EX-99.1 3 g91286exv99w1.txt EX-99.1 NEWS RELEASE, DATED OCTOBER 13, 2004 EXHIBIT 99.1 [POPULAR, INC. LOGO] CONTACT: INVESTOR RELATIONS: JORGE A. JUNQUERA Chief Financial Officer Senior Executive Vice President 787-754-1685 MEDIA RELATIONS: TERUCA RULLAN Senior Vice President Global Communications 787-281-5170 or 917-679-3596/mobile NEWS FOR IMMEDIATE RELEASE: POPULAR, INC. REPORTS EARNINGS FOR THE QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 2004 SAN JUAN, PUERTO RICO WEDNESDAY, OCTOBER 13, 2004 - Popular, Inc.'s (the Corporation) (NASDAQ: BPOP, BPOPO) net income for the quarter ended September 30, 2004 totaled $115.4 million, compared with $130.9 million in the third quarter of 2003. The results for the third quarter of 2003 included $39.1 million in gain on sale of securities, mainly marketable equity securities. Also, included in 2003 results was a $12.1 million prepayment penalty on the early cancellation of certain long-term borrowings. Earnings per common share (EPS), basic and diluted, for the third quarter of 2004 were $0.42 per common share, compared with $0.48 per common share reported for the same quarter a year earlier. All references to the numbers of common shares and per share amounts have been restated to reflect the two-for-one stock split in the form of a stock dividend effective on July 8, 2004. The Corporation's return on assets (ROA) and return on common equity (ROE) for the third quarter of 2004 were 1.13% and 16.22%, respectively, compared with 1.47% and 20.85% in the same quarter in the previous year. This press release should be read in conjunction with the accompanying tables which are an integral part of this analysis. For the nine months ended September 30, 2004, the Corporation's net income reached $361.7 million, compared with $364.6 million for the same period in 2003. EPS, basic and diluted, for the 2 - POPULAR, INC. 2004 THIRD QUARTER RESULTS nine months ended September 30, 2004 and 2003 were $1.32 and $1.35, respectively. ROA and ROE for the first nine months of 2004 were 1.25% and 17.63%, respectively, compared with 1.42% and 20.35%, respectively, for the same period in 2003. The Corporation's net income for the quarter ended September 30, 2004, when compared with the same quarter in the previous year, reflected higher net interest income by $18.9 million and a lower provision for loan losses by $2.1 million. These favorable variances were partially offset by a decrease in non-interest income of $27.0 million and an increase in operating expenses of $10.6 million. "The results of various strategic initiatives undertaken over the past few years continue to strengthen our core earnings," said Richard L. Carrion, President and Chief Executive Officer of Popular, Inc. The increase in net interest income resulted mostly from a $5.1 billion increase in average earning assets for the quarter ended September 30, 2004 compared with the same period in the previous year, mostly associated with increases of $2.7 billion in mortgage loans, $1.2 billion in commercial loans and $0.6 billion in consumer loans. The average yield on earning assets declined 23 basis points, resulting from a number of factors which included the origination and purchase of earning assets with lower rates, prepayments of higher rate mortgage related products and consumer loans promotional campaigns. The increase in the volume of earning assets was funded mainly through a higher average volume of borrowings and interest-bearing deposits, which rose $3.2 billion and $1.4 billion, respectively. The average cost of interest bearing liabilities increased 9 basis points. Also, non-interest bearing sources of funds, including demand deposits and other funds, raised $0.5 billion. The net interest yield for the quarter ended September 30, 2004, was 3.61% compared with 3.94% for the third quarter of 2003. For the second quarter of 2004 the net interest yield was 3.74%. The provision for loan losses totaled $46.6 million, or 110% of net charge-offs, for the third quarter of 2004, compared with $48.7 million or 98%, respectively, for the same period in 2003. Net charge-offs for the quarter ended September 30, 2004, were $42.5 million or 0.66% of average loans, compared with $49.5 million or 0.94% for the third quarter of 2003. The decline in net charge-offs as compared with the third quarter of 2003 is mainly due to lower commercial net charge-offs, net of 2 3 - POPULAR, INC. 2004 THIRD QUARTER RESULTS construction loans net charge-offs, which declined by $7.1 million. The decrease in non-interest income for the quarter ended September 30, 2004 compared with the same quarter in the previous year was mostly associated with the aforementioned gain on the sale of securities during the third quarter of 2003. Partially offsetting this decrease were higher trading account profits and other operating income. The increase in operating expenses for the quarter ended September 30, 2004, compared with the same period in 2003, resulted mostly from higher personnel costs due to higher salaries, incentives, performance bonuses and other compensation. Full-time equivalent employees were 12,002 at September 30, 2004, an increase of 609 employees from September 30, 2003, including the recent acquisition. The increases were partially offset by lower pension costs associated in part with improvements in the fair value of plan assets. Other categories with the largest increases compared with the third quarter of the previous year included professional fees, business promotion, net occupancy and equipment expenses, which resulted in part from continuing investments in systems technology and costs to support business initiatives and expansion. Offsetting these increases was a decline in other operating expenses mostly associated with the prepayment penalty paid in 2003 on the early cancellation of debt previously mentioned. At September 30, 2004 the Corporation's total assets amounted to $42.9 billion, compared with $35.8 billion at September 30, 2003 and $39.6 billion at June 30, 2004. On August 31, 2004, the Corporation completed the acquisition of Quaker City Bancorp with total assets of approximately $2.1 billion at that date. Total loans amounted to $27.5 billion at September 30, 2004, compared with $21.7 billion on the same date in the previous year and $24.7 billion at June 30, 2004. The increase in loans from September 30, 2003 was driven primarily by good results in mortgage, commercial and consumer lending, and by the acquisition of Quaker City which contributed approximately $1.6 billion in loans at September 30, 2004, mainly commercial and mortgage loans. Mortgage loans accounted for the largest increase in the portfolio, rising $2.8 billion, or 31%, since September 30, 2003 and $1.1 billion, or 10%, from June 30, 2004. Also, commercial, including construction loans, rose $2.1 3 4 - POPULAR, INC. 2004 THIRD QUARTER RESULTS billion, or 26%, compared with September 30, 2003, and $1.5 billion, or 17%, compared with June 30, 2004. Consumer loans increased $737 million, or 23%, from September 30, 2003 and $264 million, or 7%, from June 30, 2004. Investment and trading securities totaled $12.0 billion at September 30, 2004, compared with $11.2 billion at September 30, 2003, and $11.6 billion at June 30, 2004. The allowance for loan losses totaled $446 million at September 30, 2004, or 1.62% of loans, compared with $399 million, or 1.84%, at the same date in 2003, and $426 million, or 1.73%, at June 30, 2004. The ratio of allowance for loan losses to loans continued to reflect improvement in credit quality trends and a shift in the loan portfolio mix to include a greater proportion of real estate secured loans. Non-performing assets were $623 million, or 2.26% of ending loans at September 30, 2004, compared with $628 million, or 2.89%, at the end of the third quarter of 2003, and $602 million, or 2.44%, at June 30, 2004. The allowance as a percentage of non-performing loans was 79.01% at September 30, 2004, compared with 69.43% at the end of the third quarter of 2003 and 77.69% at June 30, 2004. Effective for the quarter ended March 31, 2004, the Corporation adopted the standard industry practice of placing commercial and construction loans in non-accrual status when payments of principal or interest are delinquent 90 days or more rather than 60 days or more. Had the Corporation continued reporting commercial and construction loans in non-performing status under the previous policy, non-performing assets would have amounted to $663 million at September 30, 2004, or 2.41% of ending loans. The allowance as a percentage of non-performing loans would have amounted to 73.82%. Non-performing mortgage loans totaled $387 million or 62% of total non-performing assets and 3% of total mortgage loans at September 30, 2004, compared with $318 million or 51% of total non-performing assets and 3% of total mortgage loans at September 30, 2003. At June 30, 2004, non-performing mortgage loans totaled $359 million or 60% of total non-performing assets and 3% of total mortgage loans. Mortgage loans net charge-offs as a percentage of the average mortgage loan portfolio was 0.30% in the third quarter of 2004, compared with 0.47% in the third quarter of 2003 and 0.29% in the second quarter of 2004. On the other hand, commercial and construction non-performing loans reflected a decline of $80 million, when compared with September 30, 2003. 4 5 - POPULAR, INC. 2004 THIRD QUARTER RESULTS Approximately $40 million of the decline in commercial and construction non-performing loans was due to the aforementioned change in the Corporation's policy for non-accrual commercial and construction loans. When compared with June 30, 2004, commercial and construction non-performing loans declined $13 million. Deposits totaled $20.5 billion at September 30, 2004, compared with $17.7 billion at September 30, 2003, an increase of 16%. Quaker City contributed with approximately $1.2 billion in deposits at September 30, 2004. Total deposits at June 30, 2004 were $19.2 billion. The growth since September 30, 2003 was mostly reflected in savings and time deposits, which rose $1.1 billion and $1.3 billion, respectively. Demand deposits increased $520 million compared with September 30, 2003. The increase in deposits was also associated with marketing campaigns and sales efforts. Borrowed funds reached $18.7 billion at September 30, 2004, from $14.8 billion on the same date of the previous year. At June 30, 2004, borrowed funds totaled $16.9 billion. The increase in borrowings since September 30, 2003 was mostly comprised of secured borrowings arising in securitization transactions and debt issuances in the form of medium-term notes. Stockholders' equity was $3.0 billion at September 30, 2004, compared with $2.8 billion at September 30, 2003 and June 30, 2004. The market value of the Corporation's common stock at September 30, 2004, was $26.30 per common share, compared with $19.90 at September 30, 2003, and $21.39 at June 30, 2004. The Corporation's market capitalization at September 30, 2004 was $7.0 billion, compared with $5.3 billion at September 30, 2003 and $5.7 billion at June 30, 2004. At September 30, 2004, the Corporation's common stock had a book value per share of $10.60, compared with $9.66 and $9.76 at September 30, 2003 and June 30, 2004, respectively. * * * On August 17, 2004, Popular, Inc. and Kislak Financial Corporation announced that they reached a definitive agreement where Popular, Inc. will acquire the operations of Kislak National Bank, a Miami, Florida-based commercial bank. The acquisition, subject to regulatory approval, is expected to close during the first quarter of 2005. Kislak operates eight full services bank facilities in the metropolitan Miami-Dade, Broward and Palm Beach counties and has approximately $1.0 billion 5 6 - POPULAR, INC. 2004 THIRD QUARTER RESULTS in total assets. Kislak National Bank is one of the nation's largest lenders to homeowner's associations. Recently, the Corporation issued $250 million in trust preferred securities as a funding source for the aforementioned acquisition of Quaker City. Furthermore, during the third quarter of 2004, the Corporation sold approximately $637 million in asset-backed securities supported by mortgage loans, under the name Equity One ABS, Inc. In recent weeks, a similar securitization deal was completed for $705 million, under the name Popular ABS, Inc., which prospectively will be the only name used by Popular, Inc. for sales of asset-backed securities supported by mortgage loans held by Equity One. * * * The information included in this press release may contain certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and involve certain risks and uncertainties that may cause actual results to differ materially from those expressed in forward-looking statements. Factors such as changes in interest rate environment as well as general changes in business and economic conditions may cause actual results to differ from those contemplated by such forward-looking statements. For a discussion of such risks and uncertainties, see the Corporation's Annual Report on Form 10-K for the most recently ended fiscal year as well as its filings with the U.S. Securities and Exchange Commission. The Corporation assumes no obligation to update any forward-looking statements to reflect occurrences or unanticipated events or circumstances after the date of such statements. * * * Popular, Inc. is a full service financial services provider with operations in Puerto Rico, the United States, the Caribbean and Latin America. As the leading financial institution in Puerto Rico, the Corporation offers retail and commercial banking services through its banking subsidiary, Banco Popular, as well as investment banking, auto and equipment leasing and financing, mortgage loans, consumer lending, insurance and information processing through specialized subsidiaries. In the United States, the Corporation has established the largest Hispanic financial services franchise, providing complete financial solutions to all the communities it serves. The Corporation continues to 6 7 - POPULAR, INC. 2004 THIRD QUARTER RESULTS use its expertise in technology and electronic banking as a competitive advantage in its Caribbean and Latin America expansion, and is exporting its 111 years of experience through the region. Popular, Inc. has always been committed to meeting the needs of retail and business clients through innovation, and to fostering growth in the communities it serves. An electronic version of this release can be found at the Corporation website, www.popularinc.com. - Tables Follow - 7 POPULAR, INC. FINANCIAL SUMMARY (In thousands, except per share data)
Third Quarter ended Quarter September 30, 2004 - 2003 Second --------------------------- Percent Quarter 2004 2003 Variance 2004 ------------ ------------ ----------- ------------ SUMMARY OF OPERATIONS Interest income $ 563,767 $ 509,399 10.67% $ 532,270 Interest expense 215,575 180,100 19.70 191,567 ------------ ------------ ------ ------------ Net interest income 348,192 329,299 5.74 340,703 Provision for loan losses 46,614 48,668 (4.22) 41,349 ------------ ------------ ------ ------------ Net interest income after provision for loan losses 301,578 280,631 7.46 299,354 Other income 143,753 137,043 4.90 157,952 Gain on sale of investment securities 39,109 402 Trading account gain (loss) 803 (4,599) 615 ------------ ------------ ------ ------------ Total other income 144,556 171,553 (15.74) 158,969 Salaries and benefits 137,569 128,379 7.16 135,921 Profit sharing 5,083 3,834 32.58 5,639 Amortization of intangibles 1,984 1,978 0.30 1,800 Other operating expenses 153,237 153,065 0.11 148,300 ------------ ------------ ------ ------------ Total operating expenses 297,873 287,256 3.70 291,660 ----------- ----------- ------ ----------- Income before income tax and minority interest 148,261 164,928 (10.11) 166,663 Income tax 32,880 33,818 (2.77) 38,864 Net gain of minority interest (184) ------------ ------------ ------ ------------ Net income $ 115,381 $ 130,926 (11.87) $ 127,799 ============ ============ ====== ============ Net income applicable to common stock $ 112,402 $ 127,947 (12.15) $ 124,821 ============ ============ ====== ============ Earnings per common share (basic and diluted) $ 0.42 $ 0.48 $ 0.47 ============ ============ ============ Dividends declared per common share $ 0.16 $ 0.13 $ 0.16 ============ ============ ============ Average common shares outstanding 266,414,016 265,599,470 266,178,304 Common shares outstanding at end of period 266,345,324 265,552,470 266,114,566 SELECTED AVERAGE BALANCES Total assets ...................................... $ 40,783,407 $ 35,425,560 15.12 $ 38,660,017 Loans ............................................. 25,751,941 21,113,732 21.97 23,920,811 Earning assets .................................... 38,551,188 33,484,969 15.13 36,474,726 Deposits .......................................... 19,587,893 17,824,112 9.90 19,041,123 Interest-bearing liabilities ...................... 33,281,456 28,694,178 15.99 31,217,219 Stockholders' equity .............................. 2,943,636 2,630,816 11.89 2,859,664 SELECTED FINANCIAL DATA AT PERIOD-END Total assets ...................................... $ 42,855,594 $ 35,777,187 19.78 $ 39,556,239 Loans ............................................. 27,517,299 21,707,755 26.76 24,690,040 Earning assets .................................... 40,337,785 33,679,695 19.77 37,190,532 Deposits .......................................... 20,483,218 17,655,992 16.01 19,227,576 Interest-bearing liabilities ...................... 35,067,658 28,871,925 21.46 32,004,854 Stockholders' equity .............................. 3,010,495 2,751,006 9.43 2,783,720 PERFORMANCE RATIOS Net interest yield * .............................. 3.61% 3.94% 3.74% Return on assets .................................. 1.13 1.47 1.33 Return on common equity ........................... 16.22 20.85 18.79 CREDIT QUALITY DATA Non-performing assets ** .......................... $ 623,085 $ 628,301 (0.83) $ 601,668 Net loans charged-off ............................. 42,482 49,490 (14.16) 35,578 Allowance for loan losses ......................... 445,845 398,578 11.86 425,949 Non-performing assets to total assets ** .......... 1.45% 1.76% 1.52% Allowance for losses to loans ..................... 1.62 1.84 1.73
* Not on a taxable equivalent basis ** Non-performing assets for 2004 are stated based on the newly adopted non-accruing policy for commercial and construction loans. Non-performing assets for 2003 were not restated. At September 30, 2004, non-performing assets which are comparable with prior periods non-accruing policy, would have amounted to $663 million, or 1.55% of total assets. Notes: Certain reclassifications have been made to prior periods to conform with this quarter. All common stock data has been adjusted to reflect the two-for-one stock split effected in the form of a dividend on July 8, 2004. 8 POPULAR, INC. FINANCIAL SUMMARY (In thousands, except per share data)
For the period ended September 30, --------------------------------- Percent 2004 2003 Variance ------------- ------------- -------- SUMMARY OF OPERATIONS Interest income $ 1,614,779 $ 1,524,340 5.93% Interest expense 595,170 566,240 5.11 ------------- ------------- -------- Net interest income 1,019,609 958,100 6.42 Provision for loan losses 132,641 146,202 (9.28) ------------- ------------- -------- Net interest income after provision for loan losses 886,968 811,898 9.25 Other income 436,074 423,373 3.00 Gain on sale of investment securities 13,435 70,398 Trading account loss (748) (9,779) ------------- ------------- -------- Total other income 448,761 483,992 (7.28) Salaries and benefits 408,372 379,333 7.66 Profit sharing 16,404 14,997 9.38 Amortization of intangibles 5,586 6,033 (7.41) Other operating expenses 438,909 429,813 2.12 ------------- ------------- -------- Total operating expenses 869,271 830,176 4.71 ------------- ------------- -------- Income before income tax and minority interest 466,458 465,714 0.16 Income tax 104,774 100,667 4.08 Net gain of minority interest (425) ------------- ------------- -------- Net income $ 361,684 $ 364,622 (0.81) ============= ============= ======== Net income applicable to common stock $ 352,749 $ 357,681 (1.38) ============= ============= ======== Earnings per common share (basic and diluted) $ 1.32 $ 1.35 ============= ============= Dividends declared per common share $ 0.46 $ 0.37 ============= ============= Average common shares outstanding 266,197,350 265,369,490 Common shares outstanding at end of period 266,345,324 265,552,470 SELECTED AVERAGE BALANCES Total assets..................................... $ 38,793,708 $ 34,290,003 13.13 Loans............................................ 24,222,902 20,264,238 19.54 Earning assets................................... 36,626,461 32,430,515 12.94 Deposits......................................... 18,960,531 17,724,580 6.97 Interest-bearing liabilities..................... 31,470,346 27,817,659 13.13 Stockholders' equity............................. 2,860,175 2,492,582 14.75 PERFORMANCE RATIOS Net interest yield *............................. 3.71% 3.94% Return on assets................................. 1.25 1.42 Return on common equity.......................... 17.63 20.35 CREDIT QUALITY DATA Non-performing assets **......................... $ 623,085 $ 628,301 (0.83) Net loans charged-off............................ 118,079 126,008 (6.29) Allowance for loan losses........................ 445,845 398,578 11.86 Non-performing assets to total assets **......... 1.45% 1.76% Allowance for losses to loans.................... 1.62 1.84
* Not on a taxable equivalent basis ** Non-performing assets for the period ended September 30, 2004 are stated based on the newly adopted non-accruing policy for commercial and construction loans. Non-performing assets for 2003 were not restated. At September 30, 2004, non-performing assets which are comparable with prior periods non-accruing policy, would have amounted to $663 million, or 1.55% of total assets. Notes: Certain reclassifications have been made to prior periods to conform with this period. All common stock data has been adjusted to reflect the two-for-one stock split effected in the form of a dividend on July 8, 2004. 9