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[POPULAR, INC. LOGO]
[PHOTO]
Popular, Inc.
First Quarter
Report
March 31, 2001
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LETTER TO SHAREHOLDERS
Economic conditions in the U.S. continued to weaken during the first quarter of
2001. The Federal Reserve immediately reacted by cutting the Federal funds
target rate by a total of 150 basis points during the quarter to 5.00%, taking
it to where it was in June 1999 just after it began a year-long series of rate
hikes that ended in May 2000. Further rate cuts are expected, as risks are
weighed toward conditions that may generate economic weakness and to keep the
economy from falling into a recession.
Our Corporation's net income amounted to $74.2 million or $0.53 per
common share for the first quarter of 2001 compared with $64.2 million or $0.46
per common share for the first quarter of 2000. Net earnings for the last
quarter of 2000 were $75.5 million, or $0.54 per common share. Net income for
the first quarter of 2001 represented annualized return on assets (ROA) and
return on common equity (ROE) of 1.09% and 15.25%, respectively. These
profitability ratios compare with an ROA of 1.01% and ROE of 14.57% attained
during the first quarter of 2000, and 1.09% and 15.72%, respectively, for the
last quarter of 2000.
The results for the first quarter of 2001, when compared with the same
period a year ago, reflected a rise of $13.5 million in net interest income, a
growth of $12.7 million in other income, excluding securities and trading gains,
together with a decrease of $6.5 million in operating expenses. These
improvements were partially offset by a decrease of $13.5 million in the gain on
sale of securities and trading activities and an increase of $8.4 million in
income tax. Furthermore, the Corporation reflected a gain of $0.7 million (net
of tax) as a cumulative effect upon the adoption of Statement of Financial
Accounting Standards (SFAS) No. 133 "Accounting for Derivative Instruments and
Hedging Activities" on January 1, 2001. This accounting pronouncement requires
recognition of all derivatives as either assets or liabilities in the statement
of condition measured at fair value.
Net interest income for the first quarter of 2001 grew to $255.7
million from $242.2 million for the same period a year earlier. This growth was
primarily due to an increase of $2.4 billion in average earning assets,
particularly a $1.2 billion growth in loans and a $1.1 billion increase in
investments, tempered by a lower net interest margin. For the first quarter of
2001, the net interest yield on a taxable equivalent basis was 4.21%, compared
with 4.42% for the same period a year earlier, mainly as a result of a higher
cost of interest-bearing liabilities, particularly long-term debt and time
deposits. Also, the average yield on loans declined due to lower credit card
income resulting from the sale of the U.S. credit card portfolio in 2000 and to
the portfolio mix which reflects higher average mortgage loans this quarter in
proportion to the total portfolio. In addition, the declining interest rate
scenario at the beginning of 2001 negatively impacted the yield in commercial
loans with floating rates. The decline in the net interest yield was partially
tempered by a rise in the yield on investment securities. For the last quarter
of 2000, the net interest yield was 4.06%. The improvement in the net interest
margin since the last quarter of 2000 stems principally from a reduction in the
cost of funding earning assets.
For the first quarters of 2001 and 2000, the provision for loan losses
amounted to $50.0 million while net charge-offs for the first quarter of 2001
were $36.1 million compared with $48.6 million for the same quarter a year
earlier. Net charge-offs as a percentage of average loans decreased to 0.89% for
the three-month period ended March 31, 2001, from 1.29% for the same period in
2000.
Other operating income, excluding securities and trading transactions,
amounted to $114.4 million for the first quarter of 2001 compared with $101.6
million for the same period in 2000. Debit card fees, insurance fees, and
processing fees rose driven by an increase in the volume of electronic
transactions, continued business expansion, and initiatives to diversify sources
of revenues, including insurance products and services to the unbanked
population. Moreover, service charges on deposit accounts also grew as a result
of higher commercial account activity and the implementation during 2000 of new
fees in deposit accounts. These increases were tempered by a decrease in other
income of $2.5 million resulting from lower revenues from the Corporation's
leasing subsidiary and the loss of revenues derived from Banco Fiduciario (BF),
sold in the latter part of 2000.
Gains on sale of securities and trading account profits for the quarter
ended March 31, 2001, amounted to $0.6 million compared with $14.1 million for
the same quarter in 2000. During the first quarter of 2000, the Corporation
exercised its conversion right and exchanged its investment in preferred stock
of a financial corporation in Puerto Rico for common stock of the same entity,
recognizing a pretax gain of $13.4 million.
Our operating expenses for the three-month period ended March 31, 2001,
amounted to $220.0 million reflecting a 2.9% reduction from the $226.5 million
reported for the same period a year earlier. This reduction was mainly attained
in business promotion, other operating expenses and professional fees as a
result of cost management initiatives implemented in 2000, together with a
realignment of business efforts, including the sale of BF and the U.S. credit
card operations during 2000. In addition, the amortization of intangibles also
reflected a decrease, as core deposits intangibles recorded on the merger with
BanPonce Corporation in 1990 became fully amortized at the end of 2000. Income
tax expense increased to $27.2 million from $18.8 million for the first quarter
of 2000.
Popular Inc.'s total assets grew to $27.3 billion, compared with $25.3
billion at the same date in 2000. Total assets were $28.1 billion as of
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Popular, Inc. 2001 Quarterly
December 31, 2000. Loans at March 31, 2001, increased 8.6% to $16.5 billion,
compared with $15.2 billion at the same date in 2000 and $16.1 billion at
December 31, 2000, led by a rise of $1.1 billion in the mortgage loan portfolio
from March 31, 2000. The allowance for loan losses was $305 million or 1.85% of
loans at March 31, 2001, compared with $293 million or 1.93% at March 31, 2000,
and $291 million or 1.81% at December 31, 2000. The allowance as a percentage of
non-performing assets was 83.01% at March 31, 2001, compared with 81.23% at the
end of the first quarter of 2000 and 83.82% at December 31, 2000.
Total deposits as of March 31, 2001, amounted to $15.1 billion from
$14.3 billion at the same date in 2000 and $14.8 billion at December 31, 2000.
Borrowings reached $9.6 billion at the end of the first quarter of 2001,
compared with $8.8 billion a year earlier and $10.8 billion at December 31,
2000.
Stockholders' equity at March 31, 2001 rose to $2.1 billion compared
with $1.7 billion at the same date in 2000. Included in stockholders' equity at
March 31, 2001, was $82 million in unrealized gains on securities
available-for-sale, net of tax, compared with $161 million in unrealized losses
a year earlier. At December 31, 2000, stockholders' equity amounted to $2.0
billion, including $4 million in unrealized gains on securities
available-for-sale.
The Corporation's stock market value was $29.45 at the end of the
quarter, compared with $22.19 at March 31, 2000, and $26.31 at December 31,
2000. At the end of the first quarter of 2001, the Corporation had a market
capitalization of $4.0 billion and a book value per share of $14.86.
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In January 2001, Banco Popular North America (BPNA) inaugurated its first branch
in Miami, Florida. This branch will offer a wide range of products and financial
services to the Hispanic community in this area. With the opening of this
branch, BPNA now operates 96 branches in the principal markets of Florida, New
York, Texas, Illinois, California and New Jersey.
/s/ Richard L. Carrion
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Chairman
President
Chief Executive Officer
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Popular, Inc. 2001 Quarterly
FINANCIAL HIGHLIGHTS
At March 31, Average for the quarter
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BALANCE SHEET HIGHLIGHTS 2001 2000 Change 2001 2000 Change
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(In thousands)
Money market investments $ 970,299 $ 892,652 $ 77,647 $ 953,664 $ 851,516 $ 102,148
Investment and trading securities 8,211,330 7,509,220 702,110 8,993,341 7,877,471 1,115,870
Loans 16,509,477 15,200,931 1,308,546 16,204,326 15,027,521 1,176,805
Total assets 27,312,158 25,302,025 2,010,133 27,707,263 25,466,481 2,240,782
Deposits 15,093,179 14,337,861 755,318 14,831,555 14,147,519 684,036
Borrowings 9,629,177 8,833,572 795,605 10,392,809 9,024,486 1,368,323
Stockholders' equity 2,122,974 1,682,293 440,681 2,018,788 1,815,021 203,767
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First quarter
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OPERATING HIGHLIGHTS 2001 2000 Change
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(In thousands, except per share information)
Net interest income $ 255,717 $ 242,240 $ 13,477
Provision for loan losses 50,034 50,013 21
Fees and other income 114,967 115,726 (759)
Other expenses, net of minority interest 247,104 243,764 3,340
Cumulative effect of accounting changes 686 -- 686
Net income $ 74,232 $ 64,189 $ 10,043
Net income applicable to common stock $ 72,145 $ 62,102 $ 10,043
Earnings per common share 0.53 0.46 0.07
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First quarter
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SELECTED STATISTICAL INFORMATION 2001 2000
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COMMON STOCK DATA
Market price
High $29.45 $ 26.88
Low 25.25 18.63
End 29.45 22.19
Book value at period end 14.86 11.66
Dividends declared 0.16 0.16
Dividend payout ratio 30.16% 34.98%
Price/earnings ratio 14.44x 11.99x
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PROFITABILITY RATIOS
Return on assets 1.09% 1.01%
Return on common equity 15.25 14.57
Net interest spread (taxable equivalent) 3.40 3.61
Net interest yield (taxable equivalent) 4.21 4.42
Effective tax rate 26.97 23.03
Overhead ratio 41.06 45.73
Efficiency ratio 59.44 65.87
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CAPITALIZATION RATIOS
Equity to assets 7.29% 7.13%
Tangible equity to assets 6.34 6.01
Equity to loans 12.46 12.08
Internal capital generation 9.98 8.90
Tier I capital to risk-adjusted assets 10.63 10.04
Total capital to risk-adjusted assets 12.59 12.09
Leverage ratio 6.59 6.32
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CREDIT QUALITY RATIOS
Allowance for losses to loans 1.85% 1.93%
Allowance to non-performing assets 83.01 81.23
Allowance to non-performing loans 89.76 89.25
Non-performing assets to loans 2.23 2.38
Non-performing assets to total assets 1.35 1.43
Net charge-offs to average loans 0.89 1.29
Provision to net charge-offs 1.38x 1.03x
Net charge-offs earnings coverage 4.17 2.71
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ADDITIONAL INFORMATION
BOARD OF DIRECTORS
Richard L. Carrion, Chairman
Antonio Luis Ferre, Vice Chairman **
Juan A. Albors Hernandez *
Alfonso F. Ballester *
Jose A. Bechara Bravo *
Salustiano Alvarez Mendez*
Juan J. Bermudez
Francisco J. Carreras
Jose B. Carrion Jr. *
David H. Chafey Jr.
Maria Luisa Ferre *
Hector R. Gonzalez
Jorge A. Junquera **
Manuel Morales Jr.
Alberto M. Paracchini
Francisco M. Rexach Jr.
J. Adalberto Roig Jr. *
Felix J. Serralles Nevares
Julio E. Vizcarrondo Jr.
Samuel T. Cespedes, Secretary
* Director of Banco Popular de Puerto Rico only
** Director of Popular, Inc. only
EXECUTIVE OFFICERS
Richard L. Carrion, Chairman of the Board,
President and Chief Executive Officer
David H. Chafey Jr., Senior Executive Vice President
Jorge A. Junquera, Senior Executive Vice President
Maria Isabel P. de Burckhart, Executive Vice President
Roberto R. Herencia, Executive Vice President
Larry B. Kesler, Executive Vice President
Tere Loubriel, Executive Vice President
Humberto Martin, Executive Vice President
Emilio E. Pinero, Executive Vice President
Brunilda Santos de Alvarez, Executive Vice President
Carlos J. Vazquez, Executive Vice President
SHAREHOLDER INFORMATION
Shareholder 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 - 4th Floor
Trust Division (725)
209 Munoz Rivera Ave.
Hato Rey, Puerto Rico 00918
PUBLICATIONS: For printed material (annual and quarterly reports, 10-K and
10-Q reports), contact Mr. Amilcar L. Jordan at the Comptroller's
Division at (787) 765-9800 ext. 6101, or visit our web site at
http://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 this plan.
- Participant's funds will be fully invested, because the plan permits
fractions of shares to be credited to a participant's account.
If you would like more information on this plan, please contact our Trust
Division at (787) 756-3908 or (787) 765-9800 exts. 5637, 5525 and 5897.
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Popular, Inc. 2001 Quarterly
CONSOLIDATED STATEMENTS OF CONDITION
Quarter ended
March 31,
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In thousands 2001 2000
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ASSETS
Cash and due from banks $ 639,808 $ 606,383
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Money market investments
Federal funds sold and securities purchased
under agreements to resell 961,126 850,216
Time deposits with other banks 8,397 41,692
Bankers' acceptances 776 744
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970,299 892,652
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Investment securities available-for-sale, at market value 7,681,290 6,916,382
Investment securities held-to-maturity, at amortized cost 312,170 384,365
Trading account securities, at market value 217,870 208,473
Loans held-for-sale, at lower of cost or market 834,242 556,813
Loans 16,016,458 15,001,946
Less - Unearned income 341,223 357,828
Allowance for loan losses 305,295 293,442
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15,369,940 14,350,676
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Premises and equipment 403,263 437,932
Other real estate 27,638 32,448
Customers' liabilities on acceptances 1,941 8,308
Accrued income receivable 202,088 167,853
Other assets 376,801 438,706
Intangible assets 274,808 301,034
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$27,312,158 $25,302,025
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LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits:
Non-interest bearing $ 3,001,269 $ 2,998,252
Interest bearing 12,091,910 11,339,609
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15,093,179 14,337,861
Federal funds purchased and securities sold under agreements
to repurchase 4,053,012 4,151,527
Other short-term borrowings 3,067,197 2,441,885
Notes payable 2,233,968 1,965,160
Acceptances outstanding 1,941 8,308
Other liabilities 463,976 418,985
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24,913,273 23,323,726
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Subordinated notes 125,000 125,000
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Preferred beneficial interest in Popular North America's
junior subordinated deferrable interest debentures guaranteed
by the Corporation 150,000 150,000
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Minority interest in consolidated subsidiaries 911 21,006
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STOCKHOLDERS' EQUITY:
Preferred stock 100,000 100,000
Common stock 830,934 828,254
Surplus 262,748 245,719
Retained earnings 915,394 734,681
Treasury stock, at cost (66,136) (64,150)
Accumulated other comprehensive income (loss), net of tax 80,034 (162,211)
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2,122,974 1,682,293
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$27,312,158 $25,302,025
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Popular, Inc. 2001 Quarterly
CONSOLIDATED STATEMENTS OF INCOME
Quarter ended
March 31,
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Dollars in thousands, except per share information 2001 2000
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INTEREST INCOME:
Loans $393,565 $376,520
Money market investments 15,306 13,248
Investment securities 138,059 112,130
Trading account securities 3,521 3,903
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550,451 505,801
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INTEREST EXPENSE:
Deposits 132,777 122,474
Short-term borrowings 120,521 102,825
Long-term debt 41,436 38,262
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294,734 263,561
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Net interest income 255,717 242,240
Provision for loan losses 50,034 50,013
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Net interest income after provision for loan losses 205,683 192,227
Service charges on deposit accounts 34,658 30,223
Other service fees 58,175 47,365
Gain on sale of securities 290 13,264
Trading account profit 309 817
Other operating income 21,535 24,057
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320,650 307,953
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OPERATING EXPENSES:
Personnel costs:
Salaries 77,778 78,594
Profit sharing 5,097 4,132
Pension and other benefits 22,019 20,498
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104,894 103,224
Net occupancy expenses 17,195 16,559
Equipment expenses 24,127 23,434
Other taxes 8,810 8,575
Professional fees 15,385 17,678
Communications 11,887 10,802
Business promotion 10,545 14,087
Printing and supplies 4,319 5,172
Other operating expenses 15,931 18,381
Amortization of intangibles 6,876 8,592
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219,969 226,504
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Income before income tax, minority interest
and cumulative effect of accounting changes 100,681 81,449
Income tax 27,151 18,756
Net loss of minority interest 16 1,496
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Income before cumulative effect of accounting changes 73,546 64,189
Cumulative effect of accounting changes, net of tax 686 -
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NET INCOME $ 74,232 $ 64,189
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NET INCOME APPLICABLE TO COMMON STOCK $ 72,145 $ 62,102
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EARNINGS PER COMMON SHARE (BASIC AND DILUTED)(BEFORE AND AFTER
CUMULATIVE EFFECT OF ACCOUNTING CHANGES) $ 0.53 $ 0.46
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SUBSIDIARIES
CENTRAL OFFICE
Popular Center
209 Munoz Rivera Avenue
San Juan, Puerto Rico 00918
Telephone: (787) 765-9800
BANCO POPULAR DE PUERTO RICO
Puerto Rico Office
Popular Center
209 Munoz 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
4000 West North Avenue
Chicago, Illinois 60639
Telephone: (773) 772-8600
BANCO POPULAR, NATIONAL ASSOCIATION
5551 Vanguard Street
Suite 100
Orlando, Florida 32819
Telephone: (407) 370-7482
ATH COSTA RICA / CREST, S.A.
Costado Este del Banco Central
Calle 2 Entre Ave. Central y Primera
San Jose Centro, Costa Rica
Telephone: (011) 506-257-4112
GM GROUP, INC.
1590 Ponce de Leon Avenue
San Juan, Puerto Rico 00926
Telephone: (787) 751-4343
EQUITY ONE, INC.
Marlton Crossing Office Park
400 Lippincott Drive
Marlton, New Jersey 08053
Telephone: (856) 396-2600
POPULAR MORTGAGE, INC.
268 Ponce de Leon Avenue
San Juan, Puerto Rico 00918
Telephone: (787) 753-0245
LEVITT MORTGAGE
Galeria San Patricio
B-5 Tabonuco St.
Suite 207
Guaynabo, Puerto Rico 00968
Telephone: (787) 749-8787
POPULAR LEASING & Rental, Inc.
M-1046 Federico Costa St.
Tres Monjitas Industrial
Development
San Juan, Puerto Rico 00903
Telephone: (787) 751-4848
POPULAR LEASING, USA
16296 Westwood
Business Parkdrive
Ellisville, Missouri 63021
Telephone: (609) 273-1119
POPULAR FINANCE, INC.
10 Salud Street
El Senorial Condominium
Suite 613
Ponce, Puerto Rico 00731
Telephone: (787) 844-2860
POPULAR CASH EXPRESS, INC.
6200 North Hiawatha
Suite 200
Chicago, Illinois 60646
Telephone: (773) 205-8300
POPULAR SECURITIES, INC.
Popular Center
209 Munoz Rivera Avenue
Suite 1020
San Juan, Puerto Rico 00918
Telephone: (787) 766-4200
POPULAR INSURANCE, INC.
270 Munoz Rivera Avenue
McConnell Bldg. 6th Floor
Hato Rey, Puerto Rico 00918
Telephone: (787) 759-0080
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