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Loans

3 Months Ended

Mar. 31, 2020

Note 8 – Loans

For a summary of the accounting policies related to loans, interest recognition and allowance for credit losses refer to Note 2 - Summary of Significant Accounting Policies of the 2019 Form 10-K and updated in this Form 10Q in Note 4 to the Consolidated Financial Statements..

During the quarter ended March 31, 2020, the Corporation recorded purchases (including repurchases) of mortgage loans amounting to $85 million including $4 million in PCD loans, consumer loans of $18 million, construction loans of $37 million and commercial loans of $1 million; compared to purchases (including repurchases) of mortgage loans of $81 million and consumer loans of $69 million, during the quarter ended March 31, 2019.

The Corporation performed whole-loan sales involving approximately $10 million of residential mortgage loans and $2 million of commercial and construction loans during the quarter ended March 31, 2020 (March 31, 2019 - $12 million of residential mortgage and $8 million of commercial loans). Also, during the quarter ended March 31, 2020, the Corporation securitized approximately $ 51 million of mortgage loans into Government National Mortgage Association (“GNMA”) mortgage-backed securities and $ 34 million of mortgage loans into Federal National Mortgage Association (“FNMA”) mortgage-backed securities, compared to $71 million and $ 21 million, respectively, during the quarter ended March 31, 2019.

Delinquency status

The following table presents the amortized cost basis of loans held-in-portfolio (“HIP”), net of unearned income, by past due status, and by loan class including those that are in non-performing status or that are accruing interest but are past due 90 days or more at March 31, 2020 and December 31, 2019.

March 31, 2020
Puerto Rico

			Past due											Past due 90 days or more
		30-59		60-89		90 days		Total						Non-accrual			Accruing
(In thousands)		days		days		or more^[1]		past due		Current		Loans HIP		loans		loans
Commercial multi-family		$	8,382	$	359	$	1,379	$	10,120	$	137,145	$	147,265	$	1,379	$	-
Commercial real estate:
	Non-owner occupied		4,632		4,382		109,054		118,068		1,968,831		2,086,899		109,054		-
	Owner occupied		11,649		4,276		101,887		117,812		1,460,599		1,578,411		101,887		-
Commercial and industrial			17,112		3,608		39,280		60,000		3,458,407		3,518,407		38,784		496
Construction			4,411		-		-		4,411		159,979		164,390		-		-
Mortgage			339,648		141,841		854,105		1,335,594		4,680,414		6,016,008		404,465		449,640
Leasing			18,301		5,938		4,076		28,315		1,060,227		1,088,542		4,076		-
Consumer:
	Credit cards		14,062		9,297		20,588		43,947		1,020,740		1,064,687		-		20,588
	Home equity lines of credit		49		51		93		193		4,736		4,929		-		93
	Personal		23,697		13,078		36,125		72,900		1,390,326		1,463,226		36,064		61
	Auto		110,408		38,018		26,431		174,857		2,779,293		2,954,150		26,431		-
	Other		622		293		13,966		14,881		122,086		136,967		13,543		423
Total		$	552,973	$	221,141	$	1,206,984	$	1,981,098	$	18,242,783	$	20,223,881	$	735,683	$	471,301
[1]	Loans included as 90 days or more past due include loans that that are not delinquent in their payment terms but that are reported as non-performing due to other credit quality considerations. As part of the adoption of CECL, at January 1, 2020, the Corporation reclassified to this category $134 million of acquired loans with credit deterioration that were previously accounted for under ASC 310-30 and were excluded from non-performing status. In addition, as part of the CECL transition, an additional $125 million of loans that were 90 days or more past due previously accounted for under ASC 310-30 and excluded from non-performing status are now included as non-performing.

March 31, 2020
Popular U.S.

			Past due											Past due 90 days or more
		30-59		60-89		90 days		Total						Non-accrual			Accruing
(In thousands)		days		days		or more		past due		Current		Loans HIP		loans		loans
Commercial multi-family		$	974	$	-	$	2,097	$	3,071	$	1,627,274	$	1,630,345	$	2,097	$	-
Commercial real estate:
	Non-owner occupied		25,944		-		269		26,213		1,950,611		1,976,824		269		-
	Owner occupied		3,910		-		245		4,155		338,805		342,960		245		-
Commercial and industrial			1,067		3,546		4,793		9,406		1,208,452		1,217,858		4,793		-
Construction			-		-		-		-		737,990		737,990		-		-
Mortgage			25,639		391		12,176		38,206		1,040,543		1,078,749		12,176		-
Legacy			37		41		1,980		2,058		18,377		20,435		1,980		-
Consumer:
	Credit cards		-		-		-		-		36		36		-		-
	Home equity lines of credit		1,438		72		9,322		10,832		106,579		117,411		9,322		-
	Personal		2,687		1,632		2,110		6,429		308,559		314,988		2,110		-
	Other		21		-		-		21		774		795		-		-
Total		$	61,717	$	5,682	$	32,992	$	100,391	$	7,338,000	$	7,438,391	$	32,992	$	-

March 31, 2020
Popular, Inc.

			Past due											Past due 90 days or more
		30-59		60-89		90 days		Total						Non-accrual			Accruing
(In thousands)		days		days		or more^[3]		past due		Current		Loans HIP^{[4] [5]}		loans		loans
Commercial multi-family		$	9,356	$	359	$	3,476	$	13,191	$	1,764,419	$	1,777,610	$	3,476	$	-
Commercial real estate:
	Non-owner occupied		30,576		4,382		109,323		144,281		3,919,442		4,063,723		109,323		-
	Owner occupied		15,559		4,276		102,132		121,967		1,799,404		1,921,371		102,132		-
Commercial and industrial			18,179		7,154		44,073		69,406		4,666,859		4,736,265		43,577		496
Construction			4,411		-		-		4,411		897,969		902,380		-		-
Mortgage^[1]			365,287		142,232		866,281		1,373,800		5,720,957		7,094,757		416,641		449,640
Leasing			18,301		5,938		4,076		28,315		1,060,227		1,088,542		4,076		-
Legacy^[2]			37		41		1,980		2,058		18,377		20,435		1,980		-
Consumer:
	Credit cards		14,062		9,297		20,588		43,947		1,020,776		1,064,723		-		20,588
	Home equity lines of credit		1,487		123		9,415		11,025		111,315		122,340		9,322		93
	Personal		26,384		14,710		38,235		79,329		1,698,885		1,778,214		38,174		61
	Auto		110,408		38,018		26,431		174,857		2,779,293		2,954,150		26,431		-
	Other		643		293		13,966		14,902		122,860		137,762		13,543		423
Total		$	614,690	$	226,823	$	1,239,976	$	2,081,489	$	25,580,783	$	27,662,272	$	768,675	$	471,301

[1]	It is the Corporation’s policy to report delinquent residential mortgage loans insured by FHA or guaranteed by the VA as accruing loans past due 90 days or more as opposed to non-performing since the principal repayment is insured.
[2]	The legacy portfolio is comprised of commercial loans, construction loans and lease financings related to certain lending products exited by the Corporation as part of restructuring efforts carried out in prior years at the Popular U.S. segment.
[3]	Loans included as 90 days or more past due include loans that that are not delinquent in their payment terms but that are reported as non-performing due to other credit quality considerations. As part of the adoption of CECL, at January 1, 2020, the Corporation reclassified to this category $134 million of acquired loans with credit deterioration that were previously accounted for under ASC 310-30 and were excluded from non-performing status. In addition, as part of the CECL transition, an additional $144 million of loans that were 90 days or more past due previously accounted for under ASC 310-30 and excluded from non-performing status are now included as non-performing.
[4]	Loans held-in-portfolio are net of $ 186 million in unearned income and exclude $ 88 million in loans held-for-sale.
[5]	Includes $7.3 billion pledged to secure credit facilities and public funds that the secured parties are not permitted to sell or repledge the collateral, of which $4.6 billion were pledged at the Federal Home Loan Bank ("FHLB") as collateral for borrowings and $2.7 billion at the Federal Reserve Bank ("FRB") for discount window borrowings.

December 31, 2019
Puerto Rico

			Past due											Past due 90 days or more
			30-59		60-89		90 days	Total						Non-accrual			Accruing
(In thousands)			days		days		or more	past due		Current		Loans HIP		loans		loans^[1]
Commercial multi-family		$	2,941	$	129	$	1,512	$	4,582	$	143,267	$	147,849	$	1,473	$	-
Commercial real estate:
	Non-owner occupied		10,439		5,244		43,664		59,347		2,048,871		2,108,218		39,968		-
	Owner occupied		5,704		3,978		84,537		94,219		1,492,110		1,586,329		69,276		-
Commercial and industrial			8,780		1,646		37,156		47,582		3,371,152		3,418,734		36,538		544
Construction			1,555		-		119		1,674		135,796		137,470		119		-
Mortgage			285,006		146,197		837,651		1,268,854		4,897,894		6,166,748		283,708		439,662
Leasing			12,014		3,053		3,657		18,724		1,040,783		1,059,507		3,657		-
Consumer:
	Credit cards		11,358		7,928		19,461		38,747		1,085,053		1,123,800		-		19,461
	Home equity lines of credit		-		85		-		85		4,953		5,038		-		-
	Personal		13,481		9,352		20,296		43,129		1,325,021		1,368,150		19,529		61
	Auto		81,169		23,182		31,148		135,499		2,782,023		2,917,522		31,148		-
	Other		358		1,418		14,189		15,965		124,902		140,867		13,784		405
Total		$	432,805	$	202,212	$	1,093,390	$	1,728,407	$	18,451,825	$	20,180,232	$	499,200	$	460,133
[1]	Loans HIP of $134 million accounted for under ASC Subtopic 310-30 are excluded from the above table as they are considered to be performing due to the application of the accretion method, in which these loans would accrete interest income over the remaining life of the loans using estimated cash flow analysis.

December 31, 2019
Popular U.S.

			Past due											Past due 90 days or more
			30-59		60-89		90 days		Total					Non-accrual			Accruing
(In thousands)			days		days		or more		past due		Current		Loans HIP	loans		loans^[1]
Commercial multi-family		$	9	$	-	$	2,097	$	2,106	$	1,645,204	$	1,647,310	$	2,097	$	-
Commercial real estate:
	Non-owner occupied		1,047		-		281		1,328		1,868,968		1,870,296		281		-
	Owner occupied		1,750		-		251		2,001		337,134		339,135		251		-
Commercial and industrial			454		128		19,945		20,527		1,174,353		1,194,880		876		-
Construction			-		-		26		26		693,596		693,622		26		-
Mortgage			15,474		4,024		11,091		30,589		986,195		1,016,784		11,091		-
Legacy			49		8		1,999		2,056		20,049		22,105		1,999		-
Consumer:
	Credit cards		-		-		-		-		36		36		-		-
	Home equity lines of credit		404		267		9,954		10,625		106,718		117,343		9,954		-
	Personal		2,286		1,582		2,066		5,934		318,506		324,440		2,066		-
	Other		3		-		-		3		687		690		-		-
Total		$	21,476	$	6,009	$	47,710	$	75,195	$	7,151,446	$	7,226,641	$	28,641	$	-
[1]	Loans HIP of $ 19 million accounted for under ASC Subtopic 310-30 are excluded from the above table as they are considered to be performing due to the application of the accretion method, in which these loans would accrete interest income over the remaining life of the loans using estimated cash flow analysis.

December 31, 2019
Popular, Inc.

			Past due											Past due 90 days or more
			30-59		60-89		90 days		Total					Non-accrual			Accruing
(In thousands)			days		days		or more		past due	Current		Loans HIP^{[3] [4]}		loans		loans^[5]
Commercial multi-family		$	2,950	$	129	$	3,609	$	6,688	$	1,788,471	$	1,795,159	$	3,570	$	-
Commercial real estate:
	Non-owner occupied		11,486		5,244		43,945		60,675		3,917,839		3,978,514		40,249		-
	Owner occupied		7,454		3,978		84,788		96,220		1,829,244		1,925,464		69,527		-
Commercial and industrial			9,234		1,774		57,101		68,109		4,545,505		4,613,614		37,414		544
Construction			1,555		-		145		1,700		829,392		831,092		145		-
Mortgage^[1]			300,480		150,221		848,742		1,299,443		5,884,089		7,183,532		294,799		439,662
Leasing			12,014		3,053		3,657		18,724		1,040,783		1,059,507		3,657		-
Legacy^[2]			49		8		1,999		2,056		20,049		22,105		1,999		-
Consumer:
	Credit cards		11,358		7,928		19,461		38,747		1,085,089		1,123,836		-		19,461
	Home equity lines of credit		404		352		9,954		10,710		111,671		122,381		9,954		-
	Personal		15,767		10,934		22,362		49,063		1,643,527		1,692,590		21,595		61
	Auto		81,169		23,182		31,148		135,499		2,782,023		2,917,522		31,148		-
	Other		361		1,418		14,189		15,968		125,589		141,557		13,784		405
Total		$	454,281	$	208,221	$	1,141,100	$	1,803,602	$	25,603,271	$	27,406,873	$	527,841	$	460,133

[1]	It is the Corporation’s policy to report delinquent residential mortgage loans insured by FHA or guaranteed by the VA as accruing loans past due 90 days or more as opposed to non-performing since the principal repayment is insured.
[2]	The legacy portfolio is comprised of commercial loans, construction loans and lease financings related to certain lending products exited by the Corporation as part of restructuring efforts carried out in prior years at the Popular U.S. segment.
[3]	Loans held-in-portfolio are net of $ 181 million in unearned income and exclude $ 59 million in loans held-for-sale.
[4]	Includes $6.7 billion pledged to secure credit facilities and public funds that the secured parties are not permitted to sell or repledge the collateral, of which $4.6 billion were pledged at the FHLB as collateral for borrowings and $2.1 billion at the FRB for discount window borrowings.
[5]	Loans HIP of $153 million accounted for under ASC Subtopic 310-30 are excluded from the above table as they are considered to be performing due to the application of the accretion method, in which these loans would accrete interest income over the remaining life of the loans using estimated cash flow analysis.

At March 31, 2020, mortgage loans held-in-portfolio include $1.4 billion of loans insured by the Federal Housing Administration (“FHA”), or guaranteed by the U.S. Department of Veterans Affairs (“VA”) of which $450 million are 90 days or more past due, including $111 million of loans rebooked under the GNMA buyback option, discussed below (December 31, 2019 - $1.4 billion, $441 million and $103 million, respectively). Within this portfolio, loans in a delinquency status of 90 days or more are reported as accruing loans as opposed to non-performing since the principal repayment is insured. These balances include $222 million of residential mortgage loans in Puerto Rico that are no longer accruing interest as of March 31, 2020 (December 31, 2019 - $213 million). Additionally, the Corporation has approximately $62 million in reverse mortgage loans in Puerto Rico which are guaranteed by FHA, but which are currently not accruing interest at March 31, 2020 (December 31, 2019 - $65 million).

Loans with a delinquency status of 90 days past due as of March 31, 2020 include $111 million in loans previously pooled into GNMA securities (December 31, 2019 - $103 million). Under the GNMA program, issuers such as BPPR have the option but not the obligation to repurchase loans that are 90 days or more past due. For accounting purposes, these loans subject to the repurchase option are required to be reflected on the financial statements of BPPR with an offsetting liability.

The following table presents the amortized cost basis of non-accrual loans as of March 31, 2020 by class of loans and the related interest income recognized on these loans for the quarter-ended:

March 31, 2020
	Puerto Rico						Popular U.S.						Popular, Inc.
(In thousands)	Non-accrual with no allowance		Non-accrual with allowance		Interest income recognized		Non-accrual with no allowance		Non-accrual with allowance		Interest income recognized		Non-accrual with no allowance		Non-accrual with allowance		Interest income recognized
Commercial multi-family	$	-	$	1,379	$	1	$	2,097	$	-	$	-	$	2,097	$	1,379	$	1
Commercial real estate non-owner occupied		41,150		67,904		193		-		269		-		41,150		68,173		193
Commercial real estate owner occupied		31,003		70,884		519		-		245		-		31,003		71,129		519
Commercial and industrial		24,922		13,862		209		4,431		362		-		29,353		14,224		209
Construction		-		-		-		-		-		-		-		-		-
Mortgage		138,066		266,399		1,115		-		12,176		37		138,066		278,575		1,152
Leasing		242		3,834		(35)		-		-		-		242		3,834		(35)
Legacy		-		-		-		-		1,980		-		-		1,980		-
Consumer:
HELOCs		-		-		-		-		9,322		8		-		9,322		8
Personal		7,346		28,718		524		-		2,110		161		7,346		30,828		685
Auto		1,549		24,882		407		-		-		-		1,549		24,882		407
Other		-		13,543		128		-		-		-		-		13,543		128
Total	$	244,278	$	491,405	$	3,061	$	6,528	$	26,464	$	206	$	250,806	$	517,869	$	3,267

Loans in non-accrual status with no allowance include $242 million in collateral dependent loans.

The Corporation has designated loans classified as collateral dependent for which it applies the practical expedient to measure the ACL based on the fair value of the collateral less cost to sell, when the repayment is expected to be provided substantially by the sale or operation of the collateral and the borrower is experiencing financial difficulty. The fair value of the collateral is based on appraisals, which may be adjusted due to their age, and the type, location, and condition of the property or area or general market conditions to reflect the expected change in value between the effective date of the appraisal and the measurement date. Appraisals are updated every one to two years depending on the type of loan and the total exposure of the borrower.

The following table present the amortized cost basis of collateral-dependent loans by class of loans and type of collateral as of March 31, 2020:

		March 31, 2020
(In thousands)			Real Estate		Auto		Equipment		Taxi Medallions		Accounts Receivables		Other		Total
Puerto Rico
Commercial real estate:
	Non-owner occupied	$	291,083	$	-	$	-	$	-	$	-	$	-	$	291,083
	Owner occupied		62,330		-		-		-		-		-		62,330
Commercial and industrial			3,965		-		-		-		13,612		9,565		27,142
Mortgage			195,783		-		-		-		-		-		195,783
Leases			-		187		4		-		-		-		191
Consumer:
	Auto		-		1,549		-		-		-		-		1,549
Total Puerto Rico		$	553,161	$	1,736	$	4	$	-	$	13,612	$	9,565	$	578,078
Popular U.S.
Commercial multi-family		$	2,097	$	-	$	-	$	-	$	-	$	-	$	2,097
Commercial and industrial			-		-		-		4,430		-		-		4,430
Mortgage			717		-		-		-		-		-		717
Total Popular U.S.		$	2,814	$	-	$	-	$	4,430	$	-	$	-	$	7,244
Popular, Inc.
Commercial multi-family		$	2,097	$	-	$	-	$	-	$	-	$	-	$	2,097
Commercial real estate:
	Non-owner occupied		291,083		-		-		-		-		-		291,083
	Owner occupied		62,330		-		-		-		-		-		62,330
Commercial and industrial			3,965		-		-		4,430		13,612		9,565		31,572
Mortgage			196,500		-		-		-		-		-		196,500
Leases			-		187		4		-		-		-		191
Consumer:
	Auto		-		1,549		-		-		-		-		1,549
Total Popular, Inc.		$	555,975	$	1,736	$	4	$	4,430	$	13,612	$	9,565	$	585,322

Purchased Credit Deteriorated Loans (PCD)

The Corporation has purchased loans during the quarter, for which there was, at acquisition, evidence of more than insignificant deterioration of credit quality since origination. The carrying amount of those loans is as follows:


(In thousands)		March 31, 2020
Purchase price of loans at acquisition	$	3,112
Allowance for credit losses at acquisition		429
Non-credit discount/premium at acquisition		138
Par value of acquired loans at acquisition	$	3,679

Loans acquired with deteriorated credit quality accounted for under ASC 310-30

The following provides information of loans acquired with evidence of credit deterioration as of the acquisition date, accounted for under the guidance of ASC 310-30.

The outstanding principal balance of acquired loans accounted pursuant to ASC Subtopic 310-30, amounted $2.1 billion at March 31, 2019. The carrying amount of these loans consisted of loans determined to be impaired at the time of acquisition, which are accounted for in accordance with ASC Subtopic 310-30 (“credit impaired loans”), and loans that were considered to be performing at the acquisition date, accounted for by analogy to ASC Subtopic 310-30 (“non-credit impaired loans”).

The following table provides the carrying amount of acquired loans accounted for under ASC 310-30 by portfolio at December 31, 2019.

Carrying amount
(In thousands)		December 31, 2019
Commercial real estate	$	670,566
Commercial and industrial		104,756
Mortgage		856,618
Consumer		11,778
Carrying amount		1,643,718
Allowance for loan losses		(74,039)
Carrying amount, net of allowance	$	1,569,679

At March 31, 2019, none of the acquired loans accounted for under ASC Subtopic 310-30 were considered non-performing loans. Therefore, interest income, through accretion of the difference between the carrying amount of the loans and the expected cash flows, was recognized on all acquired loans.

Changes in the carrying amount and the accretable yield for the loans accounted pursuant to the ASC Subtopic 310-30, for the quarter ended March 31, 2019, were as follows:

Carrying amount of acquired loans accounted for pursuant to ASC 310-30
(In thousands)		For the quarter ended March 31, 2019
Beginning balance			$	1,883,556
Additions				5,220
Accretion				37,404
Collections / loan sales / charge-offs				(94,923)
Ending balance^[1]			$	1,831,257
Allowance for loan losses				(124,147)
Ending balance, net of ALLL			$	1,707,110
[1]	At March 31, 2019, includes $1.3 billion of loans considered non-credit impaired at the acquisition date.

Activity in the accretable yield of acquired loans accounted for pursuant to ASC 310-30
(In thousands)		For the quarter ended March 31, 2019
Beginning balance			$	1,092,504
Additions				2,890
Accretion				(37,404)
Change in expected cash flows				10,177
Ending balance^[1]			$	1,068,167
[1]	At March 31, 2019, includes $0.7 billion for loans considered non-credit impaired at the acquisition date.