EX-19 2 ex19.txt QUARTERLY REPORT TO SHAREHOLDERS 1 TO OUR STOCKHOLDERS For the quarter ended June 30, 2000, Popular, Inc. reported net income of $65.1 million or $0.46 per share, compared with $64.0 million or $0.46 per share for the same period in 1999. The results for the second quarter of 2000 represented an annualized return on assets (ROA) of 1.01% and a return on common equity (ROE) of 14.43%. For this same period in 1999, the profitability ratios were 1.08% and 15.53%, respectively, compared with 1.01% and 14.57%, respectively, for the first quarter of 2000. For the six-month period ended June 30, 2000, net income reached $129.3 million or $0.92 per common share, while the ROA and ROE were 1.01% and 14.50%, respectively. These figures compare with a net income of $127.6 million and a ROA of 1.11% and a ROE of 15.78% for the same period a year earlier. The financial performance for the second quarter of 2000, when compared with the same period a year ago, reflected a rise of $7.1 million in net interest income coupled with a growth of $22.4 million in other revenues. On the other hand, operating expenses rose $14.2 million while the provision for loan losses increased $12.1 million. Net interest income for the second quarter of 2000 rose to $245.9 million from $238.9 million for the same period a year earlier. This growth in net interest income was triggered by an increase of $2.2 billion in average earning assets, mainly a $2.0 billion growth in loans, partially offset by a decrease in the net interest yield. For the second quarter of 2000, the net interest yield, on a taxable equivalent basis, was 4.30%, compared with 4.68% for the same period a year earlier. The reduction in the net interest yield was driven by an increase in the cost of interest bearing liabilities as a result of a higher interest rate scenario together with an increase in the proportion of short-term borrowings to total interest-bearing liabilities. For the first quarter of 2000, the net interest yield on a taxable equivalent basis was 4.42%. For the second quarter of 2000, the provision for loan losses amounted to $48.7 million, compared with $36.6 million for the same period a year earlier, reflecting the continued growth in the loan portfolio and the rise in non-performing assets and net charge-offs. Net charge-offs for the second quarter of 2000 were $38.1 million compared with $31.2 million for the same period in 1999. Net charge-offs as a percentage of average loans increased to 0.97% for the second quarter of 2000, from 0.91% for the same period in 1999. Net charge-offs for the first quarter of 2000 were $48.6 million or 1.29% of average loans. Other operating income, excluding securities and trading transactions amounted to $108.3 million for the second quarter of 2000, compared with $87.2 million for the same period in 1999. Categories such as credit card fees and discounts, debit card fees and processing fees all reflected a significant growth when compared with the second quarter of 1999. The continued business expansion as well as the acquisition of GM Group, early in the third quarter of 1999, were the driving factors for the growth in other operating income. Operating expenses for the three-month period ended June 30, 2000, amounted to $219.4 million up from $205.2 million for the same period a year earlier. Higher personnel costs, equipment expenses and other operating expenses prompted the rise. Personnel costs increased $3.6 million mainly as a result of the acquisition of GM Group together with the continued business expansion of the banking and check-cashing operations in the United States. Partially offsetting this increase was a reduction in the medical plan expense of Banco Popular de Puerto Rico as a result of revisions made to the plan effective April 1, 2000, and to lower pension and post-retirement expenses. Equipment and other operating expenses, rose reflecting the impact of the acquisition of GM Group as well as the investment in technology, coupled with higher sundry losses. When compared with the first quarter of 2000, the Corporation experienced a decrease of $7.1 million or 3.1% in operating expenses. Popular, Inc.'s total assets grew to $26.5 billion at June 30, 2000, compared with $23.7 billion at the same date in 1999 and $25.3 billion as of March 31, 2000. Loans rose 13.6% from $13.9 billion at June 30, 1999, to $15.8 billion a year later. The commercial and mortgage loan portfolios both reflected a strong demand contributing 84.8% of the increase. At March 31, 2000, loans amounted to $15.2 billion. At June 30, 2000, the allowance for loan losses was $306 million or 1.94% of loans, compared with $283 million or 2.03% and $293 million or 1.93% at June 30, 1999, and March 31, 2000, respectively. Non-performing assets amounted to $379 million at June 30, 2000, compared with $303 million at the same date last year and $361 million at the end of the first quarter of 2000. Most of the increase in non-performing assets was triggered by the classification as non-accrual of a limited number of commercial loan relationships in Puerto Rico and the United States whose credit quality has deteriorated. In addition, the rise since the first quarter of 2000 was primarily due to the inclusion as non-accrual of $13 million in leases in our U.S. operations that became delinquent due to an external fraud scheme that was exposed during this quarter. The Corporation expects to recover this balance from the insurance companies, which have already confirmed coverage. Total deposits as of June 30, 2000, rose to $14.5 billion from $13.9 billion at the same date in 1999 and $14.3 billion at March 31, 2000, while borrowings were $9.8 billion at the end of the second quarter of 2000, compared with $7.7 billion a year earlier and $8.8 billion at March 31, 2000. Stockholders' equity at June 30, 2000, amounted to $1.74 billion compared with $1.65 billion at the same date in 1999. Included in stockholders' equity at June 30, 2000, were $150 million in unrealized losses on securities available-for-sale, net of tax, compared with $39 million in unrealized losses on securities available-for-sale, net of tax, a year earlier. At March 31, 2000, stockholders' equity amounted to $1.68 billion including $161 million in unrealized losses on securities available-for-sale. The Corporation's stock market value was $19.06 at the end of the quarter, compared with $22.19 at March 31, 2000, and $30.31 at June 30, 1999. At the end of the second quarter of 2000, the Corporation had a market capitalization of $2.6 billion and a book value per common share of $12.05. During this quarter we continued our business expansion in Puerto Rico with the acquisition of Centro Finance, a small personal loan company 2 that operates nine offices with a loan portfolio of approximately $23 million. The operations of Centro Finance became part of Popular Finance, which will now operate 53 branches throughout the island. In addition, on July 1, 2000, Popular North America purchased Aurora National Bank in Illinois. This bank operates two branches with approximately $111 million in deposits and $81 million in loans. With the acquisition of Aurora National Bank and two new branches opened during this quarter in New Jersey and Florida, Banco Popular North America now operates 95 branches in the U.S. mainland. With the objective of providing more services to our customers and participating in the competitive insurance business, effective July 1, 2000, Popular, Inc. created Banco Popular, National Association, a national bank in Orlando, Florida that will oversee the operations of the recently created Popular Insurance. Popular Insurance will begin operations immediately as it is simultaneously acquiring the operations of R&B Insurance Agency, Inc., whose management has a vast experience in the insurance business in Puerto Rico. The Annual Stockholders Meeting of Popular, Inc. was held on April 25, 2000. A 90.71% of the common shares issued and outstanding as of the record date of March 6, 2000, were represented at the meeting, which complied with the quorum, required by law. All four directors nominated for re-election were elected for a three-year term. Mr. Alfonso F. Ballester, a director since 1990, and Mr. J. Adalberto Roig Jr., a director since 1997, both retired from the Board of Directors of the Corporation upon reaching the mandatory retirement age. We are sincerely grateful for their dedication, valuable contributions and support to our organization. /s/ Richard L. Carrion ----------------------- RICHARD L. CARRION CHAIRMAN PRESIDENT CHIEF EXECUTIVE OFFICER 3 FINANCIAL HIGHLIGHTS
At June 30, Average for the six months ----------------------------- ---------------------------------- BALANCE SHEET HIGHLIGHTS 2000 1999 Change 2000 1999 Change ------------------------------------------------------------------------------------------------------------------- (In thousands) Money market investments $ 1,191,511 $ 791,285 $ 400,226 $ 882,850 $ 687,542 $ 195,308 Investment and trading securities 7,711,533 7,441,280 270,253 7,810,596 7,547,412 263,184 Loans 15,774,604 13,887,392 1,887,212 15,354,380 13,442,576 1,911,804 Total assets 26,451,246 23,665,621 2,785,625 25,719,423 23,178,177 2,541,246 Deposits 14,460,454 13,902,387 558,067 14,284,696 13,697,877 586,819 Borrowings 9,819,573 7,680,936 2,138,637 9,120,856 7,355,493 1,765,363 Stockholders' equity 1,736,890 1,650,682 86,208 1,836,261 1,678,159 158,102 ----------------------------------------------------------------------------------------------------------------- Second quarter Six months ------------------------------- -------------------------------- OPERATING HIGHLIGHTS 2000 1999 Change 2000 1999 Change ----------------------------------------------------------------------------------------------------------------- (In thousands, except per share information) Net interest income $245,916 $238,851 $ 7,065 $488,156 $475,089 $13,067 Provision for loan losses 48,719 36,631 12,088 98,732 72,402 26,330 Fees and other income 109,285 86,926 22,359 225,011 173,984 51,027 Other expenses, net of minority interest 241,359 225,169 16,190 485,123 449,030 36,093 Net income $ 65,123 $ 63,977 $ 1,146 $129,312 $127,641 $ 1,671 Net income applicable to common stock $ 63,036 $ 61,890 $ 1,146 $125,137 $123,466 $ 1,671 Earnings per common share 0.46 0.46 0.92 0.91 0.01 ----------------------------------------------------------------------------------------------------------------- Second quarter Six months ---------------- ---------------- SELECTED STATISTICAL INFORMATION 2000 1999 2000 1999 ----------------------------------------------------------------------------------------------------------------- COMMON STOCK DATA Market price High $23.56 $32.88 $26.88 $37.88 Low 19.06 28.81 18.63 28.81 End 19.06 30.31 19.06 30.31 Book value at period end 12.05 11.51 12.05 11.51 Dividends declared 0.16 0.14 0.32 0.28 Dividend payout ratio 34.46% 30.70% 34.72% 30.77% Price/earnings ratio 10.30x 17.22x 10.30x 17.22x ----------------------------------------------------------------------------------------------------------------- PROFITABILITY RATIOS Return on assets 1.01% 1.08% 1.01% 1.11% Return on common equity 14.43 15.53 14.50 15.78 Net interest spread (taxable equivalent) 3.46 3.89 3.54 3.95 Net interest yield (taxable equivalent) 4.30 4.68 4.36 4.76 Effective tax rate 24.89 24.23 23.99 25.20 Overhead ratio 44.77 49.53 45.24 49.07 ----------------------------------------------------------------------------------------------------------------- CAPITALIZATION RATIOS Equity to assets 7.15% 7.18% 7.14% 7.24% Tangible equity to assets 6.08 6.13 6.05 6.16 Equity to loans 11.85 12.40 11.96 12.47 Internal capital generation 8.89 10.12 8.90 10.19 Tier I capital to risk-adjusted assets 10.09 10.37 10.09 10.37 Total capital to risk-adjusted assets 12.12 12.59 12.12 12.59 Leverage ratio 6.42 6.37 6.42 6.37 ----------------------------------------------------------------------------------------------------------------- CREDIT QUALITY RATIOS Allowance for losses to loans 1.94% 2.03% 1.94% 2.03% Allowance to non-performing assets 80.55 93.26 80.55 93.26 Allowance to non-performing loans 89.10 103.51 89.10 103.51 Non-performing assets to loans 2.40 2.18 2.40 2.18 Non-performing assets to total assets 1.43 1.28 1.43 1.28 Net charge-offs to average loans 0.97 0.91 1.13 0.85 Provision to net charge-offs 1.28x 1.18x 1.14x 1.27x Net charge-offs earnings coverage 3.56 3.87 3.08 4.24
4 ADDITIONAL INFORMATION BOARD OF DIRECTORS Richard L. Carrion, Chairman Antonio Luis Ferre, Vice Chairman ** Juan A. Albors Hernandez * Alfonso F. Ballester * Jose A. Bechara Bravo * Salustiano Alvarez Mendez* Juan J. Bermudez Francisco J. Carreras Jose B. Carrion Jr. * David H. Chafey Jr. Maria Luisa Ferre * 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 ** Director of Popular, Inc. 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 Popular Center Building - 4th Floor Trust Division (725) 209 Munoz Rivera Ave. Hato Rey, Puerto Rico 00918 PUBLICATIONS: For printed material (annual and quarterly reports, 10-K and 10-Q reports), contact Mr. Amilcar L. Jordan at the Comptroller's Division at (787) 765-9800 ext. 6101, or VISIT OUR WEB SITE AT HTTP://WWW.POPULARINC.COM. DIVIDEND REINVESTMENT PLAN: The Corporation has a dividend reinvestment plan that provides the shareholder a simple, convenient and cost-effective way to acquire Popular, Inc. common stock. - Dividends can be automatically reinvested in additional shares at 95% of the Average Market Price. - Participants may make optional cash payments of at least $25 and not more than $10,000 per calendar month for investment in additional shares. - No brokerage commissions are charged on purchases under this plan. - Participant's funds will be fully invested, because the plan permits fractions of shares to be credited to a participant's account. If you would like more information on this plan, please contact our Trust Division at (787) 756-3908 or (787) 765-9800 exts. 5637, 5525 and 5897. 5 CONSOLIDATED STATEMENTS OF CONDITION
June 30, --------------------------- Dollars in thousands 2000 1999 --------------------------------------------------------------------------------------------------------- ASSETS Cash and due from banks $ 698,012 $ 567,143 --------------------------------------------------------------------------------------------------------- Money market investments: Federal funds sold and securities purchased under agreements to resell 1,159,754 715,618 Time deposits with other banks 31,206 74,986 Bankers' acceptances 551 681 --------------------------------------------------------------------------------------------------------- 1,191,511 791,285 --------------------------------------------------------------------------------------------------------- Investment securities available-for-sale, at market value 7,137,188 6,804,004 Investment securities held-to-maturity, at amortized cost 383,887 316,860 Trading account securities, at market value 190,458 320,416 Loans held-for-sale, at lower of cost or market 790,831 603,643 --------------------------------------------------------------------------------------------------------- Loans 15,335,791 13,655,881 Less - Unearned income 352,018 372,132 Allowance for loan losses 305,526 282,590 --------------------------------------------------------------------------------------------------------- 14,678,247 13,001,159 --------------------------------------------------------------------------------------------------------- Premises and equipment 437,181 440,167 Other real estate 36,426 30,018 Customers' liabilities on acceptances 5,735 14,768 Accrued income receivable 176,540 160,146 Other assets 429,584 355,510 Intangible assets 295,646 260,502 --------------------------------------------------------------------------------------------------------- $26,451,246 $23,665,621 ========================================================================================================= LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Deposits: Non-interest bearing $ 3,082,424 $ 3,278,464 Interest bearing 11,378,030 10,623,923 --------------------------------------------------------------------------------------------------------- 14,460,454 13,902,387 Federal funds purchased and securities sold under agreements to repurchase 4,937,816 3,319,780 Other short-term borrowings 2,854,035 2,554,433 Notes payable 1,752,722 1,531,723 Acceptances outstanding 5,735 14,768 Other liabilities 407,260 396,604 --------------------------------------------------------------------------------------------------------- 24,418,022 21,719,695 --------------------------------------------------------------------------------------------------------- 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 21,334 20,244 --------------------------------------------------------------------------------------------------------- Stockholders' equity: Preferred stock 100,000 100,000 Common stock 828,959 826,595 Surplus 247,479 220,559 Retained earnings 775,975 616,022 Treasury stock, at cost (64,150) (72,524) Accumulated other comprehensive loss, net of deferred taxes (151,373) (39,970) --------------------------------------------------------------------------------------------------------- 1,736,890 1,650,682 --------------------------------------------------------------------------------------------------------- $26,451,246 $23,665,621 =========================================================================================================
6 CONSOLIDATED STATEMENTS OF INCOME
Quarter ended Six months ended June 30, June 30, ----------------------------------------------- Dollars in thousands, except per share information 2000 1999 2000 1999 ----------------------------------------------------------------------------------------------------------------- Interest Income: Loans $392,437 $335,739 $ 768,957 $661,772 Money market investments 14,308 7,500 27,556 15,433 Investment securities 114,624 105,411 226,754 210,845 Trading account securities 3,405 4,751 7,308 9,546 ----------------------------------------------------------------------------------------------------------------- 524,774 453,401 1,030,575 897,596 ----------------------------------------------------------------------------------------------------------------- Interest Expense: Deposits 129,399 110,147 251,873 220,970 Short-term borrowings 113,684 73,138 216,509 142,513 Long-term debt 35,775 31,265 74,037 59,024 ----------------------------------------------------------------------------------------------------------------- 278,858 214,550 542,419 422,507 ----------------------------------------------------------------------------------------------------------------- Net interest income 245,916 238,851 488,156 475,089 Provision for loan losses 48,719 36,631 98,732 72,402 ----------------------------------------------------------------------------------------------------------------- Net interest income after provision for loan losses 197,197 202,220 389,424 402,687 Service charges on deposit accounts 30,831 29,731 61,054 57,980 Other service fees 55,443 39,691 102,808 77,600 Gain on sale of securities 329 286 13,593 736 Trading account profit (loss) 693 (582) 1,510 (863) Other operating income 21,989 17,800 46,046 38,531 ----------------------------------------------------------------------------------------------------------------- 306,482 289,146 614,435 576,671 ----------------------------------------------------------------------------------------------------------------- Operating Expenses: Personnel costs: Salaries 77,301 69,983 155,895 140,140 Profit sharing 5,569 6,084 9,701 12,403 Pension and other benefits 15,341 18,572 35,839 38,131 ----------------------------------------------------------------------------------------------------------------- 98,211 94,639 201,435 190,674 Net occupancy expenses 16,177 14,715 32,736 28,974 Equipment expenses 25,079 21,557 48,513 42,291 Other taxes 8,341 7,941 16,916 16,206 Professional fees 16,826 17,356 34,504 32,668 Communications 12,034 10,580 22,836 21,409 Business promotion 12,572 12,209 26,659 23,209 Printing and supplies 5,313 4,828 10,485 9,818 Other operating expenses 16,282 13,806 34,663 26,653 Amortization of intangibles 8,537 7,586 17,129 15,206 ----------------------------------------------------------------------------------------------------------------- 219,372 205,217 445,876 407,108 ----------------------------------------------------------------------------------------------------------------- Income before income tax and minority interest 87,110 83,929 168,559 169,563 Income tax 21,684 20,334 40,440 42,736 Net (gain) loss of minority interest (303) 382 1,193 814 ----------------------------------------------------------------------------------------------------------------- NET INCOME $ 65,123 $ 63,977 $ 129,312 $127,641 ================================================================================================================= NET INCOME APPLICABLE TO COMMON STOCK $ 63,036 $ 61,890 $ 125,137 $123,466 ================================================================================================================= EARNINGS PER COMMON SHARE (BASIC AND DILUTED) $ 0.46 $ 0.46 $ 0.92 $ 0.91 =================================================================================================================
7 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 Dominicana Telephone: (809) 473-9400 ATH COSTA RICA Cond. en Oficinas Ofiplaza del Este Edif. D - Piso 1 San Pedro de la Rotonda de la Bandera 150 metros Oeste San Jose, Costa Rica Telephone: (011) 506-280-9796 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 Monjitas 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 [POPULAR LOGO]