Loss Rate

BPPR

9-Qtr

Cumulative

Loss

Cumulative

Portfolio

Loss Rate

1

Average assets is the nine-quarter average of total assets (from Q4 2014 through Q4 2016).

2

Pre-provision net revenue includes losses from operational-risk events, mortgage repurchase expenses, and other real estate owned (“OREO”) costs.

Note: Projections included above are not intended to be our forecast of expected future economic or financial conditions or our forecast of the Corporation’s or BPPR’s expected future

financial

results

or

condition,

but

rather

reflect

possible

results

under

the

hypothetical,

severely

adverse

scenario

prescribed

by

the

Federal

Reserve.

Percent of average assets

Pre-Provision

Net

Revenue

(PPNR)

2

$1,026

3.3%

Loan Loss Provision

1,988

Realized Gains (Losses) on Securities

(31)

Income Tax Benefit

(289)

Net Income / (Loss)

($704)

-2.2%

Pre-Provision

Net

Revenue

(PPNR)

2

$1,106

4.3%

Loan Loss Provision

1,753

Realized Gains (Losses) on Securities

(27)

Income Tax Benefit

(298)

Net Income / (Loss)

($376)

-1.5%

(in millions)

9-Qtr Cumulative Impact

1

14.74%

14.74%

15.98%

11.73%

11.39%

11.40%

1.24%

4.54%

-8.79%

-0.33%

0%

5%

10%

15%

20%

25%

Q3 2014

Basel 1 Tier 1

Common

BASEL III

Impact

PPNR

Provision

Other

Q4 2016

Basel III CET 1

2015 DFAST Pro Forma Capital Ratio Key Drivers

1

Dotted lines represent minimum well capitalized ratio requirement.

2

Basel III Impact represents the effect of the initial adoption of Basel III in Q1 2015.

3

Reduction is mainly due to the effect of Basel III threshold deductions and higher risk weighted assets after Q1 2015.

6

Popular, Inc. CET1 ratio under Supervisory Severely

Adverse Scenario

Popular, Inc. Tier 1 leverage ratio under Supervisory

Severely Adverse Scenario

11.14%

11.14%

11.43%

8.28%

8.28%

8.87%

0.29%

3.36%

-6.50%

0.58%

0%

5%

10%

15%

20%

25%

Q3 2014

BASEL III

Impact

PPNR

Provision

Other

Q4 2016

6.5% 1

5.0% 1

BPPR CET1 ratio under Supervisory Severely Adverse

Scenario

15.10%

15.10%

16.56%

13.12%

11.86%

11.85%

1.46%

5.89%

-9.34%

-1.26%

0%

5%

10%

15%

20%

25%

Q3 2014

Basel 1 Tier 1

Common

BASEL III

Impact

PPNR

Provision

Other

Q4 2016

Basel III CET 1

6.5% 1

BPPR Tier 1 leverage ratio under Supervisory Severely

Adverse Scenario

10.33%

10.33%

11.97%

9.40%

9.21%

9.21%

1.64%

4.40%

-6.97%

-0.19%

0%

5%

10%

15%

20%

25%

Q3 2014

BASEL III

Impact

PPNR

Provision

Other

Q4 2016

5.0% 1

2

2

2

2

3

Index

7

2015 Supervisory Severely Adverse Scenario Results

3

Page

Risk Methodologies

8

Macro-Economic  Scenario                                                                                  

13

Key Risks Captured in Stress Test Projections

8

Credit Risk

Potential for default or loss resulting from an obligor’s failure to meet the terms of any contract with the Corporation or

any of its subsidiaries, or failure otherwise to perform as agreed. Credit risk arises from all activities where success

depends on counterparty, issuer, or borrower performance. 

Interest Rate Risk

Interest rate risk is the risk to earnings or capital arising from changes in interest rates. Interest rate risk arises from

differences between the timing of rate changes and the timing of cash flows (re-pricing risk); from changing rate

relationships among different yield curves affecting bank activities (basis risk); from changing rate relationships across

the spectrum of maturities (yield curve risk); and from interest related options embedded in bank products (options

risk).

Market Risk

Potential for loss resulting from changes in market prices of the assets or liabilities in the Corporation’s or in any of its

subsidiaries’ portfolios.

Liquidity Risk

Potential for loss resulting from the Corporation or its subsidiaries not being able to meet their cash payment

obligations as they come due. This could be a result of market conditions, the ability of the Corporation to liquidate

assets or manage various funding sources.

Operational Risk

Possibility that inadequate or failed systems and internal controls or procedures, human error, fraud or external

influences such as disasters, can cause loss. It includes the risk for those processes that have been outsourced to third

parties, and for the inadequate use of models.

Compliance and

Legal Risk

Potential for loss resulting from violations of or non-conformance with laws, rules, regulations, prescribed practices,

existing contracts or ethical standards.

Strategic Risk

Potential for loss arising from adverse business decisions or improper implementation of business decisions. Also, it

incorporates how management analyzes external factors that impact the strategic direction of the Corporation, and

incorporate such emerging risks within its strategies.

Reputational Risk

Potential for loss arising from negative public opinion.

Model and Risk Components Captured in Stress Test

9

Key risks captured

Model components

Capital

(Earnings)

1

Credit

2

Revenue and expense fluctuations generated by

business activities. Risks captured include:

•Interest risk

•Market risk

•Liquidity risk

•Operational risk

•Compliance and Legal risk

•Reputational risk

•Pre-provision net revenue model (“PPNR”) for

loans,  deposits, expense and income categories.

•Other than temporary  impairments (“OTTI”) on

Available for Sale and Held to Maturity securities,

mark to market losses related to the Trading

portfolio, potential losses on equity investments,

OREO related expenses, and HFS re-valuation

write-downs.

•Operational losses model

Credit risks impacted by:

•Probability of default

•Loan transition to different delinquency

status

•Loss given default

•Commitment utilization

•Credit models (Projections of net charge-offs,

reserves, and non-performing loan balances)

Model and Risk Components Captured in Stress Test

10

1

Risks embedded in earnings

–

Gains/losses on securities, Trading securities, Equity investments, OREO, HFS loans losses

Purpose

Estimated

future

impairment

and/or

valuation

losses

impacting

the

capital

base

for

other

assets

positions

(i.e.,

non-

loan

portfolio)

under

a

specified

macro-economic scenario.

Methodology

•Stressed OTTI write-downs due to credit losses are estimated at the security-level based on lifetime expected losses in security cash flows assuming

rating downgrades based on the applicable macro-economic scenario.

• Non-US Agency trading securities are modeled for potential mark-to-market (“MTM”) losses due to widening of market spreads under the Federal

Reserve’s

macro-economic

stressed

scenario

of

BBB

corporate

spreads.

Quarterly

projected

MTM

losses/gains

due

to

stressed

credit

spreads

are

calculated based on duration approximation.

•OREO balances are calculated based on average life assumptions and estimated re-valuation write-downs. Existing OREOs are modeled for future

depreciation of foreclosed asset values under the stress scenario. OREO operational expense is forecasted as a ratio of the OREO balance.

•SPVs and joint ventures equity loss is calculated by applying a property value depreciation percent to the assets owned by the entity. In the case of

joint ventures, Popular’s capital base is impacted by its share of the underlying loss.

•Strategic equity investments equity pickup forecast deterioration are mainly driven by historical stress factors and other model assumptions, taking

into consideration Popular’s equity participation.

Risks embedded in earnings

–

PPNR

Purpose

PPNR Model provides forecast of net interest income, non interest income and expenses by correlating macro-economic variables and interest rates

with historical business activity data.

Methodology

• Net interest income is estimated for each scenario taking into consideration the contractual maturities and combining them with loan growth,

deposit balances, and pricing forecasts based on each macro-economic scenario.

•

Assumptions for loan growth, pricing, deposit balances, non-interest income, and non-interest expense are determined using a bottom-up modeling

framework constructed based on historical performance.  This model captures critical products/categories and projects them into the future based on

a correlation of macro-economic factors under the specified economic scenarios. Results are subject to review and approval by management.

•The modeling approach has been implemented for the different deposit, loan, fee and expense categories considering the current size of the balance

sheet or income statement item, granularity of data on specific drivers and data availability.

Model and Risk Components Captured in Stress Test

11

1

Credit risk model

Purpose

Provide the projection of future credit losses, charge-offs and ALLL based on the level of the Corporation’s exposure to credit risk within the loan

portfolio.

Methodology

•A variety of models are used to project losses on loans. Estimated losses are a function of many factors, including historical performance, the

forecasted economic scenarios, current credit characteristics, and credit quality ratings. 

•Losses

from

the

accruing

loan

portfolio

are

projected

at

the

loan

level

using

an

expected

loss

modeling

framework,

where

future

charge-offs

are

estimated

as

a

function

of

quarterly

probability

of

default

(“PD”),

loss

given

default

(“LGD”)

and

exposure

at

default

(“EAD”).

Econometric

statistical

techniques

were

used

to

determine

and

estimate

relationships

between

PD

and

macro-economic

factors

for

each

loan

portfolio.

LGD

and

EAD

assumptions are based on the historical performance under similar macro-economic environment for each loan category, as applicable.

•NPLs and OREO properties are modeled separately, with a mark-to-market adjustment model for future additional charge-offs or expenses due to

losses from the depreciation of underlying collateral value under the modeled scenarios.

• The Credit Model forecast also incorporates idiosyncratic risks particular to the Corporation into its stress testing process, including: (1) Puerto Rico

government exposure, (2) potential losses due to further deterioration of the government’s fiscal condition, including a potential debt restructuring

of any of its agencies, and (3) the potential impact of covered portfolio losses occurring after the expiration of the loss-share agreement with the

FDIC.

2

Risks embedded in earnings

–

Operational losses

Purpose

Estimated operational losses expected in each quarter under varying macro-economic conditions.

Methodology

•

Losses related to operational risk events are a component of PPNR and include losses resulting from inadequate or failed internal processes, people

and systems, or from external events.

•Estimates for losses related to operational risk are a combination of various approaches, including scenario analysis, historical trends, and

econometric techniques.  A combination of historical trends and econometric techniques are used to project recurrent events while scenario analysis

is used to identify low-probability, high-severity loss events.

Index

12

2015 Supervisory Severely Adverse Scenario Results

3

Page

Risk Methodologies

8

Macro-Economic  Scenario                                                                                  

13

2015 DFAST Annual Supervisory Severely Adverse Scenario

The

Supervisory

Severely

Adverse

Scenario,

as

provided

by

the

Federal

Reserve,

reflects

a

substantial

weakening

in

global

economic

activity.

The

economic

variables

provided

show

large

reductions

in

asset

prices

and

increases

in

unemployment

rates,

among

other

negative

trends.

The

Federal

Reserve

provides

28

variables

(16

variables

for

the

U.S.

and

12

for

other

countries)

that

measure

economic

activity,

asset

prices

and

or

financial

conditions,

and

interest

rates

forecasted

over

a

13-quarter

horizon.

Popular’s

principal

market

is

Puerto

Rico.

As

part

of

the

DFAST

process,

the

Corporation

developed

a

tailored

set

of

economic

variables

that

are

more

reflective

of

the

Puerto

Rico

economy.

Forecasts

were

developed

for

the

economic

activity

index,

unemployment

rate

and

house

price

index

(HPI)

for

Puerto

Rico.

The

model

for

Puerto

Rico

specific

macro-economic

scenarios

is

based

on

scenarios

that

are

statistically

consistent

with

the

Federal

Reserve’s

U.S.

national

stress

scenarios

using

robust

statistical

techniques.

This

tailored

set

of

economic

variables

have

historically

demonstrated

the

highest

correlation

with

our

Puerto

Rico

based

banking

business.

The

table

below

represents

the

comparison

between

the

Federal

Reserve

provided

hypothetical

scenarios

and

those

developed

internally

and

used

for

the

Puerto

Rico

stress

scenario.

Note:

For a complete description of the 2015 Supervisory Severely Adverse Scenario, refer to the Federal Reserve’s 

“2015 Supervisory Scenarios for Annual Stress Tests Required under the Dodd-Frank Act Stress Testing Rules and the Capital

Plan Rule” (October 23, 2014) .

13

1

FED U.S. CCAR Economic Activity Indicator refers to US Real GDP. For Puerto Rico, the Economic Activity Indicator refers to GNP using the Government Development Bank’s Economic Activity Index as a proxy.

2

The US House Price Index is based on the CoreLogic house price index, seasonally adjusted by the Federal Reserve (the “US HPI”) and the PR House Price Index is based on the Federal Housing Finance Agency  HPI index, purchase-

only, seasonally adjusted (the “PR HPI”). The peak-to-trough decline in the US HPI was 45% during the last cycle (2006-2014) compared to 28% for the PR HPI.

Economic Activity Indicator

1

House Price Index Growth

2

Unemployment Rate

Federal Reserve U.S. CCAR

-1.1%

-12.1%

9.2%

Puerto Rico

-3.3%

-9.5%

18.8%

9-Quarter Average

2015 Annual Stress Test Disclosure

Dodd-Frank Act Stress Test Results

Supervisory Severely Adverse Scenario

June 2015