Segment reporting

3 Months Ended

Mar. 31, 2021

Disclosure Text Block Abstract

Segment Reporting

Note 32 – 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, 2021, 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.

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

2021
For the quarter ended March 31, 2021
				Banco Popular				Intersegment
(In thousands)				de Puerto Rico		Popular U.S.		Eliminations
Net interest income			$	410,323	$	79,169	$	2
Provision (reversal) for credit losses				(45,361)		(36,720)		-
Non-interest income				135,208		5,666		(138)
Amortization of intangibles				861		166		-
Depreciation expense				12,143		2,328		-
Other operating expenses				306,920		53,194		(136)
Income tax expense				58,813		18,035		-
Net income			$	212,155	$	47,832	$	-
Segment assets			$	55,990,801	$	10,557,751	$	(41,613)
For the quarter ended March 31, 2021
		Reportable
(In thousands)		Segments		Corporate		Eliminations		Total Popular, Inc.
Net interest income (expense)	$	489,494	$	(10,382)	$	-	$	479,112
Provision (reversal) for credit losses		(82,081)		(145)		-		(82,226)
Non-interest income		140,736		13,150		(233)		153,653
Amortization of intangibles		1,027		24		-		1,051
Depreciation expense		14,471		267		-		14,738
Other operating expenses		359,978		670		(909)		359,739
Income tax expense (benefit)		76,848		(333)		316		76,831
Net income	$	259,987	$	2,285	$	360	$	262,632
Segment assets	$	66,506,939	$	5,193,058	$	(4,829,729)	$	66,870,268

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

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

2021
For the quarter ended March 31, 2021
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	$	179,511	$	229,386	$	1,426	$	-	$	410,323
Provision (reversal) for credit losses		(27,606)		(17,755)		-		-		(45,361)
Non-interest income		25,741		86,197		23,658		(388)		135,208
Amortization of intangibles		54		694		113		-		861
Depreciation expense		5,289		6,685		169		-		12,143
Other operating expenses		86,828		199,316		21,268		(492)		306,920
Income tax expense		42,108		15,582		1,123		-		58,813
Net income	$	98,579	$	111,061	$	2,411	$	104	$	212,155
Segment assets	$	51,622,574	$	28,932,452	$	2,386,006	$	(26,950,231)	$	55,990,801

	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

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 $12.7 million (2020 - $15.1 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 (2020 - $11.6 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 $576 million (2020 - $582 million).

Geographic Information
			Quarter ended
(In thousands)			March 31, 2021		March 31, 2020
Revenues:[1]
Puerto Rico		$	518,709	$	489,636
United States			96,012		91,679
Other			18,044		18,423
Total consolidated revenues		$	632,765	$	599,738
[1]	Total revenues include net interest income, service charges on deposit accounts, other service fees, mortgage banking activities, net gain (loss), including impairment, on equity securities, net (loss) 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, 2021		December 31, 2020
Puerto Rico
	Total assets	$	54,832,769	$	54,143,954
	Loans		20,226,682		20,413,112
	Deposits		49,133,585		47,586,880
United States
	Total assets	$	11,128,729	$	10,878,030
	Loans		8,315,116		8,396,983
	Deposits		7,987,426		7,672,549
Other
	Total assets	$	908,770	$	904,016
	Loans		674,044		674,556
	Deposits[1]		1,621,790		1,606,911
[1]	Represents deposits from BPPR operations located in the U.S. and British Virgin Islands.