INVESTOR PRESENTATION · 2021. 4. 28. · This presentation contains “forward-looking...

INVESTOR PRESENTATION

First Quarter 2021

Cautionary Note Regarding Forward-Looking Statements

2

This presentation contains “forward-looking statements” within the meaning of the U.S. Private SecuritiesLitigation Reform Act of 1995. These statements are not guarantees of future performance, are based on thecurrent expectations of Popular, Inc.’s (the “Corporation”) management 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-lookingstatements. Such factors include, but are not limited to, the scope and duration of the COVID-19 pandemic(including the appearance of new strains of the virus), actions taken by governmental authorities in responsethereto, and the direct and indirect impact of the pandemic on the Corporation, our customers, service providersand third parties. Information on the risks and important factors that could affect the Corporation’s future resultsand financial condition is included in our Annual Report on Form 10-K for the year ended December 31, 2020 andour Quarterly Report on Form 10-Q for the quarter ended March 31, 2021 to be filed with the Securities andExchange Commission. Our filings are available on the Corporation’s website (www.popular.com) and on theSecurities and Exchange Commission website (www.sec.gov). The Corporation assumes no obligation to update orrevise any forward-looking statements which speak as of their respective dates.

• NPLs decreased $40 million QoQ; ratio at 2.4%

• NCO ratio decreased to 0.29% from 0.58% the previous quarter

• ACL to loans held-in-portfolio of 2.75% compared to 3.05% in Q4 2020

Credit Metrics

• Net income of $263 million

• Net interest margin: Popular, Inc. 3.07%, BPPR 3.10%

• Provision for credit losses resulted in a benefit of $82 million

Earnings

• Robust capital; Common Equity Tier 1 Capital ratio of 17.2%

• Tangible book value per share of $61.42 compared to $63.07 in Q4 2020

• Announced capital actions for 2021:

▪ Increase quarterly dividend to $0.45 per share

▪ Repurchase up to $350 million in common stock

Capital

Q1 2021 Highlights

3

Business Highlights

4

BPPRCustomer Engagement

BPPRBusiness Metrics

Q1 2021 vs Q1 2020

• Issued $1.9 billion or 42,000 loans in both PPP rounds ($1.4 billion in Round 1 and $478 million in Round 2)

• $650 million from Round 1 had been forgiven as of March 31, 2021

• PPP loans issued by BPPR represented 62% of the total PPP loans issued in P.R.

• Mortgage originations were higher by 127%

• Auto loans and lease originations increased 21%

• Deposits, excluding P.R. public funds, increased 31%

• Credit and debit card sales ($) increased 39%

Payment Protection Program

• 1.9 million customers as of March 2021 (increased by 112,000 since March 2020 and 12,000 since December 2020)

• 17% growth in active online users1 since March 2020

• Captured 69% of deposits as of Q1 2021 through digital channels, compared to 56% in Q1 2020

1 Customers who have logged on to Popular’s web and/or mobile platform in the past 30 days

-70%

-50%

-30%

-10%

10%

30%

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70%

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500

1,000

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4,000

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5,000

Mar

-17

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Sep

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Dec

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YoY

Ch

ange

(%

)

Tho

usa

nd

s o

f 9

4-l

bs

bag

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Quarterly Cement Sales

Cement Sales YoY Change (%)

-40%

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-20%

-10%

0%

10%

20%

30%

40%

-

500

1,000

1,500

2,000

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3,000

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4,000

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5,000

Mar

-17

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Dec

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Mar

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Mar

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Dec

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Mar

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Jun

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Sep

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Dec

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Mar

-21

YoY

Ch

ange

(%

)

$ M

illio

ns

Quarterly Credit & Debit Volume ($)

Credit & Debit Volume ($) YoY Change (%)

-80%

-60%

-40%

-20%

0%

20%

40%

60%

80%

-

5,000

10,000

15,000

20,000

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Mar

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Dec

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Mar

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YoY

Ch

ange

(%

)

Veh

icle

s

Quarterly New Auto Sales

New Auto Sales YoY Change (%)

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

-

100

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Mar

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Jun

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Dec

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Mar

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YoY

Ch

ange

(%

)

Tho

usa

nd

s

Total Nonfarm Employment

Total Nonfarm Employment YoY Change (%)

Puerto Rico – Key Indicators

5

Economy

1 Source: U.S. Bureau of Labor Statistics (Seasonally Adjusted) as of March 2021; 2 Source: United Automobile Importers Group (based on units); 3Source: Puerto Rico Economic Development Bank; 4Credit and debit card sales pertain to BPPR customers only

• Total nonfarm employment in March 2021 was 36,000 jobs below March 2020

• New auto sales continue to demonstrate strong consumer demand

• Credit and debit card volumes remain well above pre-pandemic levels

1 2

3 4

Financial Summary

6

(Unaudited)

($ in thousands) Q1 2021 Q4 2020

Net interest income 479,112$ 471,616$ 7,496$

Service charges on depos its 39,620 39,152 468

Other service fees 70,628 71,156 (528)

Mortgage banking activi ties 17,343 9,730 7,613

Other non-interest income 26,062 24,809 1,253

Gross revenues 632,765 616,463 16,302

Provis ion (reversa l ) for credit losses (82,226) 21,218 (103,444)

Net revenues 714,991 595,245 119,746

Personnel costs 159,479 142,267 17,212

Net occupancy expenses 26,013 42,793 (16,780)

Programming, process ing and other technology services 66,366 66,483 (117)

Other profess ional fees 33,582 37,547 (3,965)

Bus iness promotion 12,521 16,466 (3,945)

Other operating expenses 77,567 70,368 7,199

Total operating expenses 375,528 375,924 (396)

Income before income tax 339,463 219,321 120,142

Income tax expense 76,831 43,045 33,786

Net income 262,632$ 176,276$ 86,356$

Variance

$27 $28 $28 $29 $30 $29 $29

$40

$44 $45

$54

$56 $57 $59

67%63% 62%

54% 53% 52%50%

2018 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021

Total Loans Total Deposits Loans to Deposits

Net Interest Margin Dynamics

• Q1 2020 FTE1 net interest margin at 3.39%

• Money market and investment securities to earning assets ratio at 54%

• FTE loan yield increased 15 basis points QoQ to 6.15%

• Total deposit cost QoQ decreased 11 basis points in the U.S. and 1 basis point in P.R.; consolidated total deposit cost for the quarter down 2 basis points to 0.21%

7

Loan Yield, Deposit Cost and NIM (FTE)

Total Loans and Deposits ($ in billions) 2

Money Market and Investment Securities ($ in billions) 2

¹ FTE stands for fully taxable-equivalent basis. Represents a non-GAAP financial measure. See the Corporation’s earnings press release, Form 10Q and Form 10K filed with the Securities and Exchange Commission for the applicable periods, for a GAAP to non-GAAP reconciliation2 Balances are at end of periodDifferences due to rounding

6.71 6.90 6.79 6.24 6.16 6.00 6.15

4.34 4.43 4.34

3.56 3.37 3.35 3.39

0.53 0.72 0.57 0.34 0.27 0.23 0.21

2018 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021

Loans Net Interest Margin Total Deposits

$14

$18 $16

$21 $22 $22 $23

$4

$3 $6

$10

$12 $12 $12

2.64 2.96 2.63 1.64 1.49 1.56 1.52

40%44% 44%

51% 53% 53% 54%

2018 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021

Money Market Investments Investment Securities

Yield Money Market and Investments to Earning Assets

8

Capital

• Robust capital levels; Common Equity Tier 1 of 17.2%

• Leverage ratio impacted by the high proportion of zero-risk weighted assets on the balance sheet

• Tangible book value per share of $61.42 compared to $63.07 in Q4 2020

• Announced capital actions for 2021:



Capital Ratios (%)

Note: Estimated for the current period

9

Non-Performing Assets ($ in millions)

Non-Performing Assets

• NPAs decreased by $50 million QoQ

• NPLs decreased by $40 million QoQ

▪ P.R. NPLs at $666 million, or 3.1% of loans, down by $34 million, driven by:

‐ Lower mortgage NPLs by $24 million, due to the resumption of loan payments after the end of the COVID-19 moratorium

‐ Lower construction NPLs by $7 million related to a loan partially charged-off during Q1 2021

▪ U.S. NPLs at $32 million, or 0.4% of loans, down by $5 million, mainly driven by lower commercial NPLs

• OREOs down by $11 million due to the resumption of sales and the suspension of foreclosure activity in response to the pandemic

Differences due to rounding

$903 $881 $839 $824

$774

1.7%

1.4%1.3% 1.2% 1.2%

Q1 20 Q2 20 Q3 20 Q4 20 Q1 21

NPLs CECL Day 1 NPLs OREO NPL HFS NPAs/Total Assets

CECL Day 1

$769$760

$734 $738$698

2.8%

2.6%

2.5% 2.5%

2.4%

Q1 20 Q2 20 Q3 20 Q4 20 Q1 21

Commercial & Construction Mortgage

Other CECL Day 1 NPLs

NPL/Loans

CECL Day 1

Non-Performing Loans ($ in millions)

$4 $9

$29 $12 $18

$81

$97$83 $102

$66

Q1

20

Q2

20

Q3

20

Q4

20

Q1

21

U.S. Inflows P.R. Inflows

$2 $22

$14 $5

$14

$42

$11

$8

Q1

20

Q2

20

Q3

20

Q4

20

Q1

21


NPL InflowsTotal NPL Inflows

($ in millions)

Mortgage NPL Inflows ($ in millions)

Commercial and Construction NPL Inflows($ in millions)


• Total NPL inflows decreased by $30 million QoQ

• P.R. inflows decreased by $36 million QoQ, primarily related to lower mortgage NPL inflows by $32 million

• U.S. inflows increased by $6 million QoQ, mostly related to a construction loan that reached 90 days during its renewal process. As of March 31, 2021, the loan was current

10

$4 $7 $7 $11 $4

$76

$83

$42

$90

$58

Q1

20

Q2

20

Q3

20

Q4

20

Q1

21


11

NCOs and NCO-to-Loan Ratio($ in millions)

NCOs and Allowance for Credit Losses


• NCOs decreased by $21 million QoQ, mostly driven by:▪ Lower commercial NCOs by $17

million

▪ Lower consumer NCOs by $13 million, mostly driven by recoveries of $8 million related to a sale of charged-off loans

▪ Higher construction NCOs by $6 million

• NCO ratio at 0.29% vs. 0.58% in Q4 2020

• ACL decreased by $95 million QoQ, mainly prompted by improvements in the macroeconomic outlook

• ACL-to-Loans ratio at 2.75% vs. 3.05% in Q4 2020

• ACL-to-NPLs at 115% vs. 122% in Q4

2020

1

Balance Reserve Build Balance Balance ACL/Loan

($ in millions) 1/1/2020 Q1-Q4 12/31/2020 3/31/2021 3/31/2021

Commercial 241.4$ 106.2$ 347.6$ (62.2)$ 285.4$ 1.99%

Mortgage 217.6 (1.9) 215.7 (13.6) 202.1 2.59%

Leases 10.1 6.8 16.9 (4.2) 12.7 1.02%

Consumer:

Credit Cards 62.3 (15.9) 46.5 (2.4) 44 5.01%

Personal Loans 129.1 (24.1) 105.0 (13.7) 91 6.00%

Auto 118.6 31.1 149.7 1.1 151 4.71%

Other 13.7 1.1 14.9 (0.4) 14 11.37%

Total Consumer 323.8 (7.7) 316.1 (15.5) 300.6 5.25%

Total ACL 792.8$ 103.4$ 896.2$ (95.5)$ 800.8$ 2.75%

Reserve

Build

(Release)

12

Allowance for Credit Losses – Q1 2021 Movement


ACL Movement:

• Improved economic scenario was themain driver of lower ACL

• Portfolio changes includes changes involume mix and credit quality

• Additional qualitative reserves reflectpotential risks to the scenarios, mainlyrelated to U.S. CRE

Economic Activity Unemployment Rates (UR)

U.S. U.S.

Projections at: Scenario Description 2021 2022 Projections at: 2021 2022

4Q20 Baseline 4.1% 4.7% 4Q20 Baseline 7.4% 6.2%

S1 - Stronger Near-Term Growth 6.6% 5.0% S1 6.3% 4.4%

S3 - Double Dip Recession 0.0% 2.3% S3 9.5% 9.4%




P.R. P.R.



S3 - Double Dip Recession (0.3%) 1.8% S3 9.2% 9.7%




Annual GDP Growth Average UR

Economic Scenario:

• Probability weighted approach combiningMoody’s February S1 (optimistic), Baseline,and S3 (pessimistic) scenarios

• Baseline scenario is assigned the highestprobability, followed by the S3 scenario

• Moody’s February vintage includes updatesto economic stimulus assumptions thatcontribute to a more optimistic view of theeconomy compared to Q4 2020 scenarios

• Shows improvements in the expected 2021GDP growth and unemployment rate

ACL Movement

($ in millions)

13

Driving Value

Capital• Announced capital actions for 2021:



Franchise

Additional Value • Investments in Evertec and Banco BHD León

• Leading market position in Puerto Rico▪ Well positioned to take advantage of economic recovery

▪ Focus on customer service supported by broad branch network

▪ Differentiated digital offering for retail and commercial customers

▪ Diversified fee income driven by unmatched product breadth and depth

▪ Strong risk-adjusted loan margins driven by a well-diversified portfolio

▪ Substantial liquidity with low deposit beta

• Mainland U.S. banking operation provides geographic diversification

▪ Commercial led strategy focused on small and medium-sized businesses

▪ Branch footprint in South Florida and New York Metro

▪ National niche banking focus in homeowners’ associations, healthcare and non-profit organizations

INVESTOR PRESENTATIONAppendix

First Quarter 2021

15

Banco Popular de Puerto Rico

Popular Auto, LLC

Popular Securities LLC

Popular’s Insurance

Subsidaries

Popular North America, Inc.

Popular Bank1

Holding Companies

(Including Equity Investments)

Franchise Summary Corporate Structure

Assets = $56 billion Assets = $11 billion

Puerto Rico Operations United States Operations

Assets = $67 billion

Information as of December 31, 2020¹ Doing business as Popular

Selected equity investments

EVERTEC and Banco BHD León under Corporate segment

• Transaction processing, business processes outsourcing

• 16.15% stake• Adjusted EBITDA of $64

million for the quarter ended December 31, 2020

• Dominican Republic bank

• 15.84% stake• 2020 net

income of $163 million

Industry Financial services

Headquarters San Juan, Puerto Rico

Assets $67 billion (among top 50 BHCs in the U.S.)

Loans $29 billion

Deposits $59 billion

Banking branches 160 in Puerto Rico, 39 in the U.S. (28 in New York and New Jersey and 11 in Florida) and 10 in the Virgin Islands

NASDAQ ticker symbol BPOP

Market Cap $6 billion

Corporate Structure – Popular, Inc.

16Differences due to rounding

Business Segments(Una udite d)

($ in millions) Financial Results Q1 2021 Q4 2020 Variance Q1 2021 Q4 2020 Variance

Net interest income 410$ 402$ 8$ 79$ 80$ (1)$

Non-interest income 135 130 5 6 5 1

Gross revenues 545 532 13 85 85 -

Provis ion (reversa l ) for credit losses (46) 30 (76) (37) (9) (28)

Operating expenses 320 306 14 56 71 (15)

Income before income tax 271 196 75 66 23 43

Income tax expense 59 37 22 18 7 11

Net income 212$ 159$ 53$ 48$ 16$ 32$

($ in millions)

Balance Sheet Highlights

Total assets 55,991$ 55,354$ 637$ 10,558$ 10,256$ 302$

Total loans 21,378 21,633 (255) 7,801 7,815 (14)

Total depos its 50,833 49,312 1,521 8,097 7,772 325

Asset Quality Q1 2021 Q4 2020 Variance Q1 2021 Q4 2020 VarianceNon-performing loans held-in-portfol io / Total

loans 3.12% 3.24% (0.12)% 0.41% 0.48% (0.07)%

Non-performing assets / Total assets 1.32% 1.41% (0.09)% 0.35% 0.41% (0.06)%

Al lowance for credit losses / Total loans 3.19% 3.42% (0.23)% 1.53% 2.00% (0.47)%

Net interest margin 3.10% 3.07% 0.03% 3.35% 3.35% 0.00%

BPPR Popular U.S.

Q1 2021 Q4 2020 Variance Q1 2021 Q4 2020 Variance

17

Municipalities

Obligations of municipalities are backed byreal and personal property taxes, municipalexcise taxes, and/or a percentage of the salesand use tax

Indirect exposure includes loans or securitiesthat are payable by non-governmentalentities, but which carry a governmentguarantee to cover any shortfall in collateralin the event of borrower default. Majority aresingle-family mortgage related

Indirect Exposure

The Corporation does not own any loans issued by the P.R. central government or its public corporations. Our direct exposure to P.R. municipalities was $375 million, down by $2 million, from Q4 2020

P.R. Public Sector Exposure

Outstanding P.R. government exposure

($ in millions) Loans Securities Total

Municipalities 342$ 33$ 375$

Indirect Exposure 265$ 46$ 311$

51% 56% 58% 60% 60% 60% 58% 61% 63%

25%

26% 29% 30% 30%27% 26% 26%

25%16%

13%9% 7% 6% 7% 9% 7% 7%

8% 5% 4% 3% 4% 6% 7% 6% 5%

704 710 715 719 719 723 720 721 726

0

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0%

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40%

60%

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100%

2013 2014 2015 2016 2017 2018 2019 2020 2021 YTDMar

Auto LoansFICO Mix of Originations (% of Approved Amount)

700+ 625-699 <625 No FICO WA FICO

43%52% 53% 51%

65%

48% 51% 50%

76%

35%

31% 31% 31%

26%

34% 32% 38%

18%18% 13% 14% 14%9%

18% 17% 12% 5%3% 4% 1%2%

1%1% 1% 2%

724 733 736 735 753 736 734 741 758

0

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200

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400

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600

700

0%

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40%

60%

80%

100%

2013 2014 2015 2016 2017 2018 2019 2020 2021 YTDMar

PR Mortgage Originations (Non-Conforming)By Year and Original FICO (% of Mortgage Amount)

740+ 680-739 620-679 <620 No FICO WA FICO

47% 46% 47% 49%43% 43% 44% 49% 44%

45% 46% 45% 44%50% 49% 51% 46% 52%

5% 5% 5% 4% 4% 5% 3% 3% 3%3% 3% 3% 3% 3% 3% 2% 2% 1%

720 720 719 717 719 716 711 725 722

0

100

200

300

400

500

600

700

0%

20%

40%

60%

80%

100%

2013 2014 2015 2016 2017 2018 2019 2020 2021 YTDMar

PR Unsecured Personal Installment LoansFICO Mix of Originations (% of Approved Amount)

750+ 650-749 <650 No FICO WA FICO

55% 55% 57% 53% 51% 49% 51% 55% 53%

40% 40% 38% 41% 44% 44% 43%41% 45%

3% 3% 3% 2% 2% 2% 2% 1% 2%2% 2% 2% 4% 3% 5% 4% 2%

751 751 754 750 748 748 750 754 753

0

100

200

300

400

500

600

700

0%

20%

40%

60%

80%

100%

2013 2014 2015 2016 2017 2018 2019 2020 2021 YTDMar

Credit CardsFICO Mix of Originations (% of Approved Amount)

750+ 650-749 <650 No FICO WA FICO

18

FICO Mix of Consumer Originations

Popular, Inc. Credit Ratings

19

Senior Unsecured Ratings

Moody’s Ba3 Stable Outlook

Fitch BB Positive Outlook

S&P BB- Positive Outlook

February Moody’s changes

outlook to Positive from

Negative

AprilS&P upgrades to

BB- from B+ revised outlook

to Positive

2017

October Fitch and S&P

change outlook to Negative

from Positive

2018

MayFitch revised

outlook to Positive

2019

AprilMoody's

upgrades to B1 from B2

S&P revised outlook to

Positive

MayFitch

upgrades to BB from BB-

2020

MarchS&P lowers outlook to

Stable

2021

MarchMoody’s revised

outlook to Positive

AprilMoody’s

upgrades to Ba3 from B1

Fitch and S&P revised outlook

to Positive

INVESTOR PRESENTATION

First Quarter 2021

INVESTOR PRESENTATION · 2021. 4. 28. · This presentation contains “forward-looking...

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