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Popular, Inc. Announces First Quarter 2019 Financial Results

SAN JUAN, Puerto Rico--(BUSINESS WIRE)--

  • Net income of $167.9 million in Q1 2019, compared to net income of $106.4 million and adjusted net income of $134.1 million in Q4 2018.
  • Net interest margin of 4.20% in Q1 2019, compared to 4.25% in Q4 2018.
  • Credit Quality:
    • Non-performing loans held-in-portfolio (“NPLs”) decreased by $24.9 million from Q4 2018; NPLs to loans ratio at 2.2% vs. 2.3% in Q4 2018;
    • Net charge-offs (“NCOs”) decreased by $46.4 million from Q4 2018; NCOs at 0.92% of average loans held-in-portfolio vs. 1.63% in Q4 2018;
    • Allowance for loan losses to loans held-in-portfolio at 2.07% vs. 2.15% in Q4 2018; and
    • Allowance for loan losses to NPLs at 93.9% vs. 93.2% in Q4 2018.
  • Common Equity Tier 1 ratio of 16.39%, Common Equity per Share of $55.78 and Tangible Book Value per Share of $48.58 at March 31, 2019.

Popular, Inc. (the “Corporation,” “Popular,” “we,” “us,” “our”) (BPOP) reported net income of $167.9 million for the first quarter ended March 31, 2019, compared to net income of $106.4 million and adjusted net income of $134.1 million for the fourth quarter ended December 31, 2018.

Ignacio Alvarez, President and Chief Executive Officer, said: “The first quarter was a great start to 2019 and places us on a solid footing for the remainder of the year. Credit quality metrics were positive, and we achieved loan growth in Puerto Rico for the second quarter in a row, led by our auto finance business. Our unique franchise puts us in a privileged position to take advantage of opportunities that will arise as Puerto Rico’s recovery continues. We continued to make progress in our U.S. mainland operations, which remain an important source of revenue diversification. Loan balances for the quarter were flat, but we are optimistic that loan growth will pick up as the year progresses.”

 
Earnings Highlights
             
(Unaudited)       Quarters ended
(Dollars in thousands, except per share information)       31-Mar-19     31-Dec-18     31-Mar-18
Net interest income $ 470,963 $ 476,225 $ 393,047
Provision for loan losses – non-covered loans 41,825 42,568 69,333
Provision for loan losses – covered loans [1]         -       -       1,730  
Net interest income after provision for loan losses 429,138 433,657 321,984
FDIC loss-share expense - - (8,027 )
Other non-interest income 136,430 153,167 121,524
Operating expenses         347,420       396,455       322,002  
Income before income tax 218,148 190,369 113,479
Income tax expense         50,223       83,966       22,155  
Net income       $ 167,925     $ 106,403     $ 91,324  
Net income applicable to common stock       $ 166,994     $ 105,472     $ 90,393  
Net income per common share - Basic       $ 1.69     $ 1.06     $ 0.89  
Net income per common share - Diluted       $ 1.69     $ 1.05     $ 0.89  
 
[1] Covered loans represent loans acquired in the Westernbank FDIC-assisted transaction that were covered under the terminated FDIC loss sharing agreements.
 

Significant Events

Accelerated share repurchase transaction

On February 28, 2019, the Corporation entered into an accelerated share repurchase (“ASR”) transaction of $250 million with respect to its common stock, which was accounted for as a treasury stock transaction. Accordingly, as a result of the receipt of the initial shares, the Corporation recognized in shareholders’ equity approximately $200 million in treasury stock and $50 million as a reduction in capital surplus. 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.

Increase in quarterly common stock dividend

As part of its capital plan for 2019, on January 23, 2019, the Corporation announced an increase in its quarterly common stock dividend from $0.25 per share to $0.30 per share, payable commencing in the second quarter of 2019. On February 15, 2019, the Corporation’s Board of Directors approved the first quarterly cash dividend of $0.30 per share on its outstanding common stock, which was paid on April 1, 2019 to shareholders of record at the close of business on March 8, 2019.

Adjusted results – Non-GAAP

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

The table below describes adjustments to net income for the quarter ended December 31, 2018. No adjustments to net income are reflected for the quarter ended March 31, 2019.

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

Income tax
effect

   

Impact on net
income

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

Net interest income

Net interest income for the quarter ended March 31, 2019 was $471.0 million, compared to $476.2 million for the previous quarter. The net interest margin was 4.20% for the quarter, compared to 4.25% for the previous quarter.

The decrease of $5.2 million in net interest income is mainly the result of the following:

  • Lower income from the commercial loan portfolio by $3.8 million, or 5 basis points, mainly at Popular Bank (“Popular U.S.” or “PB”) due to lower prepayment penalties collected on cancelled loans and the impact of two fewer days in the quarter. The results for the fourth quarter of 2018 for Banco Popular de Puerto Rico (“BPPR”) benefited from a positive adjustment of $5.7 million to interest income due to the prepayment of a commercial loan accounted for under ASC 310-30;
  • Lower income from construction loans by $1.6 million, or 20 basis points, mainly at Popular Bank due to lower average balance of the portfolio;
  • Lower income from the auto loans portfolio by $3.0 million, or 77 basis points, driven by $4.5 million lower amortization of the fair value discount of the portfolio acquired from Wells Fargo during the third quarter of 2018 and the impact of two fewer days in the quarter, partially offset by higher average volume of loans by $141 million; and
  • Higher cost of interest-bearing deposits by $5.6 million, or 8 basis points, was mainly due to higher average balances in NOW and money market and savings accounts, driven by public sector deposits at BPPR, coupled with the impact of the increase in short-term rates at the end of the fourth quarter of 2018. Popular Bank reflected an increase in the cost of time deposits, mainly related to its digital deposit channel.

Partially offset by:

  • Higher income from money market, trading and investments by $6 million, or 10 basis points, as a result of higher yields during the quarter, including the impact of the increase in the Fed Funds rate by 25 basis points in December 2018 as well as higher average balance of money market investment and debt securities; and
  • Lower borrowing costs by $1.9 million, or 6 basis points, due mainly to lower rates on borrowings as a result of the Corporation having redeemed during the fourth quarter of 2018 $450 million, 7% Senior Notes and issued during the third quarter of 2018 $300 million of its 6.125% Senior Notes due 2023.

BPPR’s net interest income amounted to $407.4 million for the quarter ended March 31, 2019, compared to $408.7 million in the previous quarter. The decrease of $1.3 million in net interest income was mainly due to higher cost and higher average deposit balances, principally from the public sector. Also, lower income from the auto loans portfolio driven by lower amortization of the fair value discount portfolio acquired from Wells Fargo, partially offset by higher interest income from money market and investment securities, as mentioned above. The net interest margin for the first quarter of 2019 was 4.49%, a decrease of 2 basis points when compared to 4.51% for the previous quarter. The decrease in net interest margin was due to higher cost of deposits and lower yield on the auto portfolio. BPPR’s earning assets yielded 5.07%, compared to 5.04% in the previous quarter, while the cost of interest-bearing deposits was 0.79%, or 6 basis points higher than the 0.73% reported in the previous quarter. Total cost of deposits for the quarter was 0.60%. The impact of 2 fewer days in the quarter represented approximately $6.3 million in BPPR’s net interest income.

Net interest income for Popular U.S. was $72.8 million, for the quarter ended March 31, 2019, compared to $77.9 million during the previous quarter. The decrease of $5.1 million in net interest income was primarily due to lower income from commercial and construction loans, lower fees earned on the cancellation of loans and higher cost of deposits, as discussed above. Net interest margin for the quarter decreased 21 basis points to 3.40%, compared to 3.61% for the previous quarter. Earning assets yielded 4.61%, compared to 4.74% in the previous quarter, while the cost of interest-bearing deposits was 1.51%, compared to 1.38% in the previous quarter. The impact of 2 fewer days in the quarter represented approximately $1.3 million in Popular U.S. ‘s net interest income.

Non-interest income

Non-interest income decreased by $16.7 million to $136.4 million for the quarter ended March 31, 2019, compared to $153.2 million for the previous quarter. The reduction in non-interest income was primarily driven by:

  • Lower other service fees by $5.9 million due to lower credit card and debit fees by $1.5 million and $0.7 million, respectively, as a result of lower interchange fees due to lower seasonal transaction volumes. Also, lower insurance fees by $1.6 million due to contingent commissions, which are typically recognized during the fourth quarter;
  • lower income on mortgage banking activities by $9.5 million, mainly due to a variance in the fair value of mortgage servicing rights that included an $8.7 million positive adjustment during the fourth quarter of 2018; and
  • lower other operating income by $11.1 million, principally due to $9.5 million in recoveries for hurricane-related claims recognized in the previous quarter and lower modification fees received for the successful completion of loss mitigation alternatives by $1.3 million.

These variances were partially offset by:

  • Higher unrealized net gains on equity securities by $3.5 million mainly on deferred compensation plans that have an offsetting expense in personnel costs; and
  • favorable variance in adjustments to indemnity reserves of $6.4 million related to loans previously sold with credit recourse at BPPR.

Refer to Table B for further details.

Operating expenses

Operating expenses for the first quarter of 2019 amounted to $347.4 million, a decrease of $49.0 million when compared to the fourth quarter of 2018. The decrease in operating expenses was driven primarily by:

  • Lower personnel costs by $29.9 million, as a result of $17.2 million recognized during the fourth quarter of 2018 in connection with the implementation of the Voluntary Retirement Program (“VRP”) and $13.9 million related to annual incentives tied to the Corporation’s profit-sharing plans;
  • lower business promotion expenses by $7.0 million due to lower seasonal advertising costs and lower consumer reward program expense; and
  • favorable variance of $12.5 million, resulting from the recognition of a loss in the fourth quarter of 2018 in connection with the early extinguishment of $450 million in 7% Senior Notes, which were due in 2019.

Full-time equivalent employees were 8,242 as of March 31, 2019, compared to 8,474 as of December 31, 2018. The decrease in headcount is mainly related to the net impact of the VRP.

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

Income taxes

For the quarter ended March 31, 2019, the Corporation recorded an income tax expense of $50.2 million, compared to $84.0 million for the previous quarter. As previously disclosed, during the fourth quarter of 2018 the Corporation recognized a non-cash income tax expense of $27.7 million resulting from adjustments to the DTA related to its Puerto Rico operations due to the enactment of Act No. 257 of 2018, which amended the Puerto Rico Internal Revenue Code to, among other things, reduce the corporate income tax rate from 39% to 37.5%.

The effective tax rate for the first quarter of 2019 was 23%. Excluding the impact of the above mentioned adjustment, the effective tax rate for the fourth quarter of 2018 was 30% as more income was recognized at the 39% marginal tax rate in Puerto Rico and the debt extinguishment expenses of $12.5 million recorded during that quarter were not subject to a tax benefit. The effective tax rate of the Corporation is impacted by the composition and source of its taxable income. For the year 2019, the Corporation expects its consolidated effective tax rate to be within a range from 22-25%.

Credit Quality

During the first quarter of 2019, the Puerto Rico segment continued to reflect positive credit quality trends. Mortgage delinquencies continued to improve, and net charge-offs were at 0.71% on that portfolio. The Corporation continues to be attentive to the performance of its portfolios and related credit metrics. The credit quality metrics of our U.S. operation also remained favorable. The following presents credit quality results for the first quarter of 2019.

  • Inflows of NPLs held-in-portfolio, excluding consumer loans, decreased by $13.1 million quarter-over-quarter, primarily related to lower P.R. commercial inflows. P.R. mortgage inflows for the quarter remained stable, mainly driven by lower early delinquencies.
  • Total non-performing loans held-in-portfolio decreased by $24.9 million from the fourth quarter of 2018, mainly driven by lower P.R. commercial NPLs of $16.7 million, primarily related to a $12.0 million charge-off on a previously reserved loan. P.R. mortgage NPLs continued to gradually improve, decreasing by $5.7 million from the fourth quarter of 2018. At March 31, 2019, the ratio of NPLs to total loans held-in-portfolio was 2.2%, compared to 2.3% in the fourth quarter of 2018.
  • Net charge-offs decreased by $46.4 million from the fourth quarter of 2018, primarily driven by lower P.R. commercial NCOs of $35.1 million, as the prior quarter included charge-offs from two large relationships. In addition, P.R. mortgage NCOs decreased by $6.9 million from the prior quarter. The Corporation’s ratio of annualized net charge-offs to average loans held-in-portfolio was 0.92%, compared to 1.63% in the fourth quarter of 2018. Refer to Table J for further information on net charge-offs and related ratios.
  • The allowance for loan and lease losses (“ALLL”) decreased by $18.7 million from the fourth quarter of 2018 to $550.6 million. The P.R. segment ALLL decreased by $22.8 million, principally due to charge-offs from impaired loans, most significantly the abovementioned $12.0 million charge-off, coupled with improvements in loss trends in the mortgage portfolio.
  • The general and specific reserves totaled $448.7 million and $101.9 million, respectively, at quarter-end, compared with $449.7 million and $119.7 million, respectively, as of December 31, 2018. The ratio of the allowance for loan losses to loans held-in-portfolio was 2.07% in the first quarter of 2019, compared to 2.15% in the previous quarter. The ratio of the allowance for loan losses to NPLs held-in-portfolio stood at 93.9% compared to 93.2% in the previous quarter.
  • The provision for loan losses for the first quarter of 2019 remained essentially flat at $41.8 million. The P.R. segment provision decreased by $12.0 million, while the U.S. segment increased by $11.3 million, primarily driven by the commercial portfolios. The provision to net charge-offs ratio was 69.1% in the first quarter of 2019, compared to 39.8% in the previous quarter.
 
Non-Performing Assets
(Unaudited)
(In thousands)       31-Mar-19     31-Dec-18     31-Mar-18
Total non-performing loans held-in-portfolio, excluding covered loans       $ 586,202     $ 611,087     $ 606,796
Other real estate owned (“OREO”), excluding covered OREO        

125,478

        136,705         153,061  
Total non-performing assets, excluding covered assets

711,680

747,792 759,857
Covered loans and OREO         -         -         18,928  
Total non-performing assets       $

711,680

      $ 747,792       $ 778,785  
Net charge-offs for the quarter (excluding covered loans)       $ 60,545       $ 106,938       $ 52,547  
 
 
Ratios (excluding covered loans):                    
Non-covered loans held-in-portfolio $ 26,647,708 $ 26,507,889 $ 24,087,937
Non-performing loans held-in-portfolio to loans held-in-portfolio 2.20 % 2.31 % 2.52 %
Allowance for loan losses to loans held-in-portfolio 2.07 2.15 2.52
Allowance for loan losses to non-performing loans, excluding loans held-for-sale         93.93         93.17         100.03  
 
Refer to Table H for additional information.
 
             
Provision for Loan Losses
 
(Unaudited)       Quarters ended
(In thousands)       31-Mar-19     31-Dec-18     31-Mar-18
Provision (reversal) for loan losses:
BPPR $ 31,454 $ 43,461 $ 56,718
Popular U.S.         10,371       (893 )       12,615
Total provision for loan losses - non-covered loans       $ 41,825     $ 42,568       $ 69,333
Provision for loan losses - covered loans         -       -         1,730
Total provision for loan losses       $ 41,825     $ 42,568       $ 71,063
 
 
Credit Quality by Segment
(Unaudited)
(In thousands)       Quarters ended
BPPR       31-Mar-19     31-Dec-18     31-Mar-18
Provision for loan losses       $ 31,454     $ 43,461     $ 56,718
Net charge-offs 54,229 96,479 41,227
Total non-performing loans held-in-portfolio, excluding covered loans 544,992 568,098 573,516
Allowance / non-covered loans held-in-portfolio         2.42 %       2.55 %       3.01 %
 
 
        Quarters ended
Popular U.S.       31-Mar-19     31-Dec-18     31-Mar-18
Provision (reversal) for loan losses $ 10,371 $ (893 ) $ 12,615
Net charge-offs 6,316 10,459 11,320
Total non-performing loans held-in-portfolio 41,210 42,989 33,280
Allowance / non-covered loans held-in-portfolio         1.00 %       0.94 %       1.16 %
 
 
Financial Condition Highlights
             
(Unaudited)                    
(In thousands)       31-Mar-19     31-Dec-18     31-Mar-18
Cash and money market investments $ 5,190,692 $ 4,565,083 $ 7,264,086
Investment securities 13,839,874 13,595,130 10,733,010
Loans not covered under loss-sharing agreements with the FDIC 26,647,708 26,507,889 24,087,937
Loans covered under loss-sharing agreements with the FDIC - - 514,611
Total assets 48,680,607 47,604,577 45,756,761
Deposits 40,879,838 39,710,039 37,134,093
Borrowings 1,377,401 1,537,673 2,130,465
Total liabilities 43,240,547 42,169,520 40,691,852
Stockholders’ equity         5,440,060       5,435,057       5,064,909
 

Total assets increased by $1.1 billion from the fourth quarter of 2018, driven by:

  • An increase of $0.6 billion in cash and money market investments, mainly due to an increase in public sector deposits at BPPR, partially offset by purchases of mortgage-backed securities;
  • An increase of $0.2 billion in debt securities available-for-sale mainly due to purchases of mortgage-backed securities at BPPR and PB, partially offset by maturities of U.S. Treasury securities at BPPR;
  • An increase of $0.1 billion in loans held-in-portfolio, mainly driven by growth of auto loans and leases at the BPPR segment; and
  • An increase of $0.1 billion in other assets due to the recognition of right-of-use assets as a result of the implementation of the new lease accounting standard, which required balance sheet recognition of operating lease contracts.

Total liabilities increased by $1.1 billion from the fourth quarter of 2018, mainly due to:

  • An increase of $1.2 billion in deposits due to an increase of $0.8 billion and $0.1 billion, respectively, in Puerto Rico public sector deposits and private savings deposits at BPPR and $0.2 billion in non-brokered time deposits at PB; and
  • An increase of $0.1 billion in other liabilities due to the recognition of operating lease liabilities, as discussed above.

Partially offset by:

  • A decrease of $0.2 billion in borrowings due to a decrease in assets sold under agreements to repurchase and Federal Home Loan Bank advances mainly at PB.

Stockholders’ equity increased by approximately $5.0 million from the fourth quarter of 2018, principally due to the net income for the quarter of $167.9 million and lower unrealized losses on debt securities available-for-sale by $101.4 million, offset by other adjustments including the impact of the $250 million accelerated share repurchase transaction and declared dividends on common and preferred stock.

Common equity tier-1 ratio (“CET1”), common equity per share and tangible book value per share were 16.39%, $55.78 and $48.58, respectively, at March 31, 2019, compared to 16.90%, $53.88 and $46.90 at December 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 and regulatory proceedings and new accounting standards on the Corporation’s financial condition and results of operations. All statements contained herein that are not clearly historical in nature, are forward-looking, and the words “anticipate,” “believe,” “continues,” “expect,” “estimate,” “intend,” “project” and similar expressions, and future or conditional verbs such as “will,” “would,” “should,” “could,” “might,” “can,” “may” or similar expressions, are generally intended to identify forward-looking statements.

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, 2018, and in our Form 10-Q for the first quarter ended March 31, 2019 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 Thursday, April 18, 2019 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, May 17, 2019. The replay dial-in is: 1-877-344-7529 or 1-412-317-0088. The replay passcode is 10129964.

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

 
Popular, Inc.
Financial Supplement to First Quarter 2019 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 - Intentionally Left Blank (Consolidated Average Balances and Yield / Rate Analysis - YTD)
 
Table F - Mortgage Banking Activities & 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 First Quarter 2019 Earnings Release
Table A - Selected Ratios and Other Information
(Unaudited)
             
                     
Quarters ended
        31-Mar-19     31-Dec-18     31-Mar-18
Basic EPS $ 1.69 $ 1.06 $ 0.89
Diluted EPS $ 1.69 $ 1.05 $ 0.89
Average common shares outstanding 98,581,743 99,933,184 101,696,343
Average common shares outstanding - assuming dilution 98,758,898 100,114,358 101,837,212
Common shares outstanding at end of period 96,629,891 99,942,845 102,189,914
 
Market value per common share $ 52.13 $ 47.22 $ 41.62
 
Market capitalization - (In millions) $ 5,037 $ 4,719 $ 4,253
 
Return on average assets 1.40 % 0.88 % 0.84 %

 

 

Return on average common equity 12.17 % 7.57 % 7.06 %
 
Net interest margin 4.20 % 4.25 % 3.89 %
 
Common equity per share $ 55.78 $ 53.88 $ 49.07
 
Tangible common book value per common share (non-GAAP) [1] $ 48.58 $ 46.90 $ 42.61
 
Tangible common equity to tangible assets (non-GAAP) [1] 9.78 % 9.99 % 9.66 %
 
Tier 1 capital 16.39 % 16.90 % 16.80 %
 
Total capital 19.00 % 19.54 % 19.74 %
 
Tier 1 leverage 9.57 % 9.88 % 9.98 %
 
Common Equity Tier 1 capital         16.39 %       16.90 %       16.80 %
[1] Refer to Table N for reconciliation to GAAP financial measures.
 
 
POPULAR, INC.
Financial Supplement to First Quarter 2019 Earnings Release
Table B - Consolidated Statement of Operations
(Unaudited)
      Quarters ended     Variance     Quarter ended     Variance
(In thousands, except per share information)       31-Mar-19     31-Dec-18    

Q1 2019
vs. Q4 2018

    31-Mar-18    

Q1 2019
vs. Q1 2018

Interest income:    
Loans $ 447,713 $ 455,238 $ (7,525 ) $ 373,584 $ 74,129
Money market investments 29,220 25,030 4,190 22,285 6,935
Investment securities         81,036         79,287         1,749         57,209         23,827  
Total interest income         557,969         559,555         (1,586 )       453,078         104,891  
Interest expense:
Deposits 70,826 65,215 5,611 38,688 32,138
Short-term borrowings 1,600 1,823 (223 ) 2,013 (413 )
Long-term debt         14,580         16,292         (1,712 )       19,330         (4,750 )
Total interest expense         87,006         83,330         3,676         60,031         26,975  
Net interest income 470,963 476,225 (5,262 ) 393,047 77,916
Provision for loan losses - non-covered loans 41,825 42,568 (743 ) 69,333 (27,508 )
Provision for loan losses - covered loans         -         -         -         1,730         (1,730 )
Net interest income after provision for loan losses         429,138         433,657         (4,519 )       321,984         107,154  
Service charges on deposit accounts 38,691 38,973 (282 ) 36,455 2,236
Other service fees 64,307 70,226 (5,919 ) 60,602 3,705
Mortgage banking activities 9,926 19,394 (9,468 ) 12,068 (2,142 )
Net gain (loss), including impairment, on equity securities 1,433 (2,039 ) 3,472 (646 ) 2,079
Net profit (loss) on trading account debt securities 260 91 169 (198 ) 458
Net gain on sale of loans, including valuation adjustments on loans held-for-sale - 33 (33 ) - -
Adjustments (expense) to indemnity reserves on loans sold (93 ) (6,477 ) 6,384 (2,926 ) 2,833
FDIC loss-share expense - - - (8,027 ) 8,027
Other operating income         21,906         32,966         (11,060 )       16,169         5,737  
Total non-interest income         136,430         153,167         (16,737 )       113,497         22,933  
Operating expenses:
Personnel costs
Salaries 84,450 86,569 (2,119 ) 78,397 6,053
Commissions, incentives and other bonuses 25,761 23,315 2,446 21,316 4,445
Pension, postretirement and medical insurance 9,761 11,698 (1,937 ) 9,929 (168 )
Other personnel costs, including payroll taxes         23,145         51,465         (28,320 )       16,210         6,935  
Total personnel costs 143,117 173,047 (29,930 ) 125,852 17,265
Net occupancy expenses 23,537 24,500 (963 ) 22,802 735
Equipment expenses 19,705 18,504 1,201 17,206 2,499
Other taxes 11,662 12,583 (921 ) 10,902 760
Professional fees
Collections, appraisals and other credit related fees 3,724 4,043 (319 ) 3,058 666
Programming, processing and other technology services 60,178 55,089 5,089 51,305 8,873
Legal fees, excluding collections 3,489 4,118 (629 ) 5,763 (2,274 )
Other professional fees         20,075         25,846         (5,771 )       22,859         (2,784 )
Total professional fees 87,466 89,096 (1,630 ) 82,985 4,481
Communications 5,849 5,765 84 5,906 (57 )
Business promotion 14,674 21,653 (6,979 ) 12,009 2,665
FDIC deposit insurance 4,806 5,223 (417 ) 6,920 (2,114 )
Loss on early extinguishment of debt - 12,522 (12,522 ) - -
Other real estate owned (OREO) expenses 2,677 2,310 367 6,131 (3,454 )
Credit and debit card processing, volume, interchange and other expenses 8,223 4,790 3,433 4,608 3,615
Other operating expenses
Operational losses 4,888 9,103 (4,215 ) 9,924 (5,036 )
All other         18,504         15,006         3,498         14,432         4,072  
Total other operating expenses 23,392 24,109 (717 ) 24,356 (964 )
Amortization of intangibles         2,312         2,353         (41 )       2,325         (13 )
Total operating expenses         347,420         396,455         (49,035 )       322,002         25,418  
Income before income tax 218,148 190,369 27,779 113,479 104,669
Income tax expense         50,223         83,966         (33,743 )       22,155         28,068  
Net income       $ 167,925       $ 106,403       $ 61,522       $ 91,324       $ 76,601  
Net income applicable to common stock       $ 166,994       $ 105,472       $ 61,522       $ 90,393       $ 76,601  
Net income per common share - basic       $ 1.69       $ 1.06       $ 0.63       $ 0.89       $ 0.80  
Net income per common share - diluted       $ 1.69       $ 1.05       $ 0.64       $ 0.89       $ 0.80  
Dividends Declared per Common Share       $ 0.30       $ 0.25       $ 0.05       $ 0.25       $ 0.05  
 
 
Popular, Inc.
Financial Supplement to First Quarter 2019 Earnings Release
Table C - Consolidated Statement of Financial Condition
(Unaudited)
                  Variance
Q1 2019 vs.
(In thousands)       31-Mar-19     31-Dec-18     31-Mar-18     Q4 2018
Assets:
Cash and due from banks $ 376,558 $ 394,035 $ 280,077 $ (17,477 )
Money market investments 4,814,134 4,171,048 6,984,009 643,086
Trading account debt securities, at fair value 39,217 37,787 42,386 1,430
Debt securities available-for-sale, at fair value 13,542,695 13,300,184 10,420,589 242,511
Debt securities held-to-maturity, at amortized cost 99,455 101,575 104,817 (2,120 )
Equity securities 158,507 155,584 165,218 2,923
Loans held-for-sale, at lower of cost or fair value 43,985 51,422 77,701 (7,437 )
Loans held-in-portfolio:
Loans not covered under loss-sharing agreements with the FDIC 26,808,287 26,663,713 24,224,793 144,574
Loans covered under loss-sharing agreements with the FDIC - - 514,611 -
Less: Unearned income 160,579 155,824 136,856 4,755
Allowance for loan losses         550,628         569,348         640,578         (18,720 )
Total loans held-in-portfolio, net         26,097,080         25,938,541         23,961,970         158,539  
FDIC loss-share asset - - 44,469 -
Premises and equipment, net 557,517 569,808 544,109 (12,291 )
Other real estate not covered under loss-sharing agreements with the FDIC 125,478 136,705 153,061 (11,227 )
Other real estate covered under loss-sharing agreements with the FDIC - - 15,333 -
Accrued income receivable 162,797 166,022 157,340 (3,225 )
Mortgage servicing assets, at fair value 167,813 169,777 166,281 (1,964 )
Other assets 1,799,728 1,714,134 1,978,760 85,594
Goodwill 671,122 671,122 627,294 -
Other intangible assets         24,521         26,833         33,347         (2,312 )
Total assets       $ 48,680,607       $ 47,604,577       $ 45,756,761       $ 1,076,030  
Liabilities and Stockholders’ Equity:
Liabilities:
Deposits:
Non-interest bearing $ 9,046,104 $ 9,149,036 $ 8,698,610 $ (102,932 )
Interest bearing         31,833,734         30,561,003         28,435,483         1,272,731  
Total deposits         40,879,838         39,710,039         37,134,093         1,169,799  
Assets sold under agreements to repurchase 200,871 281,529 380,061 (80,658 )
Other short-term borrowings 42 42 186,200 -
Notes payable 1,176,488 1,256,102 1,564,204 (79,614 )
Other liabilities         983,308         921,808         1,427,294         61,500  
Total liabilities         43,240,547         42,169,520         40,691,852         1,071,027  
Stockholders’ equity:
Preferred stock 50,160 50,160 50,160 -
Common stock 1,043 1,043 1,043 -
Surplus 4,313,040 4,365,606 4,300,936 (52,566 )
Retained earnings 1,794,644 1,651,731 1,261,775 142,913
Treasury stock (394,848 ) (205,509 ) (86,167 ) (189,339 )
Accumulated other comprehensive loss, net of tax         (323,979 )       (427,974 )       (462,838 )       103,995  
Total stockholders’ equity         5,440,060         5,435,057         5,064,909         5,003  
Total liabilities and stockholders’ equity       $ 48,680,607       $ 47,604,577       $ 45,756,761       $ 1,076,030  
 
 
Popular, Inc.
Financial Supplement to First Quarter 2019 Earnings Release
Table D - Consolidated Average Balances and Yield / Rate Analysis - QUARTER
(Unaudited)
 
      Quarters ended     Variance
31-Mar-19     31-Dec-18     31-Mar-18 Q1 2019 vs. Q4 2018     Q1 2019 vs. Q1 2018
 
($ 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 $ 18,773     $ 110.3   2.37 % $ 18,278     $ 104.3   2.27 % $ 16,748     $ 79.5   1.91 % $ 495     $ 6.0     0.10 % $ 2,025     $ 30.8     0.46 %
Loans not covered under loss sharing agreements with the FDIC:
Commercial 12,064 178.3 5.99 11,967 182.1 6.04 11,469 161.5 5.71 97 (3.8 ) (0.05 ) 595 16.8 0.28
Construction 807 13.6 6.85 905 15.2 6.65 905 13.6 6.08 (98 ) (1.6 ) 0.20 (98 ) - 0.77
Mortgage 7,134 91.1 5.11 7,149 90.1 5.04 7,073 89.0 5.04 (15 ) 1.0 0.07 61 2.1 0.07
Consumer 2,814 82.8 11.93 2,815 83.6 11.78 2,885 78.1 10.98 (1 ) (0.8 ) 0.15 (71 ) 4.7 0.95
Auto 2,729 67.6 10.05 2,588 70.6 10.82 922 19.0 8.34 141 (3.0 ) (0.77 ) 1,807 48.6 1.71
Lease financing   944       14.3   6.08     913       13.6   5.97     819       12.3   5.99     31       0.7     0.11     125       2.0     0.09  
Total loans   26,492       447.7   6.83     26,337       455.2   6.87     24,073       373.5   6.27     155       (7.5 )   (0.04 )   2,419       74.2     0.56  
Total interest earning assets $ 45,265     $ 558.0   4.98 % $ 44,615     $ 559.5   4.99 % $ 40,821     $ 453.0   4.48 % $ 650       (1.5 )   (0.01 ) % $ 4,444     $ 105.0     0.50 %
Allowance for loan losses (576 ) (621 ) (634 ) 45 58
Other non-interest earning assets   3,938     3,925     4,063     13     (125 )
Total average assets $ 48,627   $ 47,919   $ 44,250   $ 708   $ 4,377  
 
Liabilities and Stockholders' Equity:
Interest bearing deposits:
NOW and money market $ 14,051 $ 33.8 0.97 % $ 13,848 $ 30.4 0.87 % $ 11,194 $ 11.5 0.42 % $ 203 $ 3.4 0.10 % $ 2,857 $ 22.3 0.55 %
Savings 9,847 9.9 0.41 9,728 9.9 0.40 8,744 5.2 0.24 119 - 0.01 1,103 4.7 0.17
Time deposits   7,676       27.1   1.43     7,419       24.9   1.33     7,697       22.0   1.16     257       2.2     0.10     (21 )     5.1     0.27  
Total interest-bearing deposits 31,574 70.8 0.91 30,995 65.2 0.83 27,635 38.7 0.57 579 5.6 0.08 3,939 32.1 0.34
Borrowings   1,469       16.2   4.44     1,658       18.1   4.38     2,041       21.3   4.21     (189 )     (1.9 )   0.06     (572 )     (5.1 )   0.23  
Total interest-bearing liabilities   33,043       87.0   1.07     32,653       83.3   1.01     29,676       60.0   0.82     390       3.7     0.06     3,367       27.0     0.25  
Net interest spread 3.91 % 3.98 % 3.66 % (0.07 ) % 0.25 %
Non-interest bearing deposits 8,953 8,895 8,434 58 519
Other liabilities 1,016 799 898 217 118
Stockholders' equity   5,615     5,572     5,242     43     373  
Total average liabilities and stockholders' equity $ 48,627   $ 47,919   $ 44,250   $ 708   $ 4,377  
 
Net interest income / margin non-taxable equivalent basis $ 471.0   4.20 % $ 476.2   4.25 % $ 393.0   3.89 %   ($5.2 )   (0.05 ) % $ 78.0     0.31 %
 
 
Popular, Inc.
Financial Supplement to First Quarter 2019 Earnings Release
Table E - Consolidated Average Balances and Yield / Rate Analysis - YEAR-TO-DATE
 
 
Popular, Inc.
Financial Supplement to First Quarter 2019 Earnings Release
Table F - Mortgage Banking Activities and Other Service Fees
(Unaudited)
 
Mortgage Banking Activities                      
Quarters ended Variance
(In thousands)       31-Mar-19     31-Dec-18     31-Mar-18    

Q1 2019
vs.Q4 2018

   

Q1 2019
vs.Q1 2018

Mortgage servicing fees, net of fair value adjustments:
Mortgage servicing fees $ 11,687 $ 12,327 $ 12,456 $ (640 ) $ (769 )
Mortgage servicing rights fair value adjustments         (3,825 )       4,646         (4,307 )       (8,471 )       482  
Total mortgage servicing fees, net of fair value adjustments         7,862         16,973         8,149         (9,111 )       (287 )
Net gain on sale of loans, including valuation on loans held-for-sale         4,017         2,893         1,057         1,124         2,960  
Trading account (loss) profit:
Unrealized losses on outstanding derivative positions - (122 ) (221 ) 122 221
Realized (losses) gains on closed derivative positions         (1,953 )       (350 )       3,083         (1,603 )       (5,036 )
Total trading account (loss) profit         (1,953 )       (472 )       2,862         (1,481 )       (4,815 )
Total mortgage banking activities       $ 9,926       $ 19,394       $ 12,068       $ (9,468 )     $ (2,142 )
 
Other Service Fees
Quarters ended Variance
(In thousands)       31-Mar-19     31-Dec-18     31-Mar-18    

Q1 2019
vs.Q4 2018

   

Q1 2019
vs.Q1 2018

Other service fees:
Debit card fees $ 11,170 $ 11,868 $ 11,638 $ (698 ) $ (468 )
Insurance fees 12,791 14,362 12,599 (1,571 ) 192
Credit card fees 22,286 23,827 21,683 (1,541 ) 603
Sale and administration of investment products 5,259 5,824 5,355 (565 ) (96 )
Trust fees 4,716 4,677 5,097 39 (381 )
Other fees         8,085         9,668         4,230         (1,583 )       3,855  
Total other service fees       $ 64,307       $ 70,226       $ 60,602       $ (5,919 )     $ 3,705  
 
...
 
Popular, Inc.
Financial Supplement to First Quarter 2019 Earnings Release
Table G - Loans and Deposits
(Unaudited)
 
Loans - Ending Balances                      
Variance
(In thousands)       31-Mar-19     31-Dec-18     31-Mar-18    

Q1 2019 vs.
Q4 2018

   

Q1 2019 vs.
Q1 2018

Loans not covered under FDIC loss-sharing agreements:
Commercial $ 12,058,310 $ 12,043,019 $ 11,468,507 $ 15,291 $ 589,803
Construction 791,320 779,449 893,391 11,871 (102,071 )
Legacy [1] 24,404 25,949