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Segment Reporting
 3 Months Ended
Mar. 31, 2020
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 Popular U.S. 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, 2020, 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 Risk Services, and Popular Life Re. Most of the services that are provided by these subsidiaries generate profits based on fee income.

Popular U.S.:

Popular U.S. reportable segment consists of the banking operations of Popular Bank (PB) and Popular Insurance Agency, U.S.A. PB operates through a retail branch network in the U.S. mainland under the name of Popular. Popular Insurance Agency, U.S.A. offers investment and insurance services across the PB 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, León.

 

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.

 

Effective on January 1, 2019, the Corporation’s management changed the measurement basis for its reportable segments. Historically, for management reporting purposes, the Corporation had reversed the effect of the intercompany billings from Popular Inc., holding company, to its subsidiaries for certain services or expenses incurred on their behalf. In addition, the Corporation used to reflect an income tax expense allocation for several of its subsidiaries which are Limited Liability Companies (“LLCs”) and had made an election to be treated as a pass through entities for income tax purposes. The Corporation’s management has determined to discontinue making these adjustments, effective on January 1, 2019, for purposes of its management and reportable segment reporting. The Corporation reflected these changes in the measurement of the reportable segments’ results prospectively beginning on January 1, 2019.

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

2020

For the quarter ended March 31, 2020

 

 

 

 

Banco Popular

 

 

 

Intersegment

(In thousands)

 

 

 

de Puerto Rico

 

Popular U.S.

 

Eliminations

Net interest income

 

 

$

409,626

$

72,689

$

3

Provision for credit losses

 

 

 

113,582

 

75,991

 

-

Non-interest income

 

 

 

112,142

 

5,232

 

(140)

Amortization of intangibles

 

 

 

2,282

 

167

 

-

Depreciation expense

 

 

 

12,287

 

1,953

 

-

Other operating expenses

 

 

 

300,377

 

55,194

 

(137)

Income tax expense (benefit)

 

 

 

15,101

 

(11,951)

 

-

Net income (loss)

 

 

$

78,139

$

(43,433)

$

-

Segment assets

 

 

$

42,392,356

$

10,107,045

$

(23,284)

 

 

 

 

 

 

 

 

 

For the quarter ended March 31, 2020

 

 

Reportable

 

 

 

 

 

 

(In thousands)

 

Segments

 

Corporate

 

Eliminations

 

Total Popular, Inc.

Net interest income (expense)

$

482,318

$

(9,223)

$

-

$

473,095

Provision for credit losses

 

189,573

 

158

 

-

 

189,731

Non-interest income

 

117,234

 

9,461

 

(52)

 

126,643

Amortization of intangibles

 

2,449

 

24

 

-

 

2,473

Depreciation expense

 

14,240

 

246

 

-

 

14,486

Other operating expenses

 

355,434

 

1,037

 

(822)

 

355,649

Income tax expense (benefit)

 

3,150

 

(322)

 

269

 

3,097

Net income (loss)

$

34,706

$

(905)

$

501

$

34,302

Segment assets

$

52,476,117

$

5,241,196

$

(4,913,674)

$

52,803,639

2019

For the quarter ended March 31, 2019

 

 

 

 

Banco Popular

 

 

 

Intersegment

(In thousands)

 

 

 

de Puerto Rico

 

Popular U.S.

 

Eliminations

Net interest income

 

 

$

407,357

$

72,828

$

4

Provision for credit losses

 

 

 

31,349

 

10,371

 

-

Non-interest income

 

 

 

120,770

 

5,864

 

(141)

Amortization of intangibles

 

 

 

2,122

 

166

 

-

Depreciation expense

 

 

 

11,939

 

2,168

 

-

Other operating expenses

 

 

 

280,698

 

48,609

 

(136)

Income tax expense

 

 

 

45,376

 

5,215

 

-

Net income

 

 

$

156,643

$

12,163

$

(1)

Segment assets

 

 

$

38,896,514

$

9,585,380

$

(113,126)

 

 

 

 

 

 

 

 

 

For the quarter ended March 31, 2019

 

 

Reportable

 

 

 

 

 

 

(In thousands)

 

Segments

 

Corporate

 

Eliminations

 

Total Popular, Inc.

Net interest income (expense)

$

480,189

$

(9,226)

$

-

$

470,963

Provision for credit losses

 

41,720

 

105

 

-

 

41,825

Non-interest income

 

126,493

 

10,061

 

(124)

 

136,430

Amortization of intangibles

 

2,288

 

24

 

-

 

2,312

Depreciation expense

 

14,107

 

188

 

-

 

14,295

Other operating expenses

 

329,171

 

2,358

 

(716)

 

330,813

Income tax expense (benefit)

 

50,591

 

(586)

 

218

 

50,223

Net income (loss)

$

168,805

$

(1,254)

$

374

$

167,925

Segment assets

$

48,368,768

$

5,021,367

$

(4,709,528)

$

48,680,607

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

2020

For the quarter ended March 31, 2020

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

$

161,534

$

243,056

$

5,036

$

-

$

409,626

Provision for credit losses

 

10,313

 

103,269

 

-

 

-

 

113,582

Non-interest income

 

24,712

 

63,984

 

23,740

 

(294)

 

112,142

Amortization of intangibles

 

48

 

1,310

 

924

 

-

 

2,282

Depreciation expense

 

5,150

 

6,978

 

159

 

-

 

12,287

Other operating expenses

 

74,875

 

202,042

 

23,769

 

(309)

 

300,377

Income tax expense (benefit)

 

25,616

 

(12,952)

 

2,437

 

-

 

15,101

Net income

$

70,244

$

6,393

$

1,487

$

15

$

78,139

Segment assets

$

33,212,687

$

24,388,065

$

3,080,386

$

(18,288,782)

$

42,392,356

 

2019

 

For the quarter ended March 31, 2019

 

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

$

151,460

$

254,668

$

1,318

$

(89)

$

407,357

Provision (reversal) for credit losses

 

(1,992)

 

33,341

 

-

 

-

 

31,349

Non-interest income

 

23,589

 

75,404

 

22,534

 

(757)

 

120,770

Amortization of intangibles

 

49

 

1,072

 

1,001

 

-

 

2,122

Depreciation expense

 

4,654

 

7,127

 

158

 

-

 

11,939

Other operating expenses

 

72,929

 

192,670

 

15,827

 

(728)

 

280,698

Income tax expense

 

31,194

 

11,743

 

2,439

 

-

 

45,376

Net income

$

68,215

$

84,119

$

4,427

$

(118)

$

156,643

Segment assets

$

29,478,917

$

23,039,995

$

327,487

$

(13,949,885)

$

38,896,514

Geographic Information

 

The following information presents selected financial information based on the geographic location where the Corporation conducts its business. The banking operations of BPPR are primarily based in Puerto Rico, where it has the largest retail banking franchise. BPPR also conducts banking operations in the U.S. Virgin Islands, the British Virgin Islands and New York. BPPR’s banking operations in the United States include E-loan, an online platform used to offer personal loans, co-branded credit cards offerings and an online deposit gathering platform. In the Virgin Islands, the BPPR segment offers banking products, including loans and deposits. During the quarter ended March 31, 2020, the BPPR segment generated approximately $15.1 million (2019 - $12.8 million) in revenues from its operations in the United States, including net interest income, service charges on deposit accounts and other service fees. In addition, the BPPR segment generated $11.6 million in revenues (2019 - $11.9 million) from its operations in the U.S. and British Virgin Islands. At March 31, 2020, total assets for the BPPR segment related to its operations in the United States amounted to $582 million (2019 - $550 million) and total deposits amounted to $43 million (2019 - $70 million).

Geographic Information

 

 

 

Quarter ended

(In thousands)

 

March 31, 2020

 

March 31, 2019

Revenues:[1]

 

 

 

 

Puerto Rico

$

489,636

$

500,138

United States

 

91,679

 

89,856

Other

 

18,423

 

17,399

Total consolidated revenues

$

599,738

$

607,393

[1]

Total revenues include net interest income, service charges on deposit accounts, other service fees, mortgage banking activities, net (loss) gain, including impairment, on equity securities, net profit on trading account debt securities, net gain on sale of loans, including valuation adjustments on loans held-for-sale, indemnity reserves on loans sold and other operating income.

Selected Balance Sheet Information:

(In thousands)

 

March 31, 2020

 

December 31, 2019

Puerto Rico

 

 

 

 

 

Total assets

$

41,233,363

$

40,544,255

 

Loans

 

19,039,704

 

18,989,286

 

Deposits

 

35,768,869

 

34,664,243

United States

 

 

 

 

 

Total assets

$

10,686,885

$

10,693,536

 

Loans

 

8,054,521

 

7,819,187

 

Deposits

 

7,589,707

 

7,664,792

Other

 

 

 

 

 

Total assets

$

883,391

$

877,533

 

Loans

 

655,902

 

657,603

 

Deposits[1]

 

1,438,600

 

1,429,571

[1]

Represents deposits from BPPR operations located in the U.S. and British Virgin Islands.