Exhibit No. 19
[POPULAR LOGO] POPULAR, INC.
2002
JUNE 30, 2002
POPULAR, INC.
SECOND QUARTER
REPORT
LETTER TO SHAREHOLDERS
For the quarter ended June 30, 2002, Popular, Inc.'s net income reached $96.3
million or $0.72 earnings per common share, basic and diluted. The
Corporation's net income rose 24%, or $18.8 million, compared with $77.5
million or $0.55 per common share in the same period of 2001. Second quarter
earnings performance resulted in a return on average assets (ROA) of 1.23% and
a return on common equity (ROE) of 18.14%, compared with 1.14% and 15.36%,
respectively, for the same period in 2001.
Net income for the six months ended June 30, 2002 amounted to $185.3
million or $1.35 earnings per common share, an increase of $33.5 million, or
22%, compared with $151.8 million or $1.08 per common share for the same period
in 2001. ROA and ROE for the first six months of 2002 were 1.21% and 17.43%,
respectively, compared with 1.12% and 15.31%, respectively, for the same period
in 2001.
The Corporation's net interest income for the quarter ended June 30,
2002 increased to $294.7 million, an 11% or $29.2 million improvement over the
$265.5 million reported in the second quarter of 2001. Net interest margin for
the quarter, on a taxable equivalent basis, was 4.28%, compared with 4.44% a
year earlier. This reduction resulted from higher levels of arbitrage
activities and the impact of the declining interest rate scenario. The
provision for loan losses amounted to $50.1 million, compared with $49.5
million for the second quarter in 2001. Operating income, excluding
derivatives, securities and trading transactions, reached $136.1 million for
the second quarter of 2002, 10% or $12.1 million higher than the $124.0 million
reported in the same quarter last year. This rise resulted mostly from higher
commercial account charges and insurance, debit card, credit card and
check-cashing fees. Gain on sale of securities for the second quarter of 2002
was $85 thousand, compared with losses of $2.2 million for the same period in
2001, and derivative losses amounted to $0.9 million, compared with gains of
$1.7 million for the quarter ended June 30, 2001. Operating expenses totaled
$250.7 million for the second quarter of 2002, compared with $233.9 million for
the same period in 2001.
As of June 30, 2002, total assets reached $32.7 billion, an increase
of $4.8 billion over the $27.9 billion at June 30, 2001. Total loans amounted
to $18.9 billion at June 30, 2002, an increase of $1.7 billion from $17.2
billion at June 30, 2001, mainly in mortgage and commercial loans. Investment
securities totaled $10.3 billion at June 30, 2002, compared with $7.7 billion
at the same date in prior year, partly due to arbitrage activities. Deposits
rose to $17.8 billion at June 30, 2002, increasing $2.2 billion, or 15%, from
$15.6 billion at the same date a year earlier, driven principally by higher
savings and demand deposits.
Stockholders' equity amounted to $2.2 billion as of June 30, 2002 and
2001. Subsequent to December 31, 2001, the Corporation redeemed $100 million of
its preferred stock and repurchased 4.3 million shares of its common stock from
Banco Popular Retirement Plan. Earnings retention and a favorable change in the
value of securities available-for-sale offset these capital reductions.
The Corporation's stock market value was $33.68 per share at June 30,
2002, compared with $32.94 at June 30, 2001 and $29.22 at March 31, 2002. As of
the end of the second quarter of 2002 and 2001, the Corporation had a market
capitalization of $4.5 billion. Book value per share of common stock increased
10% to $16.69, compared with $15.18 as of June 30, 2001.
As part of our commitment in creating innovative and value-added products and
services that meet the changing needs of our customers, on April 29, 2002,
Banco Popular launched the new PREMIA rewards program. This customer-loyalty
program allows customers of Banco Popular de Puerto Rico and of other
Corporation's subsidiaries in Puerto Rico to accumulate points for their
everyday financial transactions and from a diversity of products and services,
including deposit accounts, credit cards, mortgage and auto loans, and
electronic services transactions, among others. The accumulated points are
redeemable for airline tickets, merchandise and pre-paid ATM cards, among many
other alternatives. This is a unique program that emphasizes on compensating
our customers and maximizing the value of the many products and services being
offered. Since its launching, the PREMIA rewards program has attracted more
than 100,000 participants, exceeding our short-term expectations.
Also, Popular Mortgage, our mortgage subsidiary in Puerto Rico, is
introducing a unique pre-approval service through an innovative program
together with Fannie Mae. This new service will permit qualified customers to
receive an instant pre-approval letter for mortgage loans through the Internet
in minimal time, thus making easier their decision-making process in buying a
home. The service is available by accessing Popular Mortgage's web site at
www.popularmortgagepr.com.
During this quarter, the Corporation acquired the general insurance
agencies of Del Nido & Associates and Life Insurance Services, Inc., broadening
our customer base and allowing us to offer a wider variety of insurance
products and services to more customers. We also established an insurance
subsidiary in the U.S. Virgin Islands, Popular
POPULAR, INC.
Insurance V.I., Inc., which will allow us to offer insurance products and
services to our customers in this area.
As part of our social commitment to bring financial advice to all the
communities we serve, Banco Popular North America, the U.S. leading
Hispanic-owned bank, launched the new Programa Acceso Popular. Through this
program, we offer tailored financial products and services to Hispanic
customers in the U.S. mainland, while we bring our financial expertise directly
into their communities and workplace.
During the Annual Stockholders Meeting of Popular, Inc., held on April 30,
2002, all three directors nominated for re-election were elected for a
three-year term. Also, Alberto Paracchini and Dr. Francisco Carreras retired
from the Popular, Inc. Board of Directors after reaching the mandatory
retirement age. We are very grateful for their valuable advice and
contributions during their tenure. Nonetheless, we will continue to benefit
from their ideas, experience and counsel on the Banco Popular de Puerto Rico
Board of Directors.
/s/ Richard L. Carrion
- -----------------------
Chairman
President
Chief Executive Officer
POPULAR, INC.
FINANCIAL HIGHLIGHTS
At June 30, Average for the six months
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BALANCE SHEET HIGHLIGHTS 2002 2001 Change 2002 2001 Change
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(In thousands)
Money market investments $ 1,071,658 $ 1,063,854 $ 7,804 $ 876,091 $ 949,489 $ (73,398)
Investment and trading securities 10,651,135 7,991,158 2,659,977 10,200,184 8,466,557 1,733,627
Loans 18,901,142 17,192,246 1,708,896 18,249,592 16,496,421 1,753,171
Total assets 32,740,722 27,850,634 4,890,088 30,915,430 27,448,384 3,467,046
Deposits 17,829,287 15,569,785 2,259,502 16,807,732 15,068,602 1,739,130
Borrowings 12,178,407 9,639,656 2,538,751 11,507,639 9,876,743 1,630,896
Stockholders' equity 2,207,617 2,166,652 40,965 2,141,750 2,044,659 97,091
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Second quarter Six months
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OPERATING HIGHLIGHTS 2002 2001 Change 2002 2001 Change
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(In thousands, except per share information)
Net interest income $294,678 $265,518 $29,160 $580,093 $521,235 $ 58,858
Provision for loan losses 50,075 49,462 613 104,529 99,496 5,033
Fees and other income 134,988 122,742 12,246 265,396 238,263 27,133
Other expenses, net of minority interest 283,286 261,261 22,025 555,611 508,919 46,692
Cumulative effect of accounting change -- -- -- -- 686 (686)
Net income $ 96,305 $ 77,537 $18,768 $185,349 $151,769 $ 33,580
Net income applicable to common stock $ 96,305 $ 75,450 $20,855 $182,839 $147,595 $ 35,244
Earnings per common share $ 0.72 $ 0.55 $ 0.17 $ 1.35 $ 1.08 $ 0.27
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Second quarter Six months
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SELECTED STATISTICAL INFORMATION 2002 2001 2002 2001
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COMMON STOCK DATA
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Market price
High $33.68 $32.94 $33.68 $32.94
Low 28.60 28.44 27.50 25.25
End 33.68 32.94 33.68 32.94
Book value at period end 16.69 15.18 16.69 15.18
Dividends declared 0.20 0.20 0.40 0.36
Dividend payout ratio 28.34% 28.86% 29.48% 29.50%
Price/earnings ratio 13.80x 15.46x 13.80x 15.46x
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PROFITABILITY RATIOS
Return on assets 1.23% 1.14% 1.21% 1.12%
Return on common equity 18.14 15.36 17.43 15.31
Net interest spread (taxable equivalent) 3.81 3.69 3.80 3.55
Net interest yield (taxable equivalent) 4.28 4.44 4.29 4.33
Effective tax rate 25.28 26.07 25.28 26.51
Overhead ratio 39.25 41.87 39.20 41.47
Efficiency ratio 58.18 60.05 57.90 59.72
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CAPITALIZATION RATIOS
Equity to assets 6.78% 7.62% 6.93% 7.45%
Tangible equity to assets 6.14 6.82 6.27 6.65
Equity to loans 11.55 12.34 11.74 12.39
Internal capital generation 13.12 9.32 12.17 9.64
Tier I capital to risk-adjusted assets 9.36 10.60 9.36 10.60
Total capital to risk-adjusted assets 11.13 12.57 11.13 12.57
Leverage ratio 5.99 6.89 5.99 6.89
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CREDIT QUALITY RATIOS
Allowance for losses to loans 1.84% 1.82% 1.84% 1.82%
Allowance to non-performing assets 69.11 81.90 69.11 81.90
Allowance to non-performing loans 74.31 88.56 74.31 88.56
Non-performing assets to loans 2.66 2.23 2.66 2.23
Non-performing assets to total assets 1.53 1.37 1.53 1.37
Net charge-offs to average loans 0.99 0.99 1.05 0.94
Provision to net charge-offs 1.09x 1.19x 1.10x 1.28x
Net charge-offs earnings coverage 3.91 3.70 3.69 3.92
ADDITIONAL INFORMATION
BOARD OF DIRECTORS
Richard L. Carrion, Chairman
Antonio Luis Ferre, Vice Chairman **
Juan A. Albors Hernandez *
Jose A. Bechara Bravo *
Juan J. Bermudez
Francisco J. Carreras *
Jose B. Carrion Jr.
David H. Chafey Jr.
Maria Luisa Ferre *
Hector R. Gonzalez
Jorge A. Junquera
Guillermo L. Martinez *
Manuel Morales Jr.
Alberto M. Paracchini *
Francisco M. Rexach Jr.
Felix J. Serralles Jr.
Jon E. Slater *
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
Emilio E. Pinero, Executive Vice President
Brunilda Santos de Alvarez, Executive Vice President
Carlos J. Vazquez, Executive Vice President
Felix M. Villamil, Executive Vice President
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 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) 764-1893 or (787) 765-9800 exts. 5637, 5525, 6108 and
6112.
POPULAR, INC.
C0NSOLIDATED STATEMENTS OF CONDITION
June 30,
--------------------------------
In thousands 2002 2001
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ASSETS
Cash and due from banks $ 1,102,933 $ 580,592
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Money market investments:
Federal funds sold and securities purchased under agreements to resell 1,067,764 1,052,960
Time deposits with other banks 3,056 10,424
Bankers' acceptances 838 470
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1,071,658 1,063,854
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Investment securities available-for-sale, at market value 10,118,219 7,463,660
Investment securities held-to-maturity, at amortized cost 225,070 247,812
Trading account securities, at market value 307,846 279,686
Loans held-for-sale, at lower of cost or market 910,006 914,071
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Loans 18,302,714 16,604,911
Less -- Unearned income 311,578 326,736
Allowance for loan losses 347,230 313,337
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17,643,906 15,964,838
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Premises and equipment 404,382 395,804
Other real estate 35,193 28,741
Accrued income receivable 190,612 190,013
Other assets 516,726 493,473
Intangible assets 214,171 228,090
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$ 32,740,722 $ 27,850,634
=============================================================================================================================
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES:
Deposits:
Non-interest bearing $ 4,012,168 $ 3,144,623
Interest bearing 13,817,119 12,425,162
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17,829,287 15,569,785
Federal funds purchased and securities sold under agreements to repurchase 5,829,016 4,157,279
Other short-term borrowings 1,944,642 2,828,347
Notes payable 4,135,749 2,379,030
Other liabilities 524,447 473,626
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30,263,141 25,408,067
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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 144,000 150,000
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Minority interest in consolidated subsidiaries 964 915
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STOCKHOLDERS' EQUITY:
Preferred stock -- 100,000
Common stock 833,672 831,408
Surplus 272,761 264,414
Retained earnings 1,186,814 963,605
Treasury stock, at cost (205,210) (66,136)
Accumulated other comprehensive income, net of tax 119,580 73,361
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2,207,617 2,166,652
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$ 32,740,722 $ 27,850,634
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POPULAR, INC.
CONSOLIDATED STATEMENTS OF INCOME
Quarter ended Six months ended
June 30, June 30,
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Dollars in thousands, except per share information 2002 2001 2002 2001
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INTEREST INCOME:
Loans $ 380,166 $ 391,841 $ 752,388 $ 785,406
Money market investments 7,370 13,026 15,155 28,332
Investment securities 115,377 114,243 227,688 252,302
Trading account securities 3,086 4,297 6,587 7,818
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505,999 523,407 1,001,818 1,073,858
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INTEREST EXPENSE:
Deposits 110,356 131,022 223,286 263,799
Short-term borrowings 45,274 84,493 89,718 203,611
Long-term debt 55,691 42,374 108,721 85,213
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211,321 257,889 421,725 552,623
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Net interest income 294,678 265,518 580,093 521,235
Provision for loan losses 50,075 49,462 104,529 99,496
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Net interest income after provision for loan losses 244,603 216,056 475,564 421,739
Service charges on deposit accounts 39,507 36,310 78,480 70,968
Other service fees 66,037 60,349 127,724 119,043
Gain (loss) on sale of securities 85 (2,152) (3,925) (1,862)
Trading account loss (359) (816) (1,389) (628)
Derivatives (losses) gains (855) 1,652 (344) 1,021
Other operating income 30,573 27,399 64,850 49,721
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379,591 338,798 740,960 660,002
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OPERATING EXPENSES
Personnel costs:
Salaries 90,746 78,884 179,307 156,662
Profit sharing 5,368 4,018 10,308 9,115
Pension and other benefits 26,469 23,841 53,270 45,860
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122,583 106,743 242,885 211,637
Net occupancy expenses 20,048 17,726 39,078 34,921
Equipment expenses 24,376 24,575 49,141 48,702
Other taxes 9,285 9,809 18,833 18,619
Professional fees 19,724 18,284 37,231 34,223
Communications 13,111 12,085 26,384 23,972
Business promotion 16,831 13,159 30,199 23,704
Printing and supplies 5,078 4,490 9,587 8,809
Other operating expenses 17,061 20,189 34,382 36,120
Amortization of intangibles 2,556 6,860 5,099 13,736
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250,653 233,920 492,819 454,443
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Income before income tax, minority interest
and cumulative effect of accounting change 128,938 104,878 248,141 205,559
Income tax 32,594 27,337 62,742 54,488
Net (gain) loss of minority interest (39) (4) (50) 12
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Income before cumulative effect of accounting change 96,305 77,537 185,349 151,083
Cumulative effect of accounting change, net of tax -- -- -- 686
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NET INCOME $ 96,305 $ 77,537 $ 185,349 $ 151,769
==================================================================================================================================
NET INCOME APPLICABLE TO COMMON STOCK $ 96,305 $ 75,450 $ 182,839 $ 147,595
==================================================================================================================================
EARNINGS PER COMMON SHARE (BASIC AND DILUTED) (BEFORE
AND AFTER CUMULATIVE EFFECT OF ACCOUNTING CHANGE) $ 0.72 $ 0.55 $ 1.35 $ 1.08
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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
8523 Commodity Circle
Suite 100
Orlando, Florida 32819
Telephone: (407) 370-7800
ATH Costa Rica/CreST, S.A.
Tournon Neighborhood, across to newspaper La Republica.
ATH Building
San Jose, Costa Rica
Telephone: (011) 506-257-9011
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 Street
Suite 207
Guaynabo, Puerto Rico 00968
Telephone: (787) 749-8787
Popular Auto, Inc.
M-1046 Federico Costa Street
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.
9 Pedro Marquez Street
Culebra, Puerto Rico 00735
Telephone: (787) 742-0255
Popular Insurance Agency, USA
1010 W Lake Street
Suite 509
Oak Park, Illinois 60301
Telephone: (773) 394-7680