EX-99.(a) Quarterly Report to Shareholders

The past months could certainly be classified as one of the toughest and uncertain economic times the United States has faced in many years. Yet in this challenging environment, we are pleased with the Corporation’s results for the second quarter of 2003. Net income for this quarter totaled $134.6 million, an increase of 40%, compared with $96.3 million in the second quarter of 2002. Earnings per common share, basic and diluted, were $0.99 for the quarter ended June 30, 2003, an increase of 38% from $0.72 per common share reported in the same period of 2002. Financial performance for the second quarter of 2003 resulted in a return on average assets (ROA) and a return on average common equity(ROE) of 1.58% and 22.63%, respectively, compared with 1.23% and 18.14%, respectively, for the quarter ended June 30, 2002.

The quarterly results for the second quarter of 2003 were affected by the occurrence of certain transactions, which are listed in the reconciliation below, and which are later described in this letter:

If we isolate these items from our quarterly net earnings, as their exclusion gives a clearer indication of the Corporation’s financial performance, our net income would have amounted to approximately $115.0 million for the quarter ended June 30, 2003, a 19% growth compared with the reported net income of the second quarter in 2002.

For the six months ended June 30, 2003, net income reached $233.7 million, or $1.73 per common share, compared with $185.3 million, or $1.35 per common share, for the same period in 2002. ROA and ROE for the first six months of 2003 were 1.40% and 20.09%, respectively, compared with 1.21% and 17.43%, respectively, for the first six months of 2002.

The Corporation’s net interest income for the quarter ended June 30, 2003, increased 11% or $32.5 million, compared with the second quarter of 2002. Also, despite the current interest rate scenario, the Corporation’s net interest margin, on a taxable equivalent basis, improved to 4.42% for the second quarter of 2003, from 4.28% in the same period of 2002. Non-interest income reached $172.2 million for the quarter ended June 30, 2003, an increase of $37.2 million, or 28%, compared with the amount reported in the same quarter of 2002. This increase was mostly associated with higher gains on the sale of securities, particularly marketable equity securities, which totaled $29.9 million for the second quarter of 2003. Other contributors to the rise in non-interest income were higher gains realized on the sale of mortgage loans, derivatives loans and increases in insurance agency commissions, debit card and check cashing fees, among others. For the second quarter of 2003, operating expenses were $279.3 million, an increase of $28.6 million, or 11%, compared with the same period in 2002. Personnel costs increased $7.2 million, mostly related to higher salaries, pension and incentive compensation. Other operating expenses, excluding personnel costs, increased $21.4 million, or 17%. This increase was triggered mostly by the recognition of approximately $15 million in losses that resulted from unauthorized credit card transactions realized by external parties on credit cards issued by Banco Popular de Puerto Rico. The Bank took remedial action to prevent further losses from this external fraud scheme.

Total assets reached $36.1 billion at June 30, 2003, compared with $32.7 billion at June 30, 2002. Loans totaled $20.9 billion at June 30, 2003, compared with $18.9 billion at the same date in the previous year, an increase of $2.0 billion, or 10%. Residential mortgage lending continued to be one of the principal contributors to the Corporation’s asset growth. Mortgage loans accounted for 62% of the rise in the total loan portfolio, increasing $1.2 billion, or 17%, since June 30, 2002. Asset growth was also associated with an increase in the investment securities and trading portfolios, which rose $1.6 billion, or 15%, reaching $12.3 billion at the end of the second quarter of 2003. The increase in assets since June 30, 2002 was funded mostly with higher deposit levels, capital raised through the recent issuance of preferred stock, and additional borrowings, including the issuance of $500 million in medium-term notes during the second quarter of 2003. Stockholders’ equity reached $2.8 billion at June 30, 2003, compared with $2.2 billion at the end of the second quarter of 2002.

Popular, Inc.’s common stock market value was $38.53 per share at June 30, 2003, compared with $33.68 at June 30, 2002, and $33.99 at March 31, 2003. The Corporation had a market capitalization of $5.1 billion at June 30, 2003, compared with $4.5 billion at June 30, 2002. Book value per share of common stock was $19.80 at June 30, 2003, an increase of 19% from June 30, 2002.

Reinforcing Popular, Inc.’s expansion efforts in Central America and supporting its technology-oriented initiatives, in June 2003, the Corporation acquired a 31.11% interest in Servicios Financieros, S.A. de C.V. (Serfinsa), located in El Salvador. Serfinsa offers services associated with electronic payment systems, currently managing over 500 ATM’s and 3,200 POS terminals in El Salvador. Furthermore, on June 30, 2003, the Corporation completed the acquisition of Mediawire Communications Inc., a company that provides Internet services in Puerto Rico, including the design, development and hosting of web pages.

During this quarter, Banco Popular North America (BPNA) inaugurated its new headquarters offices in Rosemont, Illinois, allowing the centralization of its support areas and back office services. Also, BPNA signed a long-term deal with Metavante Corporation, a technology company specialized in banking data. Metavante will provide BPNA with equipment and software that integrate banking processes, which will enable BPNA to offer more efficiently a wider range of financial services to its clients.

On April 30, 2003, the Board of Directors declared a cash dividend of $0.27 per common share for the second quarter of 2003, representing a 35% increase over the $0.20 per common share paid in previous quarterly cash dividends.

During the Annual Stockholders Meeting of Popular, Inc., held in April 2003, all five directors nominated for election were elected. We are pleased to welcome Frederic V. Salerno, former Vice Chairman and Chief Financial Officer of Verizon Communications, Inc., to Popular, Inc.’s Board of Directors. The Corporation will certainly benefit from his expertise and with the significant contributions he will make in the years to come.

In an effort to increase consumer spending and business investment, in June 2003, the Federal Reserve Bank lowered the federal funds interest rate an additional 25 basis points, reaching 1%, its lowest level in 45 years. Moreover, in recent months, the Bush Administration signed the Jobs and Growth Tax Relief Reconciliation Act of 2003, which should deliver substantial tax relief to American taxpayers. The bill allows for dividend income to be taxed at a lower rate, and also reduces the capital gains tax rate for individuals. The benefits of the new tax bill will also extend to you, our investors.


	At June 30,							Average for the six months

BALANCE SHEET HIGHLIGHTS	2003		2002		Change			2003		2002		Change

(In thousands)
Money market investments	$	783,278	$	1,071,658		($288,380	)	$	893,847	$	876,091	$	17,756
Investment and trading securities		12,258,683		10,651,135		1,607,548			11,168,137		10,200,184		967,953
Loans		20,872,076		18,901,142		1,970,934			19,832,452		18,249,592		1,582,860
Total assets		36,073,554		32,740,722		3,332,832			33,712,699		30,915,430		2,797,269
Deposits		18,275,423		17,829,287		446,136			17,669,845		16,807,732		862,113
Borrowings		14,371,249		12,178,407		2,192,842			13,099,270		11,507,639		1,591,631
Stockholders’ equity		2,812,871		2,207,617		605,254			2,422,320		2,141,750		280,570


	Second quarter							Six months

OPERATING HIGHLIGHTS	2003		2002		Change			2003		2002		Change

(In thousands, except per share information)
Net interest income	$	327,147	$	294,678	$	32,469		$	636,908	$	580,093	$	56,815
Provision for loan losses		49,325		50,075		(750	)		97,534		104,529		(6,995	)
Fees and other income		172,172		134,988		37,184			304,332		265,396		38,936
Other expenses, net of minority interest		315,387		283,286		32,101			610,010		555,611		54,399
Net income	$	134,607	$	96,305	$	38,302		$	233,696	$	185,349	$	48,347
Net income applicable to common stock	$	131,594	$	96,305	$	35,289		$	229,734	$	182,839	$	46,895
Earnings per common share	$	0.99	$	0.72	$	0.27		$	1.73	$	1.35	$	0.38


		Second quarter						Six months

SELECTED STATISTICAL INFORMATION		2003			2002			2003			2002

COMMON STOCK DATA
Market price
	High	$	40.82		$	33.68		$	40.82		$	33.68
	Low		34.16			28.60			31.95			27.50
	End		38.53			33.68			38.53			33.68
Book value at period end			19.80			16.69			19.80			16.69
Dividends declared			0.27			0.20			0.47			0.40
Dividend payout ratio			20.07	%		28.34	%		23.17	%		29.64	%
Price/earnings ratio			12.89	x		13.80	x		12.89	x		13.80	x
PROFITABILITY RATIOS
Return on assets			1.58	%		1.23	%		1.40	%		1.21	%
Return on common equity			22.63			18.14			20.09			17.43
Net interest spread (taxable equivalent)			4.04			3.81			3.97			3.80
Net interest yield (taxable equivalent)			4.42			4.28			4.36			4.29
Effective tax rate			21.06			25.28			22.22			25.28
Overhead ratio			32.74			39.25			37.46			39.20
Efficiency ratio			59.28			58.69			58.81			58.15
CAPITALIZATION RATIOS
Equity to assets			7.38	%		6.78	%		7.19	%		6.93	%
Tangible equity to assets			6.79			6.14			6.59			6.27
Equity to loans			12.55			11.55			12.21			11.74
Internal capital generation			15.23			13.12			13.74			12.17
Tier I capital to risk-adjusted assets			10.88			9.36			10.88			9.36
Total capital to risk-adjusted assets			12.56			11.13			12.56			11.13
Leverage ratio			7.01			5.99			7.01			5.99
CREDIT QUALITY RATIOS
Allowance for losses to loans			1.90	%		1.84	%		1.90	%		1.84	%
Allowance to non-performing assets			64.41			69.11			64.41			69.11
Allowance to non-performing loans			69.83			74.31			69.83			74.31
Non-performing assets to loans			2.96			2.66			2.96			2.66
Non-performing assets to total assets			1.71			1.53			1.71			1.53
Net charge-offs to average loans			0.76			0.99			0.77			1.05
Provision to net charge-offs			1.30	x		1.09	x		1.27	x		1.10	x
Net charge-offs earnings coverage			5.78			3.91			5.21			3.69


				June 30,

In thousands				2003			2002

ASSETS
	Cash and due from banks			$	905,412		$	1,102,933

	Money market investments:
		Federal funds sold and securities purchased under agreements to resell			779,076			1,067,764
		Time deposits with other banks			4,190			3,056
		Bankers’ acceptances			12			838

					783,278			1,071,658

	Investment securities available-for-sale, at market value				11,413,964			10,118,219
	Investment securities held-to-maturity, at amortized cost				194,266			225,070
	Trading account securities, at market value				650,453			307,846
	Loans held-for-sale, at lower of cost or market				333,334			910,006

	Loans				20,818,644			18,302,714
		Less – Unearned income			279,902			311,578
			Allowance for loan losses		397,503			347,230

					20,141,239			17,643,906

	Premises and equipment				473,520			404,382
	Other real estate				47,863			35,193
	Accrued income receivable				182,349			190,612
	Other assets				728,973			516,726
	Goodwill				188,310			178,739
	Other intangible assets				30,593			35,432

				$	36,073,554		$	32,740,722

LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES:
	Deposits:
		Non-interest bearing		$	4,216,227		$	4,012,168
		Interest bearing			14,059,196			13,817,119

					18,275,423			17,829,287
	Federal funds purchased and securities sold under agreements to repurchase				7,655,105			5,829,016
	Other short-term borrowings				1,171,063			1,944,642
	Notes payable				5,276,081			4,135,749
	Other liabilities				612,610			524,447

					32,990,282			30,263,141

	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					1,401			964

STOCKHOLDERS’ EQUITY:
	Preferred stock				186,875			—
	Common stock				836,134			833,672
	Surplus				280,526			272,761
	Retained earnings				1,467,833			1,186,814
	Treasury stock, at cost				(205,527	)		(205,210	)
	Accumulated other comprehensive income, net of tax				247,030			119,580

					2,812,871			2,207,617

				$	36,073,554		$	32,740,722


		Quarter ended						Six months ended
		June 30,						June 30,

Dollars in thousands, except per share information		2003			2002			2003			2002

INTEREST INCOME:
	Loans	$	385,547		$	380,166		$	763,480		$	752,388
	Money market investments		6,455			7,370			13,817			15,155
	Investment securities		110,689			115,377			220,490			227,688
	Trading account securities		8,968			3,086			17,153			6,587

			511,659			505,999			1,014,940			1,001,818

INTEREST EXPENSE:
	Deposits		85,621			110,356			179,816			223,286
	Short-term borrowings		37,804			45,274			78,593			89,718
	Long-term debt		61,087			55,691			119,623			108,721

			184,512			211,321			378,032			421,725

Net interest income			327,147			294,678			636,908			580,093
Provision for loan losses			49,325			50,075			97,534			104,529

Net interest income after provision for loan losses			277,822			244,603			539,374			475,564
Service charges on deposit accounts			39,669			39,507			79,508			78,480
Other service fees			69,016			66,037			135,442			127,724
Gain (loss) on sale of securities			29,875			85			31,289			(3,925	)
Trading account loss			(4,243	)		(359	)		(5,180	)		(1,389	)
Derivatives gains(losses)			2,548			(855	)		(8,107	)		(344	)
Gain on sale of loans			15,367			11,599			34,883			29,543
Other operating income			19,940			18,974			36,497			35,307

			449,994			379,591			843,706			740,960

OPERATING EXPENSES:
Personnel costs:
	Salaries		94,333			90,746			190,369			179,307
	Profit sharing		4,918			5,368			11,163			10,308
	Pension and other benefits		30,517			26,469			60,585			53,270

			129,768			122,583			262,117			242,885
Net occupancy expenses			20,742			20,048			41,202			39,078
Equipment expenses			26,056			24,376			52,406			49,141
Other taxes			9,302			9,285			18,854			18,833
Professional fees			20,113			19,724			38,889			37,231
Communications			14,312			13,111			29,009			26,384
Business promotion			17,010			16,831			32,980			30,199
Printing and supplies			5,004			5,078			9,747			9,587
Other operating expenses			34,943			17,061			53,661			34,382
Amortization of intangibles			2,028			2,556			4,055			5,099

			279,278			250,653			542,920			492,819

Income before income tax and minority interest			170,716			128,938			300,786			248,141
Income tax			35,946			32,594			66,849			62,742
Net gain of minority interest			(163	)		(39	)		(241	)		(50	)

NET INCOME		$	134,607		$	96,305		$	233,696		$	185,349

NET INCOME APPLICABLE TO COMMON STOCK		$	131,594		$	96,305		$	229,734		$	182,839

EARNINGS PER COMMON SHARE (BASIC AND DILUTED)		$	0.99		$	0.72		$	1.73		$	1.35

Board of Directors

Richard L. Carrión, Chairman
Antonio Luis Ferré, Vice Chairman **
Juan A. Albors Hernández *
José A. Bechara Bravo *
Juan J. Bermúdez
Francisco J. Carreras *
José B. Carrión Jr.
David H. Chafey Jr.
María Luisa Ferré *
Héctor R. González
Jorge A. Junquera
Guillermo L. Martínez *
Manuel Morales Jr.
Alberto M. Paracchini *
Francisco M. Rexach Jr.
Frederic V. Salerno **
Félix J. Serrallés Nevares Jr.
Jon E. Slater *
Julio E. Vizcarrondo Jr.
   Samuel T. Céspedes, Secretary
   * Director of Banco Popular de Puerto Rico only
   ** Director of Popular, Inc. only

Executive Officers

Richard L. Carrión, Chairman of the Board, President and Chief Executive Officer
David H. Chafey Jr., Senior Executive Vice President
Jorge A. Junquera, Senior Executive Vice President
María 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. Piñero, Executive Vice President
Brunilda Santos de Álvarez, Executive Vice President
Carlos J. Vázquez, Executive Vice President
Félix M. Villamil, Executive Vice President

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 Muñoz Rivera Ave.
Hato Rey, Puerto Rico 00918

Publications: For printed material (annual and quarterly reports, 10- K and 10-Q reports), contact Mr. Amílcar L. Jordán 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.

•

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.


Central Office Popular Center 209 Muñoz Rivera Avenue San Juan, Puerto Rico 00918 Telephone: (787) 765-9800 Banco Popular de Puerto Rico Puerto Rico Office Popular Center 209 Muñoz 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. Tournón Neighborhood, across to newspaper La República, ATH Building San José, Costa Rica Telephone: (011) 506-211-4500 GM Group, Inc. 1590 Ponce de León 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 León Avenue San Juan, Puerto Rico 00918 Telephone: (787) 753-0245 Levitt Mortgage Galería San Patricio B-5 Tabonuco Street Suite 207 Guaynabo, Puerto Rico 00968 Telephone: (787) 749-8787		Popular Auto, Inc. M-1061 Federico Costa Street Tres Monjitas Industrial Development San Juan, Puerto Rico 00918 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 Muñoz Rivera Avenue Suite 1020 San Juan, Puerto Rico 00918 Telephone: (787) 766-4200 Popular Insurance, Inc. 9 Pedro Márquez 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


	Quarter ended
	June 30, 2003
Net income as reported	$	134.6		million
Less: Gains on the sale of marketable equity securities, net of tax		(25.7	)	million
Less: Derivative gains, net of tax		(1.7	)	million
Plus: Losses related to credit cards external fraud, net of tax and profit sharing		7.8		million

Non-GAAP net income (excludes particular items)	$	115.0		million