Related party transactions

3 Months Ended

Mar. 31, 2016

Note 25 – Related party transactions

EVERTEC

The Corporation has an investment in EVERTEC, Inc. (“EVERTEC”), which provides various processing and information technology services to the Corporation and its subsidiaries and gives BPPR access to the ATH network owned and operated by EVERTEC. As of March 31, 2016, the Corporation’s stake in EVERTEC was 15.58%.The Corporation continues to have significant influence over EVERTEC. Accordingly, the investment in EVERTEC is accounted for under the equity method and is evaluated for impairment if events or circumstances indicate that a decrease in value of the investment has occurred that is other than temporary.

As disclosed in its recent SEC filings, EVERTEC has announced that it will restate its financial statements as of December 31, 2014 and 2013 and for the three year period ending in December 31, 2014 and as of the end of and for each quarterly period in 2014 and 2015. Specifically, EVERTEC identified an accounting position that required reevaluation with respect to a net operating loss pertaining to certain 2010 expenditures. These expenditures resulted in a deferred tax asset of approximately $14 million as of December 31, 2010 which is being reevaluated along with any additional related tax liabilities and the impact in subsequent periods. As of the date of this filing, EVERTEC has not completed its restatement of its financial statements and therefore Popular’s results for the first quarter of 2016 do not include the impact of any related adjustments, which would be limited to our 15.58% ownership stake. Popular does not expect that the impact of these adjustments will have a material effect on its financial statements.

The Corporation received $ 1.2 million in dividend distributions during the quarter ended March 31, 2016 from its investments in EVERTEC’s holding company (March 31, 2015 - $ 1.2 million). The Corporation’s equity in EVERTEC is presented in the table which follows and is included as part of “other assets” in the consolidated statements of financial condition.

(In thousands)		March 31, 2016			December 31, 2015
Equity investment in EVERTEC	$	35,162		$	33,590

The Corporation had the following financial condition balances outstanding with EVERTEC at March 31, 2016 and December 31, 2015. Items that represent liabilities to the Corporation are presented with parenthesis.

(In thousands)	March 31, 2016		December 31, 2015
Accounts receivable (Other assets)	$	2,980	$	3,148
Deposits		(21,322)		(23,973)
Accounts payable (Other liabilities)		(17,480)		(16,192)
Net total	$	(35,822)	$	(37,017)

The Corporation’s proportionate share of income or loss from EVERTEC is included in other operating income in the consolidated statements of operations. The Corporation’s proportionate share of EVERTEC’s income and changes in stockholders’ equity was immaterial for the quarters ended March 31, 2016 and 2015.

The following tables present the impact of transactions and service payments between the Corporation and EVERTEC (as an affiliate) and their impact on the results of operations for the quarters ended March 31, 2016 and 2015. Items that represent expenses to the Corporation are presented with parenthesis.

	Quarters ended March 31,
(In thousands)	2016		2015		Category
Interest expense on deposits	$	(19)	$	(11)	Interest expense
ATH and credit cards interchange income from services to EVERTEC		6,918		6,487	Other service fees
Rental income charged to EVERTEC		1,736		1,724	Net occupancy
Processing fees on services provided by EVERTEC		(43,516)		(39,504)	Professional fees
Other services provided to EVERTEC		256		324	Other operating expenses
Total	$	(34,625)	$	(30,980)

PRLP 2011 Holdings, LLC

As indicated in Note 24 to the consolidated financial statements, the Corporation holds a 24.9 % equity interest in PRLP 2011 Holdings, LLC and currently holds certain deposits from the entity.

The Corporation’s equity in PRLP 2011 Holdings, LLC is presented in the table which follows and is included as part of “other assets” in the consolidated statements of financial condition.

(In thousands)		March 31, 2016			December 31, 2015
Equity investment in PRLP 2011 Holdings, LLC	$	10,749		$	13,069

The Corporation had the following financial condition balances outstanding with PRLP 2011 Holdings, LLC at March 31, 2016 and December 31, 2015.

(In thousands)	March 31, 2016		December 31, 2015
Loans	$	-	$	980
Accrued interest receivable		-		10
Deposits (non-interest bearing)		(3,347)		(18,808)
Net total	$	(3,347)	$	(17,818)

The Corporation’s proportionate share of income or loss from PRLP 2011 Holdings, LLC is included in other operating income in the consolidated statements of operations. The following table presents the Corporation’s proportionate share of income (loss) from PRLP 2011 Holdings, LLC for the quarters ended March 31, 2016 and 2015.

		Quarters ended March 31,
(In thousands)		2016		2015
Share of (loss) income from the equity investment in PRLP 2011 Holdings, LLC	$	(542)	$	1,033

The following table presents transactions between the Corporation and PRLP 2011 Holdings, LLC and their impact on the Corporation’s results of operations for the quarters ended March 31, 2016 and 2015.

		Quarters ended March 31,
(In thousands)	2016		2015		Category
Interest income on loan to PRLP 2011 Holdings, LLC	$	11	$	62	Interest income

PR Asset Portfolio 2013-1 International, LLC

As indicated in Note 24 to the consolidated financial statements, effective March 2013 the Corporation holds a 24.9 % equity interest in PR Asset Portfolio 2013-1 International, LLC and currently provides certain financing to the joint venture as well as holds certain deposits from the entity.

The Corporation’s equity in PR Asset Portfolio 2013-1 International, LLC is presented in the table which follows and is included as part of “other assets” in the consolidated statements of financial condition.

(In thousands)		March 31, 2016			December 31, 2015
Equity investment in PR Asset Portfolio 2013-1 International, LLC	$	24,572		$	25,094

The Corporation had the following financial condition balances outstanding with PR Asset Portfolio 2013-1 International, LLC, at March 31, 2016 and December 31, 2015.

(In thousands)	March 31, 2016		December 31, 2015
Loans	$	35,028	$	58,302
Accrued interest receivable		130		169
Deposits		(10,360)		(11,772)
Net total	$	24,798	$	46,699

The Corporation’s proportionate share of income or loss from PR Asset Portfolio 2013-1 International, LLC is included in other operating income in the consolidated statements of operations. The following table presents the Corporation’s proportionate share of loss from PR Asset Portfolio 2013-1 International, LLC for quarters ended March 31, 2016 and 2015.

		Quarters ended March 31,
(In thousands)	2016			2015
Share of loss from the equity investment in PR Asset Portfolio 2013-1 International, LLC	$	(522)	$	(4,335)

The following table presents transactions between the Corporation and PR Asset Portfolio 2013-1 International, LLC and their impact on the Corporation’s results of operations for the quarters ended March 31, 2016 and 2015.

	Quarters ended March 31,
(In thousands)	2016		2015		Category
Interest income on loan to PR Asset Portfolio 2013-1 International, LLC	$	445	$	866	Interest income
Interest expense on deposits		(1)		-	Interest expense
Total	$	444	$	866

- Definition

The entire disclosure for related party transactions. Examples of related party transactions include transactions between (a) a parent company and its subsidiary; (b) subsidiaries of a common parent; (c) and entity and its principal owners; and (d) affiliates.

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