1
EXHIBIT 19
EXHIBIT A
TO OUR STOCKHOLDERS
For the second quarter of 1999, Popular, Inc. reported net income of $64.0
million, up $6.5 million or 11.3% from the $57.5 million reported for the same
quarter in 1998. For the first quarter of 1999, the Corporation reported net
income of $63.7 million. On a per common share basis, net income for the second
quarter of 1999 rose to $0.46 from $0.41 for the same period in 1998 and $0.45
for the first quarter of 1999.
The Corporation's return on assets (ROA) and return on common equity
(ROE) for the second quarter of 1999 amounted to 1.08% and 15.53%, respectively.
These profitability ratios compare with an ROA of 1.16% and ROE of 15.50%
attained during the second quarter of 1998. The ROA and ROE for the first
quarter of 1999 was 1.14% and 16.03%.
For the six-month period ended June 30, 1999, net income reached $127.6
million or $0.91 per common share, while the ROA and ROE were 1.11% and 15.78%,
respectively. These figures compare with a net income of $112.3 million and an
ROA of 1.15% and an ROE of 15.43% for the same period a year earlier.
Operating results for the quarter ended June 30, 1999, reflected a
$24.5 million increase in net interest income and a growth of $14.0 million in
other operating income when compared with the same quarter of 1998. These
increases were tempered by a rise in operating expenses of $30.2 million and a
$3.1 million increase in the provision for loan losses.
Net interest income for the second quarter of 1999 amounted to $238.9
million from $214.4 million for the same period a year earlier. This growth was
primarily due to an increase of $3.8 billion in average earning assets,
particularly a $2.1 billion growth in loans. The net interest yield, on a
taxable equivalent basis, decreased to 4.58% for the second quarter of 1999,
compared with 4.93% for the same period a year earlier, mainly as a result of a
higher volume of investment securities on which the net interest margin earned
by the Corporation is lower.
The provision for loan losses amounted to $36.6 million for the second
quarter of 1999, compared with $33.5 million for the same period a year earlier,
reflecting the growth in the loan portfolio, non-performing assets and net
charge-offs. Net charge-offs for the second quarter of 1999 were $31.2 million
or 0.91% of average loans, an increase over the $27.2 million or 0.94% of
average loans reported for the same period in 1998. For the six-month period
ended June 30, 1999, net charge-offs as a percentage of average loans decreased
to 0.85% from 0.95% for the same period last year.
Other operating income is a growing source of revenue for the
Corporation, representing 16.1% of total revenues in the second quarter of 1999,
an increase from 15.3% of total revenues for the same period in 1998. For the
second quarter of 1999, other operating income amounted to $86.9 million
compared with $72.9 million for the same period in 1998. This growth was driven
by an increase of $10.9 million in other service fees, particularly a rise of
$3.4 million in both check cashing fees and credit card fees and discounts. In
addition, service charges on deposit accounts rose $4.2 million while other
operating income increased $3.6 million.
Operating expenses amounted to $205.2 million for the second quarter of
1999, up from $175.0 million for the same period a year earlier. The rise of
$30.2 million in operating expenses for the quarter ended June 30, 1999, was led
by an increase of $12.0 million in personnel costs. This category rose primarily
as a result of the acquisitions completed during the second half of 1998, the
continued business expansion in the U.S. mainland as well as annual merit
increases. Professional fees, business promotion and equipment expenses also
rose reflecting the technical support and system conversion costs pertaining to
the U.S. reorganization together with increased spending on strategic business
initiatives and software packages.
Total assets at June 30, 1999, were $23.7 billion, compared with $20.0
billion at the same date in 1998 and $23.2 billion as of March 31, 1999. Loans
were $13.9 billion at June 30, 1999, an increase of 18.2% compared with $11.8
billion at the same date in 1998 and $13.5 billion at March 31, 1999.
At June 30, 1999, the allowance for loan losses was $283 million or
2.03% of loans, compared with $224 million or 1.91% at June 30, 1998, and $277
million or 2.06% at March 31, 1999. Non-performing assets (NPA) amounted to $302
million compared with $225 million at the same date last year and $299 million
at the end of the first quarter of 1999. The increase in NPA was led by a $34
million rise in non-performing assets of Banco Fiduciario, acquired on the third
quarter of 1998. In addition, the non-performing mortgage loans rose $14
million.
At June 30, 1999, total deposits were $13.9 billion, compared with
$12.1 billion at the same date in 1998, mainly as a result of an increased level
of core deposits, primarily savings and demand deposits. Total deposits amounted
to $13.6 billion at March 31, 1999. Borrowings increased to $7.7 billion at the
end of the second quarter of 1999, from $6.0 billion a year earlier.
Stockholders' equity totaled $1.7 billion at June 30, 1999, compared
with $1.6 billion a year earlier and $1.7 billion as of March 31, 1999. During
the second quarter of 1999, the Corporation repurchased a total of 1,089,700
shares of its common stock under the stock repurchase program approved by its
Board of Directors on May 8, 1997. The Corporation may continue repurchasing its
common stock if market conditions so warrant.
The Corporation's stock market value was $30.31 at the end of the
quarter, compared with $33.25 at June 30, 1998, and $30.88 at March 31, 1999.
The Corporation had a market capitalization of $4.1
2
billion at June 30, 1999, based on 134,698,572 common shares outstanding.
The Annual Stockholders Meeting of Popular, Inc. was held on April 27, 1999. An
88.43% of the common shares issued and outstanding as of record date of March 8,
1999 were represented at the meeting, which complied with the quorum required by
law. All seven directors nominated for re-election were elected for a three-year
term. During the meeting, the 1998 Corporation's Annual Report was discussed and
approved.
We are very proud to announce that the Corporation has renovated and modified
its equipment, programs and computer systems in order to have them ready for the
year 2000 date change. We successfully completed validation tests to our
equipment and programs before the June 30, 1999, deadline. In addition, we have
established contingency plans that will ensure the continuity of our operations
in the event of any casualty.
On June 30, 1999, U.S. Vice President Al Gore and U.S. Treasury Secretary Robert
E. Rubin announced the final details of the Treasury's Electronic Transfer
Account (ETA), including the first six institutions that reached a preliminary
agreement to offer the ETA account. The ETA is a low-cost account that will
allow federal payment recipients to take advantage of Direct Deposit. Banco
Popular was chosen among these first six institutions, becoming the only
Hispanic bank in the United States and the only one in Puerto Rico to offer this
transfer account.
/s/ Richard L. Carrion
Richard L. Carrion
Chairman, President and Chief
Executive Officer
3
FINANCIAL HIGHLIGHTS
At June 30, Average for the six months
-------------------------------------------- --------------------------------------------
BALANCE SHEET HIGHLIGHTS 1999 1998 Change 1999 1998 Change
----------- ----------- ---------- ----------- ----------- ----------
(In thousands)
Money market investments $ 791,285 $ 694,487 $ 96,798 $ 1,036,604 $ 732,328 $ 304,276
Investment and trading securities 7,441,280 6,278,074 1,163,206 7,547,411 6,283,034 1,264,377
Loans 13,887,392 11,753,213 2,134,179 13,452,576 11,541,256 1,911,320
Total assets 23,665,621 19,997,636 3,667,985 23,178,177 19,711,518 3,466,659
Deposits 13,902,387 12,102,594 1,799,793 13,697,877 12,001,807 1,696,070
Borrowings 7,680,936 5,950,082 1,730,854 7,340,492 5,878,283 1,462,209
Stockholders' equity 1,650,682 1,593,693 56,989 1,678,159 1,512,723 165,436
Second quarter Six months
----------------------------------------- -----------------------------------------
OPERATING HIGHLIGHTS 1999 1998 Change 1999 1998 Change
-------- -------- ------- -------- -------- -------
(In thousands, except per share
information)
Net interest income $238,851 $214,392 $24,459 $475,089 $427,096 $47,993
Provision for loan losses 36,631 33,524 3,107 72,402 67,089 5,313
Fees and other income 86,926 72,886 14,040 173,984 140,837 33,147
Other expenses, net of minority interest 225,169 196,293 28,876 449,030 388,588 60,442
Net income $ 63,977 $ 57,461 $ 6,516 $127,641 $112,256 $15,385
Net income applicable to common stock $ 61,890 $ 55,374 $ 6,516 $123,466 $108,081 $15,385
Earnings per common share 0.46 0.41 0.05 0.91 0.80 0.11
Second quarter Six months
----------------------- --------------------------
SELECTED STATISTICAL INFORMATION 1999 1998 1999 1998
------- ------- ------- -------
COMMON STOCK DATA
Market price
High $ 32.88 $ 36.16 $ 37.88 $ 36.16
Low 28.81 29.22 28.81 23.03
End 30.31 33.25 30.31 33.25
Book value at period end 11.51 11.02 11.51 11.02
Dividends declared 0.14 0.11 0.28 0.22
Dividend payout ratio 30.70% 26.90% 30.77% 27.56%
Price/earnings ratio 17.22x 21.18x 17.22x 21.18x
------- ------- ------- -------
PROFITABILITY RATIOS
Return on assets 1.08% 1.16% 1.11% 1.15%
Return on common equity 15.53 15.50 15.78 15.43
Net interest spread (taxable equivalent) 3.72 4.08 3.81 4.11
Net interest yield (taxable equivalent) 4.58 4.93 4.67 4.97
Effective tax rate 24.23 27.00 25.20 26.83
Overhead ratio 49.53 47.65 49.07 48.37
------- ------- ------- -------
CAPITALIZATION RATIOS
Equity to assets 7.18% 7.69% 7.24% 7.67%
Tangible equity to assets 6.13 6.63 6.16 6.60
Equity to loans 12.40 13.20 12.47 13.11
Internal capital generation 10.12 10.56 10.19 10.35
Tier I capital to risk-adjusted assets 10.37 12.35 10.37 12.35
Total capital to risk-adjusted assets 12.59 14.70 12.59 14.70
Leverage ratio 6.37 7.17 6.37 7.17
------- ------- ------- -------
CREDIT QUALITY RATIOS
Allowance for losses to loans 2.03% 1.91% 2.03% 1.91%
Allowance to non-performing assets 93.62 99.79 93.62 99.79
Allowance to non-performing loans 103.96 109.70 103.96 109.70
Non-performing assets to loans 2.17 1.91 2.17 1.91
Non-performing assets to total assets 1.28 1.12 1.28 1.12
Net charge-offs to average loans 0.91 0.94 0.85 0.95
Provision to net charge-offs 1.18x 1.23x 1.27x 1.23x
Net charge-offs earnings coverage 3.87 4.13 4.24 4.03
4
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
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 web site at http://www.popularinc.com.
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 or (787) 765-9800 exts. 5637, 5525 and 5897.
5
CONSOLIDATED STATEMENTS OF CONDITION
June 30,
-------------------------------
Dollars in thousands 1999 1998
------------ ------------
ASSETS
Cash and due from banks $ 567,143 $ 500,941
------------ ------------
Money market investments:
Federal funds sold and securities and mortgages purchased
under agreements to resell 715,618 650,881
Time deposits with other banks 74,986 42,779
Bankers' acceptances 681 827
------------ ------------
791,285 694,487
------------ ------------
Investment securities available-for-sale, at market value 6,804,004 5,795,668
Investment securities held-to-maturity, at cost 316,860 232,316
Trading account securities, at market value 320,416 250,090
Loans held-for-sale 603,643 338,566
------------ ------------
Loans 13,655,881 11,767,063
Less -- Unearned income 372,132 352,416
Allowance for loan losses 282,590 224,045
------------ ------------
13,001,159 11,190,602
------------ ------------
Premises and equipment 440,167 380,684
Other real estate 30,018 20,283
Customers' liabilities on acceptances 14,768 454
Accrued income receivable 160,146 128,897
Other assets 355,510 239,267
Intangible assets 260,502 225,381
------------ ------------
$ 23,665,621 $ 19,997,636
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Non-interest bearing $ 3,278,464 $ 2,585,256
Interest bearing 10,623,923 9,517,338
------------ ------------
13,902,387 12,102,594
Federal funds purchased and securities sold
under agreements to repurchase 3,319,780 2,672,811
Other short-term borrowings 2,554,433 1,864,562
Notes payable 1,531,723 1,137,709
Acceptances outstanding 14,767 454
Other liabilities 396,605 350,813
------------ ------------
21,719,695 18,128,943
------------ ------------
Subordinated notes 125,000 125,000
------------ ------------
Preferred beneficial interests in Popular North America's
junior subordinated deferrable interest debentures
guaranteed by the Corporation 150,000 150,000
------------ ------------
Minority interest in consolidated subsidiary 20,244
------------ ------------
Stockholders' equity:
Preferred stock 100,000 100,000
Common stock 826,595 412,426
Surplus 220,559 604,983
Retained earnings 616,022 473,531
Treasury stock, at cost (72,524) (39,559)
Accumulated other comprehensive (loss) income, net of deferred taxes (39,970) 42,312
------------ ------------
1,650,682 1,593,693
------------ ------------
$ 23,665,621 $ 19,997,636
============ ============
6
CONSOLIDATED STATEMENTS OF INCOME
Quarter ended Six months ended
June 30, June 30,
------------------------ ------------------------
Dollars in thousands, except per share information 1999 1998 1999 1998
--------- -------- --------- --------
Interest Income:
Loans $ 335,739 $296,476 $ 661,772 $589,693
Money market investments 7,500 9,192 15,433 18,018
Investment securities 105,411 93,177 210,845 183,436
Trading account securities 4,751 4,020 9,546 8,085
--------- -------- --------- --------
453,401 402,865 897,596 799,232
--------- -------- --------- --------
Interest Expense:
Deposits 110,147 101,777 220,970 199,108
Short-term borrowings 73,138 58,330 142,513 114,577
Long-term debt 31,265 28,366 59,024 58,451
--------- -------- --------- --------
214,550 188,473 422,507 372,136
--------- -------- --------- --------
Net interest income 238,851 214,392 475,089 427,096
Provision for loan losses 36,631 33,524 72,402 67,089
--------- -------- --------- --------
Net interest income after provision for loan losses 202,220 180,868 402,687 360,007
Service charges on deposit accounts 29,731 25,494 57,980 50,832
Other service fees 39,691 28,818 77,600 54,991
Gain on sale of securities 286 3,049 736 3,917
Trading account (loss) profit (582) 1,311 (863) 1,981
Other operating income 17,800 14,214 38,531 29,116
--------- -------- --------- --------
289,146 253,754 576,671 500,844
--------- -------- --------- --------
Operating Expenses:
Personnel costs:
Salaries 69,983 59,623 140,140 118,916
Profit sharing 6,084 6,264 12,403 11,947
Pension and other benefits 18,572 16,770 38,131 35,188
--------- -------- --------- --------
94,639 82,657 190,674 166,051
Net occupancy expenses 14,715 11,737 28,974 23,298
Equipment expenses 21,557 18,481 42,291 36,509
Other taxes 7,941 7,899 16,206 15,867
Professional fees 17,356 13,816 32,668 26,694
Communications 10,580 9,194 21,409 18,017
Business promotion 12,209 8,917 23,209 17,133
Printing and supplies 4,828 4,415 9,818 8,418
Other operating expenses 13,806 11,080 26,653 21,804
Amortization of intangibles 7,586 6,849 15,206 13,633
--------- -------- --------- --------
205,217 175,045 407,108 347,424
--------- -------- --------- --------
Net loss of minority interest 382 814
--------- -------- --------- --------
Income before income tax 84,311 78,709 170,377 153,420
Income tax 20,334 21,248 42,736 41,164
--------- -------- --------- --------
Net income $ 63,977 $ 57,461 $ 127,641 $112,256
========= ======== ========= ========
Net income applicable to common stock $ 61,890 $ 55,374 $ 123,466 $108,081
========= ======== ========= ========
Earnings per common share (basic and diluted) $ 0.46 $ 0.41 $ 0.91 $ 0.80
========= ======== ========= ========
7
SUBSIDIARIES
Central Office
Popular Center
209 Munoz Rivera Avenue
San Juan, Puerto Rico 00918
Telephone: (787) 765-9800
ATH Costa Rica
Cond. Ofiplaza del Este
Edif. D- Piso 1
San Pedro de la Rotonda
de la Bandera
150 metros Oeste
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
Virgin Islands Office
193 Estate Altona & Welgunst
St. Thomas, Virgin Islands 00802
Telephone: (340) 693-2777
Banco Popular North America
4000 West North Avenue
Chicago, Illinois 60639
Telephone: (773) 772-8600
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.
Road #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 Fiduciario
27 de Febrero Ave. #50
Santo Domingo
Republica Dominicana
Telephone: (809) 473-9400