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Segment Reporting | 12 Months Ended
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Dec. 31, 2019
Disclosure Text Block |
Segment Reporting | Note 40 – 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 December 31, 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 year ended December 31, 2018, the intercompany billings from Popular, Inc to Banco Popular de Puerto Rico amounted to $78.3 million (2017 - $66.4 million) and to the Popular U.S. reportable segments amounted to $12.5 million (2017 - $10.3 million). The tables that follow present the results of operations and total assets by reportable segments:
December 31, 2019
|  |  |  | Banco Popular |  |  |  | Intersegment
(In thousands) |  |  |  | de Puerto Rico |  | Popular U.S. |  | Eliminations
Net interest income |  |  | $ | 1,633,950 | $ | 295,470 | $ | (51)
Provision for loan losses |  |  |  | 135,495 |  | 30,028 |  | -
Non-interest income |  |  |  | 506,739 |  | 23,160 |  | (561)
Amortization of intangibles |  |  |  | 8,610 |  | 664 |  | -
Depreciation expense |  |  |  | 49,058 |  | 8,263 |  | -
Other operating expenses |  |  |  | 1,208,458 |  | 205,219 |  | (547)
Income tax expense |  |  |  | 129,145 |  | 19,164 |  | -
Net income |  |  | $ | 609,923 | $ | 55,292 | $ | (65)
Segment assets |  |  | $ | 41,756,864 | $ | 10,056,316 | $ | (18,576)
December 31, 2019
|  | Reportable |  |  |  |  |  | Total
(In thousands) |  | Segments |  | Corporate |  | Eliminations |  | Popular, Inc.
Net interest income (expense) | $ | 1,929,369 | $ | (37,675) | $ | - | $ | 1,891,694
Provision for loan losses |  | 165,523 |  | 256 |  | - |  | 165,779
Non-interest income |  | 529,338 |  | 43,901 |  | (3,356) |  | 569,883
Amortization of intangibles |  | 9,274 |  | 96 |  | - |  | 9,370
Depreciation expense |  | 57,321 |  | 746 |  | - |  | 58,067
Other operating expenses |  | 1,413,130 |  | 55 |  | (3,140) |  | 1,410,045
Income tax expense (expense) |  | 148,309 |  | (1,041) |  | (87) |  | 147,181
Net income | $ | 665,150 | $ | 6,114 | $ | (129) | $ | 671,135
Segment assets | $ | 51,794,604 | $ | 5,228,276 | $ | (4,907,556) | $ | 52,115,324
December 31, 2018
|  |  |  | Banco Popular |  |  |  | Intersegment
(In thousands) |  |  |  | de Puerto Rico |  | Popular U.S. |  | Eliminations
Net interest income |  |  | $ | 1,482,178 | $ | 304,576 | $ | (2)
Provision for loan losses |  |  |  | 198,442 |  | 29,881 |  | -
Non-interest income |  |  |  | 592,938 |  | 19,988 |  | (560)
Amortization of intangibles |  |  |  | 8,620 |  | 665 |  | -
Depreciation expense |  |  |  | 43,504 |  | 9,053 |  | -
Other operating expenses |  |  |  | 1,073,012 |  | 182,154 |  | (546)
Income tax expense |  |  |  | 121,195 |  | 25,294 |  | -
Net income |  |  | $ | 630,343 | $ | 77,517 | $ | (16)
Segment assets |  |  | $ | 38,037,696 | $ | 9,381,636 | $ | (114,923)
December 31, 2018
|  | Reportable |  |  |  |  |  | Total
(In thousands) |  | Segments |  | Corporate |  | Eliminations |  | Popular, Inc.
Net interest income (expense) | $ | 1,786,752 | $ | (51,875) | $ | - | $ | 1,734,877
Provision (reversal) for loan losses |  | 228,323 |  | (251) |  | - |  | 228,072
Non-interest income |  | 612,366 |  | 42,914 |  | (2,786) |  | 652,494
Amortization of intangibles |  | 9,285 |  | 41 |  | - |  | 9,326
Depreciation expense |  | 52,557 |  | 743 |  | - |  | 53,300
Loss on early extinguishment of debt |  | - |  | 12,522 |  | - |  | 12,522
Other operating expenses |  | 1,254,620 |  | 94,640 |  | (2,846) |  | 1,346,414
Income tax expense (benefit) |  | 146,489 |  | (26,947) |  | 37 |  | 119,579
Net income (loss) | $ | 707,844 | $ | (89,709) | $ | 23 | $ | 618,158
Segment assets | $ | 47,304,409 | $ | 5,099,491 | $ | (4,799,323) | $ | 47,604,577
December 31, 2017
|  |  |  | Banco Popular |  |  |  | Intersegment
(In thousands) |  |  |  | de Puerto Rico |  | Popular U.S. |  | Eliminations
Net interest income |  |  | $ | 1,279,844 | $ | 280,946 | $ | (217)
Provision for loan losses |  |  |  | 253,032 |  | 77,944 |  | -
Non-interest income |  |  |  | 364,164 |  | 20,430 |  | (572)
Amortization of intangibles |  |  |  | 8,713 |  | 665 |  | -
Depreciation expense |  |  |  | 39,162 |  | 8,553 |  | -
Other operating expenses |  |  |  | 957,924 |  | 170,042 |  | (551)
Income tax expense |  |  |  | 72,741 |  | 191,749 |  | (93)
Net income (loss) |  |  | $ | 312,436 | $ | (147,577) | $ | (145)
Segment assets |  |  | $ | 34,843,668 | $ | 9,168,256 | $ | (16,992)
December 31, 2017
|  | Reportable |  |  |  |  |  | Total
(In thousands) |  | Segments |  | Corporate |  | Eliminations |  | Popular, Inc.
Net interest income (expense) | $ | 1,560,573 | $ | (58,609) | $ | - | $ | 1,501,964
Provision for loan losses |  | 330,976 |  | 403 |  | (5,955) |  | 325,424
Non-interest income |  | 384,022 |  | 37,949 |  | (2,804) |  | 419,167
Amortization of intangibles |  | 9,378 |  | - |  | - |  | 9,378
Depreciation expense |  | 47,715 |  | 649 |  | - |  | 48,364
Other operating expenses |  | 1,127,415 |  | 74,731 |  | (2,692) |  | 1,199,454
Income tax expense (benefit) |  | 264,397 |  | (35,835) |  | 2,268 |  | 230,830
Net income (loss) | $ | 164,714 | $ | (60,608) | $ | 3,575 | $ | 107,681
Segment assets | $ | 43,994,932 | $ | 5,046,153 | $ | (4,763,748) | $ | 44,277,337
Additional disclosures with respect to the Banco Popular de Puerto Rico reportable segment are as follows:
December 31, 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 | $ | 619,926 | $ | 1,009,196 | $ | 4,828 | $ | - | $ | 1,633,950
Provision (reversal) for loan losses |  | (46,099) |  | 181,594 |  | - |  | - |  | 135,495
Non-interest income |  | 99,758 |  | 303,268 |  | 106,218 |  | (2,505) |  | 506,739
Amortization of intangibles |  | 195 |  | 4,294 |  | 4,121 |  | - |  | 8,610
Depreciation expense |  | 20,024 |  | 28,411 |  | 623 |  | - |  | 49,058
Other operating expenses |  | 309,762 |  | 835,582 |  | 65,631 |  | (2,517) |  | 1,208,458
Income tax expense |  | 104,636 |  | 11,999 |  | 12,510 |  | - |  | 129,145
Net income | $ | 331,166 | $ | 250,584 | $ | 28,161 | $ | 12 | $ | 609,923
Segment assets | $ | 34,340,842 | $ | 23,976,004 | $ | 380,557 | $ | (16,940,539) | $ | 41,756,864
December 31, 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 | $ | 518,404 | $ | 753,922 | $ | 7,499 | $ | 19 | $ | 1,279,844
Provision for loan losses |  | 8,911 |  | 244,121 |  | - |  | - |  | 253,032
Non-interest income |  | 79,630 |  | 194,741 |  | 90,222 |  | (429) |  | 364,164
Amortization of intangibles |  | 211 |  | 4,274 |  | 4,228 |  | - |  | 8,713
Depreciation expense |  | 17,338 |  | 21,120 |  | 704 |  | - |  | 39,162
Other operating expenses |  | 239,369 |  | 656,998 |  | 62,030 |  | (473) |  | 957,924
Income tax expense (benefit) |  | 93,378 |  | (31,404) |  | 10,767 |  | - |  | 72,741
Net income | $ | 238,827 | $ | 53,554 | $ | 19,992 | $ | 63 | $ | 312,436
Segment assets | $ | 21,735,909 | $ | 20,180,173 | $ | 520,717 | $ | (7,593,131) | $ | 34,843,668
Geographic Information The following information presents selected financial information based on the geographic location where the Corporation conducts its business. The banking operations of BPPR are primarily based in Puerto Rico, where it has the largest retail banking franchise. BPPR also conducts banking operations in the U.S. Virgin Islands, the British Virgin Islands and New York. BPPR’s banking operations in the United States include E-loan, an online platform used to offer personal loans, co-branded credit cards offerings and an online deposit gathering platform. In the Virgin Islands, the BPPR segment offers banking products, including loans and deposits. During the year ended December 31, 2019, the BPPR segment generated approximately $55.7 million (2018 - $37.6 million, 2017 - $24.5 million) in revenues from its operations in the United States, including net interest income, service charges on deposit accounts and other service fees. In addition, the BPPR segment generated $47.6 million in revenues (2018 - $48.8 million, 2017 - $50.5 million) from its operations in the U.S. and British Virgin Islands. At December 31, 2019, total assets for the BPPR segment related to its operations in the United States amounted to $635 million (2018 - $455 million) and total deposits amounted to $46 million (2018 - $92 million).
(In thousands) |  | 2019 |  | 2018 |  | 2017 |
Revenues:[1] |  |  |  |  |  |  |
| Puerto Rico | $ | 2,016,089 | $ | 1,953,671 | $ | 1,527,758 |
| United States |  | 371,368 |  | 357,680 |  | 318,093 |
| Other |  | 74,120 |  | 76,020 |  | 75,280 |
Total consolidated revenues | $ | 2,461,577 | $ | 2,387,371 | $ | 1,921,131 |
[1] | Total revenues include net interest income, service charges on deposit accounts, other service fees, mortgage banking activities, net (loss) gain on sale of debt securities, other-than-temporary impairment losses on debt securities, net gain (loss), including impairment on equity securities, net profit (loss) on trading account debt securities, net gain (loss) on sale of loans, including valuation adjustments on loans held-for-sale, indemnity reserves on loans sold expense, FDIC loss-share income (expense) and other operating income.
Selected Balance Sheet Information
(In thousands) |  | 2019 |  | 2018 |  | 2017
Puerto Rico |  |  |  |  |  |
| Total assets | $ | 40,544,255 | $ | 36,863,930 | $ | 33,705,624
| Loans |  | 18,989,286 |  | 18,837,742 |  | 17,591,078
| Deposits |  | 34,664,243 |  | 31,237,529 |  | 27,575,292
United States |  |  |  |  |  |
| Total assets | $ | 10,693,536 | $ | 9,847,944 | $ | 9,648,865
| Loans |  | 7,819,187 |  | 7,034,075 |  | 6,608,056
| Deposits |  | 7,664,792 |  | 6,878,599 |  | 6,635,153
Other |  |  |  |  |  |
| Total assets | $ | 877,533 | $ | 892,703 | $ | 922,848
| Loans |  | 657,603 |  | 687,494 |  | 743,329
| Deposits [1] |  | 1,429,571 |  | 1,593,911 |  | 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://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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