Loans

9 Months Ended

Sep. 30, 2019

Receivables

Loans

Note 8 – Loans

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

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

During the quarter and nine months ended September 30, 2019, the Corporation recorded purchases (including repurchases) of mortgage loans amounting to $81 million and $266 million, respectively; and of consumer loans of $64 million and $222 million, respectively. For the nine months ended September 30, 2019 the Corporation recorded purchases of commercial loans (including loan participations) amounting to $43 million. During the quarter and nine months ended September 30, 2018, the Corporation recorded purchases (including repurchases) of mortgage loans amounting to $147 million and $480 million, respectively; and of consumer loans of $48 million and $152 million, respectively.

The Corporation performed whole-loan sales involving approximately $18 million and $46 million of residential mortgage loans during the quarter and nine months ended September 30, 2019, respectively (September 30, 2018 - $19 million and $45 million, respectively). Also, the Corporation securitized approximately $ 88 million and $ 247 million of mortgage loans into Government National Mortgage Association (“GNMA”) mortgage-backed securities during the quarter and nine months ended September 30, 2019, respectively (September 30, 2018 - $ 110 million and $ 320 million, respectively). Furthermore, the Corporation securitized approximately $ 33 million and $ 84 million of mortgage loans into Federal National Mortgage Association (“FNMA”) mortgage-backed securities during the quarter and nine months ended September 30, 2019, respectively (September 30, 2018 - $ 26 million and $ 72 million, respectively). During the quarter and nine months ended September 30, 2019, the Corporation performed sales of commercial and construction loans, including loan participations amounting to $47 million and $81 million, respectively.

Delinquency status

The following table presents the composition of loans held-in-portfolio (“HIP”), net of unearned income, by past due status, and by loan class including those that are in non-performing status or that are accruing interest but are past due 90 days or more at September 30, 2019 and December 31, 2018

September 30, 2019
Puerto Rico
			Past due											Past due 90 days or more
		30-59		60-89		90 days		Total						Non-accrual			Accruing
(In thousands)		days		days		or more		past due		Current		Loans HIP		loans		loans[1]
Commercial multi-family		$	331	$	-	$	1,824	$	2,155	$	146,395	$	148,550	$	1,784	$	-
Commercial real estate:
	Non-owner occupied		25,497		3,449		47,692		76,638		2,020,511		2,097,149		43,349		-
	Owner occupied		9,284		2,682		90,507		102,473		1,514,624		1,617,097		75,513		-
Commercial and industrial			31,435		6,703		46,104		84,242		3,221,615		3,305,857		45,720		311
Construction			-		263		274		537		123,535		124,072		274		-
Mortgage			287,578		142,727		876,960		1,307,265		4,928,311		6,235,576		296,025		459,704
Leasing			10,906		2,745		2,733		16,384		1,006,100		1,022,484		2,733		-
Consumer:
	Credit cards		10,099		7,080		16,459		33,638		1,002,579		1,036,217		-		16,459
	Home equity lines of credit		15		-		887		902		4,981		5,883		887		-
	Personal		13,724		10,012		19,418		43,154		1,306,449		1,349,603		18,710		15
	Auto		85,717		19,973		22,954		128,644		2,719,114		2,847,758		22,954		-
	Other		660		617		13,149		14,426		127,910		142,336		12,824		325
Total		$	475,246	$	196,251	$	1,138,961	$	1,810,458	$	18,122,124	$	19,932,582	$	520,773	$	476,814
[1]	Loans HIP of $ 141 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.

September 30, 2019
Popular U.S.
			Past due											Past due 90 days or more
		30-59		60-89		90 days		Total						Non-accrual			Accruing
(In thousands)		days		days		or more		past due		Current		Loans HIP		loans		loans[1]
Commercial multi-family		$	-	$	-	$	2,097	$	2,097	$	1,598,517	$	1,600,614	$	2,097	$	-
Commercial real estate:
	Non-owner occupied		-		-		292		292		1,953,919		1,954,211		292		-
	Owner occupied		4,884		243		259		5,386		313,733		319,119		259		-
Commercial and industrial			2,449		76		48,563		51,088		1,114,764		1,165,852		683		-
Construction			-		-		10,060		10,060		619,924		629,984		10,060		-
Mortgage			1,159		4,049		9,517		14,725		918,318		933,043		9,517		-
Legacy			54		89		2,318		2,461		20,731		23,192		2,318		-
Consumer:
	Credit cards		-		-		-		-		78		78		-		-
	Home equity lines of credit		685		894		10,117		11,696		112,806		124,502		10,117		-
	Personal		1,852		1,499		1,670		5,021		319,084		324,105		1,670		-
	Other		20		-		6		26		667		693		6		-
Total		$	11,103	$	6,850	$	84,899	$	102,852	$	6,972,541	$	7,075,393	$	37,019	$	-
[1]	Loans HIP of $ 48 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.

September 30, 2019
Popular, Inc.
			Past due											Past due 90 days or more
		30-59		60-89		90 days		Total						Non-accrual			Accruing
(In thousands)		days		days		or more		past due		Current		Loans HIP[3] [4]		loans		loans[5]
Commercial multi-family		$	331	$	-	$	3,921	$	4,252	$	1,744,912	$	1,749,164	$	3,881	$	-
Commercial real estate:
	Non-owner occupied		25,497		3,449		47,984		76,930		3,974,430		4,051,360		43,641		-
	Owner occupied		14,168		2,925		90,766		107,859		1,828,357		1,936,216		75,772		-
Commercial and industrial			33,884		6,779		94,667		135,330		4,336,379		4,471,709		46,403		311
Construction			-		263		10,334		10,597		743,459		754,056		10,334		-
Mortgage[1]			288,737		146,776		886,477		1,321,990		5,846,629		7,168,619		305,542		459,704
Leasing			10,906		2,745		2,733		16,384		1,006,100		1,022,484		2,733		-
Legacy[2]			54		89		2,318		2,461		20,731		23,192		2,318		-
Consumer:
	Credit cards		10,099		7,080		16,459		33,638		1,002,657		1,036,295		-		16,459
	Home equity lines of credit		700		894		11,004		12,598		117,787		130,385		11,004		-
	Personal		15,576		11,511		21,088		48,175		1,625,533		1,673,708		20,380		15
	Auto		85,717		19,973		22,954		128,644		2,719,114		2,847,758		22,954		-
	Other		680		617		13,155		14,452		128,577		143,029		12,830		325
Total		$	486,349	$	203,101	$	1,223,860	$	1,913,310	$	25,094,665	$	27,007,975	$	557,792	$	476,814

[1]	It is the Corporation’s policy to report delinquent residential mortgage loans insured by FHA or guaranteed by the VA as accruing loans past due 90 days or more as opposed to non-performing since the principal repayment is insured.
[2]	The legacy portfolio is comprised of commercial loans, construction loans and lease financings related to certain lending products exited by the Corporation as part of restructuring efforts carried out in prior years at the Popular U.S. segment.
[3]	Loans held-in-portfolio are net of $ 173 million in unearned income and exclude $ 56 million in loans held-for-sale.
[4]	Includes $6.7 billion pledged to secure credit facilities and public funds that the secured parties are not permitted to sell or repledge the collateral, of which $4.6 billion were pledged at the Federal Home Loan Bank ("FHLB") as collateral for borrowings and $2.1 billion at the Federal Reserve Bank ("FRB") for discount window borrowings.
[5]	Loans HIP of $189 million accounted for under ASC Subtopic 310-30 are excluded from the above table as they are considered to be performing due to the application of the accretion method, in which these loans will accrete interest income over the remaining life of the loans using estimated cash flow analysis.

December 31, 2018
Puerto Rico
			Past due											Past due 90 days or more
			30-59		60-89		90 days	Total						Non-accrual			Accruing
(In thousands)			days		days		or more	past due		Current		Loans HIP		loans		loans[1]
Commercial multi-family		$	1,441	$	112	$	598	$	2,151	$	143,477	$	145,628	$	546	$	-
Commercial real estate:
	Non-owner occupied		92,075		839		45,691		138,605		2,183,996		2,322,601		39,257		-
	Owner occupied		6,681		10,839		99,235		116,755		1,605,498		1,722,253		88,069		-
Commercial and industrial			4,137		641		55,321		60,099		3,122,062		3,182,161		55,078		243
Construction			-		-		1,788		1,788		84,167		85,955		1,788		-
Mortgage			275,367		128,104		1,043,607		1,447,078		4,986,245		6,433,323		323,565		595,525
Leasing			7,663		1,827		3,313		12,803		921,970		934,773		3,313		-
Consumer:
	Credit cards		9,504		7,391		16,035		32,930		1,014,343		1,047,273		-		16,035
	Home equity lines of credit		-		97		165		262		5,089		5,351		11		154
	Personal		13,069		7,907		18,515		39,491		1,211,134		1,250,625		17,887		35
	Auto		52,204		9,862		24,177		86,243		2,522,542		2,608,785		24,050		127
	Other		566		288		14,958		15,812		128,932		144,744		14,534		424
Total		$	462,707	$	167,907	$	1,323,403	$	1,954,017	$	17,929,455	$	19,883,472	$	568,098	$	612,543
[1]	Non-covered loans HIP of $143 million accounted for under ASC Subtopic 310-30 are excluded from the above table as they are considered to be performing due to the application of the accretion method, in which these loans will accrete interest income over the remaining life of the loans using estimated cash flow analysis.

December 31, 2018
Popular U.S.
			Past due											Past due 90 days or more
			30-59		60-89		90 days		Total					Non-accrual			Accruing
(In thousands)			days		days		or more		past due		Current		Loans HIP	loans		loans[1]
Commercial multi-family		$	3,163	$	-	$	-	$	3,163	$	1,398,377	$	1,401,540	$	-	$	-
Commercial real estate:
	Non-owner occupied		707		288		365		1,360		1,880,384		1,881,744		365		-
	Owner occupied		5,125		1,728		381		7,234		291,705		298,939		381		-
Commercial and industrial			2,354		995		73,726		77,075		1,011,078		1,088,153		330		-
Construction			-		-		12,060		12,060		681,434		693,494		12,060		-
Mortgage			13,615		3,197		11,033		27,845		774,090		801,935		11,033		-
Legacy			195		445		2,627		3,267		22,682		25,949		2,627		-
Consumer:
	Credit cards		2		-		-		2		36		38		-		-
	Home equity lines of credit		886		464		13,579		14,929		128,123		143,052		13,579		-
	Personal		2,319		1,723		2,610		6,652		282,697		289,349		2,610		-
	Other		-		-		4		4		220		224		4		-
Total		$	28,366	$	8,840	$	116,385	$	153,591	$	6,470,826	$	6,624,417	$	42,989	$	-
[1]	Non-covered loans HIP of $ 73 million accounted for under ASC Subtopic 310-30 are excluded from the above table as they are considered to be performing due to the application of the accretion method, in which these loans will accrete interest income over the remaining life of the loans using estimated cash flow analysis.

December 31, 2018
Popular, Inc.
			Past due											Past due 90 days or more
			30-59		60-89		90 days		Total					Non-accrual			Accruing
(In thousands)			days		days		or more		past due	Current		Loans HIP[3] [4]		loans		loans[5]
Commercial multi-family		$	4,604	$	112	$	598	$	5,314	$	1,541,854	$	1,547,168	$	546	$	-
Commercial real estate:
	Non-owner occupied		92,782		1,127		46,056		139,965		4,064,380		4,204,345		39,622		-
	Owner occupied		11,806		12,567		99,616		123,989		1,897,203		2,021,192		88,450		-
Commercial and industrial			6,491		1,636		129,047		137,174		4,133,140		4,270,314		55,408		243
Construction			-		-		13,848		13,848		765,601		779,449		13,848		-
Mortgage[1]			288,982		131,301		1,054,640		1,474,923		5,760,335		7,235,258		334,598		595,525
Leasing			7,663		1,827		3,313		12,803		921,970		934,773		3,313		-
Legacy[2]			195		445		2,627		3,267		22,682		25,949		2,627		-
Consumer:
	Credit cards		9,506		7,391		16,035		32,932		1,014,379		1,047,311		-		16,035
	Home equity lines of credit		886		561		13,744		15,191		133,212		148,403		13,590		154
	Personal		15,388		9,630		21,125		46,143		1,493,831		1,539,974		20,497		35
	Auto		52,204		9,862		24,177		86,243		2,522,542		2,608,785		24,050		127
	Other		566		288		14,962		15,816		129,152		144,968		14,538		424
Total		$	491,073	$	176,747	$	1,439,788	$	2,107,608	$	24,400,281	$	26,507,889	$	611,087	$	612,543

[1]	It is the Corporation’s policy to report delinquent residential mortgage loans insured by FHA or guaranteed by the VA as accruing loans past due 90 days or more as opposed to non-performing since the principal repayment is insured.
[2]	The legacy portfolio is comprised of commercial loans, construction loans and lease financings related to certain lending products exited by the Corporation as part of restructuring efforts carried out in prior years at the Popular U.S. segment.
[3]	Loans held-in-portfolio are net of $ 156 million in unearned income and exclude $ 51 million in loans held-for-sale.
[4]	Includes $6.9 billion pledged to secure credit facilities and public funds that the secured parties are not permitted to sell or repledge the collateral, of which $4.8 billion were pledged at the FHLB as collateral for borrowings and $2.1 billion at the FRB for discount window borrowings.
[5]	Non-covered loans HIP of $216 million accounted for under ASC Subtopic 310-30 are excluded from the above table as they are considered to be performing due to the application of the accretion method, in which these loans will accrete interest income over the remaining life of the loans using estimated cash flow analysis.

At September 30, 2019, mortgage loans held-in-portfolio include $1.4 billion of loans insured by the Federal Housing Administration (“FHA”), or guaranteed by the U.S. Department of Veterans Affairs (“VA”) of which $461 million are 90 days or more past due, including $99 million of loans rebooked under the GNMA buyback option, discussed below (December 31, 2018 - $1.4 billion, $598 million and $134 million, respectively). Within this portfolio, loans in a delinquency status of 90 days or more are reported as accruing loans as opposed to non-performing since the principal repayment is insured. These balances include $241 million of residential mortgage loans in Puerto Rico that are no longer accruing interest as of September 30, 2019 (December 31, 2018 - $283 million). Additionally, the Corporation has approximately $65 million in reverse mortgage loans in Puerto Rico which are guaranteed by FHA, but which are currently not accruing interest at September 30, 2019 (December 31, 2018 - $69 million).

Loans with a delinquency status of 90 days past due as of September 30, 2019 include $99 million in loans previously pooled into GNMA securities (December 31, 2018 - $134 million). Under the GNMA program, issuers such as BPPR have the option but not the obligation to repurchase loans that are 90 days or more past due. For accounting purposes, these loans subject to the repurchase option are required to be reflected on the financial statements of BPPR with an offsetting liability.

Loans acquired with deteriorated credit quality accounted for under ASC 310-30

The following provides information of loans acquired with evidence of credit deterioration as of the acquisition date, accounted for under the guidance of ASC 310-30.

The outstanding principal balance of acquired loans accounted pursuant to ASC Subtopic 310-30, amounted to $1.9 billion at September 30, 2019 (December 31, 2018 - $2.2 billion). The carrying amount of these loans consisted of loans determined to be impaired at the time of acquisition, which are accounted for in accordance with ASC Subtopic 310-30 (“credit impaired loans”), and loans that were considered to be performing at the acquisition date, accounted for by analogy to ASC Subtopic 310-30 (“non-credit impaired loans”).

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

Carrying amount
(In thousands)		September 30, 2019		December 31, 2018
Commercial real estate	$	683,046	$	801,774
Commercial and industrial		134,962		84,465
Mortgage		871,803		982,821
Consumer		12,563		14,496
Carrying amount		1,702,374		1,883,556
Allowance for loan losses		(94,610)		(122,135)
Carrying amount, net of allowance	$	1,607,764	$	1,761,421

At September 30, 2019, none of the acquired loans accounted for under ASC Subtopic 310-30 were considered non-performing loans. Therefore, interest income, through accretion of the difference between the carrying amount of the loans and the expected cash flows, was recognized on all acquired loans.

Changes in the carrying amount and the accretable yield for the loans accounted pursuant to the ASC Subtopic 310-30, for the quarters and nine months ended September 30, 2019 and 2018, were as follows:

Carrying amount of acquired loans accounted for pursuant to ASC 310-30
		For the quarter ended				For the nine months ended
(In thousands)			September 30, 2019		September 30, 2018		September 30, 2019		September 30, 2018
Beginning balance		$	1,789,237	$	2,033,457	$	1,883,556	$	2,108,993
Additions			11,891		3,062		27,639		8,334
Accretion			35,502		38,886		111,083		121,752
Collections / loan sales / charge-offs			(134,256)		(84,783)		(319,904)		(248,457)
Ending balance[1]		$	1,702,374	$	1,990,622	$	1,702,374	$	1,990,622
Allowance for loan losses			(94,610)		(168,559)		(94,610)		(168,559)
Ending balance, net of ALLL		$	1,607,764	$	1,822,063	$	1,607,764	$	1,822,063
[1]	At September 30, 2019, includes $1.2 billion of loans considered non-credit impaired at the acquisition date (September 30, 2018 - $1.5 billion).

Activity in the accretable yield of acquired loans accounted for pursuant to ASC 310-30
		For the quarter ended				For the nine months ended
(In thousands)			September 30, 2019		September 30, 2018		September 30, 2019		September 30, 2018
Beginning balance		$	1,042,407	$	1,178,042	$	1,092,504	$	1,214,488
Additions			7,711		315		19,577		3,752
Accretion			(35,502)		(38,886)		(111,083)		(121,752)
Change in expected cash flows			5,043		(16,739)		18,661		26,244
Ending balance[1]		$	1,019,659	$	1,122,732	$	1,019,659	$	1,122,732
[1]	At September 30, 2019, includes $ 0.7 billion of loans considered non-credit impaired at the acquisition date (September 30, 2018 - $ 0.8 billion).