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
October 9, 2002 News Release
POPULAR, INC. REPORTS EARNINGS FOR THE QUARTER AND NINE-MONTH
PERIOD ENDED SEPTEMBER 30, 2002
Popular, Inc.'s (the Corporation) (NASDAQ: BPOP) net income for the
third quarter of 2002 was $85.8 million, compared with $77.2 million for the
same quarter of 2001, an increase of $8.6 million, or 11%. Earnings per common
share (EPS), basic and diluted, for the quarter ended September 30, 2002, were
$0.65, compared with $0.55 for the same period in 2001, representing an increase
of 18%. The repurchase of 4,300,000 of common stock in May 2002 and the
redemption of $100 million of preferred stock in January 2002 had a positive
effect in the earnings per share computation. Net earnings for the first and
second quarter of 2002 were $89.0 million and $96.3 million, or $0.63 and $0.72
per common share, respectively.
The Corporation's return on assets (ROA) and return on common equity
(ROE) for the third quarter of 2002 were 1.07% and 16.03%, respectively,
compared with 1.10% and 14.71% for the same period in 2001, and 1.23% and 18.14%
for the second quarter of 2002.
For the first nine months of 2002, the Corporation's net earnings
reached $271.1 million, compared with $229.0 million for the same period in
2001. EPS, basic and diluted, for the first nine months of 2002 and 2001 were
$2.00 and $1.63, respectively. ROA and ROE for the first nine months of 2002
were 1.16% and 16.92%, respectively. For the same period of 2001, these ratios
were 1.11% and 15.10%, respectively.
Results of operations for the quarter ended September 30, 2002,
reflected an increase of $23.5 million in net interest income, compared with the
same quarter in prior year. Also, contributing to the increase in net income was
an increase in non-interest income, excluding derivative losses, of $12.2
million, lower provision for loan losses by $4.3 million and income taxes
2 - POPULAR, INC. 2002 THIRD QUARTER RESULTS
by $4.3 million. These favorable variances were partially offset by rises of
$21.9 million in operating expenses and $13.6 million in derivative losses.
The results of operations for the quarter ended September 30, 2002,
included pre-tax derivative losses of $21.7 million, compared with losses of
$8.1 million in the same quarter the previous year. These losses resulted mostly
from adjustments to the market value of the interest rate swaps entered into by
the Corporation, which were negatively impacted by further declines in interest
rates.
The net interest income for the quarter ended September 30, 2002 rose
9%, compared with the same period of 2001. Average earning assets for the third
quarter of 2002 increased by $3.9 billion, compared with the same quarter the
previous year, driven by a $1.6 billion rise in the average loan portfolio,
mainly in mortgage loans, and a $2.3 billion increase in the investment
portfolio, mainly in 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 grew in average by $1.0 billion, while
borrowings rose by $2.8 billion. The Corporation's net interest margin decreased
to 3.93% for the third quarter of 2002, from 4.16% in the same quarter of 2001
and 3.95% in the second quarter of 2002. The Corporation's yield on earning
assets decreased by 113 basis points in the third quarter of 2002, compared with
the same period of 2001, resulting mostly from the higher level of arbitrage
activities on which the Corporation earns a lower yield and spread, and the
impact of the declines in the interest rate scenario on commercial loans with
floating rates and on the investment portfolio. The cost of interest-bearing
liabilities also dropped compared with the same quarter the previous year, due
in part to a decline in the cost of borrowed funds and adjustments in deposit
rates.
The provision for loan losses for the third quarter of 2002 amounted to
$51.0 million, compared with $55.3 million for the third quarter of 2001 and
$50.1 million in the second quarter of 2002. Net charge-offs for the quarter
ended September 30, 2002, were $44.4 million or 0.93% of average loans, compared
with $42.2 million, or 0.97%, for the third quarter of 2001, and $45.8 million,
or 0.99%, for the second quarter of 2002. For the nine month periods ended
September 30, 2002 and 2001, net charge-offs totaled $139.8 million and $120.0
million, respectively, representing 1.01% and 0.95% of average loans,
respectively. The provision represented 115% of net charge-offs
3 - POPULAR, INC. 2002 THIRD QUARTER RESULTS
for the quarter ended September 30, 2002, compared with 131% for the same period
in 2001. The decline in the provision for loan losses is influenced by the fact
that the growth in the Corporation's loan portfolio has been mostly in mortgage
loans, which historically represent a lower-risk portfolio with minimal losses.
Mortgage loans comprised 38% of the total loan portfolio as of September 30,
2002, while the commercial, consumer and lease financing portfolios represented
41%, 16% and 5%, respectively. These figures compared with 34%, 43%, 18% and 5%,
respectively, as of September 30, 2001. Furthermore, the commercial
non-performing loans have decreased slightly.
Non-interest income, excluding securities, trading and derivative
transactions, amounted to $136.8 million for the third quarter of 2002, compared
with $125.0 million for the same period in 2001, reflecting a 9% increase. These
revenues totaled $136.1 million in the second quarter of the current year. On a
combined basis, service charges on deposit accounts and other service fees rose
$4.7 million, or 5%, compared with the third quarter of 2001. This increase was
mostly attributed to higher commercial account charges, higher activity
associated with deposit account charges, and to increases in insurance
commissions and debit card fees. Other operating income for the quarter ended
September 30, 2002, grew by $7 million, or 27%, compared with the same period in
2001, mostly associated with higher gains on sales of loans and higher dividend
income from Telecomunicaciones de Puerto Rico, Inc.
Operating expenses amounted to $253.9 million for the third quarter of
2002, an increase of $21.9 million, or 9%, compared with the same period in
2001. Operating expenses totaled $250.7 million in the second quarter of 2002.
Personnel costs for the third quarter of 2002 increased by $15.9 million,
compared with the same period in 2001, resulting mostly from higher salaries,
incentives, profit sharing and pension plan expenses. Other operating expenses,
excluding personnel costs, increased $6.0 million, or 5%, mostly in professional
fees, business promotions, communications and net occupancy expenses. These
rises were partially offset by a decrease in the amortization of intangibles,
namely goodwill, which approximated $4.3 million in the third quarter of 2001.
During the third quarter of 2002, the Corporation opted to expense the
stock options granted, and accordingly, the results of the third quarter of 2002
included $0.6 million in operating expenses
4 - POPULAR, INC. 2002 THIRD QUARTER RESULTS
related to the accounting of the Corporation's stock option plan under the fair
value method defined in SFAS No.123 "Accounting for Stock-Based Compensation."
All future stock option grants will be expensed.
Income taxes for the third quarter of 2002 amounted to $23.7 million,
compared with $28.0 million in the third quarter of 2001 and $32.6 million in
the second quarter of 2002. The Corporation's effective tax rate for the quarter
ended September 30, 2002, declined to 22%, from 27% in the same quarter the
previous year, mostly as a result of an increase in the deferred tax related to
unrealized derivative losses, principally in the U.S. mainland, and a decrease
in the disallowance of expenses attributed to tax exempt investments, due to
lower cost of funds.
The Corporation's total assets at September 30, 2002, amounted to $32.8
billion, compared with $28.5 billion at September 30, 2001, and $32.7 billion at
June 30, 2002. The increase in total assets when compared with the quarter ended
September 30, 2001, was driven mainly by an increase of $2.5 billion in
investment and trading securities, and $1.6 billion in loans. The Corporation's
earning assets reached $31.2 billion at September 30, 2002, compared with $26.9
billion and $30.6 billion at September 30, 2001, and June 30, 2002,
respectively.
Total loans were $19.3 billion at September 30, 2002, compared with
$17.6 billion at September 30, 2001, and $18.9 billion at June 30, 2002.
Mortgage loans accounted for the largest growth, increasing $1.4 billion since
September 30, 2001, and $278 million since June 30, 2002.
The allowance for loan losses at September 30, 2002, amounted to $354
million, or 1.84% of loans, compared with $327 million, or 1.85%, at September
30, 2001. At June 30, 2002, the allowance for loan losses totaled $347 million
or 1.84% of loans. Non-performing assets were $527 million, or 2.73% of ending
loans, at September 30, 2002, compared with $436 million, or 2.47%, at the same
date in the previous year, and $502 million, or 2.66%, at June 30, 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 September 30, 2002 would have been $455 million, or
2.36% of loans, compared with $350 million, or 1.98%, at September 30, 2001 and
$434 million, or 2.30%, at June 30, 2002.
5 - POPULAR, INC. 2002 THIRD QUARTER RESULTS
At September 30, 2002, the increase in non-performing assets since
September 30, 2001 and June 30, 2002 was mostly reflected in mortgage loans,
which grew by $102 million and $30 million, respectively. Non-performing
mortgage loans amounted to $251 million, or 48% of non-performing assets as of
September 30, 2002, compared with $149 million or 34% for the same period in
2001, and $221 million or 44% at June 30, 2002. Non-performing mortgage loans
represented approximately 3% of the total mortgage loan portfolio as of
September 30, 2002 and 2001, and June 30, 2002. Mortgage loans net charge-offs
amounted to $3.4 million for the third quarter of 2002 and represented 0.19% of
the average mortgage loan portfolio for that period, compared with $2.0 million
or 0.14% in the third quarter of 2001, and $3.5 million or 0.20% in the second
quarter of 2002. Commercial non-performing loans decreased by $15 million and $6
million, compared with the quarters ended in September 30, 2001 and June 30,
2002, respectively. At September 30, 2002, the allowance for loan losses as a
percentage of non-performing assets was 67.25%, compared with 74.88% at
September 30, 2001, and 69.11% at June 30, 2002.
Total deposits reached $17.1 billion at September 30, 2002, from $16.0
billion at September 30, 2001, an increase of $1.1 billion or 7%. This rise was
mostly reflected in savings deposits, which grew by $1.0 billion since the end
of the third quarter of 2001. At June 30, 2002, total deposits amounted to $17.8
billion. The decrease since the second quarter of 2002 was mostly in demand
deposits, which declined by $738 million, mostly associated with deposits in
trust used to repay government bond redemptions on July 1, 2002.
Borrowed funds, including subordinated notes and capital securities,
amounted to $12.8 billion at September 30, 2002, compared with $9.7 billion at
September 30, 2001, and $12.2 billion at June 30, 2002. The increase in borrowed
funds was used to fund the Corporation's loan portfolio growth and for
investment opportunities. At September 30, 2002 and 2001, stockholders' equity
totaled $2.3 billion. Stockholders' equity was $2.2 billion as of June 30, 2002.
Subsequent to December 31, 2001, the Corporation redeemed $100 million of its
preferred stock and repurchased 4,300,000 shares of its common stock for $139
million. These decreases since the end of 2001 were offset mostly by earnings
retention and favorable changes in the market value of securities
available-for-sale.
The market value of the Corporation's common stock at September 30,
2002, was $31.60 per
6 - POPULAR, INC. 2002 THIRD QUARTER RESULTS
share, compared with $31.20 at September 30, 2001, and $33.68 at June 30, 2002.
The Corporation's market capitalization at September 30, 2002, was $4.2 billion,
compared with $4.3 billion at September 30, 2001. At September 30, 2002, the
Corporation's common stock had a book value per share of $17.52, compared with
$16.14 at September 30, 2001.
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
September 30, Third
------------------------------- Quarter --------------
2002 - 2001 Second
Percent Quarter
2002 2001 Variance 2002
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SUMMARY OF OPERATIONS
Interest income $ 508,110 $ 516,982 (1.72)% $ 505,999
Interest expense 211,155 243,562 (13.31) 211,321
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Net interest income 296,955 273,420 8.61 294,678
Provision for loan losses 50,992 55,259 (7.72) 50,075
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Net interest income after provision
for loan losses 245,963 218,161 12.74 244,603
Other income 136,755 125,024 9.38 136,117
Loss on derivatives (21,759) (8,140) 167.30 (855)
Gain on sale of securities 1,251 1,249 0.16 85
Trading account profit (loss) 1,247 777 60.49 (359)
-------------------------------------------------------------------
Total other income 117,494 118,910 (1.19) 134,988
Salaries and benefits 117,867 103,622 13.75 117,215
Profit sharing 5,646 3,986 41.65 5,368
Amortization of intangibles 1,938 6,858 (71.74) 2,556
Other operating expenses 128,406 117,444 9.33 125,514
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Total operating expenses 253,857 231,910 9.46 250,653
-------------------------------------------------------------------
Income before income tax and minority interest 109,600 105,161 4.22 128,938
Income tax 23,730 27,952 (15.10) 32,594
Net (gain) loss of minority interest (116) 7 (39)
-------------------------------------------------------------------
Net income $ 85,754 $ 77,216 11.06 $ 96,305
===================================================================
Net income applicable to common stock $ 85,754 $ 75,129 14.14 $ 96,305
===================================================================
Earnings per common share (basic and diluted) $ 0.65 $ 0.55 $ 0.72
------------ ------------ ------------
Dividends declared per common share $ 0.20 $ 0.20 $ 0.20
------------ ------------ ------------
Average common shares outstanding 132,350,192 136,277,273 134,440,879
Common shares outstanding at end of period 132,334,258 136,268,031 132,251,194
SELECTED AVERAGE BALANCES
Total assets ................................ $ 31,863,126 $ 27,879,384 14.29 $ 31,407,801
Loans ....................................... 19,043,736 17,397,831 9.46 18,439,066
Earning assets .............................. 30,249,337 26,321,222 14.92 29,789,846
Deposits .................................... 16,962,342 15,803,475 7.33 17,086,189
Interest-bearing liabilities ................ 26,054,195 22,204,990 17.33 25,561,529
Stockholders' equity ........................ 2,122,005 2,125,937 (0.18) 2,129,395
SELECTED FINANCIAL DATA AT PERIOD-END
Total assets ................................ $ 32,843,091 $ 28,530,426 15.12 $ 32,740,722
Loans ....................................... 19,263,508 17,632,274 9.25 18,901,142
Earning assets .............................. 31,188,022 26,941,949 15.76 30,623,935
Deposits .................................... 17,057,856 16,000,236 6.61 17,829,287
Interest-bearing liabilities ................ 26,616,406 22,702,336 17.24 25,995,526
Stockholders' equity ........................ 2,318,977 2,299,457 0.85 2,207,617
PERFORMANCE RATIOS
Net interest yield * ........................ 3.93% 4.16% 3.95%
Return on assets ............................ 1.07 1.10 1.23
Return on common equity ..................... 16.03 14.71 18.14
CREDIT QUALITY DATA
Non-performing assets ....................... $ 526,794 436,189 20.77 $ 502,463
Net loans charged-off ....................... 44,369 42,225 5.08 45,773
Allowance for loan losses ................... 354,282 326,630 8.47 347,230
Non-performing assets to total assets ....... 1.60% 1.53% 1.53%
Allowance for losses to loans ............... 1.84 1.85 1.84
* Not on a taxable equivalent basis
Note: Certain reclassifications have been made to prior periods to conform with
this quarter.
7
POPULAR, INC.
FINANCIAL SUMMARY
(In thousands, except per share data)
For the nine-months ended
September 30,
--------------------------
Percent
2002 2001 Variance
--------------------------------------------
SUMMARY OF OPERATIONS
Interest income $ 1,509,928 $ 1,590,840 (5.09)%
Interest expense 632,880 796,185 (20.51)
--------------------------------------------
Net interest income 877,048 794,655 10.37
Provision for loan losses 155,521 154,755 0.49
--------------------------------------------
Net interest income after provision
for loan losses 721,527 639,900 12.76
Other income 407,809 364,756 11.80
Loss on derivatives (22,103) (7,119)
Loss on sale of securities (2,674) (613)
Trading account (loss) profit (142) 149
--------------------------------------------
Total other income 382,890 357,173 7.20
Salaries and benefits 350,444 306,144 14.47
Profit sharing 15,954 13,101 21.78
Amortization of intangibles 7,037 20,594 (65.83)
Other operating expenses 373,241 346,515 7.71
--------------------------------------------
Total operating expenses 746,676 686,354 8.79
--------------------------------------------
Income before income tax, minority interest and cumulative
effect of accounting change 357,741 310,719 15.13
Income tax 86,472 82,440 4.88
Net (gain) loss of minority interest (166) 19
--------------------------------------------
Income before cumulative effect of accounting change 271,103 228,298 18.75
Cumulative effect of accounting change, net of tax 686 (100.00)
--------------------------------------------
Net income $ 271,103 $ 228,984 18.39
===========================================
Net income applicable to common stock $ 268,593 $ 222,722 20.60
===========================================
Earnings per common share (basic and diluted) $ 2.00 $ 1.63
------------ ------------
Dividends declared $ 0.60 $ 0.56
------------ ------------
Average common shares outstanding 134,407,089 136,193,360
Common shares outstanding at end of period 132,334,258 136,268,031
SELECTED AVERAGE BALANCES
Total assets ..................................... $ 31,234,800 $ 27,594,246 13.19
Loans ............................................ 18,517,164 16,800,193 10.22
Earning assets ................................... 29,637,022 26,050,832 13.77
Deposits ......................................... 16,859,835 15,316,240 10.08
Interest-bearing liabilities ..................... 25,418,867 22,020,128 15.43
Stockholders' equity ............................. 2,135,096 2,072,049 3.04
PERFORMANCE RATIOS
Net interest yield * ............................. 3.95% 4.06%
Return on assets ................................. 1.16 1.11
Return on common equity .......................... 16.92 15.10
CREDIT QUALITY DATA
Non-performing assets ............................ $ 526,794 $ 436,189 20.77
Net loans charged-off ............................ 139,827 120,041 16.48
Allowance for loan losses ........................ 354,282 326,630 8.47
Non-performing assets to total assets ............ 1.60% 1.53%
Allowance for losses to loans .................... 1.84 1.85
* Not on a taxable equivalent basis
Note: Certain reclassifications have been made to prior periods to conform with
this period.
8