EXHIBIT 19
LETTER TO SHAREHOLDERS
Popular, Inc.'s performance for the quarter ended September 30, 2002, resulted
in a net income of $85.8 million, an increase of $8.6 million, or 11%, compared
with $77.2 million in the third quarter of 2001. Earnings per common share,
basic and diluted, reached $0.65 for the third quarter of 2002, an increase of
18%, compared with $0.55 in the same period of 2001. In addition to the growth
in earnings, the increase in earnings per share for the quarter reflects the
impact of the redemption of $100 million of preferred stock in January 2002 and
the repurchase of 4.3 million shares of its common stock in May 2002. The
Corporation reported a year-to-date net income of $271.1 million as of
September 30, 2002, up $42.1 million, or 18%, from $229.0 million for the same
period a year ago. Earnings per common share, basic and diluted, for the first
nine months of 2002 were $2.00, compared with $1.63 for the same period in
2001, representing an increase of 23%.
Earnings performance for the third quarter of 2002 resulted in a
return on average assets (ROA) and return on average common equity (ROE) of
1.07% and 16.03%, respectively, compared with 1.10% and 14.71%, respectively,
for the third quarter of 2001. For the first nine months of 2002, ROA and ROE
were 1.16% and 16.92%, respectively, compared with 1.11% and 15.10%,
respectively, for the same period in 2001.
Net interest income for the quarter ended September 30, 2002,
increased to $297.0 million, a 9% improvement over the $273.4 million reported
in the third quarter of 2001. Net interest margin for the quarter, on a taxable
equivalent basis, was 4.26%, compared with 4.47% a year earlier. The provision
for loan losses totaled $51.0 million, compared with $55.3 million for the
third quarter in 2001. Operating income, excluding derivatives, securities and
trading transactions, reached $136.8 million for the third quarter of 2002, 9%
higher than the $125.0 million reported in the same quarter last year. This
rise resulted mostly from higher deposit account charges, insurance
commissions, debit card fees and gain on sale of loans, among other factors.
Derivative losses for the quarter ended September 30, 2002, totaled $21.8
million, compared with losses of $8.1 million for the same period in 2001.
These losses resulted from adjustments to the market value of the interest rate
swaps entered into by the Corporation, negatively impacted by the declining
interest rate scenario.
Operating expenses for the third quarter of 2002 were $253.9 million,
rising $22.0 million, or 9%, compared with $231.9 million for the same period
in 2001. Personnel costs increased by $15.9 million, compared with the third
quarter of 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. Moreover, the
Corporation opted to adopt the fair value recognition principles for stock
options following the provisions of SFAS No. 123 "Accounting for Stock-Based
Compensation." 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.
Assets as of September 30, 2002, totaled $32.8 billion, an increase of
$4.3 billion over the $28.5 billion reported as of September 30, 2001. Total
loans reached $19.3 billion at September 30, 2002, an increase of $1.7 billion,
from $17.6 billion at September 30, 2001. Investment securities totaled $10.3
billion at the end of the third quarter of 2002, compared with $8.0 billion in
the same period of 2001. Deposits rose to $17.1 billion at September 30, 2002,
increasing $1.1 billion, or 7%, from $16.0 billion at the same date a year
earlier, principally due to higher savings deposits.
Stockholders' equity totaled $2.3 billion as of September 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 $31.60 per share at September
30, 2002, compared with $31.20 at September 30, 2001. As of the end of the
third quarter of 2002 and 2001, the Corporation had a market capitalization of
$4.2 billion and $4.3 billion, respectively. Book value per share of common
stock increased 9% to $17.52, compared with $16.14 as of September 30, 2001.
During this quarter, Banco Popular North America (BPNA) announced its recent
strategic initiative under the theme "A New Day." The principal objective was
to communicate to its employees, BPNA's vision, new organizational structure
and strategies necessary to become the premier community bank in the markets
the subsidiary serves. "A New Day" emphasizes BPNA's growth opportunities into
the future, with the ideology of making dreams come true. As part of the
reorganization efforts, BPNA reduced 291 employee positions during the nine
months ended September 30, 2002. This resulted in part due to the
centralization of many operational and other support areas, which were
previously scattered among several of the geographical regions in which the
subsidiary operates.
Also, as part of these efforts, BPNA, which celebrates more than 40 years of
community banking service in the United States, launched an institutional
advertising campaign, "Popularity", developed to expand the Bank's brand. BPNA
will strive to serve and expand its customerbase, not only into the Hispanic
community, but also to other commercial and individual clients with diverse
cultural backgrounds, while maintaining its personalized attention,
professional guidance and corporate traditions. The campaign's theme "Make
Dreams Happen" reflects BPNA's aim to know its customers and help them achieve
their dreams.
Popular, Inc. cherishes its Corporate and institutional values that have
distinguished us throughout 109 years of existence. Our efforts toward
excellence in all aspects of our business, together with our vision of
continued expansion of products and services, and the implementation of new
technologies, have strengthened our leadership, allowing us to capitalize on
diversification and growing opportunities.
Richard L. Carrion
Chairman
President
Chief Executive Officer
Popular, Inc.
FINANCIAL HIGHLIGHTS
At September 30, Average for the nine months
BALANCE SHEET HIGHLIGHTS 2002 2001 Change 2002 2001 Change
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(In thousands)
Money market investments $ 1,153,079 $ 993,015 $ 160,064 $ 876,401 $ 940,107 $ (63,706)
Investment and trading securities 10,771,435 8,316,660 2,454,775 10,243,457 8,310,532 1,932,925
Loans 19,263,508 17,632,274 1,631,234 18,517,164 16,800,193 1,716,971
Total assets 32,843,126 28,530,422 4,312,704 31,234,800 27,594,246 3,640,554
Deposits 17,057,856 16,000,236 1,057,620 16,859,835 15,316,240 1,543,595
Borrowings 12,832,702 9,747,704 3,084,998 11,768,240 9,732,654 2,035,586
Stockholders' equity 2,319,012 2,299,457 19,555 2,135,096 2,072,049 63,047
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Third quarter Nine months
OPERATING HIGHLIGHTS 2002 2001 Change 2002 2001 Change
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(In thousands, except per share information)
Net interest income $296,955 $273,420 $ 23,535 $877,048 $794,655 $ 82,393
Provision for loan losses 50,992 55,259 (4,267) 155,521 154,755 766
Fees and other income 117,494 118,910 (1,416) 382,890 357,173 25,717
Other expenses, net of minority interest 277,703 259,855 17,848 833,314 768,775 64,539
Cumulative effect of accounting change -- -- -- -- 686 (686)
Net income $ 85,754 $ 77,216 $ 8,538 $271,103 $228,984 $ 42,119
Net income applicable to common stock $ 85,754 $ 75,129 $ 10,625 $268,593 $222,722 $ 45,871
Earnings per common share $ 0.65 $ 0.55 $ 0.10 $ 2.00 $ 1.63 $ 0.37
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Third quarter Nine months
Selected Statistical Information 2002 2001 2002 2001
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COMMON STOCK DATA
Market price
High $35.85 $36.26 $35.85 $36.26
Low 30.11 27.42 27.50 25.25
End 31.60 31.20 31.60 31.20
Book value at period end 17.52 16.14 17.52 16.14
Dividends declared 0.20 0.20 0.60 0.56
Dividend payout ratio 30.85% 36.26% 30.10% 31.78%
Price/earnings ratio 12.44x 14.38x 12.44x 14.38x
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PROFITABILITY RATIOS
Return on assets 1.07% 1.10% 1.16% 1.11%
Return on common equity 16.03 14.71 16.92 15.10
Net interest spread (taxable equivalent) 3.81 3.79 3.81 3.63
Net interest yield (taxable equivalent) 4.26 4.47 4.29 4.37
Effective tax rate 21.65 26.58 24.17 26.53
Overhead ratio 45.92 41.33 41.48 41.42
Efficiency ratio 58.60 58.20 58.30 59.20
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CAPITALIZATION RATIOS
Equity to assets 6.66% 7.63% 6.84% 7.51%
Tangible equity to assets 6.03 6.87 6.19 6.72
Equity to loans 11.14 12.22 11.53 12.33
Internal capital generation 11.18 9.01 11.80 9.42
Tier I capital to risk-adjusted assets 9.93 10.70 9.93 10.70
Total capital to risk-adjusted assets 11.70 12.68 11.70 12.68
Leverage ratio 6.36 6.91 6.36 6.91
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CREDIT QUALITY RATIOS
Allowance for losses to loans 1.84% 1.85% 1.84% 1.85%
Allowance to non-performing assets 67.24 74.88 67.24 74.88
Allowance to non-performing loans 71.84 80.27 71.84 80.27
Non-performing assets to loans 2.74 2.47 2.74 2.47
Non-performing assets to total assets 1.60 1.53 1.60 1.53
Net charge-offs to average loans 0.93 0.97 1.01 0.95
Provision to net charge-offs 1.15x 1.31x 1.11x 1.29x
Net charge-offs earnings coverage 3.62 3.80 3.67 3.88
Additional Information
Board 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
Carlos Colino, 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
CONSOLIDATED STATEMENTS OF CONDITION
September 30,
In thousands 2002 2001
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ASSETS
Cash and due from banks $ 574,282 $ 617,012
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Money market investments:
Federal funds sold and securities purchased under agreements to resell 1,149,346 988,262
Time deposits with other banks 3,056 4,343
Bankers' acceptances 677 410
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1,153,079 993,015
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Investment securities available-for-sale, at market value 9,653,348 7,798,028
Investment securities held-to-maturity, at amortized cost 644,685 240,763
Trading account securities, at market value 473,402 277,869
Loans held-for-sale, at lower of cost or market 870,607 910,615
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Loans 18,693,021 17,042,433
Less: Unearned income 300,120 320,774
Allowance for loan losses 354,282 326,630
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18,038,619 16,395,029
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Premises and equipment 446,161 390,324
Other real estate 33,713 29,257
Accrued income receivable 194,500 189,859
Other assets 546,388 467,296
Goodwill 180,337 180,943
Other intangible assets 34,005 40,412
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$ 32,843,126 $ 28,530,422
============================================================================================================================
LIABILITIES AND STOCKHOLDERS EQUITY
LIABILITIES:
Deposits:
Non-interest bearing $ 3,274,152 $ 3,045,604
Interest bearing 13,783,704 12,954,632
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17,057,856 16,000,236
Federal funds purchased and securities sold under
agreements to repurchase 5,887,739 3,978,199
Other short-term borrowings 2,046,679 3,164,520
Notes payable 4,629,284 2,329,985
Other liabilities 632,476 482,117
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30,254,034 25,955,057
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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 1,080 908
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STOCKHOLDERS' EQUITY:
Preferred stock -- 100,000
Common stock 834,170 831,932
Surplus 275,443 266,525
Retained earnings 1,246,098 1,011,473
Treasury stock, at cost (205,210) (66,136)
Accumulated other comprehensive income, net of tax 168,511 155,663
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2,319,012 2,299,457
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$ 32,843,126 $ 28,530,422
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Popular, Inc.
CONSOLIDATED STATEMENTS OF INCOME
Quarter ended Nine months ended
September 30, September 30,
Dollars in thousands, except per share information 2002 2001 2002 2001
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INTEREST INCOME:
Loans $ 391,499 $ 392,801 $ 1,143,887 $ 1,178,207
Money market investments 7,716 10,350 22,871 38,682
Investment securities 105,125 110,095 332,813 362,397
Trading account securities 3,770 3,736 10,357 11,554
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508,110 516,982 1,509,928 1,590,840
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INTEREST EXPENSE:
Deposits 106,063 130,254 329,349 394,053
Short-term borrowings 46,185 72,664 135,902 276,275
Long-term debt 58,907 40,644 167,629 125,857
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211,155 243,562 632,880 796,185
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Net interest income 296,955 273,420 877,048 794,655
Provision for loan losses 50,992 55,259 155,521 154,755
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Net interest income after provision for loan losses 245,963 218,161 721,527 639,900
Service charges on deposit accounts 39,484 37,537 117,964 108,505
Other service fees 63,941 61,194 191,666 180,237
Gain (loss) on sale of securities 1,251 1,249 (2,674) (613)
Trading account gain (loss) 1,247 777 (142) 149
Derivatives losses (21,759) (8,140) (22,103) (7,119)
Gain on sale of loans 14,960 11,068 44,502 31,925
Other operating income 18,370 15,225 53,677 44,089
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363,457 337,071 1,104,417 997,073
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OPERATING EXPENSES:
Personnel costs:
Salaries 92,704 82,080 272,011 238,742
Profit sharing 5,646 3,986 15,954 13,101
Pension and other benefits 25,163 21,542 78,433 67,402
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123,513 107,608 366,398 319,245
Net occupancy expenses 19,581 17,974 58,659 52,895
Equipment expenses 24,469 24,148 73,610 72,850
Other taxes 9,115 9,135 27,948 27,755
Professional fees 22,503 18,798 59,734 53,021
Communications 13,907 12,181 40,292 36,153
Business promotion 15,588 13,414 45,786 37,118
Printing and supplies 4,754 4,269 14,341 13,078
Other operating expenses 18,489 17,525 52,871 53,645
Amortization of intangibles 1,938 6,858 7,037 20,594
253,857 231,910 746,676 686,354
Income before income tax, minority interest
and cumulative effect of accounting change 109,600 105,161 357,741 310,719
Income tax 23,730 27,952 86,472 82,440
Net (gain) loss of minority interest (116) 7 (166) 19
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Income before cumulative effect of accounting change 85,754 77,216 271,103 228,298
Cumulative effect of accounting change, net of tax -- -- -- 686
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NET INCOME $ 85,754 $ 77,216 $ 271,103 $ 228,984
=================================================================================================================================
NET INCOME APPLICABLE TO COMMON STOCK $ 85,754 $ 75,129 $ 268,593 $ 222,722
=================================================================================================================================
EARNINGS PER COMMON SHARE (BASIC AND DILUTED)
(BEFORE AND AFTER CUMULATIVE EFFECT OF
ACCOUNTING CHANGE) $ 0.65 $ 0.55 $ 2.00 $ 1.63
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 Corporation
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.
1326 Salud Street
El Senorial Condominium
Suite 613
Ponce, Puerto Rico 00716-1687
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
Popular Insurance, V.I., Inc.
193 Estate Altona & Welgunst
St. Thomas, Virgin Islands 00802
Telephone: (340) 693-2781