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Segment Reporting | 6 Months Ended
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Jun. 30, 2019
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. 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 June 30, 2019, 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. During 2018, the Reliable brand was transferred to Popular, Inc. and is being used by Popular Auto. 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 Insurance V.I. was dissolved on December 31, 2018. Popular U.S.: Popular U.S. reportable segment consists of the banking operations of Popular Bank (PB) and Popular Insurance Agency, U.S.A. PB operates through a retail branch network in the U.S. mainland under the name of Popular. 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, León. 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. Effective on January 1, 2019, the Corporation’s management changed the measurement basis for its reportable segments. Historically, for management reporting purposes, the Corporation had reversed the effect of the intercompany billings from Popular Inc., holding company, to its subsidiaries for certain services or expenses incurred on their behalf. In addition, the Corporation used to reflect an income tax expense allocation for several of its subsidiaries which are Limited Liability Companies (“LLCs”) and had made an election to be treated as a pass through entities for income tax purposes. The Corporation’s management has determined to discontinue making these adjustments, effective on January 1, 2019, for purposes of its management and reportable segment reporting. The Corporation reflected these changes in the measurement of the reportable segments’ results prospectively beginning on January 1, 2019. For the quarter ended June 30, 2018, the intercompany billings from Popular, Inc to the Banco Popular de Puerto Rico and Popular U.S. reportable segments amounted to $20.6 million and $3.4 million, respectively. For the six months ended June 30, 2018, the intercompany billings from Popular, Inc to the Banco Popular de Puerto Rico and Popular U.S. reportable segments amounted to $37.5 million and $6.2 million, respectively. The tables that follow present the results of operations and total assets by reportable segments:
2019
For the quarter ended June 30, 2019
|  |  |  | Banco Popular |  |  |  | Intersegment
(In thousands) |  |  |  | de Puerto Rico |  | Popular U.S. |  | Eliminations
Net interest income |  |  | $ | 411,549 | $ | 74,637 | $ | (61)
Provision for loan losses |  |  |  | 28,821 |  | 11,216 |  | -
Non-interest income |  |  |  | 123,388 |  | 5,492 |  | (140)
Amortization of intangibles |  |  |  | 2,180 |  | 166 |  | -
Depreciation expense |  |  |  | 12,243 |  | 2,001 |  | -
Other operating expenses |  |  |  | 297,428 |  | 51,741 |  | (137)
Income tax expense |  |  |  | 36,751 |  | 4,097 |  | -
Net income |  |  | $ | 157,514 | $ | 10,908 | $ | (64)
Segment assets |  |  | $ | 40,698,293 | $ | 9,723,815 | $ | (114,605)
For the quarter ended June 30, 2019
|  | Reportable |  |  |  |  |  |
(In thousands) |  | Segments |  | Corporate |  | Eliminations |  | Total Popular, Inc.
Net interest income (expense) | $ | 486,125 | $ | (9,809) | $ | - | $ | 476,316
Provision for loan losses |  | 40,037 |  | 154 |  | - |  | 40,191
Non-interest income |  | 128,740 |  | 11,339 |  | (1,753) |  | 138,326
Amortization of intangibles |  | 2,346 |  | 25 |  | - |  | 2,371
Depreciation expense |  | 14,244 |  | 185 |  | - |  | 14,429
Other operating expenses |  | 349,032 |  | (1,944) |  | (873) |  | 346,215
Income tax expense (benefit) |  | 40,848 |  | (180) |  | (338) |  | 40,330
Net income (loss) | $ | 168,358 | $ | 3,290 | $ | (542) | $ | 171,106
Segment assets | $ | 50,307,503 | $ | 5,062,632 | $ | (4,752,914) | $ | 50,617,221
For the six months ended June 30, 2019
|  |  |  | Banco Popular |  |  |  | Intersegment
(In thousands) |  |  |  | de Puerto Rico |  | Popular U.S. |  | Eliminations
Net interest income |  |  | $ | 818,906 | $ | 147,465 | $ | (57)
Provision for loan losses |  |  |  | 60,170 |  | 21,587 |  | -
Non-interest income |  |  |  | 244,158 |  | 11,356 |  | (281)
Amortization of intangibles |  |  |  | 4,302 |  | 332 |  | -
Depreciation expense |  |  |  | 24,182 |  | 4,169 |  | -
Other operating expenses |  |  |  | 578,126 |  | 100,350 |  | (273)
Income tax expense |  |  |  | 82,127 |  | 9,312 |  | -
Net income |  |  | $ | 314,157 | $ | 23,071 | $ | (65)
Segment assets |  |  | $ | 40,698,293 | $ | 9,723,815 | $ | (114,605)
For the six months ended June 30, 2019
|  | Reportable |  |  |  |  |  |
(In thousands) |  | Segments |  | Corporate |  | Eliminations |  | Total Popular, Inc.
Net interest income (expense) | $ | 966,314 | $ | (19,035) | $ | - | $ | 947,279
Provision for loan losses |  | 81,757 |  | 259 |  | - |  | 82,016
Non-interest income |  | 255,233 |  | 21,400 |  | (1,877) |  | 274,756
Amortization of intangibles |  | 4,634 |  | 49 |  | - |  | 4,683
Depreciation expense |  | 28,351 |  | 373 |  | - |  | 28,724
Other operating expenses |  | 678,203 |  | 414 |  | (1,589) |  | 677,028
Income tax expense (benefit) |  | 91,439 |  | (766) |  | (120) |  | 90,553
Net income | $ | 337,163 | $ | 2,036 | $ | (168) | $ | 339,031
Segment assets | $ | 50,307,503 | $ | 5,062,632 | $ | (4,752,914) | $ | 50,617,221
2018
For the quarter ended June 30, 2018
|  |  |  | Banco Popular |  |  |  | Intersegment
(In thousands) |  |  |  | de Puerto Rico |  | Popular U.S. |  | Eliminations
Net interest income |  |  | $ | 352,721 | $ | 75,477 | $ | (2)
Provision for loan losses |  |  |  | 44,425 |  | 15,649 |  | -
Non-interest income |  |  |  | 220,190 |  | 5,139 |  | (140)
Amortization of intangibles |  |  |  | 2,158 |  | 166 |  | -
Depreciation expense |  |  |  | 10,406 |  | 2,163 |  | -
Other operating expenses |  |  |  | 254,921 |  | 45,806 |  | (137)
Income tax (benefit) expense |  |  |  | (24,180) |  | 4,231 |  | -
Net income |  |  | $ | 285,181 | $ | 12,601 | $ | (5)
Segment assets |  |  | $ | 37,883,250 | $ | 9,468,740 | $ | (110,936)
For the quarter ended June 30, 2018
|  | Reportable |  |  |  |  |  |
(In thousands) |  | Segments |  | Corporate |  | Eliminations |  | Total Popular, Inc.
Net interest income (expense) | $ | 428,196 | $ | (14,060) | $ | - | $ | 414,136
Provision (reversal) for loan losses |  | 60,074 |  | (20) |  | - |  | 60,054
Non-interest income |  | 225,189 |  | 10,790 |  | (1,170) |  | 234,809
Amortization of intangibles |  | 2,324 |  | - |  | - |  | 2,324
Depreciation expense |  | 12,569 |  | 173 |  | - |  | 12,742
Other operating expenses |  | 300,590 |  | 22,689 |  | (677) |  | 322,602
Income tax (benefit) expense |  | (19,949) |  | (8,423) |  | (188) |  | (28,560)
Net income (loss) | $ | 297,777 | $ | (17,689) | $ | (305) | $ | 279,783
Segment assets | $ | 47,241,054 | $ | 5,344,785 | $ | (5,050,662) | $ | 47,535,177
For the six months ended June 30, 2018
|  |  |  | Banco Popular |  |  |  | Intersegment
(In thousands) |  |  |  | de Puerto Rico |  | Popular U.S. |  | Eliminations
Net interest income |  |  | $ | 684,989 | $ | 150,470 | $ | 2
Provision for loan losses |  |  |  | 102,894 |  | 28,264 |  | -
Non-interest income |  |  |  | 316,815 |  | 9,480 |  | (279)
Amortization of intangibles |  |  |  | 4,317 |  | 332 |  | -
Depreciation expense |  |  |  | 20,934 |  | 4,281 |  | -
Other operating expenses |  |  |  | 495,450 |  | 91,026 |  | (273)
Income tax expense |  |  |  | 1,667 |  | 5,320 |  | -
Net income |  |  | $ | 376,542 | $ | 30,727 | $ | (4)
Segment assets |  |  | $ | 37,883,250 | $ | 9,468,740 | $ | (110,936)
For the six months ended June 30, 2018
|  | Reportable |  |  |  |  |  |
(In thousands) |  | Segments |  | Corporate |  | Eliminations |  | Total Popular, Inc.
Net interest income (expense) | $ | 835,461 | $ | (28,278) | $ | - | $ | 807,183
Provision (reversal) for loan losses |  | 131,158 |  | (41) |  | - |  | 131,117
Non-interest income |  | 326,016 |  | 23,738 |  | (1,448) |  | 348,306
Amortization of intangibles |  | 4,649 |  | - |  | - |  | 4,649
Depreciation expense |  | 25,215 |  | 360 |  | - |  | 25,575
Other operating expenses |  | 586,203 |  | 44,771 |  | (1,528) |  | 629,446
Income tax expense (benefit) |  | 6,987 |  | (13,435) |  | 43 |  | (6,405)
Net income (loss) | $ | 407,265 | $ | (36,195) | $ | 37 | $ | 371,107
Segment assets | $ | 47,241,054 | $ | 5,344,785 | $ | (5,050,662) | $ | 47,535,177
Additional disclosures with respect to the Banco Popular de Puerto Rico reportable segment are as follows:
2019
For the quarter ended June 30, 2019
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 | $ | 152,943 | $ | 257,301 | $ | 1,327 | $ | (22) | $ | 411,549
Provision for loan losses |  | 2,855 |  | 25,966 |  | - |  | - |  | 28,821
Non-interest income |  | 25,696 |  | 68,806 |  | 29,654 |  | (768) |  | 123,388
Amortization of intangibles |  | 48 |  | 1,074 |  | 1,058 |  | - |  | 2,180
Depreciation expense |  | 4,897 |  | 7,191 |  | 155 |  | - |  | 12,243
Other operating expenses |  | 74,021 |  | 207,925 |  | 16,263 |  | (781) |  | 297,428
Income tax expense |  | 27,819 |  | 5,486 |  | 3,446 |  | - |  | 36,751
Net income | $ | 68,999 | $ | 78,465 | $ | 10,059 | $ | (9) | $ | 157,514
Segment assets | $ | 32,240,745 | $ | 23,582,849 | $ | 381,020 | $ | (15,506,321) | $ | 40,698,293
For the six months ended June 30, 2019
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 | $ | 304,403 | $ | 511,969 | $ | 2,645 | $ | (111) | $ | 818,906
Provision for loan losses |  | 863 |  | 59,307 |  | - |  | - |  | 60,170
Non-interest income |  | 49,285 |  | 144,210 |  | 52,188 |  | (1,525) |  | 244,158
Amortization of intangibles |  | 97 |  | 2,146 |  | 2,059 |  | - |  | 4,302
Depreciation expense |  | 9,551 |  | 14,318 |  | 313 |  | - |  | 24,182
Other operating expenses |  | 146,950 |  | 400,595 |  | 32,090 |  | (1,509) |  | 578,126
Income tax expense |  | 59,013 |  | 17,229 |  | 5,885 |  | - |  | 82,127
Net income | $ | 137,214 | $ | 162,584 | $ | 14,486 | $ | (127) | $ | 314,157
Segment assets | $ | 32,240,745 | $ | 23,582,849 | $ | 381,020 | $ | (15,506,321) | $ | 40,698,293
| 2018
| For the quarter ended June 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 | $ | 145,674 | $ | 205,795 | $ | 1,258 | $ | (6) | $ | 352,721
Provision for loan losses |  | 9,754 |  | 34,671 |  | - |  | - |  | 44,425
Non-interest income |  | 23,930 |  | 69,967 |  | 23,764 |  | 102,529 |  | 220,190
Amortization of intangibles |  | 51 |  | 1,071 |  | 1,036 |  | - |  | 2,158
Depreciation expense |  | 4,341 |  | 5,912 |  | 153 |  | - |  | 10,406
Other operating expenses |  | 60,639 |  | 172,031 |  | 14,367 |  | 7,884 |  | 254,921
Income tax expense |  | 24,697 |  | 11,732 |  | 3,279 |  | (63,888) |  | (24,180)
Net income | $ | 70,122 | $ | 50,345 | $ | 6,187 | $ | 158,527 | $ | 285,181
Segment assets | $ | 26,355,657 | $ | 21,007,705 | $ | 536,164 | $ | (10,016,276) | $ | 37,883,250
[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.
| For the six months ended June 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 | $ | 284,944 | $ | 397,229 | $ | 2,834 | $ | (18) | $ | 684,989
Provision for loan losses |  | 30,447 |  | 72,447 |  | - |  | - |  | 102,894
Non-interest income |  | 36,492 |  | 131,824 |  | 46,213 |  | 102,286 |  | 316,815
Amortization of intangibles |  | 103 |  | 2,140 |  | 2,074 |  | - |  | 4,317
Depreciation expense |  | 8,630 |  | 11,997 |  | 307 |  | - |  | 20,934
Other operating expenses |  | 120,900 |  | 334,521 |  | 32,400 |  | 7,629 |  | 495,450
Income tax expense |  | 41,572 |  | 19,189 |  | 4,794 |  | (63,888) |  | 1,667
Net income | $ | 119,784 | $ | 88,759 | $ | 9,472 | $ | 158,527 | $ | 376,542
Segment assets | $ | 26,355,657 | $ | 21,007,705 | $ | 536,164 | $ | (10,016,276) | $ | 37,883,250
[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.
Geographic Information |  |  |  |
|  |  | Quarter ended |  | Six months ended
(In thousands) |  | June 30, 2019 |  | June 30, 2018 |  | June 30, 2019 |  | June 30, 2018
Revenues:[1] |  |  |  |  |  |  |  |
Puerto Rico | $ | 501,640 | $ | 542,173 | $ | 1,001,778 | $ | 941,587
United States |  | 93,964 |  | 87,045 |  | 183,820 |  | 173,573
Other |  | 19,038 |  | 19,727 |  | 36,437 |  | 40,329
Total consolidated revenues | $ | 614,642 | $ | 648,945 | $ | 1,222,035 | $ | 1,155,489
[1] | Total revenues include net interest income, service charges on deposit accounts, other service fees, mortgage banking activities, net gain (loss), including impairment on equity securities, net profit (loss) on trading account debt securities, adjustments (expense) to indemnity reserves on loans sold, FDIC loss share income and other operating income.
Selected Balance Sheet Information:
(In thousands) |  | June 30, 2019 |  | December 31, 2018
Puerto Rico |  |  |  |
| Total assets | $ | 39,417,569 | $ | 36,863,930
| Loans |  | 18,879,047 |  | 18,837,742
| Deposits |  | 33,574,495 |  | 31,237,529
United States |  |  |  |
| Total assets | $ | 10,324,391 | $ | 9,847,944
| Loans |  | 7,511,132 |  | 7,034,075
| Deposits |  | 6,951,081 |  | 6,878,599
Other |  |  |  |
| Total assets | $ | 875,261 | $ | 892,703
| Loans |  | 669,594 |  | 687,494
| Deposits[1] |  | 1,534,261 |  | 1,593,911
[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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -URI http://asc.fasb.org/topic&trid=2134510 + Details
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