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[POPULAR, INC. LOGO]
For additional information contact:
Mr. Jorge A. Junquera
Senior Executive Vice President
Or visit our web site at http://www.popularinc.com
Telephone (787) 754-1685
July 10, 2001 News Release
POPULAR, INC. EARNINGS FOR THE QUARTER AND SIX-MONTH PERIOD ENDED JUNE 30, 2001
Popular, Inc. (the Corporation) reported net income of $77.5 million or
$0.55 earnings per common share (EPS) for the second quarter of 2001, compared
with $65.1 million or $0.46 for the same period in 2000. Net earnings for the
first quarter of 2001 were $74.2 million, or $0.53 per common share.
The Corporation's return on assets (ROA) and return on common equity
(ROE) for the second quarter of 2001 were 1.14% and 15.36%, respectively,
compared with 1.01% and 14.43% for the same period in 2000 and 1.09% and 15.25%
for the first quarter of 2001.
For the first six months of 2001, the Corporation's net earnings
reached $151.7 million, compared with $129.3 million for the same period in
2000. EPS for the first six-months of 2001 and 2000 were $1.08 and $0.92,
respectively. ROA and ROE for the first six months of 2001 were 1.10% and
15.31%, respectively. For the same period of 2000, these ratios were 1.01% and
14.50%.
The Corporation's results of operations for the quarter ended June 30,
2001, when compared with the same quarter of 2000, reflected an increase of
$21.4 million in net interest income together with an increase of $10.2 million
in other revenues. These improvements were partially offset by rises of $0.8
million in the provision for loan losses, $13.1 million in operating expenses
and $5.7 million in income taxes.
The Corporation has benefited from the overall interest rate reductions
occurring since the beginning of 2001. The increase in net interest income was
mostly attributed to a higher reduction in the cost of funding the Corporation's
earning assets compared with the reduction in their yields. The net interest
margin of the Corporation increased to 4.17% for the second quarter of 2001,
from
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2 - POPULAR, INC. 2001 SECOND QUARTER RESULTS
4.04% in the same quarter of 2000 and 3.90% in the first quarter of 2001. An
increase of $1.3 billion in average earning assets allowed the Corporation to
increase its interest income by $464 thousand notwithstanding the decline of 45
basis points in yields since the same quarter in 2000. The yield on earning
assets for the second quarter of 2001 was 8.20%, while the cost of
interest-bearing liabilities dropped by 67 basis points since the second quarter
of 2000.
The provision for loan losses for the second quarter of 2001 amounted
to $49.5 million compared with $48.7 million for the second quarter of 2000. Net
charge-offs for the quarter ended June 30, 2001, were $41.7 million or 0.99% of
average loans compared with $38.1 million or 0.97% for the second quarter of
2000, and $36.1 million or 0.89% for the first quarter of 2001.
Non-interest income grew $10.2 million or 9.4%, reaching $119.5 million
for the second quarter of 2001, compared with $109.3 million for the same period
in 2000. These revenues totaled $115.0 million in the first quarter of this
year. Service charges on deposit accounts and other service fees rose $8.9
million on a combined basis when compared to the second quarter of 2000, mostly
attributed to higher activity on commercial deposit accounts and the
implementation during the second half of 2000 of new fees in deposit accounts,
including charges for electronic transaction overdrafts, accounts without
activity, and others. Also, contributing to the growth in fees were higher
insurance commission income derived from Popular Insurance and processing fees
generated by GM Group. Moreover, debit card fees rose principally due to the
growing volume of point-of-sale terminals and transactions. These rises were
tempered by lower credit card fees and discounts due to the sale of the U. S.
credit card operations during the third quarter of 2000. Other operating income
rose $1.9 million or 8.4% compared to the second quarter of 2000, mostly driven
by higher gains on sale of loans and investment banking fees, partially
compensated by lower other income derived by GM Group.
Net losses on sale of securities amounted to $2.2 million for the
quarter ended June 30, 2001, compared with gains of $0.3 million in the same
period of 2000 and in the first quarter of 2001. Net gains on derivative
transactions, resulting from the change in the fair market value of derivative
instruments, amounted to $1.7 million for the quarter just ended. The latter
related mostly to adjustments on the market value of interest rate swaps entered
into by the Corporation.
Operating expenses for the second quarter of 2001 increased $13.1
million or 6.0%, reaching
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3 - POPULAR, INC. 2001 SECOND QUARTER RESULTS
$232.5 million. Personnel costs increased $8.5 million as compared with the
second quarter of 2000, resulting mostly from higher pension and medical plan
costs. Other operating expenses, excluding personnel costs, increased $4.6
million, mainly in net occupancy expenses, operating taxes, and other general
operating expenses. The latter was mostly associated to higher sundry losses,
which resulted primarily from unresolved claims on credit cards and automated
teller machine transactions. Partially tempering the rise in operating expenses
was a decrease in the amortization of intangibles due to the full amortization
in late 2000 of the core deposits recorded on the merger with BanPonce
Corporation in 1990. When compared to the first quarter of 2001, the Corporation
experienced an increase of $12.5 million or 5.7% in operating expenses.
Income taxes for the second quarter of 2001 increased $5.7 million or
26.1% when compared with the same period in 2000, reaching $27.3 million.
Notwithstanding the rise in tax resulting from higher taxable income, mainly at
our U.S. operations, the Corporation was favorably impacted by a reduction in
the capital gains tax rate applicable to assets located in Puerto Rico from
25.0% to 12.5% upon the enactment of a change in the tax laws in Puerto Rico
during the quarter. The new rate is effective for transactions occurring from
January 1st, 2001 and thereafter. Consequently, the Corporation reversed $1.7
million in deferred taxes related to capital assets.
The Corporation's total assets at June 30, 2001, amounted to $27.9
billion, compared with $26.5 billion at June 30, 2000 and $27.3 billion at March
31, 2001. The Corporation's earning assets reached $26.3 billion at June 30,
2001, compared with $24.7 billion and $25.7 billion at June 30, 2000 and March
31, 2001, respectively.
Total loans were $17.2 billion at June 30, 2001 or $1.4 billion more
than the level at June 30, 2000, and $683 million over March 31, 2001.
Commercial and mortgage loans accounted for the largest growth since June 30,
2000, increasing $256 million and $1.2 billion, respectively. These same
portfolios rose $127 million and $580 million, respectively, when compared with
March 31, 2001.
The allowance for loan losses at June 30, 2001, amounted to $313
million or 1.82% of loans compared with $306 million or 1.94% at June 30, 2000.
At March 31, 2001, the allowance for loan losses totaled $305 million or 1.85%
of loans. Non-performing assets were $382 million or 2.22% of ending loans at
June 30, 2001, compared with $380 million or 2.41% at the same date last year
and
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4 - POPULAR, INC. 2001 SECOND QUARTER RESULTS
$368 million or 2.23% at March 31, 2001. The increase in non-performing assets
since March 31, 2001 was mostly reflected in mortgage loans, which are
considered low-risk since they are secured by real estate. At June 30, 2001, the
allowance for loan losses as a percentage of non-performing assets was 81.92%
compared with 80.30% at June 30, 2000 and 83.01% at March 31, 2001. During the
last 12 months, the New York City taxicab medallion industry has experienced
high volatility in the market value of the taxicab medallions. Popular, Inc.,
through Banco Popular North America, is one of the largest lenders in this
industry sector with an aggregate exposure of $289 million, which approximates
1.7% of the Corporation's loan portfolio. Due to the noted volatility in the
market values of the medallions, and consistent with the Corporation's Internal
Risk Classification System, as of June 30, 2001 a segment of the New York City
taxicab medallion loan portfolio was downgraded and included in the criticized
assets of the Corporation. However, the Corporation does not anticipate any
significant loss in this portfolio.
Total deposits grew to $15.6 billion at June 30, 2001, from $14.5
billion at June 30, 2000. At March 31, 2001, total deposits amounted to $15.1
billion, respectively.
Borrowed funds, including subordinated notes and capital securities,
amounted to $9.7 billion at June 30, 2001 compared with $9.8 billion at June 30,
2000, and $9.6 billion at March 31, 2001.
At June 30, 2001, stockholders' equity totaled $2.2 billion compared
with $1.7 billion at the same date last year. These figures include unrealized
gains on securities available-for-sale, net of deferred taxes, of $75 million as
of June 30, 2001, compared with unrealized losses of $150 million as of the same
date last year. Stockholders' equity was $2.1 billion as of March 31, 2001.
The market value of the Corporation's common stock at June 30, 2001,
was $32.94 per share, compared with $19.06 at June 30, 2000 and $29.45 at March
31, 2001. The Corporation's market capitalization at June 30, 2001 was $4.5
billion, compared with $2.6 billion at June 30, 2000. At June 30, 2001, the
Corporation's common stock had a book value per share of $15.17.
During this quarter the Corporation reiterated its interest in
expanding the business in the Latin American markets through the acquisition of
19.99% of the voting stock of Centro Financiero BHD, S.A., the third largest
private financial institution in the Dominican Republic. Also, during the
quarter, the Corporation acquired 19.9% of the voting common stock of Coqui.com,
as well as a 13.1% of the Company's non-voting stock. Coqui.com owns PRTC.net
and Coqui.net, which
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together form the leading Internet service provider in Puerto Rico. This
investment provides the Corporation greater opportunities to increase its
Internet customer base and enhance its electronic capabilities, products and
services.
Popular Mortgage, the Corporation's mortgage loan subsidiary in Puerto
Rico, has reached record-breaking levels in the volume of mortgage loans closed
in recent months. The reductions in interest rates made by the Federal Reserve
Bank over the recent months continue having a positive impact in the volume of
mortgage loan origination. Also, improvements in the systems, constant personnel
training, an aggressive marketing campaign and the development of innovative
products have been key elements in the success.
On May 9, 2001 the Board of Directors of the Corporation declared a
cash dividend of $0.20 per common share for the second quarter of 2001. This
represented a 25.0 percent increase over the $0.16 per share paid in previous
quarterly cash dividends.
The Corporation's common and preferred stocks are traded on the
National Association of Securities Dealers Automated Quotation (NASDAQ) National
Market System under the symbols BPOP and BPOPP, respectively.
* * *
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POPULAR, INC.
FINANCIAL SUMMARY
(In thousands, except per share data)
Quarter Ended
June 30 Second
-------------------------------- Quarter -------------
2001 - 2000 First
Percent Quarter
2001 2000 Variance 2001
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SUMMARY OF OPERATIONS
Interest income ......................................... $ 525,238 $ 524,774 0.09% $ 550,451
Interest expense ........................................ 257,925 278,858 (7.51) 294,734
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Net interest income ..................................... 267,313 245,916 8.70 255,717
Provision for loan losses ............................... 49,462 48,719 1.53 50,034
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Net interest income after provision
for loan losses ....................................... 217,851 197,197 10.47 205,683
Other operating income .................................. 119,060 108,263 9.97 114,999
Gain on derivatives ..................................... 1,652 0 (631)
(Loss) gain on sale of securities ....................... (2,152) 329 290
Trading account profit .................................. 945 693 309
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Total other income ...................................... 119,505 109,285 9.35 114,967
Salaries and benefits ................................... 102,725 92,642 10.88 99,797
Profit sharing .......................................... 4,018 5,569 (27.85) 5,097
Amortization of intangibles ............................. 6,860 8,537 (19.64) 6,876
Other operating expenses ................................ 118,875 112,624 5.55 108,199
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Total operating expenses ................................ 232,478 219,372 5.97 219,969
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Income before income tax, minority interest and
cumulative effect of accounting changes ................ 104,878 87,110 20.40 100,681
Income tax .............................................. 27,337 21,684 26.07 27,151
Net (gain) loss of minority interest .................... (4) (303) (98.68) 16
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Income before cumulative effect of accounting changes ... 77,537 65,123 19.06 73,546
Cumulative effect of accounting changes, net of tax ..... 686
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Net income .............................................. $ 77,537 $ 65,123 19.06 $ 74,232
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Net income applicable to common stock ................... $ 75,450 $ 63,036 19.69 $ 72,145
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Earnings per common share (basic and diluted) ........... $ 0.55 $ 0.46 $ 0.53
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Dividends declared per common share ..................... $ 0.20 $ 0.16 $ 0.16
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Average common shares outstanding ....................... 136,189,956 135,878,677 136,111,025
Common shares outstanding at end of period .............. 136,180,713 135,865,104 136,101,782
SELECTED AVERAGE BALANCES
Total assets ............................................ $ 27,195,284 $ 25,972,365 4.71 $ 27,714,226
Loans ................................................... 16,774,330 15,681,239 6.97 16,215,424
Earning assets .......................................... 25,663,841 24,337,038 5.45 26,168,217
Deposits ................................................ 15,340,466 14,421,873 6.37 14,831,555
Interest-bearing liabilities ............................ 21,378,624 20,564,987 3.96 22,243,934
Stockholders' equity .................................... 2,070,246 1,857,501 11.45 2,018,788
SELECTED FINANCIAL DATA AT PERIOD-END
Total assets ............................................ $ 27,867,715 $ 26,451,246 5.36 $ 27,312,158
Loans ................................................... 17,192,246 15,774,604 8.99 16,509,477
Earning assets .......................................... 26,259,758 24,677,648 6.41 25,691,106
Deposits ................................................ 15,569,785 14,460,454 7.67 15,093,179
Interest-bearing liabilities ............................ 22,077,317 21,212,448 4.08 21,721,087
Stockholders' equity .................................... 2,166,129 1,736,890 24.71 2,122,974
PERFORMANCE RATIOS
Net interest yield * .................................... 4.17% 4.04% 3.90%
Return on assets ........................................ 1.14 1.01 1.09
Return on common equity ................................. 15.36 14.43 15.25
CREDIT QUALITY DATA
Non-performing assets ................................... $ 382,491 380,478 0.53 $ 367,761
Net loans charged-off ................................... 41,686 38,116 9.37 36,130
Allowance for loan losses ............................... 313,337 305,526 2.56 305,295
Non-performing assets to total assets ................... 1.37% 1.44% 1.35%
Allowance for losses to loans ........................... 1.82 1.94 1.85
* Not on a taxable equivalent basis
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POPULAR, INC.
FINANCIAL SUMMARY
(In thousands, except per share data)
For the six-months ended
June 30
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Percent
2001 2000 Variance
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SUMMARY OF OPERATIONS
Interest income ......................................... $ 1,075,689 $ 1,030,575 4.38%
Interest expense ........................................ 552,659 542,419 1.89
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Net interest income ..................................... 523,030 488,156 7.14
Provision for loan losses ............................... 99,496 98,732 0.77
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Net interest income after provision
for loan losses ....................................... 423,534 389,424 8.76
Other operating income .................................. 234,058 209,908 11.51
Gain on derivatives ..................................... 1,021
(Loss) gain on sale of securities ....................... (1,862) 13,593 (113.70)
Trading account profit .................................. 1,254 1,510 (16.95)
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Total other income ...................................... 234,471 225,011 4.20
Salaries and benefits ................................... 202,522 191,734 5.63
Profit sharing .......................................... 9,115 9,701 (6.04)
Amortization of intangibles ............................. 13,736 17,129 (19.81)
Other operating expenses ................................ 227,074 227,312 (0.10)
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Total operating expenses ................................ 452,447 445,876 1.47
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Income before income tax, minority interest and
cumulative effect of accounting changes ................. 205,558 168,559 21.95
Income tax .............................................. 54,488 40,440 34.74
Net loss of minority interest ........................... 12 1,193 (98.99)
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Income before cumulative effect of accounting changes ... 151,082 129,312 16.84
Cumulative effect of accounting changes, net of tax ..... 686
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Net income .............................................. $ 151,768 $ 129,312 17.37
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Net income applicable to common stock ................... $ 147,594 $ 125,137 17.95
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Earnings per common share (basic and diluted) ........... $ 1.08 $ 0.92
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Dividends declared ...................................... $ 0.36 $ 0.32
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Average common shares outstanding ....................... 136,150,709 135,821,221
Common shares outstanding at end of period .............. 136,180,713 135,865,104
SELECTED AVERAGE BALANCES
Total assets ............................................ $ 27,704,171 $ 25,719,423 7.72
Loans ................................................... 16,724,347 15,354,380 8.92
Earning assets .......................................... 26,155,728 24,046,773 8.77
Deposits ................................................ 15,100,994 14,284,696 5.71
Interest-bearing liabilities ............................ 22,187,641 20,332,255 9.13
Stockholders' equity .................................... 2,044,659 1,836,261 11.35
PERFORMANCE RATIOS
Net interest yield * .................................... 3.99% 4.06%
Return on assets ........................................ 1.10 1.01
Return on common equity ................................. 15.31 14.50
CREDIT QUALITY DATA
Non-performing assets ................................... $ 382,491 $ 380,478 0.53
Net loans charged-off ................................... 77,816 86,697 (10.24)
Allowance for loan losses ............................... 313,337 305,526 2.56
Non-performing assets to total assets ................... 1.37% 1.44%
Allowance for losses to loans ........................... 1.82 1.94
* Not on a taxable equivalent basis