Company Quick10K Filing
Quick10K
Popular
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$56.97 97 $5,510
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-05-07 Other Events, Exhibits
8-K 2019-05-07 Shareholder Vote
8-K 2019-04-18 Earnings, Regulation FD, Exhibits
8-K 2019-02-15 Other Events, Exhibits
8-K 2019-01-23 Earnings, Exhibits
8-K 2019-01-23 Regulation FD, Exhibits
8-K 2019-01-23 Other Events, Exhibits
8-K 2018-12-13 Officers, Other Events, Exhibits
8-K 2018-11-14 Other Events, Exhibits
8-K 2018-10-24 Earnings, Exhibits
8-K 2018-10-24 Regulation FD, Exhibits
8-K 2018-09-14 Enter Agreement, Off-BS Arrangement, Other Events, Exhibits
8-K 2018-09-14 Officers
8-K 2018-09-14 Other Events, Exhibits
8-K 2018-09-11 Other Events, Exhibits
8-K 2018-08-23 Other Events, Exhibits
8-K 2018-08-06 Other Events, Exhibits
8-K 2018-08-01 Regulation FD, Exhibits
8-K 2018-07-23 Other Events, Exhibits
8-K 2018-07-23 Regulation FD, Exhibits
8-K 2018-07-23 Earnings, Exhibits
8-K 2018-07-05 Other Events, Exhibits
8-K 2018-06-19 Officers, Other Events, Exhibits
8-K 2018-05-31 Other Events, Exhibits
8-K 2018-05-22 Leave Agreement, Other Events, Exhibits
8-K 2018-05-08 Shareholder Vote
8-K 2018-04-24 Earnings, Exhibits
8-K 2018-02-23 Other Events, Exhibits
8-K 2018-02-14 Regulation FD, Other Events, Exhibits
8-K 2018-01-23 Regulation FD, Exhibits
AMX America Movil 46,080
ICE Intercontinental Exchange 45,560
LPL LG Display 5,360
SSD Simpson Manufacturing 2,990
FBNC First Bancorp 1,120
TOUR Tuniu 532
MMAC MMA Capital Management 179
HSTC HST Global 0
MAGAA Magna Lab 0
WESC W&E Source 0
BPOP 2019-03-31
Note 1 - Nature of Operations
Note 2 - Basis of Presentation and Summary of Significant Accounting Policies
Note 3 - New Accounting Pronouncements
Note 4 - Business Combination
Note 5 - Restrictions on Cash and Due From Banks and Certain Securities
Note 6 - Debt Securities Available-For-Sale
Note 7 - Debt Securities Held-To-Maturity
Note 8 - Loans
Note 9 - Allowance for Loan Losses
Note 10 - Fdic Loss-Share Asset and True-Up Payment Obligation
Note 11 - Mortgage Banking Activities
Note 12 - Transfers of Financial Assets and Mortgage Servicing Assets
Note 13 - Other Real Estate Owned
Note 14 - Other Assets
Note 15 - Goodwill and Other Intangible Assets
Note 16 - Deposits
Note 17 - Borrowings
Note 18 - Stockholders' Equity
Note 19 - Other Comprehensive Loss
Note 20 - Guarantees
Note 21 - Commitments and Contingencies
Note 22 - Non-Consolidated Variable Interest Entities
Note 23 - Related Party Transactions
Note 24 - Fair Value Measurement
Note 25 - Fair Value of Financial Instruments
Note 26 - Net Income per Common Share
Note 27 - Revenue From Contracts with Customers
Note 28 - Leases
Note 29 - Fdic Loss Share Expense
Note 30 - Pension and Postretirement Benefits
Note 31 - Stock-Based Compensation
Note 32 - Income Taxes
Note 33 - Supplemental Disclosure on The Consolidated Statements of Cash Flows
Note 34 - Segment Reporting
Note 35 - Condensed Consolidating Financial Information of Guarantor and Issuers of Registered Guaranteed Securities
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-10.1 d738164dex101.htm
EX-31.1 d738164dex311.htm
EX-31.2 d738164dex312.htm
EX-32.1 d738164dex321.htm
EX-32.2 d738164dex322.htm

Popular Earnings 2019-03-31

BPOP 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 d738164d10q.htm FORM 10-Q Form 10-Q
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Form 10-Q

 

 

 

Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2019

Commission File Number: 001-34084

 

 

POPULAR, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Puerto Rico   66-0667416

(State or other jurisdiction of

Incorporation or organization)

 

(IRS Employer

Identification Number)

Popular Center Building

209 Muñoz Rivera Avenue

Hato Rey, Puerto Rico

  00918
(Address of principal executive offices)   (Zip code)

(787) 765-9800

(Registrant’s telephone number, including area code)

NOT APPLICABLE

(Former name, former address and former fiscal year, if changed since last report)

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    ☒  Yes    ☐  No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    ☒  Yes    ☐  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

 

Large accelerated filer      Accelerated filer  
Non-accelerated filer      Smaller reporting company  
     Emerging growth company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ☐  Yes    ☒  No

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

  

Trading

Symbol(s)

  

Name of each exchange

on which registered

Common Stock ($0.01 par value)    BPOP    The NASDAQ Stock Market
6.70% Cumulative Monthly Income Trust Preferred Securities    BPOPN    The NASDAQ Stock Market
6.125% Cumulative Monthly Income Trust Preferred Securities    BPOPM    The NASDAQ Stock Market

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: Common Stock, $0.01 par value, 96,647,087 shares outstanding as of May 6, 2019.

 

 

 


Table of Contents

POPULAR, INC.

INDEX

 

        

Page

 

Part I – Financial Information

  

Item 1.

  Financial Statements   

Unaudited Consolidated Statements of Financial Condition at March 31, 2019 and December 31, 2018

     5  

Unaudited Consolidated Statements of Operations for the quarters ended March 31, 2019 and 2018

     6  

Unaudited Consolidated Statements of Comprehensive Income (Loss) for the quarters ended March 31, 2019 and 2018

     7  

Unaudited Consolidated Statements of Changes in Stockholders’ Equity for the quarters ended March 31, 2019 and 2018

     8  

Unaudited Consolidated Statements of Cash Flows for the quarters ended March 31, 2019 and 2018

     9  

Notes to Unaudited Consolidated Financial Statements

     10  

Item 2.

  Management’s Discussion and Analysis of Financial Condition and Results of Operations      99  

Item 3.

  Quantitative and Qualitative Disclosures about Market Risk      130  

Item 4.

  Controls and Procedures      130  

Part II – Other Information

  

Item 1.

  Legal Proceedings      131  

Item 1A.

  Risk Factors      131  

Item 2.

  Unregistered Sales of Equity Securities and Use of Proceeds      131  

Item 3.

  Defaults upon Senior Securities      132  

Item 4.

  Mine Safety Disclosures      132  

Item 5.

  Other information      132  

Item 6.

  Exhibits      132  

Signatures

     133  

 

2


Table of Contents

Forward-Looking Information

This Form 10-Q contains “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, including, without limitation, statements about Popular Inc.’s (the “Corporation,” “Popular,” “we,” “us,” “our”) business, financial condition, results of operations, plans, objectives and future performance. These statements are not guarantees of future performance, are based on management’s current expectations and, by their nature, involve risks, uncertainties, estimates and assumptions. Potential factors, some of which are beyond the Corporation’s control, could cause actual results to differ materially from those expressed in, or implied by, such forward-looking statements. Risks and uncertainties include without limitation the effect of competitive and economic factors, and our reaction to those factors, the adequacy of the allowance for loan losses, delinquency trends, market risk and the impact of interest rate changes, capital markets conditions, capital adequacy and liquidity, and the effect of legal and regulatory proceedings and new accounting standards on the Corporation’s financial condition and results of operations. All statements contained herein that are not clearly historical in nature are forward-looking, and the words “anticipate,” “believe,” “continues,” “expect,” “estimate,” “intend,” “project” and similar expressions and future or conditional verbs such as “will,” “would,” “should,” “could,” “might,” “can,” “may” or similar expressions are generally intended to identify forward-looking statements.

Various factors, some of which are beyond Popular’s control, could cause actual results to differ materially from those expressed in, or implied by, such forward-looking statements. Factors that might cause such a difference include, but are not limited to:

 

   

the rate of growth or decline in the economy and employment levels, as well as general business and economic conditions in the geographic areas we serve and, in particular, in the Commonwealth of Puerto Rico (the “Commonwealth” or “Puerto Rico”), where a significant portion of our business is concentrated;

 

   

the impact of the current fiscal and economic challenges of Puerto Rico and the measures taken and to be taken by the Puerto Rico Government and the Federally-appointed oversight board on the economy, our customers and our business;

 

   

the impact of the pending debt restructuring proceedings under Title III of the Puerto Rico Oversight, Management and Economic Stability Act (“PROMESA”) and of other actions taken or to be taken to address Puerto Rico’s fiscal challenges on the value of our portfolio of Puerto Rico government securities and loans to governmental entities and of our commercial, mortgage and consumer loan portfolios where private borrowers could be directly affected by governmental action;

 

   

the impact of Hurricanes Irma and Maria, and the measures taken to recover from these hurricanes (including the availability of relief funds and insurance proceeds), on the economy of Puerto Rico, the U.S. Virgin Islands and the British Virgin Islands, and on our customers and our business;

 

   

changes in interest rates and market liquidity, which may reduce interest margins, impact funding sources and affect our ability to originate and distribute financial products in the primary and secondary markets;

 

   

the fiscal and monetary policies of the federal government and its agencies;

 

   

changes in federal bank regulatory and supervisory policies, including required levels of capital and the impact of proposed capital standards on our capital ratios;

 

   

additional Federal Deposit Insurance Corporation (“FDIC”) assessments;

 

   

regulatory approvals that may be necessary to undertake certain actions or consummate strategic transactions such as acquisitions and dispositions;

 

   

hurricanes and other weather-related events, as well as man-made disasters, which could cause a disruption in our operations or other adverse consequences for our business;

 

   

the ability to successfully integrate the auto finance business acquired from Wells Fargo & Company, as well as unexpected costs, including as a result of any unrecorded liabilities or issues not identified during the due diligence investigation of the business or that may not be subject to indemnification or reimbursement under the acquisition agreement, and risks that the business may suffer as a result of the transaction, including due to adverse effects on relationships with customers, employees and service providers;

 

3


Table of Contents
   

the relative strength or weakness of the consumer and commercial credit sectors and of the real estate markets in Puerto Rico and the other markets in which borrowers are located;

 

   

the performance of the stock and bond markets;

 

   

competition in the financial services industry;

 

   

possible legislative, tax or regulatory changes; and

 

   

a failure in or breach of our operational or security systems or infrastructure or those of EVERTEC, Inc., our provider of core financial transaction processing and information technology services, or of other third parties providing services to us, including as a result of cyberattacks, e-fraud, denial-of-services and computer intrusion, that might result in loss or breach of customer data, disruption of services, reputational damage or additional costs to Popular.

Other possible events or factors that could cause results or performance to differ materially from those expressed in these forward-looking statements include the following:

 

   

negative economic conditions that adversely affect housing prices, the job market, consumer confidence and spending habits which may affect, among other things, the level of non-performing assets, charge-offs and provision expense;

 

   

changes in market rates and prices which may adversely impact the value of financial assets and liabilities;

 

   

liabilities resulting from litigation and regulatory investigations;

 

   

changes in accounting standards, rules and interpretations;

 

   

our ability to grow our core businesses;

 

   

decisions to downsize, sell or close units or otherwise change our business mix; and

 

   

management’s ability to identify and manage these and other risks.

Moreover, the outcome of legal and regulatory proceedings, as discussed in “Part II, Item 1. Legal Proceedings,” is inherently uncertain and depends on judicial interpretations of law and the findings of regulators, judges and/or juries. Investors should refer to the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2018, as well as “Part II, Item 1A” of this Form 10-Q for a discussion of such factors and certain risks and uncertainties to which the Corporation is subject.

All forward-looking statements included in this Form 10-Q are based upon information available to Popular as of the date of this Form 10-Q, and other than as required by law, including the requirements of applicable securities laws, we assume no obligation to update or revise any such forward-looking statements to reflect occurrences or unanticipated events or circumstances after the date of such statements.

 

4


Table of Contents

POPULAR, INC.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(UNAUDITED)

 

(In thousands, except share information)

   March 31,
2019
    December 31,
2018
 

Assets:

    

Cash and due from banks

   $ 376,558     $ 394,035  
  

 

 

   

 

 

 

Money market investments:

    

Time deposits with other banks

     4,814,134       4,171,048  
  

 

 

   

 

 

 

Total money market investments

     4,814,134       4,171,048  
  

 

 

   

 

 

 

Trading account debt securities, at fair value:

    

Pledged securities with creditors’ right to repledge

     598       598  

Other trading account debt securities

     38,619       37,189  

Debt securities available-for-sale, at fair value:

    

Pledged securities with creditors’ right to repledge

     206,309       280,502  

Other debt securities available-for-sale

     13,336,386       13,019,682  

Debt securities held-to-maturity, at amortized cost (fair value 2019 - $103,457; 2018 - $102,653)

     99,455       101,575  

Equity securities (realizable value 2019 - $163,550); (2018 - $159,821)

     158,507       155,584  

Loans held-for-sale, at lower of cost or fair value

     43,985       51,422  
  

 

 

   

 

 

 

Loans held-in-portfolio

     26,808,287       26,663,713  

Less – Unearned income

     160,579       155,824  

Allowance for loan losses

     550,628       569,348  
  

 

 

   

 

 

 

Total loans held-in-portfolio, net

     26,097,080       25,938,541  
  

 

 

   

 

 

 

Premises and equipment, net

     557,517       569,808  

Other real estate

     125,478       136,705  

Accrued income receivable

     162,797       166,022  

Mortgage servicing assets, at fair value

     167,813       169,777  

Other assets

     1,799,728       1,714,134  

Goodwill

     671,122       671,122  

Other intangible assets

     24,521       26,833  
  

 

 

   

 

 

 

Total assets

   $ 48,680,607     $ 47,604,577  
  

 

 

   

 

 

 

Liabilities and Stockholders’ Equity

    

Liabilities:

    

Deposits:

    

Non-interest bearing

   $ 9,046,104     $ 9,149,036  

Interest bearing

     31,833,734       30,561,003  
  

 

 

   

 

 

 

Total deposits

     40,879,838       39,710,039  
  

 

 

   

 

 

 

Assets sold under agreements to repurchase

     200,871       281,529  

Other short-term borrowings

     42       42  

Notes payable

     1,176,488       1,256,102  

Other liabilities

     983,308       921,808  
  

 

 

   

 

 

 

Total liabilities

     43,240,547       42,169,520  
  

 

 

   

 

 

 

Commitments and contingencies (Refer to Note 21)

    

Stockholders’ equity:

    

Preferred stock, 30,000,000 shares authorized; 2,006,391 shares issued and outstanding

     50,160       50,160  

Common stock, $0.01 par value; 170,000,000 shares authorized; 104,338,340 shares issued (2018 - 104,320,303) and 96,629,891 shares outstanding (2018 - 99,942,845)

     1,043       1,043  

Surplus

     4,313,040       4,365,606  

Retained earnings

     1,794,644       1,651,731  

Treasury stock - at cost, 7,708,449 shares (2018 - 4,377,458)

     (394,848     (205,509

Accumulated other comprehensive loss, net of tax

     (323,979     (427,974
  

 

 

   

 

 

 

Total stockholders’ equity

     5,440,060       5,435,057  
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 48,680,607     $ 47,604,577  
  

 

 

   

 

 

 

The accompanying notes are an integral part of these Consolidated Financial Statements.

 

 

5


Table of Contents

POPULAR, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

 

     Quarters ended March 31,  

(In thousands, except per share information)

   2019     2018  

Interest income:

    

Loans

   $ 447,713     $ 373,584  

Money market investments

     29,220       22,285  

Investment securities

     81,036       57,209  
  

 

 

   

 

 

 

Total interest income

     557,969       453,078  
  

 

 

   

 

 

 

Interest expense:

    

Deposits

     70,826       38,688  

Short-term borrowings

     1,600       2,013  

Long-term debt

     14,580       19,330  
  

 

 

   

 

 

 

Total interest expense

     87,006       60,031  
  

 

 

   

 

 

 

Net interest income

     470,963       393,047  

Provision for loan losses - non-covered loans

     41,825       69,333  

Provision for loan losses - covered loans

     —         1,730  
  

 

 

   

 

 

 

Net interest income after provision for loan losses

     429,138       321,984  
  

 

 

   

 

 

 

Service charges on deposit accounts

     38,691       36,455  

Other service fees

     64,307       60,602  

Mortgage banking activities (Refer to Note 11)

     9,926       12,068  

Net gain (loss), including impairment, on equity securities

     1,433       (646

Net profit (loss) on trading account debt securities

     260       (198

Adjustments (expense) to indemnity reserves on loans sold

     (93     (2,926

FDIC loss share expense (Refer to Note 29)

     —         (8,027

Other operating income

     21,906       16,169  
  

 

 

   

 

 

 

Total non-interest income

     136,430       113,497  
  

 

 

   

 

 

 

Operating expenses:

    

Personnel costs

     143,117       125,852  

Net occupancy expenses

     23,537       22,802  

Equipment expenses

     19,705       17,206  

Other taxes

     11,662       10,902  

Professional fees

     87,466       82,985  

Communications

     5,849       5,906  

Business promotion

     14,674       12,009  

FDIC deposit insurance

     4,806       6,920  

Other real estate owned (OREO) expenses

     2,677       6,131  

Other operating expenses

     31,615       28,964  

Amortization of intangibles

     2,312       2,325  
  

 

 

   

 

 

 

Total operating expenses

     347,420       322,002  
  

 

 

   

 

 

 

Income before income tax

     218,148       113,479  

Income tax expense

     50,223       22,155  
  

 

 

   

 

 

 

Net Income

   $ 167,925     $ 91,324  
  

 

 

   

 

 

 

Net Income Applicable to Common Stock

   $ 166,994     $ 90,393  
  

 

 

   

 

 

 

Net Income per Common Share - Basic

   $ 1.69     $ 0.89  
  

 

 

   

 

 

 

Net Income per Common Share - Diluted

   $ 1.69     $ 0.89  
  

 

 

   

 

 

 

The accompanying notes are an integral part of these Consolidated Financial Statements.

 

 

6


Table of Contents

POPULAR, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

 

     Quarters ended March 31,  

(In thousands)

   2019     2018  

Net income

   $ 167,925     $ 91,324  
  

 

 

   

 

 

 

Reclassification to retained earnings due to cumulative effect of accounting change

     (50     (605

Other comprehensive income (loss) before tax:

    

Foreign currency translation adjustment

     (1,238     93  

Amortization of net losses of pension and postretirement benefit plans

     5,876       5,386  

Amortization of prior service credit of pension and postretirement benefit plans

     —         (867

Unrealized holding gains (losses) on debt securities arising during the period

     109,863       (121,189

Unrealized net (losses) gains on cash flow hedges

     (682     1,225  

Reclassification adjustment for net losses (gains) included in net income

     1,030       (1,267
  

 

 

   

 

 

 

Other comprehensive income (loss) before tax

     114,799       (117,224

Income tax (expense) benefit

     (10,804     5,038  
  

 

 

   

 

 

 

Total other comprehensive income (loss), net of tax

     103,995       (112,186
  

 

 

   

 

 

 

Comprehensive income (loss), net of tax

   $ 271,920     $ (20,862
  

 

 

   

 

 

 
Tax effect allocated to each component of other comprehensive income (loss):    Quarters ended March 31,  

(In thousands)

   2019     2018  

Amortization of net losses of pension and postretirement benefit plans

   $ (2,203   $ (2,101

Amortization of prior service credit of pension and postretirement benefit plans

     —         338  

Unrealized holding gains (losses) on debt securities arising during the period

     (8,460     6,785  

Unrealized net (losses) gains on cash flow hedges

     245       (478

Reclassification adjustment for net losses (gains) included in net income

     (386     494  
  

 

 

   

 

 

 

Income tax (expense) benefit

   $ (10,804   $ 5,038  
  

 

 

   

 

 

 

The accompanying notes are an integral part of these Consolidated Financial Statements.

 

 

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Table of Contents

POPULAR, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(UNAUDITED)

 

(In thousands)

   Common
stock
     Preferred
stock
     Surplus     Retained
earnings
    Treasury
stock
    Accumulated
other
comprehensive
loss
    Total  

Balance at December 31, 2017

   $ 1,042      $ 50,160      $ 4,298,503     $ 1,194,994     $ (90,142   $ (350,652   $ 5,103,905  

Cumulative effect of accounting change

             1,935           1,935  

Net income

             91,324           91,324  

Issuance of stock

     1           880             881  

Dividends declared:

                

Common stock [1]

             (25,547         (25,547

Preferred stock

             (931         (931

Common stock purchases

               (1,328       (1,328

Common stock reissuance

           (16       738         722  

Stock based compensation

           1,569         4,565         6,134  

Other comprehensive income, net of tax

                 (112,186     (112,186
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at March 31, 2018

   $ 1,043      $ 50,160      $ 4,300,936     $ 1,261,775     $ (86,167   $ (462,838   $ 5,064,909  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at December 31, 2018

   $ 1,043      $ 50,160      $ 4,365,606     $ 1,651,731     $ (205,509   $ (427,974   $ 5,435,057  

Cumulative effect of accounting change

             4,905           4,905  

Net income

             167,925           167,925  

Issuance of stock

           793             793  

Dividends declared:

                

Common stock [1]

             (28,986         (28,986

Preferred stock

             (931         (931

Common stock purchases [2]

           (52,670       (200,449       (253,119

Common stock reissuance

           178         2,005         2,183  

Stock based compensation

           (867       9,105         8,238  

Other comprehensive income, net of tax

                 103,995       103,995  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at March 31, 2019

   $ 1,043      $ 50,160      $ 4,313,040     $ 1,794,644     $ (394,848   $ (323,979   $ 5,440,060  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

[1]

Dividends declared per common share during the quarter ended March 31, 2019 - $0.30 (2018 - $0.25).

[2]

On February 28, 2019, the Corporation entered into a $250 million accelerated share repurchase transaction with respect to its common stock, which was accounted for as a treasury stock transaction. Refer to Note 18 for additional information.

Disclosure of changes in number of shares:

   March 31,
2019
    March 31,
2018
 

Preferred Stock:

    

Balance at beginning and end of period

     2,006,391       2,006,391  
  

 

 

   

 

 

 

Common Stock – Issued:

    

Balance at beginning of period

     104,320,303       104,238,159  

Issuance of stock

     18,037       25,760  
  

 

 

   

 

 

 

Balance at end of period

     104,338,340       104,263,919  

Treasury stock

     (7,708,449     (2,074,005
  

 

 

   

 

 

 

Common Stock – Outstanding

     96,629,891       102,189,914  
  

 

 

   

 

 

 

The accompanying notes are an integral part of these Consolidated Financial Statements.

    

 

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Table of Contents

POPULAR, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

     Quarters ended March 31,  

(In thousands)

   2019     2018  

Cash flows from operating activities:

    

Net income

   $ 167,925     $ 91,324  
  

 

 

   

 

 

 

Adjustments to reconcile net income to net cash provided by operating activities:

    

Provision for loan losses

     41,825       71,063  

Amortization of intangibles

     2,312       2,325  

Depreciation and amortization of premises and equipment

     14,295       12,836  

Net accretion of discounts and amortization of premiums and deferred fees

     (38,813     (7,006

Share-based compensation

     6,930       3,112  

Impairment losses on long-lived assets

     —         272  

Fair value adjustments on mortgage servicing rights

     3,825       4,307  

FDIC loss share expense

     —         8,027  

Adjustments (expense) to indemnity reserves on loans sold

     93       2,926  

Earnings from investments under the equity method, net of dividends or distributions

     (9,027     (7,370

Deferred income tax expense

     45,796       10,758  

Gain on:

    

Disposition of premises and equipment and other productive assets

     (2,265     (72

Proceeds from insurance claims

     —         (258

Sale of loans, including valuation adjustments on loans held-for-sale and mortgage banking activities

     (4,058     (1,116

Sale of foreclosed assets, including write-downs

     (3,772     (99

Acquisitions of loans held-for-sale

     (44,748     (47,335

Proceeds from sale of loans held-for-sale

     13,802       12,036  

Net originations on loans held-for-sale

     (53,231     (48,375

Net decrease (increase) in:

    

Trading debt securities

     105,838       93,998  

Equity securities

     (4,362     (130

Accrued income receivable

     3,224       56,504  

Other assets

     28,709       36,272  

Net (decrease) increase in:

    

Interest payable

     (6,915     (10,614

Pension and other postretirement benefits obligation

     5,297       1,225  

Other liabilities

     (100,585     (94,529
  

 

 

   

 

 

 

Total adjustments

     4,170       98,757  
  

 

 

   

 

 

 

Net cash provided by operating activities

     172,095       190,081  
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Net increase in money market investments

     (643,117     (1,728,858

Purchases of investment securities:

    

Available-for-sale

     (3,123,508     (1,311,382

Equity

     (1,239     (9,730

Proceeds from calls, paydowns, maturities and redemptions of investment securities:

    

Available-for-sale

     3,006,779       1,016,203  

Held-to-maturity

     2,587       2,639  

Proceeds from sale of investment securities:

    

Equity

     2,679       9,745  

Net (disbursements) repayments on loans

     (78,969     93,482  

Proceeds from sale of loans

     7,806       —    

Acquisition of loan portfolios

     (129,875     (161,295

Net payments (to) from FDIC under loss sharing agreements

     —         (1,263

Return of capital from equity method investments

     1,371       —    

Acquisition of premises and equipment

     (19,438     (13,046

Proceeds from insurance claims

     —         258  

Proceeds from sale of:

    

Premises and equipment and other productive assets

     5,975       3,033  

Foreclosed assets

     26,119       25,746  
  

 

 

   

 

 

 

Net cash used in investing activities

     (942,830     (2,074,468
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Net increase (decrease) in:

    

Deposits

     1,169,706       1,678,029  

Assets sold under agreements to repurchase

     (80,659     (10,860

Other short-term borrowings

     1       89,992  

Payments of notes payable

     (59,526     (12,680

Principal payments of finance leases

     (439     —    

Proceeds from issuance of notes payable

     —         40,000  

Proceeds from issuance of common stock

     2,976       4,712  

Dividends paid

     (25,713     (26,138

Net payments for repurchase of common stock

     (250,314     (193

Payments related to tax withholding for share-based compensation

     (2,805     (1,223
  

 

 

   

 

 

 

Net cash provided by financing activities

     753,227       1,761,639  
  

 

 

   

 

 

 

Net decrease in cash and due from banks, and restricted cash

     (17,508     (122,748

Cash and due from banks, and restricted cash at beginning of period

     403,251       412,629  
  

 

 

   

 

 

 

Cash and due from banks, and restricted cash at the end of the period

   $ 385,743     $ 289,881  
  

 

 

   

 

 

 
The accompanying notes are an integral part of these Consolidated Financial Statements.

 

 

 

9


Table of Contents

Notes to Consolidated Financial

Statements (Unaudited)

 

Note 1 - Nature of operations

     11  

Note 2 - Basis of presentation and summary of significant accounting policies

     12  

Note 3 - New accounting pronouncements

     13  

Note 4 - Business combination

     15  

Note 5 - Restrictions on cash and due from banks and certain securities

     16  

Note 6 - Debt securities available-for-sale

     17  

Note 7 - Debt securities held-to-maturity

     20  

Note 8 - Loans

     22  

Note 9 - Allowance for loan losses

     27  

Note 10 - FDIC loss share asset and true-up payment obligation

     39  

Note 11 - Mortgage banking activities

     41  

Note 12 - Transfers of financial assets and mortgage servicing assets

     42  

Note 13 - Other real estate owned

     45  

Note 14 - Other assets

     46  

Note 15 - Goodwill and other intangible assets

     47  

Note 16 - Deposits

     49  

Note 17 - Borrowings

     50  

Note 18 - Stockholders’ equity

     52  

Note 19 - Other comprehensive loss

     53  

Note 20 - Guarantees

     55  

Note 21 - Commitments and contingencies

     57  

Note 22 - Non-consolidated variable interest entities

     63  

Note 23 - Related party transactions

     65  

Note 24 - Fair value measurement

     68  

Note 25 - Fair value of financial instruments

     72  

Note 26 - Net income per common share

     75  

Note 27 - Revenue from contracts with customers

     76  

Note 28 - Leases

     78  

Note 29 - FDIC loss share expense

     80  

Note 30 - Pension and postretirement benefits

     81  

Note 31 - Stock-based compensation

     82  

Note 32 - Income taxes

     84  

Note 33 - Supplemental disclosure on the consolidated statements of cash flows

     87  

Note 34 - Segment reporting

     88  

Note 35 - Condensed consolidating financial information of guarantor and issuers of registered guaranteed securities

     91  

 

10


Table of Contents

Note 1 – Nature of operations

Popular, Inc. (the “Corporation” or “Popular”) is a diversified, publicly-owned financial holding company subject to the supervision and regulation of the Board of Governors of the Federal Reserve System. The Corporation has operations in Puerto Rico, the mainland United States and U.S. and British Virgin Islands. In Puerto Rico, the Corporation provides retail, mortgage, and commercial banking services through its principal banking subsidiary, Banco Popular de Puerto Rico (“BPPR”), as well as investment banking, broker-dealer, auto and equipment leasing and financing, and insurance services through specialized subsidiaries. In the U.S. mainland, the Corporation provides retail, mortgage and commercial banking services through its New York-chartered banking subsidiary, Popular Bank (“PB”), which has branches located in New York, New Jersey and Florida.

 

11


Table of Contents

Note 2 – Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

The consolidated interim financial statements have been prepared without audit. The Consolidated Statement of Financial Condition data at December 31, 2018 was derived from audited financial statements. The unaudited interim financial statements are, in the opinion of management, a fair statement of the results for the periods reported and include all necessary adjustments, all of a normal recurring nature, for a fair statement of such results.

Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted from the unaudited financial statements pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, these financial statements should be read in conjunction with the audited Consolidated Financial Statements of the Corporation for the year ended December 31, 2018, included in the Corporation’s 2018 Form 10-K. Operating results for the interim periods disclosed herein are not necessarily indicative of the results that may be expected for a full year or any future period.

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

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Table of Contents

Note 3 – New accounting pronouncements

Recently Adopted Accounting Standards Updates

FASB Accounting Standards Updates (“ASUs”), Leases (Topic 842)

The FASB has issued a series of ASUs which, among other things, supersede ASC Topic 840 and set out the principles for the recognition, measurement, presentation and disclosure of leases for both lessors and lessees. The new guidance requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease, respectively. A lessee is also required to record a right-of-use asset (“ROU asset”) and a lease liability for all leases with a term greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today. The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases.

In addition, the new leases standard requires lessors, among other things, to present lessor costs paid by the lessee to the lessor on a gross basis.

The Corporation adopted the new leases standard during the first quarter of 2019 using the modified retrospective approach. The Corporation elected the practical expedients to not reassess at the date of adoption whether any existing contracts were or contained leases, their lease classification, and initial direct costs. The Corporation also elected the optional transition method that allows application of the transition provisions of the new leases standard at the adoption date, instead of at the earliest comparative period presented. Therefore, comparative periods will continue to be presented in accordance with ASC Topic 840. The Corporation also elected the optional practical expedients that permit the use of hindsight in evaluating lessee options to extend or terminate a lease, and to not apply ASC Topic 842 to all classes of short-term leases. On the other hand, the Corporation did not elect the practical expedient on not separating lease components from nonlease components.

As of January 1, 2019, the Corporation recognized ROU assets of $139 million, net of deferred rent liability of $15 million and lease liabilities of $154 million on its operating leases. In addition, the Corporation recorded a positive cumulative effect adjustment of $4.8 million to retained earnings as a result of the reclassification of previously deferred gains on sale and operating lease back transactions.

In addition, the Corporation early adopted ASU 2019-01 which, among other things, reinstates the specific fair value guidance in ASC Topic 840 for lessors that are not manufacturers or dealers to continue to measure the fair value of an underlying asset at its cost and clarifies that lessors that are depository or lending institutions in the scope of ASC Topic 942 are required to present the principal portion of lessee payments received from sales-type or direct financing leases as cash flows from investing activities. The Corporation was not impacted by the adoption of ASU 2019-01.

FASB Accounting Standards Update (“ASU”) 2018-16, Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes

The FASB issued ASU 2018-16 in October 2018 which permits use of the OIS rate based on SOFR as a U.S. benchmark interest rate for hedge accounting purposes under Topic 815 in addition to other permissible U.S. benchmark rates.

The Corporation adopted ASU 2018-16 during the first quarter of 2019. As such, the Corporation will consider this guidance for qualifying new hedging relationships entered into on or after the effective date.

FASB Accounting Standards Update (“ASU”) 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income

The FASB issued ASU 2018-02 in February 2018, which allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. These stranded tax effects result from recognizing in income the impact of changes in tax rates even when the related tax effects were recognized in accumulated other comprehensive income. The amendments also require certain disclosures about stranded tax effects.

 

13


Table of Contents

The Corporation adopted ASU 2018-02 during the first quarter of 2019. As of December 31, 2018, the Corporation maintained a full valuation allowance on the deferred tax assets, which were recognized in accumulated other comprehensive income related to its U.S. operations. As such, the Corporation was not impacted by the adoption of this accounting pronouncement during the first quarter of 2019.

FASB Accounting Standards Update (“ASU”) 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities

The FASB issued ASU 2017-12 in August 2017, which makes more financial and nonfinancial hedging strategies eligible for hedge accounting and changes how companies assess effectiveness by, among other things, eliminating the requirement for entities to recognize hedge ineffectiveness each reporting period for cash flow hedges and requiring presentation of the changes in fair value of cash flow hedges in the same income statement line item(s) as the earnings effect of the hedged items when the hedged item affects earnings.

The Corporation adopted ASU 2017-12 during the first quarter of 2019. The cumulative effect adjustment recorded to retained earnings to reverse the hedge ineffectiveness as of December 31, 2018 was not significant. There were no changes in presentation since the earnings effect of the hedges and the hedged items are already presented in the same income statement line item. In addition, the Corporation elected to continue to perform subsequent assessments of hedge effectiveness quantitatively.

Additionally, adoption of the following standards effective during the first quarter of 2019 did not have a significant impact on the Corporation’s Consolidated Financial Statements:

 

   

FASB Accounting Standards Update (“ASU”) 2018-09, Codification Improvements

 

   

FASB Accounting Standards Update (“ASU”) 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting

 

   

FASB Accounting Standards Update (“ASU”) 2017-11, Earnings per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): Part I: Accounting for Certain Financial Instruments with Down Round Features; Part II: Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception

 

   

FASB Accounting Standards Update (“ASU”) 2017-08, Receivables– Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities

Recently Issued Accounting Standards Updates

FASB Accounting Standards Update (“ASU”) 2019-04, Codification Improvements to Topic 326, Financial Instruments– Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments

The FASB issued ASU 2019-04 in April 2019, which clarifies areas of guidance related to the recently issued standards on credit losses (Topic 326), derivatives and hedging (Topic 815), and recognition and measurement of financial instruments (Topic 825). Amendments to Topic 326 are mainly in the areas of accrued interest receivable, transfers of loans and debt securities between classifications, inclusion of expected recoveries in the allowance for credit losses, and permitting a prepay-adjusted effective interest rate except for TDRs. Amendments to Topic 815 and Topic 825 are mainly in the areas of fair value hedges and equity securities accounted for under the measurement alternative, respectively.

The amendments of this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019.

The Corporation is currently evaluating the impact that the amendments to Topic 326 will have on the CECL implementation. Nonetheless, the Corporation does not anticipate that the amendments to Topic 815 and Topic 825 will have a material effect on its Consolidated Financial Statements.

For other recently issued Accounting Standards Updates not yet effective, refer to Note 3 to the Consolidated Financial Statements included in the 2018 Form 10-K.

 

14


Table of Contents

Note 4 – Business combination

On August 1, 2018, Popular, Inc., through its subsidiary Popular Auto, LLC (“Popular Auto”), acquired and assumed from Reliable Financial Services, Inc. and Reliable Finance Holding Co. (“Reliable”), subsidiaries of Wells Fargo & Company, certain assets and liabilities related to their auto finance business in Puerto Rico (the “Reliable Transaction” or “Transaction”). Popular Auto acquired approximately $1.6 billion in retail auto loans and $341 million in primarily auto-related commercial loans. Reliable has continued operating as a Division of Popular Auto in parallel with Popular Auto’s existing operations to provide continuity of service to Reliable customers while allowing Popular to assess best practices before completing the integration of the two operations. The Corporation expects to complete the integration of these operations during the second quarter of 2019 and continue to operate this business under the name of Popular Auto.

Wells Fargo retained approximately $398 million in retail auto loans as part of the Transaction and subsequently sold the same to a third party. Popular Auto has entered into a separate servicing agreement with respect to such loans.

Popular entered into the Transaction as part of its growth strategy to increase its market share in the auto finance business in Puerto Rico.    

The following table presents the fair values of the consideration and major classes of identifiable assets acquired and liabilities assumed by the Corporation as of August 1, 2018, net of cumulative measurement period adjustments as of period end.

 

(In thousands)

   Book value prior to
purchase accounting
adjustments
     Fair value
adjustments
    Measurement
period adjustments
    As recorded by
Popular, Inc.
 

Cash consideration

   $ 1,843,256      $ —       $ —       $ 1,843,256  
  

 

 

    

 

 

   

 

 

   

 

 

 

Assets:

         

Loans

   $ 1,912,866      $ (126,908 )[1]    $ 16,505  [1]    $ 1,802,463  

Premises and equipment

     1,246        —         —         1,246  

Accrued income receivable

     1,466        —         —         1,466  

Other assets

     5,020        —         (91     4,929  

Trademark

     —          488       —         488  
  

 

 

    

 

 

   

 

 

   

 

 

 

Total assets

   $ 1,920,598      $ (126,420   $ 16,414     $ 1,810,592  
  

 

 

    

 

 

   

 

 

   

 

 

 

Liabilities:

         

Other liabilities

   $ 11,164      $ —       $ —       $ 11,164  
  

 

 

    

 

 

   

 

 

   

 

 

 

Total liabilities

   $ 11,164      $ —       $ —       $ 11,164  
  

 

 

    

 

 

   

 

 

   

 

 

 

Net assets acquired

   $ 1,909,434      $ (126,420   $ 16,414     $ 1,799,428  
  

 

 

    

 

 

   

 

 

   

 

 

 

Goodwill on acquisition

          $ 43,828  
         

 

 

 

 

[1]

The fair value discount is comprised of $106 million related to the retail auto loans portfolio and $4 million related to the commercial loans portfolio.

During the fourth quarter of 2018, measurement period adjustments, amounting to $16.5 million, were made to the estimated fair values of the loans acquired as part of the Transaction to reflect new information obtained about facts and circumstances that existed as of the acquisition date. The increase in the fair value of retail auto loans and commercial loans by $12.2 million and $4.3 million, respectively, was mainly attributed to decreases in credit loss expectations. The related cumulative adjustment to the amortization of the fair value discounts for the retail and commercial portfolios offset each other, resulting in an immaterial impact to the Corporation’s results.

Contractual cash flows for retail auto loans and commercial loans amounted to $1.8 billion and $348 million, respectively, from which $105 million and $3 million, respectively, are not expected to be collected.

For a description of the methods used to determine the fair values of significant assets acquired on the Reliable Transaction, refer to Note 4 of the Consolidated Statements included in the 2018 Form 10-K.

 

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Table of Contents

Note 5 – Restrictions on cash and due from banks and certain securities

The Corporation’s banking subsidiaries, BPPR and PB, are required by federal and state regulatory agencies to maintain average reserve balances with the Federal Reserve Bank of New York (the “Fed”) or other banks. Those required average reserve balances amounted to $ 1.6 billion at March 31, 2019 (December 31, 2018 - $ 1.6 billion). Cash and due from banks, as well as other highly liquid securities, are used to cover the required average reserve balances.

At March 31, 2019, the Corporation held $ 47 million in restricted assets in the form of funds deposited in money market accounts, debt securities available for sale and equity securities (December 31, 2018 - $ 62 million). The restricted assets held in debt securities available for sale and equity securities consist primarily of assets held for the Corporation’s non-qualified retirement plans and fund deposits guaranteeing possible liens or encumbrances over the title of insured properties.

 

16


Table of Contents

Note 6 – Debt securities available-for-sale

The following tables present the amortized cost, gross unrealized gains and losses, approximate fair value, weighted average yield and contractual maturities of debt securities available-for-sale at March 31, 2019 and December 31, 2018.

 

     At March 31, 2019  

(In thousands)

   Amortized
cost
     Gross
unrealized
gains
     Gross
unrealized
losses
     Fair
value
     Weighted
average
yield
 

U.S. Treasury securities

              

Within 1 year

   $ 3,453,820      $ 677      $ 4,064      $ 3,450,433        2.06

After 1 to 5 years

     4,559,672        34,676        16,420        4,577,928        2.31  

After 5 to 10 years

     2,988        138        —          3,126        3.06  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total U.S. Treasury securities

     8,016,480        35,491        20,484        8,031,487        2.20  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Obligations of U.S. Government sponsored entities

              

Within 1 year

     181,084        3        980        180,107        1.45  

After 1 to 5 years

     85,737        7        1,180        84,564        1.49  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total obligations of U.S. Government sponsored entities

     266,821        10        2,160        264,671        1.46  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Obligations of Puerto Rico, States and political subdivisions

              

Within 1 year

     6,975        —          166        6,809        —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total obligations of Puerto Rico, States and political subdivisions

     6,975        —          166        6,809        —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Collateralized mortgage obligations - federal agencies

              

After 1 to 5 years

     1,082        —          8        1,074        2.01  

After 5 to 10 years

     107,033        —          3,502        103,531        1.68  

After 10 years

     612,396        2,260        17,495        597,161        2.10  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total collateralized mortgage obligations - federal agencies

     720,511        2,260        21,005        701,766        2.04  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Mortgage-backed securities

              

Within 1 year

     135        1        —          136        4.15  

After 1 to 5 years

     14,133        206        1        14,338        3.14  

After 5 to 10 years

     347,822        1,156        5,621        343,357        2.15  

After 10 years

     4,238,051        19,949        78,307        4,179,693        2.55  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total mortgage-backed securities

     4,600,141        21,312        83,929        4,537,524        2.52  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Other

              

After 5 to 10 years

     433        5        —          438        3.62  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total other

     433        5        —          438        3.62  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total debt securities available-for-sale[1]

   $ 13,611,361      $ 59,078      $ 127,744      $ 13,542,695        2.29
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

[1]

Includes $10 billion pledged to secure public and trust deposits, assets sold under agreements to repurchase, credit facilities and loan servicing agreements that the secured parties are not permitted to sell or repledge the collateral, of which $8.9 billion serve as collateral for public funds.

 

17


Table of Contents
     At December 31, 2018  

(In thousands)

   Amortized
cost
     Gross
unrealized
gains
     Gross
unrealized
losses
     Fair
value
     Weighted
average
yield
 

U.S. Treasury securities

              

Within 1 year

   $ 3,565,571      $ 108      $ 5,319      $ 3,560,360        2.10

After 1 to 5 years

     4,483,741        13,647        35,213        4,462,175        2.25  

After 5 to 10 years

     245,891        3,770        —          249,661        2.84  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total U.S. Treasury securities

     8,295,203        17,525        40,532        8,272,196        2.21  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Obligations of U.S. Government sponsored entities

              

Within 1 year

     212,951        —          1,406        211,545        1.44  

After 1 to 5 years

     123,857        1        2,094        121,764        1.51  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total obligations of U.S. Government sponsored entities

     336,808        1        3,500        333,309        1.47  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Obligations of Puerto Rico, States and political subdivisions

              

After 1 to 5 years

     6,926        —          184        6,742        0.70  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total obligations of Puerto Rico, States and political subdivisions

     6,926        —          184        6,742        0.70  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Collateralized mortgage obligations - federal agencies

              

After 1 to 5 years

     749        —          7        742        1.92  

After 5 to 10 years

     115,744        1        4,715        111,030        1.71  

After 10 years

     638,995        1,584        23,680        616,899        2.10  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total collateralized mortgage obligations - federal agencies

     755,488        1,585        28,402        728,671        2.04  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Mortgage-backed securities

              

Within 1 year

     431        4        —          435        4.30  

After 1 to 5 years

     6,762        43        1        6,804        2.74  

After 5 to 10 years

     365,727        1,090        8,499        358,318        2.19  

After 10 years

     3,710,731        10,679        128,189        3,593,221        2.45  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total mortgage-backed securities

     4,083,651        11,816        136,689        3,958,778        2.43  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Other

              

After 5 to 10 years

     486        2        —          488        3.62  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total other

     486        2        —          488        3.62  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total debt securities available-for-sale[1]

   $ 13,478,562      $ 30,929      $ 209,307      $ 13,300,184        2.25
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

[1]

Includes $8.9 billion pledged to secure public and trust deposits, assets sold under agreements to repurchase, credit facilities and loan servicing agreements that the secured parties are not permitted to sell or repledge the collateral, of which $7.9 billion serve as collateral for public funds.

The weighted average yield on debt securities available-for-sale is based on amortized cost; therefore, it does not give effect to changes in fair value.

Debt securities not due on a single contractual maturity date, such as mortgage-backed securities and collateralized mortgage obligations, are classified in the period of final contractual maturity. The expected maturities of collateralized mortgage obligations, mortgage-backed securities and certain other securities may differ from their contractual maturities because they may be subject to prepayments or may be called by the issuer.

There were no debt securities sold during the quarters ended March 31, 2019 and March 31, 2018.

The following tables present the Corporation’s fair value and gross unrealized losses of debt securities available-for-sale, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at March 31, 2019 and December 31, 2018.

 

     At March 31, 2019  
     Less than 12 months      12 months or more      Total  

(In thousands)

   Fair
value
     Gross
unrealized
losses
     Fair
value
     Gross
unrealized
losses
     Fair
value
     Gross
unrealized
losses
 

U.S. Treasury securities

   $ 1,473,943      $ 76      $ 2,604,306      $ 20,408      $ 4,078,249      $ 20,484  

Obligations of U.S. Government sponsored entities

     —          —          263,499        2,160        263,499        2,160  

Obligations of Puerto Rico, States and political subdivisions

     —          —          6,809        166        6,809        166  

Collateralized mortgage obligations - federal agencies

     3,447        5        480,426        21,000        483,873        21,005  

Mortgage-backed securities

     18,074        220        3,460,223        83,709        3,478,297        83,929  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total debt securities available-for-sale in an unrealized loss position

   $ 1,495,464      $ 301      $ 6,815,263      $ 127,443      $ 8,310,727      $ 127,744  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

 

18


Table of Contents
     At December 31, 2018  
     Less than 12 months      12 months or more      Total  

(In thousands)

   Fair
value
     Gross
unrealized
losses
     Fair value      Gross
unrealized
losses
     Fair
value
     Gross
unrealized
losses
 

U.S. Treasury securities

   $ 3,189,007      $ 4,188      $ 2,607,276      $ 36,343      $ 5,796,283      $ 40,531  

Obligations of U.S. Government sponsored entities

     14,847        46        318,271        3,454        333,118        3,500  

Obligations of Puerto Rico, States and political subdivisions

     —          —          6,742        184        6,742        184  

Collateralized mortgage obligations - federal agencies

     66,652        489        587,869        27,913        654,521        28,402  

Mortgage-backed securities

     125,872        2,280        3,478,635        134,410        3,604,507        136,690  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total debt securities available-for-sale in an unrealized loss position

   $ 3,396,378      $ 7,003      $ 6,998,793      $ 202,304      $ 10,395,171      $ 209,307  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

As of March 31, 2019, the portfolio of available-for-sale debt securities reflects gross unrealized losses of approximately $128 million, driven mainly by mortgage-backed securities, U.S. Treasury securities and collateralized mortgage obligations.

Management evaluates debt securities for other-than-temporary (“OTTI”) declines in fair value on a quarterly basis. Once a decline in value is determined to be other-than-temporary, the value of a debt security is reduced and a corresponding charge to earnings is recognized for anticipated credit losses. The OTTI analysis requires management to consider various factors, which include, but are not limited to: (1) the length of time and the extent to which fair value has been less than the amortized cost basis, (2) the financial condition of the issuer or issuers, (3) actual collateral attributes, (4) the payment structure of the debt security and the likelihood of the issuer being able to make payments, (5) any rating changes by a rating agency, (6) adverse conditions specifically related to the security, industry, or a geographic area, and (7) management’s intent to sell the debt security or whether it is more likely than not that the Corporation would be required to sell the debt security before a forecasted recovery occurs.

At March 31, 2019, management performed its quarterly analysis of all debt securities in an unrealized loss position. Based on the analysis performed, management concluded that no individual debt security was other-than-temporarily impaired as of such date. At March 31, 2019, the Corporation did not have the intent to sell debt securities in an unrealized loss position and it was not more likely than not that the Corporation would have to sell the debt securities prior to recovery of their amortized cost basis.

The following table states the name of issuers, and the aggregate amortized cost and fair value of the debt securities of such issuer (includes available-for-sale and held-to-maturity debt securities), in which the aggregate amortized cost of such securities exceeds 10% of stockholders’ equity. This information excludes debt securities backed by the full faith and credit of the U.S. Government. Investments in obligations issued by a state of the U.S. and its political subdivisions and agencies, which are payable and secured by the same source of revenue or taxing authority, other than the U.S. Government, are considered securities of a single issuer.

 

     March 31, 2019      December 31, 2018  

(In thousands)

   Amortized cost      Fair value      Amortized cost      Fair value  

FNMA

   $ 3,273,409      $ 3,220,000      $ 2,999,110      $ 2,901,904  

Freddie Mac

     1,312,120        1,293,207        1,095,855        1,058,013  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

19


Table of Contents

Note 7 – Debt securities held-to-maturity

The following tables present the amortized cost, gross unrealized gains and losses, approximate fair value, weighted average yield and contractual maturities of debt securities held-to-maturity at March 31, 2019 and December 31, 2018.

 

     At March 31, 2019  

(In thousands)

   Amortized
cost
     Gross
unrealized
gains
     Gross
unrealized
losses
     Fair
value
     Weighted
average
yield
 

Obligations of Puerto Rico, States and political subdivisions

              

Within 1 year

   $ 3,670      $ —        $ 31      $ 3,639        6.01

After 1 to 5 years

     17,255        —          205        17,050        6.10  

After 5 to 10 years

     20,585        —          1,502        19,083        3.19  

After 10 years

     45,831        5,751        14        51,568        1.76  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total obligations of Puerto Rico, States and political subdivisions

     87,341        5,751        1,752        91,340        3.13  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Collateralized mortgage obligations - federal agencies

              

After 5 to 10 years

     53        3        —          56        6.44  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total collateralized mortgage obligations - federal agencies

     53        3        —          56        6.44  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Securities in wholly owned statutory business trusts

              

After 10 years

     11,561        —          —          11,561        6.51  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total securities in wholly owned statutory business trusts

     11,561        —          —          11,561        6.51  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Other

              

After 1 to 5 years

     500        —          —          500        2.97  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total other

     500        —          —          500        2.97  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total debt securities held-to-maturity

   $ 99,455      $ 5,754      $ 1,752      $ 103,457        3.53
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     At December 31, 2018  

(In thousands)

   Amortized
cost
     Gross
unrealized
gains
     Gross
unrealized
losses
     Fair
value
     Weighted
average
yield
 

Obligations of Puerto Rico, States and political subdivisions

              

Within 1 year

   $ 3,510      $ —        $ 36      $ 3,474        5.99

After 1 to 5 years

     16,505        —          1,081        15,424        6.07  

After 5 to 10 years

     23,885        —          1,704        22,181        3.61  

After 10 years

     45,559        3,943        47        49,455        1.79  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total obligations of Puerto Rico, States and political subdivisions

     89,459        3,943        2,868        90,534        3.23  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Collateralized mortgage obligations - federal agencies

              

After 5 to 10 years

     55        3        —          58        5.45  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total collateralized mortgage obligations - federal agencies

     55        3        —          58        5.45  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Securities in wholly owned statutory business trusts

              

After 10 years

     11,561        —          —          11,561        6.51  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total securities in wholly owned statutory business trusts

     11,561        —          —          11,561        6.51  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Other

              

After 1 to 5 years

     500        —          —          500        2.97  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total other

     500        —          —          500        2.97  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total debt securities held-to-maturity

   $ 101,575      $ 3,946      $ 2,868      $ 102,653        3.60
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Debt securities not due on a single contractual maturity date, such as collateralized mortgage obligations, are classified in the period of final contractual maturity. The expected maturities of collateralized mortgage obligations and certain other securities may differ from their contractual maturities because they may be subject to prepayments or may be called by the issuer.

The following tables present the Corporation’s fair value and gross unrealized losses of debt securities held-to-maturity, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at March 31, 2019 and December 31, 2018.

 

20


Table of Contents
     At March 31, 2019  
     Less than 12 months      12 months or more      Total  

(In thousands)

   Fair
value
     Gross
unrealized
losses
     Fair
value
     Gross
unrealized
losses
     Fair
value
     Gross
unrealized
losses
 

Obligations of Puerto Rico, States and political subdivisions

   $ 14,695      $ 250      $ 11,118      $ 1,502      $ 25,813      $ 1,752  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total debt securities held-to-maturity in an unrealized loss position

   $ 14,695      $ 250      $ 11,118      $ 1,502      $ 25,813      $ 1,752  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     At December 31, 2018  
     Less than 12 months      12 months or more      Total  

(In thousands)

   Fair
value
     Gross
unrealized
losses
     Fair
value
     Gross
unrealized
losses
     Fair
value
     Gross
unrealized
losses
 

Obligations of Puerto Rico, States and political subdivisions

   $ 27,471      $ 1,165      $ 13,307      $ 1,703      $ 40,778      $ 2,868  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total debt securities held-to-maturity in an unrealized loss position

   $ 27,471      $ 1,165      $ 13,307      $ 1,703      $ 40,778      $ 2,868  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

As indicated in Note 6 to these Consolidated Financial Statements, management evaluates debt securities for OTTI declines in fair value on a quarterly basis.

The “Obligations of Puerto Rico, States and political subdivisions” classified as held-to-maturity at March 31, 2019 are primarily associated with securities issued by municipalities of Puerto Rico and are generally not rated by a credit rating agency. This includes $42 million of general and special obligation bonds issued by three municipalities of Puerto Rico, which are payable primarily from certain property taxes imposed by the issuing municipality. In the case of general obligations, they also benefit from a pledge of the full faith, credit and unlimited taxing power of the issuing municipality, which is required by law to levy property taxes in an amount sufficient for the payment of debt service on such general obligation bonds.

The portfolio also includes $45 million in securities for which the underlying source of payment is second mortgage loans in Puerto Rico residential properties, not the central government, but in which a government instrumentality provides a guarantee in the event of default and subsequent foreclosure of the underlying property. The Corporation performs periodic credit quality reviews on these issuers. Based on the quarterly analysis performed, management concluded that no individual debt security held-to-maturity was other-than-temporarily impaired at March 31, 2019. A deterioration of the Puerto Rico economy or of the fiscal health of the Government of Puerto Rico and/or its instrumentalities (including if any of the issuing municipalities become subject to a debt restructuring proceeding under PROMESA) could further affect the value of these securities, resulting in losses to the Corporation. The Corporation does not have the intent to sell debt securities held-to-maturity and it is more likely than not that the Corporation will not have to sell these debt securities prior to recovery of their amortized cost basis.

Refer to Note 21 for additional information on the Corporation’s exposure to the Puerto Rico Government.

 

21


Table of Contents

Note 8 – Loans

For a summary of the accounting policies related to loans, interest recognition and allowance for loan losses refer to Note 2 —Summary of Significant Accounting Policies of the 2018 Form 10-K.

As previously disclosed in Note 4, as a result of the Reliable Transaction completed on August 1, 2018, Popular Auto, LLC, acquired approximately $1.6 billion in retail auto loans and $341 million in primarily auto-related commercial loans. These loans are included in the information presented in this note.

During the quarter ended March 31, 2019, the Corporation recorded purchases (including repurchases) of mortgage loans amounting to $81 million and consumer loans of $69 million, compared to purchases (including repurchases) of mortgage loans of $156 million and consumer loans of $51 million, during the quarter ended March 31, 2018.

The Corporation performed whole-loan sales involving approximately $12 million of residential mortgage loans and $8 million of commercial loans during the quarter ended March 31, 2019 (March 31, 2018 - $10 million of residential mortgage loans). Also, during the quarter ended March 31, 2019, the Corporation securitized approximately $71 million of mortgage loans into Government National Mortgage Association (“GNMA”) mortgage-backed securities and $21 million of mortgage loans into Federal National Mortgage Association (“FNMA”) mortgage-backed securities, compared to $112 million and $26 million, respectively, during the quarter ended March 31, 2018.

Delinquency status

The following table presents the composition 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, 2019 and December 31, 2018.

 

March 31, 2019

 

Puerto Rico

 
     Past due                    Past due 90 days or more  

(In thousands)

   30-59
days
     60-89
days
     90 days
or more
     Total
past due
     Current      Loans HIP      Non-accrual
loans
     Accruing
loans[1]
 

Commercial multi-family

   $ 729      $ 1,347      $ 692      $ 2,768      $ 150,494      $ 153,262      $ 646      $ —    

Commercial real estate:

                       

Non-owner occupied

     12,605        21,432        91,872        125,909        2,174,869        2,300,778        38,189        —    

Owner occupied

     14,279        3,350        99,557        117,186        1,573,993        1,691,179        83,607        —    

Commercial and industrial

     4,473        435        44,148        49,056        3,196,847        3,245,903        43,851        297  

Construction

     —          —          1,788        1,788        89,584        91,372        1,788        —    

Mortgage

     278,233        131,178        974,718        1,384,129        4,991,459        6,375,588        317,850        532,809  

Leasing

     8,202        2,409        2,525        13,136        950,096        963,232        2,525        —    

Consumer:

                       

Credit cards

     9,732        6,093        16,639        32,464        983,124        1,015,588        —          16,639  

Home equity lines of credit

     6        58        —          64        4,835        4,899        —          —    

Personal

     12,180        8,506        17,760        38,446        1,233,178        1,271,624        17,178        62  

Auto

     57,106        10,955        25,172        93,233        2,648,862        2,742,095        25,162        10  

Other

     1,598        468        15,013        17,079        123,751        140,830        14,196        817  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 399,143      $ 186,231      $ 1,289,884      $ 1,875,258      $ 18,121,092      $ 19,996,350      $ 544,992      $ 550,634  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

[1]   Loans HIP of $194 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 will accrete interest income over the remaining life of the loans using estimated cash flow analysis.

    

 

22


Table of Contents

March 31, 2019

 

Popular U.S.

 
     Past due                    Past due 90 days or more  

(In thousands)

   30-59
days
     60-89
days
     90 days
or more
     Total
past due
     Current      Loans HIP      Non-accrual
loans
     Accruing
loans[1]
 

Commercial multi-family

   $ 1,197      $ 2,555      $ —        $ 3,752      $ 1,388,268      $ 1,392,020      $ —        $ —    

Commercial real estate:

                       

Non-owner occupied

     2,329        —          —          2,329        1,851,166        1,853,495        —          —    

Owner occupied

     4,775        —          2,064        6,839        306,708        313,547        2,064        —    

Commercial and industrial

     1,237        50        63,588        64,875        1,043,251        1,108,126        797        —    

Construction

     10,343        —          12,060        22,403        677,545        699,948        12,060        —    

Mortgage

     14,328        1,241        9,808        25,377        806,215        831,592        9,808        —    

Legacy

     61        13        2,583        2,657        21,747        24,404        2,583        —    

Consumer:

                       

Credit cards

     —          —          2        2        33        35        2        —    

Home equity lines of credit

     451        388        12,087        12,926        119,956        132,882        12,087        —    

Personal

     1,957        1,301        1,809        5,067        290,041        295,108        1,809        —    

Other

     4        6        —          10        191        201        —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 36,682      $ 5,554      $ 104,001      $ 146,237      $ 6,505,121      $ 6,651,358      $ 41,210      $ —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

[1]

Loans HIP of $63 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 will accrete interest income over the remaining life of the loans using estimated cash flow analysis.

 

March 31, 2019

 

Popular, Inc.

 
     Past due                    Past due 90 days or more  

(In thousands)

   30-59
days
     60-89
days
     90 days
or more
     Total
past due
     Current      Loans HIP[3] [4]      Non-accrual
loans
     Accruing
loans[5]
 

Commercial multi-family

   $ 1,926      $ 3,902      $ 692      $ 6,520      $ 1,538,762      $ 1,545,282      $ 646      $ —    

Commercial real estate:

                       

Non-owner occupied

     14,934        21,432        91,872        128,238        4,026,035        4,154,273        38,189        —    

Owner occupied

     19,054        3,350        101,621        124,025        1,880,701        2,004,726        85,671        —    

Commercial and industrial

     5,710        485        107,736        113,931        4,240,098        4,354,029        44,648        297  

Construction

     10,343        —          13,848        24,191        767,129        791,320        13,848        —    

Mortgage[1]

     292,561        132,419        984,526        1,409,506        5,797,674        7,207,180        327,658        532,809  

Leasing

     8,202        2,409        2,525        13,136        950,096        963,232        2,525        —    

Legacy[2]

     61        13        2,583        2,657        21,747        24,404        2,583        —    

Consumer:

                       

Credit cards

     9,732        6,093        16,641        32,466        983,157        1,015,623        2        16,639  

Home equity lines of credit

     457        446        12,087        12,990        124,791        137,781        12,087        —    

Personal

     14,137        9,807        19,569        43,513        1,523,219        1,566,732        18,987        62  

Auto

     57,106        10,955        25,172        93,233        2,648,862        2,742,095        25,162        10  

Other

     1,602        474        15,013        17,089        123,942        141,031        14,196        817  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 435,825      $ 191,785      $ 1,393,885      $ 2,021,495      $ 24,626,213      $ 26,647,708      $ 586,202      $ 550,634  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

[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 $161 million in unearned income and exclude $44 million in loans held-for-sale.

[4]   Includes $6.6 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 $2.0 billion at the Federal Reserve Bank (“FRB”) for discount window borrowings.

[5]   Loans HIP of $257 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 will accrete interest income over the remaining life of the loans using estimated cash flow analysis.

 

23


Table of Contents

December 31, 2018

 

Puerto Rico

 
     Past due                    Past due 90 days or more  

(In thousands)

   30-59
days
     60-89
days
     90 days
or more
     Total
past due
     Current      Loans HIP      Non-accrual
loans
     Accruing
loans[1]
 

Commercial multi-family

   $ 1,441      $ 112      $ 598      $ 2,151      $ 143,477      $ 145,628      $ 546      $ —    

Commercial real estate:

                       

Non-owner occupied

     92,075        839        45,691        138,605        2,183,996        2,322,601        39,257        —    

Owner occupied

     6,681        10,839        99,235        116,755        1,605,498        1,722,253        88,069        —    

Commercial and industrial

     4,137        641        55,321        60,099        3,122,062        3,182,161        55,078        243  

Construction

     —          —          1,788        1,788        84,167        85,955        1,788        —    

Mortgage

     275,367        128,104        1,043,607        1,447,078        4,986,245        6,433,323        323,565        595,525  

Leasing

     7,663        1,827        3,313        12,803        921,970        934,773        3,313        —    

Consumer:

                       

Credit cards

     9,504        7,391        16,035        32,930        1,014,343        1,047,273        —          16,035  

Home equity lines of credit

     —          97        165        262        5,089        5,351        11        154  

Personal

     13,069        7,907        18,515        39,491        1,211,134        1,250,625        17,887        35  

Auto

     52,204        9,862        24,177        86,243        2,522,542        2,608,785        24,050        127  

Other

     566        288        14,958        15,812        128,932        144,744        14,534        424  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 462,707      $ 167,907      $ 1,323,403      $ 1,954,017      $ 17,929,455      $ 19,883,472      $ 568,098      $ 612,543  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

[1]   Non-covered loans HIP of $143 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 will accrete interest income over the remaining life of the loans using estimated cash flow analysis.

    

 

December 31, 2018

 

Popular U.S.

 
     Past due                    Past due 90 days or more  

(In thousands)

   30-59
days
     60-89
days
     90 days
or more
     Total
past due
     Current      Loans HIP      Non-accrual
loans
     Accruing
loans[1]
 

Commercial multi-family

   $ 3,163      $ —        $ —        $ 3,163      $ 1,398,377      $ 1,401,540      $ —        $ —    

Commercial real estate:

                       

Non-owner occupied

     707        288        365        1,360        1,880,384        1,881,744        365        —    

Owner occupied

     5,125        1,728        381        7,234        291,705        298,939        381        —    

Commercial and industrial

     2,354        995        73,726        77,075        1,011,078        1,088,153        330        —    

Construction

     —          —          12,060        12,060        681,434        693,494        12,060        —    

Mortgage

     13,615        3,197        11,033        27,845        774,090        801,935        11,033        —    

Legacy

     195        445        2,627        3,267        22,682        25,949        2,627        —    

Consumer:

                       

Credit cards

     2        —          —          2        36        38        —          —    

Home equity lines of credit

     886        464        13,579        14,929        128,123        143,052        13,579        —    

Personal

     2,319        1,723        2,610        6,652        282,697        289,349        2,610        —    

Other

     —          —          4        4        220        224        4        —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 28,366      $ 8,840      $ 116,385      $ 153,591      $ 6,470,826      $ 6,624,417      $ 42,989      $ —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

[1]   Non-covered loans HIP of $73 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 will accrete interest income over the remaining life of the loans using estimated cash flow analysis.

    

 

24


Table of Contents

December 31, 2018

 

Popular, Inc.

 
     Past due                    Past due 90 days or more  

(In thousands)

   30-59
days
     60-89
days
     90 days
or more
     Total
past due
     Current      Loans HIP[3] [4]      Non-accrual
loans
     Accruing
loans[5]
 

Commercial multi-family

   $ 4,604      $ 112      $ 598      $ 5,314      $ 1,541,854      $ 1,547,168      $ 546      $ —    

Commercial real estate:

                       

Non-owner occupied

     92,782        1,127        46,056        139,965        4,064,380        4,204,345        39,622        —    

Owner occupied

     11,806        12,567        99,616        123,989        1,897,203        2,021,192        88,450        —    

Commercial and industrial

     6,491        1,636        129,047        137,174        4,133,140        4,270,314        55,408        243  

Construction

     —          —          13,848        13,848        765,601        779,449        13,848        —    

Mortgage[1]

     288,982        131,301        1,054,640        1,474,923        5,760,335        7,235,258        334,598        595,525  

Leasing

     7,663        1,827        3,313        12,803        921,970        934,773        3,313        —    

Legacy[2]

     195        445        2,627        3,267        22,682        25,949        2,627        —    

Consumer:

                       

Credit cards

     9,506        7,391        16,035        32,932        1,014,379        1,047,311        —          16,035  

Home equity lines of credit

     886        561        13,744        15,191        133,212        148,403        13,590        154  

Personal

     15,388        9,630        21,125        46,143        1,493,831        1,539,974        20,497        35  

Auto

     52,204        9,862        24,177        86,243        2,522,542        2,608,785        24,050        127  

Other

     566        288        14,962        15,816        129,152        144,968        14,538        424  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 491,073      $ 176,747      $ 1,439,788      $ 2,107,608      $ 24,400,281      $ 26,507,889      $ 611,087      $ 612,543  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

[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 $156 million in unearned income and exclude $51 million in loans held-for-sale.

[4]   Includes $6.9 billion pledged to secure credit facilities and public funds that the secured parties are not permitted to sell or repledge the collateral, of which $4.8 billion were pledged at the FHLB as collateral for borrowings and $2.1 billion at the FRB for discount window borrowings.

[5]   Non-covered loans HIP of $216 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 will accrete interest income over the remaining life of the loans using estimated cash flow analysis.

At March 31, 2019, 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 $535 million are 90 days or more past due, including $106 million of loans rebooked under the GNMA buyback option, discussed below (December 31, 2018 - $1.4 billion, $598 million and $134 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 $292 million of residential mortgage loans in Puerto Rico that are no longer accruing interest as of March 31, 2019 (December 31, 2018 - $283 million). Additionally, the Corporation has approximately $67 million in reverse mortgage loans in Puerto Rico which are guaranteed by FHA, but which are currently not accruing interest at March 31, 2019 (December 31, 2018 - $69 million).

Loans with a delinquency status of 90 days past due as of March 31, 2019 include $106 million in loans previously pooled into GNMA securities (December 31, 2018 - $134 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.

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 to $2.1 billion at March 31, 2019 (December 31, 2018—$2.2 billion). 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”).

 

25


Table of Contents

The following table provides the carrying amount of acquired loans accounted for under ASC 310-30 by portfolio at March 31, 2019 and December 31, 2018.

 

Carrying amount

 

(In thousands)

   March 31, 2019      December 31, 2018  

Commercial real estate

   $ 775,292      $ 801,774  

Commercial and industrial

     145,835        84,465  

Mortgage

     896,761        982,821  

Consumer

     13,369        14,496  
  

 

 

    

 

 

 

Carrying amount

     1,831,257        1,883,556  

Allowance for loan losses

     (124,147      (122,135
  

 

 

    

 

 

 

Carrying amount, net of allowance

   $ 1,707,110      $ 1,761,421  
  

 

 

    

 

 

 

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 quarters ended March 31, 2019 and 2018, were as follows:

 

Carrying amount of acquired loans accounted for pursuant to ASC 310-30

 
     For the quarter ended  

(In thousands)

   March 31, 2019      March 31, 2018  

Beginning balance

   $ 1,883,556      $ 2,108,993  

Additions

     5,220        5,272  

Accretion

     37,404        42,060  

Collections / loan sales / charge-offs

     (94,923      (71,134
  

 

 

    

 

 

 

Ending balance[1]

   $ 1,831,257      $ 2,085,191  

Allowance for loan losses

     (124,147      (146,120
  

 

 

    

 

 

 

Ending balance, net of ALLL

   $ 1,707,110      $ 1,939,071  
  

 

 

    

 

 

 

 

[1]

At March 31, 2019, includes $1.3 billion of loans considered non-credit impaired at the acquisition date (March 31, 2018 - $1.5 billion).

 

Activity in the accretable yield of acquired loans accounted for pursuant to ASC 310-30

 
     For the quarter ended  

(In thousands)

   March 31, 2019      March 31, 2018  

Beginning balance

   $ 1,092,504      $ 1,214,488  

Additions

     2,890        3,437  

Accretion

     (37,404      (42,060

Change in expected cash flows

     10,177        28,861  
  

 

 

    

 

 

 

Ending balance[1]

   $ 1,068,167      $ 1,204,726  
  

 

 

    

 

 

 

 

[1]

At March 31, 2019, includes $0.7 billion for loans considered non-credit impaired at the acquisition date (March 31, 2018 - $0.9 billion).

 

26


Table of Contents

Note 9 – Allowance for loan losses

The Corporation follows a systematic methodology to establish and evaluate the adequacy of the allowance for loan losses (“ALLL”) to provide for inherent losses in the loan portfolio. This methodology includes the consideration of factors such as current economic conditions, portfolio risk characteristics, prior loss experience and results of periodic credit reviews of individual loans. The provision for loan losses charged to current operations is based on this methodology. Loan losses are charged and recoveries are credited to the ALLL.

The Corporation’s assessment of the ALLL is determined in accordance with the guidance of loss contingencies in ASC Subtopic 450-20 and loan impairment guidance in ASC Section 310-10-35. Also, the Corporation determines the ALLL on purchased impaired loans and purchased loans accounted for under ASC Subtopic 310-30, by evaluating decreases in expected cash flows after the acquisition date.

The accounting guidance provides for the recognition of a loss allowance for groups of homogeneous loans. The determination of the general ALLL includes the following principal factors:

 

   

Base net loss rates, which are based on the moving average of annualized net loss rates computed over a 5-year historical loss period for the commercial and construction loan portfolios, and an 18-month period for the consumer and mortgage loan portfolios. The base net loss rates are applied by loan type and by legal entity.

 

   

Recent loss trend adjustment, which replaces the base loss rate with a 12-month average loss rate, when these trends are higher than the respective base loss rates. The objective of this adjustment is to allow for a more recent loss trend to be captured and reflected in the ALLL estimation process.    

For the period ended March 31, 2019, 41% (March 31, 2018 - 45%) of the ALLL for the BPPR segment loan portfolios utilized the recent loss trend adjustment instead of the base loss. The effect of replacing the base loss with the recent loss trend adjustment was mainly concentrated in the commercial and personal loans portfolios for 2019 and in the mortgage, leasing, credit cards and auto loans portfolios for 2018.

For the period ended March 31, 2019, 23% (March 31, 2018 - 5%) of the Popular U.S. segment loan portfolios utilized the recent loss trend adjustment instead of the base loss. The effect of replacing the base loss with the recent loss trend adjustment was concentrated in the consumer portfolio for 2019 and 2018.

 

   

Environmental factors, which include credit and macroeconomic indicators such as unemployment rate, economic activity index and delinquency rates, adopted to account for current market conditions that are likely to cause estimated credit losses to differ from historical losses. The Corporation reflects the effect of these environmental factors on each loan group as an adjustment that, as appropriate, increases the historical loss rate applied to each group. Environmental factors provide updated perspective on credit and economic conditions. Regression analysis is used to select these indicators and quantify the effect on the general ALLL. The Corporation’s methodology also includes qualitative judgmental reserves based on stressed credit quality assumptions to provide for probable losses in the loan portfolios not embedded in the historical loss rates.

The following tables present the changes in the allowance for loan losses, loan ending balances and whether such loans and the allowance pertain to loans individually or collectively evaluated for impairment for the quarters ended March 31, 2019 and 2018.

 

For the quarter ended March 31, 2019

 

Puerto Rico

 

(In thousands)

   Commercial     Construction     Mortgage     Leasing     Consumer     Total  

Allowance for credit losses:

            

Beginning balance

   $ 207,214     $ 886     $ 142,978     $ 11,486     $ 144,594     $ 507,158  

Provision (reversal of provision)

     (1,689     (81     6,061       (891     28,054       31,454  

Charge-offs

     (19,461     (22     (13,174     (2,096     (35,869     (70,622

Recoveries

     2,867       39       1,991       610       10,886       16,393  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

   $ 188,931     $ 822     $ 137,856     $ 9,109     $ 147,665     $ 484,383  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Specific ALLL

   $ 33,253     $ 19     $ 40,779     $ 321     $ 23,350     $ 97,722  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

General ALLL

   $ 155,678     $ 803     $ 97,077     $ 8,788     $ 124,315     $ 386,661  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loans held-in-portfolio:

            

Impaired non-covered loans

   $ 381,803     $ 1,788     $ 515,365     $ 1,018     $ 101,887     $ 1,001,861  

Non-covered loans held-in-portfolio excluding impaired loans

     7,009,319       89,584       5,860,223       962,214       5,073,149       18,994,489  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total loans held-in-portfolio

   $ 7,391,122     $ 91,372     $ 6,375,588     $ 963,232     $ 5,175,036     $ 19,996,350  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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Table of Contents

For the quarter ended March 31, 2019

 

Popular U.S.

 

(In thousands)

   Commercial     Construction      Mortgage     Legacy     Consumer     Total  

Allowance for credit losses:

             

Beginning balance

   $ 31,901     $ 6,538      $ 4,434     $ 969     $ 18,348     $ 62,190  

Provision (reversal of provision)

     6,491       128        237       (855     4,370       10,371  

Charge-offs

     (3,481     —          (251     164       (5,651     (9,219

Recoveries

     647       8        22       551       1,675       2,903  
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

   $ 35,558     $ 6,674      $ 4,442     $ 829     $ 18,742     $ 66,245  
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Specific ALLL

   $ 223     $ —        $ 2,360     $ —       $ 1,653     $ 4,236  
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

General ALLL

   $ 35,335     $ 6,674      $ 2,082     $ 829     $ 17,089     $ 62,009  
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Loans held-in-portfolio:

             

Impaired loans

   $ 1,691     $ 12,060      $ 9,438     $ —       $ 8,987     $ 32,176  

Loans held-in-portfolio excluding impaired loans

     4,665,497       687,888        822,154       24,404       419,239       6,619,182  
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Total loans held-in-portfolio

   $ 4,667,188     $ 699,948      $ 831,592     $ 24,404     $ 428,226     $ 6,651,358  
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

 

For the quarter ended March 31, 2019

 

Popular, Inc.

 

(In thousands)

   Commercial     Construction     Mortgage     Legacy     Leasing     Consumer     Total  

Allowance for credit losses:

              

Beginning balance

   $ 239,115     $ 7,424     $ 147,412     $ 969     $ 11,486     $ 162,942     $ 569,348  

Provision (reversal of provision)

     4,802       47       6,298       (855     (891     32,424       41,825  

Charge-offs

     (22,942     (22     (13,425     164       (2,096     (41,520     (79,841

Recoveries

     3,514       47       2,013       551       610       12,561       19,296  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

   $ 224,489     $ 7,496     $ 142,298     $ 829     $ 9,109     $ 166,407     $ 550,628  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Specific ALLL

   $ 33,476     $ 19     $ 43,139     $ —       $ 321     $ 25,003     $ 101,958  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

General ALLL

   $ 191,013     $ 7,477     $ 99,159     $ 829     $ 8,788     $ 141,404     $ 448,670  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loans held-in-portfolio:

              

Impaired loans

   $ 383,494     $ 13,848     $ 524,803     $ —       $ 1,018     $ 110,874     $ 1,034,037  

Loans held-in-portfolio excluding impaired loans

     11,674,816       777,472       6,682,377       24,404       962,214       5,492,388       25,613,671  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total loans held-in-portfolio

   $ 12,058,310     $ 791,320     $ 7,207,180     $ 24,404     $ 963,232     $ 5,603,262     $ 26,647,708  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

For the quarter ended March 31, 2018

 

Puerto Rico - Non-covered loans

 

(In thousands)

   Commercial     Construction      Mortgage     Leasing     Consumer     Total  

Allowance for credit losses:

             

Beginning balance

   $ 171,531     $ 1,286      $ 159,081     $ 11,991     $ 174,215     $ 518,104  

Provision

     20,934       1,163        7,464       2,914       24,243       56,718  

Charge-offs

     (6,789     48        (13,791     (2,513     (28,372     (51,417

Recoveries

     2,846       160        547       520       6,117       10,190  
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

   $ 188,522     $ 2,657      $ 153,301     $ 12,912     $ 176,203     $ 533,595  
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Specific ALLL

   $ 45,028     $ 474      $ 44,419     $ 448     $ 22,955     $ 113,324  
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

General ALLL

   $ 143,494     $ 2,183      $ 108,882     $ 12,464     $ 153,248     $ 420,271  
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Loans held-in-portfolio:

             

Impaired non-covered loans

   $ 352,064     $ 4,293      $ 510,849     $ 1,361     $ 97,730     $ 966,297  

Non-covered loans held-in-portfolio excluding impaired loans

     6,770,732       89,565        5,844,857       837,022       3,231,207       16,773,383  
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Total non-covered loans held-in-portfolio

   $ 7,122,796     $ 93,858      $ 6,355,706     $ 838,383     $ 3,328,937     $ 17,739,680  
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

 

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Table of Contents

For the quarter ended March 31, 2018

 

Puerto Rico - Covered Loans

 

(In thousands)

   Commercial      Construction      Mortgage     Leasing      Consumer     Total  

Allowance for credit losses:

               

Beginning balance

   $ —        $ —        $ 32,521     $ —        $ 723     $ 33,244  

Provision (reversal of provision)

     —          —          2,265       —          (535     1,730  

Charge-offs

     —          —          (1,446     —          (2     (1,448

Recoveries

     —          —          82       —          2       84  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Ending balance

   $ —        $ —        $ 33,422     $ —        $ 188     $ 33,610  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Specific ALLL

   $ —        $ —        $ —       $ —        $ —       $ —    
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

General ALLL

   $ —        $ —        $ 33,422     $ —        $ 188     $ 33,610  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Loans held-in-portfolio:

               

Impaired covered loans

   $ —        $ —        $ —       $ —        $ —       $ —    

Covered loans held-in-portfolio excluding impaired loans

     —          —          500,683       —          13,928       514,611  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total covered loans held-in-portfolio

   $ —        $ —        $ 500,683     $ —        $ 13,928     $ 514,611  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

 

For the quarter ended March 31, 2018

 

Popular U.S.

 

(In thousands)

   Commercial     Construction      Mortgage     Legacy     Consumer     Total  

Allowance for credit losses:

             

Beginning balance

   $ 44,134     $ 7,076      $ 4,541     $ 798     $ 15,529     $ 72,078  

Provision (reversal of provision)

     10,555       16        (118     (477     2,639       12,615  

Charge-offs

     (8,396     —          (82     (157     (6,316     (14,951

Recoveries

     1,566       —          386       488       1,191       3,631  
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

   $ 47,859     $ 7,092      $ 4,727     $ 652     $ 13,043     $ 73,373  
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Specific ALLL

   $ —       $ —        $ 2,496     $ —       $ 1,195     $ 3,691  
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

General ALLL

   $ 47,859     $ 7,092      $ 2,231     $ 652     $ 11,848     $ 69,682  
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Loans held-in-portfolio:

             

Impaired loans

   $ —       $ —        $ 9,073     $ —       $ 5,853     $ 14,926  

Loans held-in-portfolio excluding impaired loans

     4,345,711       799,533        699,865       31,167       457,055       6,333,331  
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Total loans held-in-portfolio

   $ 4,345,711     $ 799,533      $ 708,938     $ 31,167     $ 462,908     $ 6,348,257  
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 
             

 

For the quarter ended March 31, 2018

 

Popular, Inc.

 

(In thousands)

   Commercial     Construction      Mortgage     Legacy     Leasing     Consumer     Total  

Allowance for credit losses:

               

Beginning balance

   $ 215,665     $ 8,362      $ 196,143     $ 798     $ 11,991     $ 190,467     $ 623,426  

Provision (reversal of provision)

     31,489       1,179        9,611       (477     2,914       26,347       71,063  

Charge-offs

     (15,185     48        (15,319     (157     (2,513     (34,690     (67,816

Recoveries

     4,412       160        1,015       488       520       7,310       13,905  
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

   $ 236,381     $ 9,749      $ 191,450     $ 652     $ 12,912     $ 189,434     $ 640,578  
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Specific ALLL

   $ 45,028     $ 474      $ 46,915     $ —       $ 448     $ 24,150     $ 117,015  
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

General ALLL

   $ 191,353     $ 9,275      $ 144,535     $ 652     $ 12,464     $ 165,284     $ 523,563  
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loans held-in-portfolio:

               

Impaired loans

   $ 352,064     $ 4,293      $ 519,922     $ —       $ 1,361     $ 103,583     $ 981,223  

Loans held-in-portfolio excluding impaired loans

     11,116,443       889,098        7,045,405       31,167       837,022       3,702,190       23,621,325  
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total loans held-in-portfolio

   $ 11,468,507     $ 893,391      $ 7,565,327     $ 31,167     $ 838,383     $ 3,805,773     $ 24,602,548  
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

29


Table of Contents

The following table provides the activity in the allowance for loan losses related to loans accounted for pursuant to ASC Subtopic 310-30.

 

     ASC 310-30  
     For the quarters ended  

(In thousands)

   March 31, 2019      March 31, 2018  

Balance at beginning of period

   $ 122,135      $ 119,505  

Provision

     7,726        37,335  

Net charge-offs

     (5,714      (10,720
  

 

 

    

 

 

 

Balance at end of period

   $ 124,147      $ 146,120  
  

 

 

    

 

 

 

Impaired loans

The following tables present loans individually evaluated for impairment at March 31, 2019 and December 31, 2018.

 

March 31, 2019

 

Puerto Rico

 
     Impaired Loans – With an      Impaired Loans                       
     Allowance      With No Allowance      Impaired Loans - Total  

(In thousands)

   Recorded
investment
     Unpaid
principal
balance
     Related
allowance
     Recorded
investment
     Unpaid
principal
balance
     Recorded
investment
     Unpaid
principal
balance
     Related
allowance
 

Commercial multi-family

   $ 924      $ 924      $ 4      $ —        $ —        $ 924      $