UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

þ		Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number: 001-34084

POPULAR, INC.

(Exact name of registrant as specified in its charter)

Puerto Rico		66-0667416
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification Number)

Popular Center Building
209 Muñoz Rivera Avenue, Hato Rey
San Juan, Puerto Rico		00918
(Address of principal executive offices)		(Zip code)

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

þ Yes                    o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

þ Yes                    o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “accelerated filer, large accelerated filer and smaller reporting company” in Rule 12b-2 of the Exchange Act:

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

o Yes                    þ No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: Common Stock $0.01 par value, 1,022,682,796 shares outstanding as of November 2, 2010.

 

 

POPULAR, INC.
INDEX

		Page
Part I — Financial Information
Item 1. Financial Statements
Unaudited Consolidated Statements of Condition as of September 30, 2010, December 31, 2009 and September 30, 2009			4
Unaudited Consolidated Statements of Operations for the quarters and nine months ended September 30, 2010 and 2009			5
Unaudited Consolidated Statements of Changes in Stockholders’ Equity for the nine months ended September 30, 2010 and 2009			6
Unaudited Consolidated Statements of Comprehensive (Loss) Income for the quarters and nine months ended September 30, 2010 and 2009			8
Unaudited Consolidated Statements of Cash Flows for the nine months ended September 30, 2010 and 2009			9
Notes to Unaudited Consolidated Financial Statements			11
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			91
Item 3. Quantitative and Qualitative Disclosures about Market Risk			148
Item 4. Controls and Procedures			156
Part II — Other Information
Item 1. Legal Proceedings			156
Item 1A. Risk Factors			158
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			160
Item 6. Exhibits			161
Signatures			162
EX-10.1
EX-12.1
EX-31.1
EX-31.2
EX-32.1
EX-32.2
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

Forward-Looking Information

The information included in this Form 10-Q contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may relate to Popular, Inc.’s (the “Corporation”) financial condition, results of operations, plans, objectives, future performance and business, including, but not limited to, statements with respect to the adequacy of the allowance for loan losses, market risk and the impact of interest rate changes, capital markets conditions, capital adequacy and liquidity, and the effect of legal proceedings and new accounting standards on the Corporation’s financial condition and results of operations. All statements contained herein that are not clearly historical in nature are forward-looking, and the words “anticipate,” “believe,” “continues,” “expect,” “estimate,” “intend,” “project” and similar expressions and future or conditional verbs such as “will,” “would,” “should,” “could,” “might,” “can,” “may,” or similar expressions are generally intended to identify forward-looking statements.

These statements are not guarantees of future performance and involve certain risks, uncertainties, estimates and assumptions by management that are difficult to predict.

Various factors, some of which are beyond Popular’s control, could cause actual results to differ materially from those expressed in, or implied by, such forward-looking statements. Factors that might cause such a difference include, but are not limited to:

	•		the rate of growth in the economy and employment levels, as well as general business and economic conditions;
	•		difficulties in combining the operations of acquired entities, including in connection with our acquisition of certain assets and assumption of certain liabilities of Westernbank Puerto Rico from the Federal Deposit Insurance Corporation (“FDIC”);
	•		changes in interest rates, as well as the magnitude of such changes;
	•		the fiscal and monetary policies of the federal government and its agencies;
	•		changes in federal bank regulatory and supervisory policies, including required levels of capital;
	•		the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Financial Reform Act) on the Corporation’s businesses, business practices and costs of operations;
	•		the relative strength or weakness of the consumer and commercial credit sectors and of the real estate markets in Puerto Rico and the other markets in which borrowers are located;
	•		the performance of the stock and bond markets;
	•		competition in the financial services industry;
	•		additional FDIC assessments; and
	•		possible legislative, tax or regulatory changes.

Investors should refer to the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2009 as well as “Part II, Item 1A” of this Form 10-Q for a discussion of such factors and certain risks and uncertainties to which the Corporation is subject.

Moreover, the outcome of legal proceedings, as discussed in “Part II, Item I. Legal Proceedings,” is inherently uncertain and depends on judicial interpretations of law and the findings of regulators, judges and juries.

All forward-looking statements included in this document are based upon information available to the Corporation as of the date of this document, and other than as required by law, including the requirements of applicable securities laws, we assume no obligation to update or revise any such forward-looking statements to reflect occurrences or unanticipated events or circumstances after the date of such statements.

ITEM 1. FINANCIAL STATEMENTS
POPULAR, INC.

CONSOLIDATED STATEMENTS OF CONDITION(UNAUDITED)

		September 30,				December 31,				September 30,
(In thousands, except share information)		2010				2009				2009
ASSETS
Cash and due from banks		$	580,811			$	677,330			$	606,861
Money market investments:
Federal funds sold			—				159,807				140,635
Securities purchased under agreements to resell			290,456				293,125				325,178
Time deposits with other banks			1,733,493				549,865				633,010
Total money market investments			2,023,949				1,002,797				1,098,823
Trading account securities, at fair value:
Pledged securities with creditors’ right to repledge			434,637				415,653				386,478
Other trading securities			48,555				46,783				59,890
Investment securities available-for-sale, at fair value:
Pledged securities with creditors’ right to repledge			2,048,258				2,330,441				2,432,720
Other investment securities available-for-sale			3,693,225				4,364,273				4,560,571
Investment securities held-to-maturity, at amortized cost (fair value as of September 30, 2010 — $214,803; December 31, 2009 — $213,146; September 30, 2009 — $210,913)			214,152				212,962				212,950
Other investment securities, at lower of cost or realizable value (realizable value as of September 30, 2010 — $159,622; December 31, 2009 — $165,497; September 30, 2009 — $176,286)			158,309				164,149				174,943
Loans held-for-sale measured at lower of cost or fair value			115,088				90,796				75,447
Loans held-in-portfolio:
Loans not covered under loss sharing agreements with the FDIC			22,249,167				23,827,263				24,512,966
Loans covered under loss sharing agreements with the FDIC			4,006,227				—				—
Less — Unearned income			106,685				114,150				116,897
Allowance for loan losses			1,243,994				1,261,204				1,207,401
Total loans held-in-portfolio, net			24,904,715				22,451,909				23,188,668
FDIC loss share indemnification asset			3,308,959				—				—
Premises and equipment, net			531,849				584,853				589,592
Other real estate not covered under loss sharing agreements with the FDIC			168,823				125,483				129,485
Other real estate covered under loss sharing agreements with the FDIC			77,516				—				—
Accrued income receivable			160,167				126,080				131,745
Mortgage servicing assets, at fair value			165,947				169,747				180,335
Other assets (See Note 13)			1,459,985				1,324,917				1,156,721
Goodwill			665,333				604,349				606,508
Other intangible assets			60,438				43,803				46,067
Total assets		$	40,820,716			$	34,736,325			$	35,637,804
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Deposits:
Non-interest bearing		$	5,371,439			$	4,495,301			$	4,281,817
Interest bearing			22,368,605				21,429,593				22,101,081
Total deposits			27,740,044				25,924,894				26,382,898
Federal funds purchased and assets sold under agreements to repurchase			2,358,139				2,632,790				2,807,891
Other short-term borrowings			191,342				7,326				3,077
Notes payable			5,143,388				2,648,632				2,649,821
Other liabilities			1,278,603				983,866				1,051,661
Total liabilities			36,711,516				32,197,508				32,895,348
Commitments and contingencies (See Note 19)
Stockholders’ equity:
Preferred stock, 30,000,000 shares authorized; 2,006,391 shares issued and outstanding at September 30, 2010, December 31, 2009 and September 30, 2009 (aggregate liquidation preference — $50,160)			50,160				50,160				50,160
Common stock, $0.01 par value; 1,700,000,000 shares authorized as of September 30, 2010 (December 31, 2009 and September 30, 2009 — 700,000,000); 1,022,878,228 shares issued as of September 30, 2010 (December 31,2009 and September 30, 2009 — 639,544,895) and 1,022,686,418 outstanding as of September 30, 2010 (December 31, 2009 — 639,540,105; September 30, 2009 — 639,541,515)			10,229				6,395				6,395
Surplus			4,094,302				2,804,238				2,794,660
Accumulated deficit			(130,808	)			(292,752	)			(69,525	)
Treasury stock — at cost, 191,810 shares as of September 30, 2010 (December 31, 2009 — 4,790 shares; September 30, 2009 — 3,380)			(545	)			(15	)			(11	)
Accumulated other comprehensive income (loss), net of tax expense of $16,856 (December 31, 2009 — $33,964; September 30, 2009 — $57,302)			85,862				(29,209	)			(39,223	)
Total stockholders’ equity			4,109,200				2,538,817				2,742,456
Total liabilities and stockholders’ equity		$	40,820,716			$	34,736,325			$	35,637,804

The accompanying notes are an integral part of these unaudited consolidated financial statements.

POPULAR, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

		Quarter ended								Nine months ended
		September 30,								September 30,
(In thousands, except per share information)		2010				2009				2010				2009
INTEREST INCOME:
Loans		$	484,883			$	371,366			$	1,224,846			$	1,155,378
Money market investments			1,391				1,510				4,326				7,024
Investment securities			57,277				74,360				185,118				223,661
Trading account securities			7,136				7,227				20,313				28,638
Total interest income			550,687				454,463				1,434,603				1,414,701
INTEREST EXPENSE:
Deposits			86,330				118,941				269,919				395,432
Short-term borrowings			14,945				16,142				45,756				53,476
Long-term debt			62,494				42,991				184,117				133,858
Total interest expense			163,769				178,074				499,792				582,766
Net interest income			386,918				276,389				934,811				831,935
Provision for loan losses			215,013				331,063				657,471				1,053,036
Net interest income after provision for loan losses			171,905				(54,674	)			277,340				(221,101	)
Service charges on deposit accounts			48,608				54,208				149,865				161,412
Other service fees (See Note 24)			100,822				97,614				305,867				298,584
Net gain (loss) on sale and valuation adjustments of investment securities			3,732				(9,059	)			4,210				220,792
Trading account profit			5,860				7,579				8,101				31,241
Loss on sale of loans, including adjustments to indemnity reserves, and valuation adjustments on loans held-for-sale			(1,573	)			(8,728	)			(23,106	)			(35,994	)
FDIC loss share expense			(36,936	)			—				(13,602	)			—
Fair value change in equity appreciation instrument			10,641				—				35,035				—
Gain on sale of processing and technology business			640,802				—				640,802				—
Other operating income			24,568				18,430				63,076				44,579
Total non-interest income			796,524				160,044				1,170,248				720,614
OPERATING EXPENSES:
Personnel costs:
Salaries			116,426				102,822				321,423				315,224
Pension and other benefits			24,779				27,725				78,746				96,820
Total personnel costs			141,205				130,547				400,169				412,044
Net occupancy expenses			28,425				28,269				86,359				80,734
Equipment expenses			25,432				24,983				74,231				76,289
Other taxes			13,872				13,109				38,635				39,369
Professional fees			48,224				28,694				109,498				80,643
Communications			9,514				11,902				31,628				36,115
Business promotion			11,260				8,905				29,759				26,761
Printing and supplies			2,876				2,857				7,898				8,664
FDIC deposit insurance			17,183				16,506				49,894				61,954
Loss (gain) on early extinguishment of debt			25,448				(79,304	)			26,426				(79,304	)
Other operating expenses			45,697				31,753				119,464				104,955
Amortization of intangibles			2,411				2,379				6,915				7,218
Total operating expenses			371,547				220,600				980,876				855,442
Income (loss) from continuing operations before income tax			596,882				(115,230	)			466,712				(355,929	)
Income tax expense (benefit)			102,388				6,331				113,101				(15,209	)
Income (loss) from continuing operations			494,494				(121,561	)			353,611				(340,720	)
Loss from discontinued operations, net of income tax			—				(3,427	)			—				(19,972	)
NET INCOME (LOSS)		$	494,494				($124,988	)		$	353,611				($360,692	)
NET INCOME APPLICABLE TO COMMON STOCK		$	494,494			$	595,614			$	161,944			$	310,604
NET INCOME PER COMMON SHARE — BASIC
Net income from continuing operations		$	0.48			$	1.41			$	0.19			$	1.00
Net loss from discontinued operations			—				(0.01	)			—				(0.06	)
Net income per common share — basic		$	0.48			$	1.40			$	0.19			$	0.94
NET INCOME PER COMMON SHARE — DILUTED
Net income from continuing operations		$	0.48			$	1.41			$	0.19			$	1.00
Net loss from discontinued operations			—				(0.01	)			—				(0.06	)
Net income per common share — diluted		$	0.48			$	1.40			$	0.19			$	0.94
DIVIDENDS DECLARED PER COMMON SHARE			—				—				—			$	0.02

The accompanying notes are an integral part of these unaudited consolidated financial statements.

POPULAR INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY(UNAUDITED)

		Common stock,																Accumulated other
		including																comprehensive
(In thousands)		treasury stock				Preferred stock				Surplus				Accumulated deficit				(loss) income				Total
Balance as of December 31, 2008		$	1,566,277			$	1,483,525			$	621,879				($374,488	)			($28,829	)		$	3,268,364
Net loss															(360,692	)							(360,692	)
Accretion of discount							4,515	[3]							(4,515)	[3]
Exchange of preferred stock for trust preferred securities issued							(901,165	)							485,280	[1]							(415,885	)
Issuance of common stock in exchange of preferred stock			1,717				(536,715	)			291,974				230,388	[1]							(12,636	)
Issuance of common stock in connection with early extinguishment of debt			1,858								315,794												317,652
Issuance costs											1,018	[2]											1,018
Stock options expense on unexercised options, net of forfeitures											162												162
Change in par value			(1,689,389)	[4]							1,689,389	[4]
Cash dividends declared:
Common stock															(5,641	)							(5,641	)
Preferred stock															(39,857	)							(39,857	)
Common stock reissuance			378																				378
Common stock purchases			(13	)																			(13	)
Treasury stock retired			125,556								(125,556	)
Other comprehensive loss, net of tax																			(10,394	)			(10,394	)
Balance as of September
30, 2009		$	6,384			$	50,160			$	2,794,660				($69,525	)			($39,223	)		$	2,742,456
Balance as of December
31, 2009		$	6,380			$	50,160			$	2,804,238				($292,752	)			($29,209	)		$	2,538,817
Net income															353,611								353,611
Issuance of stocks							1,150,000	[5]															1,150,000
Issuance of common stock upon conversion of preferred stock			3,834	[5]			(1,150,000)	[5]			1,337,833	[5]											191,667
Issuance costs											(47,769)	[6]											(47,769	)
Deemed dividend on preferred stock															(191,667	)							(191,667	)
Common stock purchases			(530	)																			(530	)
Other comprehensive income, net of tax																			115,071				115,071
Balance as of September
30, 2010		$	9,684			$	50,160			$	4,094,302				($130,808	)		$	85,862			$	4,109,200

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Disclosure of changes in number of shares:

		September 30,				December 31,				September 30,
		2010				2009				2009
Preferred Stock:
Balance at beginning of period (January 1)			2,006,391				24,410,000				24,410,000
Issuance of stocks			1,150,000	[1]
Exchange of stocks							(22,403,609	) [2]			(22,403,609	) [2]
Conversion of stocks			(1,150,000	) [1]			—
Balance at end of period			2,006,391				2,006,391				2,006,391
Common Stock — Issued:
Balance at beginning of period			639,544,895				295,632,080				295,632,080
Issuance of stocks			383,333,333	[1]			357,510,076	[3]			357,510,076	[3]
Treasury stock retired			—				(13,597,261	)			(13,597,261	)
Balance at end of period			1,022,878,228				639,544,895				639,544,895
Treasury Stock			(191,810	)			(4,790	)			(3,380	)
Common Stock — Outstanding			1,022,686,418				639,540,105				639,541,515

The accompanying notes are an integral part of these unaudited consolidated financial statements.

POPULAR, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

		Quarter ended								Nine months ended
		September 30,								September 30,
(In thousands)		2010				2009				2010				2009
Net income (loss)		$	494,494				($124,988	)		$	353,611				($360,692	)
Other comprehensive income (loss) before tax:
Foreign currency translation adjustment			1,017				(1,360	)			440				(2,117	)
Reclassification adjustment for losses included in net income (loss)			4,967				—				4,967				—
Adjustment of pension and postretirement benefit plans			1,709				3,128				7,945				66,223
Unrealized holding gains on securities available-for-sale arising during the period			7,438				82,934				124,350				63,535
Reclassification adjustment for (gains) losses included in net income (loss)			(3,717	)			3,688				(3,701	)			(173,868	)
Unrealized net losses on cash flow hedges			(623	)			(995	)			(2,163	)			(2,618	)
Reclassification adjustment for losses included in net income (loss)			1,509				37				341				5,920
Other comprehensive income (loss) before tax:			12,300				87,432				132,179				(42,925	)
Income tax (expense) benefit			(888	)			(9,955	)			(17,108	)			32,531
Total other comprehensive income (loss), net of tax			11,412				77,477				115,071				(10,394	)
Comprehensive income (loss), net of tax		$	505,906				($47,511	)		$	468,682				($371,086	)

Tax Effects Allocated to Each Component of Other Comprehensive Income (Loss):

		Quarter ended								Nine months ended
		September 30,								September 30,
(In thousands)		2010				2009				2010				2009
Underfunding of pension and postretirement benefit plans			($882	)			($1,272	)			($2,647	)			($24,055	)
Unrealized holding gains on securities available-for-sale arising during the period			(217	)			(9,137	)			(15,724	)			(5,844	)
Reclassification adjustment for (gains) losses included in net income (loss)			556				81				552				62,790
Unrealized net losses on cash flows hedges			244				388				844				1,021
Reclassification adjustment for losses included in net income (loss)			(589	)			(15	)			(133	)			(1,381	)
Income tax (expense) benefit			($888	)			($9,955	)			($17,108	)		$	32,531

Disclosure of accumulated other comprehensive income (loss):

		September 30,				December 31,				September 30,
(In thousands)		2010				2009				2009
Foreign currency translation adjustment			($35,269	)			($40,676	)			($41,185	)
Underfunding of pension and postretirement benefit plans			(119,841	)			(127,786	)			(193,986	)
Tax effect			45,919				48,566				75,586
Underfunding of pension and postretirement benefit plans, net of tax			(73,922	)			(79,220	)			(118,400	)
Unrealized holding gains on securities available-for-sale			224,739				104,090				139,641
Tax effect			(29,306	)			(14,134	)			(18,672	)
Unrealized holding gains on securities available-for-sale, net of tax			195,433				89,956				120,969
Unrealized (losses) gains on cash flows hedges			(623	)			1,199				(995	)
Tax effect			243				(468	)			388
Unrealized (losses) gains on cash flows hedges, net of tax			(380	)			731				(607	)
Accumulated other comprehensive income (loss)		$	85,862				($29,209	)			($39,223	)

The accompanying notes are an integral part of these unaudited consolidated financial statements.

POPULAR, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

		Nine months ended
		September 30,
(In thousands)		2010				2009
Cash flows from operating activities:
Net income (loss)		$	353,611				($360,692	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization of premises and equipment			47,084				49,033
Provision for loan losses			657,471				1,053,036
Amortization of intangibles			6,915				7,218
Fair value adjustments of mortgage servicing rights			19,959				17,598
Net (accretion of discounts) amortization of premiums and deferred fees			(150,577	)			50,613
Net gain on sale and valuation adjustments of investment securities			(4,210	)			(220,792	)
Fair value change in equity appreciation instrument			(35,035	)			—
FDIC loss share expense			13,602				—
Gains from changes in fair value related to instruments measured at fair value pursuant to the fair value option			—				(1,674	)
Net (gain) loss on disposition of premises and equipment			(1,993	)			1,696
Net loss on sale of loans, including adjustments to indemnity reserves, and valuation adjustments on loans held-for-sale			23,106				41,202
Loss (gain) on early extinguishment of debt			26,426				(79,304	)
Gain on sale of processing and technology business, net of transaction costs			(616,186	)			—
Earnings from investments under the equity method			(16,144	)			(14,307	)
Stock options expense			—				162
Deferred income taxes, net of valuation			2,458				(76,444	)
Net disbursements on loans held-for-sale			(494,312	)			(919,719	)
Acquisitions of loans held-for-sale			(213,897	)			(280,243	)
Proceeds from sale of loans held-for-sale			57,831				65,258
Net decrease in trading securities			565,611				1,302,093
Net decrease in accrued income receivable			1,806				24,935
Net decrease in other assets			5,521				26,935
Net decrease in interest payable			(34,559	)			(57,763	)
Net increase in postretirement benefit obligation			1,825				3,652
Net increase in other liabilities			95,902				65,431
Total adjustments			(41,396	)			1,058,616
Net cash provided by operating activities			312,215				697,924
Cash flows from investing activities:
Net increase in money market investments			(924,913	)			(304,169	)
Purchases of investment securities:
Available-for-sale			(688,678	)			(4,105,915	)
Held-to-maturity			(52,198	)			(54,562	)
Other			(44,021	)			(36,601	)
Proceeds from calls, paydowns, maturities and redemptions of investment securities:
Available-for-sale			1,329,390				1,261,801
Held-to-maturity			51,067				136,535
Other			108,470				62,480
Proceeds from sale of investment securities available-for-sale			396,676				3,825,502
Proceeds from sale of other investment securities			—				52,294
Net repayments on loans			1,292,935				666,618
Proceeds from sale of loans			15,908				325,414
Acquisition of loan portfolios			(130,488	)			(37,965	)
Cash received from acquisitions			261,311				—
Net proceeds from sale of processing and technology businesses			642,322				—
Mortgage servicing rights purchased			(598	)			(1,029	)
Acquisition of premises and equipment			(40,336	)			(55,625	)
Proceeds from sale of premises and equipment			13,503				36,105
Proceeds from sale of foreclosed assets			120,412				107,720
Net cash provided by investing activities			2,350,762				1,878,603
Cash flows from financing activities:
Net decrease in deposits			(574,739	)			(1,167,108	)
Net decrease in assets sold under agreements to repurchase			(274,651	)			(743,717	)
Net increase (decrease) in other short-term borrowings			184,016				(1,857	)
Payments of notes payable			(3,281,449	)			(807,002	)
Proceeds from issuance of notes payable			111,101				61,100
Prepayment penalties paid on cancellation of debt			(25,475	)			—
Net proceeds from issuance of depositary shares			1,102,231				—
Dividends paid			—				(71,438	)
Issuance costs and fees paid on exchange of preferred stock and trust preferred securities			—				(24,618	)
Treasury stock acquired			(530	)			(13	)
Net cash used in financing activities			(2,759,496	)			(2,754,653	)
Net decrease in cash and due from banks			(96,519	)			(178,126	)
Cash and due from banks at beginning of period			677,330				784,987
Cash and due from banks at end of period		$	580,811			$	606,861

Note: The Consolidated Statement of Cash Flows for the nine months ended September 30, 2009 includes the cash flows from operating, investing and financing activities associated with discontinued operations.

Notes to Unaudited Consolidated Financial Statements

Note 1		—		Nature of Operations
Note 2		—		Business Combination
Note 3		—		Sale of Processing and Technology Business
Note 4		—		Basis of Presentation and Summary of Significant Accounting Policies
Note 5		—		Adoption of New Accounting Standards and Issued But Not Yet Effective Accounting Standards
Note 6		—		Discontinued Operations
Note 7		—		Restrictions on Cash and Due from Banks and Certain Securities
Note 8		—		Pledged Assets
Note 9		—		Investment Securities Available-For-Sale
Note 10		—		Investment Securities Held-to-Maturity
Note 11		—		Loans Held-in-Portfolio and Allowance for Loan Losses
Note 12		—		Transfers of Financial Assets and Mortgage Servicing Rights
Note 13		—		Other Assets
Note 14		—		Goodwill and Other Intangible Assets
Note 15		—		Deposits
Note 16		—		Borrowings
Note 17		—		Trust Preferred Securities
Note 18		—		Stockholders’ Equity
Note 19		—		Commitments, Contingencies and Guarantees
Note 20		—		Non-consolidated Variable Interest Entities
Note 21		—		Fair Value Measurement
Note 22		—		Fair Value of Financial Instruments
Note 23		—		Net Income per Common Share
Note 24		—		Other Service Fees
Note 25		—		Pension and Postretirement Benefits
Note 26		—		Stock-Based Compensation
Note 27		—		Income Taxes
Note 28		—		Supplemental Disclosure on the Consolidated Statements of Cash Flows
Note 29		—		Segment Reporting
Note 30		—		Subsequent Events
Note 31		—		Condensed Consolidating Financial Information of Guarantor and Issuers of Registered Guaranteed Securities

Notes to Unaudited Consolidated Financial Statements

Note 1 — Nature of Operations

Popular, Inc. (the “Corporation” or “Popular”) is a diversified, publicly owned financial holding company subject to the supervision and regulation of the Board of Governors of the Federal Reserve System. The Corporation has operations in Puerto Rico, the United States, the Caribbean and Latin America. In Puerto Rico, the Corporation provides retail and commercial banking services through its principal banking subsidiary, Banco Popular de Puerto Rico (“BPPR”), as well as auto and equipment leasing and financing, mortgage loans, investment banking, broker-dealer and insurance services through specialized subsidiaries. In the United States, the Corporation operates Banco Popular North America (“BPNA”), including its wholly-owned subsidiary E-LOAN. BPNA is a community bank providing a broad range of financial services and products to the communities it serves. BPNA operates branches in New York, California, Illinois, New Jersey and Florida. E-LOAN markets deposit accounts under its name for the benefit of BPNA. The sections that follow provide a description of two significant transactions that impacted the Corporation’s operations during 2010.

Westernbank FDIC-Assisted Transaction

On April 30, 2010, BPPR entered into a purchase and assumption agreement with the Federal Deposit Insurance Corporation (the “FDIC”) to acquire certain assets and assume certain deposits and liabilities of Westernbank Puerto Rico, a Puerto Rico state-chartered bank headquartered in Mayaguez, Puerto Rico (“Westernbank”)(herein the “Westernbank FDIC-assisted transaction”). Westernbank was a wholly-owned commercial bank subsidiary of W Holding Company, Inc. and operated through a network of 44 branches located throughout Puerto Rico. In August 2010, Popular successfully completed the Westernbank’s systems and branch conversions. All retail and commercial accounts were converted to Popular’s applications. Furthermore, out of the estimated 1,440 full-time equivalent employees (“FTEs”) that Westernbank had at the time of acquisition, the Corporation has hired to date close to 816 FTEs. The Corporation retained a limited number of the branches, some of which were consolidated with other existing branches of BPPR. Refer to Note 2 to the consolidated financial statements for detailed information on the Westernbank FDIC-assisted transaction. Refer to the Corporation’s Form 8-K/A filed on July 16, 2010 for additional information with respect to this FDIC-assisted transaction.

EVERTEC

On September 30, 2010, the Corporation completed the sale of a 51% interest in EVERTEC, including the Corporation’s merchant acquiring and processing and technology businesses (the “EVERTEC transaction”), and continues to hold the remaining 49% interest in the company. Refer to Note 3 to the consolidated financial statements for a description of the EVERTEC transaction. EVERTEC provides transaction processing services throughout the Caribbean and Latin America, and continues to provide processing and technology services to many of Popular’s subsidiaries.

Note 2 — Business Combination

As indicated in Note 1 to the consolidated financial statements, on April 30, 2010, the Corporation’s banking subsidiary, BPPR, acquired certain assets and assumed certain deposits of Westernbank Puerto Rico from the FDIC, as receiver for Westernbank, in an assisted transaction. BPPR acquired approximately $9.1 billion in assets and assumed approximately $2.4 billion in deposits, excluding the effects of purchase accounting adjustments. As part of the transaction, on April 30, 2010, BPPR issued a five-year $5.8 billion note payable to the FDIC bearing an annual interest rate of 2.50%. The note is secured by a substantial amount of the assets, including loans and foreclosed other real estate properties acquired by BPPR from the FDIC in the Westernbank FDIC-assisted transaction, and which are subject to the loss sharing agreements. In addition, as part of the consideration for the transaction, the FDIC received a cash-settled equity appreciation instrument, which is described in detail below.

Loss Sharing Agreements

In connection with the acquisition, BPPR entered into loss sharing agreements with the FDIC with respect to approximately $8.6 billion of loans and other real estate (the “covered assets”) acquired in the Westernbank FDIC-assisted transaction. Pursuant to the terms of the loss sharing agreements, the FDIC’s obligation to reimburse BPPR for losses with respect to covered assets begins with the first dollar of loss incurred. The FDIC will reimburse BPPR

for 80% of losses with respect to covered assets, and BPPR will reimburse the FDIC for 80% of recoveries with respect to losses for which the FDIC paid BPPR 80% reimbursement under the loss sharing agreements. The loss sharing agreement applicable to single-family residential mortgage loans provides for FDIC loss and recoveries sharing for ten years. The loss sharing agreement applicable to commercial and consumer loans provides for FDIC loss sharing for five years and BPPR reimbursement to the FDIC for eight years, in each case, on the same terms and conditions as described above.

In addition, BPPR has agreed to make a true-up payment to the FDIC on the date that is 45 days following the last day (the “True-Up Measurement Date”) of the final shared loss month, or upon the final disposition of all covered assets under the loss sharing agreements in the event losses on the loss sharing agreements fail to reach expected levels. The estimated fair value of such true-up payment is recorded as a reduction in the fair value of the FDIC loss share indemnification asset. Under the loss sharing agreements, BPPR shall pay to the FDIC, 50% of the excess, if any, of: (i) 20% of the Intrinsic Loss Estimate of $4.6 billion (or $925 million)(as determined by the FDIC) less (ii) the sum of: (A) 25% of the asset discount (per bid) (or ($1.1 billion)); plus (B) 25% of the cumulative shared-loss payments (defined as the aggregate of all of the payments made or payable to BPPR minus the aggregate of all of the payments made or payable to the FDIC); plus (C) the sum of the period servicing amounts for every consecutive twelve-month period prior to and ending on the True-Up Measurement Date in respect of each of the loss sharing agreements during which the loss sharing provisions of the applicable loss sharing agreement is in effect (defined as the product of the simple average of the principal amount of shared loss loans and shared loss assets at the beginning and end of such period times 1%).

Covered loans under loss sharing agreements with the FDIC (the “covered loans”) are reported in loans exclusive of the estimated FDIC loss share indemnification asset. The covered loans acquired in the Westernbank transaction are, and will continue to be, reviewed for collectability. Under ASC Subtopic 310-30, if there is a decrease in the expected cash flows on loans due to an increase in estimated credit losses compared to the estimate made at the April 30, 2010 acquisition date, the Corporation will record a charge to the provision for loan losses and an allowance for loan losses will be established. If there is an increase in inherent losses on the loans accounted for under ASC Subtopic 310-20, an allowance for loan losses will be established to record the loans at their net realizable value. A related credit to income and an increase in the FDIC loss share indemnification asset will be recognized at the same time, measured based on the loss share percentages described above, for ASC Subtopic 310-20 and 310-30 loans.

The operating results of the Corporation for the quarter and nine months ended September 30, 2010 include the operating results produced by the acquired assets and liabilities assumed for the period of May 1, 2010 to September 30, 2010. The Corporation believes that given the nature of assets and liabilities assumed, the significant amount of fair value adjustments, the nature of additional consideration provided to the FDIC (note payable and equity appreciation instrument) and the FDIC loss sharing agreements now in place, historical results of Westernbank are not meaningful to Popular’s results, and thus no pro forma information is presented.

The following table presents balances recorded by the Corporation at the time of the Westernbank FDIC-assisted transaction on April 30, 2010.

		Book value prior
		to purchase												As recorded by
		accounting				Fair value				Additional				Popular, Inc. on
(In thousands)		adjustments				adjustments				consideration				April 30, 2010
Assets:
Cash and money market investments		$	358,132				—				—			$	358,132
Investment in Federal Home Loan Bank stock			58,610				—				—				58,610
Covered loans			8,503,839				($4,286,847	)			—				4,216,992
Non-covered loans			50,905				(6,909	)			—				43,996
FDIC loss share indemnification asset			—				3,322,561				—				3,322,561
Covered other real estate owned			125,947				(52,712	)			—				73,235
Core deposit intangible			—				24,415				—				24,415
Receivable from FDIC (associated to the note issued to the FDIC)			—				—			$	111,101				111,101
Other assets			44,926				—				—				44,926
Total assets		$	9,142,359				($999,492	)		$	111,101			$	8,253,968
Liabilities:
Deposits		$	2,380,170			$	11,465				—			$	2,391,635
Note issued to the FDIC (including a premium of $11,612 resulting from the fair value adjustment)			—				—			$	5,769,696				5,769,696
Equity appreciation instrument			—				—				52,500				52,500
Contingent liability on unfunded loan commitments			—				132,442				—				132,442
Accrued expenses and other liabilities			13,925				—				—				13,925
Total liabilities		$	2,394,095			$	143,907			$	5,822,196			$	8,360,198
Excess of assets acquired over liabilities assumed		$	6,748,264
Aggregate fair value adjustments							($1,143,399	)
Aggregate additional consideration, net										$	5,711,095
Goodwill on acquisition														$	106,230

As previously disclosed, the fair values initially assigned to the assets acquired and liabilities assumed were preliminary and subject to refinement for up to one year after the closing date of the acquisition as new information relative to closing date fair values becomes available. Because of the size of the transaction and delays in the receipt of certain information, the Corporation continues to analyze its estimates of fair value on loans acquired, FDIC loss share indemnification asset recorded and the note issued to the FDIC. As the Corporation finalizes its analyses of these assets and liabilities, there may be adjustments to the recorded carrying values, and thus the recognized goodwill may increase or decrease.

The following is a description of the methods used to determine the fair values of significant assets acquired and liabilities assumed in the Westernbank FDIC-assisted transaction:

Loans

Fair values for loans were based on a discounted cash flow methodology. Certain loans were valued individually, while other loans were valued as pools. Aggregation into pools considered characteristics such as loan type, payment term, rate type and accruing status. Principal and interest projections considered prepayment rates and credit loss expectations. The discount rates were developed based on the relative risk of the cash flows, taking into account principally the loan type, market rates as of the valuation date, liquidity expectations, and the expected life of the loans.

FDIC loss share indemnification asset

Fair value was estimated using projected cash flows related to the loss sharing agreements based on the expected reimbursements for losses, including consideration of the true up payment and the applicable loss sharing percentages. These expected reimbursements do not include reimbursable amounts related to future covered expenditures. The estimates of expected losses used in valuation of this asset are consistent with the loss estimates used in the valuation of the covered assets. These cash flows were discounted to reflect the estimated timing of the receipt of the loss share reimbursement from the FDIC and the value of any true-up payment due to the FDIC at the end of the loss sharing agreements, to the extent applicable. The discount rate used in this calculation was

determined using a yield of an A-rated corporate security with a term based on the weighted average life of the recovery of cash flows plus a risk premium reflecting the uncertainty related to the timing of cash flows and the potential rejection of claims by the FDIC. Due to the increased uncertainty of the true-up payment, an additional risk premium was added to the discount rate.

As of September 30, 2010, the Corporation has not made any claims to the FDIC associated with losses incurred on covered loans or covered other real estate owned.

Receivable from the FDIC

The note issued to the FDIC as of the April 30, 2010 transaction date was determined based on a pro-forma statement of assets acquired and liabilities assumed as of February 24, 2010, the bid transaction date. The receivable from the FDIC represents an adjustment to reconcile the consideration paid based on the assets acquired and liabilities assumed as of April 30, 2010 compared with the pro-forma statement as of February 24, 2010. The carrying amount of this receivable was a reasonable estimate of fair value based on its short-term nature. The receivable from the FDIC was collected by BPPR in June 2010 and is reflected as a cash inflow from financing activities in the consolidated statement of cash flows for the nine months ended September 30, 2010. The proceeds were remitted to the FDIC in July 2010 as a payment on the note.

Other real estate covered under loss sharing agreements with the FDIC (“OREO”)

OREO includes real estate acquired in settlement of loans. OREO properties were recorded at estimated fair values less costs to sell at the date acquired based on management’s assessments of existing appraisals or broker price opinions. The estimated costs to sell are based on past experience with similar property types and terms customary for real estate transactions.

Goodwill

The amount of goodwill is the residual difference in the fair value of liabilities assumed and net consideration paid to the FDIC over the fair value of the assets acquired. The goodwill is deductible for income tax purposes. The goodwill from the Westernbank FDIC-assisted transaction was assigned to the BPPR reportable segment.

Core deposit intangible

This intangible asset represents the value of the relationships that Westernbank had with its deposit customers. The fair value of this intangible asset was estimated based on a discounted cash flow methodology that gave appropriate consideration to expected customer attrition rates, cost of the core deposit base, interest costs, and the net maintenance cost attributable to customer deposits, and the cost of alternative funds.

Deposits

The fair values used for the demand and savings deposits that comprise the transaction accounts acquired, by definition equal the amount payable on demand at the reporting date. The fair values for time deposits were estimated using a discounted cash flow calculation that applies interest rates currently offered to comparable time deposits with similar maturities.

Contingent liability on unfunded loan commitments

Unfunded loan commitments are contractual obligations to provide future funding. The fair value of a liability associated to unfunded loan commitments is principally based on the expected utilization rate or likelihood that the commitment will be exercised. The estimated value of the unfunded commitments was equal to the expected loss associated with the balance expected to be funded. The expected loss is comprised of both credit and non-credit components; therefore, the discounts derived from the loan valuation were applied to the expected balance to be funded to derive the fair value. The unfunded loan commitments outstanding as of the April 30, 2010 transaction date, which approximated $227 million, relate principally to commercial and construction loans and commercial revolving lines of credit. Losses incurred on loan disbursements made under these unfunded loan commitments are covered by the FDIC loss sharing agreements provided that the Corporation complies with specific requirements under such agreements. The contingent liability on unfunded loan commitments is included as part of “other liabilities” in the consolidated statement of condition.

Deferred taxes

Deferred taxes relate to a difference between the financial statement and tax basis of the assets acquired and liabilities assumed in the transaction. Deferred taxes are reported based upon the principles in ASC Topic 740 “Income Taxes”, and are measured using the enacted statutory income tax rate to be in effect for BPPR at the time the deferred tax is expected to reverse, which is 39%.

For income tax purposes, the Westernbank transaction was accounted for as an asset purchase and the tax bases of assets acquired were allocated based on fair values using a modified residual method. Under this method, the purchase price was allocated among the assets in order of liquidity (the most liquid first) up to its fair market value.

Note issued to the FDIC

The fair value of the note issued to the FDIC was determined using discounted cash flows based on market rates currently available for debt with similar terms, including consideration that the debt is collateralized by the assets covered under the loss sharing agreements. The principal source of cash flows to pay down the note derives from the cash flows collected from the covered assets, as well as payments from the FDIC on claimed credit losses associated to the covered assets. The Corporation is required under the agreements with the FDIC to use those proceeds to repay the note and remit payments on a monthly basis.

Equity appreciation instrument

As part of the consideration for the acquisition of Westernbank assets, BPPR also issued an equity appreciation instrument to the FDIC. Under the terms of the equity appreciation instrument, the FDIC has the opportunity to obtain a cash payment with a value equal to the product of (a) 50 million units and (b) the difference between (i) Popular, Inc.’s “average volume weighted price” over the two NASDAQ trading days immediately prior to the exercise date and (ii) the exercise price of $3.43. The equity appreciation instrument is exercisable by the holder thereof, in whole or in part, up to May 7, 2011. The fair value of the equity appreciation instrument was estimated by determining a call option value using the Black-Scholes Option Pricing Model. The equity appreciation instrument is recorded as a liability and any subsequent changes in its estimated fair value will be recognized in earnings. The Corporation recognized non-interest income of $10.6 million and $35.0 million during the quarter and nine-month periods ended September 30, 2010, respectively, as a result of a decrease in the fair value of the equity appreciation instrument. These amounts are separately disclosed in the consolidated statement of operations within the non-interest income category.

Note 3 — Sale of Processing and Technology Business

On June 30, 2010, Popular and its subsidiaries BPPR, Popular International Bank, Inc. (“PIBI”) and EVERTEC completed an internal reorganization transferring certain intellectual property assets and interests in certain of the Corporation’s foreign subsidiaries to EVERTEC. Commencing on June 30, 2010, PIBI’s wholly-owned subsidiaries ATH Costa Rica S.A. and T.I.I. Smart Solutions Inc. became wholly-owned subsidiaries of EVERTEC. Also, in connection with the reorganization, BPPR’s Merchant Business and TicketPop divisions were transferred to EVERTEC. On September 30, 2010, EVERTEC DE VENEZUELA, C.A. became a subsidiary of PIBI and EVERTEC LATINOAMERICA, SOCIEDAD ANONIMA was transferred from PIBI to EVERTEC.

On September 30, 2010, the Corporation completed the sale of a majority interest in its processing and technology business EVERTEC, including the businesses transferred in the internal reorganization discussed above. The Corporation retained EVERTEC’s operations in Venezuela and certain related contracts. Under the terms of the sale, an unrelated third party acquired a 51% interest in EVERTEC for cash under a leverage buyout. The Corporation retained the remaining 49% interest. The Corporation’s investment in EVERTEC, which is accounted for under the equity method, amounted to $177 million as of September 30, 2010, and is included as part of “other assets” in the consolidated statement of condition. The Corporation’s proportionate share of income or loss from EVERTEC will be included in other operating income in the consolidated statements of operations commencing on October 1, 2010.

As a result of the sale, the Corporation recognized a pre-tax gain, net of transaction costs, of approximately $616.2 million ($531.0 million after-tax), of which $640.8 million was separately disclosed within non-interest income in the consolidated statement of operations and $24.6 million are included as operating expenses (transaction costs) for the quarter and nine months ended September 30, 2010. Approximately $94.0 million of the pre-tax gain was the result of marking the Corporation’s retained interest in the EVERTEC business at fair value. This portion of the gain was non-cash. The equity value of the Corporation’s retained interest in the former subsidiary takes into consideration the buyer’s enterprise value of EVERTEC reduced by the leverage financing, net of debt issue costs, utilized as part of the sale transaction. This leverage financing significantly impacts the resulting fair value of the retained interest.

In connection with the leverage transaction, EVERTEC issued financing in the form of unsecured senior notes and a syndicated loan (senior secured credit facility). The Corporation invested $35 million in senior unsecured notes issued by EVERTEC ($17.85 million, net of the intercompany elimination related to the 49% ownership interest maintained by Popular), which bear interest at an annual fixed rate of 11% and mature in October 2018. Also, the Corporation provided financing to EVERTEC by acquiring $58.2 million of the syndicated loan ($29.7 million, net of intercompany eliminations).

Also, as part of the sale, Popular entered into various agreements including a master services agreement pursuant to which EVERTEC will continue providing various processing and information technology services to Popular, BPPR, and their respective subsidiaries. These service costs will be included prospectively in operating expenses on the Corporation’s consolidated statements of operations, net of elimination entries that are required due to Popular holding a 49% ownership interest in EVERTEC. Also, as part of the agreement, BPPR commits to support the ATH debit cards as well as the ATH network, owned and operated by EVERTEC.

The equity investments in the processing businesses of Servicios Financieros, S.A. de C.V. (“Serfinsa”) and Consorcio de Tarjetas Dominicanas, S.A. (“CONTADO”) continued to be held by the Corporation as of September 30, 2010. Under the terms of the merger agreement, the Corporation is required for a period of twelve months following the merger to continue to seek to sell its equity interests in such entities to EVERTEC, subject to complying with certain rights of first refusal in favor of the Serfinsa and CONTADO shareholders. The Corporation’s investments in Serfinsa and Contado, accounted for under the equity method, amounted to $1.3 million and $15.9 million, respectively, as of September 30, 2010.

Note 4 — Basis of Presentation and Summary of Significant Accounting Policies

The consolidated financial statements include the accounts of Popular, Inc. and its majority-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. The consolidated interim financial statements have been prepared without audit. The statement of condition data as of December 31, 2009 was derived from audited financial statements. The unaudited interim financial statements are, in the opinion of management, a fair statement of the results for the periods reported and include all necessary adjustments, all of a normal recurring nature, for a fair statement of such results.

Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted from the unaudited financial statements pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, these financial statements should be read in conjunction with the audited consolidated financial statements of the Corporation for the year ended December 31, 2009, included in the Corporation’s Annual Report on Form 10-K filed on March 1, 2010 (the “2009 Annual Report”). Additionally, where applicable, the policies conform to the accounting and reporting guidelines prescribed by bank regulatory authorities. Operating results for the interim periods disclosed herein are not necessarily indicative of the results that may be expected for a full year or any future period.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the consolidated statement of condition.

Management exercised significant judgment regarding assumptions about discount rates, future expected cash flows including prepayments, default rates, market conditions and other future events that are highly subjective in nature, and subject to change, and all of which affected the estimation of the fair values of the net assets acquired in the Westernbank FDIC-assisted transaction. Actual results could differ from those estimates; others provided with the same information could draw different reasonable conclusions and calculate different fair values. Changes that may vary significantly from our assumptions include loan prepayments, credit losses, the estimated market values of collateral at disposition, the timing of such disposition, and deposit attrition.

Reclassifications

Servicing rights related to commercial loans (Small Business Administration), which are accounted for under the amortization method, have been reclassified to other assets in all periods presented, while mortgage servicing rights, which are accounted for at fair value, are presented separately in the consolidated statements of condition. Amounts reported in prior periods’ consolidated financial statements have been reclassified to conform to the current presentation. Such reclassifications had no effect on previously reported cash flows, shareholders’ equity or net income.

Business Acquisition

The Corporation determined that the acquisition of certain assets and assumption of certain liabilities of Westernbank in the Westernbank FDIC-assisted transaction constitutes a business acquisition as defined by the Financial Accounting Standards Board (“FASB”) Codification (“ASC”) Topic 805 “Business Combinations”. The assets and liabilities, both tangible and intangible, were initially recorded at their estimated fair values. Fair values were determined based on the requirements of FASB Codification Topic 820 “Fair Value Measurements”. These fair value estimates are preliminary and subject to refinement for up to one year after the closing date of the acquisition as additional information regarding the closing date fair value becomes available. Acquisition-related costs are expensed as incurred.

Loans acquired in an FDIC-assisted transaction

Loans acquired in a business acquisition are recorded at their fair value at the acquisition date. Credit discounts are included in the determination of fair value; therefore, an allowance for loan losses is not recorded at the acquisition date.

Loans accounted for under ASC Subtopic 310-30 represent loans showing evidence of credit deterioration and that it is probable, at the date of acquisition, that the Corporation will not collect all contractually required principal and interest payments. Generally, acquired loans that meet the definition for nonaccrual status fall within the Corporation’s definition of impaired loans under ASC Subtopic 310-30. Also, based on the fair value determined for the acquired portfolio, acquired loans that did not meet the definition of nonaccrual status also resulted in the recognition of a significant discount attributable to credit quality. Accordingly, an election was made by the Corporation to apply the accretable yield method (expected cash flow model of ASC Subtopic 310-30), as a loan with credit deterioration and impairment, instead of the standard loan discount accretion guidance of ASC Subtopic 310-20. These loans are disclosed as a loan that was acquired with credit deterioration and impairment.

The Corporation applied the guidance of ASC Subtopic 310-30 to all loans acquired in the transaction (including loans that do not meet scope of ASC Subtopic 310-30), except for credit cards and revolving lines of credit that were expressly scoped out from the application of this guidance since they continued to have revolving privileges after acquisition. Management used its judgment in evaluating factors impacting expected cash flows and probable loss assumptions, including the quality of the loan portfolio, portfolio concentrations, distressed economic conditions in Puerto Rico, quality of underwriting standards of the acquired institution, reductions in collateral real estate values, among other considerations that could also impact the expected cash inflows on the loans.

Under ASC Subtopic 310-30, the covered loans acquired from the FDIC were aggregated into pools based on loans that had common risk characteristics. Each loan pool is accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows. Characteristics considered in pooling loans in the FDIC-assisted transaction included loan type, interest rate type, accruing status, and amortization type. Once the pools are defined, the Corporation maintains the integrity of the pool of multiple loans accounted for as a single asset.

Under ASC Subtopic 310-30, the difference between the undiscounted cash flows expected at acquisition and the fair value in the loans, or the “accretable yield,” is recognized as interest income using the effective yield method over the estimated life of the loan if the timing and amount of the future cash flows of the pool is reasonably estimable. The non-accretable difference represents the difference between contractually required principal and interest and the cash flows expected to be collected. Subsequent to the acquisition date, increases in cash flows over those expected at the acquisition date are recognized as interest income prospectively. Decreases in expected cash flows after the acquisition date are recognized by recording an allowance for loan losses.

The fair value discount of lines of credit with revolving privileges that are accounted for pursuant to the guidance of ASC Subtopic 310-20 represents the difference between the contractually required loan payment receivable in excess of the initial investment in the loan. This discount is accreted into interest income over the life of the loan if the loan is in accruing status. Any cash flows collected in excess of the carrying amount of the loan are recognized in earnings at the time of collection. The carrying amount of lines of credit with revolving privileges, which are accounted pursuant to the guidance of ASC Subtopic 310-20, are subject to periodic review to determine the need for recognizing an allowance for loan losses.

Covered Assets

Assets subject to loss sharing agreements with the FDIC are labeled “covered” on the consolidated statement of condition and include certain loans and other real estate properties. Loans acquired in the Westernbank FDIC-assisted transaction, except for credit cards, are considered “covered loans” because the Corporation will be reimbursed for 80% of any future losses on these loans subject to the terms of the FDIC loss sharing agreements.

FDIC Loss Share Indemnification Asset

The acquisition date fair value of the reimbursement that the Corporation expects to receive from the FDIC under the loss sharing agreements was recorded as an FDIC loss share indemnification asset on the consolidated statement of condition. Fair value was estimated using projected cash flows related to the loss sharing agreements. Refer to Note 2 for additional information on the valuation methodology.

The FDIC loss share indemnification asset for loss share agreements is measured separately from the related covered assets as it is not contractually embedded in the assets and is not transferable with the assets should the assets be sold.

The impact of the FDIC loss share indemnification on the Corporation’s results of operations is included in non-interest income, particularly in the category of “FDIC loss share expense”, and considers the accretion due to discounting and the changes in expected loss sharing reimbursements.

The indemnification asset is recognized on the same basis as the assets subject to loss share protection. As such, for covered loans accounted pursuant to ASC Subtopic 310-30, decreases in expected reimbursements will be recognized in income prospectively consistent with the approach taken to recognize increases in cash flows on covered loans. For covered loans accounted for under ASC Subtopic 310-20, as the loan discount recorded as of the acquisition date is accreted into income, a reduction of the corresponding indemnification asset is recorded as a reduction in non-interest income.

Increases in expected reimbursements will be recognized in income in the same period that the allowance for credit losses for the related loans is recognized.

Equity Appreciation Instrument

The equity appreciation instrument is recorded as an “other liability” in the consolidated statement of condition and any subsequent change in its estimated fair value is recognized in earnings on each quarterly reporting date. Refer to Note 2 to the consolidated financial statements for additional information on the equity appreciation instrument issued to the FDIC.

Note 5 — Adoption of New Accounting Standards and Issued But Not Yet Effective Accounting Standards

FASB Accounting Standards Update 2009-16, Transfers and Servicing (Accounting Standards Codification (“ASC”) Topic 860) — Accounting for Transfers of Financial Assets (“ASU 2009-16”)

ASU 2009-16 amends previous guidance relating to transfers of financial assets and eliminates the concept of a qualifying special-purpose entity, removes the exception for guaranteed mortgage securitizations when a transferor has not surrendered control over the transferred financial assets, changes the requirements for derecognizing financial assets, and includes additional disclosures requiring more information about transfers of financial assets in which entities have continuing exposure to the risks related to the transferred financial assets. Among the most significant amendments and additions to this guidance are changes to the conditions for sales of financial assets which objective is to determine whether a transferor and its consolidated affiliates included in the financial statements have surrendered control over transferred financial assets or third-party beneficial interests, and the addition of the meaning of the term participating interest which represents a proportionate (pro rata) ownership interest in an entire financial asset. The requirements for sale accounting must be applied only to a financial asset in its entirety, a pool of financial assets in its entirety, or participating interests as defined in ASC paragraph 860-10-40-6A. This guidance has been applied as of the beginning of the first annual reporting period that began after November 15, 2009, for interim periods within that first annual reporting period and will be applied for interim and annual reporting periods thereafter. Earlier application was prohibited. The recognition and measurement provisions have been applied to transfers that have occurred on or after the effective date. On and after the effective date,

existing qualifying special-purpose entities have been evaluated for consolidation in accordance with the applicable consolidation guidance in the Codification. The Corporation adopted this new authoritative accounting guidance effective January 1, 2010. The Corporation evaluated transfers of financial assets executed during the nine months ended September 30, 2010 pursuant to the new accounting guidance, principally consisting of guaranteed mortgage securitizations (Government National Mortgage Association (“GNMA”) and Federal National Mortgage Association (“FNMA”) mortgage-backed securities), and determined that the adoption of ASU 2009-16 did not have a significant impact on the Corporation’s accounting for such transactions or results of operations or financial condition for such period.

A securitization of a financial asset, a participating interest in a financial asset, or a pool of financial assets in which the Corporation (and its consolidated affiliates) (a) surrenders control over the transferred assets and (b) receives cash or other proceeds is accounted for as a sale. Control is considered to be surrendered only if all three of the following conditions are met: (1) the assets have been legally isolated; (2) the transferee has the ability to pledge or exchange the assets; and (3) the transferor no longer maintains effective control over the assets. When the Corporation transfers financial assets and the transfer fails any one of the above criteria, the Corporation is prevented from derecognizing the transferred financial assets and the transaction is accounted for as a secured borrowing.

The Corporation recognizes and initially measures at fair value a servicing asset or servicing liability each time it undertakes an obligation to service a financial asset by entering into a servicing contract in either of the following situations: (1) a transfer of an entire financial asset, a group of entire financial assets, or a participating interest in an entire financial asset that meets the requirements for sale accounting; or (2) an acquisition or assumption of a servicing obligation of financial assets that do not pertain to the Corporation or its consolidated subsidiaries. Upon adoption of ASU 2009-16, the Corporation does not recognize either a servicing asset or a servicing liability if it transfers or securitizes financial assets in a transaction that does not meet the requirements for sale accounting and is accounted for as a secured borrowing.

Refer to Note 12 to the consolidated financial statements for disclosures on transfers of financial assets and servicing assets retained as part of guaranteed mortgage securitizations.

FASB Accounting Standards Update 2009-17, Consolidations (ASC Topic 810) — Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities (“ASU 2009-17”) and FASB Accounting Standards Update 2010-10, Consolidation (ASC Topic 810): Amendments for Certain Investment Funds (“ASU 2010-10”)

ASU 2009-17 amends the guidance applicable to variable interest entities (“VIEs”) and changes how a reporting entity determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated. This guidance replaces a quantitative-based risks and rewards calculation for determining which entity, if any, has both (a) a controlling financial interest in a VIE with an approach focused on identifying which entity has the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and (b) the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE. This guidance requires reconsideration of whether an entity is a VIE when any changes in facts or circumstances occur such that the holders of the equity investment at risk, as a group, lose the power to direct the activities of the entity that most significantly impact the entity’s economic performance. It also requires ongoing assessments of whether a variable interest holder is the primary beneficiary of a VIE. The amendments to the consolidated guidance affect all entities that were within the scope of the original guidance, as well as qualifying special-purpose entities (“QSPEs”) that were previously excluded from the guidance. ASU 2009-17 requires a reporting entity to provide additional disclosures about its involvement with VIEs and any significant changes in risk exposure due to that involvement. The Corporation adopted this new authoritative accounting guidance effective January 1, 2010. The new accounting guidance on VIEs did not have an effect on the Corporation’s consolidated statement of condition or results of operations upon adoption.

The principal VIEs evaluated by the Corporation during the nine months ended September 30, 2010 included: (1) GNMA and FNMA guaranteed mortgage securitizations and for which management has concluded that the Corporation is not the primary beneficiary (refer to Note 20 to the consolidated financial statements) and (2) the trust preferred securities for which management believes that the Corporation does not possess a significant variable interest on the trusts (refer to Note 17 to the consolidated financial statements).

Additionally, the Corporation has variable interests in certain investments that have the attributes of investment companies, as well as limited partnership investments in venture capital companies. However, in January 2010, the FASB issued ASU 2010-10, Consolidation (ASC Topic 810), Amendments for Certain Investment Funds, which deferred the effective date of the provisions of ASU 2009-17 for a reporting entity’s interest in an entity that has all the attributes of an investment company; or for which it is industry practice to apply measurement principles for financial reporting purposes that are consistent with those followed by investment companies. The deferral allows asset managers that have no obligation to fund potentially significant losses of an investment entity to continue to apply the previous accounting guidance to investment entities that have the attributes of entities subject to ASC Topic 946 (the “Investment Company Guide”). The FASB also decided to defer the application of ASU 2009-17 for money market funds subject to Rule 2a-7 of the Investment Company Act of 1940. Asset managers would continue to apply the applicable existing guidance to those entities that qualify for the deferral. ASU 2010-10 did not defer the disclosure requirements in ASU 2009-17.

The Corporation was not required to consolidate existing VIEs for which it has a variable interest as of September 30, 2010. Refer to Note 20 to the consolidated financial statements for required disclosures associated with the guaranteed mortgage securitizations in which the Corporation holds a variable interest.

FASB Accounting Standards Update 2010-06, Fair Value Measurements and Disclosures (ASC Topic 820) - Improving Disclosures about Fair Value Measurements (“ASU 2010-06”)

ASU 2010-06, issued in January 2010, revises two disclosure requirements concerning fair value measurements and clarifies two others. It requires separate presentation of significant transfers into and out of Levels 1 and 2 of the fair value hierarchy and disclosure of the reasons for such transfers. It will also require the presentation of purchases, sales, issuances and settlements within Level 3 on a gross basis rather than a net basis. The amendments also clarify that disclosures should be disaggregated by class of asset or liability and that disclosures about inputs and valuation techniques should be provided for both recurring and non-recurring fair value measurements. ASU 2010-06 has been effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances, and settlements in the rollforward of activity in Level 3 fair value measurements, which are effective for interim and annual reporting periods beginning after December 15, 2010. This guidance impacts disclosures only and will not have an effect on the Corporation’s consolidated statements of condition or results of operations. The Corporation’s disclosures about fair value measurements are presented in Note 21 to the consolidated financial statements.

FASB Accounting Standards Update 2010-11, Derivatives and Hedging (ASC Topic 815): Scope Exception Related to Embedded Credit Derivatives (“ASU 2010-11”)

ASU 2010-11 clarifies the type of embedded credit derivative that is exempt from embedded derivative bifurcation requirements. The type of credit derivative that qualifies for the exemption is related only to the subordination of one financial instrument to another. As a result, entities that have contracts containing an embedded credit derivative feature in a form other than such subordination may need to separately account for the embedded credit derivative feature. The amendments in ASU 2010-11 are effective for each reporting entity at the beginning of its first fiscal quarter beginning after June 15, 2010. The adoption of this standard in the third quarter of 2010 did not have a significant impact on the Corporation’s consolidated financial statements.

FASB Accounting Standards Update 2010-18, Receivables (ASC Topic 310): Effect of a Loan Modification When the Loan is Part of a Pool That is Accounted for as a Single Asset (“ASU 2010-18”)

The amendments in ASU 2010-18, issued in April 2010, affect any entity that acquires loans subject to ASC Subtopic 310-30, that accounts for some or all of those loans within pools, and that subsequently modifies one or more of those loans after acquisition. ASC Subtopic 310-30 provides guidance on accounting for acquired loans that have evidence of credit deterioration upon acquisition. As a result of the amendments in ASU 2010-18, modifications of loans that are accounted for within a pool under ASC Subtopic 310-30 do not result in the removal of those loans from the pool even if the modification of those loans would otherwise be considered a troubled debt restructuring. An entity will continue to be required to consider whether the pool of assets in which the loan is included is impaired if expected cash flows for the pool change. The amendments in ASU 2010-18 do not affect the accounting for loans under the scope of ASC Subtopic 310-30 that are not accounted for within pools. Loans

accounted for individually under ASC Subtopic 310-30 continue to be subject to the troubled debt restructuring accounting provisions within ASC Subtopic 310-40, Receivables—Troubled Debt Restructurings by Creditors. The amendments in ASU 2010-18 are effective for modifications of loans accounted for within pools under ASC Subtopic 310-30 occurring in the first interim or annual period ending on or after July 15, 2010. The amendments are to be applied prospectively. Early application is permitted. Upon initial adoption of the guidance in ASU 2010-18, an entity may make a one-time election to terminate accounting for loans as a pool under ASC Subtopic 310-30. This election may be applied on a pool-by-pool basis and does not preclude an entity from applying pool accounting to subsequent acquisitions of loans with credit deterioration. The Corporation elected to early adopt the provisions of this statement, effective with the closing of the Westernbank FDIC-assisted transaction on April 30, 2010. As a result, the accounting for modified loans follows the guidelines of ASU 2010-18; however, the adoption of these provisions did not have a significant impact on the Corporation’s result of operations or financial position as of September 30, 2010.

FASB Accounting Standards Update 2010-20, Receivables (ASC Topic 310): Disclosure about the Credit Quality of Financing Receivables and the Allowance for Credit Losses (“ASU 2010-20”)

ASU 2010-20, issued in July 2010, expands disclosure requirements about the credit quality of financing receivables and allowance for credit losses. The objective of this ASU is for an entity to provide disclosures that facilitate financial statement users’ evaluation of the following: (1) the nature of credit risk inherent in the entity’s portfolio of financing receivables; (2) how that risk is analyzed and assessed in arriving at the allowance for credit losses; and (3) the changes and reasons for those changes in the allowance for credit losses. Disclosures should be provided on a disaggregated basis on two defined levels: (1) portfolio segment; and (2) class of financing receivable. The ASU 2010-20 makes changes to existing disclosure requirements and includes additional disclosure requirements about financing receivables, including: the credit quality indicators of financing receivables at the end of the reporting period by class of financing receivables; the aging of past due financing receivables at the end of the reporting period by class of financing receivables; and the nature and extent of troubled debt restructurings that occurred during the period by class of financing receivables and their effect on the allowance for credit losses. The disclosure requirements as of the end of a reporting period are effective for interim and annual reporting periods ending on or after December 15, 2010. The disclosures about activity that occurs during a reporting period are effective for interim and annual reporting periods beginning on or after December 15, 2010. This guidance impacts disclosures only and will not have an effect on the Corporation’s consolidated statements of condition or results of operations.

Note 6 — Discontinued Operations

In 2008, the Corporation discontinued the operations of Popular Financial Holdings (“PFH”) by selling assets and closing service branches and other units. The loss from discontinued operations for the quarter and nine months ended September 30, 2009 was $3.4 million and $20.0 million, respectively, net of taxes. This loss was primarily related to salary and other expenses incurred in providing loan portfolio servicing to affiliated companies and other costs for FTEs that were retained for a transition period, as well as adjustments to indemnity reserves on loans previously sold.

Note 7 — Restrictions on Cash and Due from Banks and Certain Securities

The Corporation’s subsidiary banks are required by federal and state regulatory agencies to maintain average reserve balances with the Federal Reserve Bank or other banks. Those required average reserve balances were $828 million as of September 30, 2010 (December 31, 2009 — $721 million; September 30, 2009 — $705 million). Cash and due from banks as well as other short-term, highly-liquid securities are used to cover the required average reserve balances.

As required by the Puerto Rico International Banking Center Regulatory Act, as of September 30, 2010, December 31, 2009, and September 30, 2009, the Corporation maintained separately for its two international banking entities (“IBEs”), $0.6 million in time deposits, equally divided for the two IBEs, which were considered restricted assets.

As part of a line of credit facility with a financial institution, as of December 31, 2009 and September 30, 2009, the Corporation maintained restricted cash of $2 million as collateral for the line of credit. This restriction expired on July 2010.

As of September 30, 2010, the Corporation maintained restricted cash of $6 million to support letters of credit (December 31, 2009 — $4 million; September 30, 2009 — $5 million).

As of September 30, 2010, the Corporation maintained restricted cash of $2 million that represents funds deposited in an escrow account which are guaranteeing possible liens or encumbrances over the title of insured properties.

As of September 30, 2010, the Corporation maintained restricted cash of $12 million to comply with the requirements of the credit card networks.

Note 8 — Pledged Assets

Certain securities, loans and other real estate owned were pledged principally to secure public and trust deposits, assets sold under agreements to repurchase, other borrowings and credit facilities available, derivative positions, loan servicing agreements and the loss sharing agreement with the FDIC.

The classification and carrying amount of the Corporation’s pledged assets, in which the secured parties are not permitted to sell or repledge the collateral, were as follows:

		September 30,				December 31,				September 30,
(In thousands)		2010				2009				2009
Investment securities available-for-sale, at fair value		$	2,102,699			$	1,923,338			$	2,183,586
Investment securities held-to-maturity, at amortized cost			125,770				125,769				25,769
Loans held-for-sale measured at lower of cost or fair value			2,291				2,254				2,636
Loans held-in-portfolio covered under loss sharing agreements with the FDIC			3,966,574				—				—
Loans held-in-portfolio not covered under loss sharing agreements with the FDIC			9,646,035				8,993,967				8,406,876
Other real estate covered under loss sharing agreements with the FDIC			77,516				—				—
Total pledged assets		$	15,920,885			$	11,045,328			$	10,618,867

Pledged investment securities and loans in which the creditor has the right by custom or contract to repledge are presented separately in the consolidated statements of condition.

As of September 30, 2010, investment securities available-for-sale and held-to-maturity totaling $1.7 billion, and loans of $0.2 billion, served as collateral to secure public funds.

The Corporation’s banking subsidiaries have the ability to borrow funds from the Federal Home Loan Bank of New York (“FHLB) and from the Federal Reserve Bank of New York (“Fed”). As of September 30, 2010, the banking subsidiaries had short-term and long-term credit facilities authorized with the FHLB aggregating $1.7 billion. Refer to Note 16 to the consolidated financial statements for borrowings outstanding under these credit facilities. As of September 30, 2010, the credit facilities authorized with the FHLB were collateralized by $3.7 billion in loans held-in-portfolio. Also, the Corporation’s banking subsidiaries had a borrowing capacity at the Fed discount window of $2.7 billion, which remained unused as of such date. The amount available under this credit facility is dependent upon the balance of loans and securities pledged as collateral. As of September 30, 2010, the credit facilities with the Fed discount window were collateralized by $5.7 billion in loans held-in-portfolio. These pledged assets are included in the above table and were not reclassified and separately reported in the consolidated statement of condition as of September 30, 2010.

Loans held-in-portfolio and other real estate owned that are covered by loss sharing agreements with the FDIC amounting to $4.0 billion as of September 30, 2010, serve as collateral to secure the note issued to the FDIC. Refer to Note 2 to the consolidated financial statements for descriptive information on the note issued to the FDIC.

Note 9 — Investment Securities Available-For-Sale

The amortized cost, gross unrealized gains and losses, fair value and weighted average yield of investment securities available-for-sale as of September 30, 2010, December 31, 2009 and September 30, 2009 were as follows:

		AS OF SEPTEMBER 30, 2010
						Gross				Gross								Weighted
		Amortized				Unrealized				Unrealized				Fair				Average
(In thousands)		Cost				Gains				Losses				Value				Yield
U.S. Treasury securities
After 1 to 5 years		$	6,998			$	166				—			$	7,164				1.50	%
After 5 to 10 years			28,850				3,409				—				32,259				3.81
Total U.S. Treasury securities			35,848				3,575				—				39,423				3.36
Obligations of U.S. Government sponsored entities
Within 1 year			288,588				2,980				—				291,568				3.45
After 1 to 5 years			1,011,751				65,003				—				1,076,754				3.77
After 5 to 10 years			1,518				51				—				1,569				6.26
After 10 years			26,890				179				—				27,069				5.68
Total obligations of U.S. Government sponsored entities			1,328,747				68,213				—				1,396,960				3.74
Obligations of Puerto Rico, States and political subdivisions
Within 1 year			10,140				18				—				10,158				3.90
After 1 to 5 years			15,858				375			$	6				16,227				4.52
After 5 to 10 years			21,225				70				71				21,224				5.07
After 10 years			5,560				155				—				5,715				5.29
Total obligations of Puerto Rico, States and political subdivisions			52,783				618				77				53,324				4.70
Collateralized mortgage obligations — federal agencies
Within 1 year			118				2				—				120				4.24
After 1 to 5 years			3,020				105				—				3,125				5.56
After 5 to 10 years			87,668				1,643				—				89,311				2.56
After 10 years			1,215,779				38,744				38				1,254,485				2.89
Total collateralized mortgage obligations — federal agencies			1,306,585				40,494				38				1,347,041				2.87
Collateralized mortgage obligations — private label
After 5 to 10 years			13,612				86				444				13,254				1.71
After 10 years			85,796				202				3,862				82,136				2.32
Total collateralized mortgage obligations — private label			99,408				288				4,306				95,390				2.24
Mortgage-backed securities — agencies
Within 1 year			3,494				75				—				3,569				3.78
After 1 to 5 years			18,557				719				—				19,276				4.02
After 5 to 10 years			182,930				12,349				2				195,277				4.71
After 10 years			2,461,567				103,118				156				2,564,529				4.29
Total mortgage-backed securities — agencies			2,666,548				116,261				158				2,782,651				4.32
Equity securities			8,975				379				510				8,844				3.47
Others
After 5 to 10 years			17,850				—				—				17,850				11.00
Total investment securities available-for-sale		$	5,516,744			$	229,828			$	5,089			$	5,741,483				3.82	%

		AS OF DECEMBER 31, 2009
						Gross				Gross								Weighted
		Amortized				Unrealized				Unrealized				Fair				Average
(In thousands)		Cost				Gains				Losses				Value				Yield
U.S. Treasury securities
After 5 to 10 years		$	29,359			$	1,093				—			$	30,452				3.80	%
Obligations of U.S. Government sponsored entities
Within 1 year			349,424				7,491				—				356,915				3.67
After 1 to 5 years			1,177,318				58,151				—				1,235,469				3.79
After 5 to 10 years			27,812				680				—				28,492				4.96
After 10 years			26,884				176				—				27,060				5.68
Total obligations of U.S. Government sponsored entities			1,581,438				66,498				—				1,647,936				3.82
Obligations of Puerto Rico, States and political subdivisions
After 1 to 5 years			22,311				7			$	15				22,303				6.92
After 5 to 10 years			50,910				249				632				50,527				5.08
After 10 years			7,840				—				61				7,779				5.26
Total obligations of Puerto Rico, States and political subdivisions			81,061				256				708				80,609				5.60
Collateralized mortgage obligations — federal agencies
Within 1 year			41				—				—				41				3.78
After 1 to 5 years			4,875				120				—				4,995				4.44
After 5 to 10 years			125,397				2,105				404				127,098				2.85
After 10 years			1,454,833				19,060				5,837				1,468,056				3.03
Total collateralized mortgage obligations — federal agencies			1,585,146				21,285				6,241				1,600,190				3.02
Collateralized mortgage obligations — private label
After 5 to 10 years			20,885				—				653				20,232				2.00
After 10 years			105,669				109				8,452				97,326				2.59
Total collateralized mortgage obligations — private label			126,554				109				9,105				117,558				2.50
Mortgage-backed securities — agencies
Within 1 year			26,878				512				—				27,390				3.61
After 1 to 5 years			30,117				823				—				30,940				3.94
After 5 to 10 years			205,480				8,781				—				214,261				4.80
After 10 years			2,915,689				32,102				10,203				2,937,588				4.40
Total mortgage-backed securities — agencies			3,178,164				42,218				10,203				3,210,179				4.42
Equity securities			8,902				233				1,345				7,790				3.65
Total investment securities available-for-sale		$	6,590,624			$	131,692			$	27,602			$	6,694,714				3.91	%