Popular, Inc. Announces Second Quarter 2020 Financial Results

Popular, Inc. (the “Corporation,” “Popular,” “we,” “us,” “our”) (NASDAQ:BPOP) reported net income of $127.6 million for the quarter ended June 30, 2020, compared to net income of $34.3 million for the quarter ended March 31, 2020.

Ignacio Alvarez, President and Chief Executive Officer, said: “We reported net income of $127.6 million for the quarter, notwithstanding the challenging economic environment resulting from the coronavirus pandemic and the historically low interest rate scenario. After 126 years in the banking business, we know success requires that we act quickly and decisively, putting people first. I want to express my gratitude to our employees for their commitment to serve our customers and their creativity and ability to adapt to a rapidly changing situation. We continue to support the communities we serve during these difficult times by providing payment deferrals to more than 120,000 customers and have also provided assistance to health care professionals and non-profit organizations as they battle the pandemic. I would also like to thank our customers for their continued trust and for adapting to this new reality. They have accelerated their adoption of digital channels, helping us reach an important milestone – more than one million active users in our digital banking platform.

We are aware that there remains much uncertainty as to the future of the economy. Economic performance will continue to be tied to developments on the health front, which are very difficult to predict. If the health situation deteriorates, leading to a new round of restrictions on businesses, this will obviously hamper the economic recovery. The strength of our balance sheet, levels of capital and liquidity place us in a strong position to continue to serve our clients and weather the challenges that may lie ahead.”

Significant Events

Financial Highlights

For the second quarter of 2020 the Corporation recorded a net income of $127.6 million, compared to a net income of $34.3 million for the previous quarter. The results for both periods were significantly impacted by the COVID-19 pandemic, which has affected the markets in which we operate and our results of operations, as explained below.

The Corporation’s total assets increased by $10.0 billion during the quarter to $62.8 billion, primarily due to an increase in deposits of $9.0 billion, of which $4.2 billion were from the public sector, driven by Federal and Puerto Rico Government assistance programs related to the pandemic. Most of this increased liquidity was deployed in overnight Fed Funds or in short-term U.S. Treasury securities and to originate $1.4 billion in Small Business Administration (“SBA”) loans under the Payment Protection Program (“PPP”). These are all lower yielding assets. This change in the composition of our earning assets, coupled with the effect of the declines in market interest rates, resulted in a compression of the Corporation’s net interest margin which declined 69 basis points during the quarter to 3.25%. Net interest income for the quarter ended June 30, 2020 was $450.9 million compared to $473.1 million in the previous quarter, a decrease of $22.2 million.

Coronavirus (COVID-19) Pandemic

The Corporation’s results for the second quarter of 2020 reflect the impact of the continued business disruption caused by the pandemic, the relief measures implemented by the Corporation and by the federal, state and local governments in response thereto. Certain of the measures imposed by the governments of Puerto Rico, the United States mainland and United States Virgin Islands, including lockdowns, business closures, mandatory curfews and limits to public activities, were relaxed late in the second quarter of 2020 to allow for the gradual reopening of the economy. Nevertheless, economic activity was negatively impacted by the pandemic throughout the quarter, which in turn impacted our financial results. The recent regional resurgence in the spread of the virus has also led to the reinstitution of certain restrictive health and safety measures. For example, in July 16, 2020, as a result of the resurgence of COVID-19 cases on the Island, the Government of Puerto Rico scaled back measures to reopen the economy, including by further restricting non-essential business establishments and public activities.

As previously disclosed, the Corporation implemented several financial relief programs in response to the pandemic, including payment moratoriums, suspensions of foreclosures and other collection activity, as well as waivers of certain fees and service charges, such as late-payment charges and ATM transaction fees. In the case of Puerto Rico, the moratoriums for all consumer products are mandated by local law. As of June 30, 2020, the Corporation had granted a loan payment moratorium to 116,226 eligible retail customers with an aggregate book value of $3.9 billion, and to 5,003 eligible commercial clients with an aggregate book value of $4.1 billion as detailed below. Covid-related moratoriums began in March of 2020 and are set to expire between July 1, 2020 and September 30, 2020, depending on the loan product and deferral agreements with the borrowers. Other clients benefitted from moratoriums since mid-January 2020 as a result of various areas of Puerto Rico being declared disaster areas as a result of the January earthquakes.

Loan portfolio affected by Covid-related moratoriums

 

Loan count

 

Book Value
(In thousands)

 

Percentage by portfolio

Mortgage

 

16,595

 

$

2,108,825

 

28.0

%

Auto loans

 

47,975

 

907,651

 

31.3

%

Lease financing

 

10,600

 

431,285

 

39.3

%

Credit cards

 

19,256

 

107,644

 

11.0

%

Other consumer loans

 

21,800

 

313,014

 

16.6

%

Commercial

 

5,003

 

4,116,697

 

28.0

%

Total

 

121,229

 

$

7,985,116

 

27.5

%

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.

As of June 30, 2020, the Corporation had secured funding approval for over 28,000 loans totaling approximately $1.4 billion under the Small Business Administration’s (“SBA”) Payroll Protection Program (“PPP”). Approximately $1.2 billion of such loans were granted in Puerto Rico, $215 million in the mainland United States and $29 million in the U.S. Virgin Islands. The average size of loans extended under the PPP was approximately $45,000 in Puerto Rico and the U.S. Virgin Islands and $152,000 in the mainland United States. The Corporation will continue to extend PPP loans while the program remains open and is now working on the second part of the process, loan forgiveness, which is expected to be completed predominantly through digital channels.

During the second quarter, the Corporation’s revenue streams were also impacted by reduced consumer transaction activity, the waiver of certain late fees and service charges, including ATM transaction fees, as well as the temporary suspension of auto loans and leases as well as mortgage originations and related securitization and loan sale activities. Collectively, these revenue captions experienced a decrease of approximately $21.9 million when compared to the previous quarter and of approximately $27.2 million when compared to the same quarter of the previous year, reflecting the impact of the COVID-19 pandemic. As of July 2020, the corporation reinstated most of the fees waived as a result of the pandemic as well as its normal collection efforts. The speed at which earnings from those activities return to pre-pandemic levels remain highly uncertain and depend on client activity and the economic recovery.

Mortgage loan origination activity resumed during the month of May. Origination volumes and related mortgage loan securitization activity reflect the impact of the lockdown for a portion of the second quarter of 2020, although the origination volumes for the month of June reflect an increase to a level that is comparable to the same period of the previous year.

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 and actions taken by governmental authorities and other third parties in response thereto.

Common Stock Repurchase Plan

On May 27, 2020, the Corporation completed its previously announced $500 million accelerated share repurchase transaction (“ASR”) for 2020 with respect to its common stock. On March 19, 2020 (the “early termination date”), the dealer counterparty to the ASR exercised its right under the ASR agreement to terminate the transaction because the trading price of the Corporation’s common stock fell below a specified level due to the effects of the COVID-19 pandemic on the global markets. As a result of such early termination, the final settlement of the ASR, which was originally expected to occur during the fourth quarter of 2020, occurred during the second quarter of 2020.

Under the ASR, the Corporation prepaid $500 million and received from the dealer counterparty an initial delivery of 7,055,919 shares of common stock on February 3, 2020. As part of the final settlement of the ASR, the Corporation received an additional 4,763,216 shares of common stock after the early termination date. In total the Corporation repurchased 11,819,135 shares at an average price per share of $42.3043 under the ASR. The Corporation accounted for the ASR as a treasury stock transaction. This transaction increased by $2.20 the Corporation’s tangible book value per share.

Goodwill Impairment Evaluation

As disclosed in the Form 10-Q for the quarter ended March 31, 2020, the Corporation deemed the effects of the current and projected interest rate environment and the continued effects of the pandemic on the valuation of the Corporation and its subsidiaries, as an interim triggering event for the evaluation of goodwill. During the second quarter, management has continued to monitor changes in circumstances 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 June 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.

Earnings Highlights

(Unaudited)

Quarters ended

Six months ended

(Dollars in thousands, except per share information)

30-Jun-20

31-Mar-20

30-Jun-19

30-Jun-20

30-Jun-19

Net interest income

$450,881

$473,095

$476,316

$923,976

$947,279

Provision for credit losses - loan portfolios

63,104

188,995

40,191

252,099

82,016

Provision (reversal) for credit losses - investment securities

(655)

736

-

81

-

Net interest income after provision for credit losses

388,432

283,364

436,125

671,796

865,263

Other non-interest income

112,055

126,643

138,326

238,698

274,756

Operating expenses

348,231

372,608

363,015

720,839

710,435

Income before income tax

152,256

37,399

211,436

189,655

429,584

Income tax expense

24,628

3,097

40,330

27,725

90,553

Net income

$127,628

$34,302

$171,106

$161,930

$339,031

Net income applicable to common stock

$127,275

$33,602

$170,175

$160,877

$337,169

Net income per common share - basic

$1.49

$0.37

$1.77

$1.83

$3.46

Net income per common share - diluted

$1.49

$0.37

$1.76

$1.83

$3.45

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

Net interest income, on a taxable equivalent basis, is presented with its different components in Table D for the quarter and six month period ended June 30, 2020 and comparable periods, segregated by major categories of interest earning assets and interest-bearing liabilities.

Interest earning assets include investment securities and loans that are exempt from income tax, principally in Puerto Rico. The main sources of tax-exempt interest income are certain investments in obligations of the U.S. Government, its agencies and sponsored entities, and certain obligations of the Commonwealth of Puerto Rico and/or its agencies and municipalities and assets held by the Corporation’s international banking entities. To facilitate the comparison of all interest related to these assets, the interest income has been converted to a taxable equivalent basis, using the applicable statutory income tax rates for each period. Net interest income on a taxable equivalent basis is a non-GAAP financial measure. Management believes that this presentation provides meaningful information since it facilitates the comparison of revenues arising from taxable and tax-exempt sources.

Non-GAAP financial measures used by the Corporation may not be comparable to similarly named Non-GAAP financial measures used by other companies.

Net interest income

Net interest income for the quarter ended June 30, 2020 was $450.9 million compared to $473.1 million in the previous quarter, a decrease of $22.2 million. Net interest income, on a taxable equivalent basis, for the second quarter of 2020 was $493.0 million, a decrease of $28.4 million when compared to $521.4 million in the first quarter of 2020.

The net interest margin decreased by 69 basis points to 3.25% in the second quarter of 2020, compared to 3.94% in the previous quarter. The lower margin for the quarter is mainly as a result of three major factors: the decrease of 150 basis points in the Federal Funds Rate in mid-March, the increase in average deposits by $7.3 billion which were redeployed mostly at overnight Fed Funds, short-term U.S. Treasury securities and $1.4 billion ($913 million in average balance) in loans under the SBA PPP. These assets, although accretive to net interest income, are low yielding assets and compressed the net interest margin. The redeployment in relatively short tenured assets respond to the uncertainty of the tenure of the deposit growth. On a taxable equivalent basis, net interest margin was 3.56 % compared to 4.34% in the first quarter of 2020, a decrease of 78 basis points. The main variances in net interest income on a taxable equivalent basis were:

  • Lower income from money market, trading and investment securities by $24.2 million of which $46.7 million came from lower yields by 99 basis points related to the above-mentioned decrease in the Federal funds rate, partially offset by an increase in interest income of $22.4 million caused by the increase in average volume of $6.6 billion; and
  • lower interest income from loans by $23.8 million mainly driven by the decrease in yields of 55 basis points, partially offset by an increase in volume of $875 million. As mentioned above the loans issued under the SBA PPP carry a low yield of approximately 2.85%, including the amortization of fees received under the program. The decrease in yield is also impacted by the waived fees on past due loans associated to the moratoriums granted in order to mitigate the financial impact of the pandemic.

Partially offset by:

  • Lower interest expense on deposits by $19.3 million due to lower interest cost by 29 basis points resulting from the decrease in market rates, mostly on Puerto Rico Government and U.S. deposits, partially offset by higher average balance of interest-bearing deposits of $5.3 billion. This increase is related to inflow of deposits from the relief and assistance programs provided by the P.R. and Federal governments in response to the pandemic. Payment moratoriums and the closure of economic activity may have also contributed to this outcome. Non-interest-bearing deposits increased $2.0 billion in average quarter over quarter.

The net interest income for the Banco Popular de Puerto Rico (“BPPR”) segment amounted to $387.2 million for the quarter ended June 30, 2020, compared to $409.6 million in the previous quarter. The net interest margin for the second quarter of 2020 was 3.39%, a decrease of 83 basis points when compared to 4.22% for the previous quarter. The decrease in net interest margin was impacted by lower loan fees resulting from waivers granted due to the COVID-19 pandemic, the decrease in interest rates and a higher average balance of deposits by $6.8 billion which are mostly invested in overnight Fed Funds or in short-term U.S. Treasury securities. The issuance of PPP loans in BPPR amounted to $1.2 billion or $770 million in average loan balances during the second quarter. The cost of interest-bearing deposits was 0.28%, half of the cost reported in the first quarter of 0.56%, mostly driven by a lower cost of Puerto Rico Government deposits. Total cost of deposits for the quarter was 0.22%, compared to 0.44% reported in the first quarter of 2020, a decrease of 22 basis points.

Net interest income for Popular Bank (“Popular U.S.” or “PB”) was $73.7 million, for the quarter ended June 30, 2020, compared to $72.7 million during the previous quarter. The increase of $1.0 million in net interest income was primarily due to lower deposit costs by 26 basis points, partially offset by lower yields on debt securities, both driven by the decrease in market rates. Commercial and mortgage loan yields also decreased due to lower service fees related to waivers granted due to the pandemic, lower origination rates and the origination of PPP loans of approximately $207 million or $146 million in average loan balance during the second quarter. Net interest margin for the quarter was 3.07%, a decrease of 14 basis points when compared to 3.21% reported in the first quarter of 2020. Earning assets yielded 4.02%, compared to 4.37% in the previous quarter. The cost of interest-bearing deposits was 1.18%, compared to 1.44% in the previous quarter. Total cost of deposits for the quarter was 1.01%, compared to 1.25% reported in the first quarter.

Non-interest income

Non-interest income decreased by $14.6 million to $112.0 million for the quarter ended June 30, 2020, compared to $126.6 million for the quarter ended March 31, 2020. The decrease in non-interest income was primarily driven by:

  • Lower service charges on deposit accounts by $11.5 million, mainly in the BPPR segment, due to lower transactions resulting from business disruptions and the waiver of fees related to the pandemic;
  • lower other services by $12.7 million, mainly in the BPPR segment, due to lower debit and credit card fees by $8.6 million due to lower transactional volumes resulting from business disruptions related to the pandemic, which also resulted in the elimination of service charges and late fees, lower insurance fees by $1.7 million, and lower commission income by $1.4 million principally in the broker-dealer subsidiary; and
  • lower income from mortgage banking activities by $2.6 million mainly due to lower mortgage servicing fees by $1.9 million and higher unfavorable fair value adjustments on mortgage servicing rights (“MSRs”) by $2.4 million mainly due to a decrease in float earnings and a reduction in late fee revenues resulting from the moratoriums and fee waivers granted as a result of the pandemic relief efforts, partially offset by higher gains on securitization transactions and whole loan sales by $1.5 million;

Partially offset by:

  • an increase in net unrealized gain on equity securities of $5.2 million mainly related to employee deferred compensation plans that have an offsetting expense on personnel related expenses;
  • a favorable variance in adjustments to indemnity reserves on previously sold loans of $3.6 million mainly due to a lower provision related to loans previously sold with credit recourse; and
  • higher other operating income by $2.6 million mostly due to a gain of $5.6 million recognized as a result of the sale and partial leaseback of the corporate office building that houses our auto lending subsidiary, partially offset by lower daily rental revenues by $1.2 million.

Refer to Table B for further details.

Operating expenses

Operating expenses for the second quarter of 2020 totaled $348.2 million, a decrease of $24.4 million from the first quarter of 2020. The decrease in operating expenses was driven primarily by:

  • Lower personnel cost by $7.7 million due to lower commission, incentive and other bonuses by $9.2 million, mainly related to a special incentive to front-line employees during the COVID-19 pandemic amounting to $3.4 million which was granted during the first quarter of 2020, lower stock based compensation expense by $3.8 million due to awards granted in the first quarter and lower employment taxes by $2.4 million; partially offset by higher employee deferred compensation plans expense by $4.8 million, resulting from the unrealized gains in equity securities reflected by the Corporation, as administrator of these plan;
  • lower professional fees by $8.5 million due to lower processing and technology services by $3.4 million, mainly as a result of lower number of transactions, lower advisory expenses by $2.3 million, lower legal fees by $1.1 million and lower audit and tax services by $0.7 million;
  • lower business promotion by $1.9 million due to lower advertising expense;
  • lower OREO expenses by $2.8 million due to the temporary suspension of foreclosure activity as part of the pandemic relief measures; and
  • lower other operating expenses by $1.5 million mainly due to lower mortgage loans servicing operational losses and lower legal contingency reserves.

Full-time equivalent employees were 8,525 as of June 30, 2020, compared to 8,551 as of March 31, 2020.

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

Income taxes

For the quarter ended June 30, 2020, the Corporation recorded an income tax expense of $24.6 million, compared to $3.1 million for the previous quarter. The increase in income tax expense was mainly attributed to higher income before tax during the second quarter of 2020. The effective tax rate (“ETR”) for the second quarter of 2020 was of 16%, compared to 8% in the previous quarter.

The ETR of the Corporation is impacted by the composition and source of its taxable income. For the remainder of 2020, the Corporation currently expects its consolidated ETR to be within the 14% to 17% range.

Credit Quality

The Corporation exhibited stable credit quality metrics in the second quarter of 2020 as Popular continued to provide financial relief to customers impacted by the pandemic. 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 COVID-19 pandemic related risks, changes in the economic outlook of the regions in which we operate and how delinquencies and NCOs evolve after the period of payment deferrals lapses during the third quarter of 2020.

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

  • At June 30, 2020, total non-performing loans held-in-portfolio decreased by $8.5 million from March 31, 2020. BPPR’s NPLs decreased by $9.1 million, driven by lower mortgage and consumer (mostly auto loans), by $7.2 million and $5.3 million, respectively. Popular Bank’s NPLs remained flat quarter-over-quarter. During the first quarter of 2020, as a result of the implementation of CECL for purchased credit deteriorated (“PCD”) loans, the NPLs increased by $278 million. At June 30, 2020, the ratio of NPLs to total loans held-in-portfolio was 2.6% compared to 2.8% in the first quarter of 2020.
  • Inflows of NPLs held-in-portfolio, excluding consumer loans, increased by $21.0 million quarter-over-quarter. In Puerto Rico, commercial inflows increased by $9.2 million when compared to the first quarter of 2020, driven by a single $6.7 million loan relationship, while the mortgage inflows increased by $6.6 million. The PB inflows increased by $5.2 million from the previous quarter, mainly driven by higher mortgage inflows of $3.4 million during the period.
  • NCOs increased by $2.4 million from the first quarter of 2020, primarily driven by higher BPPR mortgage NCOs by $2.0 million. The Corporation’s ratio of annualized net charge-offs to average loans held-in-portfolio was 0.92%, compared to 0.91% in the first quarter of 2020. Refer to Table M for further information on net charge-offs and related ratios.
  • For the first quarter of 2020’s ACL computation, the Corporation utilized the March 27 Moody’s Analytics’ S3 Downside Scenario. That scenario assumed a double-dip recession. The U.S. stimulus plan enabled GDP growth in the third quarter of 2020, but the economy declined again in Q4 and it was not until Q2 2021 that a sustained recovery began. Under that scenario, unemployment peaked in the second quarter of 2020 with rates of 13.0% and 13.5% and economic activity declined by 25.3% and 18.3% in the U.S. and P.R., respectively. The recovery period began in the second quarter of 2021 and third quarter of 2021 for the U.S. and P.R., respectively.  For the second quarter’s ACL computation, the Corporation utilized Moody’s Analytics’ June Baseline scenario.  This scenario assumes that a significant pickup in economic activity will occur in the third quarter of 2020 driven by federal assistance programs, followed by a period of tepid growth.  Under this scenario, during the second quarter of 2020, the unemployment peaked with rates of 14.0% and 14.4% and economic activity declined by 33.4% and 24.6% in the U.S. and P.R., respectively. A sustained, albeit gradual, recovery begins in the fourth quarter of 2020 for the U.S. and P.R.

  • At June 30, 2020, the allowance for credit losses remained essentially flat, decreasing slightly by $1.3 million from the first quarter of 2020 to $918.4 million. The ACL reflects the current economic outlook, as well as downgrades in the internal credit rating of parts of the commercial portfolio, related to the impact of the COVID-19 pandemic. Incremental reserves in the prior quarter related to the pandemic amounted to $134 million. The ratio of the allowance for credit losses to loans held-in-portfolio was 3.16% in the second quarter of 2020, compared to 3.32% in the previous quarter. The ratio of the allowance for credit losses to NPLs held-in-portfolio stood at 120.8%, compared to 119.7% in the previous quarter.
  • The provision for credit losses for the second quarter of 2020 decreased by $125.9 million from the prior quarter. The provision for the BPPR and PB segments decreased by $52.6 million and $73.3 million, respectively, as the provision for the first quarter of 2020 included incremental reserves related to the COVID-19 pandemic impact. The provision to net charge-offs ratio was 97.2% in the second quarter of 2020, compared to 302.3% in the previous quarter.

Non-Performing Assets

(Unaudited)

(In thousands)

30-Jun-20

31-Mar-20

30-Jun-19

Total non-performing loans held-in-portfolio

$760,204

$768,675

$564,358

Non-performing loans held-for-sale

6,778

10,679

-

Other real estate owned (“OREO”)

113,940

123,922

118,851

Total non-performing assets

$880,922

$903,276

$683,209

Net charge-offs for the quarter

$64,953

$62,523

$47,153

Ratios:

Loans held-in-portfolio

$29,070,553

$27,662,272

$27,005,745

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

2.62%

2.78%

2.09%

Allowance for credit losses to loans held-in-portfolio

3.16

3.32

2.01

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

120.81

119.65

96.33

Refer to Table K for additional information.

Provision for Credit Losses - Loan Portfolios

(Unaudited)

Quarters ended

Six months ended

(In thousands)

30-Jun-20

31-Mar-20

30-Jun-19

30-Jun-20

30-Jun-19

Provision for credit losses:

BPPR

$60,423

$113,004

$28,975

$173,427

$60,429

Popular U.S.

2,681

75,991

11,216

78,672

21,587

Total provision for credit losses

$63,104

$188,995

$40,191

$252,099

$82,016

Credit Quality by Segment

(Unaudited)

(In thousands)

Quarters ended

BPPR

30-Jun-20

31-Mar-20

30-Jun-19

Provision for credit losses - loan portfolios

$60,423

$113,004

$28,975

Net charge-offs

62,143

59,517

37,167

Total non-performing loans held-in-portfolio

726,603

735,683

522,525

Allowance / loans held-in-portfolio

3.53%

3.74%

2.38%

Quarters ended

Popular U.S.

30-Jun-20

31-Mar-20

30-Jun-19

Provision for credit losses - loan portfolios

$2,681

$75,991

$11,216

Net charge-offs

2,810

3,006

9,986

Total non-performing loans held-in-portfolio

33,601

32,992

41,833

Allowance / loans held-in-portfolio

2.13%

2.19%

0.97%

Financial Condition Highlights

(Unaudited)

(In thousands)

30-Jun-20

31-Mar-20

30-Jun-19

Cash and money market investments

$10,060,358

$6,387,267

$3,563,819

Investment securities

21,058,918

16,114,167

17,038,098

Loans

29,070,553

27,662,272

27,005,745

Total assets

62,845,352

52,803,639

50,617,221

Deposits

53,844,300

44,797,176

42,059,837

Borrowings

1,339,339

1,336,897

1,604,670

Total liabilities

57,065,187

47,134,034

44,897,387

Stockholders’ equity

5,780,165

5,669,605

5,719,834

Total assets increased by $10.0 billion from the first quarter of 2020, driven by:

  • An increase of $3.7 billion in cash and money market investments, mainly due to an increase in deposits, partially offset by purchases of available-for-sale debt securities;
  • An increase of $5.0 billion in debt securities available-for-sale mainly due to purchases of U.S. Treasury securities and mortgage-backed securities; and
  • An increase of $1.4 billion in loans held-in-portfolio mainly due to growth of commercial loans due to originations of PPP loans at both BPPR and PB and an increase of $411 million in mortgage loans due to an increase in the rebooking of GNMA loans subject to the repurchase option due to an increase in delinquency resulting from the moratorium. Loans in our serviced GNMA portfolio benefit from payment forbearance programs but continue to reflect the contractual delinquency until the borrower repays deferred payments or completes a payment deferral modification or other borrower assistance alternative.

Total liabilities increased by $9.9 billion from the first quarter of 2020, mainly due to:

  • An increase of $9.0 billion in deposits, mainly from an increase at BPPR of public sector deposits by $4.2 billion and retail and commercial demand and savings accounts by $5.0 billion; and
  • An increase of $0.9 billion in other liabilities due to an increase in the liability for GNMA loans sold with a repurchase option of $0.4 billion, and $0.4 billion in unsettled purchases of debt securities.

Stockholders’ equity increased by approximately $110.6 million from the first quarter of 2020, principally due to net income for the quarter of $127.6 million and higher unrealized gains on debt securities available-for-sale by $15.2 million, partially offset by declared dividends of $33.7 million on common stock (paid on July 1, 2020) and $0.3 million in dividends on preferred stock reflecting the reduction due to the redemption of the Series B Preferred Stock during the first quarter of 2020.

Common equity tier-1 ratio (“CET1”), common equity per share and tangible book value per share were 15.70%, $68.40 and $60.13, respectively, at June 30, 2020, compared to 15.79%, $64.08 and $56.17 at March 31, 2020. The regulatory capital ratios for the second quarter of 2020 reflect the impact of the new capital simplification rules, effective on April 1, 2020, which resulted in a reduction to CET1 of 48 bps. These rules alleviate the limitations to the amount of mortgage servicing assets and certain deferred tax assets allowed as CET1 and increased the risk weight for the portion of the deferred tax assets included as a component of CET1 from 100% to 250% among other provisions. 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 Form 10Q for the quarter ended March 31, 2020, and in our Form 10Q for the quarter ended June 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 Thursday, July 23, 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 Sunday, August 23, 2020. The replay dial-in is: 1-877-344-7529 or 1-412-317-0088. The replay passcode is 10145761.

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

Popular, Inc.

Financial Supplement to Second Quarter 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 Second Quarter 2020 Earnings Release

Table A - Selected Ratios and Other Information

(Unaudited)

Quarters ended

Six months ended

30-Jun-20

31-Mar-20

30-Jun-19

30-Jun-20

30-Jun-19

Basic EPS

$1.49

$0.37

$1.77

$1.83

$3.46

Diluted EPS

$1.49

$0.37

$1.76

$1.83

$3.45

Average common shares outstanding

85,135,522

90,788,557

96,305,118

87,962,040

97,437,141

Average common shares outstanding - assuming dilution

85,161,661

90,892,961

96,457,448

88,039,712

97,591,989

Common shares outstanding at end of period

84,184,927

88,125,974

96,703,351

84,184,927

96,703,351

Market value per common share

$37.17

$35.00

$54.24

$37.17

$54.24

Market capitalization - (In millions)

$3,129

$3,084

$5,245

$3,129

$5,245

Return on average assets

0.87%

0.27%

1.38%

0.59%

1.39%

Return on average common equity

9.74%

2.50%

12.31%

6.06%

12.24%

Net interest margin (non-taxable equivalent basis)

3.25%

3.94%

4.11%

3.58%

4.16%

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

3.56%

4.34%

4.50%

3.93%

4.53%

Common equity per share

$68.40

$64.08

$58.63

$68.40

$58.63

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

$60.13

$56.17

$51.44

$60.13

$51.44

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

8.15%

9.50%

9.96%

8.15%

9.96%

Return on average tangible common equity [1]

11.23%

2.87%

14.07%

6.97%

14.00%

Tier 1 capital

15.77%

15.79%

16.80%

15.77%

16.80%

Total capital

18.27%

18.36%

19.39%

18.27%

19.39%

Tier 1 leverage

8.13%

8.94%

9.75%

8.13%

9.75%

Common Equity Tier 1 capital

15.70%

15.79%

16.80%

15.70%

16.80%

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

POPULAR, INC.

Financial Supplement to Second Quarter 2020 Earnings Release

Table B - Consolidated Statement of Operations

(Unaudited)

Quarters ended

Variance

Quarter ended

Variance

Six months ended

Q2 2020

Q2 2020

(In thousands, except per share information)

30-Jun-20

31-Mar-20

vs. Q1 2020

30-Jun-19

vs. Q2 2019

30-Jun-20

30-Jun-19

Interest income:

Loans

$429,670

$450,446

$(20,776)

$454,204

$(24,534)

$880,116

$901,917

Money market investments

2,015

12,000

(9,985)

22,534

(20,519)

14,015

51,754

Investment securities

76,884

87,912

(11,028)

94,241

(17,357)

164,796

175,277

Total interest income

508,569

550,358

(41,789)

570,979

(62,410)

1,058,927

1,128,948

Interest expense:

Deposits

42,780

62,101

(19,321)

78,449

(35,669)

104,881

149,275

Short-term borrowings

645

1,048

(403)

1,656

(1,011)

1,693

3,256

Long-term debt

14,263

14,114

149

14,558

(295)

28,377

29,138

Total interest expense

57,688

77,263

(19,575)

94,663

(36,975)

134,951

181,669

Net interest income

450,881

473,095

(22,214)

476,316

(25,435)

923,976

947,279

Provision for credit losses - loan portfolios

63,104

188,995

(125,891)

40,191

22,913

252,099

82,016

Provision (reversal) for credit losses - investment securities

(655)

736

(1,391)

-

(655)

81

-

Net interest income after provision for credit losses

388,432

283,364

105,068

436,125

(47,693)

671,796

865,263

Service charges on deposit accounts

30,163

41,659

(11,496)

39,617

(9,454)

71,822

78,308

Other service fees

52,084

64,773

(12,689)

74,031

(21,947)

116,857

138,338

Mortgage banking activities

3,777

6,420

(2,643)

(1,773)

5,550

10,197

8,153

Net gain (loss), including impairment, on equity securities

2,447

(2,728)

5,175

528

1,919

(281)

1,961

Net profit on trading account debt securities

82

491

(409)

422

(340)

573

682

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

2,222

957

1,265

-

2,222

3,179

-

Adjustments (expense) to indemnity reserves on loans sold

(1,160)

(4,793)

3,633

1,840

(3,000)

(5,953)

1,747

Other operating income

22,440

19,864

2,576

23,661

(1,221)

42,304

45,567

Total non-interest income

112,055

126,643

(14,588)

138,326

(26,271)

238,698

274,756

Operating expenses:

Personnel costs

Salaries

93,969

92,256

1,713

86,161

7,808

186,225

170,611

Commissions, incentives and other bonuses

16,076

25,258

(9,182)

22,636

(6,560)

41,334

48,397

Pension, postretirement and medical insurance

11,392

9,638

1,754

10,406

986

21,030

20,167

Other personnel costs, including payroll taxes

17,729

19,679

(1,950)

22,296

(4,567)

37,408

45,441

Total personnel costs

139,166

146,831

(7,665)

141,499

(2,333)

285,997

284,616

Net occupancy expenses

25,487

25,158

329

23,299

2,188

50,645

46,836

Equipment expenses

20,844

21,605

(761)

21,323

(479)

42,449

41,028

Other taxes

13,323

13,681

(358)

12,577

746

27,004

24,239

Professional fees

Collections, appraisals and other credit related fees

2,897

3,881

(984)

4,741

(1,844)

6,778

8,465

Programming, processing and other technology services

59,387

62,819

(3,432)

61,033

(1,646)

122,206

121,211

Legal fees, excluding collections

2,184

2,986

(802)

4,446

(2,262)

5,170

7,935

Other professional fees

28,079

31,385

(3,306)

25,028

3,051

59,464

45,103

Total professional fees

92,547

101,071

(8,524)

95,248

(2,701)

193,618

182,714

Communications

5,574

5,954

(380)

5,955

(381)

11,528

11,804

Business promotion

12,281

14,197

(1,916)

19,119

(6,838)

26,478

33,793

FDIC deposit insurance

5,340

5,080

260

5,278

62

10,420

10,084

Other real estate owned (OREO) expense

(344)

2,479

(2,823)

1,237

(1,581)

2,135

3,914

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

9,873

10,282

(409)

9,900

(27)

20,155

18,123

Other operating expenses

Operational losses

4,128

8,374

(4,246)

4,778

(650)

12,502

9,666

All other

18,217

15,423

2,794

20,431

(2,214)

33,640

38,935

Total other operating expenses

22,345

23,797

(1,452)

25,209

(2,864)

46,142

48,601

Amortization of intangibles

1,795

2,473

(678)

2,371

(576)

4,268

4,683

Total operating expenses

348,231

372,608

(24,377)

363,015

(14,784)

720,839

710,435

Income before income tax

152,256

37,399

114,857

211,436

(59,180)

189,655

429,584

Income tax expense

24,628

3,097

21,531

40,330

(15,702)

27,725

90,553

Net income

$127,628

$34,302

$93,326

$171,106

$(43,478)

$161,930

$339,031

Net income applicable to common stock

$127,275

$33,602

$93,673

$170,175

$(42,900)

$160,877

$337,169

Net income per common share - basic

$1.49

$0.37

$1.12

$1.77

$(0.28)

$1.83

$3.46

Net income per common share - diluted

$1.49

$0.37

$1.12

$1.76

$(0.27)

$1.83

$3.45

Dividends Declared per Common Share

$0.40

$0.40

$-

$0.30

$0.10

$0.80

$0.60

Popular, Inc.

Financial Supplement to Second Quarter 2020 Earnings Release

Table C - Consolidated Statement of Financial Condition

(Unaudited)

Variance

Q2 2020 vs.

(In thousands)

30-Jun-20

31-Mar-20

30-Jun-19

Q1 2020

Assets:

Cash and due from banks

$435,080

$445,551

$391,703

$(10,471)

Money market investments

9,625,278

5,941,716

3,172,116

3,683,562

Trading account debt securities, at fair value

33,560

42,545

35,623

(8,985)

Debt securities available-for-sale, at fair value

20,763,453

15,813,301

16,734,722

4,950,152

Debt securities held-to-maturity, at amortized cost

95,429

95,263

99,599

166

Less: Allowance for credit losses

12,735

13,390

-

(655)

Total debt securities held-to-maturity, net

82,694

81,873

99,599

821

Equity securities

166,476

163,058

168,154

3,418

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

68,725

87,855

54,028

(19,130)

Loans held-in-portfolio

29,250,076

27,847,840

27,171,467

1,402,236

Less: Unearned income

179,523

185,568

165,722

(6,045)

Allowance for credit losses

918,434

919,716

543,666

(1,282)

Total loans held-in-portfolio, net

28,152,119

26,742,556

26,462,079

1,409,563

Premises and equipment, net

513,680

552,007

554,614

(38,327)

Other real estate

113,940

123,922

118,851

(9,982)

Accrued income receivable

220,126

176,078

170,886

44,048

Mortgage servicing assets, at fair value

141,144

147,311

153,021

(6,167)

Other assets

1,833,444

1,788,437

1,806,825

45,007

Goodwill

671,122

671,122

671,122

-

Other intangible assets

24,511

26,307

23,878

(1,796)

Total assets

$62,845,352

$52,803,639

$50,617,221

$10,041,713

Liabilities and Stockholders’ Equity:

Liabilities:

Deposits:

Non-interest bearing

$12,520,510

$9,396,449

$8,955,304

$3,124,061

Interest bearing

41,323,790

35,400,727

33,104,533

5,923,063

Total deposits

53,844,300

44,797,176

42,059,837

9,047,124

Assets sold under agreements to repurchase

153,065

178,766

233,091

(25,701)

Other short-term borrowings

-

100,000

160,000

(100,000)

Notes payable

1,186,274

1,058,131

1,211,579

128,143

Other liabilities

1,881,548

999,961

1,232,880

881,587

Total liabilities

57,065,187

47,134,034

44,897,387

9,931,153

Stockholders’ equity:

Preferred stock

22,143

22,143

50,160

-

Common stock

1,044

1,044

1,044

-

Surplus

4,520,333

4,366,300

4,316,225

154,033

Retained earnings

2,033,782

1,940,170

1,935,826

93,612

Treasury stock

(1,016,486)

(870,675)

(392,208)

(145,811)

Accumulated other comprehensive income (loss), net of tax

219,349

210,623

(191,213)

8,726

Total stockholders’ equity

5,780,165

5,669,605

5,719,834

110,560

Total liabilities and stockholders’ equity

$62,845,352

$52,803,639

$50,617,221

$10,041,713

Popular, Inc.

Financial Supplement to Second Quarter 2020 Earnings Release

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

(Unaudited)

Quarters ended

Variance

30-Jun-20

31-Mar-20

30-Jun-19

Q2 2020 vs. Q1 2020

Q2 2020 vs. Q2 2019

($ 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

$27,356

$111.5

1.64

%

$20,744

$135.7

2.63

%

$19,664

$153.7

3.13

%

$6,612

($24.2)

(0.99)

%

$7,692

($42.2)

(1.49)

%

Loans:

Commercial

13,350

168.8

5.09

12,342

183.2

5.97

12,156

186.0

6.14

1,008

(14.4)

(0.88)

1,194

(17.2)

(1.05)

Construction

935

13.2

5.69

861

13.2

6.16

806

13.5

6.74

74

-

(0.47)

129

(0.3)

(1.05)

Mortgage

7,038

92.2

5.24

7,028

93.2

5.30

7,113

95.2

5.36

10

(1.0)

(0.06)

(75)

(3.0)

(0.12)

Consumer

2,918

82.9

11.43

3,110

89.4

11.56

2,864

85.3

11.95

(192)

(6.5)

(0.13)

54

(2.4)

(0.52)

Auto

2,957

66.0

8.98

2,992

67.7

9.10

2,822

67.7

9.62

(35)

(1.7)

(0.12)

135

(1.7)

(0.65)

Lease financing

1,082

16.1

5.97

1,072

16.3

6.07

972

14.8

6.07

10

(0.2)

(0.10)

110

1.3

(0.10)

Total loans

28,280

439.2

6.24

27,405

463.0

6.79

26,733

462.5

6.94

875

(23.8)

(0.55)

1,547

(23.3)

(0.70)

Total interest earning assets

$55,636

$550.7

3.98

%

$48,149

$598.7

4.99

%

$46,397

$616.2

5.32

%

$7,487

(48.0)

(1.01)

%

$9,239

$(65.5)

(1.34)

%

Allowance for credit losses - loan portfolio

(926)

(808)

(553)

(118)

(373)

Allowance for credit losses - investment securities

(13)

(13)

-

-

(13)

Other non-interest earning assets

4,100

4,026

3,931

74

169

Total average assets

$58,797

$51,354

$49,775

$7,443

$9,022

Liabilities and Stockholders' Equity:

Interest bearing deposits:

NOW and money market

$19,392

$11.6

0.24

%

$16,229

$25.3

0.63

%

$14,953

$39.3

1.05

%

$3,163

$(13.7)

(0.39)

%

$4,439

$(27.7)

(0.81)

%

Savings

11,856

10.2

0.35

10,724

11.7

0.44

10,067

10.5

0.42

1,132

(1.5)

(0.09)

1,789

(0.3)

(0.07)

Time deposits

8,730

21.0

0.97

7,691

25.1

1.31

7,827

28.7

1.47

1,039

(4.1)

(0.34)

903

(7.7)

(0.50)

Total interest-bearing deposits

39,978

42.8

0.43

34,644

62.1

0.72

32,847

78.5

0.96

5,334

(19.3)

(0.29)

7,131

(35.7)

(0.53)

Borrowings

1,336

14.9

4.48

1,327

15.2

4.59

1,448

16.2

4.50

9

(0.3)

(0.11)

(112)

(1.3)

(0.02)

Total interest-bearing liabilities

41,314

57.7

0.56

35,971

77.3

0.86

34,295

94.7

1.11

5,343

(19.6)

(0.30)

7,019

(37.0)

(0.55)

Net interest spread

3.42

%

4.13

%

4.21

%

(0.71)

%

(0.79)

%

Non-interest bearing deposits

11,006

9,005

8,868

2,001

2,138

Other liabilities

1,203

897

1,016

306

187

Stockholders' equity

5,274

5,481

5,596

(207)

(322)

Total average liabilities and stockholders' equity

$58,797

$51,354

$49,775

$7,443

$9,022

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

$493.0

3.56

%

$521.4

4.34

%

$521.5

4.50

%

($28.4)

(0.78)

%

($28.5)

(0.94)

%

Taxable equivalent adjustment

42.1

48.3

45.2

(6.2)

(3.1)

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

$450.9

3.25

%

$473.1

3.94

%

$476.3

4.11

%

($22.2)

(0.69)

%

($25.4)

(0.86)

%

Popular, Inc.

Financial Supplement to Second Quarter 2020 Earnings Release

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

(Unaudited)

Six months ended

30-Jun-20

30-Jun-19

Variance

Average

Income /

Yield /

Average

Income /

Yield /

Average

Income /

Yield /

($ amounts in millions; yields not on a taxable equivalent basis)

balance

Expense

Rate

balance

Expense

Rate

balance

Expense

Rate

Assets:

Interest earning assets:

Money market, trading and investment securities

$24,050

$247.2

2.06

%

$19,221

$295.0

3.09

%

$4,829

($47.8)

(1.03)

%

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

Commercial

12,846

352.0

5.51

12,110

368.7

6.14

736

(16.7)

(0.63)

Construction

898

26.4

5.91

806

27.2

6.79

92

(0.8)

(0.88)

Mortgage

7,033

185.4

5.27

7,124

190.4

5.35

(91)

(5.0)

(0.08)

Consumer

3,014

172.2

11.49

2,839

168.1

11.94

175

4.1

(0.45)

Auto

2,975

133.8

9.04

2,776

135.3

9.83

199

(1.5)

(0.79)

Lease financing

1,077

32.4

6.02

958

29.1

6.07

119

3.3

(0.05)

Total loans

27,843

902.2

6.51

26,613

918.8

6.95

1,230

(16.6)

(0.44)

Total interest earning assets

$51,893

$1,149.4

4.45

%

$45,834

$1,213.8

5.33

%

$6,059

($64.4)

(0.88)

%

Allowance for credit losses - loan portfolio

(867)

(564)

(303)

Allowance for credit losses - investment securities

(13)

-

(13)

Other non-interest earning assets

4,064

3,934

130

Total average assets

$55,077

$49,204

$5,873

Liabilities and Stockholders' Equity:

Interest bearing deposits:

NOW and money market

$17,811

$36.8

0.42

%

$14,504

$73.0

1.02

%

$3,307

($36.2)

(0.60)

%

Savings

11,290

21.9

0.39

9,958

20.4

0.41

1,332

1.5

(0.02)

Time deposits

8,211

46.1

1.13

7,752

55.9

1.45

459

(9.8)

(0.32)

Total interest-bearing deposits

37,312

104.8

0.57

32,214

149.3

0.93

5,098

(44.5)

(0.36)

Borrowings

1,331

30.1

4.53

1,458

32.4

4.46

(127)

(2.3)

0.07

Total interest-bearing liabilities

38,643

134.9

0.70

33,672

181.7

1.09

4,971

(46.8)

(0.39)

Net interest spread

3.75

%

4.24

%

(0.49)

%

Non-interest bearing deposits

10,004

8,910

1,094

Other liabilities

1,052

1,017

35

Stockholders' equity

5,378

5,605

(227)

Total average liabilities and stockholders' equity

$55,077

$49,204

$5,873

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

$1,014.5

3.93

%

$1,032.1

4.53

%

($17.6)

(0.60)

%

Taxable equivalent adjustment

90.5

84.8

5.7

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

$924.0

3.58

%

$947.3

4.16

%

($23.3)

(0.58)

%

Popular, Inc.

Financial Supplement to Second Quarter 2020 Earnings Release

Table F - Mortgage Banking Activities and Other Service Fees

(Unaudited)

Mortgage Banking Activities

Quarters ended

Variance

Six months ended

Variance

(In thousands)

30-Jun-20

31-Mar-20

30-Jun-19

Q2 2020 vs.Q1 2020

Q2 2020 vs.Q2 2019

30-Jun-20

30-Jun-19

2020 vs. 2019

Mortgage servicing fees, net of fair value adjustments:

Mortgage servicing fees

$9,058

$10,968

$11,916

$(1,910)

$(2,858)

$20,026

$23,603

$(3,577)

Mortgage servicing rights fair value adjustments

(7,640)

(5,229)

(17,186)

(2,411)

9,546

(12,869)

(21,011)

8,142

Total mortgage servicing fees, net of fair value adjustments

1,418

5,739

(5,270)

(4,321)

6,688

7,157

2,592

4,565

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

5,487

3,986

5,215

1,501

272

9,473

9,232

241

Trading account loss:

Unrealized gains (losses) on outstanding derivative positions

1,695

(1,695)

(227)

3,390

1,922

-

(227)

227

Realized losses on closed derivative positions

(4,823)

(1,610)

(1,491)

(3,213)

(3,332)

(6,433)

(3,444)

(2,989)

Total trading account loss

(3,128)

(3,305)

(1,718)

177

(1,410)

(6,433)

(3,671)

(2,762)

Total mortgage banking activities

$3,777

$6,420

$(1,773)

$(2,643)

$5,550

$10,197

$8,153

$2,044

Other Service Fees

Quarters ended

Variance

Six months ended

Variance

(In thousands)

30-Jun-20

31-Mar-20

30-Jun-19

Q2 2020 vs.Q1 2020

Q2 2020 vs.Q2 2019

30-Jun-20

30-Jun-19

2020 vs. 2019

Other service fees:

Debit card fees

$7,082

$10,237

$12,034

$(3,155)

$(4,952)

$17,319

$23,204

$(5,885)

Insurance fees

11,301

12,969

17,253

(1,668)

(5,952)

24,270

30,044

(5,774)

Credit card fees

17,762

23,186

24,794

(5,424)

(7,032)

40,948

47,080

(6,132)

Sale and administration of investment products

4,910

6,263

5,732

(1,353)

(822)

11,173

10,991

182

Trust fees

5,546

5,260

5,522

286

24

10,806

10,238

568

Other fees

5,483

6,858

8,696

(1,375)

(3,213)

12,341

16,781

(4,440)

Total other service fees

$52,084

$64,773

$74,031

$(12,689)

$(21,947)

$116,857

$138,338

$(21,481)

Popular, Inc.

Financial Supplement to Second Quarter 2020 Earnings Release

Table G - Loans and Deposits

(Unaudited)

Loans - Ending Balances

Variance

(In thousands)

30-Jun-20

31-Mar-20

30-Jun-19

Q2 2020 vs.Q1 2020

Q2 2020 vs.Q2 2019

Loans held-in-portfolio:

Commercial

$13,735,082

$12,498,969

$12,216,603

$1,236,113

$1,518,479

Construction

928,507

902,380

825,419

26,127

103,088

Legacy [1]

17,000

20,435

23,893

(3,435)

(6,893)

Lease financing

1,098,188

1,088,542

991,546

9,646

106,642

Mortgage

7,521,795

7,094,757

7,198,959

427,038

322,836

Auto

2,904,324

2,954,150

2,796,403

(49,826)

107,921

Consumer

2,865,657

3,103,039

2,952,922

(237,382)

(87,265)

Total loans held-in-portfolio

$29,070,553

$27,662,272

$27,005,745

$1,408,281

$2,064,808

Loans held-for-sale:

Commercial

$6,778

$10,679

$-

$(3,901)

$6,778

Mortgage

61,947

77,176

54,028

(15,229)

7,919

Total loans held-for-sale

$68,725

$87,855

$54,028

$(19,130)

$14,697

Total loans

$29,139,278

$27,750,127

$27,059,773

$1,389,151

$2,079,505

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

Deposits - Ending Balances

Variance

(In thousands)

30-Jun-20

31-Mar-20

30-Jun-19

Q2 2020 vs. Q1 2020

Q2 2020 vs.Q2 2019

Demand deposits [1]

$22,731,726

$17,023,170

$17,750,676

$5,708,556

$4,981,050

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

22,457,951

18,786,042

16,011,646

3,671,909

6,446,305

Savings, NOW and money market deposits (brokered)

522,929

460,140

384,251

62,789

138,678

Time deposits (non-brokered)

7,919,265

8,404,525

7,816,939

(485,260)

102,326

Time deposits (brokered CDs)

212,429

123,299

96,325

89,130

116,104

Total deposits

$53,844,300

$44,797,176

$42,059,837

$9,047,124

$11,784,463

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

Popular, Inc.

Financial Supplement to Second Quarter 2020 Earnings Release

Table H - Loan Delinquency - Puerto Rico Operations

(Unaudited)

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

31-Mar-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

$

8,382

$

359

$

1,379

$

10,120

$

137,145

$

147,265

$

1,379

$

-

Commercial real estate:

Non-owner occupied

4,632

4,382

109,054

118,068

1,968,831

2,086,899

109,054

-

Owner occupied

11,649

4,276

101,887

117,812

1,460,599

1,578,411

101,887

-

Commercial and industrial

17,112

3,608

39,280

60,000

3,458,407

3,518,407

38,784

496

Construction

4,411

-

-

4,411

159,979

164,390

-

-

Mortgage

339,648

141,841

854,105

1,335,594

4,680,414

6,016,008

404,465

449,640

Leasing

18,301

5,938

4,076

28,315

1,060,227

1,088,542

4,076

-

Consumer:

Credit cards

14,062

9,297

20,588

43,947

1,020,740

1,064,687

-

20,588

Home equity lines of credit

49

51

93

193

4,736

4,929

-

93

Personal

23,697

13,078

36,125

72,900

1,390,326

1,463,226

36,064

61

Auto

110,408

38,018

26,431

174,857

2,779,293

2,954,150

26,431

-

Other

622

293

13,966

14,881

122,086

136,967

13,543

423

Total

$

552,973

$

221,141

$

1,206,984

$

1,981,098

$

18,242,783

$

20,223,881

$

735,683

$

471,301

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

$

(6,741)

$

2,165

$

(11)

$

(4,587)

$

5,485

$

898

$

(11)

$

-

Commercial real estate:

Non-owner occupied

19,459

(262)

(383)

18,814

(28,813)

(9,999)

(383)

-

Owner occupied

7,790

1,195

(775)

8,210

93,554

101,764

(775)

-

Commercial and industrial

(11,690)

11,796

4,612

4,718

923,814

928,532

3,955

657

Construction

(4,411)

-

-

(4,411)

16,633

12,222

-

-

Mortgage

(60,150)

(18,683)

402,254

323,421

71,389

394,810

(7,203)

409,457 [1]

Leasing

(6,915)

4,417

675

(1,823)

11,469

9,646

675

-

Consumer:

Credit cards

(4,934)

6,127

(2,739)

(1,546)

(85,759)

(87,305)

-

(2,739)

Home equity lines of credit

(35)

211

(87)

89

(452)

(363)

-

(87)

Personal

(3,212)

652

(1,291)

(3,851)

(89,680)

(93,531)

(1,230)

(61)

Auto

(45,431)

(8,205)

(4,320)

(57,956)

8,130

(49,826)

(4,320)

-

Other

78

51

460

589

(7,115)

(6,526)

212

248

Total

$

(116,192)

$

(536)

$

398,395

$

281,667

$

918,655

$

1,200,322

$

(9,080)

$

407,475

[1]

Under the GNMA program, issuers such as BPPR have the option but not the obligation to repurchase loans that are 90 days or more past due. For accounting purposes, these loans subject to the repurchase option are required to be reflected on the financial statements of BPPR with an offsetting liability. While the borrowers for our serviced GNMA portfolio benefited from the moratorium, the delinquency status of these loans continued to be reported to GNMA without considering the moratorium.

Popular, Inc.

Financial Supplement to Second Quarter 2020 Earnings Release

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

(Unaudited)

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

$

-

March 31, 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

$

974

$

-

$

2,097

$

3,071

$

1,627,274

$

1,630,345

$

2,097

$

-

Commercial real estate:

Non-owner occupied

25,944

-

269

26,213

1,950,611

1,976,824

269

-

Owner occupied

3,910

-

245

4,155

338,805

342,960

245

-

Commercial and industrial

1,067

3,546

4,793

9,406

1,208,452

1,217,858

4,793

-

Construction

-

-

-

-

737,990

737,990

-

-

Mortgage

25,639

391

12,176

38,206

1,040,543

1,078,749

12,176

-

Legacy

37

41

1,980

2,058

18,377

20,435

1,980

-

Consumer:

Credit cards

-

-

-

-

36

36

-

-

Home equity lines of credit

1,438

72

9,322

10,832

106,579

117,411

9,322

-

Personal

2,687

1,632

2,110

6,429

308,559

314,988

2,110

-

Other

21

-

-

21

774

795

-

-

Total

$

61,717

$

5,682

$

32,992

$

100,391

$

7,338,000

$

7,438,391

$

32,992

$

-

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

$

(974)

$

366

$

-

$

(608)

$

10,722

$

10,114

$

-

$

-

Commercial real estate:

Non-owner occupied

(24,252)

5,136

128

(18,988)

(5,246)

(24,234)

128

-

Owner occupied

(2,900)

-

107

(2,793)

6,607

3,814

107

-

Commercial and industrial

3,374

2,515

(401)

5,488

219,736

225,224

(401)

-

Construction

23,209

9,600

-

32,809

(18,904)

13,905

-

-

Mortgage

(23,107)

4,086

1,968

(17,053)

49,281

32,228

1,968

-

Legacy

(8)

42

21

55

(3,490)

(3,435)

21

-

Consumer:

Credit cards

-

-

-

-

(10)

(10)

-

-

Home equity lines of credit

277

583

(1,080)

(220)

(6,484)

(6,704)

(1,080)

-

Personal

(1,049)

(108)

(134)

(1,291)

(42,229)

(43,520)

(134)

-

Auto

-

-

-

-

-

-

-

-

Other

(21)

-

-

(21)

598

577

-

-

Total

$

(25,451)

$

22,220

$

609

$

(2,622)

$

210,581

$

207,959

$

609

$

-

Popular, Inc.

Financial Supplement to Second Quarter 2020 Earnings Release

Table J - Loan Delinquency - Consolidated

(Unaudited)

30-Jun-20

Popular, Inc.

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

$

2,890

$

3,465

$

7,996

$

1,780,626

$

1,788,622

$

3,465

$

-

Commercial real estate:

Non-owner occupied

25,783

9,256

109,068

144,107

3,885,383

4,029,490

109,068

-

Owner occupied

20,449

5,471

101,464

127,384

1,899,565

2,026,949

101,464

-

Commercial and industrial

9,863

21,465

48,284

79,612

5,810,409

5,890,021

47,131

1,153

Construction

23,209

9,600

-

32,809

895,698

928,507

-

-

Mortgage

282,030

127,635

1,270,503

1,680,168

5,841,627

7,521,795

411,406

859,097

Leasing

11,386

10,355

4,751

26,492

1,071,696

1,098,188

4,751

-

Legacy

29

83

2,001

2,113

14,887

17,000

2,001

-

Consumer:

Credit cards

9,128

15,424

17,849

42,401

935,007

977,408

-

17,849

Home equity lines of credit

1,729

917

8,248

10,894

104,379

115,273

8,242

6

Personal

22,123

15,254

36,810

74,187

1,566,976

1,641,163

36,810

-

Auto

64,977

29,813

22,111

116,901

2,787,423

2,904,324

22,111

-

Other

700

344

14,426

15,470

116,343

131,813

13,755

671

Total

$

473,047

$

248,507

$

1,638,980

$

2,360,534

$

26,710,019

$

29,070,553

$

760,204

$

878,776

31-Mar-20

Popular, Inc.

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

$

9,356

$

359

$

3,476

$

13,191

$

1,764,419

$

1,777,610

$

3,476

$

-

Commercial real estate:

Non-owner occupied

30,576

4,382

109,323

144,281

3,919,442

4,063,723

109,323

-

Owner occupied

15,559

4,276

102,132

121,967

1,799,404

1,921,371

102,132

-

Commercial and industrial

18,179

7,154

44,073

69,406

4,666,859

4,736,265

43,577

496

Construction

4,411

-

-

4,411

897,969

902,380

-

-

Mortgage

365,287

142,232

866,281

1,373,800

5,720,957

7,094,757

416,641

449,640

Leasing

18,301

5,938

4,076

28,315

1,060,227

1,088,542

4,076

-

Legacy

37

41

1,980

2,058

18,377

20,435

1,980

-

Consumer:

Credit cards

14,062

9,297

20,588

43,947

1,020,776

1,064,723

-

20,588

Home equity lines of credit

1,487

123

9,415

11,025

111,315

122,340

9,322

93

Personal

26,384

14,710

38,235

79,329

1,698,885

1,778,214

38,174

61

Auto

110,408

38,018

26,431

174,857

2,779,293

2,954,150

26,431

-

Other

643

293

13,966

14,902

122,860

137,762

13,543

423

Total

$

614,690

$

226,823

$

1,239,976

$

2,081,489

$

25,580,783

$

27,662,272

$

768,675

$

471,301

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

$

(7,715)

$

2,531

$

(11)

$

(5,195)

$

16,207

$

11,012

$

(11)

$

-

Commercial real estate:

Non-owner occupied

(4,793)

4,874

(255)

(174)

(34,059)

(34,233)

(255)

-

Owner occupied

4,890

1,195

(668)

5,417

100,161

105,578

(668)

-

Commercial and industrial

(8,316)

14,311

4,211

10,206

1,143,550

1,153,756

3,554

657

Construction

18,798

9,600

-

28,398

(2,271)

26,127

-

-

Mortgage

(83,257)

(14,597)

404,222

306,368

120,670

427,038

(5,235)

409,457 [1]

Leasing

(6,915)

4,417

675

(1,823)

11,469

9,646

675

-

Legacy

(8)

42

21

55

(3,490)

(3,435)

21

-

Consumer:

Credit cards

(4,934)

6,127

(2,739)

(1,546)

(85,769)

(87,315)

-

(2,739)

Home equity lines of credit

242

794

(1,167)

(131)

(6,936)

(7,067)

(1,080)

(87)

Personal

(4,261)

544

(1,425)

(5,142)

(131,909)

(137,051)

(1,364)

(61)

Auto

(45,431)

(8,205)

(4,320)

(57,956)

8,130

(49,826)

(4,320)

-

Other

57

51

460

568

(6,517)

(5,949)

212

248

Total

$

(141,643)

$

21,684

$

399,004

$

279,045

$

1,129,236

$

1,408,281

$

(8,471)

$

407,475

[1]

Under the GNMA program, issuers such as BPPR have the option but not the obligation to repurchase loans that are 90 days or more past due. For accounting purposes, these loans subject to the repurchase option are required to be reflected on the financial statements of BPPR with an offsetting liability. While the borrowers for our serviced GNMA portfolio benefited from the moratorium, the delinquency status of these loans continued to be reported to GNMA without considering the moratorium.

Popular, Inc.

Financial Supplement to Second Quarter 2020 Earnings Release

Table K - Non-Performing Assets

(Unaudited)

Variance

(Dollars in thousands)

30-Jun-20

As a % of loans HIP by category

31-Mar-20

As a % of loans HIP by category

30-Jun-19

As a % of loans HIP by category

Q2 2020 vs. Q1 2020

Q2 2020 vs. Q2 2019

Non-accrual loans:

Commercial [1]

$261,128

1.9

%

$258,508

2.1

%

$155,348

1.3

%

$2,620

$105,780

Construction

-

-

-

-

13,848

1.7

-

(13,848)

Legacy [2]

2,001

11.8

1,980

9.7

2,469

10.3

21

(468)

Lease financing

4,751

0.4

4,076

0.4

2,830

0.3

675

1,921

Mortgage [1]

411,406

5.5

416,641

5.9

318,396

4.4

(5,235)

93,010

Auto

22,111

0.8

26,431

0.9

28,085

1.0

(4,320)

(5,974)

Consumer [1]

58,807

2.1

61,039

2.0

43,382

1.5

(2,232)

15,425

Total non-performing loans held-in-portfolio

760,204

2.6

%

768,675

2.8

%

564,358

2.1

%

(8,471)

195,846

Non-performing loans held-for-sale [3]

6,778

10,679

-

(3,901)

6,778

Other real estate owned (“OREO”)

113,940

123,922

118,851

(9,982)

(4,911)

Total non-performing assets

$880,922

$903,276

$683,209

$(22,354)

$197,713

Accruing loans past due 90 days or more [4] [5]

$878,776

$471,301

$494,488

$407,475

$384,288

Ratios:

Non-performing assets to total assets

1.40

%

1.71

%

1.35

%

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

2.62

2.78

2.09

Allowance for credit losses to loans held-in-portfolio

3.16

3.32

2.01

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

120.81

119.65

96.33

[1] The increase in non-accrual loans during the first quarter of 2020 includes the initial impact of $278 million related to the adoption of CECL on the portfolio of previously purchased credit deteriorated loans. This included mortgage loans for $133 million, commercial loans for $131 million and $14 million in consumer loans.

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

[3] There were $7 million in non-performing commercial loans held-for-sale as of June 30, 2020, $11 million for the quarter ended March 31, 2020 and none for the quarter ended June 30, 2019.

[4] It is the Corporation’s policy to report delinquent residential mortgage loans insured by FHA or guaranteed by the VA as accruing loans past due 90 days or more as opposed to non-performing since the principal repayment is insured. These include loans rebooked, which were previously pooled into GNMA securities amounting to $522 million (March 31, 2020 - $111 million; June 30, 2019 - $96 million). Under the GNMA program, issuers such as BPPR have the option but not the obligation to repurchase loans that are 90 days or more past due. For accounting purposes, these loans subject to the repurchase option are required to be reflected on the financial statements of BPPR with an offsetting liability. While the borrowers for our serviced GNMA portfolio benefited from the moratorium, the delinquency status of these loans continued to be reported to GNMA without considering the moratorium. These balances include $234 million of residential mortgage loans insured by FHA or guaranteed by the VA that are no longer accruing interest as of June 30, 2020 (March 31, 2020 - $222 million; June 30, 2019 - $262 million). Furthermore, the Corporation has approximately $62 million in reverse mortgage loans which are guaranteed by FHA, but which are currently not accruing interest. Due to the guaranteed nature of the loans, it is the Corporation's policy to exclude these balances from non-performing assets (March 31, 2020 - $62 million; June 30, 2019 - $66 million).

[5] The carrying value of loans accounted for under ASC Subtopic 310-30 that are contractually 90 days or more past due was $248 million at June 30, 2019. This amount is excluded from the above table as the loans’ accretable yield interest recognition is independent from the underlying contractual loan delinquency status.

Popular, Inc.

Financial Supplement to Second Quarter 2020 Earnings Release

Table L - Activity in Non-Performing Loans

(Unaudited)

Commercial loans held-in-portfolio:

Quarter ended

Quarter ended

30-Jun-20

31-Mar-20

(In thousands)

BPPR

Popular U.S.

Popular, Inc.

BPPR

Popular U.S.

Popular, Inc.

Beginning balance NPLs

$251,104

$7,404

$258,508

$147,255

$3,505

$150,760

Transition of PCI to PCD loans under CECL

-

-

-

112,517

18,547

131,064

Plus:

New non-performing loans

14,187

1,986

16,173

4,954

166

5,120

Advances on existing non-performing loans

-

100

100

-

95

95

Less:

Non-performing loans transferred to OREO

-

-

-

(2,202)

-

(2,202)

Non-performing loans charged-off

(1,402)

(368)

(1,770)

(2,146)

(554)

(2,700)

Loans returned to accrual status / loan collections

(9,999)

(1,884)

(11,883)

(9,274)

(3,676)

(12,950)

Loans transferred to held-for-sale

-

-

-

-

(10,679)

(10,679)

Ending balance NPLs

$253,890

$7,238

$261,128

$251,104

$7,404

$258,508

Construction loans held-in-portfolio:

Quarter ended

Quarter ended

30-Jun-20

31-Mar-20

(In thousands)

BPPR

Popular U.S.

Popular, Inc.

BPPR

Popular U.S.

Popular, Inc.

Beginning balance NPLs

$-

$-

$-

$119

$26

$145

Less:

Loans returned to accrual status / loan collections

-

-

-

(119)

(26)

(145)

Ending balance NPLs

$-

$-

$-

$-

$-

$-

Mortgage loans held-in-portfolio:

Quarter ended

Quarter ended

30-Jun-20

31-Mar-20

(In thousands)

BPPR

Popular U.S.

Popular, Inc.

BPPR

Popular U.S.

Popular, Inc.

Beginning balance NPLs

$404,465

$12,176

$416,641

$283,708

$11,091

$294,799

Transition of PCI to PCD loans under CECL

-

-

-

133,186

-

133,186

Plus:

New non-performing loans

82,560

7,440

90,000

75,966

4,007

79,973

Advances on existing non-performing loans

-

11

11

-

52

52

Less:

Non-performing loans transferred to OREO

(48)

-

(48)

(8,188)

-

(8,188)

Non-performing loans charged-off

(7,847)

(7)

(7,854)

(4,747)

-

(4,747)

Loans returned to accrual status / loan collections

(81,868)

(5,476)

(87,344)

(75,460)

(2,974)

(78,434)

Ending balance NPLs

$397,262

$14,144

$411,406

$404,465

$12,176

$416,641

Total non-performing loans held-in-portfolio (excluding consumer):

Quarter ended

Quarter ended

30-Jun-20

31-Mar-20

(In thousands)

BPPR

Popular U.S.

Popular, Inc.

BPPR

Popular U.S.

Popular, Inc.

Beginning balance NPLs

$655,569

$21,560

$677,129

$431,082

$16,621

$447,703

Transition of PCI to PCD loans under CECL

-

-

-

245,703

18,547

264,250

Plus:

New non-performing loans

96,747

9,426

106,173

80,920

4,173

85,093

Advances on existing non-performing loans

-

137

137

-

171

171

Less:

Non-performing loans transferred to OREO

(48)

-

(48)

(10,390)

-

(10,390)

Non-performing loans charged-off

(9,249)

(375)

(9,624)

(6,893)

(554)

(7,447)

Loans returned to accrual status / loan collections

(91,867)

(7,365)

(99,232)

(84,853)

(6,719)

(91,572)

Loans transferred to held-for-sale

-

-

-

-

(10,679)

(10,679)

Ending balance NPLs [1]

$651,152

$23,383

$674,535

$655,569

$21,560

$677,129

[1] Includes $2.0 million of NPLs related to the legacy portfolio as of June 30, 2020 (March 31, 2020 - $2.0 million).

Popular, Inc.

Financial Supplement to Second Quarter 2020 Earnings Release

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

(Unaudited)

Quarter ended

Quarter ended

Quarter ended

30-Jun-20

31-Mar-20

30-Jun-19

(Dollars in thousands)

Total

Total

Total

Balance at beginning of period

$919,716

$477,708

$550,628

Impact of adopting CECL

-

315,107

-

Provision for credit losses

63,104

188,995

40,191

Initial allowance for credit losses - PCD Loans

567

429

-

983,387

982,239

590,819

Net loans charged-off:

BPPR

Commercial

1,097

580

184

Construction

(195)

(19)

(54)

Lease financing

3,390

3,307

1,630

Mortgage

7,554

5,538

8,713

Consumer

50,297

50,111

26,694

Total BPPR

62,143

59,517

37,167

Popular U.S.

Commercial

(897)

100

5,791

Construction

-

(155)

-

Legacy [1]

113

(101)

(277)

Mortgage

(19)

(1)

230

Consumer

3,613

3,163

4,242

Total Popular U.S.

2,810

3,006

9,986

Total loans charged-off - Popular, Inc.

64,953

62,523

47,153

Balance at end of period

$918,434

$919,716

$543,666

POPULAR, INC.

Annualized net charge-offs to average loans held-in-portfolio

0.92

%

0.91

%

0.71

%

Provision for credit losses to net charge-offs

97.15

%

302.28

%

85.24

%

BPPR

Annualized net charge-offs to average loans held-in-portfolio

1.20

%

1.18

%

0.75

%

Provision for credit losses to net charge-offs

97.23

%

189.87

%

77.96

%

Popular U.S.

Annualized net charge-offs to average loans held-in-portfolio

0.15

%

0.17

%

0.59

%

Provision for credit losses to net charge-offs

95.41

%

2527.98

%

112.32

%

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

Popular, Inc.

Financial Supplement to Second Quarter 2020 Earnings Release

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

(Unaudited)

30-Jun-20

(Dollars in thousands)

Commercial

Construction

Legacy [1]

Mortgage

Lease financing

Consumer

Total

Total ACL

$314,956

$6,417

$2,052

$222,237

$13,093

$359,679

$918,434

Total loans held-in-portfolio

$13,735,082

$928,507

$17,000

$7,521,795

$1,098,188

$5,769,981

$29,070,553

ACL to loans held-in-portfolio

2.29

%

0.69

%

12.07

%

2.95

%

1.19

%

6.23

%

3.16

%

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

31-Mar-20

(Dollars in thousands)

Commercial

Construction

Legacy [1]

Mortgage

Lease financing

Consumer

Total

Total ACL

$305,048

$2,591

$2,026

$227,087

$12,589

$370,375

$919,716

Total loans held-in-portfolio

$12,498,969

$902,380

$20,435

$7,094,757

$1,088,542

$6,057,189

$27,662,272

ACL to loans held-in-portfolio

2.44

%

0.29

%

9.91

%

3.20

%

1.16

%

6.11

%

3.32

%

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

Variance

(Dollars in thousands)

Commercial

Construction

Legacy

Mortgage

Lease financing

Consumer

Total

Total ACL

$9,908

$3,826

$26

$(4,850)

$504

$(10,696)

$(1,282)

Total loans held-in-portfolio

$1,236,113

$26,127

$(3,435)

$427,038

$9,646

$(287,208)

$1,408,281

Popular, Inc.

Financial Supplement to Second Quarter 2020 Earnings Release

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

(Unaudited)

30-Jun-20

Puerto Rico

(In thousands)

Commercial

Construction

Mortgage

Lease financing

Consumer

Total

Allowance for credit losses:

$214,927

$354

$199,250

$13,093

$328,158

$755,782

Loans held-in-portfolio:

8,352,177

176,612

6,410,818

1,098,188

5,386,408

21,424,203

ACL to loans held-in-portfolio:

2.57

%

0.20

%

3.11

%

1.19

%

6.09

%

3.53

%

31-Mar-20

Puerto Rico

(In thousands)

Commercial

Construction

Mortgage

Lease financing

Consumer

Total

Allowance for credit losses:

$207,850

$419

$202,800

$12,589

$333,277

$756,935

Loans held-in-portfolio:

7,330,982

164,390

6,016,008

1,088,542

5,623,959

20,223,881

ACL to loans held-in-portfolio:

2.84

%

0.25

%

3.37

%

1.16

%

5.93

%

3.74

%

Variance

(In thousands)

Commercial

Construction

Mortgage

Lease financing

Consumer

Total

Allowance for credit losses:

$7,077

$(65)

$(3,550)

$504

$(5,119)

$(1,153)

Loans held-in-portfolio:

1,021,195

12,222

394,810

9,646

(237,551)

1,200,322

Popular, Inc.

Financial Supplement to Second Quarter 2020 Earnings Release

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

(Unaudited)

30-Jun-20

Popular U.S.

(In thousands)

Commercial

Construction

Legacy

Mortgage

Consumer

Total

Allowance for credit losses:

$100,029

$6,063

$2,052

$22,987

$31,521

$162,652

Loans held-in-portfolio:

5,382,905

751,895

17,000

1,110,977

383,573

7,646,350

ACL to loans held-in-portfolio:

1.86

%

0.81

%

12.07

%

2.07

%

8.22

%

2.13

%

31-Mar-20

Popular U.S.

(In thousands)

Commercial

Construction

Legacy

Mortgage

Consumer

Total

Allowance for credit losses:

$97,198

$2,172

$2,026

$24,287

$37,098

$162,781

Loans held-in-portfolio:

5,167,987

737,990

20,435

1,078,749

433,230

7,438,391

ACL to loans held-in-portfolio:

1.88

%

0.29

%

9.91

%

2.25

%

8.56

%

2.19

%

Variance

(In thousands)

Commercial

Construction

Legacy

Mortgage

Consumer

Total

Allowance for credit losses:

$2,831

$3,891

$26

$(1,300)

$(5,577)

$(129)

Loans held-in-portfolio:

214,918

13,905

(3,435)

32,228

(49,657)

207,959

Popular, Inc.

Financial Supplement to Second Quarter 2020 Earnings Release

Table Q - Reconciliation to GAAP Financial Measures

(Unaudited)

(In thousands, except share or per share information)

30-Jun-20

31-Mar-20

30-Jun-19

Total stockholders’ equity

$5,780,165

$5,669,605

$5,719,834

Less: Preferred stock

(22,143)

(22,143)

(50,160)

Less: Goodwill

(671,122)

(671,122)

(671,122)

Less: Other intangibles

(24,511)

(26,307)

(23,878)

Total tangible common equity

$5,062,389

$4,950,033

$4,974,674

Total assets

$62,845,352

$52,803,639

$50,617,221

Less: Goodwill

(671,122)

(671,122)

(671,122)

Less: Other intangibles

(24,511)

(26,307)

(23,878)

Total tangible assets

$62,149,719

$52,106,210

$49,922,221

Tangible common equity to tangible assets

8.15

%

9.50

%

9.96

%

Common shares outstanding at end of period

84,184,927

88,125,974

96,703,351

Tangible book value per common share

$60.13

$56.17

$51.44

Quarterly average

Total stockholders’ equity [1]

$5,274,071

$5,481,179

$5,595,762

Less: Preferred Stock

(22,143)

(38,768)

(50,160)

Less: Goodwill

(671,121)

(671,121)

(671,121)

Less: Other intangibles

(25,497)

(27,826)

(24,715)

Total tangible equity

$4,555,310

$4,743,464

$4,849,766

Return on average tangible common equity

11.23

%

2.87

%

14.07

%

[1] Average balances exclude unrealized gains or losses on debt securities available-for-sale.

Contacts:

Popular, Inc.
Investor Relations:
Paul Cardillo, 212-417-6721
Senior Vice President, Investor Relations Officer

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