EX-19 3 g70896ex19.txt QUARTERLY REPORT TO SHAREHOLDER 1 EXHIBIT 19 LETTER TO SHAREHOLDERS Our Corporation completed the second quarter of 2001 with a net income of $77.5 million or $0.55 per common share, representing an increase of $12.4 million over the $65.1 million or $0.46 per common share reported for the same quarter in 2000. The second quarter results represented an annualized return on assets (ROA) of 1.14% and a return on common equity (ROE) of 15.36%, compared with 1.01% and 14.43%, respectively, for the same period in 2000. For the first quarter of 2001, ROA and ROE were 1.09% and 15.25%, respectively. For the first six-months of 2001 net earnings amounted to $151.8 million or $1.08 per common share, an increase of $22.5 million compared with $129.3 million or $0.92 reported for the same period in 2000. ROA and ROE for the first six-months of 2001 were 1.12% and 15.31%, respectively, compared with 1.01% and 14.50%, respectively, for the same period a year earlier. During this quarter, the Federal Reserve again reacted to economic conditions by reducing the Federal funds target rate by 125 basis points reaching 3.75% on June 27, 2001. The low interest rate scenario had a positive effect on our net interest margin as the net interest income for the quarter ended June 30, 2001, reached $267.3 million, representing an increase of $21.4 million or 8.7% over the $245.9 million reported for the same period a year earlier. The net interest margin of the Corporation, on a taxable equivalent basis, increased to 4.47% for the second quarter of 2001, from 4.30% in the second quarter of 2000. Also, our Corporation reflected growth in most categories of other income, including service charges on deposit accounts, directly related to higher commercial deposit account activity and to newly implemented fees on deposit accounts. Other income categories reflecting sound growth were insurance commissions debit card fees, processing fees and gains on sale of loans. The provision for loan losses for the second quarter of 2001 amounted to $49.5 million, compared with $48.7 million for the second quarter of 2000, while net charge-offs amounted to $41.7 million and $38.1 million for the second quarter of 2001 and 2000, respectively. Operating expenses amounted to $232.5 million for the second quarter of 2001. This constituted an increase of $13.1 million or 6.0% when compared with $219.4 million for the same period a year earlier. The rise in operating expenses was mostly a result of higher personnel costs, particularly higher pension and medical plan costs, as well as net occupancy expenses, operating taxes and other expenses. Income tax expense also rose by $5.7 million to $27.3 million for the second quarter of 2001. Popular, Inc.'s total assets grew to $27.9 billion at June 30, 2001, compared with $26.5 billion at the same date in 2000 and $27.3 billion at March 31, 2001. Loans rose 9.0% from $15.8 billion at June 30, 2000 to $17.2 billion at June 30, 2001. At March 31, 2001, loans amounted to $16.5 billion. Total deposits at June 30, 2001, amounted to $15.6 billion from $14.5 billion at the same date in 2000 and $15.1 billion at March 31, 2001. Stockholders' equity at June 30, 2001 amounted to $2.2 billion compared with $1.7 billion at the same date in 2000. Included in stockholders' equity at June 30, 2001 were $75 million in unrealized gains on securities available-for-sale, net of tax, compared with $150 million in unrealized losses a year earlier. At March 31, 2001, stockholders' equity amounted to $2.1 billion, including $81 million in unrealized gains on securities available-for-sale. The Corporation's stock price was $32.94 at the end of the quarter, compared with $19.06 at June 30, 2000, and $29.45 at March 31, 2001. At the end of the second quarter of 2001, the Corporation had a market capitalization of $4.5 billion and a book value per share of $15.17. ------------------------------------------------------------------------------- I am very pleased to inform that on May 9, 2001, the Board of Directors declared a dividend of $0.20 per common share for the second quarter of 2001, which represents a 25% increase over the $0.16 declared per common share in previous quarters. ------------------------------------------------------------------------------- Our continuing effort for expansion and diversification has provided us with a greater ability and potential for growth. During this quarter, Popular, Inc. acquired 19.9% of the voting common stock as well as a 13.1% of non-voting stock of Coqui.com. This company owns PRTC.net and Coqui.net, which together form the leading Internet service provider in Puerto Rico. This investment allows us to expand in the Internet market and offer our customers enhanced on-line products and services as part of our e-commerce initiatives. In an effort to continue fulfilling our customer's financial needs, we have introduced a new Internet service, plazapop.com, for the Bank's commercial clients. This service allows commercial clients to have their own Internet page and have access to thousands of potential customers in Puerto Rico with the capability to offer online sales. This new service represents an added value for commercial customers, in particular small and medium-size companies. 2 In addition, during this quarter we exercised our option to purchase 19.99% in Centro Financiero BHD, S.A., the third largest private financial institution in the Dominican Republic. ------------------------------------------------------------------------------- We are very enthusiastic about the record-breaking performance of Popular Mortgage, the Corporation's mortgage loan subsidiary in Puerto Rico, which has reached unprecedented levels in mortgage loan closings during this year, triggered by the interest rate reductions, as well as, an aggressive marketing campaign, its staff performance and the development of innovative products. The volume of loan closings by this subsidiary in the period ended June 30, 2001, increased by approximately 75% when compared with the same period last year. ------------------------------------------------------------------------------- The Annual Stockholders Meeting of Popular, Inc. was held on April 23, 2001. An 83.54% of the common shares issued and outstanding as of the record date of March 5, 2001, were represented at the meeting, complying with the quorum required by law. All four directors nominated for re-election were elected for a three-year term. During the meeting, the 2000 Corporation's Annual Report was discussed and approved. In addition, the 2001 Stock Option Plan created to attain and retain highly qualified personnel and to provide additional incentive to employees and directors was presented and approved. ------------------------------------------------------------------------------- As an incentive to promote capital investment in Puerto Rico, the local government amended the Puerto Rico Internal Revenue Code to reduce the tax rate on capital gains effective for taxable years beginning after December 31, 2000. Long-term capital gains derived from the sale or exchange of capital assets located in Puerto Rico will be taxed at 10% for individuals, estates and trusts and at 12.5% for corporations and partnerships, previously 20% and 25%, respectively. ------------------------------------------------------------------------------- Based on financial results as of the end of 2000, our Corporation has been ranked 29th in total revenues among the top financial corporations of the United States, and is number 571 of the top 1,000 highest-revenue producing companies in the nation. We are committed to maintain our focus on long-term growth and profitability and generate consistent above-average results for our stockholders. RICHARD L. CARRION CHAIRMAN PRESIDENT CHIEF EXECUTIVE OFFICER 3 Popular, Inc. 2001 Quarterly Financial Highlights
At June 30, Average for the six months BALANCE SHEET HIGHLIGHTS 2001 2000 Change 2001 2000 Change ----------------------------------------------------------------------------------------------------------------------------------- (In thousands) Money market investments $ 1,063,854 $ 1,191,511 $ (127,657) $ 949,489 $ 882,850 $ 66,639 Investment and trading securities 7,991,158 7,711,533 279,625 8,466,557 7,810,596 655,961 Loans 17,192,246 15,774,604 1,417,642 16,496,421 15,354,380 1,142,041 Total assets 27,850,903 26,451,246 1,399,657 27,448,384 25,719,423 1,728,961 Deposits 15,569,785 14,460,454 1,109,331 15,087,417 14,284,696 802,721 Borrowings 9,639,656 9,819,573 (179,917) 9,876,743 9,120,375 756,368 Stockholders' equity 2,166,129 1,736,890 429,239 2,044,659 1,836,261 208,398 -----------------------------------------------------------------------------------------------------------------------------------
Second quarter Six months OPERATING HIGHLIGHTS 2001 2000 Change 2001 2000 Change ----------------------------------------------------------------------------------------------------------------------------------- (In thousands, except per share information) Net interest income $ 267,313 $ 245,916 $ 21,397 $ 523,030 $ 488,156 $ 34,874 Provision for loan losses 49,462 48,719 743 99,496 98,732 764 Fees and other income 119,505 109,285 10,220 234,472 225,011 9,461 Other expenses, net of minority inter 259,819 241,359 18,460 506,923 485,123 21,800 Cumulative effect of accounting changes -- -- -- 686 -- 686 Net income $ 77,537 $ 65,123 $ 12,414 $ 151,769 $ 129,312 $ 22,457 Net income applicable to common stock$ 75,450 $ 63,036 $ 12,414 $ 147,594 $ 125,137 $ 22,457 Earnings per common share $ 0.55 $ 0.46 $ 0.09 $ 1.08 $ 0.92 $ 0.16 -----------------------------------------------------------------------------------------------------------------------------------
Second quarter Six months SELECTED STATISTICAL INFORMATION 2001 2000 2001 2000 --------------------------------------------------------------------------------------------------------------- COMMON STOCK DATA Market price High $32.94 $23.56 $32.94 $26.88 Low 28.44 19.06 25.25 18.63 End 32.94 19.06 32.94 19.06 Book value at period end 15.17 12.05 15.17 12.05 Dividends declared 0.20 0.16 0.36 0.32 Dividend payout ratio 28.86% 34.46% 29.50% 34.72% Price/earnings ratio 15.46x 10.30x 15.46x 10.30x --------------------------------------------------------------------------------------------------------------- PROFITABILITY RATIOS Return on assets 1.14% 1.01% 1.12% 1.01% Return on common equity 15.36 14.43 15.31 14.50 Net interest spread (taxable equivalent) 3.72 3.46 3.56 3.54 Net interest yield (taxable equivalent) 4.47 4.30 4.34 4.36 Effective tax rate 26.07 24.89 26.51 23.99 Overhead ratio 42.26 44.77 41.68 45.24 Efficiency ratio 60.17 61.94 59.76 63.87 --------------------------------------------------------------------------------------------------------------- CAPITALIZATION RATIOS Equity to assets 7.62% 7.15% 7.45% 7.14% Tangible equity to assets 6.68 6.08 6.51 6.05 Equity to loans 12.34 11.85 12.39 11.96 Internal capital generation 9.32 8.89 9.64 8.90 Tier I capital to risk-adjusted assets 10.60 10.09 10.60 10.09 Total capital to risk-adjusted assets 12.57 12.12 12.57 12.12 Leverage ratio 6.89 6.42 6.89 6.42 --------------------------------------------------------------------------------------------------------------- CREDIT QUALITY RATIOS Allowance for losses to loans 1.82% 1.94% 1.82% 1.94% Allowance to non-performing assets 81.90 80.30 81.90 80.30 Allowance to non-performing loans 88.56 88.80 88.56 88.80 Non-performing assets to loans 2.23 2.41 2.23 2.41 Non-performing assets to total assets 1.37 1.44 1.37 1.44 Net charge-offs to average loans 0.99 0.97 0.94 1.13 Provision to net charge-offs 1.19x 1.28x 1.28x 1.14x Net charge-offs earnings coverage 3.70 3.56 3.92 3.08
4 Popular, Inc. 2001 Quarterly CONSOLIDATED STATEMENTS OF CONDITION
June 30, In thousands 2001 2000 ---------------------------------------------------------------------------------------------------------- ASSETS Cash and due from banks $ 580,592 $ 698,012 ---------------------------------------------------------------------------------------------------------- Money market investments: Federal funds sold and securities purchased under agreements to resell 1,052,960 1,159,754 Time deposits with other banks 10,424 31,206 Bankers' acceptances 470 551 ---------------------------------------------------------------------------------------------------------- 1,063,854 1,191,511 ---------------------------------------------------------------------------------------------------------- Investment securities available-for-sale, at market value 7,463,660 7,228,826 Investment securities held-to-maturity, at amortized cost 247,812 292,249 Trading account securities, at market value 279,686 190,458 Loans held-for-sale, at lower of cost or market 914,071 790,831 ---------------------------------------------------------------------------------------------------------- Loans 16,604,911 15,335,791 Less - Unearned income 326,736 352,018 Allowance for loan losses 313,337 305,526 ---------------------------------------------------------------------------------------------------------- 15,964,838 14,678,247 ---------------------------------------------------------------------------------------------------------- Premises and equipment 395,804 437,181 Other real estate 28,741 36,426 Customers' liabilities on acceptances 1,673 5,735 Accrued income receivable 190,013 176,540 Other assets 451,101 429,584 Intangible assets 269,058 295,646 ---------------------------------------------------------------------------------------------------------- $27,850,903 $26,451,246 ========================================================================================================== LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES: Deposits: Non-interest bearing $ 3,144,623 $ 3,067,579 Interest bearing 12,425,162 11,392,875 ---------------------------------------------------------------------------------------------------------- 15,569,785 14,460,454 Federal funds purchased and securities sold under agreements to repurchase 4,157,279 4,937,816 Other short-term borrowings 2,828,347 2,854,035 Notes payable 2,379,030 1,752,722 Acceptances outstanding 1,673 5,735 Other liabilities 472,745 407,260 ---------------------------------------------------------------------------------------------------------- 25,408,859 24,418,022 ---------------------------------------------------------------------------------------------------------- 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 915 21,334 ---------------------------------------------------------------------------------------------------------- STOCKHOLDERS' EQUITY: Preferred stock 100,000 100,000 Common stock 831,408 828,959 Surplus 264,414 247,479 Retained earnings 963,605 775,975 Treasury stock, at cost (66,136) (64,150) Accumulated other comprehensive income (loss), net of tax 72,838 (151,373) ---------------------------------------------------------------------------------------------------------- 2,166,129 1,736,890 ---------------------------------------------------------------------------------------------------------- $27,850,903 $26,451,246 ==========================================================================================================
5 Popular, Inc. 2001 Quarterly CONSOLIDATED STATEMENTS OF INCOME
Quarter ended Six months ended June 30, June 30, Dollars in thousands, except per share information 2001 2000 2001 2000 ------------------------------------------------------------------------------------------------------------------------------ INTEREST INCOME: Loans $ 391,841 $ 392,437 $ 785,406 $ 768,957 Money market investments 13,026 14,308 28,332 27,556 Investment securities 116,038 114,624 254,097 226,754 Trading account securities 4,297 3,405 7,818 7,308 ------------------------------------------------------------------------------------------------------------------------------ 525,202 524,774 1,075,653 1,030,575 ------------------------------------------------------------------------------------------------------------------------------ INTEREST EXPENSE: Deposits 131,022 129,399 263,799 251,873 Short-term borrowings 84,933 113,684 205,454 216,509 Long-term debt 41,934 35,775 83,370 74,037 ------------------------------------------------------------------------------------------------------------------------------ 257,889 278,858 552,623 542,419 ------------------------------------------------------------------------------------------------------------------------------ Net interest income 267,313 245,916 523,030 488,156 Provision for loan losses 49,462 48,719 99,496 98,732 ------------------------------------------------------------------------------------------------------------------------------ Net interest income after provision for loan losses 217,851 197,197 423,534 389,424 Service charges on deposit accounts 36,310 30,831 70,968 61,054 Other service fees 58,907 55,443 117,082 102,808 Net (loss) gain on sale of securities (2,152) 329 (1,862) 13,593 Trading account profit 945 693 1,254 1,510 Net gain on derivatives 1,652 -- 1,021 -- Other operating income 23,843 21,989 46,009 46,046 ------------------------------------------------------------------------------------------------------------------------------ 337,356 306,482 658,006 614,435 ------------------------------------------------------------------------------------------------------------------------------ OPERATING EXPENSES: Personnel costs: Salaries 78,884 77,301 156,662 155,895 Profit sharing 4,018 5,569 9,115 9,701 Pension and other benefits 23,841 15,341 45,860 35,839 ------------------------------------------------------------------------------------------------------------------------------ 106,743 98,211 211,637 201,435 Net occupancy expenses 17,726 16,177 34,921 32,736 Equipment expenses 24,575 25,079 48,702 48,513 Other taxes 9,809 8,341 18,619 16,916 Professional fees 16,842 16,826 32,227 34,504 Communications 12,085 12,034 23,972 22,836 Business promotion 13,159 12,572 23,704 26,659 Printing and supplies 4,490 5,313 8,809 10,485 Other operating expenses 20,189 16,282 36,120 34,663 Amortization of intangibles 6,860 8,537 13,736 17,129 ------------------------------------------------------------------------------------------------------------------------------ 232,478 219,372 452,447 445,876 ------------------------------------------------------------------------------------------------------------------------------ Income before income tax, minority interest and cumulative effect of accounting changes 104,878 87,110 205,559 168,559 Income tax 27,337 21,684 54,488 40,440 Net (gain) loss of minority interest (4) (303) 12 1,193 ------------------------------------------------------------------------------------------------------------------------------ Income before cumulative effect of accounting changes 77,537 65,123 151,083 129,312 Cumulative effect of accounting changes, net of tax -- -- 686 -- ------------------------------------------------------------------------------------------------------------------------------ NET INCOME $ 77,537 $ 65,123 $ 151,769 $ 129,312 ============================================================================================================================== NET INCOME APPLICABLE TO COMMON STOCK $ 75,450 $ 63,036 $ 147,594 $ 125,137 ============================================================================================================================== EARNINGS PER COMMON SHARE (BASIC AND DILUTED) (BEFORE AND AFTER CUMULATIVE EFFECT OF ACCOUNTING CHANGES) $ 0.55 $ 0.46 $ 1.08 $ 0.92 ==============================================================================================================================
6 ADDITIONAL INFORMATION Board of Directors Richard L. Carrion, Chairman Antonio Luis Ferre, Vice Chairman ** Juan A. Albors Hernandez * Jose A. Bechara Bravo * Juan J. Bermudez Francisco J. Carreras Jose B. Carrion Jr. David H. Chafey Jr. Maria Luisa Ferre * Hector R. Gonzalez Jorge A. Junquera ** Guillermo Martinez * Manuel Morales Jr. Alberto M. Paracchini Francisco M. Rexach Jr. J. Adalberto Roig Jr. * Felix J. Serralles Nevares Jon E. Slater * 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, Senior Executive Vice President Maria Isabel P. de Burckhart, Executive Vice President Roberto R. Herencia, Executive Vice President Larry B. Kesler, Executive Vice President Tere Loubriel, Executive Vice President Humberto Martin, Executive Vice President Brunilda Santos de Alvarez, Executive Vice President Emilio E. Pinero, Executive Vice President Carlos J. Vazquez, Executive Vice President Shareholders' Information Shareholders' 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. 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 Popular, National Association 5551 Vanguard Street Suite 100 Orlando, Florida 32819 Telephone: (407) 370-7482 ATH Costa Rica/CreST, S.A. Tournon Neighborhood, accross to newspaper La Republica, ATH Building San Jose, Costa Rica Telephone: (506) 257-9011 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 8 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 Insurance, Inc. 270 Munoz Rivera Avenue McConnell Bldg. 6th Floor Hato Rey, Puerto Rico 00918 Telephone: (787) 759-0080