Related party transactions

3 Months Ended

Mar. 31, 2017

Note 23 – 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, 2017, the Corporation’s stake in EVERTEC was 16.06%.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.

The Corporation received $ 1.2 million in dividend distributions during the quarter ended March 31, 2017 from its investments in EVERTEC’s holding company (March 31, 2016 - $ 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, 2017			December 31, 2016
Equity investment in EVERTEC	$	42,408		$	38,904

The Corporation had the following financial condition balances outstanding with EVERTEC at March 31, 2017 and December 31, 2016. Items that represent liabilities to the Corporation are presented with parenthesis.

(In thousands)	March 31, 2017		December 31, 2016
Accounts receivable (Other assets)	$	4,424	$	6,394
Deposits		(12,937)		(14,899)
Accounts payable (Other liabilities)		(3,154)		(20,372)
Net total	$	(11,667)	$	(28,877)

The Corporation’s proportionate share of income from EVERTEC is included in other operating income in the consolidated statements of operations. The following table presents the Corporation’s proportionate share of EVERTEC’s income and changes in stockholders’ equity for the quarters ended March 31, 2017 and 2016.

		Quarters ended March 31,
(In thousands)		2017		2016
Share of income from investment in EVERTEC	$	3,700	$	2,983
Share of other changes in EVERTEC's stockholders' equity		619		242
Share of EVERTEC's changes in equity recognized in income	$	4,319	$	3,225

The following table 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, 2017 and 2016. Items that represent expenses to the Corporation are presented with parenthesis.

	Quarters ended March 31,
(In thousands)	2017		2016		Category
Interest expense on deposits	$	(9)	$	(19)	Interest expense
ATH and credit cards interchange income from services to EVERTEC		7,666		6,918	Other service fees
Rental income charged to EVERTEC		1,759		1,736	Net occupancy
Processing fees on services provided by EVERTEC		(42,370)		(43,516)	Professional fees
Other services provided to EVERTEC		266		256	Other operating expenses
Total	$	(32,688)	$	(34,625)

PRLP 2011 Holdings, LLC

As indicated in Note 22 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, 2017			December 31, 2016
Equity investment in PRLP 2011 Holdings, LLC	$	8,656		$	9,167

The Corporation had the following financial condition balances outstanding with PRLP 2011 Holdings, LLC at March 31, 2017 and December 31, 2016.

(In thousands)	March 31, 2017		December 31, 2016
Deposits (non-interest bearing)	$	(1,118)	$	(1,127)

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 loss from PRLP 2011 Holdings, LLC for the quarters ended March 31, 2017 and 2016.

		Quarters ended March 31,
(In thousands)		2017		2016
Share of loss from the equity investment in PRLP 2011 Holdings, LLC	$	(511)	$	(542)

During the quarter ended March 31, 2016, the Corporation received $1.8 million in capital distributions from its investment in PRLP 2011 Holdings, LLC. 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, 2017 and 2016.

		Quarters ended March 31,
(In thousands)	2017		2016		Category
Interest income on loan to PRLP 2011 Holdings, LLC	$	-	$	11	Interest income

PR Asset Portfolio 2013-1 International, LLC

As indicated in Note 22 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, 2017			December 31, 2016
Equity investment in PR Asset Portfolio 2013-1 International, LLC	$	18,862		$	22,378

The Corporation had the following financial condition balances outstanding with PR Asset Portfolio 2013-1 International, LLC, at March 31, 2017 and December 31, 2016.

(In thousands)	March 31, 2017		December 31, 2016
Loans	$	-	$	3,866
Accrued interest receivable		-		19
Deposits		(22,564)		(9,692)
Net total	$	(22,564)	$	(5,807)

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, 2017 and 2016.

		Quarters ended March 31,
(In thousands)	2017			2016
Share of loss from the equity investment in PR Asset Portfolio 2013-1 International, LLC	$	(154)	$	(522)

During the quarter ended March 31, 2017, the Corporation received $3.4 million in capital distribution from its investment in PR Asset Portfolio 2013-1 International, LLC. 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 March 31, 2017 and 2016.

	Quarters ended March 31,
(In thousands)	2017		2016		Category
Interest income on loan to PR Asset Portfolio 2013-1 International, LLC	$	9	$	445	Interest income
Interest expense on deposits		(4)		(1)	Interest expense
Total	$	5	$	444

Centro Financiero BHD León

At March 31, 2017, the Corporation had a 15.84% stake in Centro Financiero BHD Leon, S.A. (“BHD Leon”), one of the largest banking and financial services groups in the Dominican Republic. During the quarter ended March 31, 2017 the Corporation recorded $6.1 million in earnings from its investment in BHD Leon (2016- $ 6.2 million), which had a carrying amount of $131.4 million, as of the end of the quarter (December 31, 2016 - $ 125.5 million). BPPR has extended a credit facility of $ 50 million to BHD León, which had no outstanding balance at March 31, 2017 (December 31, 2016 - $ 25 million).

Puerto Rico Investment Companies

The Corporation provides advisory services to several Puerto Rico investment companies in exchange for a fee. The Corporation also provides administrative, custody and transfer agency services to these investment companies. These fees are calculated at an annual rate of the average net assets of the investment company, as defined in each agreement. Due to its advisory role, the Corporation considers these investment companies as related parties.

For the quarter ended March 31, 2017 administrative fees charged to these investment companies amounted to $ 2.0 million (2016- $ 2.0 million) and waived fees amounted to $ 0.6 million (2016 - $ 0.7million), for a net fee of $ 1.4 million (2016 - $ 1.3 million).

The Corporation, through its subsidiary Banco Popular de Puerto Rico, has also entered into lines of credit facilities with these companies. As of March 31, 2017, the available lines of credit facilities amounted to $357 million ( December 31 2016 - $357 million). The aggregate sum of all outstanding balances under all credit facilities that may be made available by BPPR, from time to time, to those Puerto Rico investment companies for which BPPR acts as investment advisor or co-investment advisor, shall never exceed the lesser of $200 million or 10% of BPPR’s capital.