EX-99.A 3 g82397exv99wa.txt EX-99.1 QUARTERLY REPORT EXHIBIT (a) 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 9600 West Bryn Mawr Suite 400 Rosemont, Illinois 60018 Telephone: (847) 994-5800 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) 506-211-4500 GM Group, Inc. 1590 Ponce de Leon Avenue GM Group Plaza Bldg., Suite 400 San Juan, Puerto Rico 00926 Telephone: (787) 751-4343 Equity One, Inc. 301 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 16280 Westwood Business Park Drive Ellisville, Missouri 63021 Telephone: (636) 391-0777 Popular Finance, Inc. 1326 Salud Street Suite 613 Ponce, Puerto Rico 00716-1687 Telephone: (787) 844-2760 Popular Cash Express, Inc. 9600 West Bryn Mawr First floor Rosemont, Illinois 60018 Telephone: (847) 994-5973 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 9600 West Bryn Mawr First Floor Rosemont, Illinois 60018 Telephone: (847) 994-6580 Popular Insurance, V.I., Inc. 193 Estate Altona & Welgunst St. Thomas, Virgin Islands 00802 Telephone: (340) 693-2850 POPULAR, INC. 1ST QUARTER REPORT MARCH 31, 2003 Letter to Shareholders Despite the weakened economy and uncertain global conditions, which continued to present a challenging environment in which to operate, we are pleased with our Corporation's performance for the first quarter of 2003. The war against Iraq has further slowed the financial market recovery and U.S. economic conditions continue to be uncertain. Nonetheless, we look forward to a positive resolution to this conflict, and we are confident that Popular, Inc. will maintain its consistent growth regardless of the challenges that our economy faces. During the quarter ended March 31, 2003, the Corporation completed the public offering of its 6.375% Non-cumulative Monthly Income Preferred Stock, 2003 Series A. The offering was made through a group of underwriters led by Popular Securities, Inc., a subsidiary of Popular, Inc. This issuance, after the underwriting discounts and expenses, contributed with approximately $182 million in additional Tier I capital, further strengthening the Corporation's capital position. Also, in recent weeks, Popular North America, Inc., a subsidiary of Popular, Inc., sold $500 million in five-year fixed-rate medium-term notes. The funds raised will be used to repurchase short-term existing debt and to finance the growth of its operations in the United States. During the first quarter of 2003, Equity One, a subsidiary of Popular, Inc., tapped the asset-backed securities market with an offering of approximately $510 million. Subsequent to this quarter-end, this same subsidiary sold approximately $500 million in additional asset-backed securities, supported by home equity loans. The Corporation's net income for the quarter ended March 31, 2003, reached $99.1 million, an increase of $10.1 million, or 11%, compared with $89.0 million in the first quarter of 2002. Earnings per common share, basic and diluted, were $0.74 for the first quarter of 2003, an increase of 17% over the $0.63 reported in the same period of 2002. The Corporation's financial performance for the first quarter of 2003 resulted in a return on average assets (ROA) and a return on average common equity (ROE) of 1.21% and 17.39%, respectively, compared with 1.19% and 16.83%, respectively, for the same period of 2002. The Corporation's net interest income for the quarter ended March 31, 2003, increased to $309.8 million, a rise of 9% over the $285.4 million reported in the first quarter of 2002. The net interest margin for the quarter, on a taxable equivalent basis, was 4.30%, remaining at the same level as in the same quarter the previous year. The provision for loan losses amounted to $48.2 million, compared with $54.4 million for the first quarter of 2002. Non-interest income amounted to $132.2 million for the first quarter of 2003, compared with $130.4 million in the same period of 2002, an increase of $1.8 million. This increase was mostly associated with higher service charges on commercial deposit accounts, debit and credit card fees, insurance agency commissions, check-cashing fees and gain on sales of loans, among other factors. Also, higher gain on sales of securities contributed to the growth in non-interest income. These favorable variances were partially offset by higher derivatives losses during the first quarter of 2003, mostly attributed to changes in the fair value of the Corporation's interest rate swaps. Operating expenses were $263.6 million in the first quarter of 2003, an increase of $21.4 million, or 9%, compared with $242.2 million for the same period in 2002. Personnel costs increased by $12.0 million, or 10%, compared with the first quarter of 2002, mostly related to higher salaries, pension, incentive compensation and profit sharing. Other operating expenses, excluding personnel costs, increased $9.4 million, or 8%. Popular, Inc.'s total assets reached $33.7 billion as of March 31, 2003 and December 31, 2002. Total loans were $19.9 billion at March 31, 2003, compared with $19.6 billion at the end of 2002. Mortgage loans accounted for the largest growth in the portfolio, increasing $353 million, or 5%. Investment securities totaled $10.9 billion at the end of the first quarter of 2003, compared with $11.2 billion at December 31, 2002. Deposits reached $17.6 billion at March 31, 2003 and December 31, 2002. Stockholders' equity was $2.7 billion as of March 31, 2003 compared with $2.4 billion as of December 31, 2002. The increase in stockholders' equity since December 31, 2002 was mainly attributed to the additional capital obtained through the issuance of the preferred stock in the first quarter of 2003 and earnings retention. The Corporation's common stock market value was $33.99 per share at March 31, 2003, compared with $29.22 at March 31, 2002. As of the end of the first quarters of 2003 and 2002, the Corporation had a market capitalization of $4.5 billion and $4.0 billion, respectively. Book value per share of common stock increased 17% to $18.75 as of March 31, 2003, from $16.01 per share as of March 31, 2002. Several weeks ago Banco Popular de Puerto Rico launched a new products campaign with the slogan "We listen to you". It was prompted by comments we hear almost daily from customers through branch officers, interviews or surveys. The "We listen to you" campaign will serve as a unifying element for the Bank's products, while presenting deposit products, personal loans, credit cards and payment services (Popular TeleBanking, Popular Pay-by-Phone, Internet and ATH card). It also addresses customers' questions and clearly establishes the optimum quality of our products vis-a-vis those of our competitors. The campaign, directed to the general public, particularly young people who are starting their banking relationships, is being presented in radio, printed media, and television, in addition to internal and external media. It will run through the end of this year. Its goal is to position Banco Popular as a bank for all the people, that is accessible and that adjusts to the needs of the customers. With the slogan "We listen to you", we reiterate how responsive we are to our customers' needs and our commitment to serve them better. To listen, understand and solve... that summarizes our commitment of service we seek to offer our clients. It is our most valuable tool as we seek to attain utmost satisfaction for each client, and it is also one of the most powerful strategies to continue reaching adequate competitive levels. /s/ Richard L. Carrion ---------------------- RICHARD L. CARRION CHAIRMAN PRESIDENT CHIEF EXECUTIVE OFFICER POPULAR, INC. Consolidated Statements of Condition
March 31, --------------------------------- In thousands 2003 2002 ------------ ------------ ASSETS Cash and due from banks $ 689,090 $ 383,927 ------------ ------------ Money market investments: Federal funds sold and securities purchased under agreements to resell 1,004,353 716,123 Time deposits with other banks 4,056 3,056 Bankers' acceptances 51 409 ------------ ------------ 1,008,460 719,588 ------------ ------------ Investment securities available-for-sale, at market value 10,132,474 9,401,158 Investment securities held-to-maturity, at amortized cost 179,737 202,022 Trading account securities, at market value 581,001 299,415 Loans held-for-sale, at lower of cost or market 317,041 900,461 ------------ ------------ Loans 19,819,521 17,676,000 Less - Unearned income 274,680 319,537 Allowance for loan losses 383,517 341,744 ------------ ------------ 19,161,324 17,014,719 ------------ ------------ Premises and equipment 471,777 404,842 Other real estate 45,759 34,550 Accrued income receivable 202,491 191,118 Other assets 689,449 549,324 Goodwill 184,068 178,501 Other intangible assets 32,620 37,741 ------------ ------------ $ 33,695,291 $ 30,317,366 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES: Deposits: Non-interest bearing $ 3,453,971 $ 3,100,625 Interest bearing 14,183,876 13,423,529 ------------ ------------ 17,637,847 16,524,154 Federal funds purchased and securities sold under agreements to repurchase 6,642,379 4,564,815 Other short-term borrowings 1,296,394 2,252,679 Notes payable 4,566,492 3,996,616 Other liabilities 609,343 524,350 ------------ ------------ 30,752,455 27,862,614 ------------ ------------ Subordinated notes 125,000 125,000 ------------ ------------ Preferred beneficial interest in Popular North America's junior subordinated deferrable interest debentures guaranteed by the Corporation 144,000 144,000 ------------ ------------ Minority interest in consolidated subsidiaries 1,240 925 ------------ ------------ STOCKHOLDERS' EQUITY: Preferred stock 186,875 -- Common stock 835,528 833,121 Surplus 277,649 270,766 Retained earnings 1,372,061 1,116,963 Treasury stock, at cost (205,527) (66,363) Accumulated other comprehensive income, net of tax 206,010 30,340 ------------ ------------ 2,672,596 2,184,827 ------------ ------------ $ 33,695,291 $ 30,317,366 ============ ============
POPULAR, INC. Consolidated Statements of Income
Quarter ended March 31, --------------------------------- Dollars in thousands, except per share information 2003 2002 ------------ ------------ INTEREST INCOME: Loans $ 377,933 $ 372,221 Money market investments 7,363 7,785 Investment securities 109,801 112,311 Trading account securities 8,185 3,502 ------------ ------------ 503,282 495,819 ------------ ------------ INTEREST EXPENSE: Deposits 94,195 112,931 Short-term borrowings 40,789 44,443 Long-term debt 58,537 53,030 ------------ ------------ 193,521 210,404 ------------ ------------ Net interest income 309,761 285,415 Provision for loan losses 48,209 54,454 ------------ ------------ Net interest income after provision for loan losses 261,552 230,961 Service charges on deposit accounts 39,839 38,973 Other service fees 66,426 61,687 Gain (loss) on sale of securities 1,414 (4,010) Trading account loss (937) (1,030) Derivatives (losses) gains (10,655) 511 Gain on sale of loans 19,516 17,943 Other operating income 16,557 16,334 ------------ ------------ 393,712 361,369 ------------ ------------ OPERATING EXPENSES: Personnel costs: Salaries 96,036 88,561 Profit sharing 6,245 4,940 Pension and other benefits 30,068 26,801 ------------ ------------ 132,349 120,302 Net occupancy expenses 20,460 19,030 Equipment expenses 26,350 24,765 Other taxes 9,552 9,549 Professional fees 18,776 17,507 Communications 14,697 13,273 Business promotion 15,970 13,367 Printing and supplies 4,743 4,509 Other operating expenses 18,718 17,321 Amortization of intangibles 2,027 2,543 ------------ ------------ 263,642 242,166 ------------ ------------ Income before income tax and minority interest 130,070 119,203 Income tax 30,903 30,148 Net gain of minority interest (78) (11) ------------ ------------ NET INCOME $ 99,089 $ 89,044 ============ ============ NET INCOME APPLICABLE TO COMMON STOCK $ 98,140 $ 86,534 ============ ============ EARNINGS PER COMMON SHARE (BASIC AND DILUTED) $ 0.74 $ 0.63 ============ ============
POPULAR, INC. Financial Highlights
At March 31, Average for the quarter ------------------------------------------ ------------------------------------------ BALANCE SHEET HIGHLIGHTS 2003 2002 Change 2003 2002 Change ----------- ----------- ---------- ----------- ----------- ---------- (In thousands) Money market investments $ 1,008,460 $ 719,588 $ 288,872 $ 972,373 $ 927,038 $ 45,335 Investment and trading securities 10,893,212 9,902,595 990,617 10,909,397 9,871,684 1,037,713 Loans 19,861,882 18,256,924 1,604,958 19,537,968 18,058,011 1,479,957 Total assets 33,695,291 30,317,366 3,377,925 33,158,518 30,417,589 2,740,929 Deposits 17,637,847 16,524,154 1,113,693 17,526,977 16,526,180 1,000,797 Borrowings 12,774,265 11,083,110 1,691,155 12,797,395 11,283,963 1,513,432 Stockholders' equity 2,672,596 2,184,827 487,769 2,314,620 2,154,243 160,377
First quarter ---------------------------------------- OPERATING HIGHLIGHTS 2003 2002 Change -------- -------- -------- (In thousands, except per share information) Net interest income $309,761 $285,415 $ 24,346 Provision for loan losses 48,209 54,454 (6,245) Fees and other income 132,160 130,408 1,752 Other expenses, net of minority interest 294,623 272,325 22,298 Net income $ 99,089 $ 89,044 $ 10,045 Net income applicable to common stock $ 98,140 $ 86,534 $ 11,606 Earnings per common share $ 0.74 $ 0.63 $ 0.11
First quarter --------------------- SELECTED STATISTICAL INFORMATION 2003 2002 ------ ------ COMMON STOCK DATA Market price High $34.97 $29.94 Low 31.95 27.50 End 33.99 29.22 Book value at period end 18.75 16.01 Dividends declared 0.20 0.20 Dividend payout ratio 27.45% 30.85% Price/earnings ratio 12.50x 12.87x ------ ------ PROFITABILITY RATIOS Return on assets 1.21% 1.19% Return on common equity 17.39 16.83 Net interest spread (taxable equivalent) 3.90 3.80 Net interest yield (taxable equivalent) 4.30 4.30 Effective tax rate 23.76 25.29 Overhead ratio 42.45 39.16 Efficiency ratio 58.32 57.61 ------ ------ CAPITALIZATION RATIOS Equity to assets 6.98% 7.08% Tangible equity to assets 6.42 6.29 Equity to loans 11.85 11.93 Internal capital generation 12.09 11.35 Tier I capital to risk-adjusted assets 10.96 10.20 Total capital to risk-adjusted assets 12.67 11.99 Leverage ratio 7.02 6.34 ------ ------ CREDIT QUALITY RATIOS Allowance for losses to loans 1.93% 1.87% Allowance to non-performing assets 64.25 69.24 Allowance to non-performing loans 69.58 74.45 Non-performing assets to loans 3.01 2.70 Non-performing assets to total assets 1.77 1.63 Net charge-offs to average loans 0.79 1.10 Provision to net charge-offs 1.25x 1.10x Net charge-offs earnings coverage 4.64 3.50
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 Nevares 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 Carlos Colino, Executive Vice President Roberto R. Herencia, 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 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.