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Segment Reporting | 9 Months Ended
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Sep. 30, 2019
Disclosure Text Block |
Segment Reporting | Note 35 – 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 September 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 September 30, 2018, the intercompany billings from Popular, Inc. to the Banco Popular de Puerto Rico and Popular U.S. reportable segments amounted to $21.8 million and $3.3 million, respectively. For the nine months ended September 30, 2018, the intercompany billings from Popular, Inc to the Banco Popular de Puerto Rico and Popular U.S. reportable segments amounted to $59.3 million and $9.5 million, respectively. The tables that follow present the results of operations and total assets by reportable segments:
2019
For the quarter ended September 30, 2019
|  |  |  | Banco Popular |  |  |  | Intersegment
(In thousands) |  |  |  | de Puerto Rico |  | Popular U.S. |  | Eliminations
Net interest income |  |  | $ | 412,182 | $ | 74,391 | $ | 4
Provision for loan losses |  |  |  | 34,481 |  | 2,060 |  | -
Non-interest income |  |  |  | 124,868 |  | 5,953 |  | (140)
Amortization of intangibles |  |  |  | 2,208 |  | 167 |  | -
Depreciation expense |  |  |  | 11,972 |  | 2,046 |  | -
Other operating expenses |  |  |  | 309,815 |  | 51,616 |  | (136)
Income tax expense |  |  |  | 35,286 |  | 6,216 |  | -
Net income |  |  | $ | 143,288 | $ | 18,239 | $ | -
Segment assets |  |  | $ | 42,080,292 | $ | 10,095,526 | $ | (14,414)
For the quarter ended September 30, 2019
|  | Reportable |  |  |  |  |  |
(In thousands) |  | Segments |  | Corporate |  | Eliminations |  | Total Popular, Inc.
Net interest income (expense) | $ | 486,577 | $ | (9,586) | $ | - | $ | 476,991
Provision for loan losses |  | 36,541 |  | (2) |  | - |  | 36,539
Non-interest income |  | 130,681 |  | 12,137 |  | (106) |  | 142,712
Amortization of intangibles |  | 2,375 |  | 24 |  | - |  | 2,399
Depreciation expense |  | 14,018 |  | 186 |  | - |  | 14,204
Other operating expenses |  | 361,295 |  | (647) |  | (776) |  | 359,872
Income tax expense (benefit) |  | 41,502 |  | (392) |  | 260 |  | 41,370
Net income (loss) | $ | 161,527 | $ | 3,382 | $ | 410 | $ | 165,319
Segment assets | $ | 52,161,404 | $ | 5,134,608 | $ | (4,815,597) | $ | 52,480,415
For the nine months ended September 30, 2019
|  |  |  | Banco Popular |  |  |  | Intersegment
(In thousands) |  |  |  | de Puerto Rico |  | Popular U.S. |  | Eliminations
Net interest income |  |  | $ | 1,231,088 | $ | 221,856 | $ | (53)
Provision for loan losses |  |  |  | 94,651 |  | 23,647 |  | -
Non-interest income |  |  |  | 369,026 |  | 17,309 |  | (421)
Amortization of intangibles |  |  |  | 6,510 |  | 499 |  | -
Depreciation expense |  |  |  | 36,154 |  | 6,215 |  | -
Other operating expenses |  |  |  | 887,941 |  | 151,966 |  | (409)
Income tax expense |  |  |  | 117,413 |  | 15,528 |  | -
Net income |  |  | $ | 457,445 | $ | 41,310 | $ | (65)
Segment assets |  |  | $ | 42,080,292 | $ | 10,095,526 | $ | (14,414)
For the nine months ended September 30, 2019
|  | Reportable |  |  |  |  |  |
(In thousands) |  | Segments |  | Corporate |  | Eliminations |  | Total Popular, Inc.
Net interest income (expense) | $ | 1,452,891 | $ | (28,621) | $ | - | $ | 1,424,270
Provision for loan losses |  | 118,298 |  | 257 |  | - |  | 118,555
Non-interest income |  | 385,914 |  | 33,537 |  | (1,983) |  | 417,468
Amortization of intangibles |  | 7,009 |  | 73 |  | - |  | 7,082
Depreciation expense |  | 42,369 |  | 559 |  | - |  | 42,928
Other operating expenses |  | 1,039,498 |  | (233) |  | (2,365) |  | 1,036,900
Income tax expense (benefit) |  | 132,941 |  | (1,158) |  | 140 |  | 131,923
Net income | $ | 498,690 | $ | 5,418 | $ | 242 | $ | 504,350
Segment assets | $ | 52,161,404 | $ | 5,134,608 | $ | (4,815,597) | $ | 52,480,415
2018
For the quarter ended September 30, 2018
|  |  |  | Banco Popular |  |  |  | Intersegment
(In thousands) |  |  |  | de Puerto Rico |  | Popular U.S. |  | 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 U.S. |  | 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
Additional disclosures with respect to the Banco Popular de Puerto Rico reportable segment are as follows:
2019
For the quarter ended September 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 | $ | 160,038 | $ | 250,944 | $ | 1,212 | $ | (12) | $ | 412,182
Provision (reversal) for loan losses |  | (23,619) |  | 58,100 |  | - |  | - |  | 34,481
Non-interest income |  | 25,196 |  | 75,854 |  | 24,545 |  | (727) |  | 124,868
Amortization of intangibles |  | 50 |  | 1,072 |  | 1,086 |  | - |  | 2,208
Depreciation expense |  | 5,064 |  | 6,753 |  | 155 |  | - |  | 11,972
Other operating expenses |  | 82,817 |  | 210,753 |  | 16,986 |  | (741) |  | 309,815
Income tax expense |  | 29,340 |  | 2,649 |  | 3,297 |  | - |  | 35,286
Net income | $ | 91,582 | $ | 47,471 | $ | 4,233 | $ | 2 | $ | 143,288
Segment assets | $ | 35,590,229 | $ | 23,714,260 | $ | 379,126 | $ | (17,603,323) | $ | 42,080,292
For the nine months ended September 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 | $ | 464,441 | $ | 762,913 | $ | 3,857 | $ | (123) | $ | 1,231,088
Provision (reversal) for loan losses |  | (22,756) |  | 117,407 |  | - |  | - |  | 94,651
Non-interest income |  | 74,481 |  | 220,064 |  | 76,733 |  | (2,252) |  | 369,026
Amortization of intangibles |  | 147 |  | 3,218 |  | 3,145 |  | - |  | 6,510
Depreciation expense |  | 14,615 |  | 21,071 |  | 468 |  | - |  | 36,154
Other operating expenses |  | 229,767 |  | 611,348 |  | 49,076 |  | (2,250) |  | 887,941
Income tax expense |  | 88,353 |  | 19,878 |  | 9,182 |  | - |  | 117,413
Net income | $ | 228,796 | $ | 210,055 | $ | 18,719 | $ | (125) | $ | 457,445
Segment assets | $ | 35,590,229 | $ | 23,714,260 | $ | 379,126 | $ | (17,603,323) | $ | 42,080,292
| 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 33 to the Consolidated Financial Statements for additional information.
Geographic Information |  |  |  |
|  |  | Quarter ended |  | Nine months ended
(In thousands) |  | September 30, 2019 |  | September 30, 2018 |  | September 30, 2019 |  | September 30, 2018
Revenues:[1] |  |  |  |  |  |  |  |
Puerto Rico | $ | 505,608 | $ | 493,512 | $ | 1,507,386 | $ | 1,435,099
United States |  | 94,510 |  | 90,659 |  | 278,330 |  | 264,232
Other |  | 19,585 |  | 18,319 |  | 56,022 |  | 58,648
Total consolidated revenues | $ | 619,703 | $ | 602,490 | $ | 1,841,738 | $ | 1,757,979
[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, indemnity reserves on loans sold expense, FDIC loss-share income and other operating income.
Selected Balance Sheet Information:
(In thousands) |  | September 30, 2019 |  | December 31, 2018
Puerto Rico |  |  |  |
| Total assets | $ | 40,883,975 | $ | 36,863,930
| Loans |  | 18,752,442 |  | 18,837,742
| Deposits |  | 35,110,213 |  | 31,237,529
United States |  |  |  |
| Total assets | $ | 10,716,967 | $ | 9,847,944
| Loans |  | 7,649,658 |  | 7,034,075
| Deposits |  | 7,676,409 |  | 6,878,599
Other |  |  |  |
| Total assets | $ | 879,473 | $ | 892,703
| Loans |  | 662,245 |  | 687,494
| Deposits[1] |  | 1,379,573 |  | 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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