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, 2018

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post 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   ☐  (Do not check if a smaller reporting company)    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

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, 102,285,819 shares outstanding as of May 7, 2018.

 

 

 


Table of Contents

POPULAR, INC.

INDEX

 

     Page  

Part I – Financial Information

  
Item 1. Financial Statements   
Unaudited Consolidated Statements of Financial Condition at March 31, 2018 and December 31, 2017      5  
Unaudited Consolidated Statements of Operations for the quarters ended March 31, 2018 and 2017      6  
Unaudited Consolidated Statements of Comprehensive Income for the quarters ended March 31, 2018 and 2017      7  
Unaudited Consolidated Statements of Changes in Stockholders’ Equity for the quarters ended March 31, 2018 and 2017      8  
Unaudited Consolidated Statements of Cash Flows for the quarters ended March 31, 2018 and 2017      9  
Notes to Unaudited Consolidated Financial Statements      10  
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations      114  
Item 3. Quantitative and Qualitative Disclosures about Market Risk      160  
Item 4. Controls and Procedures      160  
Part II – Other Information      160  
Item 1. Legal Proceedings      160  
Item 1A. Risk Factors      161  
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds      161  
Item 3. Defaults upon Senior Securities      161  
Item 4. Mine Safety Disclosures      161  
Item 5. Other Information      161  
Item 6. Exhibits      161  
Signatures      163  

 

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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 about Popular, Inc.’s (the “Corporation,” “Popular,” “we,” “us,” “our”), including without limitation statements about Popular’s 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, the effect of legal proceedings and new accounting standards on the Corporation’s financial condition and results of operations, and the impact of Hurricanes Irma and María on the Corporation. 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 in the economy and employment levels, as well as general business and economic conditions in the geographic areas we serve;

 

    the impact of the current fiscal and economic crisis of the Commonwealth of Puerto Rico (the “Commonwealth” or “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 crisis on the value of our portfolio of Puerto Rico government securities and loans to governmental entities and private borrowers that have relationships with the government, and the possibility that these actions may result in credit losses that are higher than currently expected;

 

    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;

 

    the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) on our businesses, business practices and cost of operations;

 

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

 

    the length of time and the receipt of regulatory approvals necessary to consummate our acquisition and assumption of certain assets and liabilities related to Wells Fargo’s auto finance business in Puerto Rico, as well as the ability to successfully transition and integrate the business, unexpected costs, including, without limitation, costs due to exposure to any unrecorded liabilities or issues not identified during due diligence investigation of the business or that are not subject to indemnification or reimbursement, 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;

 

    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;

 

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    the performance of the stock and bond markets;

 

    competition in the financial services industry;

 

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

 

    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, as a result of cyberattacks, including 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, including as a result of Hurricanes Irma and Maria, 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 proceedings, as discussed in “Part II, Item I. 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, 2017 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 or information which speak as of their respective dates.

 

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POPULAR, INC.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(UNAUDITED)

 

(In thousands, except share information)

   March 31,
2018
    December 31,
2017
 

Assets:

    

Cash and due from banks

   $ 280,077     $ 402,857  
  

 

 

   

 

 

 

Money market investments:

    

Time deposits with other banks

     6,984,009       5,255,119  
  

 

 

   

 

 

 

Total money market investments

     6,984,009       5,255,119  
  

 

 

   

 

 

 

Trading account debt securities, at fair value:

    

Pledged securities with creditors’ right to repledge

     622       625  

Other trading securities

     41,764       33,301  

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

    

Pledged securities with creditors’ right to repledge

     380,644       393,634  

Other investment securities available-for-sale

     10,039,945       9,783,289  

Debt securities held-to-maturity, at amortized cost (fair value 2018 - $98,740; 2017 - $97,501)

     104,817       107,019  

Equity securities (realizable value 2018 -$169,340); (2017 - $168,417)

     165,218       165,103  

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

     77,701       132,395  
  

 

 

   

 

 

 

Loans held-in-portfolio:

    

Loans not covered under loss-sharing agreements with the FDIC

     24,224,793       24,423,427  

Loans covered under loss-sharing agreements with the FDIC

     514,611       517,274  

Less – Unearned income

     136,856       130,633  

Allowance for loan losses

     640,578       623,426  
  

 

 

   

 

 

 

Total loans held-in-portfolio, net

     23,961,970       24,186,642  
  

 

 

   

 

 

 

FDIC loss-share asset

     44,469       45,192  

Premises and equipment, net

     544,109       547,142  

Other real estate not covered under loss-sharing agreements with the FDIC

     153,061       169,260  

Other real estate covered under loss-sharing agreements with the FDIC

     15,333       19,595  

Accrued income receivable

     157,340       213,844  

Mortgage servicing assets, at fair value

     166,281       168,031  

Other assets

     1,978,760       1,991,323  

Goodwill

     627,294       627,294  

Other intangible assets

     33,347       35,672  
  

 

 

   

 

 

 

Total assets

   $ 45,756,761     $ 44,277,337  
  

 

 

   

 

 

 

Liabilities and Stockholders’ Equity

    

Liabilities:

    

Deposits:

    

Non-interest bearing

   $ 8,698,610     $ 8,490,945  

Interest bearing

     28,435,483       26,962,563  
  

 

 

   

 

 

 

Total deposits

     37,134,093       35,453,508  
  

 

 

   

 

 

 

Assets sold under agreements to repurchase

     380,061       390,921  

Other short-term borrowings

     186,200       96,208  

Notes payable

     1,564,204       1,536,356  

Other liabilities

     1,427,294       1,696,439  
  

 

 

   

 

 

 

Total liabilities

     40,691,852       39,173,432  
  

 

 

   

 

 

 

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; 104,263,919 shares issued (2017 - 104,238,159) and 102,189,914 shares outstanding (2017 - 102,068,981)

     1,043       1,042  

Surplus

     4,300,936       4,298,503  

Retained earnings

     1,261,775       1,194,994  

Treasury stock - at cost, 2,074,005 shares (2017 - 2,169,178)

     (86,167     (90,142

Accumulated other comprehensive loss, net of tax

     (462,838     (350,652
  

 

 

   

 

 

 

Total stockholders’ equity

     5,064,909       5,103,905  
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 45,756,761     $ 44,277,337  
  

 

 

   

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

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POPULAR, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

 

     Quarters ended March 31,  

(In thousands, except per share information)

   2018     2017  

Interest income:

    

Loans

   $ 373,584     $ 363,136  

Money market investments

     22,285       6,573  

Investment securities

     57,209       46,286  
  

 

 

   

 

 

 

Total interest income

     453,078       415,995  
  

 

 

   

 

 

 

Interest expense:

    

Deposits

     38,688       33,757  

Short-term borrowings

     2,013       1,095  

Long-term debt

     19,330       19,045  
  

 

 

   

 

 

 

Total interest expense

     60,031       53,897  
  

 

 

   

 

 

 

Net interest income

     393,047       362,098  

Provision for loan losses—non-covered loans

     69,333       42,057  

Provision (reversal) for loan losses—covered loans

     1,730       (1,359
  

 

 

   

 

 

 

Net interest income after provision for loan losses

     321,984       321,400  
  

 

 

   

 

 

 

Service charges on deposit accounts

     36,455       39,536  

Other service fees

     60,602       56,175  

Mortgage banking activities (Refer to Note 10)

     12,068       11,369  

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

     (646     162  

Net loss on trading account debt securities

     (198     (278

Adjustments (expense) to indemnity reserves on loans sold

     (2,926     (1,966

FDIC loss share expense (Refer to Note 28)

     (8,027     (8,257

Other operating income

     16,169       19,128  
  

 

 

   

 

 

 

Total non-interest income

     113,497       115,869  
  

 

 

   

 

 

 

Operating expenses:

    

Personnel costs

     125,852       123,740  

Net occupancy expenses

     22,802       20,776  

Equipment expenses

     17,206       15,970  

Other taxes

     10,902       10,969  

Professional fees

     82,985       69,250  

Communications

     5,906       5,949  

Business promotion

     12,009       11,576  

FDIC deposit insurance

     6,920       6,493  

Other real estate owned (OREO) expenses

     6,131       12,818  

Other operating expenses

     28,964       31,432  

Amortization of intangibles

     2,325       2,345  
  

 

 

   

 

 

 

Total operating expenses

     322,002       311,318  
  

 

 

   

 

 

 

Income before income tax

     113,479       125,951  

Income tax expense

     22,155       33,006  
  

 

 

   

 

 

 

Net Income

   $ 91,324     $ 92,945  
  

 

 

   

 

 

 

Net Income Applicable to Common Stock

   $ 90,393     $ 92,014  
  

 

 

   

 

 

 

Net Income per Common Share—Basic

   $ 0.89     $ 0.89  
  

 

 

   

 

 

 

Net Income per Common Share—Diluted

   $ 0.89     $ 0.89  
  

 

 

   

 

 

 

Dividends Declared per Common Share

   $ 0.25     $ 0.25  
  

 

 

   

 

 

 

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

 

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POPULAR, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(UNAUDITED)

 

     Quarters ended March 31,  

(In thousands)

   2018     2017  

Net income

   $ 91,324     $ 92,945  
  

 

 

   

 

 

 

Reclassification to retained earnings due to cumulative effect of accounting change (Note 3)

     (605     —    

Other comprehensive (loss) income before tax:

    

Foreign currency translation adjustment

     93       139  

Amortization of net losses of pension and postretirement benefit plans

     5,386       5,607  

Amortization of prior service credit of pension and postretirement benefit plans

     (867     (950

Unrealized holding losses on debt securities arising during the period

     (121,189     (3,026

Unrealized holding gains on equity securities arising during the period

     —         119  

Reclassification adjustment for gains included in net income

     —         (162

Unrealized net gains (losses) on cash flow hedges

     1,225       (637

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

     (1,267     855  
  

 

 

   

 

 

 

Other comprehensive (loss) income before tax

     (117,224     1,945  

Income tax benefit (expense)

     5,038       (1,571
  

 

 

   

 

 

 

Total other comprehensive (loss) income, net of tax

     (112,186     374  
  

 

 

   

 

 

 

Comprehensive (loss) income, net of tax

   $ (20,862   $ 93,319  
  

 

 

   

 

 

 

Tax effect allocated to each component of other comprehensive (loss) income:

 

   Quarters ended March 31,  

(In thousands)

   2018     2017  

Amortization of net losses of pension and postretirement benefit plans

   $ (2,101   $ (2,186

Amortization of prior service credit of pension and postretirement benefit plans

     338       370  

Unrealized holding losses on debt securities arising during the period

     6,785       322  

Unrealized holding gains on equity securities arising during the period

     —         (24

Reclassification adjustment for gains included in net income

     —         32  

Unrealized net gains (losses) on cash flow hedges

     (478     248  

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

     494       (333
  

 

 

   

 

 

 

Income tax benefit (expense)

   $ 5,038     $ (1,571
  

 

 

   

 

 

 

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

 

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POPULAR, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(UNAUDITED)

 

                                     Accumulated        
                                     other        
     Common      Preferred            Retained     Treasury     comprehensive        

(In thousands)

   stock      stock      Surplus     earnings     stock     loss     Total  

Balance at December 31, 2016

   $ 1,040      $ 50,160      $ 4,255,022     $ 1,220,307     $ (8,286   $ (320,286   $ 5,197,957  

Net income

             92,945           92,945  

Issuance of stock

     1           1,806             1,807  

Dividends declared:

                

Common stock

             (25,615         (25,615

Preferred stock

             (931         (931

Common stock purchases

           4,518         (80,842       (76,324

Other comprehensive income, net of tax

                 374       374  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at March 31, 2017

   $ 1,041      $ 50,160      $ 4,261,346     $ 1,286,706     $ (89,128   $ (319,912   $ 5,190,213  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

             (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  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
                                     March 31,     March 31,  

Disclosure of changes in number of shares:

                              2018     2017  

Preferred Stock:

                

Balance at beginning and end of period

                 2,006,391       2,006,391  
              

 

 

   

 

 

 

Common Stock – Issued:

                

Balance at beginning of period

                 104,238,159       104,058,684  

Issuance of stock

                 25,760       42,934  
              

 

 

   

 

 

 

Balance at end of period

                 104,263,919       104,101,618  

Treasury stock

                 (2,074,005     (2,144,878
              

 

 

   

 

 

 

Common Stock – Outstanding

                 102,189,914       101,956,740  
              

 

 

   

 

 

 

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

 

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POPULAR, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

     Quarters ended March 31,  

(In thousands)

   2018     2017  

Cash flows from operating activities:

    

Net income

   $ 91,324     $ 92,945  
  

 

 

   

 

 

 

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

    

Provision for loan losses

     71,063       40,698  

Amortization of intangibles

     2,325       2,345  

Depreciation and amortization of premises and equipment

     12,836       11,799  

Net accretion of discounts and amortization of premiums and deferred fees

     (7,006     (6,463

Share-based compensation

     3,112       —    

Impairment losses on long-lived assets

     272       —    

Fair value adjustments on mortgage servicing rights

     4,307       5,954  

FDIC loss share expense

     8,027       8,257  

Adjustments (expense) to indemnity reserves on loans sold

     2,926       1,966  

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

     (7,370     (9,213

Deferred income tax expense

     10,758       25,060  

(Gain) loss on:

    

Disposition of premises and equipment and other productive assets

     (72     6,466  

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

     (1,116     (5,381

Sale of foreclosed assets, including write-downs

     (99     4,512  

Acquisitions of loans held-for-sale

     (47,335     (73,043

Proceeds from sale of loans held-for-sale

     12,036       29,364  

Net originations on loans held-for-sale

     (48,375     (123,336

Net decrease (increase) in:

    

Trading debt securities

     93,998       176,937  

Equity securities

     (130     435  

Accrued income receivable

     56,504       10,024  

Other assets

     36,014       11,995  

Net (decrease) increase in:

    

Interest payable

     (10,614     (11,281

Pension and other postretirement benefits obligation

     1,225       331  

Other liabilities

     (94,529     (13,654
  

 

 

   

 

 

 

Total adjustments

     98,757       93,772  
  

 

 

   

 

 

 

Net cash provided by operating activities

     190,081       186,717  
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Net increase in money market investments

     (1,728,858     (766,208

Purchases of investment securities:

    

Available-for-sale

     (1,311,382     (1,216,880

Equity

     (9,730     (225

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

    

Available-for-sale

     1,016,203       222,677  

Held-to-maturity

     2,639       2,184  

Proceeds from sale of investment securities:

    

Equity

     9,745       1,757  

Net disbursements on loans

     93,482       99,306  

Acquisition of loan portfolios

     (161,295     (109,098

Net payments (to) from FDIC under loss sharing agreements

     (1,263     (23,574

Return of capital from equity method investments

     —         3,362  

Acquisition of premises and equipment

     (13,046     (18,646

Proceeds from insurance claims

     258       —    

Proceeds from sale of:

    

Premises and equipment and other productive assets

     3,033       3,011  

Foreclosed assets

     25,746       27,547  
  

 

 

   

 

 

 

Net cash used in investing activities

     (2,074,468     (1,774,787
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Net increase (decrease) in:

    

Deposits

     1,678,029       1,715,958  

Federal funds purchased and assets sold under agreements to repurchase

     (10,860     (44,711

Other short-term borrowings

     89,992       —    

Payments of notes payable

     (12,680     (17,408

Proceeds from issuance of notes payable

     40,000       —    

Proceeds from issuance of common stock

     4,712       1,806  

Dividends paid

     (26,138     (16,499

Net payments for repurchase of common stock

     (193     (75,604

Payments related to tax withholding for share-based compensation

     (1,223     (719
  

 

 

   

 

 

 

Net cash provided by financing activities

     1,761,639       1,562,823  
  

 

 

   

 

 

 

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

     (122,748     (25,247

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

     412,629       374,196  
  

 

 

   

 

 

 

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

   $ 289,881     $ 348,949  
  

 

 

   

 

 

 

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

 

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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 -  

Restrictions on cash and due from banks and certain securities

     16  
Note 5 -  

Debt securities available-for-sale

     17  
Note 6 -  

Debt securities held-to-maturity

     21  
Note 7 -  

Loans

     23  
Note 8 -  

Allowance for loan losses

     32  
Note 9 -  

FDIC loss share asset and true-up payment obligation

     46  
Note 10 -  

Mortgage banking activities

     48  
Note 11 -  

Transfers of financial assets and mortgage servicing assets

     49  
Note 12 -  

Other real estate owned

     52  
Note 13 -  

Other assets

     53  
Note 14 -  

Goodwill and other intangible assets

     54  
Note 15 -  

Deposits

     56  
Note 16 -  

Borrowings

     57  
Note 17 -  

Offsetting of financial assets and liabilities

     59  
Note 18 -  

Stockholders’ equity

     61  
Note 19 -  

Other comprehensive loss

     62  
Note 20 -  

Guarantees

     64  
Note 21 -  

Commitments and contingencies

     66  
Note 22 -  

Non-consolidated variable interest entities

     74  
Note 23 -  

Related party transactions

     77  
Note 24 -  

Fair value measurement

     80  
Note 25 -  

Fair value of financial instruments

     86  
Note 26 -  

Net income per common share

     90  
Note 27 -  

Revenue from contracts with customers

     91  
Note 28 -  

FDIC loss share expense

     93  
Note 29 -  

Pension and postretirement benefits

     94  
Note 30 -  

Stock-based compensation

     95  
Note 31 -  

Income taxes

     97  
Note 32 -  

Supplemental disclosure on the consolidated statements of cash flows

     101  
Note 33 -  

Segment reporting

     102  
Note 34 -  

Subsequent events

     106  
Note 35 -  

Condensed consolidating financial information of guarantor and issuers of registered guaranteed securities

     107  

 

10


Table of Contents

Note 1 – Nature of operations

Popular, Inc. (the “Corporation”) 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.

Prior to April 9, 2018, PB operated under the legal name of Banco Popular North America and conducted business under the assumed name of Popular Community Bank.

 

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Table of Contents

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

Principles of Consolidation and Basis of Presentation

The consolidated interim financial statements have been prepared without audit. The consolidated statement of financial condition data at December 31, 2017 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 reclassifications have been made to the 2017 consolidated financial statements and notes to the financial statements to conform with the 2018 presentation.

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, 2017, included in the Corporation’s 2017 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 Update (“ASU”) 2017-07, Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost

The FASB issued ASU 2017-07 in March 2017, which requires that an employer disaggregate the service cost component from the other components of net benefit cost of pension and postretirement benefit plans. The amendments also provide guidance on how to present the service cost component and the other components of net benefit cost in the income statement and allow only the service cost component of net benefit cost to be eligible for capitalization.

As a result of the adoption of this accounting pronouncement during the first quarter of 2018, the Corporation recognized $2.2 million (March 31, 2017—$1.9 million) as components of net periodic benefit cost other than service cost in the other operating expenses caption, which would have otherwise previously been recognized as personnel cost. The presentation for prior periods has been adjusted to reflect the new classification. Effective January 1, 2018, these expenses are no longer capitalized as part of loan origination costs.

FASB Accounting Standards Update (“ASU”) 2017-05, Other Income– Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets

The FASB issued ASU 2017-05 in February 2017, which, among other things, clarifies the scope of the derecognition of nonfinancial assets, the definition of in substance financial assets, and impacts the accounting for partial sales of nonfinancial assets by requiring full gain recognition upon the sale.

The adoption of this standard during the first quarter of 2018 did not have a material impact on the Corporation’s financial statements.

FASB Accounting Standards Update (“ASU”) 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business

The FASB issued ASU 2017-01 in January 2017, which revises the definition of a business by providing an initial screen to determine when an integrated set of assets and activities (“set”) is not a business. Also, the amendments, among other things, specify the minimum inputs and processes required for a set to meet the definition of a business when the initial screen is not met and narrow the definition of the term output so that the term is consistent with Topic 606.

The Corporation adopted ASU 2017-01 during the first quarter of 2018. As such, the Corporation will consider this guidance in any business combinations completed after the effective date.

FASB Accounting Standards Update (“ASU”) 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash

The FASB issued ASU 2016-18 in November 2016, which require entities to present the changes in total cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows. The new guidance also requires a reconciliation of the totals in the statement of cash flows to the related captions in the balance sheet if restricted cash and restricted cash equivalents are presented in a different line item in the balance sheet.

As a result of the adoption of this accounting pronouncement during the first quarter of 2018, the Corporation included restricted cash and restricted cash equivalents within money market investments of $9.8 million at March 31, 2018 (March 31, 2017—$8.7 million) in the Consolidated Statements of Cash Flows. In addition, the Corporation presented a reconciliation of the totals in the Consolidated Statements of Cash Flows to the related captions in the Consolidated Statements of Condition in Note 32, Supplemental disclosure on the consolidated statements of cash flows.

 

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Table of Contents

FASB Accounting Standards Update (“ASU”) 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory

The FASB issued ASU 2016-16 in October 2016, which eliminates the exception for all intra-entity sales of assets other than inventory that requires deferral of the tax effects until the transferred asset is sold to a third party or otherwise recovered through use. The new guidance requires a reporting entity to recognize the tax impact from the sale of the asset in the seller’s tax jurisdiction when the transfer occurs, even though the pre-tax effects of that transaction are eliminated in consolidation. Any deferred tax asset that arises in the buyer’s jurisdiction would also be recognized at the time of the transfer.

As a result of the adoption of this accounting pronouncement during the first quarter of 2018, the Corporation recorded a positive cumulative effect adjustment of $1.3 million to retained earnings to reflect the net tax benefit resulting from intra-entity sales of assets.

FASB Accounting Standards Update (“ASU”) 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments

The FASB issued ASU 2016-15 in August 2016, which addresses specific cash flow issues with the objective of reducing existing diversity in practice, which may lead to a difference in the classification of transactions between operating, financing or investing activities. Among other things, the guidance provides an accounting policy election for classifying distributions received from equity method investees and clarifies the application of the predominance principle.

As a result of the adoption of this accounting pronouncement during the first quarter of 2018, the Corporation reclassified from investing to operating activities $0.5 million in the Consolidated Statements of Cash Flows for the quarter ended March 31, 2017 as a result of electing the cumulative earnings approach for classifying distributions received from equity investees.

FASB Accounting Standards Updates (“ASUs”), Revenue from Contracts with Customers (Topic 606)

The FASB has issued a series of ASUs which, among other things, clarify the principles for recognizing revenue and develop a common revenue standard. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services, that is, the satisfaction of performance obligations, to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. A five-step process is defined to achieve this core principle. The new guidance also requires disclosures to enable users of financial statements to understand the nature, timing, and uncertainty of revenue and cash flows arising from contracts with customers.

The Corporation adopted this accounting pronouncement during the first quarter of 2018 using the modified retrospective approach. The Corporation elected the practical expedient that permits an entity to expense incremental costs of obtaining contracts, given the amortization periods were one year or less. There were no material changes in the presentation and timing of when revenues are recognized. ASC Topic 606 was applied to contracts that were not completed as of January 1, 2018. There was no impact in the evaluation of these contracts. Refer to additional disclosures on Note 27, Revenue from contracts with customers.

FASB Accounting Standards Update (“ASU”) 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities

The FASB issued ASU 2016-01 in January 2016, which primarily affects the accounting for equity investments and financial liabilities under the fair value option as follows: require equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income; simplify the impairment assessment of equity investments without readily determinable fair values; require changes in fair value due to instrument-specific credit risk to be presented separately in other comprehensive income for financial liabilities under the fair value option; and clarify that the need for a valuation allowance on a deferred tax asset related to available-for-sale securities should be evaluated in combination with the entity’s other deferred tax assets. In addition, the ASU also impacts the presentation and disclosure requirements of financial instruments.

As a result of the adoption of this accounting pronouncement during the first quarter of 2018, the Corporation aggregated $11 million previously classified as available-for-sale and as trading to those under the other investment securities caption and reclassified under the caption of equity securities which amounted to $165.2 million at March 31, 2018 (December 31, 2017—$165.1 million). In addition, a positive cumulative effect adjustment of $0.6 million was recognized due to the reclassification of unrealized gains of equity securities available-for-sale, net of tax, from accumulated other comprehensive loss to retained earnings.

 

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Table of Contents

The adoption of FASB Accounting Standards Update (“ASU”) 2017-09, Compensation– Stock Compensation (Topic 718): Scope of Modification Accounting, effective during the first quarter of 2018, did not have a significant impact on the Consolidated Financial Statements.

Recently Issued Accounting Standards Updates

FASB Accounting Standards Update (“ASU”) 2018-03, Technical Corrections and Improvements to Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Liabilities

The FASB issued ASU 2018-03 in February 2018, which clarifies certain aspects of the guidance in ASU 2016-01, principally related to equity securities without a readily determinable fair value.

The amendments in this Update are effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years beginning after June 15, 2018. Early adoption is permitted.

The Corporation does not expect to be significantly impacted by these technical corrections and improvements.

For recently issued Accounting Standards Updates not yet effective, refer to Note 4 to the Consolidated Financial Statements included in the 2017 Form 10-K.

 

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Table of Contents

Note 4 – 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 $ 1.5 billion at March 31, 2018 (December 31, 2017 - $ 1.4 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, 2018, the Corporation held $39 million in restricted assets in the form of funds deposited in money market accounts, debt securities available for sale and equity securities (December 31, 2017—$41 million). The amounts held in debt securities available for sale and equity securities consist primarily of restricted 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 5 – 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, 2018 and December 31, 2017.

 

     At March 31, 2018  

(In thousands)

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

U.S. Treasury securities

              

Within 1 year

   $ 1,148,842      $ 9      $ 2,845      $ 1,146,006        1.22

After 1 to 5 years

     2,881,995        176        49,382        2,832,789        1.69  

After 5 to 10 years

     538,364        —          4,764        533,600        2.44  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total U.S. Treasury securities

     4,569,201        185        56,991        4,512,395        1.66  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Obligations of U.S. Government sponsored entities

              

Within 1 year

     319,734        29        1,176        318,587        1.33  

After 1 to 5 years

     268,528        2        4,343        264,187        1.48  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total obligations of U.S. Government sponsored entities

     588,262        31        5,519        582,774        1.39  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Obligations of Puerto Rico, States and political subdivisions

              

After 1 to 5 years

     6,731        —          119        6,612        2.07  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total obligations of Puerto Rico, States and political subdivisions

     6,731        —          119        6,612        2.07  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Collateralized mortgage obligations—federal agencies

              

Within 1 year

     17        —          —          17        1.47  

After 1 to 5 years

     16,648        72        111        16,609        2.90  

After 5 to 10 years

     75,511        9        3,058        72,462        1.85  

After 10 years

     825,468        1,723        32,646        794,545        2.05  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total collateralized mortgage obligations—federal agencies

     917,644        1,804        35,815        883,633        2.04  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Mortgage-backed securities

              

Within 1 year

     928        6        —          934        4.18  

After 1 to 5 years

     11,871        134        211        11,794        3.56  

After 5 to 10 years

     331,616        1,827        7,102        326,341        2.22  

After 10 years

     4,222,400        15,163        142,211        4,095,352        2.45  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total mortgage-backed securities

     4,566,815        17,130        149,524        4,434,421        2.44  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Other

              

After 5 to 10 years

     748        6        —          754        3.62  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total other

     748        6        —          754        3.62  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total debt securities available-for-sale[1]

   $ 10,649,401      $ 19,156      $ 247,968      $ 10,420,589        2.01
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

[1] Includes $7.0 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 $6.1 billion serve as collateral for public funds.

 

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Table of Contents
     At December 31, 2017  

(In thousands)

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

U.S. Treasury securities

              

Within 1 year

   $ 1,112,791      $ 8      $ 2,101      $ 1,110,698        1.06

After 1 to 5 years

     2,550,116        —          26,319        2,523,797        1.55  

After 5 to 10 years

     293,579        281        191        293,669        2.24  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total U.S. Treasury securities

     3,956,486        289        28,611        3,928,164        1.46  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Obligations of U.S. Government sponsored entities

              

Within 1 year

     276,304        21        818        275,507        1.26  

After 1 to 5 years

     336,922        22        3,518        333,426        1.48  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total obligations of U.S. Government sponsored entities

     613,226        43        4,336        608,933        1.38  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Obligations of Puerto Rico, States and political subdivisions

              

After 1 to 5 years

     6,668        —          59        6,609        2.30  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total obligations of Puerto Rico, States and political subdivisions

     6,668        —          59        6,609        2.30  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Collateralized mortgage obligations—federal agencies

              

Within 1 year

     40        —          —          40        2.60  

After 1 to 5 years

     16,972        173        75        17,070        2.90  

After 5 to 10 years

     36,186        57        526        35,717        2.31  

After 10 years

     914,568        2,789        26,431        890,926        2.01  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total collateralized mortgage obligations—federal agencies

     967,766        3,019        27,032        943,753        2.03  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Mortgage-backed securities

              

Within 1 year

     484        8        —          492        4.23  

After 1 to 5 years

     14,599        206        211        14,594        3.50  

After 5 to 10 years

     339,161        2,390        3,765        337,786        2.21  

After 10 years

     4,385,368        19,493        69,071        4,335,790        2.46  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total mortgage-backed securities

     4,739,612        22,097        73,047        4,688,662        2.44  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Other

              

After 5 to 10 years

     789        13        —          802        3.62  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total other

     789        13        —          802        3.62  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total debt securities available-for-sale[1]

   $ 10,284,547      $ 25,461      $ 133,085      $ 10,176,923        1.96
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

[1] Includes $6.6 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 $5.6 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 securities sold during the quarters ended March 31, 2018 and March 31, 2017.

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, 2018 and December 31, 2017.

 

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Table of Contents
     At March 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

   $ 2,782,548      $ 38,901      $ 1,332,915      $ 18,090      $ 4,115,463      $ 56,991  

Obligations of U.S. Government sponsored entities

     228,285        1,532        351,070        3,987        579,355        5,519  

Obligations of Puerto Rico, States and political subdivisions

     6,613        119        —          —          6,613        119  

Collateralized mortgage obligations—federal agencies

     208,888        3,646        578,882        32,169        787,770        35,815  

Mortgage-backed securities

     1,542,995        41,063        2,512,508        108,461        4,055,503        149,524  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

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

   $ 4,769,329      $ 85,261      $ 4,775,375      $ 162,707      $ 9,544,704      $ 247,968  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     At December 31, 2017  
     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

   $ 2,608,473      $ 14,749      $ 1,027,066      $ 13,862      $ 3,635,539      $ 28,611  

Obligations of U.S. Government sponsored entities

     214,670        1,108        376,807        3,228        591,477        4,336  

Obligations of Puerto Rico, States and political subdivisions

     6,609        59        —          —          6,609        59  

Collateralized mortgage obligations—federal agencies

     153,336        2,110        595,339        24,922        748,675        27,032  

Mortgage-backed securities

     1,515,295        12,529        2,652,359        60,518        4,167,654        73,047  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

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

   $ 4,498,383      $ 30,555      $ 4,651,571      $ 102,530      $ 9,149,954      $ 133,085  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

As of March 31, 2018, the portfolio of available-for-sale debt securities reflects gross unrealized losses of approximately $248 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, 2018, 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, 2018, 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.

 

19


Table of Contents
     March 31, 2018      December 31, 2017  

(In thousands)

   Amortized
cost
     Fair
value
     Amortized
cost
     Fair
value
 

FNMA

   $ 3,500,042      $ 3,392,654      $ 3,621,537      $ 3,572,474  

Freddie Mac

     1,279,650        1,236,594        1,358,708        1,335,685  
           

 

20


Table of Contents

Note 6 – 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, 2018 and December 31, 2017.

 

     At March 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

   $ 3,445      $ —        $ 271      $ 3,174        5.98

After 1 to 5 years

     16,195        —          3,281        12,914        6.06  

After 5 to 10 years

     26,140        —          5,588        20,552        3.62  

After 10 years

     45,023        3,312        249        48,086        1.91  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total obligations of Puerto Rico, States and political subdivisions

     90,803        3,312        9,389        84,726        3.30  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Collateralized mortgage obligations - federal agencies

              

After 5 to 10 years

     66        4        —          70        5.45  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total collateralized mortgage obligations - federal agencies

     66        4        —          70        5.45  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Trust preferred securities

              

After 5 to 10 years

     1,637        —          —          1,637        8.33  

After 10 years

     11,561        —          —          11,561        6.51  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total trust preferred securities

     13,198        —          —          13,198        6.73  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Other

              

Within 1 year

     250        —          —          250        2.44  

After 1 to 5 years

     500        —          4        496        2.97  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total other

     750        —          4        746        2.79  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total debt securities held-to-maturity[1]

   $ 104,817      $ 3,316      $ 9,393      $ 98,740        3.73
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

[1] Includes $90.8 million pledged to secure public and trust deposits that the secured parties are not permitted to sell or repledge the collateral.

 

     At December 31, 2017  

(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

   $ 3,295      $ —        $ 79      $ 3,216        5.96

After 1 to 5 years

     15,485        —          4,143        11,342        6.05  

After 5 to 10 years

     29,240        —          8,905        20,335        3.89  

After 10 years

     44,734        3,834        222        48,346        1.93  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total obligations of Puerto Rico, States and political subdivisions

     92,754        3,834        13,349        83,239        3.38  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Collateralized mortgage obligations - federal agencies

              

After 5 to 10 years

     67        4        —          71        5.45  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total collateralized mortgage obligations - federal agencies

     67        4        —          71        5.45  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Trust preferred securities

              

After 5 to 10 years

     1,637        —          —          1,637        8.33  

After 10 years

     11,561        —          —          11,561        6.51  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total trust preferred securities

     13,198        —          —          13,198        6.73  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Other

              

Within 1 year

     500        —          7        493        1.96  

After 1 to 5 years

     500        —          —          500        2.97  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total other

     1,000        —          7        993        2.47  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total debt securities held-to-maturity[1]

   $ 107,019      $ 3,838      $ 13,356      $ 97,501        3.79
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

[1] Includes $92.8 million pledged to secure public and trust deposits that the secured parties are not permitted to sell or repledge the collateral.

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, 2018 and December 31, 2017.

 

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Table of Contents
     At March 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

   $ 9,980      $ 101      $ 37,517      $ 9,288      $ 47,497      $ 9,389  

Other

     250        —          496        4        746        4  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

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

   $ 10,230      $ 101      $ 38,013      $ 9,292      $ 48,243      $ 9,393  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     At December 31, 2017  
     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

   $ —        $ —        $ 35,696      $ 13,349      $ 35,696      $ 13,349  

Other

     —          —          743        7        743        7  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

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

   $ —        $ —        $ 36,439      $ 13,356      $ 36,439      $ 13,356  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

As indicated in Note 5 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, 2018 are primarily associated with securities issued by municipalities of Puerto Rico and are generally not rated by a credit rating agency. This includes $47 million of general and special obligation bonds issued by three municipalities of Puerto Rico, which are payable primarily from, and have a lien on, 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 and issuing municipalities are required by law to levy property taxes in an amount sufficient for the payment of debt service on such general obligations bonds.

The portfolio also includes $44 million in securities for which the underlying source of payment is not the central government, but in which a government instrumentality provides a guarantee in the event of default. 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, 2018. Further deterioration of the fiscal crisis of the Government of Puerto Rico or of Puerto Rico’s economy 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 investment 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.

 

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Table of Contents

Note 7 – Loans

Loans acquired in the Westernbank FDIC-assisted transaction, except for lines of credit with revolving privileges, are accounted for by the Corporation in accordance with ASC Subtopic 310-30. Under ASC Subtopic 310-30, the acquired loans were aggregated into pools based on similar characteristics. Each loan pool is accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows. The loans which are accounted for under ASC Subtopic 310-30 by the Corporation are not considered non-performing and will continue to have an accretable yield as long as there is a reasonable expectation about the timing and amount of cash flows expected to be collected. The Corporation measures additional losses for this portfolio when it is probable the Corporation will be unable to collect all cash flows expected at acquisition plus additional cash flows expected to be collected arising from changes in estimates after acquisition. Lines of credit with revolving privileges that were acquired as part of the Westernbank FDIC-assisted transaction are accounted for under the guidance of ASC Subtopic 310-20, which requires that any differences between the contractually required loan payment receivable in excess of the Corporation’s initial investment in the loans be accreted into interest income. Loans accounted for under ASC Subtopic 310-20 are placed in non-accrual status when past due in accordance with the Corporation’s non-accruing policy and any accretion of discount is discontinued.

The risks on loans acquired in the FDIC-assisted transaction are significantly different from the risks on loans not covered under the FDIC loss sharing agreements because of the loss protection provided by the FDIC. Accordingly, the Corporation presents loans subject to the loss sharing agreements as “covered loans” in the information below and loans that are not subject to the FDIC loss sharing agreements as “non-covered loans”. The FDIC loss sharing agreements expired on June 30, 2015 for commercial (including construction) and consumer loans, and expires on June 30, 2020 for single-family residential mortgage loans, as explained in Note 9.

During the quarter ended March 31, 2018, the Corporation recorded purchases (including repurchases) of mortgage loans amounting to $156 million and consumer loans of $51 million, compared to purchases (including repurchases) of mortgage loans of $136 million, consumer loans of $42 million and leases of $2 million, during the quarter ended March 31, 2017.

The Corporation performed whole-loan sales involving approximately $10 million of residential mortgage loans during the quarter ended March 31, 2018 (March 31, 2017 - $28 million). Also, during the quarter ended March 31, 2018, the Corporation securitized approximately $112 million of mortgage loans into Government National Mortgage Association (“GNMA”) mortgage-backed securities and $26 million of mortgage loans into Federal National Mortgage Association (“FNMA”) mortgage-backed securities, compared to $147 million and $28 million, respectively, during the quarter ended March 31, 2017.

Non-covered loans

The following table presents the composition of non-covered loans held-in-portfolio (“HIP”), net of unearned income, by past due status at March 31, 2018 and December 31, 2017, including loans previously covered by the commercial FDIC loss sharing agreements.

 

23


Table of Contents

March 31, 2018

 

Puerto Rico

 
     Past due      Current      Non-covered
loans HIP
Puerto Rico
 

(In thousands)

   30-59
days
     60-89
days
     90 days
or more
     Total
past due
       

Commercial multi-family

   $ 5,296      $ 211      $ 2,876      $ 8,383      $ 142,706      $ 151,089  

Commercial real estate non-owner occupied

     106,662        3,383        27,890        137,935        2,243,092        2,381,027  

Commercial real estate owner occupied

     31,295        16,783        121,620        169,698        1,598,786        1,768,484  

Commercial and industrial

     38,309        4,712        36,832        79,853        2,742,343        2,822,196  

Construction

     1,369        —          4,463        5,832        88,026        93,858  

Mortgage

     281,846        185,748        1,558,078        2,025,672        4,330,034        6,355,706  

Leasing

     8,899        2,962        3,957        15,818        822,565        838,383  

Consumer:

                 

Credit cards

     15,418        21,379        11,004        47,801        1,007,076        1,054,877  

Home equity lines of credit

     404        176        329        909        4,524        5,433  

Personal

     15,259        10,791        21,963        48,013        1,182,928        1,230,941  

Auto

     26,996        10,329        13,356        50,681        835,793        886,474  

Other

     1,303        510        15,789        17,602        133,610        151,212  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 533,056      $ 256,984      $ 1,818,157      $ 2,608,197      $ 15,131,483      $ 17,739,680  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

March 31, 2018

 

Popular U.S.

 
     Past due                

(In thousands)

   30-59
days
     60-89
days
     90 days
or more
     Total
past due
     Current      Loans HIP
Popular U.S.
 

Commercial multi-family

   $ 20      $ —        $ —        $ 20      $ 1,249,577      $ 1,249,597  

Commercial real estate non-owner occupied

     4,965        126        365        5,456        1,786,075        1,791,531  

Commercial real estate owner occupied

     2,771        —          405        3,176        265,507        268,683  

Commercial and industrial

     5,616        2,115        94,141        101,872        934,028        1,035,900  

Construction

     20,021        —          —          20,021        779,512        799,533  

Mortgage

     15,600        948        11,647        28,195        680,743        708,938  

Legacy

     1,597        8        3,137        4,742        26,425        31,167  

Consumer:

                 

Credit cards

     1        8        7        16        57        73  

Home equity lines of credit

     1,402        2,791        14,731        18,924        147,493        166,417  

Personal

     2,399        1,575        2,604        6,578        289,628        296,206  

Other

     —          —          7        7        205        212  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 54,392      $ 7,571      $ 127,044      $ 189,007      $ 6,159,250      $ 6,348,257  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

24


Table of Contents

March 31, 2018

 

Popular, Inc.

 
     Past due             Non-covered
loans HIP
Popular, Inc.[1] [2]
 

(In thousands)

   30-59
days
     60-89
days
     90 days
or more
     Total
past due
     Current     

Commercial multi-family

   $ 5,316      $ 211      $ 2,876      $ 8,403      $ 1,392,283      $ 1,400,686  

Commercial real estate non-owner occupied

     111,627        3,509        28,255        143,391        4,029,167        4,172,558  

Commercial real estate owner occupied

     34,066        16,783        122,025        172,874        1,864,293        2,037,167  

Commercial and industrial

     43,925        6,827        130,973        181,725        3,676,371        3,858,096  

Construction

     21,390        —          4,463        25,853        867,538        893,391  

Mortgage

     297,446        186,696        1,569,725        2,053,867        5,010,777        7,064,644  

Leasing

     8,899        2,962        3,957        15,818        822,565        838,383  

Legacy[3]

     1,597        8        3,137        4,742        26,425        31,167  

Consumer:

                 

Credit cards

     15,419        21,387        11,011        47,817        1,007,133        1,054,950  

Home equity lines of credit

     1,806        2,967        15,060        19,833        152,017        171,850  

Personal

     17,658        12,366        24,567        54,591        1,472,556        1,527,147  

Auto

     26,996        10,329        13,356        50,681        835,793        886,474  

Other

     1,303        510        15,796        17,609        133,815        151,424  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 587,448      $ 264,555      $ 1,945,201      $ 2,797,204      $ 21,290,733      $ 24,087,937  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

[1] Non-covered loans held-in-portfolio are net of $137 million in unearned income and exclude $78 million in loans held-for-sale.
[2] Includes $7.1 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, $2.1 billion at the Federal Reserve Bank (“FRB”) for discount window borrowings and $0.4 billion serve as collateral for public funds.
[3] 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.

 

December 31, 2017

 

Puerto Rico

 
     Past due             Non-covered
loans HIP
Puerto Rico
 

(In thousands)

   30-59
days
     60-89
days
     90 days
or more
     Total
past due
     Current     

Commercial multi-family

   $ —        $ 426      $ 1,210      $ 1,636      $ 144,763      $ 146,399  

Commercial real estate non-owner occupied

     39,617        131        28,045        67,793        2,336,766        2,404,559  

Commercial real estate owner occupied

     7,997        2,291        123,929        134,217        1,689,397        1,823,614  

Commercial and industrial

     3,556        1,251        40,862        45,669        2,845,658        2,891,327  

Construction

     —          —          170        170        95,199        95,369  

Mortgage

     217,890        77,833        1,596,763        1,892,486        4,684,293        6,576,779  

Leasing

     10,223        1,490        2,974        14,687        795,303        809,990  

Consumer:

                 

Credit cards

     7,319        4,464        18,227        30,010        1,063,211        1,093,221  

Home equity lines of credit

     438        395        257        1,090        4,997        6,087  

Personal

     13,926        6,857        19,981        40,764        1,181,548        1,222,312  

Auto

     24,405        5,197        5,466        35,068        815,745        850,813  

Other

     537        444        16,765        17,746        139,842        157,588  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 325,908      $ 100,779      $ 1,854,649      $ 2,281,336      $ 15,796,722      $ 18,078,058  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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Table of Contents

December 31, 2017

 

Popular U.S.

 
     Past due                
     30-59      60-89      90 days      Total             Loans HIP  

(In thousands)

   days      days      or more      past due      Current      Popular U.S.  

Commercial multi-family

   $ 395      $ —        $ 784      $ 1,179      $ 1,209,514      $ 1,210,693  

Commercial real estate non-owner occupied

     4,028        1,186        1,599        6,813        1,681,498        1,688,311  

Commercial real estate owner occupied

     2,684        —          862        3,546        315,429        318,975  

Commercial and industrial

     1,121        5,278        97,427        103,826        901,157        1,004,983  

Construction

     —          —          —          —          784,660        784,660  

Mortgage

     13,453        6,148        14,852        34,453        659,175        693,628  

Legacy

     291        417        3,039        3,747        29,233        32,980  

Consumer:

                 

Credit cards

     3        2        11        16        84        100  

Home equity lines of credit

     4,653        3,675        14,997        23,325        158,760        182,085  

Personal

     3,342        2,149        2,779        8,270        289,732        298,002  

Other

     —          —          —          —          319        319  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 29,970      $ 18,855      $ 136,350      $ 185,175      $ 6,029,561      $ 6,214,736  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

December 31, 2017

 

Popular, Inc.

 
     Past due             Non-covered  

(In thousands)

   30-59
days
     60-89
days
     90 days
or more
     Total
past due
     Current      loans HIP
Popular, Inc.[1] [2]
 

Commercial multi-family

   $ 395      $ 426      $ 1,994      $ 2,815      $ 1,354,277      $ 1,357,092  

Commercial real estate non-owner occupied

     43,645        1,317        29,644        74,606        4,018,264        4,092,870  

Commercial real estate owner occupied

     10,681        2,291        124,791        137,763        2,004,826        2,142,589  

Commercial and industrial

     4,677        6,529        138,289        149,495        3,746,815        3,896,310  

Construction

     —          —          170        170        879,859        880,029  

Mortgage

     231,343        83,981        1,611,615        1,926,939        5,343,468        7,270,407  

Leasing

     10,223        1,490        2,974        14,687        795,303        809,990  

Legacy[3]

     291        417        3,039        3,747        29,233        32,980  

Consumer:

                 

Credit cards

     7,322        4,466        18,238        30,026        1,063,295        1,093,321  

Home equity lines of credit

     5,091        4,070        15,254        24,415        163,757        188,172  

Personal

     17,268        9,006        22,760        49,034        1,471,280        1,520,314  

Auto

     24,405        5,197        5,466        35,068        815,745        850,813  

Other

     537        444        16,765        17,746        140,161        157,907  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 355,878      $ 119,634      $ 1,990,999      $ 2,466,511      $ 21,826,283      $ 24,292,794  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

[1] Non-covered loans held-in-portfolio are net of $131 million in unearned income and exclude $132 million in loans held-for-sale.
[2] Includes $7.1 billion pledged to secure credit facilities and public funds that the secured parties are not permitted to sell or repledge the collateral, of which $4.6 billion were pledged at the FHLB as collateral for borrowings, $2.0 billion at the FRB for discount window borrowings and $0.5 billion serve as collateral for public funds.
[3] 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.

The level of delinquencies for mortgage loans was impacted by the loan moratorium implemented by the Corporation as part of its hurricane relief measures. Also, loans with a delinquency status of 90 days past due as of March 31, 2018 include approximately $535 million in loans previously pooled into GNMA securities (December 31, 2017—$840 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 the Bank with an offsetting liability. While the borrowers for our serviced GNMA portfolio benefited from the loan payment moratorium, the delinquency status of these loans continued to be reported to GNMA without considering the moratorium. Management will continue to monitor the effect of the moratorium as the period comes to an end and the loan repayment schedule is resumed.

 

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Table of Contents

The following tables present non-covered loans held-in-portfolio by loan class that are in non-performing status or are accruing interest but are past due 90 days or more at March 31, 2018 and December 31, 2017. Accruing loans past due 90 days or more consist primarily of credit cards, Federal Housing Administration (“FHA”) / U.S. Department of Veterans Affairs (“VA”) and other insured mortgage loans, and delinquent mortgage loans which are included in the Corporation’s financial statements pursuant to GNMA’s buy-back option program. Servicers of loans underlying GNMA mortgage-backed securities must report as their own assets the defaulted loans that they have the option (but not the obligation) to repurchase, even when they elect not to exercise that option.

 

At March 31, 2018

 
     Puerto Rico      Popular U.S.      Popular, Inc.  

(In thousands)

   Non-accrual
loans
     Accruing loans
past-due 90
days or more [1]
     Non-accrual
loans
     Accruing loans
past-due 90
days or more [1]
     Non-accrual
loans
     Accruing loans
past-due 90
days or more [1]
 

Commercial multi-family

   $ 1,396      $ —        $ —        $ —        $ 1,396      $ —    

Commercial real estate non-owner occupied

     18,205        —          365        —          18,570        —    

Commercial real estate owner occupied

     100,777        —          405        —          101,182        —    

Commercial and industrial

     36,754        78        377        —          37,131        78  

Construction

     4,293        —          —          —          4,293        —    

Mortgage[3]

     357,967        1,117,460        11,647        —          369,614        1,117,460  

Leasing

     3,957        —          —          —          3,957        —    

Legacy

     —          —          3,137        —          3,137        —    

Consumer:

                 

Credit cards

     —          11,004        7        —          7        11,004  

Home equity lines of credit

     —          329        14,731        —          14,731        329  

Personal

     21,852        91        2,604        —          24,456        91  

Auto

     13,356        —          —          —          13,356        —    

Other

     14,959        830        7        —          14,966        830  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total[2]

   $ 573,516      $ 1,129,792      $ 33,280      $ —        $ 606,796      $ 1,129,792  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

[1] Non-covered loans of $209 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.
[2] For purposes of this table non-performing loans exclude non-performing loans held-for-sale.
[3] 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. These balances include $194 million of residential mortgage loans in Puerto Rico insured by FHA or guaranteed by the VA that are no longer accruing interest as of March 31, 2018. These balances also include approximately $535 million of loans rebooked due to a repurchase option with GNMA. Under the GNMA program, issuers such as BPPR have the option but not the obligation to repurchase loans that are 90 days or more past due. For accounting purposes, these loans subject to the repurchase option are required to be reflected on the financial statements of BPPR with an offsetting liability. The Corporation has approximately $57 million in reverse mortgage loans in Puerto Rico which are guaranteed by FHA, but which are currently not accruing interest. Due to the guaranteed nature of the loans, it is the Corporation’s policy to exclude these balances from non-performing assets.

 

27


Table of Contents

At December 31, 2017

 
     Puerto Rico      Popular U.S.      Popular, Inc.  

(In thousands)

   Non-accrual
loans
     Accruing loans
past-due 90
days or more [1]
     Non-accrual
loans
     Accruing loans
past-due 90
days or more [1]
     Non-accrual
loans
     Accruing loans
past-due 90
days or more [1]
 

Commercial multi-family

   $ 1,115      $ —        $ 784      $ —        $ 1,899      $ —    

Commercial real estate non-owner occupied

     18,866        —          1,599        —          20,465        —    

Commercial real estate owner occupied

     101,068        —          862        —          101,930        —    

Commercial and industrial

     40,177        685        594        —          40,771        685  

Mortgage[3]

     306,697        1,204,691        14,852        —          321,549        1,204,691  

Leasing

     2,974        —          —          —          2,974        —    

Legacy

     —          —          3,039        —          3,039        —    

Consumer:

                 

Credit cards

     —          18,227        11        —          11        18,227  

Home equity lines of credit

     —          257        14,997        —          14,997        257  

Personal

     19,460        141        2,779        —          22,239        141  

Auto

     5,466        —          —          —          5,466        —    

Other

     15,617        1,148        —          —          15,617        1,148  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total[2]

   $ 511,440      $ 1,225,149      $ 39,517      $ —        $ 550,957      $ 1,225,149  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

[1] Non-covered loans of $215 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.
[2] For purposes of this table non-performing loans exclude non-performing loans held-for-sale.
[3] 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. These balances include $178 million of residential mortgage loans in Puerto Rico insured by FHA or guaranteed by the VA that are no longer accruing interest as of December 31, 2017. These balances also include approximately $840 million of loans rebooked due to a repurchase option with GNMA. Under the GNMA program, issuers such as BPPR have the option but not the obligation to repurchase loans that are 90 days or more past due. For accounting purposes, these loans subject to the repurchase option are required to be reflected on the financial statements of BPPR with an offsetting liability. The Corporation has approximately $58 million in reverse mortgage loans in Puerto Rico which are guaranteed by FHA, but which are currently not accruing interest. Due to the guaranteed nature of the loans, it is the Corporation’s policy to exclude these balances from non-performing assets.

Covered loans

The following tables present the composition of loans by past due status at March 31, 2018 and December 31, 2017 for covered loans held-in-portfolio. The information considers covered loans accounted for under ASC Subtopic 310-20 and ASC Subtopic 310-30.

 

March 31, 2018

 
     Past due                
     30-59      60-89      90 days      Total             Covered  

(In thousands)

   days      days      or more      past due      Current      loans HIP [1]  

Mortgage

   $ 44,199      $ 2,753      $ 67,652      $ 114,604      $ 386,079      $ 500,683  

Consumer

     1,231        —          1,026        2,257        11,671        13,928  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total covered loans

   $ 45,430      $ 2,753      $ 68,678      $ 116,861      $ 397,750      $ 514,611  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

[1] Includes $268 million pledged to secure credit facilities at the FHLB which are not permitted to sell or repledge the collateral.

 

December 31, 2017

 
     Past due                
     30-59      60-89      90 days      Total             Covered  

(In thousands)

   days      days      or more      past due      Current      loans HIP [1]  

Mortgage

   $ 16,640      $ 5,453      $ 59,018      $ 81,111      $ 421,818      $ 502,929  

Consumer

     518        147        988        1,653        12,692        14,345  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total covered loans

   $ 17,158      $ 5,600      $ 60,006      $ 82,764      $ 434,510      $ 517,274  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

[1] Includes $279 million pledged to secure credit facilities at the FHLB which are not permitted to sell or repledge the collateral.

 

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Table of Contents

The following table presents covered loans in non-performing status and accruing loans past-due 90 days or more by loan class at March 31, 2018 and December 31, 2017.

 

     March 31, 2018      December 31, 2017  
     Non-accrual      Accruing loans past      Non-accrual      Accruing loans past  

(In thousands)

   loans      due 90 days or more      loans      due 90 days or more  

Mortgage

   $ 3,413      $ —        $ 3,165      $ —    

Consumer

     182        —          188        —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Total[1]

   $ 3,595      $ —        $ 3,353      $ —    
  

 

 

    

 

 

    

 

 

    

 

 

 

 

[1] Covered loans 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 analyses.

The Corporation accounts for lines of credit with revolving privileges under the accounting guidance of ASC Subtopic 310-20, which requires that any differences between the contractually required loans payment receivable in excess of the initial investment in the loans be accreted into interest income over the life of the loans, if the loan is accruing interest. Covered loans accounted for under ASC Subtopic 310-20 amounted to $10 million at March 31, 2018 (December 31, 2017—$10 million).

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.

Loans acquired from Westernbank as part of an FDIC-assisted transaction

The carrying amount of the Westernbank 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”), as detailed in the following table.

 

     March 31, 2018     December 31, 2017  
     Carrying amount     Carrying amount  

(In thousands)

   Non-credit
impaired loans
    Credit impaired
loans
    Total     Non-credit
impaired loans
    Credit impaired
loans
    Total  

Commercial real estate

   $ 898,172     $ 13,543     $ 911,715     $ 909,389     $ 14,035     $ 923,424  

Commercial and industrial

     86,447       —         86,447       88,130       —         88,130  

Construction

     —         170       170       —         170       170  

Mortgage

     538,352       21,605       559,957       542,182       21,357       563,539  

Consumer

     16,096       758       16,854       16,900       758       17,658  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Carrying amount [1]

     1,539,067       36,076       1,575,143       1,556,601       36,320       1,592,921  

Allowance for loan losses

     (84,801     (4,962     (89,763     (64,520     (5,609     (70,129
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Carrying amount, net of allowance

   $ 1,454,266     $ 31,114     $ 1,485,380     $ 1,492,081     $ 30,711     $ 1,522,792  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

[1] The carrying amount of loans acquired from Westernbank and accounted for under ASC 310-30 which remains subject to the loss sharing agreement with the FDIC amounted to approximately $505 million as of March 31, 2018 and $507 million as of December 31, 2017.

The outstanding principal balance of Westernbank loans accounted pursuant to ASC Subtopic 310-30, amounted to $1.9 billion at March 31, 2018 (December 31, 2017 - $1.9 billion). At March 31, 2018, none of the acquired loans from the Westernbank FDIC-assisted transaction 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.

 

29


Table of Contents

Changes in the carrying amount and the accretable yield for the Westernbank loans accounted pursuant to the ASC Subtopic 310-30, for the quarters ended March 31, 2018 and 2017, were as follows:

 

     Activity in the accretable yield  
     Westernbank loans ASC 310-30  
     For the quarters ended  
     March 31, 2018     March 31, 2017  

(In thousands)

   Non-credit
impaired loans
    Credit
impaired loans
    Total     Non-credit
impaired loans
    Credit impaired
loans
    Total  

Beginning balance

   $ 875,837     $ 4,878     $ 880,715     $ 1,001,908     $ 8,179     $ 1,010,087  

Accretion

     (34,349     (659     (35,008     (36,016     (876     (36,892

Change in expected cash flows

     28,798       (130     28,668       7,789       222       8,011  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

   $ 870,286     $ 4,089     $ 874,375     $ 973,681     $ 7,525     $ 981,206  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     Carrying amount of Westernbank loans accounted for pursuant to ASC 310-30  
     For the quarters ended  
     March 31, 2018     March 31, 2017  

(In thousands)

   Non-credit
impaired loans
    Credit
impaired loans
    Total     Non-credit
impaired loans
    Credit impaired
loans
    Total  

Beginning balance

   $ 1,556,601     $ 36,320     $ 1,592,921     $ 1,695,381     $ 42,948     $ 1,738,329  

Accretion

     34,349       659       35,008       36,016       876       36,892  

Collections / loan sales / charge-offs

     (51,883     (903     (52,786     (83,069     (3,252     (86,321
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance[1]

   $ 1,539,067     $ 36,076     $ 1,575,143     $ 1,648,328     $ 40,572     $ 1,688,900  

Allowance for loan losses ASC 310-30 Westernbank loans

     (84,801     (4,962     (89,763     (59,283     (7,261     (66,544
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance, net of ALLL

   $ 1,454,266     $ 31,114     $ 1,485,380     $ 1,589,045     $ 33,311     $ 1,622,356  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

[1] The carrying amount of loans acquired from Westernbank and accounted for under ASC 310-30 which remain subject to the loss sharing agreement with the FDIC amounted to approximately $ 505 million as of March 31, 2018 (March 31, 2017- $542 million).

Other loans acquired with deteriorated credit quality

The outstanding principal balance of other acquired loans accounted pursuant to ASC Subtopic 310-30, amounted to $552 million at March 31, 2018 (December 31, 2017—$556 million). At March 31, 2018, none of the other acquired loans accounted 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 other acquired loans accounted pursuant to the ASC Subtopic 310-30, for the quarters ended March 31, 2018 and 2017 were as follows:

 

Activity in the accretable yield - Other acquired loans ASC 310-30

 
     For the quarters ended  

(In thousands)

   March 31, 2018      March 31, 2017  

Beginning balance

   $ 333,773      $ 278,896  

Additions

     3,437        3,254  

Accretion

     (7,052      (8,836

Change in expected cash flows

     193        36,464  
  

 

 

    

 

 

 

Ending balance

   $ 330,351      $ 309,778  
  

 

 

    

 

 

 

 

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

 
     For the quarters ended  

(In thousands)

   March 31, 2018      March 31, 2017  

Beginning balance

   $ 516,072      $ 562,695  

Additions

     5,272        5,581  

Accretion

     7,052        8,836  

Collections and charge-offs

     (18,348      (20,388
  

 

 

    

 

 

 

Ending balance

   $ 510,048      $ 556,724  

Allowance for loan losses ASC 310-30 non-covered loans

     (56,357      (28,909
  

 

 

    

 

 

 

Ending balance, net of allowance for loan losses

   $ 453,691      $ 527,815  
  

 

 

    

 

 

 

 

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Note 8 – Allowance for loan losses

The Corporation follows a systematic methodology to establish and evaluate the adequacy of the allowance for loan losses 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 allowance for loan losses.

The Corporation’s assessment of the allowance for loan losses 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 allowance for loan losses 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 for general reserves of the allowance for loan losses 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, 2018, 45% (March 31, 2017—55%) of the ALLL for non-covered 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 mortgage, leasing, credit cards and auto loans portfolios for 2018 and in the mortgage, other consumer and commercial real estate owner occupied portfolios for 2017.

For the period ended March 31, 2018, 5.41% (March 31, 2017—0.35%) of our 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 portfolios for 2018 and in the commercial multifamily loan and legacy portfolios for 2017.

 

  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 reserve of the allowance for loan losses.

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, 2018 and 2017.

 

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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 (reversal of 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  
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

 

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

     —          —          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  
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

 

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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  
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

For the quarter ended March 31, 2017

 

Puerto Rico - Non-covered loans

 

(In thousands)

   Commercial     Construction     Mortgage     Leasing     Consumer     Total  

Allowance for credit losses:

            

Beginning balance

   $ 189,686     $ 1,353     $ 143,320     $ 7,662     $ 125,963     $ 467,984  

Provision (reversal of provision)

     583       464       15,172       1,048       14,211       31,478  

Charge-offs

     (11,071     (3,587     (14,983     (1,341     (21,812     (52,794

Recoveries

     8,433       3,731       1,428       528       5,729       19,849  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

   $ 187,631     $ 1,961     $ 144,937     $ 7,897     $ 124,091     $ 466,517  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Specific ALLL

   $ 51,276     $ —       $ 41,067     $ 522     $ 22,331     $ 115,196  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

General ALLL

   $ 136,355     $ 1,961     $ 103,870     $ 7,375     $ 101,760     $ 351,321  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loans held-in-portfolio:

            

Impaired non-covered loans

   $ 348,823     $ —       $ 501,647     $ 1,803     $ 106,236     $ 958,509  

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

     6,715,507       95,459       5,368,071       717,840       3,120,843       16,017,720  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total non-covered loans held-in-portfolio

   $ 7,064,330     $ 95,459     $ 5,869,718     $ 719,643     $ 3,227,079     $ 16,976,229  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

For the quarter ended March 31, 2017

 

Puerto Rico - Covered Loans

 

(In thousands)

   Commercial      Construction      Mortgage     Leasing      Consumer     Total  

Allowance for credit losses:

               

Beginning balance

   $ —        $ —        $ 30,159     $ —        $ 191     $ 30,350  

Provision (reversal of provision)

     —          —          (1,690     —          331       (1,359

Charge-offs

     —          —          (1,231     —          (93     (1,324

Recoveries

     —          —          103       —          1       104  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Ending balance

   $ —        $ —        $ 27,341     $ —        $ 430     $ 27,771  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Specific ALLL

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

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

General ALLL

   $ —        $ —        $ 27,341     $ —        $ 430     $ 27,771  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Loans held-in-portfolio:

               

Impaired covered loans

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

Covered loans held-in-portfolio excluding impaired loans

     —          —          536,287       —          15,693       551,980  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total covered loans held-in-portfolio

   $ —        $ —        $ 536,287     $ —        $ 15,693     $ 551,980  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

 

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For the quarter ended March 31, 2017

 

Popular U.S.

 

(In thousands)

  Commercial     Construction     Mortgage     Legacy     Consumer     Total  

Allowance for credit losses:

           

Beginning balance

  $ 12,968     $ 8,172     $ 4,614     $ 1,343     $ 15,220     $ 42,317  

Provision (reversal of provision)

    7,622       (136     (436     (665     4,194       10,579  

Charge-offs

    (70     —         (106     (41     (4,733     (4,950

Recoveries

    533       —         210       529       990       2,262  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

  $ 21,053     $ 8,036     $ 4,282     $ 1,166     $ 15,671     $ 50,208  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Specific ALLL

  $ —       $ —       $ 2,197     $ —       $ 679     $ 2,876  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

General ALLL

  $ 21,053     $ 8,036     $ 2,085     $ 1,166     $ 14,992     $ 47,332  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loans held-in-portfolio:

           

Impaired loans

  $ —       $ —       $ 8,921     $ —       $ 2,780     $ 11,701  

Loans held-in-portfolio excluding impaired loans

    3,747,370       735,846       749,348       40,688       473,539       5,746,791  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total loans held-in-portfolio

  $ 3,747,370     $ 735,846     $ 758,269     $ 40,688     $ 476,319     $ 5,758,492  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

For the quarter ended March 31, 2017

 

Popular, Inc.

 

(In thousands)

  Commercial     Construction     Mortgage     Legacy     Leasing     Consumer     Total  

Allowance for credit losses:

             

Beginning balance

  $ 202,654     $ 9,525     $ 178,093     $ 1,343     $ 7,662     $ 141,374     $ 540,651  

Provision (reversal of provision)

    8,205       328       13,046       (665     1,048       18,736       40,698  

Charge-offs

    (11,141     (3,587     (16,320     (41     (1,341     (26,638     (59,068

Recoveries

    8,966       3,731       1,741       529       528       6,720       22,215  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

  $ 208,684     $ 9,997     $ 176,560     $ 1,166     $ 7,897     $ 140,192     $ 544,496