Segment Reporting

3 Months Ended

Mar. 31, 2017

Note 33 – 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.

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, 2017, 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, Inc., 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, Inc. supported BPNA’s deposit gathering through its online platform until March 31, 2017, when said operations were transferred to Popular Direct, a division of BPNA. 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:

2017

For the quarter ended March 31, 2017
				Banco Popular		Banco Popular		Intersegment
(In thousands)				de Puerto Rico		North America		Eliminations
Net interest income			$	310,212	$	67,119	$	(164)
Provision for loan losses				30,118		10,580		-
Non-interest income				99,732		4,931		(144)
Amortization of intangibles				2,179		166		-
Depreciation expense				9,733		1,903		-
Other operating expenses				236,301		41,713		(138)
Income tax expense				33,998		7,290		(70)
Net income			$	97,615	$	10,398	$	(100)
Segment assets			$	31,217,093	$	8,832,246	$	(22,946)


For the quarter ended March 31, 2017
		Reportable
(In thousands)		Segments		Corporate		Eliminations		Total Popular, Inc.
Net interest income (expense)	$	377,167	$	(15,069)	$	-	$	362,098
Provision for loan losses		40,698		-		-		40,698
Non-interest income		104,519		11,427		(77)		115,869
Amortization of intangibles		2,345		-		-		2,345
Depreciation expense		11,636		163		-		11,799
Other operating expenses		277,876		19,926		(628)		297,174
Income tax expense (benefit)		41,218		(8,423)		211		33,006
Net income (loss)	$	107,913	$	(15,308)	$	340	$	92,945
Segment assets	$	40,026,393	$	5,004,658	$	(4,771,769)	$	40,259,282

2016

For the quarter ended March 31, 2016
				Banco Popular		Banco Popular		Intersegment
(In thousands)				de Puerto Rico		North America		Eliminations
Net interest income			$	305,350	$	62,257	$	-
Provision for loan losses				40,800		4,069		-
Non-interest income				98,566		4,950		-
Amortization of intangibles				2,948		166		-
Depreciation expense				10,197		1,333		-
Other operating expenses				224,669		41,331		-
Income tax expense				31,877		8,456		-
Net income			$	93,425	$	11,852	$	-
Segment assets			$	28,108,702	$	7,880,357	$	(52,740)


For the quarter ended March 31, 2016
		Reportable
(In thousands)		Segments		Corporate		Eliminations		Total Popular, Inc.
Net interest income (expense)	$	367,607	$	(15,195)	$	-	$	352,412
Provision (reversal of provision) for loan losses		44,869		(34)		-		44,835
Non-interest income		103,516		8,177		(63)		111,630
Amortization of intangibles		3,114		-		-		3,114
Depreciation expense		11,530		177		-		11,707
Other operating expenses		266,000		21,731		(609)		287,122
Income tax expense (benefit)		40,333		(8,281)		213		32,265
Net income (loss)	$	105,277	$	(20,611)	$	333	$	84,999
Segment assets	$	35,936,319	$	4,938,750	$	(4,728,060)	$	36,147,009

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

2017

For the quarter ended March 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	$	120,296	$	188,132	$	1,787	$	(3)	$	310,212
Provision for loan losses		(573)		30,691		-		-		30,118
Non-interest income		19,428		58,071		22,311		(78)		99,732
Amortization of intangibles		54		1,067		1,058		-		2,179
Depreciation expense		4,262		5,267		204		-		9,733
Other operating expenses		60,833		161,264		14,292		(88)		236,301
Income tax expense		22,076		8,983		2,939		-		33,998
Net income	$	53,072	$	38,931	$	5,605	$	7	$	97,615
Segment assets	$	17,559,586	$	18,178,383	$	325,217	$	(4,846,093)	$	31,217,093

2016

For the quarter ended March 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	$	115,553	$	186,545	$	1,615	$	1,637	$	305,350
Provision for loan losses		15,461		25,339		-		-		40,800
Non-interest income		22,412		54,927		21,311		(84)		98,566
Amortization of intangibles		22		1,836		1,090		-		2,948
Depreciation expense		4,286		5,680		231		-		10,197
Other operating expenses		58,161		149,283		17,309		(84)		224,669
Income tax expense		18,169		12,379		1,329		-		31,877
Net income	$	41,866	$	46,955	$	2,967	$	1,637	$	93,425
Segment assets	$	11,317,146	$	17,046,370	$	342,867	$	(597,681)	$	28,108,702

Geographic Information
		Quarter ended
(In thousands)		March 31, 2017		March 31, 2016
Revenues:^[1]
Puerto Rico	$	384,448	$	380,036
United States		74,843		64,640
Other		18,676		19,366
Total consolidated revenues	$	477,967	$	464,042

[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)		March 31, 2017		December 31, 2016
Puerto Rico
Total assets	$	30,185,470	$	28,813,289
Loans		16,619,906		16,880,868
Deposits		24,722,769		23,185,551
United States
Total assets	$	9,159,712	$	8,928,475
Loans		6,003,805		5,799,562
Deposits		6,445,544		6,266,473
Other
Total assets	$	914,100	$	919,845
Loans		748,299		755,017
Deposits ^[1]		1,044,266		1,044,200
[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