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[POPULAR, INC. LOGO]
3rd
Quarter Report
September 30, 1998
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POPULAR, INC. 3RD QUARTER REPORT
SEPTEMBER 30, 1998
TO OUR STOCKHOLDERS
Popular, Inc. reflected earnings of $57.6 million for the third quarter
of 1998, compared with $53.6 million for the same period in 1997, for an
increase of $4.0 million or 7.4%. Earnings per common share (EPS) for the
quarter ended September 30, 1998, were $0.41, compared with $0.38 for the third
quarter of 1997. The performance measures of return on assets (ROA) and return
on common equity (ROE) amounted to 1.12% and 14.94%, respectively, for the third
quarter of 1998, from 1.10% and 15.46% for the same period a year earlier.
For the first nine months of 1998, net income was $169.8 million or
$1.21 per common share, up 10.1% from the $154.2 million or $1.11 per common
share for the first nine months of 1997. For the first nine months of this year,
ROA was 1.14% and ROE was 15.26%, compared with 1.15% and 15.93% for the same
period in 1997.
Net interest income rose $12.0 million for the quarter ended September
30, 1998, when compared with the same quarter last year, as a result of
sustained growth in the average volume of earning assets, partially offset by a
lower yield on earning assets. In addition, other income grew $7.9 million led
by a gain realized on the sale of equity securities, a rise in other service
fees coupled with an increase in service charges on deposit accounts, as a
result of the Corporation's continued emphasis on diversifying sources of
non-interest income.
The provision for loan losses rose $4.8 million, principally resulting
from the growth in the loan portfolio and the rise in non-performing assets. The
allowance for loan losses at September 30, 1998, amounted to $245 million,
representing 1.98% of loans, compared with $205 million or 1.83% of loans at the
same date in 1997.
Operating expenses for the three-month period ended September 30, 1998,
totaled $178.6 million compared with $167.3 million for the same quarter a year
earlier. The expansion of the Corporation's business activities, the
implementation of strategic initiatives and the use of technology to further
enhance customer convenience were some of the driving factors that resulted in
higher operating expenses.
The Corporation's total assets at September 30, 1998, were $21.3
billion compared with $19.9 billion at the same date in 1997 and $20.0 billion
as of June 30, 1998. Total loans reached $12.4 billion while total deposits were
$12.5 billion. The Corporation's capital increased to $1.70 billion at September
30, 1998, compared with $1.45 billion a year earlier. At September 30, 1998, the
market value of the Corporation's common stock amounted to $28.38.
On August 13, 1998, the Board of Directors of Popular, Inc. declared a
cash dividend of $0.14 per common share for the third quarter of 1998. This
represents a 27.3% increase over the $0.11 per share paid in previous quarterly
cash dividends (after adjusting for the stock split effective on July 1, 1998).
The dividend was paid on October 1, 1998, to shareholders of record on September
11, 1998.
In August, Banco Popular de Puerto Rico became the first bank in Puerto
Rico to launch the new American Express credit card. In addition to providing
revolving credit facilities, this new card will provide its holders access to
over 190,000 automatic teller machines (ATM) that are part of the American
Express worldwide ATM network and ATH network of Banco Popular, participation in
the American Express Retail Protection and Travel Accident Insurance Programs,
among others.
On September 21, 1998, Hurricane Georges struck the island of Puerto
Rico, the Corporation's principal place of business. Economists estimate
infrastructure and personal property losses to be about $3.8 billion, whereas
the loss of production due to the lack of electricity, water and communications
could reach $3.1 billion. In 1994, Banco Popular de Puerto Rico established a
bankwide Disaster Recovery Plan that proved its effectiveness with Georges.
Notwithstanding the impact this hurricane had on Puerto Rico, 86% of the branch
network was fully operational seven days after the hurricane, and the operations
of both the ATH network and the bank's electronic data center were never
interrupted.
On September 30, 1998, Popular, Inc. became the principal shareholder
of Banco Gerencial & Fiduciario (BGF) with the acquisition of 45% in newly
issued stock. BGF is the fourth largest bank in the Dominican Republic, with
$496 million in total assets and $320 million in total deposits.
During this quarter, we continued investing in our franchise as the
Corporation signed an agreement to acquire First State Bank of Southern
California. First State, with $180 million in assets and over $155 million in
deposits, has five branches located in Santa Fe Springs, Paramount, Lynwood and
Los Angeles. Also, the Corporation signed an agreement to acquire Gore-Bronson
Bancorp (GBB), and its subsidiaries Bronson-Gore
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POPULAR, INC. 3RD QUARTER REPORT
SEPTEMBER 30, 1998
Bank, Irving Bank, and Water Tower Bank with assets of $250 million and deposits
of over $220 million. This corporation specializes in asset-based lending and
operates five branches in the Greater Chicago Metropolitan Area.
In addition, Popular Cash Express (PCE) is in the process of acquiring
Inglewood Quik Check, Inc., a corporation that handles eight check-cashing
locations and 27 mobile check-cashing operations in California. Also, PCE will
acquire Houston Check-Cashers, Inc., and The Telephone Center, located in Texas
and Florida, respectively.
All of these acquisitions have received the approval from the
regulatory agencies and are expected to close during the last quarter of 1998.
Furthermore, focusing on our objective of becoming the number one bank
for the Hispanics in the United States, the Corporation continues its plan of
corporate reorganization for its U.S. banking subsidiaries. The objective of
this reorganization is to consolidate all banking operations within the U.S.
mainland into one legal entity with corporate offices in Chicago and regional
offices in Florida, California, New York, New Jersey, and Illinois. This new
structure will facilitate the communication and geographic expansion while at
the same time reduce costs, provide more flexibility and efficiency to the
Corporation.
The Corporation is aggressively addressing the operating challenges
imposed by the "Year 2000". We have been actively engaged in modifying,
converting and testing our computer systems as well as working with customers
and business partners to ascertain their progress toward Year 2000 compliance.
Our projection is to have all mission critical items Year 2000 ready and
implemented by June 30, 1999.
/s/ Richard L. Carrion
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Richard L. Carrion
Chairman, President and
Chief Executive Officer
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POPULAR, INC. 3RD QUARTER REPORT
SEPTEMBER 30, 1998
Financial Highlights
BALANCE SHEET HIGHLIGHTS AT SEPTEMBER 30, AVERAGE FOR THE NINE MONTHS
(In thousands) 1998 1997 Change 1998 1997 Change
Money market investments $ 823,396 $ 475,412 $ 347,984 $ 747,358 $ 644,595 $ 102,763
Investment and trading securities 6,734,621 6,923,609 (188,988) 6,359,326 6,001,053 358,273
Loans 12,362,527 11,182,061 1,180,466 11,671,654 10,329,862 1,341,792
Total assets 21,273,593 19,896,785 1,376,808 19,924,608 17,972,201 1,952,407
Deposits 12,547,778 11,214,167 1,333,611 12,028,881 10,808,220 1,220,661
Borrowings 6,590,229 6,902,566 (312,337 5,892,423 5,640,541 251,882
Stockholders' equity 1,696,891 1,449,780 247,111 1,533,104 1,341,984 191,120
OPERATING HIGHLIGHTS
(In thousands, except per share information)
THIRD QUARTER NINE MONTHS
1998 1997 Change 1998 1997 Change
Net interest income $215,041 $203,005 $12,036 $642,137 $574,255 $67,882
Provision for loan losses 34,667 29,849 4,818 101,756 78,949 22,807
Fees and other income 74,221 66,309 7,912 215,058 176,791 38,267
Other expenses 197,015 185,852 11,163 585,603 517,854 67,749
Net income $ 57,580 $ 53,613 $ 3,967 $169,836 $154,243 $15,593
Net income applicable to common stock $ 55,493 $ 51,526 $ 3,967 $163,574 $147,981 $15,593
Earnings per common share 0.41 0.38 0.03 1.21 1.11 0.10
SELECTED STATISTICAL
INFORMATION THIRD QUARTER NINE MONTHS
1998 1997 1998 1997
COMMON STOCK DATA -Market price
High $ 36.75 $ 27.94 $ 36.75 $ 27.94
Low 28.00 20.57 23.03 16.53
End 28.38 26.50 28.38 26.50
Book value at period end 11.80 9.98 11.80 9.98
Dividends declared 0.14 0.11 0.36 0.29
Dividend payout ratio 26.86% 23.30% 27.32% 24.19%
Price/earnings ratio 17.74x 18.21x 17.74x 18.21x
PROFITABILITY RATIOS
Return on assets 1.12% 1.10% 1.14% 1.15%
Return on common equity 14.94 15.46 15.26 15.93
Net interest spread (taxable equivalent) 3.89 4.02 4.03 4.06
Net interest yield (taxable equivalent) 4.77 4.72 4.92 4.85
Effective tax rate 24.21 25.67 25.96 26.75
Overhead ratio 48.55 49.77 48.43 49.58
CAPITALIZATION RATIOS
Equity to assets 7.73% 7.35% 7.69% 7.47%
Tangible equity to assets 6.72 6.23 6.64 6.60
Equity to loans 13.19 12.89 13.14 12.99
Internal capital generation 9.28 10.31 9.98 10.85
Tier I capital to risk-adjusted assets 12.06 12.06 12.06 12.06
Total capital to risk-adjusted assets 14.42 14.47 14.42 14.47
Leverage ratio 7.37 6.88 7.37 6.88
CREDIT QUALITY RATIOS
Allowance for losses to loans 1.98% 1.83% 1.98% 1.83%
Allowance to non-performing assets 87.17 96.38 87.17 96.38
Allowance to non-performing loans 95.94 102.15 95.94 102.15
Non-performing assets to loans 2.28 1.90 2.28 1.90
Non-performing assets to total assets 1.32 1.07 1.32 1.07
Net charge-offs to average loans 0.93 1.14 0.94 0.93
Provision to net charge-offs 1.25x 0.95x 1.24x 1.09x
Net charge-offs earnings coverage 4.00 3.24 4.02 4.01
NOTE: All common stock data has been adjusted to reflect the stock split
effected in the form of a dividend on July 1, 1998.
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POPULAR, INC. 3RD QUARTER REPORT
SEPTEMBER 30, 1998
Consolidated Statements of Condition
September 30,
(In thousands) 1998 1997
- ---------------------------------------------------------------------------------------------------------------------
ASSETS
Cash and due from banks ..................................................... $ 543,565 $ 530,915
Money market investments:
Federal funds sold and securities and mortgages
purchased under agreements to resell ........................................ 720,511 467,285
Time deposits with other banks .............................................. 102,525 5,256
Bankers' acceptances ........................................................ 360 2,871
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823,396 475,412
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Investment securities available-for-sale,
at market value ..................................................... 6,228,354 5,869,770
Investment securities held-to-maturity, at cost ............................. 253,138 829,105
Trading account securities, at market value ................................. 253,129 224,734
Loans held-for-sale ......................................................... 495,241 238,991
Loans ....................................................................... 12,217,822 11,287,080
Less--Unearned income ............................................... 350,536 344,010
Allowance for loan losses ...................................... 245,382 205,077
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$ 11,621,904 10,737,993
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Premises and equipment ..................................................... 408,919 390,905
Other real estate .......................................................... 25,743 12,014
Customers' liabilities on acceptances ...................................... 16,288 3,005
Accrued income receivable .................................................. 141,184 144,769
Other assets ............................................................... 242,472 212,070
Intangible assets .......................................................... 220,260 227,102
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$ 21,273,593 $ 19,896,785
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LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Non-interest bearing .................................................... $ 2,665,528 $ 2,293,394
Interest bearing ........................................................ 9,882,250 8,920,773
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12,547,778 11,214,167
Federal funds purchased and securities sold
under agreements to repurchase ........................................ 3,469,382 3,897,110
Other short-term borrowings ............................................. 1,515,037 1,294,693
Notes payable ........................................................... 1,330,809 1,435,763
Acceptances outstanding ................................................. 16,288 3,005
Other liabilities ....................................................... 391,799 327,267
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19,271,093 18,172,005
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Subordinated notes ...................................................... 125,000 125,000
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Preferred beneficial interests in Popular North America's junior
subordinated deferrable interest debentures guaranteed by the
Corporation .......................................................... 150,000 150,000
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Minority interest in consolidated subsidiary ............................ 30,609
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Stockholders' equity:
Preferred stock ........................................................ 100,000 100,000
Common stock ........................................................... 825,200 411,870
Surplus ................................................................ 194,033 580,806
Retained earnings ...................................................... 510,046 376,908
Treasury stock, at cost ................................................ (39,560) (39,560)
Unrealized gains on securities available-for-sale, net of
deferred taxes ....................................................... 107,172 19,756
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1,696,891 1,449,780
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$ 21,273,593 $ 19,896,785
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POPULAR, INC. 3RD QUARTER REPORT
SEPTEMBER 30, 1998
Consolidated Statements of Income
Quarter ended Nine Months ended
September 30, September 30,
(Dollars in thousands, except per share information) 1998 1997 1998 1997
- --------------------------------------------------------------------------------------------------------------------------
INTEREST INCOME:
Loans ............................................. $ 302,403 $ 283,139 $ 892,096 $ 790,296
Money market investments .......................... 9,566 8,237 27,585 25,619
Investment securities ............................. 93,977 97,522 277,413 257,279
Trading account securities ........................ 4,875 4,516 12,960 13,490
----------------------------------------------------------
410,821 393,414 1,210,054 1,086,684
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INTEREST EXPENSE:
Deposits .......................................... 101,239 95,594 300,346 268,881
Short-term borrowings ............................. 66,611 66,117 181,189 169,888
Long-term debt .................................... 27,930 28,698 86,382 73,660
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195,780 190,409 567,917 512,429
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Net interest income ............................... 215,041 203,005 642,137 574,255
Provision for loan losses ......................... 34,667 29,849 101,756 78,949
----------------------------------------------------------
Net interest income after provision for loan losses 180,374 173,156 540,381 495,306
Service charges on deposit accounts ............... 26,344 24,378 77,176 68,411
Other service fees ................................ 28,557 25,252 83,548 72,206
Gain on sale of securities ........................ 4,553 519 8,469 145
Trading account profit ............................ 506 959 2,486 2,209
Other operating income ............................ 14,261 15,201 43,379 33,820
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254,595 239,465 755,439 672,097
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OPERATING EXPENSES:
Personnel costs:
Salaries ........................................ 61,267 55,566 180,183 154,255
Profit sharing .................................. 5,618 6,164 17,565 19,392
Pension and other benefits ...................... 17,433 17,806 52,621 51,813
----------------------------------------------------------
84,318 79,536 250,369 225,460
Net occupancy expenses ............................ 12,260 10,362 35,558 28,107
Equipment expenses ................................ 18,533 16,976 55,042 48,604
Other taxes ....................................... 8,035 8,215 23,902 21,971
Professional fees ................................. 14,218 11,900 40,912 32,726
Communications .................................... 9,444 8,743 27,462 24,074
Business promotion ................................ 9,751 9,831 26,884 23,768
Printing and supplies ............................. 4,490 3,984 12,908 10,755
Other operating expenses .......................... 10,679 10,984 32,483 29,958
Amortization of intangibles ....................... 6,890 6,810 20,523 16,089
----------------------------------------------------------
178,618 167,341 526,043 461,512
----------------------------------------------------------
Income before taxes ............................... 75,977 72,124 229,396 210,585
Income tax ........................................ 18,397 18,511 59,560 56,342
----------------------------------------------------------
NET INCOME ............................................... $ 57,580 $ 53,613 $ 169,836 $ 154,243
==========================================================
NET INCOME APPLICABLE TO COMMON STOCK .................... $ 55,493 $ 51,526 $ 163,574 $ 147,981
==========================================================
EARNINGS PER COMMON SHARE ................................ $ 0.41 $ 0.38 $ 1.21 $ 1.11
==========================================================
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POPULAR, INC. 3RD QUARTER REPORT
SEPTEMBER 30, 1998
Subsidiaries
CENTRAL OFFICE
Popular Center
209 Munoz Rivera Avenue
San Juan, Puerto Rico 00918
Telephone: (787) 765-9800
ATH COSTA RICA
Cond. en Oficinas Ofiplaza del Este
Edif. D- Piso 1, San Pedro
150 metros Oeste de la
Rotonda de la Bandera
San Jose, Costa Rica
Telephone: (011) 506-280-9796
BANCO POPULAR DE PUERTO RICO
PUERTO RICO OFFICE
Popular Center
209 Munoz Rivera Avenue
San Juan, Puerto Rico 00918
Telephone: (787) 765-9800
NEW YORK OFFICE
7 West 51st St.
New York, N.Y. 10019
Telephone: (212) 315-2800
VIRGIN ISLANDS OFFICE
80 Kronprindsens Gade
Kronprindsens Quarter
Charlotte Amalie, St. Thomas
U.S. Virgin Islands 00802
Telephone: (809) 774-2300
BANCO POPULAR, FSB
500 Bloomfield Avenue
Newark, New Jersey 07107
Telephone: (201) 484-6525
BANCO POPULAR, ILLINOIS
4000 West North Avenue
Chicago, Illinois 60639
Telephone: (773) 772-8600
BANCO POPULAR, N.A. (CALIFORNIA)
6001 E. Washington Blvd.
City of Commerce
California 9004
Telephone: (213) 724-8800
BANCO POPULAR, N.A. (FLORIDA)
5551 Vanguard Street
Suite 100
Orlando, Florida 32819
Telephone: (407) 370-8000
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POPULAR, INC. 3RD QUARTER REPORT
SEPTEMBER 30, 1998
BANCO POPULAR, N.A. (TEXAS)
9600 Long Point #300
Houston, Texas 77055
Telephone: (713) 463-2400
EQUITY ONE, INC.
523 Fellowship Road, Suite 220
Mt. Laurel, New Jersey 08054
Telephone: (609) 273-1119
METROPOLITANA DE PRESTAMOS, INC.
Carr. #2 Km. 6.8
Villa Caparra
Guaynabo, Puerto Rico 00966
Telephone: (787) 792-9292
POPULAR FINANCE, INC.
10 Salud Street
El Senorial Condominium
Suite 613
Ponce, Puerto Rico 00731
Telephone: (787) 844-2860
POPULAR MORTGAGE, INC.
268 Ponce de Leon Avenue
San Juan, Puerto Rico 00918
Telephone: (787) 753-0245
POPULAR LEASING & RENTAL, INC.
M-1046 Federico Costa St.
Tres Monjitas Industrial
Development
San Juan, Puerto Rico 00903
Telephone: (787) 751-4848
POPULAR SECURITIES INCORPORATED
Popular Center
Suite 1020
San Juan, Puerto Rico 00918
Telephone: (787) 766-4200
POPULAR CASH EXPRESS
6200 North Hiawatha
Suite 200
Chicago, Illinois 60646
Telephone: (773) 205-8300
BANCO GERENCIAL & FIDUCIARIO
27 de febrero Ave. #50
Santo Domingo
Republica Dominicana
Telephone: (809) 473-9400
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POPULAR, INC. 3RD QUARTER REPORT
SEPTEMBER 30, 1998
Additional Information
BOARD OF DIRECTORS
Richard L. Carrion, Chairman
Alfonso F. Ballester, Vice Chairman
Antonio Luis Ferre, Vice Chairman
Juan A. Albors Hernandez *
Salustiano Alvarez Mendez *
Jose A. Bechara Bravo *
Juan J. Bermudez
Esteban D. Bird *
Francisco J. Carreras
David H. Chafey Jr.
Luis E. Dubon Jr.
Hector R. Gonzalez
Jorge A. Junquera Diez
Manuel Morales Jr.
Alberto M. Paracchini
Francisco M. Rexach Jr.
J. Adalberto Roig Jr.
Felix J. Serralles Nevares
Julio E. Vizcarrondo Jr.
Samuel T. Cespedes, Secretary
* Director of Banco Popular de Puerto Rico only
EXECUTIVE OFFICERS
Richard L. Carrion, Chairman of the Board,
President and Chief Executive Officer
David H. Chafey Jr., Senior Executive Vice President
Jorge A. Junquera Diez, Senior Executive Vice President
Maria Isabel P. de Burckhart, Executive Vice President
Roberto R. Herencia, Executive Vice President
Larry B. Kesler, Executive Vice President
Humberto Martin, Executive Vice President
Emilio E. Pinero, Executive Vice President
Carlos Rom Jr., Executive Vice President
Carlos J. Vazquez, Executive Vice President
SHAREHOLDER INFORMATION
SHAREHOLDER ASSISTANCE - Shareholders requiring a change of address,
records or information about lost certificates, dividend checks or dividend
reinvestment should contact:
Banco Popular de Puerto Rico
Trust Division (725)
Popular Center Building
4th Floor Suite 400
209 Munoz Rivera Ave.
Hato Rey, Puerto Rico 00918
PUBLICATIONS - For printed material (annual and quarterly reports, 10-K and
10-Q reports), contact Mr. Amilcar L. Jordan at the Comptroller's Division
at (787) 765-9800 ext. 6101, or VISIT OUR WEBSITE AT
HTTP://WWW.POPULARINC.COM.
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POPULAR, INC. 3RD QUARTER REPORT
SEPTEMBER 30, 1998
DIVIDEND REINVESTMENT PLAN - The Corporation has a dividend reinvestment
plan that provides the shareholder a simple, convenient and cost-effective
way to acquire Popular, Inc. common stock.
- Dividends can be automatically reinvested in additional shares at 95%
of the Average Market Price.
- Participants may make optional cash payments of at least $25 and not
more than $10,000 per calendar month for investment in additional
shares.
- No brokerage commissions are charged on purchases under this plan.
- Participant's funds will be fully invested, because the plan permits
fractions of shares to be credited to a participant's account.
If you would like more information on this plan, please contact our Trust
Division at (787) 756-3908, (787) 765-9800 ext. 5637, 5525 and 5897.
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