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Loans

12 Months Ended

Dec. 31, 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 2 - Summary of Significant Accounting Policies of this 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 year ended December 31, 2018, the Corporation recorded purchases (including repurchases) of mortgage loans amounting to $624 million and consumer loans of $205 million, compared to purchases (including repurchases) of mortgage loans of $460 million, consumer loans of $311 million, commercial loans of $2 million and leases of $2 million, during the year ended December 31, 2017.

The Corporation performed whole-loan sales involving approximately $59 million of residential mortgage loans and $30 million of commercial loans during the year ended December 31, 2018 (December 31, 2017 - $64 million of residential mortgage loans). Also, during the year ended December 31, 2018, the Corporation securitized approximately $413 million of mortgage loans into Government National Mortgage Association (“GNMA”) mortgage-backed securities and $94 million of mortgage loans into Federal National Mortgage Association (“FNMA”) mortgage-backed securities, compared to $376 million and $86 million, respectively, during the year ended December 31, 2017.

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 December 31, 2018 and 2017.

December 31, 2018
Puerto Rico
				Past due																		Past due 90 days or more
			30-59			60-89			90 days			Total										Non-accrual				Accruing
(In thousands)			days			days			or more			past due			Current			Loans HIP				loans			loans[1]
Commercial multi-family			$	1,441		$	112		$	598		$	2,151		$	143,477		$	145,628			$	546		$	-
Commercial real estate:
	Non-owner occupied			92,075			839			45,691			138,605			2,183,996			2,322,601				39,257			-
	Owner occupied			6,681			10,839			99,235			116,755			1,605,498			1,722,253				88,069			-
Commercial and industrial				4,137			641			55,321			60,099			3,122,062			3,182,161				55,078			243
Construction				-			-			1,788			1,788			84,167			85,955				1,788			-
Mortgage				275,367			128,104			1,043,607			1,447,078			4,986,245			6,433,323				323,565			595,525
Leasing				7,663			1,827			3,313			12,803			921,970			934,773				3,313			-
Consumer:
	Credit cards			9,504			7,391			16,035			32,930			1,014,343			1,047,273				-			16,035
	Home equity lines of credit			-			97			165			262			5,089			5,351				11			154
	Personal			13,069			7,907			18,515			39,491			1,211,134			1,250,625				17,887			35
	Auto			52,204			9,862			24,177			86,243			2,522,542			2,608,785				24,050			127
	Other			566			288			14,958			15,812			128,932			144,744				14,534			424
Total			$	462,707		$	167,907		$	1,323,403		$	1,954,017		$	17,929,455		$	19,883,472			$	568,098		$	612,543
[1]	Loans HIP of $143 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, 2018
Popular U.S.
				Past due																		Past due 90 days or more
			30-59			60-89			90 days			Total										Non-accrual				Accruing
(In thousands)			days			days			or more			past due			Current			Loans HIP				loans			loans[1]
Commercial multi-family			$	3,163		$	-		$	-		$	3,163		$	1,398,377		$	1,401,540			$	-		$	-
Commercial real estate:
	Non-owner occupied			707			288			365			1,360			1,880,384			1,881,744				365			-
	Owner occupied			5,125			1,728			381			7,234			291,705			298,939				381			-
Commercial and industrial				2,354			995			73,726			77,075			1,011,078			1,088,153				330			-
Construction				-			-			12,060			12,060			681,434			693,494				12,060			-
Mortgage				13,615			3,197			11,033			27,845			774,090			801,935				11,033			-
Legacy				195			445			2,627			3,267			22,682			25,949				2,627			-
Consumer:
	Credit cards			2			-			-			2			36			38				-			-
	Home equity lines of credit			886			464			13,579			14,929			128,123			143,052				13,579			-
	Personal			2,319			1,723			2,610			6,652			282,697			289,349				2,610			-
	Other			-			-			4			4			220			224				4			-
Total			$	28,366		$	8,840		$	116,385		$	153,591		$	6,470,826		$	6,624,417			$	42,989		$	-
[1]	Loans HIP of $73 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, 2018
Popular, Inc.
			Past due																		Past due 90 days or more
		30-59			60-89			90 days			Total										Non-accrual				Accruing
(In thousands)		days			days			or more			past due			Current			Loans HIP[3] [4]				loans			loans[5]
Commercial multi-family		$	4,604		$	112		$	598		$	5,314		$	1,541,854		$	1,547,168			$	546		$	-
Commercial real estate:
	Non-owner occupied		92,782			1,127			46,056			139,965			4,064,380			4,204,345				39,622			-
	Owner occupied		11,806			12,567			99,616			123,989			1,897,203			2,021,192				88,450			-
Commercial and industrial			6,491			1,636			129,047			137,174			4,133,140			4,270,314				55,408			243
Construction			-			-			13,848			13,848			765,601			779,449				13,848			-
Mortgage[1]			288,982			131,301			1,054,640			1,474,923			5,760,335			7,235,258				334,598			595,525
Leasing			7,663			1,827			3,313			12,803			921,970			934,773				3,313			-
Legacy[2]			195			445			2,627			3,267			22,682			25,949				2,627			-
Consumer:
	Credit cards		9,506			7,391			16,035			32,932			1,014,379			1,047,311				-			16,035
	Home equity lines of credit		886			561			13,744			15,191			133,212			148,403				13,590			154
	Personal		15,388			9,630			21,125			46,143			1,493,831			1,539,974				20,497			35
	Auto		52,204			9,862			24,177			86,243			2,522,542			2,608,785				24,050			127
	Other		566			288			14,962			15,816			129,152			144,968				14,538			424
Total		$	491,073		$	176,747		$	1,439,788		$	2,107,608		$	24,400,281		$	26,507,889			$	611,087		$	612,543

[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 $156 million in unearned income and exclude $51 million in loans held-for-sale.
[4]	Includes $6.9 billion pledged to secure credit facilities and public funds that the secured parties are not permitted to sell or repledge the collateral, of which $4.8 billion were pledged at the Federal Home Loan Bank ("FHLB") as collateral for borrowings and $2.1 billion at the Federal Reserve Bank ("FRB") for discount window borrowings.
[5]	Loans HIP of $216 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 due																		Past due 90 days or more
				30-59			60-89			90 days		Total						Non-covered				Non-accrual				Accruing
(In thousands)				days			days			or more		past due			Current			loans HIP				loans			loans[1]
Commercial multi-family			$	-		$	426		$	1,210		$	1,636		$	144,763		$	146,399			$	1,115		$	-
Commercial real estate:
	Non-owner occupied			39,617			131			28,045			67,793			2,336,766			2,404,559				18,866			-
	Owner occupied			7,997			2,291			123,929			134,217			1,689,397			1,823,614				101,068			-
Commercial and industrial				3,556			1,251			40,862			45,669			2,845,658			2,891,327				40,177			685
Construction				-			-			170			170			95,199			95,369				-			-
Mortgage				217,890			77,833			1,596,763			1,892,486			4,684,293			6,576,779				306,697			1,204,691
Leasing				10,223			1,490			2,974			14,687			795,303			809,990				2,974			-
Consumer:
	Credit cards			7,319			4,464			18,227			30,010			1,063,211			1,093,221				-			18,227
	Home equity lines of credit			438			395			257			1,090			4,997			6,087				-			257
	Personal			13,926			6,857			19,981			40,764			1,181,548			1,222,312				19,460			141
	Auto			24,405			5,197			5,466			35,068			815,745			850,813				5,466			-
	Other			537			444			16,765			17,746			139,842			157,588				15,617			1,148
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 due																		Past due 90 days or more
				30-59			60-89			90 days			Total					Non-covered				Non-accrual				Accruing
(In thousands)				days			days			or more			past due			Current			loans HIP			loans			loans[1]
Commercial multi-family			$	395		$	-		$	784		$	1,179		$	1,209,514		$	1,210,693			$	784		$	-
Commercial real estate:
	Non-owner occupied			4,028			1,186			1,599			6,813			1,681,498			1,688,311				1,599			-
	Owner occupied			2,684			-			862			3,546			315,429			318,975				862			-
Commercial and industrial				1,121			5,278			97,427			103,826			901,157			1,004,983				594			-
Construction				-			-			-			-			784,660			784,660				-			-
Mortgage				13,453			6,148			14,852			34,453			659,175			693,628				14,852			-
Legacy				291			417			3,039			3,747			29,233			32,980				3,039			-
Consumer:
	Credit cards			3			2			11			16			84			100				11			-
	Home equity lines of credit			4,653			3,675			14,997			23,325			158,760			182,085				14,997			-
	Personal			3,342			2,149			2,779			8,270			289,732			298,002				2,779			-
	Other			-			-			-			-			319			319				-			-
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 due																		Past due 90 days or more
			30-59			60-89			90 days			Total				Non-covered					Non-accrual				Accruing
(In thousands)			days			days			or more			past due		Current			loans HIP[3] [4]				loans			loans[5]
Commercial multi-family		$	395		$	426		$	1,994		$	2,815		$	1,354,277		$	1,357,092			$	1,899		$	-
Commercial real estate:
	Non-owner occupied		43,645			1,317			29,644			74,606			4,018,264			4,092,870				20,465			-
	Owner occupied		10,681			2,291			124,791			137,763			2,004,826			2,142,589				101,930			-
Commercial and industrial			4,677			6,529			138,289			149,495			3,746,815			3,896,310				40,771			685
Construction			-			-			170			170			879,859			880,029				-			-
Mortgage[1]			231,343			83,981			1,611,615			1,926,939			5,343,468			7,270,407				321,549			1,204,691
Leasing			10,223			1,490			2,974			14,687			795,303			809,990				2,974			-
Legacy[2]			291			417			3,039			3,747			29,233			32,980				3,039			-
Consumer:
	Credit cards		7,322			4,466			18,238			30,026			1,063,295			1,093,321				11			18,227
	Home equity lines of credit		5,091			4,070			15,254			24,415			163,757			188,172				14,997			257
	Personal		17,268			9,006			22,760			49,034			1,471,280			1,520,314				22,239			141
	Auto		24,405			5,197			5,466			35,068			815,745			850,813				5,466			-
	Other		537			444			16,765			17,746			140,161			157,907				15,617			1,148
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 December 31, 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 $598 million are 90 days or more past due, including $134 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 $283 million of residential mortgage loans in Puerto Rico that are no longer accruing interest as of December 31, 2018 (December 31, 2017 - $178 million). Additionally, the Corporation has approximately $69 million in reverse mortgage loans in Puerto Rico which are guaranteed by FHA, but which are currently not accruing interest at December 31, 2018 (December 31, 2017 - $58 million).

Loans with a delinquency status of 90 days past due as of December 31, 2018 include $134 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.

The components of the net financing leases receivable at December 31, 2018 and 2017 were as follows:

(In thousands)			2018		2017
Total minimum lease payments		$	781,060	$	681,198
Estimated residual value of leased property (unguaranteed)			293,495		246,248
Deferred origination costs, net of fees			12,261		9,496
	Less - Unearned financing income		151,881		126,797
Net minimum lease payments			934,935		810,145
	Less - Allowance for loan losses		11,487		12,000
Net minimum lease payments, net of allowance for loan losses		$	923,448	$	798,145

At December 31, 2018, future minimum lease payments are expected to be received as follows:

(In thousands)
2019	$	34,012
2020		83,797
2021		137,297
2022		197,996
2023 and thereafter		327,958
Total	$	781,060

Covered loans

The following table presents the composition of loans by past due status, and by loan class including those 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 due																		Past due 90 days or more
			30-59		60-89			90 days			Total						Covered				Non-accrual			Accruing
(In thousands)			days		days			or more			past due				Current		loans HIP[2]				loans			loans
Mortgage		$	16,640		$	5,453		$	59,018		$	81,111		$	421,818		$	502,929			$	3,165		$	-
Consumer			518			147			988			1,653			12,692			14,345				188			-
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 $2.2 billion at December 31, 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 December 31, 2018 and 2017.

Carrying amount
(In thousands)		December 31, 2018		December 31, 2017
Commercial real estate	$	801,774	$	923,424
Commercial and industrial		84,465		88,130
Construction		-		170
Mortgage		982,821		1,079,611
Consumer		14,496		17,658
Carrying amount		1,883,556		2,108,993
Allowance for loan losses		(122,135)		(119,505)
Carrying amount, net of allowance	$	1,761,421	$	1,989,488

At December 31, 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 years ended December 31, 2018 and 2017, were as follows:

Carrying amount of acquired loans accounted for pursuant to ASC 310-30
							For the year ended
(In thousands)								December 31, 2018		December 31, 2017
Beginning balance							$	2,108,993	$	2,301,024
Additions								16,645		18,824
Accretion								166,272		175,121
Collections / loan sales / charge-offs								(408,354)		(385,976)
Ending balance[1]							$	1,883,556	$	2,108,993
Allowance for loan losses								(122,135)		(119,505)
Ending balance, net of ALLL							$	1,761,421	$	1,989,488
[1]	At December 31, 2018, includes $1.4 billion of loans considered non-credit impaired at the acquisition date (December 31, 2017 - $1.6 billion).

Activity in the accretable yield of acquired loans accounted for pursuant to ASC 310-30
						For the years ended
(In thousands)							December 31, 2018		December 31, 2017
Beginning balance						$	1,214,488	$	1,288,983
Additions							6,535		11,218
Accretion							(166,272)		(175,121)
Change in expected cash flows							37,753		89,408
Ending balance[1]						$	1,092,504	$	1,214,488
[1]	At December 31, 2018, includes $0.8 billion for loans considered non-credit impaired at the acquisition date (December 31, 2017 - $0.9 billion).

X

- Definition

The entire disclosure for claims held for amounts due a entity, excluding financing receivables. Examples include, but are not limited to, trade accounts receivables, notes receivables, loans receivables. Includes disclosure for allowance for credit losses.

+ References

Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 310
-SubTopic 10
-Section 50
-Paragraph 4
-URI http://asc.fasb.org/extlink&oid=84173941&loc=d3e5074-111524

Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 210
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.5-02(4))
-URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682

Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 944
-SubTopic 210
-Section S99
-Paragraph 1
-Subparagraph (SX 210.7-03(a)(5))
-URI http://asc.fasb.org/extlink&oid=6879938&loc=d3e572229-122910

Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 310
-SubTopic 10
-Section 50
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