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Related party transactions
 12 Months Ended
Dec. 31, 2023
Related Party Transactions  
Related Party Transactions
Note 27 – Related party transactions
The Corporation grants loans to its directors, executive officers, including
 
certain related individuals or organizations, and affiliates in
the ordinary course of business. The activity and
 
balance of these loans were as follows:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(In thousands)
Balance at December 31, 2021
$
102,579
New loans
11,090
Payments
(15,402)
Other changes, including existing loans to new related parties
27,070
Balance at December 31, 2022
$
125,337
New loans
23,381
Payments
(9,731)
Other changes, including existing loans to new related parties
7,030
Balance at December 31, 2023
$
146,017
New loans and payments include disbursements and collections
 
from existing lines of credit.
The Corporation has had loan transactions with
 
the Corporation’s directors, executive officers, including certain
 
related individuals or
organizations, and affiliates, and
 
proposes to continue such
 
transactions in the ordinary
 
course of its business,
 
on substantially the
same terms, including interest rates and collateral, as those prevailing for comparable loan transactions with third parties. Except as
discussed
 
below,
 
the extensions
 
of
 
credit
 
have not
 
involved and
 
do not
 
currently
 
involve more
 
than normal
 
risks of
 
collection
 
or
present other unfavorable features.
In 2010,
 
as part
 
of the
 
Westernbank FDIC
 
assisted transaction,
 
BPPR acquired
 
five commercial
 
loans made
 
to entities
 
that were
wholly
 
owned
 
by
 
one
 
brother-in-law
 
of
 
a
 
director
 
of
 
the
 
Corporation.
 
The
 
loans
 
were
 
secured
 
by
 
real
 
estate
 
and
 
personally
guaranteed
 
by
 
the
 
director’s
 
brother-in-law.
 
The
 
loans
 
were
 
originated
 
by
 
Westernbank
 
between
 
2001
 
and
 
2005
 
and
 
had
 
an
aggregate outstanding principal
 
balance of approximately
 
$
33.5
 
million when they
 
were acquired by BPPR
 
in 2010. Between
 
2011
and 2014,
 
the loans
 
were restructured to
 
consist of
 
(i)
five
 
notes with
 
an aggregate
 
outstanding principal
 
balance of
 
$
19.8
 
million
with
 
a
6
%
 
annual interest
 
rate
 
(“Notes A”)
 
and
 
(ii)
five
 
notes
 
with
 
an
 
aggregate outstanding
 
balance
 
of
 
$
13.5
 
million
 
with a
1
%
annual interest
 
rate, to
 
be paid
 
upon maturity
 
(“Notes B”).
 
The restructured
 
notes had
 
an original
 
maturity of
 
September 30,
 
2016
and, thereafter,
 
various interim
 
renewals were
 
approved to
 
allow for
 
the re-negotiation
 
of a
 
longer-term extension.
 
On April
 
2022,
one of
 
these interim
 
extensions decreased the
 
interest rate
 
applicable to the
 
Notes A to
4.25
% and
 
maintained the
 
Notes B
 
at an
interest rate of
1
%. In November 2022, BPPR and related parties of the Corporation’s director entered into a three-year extension of
the
 
loans,
 
until
 
November
 
2025,
 
which,
 
among
 
other
 
things:
 
(i)
 
increased
 
the
 
interest
 
rate
 
applicable
 
to
 
Notes
 
A
 
to
5.25
%
 
and
maintained the Notes
 
B at
 
an interest rate
 
of
1
% and
 
(ii) established a
 
principal repayment schedule
 
for Notes
 
A, including a
 
$
0.7
million mandatory prepayment. The three-year extension of the
 
loans was approved by the Audit Committee
 
in accordance with the
Related Party Policy. The aggregate outstanding balance on the loans as of December 31, 2023 was approximately
 
$
28.5
 
million, of
which
 
approximately
 
$
15.0
 
million
 
corresponded
 
to
 
Notes
 
A
 
and
 
$
13.5
 
million
 
to
 
Notes
 
B.
 
During
 
2023,
 
the
 
borrower
 
paid
approximately $
0.8
 
million and $
0.8
 
million in principal and interest, respectively.
In April 2010, in
 
connection with the acquisition of
 
the Westernbank assets from the
 
FDIC, as receiver,
 
BPPR acquired a term
 
loan
to a
 
corporate borrower
 
partially owned
 
by an
 
investment corporation
 
in which
 
the Corporation’s
 
Chairman, at
 
that time
 
the Chief
Executive Officer,
 
as well
 
as certain
 
of his
 
family members,
 
are the
 
owners. In
 
addition, the
 
Chairman’s sister
 
is the
 
owner of
 
an
entity
 
that
 
holds
 
an
 
ownership interest
 
in
 
the
 
borrower.
 
At
 
the
 
time
 
the
 
loan
 
was
 
acquired
 
by
 
BPPR,
 
it
 
had
 
an
 
unpaid
 
principal
balance of $
40.2
 
million. In May
 
2017, this loan was
 
sold by BPPR to
 
Popular, Inc.,
 
holding company (“PIHC”). At
 
the time of
 
sale,
the loan had
 
an unpaid principal
 
balance of $
37.9
 
million. PIHC paid
 
$
37.9
 
million to BPPR
 
for the
 
loan, of which
 
$
6.0
 
million was
recognized by BPPR
 
as a capital
 
contribution representing the
 
difference between the
 
fair value and
 
the book
 
value of the
 
loan at
the time of transfer. Immediately upon being acquired by PIHC, the loan’s maturity was extended by 90 days (under the same terms
as originally contracted) to provide
 
the PIHC additional time to
 
evaluate a refinancing or long-term
 
extension of the loan.
 
In August
2017, the
 
credit facility
 
was refinanced
 
with a
 
stated maturity
 
in February
 
2019.
 
During 2017,
 
the facility
 
was subject
 
to the
 
loan
payment
 
moratorium
 
offered
 
as
 
part
 
of
 
the
 
hurricane
 
relief
 
efforts.
 
As
 
such,
 
interest
 
payments
 
amounting to
 
approximately $
0.5
million
 
were
 
deferred
 
and
 
capitalized
 
as
 
part
 
of
 
the
 
loan
 
balance.
 
In
 
February
 
2019,
 
the
 
Audit
 
Committee
 
approved,
 
under
 
the
Related Party Policy, a
36
-month renewal of the loan at an interest rate of
5.75
% and a
30
-year amortization schedule. In
December
2021, the Corporation refinanced the then-current $
36.0
 
million principal balance of the loan
 
at an interest rate of
4.50
%, a maturity
date of December
 
2026 and a
20
-year amortization schedule. Payments
 
of principal and
 
interest of approximately
 
$
1.2
 
million and
$
1.5
 
million,
 
respectively,
 
were
 
made
 
during
 
2023.
 
As
 
of
 
December
 
31,
 
2023,
 
the
 
outstanding
 
balance
 
of
 
the
 
loan
 
was
approximately $
32.4
 
million. The borrower is current on its payments.
At December 31,
 
2023, the Corporation’s
 
banking subsidiaries held deposits
 
from related parties
 
amounting to approximately $
655
million (2022 - $
628
 
million).
 
From
 
time
 
to
 
time,
 
the
 
Corporation,
 
in
 
the
 
ordinary
 
course
 
of
 
business,
 
obtains
 
services
 
from
 
related
 
parties
 
that
 
have
 
some
association with the
 
Corporation. Management believes the
 
terms of such
 
arrangements are consistent with
 
arrangements entered
into with independent third parties.
 
For
 
the
 
year
 
ended
 
December
 
31,
 
2023,
 
the
 
Corporation made
 
contributions
 
of
 
approximately
 
$
2.6
 
million
 
to
 
Fundación
 
Banco
Popular and
 
Popular Bank
 
Foundation, which
 
are not-for-profit
 
corporations dedicated
 
to philanthropic
 
work (2022
 
- $
4.8
 
million).
The Corporation also provided
 
human and operational resources to
 
support the activities of
 
the Fundación Banco Popular
 
which in
2023 amounted to approximately $
1.4
 
million (2022- $
1.5
 
million).
 
 
 
 
 
 
 
 
 
Related party transactions with Evertec,
 
as an affiliate
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 year ended December 31, 2022.
On July 1, 2022, BPPR completed its previously announced
 
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 will continue
 
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. The Corporation recorded a
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 years ended December 31, 2022 and 2021.
 
 
 
 
 
 
 
 
 
Year ended December
 
31,
(In thousands)
2022
2021
Share of Evertec income and Gain from the Evertec
Transactions and related accounting adjustments
 
[1]
$
269,539
$
26,096
Share of other changes in Evertec's stockholders' equity
3,168
53
Share of Evertec's changes in equity recognized in income
 
and
Gain from the Evertec Transaction and
 
related accounting
adjustments
 
$
272,707
$
26,149
[1]
 
The
 
Gain
 
from
 
the
 
Evertec
 
Transactions
 
and
 
related
 
accounting
 
adjustments
 
are
 
reflected
 
within
 
other
 
operating
 
income
 
in
 
the
 
accompanying
consolidated
 
financial
 
statements.
 
As
 
discussed
 
in
 
Note
 
4,
 
the
 
Corporation
 
recognized
 
an
 
additional
 
$
17.3
 
million
 
as
 
an
 
operating
 
expense
 
in
connection with the Business Acquisition Transaction.
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
 
years ended
 
December 31, 2022
 
and 2021. Items
 
that represent expenses
 
to
the Corporation are presented with parenthesis.
 
 
 
 
 
 
 
 
 
 
 
 
Years ended December
 
31,
(In thousands)
2022 [1]
2021
Category
Interest expense on deposits
$
(267)
$
(388)
Interest expense
ATH and credit cards interchange
 
income from services to Evertec
13,955
27,384
Other service fees
Rental income charged to Evertec
3,258
6,593
Net occupancy
Fees on services provided by Evertec
(128,681)
(245,945)
Professional fees
Other services provided to Evertec
420
740
Other operating expenses
Total
$
(111,315)
$
(211,616)
[1] Includes activity through June 30, 2022.
 
 
Centro Financiero BHD, S.A.
At December
 
31, 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
 
year
 
ended
 
December
 
31,
 
2023,
 
the
 
Corporation
recorded
 
$
40.1
 
million
 
in
 
equity
 
pickup
 
from
 
its
 
investment
 
in
 
BHD
 
(December
 
31,
 
2022
 
-
 
$
31.2
 
million),
 
which
 
had
 
a
 
carrying
amount of
 
$
225.9
 
million at
 
December 31,
 
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 year ended December 31, 2023
 
from its investment in BHD
(December 31, 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
 
year
 
ended
 
December
 
31,
 
2023
 
administrative
 
fees
 
charged
 
to
 
these
 
investment
 
companies
 
amounted
 
to
 
$
2.3
 
million
(December 31, 2022 -
2.5
 
million) and waived fees amounted to $
0.9
 
million (December 31, 2022 - $
0.9
 
million), for a net fee of $
1.4
million (December 31, 2022 - $
1.6
 
million).