Popular, Inc. (Form: 8-K)

Section 4.6. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders, or entitled to receive payment of any dividend, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors and which record date: (1) in the case of determination of stockholders entitled to vote at any meeting of stockholders shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting; and (2) in the case of the payment of dividends shall not be more than fifty 50 days prior to the day appointed for the payment of such dividends.

Popular, Inc. Reports Financial Results for the Quarter Ended
September 30, 2007

San Juan, Puerto Rico, Friday, October 19, 2007 – Popular, Inc. (“the Corporation”) (NASDAQ: BPOP, BPOPO) announced today its financial results for the third quarter of 2007. Net income for the quarter ended September 30, 2007 was $36.0 million, compared with $82.2 million in the same quarter of 2006 and $75.0 million in the second quarter of 2007. Basic and diluted earnings per common share (EPS) for the quarter ended September 30, 2007 were $0.12, compared with $0.28 for the quarter ended September 30, 2006, and $0.26 for the quarter ended June 30, 2007. The reduction in the Corporation’s consolidated net income for the third quarter of 2007 was driven principally by net losses in its U.S. operations of $44.7 million for the third quarter of 2007.

The Corporation’s net income for the third quarter of 2007 represented a return on assets (ROA) of 0.30% and a return on common equity (ROE) of 3.52%, compared with 0.67% and 8.75%, respectively, in the same quarter of 2006, and 0.64% and 7.80%, respectively, in the second quarter of 2007.

“The results of the third quarter continue to reflect the impact of unprecedented market conditions, particularly on our mainland U.S. operations. The Corporation’s core operations in Puerto Rico continued to perform well despite a difficult economic environment which presents credit challenges. We continue to realign our U.S. operations to return them to acceptable levels of profitability. We will strengthen our core banking businesses, which are healthy, and will review our non core banking activities. We are currently evaluating strategic alternatives for all non-core businesses and have several cost control initiatives underway.” indicated Richard L. Carrión, Chairman of the Board and Chief Executive Officer of Popular, Inc.

Financial results for the third quarter of 2007 were principally impacted by the following items (on a pre-tax basis):

•

An $84.6 million increase in the provision for loan losses for the third quarter of 2007 as compared with the same quarter in the previous year, which was mostly influenced by higher charge-offs due to a slowdown in the housing sector, particularly in the U.S. mainland, and to weak economic conditions in Puerto Rico. The provision for loans losses for the quarter ended September 30, 2007 increased by $32.9 million compared with the second quarter of 2007.

•

A decrease of $24.3 million in non-interest income, mostly driven by lower gain on sale of loans and reductions in value in the residual interests of Popular Financial Holdings (“PFH”).

For the nine months ended September 30, 2007, the Corporation’s net income totaled $229.6 million, compared to $298.0 million for the same period in 2006. Basic and diluted EPS for the nine months ended September 30, 2007 were $0.79, compared with $1.04 for the nine months ended September 30, 2006. ROA and ROE for the first nine months of 2007 were 0.65% and 8.01%, respectively, compared with 0.82% and 11.00%, respectively, for the same period in 2006.

This press release should be read in conjunction with the accompanying Exhibit A which is an integral part of this report.

Net interest income reflected an increase of $18.1 million for the quarter ended September 30, 2007 when compared with the same quarter in 2006. The following table summarizes the principal changes in average earning assets and funding sources and their corresponding yields and costs for the quarter ended September 30, 2007, compared with the same quarter in 2006:


(Dollars in billions)	Average balances										Average Yields / Costs
	3rd		3rd								3rd			3rd
	quarter		quarter		Dollar			%			quarter			quarter
	2007		2006		Variance			Variance			2007			2006			Variance
Money market, trading and investment securities	$	10.8	$	12.7		($1.9	)		(15	%)		4.68	%		4.54	%		0.14	%

Loans:
Commercial •		15.3		13.8		1.5			11			7.63			7.67			(0.04	)
Mortgage		10.8		12.0		(1.2	)		(10	)		7.07			6.94			0.13
Consumer		5.6		5.1		0.5			10			10.97			10.71			0.26
Lease financing		1.2		1.3		(0.1	)		(8	)		7.94			7.15			0.79

Total loans		32.9		32.2		0.7			2			8.03			7.86			0.17

Total earning assets	$	43.7	$	44.9		($1.2	)		(3	%)		7.20	%		6.93	%		0.27	%

Interest bearing deposits	$	21.7	$	19.2	$	2.5			13	%		3.60	%		3.11	%		0.49	%
Short-term borrowings		8.6		10.6		(2.0	)		(19	)		5.23			5.30			(0.07	)
Long-term borrowings		8.1		10.0		(1.9	)		(19	)		5.87			5.83			0.04

Total interest bearing liabilities		38.4		39.8		(1.4	)		(4	)		4.45			4.38			0.07

Non-interest bearing sources of funds		5.3		5.1		0.2			4

Total funds	$	43.7	$	44.9		($1.2	)		(3	%)		3.90	%		3.88	%		0.02	%

Net interest spread												2.75	%		2.55	%		0.20	%

Net interest yield												3.30	%		3.05	%		0.25	%

The increase in the net interest yield was mainly the result of improved yield in the Corporation’s earning assets, resulting from the maturity and repricing of collateralized mortgage obligations and U.S. agency securities which carried a low yield, and to a rise in the volume of commercial and consumer loans at higher rates.

The net interest income for the quarter ended September 30, 2007 decreased by $11.3 million, or 3%, compared to the second quarter of 2007. The net interest yield was 3.39% for the quarter ended June 30, 2007. The unfavorable variance was principally the result of derivative losses of $9.7 million for the third quarter of 2007, which are included as funding costs on borrowed funds, compared to derivative gains of $5.4 million for the second quarter this same year. Most of these derivatives are economically hedging long-term debt. The decline in the fair value of the derivative instruments was influenced by disruptions in the financial markets during the third quarter of 2007 and the reduction in interest rates by the Fed in September 2007.

The provision for loan losses totaled $148.1 million or 131% of net charge-offs for the quarter ended September 30, 2007, compared with $63.4 million or 106%, respectively, for the same quarter in 2006, and $115.2 million or 125%, respectively, for the second quarter of 2007. There was an increase of $52.7 million in net charge-offs for the quarter ended September 30, 2007, compared with the same quarter in the previous year, resulting from higher net charge-offs on mortgage loans by $29.2 million, consumer loans by $13.8 million, commercial loans by $8.9 million and in lease financing by $0.8 million. The increase in net charge-offs on mortgage loans reflects the continued credit problems in the U.S. mainland subprime mortgage market, and includes an increase of $16.1 million in charge-offs of second mortgages at PFH. Increases in net charge-offs in the commercial loan and consumer loan portfolios are principally due to higher delinquencies in Puerto Rico resulting from a weak economic environment.

The increase in the provision for loan losses for the third quarter of 2007 when compared to the second quarter of 2007 is primarily the result of further deterioration in the residential mortgage loan market, principally with respect to the subprime portfolio of PFH. Although, as previously announced, PFH has exited the wholesale mortgage loan origination business, the existing subprime portfolio that remains on the Corporation’s books originated by this wholesale business continues to adversely impact the Corporation’s financial results. Refer to the “Overview of Mortgage Loan Exposure at the Corporation” section later in this press release for additional information on PFH’s subprime loan portfolio. The increase of $20.6 million in net charge-offs for the quarter ended September 30, 2007, compared with the second quarter in 2007, resulted from higher net charge-offs on mortgage loans by $21.8 million, including $13.2 million in second mortgages at PFH, and lease financing by $0.4 million, partially offset by declines in consumer loans net charge-offs by $1.1 million and commercial loans by $0.5 million.

The following table presents annualized net charge-offs to average loans held-in-portfolio by loan category.

Exhibit A provides credit quality data, including certain key credit quality metrics. The allowance for loan losses represented 1.82% of loans held-in-portfolio at September 30, 2007, compared with 1.56% at September 30, 2006 and 1.76% at June 30, 2007. Non-performing assets increased $404 million from September 30, 2006 to the same date in 2007. This increase was principally reflected in mortgage loans by $176 million, commercial loans by $172 million, consumer loans by $8 million and other real estate by $50 million. Non-performing assets rose by $171 million since June 30, 2007, with the increase mainly attributable to an $87 million increase in non-performing commercial loans, $52 million in non-performing mortgage loans, $21 million in other real estate owned and $10 million in consumer loans. The increase in the Puerto Rico operations was mainly in commercial loans, including one large construction loan, while the increase in the U.S. mainland was principally in mortgage loans, reflecting continued adverse credit trends in the U.S. mainland residential mortgage market.

Non-interest income totaled $167.0 million for the quarter ended September 30, 2007, compared with $191.3 million for the same quarter in 2006 and $203.4 million for the quarter ended June 30, 2007. The decrease in non-interest income for the quarter ended September 30, 2007 as compared to the same quarter in 2006 resulted from the following principal factors / variances.

•

Lower gains on the sale of loans and higher negative valuation adjustments on loans held-for-sale of $14.1 million, on a net pre-tax basis. The decrease in gains on the sale of loans was due to a lower volume of loans originated and the exiting of the wholesale subprime mortgage business by PFH, lower origination volume at E-LOAN due to weakness in the U.S. mainland mortgage and housing market, and the lack of liquidity in the private secondary markets. Also, contributing to the variance was the fact that in the third quarter of 2006 the Corporation realized approximately $7.3 million in gains from an off-balance sheet mortgage loan securitization by PFH. The impact of these variances was partially offset by realized losses of $20.1 million during the third quarter of 2006 from the bulk sale of mortgage loans by BPPR to a private investor.

•

Unfavorable valuation adjustments in PFH’s residual interests, including those classified as available-for-sale and as trading securities, amounted to $14.1 million in the third quarter of 2007, compared with approximately $0.8 million in the same quarter of 2006. These valuation adjustments are included as part of “Net (loss) gain on sale and valuation adjustments of investment securities” and “Trading account profit (loss)” in Exhibit A. These downward adjustments reflect an increase in the discount rate assumption used to value the residual interests from 25% to 30%, revisions in credit loss assumptions based on worsening credit and liquidity conditions in the U.S. subprime market, and a slowdown in prepayment speed for fixed-rate loans. As of September 30, 2007, the aggregate balance of PFH’s residual interests approximated $22 million. As previously disclosed, the Corporation exited the wholesale subprime mortgage loan origination business during the first quarter of 2007. No new residual interests related to subprime mortgage loan securitizations were recorded during the third quarter of 2007.

•

As shown in Exhibit A, other non-interest income rose by $12.9 million in comparison to the third quarter of 2006, mostly driven by increases of $9.2 million in net mortgage servicing fees and $4.8 million in debit and credit card fees.

The decrease in non-interest income when comparing the results for the third quarter of 2007 to the second quarter of 2007 was due to lower net gains on the sale of loans and valuation adjustments of loans held-for-sale by $22.3 million primarily at E-LOAN and PFH due to lack of liquidity in the secondary markets. Also, there were trading account losses in the third quarter of 2007 of $2.9 million, compared to trading profits in the second quarter of 2007 of $10.4 million. The consolidated trading account losses for the quarter ended September 30, 2007 reflect trading profits of $9.2 million in the Puerto Rico operations that were offset by the write-downs in PFH’s residual interests classified as trading securities of $12.1 million.

Operating expenses totaled $347.0 million for the quarter ended September 30, 2007, a decrease of $13.0 million, or 4%, compared with the same quarter in 2006, and a decrease of $14.1 million, or 4% when compared to the second quarter of 2007. The reduction in operating expenses for the quarter ended September 30, 2007 compared with the same quarter in 2006 was principally in personnel costs, which declined by $12.5 million. Of this decrease, $11.7 million was related to the Corporation’s U.S. mainland operations, primarily due to the restructuring plan implemented at PFH. The Corporation’s full-time equivalent employees were 12,181 at September 30, 2007, a decrease of 423 from the same date in 2006. Other operating expense categories in the aggregate remained stable for the quarter ended September 30, 2007 as compared to the same quarter in the previous year. The decrease in operating expenses for the quarter ended September 30, 2007 compared to the quarter ended June 30, 2007 was also principally in personnel costs which declined by $12.0 million. This decline was associated primarily with the reversal of accruals for bonuses and incentives that are linked to financial performance, lower medical insurance costs and lower savings plan expenses.

Income tax benefit amounted to $3.9 million for the quarter ended September 30, 2007, compared with income tax expense of $27.9 million in the same quarter of 2006, and $23.6 million in the second quarter of 2007. The tax benefit in the third quarter of 2007 is directly associated with the taxable loss in the Corporation’s U.S. mainland operations.

The accompanying Exhibit A provides information on principal categories of the Corporation’s balance sheet at September 30, 2007, September 30, 2006 and June 30, 2007, and the following provides more detailed information.

A breakdown of the Corporation’s investment securities available-for-sale and held-to-maturity is provided below:

The vast majority of these investment securities, or approximately 99%, are rated the equivalent of AAA by the major rating agencies. The mortgage-backed securities (“MBS”) and collateralized mortgage obligations (“CMOs”) are investment grade securities, all of which are rated AAA by at least one of the three major rating agencies as of September 30, 2007. All MBS held by the Corporation and approximately 83% of the CMOs held as of September 30, 2007 are guaranteed by government sponsored entities.

The decrease in the Corporation’s investment securities portfolio from September 30, 2006 was mainly due to maturities of U.S. agency securities with low rates which were not replaced as part of the Corporation’s strategy to deleverage the balance sheet.

A breakdown of the Corporation’s loan portfolio at period-end, which represents the principal category of earning assets, follows:

The growth in time deposits from June 30, 2007 was principally in brokered certificates of deposit which increased from $0.6 billion at June 30, 2007 to $2.1 billion at September 30, 2007. This increase in brokered certificates of deposit is directly related to the reduced availability of non-deposit funding and the decision of the Corporation to substitute overnight borrowings with longer term funding. The increase in time deposits from September 30, 2006 to the same date in 2007 was primarily due to competitive interest rate campaigns by Banco Popular de Puerto Rico (“BPPR”) and to the increased volume of brokered certificates of deposits. The increase in savings deposits from September 30, 2006 was mainly due to the U.S. mainland operations as a result of deposits captured through E-LOAN’s online platform.

The accompanying Exhibit A also provides information on outstanding borrowings and stockholders’ equity at September 30, 2007 and 2006, and June 30, 2007. Also, refer to the “Liquidity and Capital Resources” section in this press release for a discussion of the Corporation’s liquidity position as of the end of the third quarter of 2007.

The following table provides information on the Corporation’s mortgage loan exposure (for loans held-in-portfolio, thus excludes loans held-for-sale) at September 30, 2007. Subprime mortgage loans refer to mortgage loans made to individuals with a FICO^® score of 660 or below. FICO^® scores are used as an indicator of the probability of default for loans.

BPPR’s mortgage loans held-in-portfolio that are considered subprime under the above definition approximated 51% of its total mortgage loans held-in-portfolio as of September 30, 2007 based on amounts presented on the table above. The Corporation, however, believes that the particular characteristics of this subprime portfolio limit its exposure under current market conditions. BPPR’s loans are fixed-rate fully amortizing, full-documentation loans that do not have the level of layered risk associated with subprime loans offered by certain major U.S. mortgage loan originators. Deteriorating economic conditions have impacted the mortgage delinquency rates in Puerto Rico increasing the levels of non-accruing mortgage loans. However, BPPR has not to date experienced significant increases in losses. The annualized ratio of mortgage loans net charge-offs to average mortgage loans held-in-portfolio for this subprime portfolio was 0.11% for the nine months ended September 30, 2007.

BPNA’s mortgage loans held-in-portfolio considered subprime under the above definition approximated 69% of its total mortgage loans held-in-portfolio as of September 30, 2007. This portfolio has principally two products — either 7/1 ARMs (fixed-rate interest until end of year seven in which interest rate begins to reset annually until maturity) or fixed-rate mortgages - with no characteristics associated with subprime loans. Deteriorating economic conditions in the U.S. mainland housing market have impacted the mortgage industry delinquency rates, however, the levels of non-accruing mortgage loans in BPNA’s subprime mortgage portfolio have performed much better than the Corporation’s subprime portfolio at PFH because BPNA’s subprime mortgage portfolio consists of fixed rate loans. The non-accruing loans to loans held-in-portfolio ratio for BPNA’s subprime mortgage loans was 2.65% at September 30, 2007. The annualized ratio of mortgage loans net charge-offs to average mortgage loans held-in-portfolio for this subprime portfolio was 0.94% for the nine months ended September 30, 2007.

PFH’s mortgage loans held-in-portfolio is segregated between loans “owned-in-trust” (loans included in securitizations that did not qualify for sale treatment) totaling $3.6 billion (which are described below) and loans “owned” amounting to $2.1 billion at September 30, 2007. The following table provides more detailed information on PFH’s mortgage loans held-in-portfolio.


Table
Mortgage Loan Exposure at Popular Financial Holdings – (excludes mortgage loans held-for-sale)										(c) (d)
As of September 30, 2007
	Total			Vintage			Vintage				Vintage			Vintage			Vintage
(In thousands)	Vintages			2007			2006				2005			2004			2003 & Prior
Prime mortgage loans — Owned portfolio	$	522,125		$	120,245		$	144,312			$	111,865		$	55,343		$	90,360

FICO^®- Average score		708			697			704				706			713			719
Original Loan-to-value – Average		81.05	%		80.45	%		79.55	%			86.43	%		84.82	%		73.35	%
% Fixed-rate		90	%		96	%		84	%			83	%		97	%		98	%
% ARM		10	%		4	%		16	%			17	%		3	%		2	%
Delinquencies %		2.14	%		1.16	%		4.21	%			0.54	%		0.87	%		2.88	%
Non-performing %		1.53	%		1.11	%		3.52	%			0.22	%		0.46	%		1.17	%
Charge-offs % — Third Quarter 2007 (a)		0.45	%		0	%		1.13	%			0.32	%		0.10	%		0.22	%
Prime mortgage loans – Owned-in-Trust	$	1,275,313		$	0		$	74,972			$	388,933		$	420,530		$	390,878

FICO^®- Average score		713			n/a			696				705			717			717
Original Loan-to-value – Average		83.48	%		n/a			83.44	%			84.71	%		80.62	%		84.78	%
% Fixed-rate		84	%		n/a			45	%			64	%		96	%		98	%
% ARM		16	%		n/a			55	%			36	%		4	%		2	%
Delinquencies %		1.57	%		n/a			2.81	%			2.38	%		0.95	%		1.19	%
Non-performing %		0.75	%		n/a			0.79	%			1.09	%		0.52	%		0.65	%
Charge-offs % — Third Quarter 2007 (a)		0.23	%		n/a			1.60	%			0.16	%		0.06	%		0.19	%
Subprime mortgage loans — Owned portfolio	$	1,560,305		$	466,353		$	423,210			$	319,235		$	116,116		$	235,391

FICO^®- Average score		572			588			569				564			565			567
Original Loan-to-value – Average		83.05	%		81.35	%		81.69	%			90.00	%		89.77	%		75.47	%
% Fixed-rate		86	%		94	%		83	%			74	%		91	%		91	%
% ARM		14	%		6	%		17	%			26	%		9	%		9	%
Delinquencies %		12.97	%		3.59	%		13.34	%			19.58	%		16.43	%		20.21	%
Non-performing %		8.12	%		1.37	%		8.56	%			12.45	%		11.21	%		13.30	%
Charge-offs % — Third Quarter 2007 (a)		5.62	%		0.13	%		2.81	%			15.62	%		6.17	%		4.84	%
Subprime mortgage loans – Owned-in-Trust	$	2,365,330		$	0		$	361,191			$	916,147		$	449,926		$	638,066

FICO^®- Average score		572			n/a			575				569			576			571
Original Loan-to-value – Average		84.09	%		n/a			84.66	%			83.42	%		83.31	%		84.80	%
% Fixed-rate		63	%		n/a			29	%			50	%		86	%		85	%
% ARM		37	%		n/a			71	%			50	%		14	%		15	%
Delinquencies %		21.82	%		n/a			17.62	%			24.81	%		17.20	%		23.16	%
Non-performing %		13.50	%		n/a			10.90	%			15.33	%		10.10	%		14.72	%
Charge-offs % — Third Quarter 2007 (a)		2.74	%		n/a			2.38	%			3.07	%		2.12	%		2.88	%
Loans without FICO scores	$	4,064		$	3,441		$	232			$	0		$	0		$	391

Total PFH — Mortgage Loans (b)	$	5,727,137		$	590,039		$	1,003,917			$	1,736,180		$	1,041,915		$	1,355,086

FICO^®- Average score		612			611			600				604			629			617
Original Loan-to-value – Average		83.27	%		81.13	%		82.04	%			85.95	%		82.86	%		82.89	%
% Fixed-rate		76	%		95	%		61	%			60	%		91	%		90	%
% ARM		24	%		5	%		39	%			40	%		9	%		10	%
Delinquencies %		13.09	%		3.07	%		12.79	%			17.26	%		9.69	%		14.96	%
Non-performing %		8.09	%		1.31	%		8.11	%			10.64	%		5.84	%		9.51	%
Charge-offs % — Third Quarter 2007 (a)		2.72	%		0.10	%		2.32	%			4.59	%		1.66	%		2.29	%
Deferred fees, origination costs, net premiums and other items		115,686

PFH Total Mortgage Loans HIP	$	5,842,823

Vintage = year of origination
(a) The average balances used to calculate these net charge-offs to average loans ratios were calculated using the ending balances as of June 30, 2007 and September 30, 2007 for these business areas.
(b) Includes loans without FICO^® scores.
(c) PFH’s loans held-for-sale approximated $3 million as of September 30, 2007 and are accounted at lower of cost or market value.
(d) Included above are $315 million in second mortgages.

In the past, PFH originated mortgage loans through various channels including bulk acquisitions, mortgage loan brokers and its retail branch network. As part of the 2007 Restructuring Plan, PFH ceased originating loans through all channels except for loans originated directly through its consumer finance branches and the customer loan center. This has resulted in a significant reduction in total origination of mortgage loans at PFH.

Approximately $3.7 billion of the loans held-in-portfolio by PFH as of September 30, 2007 is pledged as collateral for asset-backed securities issued by the Corporation (in the form of bond certificates) as a financing vehicle through on-balance sheet securitization transactions. These loan securitizations conducted by the Corporation between 2005 and 2006 did not meet the sale criteria under SFAS No. 140; accordingly, the transactions were treated as on-balance sheet securitizations for accounting purposes. These loans are identified as “owned-in-trust” for purposes of these disclosures. These “owned-in-trust” loans do not pose the same magnitude of risk to the Corporation as those loans owned outright because the potential losses related to owned-in-trust loans above overcollaterization levels will be borne by the bondholders and not the Corporation. Overcollateralization is defined as a type of credit enhancement by which an issuer of bond certificates pledges mortgage loans as collateral in excess of what is assumed to adequately cover the repayment of the bond certificates.

The table below presents the outstanding balance of loans “owned-in-trust” at September 30, 2007, the excess of trust assets over securitized debt in the form of bond certificates due to investors (“overcollateralization”), as well as the related unamortized net premiums/FAS 91 on loans and the allowance for loan losses attributable to the “owned-in-trust” portfolio.

The U.S. credit markets have been marked by unprecedented instability and disruption since the beginning of the third quarter of 2007, making even routine asset sale and funding activities much more challenging for financial institutions. Credit spreads have widened significantly and rapidly, as many investors have allocated their funds to only the highest-quality financial assets such as U.S. government securities. The result of these actions by market participants has made it more difficult for corporate borrowers to raise financing in the credit markets and has reduced the value of most financial assets except the highest-quality obligations.

The sector that has been most severely impacted is the money market sector, where companies raise short-term financing, and the corporate and asset-backed markets where longer-term debt funding is raised. A primary catalyst of the market disruptions has been an abrupt shift by investors away from non-government mortgage-backed securities and asset-backed securities, primarily those backed by subprime mortgage loans.

The Corporation usually finances a portion of its business in the money and corporate bond markets, both of which have been affected by recent financial market developments. Even though it has become more challenging to raise financing in the credit markets, we believe that the challenges are manageable and we have various initiatives underway to ensure our access to stable sources of liquidity.

The Corporation’s banking subsidiaries (BPPR and BPNA, or “the banking subsidiaries”) have multiple channels and sources of liquidity. To mitigate exposure to funding risk in the current environment, concrete steps have been taken to reduce the need to access the money markets for financing.

The Corporation’s banking subsidiaries are primarily funded with deposits. As of September 30, 2007, the ending balances deposits were $16.1 billion for BPPR and $10.6 billion for BPNA, excluding intercompany balances between these two entities.

Borrowings at the banking subsidiaries amounted to $6.9 billion as of September 30, 2007. This includes $1.4 billion in short-term unsecured borrowings.

Several strategies are in place with the objective of mitigating the impact of current market conditions on liquidity risk. Total deposits at the Corporation increased from $25.4 billion as of June 30, 2007 to $26.6 billion as of September 30, 2007, an increase of $1.2 billion or 5%.

Other strategies implemented included the utilization of unpledged liquid assets to raise financing in the repo markets, the proceeds of which were also used to pay off unsecured borrowings. Short-term unsecured borrowings at the banking subsidiaries were reduced from $3.8 billion as of June 30, 2007 to $1.4 billion as of September 30, 2007 which represents a decrease of $2.4 billion or 63%.

It is expected that during the fourth quarter, the Corporation’s announced acquisition of Citibank’s retail banking business in Puerto Rico be completed. The closing of the acquisition is expected to provide BPPR with over approximately $735 million in cash which will further strengthen BPPR’s liquidity position.

The Corporation’s bank holding companies (“BHCs”, Popular, Inc. and Popular North America) borrow in the money markets and the corporate debt market primarily to finance their non-banking subsidiaries. However, current conditions have made market access more uncertain. As an alternative to raise capital markets financing, the Corporation is working on several initiatives to ensure adequate funding sources are available notwithstanding adverse market conditions.

The Corporation is in the process of securing committed financing facilities with two leading global banking institutions. When market conditions are adequate, the Corporation intends to pursue a capital markets medium-term notes transaction.

The BHCs have additional sources of liquidity available, in the form of credit facilities available from affiliate banking subsidiaries and third party providers.

After the end of the third quarter of 2007, Fitch Ratings reduced the short-term rating of the BHCs to “F-2” from “F-1”, and placed the long-term senior rating on negative watch. The rating is currently “A-”. Fitch Ratings mentioned that the rating actions reflected credit quality pressures from the company’s subprime loan exposure as well as a more difficult environment for BHC funding. In both cases, Fitch Ratings maintained that it believes that both situations are challenging but manageable.

Moodys currently has the Corporation’s senior rating on negative watch. The current level is A2 for the long-term rating and P-1 for the short-term rating.

Standard and Poors, currently has the Corporation’s ratings at BBB+ for senior long-term debt and A-2 for short-term debt, both on stable outlook.

Credit ratings are an important factor in accessing the credit markets. Even though the Corporation is currently several notches above the investment grade threshold, the possibility of ratings downgrades can affect our ability to raise unsecured financing at competitive rates.

The Corporation continues to exceed the well-capitalized guidelines under the federal banking regulations. The ratios of total risk-based capital, Tier 1 risk-based capital and Tier 1 leverage approximated 11.95%, 10.70% and 8.30%, respectively, at September 30, 2007. Also, BPPR and BPNA continue to exceed the well-capitalized guidelines under the federal banking regulations.

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, losses on the subprime portfolio, as well as general changes in business market 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 institution based in Puerto Rico with operations in Puerto Rico, the United States, the Caribbean and Latin America. As the leading financial institution in Puerto Rico, with over 300 branches and offices, the Corporation offers retail and commercial banking services through its franchise, Banco Popular de Puerto Rico, as well as auto and equipment leasing and financing, mortgage loans, consumer lending, investment banking, broker / dealer and insurance services through specialized subsidiaries. In the United States, the Corporation has established a community banking franchise providing a broad range of financial services and products to the communities it serves. Banco Popular North America operates branches in New York, California, Illinois, New Jersey, Florida and Texas, while E-LOAN provides online consumer direct lending for obtaining mortgage, auto and home equity loans, and provides an online platform to raise deposits for BPNA. Popular Financial Holdings offers mortgage and personal loans and provides mortgage loan servicing. The Corporation, through its transaction processing company, EVERTEC, continues to use its expertise in technology as a competitive advantage in its expansion throughout the United States, the Caribbean and Latin America, as well as internally servicing many of its subsidiaries’ system infrastructures and transactional processing businesses. The Corporation is exporting its 114 years of experience through these regions while continuing its commitment 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 press release can be found at the Corporation’s website, www.popular.com.


Financial Summary (unaudited)	Quarter ended						3^rd Quarter						Quarter ended			3^rd vs 2^nd Quarter
	September 30,						2007 vs 2006									2007
	2007			2006			$ Variance			% Variance			June 30, 2007			$ Variance			% Variance
Summary of Operations
(In thousands, except share information)
Interest income	$	790,226		$	781,331		$	8,895			1.1	%	$	784,911		$	5,315			0.7	%

Interest expense		430,110			439,293			(9,183	)		(2.1	)		413,494			16,616			4.0

Net Interest income		360,116			342,038			18,078			5.3			371,417			(11,301	)		(3.0	)

Provision for loan losses		148,093			63,445			84,648			133.4			115,167			32,926			28.6

Net interest income after provision for loan losses		212,023			278,593			(66,570	)		(23.9	)		256,250			(44,227	)		(17.3	)

Net (loss) gain on sale and valuation adjustments of investment securities		(3,089	)		7,123			(10,212	)		(143.4	)		1,175			(4,264	)		(362.9	)

Trading account (loss) profit		(2,867	)		10,019			(12,886	)		(128.6	)		10,377			(13,244	)		(127.6	)

Gain on sale of loans and valuation adjustments on loans held-for-sale		5,991			20,113			(14,122	)		(70.2	)		28,294			(22,303	)		(78.8	)

Other non-interest income		166,970			154,094			12,876			8.4			163,529			3,441			2.1

Total non-interest income		167,005			191,349			(24,344	)		(12.7	)		203,375			(36,370	)		(17.9	)

Personnel costs		152,240			164,696			(12,456	)		(7.6	)		164,288			(12,048	)		(7.3	)

Amortization of intangibles		2,234			3,608			(1,374	)		(38.1	)		2,813			(579	)		(20.6	)

Other operating expenses		192,499			191,619			880			0.5			193,952			(1,453	)		(0.7	)

Total operating expenses		346,973			359,923			(12,950	)		(3.6	)		361,053			(14,080	)		(3.9	)

Net income before income tax		32,055			110,019			(77,964	)		(70.9	)		98,572			(66,517	)		(67.5	)

Income tax		(3,948	)		27,859			(31,807	)		(114.2	)		23,622			(27,570	)		(116.7	)

Net income	$	36,003		$	82,160			($46,157	)		(56.2	)%	$	74,950			($38,947	)		(52.0	)%

Net income applicable to common stock	$	33,024		$	79,181			($46,157	)		(58.3	)%	$	71,972			($38,948	)		(54.1	)%

Basic and diluted EPS	$	0.12		$	0.28								$	0.26

Dividends declared per common share	$	0.16		$	0.16								$	0.16

Average common shares outstanding		279,625,715			278,602,482									279,355,701

Average common shares outstanding – assuming dilution		279,625,715			278,812,947									279,443,859

Common shares outstanding at end of period		279,597,529			278,553,152									279,326,816

Market value per common share	$	12.28		$	19.44								$	16.07

Book value per common share	$	12.94		$	12.38								$	12.57

Market capitalization – (In millions)	$	3,433		$	5,415								$	4,489

Selected Average Balances – (In millions)

Total assets	$	47,057		$	48,376			($1,319	)		(2.7	)%	$	47,140			($83	)		(0.2	)%

Investment securities available-for-sale and held-to-maturity		9,477			11,367			(1,890	)		(16.6	)		9,812			(335	)		(3.4	)

Trading and other investment securities		838			800			38			4.8			817			21			2.6

Total loans *		32,875			32,273			602			1.9			32,766			109			0.3

Earning assets		43,728			44,948			(1,220	)		(2.7	)		43,828			(100	)		(0.2	)

Deposits		25,646			23,217			2,429			10.5			24,924			722			2.9

Borrowings		16,725			20,594			(3,869	)		(18.8	)		17,563			(838	)		(4.8	)

Interest-bearing liabilities		38,391			39,841			(1,450	)		(3.6	)		38,422			(31	)		(0.1	)

Stockholders’ equity		3,903			3,776			127			3.4			3,886			17			0.4

Selected Financial Data at Period-End – (In millions)

Total assets	$	47,280		$	46,935		$	345			0.7	%	$	46,985		$	295			0.6	%

Investment securities available-for-sale and held-to-maturity		9,158			10,516			(1,358	)		(12.9	)		9,404			(246	)		(2.6	)

Trading and other investment securities		842			749			93			12.4			837			5			0.6

Total loans *		33,321			31,757			1,564			4.9			32,752			569			1.7

Earning assets		43,955			43,567			388			0.9			43,568			387			0.9

Deposits		26,602			23,137			3,465			15.0			25,386			1,216			4.8

Borrowings		16,017			19,437			(3,420	)		(17.6	)		17,109			(1,092	)		(6.4	)

Interest-bearing liabilities		38,643			38,752			(109	)		(0.3	)		38,214			429			1.1

Stockholders’ equity		3,804			3,636			168			4.6			3,697			107			2.9

Performance Ratios

Net interest yield **		3.30	%		3.05	%								3.39	%

Return on assets		0.30			0.67									0.64

Return on common equity		3.52			8.75									7.80

Credit Quality Data – (Dollars in millions)

Net loans charged-off	$	112.7		$	59.9		$	52.8			88.1	%	$	92.1		$	20.6			22.4	%

Allowance for loan losses	$	600		$	487		$	113			23.2		$	565		$	35			6.2

Non-performing assets	$	1,142		$	738		$	404			54.7		$	971		$	171			17.6

Non-performing assets to total assets		2.42	%		1.57	%								2.07	%

Non-performing assets to loans held-in-portfolio		3.47			2.36									3.02

Non-performing loans to loans held-in-portfolio		3.07			2.09									2.67

Allowance for loan losses to non-performing loans		59.53			74.50									65.81

Allowance for loan losses to loans held-in-portfolio		1.82			1.56									1.76

*Includes loans held-for-sale
**Not on a taxable equivalent basis
Notes: Certain reclassifications have been made to prior periods to conform with this quarter.


Financial Summary (unaudited)	For the nine months ended
	September 30,
	2007			2006			$ Variance			% Variance
Summary of Operations (In thousands, except share information)

Interest income	$	2,348,732		$	2,285,578		$	63,154			2.8	%

Interest expense		1,262,217			1,217,997			44,220			3.6

Net Interest income		1,086,515			1,067,581			18,934			1.8

Provision for loan losses		359,606			179,488			180,118			100.4

Net interest income after provision for loan losses		726,909			888,093			(161,184	)		(18.1	)

Net gain on sale and valuation adjustments of investment securities		79,857			5,039			74,818

Trading account (loss) profit		(6,654	)		23,324			(29,978	)		(128.5	)

Gain on sale of loans and valuation adjustments on loans held-for-sale		37,719			96,428			(58,709	)		(60.9	)

Other non-interest income		511,634			479,377			32,257			6.7

Total non-interest income		622,556			604,168			18,388			3.0

Personnel costs		494,903			509,231			(14,328	)		(2.8	)

Amortization of intangibles		8,030			9,160			(1,130	)		(12.3	)

Impact of change in fiscal period at certain subsidiaries		—			9,741			(9,741	)		(100.0	)

Other operating expenses		580,421			578,025			2,396			0.4

Total operating expenses		1,083,354			1,106,157			(22,803	)		(2.1	)

Net income before income tax		266,111			386,104			(119,993	)		(31.1	)

Income tax		36,511			88,060			(51,549	)		(58.5	)

Net income	$	229,600		$	298,044			($68,444	)		(23.0	)%

Net income applicable to common stock	$	220,665		$	289,109			($68,444	)		(23.7	)%

Basic and diluted EPS	$	0.79		$	1.04

Dividends declared per common share	$	0.48		$	0.48

Average common shares outstanding		279,355,496			278,349,354

Average common shares outstanding – assuming dilution		279,433,512			278,605,105

Common shares outstanding at end of period		279,597,529			278,553,152

Selected Average Balance– (In millions)

Total assets	$	47,168		$	48,630			($1,462	)		(3.0	)%

Investment securities available-for-sale and held-to-maturity		9,779			11,796			(2,017	)		(17.1	)

Trading and other investment securities		848			817			31			3.8

Total loans *		32,767			32,048			719			2.2

Earning assets		43,843			45,247			(1,404	)		(3.1	)

Deposits		24,973			22,947			2,026			8.8

Borrowings		17,531			21,219			(3,688	)		(17.4	)

Interest-bearing liabilities		38,491			40,213			(1,722	)		(4.3	)

Stockholders’ equity		3,871			3,719			152			4.1

Performance Ratios

Net interest yield **		3.30	%		3.14	%

Return on assets		0.65			0.82

Return on common equity		8.01			11.00

Credit Quality Data – (Dollars in millions)

Net loans charged-off	$	281.6		$	156.4		$	125.2			80.1	%

Allowance for loan losses	$	600		$	487		$	113			23.2

Non-performing assets	$	1,142		$	738		$	404			54.7

Non-performing assets to total assets		2.42	%		1.57	%

Non-performing assets to loans held-in-portfolio		3.47			2.36

Non-performing loans to loans held-in-portfolio		3.07			2.09

Allowance for loan losses to non-performing loans		59.53			74.50

Allowance for loan losses to loans held-in-portfolio		1.82			1.56

*Includes loans held-for-sale
**Not on a taxable equivalent basis
Notes: Certain reclassifications have been made to prior periods to conform with this period.

JOINT NEWS RELEASE
Prosperity Bancshares, Inc.®
Prosperity Bank Plaza
4295 San Felipe
Houston, Texas 77027
For more information contact:
Dan Rollins
President & Chief Operating Officer
281-269-7199
dan.rollins@prosperitybanktx.com

Banco Popular North America
9600 W. Bryn Mawr
Rosemont, Illinois 60018
For more information contact:
Juan Carlos Cruz
Vice President Public Relations & Media
847-994-6442
jccruz@bpop.com

HOUSTON, October 22, 2007. Prosperity Bancshares, Inc.® (NASDAQ: PRSP) and Popular, Inc. (NASDAQ:BPOP) announced today the signing of a definitive agreement to sell the six (6) Houston retail bank branches of Banco Popular North America (BPNA) to Prosperity Bank.

Prosperity Bank will pay a premium of 10.10% for approximately $140 million in deposits, as well as purchase certain loans and other assets attributable to the branches. Prosperity also agreed to retain all branch-based employees of BPNA’s Houston locations as part of the transaction.

BPNA will continue to operate its mortgage business based in Houston as well as it franchise and small business lending activities in Texas. BPNA will also continue to maintain a retail branch in Arlington, Texas.

Mr. Richard L. Carrion, President, Chief Executive Officer and Chairman of the Board of Popular said “We have a small retail branch presence in a market that requires a larger physical footprint to pursue our type of community banking strategy to its full extent. This action will allow us to focus and prioritize resources in retail markets where we have better scale and in the profitable niche businesses we currently operate out of Houston and Arlington.”

“We are pleased with this opportunity to grow in the Houston Area and reach out to a new market. After the acquisition of the Banco Popular locations, Prosperity will have 46 banking centers in Houston and its surrounding areas,” said David Zalman, Chief Executive Officer and Chairman of Prosperity Bancshares. “We look forward to combining the Banco Popular team with our current Houston team and believe that both of our customer bases will benefit.”

The agreement has been approved by the Boards of Directors of both banks and is expected to close during the fourth quarter of 2007, although delays could occur. The transaction is subject to certain conditions, including customary regulatory approvals.

Prosperity Bancshares, Inc.®, a $6.2 billion Houston, Texas based regional financial holding company, formed in 1983, was named to the Keefe Bruyette & Woods, Inc. 2007 Honor Roll for achieving exceptional earnings per share growth for the past 10 years. Other recent honors include being named to the Sandler O’Neill & Partners 2005 Bank and Thrift Small All Stars, listed in US Banker’s August 2005 Top 100 Publicly Traded Mid-Tier Banks, ranked #2 out of 195 publicly traded companies in the 2005 Stephens, Inc. Bank and Thrift Performance Matrix and listed on the Houston Chronicle’s Houston 100 list.

Operating under a community banking philosophy, Prosperity seeks to develop broad customer relationships based on service and convenience. Prosperity offers a variety of traditional loan and deposit products to its customers, which consist primarily of consumers and small and medium sized businesses. In addition to established banking products, Prosperity offers a complete line of services including: Internet Banking services at www.prosperitybanktx.com, Retail Brokerage Services, MasterMoney Debit Cards, and 24 hour voice response banking. Prosperity currently operates one hundred twenty-four (124) full service banking locations; forty (40) in the Houston CMSA; thirty-three (33) in the South Texas area including Corpus Christi and Victoria; twenty-six (26) in the Dallas/Fort Worth metroplex; two (2) in the East Texas area; twenty-three (23) in the Central Texas area including Austin and Bryan/College Station; and a loan production office in San Antonio.

“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995: This release contains, and the remarks by our management on the conference call may contain, forward-looking statements within the meaning of the securities laws that are based on current expectations, assumptions’ estimates and projections about Prosperity Bancshares®, and its subsidiaries. These forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties, many of which are outside of Prosperity’s control, that may cause actual results to differ materially from those expressed or implied by the forward-looking statements. These risks and uncertainties include but are not limited to whether Prosperity can: successfully identify acquisition targets and integrate the businesses of acquired companies and banks; continue to sustain its current internal growth rate or total growth rate; provide products and services that appeal to its customers; continue to have access to debt and equity capital markets; and achieve its sales objectives. Other risks include the possibility that credit quality could deteriorate; actions of competitors; changes in laws and regulations (including changes in governmental interpretations of regulations and changes in accounting standards); customer and consumer demand, including customer and consumer response to marketing; effectiveness of spending, investments or programs; fluctuations in the cost and availability of supply chain resources; economic conditions, including currency rate fluctuations and interest rate fluctuations; weather; and the stock price volatility associated with “small-cap” companies. These and various other factors are discussed in our most recent Annual Report on Form 10-K and other reports and statements we have filed with the SEC. Copies of the SEC filings for Prosperity Bancshares’s® may be downloaded from the Internet at no charge from www.prosperitybanktx.com.


Puerto Rico	0-13818	66-0667416
_____________________ (State or other jurisdiction	_____________ (Commission	______________ (I.R.S. Employer
of incorporation)	File Number)	Identification No.)

209 MUNOZ RIVERA AVE, POPULAR CENTER BUILDING, HATO REY , Puerto Rico		00918
_________________________________ (Address of principal executive offices)		___________ (Zip Code)


	Popular, Inc.

October 22, 2007	By:	Ileana Gonzalez

		Name: Ileana Gonzalez
		Title: Senior Vice President and Comptroller


Exhibit No.		Description

3.1		Amendment to By-Laws approved on October 17, 2007
99.1		Press release dated October 19, 2007
99.2		Joint press release dated October 22, 2007


POPULAR, INC. Contact:				Exhibit 99.1
Investor Relations:
Jorge A. Junquera Chief Financial Officer Senior Executive Vice President 787-754-1685
Media Relations:
Teruca Rullán Senior Vice President Corporate Communications 787-281-5170 or 917-679-3596/mobile


Annualized Net Charge-offs to Average Loans Held-in-Portfolio
	3rd Quarter			2nd Quarter			3rd Quarter
	2007			2007			2006
Commercial *		0.46	%		0.49	%		0.25	%
Lease financing		1.43			1.24			1.07
Mortgage		1.70			0.87			0.55
Consumer		3.32			3.61			2.58

Total portfolio		1.39	%		1.16	%		0.77	%

* Includes commercial construction loans


Date of Report (Date of Earliest Event Reported):		October 17, 2007


Registrant’s telephone number, including area code:		787-765-9800


	September 30,		June 30,					September 30,
(In millions)	2007		2007		Variance			2006		Variance
U.S Treasury securities	$	475.8	$	462.6	$	13.2		$	493.5		($17.7	)
Obligations of U.S. government sponsored entities		6,014.6		6,182.1		(167.5	)		6,891.9		(877.3	)
Obligations of Puerto Rico, states and political subdivisions		178.3		186.2		(7.9	)		188.5		(10.2	)
Collateralized mortgage obligations		1,469.7		1,532.4		(62.7	)		1,713.3		(243.6	)
Mortgage-backed securities		949.5		960.2		(10.7	)		1,071.2		(121.7	)
Equity securities		41.3		45.3		(4.0	)		72.8		(31.5	)
Other		28.6		35.1		(6.5	)		84.6		(56.0	)

Total	$	9,157.8	$	9,403.9		($246.1	)	$	10,515.8		($1,358.0	)


(In millions)	Prime loans		Subprime loans		Total
Banco Popular de Puerto Rico	$	1,128	$	1,197	$	2,325
Popular North America:
Banco Popular North America		534		1,169		1,703
Popular Financial Holdings:
- Owned-in-trust		1,275		2,365		3,640
- Owned — originated through wholesale channels		217		747		964
- Owned — originated through consumer branches		305		814		1,119

Sub-total	$	3,459	$	6,292	$	9,751
Other not classified as prime or subprime loans						729

Total					$	10,480


	September 30,			June 30,			March 31,			December 31,
(In millions)	2007			2007			2007			2006
Loans (a)	$	3,666		$	3,947		$	4,240		$	4,543
Other real estate		100			83			63			59
Securitization advances		15			37			43			56
Delinquency advances		15			11			11			9
Escrow advances		19			17			18			17

Total trust assets		3,815			4,095			4,375			4,684
Less: Balance of bond certificates		(3,570	)		(3,842	)		(4,106	)		(4,391	)

Excess of trust assets (“overcollateralization”)		245			253			269			293
Unamortized net premiums and net deferred origination fees / costs		91			99			108			117
Allowance for loan losses		(68	)		(67	)		(66	)		(55	)

Total exposure	$	268		$	285		$	311		$	355

(a) Includes mixed-used loans which are categorized as commercial loans. These loans totaled $25 million at September 30, 2007.