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Segment Reporting
 12 Months Ended
Dec. 31, 2019
Disclosure Text Block  
Segment Reporting Note 40 – Segment reporting

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

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, 2019, 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. During 2018, the Reliable brand was transferred to Popular, Inc. and is being used by Popular Auto. 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 Insurance V.I. was dissolved on December 31, 2018.

Popular U.S.:

Popular U.S. reportable segment consists of the banking operations of Popular Bank (PB) and Popular Insurance Agency, U.S.A. PB operates through a retail branch network in the U.S. mainland under the name of Popular. 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, León.

 

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.

 

Effective on January 1, 2019, the Corporation’s management changed the measurement basis for its reportable segments. Historically, for management reporting purposes, the Corporation had reversed the effect of the intercompany billings from Popular Inc., holding company, to its subsidiaries for certain services or expenses incurred on their behalf. In addition, the Corporation used to reflect an income tax expense allocation for several of its subsidiaries which are Limited Liability Companies (“LLCs”) and had made an election to be treated as a pass through entities for income tax purposes. The Corporation’s management has determined to discontinue making these adjustments, effective on January 1, 2019, for purposes of its management and reportable segment reporting. The Corporation reflected these changes in the measurement of the reportable segments’ results prospectively beginning on January 1, 2019. For the year ended December 31, 2018, the intercompany billings from Popular, Inc to Banco Popular de Puerto Rico amounted to $78.3 million (2017 - $66.4 million) and to the Popular U.S. reportable segments amounted to $12.5 million (2017 - $10.3 million).

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

December 31, 2019

 

 

 

 

Banco Popular

 

 

 

Intersegment

(In thousands)

 

 

 

de Puerto Rico

 

Popular U.S.

 

Eliminations

Net interest income

 

 

$

1,633,950

$

295,470

$

(51)

Provision for loan losses

 

 

 

135,495

 

30,028

 

-

Non-interest income

 

 

 

506,739

 

23,160

 

(561)

Amortization of intangibles

 

 

 

8,610

 

664

 

-

Depreciation expense

 

 

 

49,058

 

8,263

 

-

Other operating expenses

 

 

 

1,208,458

 

205,219

 

(547)

Income tax expense

 

 

 

129,145

 

19,164

 

-

Net income

 

 

$

609,923

$

55,292

$

(65)

Segment assets

 

 

$

41,756,864

$

10,056,316

$

(18,576)

 

 

 

 

 

 

 

 

 

December 31, 2019

 

 

Reportable

 

 

 

 

 

Total

(In thousands)

 

Segments

 

Corporate

 

Eliminations

 

Popular, Inc.

Net interest income (expense)

$

1,929,369

$

(37,675)

$

-

$

1,891,694

Provision for loan losses

 

165,523

 

256

 

-

 

165,779

Non-interest income

 

529,338

 

43,901

 

(3,356)

 

569,883

Amortization of intangibles

 

9,274

 

96

 

-

 

9,370

Depreciation expense

 

57,321

 

746

 

-

 

58,067

Other operating expenses

 

1,413,130

 

55

 

(3,140)

 

1,410,045

Income tax expense (expense)

 

148,309

 

(1,041)

 

(87)

 

147,181

Net income

$

665,150

$

6,114

$

(129)

$

671,135

Segment assets

$

51,794,604

$

5,228,276

$

(4,907,556)

$

52,115,324

December 31, 2018

 

 

 

 

Banco Popular

 

 

 

Intersegment

(In thousands)

 

 

 

de Puerto Rico

 

Popular U.S.

 

Eliminations

Net interest income

 

 

$

1,482,178

$

304,576

$

(2)

Provision for loan losses

 

 

 

198,442

 

29,881

 

-

Non-interest income

 

 

 

592,938

 

19,988

 

(560)

Amortization of intangibles

 

 

 

8,620

 

665

 

-

Depreciation expense

 

 

 

43,504

 

9,053

 

-

Other operating expenses

 

 

 

1,073,012

 

182,154

 

(546)

Income tax expense

 

 

 

121,195

 

25,294

 

-

Net income

 

 

$

630,343

$

77,517

$

(16)

Segment assets

 

 

$

38,037,696

$

9,381,636

$

(114,923)

 

 

 

 

 

 

 

 

 

December 31, 2018

 

 

Reportable

 

 

 

 

 

Total

(In thousands)

 

Segments

 

Corporate

 

Eliminations

 

Popular, Inc.

Net interest income (expense)

$

1,786,752

$

(51,875)

$

-

$

1,734,877

Provision (reversal) for loan losses

 

228,323

 

(251)

 

-

 

228,072

Non-interest income

 

612,366

 

42,914

 

(2,786)

 

652,494

Amortization of intangibles

 

9,285

 

41

 

-

 

9,326

Depreciation expense

 

52,557

 

743

 

-

 

53,300

Loss on early extinguishment of debt

 

-

 

12,522

 

-

 

12,522

Other operating expenses

 

1,254,620

 

94,640

 

(2,846)

 

1,346,414

Income tax expense (benefit)

 

146,489

 

(26,947)

 

37

 

119,579

Net income (loss)

$

707,844

$

(89,709)

$

23

$

618,158

Segment assets

$

47,304,409

$

5,099,491

$

(4,799,323)

$

47,604,577

December 31, 2017

 

 

 

 

Banco Popular

 

 

 

Intersegment

(In thousands)

 

 

 

de Puerto Rico

 

Popular U.S.

 

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 (loss)

 

 

$

312,436

$

(147,577)

$

(145)

Segment assets

 

 

$

34,843,668

$

9,168,256

$

(16,992)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2017

 

 

Reportable

 

 

 

 

 

Total

(In thousands)

 

Segments

 

Corporate

 

Eliminations

 

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

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

December 31, 2019

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

$

619,926

$

1,009,196

$

4,828

$

-

$

1,633,950

Provision (reversal) for loan losses

 

(46,099)

 

181,594

 

-

 

-

 

135,495

Non-interest income

 

99,758

 

303,268

 

106,218

 

(2,505)

 

506,739

Amortization of intangibles

 

195

 

4,294

 

4,121

 

-

 

8,610

Depreciation expense

 

20,024

 

28,411

 

623

 

-

 

49,058

Other operating expenses

 

309,762

 

835,582

 

65,631

 

(2,517)

 

1,208,458

Income tax expense

 

104,636

 

11,999

 

12,510

 

-

 

129,145

Net income

$

331,166

$

250,584

$

28,161

$

12

$

609,923

Segment assets

$

34,340,842

$

23,976,004

$

380,557

$

(16,940,539)

$

41,756,864

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 (benefit)

 

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

Geographic Information

 

The following information presents selected financial information based on the geographic location where the Corporation conducts its business. The banking operations of BPPR are primarily based in Puerto Rico, where it has the largest retail banking franchise. BPPR also conducts banking operations in the U.S. Virgin Islands, the British Virgin Islands and New York. BPPR’s banking operations in the United States include E-loan, an online platform used to offer personal loans, co-branded credit cards offerings and an online deposit gathering platform. In the Virgin Islands, the BPPR segment offers banking products, including loans and deposits. During the year ended December 31, 2019, the BPPR segment generated approximately $55.7 million (2018 - $37.6 million, 2017 - $24.5 million) in revenues from its operations in the United States, including net interest income, service charges on deposit accounts and other service fees. In addition, the BPPR segment generated $47.6 million in revenues (2018 - $48.8 million, 2017 - $50.5 million) from its operations in the U.S. and British Virgin Islands. At December 31, 2019, total assets for the BPPR segment related to its operations in the United States amounted to $635 million (2018 - $455 million) and total deposits amounted to $46 million (2018 - $92 million).

(In thousands)

 

2019

 

2018

 

2017

 

Revenues:[1]

 

 

 

 

 

 

 

 

Puerto Rico

$

2,016,089

$

1,953,671

$

1,527,758

 

 

United States

 

371,368

 

357,680

 

318,093

 

 

Other

 

74,120

 

76,020

 

75,280

 

Total consolidated revenues

$

2,461,577

$

2,387,371

$

1,921,131

 

[1]

Total revenues include net interest income, service charges on deposit accounts, other service fees, mortgage banking activities, net (loss) gain on sale of debt securities, other-than-temporary impairment losses on debt securities, net gain (loss), including impairment on equity securities, net profit (loss) on trading account debt securities, net gain (loss) on sale of loans, including valuation adjustments on loans held-for-sale, indemnity reserves on loans sold expense, FDIC loss-share income (expense) and other operating income.

Selected Balance Sheet Information

(In thousands)

 

2019

 

2018

 

2017

Puerto Rico

 

 

 

 

 

 

 

Total assets

$

40,544,255

$

36,863,930

$

33,705,624

 

Loans

 

18,989,286

 

18,837,742

 

17,591,078

 

Deposits

 

34,664,243

 

31,237,529

 

27,575,292

United States

 

 

 

 

 

 

 

Total assets

$

10,693,536

$

9,847,944

$

9,648,865

 

Loans

 

7,819,187

 

7,034,075

 

6,608,056

 

Deposits

 

7,664,792

 

6,878,599

 

6,635,153

Other

 

 

 

 

 

 

 

Total assets

$

877,533

$

892,703

$

922,848

 

Loans

 

657,603

 

687,494

 

743,329

 

Deposits [1]

 

1,429,571

 

1,593,911

 

1,243,063

[1]

Represents deposits from BPPR operations located in the U.S. and British Virgin Islands.