Segment reporting

9 Months Ended

Sep. 30, 2021

Segment reporting disclosure

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 September 30, 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 service units of BPPR, asset management services of Popular Asset Management, 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 September 30, 2021
				Banco Popular				Intersegment
(In thousands)				de Puerto Rico		Popular U.S.		Eliminations
Net interest income			$	419,166	$	80,038	$	2
Provision for credit losses (benefit)				(37,022)		(23,937)		-
Non-interest income				146,139		6,150		(136)
Amortization of intangibles				617		166		-
Depreciation expense				11,164		1,516		-
Other operating expenses				324,171		50,694		(136)
Income tax expense				65,357		18,139		-
Net income			$	201,018	$	39,610	$	2
Segment assets			$	63,476,269	$	10,338,333	$	(23,074)
For the quarter ended September 30, 2021
		Reportable
(In thousands)		Segments		Corporate		Eliminations		Total Popular, Inc.
Net interest income (expense)	$	499,206	$	(9,813)	$	-	$	489,393
Provision for credit losses (benefit)		(60,959)		(214)		-		(61,173)
Non-interest income		152,153		17,251		(146)		169,258
Amortization of intangibles		783		-		-		783
Depreciation expense		12,680		328		-		13,008
Other operating expenses		374,729		615		(967)		374,377
Income tax expense (benefit)		83,496		(279)		325		83,542
Net income	$	240,630	$	6,988	$	496	$	248,114
Segment assets	$	73,791,528	$	5,378,819	$	(4,981,184)	$	74,189,163

For the nine months ended September 30, 2021
				Banco Popular				Intersegment
(In thousands)				de Puerto Rico		Popular U.S.		Eliminations
Net interest income			$	1,248,689	$	237,950	$	5
Provision for credit losses (benefit)				(104,425)		(55,801)		-
Non-interest income				417,399		17,083		(411)
Amortization of intangibles				2,338		499		-
Depreciation expense				35,115		5,441		-
Other operating expenses				938,754		152,421		(408)
Income tax expense				187,784		46,337		-
Net income			$	606,522	$	106,136	$	2
Segment assets			$	63,476,269	$	10,338,333	$	(23,074)
For the nine months ended September 30, 2021
		Reportable						Total
(In thousands)		Segments		Corporate		Eliminations		Popular, Inc.
Net interest income (expense)	$	1,486,644	$	(30,337)	$	-	$	1,456,307
Provision for credit losses (benefit)		(160,226)		(188)		-		(160,414)
Non-interest income		434,071		45,675		(2,295)		477,451
Amortization of intangibles		2,837		252		-		3,089
Depreciation expense		40,556		860		-		41,416
Other operating expenses		1,090,767		(567)		(2,824)		1,087,376
Income tax expense (benefit)		234,121		(925)		270		233,466
Net income	$	712,660	$	15,906	$	259	$	728,825
Segment assets	$	73,791,528	$	5,378,819	$	(4,981,184)	$	74,189,163

2020
For the quarter ended September 30, 2020
				Banco Popular				Intersegment
(In thousands)				de Puerto Rico		Popular U.S.		Eliminations
Net interest income			$	394,662	$	76,481	$	2
Provision for credit losses				7,288		11,770		-
Non-interest income				107,577		7,186		(138)
Amortization of intangibles				886		166		-
Depreciation expense				11,921		2,338		-
Other operating expenses				292,528		54,679		(136)
Income tax expense				35,834		5,350		-
Net income			$	153,782	$	9,364	$	-
Segment assets			$	55,388,782	$	10,220,824	$	(28,177)
For the quarter ended September 30, 2020
		Reportable
(In thousands)		Segments		Corporate		Eliminations		Total Popular, Inc.
Net interest income (expense)	$	471,145	$	(10,124)	$	-	$	461,021
Provision for credit losses		19,058		80		-		19,138
Non-interest income		114,625		14,230		(88)		128,767
Amortization of intangibles		1,052		24		-		1,076
Depreciation expense		14,259		259		-		14,518
Other operating expenses		347,071		(748)		(851)		345,472
Income tax expense (benefit)		41,184		(312)		296		41,168
Net income	$	163,146	$	4,803	$	467	$	168,416
Segment assets	$	65,581,429	$	5,201,316	$	(4,872,376)	$	65,910,369

For the nine months ended September 30, 2020
				Banco Popular				Intersegment
(In thousands)				de Puerto Rico		Popular U.S.		Eliminations
Net interest income			$	1,191,452	$	222,874	$	9
Provision for credit losses				180,659		90,442		-
Non-interest income				315,522		18,831		(414)
Amortization of intangibles				4,773		499		-
Depreciation expense				36,282		6,396		-
Other operating expenses				876,438		160,749		(408)
Income tax expense				69,040		666		-
Net income (loss)			$	339,782	$	(17,047)	$	3
Segment assets			$	55,388,782	$	10,220,824	$	(28,177)
For the nine months ended September 30, 2020
		Reportable						Total
(In thousands)		Segments		Corporate		Eliminations		Popular, Inc.
Net interest income (expense)	$	1,414,335	$	(29,338)	$	-	$	1,384,997
Provision for credit losses		271,101		217		-		271,318
Non-interest income		333,939		35,645		(2,119)		367,465
Amortization of intangibles		5,272		73		-		5,345
Depreciation expense		42,678		741		-		43,419
Other operating expenses		1,036,779		(1,056)		(2,582)		1,033,141
Income tax expense (benefit)		69,706		(964)		151		68,893
Net income	$	322,738	$	7,296	$	312	$	330,346
Segment assets	$	65,581,429	$	5,201,316	$	(4,872,376)	$	65,910,369

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

2021
For the quarter ended September 30, 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	$	183,456	$	234,477	$	1,233	$	-	$	419,166
Provision for credit losses (benefit)		(11,948)		(25,074)		-		-		(37,022)
Non-interest income		36,662		83,531		26,335		(389)		146,139
Amortization of intangibles		54		457		106		-		617
Depreciation expense		4,881		6,124		159		-		11,164
Other operating expenses		96,414		206,257		21,911		(411)		324,171
Income tax expense		46,183		17,836		1,338		-		65,357
Net income	$	84,534	$	112,408	$	4,054	$	22	$	201,018
Segment assets	$	63,743,047	$	30,902,005	$	2,020,629	$	(33,189,412)	$	63,476,269

For the nine months ended September 30, 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	$	543,807	$	701,018	$	3,864	$	-	$	1,248,689
Provision for credit losses (benefit)		(57,305)		(47,120)		-		-		(104,425)
Non-interest income		91,235		251,022		76,322		(1,180)		417,399
Amortization of intangibles		161		1,845		332		-		2,338
Depreciation expense		15,401		19,222		492		-		35,115
Other operating expenses		273,374		599,289		67,417		(1,326)		938,754
Income tax expense		132,632		51,531		3,621		-		187,784
Net income	$	270,779	$	327,273	$	8,324	$	146	$	606,522
Segment assets	$	63,743,047	$	30,902,005	$	2,020,629	$	(33,189,412)	$	63,476,269

	2020
	For the quarter ended September 30, 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		$	164,791	$	228,293	$	1,578	$	-	$	394,662
Provision for credit losses			4,061		3,227		-		-		7,288
Non-interest income			24,804		58,955		24,194		(376)		107,577
Amortization of intangibles			50		699		137		-		886
Depreciation expense			5,179		6,569		173		-		11,921
Other operating expenses			77,906		195,624		19,389		(391)		292,528
Income tax expense			32,331		2,275		1,228		-		35,834
Net income		$	70,068	$	78,854	$	4,845	$	15	$	153,782
Segment assets		$	47,920,631	$	29,358,230	$	2,408,998	$	(24,299,077)	$	55,388,782

	For the nine months ended September 30, 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		$	486,050	$	694,983	$	10,419	$	-	$	1,191,452
Provision for credit losses			23,244		157,415		-		-		180,659
Non-interest income			74,771		170,205		71,459		(913)		315,522
Amortization of intangibles			148		2,911		1,714		-		4,773
Depreciation expense			15,406		20,383		493		-		36,282
Other operating expenses			226,232		587,297		63,863		(954)		876,438
Income tax expense (benefit)			82,271		(18,912)		5,681		-		69,040
Net income		$	213,520	$	116,094	$	10,127	$	41	$	339,782
Segment assets		$	47,920,631	$	29,358,230	$	2,408,998	$	(24,299,077)	$	55,388,782

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 September 30, 2021, the BPPR segment generated approximately $38.1 million (2020 - $41.7 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 $34.7 million in revenues (2020 - $33.5 million) from its operations in the U.S. and British Virgin Islands. At September 30, 2021, total assets for the BPPR segment related to its operations in the United States amounted to $565 million (2020 - $579 million).

Geographic Information
			Quarter ended				Nine months ended
(In thousands)			September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
Revenues:[1]
Puerto Rico		$	542,178	$	476,863	$	1,590,030	$	1,418,243
United States			97,331		95,145		288,619		279,246
Other			19,142		17,780		55,109		54,973
Total consolidated revenues		$	658,651	$	589,788	$	1,933,758	$	1,752,462
[1]	Total revenues include net interest income, service charges on deposit accounts, other service fees, mortgage banking activities, net gain on sale of debt securities, net (loss) gain, including impairment on equity securities, net profit (loss) on trading account debt securities, net (loss) gain on sale of loans, including valuation adjustment on loans held-for-sale, adjustments (expense) to indemnity reserves on loans sold, and other operating income.

Selected Balance Sheet Information:
(In thousands)			September 30, 2021		December 31, 2020
Puerto Rico
	Total assets	$	62,401,086	$	54,143,954
	Loans		20,097,055		20,413,112
	Deposits		56,247,551		47,586,880
United States
	Total assets	$	10,900,069	$	10,878,030
	Loans		8,211,160		8,396,983
	Deposits		7,836,138		7,672,549
Other
	Total assets	$	888,008	$	904,016
	Loans		638,470		674,556
	Deposits[1]		1,929,872		1,606,911
[1]	Represents deposits from BPPR operations located in the U.S. and British Virgin Islands.