UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of report (Date of earliest event reported): April 22, 2014
POPULAR, INC.
(Exact name of registrant as specified in its charter)
| Puerto Rico | 001-34084 | 66-0667416 | ||
| (State or other jurisdiction | (Commission File | (I.R.S. Employer | ||
| of incorporation) | Number) | Identification No. |
| 209 Munoz Rivera Avenue | ||
| Hato Rey, Puerto Rico | 00918 | |
| (Address of principal executive offices) | (Zip Code) |
(787) 765-9800
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.05. Costs Associated with Exit or Disposal Activities.
The information included in Item 8.01 is incorporated herein by reference.
Item 2.06. Material Impairments.
The information included in Item 8.01 is incorporated herein by reference.
Item 8.01. Other Events.
On April 23, 2014, Popular, Inc. (the “Company”) announced that Banco Popular North America, its U.S. banking subsidiary doing business as Popular Community Bank (“PCB”), had entered into three separate definitive agreements, each dated April 22, 2014, to sell and transfer certain assets and liabilities, including bank branches, deposits and related loan portfolios, in California, Central Florida and Illinois. The material terms of each of the three agreements are described below.
California
On April 22, 2014, PCB entered into a Purchase and Assumption Agreement with Banc of California, National Association, pursuant to which PCB will transfer certain assets and liabilities from its regional operations in California to the purchaser, including 20 branches with approximately $1.2 billion in loans and $1.1 billion in deposits.
PCB agreed to provide, subject to certain limitations, customary indemnification to the purchaser, including with respect to certain pre-closing liabilities and violations of representations and warranties. PCB 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 and not to engage in a competitive business with the transferred operations in the Los Angeles metropolitan area for a period of two years after the closing (subject to customary exceptions). The transaction is subject to receipt of required regulatory approvals and satisfaction of other closing conditions, including the receipt by the purchaser of financing necessary to complete the transaction.
Central Florida
On April 22, 2014, PCB entered into a Purchase and Assumption Agreement with Harbor Community Bank pursuant to which PCB will transfer certain assets and liabilities from its regional operations in Central Florida to the purchaser, including 9 branches with approximately $115 million in loans and $239 million in deposits.
PCB agreed to provide, subject to certain limitations, customary indemnification to the purchaser, including with respect to certain pre-closing liabilities and violation of representations and warranties. PCB also agreed not to engage in a competitive business with the transferred operations in the Orange, Seminole and Osceola Counties, Florida, for a period of three years after the closing (subject to customary exceptions). The transaction is subject to receipt of required regulatory approvals and satisfaction of other closing conditions.
Illinois
On April 22, 2014, PCB entered into a Purchase and Assumption Agreement with First Midwest Bank pursuant to which PCB will transfer certain assets and liabilities from its regional operations in Illinois to the purchaser, including 12 branches with approximately $521 million in loans and $761 million in deposits.
PCB agreed to provide, subject to certain limitations, customary indemnification to the purchaser, including with respect to certain pre-closing liabilities and violation of representations and warranties. PCB also agreed not to engage in a competitive business with the transferred operations in the Chicago, Illinois-Joliet, Indiana-Naperville, Wisconsin metropolitan statistical area for a period of three years after the closing (subject to customary exceptions). The transaction is subject to receipt of required regulatory approvals and satisfaction of other closing conditions.
The combined transactions are expected to result in an aggregate estimated pre-tax gain of approximately $25 million, which is expected to be recognized upon closing of the transactions. The transactions are expected to be completed during the fourth quarter of 2014.
The Company also expects to record an estimated non-cash write-down to goodwill of approximately $160 million in connection with the transactions.
Reorganization of Centralized Back Office Operations
In connection with the transactions described above, PCB will close its Rosemont, IL and Orlando, FL operations centers and transfer most of the support functions to Puerto Rico and New York. This reorganization will have an estimated cost of approximately $33 million in severance and retention payments and approximately $20 million in operational set-up costs, and lease cancelations. Annual operating expenses are expected to be prospectively reduced by an estimated $45 million after the reorganization is complete.
Item 9.01 Financial Statements and Exhibits.
Exhibit 99.1 Press release dated April 23, 2014
Exhibit 99.1 shall not be deemed “filed” for purposes of the Securities Exchange Act of 1934, as amended, nor shall it be incorporated by reference into any of the Corporation’s filings under the Securities Act of 1933, as amended, unless otherwise expressly stated in such filing.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Popular, Inc. (Registrant) | ||||||||
| Date: April 24, 2014 | By: | /s/ Jorge J. García | ||||||
| Name: Jorge J. García Title: Senior Vice President and Corporate Comptroller | ||||||||
Exhibit 99.1
Popular, Inc. to Focus U.S. Community Banking Strategy in New York and South Florida with Centralized Operations in Puerto Rico and New York
| • | Popular Community Bank (PCB) to improve operations and optimize invested capital by concentrating on New York and South Florida markets and divesting its regional operations in California, Illinois and Central Florida |
| • | Sale of the regional operations including bank branches, deposits and related loan portfolios is expected to result in a net premium of approximately $25 million and an estimated noncash Goodwill write-down of approximately $160 million |
| • | PCB to streamline back office operations and relocate centralized functions to Puerto Rico, NY and SFL. An estimated restructuring charge of approximately $53 million will be taken by PCB, and annual operating expenses will be prospectively reduced by an estimated $45 million after the reorganization is complete. This decrease in expenses offsets a reduction in revenues that results from the sale of the regional operations |
| • | The reduction in assets and an improved risk profile of the bank is expected to reduce the amount of required capital, which, subject to regulatory approval, may be re-deployed |
SAN JUAN, Puerto Rico — (BUSINESS WIRE) — Popular, Inc. (NASDAQ:BPOP) today announced that in order to sharpen its focus on key markets for its U.S. franchise, drive efficiencies and improve profitability, its subsidiary Popular Community Bank (PCB) will undergo a strategic reorganization in which it will divest its regional operations in California, Illinois and Central Florida and centralize certain back office operations in Puerto Rico and New York.
PCB will strengthen its mainland U.S. presence by concentrating on New York and South Florida. With a more clearly defined geographical footprint and leaner operation, the new PCB will be better able to focus on its core competencies, providing a full range of financial services and products to its commercial and retail banking customers.
Popular entered into definitive agreements to sell its regional operations, including 41 branches, approximately $1.8 billion in related loan portfolios, and approximately $2.1 billion in deposits, to three different buyers. The transactions will result in net premium of approximately $25 million and an estimated noncash Goodwill write-down of approximately $160 million.
The reorganization of PCB’s centralized operations will result in an estimated charge of approximately $53 million, and annual operating expenses are expected to be prospectively reduced by an estimated $45 million after the completion of the reorganization. This decrease in expenses offsets a reduction in revenues that results from the sale of the regional operations.
The transactions, which are subject to regulatory approval and other closing conditions, are expected to close before the end of the year.
Mr. Richard L. Carrión, Chairman of the Board, President and Chief Executive Officer, said: “Popular remains deeply committed to serving mainland U.S. customers by building on PCB’s success in New York and South Florida. We believe there are significant opportunities for the growth of our franchise in these markets as the banking sector and overall economy continues in its recovery. Focusing our efforts on these markets will ultimately enable us to better serve and grow our customer base, while strengthening the capital position of both PCB and Popular.”
Leaner, More Focused Bank, Improved Profitability and Efficiency Ratios
The new PCB will have 49 branches in the New York/New Jersey and South Florida regions. As a more focused bank operating in two regions on the east coast, PCB will continue to offer a broad array of financial services for businesses and consumers, from lending, cash management, and other services to our commercial clients, to a full offering of consumer finance and transactional products including mobile banking and mobile check deposit.
This restructuring will lead to improved capital ratios and efficiency ratios at both PCB and Popular and increased return on capital for our U.S. business.
Reorganization of Centralized Back Office Operation
As part of the restructuring plan, PCB will reduce back-office expenses by closing its Rosemont, IL and Orlando, FL operations centers and transferring most of the support functions to Puerto Rico and New York. Of the 550 positions in the two current operations locations, 100 will be relocated to other offices in the U.S. and 200 will be moved to Puerto Rico for a net saving of approximately 250 positions. This transition is expected to be completed by the 1st quarter of 2015.
The reorganization will have an estimated cost of approximately $53 million, consisting of severance and retention payments, operational set-up costs, and lease cancelations.
Sale of California, Illinois and Central Florida Business Regions
Popular has entered into definitive agreements to sell regional operations to three different buyers:
| • | In Central Florida, PCB will sell 9 branches with loans of approximately $115 million and deposits of approximately $239 million to Harbor Community Bank, a bank of approximately $629 million in total assets. |
| • | In Illinois, PCB will sell 12 branches with loans totaling approximately $521 million and deposits of approximately $761 million to First Midwest Bank, a bank with approximately $8.3 billion in total assets. |
| • | In California, PCB will sell 20 branches with loans totaling approximately $1.2 billion and approximately $1.1 billion in deposits to Banc of California, a bank with approximately $3.6 billion in total assets. |
Mr. Carrión concluded: “We have selected the buyers of our regional branches with care to ensure that they are committed to the communities in which they operate and that our customers will continue to receive the same high quality of service that they have always received from us.”
RBC Capital Markets, LLC acted as financial advisor to Popular. Sullivan & Cromwell LLP, New York, NY, acted as legal counsel.
About Popular, Inc.
Founded in 1893, Popular, Inc. is the leading banking institution by both assets and deposits in Puerto Rico and ranks among the top 50 U.S. banks by assets. In the United States, Popular has established a community-banking franchise that does business as Popular Community Bank, providing a broad range of financial services and products with branches in New York, New Jersey, Illinois, Florida and California.
Popular, Inc.
Investor Relations:
Brett Scheiner, 212-417-6721
Investor Relations Officer
or
Media Relations:
Senior Vice President
Teruca Rullán, 787-281-5170 or 917-679-3596 (mobile)
Source: Popular, Inc.