SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
April 30, 2010
(Exact name of registrant as specified in its charter)
209 Munoz Rivera Avenue, Hato Rey, Puerto Rico 00918
(Address of principal executive offices)
(Registrants telephone number, including area code)
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2 below):
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
On April 30, 2010, Banco Popular de Puerto Rico (Banco Popular), a subsidiary of Popular, Inc. (the Corporation), acquired certain assets and assumed certain deposit liabilities of Westernbank Puerto Rico, a Puerto Rico chartered non-member bank headquartered in Mayaguez, Puerto Rico (Westernbank), from the Federal Deposit Insurance Corporation (the FDIC), as receiver for Westernbank (the Acquisition), pursuant to the terms of the Purchase and Assumption Agreement Whole Bank; All Deposits, dated April 30, 2010, among Banco Popular and the FDIC, as receiver (the Agreement). A copy of the Agreement is attached hereto as Exhibit 2.1 and is incorporated by reference herein.
Banco Popular acquired approximately $9.2 billion in assets and assumed approximately $2.5 billion in deposit liabilities. As part of the transaction, Banco Popular issued a five-year $5,758,084,000 note to the FDIC bearing an annual interest rate of 2.50%. The note is secured by all loans and foreclosed real estate acquired by Banco Popular from the FDIC that are subject to the shared-loss agreements and certain related assets. A copy of the note is attached as Exhibit 4.1 and is incorporated by reference herein.
Banco Popular also acquired Westernbank Insurance Corp., a wholly owned subsidiary of the former Westernbank and a general insurance agent placing property, casualty, life, and disability insurance, primarily to mortgage customers of the former Westernbank. No other subsidiaries or other assets were acquired or liabilities assumed from the former Westernbank or its parent entity, W Holding Company Inc. The deposits were acquired without a premium and the assets were acquired at a discount of 12.0% to the former Westernbanks historic book value. The terms of the Agreement provide for the FDIC to indemnify Banco Popular against claims with respect to liabilities and assets of the former Westernbank or any of its affiliates, not assumed or otherwise purchased by Banco Popular and with respect to certain other claims by third parties.
In addition, as part of the consideration for the transaction, the FDIC received a cash-settled value appreciation instrument (the Value Appreciation Instrument) in which Banco Popular agreed to make a cash payment to the holder thereof equal to the product of (a) 50 million and (b) the amount by which the average volume weighted price of the Corporations common stock over the two NASDAQ trading days immediately prior to the date on which the Value Appreciation Instrument is exercised exceeds $3.43 (the Corporations 20-day trailing average common stock price on April 27). The Value Appreciation Instrument is exercisable by the holder thereof, in whole or in part, from and including May 7, 2010 to May 7, 2011. A copy of the Value Appreciation Instrument is attached hereto as Exhibit 4.2 and is incorporated by reference herein.
All of the former Westernbanks 46 branches and offices throughout Puerto Rico have reopened as branches and offices of Banco Popular. The physical branch locations and leases were not immediately acquired by Banco Popular in the Acquisition. Banco Popular has an option, exercisable until July 29, 2010, to acquire, at fair market value, any bank premises that
were owned by, or any leases relating to bank premises held by, the former Westernbank (including ATM locations). Banco Popular is currently reviewing the bank premises and related leases of the former Westernbank. In addition, Banco Popular has an option, exercisable until May 30, 2010, to elect to assume or reject any contracts that provided for the rendering of services by or to the former Westernbank.
Loss Sharing Arrangements
In connection with the Acquisition, Banco Popular entered into loss sharing agreements with the FDIC with respect to approximately $8.8 billion of loans, including single family residential mortgage loans and commercial loans (referred to collectively as Covered Assets).
Pursuant to the terms of the loss sharing agreements, the FDICs obligation to reimburse Banco Popular for losses with respect to Covered Assets begins with the first dollar of loss incurred. The FDIC will reimburse Banco Popular for 80% of losses with respect to Covered Assets, and Banco Popular will reimburse the FDIC for 80% of recoveries with respect to losses for which the FDIC paid Banco Popular 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 loans provides for FDIC loss sharing for five years and Banco Popular reimbursement to the FDIC for eight years, in each case, on the same terms and conditions as described above. In particular, for each single family shared-loss loan in default or for which a default is reasonably foreseeable, Banco Popular is required to undertake reasonable and customary loss mitigation efforts, in accordance with any of the following programs selected by Banco Popular in its sole discretion; the FDIC Mortgage Loan Modification Program, the United States Treasurys Home Affordable Modification Program Guidelines or any other modification program approved by the United States Treasury Department, the FDIC, the Board of Governors of the Federal Reserve System or any other governmental agency.
The foregoing summary of the Agreement is not complete and is qualified in its entirety by reference to the full text of the Agreement and certain exhibits attached thereto, a copy of which is attached hereto as Exhibit 2.1 and incorporated by reference herein.
The information set forth under Item 1.01 Entry into a Material Definitive Agreement is incorporated by reference into this Item 2.01.
The information set forth under Item 1.01 Entry into a Material Definitive Agreement is incorporated by reference into this Item 2.03.
At the Annual Meeting of the shareholders held on May 4, 2010 (the Annual Meeting), shareholders of the Corporation approved an amendment (the Amendment) to the Corporations Restated Certificate of Incorporation. The Amendment increased the authorized number of shares of common stock, par value $0.01 per share, from 700,000,000 to 1,700,000,000. The shareholders of the Corporation did not approve a proposed elimination of the provision, pursuant to which the amount of authorized capital stock of any class or classes of the Corporation may be increased or decreased by the affirmative vote of the holders of a majority of stock of the Corporation entitled to vote.
The Amendment, descriptions of which are set forth in Item 3.03 Material Modification to Rights of Security Holders and which is incorporated by reference into this Item 5.03, is attached as Exhibit 3.1.
Two directors were elected, each for a two-year term, by the votes indicated.
The following matter was not approved because the votes cast for the proposal represented less than two-thirds of the outstanding shares of common stock of the Corporation:
Item 9.01. Financial Statements and Exhibits.
To the extent that financial statements are required by this Item, such financial statements will be filed by an amendment of this Current Report no later than July 16, 2010.
To the extent that pro forma financial information is required by this Item, such information will be filed by an amendment of this Current Report no later than July 16, 2010.
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: May 6, 2010