Popular Inc. reported net income of $110.7 million for the quarter ended June 30, 2011, buoyed by a tax benefit of $59.6 million granted through an agreement with the Treasury Department related to the timing of charge-offs for accounting and financial reporting purposes.
On June 30, Popular Inc. and Treasury agreed that for tax purposes, the deductions related to certain charge-offs recorded on the financial institution’s statements for 2009 and 2010 will be deferred until 2013, 2014, 2015 and 2016.
As a result of the agreement, Popular Inc. made a payment of $89.4 million to Treasury and recorded a tax benefit of $143 million, or $53.6 net of what it owed the government on the recovery of certain tax benefits not previously recorded during years 2009 (the benefit of reduced tax rates for capital gains) and 2010 (the benefit of exempt income) that it was previously unable to record because it had reported negative income for those years.
Consequently, the June 30 quarterly results show a significant jump from the $10.1 million net income on record for the prior quarter ended March 31, 2011, and the net loss of $44.5 million for the quarter ended June 30, 2010.
“We are producing strong and consistent levels of revenues despite credit conditions not improving as quickly as we would like,” Popular Inc. CEO Richard L. Carrión said. “There are some encouraging signs in the Puerto Rico economy but we remain cautious. The main takeaway is that we had another profitable quarter, even excluding the favorable tax impact.”
Pre-tax income for the quarter ended June 30, 2011 amounted to $72.6 million, compared with pre-tax income of $157.4 million for the quarter ended March 31, 2011 and a pre-tax loss of $17.3 million for the quarter ended June 30, 2010.
For the six months ended June 30, 2011, the Corporation’s net income and pre-tax income totaled $120.8 million and $229.9 million, respectively, compared to a net loss and pre-tax loss of $129.5 million and $111.6 million, respectively, for the same period in 2010.