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Segment Reporting
6 Months Ended
Jun. 30, 2017
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 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 June 30, 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 June 30, 2017
Banco Popular Banco Popular Intersegment
(In thousands)de Puerto RicoNorth AmericaEliminations
Net interest income$319,667$69,702$(50)
Provision for loan losses50,3737,791-
Non-interest income 102,1405,204(146)
Amortization of intangibles2,178166-
Depreciation expense9,8122,160-
Other operating expenses233,72940,267(138)
Income tax expense31,65210,029(23)
Net income$94,063$14,493$(35)
Segment assets$32,004,896$8,974,157$(14,533)
For the quarter ended June 30, 2017
Reportable
(In thousands)SegmentsCorporateEliminationsTotal Popular, Inc.
Net interest income (expense)$389,319$(14,840)$-$374,479
Provision for loan losses58,164270(5,955)52,479
Non-interest income107,19810,912(1,317)116,793
Amortization of intangibles2,344--2,344
Depreciation expense11,972157-12,129
Other operating expenses273,85819,275(771)292,362
Income tax expense (benefit)41,658(8,036)2,11035,732
Net income (loss)$108,521$(15,594)$3,299$96,226
Segment assets$40,964,520$5,013,932$(4,735,783)$41,242,669

For the six months ended June 30, 2017
Banco Popular Banco Popular Intersegment
(In thousands)de Puerto RicoNorth AmericaEliminations
Net interest income$629,879$136,821$(214)
Provision for loan losses80,49118,371-
Non-interest income 201,87210,135(290)
Amortization of intangibles4,357332-
Depreciation expense19,5454,063-
Other operating expenses470,03081,980(276)
Income tax expense65,65017,319(93)
Net income $191,678$24,891$(135)
Segment assets$32,004,896$8,974,157$(14,533)
For the six months ended June 30, 2017
Reportable
(In thousands) SegmentsCorporateEliminationsTotal Popular, Inc.
Net interest income (expense)$766,486$(29,909)$-$736,577
Provision (reversal of provision) for loan losses98,862270(5,955)93,177
Non-interest income211,71722,339(1,394)232,662
Amortization of intangibles4,689--4,689
Depreciation expense23,608320-23,928
Other operating expenses551,73439,201(1,399)589,536
Income tax expense (benefit)82,876(16,459)2,32168,738
Net income (loss)$216,434$(30,902)$3,639$189,171
Segment assets$40,964,520$5,013,932$(4,735,783)$41,242,669

2016
For the quarter ended June 30, 2016
Banco Popular Banco Popular Intersegment
(In thousands)de Puerto Rico North AmericaEliminations
Net interest income$310,361$65,505$-
Provision for loan losses39,1231,317-
Non-interest income 98,2415,250-
Amortization of intangibles2,931166-
Depreciation expense9,9151,344-
Other operating expenses234,70444,398-
Income tax expense31,29511,103-
Net income$90,634$12,427$-
Segment assets$29,190,397$8,223,781$(15,239)
For the quarter ended June 30, 2016
Reportable
(In thousands)SegmentsCorporateEliminationsTotal Popular, Inc.
Net interest income (expense)$375,866$(15,202)$(113)$360,551
Provision for loan losses40,44032-40,472
Non-interest income103,4918,062(1,050)110,503
Amortization of intangibles3,097--3,097
Depreciation expense11,259176-11,435
Other operating expenses279,10216,717(1,202)294,617
Income tax expense (benefit)42,398(9,979)2732,446
Net income (loss)$103,061$(14,086)$12$88,987
Segment assets$37,398,939$4,953,432$(4,746,223)$37,606,148

For the six months ended June 30, 2016
Banco Popular Banco Popular Intersegment
(In thousands)de Puerto RicoNorth America Eliminations
Net interest income$615,711$127,762$-
Provision for loan losses79,9245,386-
Non-interest income 196,80810,200-
Amortization of intangibles5,879332-
Depreciation expense20,1112,677-
Other operating expenses459,37385,728-
Income tax expense63,17219,560-
Net income$184,060$24,279$-
Segment assets$29,190,397$8,223,781$(15,239)
For the six months ended June 30, 2016
Reportable
(In thousands) SegmentsCorporateEliminationsTotal Popular, Inc.
Net interest income (expense)$743,473$(30,397)$(113)$712,963
Provision (reversal for provision) for loan losses85,310(3)-85,307
Non-interest income207,00816,239(1,114)222,133
Amortization of intangibles6,211--6,211
Depreciation expense22,788353-23,141
Other operating expenses545,10138,449(1,810)581,740
Income tax expense (benefit)82,732(18,260)23964,711
Net income (loss)$208,339$(34,697)$344$173,986
Segment assets$37,398,939$4,953,432$(4,746,223)$37,606,148

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

2017
For the quarter ended June 30, 2017
Banco Popular de Puerto Rico
ConsumerOtherTotal Banco
Commercial and Retail FinancialPopular de
(In thousands)Banking Banking ServicesEliminations Puerto Rico
Net interest income $128,364$189,997$1,295$11$319,667
Provision for loan losses89649,477--50,373
Non-interest income21,33558,52022,346(61)102,140
Amortization of intangibles501,0731,055-2,178
Depreciation expense4,3465,285181-9,812
Other operating expenses54,602166,69412,505(72)233,729
Income tax expense26,7791,0683,805-31,652
Net income $63,026$24,920$6,095$22$94,063
Segment assets$19,409,235$18,254,883$468,540$(6,127,762)$32,004,896

For the six months ended June 30, 2017
Banco Popular de Puerto Rico
Consumer Other Total Banco
Commercialand Retail Financial Popular de
(In thousands) BankingBankingServicesEliminationsPuerto Rico
Net interest income $248,660$378,129$3,082$8$629,879
Provision for loan losses32380,168--80,491
Non-interest income40,763116,59144,657(139)201,872
Amortization of intangibles1042,1402,113-4,357
Depreciation expense8,60810,552385-19,545
Other operating expenses115,435327,95826,797(160)470,030
Income tax expense48,85510,0516,744-65,650
Net income $116,098$63,851$11,700$29$191,678
Segment assets$19,409,235$18,254,883$468,540$(6,127,762)$32,004,896

2016
For the quarter ended June 30, 2016
Banco Popular de Puerto Rico
Consumer Other Total Banco
Commercial and Retail Financial Popular de
(In thousands)BankingBankingServicesEliminationsPuerto Rico
Net interest income $123,147$184,499$1,680$1,035$310,361
Provision for loan losses(1,704)40,827--39,123
Non-interest income18,55654,64825,128(91)98,241
Amortization of intangibles491,8101,072-2,931
Depreciation expense4,2615,431223-9,915
Other operating expenses64,914153,04116,840(91)234,704
Income tax expense23,2285,1372,930-31,295
Net income $50,955$32,901$5,743$1,035$90,634
Segment assets$12,934,770$17,624,084$474,482$(1,842,939)$29,190,397

For the six months ended June 30, 2016
Banco Popular de Puerto Rico
ConsumerOther Total Banco
Commercial and Retail FinancialPopular de
(In thousands)BankingBanking ServicesEliminationsPuerto Rico
Net interest income $238,700$371,044$3,295$2,672$615,711
Provision for loan losses13,75766,167--79,924
Non-interest income40,968109,57646,439(175)196,808
Amortization of intangibles713,6462,162-5,879
Depreciation expense8,54711,111453-20,111
Other operating expenses123,075302,32434,149(175)459,373
Income tax expense41,39717,5164,259-63,172
Net income $92,821$79,856$8,711$2,672$184,060
Segment assets$12,934,770$17,624,084$474,482$(1,842,939)$29,190,397

Geographic Information
Quarter endedSix months ended
(in thousands)June 30, 2017June 30, 2016June 30, 2017June 30, 2016
Revenues:
Puerto Rico $394,086$384,902$778,534$764,938
United States78,28367,543153,126132,183
Other18,90318,60937,57937,975
Total consolidated revenues $491,272$471,054$969,239$935,096

[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)June 30, 2017December 31, 2016
Puerto Rico
Total assets$30,946,886$28,813,289
Loans16,640,27716,880,868
Deposits25,669,21623,185,551
United States
Total assets$9,387,356$8,928,475
Loans6,135,0435,799,562
Deposits6,403,2006,266,473
Other
Total assets$908,427$919,845
Loans749,089755,017
Deposits [1]1,049,6171,044,200
[1] Represents deposits from BPPR operations located in the U.S. and British Virgin Islands.