UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 11-K
| x | ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2013
Or
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 001-34084
POPULAR, INC. PUERTO RICO SAVINGS AND INVESTMENT PLAN
(Full title of the Plan and address of the Plan, if different from that of the issuer named below)
POPULAR, INC.
209 MUÑOZ RIVERA AVENUE
HATO REY, PUERTO RICO 00918
(Name of issuer of the securities held pursuant to the plan and the address of principal executive office)
Popular, Inc. Puerto Rico Savings
and Investment Plan
Financial Statements and Supplemental Schedule
December 31, 2013 and 2012
Popular, Inc. Puerto Rico Savings and Investment Plan
Financial Statements and Supplemental Schedule
Index
| Note: | Other schedules required by Section 2520.103-10 of the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974 (“ERISA”) have been omitted because they are not applicable or not required. |
Report of Independent Registered Public Accounting Firm
To the Participants and Administrator of
Popular, Inc. Puerto Rico Savings and Investment Plan
In our opinion, the accompanying statements of net assets available for benefits and the related statement of changes in net assets available for benefits present fairly, in all material respects, the net assets available for benefits of Popular, Inc. Puerto Rico Savings and Investment Plan (the “Plan”) at December 31, 2013 and 2012, and the changes in net assets available for benefits for the year ended December 31, 2013 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedule of assets (held at end of year) is presented for the purpose of additional analysis and is not a required part of the basic financial statements but is supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. This supplemental schedule is the responsibility of the Plan’s management. The supplemental schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
/s/ PricewaterhouseCoopers LLP
San Juan, Puerto Rico
June 30, 2014
1
Popular, Inc. Puerto Rico Savings and Investment Plan
Statements of Net Assets Available for Benefits
December 31, 2013 and 2012
| 2013 | 2012 | |||||||
| Assets |
||||||||
| Investments |
||||||||
| Investments, at fair value |
$ | 204,043,728 | $ | 165,070,694 | ||||
|
|
|
|
|
|||||
| Total investments |
204,043,728 | 165,070,694 | ||||||
|
|
|
|
|
|||||
| Receivables |
||||||||
| Employer contributions |
99,779 | — | ||||||
| Participant contributions |
333,409 | 394,812 | ||||||
| Notes receivable from participants |
367,072 | 512,858 | ||||||
| Dividends and interest |
3,793 | 3,568 | ||||||
| Receivable for investments sold |
30,061 | 1,227 | ||||||
|
|
|
|
|
|||||
| Total receivables |
834,114 | 912,465 | ||||||
| Interest bearing deposits |
22,695,148 | 20,900,962 | ||||||
| Cash and cash equivalents |
39,469 | 75,258 | ||||||
|
|
|
|
|
|||||
| Total assets |
$ | 227,612,459 | $ | 186,959,379 | ||||
|
|
|
|
|
|||||
| Liabilities |
||||||||
| Accrued expenses |
94,455 | 76,700 | ||||||
| Participant refundable contributions |
121,294 | — | ||||||
| Payable for investments purchased |
40,687 | 41,075 | ||||||
|
|
|
|
|
|||||
| Total liabilities |
256,436 | 117,775 | ||||||
|
|
|
|
|
|||||
| Net assets available for benefits |
$ | 227,356,023 | $ | 186,841,604 | ||||
|
|
|
|
|
|||||
The accompanying notes are an integral part of these financial statements.
2
Popular, Inc. Puerto Rico Savings and Investment Plan
Statement of Changes in Net Assets Available for Benefits
For the Year Ended December 31, 2013
| Additions to assets attributed to: |
||||
| Investment income |
||||
| Net appreciation in fair value of investments |
$ | 33,222,613 | ||
| Interest and dividends |
6,827,912 | |||
|
|
|
|||
| Total investment gain |
40,050,525 | |||
|
|
|
|||
| Interest income on notes receivable from participants |
15,258 | |||
|
|
|
|||
| Contributions |
||||
| Employer |
2,618,593 | |||
| Participants (net of refundable contributions) |
11,867,638 | |||
| Rollovers from other qualified plans |
226,014 | |||
|
|
|
|||
| Total contributions |
14,712,245 | |||
|
|
|
|||
| Additions |
||||
| Settlement Payments |
1,372,246 | |||
|
|
|
|||
| Total additions |
56,150,274 | |||
|
|
|
|||
| Deductions from assets attributed to: |
||||
| Benefits and withdrawals paid to participants, including rollover distributions |
15,485,744 | |||
| Administrative expenses |
150,111 | |||
|
|
|
|||
| Total deductions |
15,635,855 | |||
|
|
|
|||
| Net increase |
40,514,419 | |||
| Net assets available for benefits |
||||
| Beginning of year |
186,841,604 | |||
|
|
|
|||
| End of year |
$ | 227,356,023 | ||
|
|
|
The accompanying notes are an integral part of these financial statements.
3
Popular, Inc. Puerto Rico Savings and Investment Plan
December 31, 2013 and 2012
Note 1. Description of Plan
The following description of the Popular, Inc. Puerto Rico Savings and Investment Plan (the “Plan”) provides only general information. Participants should refer to the Plan Document for a more complete description of its provisions.
Plan Description
The Plan is sponsored by Popular, Inc. (the “Corporation”). The Plan is a defined contribution plan covering substantially all employees of the Corporation and its affiliates (the “Companies”), who have one month of service, are at least eighteen years old and are residents of the Commonwealth of Puerto Rico. The Plan was established for the purpose of providing retirement benefits to employees and to encourage and assist them in adopting a regular savings plan that qualifies under the applicable income tax laws of the Commonwealth of Puerto Rico. The Plan provides the participants the ability to invest in mutual funds, interest bearing deposits, and common stock of the Corporation. The Plan is subject to the provisions of Employee Retirement Income Security Act of 1974 (“ERISA”).
Significant Transactions
Popular, Inc. Securities Litigation (Hoff Class Action Settlement Proceeds):
During 2013, the Plan implemented the settlement terms of the legal action known as Hoff v. Popular Inc., et al., Civil Action No. 3:09-cv-01428-GAG (Consolidated), in the United States District Court for the District of Puerto Rico. Said legal action had been filed on behalf of all purchasers of Popular, Inc. common stock between January 24, 2008 and February 19, 2009, inclusive (the “Class Period”), who suffered losses on those securities during the Class Period.
Fiduciary Counselors, Inc. served as independent fiduciary for the Plan in connection with the litigation. It filed a claim on behalf of the Plan, and it provided instructions to the Plan with regard to the implementation of the Court-approved Plan of Allocation of settlement proceeds.
As a result of the settlement, the Plan and the Popular, Inc. USA 401(K) Savings and Investment Plan were credited with amounts representing their respective shares of settlement proceeds in accordance with the claims submitted to the Class Administrator in the class action litigation. The amount of $1,372,246 was credited to the Plan and is reflected as a settlement payment on the statement of changes in net assets available for benefits.
Reverse stock split:
On May 29, 2012, the Corporation completed a 1-for-10 reverse split of its common stock, $0.01 par value per share. Pursuant to the reverse stock split, each ten shares of authorized and outstanding common stock were reclassified and combined into one new share of common stock. Therefore, the number of shares of common stock authorized under the Corporation’s Restated Certificate of Incorporation was reduced from 1,700,000,000 to 170,000,000 shares, without any change in par value per common share. The reverse split did not change the number of shares of the Corporation’s authorized preferred stock, which remains at 30,000,000.
All share and per share information presented in these financial statements has been adjusted to retroactively reflect the reverse stock split.
Contributions
At December 31, 2013, Plan participants could authorize the Corporation to make pre-tax deductions ranging from 1% to 70% and after-tax deductions ranging from 1% to 10% of their monthly compensation, as defined. At no time may participant’s pre-tax contributions exceed the PR-Code Section 1081.01 (d)(7)(A) established legal limit ($15,000 for 2013 and $13,000 for
4
Popular, Inc. Puerto Rico Savings and Investment Plan
Notes to Financial Statements
December 31, 2013 and 2012
2012). Employees are automatically enrolled in the Plan at the pre-tax contribution rate of 4% of annual compensation and may change their contribution rate at any time. Also the Plan permits catch-up contributions that are before tax contributions made in excess of the deferral limit by a participant who has reached age 50, limited for the calendar year ended on December 31, 2013 and 2012 to $1,500.
On April 1, 2013, the Corporation reinstated the employer matching contribution with the following formula: 50% of employee contributions up to a 4% of total compensation. Matching contributions are invested pursuant to each participant’s investment directions. Previously, matching contributions had been suspended since March 20, 2009.
In addition, the Corporation may make discretionary contributions to its own employees out of its net profits in such amounts as each subsidiary’s Board of Directors may determine. There were no profit sharing contributions for the years 2013 and 2012.
Participant Accounts
Each participant account is credited with its contribution and allocation of: (a) its own Corporation matching and profit sharing contribution and (b) plan earnings. Allocations are based on participant earnings or account balances, as defined in the Plan Document. The benefit to which a participant is entitled is the benefit that can be provided from the participant’s vested account.
Vesting
Participants are immediately vested in their voluntary contributions plus actual earnings thereon. Vesting in the Companies’ matching and discretionary profit sharing contributions plus actual earnings thereon is based on years of service. These contributions and actual earnings thereon vest in accordance with the following schedule:
| Years of Service |
Vesting % | |||
| Less than 1 |
0 | |||
| At least 1 |
20 | |||
| At least 2 |
40 | |||
| At least 3 |
60 | |||
| At least 4 |
80 | |||
| 5 or more |
100 | |||
Payment of Benefits
Plan participants are permitted to make withdrawals from the Plan from after-tax contributions, subject to provisions in the Plan Document as amended. If a participant suffers financial hardship, as defined in the Plan Document, the participant may request a withdrawal from his/her pre-tax contributions. Upon termination of service due to disability, retirement or other reasons, a participant may elect to receive either a lump sum distribution in cash, recurring benefit payments, shares of Popular, Inc. common stock, if applicable, or a combination of elections. In the case of participant termination due to death, the entire vested amount is paid to the person or persons legally entitled thereto.
Notes Receivable from Participants
The Plan does not allow participants to take loans from their accounts. However, during 2006 the Plan was amended to allow active participants to take a one-time loan from the Plan collateralized by their account balances for the payment of the 5% tax on their Savings Plan account balance and Banco Popular de Puerto Rico Retirement Plan accrued benefits as provided by Act 87 of May 13, 2006. Subsequent to December 31, 2006, the Plan does not allow participants to take loans.
5
Popular, Inc. Puerto Rico Savings and Investment Plan
Notes to Financial Statements
December 31, 2013 and 2012
As of December 31, 2013, notes receivable from participants amounted to $367,072 (2012 - $512,858) which is the unpaid principal balance of the loans issued during 2006, plus any accrued but unpaid interest.
Plan Expenses and Administration
The Plan is administered by the Popular, Inc. Benefits Committee which, in turn, may delegate certain administrative functions to other committees and/or officers of the Corporation. The named fiduciary of the Plan for purposes of investment-related matters is the Popular, Inc. Corporate Investment Committee. The total administrative expenses amounted to $150,111 for the year ended December 31, 2013.
The Plan’s Recordkeeper and Trustee is Banco Popular de Puerto Rico. Unless otherwise paid by the Corporation, expenses of the Plan are borne by the Plan.
Forfeited Accounts
Forfeited balances of terminated participants’ non-vested accounts may first be used to pay administrative expenses, to reduce the earliest employer contributions made after the forfeitures are determined, or at the Corporation’s discretion, may be redistributed among participants after a five (5) year severance period. During the severance period, if the terminated participant is re-employed by the Corporation, the dollar value at the date of re-employment shall be restored to the participant’s account if the re-employed participant repays to the Plan an amount equal to the dollar value of his/her vested balance distributed upon termination.
During 2013, the Companies used forfeitures of $132,356 to pay administrative expenses.
Forfeited non-vested accounts amounted to $64,769 and $151,171 at December 31, 2013 and 2012, respectively.
Non-Participant Directed Investments
At December 31, 2013, there were no non-participant directed investments in the Plan.
Note 2. Summary of Significant Accounting Policies
The significant accounting policies followed by the Plan in the preparation of the financial statements are summarized below:
Basis of Presentation
The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America.
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 reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
Investment Valuation and Income Recognition
Plan investments are presented at fair value. Shares of registered investment companies are presented at quoted market prices which represent the net asset value of shares held by the Plan at the reporting date. Popular, Inc.’s common stock is presented at
6
Popular, Inc. Puerto Rico Savings and Investment Plan
Notes to Financial Statements
December 31, 2013 and 2012
the market price. The Plan presents in the Statement of Changes in Net Assets Available for Benefits the net appreciation (depreciation) in the fair value of its investments which consists of the realized gains or losses and the unrealized appreciation (depreciation) on those investments. Purchases and sales of securities are recorded on a trade date basis. Dividends are recorded on the ex-dividend date and interest is recorded under the accrual basis and credited to each participant’s account, as defined by the Plan Document. Realized gains and losses from security transactions are reported on the average cost basis.
The Plan determines the fair values of its investments based on the fair value framework established in the Financial Accounting Standard Board (FASB) Accounting Standards Codification (ASC) 820 “Fair Value Measurements and Disclosures”, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Fair value is defined under ASC 820 as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurements date. The standard describes three levels of inputs that may be used to measure fair value which are: (1) quoted market prices for identical assets or liabilities in active markets, (2) observable market-based inputs or unobservable inputs that are corroborated by market data, and (3) unobservable inputs that are not corroborated by market data. The fair value hierarchy ranks the quality and reliability of the information used to determine fair values. Refer to Note 4 to these financial statements for the ASC 820 disclosures required as of December 31, 2013 and 2012.
Interest Bearing Deposits
Interest Bearing Deposits consist of all demand deposits and balances invested in short-term highly liquid investments with original maturities of 90 days or less. Interest Bearing Deposits includes revenue sharing dollars accumulated over the past years that the Corporation will use to allocate pro-rata among Plan’s participants on the last day of the Plan Year based on their year-end funds account balance. Revenue sharing dollars accumulated as of December 31, 2013 and 2012 were $281,327 and $795,996, respectively.
Cash and Cash Equivalents
Cash and Cash Equivalents consist of all non interest bearing demand deposits.
Contributions
Employee and employer matching contributions are recorded in the period in which the Companies make the payroll deductions.
Discretionary contributions are recorded in the period in which they are earned by the participant as determined by the Corporation’s Board of Directors.
Rollovers Distributions
Terminated employees or retirees may elect to transfer their savings to other plans qualified by the Puerto Rico Department of the Treasury.
Rollovers Contributions
Rollovers Contributions to the Plan consist of monies received by a Participant from another plan qualified under PR Code.
Payment of benefits
Benefits are recorded when paid.
7
Popular, Inc. Puerto Rico Savings and Investment Plan
Notes to Financial Statements
December 31, 2013 and 2012
Recently Issued Accounting Standards
In July 2013, the Financial Accounting Standards Board issued ASU 2013-09 Deferral of the Effective Date of Certain Disclosures for Nonpublic Employee Benefit Plans in Update No. 2011-04 (“ASU 2013-09”). ASU 2013-09 defers indefinitely the effective date of certain required disclosures in Update 2011-04 of qualitative information about the significant unobservable inputs used in Level 3 investment fair value measurements. The Plan was not impacted by the adoption of this new guidance as it did not hold any Level 3 assets at December 31, 2013 and 2012.
Note 3. Plan Investments
The following table presents the Plan’s investments that represent five percent or more of the Plan’s net assets at December 31:
| 2013 | 2012 | |||||||||||||||
| # of shares | Value | # of shares | Value | |||||||||||||
| Mutual funds |
||||||||||||||||
| Principal Lifetime 2020 A |
823,135 | $ | 11,762,612 | 735,686 | $ | 9,343,215 | ||||||||||
| Lord Abbett Value |
||||||||||||||||
| Opportunities I |
614,099 | $ | 12,920,650 | 566,235 | $ | 9,541,071 | ||||||||||
| Manning & Napier Fund Pro |
||||||||||||||||
| Blend Extended Term Class S |
3,091,199 | $ | 54,034,171 | 3,204,388 | $ | 50,981,815 | ||||||||||
| Common stock |
||||||||||||||||
| Popular, Inc. |
1,939,089 | $ | 55,710,032 | 2,046,162 | $ | 42,539,711 | ||||||||||
| Other |
||||||||||||||||
| BPPR Bank Deposit Open |
||||||||||||||||
| Account |
22,271,935 | $ | 22,271,935 | 19,995,651 | $ | 19,995,651 | ||||||||||
BPPR Bank Deposit Open Account (“BDOA”) is reclassified to interest bearing deposits as prescribed by GAAP. For ERISA purposes, this BDOA is considered as an investment.
During 2013, the Plan’s investments (including gains and losses on investments bought and sold, as well as held during the year) appreciated in value as follows:
| Popular, Inc. common stock |
$ | 16,451,717 | ||
| Mutual funds |
16,770,896 | |||
|
|
|
|||
| $ | 33,222,613 | |||
|
|
|
Note 4. Fair Value Measurements
The Plan measures fair value as required by ASC 820, “Fair Value Measurements and Disclosures” which provides a framework for measuring fair value under accounting principles generally accepted in the United States. Under ASC 820, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
8
Popular, Inc. Puerto Rico Savings and Investment Plan
Notes to Financial Statements
December 31, 2013 and 2012
market participants at the measurement date. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability.
ASC 820 establishes a fair value hierarchy that prioritizes the inputs and valuation techniques used to measure fair value into three levels in order to increase consistency and comparability in fair value measurements and disclosures. The classification of assets and liabilities within the hierarchy is based on whether the inputs to the valuation methodology used for the fair value measurement are observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from independent sources. Unobservable inputs reflect the Plan’s estimates about assumptions that market participants would use in pricing the asset or liability based on the best information available. The hierarchy is broken down into three levels based on the reliability of inputs as follows:
Level 1 – Unadjusted quoted prices in active markets for identical assets that the Plan has the ability to access at the measurement date. Valuation on these instruments does not require a significant degree of judgment since valuations are based on quoted prices that are readily available in an active market.
Level 2 – Quoted prices other than those included in Level 1 that are observable either directly or indirectly. Level 2 inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or that can be corroborated by observable market data for substantially the full term of the financial instrument.
Level 3 – Inputs are unobservable and significant to the fair value measurement. Unobservable inputs reflect the Plan’s own assumptions about assumptions that market participants would use in pricing the asset or liability.
Following is a description of the Plan’s valuation methodologies used for assets measured at fair value. There have been no changes in the methodologies used at December 31, 2013 and 2012.
Cash & Cash Equivalents: The carrying amount of cash and cash equivalents are reasonable estimates of the fair value due to its short term maturity.
Interest Bearing Deposits: The carrying amount of interest bearing deposits are reasonable estimates of the fair value due to its short term maturity.
Equity Securities: Equity securities with quoted market prices obtained from an active exchange market are classified as Level 1.
Mutual Funds: Investments in mutual funds are valued at the net asset value (NAV) of shares held by the Plan at year end. These securities are classified as Level 2. Investments in mutual funds generally may be redeemed daily.
The preceding methods may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, although the Plan believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.
9
Popular, Inc. Puerto Rico Savings and Investment Plan
Notes to Financial Statements
December 31, 2013 and 2012
The following tables set forth by level, within the fair value hierarchy, the Plan’s net assets at fair value as of December 31, 2013 and December 31, 2012.
| Assets at Fair Value as of December 31, 2013 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Mutual Funds |
||||||||||||||||
| Large US Equity |
$ | — | $ | 22,478,187 | $ | — | $ | 22,478,187 | ||||||||
| Small/Mid US Equity |
— | 14,484,707 | — | 14,484,707 | ||||||||||||
| Fixed Income |
— | 8,616,515 | — | 8,616,515 | ||||||||||||
| Balanced/Asset Allocation |
— | 97,118,780 | — | 97,118,780 | ||||||||||||
| International Equity |
— | 5,635,507 | — | 5,635,507 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total Mutual Funds |
— | 148,333,696 | — | 148,333,696 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Popular, Inc. Common Stock |
55,710,032 | — | — | 55,710,032 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total assets at fair value |
$ | 55,710,032 | $ | 148,333,696 | $ | — | $ | 204,043,728 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Assets at Fair Value as of December 31, 2012 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Mutual Funds |
||||||||||||||||
| Large US Equity |
$ | — | $ | 14,723,127 | $ | — | $ | 14,723,127 | ||||||||
| Small/Mid US Equity |
— | 10,168,094 | — | 10,168,094 | ||||||||||||
| Fixed Income |
— | 7,450,381 | — | 7,450,381 | ||||||||||||
| Balanced/Asset Allocation |
— | 85,750,033 | — | 85,750,033 | ||||||||||||
| International Equity |
— | 4,439,348 | — | 4,439,348 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total Mutual Funds |
— | 122,530,983 | — | 122,530,983 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Popular, Inc. Common Stock |
42,539,711 | — | — | 42,539,711 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total assets at fair value |
$ | 42,539,711 | $ | 122,530,983 | $ | — | $ | 165,070,694 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
There were no transfers in and/or out of Level 3 for financial instruments measured at fair value on a recurring basis during the years ended December 31, 2013 and 2012. There were no transfers in and/or out of Level 1 and Level 2 during the years ended December 31, 2013 and 2012. If the Plan were to recognize transfers, it would do so at the end of the reporting period.
Note 5. Plan Termination
Although it has not expressed any intent to do so, the Corporation has the right under the Plan to terminate the Plan subject to the provisions of ERISA. In the event of Plan termination, the interest of each participant in the Plan shall be fully vested and such termination shall not reduce the interest of any participating employee or their beneficiaries accrued under the Plan up to the date of such termination.
10
Popular, Inc. Puerto Rico Savings and Investment Plan
Notes to Financial Statements
December 31, 2013 and 2012
Note 6. Tax Status
The Plan is designed and intended to be qualified under Section 1165 of the Puerto Rico Internal Revenue Code of 1994, as amended (the (“1994 PR Code”), and Section 1081.01(a) of the Internal Revenue Code for a New Puerto Rico, Act No. 1 of January 31, 2011, as amended from time to time (the “2011 PR Code”). On April 16, 2010 the Plan received a favorable determination letter from the Puerto Rico Treasury Department (the “PR Treasury”) as to its qualified status under the 1994 PR Code.
The Plan filed for a favorable determination letter with the PR Treasury under the 2011 PR Code. No events have occurred with respect to the Plan that, in substantial likelihood, would result in the Plan being disqualified by the PR Treasury. The Plan is intended to be exempt from Puerto Rico income taxation pursuant to the provisions of Section 1165(a) of the 1994 PR Code and Section 1081.01(a) of the 2011 PR Code, and, pursuant to Section 1022(i)(1) of ERISA, for United States income tax purposes.
Accounting principles generally accepted in the United States of America require plan management to evaluate tax positions taken by the Plan and recognize a tax liability (or asset) if the Plan has taken an uncertain position that more likely than not would not be sustained upon examination by federal, state and/or local taxing authorities. The plan administrator believes there are no tax positions and has concluded that as of December 31, 2013 and 2012 there are no uncertain positions taken or expected to be taken that would require recognition of a liability (or asset) or disclosure in the financial statements. The Plan is subject to routine audits by taxing jurisdictions. At December 31, 2013, the years 2009 and thereafter remains subject to examination; however, there are currently no audits for any tax periods in progress.
Note 7. Risks and Uncertainties
The Plan’s investments are exposed to various risks, such as interest rate, market and credit risks. Due to the level of risk associated with certain investments and the level of uncertainty related to changes in the values of investments, it is at least reasonably possible that changes in these factors in the near term could materially affect participants’ account balances and the amounts reported in the Statements of Net Assets Available for Benefits and the Statement of Changes in Net Assets Available for Benefits. Individual participants’ accounts bear the risk of loss resulting from fluctuations in investment values.
Note 8. Related-Party Transactions
At December 31, 2013 and 2012, the Plan held 1,939,089 and 2,046,162 common stock shares of Popular, Inc., with a quoted market value of $55,710,032 and $42,539,711, respectively. These transactions are permitted party-in-interest transactions under provisions of ERISA and the regulations promulgated thereunder.
As of December 31, 2013 and 2012, the Plan held a bank deposit open account with Banco Popular de Puerto Rico of $22,271,935 and $19,995,651, respectively. The Plan held a time deposit open account with Banco Popular de Puerto Rico ($432,213 in 2013 and $905,311 in 2012).
Included in the Plan assets are notes receivable from participants. At December 31, 2013 and 2012, notes receivable from participants amounted to $367,072 and $512,858, respectively. For the year ended December 31, 2013 interest income related to notes receivable from participants amounted to $15,258. These transactions qualify as party-in-interest transactions permitted under provisions of ERISA.
11
Popular, Inc. Puerto Rico Savings and Investment Plan
Notes to Financial Statements
December 31, 2013 and 2012
Banco Popular de Puerto Rico, one of the companies covered by the Plan, is providing services as Trustee and Recordkeeper for the Plan. Fees paid by the Plan Sponsor for these services amounted to approximately $265,877 for the year ended December 31, 2013.
Note 9. Reconciliation of Financial Statements to Form 5500
The following is a reconciliation of net assets available for benefits per the financial statements at December 31, 2013 and 2012 to Form 5500:
| 2013 | 2012 | |||||||
| Net assets available for benefits per the financial statements |
$ | 227,356,023 | $ | 186,841,604 | ||||
| Less: Amounts allocated to withdrawing participants |
(8,116 | ) | (102,771 | ) | ||||
|
|
|
|
|
|||||
| Net assets available for benefits per the Form 5500 |
$ | 227,347,907 | $ | 186,738,833 | ||||
|
|
|
|
|
|||||
The following is a reconciliation of benefits paid to participants per the financial statements for the period ended December 31, 2013 to Form 5500:
| Benefits paid to participants per the financial statements |
$ | 15,485,744 | ||
| Add: Amounts allocated to withdrawing participants at December 31, 2013 |
8,116 | |||
| Less: Amounts allocated to withdrawing participants at December 31, 2012 |
(102,771 | ) | ||
|
|
|
|||
| Benefits paid to participants per Form 5500 |
$ | 15,391,089 | ||
|
|
|
For purposes of Form 5500, interest-bearing cash equivalents are classified as Plan investments. The amount of interest-bearing cash equivalents classified as investment on the Form 5500 was $22,695,148 and $20,900,962 as of December 31, 2013 and 2012, respectively.
Note 10. Subsequent Events
The Plan has evaluated subsequent events through the date the financial statements were issued.
12
Popular, Inc. Puerto Rico Savings and Investment Plan
Schedule H, Line 4i - Schedule of Assets
December 31, 2013
Supplemental Schedule
Exhibit I
| (a) | (b) Identity of Issue, Borrower, Lessor, or Similar Party |
(c) Description of Investment | (d) Cost | (e) Current Value |
||||||
| American Funds Amcap R5 | Mutual Fund 137,977 shares | ** | $ | 3,794,383 | ||||||
| Franklin US Government Secs Adv | Mutual Fund 225,861 shares | ** | 1,461,325 | |||||||
| Lord Abbett Value Opportunities I | Mutual Fund 614,099 shares | ** | 12,920,650 | |||||||
| Manning & Napier Fund Pro Blend Extended Term Class S | Mutual Fund 3,091,199 shares | ** | 54,034,171 | |||||||
| MFS Research International A | Mutual Fund 315,184 shares | ** | 5,635,507 | |||||||
| MFS Value R4 | Mutual Fund 229,743 shares | ** | 7,627,469 | |||||||
| Pimco Total Return Admin | Mutual Fund 669,334 shares | ** | 7,155,190 | |||||||
| Principal Lifetime 2010 A | Mutual Fund 572,976 shares | ** | 7,551,834 | |||||||
| Principal Lifetime 2020 A | Mutual Fund 823,135 shares | ** | 11,762,612 | |||||||
| Principal Lifetime 2030 A | Mutual Fund 510,487 shares | ** | 7,396,969 | |||||||
| Principal Lifetime 2040 A | Mutual Fund 472,707 shares | ** | 6,953,528 | |||||||
| Principal Lifetime 2050 A | Mutual Fund 283,279 shares | ** | 4,113,217 | |||||||
| Principal Lifetime Strategic Inc A | Mutual Fund 449,699 shares | ** | 5,306,449 | |||||||
| Prudential Jennison Small Company A | Mutual Fund 57,165 shares | ** | 1,564,056 | |||||||
| Vanguard Institutional Index Instl | Mutual Fund 65,313 shares | ** | 11,056,336 | |||||||
|
|
|
|||||||||
| Total Mutual Funds |
** | 148,333,696 | ||||||||
| * | BPPR Bank Deposit Open Account | Time Deposit Variable | ** | 22,271,935 | ||||||
| * | BPPR Time Deposit Open Account | Time Deposit Variable | ** | 423,213 | ||||||
|
|
|
|||||||||
| Total Interest Bearing Deposits |
22,695,148 | |||||||||
| * | Cash and Cash Equivalents | 39,469 | ||||||||
|
|
|
|||||||||
| * | Popular, Inc. | Common Stock 1,939,089 shares | ** | 55,710,032 | ||||||
|
|
|
|||||||||
| * | Participant loans | Participant loans with maturities ranging from 01/01/2014 to 12/31/2016 and interest rate of 5% |
** | 367,072 | ||||||
|
|
|
|||||||||
| $ | 227,145,417 | |||||||||
|
|
|
|||||||||
| * | Party in-interest |
| ** | Cost is not required to be presented for participant directed investments |
13
Pursuant to the requirement of the Securities Exchange Act of 1934, the persons who administer the employee benefit plan have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.
| POPULAR, INC. PUERTO RICO SAVINGS & INVESTMENT PLAN | ||||||||
| (Registrant) | ||||||||
| Date: June 30, 2014 | By: | /s/ Eduardo J. Negrón | ||||||
| Eduardo J. Negrón | ||||||||
| Chairperson | ||||||||
| Popular, Inc. Benefits Committee | ||||||||
| (Plan Administrator) | ||||||||