Market Overview

Popular, Inc. Announces Second Quarter 2018 Financial Results

Share:
  • Net income of $279.8 million and adjusted net income of $121.3
    million for the second quarter of 2018, compared to a net income of
    $91.3 million for Q1 2018
  • Net interest margin of 3.81% in Q2 2018, compared to 3.89% in Q1
    2018
  • Credit Quality (excluding loans previously classified as covered
    loans in prior period):
    • Non-performing loans held-in-portfolio ("NPLs") increased by
      $36.4 million from Q1 2018; NPLs to loans ratio at 2.6% vs. 2.5%
      in Q1 2018;
    • Net charge-offs ("NCOs") increased by $5.1 million; NCOs at
      0.95% of average loans held-in-portfolio vs. 0.90% in Q1 2018;
    • Provision expense of $60.1 million vs. $69.3 million in Q1 2018;
    • Allowance for loan losses of $643.0 million vs. $607.0 million
      in Q1 2018, including the reclassification in Q2 of $33.6 million
      from the covered portfolio;
    • Allowance for loan losses to loans held-in-portfolio at 2.61%
      vs. 2.52% in Q1 2018; and
    • Allowance for loan losses to NPLs flat at 100.0%.
  • Common Equity Tier 1 ratio of 17.46%, Common Equity per Share of
    $51.22 and Tangible Book Value per Share of $44.78 at June 30, 2018

Popular, Inc. (the "Corporation," "Popular," "we," "us," "our")
(NASDAQ:BPOP) reported a net income of $279.8 million and an adjusted
net income of $121.3 million for the second quarter ended June 30, 2018,
compared to a net income of $91.3 million for the quarter ended March
31, 2018.

Ignacio Alvarez, President and Chief Executive Officer, said: "We are
very pleased with the results for the second quarter. In addition to
achieving a successful termination of our shared-loss agreements with
the FDIC, we produced excellent financial results. These results were
primarily driven by strong top line revenue growth in our Puerto Rico
franchise, where the economy continues to recover from the impact of
Hurricane Maria. We look forward to closing the acquisition of Wells
Fargo's auto loan business in Puerto Rico in the third quarter, which
will contribute favorably to our earnings in the second half of the
year."

Significant Events

Early Termination of FDIC Shared-Loss Agreements

On May 22, 2018, Banco Popular de Puerto Rico, ("Banco Popular" or
"BPPR"), Popular's Puerto Rico banking subsidiary, entered into a
Termination Agreement (the "Termination Agreement") with the Federal
Deposit Insurance Corporation (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 through an
FDIC-assisted transaction in 2010 (the "FDIC Transaction").

As a result of the Termination Agreement, assets that were covered by
the Shared-Loss Agreements, including covered loans in the amount of
approximately $514.6 million and covered real estate owned assets in the
amount of approximately $15.3 million as of March 31, 2018, were
reclassified as non-covered. Banco Popular now recognizes entirely all
credit losses, expenses, gains, and recoveries related to the formerly
covered assets with no offset due to or from the FDIC.

As of March 31, 2018, the Corporation had an FDIC Loss Share Asset in
its financial statements of $44.5 million related to the covered assets.
Additionally, as part of the Shared-Loss Agreements, Banco Popular also
had agreed to make a true-up payment to the FDIC on the date that is 45
days following the last day of the final shared-loss month, or upon the
final disposition of all covered assets under the Shared-Loss
Agreements, in the event losses on the Shared-Loss Agreements failed to
reach expected levels. The estimated fair value of such true-up payment
obligation at March 31, 2018 was approximately $171.0 million.

Under the terms of the Termination Agreement, Banco Popular made a
payment of approximately $23.7 million, (the "Termination Payment") to
the FDIC as consideration for the termination of the Shared-Loss
Agreements. Popular recorded a pre-tax gain of approximately $94.6
million, calculated based on the difference between the Termination
Payment and the net amount of the true-up payment obligation and the
FDIC Loss Share Asset, less related professional and advisory fees
associated with the Termination Agreement. Net of income tax expense of
$45.0 million, the Termination Agreement contributed $49.6 million to
net income.

In June 2012, the Puerto Rico Department of the Treasury and the
Corporation entered into a Tax Closing Agreement (the "Tax Closing
Agreement") 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. The Tax Closing Agreement provides that these loans are
capital assets and any principal amount collected in excess of the
amount paid for such loans will be taxed as a capital gain. The Tax
Closing Agreement further provides that the Corporation's tax liability
upon the termination of the Shared-Loss Agreements be calculated based
on the "deemed sale" of the underlying loans. As a result, the
Corporation recognized an income tax benefit of $108.9 million during
the second quarter of 2018. This income tax benefit is composed of an
increase in the deferred tax asset balance of $158.7 million related to
the increase in tax basis as a result of the "deemed sale", net of the
additional income tax expense of $49.8 million associated with the
"deemed sale" incremental tax liability at the capital gains rate per
the Tax Closing Agreement.

The combined effect of the Termination Agreement and the Tax Closing
Agreement was a contribution of $158.5 million to net income for the
quarter ended June 30, 2018.

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

On February 14, 2018, Popular announced that Banco Popular agreed to
acquire certain assets and liabilities related to Wells Fargo's auto
finance business in Puerto Rico. On May 31, 2018 Popular filed a notice
with the Board of Governors of the Federal Reserve System in order for
Popular Auto, LLC, BPPR's direct, wholly-owned subsidiary, to be
permitted to consummate the transaction. On July 5, 2018, Popular
announced the completion of such regulatory clearance process. Popular
also announced that the parties have agreed to close the transaction on
August 1, 2018, subject to the satisfaction or waiver of customary
closing conditions.

Earnings Highlights              
 
(Unaudited)   Quarters ended Six months ended
(Dollars in thousands, except per share information)   30-Jun-18   31-Mar-18   30-Jun-17 30-Jun-18   30-Jun-17
Net interest income $414,136 $393,047 $ 374,479 $ 807,183 $ 736,577
Provision for loan losses 60,054 69,333 49,965 129,387 92,022
Provision for loan losses - covered loans [1]   -     1,730       2,514     1,730       1,155  
Net interest income after provision for loan losses 354,082 321,984 322,000 676,066 643,400
FDIC loss-share income (expense) 102,752 (8,027 ) (475 ) 94,725 (8,732 )
Other non-interest income 132,057 121,524 117,268 253,581 241,394
Operating expenses   337,668     322,002       306,835     659,670       618,153  
Income before income tax 251,223 113,479 131,958 364,702 257,909
Income tax (benefit) expense   (28,560 )   22,155       35,732     (6,405 )     68,738  
Net income   $279,783     $91,324     $ 96,226   $ 371,107     $ 189,171  
Net income applicable to common stock   $278,852     $90,393     $ 95,295   $ 369,245     $ 187,309  
Net income per common share - Basic   $2.74     $0.89     $ 0.94   $ 3.63     $ 1.83  
Net income per common share - Diluted   $2.73     $0.89     $ 0.94   $ 3.62     $ 1.83  

[1] Covered loans represent loans acquired in the Westernbank
FDIC-assisted transaction that were covered under the FDIC
loss-sharing 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 first quarter of 2018.

(Unaudited)            
(In thousands)   30-Jun-18
    Pre-tax  

Income tax
effect

 

Impact on net
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[1]   -     (108,946 )     (108,946 )
Adjusted net income (Non-GAAP)           $ 121,263  

[1]Refer to the Significant Events section above for
additional information.

Net interest income

Net interest income for the quarter ended June 30, 2018 was $414.1
million, compared to $393.0 million for the previous quarter. Net
interest margin was 3.81% for the quarter compared to 3.89% for the
previous quarter. The presentation of net interest income has been
adjusted for the second quarter of 2018 to present the income from the
loans acquired from Westernbank ("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 $21.1 million in net interest income was mainly the
result of the following:

Positive variances:

  • Higher income from money market, trading and investments by $15.1
    million due to a higher average volume of funds available to invest as
    a result of higher balance of deposits at BPPR, from public, retail
    and commercial depositors, and a higher yield by 6 basis points as a
    result of the increase in interest rates by 25 basis points late in
    the first quarter and in mid-June 2018
  • higher income from commercial loans by $4.7 million, or 6 basis
    points, due to higher yields, mostly in variable rate loans, as a
    result of increases in market interest rates, loan growth in Popular
    Bank ("Popular U.S.") in a higher interest rate environment and one
    additional day in the quarter
  • higher income from mortgage loans by $1.9 million, or 8 basis points,
    due mainly to higher yields related to fees collected on delayed loans
    payments that had been forgiven last quarter due to the moratorium
    granted as part of the Corporation's hurricane relief efforts; and
  • higher income from consumer loans by $5.0 million, or 42 basis points,
    due to the reserve for uncollectible interest and fees of $3.5 million
    recorded for credit cards during the first quarter and higher average
    balances and yields in the auto loan portfolio.

Negative variance:

  • higher cost of interest-bearing deposits by $6.5 million, or 4 basis
    points, due mainly to higher average balances in NOW and money market
    and savings accounts, impacted primarily by public sector deposits and
    U.S. deposits to fund loan growth, partially offset by lower cost of
    time deposits.

BPPR's net interest income amounted to $352.7 million for the quarter
ended June 30, 2018, compared to $332.3 million in the previous quarter.
The increase of $20.4 million in net interest income was mainly due to
higher income from money market, trading and investment securities
resulting from higher volumes and yields, as previously stated. Higher
yields on the commercial and mortgage loan portfolios were mostly due to
the increase in market rates and the end of the moratorium period during
the first quarter. Higher income from the credit cards portfolio, due to
the reserve for uncollectible interests and fees recorded in the first
quarter, also contributed to the increase. These positive results were
partially offset by higher interest expense on deposits. The net
interest margin for the second quarter of 2018 was 4.07%, a decline of 7
basis points when compared to 4.14% for the previous quarter. The
decrease in net interest margin was due to the composition of earning
assets, which has shifted towards lower yielding assets as a result of
higher balances of Fed Funds and investment securities. BPPR's earning
assets yielded 4.43%, compared to 4.49% in the previous quarter, while
the cost of interest bearing deposits was 0.49%, or two basis points
higher than the 0.47% reported in the previous quarter.

Net interest income for Popular U.S. was $75.5 million, for the quarter
ended June 30, 2018, compared to $75.0 million during the previous
quarter. The increase of $0.5 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 decreased 14 basis points to 3.47%, compared to 3.61% for
the previous quarter. The decrease in net interest margin was mostly due
to higher cost of deposits by $3.5 million, or 17 basis points as a
result of an increase in deposits mostly raised through the U.S. online
deposit platform. Popular U.S. earning assets yielded 4.44%, compared to
4.45% in the previous quarter, while the cost of interest bearing
deposits was 1.17%, compared to 1.00% in the previous quarter.

Non-interest income

Non-interest income amounted to $234.8 million for the quarter ended
June 30, 2018, compared to $113.5 million for the previous quarter. The
increase of $121.3 million was mainly due to the gain of $102.8 million
recorded during the second quarter as a result of the Termination
Agreement with the FDIC. Excluding the favorable variance on the FDIC
loss-share income (expense) of $110.8 million, non-interest income
increased by $10.5 million primarily driven by:

  • Higher other service fees by $2.3 million, mainly at BPPR, resulting
    from higher credit card interchange income due to higher transactional
    volumes and higher insurance fees due to policy renewals;
  • favorable variance in adjustments to indemnity reserves of $2.4
    million related to loans previously sold with credit recourse at BPPR;
    and
  • higher other operating income by $6.1 million mainly due to
    modification fees received from FNMA for the successful completion of
    loss mitigation alternatives related to hurricane relief measures of
    $2.7 million and higher net earnings from the portfolio of investments
    under the equity method by $3.3 million.

These positive variances were partially offset by:

  • Lower income on mortgage banking activities by $2.0 million mainly due
    to lower realized gains on closed derivatives positions by $3.3
    million, partially offset by higher gains on securitization
    transactions by $1.4 million.

Refer to Table B for further details.

Operating expenses

Operating expenses amounted to $337.7 million for the second quarter of
2018, an increase of $15.7 million when compared to the first quarter of
2018. The most notable variances within operating expenses were the
following:

  • Higher professional fees by $10.9 million mainly due to professional
    and advisory expenses associated with the Termination Agreement with
    the FDIC of $8.1 million;
  • higher business promotions by $4.8 million due to higher customer
    reward program expense and higher advertising costs at BPPR; and
  • higher credit and debit card processing, volume, interchange and other
    expenses by $5.0 million as a result of a contingent incentive payment
    received by BPPR during the first quarter of 2018 for exceeding volume
    targets.

These increases were partially offset by:

  • Lower personnel cost by $1.5 million due to lower commission,
    incentives and other bonuses; and
  • lower other operating expenses by $4.1 million mainly due to lower
    provision for unused commitments by $2.6 million and lower sundry
    losses.

Full-time equivalent employees were 7,958 as of June 30, 2018, compared
to 7,808 as of March 31, 2018. Increase in FTEs mainly related to summer
internship programs, post-hurricane loan modification support and retail
banking units.

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

Income taxes

For the quarter ended June 30, 2018, the Corporation recorded an income
tax benefit of $28.6 million, compared to an income tax expense of $22.2
million for the previous quarter. As previously mentioned, the results
for the second quarter include a pre-tax gain of $94.6 million resulting
from the Termination Agreement with the FDIC 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 Transaction. 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%, and an increase of approximately
$13.0 million when compared to the first quarter of 2018, mainly due to
higher taxable income.

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

Credit Quality

The P.R. market continues to show signs of recovery after the
devastation caused by Hurricanes Irma and María approximately 10 months
ago. The second quarter results reflect some normalization, with some of
the metrics near or better than pre-hurricane levels. Nonetheless, the
Corporation continues to closely monitor its loan portfolios and related
credit metrics, since uncertainties remain regarding Puerto Rico's
fiscal and economic outlook and the full effect of the hurricanes. The
U.S. operation continued to 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 second quarter of
2018. These results include the impact of the loans previously
classified as "covered" as a result of the Shared-Loss Agreements
entered into in connection with the FDIC Transaction and recently
terminated pursuant to the Termination Agreement.

  • Inflows of NPLs held-in-portfolio, excluding consumer loans, increased
    by $50.8 million quarter-over-quarter, mainly driven by higher inflows
    in the P.R. commercial and U.S. construction portfolios of $39.3
    million and $17.9 million, respectively. The increase in the P.R.
    commercial portfolio was driven by two borrowers with an aggregate
    amount of $45.5 million. P.R. mortgage inflows remained stable after
    experiencing a significant increase in the previous quarter, prompted
    by the end of the payment moratorium. The increase in the U.S.
    construction portfolio was driven by a single borrower.
  • Total non-performing loans held-in-portfolio increased by $36.4
    million from the first quarter of 2018, driven by higher U.S.
    construction and P.R. mortgage NPLs of $17.9 million and $15.3
    million, respectively. The U.S. construction NPL increase was driven
    by a single borrower. The P.R. mortgage NPLs increase was driven by
    loans which failed to make a payment after the end of the moratorium.
    The P.R. mortgage NPLs quarter-over-quarter increase includes $3.4
    million related to loans previously classified as covered. At June 30,
    2018, the ratio of NPLs to total loans held-in-portfolio was 2.6%,
    compared to 2.5% in the first quarter of 2018.
  • Net charge-offs increased by $5.1 million from the first quarter of
    2018, driven by higher P.R. commercial NCOs, mostly related to loans
    reserved in prior quarters. The Corporation's ratio of annualized net
    charge-offs to average loans held-in-portfolio was at 0.95%, compared
    to 0.90% in the first quarter of 2018. Refer to Table J for further
    information on net charge-offs and related ratios.
  • The allowance for loan losses increased by $36.1 million from the
    first quarter of 2018 to $643.0 million. The P.R. segment ALLL
    increased by $33.6 million, principally driven by the reclassification
    of the allowance from loans previously classified as covered. The U.S.
    segment ALLL increased by $2.5 million when compared to the previous
    quarter, primarily related to the U.S. taxi medallions portfolio.
  • The general and specific reserves totaled $523.7 million and $119.3
    million, respectively, at quarter-end, compared with $490.0 million
    and $117.0 million, respectively, as of March 31, 2018. The ratio of
    the allowance for loan losses to loans held-in-portfolio was 2.61% in
    the second quarter of 2018, compared to 2.52% from the previous
    quarter. The ratio of the allowance for loan losses to NPLs
    held-in-portfolio stood at 100.0%.
  • The provision for loan losses for the second quarter of 2018 decreased
    by $9.3 million. The P.R. provision decreased by $12.3 million, which
    includes a downward adjustment of $8.6 million to the environmental
    reserves associated with Hurricane Maria. The U.S. provision increased
    by $3.0 million from the previous quarter driven by the abovementioned
    incremental reserve for the U.S. taxi medallion portfolio. The
    provision to net charge-offs ratio was 104.2% in the second quarter of
    2018, compared to 131.9% in the previous quarter.
Non-Performing Assets      
(Unaudited)            
(In thousands)   30-Jun-18   31-Mar-18   30-Jun-17
Total non-performing loans held-in-portfolio, excluding covered loans $ 643,199 $ 606,796 $ 547,129
Other real estate owned ("OREO"), excluding covered OREO     142,063       153,061       181,096  
Total non-performing assets, excluding covered assets 785,262 759,857 728,225
Covered loans and OREO     -       18,928       29,376  
Total non-performing assets   $ 785,262     $ 778,785     $ 757,601  
Net charge-offs for the quarter (excluding covered loans)   $

57,614

    $ 52,547     $ 57,484  
 
 
Ratios (excluding covered loans):            
Non-covered loans held-in-portfolio $ 24,608,516 $ 24,087,937 $ 22,918,271
Non-performing loans held-in-portfolio to loans held-in-portfolio 2.61 % 2.52 % 2.39 %
Allowance for loan losses to loans held-in-portfolio 2.61 2.52 2.22
Allowance for loan losses to non-performing loans, excluding loans
held-for-sale
    99.97       100.03       93.07  
 
Refer to Table H for additional information.
 
Provision for Loan Losses
       
(Unaudited)   Quarters ended   Six months ended
(In thousands)   30-Jun-18   31-Mar-18   30-Jun-17   30-Jun-18 30-Jun-17
Provision for loan losses:
BPPR $ 44,405 $ 56,718 $ 42,173 $ 101,123 $ 73,651
Popular U.S.     15,649     12,615     7,792     28,264   18,371
Total provision for loan losses - non-covered loans   $ 60,054   $ 69,333   $ 49,965   $ 129,387 $ 92,022
Provision for loan losses - covered loans     -     1,730     2,514     1,730   1,155
Total provision for loan losses   $ 60,054   $ 71,063   $ 52,479   $ 131,117 $ 93,177
 

Credit Quality by Segment
(Unaudited)
(In thousands)   Quarters ended
BPPR   30-Jun-18   31-Mar-18   30-Jun-17
Provision for loan losses   $ 44,405   $ 56,718   $ 42,173
Net charge-offs

44,465

41,227 54,255
Total non-performing loans held-in-portfolio, excluding covered loans 589,838 573,516 517,382
Allowance / non-covered loans held-in-portfolio     3.14 %     3.01 %     2.66 %
 
    Quarters ended
Popular U.S.   30-Jun-18   31-Mar-18   30-Jun-17
Provision for loan losses $ 15,649 $ 12,615 $ 7,792
Net charge-offs 13,149 11,320 3,229
Total non-performing loans held-in-portfolio 53,361 33,280 29,747
Allowance / non-covered loans held-in-portfolio     1.16 %     1.16 %     0.94 %
 
Financial Condition Highlights
         
(Unaudited)
(In thousands)   30-Jun-18   31-Mar-18   30-Jun-17
Cash and money market investments $ 9,029,010 $ 7,264,086 $ 4,625,318
Investment securities 10,847,601 10,733,010 9,726,158
Loans not covered under loss-sharing agreements with the FDIC 24,608,516 24,087,937 22,918,271
Loans covered under loss-sharing agreements with the FDIC - 514,611 536,341
Total assets 47,535,177 45,756,761 41,242,669
Deposits 39,377,561 37,134,093 33,122,033
Borrowings 1,869,774 2,130,465 1,968,419
Total liabilities 42,245,516 40,691,852 35,964,624
Stockholders' equity     5,289,661     5,064,909     5,278,045
 

Total assets increased by $1.8 billion from the first quarter of 2018,
driven by:

  • A net increase of $1.8 billion in cash and money market investments at
    BPPR, mainly due to an increase in government demand and commercial
    checking deposits; and

Total liabilities increased by $1.6 billion from the first quarter of
2018, principally driven by:

  • An increase of $2.2 billion in deposits mainly due to an increase in
    public demand and commercial checking deposits at BPPR. Refer to Table
    G for additional information on deposits.

Partially offset by:

  • A decrease of $0.4 billion in other liabilities at BPPR, mainly due to
    a decrease in the liability for GNMA loans sold with an option to
    repurchase by $0.2 billion and the elimination of the true-up payment
    obligation with the FDIC of $0.2 billion as a result of the
    Termination Agreement with the FDIC, as previously stated.

Stockholders' equity increased by approximately $224.8 million from the
first quarter of 2018, principally due to net income for the quarter of
$279.8 million, partially offset by higher unrealized losses on debt
securities available-for-sale by $33.2 million, declared dividends of
$25.6 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 17.46%, $51.22 and $44.78,
respectively, at June 30, 2018, compared to 16.80%, $49.07 and $42.61 at
March 31, 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 timely and
effectively consummate our acquisition and assumption of certain assets
and liabilities related to Wells Fargo's auto finance business in Puerto
Rico, as well as the ability to successfully transition and integrate
the business, 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, the
Quarterly Report on Form 10-Q for the quarter ended March 31, 2018 and
in our Form 10-Q for the quarter ended June 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.

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 Monday, July 23, 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 Thursday, August 23, 2018. The replay dial-in
is: 1-877-344-7529 or 1-412-317-0088. The replay passcode is 10121650.

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

Popular, Inc.
Financial Supplement to Second Quarter 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 - U.S. MAINLAND OPERATIONS
 
Table N - Reconciliation to GAAP Financial Measures
 

POPULAR, INC.
Financial Supplement to Second Quarter 2018 Earnings Release
Table A - Selected Ratios and Other Information
(Unaudited)
         
             
Quarters ended Six months ended
    30-Jun-18   31-Mar-18   30-Jun-17   30-Jun-18   30-Jun-17
Basic EPS $2.74 $0.89 $0.94 $3.63 $1.83
Diluted EPS $2.73 $0.89 $0.94 $3.62 $1.83
Average common shares outstanding 101,892,402 101,696,343 101,601,552 101,794,914 102,263,593
Average common shares outstanding - assuming dilution 102,031,955 101,837,212 101,708,703 101,932,477 102,387,246
Common shares outstanding at end of period 102,296,440 102,189,914 101,986,758 102,296,440 101,986,758
 
Market value per common share $45.21 $41.62 $41.71 $45.21 $41.71
 
Market capitalization - (In millions) $4,625 $4,253 $4,254 $4,625 $4,254
 
Return on average assets 2.40% 0.84% 0.94% 1.64% 0.95%
. .
Return on average common equity 20.84% 7.06% 7.24% 14.10% 7.19%
 
Net interest margin 3.81% 3.89% 4.02% 3.85% 4.05%
 
Common equity per share $51.22 $49.07 $51.26 $51.22 $51.26
 
Tangible common book value per common share (non-GAAP) [1] $44.78 $42.61 $44.71 $44.78 $44.71
 
Tangible common equity to tangible assets (non-GAAP) [1] 9.77% 9.66% 11.24% 9.77% 11.24%
 
Tier 1 capital

17.46%

16.80% 16.68%

17.46%

16.68%
 
Total capital

20.41%

19.74% 19.66%

20.41%

19.66%
 
Tier 1 leverage

9.82%

9.98% 10.48%

9.82%

10.48%
 
Common Equity Tier 1 capital  

17.46%

  16.80%   16.68%  

17.46%

  16.68%
[1] Refer to Table N for reconciliation to GAAP financial measures.
 

POPULAR, INC.
Financial Supplement to Second Quarter 2018 Earnings Release
Table B - Consolidated Statement of Operations
(Unaudited)
  Quarters ended   Variance   Quarter ended   Variance   Six months ended
(In thousands, except per share information)   30-Jun-18   31-Mar-18  

Q2 2018
vs. Q1 2018

  30-Jun-17  

Q2 2018
vs. Q2 2017

  30-Jun-18   30-Jun-17
Interest income:    
Loans $386,277 $373,584 $12,693 $367,669 $18,608 $759,861 $730,805
Money market investments 36,392 22,285 14,107 11,131 25,261 58,677 17,704
Investment securities   58,181   57,209   972   49,933   8,248   115,390   96,219
Total interest income   480,850   453,078   27,772   428,733   52,117   933,928   844,728
Interest expense:
Deposits 45,228 38,688 6,540 34,092 11,136 83,916 67,849
Short-term borrowings 1,752 2,013 (261) 1,115 637 3,765 2,210
Long-term debt   19,734   19,330   404   19,047   687   39,064   38,092
Total interest expense   66,714   60,031   6,683   54,254   12,460   126,745   108,151
Net interest income 414,136 393,047 21,089 374,479 39,657 807,183 736,577
Provision for loan losses - non-covered loans 60,054 69,333 (9,279) 49,965 10,089 129,387 92,022
Provision for loan losses - covered loans   -   1,730   (1,730)   2,514   (2,514)   1,730   1,155
Net interest income after provision for loan losses   354,082   321,984   32,098   322,000   32,082   676,066   643,400
Service charges on deposit accounts 37,102 36,455 647 41,073 (3,971) 73,557 80,609
Other service fees 62,876 60,602 2,274 59,168 3,708 123,478 115,343
Mortgage banking activities 10,071 12,068 (1,997) 10,741 (670) 22,139 22,110
Other-than-temporary impairment losses on debt securities - - - (8,299) 8,299 - (8,299)
Net gain (loss), including impairment, on equity securities 234 (646) 880 19 215 (412) 181
Net profit (loss) on trading account debt securities 21 (198) 219 (655) 676 (177) (933)
Adjustments (expense) to indemnity reserves on loans sold (527) (2,926) 2,399 (2,930) 2,403 (3,453) (4,896)
FDIC loss-share income (expense) 102,752 (8,027) 110,779 (475) 103,227 94,725 (8,732)
Other operating income   22,280   16,169   6,111   18,151   4,129   38,449   37,279
Total non-interest income   234,809   113,497   121,312   116,793   118,016   348,306   232,662
Operating expenses:
Personnel costs
Salaries 78,008 78,397 (389) 77,703 305 156,405 156,079
Commissions, incentives and other bonuses 20,004 21,316 (1,312) 18,295 1,709 41,320 38,373
Pension, postretirement and medical insurance 9,363 9,929 (566) 10,723 (1,360) 19,292 20,100
Other personnel costs, including payroll taxes   16,957   16,210   747   10,227   6,730   33,167   26,136
Total personnel costs 124,332 125,852 (1,520) 116,948 7,384 250,184 240,688
Net occupancy expenses 22,425 22,802 (377) 22,265 160 45,227 43,041
Equipment expenses 17,775 17,206 569 16,250 1,525 34,981 32,220
Other taxes 10,876 10,902 (26) 10,740 136 21,778 21,709
Professional fees
Collections, appraisals and other credit related fees 4,228 3,058 1,170 3,779 449 7,286 7,602
Programming, processing and other technology services 54,547 51,305 3,242 51,569 2,978 105,852 99,660
Legal fees, excluding collections 4,907 5,763 (856) 2,314 2,593 10,670 5,610
Other professional fees   30,221   22,859   7,362   15,272   14,949   53,080   29,312
Total professional fees 93,903 82,985 10,918 72,934 20,969 176,888 142,184
Communications 5,382 5,906 (524) 5,899 (517) 11,288 11,848
Business promotion 16,778 12,009 4,769 13,366 3,412 28,787 24,942
FDIC deposit insurance 7,004 6,920 84 6,172 832 13,924 12,665
Other real estate owned (OREO) expenses 6,947 6,131 816 16,670 (9,723) 13,078 29,488
Credit and debit card processing, volume, interchange and other
expenses
9,635 4,608 5,027 6,441 3,194 14,243 11,973
Other operating expenses
Operational losses 9,001 9,924 (923) 7,215 1,786 18,925 14,751
All other   11,286   14,432   (3,146)   9,591   1,695   25,718   27,955
Total other operating expenses 20,287 24,356 (4,069) 16,806 3,481 44,643 42,706
Amortization of intangibles   2,324   2,325   (1)   2,344   (20)   4,649   4,689
Total operating expenses   337,668   322,002   15,666   306,835   30,833   659,670   618,153
Income before income tax 251,223 113,479 137,744 131,958 119,265 364,702 257,909
Income tax (benefit) expense   (28,560)   22,155   (50,715)   35,732   (64,292)   (6,405)   68,738
Net income   $279,783   $91,324   $188,459   $96,226   $183,557   $371,107   $189,171
Net income applicable to common stock   $278,852   $90,393   $188,459   $95,295   $183,557   $369,245   $187,309
Net income per common share - basic   $2.74   $0.89   $1.85   $0.94   $1.80   $3.63   $1.83
Net income per common share - diluted   $2.73   $0.89   $1.84   $0.94   $1.79   $3.62   $1.83
Dividends Declared per Common Share   $0.25   $0.25   $-   $0.25   $-   $0.50   $0.50
 

Popular, Inc.
Financial Supplement to Second Quarter 2018 Earnings Release
Table C - Consolidated Statement of Financial Condition
(Unaudited)
        Variance
Q2 2018 vs.
(In thousands)   30-Jun-18   31-Mar-18   30-Jun-17   Q1 2018
Assets:
Cash and due from banks $400,568 $280,077 $405,688 $120,491
Money market investments 8,628,442 6,984,009 4,219,630 1,644,433
Trading account debt securities, at fair value 41,637 42,386 42,205 (749)
Debt securities available-for-sale, at fair value 10,542,010 10,420,589 9,407,534 121,421
Debt securities held-to-maturity, at amortized cost 104,937 104,817 109,484 120
Equity securities 159,017 165,218 166,935 (6,201)
Loans held-for-sale, at lower of cost or fair value 73,859 77,701 69,797 (3,842)
Loans held-in-portfolio:
Loans not covered under loss-sharing agreements with the FDIC 24,752,700 24,224,793 23,046,078 527,907
Loans covered under loss-sharing agreements with the FDIC - 514,611 536,341 (514,611)
Less: Unearned income 144,184 136,856 127,807 7,328
Allowance for loan losses   643,018   640,578   540,014   2,440
Total loans held-in-portfolio, net   23,965,498   23,961,970   22,914,598   3,528
FDIC loss-share asset - 44,469 52,583 (44,469)
Premises and equipment, net 548,432 544,109 546,986 4,323
Other real estate not covered under loss-sharing agreements with the
FDIC
142,063 153,061 181,096 (10,998)
Other real estate covered under loss-sharing agreements with the FDIC - 15,333 25,350 (15,333)
Accrued income receivable 165,592 157,340 136,104 8,252
Mortgage servicing assets, at fair value 164,025 166,281 188,728 (2,256)
Other assets 1,940,780 1,978,760 2,108,296 (37,980)
Goodwill 627,294 627,294 627,294 -
Other intangible assets   31,023   33,347   40,361   (2,324)
Total assets   $47,535,177   $45,756,761   $41,242,669   $1,778,416
Liabilities and Stockholders' Equity:
Liabilities:
Deposits:
Non-interest bearing $9,392,263 $8,698,610 $7,481,732 $693,653
Interest bearing   29,985,298   28,435,483   25,640,301   1,549,815
Total deposits   39,377,561   37,134,093   33,122,033   2,243,468
Assets sold under agreements to repurchase 306,911 380,061 406,385 (73,150)
Other short-term borrowings 1,200 186,200 1,200 (185,000)
Notes payable 1,561,663 1,564,204 1,560,834 (2,541)
Other liabilities   998,181   1,427,294   874,172   (429,113)
Total liabilities   42,245,516   40,691,852   35,964,624   1,553,664
Stockholders' equity:
Preferred stock 50,160 50,160 50,160 -
Common stock 1,043 1,043 1,041 -
Surplus 4,302,946 4,300,936 4,263,370 2,010
Retained earnings 1,515,058 1,261,775 1,356,504 253,283
Treasury stock (82,754) (86,167) (90,087) 3,413
Accumulated other comprehensive loss, net of tax   (496,792)   (462,838)   (302,943)   (33,954)
Total stockholders' equity   5,289,661   5,064,909   5,278,045   224,752
Total liabilities and stockholders' equity   $47,535,177   $45,756,761   $41,242,669   $1,778,416
 

Popular, Inc.
Financial Supplement to Second Quarter 2018 Earnings Release
Table D - Consolidated Average Balances and Yield / Rate Analysis
- QUARTER
(Unaudited)
                                 
Quarter ended Quarter ended Quarter ended Variance Variance
30-Jun-18 31-Mar-18 30-Jun-17 Q2 2018 vs. Q1 2018 Q2 2018 vs. Q2 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 $19,257   $94.6   1.97 % $16,748   $79.5   1.91 % $14,018   $61.1   1.74 % $2,509   $15.1   0.06 % $5,239   $33.5   0.23 %
Loans not covered under loss-sharing agreements with the FDIC:
Commercial 11,537 166.0 5.77 11,469 161.5 5.71 10,916 150.9 5.54 68 4.5 0.06 621 15.1 0.23
Construction 918 14.3 6.28 905 13.6 6.08 813 11.2 5.53 13 0.7 0.20 105 3.1 0.75
Mortgage 7,109 91.0 5.12 7,073 89.0 5.04 7,128 94.2 5.29 36 2.0 0.08 (19) (3.2) (0.17)
Consumer 3,805 102.2 10.77 3,807 97.1 10.35 3,724 99.6 10.73 (2) 5.1 0.42 81 2.6 0.04
Lease financing 850   12.7   5.99 819   12.3   5.99 727   11.8   6.48 31   0.4   - 123   0.9   (0.49)
Total loans 24,219   386.2   6.39 24,073   373.5   6.27 23,308   367.7   6.32 146   12.7   0.12 911   18.5   0.07
Total interest earning assets $43,476   $480.8   4.43 % $40,821   $453.0   4.48 % $37,326   $428.8   4.60 % $2,655   $27.8   (0.05) % $6,150   $52.0   (0.17) %
Allowance for loan losses (645) (634) (537) (11) (108)
Other non-interest earning assets 4,019 4,063 4,282 (44) (263)
Total average assets $46,850 $44,250 $41,071 $2,600 $5,779
 
Liabilities and Stockholders' Equity:
Interest bearing deposits:
NOW and money market $12,476 $15.7 0.51 % $11,194 $11.5 0.42 % $9,941 $8.9 0.36 % $1,282 $4.2 0.09 % $2,535 $6.8 0.15 %
Savings 9,472 7.8 0.33 8,744 5.2 0.24 8,134 5.0 0.24 728 2.6 0.09 1,338 2.8 0.09
Time deposits 7,749   21.7   1.12 7,697   22.0   1.16 7,661   20.2   1.06 52   (0.3)   (0.04) 88   1.5   0.06
Total interest-bearing deposits 29,697 45.2 0.61 27,635 38.7 0.57 25,736 34.1 0.53 2,062 6.5 0.04 3,961 11.1 0.08
Borrowings 1,962   21.5   4.39 2,041   21.3   4.21 1,936   20.2   4.18 (79)   0.2   0.18 26   1.3   0.21
Total interest-bearing liabilities 31,659   66.7   0.85 29,676   60.0   0.82 27,672   54.3   0.79 1,983   6.7   0.03 3,987   12.4   0.06
Net interest spread 3.58 % 3.66 % 3.81 % (0.08) % (0.23) %
Non-interest bearing deposits 8,966 8,434 7,204 532 1,762
Other liabilities 811 898 869 (87) (58)
Stockholders' equity 5,414 5,242 5,326 172 88
Total average liabilities and stockholders' equity $46,850 $44,250 $41,071 $2,600 $5,779
 
Net interest income / margin non-taxable equivalent basis $414.1   3.81 % $393.0   3.89 % $374.5   4.02 % $21.1   (0.08) % $39.6   (0.21) %
 

Popular, Inc.
Financial Supplement to Second Quarter 2018 Earnings Release
Table E - Consolidated Average Balances and Yield / Rate Analysis
- YEAR-TO-DATE
(Unaudited)
                 
Six months ended Six months ended
30-Jun-18 30-Jun-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 $18,010   $174.1   1.94 % $13,225   $113.9   1.73 % $4,785   $60.2   0.21 %
Loans not covered under loss-sharing agreements with the FDIC:
Commercial 11,503 327.5 5.74 10,885 298.5 5.53 618 29.0 0.21
Construction 911 27.9 6.18 818 22.0 5.44 93 5.9 0.74
Mortgage 7,091 180.0 5.08 7,182 189.4 5.27 (91) (9.4) (0.19)
Consumer 3,806 199.4 10.56 3,727 197.5 10.69 79 1.9 (0.13)
Lease financing 835   25.0   5.99 718   23.4   6.51 117   1.6   (0.52)
Total loans 24,146   759.8   6.33 23,330   730.8   6.30 816   29.0   0.03 -
Total interest earning assets $42,156   $933.9   4.46 % $36,555   $844.7   4.65 % $5,601   $89.2   (0.19) %
Allowance for loan losses (640) (539) (101)
Other non-interest earning assets 4,041 4,297 (256)
Total average assets $45,557 $40,313 $5,244
 
Liabilities and Stockholders' Equity:
Interest bearing deposits:
NOW and money market $11,838 $27.2 0.46 % $9,392 $17.4 0.38 % $2,446 $9.8 0.08 %
Savings 9,110 13.0 0.29 7,928 9.9 0.25 1,182 3.1 0.04
Time deposits 7,723   43.7   1.14 7,708   40.5   1.06 15   3.2   0.08
Total interest-bearing deposits 28,671 83.9 0.59 25,028 67.8 0.55 3,643 16.1 0.04
Borrowings 2,001   42.8   4.30 1,980   40.3   4.09 21   2.5   0.21
Total interest-bearing liabilities 30,672   126.7   0.83 27,008   108.1   0.81 3,664   18.6   0.02
Net interest spread 3.63 % 3.84 % (0.21) %
Non-interest bearing deposits 8,702 7,116 1,586
Other liabilities 855 883 (28)
Stockholders' equity 5,328 5,306 22
Total average liabilities and stockholders' equity $45,557 $40,313 $5,244
 
Net interest income / margin non-taxable equivalent basis $807.2   3.85 % $736.6   4.05 % $70.6   (0.20) %
 

Popular, Inc.

Financial Supplement to Second Quarter 2018 Earnings Release
Table F - Mortgage Banking Activities and Other Service Fees
(Unaudited)                
 
Mortgage Banking Activities
Quarters ended Variance Six months ended Variance
(In thousands)   30-Jun-18   31-Mar-18   30-Jun-17  

Q2 2018
vs.Q1 2018

 

Q2 2018
vs.Q2 2017

  30-Jun-18   30-Jun-17   2018 vs. 2017
Mortgage servicing fees, net of fair value adjustments:
Mortgage servicing fees $12,425 $12,456 $13,021 $(31) $(596) $24,881 $26,473 $(1,592)
Mortgage servicing rights fair value adjustments   (4,622)   (4,307)   (8,046)   (315)   3,424   (8,929)   (14,000)   5,071
Total mortgage servicing fees, net of fair value adjustments   7,803   8,149   4,975   (346)   2,828   15,952   12,473   3,479
Net gain on sale of loans, including valuation on loans held-for-sale   2,460   1,057   7,250   1,403   (4,790)   3,517   12,631   (9,114)
Trading account (loss) profit:
Unrealized gains (losses) on outstanding derivative positions 45 (221) 83 266 (38) (176) 43 (219)
Realized (losses) gains on closed derivative positions   (237)   3,083   (1,567)   (3,320)   1,330   2,846   (3,037)   5,883
Total trading account (loss) profit   (192)   2,862   (1,484)   (3,054)   1,292   2,670   (2,994)   5,664
Total mortgage banking activities   $10,071   $12,068   $10,741   $(1,997)   $(670)   $22,139   $22,110   $29
               
Other Service Fees
Quarters ended Variance Six months ended Variance
(In thousands)   30-Jun-18   31-Mar-18   30-Jun-17  

Q2 2018
vs.Q1 2018

 

Q2 2018
vs.Q2 2017

  30-Jun-18   30-Jun-17   2018 vs. 2017
Other service fees:
Debit card fees $11,684 $11,638 $11,576 $46 $108 $23,322 $23,119 $203
Insurance fees 13,027 12,599 13,529 428 (502) 25,626 26,334 (708)
Credit card fees 22,658 21,683 19,305 975 3,353 44,341 37,581 6,760
Sale and administration of investment products 5,020 5,355 5,799 (335) (779) 10,375 10,881 (506)
Trust fees 5,139 5,097 4,903 42 236 10,236 9,858 378
Other fees   5,348   4,230   4,056   1,118   1,292   9,578   7,570   2,008
Total other service fees   $62,876   $60,602   $59,168   $2,274   $3,708   $123,478   $115,343   $8,135
 

Popular, Inc.

Financial Supplement to Second Quarter 2018 Earnings Release
Table G - Loans and Deposits
(Unaudited)
         
Loans - Ending Balances
Variance
(In thousands)   30-Jun-18   31-Mar-18   30-Jun-17  

Q2 2018 vs.
Q1 2018

 

Q2 2018 vs.
Q2 2017

Loans not covered under FDIC loss-sharing agreements:
Commercial $11,589,993 $11,468,507 $11,047,359 $121,486 $542,634
Construction 899,323 893,391 784,389 5,932 114,934
Legacy [1] 29,250 31,167 39,067 (1,917) (9,817)
Lease financing 872,098 838,383 743,603 33,715 128,495
Mortgage 7,376,711 7,064,644 6,552,796 312,067 823,915
Consumer   3,841,141   3,791,845   3,751,057   49,296   90,084
Total non-covered loans held-in-portfolio $24,608,516 $24,087,937 $22,918,271 $520,579 $1,690,245
Loans covered under FDIC loss-sharing agreements   -   514,611   536,341   (514,611)   (536,341)
Total loans held-in-portfolio   $24,608,516   $24,602,548   $23,454,612   $5,968   $1,153,904
Loans held-for-sale:
Mortgage   73,859   77,701   69,797   (3,842)   4,062
Total loans held-for-sale   $73,859   $77,701   $69,797   $(3,842)   $4,062
Total loans   $24,682,375   $24,680,249   $23,524,409   $2,126   $1,157,966
[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-Jun-18   31-Mar-18   30-Jun-17  

Q2 2018 vs.
Q1 2018

 

Q2 2018 vs.
Q2 2017

Demand deposits [1] $15,813,188 $12,698,538 $11,194,860 $3,114,650 $4,618,328
Savings, NOW and money market deposits (non-brokered) 15,751,376 16,225,871 13,946,680 (474,495) 1,804,696
Savings, NOW and money market deposits (brokered) 389,912 414,441 424,303 (24,529) (34,391)
Time deposits (non-brokered) 7,284,697 7,655,903 7,361,587 (371,206) (76,890)
Time deposits (brokered CDs)   138,388   139,340   194,603   (952)   (56,215)
Total deposits   $39,377,561   $37,134,093   $33,122,033   $2,243,468   $6,255,528
[1] Includes interest and non-interest bearing demand deposits.
 

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

As a % of
loans HIP by
category

    31-Mar-18    

As a % of
loans HIP by
category

    30-Jun-17    

As a % of
loans HIP by
category

   

Q2 2018 vs.
Q1 2018

 

Q2 2018 vs.
Q2 2017

Non-accrual loans:  
Commercial $164,949 1.4 % $158,279 1.4 % $166,864 1.5 % $6,670 $(1,915)
Construction 20,460 2.3 4,293 0.5 - - 16,167 20,460
Legacy [1] 3,663 12.5 3,137 10.1 3,360 8.6 526 303
Lease financing 3,696 0.4 3,957 0.5 2,065 0.3 (261) 1,631
Mortgage 384,655 5.2 369,614 5.2 318,922 4.9 15,041 65,733
Consumer   65,776     1.7     67,516     1.8     55,918     1.5     (1,740)   9,858

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

643,199 2.6 % 606,796 2.5 % 547,129 2.4 % 36,403 96,070

Other real estate owned ("OREO"), excluding covered OREO

142,063 153,061 181,096 (10,998) (39,033)

Total non-performing assets, excluding covered assets

785,262 759,857 728,225 25,405 57,037
Covered loans and OREO   -           18,928           29,376           (18,928)   (29,376)
Total non-performing assets [2]   $785,262           $778,785           $757,601           $6,477   $27,661
Accruing loans past due 90 days or more [3]   $901,473           $1,129,792           $391,569           $(228,319)   $509,904
Ratios excluding covered loans:

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

2.61

%

 

2.52

%

 

2.39

%

 

Allowance for loan losses to loans held-in-portfolio

2.61

2.52 2.22

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

99.97

100.03 93.07
Ratios including covered loans:
Non-performing assets to total assets 1.65

%

 

1.70

%

 

1.84

%

 

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

2.61 2.48 2.35

Allowance for loan losses to loans held-in-portfolio

2.61

2.60 2.30

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

 

99.97

          104.95           97.98                
[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 June 30,
2018, March 31, 2018 and June 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 $298
million (March 31, 2018 - $535 million; June 30, 2017 - $48
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 $216 million of residential mortgage loans insured by FHA or
guaranteed by the VA that are no longer accruing interest as of June
30, 2018 (March 31, 2018 - $194 million; June 30, 2017 - $160
million). Furthermore, the Corporation has approximately $66 million
in reverse mortgage loans which are guaranteed by FHA, but which are
currently not accruing interest. Due to the guaranteed nature of the
loans, it is the Corporation's policy to exclude these balances from
non-performing assets (March 31, 2018 - $57 million; June 30, 2017 -
$57 million).
 

Popular, Inc.
Financial Supplement to Second Quarter 2018 Earnings Release
Table I - Activity in Non-Performing Loans
(Unaudited)
           
Commercial loans held-in-portfolio:
Quarter ended Quarter ended
30-Jun-18   31-Mar-18
(In thousands)   BPPR   Popular U.S.   Popular, Inc.   BPPR   Popular U.S.   Popular, Inc.
Beginning balance NPLs $157,132 $1,147 $158,279 $161,226 $3,839 $165,065
Plus:
New non-performing loans 53,794 1,294 55,088 15,179 680 15,859
Advances on existing non-performing loans 647 - 647 - - -
Less:
Non-performing loans transferred to OREO (1,831) - (1,831) (2,674) - (2,674)
Non-performing loans charged-off (9,758) - (9,758) (4,789) (231) (5,020)
Loans returned to accrual status / loan collections   (37,203)   (273)   (37,476)   (11,810)   (3,141)   (14,951)
Ending balance NPLs   $162,781   $2,168   $164,949   $157,132   $1,147   $158,279
 
Construction loans held-in-portfolio:
Quarter ended Quarter ended
30-Jun-18   31-Mar-18
(In thousands)   BPPR   Popular U.S.   Popular, Inc.   BPPR   Popular U.S.   Popular, Inc.
Beginning balance NPLs $4,293 $- $4,293 $- $- $-
Plus:
New non-performing loans - 17,901 17,901 4,177 - 4,177
Advances on existing non-performing loans - - - 116 - 116
Less:
Loans returned to accrual status / loan collections   (1,734)   -   (1,734)   -   -   -
Ending balance NPLs   $2,559   $17,901   $20,460   $4,293   $-   $4,293
 
Mortgage loans held-in-portfolio:
Quarter ended Quarter ended
30-Jun-18   31-Mar-18
(In thousands)   BPPR   Popular U.S.   Popular, Inc.   BPPR   Popular U.S.   Popular, Inc.
Beginning balance NPLs $357,967 $11,647 $369,614 $306,697 $14,852 $321,549
Plus:
New non-performing loans 103,844 3,658 107,502 108,075 2,955 111,030
Reclassification from covered loans 3,413 - 3,413 - - -
Less:
Non-performing loans transferred to OREO (1,095) - (1,095) (2,512) - (2,512)
Non-performing loans charged-off (8,635) (49) (8,684) (11,474) (33) (11,507)
Loans returned to accrual status / loan collections   (82,237)   (3,858)   (86,095)   (42,819)   (6,127)   (48,946)
Ending balance NPLs   $373,257   $11,398   $384,655   $357,967   $11,647   $369,614
                         
 
Total non-performing loans held-in-portfolio (excluding consumer
and covered loans):
Quarter ended Quarter ended
30-Jun-18   31-Mar-18
(In thousands)   BPPR   Popular U.S.   Popular, Inc.   BPPR   Popular U.S.   Popular, Inc.
Beginning balance NPLs $519,392 $15,931 $535,323 $467,923 $21,730 $489,653
Plus:
New non-performing loans 157,638 23,797 181,435 127,431 3,763 131,194
Advances on existing non-performing loans 647 2 649 116 4 120
Reclassification from covered loans 3,413 - 3,413 - - -
Less:
Non-performing loans transferred to OREO (2,926) - (2,926) (5,186) - (5,186)
Non-performing loans charged-off (18,393) (49) (18,442) (16,263) (264) (16,527)
Loans returned to accrual status / loan collections   (121,174)   (4,551)   (125,725)   (54,629)   (9,302)   (63,931)
Ending balance NPLs   $538,597   $35,130   $573,727   $519,392   $15,931   $535,323
 

Popular, Inc.
Financial Supplement to Second Quarter 2018 Earnings Release
Table J - Allowance for Credit Losses, Net Charge-offs and
Related Ratios
(Unaudited)
                 
 
Quarter ended Quarter ended Quarter ended
    30-Jun-18     31-Mar-18     30-Jun-17  
(Dollars in thousands)   Non-covered loans     Covered loans   Total     Non-covered loans     Covered loans   Total     Non-covered loans     Covered loans   Total  
Balance at beginning of period $606,968 $33,610 $640,578 $590,182 $33,244 $623,426 $516,725 $27,771 $544,496
Provision for loan losses   60,054     -   60,054     69,333     1,730   71,063     49,965     2,514   52,479  
    667,022     33,610   700,632     659,515     34,974   694,489     566,690     30,285   596,975  
Net loans charged-off (recovered):
BPPR
Commercial 7,960 - 7,960 3,943 - 3,943 11,745 - 11,745
Construction (301) - (301) (208) - (208) (2,370) - (2,370)
Lease financing 1,157 - 1,157 1,993 - 1,993 1,438 - 1,438
Mortgage

11,575

-

11,575

13,244 1,364 14,608 20,753 (538) 20,215
Consumer   24,074     -   24,074     22,255     -   22,255     22,689     15   22,704
Total BPPR  

44,465

    -  

44,465

    41,227     1,364   42,591     54,255     (523)   53,732
 
Popular U.S.
Commercial 10,132 - 10,132 6,830 - 6,830 (643) - (643)
Legacy [1] (277) - (277) (331) - (331) (298) - (298)
Mortgage 18 - 18 (304) - (304) 462 - 462
Consumer   3,276     -   3,276     5,125     -   5,125     3,708     -   3,708  
Total Popular U.S.   13,149     -   13,149     11,320     -   11,320     3,229     -   3,229  
Total loans charged-off (recovered) - Popular, Inc.  

57,614

    -  

57,614

    52,547     1,364   53,911     57,484     (523)   56,961  
Allowance transferred from covered to non-covered loans [2]   33,610     (33,610)   -     -     -   -     -     -   -  
Balance at end of period  

$643,018

    $-  

$643,018

    $606,968     $33,610   $640,578     $509,206     $30,808   $540,014  
 
POPULAR, INC.
Annualized net charge-offs to average loans held-in-portfolio

0.95

%

0.95

% 0.90 % 0.90 % 1.01 % 0.98 %
Provision for loan losses to net charge-offs

1.04

x

1.04

x 1.32 x 1.32 x 0.87 x 0.92 x
 
BPPR
Annualized net charge-offs to average loans held-in-portfolio

1.01

%

1.01

% 0.96 % 0.96 % 1.28 % 1.23 %
Provision for loan losses to net charge-offs

1.00

x

1.00

x 1.38 x 1.37 x 0.78 x 0.83 x
 
Popular U.S.
Annualized net charge-offs to average loans held-in-portfolio 0.81 % 0.72 % 0.22 %
Provision for loan losses to net charge-offs             1.19 x             1.11 x             2.41 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.
[2] Represents the allowance transferred from covered to non-covered
loans at June 30, 2018, due to the Termination Agreement with the
FDIC.
 

Popular, Inc.
Financial Supplement to Second Quarter 2018 Earnings Release
Table K - Allowance for Loan Losses - Breakdown of General and
Specific Reserves - CONSOLIDATED
(Unaudited)
                                             
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 non-covered 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.
                                             
31-Mar-18
(Dollars in thousands)     Commercial     Construction     Legacy [2]     Mortgage     Lease financing     Consumer     Total  
Specific ALLL $45,028 $474 $- $46,915 $448 $24,150 $117,015
Impaired loans [1] $352,064 $4,293 $- $519,922 $1,361 $103,583 $981,223
Specific ALLL to impaired loans [1]   12.79 %   11.04 %   - %   9.02 %   32.92 %   23.31 %   11.93 %
General ALLL $191,353 $9,275 $652 $111,113 $12,464 $165,096 $489,953
Loans held-in-portfolio, excluding impaired loans [1] $11,116,443 $889,098 $31,167 $6,544,722 $837,022 $3,688,262 $23,106,714
General ALLL to loans held-in-portfolio, excluding impaired loans [1]   1.72 %   1.04 %   2.09 %   1.70 %   1.49 %   4.48 %   2.12 %
Total ALLL $236,381 $9,749 $652 $158,028 $12,912 $189,246 $606,968
Total non-covered loans held-in-portfolio [1] $11,468,507 $893,391 $31,167 $7,064,644 $838,383 $3,791,845 $24,087,937
ALLL to loans held-in-portfolio [1]   2.06 %   1.09 %   2.09 %   2.24 %   1.54 %   4.99 %   2.52 %
[1] Excludes covered loans acquired in the Westernbank FDIC-assisted
transaction.
[2] The legacy portfolio is comprised of commercial loans,
construction loans and lease financings related to certain lending
products exited by the Corporation as part of restructuring efforts
carried out in prior years at the Popular U.S. reportable segment.
                                             
Variance
(Dollars in thousands)     Commercial     Construction     Legacy     Mortgage     Lease financing     Consumer     Total  
Specific ALLL $1,598 $(474) $- $600 $(86) $686 $2,324
Impaired loans     $7,383     $16,167     $-     $(2,614)     $(231)     $8,902     $29,607  
General ALLL $3,867 $(1,573) $48 $27,838 $1,459 $2,087 $33,726
Loans held-in-portfolio, excluding impaired loans     $114,103     $(10,235)     $(1,917)     $314,681     $33,946     $40,394     $490,972  
Total ALLL $5,465 $(2,047) $48 $28,438 $1,373 $2,773 $36,050
Total non-covered loans held-in-portfolio     $121,486     $5,932     $(1,917)     $312,067     $33,715     $49,296     $520,579  
 

Popular, Inc.
Financial Supplement to Second Quarter 2018 Earnings Release
Table L - Allowance for Loan Losses - Breakdown of General and
Specific Reserves - PUERTO RICO OPERATIONS
(Unaudited)
           
30-Jun-18
Puerto Rico
(In thousands)   Commercial   Construction   Mortgage   Lease financing   Consumer   Total
Allowance for credit losses:
Specific ALLL non-covered loans $46,626 $- $45,039 $362 $23,553 $115,580
General ALLL non-covered loans   144,300   765   137,064   13,923   155,513   451,565
ALLL - non-covered loans   190,926   765   182,103   14,285   179,066   567,145
Specific ALLL covered loans - - - - - -
General ALLL covered loans   -   -   -   -   -   -
ALLL - covered loans   -   -   -   -   -   -
Total ALLL   $190,926   $765   $182,103   $14,285   $179,066   $567,145
Loans held-in-portfolio:
Impaired non-covered loans $359,447 $2,559 $507,580 $1,130 $105,922 $976,638
Non-covered loans held-in-portfolio, excluding impaired loans   6,688,151   94,616   6,135,546   870,968   3,281,198   17,070,479
Non-covered loans held-in-portfolio   7,047,598   97,175   6,643,126   872,098   3,387,120   18,047,117
Impaired covered loans - - - - - -
Covered loans held-in-portfolio, excluding impaired loans   -   -   -   -   -   -
Covered loans held-in-portfolio   -   -   -   -   -   -
Total loans held-in-portfolio   $7,047,598   $97,175   $6,643,126   $872,098   $3,387,120   $18,047,117
 
 
31-Mar-18
Puerto Rico
(In thousands)   Commercial   Construction   Mortgage   Lease financing   Consumer   Total
Allowance for credit losses:
Specific ALLL non-covered loans $45,028 $474 $44,419 $448 $22,955 $113,324
General ALLL non-covered loans   143,494   2,183   108,882   12,464   153,248   420,271
ALLL - non-covered loans   188,522   2,657   153,301   12,912   176,203   533,595
Specific ALLL covered loans - - - - - -
General ALLL covered loans   -   -   33,422   -   188   33,610
ALLL - covered loans   -   -   33,422   -   188   33,610
Total ALLL   $188,522   $2,657   $186,723   $12,912   $176,391   $567,205
Loans held-in-portfolio:
Impaired non-covered loans $352,064 $4,293 $510,849 $1,361 $97,730 $966,297
Non-covered loans held-in-portfolio, excluding impaired loans   6,770,732   89,565   5,844,857   837,022   3,231,207   16,773,383
Non-covered loans held-in-portfolio   7,122,796   93,858   6,355,706   838,383   3,328,937   17,739,680
Impaired covered loans - - - - - -
Covered loans held-in-portfolio, excluding impaired loans   -   -   500,683   -   13,928   514,611
Covered loans held-in-portfolio   -   -   500,683   -   13,928   514,611
Total loans held-in-portfolio   $7,122,796   $93,858   $6,856,389   $838,383   $3,342,865   $18,254,291
 
                         
Variance
(In thousands)   Commercial   Construction   Mortgage   Lease financing   Consumer   Total
Allowance for credit losses:
Specific ALLL non-covered loans $1,598 $(474) $620 $(86) $598 $2,256
General ALLL non-covered loans   806   (1,418)   28,182   1,459   2,265   31,294
ALLL - non-covered loans   2,404   (1,892)   28,802   1,373   2,863   33,550
Specific ALLL covered loans - - - - - -
General ALLL covered loans   -   -   (33,422)   -   (188)   (33,610)
ALLL - covered loans   -   -   (33,422)   -   (188)   (33,610)
Total ALLL   $2,404   $(1,892)   $(4,620)   $1,373   $2,675   $(60)
Loans held-in-portfolio:
Impaired non-covered loans $7,383 $(1,734) $(3,269) $(231) $8,192 $10,341
Non-covered loans held-in-portfolio, excluding impaired loans   (82,581)   5,051   290,689   33,946   49,991   297,096
Non-covered loans held-in-portfolio   (75,198)   3,317   287,420   33,715   58,183   307,437
Impaired covered loans - - - - - -
Covered loans held-in-portfolio, excluding impaired loans   -   -   (500,683)   -   (13,928)   (514,611)
Covered loans held-in-portfolio   -   -   (500,683)   -   (13,928)   (514,611)
Total loans held-in-portfolio   $(75,198)   $3,317   $(213,263)   $33,715   $44,255   $(207,174)
 

Popular, Inc.
Financial Supplement to Second Quarter 2018 Earnings Release
Table M - Allowance for Loan Losses - Breakdown of General and
Specific Reserves - POPULAR U.S. OPERATIONS
(Unaudited)
           
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
 
 
31-Mar-18
Popular U.S.
(In thousands)   Commercial   Construction   Legacy   Mortgage   Consumer   Total
Allowance for credit losses:
Specific ALLL $- $- $- $2,496 $1,195 $3,691
General ALLL   47,859   7,092   652   2,231   11,848   69,682
Total ALLL   $47,859   $7,092   $652   $4,727   $13,043   $73,373
Loans held-in-portfolio:
Impaired loans $- $- $- $9,073 $5,853 $14,926
Loans held-in-portfolio, excluding impaired loans   4,345,711   799,533   31,167   699,865   457,055   6,333,331
Total loans held-in-portfolio   $4,345,711   $799,533   $31,167   $708,938   $462,908   $6,348,257
 
                         
Variance
(In thousands)   Commercial   Construction   Legacy   Mortgage   Consumer   Total
Allowance for credit losses:
Specific ALLL $- $- $- $(20) $88 $68
General ALLL   3,061   (155)   48   (344)   (178)   2,432
Total ALLL   $3,061   $(155)   $48   $(364)   $(90)   $2,500
Loans held-in-portfolio:
Impaired loans $- $17,901 $- $655 $710 $19,266
Loans held-in-portfolio, excluding impaired loans   196,684   (15,286)   (1,917)   23,992   (9,597)   193,876
Total loans held-in-portfolio   $196,684   $2,615   $(1,917)   $24,647   $(8,887)   $213,142
 

Popular, Inc.
Financial Supplement to Second Quarter 2018 Earnings Release
Table N - Reconciliation to GAAP Financial Measures
(Unaudited)
 
 
(In thousands, except share or per share information)   30-Jun-18   31-Mar-18   30-Jun-17  
Total stockholders' equity $5,289,661 $5,064,909 $5,278,045
Less: Preferred stock (50,160) (50,160) (50,160)
Less: Goodwill (627,294) (627,294) (627,294)
Less: Other intangibles   (31,023)   (33,347)   (40,361)  
Total tangible common equity   $4,581,184   $4,354,108   $4,560,230  
Total assets $47,535,177 $45,756,761 $41,242,669
Less: Goodwill (627,294) (627,294) (627,294)
Less: Other intangibles   (31,023)   (33,347)   (40,361)  
Total tangible assets   $46,876,860   $45,096,120   $40,575,014  
Tangible common equity to tangible assets 9.77 % 9.66 % 11.24 %
Common shares outstanding at end of period 102,296,440 102,189,914 101,986,758
Tangible book value per common share   $44.78   $42.61   $44.71  

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