1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10 - Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 1994 Commission file number 0- 13818
------------------ --------
BANPONCE CORPORATION
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Puerto Rico 66-041-6582
---------------------- ----------------------------------
(State of incorporation) (I.R.S. Employer Identification No.)
Popular Center Building
209 Munoz Rivera Avenue,
Hato Rey, Puerto Rico 00918
--------------------------------------
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code (809) 765-9800
Not Applicable
--------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the period covered by this report.
Common Stock $6.00 Par value 32,812,818
---------------------------- -------------------------------------------
(Title of Class) (Shares Outstanding as of September 30, 1994)
2
BANPONCE CORPORATION
INDEX
Part I - Financial Information Page
- - ------------------------------ ------
Item 1. Financial Statements
Unaudited consolidated statements of condition
September 30, 1994 and December 31, 1993. 3
Unaudited consolidated statements of income
three months and nine months ended September 30, 1994
and 1993. 4
Unaudited consolidated statements of cash
flows - nine months ended September 30, 1994 and 1993. 5
Notes to unaudited consolidated financial
statements. 6-12
Item 2. Management's discussion and analysis of
financial condition and results of operation. 13-21
Part II - Other Information
- - ---------------------------
Item 1. Legal proceedings - None N/A
Item 2. Changes in securities - None N/A
Item 3. Defaults upon senior securities - None N/A
Item 4. Submission of matters to a vote of
security holders - None N/A
Item 5. Other information N/A
Item 6. Exhibits and reports on Form 8-K 22
--- Signature 22
3
3
BANPONCE CORPORATION
CONSOLIDATED STATEMENTS OF CONDITION
(UNAUDITED)
September 30, December 31,
(In thousands) 1994 1993
- - ---------------------------------------------------------------------------------------------------------------
ASSETS
Cash and due from banks $ 340,920 $ 368,837
- - ---------------------------------------------------------------------------------------------------------------
Money market investments:
Federal funds sold and securities and
mortgages purchased under agreements to resell 146,790 247,333
Time deposits with other banks 3,100 15,100
Banker's acceptances 275 259
- - ---------------------------------------------------------------------------------------------------------------
150,165 262,692
- - ---------------------------------------------------------------------------------------------------------------
Investment securities held to maturity,
at cost (Notes 3 and 4) 3,210,192 3,330,798
Investment securities available for sale,
at market (Notes 3 and 4) 724,522 714,565
Trading account securities, at market 19,214 3,017
Loans (Note 4) 7,798,689 6,655,072
Less - Unearned income 296,599 308,150
Allowance for loan losses 149,429 133,437
- - ---------------------------------------------------------------------------------------------------------------
7,352,661 6,213,485
- - ---------------------------------------------------------------------------------------------------------------
Premises and equipment 322,780 298,089
Other real estate 10,959 12,699
Customer's liabilities on acceptances 1,257 1,392
Accrued income receivable 76,444 79,285
Other assets 104,339 95,763
Intangible assets 131,072 132,746
- - ---------------------------------------------------------------------------------------------------------------
$12,444,525 $ 11,513,368
===============================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Non-interest bearing $ 1,760,969 $ 1,848,859
Interest bearing 7,115,412 6,673,799
- - ---------------------------------------------------------------------------------------------------------------
8,876,381 8,522,658
Federal funds purchased and securities sold
under agreements to repurchase (Note 4) 1,195,956 951,733
Other short-term borrowings 702,804 664,173
Notes payable 408,529 253,855
Senior debentures 30,000 30,000
Acceptances outstanding 1,257 1,392
Other liabilities 190,725 182,362
- - ---------------------------------------------------------------------------------------------------------------
11,405,652 10,606,173
- - ---------------------------------------------------------------------------------------------------------------
Subordinated notes (Note 6) 50,000 62,000
- - ---------------------------------------------------------------------------------------------------------------
Preferred stock of subsidiary Bank (Note 7) 11,000
- - ---------------------------------------------------------------------------------------------------------------
Stockholders' equity (Note 8):
Preferred stock 100,000
Common stock 196,877 196,395
Surplus 393,800 386,622
Retained earnings 272,273 208,607
Unrealized losses on securities available for sale (Note 2) (9,791)
Capital reserves 35,714 42,571
- - ---------------------------------------------------------------------------------------------------------------
988,873 834,195
- - ---------------------------------------------------------------------------------------------------------------
$12,444,525 $11,513,368
===============================================================================================================
The accompanying notes are an integral part of these unaudited financial
statements
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4
BANPONCE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED) Quarter ended For the nine months
September 30, ended September 30,
(Dollars in thousands, except per share information) 1994 1993 1994 1993
- - ---------------------------------------------------------------------------------------------------------------------------------
INTEREST INCOME:
Loans $172,946 $140,665 $482,529 $402,580
Money market investments 803 1,465 4,152 4,758
Investment securities 54,338 54,422 159,878 164,711
Trading account securities 140 157 192 307
- - -------------------------------------------------------------------------------------------------------------------------------
228,227 196,709 646,751 572,356
- - --------------------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE:
Deposits 63,536 54,432 178,437 164,783
Short-term borrowings 21,714 12,080 53,015 29,324
Long-term debt 6,746 5,023 18,598 12,611
- - -------------------------------------------------------------------------------------------------------------------------------
91,996 71,535 250,050 206,718
- - --------------------------------------------------------------------------------------------------------------------------------
Net interest income 136,231 125,174 396,701 365,638
Provision for loan losses 13,544 17,442 41,244 58,155
- - -------------------------------------------------------------------------------------------------------------------------------
Net interest income after provision
for loan losses 122,687 107,732 355,457 307,483
Service charges on deposit accounts 18,419 17,400 53,644 50,706
Other service fees 14,011 10,737 39,202 32,122
Gain (loss) on sale of securities (205) 332 67 864
Trading account profit (loss) (8) 183 323 407
Other operating income 4,060 1,858 11,459 7,081
- - -------------------------------------------------------------------------------------------------------------------------------
158,964 138,242 460,152 398,663
- - --------------------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES:
Personnel costs:
Salaries 41,002 38,011 119,901 112,085
Profit sharing 5,378 4,648 15,993 15,062
Pension and other benefits 11,465 9,527 34,167 35,303
- - -------------------------------------------------------------------------------------------------------------------------------
57,845 52,186 170,061 162,450
Net occupancy expense 7,304 6,426 21,134 19,109
Equipment expenses 9,101 7,347 26,064 20,186
Other taxes 4,961 4,153 14,060 11,848
Professional fees 8,694 7,259 24,746 19,785
Communications 5,206 4,447 15,099 13,718
Business promotion 4,385 3,659 11,614 11,429
Printing and supplies 2,321 1,943 6,733 5,967
Other operating expenses 10,233 9,975 30,706 28,517
Amortization of intangibles 4,501 4,041 13,364 11,805
- - -------------------------------------------------------------------------------------------------------------------------------
114,551 101,436 333,581 304,814
- - --------------------------------------------------------------------------------------------------------------------------------
Income before tax, dividends on preferred stock of subsidiary
Bank and cumulative effect of accounting changes 44,413 36,806 126,571 93,849
Income tax 12,696 8,459 34,063 18,276
- - -------------------------------------------------------------------------------------------------------------------------------
Income before dividends on preferred stock of subsidiary
Bank and cumulative effect of accounting changes 31,717 28,347 92,508 75,573
Dividends on preferred stock of subsidiary Bank 193 385 578
- - -------------------------------------------------------------------------------------------------------------------------------
Income before cumulative effect of accounting changes 31,717 28,154 92,123 74,995
Cumulative effect of accounting changes (Note 2) 6,185
- - -------------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 31,717 $ 28,154 $ 92,123 $ 81,180
================================================================================================================================
EARNINGS PER COMMON SHARE (NOTE 9):
Income before cumulative effect of accounting changes $ 0.90 $ 0.86 $ 2.74 $ 2.29
Cumulative effect of accounting changes (Note 2) 0.19
- - --------------------------------------------------------------------------------------------------------------------------------
Net Income $ 0.90 $ 0.86 $ 2.74 $ 2.48
================================================================================================================================
The accompanying notes are an integral part of these unaudited financial
statements.
5
5
BANPONCE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the nine months ended
(In thousands) September 30,
1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 92,123 $ 81,180
- - ---------------------------------------------------------------------------------------------------------------
Adjustments to reconcile net income to cash provided
by operating activities:
Depreciation and amortization of premises and equipment 27,505 19,784
Provision for loan losses 41,244 58,155
Amortization of intangibles 13,364 11,805
Gain on sale of investment securities available for sale (67) (864)
Gain on sale of premises and equipment (862) (912)
Gain on sale of loans (2,775) (262)
Amortization of premiums and accretion of discounts
on investments 6,170 8,354
Amortization of deferred loan fees and costs 975 4,470
Net increase in postretirement benefit obligation 3,273 42,695
Net increase in trading securities (16,197) (16,344)
Net decrease in interest receivable 4,934 3,754
Net increase in other assets (6,189) (15,237)
Net increase (decrease) in interest payable 991 (1,234)
Net increase (decrease) in current and deferred taxes 10,406 (47,276)
Net (decrease) increase in other liabilities (1,393) 11,770
- - ---------------------------------------------------------------------------------------------------------------
Total adjustments 81,379 78,658
- - ---------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 173,502 159,838
- - ---------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net decrease in money market investments 117,927 113,844
Purchases of investment securities held to maturity (5,860,771) (2,686,065)
Maturities of investment securities held to maturity 5,977,209 2,483,979
Sales of investment securities held to maturity 12,059
Purchases of investment securities available for sale (258,595) (233,200)
Sales of investment securities available for sale 347,799 83,039
Net disbursements on loans (1,010,521) (529,299)
Proceeds from sale of loans 84,285 22,998
Acquisition of mortgage loan portfolio (76,700) (297,688)
Assets acquire, net of cash (17,557)
Acquisition of premises and equipment (46,853) (46,557)
Proceeds from sale of premises and equipment 2,049 8,198
- - ---------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (741,728) (1,068,692)
- - ---------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits 61,018 (92,223)
Net deposits acquired 199,179
Net increase in federal funds purchased and
securities sold under agreements to repurchase 239,222 599,771
Net increase in other short-term borrowings 36,031 130,388
Proceeds from issuance of notes payable 154,681 139,011
Payments of notes payable (7) (7)
Payments of subordinated notes (12,000)
Dividends paid (26,725) (19,603)
Proceeds from issuance of common stock 2,399 1,464
Proceeds from issuance of preferred stock 96,690
Redemption of preferred stock of subsidiary Bank 11,000
--------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 540,309 957,980
- - ---------------------------------------------------------------------------------------------------------------
Net (decrease) increase in cash and due from banks (27,917) 49,126
Cash and due from banks at beginning of period 368,837 325,497
- - ---------------------------------------------------------------------------------------------------------------
Cash and due from banks at end of period $ 340,920 $ 374,623
===============================================================================================================
The accompanying notes are an integral part of these unaudited financial
statements.
6
6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share information)
NOTE 1- CONSOLIDATION
The consolidated financial statements of BanPonce Corporation include the
balance sheet of the Corporation and its wholly-owned subsidiaries, Velco,
Popular International Bank, Inc. and its wholly-owned subsidiaries BanPonce
Financial Corp., Spring Financial Services, Inc. and Pioneer Bancorp, Inc.
(second tier subsidiaries), and Banco Popular de Puerto Rico and its
wholly-owned subsidiaries, Popular Leasing and Rental, Inc. and Popular
Consumer Services, Inc., as of September 30, 1994 and December 31, 1993, and
their related statements of income and cash flows for the nine-month periods
ended September 30, 1994 and September 30, 1993. These statements are, in the
opinion of management, a fair statement of the results of the periods
presented. These results are unaudited, but include all necessary adjustments
for a fair presentation of such results.
NOTE 2- ACCOUNTING CHANGES
During the first quarter of 1994 the Corporation adopted SFAS 115 "Accounting
for Certain Investments in Debt and Equity Securities." SFAS 115 requires
financial institutions to divide their securities holdings among three
categories: held-to-maturity, available-for-sale and trading securities. Those
securities which management has the positive intent and ability to hold to
maturity will be classified as held-to-maturity and will be carried at cost.
Those that are bought and held principally for the purpose of selling them in
the near term, will be classified as trading and will continue to be reported
at fair value with unrealized gains and losses included in earnings. All other
securities will be classified as available-for-sale and will be reported at
fair value with unrealized gains and losses excluded from earnings and reported
as a separate component of shareholders' equity. As a result of the adoption of
this statement, the Corporation's stockholders' equity at September 30, 1994
includes $9.8 million, net of taxes, in unrealized holding losses on securities
available for sale.
Effective January 1, 1993, the Corporation implemented the Statement of
Financial Accounting Standards (SFAS) 106, "Employers Accounting for
Postretirement Benefits other than Pensions", and SFAS 109, "Accounting for
Income Taxes". Under SFAS 106 the cost of retiree health care and other
postretirement benefits is accrued during employees' service periods. The
Corporation elected to recognize the full transition obligation, which is the
portion of future retiree benefit costs related to service already rendered by
both active and retired employees up to the date of adoption, in the first
quarter of 1993 rather than amortize it over future periods. The cumulative
effect, net of taxes, of this accounting change amounted to $22.7 million, or
$0.70 per share. The SFAS 109 established accounting and reporting standards
for the recognition of deferred tax assets and liabilities for the future tax
consequences of temporary differences between the amount of assets and
liabilities for financial reporting purposes and such amounts as measured by
tax laws. The cumulative effect of this change resulted in a credit to income
of $28.9 million, or $0.89 per share. This amount is net of a valuation
allowance of approximately $2.1 million related to a deferred tax asset arising
from net operating loss carryforwards for which the Corporation cannot
determine the likelihood that they will be realized.
7
7
NOTE 3 - INVESTMENT SECURITIES
The maturities as of September 30, 1994 and the market value as of September
30, 1994 and September 30, 1993 for the following investment securities are:
Investments securities held to maturity:
September 30,
1994 1993
Book Value Market Value Book Value Market Value
----------------------------------------------------------------------
(Dollars in Thousands)
U.S. Treasury (average maturity of
1 year and 1.3 months) $1,803,692 $1,783,353 $2,526,877 $2,558,708
Obligations of other U.S. Government
agencies and corporations (average
maturity of 1 year and 9.4 months) 555,637 549,935 119,832 121,804
Obligations of Puerto Rico, States and
political subdivisions (average
maturity of 3 years and 7.4 months) 193,731 196,596 218,709 228,947
Others (average maturity of 3 years
and 7.1 months) 657,132 635,678 607,011 607,285
----------------------------------------------------------------------
$3,210,192 $3,165,562 $3,472,429 $3,516,744
----------------------------------------------------------------------
Investment securities available for sale:
September 30,
1994 1993
Book Value Market Value Book Value Market Value
----------------------------------------------------------------------
(Dollars in Thousands)
U.S. Treasury (average maturity
of 2 years and 8.1 months) $563,154 $552,108 $455,715 $481,407
Obligations of other U.S. Government
agencies and corporations (average
maturity of 2 years and 8.6 months) 62,463 61,546 95,137 96,656
Obligations of Puerto Rico, States and
political subdivisions (average maturity
of 2 years and 9.8 months) 23,915 23,157
Others (average maturity of 3 years
and 5.1 months) 88,641 87,711 8,484 8,484
--------------------------------------------------------------------
$738,173 $724,522 $559,336 $586,547
--------------------------------------------------------------------
NOTE 4- PLEDGED ASSETS
Securities and insured mortgage loans of the Corporation of $2,305,087 (1993 -
$1,877,687) are pledged to secure public and trust deposits and securities and
mortgages sold under repurchase agreements.
NOTE 5- COMMITMENTS
In the normal course of business there are letters of credit outstanding and
stand-by letters of credit which at September 30, 1994 amounted to $15,146 and
$75,468, respectively. There are also outstanding other commitments and
contingent liabilities, such as guarantees and commitments to extend credit,
which are not reflected in the accompanying financial statements. No losses are
anticipated as a result of these transactions.
8
8
NOTE 6- SUBORDINATED NOTES
Subordinated notes consist of the following:
8.875% Fixed Rate Notes series A, due in 1996 $15,000
8.6875% Fixed Rate Notes series B, due in 1996 15,000
Floating Rate Notes series A with interest
payable at 88% of LIBID rate, due in 1996 19,000
Floating Rate Notes series B with interest
payable at 86% of LIBID rate, due in 1996 1,000
-------
$50,000
=======
NOTE 7- PREFERRED STOCK OF SUBSIDIARY BANK
The subsidiary Bank has 200,000 shares of authorized preferred stock with a par
value of $100. Of these, 110,000 were issued and outstanding until June 30,
1994, when the shares were redeemed at par value.
NOTE 8- STOCKHOLDERS' EQUITY
Authorized common stock is 90,000,000 shares with a par value of $6 per share
of which 32,812,818 are issued and outstanding at September 30, 1994. On June
27, 1994, the Corporation issued 4,000,000 shares of non-cumulative preferred
stock with a dividend rate of 8.35% and a liquidation preference value of $25.
Authorized preferred stock is 10,000,000 shares without par value.
NOTE 9 - EARNINGS PER COMMON SHARE
Earnings per common share (EPS) are calculated based on the net income
applicable to common stockholders which amounted to $29,560 and $89,966 for the
quarter and nine-month period ended September 30, 1994, respectively, after
deducting the dividends on preferred stock. EPS are based on 32,812,818 and
32,709,858 average shares outstanding during the third quarters of 1994 and
1993, respectively, and 32,784,802 and 32,690,726 during the nine-month periods
of 1994 and 1993, respectively.
NOTE 10 - SUPPLEMENTAL DISCLOSURE ON THE CONSOLIDATED STATEMENTS OF CASH FLOWS
During the nine-month period ended September 30, 1994 the Corporation paid
interest and income taxes amounting to $248,737 and $21,051, respectively (1993
- - - $199,284 and $17,559). In addition, the loans receivable transferred to other
real estate and other property as of September 30, 1994, amounted to $1,822 and
$2,376, respectively (1993 - $13,748 and $3,198). The Corporation's
stockholders' equity at September 30, 1994 includes $9.8 million, net of taxes,
in unrealized holding losses on securities available for sale.
9
9
NOTE 11- POPULAR INTERNATIONAL BANK, INC. (A WHOLLY-OWNED SUBSIDIARY OF
BANPONCE CORPORATION) FINANCIAL INFORMATION:
The following summarized financial information presents the unaudited
consolidated financial position of Popular International, Inc. and its
wholly-owned subsidiaries BanPonce Financial Corp., Spring Financial Services,
Inc. and Pioneer Bancorp, Inc. (second tier subsidiaries), as of September 30,
1994 and 1993, and the results of their operations for the nine-month periods
then ended. Pioneer Bancorp, Inc. was acquired on March 31, 1994.
POPULAR INTERNATIONAL BANK, INC.
STATEMENT OF CONDITION
(In thousands)
September 30,
1994 1993
---- ----
Assets:
Cash $ 20,052 $ 5,697
Money market investments 44,716 7,458
Investment securities 105,765 -0-
-------- --------
Loans 810,634 321,664
Less: Unearned income 31,043 13,978
Allowance for loan losses 11,781 4,372
-------- --------
767,810 303,314
Other assets, consisting principally of
intangible assets, including goodwill, net 36,372 11,135
-------- --------
Total assets $974,715 $327,604
======== ========
Liabilities and Stockholder's Equity:
Deposits $329,932 $ -0-
Short-term borrowings 160,371 83,666
Notes payable 348,906 199,352
Other liabilities 21,719 14,296
Stockholder's equity 113,787 30,290
-------- --------
Total liabilities and stockholder's equity $974,715 $327,604
======== ========
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10
POPULAR INTERNATIONAL BANK, INC.
STATEMENT OF INCOME
(In thousands)
Quarter ended For the nine months ended
September 30, September 30,
1994 1993 1994 1993
----------------------- ----------------------------
Income:
Interest and fees $20,545 $9,011 $49,533 $23,616
Other service fees 1,916 482 5,123 1,363
------- ------ ------- -------
Total income 22,461 9,493 54,656 24,979
------- ------ ------- -------
Expenses:
Interest expense 10,280 3,735 24,374 9,585
Provision for loan losses 1,930 1,228 5,050 3,184
Operating expenses 6,507 3,061 15,853 8,806
------- ------ ------- -------
Total expenses 18,717 8,024 45,277 21,575
------- ------ ------- -------
Income before income tax 3,744 1,469 9,379 3,404
Income tax 1,521 670 3,819 1,533
------- ------ ------- -------
Net income $ 2,223 $ 799 $ 5,560 $ 1,871
======= ====== ======= =======
11
11
NOTE 12- BANPONCE FINANCIAL CORP. (A SECOND TIER SUBSIDIARY OF BANPONCE
CORPORATION) FINANCIAL INFORMATION:
The following summarized financial information presents the unaudited
consolidated financial position of BanPonce Financial Corp. and its
wholly-owned subsidiaries Spring Financial Services, Inc. and Pioneer Bancorp
Inc., as of September 30, 1994 and 1993, and the results of their operations
for the nine-month periods then ended. Pioneer Bancorp, Inc. was acquired on
March 31, 1994.
BANPONCE FINANCIAL CORP.
STATEMENT OF CONDITION
(In thousands)
September 30,
-------------
1994 1993
---- ----
Assets:
Cash $ 19,997 $ 5,690
Money market investments 43,688 6,422
Investment securities 105,765 -0-
-------- --------
Loans 810,634 321,664
Less: Unearned income 31,043 13,978
Allowance for loan losses 11,781 4,372
-------- --------
767,810 303,314
Other assets, consisting principally of
intangible assets, including goodwill, net 36,370 11,126
------- --------
Total assets $973,630 $326,552
======== ========
Liabilities and Stockholder's Equity:
Deposits $329,932 $ -0-
Other short-term borrowings 160,371 83,666
Notes payable 348,905 199,352
Other liabilities 21,720 14,296
Stockholder's equity 112,702 29,238
-------- --------
Total liabilities and stockholder's equity $973,630 $326,552
======== ========
12
12
BANPONCE FINANCIAL CORP.
STATEMENT OF INCOME
(In thousands)
Quarter ended For the nine months ended
September 30, September 30,
1994 1993 1994 1993
----------------------- -----------------------------
Income:
Interest and fees $20,535 $9,002 $49,505 $23,589
Other service fees 1,916 482 5,123 1,363
------- ------ ------- -------
Total income 22,451 9,484 54,628 24,952
------- ------ ------- -------
Expenses:
Interest expense 10,280 3,734 24,374 9,584
Provision for loan losses 1,930 1,228 5,050 3,184
Operating expenses 6,521 2,972 15,844 8,530
------- ------ ------- -------
Total expenses 18,731 7,934 45,268 21,298
------- ------ ------- -------
Income before income tax 3,720 1,550 9,360 3,654
Income tax 1,521 670 3,819 1,533
------- ------ ------- -------
Net income $ 2,199 $ 880 $ 5,541 $ 2,121
======= ====== ======= =======
13
13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
This financial review contains an analysis of the performance of BanPonce
Corporation (the Corporation) and its subsidiaries Banco Popular de Puerto Rico
(Banco Popular), including its wholly-owned subsidiaries Popular Leasing and
Rental, Inc. (Popular Leasing) and Popular Consumer Services, Inc., Vehicle
Equipment Leasing Company, Inc. (VELCO), Popular International Bank, Inc. and
its wholly owned subsidiaries BanPonce Financial Corp. (BanPonce Financial),
Spring Financial Services, Inc. (Spring) and Pioneer Bancorp, Inc. (Pioneer),
second tier subsidiaries. Pioneer was acquired on March 31, 1994.
This financial review should be read in conjunction with the consolidated
financial statements, supplemental financial data and tables contained herein.
NET INCOME
Net income for the third quarter of 1994 reached $31.7 million, an increase of
12.7% when compared with $28.2 million reported during the same quarter of
1993. Earnings per common share for the three-month period ended September 30,
1994 and 1993 were $0.90 based on 32,812,818 average shares outstanding, and
$0.86 based on 32,709,858 average shares outstanding, respectively. The
Corporation's Return on Assets (ROA) and Return on Common Equity (ROE) for the
quarter ended September 30, 1994 were 1.02% and 13.26%, respectively, compared
with 1.03% and 13.90% reported during the same quarter in 1993.
The increase in earnings reflects a higher net interest income of $11.1
million, a higher operating income by $5.8 million and a lower provision for
loan losses of $3.9 million. On the other hand, the Corporation's operating
expenses and income tax expense rose $13.1 million and $4.2 million,
respectively. Of the total increase in operating expenses $2.7 million pertain
to Pioneer's operation and $2.5 million to the operations acquired in the
Virgin Islands during the last quarter of 1993.
For the first nine months of 1994, the Corporation reported net earnings of
$92.1 million compared with $81.2 million during the first nine months of 1993.
The results for 1993 include $6.2 million in additional revenues which resulted
from the implementation of two new accounting principles (SFAS 106 and 109).
The increase of $10.9 million or 13.5% in the Corporation's net earnings for
the nine-month period, results from a rise of $6.8 million in the net earnings
of Banco Popular and its subsidiaries and an increase of $4.1 million in the
net revenues of the Corporation and its other subsidiaries.
Earnings per common share (EPS) for the nine-month period ended September 30,
1994 were $2.74 based on 32,784,802 average shares outstanding during the
period, compared with $2.48 based on 32,690,726 average shares outstanding
during the same period of 1993. Excluding the cumulative effect of the changes
in accounting principles adopted during the first quarter of 1993, EPS were
$2.29 for the first nine months of 1993. ROA and ROE for the first nine months
of 1994 were 1.02% and 13.72%, respectively, compared with 1.04% and 13.87%
obtained during the first nine months of 1993. To calculate earnings per common
share and ROE, the dividends paid on the preferred shares issued on June 27,
1994 are reduced from the Corporation's earnings. Such dividends amounted to
$2.2 million.
14
14
NET INTEREST INCOME
Net interest income, the Corporation's major source of earnings, rose from
$125.2 million reported during the third quarter of 1993 to $136.2 million in
the third quarter of 1994. On a taxable equivalent basis, net interest income
increased to $146.6 million for the quarter just ended from $138.3 million for
the three month period ended September 30, 1993. The improved net interest
income is the net effect of a $22.2 million increase due to the growth and
change in the composition of average earning assets and a $13.9 million
decrease due to a slightly lower taxable equivalent yield and a higher cost of
funding earning assets. For analytical purposes, the interest earned on
tax-exempt assets is presented on a taxable equivalent basis, which places
tax-exempt income and yields on a comparable basis with taxable income,
assuming a statutory income tax rate of 42%.
Average earning assets increased 14.7% or $1.5 billion, reaching $11.5 billion
for the third quarter of 1994 as compared with $10 billion for the same period
of 1993. This increase was experienced in the Corporation's average loan
portfolio, principally in mortgage and commercial loans which rose $717 million
and $548 million, respectively. The growth in mortgages resulted from the
significant mortgage loan origination and refinancing activity during 1993 and
the beginning of 1994 in Banco Popular and Spring. In addition, the purchase of
$76.7 million in mortgage loan portfolios during the first quarter of 1994 and
the operations acquired in the Virgin Islands in the last quarter of
1993, which added $54.8 million in mortgage loans, contributed
to the aforementioned increase. The increase in the commercial loan portfolio
was mostly attained at Banco Popular, where average commercial loans rose
$369.5 million or 15.1%. The acquisition of Pioneer, on March 31, 1994, also
added $115.7 million to the Corporation's commercial loan portfolio. The
overall improvement in the economy has been a significant factor for the growth
in this portfolio.
The average yield on earning assets, on a taxable equivalent basis, for the
quarter ended September 30, 1994, decreased 7 basis points to 8.27% compared
with 8.34% for the third quarter of 1993. The average yield on loans, on a
taxable equivalent basis, was 9.49% for the third quarter of 1994 compared with
9.73% for the same period of 1993. This decrease is principally due to the
significant volume of mortgage activity during the low interest rate
environment that prevailed in 1993 and the beginning of 1994, which resulted in
a reduction of 85 basis points in the yield of the mortgage loan portfolio. On
the other hand, the yield on commercial loans increased 71 basis points as a
result of the increases in the prime rate during 1994. Approximately 60% of the
commercial loan portfolio has a floating rate tied to the prime rate.
The yield on investment securities, on a taxable equivalent basis, decreased to
6.15% from 6.51% reported during the third quarter of 1993. The decrease in
yield resulted from the maturity of tax-exempt securities with higher yields
which were replaced during a lower interest rate environment with shorter-term
securities in anticipation of further increases in interest rates.
Average interest bearing liabilities for the quarter ended September 30, 1994,
were $9.4 billion compared with $8.2 billion for the same quarter of 1993.
Average short-term borrowings reached $1,929 million, an increase of $418
million when compared with $1,511 million reported during the third quarter of
1993. This increase is mostly related to a higher volume of arbitrage
activities in Banco Popular and in the notes issued to finance Spring's
operation. Interest-bearing deposits rose to $7,067 million or 9.7%,
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mostly in savings accounts which increased $352 million. Certificates of
deposit and other time deposits rose $255.9 million or 9.0%, mainly as a result
of the higher interest rates available on these instruments since mid 1994.
Non-interest bearing deposits also increased by $142 million or 8.7% to $1,774
million. The increase in total deposits relates primarily to the expansion of
the Corporation's activities during the latter part of 1993 and the beginning
of 1994. The acquisition of Pioneer on March 31, 1994 added $292.7 million in
deposits and other deposit acquisitions realized since September 30, 1993 in
New York and the Virgin Islands added $276 million.
The average cost of interest bearing liabilities increased 43 basis points,
from 3.47% for the third quarter of 1993 to 3.90% for the third quarter of
1994. The average cost of interest bearing deposits for the third quarter of
1994 increased to 3.60% compared with 3.38% for the same period in 1993. The
increase is the result of a rise of 52 basis points in the average cost of time
deposits, partially offset by a reduction of 17 basis points in the cost of
savings accounts. In addition, the average cost of short-term borrowings
increased 131 basis points when compared to the average cost reported for the
same quarter of 1993. The rise in the average cost of funds resulted from the
higher interest rate scenario that has prevailed during 1994. The total cost of
funding earning assets rose 35 basis points, from 2.84% in the third quarter of
1993 to 3.19% in this quarter leading to a reduction in the net interest yield,
on a taxable equivalent basis, to 5.08% for the third quarter of 1994 from
5.50% reported for the same quarter of 1993.
TABLE A
NET INTEREST INCOME (TAXABLE EQUIVALENT BASIS)
- - ----------------------------------------------------------------------------------------------------
(In Millions) First Nine Months
- - ----------------------------------------------------------------------------------------------------
1994 Average 1993 Average
Balance Rate Balance Rate
--------------------------------------------------------
Earning assets $11,269 8.05% $9,676 8.42%
======= ======
Financed by:
Interest
bearing funds $9,249 3.60% $7,924 3.48%
Non-interest
bearing funds 2,020 1,752
------- ------
TOTAL $11,269 2.96% $9,676 2.85%
======= ======
Net interest income
per books $396.7 $365.6
Taxable equivalent
adjustment 33.2 38.5
------ ------
Net interest income on a
taxable equivalent basis $ 429.9 $404.1
======= ======
Spread 4.45% 4.94%
Net interest yield 5.09% 5.57%
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For the nine-month period ended September 30, 1994, net interest income
amounted to $396.7 million, an increase of $31.1 million from the $365.6
million reported for the same period in 1993. On a taxable equivalent basis,
net interest income rose to $429.9 million for such period from $404.1 million
for the same period in 1993. This rise is composed of a $64.4 million increase
due to the growth and change in the composition of average earning assets and a
$38.6 million decrease due to lower taxable equivalent net interest yields.
As presented in Table A, the yield on earning assets, on a taxable equivalent
basis, declined 37 basis points for the nine-month period ended September 30,
1994, from 8.42% in 1993 to 8.05%. The average cost of interest bearing
liabilities for the nine-month periods ended September 30, 1994 and 1993, was
3.60% and 3.48%, respectively. The net interest yield, on a taxable equivalent
basis, was 5.09% for the first nine months of 1994 compared with 5.57% for the
same period in 1993.
PROVISION AND ALLOWANCE FOR LOAN LOSSES
The Corporation's provision for loan losses was $13.5 million for the quarter
ended September 30, 1994, compared with $17.4 million for the same quarter of
1993, a reduction of $3.9 million or 22.3%. The provision for the second
quarter of 1994, was $14.0 million. For the nine-month period ended September
30, 1994, the provision for loan losses decreased $17 million or 29.1%, from
$58.2 million for the same period of 1993 to $41.2 million. The decrease in the
provision for loan losses is the result of the continuous improvement in loan
quality and a lower ratio of net charge-offs.
TABLE B
- - ---------------------------------------------------------------------------------------------
Provision for Net Allowance for
Quarter Ended Loan Losses Charge-offs Loan Losses
- - ---------------------------------------------------------------------------------------------
(In Millions)
September 30, 1994 $13.5 $10.5 $149.4
June 30, 1994 14.0 8.6 146.4
March 31, 1994 13.7 9.6 140.9
December 31, 1993 14.7 11.9 133.4
September 30, 1993 17.4 9.6 130.6
As presented in Table B, net charge-offs for the third quarter of 1994 totaled
$10.5 million or 0.57% of average loans, as compared with $9.6 million or 0.66%
for the same quarter of 1993 and $8.6 million or 0.49% for the second quarter
of 1994. Commercial loans net charge-offs increased $1.2 million as compared
with the third quarter of 1993, and mortgage loans net charge-offs rose $0.5
million. Partially offsetting these increases was a reduction of $0.9 million
in consumer loans net charge-offs.
For the nine-month period ended September 30, 1994, net charge- offs amounted
to $28.7 million, a decrease of $11.1 million as compared with the same period
on prior year when net charge-offs totaled $39.8 million. Net charge-offs as a
percentage of average loans were 0.55% and 0.96% for the nine- month periods
ended September 30, 1994 and 1993, respectively. Consumer loans net charge-
offs decreased $5.4 million or 37.7%. In addition, construction, lease
financing and commercial loans net charge-offs decreased $2.5 million, $2.1
million and $2.0 million, respectively, as compared with the first nine months
of 1993. Mortgage loans net charge-offs were $0.9 million for the first nine
months of 1994.
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At September 30, 1994, the allowance for loan losses stood at $149.4 million,
representing 1.99% of loans. At the same date of 1993 the allowance for loan
losses amounted to $130.6 million or 2.13% of loans. At June 30, 1994, the
allowance was $146.4 million or 2.03% of loans. Although the ratio of allowance
to loans shows a small decrease, the Corporation continues enjoying a strong
allowance position since most of the increase in loans has been experienced in
the mortgage loan portfolio where the Corporation, based on its historical
experience and expected economic conditions, does not foresee significant
losses.
Table C presents the movement in the allowance for loan losses and shows
selected loan loss statistics for the three and nine- month periods ended
September 30, 1994 and 1993.
TABLE C
ALLOWANCE FOR LOAN LOSSES AND SELECTED LOAN LOSSES STATISTICS
Third Quarter Year To Date
(Dollars in thousands) 1994 1993 1994 1993
- - --------------------------------------------------------------------------------------------------------------
Balance at beginning of period $146,418 $121,402 $133,437 $110,714
Allowances purchased 1,354 3,473 1,580
Provision for loan losses 13,544 17,442 41,244 58,155
-----------------------------------------------------------
159,962 140,198 178,154 170,449
-----------------------------------------------------------
Losses charged to the allowance
Commercial 7,952 6,438 21,363 22,735
Construction 85 285 2,925
Lease financing 1,871 1,321 5,229 6,294
Mortgage 549 887
Consumer 7,688 8,024 22,073 26,916
-----------------------------------------------------------
18,145 15,783 49,837 58,870
-----------------------------------------------------------
Recoveries
Commercial 1,732 1,454 5,043 4,448
Construction 27 58 258 402
Lease financing 1,248 647 2,703 1,652
Mortgage
Consumer 4,605 4,029 13,108 12,522
-----------------------------------------------------------
7,612 6,188 21,112 19,024
-----------------------------------------------------------
Net loans charged-off 10,533 9,595 28,725 39,846
-----------------------------------------------------------
Balance at end of period $149,429 $130,603 $149,429 $130,603
===========================================================
Ratios:
Allowance for losses to loans 1.99% 2.13% 1.99% 2.13%
Allowance to non-performing assets 126.67 95.02 126.67 95.02
Allowance to non-performing loans 146.92 112.29 146.92 112.29
Non-performing assets to loans 1.57 2.24 1.57 2.24
Non-performing assets to total assets 0.95 1.23 0.95 1.23
Net charge-offs to average loans 0.57 0.66 0.55 0.96
Provision to net charge-offs 1.29x 1.82x 1.44x 1.46x
Net charge-offs earnings coverage 5.50 5.65 5.84 3.81
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CREDIT QUALITY
The Corporation reports its non-performing assets on a more conservative basis
than most other U.S. banks. The Corporation's policy is to place commercial
loans on non-accrual status if payments of principal or interest are delinquent
60 days rather than the standard industry practice of 90 days. Financing
leases, conventional mortgages and closed-end consumer loans are placed on
non-accrual status if payments are delinquent 90 days. Closed-end consumer
loans are charged-off against the allowance when delinquent 120 days. Open-end
(revolving credit) consumer loans are charged-off if payments are delinquent
180 days. Certain loans which would be treated as non-accrual loans pursuant to
the foregoing policy, are treated as accruing loans if they are considered well
secured and in the process of collection. Under the standard industry practice,
close-end consumer loans are charged-off if delinquent 120 days, but these
consumer loans are not customarily placed on non-accrual status prior to being
charged-off.
TABLE D
- - -----------------------------------------------------------------------------------
NPA Allowance
as a % as a %
Date NPA of Loans of NPA
- - -----------------------------------------------------------------------------------
(In millions)
September 30, 1994 $118.0 1.57% 126.7%
June 30, 1994 115.9 1.60 126.4
March 31, 1994 117 .3 1 .72 120.2
December 31, 1993 111.2 1.75 120.0
September 30, 1993 137.5 2.24 95.0
As of September 30, 1994, non-performing assets ("NPA"), which consist of
past-due loans on which no interest income is being accrued, renegotiated
loans, other real estate and in substance foreclosed assets, amounted to $118.0
million or 1.57% of loans. NPA were $137.5 million or 2.24% of loans a year
earlier and $115.9 million or 1.60% at June 30, 1994. At the end of the first
quarter of 1994, NPA totaled $117.3 million or 1.72% of loans.
The decrease in non-performing assets of $19.5 million or 14.2% as compared
with September 30, 1993, was mainly in non-performing commercial and
construction loans, which declined $10.6 million due to improved collection
efforts of classified loans. In addition, non-performing consumer loans
decreased $6.3 million. On the other hand, non-performing mortgage loans
increased $2.5 million mainly due to the rise in the mortgage loan portfolio.
The Corporation was also able to reduce the other real estate owned by $4.6
million through successful efforts in the disposition of these properties.
Table D presents NPA for the current and previous four quarters.
Accruing loans which are contractually past due 90 days or more as to principal
or interest amounted to $13.7 million at September 30, 1994, compared with
$17.1 million at September 30, 1993, and $13.2 million at June 30, 1994.
Renegotiated loans at the end of this period amounted to $5.9 million of which
$0.6 million were in non-accrual status. All renegotiated loans are classified
as non-performing assets.
Assuming the standard industry practice of placing commercial loans on non
accrual status when payments are past due 90 days or more and excluding the
closed-end consumer loans from non-accruing loans, non-performing assets as of
September 30,
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1994, amounted to $90.1 million or 1.20% of total loans. At that date, the
allowance for loan losses as a percent of adjusted non-performing assets was
165.86%. These two ratios compare with 1.57% and 135.42% as of September 30,
1993, and 1.15% and 175.80% at June 30, 1994.
OTHER OPERATING INCOME
Other operating income, excluding securities and trading gains, amounted to
$36.5 million for the third quarter of 1994 compared with $30.0 million for the
same quarter of 1993. For the nine-month periods ended September 30, 1994 and
1993, these revenues were $104.3 million and $89.9 million, respectively.
Service charges on deposit accounts, which comprised approximately 51% of total
other operating income for the third quarter of 1994, rose to $18.4 million, an
increase of 5.9% over the $17.4 million reported for the same period last year.
This increase reflects the growth in the customer base due to the acquired
operations and the introduction of several new products and services.
For the nine-month periods ended September 30, 1994 and 1993, service charges
on deposit accounts totaled $53.6 million and $50.7 million, respectively, an
increase of $2.9 million.
Other service charges for the third quarter of 1994 were $14.0 million, an
increase of 30.5% from the $10.7 million reported for the same period in 1993.
Credit card fees, credit life insurance fees and other fees collected on new
services accounted for $2.1 million of the total increase. In addition, other
service fees increased $0.8 million in Spring as a result of the gain on sale
of mortgage loans and an increase in servicing activities.
Other operating income rose to $4.1 million for the third quarter of 1994, an
increase of $2.2 million over the $1.9 million reported for the same period in
1993. During the third quarter of 1993 a downward adjustment of $1.2 million
was recorded in the market value of the excess servicing recognized by Banco
Popular on the sale of $86 million on mortgage loans through a grantor trust on
June 30, 1992. This adjustment was necessary due to the higher than expected
mortgage prepayments as a result of the declining interest rate scenario that
prevailed in 1993.
OPERATING EXPENSES
Operating expenses for the third quarter of 1994 increased to $114.6 million or
12.9%, as compared with $101.4 million for the third quarter of 1993. For the
first nine months of 1994, operating expenses totaled $333.6 million compared
with $304.8 million for the same period of 1993.
Personnel costs represent the largest category of operating expenses. These
costs increased $5.7 million or 10.8% in the third quarter of 1994 from $52.2
million a year earlier. Included in the personnel expenses for this quarter are
$1.2 million pertaining to the operations of Pioneer and $1.4 million of the
operations acquired in the Virgin Islands in the last quarter of 1993. Salary
expense increased $3.0 million from the $38.0 million reported for the quarter
ended September 30, 1993 due to merit increases and business expansion. At
September 30, 1994, full-time equivalent employees (F.T.E.) totaled 7,542
versus 7,149 a year earlier. The
20
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increase of 393 F.T.E. results principally from the business expansion of
Spring and the acquired operations, as previously mentioned. Profit sharing
expense rose $0.7 million as a result of the higher salary base.
Personnel costs for the nine-month period ended September 30, 1994 grew 4.7%
from the $162.5 million recorded for the same period a year earlier.
Pension and other benefits account for $1.9 million of the total increase in
personnel costs for the quarter. This is a result of an accrual of $1.5 million
recorded this quarter for post-retirement benefits as required by SFAS 106,
compared with the recognition during the first quarter of 1993 of the full year
expense.
All other operating expenses, excluding personnel costs, increased $7.5
million, or 15.1%, from $49.2 million in the third quarter of 1993 to $56.7
million in 1994. The acquired operations account for approximately $2.6 million
of the total increase. Areas such as equipment expenses, professional fees, and
communications reflected an increase related to the expanded usage of
technological advances in order to provide a broader variety of products and
services to customers. Also, business promotion increased as a result of the
efforts to introduce the new services.
For the nine months ended September 30, 1994, other operating expenses amounted
to $163.5 million, an increase of $21.1 million from the $142.4 million
reported for the same period in 1993. The increase is primarily reflected in
the same items mentioned above.
Income tax expense for the quarter ended September 30, 1994, reached $12.7
million compared with $8.5 million for the same quarter in 1993. Income tax
expense for the nine-month period ended September 30, 1994, increased to $34.1
million, $15.8 million higher than the $18.3 million reported during the same
period in 1993. This increase is primarily related to higher levels of pre-tax
income and to a lower ratio of tax exempt assets, principally resulting from
the increase in the loan portfolio.
BALANCE SHEET COMMENTS
At September 30, 1994, total assets were $12.4 billion, including $11.6 billion
of interest earning assets. Comparable amounts a year earlier were $11.2
billion and $10.3 billion, respectively. Average total assets for the
nine-month period ended September 30, 1994 were $12.1 billion compared with
$10.5 billion for the same period in 1993.
Total loans at September 30, 1994, amounted to $7.5 billion compared with $6.1
billion a year ago. The mortgage loan portfolio reflected 46.5% of the total
increase in loans due to the significant mortgage loan origination and
refinancing activity during 1993 and the beginning of 1994 in Banco Popular and
Spring. The commercial loan portfolio also showed an increase of $560.8 million
due to the overall improvement in the economic environment. Consumer loans
increased $175.1 million or 9.48% while financing leases rose $83.4 million or
23.3% during the period. Included in the total loan portfolio at September 30,
1994 are $226.9 million in loans of Pioneer.
Investment securities as of September 30, 1994, totaled $3.9 billion compared
with $4.0 billion as of September 30, 1993. These figures include $724.5
million in investment securities available for sale as of September 30, 1994
and $559.3 million
21
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as of September 30, 1993. These securities are currently carried at market
value under the provisions of SFAS 115 and were carried at the lower of cost or
market in 1993.
Total deposits were $8.9 billion at September 30,1994, compared with $8.3
billion at the same date of 1993. This increase was mainly due to the deposits
acquired in the Pioneer transaction which amounted to $292.7 million.
Borrowings increased $476 million as compared with the prior year. This rise is
mainly due to an increase of $226.7 million in securities under agreements to
repurchase due to arbitrage opportunities, and an increase of $186.5 million in
the medium-term notes issued by BanPonce Financial to finance Spring's
operations.
Subordinated notes decreased to $50 million from the $74 million outstanding a
year ago, due to the prepayment in December of 1993 of a 7.95% note due in 1994
and the prepayment in July of 1994 of a 8.50% note due in 1996. Also, the $11
million in preferred stock of Banco Popular were redeemed at par value on June
30, 1994.
Stockholders' equity at September 30, 1994, amounted to $988.9 million,
compared with $813.5 million at September 30, 1993. The increase is mainly due
to the issuance on June 27, 1994 of 4,000,000 shares of non-cumulative
preferred stock which raised $96.7 million in additional capital and to
earnings' retention. The Corporation's stockholders' equity at September 30,
1994 includes an allowance of $9.8 million, net of taxes, in unrealized holding
losses on securities available for sale, as required by SFAS 115 "Accounting
for Certain Investments in Debt and Equity Securities'.
Book value per common share increased to $27.09 as of September 30, 1994,
compared with $24.87 as of the same date last year. The market value of the
Corporation's common stock also rose to $33.125 at September 30, 1994 from
$29.75 a year before. The Corporation's Tier 1, total capital and leverage
ratios at September 30, 1994 were 12.90%, 14.31% and 7.56%, respectively, as
compared with 12.38%, 14.09% and 7.06% at September 30, 1993. Capital ratios
remain well in excess of minimum regulatory requirements.
22
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Part II - Other Information
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibit No. Description Exhibit Reference
-------------- ------------------- ---------
19 Quarterly Report to shareholders for the Exhibit "A"
period ended September 30, 1994.
27 Financial Data Schedule Exhibit "B"
b) One report on Form 8-K was filed for the three months ended September
30, 1994:
Dated: August 4, 1994
Item reported: Item 7 - Financial Statements and Exhibits (for SEC
purposes only)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be filed on its behalf
by the undersigned duly authorized.
BANPONCE CORPORATION
--------------------
(Registrant)
Date: 11/11/94 By: /s/ David H. Chafey, Jr.
------------ ---------------------------
David H. Chafey, Jr.
Executive Vice President
Date: 11/11/94 By: /s/ Orlando Berges
------------ ---------------------------
Orlando Berges
Senior Vice President
& Comptroller