-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FykgmYuWbps6aM3AKmcFgKpFIMdzjBd7xCszCEZB3p2BCajOc9CXUxdrJfWQaRP1 xld9cEIWEBw8JXD94ijYwQ== 0000950144-00-006770.txt : 20000516 0000950144-00-006770.hdr.sgml : 20000516 ACCESSION NUMBER: 0000950144-00-006770 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: POPULAR INC CENTRAL INDEX KEY: 0000763901 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 660416582 STATE OF INCORPORATION: PR FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 002-96018 FILM NUMBER: 633660 BUSINESS ADDRESS: STREET 1: 209 MUNOZ RIVERA AVE STREET 2: POPULAR CENTER BUILDING CITY: HATO REY STATE: PR ZIP: 00918 BUSINESS PHONE: 7877659800 MAIL ADDRESS: STREET 1: P.O. BOX 362708 CITY: SAN JUAN STATE: PR ZIP: 00936-2708 FORMER COMPANY: FORMER CONFORMED NAME: BANPONCE CORP DATE OF NAME CHANGE: 19920703 10-Q 1 POPULAR, INC. 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 March 31, 2000 Commission file number 0 - 13818 ----------------- --------- POPULAR, INC. ----------------------------------------------------- (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 San Juan, Puerto Rico 00918 ---------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (787) 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 latest practicable date: Common Stock $6.00 Par value 135,881,266 ---------------------------- -------------------------------------- (Title of Class) (Shares Outstanding as of May 15, 2000) 2 POPULAR, INC. INDEX
Part I - Financial Information Page - ------------------------------ ---- Item 1. Financial Statements Unaudited consolidated statements of condition - March 31, 2000, December 31, 1999 and March 31, 1999 3 ------ Unaudited consolidated statements of income - Quarters ended March 31, 2000 and 1999 4 ------ Unaudited consolidated statements of comprehensive income - Quarters ended March 31, 2000 and 1999 5 ------ Unaudited consolidated statements of cash flows - Quarters ended March 31, 2000 and 1999 6 ------ Notes to unaudited consolidated financial statements 7-21 ------ Item 2. Management's discussion and analysis of financial condition and results of operation 22-34 ------ Item 3. Quantitative and qualitative disclosures about market risk 25 ------ Part II - Other Information - --------------------------- Item 1. Legal proceedings 34 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 34 ------ Item 6. Exhibits and reports on Form 8-K 34 ------ --- Signature 35 ------
FORWARD LOOKING INFORMATION. This Quarterly Report on Form 10-Q contains certain forward looking statements with respect to the adequacy of the allowance for loan losses, the Corporation's market risk and the effect of legal proceedings on Popular, Inc.'s financial condition and results of operations. These forward looking statements involve certain risks, uncertainties, estimates and assumptions by management. Various factors could cause actual results to differ from those contemplated by such forward looking statements. With respect to the adequacy of the allowance for loan losses and market risk, these factors include, among others, the rate of growth in the economy, the relative strength and weakness in the consumer and commercial credit sectors and in the real estate markets, the performance of the stock and bond market and the magnitude of interest rate changes. Moreover, the outcome of litigation, as discussed in "Part II, Item I. Legal Proceedings," is inherently uncertain and depends on judicial interpretations of law and the findings of judges and juries. 2 3 POPULAR, INC. CONSOLIDATED STATEMENTS OF CONDITION (UNAUDITED)
MARCH 31, December 31, March 31, (In thousands) 2000 1999 1999 - -------------------------------------------------------------------------------------------------------------------------------- ASSETS Cash and due from banks $ 606,383 $ 663,696 $ 596,116 - -------------------------------------------------------------------------------------------------------------------------------- Money market investments: Federal funds sold and securities purchased under agreements to resell 850,216 931,123 828,981 Time deposits with other banks 41,692 54,354 36,068 Banker's acceptances 744 517 563 - -------------------------------------------------------------------------------------------------------------------------------- 892,652 985,994 865,612 - -------------------------------------------------------------------------------------------------------------------------------- Investment securities available-for-sale, at market value 6,916,382 7,324,950 6,544,252 Investment securities held-to-maturity, at amortized cost 384,365 299,312 484,958 Trading account securities, at market value 208,473 236,610 273,467 Loans held-for-sale, at lower of cost or market 556,813 619,298 475,081 - -------------------------------------------------------------------------------------------------------------------------------- Loans 15,001,946 14,659,400 13,339,826 Less - Unearned income 357,828 370,944 356,662 Allowance for loan losses 293,442 292,010 277,116 - -------------------------------------------------------------------------------------------------------------------------------- 14,350,676 13,996,446 12,706,048 - -------------------------------------------------------------------------------------------------------------------------------- Premises and equipment 437,932 440,971 432,694 Other real estate 32,448 29,268 29,800 Customers' liabilities on acceptances 8,308 12,041 21,208 Accrued income receivable 167,853 175,746 161,258 Other assets 438,706 371,421 315,602 Intangible assets 301,034 304,786 267,979 - -------------------------------------------------------------------------------------------------------------------------------- $ 25,302,025 $ 25,460,539 $ 23,174,075 ================================================================================================================================ LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Deposits: Non-interest bearing $ 2,998,252 $ 3,284,949 $ 2,919,926 Interest bearing 11,339,609 10,888,766 10,656,746 - -------------------------------------------------------------------------------------------------------------------------------- 14,337,861 14,173,715 13,576,672 Federal funds purchased and securities sold under Agreements to repurchase 4,151,527 4,414,480 3,915,208 Other short-term borrowings 2,441,885 2,612,389 1,690,489 Notes payable 1,965,160 1,852,599 1,521,093 Acceptances outstanding 8,308 12,041 21,208 Other liabilities 418,985 436,718 450,411 - -------------------------------------------------------------------------------------------------------------------------------- 23,323,726 23,501,942 21,175,081 - -------------------------------------------------------------------------------------------------------------------------------- Subordinated notes 125,000 125,000 125,000 - -------------------------------------------------------------------------------------------------------------------------------- Preferred beneficial interests in Popular North America's junior subordinated deferrable interest debentures guaranteed by the Corporation 150,000 150,000 150,000 - -------------------------------------------------------------------------------------------------------------------------------- Minority interest in consolidated subsidiaries 21,006 22,611 19,512 - -------------------------------------------------------------------------------------------------------------------------------- Commitments and contingencies - -------------------------------------------------------------------------------------------------------------------------------- Stockholders' equity: Preferred stock 100,000 100,000 100,000 Common stock 828,254 827,662 826,121 Surplus 245,719 243,855 218,635 Retained earnings 734,681 694,301 573,068 Treasury stock-at cost (64,150) (64,123) (39,559) Accumulated other comprehensive (loss) income, net of deferred taxes of ($40,709) (December 31, 1999 - ($35,993); March 31, 1999 - $8,812) (162,211) (140,709) 26,217 - -------------------------------------------------------------------------------------------------------------------------------- 1,682,293 1,660,986 1,704,482 - -------------------------------------------------------------------------------------------------------------------------------- $ 25,302,025 $ 25,460,539 $ 23,174,075 ================================================================================================================================
The accompanying notes are an integral part of these unaudited consolidated financial statements. 3 4 POPULAR, INC. CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Quarters ended March 31, (Dollars in thousands, except per share information) 2000 1999 - ----------------------------------------------------------------------------------------- INTEREST INCOME: Loans $376,520 $326,033 Money market investments 13,248 7,933 Investment securities 112,130 105,434 Trading account securities 3,903 4,795 - ----------------------------------------------------------------------------------------- 505,801 444,195 - ----------------------------------------------------------------------------------------- INTEREST EXPENSE: Deposits 122,474 110,823 Short-term borrowings 102,825 69,374 Long-term debt 38,262 27,759 - ----------------------------------------------------------------------------------------- 263,561 207,956 - ----------------------------------------------------------------------------------------- Net interest income 242,240 236,239 Provision for loan losses 50,013 35,771 - ----------------------------------------------------------------------------------------- Net interest income after provision for loan losses 192,227 200,468 Service charges on deposit accounts 30,223 28,249 Other service fees 47,365 37,909 Gain on sale of securities 13,264 450 Trading account profit (loss) 817 (282) Other operating income 24,057 20,731 - ----------------------------------------------------------------------------------------- 307,953 287,525 - ----------------------------------------------------------------------------------------- OPERATING EXPENSES: Personnel costs: Salaries 78,594 70,157 Profit sharing 4,132 6,320 Pension and other benefits 20,498 19,559 - ----------------------------------------------------------------------------------------- 103,224 96,036 Net occupancy expense 16,559 14,258 Equipment expenses 23,434 20,734 Other taxes 8,575 8,265 Professional fees 17,678 15,312 Communications 10,802 10,829 Business promotion 14,087 11,000 Printing and supplies 5,172 4,990 Other operating expenses 18,381 12,847 Amortization of intangibles 8,592 7,620 - ----------------------------------------------------------------------------------------- 226,504 201,891 - ----------------------------------------------------------------------------------------- Income before income tax and minority interest 81,449 85,634 Income tax 18,756 22,402 Net loss of minority interest 1,496 432 - ----------------------------------------------------------------------------------------- NET INCOME $ 64,189 $ 63,664 ========================================================================================= NET INCOME APPLICABLE TO COMMON STOCK $ 62,102 $ 61,577 ========================================================================================= EARNINGS PER COMMON SHARE (BASIC AND DILUTED) $ 0.46 $ 0.45 ========================================================================================= DIVIDENDS DECLARED PER COMMON SHARES $ 0.16 $ 0.14 =========================================================================================
The accompanying notes are an integral part of these unaudited consolidated financial statements. 4 5 POPULAR, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
Quarters ended March 31, (In thousands) 2000 1999 - ----------------------------------------------------------------------------------------------------------- Net Income $ 64,189 $ 63,664 ------------------------------ Other comprehensive loss, net of tax: Foreign currency translation adjustment (385) (833) Unrealized holding losses on securities: Unrealized holding losses arising during the period, net of tax of ($1,327) (1999- ($16,301)) (10,828) (48,509) Less: reclassification adjustment for net gains included in net income, net of tax of $3,389 (1999 - $61) 10,290 148 ------------------------------ Total other comprehensive loss $(21,503) $(49,490) ------------------------------ Comprehensive income $ 42,686 $ 14,174 ==============================
DISCLOSURE OF ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME:
MARCH 31, December 31, March 31, (In thousands) 2000 1999 1999 - ------------------------------------------------------------------------------------------------------------- Foreign currency translation adjustment $ (1,650) $ (1,265) $(1,048) Unrealized (losses) gains on securities (160,561) (139,444) 27,265 --------------------------------------------- Accumulated other comprehensive (loss) income $(162,211) $(140,709) $26,217 =============================================
The accompanying notes are an integral part of these unaudited consolidated financial statements. 5 6 POPULAR, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the quarters ended March 31, (In thousands) 2000 1999 - ---------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 64,189 $ 63,664 - ---------------------------------------------------------------------------------------------------------------- Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization of premises and equipment 18,921 17,495 Provision for loan losses 50,013 35,771 Amortization of intangibles 8,592 7,620 Gain on sale of investment securities available-for-sale (13,264) (450) Gain on disposition of premises and equipment (2) (20) Gain on sale of loans (5,359) (7,877) Amortization of premiums and accretion of discounts on investments 788 670 Decrease in loans held-for-sale 62,485 169,077 Amortization of deferred loan fees and costs (117) (509) Net decrease in trading securities 28,137 45,260 Net decrease (increase) in accrued income receivable 7,893 (4,944) Net increase in other assets (47,352) (46,951) Net decrease in interest payable (33,207) (16,020) Net increase in current and deferred taxes 7,700 32,430 Net increase in postretirement benefit obligation 2,433 3,195 Net (decrease) increase in other liabilities (8,775) 1,682 - ---------------------------------------------------------------------------------------------------------------- Total adjustments 78,886 236,429 - ---------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 143,075 300,093 - ---------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Net decrease in money market investments 93,342 82,286 Purchases of investment securities held-to-maturity (4,517,627) (1,120,189) Maturities of investment securities held-to-maturity 4,036,370 1,050,510 Purchases of investment securities available-for-sale (513,212) (2,056,570) Maturities of investment securities available-for-sale 1,232,543 2,087,975 Sales of investment securities available-for-sale 77,078 194,301 Net disbursements on loans (628,637) (887,509) Proceeds from sale of loans 214,533 315,535 Acquisition of loan portfolios (2,275) Cash received in acquisition 715 Acquisition of premises and equipment (18,657) (28,253) Proceeds from sale of premises and equipment 2,779 2,805 - ---------------------------------------------------------------------------------------------------------------- Net cash used in investing activities (20,773) (361,384) - ---------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Net increase (decrease) in deposits 164,146 (95,541) Net decrease in federal funds purchased and securities Sold under agreements to repurchase (262,953) (425,293) Net (decrease) increase in other short-term borrowings (170,941) 315,407 Proceeds from issuance of notes payable 264,481 1,067,029 Payments of notes payable (151,921) (853,097) Dividends paid (24,884) (21,077) Proceeds from issuance of common stock 2,457 2,272 - ---------------------------------------------------------------------------------------------------------------- Net cash used in financing activities (179,615) (10,300) - ---------------------------------------------------------------------------------------------------------------- Net decrease in cash and due from banks (57,313) (71,591) Cash and due from banks at beginning of period 663,696 667,707 - ---------------------------------------------------------------------------------------------------------------- Cash and due from banks at end of period $ 606,383 $ 596,116 ================================================================================================================
The accompanying notes are an integral part of these unaudited consolidated financial statements. 6 7 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share information) NOTE 1 - CONSOLIDATION Popular, Inc. (the Corporation) is a bank holding company offering a full range of financial services through banking offices in Puerto Rico, the U.S. and British Virgin Islands, New York, Illinois, New Jersey, Florida, California and Texas. The Corporation is also the principal shareholder of Banco Fiduciario, S.A. in the Dominican Republic. The Corporation is engaged in mortgage and consumer finance, lease financing, investment banking and broker/dealer activities, retail financial services, and information technology, ATM and data processing services through its non-banking subsidiaries in Puerto Rico, the United States and Costa Rica. Also, in January 2000, the Corporation acquired CreST, S.A., a local card processor and POS provider in Costa Rica. Refer to note 10 to the consolidated financial statements for further information on the nature of operations of the Corporation by business segments. The consolidated financial statements include the accounts of Popular, Inc. and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. These statements are, in the opinion of management, a fair presentation of the results for the periods presented. These results are unaudited, but include all necessary adjustments, of a normal recurring nature, for a fair presentation of such results. Certain reclassifications have been made to the prior year consolidated financial statements to conform to the 2000 presentation. NOTE 2 - ACCOUNTING CHANGES In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." This statement establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. It requires recognition of all derivatives as either assets or liabilities in the statement of condition measured at fair value. It also establishes unique accounting treatment for the following three different types of hedges: fair value hedges, cash flows hedges and foreign currency hedges. The accounting for each of the three types of hedges results in recognizing offsetting changes in value or cash flows of both the derivative instrument and the hedged item in earnings in the same period. Changes in the fair value of derivatives that do not meet the criteria of one of these types of hedges are included in earnings in the period of change. The FASB has delayed the effective date of this statement to fiscal years beginning after June 15, 2000. Management estimates that the adoption of this statement will not have a material effect on the consolidated financial statements of the Corporation. 7 8 NOTE 3 - INVESTMENT SECURITIES The average contractual maturities as of March 31, 2000, and market value for the following investment securities are: Investment securities available-for-sale:
March 31, --------- 2000 1999 ---- ---- Amortized Market Amortized Market Cost Value Cost Value --------------------------------------------------------- (In thousands) U.S. Treasury (average maturity of 1 year And 7 months) $1,716,151 $1,698,684 $2,456,707 $2,477,732 Obligations of other U.S. Government Agencies and corporations (average Maturity of 5 years and 6 months) 3,292,509 3,145,455 2,312,930 2,289,475 Obligations of Puerto Rico, States and Political subdivisions (average maturity Of 10 years) 77,330 76,896 75,634 76,549 Collateralized mortgage obligations (average Maturity of 22 years and 10 months) 1,350,727 1,318,300 1,140,210 1,142,019 Mortgage-backed securities (average maturity Of 24 years and 3 months) 470,304 473,110 348,127 355,850 Equity securities (without contractual maturity) 136,929 134,535 122,000 150,483 Others (average maturity of 11 years and 1 months) 73,702 69,402 52,567 52,144 --------------------------------------------------------- $7,117,652 $6,916,382 $6,508,175 $6,544,252 =========================================================
Investment securities held-to-maturity:
March 31, --------- 2000 1999 ---- ---- Amortized Market Amortized Market Cost Value Cost Value --------------------------------------------------------- (In thousands) Obligations of other U.S. Government agencies and Corporations $154,966 $160,819 Obligations of Puerto Rico, States and Political subdivisions (average maturity Of 7 years and 11 months) $147,114 $147,781 31,547 32,590 Collateralized mortgage obligations (average Maturity of 12 years and 3 months) 17,396 17,188 25,999 26,109 Mortgage-backed securities (average maturity of 9 years and 5 months) 22,250 22,164 31,020 31,269 Equity securities (without contractual maturity) 91,188 91,188 88,312 88,312 Others (average maturity of 4 years and 2 months) 106,417 101,349 153,114 153,101 --------------------------------------------------------- $384,365 $379,670 $484,958 $492,200 =========================================================
8 9 The expected maturity of collateralized mortgage obligations, mortgage-backed securities and certain other securities differs from their contractual maturities because they may be subject to prepayments. Stock that is owned by the Corporation to comply with regulatory requirements, such as Federal Reserve Bank and Federal Home Loan Bank stock, is included as equity securities held-to-maturity and reported at amortized cost. NOTE 4 - PLEDGED ASSETS Securities and loans of the Corporation of $5,099,733 (1999 - $4,738,716) are pledged to secure public and trust deposits and securities 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 March 31, 2000, amounted to $18,190 and $69,568 (1999 - $15,644 and $78,234). 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. NOTE 6 - SUBORDINATED NOTES AND PREFERRED BENEFICIAL INTEREST IN POPULAR NORTH AMERICA'S JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES GUARANTEED BY THE CORPORATION Subordinated notes of $125,000 consist of notes issued by the Corporation on December 12, 1995, maturing on December 15, 2005, with interest payable semi-annually at 6.75%. On February 5, 1997, BanPonce Trust I, a statutory business trust created under the laws of the State of Delaware that is wholly-owned by Popular North America, Inc. (PNA) and indirectly wholly-owned by the Corporation, sold to institutional investors $150,000 of its 8.327% Capital Securities Series A (liquidation amount $1,000 per Capital Security) through certain underwriters. The proceeds of the issuance, together with the proceeds of the purchase by PNA of $4,640 of its 8.327% common securities (liquidation amount $1,000 per common security) were used to purchase $154,640 aggregate principal amount of PNA 8.327% Junior Subordinated Deferrable Interest Debentures, Series A (the "Junior Subordinated Debentures"). These capital securities qualify as Tier 1 capital, are fully and unconditionally guaranteed by the Corporation, and are presented in the Consolidated Statements of Condition as "Guaranteed Preferred Beneficial Interest in Popular North America's Subordinated Debentures." The obligations of PNA under the Junior Subordinated Debentures and its guarantees of the obligations of BanPonce Trust 1 are fully and unconditionally guaranteed by the Corporation. The assets of BanPonce Trust 1 consisted of $154,640 of Junior Subordinated Debentures and a related accrued interest receivable of $7,512. The Junior Subordinated Debentures mature on February 1, 2027; however, under certain circumstances, the maturity of the Junior Subordinated Debentures (which shortening would result in a mandatory redemption of the Capital Securities) may be shortened. NOTE 7 - STOCKHOLDERS' EQUITY Authorized common stock is 180,000,000 shares with a par value of $6 per share. At March 31, 2000, there were 138,042,365 (1999 - 137,686,887) shares issued and 135,747,610 (1999 - 135,709,287) outstanding. As of March 31, 2000, a total of 2,294,755 (1999 - 1,977,600) common shares with a total cost of $64,150 (1999 - $39,559) were maintained as treasury stock. Authorized preferred stock consists of 10,000,000 shares without par value of which 4,000,000, non-cumulative with a dividend rate of 8.35% and a liquidation preference value of $25 per share, were issued and outstanding at March 31, 2000 and 1999. 9 10 Popular International Bank, Inc. (PIB) and Popular North America, Inc.'s (PNA) bank subsidiaries have certain statutory provisions and regulatory requirements and policies, such as the maintenance of adequate capital, that limit the amount of dividends they can pay. Other than these limitations, no other restrictions exist on the ability of PIB and PNA to make dividend and asset distributions to the Corporation, nor on the ability of PNA's subsidiaries to make distributions to PNA. NOTE 8 - EARNINGS PER COMMON SHARE Earnings per common share (EPS) are calculated based on net income applicable to common stockholders which amounted to $62,102 for the first quarter of 2000 (1999 - $61,577), after deducting the dividends on preferred stock. EPS are based on 135,763,765 average shares outstanding for the first quarter of 2000 (1999 - 135,709,287). NOTE 9 - SUPPLEMENTAL DISCLOSURE ON THE CONSOLIDATED STATEMENTS OF CASH FLOWS During the quarter ended March 31, 2000, the Corporation paid interest and income taxes amounting to $296,768 and $4,157, respectively (1999 - $233,369 and $3,636). In addition, the loans receivable transferred to other real estate and other property for the quarter ended March 31, 2000, amounted to $9,872 and $5,464, respectively (1999 - $3,147 and $5,057). NOTE 10 - SEGMENT REPORTING Popular, Inc. operates three major reportable segments: commercial banking, mortgage and consumer lending, and lease financing. Management has determined its reportable segments based on legal entity, which is the way that operating decisions and performance is measured. These entities have then been aggregated by products, services and markets with similar characteristics. The Corporation's commercial banking segment includes all banking subsidiaries engaged in business in Puerto Rico and the U.S. mainland, which provide individuals, corporations and institutions with commercial and retail banking services, including loans and deposits, trusts, mortgage banking and servicing, asset management, credit cards and other financial services. These services are offered through a delivery system of branches throughout Puerto Rico, the U.S. and British Virgin Islands, New York, Illinois, California, Florida, Texas and New Jersey. The Corporation's mortgage and consumer finance segment includes those non-banking subsidiaries whose principal activity is originating mortgage and consumer loans such as Popular Mortgage, Popular Finance, Equity One and Levitt Mortgage. The Corporation's lease financing segment provides financing for vehicles and equipment through Popular Leasing and Rental, Inc. in Puerto Rico and Popular Leasing, USA in the U.S. mainland. The "Other" category includes all holding companies and non-banking subsidiaries which provide retail financial services, investment banking and broker/dealer activities, as well as those providing ATM processing services, electronic data processing and consulting services, sale and rental of electronic data processing equipment and selling and maintenance of computer software. It also includes the banking operations of Banco Fiduciario in the Dominican Republic. The accounting policies of the segments are the same as those followed by the Corporation in the ordinary course of business and conform with generally accepted accounting principles and with general practices within the financial industry. Following are the results of operations and selected financial information by operating segments for the first quarter of 2000 and 1999. 10 11
Mortgage and Commercial consumer Lease banking lending Financing Other Eliminations Total - --------------------------------------------------------------------------------------------------------- (In thousands) March 31, 2000 - --------------------------------------------------------------------------------------------------------- Net interest income $ 208,354 $ 22,566 $ 11,010 $ 343 $ (33) $ 242,240 Provision for loan losses 38,443 5,483 4,395 1,692 0 50,013 Other income 64,417 10,587 6,310 36,416 (2,004) 115,726 Amortization expense 7,022 161 188 1,221 0 8,592 Depreciation expense 14,216 471 2,422 1,812 0 18,921 Other operating expense 150,787 19,539 6,107 23,608 (1,050) 198,991 Minority interest 1,496 1,496 Income tax 12,351 2,584 1,604 2,482 (265) 18,756 - --------------------------------------------------------------------------------------------------------- Net income $ 49,952 $ 4,915 $ 2,604 $ 7,440 $ (722) $ 64,189 ========================================================================================================= Segment Assets $21,465,088 $2,235,598 $859,451 $6,332,797 $(5,590,909) $25,302,025 ========================================================================================================= Mortgage and Commercial consumer Lease banking lending Financing Other Eliminations Total - -------------------------------------------------------------------------------------------------------- (In thousands) March 31, 1999 - -------------------------------------------------------------------------------------------------------- Net interest income $ 202,243 $ 21,170 $ 10,696 $ 2,143 $ (13) $ 236,239 Provision for loan losses 27,036 6,106 2,629 0 0 35,771 Other income 57,929 13,909 5,050 11,567 (1,398) 87,057 Amortization expense 7,062 84 189 285 0 7,620 Depreciation expense 13,562 375 2,246 1,312 0 17,495 Other operating expense 141,778 17,009 5,558 12,549 (118) 176,776 Minority interest 432 432 Income tax 16,250 4,246 1,937 294 (325) 22,402 - -------------------------------------------------------------------------------------------------------- Net income $ 54,484 $ 7,259 $ 3,187 (298) (968) 63,664 ======================================================================================================== Segment Assets $19,812,764 $1,760,856 $695,302 $5,621,060 $(4,715,907) $23,174,075 ========================================================================================================
During the quarter ended March 31, 2000, the Corporation's Bank Holding Company exercised its conversion right and exchanged its investment in preferred stock of a financial corporation in Puerto Rico for common stock of the same entity, resulting in a $13.4 million gain. This gain is included in "other income" within the "other" reportable segment category. GEOGRAPHIC INFORMATION
MARCH 31, March 31, 2000 1999 - ----------------------------------------------------------------- (IN THOUSANDS) Revenues* Puerto Rico $430,572 $369,777 United States 159,853 132,167 Other 31,102 29,308 - ----------------------------------------------------------------- Total consolidated revenues $621,527 $531,252 =================================================================
* Total revenues include interest income, service charges on deposit accounts, other service fees, gain on sale of securities, trading account profit (loss), and other operating income. 11 12
MARCH 31, March 31, 2000 1999 - ------------------------------------------------------------------------------------------------ (IN THOUSANDS) Selected Balance Sheet Information: Puerto Rico Total assets $17,533,379 $16,616,630 Loans 8,782,436 8,147,861 Deposits 9,734,120 9,427,048 United States Total assets $6,736,396 $5,664,624 Loans 5,742,799 4,684,895 Deposits 3,624,759 3,365,560 Other Total assets $1,032,250 $892,821 Loans 675,696 625,489 Deposits 978,982 784,064
NOTE 11 - POPULAR INTERNATIONAL BANK, INC. (A WHOLLY-OWNED SUBSIDIARY OF POPULAR, INC.) FINANCIAL INFORMATION: The following financial information presents the unaudited consolidated financial position of Popular International Bank, Inc. (PIB) and its subsidiaries, ATH Costa Rica, CreST, S.A., Banco Fiduciario, S.A. and Popular North America, Inc., including Popular Holdings USA, Inc. and its wholly-owned subsidiary Banco Popular North America; Popular Cash Express, Inc. and Equity One, Inc. (second-tier subsidiaries), as of February 29, 2000 and February 28,1999, and their related statement of income, cash flows and comprehensive income for each of the quarters then ended. The results of Popular Holdings USA, Inc. and its subsidiary are included as of March 31, 2000 and 1999. PIB has a fiscal year that ends on November 30. Accordingly, the consolidated financial information of PIB presented below, corresponds to the financial information of PIB included in the consolidated financial statements of Popular, Inc. as of March 31, 2000 and 1999. Popular, Inc. has not presented separate financial statements nor any other disclosures concerning PIB, other than the following financial information, because management has determined that such information is not material to holders of debt securities issued by PIB which are guaranteed by the Corporation. 12 13 POPULAR INTERNATIONAL BANK, INC. CONSOLIDATED STATEMENTS OF CONDITION (UNAUDITED)
February 29, February 28, (In thousands) 2000 1999 - -------------------------------------------------------------------------------------------------------------------------- ASSETS Cash and due from banks $ 217,135 $ 215,652 Money market investments 93,203 107,219 Investment securities available-for-sale, at market value 331,550 376,777 Investment securities held-to-maturity, at cost 49,104 61,558 Trading account securities, at market value Loans held-for-sale 18,384 72,694 Loans $ 5,985,444 $ 4,926,915 Less - Unearned income 72,246 70,632 Allowance for loan losses 99,505 94,300 - -------------------------------------------------------------------------------------------------- ----------- 5,813,693 4,761,983 - -------------------------------------------------------------------------------------------------- ----------- Premises and equipment 137,817 132,514 Other real estate 24,204 21,664 Customers' liabilities on acceptances 7,824 19,737 Accrued income receivable 44,923 38,784 Other assets 129,392 82,003 Intangible assets 150,341 148,073 - -------------------------------------------------------------------------------------------------- ----------- $ 7,017,570 $ 6,038,658 ================================================================================================== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Deposits: Non-interest bearing $ 634,683 $ 629,203 Interest bearing 3,782,391 3,028,600 - -------------------------------------------------------------------------------------------------- ----------- 4,417,074 3,657,803 Federal funds purchased and securities sold under agreements to repurchase 79,116 118,023 Other short-term borrowings 400,503 598,461 Notes payable 1,309,606 862,820 Acceptances outstanding 7,824 19,737 Other liabilities 85,134 69,701 - -------------------------------------------------------------------------------------------------- ----------- 6,299,257 5,326,545 - -------------------------------------------------------------------------------------------------- ----------- 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 subsidiaries 20,135 19,512 - -------------------------------------------------------------------------------------------------- ----------- Stockholders' equity: Common stock 3,962 3,961 Surplus 482,226 470,226 Retained earnings 67,885 68,352 Accumulated other comprehensive (loss) income, net of deferred taxes of ($1,540); (February 28, 1999 - $656) (5,895) 62 - -------------------------------------------------------------------------------------------------- ----------- 548,178 542,601 - -------------------------------------------------------------------------------------------------- ----------- $ 7,017,570 $ 6,038,658 ================================================================================================== ===========
13 14 POPULAR INTERNATIONAL BANK, INC. CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Quarter ended February 29, February 28, ------------ ------------ (In thousands) 2000 1999 ---- ---- INTEREST INCOME: Loans $141,240 $114,572 Money market investments 761 654 Investment securities 5,564 7,308 - ------------------------------------------------------------------------------------- -------- 147,565 122,534 - ------------------------------------------------------------------------------------- -------- INTEREST EXPENSE: Deposits 48,929 37,030 Short-term borrowings 7,513 11,180 Long-term debt 25,200 15,252 - ------------------------------------------------------------------------------------- -------- 81,642 63,462 - ------------------------------------------------------------------------------------- -------- Net interest income 65,923 59,072 Provision for loan losses 13,382 9,595 - ------------------------------------------------------------------------------------- -------- Net interest income after provision for loan losses 52,541 49,477 Service charges on deposit accounts 7,574 6,739 Other service fees 15,128 10,863 Gain on sale of securities 393 Other operating income 4,837 8,746 - ------------------------------------------------------------------------------------- -------- 80,080 76,218 - ------------------------------------------------------------------------------------- -------- OPERATING EXPENSES: Personnel costs: Salaries 27,563 25,051 Profit sharing 181 713 Pension and other benefits 7,265 6,207 - ------------------------------------------------------------------------------------- -------- 35,009 31,971 Net occupancy expense 6,989 6,171 Equipment expenses 5,496 4,122 Other taxes 797 421 Professional fees 8,635 6,560 Communications 3,422 3,229 Business promotion 7,420 5,764 Printing and supplies 2,113 1,897 Other operating expenses 8,877 5,266 Amortization of intangibles 3,717 3,456 - ------------------------------------------------------------------------------------- -------- 82,475 68,857 - ------------------------------------------------------------------------------------- -------- Income before income tax and minority interest (2,395) 7,361 Income tax 745 4,120 Net loss on minority interest 1,496 432 ===================================================================================== ======== NET (LOSS) INCOME $ (1,644) $ 3,673 ===================================================================================== ========
14 15 POPULAR INTERNATIONAL BANK, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the quarters ended February 29, February 28, (In thousands) 2000 1999 - ---------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net (loss) income $ (1,644) $ 3,673 - ---------------------------------------------------------------------------------------------------------------------- Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization of premises and equipment 4,123 3,896 Provision for loan losses 13,382 9,595 Amortization of intangibles 3,717 3,456 Gain on sale of investment securities available-for-sale (393) (Gain) loss on disposition of premises and equipment (14) 2 Gain on sale of loans (3,541) (7,873) Amortization of premiums and accretion of discounts on investments (25) (156) Decrease in loans held-for-sale 68,751 154,944 Amortization of deferred loan fees and costs (817) (470) Net decrease in interest receivable 4,515 2,195 Net increase in other assets (39,884) (18,205) Net decrease in interest payable (21,084) (11,983) Net (decrease) increase in current and deferred taxes (2,528) 6,344 Net increase (decrease) in other liabilities 18,585 (13,496) - ---------------------------------------------------------------------------------------------------------------------- Total adjustments 45,180 127,856 - ---------------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 43,536 131,529 - ---------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Net (increase) decrease in money market investments (4,326) 50,339 Purchases of investment securities held-to-maturity (234) (13) Maturities of investment securities held-to-maturity 20 55,613 Purchases of investment securities available-for-sale (50,763) (1,098,299) Maturities of investment securities available-for-sale 48,371 1,107,291 Sales of investment securities available-for-sale 388 29,971 Net disbursements on loans (557,958) (565,802) Proceeds from sale of loans 213,620 308,535 Capital contribution to subsidiaries (2,969) (72,000) Acquisition of loan portfolios (7,000) Cash received in acquisition 715 Acquisition of premises and equipment (5,960) (6,225) Proceeds from sale of premises and equipment 1,686 352 - ---------------------------------------------------------------------------------------------------------------------- Net cash used in investing activities (357,410) (197,238) - ---------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Net increase (decrease) in deposits 41,698 (69,540) Net increase (decrease) in federal funds purchased and securities sold under agreements to repurchase 38,576 (287,787) Net increase in other short-term borrowings 47,014 68,430 Proceeds from issuance of notes payable 149,857 969,970 Payments of notes payable (1,285) (773,918) Capital contribution received from Parent company 12,000 74,047 - ---------------------------------------------------------------------------------------------------------------------- Net cash provided by (used in) financing activities 287,860 (18,798) - ---------------------------------------------------------------------------------------------------------------------- Net decrease in cash and due from banks (26,014) (84,507 Cash and due from banks at beginning of period 243,149 300,159 - ---------------------------------------------------------------------------------------------------------------------- Cash and due from banks at end of period $ 217,135 $ 215,652 ======================================================================================================================
15 16 POPULAR INTERNATIONAL BANK, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
Quarters ended February 29, February 28, (In thousands) 2000 1999 - ----------------------------------------------------------------------------------------------------------- Net (loss) income $ (1,644) $ 3,673 ------------------------------ Other comprehensive loss, net of tax: Foreign currency translation adjustment (362) (833) Unrealized holding losses arising during the period, net of tax of ($480) (1999 - ($495)) (2,682) (589) Less: reclassification adjustment for gains Included in net income, net of tax of $61 in 1999 91 ------------------------------ Total other comprehensive loss $ (3,044) $ (1,513) ------------------------------ Comprehensive (loss) income $ (4,688) $ 2,160 ==============================
DISCLOSURE OF ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME:
February 29, November 30, February 28, (In thousands) 2000 1999 1999 - ------------------------------------------------------------------------------------------------------- Foreign currency translation adjustment $(1,600) $(1,238) $(1,048) Unrealized (losses) gains on securities (4,295) (1,613) 1,110 ---------------------------------------- Accumulated other comprehensive (loss) income $(5,895) $(2,851) $ 62 ========================================
16 17 NOTE 12 - POPULAR NORTH AMERICA, INC. (A SECOND-TIER SUBSIDIARY OF POPULAR, INC.) FINANCIAL INFORMATION: The following financial information presents the unaudited consolidated financial position of Popular North America, Inc. (PNA) and its wholly-owned subsidiaries, Popular Cash Express, Inc., Equity One, Inc. and Popular Holdings USA, and its wholly-owned subsidiary Banco Popular North America, as of February 29, 2000 and February 28, 1999, and their related statement of income, cash flows and comprehensive income for each of the quarters then ended. The results of Popular Holdings USA, Inc. and its subsidiary are included as of March 31, 2000 and 1999. PNA has a fiscal year that ends on November 30. Accordingly, the consolidated financial information of PNA presented below, corresponds to the financial information of PNA included in the consolidated financial statements of Popular, Inc. as of March 31, 2000 and 1999. Popular, Inc. has not presented separate financial statements nor any other disclosures concerning PNA, other than the following financial information, because management has determined that such information is not material to holders of debt securities issued by PNA which are guaranteed by the Corporation. 17 18 POPULAR NORTH AMERICA, INC. CONSOLIDATED STATEMENTS OF CONDITION (UNAUDITED)
February 29, February 28, ------------ ------------ (In thousands) 2000 1999 - ---------------------------------------------------------------------------------- ------------ ASSETS Cash and due from banks $ 176,218 $ 160,111 Money market investments 58,943 75,692 Investment securities available-for-sale, at market value 316,863 338,979 Investment securities held-to-maturity, at cost 49,104 61,558 Trading account securities, at market value Loans held-for-sale 18,384 72,694 Loans $ 5,728,219 $4,672,679 Less - Unearned income 72,246 70,632 Allowance for loan losses 77,733 69,578 - ---------------------------------------------------------------------------------- ----------- 5,578,240 4,532,469 - ---------------------------------------------------------------------------------- ----------- Premises and equipment 110,681 104,025 Other real estate 12,264 14,868 Customers' liabilities on acceptances 868 292 Accrued income receivable 40,018 35,016 Other assets 94,879 51,376 Intangible assets 137,695 145,053 - ---------------------------------------------------------------------------------- ----------- $ 6,594,157 $5,592,133 ================================================================================== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Deposits: Non-interest bearing $ 588,452 $ 588,921 Interest bearing 3,542,098 2,776,638 - ---------------------------------------------------------------------------------- ----------- 4,130,550 3,365,559 Federal funds purchased and securities sold under agreements to repurchase 79,116 116,023 Other short-term borrowings 367,111 567,283 Notes payable 1,274,974 823,274 Acceptances outstanding 868 292 Other liabilities 78,841 59,471 - ---------------------------------------------------------------------------------- ----------- 5,931,460 4,931,902 - ---------------------------------------------------------------------------------- ----------- Preferred beneficial interests in Popular North America's junior subordinated deferrable interest debentures guaranteed by the Corporation 150,000 150,000 - ---------------------------------------------------------------------------------- ----------- Stockholders' equity: Common stock 2 2 Surplus 439,964 439,964 Retained earnings 74,764 69,417 Accumulated other comprehensive (loss) income, net of deferred taxes of $(1,540); (February 28, 1999 - $656) (2,033) 848 - ---------------------------------------------------------------------------------- ---------- 512,697 510,231 - ---------------------------------------------------------------------------------- ---------- $ 6,594,157 $5,592,133 ================================================================================== ==========
18 19 POPULAR NORTH AMERICA, INC. CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Quarter ended February 29, February 28, ------------ ------------ (In thousands) 2000 1999 ---- ---- INTEREST INCOME: Loans $127,637 $101,146 Money market investments 562 715 Investment securities 5,512 5,991 - ------------------------------------------------------------------- -------- 133,711 107,852 - ------------------------------------------------------------------- -------- INTEREST EXPENSE: Deposits 40,079 26,998 Short-term borrowings 6,480 9,708 Long-term debt 23,927 14,817 - ------------------------------------------------------------------- -------- 70,486 51,523 - ------------------------------------------------------------------- -------- Net interest income 63,225 56,329 Provision for loan losses 11,690 9,595 - ------------------------------------------------------------------- -------- Net interest income after provision for loan losses 51,535 46,734 Service charges on deposit accounts 6,417 5,714 Other service fees 13,326 9,083 Gain on sale of securities 389 Other operating income 3,865 8,221 - ------------------------------------------------------------------- -------- 75,143 70,141 - ------------------------------------------------------------------- -------- OPERATING EXPENSES: Personnel costs: Salaries 24,462 22,187 Profit sharing 181 713 Pension and other benefits 6,975 5,777 - ------------------------------------------------------------------- -------- 31,618 28,677 Net occupancy expense 6,321 5,341 Equipment expenses 3,887 3,106 Other taxes 494 357 Professional fees 7,842 5,939 Communications 3,108 2,724 Business promotion 7,135 5,428 Printing and supplies 1,822 1,783 Other operating expenses 6,675 4,609 Amortization of intangibles 3,497 3,336 - ------------------------------------------------------------------- -------- 72,399 61,300 - ------------------------------------------------------------------- -------- Income before income tax 2,744 8,841 Income tax 1,985 4,477 =================================================================== ======== NET INCOME $ 759 $ 4,364 =================================================================== ========
19 20 POPULAR NORTH AMERICA, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the quarters ended February 29, February 28, (In thousands) 2000 1999 - -------------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 759 $ 4,364 - -------------------------------------------------------------------------------------------------------- Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization of premises and equipment 2,954 2,666 Provision for loan losses 11,690 9,595 Amortization of intangibles 3,497 3,336 Gain on sale of investment securities available-for-sale (389) Gain (loss) on disposition of premises and equipment (14) 2 Gain on sale of loans (3,541) (7,873) Amortization of premiums and accretion of discounts on investments (25) (156) Decrease in loans held-for-sale 68,751 154,944 Amortization of deferred loan fees and costs (817) (470) Net decrease (increase) in interest receivable 4,108 (236) Net increase in other assets (41,743) (8,908) Net decrease in interest payable (21,084) (12,001) Net (decrease) increase in current and deferred taxes (3,407) 4,434 Net increase (decrease) in other liabilities 25,674 (12,225) - -------------------------------------------------------------------------------------------------------- Total adjustments 46,043 132,719 - -------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 46,802 137,083 - -------------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Net (increase) decrease in money market investments (2,822) 33,181 Purchases of investment securities held-to-maturity (234) (13) Maturities of investment securities held-to-maturity 20 55,613 Purchases of investment securities available-for-sale (50,763) (1,069,597) Maturities of investment securities available-for-sale 47,445 1,107,291 Sales of investment securities available-for-sale 388 29,971 Net disbursements on loans (548,747) (572,414) Proceeds from sale of loans 213,620 308,535 Capital contribution to subsidiaries (143,320) Acquisition of loan portfolios (7,000) Acquisition of premises and equipment (4,182) (6,256) Proceeds from sale of premises and equipment 1,612 27 - -------------------------------------------------------------------------------------------------------- Net cash used in investing activities (343,663) (263,982) - -------------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Net increase (decrease) in deposits 48,217 (42,129) Net increase (decrease) in federal funds purchased and securities sold under agreements to repurchase 38,576 (289,787) Net increase in other short-term borrowings 42,206 80,728 Proceeds from issuance of notes payable 149,963 969,770 Payments of notes payable (773,918) Capital contribution received from Parent company 143,806 - -------------------------------------------------------------------------------------------------------- Net cash provided by financing activities 278,962 88,470 - -------------------------------------------------------------------------------------------------------- Net decrease in cash and due from banks (17,899) (38,429) Cash and due from banks at beginning of period 194,117 198,540 - -------------------------------------------------------------------------------------------------------- Cash and due from banks at end of period $ 176,218 $ 160,111 ========================================================================================================
20 21 POPULAR NORTH AMERICA, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
Quarters ended February 29, February 28, (In thousands) 2000 1999 - -------------------------------------------------------------------------------------------- Net Income $ 759 $ 4,364 ------------------------- Other comprehensive loss, net of tax: Unrealized holding losses arising during the period, net of tax of $(480) (1999 - $(495)) (470) (756) Less: reclassification adjustment for gains Included in net income, net of tax of $61 in 1999 91 ------------------------- Total other comprehensive loss $(470) $ (847) ------------------------- Comprehensive income $ 289 $ 3,517 =========================
DISCLOSURE OF ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME:
February 29, November 30, February 28, (In thousands) 2000 1999 1999 - ------------------------------------------------------------------------------------------------------------ Unrealized (losses) gains on securities $(2,034) $(1,564) $848 ------------------------------------------------ Accumulated other comprehensive (loss) income $(2,034) $(1,564) $848 ================================================
21 22 TABLE A ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------------------------------------------------------- AT MARCH 31, AVERAGE FOR THE QUARTER BALANCE SHEET HIGHLIGHTS 2000 1999 Change 2000 1999 Change (In thousands) - --------------------------------------------------------------------------------------------------------------------------------- Money market investments $ 892,652 $ 865,612 $ 27,040 $ 851,516 $ 694,307 $ 157,209 Investment and trading securities 7,509,220 7,302,677 206,543 7,877,471 7,361,873 515,598 Loans 15,200,931 13,458,245 1,742,686 15,027,521 13,201,405 1,826,116 Total assets 25,302,025 23,174,075 2,127,950 25,466,481 22,695,779 2,770,702 Deposits 14,337,861 13,576,672 761,189 14,147,519 13,578,244 569,275 Borrowings 8,833,572 7,401,790 1,431,782 9,016,053 7,036,406 1,979,647 Stockholders' equity 1,682,293 1,704,482 (22,189) 1,815,021 1,657,898 157,123 - --------------------------------------------------------------------------------------------------------------------------------- FIRST QUARTER OPERATING HIGHLIGHTS 2000 1999 Change (In thousands, except per share information) - --------------------------------------------------------------------------------------------------------------------------------- Net interest income $ 242,240 $ 236,239 $ 6,001 Provision for loan losses 50,013 35,771 14,242 Fees and other income 115,726 87,057 28,669 Other expenses 243,764 223,861 19,903 Net loss of minority interest 1,496 432 1,064 Net income $ 64,189 $ 63,664 $ 525 Net income applicable to common stock $ 62,102 $ 61,577 $ 525 Earnings per common share 0.46 0.45 0.01 - --------------------------------------------------------------------------------------------------------------------------------- SELECTED STATISTICAL FIRST QUARTER Information 2000 1999 - --------------------------------------------------------------------------------------------------------------------------------- COMMON STOCK DATA- Market price High $ 26.88 $ 37.88 Low 18.63 30.88 End 22.19 30.88 Book value at period ended 11.66 11.82 Dividends declared 0.16 0.14 Dividend payout ratio 34.98% 30.84% Price/earnings ratio 11.99X 18.06x - --------------------------------------------------------------------------------------------------------------------------------- PROFITABILITY RATIOS - Return on assets 1.01% 1.14% Return on common equity 14.57 16.03 Net interest spread (taxable equivalent) 3.60 4.02 Net interest yield (taxable equivalent) 4.42 4.84 Effective tax rate 23.03 26.16 Overhead ratio 45.73 48.61 - ----------------------------------------------------------------------------------------------------------------------------------- CAPITALIZATION RATIOS - Equity to assets 7.13% 7.31% Tangible equity to assets 6.01 6.19 Equity to loans 12.08 12.56 Internal capital generation 8.90 10.27 Tier I capital to risk - adjusted assets 10.04 10.73 Total capital to risk - adjusted assets 12.09 12.98 Leverage ratio 6.32 6.69
22 23 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This financial review contains the analysis of the consolidated financial position and financial performance of Popular, Inc. and its subsidiaries (the Corporation) and should be read in conjunction with the consolidated financial statements, tables and notes included in this report. The Corporation is a diversified bank holding company, which offers a wide range of products and services through its subsidiaries and is engaged in the following businesses: - Commercial Banking - Banco Popular de Puerto Rico (BPPR), Banco Popular North America (BPNA) and Banco Fiduciario, S.A. (BF) - Lease Financing - Popular Leasing and Rental, Inc. and Popular Leasing, U.S.A. - Consumer and Mortgage Banking - Popular Mortgage, Inc., Equity One, Inc. Popular Finance, Inc. and Newco Mortgage Holding Corporation (d/b/a Levitt Mortgage, Inc.) - Broker/dealer - Popular Securities, Inc. - ATM Processing and Information Technology Services - GM Group, ATH Costa Rica and CreST, S.A. - Retail Financial Services - Popular Cash Express, Inc. NET INCOME The Corporation's net income amounted to $64.2 million for the first quarter of 2000, compared with $63.7 million for the same quarter of 1999. Earnings per common share (EPS) for the quarter were $0.46 compared with $0.45 reported in the first quarter of 1999. Net earnings for the last quarter of 1999 were $65.7 million or $0.47 per common share. Return on assets (ROA) and return on common equity (ROE) for the quarter ended March 31, 2000 were 1.01% and 14.57%, respectively, compared with 1.14% and 16.03% for the same period in 1999 and 1.05% and 15.06% for the last quarter of 1999. The Corporation's results of operations for the quarter ended March 31, 2000 reflected increases of $6.0 million in net interest income and $28.7 million in other revenues when compared with the same quarter of 1999. Operating expenses rose $24.6 million and the provision for loan losses increased $14.2 million. NET INTEREST INCOME Net interest income for the first quarter of 2000 reached $242.2 million, compared with $236.2 million in the same period of 1999. On a taxable equivalent basis, net interest income increased to $262.7 million from $256.1 million reported in the same quarter of 1999. The growth of $6.6 million in net interest income on a taxable equivalent basis from the first quarter of 1999 resulted from a $20.6 million increase mainly attributable to a higher volume of earning assets, partially offset by a $14.0 million decrease due to a lower net interest yield. For analytical purposes, the interest earned on tax-exempt assets is adjusted to a taxable equivalent basis assuming the applicable statutory income tax rates. Table B summarizes the changes in the composition of average earning assets and interest bearing liabilities, and their respective interest income and expense and yields and costs, on a taxable equivalent basis, for the first quarter of 2000, as compared with the same quarter in 1999. 23 24 TABLE B ANALYSIS OF LEVELS AND YIELDS ON A TAXABLE EQUIVALENT BASIS QUARTER ENDED ON MARCH 31,
Average Volume Average Yields - ------------------------------------------------------------------------- 2000 1999 Variance 2000 1999 Variance - ------------------------------------------------------------------------- $(in millions) $ 852 $ 695 $ 157 6.26% 4.63% 1.63% Money market investments 7,645 7,044 601 6.66 7.05 (0.39) Investment securities 232 318 (86) 8.10 6.51 1.59 Trading - ------------------------------------------------------------------------- $ 8,729 $ 8,057 $ 672 6.66 6.82 (0.16) - ------------------------------------------------------------------------- Loans: 7,021 6,103 918 9.45 9.14 0.31 Commercial 671 621 50 12.88 13.10 (0.22) Leasing 4,011 3,318 693 8.54 8.14 0.40 Mortgage 3,325 3,159 166 13.15 13.03 0.12 Consumer - ------------------------------------------------------------------------- 15,028 13,201 1,827 10.18 10.00 0.18 - ------------------------------------------------------------------------- $23,757 $21,258 $2,499 8.88% 8.80% 0.08% TOTAL EARNING ASSETS ========================================================================= Interest bearing deposits: $ 1,688 $1,673 $ 15 3.36% 3.16% 0.20% NOW and money market 4,128 4,163 (35) 2.91 2.98 (0.07) Savings 5,260 4,750 510 6.00 5.74 0.26 Time deposits - ------------------------------------------------------------------------- 11,076 10,586 490 4.45 4.25 0.20 - ------------------------------------------------------------------------- 6,803 5,383 1,420 6.08 5.23 0.85 Short-term borrowings 2,213 1,653 560 6.95 6.79 0.16 Medium and long-term debt - ------------------------------------------------------------------------- 20,092 17,622 2,470 5.28 4.78 0.50 TOTAL INTEREST-BEARING LIABILITIES 3,072 2,992 80 Demand deposits 593 644 (51) Other sources of funds - ------------------------------------------------------------------------- $23,757 $21,258 $2,499 4.46% 3.96% 0.50% ========================================================================= 4.42% 4.84% (0.42)% NET INTEREST MARGIN AND ====================================== NET INTEREST INCOME 3.60% 4.02% (0.42)% NET INTEREST SPREAD ====================================== Taxable equivalent adjustment Net interest income Variance Interest Attributable to --------------------------------------------------------------------------------------- 2000 1999 Variance Rate Volume --------------------------------------------------------------------------------------- (in thousands) Money market investments $ 13,248 $ 7,932 $ 5,316 $ 5,391 $ (75) Investment securities 127,073 123,348 3,725 (7,021) 10,746 Trading 4,672 5,105 (433) 1,124 (1,557) --------------------------------------------------------------------------------------- 144,993 136,385 8,608 (506) 9,114 --------------------------------------------------------------------------------------- Loans: Commercial 165,022 137,552 27,470 6,085 21,385 Leasing 21,610 20,357 1,253 (347) 1,600 Mortgage 85,635 67,478 18,157 3,484 14,673 Consumer 109,022 102,329 6,693 238 6,455 --------------------------------------------------------------------------------------- 381,289 327,716 53,573 9,460 44,113 --------------------------------------------------------------------------------------- TOTAL EARNING ASSETS $526,282 $464,101 $62,181 $ 8,954 $ 53,227 ======================================================================================= Interest bearing deposits: NOW and money market $ 14,099 $ 13,036 $ 1,063 $ 925 $ 138 Savings 29,887 30,573 (686) (531) (155) Time deposits 78,488 67,214 11,274 8,294 2,980 --------------------------------------------------------------------------------------- 122,474 110,823 11,651 8,688 2,963 --------------------------------------------------------------------------------------- Short-term borrowings 102,825 69,374 33,451 13,196 20,255 Medium and long-term debt 38,262 27,759 10,503 1,045 9,458 --------------------------------------------------------------------------------------- TOTAL INTEREST-BEARING 263,561 207,956 55,605 22,929 32,676 LIABILITIES Demand deposits Other sources of funds --------------------------------------------------------------------------------------- NET INTEREST MARGIN AND NET INTEREST INCOME 262,721 256,145 6,576 $ (13,975) $ 20,551 =========================== NET INTEREST SPREAD Taxable equivalent adjustment 20,481 19,906 575 --------------------------------------------------- Net interest income $242,240 $236,239 $ 6,001 ===================================================
Note: The changes that are not due solely to volume or rate are allocated to volume and rate based on the proportion of the change in each category. Average earning assets rose $2.5 billion primarily due to a higher average loan portfolio, which grew by $1.8 billion when compared with the same quarter of 1999. Commercial loans and mortgage loans accounted for 88% of the total average loan increase, resulting primarily from the Corporation's efforts directed to the retail and middle markets and to higher loan origination and refinancing activity during 1999, as a result of the prevailing interest rate environment for these activities and to the Corporation's marketing campaigns. The increase in average investment securities, when compared with the first quarter of 1999, reflects increased investment portfolio activity, primarily in the last two quarters of 1999. The category that increased the most was U.S. Agency securities, which increased by $1.2 billion over the average balance in the first quarter of 1999. The income derived from these securities is exempt for income tax purposes in Puerto Rico. The increase in the volume of loans was funded mainly through a higher average volume of borrowings and interest bearing deposits, mainly time deposits. The increase in borrowed funds was also used to fund the Corporation's business expansion and for investment portfolio opportunities. 24 25 The net interest margin, on a taxable equivalent basis, for the quarter ended March 31, 2000 was 4.42% compared with 4.84% for the first quarter of 1999. This reduction resulted primarily from an increase of 50 basis points in the average cost of interest bearing liabilities, mostly due to a higher interest rate scenario and a higher proportion of short-term borrowings, which grew by 26% from the first quarter of 1999 and represented 57% of the Corporation's growth in average interest-bearing liabilities when compared to the average balances reported for the first quarter of 1999. Since the last few months of 1999, the cost of short-term financing increased substantially, as money market rates increased as a result of a tightening policy by the Fed commencing in the latter part of 1999. In addition, the average cost of interest bearing deposits increased by 20 basis points when compared with the first quarter of 1999, primarily related to a higher cost in time deposits due in part to the higher cost of longer term money and the increases in rates during the latter part of 1999 and the first quarter of 2000. The rise in the cost of funds was partially offset by an increase in the average yield on earning assets, which increased, on a taxable equivalent basis, eight basis points from 8.80% for the first quarter of 1999 to 8.88% during the first quarter of 2000. This improvement is primarily related to the increase of 18 basis points in the average yield on loans, partially offset by a lower yield on investment securities. MARKET RISK Market risk is the risk of economic loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates, commodity prices, and other relevant market or price changes. The Corporation's primary market risk exposure is that to interest rates, as primarily interest rate volatility and its impact on the repricing of assets and liabilities affect the net interest income. The Corporation maintains a formal asset and liability management process to quantify, monitor and control interest rate risk and to assist management in maintaining stability in the net interest margin under varying interest rate environments. The Corporation uses various techniques to assess the degree of interest rate risk, including static gap analysis, simulation and duration analysis. Each focuses on different aspects of the interest rate risk that is assumed at any point in time, and are therefore used jointly to make informed judgements about the risk levels and the appropriateness of strategies under consideration. An interest rate sensitivity analysis, performed at the Corporation level, is the primary tool used in expressing the potential loss in future earnings resulting from selected hypothetical changes in interest rates. Sensitivity analysis is calculated on a monthly basis using a simulation model which incorporates actual balance sheet figures detailed by maturity and interest yields or costs, the expected balance sheet dynamics, reinvestments, and other non-interest related data. Simulations are processed using various interest rate scenarios to determine potential changes to the future earnings of the Corporation. Computations of the prospective effects of hypothetical interest rate changes are based on many assumptions, including relative levels of market interest rates, loan prepayments and deposit decay. They should not be relied upon as indicative of actual results. Further, the computations do not contemplate actions that management could take to respond to changes in interest rates. By their nature, these forward-looking choices are only estimates and may be different from what actually may occur in the future. Based on the results of the sensitivity analysis as of March 31, 2000, the change in net interest income on a hypothetical rising rate scenario for the next twelve months was a $7.3 million increase and the change for the same period utilizing a hypothetical declining rate scenario was a decrease of $7.5 million. Both hypothetical rate scenarios consider a gradual change of 150 basis points during the twelve-month period. These estimated changes are well within the policy guidelines established by the Board. 25 26 In the course of its business, the Corporation occasionally enters into foreign exchange transactions as an intermediary primarily for its commercial and retail clients. Any risk assumed by these transactions is immediately offset in the foreign exchange markets. Management therefore believes that the market risk assumed by the Corporation in its foreign currency transactions is not significant. The Corporation is the largest shareholder of BF, a commercial banking institution in the Dominican Republic (DR), with a 57% ownership interest. Most of BF's business is conducted in Dominican `pesos' (DR$). Local (DR) regulations limit the ability of BF to assume unhedged foreign currency positions. The value of the Corporation's investment in BF may be affected prospectively by fluctuations in future exchange rates between the DR$ and US$. However, management does not expect future exchange rate volatility between these two currencies to affect significantly the value of the Corporation's investment in BF. PROVISION AND ALLOWANCE FOR LOAN LOSSES The provision for loan losses totaled $50.0 million for the first quarter of 2000, an increase of 39.8% when compared with $35.8 million for the same quarter of 1999. For the fourth quarter of 1999, the provision was $39.5 million. The increase in the provision for loan losses resulted from a rise in the Corporation's loan portfolio, increases in non-performing assets and net charge-offs. This increase was considered necessary to maintain the adequacy of the allowance for loan losses and to adjust for changes in the potential losses embedded in the portfolio due to changes in credit quality. Net charge-offs for the quarter ended March 31,2000, reached $48.6 million or 1.29% of average loans, compared with $25.9 million or 0.78% reported for the same period in 1999, and $36.1 million or 0.99% for the fourth quarter of 1999. The rise primarily reflected higher net charge-offs in the consumer, commercial loan and lease financing portfolios. Table C summarizes the movement in the allowance for loan losses and presents selected loan loss statistics for the quarters ended March 31, 2000 and 1999. Consumer loans net charge-offs totaled $26.2 million or 3.15% of average consumer loans in the first quarter of 2000, compared with $14.5 million or 1.84% in the first quarter of 1999. The increases experienced since March 31, 1999 were mostly in the credit card and personal loan portfolios in both, Puerto Rico and the U.S. mainland. Lease financing net charge-offs totaled $5.0 million or 3.0% of the average lease financing portfolio for the quarter ended March 31, 2000, compared with $1.9 million or 1.24% for the same quarter last year. Economic factors such as the increase in personal delinquencies coupled with lower recovery activity were factors contributing to the increase. Commercial loans net charge-offs, including construction loans, increased $7.9 million for the quarter ended March 31, 2000, when compared with the same quarter in 1999. This increase was partly related to the rise in the commercial loan portfolio, as well as the deterioration in the credit quality of a limited number of commercial relationships, which included a $3 million charge-off of a commercial relationship in BPPR and a $2.4 million charge-off of a relationship in BPNA. Commercial and construction loans net charge-offs represented 0.97% of the average balance of those loans for the quarter ended March 31, 2000, compared with 0.58% for the same quarter last year. 26 27 TABLE C ALLOWANCE FOR LOAN LOSSES AND SELECTED LOAN LOSSES STATISTICS
FIRST QUARTER (Dollars in thousands) 2000 1999 - ------------------------------------------------------------------------- Balance at beginning of period $292,010 $267,249 Provision for loan losses 50,013 35,771 ------------------------- 342,023 303,020 ------------------------- Losses charged to the allowance: Commercial 19,488 11,296 Construction 141 500 Lease financing 7,398 5,846 Mortgage 642 943 Consumer 32,198 20,572 ------------------------- 59,867 39,157 ------------------------- Recoveries: Commercial 2,861 2,972 Construction 2 Lease financing 2,371 3,918 Mortgage 61 294 Consumer 5,993 6,067 ------------------------- 11,286 13,253 ------------------------- Net loans charged-off (recovered): Commercial 16,627 8,324 Construction 141 498 Lease financing 5,027 1,928 Mortgage 581 649 Consumer 26,205 14,505 ------------------------- 48,581 25,904 ------------------------- Balance at end of period $293,442 $277,116 ========================= Ratios: Allowance for losses to loans 1.93% 2.06% Allowance to non-performing assets 81.23 92.81 Allowance to non-performing loans 89.25 103.10 Non-performing assets to loans 2.38 2.22 Non-performing assets to total assets 1.43 1.29 Net charge-offs to average loans 1.29 0.78 Provision to net charge-offs 1.03X 1.38x Net charge-offs earnings coverage 2.71 4.69
At March 31, 2000, the allowance for loan losses was $293.4 million, representing 1.93% of loans, compared with $277.1 million or 2.06% a year earlier, and $292.0 million or 1.96% at December 31, 1999. The allowance for loan losses is maintained at a level which is considered by management to be sufficient to provide for estimated losses based on evaluations of known and inherent risks in the loan portfolio. The Corporation's management evaluates the adequacy of the allowance for loan losses on a monthly basis. In determining the allowance, management considers the portfolio risk characteristics, the results of periodic credit reviews of individual loans, prior loss experience, prevailing and projected economic conditions and loan impairment measurement. 27 28 The Corporation has defined impaired loans as all loans with interest and/or principal past due 90 days or more and other specific loans for which, based on current information and events, it is probable that the debtor will be unable to pay all amounts due according to the contractual terms of the loan agreement. Loan impairment is measured based on the present value of expected future cash flows discounted at the loan's effective rate, on the observable market price of the loan or on the fair value of the collateral if the loan is collateral dependent. Large groups of smaller balance homogeneous loans are collectively evaluated for impairment based on past experience, adjusted for current conditions. All other loans are evaluated on a loan-by-loan basis. Impaired loans for which the discounted cash flows, collateral value or market price equals or exceeds its carrying value do not require an allowance. The allowance for impaired loans is part of the Corporation's overall allowance for loan losses. The following table shows the Corporation's recorded investment in impaired loans and the related valuation allowance calculated under SFAS No. 114 (as amended by SFAS No. 118) at March 30, 2000 and March 31, 1999.
March 31, 2000 March 31, 1999 -------------- -------------- Recorded Valuation Recorded Valuation Investment Allowance Investment Allowance ---------- --------- ---------- --------- (In millions) Impaired loans: Valuation allowance required $152.9 $55.3 $136.4 $ 36.6 No valuation allowance required 39.1 36.8 ------ ----- ------ ------ Total impaired loans $192.0 $55.3 $173.2 $ 36.6 ====== ===== ====== ======
Average impaired loans during the first quarter of 2000 and 1999 were $178 million and $171 million, respectively. The Corporation recognized interest income on impaired loans of $1.2 million during the first quarter of 2000 and $1.8 million during the same period of 1999. CREDIT QUALITY Non-performing assets (NPA) consist of past-due loans on which no interest income is being accrued, renegotiated loans and real estate acquired through foreclosure. Non-performing assets as of March 31, 2000 amounted to $361.2 million or 2.38% as a percentage of total loans, compared with $298.6 million or 2.22% at March 31, 1999 and $326.1 million or 2.19% at December 31, 1999. A summary of non-performing assets by loan categories and related ratios is presented in Tables C and D. 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 industry practice for most U.S. banks which is 90 days. Financing leases, conventional mortgages and close-end consumer loans are placed on non-accrual status if payments are delinquent 90 days. Closed-end consumer loans are charged-off when payments are 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 industry practice for most U.S. banks, close-end consumer loans are charged-off when delinquent 120 days, but are not customarily placed on non-accrual status prior to being charged-off. 28 29 TABLE D NON-PERFORMING ASSETS
- ------------------------------------------------------------------------------------------- MARCH 31, December 31, March 31, 2000 1999 1999 - ------------------------------------------------------------------------------------------- (Dollars in thousands) Commercial, construction, industrial and agricultural $196,457 $165,472 $148,334 Lease financing 3,818 3,820 4,481 Mortgage 74,493 70,038 69,419 Consumer 54,031 57,515 46,555 Other real estate 32,448 29,268 29,800 --------------------------------------------- Total $361,247 $326,113 $298,589 ============================================= Accruing loans past-due 90 days or more $ 29,434 $ 28,731 $ 24,712 ============================================= Non-performing assets to loans 2.38% 2.19% 2.22% Non-performing assets to assets 1.43 1.28 1.29
Assuming the standard industry practice of placing commercial loans on non-accrual status when payments of principal and interest are past due 90 days or more and excluding the closed-end consumer loans from non-accruing, the Corporation's non-performing assets at March 31, 2000, would have been $274 million or 1.80% of loans, and the allowance for loan losses would have been 107.2% of non-performing assets. At March 31, 1999 and December 31, 1999, adjusted non-performing assets would have been $226 million or 1.68% of loans and $247 million or 1.66% of loans, respectively, and the allowance to non-performing assets would have been 122.6% and 118.2%, respectively. As Table D presents, the increase in non-performing loans is principally due to higher non-performing commercial and mortgage loans, which increased $31.0 million and $4.5 million, respectively, from December 31, 1999. The rise in commercial non-performing loans corresponded principally to the classification on non-accrual of a limited number of commercial loan relationships in Puerto Rico and the United States. The increase in non-performing mortgage loans from December 31, 1999 was principally due to the growth in the mortgage loan portfolio and higher delinquency levels. As shown in Table D, the other real estate category also reflected an increase of $3.2 million from the end of 1999, principally as a result of various properties repossessed by the Corporation's banking subsidiary in the Dominican Republic. The rises described above were partially offset by a decrease of $3.5 million in non-performing consumer loans when compared with December 31, 1999. Non-performing consumer loans represented 1.63% of the average consumer loan portfolio at March 31, 2000 compared with 1.82% at December 31, 1999. This decrease mainly resulted from the fact that the growth in consumer loans was derived mainly from credit cards, which are not customarily placed on non-accrual status prior to being charged-off. 29 30 NON-INTEREST INCOME Total non-interest income, including securities and trading gains, amounted to $115.7 million for the first quarter of 2000, compared with $87.1 million for the same quarter in 1999, an increase of $28.6 million or 32.9%. This rise was driven by increases of $12.8 million in gain on sale of securities, $9.5 million in other service fees, $3.3 million in other operating income and $2.0 million in service charges on deposit accounts. During the first three months of 2000, the Corporation realized net gains on sale of securities of $13.3 million compared with $0.5 million for the same period in 1999. During this quarter, the Corporation exercised its conversion right and exchanged its investment in preferred stock of a financial corporation in Puerto Rico for common stock of the same entity, resulting in a $13.4 million gain. Also, during the quarter, the Corporation realized gains on trading transactions of $0.8 million compared with losses of $0.3 million for the same quarter last year. As shown in Table E, the increase in other service fees, when compared with the same period in 1999 was mostly attributed to higher processing fees primarily due to the acquisition of GM Group in July 1999. The increase in credit card fees and discounts was driven by the growth of 33.1% in credit card active accounts and to higher credit card sales both in Puerto Rico and the United States. Check cashing fees also rose, mainly driven by the Corporation's continued expansion of its retail financial business through Popular Cash Express. In addition, external payment fees reflected growth mainly due to higher transaction volume and revisions to transaction rates. These rises were partially tempered by lower fees on debit card transactions, credit life insurance and on the sale and administration of investment products. The latter related mostly to the fact that a new mutual fund was issued by the Corporation's broker/dealer subsidiary in the first quarter of 1999, while none was issued the first quarter of 2000. The increase in other operating income was fueled mainly by fees generated by the Corporation's investment in Telecomunicaciones de Puerto Rico, Inc. and other revenues derived by GM Group, such as programming fees, consulting services for new technology and engineering and system services, among others. The increase in service charges on deposit accounts was mainly due to the higher activity on commercial and retail accounts and a higher volume of deposits. 30 31 TABLE E NON-INTEREST INCOME
First Quarter - ----------------------------------------------------------------------------------------------- 2000 1999 Change - ----------------------------------------------------------------------------------------------- (Dollars in thousands) Service charges on deposit accounts $ 30,223 $28,249 $ 1,974 Other service fees: Credit cards fees and discounts 14,370 12,136 2,234 Processing fees 6,169 6,169 Other fees 6,042 5,035 1,007 Debit card fees 4,891 5,434 (543) Sale and administration of investment products 3,914 4,498 (584) Check cash fees 3,530 2,202 1,328 Mortgage servicing fees, net of amortization 2,746 3,022 (276) Trust fees 2,414 2,459 (45) Credit life insurance fees 1,751 2,173 (422) External payments fees 1,538 950 588 --------------------------------------- Subtotal 47,365 37,909 9,456 --------------------------------------- Other operating income 24,057 20,731 3,326 --------------------------------------- Total $101,645 $86,889 $14,756 =======================================
OPERATING EXPENSES Operating expenses for the first quarter of 2000 were $226.5 million compared with $201.9 million for the same quarter in 1999, an increase of $24.6 million or 12.2%. Personnel costs, the largest category of operating expenses, totaled $103.2 million for the first three months of 2000, compared with $96.0 million for the same period in 1999, an increase of $7.2 million or 7.5%. Salaries accounted for the largest portion of the increase in personnel costs, rising $8.4 million or 12% when compared with the first quarter of 1999, reflecting the acquisition of GM Group, the continued business expansion and annual merit increases. Full-time equivalent employees (FTE's) amounted to 11,591 at the end of this quarter, up 975 from 10,616 FTE's at the same date in 1999. Partially offsetting the increase in salaries was a decrease of $2.2 million in profit sharing expense at the Corporation's banking subsidiaries when compared with the first quarter of 1999. Other operating expenses, excluding personnel costs, increased $17.4 million when compared with the first quarter of 1999. Business promotion rose $3.1 million, primarily as a result of the launching of a new institutional advertising campaign in Puerto Rico during the last quarter of 1999 and additional advertising efforts pertaining to the mortgage banking business in the U.S. mainland. Moreover, equipment expenses rose $2.7 million mostly due to the aforementioned acquisition of GM Group and higher expenses related to the depreciation of new equipment and software upgrades acquired throughout 1999 as part of the Y2K plan. The increase in professional fees of $2.4 million resulted mainly from consulting and temporary services needed to support the growth of the Corporation's business activity, coupled with the legal and consulting expenses incurred in connection with 31 32 enhancing and improving Banco Popular de Puerto Rico's anti-money laundering policies and procedures as agreed with the Federal Reserve Bank of New York during this quarter. Furthermore, other operating expenses grew $5.5 million primarily due to higher sundry losses, traveling and other miscellaneous expenses. Income tax expense decreased $3.6 million from $22.4 million in the first quarter of 1999, to $18.8 million in the same quarter this year, primarily as a result of a lower income before tax combined with higher income subject to a capital gains tax rate. The effective tax rate for the first quarter of 2000 was 23.0% compared with 26.2% for the same period in 1999. BALANCE SHEET COMMENTS Total assets as of March 31, 2000 reached $25.3 billion compared with $23.2 billion as of the same date a year earlier. Total assets at December 31, 1999, were $25.5 billion. Earning assets totaled $23.6 billion at March 31, 2000, compared with $23.8 billion at December 31, 1999 and $21.6 billion at March 31, 1999. The investment portfolio reached $7.3 billion as of March 31, 2000, a decrease of $324 million when compared with $7.6 billion as of December 31, 1999. Investment securities as of March 31, 1999 amounted to $7.0 billion. Money market investments decreased $93.3 million and trading account securities decreased $28.1 million when compared with December 31, 1999. As shown in Table F, the loan portfolio increased $293 million as compared with December 31, 1999, of which $216 million were in commercial and $46 million in mortgage loans. The growth in the commercial loan portfolio resulted principally from the continued marketing efforts directed to the retail and middle market and the sustained growth in Puerto Rico and the expansion in the United States. The increase in the loan portfolio compared with the same date last year was also reflected in the commercial and mortgage loan portfolios, which increased $902 million and $579 million, respectively. TABLE F LOANS ENDING BALANCES
- -------------------------------------------------------------------------------------------------- MARCH 31, December 31, March 31, 2000 1999 1999 - -------------------------------------------------------------------------------------------------- (Dollars in thousands) Commercial, industrial and agricultural $ 6,872,173 $ 6,656,411 $ 5,970,388 Construction 257,888 247,288 285,796 Lease financing 731,803 728,644 638,693 Mortgage* 3,979,474 3,933,663 3,400,340 Consumer 3,359,593 3,341,748 3,163,028 --------------------------------------------------- Total $15,200,931 $14,907,754 $13,458,245 ===================================================
* Includes loans held-for-sale 32 33 The increase of $67.3 million in other assets when compared with December 31, 1999, was mainly due to an increase in accounts receivables, mostly related to loan sale and broker/dealer transactions. Also, there was an increase in deferred taxes, as a result of unrealized losses on securities available-for-sale. Total deposits were $14.3 billion at March 31, 2000, or $164 million higher than the $14.2 billion reported at December 31, 1999. At March 31, 1999 total deposits amounted to $13.6 billion. Savings and time deposits continued their growth, increasing $224.0 million and $229 million, respectively, when compared with December 31, 1999. Demand deposits had a decrease of $288.9 million compared with the amount at December 31, 1999 mainly attributable to funds held in trust as paying agent on several bonds issues, which were disbursed at the beginning of 2000. Borrowed funds, including subordinated notes and capital securities, amounted to $8.8 billion at March 31, 2000, from $9.2 billion as of December 31, 1999 and $7.4 billion at March 31, 1999. The increase in borrowed funds was used primarily to fund the Corporation's business expansion and loan growth. As part of the investment in BF and Levitt Mortgage, the Corporation recognized a minority interest of $21.0 million as of March 31, 2000, which represents the beneficial interest of the minority investors of these two entities. At December 31, 1999, this minority interest totaled $22.6 million. The Corporation's stockholders' equity at March 31, 2000 and December 31, 1999 was $1.68 billion and $1.66 billion, respectively, compared with $1.70 billion at March 31, 1999. The small decrease since March 31, 1999, was mostly the result of a reduction of $188.4 million in the accumulated other comprehensive income, mainly attributed to unrealized losses on available-for-sale securities. The dividend payout ratio to common stockholders for the quarter ended March 31, 2000, was 34.98% compared with 30.84% for the same quarter last year and 31.56% for the year ended December 31, 1999. Under the regulatory framework for prompt corrective action, banks, which meet or exceed a Tier I ratio of 6%, a total capital ratio of 10% and a leverage ratio of 5% are considered well capitalized. Information pertaining to the Corporation's regulatory risk-based capital requirements is shown on Table H. The market value of the Corporation's common stock at March 31, 2000 was $22.19, compared with $27.94 at December 31, 1999 and $30.88 at March 31, 1999. The Corporation's market capitalization at March 31, 2000, was $3.0 billion compared with $3.8 billion as of December 31, 1999 and $4.2 billion at March 31, 1999. 33 34 TABLE H CAPITAL ADEQUACY DATA
- ----------------------------------------------------------------------------------------------------- (Dollars in thousands) MARCH 31, December 31, March 31, 2000 1999 1999 - ----------------------------------------------------------------------------------------------------- Risk-based capital Tier I capital $ 1,583,637 $ 1,557,096 $ 1,492,294 Supplementary (Tier II) capital 323,358 324,519 313,708 ------------------------------------------------ Total capital $ 1,906,995 $ 1,881,615 $ 1,806,002 ================================================ Risk-weighted assets Balance sheet items 15,258,355 14,878,731 $13,490,781 Off-balance sheet items 515,180 428,780 428,202 ------------------------------------------------ Total risk-weighted assets $15,773,535 $15,307,511 $13,918,983 ================================================ Ratios: Tier I capital (minimum required - 4.00%) 10.04% 10.17% 10.73% Total capital (minimum required - 8.00%) 12.09% 12.29% 12.98 Leverage ratio (minimum required - 3.00%) 6.32% 6.40% 6.69
PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Corporation is a defendant in a number of legal proceedings arising in the normal course of business. Management believes, based on the opinion of legal counsel, that the final disposition of these matters will not have a material adverse effect on the Corporation's financial position or results of operations. ITEM 5. OTHER INFORMATION On May 3, 2000, Banco Popular de Puerto Rico received from the Federal Reserve Bank of New York the approval of the plans and programs submitted on March 31, 2000, as required under the terms of Article 7 of the Written Agreement dated March 9, 2000, relating to Bank Secrecy Act compliance. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibit No. Exhibit Description Reference ----------- ------------------- --------- 19 Quarterly Report to Shareholders for the Exhibit "A" period ended March 31, 2000 27 Financial Data Schedule Exhibit "B" b) One report on Form 8-K was filed for the quarter ended March 31, 2000: Dated: January 11, 2000 Items reported: Item 5 - Other Events Item 7 - Financial Statements, Pro-Forma, Financial Information and Exhibits
34 35 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 thereunto duly authorized. POPULAR, INC. (Registrant) Date: May 15, 2000 By: S/ Jorge A. Junquera ----------------------- ---------------------- Jorge A. Junquera Senior Executive Vice President Date: May 15, 2000 By: S/ Amilcar L. Jordan ----------------------- --------------------- Amilcar L. Jordan, Esq. Senior Vice President & Comptroller 35 EX-19 2 QUARTERLY REPORT TO SHAREHOLDERS 1 TO OUR STOCKHOLDERS As expected, the first quarter of the year 2000 began with an aggressive tightening schedule as the Federal Reserve rose the Fed Funds rate 25 basis points twice during this quarter while still another rise is expected. Popular, Inc.'s net income amounted to $64.2 million or $0.46 per share for the first quarter of 2000 compared with $63.7 million or $0.45 per share for the first quarter of 1999. Net income for the first quarter of 2000 represented annualized return on assets (ROA) and return on common equity (ROE) of 1.01% and 14.57%, respectively. These profitability ratios compare with an ROA of 1.14% and ROE of 16.03% attained during the first quarter of 1999, and 1.05% and 15.06%, respectively, for the last quarter of 1999. The results for the first quarter of 2000, when compared with the same period a year ago, reflected a rise of $6.0 million in net interest income together with a growth of $28.7 million in other income. Operating expenses rose $24.6 million while the provision for loan losses increased $14.2 million. Net interest income for the first quarter of 2000 grew to $242.2 million from $236.2 million for the same period a year earlier. This growth was primarily due to an increase of $2.5 billion in average earning assets, particularly a $1.8 billion growth in loans, partially offset by a decrease in the net interest yield. For the first quarter of 2000, the net interest yield, on a taxable equivalent basis, was 4.42%, compared to 4.84% for the same period a year earlier, mainly as a result of a higher cost of interest bearing liabilities triggered by a higher interest rate scenario. For the last quarter of 1999, the net interest yield on a taxable equivalent basis was 4.57%. For the first quarter of 2000, the provision for loan losses amounted to $50.0 million, compared with $35.8 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 first quarter of 2000 were $48.6 million compared to $25.9 million for the same period in 1999, mainly as a result of increased charge-offs in the consumer and commercial portfolios. Net charge-offs as a percentage of average loans increased to 1.29% for the three-month period ended March 31, 2000 from 0.78% for the same period a year earlier. Other operating income, excluding securities and trading transactions amounted to $101.6 million for the first quarter of 2000 compared with $86.9 million for the same period in 1999. Processing fees reflected a significant growth when compared with the same period in 1999, primarily due to the acquisition of GM Group in July 1999. Credit card fees and check cashing fees also rose as a result of the continued business expansion of the credit card business and Popular Cash Express. In addition, the investment in Telecomunicaciones de Puerto Rico, Inc. and the operations of GM Group generated additional revenues during this quarter. Gains on sale of securities and trading transactions for the quarter ended March 31, 2000 amounted to $14.1 million compared with $0.2 million for the same period in 1999. During this quarter, the Corporation exercised its conversion right and exchanged its investment in preferred stock of a financial corporation in Puerto Rico for common stock of the same entity, resulting in a gain of $13.4 million. Operating expenses for the three-month period ended March 31, 2000, amounted to $226.5 million, up from $201.9 million for the same period a year earlier. The rise of $24.6 million in operating expenses for the quarter ended March 31, 2000, was driven by a $7.2 million increase in personnel costs principally as a result of the aforementioned acquisition of GM Group, together with the continued business expansion of the banking operations in the United States. Equipment expenses, business promotion and other operating expenses rose reflecting the impact of acquisitions during the second half of 1999, investment in technology, the new institutional advertising campaign launched during the last quarter of 1999 coupled with higher sundry losses. Moreover, professional services also increased due to consulting services needed to support the growth of the Corporation's business activity. On the other hand, income tax expense decreased $3.6 million from $22.4 million for the first quarter of 1999 to $18.8 million for the same period in 2000 due to lower income before tax combined with higher income subject to a capital gains rate. At March 31, 2000, total assets amounted to $25.3 billion compared with $23.2 billion at the same date in 1999 and $25.5 billion as of December 31, 1999. Loans at March 31, 2000, increased 13.0% to $15.2 billion compared with $13.5 billion at the same date in 1999 and $14.9 billion at December 31, 1999. The growth in the loan portfolio occurred principally in the commercial and mortgage loan portfolios. The allowance for loan losses was $293 million or 1.93% of loans as of March 31, 2000 compared with $277 million or 2.06% at March 31, 1999, and $292 million or 1.96% at December 31, 1999. Non-performing assets amounted to $361 million compared with $299 million at the same date last year and $326 million at the end of 1999. The rise in non-performing assets corresponded principally to the classification on non-accrual of a limited number of commercial relationships in Puerto Rico and the United States. Total deposits as of March 31, 2000 rose to $14.3 billion from $13.6 billion at the same date in 1999 and $14.2 billion at December 31, 1999, while borrowings were $8.8 billion at the end of the first quarter of 2000, compared with $7.4 billion a year earlier and $9.2 billion at December 31, 1999. Stockholders' equity at March 31, 2000 amounted to $1.68 billion compared with $1.70 billion at the same date in 1999. Included in stockholders' equity at March 31, 2000 was $161 million in unrealized losses on securities available-for-sale, net of tax, compared with $27 million in unrealized gains on securities available-for-sale, net of tax, a year earlier. At December 31, 1999, stockholders' equity amounted to $1.66 billion, including $139 million in unrealized losses on securities available-for-sale. The Corporation's stock market value was $22.19 at the end of the quarter, compared with $30.88 at March 31, 1999 and $27.94 at December 31, 1999. At the end of the first quarter of 2000, the Corporation had a market capitalization of $3.0 billion and a book value per share of $11.66. In March 2000, Banco Popular launched a redesigned web site that includes its new online banking service "Mi Banco Popular". In this new transactional web site, accessible at www.bancopopular.com, retail clients will have access to all their financial relations, be able to personalize the content, and securely conduct transactions over the internet. In addition, clients will be able to export personal banking information to other software programs, such as Quicken and Money. "Mi Banco Popular" will complement PC Banco, the highly successful dial-up PC banking system. The new site offers a variety of other services such as the ability to open a deposit account, request a mortgage loan, lease, credit card and even open an investment account with Popular Securities. In January 2000, the Corporation acquired CreST, S.A., a local card processor and POS provider in Costa Rica. This acquisition will allow us to provide more services to our customers in this area. Meanwhile, on April 6, 2000, Banco Popular North America (BPNA) announced its strategic alliance with Cendant Mortgage, a division of Cendant Corporation, in order to expand the mortgage services to the Hispanic markets within the United States. Cendant Mortgage, a leader in the mortgage banking business in the U.S., will process and service loans on a private label basis through BPNA's retail sales staff and telemarketing group. In addition, the alliance calls for the origination of loans by BPNA through Cendant Corporation's real estate brands: Century 21, Coldwell Banker, and ERA. /s/ Richard L. Carrion - ----------------------- RICHARD L. CARRION CHAIRMAN PRESIDENT CHIEF EXECUTIVE OFFICER 2 FINANCIAL HIGHLIGHTS
March 31, Average for the quarter - ------------------------- --------------------------------- ---------------------------------------- BALANCE SHEET HIGHLIGHTS 2000 1999 Change 2000 1999 Change - ------------------------------------------------------------------------------------------------------------------------------------ (In thousands) Money market investments $ 892,652 $865,612 $ 27,040 $ 851,516 $ 694,307 $ 157,209 Investment and trading securities 7,509,220 7,302,677 206,543 7,877,471 7,361,873 515,598 Loans 15,200,931 13,458,245 1,742,686 15,027,521 13,201,405 1,826,116 Total assets 25,302,025 23,174,075 2,127,950 25,466,481 22,695,779 2,770,702 Deposits 14,337,861 13,576,672 761,189 14,147,519 13,578,244 569,275 Borrowings 8,833,572 7,401,790 1,431,782 9,016,053 7,036,406 1,979,647 Stockholders' equity 1,682,293 1,704,482 (22,189) 1,815,021 1,657,898 157,123 - ------------------------------------------------------------------------------------------------------------------------------------ First Quarter --------------------------------- OPERATING HIGHLIGHTS 2000 1999 Change - ------------------------------------------------------------------------------------------------------------------------------------ (In thousands, except per share information) Net interest income $ 242,240 $236,239 $ 6,001 Provision for loan losses 50,013 35,771 14,242 Fees and other income 115,726 87,057 28,669 Other expenses, net of minority interest 243,764 223,861 19,903 Net income $ 64,189 $ 63,664 $ 525 Net income applicable to common stock $ 62,102 $ 61,577 $ 525 Earnings per common share 0.46 0.45 0.01 - ------------------------------------------------------------------------------------------------------------------------------------ First Quarter ------------------- SELECTED STATISTICAL INFORMATION 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------------ COMMON STOCK DATA Market price High $26.88 $37.88 Low 18.63 30.88 End 22.19 30.88 Book value at period end 11.66 11.82 Dividends declared 0.16 0.14 Dividends payout ratio 34.98% 30.84% Price/earnings ratio 11.99% 18.06x - ------------------------------------------------------------------------------------------------------------------------------------ PROFITABILITY RATIOS Return on assets 1.01% 1.14% Return on common equity 14.57 16.03 Net interest spread (taxable equivalent) 3.60 4.02 Net interest yield (taxable equivalent) 4.42 4.84 Effective tax rate 23.03 26.16 Overhead ratio 45.73 48.61 - ----------------------------------------------------------------------------------------------------------------------------------- CAPITALIZATION RATIOS Equity to assets 7.13% 7.31% Tangible equity to assets 6.01 6.19 Equity to loans 12.08 12.56 Internal capital generation 8.90 10.27 Tier 1 capital to risk-adjusted assets 10.04 10.73 Total capital to risk-adjusted assets 12.09 12.98 Leverage ratio 6.32 6.69 - ------------------------------------------------------------------------------------------------------------------------------------ CREDIT QUALITY RATIOS Allowance for losses to loans 1.93% 2.06% Allowance to non-performing assets 81.23 92.81 Allowance to non-performing loans 89.25 103.10 Non-performing assets to loans 2.38 2.22 Non-performing assets to total assets 1.43 1.29 Net charge-offs to average loans 1.29 0.78 Provision to net charge-offs 1.03x 1.38x Net charge-offs earnings coverage 2.71 4.69
3 ADDITIONAL INFORMATION BOARD OF DIRECTORS Richard L. Carrion, Chairman Alfonso F. Ballester, Vice Chairman Antonio Luis Ferre, Vice Chairman Juan A. Albors Hernandez* Jose A. Bechara Bravo* Salustiano Alvarez Mendez* Juan J. Bermudez Francisco J. Carreras David H. Chafey 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 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 transactions 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. 4 CONSOLIDATED STATEMENTS OF CONDITION
March 31, --------------------------------------- Dollars in thousands 2000 1999 - ------------------------------------------------------------------------------------------------------------- ASSETS Cash and due from banks $ 606,383 $ 596,116 - ------------------------------------------------------------------------------------------------------------- Money market investments: Federal funds sold and securities purchased under agreements to resell 850,216 828,981 Time deposits with other banks 41,692 36,068 Bankers' acceptances 744 563 - ------------------------------------------------------------------------------------------------------------- 892,652 865,612 - ------------------------------------------------------------------------------------------------------------- Investment securities available-for-sale, at market value 6,916,382 6,544,252 Investment securities held-to-maturity, at cost 384,365 484,958 Trading account securities, at market value 208,473 273,467 Loans held-for-sale 556,813 475,081 - ------------------------------------------------------------------------------------------------------------- Loans 15,001,946 13,339,826 Less - Unearned income 357,828 356,662 Allowance for loan losses 293,442 277,116 - ------------------------------------------------------------------------------------------------------------- 14,350,676 12,706,048 - ------------------------------------------------------------------------------------------------------------- Premises and equipment 437,932 432,694 Other real estate 32,448 29,800 Customers' liabilities on acceptances 8,308 21,208 Accrued income receivable 167,853 161,258 Other assets 438,706 315,602 Intangible assets 301,034 267,979 - ------------------------------------------------------------------------------------------------------------- $25,302,025 $23,174,075 ============================================================================================================= LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities Deposits: Non-interest bearing $ 2,998,252 $ 2,919,926 Interest bearing 11,339,609 10,656,746 - ------------------------------------------------------------------------------------------------------------- 14,337,861 13,576,672 Federal funds purchased and securities sold under agreements to repurchase 4,151,527 3,651,208 Other short-term borrowings 2,245,885 1,954,489 Notes payable 2,161,160 1,521,093 Acceptances outstanding 8,308 21,208 Other liabilities 418,985 450,411 - ------------------------------------------------------------------------------------------------------------- 23,323,726 21,175,081 - ------------------------------------------------------------------------------------------------------------- Subordinated notes 125,000 125,000 - ------------------------------------------------------------------------------------------------------------- Preferred beneficial interest in Popular North America's junior subordinated deferrable interest debentures guaranteed by the Corporation 150,000 150,000 - ------------------------------------------------------------------------------------------------------------- Minority interest in consolidated subsidiaries 21,006 19,512 - ------------------------------------------------------------------------------------------------------------- Stockholders' equity: Preferred stock 100,000 100,000 Common stock 828,254 826,121 Surplus 245,719 218,635 Retained earnings 734,681 573,068 Treasury stock, at cost (64,150) (39,559) Accumulated other comprehensive (loss) income, net of deferred taxes (162,211) 26,217 - ------------------------------------------------------------------------------------------------------------- 1,682,293 1,704,482 - ------------------------------------------------------------------------------------------------------------- $25,302,025 $23,174,075 =============================================================================================================
5 CONSOLIDATED STATEMENTS OF INCOME
Quarter ended March 31 --------------------------------- Dollars in thousands, except per share information 2000 1999 - ------------------------------------------------------------------------------------------------------------ Interest Income: Loans $376,520 $326,033 Money market investments 13,248 7,933 Investment securities 112,130 105,434 Trading account securities 3,903 4,795 - ------------------------------------------------------------------------------------------------------------ 505,801 444,195 - ------------------------------------------------------------------------------------------------------------ Interest Expense: Deposits 122,474 110,823 Short-term borrowings 102,825 69,374 Long-term debt 38,262 27,759 - ------------------------------------------------------------------------------------------------------------ 263,561 207,956 - ------------------------------------------------------------------------------------------------------------ Net interest income 242,240 236,239 Provision for loan losses 50,013 35,771 - ------------------------------------------------------------------------------------------------------------ Net interest income after provision for loan losses 192,227 200,468 Service charges on deposit accounts 30,223 28,249 Other service fees 47,365 37,909 Gain on sale of securities 13,264 450 Trading account profit (loss) 817 (282) Other operating income 24,057 20,731 - ------------------------------------------------------------------------------------------------------------ 307,953 287,525 - ------------------------------------------------------------------------------------------------------------ Operating Expenses: Personnel costs: Salaries 78,594 70,157 Profit sharing 4,132 6,320 Pension and other benefits 20,498 19,559 - ------------------------------------------------------------------------------------------------------------ 103,224 96,036 Net occupancy expenses 16,559 14,258 Equipment expenses 23,434 20,734 Other taxes 8,575 8,265 Professional fees 17,678 15,312 Communications 10,802 10,829 Business promotion 14,087 11,000 Printing and supplies 5,172 4,990 Other operating expenses 18,381 12,847 Amortization of intangibles 8,592 7,620 - ------------------------------------------------------------------------------------------------------------ 226,504 201,891 - ------------------------------------------------------------------------------------------------------------ Income before income tax and minority interest 81,449 85,634 Income tax 18,756 22,402 Net loss of minority interest 1,496 432 - ------------------------------------------------------------------------------------------------------------ NET INCOME $ 64,189 $ 63,664 - ------------------------------------------------------------------------------------------------------------ NET INCOME APPLICABLE TO COMMON STOCK $ 62,102 $ 61,577 - ------------------------------------------------------------------------------------------------------------ EARNINGS PER COMMON SHARE (BASIC AND DILUTED) $ 0.46 $ 0.45 ============================================================================================================
6 SUBSIDIARIES CENTRAL OFFICE Popular Center 209 Munoz Rivera Avenue San Juan, Puerto Rico 00918 Telephone: (787) 765-9800 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 FIDUCIARIO, S.A. 27 de Febrero Ave. #50 Santo Domingo Republica Doninicana Telephone: (809) 473-9400 ATH COSTA RICA Cond. en Oficinas Ofiplaza del Este Edif D - Piso 1 San Pedro de la Rotonda dela Bandera 150 metros Oeste San Jose, Costa Rica Telephone: (011) 506-280-9796 CREST, S.A. Costado Este del Banco Central Calle 2 Entre Ave. Central y Primera San Jose Centro, Costa Rica Telephone: (011) 506-257-4112 GM GROUP, INC. 1590 Ponce de Leon Avenue San Juan, Puerto Rico 00926 Telephone: (787) 751-4343 EQUITY ONE, INC. Marlton Crossing Office Park 400 Lippincott Drive Marlton, New Jersey 08053 Telephone: (856) 396-2600 POPULAR MORTGAGE, INC. 268 Ponce de Leon Avenue San Juan, Puerto Rico 00918 Telephone: (787) 753-0245 LEVITT MORTGAGE 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 Monjltas Industrial Development San Juan, Puerto Rico 00903 Telephone: (787) 751-4848 POPULAR LEASING, USA 16296 Westwood Business Parkdrive Ellisville, Missouri 63021 Telephone: (609) 273-1119 POPULAR FINANCE, INC. 10 Salud Street El Senorial Condominium Suite 613 Ponce, Puerto Rico 00731 Telephone: (787) 844-2860 POPULAR CASH EXPRESS, INC. 6200 North Hiawatha Suite 200 Chicago, Illinois 60646 Telephone: (773) 205-8300 POPULAR SECURITIES, INC. Popular Center 209 Munoz Rivera Avenue Suite 1020 San Juan, Puerto Rico 00918 Telephone: (787) 766-4200 EX-27 3 FINANCIAL DATA SCHEDULE
9 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF POPULAR, INC. FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 U.S. DOLLARS 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 1,000 606,383 41,692 850,216 208,473 6,916,382 384,365 379,670 15,200,931 293,442 25,302,025 14,337,861 6,397,412 439,991 2,436,160 0 100,000 828,254 754,039 25,302,025 376,520 112,130 17,151 505,801 122,474 263,561 242,240 50,013 13,264 226,504 82,945 64,189 0 0 64,189 0.46 0 4.42 328,799 29,434 0 123,206 292,010 59,867 11,286 293,442 269,700 23,742 0
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