Note 16 – Borrowings

The composition of federal funds purchased and assets sold under agreements to repurchase were as follows:


(In thousands)	June 30, 2011		December 31, 2010		June 30, 2010
Federal funds purchased		—		—	$	9,900
Assets sold under agreements to repurchase	$	2,570,322	$	2,412,550		2,297,294

Total federal funds purchased and assets sold under agreements to repurchase	$	2,570,322	$	2,412,550	$	2,307,194

The repurchase agreements outstanding at June 30, 2011 were collateralized by $ 1.9 billion in investment securities available-for-sale, $ 735 million in trading securities and $ 37 million in other assets. At December 31, 2010 and June 30, 2010, the repurchase agreements were collateralized by investment securities available-for-sale and trading securities of $ 2.1 billion and $ 492 million; and $ 2.0 billion and $ 372 million; respectively. It is the Corporation’s policy to maintain effective control over assets sold under agreements to repurchase; accordingly, such securities continue to be carried on the consolidated statements of condition.

In addition, there were repurchase agreements outstanding collateralized by $ 264 million in securities purchased underlying agreements to resell to which the Corporation has the right to repledge (December 31, 2010 - $ 172 million; June 30, 2010 - $ 177 million). It is the Corporation’s policy to take possession of securities purchased under agreements to resell. However, the counterparties to such agreements maintain effective control over such securities, and accordingly are not reflected in the Corporation’s consolidated statements of condition.

Other short-term borrowings consisted of:


(In thousands)	June 30, 2011		December 31, 2010		June 30, 2010
Advances with the FHLB paying interest at maturity, at fixed rates of 0.35%	$	150,000	$	300,000	$	—
Term funds purchased paying interest at maturity, at fixed rates of 0.65%		102		52,500		—
Securities sold not yet purchased		—		10,459		—
Others		1,200		1,263		1,263

Total other short-term borrowings	$	151,302	$	364,222	$	1,263

Notes payable consisted of:


(In thousands)	June 30, 2011		December 31, 2010		June 30, 2010
Advances with the FHLB:
-with maturities ranging from 2011 through 2021 paying interest at monthly fixed rates ranging from 0.66% to 4.95% (June 30, 2010 - 1.48% to 5.10%)	$	704,500	$	385,000	$	1,032,873
-maturing in 2010 paying interest quarterly at a fixed rate of 5.10%		—		—		20,000
Note issued to the FDIC, including unamortized premium of $1,202; paying interest monthly at an annual fixed rate of 2.50%; maturing on April 30, 2015 or such earlier date as such amount may become due and payable pursuant to the terms of the note		1,517,843		2,492,928		5,728,954
Term notes with maturities ranging from 2012 to 2016 paying interest semiannually at fixed rates ranging from 5.25% to 7.86% (June 30, 2010 - 5.25% to 13.00%)		278,255		381,133		380,995
Term notes with maturities ranging from 2011 to 2013 paying interest monthly at a floating rate of 3.00% over the 10-year U.S. Treasury note rate		801		1,010		1,217
Term notes maturing in 2011 paying interest quarterly at a floating rate of 9.75% over the 3-month LIBOR rate		—		—		175,000
Junior subordinated deferrable interest debentures (related to trust preferred securities) with maturities ranging from 2027 to 2034 with fixed interest rates ranging from 6.125% to 8.327% (Refer to Note 17)		439,800		439,800		439,800
Junior subordinated deferrable interest debentures (related to trust preferred securities) ($936,000 less discount of $478,995 as of June 30, 2011 and $502,113 at June 30, 2010) with no stated maturity and a fixed interest rate of 5.00% until, but excluding December 5, 2013 and 9.00% thereafter (Refer to Note 17)		457,005		444,981		433,887
Others		25,082		25,331		25,551

Total notes payable	$	3,423,286	$	4,170,183	$	8,238,277

Note: Refer to the Corporation’s 2010 Annual Report, for rates and maturity information corresponding to the borrowings outstanding at December 31, 2010. Key index rates as of June 30, 2011 and June 30, 2010, respectively, were as follows: 3-month LIBOR rate = 0.25% and 0.53%; 10-year U.S. Treasury note = 3.16% and 2.93%.

On June 30, 2011, Popular North America, Inc. (“PNA”), the parent bank holding company of all of the Corporation’s U.S. mainland operations, modified $233.2 million in aggregate principal amount of the $275 million 6.85% Senior Notes due 2012, fully and unconditionally guaranteed by the Corporation, issued by PNA on December 21, 2007 for (1) $78.0 million aggregate principal amount of 7.47% Senior Notes due 2014, (2) $35.2 million aggregate principal amount of 7.66% Senior Notes due 2015 and (3) $120.0 million aggregate principal amount of 7.86% Senior Notes due 2016 issued by PNA, also fully and unconditionally guaranteed by the Corporation.

In consideration for the excess assets acquired over liabilities assumed as part of the Westernbank FDIC-assisted transaction, BPPR issued to the FDIC a secured note (the “note issued to the FDIC”) in the amount of $5.8 billion at April 30, 2010, which has full recourse to BPPR. As indicated in Note 6 to the consolidated financial statements, the note issued to the FDIC is collateralized by the loans (other than certain consumer loans) and other real estate acquired in the agreement with the FDIC and all proceeds derived from such assets, including cash inflows from claims to the FDIC under the loss sharing agreements. Proceeds received from such sources are used to pay the note under the conditions stipulated in the agreement. The entire outstanding principal balance of the note issued to the FDIC is due five years from issuance (April 30, 2015), or such date as such amount may become due and payable pursuant to the terms of the note. Borrowings under the note bear interest at an annual fixed rate of 2.50% and are paid monthly. If the Corporation fails to pay any interest as and when due, such interest shall accrue interest at the note interest rate plus 2.00% per annum. The Corporation may repay the note in whole or in part without any penalty subject to certain notification requirements indicated in the agreement. During the six months ended June 30, 2011, the Corporation prepaid $480 million of the note issued to the FDIC from funds unrelated to the assets securing the note.

A breakdown of borrowings by contractual maturities at June 30, 2011 is included in the table below. Given its nature, the maturity of the note issued to the FDIC was based on expected repayment dates and not on its April 30, 2015 contractual maturity date. The expected repayments consider the timing of expected cash inflows on the loans, OREO and claims on the loss sharing agreements that will be applied to repay the note during the period that the note payable to the FDIC is outstanding.


(In thousands)	Assets sold under agreements to repurchase		Short-term borrowings		Notes payable		Total
Year
2011	$	1,458,132	$	151,302	$	1,593,692	$	3,203,126
2012		75,000		—		214,782		289,782
2013		49,000		—		98,744		147,744
2014		350,000		—		189,380		539,380
2015		174,135		—		35,991		210,126
Later years		464,055		—		833,692		1,297,747
No stated maturity		—		—		936,000		936,000

Subtotal		2,570,322		151,302		3,902,281		6,623,905
Less: Discount		—		—		478,995		478,995

Total borrowings	$	2,570,322	$	151,302	$	3,423,286	$	6,144,910