Regulatory capital requirements

12 Months Ended

Dec. 31, 2016

Regulatory Capital Requirements

Regulatory Capital Requirments

Note 25 – Regulatory capitalrequirements

The Corporation and its banking subsidiaries are subject to various regulatory capital requirements imposed by the federal banking agencies. Failure to meet minimum capital requirements can lead to certain mandatory and additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Corporation’s consolidated financial statements. On January 1, 2015, the Corporation, BPPR and BPNA became subject to Basel III capital requirements, including also revised minimum and well capitalized regulatory capital ratios and compliance with the standardized approach for determining risk-weighted assets.

The Basel III Capital Rules introduced a new capital measure known as Common Equity Tier I (“CET1”) and related regulatory capital ratio CET1 to risk-weighted assets.

The Basel III Capital Rules provide that a depository institution will be deemed to be well capitalized if it maintained a leverage ratio of at least 5%, a CET1 ratio of at least 6.5%, a Tier 1 risk-based capital ratio of at least 8% and a total risk-based ratio of at least 10%. Management has determined that at December 31, 2016 and 2015, the Corporation exceeded all capital adequacy requirements to which it is subject.

At December 31, 2016 and 2015,BPPR and BPNA were well-capitalized under the regulatory framework of Basel III.

The Corporation has been designated by the Federal Reserve Board as a Financial Holding Company (“FHC”) and is eligible to engage in certain financial activities permitted under the Gramm-Leach-Bliley Act of 1999.

The following tables present the Corporation’s risk-based capital and leverage ratios at December 31, 2016 and 2015 under the Basel III regulatory guidance

		Actual				Capital adequacy minimum requirement (including conservation capital buffer)
(Dollars in thousands)		Amount	Ratio			Amount	Ratio
		2016
Total Capital (to Risk-Weighted Assets):
Corporation	$	4,869,215	19.48	%	$	2,156,365	8.625	%
BPPR		3,678,619	19.53			1,624,727	8.625
BPNA		1,040,234	17.91			501,075	8.625
Common Equity Tier I Capital (to Risk-Weighted Assets):
Corporation	$	4,121,208	16.48	%	$	1,281,318	5.125	%
BPPR		3,436,615	18.24			965,417	5.125
BPNA		997,094	17.16			297,740	5.125
Tier I Capital (to Risk-Weighted Assets):
Corporation	$	4,121,208	16.48	%	$	1,656,338	6.625	%
BPPR		3,436,615	18.24			1,247,979	6.625
BPNA		997,094	17.16			384,883	6.625
Tier I Capital (to Average Assets):
Corporation	$	4,121,208	10.91	%	$	1,511,403	4	%
BPPR		3,436,615	11.53			1,191,783	4
BPNA		997,094	13.02			306,375	4

		Actual				Capital adequacy minimum requirement
(Dollars in thousands)		Amount	Ratio			Amount	Ratio
		2015
Total Capital (to Risk-Weighted Assets):
Corporation	$	4,692,409	18.78	%	$	1,998,971	8	%
BPPR		3,591,547	18.27			1,572,988	8
BPNA		945,132	19.02			397,519	8
Common Equity Tier I Capital (to Risk-Weighted Assets):
Corporation	$	4,049,576	16.21	%	$	1,124,421	4.5	%
BPPR		3,339,165	16.98			884,806	4.5
BPNA		908,722	18.29			223,604	4.5
Tier I Capital (to Risk-Weighted Assets):
Corporation	$	4,049,576	16.21	%	$	1,499,229	6	%
BPPR		3,339,165	16.98			1,179,741	6
BPNA		908,722	18.29			298,139	6
Tier I Capital (to Average Assets):
Corporation	$	4,049,576	11.82	%	$	1,370,145	4	%
BPPR		3,339,165	12.21			1,094,291	4
BPNA		908,722	13.74			264,547	4

The following table presents the minimum amounts and ratios for the Corporation’s banks to be categorized as well-capitalized.

		2016				2015
(Dollars in thousands)		Amount	Ratio			Amount	Ratio
Total Capital (to Risk-Weighted Assets):
BPPR	$	1,883,741	10	%	$	1,966,236	10	%
BPNA		580,956	10			496,899	10
Common Equity Tier I Capital (to Risk-Weighted Assets):
BPPR	$	1,224,432	6.5	%	$	1,278,053	6.5	%
BPNA		377,621	6.5			322,984	6.5
Tier I Capital (to Risk-Weighted Assets):
BPPR	$	1,506,993	8	%	$	1,572,988	8	%
BPNA		464,765	8			397,519	8
Tier I Capital (to Average Assets):
BPPR	$	1,489,729	5	%	$	1,367,864	5	%
BPNA		382,968	5			330,683	5

The final Basel III capital rules require the phase out of non-qualifying Tier 1 capital instruments such as trust preferred securities. At December 31, 2016, the Corporation had $427 million in trust preferred securities outstanding. On January 1, 2016, all $427 million in principal amount of the trust preferred securities no longer qualified for Tier 1 capital treatment, but instead qualified for Tier 2 capital treatment.

Beginning January 1, 2016, the Basel III final rules introduce a phase-in capital conservation buffer of 2.5% of risk-weighted assets that is effectively layered on top of the minimum capital risk-based ratios, which places restrictions on the amount of retained earnings that may be used for distributions or discretionary bonus payments as risk-based capital ratios approach their respective “adequately capitalized minimums.”

The following table presents the capital requirements for a standardized approach banking organization under Basel III final rules.

					Minimum Capital Plus Capital Conservation Buffer
	Minimum Capital		Well-Capitalized		2016		2017		2018		2019
Common Equity Tier 1 to Risk-Weighted Assets	4.5	%	6.5	%	5.125	%	5.750	%	6.375	%	7.000	%
Tier 1 Capital to Risk-Weighted Assets	6.0		8.0		6.625		7.250		7.875		8.500
Total Capital to Risk-Weighted Assets	8.0		10.0		8.625		9.250		9.875		10.500
Leverage Ratio	4.0		5.0		N/A		N/A		N/A		N/A