English /

Spanish

“I am pleased to report that 2015 was a year of positive
results and important achievements for Popular.”

Richard L. Carrión

Chairman & Chief Executive Officer

Popular, Inc.

Year in Reviewe strengthened our operations both in Puerto Rico and mainland United States, successfully managed credit quality, delivered solid financial results and further improved our capital position, despite the continued economic weakness in Puerto Rico and the uncertainty created by its ongoing fiscal crisis. We reported net income of $895 million for the year. This figure includes, among other significant items, the impact of the partial recapture of our deferred tax asset related to our operations in the United States. After adjusting for these items, net income totaled $375 million, compared to an adjusted net income of $301 million in 2014, representing an increase of 25%. These results were mainly driven by the impact of the accounting on the covered loan portfolio acquired in the Westernbank Federal Deposit Insurance Corporation (FDIC)-assisted transaction, lower provision for loan losses, higher fee income from our mortgage and insurance business lines and the contribution from the Doral Bank transaction offset in part by a higher effective tax rate.
READ MORECredit quality remained stable in Puerto Rico despite the difficult economic environment, which, combined with excellent credit quality metrics in the United States business, translated into stable results on a consolidated level. Total non-performing assets at year-end stood at $843 million or 2.36% of assets, compared to $933 million or 2.82% of assets in 2014. Net charge-offs were stable and inflows into non-performing loans decreased when compared to the previous year. While encouraged by this stability, we remain attentive to economic trends. We are comfortable with the structure and size of our exposure to the Puerto Rico government. The majority of our direct exposure is in loans to municipalities with independent sources of revenue, not publicly traded securities of the central government or its public corporations. Our total outstanding exposure to the central government and public corporations represents only 1.9% of our total Tier 1 capital. We continue to monitor this portfolio closely and will make future adjustments as needed, while selectively participating in funding the Puerto Rico government’s capital needs where we feel the risk/reward is appropriate. In addition to a positive financial performance, we achieved significant milestones, including the Doral Bank transaction, the completion of the restructuring of our operations in the United States and the reinstatement of a quarterly common stock dividend. In February of 2015, Popular acquired over $2 billion in assets from the FDIC as Receiver for Doral Bank. As part of the transaction, Banco Popular de Puerto Rico (BPPR) acquired eight branches, approximately $800 million in loans and $1 billion in deposits. BPPR also acquired $5 billion in mortgage servicing rights and Doral’s insurance agency portfolio. In the transaction, Popular Community Bank (PCB) acquired three branches in New York City, approximately $880 million in loans and $1.2 billion in deposits. Aside from the additional earning assets, the transaction was strategically significant since it solidified our leading position in Puerto Rico and provided additional momentum to our operations in the United States. The integration of the acquired operations was well executed, completing all systems conversions within a short period after the closing of the transaction. In 2015 we completed the restructuring of our operations in the United States. In 2014, we sold our California, Chicago and Central Florida regions to focus our business on the New York Metro and Miami regions and began the transfer of most support functions to Puerto Rico. We successfully completed the operational restructuring during the first half of 2015, leveraging our infrastructure and lower cost structure in Puerto Rico to reduce the number of back office employees by approximately 40%. As a result, PCB is a leaner and more focused operation, well-positioned for future growth. Reflecting our confidence in our capital position and revenue generating capacity, in September we reinstated a quarterly dividend of $0.15 per common share. With a Common Equity Tier 1 ratio of 16.2%, we continue to enjoy strong capital levels relative to peers in the United States and Puerto Rico and in excess of well-capitalized regulatory requirements. Our 2015 Dodd Frank Stress Test showed that, even in a severely adverse scenario, we would remain above well-capitalized levels. We will pursue opportunities to actively manage our capital and intend to return additional capital to our shareholders, taking into consideration the challenging economic environment in our main market. Over the course of last year, BPPR strengthened its unique franchise in Puerto Rico. We have consistently grown our client base, and currently serve 1.6 million customers or 65% of Puerto Rico’s banked population. We continued to hold, and have even improved, our leading market share position in most categories. Despite a contracting economy, we were able to grow certain businesses, such as auto financing, and we targeted specific segments to attract new clients or deepen existing relationships. For example, we opened a specialized office to better service investors relocating to Puerto Rico as a result of Act 20 and Act 22, which were enacted to attract U.S. mainland and foreign investment to the Island. We relaunched the Premium Banking Services program to reach more mass affluent clients and launched Start-Up Popular to promote entrepreneurship. We also continued fostering innovation and making headway in the migration of transactions to electronic channels. In December of 2015, 29.1% of deposit transactions were made through ATMs or mobile devices, compared to 21.3% during December of 2014. We are also encouraged by the performance of our operation in the mainland United States during 2015. PCB generated organic commercial loan growth of $810 million or 42%, excluding the $880 million in loans acquired in the Doral transaction. With that transaction we brought on board an experienced group of commercial bankers, further strengthening our existing team. We also continued the transformation of our retail network in the United States. We opened a prototype branch in Brooklyn to test a new strategy, which involves a different design and seeks to leverage technology to drive digital transactions. We continued to support our communities through Fundación Banco Popular in Puerto Rico and the Popular Community Bank Foundation in the United States, as well as through many efforts we undertake as part of our business. Employee contributions to our foundations increased in 2015, reaching $768,203. Thanks in large part to these contributions, our foundations donated over $2.6 million to support education and community development programs in 114 nonprofit organizations, impacting thousands of individuals. Volunteerism also remained strong. Approximately one third of our employees donated their time to collaborate with many of the organizations we support financially. The Echar Pa’lante multisector alliance, which has been recognized by the Clinton Global Initiative and received the American Bankers Association (ABA) Community and Economic Development Award, continues to gain traction. The alliance expanded its impact, integrating over 300 organizations, experts and volunteers that are helping to strengthen the entrepreneurial ecosystem and transform primary and secondary education content in Puerto Rico to develop globally competitive citizens. In 2015 we also continued expanding the footprint of our financial education program, Finance in Your Hands, reaching over 500,000 individuals through face-to-face workshops and via radio, TV, press, social media and our internal channels. Unfortunately, the price of our stock does not reflect these achievements. Our stock closed the year at $28.34, 67% of tangible book value and 17% lower than 2014. In June of 2015, all Puerto Rico bank stocks experienced a sharp price drop after the Governor of Puerto Rico announced that the government would not be able to meet its debt obligations. While our stock did not decline as dramatically as other local banks, we were not able to regain the lost ground when compared to the KBW NASDAQ Bank Index, which declined by 2% during 2015. It is clear that the Puerto Rico fiscal and economic situation and the related uncertainty stemming from it are hurting our stock price and overshadowing our solid financial results, limited government exposure and the reinstatement of the quarterly dividend. Puerto Rico is at a crossroads. Having nearly exhausted all potential sources of liquidity, even after resorting to unsustainable emergency measures, the government will soon run out of money to meet its obligations. Changes are inevitable and cannot be postponed any longer. An effective long-term solution for Puerto Rico’s fiscal and economic troubles must include three components: a legal framework to restructure Puerto Rico’s public debt in an orderly fashion, an effective fiscal oversight and control mechanism and stimulus measures to jumpstart the economy. These three components are like the legs of a three-legged stool – all necessary and not one of them sufficient by itself. The failure to include any one of these components will render the other two ineffective. Problems that took decades to create cannot be solved in months, or through the small or isolated efforts of one group or another. A real solution will require local and federal action, support from the executive and legislative branches, backing from all political parties and the active participation of all sectors of Puerto Rico society. While we have no direct control of the external environment or government actions, we remain involved and committed to doing everything in our power to be a positive influence, contribute in the search for long-term solutions and serve as a force that promotes economic growth on the Island. All the achievements I have shared with you are the result of the work of a team of talented and dedicated colleagues. The challenging situation in Puerto Rico, as well as the changes in our operations in the United States, have demanded a remarkable level of agility and commitment from our employees. As in the past, they have met these challenges head on and delivered results. I want to express my heartfelt gratitude to them for their efforts and to our management team for their leadership. During 2015 we expanded our Senior Management Team (SMT) to include two areas that, due to their strategic importance, merit direct representation at the organization’s highest level. Camille Burckhart, who has been a part of Popular since 2001 and has been leading the technology group for five years, was named Chief Information and Digital Officer. Manuel Chinea, who has 27 years of service at Popular and ample experience both in our Puerto Rico and mainland United States operations, joined the Senior Management Team as Chief Operating Officer of Popular Community Bank. Camille and Manuel have excelled throughout their careers at Popular not only for their solid performance, but also for demonstrating outstanding leadership skills. I also take this opportunity to thank our Board of Directors for their guidance and support. We are fortunate to be able to count on the counsel of such an experienced and dedicated group of professionals. Finally, I’d like to thank our customers in Puerto Rico, the Virgin Islands, New York, New Jersey and Florida for trusting us with their business and reiterate our commitment to meeting their current and future needs. As I look back to the last five years, I cannot help but feel proud of all we have accomplished, particularly under challenging circumstances. We have refocused our loan portfolio on business lines with a lower loss content, reduced non-performing assets through several bulk sales and the timely resolution of impaired loans, completed two FDIC-assisted acquisitions in Puerto Rico, restructured our operations in the United States, raised approximately $2 billion in common equity, repaid TARP and reinstated our common dividend. We are well prepared for the challenges that lie ahead. Popular’s story is to a large extent linked to Puerto Rico, its economy and its future. We are aware of that and remain committed to working to improve the Island’s prospects. But Popular’s is also a story of a solid organization that has navigated through a complex environment and has emerged as a stronger, better capitalized and more diversified institution. While we are pleased with these achievements, we are far from satisfied. We are committed to continue building on this solid foundation and delivering strong results for the benefit of all our stakeholders.       Richard L. Carrión

2015 Financial Highlights

Adjusted net income

$375 million

PCB's organic commercial loan growth

42%

Reinstatement of quarterly dividends

$0.15

Robust capital metrics

16.2%

25 Year Historical Financial Summary

VIEW CHART

10K

VIEW THE REPORT

Proxy

VIEW THE REPORT

Corporate Social Responsibility Report

 

VIEW THE REPORT

Management

  • Richard L. Carrión
    Richard L. Carrión
    Chairman of the Board &
    Chief Executive Officer
    Popular, Inc.
  • Ignacio Alvarez
    Ignacio Alvarez
    President &
    Chief Operating Officer
    Popular, Inc. and
    Banco Popular de Puerto Rico
    President
    Popular Community Bank
  • Camille Burckhart
    Camille Burckhart
    Executive Vice President
    & Chief Information and
    Digital Officer
    Technology & Digital Strategy Group
    Popular, Inc.
  • Manuel A. Chinea
    Manuel A. Chinea
    Executive Vice President
    Popular, Inc.
    Chief Operating Officer
    Popular Community Bank
  • Javier D. Ferrer
    Javier D. Ferrer
    Executive Vice President,
    Chief Legal Officer & Corporate Secretary General Counsel
    & Corporate Matters Group
    Popular, Inc.
  • Ileana González
    Ileana González
    Executive Vice President
    Commercial Credit
    Administration Group
    Banco Popular de Puerto Rico
  • Juan O. Guerrero
    Juan O. Guerrero
    Executive Vice President
    Financial and Insurance
    Services Group
    Banco Popular de Puerto Rico
  • Gilberto Monzón
    Gilberto Monzón
    Executive Vice President
    Individual Credit Group
    Banco Popular de Puerto Rico
  • Eduardo J. Negrón
    Eduardo J. Negrón
    Executive Vice President,
    Administration Group
    Popular, Inc.
  • Néstor O. Rivera
    Néstor O. Rivera
    Executive Vice President
    Retail Banking Group
    Banco Popular de Puerto Rico
  • Eli S. Sepúlveda
    Eli S. Sepúlveda
    Executive Vice President
    Commercial Credit Group
    Banco Popular de Puerto Rico
  • Lidio V. Soriano
    Lidio V. Soriano
    Executive Vice President
    & Chief Risk Officer
    Corporate Risk Management Group
    Popular, Inc.
  • Carlos J. Vázquez
    Carlos J. Vázquez
    Executive Vice President
    & Chief Financial Officer
    Popular, Inc.

 

Board of Directors

  • Richard L. Carrión
    Richard L. Carrión
    Chairman of the Board &
    Chief Executive Officer
    Popular, Inc.
  • Joaquín E. Bacardí, III
    Joaquín E. Bacardí, III
    President & Chief Executive Officer
    Bacardi Corporation
  • Alejandro M. Ballester
    Alejandro M. Ballester
    President
    Ballester Hermanos, Inc.
  • John W. Diercksen
    John W. Diercksen
    Principal
    Greycrest, LLC
  • María Luisa Ferré
    María Luisa Ferré
    President & Chief Executive Officer
    Grupo Ferre Rangel
  • David E. Goel
    David E. Goel
    Managing General Partner
    Matrix Capital Management Company, LP
  • C. Kim Goodwin
    C. Kim Goodwin
    Private Investor
  • William J. Teuber, Jr.
    William J. Teuber, Jr.
    Vice Chairman
    EMC Corporation
  • Carlos A. Unanue
    Carlos A. Unanue
    President
    Goya de Puerto Rico

Annual Meeting of Stockholders

 

Tuesday, April 26, 2016 | 9:00 A.M.


POPULAR CENTER BUILDING  |  209 LUIS MUÑOZ RIVERA AVE.  |  SAN JUAN, PUERTO RICO

GET DIRECTIONS

Financial Highlights

Year in Review

e strengthened our operations both in Puerto Rico and mainland United States, successfully managed credit quality, delivered solid financial results and further improved our capital position, despite the continued economic weakness in Puerto Rico and the uncertainty created by its ongoing fiscal crisis. We reported net income of $895 million for the year. This figure includes, among other significant items, the impact of the partial recapture of our deferred tax asset related to our operations in the United States. After adjusting for these items, net income totaled $375 million, compared to an adjusted net income of $301 million in 2014, representing an increase of 25%. These results were mainly driven by the impact of the accounting on the covered loan portfolio acquired in the Westernbank Federal Deposit Insurance Corporation (FDIC)-assisted transaction, lower provision for loan losses, higher fee income from our mortgage and insurance business lines and the contribution from the Doral Bank transaction offset in part by a higher effective tax rate.

READ MORECredit quality remained stable in Puerto Rico despite the difficult economic environment, which, combined with excellent credit quality metrics in the United States business, translated into stable results on a consolidated level. Total non-performing assets at year-end stood at $843 million or 2.36% of assets, compared to $933 million or 2.82% of assets in 2014. Net charge-offs were stable and inflows into non-performing loans decreased when compared to the previous year. While encouraged by this stability, we remain attentive to economic trends. We are comfortable with the structure and size of our exposure to the Puerto Rico government. The majority of our direct exposure is in loans to municipalities with independent sources of revenue, not publicly traded securities of the central government or its public corporations. Our total outstanding exposure to the central government and public corporations represents only 1.9% of our total Tier 1 capital. We continue to monitor this portfolio closely and will make future adjustments as needed, while selectively participating in funding the Puerto Rico government’s capital needs where we feel the risk/reward is appropriate. In addition to a positive financial performance, we achieved significant milestones, including the Doral Bank transaction, the completion of the restructuring of our operations in the United States and the reinstatement of a quarterly common stock dividend. In February of 2015, Popular acquired over $2 billion in assets from the FDIC as Receiver for Doral Bank. As part of the transaction, Banco Popular de Puerto Rico (BPPR) acquired eight branches, approximately $800 million in loans and $1 billion in deposits. BPPR also acquired $5 billion in mortgage servicing rights and Doral’s insurance agency portfolio. In the transaction, Popular Community Bank (PCB) acquired three branches in New York City, approximately $880 million in loans and $1.2 billion in deposits. Aside from the additional earning assets, the transaction was strategically significant since it solidified our leading position in Puerto Rico and provided additional momentum to our operations in the United States. The integration of the acquired operations was well executed, completing all systems conversions within a short period after the closing of the transaction. In 2015 we completed the restructuring of our operations in the United States. In 2014, we sold our California, Chicago and Central Florida regions to focus our business on the New York Metro and Miami regions and began the transfer of most support functions to Puerto Rico. We successfully completed the operational restructuring during the first half of 2015, leveraging our infrastructure and lower cost structure in Puerto Rico to reduce the number of back office employees by approximately 40%. As a result, PCB is a leaner and more focused operation, well-positioned for future growth. Reflecting our confidence in our capital position and revenue generating capacity, in September we reinstated a quarterly dividend of $0.15 per common share. With a Common Equity Tier 1 ratio of 16.2%, we continue to enjoy strong capital levels relative to peers in the United States and Puerto Rico and in excess of well-capitalized regulatory requirements. Our 2015 Dodd Frank Stress Test showed that, even in a severely adverse scenario, we would remain above well-capitalized levels. We will pursue opportunities to actively manage our capital and intend to return additional capital to our shareholders, taking into consideration the challenging economic environment in our main market. Over the course of last year, BPPR strengthened its unique franchise in Puerto Rico. We have consistently grown our client base, and currently serve 1.6 million customers or 65% of Puerto Rico’s banked population. We continued to hold, and have even improved, our leading market share position in most categories. Despite a contracting economy, we were able to grow certain businesses, such as auto financing, and we targeted specific segments to attract new clients or deepen existing relationships. For example, we opened a specialized office to better service investors relocating to Puerto Rico as a result of Act 20 and Act 22, which were enacted to attract U.S. mainland and foreign investment to the Island. We relaunched the Premium Banking Services program to reach more mass affluent clients and launched Start-Up Popular to promote entrepreneurship. We also continued fostering innovation and making headway in the migration of transactions to electronic channels. In December of 2015, 29.1% of deposit transactions were made through ATMs or mobile devices, compared to 21.3% during December of 2014. We are also encouraged by the performance of our operation in the mainland United States during 2015. PCB generated organic commercial loan growth of $810 million or 42%, excluding the $880 million in loans acquired in the Doral transaction. With that transaction we brought on board an experienced group of commercial bankers, further strengthening our existing team. We also continued the transformation of our retail network in the United States. We opened a prototype branch in Brooklyn to test a new strategy, which involves a different design and seeks to leverage technology to drive digital transactions. We continued to support our communities through Fundación Banco Popular in Puerto Rico and the Popular Community Bank Foundation in the United States, as well as through many efforts we undertake as part of our business. Employee contributions to our foundations increased in 2015, reaching $768,203. Thanks in large part to these contributions, our foundations donated over $2.6 million to support education and community development programs in 114 nonprofit organizations, impacting thousands of individuals. Volunteerism also remained strong. Approximately one third of our employees donated their time to collaborate with many of the organizations we support financially. The Echar Pa’lante multisector alliance, which has been recognized by the Clinton Global Initiative and received the American Bankers Association (ABA) Community and Economic Development Award, continues to gain traction. The alliance expanded its impact, integrating over 300 organizations, experts and volunteers that are helping to strengthen the entrepreneurial ecosystem and transform primary and secondary education content in Puerto Rico to develop globally competitive citizens. In 2015 we also continued expanding the footprint of our financial education program, Finance in Your Hands, reaching over 500,000 individuals through face-to-face workshops and via radio, TV, press, social media and our internal channels. Unfortunately, the price of our stock does not reflect these achievements. Our stock closed the year at $28.34, 67% of tangible book value and 17% lower than 2014. In June of 2015, all Puerto Rico bank stocks experienced a sharp price drop after the Governor of Puerto Rico announced that the government would not be able to meet its debt obligations. While our stock did not decline as dramatically as other local banks, we were not able to regain the lost ground when compared to the KBW NASDAQ Bank Index, which declined by 2% during 2015. It is clear that the Puerto Rico fiscal and economic situation and the related uncertainty stemming from it are hurting our stock price and overshadowing our solid financial results, limited government exposure and the reinstatement of the quarterly dividend. Puerto Rico is at a crossroads. Having nearly exhausted all potential sources of liquidity, even after resorting to unsustainable emergency measures, the government will soon run out of money to meet its obligations. Changes are inevitable and cannot be postponed any longer. An effective long-term solution for Puerto Rico’s fiscal and economic troubles must include three components: a legal framework to restructure Puerto Rico’s public debt in an orderly fashion, an effective fiscal oversight and control mechanism and stimulus measures to jumpstart the economy. These three components are like the legs of a three-legged stool – all necessary and not one of them sufficient by itself. The failure to include any one of these components will render the other two ineffective. Problems that took decades to create cannot be solved in months, or through the small or isolated efforts of one group or another. A real solution will require local and federal action, support from the executive and legislative branches, backing from all political parties and the active participation of all sectors of Puerto Rico society. While we have no direct control of the external environment or government actions, we remain involved and committed to doing everything in our power to be a positive influence, contribute in the search for long-term solutions and serve as a force that promotes economic growth on the Island. All the achievements I have shared with you are the result of the work of a team of talented and dedicated colleagues. The challenging situation in Puerto Rico, as well as the changes in our operations in the United States, have demanded a remarkable level of agility and commitment from our employees. As in the past, they have met these challenges head on and delivered results. I want to express my heartfelt gratitude to them for their efforts and to our management team for their leadership. During 2015 we expanded our Senior Management Team (SMT) to include two areas that, due to their strategic importance, merit direct representation at the organization’s highest level. Camille Burckhart, who has been a part of Popular since 2001 and has been leading the technology group for five years, was named Chief Information and Digital Officer. Manuel Chinea, who has 27 years of service at Popular and ample experience both in our Puerto Rico and mainland United States operations, joined the Senior Management Team as Chief Operating Officer of Popular Community Bank. Camille and Manuel have excelled throughout their careers at Popular not only for their solid performance, but also for demonstrating outstanding leadership skills. I also take this opportunity to thank our Board of Directors for their guidance and support. We are fortunate to be able to count on the counsel of such an experienced and dedicated group of professionals. Finally, I’d like to thank our customers in Puerto Rico, the Virgin Islands, New York, New Jersey and Florida for trusting us with their business and reiterate our commitment to meeting their current and future needs. As I look back to the last five years, I cannot help but feel proud of all we have accomplished, particularly under challenging circumstances. We have refocused our loan portfolio on business lines with a lower loss content, reduced non-performing assets through several bulk sales and the timely resolution of impaired loans, completed two FDIC-assisted acquisitions in Puerto Rico, restructured our operations in the United States, raised approximately $2 billion in common equity, repaid TARP and reinstated our common dividend. We are well prepared for the challenges that lie ahead. Popular’s story is to a large extent linked to Puerto Rico, its economy and its future. We are aware of that and remain committed to working to improve the Island’s prospects. But Popular’s is also a story of a solid organization that has navigated through a complex environment and has emerged as a stronger, better capitalized and more diversified institution. While we are pleased with these achievements, we are far from satisfied. We are committed to continue building on this solid foundation and delivering strong results for the benefit of all our stakeholders.       Richard L. Carrión

Tuesday, April 26, 2016  9:00 A.M.


POPULAR CENTER BUILDING
209 LUIS MUÑOZ RIVERA AVE.
SAN JUAN, PUERTO RICOO