EX-19 3 g72391ex19.txt QUARTERLY REPORT TO SHAREHOLDERS EXHIBIT 19 Letter to Shareholders Popular, Inc.'s net income for the third quarter ended September 30, 2001, increased 8% to $77.2 million, up from $71.3 million reported in the third quarter of 2000. Earnings per share were $0.55 for the third quarter, an increase of 8% over $0.51 earned in the same quarter of 2000. The Corporation reported a year-to-date net income of $229.0 million, up 14% from $200.6 million for the same period a year ago. For the first nine months of 2001, earnings per share were $1.63, an increase of 14% over $1.43 reported for the same period last year. The Corporation's performance resulted in a third quarter return on average assets (ROA) of 1.10% and a return on common equity (ROE) of 14.71%, compared with 1.04% and 15.24%, respectively, for the same period in 2000. ROA and ROE for the first nine months of 2001 were 1.11% and 15.10%, respectively, compared with 1.02% and 14.75%, respectively, for the same period last year. The Corporation's net interest income for the third quarter rose to $273.4 million, a 10% improvement over the third quarter of 2000. The net interest margin for the quarter, on a taxable equivalent basis, was 4.48%, compared with 4.16% a year earlier. The provision for loan losses for this quarter amounted to $55.3 million, compared with $49.7 million for the same quarter in 2000. Non-interest income, excluding securities, trading and derivatives transactions, increased to $123.5 million for the third quarter of 2001, a 3% improvement over the same period last year. For the quarter just ended, the Corporation had losses on derivatives of $8.1 million, resulting from changes in the fair value of interest-rate swaps. Third quarter operating expenses increased to $230.4 million or 5% over last year's third quarter. Total assets reached $28.5 billion at September 30, 2001, an increase of 5% over the year ago total of $27.2 billion. Total loans increased to $17.6 billion, up 9% from the same period in 2000. Deposits grew to $16.0 billion, an increase of $1.4 billion or 10% from September 30, 2000. Stockholders' equity at September 30, 2001, amounted to $2.3 billion compared with $1.8 billion at the same date in 2000. The Corporation's stock market value was $31.20 at the end of the quarter, compared with $27.06 at September 30, 2000. At the end of the third quarter of 2001, the Corporation had a market capitalization of $4.3 billion. Book value per share of common stock increased 26% to $16.14, compared with its value on September 30, 2000. In a strategic move that will result in greater efficiency and enhanced customer service, in September 2001 the Corporation merged the auto financing division of Banco Popular de Puerto Rico with Popular Leasing, creating Popular Auto. The products of this subsidiary range from auto and marine conventional loans, car, equipment and company fleet leasing to daily, weekly or monthly car and truck rental - all under one umbrella. The subsidiary, which manages more than 75,000 accounts, consolidated its leadership in the auto financing industry in Puerto Rico. During this quarter, and reinforcing our initiatives in e-business, GM Group became the representative in Puerto Rico of Teradata, an NCR division, which offers analytical applications of data warehousing and customer relationship management. These applications, which operate with accumulated data gathered from the companies' operational systems, allow businesses to analyze information about clients and their buying habits as well as market trends and fluctuations, allowing companies to make better-informed decisions. E-management, in the spur of a technologically oriented society, presents a market with a vast potential for growth. The unfortunate events of September 11, 2001, have deeply touched all of us. I would like to extend a special recognition to our co-workers in New York, who, with their actions during the crisis, have been steadfast proof of our institutional values. In solidarity, all our subsidiaries are active in fund-raising activities for the victims and their families. We are also participating in a joint effort of seven major banks in New York, offering emergency loans to small businesses. Shortly after the close of the third quarter, we commemorated 108 years of service. We have walked hand-in-hand with Puerto Rico throughout our history and in New York for more than 40 years. We have experienced times of prosperity and times of challenge. And each anniversary gives us the opportunity to reaffirm our commitment to service and to remember that our roots are grounded in our corporate values, among which is one that is fundamental for us: our Social Responsibility. The recent events significantly heightened uncertainty in a U.S. economy that was already weak. In light of the overall slow economy and as a move to prevent a prolonged recession, the Federal Reserve cut the federal funds and discount rates by 75 basis points during the quarter, to 2.5% and 2.0%, respectively. The financial consequences of the terrorist attacks and the uncertainty of the military campaigns clearly concern us. But we are optimistic and look forward to an economic recovery, as the Federal Reserve's interest rate reductions and Government spending and tax incentives should promote consumer spending and boost investors' confidence, helping stabilize the economy. RICHARD L. CARRION CHAIRMAN PRESIDENT CHIEF EXECUTIVE OFFICER Financial Highlights
At September 30, Average for the nine months BALANCE SHEET HIGHLIGHTS 2001 2000 Change 2001 2000 Change ----------------------------------------------------------------------------------------------------------------------------------- (In thousands) Money market investments $ 993,015 $ 879,651 $ 113,364 $ 940,122 $ 932,578 $ 7,544 Investment and trading securities 8,316,660 8,520,136 (203,476) 8,310,532 7,945,071 365,461 Loans 17,632,274 16,237,687 1,394,587 16,800,193 15,674,947 1,125,246 Total assets 28,530,426 27,230,263 1,300,163 27,594,261 26,240,525 1,353,736 Deposits 16,000,236 14,557,878 1,442,358 15,316,240 14,447,585 868,655 Borrowings 9,747,704 10,390,202 (642,498) 9,732,669 9,434,291 298,378 Stockholders' equity 2,299,457 1,835,734 463,723 2,072,049 1,859,882 212,167 ----------------------------------------------------------------------------------------------------------------------------------- Third quarter Nine months OPERATING HIGHLIGHTS 2001 2000 Change 2001 2000 Change ----------------------------------------------------------------------------------------------------------------------------------- (In thousands, except per share information) Net interest income $273,420 $248,856 $24,564 $794,655 $737,012 $57,643 Provision for loan losses 55,259 49,666 5,593 154,755 148,398 6,357 Fees and other income 117,359 120,038 (2,679) 352,672 345,050 7,622 Other expenses, net of minority interest 258,304 247,936 10,368 764,274 733,060 31,214 Cumulative effect of accounting changes -- -- -- 686 -- 686 Net income $ 77,216 $ 71,292 $ 5,924 $228,984 $200,604 $28,380 Net income applicable to common stock $ 75,129 $ 69,205 $ 5,924 $222,722 $194,342 $28,380 Earnings per common share $ 0.55 $ 0.51 $ 0.04 $1.63 $ 1.43 $ 0.20 ----------------------------------------------------------------------------------------------------------------------------------- Third quarter Nine months SELECTED STATISTICAL INFORMATION 2001 2000 2001 2000 ----------------------------------------------------------------------------------------------------------------------------------- COMMON STOCK DATA Market price High $36.26 $27.06 $36.26 $27.06 Low 27.42 19.63 25.25 18.63 End 31.20 27.06 31.20 27.06 Book value at period end 16.14 12.77 16.14 12.77 Dividends declared 0.20 0.16 0.56 0.48 Dividend payout ratio 36.26% 31.42% 31.78% 33.54% Price/earnings ratio 14.38x 14.24x 14.38x 14.24x ----------------------------------------------------------------------------------------------------------------------------------- PROFITABILITY RATIOS Return on assets 1.10% 1.04% 1.11% 1.02% Return on common equity 14.71 15.24 15.10 14.75 Net interest spread (taxable equivalent) 3.80 3.33 3.63 3.46 Net interest yield (taxable equivalent) 4.48 4.16 4.37 4.29 Effective tax rate 26.58 27.94 26.53 25.45 Overhead ratio 41.33 40.26 41.42 43.56 Efficiency ratio 58.04 61.27 59.04 62.98 ----------------------------------------------------------------------------------------------------------------------------------- CAPITALIZATION RATIOS Equity to assets 7.63% 6.99% 7.51% 7.09% Tangible equity to assets 6.74 5.99 6.59 6.02 Equity to loans 12.22 11.69 12.33 11.87 Internal capital generation 9.01 9.95 9.42 9.26 Tier I capital to risk-adjusted assets 10.70 10.29 10.70 10.29 Total capital to risk-adjusted assets 12.68 12.33 12.68 12.33 Leverage ratio 6.91 6.29 6.91 6.29 ----------------------------------------------------------------------------------------------------------------------------------- CREDIT QUALITY RATIOS Allowance for losses to loans 1.85% 1.82% 1.85% 1.82% Allowance to non-performing assets 74.88 85.85 74.88 85.85 Allowance to non-performing loans 80.27 91.57 80.27 91.57 Non-performing assets to loans 2.47 2.12 2.47 2.12 Non-performing assets to total assets 1.53 1.26 1.53 1.26 Net charge-offs to average loans 0.97 1.04 0.95 1.10 Provision to net charge-offs 1.31x 1.17x 1.29x 1.15x Net charge-offs earnings coverage 3.80 3.49 3.88 3.22
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 L. 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. Consolidated Statements of Condition
September 30, In thousands 2001 2000 ------------------------------------------------------------------------------------------------------------------------- ASSETS Cash and due from banks $ 617,012 $ 573,396 ------------------------------------------------------------------------------------------------------------------------- Money market investments: Federal funds sold and securities purchased under agreements to resell 988,262 868,513 Time deposits with other banks 4,343 10,638 Bankers' acceptances 410 500 ------------------------------------------------------------------------------------------------------------------------- 993,015 879,651 ------------------------------------------------------------------------------------------------------------------------- Investment securities available-for-sale, at market value 7,798,028 8,070,662 Investment securities held-to-maturity, at amortized cost 240,763 285,829 Trading account securities, at market value 277,869 163,645 Loans held-for-sale, at lower of cost or market 910,615 682,455 ------------------------------------------------------------------------------------------------------------------------- Loans 17,042,433 15,908,554 Less - Unearned income 320,774 353,322 Allowance for loan losses 326,630 295,177 ------------------------------------------------------------------------------------------------------------------------- 16,395,029 15,260,055 ------------------------------------------------------------------------------------------------------------------------- Premises and equipment 390,324 401,975 Other real estate 29,257 21,494 Customers' liabilities on acceptances 1,953 1,904 Accrued income receivable 189,863 200,638 Other assets 423,396 401,123 Intangible assets 263,302 287,436 ------------------------------------------------------------------------------------------------------------------------- $ 28,530,426 $ 27,230,263 ========================================================================================================================= LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES: Deposits: Non-interest bearing $ 3,045,604 $ 2,945,057 Interest bearing 12,954,632 11,612,821 ------------------------------------------------------------------------------------------------------------------------- 16,000,236 14,557,878 Federal funds purchased and securities sold under agreements to repurchase 3,978,199 5,236,644 Other short-term borrowings 3,164,520 3,444,129 Notes payable 2,329,985 1,434,429 Acceptances outstanding 1,953 1,904 Other liabilities 480,168 443,707 ------------------------------------------------------------------------------------------------------------------------- 25,955,061 25,118,691 ------------------------------------------------------------------------------------------------------------------------- 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 908 838 ------------------------------------------------------------------------------------------------------------------------- STOCKHOLDERS' EQUITY: Preferred stock 100,000 100,000 Common stock 831,932 829,729 Surplus 266,525 249,238 Retained earnings 1,011,473 823,418 Treasury stock, at cost (66,136) (66,214) Accumulated other comprehensive income (loss), net of tax 155,663 (100,437) ------------------------------------------------------------------------------------------------------------------------- 2,299,457 1,835,734 ------------------------------------------------------------------------------------------------------------------------- $ 28,530,426 $ 27,230,263 =========================================================================================================================
Consolidated Statements of Income
Quarter ended Nine months ended September 30, September 30, Dollars in thousands, except per share information 2001 2000 2001 2000 --------------------------------------------------------------------------------------------------------------------------------- INTEREST INCOME: Loans $ 392,801 $ 414,677 $ 1,178,207 $1,183,634 Money market investments 10,350 18,187 38,682 45,743 Investment securities 110,095 125,109 362,397 351,863 Trading account securities 3,736 3,201 11,554 10,509 --------------------------------------------------------------------------------------------------------------------------------- 516,982 561,174 1,590,840 1,591,749 --------------------------------------------------------------------------------------------------------------------------------- INTEREST EXPENSE: Deposits 130,254 140,811 394,053 392,684 Short-term borrowings 72,664 139,757 276,275 356,266 Long-term debt 40,644 31,750 125,857 105,787 --------------------------------------------------------------------------------------------------------------------------------- 243,562 312,318 796,185 854,737 --------------------------------------------------------------------------------------------------------------------------------- Net interest income 273,420 248,856 794,655 737,012 Provision for loan losses 55,259 49,666 154,755 148,398 --------------------------------------------------------------------------------------------------------------------------------- Net interest income after provision for loan losses 218,161 199,190 639,900 588,614 Service charges on deposit accounts 37,537 32,558 108,505 93,612 Other service fees 59,643 57,493 175,736 160,302 Gain (loss) on sale of securities 1,249 147 (613) 13,740 Trading account profit 777 259 149 1,617 Loss on derivatives (8,140) -- (7,119) -- Other operating income 26,293 29,581 76,014 75,779 --------------------------------------------------------------------------------------------------------------------------------- 335,520 319,228 992,572 933,664 --------------------------------------------------------------------------------------------------------------------------------- OPERATING EXPENSES: Personnel costs: Salaries 82,080 78,104 238,742 233,999 Profit sharing 3,986 5,197 13,101 14,897 Pension and other benefits 21,542 17,078 67,402 52,918 --------------------------------------------------------------------------------------------------------------------------------- 107,608 100,379 319,245 301,814 Net occupancy expenses 17,974 17,610 52,895 50,346 Equipment expenses 24,148 25,294 72,850 73,807 Other taxes 9,135 8,507 27,754 25,423 Professional fees 17,247 15,602 48,521 50,107 Communications 12,181 11,661 36,153 34,497 Business promotion 13,414 9,694 37,118 36,353 Printing and supplies 4,269 5,351 13,078 15,836 Other operating expenses 17,525 17,289 53,645 51,952 Amortization of intangibles 6,858 8,829 20,594 25,958 --------------------------------------------------------------------------------------------------------------------------------- 230,359 220,216 681,853 666,093 --------------------------------------------------------------------------------------------------------------------------------- Income before income tax, minority interest and cumulative effect of accounting changes 105,161 99,012 310,719 267,571 Income tax 27,952 27,662 82,440 68,103 Net loss (gain) of minority interest 7 (58) 19 1,136 --------------------------------------------------------------------------------------------------------------------------------- Income before cumulative effect of accounting changes 77,216 71,292 228,298 200,604 Cumulative effect of accounting changes, net of tax -- -- 686 -- --------------------------------------------------------------------------------------------------------------------------------- NET INCOME $ 77,216 $ 71,292 $ 228,984 $ 200,604 --------------------------------------------------------------------------------------------------------------------------------- NET INCOME APPLICABLE TO COMMON STOCK $ 75,129 $ 69,205 $ 222,722 $ 194,342 --------------------------------------------------------------------------------------------------------------------------------- EARNINGS PER COMMON SHARE (BASIC AND DILUTED) (BEFORE AND AFTER CUMULATIVE EFFECT OF ACCOUNTING CHANGES) $ 0.55 $ 0.51 $ 1.63 $ 1.43 ---------------------------------------------------------------------------------------------------------------------------------
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 8523 Commodity Circle Suite 100 Orlando, Florida 32819 Telephone: (407) 370-7800 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 Auto, 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 Insurance, Inc. 9 Pedro Marquez Street Culebra, Puerto Rico 00735 Telephone: (787) 742-0255