EXHIBIT-99(A)
[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, 2002 News Release
POPULAR, INC. REPORTS EARNINGS FOR THE QUARTER AND SIX-MONTH PERIOD
ENDED JUNE 30, 2002
Popular, Inc.'s (the Corporation) (NASDAQ:BPOP) net income amounted to
$96.3 million or $0.72 earnings per common share (EPS), basic and diluted, in
the second quarter of 2002, compared with $77.5 million or $0.55 in the same
period of 2001, representing an increase of $18.8 million or 24%, and $0.17 or
31% per common share. Net earnings for the first quarter of 2002 were $89.0
million, or $0.63 per common share.
The Corporation's return on assets (ROA) and return on common equity
(ROE) for the second quarter of 2002 were 1.23% and 18.14%, respectively,
compared with 1.14% and 15.36% for the same period in 2001, and 1.19% and 16.83%
for the first quarter of 2002.
For the first six months of 2002, the Corporation's net income reached
$185.3 million, compared with $151.8 million for the same period in 2001. EPS
for the first six months of 2002 and 2001 were $1.35 and $1.08, respectively.
ROA and ROE for the first six months of 2002 were 1.21% and 17.43%,
respectively. For the same period of 2001, these ratios were 1.12% and 15.31%.
The Corporation's results of operations for the quarter ended June 30,
2002, when compared with the same quarter of 2001, reflected an increase of
$29.2 million in net interest income and $14.8 million in other income,
excluding derivatives. These improvements were partially offset by rises of
$16.7 million in operating expenses and $5.3 million in income taxes. Derivative
losses for the quarter amounted to $0.9 million compared with gains of $1.7
million for the quarter ended June 30, 2001. The results for this quarter
included the reduction of $4.3 million in the amortization of intangibles when
compared with the same quarter in 2001, associated with the adoption in 2002 of
SFAS No. 142 "Goodwill and Other Intangible Assets," which no longer permits
the amortization of
2 - POPULAR, INC. 2002 SECOND QUARTER RESULTS
goodwill and other intangibles that have indefinite useful lives, but rather
requires that they be tested at least annually for impairment.
Net interest income for the quarter ended June 30, 2002, rose $29.2
million or 11% over the second quarter of 2001. Average earning assets rose $4.1
billion, driven by a $1.7 billion increase in the average loan portfolio, mainly
in mortgage loans, and a $2.4 billion increase in average money market, trading
and investment securities, mostly U.S. Agency securities and collateralized
mortgage obligations. A mix of funding sources supported the increase in the
volume of earning assets. Interest-bearing deposits, short-term and long-term
borrowings rose by an average of $1.6 billion, $0.6 billion and $1.8 billion,
respectively. The increase in long-term debt results from the issuance of
medium-term notes and secured borrowings, as the Corporation is positioning
itself against the event of a rising rate scenario. The net interest yield for
the quarter ended June 30, 2002, was 3.95% compared with 4.14% for the second
quarter of 2001. The reduction in the net interest margin resulted mostly from
the higher level of arbitrage activities, on which the Corporation earns a lower
margin, and the impact of the declining interest rate scenario during the second
half of 2001 on commercial loans with floating rates and on the investment
portfolio. For the first quarter of 2002 the net interest yield was also 3.95%.
The provision for loan losses for the second quarter of 2002 amounted
to $50.1 million compared with $49.5 million for the second quarter of 2001. Net
charge-offs for the quarter ended June 30, 2002, were $45.8 million or 0.99% of
average loans, compared with $41.7 million or 0.99% for the second quarter of
2001, and $49.7 million or 1.10% for the first quarter of 2002. The decline in
net charge-offs after the first quarter of 2002 was mostly reflected in
commercial loans. The provision represented 109% of net charge-offs for the
quarter ended June 30, 2002.
Operating income, excluding derivatives, securities and trading
transactions, grew $12.1 million or 10%, reaching $136.1 million for the second
quarter of 2002, compared with $124.0 million for the same quarter in 2001.
Service charges on deposit accounts contributed with a rise of $3.2 million or
9%, which was mostly attributed to higher commercial account charges. Also,
other service fees increased $5.7 million or 9%, including higher insurance,
debit card, credit card and check-cashing fees, mostly attributed to higher
activity and business growth. Other operating income rose $3.2 million or 12%,
compared with the second quarter of 2001. This rise resulted mostly from
3 - POPULAR, INC. 2002 SECOND QUARTER RESULTS
a $3.1 million gain realized on the sale of Banco Popular North America's trust
operations in Chicago, Illinois, and a $0.6 million net gain recorded on the
sale of 15 branches of Popular Finance, both as part of restructuring efforts at
these subsidiaries. Operating income, excluding derivatives, securities and
trading transactions, totaled $134.9 million in the first quarter of the current
year.
Sales of securities during the quarter ended June 30, 2002, resulted in
moderate gains of $85 thousand, compared with losses of $2.2 million in the same
period of 2001, and losses of $4 million in the first quarter of 2002.
Operating expenses for the second quarter of 2002 totaled $250.7
million, an increase of $16.7 million, or 7%, compared with the second quarter
of 2001. Personnel costs rose $15.8 million, or 15%, due in part to higher
salaries resulting from merit increases and headcount, incentives, as well as
other costs associated with restructuring efforts. Excluding personnel costs,
operating expenses rose $0.9 million, compared with the same period in 2001.
During this quarter the Corporation incurred higher business promotion expenses
partly related to the launching of PREMIA, an innovative program to reward our
customers in Puerto Rico. Also, there were higher expenses incurred for
consulting services in the restructuring of operations, and higher communication
costs. These rises were partially offset by a decrease in the amortization of
intangibles, namely goodwill, which approximated $4.3 million in the second
quarter of 2001, and lower sundry losses. Operating expenses totaled $242.2
million in the first quarter of 2002.
Income taxes for the second quarter of 2002 amounted to $32.6 million,
an increase of $5.3 million, or 19%, compared with the same period in 2001.
Income taxes were $30.1 million in the first quarter of 2002.
The Corporation's total assets at June 30, 2002, were $32.7 billion,
compared with $27.9 billion at June 30, 2001, and $30.3 billion at March 31,
2002. The Corporation's earning assets reached $30.6 billion at June 30, 2002,
compared with $26.2 billion and $28.9 billion at June 30, 2001 and March 31,
2002, respectively.
Total loans were $18.9 billion at June 30, 2002, or $1.7 billion and
$644 million higher than the levels at June 30, 2001, and March 31, 2002,
respectively. Mortgage and commercial loans accounted for the largest growth
since June 30, 2001, increasing $1.5 billion and $245 million, respectively.
These same portfolios rose $451 million and $97 million, respectively, when
compared
4 - POPULAR, INC. 2002 SECOND QUARTER RESULTS
with March 31, 2002. Investment securities totaled $10.3 billion at June 30,
2002, compared with $7.7 billion at June 30, 2001. This rise is partly due to
higher arbitrage activity undertaken by the Corporation in the latter part of
2001 and 2002. Investment securities were $9.6 billion as of March 31, 2002.
The allowance for loan losses at June 30, 2002 stood at $347 million or
1.84% of loans compared with $313 million or 1.82% at June 30, 2001. At March
31, 2002, the allowance for loan losses totaled $342 million or 1.87% of loans.
Non-performing assets were $502 million or 2.66% of loans at June 30, 2002,
compared with $383 million or 2.23% at the same date last year and $494 million
or 2.70% at March 31, 2002. The Corporation's policy is to place commercial
loans on non-accrual status when payments of principal or interest are
delinquent 60 days. Assuming the standard industry practice of placing
commercial loans on non-accrual status when payments of principal and interest
are past due 90 days or more, and excluding the closed-end consumer loans from
non-accruing, the Corporation's non-performing assets as of June 30, 2002 would
have been $434 million or 2.30% of loans, compared with $313 million or 1.82% at
June 30, 2001 and $425 million or 2.33% at March 31, 2002. The increase in
non-performing assets since June 30, 2001 is reflected mostly in mortgage loans,
which rose by $102 million. Non-performing mortgage loans were $221 million or
44% of non-performing assets and 3.10% of total mortgage loans as of June 30,
2002, compared with $119 million or 31% of non-performing assets and 2.12% of
total mortgage loans as of June 30, 2001. Mortgage loans net charge-offs
amounted to $3.5 million for the second quarter of 2002 and represented 0.20% of
the average mortgage loan portfolio for that period, compared with $2.0 million
or 0.15% in the second quarter of 2001, and $2.3 million or 0.14% in the first
quarter of 2002. At June 30, 2002, the allowance for loan losses as a percentage
of non-performing assets was 69.11%, compared with 81.90% at June 30, 2001, and
69.24% at March 31, 2002. Excluding non-performing mortgage loans, the total
allowance for loan losses to non-performing assets was 123.32% as of June 30,
2002, compared with 118.81% and 119.96% as of June 30, 2001 and March 31, 2002,
respectively.
Total deposits grew to $17.8 billion at June 30, 2002, from $15.6
billion at June 30, 2001, an increase of $2.2 billion, or 15%. At March 31,
2002, total deposits amounted to $16.5 billion. Savings and demand deposits
contributed to the growth since June 30, 2001, with increases of $1.1
5 - POPULAR, INC. 2002 SECOND QUARTER RESULTS
billion and $873 million, respectively. The increase since March 31, 2002 was
mostly reflected in demand deposits, which rose by $912 million, partly in
deposits in trust from governmental sources used to repay government bond
redemptions on July 1st.
Borrowed funds, including subordinated notes and capital securities,
amounted to $12.2 billion at June 30, 2002, compared with $9.6 billion at June
30, 2001, and $11.1 billion at March 31, 2002. The additional borrowed funds
have been used to fund the Corporation's loan and investment portfolio growth.
At June 30, 2002 and 2001, and March 31, 2002, stockholders' equity
totaled $2.2 billion. Stockholders' equity was $2.3 billion as of December 31,
2001. Various factors have impacted stockholders' equity since the end of 2001,
including the redemption of $100 million of the Corporation's preferred stock in
January 2002 and the repurchase of 4,300,000 shares of the Corporation's common
stock from Banco Popular de Puerto Rico Retirement Plan in May 2002 at a cost of
$139 million. These decreases since the end of 2001 have been offset by earnings
retention and by an increase of $41 million in unrealized gains on securities
available-for-sale.
The market value of the Corporation's common stock at June 30, 2002,
was $33.68 per share, compared with $32.94 at June 30, 2001, and $29.22 at March
31, 2002. The Corporation's market capitalization at June 30, 2002, and 2001 was
$4.5 billion. At June 30, 2002 and 2001, the Corporation's common stock had a
book value per share of $16.69 and $15.18, respectively.
The Corporation's common stock is traded on the National Association of
Securities Dealers Automated Quotation (NASDAQ) National Market System under the
symbol BPOP.
* * *
POPULAR, INC.
FINANCIAL SUMMARY
(In thousands, except per share data)
Quarter ended
June 30 Second
-------------------------------------- Quarter --------------
2002 - 2001 First
Percent Quarter
2002 2001 Variance 2002
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SUMMARY OF OPERATIONS
Interest income .................................. $ 505,999 $ 523,407 (3.33) $ 495,819
Interest expense ................................. 211,321 257,889 (18.06) 210,404
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Net interest income .............................. 294,678 265,518 10.98 285,415
Provision for loan losses ........................ 50,075 49,462 1.24 54,454
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Net interest income after provision
for loan losses ................................ 244,603 216,056 13.21 230,961
Other operating income ........................... 136,117 124,058 9.72 134,937
(Loss) gain on derivatives ....................... (855) 1,652 511
Gain (loss) on sale of securities ................ 85 (2,152) (4,010)
Trading account loss ............................. (359) (816) (1,030)
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Total other income ............................... 134,988 122,742 9.98 130,408
Salaries and benefits ............................ 117,215 102,725 14.11 115,362
Profit sharing ................................... 5,368 4,018 33.60 4,940
Amortization of intangibles ...................... 2,556 6,860 (62.74) 2,543
Other operating expenses ......................... 125,514 120,317 4.32 119,321
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Total operating expenses ......................... 250,653 233,920 7.15 242,166
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Income before income tax and minority interest ... 128,938 104,878 22.94 119,203
Income tax ....................................... 32,594 27,337 19.23 30,148
Net gain of minority interest .................... (39) (4) (11)
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Net income ....................................... $ 96,305 $ 77,537 24.21 $ 89,044
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Net income applicable to common stock ............ $ 96,305 $ 75,450 27.64 $ 86,534
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Earnings per common share (basic and diluted) .... $ 0.72 $ 0.55 $ 0.63
============= ============= =============
Dividends declared per common share .............. $ 0.20 $ 0.20 $ 0.20
============= ============= =============
Average common shares outstanding ................ 134,440,879 136,189,956 136,475,530
Common shares outstanding at end of period ....... 132,251,194 136,180,714 136,459,471
SELECTED AVERAGE BALANCES
Total assets ..................................... $ 31,407,801 $ 27,185,464 15.53 $ 30,417,589
Loans ............................................ 18,439,066 16,774,330 9.92 18,058,011
Earning assets ................................... 29,789,846 25,659,527 16.10 28,856,733
Deposits ......................................... 17,086,189 15,321,682 11.52 16,526,180
Interest-bearing liabilities ..................... 25,561,529 21,630,527 18.17 24,625,174
Stockholders' equity ............................. 2,129,395 2,070,246 2.86 2,154,243
SELECTED FINANCIAL DATA AT PERIOD-END
Total assets ..................................... $ 32,740,722 $ 27,850,634 17.56 $ 30,317,366
Loans ............................................ 18,901,142 17,192,246 9.94 18,256,924
Earning assets ................................... 30,623,934 26,247,258 16.67 28,879,106
Deposits ......................................... 17,829,287 15,569,785 14.51 16,524,154
Interest-bearing liabilities ..................... 25,995,526 22,064,818 17.81 24,506,640
Stockholders' equity ............................. 2,207,617 2,166,652 1.89 2,184,827
PERFORMANCE RATIOS
Net interest yield* .............................. 3.95% 4.14% 3.95%
Return on assets ................................. 1.23 1.14 1.19
Return on common equity .......................... 18.14 15.36 16.83
CREDIT QUALITY DATA
Non-performing assets ............................ $ 502,463 $ 382,563 31.34 $ 493,575
Net loans charged-off ............................ 45,773 41,686 9.80 49,685
Allowance for loan losses ........................ 347,230 313,337 10.82 341,744
Non-performing assets to total assets ............ 1.53% 1.37% 1.63%
Allowance for losses to loans .................... 1.84 1.82 1.87
* Not on a taxable equivalent basis
Note: Certain reclassifications have been made to prior periods to conform with
this quarter.
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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
2002 2001 Variance
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SUMMARY OF OPERATIONS
Interest income .......................................... $ 1,001,818 $ 1,073,858 (6.71)
Interest expense ......................................... 421,725 552,623 (23.69)
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Net interest income ...................................... 580,093 521,235 11.29
Provision for loan losses ................................ 104,529 99,496 5.06
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Net interest income after provision
for loan losses ........................................ 475,564 421,739 12.76
Other operating income ................................... 271,054 239,732 13.07
(Loss) gain on derivatives ............................... (344) 1,021
Loss on sale of securities ............................... (3,925) (1,862) 110.79
Trading account loss ..................................... (1,389) (628) 121.18
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Total other income ....................................... 265,396 238,263 11.39
Salaries and benefits .................................... 232,577 202,522 14.84
Profit sharing ........................................... 10,308 9,115 13.09
Amortization of intangibles .............................. 5,099 13,736 (62.88)
Other operating expenses ................................. 244,835 229,070 6.88
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Total operating expenses ................................. 492,819 454,443 8.44
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Income before income tax, minority interest and cumulative
effect of accounting change ............................. 248,141 205,559 20.72
Income tax ............................................... 62,742 54,488 15.15
Net (gain) loss of minority interest ..................... (50) 12
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Income before cumulative effect of accounting change ..... 185,349 151,083 22.68
Cumulative effect of accounting change, net of tax ....... 686 (100.00)
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Net income ............................................... $ 185,349 $ 151,769 22.13
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Net income applicable to common stock .................... $ 182,839 $ 147,595 23.88
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Earnings per common share (basic and diluted) ............ $ 1.35 $ 1.08
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Dividends declared ....................................... $ 0.40 $ 0.36
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Average common shares outstanding ........................ 135,452,584 136,150,709
Common shares outstanding at end of period ............... 132,251,194 136,180,714
SELECTED AVERAGE BALANCES
Total assets ............................................. $ 30,915,430 $ 27,448,384 12.63
Loans .................................................... 18,249,592 16,496,421 10.63
Earning assets ........................................... 29,325,867 25,912,467 13.17
Deposits ................................................. 16,807,732 15,068,602 11.54
Interest-bearing liabilities ............................. 25,095,938 21,926,165 14.46
Stockholders' equity ..................................... 2,141,750 2,044,659 4.75
PERFORMANCE RATIOS
Net interest yield* ...................................... 3.95% 4.02%
Return on assets ......................................... 1.21 1.12
Return on common equity .................................. 17.43 15.31
CREDIT QUALITY DATA
Non-performing assets .................................... $ 502,463 $ 382,563 31.34
Net loans charged-off .................................... 95,458 77,816 22.67
Allowance for loan losses ................................ 347,230 313,337 10.82
Non-performing assets to total assets .................... 1.53% 1.37%
Allowance for losses to loans ............................ 1.84 1.82
* Not on a taxable equivalent basis
Note: Certain reclassifications have been made to prior periods to conform with
this period.
7