[POPULAR, INC. LOGO] EXHIBIT 99.1
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 AND SIX-MONTHS ENDED
JUNE 30, 2004
San Juan, PR - July 14, 2004 - Popular, Inc.'s (the Corporation) (NASDAQ:
BPOP, BPOPO) net income for the quarter ended June 30, 2004 totaled $127.8
million, compared with $134.6 million in the second quarter of 2003. The results
for the second quarter of 2003 included $29.9 million in gain on sale of
securities, mainly marketable equity securities, compared with $402 thousand in
the same quarter of 2004. Earnings per common share (EPS), basic and diluted,
for the second quarter of 2004, after adjusting for the stock split in the form
of a dividend of one share for each share outstanding effective on July 8, 2004,
were $0.47 per common share, compared with $0.50 per common share reported for
the same quarter a year earlier. Net income for the quarter ended March 31, 2004
was $118.5 million, or $0.43 per common share, and included $13.0 million in
gain on sale of securities. The Corporation's return on assets (ROA) and return
on common equity (ROE) for the second quarter of 2004 were 1.33% and 18.79%,
respectively, compared with 1.58% and 22.63%, respectively, for the same period
in 2003, and 1.29% and 17.95%, respectively, for the first quarter of 2004.
For the six months ended June 30, 2004, the Corporation's net income
reached $246.3 million, compared with $233.7 million for the same period in
2003. EPS, basic and diluted, for the six months ended June 30, 2004 and 2003
and after adjusting for the aforementioned stock split were $0.90 and $0.87,
respectively. ROA and ROE for the first six months of 2004 were 1.31% and
18.37%, respectively, compared with 1.40% and 20.09%, respectively, for the same
period in 2003.
On May 12, 2004, the Board of Directors authorized a two-for-one common
stock split in the form of a stock dividend. The new shares were distributed on
July 8, 2004 to shareholders of record
2- POPULAR, INC. 2004 SECOND QUARTER RESULTS
as of June 18, 2004. All per share data included herein has been adjusted to
reflect the stock split.
The Corporation's net income for the second quarter of 2004 reflected the
following variances when compared to the same quarter last year:
- higher net interest income by $11.0 million
- lower provision for loan losses by $8.0 million
- decrease of $10.7 million in non-interest income due to a gain on
the sale of securities during the second quarter of 2003 by $29.9
million, partially offset by a gain on sale of property of $10.9
million in the second quarter of 2004
- higher operating expenses by $12.4 million.
"Of significant importance is the 18% increase in ending loans from June
30, 2003. Such increase, particularly commercial and consumer loans which grew
by $1.1 billion, were the result of favorable customer response to aggressive
marketing efforts," said Richard L. Carrion, President and Chief Executive
Officer of Popular, Inc.
The increase in net interest income resulted mostly from a $4.1 billion
increase in average earning assets for the quarter ended June 30, 2004 compared
with the same period in the previous year, mostly associated with increases of
$2.5 billion in mortgage loans, $0.7 billion in commercial loans and $0.3
billion in consumer loans. The average yield on earning assets declined 48 basis
points, resulting from a number of factors which included the origination and
purchase of earning assets with lower rates, prepayments of higher rate mortgage
related products, repricing of adjustable and floating rate commercial loans and
consumer loan promotional campaigns. The increase in the volume of earning
assets was funded mainly through a higher average volume of borrowings and
interest-bearing deposits, which rose $2.7 billion and $0.9 billion,
respectively. The average cost of interest bearing liabilities decreased 16
basis points. Also, non-interest bearing sources of funds, including demand
deposits and other funds, rose $0.5 billion. The net interest yield for the
quarter ended June 30, 2004, was 3.74% compared with 4.08% for the second
quarter of 2003. For the first quarter of 2004 the net interest yield was 3.80%.
The provision for loan losses totaled $41.3 million, or 116% of net
charge-offs, for the second quarter of 2004, compared with $49.3 million or
130%, respectively, for the same period in
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3- POPULAR, INC. 2004 SECOND QUARTER RESULTS
2003. Net charge-offs for the quarter ended June 30, 2004, were $35.6 million or
0.59% of average loans, compared with $38.1 million or 0.76% for the second
quarter of 2003. The decline in net charge-offs as compared with the second
quarter of 2003 is mainly due to lower lease financing net charge-offs, which
declined by $1.6 million. Also, commercial loans net charge-offs, including
construction loans, declined by $1.1 million. The decrease in the net charge-off
ratio to average loans was reflected in all loan categories.
The decrease in non-interest income for the quarter ended June 30, 2004
compared with the same quarter last year, was mostly associated with the
aforementioned gain on the sale of securities during the second quarter of 2003.
Partially offsetting this decrease were higher service fees, including insurance
fees, debit card fees and credit card fees and discounts. Other operating income
rose in part due to the sale of a real estate property by Banco Popular during
the second quarter of 2004, which contributed with $10.9 million in gains. This
rise was partially reduced by lower dividend income from the Corporation's
ownership participation in Telecomunicaciones de Puerto Rico, Inc.
Operating expenses for the quarter ended June 30, 2004 increased 4%,
compared with the same period in 2003. Personnel costs increased by $11.8
million, or 9%, mostly due to higher salaries, incentives, performance bonuses,
stock options, and other compensation. The increases were partially offset by
lower pension costs associated in part with improvements in the fair value of
plan assets. Categories with the largest increases compared with the second
quarter of the previous year included professional fees, net occupancy and
equipment expenses. Offsetting these increases was a decline in other operating
expenses mostly associated with lower sundry losses. The results of the second
quarter of 2003 included non-recurrent losses resulting from unauthorized credit
card transactions. The decrease in sundry losses was partly compensated by an
increase in other real estate expenses, insurance costs and credit card
interchange expenses.
At June 30, 2004 the Corporation's total assets amounted to $39.6 billion,
compared with $36.1 billion at June 30, 2003 and $38.1 billion at March 31,
2004. Total loans amounted to $24.7 billion at June 30, 2004, compared with
$20.9 billion on the same date in the previous year and $23.7 billion at March
31, 2004. Mortgage loans accounted for the largest increase in the portfolio,
rising
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4- POPULAR, INC. 2004 SECOND QUARTER RESULTS
$2.6 billion, or 31%, since June 30, 2003 and $395 million, or 4%, from March
31, 2004. Also, commercial and construction loans rose $641 million, or 8%, and
$275 million, or 3%, compared with June 30, 2003 and March 31, 2004,
respectively, while consumer loans increased $503 million, or 16%, and $258
million, or 8%, from each respective period. Investment and trading securities
totaled $11.6 billion at June 30, 2004, compared with $12.3 billion at June 30,
2003, and $11.4 billion at March 31, 2004.
The allowance for loan losses totaled $426 million at June 30, 2004, or
1.73% of loans, compared with $398 million, or 1.90%, at the same date in 2003,
and $417 million, or 1.76%, at March 31, 2004. The ratio of allowance for loan
losses to loans continued to reflect improvement in credit quality trends and a
continued shift in the loan portfolio mix to include a greater proportion of
residential mortgages. Non-performing assets were $602 million, or 2.44% of
ending loans at June 30, 2004, compared with $617 million, or 2.96%, at the end
of the second quarter of 2003, and $609 million, or 2.57%, at March 31, 2004.
The allowance as a percentage of non-performing loans was 77.69% at June 30,
2004, compared with 69.83% at the end of the second quarter of 2003 and 75.27%
at March 31, 2004. Effective for the quarter ended March 31, 2004, the
Corporation adopted the standard industry practice of placing commercial and
construction loans in non-accrual status when payments of principal or interest
are delinquent 90 days or more rather than 60 days or more. Had the Corporation
continued reporting commercial and construction loans in non-performing status
when delinquent 60 days or more, non-performing assets would have amounted to
$635 million at June 30, 2004, or 2.57% of ending loans. The allowance as a
percentage of non-performing loans would have amounted to 73.18%.
Non-performing mortgage loans totaled $359 million or 60% of total
non-performing assets and 3% of total mortgage loans at June 30, 2004, compared
with $323 million or 52% of total non-performing assets and 4% of total mortgage
loans at June 30, 2003. Mortgage loans net charge-offs as a percentage of the
average mortgage loan portfolio was 0.29% in the second quarter of 2004,
compared with 0.38% in the second quarter of 2003. Other real estate assets
reached $53 million at June 30, 2004, or 9% of non-performing assets, compared
with $48 million, or 8%, at June 30, 2003. On the other hand, commercial,
including construction, and lease financing non-performing loans
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5- POPULAR, INC. 2004 SECOND QUARTER RESULTS
reflected declines of $54 million and $5 million, respectively, when compared
with June 30, 2003. Approximately $34 million of the decline in commercial and
construction non-performing loans was due to the aforementioned change in the
Corporation's policy for non-accrual commercial and construction loans.
Deposits totaled $19.2 billion at June 30, 2004, compared with $18.3
billion at June 30, 2003, an increase of 5%. Total deposits at March 31, 2004
were $18.6 billion. The growth since June 30, 2003 was mostly reflected in
savings and time deposits, which rose $542 million and $499 million,
respectively. Demand deposits declined $89 million compared with June 30, 2003.
Borrowed funds reached $16.9 billion at June 30, 2004, from $14.4 billion on the
same date of the previous year. At March 31, 2004, borrowed funds totaled $15.9
billion. The increase in borrowings since June 30, 2003, mostly comprised of
secured borrowings arising in securitization transactions, was mainly used to
fund loan growth.
Stockholders' equity was $2,784 million at June 30, 2004, compared with
$2,813 million at June 30, 2003 and $2,950 million at March 31, 2004.
Stockholders' equity at June 30, 2004 declined when compared with the same date
in the previous year mainly due to lower accumulated other comprehensive income
of $369 million, mostly associated with unrealized losses on the securities
available-for-sale portfolio caused by rising long-term rates. When compared
with March 31, 2004, accumulated other comprehensive income decreased by $254
million, also associated with unrealized losses on the securities
available-for-sale portfolio.
The market value of the Corporation's common stock at June 30, 2004, was
$21.39 per common share, compared with $19.27 at June 30, 2003, and $21.55 at
March 31, 2004. The Corporation's market capitalization at June 30, 2004 was
$5.7 billion, compared with $5.1 billion at June 30, 2003 and $5.7 billion at
March 31, 2004. At June 30, 2004, the Corporation's common stock had a book
value per share of $9.76.
* * *
During the second quarter of 2004, Equity One, the Corporation's mortgage
and consumer lending subsidiary in the U.S. Mainland, sold approximately $700
million in asset-backed securities, supported by home equity loans. Also, in
recent weeks, Popular North America, Inc., a subsidiary of
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6- POPULAR, INC. 2004 SECOND QUARTER RESULTS
Popular, Inc., sold $400 million in fixed-rate five-year medium-term notes. The
funds raised will be used primarily to repay outstanding short-term borrowings
and the remainder will be used to partially fund the acquisition of Quaker City
Bancorp in California, expected to be completed during the third quarter of
2004.
* * *
The information included in this press release may contain certain
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements are based on management's
current expectations and 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. For a
discussion of such risks and uncertainties, see the Corporation's Annual Report
on Form 10-K for the most recently ended fiscal year as well as its filings with
the U.S. Securities and Exchange Commission. The Corporation assumes no
obligation to update any forward-looking statements to reflect occurrences or
unanticipated events or circumstances after the date of such statements.
* * *
Popular, Inc. is a complete financial services provider with operations in
Puerto Rico, the United States, the Caribbean and Latin America. As the leading
financial institution in Puerto Rico, the Corporation offers full retail and
commercial banking services through its main subsidiary, Banco Popular, as well
as investment banking, auto and equipment leasing and financing, mortgage loans,
consumer lending, insurance and information processing through specialized
subsidiaries. In the United States, the Corporation has established the largest
Hispanic financial services franchise, providing complete financial solutions to
all the communities it serves. The Corporation continues to use its expertise in
technology and electronic banking as a competitive advantage in its Caribbean
and Latin America expansion, and is exporting its 110 years of experience to the
region. Popular, Inc. has always been committed to meeting the needs of retail
and business clients through innovation, and to fostering growth in the
communities it serves.
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POPULAR, INC.
FINANCIAL SUMMARY
(In thousands, except per share data)
Quarter ended
June 30, Second
-------------------------------- Quarter -------------
2004 - 2003 First
Percent Quarter
2004 2003 Variance 2004
------------- ------------- ----------- -------------
SUMMARY OF OPERATIONS
Interest income $ 532,270 $ 511,659 4.03% $ 518,742
Interest expense 191,567 181,964 5.28 188,028
------------- ------------- -------- -------------
Net interest income 340,703 329,695 3.34 330,714
Provision for loan losses 41,349 49,325 (16.17) 44,678
------------- ------------- -------- -------------
Net interest income after provision for loan losses 299,354 280,370 6.77 286,036
Other income 157,952 143,992 9.69 134,369
Gain on sale of investment securities 402 29,875 13,033
Trading account gain (loss) 615 (4,243) (2,166)
------------- ------------- -------- -------------
Total other income 158,969 169,624 (6.28) 145,236
Salaries and benefits 135,921 124,850 8.87 134,882
Profit sharing 5,639 4,918 14.66 5,682
Amortization of intangibles 1,800 2,028 (11.24) 1,802
Other operating expenses 148,300 147,482 0.55 137,372
------------- ------------- -------- -------------
Total operating expenses 291,660 279,278 4.43 279,738
------------- ------------- -------- -------------
Income before income tax and minority interest 166,663 170,716 (2.37) 151,534
Income tax 38,864 35,946 8.12 33,030
Net gain of minority interest (163)
------------- ------------- -------- -------------
Net income $ 127,799 $ 134,607 (5.06) $ 118,504
============= ============= ======== =============
Net income applicable to common stock $ 124,821 $ 131,594 (5.15) $ 115,526
============= ============= ======== =============
Earnings per common share (basic and diluted) $ 0.47 $ 0.50 $ 0.43
============= ============= =============
Dividends declared per common share $ 0.16 $ 0.14 $ 0.14
============= ============= =============
Average common shares outstanding 266,178,304 265,350,918 265,997,349
Common shares outstanding at end of period 266,114,566 265,306,756 265,920,898
SELECTED AVERAGE BALANCES
Total assets....................................... $ 38,660,017 $ 34,278,629 12.78 $ 36,915,835
Loans.............................................. 23,920,811 20,141,310 18.76 22,979,153
Earning assets..................................... 36,474,726 32,381,754 12.64 34,832,318
Deposits........................................... 19,041,123 17,811,144 6.91 18,245,681
Interest-bearing liabilities....................... 31,217,219 27,699,110 12.70 29,892,460
Stockholders' equity............................... 2,859,664 2,528,726 13.09 2,776,307
SELECTED FINANCIAL DATA AT PERIOD-END
Total assets....................................... $ 39,556,239 $ 36,073,554 9.65 $ 38,101,986
Loans.............................................. 24,690,040 20,872,076 18.29 23,700,334
Earning assets..................................... 37,190,530 33,914,037 9.66 35,963,864
Deposits........................................... 19,227,576 18,275,423 5.21 18,602,940
Interest-bearing liabilities....................... 32,004,854 28,430,445 12.57 30,635,848
Stockholders' equity............................... 2,783,720 2,812,871 (1.04) 2,949,756
PERFORMANCE RATIOS
Net interest yield *............................... 3.74% 4.08% 3.80%
Return on assets................................... 1.33 1.58 1.29
Return on common equity............................ 18.79 22.63 17.95
CREDIT QUALITY DATA
Non-performing assets **........................... $ 601,668 $ 617,146 (2.51) $ 609,449
Net loans charged-off.............................. 35,578 38,078 (6.57) 40,019
Allowance for loan losses.......................... 425,949 397,503 7.16 417,143
Non-performing assets to total assets **........... 1.52% 1.71% 1.60%
Allowance for losses to loans...................... 1.73 1.90 1.76
* Not on a taxable equivalent basis.
** Non-performing assets for 2004 are stated based on the newly adopted
non-accruing policy for commercial and construction loans. Non-performing assets
for prior periods were not restated. At June 30, 2004, non-performing assets
which are comparable with prior periods non-accruing policy, would have amounted
to $635 million, or 1.61% of total assets.
Notes: Certain reclassifications have been made to prior periods to conform with
this quarter.
All common stock data has been adjusted to reflect the two-for-one stock
split effected in the form of a dividend on July 8, 2004.
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POPULAR, INC.
FINANCIAL SUMMARY
(In thousands, except per share data)
For the period ended
June 30,
--------------------------------
Percent
2004 2003 Variance
------------- ------------- ---------
SUMMARY OF OPERATIONS
Interest income $ 1,051,012 $ 1,014,940 3.55%
Interest expense 379,595 386,139 (1.69)
------------- ------------- ---------
Net interest income 671,417 628,801 6.78
Provision for loan losses 86,027 97,534 (11.80)
------------- ------------- ---------
Net interest income after provision for loan losses 585,390 531,267 10.19
Other income 292,321 286,330 2.09
Gain on sale of investment securities 13,435 31,289
Trading account loss (1,551) (5,180)
------------- ------------- ---------
Total other income 304,205 312,439 (2.64)
Salaries and benefits 270,803 250,954 7.91
Profit sharing 11,321 11,163 1.42
Amortization of intangibles 3,602 4,055 (11.17)
Other operating expenses 285,672 276,748 3.22
------------- ------------- ---------
Total operating expenses 571,398 542,920 5.25
------------- ------------- ---------
Income before income tax and minority interest 318,197 300,786 5.79
Income tax 71,894 66,849 7.55
Net gain of minority interest (241)
------------- ------------- ---------
Net income $ 246,303 $ 233,696 5.39
============= ============= =========
Net income applicable to common stock $ 240,347 $ 229,734 4.62
============= ============= =========
Earnings per common share (basic and diluted) $ 0.90 $ 0.87
============= =============
Dividends declared per common share $ 0.30 $ 0.24
============= =============
Average common shares outstanding 266,087,827 265,252,594
Common shares outstanding at end of period 266,114,566 265,306,756
SELECTED AVERAGE BALANCES
Total assets........................................ $ 37,787,926 $ 33,712,699 12.09
Loans............................................... 23,449,982 19,832,452 18.24
Earning assets...................................... 35,653,523 31,894,436 11.79
Deposits............................................ 18,643,402 17,669,845 5.51
Interest-bearing liabilities........................ 30,554,840 27,372,136 11.63
Stockholders' equity................................ 2,817,985 2,422,320 16.33
PERFORMANCE RATIOS
Net interest yield *................................ 3.77% 3.94%
Return on assets.................................... 1.31 1.40
Return on common equity............................. 18.37 20.09
CREDIT QUALITY DATA
Non-performing assets **............................ $ 601,668 $ 617,146 (2.51)
Net loans charged-off............................... 75,597 76,518 (1.20)
Allowance for loan losses........................... 425,949 397,503 7.16
Non-performing assets to total assets **............ 1.52% 1.71%
Allowance for losses to loans....................... 1.73 1.90
* Not on a taxable equivalent basis.
** Non-performing assets for the period ended June 30, 2004 are stated based on
the newly adopted non-accruing policy for commercial and construction loans.
Non-performing assets for prior periods were not restated. At June 30, 2004,
non-performing assets which are comparable with prior periods non-accruing
policy, would have amounted to $635 million, or 1.61% of total assets.
Notes: Certain reclassifications have been made to prior periods to conform with
this period.
All common stock data has been adjusted to reflect the two-for-one stock
split effected in the form of a dividend on July 8, 2004.
8