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Segment Reporting | 3 Months Ended
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Mar. 31, 2020
Disclosure Text Block |
Segment Reporting | Note 33 – 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 March 31, 2020, 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 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 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. The tables that follow present the results of operations and total assets by reportable segments:
2020
For the quarter ended March 31, 2020
|  |  |  | Banco Popular |  |  |  | Intersegment
(In thousands) |  |  |  | de Puerto Rico |  | Popular U.S. |  | Eliminations
Net interest income |  |  | $ | 409,626 | $ | 72,689 | $ | 3
Provision for credit losses |  |  |  | 113,582 |  | 75,991 |  | -
Non-interest income |  |  |  | 112,142 |  | 5,232 |  | (140)
Amortization of intangibles |  |  |  | 2,282 |  | 167 |  | -
Depreciation expense |  |  |  | 12,287 |  | 1,953 |  | -
Other operating expenses |  |  |  | 300,377 |  | 55,194 |  | (137)
Income tax expense (benefit) |  |  |  | 15,101 |  | (11,951) |  | -
Net income (loss) |  |  | $ | 78,139 | $ | (43,433) | $ | -
Segment assets |  |  | $ | 42,392,356 | $ | 10,107,045 | $ | (23,284)
For the quarter ended March 31, 2020
|  | Reportable |  |  |  |  |  |
(In thousands) |  | Segments |  | Corporate |  | Eliminations |  | Total Popular, Inc.
Net interest income (expense) | $ | 482,318 | $ | (9,223) | $ | - | $ | 473,095
Provision for credit losses |  | 189,573 |  | 158 |  | - |  | 189,731
Non-interest income |  | 117,234 |  | 9,461 |  | (52) |  | 126,643
Amortization of intangibles |  | 2,449 |  | 24 |  | - |  | 2,473
Depreciation expense |  | 14,240 |  | 246 |  | - |  | 14,486
Other operating expenses |  | 355,434 |  | 1,037 |  | (822) |  | 355,649
Income tax expense (benefit) |  | 3,150 |  | (322) |  | 269 |  | 3,097
Net income (loss) | $ | 34,706 | $ | (905) | $ | 501 | $ | 34,302
Segment assets | $ | 52,476,117 | $ | 5,241,196 | $ | (4,913,674) | $ | 52,803,639
2019
For the quarter ended March 31, 2019
|  |  |  | Banco Popular |  |  |  | Intersegment
(In thousands) |  |  |  | de Puerto Rico |  | Popular U.S. |  | Eliminations
Net interest income |  |  | $ | 407,357 | $ | 72,828 | $ | 4
Provision for credit losses |  |  |  | 31,349 |  | 10,371 |  | -
Non-interest income |  |  |  | 120,770 |  | 5,864 |  | (141)
Amortization of intangibles |  |  |  | 2,122 |  | 166 |  | -
Depreciation expense |  |  |  | 11,939 |  | 2,168 |  | -
Other operating expenses |  |  |  | 280,698 |  | 48,609 |  | (136)
Income tax expense |  |  |  | 45,376 |  | 5,215 |  | -
Net income |  |  | $ | 156,643 | $ | 12,163 | $ | (1)
Segment assets |  |  | $ | 38,896,514 | $ | 9,585,380 | $ | (113,126)
For the quarter ended March 31, 2019
|  | Reportable |  |  |  |  |  |
(In thousands) |  | Segments |  | Corporate |  | Eliminations |  | Total Popular, Inc.
Net interest income (expense) | $ | 480,189 | $ | (9,226) | $ | - | $ | 470,963
Provision for credit losses |  | 41,720 |  | 105 |  | - |  | 41,825
Non-interest income |  | 126,493 |  | 10,061 |  | (124) |  | 136,430
Amortization of intangibles |  | 2,288 |  | 24 |  | - |  | 2,312
Depreciation expense |  | 14,107 |  | 188 |  | - |  | 14,295
Other operating expenses |  | 329,171 |  | 2,358 |  | (716) |  | 330,813
Income tax expense (benefit) |  | 50,591 |  | (586) |  | 218 |  | 50,223
Net income (loss) | $ | 168,805 | $ | (1,254) | $ | 374 | $ | 167,925
Segment assets | $ | 48,368,768 | $ | 5,021,367 | $ | (4,709,528) | $ | 48,680,607
Additional disclosures with respect to the Banco Popular de Puerto Rico reportable segment are as follows:
2020
For the quarter ended March 31, 2020
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 | $ | 161,534 | $ | 243,056 | $ | 5,036 | $ | - | $ | 409,626
Provision for credit losses |  | 10,313 |  | 103,269 |  | - |  | - |  | 113,582
Non-interest income |  | 24,712 |  | 63,984 |  | 23,740 |  | (294) |  | 112,142
Amortization of intangibles |  | 48 |  | 1,310 |  | 924 |  | - |  | 2,282
Depreciation expense |  | 5,150 |  | 6,978 |  | 159 |  | - |  | 12,287
Other operating expenses |  | 74,875 |  | 202,042 |  | 23,769 |  | (309) |  | 300,377
Income tax expense (benefit) |  | 25,616 |  | (12,952) |  | 2,437 |  | - |  | 15,101
Net income | $ | 70,244 | $ | 6,393 | $ | 1,487 | $ | 15 | $ | 78,139
Segment assets | $ | 33,212,687 | $ | 24,388,065 | $ | 3,080,386 | $ | (18,288,782) | $ | 42,392,356
| 2019
| For the quarter ended March 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 | $ | 151,460 | $ | 254,668 | $ | 1,318 | $ | (89) | $ | 407,357
Provision (reversal) for credit losses |  | (1,992) |  | 33,341 |  | - |  | - |  | 31,349
Non-interest income |  | 23,589 |  | 75,404 |  | 22,534 |  | (757) |  | 120,770
Amortization of intangibles |  | 49 |  | 1,072 |  | 1,001 |  | - |  | 2,122
Depreciation expense |  | 4,654 |  | 7,127 |  | 158 |  | - |  | 11,939
Other operating expenses |  | 72,929 |  | 192,670 |  | 15,827 |  | (728) |  | 280,698
Income tax expense |  | 31,194 |  | 11,743 |  | 2,439 |  | - |  | 45,376
Net income | $ | 68,215 | $ | 84,119 | $ | 4,427 | $ | (118) | $ | 156,643
Segment assets | $ | 29,478,917 | $ | 23,039,995 | $ | 327,487 | $ | (13,949,885) | $ | 38,896,514
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 quarter ended March 31, 2020, the BPPR segment generated approximately $15.1 million (2019 - $12.8 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 $11.6 million in revenues (2019 - $11.9 million) from its operations in the U.S. and British Virgin Islands. At March 31, 2020, total assets for the BPPR segment related to its operations in the United States amounted to $582 million (2019 - $550 million) and total deposits amounted to $43 million (2019 - $70 million).
Geographic Information
|  |  | Quarter ended
(In thousands) |  | March 31, 2020 |  | March 31, 2019
Revenues:[1] |  |  |  |
Puerto Rico | $ | 489,636 | $ | 500,138
United States |  | 91,679 |  | 89,856
Other |  | 18,423 |  | 17,399
Total consolidated revenues | $ | 599,738 | $ | 607,393
[1] | Total revenues include net interest income, service charges on deposit accounts, other service fees, mortgage banking activities, net (loss) gain, including impairment, on equity securities, net profit on trading account debt securities, net gain on sale of loans, including valuation adjustments on loans held-for-sale, indemnity reserves on loans sold and other operating income.
Selected Balance Sheet Information:
(In thousands) |  | March 31, 2020 |  | December 31, 2019
Puerto Rico |  |  |  |
| Total assets | $ | 41,233,363 | $ | 40,544,255
| Loans |  | 19,039,704 |  | 18,989,286
| Deposits |  | 35,768,869 |  | 34,664,243
United States |  |  |  |
| Total assets | $ | 10,686,885 | $ | 10,693,536
| Loans |  | 8,054,521 |  | 7,819,187
| Deposits |  | 7,589,707 |  | 7,664,792
Other |  |  |  |
| Total assets | $ | 883,391 | $ | 877,533
| Loans |  | 655,902 |  | 657,603
| Deposits[1] |  | 1,438,600 |  | 1,429,571
[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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