Segment Reporting

3 Months Ended

Mar. 31, 2018

Note 33 – Segment reporting

The Corporation’s corporate structure consists of two reportable segments – Banco Popular de Puerto Rico and Popular U.S. 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 March 31, 2018, 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.

Popular U.S.:

Popular U.S. reportable segment consists of the banking operations of PB, E-LOAN, Inc., Popular Equipment Finance, Inc. and Popular Insurance Agency, U.S.A. PB operates through a retail branch network in the U.S. mainland under the name of Popular, while E-LOAN, Inc. supported PB’s deposit gathering through its online platform until March 31, 2017, when said operations were transferred to Popular Direct, a division of PB. 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 PB branch network.

The Corporate group consists primarily of the holding companies: Popular, Inc., Popular North America, Popular International Bank and certain of the Corporation’s investments accounted for under the equity method, including EVERTEC and Centro Financiero BHD, 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:

2018

For the quarter ended March 31, 2018
				Banco Popular				Intersegment
(In thousands)				de Puerto Rico		Popular Bank		Eliminations
Net interest income			$	332,268	$	74,993	$	4
Provision for loan losses				58,469		12,615		-
Non-interest income				96,625		4,341		(139)
Amortization of intangibles				2,159		166		-
Depreciation expense				10,528		2,118		-
Other operating expenses				240,529		45,220		(136)
Income tax expense				25,847		1,089		-
Net income			$	91,361	$	18,126	$	1
Segment assets			$	36,244,300	$	9,227,093	$	(14,471)


For the quarter ended March 31, 2018
		Reportable
(In thousands)		Segments		Corporate		Eliminations		Total Popular, Inc.
Net interest income (expense)	$	407,265	$	(14,218)	$	-	$	393,047
Provision (reversal) for loan losses		71,084		(21)		-		71,063
Non-interest income		100,827		12,948		(278)		113,497
Amortization of intangibles		2,325		-		-		2,325
Depreciation expense		12,646		187		-		12,833
Other operating expenses		285,613		22,082		(851)		306,844
Income tax expense (benefit)		26,936		(5,012)		231		22,155
Net income (loss)	$	109,488	$	(18,506)	$	342	$	91,324
Segment assets	$	45,456,922	$	5,033,543	$	(4,733,704)	$	45,756,761

2017

For the quarter ended March 31, 2017
				Banco Popular				Intersegment
(In thousands)				de Puerto Rico		Popular Bank		Eliminations
Net interest income			$	310,212	$	67,119	$	(164)
Provision for loan losses				30,118		10,580		-
Non-interest income				99,732		4,931		(144)
Amortization of intangibles				2,179		166		-
Depreciation expense				9,733		1,903		-
Other operating expenses				236,301		41,713		(138)
Income tax expense				33,998		7,290		(70)
Net income			$	97,615	$	10,398	$	(100)
Segment assets			$	31,217,093	$	8,832,246	$	(22,946)


For the quarter ended March 31, 2017
		Reportable
(In thousands)		Segments		Corporate		Eliminations		Total Popular, Inc.
Net interest income (expense)	$	377,167	$	(15,069)	$	-	$	362,098
Provision for loan losses		40,698		-		-		40,698
Non-interest income		104,519		11,427		(77)		115,869
Amortization of intangibles		2,345		-		-		2,345
Depreciation expense		11,636		163		-		11,799
Other operating expenses		277,876		19,926		(628)		297,174
Income tax expense (benefit)		41,218		(8,423)		211		33,006
Net income (loss)	$	107,913	$	(15,308)	$	340	$	92,945
Segment assets	$	40,026,393	$	5,004,658	$	(4,771,769)	$	40,259,282

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

2018

For the quarter ended March 31, 2018
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	$	139,270	$	191,434	$	1,576	$	(12)	$	332,268
Provision for loan losses		20,693		37,776		-		-		58,469
Non-interest income		12,562		61,857		22,449		(243)		96,625
Amortization of intangibles		52		1,069		1,038		-		2,159
Depreciation expense		4,289		6,085		154		-		10,528
Other operating expenses		60,261		162,490		18,033		(255)		240,529
Income tax expense		16,875		7,457		1,515		-		25,847
Net income	$	49,662	$	38,414	$	3,285	$	-	$	91,361
Segment assets	$	23,652,941	$	20,618,670	$	346,096	$	(8,373,407)	$	36,244,300

2017

For the quarter ended March 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	$	120,296	$	188,132	$	1,787	$	(3)	$	310,212
Provision (reversal) for loan losses		(573)		30,691		-		-		30,118
Non-interest income		19,428		58,071		22,311		(78)		99,732
Amortization of intangibles		54		1,067		1,058		-		2,179
Depreciation expense		4,262		5,267		204		-		9,733
Other operating expenses		60,833		161,264		14,292		(88)		236,301
Income tax expense		22,076		8,983		2,939		-		33,998
Net income	$	53,072	$	38,931	$	5,605	$	7	$	97,615
Segment assets	$	17,559,586	$	18,178,383	$	325,217	$	(4,846,093)	$	31,217,093

Geographic Information
		Quarter ended
(In thousands)		March 31, 2018		March 31, 2017
Revenues:^[1]
Puerto Rico	$	399,414	$	384,448
United States		86,528		74,843
Other		20,602		18,676
Total consolidated revenues	$	506,544	$	477,967

[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)		March 31, 2018		December 31, 2017
Puerto Rico
Total assets	$	35,123,827	$	33,705,624
Loans		17,202,481		17,591,078
Deposits		29,053,772		27,575,292
United States
Total assets	$	9,711,729	$	9,648,865
Loans		6,751,863		6,608,056
Deposits		6,601,323		6,635,153
Other
Total assets	$	921,205	$	922,848
Loans		725,905		743,329
Deposits ^[1]		1,478,998		1,243,063
[1] Represents deposits from BPPR operations located in the U.S. and British Virgin Islands.