EXHIBIT (a)
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
9600 West Bryn Mawr
Suite 400
Rosemont, Illinois 60018
Telephone: (847) 994-5800
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) 506-211-4500
GM Group, Inc.
1590 Ponce de Leon Avenue
GM Group Plaza Bldg., Suite 400
San Juan, Puerto Rico 00926
Telephone: (787) 751-4343
Equity One, Inc.
301 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
16280 Westwood
Business Park Drive
Ellisville, Missouri 63021
Telephone: (636) 391-0777
Popular Finance, Inc.
1326 Salud Street
Suite 613
Ponce, Puerto Rico 00716-1687
Telephone: (787) 844-2760
Popular Cash Express, Inc.
9600 West Bryn Mawr
First floor
Rosemont, Illinois 60018
Telephone: (847) 994-5973
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
9600 West Bryn Mawr
First Floor
Rosemont, Illinois 60018
Telephone: (847) 994-6580
Popular Insurance, V.I., Inc.
193 Estate Altona & Welgunst
St. Thomas, Virgin Islands 00802
Telephone: (340) 693-2850
POPULAR, INC.
1ST QUARTER
REPORT
MARCH 31, 2003
Letter to Shareholders
Despite the weakened economy and uncertain global conditions, which continued to
present a challenging environment in which to operate, we are pleased with our
Corporation's performance for the first quarter of 2003. The war against Iraq
has further slowed the financial market recovery and U.S. economic conditions
continue to be uncertain. Nonetheless, we look forward to a positive resolution
to this conflict, and we are confident that Popular, Inc. will maintain its
consistent growth regardless of the challenges that our economy faces.
During the quarter ended March 31, 2003, the Corporation completed the
public offering of its 6.375% Non-cumulative Monthly Income Preferred Stock,
2003 Series A. The offering was made through a group of underwriters led by
Popular Securities, Inc., a subsidiary of Popular, Inc. This issuance, after the
underwriting discounts and expenses, contributed with approximately $182 million
in additional Tier I capital, further strengthening the Corporation's capital
position.
Also, in recent weeks, Popular North America, Inc., a subsidiary of
Popular, Inc., sold $500 million in five-year fixed-rate medium-term notes. The
funds raised will be used to repurchase short-term existing debt and to finance
the growth of its operations in the United States.
During the first quarter of 2003, Equity One, a subsidiary of Popular,
Inc., tapped the asset-backed securities market with an offering of
approximately $510 million. Subsequent to this quarter-end, this same subsidiary
sold approximately $500 million in additional asset-backed securities, supported
by home equity loans.
The Corporation's net income for the quarter ended March 31, 2003,
reached $99.1 million, an increase of $10.1 million, or 11%, compared with $89.0
million in the first quarter of 2002. Earnings per common share, basic and
diluted, were $0.74 for the first quarter of 2003, an increase of 17% over the
$0.63 reported in the same period of 2002. The Corporation's financial
performance for the first quarter of 2003 resulted in a return on average assets
(ROA) and a return on average common equity (ROE) of 1.21% and 17.39%,
respectively, compared with 1.19% and 16.83%, respectively, for the same period
of 2002.
The Corporation's net interest income for the quarter ended March 31,
2003, increased to $309.8 million, a rise of 9% over the $285.4 million reported
in the first quarter of 2002. The net interest margin for the quarter, on a
taxable equivalent basis, was 4.30%, remaining at the same level as in the same
quarter the previous year. The provision for loan losses amounted to $48.2
million, compared with $54.4 million for the first quarter of 2002. Non-interest
income amounted to $132.2 million for the first quarter of 2003, compared with
$130.4 million in the same period of 2002, an increase of $1.8 million. This
increase was mostly associated with higher service charges on commercial deposit
accounts, debit and credit card fees, insurance agency commissions,
check-cashing fees and gain on sales of loans, among other factors. Also, higher
gain on sales of securities contributed to the growth in non-interest income.
These favorable variances were partially offset by higher derivatives losses
during the first quarter of 2003, mostly attributed to changes in the fair value
of the Corporation's interest rate swaps. Operating expenses were $263.6 million
in the first quarter of 2003, an increase of $21.4 million, or 9%, compared with
$242.2 million for the same period in 2002. Personnel costs increased by $12.0
million, or 10%, compared with the first quarter of 2002, mostly related to
higher salaries, pension, incentive compensation and profit sharing. Other
operating expenses, excluding personnel costs, increased $9.4 million, or 8%.
Popular, Inc.'s total assets reached $33.7 billion as of March 31, 2003
and December 31, 2002. Total loans were $19.9 billion at March 31, 2003,
compared with $19.6 billion at the end of 2002. Mortgage loans accounted for the
largest growth in the portfolio, increasing $353 million, or 5%. Investment
securities totaled $10.9 billion at the end of the first quarter of 2003,
compared with $11.2 billion at December 31, 2002. Deposits reached $17.6 billion
at March 31, 2003 and December 31, 2002.
Stockholders' equity was $2.7 billion as of March 31, 2003 compared
with $2.4 billion as of December 31, 2002. The increase in stockholders' equity
since December 31, 2002 was mainly attributed to the additional capital obtained
through the issuance of the preferred stock in the first quarter of 2003 and
earnings retention.
The Corporation's common stock market value was $33.99 per share at
March 31, 2003, compared with $29.22 at March 31, 2002. As of the end of the
first quarters of 2003 and 2002, the Corporation had a market capitalization of
$4.5 billion and $4.0 billion, respectively. Book value per share of common
stock increased 17% to $18.75 as of March 31, 2003, from $16.01 per share as of
March 31, 2002.
Several weeks ago Banco Popular de Puerto Rico launched a new products
campaign with the slogan "We listen to you". It was prompted by comments we hear
almost daily from customers through branch officers, interviews or surveys.
The "We listen to you" campaign will serve as a unifying element for
the Bank's products, while presenting deposit products, personal loans, credit
cards and payment services (Popular TeleBanking, Popular Pay-by-Phone, Internet
and ATH card). It also addresses customers' questions and clearly establishes
the optimum quality of our products vis-a-vis those of our competitors.
The campaign, directed to the general public, particularly young people
who are starting their banking relationships, is being presented in radio,
printed media, and television, in addition to internal and external media. It
will run through the end of this year. Its goal is to position Banco Popular as
a bank for all the people, that is accessible and that adjusts to the needs of
the customers. With the slogan "We listen to you", we reiterate how responsive
we are to our customers' needs and our commitment to serve them better.
To listen, understand and solve... that summarizes our commitment of
service we seek to offer our clients. It is our most valuable tool as we seek to
attain utmost satisfaction for each client, and it is also one of the most
powerful strategies to continue reaching adequate competitive levels.
/s/ Richard L. Carrion
- ----------------------
RICHARD L. CARRION
CHAIRMAN
PRESIDENT
CHIEF EXECUTIVE OFFICER
POPULAR, INC.
Consolidated Statements of Condition
March 31,
---------------------------------
In thousands 2003 2002
------------ ------------
ASSETS
Cash and due from banks $ 689,090 $ 383,927
------------ ------------
Money market investments:
Federal funds sold and securities purchased under agreements to resell 1,004,353 716,123
Time deposits with other banks 4,056 3,056
Bankers' acceptances 51 409
------------ ------------
1,008,460 719,588
------------ ------------
Investment securities available-for-sale, at market value 10,132,474 9,401,158
Investment securities held-to-maturity, at amortized cost 179,737 202,022
Trading account securities, at market value 581,001 299,415
Loans held-for-sale, at lower of cost or market 317,041 900,461
------------ ------------
Loans 19,819,521 17,676,000
Less - Unearned income 274,680 319,537
Allowance for loan losses 383,517 341,744
------------ ------------
19,161,324 17,014,719
------------ ------------
Premises and equipment 471,777 404,842
Other real estate 45,759 34,550
Accrued income receivable 202,491 191,118
Other assets 689,449 549,324
Goodwill 184,068 178,501
Other intangible assets 32,620 37,741
------------ ------------
$ 33,695,291 $ 30,317,366
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits:
Non-interest bearing $ 3,453,971 $ 3,100,625
Interest bearing 14,183,876 13,423,529
------------ ------------
17,637,847 16,524,154
Federal funds purchased and securities sold
under agreements to repurchase 6,642,379 4,564,815
Other short-term borrowings 1,296,394 2,252,679
Notes payable 4,566,492 3,996,616
Other liabilities 609,343 524,350
------------ ------------
30,752,455 27,862,614
------------ ------------
Subordinated notes 125,000 125,000
------------ ------------
Preferred beneficial interest in Popular North America's junior subordinated
deferrable interest debentures guaranteed by the Corporation 144,000 144,000
------------ ------------
Minority interest in consolidated subsidiaries 1,240 925
------------ ------------
STOCKHOLDERS' EQUITY:
Preferred stock 186,875 --
Common stock 835,528 833,121
Surplus 277,649 270,766
Retained earnings 1,372,061 1,116,963
Treasury stock, at cost (205,527) (66,363)
Accumulated other comprehensive income, net of tax 206,010 30,340
------------ ------------
2,672,596 2,184,827
------------ ------------
$ 33,695,291 $ 30,317,366
============ ============
POPULAR, INC.
Consolidated Statements of Income
Quarter ended
March 31,
---------------------------------
Dollars in thousands, except per share information 2003 2002
------------ ------------
INTEREST INCOME:
Loans $ 377,933 $ 372,221
Money market investments 7,363 7,785
Investment securities 109,801 112,311
Trading account securities 8,185 3,502
------------ ------------
503,282 495,819
------------ ------------
INTEREST EXPENSE:
Deposits 94,195 112,931
Short-term borrowings 40,789 44,443
Long-term debt 58,537 53,030
------------ ------------
193,521 210,404
------------ ------------
Net interest income 309,761 285,415
Provision for loan losses 48,209 54,454
------------ ------------
Net interest income after provision for loan losses 261,552 230,961
Service charges on deposit accounts 39,839 38,973
Other service fees 66,426 61,687
Gain (loss) on sale of securities 1,414 (4,010)
Trading account loss (937) (1,030)
Derivatives (losses) gains (10,655) 511
Gain on sale of loans 19,516 17,943
Other operating income 16,557 16,334
------------ ------------
393,712 361,369
------------ ------------
OPERATING EXPENSES:
Personnel costs:
Salaries 96,036 88,561
Profit sharing 6,245 4,940
Pension and other benefits 30,068 26,801
------------ ------------
132,349 120,302
Net occupancy expenses 20,460 19,030
Equipment expenses 26,350 24,765
Other taxes 9,552 9,549
Professional fees 18,776 17,507
Communications 14,697 13,273
Business promotion 15,970 13,367
Printing and supplies 4,743 4,509
Other operating expenses 18,718 17,321
Amortization of intangibles 2,027 2,543
------------ ------------
263,642 242,166
------------ ------------
Income before income tax and minority interest 130,070 119,203
Income tax 30,903 30,148
Net gain of minority interest (78) (11)
------------ ------------
NET INCOME $ 99,089 $ 89,044
============ ============
NET INCOME APPLICABLE TO COMMON STOCK $ 98,140 $ 86,534
============ ============
EARNINGS PER COMMON SHARE (BASIC AND DILUTED) $ 0.74 $ 0.63
============ ============
POPULAR, INC.
Financial Highlights
At March 31, Average for the quarter
------------------------------------------ ------------------------------------------
BALANCE SHEET HIGHLIGHTS 2003 2002 Change 2003 2002 Change
----------- ----------- ---------- ----------- ----------- ----------
(In thousands)
Money market investments $ 1,008,460 $ 719,588 $ 288,872 $ 972,373 $ 927,038 $ 45,335
Investment and trading securities 10,893,212 9,902,595 990,617 10,909,397 9,871,684 1,037,713
Loans 19,861,882 18,256,924 1,604,958 19,537,968 18,058,011 1,479,957
Total assets 33,695,291 30,317,366 3,377,925 33,158,518 30,417,589 2,740,929
Deposits 17,637,847 16,524,154 1,113,693 17,526,977 16,526,180 1,000,797
Borrowings 12,774,265 11,083,110 1,691,155 12,797,395 11,283,963 1,513,432
Stockholders' equity 2,672,596 2,184,827 487,769 2,314,620 2,154,243 160,377
First quarter
----------------------------------------
OPERATING HIGHLIGHTS 2003 2002 Change
-------- -------- --------
(In thousands, except per share information)
Net interest income $309,761 $285,415 $ 24,346
Provision for loan losses 48,209 54,454 (6,245)
Fees and other income 132,160 130,408 1,752
Other expenses, net of minority interest 294,623 272,325 22,298
Net income $ 99,089 $ 89,044 $ 10,045
Net income applicable to common stock $ 98,140 $ 86,534 $ 11,606
Earnings per common share $ 0.74 $ 0.63 $ 0.11
First quarter
---------------------
SELECTED STATISTICAL INFORMATION 2003 2002
------ ------
COMMON STOCK DATA
Market price
High $34.97 $29.94
Low 31.95 27.50
End 33.99 29.22
Book value at period end 18.75 16.01
Dividends declared 0.20 0.20
Dividend payout ratio 27.45% 30.85%
Price/earnings ratio 12.50x 12.87x
------ ------
PROFITABILITY RATIOS
Return on assets 1.21% 1.19%
Return on common equity 17.39 16.83
Net interest spread (taxable equivalent) 3.90 3.80
Net interest yield (taxable equivalent) 4.30 4.30
Effective tax rate 23.76 25.29
Overhead ratio 42.45 39.16
Efficiency ratio 58.32 57.61
------ ------
CAPITALIZATION RATIOS
Equity to assets 6.98% 7.08%
Tangible equity to assets 6.42 6.29
Equity to loans 11.85 11.93
Internal capital generation 12.09 11.35
Tier I capital to risk-adjusted assets 10.96 10.20
Total capital to risk-adjusted assets 12.67 11.99
Leverage ratio 7.02 6.34
------ ------
CREDIT QUALITY RATIOS
Allowance for losses to loans 1.93% 1.87%
Allowance to non-performing assets 64.25 69.24
Allowance to non-performing loans 69.58 74.45
Non-performing assets to loans 3.01 2.70
Non-performing assets to total assets 1.77 1.63
Net charge-offs to average loans 0.79 1.10
Provision to net charge-offs 1.25x 1.10x
Net charge-offs earnings coverage 4.64 3.50
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 Nevares 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
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 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.