Popular(US:BPOP)2024-11-12 19:25Part I – Financial Information Item 1. Financial Statements This section presents Popular, Inc.'s unaudited consolidated financial statements as of September 30, 2024, and for the three and nine-month periods then ended, including statements of financial condition, operations, comprehensive income, changes in stockholders' equity, and cash flows, with detailed notes Unaudited Consolidated Statements of Financial Condition As of September 30, 2024, Popular, Inc. reported total assets of $71.3 billion, an increase from $70.8 billion at year-end 2023, primarily driven by growth in net loans held-in-portfolio, with total liabilities stable at $65.5 billion and stockholders' equity growing to $5.8 billion from $5.1 billion Consolidated Balance Sheet Highlights (in thousands) | Account | September 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total Assets | $71,323,074 | $70,758,155 | | Total loans held-in-portfolio, net | $35,450,647 | $34,335,630 | | Total debt securities (AFS & HTM), net | $25,045,987 | $24,917,599 | | Total Liabilities | $65,532,560 | $65,611,202 | | Total deposits | $63,668,501 | $63,618,243 | | Total Stockholders' Equity | $5,790,514 | $5,146,953 | Unaudited Consolidated Statements of Operations For Q3 2024, Popular, Inc. reported net income of $155.3 million ($2.16 per diluted share), up from $136.6 million in Q3 2023, driven by higher net interest income of $572.5 million versus $534.0 million, partially offset by increased provision for credit losses Key Operating Results (in thousands, except per share data) | Metric | Q3 2024 | Q3 2023 | Nine Months 2024 | Nine Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $572,473 | $534,020 | $1,691,529 | $1,597,344 | | Provision for Credit Losses | $71,448 | $45,117 | $190,840 | $129,946 | | Non-interest Income | $164,082 | $159,549 | $494,206 | $481,981 | | Total Operating Expenses | $467,321 | $465,984 | $1,420,010 | $1,366,955 | | Net Income | $155,323 | $136,609 | $436,395 | $446,748 | | Net Income per Share – Diluted | $2.16 | $1.90 | $6.05 | $6.21 | Unaudited Consolidated Statements of Comprehensive Income (Loss) The company reported comprehensive income of $520.6 million for Q3 2024, a significant turnaround from a $68.9 million comprehensive loss in Q3 2023, primarily due to a positive swing in other comprehensive income driven by unrealized holding gains on debt securities Comprehensive Income (Loss) Summary (in thousands) | Metric | Q3 2024 | Q3 2023 | Nine Months 2024 | Nine Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Net Income | $155,323 | $136,609 | $436,395 | $446,748 | | Total other comprehensive income (loss), net of tax | $365,288 | $(205,507) | $382,537 | $(9,014) | | Comprehensive income (loss), net of tax | $520,611 | $(68,898) | $818,932 | $437,734 | Unaudited Consolidated Statements of Changes in Stockholders' Equity Stockholders' equity increased from $5.15 billion at year-end 2023 to $5.79 billion at September 30, 2024, driven by $436.4 million in net income and $382.5 million in positive other comprehensive income, partially offset by dividends and stock repurchases - Key drivers for the increase in stockholders' equity in the first nine months of 2024 were net income ($436.4M) and other comprehensive income ($382.5M)12 - Reductions to equity included dividends on common stock ($134.3M), preferred stock ($1.1M), and common stock repurchases ($65.9M)12 - Dividends declared per common share for the nine months ended September 30, 2024, were $1.86, up from $1.65 in the same period of 202312 Unaudited Consolidated Statements of Cash Flows For the nine months ended September 30, 2024, net cash provided by operating activities was $475.2 million, while net cash used in investing activities significantly decreased to $209.6 million from $2.1 billion in the prior year, and net cash used in financing activities was $257.5 million Cash Flow Summary (in thousands) | Activity | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $475,239 | $473,023 | | Net cash used in investing activities | $(209,614) | $(2,066,726) | | Net cash (used in) provided by financing activities | $(257,534) | $1,658,782 | | Net increase in cash and due from banks | $8,091 | $65,079 | Notes to Unaudited Consolidated Financial Statements This section provides detailed disclosures supporting the consolidated financial statements, covering the nature of operations, basis of presentation, accounting pronouncements, debt securities, loan portfolio, credit quality, and other key financial areas Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's Q3 2024 financial performance, highlighting net income of $155.3 million driven by higher net interest income, and analyzes financial condition, capital adequacy, liquidity, and risk management practices - Q3 2024 net income was $155.3 million, compared to $136.6 million in Q3 2023355 - Net interest margin for Q3 2024 increased to 3.24% from 3.07% in Q3 2023, mainly due to higher yields on investment securities and loans355 - Total assets grew to $71.3 billion from $70.8 billion at year-end 2023, driven by loan growth361 - Tangible book value per common share increased to $69.04 from $59.74 at year-end 2023363424 Operating Results Analysis Net interest income for Q3 2024 rose to $572.5 million, up $38.5 million year-over-year, driven by higher yields on loans and investments, while provision for credit losses increased to $71.4 million, and non-interest income grew to $164.1 million - Net interest income increased by $38.5 million YoY in Q3 2024, driven by higher yields on investment securities (+$33.8M) and loans (+$69.6M), partially offset by higher deposit interest expense (+$56.9M)366 - The provision for credit losses increased by $26.3 million YoY to $71.4 million in Q3 2024, primarily due to higher net charge-offs in the commercial loan portfolio compared to net recoveries in Q3 2023356370 - Operating expenses were stable YoY, with increases in technology (+$15.5M) and personnel costs (+$8.7M) being offset by a $23.0M goodwill impairment charge recorded in Q3 2023 and lower professional fees (-$11.8M)376 Financial Condition Analysis As of September 30, 2024, total assets reached $71.3 billion, with loans held-in-portfolio growing by $1.1 billion to $36.2 billion, total deposits remaining stable at $63.7 billion, and stockholders' equity increasing by $643.6 million to $5.8 billion - Loans held-in-portfolio increased by $1.1 billion to $36.2 billion since Dec 31, 2023, with the BPPR portfolio growing by $1.2 billion399 - Total deposits were stable at $63.7 billion. Puerto Rico public sector deposits increased to $18.7 billion from $18.1 billion at year-end 2023405408 - Stockholders' equity grew by $643.6 million since year-end 2023, driven by net income and a $272.0 million after-tax decrease in unrealized losses on AFS securities415 Capital The Corporation's capital ratios remained strong and well-capitalized as of September 30, 2024, with the Common Equity Tier 1 (CET1) capital ratio at 16.42% and tangible book value per common share increasing to $69.04 Regulatory Capital Ratios | Ratio | September 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Common equity tier 1 capital | 16.42% | 16.30% | | Tier 1 capital | 16.48% | 16.36% | | Total capital | 18.24% | 18.13% | | Tier 1 leverage | 8.67% | 8.51% | - The increase in capital ratios compared to year-end 2023 was mainly due to earnings for the nine-month period, partially offset by higher risk-weighted assets from loan growth422 Risk Management The company actively manages market, interest rate, liquidity, and credit risks, maintaining an asset-sensitive position with strong liquidity totaling $20.5 billion, and stable credit quality metrics including a 1.0% non-performing loan ratio - The Corporation's Net Interest Income (NII) simulation shows an asset-sensitive position. A +100 basis point parallel rate shift is estimated to increase NII by $20.6 million (0.87%) over one year429 - Total available liquidity sources increased to $20.5 billion as of September 30, 2024, from $19.5 billion at year-end 2023436437 - Non-performing loans (NPLs) to total loans held-in-portfolio ratio was stable at 1.0% as of September 30, 2024, unchanged from December 31, 2023478 Item 3. Quantitative and Qualitative Disclosures about Market Risk This section refers to the Market Risk section within Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations, for market risk disclosures - Disclosures regarding market risk for the current period are located in the Market Risk section of the MD&A506 Item 4. Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of September 30, 2024, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the Corporation's disclosure controls and procedures were effective as of the end of the period covered by this report507 - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls508 Part II – Other Information Item 1. Legal Proceedings The company is involved in various legal proceedings, including the Golden v. Popular, Inc. class action which is now closed, and the Lipsett v. Popular, Inc. class action which has reached a settlement in principle, with estimated possible losses up to $6.49 million - The Golden v. Popular, Inc. class action lawsuit regarding overdraft fees has been settled and is now closed235 - A settlement in principle has been reached in the Lipsett v. Popular, Inc. class action, with a final approval hearing set for January 27, 2025237 - Management estimates the range of reasonably possible losses for current legal proceedings, in excess of amounts accrued, is from $0 to approximately $6.49 million as of September 30, 2024231 Item 1A. Risk Factors The company reports no material changes to the risk factors previously disclosed in its Annual Report on Form 10-K for the year ended December 31, 2023 - There have been no material changes to the risk factors previously disclosed in the Corporation's 2023 Form 10-K510 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During Q3 2024, the Corporation repurchased 602,451 common shares at an average price of $98.06 per share, with $441.2 million remaining under the $500 million repurchase program announced in August 2024 Issuer Purchases of Equity Securities (Q3 2024) | Period | Total Shares Purchased | Average Price Paid | Shares Purchased Under Plan | Remaining Plan Value | | :--- | :--- | :--- | :--- | :--- | | July 2024 | 2,668 | $87.72 | - | $500,000,000 | | August 2024 | 303,638 | $97.14 | 303,202 | $470,550,231 | | September 2024 | 296,145 | $99.11 | 295,894 | $441,224,007 | | Total Q3 | 602,451 | $98.06 | 599,096 | $441,224,007 | - In July 2024, the Corporation announced a new stock repurchase program of up to $500 million. Repurchases began in August 2024512 Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities during the period - None513 Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable514 Item 5. Other Information This section notes that certain officers or directors may participate in company stock plans, potentially designed to satisfy Rule 10b5-1 conditions or constitute non-Rule 10b5-1 trading arrangements - Certain officers and directors participate in company stock plans, which may be designed to satisfy Rule 10b5-1 or be considered non-Rule 10b5-1 trading arrangements515 Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including Sarbanes-Oxley Act certifications and XBRL data files