Popular (BPOP) 8-K Other events

EXHIBIT 99.1

2004
Popular, Inc.
Second Quarter
Report

June 30, 2004

2

Popular, Inc.

Letter to Shareholders

The financial results for the Corporation remained sound for the second quarter of 2004. Net income for this quarter totaled $127.8 million, compared with $134.6 million in the second quarter of 2003. The results for the second quarter of 2003 included $29.9 million in gain on sale of securities, mainly marketable equity securities, compared with $402 thousand in the same quarter of 2004. For the quarter ended June 30, 2004, the Corporation reported basic and diluted earnings per common share of $0.47, compared with $0.50 per common share in the second quarter of 2003. Financial performance for the second quarter of 2004 resulted in a return on average assets (ROA) and a return on average common equity (ROE) of 1.33% and 18.79%, respectively, compared with 1.58% and 22.63%, respectively, for the quarter ended June 30, 2003.

     For the six months ended June 30, 2004, net income totaled $246.3 million, or $0.90 per common share, compared with $233.7 million, or $0.87 per common share, for the same period in 2003. ROA and ROE for the first six months of 2004 were 1.31% and 18.37%, respectively, compared with 1.40% and 20.09%, respectively, for the first six months of 2003.

     The Corporation’s net interest income for the quarter ended June 30, 2004, grew $11.0 million, compared with the second quarter of 2003, principally as a result of strong growth in average earning assets, mainly loans. The net interest margin, on a taxable equivalent basis, declined to 4.05% for the second quarter of 2004, from 4.46% in the same period of 2003. The margin compression was mainly due to earning assets repricing and growth in lower-yielding assets, primarily mortgage loans. Results for the second quarter of 2004 showed improved credit quality trends. Net charge-offs to average loans for the quarter reflected reductions in all loan categories, compared with the same quarter in the previous year. This factor, coupled with a continued shift in the loan portfolio mix to include a greater proportion of residential mortgages and favorable changes in certain categories of non-performing assets, contributed to lowering the provision for loan losses for this quarter, compared with the same period in 2003.

     Furthermore, net income for the quarter ended June 30, 2004, benefited from growth in other service fees, including insurance fees, debit card fees and credit card fees and discounts. Also, other non-interest revenues, including an extraordinary gain on the sale of a real estate property, contributed to the quarterly earnings. On the other hand,

lower gain on sale of securities, as previously mentioned, impacted the Corporation’s financial performance when compared with the second quarter of 2003.

     For the second quarter of 2004, operating expenses were up 4% compared with the same period in the previous year, reflecting higher personnel costs as well as continuing investments in systems technology and costs to support business initiatives and expansion. The results of the second quarter of 2003 included non-recurrent losses resulting from unauthorized credit card transactions.

     The Corporation’s total assets amounted to $39.6 billion at June 30, 2004, compared with $36.1 billion at June 30, 2003. Popular, Inc. continued to generate earning assets growth. Loans totaled $24.7 billion at June 30, 2004, compared with $20.9 billion at the same date in the previous year, an increase of $3.8 billion, or 18%. Mortgage loans accounted for 67% of the rise in the total loan portfolio, increasing $2.6 billion, or 31%, since June 30, 2003. Commercial and construction loans rose $641 million, or 8%, compared with June 30, 2003, while consumer loans increased $503 million, or 16%. We are very encouraged with the growth trend reflected in the consumer portfolio, which was partly the result of favorable customer response to aggressive marketing efforts, targeted mostly to auto loans and personal loans. Equally important, the Corporation continued growing its deposit base. Deposits totaled $19.2 billion at June 30, 2004, compared with $18.3 billion at June 30, 2003, an increase of 5%, mostly reflected in savings and time deposits.

     Popular, Inc.’s common stock market value was $21.39 per common share at June 30, 2004, compared with $19.27 at June 30, 2003, and $21.55 at March 31, 2004. At June 30, 2004, the Corporation had a market capitalization of $5.7 billion and a book value per share of common stock of $9.76, compared with $5.1 billion and $9.90, respectively, at June 30, 2003.

     Reflecting our strong financial position and our confidence in the earning potential of Popular, Inc., in May 2004, your Board of Directors declared an 18.5% increase in the quarterly cash dividend, from $0.27 to $0.32 per common share. Also, the Board authorized a two-for-one stock split in the form of a stock dividend for each common share held as of the record date of June 18, 2004. All per share data included herein has been adjusted to reflect the stock split. Following the effective date of the stock split, the regular quarterly dividend on the common stock was adjusted from $0.32 per share to $0.16 per share to reflect the additional shares issued as part of the stock split.

On June 15, 2004, Popular, Inc. became the first Puerto Rican company to open the NASDAQ Stock Market, where our stock is listed since 1985. This great honor reinforces our position as leaders in the financial services industry and in our community and gave the Corporation international exposure and recognition among the greatest companies in the United States.

During the second quarter of 2004, Equity One, the Corporation’s mortgage and consumer lending subsidiary in the U.S. mainland, sold approximately $700 million in asset-backed securities, supported by home equity loans. Also, in recent weeks, Popular North America, Inc., a subsidiary of Popular, Inc., sold $400 million in fixed-rate five-year medium-term notes. The funds raised will be used primarily to repay outstanding short-term borrowings and the remainder will be used to partially fund the acquisition of Quaker City Bancorp in California, expected to be completed during the third quarter of 2004.

     To curb emerging inflation threats and influence economic activity, in June 2004, the Federal Reserve (FED) raised the federal funds interest rate by 25 basis points, the first time in four years. They also approved a 25 basis points increase in the discount rate to 2.25%. U.S. Banks responded to the FED action by raising their prime lending rates for business loans. With the FED actions and the current outlook, economic growth is expected to continue improving in 2004.

     On the Annual Stockholders’ Meeting of Popular, Inc., María Luisa Ferré and José R. Vizcarrondo were elected as new members of Popular, Inc.’s Board of Directors. Antonio Luis Ferré retired early from this Board, while Julio E. Vizcarrondo, Jr. and Héctor R. González retired after reaching the mandatory retirement age. Additionally, Alberto M. Paracchini and Francisco J. Carreras retired from Banco Popular de Puerto Rico’s Board of Directors. We are extremely grateful for all their valuable guidance and contributions during their tenure. During the meeting, the shareholders also ratified the appointment of PricewaterhouseCoopers LLP as independent auditors for 2004.

Richard L. Carrión
Chairman of the Board
President
Chief Executive Officer

Popular, Inc.

Financial Highlights

	At June 30,							Average for the six months
BALANCE SHEET HIGHLIGHTS	2004		2003		Change			2004		2003		Change
(In thousands)
Money market investments	$	942,752	$	783,278	$	159,474		$	822,863	$	893,847		($70,984	)
Investment and trading securities		11,557,740		12,258,683		(700,943	)		11,380,678		11,168,137		212,541
Loans		24,690,040		20,872,076		3,817,964			23,449,982		19,832,452		3,617,530
Total assets		39,556,239		36,073,554		3,482,685			37,787,926		33,712,699		4,075,227
Deposits		19,227,576		18,275,423		952,153			18,643,402		17,669,845		973,557
Borrowings		16,904,740		14,371,249		2,533,491			15,698,360		13,099,270		2,599,090
Stockholders’ equity		2,783,720		2,812,871		(29,151	)		2,817,985		2,422,320		395,665

	Second quarter							Six months
OPERATING HIGHLIGHTS	2004		2003		Change			2004		2003		Change
(In thousands,except per share information)
Net interest income	$	340,703	$	329,695	$	11,008		$	671,417	$	628,801	$	42,616
Provision for loan losses		41,349		49,325		(7,976	)		86,027		97,534		(11,507	)
Fees and other income		158,969		169,624		(10,655	)		304,205		312,439		(8,234	)
Other expenses, net of minority interest		330,524		315,387		15,137			643,292		610,010		33,282
Net income	$	127,799	$	134,607		($6,808	)	$	246,303	$	233,696	$	12,607
Net income applicable to common stock	$	124,821	$	131,594		($6,773	)	$	240,347	$	229,734	$	10,613
Earnings per common share	$	0.47	$	0.50		($0.03	)	$	0.90	$	0.87	$	0.03

	Second quarter						Six months
SELECTED STATISTICAL INFORMATION	2004			2003			2004			2003
COMMON STOCK DATA
Market price
High	$	21.97		$	20.41		$	24.05		$	20.41
Low		20.04			17.08			20.04			15.98
End		21.39			19.27			21.39			19.27
Book value at period end		9.76			9.90			9.76			9.90
Dividends declared		0.16			0.14			0.30			0.24
Dividend payout ratio		28.77	%		20.07	%		29.87	%		23.17	%
Price/earnings ratio		12.08	x		12.89	x		12.08	x		12.89	x
PROFITABILITY RATIOS
Return on assets		1.33	%		1.58	%		1.31	%		1.40	%
Return on common equity		18.79			22.63			18.37			20.09
Net interest spread (taxable equivalent)		3.69			4.08			3.72			3.91
Net interest yield (taxable equivalent)		4.05			4.46			4.08			4.31
Effective tax rate		23.32			21.06			22.59			22.22
Overhead ratio		38.95			33.26			39.80			36.65
Efficiency ratio		59.79			58.96			59.97			59.33
CAPITALIZATION RATIOS
Equity to assets		7.40	%		7.38	%		7.46	%		7.19	%
Tangible equity to assets		6.87			6.79			6.92			6.59
Equity to loans		11.95			12.55			12.02			12.21
Internal capital generation		11.50			15.23			11.49			13.74
Tier I capital to risk-adjusted assets		12.32			10.88			12.32			10.88
Total capital to risk-adjusted assets		13.79			12.56			13.79			12.56
Leverage ratio		7.86			7.01			7.86			7.01
CREDIT QUALITY RATIOS
Allowance for losses to loans		1.73	%		1.90	%		1.73	%		1.90	%
Allowance to non-performing assets		70.79			64.41			70.79			64.41
Allowance to non-performing loans		77.69			69.83			77.69			69.83
Non-performing assets to loans		2.44			2.96			2.44			2.96
Non-performing assets to total assets		1.52			1.71			1.52			1.71
Net charge-offs to average loans		0.59			0.76			0.64			0.77
Provision to net charge-offs		1.16	x		1.30	x		1.14	x		1.27	x
Net charge-offs earnings coverage		5.85			5.78			5.35			5.21

Note: All per common share data has been adjusted to reflect the two-for-one stock split effected in the form of a dividend.

Popular, Inc.

Consolidated Statements of Condition

	June 30,
In thousands	2004			2003
ASSETS
Cash and due from banks	$	844,873		$	905,412
Money market investments:
Federal funds sold and securities purchased under agreements to resell		939,695			779,076
Time deposits with other banks		3,057			4,190
Bankers’ acceptances		—			12
		942,752			783,278
Investment securities available-for-sale, at market value		10,613,865			11,199,394
Investment securities held-to-maturity, at amortized cost		287,732			194,266
Other investment securities, at cost		245,573			214,570
Trading account securities, at market value		410,570			650,453
Loans held-for-sale, at lower of cost or market		328,744			333,334
Loans		24,640,672			20,818,644
Less — Unearned income		279,376			279,902
Allowance for loan losses		425,949			397,503
		23,935,347			20,141,239
Premises and equipment		495,080			473,520
Other real estate		53,426			47,863
Accrued income receivable		183,605			182,349
Other assets		998,710			728,973
Goodwill		192,174			188,310
Other intangible assets		23,788			30,593
	$	39,556,239		$	36,073,554
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES:
Deposits:
Non-interest bearing	$	4,127,462		$	4,216,227
Interest bearing		15,100,114			14,059,196
		19,227,576			18,275,423
Federal funds purchased and assets sold under agreements to repurchase		6,917,678			7,655,105
Other short-term borrowings		2,226,692			1,171,063
Notes payable		7,635,370			5,276,081
Subordinated notes		125,000			125,000
Preferred beneficial interest in Popular North America’s junior subordinated deferrable interest debentures guaranteed by the Corporation		—			144,000
Other liabilities		640,099			612,610
		36,772,415			33,259,282
Minority interest in consolidated subsidiaries		104			1,401
STOCKHOLDERS’ EQUITY:
Preferred stock		186,875			186,875
Common stock		1,677,291			836,134
Surplus		323,273			280,526
Retained earnings		925,052			1,467,833
Treasury stock, at cost		(206,437	)		(205,527	)
Accumulated other comprehensive (loss) income, net of tax		(122,334	)		247,030
		2,783,720			2,812,871
	$	39,556,239		$	36,073,554

Popular, Inc.

Consolidated Statements of Income

	Quarter ended					Six months ended
	June 30,					June 30,
In thousands, except per share information	2004		2003			2004			2003
INTEREST INCOME:
Loans	$	417,841	$	385,547		$	826,337		$	763,480
Money market investments		6,349		6,455			12,162			13,817
Investment securities		102,444		110,689			197,476			220,490
Trading account securities		5,636		8,968			15,037			17,153
		532,270		511,659			1,051,012			1,014,940
INTEREST EXPENSE:
Deposits		79,270		85,776			157,385			179,813
Short-term borrowings		35,448		37,804			67,610			78,593
Long-term debt		76,849		58,384			154,600			127,733
		191,567		181,964			379,595			386,139
Net interest income		340,703		329,695			671,417			628,801
Provision for loan losses		41,349		49,325			86,027			97,534
Net interest income after provision for loan losses		299,354		280,370			585,390			531,267
Service charges on deposit accounts		40,540		39,669			81,622			79,508
Other service fees		77,859		71,639			147,413			140,992
Gain on sale of investment securities		402		29,875			13,435			31,289
Trading account profit (loss)		615		(4,243	)		(1,551	)		(5,180	)
Gain on sale of loans		12,047		12,744			18,315			29,333
Other operating income		27,506		19,940			44,971			36,497
		458,323		449,994			889,595			843,706
OPERATING EXPENSES:
Personnel costs:
Salaries		105,414		94,333			206,978			190,369
Profit sharing		5,639		4,918			11,321			11,163
Pension and other benefits		30,507		30,517			63,825			60,585
		141,560		129,768			282,124			262,117
Net occupancy expenses		22,820		20,742			43,865			41,202
Equipment expenses		28,118		26,056			55,298			52,406
Other taxes		9,729		9,302			19,221			18,854
Professional fees		22,548		20,113			42,634			38,889
Communications		15,450		14,312			30,883			29,009
Business promotion		17,535		17,010			33,926			32,980
Printing and supplies		4,818		5,004			9,389			9,747
Other operating expenses		27,282		34,943			50,456			53,661
Amortization of intangibles		1,800		2,028			3,602			4,055
		291,660		279,278			571,398			542,920
Income before income tax and minority interest		166,663		170,716			318,197			300,786
Income tax		38,864		35,946			71,894			66,849
Net gain of minority interest		—		(163	)		—			(241	)
NET INCOME	$	127,799	$	134,607		$	246,303		$	233,696
NET INCOME APPLICABLE TO COMMON STOCK	$	124,821	$	131,594		$	240,347		$	229,734
EARNINGS PER COMMON SHARE (BASIC AND DILUTED)	$	0.47	$	0.50		$	0.90		$	0.87

Additional Information

Board of Directors

Richard L. Carrión, Chairman
Juan A. Albors Hernández *
José A. Bechara Bravo *
Juan J. Bermúdez
José B. Carrión Jr.
David H. Chafey Jr. *
María Luisa Ferré
Héctor R. González *
Jorge A. Junquera *
Guillermo L. Martínez*
Manuel Morales Jr.
Francisco M. Rexach Jr.
Frederic V. Salerno **
Félix J. Serrallés Nevares Jr.
Jon E. Slater *
José R. Vizcarrondo
    Samuel T. Céspedes, Secretary

*	Director of Banco Popular de Puerto Rico only
**	Director of Popular, Inc. only

Corporate Leadership Circle

Richard L. Carrión, Chairman of the Board,
   President and Chief Executive Officer
David H. Chafey Jr., Senior Executive Vice President
    and President of Banco Popular de Puerto Rico
Jorge A. Junquera, Senior Executive Vice President
   and Chief Financial Officer
Roberto R. Herencia, Executive Vice President
   and President of Banco Popular North America
Amílcar L. Jordán, Executive Vice President, Risk Management
Tere Loubriel, Executive Vice President, People, Communications
   and Strategic Planning
Brunilda Santos de Álvarez, Executive Vice President
   and Chief Legal Counsel
Félix M. Villamil, Executive Vice President
   and President of EVERTEC, INC.
C.E. (Bill) Williams, Executive Vice President
   and President of Equity One, Inc.

Shareholders’ Information

Shareholders’ Assistance: Shareholders requiring a change of address, records or information about lost certificates, dividend checks or dividend reinvestment should contact:

   Banco Popular de Puerto Rico
   Popular Center Building — 11th Floor, Office 1111
   Trust Division (724)
   209 Muñoz Rivera Ave.
   Hato Rey, Puerto Rico 00918

Publications: For printed material (annual reports, 10-K and 10-Q reports), contact Ms. Ileana González at the Comptroller’s Division at (787) 765-9800 ext. 6101, or visit our web site at www.popularinc.com.

Dividend Reinvestment Plan: The Corporation has a dividend reinvestment plan that provides the shareholder a simple, convenient and cost-effective way to acquire Popular, Inc. common stock.

• Dividends can be automatically reinvested in additional shares at 95% of the Average Market Price.

• Participants may make optional cash payments of at least $25 and not more than $10,000 per calendar month for investment in additional             shares.

• No brokerage commissions are charged on purchases under the plan.

• Participant’s funds will be fully invested, because the plan permits fractions of shares to be credited to a participant’s account.

For more information on this plan, contact our Trust Division at (787) 764-1893 or (787) 765-9800 exts. 5637, 5525, 6108 and 6112.

Subsidiaries

Central Office

Popular Center
209 Muñoz Rivera Avenue
San Juan, Puerto Rico 00918
Telephone: (787) 765-9800

Banco Popular de Puerto Rico

Puerto Rico Office
Popular Center
209 Muñoz Rivera Avenue
San Juan, Puerto Rico 00918
Telephone: (787) 765-9800

Virgin Islands Office
193 Estate Altona & Welgunst
St. Thomas, Virgin Islands 00802
Telephone: (340) 693-2777

Banco Popular North America

9600 West Bryn Mawr
Suite 400
Rosemont, Illinois 60018
Telephone: (847) 994-5800

Banco Popular, National Association

8523 Commodity Circle
Suite 100
Orlando, Florida 32819
Telephone: (407) 370-7800

ATH Costa Rica / CreST, S.A.

Tournón Neighborhood, across to
newspaper La República,
ATH Building
San José, Costa Rica
Telephone: (011) 506-211-4500

EVERTEC, INC.

1590 Ponce de León Avenue
GM Group Plaza Bldg., Suite 400
San Juan, Puerto Rico 00926
Telephone: (787) 751-4343

Equity One, Inc.

301 Lippincott Drive
Marlton, New Jersey 08053
Telephone: (856) 396-2600

     Levitt Mortgage

Galería San Patricio
B-5 Tabonuco Street
Suite 207
Guaynabo, Puerto Rico 00968
Telephone: (787) 749-8787

Popular Mortgage, Inc.

268 Ponce de León Avenue
San Juan, Puerto Rico 00918
Telephone: (787) 753-0245

Popular FS, LLC

301 Lippincott Drive
Marlton, New Jersey 08053
Telephone: (856) 396-2600

Popular Auto, Inc.

M-1061 Federico Costa Street
Tres Monjitas Industrial Development
San Juan, Puerto Rico 00918
Telephone: (787) 751-4848

Popular Leasing, USA

16280 Westwood
Business Park Drive
Ellisville, Missouri 63021
Telephone: (636) 391-0777

Popular Finance, Inc.

1326 Salud Street
Suite 613
Ponce, Puerto Rico 00716-1687
Telephone: (787) 844-2760

Popular Cash Express, Inc.

9600 West Bryn Mawr
First floor
Rosemont, Illinois 60018
Telephone: (847) 994-5973

Popular Securities, Inc.

Popular Center
209 Muñoz Rivera Avenue
Suite 1020
San Juan, Puerto Rico 00918
Telephone: (787) 766-4200

Popular Insurance, Inc.

9 Pedro Márquez Street
Culebra, Puerto Rico 00735
Telephone: (787) 742-0255

Popular Insurance Agency, USA

9600 West Bryn Mawr
First Floor
Rosemont, Illinois 60018
Telephone: (847) 994-6580

Popular Insurance, V.I., Inc.

193 Estate Altona & Welgunst
St. Thomas, Virgin Islands 00802
Telephone: (340) 693-2850

Popular RE, Inc.

MCV Building
Sixth Floor
270 Muñoz Rivera Avenue
San Juan, Puerto Rio 00918
Telephone: (787) 759-0080