XML 28 R16.htm IDEA: XBRL DOCUMENT v3.10.0.1
Loans
 9 Months Ended
Sep. 30, 2018
Receivables  
Loans

Note 8 – Loans

For a summary of the accounting policies related to loans, interest recognition and allowance for loan losses refer to Note 3 - Summary of significant accounting policies of the 2017 Form 10-K.

The Corporation has presented the loans covered by the loss-sharing agreements with the FDIC separately as “covered loans” since the risk of loss was significantly different than those not covered under the loss-sharing agreements, due to the loss protection provided by the FDIC. As discussed in Note 10, on May 22, 2018, the Corporation entered into a Termination Agreement with the FDIC to terminate all loss-share arrangements in connection with the Westernbank FDIC-assisted transaction. As a result of the Termination Agreement, assets that were covered by the loss share agreement, including covered loans in the amount of approximately $514.6 million as of March 31, 2018, were reclassified as non-covered. The Corporation now recognizes entirely all future credit losses, expenses, gains, and recoveries related to the formerly covered assets with no offset due to or from the FDIC.

As previously disclosed in Note 4, as a result of the Reliable Transaction completed on August 1, 2018, Popular Auto, LLC, acquired approximately $1.6 billion in retail auto loans and $341 million in primarily auto-related commercial loans. These loans are included in the information presented in this note.

During the quarter and nine months ended September 30, 2018, the Corporation recorded purchases (including repurchases) of mortgage loans amounting to $147 million and $480 million, respectively and consumer loans of $48 million and $152 million, respectively. During the quarter and nine months ended September 30, 2017, the Corporation recorded purchases (including repurchases) of mortgage loans amounting to $104 million and $364 million, respectively; consumer loans of $133 million and $283 million, respectively; and leases of $2 million, for the nine months ended September 30, 2017.

The Corporation performed whole-loan sales involving approximately $19 million and $45 million of residential mortgage loans during the quarter and nine months ended September 30, 2018, respectively (September 30, 2017 - $9 million and $63 million, respectively). Also, the Corporation securitized approximately $110 million and $320 million of mortgage loans into Government National Mortgage Association (“GNMA”) mortgage-backed securities during the quarter and nine months ended September 30, 2018, respectively (September 30, 2017 - $86 million and $369 million, respectively). Furthermore, the Corporation securitized approximately $26 million and $72 million of mortgage loans into Federal National Mortgage Association (“FNMA”) mortgage-backed securities during the quarter and nine months ended September 30, 2018, respectively (September 30, 2017 - $21 million and $86 million, respectively).

Delinquency status

The following table presents the composition of loans held-in-portfolio (“HIP”), net of unearned income, by past due status, and by loan class including those that are in non-performing status or that are accruing interest but are past due 90 days or more at September 30, 2018 and December 31, 2017

September 30, 2018
Puerto Rico
Past duePast due 90 days or more
30-5960-8990 daysTotalNon-accrualAccruing
(In thousands)daysdaysor morepast dueCurrentLoans HIPloansloans[1]
Commercial multi-family$466$242$2,061$2,769$145,459$148,228$577$-
Commercial real estate:
Non-owner occupied34,5871,61286,831123,0302,234,3012,357,33129,288-
Owner occupied12,9473,260120,401136,6081,598,8971,735,50593,192-
Commercial and industrial8,31350348,42557,2413,109,1713,166,41248,214211
Construction2,306-1,8294,13573,65877,7931,829-
Mortgage285,917136,2651,215,2691,637,4514,893,8256,531,276348,779735,454
Leasing7,4162,2593,00912,684890,856903,5403,009-
Consumer:
Credit cards9,5156,17816,76832,4611,005,3721,037,833-16,768
Home equity lines of credit1593911076574,8245,4811196
Personal12,6097,16219,78039,5511,203,8451,243,39618,9391
Auto53,34710,78322,16586,2952,382,3152,468,61022,09768
Other4439215,34415,879132,069147,94814,868476
Total$428,025$168,747$1,551,989$2,148,761$17,674,592$19,823,353$580,803$753,074
[1]Loans HIP of $218 million accounted for under ASC Subtopic 310-30 are excluded from the above table as they are considered to be performing due to the application of the accretion method, in which these loans will accrete interest income over the remaining life of the loans using estimated cash flow analysis.

September 30, 2018
Popular U.S.
Past duePast due 90 days or more
30-5960-8990 daysTotal Non-accrualAccruing
(In thousands)daysdaysor morepast dueCurrentLoans HIPloansloans[1]
Commercial multi-family$2,581$17$-$2,598$1,325,974$1,328,572$-$-
Commercial real estate:
Non-owner occupied-13,99336514,3581,885,0351,899,393365-
Owner occupied1,5786183892,585285,820288,405389-
Commercial and industrial1,3502,03686,22089,606980,2551,069,861660-
Construction20,588-17,86638,454827,118865,57217,866-
Mortgage9323,11212,30616,350756,544772,89412,306-
Legacy232693,4033,69523,87127,5663,403-
Consumer:
Credit cards1-5657635-
Home equity lines of credit1,73959413,93816,271129,274145,54513,938-
Personal2,1641,7782,7536,695283,966290,6612,753-
Other-4-4279283--
Total$30,956$22,421$137,245$190,622$6,498,193$6,688,815$51,685$-
[1]Loans HIP of $86 million accounted for under ASC Subtopic 310-30 are excluded from the above table as they are considered to be performing due to the application of the accretion method, in which these loans will accrete interest income over the remaining life of the loans using estimated cash flow analysis.

September 30, 2018
Popular, Inc.
Past duePast due 90 days or more
30-5960-8990 daysTotalNon-accrualAccruing
(In thousands)daysdaysor morepast dueCurrentLoans HIP[3] [4]loansloans[5]
Commercial multi-family$3,047$259$2,061$5,367$1,471,433$1,476,800$577$-
Commercial real estate:
Non-owner occupied34,58715,60587,196137,3884,119,3364,256,72429,653-
Owner occupied14,5253,878120,790139,1931,884,7172,023,91093,581-
Commercial and industrial9,6632,539134,645146,8474,089,4264,236,27348,874211
Construction22,894-19,69542,589900,776943,36519,695-
Mortgage[1]286,849139,3771,227,5751,653,8015,650,3697,304,170361,085735,454
Leasing7,4162,2593,00912,684890,856903,5403,009-
Legacy[2]232693,4033,69523,87127,5663,403-
Consumer:
Credit cards9,5166,17816,77332,4671,005,4291,037,896516,768
Home equity lines of credit1,89898514,04516,928134,098151,02613,94996
Personal14,7738,94022,53346,2461,487,8111,534,05721,6921
Auto53,34710,78322,16586,2952,382,3152,468,61022,09768
Other4439615,34415,883132,348148,23114,868476
Total$458,981$191,168$1,689,234$2,339,383$24,172,785$26,512,168$632,488$753,074

[1] It is the Corporation’s policy to report delinquent residential mortgage loans insured by FHA or guaranteed by the VA as accruing loans past due 90 days or more as opposed to non-performing since the principal repayment is insured.
[2]The legacy portfolio is comprised of commercial loans, construction loans and lease financings related to certain lending products exited by the Corporation as part of restructuring efforts carried out in prior years at the Popular U.S. segment.
[3]Loans held-in-portfolio are net of $150 million in unearned income and exclude $52 million in loans held-for-sale.
[4]Includes $7.2 billion pledged to secure credit facilities and public funds that the secured parties are not permitted to sell or repledge the collateral, of which $4.7 billion were pledged at the Federal Home Loan Bank ("FHLB") as collateral for borrowings, $2.1 billion at the Federal Reserve Bank ("FRB") for discount window borrowings and $0.4 billion serve as collateral for public funds.
[5]Loans HIP of $304 million accounted for under ASC Subtopic 310-30 are excluded from the above table as they are considered to be performing due to the application of the accretion method, in which these loans will accrete interest income over the remaining life of the loans using estimated cash flow analysis.

December 31, 2017
Puerto Rico
Past duePast due 90 days or more
30-5960-8990 days TotalNon-coveredNon-accrualAccruing
(In thousands) days daysor morepast dueCurrentloans HIPloansloans[1]
Commercial multi-family$-$426$1,210$1,636$144,763$146,399$1,115$-
Commercial real estate:
Non-owner occupied39,61713128,04567,7932,336,7662,404,55918,866-
Owner occupied7,9972,291123,929134,2171,689,3971,823,614101,068-
Commercial and industrial3,5561,25140,86245,6692,845,6582,891,32740,177685
Construction--17017095,19995,369--
Mortgage217,89077,8331,596,7631,892,4864,684,2936,576,779306,6971,204,691
Leasing10,2231,4902,97414,687795,303809,9902,974-
Consumer:
Credit cards7,3194,46418,22730,0101,063,2111,093,221-18,227
Home equity lines of credit4383952571,0904,9976,087-257
Personal13,9266,85719,98140,7641,181,5481,222,31219,460141
Auto24,4055,1975,46635,068815,745850,8135,466-
Other53744416,76517,746139,842157,58815,6171,148
Total$325,908$100,779$1,854,649$2,281,336$15,796,722$18,078,058$511,440$1,225,149
[1]Non-covered loans HIP of $118 million accounted for under ASC Subtopic 310-30 are excluded from the above table as they are considered to be performing due to the application of the accretion method, in which these loans will accrete interest income over the remaining life of the loans using estimated cash flow analysis.

December 31, 2017
Popular U.S.
Past duePast due 90 days or more
30-5960-8990 days TotalNon-coveredNon-accrualAccruing
(In thousands) days daysor morepast dueCurrentloans HIPloansloans[1]
Commercial multi-family$395$-$784$1,179$1,209,514$1,210,693$784$-
Commercial real estate:
Non-owner occupied4,0281,1861,5996,8131,681,4981,688,3111,599-
Owner occupied2,684-8623,546315,429318,975862-
Commercial and industrial1,1215,27897,427103,826901,1571,004,983594-
Construction----784,660784,660--
Mortgage13,4536,14814,85234,453659,175693,62814,852-
Legacy2914173,0393,74729,23332,9803,039-
Consumer:
Credit cards3211168410011-
Home equity lines of credit4,6533,67514,99723,325158,760182,08514,997-
Personal 3,3422,1492,7798,270289,732298,0022,779-
Other----319319--
Total$29,970$18,855$136,350$185,175$6,029,561$6,214,736$39,517$-
[1]Non-covered loans HIP of $97 million accounted for under ASC Subtopic 310-30 are excluded from the above table as they are considered to be performing due to the application of the accretion method, in which these loans will accrete interest income over the remaining life of the loans using estimated cash flow analysis.

December 31, 2017
Popular, Inc.
Past duePast due 90 days or more
30-5960-8990 days TotalNon-coveredNon-accrualAccruing
(In thousands) days daysor morepast dueCurrentloans HIP[3] [4]loansloans[5]
Commercial multi-family$395$426$1,994$2,815$1,354,277$1,357,092$1,899$-
Commercial real estate:
Non-owner occupied43,6451,31729,64474,6064,018,2644,092,87020,465-
Owner occupied10,6812,291124,791137,7632,004,8262,142,589101,930-
Commercial and industrial4,6776,529138,289149,4953,746,8153,896,31040,771685
Construction--170170879,859880,029--
Mortgage[1]231,34383,9811,611,6151,926,9395,343,4687,270,407321,5491,204,691
Leasing10,2231,4902,97414,687795,303809,9902,974-
Legacy[2]2914173,0393,74729,23332,9803,039-
Consumer:
Credit cards7,3224,46618,23830,0261,063,2951,093,3211118,227
Home equity lines of credit5,0914,07015,25424,415163,757188,17214,997257
Personal17,2689,00622,76049,0341,471,2801,520,31422,239141
Auto24,4055,1975,46635,068815,745850,8135,466-
Other53744416,76517,746140,161157,90715,6171,148
Total$355,878$119,634$1,990,999$2,466,511$21,826,283$24,292,794$550,957$1,225,149

[1]It is the Corporation’s policy to report delinquent residential mortgage loans insured by FHA or guaranteed by the VA as accruing loans past due 90 days or more as opposed to non-performing since the principal repayment is insured.
[2]The legacy portfolio is comprised of commercial loans, construction loans and lease financings related to certain lending products exited by the Corporation as part of restructuring efforts carried out in prior years at the Popular U.S. segment.
[3]Loans held-in-portfolio are net of $131 million in unearned income and exclude $132 million in loans held-for-sale.
[4]Includes $7.1 billion pledged to secure credit facilities and public funds that the secured parties are not permitted to sell or repledge the collateral, of which $4.6 billion were pledged at the FHLB as collateral for borrowings, $2.0 billion at the FRB for discount window borrowings and $0.5 billion serve as collateral for public funds.
[5]Non-covered loans HIP of $215 million accounted for under ASC Subtopic 310-30 are excluded from the above table as they are considered to be performing due to the application of the accretion method, in which these loans will accrete interest income over the remaining life of the loans using estimated cash flow analysis.

At September 30, 2018, mortgage loans held-in-portfolio include $1.4 billion of loans insured by the Federal Housing Administration (“FHA”), or guaranteed by the U.S. Department of Veterans Affairs (“VA”) of which $739 million are 90 days or more past due, including $195 million of loans rebooked under the GNMA buyback option, discussed below (December 31, 2017 - $1.8 billion, $1.2 billion and $840 million, respectively). Within this portfolio, loans in a delinquency status of 90 days or more are reported as accruing loans as opposed to non-performing since the principal repayment is insured. These balances include $238 million of residential mortgage loans in Puerto Rico that are no longer accruing interest as of September 30, 2018 (December 31, 2017 - $178 million). Additionally, the Corporation has approximately $53 million in reverse mortgage loans in Puerto Rico which are guaranteed by FHA, but which are currently not accruing interest at September 30, 2018 (December 31, 2017 - $58 million).

Loans with a delinquency status of 90 days past due as of September 30, 2018 include $195 million in loans previously pooled into GNMA securities (December 31, 2017 - $840 million). Under the GNMA program, issuers such as BPPR have the option but not the obligation to repurchase loans that are 90 days or more past due. For accounting purposes, these loans subject to the repurchase option are required to be reflected on the financial statements of the Bank with an offsetting liability.

Covered loans

The following table presents the composition of covered loans held-in-portfolio by past due status, and by loan class that are in non-performing status or are accruing interest but are past due 90 days or more at December 31, 2017.

December 31, 2017
Past duePast due 90 days or more
30-5960-8990 daysTotalCoveredNon-accrualAccruing
(In thousands)daysdaysor morepast dueCurrentloans HIP[2]loansloans
Mortgage$16,640$5,453$59,018$81,111$421,818$502,929$3,165$-
Consumer5181479881,65312,69214,345188-
Total covered loans[1]$17,158$5,600$60,006$82,764$434,510$517,274$3,353$-
[1]Covered loans accounted for under ASC Subtopic 310-30 are excluded from the above table as they are considered to be performing due to the application of the accretion method, in which these loans will accrete interest income over the remaining life of the loans using estimated cash flow analyses.
[2] Includes $279 million pledged to secure credit facilities at the FHLB which are not permitted to sell or repledge the collateral.

Loans acquired with deteriorated credit quality accounted for under ASC 310-30

The following provides information of loans acquired with evidence of credit deterioration as of the acquisition date, accounted for under the guidance of ASC 310-30.

The outstanding principal balance of acquired loans accounted pursuant to ASC Subtopic 310-30, amounted to $2.3 billion at September 30, 2018 (December 31, 2017 - $2.5 billion). The carrying amount of these loans consisted of loans determined to be impaired at the time of acquisition, which are accounted for in accordance with ASC Subtopic 310-30 (“credit impaired loans”), and loans that were considered to be performing at the acquisition date, accounted for by analogy to ASC Subtopic 310-30 (“non-credit impaired loans”).

The following table provides the carrying amount of acquired loans accounted for under ASC 310-30 by portfolio at September 30, 2018 and December 31, 2017.

Carrying amount
(In thousands)September 30, 2018December 31, 2017
Commercial real estate$876,521$923,424
Commercial and industrial86,00088,130
Construction-170
Mortgage1,012,7891,079,611
Consumer15,31217,658
Carrying amount [1]1,990,6222,108,993
Allowance for loan losses(168,559)(119,505)
Carrying amount, net of allowance$1,822,063$1,989,488

At September 30, 2018, none of the acquired loans accounted for under ASC Subtopic 310-30 were considered non-performing loans. Therefore, interest income, through accretion of the difference between the carrying amount of the loans and the expected cash flows, was recognized on all acquired loans.

Changes in the carrying amount and the accretable yield for the loans accounted pursuant to the ASC Subtopic 310-30, for the quarters and the nine months ended September 30, 2018 and 2017, were as follows:

Carrying amount of acquired loans accounted for pursuant to ASC 310-30
For the quarter endedFor the nine months ended
(In thousands)September 30, 2018September 30, 2017September 30, 2018September 30, 2017
Beginning balance$2,033,457$2,168,664$2,108,993$2,301,024
Additions3,0624,7928,33414,671
Accretion38,88642,735121,752133,373
Collections / loan sales / charge-offs(84,783)(82,245)(248,457)(315,122)
Ending balance[1]$1,990,622$2,133,946$1,990,622$2,133,946
Allowance for loan losses(168,559)(138,030)(168,559)(138,030)
Ending balance, net of ALLL$1,822,063$1,995,916$1,822,063$1,995,916
[1]At September 30, 2018, includes $1.5 billion of loans considered non-credit impaired at the acquisition date (September 30, 2017 - $1.6 billion).

Activity in the accretable yield of acquired loans accounted for pursuant to ASC 310-30
For the quarter endedFor the nine months ended
(In thousands)September 30, 2018September 30, 2017September 30, 2018September 30, 2017
Beginning balance$1,178,042$1,245,672$1,214,488$1,288,983
Additions3152,8823,7528,737
Accretion(38,886)(42,735)(121,752)(133,373)
Change in expected cash flows(16,739)(6,475)26,24434,997
Ending balance[1]$1,122,732$1,199,344$1,122,732$1,199,344
[1]At September 30, 2018, includes $0.8 billion of loans considered non-credit impaired at the acquisition date (September 30, 2017 - $0.9 billion).