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Related party transactions | 9 Months Ended
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Sep. 30, 2019
Related Party Transactions |
Related Party Transactions | Note 24 – 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 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 September 30, 2019, the Corporation held 11,654,803 shares of EVERTEC, representing an ownership stake of 16.20%. 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 $ 1.7 million in dividend distributions during the nine months ended September 30, 2019, from its investments in EVERTEC’s holding company (September 30, 2018 - $ 0.6 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) |  | September 30, 2019 |  |  | December 31, 2018
Equity investment in EVERTEC | $ | 69,380 |  | $ | 60,591
The Corporation had the following financial condition balances outstanding with EVERTEC at September 30, 2019 and December 31, 2018. Items that represent liabilities to the Corporation are presented with parenthesis.
(In thousands) | September 30, 2019 | December 31, 2018
Accounts receivable (Other assets) | $ | 2,561 | $ | 6,829
Deposits |  | (47,108) |  | (28,606)
Accounts payable (Other liabilities) |  | (1,512) |  | (3,671)
Net total | $ | (46,059) | $ | (25,448)
The Corporation’s proportionate share of income or loss 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 (loss) and changes in stockholders’ equity for the quarters and nine months ended September 30, 2019 and 2018.
|  | Quarter ended |  |  | Nine months ended
(In thousands) |  | September 30, 2019 |  |  | September 30, 2019
Share of income from the investment in EVERTEC | $ | 4,010 |  | $ | 12,709
Share of other changes in EVERTEC's stockholders' equity |  | 621 |  |  | 703
Share of EVERTEC's changes in equity recognized in income | $ | 4,631 |  | $ | 13,412
|  | Quarter ended |  |  | Nine months ended
(In thousands) |  | September 30, 2018 |  |  | September 30, 2018
Share of income from the investment in EVERTEC | $ | 3,682 |  | $ | 10,586
Share of other changes in EVERTEC's stockholders' equity |  | (34) |  |  | 601
Share of EVERTEC's changes in equity recognized in income | $ | 3,648 |  | $ | 11,187
The following tables present the transactions and service payments between the Corporation and EVERTEC (as an affiliate) and their impact on the results of operations for the quarters and nine months ended September 30, 2019 and 2018. Items that represent expenses to the Corporation are presented with parenthesis.
|  | Quarter ended | Nine months ended |
(In thousands) | September 30, 2019 | September 30, 2019 | Category
Interest expense on deposits |  | $ | (27) |  | $ | (59) | Interest expense
ATH and credit cards interchange income from services to EVERTEC |  |  | 6,221 |  |  | 22,897 | Other service fees
Rental income charged to EVERTEC |  |  | 1,744 |  |  | 5,337 | Net occupancy
Processing fees on services provided by EVERTEC |  |  | (55,901) |  |  | (164,255) | Professional fees
Other services provided to EVERTEC |  |  | 247 |  |  | 873 | Other operating expenses
Total |  | $ | (47,716) |  | $ | (135,207) |
|  | Quarter ended | Nine months ended |
(In thousands) |  | September 30, 2018 | September 30, 2018 | Category
Interest expense on deposits |  | $ | (21) |  | $ | (46) | Interest expense
ATH and credit cards interchange income from services to EVERTEC |  |  | 8,486 |  |  | 24,940 | Other service fees
Rental income charged to EVERTEC |  |  | 1,781 |  |  | 5,297 | Net occupancy
Processing fees on services provided by EVERTEC |  |  | (48,360) |  |  | (142,443) | Professional fees
Other services provided to EVERTEC |  |  | 279 |  |  | 884 | Other operating expenses
Total |  | $ | (37,835) |  | $ | (111,368) |
PRLP 2011 Holdings, LLC and PR Asset Portfolio 2013-1 International, LLC As indicated in Note 23 to the Consolidated Financial Statements, the Corporation holds a 24.9% equity interest in PRLP 2011 Holdings, LLC and PR Asset Portfolio 2013-1 International, LLC. The Corporation’s equity in PRLP 2011 Holdings, LLC and 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.
|  | PRLP 2011 Holdings, LLC |  | PR Asset Portfolio 2013-1 International, LLC
(In thousands) |  | September 30, 2019 |  | December 31, 2018 |  | September 30, 2019 |  | December 31, 2018
Equity investment | $ | 6,393 | $ | 6,469 | $ | 3,409 | $ | 5,794
The Corporation held deposits from these entities, as follows:
| PRLP 2011 Holdings, LLC |  | PR Asset Portfolio 2013-1 International, LLC
(In thousands) | September 30, 2019 | December 31, 2018 |  | September 30, 2019 | December 31, 2018
Deposits (non-interest bearing) | $ | (909) | $ | (2,566) |  | $ | (9,582) | $ | (7,994)
The Corporation’s proportionate share of income or loss from these entities is presented in the following table and is included in other operating income in the Consolidated Statements of Operations.
|  | PRLP 2011 Holdings, LLC |  |  | PR Asset Portfolio 2013-1 International, LLC
|  | Quarter ended |  | Nine months ended |  |  | Quarter ended |  | Nine months ended
(In thousands) |  | September 30, 2019 |  | September 30, 2018 |  | September 30, 2019 |  | September 30, 2018 |  |  | September 30, 2019 |  | September 30, 2018 |  | September 30, 2019 |  | September 30, 2018
Share of income (loss) from the equity investment | $ | (65) | $ | 55 | $ | (76) | $ | (257) |  | $ | (236) | $ | 112 | $ | 306 | $ | (5,297)
During the nine months ended September 30, 2019, the Corporation received $ 2.7 million in capital distributions from its investment in PR Asset Portfolio 2013-1 International, LLC (September 30, 2018 - $ 2.0 million). There were no transactions between the Corporation and PRLP 2011 Holdings, LLC during the nine months ended September 30, 2019 and 2018. Centro Financiero BHD León At September 30, 2019, the Corporation had a 15.84% equity interest in Centro Financiero BHD León, S.A. (“BHD León”), one of the largest banking and financial services groups in the Dominican Republic. During the nine months ended September 30, 2019, the Corporation recorded $ 20.1 million in earnings from its investment in BHD León (September 30, 2018 - $ 22.1 million), which had a carrying amount of $ 150.0 million at September 30, 2019 (December 31, 2018 - $ 140.4 million). On December 2017, BPPR extended a credit facility of $ 40 million to BHD León. This credit facility was repaid during the quarter ended March 31, 2018. The Corporation received $ 12.6 million in dividend distributions during the nine months ended September 30, 2019 from its investment in BHD León (September 30, 2018 - $ 12.6 million). On June 30, 2017, BPPR extended an $8 million credit facility to Grupo Financiero Leon, S.A. Panamá (“GFL”), a shareholder of BHD León with an outstanding balance of $8 million at September 30, 2018. The sources of repayment for this loan were the dividends to be received by GFL from its investment in BHD León. BPPR’s credit facility ranked pari passu with another $8 million credit facility extended to GFL by BHD International Panama, an affiliate of BHD León. This credit facility was repaid during the quarter ended June 30, 2018. Investment Companies The Corporation provides advisory services to several investment companies registered under the Puerto Rico Investment Companies Act 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 nine months ended September 30, 2019 administrative fees charged to these investment companies amounted to $ 4.8 million (September 30, 2018 - $ 5.1 million) and waived fees amounted to $ 1.6 million (September 30, 2018 - $ 1.6 million), for a net fee of $ 3.2 million (September 30, 2018 - $ 3.5 million). The Corporation, through its subsidiary BPPR, has also entered into certain uncommitted credit facilities with those investment companies. As of September 30, 2019, the available lines of credit facilities amounted to $ 330 million (December 31, 2018 - $ 330 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 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. At September 30, 2019 there was no outstanding balance for these credit facilities. Other related party transactions On August 2018, BPPR acquired certain assets and assumed certain liabilities of Reliable Financial Services and Reliable Finance Holding Company, Puerto Rico-based subsidiaries of Wells Fargo & Company engaged in the auto finance business in Puerto Rico. Refer to Note 4 for additional information on this transaction. As part of the acquisition transaction, the Corporation entered into an agreement with Reliable Financial Services to sublease the space necessary to continue the acquired operations. Reliable Financial Services’ underlying lease agreement was with an entity in which the Corporation’s Chairman of the Board and his family members hold an ownership interest. This lease expired on April 30, 2019 pursuant to its terms. During the quarter ended March 31, 2019, the Corporation paid to Reliable Financial Services approximately $0.4 million under the sublease.

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- Definition The entire disclosure for related party transactions. Examples of related party transactions include transactions between (a) a parent company and its subsidiary; (b) subsidiaries of a common parent; (c) and entity and its principal owners; and (d) affiliates. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 850 -URI http://asc.fasb.org/topic&trid=2122745 + Details
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