Segment Reporting

12 Months Ended

Dec. 31, 2016

Note 42 – Segment reporting

The Corporation’s corporate structure consists of two reportable segments – Banco Popular de Puerto Rico and Banco Popular North America. These reportable segments pertain only to the continuing operations of Popular, Inc. As previously indicated in Note 4 to the consolidated financial statements, the regional operations in California, Illinois and Central Florida were classified as discontinued operations and sold during 2014.

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, 2016, 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 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.

Banco Popular North America:

Banco Popular North America’s reportable segment consists of the banking operations of BPNA, E-LOAN, Popular Equipment Finance, Inc. and Popular Insurance Agency, U.S.A. BPNA operates through a retail branch network in the U.S. mainland under the name of Popular Community Bank, while E-LOAN supports BPNA’s deposit gathering through its online platform. All direct lending activities at E-LOAN were ceased during 2008. During the third quarter of 2015, BPNA and E-LOAN completed an asset purchase and sale transaction in which E-LOAN sold to BPNA all of its outstanding loan portfolio, including residential mortgage loans and home equity lines of credit, which had a carrying value of approximately $213 million. Prior to this transaction, the Corporation provided additional disclosures for the BPNA reportable segment related to E-LOAN. After the close of the above mentioned asset purchase and sale transaction, additional disclosures with respect to E-LOAN are no longer considered relevant to the financial statements and accordingly are not presented. Popular Equipment Finance, Inc. also holds a running-off loan portfolio as this subsidiary ceased originating loans during 2009. Popular Insurance Agency, U.S.A. offers investment and insurance services across the BPNA 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, Leon. The Corporate group also includes the expenses of certain corporate areas that are identified as critical to the organization: Finance, Risk Management and Legal.

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.

The tables that follow present the results of operations and total assets by reportable segments:

December 31, 2016
				Banco Popular		Banco Popular		Intersegment
(In thousands)				de Puerto Rico		North America		Eliminations
Net interest income			$	1,224,771	$	258,416	$	(474)
Provision for loan losses				154,785		15,266		-
Non-interest income				243,368		21,651		(119)
Amortization of intangibles				11,479		665		-
Goodwill impairment charge				3,801		-		-
Depreciation expense				39,505		6,715		-
Other operating expenses				952,894		174,585		(779)
Income tax expense				75,615		36,712		92
Net income			$	230,060	$	46,124	$	94
Segment assets			$	29,841,854	$	8,629,439	$	(31,397)


December 31, 2016
		Reportable
(In thousands)		Segments		Corporate		Eliminations		Total Popular, Inc.
Net interest income (expense)	$	1,482,713	$	(60,658)	$	-	$	1,422,055
Provision (reversal of provision) for loan losses		170,051		(35)		-		170,016
Non-interest income		264,900		35,705		(2,669)		297,936
Amortization of intangibles		12,144		-		-		12,144
Goodwill impairment charge		3,801		-		-		3,801
Depreciation expense		46,220		654		-		46,874
Other operating expenses		1,126,700		68,694		(2,578)		1,192,816
Income tax expense (benefit)		112,419		(33,617)		(18)		78,784
Net income (loss)	$	276,278	$	(60,649)	$	(73)	$	215,556
Segment assets	$	38,439,896	$	4,982,113	$	(4,760,400)	$	38,661,609

December 31, 2015
				Banco Popular		Banco Popular		Intersegment
(In thousands)				de Puerto Rico		North America		Eliminations
Net interest income			$	1,231,585	$	239,379	$	-
Provision for loan losses				240,817		626		-
Non-interest income				464,786		22,667		125
Amortization of intangibles				10,465		554		-
Depreciation expense				40,440		6,272		-
Other operating expenses				970,201		188,102		-
Income tax expense (benefit)				116,058		(580,738)		-
Net income			$	318,390	$	647,230	$	125
Segment assets				27,907,350		7,780,002		(129,038)


December 31, 2015
		Reportable
(In thousands)		Segments		Corporate		Eliminations		Total Popular, Inc.
Net interest income (expense)	$	1,470,964	$	(61,981)	$	-	$	1,408,983
Provision for loan losses		241,443		35		-		241,478
Non-interest income		487,578		34,486		(2,523)		519,541
Amortization of intangibles		11,019		-		-		11,019
Depreciation expense		46,712		762		-		47,474
Other operating expenses		1,158,303		74,212		(2,787)		1,229,728
Income tax benefit		(464,680)		(30,595)		103		(495,172)
Net income (loss)	$	965,745	$	(71,909)	$	161	$	893,997
Segment assets		35,558,314		4,945,704		(4,742,285)		35,761,733



December 31, 2014
				Banco Popular		Banco Popular		Intersegment
(In thousands)				de Puerto Rico		North America		Eliminations
Net interest income			$	1,288,889	$	157,701	$	-
Provision (reversal of provision) for loan losses				289,184		(18,850)		-
Non-interest income				283,251		64,319		-
Amortization of intangibles				7,351		809		-
Depreciation expense				39,062		6,617		-
Loss on early extinguishment of debt				-		532		-
Other operating expenses				884,289		184,369		-
Income tax expense				77,973		3,101		-
Net income			$	274,281	$	45,442	$	-
Segment assets			$	27,384,169	$	5,503,433	$	(17,972)


December 31, 2014
		Reportable
(In thousands)		Segments		Corporate		Eliminations		Total Popular, Inc.
Net interest income (expense)	$	1,446,590	$	(501,518)	$	-	$	945,072
Provision (reversal of provision) for loan losses		270,334		(200)		-		270,134
Non-interest income		347,570		41,695		(2,750)		386,515
Amortization of intangibles		8,160		-		-		8,160
Depreciation expense		45,679		648		-		46,327
Loss on early extinguishment of debt		532		-		-		532
Other operating expenses		1,068,658		72,759		(2,752)		1,138,665
Income tax expense (benefit)		81,074		(22,796)		1		58,279
Net income (loss)	$	319,723	$	(510,234)	$	1	$	(190,510)
Segment assets	$	32,869,630	$	4,927,448	$	(4,710,307)	$	33,086,771

Additional disclosures with respect to the Banco Popular de Puerto Rico reportable segment are as follows:

December 31, 2016
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	$	472,948	$	742,854	$	6,172	$	2,797	$	1,224,771
Provision for loan losses		12,884		141,901		-		-		154,785
Non-interest income		(91,411)		232,113		103,005		(339)		243,368
Amortization of intangibles		145		7,042		4,292		-		11,479
Goodwill impairment charge		-		-		3,801		-		3,801
Depreciation expense		16,956		21,684		865		-		39,505
Other operating expenses		251,375		631,234		70,624		(339)		952,894
Income tax expense		41,639		24,068		9,908		-		75,615
Net income	$	58,538	$	149,038	$	19,687	$	2,797	$	230,060
Segment assets	$	15,263,278	$	17,592,743	$	406,429	$	(3,420,596)	$	29,841,854

December 31, 2015
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	$	457,119	$	760,157	$	7,793	$	6,516	$	1,231,585
Provision for loan losses		101,840		138,977		-		-		240,817
Non-interest income		113,697		248,024		103,464		(399)		464,786
Amortization of intangibles		7		7,330		3,128		-		10,465
Depreciation expense		16,984		22,385		1,071		-		40,440
Other operating expenses		281,995		617,973		70,632		(399)		970,201
Income tax expense		48,793		55,429		11,836		-		116,058
Net income	$	121,197	$	166,087	$	24,590	$	6,516	$	318,390
Segment assets	$	12,169,349	$	15,662,115	$	392,658	$	(316,772)	$	27,907,350



December 31, 2014
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	$	512,920	$	766,758	$	9,207	$	4	$	1,288,889
Provision for loan losses		138,247		150,937		-		-		289,184
Non-interest income		6,217		178,434		98,794		(194)		283,251
Amortization of intangibles		4		6,836		511		-		7,351
Depreciation expense		16,445		21,513		1,104		-		39,062
Other operating expenses		257,970		558,521		67,992		(194)		884,289
Income tax expense		22,899		38,825		16,249		-		77,973
Net income	$	83,572	$	168,560	$	22,145	$	4	$	274,281
Segment assets	$	11,508,845	$	17,654,762	$	591,955	$	(2,371,393)	$	27,384,169

Geographic Information

(In thousands)		2016		2015		2014
Revenues:^[1]
Puerto Rico	$	1,361,663	$	1,598,066	$	1,024,416
United States		283,349		255,714		223,264
Other		74,979		74,744		83,907
Total consolidated revenues	$	1,719,991	$	1,928,524	$	1,331,587

[1] Total revenues include net interest income (expense), service charges on deposit accounts, other service fees, mortgage banking activities, net gain (loss) and valuation adjustments on investment securities, trading account (loss) profit, net (loss) gain on sale of loans and valuation adjustments on loans held-for-sale, adjustments to indemnity reserves on loans sold, FDIC loss share (expense) income and other operating income.

Selected Balance Sheet Information
(In thousands)		2016		2015		2014
Puerto Rico
Total assets	$	28,813,289	$	26,764,689	$	26,267,180
Loans		16,880,868		17,477,070		17,704,170
Deposits		23,185,551		20,893,232		20,365,445
United States
Total assets	$	8,928,475	$	7,858,712	$	5,689,061
Loans		5,799,562		4,873,504		3,568,564
Deposits		6,266,473		5,288,886		3,442,084
Other
Total assets	$	919,845	$	1,138,332	$	1,130,530
Loans		755,017		778,656		780,483
Deposits ^[1]		1,044,200		1,027,605		1,000,006
[1] Represents deposits from BPPR operations located in the U.S. and British Virgin Islands.

- 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

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+ Details