1
EXHIBIT 99(a)
Popular, Inc.
[LOGO] POPULAR INC. PO BOX 362708
For additional information contact: SAN JUAN, PUERTO RICO 00936-2708
Mr. Jorge A. Junquera TEL.(787) 765-9800
Senior Executive Vice President
(787) 754-1685
January 11, 1999 NEWS RELEASE
POPULAR, INC. EARNINGS FOR THE QUARTER AND YEAR ENDED DECEMBER 31, 1998
Popular, Inc. (the Corporation) reported net income of $232.3 million
for the year ended December 31, 1998, an increase of $22.7 million or 10.9% over
the net income of $209.6 million obtained in 1997. Earnings per common share
(FPS) for the year were $1.65, based on 135,532,086 average shares outstanding,
compared with $1.50 for 1997, based on 134,036,964 average shares outstanding.
The net income for 1998 represented a return on assets (ROA) of 1.14% and a
return on common equity (ROE) of 15.41%. In 1997, the Corporation reported ROA
and ROE of 1.14% and 15.83%, respectively.
Net earnings for the last quarter of 1998 reached $62.5 million or
$0.44 per common share, based on 135,637,327 average shares outstanding,
compared with $57.6 million or $0.41 per common share for the third quarter of
1998, based on 135,555,652 average shares outstanding. Net earnings for the
fourth quarter of 1997, totaled $55.3 million or $0.39 per common on share,
based on 135,365,408 average shares outstanding. The results for the fourth
quarter of 1998 represented a ROA of 1.13% and a ROE of 15.84%, compared with
1.11% and 15.56%, respectively, for the same period in 1997. For the third
quarter of 1998 these ratios were 1.12% and 14.94%.
The Corporation's results of operations for the quarter ended December
31, 1998, reflected an increase of $21.2 million in net interest income, an
increase of $5.4 million in other revenues, and a decrease of $3.0 million in
income taxes when compared with the quarter ended on December 31, 1997. These
positive variances were partially offset by increases of $18.9 million in
operating expenses and $3.8 million in the provision for loan losses.
The earnings performance for the year ended on December 31, 1998, when
compared with 1997, reflects a growth of $89.1 million in net interest income
along with an improvement of $43.6 million in noninterest revenues, tempered by
a rise of $83.4 million in operating expenses and $26.6 million in the provision
for loan losses.
2
2-POPULAR, INC. 1998 FOURTH QUARTER RESULTS
The rise in net interest income resulted mainly from the growth of $1.9
billion in the average volume of earnings assets driven primarily by a $1.4
billion increase in the loan portfolio, particularly commercial loans, together
with an increase of $516 million in investment and money market securities. The
yield on earning assets for 1998 was 8.56% compared with 8.57% in 1997. The
average cost of interest bearing liabilities rose 8 basis points. The net
interest yield for the year ended December 31, 1998, was 4.52% compared with
4.51% for 1997. The net interest yield for the last quarter of 1998, was 4.44%
compared with 4.45% for the quarter ended September 30, 1998.
The provision for loan losses rose to $137.2 million for the year ended
December 31, 1998, compared with $110.6 million a year earlier. The increase in
the provision, which is in line with the rises in the loan portfolio,
delinquency levels and net charge-offs, was considered necessary to maintain the
adequacy of the allowance for loan losses to absorb potential write-offs in the
portfolio. Net charge-offs for the year ended December 31, 1998, were $112.9
million or 0.95% of average loans, compared with $97.8 million or 0.93% of
average loans for 1997. The increase in net charge-offs was mostly reflected in
the consumer loan portfolio.
Total non-interest income, including securities and trading gains,
amounted to $291.2 million for 1998, compared with $247.6 million a year
earlier, resulting in an increase of 17.6%. This increase was fueled by a rise
of $17.9 million in other service fees, $9.7 million in other operating income
and $9.6 million in service charges on deposit accounts. The rise in other
service fees is primarily attributable to higher credit card fees and debit card
fees principally as a result of the growing volume of point-of-sale (POS)
terminals and transactions, and fees earned by the Corporation's check cashing
subsidiary in the U.S. mainland. Also, fees related to the sale and
administration of investment products rose $2.4 million driven by the
performance of the retail brokerage division of Popular Securities. The increase
in other income mainly resulted from the recording during 1997 of a loss of $3.6
million in the sale of a real estate asset. In addition, nonrecurring income of
$1.7 million was recorded during 1998 as the Corporation recovered most of its
investment in stock of Citizens Bank of Jamaica which was written down during
1997. There were also increases in gains on sale of mortgage loans and in
underwriting fees. Service charges on deposit accounts reflected a higher volume
of deposits and services offered to commercial accounts.
3
3-POPULAR, INC. 1998 FOURTH QUARTER RESULTS
The gains on sale of investment securities available-for-sale for 1998
amounted to $8.9 million, compared with $2.3 million for 1997. Trading profits
totaled $3.7 million in 1998 compared with $3.9 million the year before.
Operating expenses for 1998 reached $720.3 million, compared with
$636.9 million in 1997. This increase was largely reflected in the personnel
costs category, which grew $30.5 million, principally resulting from increased
employment levels due to acquired operations and growth.
Other operating expenses rose $52.9 million reaching $382.9.million for
1998, compared with $330.0 million in 1997. The rise in other operating expenses
was primarily in professional fees, net occupancy and equipment expenses.
Professional fees rose $11.3 million reflecting higher legal, consulting and
technical support fees for business expansion and costs incurred in relation to
the Corporation's action plan to address the Year 2000 issue. Net occupancy
expense grew $9.0 million, principally due to the sale of the income-producing
real property previously mentioned and the Corporation's growth and expansion.
The increase in equipment expenses of $8.9 million mainly resulted from the
growth of the Corporation's business activity and geographical expansion, and
expenses related to the Year 2000 issue.
Income tax expense remained flat with 1997, notwithstanding the
increase in pre-tax earnings, due to a higher amount of tax-exempt revenues and
to the reversal of a valuation allowance on deferred taxes that became
realizable during the year.
The Corporation's total assets at December 31, 1998, amounted to $23.2
billion, compared with $19.3 billion at December 31, 1997 and $21.3 billion at
September 30, 1998. Most of the growth relates to the acquisitions completed
during 1998, and the Corporation's continued business expansion.
Total loans amounted to $13.1 billion at December 31, 1998, compared
with $11.4 billion a year ago. Commercial loans reflected the largest growth,
followed by mortgage loans. The banks acquired after December 31, 1997,
contributed with $473 million to the increase in the Corporation's commercial
loan portfolio.
The allowance for loan losses amounted to $271 million as of December
31, 1998, or 2.08% of loans and 93.1% of non-performing assets, compared with
$212 million or 1.86% and 99.6%,
4
4-POPULAR, INC. 1998 FOURTH QUARTER RESULTS
respectively, at the same date in 1997. At September 30, 1998, the allowance for
loan losses amounted to $245 million or 1.98% of loans and 87.2% of
non-performing assets.
Non-performing assets were $291 million or 2.23% of loans at December
31, 1998, compared with $212 million or 1.87%, at the same date in 1997 and $282
million or 2.28% at September 30, 1998. The increase of $79 million from
December 31, 1997, was mostly reflected in non-performing commercial, consumer
and mortgage loans resulting from the growth in portfolios and higher levels in
bankruptcy filings, and the inclusion of $38 million in non-performing assets of
the subsidiary bank acquired in the Dominican Republic. The Corporation's policy
is to place commercial loans on non-accrual status when payments of principal or
interest are delinquent 60 days. The industry practice for most U.S. banks is to
place commercial loans in non-accrual status when payments of principal or
interests are delinquent 90 days. Lease financing, conventional mortgage and
close-end consumer loans are placed on non-accrual status when payments are
delinquent 90 days.
Total deposits were $13.7 billion at December 31, 1998, compared with
$11.7 billion at December 31, 1997. At the end of 1998, the Corporation had
deposits of $9.4 billion in Puerto Rico, $3.5 billion in the United States, $0.5
billion in the U.S. and British Virgin Islands, and $0.3 billion in the
Dominican Republic.
Borrowed funds increased to $7.3 billion at December 31, 1998, compared
with $5.7 billion at the same date a year earlier. At September 30, 1998,
borrowed funds totaled $6.6 billion. Borrowed funds were used primarily to
finance loan growth and arbitrage activities.
At December 31, 1998, stockholders' equity was $1.71 billion, compared
with $1.50 billion at December 31, 1997. Stockholders' equity was $1.70 billion
at September 30, 1998. The allowance for unrealized gains on securities
available-for-sale, net of deferred taxes, amounted to $75.9 million at December
31, 1998, compared with $33.3 million a year ago.
The market value of the Corporation's common stock at December 31,
1998, was $34.00 per share, compared with $24.75 at December 31, 1997. The
Corporation's market capitalization at December 31, 1998, was $4.6 billion,
compared with $3.4 billion at December 31, 1997. At December 31, 1998, the
Corporation's common stock had a book value per share of $11.86.
5
5-POPULAR, INC. 1998 FOURTH QUARTER RESULTS
Effective January 1, 1999, the Corporation reorganized its bank
subsidiaries into a more streamlined structure. The resulting structure is
focused on two primary bank subsidiaries: a New York State-charter Federal
Reserve member bank named "Banco Popular North America" and a Puerto
Rico-chartered Federal Reserve member bank named "Banco Popular de Puerto Rico".
Banco Popular de Puerto Rico controls the Corporation's bank operations in
Puerto Rico and the U.S. and British Virgin Islands, as well as maintains a
branch in New York and a Federal agency in Chicago. Banco Popular North America
controls the Corporation's U.S. mainland bank operations with branches in New
York, New Jersey, Illinois, Florida and California. To achieve this structure,
the Corporation's banking operations located in New Jersey, Illinois, Florida
and California were merged into Banco Popular North America as of January 1,
1999. Certain banks newly acquired by the Corporation, namely First State Bank
of Southern California, Bronson-Gore Bank in Prospect Heights, The Irving Bank
and Water Tower Bank, are expected to be merged into Banco Popular North America
in the first quarter of 1999.
***
6
POPULAR, INC.
FINANCIAL SUMMARY
(In thousands, except per share data)
FOURTH FOR THE YEAR ENDED
1998 1997 QUARTER DECEMBER 31
--------------------------- ------------ 1998-1997 --------------------------------------
FOURTH THIRD FOURTH PERCENT PERCENT
QUARTER QUARTER QUARTER VARIANCE 1998 1997 VARIANCE
------------ ------------ ------------ --------- ------------ ------------ --------
Summary of Operations
Interest income...... $ 442,402 $ 410,821 $ 404,619 9.34% $ 1,652,456 $ 1,491,303 10.81%
Interest expense..... 211,527 195,780 194,919 8.52 779,444 707,348 10.19
------------ ------------ ------------ ------ ------------ ------------ ------
Net interest income.. 230,875 215,041 209,700 10.10 873,012 783,955 11.36
Provision for loan
losses............. 35,457 34,667 31,657 12.00 137,213 110,607 24.05
------------ ------------ ------------ ------ ------------ ------------ ------
Net interest income
after provision for
loan losses........ 195,418 180,374 178,043 9.76 735,799 673,348 9.27
Other operating
income............. 75,556 69,162 66,960 11.34 278,659 241,396 15.44
Gain on sale of
securities......... 465 4,553 2,122 8,933 2,268
Trading account
profit............. 1,167 506 1,724 3,653 3,934
------------ ------------ ------------ ------ ------------ ------------ ------
Total other income... 76,188 74,221 70,806 7.60 291,245 247,598 17.63
Salaries and
benefits........... 82,529 78,700 75,140 9.83 315,333 281,209 12.13
Profit sharing....... 4,502 5,618 6,292 -28.45 22,067 25,684 -14.08
Amortization of
intangibles........ 7,337 6,890 6,785 8.14 27,860 22,874 21.80
Other operating
expenses........... 99,943 87,410 87,191 14.63 355,093 307,153 15.61
------------ ------------ ------------ ------ ------------ ------------ ------
Total operating
expenses........... 194,311 178,618 175,408 10.78 720,353 636,920 13.10
------------ ------------ ------------ ------ ------------ ------------ ------
Net earnings (losses)
of minority
interest........... (328) (328)
Income before income
tax................ 77,623 75,977 73,441 5.69 307,019 284,026 8.10
Income tax........... 15,111 18,397 18,119 -16.60 74,671 74,461 0.28
------------ ------------ ------------ ------ ------------ ------------ ------
Net income........... $ 62,512 $ 57,580 $ 55,322 13.00 $ 232,348 $ 209,565 10.87
============ ============ ============ ====== ============ ============ ======
Net income applicable
to common stock.... $ 60,425 $ 55,493 $ 53,234 13.51 $ 223,998 $ 201,215 11.32
============ ============ ============ ====== ============ ============ ======
Earnings per common
share:
Net income........... $ 0.44 $ 0.41 $ 0.39 10.74 $ 1.65 $ 1.50 10.09
---- ---- ---- ----- ---- ---- -----
Average common shares
outstanding*....... 135,637,327 135,555,652 135,365,408 135,532,086 134,036,964
Common shares
outstanding at end
of period*......... 135,637,327 135,555,652 135,365,408 135,637,327 135,365,408
Restated to reflect the stock split in the form of a dividend of one share for
each share outstanding effective on July 1, 1998.
6
7
POPULAR, INC.
FINANCIAL SUMMARY
(In thousands)
Fourth For the year ended
1998 1997 Quarter December 31,
------------------------- ----------- 1998-1997 ------------------------------------
Fourth Third Fourth Percent Percent
Quarter Quarter Quarter Variance 1998 1997 Variance
----------- ----------- ----------- --------- ----------- ----------- --------
SELECTED AVERAGE BALANCES
Total assets............................ $21,947,228 $20,343,839 $19,745,399 11.15 $20,434,419 $18,419,144 10.94
Loans................................... 12,699,077 11,928,198 11,196,118 13.42 11,930,621 10,548,207 13.11
Earning assets.......................... 20,824,426 19,214,551 18,697,850 11.37 19,294,065 17,409,634 10.82
Interest-bearing liabilities............ 16,575,343 15,946,220 15,716,914 5.46 15,802,266 14,572,317 8.44
Stockholders' equity.................... 1,613,063 1,573,201 1,457,037 10.71 1,553,258 1,370,984 13.30
PERFORMANCE RATIOS
Net interest yield*..................... 4.44% 4.45% 4.48% 4.52% 4.51%
Return on assets........................ 1.13 1.12 1.11 1.14 1.14
Return on common equity................. 15.84 14.94 15.56 15.41 15.83
CREDIT QUALITY DATA
Nonperforming assets.................... $ 291,464 $ 281,508 $ 212,460 37.19 $ 291,464 $ 212,460 37.19
Net loans charged-off................... 30,554 27,662 25,489 19.87 112,911 97,767 15.49
Allowance for loan losses............... 271,458 245,382 211,651 28.26 271,458 211,651 28.26
Nonperforming assets to total assets.... 1.26% 1.32% 1.10% 1.26% 1.10%
Allowance for losses to loans........... 2.08 1.98 1.86 2.08 1.86
SELECTED FINANCIAL DATA AT PERIOD-END
Total assets............................ $23,204,839 $21,273,593 $19,300,507 $23,204,839 $19,300,507 20.23
Loans................................... 13,077,755 12,362,527 11,376,607 13,077,755 11,376,607 14.95
Earning assets.......................... 21,634,128 19,920,544 18,060,998 21,634,128 18,060,998 19.78
Interest-bearing liabilities............ 17,771,832 16,472,478 14,892,210 17,771,832 14,892,210 19.34
Stockholders' equity.................... 1,709,113 1,696,891 1,503,092 1,709,113 1,503,092 13.71
* Not on a taxable equivalent basis
7