EX-19 3 g77476exv19.txt QUARTERLY REPORT TO SHAREHOLDERS Exhibit No. 19 [POPULAR LOGO] POPULAR, INC. 2002 JUNE 30, 2002 POPULAR, INC. SECOND QUARTER REPORT LETTER TO SHAREHOLDERS For the quarter ended June 30, 2002, Popular, Inc.'s net income reached $96.3 million or $0.72 earnings per common share, basic and diluted. The Corporation's net income rose 24%, or $18.8 million, compared with $77.5 million or $0.55 per common share in the same period of 2001. Second quarter earnings performance resulted in a return on average assets (ROA) of 1.23% and a return on common equity (ROE) of 18.14%, compared with 1.14% and 15.36%, respectively, for the same period in 2001. Net income for the six months ended June 30, 2002 amounted to $185.3 million or $1.35 earnings per common share, an increase of $33.5 million, or 22%, compared with $151.8 million or $1.08 per common share for the same period in 2001. ROA and ROE for the first six months of 2002 were 1.21% and 17.43%, respectively, compared with 1.12% and 15.31%, respectively, for the same period in 2001. The Corporation's net interest income for the quarter ended June 30, 2002 increased to $294.7 million, an 11% or $29.2 million improvement over the $265.5 million reported in the second quarter of 2001. Net interest margin for the quarter, on a taxable equivalent basis, was 4.28%, compared with 4.44% a year earlier. This reduction resulted from higher levels of arbitrage activities and the impact of the declining interest rate scenario. The provision for loan losses amounted to $50.1 million, compared with $49.5 million for the second quarter in 2001. Operating income, excluding derivatives, securities and trading transactions, reached $136.1 million for the second quarter of 2002, 10% or $12.1 million higher than the $124.0 million reported in the same quarter last year. This rise resulted mostly from higher commercial account charges and insurance, debit card, credit card and check-cashing fees. Gain on sale of securities for the second quarter of 2002 was $85 thousand, compared with losses of $2.2 million for the same period in 2001, and derivative losses amounted to $0.9 million, compared with gains of $1.7 million for the quarter ended June 30, 2001. Operating expenses totaled $250.7 million for the second quarter of 2002, compared with $233.9 million for the same period in 2001. As of June 30, 2002, total assets reached $32.7 billion, an increase of $4.8 billion over the $27.9 billion at June 30, 2001. Total loans amounted to $18.9 billion at June 30, 2002, an increase of $1.7 billion from $17.2 billion at June 30, 2001, mainly in mortgage and commercial loans. Investment securities totaled $10.3 billion at June 30, 2002, compared with $7.7 billion at the same date in prior year, partly due to arbitrage activities. Deposits rose to $17.8 billion at June 30, 2002, increasing $2.2 billion, or 15%, from $15.6 billion at the same date a year earlier, driven principally by higher savings and demand deposits. Stockholders' equity amounted to $2.2 billion as of June 30, 2002 and 2001. Subsequent to December 31, 2001, the Corporation redeemed $100 million of its preferred stock and repurchased 4.3 million shares of its common stock from Banco Popular Retirement Plan. Earnings retention and a favorable change in the value of securities available-for-sale offset these capital reductions. The Corporation's stock market value was $33.68 per share at June 30, 2002, compared with $32.94 at June 30, 2001 and $29.22 at March 31, 2002. As of the end of the second quarter of 2002 and 2001, the Corporation had a market capitalization of $4.5 billion. Book value per share of common stock increased 10% to $16.69, compared with $15.18 as of June 30, 2001. As part of our commitment in creating innovative and value-added products and services that meet the changing needs of our customers, on April 29, 2002, Banco Popular launched the new PREMIA rewards program. This customer-loyalty program allows customers of Banco Popular de Puerto Rico and of other Corporation's subsidiaries in Puerto Rico to accumulate points for their everyday financial transactions and from a diversity of products and services, including deposit accounts, credit cards, mortgage and auto loans, and electronic services transactions, among others. The accumulated points are redeemable for airline tickets, merchandise and pre-paid ATM cards, among many other alternatives. This is a unique program that emphasizes on compensating our customers and maximizing the value of the many products and services being offered. Since its launching, the PREMIA rewards program has attracted more than 100,000 participants, exceeding our short-term expectations. Also, Popular Mortgage, our mortgage subsidiary in Puerto Rico, is introducing a unique pre-approval service through an innovative program together with Fannie Mae. This new service will permit qualified customers to receive an instant pre-approval letter for mortgage loans through the Internet in minimal time, thus making easier their decision-making process in buying a home. The service is available by accessing Popular Mortgage's web site at www.popularmortgagepr.com. During this quarter, the Corporation acquired the general insurance agencies of Del Nido & Associates and Life Insurance Services, Inc., broadening our customer base and allowing us to offer a wider variety of insurance products and services to more customers. We also established an insurance subsidiary in the U.S. Virgin Islands, Popular POPULAR, INC. Insurance V.I., Inc., which will allow us to offer insurance products and services to our customers in this area. As part of our social commitment to bring financial advice to all the communities we serve, Banco Popular North America, the U.S. leading Hispanic-owned bank, launched the new Programa Acceso Popular. Through this program, we offer tailored financial products and services to Hispanic customers in the U.S. mainland, while we bring our financial expertise directly into their communities and workplace. During the Annual Stockholders Meeting of Popular, Inc., held on April 30, 2002, all three directors nominated for re-election were elected for a three-year term. Also, Alberto Paracchini and Dr. Francisco Carreras retired from the Popular, Inc. Board of Directors after reaching the mandatory retirement age. We are very grateful for their valuable advice and contributions during their tenure. Nonetheless, we will continue to benefit from their ideas, experience and counsel on the Banco Popular de Puerto Rico Board of Directors. /s/ Richard L. Carrion ----------------------- Chairman President Chief Executive Officer POPULAR, INC. FINANCIAL HIGHLIGHTS
At June 30, Average for the six months ------------------------------------ --------------------------------------- BALANCE SHEET HIGHLIGHTS 2002 2001 Change 2002 2001 Change --------------------------------------------------------------------------------------------------------------------- (In thousands) Money market investments $ 1,071,658 $ 1,063,854 $ 7,804 $ 876,091 $ 949,489 $ (73,398) Investment and trading securities 10,651,135 7,991,158 2,659,977 10,200,184 8,466,557 1,733,627 Loans 18,901,142 17,192,246 1,708,896 18,249,592 16,496,421 1,753,171 Total assets 32,740,722 27,850,634 4,890,088 30,915,430 27,448,384 3,467,046 Deposits 17,829,287 15,569,785 2,259,502 16,807,732 15,068,602 1,739,130 Borrowings 12,178,407 9,639,656 2,538,751 11,507,639 9,876,743 1,630,896 Stockholders' equity 2,207,617 2,166,652 40,965 2,141,750 2,044,659 97,091 ---------------------------------------------------------------------------------------------------------------------
Second quarter Six months -------------------------------- ---------------------------------- OPERATING HIGHLIGHTS 2002 2001 Change 2002 2001 Change ----------------------------------------------------------------------------------------------------------------------------- (In thousands, except per share information) Net interest income $294,678 $265,518 $29,160 $580,093 $521,235 $ 58,858 Provision for loan losses 50,075 49,462 613 104,529 99,496 5,033 Fees and other income 134,988 122,742 12,246 265,396 238,263 27,133 Other expenses, net of minority interest 283,286 261,261 22,025 555,611 508,919 46,692 Cumulative effect of accounting change -- -- -- -- 686 (686) Net income $ 96,305 $ 77,537 $18,768 $185,349 $151,769 $ 33,580 Net income applicable to common stock $ 96,305 $ 75,450 $20,855 $182,839 $147,595 $ 35,244 Earnings per common share $ 0.72 $ 0.55 $ 0.17 $ 1.35 $ 1.08 $ 0.27 -----------------------------------------------------------------------------------------------------------------------------
Second quarter Six months ----------------- ----------------- SELECTED STATISTICAL INFORMATION 2002 2001 2002 2001 ---------------------------------------------------------------------------------------------------------------- COMMON STOCK DATA ---------------------------------------------------------------------------------------------------------------- Market price High $33.68 $32.94 $33.68 $32.94 Low 28.60 28.44 27.50 25.25 End 33.68 32.94 33.68 32.94 Book value at period end 16.69 15.18 16.69 15.18 Dividends declared 0.20 0.20 0.40 0.36 Dividend payout ratio 28.34% 28.86% 29.48% 29.50% Price/earnings ratio 13.80x 15.46x 13.80x 15.46x ---------------------------------------------------------------------------------------------------------------- PROFITABILITY RATIOS Return on assets 1.23% 1.14% 1.21% 1.12% Return on common equity 18.14 15.36 17.43 15.31 Net interest spread (taxable equivalent) 3.81 3.69 3.80 3.55 Net interest yield (taxable equivalent) 4.28 4.44 4.29 4.33 Effective tax rate 25.28 26.07 25.28 26.51 Overhead ratio 39.25 41.87 39.20 41.47 Efficiency ratio 58.18 60.05 57.90 59.72 ---------------------------------------------------------------------------------------------------------------- CAPITALIZATION RATIOS Equity to assets 6.78% 7.62% 6.93% 7.45% Tangible equity to assets 6.14 6.82 6.27 6.65 Equity to loans 11.55 12.34 11.74 12.39 Internal capital generation 13.12 9.32 12.17 9.64 Tier I capital to risk-adjusted assets 9.36 10.60 9.36 10.60 Total capital to risk-adjusted assets 11.13 12.57 11.13 12.57 Leverage ratio 5.99 6.89 5.99 6.89 ---------------------------------------------------------------------------------------------------------------- CREDIT QUALITY RATIOS Allowance for losses to loans 1.84% 1.82% 1.84% 1.82% Allowance to non-performing assets 69.11 81.90 69.11 81.90 Allowance to non-performing loans 74.31 88.56 74.31 88.56 Non-performing assets to loans 2.66 2.23 2.66 2.23 Non-performing assets to total assets 1.53 1.37 1.53 1.37 Net charge-offs to average loans 0.99 0.99 1.05 0.94 Provision to net charge-offs 1.09x 1.19x 1.10x 1.28x Net charge-offs earnings coverage 3.91 3.70 3.69 3.92
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. Felix J. Serralles Jr. 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 Emilio E. Pinero, Executive Vice President Brunilda Santos de Alvarez, Executive Vice President Carlos J. Vazquez, Executive Vice President Felix M. Villamil, 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 - 11th Floor, Office 1111 Trust Division (724) 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) 764-1893 or (787) 765-9800 exts. 5637, 5525, 6108 and 6112. POPULAR, INC. C0NSOLIDATED STATEMENTS OF CONDITION
June 30, -------------------------------- In thousands 2002 2001 ----------------------------------------------------------------------------------------------------------------------------- ASSETS Cash and due from banks $ 1,102,933 $ 580,592 ----------------------------------------------------------------------------------------------------------------------------- Money market investments: Federal funds sold and securities purchased under agreements to resell 1,067,764 1,052,960 Time deposits with other banks 3,056 10,424 Bankers' acceptances 838 470 ----------------------------------------------------------------------------------------------------------------------------- 1,071,658 1,063,854 ----------------------------------------------------------------------------------------------------------------------------- Investment securities available-for-sale, at market value 10,118,219 7,463,660 Investment securities held-to-maturity, at amortized cost 225,070 247,812 Trading account securities, at market value 307,846 279,686 Loans held-for-sale, at lower of cost or market 910,006 914,071 ----------------------------------------------------------------------------------------------------------------------------- Loans 18,302,714 16,604,911 Less -- Unearned income 311,578 326,736 Allowance for loan losses 347,230 313,337 ----------------------------------------------------------------------------------------------------------------------------- 17,643,906 15,964,838 ----------------------------------------------------------------------------------------------------------------------------- Premises and equipment 404,382 395,804 Other real estate 35,193 28,741 Accrued income receivable 190,612 190,013 Other assets 516,726 493,473 Intangible assets 214,171 228,090 ----------------------------------------------------------------------------------------------------------------------------- $ 32,740,722 $ 27,850,634 ============================================================================================================================= LIABILITIES AND STOCKHOLDER'S EQUITY LIABILITIES: Deposits: Non-interest bearing $ 4,012,168 $ 3,144,623 Interest bearing 13,817,119 12,425,162 ----------------------------------------------------------------------------------------------------------------------------- 17,829,287 15,569,785 Federal funds purchased and securities sold under agreements to repurchase 5,829,016 4,157,279 Other short-term borrowings 1,944,642 2,828,347 Notes payable 4,135,749 2,379,030 Other liabilities 524,447 473,626 ----------------------------------------------------------------------------------------------------------------------------- 30,263,141 25,408,067 ----------------------------------------------------------------------------------------------------------------------------- Subordinated notes 125,000 125,000 ----------------------------------------------------------------------------------------------------------------------------- Preferred beneficial interest in Popular North America's junior subordinated deferrable interest debentures guaranteed by the Corporation 144,000 150,000 ----------------------------------------------------------------------------------------------------------------------------- Minority interest in consolidated subsidiaries 964 915 ----------------------------------------------------------------------------------------------------------------------------- STOCKHOLDERS' EQUITY: Preferred stock -- 100,000 Common stock 833,672 831,408 Surplus 272,761 264,414 Retained earnings 1,186,814 963,605 Treasury stock, at cost (205,210) (66,136) Accumulated other comprehensive income, net of tax 119,580 73,361 ----------------------------------------------------------------------------------------------------------------------------- 2,207,617 2,166,652 ----------------------------------------------------------------------------------------------------------------------------- $ 32,740,722 $ 27,850,634 =============================================================================================================================
POPULAR, INC. CONSOLIDATED STATEMENTS OF INCOME
Quarter ended Six months ended June 30, June 30, --------------------------------------------------------------------- Dollars in thousands, except per share information 2002 2001 2002 2001 ---------------------------------------------------------------------------------------------------------------------------------- INTEREST INCOME: Loans $ 380,166 $ 391,841 $ 752,388 $ 785,406 Money market investments 7,370 13,026 15,155 28,332 Investment securities 115,377 114,243 227,688 252,302 Trading account securities 3,086 4,297 6,587 7,818 ---------------------------------------------------------------------------------------------------------------------------------- 505,999 523,407 1,001,818 1,073,858 ---------------------------------------------------------------------------------------------------------------------------------- INTEREST EXPENSE: Deposits 110,356 131,022 223,286 263,799 Short-term borrowings 45,274 84,493 89,718 203,611 Long-term debt 55,691 42,374 108,721 85,213 ---------------------------------------------------------------------------------------------------------------------------------- 211,321 257,889 421,725 552,623 ---------------------------------------------------------------------------------------------------------------------------------- Net interest income 294,678 265,518 580,093 521,235 Provision for loan losses 50,075 49,462 104,529 99,496 ---------------------------------------------------------------------------------------------------------------------------------- Net interest income after provision for loan losses 244,603 216,056 475,564 421,739 Service charges on deposit accounts 39,507 36,310 78,480 70,968 Other service fees 66,037 60,349 127,724 119,043 Gain (loss) on sale of securities 85 (2,152) (3,925) (1,862) Trading account loss (359) (816) (1,389) (628) Derivatives (losses) gains (855) 1,652 (344) 1,021 Other operating income 30,573 27,399 64,850 49,721 ---------------------------------------------------------------------------------------------------------------------------------- 379,591 338,798 740,960 660,002 ---------------------------------------------------------------------------------------------------------------------------------- OPERATING EXPENSES Personnel costs: Salaries 90,746 78,884 179,307 156,662 Profit sharing 5,368 4,018 10,308 9,115 Pension and other benefits 26,469 23,841 53,270 45,860 ---------------------------------------------------------------------------------------------------------------------------------- 122,583 106,743 242,885 211,637 Net occupancy expenses 20,048 17,726 39,078 34,921 Equipment expenses 24,376 24,575 49,141 48,702 Other taxes 9,285 9,809 18,833 18,619 Professional fees 19,724 18,284 37,231 34,223 Communications 13,111 12,085 26,384 23,972 Business promotion 16,831 13,159 30,199 23,704 Printing and supplies 5,078 4,490 9,587 8,809 Other operating expenses 17,061 20,189 34,382 36,120 Amortization of intangibles 2,556 6,860 5,099 13,736 ---------------------------------------------------------------------------------------------------------------------------------- 250,653 233,920 492,819 454,443 ---------------------------------------------------------------------------------------------------------------------------------- Income before income tax, minority interest and cumulative effect of accounting change 128,938 104,878 248,141 205,559 Income tax 32,594 27,337 62,742 54,488 Net (gain) loss of minority interest (39) (4) (50) 12 ---------------------------------------------------------------------------------------------------------------------------------- Income before cumulative effect of accounting change 96,305 77,537 185,349 151,083 Cumulative effect of accounting change, net of tax -- -- -- 686 ---------------------------------------------------------------------------------------------------------------------------------- NET INCOME $ 96,305 $ 77,537 $ 185,349 $ 151,769 ================================================================================================================================== NET INCOME APPLICABLE TO COMMON STOCK $ 96,305 $ 75,450 $ 182,839 $ 147,595 ================================================================================================================================== EARNINGS PER COMMON SHARE (BASIC AND DILUTED) (BEFORE AND AFTER CUMULATIVE EFFECT OF ACCOUNTING CHANGE) $ 0.72 $ 0.55 $ 1.35 $ 1.08 ----------------------------------------------------------------------------------------------------------------------------------
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, across to newspaper La Republica. ATH Building San Jose, Costa Rica Telephone: (011) 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 Street Suite 207 Guaynabo, Puerto Rico 00968 Telephone: (787) 749-8787 Popular Auto, Inc. M-1046 Federico Costa Street 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 Popular Insurance Agency, USA 1010 W Lake Street Suite 509 Oak Park, Illinois 60301 Telephone: (773) 394-7680