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Segment Reporting

9 Months Ended

Sep. 30, 2018

Disclosure Text Block

Segment Reporting

Note 34 – Segment reporting

The Corporation’s corporate structure consists of two reportable segments – Banco Popular de Puerto Rico and Popular U.S. These reportable segments pertain only to the continuing operations of Popular, Inc.

Management determined the reportable segments based on the internal reporting used to evaluate performance and to assess where to allocate resources. The segments were determined based on the organizational structure, which focuses primarily on the markets the segments serve, as well as on the products and services offered by the segments.

Banco Popular de Puerto Rico:

Given that Banco Popular de Puerto Rico constitutes a significant portion of the Corporation’s results of operations and total assets at September 30, 2018, additional disclosures are provided for the business areas included in this reportable segment, as described below:

• Commercial banking represents the Corporation’s banking operations conducted at BPPR, which are targeted mainly to corporate, small and middle size businesses. It includes aspects of the lending and depository businesses, as well as other finance and advisory services. BPPR allocates funds across business areas based on duration matched transfer pricing at market rates. This area also incorporates income related with the investment of excess funds, as well as a proportionate share of the investment function of BPPR.
• Consumer and retail banking represents the branch banking operations of BPPR which focus on retail clients. It includes the consumer lending business operations of BPPR, as well as the lending operations of Popular Auto and Popular Mortgage. Popular Auto focuses on auto and lease financing, while Popular Mortgage focuses principally on residential mortgage loan originations. The consumer and retail banking area also incorporates income related with the investment of excess funds from the branch network, as well as a proportionate share of the investment function of BPPR.
• Other financial services include the trust and asset management service units of BPPR, the brokerage and investment banking operations of Popular Securities, and the insurance agency and reinsurance businesses of Popular Insurance, Popular Insurance V.I., Popular Risk Services, and Popular Life Re. Most of the services that are provided by these subsidiaries generate profits based on fee income.

Popular U.S.:

Popular U.S. reportable segment consists of the banking operations of PB, E-LOAN, Inc., Popular Equipment Finance, Inc. and Popular Insurance Agency, U.S.A. PB operates through a retail branch network in the U.S. mainland under the name of Popular, while E-LOAN, Inc. supported PB’s deposit gathering through its online platform until March 31, 2017, when said operations were transferred to Popular Direct, a division of PB. During 2017, the E-LOAN brand was transferred to Popular Inc. and is being used by BPPR to offer personal loans through an online platform. Popular Equipment Finance, Inc. also holds a running-off loan portfolio as this subsidiary ceased originating loans during 2009. Popular Insurance Agency, U.S.A. offers investment and insurance services across the PB branch network.

The Corporate group consists primarily of the holding companies Popular, Inc., Popular North America, Popular International Bank and certain of the Corporation’s investments accounted for under the equity method, including EVERTEC and Centro Financiero BHD, Leon. The Corporate group also includes the expenses of certain corporate areas that are identified as critical to the organization including: Finance, Risk Management and Legal.

The accounting policies of the individual operating segments are the same as those of the Corporation. Transactions between reportable segments are primarily conducted at market rates, resulting in profits that are eliminated for reporting consolidated results of operations.

The tables that follow present the results of operations and total assets by reportable segments:

2018
For the quarter ended September 30, 2018
				Banco Popular				Intersegment
(In thousands)				de Puerto Rico		Popular Bank		Eliminations
Net interest income			$	388,533	$	76,184	$	3
Provision for loan losses				51,911		2,510		-
Non-interest income				135,762		5,530		(141)
Amortization of intangibles				2,157		167		-
Depreciation expense				11,135		2,185		-
Other operating expenses				282,124		44,279		(136)
Income tax expense				39,421		10,439		-
Net income			$	137,547	$	22,134	$	(2)
Segment assets			$	38,338,571	$	9,388,787	$	(112,222)
For the quarter ended September 30, 2018
		Reportable
(In thousands)		Segments		Corporate		Eliminations		Total Popular, Inc.
Net interest income (expense)	$	464,720	$	(13,251)	$	-	$	451,469
Provision (reversal) for loan losses		54,421		(34)		-		54,387
Non-interest income		141,151		9,960		(90)		151,021
Amortization of intangibles		2,324		-		-		2,324
Depreciation expense		13,320		188		-		13,508
Other operating expenses		326,267		23,995		(657)		349,605
Income tax expense (benefit)		49,860		(8,070)		228		42,018
Net income (loss)	$	159,679	$	(19,370)	$	339	$	140,648
Segment assets	$	47,615,136	$	5,478,884	$	(5,174,592)	$	47,919,428

For the nine months ended September 30, 2018
				Banco Popular				Intersegment
(In thousands)				de Puerto Rico		Popular Bank		Eliminations
Net interest income			$	1,073,522	$	226,654	$	5
Provision for loan losses				154,805		30,774		-
Non-interest income				452,577		15,010		(420)
Amortization of intangibles				6,474		499		-
Depreciation expense				32,069		6,466		-
Other operating expenses				777,574		135,305		(409)
Income tax expense				41,088		15,759		-
Net income			$	514,089	$	52,861	$	(6)
Segment assets			$	38,338,571	$	9,388,787	$	(112,222)
For the nine months ended September 30, 2018
		Reportable
(In thousands)		Segments		Corporate		Eliminations		Total Popular, Inc.
Net interest income (expense)	$	1,300,181	$	(41,529)	$	-	$	1,258,652
Provision (reversal) for loan losses		185,579		(75)		-		185,504
Non-interest income		467,167		33,698		(1,538)		499,327
Amortization of intangibles		6,973		-		-		6,973
Depreciation expense		38,535		548		-		39,083
Other operating expenses		912,470		68,766		(2,185)		979,051
Income tax expense (benefit)		56,847		(21,505)		271		35,613
Net income (loss)	$	566,944	$	(55,565)	$	376	$	511,755
Segment assets	$	47,615,136	$	5,478,884	$	(5,174,592)	$	47,919,428

2017
For the quarter ended September 30, 2017
				Banco Popular				Intersegment
(In thousands)				de Puerto Rico		Popular Bank		Eliminations
Net interest income			$	321,145	$	71,453	$	7
Provision for loan losses				118,177		42,544		-
Non-interest income				88,170		5,124		(141)
Amortization of intangibles				2,178		167		-
Depreciation expense				9,751		2,128		-
Other operating expenses				243,564		41,960		(138)
Income tax benefit				(8,704)		(4,117)		-
Net income (loss)			$	44,349	$	(6,105)	$	4
Segment assets			$	33,031,839	$	9,323,647	$	(24,615)
For the quarter ended September 30, 2017
		Reportable
(In thousands)		Segments		Corporate		Eliminations		Total Popular, Inc.
Net interest income (expense)	$	392,605	$	(14,434)	$	-	$	378,171
Provision for loan losses		160,721		38		-		160,759
Non-interest income		93,153		7,277		(56)		100,374
Amortization of intangibles		2,345		-		-		2,345
Depreciation expense		11,879		159		-		12,038
Other operating expenses		285,386		17,944		(625)		302,705
Income tax benefit		(12,821)		(7,360)		215		(19,966)
Net income (loss)	$	38,248	$	(17,938)	$	354	$	20,664
Segment assets	$	42,330,871	$	5,003,304	$	(4,732,908)	$	42,601,267

For the nine months ended September 30, 2017
				Banco Popular				Intersegment
(In thousands)				de Puerto Rico		Popular Bank		Eliminations
Net interest income			$	951,024	$	208,274	$	(207)
Provision for loan losses				198,668		60,915		-
Non-interest income				290,042		15,259		(431)
Amortization of intangibles				6,535		499		-
Depreciation expense				29,296		6,191		-
Other operating expenses				713,594		123,940		(414)
Income tax expense				56,946		13,202		(93)
Net income			$	236,027	$	18,786	$	(131)
Segment assets			$	33,031,839	$	9,323,647	$	(24,615)
For the nine months ended September 30, 2017
		Reportable
(In thousands)		Segments		Corporate		Eliminations		Total Popular, Inc.
Net interest income (expense)	$	1,159,091	$	(44,343)	$	-	$	1,114,748
Provision for loan losses		259,583		308		(5,955)		253,936
Non-interest income		304,870		29,616		(1,450)		333,036
Amortization of intangibles		7,034		-		-		7,034
Depreciation expense		35,487		479		-		35,966
Other operating expenses		837,120		57,145		(2,024)		892,241
Income tax expense (benefit)		70,055		(23,819)		2,536		48,772
Net income (loss)	$	254,682	$	(48,840)	$	3,993	$	209,835
Segment assets	$	42,330,871	$	5,003,304	$	(4,732,908)	$	42,601,267

Additional disclosures with respect to the Banco Popular de Puerto Rico reportable segment are as follows:

2018
For the quarter ended September 30, 2018
Banco Popular de Puerto Rico
				Consumer		Other		Eliminations		Total Banco
		Commercial		and Retail		Financial		and Other		Popular de
(In thousands)		Banking		Banking		Services		Adjustments [1]		Puerto Rico
Net interest income	$	145,397	$	241,920	$	1,232	$	(16)	$	388,533
Provision for loan losses		25,580		26,331		-		-		51,911
Non-interest income		23,630		88,866		23,663		(397)		135,762
Amortization of intangibles		50		1,069		1,038		-		2,157
Depreciation expense		4,697		6,287		151		-		11,135
Other operating expenses		78,628		183,626		20,279		(409)		282,124
Income tax expense		11,068		27,436		917		-		39,421
Net income	$	49,004	$	86,037	$	2,510	$	(4)	$	137,547
Segment assets	$	28,247,478	$	22,672,941	$	336,311	$	(12,918,159)	$	38,338,571

For the nine months ended September 30, 2018
Banco Popular de Puerto Rico
				Consumer		Other		Eliminations		Total Banco
		Commercial		and Retail		Financial		and Other		Popular de
(In thousands)		Banking		Banking		Services		Adjustments [1]		Puerto Rico
Net interest income	$	430,341	$	639,149	$	4,066	$	(34)	$	1,073,522
Provision for loan losses		56,027		98,778		-		-		154,805
Non-interest income		60,122		220,690		69,876		101,889		452,577
Amortization of intangibles		153		3,209		3,112		-		6,474
Depreciation expense		13,327		18,284		458		-		32,069
Other operating expenses		199,528		518,147		52,679		7,220		777,574
Income tax expense		52,640		46,625		5,711		(63,888)		41,088
Net income	$	168,788	$	174,796	$	11,982	$	158,523	$	514,089
Segment assets	$	28,247,478	$	22,672,941	$	336,311	$	(12,918,159)	$	38,338,571
[1] Includes the impact of the Termination Agreement with the FDIC and the Tax Closing Agreement entered into in connection with the FDIC transaction. These transactions resulted in a gain of $102.8 million reported in the non-interest income line, other operating expenses of $8.1 million and a net tax benefit of $63.9 million. Refer to Notes 10 and 32 to the Consolidated Financial Statements for additional information.

2017
For the quarter ended September 30, 2017
Banco Popular de Puerto Rico
				Consumer		Other				Total Banco
		Commercial		and Retail		Financial				Popular de
(In thousands)		Banking		Banking		Services		Eliminations		Puerto Rico
Net interest income	$	132,101	$	186,827	$	2,213	$	4	$	321,145
Provision for loan losses		27,647		90,530		-		-		118,177
Non-interest income		19,733		46,022		22,473		(58)		88,170
Amortization of intangibles		54		1,066		1,058		-		2,178
Depreciation expense		4,386		5,207		158		-		9,751
Other operating expenses		61,843		164,981		16,809		(69)		243,564
Income tax expense (benefit)		11,925		(22,811)		2,182		-		(8,704)
Net income (loss)	$	45,979	$	(6,124)	$	4,479	$	15	$	44,349
Segment assets	$	21,258,790	$	18,501,519	$	522,008	$	(7,250,478)	$	33,031,839

For the nine months ended September 30, 2017
Banco Popular de Puerto Rico
				Consumer		Other				Total Banco
		Commercial		and Retail		Financial				Popular de
(In thousands)		Banking		Banking		Services		Eliminations		Puerto Rico
Net interest income	$	380,761	$	564,956	$	5,295	$	12	$	951,024
Provision for loan losses		27,970		170,698		-		-		198,668
Non-interest income		60,496		162,613		67,130		(197)		290,042
Amortization of intangibles		158		3,206		3,171		-		6,535
Depreciation expense		12,994		15,759		543		-		29,296
Other operating expenses		177,278		492,939		43,606		(229)		713,594
Income tax expense (benefit)		60,780		(12,760)		8,926		-		56,946
Net income	$	162,077	$	57,727	$	16,179	$	44	$	236,027
Segment assets	$	21,258,790	$	18,501,519	$	522,008	$	(7,250,478)	$	33,031,839

Geographic Information
		Quarter ended				Nine months ended
(in thousands)		September 30, 2018		September 30, 2017		September 30, 2018		September 30, 2017
Revenues:
Puerto Rico	$	493,512	$	378,790	$	1,435,099	$	1,157,324
United States		90,659		81,652		264,232		234,778
Other		18,319		18,103		58,648		55,682
Total consolidated revenues	$	602,490	$	478,545	$	1,757,979	$	1,447,784

[1] Total revenues include net interest income (expense), service charges on deposit accounts, other service fees, mortgage banking activities, net gain (loss) and valuation adjustments on investment securities, trading account (loss) profit, net (loss) gain on sale of loans and valuation adjustments on loans held-for-sale, adjustments to indemnity reserves on loans sold, FDIC loss share (expense) income and other operating income.

Selected Balance Sheet Information:
(In thousands)		September 30, 2018		December 31, 2017
Puerto Rico
Total assets	$	37,167,038	$	33,705,624
Loans		18,782,224		17,591,078
Deposits		31,171,092		27,575,292
United States
Total assets	$	9,855,363	$	9,648,865
Loans		7,085,761		6,608,056
Deposits		6,956,336		6,635,153
Other
Total assets	$	897,027	$	922,848
Loans		695,925		743,329
Deposits [1]		1,521,399		1,243,063
[1] Represents deposits from BPPR operations located in the U.S. and British Virgin Islands.

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- Definition

The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-URI http://asc.fasb.org/topic&trid=2134510

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