Popular, Inc. Announces Second Quarter Financial Results

 
 

Contact a member of Banco
Popular de Puerto Rico's
Media Relations Team.


  • Net income of $96.2 million for the second quarter of 2017
  • Net interest margin of 4.02% in Q2 2017, compared to 4.08% in Q1 2017

  • Credit Quality (excluding covered loans):
    • Non-performing loans held-in-portfolio (NPLs) decreased by $28.5 million from Q1 2017; NPLs to loans ratio stable at 2.4% vs. 2.5% in Q1 2017;
    • Net charge-offs (NCOs) increased by $21.9 million; NCOs at 1.01% of average loans held-in-portfolio vs. 0.63% in Q1 2017;
    • Allowance for loan losses of $509.2 million vs. $516.7 million in Q1 2017; Allowance for loan losses to loans held-in-portfolio at 2.22% vs. 2.27% in Q1 2017;
    • Allowance for loan losses to NPLs at 93.1% vs. 89.8% in Q1 2017.
  • Common Equity Tier 1 ratio of 16.69%, Common Equity per Share of $51.26 and Tangible Book Value per Share of $44.71 at June 30, 2017

Wednesday, July 26, 2017 8:00 am EDT

Dateline:

SAN JUAN, Puerto Rico

Public Company Information:

NASDAQ:
BPOP
PR7331741061

SAN JUAN, Puerto Rico--(BUSINESS WIRE)--Popular, Inc. (the “Corporation” or “Popular”) (NASDAQ:BPOP) reported a net income of $96.2 million for the quarter ended June 30, 2017, compared to a net income of $92.9 million for the quarter ended March 31, 2017.

Mr. Ignacio Alvarez, President and Chief Executive Officer, said: “I am fortunate to step into my new role as CEO at a time when Popular is on a solid footing, as evidenced by our results for the second quarter. Top line revenues were strong, credit quality remained stable and we achieved loan growth in both the United States and Puerto Rico. While we will continue to operate in a challenging environment in the near term, the team is energized and focused. We have more financial and human capital than at any time in our history and are well positioned for the future.”

Earnings Highlights              
 
(Unaudited)   Quarters ended Six months ended
(Dollars in thousands, except per share information)   30-Jun-17   31-Mar-17   30-Jun-16 30-Jun-17   30-Jun-16
Net interest income   $374,479   $362,098   $360,551 $736,577   $712,963
Provision for loan losses   49,965   42,057   39,668 92,022   87,608
Provision (reversal) for loan losses - covered loans [1]   2,514   (1,359)   804 1,155   (2,301)
Net interest income after provision for loan losses   322,000   321,400   320,079 643,400   627,656
FDIC loss-share expense   (475)   (8,257)   (12,576) (8,732)   (15,722)
Other non-interest income   117,268   124,126   123,079 241,394   237,855
Other operating expenses   306,835   311,318   309,149 618,153   611,092
Income before income tax   131,958   125,951   121,433 257,909   238,697
Income tax expense   35,732   33,006   32,446 68,738   64,711
Net income   $96,226   $92,945   $88,987 $189,171   $173,986
Net income applicable to common stock   $95,295   $92,014   $88,056 $187,309   $172,124
Net income per common share - Basic   $0.94   $0.89   $0.85 $1.83   $1.67
Net income per common share - Diluted   $0.94   $0.89   $0.85 $1.83   $1.67
[1] Covered loans represent loans acquired in the Westernbank FDIC-assisted transaction that are covered under an FDIC loss-sharing agreement.
 

Net interest income

Net interest income for the quarter ended June 30, 2017 was $374.5 million, compared to $362.1 million for the previous quarter. The impact of having one more day in the quarter had a positive effect in the net interest income of $2.6 million. Net interest margin was 4.02% for the quarter compared to 4.08% for the previous quarter.

The increase of $12.4 million in net interest income was mainly related to the following:

Positive variances:

  • Higher income from money market investments by $4.5 million due to both an increase in volume of funds available to invest, related mostly to a higher balance of Puerto Rico government deposits, and to the recent increases in rates by the U.S. Federal Reserve. The average rate of the money market investments portfolio for the quarter was 1.06%, compared to 0.81% in the first quarter of 2017;
  • Higher interest income from investment securities by $3.7 million mainly due to higher volumes, particularly on U.S. Treasuries and mortgage-backed securities related to recent purchases;
  • Higher income from commercial loans by $3.4 million, or 3 basis points, driven by loan growth in the U.S. and higher yields at Banco Popular de Puerto Rico (“BPPR”) due in part to one additional day in the quarter and the impact on the variable rate portfolio from the above-mentioned increases in rates; and
  • Higher income from the consumer loans portfolio by $2.0 million, or 12 basis points, due to higher yields mostly from the credit cards portfolio.

Negative variances:

  • Lower income from mortgage loans by $1.1 million due to lower average balances, mainly in P.R.; and
  • Higher interest expense from deposits by $0.3 million due to higher volume mostly from Puerto Rico government deposits, as mentioned above, and the negative impact of one more day in the quarter, partially offset by lower cost by 3 basis points, due to deposit mix.

BPPR’s net interest income amounted to $319.7 million for the quarter ended June 30, 2017, compared to $310.2 million for the previous quarter. The increase of $9.5 million in net interest income was mainly due to higher income from money market and investment securities resulting from higher volumes and yields, as previously stated. Also, the results for the quarter reflected a higher yield from commercial and consumer loans, as discussed above, resulting mostly from the increase in market rates, which was partially offset by lower income from mortgage loans. The net interest margin for the second quarter was 4.36%, a decline of 10 basis points when compared to 4.46% for the previous quarter. The decrease in net interest margin results from the composition of earning assets, which has shifted towards lower yielding assets resulting from higher balances in Fed Funds, mainly as a result of higher balances of Puerto Rico government deposits. P.R. earning assets yielded 4.69%, compared to 4.81% in the previous quarter, while the cost of interest bearing liabilities was 0.46%, compared to 0.50% in the previous quarter.

Banco Popular North America’s (“BPNA”)’s net interest income was $69.7 million, compared to $67.1 million in the previous quarter, mainly due to higher income resulting mostly from higher volume of commercial loans and investment securities and the positive impact of one more day in the quarter, partially offset by slightly higher deposit costs. Net interest margin increased 2 basis points to 3.54%, compared to 3.52% for the previous quarter, driven by higher yields on interest earning assets. U.S. earning assets yielded 4.30%, compared to 4.28% in the previous quarter, while the cost of interest bearing liabilities was 0.99%, relatively flat when compared to 0.98% in the previous quarter.

Non-interest income

Non-interest income amounted to $116.8 million for the quarter ended June 30, 2017, compared to $115.9 million for the previous quarter. The favorable variance of $0.9 million in non-interest income was primarily driven by:

  • Higher other service fees by $3.0 million due to higher credit card interchange income resulting from higher transaction volumes at BPPR, higher commissions at the broker-dealer subsidiary and higher insurance revenues; and
  • Lower FDIC loss-share expense by $7.8 million due to higher income on mirror accounting on reimbursable credit impairment losses; lower fair value adjustments to the true-up payment obligation, that are mainly impacted by changes in the discount rate; and the indemnity asset accretion.

These positive variances were partially offset by an other-than-temporary impairment charge of $8.3 million on senior Puerto Rico Sales Tax Financing Corporation (“COFINA”) bonds classified as available-for-sale. On May 5, 2017 the federally appointed Puerto Rico Management and Oversight Board filed a Title III bankruptcy petition for COFINA. After the COFINA inclusion under Title III, the U.S. District Court escrowed payments due to COFINA bondholders with the COFINA trustee pending resolution of certain legal disputes, which resulted in the first missed interest payment on the COFINA bonds during June 2017. As such, the Corporation determined the entire unrealized loss on these securities to be other-than-temporary.

Refer to Table B for further details.

Financial Impact of the 2010 FDIC-Assisted Transaction    
   
(Unaudited)   Quarters ended
(In thousands)   30-Jun-17   31-Mar-17   30-Jun-16
 

Income Statement

Interest income on WB loans $37,900 $38,182 $49,794
Total FDIC loss-share expense (475) (8,257) (12,576)
Reversal of provision for loan losses- WB loans [1]   (417)   (499)   (7,282)
Total revenues less reversal of provision for loan losses   $37,842   $30,424   $44,500
 

Balance Sheet

WB loans $1,737,448 $1,808,057 $1,932,062
FDIC loss-share asset 52,583 58,793 214,029
FDIC true-up payment obligation   163,668   160,543   127,876
[1] Includes the elimination of an incremental $6.0 million provision for loan losses related to the inter-company transfer of a loan between BPPR and Popular, Inc., its bank holding company, the impact of which is eliminated in the consolidated results of the Corporation in accordance with U.S. GAAP.
 

See additional details on accounting for the 2010 FDIC-Assisted transaction in Table O.

Operating expenses

Operating expenses amounted to $306.8 million for the second quarter of 2017, a decrease of $4.5 million when compared to the first quarter of 2017. The decrease in operating expenses was driven primarily by:

  • Lower personnel cost by $6.8 million mainly due to lower incentive compensation, performance shares and other compensation expense, including payroll taxes; and
  • Lower other operating expenses by $9.1 million as a result of a write-down of $7.6 million recognized during the first quarter of 2017 related to capitalized software costs for a project that was discontinued by the Corporation.

These decreases were partially offset by:

  • Higher net occupancy expenses by $1.5 million mainly due to higher repair and maintenance expense at BPPR;
  • Higher professional fees by $3.7 million due to higher programming, processing and other technology services;
  • Higher business promotion by $1.8 million mostly due to higher customer reward program expense at BPPR; and
  • Higher OREO expense by $3.9 million as a result of higher write–downs on valuation of mortgage properties, partially offset by higher gain on sales at BPPR.

Non-personnel credit-related costs, which include collections, appraisals, credit related fees and OREO expenses, amounted to $20.4 million for the second quarter of 2017, compared to $16.6 million for the first quarter of 2017. The increase was principally due to higher write-downs on OREO at BPPR.

Full-time equivalent employees were 7,789 as of June 30, 2017, compared to 7,820 as of March 31, 2017.

For a breakdown of operating expenses by category refer to table B.

Income taxes

For the quarter ended June 30, 2017, the Corporation recorded an income tax expense of $35.7 million, compared to $33.0 million for the previous quarter. The increase in the income tax expense is mainly attributed to higher taxable income at BPNA.

The effective income tax rate for the second quarter of 2017 was 27%, compared to 26% for previous quarter. The effective tax rate is impacted by the composition and source of the taxable income.

Credit Quality

The Corporation continued to reflect stable credit quality metrics when compared to the first quarter of 2017. The BPPR segment experienced a decline in inflows to non-performing loans and NPLs balances, while net charge-offs increased quarter-over-quarter. The U.S. operation continued to reflect positive results with strong loan growth and favorable credit quality metrics. The Corporation remains attentive to changes in credit quality trends given the continued challenges in the economic environment in Puerto Rico.

  • Inflows of NPLs held-in-portfolio, excluding consumer loans, decreased by $20.4 million quarter-over-quarter, mainly driven by lower inflows in the BPPR commercial portfolio by $19.8 million, as the prior quarter was impacted by a single $24.5 million relationship.
  • Total non-performing loans held-in-portfolio decreased by $28.5 million from the first quarter of 2017, driven by lower BPPR mortgage and commercial NPLs of $12.8 million and $12.6 million, respectively, mostly due to NCO activity, as explained below. At June 30, 2017, NPLs to total loans held-in-portfolio remained stable at 2.4% from 2.5% in the first quarter of 2017.
  • Net charge-offs increased by $21.9 million from the first quarter of 2017. This increase was mainly driven by a $12.3 million charge-off taken on a previously reserved single P.R. commercial relationship, and an increase in the P.R. mortgage NCOs, due to the $6.4 million impact associated with a residential project acquired from Doral that suffered significant structural damages. The Corporation’s ratio of annualized net charge-offs to average non-covered loans held-in-portfolio was at 1.01%, compared to 0.63% in the first quarter of 2017. Refer to Table J for further information on net charge-offs and related ratios.
  • The allowance for loan losses decreased by $7.5 million from the first quarter of 2017 to $509.2 million. The BPPR segment ALLL decreased by $12.1 million, primarily attributed to the above mentioned $12.3 million charge-off of a previously reserved relationship. The BPNA segment ALLL increased by $4.6 million driven by reserves for the taxi medallion portfolio. The general and specific reserves related to non-covered loans totaled $393.9 million and $115.3 million, respectively, at quarter-end, compared with $398.6 million and $118.1 million, respectively, as of March 31, 2017. The ratio of the allowance for loan losses to loans held-in-portfolio was 2.22% in the second quarter of 2017, compared to 2.27% from the previous quarter.
  • The ratio of the allowance for loan losses to NPLs held-in-portfolio increased to 93.1%, compared to 89.8% in the previous quarter.
  • The provision for loan losses for non-covered loans for the second quarter of 2017 increased by $7.9 million quarter-over-quarter to $50.0 million. The provision for the BPPR segment increased by $10.7 million, mainly related to higher specific reserves for the mortgage portfolio, while the decrease in the BPNA segment was due to higher impairments on the taxi medallion portfolio recorded during the first quarter of 2017. The provision to net charge-offs ratio was 86.92% in the second quarter of 2017, compared to 118.03% in the previous quarter.

Non-Performing Assets      
(Unaudited)            
(In thousands)   30-Jun-17   31-Mar-17   30-Jun-16
Total non-performing loans held-in-portfolio, excluding covered loans $547,129 $575,613 $577,739
Non-performing loans held-for-sale - - 39,544
Other real estate owned (“OREO”), excluding covered OREO   181,096   185,836   177,025
Total non-performing assets, excluding covered assets   728,225   761,449   794,308
Covered loans and OREO   29,376   33,866   41,466
Total non-performing assets   $757,601   $795,315   $835,774
Net charge-offs for the quarter (excluding covered loans)   $57,484   $35,633   $35,401
 
 
Ratios (excluding covered loans):            
Non-covered loans held-in-portfolio $22,918,271 $22,734,721 $22,540,661
Non-performing loans held-in-portfolio to loans held-in-portfolio 2.39% 2.53% 2.56%
Allowance for loan losses to loans held-in-portfolio 2.22 2.27 2.30
Allowance for loan losses to non-performing loans, excluding loans held-for-sale   93.07   89.77   89.68
 
Refer to Table H for additional information.
 
Provision for Loan Losses        
 
(Unaudited)   Quarters ended   Six months ended
(In thousands)   30-Jun-17   31-Mar-17   30-Jun-16   30-Jun-17 30-Jun-16
Provision for loan losses:
BPPR [1] $42,173 $31,478 $38,351 $73,651 $82,222
BPNA   7,792   10,579   1,317   18,371 5,386
Total provision for loan losses - non-covered loans   $49,965   $42,057   $39,668   $92,022 $87,608
Provision (reversal) for loan losses - covered loans   2,514   (1,359)   804   1,155 (2,301)
Total provision for loan losses   $52,479   $40,698   $40,472   $93,177 $85,307
[1] Includes the elimination of an incremental $6.0 million provision for loan losses related to the inter-company transfer of a loan between BPPR and Popular, Inc., its bank holding company, the impact of which is eliminated in the consolidated results of the Corporation in accordance with U.S. GAAP.
Credit Quality by Segment
 
(Unaudited)
(In thousands) Quarters ended
BPPR   30-Jun-17   31-Mar-17   30-Jun-16
Provision for loan losses [1]   $42,173   $31,478   $38,351
Net charge-offs [1] 54,255 32,945 36,222
Total non-performing loans held-in-portfolio, excluding covered loans 517,382 548,385 550,632
Allowance / non-covered loans held-in-portfolio   2.66%   2.75%   2.77%
[1] Includes the elimination of an incremental $6.0 million provision for loan losses and corresponding charge-off related to the inter-company transfer of a loan between BPPR and Popular, Inc., its bank holding company, the impact of which is eliminated in the consolidated results of the Corporation in accordance with U.S. GAAP.

 

Quarters ended
BPNA   30-Jun-17       31-Mar-17       30-Jun-16
Provision for loan losses   $7,792       $10,579       $1,317
Net charge-offs (recoveries) 3,229 2,688 (821)
Total non-performing loans held-in-portfolio 29,747 27,228 27,107
Allowance / non-covered loans held-in-portfolio   0.94%       0.87%       0.72%
 
Financial Condition Highlights
 
(Unaudited)
(In thousands)       30-Jun-17       31-Mar-17       30-Jun-16
Cash and money market investments       $4,625,318       $3,993,572       $3,150,808
Trading and investment securities 9,726,158 9,511,124 7,583,294
Loans not covered under loss-sharing agreements with the FDIC 22,918,271 22,734,721 22,540,661
Loans covered under loss-sharing agreements with the FDIC 536,341 551,980 607,170
Total assets 41,242,669 40,259,282 37,606,148
Deposits 33,122,033 32,212,579 28,737,856
Borrowings 1,968,419 1,993,886 2,428,752
Liabilities from discontinued operations - - 1,815
Total liabilities 35,964,624 35,069,069 32,246,317
Stockholders’ equity       5,278,045       5,190,213       5,359,831
 

Total assets increased by $1.0 billion from the first quarter of 2017, driven by:

  • An increase of $0.6 billion in money market investments, mainly at BPPR, due to higher liquidity driven by increase in deposits balances;
  • An increase of $0.2 billion in investment securities available-for-sale mainly due to purchases of mortgage-backed agency pools at BPPR and BPNA; and
  • A net increase of $0.2 billion in non-covered loans held-in-portfolio, mainly driven by growth of commercial loans at BPPR and BPNA.

Total liabilities increased by $0.9 billion from the first quarter of 2017, principally driven by an increase of $0.9 billion in deposits mainly due to an increase in demand deposits from the Puerto Rico public sector at BPPR. Refer to Table G for additional information on deposits.

Stockholders’ equity increased by approximately $87.8 million from the first quarter of 2017, mainly as a result of net income for the quarter of $96.2 million, offset by declared dividends of $25.5 million on common stock and $0.9 million in dividends on preferred stock, and lower unrealized losses on available-for-sale securities by $15.3 million partially due to the reclassification to earnings of the entire unrealized loss of the COFINA bonds which was deemed to be other-than-temporary.

Common equity tier-1 ratio (“CET1”), common equity per share and tangible book value per share were 16.69%, $51.26 and $44.71, respectively at June 30, 2017, compared to 16.34%, $50.41 and $43.84 at March 31, 2017. Refer to Table A for capital ratios.

Cautionary Note Regarding Forward-Looking Statements

The information contained in this press release contains “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements may relate to Popular, Inc’s (the “Corporation”, “we”, “us”, “our”) financial condition, results of operations, plans, objectives, future performance and business, including, but not limited to, statements with respect to the adequacy of the allowance for loan losses, delinquency trends, market risk and the impact of interest rate changes, capital market conditions, capital adequacy and liquidity, the anticipated impacts of our acquisition of certain assets and deposits and the effect of legal proceedings and new accounting standards on the Corporation’s financial condition and results of operations. 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.

Forward-looking statements are not guarantees of future performance are based on management’s current expectations and, by their nature, involve certain risks, uncertainties, estimates and assumptions by management that are difficult to predict. Various 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. Please refer to our Annual Report on Form 10-K for the year ended December 31, 2016, the Quarterly Report on Form 10-Q for the quarter ended March 31, 2017, and our other filings with the Securities and Exchange Commission for a discussion of some of the risks and important factors that could cause such differences and otherwise affect the Corporation’s future results and financial condition. Those filings are available on the Corporation’s website (www.popular.com) and on the Securities and Exchange Commission website (www.SEC.gov). The Corporation does not undertake to update or revise any forward-looking statement to reflect occurrences or unanticipated events or circumstances that may arise after the date of such statements.

Founded in 1893, Popular, Inc. is the leading banking institution by both assets and deposits in Puerto Rico and ranks among the top 50 U.S. banks by assets. Popular provides retail, mortgage and commercial banking services through its principal banking subsidiary, Banco Popular de Puerto Rico, as well as auto and equipment leasing and financing, investment banking, broker-dealer and insurance services through specialized subsidiaries. In the United States, Popular has established a community-banking franchise providing a broad range of financial services and products with branches in New York, New Jersey and Florida under the name of Popular Community Bank.

Conference Call

Popular will hold a conference call to discuss its financial results today Wednesday, July 26, 2017 at 11:00 a.m. Eastern Time. The call will be open to the public and broadcast live over the Internet, and can be accessed through the Investor Relations section of the Corporation’s website: www.popular.com.

Listeners are recommended to go to the website at least 15 minutes prior to the call to download and install any necessary audio software. The call may also be accessed through a dial-in telephone number 1-866-235-1201 or 1-412-902-4127. [There is no charge to access the call.]

A replay of the webcast will be archived in Popular’s website. A telephone replay will be available one hour after the end of the conference call through Friday, August 25, 2017. The replay dial-in is: 1-877-344-7529 or 1-412-317-0088. The replay passcode is 10109994.

An electronic version of this press release can be found at the Corporation’s website: www.popular.com.

Popular, Inc.
Financial Supplement to Second Quarter 2017 Earnings Release
 
Table A - Selected Ratios and Other Information
 
Table B - Consolidated Statement of Operations
 
Table C - Consolidated Statement of Financial Condition
 
Table D - Consolidated Average Balances and Yield / Rate Analysis - QUARTER
 
Table E - Consolidated Average Balances and Yield / Rate Analysis - YEAR-TO-DATE
 
Table F - Mortgage Banking Activities and Other Service Fees
 
Table G - Loans and Deposits
 
Table H - Non-Performing Assets
 
Table I - Activity in Non-Performing Loans
 
Table J - Allowance for Credit Losses, Net Charge-offs and Related Ratios
 
Table K - Allowance for Loan Losses - Breakdown of General and Specific Reserves - CONSOLIDATED
 
Table L - Allowance for Loan Losses - Breakdown of General and Specific Reserves - PUERTO RICO OPERATIONS
 
Table M - Allowance for Loan Losses - Breakdown of General and Specific Reserves - U.S. MAINLAND OPERATIONS
 
Table N - Reconciliation to GAAP Financial Measures
 
Table O - Financial Information - Westernbank Loans
 

POPULAR, INC.
Financial Supplement to Second Quarter 2017 Earnings Release
Table A - Selected Ratios and Other Information
(Unaudited)
                     
                                 
Quarters ended Six months ended
        30-Jun-17     31-Mar-17     30-Jun-16     30-Jun-17     30-Jun-16
Basic EPS $0.94 $0.89 $0.85 $1.83 $1.67
 
Diluted EPS $0.94 $0.89 $0.85 $1.83 $1.67
 
Average common shares outstanding 101,601,552 102,932,989 103,245,717 102,263,593 103,217,266
 
Average common shares outstanding - assuming dilution 101,708,703 103,113,895 103,343,486 102,387,246 103,297,707
 
Common shares outstanding at end of period 101,986,758 101,956,740 103,703,041 101,986,758 103,703,041
 
Market value per common share $41.71 $40.73 $29.30 $41.71 $29.30
 
Market capitalization - (In millions) $4,254 $4,153 $3,038 $4,254 $3,038
 
Return on average assets 0.94% 0.95% 0.96% 0.95% 0.96%
. .
Return on average common equity 7.24% 7.13% 6.80% 7.19% 6.69%
 
Net interest margin 4.02% 4.08% 4.31% 4.05% 4.38%
 
Common equity per share $51.26 $50.41 $51.20 $51.26 $51.20
 
Tangible common book value per common share (non-GAAP) $44.71 $43.84 $44.62 $44.71 $44.62
 
Tangible common equity to tangible assets (non-GAAP) 11.24% 11.29% 12.53% 11.24% 12.53%
 
Tier 1 capital 16.69% 16.34% 16.29% 16.69% 16.29%
 
Total capital 19.67% 19.34% 19.29% 19.67% 19.29%
 
Tier 1 leverage 10.48% 10.61% 11.29% 10.48% 11.29%
 
Common Equity Tier 1 capital       16.69%     16.34%     16.29%     16.69%     16.29%
 

POPULAR, INC.
Financial Supplement to Second Quarter 2017 Earnings Release
Table B - Consolidated Statement of Operations
(Unaudited)
    Quarters ended       Variance       Quarter ended       Variance       Six months ended
 
(In thousands, except per share information)   30-Jun-17       31-Mar-17      

Q2 2017

vs. Q1 2017

      30-Jun-16      

Q2 2017

vs. Q2 2016

      30-Jun-17       30-Jun-16
Interest income:            
Loans $367,669 $363,136 $4,533 $369,721 $(2,052) $730,805 $732,918
Money market investments 11,131 6,573 4,558 3,889 7,242 17,704 6,752
Investment securities 48,537 44,886 3,651 36,725 11,812 93,423 72,996
  Trading account securities   1,396       1,400       (4)       1,875       (479)       2,796       3,564
  Total interest income   428,733       415,995       12,738       412,210       16,523       844,728       816,230
Interest expense:
Deposits 34,092 33,757 335 30,599 3,493 67,849 60,473
Short-term borrowings 1,115 1,095 20 2,058 (943) 2,210 3,919
  Long-term debt   19,047       19,045       2       19,002       45       38,092       38,875
  Total interest expense   54,254       53,897       357       51,659       2,595       108,151       103,267
Net interest income 374,479 362,098 12,381 360,551 13,928 736,577 712,963
Provision for loan losses - non-covered loans 49,965 42,057 7,908 39,668 10,297 92,022 87,608
Provision (reversal) for loan losses - covered loans   2,514       (1,359)       3,873       804       1,710       1,155       (2,301)
Net interest income after provision for loan losses   322,000       321,400       600       320,079       1,921       643,400       627,656
Service charges on deposit accounts 41,073 39,536 1,537 40,296 777 80,609 80,158
Other service fees 59,168 56,175 2,993 56,945 2,223 115,343 110,327
Mortgage banking activities 10,741 11,369 (628) 16,227 (5,486) 22,110 26,778
Net gain and valuation adjustments on investment securities 19 162 (143) 1,583 (1,564) 181 1,583
Other-than-temporary impairment losses on investment securities (8,299) - (8,299) (209) (8,090) (8,299) (209)
Trading account (loss) profit (655) (278) (377) 1,117 (1,772) (933) 955
Net loss on sale of loans, including valuation adjustments on loans held-for-sale - - - - - - (304)
Adjustments (expense) to indemnity reserves on loans sold (2,930) (1,966) (964) (5,746) 2,816 (4,896) (9,844)
FDIC loss-share expense (475) (8,257) 7,782 (12,576) 12,101 (8,732) (15,722)
Other operating income   18,151       19,128       (977)       12,866       5,285       37,279       28,411
  Total non-interest income   116,793       115,869       924       110,503       6,290       232,662       222,133
Operating expenses:
Personnel costs
Salaries 77,703 78,376 (673) 75,792 1,911 156,079 153,090
Commissions, incentives and other bonuses 18,295 20,078 (1,783) 16,982 1,313 38,373 37,751
Pension, postretirement and medical insurance 12,590 11,244 1,346 12,279 311 23,834 25,390
  Other personnel costs, including payroll taxes   10,227       15,909       (5,682)       11,655       (1,428)       26,136       27,568
Total personnel costs 118,815 125,607 (6,792) 116,708 2,107 244,422 243,799
Net occupancy expenses 22,265 20,776 1,489 21,714 551 43,041 42,144
Equipment expenses 16,250 15,970 280 15,261 989 32,220 29,809
Other taxes 10,740 10,969 (229) 10,170 570 21,709 20,365
Professional fees
Collections, appraisals and other credit related fees 3,779 3,823 (44) 4,974 (1,195) 7,602 9,474
Programming, processing and other technology services 51,569 48,091 3,478 50,232 1,337 99,660 100,096
Legal fees, excluding collections 2,314 3,296 (982) 10,009 (7,695) 5,610 16,263
  Other professional fees   15,272       14,040       1,232       15,410       (138)       29,312       30,251
Total professional fees 72,934 69,250 3,684 80,625 (7,691) 142,184 156,084
Communications 5,899 5,949 (50) 6,012 (113) 11,848 12,332
Business promotion 13,366 11,576 1,790 13,705 (339) 24,942 24,815
FDIC deposit insurance 6,172 6,493 (321) 5,362 810 12,665 12,732
Other real estate owned (OREO) expenses 16,670 12,818 3,852 12,980 3,690 29,488 22,121
Credit and debit card processing, volume, interchange and other expenses 6,441 5,532 909 6,617 (176) 11,973 12,339
Other operating expenses
Operational losses 7,215 7,536 (321) 7,146 69 14,751 9,807
  All other   7,724       16,497       (8,773)       9,752       (2,028)       24,221       18,534
Total other operating expenses 14,939 24,033 (9,094) 16,898 (1,959) 38,972 28,341
Amortization of intangibles   2,344       2,345       (1)       3,097       (753)       4,689       6,211
  Total operating expenses   306,835       311,318       (4,483)       309,149       (2,314)       618,153       611,092
Income before income tax 131,958 125,951 6,007 121,433 10,525 257,909 238,697
Income tax expense   35,732       33,006       2,726       32,446       3,286       68,738       64,711
Net income   $96,226       $92,945       $3,281       $88,987       $7,239       $189,171       $173,986
Net income applicable to common stock   $95,295       $92,014       $3,281       $88,056       $7,239       $187,309       $172,124
Net income per common share - basic   $0.94       $0.89       $0.05       $0.85       $0.09       $1.83       $1.67
Net income per common share - diluted   $0.94       $0.89       $0.05       $0.85       $0.09       $1.83       $1.67
Dividends Declared per Common Share   $0.25       $0.25       $-       $0.15       $0.10       $0.50       $0.30
 

Popular, Inc.
Financial Supplement to Second Quarter 2017 Earnings Release
Table C - Consolidated Statement of Financial Condition
(Unaudited)
                            Variance
Q2 2017 vs.
(In thousands)       30-Jun-17       31-Mar-17       30-Jun-16       Q1 2017
Assets:
Cash and due from banks $405,688 $340,225 $365,308 $65,463
Money market investments 4,219,630 3,653,347 2,785,500 566,283
Trading account securities, at fair value 50,293 50,985 72,530 (692)
Investment securities available-for-sale, at fair value 9,409,402 9,197,527 7,242,676 211,875
Investment securities held-to-maturity, at amortized cost 96,286 96,326 99,525 (40)
Other investment securities, at lower of cost or realizable value 170,177 166,286 168,563 3,891
Loans held-for-sale, at lower of cost or fair value 69,797 85,309 122,338 (15,512)
Loans held-in-portfolio:
Loans not covered under loss-sharing agreements with the FDIC 23,046,078 22,858,556 22,655,877 187,522
Loans covered under loss-sharing agreements with the FDIC 536,341 551,980 607,170 (15,639)
Less: Unearned income 127,807 123,835 115,216 3,972
    Allowance for loan losses       540,014       544,496       548,720       (4,482)
    Total loans held-in-portfolio, net       22,914,598       22,742,205       22,599,111       172,393
FDIC loss-share asset 52,583 58,793 214,029 (6,210)
Premises and equipment, net 546,986 548,995 535,865 (2,009)
Other real estate not covered under loss-sharing agreements with the FDIC 181,096 185,836 177,025 (4,740)
Other real estate covered under loss-sharing agreements with the FDIC 25,350 29,926 37,984 (4,576)
Accrued income receivable 136,104 128,018 120,979 8,086
Mortgage servicing assets, at fair value 188,728 193,698 203,577 (4,970)
Other assets 2,108,296 2,111,806 2,179,060 (3,510)
Goodwill 627,294 627,294 631,095 -
Other intangible assets       40,361       42,706       50,983       (2,345)
Total assets       $41,242,669       $40,259,282       $37,606,148       $983,387
Liabilities and Stockholders’ Equity:
Liabilities:
Deposits:
Non-interest bearing $7,481,732 $7,262,328 $6,531,108 $219,404
    Interest bearing       25,640,301       24,950,251       22,206,748       690,050
    Total deposits       33,122,033       32,212,579       28,737,856       909,454
Federal funds purchased and assets sold under agreements to repurchase 406,385 434,714 821,604 (28,329)
Other short-term borrowings 1,200 1,200 31,200 -
Notes payable 1,560,834 1,557,972 1,575,948 2,862
Other liabilities 874,172 862,604 1,077,894 11,568
Liabilities from discontinued operations       -       -       1,815       -
Total liabilities       35,964,624       35,069,069       32,246,317       895,555
Stockholders’ equity:
Preferred stock 50,160 50,160 50,160 -
Common stock 1,041 1,041 1,039 -
Surplus 4,263,370 4,261,346 4,232,835 2,024
Retained earnings 1,356,504 1,286,706 1,228,979 69,798
Treasury stock (90,087) (89,128) (7,570) (959)
Accumulated other comprehensive loss       (302,943)       (319,912)       (145,612)       16,969
    Total stockholders’ equity       5,278,045       5,190,213       5,359,831       87,832
Total liabilities and stockholders’ equity       $41,242,669       $40,259,282       $37,606,148       $983,387
 

Popular, Inc.
Financial Supplement to Second Quarter 2017 Earnings Release
Table D - Consolidated Average Balances and Yield / Rate Analysis - QUARTER
(Unaudited)
 
        Quarter ended     Quarter ended Quarter ended     Variance   Variance
 
30-Jun-17 31-Mar-17 30-Jun-16 Q2 2017 vs. Q1 2017 Q2 2017 vs. Q2 2016
 

($ amounts in millions; yields

not on a taxable equivalent basis)

    Average balance    

Income /

Expense

   

Yield /

Rate

Average balance    

Income /

Expense

   

Yield /

Rate

Average balance    

Income /

Expense

   

Yield /

Rate

Average balance    

Income /

Expense

   

Yield /

Rate

Average balance    

Income /

Expense

   

Yield /

Rate

Assets:                                        
Interest earning assets:
Money market, trading and investment securities $14,018     $61.1     1.74 % $12,423     $52.9     1.71 % $10,286     $42.5     1.65 % $1,595     $8.2     0.03

%

 

$3,732     $18.6     0.09 %
 
Loans not covered under loss-sharing agreements with the FDIC:
 
Commercial 9,815 122.2 5.00 9,704 118.8 4.97 9,150 110.9 4.88 111 3.4 0.03 665 11.3 0.12
Construction 812 11.2 5.54 821 10.9 5.41 723 9.7 5.43 (9) 0.3 0.13 89 1.5 0.11
Mortgage 6,518 87.3 5.36 6,606 88.4 5.35 6,743 88.9 5.27 (88) (1.1) 0.01 (225) (1.6) 0.09
Consumer 3,698 97.2 10.55 3,704 95.2 10.43 3,865 99.4 10.34 (6) 2.0 0.12 (167) (2.2) 0.21
Lease financing 727     11.8     6.48 708     11.6     6.54 651     11.0     6.73 19     0.2     (0.06) 76     0.8     (0.25)
Total loans (excluding WB loans) 21,570 329.8 6.13 21,543 324.9 6.09 21,132 319.9 6.08 27 4.9 0.04 438 9.9 0.05
WB loans 1,740     37.9     8.73 1,810     38.2     8.53 2,013     49.8     9.94 (70)     (0.3)     0.20 (273)     (11.9)     (1.21)
Total loans 23,309     367.7     6.32 23,353     363.1     6.28 23,145     369.7     6.41 (44)     4.6     0.04 164     (2.0)     (0.09)
Total interest earning assets $37,327     $428.7     4.60 % $35,776     $416.0     4.69

%

 

$33,431     $412.2     4.95 % $1,551     $12.7     (0.09)

%

 

$3,896     $16.5     (0.35) %
Allowance for loan losses (537) (542) (539) 5 2
Other non-interest earning assets 4,282 4,312 4,479 (30) (197)
Total average assets $41,071 $39,546 $37,371 $1,525 $3,700
 
Liabilities and Stockholders' Equity:
Interest bearing deposits:
NOW and money market $9,941 $8.9 0.36 % $8,516 $8.6 0.41

%

 

$7,023 $6.6 0.38 % $1,425 $0.3 (0.05)

%

 

$2,918 $2.3 (0.02) %
Savings 8,134 5.0 0.24 8,041 4.9 0.25 7,487 4.4 0.24 93 0.1 (0.01) 647 0.6 -
Time deposits 7,661     20.2     1.06 7,756     20.3     1.06 7,866     19.6     1.00 (95)     (0.1)     - (205)     0.6     0.06
Total interest bearing deposits 25,736 34.1 0.53 24,313 33.8 0.56 22,376 30.6 0.55 1,423 0.3 (0.03) 3,360 3.5 (0.02)
Borrowings 1,936     20.2     4.18 2,025     20.1     4.00 2,307     21.0     3.67 (89)     0.1     0.18 (371)     (0.8)     0.51
Total interest bearing liabilities 27,672     54.3     0.79 26,338     53.9     0.83 24,683     51.6     0.84 1,334     0.4     (0.04) 2,989     2.7     (0.05)
Net interest spread 3.81 % 3.86

%

 

4.11 % (0.05)

%

 

(0.30) %
Non-interest bearing deposits 7,204 7,027 6,481 177 723
Other liabilities 869 896 943 (27) (74)
Liabilities from discontinued operations - - 2 - (2)
Stockholders' equity 5,326 5,285 5,262 41 64
Total average liabilities and stockholders' equity $41,071 $39,546 $37,371 $1,525 $3,700
 

Net interest income / margin non-

taxable equivalent basis

$374.5     4.02 % $362.1     4.08

%

 

$360.6     4.33 % $12.4     (0.06)

%

 

$13.9     (0.31) %
 

Popular, Inc.
Financial Supplement to Second Quarter 2017 Earnings Release
Table E - Consolidated Average Balances and Yield / Rate Analysis - YEAR-TO-DATE
(Unaudited)
 
      Six months ended   Six months ended      
 
30-Jun-17 30-Jun-16 Variance
 
Average   Income /   Yield / Average   Income /   Yield / Average Income / Yield /
($ amounts in millions; yields not on a taxable equivalent basis)   balance   Expense   Rate balance   Expense   Rate balance   Expense   Rate
Assets:
Interest earning assets:
Money market, trading and investment securities $13,225   $113.9   1.73 % $9,619   $83.3   1.73 % $3,606   $30.6   - %
Loans not covered under loss-sharing agreements with the FDIC:
Commercial 9,760 241.1 4.98 9,054 221.6 4.92 706 19.5 0.06
Construction 816 22.2 5.47 713 19.0 5.37 103 3.2 0.10
Mortgage 6,562 175.7 5.35 6,786 178.6 5.26 (224) (2.9) 0.09
Consumer 3,701 192.5 10.49 3,836 197.4 10.35 (135) (4.9) 0.14
Lease financing 718   23.4   6.51 641   21.6   6.75 77   1.8   (0.24)
Total loans (excluding WB loans) 21,556 654.7 6.11 21,030 638.2 6.09 526 16.5 0.02
WB loans 1,775   76.1   8.63 2,035   94.8   9.34 (260)   (18.7)   (0.71)
Total loans 23,331   730.8   6.30 23,065   733.0   6.38 266   (2.2)   (0.08)
Total interest earning assets $36,555   $844.7   4.65 % $32,684   $816.3   5.01 % $3,871   $28.4   (0.36) %
Allowance for loan losses (539) (538) (1)
Other non-interest earning assets 4,297 4,484 (187)
Total average assets $40,313 $36,630 $3,683
 
Liabilities and Stockholders' Equity:
Interest bearing deposits:
NOW and money market $9,232 $17.4 0.38 % $6,367 $12.2 0.39 % $2,865 $5.2 (0.01) %
Savings 8,088 9.9 0.25 7,381 8.7 0.24 707 1.2 0.01
Time deposits 7,708   40.6   1.06 7,962   39.6   1.00 (254)   1.0   0.06
Total interest bearing deposits 25,028 67.8 0.55 21,710 60.5 0.56 3,318 7.3 (0.01)
Borrowings 1,980   40.3   4.08 2,374   42.8   3.61 (394)   (2.5)   0.47
Total interest bearing liabilities 27,008   108.2   0.81 24,084   103.3   0.86 2,924   4.9   (0.05)
Net interest spread 3.84 % 4.15 % (0.31) %
Non-interest bearing deposits 7,116 6,387 729
Other liabilities 883 930 (47)
Liabilities from discontinued operations - 2 (2)
Stockholders' equity 5,306 5,227 79
Total average liabilities and stockholders' equity $40,313 $36,630 $3,683
 
Net interest income / margin non-taxable equivalent basis $736.6   4.05 % $713.0   4.38 % $23.6   (0.33) %
           

Financial Supplement to Second Quarter 2017 Earnings Release        
Table F - Mortgage Banking Activities and Other Service Fees
(Unaudited)          
 
Mortgage Banking Activities Variance
Quarters ended

Q2 2017

vs.

Q2 2017

vs.

Six months ended Variance
 
(In thousands)     30-Jun-17   31-Mar-17   30-Jun-16   Q1 2017   Q2 2016   30-Jun-17   30-Jun-16  

2017 vs.

2016

Mortgage servicing fees, net of fair value adjustments:
  Mortgage servicing fees $13,021 $13,452 $14,675 $(431) $(1,654) $26,473 $29,477 $(3,004)
  Mortgage servicing rights fair value adjustments     (8,046)   (5,954)   (4,340)   (2,092)   (3,706)   (14,000)   (12,817)   (1,183)
Total mortgage servicing fees, net of fair value adjustments     4,975   7,498   10,335   (2,523)   (5,360)   12,473   16,660   (4,187)
Net gain on sale of loans, including valuation on loans held-for-sale     7,250   5,381   8,474   1,869   (1,224)   12,631   15,584   (2,953)
Trading account loss:
Unrealized gains (losses) on outstanding derivative positions 83 (40) (59) 123 142 43 (139) 182
  Realized losses on closed derivative positions     (1,567)   (1,470)   (2,523)   (97)   956   (3,037)   (5,327)   2,290
Total trading account loss     (1,484)   (1,510)   (2,582)   26   1,098   (2,994)   (5,466)   2,472
Total mortgage banking activities     $10,741   $11,369   $16,227   $(628)   $(5,486)   $22,110   $26,778   $(4,668)
 
Other Service Fees         Variance      
 
Quarters ended

Q2 2017

vs.

Q2 2017

vs.

Six months ended Variance
 
(In thousands)   30-Jun-17   31-Mar-17   30-Jun-16   Q1 2017   Q2 2016   30-Jun-17   30-Jun-16   2017 vs. 2016
Other service fees:
  Debit card fees $11,576 $11,543 $11,382 $33 $194 $23,119 $22,669 $450
Insurance fees 13,529 12,805 13,885 724 (356) 26,334 26,735 (401)
Credit card fees 19,305 18,276 17,700 1,029 1,605 37,581 34,558 3,023
Sale and administration of investment products 5,799 5,082 5,417 717 382 10,881 10,256 625
Trust fees 4,903 4,955 4,827 (52) 76 9,858 9,063 795
  Other fees   4,056   3,514   3,734   542   322   7,570   7,046   524
Total other service fees   $59,168   $56,175   $56,945   $2,993   $2,223   $115,343   $110,327   $5,016
 

Popular, Inc.          
Financial Supplement to Second Quarter 2017 Earnings Release
Table G - Loans and Deposits
(Unaudited)
 
Loans - Ending Balances
Variance
(In thousands)   30-Jun-17   31-Mar-17   30-Jun-16  

Q2 2017 vs.

Q1 2017

 

Q2 2017 vs.

Q2 2016

 

Loans not covered under FDIC loss-sharing agreements:
Commercial $11,047,359 $10,811,700 $10,359,815 $235,659 $687,544
Construction 784,389 831,305 717,332 (46,916) 67,057
Legacy [1] 39,067 40,688 49,709 (1,621) (10,642)
Lease financing 743,603 719,643 664,094 23,960 79,509
Mortgage 6,552,796 6,627,987 6,864,118 (75,191) (311,322)
Consumer   3,751,057   3,703,398   3,885,593   47,659   (134,536)
Total non-covered loans held-in-portfolio $22,918,271 $22,734,721 $22,540,661 $183,550 $377,610
Loans covered under FDIC loss-sharing agreements   536,341   551,980   607,170   (15,639)   (70,829)
Total loans held-in-portfolio   $23,454,612   $23,286,701   $23,147,831   $167,911   $306,781
Loans held-for-sale:
Commercial $- $- $39,544 $- $(39,544)
Mortgage   69,797   85,309   82,794   (15,512)   (12,997)
Total loans held-for-sale   $69,797   $85,309   $122,338   $(15,512)   $(52,541)
Total loans   $23,524,409   $23,372,010   $23,270,169   $152,399   $254,240
[1] 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 BPNA segment.
 
Deposits - Ending Balances
Variance
(In thousands)   30-Jun-17   31-Mar-17   30-Jun-16   Q2 2017 vs. Q1 2017   Q2 2017 vs.Q2 2016
Demand deposits [1] $11,194,860 $10,136,435 $8,106,291 $1,058,425 $3,088,569
Savings, NOW and money market deposits (non-brokered) 13,946,680 13,939,838 12,289,793 6,842 1,656,887
Savings, NOW and money market deposits (brokered) 424,303 423,339 387,026 964 37,277
Time deposits (non-brokered) 7,361,587 7,508,726 7,570,673 (147,139) (209,086)
Time deposits (brokered CDs)   194,603   204,241   384,073   (9,638)   (189,470)
Total deposits   $33,122,033   $32,212,579   $28,737,856   $909,454   $4,384,177
[1] Includes interest and non-interest bearing demand deposits.                
 

Popular, Inc.
Financial Supplement to Second Quarter 2017 Earnings Release
Table H - Non-Performing Assets
(Unaudited)
              Variance
(Dollars in thousands)   30-Jun-17  

As a % of

loans HIP by

category

    31-Mar-17  

As a % of

loans HIP by

category

    30-Jun-16  

As a % of

loans HIP by

category

   

Q2 2017 vs.

Q1 2017

 

Q2 2017 vs.

Q2 2016

Non-accrual loans:  
Commercial $166,864 1.5 % $179,241 1.7 % $175,615 1.7 % $(12,377) $(8,751)
Construction - - - - 2,523 0.4 - (2,523)
Legacy [1] 3,360 8.6 3,335 8.2 3,839 7.7 25 (479)
Lease financing 2,065 0.3 2,444 0.3 3,019 0.5 (379) (954)
Mortgage 318,922 4.9 331,339 5.0 338,048 4.9 (12,417) (19,126)
Consumer   55,918   1.5     59,254   1.6     54,695   1.4     (3,336)   1,223
Total non-performing loans held-in-
portfolio, excluding covered loans 547,129 2.4 % 575,613 2.5 % 577,739 2.6 % (28,484) (30,610)
Non-performing loans held-for-sale [2] - - 39,544 - (39,544)
Other real estate owned (“OREO”),
excluding covered OREO   181,096         185,836         177,025         (4,740)   4,071
Total non-performing assets,
excluding covered assets 728,225 761,449 794,308 (33,224) (66,083)
Covered loans and OREO   29,376         33,866         41,466         (4,490)   (12,090)
Total non-performing assets   $757,601         $795,315         $835,774         $(37,714)   $(78,173)
Accruing loans past due 90 days or more [3]   $391,569         $408,346         $413,319         $(16,777)   $(21,750)
Ratios excluding covered loans:
Non-performing loans held-in-portfolio
to loans held-in-portfolio 2.39 % 2.53 % 2.56 %
Allowance for loan losses to loans
held-in-portfolio 2.22 2.27 2.30
Allowance for loan losses to
non-performing loans, excluding loans
held-for-sale   93.07         89.77         89.68              
Ratios including covered loans:
Non-performing assets to total assets 1.84 % 1.98 % 2.22 %
Non-performing loans held-in-portfolio
to loans held-in-portfolio 2.35 2.49 2.51
Allowance for loan losses to loans
held-in-portfolio 2.30 2.34 2.37
Allowance for loan losses to non-performing
loans, excluding loans held-for-sale   97.98         93.95         94.41              
[1] 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 BPNA segment.
 
[2] There were no non-performing loans held-for-sale as of June 30, 2017 and March 31, 2017 (June 30, 2016 - $40 million in commercial loans).
 
[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 $160 million of residential mortgage loans insured by FHA or guaranteed by the VA that are no longer accruing interest as of June 30, 2017 (March 31, 2017 - $173 million; June 30, 2016 - $149 million). Furthermore, the Corporation has approximately $56.6 million in reverse mortgage loans 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 (March 31, 2017 - $58.6 million; June 30, 2016 - $62.8 million).

Popular, Inc.
Financial Supplement to Second Quarter 2017 Earnings Release
Table I - Activity in Non-Performing Loans
(Unaudited)
             
Commercial loans held-in-portfolio:
Quarter ended Quarter ended
30-Jun-17 31-Mar-17
(In thousands)   BPPR   BPNA   Popular, Inc.   BPPR   BPNA   Popular, Inc.
Beginning balance NPLs $175,477 $3,764 $179,241 $159,655 $3,693 $163,348
Plus:
New non-performing loans 13,809 1,027 14,836 33,600 1,355 34,955
Advances on existing non-performing loans - 4 4 - - -
Less:
Non-performing loans transferred to OREO (2,442) - (2,442) (3,510) - (3,510)
Non-performing loans charged-off (19,184) (22) (19,206) (5,153) (46) (5,199)
Loans returned to accrual status / loan collections   (4,797)   (772)   (5,569)   (9,115)   (1,238)   (10,353)
Ending balance NPLs   $162,863   $4,001   $166,864   $175,477   $3,764   $179,241
 
 
Mortgage loans held-in-portfolio:
Quarter ended Quarter ended
30-Jun-17 31-Mar-17
(In thousands)   BPPR   BPNA   Popular, Inc.   BPPR   BPNA   Popular, Inc.
Beginning balance NPLs $319,450 $11,889 $331,339 $318,194 $11,713 $329,907
Plus:
New non-performing loans 81,582 4,990 86,572 82,149 4,753 86,902
Less:
Non-performing loans transferred to OREO (12,229) - (12,229) (11,256) (46) (11,302)
Non-performing loans charged-off (14,123) (580) (14,703) (9,428) (69) (9,497)
Loans returned to accrual status / loan collections   (68,038)   (4,019)   (72,057)   (60,209)   (4,462)   (64,671)
Ending balance NPLs   $306,642   $12,280   $318,922   $319,450   $11,889   $331,339
 
Legacy loans held-in-portfolio:
Quarter ended Quarter ended
30-Jun-17 31-Mar-17
(In thousands)   BPPR   BPNA   Popular, Inc.   BPPR   BPNA   Popular, Inc.
Beginning balance NPLs $- $3,335 $3,335 $- $3,337 $3,337
Plus:
New non-performing loans - 114 114 - - -
Advances on existing non-performing loans - 8 8 - 47 47
Less:
Non-performing loans charged-off - (11) (11) - (2) (2)
Loans returned to accrual status / loan collections   -   (86)   (86)   -   (47)   (47)
Ending balance NPLs   $-   $3,360   $3,360   $-   $3,335   $3,335
 
             
Total non-performing loans held-in-portfolio (excluding consumer and covered loans):
Quarter ended Quarter ended
30-Jun-17 31-Mar-17
(In thousands)   BPPR   BPNA   Popular, Inc.   BPPR   BPNA   Popular, Inc.
Beginning balance NPLs $494,927 $18,988 $513,915 $477,849 $18,743 $496,592
Plus:
New non-performing loans 95,391 6,131 101,522 115,749 6,108 121,857
Advances on existing non-performing loans - 12 12 - 47 47
Less:
Non-performing loans transferred to OREO (14,671) - (14,671) (14,766) (46) (14,812)
Non-performing loans charged-off (33,307) (613) (33,920) (14,581) (117) (14,698)
Loans returned to accrual status / loan collections   (72,835)   (4,877)   (77,712)   (69,324)   (5,747)   (75,071)
Ending balance NPLs   $469,505   $19,641   $489,146   $494,927   $18,988   $513,915
 

Popular, Inc.
Financial Supplement to Second Quarter 2017 Earnings Release
Table J - Allowance for Credit Losses, Net Charge-offs and Related Ratios
(Unaudited)
       
 
Quarter ended Quarter ended Quarter ended
 
    30-Jun-17   31-Mar-17   30-Jun-16  
(Dollars in thousands)  

Non-covered

loans

 

Covered

loans

  Total  

Non-covered

loans

 

Covered

loans

  Total  

Non-covered

loans

 

Covered

loans

  Total  
Balance at beginning of period $516,725 $27,771 $544,496 $510,301 $30,350 $540,651 $508,427 $30,045 $538,472
Provision (reversal) for loan losses   49,965   2,514   52,479   42,057   (1,359)   40,698   39,668   804   40,472  
    566,690   30,285   596,975   552,358   28,991   581,349   548,095   30,849   578,944  
Net loans charged-off (recovered):
BPPR
Commercial [4] 11,745 - 11,745 2,638 - 2,638 5,647 - 5,647
Construction (2,370) - (2,370) (144) - (144) (3,226) - (3,226)
Lease financing 1,438 - 1,438 813 - 813 434 - 434
Mortgage 20,753 (538) 20,215 13,555 1,128 14,683 13,464 699 14,163
Consumer   22,689   15   22,704   16,083   92   16,175   19,903   (431)   19,472
Total BPPR   54,255   (523)   53,732   32,945   1,220   34,165   36,222   268   36,490
 
BPNA
Commercial (643) - (643) (463) - (463) (1,265) - (1,265)
Legacy [1] (298) - (298) (488) - (488) (893) - (893)
Mortgage 462 - 462 (104) - (104) 16 - 16
Consumer   3,708   -   3,708   3,743   -   3,743   1,321   -   1,321  
Total BPNA   3,229   -   3,229   2,688   -   2,688   (821)   -   (821)  
Total loans charged-off - Popular, Inc.   57,484   (523)   56,961   35,633   1,220   36,853   35,401   268   35,669  
Net recoveries [2]   -   -   -   -   -   -   5,445   -   5,445  
Balance at end of period   $509,206   $30,808   $540,014   $516,725   $27,771   $544,496   $518,139   $30,581   $548,720  
 
POPULAR, INC.
Annualized net charge-offs to average loans held-in-portfolio 1.01 % 0.98 % 0.63 % 0.63 % 0.63 % 0.62 %
Provision for loan losses to net charge-offs [3] 0.87 x 0.92 x 1.18 x 1.10 x 1.27 x 1.29 x
 
BPPR
Annualized net charge-offs to average loans held-in-portfolio 1.28 % 1.23 % 0.77 % 0.78 % 0.83 % 0.81 %
Provision for loan losses to net charge-offs [3] 0.78 x 0.83 x 0.96 x 0.88 x 1.21 x 1.22 x
 
BPNA
Annualized net charge-offs (recoveries) to average loans held-in-portfolio 0.22 % 0.19 % (0.06) %
Provision for loan losses to net charge-offs (recoveries)           2.41 x         3.94 x         (1.60) x
[1] 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 BPNA segment.
[2] Net recoveries are related to loans sold or reclassified to held-for-sale.
[3] Excluding provision for loan losses and net recoveries related to loans sold.
[4] Includes the elimination of an incremental $6.0 million charge-off related to the inter-company transfer of a loan between BPPR and Popular, Inc., its bank holding company, the impact of which is eliminated in the consolidated results of the Corporation in accordance with U.S. GAAP.

Popular, Inc.
Financial Supplement to Second Quarter 2017 Earnings Release
Table K - Allowance for Loan Losses - Breakdown of General and Specific Reserves - CONSOLIDATED
(Unaudited)
               
                                               
30-Jun-17
(Dollars in thousands)       Commercial     Construction     Legacy [2]     Mortgage     Lease financing     Consumer     Total [3]
Specific ALLL $41,982 $- $- $50,148 $487 $22,693 $115,310
Impaired loans [1] $333,936 $- $- $514,140 $1,668 $107,027 $956,771
Specific ALLL to impaired loans   [1]   12.57 %   - %   - %   9.75 %   29.20 %   21.20 %   12.05 %
General ALLL $160,526 $8,001 $993 $101,840 $7,516 $115,020 $393,896
Loans held-in-portfolio, excluding impaired loans [1] $10,713,423 $784,389 $39,067 $6,038,656 $741,935 $3,644,030 $21,961,500
General ALLL to loans held-in-portfolio, excluding impaired loans   [1]   1.50 %   1.02 %   2.54 %   1.69 %   1.01 %   3.16 %   1.79 %
Total ALLL $202,508 $8,001 $993 $151,988 $8,003 $137,713 $509,206
Total non-covered loans held-in-portfolio [1] $11,047,359 $784,389 $39,067 $6,552,796 $743,603 $3,751,057 $22,918,271
ALLL to loans held-in-portfolio   [1]   1.83 %   1.02 %   2.54 %   2.32 %   1.08 %   3.67 %   2.22 %
[1] Excludes covered loans acquired on the Westernbank FDIC-assisted transaction.
[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 BPNA reportable segment.
[3] Excludes covered loans acquired on the Westernbank FDIC-assisted transaction. As of June 30, 2017 the general allowance on the covered loans amounted to $30.8 million.
                                               
31-Mar-17
(Dollars in thousands)       Commercial     Construction     Legacy [2]     Mortgage     Lease financing     Consumer     Total [3]
Specific ALLL $51,276 $- $- $43,264 $522 $23,010 $118,072
Impaired loans [1] $348,823 $- $- $510,568 $1,803 $109,016 $970,210
Specific ALLL to impaired loans   [1]   14.70 %   - %   - %   8.47 %   28.95 %   21.11 %   12.17 %
General ALLL $157,408 $9,997 $1,166 $105,955 $7,375 $116,752 $398,653
Loans held-in-portfolio, excluding impaired loans [1] $10,462,877 $831,305 $40,688 $6,117,419 $717,840 $3,594,382 $21,764,511
General ALLL to loans held-in-portfolio, excluding impaired loans   [1]   1.50 %   1.20 %   2.87 %   1.73 %   1.03 %   3.25 %   1.83 %
Total ALLL $208,684 $9,997 $1,166 $149,219 $7,897 $139,762 $516,725
Total non-covered loans held-in-portfolio [1] $10,811,700 $831,305 $40,688 $6,627,987 $719,643 $3,703,398 $22,734,721
ALLL to loans held-in-portfolio   [1]   1.93 %   1.20 %   2.87 %   2.25 %   1.10 %   3.77 %   2.27 %
[1] Excludes covered loans acquired on the Westernbank FDIC-assisted transaction.
[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 BPNA reportable segment.
[3] Excludes covered loans acquired on the Westernbank FDIC-assisted transaction. As of March 31, 2017 the general allowance on the covered loans amounted to $27.8 million.
                                               
Variance
(Dollars in thousands)       Commercial     Construction     Legacy     Mortgage     Lease financing     Consumer     Total  
Specific ALLL $(9,294) $- $- $6,884 $(35) $(317) $(2,762)
Impaired loans       $(14,887)     $-     $-     $3,572     $(135)     $(1,989)     $(13,439)  
General ALLL $3,118 $(1,996) $(173) $(4,115) $141 $(1,732) $(4,757)
Loans held-in-portfolio, excluding impaired loans       $250,546     $(46,916)     $(1,621)     $(78,763)     $24,095     $49,648     $196,989  
Total ALLL $(6,176) $(1,996) $(173) $2,769 $106 $(2,049) $(7,519)
Total non-covered loans held-in-portfolio       $235,659     $(46,916)     $(1,621)     $(75,191)     $23,960     $47,659     $183,550  
 

Popular, Inc.
Financial Supplement to Second Quarter 2017 Earnings Release
Table L - Allowance for Loan Losses - Breakdown of General and Specific Reserves - PUERTO RICO OPERATIONS
(Unaudited)
 
30-Jun-17
Puerto Rico
(In thousands)   Commercial   Construction   Mortgage   Lease financing   Consumer   Total
Allowance for credit losses:            
  Specific ALLL non-covered loans $41,982 $- $47,954 $487 $21,999 $112,422
  General ALLL non-covered loans   132,207   1,473   99,912   7,516   100,905   342,013
ALLL - non-covered loans   174,189   1,473   147,866   8,003   122,904   454,435
Specific ALLL covered loans - - - - - -
  General ALLL covered loans   -   -   30,284   -   524   30,808
ALLL - covered loans   -   -   30,284   -   524   30,808
Total ALLL   $174,189   $1,473   $178,150   $8,003   $123,428   $485,243
Loans held-in-portfolio:
Impaired non-covered loans $333,936 $- $505,244 $1,668 $103,798 $944,646
  Non-covered loans held-in-portfolio, excluding impaired loans   6,822,150   96,904   5,313,039   741,935   3,157,991   16,132,019
Non-covered loans held-in-portfolio   7,156,086   96,904   5,818,283   743,603   3,261,789   17,076,665
Impaired covered loans - - - - - -
  Covered loans held-in-portfolio, excluding impaired loans   -   -   521,066   -   15,275   536,341
Covered loans held-in-portfolio   -   -   521,066   -   15,275   536,341
Total loans held-in-portfolio   $7,156,086   $96,904   $6,339,349   $743,603   $3,277,064   $17,613,006
 
 
31-Mar-17
Puerto Rico
(In thousands)   Commercial   Construction   Mortgage   Lease financing   Consumer   Total
Allowance for credit losses:
Specific ALLL non-covered loans $51,276 $- $41,067 $522 $22,331 $115,196
  General ALLL non-covered loans   136,355   1,961   103,870   7,375   101,760   351,321
ALLL - non-covered loans   187,631   1,961   144,937   7,897   124,091   466,517
Specific ALLL covered loans - - - - - -
  General ALLL covered loans   -   -   27,341   -   430   27,771
ALLL - covered loans   -   -   27,341   -   430   27,771
Total ALLL   $187,631   $1,961   $172,278   $7,897   $124,521   $494,288
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
Non-covered loans held-in-portfolio   7,064,330   95,459   5,869,718   719,643   3,227,079   16,976,229
Impaired covered loans - - - - - -
  Covered loans held-in-portfolio, excluding impaired loans   -   -   536,287   -   15,693   551,980
Covered loans held-in-portfolio   -   -   536,287   -   15,693   551,980
Total loans held-in-portfolio   $7,064,330   $95,459   $6,406,005   $719,643   $3,242,772   $17,528,209
 
                           
Variance
(In thousands)   Commercial   Construction   Mortgage   Lease financing   Consumer   Total
Allowance for credit losses:
Specific ALLL non-covered loans $(9,294) $- $6,887 $(35) $(332) $(2,774)
  General ALLL non-covered loans   (4,148)   (488)   (3,958)   141   (855)   (9,308)
ALLL - non-covered loans   (13,442)   (488)   2,929   106   (1,187)   (12,082)
Specific ALLL covered loans - - - - - -
  General ALLL covered loans   -   -   2,943   -   94   3,037
ALLL - covered loans   -   -   2,943   -   94   3,037
Total ALLL   $(13,442)   $(488)   $5,872   $106   $(1,093)   $(9,045)
Loans held-in-portfolio:
Impaired non-covered loans $(14,887) $- $3,597 $(135) $(2,438) $(13,863)
  Non-covered loans held-in-portfolio, excluding impaired loans   106,643   1,445   (55,032)   24,095   37,148   114,299
Non-covered loans held-in-portfolio   91,756   1,445   (51,435)   23,960   34,710   100,436
Impaired covered loans - - - - - -
  Covered loans held-in-portfolio, excluding impaired loans   -   -   (15,221)   -   (418)   (15,639)
Covered loans held-in-portfolio   -   -   (15,221)   -   (418)   (15,639)
Total loans held-in-portfolio   $91,756   $1,445   $(66,656)   $23,960   $34,292   $84,797
 

Popular, Inc.
Financial Supplement to Second Quarter 2017 Earnings Release
Table M - Allowance for Loan Losses - Breakdown of General and Specific Reserves - U.S. MAINLAND OPERATIONS
(Unaudited)
 
30-Jun-17
U.S. Mainland
(In thousands)   Commercial   Construction   Legacy   Mortgage   Consumer   Total
Allowance for credit losses:            
  Specific ALLL $- $- $- $2,194 $694 $2,888
  General ALLL   28,319   6,528   993   1,928   14,115   51,883
Total ALLL   $28,319   $6,528   $993   $4,122   $14,809   $54,771
Loans held-in-portfolio:
Impaired loans $- $- $- $8,896 $3,229 $12,125
  Loans held-in-portfolio, excluding impaired loans   3,891,273   687,485   39,067   725,617   486,039   5,829,481
Total loans held-in-portfolio   $3,891,273   $687,485   $39,067   $734,513   $489,268   $5,841,606
 
 
31-Mar-17
U.S. Mainland
(In thousands)   Commercial   Construction   Legacy   Mortgage   Consumer   Total
Allowance for credit losses:
Specific ALLL $- $- $- $2,197 $679 $2,876
  General ALLL   21,053   8,036   1,166   2,085   14,992   47,332
Total ALLL   $21,053   $8,036   $1,166   $4,282   $15,671   $50,208
Loans held-in-portfolio:
Impaired loans $- $- $- $8,921 $2,780 $11,701
  Loans held-in-portfolio, excluding impaired loans   3,747,370   735,846   40,688   749,348   473,539   5,746,791
Total loans held-in-portfolio   $3,747,370   $735,846   $40,688   $758,269   $476,319   $5,758,492
 
                           
Variance
(In thousands)   Commercial   Construction   Legacy   Mortgage   Consumer   Total
Allowance for credit losses:
Specific ALLL $- $- $- $(3) $15 $12
  General ALLL   7,266   (1,508)   (173)   (157)   (877)   4,551
Total ALLL   $7,266   $(1,508)   $(173)   $(160)   $(862)   $4,563
Loans held-in-portfolio:
Impaired loans $- $- $- $(25) $449 $424
  Loans held-in-portfolio, excluding impaired loans   143,903   (48,361)   (1,621)   (23,731)   12,500   82,690
Total loans held-in-portfolio   $143,903   $(48,361)   $(1,621)   $(23,756)   $12,949   $83,114
 

Popular, Inc.  
Financial Supplement to Second Quarter 2017 Earnings Release
Table N - Reconciliation to GAAP Financial Measures
(Unaudited)
 
 
(In thousands, except share or per share information)   30-Jun-17   31-Mar-17   30-Jun-16  
Total stockholders’ equity $5,278,045 $5,190,213 $5,359,831
Less: Preferred stock   (50,160)   (50,160)   (50,160)
$5,227,885 $5,140,053 $5,309,671
Common shares outstanding at end of period 101,986,758 101,956,740 103,703,041
Common equity per share   $51.26   $50.41   $51.20
 
Total stockholders’ equity $5,278,045 $5,190,213 $5,359,831
Less: Preferred stock (50,160) (50,160) (50,160)
Less: Goodwill (627,294) (627,294) (631,095)
Less: Other intangibles   (40,361)   (42,706)   (50,983)  
Total tangible common equity   $4,560,230   $4,470,053   $4,627,593  
Total assets $41,242,669 $40,259,282 $37,606,148
Less: Goodwill (627,294) (627,294) (631,095)
Less: Other intangibles   (40,361)   (42,706)   (50,983)  
Total tangible assets   $40,575,014   $39,589,282   $36,924,070  
Tangible common equity to tangible assets 11.24 % 11.29 % 12.53 %
Common shares outstanding at end of period 101,986,758 101,956,740 103,703,041
Tangible book value per common share   $44.71   $43.84   $44.62  
 

Popular, Inc.      
Financial Supplement to Second Quarter 2017 Earnings Release
Table O - Financial Information - Westernbank Loans
(Unaudited)
 
 
Revenues (Expenses)
Quarters ended
(In thousands)   30-Jun-17   31-Mar-17   Variance
Interest income on WB loans   $37,900   $38,182   $(282)
FDIC loss-share expense:
Accretion (amortization) of indemnification asset 147 (776) 923
80% mirror accounting on credit impairment losses [1] 2,126 148 1,978
80% mirror accounting on reimbursable expenses 723 921 (198)
80% mirror accounting on recoveries on covered assets, including rental income on OREOs,
subject to reimbursement to the FDIC (400) 4,833 (5,233)
Change in true-up payment obligation (3,125) (7,385) 4,260
Other   54   (5,998)   6,052
  Total FDIC loss-share expense   (475)   (8,257)   7,782
Total income   37,425   29,925   7,500
Reversal of provision for loan losses- WB loans [2]   (417)   (499)   82
Total income less reversal of provision for loan losses   $37,842   $30,424   $7,418
[1] Reductions in expected cash flows for ASC 310-30 loans, which may impact the provision for loan losses, may consider reductions in both principal and interest cash flow expectations. The amount covered under the FDIC loss-sharing agreement for interest not collected from borrowers is limited under the agreement (approximately 90 days); accordingly, these amounts are not subject fully to the 80% mirror accounting.
[2] Includes the elimination of an incremental $6.0 million provision for loan losses related to the inter-company transfer of a loan between BPPR and Popular, Inc., its bank holding company, the impact of which is eliminated in the consolidated results of the Corporation in accordance with U.S. GAAP.
 
Non-personnel operating expenses
Quarters ended [1][2]
(In thousands)   30-Jun-17   31-Mar-17   Variance
Professional fees $735 $(2,635) $3,370
OREO expenses 3,166 3,033 133
Other operating expenses   1,685   1,615   70
Total operating expenses   $5,586   $2,013   $3,573
[1] Includes expenses related to loans subject, and not subject, to the FDIC loss-sharing agreements.
[2] Expense reimbursements from the FDIC may be recorded with a time lag, since these are claimed upon the event of loss or charge-off of the loans which may occur in a subsequent period.
 
 
Quarterly average assets
Quarters ended
(In millions)   30-Jun-17   31-Mar-17   Variance
Loans $1,740 $1,810 $(70)
FDIC loss-share asset   54   44   10
 
Activity in the carrying amount and accretable yield of loans accounted for under ASC 310-30  
     
Quarters ended
      30-Jun-17   31-Mar-17
(In thousands)   Accretable yield  

Carrying amount

of loans

 

Accretable yield

 

Carrying amount

of loans

Beginning balance $981,206   $1,688,900 $1,010,087 $1,738,329
Accretion (amortization) (36,488) 36,488 (36,892) 36,892
Changes in expected cash flows (2,050) - 8,011 -
Collections / loan sales / charge-offs   -   (107,601)   -   (86,321)
Ending balance[1] 942,668 1,617,787 981,206 1,688,900
  Allowance for loan losses - ASC 310-30 loans   -   (65,674)   -   (66,544)
Ending balance, net of allowance for loan losses   $942,668   $1,552,114   $981,206   $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 $526 million as of June 30, 2017 and $542 million as of March 31, 2017.
 
 
 
Activity in the carrying amount of the FDIC indemnity asset
 
Quarters ended
(In thousands)       30-Jun-17       31-Mar-17
Balance at beginning of period $64,077 $69,334
Accretion (amortization) 147 (776)
Credit impairment losses to be covered under loss-sharing agreements 2,126 148
Reimbursable expenses to be covered under loss-sharing agreements 723 921
Net payments from FDIC under loss-sharing agreements (14,003) -
Other adjustments attributable to FDIC loss-sharing agreements       -       (5,550)
Balance at end of period       53,070       64,077
Balance due to the FDIC for recoveries on covered assets       (487)       (5,284)
Net balance of indemnity asset and amounts due from the FDIC       $52,583       $58,793
 
 
Activity in the remaining FDIC loss-share asset accretion (amortization)
 
Quarters ended
(In thousands)       30-Jun-17       31-Mar-17
Balance at beginning of period [1] $3,929 $4,812
Accretion (amortization) [2] 147 (776)
Impact of change in projected losses       (4,801)       (107)
Balance at end of period       $(725)       $3,929
[1] Positive balance represents negative discount (debit to assets), while a negative balance represents a discount (credit to assets).
[2] Amortization results in a negative impact to non-interest income, while accretion results in a positive impact to non-interest income, particularly FDIC loss-share expense.
 

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or
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