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Popular Inc. announces $34.3 million in net income for Q1

By on May 1, 2020

SAN JUAN – Popular Inc., the holding company of Banco Popular de Puerto Rico, reported net income of $34.3 million for the quarter ended March 31, compared to net income of $166.8 million for the quarter ended Dec. 31, 2019.

The corporation said the results reflect the impact during March of the business disruption and relief measures related to the Covid-19 pandemic.

“The provision for credit losses for the loans and investments portfolios, which reflects the adoption of CECL, was $189.7 million, including $134 million in incremental reserves due to the expected economic impact of COVID-19,” Popular’s earnings release reads.

The corporation explained that its revenue streams were impacted in the form of reduced consumer transaction activity, the waiver of certain late fees and service charges, including ATM transaction fees, as well as the suspension in mortgage origination and related securitization and loan sale activities.

According to the financial institution, those “revenue captions resulted in a decrease in income of approximately $6.8 million when compared to the previous quarter, reflecting the impact of the COVID-19 disruptions, mainly over the last two weeks of March. Furthermore, the Corporation has incurred in additional expenses related to front-line employee bonuses, the enabling of remote access for employees to work from home, the expansion of employee benefits, as well as the impact of specific measures to prevent the spread of the disease and efforts related to customer relief programs, among other related expenses.”

Ignacio Alvarez, president and CEO, said: “The COVID-19 global pandemic has exposed the fragility of our economic and social systems and the need for greater collaboration between all sectors. I am hopeful that it will also reveal what we can accomplish when we come together in pursuit of a common goal. At Popular, the well-being of our customers, employees and communities is our priority. We have acted decisively to help our employees stay safe while we continue to offer essential banking services to our customers and communities. We have submitted more than $1.2 billion in loans, representing more than 15,000 small and medium size businesses, under the SBA’s Payroll Protection Program. To date, we have received confirmation of SBA approval of $819 million of those submissions. We have also pledged more than $1 million dollars in support of COVID-19 emergency relief to non-profit organizations and health providers. I am deeply grateful to our colleagues for the efforts, commitment, and bravery exhibited under very difficult circumstances.

“Our net income for the quarter was significantly lower than the fourth quarter of 2019 and the same period last year. The primary driver of this decrease was a large increase in our provision expense, reflecting the newly adopted CECL methodology and the most recent post-COVID macroeconomic forecast for Puerto Rico and the U.S. Our operating results for the first quarter were solid considering the extent of the economic deceleration experienced during the second half of March. Net interest income, net interest margin as well as our net charge off ratio improved compared to the fourth quarter. We ended the quarter with a CET1 capital ratio of 15.8%

“During our 126 years, we have often operated in highly uncertain and volatile economic periods and have managed through them successfully. Almost three years ago we faced the impact of Hurricane Maria, which caused extensive damage and left Puerto Rico and the Virgin Islands without power, water and telecommunications, in some cases for months. We responded decisively, adapted to change and delivered positive results even under difficult conditions. While each situation has unique challenges, we have the team, the experience and the financial resources to do so again.

“Despite the uncertainty we are all facing as we fight this pandemic, we are confident that, with our strong liquidity position and capital levels, we are well prepared to successfully manage through the current challenges.”

The following highlights were published by the financial institution:

  • Net income of $34.3 million in Q1 2020, compared to net income of $166.8 million in Q4 2019.
  • Net interest margin of 3.94% in Q1 2020, compared to 3.83% in Q4 2019; Net interest margin on a taxable equivalent basis of 4.34% in Q1 2020, compared to 4.20% in Q4 2019.
  • Q1 2020 results reflect the impact of the adoption of the Current Expected Credit Losses (“CECL”) accounting standard.
  • Credit Quality:
    • Non-performing loans held-in-portfolio (“NPLs”) increased by $240.8 million from Q4 2019, mostly due to the effect of the adoption of CECL on previously acquired credit deteriorated loans; excluding this impact, NPLs decreased by $26.7 million; NPLs to loans ratio at 2.8% vs. 1.9% in Q4 2019;
    • Net charge-offs (“NCOs”) decreased by $19.4 million from Q4 2019; NCOs at 0.91% of average loans held-in-portfolio vs. 1.21% in Q4 2019;
    • Allowance for credit losses (“ACL”) to loans held-in-portfolio at 3.32% vs. 1.74% in Q4 2019; and
    • ACL to NPLs at 119.7% vs. 90.5% in Q4 2019.
  • Common Equity Tier 1 ratio of 15.79%, Common Equity per Share of $64.08 and Tangible Book Value per Share of $56.17 at March 31, 2020.

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