Segment Reporting

12 Months Ended

Dec. 31, 2017

Note 41 – Segment reporting

The Corporation’s corporate structure consists of two reportable segments – Banco Popular de Puerto Rico and Banco Popular North America. These reportable segments pertain only to the continuing operations of Popular, Inc.

Management determined the reportable segments based on the internal reporting used to evaluate performance and to assess where to allocate resources. The segments were determined based on the organizational structure, which focuses primarily on the markets the segments serve, as well as on the products and services offered by the segments.

Banco Popular de Puerto Rico:

Given that Banco Popular de Puerto Rico constitutes a significant portion of the Corporation’s results of operations and total assets at December 31, 2017, additional disclosures are provided for the business areas included in this reportable segment, as described below:

Commercial banking represents the Corporation’s banking operations conducted at BPPR, which are targeted mainly to corporate, small and middle size businesses. It includes aspects of the lending and depository businesses, as well as other finance and advisory services. BPPR allocates funds across business areas based on duration matched transfer pricing at market rates. This area also incorporates income related with the investment of excess funds, as well as a proportionate share of the investment function of BPPR.
Consumer and retail banking represents the branch banking operations of BPPR which focus on retail clients. It includes the consumer lending business operations of BPPR, as well as the lending operations of Popular Auto and Popular Mortgage. Popular Auto focuses on auto and lease financing, while Popular Mortgage focuses principally on residential mortgage loan originations. The consumer and retail banking area also incorporates income related with the investment of excess funds from the branch network, as well as a proportionate share of the investment function of BPPR.
Other financial services include the trust and asset management service units of BPPR, the brokerage and investment banking operations of Popular Securities, and the insurance agency and reinsurance businesses of Popular Insurance, Popular Insurance V.I., Popular Risk Services, and Popular Life Re. Most of the services that are provided by these subsidiaries generate profits based on fee income.

Banco Popular North America:

Banco Popular North America’s reportable segment consists of the banking operations of BPNA, E-LOAN, Inc., Popular Equipment Finance, Inc. and Popular Insurance Agency, U.S.A. BPNA operates through a retail branch network in the U.S. mainland under the name of Popular Community Bank, while E-LOAN, Inc. supported BPNA’s deposit gathering through its online platform until March 31, 2017, when said operations were transferred to Popular Direct, a division of BPNA. During the third quarter of 2015, BPNA and E-LOAN Inc. completed an asset purchase and sale transaction in which E-LOAN, Inc. sold to BPNA all of its outstanding loan portfolio, including residential mortgage loans and home equity lines of credit, which had a carrying value of approximately $213 million. Prior to this transaction, the Corporation provided additional disclosures for the BPNA reportable segment related to E-LOAN Inc. After the close of the above mentioned asset purchase and sale transaction, additional disclosures with respect to E-LOAN Inc. are no longer considered relevant to the financial statements and accordingly are not presented. During 2017, the E-LOAN brand was transferred to BPPR and is being used to offer personal loans through an online platform. Popular Equipment Finance, Inc. also holds a running-off loan portfolio as this subsidiary ceased originating loans during 2009. Popular Insurance Agency, U.S.A. offers investment and insurance services across the BPNA branch network.

The Corporate group consists primarily of the holding companies: Popular, Inc., Popular North America, Popular International Bank and certain of the Corporation’s investments accounted for under the equity method, including EVERTEC and Centro Financiero BHD, Leon. The Corporate group also includes the expenses of certain corporate areas that are identified as critical to the organization including: Finance, Risk Management and Legal.

The accounting policies of the individual operating segments are the same as those of the Corporation. Transactions between reportable segments are primarily conducted at market rates, resulting in profits that are eliminated for reporting consolidated results of operations.

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

December 31, 2017
				Banco Popular		Banco Popular		Intersegment
(In thousands)				de Puerto Rico		North America		Eliminations
Net interest income			$	1,279,844	$	280,946	$	(217)
Provision for loan losses				253,032		77,944		-
Non-interest income				364,164		20,430		(572)
Amortization of intangibles				8,713		665		-
Depreciation expense				39,162		8,553		-
Other operating expenses				957,924		170,042		(551)
Income tax expense				72,741		191,749		(93)
Net income			$	312,436	$	(147,577)	$	(145)
Segment assets			$	34,843,668	$	9,168,256	$	(16,992)


December 31, 2017
		Reportable
(In thousands)		Segments		Corporate		Eliminations		Total Popular, Inc.
Net interest income (expense)	$	1,560,573	$	(58,609)	$	-	$	1,501,964
Provision for loan losses		330,976		403		(5,955)		325,424
Non-interest income		384,022		37,949		(2,804)		419,167
Amortization of intangibles		9,378		-		-		9,378
Depreciation expense		47,715		649		-		48,364
Other operating expenses		1,127,415		74,731		(2,692)		1,199,454
Income tax expense (benefit)		264,397		(35,835)		2,268		230,830
Net income (loss)	$	164,714	$	(60,608)	$	3,575	$	107,681
Segment assets	$	43,994,932	$	5,046,153	$	(4,763,748)	$	44,277,337

December 31, 2016
				Banco Popular		Banco Popular		Intersegment
(In thousands)				de Puerto Rico		North America		Eliminations
Net interest income			$	1,224,771	$	258,416	$	(474)
Provision for loan losses				154,785		15,266		-
Non-interest income				243,368		21,651		(119)
Amortization of intangibles				11,479		665		-
Goodwill impairment charge				3,801		-		-
Depreciation expense				39,505		6,715		-
Other operating expenses				952,894		174,585		(779)
Income tax expense				75,615		36,712		92
Net income			$	230,060	$	46,124	$	94
Segment assets			$	29,841,854	$	8,629,439	$	(31,397)


December 31, 2016
		Reportable
(In thousands)		Segments		Corporate		Eliminations		Total Popular, Inc.
Net interest income (expense)	$	1,482,713	$	(60,658)	$	-	$	1,422,055
Provision (reversal) for loan losses		170,051		(35)		-		170,016
Non-interest income		264,900		35,705		(2,669)		297,936
Amortization of intangibles		12,144		-		-		12,144
Goodwill impairment charge		3,801		-		-		3,801
Depreciation expense		46,220		654		-		46,874
Other operating expenses		1,126,700		68,694		(2,578)		1,192,816
Income tax expense (benefit)		112,419		(33,617)		(18)		78,784
Net income (loss)	$	276,278	$	(60,649)	$	(73)	$	215,556
Segment assets	$	38,439,896	$	4,982,113	$	(4,760,400)	$	38,661,609



December 31, 2015
				Banco Popular		Banco Popular		Intersegment
(In thousands)				de Puerto Rico		North America		Eliminations
Net interest income			$	1,231,585	$	239,379	$	-
Provision for loan losses				240,817		626		-
Non-interest income				464,786		22,667		125
Amortization of intangibles				10,465		554		-
Depreciation expense				40,440		6,272		-
Other operating expenses				970,201		188,102		-
Income tax expense (benefit)				116,058		(580,738)		-
Net income			$	318,390	$	647,230	$	125
Segment assets			$	27,907,350	$	7,780,002	$	(129,038)


December 31, 2015
		Reportable
(In thousands)		Segments		Corporate		Eliminations		Total Popular, Inc.
Net interest income (expense)	$	1,470,964	$	(61,981)	$	-	$	1,408,983
Provision for loan losses		241,443		35		-		241,478
Non-interest income		487,578		34,486		(2,523)		519,541
Amortization of intangibles		11,019		-		-		11,019
Depreciation expense		46,712		762		-		47,474
Other operating expenses		1,158,303		74,212		(2,787)		1,229,728
Income tax benefit		(464,680)		(30,595)		103		(495,172)
Net income (loss)	$	965,745	$	(71,909)	$	161	$	893,997
Segment assets	$	35,558,314	$	4,945,704	$	(4,742,285)	$	35,761,733

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

December 31, 2017
Banco Popular de Puerto Rico
				Consumer		Other				Total Banco
		Commercial		and Retail		Financial				Popular de
(In thousands)		Banking		Banking		Services		Eliminations		Puerto Rico
Net interest income	$	518,404	$	753,922	$	7,499	$	19	$	1,279,844
Provision for loan losses		8,911		244,121		-		-		253,032
Non-interest income		79,630		194,741		90,222		(429)		364,164
Amortization of intangibles		211		4,274		4,228		-		8,713
Depreciation expense		17,338		21,120		704		-		39,162
Other operating expenses		239,369		656,998		62,030		(473)		957,924
Income tax expense		93,378		(31,404)		10,767		-		72,741
Net income	$	238,827	$	53,554	$	19,992	$	63	$	312,436
Segment assets	$	21,735,909	$	20,180,173	$	520,717	$	(7,593,131)	$	34,843,668

December 31, 2016
Banco Popular de Puerto Rico
				Consumer		Other				Total Banco
		Commercial		and Retail		Financial				Popular de
(In thousands)		Banking		Banking		Services		Eliminations		Puerto Rico
Net interest income	$	472,948	$	742,854	$	6,172	$	2,797	$	1,224,771
Provision for loan losses		12,884		141,901		-		-		154,785
Non-interest income		(91,411)		232,113		103,005		(339)		243,368
Amortization of intangibles		145		7,042		4,292		-		11,479
Goodwill impairment charge		-		-		3,801		-		3,801
Depreciation expense		16,956		21,684		865		-		39,505
Other operating expenses		251,375		631,234		70,624		(339)		952,894
Income tax expense		41,639		24,068		9,908		-		75,615
Net income	$	58,538	$	149,038	$	19,687	$	2,797	$	230,060
Segment assets	$	15,263,278	$	17,592,743	$	406,429	$	(3,420,596)	$	29,841,854



December 31, 2015
Banco Popular de Puerto Rico
				Consumer		Other				Total Banco
		Commercial		and Retail		Financial				Popular de
(In thousands)		Banking		Banking		Services		Eliminations		Puerto Rico
Net interest income	$	457,119	$	760,157	$	7,793	$	6,516	$	1,231,585
Provision for loan losses		101,840		138,977		-		-		240,817
Non-interest income		113,697		248,024		103,464		(399)		464,786
Amortization of intangibles		7		7,330		3,128		-		10,465
Depreciation expense		16,984		22,385		1,071		-		40,440
Other operating expenses		281,995		617,973		70,632		(399)		970,201
Income tax expense		48,793		55,429		11,836		-		116,058
Net income	$	121,197	$	166,087	$	24,590	$	6,516	$	318,390
Segment assets	$	12,169,349	$	15,662,115	$	392,658	$	(316,772)	$	27,907,350

Geographic Information

(In thousands)		2017		2016		2015
Revenues:^[1]
Puerto Rico	$	1,527,758	$	1,361,663	$	1,598,066
United States		318,093		283,349		255,714
Other		75,280		74,979		74,744
Total consolidated revenues	$	1,921,131	$	1,719,991	$	1,928,524

[1] Total revenues include net interest income (expense), service charges on deposit accounts, other service fees, mortgage banking activities, net gain (loss) and valuation adjustments on investment securities, trading account (loss) profit, net (loss) gain on sale of loans and valuation adjustments on loans held-for-sale, adjustments to indemnity reserves on loans sold, FDIC loss share (expense) income and other operating income.

Selected Balance Sheet Information
(In thousands)		2017		2016		2015
Puerto Rico
Total assets	$	33,705,624	$	28,813,289	$	26,764,689
Loans		17,591,078		16,880,868		17,477,070
Deposits		27,575,292		23,185,551		20,893,232
United States
Total assets	$	9,648,865	$	8,928,475	$	7,858,712
Loans		6,608,056		5,799,562		4,873,504
Deposits		6,635,153		6,266,473		5,288,886
Other
Total assets	$	922,848	$	919,845	$	1,138,332
Loans		743,329		755,017		778,656
Deposits ^[1]		1,243,063		1,044,200		1,027,605
[1] Represents deposits from BPPR operations located in the U.S. and British Virgin Islands.