Related party transactions

9 Months Ended

Sep. 30, 2023

Related Party Transactions

Related Party Transactions

Note 23 – Related party transactions

The Corporation considers its equity method investees as related parties. The following provides information on transactions with

equity method investees considered related parties.

EVERTEC

Until August 15, 2022, the Corporation had an investment in Evertec, Inc. (“Evertec”) which provides various processing and

information technology services to the Corporation and its subsidiaries and gave BPPR access to the ATH network owned and

operated by Evertec. This investment was accounted for under the equity method. The Corporation recorded $

1.5

 million in

dividends from its investment in Evertec during the nine months ended September 30, 2022.

On July 1, 2022, BPPR completed the acquisition of certain assets from Evertec Group, LLC (“Evertec Group”) to service certain

BPPR channels, in exchange for shares of Evertec held by BPPR. The transaction was accounted for as a business combination. In

connection with this transaction, BPPR also entered into amended and restated service agreements with Evertec Group pursuant to

which Evertec Group continues to provide various information technology and transaction processing services to Popular, BPPR

and their respective subsidiaries. As part of the transaction, BPPR and Evertec entered into a revenue sharing structure for BPPR in

connection with its merchant acquiring relationship with Evertec. On August 15, 2022, the Corporation completed the sale of its

remaining shares of common stock of Evertec, together with the aforementioned business acquisition (the "Evertec Transactions").

As a result, the Corporation discontinued accounting for its proportionate share of Evertec’s income (loss) and changes in

stockholder’s equity under the equity method of accounting in the third quarter of 2022. In connection with the Evertec Transactions

and related accounting adjustments, the Corporation recorded an aggregate pre-tax gain of $

257.7

 million considering the initial

exchange of Evertec shares as well as the sale of the remaining shares.

The following table presents the Corporation’s proportionate share of Evertec’s income (loss) and changes in stockholders’ equity

for the quarter and nine months ended September 30, 2022.

Quarter ended

Nine months ended

(In thousands)

September 30, 2022

September 30, 2022

Share of income from the investment in Evertec [1]

$

257,712

$

269,539

Share of other changes in Evertec's stockholders' equity

-

3,168

Share of Evertec's changes in equity recognized in income

$

257,712

$

272,707

[1] The Gain from Evertec Transactions and related accounting adjustments are reflected within other operating income in the accompanying

consolidated financial statements. The Corporation recognized an additional $

17.3

 million as an operating expense in connection with the Evertec

Transactions.

The following table presents 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 nine months ended September 30, 2022. Items that represent expenses to the

Corporation are presented with parenthesis.

Nine months ended

(In thousands)

September 30, 2022 [1]

Category

Interest expense on deposits

$

(267)

Interest expense

ATH and credit cards interchange income from services to Evertec

13,955

Other service fees

Rental income charged to Evertec

3,258

Net occupancy

Processing fees on services provided by Evertec

(128,681)

Professional fees

Other services provided to Evertec

420

Other operating expenses

Total

$

(111,315)

[1] Includes activity through June 30, 2022.

Centro Financiero BHD, S.A.

At September 30, 2023, the Corporation had a

15.84

% equity interest in Centro Financiero BHD, S.A. (“BHD”), one of the largest

banking and financial services groups in the Dominican Republic. During the nine months ended September 30, 2023, the

Corporation recorded $

38

 million in equity pickup from its investment in BHD (September 30, 2022 - $

28

 million), which had a

carrying amount of $

223.7

 million at September 30, 2023 (December 31, 2022 - $

199.8

 million). The Corporation received $

14.1

million in cash dividend distributions and $

2.1

 million in stock dividends during the nine months ended September 30, 2023 from its

investment in BHD (September 30, 2022 - $

16

 million cash dividends). 

Investment Companies

The Corporation, through its subsidiary Popular Asset Management LLC (“PAM”), provides advisory services to several investment

companies registered under the Investment Company Act of 1940 in exchange for a fee. The Corporation, through its subsidiary

BPPR, also provides 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 nine months ended September 30, 2023 administrative fees charged to these investment companies amounted to $

1.7

million (September 30, 2022 -

1.9

 million) and waived fees amounted to $

0.7

 million (September 30, 2022 - $

0.7

 million), for a net

fee of $

1

 million (September 30, 2022 - $

1.2

 million).