Investor Presentation Second Quarter 2016
Forward Looking Statements This presentation contains 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 are subject to risks and uncertainties. Please refer to our Annual Report on Form 10-K for the year ended December 31, 2015, the Quarterly Report on Form 10-Q for the quarter ended March 31, 2016 and our other filings with the Securities and Exchange Commission for a discussion of factors that may cause the Corporation's actual results to differ materially from any future results expressed or implied by such forward-looking statements. Those filings are available on the Corporation’s website ( www.popular.com) and on the Securities and Exchange Commission website (www.SEC.gov). The Corporation does not undertake to update or revise any forward-looking statement to reflect events or circumstances that may arise after the date of such statements.
Q2 2016 Highlights • Net income of $89.0 million and adjusted net income of $90.6 million 1 Earnings • Strong margins: Popular, Inc. 4.31%, BPPR 4.67% • NPLs decreased by $22 million QoQ; NPL ratio at 2.6% from 2.7% last quarter Credit • NPL inflows, excluding consumer loans, decreased $9 million QoQ (excluding covered loans) • NCO ratio of 0.63% compared to 0.76% last quarter • Capital Robust capital; Common Equity Tier 1 Capital ratio of 16.3% • Bulk sale of approximately $110 million of Westernbank NPAs, resulting in an Quarter Event after tax gain of $0.5 million 1 See appendix for reconciliation to GAAP 2
P.R. Public Sector Exposure Our current direct exposure to the P.R. Government, instrumentalities, and municipalities is $609 million, of which approximately $582 million is outstanding. The outstanding balance increased by $17 million from the prior quarter mostly due to additional borrowings on existing lines of credit of two municipalities. Outstanding P.R. government exposure 1 Central Government & Public Corporations Loans Securities Total ($ in millions) • Exposure to P.R. Government securities consists Central Government 2 mainly of senior COFINA bonds ($17 million); GO $ - $ 22 $ 22 bonds and GO guaranteed bonds, including privately insured GO bonds ($3 million); and GDB Public Corporations notes ($2 million) PRASA - 0 0 • Loans to Public Corporations are obligations that PREPA 3 40 0 40 have a pledge of a specific source of income or Total Central Govt & Public Corp. 40 22 62 revenues identified for their repayment as % of Tier 1 Risk-Based Capital 1.5% Municipalities 465 55 520 Municipalities Direct Government Exposure $ 505 $ 77 $ 582 • Obligations of municipalities are backed by real and personal property taxes, municipal excise Indirect Exposure $ 367 $ 51 $ 418 taxes, and a percentage of the sales and use tax 1 Numbers may not add to total due to rounding 2 Includes COFINA and GDB exposure 3 PREPA loan has a UPB of $75 million and is classified as held for sale Indirect Exposure • Indirect exposure includes loans or instruments that are payable by non-governmental entities and have a government guarantee to cover any shortfall in collateral in the event of borrower default. Majority are single-family mortgage related 3
Financial Summary Adjusted Results (Unaudited) Non-GAAP ¹ Q2 2016 Q1 2016 Variance ($ in thousands) Net interest income $ 358,494 $ 352,412 $ 6,082 FDIC loss-share expense (12,867) (3,146) (9,721) Other non-interest income 125,252 114,776 10,476 Gross revenues 470,879 464,042 6,837 Provision for loan losses – non-covered loans 45,113 47,940 (2,827) Provision (reversal) for loan losses – covered loans 804 (3,105) 3,909 Total provision for loan losses 45,917 44,835 1,082 Net revenues 424,962 419,207 5,755 Personnel costs 116,708 127,091 (10,383) Professional fees 78,813 75,459 3,354 Business promotion 13,705 11,110 2,595 OREO expenses 7,890 9,141 (1,251) Other operating expenses 85,131 79,142 5,989 Total operating expenses 302,247 301,943 304 Income before income tax 122,715 117,264 5,451 Income tax expense 32,099 32,265 (166) Net income $ 90,616 $ 84,999 $ 5,617 4 ¹ See Appendix for reconciliation to GAAP
Capital Ratios (%) • Popular’s capital levels remain robust with Common Equity Tier 1 of 16.3% • Common stock quarterly dividend of $0.15 per share Popular, Inc. 5 Note: Capital ratios for the current quarter are preliminary
Non-Performing Assets Highlights Non-Performing Assets (including covered assets) • ($ in millions) NPAs, including covered loans, decreased by $12 million 2,489 QoQ 2,402 2,365 • NPLs, excluding covered loans, down by $22 million QoQ 2,002 P.R. NPLs at $551 million, or 3.2% of loans, down by 6.9% 6.4% 6.3% $11 million 1,293 5.5% - 932 933 935 Commercial NPLs down by $10 million 852 878 843 848 806 836 U.S. NPLs at $27 million, or 0.5% of loans, down by 3.3% 2.8% 2.6% 2.6% 2.5% $11 million 2.4% 2.3% 2.2% 2.2% 1.9% - Commercial NPLs down by $12 million driven by Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 2007 2008 2009 2010 2011 2012 2013 2014 a commercial relationship that paid-off during NPLs OREO NPL HFS NPAs/Total Assets the quarter • Non-Performing Loans ( excluding covered loans ) OREO up by $13 million QoQ, mostly P.R. residential 14 properties ($ in millions) 14.0% 2,276 12 12.0% 10 10.0% 1,738 1,572 9.6% 1,425 8.0 8.0% 8.4% 1,203 7.6% 6.0 6.0% 6.8% 771 665 635 630 602 600 598 578 576 4.0 4.0% 4.7% 3.3% 3.2% 2.8% 2.0% 2.0 2.8% 2.8% 2.7% 2.7% 2.6% 2.6% 2007 2008 2009 2010 2011 2012 2013 2014 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 0.0% 0.0 Mortgage Commercial & Construction Other NPL/Loans (HIP) 6 Differences due to rounding
NPL Inflows Highlights Total NPL Inflows • ($ in millions) Total NPL inflows down by $9 million QoQ P.R. commercial inflows, including construction, up by 205 $4 million 183 185 158 P.R. mortgage inflows stable 136 136 135 U.S. NPL inflows down by $14 million QoQ, as the prior 126 119 101 103 quarter included the addition of an $11 million 103 106 commercial borrower that paid-off during Q2 2016 29 27 23 23 17 16 16 16 15 12 9 10 9 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Excludes consumer loans U.S. Inflows P.R. Inflows Commercial, Construction, and Legacy NPL Inflows Mortgage NPL Inflows ($ in millions) ($ in millions) 17 105 99 94 92 94 94 95 86 113 90 94 89 85 80 79 91 59 42 32 31 22 28 26 23 18 17 22 22 19 8 16 5 12 3 10 11 11 9 7 6 7 7 7 5 5 5 4 6 7 3 6 2 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 U.S. Inflows P.R. Inflows U.S. Inflows P.R. Inflows Doral Inflows 7 Metrics exclude covered loans. Differences due to rounding
Additional Credit Metrics Highlights NCOs ($ in millions) and NCO-to-Loan Ratio • NCOs decreased by $7 million QoQ mainly driven by: Lower construction and consumer NCOs by $4 million and $2 1.47% million, respectively; excluding net recoveries of $5 million related to the bulk sale of Westernbank loans 200 NCO ratio of 0.63% vs. 0.76% in Q1 2016 • Adjusted provision down slightly at $45 million vs $48 million in Q1 2016 8 83 Provision to NCO of 127% compared to 113% in Q1 2016 3 31 32 0.63% • 79 42 ALLL at $518 million, increased by $10 million QoQ 35 50 35 58 36 46 46 40 46 43 (5) ALLL to loans at 2.30% vs. 2.26% in Q1 2016 -3 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 • ALLL to NPL coverage ratio increased to 90%, compared to 85% NCO Loan Sales Write-downs/(recoveries) NCO% Loan Sales NCO% in Q1 2016 Provision ($ in millions) and Provision-to-NCO Ratio ALLL ($ in millions ), ALLL-to-NCO and ALLL-to-NPL Ratios 366% 132% 169 543 538 536 529 526 526 522 520 516 518 513 508 503 127% 167% 80% 86% 90% 1 69% 12 10 2 11 59 59 55 55 56 50 50 48 47 48 47 45 30 (5) Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 ALLL ALLL/NCO ALLL/NPL PLLL Loan Sales PLLL PLLL/NCO Loan Sales PLLL/NCO 8 Metrics exclude covered loans. Differences due to rounding
Driving Shareholder Value • Unique franchise in P.R. provides strong, stable revenue-generating capacity Earnings • Continued strong loan growth in the U.S. • Capital Robust capital with Common Equity Tier 1 Capital of 16.3% • Additional Value EVTC ownership and Banco BHD León stake 9
Investor Presentation Second Quarter 2016 APPENDIX
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