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 Rico | | North America | | Eliminations | Net interest income | | | $ | 319,667 | $ | 69,702 | $ | (50) | Provision for loan losses | | | | 50,373 | | 7,791 | | - | Non-interest income | | | | 102,140 | | 5,204 | | (146) | Amortization of intangibles | | | | 2,178 | | 166 | | - | Depreciation expense | | | | 9,812 | | 2,160 | | - | Other operating expenses | | | | 233,729 | | 40,267 | | (138) | Income tax expense | | | | 31,652 | | 10,029 | | (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) | | Segments | | Corporate | | Eliminations | | Total Popular, Inc. | Net interest income (expense) | $ | 389,319 | $ | (14,840) | $ | - | $ | 374,479 | Provision for loan losses | | 58,164 | | 270 | | (5,955) | | 52,479 | Non-interest income | | 107,198 | | 10,912 | | (1,317) | | 116,793 | Amortization of intangibles | | 2,344 | | - | | - | | 2,344 | Depreciation expense | | 11,972 | | 157 | | - | | 12,129 | Other operating expenses | | 273,858 | | 19,275 | | (771) | | 292,362 | Income tax expense (benefit) | | 41,658 | | (8,036) | | 2,110 | | 35,732 | 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 Rico | | North America | | Eliminations | Net interest income | | | $ | 629,879 | $ | 136,821 | $ | (214) | Provision for loan losses | | | | 80,491 | | 18,371 | | - | Non-interest income | | | | 201,872 | | 10,135 | | (290) | Amortization of intangibles | | | | 4,357 | | 332 | | - | Depreciation expense | | | | 19,545 | | 4,063 | | - | Other operating expenses | | | | 470,030 | | 81,980 | | (276) | Income tax expense | | | | 65,650 | | 17,319 | | (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) | | Segments | | Corporate | | Eliminations | | Total Popular, Inc. | Net interest income (expense) | $ | 766,486 | $ | (29,909) | $ | - | $ | 736,577 | Provision (reversal of provision) for loan losses | | 98,862 | | 270 | | (5,955) | | 93,177 | Non-interest income | | 211,717 | | 22,339 | | (1,394) | | 232,662 | Amortization of intangibles | | 4,689 | | - | | - | | 4,689 | Depreciation expense | | 23,608 | | 320 | | - | | 23,928 | Other operating expenses | | 551,734 | | 39,201 | | (1,399) | | 589,536 | Income tax expense (benefit) | | 82,876 | | (16,459) | | 2,321 | | 68,738 | 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 America | | Eliminations | Net interest income | | | $ | 310,361 | $ | 65,505 | $ | - | Provision for loan losses | | | | 39,123 | | 1,317 | | - | Non-interest income | | | | 98,241 | | 5,250 | | - | Amortization of intangibles | | | | 2,931 | | 166 | | - | Depreciation expense | | | | 9,915 | | 1,344 | | - | Other operating expenses | | | | 234,704 | | 44,398 | | - | Income tax expense | | | | 31,295 | | 11,103 | | - | 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) | | Segments | | Corporate | | Eliminations | | Total Popular, Inc. | Net interest income (expense) | $ | 375,866 | $ | (15,202) | $ | (113) | $ | 360,551 | Provision for loan losses | | 40,440 | | 32 | | - | | 40,472 | Non-interest income | | 103,491 | | 8,062 | | (1,050) | | 110,503 | Amortization of intangibles | | 3,097 | | - | | - | | 3,097 | Depreciation expense | | 11,259 | | 176 | | - | | 11,435 | Other operating expenses | | 279,102 | | 16,717 | | (1,202) | | 294,617 | Income tax expense (benefit) | | 42,398 | | (9,979) | | 27 | | 32,446 | 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 Rico | | North America | | Eliminations | Net interest income | | | $ | 615,711 | $ | 127,762 | $ | - | Provision for loan losses | | | | 79,924 | | 5,386 | | - | Non-interest income | | | | 196,808 | | 10,200 | | - | Amortization of intangibles | | | | 5,879 | | 332 | | - | Depreciation expense | | | | 20,111 | | 2,677 | | - | Other operating expenses | | | | 459,373 | | 85,728 | | - | Income tax expense | | | | 63,172 | | 19,560 | | - | 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) | | Segments | | Corporate | | Eliminations | | Total Popular, Inc. | Net interest income (expense) | $ | 743,473 | $ | (30,397) | $ | (113) | $ | 712,963 | Provision (reversal for provision) for loan losses | | 85,310 | | (3) | | - | | 85,307 | Non-interest income | | 207,008 | | 16,239 | | (1,114) | | 222,133 | Amortization of intangibles | | 6,211 | | - | | - | | 6,211 | Depreciation expense | | 22,788 | | 353 | | - | | 23,141 | Other operating expenses | | 545,101 | | 38,449 | | (1,810) | | 581,740 | Income tax expense (benefit) | | 82,732 | | (18,260) | | 239 | | 64,711 | 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 | | | | | Consumer | | Other | | | | Total Banco | | | Commercial | | and Retail | | Financial | | | | Popular de | (In thousands) | | Banking | | Banking | | Services | | Eliminations | | Puerto Rico | Net interest income | $ | 128,364 | $ | 189,997 | $ | 1,295 | $ | 11 | $ | 319,667 | Provision for loan losses | | 896 | | 49,477 | | - | | - | | 50,373 | Non-interest income | | 21,335 | | 58,520 | | 22,346 | | (61) | | 102,140 | Amortization of intangibles | | 50 | | 1,073 | | 1,055 | | - | | 2,178 | Depreciation expense | | 4,346 | | 5,285 | | 181 | | - | | 9,812 | Other operating expenses | | 54,602 | | 166,694 | | 12,505 | | (72) | | 233,729 | Income tax expense | | 26,779 | | 1,068 | | 3,805 | | - | | 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 | | | Commercial | | and Retail | | Financial | | | | Popular de | (In thousands) | | Banking | | Banking | | Services | | Eliminations | | Puerto Rico | Net interest income | $ | 248,660 | $ | 378,129 | $ | 3,082 | $ | 8 | $ | 629,879 | Provision for loan losses | | 323 | | 80,168 | | - | | - | | 80,491 | Non-interest income | | 40,763 | | 116,591 | | 44,657 | | (139) | | 201,872 | Amortization of intangibles | | 104 | | 2,140 | | 2,113 | | - | | 4,357 | Depreciation expense | | 8,608 | | 10,552 | | 385 | | - | | 19,545 | Other operating expenses | | 115,435 | | 327,958 | | 26,797 | | (160) | | 470,030 | Income tax expense | | 48,855 | | 10,051 | | 6,744 | | - | | 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) | | Banking | | Banking | | Services | | Eliminations | | Puerto 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 income | | 18,556 | | 54,648 | | 25,128 | | (91) | | 98,241 | Amortization of intangibles | | 49 | | 1,810 | | 1,072 | | - | | 2,931 | Depreciation expense | | 4,261 | | 5,431 | | 223 | | - | | 9,915 | Other operating expenses | | 64,914 | | 153,041 | | 16,840 | | (91) | | 234,704 | Income tax expense | | 23,228 | | 5,137 | | 2,930 | | - | | 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 | | | | | Consumer | | Other | | | | Total Banco | | | Commercial | | and Retail | | Financial | | | | Popular de | (In thousands) | | Banking | | Banking | | Services | | Eliminations | | Puerto Rico | Net interest income | $ | 238,700 | $ | 371,044 | $ | 3,295 | $ | 2,672 | $ | 615,711 | Provision for loan losses | | 13,757 | | 66,167 | | - | | - | | 79,924 | Non-interest income | | 40,968 | | 109,576 | | 46,439 | | (175) | | 196,808 | Amortization of intangibles | | 71 | | 3,646 | | 2,162 | | - | | 5,879 | Depreciation expense | | 8,547 | | 11,111 | | 453 | | - | | 20,111 | Other operating expenses | | 123,075 | | 302,324 | | 34,149 | | (175) | | 459,373 | Income tax expense | | 41,397 | | 17,516 | | 4,259 | | - | | 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 ended | | Six months ended | (in thousands) | | June 30, 2017 | | June 30, 2016 | | June 30, 2017 | | June 30, 2016 | Revenues: | | | | | | | | | Puerto Rico | $ | 394,086 | $ | 384,902 | $ | 778,534 | $ | 764,938 | United States | | 78,283 | | 67,543 | | 153,126 | | 132,183 | Other | | 18,903 | | 18,609 | | 37,579 | | 37,975 | 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, 2017 | | December 31, 2016 | Puerto Rico | | | | | Total assets | $ | 30,946,886 | $ | 28,813,289 | Loans | | 16,640,277 | | 16,880,868 | Deposits | | 25,669,216 | | 23,185,551 | United States | | | | | Total assets | $ | 9,387,356 | $ | 8,928,475 | Loans | | 6,135,043 | | 5,799,562 | Deposits | | 6,403,200 | | 6,266,473 | Other | | | | | Total assets | $ | 908,427 | $ | 919,845 | Loans | | 749,089 | | 755,017 | Deposits [1] | | 1,049,617 | | 1,044,200 | [1] Represents deposits from BPPR operations located in the U.S. and British Virgin Islands. |
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