Popular, Inc. Announces Third Quarter 2018 Financial Results

 
 

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Popular de Puerto Rico's
Media Relations Team.


  • Net income of $140.6 million for the third quarter of 2018, compared to a net income of $279.8 million and an adjusted net income of $121.3 million for Q2 2018
  • Net interest margin of 4.07% in Q3 2018, compared to 3.81% in Q2 2018
  • Credit Quality:
    • Non-performing loans held-in-portfolio (“NPLs”) decreased by $10.7 million from Q2 2018; NPLs to loans ratio at 2.4% vs. 2.6% in Q2 2018;
    • Net charge-offs (“NCOs”) increased by $6.1 million; NCOs at 1.00% of average loans held-in-portfolio vs. 0.95% in Q2 2018;
    • Provision expense of $54.4 million vs. $60.1 million in Q2 2018;
    • Allowance for loan losses of $633.7 million vs. $643.0 million in Q2 2018;
    • Allowance for loan losses to loans held-in-portfolio at 2.39% vs. 2.61% in Q2 2018; and
    • Allowance for loan losses to NPLs flat at 100.2%.
  • Common Equity Tier 1 ratio of 16.20%, Common Equity per Share of $51.77 and Tangible Book Value per Share of $44.62 at September 30, 2018
Wednesday, October 24, 2018 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,” “Popular,” “we,” “us,” “our”) (NASDAQ:BPOP) reported a net income of $140.6 million for the third quarter ended September 30, 2018, compared to a net income of $279.8 million and an adjusted net income of $121.3 million for the second quarter ended June 30, 2018.

Ignacio Alvarez, President and Chief Executive Officer, said: “We delivered solid results for the quarter, as we continued to build on the positive momentum created during the first half of the year. We achieved strong top line revenue once again, with net interest income growing by $37 million. These results include the positive contribution of the Reliable acquisition which closed on August 1. Our credit metrics in Puerto Rico are trending favorably, reflecting the steady recovery of the Puerto Rico economy following the impact of Hurricanes Irma and Maria in September of 2017. We are also pleased with the growth of our commercial loan portfolio in our mainland U.S. operation and the execution of several capital actions during the quarter.”

Significant Events

Acquisition of Wells Fargo’s Auto Finance Business in Puerto Rico

On August 1, 2018, Popular Auto, LLC (“Popular Auto”), Banco Popular de Puerto Rico’s auto finance subsidiary, completed the acquisition of certain assets and the assumption of certain liabilities related to Wells Fargo & Company’s (“Wells Fargo”) auto finance business in Puerto Rico (“Reliable”).

Popular Auto acquired approximately $1.6 billion in retail auto loans and $341 million in primarily auto-related commercial loans. Reliable will continue operating as a Division of Popular Auto in parallel with Popular Auto’s existing operations for a period after closing to provide continuity of service to Reliable customers while allowing Popular to assess best practices before completing the integration of the two operations. Substantially all Reliable employees received and accepted offers of employment from Popular Auto.

Wells Fargo retained approximately $398 million in retail auto loans as part of the transaction and has entered into a loan servicing agreement with Popular Auto with respect to such loans.

During the quarter ended September 30, 2018, the Reliable acquisition contributed approximately $11.7 million to net income for the quarter, composed of net interest income of $30.7 million, $5.1 million of operating income, including servicing fees from the retained Wells Fargo portfolio, and expenses of $8.6 million, including $3.8 million of transaction related expenses.

Common Stock Repurchase Plan

During the quarter ended September 30, 2018, the Corporation entered into a $125 million accelerated share repurchase transaction (“ASR”) and, in connection therewith, received an initial delivery of 2,000,000 shares (the “Initial Shares”), which was accounted for as a treasury stock transaction. As a result of the receipt of the Initial Shares, the Corporation recognized in shareholders’ equity approximately $102 million in treasury stock and $23 million as a reduction of capital surplus. During the fourth quarter of 2018, the Corporation expects to further adjust its treasury stock and capital surplus accounts to reflect the delivery or receipt of cash or shares upon the termination of the ASR agreement, which will depend on the average price of the Corporation’s shares during the term of the ASR.

Redemption of Trust Preferred Securities

On September 7, 2018, Popular North America, Inc. (“PNA”), a wholly-owned subsidiary of the Corporation, completed the redemption of all outstanding 8.327% Capital Securities, Series A (liquidation amount $1,000 per security and $52,865,000 in the aggregate) issued by BanPonce Trust I, a Delaware statutory trust established by PNA. The redemption price of each security was equal to 100% of the liquidation amount of the securities plus accumulated and unpaid distributions up to and excluding the redemption date.

Issuance of Senior Notes

On September 11, 2018, the Corporation issued $300 million aggregate principal amount of 6.125% Senior Notes due 2023 (the “Notes”) in an underwritten public offering pursuant to an effective shelf registration statement filed with the Securities and Exchange Commission. The Corporation used the net proceeds of the offering and available cash to redeem on October 15, 2018 (the “Redemption Date”) $450 million aggregate principal amount of its outstanding 7.00% Senior Notes due 2019 (the “2019 Notes”).

The redemption price of each security was equal to the sum of the present values of the remaining scheduled payments of principal and interest on the 2019 Notes redeemed that would have been due after the Redemption Date and on or prior to June 1, 2019 (exclusive of any interest accrued to the Redemption Date), discounted to the Redemption Date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate plus 50 basis points, plus in each case unpaid interest, if any, accrued to, but not including the Redemption Date. As such, during the fourth quarter of 2018, the Corporation expects to recognize approximately $13 million in expenses associated with the accelerated amortization of debt issuance costs and the redemption price of these securities.

Earnings Highlights                    
 
(Unaudited)   Quarters ended Nine months ended
(Dollars in thousands, except per share information)   30-Sep-18   30-Jun-18   30-Sep-17 30-Sep-18   30-Sep-17
Net interest income $451,469 $414,136 $378,171 $1,258,652 $1,114,748
Provision for loan losses 54,387 60,054 157,659 183,774 249,681
Provision for loan losses - covered loans [1]   -   -   3,100 1,730   4,255
Net interest income after provision for loan losses 397,082 354,082 217,412 1,073,148 860,812
FDIC loss-share income (expense) - 102,752 (3,948) 94,725 (12,680)
Other non-interest income 151,021 132,057 104,322 404,602 345,716
Operating expenses   365,437   337,668   317,088 1,025,107   935,241
Income before income tax 182,666 251,223 698 547,368 258,607
Income tax expense (benefit)   42,018   (28,560)   (19,966) 35,613   48,772
Net income   $140,648   $279,783   $20,664 $511,755   $209,835
Net income applicable to common stock   $139,718   $278,852   $19,734 $508,963   $207,043
Net income per common share - Basic   $1.38   $2.74   $0.19 $5.01   $2.03
Net income per common share - Diluted   $1.38   $2.73   $0.19 $5.00   $2.03

[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 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.

No adjustments are reflected for the third quarter of 2018. The table below describes adjustments to net income for the quarter ended June 30, 2018.

(Unaudited)        
Quarter ended
(In thousands) 30-Jun-18
Income tax   Impact on net
  Pre-tax effect   income
U.S. GAAP Net income $279,783
Non-GAAP Adjustments:
Termination of FDIC Shared-Loss Agreements[1]

$(94,633

)

$45,059

(49,574 )
Tax Closing Agreement[2] -   (108,946 )   (108,946 )
Adjusted net income (Non-GAAP)       $121,263  
[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 assumption 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.

Net interest income

Net interest income for the quarter ended September 30, 2018 was $451.5 million, compared to $414.1 million for the previous quarter. Net interest margin was 4.07% for the quarter, compared to 3.81% 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 $37.4 million in net interest income is mainly the result of the following:

Positive variances:

  • Higher income from money market, trading and investments by $3.1 million due to higher yields by 13 basis points as a result of investments at higher yields during the quarter, including the impact of the increase in the Fed Funds rate by 25 basis points in mid-June 2018;
  • Higher income from the consumer loans portfolio by $33 million, or 37 basis points, mainly driven by income from the portfolio acquired from Reliable of $30.1 million, which includes $9.3 million related to the amortization of the fair value discount recognized in connection with the transaction;
  • Higher income from the commercial loans portfolio by $10.7 million, or 17 basis points, mainly driven by income from the portfolio acquired from Reliable of $7.0 million, which includes $4.1 million related to the amortization of the fair value discount recognized in connection with the transaction. Also, portfolio growth at Popular Bank (“Popular U.S.”) and the positive impact of higher market rates in the adjustable rate portfolio continue to contribute to the increase in interest income; and
  • The impact of one additional day in the third quarter contributed to the increase in net interest income by $3.2 million.

Negative variance:

  • Higher cost of interest-bearing deposits by $9.9 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 the U.S. deposits, mainly from Popular U.S. online platform.

BPPR’s net interest income amounted to $388.5 million for the quarter ended September 30, 2018, compared to $352.7 million in the previous quarter. The increase of $35.8 million in net interest income was mainly due to the income from the loan portfolio acquired from Reliable and higher income from money market, trading and investment securities resulting from higher yields, 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 third quarter of 2018 was 4.35%, an increase of 28 basis points when compared to 4.07% for the previous quarter. The increase in net interest margin was due to the composition of earning assets, which during the third quarter were deployed to purchase the loan portfolio acquired from Reliable, which resulted in an average yield of 12%, including the fair value discount amortization. BPPR’s earning assets yielded 4.81%, compared to 4.43% in the previous quarter, while the cost of interest bearing deposits was 0.62%, or 13 basis points higher than the 0.49% reported in the previous quarter. The total cost of deposits, including non-interest demand deposits for the quarter was 0.47%.

Net interest income for Popular U.S. was $76.2 million, for the quarter ended September 30, 2018, compared to $75.5 million during the previous quarter. The increase of $0.7 million in net interest income was mainly due to higher volume and yields on commercial and construction loans, partially offset by the related funding costs. Net interest margin for the quarter increased 3 basis points to 3.50%, compared to 3.47% 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 the Popular U.S.’s online deposit platform. Popular U.S.’s earning assets yielded 4.54%, compared to 4.44% in the previous quarter, while the cost of interest bearing deposits was 1.26%, compared to 1.17% in the previous quarter.

Non-interest income

Non-interest income amounted to $151.0 million for the quarter ended September 30, 2018, including $9.5 million of insurance recoveries related to Hurricane Maria, compared to $234.8 million for the previous quarter. The decrease of $83.8 million was mainly due to the gain of $102.8 million recorded during the second quarter as a result of the termination of the FDIC Shared-Loss Agreements. Excluding the unfavorable variance due to the FDIC transaction, non-interest income increased by $19.0 million primarily driven by:

  • Higher service charges on deposit accounts by $1.0 million, mainly at BPPR, due to higher fees on transactional cash management services;
  • higher other service fees by $1.4 million due to higher asset management fees and higher insurance commission revenues, partially offset by lower credit card late fees due to the reversal of income related to loans charged off during the quarter, as well as improved delinquencies, and lower debit card fees due to lower transactional volumes;
  • higher income on mortgage banking activities by $1.2 million mainly due to higher gains on securitization transactions by $0.5 million, lower runoff of the mortgage servicing rights portfolio by $0.4 million, and higher realized gains on closed derivatives positions by $0.3 million; and
  • higher other operating income by $17.8 million resulting from the previously mentioned insurance recoveries of $9.5 million and higher modification fees received for the successful completion of loss mitigation alternatives related to hurricane relief measures by $5.7 million.

These positive variances were partially offset by:

  • Unfavorable variance in adjustments to indemnity reserves of $2.5 million related to loans previously sold with credit recourse at BPPR.

Refer to Table B for further details.

Operating expenses

Operating expenses of $365.4 million for the third quarter of 2018, including the write-down of $19.6 million charge related to the capitalized software costs of a technology project discontinued by the Corporation. Other variances which contributed to the increase of $27.8 million when compared with the second quarter of 2018 were the following:

  • Higher personnel costs by $15.4 million, including $3.9 million related to the Reliable acquisition, due to higher salaries of $5.5 million as result of higher headcount and salary increases; and higher commissions, incentives and other bonuses of $5.4 million. The remaining increase in personnel costs is mainly related to annual incentives tied to the Corporation’s improved performance.
  • Expenses related to the Reliable acquisition, other than personnel costs, which amounted to $4.7 million for the third quarter of 2018.

Partially offset by:

  • Lower professional fees by $10.0 million mainly due to professional and advisory expenses associated with the termination of the FDIC Shared-Loss Agreements of $8.1 million during the second quarter of 2018.

Full-time equivalent employees were 8,363 as of September 30, 2018, compared to 7,958 as of June 30, 2018. The increase in FTEs was mainly related to the integration of 352 Reliable employees.

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

Income taxes

For the quarter ended September 30, 2018, the Corporation recorded an income tax expense of $42.0 million, compared to an income tax benefit of $28.6 million for the previous quarter. The results for the second quarter include a pre-tax gain of $94.6 million resulting from the previously mentioned termination of the FDIC Shared-Loss Agreements and the related income tax expense of $45.0 million. The results also include an income tax benefit of $108.9 million related to the Tax Closing Agreement entered into in connection with the FDIC assisted acquisition of Westernbank. Excluding the combined impact of these items, the income tax expense for the second quarter was $35.3 million, an effective tax rate of 23%. The effective tax rate for the third quarter of 2018 was of 23%.

The effective tax rate of the Corporation is impacted by the composition and source of its taxable income. For the fourth quarter of 2018, the Corporation expects its consolidated effective tax rate to be approximately 22%.

Credit Quality

The third quarter results reflect improvements in credit quality, with most of the credit metrics improving or trending back to pre-hurricane levels. The Corporation continues to closely monitor its loan portfolios and related credit metrics given remaining challenges in the Puerto Rico’s fiscal and economic outlook. The results of our U.S. operation also reflect strong growth and favorable credit quality metrics, except for the U.S. taxi medallion portfolio acquired from the FDIC in the assisted sale of Doral Bank, which continues to reflect the pressure on medallion collateral values, particularly in the New York City metro area.

The following presents asset quality results for the third quarter of 2018. These results include the impact of the Reliable acquisition completed in August 1, 2018.

  • Inflows of NPLs held-in-portfolio, excluding consumer loans, decreased by $107.6 million quarter-over-quarter, mainly driven by lower inflows in the P.R. mortgage and commercial portfolios of $59.4 million and $30.5 million, respectively. P.R. mortgage inflows for the quarter were significantly lower than pre-hurricane levels, reflective of lower early delinquencies post-moratorium. The decrease in the P.R. commercial portfolio was driven by the impact of two large customers with an aggregate amount of $45.5 million in the previous quarter.
  • Total non-performing loans held-in-portfolio decreased by $10.7 million from the second quarter of 2018, mainly driven by lower P.R. mortgage NPLs of $24.5 million, primarily due to lower inflows for the quarter. This decrease was partially offset by higher P.R. consumer and commercial NPLs of $8.4 million and $8.5 million, respectively. The P.R. consumer NPLs increase was related to the Reliable acquisition, while the commercial NPLs increase was mostly driven by a relationship of $16.3 million. At September 30, 2018, the ratio of NPLs to total loans held-in-portfolio was 2.4%, compared to 2.6% in the second quarter of 2018.
  • Net charge-offs increased by $6.1 million from the second quarter of 2018. P.R. mortgage and consumer NCOs increases of $10.4 million and $9.0 million, respectively, were mostly due to post-moratorium effects, which were accounted for in the hurricane-related reserve. This increase was in part offset by lower commercial NCOs by $14.0 million, of which $8.6 million were related to taxi medallion charge-offs. The Corporation’s ratio of annualized net charge-offs to average loans held-in-portfolio was at 1.00%, compared to 0.95% in the second quarter of 2018. Refer to Table J for further information on net charge-offs and related ratios.
  • The allowance for loan losses decreased by $9.3 million from the second quarter of 2018 to $633.7 million. The P.R. segment ALLL decreased by $7.0 million, principally driven by downward adjustments of $23.1 million to the hurricane-related reserve, as portfolios have performed better than the assumptions used to create this reserve in the third quarter of last year, coupled with a decrease of $5.9 million related to the annual ALLL review and recalibration completed during this quarter. In addition to the ALLL models’ recalibration, management revised certain loss estimates prompting an increase in the reserves for the purchased credit impaired loans accounted for under ASC 310-30 and the U.S. consumer portfolio of $20.5 million and $6.9 million, respectively. The U.S. segment ALLL decreased by $2.3 million when compared to the previous quarter. The impact of the annual ALLL review was immaterial for the U.S. segment.
  • The general and specific reserves totaled $503.2 million and $130.5 million, respectively, at quarter-end, compared with $523.7 million and $119.3 million, respectively, as of June 30, 2018. The ratio of the allowance for loan losses to loans held-in-portfolio was 2.39% in the third quarter of 2018, compared to 2.61% from the previous quarter. The ratio of the allowance for loan losses to NPLs held-in-portfolio stood at 100.2%.
  • The provision for loan losses for the third quarter of 2018 decreased by $5.7 million. The U.S. provision decreased by $13.1 million due to higher incremental reserves for the U.S. taxi medallion portfolio in the previous quarter, in part offset by a higher P.R. provision of $7.5 million. The provision to net charge-offs ratio was 85.4% in the third quarter of 2018, compared to 104.2% in the previous quarter.

Non-Performing Assets              
(Unaudited)                    
(In thousands)   30-Sep-18       30-Jun-18       30-Sep-17
Total non-performing loans held-in-portfolio, excluding covered loans $632,488 $643,199 $585,928
Other real estate owned (“OREO”), excluding covered OREO   133,780       142,063       176,728
Total non-performing assets, excluding covered assets 766,268 785,262 762,656
Covered loans and OREO   -       -       24,951
Total non-performing assets   $766,268       $785,262       $787,607
Net charge-offs for the quarter (excluding covered loans)   $63,687       $57,614       $53,009
 
 
Ratios (excluding covered loans):                    
Non-covered loans held-in-portfolio $26,512,168 $24,608,516 $23,173,450
Non-performing loans held-in-portfolio to loans held-in-portfolio 2.39% 2.61% 2.53%
Allowance for loan losses to loans held-in-portfolio 2.39 2.61 2.65
Allowance for loan losses to non-performing loans, excluding loans held-for-sale   100.19       99.97       104.77
 
Refer to Table H for additional information.
Provision for Loan Losses        
 
(Unaudited)   Quarters ended   Nine months ended
(In thousands)   30-Sep-18   30-Jun-18   30-Sep-17   30-Sep-18 30-Sep-17
Provision for loan losses:
BPPR $51,878 $44,405 $115,115 $153,001 $188,766
Popular U.S.   2,509   15,649   42,544   30,773 60,915
Total provision for loan losses - non-covered loans   $54,387   $60,054   $157,659   $183,774 $249,681
Provision for loan losses - covered loans   -   -   3,100   1,730 4,255
Total provision for loan losses   $54,387   $60,054   $160,759   $185,504 $253,936

Credit Quality by Segment    
(Unaudited)
(In thousands) Quarters ended
BPPR   30-Sep-18   30-Jun-18   30-Sep-17
Provision for loan losses $51,878 $44,405 $115,115
Net charge-offs 58,846 44,465 45,301
Total non-performing loans held-in-portfolio, excluding covered loans 580,803 589,838 548,666
Allowance / non-covered loans held-in-portfolio 2.83%   3.14%   3.06%
 
 
  Quarters ended
Popular U.S.   30-Sep-18   30-Jun-18   30-Sep-17
Provision for loan losses $2,509 $15,649 $42,544
Net charge-offs 4,841 13,149 7,708
Total non-performing loans held-in-portfolio 51,685 53,361 37,262
Allowance / non-covered loans held-in-portfolio 1.10%   1.16%   1.48%
Financial Condition Highlights      
 
(Unaudited)        
(In thousands)   30-Sep-18   30-Jun-18   30-Sep-17
Cash and money market investments $5,010,010 $9,029,010 $6,005,649
Investment securities 13,344,548 10,847,601 9,374,355
Loans not covered under loss-sharing agreements with the FDIC 26,512,168 24,608,516 23,173,450
Loans covered under loss-sharing agreements with the FDIC - - 524,854
Total assets 47,919,428 47,535,177 42,601,267
Deposits 39,648,827 39,377,561 34,248,936
Borrowings 2,046,003 1,869,774 2,147,064
Total liabilities 42,675,079 42,245,516 37,315,836
Stockholders’ equity   5,244,349   5,289,661   5,285,431

Total assets increased by $0.4 billion from the second quarter of 2018, driven by:

  • An increase of $2.5 billion in debt securities available-for-sale mainly due to purchases of U.S. Treasury securities at BPPR; and
  • an increase of $1.9 billion in loans held-in-portfolio principally related to the retail auto loan and commercial loan portfolio acquired from Reliable;

Partially offset by:

  • A decrease of $4.0 billion in cash and money market investments at BPPR, due to the cash consideration of approximately $1.8 billion paid in connection with the acquisition of Reliable and the previously mentioned purchases of U.S. Treasury securities.

Total liabilities increased by $0.4 billion from the second quarter of 2018, mainly due to:

  • An increase of $0.3 billion in deposits mainly due to an increase in interest-bearing public demand deposits of $0.9 billion at BPPR; partially offset by a decrease in non-interest bearing private demand deposits of $0.6 billion. Refer to Table G for additional information on deposits; and
  • An increase of $0.2 billion in notes payable due to the issuance of $300 million in senior notes, partially offset by the repayment of $55 million of junior subordinated debentures in connection with the redemption of the capital securities issued by BanPonce Trust I, as previously mentioned. The proceeds from the issuance of $300 million in senior notes were used, together with available cash, to redeem on October 15, 2018 $450 million aggregate principal amount of outstanding 7.00% Senior Notes due 2019.

Stockholders’ equity decreased by approximately $45.3 million from the second quarter of 2018, principally due to the recognition of $102.0 million in treasury stock and $23.0 million as a reduction to capital surplus as part of the $125 million accelerated share repurchase transaction; declared dividends of $25.1 million on common stock and $0.9 million in dividends on preferred stock; and higher unrealized losses on debt securities available-for-sale by $39.8 million; partially offset by net income for the quarter of $140.6 million.

Common equity tier-1 ratio (“CET1”), common equity per share and tangible book value per share were 16.20%, $51.77 and $44.62, respectively, at September 30, 2018, compared to 17.47%, $51.22 and $44.78 at June 30, 2018. Refer to Table A for capital ratios.

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 & Company, as well as the unexpected costs, including, without limitation, costs due to exposure to any unrecorded liabilities or issues not identified during 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 transaction, 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 and June 30, 2018, and our Form 10-Q for the quarter ended September 30, 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, October 24, 2018 at 11:00 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 Friday, November 23, 2018. The replay dial-in is: 1-877-344-7529 or 1-412-317-0088. The replay passcode is 10123793.

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

Popular, Inc.
Financial Supplement to Third 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

POPULAR, INC.
Financial Supplement to Third Quarter 2018 Earnings Release
Table A - Selected Ratios and Other Information
(Unaudited)
         
             
    Quarters ended   Nine months ended
    30-Sep-18   30-Jun-18   30-Sep-17   30-Sep-18   30-Sep-17
Basic EPS $1.38 $2.74 $0.19 $5.01 $2.03
Diluted EPS $1.38 $2.73 $0.19 $5.00 $2.03
Average common shares outstanding 101,067,300 101,892,402 101,652,352 101,549,711 102,057,607
Average common shares outstanding - assuming dilution 101,249,154 102,031,955 101,763,872 101,731,930 102,185,544
Common shares outstanding at end of period 100,336,341 102,296,440 102,026,417 100,336,341 102,026,417
 
Market value per common share $51.25 $45.21 $35.94 $51.25 $35.94
 
Market capitalization - (In millions) $5,142 $4,625 $3,667 $5,142 $3,667
 
Return on average assets 1.17% 2.40% 0.20% 1.48% 0.69%
. .
Return on average common equity 10.10% 20.84% 1.47% 12.72% 5.24%
 
Net interest margin 4.07% 3.81% 3.96% 3.92% 4.02%
 
Common equity per share $51.77 $51.22 $51.31 $51.77 $51.31
 
Tangible common book value per common share (non-GAAP) [1] $44.62 $44.78 $44.79 $44.62 $44.79
 
Tangible common equity to tangible assets (non-GAAP) [1] 9.49% 9.77% 10.90% 9.49% 10.90%
 
Tier 1 capital 16.20% 17.47% 16.63% 16.20% 16.63%
 
Total capital 18.84% 20.41% 19.62% 18.84% 19.62%
 
Tier 1 leverage 9.60% 9.82% 10.29% 9.60% 10.29%
 
Common Equity Tier 1 capital   16.20%   17.47%   16.63%   16.20%   16.63%
[1] Refer to Table N for reconciliation to GAAP financial measures.

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

Q3 2018
vs. Q2 2018

  30-Sep-17  

Q3 2018
vs. Q3 2017

  30-Sep-18   30-Sep-17
Interest income:    
Loans $430,637 $386,277 $44,360 $371,979 $58,658 $1,190,498 $1,102,784
Money market investments 27,581 36,392 (8,811) 15,529 12,052 86,258 33,233
  Investment securities   70,147   58,181   11,966   48,375   21,772   185,537   144,594
  Total interest income   528,365   480,850   47,515   435,883   92,482   1,462,293   1,280,611
Interest expense:
Deposits 55,134 45,228 9,906 37,058 18,076 139,050 104,907
Short-term borrowings 1,622 1,752 (130) 1,524 98 5,387 3,734
  Long-term debt   20,140   19,734   406   19,130   1,010   59,204   57,222
  Total interest expense   76,896   66,714   10,182   57,712   19,184   203,641   165,863
Net interest income 451,469 414,136 37,333 378,171 73,298 1,258,652 1,114,748
Provision for loan losses - non-covered loans 54,387 60,054 (5,667) 157,659 (103,272) 183,774 249,681
Provision for loan losses - covered loans   -   -   -   3,100   (3,100)   1,730   4,255
Net interest income after provision for loan losses   397,082   354,082   43,000   217,412   179,670   1,073,148   860,812
Service charges on deposit accounts 38,147 37,102 1,045 39,273 (1,126) 111,704 119,882
Other service fees 64,316 62,876 1,440 53,481 10,835 187,794 168,824
Mortgage banking activities 11,269 10,071 1,198 5,239 6,030 33,408 27,349
Net gain on sale of debt securities - - - 83 (83) - 83
Other-than-temporary impairment losses on debt securities - - - - - - (8,299)
Net gain (loss), including impairment, on equity securities 370 234 136 20 350 (42) 201
Net (loss) profit on trading account debt securities (122) 21 (143) 253 (375) (299) (680)
Net loss on sale of loans, including valuation adjustments on loans held-for-sale - - - (420) 420 - (420)
Adjustments (expense) to indemnity reserves on loans sold (3,029) (527) (2,502) (6,406) 3,377 (6,482) (11,302)
FDIC loss-share income (expense) - 102,752 (102,752) (3,948) 3,948 94,725 (12,680)
Other operating income   40,070   22,280   17,790   12,799   27,271   78,519   50,078
  Total non-interest income   151,021   234,809   (83,788)   100,374   50,647   499,327   333,036
Operating expenses:
Personnel costs
Salaries 83,535 78,008 5,527 78,976 4,559 239,940 235,055
Commissions, incentives and other bonuses 25,365 20,004 5,361 16,879 8,486 66,685 55,252
Pension, postretirement and medical insurance 8,670 9,363 (693) 9,668 (998) 27,962 29,768
  Other personnel costs, including payroll taxes   22,187   16,957   5,230   12,246   9,941   55,354   38,382
Total personnel costs 139,757 124,332 15,425 117,769 21,988 389,941 358,457
Net occupancy expenses 18,602 22,425 (3,823) 22,254 (3,652) 63,829 65,295
Equipment expenses 18,303 17,775 528 16,457 1,846 53,284 48,677
Other taxes 11,923 10,876 1,047 10,858 1,065 33,701 32,567
Professional fees
Collections, appraisals and other credit related fees 3,371 4,228 (857) 3,559 (188) 10,657 11,161
Programming, processing and other technology services 55,187 54,547 640 49,717 5,470 161,039 149,377
Legal fees, excluding collections 4,284 4,907 (623) 2,928 1,356 14,954 8,538
  Other professional fees   21,018   30,221   (9,203)   14,568   6,450   74,098   43,880
Total professional fees 83,860 93,903 (10,043) 70,772 13,088 260,748 212,956
Communications 6,054 5,382 672 5,394 660 17,342 17,242
Business promotion 15,478 16,778 (1,300) 15,216 262 44,265 40,158
FDIC deposit insurance 8,610 7,004 1,606 6,271 2,339 22,534 18,936
Other real estate owned (OREO) expenses 7,950 6,947 1,003 11,724 (3,774) 21,028 41,212
Credit and debit card processing, volume, interchange and other expenses 8,946 9,635 (689) 7,375 1,571 23,189 19,348
Other operating expenses
Operational losses 7,770 9,001 (1,231) 13,222 (5,452) 26,695 27,973
  All other   35,860   11,286   24,574   17,431   18,429   61,578   45,386
Total other operating expenses 43,630 20,287 23,343 30,653 12,977 88,273 73,359
Amortization of intangibles   2,324   2,324   -   2,345   (21)   6,973   7,034
  Total operating expenses   365,437   337,668   27,769   317,088   48,349   1,025,107   935,241
Income before income tax 182,666 251,223 (68,557) 698 181,968 547,368 258,607
Income tax expense (benefit)   42,018   (28,560)   70,578   (19,966)   61,984   35,613   48,772
Net income   $140,648   $279,783   $(139,135)   $20,664   $119,984   $511,755   $209,835
Net income applicable to common stock   $139,718   $278,852   $(139,134)   $19,734   $119,984   $508,963   $207,043
Net income per common share - basic   $1.38   $2.74   $(1.36)   $0.19   $1.19   $5.01   $2.03
Net income per common share - diluted   $1.38   $2.73   $(1.35)   $0.19   $1.19   $5.00   $2.03
Dividends Declared per Common Share   $0.25   $0.25   $-   $0.25   $-   $0.75   $0.75

Popular, Inc.
Financial Supplement to Third Quarter 2018 Earnings Release
Table C - Consolidated Statement of Financial Condition
(Unaudited)
            Variance
Q3 2018 vs.
(In thousands)   30-Sep-18   30-Jun-18   30-Sep-17   Q2 2018
Assets:
Cash and due from banks $400,949 $400,568 $517,437 $381
Money market investments 4,609,061 8,628,442 5,488,212 (4,019,381)
Trading account debt securities, at fair value 37,731 41,637 37,307 (3,906)
Debt securities available-for-sale, at fair value 13,047,617 10,542,010 9,059,116 2,505,607
Debt securities held-to-maturity, at amortized cost 101,238 104,937 106,636 (3,699)
Equity securities 157,962 159,017 171,296 (1,055)
Loans held-for-sale, at lower of cost or fair value 51,742 73,859 68,864 (22,117)
Loans held-in-portfolio:
Loans not covered under loss-sharing agreements with the FDIC 26,661,951 24,752,700 23,302,047 1,909,251
Loans covered under loss-sharing agreements with the FDIC - - 524,854 -
Less: Unearned income 149,783 144,184 128,597 5,599
    Allowance for loan losses   633,718   643,018   646,913   (9,300)
    Total loans held-in-portfolio, net   25,878,450   23,965,498   23,051,391   1,912,952
FDIC loss-share asset - - 48,470 -
Premises and equipment, net 557,104 548,432 532,532 8,672
Other real estate not covered under loss-sharing agreements with the FDIC 133,780 142,063 176,728 (8,283)
Other real estate covered under loss-sharing agreements with the FDIC - - 21,545 -
Accrued income receivable 163,443 165,592 146,339 (2,149)
Mortgage servicing assets, at fair value 162,779 164,025 180,157 (1,246)
Other assets 1,900,850 1,940,780 2,329,927 (39,930)
Goodwill 687,536 627,294 627,294 60,242
Other intangible assets   29,186   31,023   38,016   (1,837)
Total assets   $47,919,428   $47,535,177   $42,601,267   $384,251
Liabilities and Stockholders’ Equity:
Liabilities:
Deposits:
Non-interest bearing $8,803,752 $9,392,263 $7,449,857 $(588,511)
    Interest bearing   30,845,075   29,985,298   26,799,079   859,777
    Total deposits   39,648,827   39,377,561   34,248,936   271,266
Assets sold under agreements to repurchase 300,116 306,911 374,405 (6,795)
Other short-term borrowings 1,200 1,200 240,598 -
Notes payable 1,744,687 1,561,663 1,532,061 183,024
Other liabilities   980,249   998,181   919,836   (17,932)
Total liabilities   42,675,079   42,245,516   37,315,836   429,563
Stockholders’ equity:
Preferred stock 50,160 50,160 50,160 -
Common stock 1,043 1,043 1,042 -
Surplus 4,281,515 4,302,946 4,265,053 (21,431)
Retained earnings 1,629,692 1,515,058 1,350,730 114,634
Treasury stock (183,872) (82,754) (90,222) (101,118)
Accumulated other comprehensive loss, net of tax   (534,189)   (496,792)   (291,332)   (37,397)
    Total stockholders’ equity   5,244,349   5,289,661   5,285,431   (45,312)
Total liabilities and stockholders’ equity   $47,919,428   $47,535,177   $42,601,267   $384,251

Popular, Inc.
Financial Supplement to Third Quarter 2018 Earnings Release
Table D - Consolidated Average Balances and Yield / Rate Analysis - QUARTER
(Unaudited)
                                 
Quarter ended Quarter ended Quarter ended Variance Variance
30-Sep-18 30-Jun-18 30-Sep-17 Q3 2018 vs. Q2 2018 Q3 2018 vs. Q3 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 $18,547   $97.7   2.10 %   $19,257   $94.6   1.97 %   $14,483   $63.9   1.76 %   ($710)   $3.1   0.13 %   $4,064   $33.8   0.34 %
Loans not covered under loss-sharing agreements with the FDIC:
Commercial 11,814 176.7 5.94 11,537 166.0 5.77 11,131 155.4 5.54 277 10.7 0.17 683 21.3 0.40
Construction 932 15.2 6.45 918 14.3 6.28 826 12.0 5.76 14 0.9 0.17 106 3.2 0.69
Mortgage 7,142 90.3 5.06 7,109 91.0 5.12 7,035 91.3 5.19 33 (0.7) (0.06) 107 (1.0) (0.13)
Consumer 4,818 135.2 11.14 3,805 102.2 10.77 3,806 101.4 10.57 1,013 33.0 0.37 1,012 33.8 0.57
Lease financing 885   13.3   5.99     850   12.7   5.99     750   11.9   6.37     35   0.6   -     135   1.4   (0.38)
Total loans 25,591   430.7   6.69     24,219   386.2   6.39     23,548   372.0   6.28     1,372   44.5   0.30     2,043   58.7   0.41
Total interest earning assets $44,138   $528.4   4.76 %   $43,476   $480.8   4.43 %   $38,031   $435.9   4.56 %   $662   $47.6   0.33 %   $6,107   $92.5   0.20 %
Allowance for loan losses (639) (645) (566) 6 (73)
Other non-interest earning assets 3,992 4,019 4,238 (27) (246)
Total average assets $47,491 $46,850 $41,703 $641 $5,788
 
Liabilities and Stockholders' Equity:
Interest bearing deposits:
NOW and money market $13,201 $23.0 0.69 % $12,476 $15.7 0.51 % $10,465 $10.3 0.39 % $725 $7.3 0.18 % $2,736 $12.7 0.30 %
Savings 9,797 9.0 0.37 9,472 7.8 0.33 8,260 5.0 0.24 325 1.2 0.04 1,537 4.0 0.13
Time deposits 7,419   23.1   1.24     7,749   21.7   1.12     7,543   21.8   1.14     (330)   1.4   0.12     (124)   1.3   0.10
Total interest-bearing deposits 30,417 55.1 0.72 29,697 45.2 0.61 26,268 37.1 0.56 720 9.9 0.11 4,149 18.0 0.16
Borrowings 1,861   21.8   4.68     1,962   21.5   4.39     1,982   20.6   4.17     (101)   0.3   0.29     (121)   1.2   0.51
Total interest-bearing liabilities 32,278   76.9   0.95     31,659   66.7   0.85     28,250   57.7   0.81     619   10.2   0.10     4,028   19.2   0.14
Net interest spread 3.81 % 3.58 % 3.75 % 0.23 % 0.06 %
Non-interest bearing deposits 8,860 8,966 7,235 (106) 1,625
Other liabilities 816 811 832 5 (16)
Stockholders' equity 5,537 5,414 5,386 123 151
Total average liabilities and stockholders' equity $47,491 $46,850 $41,703 $641 $5,788
 
Net interest income / margin non-taxable equivalent basis $451.5   4.07 % $414.1   3.81 % $378.2   3.96 % $37.4   0.26 % $73.3   0.11 %

Popular, Inc.
Financial Supplement to Third Quarter 2018 Earnings Release
Table E - Consolidated Average Balances and Yield / Rate Analysis - YEAR-TO-DATE
(Unaudited)
                 
Nine months ended Nine months ended
30-Sep-18 30-Sep-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 $18,191   $271.8 2.00 % $13,649   $177.8   1.74 % $4,542   $94.0   0.26 %
Loans not covered under loss-sharing agreements with the FDIC:
Commercial 11,607 504.2 5.81 10,967 454.0 5.53 640 50.2 0.28
Construction 919 43.1 6.27 820 34.0 5.55 99 9.1 0.72
Mortgage 7,109 270.3 5.07 7,133 280.6 5.25 (24) (10.3) (0.18)
Consumer 4,147 334.6 10.79 3,754 298.9 10.65 393 35.7 0.14
Lease financing 852   38.3 5.99   729   35.3   6.46 123   3.0   (0.47)
Total loans 24,634   1,190.5 6.46   23,403   1,102.8   6.29 1,231   87.7   0.17
Total interest earning assets $42,825   $1,462.3 4.56 % $37,052   $1,280.6   4.62 % $5,773   $181.7   (0.06) %
Allowance for loan losses (640) (548) (92)
Other non-interest earning assets 4,024 4,277 (253)
Total average assets $46,209 $40,781 $5,428
 
Liabilities and Stockholders' Equity:
Interest bearing deposits:
NOW and money market $12,298 $50.2 0.55 % $9,809 $27.9 0.38 % $2,489 $22.3 0.17 %
Savings 9,341 22.0 0.31 7,984 14.9 0.25 1,357 7.1 0.06
Time deposits 7,621   66.8 1.17 7,653   62.1   1.08 (32)   4.7   0.09
Total interest-bearing deposits 29,260 139.0 0.64 25,446 104.9 0.55 3,814 34.1 0.09
Borrowings 1,954   64.6 4.42 1,981   61.0   4.11 (27)   3.6   0.31
Total interest-bearing liabilities 31,214   203.6 0.87 27,427   165.9   0.81 3,787   37.7   0.06
Net interest spread 3.69 % 3.81 % (0.12) %
Non-interest bearing deposits 8,755 7,156 1,599
Other liabilities 842 865 (23)
Stockholders' equity 5,398 5,333 65
Total average liabilities and stockholders' equity $46,209 $40,781 $5,428
 
Net interest income / margin non-taxable equivalent basis $1,258.7 3.92 % $1,114.7   4.02 % $144.0   (0.10) %

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

Q3 2018
vs. Q2 2018

 

Q3 2018
vs. Q3 2017

  30-Sep-18   30-Sep-17  

2018
vs. 2017

Mortgage servicing fees, net of fair value adjustments:
Mortgage servicing fees $12,324 $12,425 $12,012 $(101) $312 $37,205 $38,485 $(1,280)
  Mortgage servicing rights fair value adjustments   (4,194)   (4,622)   (10,262)   428   6,068   (13,123)   (24,262)   11,139
Total mortgage servicing fees, net of fair value adjustments   8,130   7,803   1,750   327   6,380   24,082   14,223   9,859
Net gain on sale of loans, including valuation on loans held-for-sale   3,014   2,460   4,244   554   (1,230)   6,531   16,875   (10,344)
Trading account profit (loss):
Unrealized gains (losses) on outstanding derivative positions 45 45 (147) - 192 (131) (104) (27)
  Realized gains (losses) on closed derivative positions   80   (237)   (608)   317   688   2,926   (3,645)   6,571
Total trading account profit (loss)   125   (192)   (755)   317   880   2,795   (3,749)   6,544
Total mortgage banking activities   $11,269   $10,071   $5,239   $1,198   $6,030   $33,408   $27,349   $6,059
                 
Other Service Fees
Quarters ended Variance Nine months ended Variance
(In thousands)   30-Sep-18   30-Jun-18   30-Sep-17  

Q3 2018
vs. Q2 2018

 

Q3 2018
vs. Q3 2017

  30-Sep-18   30-Sep-17  

2018 vs.
2017

Other service fees:
Debit card fees $10,984 $11,684 $10,359 $(700) $625 $34,306 $33,478 $828
Insurance fees 14,042 13,027 13,076 1,015 966 39,668 39,410 258
Credit card fees 21,525 22,658 16,699 (1,133) 4,826 65,866 54,280 11,586
Sale and administration of investment products 5,696 5,020 5,496 676 200 16,071 16,377 (306)
Trust fees 4,967 5,139 4,817 (172) 150 15,203 14,675 528
  Other fees   7,102   5,348   3,034   1,754   4,068   16,680   10,604   6,076
Total other service fees   $64,316   $62,876   $53,481   $1,440   $10,835   $187,794   $168,824   $18,970

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

Q3 2018 vs.
Q2 2018

 

Q3 2018 vs.
Q3 2017

Loans not covered under FDIC loss-sharing agreements:
Commercial $11,993,707 $11,589,993 $11,227,095 $403,714 $766,612
Construction 943,365 899,323 823,325 44,042 120,040
Legacy [1] 27,566 29,250 37,508 (1,684) (9,942)
Lease financing 903,540 872,098 754,881 31,442 148,659
Mortgage 7,304,170 7,376,711 6,529,235 (72,541) 774,935
Consumer   5,339,820   3,841,141   3,801,406   1,498,679   1,538,414
Total non-covered loans held-in-portfolio $26,512,168 $24,608,516 $23,173,450 $1,903,652 $3,338,718
Loans covered under FDIC loss-sharing agreements   -   -   524,854   -   (524,854)
Total loans held-in-portfolio   $26,512,168   $24,608,516   $23,698,304   $1,903,652   $2,813,864
Loans held-for-sale:
Mortgage   51,742   73,859   68,864   (22,117)   (17,122)
Total loans held-for-sale   $51,742   $73,859   $68,864   $(22,117)   $(17,122)
Total loans   $26,563,910   $24,682,375   $23,767,168   $1,881,535   $2,796,742
[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)   30-Sep-18   30-Jun-18   30-Sep-17  

Q3 2018 vs. Q2
2018

 

Q3 2018 vs. Q3
2017

Demand deposits [1] $16,120,156 $15,813,188 $11,576,048 $306,968 $4,544,108
Savings, NOW and money market deposits (non-brokered) 15,714,275 15,751,376 14,638,191 (37,101) 1,076,084
Savings, NOW and money market deposits (brokered) 402,116 389,912 422,174 12,204 (20,058)
Time deposits (non-brokered) 7,280,854 7,284,697 7,446,922 (3,843) (166,068)
Time deposits (brokered CDs)   131,426   138,388   165,601   (6,962)   (34,175)
Total deposits   $39,648,827   $39,377,561   $34,248,936   $271,266   $5,399,891
[1] Includes interest and non-interest bearing demand deposits.                

Popular, Inc.
Financial Supplement to Third Quarter 2018 Earnings Release
Table H - Non-Performing Assets
(Unaudited)
Variance
(Dollars in thousands) 30-Sep-18

As a % of
loans HIP by
category

  30-Jun-18

As a % of
loans HIP by
category

  30-Sep-17

As a % of
loans HIP by
category

 

Q3 2018 vs.
Q2 2018

Q3 2018 vs.
Q3 2017

Non-accrual loans:
Commercial $172,685 1.4 % $164,949 1.4 % $165,352 1.5 % $7,736 $7,333
Construction 19,695 2.1 20,460 2.3 99 - (765) 19,596
Legacy [1] 3,403 12.3 3,663 12.5 3,268 8.7 (260) 135
Lease financing 3,009 0.3 3,696 0.4 2,684 0.4 (687) 325
Mortgage 361,085 4.9 384,655 5.2 352,315 5.4 (23,570) 8,770
Consumer 72,611 1.4   65,776 1.7   62,210 1.6   6,835 10,401
Total non-performing loans held-in-
portfolio, excluding covered loans 632,488 2.4 % 643,199 2.6 % 585,928 2.5 % (10,711) 46,560
Other real estate owned (“OREO”),
excluding covered OREO 133,780     142,063     176,728     (8,283) (42,948)
Total non-performing assets,
excluding covered assets 766,268 785,262 762,656 (18,994) 3,612
Covered loans and OREO -     -     24,951     - (24,951)
Total non-performing assets [2] $766,268     $785,262     $787,607     $(18,994) $(21,339)
Accruing loans past due 90 days or more [3] [4] $753,074     $901,473     $465,127     $(148,399) $287,947
Ratios excluding covered loans:
Non-performing loans held-in-portfolio
to loans held-in-portfolio 2.39 % 2.61 % 2.53 %
Allowance for loan losses to loans
held-in-portfolio 2.39 2.61 2.65
Allowance for loan losses to
non-performing loans, excluding loans
held-for-sale 100.19     99.97     104.77        
Ratios including covered loans:
Non-performing assets to total assets 1.60 % 1.65 % 1.85 %
Non-performing loans held-in-portfolio
to loans held-in-portfolio 2.39 2.61 2.49
Allowance for loan losses to loans
held-in-portfolio 2.39 2.61 2.73
Allowance for loan losses to non-performing
loans, excluding loans held-for-sale 100.19     99.97     109.77        
[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 September 30, 2018, June 30, 2018 and September 30, 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 $195 million (June 30, 2018 - $298 million; September 30, 2017 - $92 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 $238 million of residential mortgage loans insured by FHA or guaranteed by the VA that are no longer accruing interest as of September 30, 2018 (June 30, 2018 - $216 million; September 30, 2017 - $157 million). Furthermore, the Corporation has approximately $53 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 (June 30, 2018 - $66 million; September 30, 2017 - $57 million).
[4] The carrying value of loans accounted for under ASC Subtopic 310-30 that are contractually 90 days or more past due was $304 million at September 30, 2018 (June 30, 2018 - $265 million; September 30, 2017 - $251 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 Third Quarter 2018 Earnings Release
Table I - Activity in Non-Performing Loans
(Unaudited)
             
Commercial loans held-in-portfolio:
Quarter ended Quarter ended
30-Sep-18   30-Jun-18
(In thousands)   BPPR   Popular U.S.   Popular, Inc.   BPPR   Popular U.S.   Popular, Inc.
Beginning balance NPLs $162,781 $2,168 $164,949 $157,132 $1,147 $158,279
Plus:
New non-performing loans 23,894 1,663 25,557 53,794 1,294 55,088
Advances on existing non-performing loans - - - 647 - 647
Less:
Non-performing loans transferred to OREO (1,480) - (1,480) (1,831) - (1,831)
Non-performing loans charged-off (5,179) (3) (5,182) (9,758) - (9,758)
Loans returned to accrual status / loan collections   (8,745)   (2,414)   (11,159)   (37,203)   (273)   (37,476)
Ending balance NPLs   $171,271   $1,414   $172,685   $162,781   $2,168   $164,949
 
Construction loans held-in-portfolio:
Quarter ended Quarter ended
30-Sep-18   30-Jun-18
(In thousands)   BPPR   Popular U.S.   Popular, Inc.   BPPR   Popular U.S.   Popular, Inc.
Beginning balance NPLs $2,559 $17,901 $20,460 $4,293 $- $4,293
Plus:
New non-performing loans - - - - 17,901 17,901
Less:
Loans returned to accrual status / loan collections   (730)   (35)   (765)   (1,734)   -   (1,734)
Ending balance NPLs   $1,829   $17,866   $19,695   $2,559   $17,901   $20,460
 
Mortgage loans held-in-portfolio:
Quarter ended Quarter ended
30-Sep-18   30-Jun-18
(In thousands)   BPPR   Popular U.S.   Popular, Inc.   BPPR   Popular U.S.   Popular, Inc.
Beginning balance NPLs $373,257 $11,398 $384,655 $357,967 $11,647 $369,614
Plus:
New non-performing loans 44,453 4,406 48,859 103,844 3,658 107,502
Advances on existing non-performing loans - 52 52 - - -
Reclassification from covered loans - - - 3,413 - 3,413
Less:
Non-performing loans transferred to OREO (4,688) (183) (4,871) (1,095) - (1,095)
Non-performing loans charged-off (18,590) (14) (18,604) (8,635) (49) (8,684)
Loans returned to accrual status / loan collections   (45,653)   (3,353)   (49,006)   (82,237)   (3,858)   (86,095)
Ending balance NPLs   $348,779   $12,306   $361,085   $373,257   $11,398   $384,655
                           
 
Total non-performing loans held-in-portfolio (excluding consumer):
Quarter ended Quarter ended
30-Sep-18   30-Jun-18
(In thousands)   BPPR   Popular U.S.   Popular, Inc.   BPPR   Popular U.S.   Popular, Inc.
Beginning balance NPLs $538,597 $35,130 $573,727 $519,392 $15,931 $535,323
Plus:
New non-performing loans 68,347 6,069 74,416 157,638 23,797 181,435
Advances on existing non-performing loans - 58 58 647 2 649
Reclassification from covered loans - - - 3,413 - 3,413
Less:
Non-performing loans transferred to OREO (6,168) (183) (6,351) (2,926) - (2,926)
Non-performing loans charged-off (23,769) (17) (23,786) (18,393) (49) (18,442)
Loans returned to accrual status / loan collections   (55,128)   (6,068)   (61,196)   (121,174)   (4,551)   (125,725)

Ending balance NPLs (1)

  $521,879   $34,989   $556,868   $538,597   $35,130   $573,727

(1) Includes $3.4 million of NPLS related to the legacy portfolio as of September 30, 2018 (June 30, 2018 - $3.7 million).

Popular, Inc.
Financial Supplement to Third Quarter 2018 Earnings Release
Table J - Allowance for Credit Losses, Net Charge-offs and Related Ratios
(Unaudited)
     
 
Quarter ended Quarter ended Quarter ended
  30-Sep-18   30-Jun-18   30-Sep-17  
(Dollars in thousands)   Total  

Non-covered
loans

 

Covered
loans

  Total  

Non-covered
loans

 

Covered
loans

  Total  
Balance at beginning of period $643,018 $606,968 $33,610 $640,578 $509,206 $30,808 $540,014
Provision for loan losses   54,387   60,054   -   60,054   157,659   3,100   160,759  
    697,405   667,022   33,610   700,632   666,865   33,908   700,773  
Net loans charged-off (recovered):
BPPR
Commercial 2,369 7,960 - 7,960 (438) - (438)
Construction (125) (301) - (301) (50) - (50)
Lease financing 1,557 1,157 - 1,157 1,495 - 1,495
Mortgage 21,962 11,575 - 11,575 17,071 831 17,902
Consumer   33,083   24,074   -   24,074   27,223   20   27,243
Total BPPR   58,846   44,465   -   44,465   45,301   851   46,152
 
Popular U.S.
Commercial 1,741 10,132 - 10,132 4,282 - 4,282
Legacy [1] (685) (277) - (277) (297) - (297)
Mortgage (3) 18 - 18 (174) - (174)
Consumer   3,788   3,276   -   3,276   3,897   -   3,897  
Total Popular U.S.   4,841   13,149   -   13,149   7,708   -   7,708  
Total loans charged-off - Popular, Inc.   63,687   57,614   -   57,614   53,009   851   53,860  
Allowance transferred from covered to non-covered loans   -   33,610   (33,610)   -   -   -   -  
Balance at end of period   $633,718   $643,018   $-   $643,018   $613,856   $33,057   $646,913  
 
POPULAR, INC.
Annualized net charge-offs to average loans held-in-portfolio 1.00 % 0.95 % 0.95 % 0.92 % 0.92 %
Provision for loan losses to net charge-offs 0.85 x 1.04 x 1.04 x 2.97 x 2.98 x
 
BPPR
Annualized net charge-offs to average loans held-in-portfolio 1.24 % 1.01 % 1.01 % 1.07 % 1.05 %
Provision for loan losses to net charge-offs 0.88 x 1.00 x 1.00 x 2.54 x 2.56 x
 
Popular U.S.
Annualized net charge-offs to average loans held-in-portfolio 0.29 % 0.81 % 0.52 %
Provision for loan losses to net charge-offs   0.52 x         1.19 x         5.52 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 Popular U.S. segment.

Popular, Inc.
Financial Supplement to Third Quarter 2018 Earnings Release
Table K - Allowance for Loan Losses - Breakdown of General and Specific Reserves - CONSOLIDATED
(Unaudited)
 
                               
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.
 
                               
30-Jun-18
(Dollars in thousands)   Commercial   Construction   Legacy [1]   Mortgage  

Lease
financing

  Consumer   Total  
Specific ALLL $46,626 $- $- $47,515 $362 $24,836 $119,339
Impaired loans $359,447 $20,460 $- $517,308 $1,130 $112,485 $1,010,830
Specific ALLL to impaired loans   12.97 % - % - % 9.19 % 32.04 % 22.08 % 11.81 %
General ALLL $195,220 $7,702 $700 $138,951 $13,923 $167,183 $523,679
Loans held-in-portfolio, excluding impaired loans $11,230,546 $878,863 $29,250 $6,859,403 $870,968 $3,728,656 $23,597,686
General ALLL to loans held-in-portfolio, excluding impaired loans   1.74 % 0.88 % 2.39 % 2.03 % 1.60 % 4.48 % 2.22 %
Total ALLL $241,846 $7,702 $700 $186,466 $14,285 $192,019 $643,018
Total loans held-in-portfolio $11,589,993 $899,323 $29,250 $7,376,711 $872,098 $3,841,141 $24,608,516
ALLL to loans held-in-portfolio   2.09 % 0.86 % 2.39 % 2.53 % 1.64 % 5.00 % 2.61 %
[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 $5,624 $5,530 $- $(1,310) $(65) $1,419 $11,198
Impaired loans   $(3,440)   $(765)   $-   $(225)   $(199)   $2,087   $(2,542)  
General ALLL $(2,930) $1,888 $(323) $(10,569) $(1,914) $(6,650) $(20,498)
Loans held-in-portfolio, excluding impaired loans   $407,154   $44,807   $(1,684)   $(72,316)   $31,641   $1,496,592   $1,906,194  
Total ALLL $2,694 $7,418 $(323) $(11,879) $(1,979) $(5,231) $(9,300)
Total loans held-in-portfolio   $403,714   $44,042   $(1,684)   $(72,541)   $31,442   $1,498,679   $1,903,652  

Popular, Inc.
Financial Supplement to Third Quarter 2018 Earnings Release
Table L - Allowance for Loan Losses - Breakdown of General and Specific Reserves - PUERTO RICO OPERATIONS
(Unaudited)
             
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 loans $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
 
 
30-Jun-18
Puerto Rico
(In thousands)   Commercial   Construction   Mortgage   Lease financing   Consumer   Total
Allowance for credit losses:
Specific ALLL $46,626 $- $45,039 $362 $23,553 $115,580
  General ALLL   144,300   765   137,064   13,923   155,513   451,565
Total ALLL   $190,926   $765   $182,103   $14,285   $179,066   $567,145
Loans held-in-portfolio:
Impaired $359,447 $2,559 $507,580 $1,130 $105,922 $976,638
  Loans held-in-portfolio, excluding impaired loans   6,688,151   94,616   6,135,546   870,968   3,281,198   17,070,479
Total loans held-in-portfolio   $7,047,598   $97,175   $6,643,126   $872,098   $3,387,120   $18,047,117
 
                           
Variance
(In thousands)   Commercial   Construction   Mortgage   Lease financing   Consumer   Total
Allowance for credit losses:
Specific ALLL $5,624 $- $(1,198) $(65) $1,353 $5,714
  General ALLL   13,555   113   (10,619)   (1,914)   (13,818)   (12,683)
Total ALLL   $19,179   $113   $(11,817)   $(1,979)   $(12,465)   $(6,969)
Loans held-in-portfolio:
Impaired $(3,440) $(730) $678 $(199) $1,262 $(2,429)
  Loans held-in-portfolio, excluding impaired loans   363,318   (18,652)   (112,528)   31,641   1,514,886   1,778,665
Total loans held-in-portfolio   $359,878   $(19,382)   $(111,850)   $31,442   $1,516,148   $1,776,236

Popular, Inc.
Financial Supplement to Third Quarter 2018 Earnings Release
Table M - Allowance for Loan Losses - Breakdown of General and Specific Reserves - POPULAR U.S. OPERATIONS
(Unaudited)
             
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
 
 
30-Jun-18
Popular U.S.
(In thousands)   Commercial   Construction   Legacy   Mortgage   Consumer   Total
Allowance for credit losses:
Specific ALLL $- $- $- $2,476 $1,283 $3,759
  General ALLL   50,920   6,937   700   1,887   11,670   72,114
Total ALLL   $50,920   $6,937   $700   $4,363   $12,953   $75,873
Loans held-in-portfolio:
Impaired loans $- $17,901 $- $9,728 $6,563 $34,192
  Loans held-in-portfolio, excluding impaired loans   4,542,395   784,247   29,250   723,857   447,458   6,527,207
Total loans held-in-portfolio   $4,542,395   $802,148   $29,250   $733,585   $454,021   $6,561,399
 
                           
Variance
(In thousands)   Commercial   Construction   Legacy   Mortgage   Consumer   Total
Allowance for credit losses:
Specific ALLL $- $5,530 $- $(112) $66 $5,484
  General ALLL   (16,485)   1,775   (323)   50   7,168   (7,815)
Total ALLL   $(16,485)   $7,305   $(323)   $(62)   $7,234   $(2,331)
Loans held-in-portfolio:
Impaired loans $- $(35) $- $(903) $825 $(113)
  Loans held-in-portfolio, excluding impaired loans   43,836   63,459   (1,684)   40,212   (18,294)   127,529
Total loans held-in-portfolio   $43,836   $63,424   $(1,684)   $39,309   $(17,469)   $127,416

Popular, Inc.    
Financial Supplement to Third Quarter 2018 Earnings Release
Table N - Reconciliation to GAAP Financial Measures
(Unaudited)
 
 
(In thousands, except share or per share information) 30-Sep-18     30-Jun-18     30-Sep-17  
Total stockholders’ equity $5,244,349 $5,289,661 $5,285,431
Less: Preferred stock (50,160) (50,160) (50,160)
Less: Goodwill (687,536) (627,294) (627,294)
Less: Other intangibles (29,186)     (31,023)     (38,016)  
Total tangible common equity $4,477,467     $4,581,184     $4,569,961  
Total assets $47,919,428 $47,535,177 $42,601,267
Less: Goodwill (687,536) (627,294) (627,294)
Less: Other intangibles (29,186)     (31,023)     (38,016)  
Total tangible assets $47,202,706     $46,876,860     $41,935,957  
Tangible common equity to tangible assets 9.49 % 9.77 % 10.90 %
Common shares outstanding at end of period 100,336,341 102,296,440 102,026,417
Tangible book value per common share $44.62     $44.78     $44.79  

Contact:

Popular, Inc.
Media Relations:
Teruca Rullán, 787-281-5170
Mobile: 917-679-3596
Senior Vice President, Corporate Communications

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