Popular, Inc. Announces Third Quarter 2020 Financial Results

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  • Net income of $168.4 million in Q3 2020, compared to net income of $127.6 million in Q2 2020.

  • Net interest margin of 3.06% in Q3 2020, compared to 3.25% in Q2 2020; net interest margin on a taxable equivalent basis of 3.37% in Q3 2020, compared to 3.56% in Q2 2020.

  • Credit Quality:

    • Non-performing loans held-in-portfolio ("NPLs") decreased by $25.8 million from Q2 2020; NPLs to loans ratio at 2.5% vs. 2.6% in Q2 2020;

    • Net charge-offs ("NCOs") decreased by $48.1 million from Q2 2020; NCOs at 0.24% of average loans held-in-portfolio vs. 0.92% in Q2 2020;

    • Allowance for credit losses ("ACL") to loans held-in-portfolio at 3.15% vs. 3.16% in Q2 2020; and

    • ACL to NPLs at 126.1% vs. 120.8% in Q2 2020.

  • Common Equity Tier 1 ratio of 15.93%, Common Equity per Share of $69.94 and Tangible Book Value per Share of $61.69 at September 30, 2020.

Popular, Inc. (the "Corporation," "Popular," "we," "us," "our") (NASDAQ:BPOP) reported net income of $168.4 million for the quarter ended September 30, 2020, compared to net income of $127.6 million for the quarter ended June 30, 2020.

Ignacio Alvarez, President and Chief Executive Officer, said: "We generated $168.4 million in earnings in the third quarter, reflecting the economic rebound fueled by the unprecedented level of federal stimulus. While the economic scenario remains uncertain, the strong results reflect our diversified sources of revenue and prudent risk management. Deposits continued to grow and loan demand remains low as customers are cautious and conserving cash. Our capital and liquidity levels are robust and we are well positioned to continue to serve our customers as they manage through these uncertain times. The American Bankers Association recently recognized our commitment to the community, selecting us as one of seven banks to receive the 2020 Community Commitment Award for our financial education program.

I want to thank all our colleagues who, while facing their own personal challenges as a result of the pandemic, continue to go the extra mile to serve our customers."

Significant Events

Financial Highlights

For the third quarter of 2020, the Corporation recorded net income of $168.4 million, compared to a net income of $127.6 million for the previous quarter. The Corporation continues to monitor and be attentive to the impact of the COVID-19 pandemic, on the markets in which we operate and our results of operations, as further explained below.

The Corporation’s total assets increased by $3.1 billion during the quarter to $65.9 billion, primarily due to an increase in deposits of $2.2 billion, of which $2.0 billion were from commercial and retail clients and $0.8 billion were from the public sector in Puerto Rico, driven in part by Federal and Puerto Rico Government assistance programs related to the pandemic. The net interest margin continues to reflect the increase in earning assets concentrated in investments in overnight Fed Funds, U.S. Treasury and U.S. Agency debt securities plus an average balance of $1.4 billion loans issued pursuant to the U.S. Small Business Administration’s ("SBA") Payment Protection Program ("PPP"), which are all lower yielding assets. Net interest income for the quarter increased by $10.1 million, although the net interest margin declined by 19 basis points to 3.06% due to the increase in lower earning assets.

Coronavirus (COVID-19) Pandemic

The disruptions related to the COVID-19 pandemic continue to have an impact on the macroeconomic environment and therefore on the financial results of the Corporation. Although certain measures imposed by the governments of Puerto Rico, the United States and United States Virgin Islands, including lockdowns, business closures, mandatory curfews and limits to public activities, were relaxed during the second and third quarters of 2020 to allow for the gradual reopening of the economy, certain restrictions continue in place which results in many businesses not being able to operate at their full capacity. The Corporation’s results for the third quarter of 2020 reflect the benefit of increased economic activity resulting from such reopening and the related improvement in the macroeconomic environment, as well as the impact of the various government stimulus programs launched in response to the pandemic.

As previously disclosed, beginning in March 2020, the Corporation implemented several financial relief programs in response to the pandemic, including loan payment moratoriums, suspensions of foreclosures and other collection activity, as well as waivers of certain fees and service charges. During the third quarter of 2020, the Corporation reinstated the imposition of the fees the Corporation elected to waive in connection with such financial relief programs and resumed its delinquent loan collection efforts. As of September 30, 2020, the Corporation had granted loan payment moratoriums to 125,736 eligible retail customers with an aggregate book value of $4.5 billion, and to 5,063 eligible commercial clients with an aggregate book value of $4.1 billion as further detailed below. COVID-19-related moratoriums were offered beginning in March of 2020. Certain clients benefitted from loan payment moratoriums offered by the Corporation since mid-January 2020 as a result of seismic activity in the Southern region of the island in January 2020. At September 30, 2020, 124,884 loans with an aggregate book value of $7.9 billion had already completed their payment moratorium period, while 5,915 loans with an aggregate book value of $0.7 billion are still under the moratorium. As of quarter end, 95% of COVID-19 payment deferrals have expired. After excluding government guaranteed loans that are still pending to complete their COVID-19 related modifications, 95% of the remaining loans were in turn current on their payments. The following table presents the moratoriums granted by loan portfolio.

Loan portfolio affected by Covid-related moratoriums

Total Moratoriums Granted

Active Moratoriums

Loan count

Book Value
(In thousands)

Percentage by
portfolio

Loan count

Book Value
(In thousands)

Percentage by
portfolio

Mortgage

23,209

$

2,812,171

35.5

%

5,240

$

552,095

7.0

%

Auto loans

48,819

860,419

28.3

%

-

-

-

%

Lease financing

10,803

402,258

34.9

%

-

-

-

%

Credit cards

19,615

100,711

10.8

%

18

95

-

%

Other consumer loans

23,290

340,561

19.2

%

595

8,706

0.5

%

Commercial

5,063

4,064,352

27.9

%

62

137,470

0.9

%

Total

130,799

$

8,580,472

29.2

%

5,915

$

698,366

2.4

%

The delinquency status of loans subject to the Corporation’s payment moratorium programs remains unaltered during the payment deferral period and the Corporation continues to accrue interest income during such term.

The extent to which the pandemic further impacts our business, results of operations and financial condition (including our regulatory capital, liquidity ratios and realizability of deferred tax assets), as well as the operations of our clients, customers, service providers and suppliers, will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of the pandemic, the speed and strength of economic recovery and actions taken by governmental authorities and other third parties in response thereto.

Loan repurchase transaction

During the quarter ended September 30, 2020, the Corporation completed bulk loan repurchases from its Ginnie Mae ("GNMA’’), Fannie Mae ("FNMA’’) and Freddie Mac (‘’FHMLC’’) (combined ‘’GSEs’’) loan servicing portfolios with an aggregate balance of $807.6 million. The transactions were executed to limit future exposures to principal and interest advances as well as sundry losses and to deploy liquidity to increase interest income. At September 30, 2020, loans with an aggregate unpaid principal balance of $106 million, corresponding to the portfolio acquired from FNMA and FHMLC, had been modified under the Corporation’s COVID-19 relief or other loss mitigation programs.

The following table presents a summary of the impact of the transactions.

Transaction highlights (in thousands)

FHLMC & FNMA

GNMA [1]

Total

Balance Sheet:

Repurchased mortgage loans

$

119,764

$

687,871

$

807,635

Loan premium [2]

6,297

-

6,297

Allowance for credit losses ("ACL'') [2]

(4,144)

-

(4,144)

Advanced interest receivable

816

20,575

21,391

Income Statement:

Adjustments to indemnity reserves

$

5,052

$

-

$

5,052

Mortgage banking activities:

Mortgage servicing fees

208

3,145

3,353

Mortgage servicing rights fair value adjustments

(936)

(7,819)

(8,755)

Losses on repurchased loans, including interest advances

-

(10,548)

(10,548)

Total mortgage banking activities

(728)

(15,222)

(15,950)

Pre-tax income (loss)

$

4,324

$

(15,222)

$

(10,898)

[1] The GNMA repurchase transaction resulted in an increase in the mortgage portfolio of $364 million QoQ. A portion of the acquired loans amounting to $324 million were included in the prior period's ending portfolio balance, in accordance with U.S. GAAP, due to the delinquency status of the loans and the Corporation's right but not the obligation to repurchase the assets.

[2] The repurchased FNMA loans were previously sold with credit recourse and are considered Purchased Credit Deteriorated (''PCD'') at the time of repurchase. Therefore, the establishment of the related ACL is recorded as a gross up of the acquired loan balance that will be amortized (decrease interest income) over the life of the loan.

Goodwill Impairment Evaluation

The Corporation is in the process of completing its annual goodwill impairment test, using July 31, 2020 as the evaluation date. Management has continued to monitor changes in circumstances related to the impact of the COVID-19 pandemic and the effect of the current and projected interest rate environment to determine if these changes would more likely than not result in an impairment of goodwill. The Corporation expects to complete its evaluation prior to the filing of its Form 10-Q for the quarter ended September 30, 2020 with the Securities and Exchange Commission. An impairment of goodwill would result in a non-cash expense, net of tax impact. A charge to earnings related to a goodwill impairment would not impact regulatory capital calculations.

Popular Bank New York Branches Optimization Strategy

On October 27, 2020, Popular Bank ("PB"), the United States mainland banking subsidiary of the Corporation, authorized and approved a strategic realignment of its New York Metro branch network that will result in eleven (11) branch closures and related staffing reductions. The branch closures are expected to be completed, subject to applicable regulatory requirements, by January 29, 2021.

This strategic realignment, which will allow PB to reduce its operating expenses, leverage resources to enhance its focus on small and medium size businesses, as well as support changing customer behaviors, was approved after an assessment of PB’s current branch network, including its usage, proximity to its other branches and customer needs. PB will maintain our largest regional retail network in the mainland US with twenty-seven (27) branches in its New York Metro region, located throughout Brooklyn, Bronx, Manhattan and Queens, as well as in northern New Jersey.

As a result of PB’s closure of the eleven (11) New York Metro region branches, the Corporation expects to record a total pre-tax charge of approximately $24.5 million, of which $23.1 million is expected to be recognized during the fourth quarter of 2020. This aggregate pre-tax charge includes approximately $2.4 million in costs associated with severance and related benefit costs for the 83 impacted employees and charges of approximately $20.0 million associated with the impairment of right-of-use assets related to the abandonment of real property leases. The Corporation anticipates annual operating expense savings of approximately $13 million as a result of this strategic realignment. These estimates could change as the Corporation’s plan evolves and becomes finalized.

Earnings Highlights

(Unaudited)

Quarters ended

Nine months ended

(Dollars in thousands, except per share information)

30-Sep-20

30-Jun-20

30-Sep-19

30-Sep-20

30-Sep-19

Net interest income

$461,021

$450,881

$476,991

$1,384,997

$1,424,270

Provision for credit losses - loan portfolios

19,452

63,104

36,539

271,551

118,555

Provision (reversal) for credit losses - investment securities

(314)

(655)

-

(233)

-

Net interest income after provision for credit losses

441,883

388,432

440,452

1,113,679

1,305,715

Other non-interest income

128,767

112,055

142,712

367,465

417,468

Operating expenses

361,066

348,231

376,475

1,081,905

1,086,910

Income before income tax

209,584

152,256

206,689

399,239

636,273

Income tax expense

41,168

24,628

41,370

68,893

131,923

Net income

$168,416

$127,628

$165,319

$330,346

$504,350

Net income applicable to common stock

$168,064

$127,275

$164,389

$328,941

$501,558

Net income per common share - basic

$2.01

$1.49

$1.71

$3.80

$5.17

Net income per common share - diluted

$2.00

$1.49

$1.70

$3.80

$5.16

Net interest income on a taxable equivalent basis – Non-GAAP financial measure

Net interest income for the quarter ended September 30, 2020 was $461.0 million compared to $450.9 million in the previous quarter, an increase of $10.1 million. Net interest income, on a taxable equivalent basis, for the third quarter of 2020 was $506.9 million, an increase of $13.9 million when compared to $493.0 million in the second quarter of 2020.

The net interest margin decreased by 19 basis points to 3.06% in the third quarter of 2020, compared to 3.25% in the previous quarter. The reduction in the margin reflects an increase in the investments in overnight Fed Funds and in U.S. Treasury and U.S. Agency debt securities plus an average balance of $1.4 billion in SBA PPP loans, compared with an average balance of $913 million for the previous quarter. These assets, although accretive to net interest income, are lower yielding assets and therefore compressed the net interest margin. The redeployment into relatively short tenured assets responds in part to the uncertainty of the tenure of the deposit growth. On a taxable equivalent basis, net interest margin was 3.37 % compared to 3.56 % in the second quarter of 2020, a decrease of 19 basis points. The main variances in net interest income on a taxable equivalent basis were:

  • Higher income from money market, trading and investment securities by $6.0 million, mainly due to higher average balance of U.S. Agency mortgage backed debt securities;

  • higher interest income from loans by $2.4 million mainly driven by the acceleration of the discount amortization related to the prepayment of a commercial loan, higher income from mortgage and auto loans driven by higher originations and higher average balance of SBA PPP loans by approximately $0.5 billion, partially offset by lower income from personal and credit card loans. During the quarter, the Corporation recognized income of $10.3 million related to loans issued under the SBA PPP program, compared to $6.5 million in the previous quarter. As mentioned above, these loans carry a lower yield (approximately 2.88%, including the amortization of fees received under the program that at September 30, 2020 still had $41.4 million in unamortized balance); and

  • lower interest expense on deposits by $5.2 million, or 8 basis points, due to lower interest cost, mainly at Popular Bank

The net interest income for the Banco Popular de Puerto Rico ("BPPR") segment amounted to $394.7 million for the quarter ended September 30, 2020, compared to $387.2 million in the previous quarter. The net interest margin for the third quarter of 2020 was 3.13%, a decrease of 26 basis points when compared to 3.39% for the previous quarter. As discussed above, the net interest margin was impacted by higher average balances of SBA PPP loans by approximately $0.4 billion and of the investments in overnight Fed Funds and other short-term investments, which carry a low yield. The cost of interest-bearing deposits was 0.24%, compared to 0.28% for the previous quarter. Total cost of deposits for the quarter was 0.18%, compared to 0.22% reported in the second quarter of 2020, a decrease of 4 basis points.

Net interest income for Popular Bank ("Popular U.S." or "PB") was $76.5 million for the quarter ended September 30, 2020, compared to $73.7 million during the previous quarter. The increase of $2.8 million in net interest income was primarily due to lower deposit costs by 20 basis points, partially offset by lower income from loans, mainly personal loans. Net interest margin for the quarter was 3.18%, an increase of 11 basis points when compared to 3.07% reported in the second quarter of 2020, mainly due to a decrease in deposit costs. The cost of interest-bearing deposits was 0.98%, compared to 1.18% in the previous quarter. Total cost of deposits for the quarter was 0.81%, compared to 1.01% reported in the second quarter.

Non-interest income

Non-interest income increased by $16.7 million to $128.8 million for the quarter ended September 30, 2020, compared to $112.1 million for the quarter ended June 30, 2020. The increase in non-interest income was primarily driven by:

  • Higher service charges on deposit accounts by $6.7 million, mainly in the BPPR segment, due to higher transaction volumes and the reinstatement of certain fees and service charges which were waived during the second quarter of 2020 as part of the financial relief programs implemented in response to the COVID-19 pandemic;

  • higher other service fees by $17.8 million, mainly at the BPPR segment, due to higher debit and credit card fees by $13.4 million as a result of increased economic activity after business disruptions caused by the COVID-19 pandemic and the reinstatement of previously waived fees;

  • an increase in net gain, including impairment, on equity securities of $2.7 million mainly related to a gain on sale of certain equity securities at PB;

  • a favorable variance in adjustments to indemnity reserves on previously sold loans of $5.3 million mainly due to a recourse reserve release related to the bulk loan repurchase from FNMA and FHLMC; and

  • higher other operating income by $1.9 million mainly due to higher net earnings from the combined portfolio of investments under the equity method by $2.8 million and $4.1 million in higher revenues recognized by our auto lending subsidiary principally associated to daily car rental activities. The second quarter included a gain of $5.6 million as a result of the sale and partial leaseback of the corporate office building that houses our auto lending subsidiary;

Partially offset by:

  • lower income from mortgage banking activities by $13.3 million mainly due to higher unfavorable fair value adjustments on mortgage servicing rights ("MSRs") by $12.9 million, of which $8.8 million was related to the bulk loan repurchases from the Corporation’s GNMA, FNMA and FHLMC loan servicing portfolio; and $10.5 million in interest advanced losses related to the loans repurchased in bulk from GNMA; partially offset by higher mortgage servicing fees by $3.9 million mainly related to fees in arrears collected and recognized in connection with the bulk repurchase transactions, and higher gains on securitization transactions and whole loan sales by $5.4 million; and

  • an unfavorable variance in net (loss) gain on sale of loans, including valuation adjustments, of $4.4 million mainly due to a $2.0 million negative adjustment recognized during the third quarter of 2020 on the held-for-sale taxi medallion portfolio at PB compared to a net gain of $2.2 million recognized on the sale of taxi medallions during the second quarter of 2020.

Refer to Table B for further details.

Operating expenses

Operating expenses for the third quarter of 2020 totaled $361.1 million, an increase of $12.8 million from the second quarter of 2020. The increase in operating expenses was driven primarily by:

  • Higher equipment expenses by $3.2 million mainly due to higher amortization expense;

  • higher professional fees by $3.9 million mainly due to higher processing and technology services by $5.5 million related to increased customer activity;

  • higher business promotion expenses by $2.4 million due primarily to higher customer reward program expense in our credit card business by $1.9 million due to higher purchasing activities by our customers;

  • higher credit and debit card processing fees and higher interchange and other expenses by $1.9 million due to higher volume of transactions; and

  • higher other operating expenses by $4.3 million mainly due to higher operational losses reserves by $4.7 million and a higher provision for unused loan commitments by $4.3 million, partially offset by lower subsequent write-downs of foreclosed auto units by $3.5 million.

Partially offset by:

  • Lower personnel cost by $3.2 million due to lower salaries by $2.1 million, lower employee deferred compensation plans expense by $1.2 million; partially offset by higher commission, incentives and other bonuses by $1.8 million due to higher production.

Full-time equivalent employees were 8,514 as of September 30, 2020, compared to 8,525 as of June 30, 2020.

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

Income taxes

For the quarter ended September 30, 2020, the Corporation recorded an income tax expense of $41.2 million, compared to $24.6 million for the previous quarter. The increase in income tax expense was mainly attributed to higher income before tax during the third quarter of 2020. The effective tax rate ("ETR") for the third quarter of 2020 was of 20%, compared to 16% in the previous quarter.

The ETR of the Corporation is impacted by the composition and source of its taxable income. For the fourth quarter of 2020, the Corporation currently expects its consolidated ETR to be within the 19% to 22% range.

Credit Quality

The Corporation’s credit performance remained stable during the third quarter of 2020, aided by payment deferrals, government stimulus measures instituted in response to the COVID-19 pandemic and the resumption of collection efforts. Notwithstanding these indicators and the increase in economic activity experienced during the quarter, the effect of the pandemic and the full extent of its economic disruption remains uncertain. Management believes that the improvement over the last few years in the risk profile of the Corporation’s loan portfolios better positions Popular to operate successfully under the ongoing challenging environment. Management will continue to carefully monitor the exposure of the portfolios to the COVID-19 pandemic related risks, changes in the economic outlook of the regions in which we operate and how delinquencies and NCOs evolve during the next several quarters.

The following presents credit quality results for the third quarter of 2020:

  • At September 30, 2020, total non-performing loans held-in-portfolio decreased by $25.8 million from June 30, 2020. BPPR’s NPLs decreased by $32.9 million, driven by lower mortgage, consumer (mostly auto loans), and commercial NPLs by $27.2 million, $13.8 million, and $11.9 million, respectively, offset in part by an increase of $21.5 million in construction NPLs. PB’s NPLs increased by $7.1 million, driven by a $9.1 million construction relationship. During the first quarter of 2020, NPLs increased by $278 million as a result of the implementation of CECL for purchased credit deteriorated ("PCD") loans. At September 30, 2020, the ratio of NPLs to total loans held-in-portfolio was 2.5% compared to 2.6% in the second quarter of 2020.

  • Inflows of NPLs held-in-portfolio, excluding consumer loans, increased by $5.9 million quarter-over-quarter. In BPPR, total inflows decreased by $13.5 million driven by a mortgage inflow decrease of $41.0 million, while the commercial and construction inflows in aggregate increased by $27.6 million, mostly related to a $21.5 million construction relationship, as mentioned above. The NPL inflows at PB increased by $19.4 million from the previous quarter, mainly driven by higher construction inflows related to a $9.1 million loan from a single borrower in the New York region and commercial inflows of $10.8 million related to an administrative delinquency on a performing loan that matured and reached 90 days during its renewal process. The loan renewal was completed during the quarter and the loan was returned to accrual status before the quarter ended.

  • NCOs trended significantly lower during the quarter, decreasing by $48.1 million from the second quarter of 2020, aided by the pandemic relief programs, as well as the resumption of collection and repossession activity. BPPR ‘s NCOs decreased by $48.4 million, primarily driven by lower consumer NCOs by $36.0 million, mostly related to auto loans. We continue to be attentive to changes in delinquencies and NCOs, as most deferrals expired during the third quarter of 2020 and given the uncertainty around the outlook of the pandemic. The Corporation’s ratio of annualized net charge-offs to average loans held-in-portfolio was 0.24%, compared to 0.92% in the second quarter of 2020. Refer to Table M for further information on net charge-offs and related ratios.

  • At September 30, 2020, the allowance for credit losses ("ACL") reflected an increase of $7.4 million from the second quarter of 2020 to $925.9 million. The ACL incorporates the current economic outlook using Moody’s Analytics’ September scenarios, as well as the effect of the credit risk rating downgrades of certain commercial borrowers during the quarter, the hotel industry representing the largest impacted segment. These increases were in part offset by lower reserves for consumer loans influenced by lower balances, delinquencies and the impact of the macroeconomic scenario. The ratio of the allowance for credit losses to loans held-in-portfolio was 3.15% in the third quarter of 2020, compared to 3.16% in the previous quarter. The ratio of the allowance for credit losses to NPLs held-in-portfolio stood at 126.1%, compared to 120.8% in the previous quarter.

  • Given that any one economic outlook is inherently uncertain, the Corporation leverages multiple scenarios to estimate its ACL. For the third quarter’s ACL computation, the Corporation combined Moody’s Analytics’ September S1 (optimistic), Baseline, and S3 (pessimistic) scenarios. Probability weights were applied to each such scenario’s outputs as part of the ACL estimation process. When compared to the Moody’s Analytics’ second quarter’s June Baseline scenario, the third quarter’s Baseline scenario assumes a more favorable increase in economic activity from the third quarter of 2020 through the second quarter of 2021, with continued growth thereafter. A significant second wave of COVID-19 infections as well as delays in the additional government stimulus continue to be key risks to the Baseline forecast. Among the three scenarios used in the ACL, the Baseline is assigned the highest probability, followed by the S3 scenario given the uncertainties in the economic outlook and downside risk. For the second quarter’s ACL computation, the Corporation only utilized Moody’s Analytics’ June Baseline scenario, which assumed that a significant pickup in economic activity would occur in the third quarter of 2020 driven by federal assistance programs, followed by a period of tepid growth.

  • The provision for credit losses for the third quarter of 2020 decreased by $43.7 million from the prior quarter, linked to significantly lower NCOs for the quarter. The provision for the BPPR segment decreased by $52.7 million, reflective of lower NCOs, while the provision for the PB segment increased by $9.1 million mainly due to the use of the probability weights in the estimation process. The provision to net charge-offs ratio was 115.4% in the third quarter of 2020, compared to 97.2% in the previous quarter.

Non-Performing Assets

(Unaudited)

(In thousands)

30-Sep-20

30-Jun-20

30-Sep-19

Total non-performing loans held-in-portfolio

$734,368

$760,204

$557,792

Non-performing loans held-for-sale

4,070

6,778

-

Other real estate owned ("OREO")

100,592

113,940

117,928

Total non-performing assets

$839,030

$880,922

$675,720

Net charge-offs for the quarter

$16,859

$64,953

$67,840

Ratios:

Loans held-in-portfolio

$29,392,510

$29,070,553

$27,007,975

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

2.50%

2.62%

2.07%

Allowance for credit losses to loans held-in-portfolio

3.15

3.16

1.90

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

126.07

120.81

91.86

Refer to Table K for additional information.

Provision for Credit Losses - Loan Portfolios

(Unaudited)

Quarters ended

Nine months ended

(In thousands)

30-Sep-20

30-Jun-20

30-Sep-19

30-Sep-20

30-Sep-19

Provision for credit losses:

BPPR

$7,682

$60,423

$34,479

$181,109

$94,908

Popular U.S.

11,770

2,681

2,060

90,442

23,647

Total provision for credit losses

$19,452

$63,104

$36,539

$271,551

$118,555

Credit Quality by Segment

(Unaudited)

(In thousands)

Quarters ended

BPPR

30-Sep-20

30-Jun-20

30-Sep-19

Provision for credit losses - loan portfolios

$7,682

$60,423

$34,479

Net charge-offs

13,769

62,143

59,900

Total non-performing loans held-in-portfolio

693,676

726,603

520,773

Allowance / loans held-in-portfolio

3.48%

3.53%

2.26%

Quarters ended

Popular U.S.

30-Sep-20

30-Jun-20

30-Sep-19

Provision for credit losses - loan portfolios

$11,770

$2,681

$2,060

Net charge-offs

3,090

2,810

7,940

Total non-performing loans held-in-portfolio

40,692

33,601

37,019

Allowance / loans held-in-portfolio

2.22%

2.13%

0.87%

Financial Condition Highlights

(Unaudited)

(In thousands)

30-Sep-20

30-Jun-20

30-Sep-19

Cash and money market investments

$12,425,126

$10,060,358

$5,670,645

Investment securities

21,478,048

21,058,918

16,773,578

Loans

29,392,510

29,070,553

27,007,975

Total assets

65,910,369

62,845,352

52,480,415

Deposits

56,021,983

53,844,300

44,166,195

Borrowings

1,407,424

1,339,339

1,379,767

Total liabilities

59,998,284

57,065,187

46,571,967

Stockholders’ equity

5,912,085

5,780,165

5,908,448

Total assets increased by $3.1 billion from the second quarter of 2020, driven by:

  • An increase of $2.4 billion in cash and money market investments, mainly due to an increase in deposits;

  • an increase of $0.4 billion in debt securities available-for-sale mainly due to purchases of U.S. agency mortgage-backed securities, partially offset by maturities and paydowns of U.S. Treasury securities; and

  • an increase of $0.3 billion in loans held-in-portfolio mainly due to growth of auto loans at BPPR by $0.1 billion and an increase of $0.4 billion in mortgage loans at BPPR mainly due to loan repurchases from its GSEs loan servicing portfolio.

Total liabilities increased by $3.0 billion from the second quarter of 2020, mainly due to:

  • An increase of $2.2 billion in deposits, mainly from an increase at BPPR, of which $0.8 billion related to public sector deposits and $2.0 billion related to retail and commercial demand and savings accounts, including an increase of $0.7 billion in GNMA custodial deposit balances related to the repurchases that were transferred out in early October, partially offset by a decrease of $0.5 billion in deposits at PB; and

  • an increase of $0.7 billion in other liabilities due to an increase of $1.0 billion in unsettled purchases of debt securities; partially offset by a reduction in the liability for GNMA loans sold with a repurchase option of $0.4 billion as a result of the previously mentioned GNMA repurchase.

Stockholders’ equity increased by approximately $131.9 million from the second quarter of 2020, principally due to net income for the quarter of $168.4 million, partially offset by declared dividends of $33.7 million on common stock and $0.3 million in dividends on preferred stock.

Common equity tier-1 ratio ("CET1"), common equity per share and tangible book value per share were 15.93%, $69.94 and $61.69, respectively, at September 30, 2020, compared to 15.71%, $68.40 and $60.13 at June 30, 2020. 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 (including as a result of any participation in and execution of government programs related to the COVID-19 pandemic), new accounting standards on the Corporation’s financial condition and results of operations, the scope and duration of the COVID-19 pandemic, actions taken by governmental authorities in response thereto, and the direct and indirect impact of the pandemic on Popular, our customers, service providers and third parties. 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, 2019, our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2020 and June 30, 2020, and in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2020 to be filed with the Securities and Exchange Commission. 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. (NASDAQ: BPOP) 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 in Puerto Rico auto and equipment leasing and financing, investment banking, broker-dealer and insurance services through specialized subsidiaries. In the mainland United States, Popular provides retail, mortgage and commercial banking services through its New York-chartered banking subsidiary, Popular Bank, which has branches located in New York, New Jersey and Florida.

Conference Call

Popular will hold a conference call to discuss its financial results today Wednesday, October 28, 2020 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 the dial-in telephone number 1-866-235-1201 or 1-412-902-4127. There is no charge to access the call.

A replay of the webcast will be archived in Popular’s website. A telephone replay will be available one hour after the end of the conference call through Saturday, November 28, 2020. The replay dial-in is: 1-877-344-7529 or 1-412-317-0088. The replay passcode is 10148486.

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

Popular, Inc.

Financial Supplement to Third Quarter 2020 Earnings Release

Table A - Selected Ratios and Other Information

Table B - Consolidated Statement of Operations

Table C - Consolidated Statement of Financial Condition

Table D - Analysis of Levels and Yields on a Taxable Equivalent Basis (Non-GAAP) - QUARTER

Table E - Analysis of Levels and Yields on a Taxable Equivalent Basis (Non-GAAP) - YEAR-TO-DATE

Table F - Mortgage Banking Activities and Other Service Fees

Table G - Loans and Deposits

Table H - Loan Delinquency - PUERTO RICO OPERATIONS

Table I - Loan Delinquency - POPULAR U.S. OPERATIONS

Table J - Loan Delinquency - CONSOLIDATED

Table K - Non-Performing Assets

Table L - Activity in Non-Performing Loans

Table M - Allowance for Credit Losses, Net Charge-offs and Related Ratios

Table N - Allowance for Credit Losses - Loan Portfolios - CONSOLIDATED

Table O - Allowance for Credit Losses - Loan Portfolios - PUERTO RICO OPERATIONS

Table P - Allowance for Credit Losses - Loan Portfolios - POPULAR U.S. OPERATIONS

Table Q - Reconciliation to GAAP Financial Measures

POPULAR, INC.

Financial Supplement to Third Quarter 2020 Earnings Release

Table A - Selected Ratios and Other Information

(Unaudited)

Quarters ended

Nine months ended

30-Sep-20

30-Jun-20

30-Sep-19

30-Sep-20

30-Sep-19

Basic EPS

$2.01

$1.49

$1.71

$3.80

$5.17

Diluted EPS

$2.00

$1.49

$1.70

$3.80

$5.16

Average common shares outstanding

83,809,272

85,135,522

96,357,117

86,567,680

97,073,177

Average common shares outstanding - assuming dilution

83,836,151

85,161,661

96,478,327

86,645,691

97,212,396

Common shares outstanding at end of period

84,219,464

84,184,927

96,714,664

84,219,464

96,714,664

Market value per common share

$36.27

$37.17

$54.08

$36.27

$54.08

Market capitalization - (In millions)

$3,055

$3,129

$5,230

$3,055

$5,230

Return on average assets

1.06%

0.87%

1.29%

0.76%

1.35%

Return on average common equity

12.46%

9.74%

11.44%

8.21%

11.96%

Net interest margin (non-taxable equivalent basis)

3.06%

3.25%

4.00%

3.39%

4.10%

Net interest margin (taxable equivalent basis) -non-GAAP

3.37%

3.56%

4.45%

3.72%

4.51%

Common equity per share

$69.94

$68.40

$60.57

$69.94

$60.57

Tangible common book value per common share (non-GAAP) [1]

$61.69

$60.13

$53.41

$61.69

$53.41

Tangible common equity to tangible assets (non-GAAP) [1]

7.97%

8.15%

9.97%

7.97%

9.97%

Return on average tangible common equity [1]

14.32%

11.23%

13.00%

9.44%

13.65%

Tier 1 capital

16.01%

15.78%

17.46%

16.01%

17.46%

Total capital

18.49%

18.29%

20.05%

18.49%

20.05%

Tier 1 leverage

7.80%

8.13%

9.87%

7.80%

9.87%

Common Equity Tier 1 capital

15.93%

15.71%

17.46%

15.93%

17.46%

[1] Refer to Table Q for reconciliation to GAAP financial measures.

POPULAR, INC.

Financial Supplement to Third Quarter 2020 Earnings Release

Table B - Consolidated Statement of Operations

(Unaudited)

Quarters ended

Variance

Quarter ended

Variance

Nine months ended

Q3 2020

Q3 2020

(In thousands, except per share information)

30-Sep-20

30-Jun-20

vs. Q2 2020

30-Sep-19

vs. Q3 2019

30-Sep-20

30-Sep-19

Interest income:

Loans

$431,286

$429,670

$1,616

$453,315

$(22,029)

$1,311,402

$1,355,232

Money market investments

2,773

2,015

758

19,119

(16,346)

16,788

70,873

Investment securities

79,142

76,884

2,258

99,542

(20,400)

243,938

274,819

Total interest income

513,201

508,569

4,632

571,976

(58,775)

1,572,128

1,700,924

Interest expense:

Deposits

37,554

42,780

(5,226)

78,760

(41,206)

142,435

228,035

Short-term borrowings

416

645

(229)

1,572

(1,156)

2,109

4,828

Long-term debt

14,210

14,263

(53)

14,653

(443)

42,587

43,791

Total interest expense

52,180

57,688

(5,508)

94,985

(42,805)

187,131

276,654

Net interest income

461,021

450,881

10,140

476,991

(15,970)

1,384,997

1,424,270

Provision for credit losses - loan portfolios

19,452

63,104

(43,652)

36,539

(17,087)

271,551

118,555

Provision (reversal) for credit losses - investment securities

(314)

(655)

341

-

(314)

(233)

-

Net interest income after provision for credit losses

441,883

388,432

53,451

440,452

1,431

1,113,679

1,305,715

Service charges on deposit accounts

36,849

30,163

6,686

40,969

(4,120)

108,671

119,277

Other service fees

69,879

52,084

17,795

71,309

(1,430)

186,736

209,647

Mortgage banking activities

(9,526)

3,777

(13,303)

10,492

(20,018)

671

18,645

Net gain (loss) on sale of deb...t securities

41

-

41

(20)

61

41

(20)

Net gain, including impairment, on equity securities

5,150

2,447

2,703

213

4,937

4,869

2,174

Net profit on trading account debt securities

20

82

(62)

295

(275)

593

977

Net (loss) gain on sale of loans, including valuation adjustments on loans held-for-sale

(2,198)

2,222

(4,420)

-

(2,198)

981

-

Adjustments (expense) to indemnity reserves on loans sold

4,183

(1,160)

5,343

(3,411)

7,594

(1,770)

(1,664)

Other operating income

24,369

22,440

1,929

22,865

1,504

66,673

68,432

Total non-interest income

128,767

112,055

16,712

142,712

(13,945)

367,465

417,468

Operating expenses:

Personnel costs

Salaries

91,891

93,969

(2,078)

90,016

1,875

278,116

260,627

Commissions, incentives and other bonuses

17,849

16,076

1,773

22,360

(4,511)

59,183

70,757

Pension, postretirement and medical insurance

10,639

11,392

(753)

10,356

283

31,669

30,523

Other personnel costs, including payroll taxes

15,562

17,729

(2,167)

24,950

(9,388)

52,970

70,391

Total personnel costs

135,941

139,166

(3,225)

147,682

(11,741)

421,938

432,298

Net occupancy expenses

25,907

25,487

420

24,595

1,312

76,552

71,431

Equipment expenses

24,088

20,844

3,244

21,596

2,492

66,537

62,624

Other taxes

13,918

13,323

595

14,028

(110)

40,922

38,267

Professional fees

Collections, appraisals and other credit related fees

2,862

2,897

(35)

4,131

(1,269)

9,640

12,596

Programming, processing and other technology services

64,876

59,387

5,489

63,092

1,784

187,082

184,303

Legal fees, excluding collections

2,707

2,184

523

2,415

292

7,877

10,350

Other professional fees

26,029

28,079

(2,050)

28,923

(2,894)

85,493

74,026

Total professional fees

96,474

92,547

3,927

98,561

(2,087)

290,092

281,275

Communications

5,694

5,574

120

5,881

(187)

17,222

17,685

Business promotion

14,664

12,281

2,383

18,365

(3,701)

41,142

52,158

FDIC deposit insurance

6,568

5,340

1,228

2,923

3,645

16,988

13,007

Other real estate owned (OREO) (income) expenses

(1,615)

(344)

(1,271)

(185)

(1,430)

520

3,729

Credit and debit card processing, volume, interchange and other expenses

11,744

9,873

1,871

9,450

2,294

31,899

27,573

Other operating expenses

Operational losses

8,837

4,128

4,709

8,832

5

21,339

18,498

All other

17,770

18,216

(446)

22,348

(4,578)

51,409

61,283

Total other operating expenses

26,607

22,344

4,263

31,180

(4,573)

72,748

79,781

Amortization of intangibles

1,076

1,796

(720)

2,399

(1,323)

5,345

7,082

Total operating expenses

361,066

348,231

12,835

376,475

(15,409)

1,081,905

1,086,910

Income before income tax

209,584

152,256

57,328

206,689

2,895

399,239

636,273

Income tax expense

41,168

24,628

16,540

41,370

(202)

68,893

131,923

Net income

$168,416

$127,628

$40,788

$165,319

$3,097

$330,346

$504,350

Net income applicable to common stock

$168,064

$127,275

$40,789

$164,389

$3,675

$328,941

$501,558

Net income per common share - basic

$2.01

$1.49

$0.52

$1.71

$0.30

$3.80

$5.17

Net income per common share - diluted

$2.00

$1.49

$0.51

$1.70

$0.30

$3.80

$5.16

Dividends Declared per Common Share

$0.40

$0.40

$-

$0.30

$0.10

$1.20

$0.90

Popular, Inc.

Financial Supplement to Third Quarter 2020 Earnings Release

Table C - Consolidated Statement of Financial Condition

(Unaudited)

Variance

Q3 2020 vs.

(In thousands)

30-Sep-20

30-Jun-20

30-Sep-19

Q2 2020

Assets:

Cash and due from banks

$565,202

$435,080

$502,060

$130,122

Money market investments

11,859,924

9,625,278

5,168,585

2,234,646

Trading account debt securities, at fair value

33,053

33,560

36,303

(507)

Debt securities available-for-sale, at fair value

21,177,839

20,763,453

16,479,110

414,386

Debt securities held-to-maturity, at amortized cost

93,163

95,429

97,707

(2,266)

Less: Allowance for credit losses

12,421

12,735

-

(314)

Total debt securities held-to-maturity, net

80,742

82,694

97,707

(1,952)

Equity securities

173,993

166,476

160,458

7,517

Loans held-for-sale, at lower of cost or fair value

102,760

68,725

56,370

34,035

Loans held-in-portfolio

29,586,348

29,250,076

27,181,241

336,272

Less: Unearned income

193,838

179,523

173,266

14,315

Allowance for credit losses

925,850

918,434

512,365

7,416

Total loans held-in-portfolio, net

28,466,660

28,152,119

26,495,610

314,541

Premises and equipment, net

510,473

513,680

547,063

(3,207)

Other real estate

100,592

113,940

117,928

(13,348)

Accrued income receivable

204,233

220,126

164,778

(15,893)

Mortgage servicing rights, at fair value

123,552

141,144

150,652

(17,592)

Other assets

1,816,706

1,833,444

1,811,190

(16,738)

Goodwill

671,122

671,122

671,122

-

Other intangible assets

23,518

24,511

21,479

(993)

Total assets

$65,910,369

$62,845,352

$52,480,415

$3,065,017

Liabilities and Stockholders’ Equity:

Liabilities:

Deposits:

Non-interest bearing

$13,546,432

$12,520,510

$8,771,970

$1,025,922

Interest bearing

42,475,551

41,323,790

35,394,225

1,151,761

Total deposits

56,021,983

53,844,300

44,166,195

2,177,683

Assets sold under agreements to repurchase

106,028

153,065

213,097

(47,037)

Other short-term borrowings

100,000

-

-

100,000

Notes payable

1,201,396

1,186,274

1,166,670

15,122

Other liabilities

2,568,877

1,881,548

1,026,005

687,329

Total liabilities

59,998,284

57,065,187

46,571,967

2,933,097

Stockholders’ equity:

Preferred stock

22,143

22,143

50,160

-

Common stock

1,045

1,044

1,044

1

Surplus

4,521,689

4,520,333

4,317,556

1,356

Retained earnings

2,168,153

2,033,782

2,071,198

134,371

Treasury stock

(1,016,361)

(1,016,486)

(392,630)

125

Accumulated other comprehensive income (loss), net of tax

215,416

219,349

(138,880)

(3,933)

Total stockholders’ equity

5,912,085

5,780,165

5,908,448

131,920

Total liabilities and stockholders’ equity

$65,910,369

$62,845,352

$52,480,415

$3,065,017

Popular, Inc.

Financial Supplement to Third Quarter 2020 Earnings Release

Table D - Analysis of Levels and Yields on a Taxable Equivalent Basis (Non-GAAP) - QUARTER

(Unaudited)

Quarters ended

Variance

30-Sep-20

30-Jun-20

30-Sep-19

Q3 2020 vs. Q2 2020

Q3 2020 vs. Q3 2019

($ amounts in millions)

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

$31,337

$117.5

1.49

%

$27,356

$111.5

1.64

%

$20,617

$159.5

3.08

%

$3,981

$6.0

(0.15)

%

$10,720

($42.0)

(1.59)

%

Loans:

Commercial

13,669

170.1

4.95

13,350

168.8

5.09

12,167

187.3

6.11

319

1.3

(0.14)

1,502

(17.2)

(1.16)

Construction

930

13.3

5.67

935

13.2

5.69

809

13.3

6.50

(5)

0.1

(0.02)

121

-

(0.83)

Mortgage

7,094

95.8

5.40

7,038

92.2

5.24

7,127

95.7

5.37

56

3.6

0.16

(33)

0.1

0.03

Consumer

2,722

76.7

11.21

2,918

82.9

11.43

2,918

86.5

11.77

(196)

(6.2)

(0.22)

(196)

(9.8)

(0.56)

Auto

3,006

68.6

9.08

2,957

66.0

8.98

2,867

68.2

9.44

49

2.6

0.10

139

0.4

(0.36)

Lease financing

1,122

17.1

6.08

1,082

16.1

5.97

1,004

15.1

6.03

40

1.0

0.11

118

2.0

0.05

Total loans

28,543

441.6

6.16

28,280

439.2

6.24

26,892

466.1

6.89

263

2.4

(0.08)

1,651

(24.5)

(0.73)

Total interest earning assets

$59,880

$559.1

3.72

%

$55,636

$550.7

3.98

%

$47,509

$625.6

5.24

%

$4,244

$8.4

(0.26)

%

$12,371

$(66.5)

(1.52)

%

Allowance for credit losses - loan portfolio

(923)

(926)

(532)

3

(391)

Allowance for credit losses - investment securities

(13)

(13)

-

-

(13)

Other non-interest earning assets

4,176

4,100

3,964

76

212

Total average assets

$63,120

$58,797

$50,941

$4,323

$12,179

Liabilities and Stockholders' Equity:

Interest bearing deposits:

NOW and money market

$21,225

$9.1

0.17

%

$19,392

$11.6

0.24

%

$15,958

$37.7

0.94

%

$1,833

$(2.5)

(0.07)

%

$5,267

$(28.6)

(0.77)

%

Savings

13,103

8.3

0.25

11,856

10.2

0.35

10,241

11.8

0.46

1,247

(1.9)

(0.10)

2,862

(3.5)

(0.21)

Time deposits

7,810

20.2

1.03

8,730

21.0

0.97

7,829

29.3

1.48

(920)

(0.8)

0.06

(19)

(9.1)

(0.45)

Total interest-bearing deposits

42,138

37.6

0.35

39,978

42.8

0.43

34,028

78.8

0.92

2,160

(5.2)

(0.08)

8,110

(41.2)

(0.57)

Borrowings

1,358

14.6

4.31

1,336

14.9

4.48

1,440

16.2

4.51

22

(0.3)

(0.17)

(82)

(1.6)

(0.20)

Total interest-bearing liabilities

43,496

52.2

0.48

41,314

57.7

0.56

35,468

95.0

1.06

2,182

(5.5)

(0.08)

8,028

(42.8)

(0.58)

Net interest spread

3.24

%

3.42

%

4.18

%

(0.18)

%

(0.94)

%

Non-interest bearing deposits

12,806

11,006

8,794

1,800

4,012

Other liabilities

1,435

1,203

926

232

509

Stockholders' equity

5,383

5,274

5,753

109

(370)

Total average liabilities and stockholders' equity

$63,120

$58,797

$50,941

$4,323

$12,179

Net interest income / margin on a taxable equivalent basis (Non-GAAP)

$506.9

3.37

%

$493.0

3.56

%

$530.6

4.45

%

$13.9

(0.19)

%

($23.7)

(1.08)

%

Taxable equivalent adjustment

45.8

42.1

53.7

3.7

(7.9)

Net interest income / margin non-taxable equivalent basis (GAAP)

$461.0

3.06

%

$450.9

3.25

%

$476.9

4.00

%

$10.1

(0.19)

%

($15.9)

(0.94)

%

Popular, Inc.

Financial Supplement to Third Quarter 2020 Earnings Release

Table E - Analysis of Levels and Yields on a Taxable Equivalent Basis (Non-GAAP) - YEAR-TO-DATE

(Unaudited)

Nine months ended

30-Sep-20

30-Sep-19

Variance

Average

Income/

Yield/

Average

Income/

Yield/

Average

Income/

Yield/

($ amounts in millions)

balance

Expense

Rate

balance

Expense

Rate

balance

Expense

Rate

Assets:

Interest earning assets:

Money market, trading and investment securities

$26,497

$364.7

1.84

%

$19,691

$450.4

3.06

%

$6,806

($85.7)

(1.22)

%

Loans not covered under loss-sharing agreements with the FDIC:

Commercial

13,122

522.1

5.31

12,137

562.4

6.20

985

(40.3)

(0.89)

Construction

909

39.6

5.83

807

40.4

6.69

102

(0.8)

(0.86)

Mortgage

7,054

281.2

5.32

7,125

286.3

5.36

(71)

(5.1)

(0.04)

Consumer

2,916

248.9

11.40

2,865

254.6

11.88

51

(5.7)

(0.48)

Auto

2,985

202.4

9.06

2,807

203.5

9.69

178

(1.1)

(0.63)

Lease financing

1,092

49.5

6.04

973

44.2

6.06

119

5.3

(0.02)

Total loans

28,078

1,343.7

6.39

26,714

1,391.4

6.96

1,364

(47.7)

(0.57)

Total interest earning assets

$54,575

$1,708.4

4.18

%

$46,405

$1,841.8

5.30

%

$8,170

($133.4)

(1.12)

%

Allowance for credit losses - loan portfolio

(886)

(553)

(333)

Allowance for credit losses - investment securities

(13)

-

(13)

Other non-interest earning assets

4,100

3,944

156

Total average assets

$57,776

$49,796

$7,980

Liabilities and Stockholders' Equity:

Interest bearing deposits:

NOW and money market

$18,956

$45.9

0.32

%

$14,994

$110.7

0.99

%

$3,962

($64.8)

(0.67)

%

Savings

11,899

30.2

0.34

10,053

32.2

0.43

1,846

(2.0)

(0.09)

Time deposits

8,076

66.3

1.10

7,778

85.1

1.46

298

(18.8)

(0.36)

Total interest-bearing deposits

38,931

142.4

0.49

32,825

228.0

0.93

6,106

(85.6)

(0.44)

Borrowings

1,340

44.7

4.45

1,452

48.6

4.47

(112)

(3.9)

(0.02)

Total interest-bearing liabilities

40,271

187.1

0.62

34,277

276.6

1.08

5,994

(89.5)

(0.46)

Net interest spread

3.56

%

4.22

%

(0.66)

%

Non-interest bearing deposits

10,945

8,871

2,074

Other liabilities

1,180

993

187

Stockholders' equity

5,380

5,655

(275)

Total average liabilities and stockholders' equity

$57,776

$49,796

$7,980

Net interest income / margin on a taxable equivalent basis (Non-GAAP)

$1,521.3

3.72

%

$1,565.2

4.51

%

($43.9)

(0.79)

%

Taxable equivalent adjustment

136.3

140.9

(4.6)

Net interest income / margin non-taxable equivalent basis (GAAP)

$1,385.0

3.39

%

$1,424.3

4.10

%

($39.3)

(0.71)

%

Popular, Inc.

Financial Supplement to Third Quarter 2020 Earnings Release

Table F - Mortgage Banking Activities and Other Service Fees

(Unaudited)

Mortgage Banking Activities

Quarters ended

Variance

Nine months ended

Variance

(In thousands)

30-Sep-20

30-Jun-20

30-Sep-19

Q3 2020
vs.Q2 2020

Q3 2020
vs.Q3 2019

30-Sep-20

30-Sep-19

2020 vs.
2019

Mortgage servicing fees, net of fair value adjustments:

Mortgage servicing fees

$12,966

$9,058

$11,797

$3,908

$1,169

$32,992

$35,400

$(2,408)

Mortgage servicing rights fair value adjustments

(20,491)

(7,640)

(4,842)

(12,851)

(15,649)

(33,360)

(25,853)

(7,507)

Total mortgage servicing fees, net of fair value adjustments

(7,525)

1,418

6,955

(8,943)

(14,480)

(368)

9,547

(9,915)

Net gain on sale of loans, including valuation on loans held-for-sale

10,916

5,487

5,421

5,429

5,495

20,389

14,695

5,694

Trading account (loss) profit:

Unrealized (losses) gains on outstanding derivative positions

(4)

1,695

227

(1,699)

(231)

(4)

-

(4)

Realized losses on closed derivative positions

(1,958)

(4,823)

(2,111)

2,865

153

(8,391)

(5,555)

(2,836)

Total trading account loss

(1,962)

(3,128)

(1,884)

1,166

(78)

(8,395)

(5,555)

(2,840)

Losses on repurchased loans, including interest advances[1]

(10,955)

-

-

(10,955)

(10,955)

(10,955)

-

(10,955)

Total mortgage banking activities

$(9,526)

$3,777

$10,492

$(13,303)

$(20,018)

$671

$18,687

$(18,016)

[1] The Corporation, from time to time, repurchases delinquent loans from its GNMA servicing portfolio, in compliance with Guarantor guidelines, and may incur in losses related to previously advanced interest on delinquent loans. During the quarter ended September 30, 2020 the Corporation repurchased $687.9 million of GNMA loans and recorded a loss of $10.5 million for previously advanced interest on delinquent loans. Effective for the quarter ended September 30, 2020, the Corporation has determined to present these losses as part of its Mortgage Banking Activities, which were previously presented within the indemnity reserves on loans sold component of non-interest income.

Other Service Fees

Quarters ended

Variance

Nine months ended

Variance

(In thousands)

30-Sep-20

30-Jun-20

30-Sep-19

Q3 2020
vs.Q2 2020

Q3 2020
vs.Q3 2019

30-Sep-20

30-Sep-19

2020 vs.
2019

Other service fees:

Debit card fees

$11,123

$7,082

$11,719

$4,041

$(596)

$28,442

$34,923

$(6,481)

Insurance fees

13,941

11,301

14,608

2,640

(667)

38,211

44,652

(6,441)

Credit card fees

27,077

17,762

25,625

9,315

1,452

68,025

72,705

(4,680)

Sale and administration of investment products

5,094

4,910

5,714

184

(620)

16,267

16,705

(438)

Trust fees

4,886

5,546

5,193

(660)

(307)

15,692

15,431

261

Other fees

7,758

5,483

8,450

2,275

(692)

20,099

25,231

(5,132)

Total other service fees

$69,879

$52,084

$71,309

$17,795

$(1,430)

$186,736

$209,647

$(22,911)

Popular, Inc.

Financial Supplement to Third Quarter 2020 Earnings Release

Table G - Loans and Deposits

(Unaudited)

Loans - Ending Balances

Variance

(In thousands)

30-Sep-20

30-Jun-20

30-Sep-19

Q3 2020
vs.Q2 2020

Q3 2020
vs.Q3 2019

Loans held-in-portfolio:

Commercial

$13,611,374

$13,735,082

$12,208,449

$(123,708)

$1,402,925

Construction

936,274

928,507

754,056

7,767

182,218

Legacy [1]

16,168

17,000

23,192

(832)

(7,024)

Lease financing

1,153,108

1,098,188

1,022,484

54,920

130,624

Mortgage

7,924,441

7,521,795

7,168,619

402,646

755,822

Auto

3,045,453

2,904,324

2,847,758

141,129

197,695

Consumer

2,705,692

2,865,657

2,983,417

(159,965)

(277,725)

Total loans held-in-portfolio

$29,392,510

$29,070,553

$27,007,975

$321,957

$2,384,535

Loans held-for-sale:

Commercial

$4,070

$6,778

$-

$(2,708)

$4,070

Mortgage

98,690

61,947

56,370

36,743

42,320

Total loans held-for-sale

$102,760

$68,725

$56,370

$34,035

$46,390

Total loans

$29,495,270

$29,139,278

$27,064,345

$355,992

$2,430,925

[1] The legacy portfolio is comprised of commercial loans, construction loans and lease financings related to certain lending products exited by the Corporation as part of restructuring efforts carried out in prior years at the Popular U.S. segment.

Deposits - Ending Balances

Variance

(In thousands)

30-Sep-20

30-Jun-20

30-Sep-19

Q3 2020
vs. Q2 2020

Q3 2020
vs.Q3 2019

Demand deposits [1]

$22,929,040

$22,731,726

$19,191,657

$197,314

$3,737,383

Savings, NOW and money market deposits (non-brokered)

24,696,244

22,457,951

16,778,332

2,238,293

7,917,912

Savings, NOW and money market deposits (brokered)

551,770

522,929

400,049

28,841

151,721

Time deposits (non-brokered)

7,664,361

7,919,265

7,614,393

(254,904)

49,968

Time deposits (brokered CDs)

180,568

212,429

181,764

(31,861)

(1,196)

Total deposits

$56,021,983

$53,844,300

$44,166,195

$2,177,683

$11,855,788

[1] Includes interest and non-interest bearing demand deposits.

Popular, Inc.

Financial Supplement to Third Quarter 2020 Earnings Release

Table H - Loan Delinquency - Puerto Rico Operations

(Unaudited)

30-Sep-20

Puerto Rico

Past due

Past due 90 days or more

30-59

60-89

90 days

Total

Non-accrual

Accruing

(In thousands)

days

days

or more

past due

Current

Loans HIP

loans

loans

Commercial multi-family

$

3,480

$

129

$

1,400

$

5,009

$

139,169

$

144,178

$

1,400

$

-

Commercial real estate:

Non-owner occupied

19,523

2,014

98,811

120,348

1,950,794

2,071,142

98,811

-

Owner occupied

10,187

4,223

97,453

111,863

1,458,412

1,570,275

97,453

-

Commercial and industrial

6,809

6,376

45,013

58,198

4,233,554

4,291,752

44,320

693

Construction

4,895

-

21,514

26,409

169,656

196,065

21,514

-

Mortgage

336,824

59,386

1,567,504

1,963,714

4,863,266

6,826,980

370,060

1,197,444

Leasing

8,254

2,450

3,217

13,921

1,139,187

1,153,108

3,217

-

Consumer:

Credit cards

6,125

6,305

14,505

26,935

904,604

931,539

-

14,505

Home equity lines of credit

181

-

58

239

4,075

4,314

-

58

Personal

13,166

7,569

29,343

50,078

1,255,707

1,305,785

29,343

-

Auto

39,887

10,377

13,454

63,718

2,981,735

3,045,453

13,454

-

Other

190

1,224

14,348

15,762

108,290

124,052

14,104

244

Total

$

449,521

$

100,053

$

1,906,620

$

2,456,194

$

19,208,449

$

21,664,643

$

693,676

$

1,212,944

30-Jun-20

Puerto Rico

Past due

Past due 90 days or more

30-59

60-89

90 days

Total

Non-accrual

Accruing

(In thousands)

days

days

or more

past due

Current

Loans HIP

loans

loans

Commercial multi-family

$

1,641

$

2,524

$

1,368

$

5,533

$

142,630

$

148,163

$

1,368

$

-

Commercial real estate:

Non-owner occupied

24,091

4,120

108,671

136,882

1,940,018

2,076,900

108,671

-

Owner occupied

19,439

5,471

101,112

126,022

1,554,153

1,680,175

101,112

-

Commercial and industrial

5,422

15,404

43,892

64,718

4,382,221

4,446,939

42,739

1,153

Construction

-

-

-

-

176,612

176,612

-

-

Mortgage

279,498

123,158

1,256,359

1,659,015

4,751,803

6,410,818

397,262

859,097

Leasing

11,386

10,355

4,751

26,492

1,071,696

1,098,188

4,751

-

Consumer:

Credit cards

9,128

15,424

17,849

42,401

934,981

977,382

-

17,849

Home equity lines of credit

14

262

6

282

4,284

4,566

-

6

Personal

20,485

13,730

34,834

69,049

1,300,646

1,369,695

34,834

-

Auto

64,977

29,813

22,111

116,901

2,787,423

2,904,324

22,111

-

Other

700

344

14,426

15,470

114,971

130,441

13,755

671

Total

$

436,781

$

220,605

$

1,605,379

$

2,262,765

$

19,161,438

$

21,424,203

$

726,603

$

878,776

Variance

Past due

Past due 90 days or more

30-59

60-89

90 days

Total

Non-accrual

Accruing

(In thousands)

days

days

or more

past due

Current

Loans HIP

loans

Loans

Commercial multi-family

$

1,839

$

(2,395)

$

32

$

(524)

$

(3,461)

$

(3,985)

$

32

$

-

Commercial real estate:

Non-owner occupied

(4,568)

(2,106)

(9,860)

(16,534)

10,776

(5,758)

(9,860)

-

Owner occupied

(9,252)

(1,248)

(3,659)

(14,159)

(95,741)

(109,900)

(3,659)

-

Commercial and industrial

1,387

(9,028)

1,121

(6,520)

(148,667)

(155,187)

1,581

(460)

Construction

4,895

-

21,514

26,409

(6,956)

19,453

21,514

-

Mortgage

57,326

(63,772)

311,145

304,699

111,463

416,162

(27,202)

338,347 [1]

Leasing

(3,132)

(7,905)

(1,534)

(12,571)

67,491

54,920

(1,534)

-

Consumer:

Credit cards

(3,003)

(9,119)

(3,344)

(15,466)

(30,377)

(45,843)

-

(3,344)

Home equity lines of credit

167

(262)

52

(43)

(209)

(252)

-

52

Personal

(7,319)

(6,161)

(5,491)

(18,971)

(44,939)

(63,910)

(5,491)

-

Auto

(25,090)

(19,436)

(8,657)

(53,183)

194,312

141,129

(8,657)

-

Other

(510)

880

(78)

292

(6,681)

(6,389)

349

(427)

Total

$

12,740

$

(120,552)

$

301,241

$

193,429

$

47,011

$

240,440

$

(32,927)

$

334,168

[1]

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 $161 million in loans rebooked under the GNMA program at September 30, 2020, in which issuers such as BPPR have the option but not the obligation to repurchase loans that are 90 days or more past due. During the third quarter the Corporation purchased $688 million in GNMA loans of which $684 are included in the 90 days past due category including $324 million previously accounted under the repurchase option at June 30, 2020.

Popular, Inc.

Financial Supplement to Third Quarter 2020 Earnings Release

Table I - Loan Delinquency - Popular U.S. Operations

(Unaudited)

September 30, 2020

Popular U.S.

Past due

Past due 90 days or more

30-59

60-89

90 days

Total

Non-accrual

Accruing

(In thousands)

days

days

or more

past due

Current

Loans HIP

loans

loans

Commercial multi-family

$

-

$

-

$

1,755

$

1,755

$

1,734,982

$

1,736,737

$

1,755

$

-

Commercial real estate:

Non-owner occupied

-

-

396

396

1,938,617

1,939,013

396

-

Owner occupied

653

-

342

995

360,131

361,126

342

-

Commercial and industrial

552

50

3,901

4,503

1,492,648

1,497,151

3,901

-

Construction

-

-

9,069

9,069

731,140

740,209

9,069

-

Mortgage

2,467

6,433

14,484

23,384

1,074,077

1,097,461

14,484

-

Legacy

41

16

1,360

1,417

14,751

16,168

1,360

-

Consumer:

Credit cards

-

3

3

6

25

31

-

3

Home equity lines of credit

1,257

351

7,586

9,194

95,715

104,909

7,586

-

Personal

1,641

1,597

1,770

5,008

228,754

233,762

1,770

-

Other

22

2

29

53

1,247

1,300

29

-

Total

$

6,633

$

8,452

$

40,695

$

55,780

$

7,672,087

$

7,727,867

$

40,692

$

3

June 30, 2020

Popular U.S.

Past due

Past due 90 days or more

30-59

60-89

90 days

Total

Non-accrual

Accruing

(In thousands)

days

days

or more

past due

Current

Loans HIP

loans

loans

Commercial multi-family

$

-

$

366

$

2,097

$

2,463

$

1,637,996

$

1,640,459

$

2,097

$

-

Commercial real estate:

Non-owner occupied

1,692

5,136

397

7,225

1,945,365

1,952,590

397

-

Owner occupied

1,010

-

352

1,362

345,412

346,774

352

-

Commercial and industrial

4,441

6,061

4,392

14,894

1,428,188

1,443,082

4,392

-

Construction

23,209

9,600

-

32,809

719,086

751,895

-

-

Mortgage

2,532

4,477

14,144

21,153

1,089,824

1,110,977

14,144

-

Legacy

29

83

2,001

2,113

14,887

17,000

2,001

-

Consumer:

Credit cards

-

-

-

-

26

26

-

-

Home equity lines of credit

1,715

655

8,242

10,612

100,095

110,707

8,242

-

Personal

1,638

1,524

1,976

5,138

266,330

271,468

1,976

-

Other

-

-

-

-

1,372

1,372

-

-

Total

$

36,266

$

27,902

$

33,601

$

97,769

$

7,548,581

$

7,646,350

$

33,601

$

-

Variance

Past due

Past due 90 days or more

30-59

60-89

90 days

Total

Non-accrual

Accruing

(In thousands)

days

days

or more

past due

Current

Loans HIP

loans

loans

Commercial multi-family

$

-

$

(366)

$

(342)

$

(708)

$

96,986

$

96,278

$

(342)

$

-

Commercial real estate:

Non-owner occupied

(1,692)

(5,136)

(1)

(6,829)

(6,748)

(13,577)

(1)

-

Owner occupied

(357)

-

(10)

(367)

14,719

14,352

(10)

-

Commercial and industrial

(3,889)

(6,011)

(491)

(10,391)

64,460