EXHIBIT 99.1
[POPULAR, INC. LOGO]
News Release
For additional information contact:
INVESTORS: MEDIA:
Jorge A. Junquera Olga Mayoral Wilson, APR
Chief Financial Officer Senior Vice President and Manager
Senior Executive Vice President Public Relations and Communications
Telephone (787) 754-1685 Telephone: (787) 764-2004
Or visit our web site at www.popularinc.com
POPULAR, INC. REPORTS EARNINGS FOR THE QUARTER ENDED JUNE 30, 2003
Second Quarter Net Income Up 40% to $134.6 million, from $96.3 million in the
Same Quarter Last Year
San Juan, PR - July 15, 2003 - Popular, Inc.'s (the Corporation)
(NASDAQ: BPOP, BPOPO) net income for the quarter ended June 30, 2003 amounted
to $134.6 million or $0.99 earnings per common share (EPS), basic and diluted,
compared with $96.3 million or $0.72 per common share in the same period of
2002, an increase of $38.3 million or 40%, and $0.27 or 38% per common share.
Net income for the first quarter of 2003 was $99.1 million, or $0.74 per common
share.
The quarterly results for second quarter of 2003 were affected by the
occurrence of certain transactions, which are listed in the reconciliation
below, and which are later described in this earnings release:
Quarter ended
June 30, 2003
Net income as reported $134.6 million
Less: Gains on the sale of marketable equity securities,
net of tax (25.7 million)
Less: Derivative gains, net of tax (1.7 million)
Plus: Losses related to credit cards external fraud, net of
tax and profit sharing 7.8 million
--------------
Non-GAAP net income (excludes particular items) $115.0 million
==============
"If we isolate these items from our quarterly net earnings, as their
exclusion gives a clearer indication of the Corporation's financial
performance, our net income would have amounted to approximately $115.0 million
for the quarter ended June 30, 2003, a 19% growth compared with the reported
net income of the second quarter in 2002. We are very pleased with our results
for the
2 - POPULAR, INC. 2003 SECOND QUARTER RESULTS
second quarter of 2003, having achieved excellent results despite the
challenges of a difficult economic environment," said Jorge Junquera, Chief
Financial Officer of Popular, Inc. "Residential mortgage lending, a sector that
has benefited from the current interest rate scenario, continued to be one of
the principal drivers of the Corporation's earnings growth in Puerto Rico and
the United States."
The Corporation's return on assets (ROA) and return on common equity
(ROE) for the second quarter of 2003 were 1.58% and 22.63%, respectively,
compared with 1.23% and 18.14%, respectively, for the same period in 2002, and
1.21% and 17.39%, respectively, for the first quarter of 2003.
For the first six months of 2003, the Corporation's net income reached
$233.7 million, compared with $185.3 million for the same period in 2002. EPS
for the six months ended June 30, 2003 and 2002 were $1.73 and $1.35,
respectively. ROA and ROE for the first six months of 2003 were 1.40% and
20.09%, respectively. For the same period of 2002, these ratios were 1.21% and
17.43%.
The Corporation's net income for the second quarter of 2003, when
compared with the same period a year ago, reflected higher net interest income
by $32.5 million and non-interest income by $37.2 million. The provision for
loan losses decreased by $0.8 million. These items were partially offset by a
rise in operating expenses of $28.6 million and an increase in income tax of
$3.4 million.
The Corporation's net interest income rose 11%, from $294.7 million
in the second quarter of 2002 to $327.2 million in 2003. This increase resulted
from a favorable variance of $23.3 million due to a higher volume of average
earning assets and $9.2 million due to a higher net interest margin. The
increase of $2.6 billion in average earning assets during the second quarter of
2003 was driven by a $1.7 billion increase in the average loan portfolio,
mainly mortgage and commercial loans, and a $0.9 billion increase in average
money market, trading and investment securities, mostly U.S. agency securities.
The average yield on earning assets declined 47 basis points. The increase in
the volume of earning assets was funded mainly through a higher average volume
of borrowings and interest-bearing deposits, which rose $1.7 billion and $0.4
billion, respectively. The average cost of interest bearing liabilities
decreased 65 basis points. Also, non-interest bearing sources of funds,
including
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3 - POPULAR, INC. 2003 SECOND QUARTER RESULTS
demand deposits and other funds, such as capital raised through the recent
preferred stock issuance, rose $0.3 billion and $0.2 billion, respectively. The
net interest yield for the quarter ended June 30, 2003, was 4.04% compared with
3.95% for the second quarter of 2002. For the first quarter of 2003 the net
interest yield was 3.94%.
The provision for loan losses totaled $49.3 million, or 130% of net
charge-offs, for the second quarter of 2003, compared with $50.1 million or
109%, respectively, for the same period in 2002. The decrease in the provision
is due in part to lower net charge-offs and to the fact that most of the growth
in the loan portfolio was in mortgage loans, which represents a lower-risk
portfolio. Net charge-offs for the quarter ended June 30, 2003, were $38.1
million or 0.76% of average loans, compared with $45.8 million or 0.99% for the
second quarter of 2002. The decline in net charge-offs as compared with the
second quarter of 2002 is mainly due to lower commercial loans net charge-offs,
including construction loans, which declined by $6.7 million. The net
charge-offs for 2002 were impacted by a $7 million charge-off of a commercial
loan pertaining to a client who filed for bankruptcy. Also, consumer and lease
financing net charge-offs declined $4.0 million and $1.2 million, respectively.
On the other hand, mortgage loans net charge-offs rose $4.2 million compared
with the second quarter of 2002.
Non-interest income amounted to $172.2 million for the second quarter
of 2003, compared with $135.0 million in the same period of 2002, an increase
of $37.2 million, or 28%. This increase was mostly associated with higher gains
on sale of securities, which totaled $29.9 million for the quarter ended June
30, 2003, compared with $85 thousand in the same quarter of 2002. These gains
arose mainly from the sale of marketable equity securities held by the
Corporation. Also contributing to the rise in non-interest income were higher
other service fees by $3.0 million, mainly insurance agency commissions, debit
card and check cashing fees. During the second quarter of 2003, the Corporation
recorded $2.5 million in derivative gains, compared with derivative losses of
$0.9 million in the same quarter in the previous year. As part of its risk
management strategies, the Corporation cancelled certain interest swap
contracts with notional amounts totaling $500 million in April 2003. Gain on
sales of loans increased by $3.8 million in the second quarter of 2003,
compared with the same quarter in the previous year. Moreover, during the
quarter ended June 30, 2003, the
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4 - POPULAR, INC. 2003 SECOND QUARTER RESULTS
Corporation recorded as part of other operating income $6.5 million of dividend
income derived from the Corporation's ownership participation in
Telecomunicaciones de Puerto Rico, Inc., compared with $1.5 million in dividend
income in the second quarter of 2002. In the second quarter of 2002, the
Corporation had gains of approximately $3.7 million on the sale of Banco
Popular North America's trust operations and the sale of 15 branches of Popular
Finance.
Operating expenses totaled $279.3 million in the second quarter of
2003, compared with $250.7 million for the same period in the previous year, an
increase of $28.6 million, or 11%. Personnel costs increased by $7.2 million,
driven mostly by higher salaries, pension, and incentive compensation. In 2003,
the Corporation lowered the assumed discount rate and the expected rate of
return on its pension plan assets, and increased the rate of salary
compensation assumption, in calculating the cost for the pension plan. All
these changes resulted in an increase of $2.5 million in the pension plan
expense. All other operating expenses, excluding personnel costs, increased
$21.4 million, or 17%, compared with the second quarter of 2002. Categories
with the largest increases compared with the second quarter of the previous
year included equipment, communications, and other operating expenses. Included
in the category of other operating expenses were higher sundry losses, which
rose by approximately $15 million, compared with the second quarter of 2002.
These sundry losses resulted mostly from unauthorized credit card transactions
conducted on credit cards issued by Banco Popular de Puerto Rico. The Bank took
remedial action to prevent further losses from this illegal external scheme.
The Corporation's total assets at June 30, 2003 amounted to $36.1
billion, compared with $32.7 billion at June 30, 2002 and $33.7 billion at
March 31, 2003. At June 30, 2003, total loans amounted to $20.9 billion,
compared with $18.9 billion on the same date in the previous year and $19.9
billion at March 31, 2003. Mortgage loans accounted for the largest growth in
the portfolio, rising $1.2 billion, or 17%, since June 30, 2002 and $521
million, or 7%, from March 31, 2003. Investment and trading securities totaled
$12.3 billion at June 30, 2003, compared with $10.7 billion at June 30, 2002,
and $10.9 billion at March 31, 2003.
The allowance for loan losses amounted to $398 million as of June 30,
2003, or 1.90% of loans, compared with $347 million or 1.84% at the same date
in 2002. At March 31, 2003, the
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5 - POPULAR, INC. 2003 SECOND QUARTER RESULTS
allowance for loan losses was $384 million or 1.93% of loans. Non-performing
assets were $618 million or 2.96% of ending loans at June 30, 2003, compared
with $502 million or 2.66% at the end of the second quarter of 2002 and $597
million or 3.01% at March 31, 2003. The allowance as a percentage of
non-performing loans was 69.77% as of June 30, 2003, compared with 74.31% at
the end of the second quarter of 2002 and 69.58% at March 31, 2003. The
increase in non-performing assets since June 30, 2002 was primarily associated
with mortgage loans, which rose by $102 million, or 46%. Non-performing
mortgage loans aggregated $323 million or 52% of the total non-performing
assets and 4% of total mortgage loans as of June 30, 2003, compared with $221
million or 44% of non-performing assets and 3% of total mortgage loans as of
June 30, 2002. The increase in non-performing mortgage loans was driven by
portfolio growth, coupled with increased delinquency due to deteriorating
economic conditions. Mortgage loans net charge-offs as a percentage of the
average mortgage loan portfolio were 0.38% in the second quarter of 2003,
compared with 0.20% in the second quarter of 2002. Since March 31, 2003,
non-performing assets increased by $21 million, or 3%, mainly in mortgage
loans. At March 31, 2003, non-performing mortgage loans were $303 million or
51% of non-performing assets and 4% of total mortgage loans, while mortgage
loans net charge-offs as a percentage of this average portfolio were 0.24% for
that quarter.
Deposits totaled $18.3 billion at June 30, 2003, compared with $17.8
billion at June 30, 2002, an increase of $0.5 billion or 3%. Total deposits at
March 31, 2003 were $17.6 billion. The growth since June 30, 2002 was mostly
reflected in savings and demand deposits, which rose $397 million and $204
million, respectively. Time deposits, including brokered certificates of
deposits, declined $155 million compared with June 30, 2002. Borrowed funds
increased $2.2 billion, reaching $14.4 billion at June 30, 2003, from $12.2
billion on the same date of the previous year. At March 31, 2003, borrowed
funds totaled $12.8 billion. The increase in borrowings since June 30, 2002,
partly in the form of medium-term notes and secured borrowings, was used to
fund loan growth and investment activities.
At June 30, 2003, stockholders' equity was $2.8 billion, compared with
$2.2 billion at the same date last year. Stockholders' equity was $2.7 billion
at March 31, 2003. The increase in stockholders' equity since June 30, 2002
reflects the issuance of the preferred stock during 2003,
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6 - POPULAR, INC. 2003 SECOND QUARTER RESULTS
earnings retention and an increase in the unrealized gains on the securities
available-for-sale portfolio. The latter improved by $144 million.
The market value of the Corporation's common stock at June 30, 2003,
was $38.53 per common share, compared with $33.68 at June 30, 2002, and $33.99
at March 31, 2003. The Corporation's market capitalization at June 30, 2003 was
$5.1 billion, compared with $4.5 billion at June 30, 2002 and March 31, 2003.
At June 30, 2003, the Corporation's common stock had a book value per share of
$19.80.
The Corporation's common and preferred stocks are traded on the
National Association of Securities Dealers Automated Quotation (NASDAQ)
National Market System under the symbols BPOP and BPOPO, respectively.
On April 30, 2003, the Board of Directors of the Corporation declared
a cash dividend of $0.27 per common share for the second quarter of 2003. This
represented a 35% increase over the $0.20 per common share paid in previous
quarterly cash dividends.
In June 2003, the Corporation completed the acquisition of a 31.11%
participation in Servicios Financieros, S.A. de C.V. (Serfinsa), a company
located in El Salvador. This company offers services associated with electronic
payment systems, including those related to point-of-sale (POS) terminals and
automated teller machines (ATM). Currently, Serfinsa manages approximately 500
ATMs and 3,200 POS terminals in El Salvador. This strategic initiative
reinforces our expansion efforts in Central America and positions the
Corporation to leverage its technological expertise in new and existing
markets. Furthermore, on June 30, 2003, the Corporation completed the
acquisition of Mediawire Communications Inc., a company that provides Internet
services in Puerto Rico, including the design, development and hosting of web
pages. With this acquisition the Corporation expects to solidify its research
and development capabilities to create new Internet products and services for
internal use, while becoming a web-service provider for some small and
medium-sized business customers of the Corporation.
In June 2003, Banco Popular North America (BPNA) inaugurated its new
headquarters offices in Rosemont, Illinois. As part of its strategic
initiatives, BPNA centralized back office and support areas in this location.
This effort is part of the foundation to support business growth and
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7 - POPULAR, INC. 2003 SECOND QUARTER RESULTS
further improve efficiency. Also, during the quarter, BPNA opened a new branch
in Newark, New Jersey.
The information included in this press release may contain certain
forward-looking statements, which involve certain risks and uncertainties that
may cause actual results to differ materially from those expressed in
forward-looking statements. Factors such as changes in interest rate
environment as well as general changes in business and economic conditions may
cause actual results to differ from those contemplated by such forward-looking
statements.
* * *
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POPULAR, INC.
FINANCIAL SUMMARY
(In thousands, except per share data)
Second
Quarter ended Quarter
June 30, 2003 - 2002 First
-------------------------------- Percent Quarter
2003 2002 Variance 2003
------------ ------------ ----------- ------------
SUMMARY OF OPERATIONS
Interest income $ 511,659 $ 505,999 1.12% $ 503,282
Interest expense 184,512 211,321 (12.69) 193,521
------------ ------------ -------- ------------
Net interest income 327,147 294,678 11.02 309,761
Provision for loan losses 49,325 50,075 (1.50) 48,209
------------ ------------ -------- ------------
Net interest income after provision
for loan losses 277,822 244,603 13.58 261,552
Other income 143,992 136,117 5.79 142,338
Gain (loss) on derivatives 2,548 (855) (10,655)
Gain on sale of securities 29,875 85 1,414
Trading account loss (4,243) (359) (937)
------------ ------------ -------- ------------
Total other income 172,172 134,988 27.55 132,160
Salaries and benefits 124,850 117,215 6.51 126,104
Profit sharing 4,918 5,368 (8.38) 6,245
Amortization of intangibles 2,028 2,556 (20.66) 2,027
Other operating expenses 147,482 125,514 17.50 129,266
------------ ------------ -------- ------------
Total operating expenses 279,278 250,653 11.42 263,642
------------ ------------ -------- ------------
Income before income tax and minority interest 170,716 128,938 32.40 130,070
Income tax 35,946 32,594 10.28 30,903
Net gain of minority interest (163) (39) (78)
------------ ------------ -------- ------------
Net income $ 134,607 $ 96,305 39.77 $ 99,089
============ ============ ======== ============
Net income applicable to common stock $ 131,594 $ 96,305 36.64 $ 98,140
============ ============ ======== ============
Earnings per common share (basic and diluted) $ 0.99 $ 0.72 $ 0.74
============ ============ ============
Dividends declared per common share $ 0.27 $ 0.20 $ 0.20
============ ============ ============
Average common shares outstanding 132,675,459 134,440,879 132,576,589
Common shares outstanding at end of period 132,653,378 132,251,194 132,552,289
SELECTED AVERAGE BALANCES
Total assets...................................... $ 34,278,629 $ 31,407,735 9.14 $ 33,158,518
Loans............................................. 20,141,310 18,439,001 9.23 19,537,968
Earning assets.................................... 32,381,754 29,789,780 8.70 31,419,738
Deposits.......................................... 17,811,144 17,086,189 4.24 17,526,977
Interest-bearing liabilities...................... 27,699,110 25,561,463 8.36 27,059,335
Stockholders' equity.............................. 2,528,726 2,129,395 18.75 2,314,620
SELECTED FINANCIAL DATA AT PERIOD-END
Total assets...................................... $ 36,073,554 $ 32,740,722 10.18 $ 33,695,291
Loans............................................. 20,872,076 18,901,142 10.43 19,861,882
Earning assets.................................... 33,914,037 30,623,935 10.74 31,763,554
Deposits.......................................... 18,275,423 17,829,287 2.50 17,637,847
Interest-bearing liabilities...................... 28,430,445 25,995,526 9.37 26,958,141
Stockholders' equity.............................. 2,812,871 2,207,617 27.42 2,672,596
PERFORMANCE RATIOS
Net interest yield*............................... 4.04% 3.95% 3.94%
Return on assets.................................. 1.58 1.23 1.21
Return on common equity........................... 22.63 18.14 17.39
CREDIT QUALITY DATA
Non-performing assets.............................. $ 617,585 $ 502,463 22.91 $ 596,927
Net loans charged-off.............................. 38,078 45,773 (16.81) 38,440
Allowance for loan losses.......................... 397,503 347,230 14.48 383,517
Non-performing assets to total assets.............. 1.71% 1.53% 1.77%
Allowance for losses to loans...................... 1.90 1.84 1.93
* 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 period ended
June 30,
-------------------------------- Percent
2003 2002 Variance
------------ ------------ --------
SUMMARY OF OPERATIONS
Interest income $ 1,014,940 $ 1,001,818 1.31%
Interest expense 378,032 421,725 (10.36)
------------ ------------ -----
Net interest income 636,908 580,093 9.79
Provision for loan losses 97,534 104,529 (6.69)
------------ ------------ -----
Net interest income after provision
for loan losses 539,374 475,564 13.42
Other income 286,330 271,054 5.64
Loss on derivatives (8,107) (344)
Gain (loss) on sale of securities 31,289 (3,925)
Trading account loss (5,180) (1,389)
------------ ------------ -----
Total other income 304,332 265,396 14.67
Salaries and benefits 250,954 232,577 7.90
Profit sharing 11,163 10,308 8.29
Amortization of intangibles 4,055 5,099 (20.47)
Other operating expenses 276,748 244,835 13.03
------------ ------------ -----
Total operating expenses 542,920 492,819 10.17
------------ ------------ -----
Income before income tax and minority interest 300,786 248,141 21.22
Income tax 66,849 62,742 6.55
Net gain of minority interest (241) (50)
------------ ------------ -----
Net income $ 233,696 $ 185,349 26.08
============ ============ =====
Net income applicable to common stock $ 229,734 $ 182,839 25.65
============ ============ =====
Earnings per common share (basic and diluted) $ 1.73 $ 1.35
============ ============
Dividends declared per common share $ 0.47 $ 0.40
============ ============
Average common shares outstanding 132,626,297 135,452,584
Common shares outstanding at end of period 132,653,378 132,251,194
SELECTED AVERAGE BALANCES
Total assets $ 33,712,699 $ 30,915,430 9.05
Loans 19,832,452 18,249,592 8.67
Earning assets 31,894,435 29,325,867 8.76
Deposits 17,669,845 16,807,732 5.13
Interest-bearing liabilities 27,372,136 25,095,938 9.07
Stockholders' equity 2,422,320 2,141,750 13.10
PERFORMANCE RATIOS
Net interest yield* 3.99% 3.95%
Return on assets 1.40 1.21
Return on common equity 20.09 17.43
CREDIT QUALITY DATA
Non-performing assets $ 617,585 $ 502,463 22.91
Net loans charged-off 76,518 95,458 (19.84)
Allowance for loan losses 397,503 347,230 14.48
Non-performing assets to total assets 1.71% 1.53%
Allowance for losses to loans 1.90 1.84
* Not on a taxable equivalent basis
Note: Certain reclassifications have been made to prior periods to conform with
this period.
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