Discontinued Operations

9 Months Ended

Sep. 30, 2014

Discontinued Operations And Disposal Groups [Abstract]

Disposal Groups Including Discontinued Operations Disclosure Text Block

Note 3–Discontinued operations

On April 22, 2014, BPNA, the Corporation's U.S. mainland banking subsidiary, entered into definitive agreements to sell its California, Illinois and Central Florida regional operations to three different buyers.

On August 8, 2014, BPNA completed the sale of its Illinois regional operations. As part of the transaction, BPNA sold its 12 branches in the Chicago metropolitan area, including $562 million in loans, and $726 million in deposits, each as of July 31, 2014. The transaction resulted in a net gain of $24.6 million.

On September 15, 2014, BPNA completed the sale of its Central Florida regional operations. As part of the transaction, BPNA sold its 9 branches in the Central Florida area, including $104 million in loans and $217 million in deposits, each as of August 31, 2014. The transaction resulted in a net gain of $1.2 million.

On November 8, 2014, the Corporation completed the sale of the California regional operations. The Corporation sold 20 branches and transferred $1.1 billion in loans and $1.1 billion in depositsto Banc of CaliforniaNational Association, a wholly owned subsidiary of Banc of California, Inc. The transaction is expected to result in a net premium estimated at approximately $4 million, before customary transaction costs. The Corporation agreed to provide, subject to certain limitations, customary indemnification to the purchaser, including with respect to certain pre-closing liabilities and violationsof representations and warranties. The Corporation also agreed to indemnify the purchaser for up to 1.5% of credit losses on transferred loans for a period of two years after the closing. Pursuant to this indemnification provision, the Corporation's maximum exposureis approximately $16 million.

The regional operations sold constituted a business, as defined in ASC 805-10-55. Accordingly, the decision to sell these businesses resulted in the discontinuance of each of these respective operations and classification as held-for-sale. For financial reporting purposes, the results of the discontinued operations are presented as “Assets / Liabilities from discontinued operations” in the consolidated statement of condition and “(Loss) income from discontinued operations, net of tax” in the consolidated statement of operations. As required by ASC 205-20, current and prior periods presented in the consolidated statement of operations as well as the related note disclosures covering income and expense amounts have been retrospectively adjusted for the impact of the discontinued operations for comparative purposes. The consolidated statement of financial condition and related note disclosure for prior periods do not reflect the reclassification of these assets and liabilities to discontinued operations.

During the quarter ended June 30, 2014, the Corporation recorded non-cash goodwill impairment charge of $186.5 million, related to the goodwill allocated, on a relative fair value basis, to these operations. However, this non-cash charge had no impact on the Corporation's tangible capital or regulatory capital ratios. Refer to Note 16, for additional information on the goodwill impairment charge.

In connection with these transactions, the Corporation is centralizing certain back office operations in Puerto Rico and New York.The Corporation incurred$8.3 million in restructuring charges during the third quarter of 2014. Over the course of the fourth quarter of 2014 and early 2015, an additional $41 million in restructuring charges are expected to be incurred, comprised of $22 million in severance and retention payments and $19 million in operational set-up costs and lease cancelations. Refer to Note 4, for restructuring charges incurred during the second and third quarter of 2014.

Assets and liabilities of discontinued operations are detailed below:

(In thousands)		September 30, 2014
Cash	$	9,500
Loans held-for-sale		1,099,673
Premises and equipment, net		8,596
Other assets		11,284
Total assets	$	1,129,053
Deposits	$	1,089,046
Other liabilities		17,716
Total liabilities	$	1,106,762
Net assets	$	22,291

The following table provides the components of net income (loss)from the discontinued operations for the quarters and nine months ended September 30, 2014 and 2013.

		Quarters ended September 30,				Nine months ended September 30,
(In thousands)		2014		2013		2014		2013
Net interest income	$	16,022	$	23,195	$	56,911	$	66,172
Provision (reversal) for loan losses		-		6,515		(6,764)		(1,345)
Net gain on sale of regions		25,775		-		25,775		-
Other non-interest income		6,567		5,250		26,488		13,642
Total non-interest income		32,342		5,250		52,263		13,642
Operating expenses:
Personnel costs		11,941		8,487		32,910		25,215
Net occupancy expenses		(1,305)		3,325		5,871		9,355
Professional fees		4,916		2,802		13,612		8,511
Goodwill impairment charge		-		-		186,511		-
Other operating expenses		3,054		3,694		9,100		9,422
Total operating expenses		18,606		18,308		248,004		52,503
Net income (loss) from discontinued operations	$	29,758	$	3,622	$	(132,066)	$	28,656