Popular, Inc. Announces Fourth Quarter 2018 Financial Results

 
 



  • Net income of $106.4 million and an adjusted net income of $134.1 million for the fourth quarter of 2018, compared to a net income of $140.6 million for Q3 2018.
  • Net income of $618.2 million and an adjusted net income of $487.3 million for the year 2018, compared to $107.7 million and an adjusted net income of $276.0 million for the year 2017.
  • Net interest margin of 4.25% in Q4 2018, compared to 4.07% in Q3 2018.
  • Credit Quality:
    • Non-performing loans held-in-portfolio (“NPLs”) decreased by $21.4 million from Q3 2018; NPLs to loans ratio at 2.3% vs. 2.4% in Q3 2018;
    • Net charge-offs (“NCOs”) increased by $43.3 million; NCOs at 1.63% of average loans held-in-portfolio vs. 1.00% in Q3 2018;
    • Provision expense of $42.6 million vs. $54.4 million in Q3 2018;
    • Allowance for loan losses of $569.3 million vs. $633.7 million in Q3 2018;
    • Allowance for loan losses to loans held-in-portfolio at 2.15% vs. 2.39% in Q3 2018; and
    • Allowance for loan losses to NPLs at 93.2% vs. 100.2% in Q3 2018.
  • Common Equity Tier 1 ratio of 16.90%, Common Equity per Share of $53.88 and Tangible Book Value per Share of $46.90 at December 31, 2018.
Miércoles, Enero 23, 2019 8:00 am EST

Dateline:

SAN JUAN, Puerto Rico

Public Company Information:

NASDAQ:
BPOP
PR7331741061

SAN JUAN, Puerto Rico--(BUSINESS WIRE)--Popular, Inc. (the “Corporation,” “Popular,” “we,” “us,” “our”) (NASDAQ:BPOP) reported a net income of $106.4 million and an adjusted net income of $134.1 million for the fourth quarter ended December 31, 2018, compared to a net income of $140.6 million for the third quarter ended September 30, 2018.

Ignacio Alvarez, President and Chief Executive Officer, said: “We are very pleased with our performance in the fourth quarter, which allowed us to finish the year on a strong note. These results include the impact of a number of corporate initiatives that increased expenses for the quarter, but continue to reflect strong top line growth, improving margins and the continuing contribution to income from the Reliable transaction. We begin 2019 with enthusiasm as we build on the momentum created in 2018 and leverage the strength of our balance sheet and unique franchise to continue to drive shareholder value.”

Significant Events

Puerto Rico Tax Reform

On December 10, 2018, the Governor of Puerto Rico signed into law Act No. 257 of 2018, which amended the Puerto Rico Internal Revenue Code to, among other things, reduce the Puerto Rico corporate income tax rate from 39% to 37.5%. The Corporation recognized a $27.7 million non-cash income tax expense as a result of a reduction in the Corporation’s net deferred tax asset (“DTA”) related to its Puerto Rico operations, due to the aforementioned reduction in tax rates at which it expects to realize the benefit of the DTA. This adjustment resulted in a reduction to Common Equity Tier 1 Capital and Total Regulatory Capital of approximately 3 bps.

Profit Sharing Plan

In 2016, the Corporation established a broad-based Profit Sharing Plan (the “Plan”) where employees receive incentive compensation if the Corporation’s earnings results exceed targets set by the Board of Directors. As a result of the Corporation’s earnings for the year ended December 31, 2018, eligible employees will receive incentive payments of up to $5,600 per employee, half of which is to be paid in cash and the other half as a contribution to their 401(K) Savings and Investment Plan. The Corporation has recorded $25.5 million in personnel costs for the year ended December 31, 2018 as a result of the Plan, $17.5 million of which were recorded in the fourth quarter.

Voluntary Retirement Program

The Corporation has offered to eligible Puerto Rico, U.S. Virgin Islands and British Virgin Island employees the opportunity to participate in a Voluntary Retirement Program (the “VRP”). The VRP offers such employees monetary and other incentives in exchange for electing to retire, effective February 1, 2019. To qualify for the VRP, eligible employees must have attained 58 years of age and have at least 10 years of service. A total of 313 eligible employees elected to participate in the VRP. Accordingly, during the fourth quarter of 2018, the Corporation recognized $19.5 million in personnel costs related to compensation arrangements for VRP participants. The Corporation expects annual personnel costs savings of approximately $11 million as a result of the VRP.

The Reliable Acquisition

As previously disclosed, on August 1, 2018, Popular Auto, LLC (“Popular Auto”), Banco Popular de Puerto Rico’s auto finance subsidiary, completed the acquisition of approximately $1.6 billion in retail auto loans and $341 million in primarily auto-related commercial loans from Wells Fargo & Company’s (“Wells Fargo”) auto finance business in Puerto Rico (“Reliable”).

During the fourth quarter of 2018, retrospective adjustments were made to the estimated fair values of the loans acquired from Reliable in order to reflect new information obtained during the measurement period of circumstances that existed as of the acquisition date, in accordance with U.S. GAAP (defined below). The adjustments resulted in a higher fair value ascribed to the loan portfolio acquired from Wells Fargo by $16.4 million and a corresponding decrease in goodwill recognized in connection with the transaction. The related cumulative adjustment to the amortization of the fair value discounts for the retail and commercial portfolios offset each other, resulting in an immaterial impact to the Corporation’s results.

For the quarter ended December 31, 2018, the acquisition of Reliable contributed approximately $18.0 million to net income, compared to $11.7 million for the previous quarter, comprised of net interest income of $42.4 million (September 30, 2018 - $30.7 million), $6.4 million (September 30, 2018 - $5.1 million) of operating income, including servicing fees from a portion of the portfolio retained by Wells Fargo and serviced by Popular Auto, and expenses of $11.7 million (September 30, 2018 - $8.6 million, including $3.8 million of transaction related expenses). These net earnings were subject to the marginal statutory corporate tax rate of 39%.

Redemption of Senior Notes

On October 15, 2018, the Corporation redeemed $450 million aggregate principal amount of its outstanding 7.00% Senior Notes due 2019 (the “2019 Notes”). The redemption was funded with available cash and the proceeds from the issuance, on September 11, 2018, of $300 million aggregate principal amount of 6.125% Senior Notes due 2023 (the “ 2023 Notes”) in an underwritten public offering pursuant to an effective shelf registration statement filed with the Securities and Exchange Commission. The Corporation recognized $12.5 million in expenses associated with the accelerated amortization of debt issuance costs and the redemption price of the 2019 Notes.

Common Stock Repurchase Plan

During the fourth quarter of 2018, the Corporation completed a $125 million accelerated share repurchase transaction (“ASR”) with respect to its common stock. In connection therewith, the Corporation had received an initial delivery of 2,000,000 shares of common stock during the third quarter of 2018 and received 438,180 additional shares of common stock during the fourth quarter of 2018. The final number of shares delivered at settlement was based on the average daily volume weighted average price of its common stock, net of a discount, during the term of the ASR, which amounted to $51.27. The Corporation accounted for this as a treasury stock transaction.

Planned Capital Actions for 2019

On January 23, 2019, the Corporation announced the following actions as part of its capital plan for 2019: (i) an increase its quarterly common stock dividend from $0.25 per share to $0.30 per share, beginning in the second quarter of 2019, subject to approval by its Board of Directors, and (ii) up to $250 million in common stock repurchases.

Earnings Highlights              
 
(Unaudited)   Quarters ended Years ended
(Dollars in thousands, except per share information)   31-Dec-18   30-Sep-18   31-Dec-17 31-Dec-18   31-Dec-17
Net interest income $476,225 $451,469 $387,216 $1,734,877 $1,501,964
Provision for loan losses 42,568 54,387 70,001 226,342 319,682
Provision for loan losses - covered loans [1]   -   -   1,487 1,730   5,742
Net interest income after provision for loan losses 433,657 397,082 315,728 1,506,805 1,176,540
FDIC loss-share income (expense) - - 2,614 94,725 (10,066)
Other non-interest income 153,167 151,021 83,517 557,769 429,233
Operating expenses   396,455   365,437   321,955 1,421,562   1,257,196
Income before income tax 190,369 182,666 79,904 737,737 338,511
Income tax expense   83,966   42,018   182,058 119,579   230,830
Net income (loss)   $106,403   $140,648   $(102,154) $618,158   $107,681
Net income (loss) applicable to common stock   $105,472   $139,718   $(103,085) $614,435   $103,958
Net income (loss) per common share - basic   $1.06   $1.38   $(1.01) $6.07   $1.02
Net income (loss) per common share - diluted   $1.05   $1.38   $(1.01) $6.06   $1.02
[1] Covered loans represent loans acquired in the Westernbank FDIC-assisted transaction that were covered under the FDIC Shared-Loss Agreements, terminated on May 22, 2018.
 

Adjusted results – Non-GAAP

The Corporation prepared its Consolidated Financial Statement using accounting principles generally accepted in the U.S. (“U.S. GAAP” or the “reported basis”). In addition to analyzing the Corporation’s results on the reported basis, management monitors the “Adjusted net income” of the Corporation and excludes from such calculation the impact of certain transactions on the results of its operations. Management believes that “Adjusted net income” provides meaningful information to investors about the underlying performance of the Corporation’s ongoing operations. “Adjusted net income” is a non-GAAP financial measure.

The table below describes adjustments to net income for the quarter ended December 31, 2018. No adjustments are reflected for the third quarter of 2018.

(Unaudited)          
(In thousands) 31-Dec-18
  Pre-tax   Income tax effect   Impact on net income
U.S. GAAP Net income     $106,403
Non-GAAP Adjustments:
Impact of Law Act No.257[1] -   27,686   27,686
Adjusted net income (Non-GAAP)         $134,089
[1]On December 10, 2018, the Governor of Puerto Rico signed into law Act No.257 of 2018, which amended the Puerto Rico Internal Revenue Code, to among other things, reduce the Puerto Rico corporate tax rate from 39% to 37.5%. The resulting adjustments reduced the DTA related to the Corporation's P.R. operations as a result of a lower realizable benefit at the lower tax rate.
 

Net interest income

Net interest income for the quarter ended December 31, 2018 was $476.2 million, compared to $451.5 million for the previous quarter. Net interest margin was 4.25% for the quarter, compared to 4.07% for the previous quarter. As a result of the May 2018 termination of the loss share agreements (the “FDIC Shared-Loss Agreements”) entered into with the Federal Deposit Insurance Corporation in connection with the acquisition of certain assets and assumption of certain liabilities of Westernbank, the presentation of net interest income has been adjusted since the second quarter of 2018 to present the income from the loans acquired from Westernbank (the “WB Loans”) in their respective loan segments. Previously, the Corporation presented the income associated with the WB Loans aggregated into a single line in its analysis of average balances and yields (Tables D and E). The presentation for prior periods has been adjusted accordingly for comparative purposes.

The increase of $24.7 million in net interest income is mainly the result of the following:

Positive variances:

  • Higher income from money market, trading and investments by $6.6 million, or 17 basis points, as a result of higher yields during the quarter, including the impact of the increase in the Fed Funds rate by 25 basis points at the end of the third quarter and in December 2018 as well as a shift in invested balances from money market investments to higher earning debt securities;
  • Higher income from the consumer loans portfolio by $19.0 million, or 18 basis points, mainly driven by income from the portfolio acquired from Reliable, which impacted the prior quarter for only two months due to the acquisition closing at the beginning of August. Interest income included $16.2 million related to the amortization of the fair value discount recognized in connection with the Reliable transaction, compared to $9.3 million for the previous quarter;
  • Higher income from the commercial loans portfolio by $5.4 million, or 10 basis points, mainly due to the prepayment of a loan accounted for under ASC 310-30 at Banco Popular de Puerto Rico (“BPPR”) which resulted in a positive adjustment to its yield. The impact of higher market rates in the adjustable rate portfolio and growth at Popular Bank (“Popular U.S.”) also contributed to the positive variance; and
  • Lower borrowing costs by $3.7 million, or 30 basis points, due to the repayment of the 2019 Senior Notes and the redemption of $53 million in Trust Preferred Securities during the previous quarter.

Negative variance:

  • Higher cost of interest-bearing deposits by $10.1 million, or 11 basis points, due mainly to higher average balances in NOW and money market and savings accounts, impacted primarily by public sector deposits at BPPR and higher cost of U.S. deposits, mainly from Popular U.S.’s online platform.

BPPR’s net interest income amounted to $408.7 million for the quarter ended December 31, 2018, compared to $388.5 million in the previous quarter. The increase of $20.2 million in net interest income was mainly due to the income from the consumer loan portfolio acquired from Reliable, primarily as a result of a full quarter of results versus only two months in the prior quarter, higher income from money market, trading and investment securities resulting from higher yields and higher income from the commercial loans portfolio as previously stated. These positive results were partially offset by higher interest expense on deposits, mainly from public sector deposits. The net interest margin for the fourth quarter of 2018 was 4.51%, an increase of 16 basis points when compared to 4.35% for the previous quarter. The increase in net interest margin was due to the composition of earning assets, the increase in market rates and the prepayment of a loan accounted for under ASC 310-30, as mentioned above. BPPR’s earning assets yielded 5.04%, compared to 4.81% in the previous quarter, while the cost of interest-bearing deposits was 0.73%, or 11 basis points higher than the 0.62% reported in the previous quarter.

Net interest income for Popular U.S. was $77.9 million, for the quarter ended December 31, 2018, compared to $76.2 million during the previous quarter. The increase of $1.7 million in net interest income was mainly due to higher volume and yields on commercial loans, driven in part by higher loan fees from the early cancellation of loans and higher market rates. These positive variances were partially offset by higher funding costs. Net interest margin for the quarter increased 11 basis points to 3.61%, compared to 3.50% for the previous quarter. The increase in net interest margin was mostly due to higher proportion of earning assets in loans, which carry a higher yield as compared to money market deposits and investments, partially offset by higher cost of deposits mostly raised through Popular U.S.’s online deposit platform. Earning assets yielded 4.74%, compared to 4.54% in the previous quarter, while the cost of interest-bearing deposits was 1.38%, compared to 1.26% in the previous quarter.

Non-interest income

Non-interest income increased by $2.2 million to $153.2 million for the quarter ended December 31, 2018, compared to $151.0 million for the previous quarter. The Corporation recognized as other income $9.5 million in recoveries for hurricane-related claims during each of the third and fourth quarters of 2018. The variance in non-interest income was primarily driven by:

  • Higher other service fees by $5.9 million due to higher credit card late fees by $1.2 million as a result of the previous quarter including a reversal of income related to charged off loans; higher debit and credit card interchange fees due to higher transactional volumes; and higher other fees by $2.6 million in part due to retail auto loan servicing fees received from Wells Fargo; and
  • higher income on mortgage banking activities by $8.1 million mainly due to a favorable fair value adjustment on mortgage servicing rights of $8.8 million recorded during the fourth quarter.

These positive variances were partially offset by:

  • Higher unrealized net losses on equity securities by $2.4 million;
  • unfavorable variance in adjustments to indemnity reserves of $3.4 million related to loans previously sold with credit recourse at BPPR; and
  • lower other operating income by $7.1 million principally due to lower modification fees received for the successful completion of loss mitigation alternatives by $6.8 million as a result of loan modification levels, which had materially increased as a result of the implementation of hurricane relief programs, normalizing.

Refer to Table B for further details.

Operating expenses

Operating expenses of $396.5 million for the fourth quarter of 2018, an increase of $31.0 million when compared to the third quarter of 2018. The increase in operating expenses was driven primarily by:

  • Higher personnel costs by $33.3 million, mainly due to higher other personnel cost by $29.3 million as a result of $17.2 million recognized in connection with the implementation of the VRP and the recognition of $17.5 million (compared to $5.0 million for the previous quarter) related to annual incentives tied to the Corporation’s financial performance; higher pension, postretirement and medical insurance by $3.0 million, also impacted by the benefits provided pursuant to the VRP and higher salaries by $3.0 million. These increases were partially offset by lower commission, incentive and other bonuses by $2.0 million;
  • higher net occupancy expense by $5.9 million due to $3.4 million of recoveries for hurricane-related insurance claims recorded during the third quarter of 2018 and higher rent expense in Popular Bank;
  • higher professional fees by $5.2 million mainly associated with higher consulting, audit and tax fees;
  • higher business promotion expenses by $6.2 million due to higher seasonal advertising costs by $3.1 million and higher donations by $1.4 million; and
  • a loss of $12.5 million resulting from the early extinguishment of the 2019 Senior Notes.

These increases were partially offset by:

  • Lower FDIC deposit insurance by $3.4 million due to the termination of the temporary surcharge assessed by the FDIC to raise its Reserve Ratio;
  • lower OREO expenses by $5.6 million due to $3.3 million in insurance reimbursement related to recoveries for hurricane-related claims and gain on sale of mortgage properties;
  • lower credit and debit card processing, volume, interchange and other expenses by $4.2 million as a result of incentives received for exceeding volume targets; and
  • lower other operating expenses by $19.5 million mainly resulting from a $19.6 million write-down related to the capitalized software cost of a technology project discontinued by the Corporation during the third quarter of 2018.

Full-time equivalent employees were 8,474 as of December 31, 2018, compared to 8,363 as of September 30, 2018.

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

Income taxes

For the quarter ended December 31, 2018, the Corporation recorded an income tax expense of $84.0 million, compared to $42.0 million for the previous quarter. As previously discussed, as a result of the enactment of Act No. 257 of 2018, which amended the Puerto Rico Internal Revenue Code to, among other things, reduce the corporate income tax rate from 39% to 37.5%, during the fourth quarter the Corporation recognized a non-cash income tax expense of $27.7 million resulting from adjustments to the DTA related to its Puerto Rico operations due to the lower tax rate, which reduces the expected benefit of the DTA . Excluding the impact of this adjustment, the effective tax rate for the fourth quarter of 2018 was 30%, as more income was recognized at the 39% marginal tax rate in Puerto Rico and the debt extinguishment expenses were not subject to a tax benefit.

The effective tax rate of the Corporation is impacted by the composition and source of its taxable income. For the year 2019, the Corporation expects its consolidated effective tax rate to be within a range from 22-25%.

Credit Quality

Overall, the Puerto Rico segment continued to reflect a positive credit quality trend, with metrics better than, or improving to levels equal to, those prevailing prior to the impact of Hurricanes Irma and Maria in September 2017. The Corporation continues to closely monitor its portfolios and related credit metrics given Puerto Rico’s ongoing economic and fiscal challenges. The results of our U.S. operation also remained solid with strong growth and favorable credit quality metrics. The following presents credit quality results for the fourth quarter of 2018.

  • Inflows of NPLs held-in-portfolio, excluding consumer loans, remained stable quarter-over-quarter, increasing slightly by $761 thousand. P.R. mortgage inflows for the quarter remained better than pre-hurricane levels, primarily due to lower early delinquencies.
  • Total non-performing loans held-in-portfolio decreased by $21.4 million from the third quarter of 2018, mainly driven by lower P.R. mortgage NPLs of $25.2 million, reflective of lower inflows for the quarter and increased foreclosure activity after the termination of the moratorium period related to the hurricanes. At December 31, 2018, the ratio of NPLs to total loans held-in-portfolio was 2.3%, compared to 2.4% in the third quarter of 2018.
  • Net charge-offs increased by $43.3 million from the third quarter of 2018, primarily driven by higher P.R. commercial NCOs of $49.3 million. This increase was related to charge-offs from two large commercial relationships. This increase was in part offset by lower consumer and mortgage NCOs by $6.9 million and $3.9 million, respectively, as the prior quarter was impacted by post-moratorium effects. The U.S. NCOs increased by $5.6 million mostly due to a previously reserved construction loan. The Corporation’s ratio of annualized net charge-offs to average loans held-in-portfolio was 1.63%, compared to 1.00% in the third quarter of 2018. Refer to Table J for further information on net charge-offs and related ratios.
  • The allowance for loan and lease losses (“ALLL”) decreased by $64.4 million from the third quarter of 2018 to $569.3 million. The P.R. segment ALLL decreased by $53.0 million, principally driven by the abovementioned charge-offs, coupled with improvements in the loss estimates of the purchased credit impaired loans accounted for under ASC 310-30 and improvements in loss trends in our consumer portfolio. The hurricane-related reserve has been substantially eliminated. However, the ALLL balance at December 31, 2018 included $50 million in environmental factors reserves to account for potential losses in our P.R. commercial portfolio not embedded in our historical loss rates. The U.S. segment ALLL decreased by $11.4 million, mostly due to the construction charge-off recorded during the quarter.
  • The general and specific reserves totaled $449.7 million and $119.7 million, respectively, at quarter-end, compared with $503.2 million and $130.5 million, respectively, as of September 30, 2018. The ratio of the allowance for loan losses to loans held-in-portfolio was 2.15% in the fourth quarter of 2018, compared to 2.39% from the previous quarter. The ratio of the allowance for loan losses to NPLs held-in-portfolio stood at 93.2% compared to 100.2% in the previous quarter.
  • The provision for loan losses for the fourth quarter of 2018 decreased by $11.8 million, driven by a decrease of $8.4 million in the P.R. expense. The provision to net charge-offs ratio was 39.8% in the fourth quarter of 2018, compared to 85.4% in the previous quarter.

Non-Performing Assets      
(Unaudited)            
(In thousands)   31-Dec-18   30-Sep-18   31-Dec-17
Total non-performing loans held-in-portfolio, excluding covered loans $611,087 $632,488 $550,957
Other real estate owned (“OREO”), excluding covered OREO   136,705   133,780   169,260
Total non-performing assets, excluding covered assets 747,792 766,268 720,217
Covered loans and OREO   -   -   22,948
Total non-performing assets   $747,792   $766,268   $743,165
Net charge-offs for the quarter (excluding covered loans)   $106,938   $63,687   $93,675
 
 
Ratios (excluding covered loans):            
Non-covered loans held-in-portfolio $26,507,889 $26,512,168 $24,292,794
Non-performing loans held-in-portfolio to loans held-in-portfolio 2.31% 2.39% 2.27%
Allowance for loan losses to loans held-in-portfolio 2.15 2.39 2.43
Allowance for loan losses to non-performing loans, excluding loans held-for-sale   93.17   100.19   107.12
 
Refer to Table H for additional information.
 
Provision for Loan Losses        
 
(Unaudited)   Quarters ended   Years ended
(In thousands)   31-Dec-18   30-Sep-18   31-Dec-17   31-Dec-18 31-Dec-17
Provision (reversal) for loan losses:
BPPR $43,461 $51,877 $52,973 $196,461 $241,739
Popular U.S.   (893)   2,510   17,028   29,881 77,943
Total provision for loan losses - non-covered loans   $42,568   $54,387   $70,001   $226,342 $319,682
Provision for loan losses - covered loans   -   -   1,487   1,730 5,742
Total provision for loan losses   $42,568   $54,387   $71,488   $228,072 $325,424
 

Credit Quality by Segment      
 
(Unaudited)
(In thousands)

 

Quarters ended

BPPR   31-Dec-18   30-Sep-18   31-Dec-17
Provision for loan losses $43,461 $51,877 $52,973
Net charge-offs 96,479 58,846 59,118
Total non-performing loans held-in-portfolio, excluding covered loans 568,098 580,803 511,440
Allowance / non-covered loans held-in-portfolio   2.55%   2.83%   2.87%
 

 

 

 

Quarters ended

Popular U.S.   31-Dec-18   30-Sep-18   31-Dec-17
Provision (reversal) for loan losses $(893) $2,510 $17,028
Net charge-offs 10,459 4,841 34,557
Total non-performing loans held-in-portfolio 42,989 51,685 39,517
Allowance / non-covered loans held-in-portfolio   0.94%   1.10%   1.16%
 
Financial Condition Highlights
         
(Unaudited)
(In thousands)   31-Dec-18   30-Sep-18   31-Dec-17
Cash and money market investments $4,565,083 $5,010,010 $5,657,976
Investment securities 13,595,130 13,344,548 10,482,971
Loans not covered under loss-sharing agreements with the FDIC 26,507,889 26,512,168 24,292,794
Loans covered under loss-sharing agreements with the FDIC - - 517,274
Total assets 47,604,577 47,919,428 44,277,337
Deposits 39,710,039 39,648,827 35,453,508
Borrowings 1,537,673 2,046,003 2,023,485
Total liabilities 42,169,520 42,675,079 39,173,432
Stockholders’ equity   5,435,057   5,244,349   5,103,905
 

Total assets decreased by $0.3 billion from the third quarter of 2018, driven by:

  • A decrease of $0.4 billion in cash and money market investments, mainly due to the repayment of the 2019 Senior Notes;

Partially offset by:

  • An increase of $0.3 billion in debt securities available-for-sale mainly due to purchases of U.S. Treasury securities at BPPR, partially offset by maturities and calls of U.S. agencies and pay-downs of mortgage-backed securities and collateralized mortgage obligations.

Total liabilities decreased by $0.5 billion from the third quarter of 2018, mainly due to:

  • A decrease of $0.5 billion in notes payable due to the redemption on October 15, 2018 of the 2019 Senior Notes.

Stockholders’ equity increased by approximately $0.2 billion from the third quarter of 2018, principally due to lower unrealized losses on debt securities available-for-sale by $0.1 billion and net income for the quarter of $106.4 million; partially offset by declared dividends of $25.1 million on common stock and $0.9 million in dividends on preferred stock.

Common equity tier-1 ratio (“CET1”), common equity per share and tangible book value per share were 16.90%, $53.88 and $46.90, respectively, at December 31, 2018, compared to 16.19%, $51.77 and $44.62 at September 30, 2018. Refer to Table A for capital ratios.

Refer to Table C for the Statements of Financial Condition.

Cautionary Note Regarding Forward-Looking Statements

This press release contains “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, including without limitation those about Popular’s business, financial condition, results of operations, plans, objectives and future performance. These statements are not guarantees of future performance, are based on management’s current expectations and, by their nature, involve risks, uncertainties, estimates and assumptions. Potential 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. Risks and uncertainties include without limitation the effect of competitive and economic factors, and our reaction to those factors, 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 effect of legal proceedings and new accounting standards on the Corporation’s financial condition and results of operations, the impact of Hurricanes Irma and Maria on us, our ability to successfully integrate the auto finance business acquired from Wells Fargo, as well as the unexpected costs, including, without limitation, costs due to exposure to any unrecorded liabilities or issues not identified during the due diligence investigation of the business or that are not subject to indemnification or reimbursement, and risks that the business may suffer as a result of the acquisition, including due to adverse effects on relationships with customers, employees and service providers. 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.

More information on the risks and important factors that could affect the Corporation’s future results and financial condition is included in our Annual Report on Form 10-K for the year ended December 31, 2017, our Quarterly Report on Form 10-Q for the quarters ended March 31, 2018, June 30, 2018 and September 30, 2018, and our Form 10-K for the year 2018 to be filed with the SEC. Our filings are available on the Corporation’s website (www.popular.com) and on the Securities and Exchange Commission website (www.sec.gov). The Corporation assumes no obligation to update or revise any forward-looking statements or information which speak as of their respective dates.

About Popular, Inc.

Popular, Inc. is the leading financial institution in Puerto Rico, by both assets and deposits, and ranks among the top 50 U.S. bank holding companies by assets. Founded in 1893, Banco Popular de Puerto Rico, Popular’s principal subsidiary, provides retail, mortgage and commercial banking services in Puerto Rico and the U.S. Virgin Islands. Popular also offers auto and equipment leasing and financing, investment banking, broker-dealer and insurance services through specialized subsidiaries. In the mainland United States, Popular provides retail, mortgage and commercial banking services through its New York-chartered banking subsidiary, Popular Bank, which has branches located in New York, New Jersey and Florida.

Conference Call

Popular will hold a conference call to discuss its financial results today Wednesday, January 23, 2019 at 10:00 a.m. Eastern Time. The call will be open to the public and broadcasted 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 Saturday, February 23, 2019. The replay dial-in is: 1-877-344-7529 or 1-412-317-0088. The replay passcode is 10127730.

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

Popular, Inc.
Financial Supplement to Fourth Quarter 2018 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 - POPULAR U.S. OPERATIONS

 

Table N -

Reconciliation to GAAP Financial Measures

 

Table P -

Adjusted Net Income for the Years Ended December 31, 2018 and 2017 (Non-GAAP)

 

POPULAR, INC.
Financial Supplement to Fourth Quarter 2018 Earnings Release
Table A - Selected Ratios and Other Information
(Unaudited)
             
  Quarters ended   Years ended
    31-Dec-18   30-Sep-18   31-Dec-17   31-Dec-18   31-Dec-17
Basic EPS $1.06   $1.38   $(1.01) $6.07   $1.02
Diluted EPS $1.05 $1.38 $(1.01) $6.06 $1.02
Average common shares outstanding 99,933,184 101,067,300 101,695,868 101,142,258 101,966,429
Average common shares outstanding - assuming dilution 100,114,358 101,249,154 101,695,868 101,308,643 102,045,336
Common shares outstanding at end of period 99,942,845 100,336,341 102,068,981 99,942,845 102,068,981
 
Market value per common share $47.22 $51.25 $35.49 $47.22 $35.49
 
Market capitalization - (In millions) $4,719 $5,142 $3,622 $4,719 $3,622
 
Return on average assets 0.88% 1.17% (0.94%) 1.33% 0.26%
. .
Return on average common equity 7.57% 10.10% (7.67%) 11.39% 1.96%
 
Net interest margin 4.25% 4.07% 3.90% 4.01% 3.99%
 
Common equity per share $53.88 $51.77 $49.51 $53.88 $49.51
 
Tangible common book value per common share (non-GAAP) [1] $46.90 $44.62 $43.02 $46.90 $43.02
 
Tangible common equity to tangible assets (non-GAAP) [1] 9.99% 9.49% 10.07% 9.99% 10.07%
 
Tier 1 capital 16.90% 16.19% 16.30% 16.90% 16.30%
 
Total capital 19.54%

18.82%

19.22% 19.54% 19.22%
 
Tier 1 leverage 9.88% 9.60% 10.02% 9.88% 10.02%
 
Common Equity Tier 1 capital   16.90%   16.19%   16.30%   16.90%   16.30%
[1] Refer to Table N for reconciliation to GAAP financial measures.
 

POPULAR, INC.
Financial Supplement to Fourth Quarter 2018 Earnings Release
Table B - Consolidated Statement of Operations
(Unaudited)
  Quarters ended   Variance   Quarter ended   Variance   Years ended
(In thousands, except per share information)   31-Dec-18   30-Sep-18  

Q4 2018
vs. Q3 2018

  31-Dec-17  

Q4 2018
vs. Q4 2017

  31-Dec-18   31-Dec-17
Interest income:    
Loans $455,238 $430,637 $24,601 $375,981 $79,257 $1,645,736 $1,478,765
Money market investments 25,030 27,581 (2,551) 18,262 6,768 111,288 51,495
Investment securities   79,287   70,147   9,140   51,090   28,197   264,824   195,684
Total interest income   559,555   528,365   31,190   445,333   114,222   2,021,848   1,725,944
Interest expense:
Deposits 65,215 55,134 10,081 36,957 28,258 204,265 141,864
Short-term borrowings 1,823 1,622 201 1,990 (167) 7,210 5,724
Long-term debt   16,292   20,140   (3,848)   19,170   (2,878)   75,496   76,392
Total interest expense   83,330   76,896   6,434   58,117   25,213   286,971   223,980
Net interest income 476,225 451,469 24,756 387,216 89,009 1,734,877 1,501,964
Provision for loan losses - non-covered loans 42,568 54,387 (11,819) 70,001 (27,433) 226,342 319,682
Provision for loan losses - covered loans   -   -   -   1,487   (1,487)   1,730   5,742
Net interest income after provision for loan losses   433,657   397,082   36,575   315,728   117,929   1,506,805   1,176,540
Service charges on deposit accounts 38,973 38,147 826 33,827 5,146 150,677 153,709
Other service fees 70,226 64,316 5,910 48,443 21,783 258,020 217,267
Mortgage banking activities 19,394 11,269 8,125 (1,853) 21,247 52,802 25,496
Net gain on sale of debt securities - - - - - - 83
Other-than-temporary impairment losses on debt securities - - - - - - (8,299)
Net (loss) gain, including impairment, on equity securities (2,039) 370 (2,409) 50 (2,089) (2,081) 251
Net profit (loss) on trading account debt securities 91 (122) 213 (137) 228 (208) (817)
Net gain (loss) on sale of loans, including valuation adjustments on loans held-for-sale 33 - 33 - 33 33 (420)
Adjustments (expense) to indemnity reserves on loans sold (6,477) (3,029) (3,448) (11,075) 4,598 (12,959) (22,377)
FDIC loss-share income (expense) - - - 2,614 (2,614) 94,725 (10,066)
Other operating income   32,966   40,070   (7,104)   14,262   18,704   111,485   64,340
Total non-interest income   153,167   151,021   2,146   86,131   67,036   652,494   419,167
Operating expenses:
Personnel costs
Salaries 86,569 83,535 3,034 78,339 8,230 326,509 313,394
Commissions, incentives and other bonuses 23,315 25,365 (2,050) 14,847 8,468 90,000 70,099
Pension, postretirement and medical insurance 11,698 8,670 3,028 10,297 1,401 39,660 40,065
Other personnel costs, including payroll taxes   51,465   22,187   29,278   14,822   36,643   106,819   53,204
Total personnel costs 173,047 139,757 33,290 118,305 54,742 562,988 476,762
Net occupancy expenses 24,500 18,602 5,898 23,899 601 88,329 89,194
Equipment expenses 18,504 18,303 201 16,465 2,039 71,788 65,142
Other taxes 12,583 11,923 660 10,815 1,768 46,284 43,382
Professional fees
Collections, appraisals and other credit related fees 4,043 3,371 672 3,254 789 14,700 14,415
Programming, processing and other technology services 55,089 55,187 (98) 50,496 4,593 216,128 199,873
Legal fees, excluding collections 4,118 4,284 (166) 3,225 893 19,072 11,763
Other professional fees   25,846   21,018   4,828   22,557   3,289   99,944   66,437
Total professional fees 89,096 83,860 5,236 79,532 9,564 349,844 292,488
Communications 5,765 6,054 (289) 5,224 541 23,107 22,466
Business promotion 21,653 15,478 6,175 18,287 3,366 65,918 58,445
FDIC deposit insurance 5,223 8,610 (3,387) 7,456 (2,233) 27,757 26,392
Loss on early extinguishment of debt 12,522 - 12,522 - 12,522 12,522 -
Other real estate owned (OREO) expenses 2,310 7,950 (5,640) 7,328 (5,018) 23,338 48,540
Credit and debit card processing, volume, interchange and other expenses 4,790 8,946 (4,156) 6,853 (2,063) 27,979 26,201
Other operating expenses
Operational losses 9,103 7,770 1,333 11,639 (2,536) 35,798 39,612
All other   15,006   35,860   (20,854)   13,808   1,198   76,584   59,194
Total other operating expenses 24,109 43,630 (19,521) 25,447 (1,338) 112,382 98,806
Amortization of intangibles   2,353   2,324   29   2,344   9   9,326   9,378
Total operating expenses   396,455   365,437   31,018   321,955   74,500   1,421,562   1,257,196
Income before income tax 190,369 182,666 7,703 79,904 110,465 737,737 338,511
Income tax expense   83,966   42,018   41,948   182,058   (98,092)   119,579   230,830
Net income (loss)   $106,403   $140,648   $(34,245)   $(102,154)   $208,557   $618,158   $107,681
Net income (loss) applicable to common stock   $105,472   $139,718   $(34,246)   $(103,085)   $208,557   $614,435   $103,958
Net income (loss) per common share - basic   $1.06   $1.38   $(0.32)   $(1.01)   $2.07   $6.07   $1.02
Net income (loss) per common share - diluted   $1.05   $1.38   $(0.33)   $(1.01)   $2.06   $6.06   $1.02
Dividends Declared per Common Share   $0.25   $0.25   $-   $0.25   $-   $1.00   $1.00
 

Popular, Inc.
Financial Supplement to Fourth Quarter 2018 Earnings Release
Table C - Consolidated Statement of Financial Condition
(Unaudited)
        Variance
Q4 2018 vs.
(In thousands)   31-Dec-18   30-Sep-18   31-Dec-17   Q3 2018
Assets:
Cash and due from banks $394,035 $400,949 $402,857 $(6,914)
Money market investments 4,171,048 4,609,061 5,255,119 (438,013)
Trading account debt securities, at fair value 37,787 37,731 33,926 56
Debt securities available-for-sale, at fair value 13,300,184 13,047,617 10,176,923 252,567
Debt securities held-to-maturity, at amortized cost 101,575 101,238 107,019 337
Equity securities 155,584 157,962 165,103 (2,378)
Loans held-for-sale, at lower of cost or fair value 51,422 51,742 132,395 (320)
Loans held-in-portfolio:
Loans not covered under loss-sharing agreements with the FDIC 26,663,713 26,661,951 24,423,427 1,762
Loans covered under loss-sharing agreements with the FDIC - - 517,274 -
Less: Unearned income 155,824 149,783 130,633 6,041
Allowance for loan losses   569,348   633,718   623,426   (64,370)
Total loans held-in-portfolio, net   25,938,541   25,878,450   24,186,642   60,091
FDIC loss-share asset - - 45,192 -
Premises and equipment, net 569,808 557,104 547,142 12,704
Other real estate not covered under loss-sharing agreements with the FDIC 136,705 133,780 169,260 2,925
Other real estate covered under loss-sharing agreements with the FDIC - - 19,595 -
Accrued income receivable 166,022 163,443 213,844 2,579
Mortgage servicing assets, at fair value 169,777 162,779 168,031 6,998
Other assets 1,714,134 1,900,850 1,991,323 (186,716)
Goodwill 671,122 687,536 627,294 (16,414)
Other intangible assets   26,833   29,186   35,672   (2,353)
Total assets   $47,604,577   $47,919,428   $44,277,337   $(314,851)
Liabilities and Stockholders’ Equity:
Liabilities:
Deposits:
Non-interest bearing $9,149,036 $8,803,752 $8,490,945 $345,284
Interest bearing   30,561,003   30,845,075   26,962,563   (284,072)
Total deposits   39,710,039   39,648,827   35,453,508   61,212
Assets sold under agreements to repurchase 281,529 300,116 390,921 (18,587)
Other short-term borrowings 42 1,200 96,208 (1,158)
Notes payable 1,256,102 1,744,687 1,536,356 (488,585)
Other liabilities   921,808   980,249   1,696,439   (58,441)
Total liabilities   42,169,520   42,675,079   39,173,432   (505,559)
Stockholders’ equity:
Preferred stock 50,160 50,160 50,160 -
Common stock 1,043 1,043 1,042 -
Surplus 4,365,606 4,281,515 4,298,503 84,091
Retained earnings 1,651,731 1,629,692 1,194,994 22,039
Treasury stock (205,509) (183,872) (90,142) (21,637)
Accumulated other comprehensive loss, net of tax   (427,974)   (534,189)   (350,652)   106,215
Total stockholders’ equity   5,435,057   5,244,349   5,103,905   190,708
Total liabilities and stockholders’ equity   $47,604,577   $47,919,428   $44,277,337   $(314,851)
 

Popular, Inc.
Financial Supplement to Fourth Quarter 2018 Earnings Release
Table D - Consolidated Average Balances and Yield / Rate Analysis - QUARTER
(Unaudited)
                                 
Quarters ended Variance
31-Dec-18 30-Sep-18 31-Dec-17 Q4 2018 vs. Q3 2018 Q4 2018 vs. Q4 2017
($ 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 $18,278   $104.3   2.27 % $18,547   $97.7   2.10 % $15,666   $69.3   1.76 % ($269)   $6.6   0.17 % $2,612   $35.0   0.51 %
Loans not covered under loss-sharing agreements with the FDIC:
Commercial 11,967 182.1 6.04 11,814 176.7 5.94 11,351 157.5 5.50 153 5.4 0.10 616 24.6 0.54
Construction 905 15.2 6.65 932 15.2 6.45 859 12.5 5.79 (27) - 0.20 46 2.7 0.86
Mortgage 7,149 90.1 5.04 7,142 90.3 5.06 7,043 89.5 5.08 7 (0.2) (0.02) 106 0.6 (0.04)
Consumer 5,403 154.2 11.32 4,818 135.2 11.14 3,796 104.7 10.95 585 19.0 0.18 1,607 49.5 0.37
Lease financing 913   13.6   5.97 885   13.3   5.99 781   11.8   6.04 28   0.3   (0.02) 132   1.8   (0.07)
Total loans 26,337   455.2   6.87 25,591   430.7   6.69 23,830   376.0   6.27 746   24.5   0.18 2,507   79.2   0.60
Total interest earning assets $44,615   $559.5   4.99 % $44,138   $528.4   4.76 % $39,496   $445.3   4.49 % $477   $31.1   0.23 % $5,119   $114.2   0.50 %
Allowance for loan losses (621) (639) (644) 18 23
Other non-interest earning assets 3,925 3,992 4,400 (67) (475)
Total average assets $47,919 $47,491 $43,252 $428 $4,667
 
Liabilities and Stockholders' Equity:
Interest bearing deposits:
NOW and money market $13,848 $30.4 0.87 % $13,201 $23.0 0.69 % $11,023 $10.1 0.36 % $647 $7.4 0.18 % $2,825 $20.3 0.51 %
Savings 9,728 9.9 0.40 9,797 9.0 0.37 8,457 5.3 0.25 (69) 0.9 0.03 1,271 4.6 0.15
Time deposits 7,419   24.9   1.33 7,419   23.1   1.24 7,545   21.6   1.13 -   1.8   0.09 (126)   3.3   0.20
Total interest-bearing deposits 30,995 65.2 0.83 30,417 55.1 0.72 27,025 37.0 0.54 578 10.1 0.11 3,970 28.2 0.29
Borrowings 1,658   18.1   4.38 1,861   21.8   4.68 2,060   21.1   4.11 (203)   (3.7)   (0.30) (402)   (3.0)   0.27
Total interest-bearing liabilities 32,653   83.3   1.01 32,278   76.9   0.95 29,085   58.1   0.80 375   6.4   0.06 3,568   25.2   0.21
Net interest spread 3.98 % 3.81 % 3.69 % 0.17 % 0.29 %
Non-interest bearing deposits 8,895 8,860 7,880 35 1,015
Other liabilities 799 816 908 (17) (109)
Stockholders' equity 5,572 5,537 5,379 35 193
Total average liabilities and stockholders' equity $47,919 $47,491 $43,252 $428 $4,667
 
Net interest income / margin non-taxable equivalent basis $476.2   4.25 % $451.5   4.07 % $387.2   3.90 % $24.7   0.18 % $89.0   0.35 %
 

Popular, Inc.
Financial Supplement to Fourth Quarter 2018 Earnings Release
Table E - Consolidated Average Balances and Yield / Rate Analysis - YEAR-TO-DATE
(Unaudited)
                 
Years ended
31-Dec-18 31-Dec-17 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 $18,212   $376.1   2.07 % $14,158   $247.2   1.75 % $4,054   $128.9   0.32 %
Loans not covered under loss-sharing agreements with the FDIC:
Commercial 11,698 686.4 5.87 11,065 611.3 5.52 633 75.1 0.35
Construction 915 58.3 6.37 830 46.6 5.61 85 11.7 0.76
Mortgage 7,119 360.4 5.06 7,110 370.1 5.21 9 (9.7) (0.15)
Consumer 4,464 488.8 10.95 3,764 403.6 10.72 700 85.2 0.23
Lease financing 867   51.9   5.98 742   47.1   6.35 125   4.8   (0.37)
Total loans 25,063   1,645.8   6.57 23,511   1,478.7   6.29 1,552   167.1   0.28
Total interest earning assets $43,275   $2,021.9   4.67 % $37,669   $1,725.9   4.58 % $5,606   $296.0   0.09 %
Allowance for loan losses (635) (573) (62)
Other non-interest earning assets 3,999 4,308 (309)
Total average assets $46,639 $41,404 $5,235
 
Liabilities and Stockholders' Equity:
Interest bearing deposits:
NOW and money market $12,688 $80.7 0.64 % $10,116 $37.5 0.36 % $2,572 $43.2 0.28 %
Savings 9,439 31.9 0.34 8,103 20.2 0.25 1,336 11.7 0.09
Time deposits 7,570   91.7   1.21 7,625   84.1   1.10 (55)   7.6   0.11
Total interest-bearing deposits 29,697 204.3 0.69 25,844 141.8 0.55 3,853 62.5 0.14
Borrowings 1,879   82.7   4.40 2,001   82.1   4.10 (122)   0.6   0.30
Total interest-bearing liabilities 31,576   287.0   0.91 27,845   223.9   0.80 3,731   63.1   0.11
Net interest spread 3.76 % 3.78 % (0.02) %
Non-interest bearing deposits 8,790 7,339 1,451
Other liabilities 831 875 (44)
Stockholders' equity 5,442 5,345 97
Total average liabilities and stockholders' equity $46,639 $41,404 $5,235
 
Net interest income / margin non-taxable equivalent basis $1,734.9 4.01 % $1,502.0 3.99 % $232.9 0.02 %
 

Popular, Inc.                
Financial Supplement to Fourth Quarter 2018 Earnings Release
Table F - Mortgage Banking Activities and Other Service Fees
(Unaudited)
 
Mortgage Banking Activities
Quarters ended Variance Years ended Variance
(In thousands)   31-Dec-18   30-Sep-18   31-Dec-17  

Q4 2018
vs.Q3 2018

 

Q4 2018
vs.Q4 2017

  31-Dec-18   31-Dec-17  

2018 vs.
2017

Mortgage servicing fees, net of fair value adjustments:
Mortgage servicing fees $12,327 $12,324 $9,815 $3 $2,512 $49,532 $48,300 $1,232
Mortgage servicing rights fair value adjustments   4,646   (4,194)   (12,257)   8,840   16,903   (8,477)   (36,519)   28,042
Total mortgage servicing fees, net of fair value adjustments   16,973   8,130   (2,442)   8,843   19,415   41,055   11,781   29,274
Net gain on sale of loans, including valuation on loans held-for-sale   2,893   3,014   213   (121)   2,680   9,424   17,088   (7,664)
Trading account (loss) profit:
Unrealized (losses) gains on outstanding derivative positions (122) 45 288 (167) (410) (253) 184 (437)
Realized (losses) gains on closed derivative positions   (350)   80   88   (430)   (438)   2,576   (3,557)   6,133
Total trading account (loss) profit   (472)   125   376   (597)   (848)   2,323   (3,373)   5,696
Total mortgage banking activities   $19,394   $11,269   $(1,853)   $8,125   $21,247   $52,802   $25,496   $27,306
   
Other Service Fees
Quarters ended Variance Years ended Variance
(In thousands)   31-Dec-18   30-Sep-18   31-Dec-17  

Q4 2018
vs.Q3 2018

 

Q4 2018
vs.Q4 2017

  31-Dec-18   31-Dec-17  

2018 vs.
2017

Other service fees:
Debit card fees $11,868 $10,984 $9,243 $884 $2,625 $46,174 $42,721 $3,453
Insurance fees 14,362 14,042 11,538 320 2,824 54,030 50,948 3,082
Credit card fees 23,827 21,525 13,304 2,302 10,523 89,693 67,584 22,109
Sale and administration of investment products 5,824 5,696 5,581 128 243 21,895 21,958 (63)
Trust fees 4,677 4,967 5,297 (290) (620) 19,880 19,972 (92)
Other fees   9,668   7,102   3,480   2,566   6,188   26,348   14,084   12,264
Total other service fees   $70,226   $64,316   $48,443   $5,910   $21,783   $258,020   $217,267   $40,753
 

Popular, Inc.          
Financial Supplement to Fourth Quarter 2018 Earnings Release
Table G - Loans and Deposits
(Unaudited)
 
Loans - Ending Balances
Variance
(In thousands)   31-Dec-18   30-Sep-18   31-Dec-17  

Q4 2018 vs.
Q3 2018

 

Q4 2018 vs.
Q4 2017

Loans not covered under FDIC loss-sharing agreements:
Commercial $12,043,019 $11,993,707 $11,488,861 $49,312 $554,158
Construction 779,449 943,365 880,029 (163,916) (100,580)
Legacy [1] 25,949 27,566 32,980 (1,617) (7,031)
Lease financing 934,773 903,540 809,990 31,233 124,783
Mortgage 7,235,258 7,304,170 7,270,407 (68,912) (35,149)
Consumer   5,489,441   5,339,820   3,810,527   149,621   1,678,914
Total non-covered loans held-in-portfolio $26,507,889 $26,512,168 $24,292,794 $(4,279) $2,215,095
Loans covered under FDIC loss-sharing agreements   -   -   517,274   -   (517,274)
Total loans held-in-portfolio   $26,507,889   $26,512,168   $24,810,068   $(4,279)   $1,697,821
Loans held-for-sale:
Mortgage   51,422   51,742   132,395   (320)   (80,973)
Total loans held-for-sale   $51,422   $51,742   $132,395   $(320)   $(80,973)
Total loans   $26,559,311   $26,563,910   $24,942,463   $(4,599)   $1,616,848
[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 Popular U.S. segment.
Deposits - Ending Balances
Variance
(In thousands)   31-Dec-18   30-Sep-18   31-Dec-17   Q4 2018 vs. Q3 2018   Q4 2018 vs.Q4 2017
Demand deposits [1] $16,077,023 $16,120,156 $12,460,081 $(43,133) $3,616,942
Savings, NOW and money market deposits (non-brokered) 15,616,247 15,714,275 15,054,242 (98,028) 562,005
Savings, NOW and money market deposits (brokered) 400,004 402,116 424,307 (2,112) (24,303)
Time deposits (non-brokered) 7,500,544 7,280,854 7,411,140 219,690 89,404
Time deposits (brokered CDs)   116,221   131,426   103,738   (15,205)   12,483
Total deposits   $39,710,039   $39,648,827   $35,453,508   $61,212   $4,256,531
[1] Includes interest and non-interest bearing demand deposits.
 

Popular, Inc.
Financial Supplement to Fourth Quarter 2018 Earnings Release
Table H - Non-Performing Assets
(Unaudited)
              Variance
(Dollars in thousands)   31-Dec-18  

As a % of
loans HIP by
category

    30-Sep-18  

As a % of
loans HIP by
category

    31-Dec-17  

As a % of
loans HIP by
category

   

Q4 2018 vs.
Q3 2018

 

Q4 2018 vs.
Q4 2017

Non-accrual loans:  
Commercial $184,026 1.5 % $172,685 1.4 % $165,065 1.4 % $11,341 $18,961
Construction 13,848 1.8 19,695 2.1 - - (5,847) 13,848
Legacy [1] 2,627 10.1 3,403 12.3 3,039 9.2 (776) (412)
Lease financing 3,313 0.4 3,009 0.3 2,974 0.4 304 339
Mortgage 334,598 4.6 361,085 4.9 321,549 4.4 (26,487) 13,049
Consumer   72,675   1.3     72,611   1.4     58,330   1.5     64   14,345

Total non-performing loans held-in-portfolio, excluding covered loans

611,087 2.3 % 632,488 2.4 % 550,957 2.3 % (21,401) 60,130

Other real estate owned (“OREO”), excluding covered OREO

  136,705         133,780         169,260         2,925   (32,555)

Total non-performing assets, excluding covered assets

747,792 766,268 720,217 (18,476) 27,575
Covered loans and OREO   -         -         22,948         -   (22,948)
Total non-performing assets [2]   $747,792         $766,268         $743,165         $(18,476)   $4,627
Accruing loans past due 90 days or more [3] [4]   $618,006         $753,074         $1,225,149         $(135,068)   $(607,143)
Ratios excluding covered loans:

Non-performing loans held-in-portfolio to loans held-in-portfolio

2.31 % 2.39 % 2.27 %

Allowance for loan losses to loans held-in-portfolio

2.15 2.39 2.43

Allowance for loan losses to non-performing loans, excluding loans held-for-sale

  93.17         100.19         107.12              
Ratios including covered loans:
Non-performing assets to total assets 1.57 % 1.60 % 1.68 %

Non-performing loans held-in-portfolio to loans held-in-portfolio

2.31 2.39 2.23

Allowance for loan losses to loans held-in-portfolio

2.15 2.39 2.51

Allowance for loan losses to non-performing loans, excluding loans held-for-sale

  93.17         100.19         112.47              
[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 Popular U.S. segment.
 
[2] There were no non-performing loans held-for-sale as of December 31, 2018, September 30, 2018 and December 31, 2017.
 
[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 include loans rebooked, which were previously pooled into GNMA securities amounting to $134 million (September 30, 2018 - $195 million; December 31, 2017 - $840 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. While the borrowers for our serviced GNMA portfolio benefited from the loan payment moratorium, the delinquency status of these loans continued to be reported to GNMA without considering the moratorium. These balances include $283 million of residential mortgage loans insured by FHA or guaranteed by the VA that are no longer accruing interest as of December 31, 2018 (September 30, 2018 - $238 million; December 31, 2017 - $178 million). Furthermore, the Corporation has approximately $69 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 (September 30, 2018 - $53 million; December 31, 2017 - $58 million).
 
[4] The carrying value of loans accounted for under ASC Subtopic 310-30 that are contractually 90 days or more past due was $216 million at December 31, 2018 (September 30, 2018 - $304 million; December 31, 2017 - $272 million). This amount is excluded from the above table as the loans’ accretable yield interest recognition is independent from the underlying contractual loan delinquency status.
 

Popular, Inc.
Financial Supplement to Fourth Quarter 2018 Earnings Release
Table I - Activity in Non-Performing Loans
(Unaudited)
           
Commercial loans held-in-portfolio:
Quarter ended Quarter ended
31-Dec-18   30-Sep-18
(In thousands)   BPPR   Popular U.S.   Popular, Inc.   BPPR   Popular U.S.   Popular, Inc.
Beginning balance NPLs $171,271 $1,414 $172,685 $162,781 $2,168 $164,949
Plus:
New non-performing loans 25,366 1,158 26,524 23,894 1,663 25,557
Less:
Non-performing loans transferred to OREO (1,075) - (1,075) (1,480) - (1,480)
Non-performing loans charged-off (3,482) (32) (3,514) (5,179) (3) (5,182)
Loans returned to accrual status / loan collections   (9,130)   (1,464)   (10,594)   (8,745)   (2,414)   (11,159)
Ending balance NPLs   $182,950   $1,076   $184,026   $171,271   $1,414   $172,685
 
Construction loans held-in-portfolio:
Quarter ended Quarter ended
31-Dec-18   30-Sep-18
(In thousands)   BPPR   Popular U.S.   Popular, Inc.   BPPR   Popular U.S.   Popular, Inc.
Beginning balance NPLs $1,829 $17,866 $19,695 $2,559 $17,901 $20,460
Less:
Non-performing loans charged-off - (5,806) (5,806) - - -
Loans returned to accrual status / loan collections   (41)   -   (41)   (730)   (35)   (765)
Ending balance NPLs   $1,788   $12,060   $13,848   $1,829   $17,866   $19,695
 
Mortgage loans held-in-portfolio:
Quarter ended Quarter ended
31-Dec-18   30-Sep-18
(In thousands)   BPPR   Popular U.S.   Popular, Inc.   BPPR   Popular U.S.   Popular, Inc.
Beginning balance NPLs $348,779 $12,306 $361,085 $373,257 $11,398 $384,655
Plus:
New non-performing loans 46,187 2,352 48,539 44,453 4,406 48,859
Advances on existing non-performing loans - 98 98 - 52 52
Less:
Non-performing loans transferred to OREO (15,258) (503) (15,761) (4,688) (183) (4,871)
Non-performing loans charged-off (9,376) (56) (9,432) (18,590) (14) (18,604)
Loans returned to accrual status / loan collections   (46,767)   (3,164)   (49,931)   (45,653)   (3,353)   (49,006)
Ending balance NPLs   $323,565   $11,033   $334,598   $348,779   $12,306   $361,085
                         
 
Total non-performing loans held-in-portfolio (excluding consumer):
Quarter ended Quarter ended
31-Dec-18   30-Sep-18
(In thousands)   BPPR   Popular U.S.   Popular, Inc.   BPPR   Popular U.S.   Popular, Inc.
Beginning balance NPLs $521,879 $34,989 $556,868 $538,597 $35,130 $573,727
Plus:
New non-performing loans 71,553 3,568 75,121 68,347 6,069 74,416
Advances on existing non-performing loans - 114 114 - 58 58
Less:
Non-performing loans transferred to OREO (16,333) (503) (16,836) (6,168) (183) (6,351)
Non-performing loans charged-off (12,858) (5,881) (18,739) (23,769) (17) (23,786)
Loans returned to accrual status / loan collections   (55,938)   (5,491)   (61,429)   (55,128)   (6,068)   (61,196)
Ending balance NPLs [1]   $508,303   $26,796   $535,099   $521,879   $34,989   $556,868
[1] Includes $2.6 million of NPLs related to the legacy portfolio as of December 31, 2018 (September 30, 2018 - $3.4 million).
 

Popular, Inc.
Financial Supplement to Fourth Quarter 2018 Earnings Release
Table J - Allowance for Credit Losses, Net Charge-offs and Related Ratios
(Unaudited)
         
 
Quarter ended Quarter ended Quarter ended
    31-Dec-18     30-Sep-18     31-Dec-17  
(Dollars in thousands)   Total     Total     Non-covered loans     Covered loans   Total  
Balance at beginning of period $633,718 $643,018 $613,856 $33,057 $646,913
Provision for loan losses   42,568     54,387     70,001     1,487   71,488  
    676,286     697,405     683,857     34,544   718,401  
Net loans charged-off (recovered):
BPPR
Commercial 51,659 2,369 8,450 - 8,450
Construction (720) (125) (59) - (59)
Lease financing 1,323 1,557 3,024 - 3,024
Mortgage 18,041 21,962 23,565 1,315 24,880
Consumer   26,176     33,083     24,138     (15)   24,123
Total BPPR   96,479     58,846     59,118     1,300   60,418
 
Popular U.S.
Commercial 1,081 1,741 30,981 - 30,981
Construction 5,806 - (7) - (7)
Legacy [1] (739) (685) (647) - (647)
Mortgage (82) (3) 56 - 56
Consumer   4,393     3,788     4,174     -   4,174  
Total Popular U.S.   10,459     4,841     34,557     -   34,557  
Total loans charged-off - Popular, Inc.   106,938     63,687     93,675     1,300   94,975  
Balance at end of period   $569,348     $633,718     $590,182     $33,244   $623,426  
 
POPULAR, INC.
Annualized net charge-offs to average loans held-in-portfolio 1.63 % 1.00 % 1.61 % 1.60 %
Provision for loan losses to net charge-offs 39.81 % 85.40 % 74.73 % 75.27 %
 
BPPR
Annualized net charge-offs to average loans held-in-portfolio 1.96 % 1.24 % 1.38 % 1.37 %
Provision for loan losses to net charge-offs 45.05 % 88.16 % 89.61 % 90.14 %
 
Popular U.S.
Annualized net charge-offs to average loans held-in-portfolio 0.63 % 0.29 % 2.26 %
Provision for loan losses to net charge-offs   (8.54) %   51.85 %             49.28 %
[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 Popular U.S. segment.
 

  Year ended   Year ended
(Dollars in thousands)   31-Dec-18     31-Dec-17
    Non-covered loans     Covered loans   Total     Non-covered loans     Covered loans   Total  
Balance at beginning of period $590,182   $33,244   $623,426 $510,301   $30,350   $540,651
Provision for loan losses [1]   226,342     1,730   228,072     319,682     5,742   325,424  
    816,524     34,974   851,498     829,983     36,092   866,075  
Net loans charged-off (recovered):
BPPR
Commercial [1] 65,931 - 65,931 22,395 - 22,395
Construction (1,354) - (1,354) (2,623) - (2,623)
Lease financing 6,030 - 6,030 6,770 - 6,770
Mortgage 64,822 1,364 66,186 74,944 2,736 77,680
Consumer   105,588     -   105,588     90,133     112   90,245  
Total BPPR   241,017     1,364   242,381     191,619     2,848   194,467  
 
Popular U.S.
Commercial 19,784 - 19,784 34,157 - 34,157
Construction 5,806 - 5,806 (7) - (7)
Legacy [2] (2,032) - (2,032) (1,730) - (1,730)
Mortgage (371) - (371) 240 - 240
Consumer   16,582     -   16,582     15,522     -   15,522  
Total Popular U.S.   39,769     -   39,769     48,182     -   48,182  
Total loans charged-off - Popular, Inc.   280,786     1,364   282,150     239,801     2,848   242,649  
Balance transferred from covered to non-covered loans   33,610     (33,610)   -     -     -   -  
Balance at end of period   $569,348     $-   $569,348     $590,182     $33,244   $623,426  
 
POPULAR, INC.
Annualized net charge-offs to average loans held-in-portfolio 1.13 % 1.13 % 1.05 % 1.03 %
Provision for loan losses to net charge-offs 80.61 % 80.83 % 133.31 % 134.11 %
 
BPPR
Annualized net charge-offs to average loans held-in-portfolio 1.31 % 1.31 % 1.13 % 1.11 %
Provision for loan losses to net charge-offs 81.51 % 81.77 % 126.16 % 127.26 %
 
Popular U.S.
Annualized net charge-offs to average loans held-in-portfolio 0.61 % 0.82 %
Provision for loan losses to net charge-offs             75.14 %             161.77 %
[1] For the year ended December 31, 2017, 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.
 
[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.
 

Popular, Inc.
Financial Supplement to Fourth Quarter 2018 Earnings Release
Table K - Allowance for Loan Losses - Breakdown of General and Specific Reserves - CONSOLIDATED
(Unaudited)
                                           
31-Dec-18
(Dollars in thousands)   Commercial     Construction     Legacy [1]     Mortgage     Lease financing     Consumer     Total  
Specific ALLL   $52,190   $56   $-   $41,211   $320   $25,893   $119,670
Impaired loans $398,518 $13,848 $- $518,888 $1,099 $112,742 $1,045,095
Specific ALLL to impaired loans   13.10 %   0.40 %   - %   7.94 %   29.12 %   22.97 %   11.45 %
General ALLL $186,925 $7,368 $969 $106,201 $11,166 $137,049 $449,678
Loans held-in-portfolio, excluding impaired loans $11,644,501 $765,601 $25,949 $6,716,370 $933,674 $5,376,699 $25,462,794
General ALLL to loans held-in-portfolio, excluding impaired loans   1.61 %   0.96 %   3.73 %   1.58 %   1.20 %   2.55 %   1.77 %
Total ALLL $239,115 $7,424 $969 $147,412 $11,486 $162,942 $569,348
Total loans held-in-portfolio $12,043,019 $779,449 $25,949 $7,235,258 $934,773 $5,489,441 $26,507,889
ALLL to loans held-in-portfolio   1.99 %   0.95 %   3.73 %   2.04 %   1.23 %   2.97 %   2.15 %
[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 Popular U.S. reportable segment.
 
                                           
30-Sep-18
(Dollars in thousands)   Commercial     Construction     Legacy [1]     Mortgage     Lease financing     Consumer     Total  
Specific ALLL $52,250 $5,530 $- $46,205 $297 $26,255 $130,537
Impaired loans $356,007 $19,695 $- $517,083 $931 $114,572 $1,008,288
Specific ALLL to impaired loans   14.68 %   28.08 %   - %   8.94 %   31.90 %   22.92 %   12.95 %
General ALLL $192,290 $9,590 $377 $128,382 $12,009 $160,533 $503,181
Loans held-in-portfolio, excluding impaired loans $11,637,700 $923,670 $27,566 $6,787,087 $902,609 $5,225,248 $25,503,880
General ALLL to loans held-in-portfolio, excluding impaired loans   1.65 %   1.04 %   1.37 %   1.89 %   1.33 %   3.07 %   1.97 %
Total ALLL $244,540 $15,120 $377 $174,587 $12,306 $186,788 $633,718
Total loans held-in-portfolio $11,993,707 $943,365 $27,566 $7,304,170 $903,540 $5,339,820 $26,512,168
ALLL to loans held-in-portfolio   2.04 %   1.60 %   1.37 %   2.39 %   1.36 %   3.50 %   2.39 %
[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 Popular U.S. reportable segment.
 
Variance
(Dollars in thousands)   Commercial     Construction     Legacy     Mortgage     Lease financing     Consumer     Total  
Specific ALLL $(60) $(5,474) $- $(4,994) $23 $(362) $(10,867)
Impaired loans   $42,511     $(5,847)     $-     $1,805     $168     $(1,830)     $36,807  
General ALLL $(5,365) $(2,222) $592 $(22,181) $(843) $(23,484) $(53,503)
Loans held-in-portfolio, excluding impaired loans   $6,801     $(158,069)     $(1,617)     $(70,717)     $31,065     $151,451     $(41,086)  
Total ALLL $(5,425) $(7,696) $592 $(27,175) $(820) $(23,846) $(64,370)
Total loans held-in-portfolio   $49,312     $(163,916)     $(1,617)     $(68,912)     $31,233     $149,621     $(4,279)  
 

Popular, Inc.
Financial Supplement to Fourth Quarter 2018 Earnings Release
Table L - Allowance for Loan Losses - Breakdown of General and Specific Reserves - PUERTO RICO OPERATIONS
(Unaudited)
           
31-Dec-18
Puerto Rico
(In thousands)   Commercial   Construction   Mortgage   Lease financing   Consumer   Total
Allowance for credit losses:
Specific ALLL $52,190 $56 $38,760 $320 $24,083 $115,409
General ALLL   155,024   830   104,218   11,166   120,511   391,749
Total ALLL   $207,214   $886   $142,978   $11,486   $144,594   $507,158
Loans held-in-portfolio:
Impaired loans $398,518 $1,788 $509,468 $1,099 $104,235 $1,015,108
Loans held-in-portfolio, excluding impaired loans   6,974,125   84,167   5,923,855   933,674   4,952,543   18,868,364
Total loans held-in-portfolio   $7,372,643   $85,955   $6,433,323   $934,773   $5,056,778   $19,883,472
 
 
30-Sep-18
Puerto Rico
(In thousands)   Commercial   Construction   Mortgage   Lease financing   Consumer   Total
Allowance for credit losses:
Specific ALLL $52,250 $- $43,841 $297 $24,906 $121,294
General ALLL   157,855   878   126,445   12,009   141,695   438,882
Total ALLL   $210,105   $878   $170,286   $12,306   $166,601   $560,176
Loans held-in-portfolio:
Impaired $356,007 $1,829 $508,258 $931 $107,184 $974,209
Loans held-in-portfolio, excluding impaired loans   7,051,469   75,964   6,023,018   902,609   4,796,084   18,849,144
Total loans held-in-portfolio   $7,407,476   $77,793   $6,531,276   $903,540   $4,903,268   $19,823,353
 
                         
Variance
(In thousands)   Commercial   Construction   Mortgage   Lease financing   Consumer   Total
Allowance for credit losses:
Specific ALLL $(60) $56 $(5,081) $23 $(823) $(5,885)
General ALLL   (2,831)   (48)   (22,227)   (843)   (21,184)   (47,133)
Total ALLL   $(2,891)   $8   $(27,308)   $(820)   $(22,007)   $(53,018)
Loans held-in-portfolio:
Impaired $42,511 $(41) $1,210 $168 $(2,949) $40,899
Loans held-in-portfolio, excluding impaired loans   (77,344)   8,203   (99,163)   31,065   156,459   19,220
Total loans held-in-portfolio   $(34,833)   $8,162   $(97,953)   $31,233   $153,510   $60,119
 

Popular, Inc.
Financial Supplement to Fourth Quarter 2018 Earnings Release
Table M - Allowance for Loan Losses - Breakdown of General and Specific Reserves - POPULAR U.S. OPERATIONS
(Unaudited)
           
31-Dec-18
Popular U.S.
(In thousands)   Commercial   Construction   Legacy   Mortgage   Consumer   Total
Allowance for credit losses:
Specific ALLL $- $- $- $2,451 $1,810 $4,261
General ALLL   31,901   6,538   969   1,983   16,538   57,929
Total ALLL   $31,901   $6,538   $969   $4,434   $18,348   $62,190
Loans held-in-portfolio:
Impaired loans $- $12,060 $- $9,420 $8,507 $29,987
Loans held-in-portfolio, excluding impaired loans   4,670,376   681,434   25,949   792,515   424,156   6,594,430
Total loans held-in-portfolio   $4,670,376   $693,494   $25,949   $801,935   $432,663   $6,624,417
 
 
30-Sep-18
Popular U.S.
(In thousands)   Commercial   Construction   Legacy   Mortgage   Consumer   Total
Allowance for credit losses:
Specific ALLL $- $5,530 $- $2,364 $1,349 $9,243
General ALLL   34,435   8,712   377   1,937   18,838   64,299
Total ALLL   $34,435   $14,242   $377   $4,301   $20,187   $73,542
Loans held-in-portfolio:
Impaired loans $- $17,866 $- $8,825 $7,388 $34,079
Loans held-in-portfolio, excluding impaired loans   4,586,231   847,706   27,566   764,069   429,164   6,654,736
Total loans held-in-portfolio   $4,586,231   $865,572   $27,566   $772,894   $436,552   $6,688,815
 
                         
Variance
(In thousands)   Commercial   Construction   Legacy   Mortgage   Consumer   Total
Allowance for credit losses:
Specific ALLL $- $(5,530) $- $87 $461 $(4,982)
General ALLL   (2,534)   (2,174)   592   46   (2,300)   (6,370)
Total ALLL   $(2,534)   $(7,704)   $592   $133   $(1,839)   $(11,352)
Loans held-in-portfolio:
Impaired loans $- $(5,806) $- $595 $1,119 $(4,092)
Loans held-in-portfolio, excluding impaired loans   84,145   (166,272)   (1,617)   28,446   (5,008)   (60,306)
Total loans held-in-portfolio   $84,145   $(172,078)   $(1,617)   $29,041   $(3,889)   $(64,398)
 

Popular, Inc.      
Financial Supplement to Fourth Quarter 2018 Earnings Release
Table N - Reconciliation to GAAP Financial Measures
(Unaudited)
 
 
(In thousands, except share or per share information)   31-Dec-18   30-Sep-18   31-Dec-17
Total stockholders’ equity $5,435,057 $5,244,349 $5,103,905
Less: Preferred stock (50,160 ) (50,160 ) (50,160 )
Less: Goodwill (671,122 ) (687,536 ) (627,294 )
Less: Other intangibles   (26,833 )   (29,186 )   (35,672 )
Total tangible common equity   $4,686,942     $4,477,467     $4,390,779  
Total assets $47,604,577 $47,919,428 $44,277,337
Less: Goodwill (671,122 ) (687,536 ) (627,294 )
Less: Other intangibles   (26,833 )   (29,186 )   (35,672 )
Total tangible assets   $46,906,622     $47,202,706     $43,614,371  
Tangible common equity to tangible assets 9.99 % 9.49 % 10.07 %
Common shares outstanding at end of period 99,942,845 100,336,341 102,068,981
Tangible book value per common share   $46.90     $44.62     $43.02  
 

Popular, Inc.
Financial Supplement to Fourth Quarter 2018 Earnings Release

Table P - Adjusted Net Income for the Years Ended December 31, 2018 and 2017 (Non-GAAP)

(Unaudited)
     
    31-Dec-18
(In thousands)   Pre-tax  

Income tax
effect

 

Impact on net
income

U.S. GAAP Net income $618,158
Non-GAAP Adjustments:
Termination of FDIC Shared-Loss Agreements[1] (94,633) 45,059 (49,574)
Tax Closing Agreement[2] - (108,946) (108,946)
Impact of Law Act No.257[3]   -   27,686   27,686
Adjusted net income (Non-GAAP)           $487,324
[1]On May 22, 2018, BPPR entered into a Termination Agreement with the FDIC to terminate all Shared-Loss Agreements in connection with the acquisition of certain assets and assumptions of certain liabilities of Westernbank Puerto Rico in 2010. As a result, BPPR recognized a pre-tax gain of $94.6 million, net of the related professional and advisory fees of $8.1 million associated with the Termination Agreement.
 
[2]Represents the impact of the Termination Agreement on income taxes. In June 2012, the Corporation entered into a Tax Closing Agreement with the Puerto Rico Department of the Treasury to clarify the tax treatment related to the loans acquired in the FDIC Transaction in accordance with the provisions of the Puerto Rico Tax Code. Based on the provisions of this Tax Closing Agreement, the Corporation recognized a net income tax benefit of $108.9 million during the second quarter of 2018.
 
[3]On December 10, 2018, the Governor of Puerto Rico signed into law Act No.257 of 2018, which amended the Puerto Rico Internal Revenue Code, to among other things, reduce the Puerto Rico corporate tax rate from 39% to 37.5%. The resulting adjustments reduced the DTA related to the Corporation's P.R. operations as a result of a lower realizable benefit at the lower tax rate.
 
    31-Dec-17
(In thousands)   Pre-tax  

Income tax
effect

 

Impact on net
income

U.S. GAAP Net income $107,681
Non-GAAP Adjustments:
Impact of the Tax Cuts and Jobs Act[1]   -   168,358   168,358
Adjusted net income (Non-GAAP)           $276,039
[1]On December 22, 2017, the Tax Cuts and Jobs Act ("the Act") was signed into law by the President of the United States. The Act, among other things, reduced the maximum federal Corporate Tax rate from 35% to 21%. The adjustments reduced the DTA related to the Corporation's U.S. operations as a result of lower realizable benefit at the lower tax rate.

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Popular, Inc.
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Senior Vice President, Corporate Communications

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