1
EXHIBIT 19
POPULAR, INC.
To Our Stockholders
Popular, Inc. (the Corporation) reported an increase in net income of $6.6
million or 11.5%, reaching $64.2 million for the third quarter of 1999, from
$57.6 million reported for the same period a year earlier. Earnings per common
share rose 12.2% to $0.46, compared with $0.41 for the third quarter of 1998.
Net income for the third quarter of 1999, represented annualized return on
assets (ROA) and return on common equity (ROE) of 1.06% and 15.23%,
respectively. These profitability ratios compare with an ROA of 1.12% and ROE of
14.94% attained during the third quarter of 1998.
Net income for the nine-month period ended September 30, 1999, was $191.9
million or $1.37 per common share, up 13.0% from the $169.8 million or $1.21 per
common share achieved during the first nine months of 1998. The Corporation's
nine-month earnings resulted in an ROA of 1.09% and an ROE of 15.59% for 1999
compared with 1.14% and 15.26%, respectively, for the first nine months of 1998.
The increase of $6.6 million in quarterly earnings was mainly derived from
the improvement of $23.8 million realized in net interest income and a growth of
$22.8 million in other operating income, partially offset by increases of $36.1
million in operating expenses, $2.4 million in the provision for loan losses and
$2.5 million in income taxes.
Net interest income for the third quarter of 1999 amounted to $238.8 million
from $215.0 million for the same period a year earlier. This growth was
primarily due to an increase of $3.3 billion in average earning assets,
particularly a $2.2 billion growth in loans. The net interest yield, on a
taxable equivalent basis, decreased to 4.59% for the third quarter of 1999,
compared with 4.86% 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 $37.1 million for the third quarter
of 1999, compared with $34.7 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 third quarter of 1999 were $31.6 million
compared with $27.7 million for the same period in 1998. Net charge-offs as a
percentage of average loans decreased from 0.93% for the three-month period
ended September 30, 1998 to 0.89% for the same period this year.
Other operating income, including securities and trading transactions,
amounted to $97.0 million for the third quarter of 1999, compared with $74.2
million for the same period in 1998. The growth was mostly experienced in the
credit card and retail financial businesses, coupled with fees generated from
the Corporation's joint venture in Puerto Rico's local telephone company and
revenues generated by GM Group. In addition, contributing to the rise are fees
from the sale and administration of investment products mostly related to the
issuance of a new mutual fund (PRITFF VI) during the quarter. Furthermore, a
$4.7 million gain resulting from the sale of $195 million in loans securitized
fueled the rise in other income.
Operating expenses for the three-month period ended September 30, 1999,
amounted to $214.7 million up from $178.6 million for the same period a year
earlier. This rise was driven by a $15.1 million increase in personnel costs.
The acquisitions completed during the latter part of 1998, in addition to the
acquisitions of GM Group and Levitt Mortgage during this quarter, as well as the
continued business expansion were all critical factors for the increase in
personnel expenses. Equipment, net occupancy, professional fees and business
promotion expenses also rose as a result of the aforementioned acquisitions, the
investment in new technology to further enhance customer convenience, business
expansion and the launching of various advertising campaigns in Puerto Rico and
the Dominican Republic.
Total assets at September 30, 1999, were $24.3 billion compared with $21.3
billion at the same date in 1998 and $23.7 billion as of June 30, 1999. Total
loans at September 30, 1999, increased 14.0% to $14.1 billion compared with
$12.4 billion at the same date in 1998 and $13.9 billion at June 30, 1999. The
growth in the loan portfolio occurred principally in the commercial and mortgage
loan portfolios. At September 30, 1999, the allowance for loan losses was $288
million or 2.05% of loans, compared with $245 million or 1.98% at September 30,
1998, and $283 million or 2.03% at June 30, 1999.
Total deposits as of June 30, 1999 were $13.8 billion compared with $12.5
billion at the same date in 1998 and $13.9 billion at June 30, 1999, while
borrowings rose to $8.4 billion at the end of the third quarter of 1999, from
$6.6 billion a year earlier.
Stockholders' equity totaled $1.68 billion at September 30, 1999, including
$83 million in unrealized losses on securities available-for-sale, compared with
$1.70 billion a year earlier, including $107 million in unrealized gains on
securities available-for-sale. During the third quarter of 1999, the Corporation
repurchased a total of 573,300 shares of its common stock.
The Corporation's stock market value was $27.75 at the end of the quarter,
compared with $28.38 at September 30, 1998 and $30.31 at June 30, 1999. The
Corporation had a market capitalization of $3.8 billion at September 30, 1999,
based on 135,700,258 common shares outstanding.
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On August 12, 1999, the Board of Directors of Popular, Inc. declared a quarterly
cash dividend of $0.16 per common share. This represents a 14.3% increase over
the $0.14 per share paid in the
2
previous quarterly cash dividends. The dividend was paid on October 1, 1999 to
shareholders of record on September 10, 1999.
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As previously announced, during this quarter the Corporation completed the
acquisition of GM Group in exchange of 1.5 million shares of the Corporation. GM
Group is a leading company in information technology services and products in
Puerto Rico and the Caribbean with offices in San Juan, Caracas, Santo Domingo
and Miami, and services customers in 12 Latin American countries. In addition,
on August 3, 1999 the Corporation acquired 85% of the shares of Levitt Mortgage,
a mortgage banking organization, with operations in Puerto Rico. This
acquisition will strengthen even more our mortgage business in Puerto Rico.
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Banco Popular North America continued its expansion during this quarter opening
two new branches in California, one in San Diego and one in Santa Ana, for a
total of 90 branches in the United States. Popular Cash Express acquired four
stores in Florida and opened three stores in Arizona, two in California and one
additional store in Florida. As of September 30, 1999, the Corporation operated
62 check-cashing locations in 5 states. Also, Equity One opened two new offices,
one in North Carolina and one in Pennsylvania for a total of 126 offices in 36
states.
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On October 5, 1999, Banco Popular de Puerto Rico proudly celebrated its 106th
anniversary. The celebration began with a grand meeting of all employees of
Popular, Inc. in Puerto Rico emphasizing our commitment to service and our
corporate values, in addition to presenting a new institutional campaign.
/s/ Richard L. Carrion
Richard L. Carrion
Chairman, President and Chief
Executive Officer
3
POPULAR, INC.
FINANCIAL HIGHLIGHTS
At September 30, Average for the nine months
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BALANCE SHEET HIGHLIGHTS 1999 1998 Change 1999 1998 Change
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(In thousands)
Money market investments $ 837,600 $ 823,396 $ 14,204 $ 683,173 $ 747,358 $ (64,185)
Investment and trading securities 7,587,577 6,734,621 852,956 7,612,418 6,359,326 1,253,092
Loans 14,097,081 12,362,527 1,734,554 13,684,777 11,671,654 2,013,123
Total assets 24,275,583 21,273,593 3,001,990 23,493,991 19,924,608 3,569,383
Deposits 13,770,048 12,547,750 1,222,298 13,732,917 12,028,881 1,704,036
Borrowings 8,386,463 6,590,228 1,796,235 7,591,165 6,042,423 1,548,742
Stockholders' equity 1,677,322 1,696,891 (19,569) 1,691,540 1,533,104 158,436
Third quarter Nine months
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OPERATING HIGHLIGHTS 1999 1998 Change 1999 1998 Change
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(In thousands, except per share information)
Net interest income $ 238,792 $ 215,041 $ 23,751 $ 713,881 $ 642,137 $ 71,744
Provision for loan losses 37,080 34,667 2,413 109,482 101,756 7,726
Fees and other income 97,023 74,221 22,802 271,007 215,058 55,949
Other expenses, net of minority interest 234,525 197,015 37,510 683,555 585,603 97,952
Net income $ 64,210 $ 57,580 $ 6,630 $ 191,851 $ 169,836 $ 22,015
Net income applicable to common stock $ 62,123 $ 55,493 $ 6,630 $ 185,589 $ 163,574 $ 22,015
Earnings per common share 0.46 0.41 0.05 1.37 1.21 0.16
Third quarter Nine months
-------------------------- --------------------------
SELECTED STATISTICAL INFORMATION 1999 1998 1999 1998
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COMMON STOCK DATA
Market price
High $ 31.00 $ 36.75 $ 37.88 $ 36.75
Low 25.81 28.00 25.81 23.03
End 27.75 28.38 27.75 28.38
Book value at period end 11.62 11.80 11.62 11.80
Dividends declared 0.16 0.14 0.44 0.36
Dividend payout ratio 30.48% 26.86% 30.67% 27.32%
Price/earnings ratio 15.33x 17.74x 15.33x 17.74x
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PROFITABILITY RATIOS
Return on assets 1.06% 1.12% 1.09% 1.14%
Return on common equity 15.23 14.94 15.59 15.26
Net interest spread (taxable equivalent) 3.80 4.03 3.89 4.07
Net interest yield (taxable equivalent) 4.59 4.86 4.69 4.92
Effective tax rate 24.86 24.21 25.09 25.96
Overhead ratio 49.28 48.55 49.14 48.43
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CAPITALIZATION RATIOS
Equity to assets 7.12% 7.73% 7.20% 7.69%
Tangible equity to assets 6.01 6.72 6.11 6.64
Equity to loans 12.15 13.19 12.36 13.14
Internal capital generation 9.40 9.28 9.93 9.98
Tier I capital to risk-adjusted assets 10.32 12.05 10.32 12.05
Total capital to risk-adjusted assets 12.50 14.42 12.50 14.42
Leverage ratio 6.36 7.37 6.36 7.37
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CREDIT QUALITY RATIOS
Allowance for losses to loans 2.05% 1.98% 2.05% 1.98%
Allowance to non-performing assets 86.56 87.17 86.56 87.17
Allowance to non-performing loans 94.48 95.94 94.48 95.94
Non-performing assets to loans 2.36 2.28 2.36 2.28
Non-performing assets to total assets 1.37 1.32 1.37 1.32
Net charge-offs to average loans 0.89 0.93 0.86 0.94
Provision to net charge-offs 1.17x 1.25x 1.23x 1.24x
Net charge-offs earnings coverage 3.83 4.00 4.09 4.02
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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.
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POPULAR, INC.
CONSOLIDATED STATEMENTS OF CONDITION
September 30,
-------------------------------
Dollars in thousands 1999 1998
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ASSETS
Cash and due from banks $ 719,681 $ 543,565
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Money market investments:
Federal funds sold and securities and mortgages purchased
under agreements to resell 789,592 720,511
Time deposits with other banks 47,501 102,525
Bankers' acceptances 507 360
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837,600 823,396
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Investment securities available-for-sale, at market value 6,938,363 6,223,460
Investment securities held-to-maturity, at cost 311,914 258,032
Trading account securities, at market value 337,300 253,129
Loans held-for-sale 526,263 495,241
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Loans 13,945,910 12,217,822
Less -- Unearned income 375,092 350,536
Allowance for loan losses 288,382 245,382
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13,282,436 11,621,904
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Premises and equipment 442,162 408,919
Other real estate 27,926 25,743
Customers' liabilities on acceptances 10,488 16,288
Accrued income receivable 159,415 141,184
Other assets 371,268 242,472
Intangible assets 310,767 220,260
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$ 24,275,583 $ 21,273,593
==========================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Non-interest bearing $ 2,994,189 $ 2,665,500
Interest bearing 10,775,859 9,882,250
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13,770,048 12,547,750
Federal funds purchased and securities sold
under agreements to repurchase 4,157,275 3,469,382
Other short-term borrowings 2,294,827 1,504,316
Notes payable 1,659,361 1,341,530
Acceptances outstanding 10,488 16,288
Other liabilities 407,981 391,827
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22,299,980 19,271,093
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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 23,281 30,609
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Stockholders' equity:
Preferred stock 100,000 100,000
Common stock 827,045 825,200
Surplus 237,892 194,033
Retained earnings 656,407 510,046
Treasury stock, at cost (60,151) (39,560)
Accumulated other comprehensive (loss) income, net of deferred taxes (83,871) 107,172
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1,677,322 1,696,891
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$ 24,275,583 $ 21,273,593
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6
POPULAR, INC.
CONSOLIDATED STATEMENTS OF INCOME
Quarter ended Nine months ended
September 30, September 30,
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Dollars in thousands, except per share information 1999 1998 1999 1998
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Interest Income:
Loans $ 349,295 $ 302,403 $ 1,011,067 $ 892,096
Money market investments 8,272 9,566 23,705 27,585
Investment securities 105,736 93,977 316,581 277,413
Trading account securities 5,229 4,875 14,775 12,960
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468,532 410,821 1,366,128 1,210,054
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Interest Expense:
Deposits 113,303 101,239 334,273 300,346
Short-term borrowings 84,071 66,611 226,584 181,189
Long-term debt 32,366 27,930 91,390 86,382
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229,740 195,780 652,247 567,917
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Net interest income 238,792 215,041 713,881 642,137
Provision for loan losses 37,080 34,667 109,482 101,756
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Net interest income after provision for loan losses 201,712 180,374 604,399 540,381
Service charges on deposit accounts 29,935 26,344 87,915 77,176
Other service fees 44,374 28,557 121,974 83,548
Gain on sale of securities 39 4,553 775 8,469
Trading account (loss) profit (698) 506 (1,561) 2,486
Other operating income 23,373 14,261 61,904 43,379
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298,735 254,595 875,406 755,439
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Operating Expenses:
Personnel costs:
Salaries 75,153 61,267 215,294 180,183
Profit sharing 5,485 5,618 17,888 17,565
Pension and other benefits 18,752 17,433 56,883 52,621
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99,390 84,318 290,065 250,369
Net occupancy expenses 15,469 12,260 44,442 35,558
Equipment expenses 22,908 18,533 65,199 55,042
Other taxes 8,717 8,035 24,923 23,902
Professional fees 17,090 14,218 49,758 40,912
Communications 10,831 9,444 32,240 27,462
Business promotion 11,916 9,751 35,125 26,884
Printing and supplies 5,321 4,490 15,139 12,908
Other operating expenses 14,949 10,679 41,602 32,483
Amortization of intangibles 8,113 6,890 23,319 20,523
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214,704 178,618 621,812 526,043
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Net loss of minority interest 1,066 1,880
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Income before income tax 85,097 75,977 255,474 229,396
Income tax 20,887 18,397 63,623 59,560
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Net income $ 64,210 $ 57,580 $ 191,851 $ 169,836
=================================================================================================================
Net income applicable to common stock $ 62,123 $ 55,493 $ 185,589 $ 163,574
=================================================================================================================
Earnings per common share (basic and diluted) $ 0.46 $ 0.41 $ 1.37 $ 1.21
=================================================================================================================
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
POPULAR LEASING, USA
16296 Westwood
Business Parkdrive
Ellisville, Missouri 63021
Telephone: (800) 829-9411
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
LEVITT MORTGAGE, INC.
Galeria San Patricio
B-5 Tabonuco St.
Suite 207
Guaynabo, Puerto Rico 00968
Telephone: (787) 749-8787
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
209 Munoz Rivera Avenue
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
GM GROUP
1590 Ponce de Leon Avenue
San Juan, Puerto Rico 00926
Telephone: (787) 751-4343