Exhibit 99.1 Investor Presentation Third Quarter 2018 |
This presentation contains “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, including without limitation those about Popular’s business, financial condition, results of operations, plans, objectives, and future performance. These statements are not guarantees of future performance, are based on management’s current expectations and, by their nature, involve risks, uncertainties, estimates and assumptions. Potential factors, some of which are beyond the Corporation’s control, could cause actual results to differ materially from those expressed in, or implied by, such forward-looking statements. Risks and uncertainties include without limitation the effect of competitive and economic factors, and our reaction to those factors, the adequacy of the allowance for loan losses, delinquency trends, market risk and the impact of interest rate changes, capital market conditions, capital adequacy and liquidity, the effect of legal proceedings and new accounting standards on the Corporation’s financial condition and results of operations, the impact of Hurricanes Irma and Maria on us, our ability to successfully integrate the auto finance business acquired from Wells Fargo & Company, as well as the unexpected costs, including, without limitation, costs due to exposure to any unrecorded liabilities or issues not identified during due diligence investigation of the business or that are not subject to indemnification or reimbursement, and risks that the business may suffer as a result of the transaction, including due to adverse effects on relationships with customers, employees and service providers. All statements contained herein that are not clearly historical in nature, are forward- looking, and the words “anticipate,” “believe,” “continues,” “expect,” “estimate,” “intend,” “project” and similar expressions, and future or conditional verbs such as “will,” “would,” “should,” “could,” “might,” “can,” “may” or similar expressions, are generally intended to identify forward-looking statements. More information on the risks and important factors that could affect the Corporation’s future results and financial condition is included in our Annual Report on Form 10-K for the year ended December 31, 2017, our Quarterly Report on Form 10-Q for the quarters ended March 31, 2018 and June 30, 2018, and our Form 10-Q for the quarter ended September 30, 2018 to be filed with the SEC. Our filings are available on the Corporation’s website (www.popular.com) and on the Securities and Exchange Commission website (www.sec.gov). The Corporation assumes no obligation to update or revise any forward-looking statements or information which speak as of their respective dates. Cautionary Note Regarding Forward-Looking Statements 2 |
• NPLs decreased by $11 million QoQ; ratio at 2.4% • NCO ratio increased to 1.00% from 0.95% in the previous quarter Credit Metrics • Net income of $140.6 million • Strong margins: Popular, Inc. 4.07%, BPPR 4.35% Earnings • Robust capital; Common Equity Tier 1 Capital ratio of 16.2% • Tangible book value per share of $44.62 compared to $44.78 in Q2 2018 Capital • Acquired Wells Fargo’s auto finance business in P.R. (“Reliable”); net income contribution of $12 million for the quarter • Executed previously announced capital actions • Issued $300 million of senior debt with a 2023 maturity and a coupon of 6.125% • Called $450 million of senior debt with a 2019 maturity and a coupon of 7% Quarter Events Q3 2018 Highlights 3 |
Reliable Transaction Overview • Acquired $1.6 billion in retail auto loans and $341 million in commercial loans at a 4.5% discount Portfolio • Average loan rate for the quarter of 7.3% and effective yield of 12%, including discount amortization Yield • Original estimate of $36 million in net income for the first twelve months, excluding servicing fees and transaction related costs • Revised estimate of approximately $55 million in net income for 2019, including servicing income and conversion costs • Approximately $40 million in operating expenses for 2019 Financial Performance • Acquisition treated as a business combination for accounting purposes • $60 million goodwill recorded as a result of the transaction Goodwill / Purchase Accounting 4 |
Financial Summary (GAAP) 1 1 See slide 6 for Q2 2018 adjusted Non-GAAP results 5 (Unaudited) ($ in thousands) Q3 2018 Q2 2018 Net interest income 451,469 $ 414,136 $ 37,333 $ Service charges on deposits 38,147 37,102 1,045 Other service fees 64,316 62,876 1,440 Mortgage banking activities 11,269 10,071 1,198 Adjustments (expense) to indemnity reserves on loans sold (3,029) (527) (2,502) FDIC loss-share income - 102,752 (102,752) Other non-interest income 40,318 22,535 17,783 Gross revenues 602,490 648,945 (46,455) Provision for loan losses 54,387 60,054 (5,667) Net revenues 548,103 588,891 (40,788) Personnel costs 139,757 124,332 15,425 Professional fees 83,860 93,903 (10,043) Business promotion 15,478 16,778 (1,300) OREO expenses 7,950 6,947 1,003 Other operating expenses 118,392 95,708 22,684 Total operating expenses 365,437 337,668 27,769 Income before income tax 182,666 251,223 (68,557) Income tax expense (benefit) 42,018 (28,560) 70,578 Net income 140,648 $ 279,783 $ (139,135) $ Variance |
GAAP Reconciliation 6 1 Refer to the Company's Q3 2018 earnings release for more detailed information (Unaudited) ($ in thousands) Pre-tax Impact on net income U.S. GAAP Net income 279,783 $ Non-GAAP Adjustments 1 : Termination of FDIC Shared-Loss Agreements (94,633) $ 45,059 $ (49,574) Tax Closing Agreement - (108,946) (108,946) Adjusted net income (Non-GAAP) 121,263 $ Q2 2018 Income tax effect |
7 Popular, Inc. (%) • Robust capital levels; Common Equity Tier 1 of 16.2% • Tangible book value per share of $44.62 compared to $44.78 in Q2 2018 • Entered into a $125 million accelerated share repurchase transaction • Redeemed $53 million of Trust Preferred Securities Capital Note: Estimated for the current period 17.5 17.5 20.4 9.8 16.2 16.2 18.8 9.6 Common Equity Tier 1 Capital Tier 1 Risk-Based Capital Total Risk-Based Capital Tier 1 Leverage Q2 2018 Q3 2018 |
8 Municipalities Obligations of municipalities are backed by real and personal property taxes, municipal excise taxes, and/or a percentage of the sales and use tax. Indirect exposure includes loans or securities that are payable by non-governmental entities, but which carry a government guarantee to cover any shortfall in collateral in the event of borrower default. Majority are single-family mortgage related. Indirect Exposure The Corporation has no direct exposure to debt of the P.R. central government or its public corporations. Our direct exposure to P.R. municipalities is $458 million, decreasing by $23 million QoQ, due to principal repayments. P.R. Public Sector Exposure Outstanding P.R. government exposure ($ in millions) Loans Securities Total Municipalities 413 $ 45 $ 458 $ Indirect Exposure 323 $ 51 $ 374 $ |
9 Highlights • NPAs decreased by $19 million QoQ • NPLs decreased by $11 million QoQ P.R. NPLs at $581 million, or 2.9% of loans, down by $9 million, mainly driven by: - lower mortgage NPLs of $24 million, primarily due to lower inflows, offset by - higher P.R. consumer NPLs of $8 million related to the Reliable acquisition - higher commercial NPLs of $8 million, driven by a single borrower of $16 million U.S. NPLs at $52 million, or 0.8% of loans, down by $2 million QoQ • OREOs down by $8 million QoQ, driven by sales activity, in part offset by the resumption of foreclosure activity after the hurricanes Non-Performing Assets ($ in millions) Non-Performing Assets Differences due to rounding Non-Performing Loans (excluding covered loans for prior periods) ($ in millions) $771 $1,203 $2,276 $1,572 $1,738 $1,425 $598 $630 $602 $558 $551 $607 $643 $632 2.8% 4.7% 9.6% 7.6% 8.4% 6.8% 2.8% 3.3% 2.7% 2.5% 2.3% 2.5% 2.6% 2.4% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Q1 18 Q2 18 Q3 18 Mortgage Commercial & Construction Other NPL/Loans (HIP) $852 $1,293 $2,402 $2,489 $2,365 $2,002 $932 $933 $843 $774 $743 $779 $785 $766 1.9% 3.3% 6.9% 6.4% 6.3% 5.5% 2.6% 2.8% 2.4% 2.0% 1.7% 1.7% 1.7% 1.6% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Q1 18 Q2 18 Q3 18 NPLs OREOs NPL HFS NPAs/Total Assets |
10 NPL Inflows Total NPL Inflows ($ in millions) Highlights • Total NPL inflows down by $108 million QoQ P.R. mortgage inflows down $59 million, significantly lower than pre-hurricane levels, reflective of lower early delinquencies post-moratorium P.R. commercial inflows down by $31 million, driven by the impact of two large customers with an aggregate amount of $46 million in the previous quarter U.S. construction inflows down by $18 million, driven by a single borrower, in the previous quarter Mortgage NPL Inflows ($ in millions) Commercial, Construction and Legacy NPL Inflows ($ in millions) Beginning in Q2 2018 figures include loans previously classified as covered Differences due to rounding 16 12 23 9 9 6 6 6 9 9 4 24 6 185 103 101 106 101 94 116 95 105 25 128 158 68 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 U.S. Inflows P.R. Inflows 6 7 7 7 7 5 5 5 5 7 3 4 4 94 85 79 80 87 76 82 82 97 2 108 104 44 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 U.S. Inflows P.R. Inflows 11 5 16 3 2 2 1 1 4 2 1 20 2 91 18 22 26 14 17 34 14 8 23 19 54 24 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 U.S. Inflows P.R. Inflows |
11 NCOs and NCO-to-Loan Ratio ($ in millions) Provision and Provision-to-NCO Ratio ($ in millions) Highlights • Net charge-offs (NCOs) increased by $6 million, driven by higher P.R. mortgage and consumer NCOs of $10 million and $9 million, respectively, mostly due to post-moratorium effects, offset by lower commercial NCOs of $14 million, mostly related to higher taxi medallion charge-offs in the previous quarter NCO ratio at 1.00% vs. 0.95% in Q2 2018 • Allowance for loan and lease losses (ALLL) decreased by $9 million QoQ P.R. ALLL decreased by $7 million. ALLL-to-Loans ratio at 2.39% vs. 2.61% in Q2 2018 ALLL-to-NPL stood at 100%, flat QoQ • Provision decreased by $6 million from Q2 2018 P.R. provision up by $7 million U.S. provision down by $13 million Provision-to-NCO ratio of 85.4%, compared to 104.2% in Q2 2018 Beginning in Q2 2018 figures include loans previously classified as covered Differences due to rounding ALLL, ALLL-to-NCO and ALLL-to-NPL Ratios ($ in millions) Additional Credit Metrics 46 83 42 35 35 56 36 57 53 94 53 58 64 8 -5 0.83% 1.00% Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 NCO Loan Sales Write-downs/(recoveries) NCO% 59 47 48 45 43 41 42 50 158 70 69 60 54 10 11 -5 0 128% 85% Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 PLLL Loan Sales PLLL PLLL/NCO |
12 Driving Shareholder Value Capital • Robust capital with Common Equity Tier 1 Capital of 16.2% • Tangible book value per share of $44.62 • Executed capital actions Earnings • Franchise in P.R. uniquely positioned to take advantage of improving economic trends • Acquisition of Reliable’s auto finance business Additional Value • Investment in Evertec and Banco BHD León |
Investor Presentation Third Quarter 2018 Appendix |
Industry Financial services Headquarters San Juan, Puerto Rico Assets $48 billion (among top 50 BHCs in the U.S.) Loans $27 billion Deposits $40 billion Banking branches 164 in Puerto Rico, 51 in the U.S. and 9 in the Virgin Islands NASDAQ ticker symbol BPOP Market Cap $5 billion 14 Banco Popular de Puerto Rico Popular Auto, LLC Popular Securities LLC Popular’s Insurance Subsidaries Popular North America, Inc. Popular Bank 1 Holding Companies (Including Equity Investments) Franchise Summary Corporate Structure Assets = $38 billion Assets = $9 billion Puerto Rico Operations United States Operations Assets = $48 billion Corporate Structure – Popular, Inc. Information as of September 30, 2018 ¹ Doing business as Popular Selected equity investments EVERTEC and Banco BHD León under Corporate segment and joint ventures under BPPR segment • Transaction processing, business processes outsourcing • 16.03% stake • Adjusted EBITDA of $54 million for the quarter ended June 30, 2018 • Dominican Republic bank • 15.84% stake • 2017 net income of $164 million • Construction and commercial loans vehicle • 24.9% stake • Construction, commercial loans and OREOs vehicle • 24.9% stake PRLP 2011 Holdings, LLC PR Asset Portfolio 2013-1 International, LLC |
De-Risked Loan Portfolios • The Corporation has de-risked its loan portfolios by reducing its exposure to asset classes with historically high loss content • The P.R. commercial portfolio reductions include: Commercial portfolio, including construction, has decreased from 55% of total loans held-in- portfolio to 38% Construction portfolio is down by 94% since Q4 2007 SME lending is down by 55% from Q4 2007 • Collateralized exposure now represents a larger portion of consumer loan portfolio • Unsecured loan credit quality has improved as overall FICO scores have increased 15 Differences due to rounding ($ in millions) Highlights 1 Small and Medium Enterprise 2 NCOs distribution represents the percentage allocation of net charge-offs from Q1 2008 through Q3 2018 per each loan category, excluding net charge-offs from previously covered loans up to Q2 2015. NCOs ($mm) (%) ($mm) (%) ($mm) (%) Distribution CRE SME $2,938 33% $1,628 22% ($1,310) -45% 27% C&I SME 2,287 25% 735 10% (1,552) -68% 28% C&I Corp 1,592 18% 2,430 32% 838 53% 6% Construction 1,231 14% 78 1% (1,153) -94% 33% CRE Corp 892 10% 2,466 33% 1,574 176% 5% Multifamily 64 1% 148 2% 84 132% 1% Total $9,004 $7,485 ($1,519) -17% 100% P.R. Commercial & Construction Distribution Q4 2007 Q3 2018 Variance 1 1 1 2 $ in millions Q4 2007 Q3 2018 Q4 2007 Q3 2018 Q4 2007 Q3 2018 Variance Commercial $7,774 $7,407 $4,515 $4,586 $12,288 $11,994 ($295) Consumer 3,552 4,903 1,698 437 5,249 5,340 91 Mortgage 2,933 6,531 3,139 773 6,071 7,304 1,233 Construction 1,231 78 237 866 1,468 943 (525) Leases 814 904 - - 814 904 89 Legacy - - 2,130 28 2,130 28 (2,102) Total $16,304 $19,823 $11,718 $6,689 $28,021 $26,512 ($1,509) Loan Composition (Held-in Portfolio) P.R. U.S. Total |
16 Business Segments (GAAP) ¹ Non-fully taxable equivalent (Unaudited) ($ in millions) Financial Results Q3 2018 Q2 2018 Variance Q3 2018 Q2 2018 Variance Net interest income 389 $ 353 $ 36 $ 76 $ 76 $ - $ Non-interest income 136 220 (84) 6 5 1 Gross revenues 525 573 (48) 82 81 1 Provision for loan losses 52 44 8 3 16 (13) Operating expenses 296 268 28 47 48 (1) Income before income tax 177 261 (84) 32 17 15 Income tax expense (benefit) 39 (24) 63 10 4 6 Net income 138 $ 285 $ (147) $ 22 $ 13 $ 9 $ ($ in millions) Balance Sheet Highlights Total assets 38,339 $ 37,883 $ 456 $ 9,389 $ 9,469 $ (80) $ Total loans 19,836 18,082 1,754 6,689 6,561 128 Total deposits 33,453 32,704 749 7,006 7,058 (52) Asset Quality (including covered assets) Q3 2018 Q2 2018 Variance Q3 2018 Q2 2018 Variance Non-performing loans held-in-portfolio / Total loans 2.93% 3.26% (0.33)% 0.77% 0.81% (0.04)% Non-performing assets / Total assets 1.85% 1.92% (0.07)% 0.58% 0.60% (0.02)% Allowance for loan losses / Total loans 2.82% 3.14% (0.32)% 1.10% 1.16% (0.06)% Net interest margin¹ 4.35% 4.07% 0.28% 3.50% 3.47% 0.03% BPPR Popular U.S. Q3 2018 Q2 2018 Variance Q3 2018 Q2 2018 Variance |
Consolidated Credit Summary 17 1 Beginning in Q2 2018 figures include loans previously classified as covered Differences due to rounding $ in millions Q3 18 Q2 18 1 Q1 18 Q4 17 Q3 17 Loans Held in Portfolio (HIP) $26,512 $24,609 $24,088 $24,293 $23,173 Performing HFS $52 $74 $78 $132 $69 NPL HFS $0 $0 $0 $0 $0 Total Non Covered Loans 26,564 $ 24,682 $ 24,166 $ 24,425 $ 23,242 $ Non-performing loans (NPLs) $632 $643 $607 $551 $586 Commercial $173 $165 $158 $165 $165 Construction $20 $20 $4 $0 $0 Legacy $3 $4 $3 $3 $3 Mortgage $361 $385 $370 $322 $352 Consumer $73 $66 $68 $58 $62 Leases $3 $4 $4 $3 $3 NPLs HIP to loans HIP 2.39% 2.61% 2.52% 2.27% 2.53% Net charge-offs (NCOs) $64 $58 $53 $94 $53 Commercial $4 $18 $11 $39 $4 Construction ($0) ($0) ($0) $0 ($0) Legacy ($1) ($0) ($0) ($1) ($0) Mortgage $22 $12 $13 $24 $17 Consumer $37 $27 $27 $28 $31 Leases $2 $1 $2 $3 $1 Write-downs/(recoveries) NCOs to average loans HIP 1.00% 0.95% 0.90% 1.61% 0.92% Provision for loan losses (PLL) $54 $60 $69 $70 $158 PLL to average loans HIP 0.85% 0.99% 1.18% 1.21% 2.75% PLL to NCOs 0.85x 1.04x 1.32x 0.75x 2.97x Allowance for loan losses (ALL) $634 $643 $607 $590 $614 ALL to loans HIP 2.39% 2.61% 2.52% 2.43% 2.65% ALL to NPLs HIP 100.19% 99.97% 100.03% 107.12% 104.77% |
Popular, Inc. Credit Ratings 18 Our senior unsecured ratings have remained stable Moody’s B2 Stable Outlook Fitch BB- Stable Outlook S&P BB- Negative Outlook February Moody’s changes outlook to stable from negative April S&P upgrades to BB- from B+ revised outlook to stable 2017 February S&P placed BPOP on credit watch negative due to the general economic environment in Puerto Rico 2015 May Moody’s, as part of a recalibration of their bank rating model, upgraded BPOP from B2 to B1 with a stable outlook July On 7/10 S&P affirmed BPOP’s rating while maintaining a negative outlook March Moody’s placed BPOP on review for possible upgrade due to a change in their bank rating methodology September Moody’s downgraded BPOP to B2; outlook negative 2016 April S&P revised outlook to positive October Fitch and S&P change outlook to negative from stable 2018 May Fitch revised outlook to stable |
Investor Presentation Third Quarter 2018 |