<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10 - Q
-----------
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 1995 Commission file number 0 - 13818
------------- ---------
BANPONCE CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Puerto Rico 66-041-6582
------------------------ ------------------
(State of incorporation) (I.R.S. Employer
Identification No.)
Popular Center Building
209 Munoz Rivera avenue, Hato Rey
San Juan, Puerto Rico 00918
----------------------------------------
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code (809) 765-9800
--------------
Not Applicable
--------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report) Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
-------- ---------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the period covered by this report.
Common Stock $6.00 Par value 32,893,968
----------------------------- ---------------------------------------
(Title of Class) (Shares Outstanding as of June 30, 1995)
<PAGE> 2
2
BANPONCE CORPORATION
INDEX
<TABLE>
<CAPTION>
Part I - Financial Information Page
------------------------------ ------
<S> <C>
Item 1. Financial Statements
Unaudited consolidated statements of condition
June 30, 1995 and December 31, 1994. 3
------
Unaudited consolidated statements of income -
Quarters and Semesters ended June 30, 1995 and 1994. 4
------
Unaudited consolidated statements of cash
flows - Semesters ended June 30, 1995 and 1994. 5
------
Notes to unaudited consolidated financial
statements. 6-12
------
Item 2. Management's discussion and analysis of
financial condition and results of operation. 13-23
------
Part II - Other Information
---------------------------
Item 1. Legal proceedings - None N/A
------
Item 2. Changes in securities - None N/A
------
Item 3. Defaults upon senior securities - None N/A
------
Item 4. Submission of matters to a vote of
security holders - None N/A
------
Item 5. Other information - None N/A
------
Item 6. Exhibits and reports on Form 8-K 24
------
--- Signature 24
------
</TABLE>
<PAGE> 3
3
BANPONCE CORPORATION
CONSOLIDATED STATEMENTS OF CONDITION
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, December 31,
(In thousands) 1995 1994
---------------------------------------------------------------------------------------------------------------
ASSETS
<S> <C> <C>
Cash and due from banks $ 411,420 $ 442,316
--------------------------------------------------------------------------------------------------------------
Money market investments:
Federal funds sold and securities and
mortgages purchased under agreements to resell 623,118 265,000
Time deposits with other banks 5,255 100
Banker's acceptances 866 570
---------------------------------------------------------------------------------------------------------------
629,239 265,670
---------------------------------------------------------------------------------------------------------------
Investment securities held to maturity, at cost
(notes 3 and 4) 3,384,693 2,955,911
Investment securities available-for-sale,
at market (notes 3 and 4) 1,186,292 839,226
Trading account securities, at market 200,527 1,670
Loans held-for-sale 27,706 10,296
Loans (Note 4) 8,483,950 8,066,954
Less - Unearned income 311,328 295,921
Allowance for loan losses 158,734 153,798
---------------------------------------------------------------------------------------------------------------
8,013,888 7,617,235
---------------------------------------------------------------------------------------------------------------
Premises and equipment 327,194 324,160
Other real estate 9,767 10,390
Customer's liabilities on acceptances 1,411 902
Accrued income receivable 101,991 78,765
Other assets 124,342 103,088
Intangible assets 154,832 128,729
---------------------------------------------------------------------------------------------------------------
$14,573,302 $12,778,358
===============================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Non-interest bearing $ 1,840,835 $ 1,950,883
Interest bearing 7,767,104 7,061,552
---------------------------------------------------------------------------------------------------------------
9,607,939 9,012,435
Federal funds purchased and securities sold
under agreements to repurchase (Note 4) 2,135,591 1,438,038
Other short-term borrowings 773,366 573,841
Notes payable 674,009 459,524
Senior debentures 30,000 30,000
Acceptances outstanding 1,411 902
Other liabilities 227,816 211,195
---------------------------------------------------------------------------------------------------------------
13,450,132 11,725,935
---------------------------------------------------------------------------------------------------------------
Subordinated notes (Note 6) 50,000 50,000
---------------------------------------------------------------------------------------------------------------
Stockholders' equity (Note 8):
Preferred stock 100,000 100,000
Common stock 197,364 197,029
Surplus 410,687 409,445
Retained earnings 318,000 272,458
Unrealized gains(losses) on securities available-for-sale, net of
deferred taxes (Note 2) 4,262 (19,366)
Capital reserves 42,857 42,857
---------------------------------------------------------------------------------------------------------------
1,073,170 1,002,423
---------------------------------------------------------------------------------------------------------------
$14,573,302 $12,778,358
===============================================================================================================
</TABLE>
The accompanying notes are an integral part of these unaudited consolidated
financial statements
<PAGE> 4
4
BANPONCE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Quarter ended For the six months ended
June 30, June 30,
(Thousands of dollars except per share amounts) 1995 1994 1995 1994
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans $200,530 $162,667 $391,080 $310,470
Money market investments 3,596 1,209 4,582 3,349
Investment securities 63,567 56,081 122,135 105,540
Trading account securities 1,125 43 1,240 52
-----------------------------------------------------------------------------------------------------------------------
268,818 220,000 519,037 419,411
-----------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE:
Deposits 84,585 60,722 161,650 114,901
Short-term borrowings 29,246 17,283 54,620 31,301
Long-term debt 12,867 6,421 23,119 11,852
-----------------------------------------------------------------------------------------------------------------------
126,698 84,426 239,389 158,054
-----------------------------------------------------------------------------------------------------------------------
Net interest income 142,120 135,574 279,648 261,357
Provision for loan losses 12,646 14,037 24,344 27,700
-----------------------------------------------------------------------------------------------------------------------
Net interest income after provision
for loan losses 129,474 121,537 255,304 233,657
Service charges on deposit accounts 19,552 18,050 37,642 35,225
Other service fees 15,565 12,480 29,376 23,391
Gain on sale of securities 66 112 272
Trading account profit 350 161 300 331
Other operating income 4,839 3,716 10,495 8,312
-----------------------------------------------------------------------------------------------------------------------
169,846 155,944 333,229 301,188
-----------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES:
Personnel costs:
Salaries 42,681 39,857 84,211 78,899
Profit sharing 6,506 5,624 9,833 10,615
Pension and other benefits 15,122 11,416 30,683 22,702
-----------------------------------------------------------------------------------------------------------------------
64,309 56,897 124,727 112,216
Net occupancy expense 8,254 6,927 16,022 13,830
Equipment expenses 9,953 8,760 19,337 16,963
Other taxes 5,094 4,667 10,725 9,099
Professional fees 9,218 9,202 16,772 16,052
Communications 5,689 4,989 11,292 9,893
Business promotion 4,170 3,539 7,962 7,229
Printing and supplies 2,517 2,311 5,298 4,412
Other operating expenses 10,414 10,659 20,865 20,473
Amortization of intangibles 5,104 4,502 10,040 8,863
-----------------------------------------------------------------------------------------------------------------------
124,722 112,453 243,040 219,030
-----------------------------------------------------------------------------------------------------------------------
Income before tax and dividends on preferred stock of
Banco Popular 45,124 43,491 90,189 82,158
Income tax 11,063 11,622 22,387 21,367
-----------------------------------------------------------------------------------------------------------------------
Income before dividends on preferred stock of
Banco Popular 34,061 31,869 67,802 60,791
Dividends on preferred stock of Banco Popular (Note 7) 192 385
-----------------------------------------------------------------------------------------------------------------------
NET INCOME $ 34,061 $ 31,677 $ 67,802 $ 60,406
=======================================================================================================================
NET INCOME APPLICABLE TO COMMON STOCK $ 31,973 $ 31,677 $ 63,627 $ 60,406
=======================================================================================================================
EARNINGS PER COMMON SHARE (NOTE 9): $ 0.98 $ 0.96 $ 1.94 $ 1.84
</TABLE>
The accompanying notes are an integral part of these unaudited consolidated
financial statements.
<PAGE> 5
5
BANPONCE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the six months ended
June 30,
(In thousands) 1995 1994
--------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 67,802 $ 60,406
--------------------------------------------------------------------------------------------------------------
Adjustments to reconcile net income to cash provided
by operating activities:
Depreciation and amortization of premises and equipment 21,008 18,208
Provision for loan losses 24,344 27,700
Amortization of intangibles 10,040 8,863
Gain on sale of investment securities available-for-sale (112) (272)
Loss( gain) on sale of premises and equipment 199 (792)
Gain on sale of loans (3,749) (1,800)
Amortization of premiums and accretion of discounts on investments (1,764) 5,648
Amortization of deferred loan fees and costs 1,280 1,707
Net increase in postretirement benefit obligation 4,009 2,063
Net increase in trading securities (36,183) (7,382)
Net (increase)decrease in interest receivable (12,830) 4,156
Net decrease(increase) in other assets 1,267 (7,329)
Net decrease in interest payable (1,203) (383)
Net (decrease) increase in current and deferred taxes (11,539) 4,464
Net decrease in other liabilities (494) (3,663)
--------------------------------------------------------------------------------------------------------------
Total adjustments (5,727) 51,188
--------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 62,075 111,594
--------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net decrease(increase) in money market investments 213,776 (86,859)
Purchases of investment securities held-to-maturity (10,727,840) (3,982,242)
Maturities of investment securities held-to-maturity 10,333,862 3,761,409
Purchases of investment securities available-for-sale (413,993) (228,208)
Maturities of investment securities available-for-sale 24,097
Sales of investment securities available-for-sale 152,217 329,674
Net disbursements on loans (604,324) (690,918)
Proceeds from sale of loans 177,718 56,271
Acquisition of mortgage loan portfolios (39,231) (76,700)
Decrease in loans held-for-sale 3,751
Assets acquired, net of cash (29,189) (17,557)
Acquisition of premises and equipment (27,185) (32,518)
Proceeds from sale of premises and equipment 4,155 3,542
--------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (932,186) (964,106)
--------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 412,124 252,926
Net deposits acquired 163,637
Net (decrease)increase in federal funds purchased and
securities sold under agreements to repurchase (93,906) 399,959
Net increase in other short-term borrowings 177,132 54,107
Proceeds from issuance of notes payable 306,757 104,702
Payments of notes payable (107,505) (5)
Dividends paid (20,601) (16,372)
Proceeds from issuance of common stock 1,577 1,562
Proceeds from issuance of preferred stock 96,690
Redemption of preferred stock (11,000)
--------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 839,215 882,569
Net (decrease) increase in cash and due from banks (30,896) 30,057
Cash and due from banks at beginning of period 442,316 368,837
--------------------------------------------------------------------------------------------------------------
Cash and due from banks at end of period $ 411,420 $ 398,894
==============================================================================================================
</TABLE>
The accompanying notes are an integral part of these unaudited consolidated
financial statements.
<PAGE> 6
6
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share information)
NOTE 1- CONSOLIDATION
The consolidated financial statements of BanPonce Corporation include the
balance sheet of the Corporation and its wholly-owned subsidiaries, Velco, BP
Capital Markets, Popular International Bank, Inc. and its wholly-owned
subsidiaries BanPonce Financial Corp., Banco Popular, FSB, and Pioneer Bancorp,
Inc. (second tier subsidiaries), Equity One, Inc., and Banco Popular de Puerto
Rico and its wholly-owned subsidiaries, Popular Leasing and Rental, Inc.,
Popular Consumer Services, Inc. and Popular Mortgage, Inc., as of June 30, 1995
and December 31, 1994, and their related statements of income and cash flows
for the six-months ended June 30, 1995 and 1994.
These statements are, in the opinion of management, a fair statement of the
results of the periods presented. These results are unaudited, but include all
necessary adjustments for a fair presentation of such results.
NOTE 2- ACCOUNTING CHANGES
Effective January 1, 1995 the Corporation adopted the Statement of Financial
Accounting Standards (SFAS) 114, "Accounting by Creditors for Impairment of a
Loan" as amended by SFAS 118, "Accounting by Creditors for Impairment of a Loan
- Income Recognition and Disclosures." SFAS 114, which defines impaired loans,
requires creditor, to set up a valuation allowance with a corresponding charge
to the provision for loan losses for loans considered to be impaired. The loan
impairment is measured based on the present value of expected future cash flows
discounted at the loan's effective rate, on the loan observable market price,
or the fair value of the collateral if the loan is collateral dependent. The
Corporation had $89,208 in loans considered impaired which required an
allowance of $20,670 as of June 30, 1995. For the first six months of 1995, no
increase in the provision for loan losses was necessary as a result of the
impairment measurement. As allowed by SFAS 118, the Corporation continued using
current practices of recognizing income on impaired loans.
During the first quarter of 1994 the Corporation adopted SFAS 115 "Accounting
for Certain Investments in Debt and Equity Securities." SFAS 115 requires
financial institutions to divide their securities holdings among three
categories: held-to-maturity, available-for-sale and trading securities. Those
securities which management has the positive intent and ability to hold to
maturity will be classified as held-to-maturity and will be carried at cost.
Those that are bought and held principally for the purpose of selling them in
the near term, will be classified as trading and will continue to be reported
at fair value with unrealized gains and losses included in earnings. All other
securities will be classified as available-for-sale and will be reported at
fair value with unrealized gains and losses excluded from earnings and reported
as a separate component of shareholders' equity. As a result of the adoption of
this statement, the Corporation's stockholders' equity at June 30, 1995
includes unrealized holding gains on securities available-for-sale of $4,262,
net of deferred taxes, as compared with $6,635 in unrealized losses at June
30, 1994.
<PAGE> 7
7
NOTE 3 - INVESTMENT SECURITIES
The maturities as of June 30, 1995 and market value for the following
investment securities are :
Investment securities held-to-maturity:
<TABLE>
<CAPTION>
June 30,
1995 1994
Book Value Market Value Book Value Market Value
-------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury (average maturity of
1 year) $2,318,157 $2,324,459 $2,074,308 $2,057,542
Obligations of other U.S. Government
agencies and corporations (average
maturity of 1 year and 9 months) 247,333 245,097 539,333 535,486
Obligations of Puerto Rico, States and
political subdivisions (average
maturity of 3 years and 2 months) 215,185 219,866 250,499 254,603
Collateralized mortgage obligations (average
maturity of 1 year and 8 months) 409,640 404,225 446,770 462,028
Mortgage-backed securities (average
maturity of 4 years and 7 months) 138,618 137,731 174,301 139,361
Others (average maturity of 7years
and 1 month) 55,760 55,795 54,688 54,789
-------------------------------------------------------------
$3,384,693 $3,387,173 $3,539,899 $3,503,809
=============================================================
Investment securities available-for-sale:
<CAPTION>
June 30,
1995 1994
Amortized Cost Market Value Amortized Cost Market Value
----------------------------------------------------------------
U.S. Treasury (average maturity
of 1 years and 11 months) $ 678,002 $ 679,583 $557,115 $549,945
Obligations of other U.S. Government
agencies and corporations (average
maturity of 1 year and 6 months) 150,135 151,110 56,261 56,647
Obligations of Puerto Rico, States and
political subdivisions (average maturity
of 2 years and 11 months) 31,154 31,201 26,916 26,916
Collateralized mortgage obligations (average
maturity of 2 years and 10 months) 41,953 41,826 48,967 48,849
Mortgage-backed securities (average
maturity of 6 years and 4 months) 215,082 214,722 29,937 29,326
Others (average maturity of 9 months) 63,464 67,850 12,953 12,953
----------------------------------------------------------------
$1,179,790 $1,186,292 $732,149 $724,636
================================================================
</TABLE>
NOTE 4- PLEDGED ASSETS
Securities and insured mortgage loans of the Corporation of $2,523,419 (1994 -
$2,373,775) are pledged to secure public and trust deposits and securities and
mortgages sold under repurchase agreements.
NOTE 5- COMMITMENTS
In the normal course of business there are letters of credit outstanding and
stand-by letters of credit which at June 30, 1995 amounted to $21,982 and
$74,487, respectively. There are
<PAGE> 8
8
also outstanding other commitments and contingent liabilities, such as
guarantees and commitments to extend credit, which are not reflected in the
accompanying unaudited consolidated financial statements. No losses are
anticipated as a result of these transactions.
NOTE 6- SUBORDINATED NOTES
Subordinated notes consist of the following:
<TABLE>
<S> <C>
8.875% Fixed Rate Notes series A, due in 1996 $15,000
8.6875% Fixed Rate Notes series B, due in 1996 15,000
Floating Rate Notes series A with interest
payable at 88% of LIBID rate, due in 1996 19,000
Floating Rate Notes series B with interest
payable at 86% of LIBID rate, due in 1996 1,000
-------
$50,000
-------
</TABLE>
NOTE 7- PREFERRED STOCK OF BANCO POPULAR
Banco Popular has 200,000 shares of authorized preferred stock with a par
value of $100. Of these, 110,000 were issued and outstanding until June 30,
1994, when the shares were redeemed at par value.
NOTE 8- STOCKHOLDERS' EQUITY
Authorized common stock is 90,000,000 shares with a par value of $6 per share
of which 32,893,968 are issued and outstanding at June 30, 1995. On June 27,
1994, the Corporation issued 4,000,000 shares of non-cumulative preferred stock
with a dividend rate of 8.35% and a liquidation preference value of $25 per
share. Authorized preferred stock is 10,000,000 shares without par value.
NOTE 9- EARNINGS PER COMMON SHARE
Earnings per common share (EPS) are calculated based on net income applicable
to common stockholders which amounted to $63,627 and $60,406 for the six months
ended June 30, 1995 and 1994, respectively, after deducting the dividends on
preferred stock. EPS are based on 32,880,371 and 32,770,562 average shares
outstanding during the first six months of 1995 and 1994, respectively.
NOTE 10 - SUPPLEMENTAL DISCLOSURE ON THE CONSOLIDATED STATEMENTS OF CASH FLOWS
During the six-months period ended June 30, 1995, the Corporation paid interest
and income taxes amounting to $233,396 and $28,750, respectively, (1994 -
$156,701 and $14,849). In addition, the loans receivable transferred to other
real estate and other property for the period ended June 30, 1995, amounted to
$1,843 and $4,084, respectively (1994 - $931 and $1,414). The Corporation's
stockholders' equity at June 30 1995 includes $4,262, in unrealized holding
losses on securities available-for-sale, net of deferred taxes, as compared
with unrealized losses of $6,635 at June 30, 1994.
<PAGE> 9
9
NOTE 11- POPULAR INTERNATIONAL BANK, INC. (A WHOLLY-OWNED SUBSIDIARY OF
BANPONCE (CORPORATION) FINANCIAL INFORMATION:
The following summarized financial information presents the unaudited
consolidated financial position of Popular International Bank, Inc. and its
wholly-owned subsidiaries BanPonce Financial Corp., Banco Popular, FSB and
Pioneer Bancorp, Inc. (second tier subsidiaries) as of June 30, 1995 and 1994,
and the results of their operations for the semesters ended June 30, 1995 and
1994.
POPULAR INTERNATIONAL BANK, INC.
STATEMENT OF CONDITION
(In thousands)
<TABLE>
<CAPTION>
June 30,
---------
1995 1994
---- ----
<S> <C> <C>
Assets:
Cash $ 30,400 $ 19,506
Money market investments 29,954 12,642
Investment securities 299,104 104,882
---------- --------
Loans 995,947 710,291
Less: Unearned income 38,636 27,500
Allowance for loan losses 14,091 10,708
---------- --------
943,220 672,083
Other assets, consisting principally of
intangible assets, including goodwill, net 63,948 34,407
---------- --------
Total assets $1,366,626 $843,520
========== ========
Liabilities and Stockholder's Equity:
Deposits $ 520,203 $293,055
Short-term borrowings 104,860 148,110
Notes payable 579,214 318,906
Other liabilities 35,395 21,676
Stockholder's equity 126,954 61,773
---------- --------
Total liabilities and stockholder's equity $1,366,626 $843,520
========== ========
</TABLE>
<PAGE> 10
10
POPULAR INTERNATIONAL BANK, INC.
STATEMENT OF INCOME
(In thousands)
<TABLE>
<CAPTION>
Quarter ended For the semester ended
June 30, June 30,
1995 1994 1995 1994
--------------------- ----------------------
<S> <C> <C> <C> <C>
Income:
Interest and fees $29,502 $18,128 $55,453 $28,987
Other service fees 2,857 1,813 5,756 3,208
------- ------- ------- -------
Total income 32,359 19,941 61,209 32,195
------- ------- ------- -------
Expenses:
Interest expense 16,717 8,813 31,342 14,094
Provision for loan losses 1,900 1,749 3,454 3,120
Operating expenses 9,115 6,087 17,159 9,346
------- ------- ------- -------
Total expenses 27,732 16,649 51,955 26,560
------- ------- ------- -------
Income before income tax 4,627 3,292 9,254 5,635
Income tax 1,912 1,319 3,798 2,298
------- ------- ------- -------
Net income $ 2,715 $ 1,973 $ 5,456 $ 3,337
======= ======= ======= =======
</TABLE>
<PAGE> 11
11
NOTE 12 - BANPONCE FINANCIAL CORP. (A SECOND TIER SUBSIDIARY OF BANPONCE
CORPORATION) FINANCIAL INFORMATION:
The following summarized financial information presents the unaudited
consolidated financial position of BanPonce Financial Corp. and its
wholly-owned subsidiaries Banco Popular, FSB and Pioneer Bancorp Inc., as of
June 30, 1995 and 1994, and the results of their operations for the semesters
ended June 30, 1995 and 1994.
BANPONCE FINANCIAL CORP.
STATEMENT OF CONDITION
(In thousands)
<TABLE>
<CAPTION>
June 30,
--------
1995 1994
---- ----
<S> <C> <C>
Assets:
Cash $ 30,390 $ 19,470
Money market investments 28,883 11,642
Investment securities 299,104 104,882
---------- --------
Loans 995,947 710,291
Less: Unearned income 38,636 27,500
Allowance for loan losses 14,091 10,708
---------- --------
943,220 672,083
Other assets, consisting principally of
intangible assets, including goodwill, net 63,939 34,383
---------- --------
Total Assets $1,365,536 $842,460
========== ========
Liabilities and Stockholder's Equity:
Deposits $ 520,203 $293,055
Other short-term borrowings 104,860 148,110
Notes payable 579,214 318,906
Other liabilities 35,383 21,677
Stockholder's equity 125,876 60,712
---------- --------
Total Liabilities and Stockholder's Equity $1,365,536 $842,460
========== ========
</TABLE>
<PAGE> 12
12
BANPONCE FINANCIAL CORP.
STATEMENT OF INCOME
(In thousands)
<TABLE>
<CAPTION>
Quarter ended For the semester ended
June 30, June 30,
1995 1994 1995 1994
------------------- ----------------------
<S> <C> <C> <C> <C>
Income:
Interest and fees $29,486 $18,119 $55,424 $28,970
Other service fees 2,857 1,814 5,756 3,208
------- ------- ------- -------
Total income 32,343 19,933 61,180 32,178
------- ------- ------- -------
Expenses:
Interest expense 16,717 8,813 31,342 14,094
Provision for loan losses 1,900 1,749 3,454 3,120
Operating expenses 9,089 6,098 17,109 9,324
------- ------- ------- -------
Total expenses 27,706 16,660 51,905 26,538
------- ------- ------- -------
Income before income tax 4,637 3,273 9,275 5,640
Income tax 1,912 1,319 3,798 2,298
------- ------- ------- -------
Net income $ 2,725 $ 1,954 $ 5,477 $ 3,342
======= ======= ======= =======
</TABLE>
<PAGE> 13
13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
This financial review contains an analysis of the performance of BanPonce
Corporation (the Corporation) and its wholly-owned subsidiaries:
- Banco Popular de Puerto Rico (Banco Popular), including its
wholly-owned subsidiaries Popular Leasing and Rental, Inc. (Popular
Leasing), Popular Consumer Services, Inc. and Popular Mortgage, Inc.
(Popular Mortgage).
- Vehicle Equipment Leasing Company (VELCO).
- Popular International Bank, Inc. and its wholly-owned subsidiary
BanPonce Financial Corp. (BanPonce Financial), including Pioneer
Bancorp, Inc. (Pioneer) and Banco Popular, FSB, second tier
subsidiaries, and Equity One, Inc. (Equity One).
- BP Capital Markets, Inc. (BP Capital).
The Corporation continues with its geographic and business diversification
strategy, completing several acquisitions during this year. On April 30, 1995
the Corporation acquired the operations of CS First Boston, Puerto Rico Inc.,
which accelerates the expansion into the financial services industry. CS First
Boston Puerto Rico, Inc., now operating under the name of BP Capital Markets,
is a well-established investment banking firm that has provided general
investment banking services to the public and private sectors for over 50 years
to the Puerto Rico market. Popular Mortgage was incorporated to acquire $123
million in assets from Puerto Rico Home Mortgage on March 31, 1995. In
addition, in January 1995, Banco Popular, FSB, a new subsidiary, acquired from
the Resolution Trust Corporation four branches of the former Carteret Federal
Savings Bank in New Jersey, with deposits of approximately $182 million.
This financial review should be read in conjunction with the consolidated
financial statements, supplemental financial data and tables contained herein.
NET INCOME
The Corporation reported net income of $34.1 million for the second quarter of
1995, compared with $31.7 million for the same quarter of 1994, an increase of
$2.4 million or 7.5%. Earnings per common share (EPS) for the quarter were
$0.98, based on 32,893,968 average shares outstanding, compared with EPS of
$0.96 for the second quarter of 1994, based on 32,784,747 average shares
outstanding. The Corporation's return on assets (ROA) and return on common
equity (ROE) for the quarter ended June 30, 1995 were 1.00% and 13.47%,
respectively, compared with 1.03% and 14.59% reported for the second quarter of
1994.
The increase in net income for the quarter ended on June 30, 1995, when
compared with the same quarter last year, resulted from a rise of $6.5 million
in net interest income, an increase of $6.0 million in other operating
revenues, a decrease of $1.4 million in the provision for loan losses and a
decrease of $0.6 million in the income tax expense. These improvements were
partially offset by an increase of $12.3 million in operating expenses.
For the first six months of 1995, the Corporation's net earnings rose to $67.8
million, compared with $60.4 million reported for the same period of 1994. EPS
for the six-month period ended June 30, 1995 were $1.94, based on 32,880,371
average shares outstanding, compared with $1.84 per
<PAGE> 14
14
common share, based on 32,770,562 average shares outstanding during the first
six months of 1994.
ROA and ROE for the first six months of 1995 were 1.03% and 13.71%,
respectively, compared with 1.02% and 14.19% obtained during the first six
months of 1994.
NET INTEREST INCOME
Net interest income for the quarter ended June 30, 1995 increased to $142.1
million or 4.8% higher than the $135.6 million reported in the same quarter of
1994. On a taxable equivalent basis, net interest income rose to $152.7 million
for the second quarter of 1995, from $146.9 million reported for the same
quarter of 1994. This rise is the net effect of a $17.1 million increase due to
a higher volume of average earning assets and an $11.3 million decrease due to
a lower net interest yield on a taxable equivalent basis. For analytical
purposes, the interest earned on tax exempt assets is adjusted to a taxable
equivalent basis assuming the applicable statutory income tax rates.
Average earning assets increased $1.4 billion, reaching $12.8 billion for the
second quarter of 1995 compared with $11.4 billion for the same quarter of
1994. This increase relates primarily to higher average balances of commercial
(including construction), mortgage and consumer loans which increased $412
million, $407 million and $230 million, respectively.
The increase in average commercial loans was principally achieved at Banco
Popular having grown $388.8 million. The rise in average mortgage loans was
experienced principally at Banco Popular and Equity One, with increases of
$192.7 million and $161.8 million, respectively. The increase in average
consumer loans relates mostly to home equity and auto loans originated in Banco
Popular and loans granted by Equity One. The leasing subsidiaries had an
increase in their average portfolios of $83 million when compared with the
second quarter of 1994.
The average yield on earning assets, on a taxable equivalent basis, for the
second quarter of 1995 rose 64 basis points reaching 8.72%, compared with 8.08%
for the second quarter of 1994. The average yield on loans, on a taxable
equivalent basis, was 9.99% for the second quarter of 1995 compared with 9.43%
reported for the same quarter in 1994. The rise in the yield of commercial
loans was the principal contributor to this increase. The yield of the
commercial loan portfolio, on a taxable equivalent basis, for the second
quarter of 1995 was 9.17% or 94 basis points higher than the 8.23% reported for
the second quarter of 1994. This rise is directly related to the repricing and
origination of commercial loans during a rising interest rate scenario in which
the prime rate increased since the first quarter of 1994.
Mortgage loans also experienced an increase of 30 basis points in their taxable
equivalent yield. The yield of the leasing portfolio increased from 11.32% for
the three-month period ended June 30, 1994 to 12.46% for the same period of
1995. The average yield on consumer loans also increased 29 basis points, from
12.02% in the second quarter of 1994 to 12.31% in 1995. The yield on investment
securities, on a taxable equivalent basis, increased to 6.61% from 6.01%
reported for the second quarter of 1994. This increase is also related to the
reinvestment of the proceeds from securities maturing in 1994 and 1995 in a
higher interest rate environment.
On the liability side, average interest bearing liabilities for the quarter
ended June 30,1995 were $10.6 billion compared with $9.4 billion for the same
quarter in 1994. The increase was the result of a higher volume of deposits,
short-term borrowings and long-term debt.
<PAGE> 15
15
Average interest bearing deposits increased $577 million to $7.8 billion, from
an average balance of $7.2 billion for the quarter ended June 30, 1994. This
increase was mainly due to a rise of $695 million in average certificates of
deposit which have been more attractive to customers during the higher interest
rate environment that prevailed earlier in the year. Banco Popular and Banco
Popular, FSB contributed with approximately $363 million and $177 million,
respectively, of the total increase in average interest bearing deposits.
Average savings accounts rose $47 million, while average NOW and money market
deposits showed a decrease of $105 million. The latter results mainly from the
migration of funds from these accounts to certificates of deposit. The average
cost of interest bearing deposits for the second quarter of 1995 was 4.36%
compared with 3.38% for the same period in 1994. The increase is mainly the
result of a rise of 140 basis points on the average cost of certificates of
deposit as a result of the higher interest rate scenario.
The rise in average short-term borrowings relates primarily to the borrowings
of BP Capital, acquired in April. The average cost of short-term borrowings
increased to 5.53% from 3.77% reported for the quarter ended June 30, 1994. Due
to the short maturity of these instruments, these rates have almost the same
volatility as the market interest rates may have. The federal funds rate rose
from 4.25% at June 1994 to 6.00%, for a 175 basis points increase. In early
July 1995 the Federal Reserve Bank lowered the rate to 5.75%. The average cost
of long-term debt also increased in 1995 reaching 7.51% compared with 6.00% for
the same quarter of 1994. The higher volume of this debt is due to additional
medium-term notes issued by BanPonce Financial and the Corporation to finance
the growth in operations of their subsidiaries.
The average cost of interest bearing liabilities increased 122 basis points,
from 3.58% reported for the second quarter of 1994 to 4.80% for the same period
in 1995. The total cost of funding earning assets rose to 3.95% from 2.95%
reported for the second quarter of 1994. The net interest yield, on a taxable
equivalent basis, decreased to 4.77% from 5.13% reported in the second quarter
of 1994.
For the six-month period ended June 30,1995, net interest income amounted to
$279.6 million, an increase of $18.3 million from the $261.3 million reported
for the same period in 1994. On a taxable equivalent basis, net interest income
rose to $299.8 million for the six-month period, from $284.2 million for the
same period in 1994. This rise is composed of a $36.5 million increase due to
the growth and change in the composition of average earning assets partially
offset with a $20.9 million decrease due to a lower net interest yield on a
taxable equivalent basis.
<PAGE> 16
16
Table A summarizes the results previously explained.
TABLE A
NET INTEREST INCOME (TAXABLE EQUIVALENT BASIS)
<TABLE>
<CAPTION>
(Dollars in millions) First Six Months
-----------------------------------------------------------------------------------
1995 Average 1994 Average
--------------------------------------------------
Balance Rate Balance Rate
--------------------------------------------------
<S> <C> <C> <C> <C>
Earning assets $12,443 8.67% $11,131 7.95%
======= =======
Financed by:
Interest
bearing funds $10,213 4.69% 9,149 3.45%
Non-interest
bearing funds 2,230 1,982
------- -------
TOTAL $12,443 3.85% $11,131 2.84%
======= =======
Net interest income
per books $ 279.6 $ 261.3
Taxable equivalent
adjustment 20.2 22.9
------- -------
Net interest income on a
taxable equivalent basis
$ 299.8 $ 284.2
======= =======
Spread 3.98% 4.50%
Net interest yield 4.82% 5.11%
</TABLE>
As presented on Table A, the yield on earning assets, on a taxable equivalent
basis, increased 72 basis points, from 7.95% for the first half of 1994 to
8.67% for the same period in 1995. The Corporation's average cost of interest
bearing liabilities for the six-month periods ended June 30, 1995 and 1994 was
4.69% and 3.45%, respectively. The net interest yield, on a taxable equivalent
basis, was 4.82% for the first six months of 1995 compared with 5.11% for the
same period in 1994.
PROVISION AND ALLOWANCE FOR LOAN LOSSES
The provision for loan losses for the quarter ended June 30, 1995 decreased to
$12.6 million compared with $14 million for the same period in 1994. For the
first quarter of 1995, the provision for loan losses amounted to $11.7 million.
For the six-month period ended June 30, 1995, the provision for loan losses
decreased $3.4 million to $24.3 million, from $27.7 million for the same period
of 1994. This decline is mostly related to the strength of the Corporation's
allowance for loan losses and the significant share of real estate and other
secured loans in the recently originated loans.
As Table B shows, net charge-offs for the second quarter of 1995 totaled $11.4
million or 0.56%
<PAGE> 17
17
of average loans, as compared with $8.6 million or 0.49% for the same quarter
in 1994 and $8 million or 0.41% for the first quarter of 1995. Commercial loans
net charge-offs reflected a rise of $1.9 million during the second quarter of
1995 totaling $7 mllion, compared with $5.1 million a year ago and $4.1 million
for the first quarter of 1995. Consumer loans net charge-offs increased $1.2
million for the quarter ended June 30, 1995, from $2.3 million for the second
quarter of 1994 to $3.5 million. Mortgage loans net charge-offs increased
slightly to $0.3 million for the quarter ended June 30, 1995 from $0.2 million
for the same period in 1994. Lease financing and construction loans net
charge-offs showed decreases of $0.1 million and $0.3 million, respectively, as
compared with the same period of 1994.
TABLE B
<TABLE>
<CAPTION>
Provision for Net Allowance for
Quarter Ended Loan Losses Charge-offs Loan Losses
------------- -------------- ----------- ------------
(In millions)
<S> <C> <C> <C>
June 30, 1995 $12.6 $11.4 $158.7
March 31, 1995 11.7 8.0 157.5
December 31, 1994 12.5 8.2 153.8
September 30, 1994 13.5 10.5 149.4
June 30, 1994 14.0 8.6 146.4
</TABLE>
For the six-month period ended June 30, 1995, net charge-offs amounted to $19.4
million, reflecting a rise of 6.7% as compared with $18.2 million recorded a
year ago. However, net charge-offs as a percentage of average loans decreased
to 0.49% from 0.54% for the six-month period ended June 30, 1994. For the same
period, commercial loans net charge-offs increased $1.1million, while consumer
and mortgage losses increased $0.9 million and $0.2 million, respectively.
Lease financing and construction loans net charge-offs reflected decreases of
$0.7 million and $0.3 million, respectively.
<PAGE> 18
18
Table C presents the movement in the allowance for loan losses and shows
selected loan loss statistics for the three and six-month periods ended June
30, 1995 and 1994.
TABLE C
ALLOWANCE FOR LOAN LOSSES AND SELECTED LOAN LOSSES STATISTICS
<TABLE>
<CAPTION>
Second Quarter First Six Months
(Dollars in thousands) 1995 1994 1995 1994
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at beginning of period $157,467 $140,949 $153,798 $133,437
Allowances purchased 3,473
Provision for loan losses 12,646 14,037 24,344 27,700
--------------------------------------------------------
170,113 154,986 178,142 164,610
--------------------------------------------------------
Losses charged to the allowance
Commercial 8,580 7,285 14,435 13,411
Construction 100 200
Lease financing 1,609 1,731 2,804 3,358
Mortgage 326 227 662 338
Consumer 7,802 6,826 14,760 14,385
--------------------------------------------------------
18,317 16,169 32,661 31,692
--------------------------------------------------------
Recoveries
Commercial 1,518 2,140 3,273 3,311
Construction 232 41 286 231
Lease financing 860 896 1,573 1,455
Mortgage 48 127
Consumer 4,280 4,524 7,994 8,503
--------------------------------------------------------
6,938 7,601 13,253 13,500
--------------------------------------------------------
Net loans charged-off 11,379 8,568 19,408 18,192
--------------------------------------------------------
Balance at end of period $158,734 $146,418 $158,734 $146,418
========================================================
Ratios:
Allowance for losses to loans 1.94% 2.03% 1.94% 2.03%
Allowance to non-performing assets 107.09 126.35 107.09 126.35
Allowance to non-performing loans 117.09 153.26 117.09 153.26
Non-performing assets to loans 1.81 1.60 1.81 1.60
Non-performing assets to total assets 1.02 0.91 1.02 0.91
Net charge-offs to average loans 0.56 0.49 0.49 0.54
Provision to net charge-offs 1.11X 1.64x 1.25X 1.52x
Net charge-offs earnings coverage 5.08 6.71 5.90 6.04
</TABLE>
At June 30, 1995, the allowance for loan losses amounted to $158.7 million,
representing 1.94% of loans, as compared with $146.4 million or 2.03% at June
30, 1994. At March 31, 1995, the allowance was $157.5 million or 1.97% of
loans. Although the ratio of allowance to loans shows a slight decrease, the
Corporation continues enjoying a strong allowance position since a significant
portion of the increase in loans has been attained in mortgage and other
secured loans where the Corporation historically has not experienced
significant losses.
Effective January 1, 1995 the Corporation adopted the Statement of Financial
Accounting Standards (SFAS) 114, "Accounting by Creditors for Impairment of a
Loan", as amended by SFAS 118, "Accounting by Creditors for Impairment of a
Loan - Income Recognition and Disclosures." SFAS 114 which defines impaired
loans, requires creditors to set up a valuation allowance with a corresponding
charge to the provision for loan losses for loans considered to be impaired.
The loan impairment is measured based on the present value of expected future
cash flows discounted at the loan's effective rate, on the loan's observable
market price, or the fair value of the collateral if the loan is collateral
dependent. The Corporation had $89.2 million in loans considered impaired which
required an allowance of $20.7 million as of June 30, 1995. For the first and
second quarters of
<PAGE> 19
19
1995, no increase in the provision for loan losses was necessary as a result of
the impairment measurement. As allowed by SFAS 118, the Corporation continued
using current practices of recognizing income on impaired loans.
CREDIT QUALITY
Non-performing assets consist of past-due loans on which no interest income is
being accrued, renegotiated loans and other real estate. The Corporation
reports its non-performing assets on a more conservative basis than most U.S.
banks. The Corporation's policy is to place commercial loans on non-accrual
status when payments of principal or interest are delinquent 60 days rather
than the standard industry practice of 90 days. Lease financing, conventional
mortgage and closed-end consumer loans are placed on non-accrual status when
payments are delinquent 90 days. Closed-end consumer loans are charged-off
against the allowance when delinquent 120 days. Open-end (revolving credit)
consumer loans are charged-off when payments are delinquent 180 days. Certain
loans which would be treated as non-accrual loans pursuant to the foregoing
policy, are treated as accruing loans when they are considered well secured and
in the process of collection. Under the standard industry practice, closed-end
consumer loans are charged-off when delinquent 120 days, but these consumer
loans are not customarily placed on non-accrual status prior to being
charged-off.
As of June 30, 1995, non-performing assets (NPA) amounted to $148.2 million or
1.81% of loans, compared with $115.9 million or 1.60% at June 30, 1994. NPA
were $124.1 million or 1.55% of loans at March 31, 1995.
Non-performing loans amounted to $135.6 million at the end of the second
quarter of 1995 compared with $95.5 million as of June 30, 1994. These loans
amounted to $113.0 million as of March 31, 1995. Most of the increase was
reflected in non-performing commercial and construction loans which increased
$32.3 million. During this quarter a major loan was classified as a
non-performing loan, accounting for more than 30% of the increase in
non-performing commercial loans. At June 30, 1995 the Corporation had over
50,000 commercial lending relationships and only 30 of these relationships had
loans outstanding over $10 million. Other reasons for the rise in
non-performing loans were the growth in the commercial and construction
portfolios which increased $331.2 million or 11.6% as compared with June 30,
1994 and the adoption, as previously mentioned, of SFAS 114. This statement
requires that a loan for which foreclosure of collateral is probable should
continue to be accounted for as a loan and not as an in-substance foreclosed
asset. Based on this requirement the Corporation reclassified $3.5 million of
in-substance foreclosed assets to non-performing commercial loans. In addition,
non-performing mortgage loans increased $8.0 million, partially offset by a
reduction of $0.3 million in non-performing lease financing. Non-performing
consumer loans remained steady as compared with prior year, despite an increase
of 11% in the loan portfolio. The increase in non-performing mortgage loans was
mainly due to the growth in the portfolio, attained primarily at Banco Popular
and Equity One. Renegotiated loans decreased $5.5 million, from $8.4 million
at June 30, 1994 to $2.9 million at the end of the second quarter of 1995.
Other real estate decreased $2.2 million mainly due to the reclassification of
in-substance foreclosed assets mentioned above. Table D presents NPA for the
current and previous four quarters.
<PAGE> 20
20
TABLE D
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------
NPA Allowance
as a % as a %
Date NPA of Loans of NPA
-----------------------------------------------------------------------------
(Dollars in millions)
<S> <C> <C> <C>
June 30, 1995 $148.2 1.81% 107.1%
March 31, 1995 124.1 1.55% 126.9%
December 31, 1994 107.6 1.38 142.9
September 30, 1994 142.9 1.57 126.7
June 30, 1994 115.9 1.60 126.4
</TABLE>
Assuming the standard industry practice of placing commercial loans on
non-accrual status when payments are past due 90 days or more and excluding the
closed-end consumer loans from non-accruing loans, non-performing assets as of
June 30, 1995, amounted to $107.7 million or 1.31% of loans, and the allowance
for loan losses would be 147.39% of non-performing assets. At June 30, 1994 and
March 31, 1995 adjusted non-performing assets would have been $83.3 million or
1.15% of loans and $95.0 million or 1.19% of loans, respectively.
Accruing loans that are contractually past-due 90 days or more as to principal
or interest as of June 30, 1995, amounted to $12.8 million as compared with
$13.2 million at June 30, 1994, and $9.5 million at March 31, 1995.
OTHER OPERATING INCOME
Other operating income, including securities and trading gains, rose to $40.4
million for the second quarter of 1995 from $34.4 million reported for the same
period in 1994. For the first quarter of 1995 these revenues totaled $37.6
million. For the six-month periods ended June 30, 1995 and 1994, these
revenues were $77.9 million and $67.5 million, respectively.
Service charges on deposit accounts, which represented 48.4% of other operating
income, amounted to $19.6 million for the second quarter of 1995, an increase
of $1.5 million or 8.3% when compared with $18.1 million reported for the
second quarter of 1994. This increase is principally attributed to revisions
made to the fee structure and higher activity on commercial accounts, the
growth in the customer base due to the introduction of new products and
services and higher fees collected on returned checks. For the six-month period
ended June 30, 1995, service charges on deposit accounts totaled $37.6 million,
increasing $2.4 million from the $35.2 million reported for the same period in
1994.
Other service fees accounted for the largest portion of the increase in other
operating income, rising $3.1 million to $15.6 million for the second quarter
of 1995 from $12.5 million for the same period in 1994, primarily due to higher
mortgage servicing fees in Banco Popular. The increase in mortgage servicing
fees resulted mainly from the acquisition of a $1.8 billion servicing portfolio
of Puerto Rico Home Mortgage on March 31, 1995. At June 30, 1995, the servicing
portfolio of Banco Popular reached approximately $3.5 billion making it the
largest servicing portfolio on the Island. Other factors such as the rise in
credit card fees, credit life insurance fees, and other fees collected on the
growing volume of transactions at point-of-sale (POS) terminals and other
electronic transactions also contributed to the increase. Furthermore, Banco
Popular and BP Capital realized additional revenues on the sale of $62 million
in shares of the second Puerto Rico Investors Tax Free Fund during May. For
the first six months of 1995, other service fees amounted to $29.4 million
compared with $23.4 million for the same period last year.
<PAGE> 21
21
Other operating income rose $1.1 million reaching $4.8 million for the second
quarter of 1995, compared with $3.7 million for the second quarter of 1994.
This growth resulted mainly from the sale of most of the student loan portfolio
of Banco Popular and higher gains realized on the sale of mortgage loans by
Equity One and Banco Popular. For the six-month periods ended June 30, 1995 and
1994, other operating revenues were $10.5 million and $8.3 million,
respectively.
The gains on sale of securities and trading transactions for the quarter ended
June 30, 1995 amounted to $0.4 million compared with $0.2 million for the same
period of 1994.
OPERATING EXPENSES
Operating expenses for the second quarter of 1995 were $124.7 million compared
with $112.4 million for the same quarter in 1994, an increase of $12.3 million.
For the first six months of 1995, operating expenses increased to $243.0
million from $219.0 million for the same period in 1994.
Personnel costs, the principal component of operating expenses, totaled $64.3
million for the second quarter of 1995, increasing $7.4 million from $56.9
million for the same period of 1994. For the six-month period ended June 30,
1995, these expenses were $124.7 million compared with $112.2 million for the
same period of 1994. Salaries increased $2.8 million or 7.1% to $42.7 million
for the quarter ended June 30, 1995, compared with $39.9 million for the same
period in 1994. This increase is basically due to annual merit increases and
the salaries of the Corporation's new subsidiaries Banco Popular, FSB, BP
Capital and Popular Mortgage. In addition, profit sharing expense rose $0.9
million due to the improvement in Banco Popular's profitability ratios.
Pension and other benefits totaled $15.1 million for the second quarter of
1995, an increase of $3.7 million from $11.4 million reported for the second
quarter of 1994. Most of the increase was experienced in Banco Popular, as a
result of the implementation of a voluntary early retirement plan for employees
meeting certain eligibility requirements, which had a total cost of $1.9
million for this quarter. This plan was available until May 1, 1995 and had a
total cost for the Corporation of $4.6 million for the six-month period.
Moreover during this quarter, Banco Popular implemented a 401(k) savings plan
covering substantially all its regular employees, which resulted in additional
costs of approximately $0.2 million. Medical plan, pension costs and
postretirement benefits also reflected increases for the quarter ended June 30,
1995 compared with the same quarter last year. The increase in pension costs
and postretirement benefits is related to changes in various actuarial
assumptions and changes in the demographic data composition of plan
participants.
Other operating expenses, excluding personnel costs, increased $4.8 million,
reaching $60.4 million for the quarter ended June 30, 1995, compared with $55.6
million for the same quarter in 1994. Occupancy expense reflected the major
increase as a result of the Corporation's growth and expansion costs.
Meanwhile, the Corporation has intensified its efforts in its electronic
payment system initiative, by installing 971 additional POS terminals during
this quarter compared with 499 during the second quarter of 1994. This resulted
in higher equipment and communication expenses. Business promotion also
increased as a result of the development of new products and services and the
promotion of the electronic payment system. In addition, the operations of
Banco Popular, FSB, Popular Mortgage and BP Capital accounted for $1.7 million
of other operating expenses for this quarter. For the six-month period ended
June 30, 1995, other operating expenses reached $118.3 million from $106.8
million reported for the same period in 1994.
The income tax expense for the quarter ended June 30, 1995 amounted to $11.0
million, a decrease of $0.6 million compared with $11.6 million recorded for
the same quarter of 1994. The decrease
<PAGE> 22
22
results mainly from the reversal of a deferred tax liability on real property
that was distributed by Banco Popular to its parent company in the form of a
dividend. This transaction resulted in a net reduction of approximately $4
million in the income tax expense of the Corporation after considering the
additional tax for the dividend income at the parent company. Partially
offsetting this reduction were higher income before taxes and a lower share of
exempt assets this quarter compared with the same quarter last year. For the
six-month period ended June 30, 1995, income tax expense reached $22.4 million,
compared with $21.4 million reported for the same period in 1994.
BALANCE SHEET COMMENTS
At June 30, 1995, the Corporation's total assets reached $14.6 billion,
reflecting an increase of 14.3% when compared with $12.8 billion at June 30,
1994. Total assets at December 31, 1994 were also $12.8 billion. Average assets
for the first six months of 1995 were $13.3 billion compared with $12.0
billion for the same period in 1994. Average assets for the year ended December
31, 1994 were $12.2 billion.
Earning assets at June 30, 1995 amounted to $13.6 billion compared with $11.9
billion at June 30, 1994. Total loans amounted to $8.2 billion at June 30, 1995
compared with $7.2 billion a year ago. All loan categories showed increases.
Mortgage loans rose $361.8 million or 18.5% as compared with June 30, 1994
reaching $2.3 billion as of June 30, 1995. Most of the increase was in Equity
One, rising $161.9 million and in Banco Popular with a $128 million increase.
Commercial and construction loans also reflected growth, increasing from $2.9
billion at June 30, 1994 to $3.2 billion at June 30, 1995, a rise of $331.2
million or 11.6%. Consumer loans increased $216.6 million or 11.0% and the
lease financing portfolio rose $69.5 million or 16.5% as compared with June 30,
1994, reflecting the incentive programs and strong marketing efforts. Total
loans at the end of 1994 reached $7.8 billion.
Investment securities as of June 30, 1995, totaled $4.6 billion compared with
$4.3 billion as of June 30, 1994. These figures include $1.2 billion in
investment securities available-for-sale as of June 30, 1995 and $724.6 million
as of June 30, 1994. Most of the increase is related to the operations of the
new subsidiaries, Banco Popular, FSB and Popular Mortgage.
The increase of $190.1 million in the trading portfolio is related to the
acquisition of BP Capital.
Total deposits were $9.6 billion at June 30, 1995, compared with $9.1 billion
at June 30, 1994, an increase of $539 million. Most of the growth was attained
at Banco Popular. Banco Popular, FSB, also contributed to the increase with
deposits of $177.4 million at June 30, 1995. Total deposits at December 31,
1994 were $9.0 billion.
Borrowings increased $1.1 billion as compared with the prior year. This rise is
mainly due to the operation of BP Capital with $783 million in borrowings at
the end of this quarter, and an increase in medium-term notes issued by
BanPonce Financial and the Corporation to finance the growth in operations of
their subsidiaries. Subordinated notes decreased to $50 million from $62
million outstanding a year ago due to the prepayment in July 1994 of an 8.50%
note due in 1996.
Stockholders' equity at June 30, 1995, amounted to $1.1 billion, compared with
$969.8 million at June 30, 1994. The increase is mainly due to earnings
retention and the reversal from a negative position in the allowance required
by SFAS 115. The Corporation's stockholders' equity at June 30, 1995 includes
an allowance of $4.3 million, net of deferred taxes, in unrealized holding
gains on securities available-for-sale, as required by SFAS 115, compared with
unrealized holding losses of $6.6 million and $19.4 million a year ago and at
December 31, 1994, respectively.
<PAGE> 23
23
The market value of the Corporation's common stock at June 30, 1995 was $35.50,
compared with $31.25 at June 30, 1994 and $31.50 at March 31, 1995. The
Corporation's market capitalization at June 30, 1995 was $1.2 billion. Book
value per common share increased to $29.59 as of June 30, 1995, compared with
$26.53 as of the same date last year. The Corporation's Tier I, total capital
and leverage ratios at June 30, 1995 were 11.58%, 12.85% and 7.07%,
respectively, as compared with 12.66%, 14.11% and 7.43%, at June 30, 1994.
Effective March 31, 1995, a portion of the deferred tax asset of the
Corporation is disallowed in the computation of Tier I capital as required by
regulatory agencies. This new requirement does not have a material effect on
the Corporation's capital ratios which continue well above the minimum
standards established by regulatory agencies.
The Corporation's dividend payout ratio to common stockholders for the quarter
ended June 30, 1995 was 25.70%, compared with 25.85% for the same quarter last
year. On its April 1995 meeting, the Board of Directors of the Corporation
approved an increase of $0.05 per common share in the quarterly cash dividend
paid on July 3, 1995. This represents a 20% increase over the $0.25 per common
share paid in previous quarters.
<PAGE> 24
24
Part II - Other Information
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
a) Exhibit No. Description Exhibit Reference
-------------- ------------------- ---------
<S> <C> <C>
19 Quarterly Report to shareholders for the Exhibit "A"
period ended June 30, 1995
27 Financial Data Schedule (for SEC use only) Exhibit "B"
</TABLE>
b) One report on Form 8-K was filed for the quarter ended June 30, 1995:
<TABLE>
<CAPTION>
<S> <C>
Dated: April 13, 1995
Item reported: Item 5 - Other Events
Item 7 - Financial Statements and Exhibits
</TABLE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be filed on its behalf
by the undersigned duly authorized.
BANPONCE CORPORATION
--------------------
(Registrant)
Date: August 14, 1995 By: S\DAVID H. CHAFEY, JR.
--------------- --------------------------
David H. Chafey, Jr.
Executive Vice President
Date: August 14, 1995 By: S\AMILCAR L. JORDAN
--------------- --------------------------
Amilcar L. Jordan, Esq.
Senior Vice President
& Comptroller
<PAGE> 1
(LOGO) BANPONCE
CORPORATION
2
JUNE 30, 1995
<PAGE> 2
TO OUR STOCKHOLDERS
Economic activity has been showing signs of slowing down during the second
quarter of 1995. Interest rates turned downward after fifteen months of
increases, in anticipation of a reduction in the federal funds rate by the
Federal Reserve, which finally occurred in July. Notwithstanding the above,
BanPonce Corporation (the Corporation) continues to exhibit steady improvement
in its performance as the second quarter of 1995 reflects an increase in net
earnings of $2.4 million over the same quarter last year. Net income for the
quarter amounted to $34.1 million or $0.98 per common share, compared with
$31.7 million or $0.96 per common share for the second quarter of 1994. Return
on assets (ROA) and return on common equity (ROE) for the quarter were 1.00%
and 13.47%, respectively, compared with 1.03% and 14.59% for the second quarter
of 1994. The improvement in this quarter's earnings resulted from higher levels
of net interest income, particularly due to loan growth, significant growth in
other operating income and a reduction in both the provision for loan losses
and income tax expense, partially offset by higher operating expenses.
For the six-month period ended June 30, 1995, net income reached $67.8
million or $1.94 per common share, with an ROA of 1.03% and an ROE of 13.71%.
For the same period in 1994, net income was $60.4 million or $1.84 per common
share, while ROA and ROE were 1.02% and 14.19%, respectively.
Net interest income for the second quarter of 1995 rose $6.5 million or
4.8% when compared with the same period in 1994. This rise in net interest
income is attributed to a $1.4 billion growth in average earning assets,
principally commercial and mortgage loans, partially offset by a reduction of
36 basis points in the net interest yield, on a taxable equivalent basis.
The provision for loan losses decreased to $12.6 million for the second
quarter of 1995 from $14.0 million for the same period a year earlier. Net
charge-offs for the second quarter were $11.4 million or 0.56% of average
loans, an increase over the $8.6 million or 0.49% of average loans, reported
for the same quarter last year. For the six-month period ended June 30, 1995,
net charge-offs as a percentage of average loans decreased to 0.49% from 0.54%
for the same period last year.
Non-performing assets (NPA) at June 30, 1995 amounted to $148.2 million
compared with $115.9 million a year earlier and $124.1 million at March 31,
1995. As a percentage of loans, non-performing assets represented 1.81%, 1.60%
and 1.55%, for these same dates, respectively. When adjusted to conform to
standard industry practice, NPA were $107.7 million or 1.31% of total loans as
of June 30, 1995. The allowance for loan losses at June 30, 1995 amounted to
$158.7 million, representing 1.94% of loans, compared with $146.4 million or
2.03% at the same date in 1994.
Operating expenses for the three-month period ended June 30, 1995, totaled
$124.7 million compared with $112.4 million for the same quarter in 1994. The
increase is partially due to the implementation of a voluntary early retirement
plan in Banco Popular for employees meeting certain eligibility requirements,
which amounted to $1.9 million in the quarter, and the operations of the
Corporation's new subsidiaries BP Capital Markets, Banco Popular, FSB and
Popular Mortgage which accounted for $2.5 million in operating expenses. Other
factors such as annual merit increases, business expansion of the Corporation,
expenses related to the usage of technological advances and the introduction of
new products and services contributed to the total increase.
The Corporation's total assets at June 30, 1995 were $14.6 billion,
compared with $12.8 billion at the same date in 1994 and $13.1 billion as of
March 31, 1995. Total loans reached $8.2 billion while total deposits were $9.6
billion. The Corporation's capital increased to $1.1 billion at June 30, 1995,
compared with $1.0 billion a year earlier.
Book value per common share increased to $29.59 as of June 30, 1995, from
$26.53 as of the same date last year. The Corporation's common stock price was
$35.50 at the end of the quarter compared with $31.25 at June 30, 1994. Based
on 32,893,968 shares outstanding, the Corporation had a market capitalization
value of $1.2 billion at June 30, 1995. The Corporation enjoys strong capital
ratios with a Tier 1 ratio of 11.58%, a total capital ratio of 12.85% and a
leverage ratio of 7.07%.
1
<PAGE> 3
Please refer to the financial review section of this quarterly report for
a more detailed discussion of the Corporation's financial performance and
results of operations.
On its April, 1995 meeting, the Board of Directors of the Corporation
declared a cash dividend of $0.30 per common share for the third quarter of
1995. This represents a 20% increase over the $0.25 per common share paid in
previous quarters. The dividend was paid on July 3, 1995 to shareholders of
record on June 16, 1995. In addition, the provisions of the recently enacted
Puerto Rico Tax Reform Act, which reduced to 10% the tax on dividends from
Puerto Rico domestic corporations to both individuals and corporations, and
eliminated the tax withholding on interest payments to non-residents, became
effective on July 1, 1995.
As anticipated, during this quarter the Corporation completed the
acquisition of CS First Boston, Puerto Rico, Inc., with total assets of
approximately $752 million. This securities underwriter and broker/dealer
operation will enhance the Corporation's ability to provide investment banking
and financial services to the public and private sector entities and provide a
greater variety of products for our customer base.
Continuing with the Corporation's geographical expansion and efforts to
provide technology and delivery systems outside of Puerto Rico, Banco Popular
entered an agreement with Banco Popular Dominicano and other financial
institutions in the Dominican Republic to establish the infrastructure and
process ATM (automated teller machines) tranactions on that sister-island. This
agreement will drive the Corporation's electronic payment system initiative
even further, while providing additional sources of revenue to the Corporation.
The Corporation's leasing subsidiaries, Velco and Popular Leasing,
announced their plans to consolidate operations. The synergies expected with
this consolidation should improve the productivity and efficiency of the
operations, provide better service to our customers and attain significant
improvements in financial returns.
After 27 years of very active and valuable participation, Mr. Manuel Luis
del Valle retired from the Board of Directors of the Corporation upon reaching
the mandatory retirement age. Likewise, Mr. George Blasini, a director of Banco
Popular since 1991, retired from the Board of Directors upon reaching the
mandatory retirement age. We are sincerely grateful for their dedication,
valuable contributions and long-time support.
/s/ Richard L. Carrion
----------------------
Richard L. Carrion
Chairman, President and
Chief Executive Officer
2
<PAGE> 4
POST MEETING REPORT
The Annual Stockholders Meeting of BanPonce Corporation was held on April 21,
1995, at 2:00 p.m. on the seventh floor of the Popular Center Building in Hato
Rey, Puerto Rico.
Mr. Richard L. Carrion, Chairman of the Board and President of the Corporation,
presided over the meeting. The secretary of the Board, Samuel T. Cespedes,
Esq., reported that out of 32,866,623 common shares issued and outstanding as
of the record date for the meeting, March 7, 1995, a total of 29,426,348
shares, or 89.53%, were represented at the meeting, which complied with the
quorum required by law.
Mr. Carrion reported the names of the five directors nominated for re-election
until the 1998 Annual Stockholders Meeting: Luis E. Dubon, Jr., Esq., Manuel
Morales, Jr., Hector Gonzalez, Francisco M. Rexach, Jr., and Julio E.
Vizcarrondo. Following the appointment of a Ballot Committee, the voting
process began.
While the votes were being counted, the Corporation's Annual Report was
discussed and several stockholders asked questions related to it, offered their
comments and thanked the Corporation's working team, Board of Directors, Senior
Management and employees. Mr. Carrion answered the questions and offered the
corresponding explanations. Following the discussion, Mr. Carrion presented
the Corporation's financial statements and an account of a diversity of
activities held throughout the year. Mr. Carrion also informed that the Board
of Directors had approved the payment for the third quarter of a $0.30 dividend
per common share to shareholders on record as of June 16, 1995 to be paid on
July 3, 1995. Upon a motion duly made and seconded, the 1994 Annual Report was
approved.
The Ballot Committee rendered its report on the voting results for the election
of directors. All five (5) candidates were elected for a three-year term, with
favorable votes ranging from 88.12% to 89.37% of the voting shares issued and
outstanding as of the record date.
After thanking those present for their attendance and cooperation, the Chairman
adjourned the meeting.
(PHOTO)
1 Mr. Richard L. Carrion, Chairman (Center)
President and Chief Executive Officer
2 Mr. Jorge A Junquera, (Right)
Executive Vice President
3 Mr. Samuel T. Cespedes, Secretary (Left)
3
<PAGE> 5
<TABLE>
<CAPTION>
FINANCIAL REVIEW
--------------------------------------------------------------------------------------------------------------------
BALANCE SHEET HIGHLIGHTS At June 30, Average for the six months
(In thousands) 1995 1994 Change 1995 1994 Change
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Money market investments $ 629,239 $ 354,951 $ 274,288 $ 155,994 $ 166,488 ($10,494)
Investment and trading securities 4,771,512 4,274,934 496,578 4,309,888 4,255,569 54,319
Loans 8,200,328 7,221,180 979,148 7,977,472 6,708,646 1,268,826
All other assets 972,223 900,204 72,019 833,612 830,651 2,961
Total assets 14,573,302 12,751,269 1,822,033 13,276,966 11,961,354 1,315,612
Non-interest bearing liabilities 2,070,062 2,204,433 (134,371) 2,027,267 1,942,692 84,575
Interest bearing liabilities 11,430,070 9,577,001 1,853,069 10,213,462 9,149,303 1,064,159
Preferred stock of Banco Popular 10,939 (10,939)
Stockholders' equity 1,073,170 969,835 103,335 1,036,237 858,420 177,817
--------------------------------------------------------------------------------------------------------------------
OPERATING HIGHLIGHTS
(In thousands, except Second Quarter Six months
per share information) 1995 1994 Change 1995 1994 Change
--------------------------------------------------------------------------------------------------------------------
Net interest income $142,120 $135,574 $6,546 $ 279,648 $261,357 $18,291
Provision for loan losses 12,646 14,037 (1,391) 24,344 27,700 (3,356)
Fees and other income 40,372 34,407 5,965 77,925 67,531 10,394
Operating expenses 135,785 124,267 11,518 265,427 240,782 24,645
Net income $ 34,061 $ 31,677 $2,384 $ 67,802 $ 60,406 $ 7,396
Net income applicable to common
stock $ 31,973 $ 31,677 $ 296 $ 63,627 $ 60,406 $ 3,221
Earnings per common share 0.98 0.96 0.02 1.94 1.84 0.10
--------------------------------------------------------------------------------------------------------------------
SELECTED STATISTICAL Second Quarter Six months
INFORMATION 1995 1994 1995 1994
--------------------------------------------------------------------------------------------------------------------
PROFITABILITY RATIOS -Return on assets 1.00% 1.03% 1.03% 1.02%
Return on earning assets 1.07 1.11 1.10 1.09
Return on equity 13.47 14.59 13.71 14.19
Net interest spread
(taxable equivalent) 3.92 4.50 3.98 4.50
Net interest yield
(taxable equivalent) 4.77 5.13 4.82 5.11
Effective tax rate 24.52 26.72 24.82 26.01
Overhead ratio 59.35 57.57 59.04 57.97
--------------------------------------------------------------------------------------------------------------------
CAPITALIZATION RATIOS -Equity to assets 7.73% 7.08% 7.80% 7.18%
Tangible equity to assets 6.65 6.03 6.76 6.12
Equity to loans 13.01 12.52 12.99 12.80
Internal capital generation 8.42 10.78 8.80 10.26
Tier I capital to risk-
adjusted assets 11.58 12.66 11.58 12.66
Total capital to risk-
adjusted assets 12.85 14.11 12.85 14.11
Leverage ratio 7.07 7.43 7.07 7.43
--------------------------------------------------------------------------------------------------------------------
COMMON STOCK DATA -Market price
High $35.50 $32.75 $35.50 $32.75
Low 31.25 31.00 28.13 30.75
End 35.50 31.25 35.50 31.25
Book value at period end 29.59 26.53 29.59 26.53
Dividends declared 0.30 0.25 0.55 0.50
Dividend payout ratio 25.70% 25.85% 25.82% 27.10%
Price/earnings ratio 9.42x 8.75x 9.42x 8.75x
--------------------------------------------------------------------------------------------------------------------
SELECTED DATA -Common shares outstanding 32,893,968 32,784,747
Full-time equivalent employees 7,620 7,584
Branches (banking operations) 212 207
Automated teller machines 312 270
Stockholders 5,204 5,306
</TABLE>
4
<PAGE> 6
FINANCIAL REVIEW
This financial review contains an analysis of the performance of BanPonce
Corporation (the Corporation) and its wholly-owned subsidiaries:
-Banco Popular de Puerto Rico (Banco Popular), including its
wholly-owned subsidiaries Popular Leasing and Rental, Inc. (Popular
Leasing), Popular Consumer Services, Inc. and Popular Mortgage, Inc.
(Popular Mortgage).
-Vehicle Equipment Leasing Company (VELCO).
-Popular International Bank, Inc. and its wholly-owned subsidiary
BanPonce Financial Corp. (BanPonce Financial), including Pioneer
Bancorp, Inc. (Pioneer) and Banco Popular, FSB, second tier
subsidiaries, and Equity One, Inc. (Equity One).
-BP Capital Markets, Inc. (BP Capital).
The Corporation continues with its geographic and business diversification
strategy, completing several acquisitions during this year. On April 30, 1995
the Corporation acquired the operations of CS First Boston, Puerto Rico Inc.,
which accelerates the expansion into the financial services industry. CS First
Boston Puerto Rico, Inc., now operating under the name of BP Capital Markets,
is a well-established investment banking firm that has provided general
investment banking services to the public and private sectors for over 50 years
to the Puerto Rico market. Also, Popular Mortgage, was incorporated to acquire
$123 million in assets from Puerto Rico Home Mortgage on March 31, 1995. In
addition, in January 1995, Banco Popular, FSB, a new subsidiary, acquired from
the Resolution Trust Corporation four branches of the former Carteret Federal
Savings Bank in New Jersey, with deposits of approximately $182 million.
This financial review should be read in conjunction with the consolidated
financial statements, supplemental financial data and tables contained herein.
NET INCOME
The Corporation reported net income of $34.1 million for the second quarter of
1995, compared with $31.7 million for the same quarter of 1994, an increase of
$2.4 million or 7.5%. Earnings per common share (EPS) for the quarter were
$0.98, based on 32,893,968 average shares outstanding, compared with EPS of
$0.96 for the second quarter of 1994, based on 32,784,747 average shares
outstanding. The Corporation's return on assets (ROA) and return on common
equity (ROE) for the quarter ended June 30, 1995 were 1.00% and 13.47%,
respectively, compared with 1.03% and 14.59% reported for the second quarter of
1994.
The increase in net income for the quarter ended on June 30, 1995, when
compared with the same quarter last year, resulted from a rise of $6.5 million
in net interest income, an increase of $6.0 million in other operating
revenues, a decrease of $1.4 million in the provision for loan losses and a
decrease of $0.6 million in the income tax expense. These improvements were
partially offset by an increase of $12.3 million in operating expenses.
For the first six months of 1995, the Corporation's net earnings rose to
$67.8 million, compared with $60.4 million reported for the same period of
1994. EPS for the six-month period ended June 30, 1995 were $1.94, based on
32,880,371 average shares outstanding, compared with $1.84 per common share,
based on 32,770,562 average shares outstanding during the first six months of
1994.
ROA and ROE for the first six months of 1995 were 1.03% and 13.71%,
respectively, compared with 1.02% and 14.19% obtained during the first six
months of 1994.
NET INTEREST INCOME
Net interest income for the quarter ended June 30, 1995 increased to $142.1
million or 4.8% higher than the $135.6 million reported in the same quarter of
1994. On a taxable equivalent basis, net interest income rose to $152.7
million for the second quarter of 1995, from $146.9 million reported for the
same quarter of 1994. This rise is the net effect of a $17.1 million increase
due to a higher volume of average earning assets and an $11.3 million decrease
due to a lower net interest yield on a taxable equivalent basis. For analytical
purposes, the interest earned on tax exempt assets is adjusted to a taxable
equivalent basis assuming the applicable statutory income tax rates.
Average earning assets increased $1.4 billion,
5
<PAGE> 7
reaching $12.8 billion for the second quarter of 1995 compared with $11.4
billion for the same quarter of 1994. This increase relates primarily to higher
average balances of commercial (including construction), mortgage and consumer
loans which increased $412 million, $407 million and $230 million,
respectively.
The increase in average commercial loans was principally achieved at Banco
Popular having grown $388.8 million. The rise in average mortgage loans was
experienced principally at Banco Popular and Equity One, with increases of
$192.7 million and $161.8 million, respectively. The increase in average
consumer loans relates mostly to home equity and auto loans originated in Banco
Popular and loans granted by Equity One. The leasing subsidiaries had an
increase in their average portfolios of $83 million when compared with the
second quarter of 1994.
The average yield on earning assets, on a taxable equivalent basis, for the
second quarter of 1995 rose 64 basis points reaching 8.72%, compared with 8.08%
for the second quarter of 1994. The average yield on loans, on a taxable
equivalent basis, was 9.99% for the second quarter of 1995 compared with 9.43%
reported for the same quarter in 1994. The rise in the yield of commercial
loans was the principal contributor to this increase. The yield of the
commercial loan portfolio, on a taxable equivalent basis, for the second
quarter of 1995 was 9.17% or 94 basis points higher than the 8.23% reported for
the second quarter of 1994. This rise is directly related to the repricing and
origination of commercial loans during a rising interest rate scenario in which
the prime rate increased since the first quarter of 1994.
Mortgage loans also experienced an increase of 30 basis points in their
taxable equivalent yield. The yield of the leasing portfolio increased from
11.32% for the three-month period ended June 30, 1994 to 12.46% for the same
period of 1995. The average yield on consumer loans also increased 29 basis
points, from 12.02% in the second quarter of 1994 to 12.31% in 1995. The yield
on investment securities, on a taxable equivalent basis, increased to 6.61%
from 6.01% reported for the second quarter of 1994. This increase is also
related to the reinvestment of the proceeds from securities maturing in 1994
and 1995 in a higher interest rate environment.
On the liability side, average interest bearing liabilities for the quarter
ended June 30,1995 were $10.6 billion compared with $9.4 billion for the same
quarter in 1994. The increase was the result of a higher volume of deposits,
short-term borrowings and long-term debt.
Average interest bearing deposits increased $577 million to $7.8 billion,
from an average balance of $7.2 billion for the quarter ended June 30, 1994.
This increase was mainly due to a rise of $695 million in average certificates
of deposit which have been more attractive to customers during the higher
interest rate environment that prevailed earlier in the year. Banco Popular and
Banco Popular, FSB contributed with approximately $363 million and $177
million, respectively, of the total increase in average interest bearing
deposits. Average savings accounts rose $47 million, while average NOW and
money market deposits showed a decrease of $105 million. The latter results
mainly from the migration of funds from these accounts to certificates of
deposit. The average cost of interest bearing deposits for the second quarter
of 1995 was 4.36% compared with 3.38% for the same period in 1994. The increase
is mainly the result of a rise of 140 basis points on the average cost of
certificates of deposit as a result of the higher interest rate scenario.
The rise in average short-term borrowings relates primarily to the
borrowings of BP Capital, acquired in April. The average cost of short-term
borrowings increased to 5.53% from 3.77% reported for the quarter ended June
30, 1994. Due to the short maturity of these instruments, these rates have
almost the same volatility as the market interest rates may have. The federal
funds rate rose from 4.25% at June 1994 to 6.00%, for a 175 basis points
increase. In early July 1995 the Federal Reserve Bank lowered the rate to
5.75%. The average cost of long-term debt also increased in 1995 reaching 7.51%
compared with 6.00% for the same quarter of 1994. The higher volume of this
debt is due to additional medium-term notes issued by BanPonce Financial and
the Corporation to finance the growth in operations of their subsidiaries.
The average cost of interest bearing liabilities increased 122 basis
points, from 3.58% reported for
6
<PAGE> 8
the second quarter of 1994 to 4.80% for the same period in 1995. The total cost
of funding earning assets rose to 3.95% from 2.95% reported for the second
quarter of 1994. The net interest yield, on a taxable equivalent basis,
decreased to 4.77% from 5.13% reported in the second quarter of 1994.
For the six-month period ended June 30,1995, net interest income amounted
to $279.6 million, an increase of $18.3 million from the $261.3 million
reported for the same period in 1994. On a taxable equivalent basis, net
interest income rose to $299.8 million for the six-month period, from $284.2
million for the same period in 1994. This rise is composed of a $36.5 million
increase due to the growth and change in the composition of average earning
assets partially offset with a $20.9 million decrease due to a lower net
interest yield on a taxable equivalent basis.
Table A summarizes the results previously explained.
<TABLE>
<CAPTION>
Table A
--------------------------------------------------------------
NET INTEREST INCOME (TAXABLE EQUIVALENT BASIS)
--------------------------------------------------------------
(DOLLARS IN MILLIONS) FIRST SIX MONTHS
--------------------------------------------------------------
1995 AVERAGE 1994 AVERAGE
-----------------------------------------
BALANCE RATE BALANCE RATE
-----------------------------------------
<S> <C> <C> <C> <C>
Earning assets $12,443 8.67% $11,131 7.95%
======= =======
Financed by:
Interest
bearing funds $10,213 4.69% $ 9,149 3.45%
Non-interest
bearing funds 2,230 1,982
------- -------
Total $12,443 3.85% $11,131 2.84%
======= =======
Net interest income
per books $ 279.6 $ 261.3
Taxable equivalent
adjustment 20.2 22.9
------- -------
Net interest income
on a taxable
equivalent
basis $ 299.8 $ 284.2
======= =======
Spread 3.98% 4.50%
Net interest yield 4.82% 5.11%
</TABLE>
As presented on Table A, the yield on earning assets, on a taxable
equivalent basis, increased 72 basis points, from 7.95% for the first half of
1994 to 8.67% for the same period in 1995. The Corporation's average cost of
interest bearing liabilities for the six-month periods ended June 30, 1995 and
1994 was 4.69% and 3.45%, respectively. The net interest yield, on a taxable
equivalent basis, was 4.82% for the first six months of 1995 compared with
5.11% for the same period in 1994.
PROVISION AND ALLOWANCE FOR LOAN LOSSES
The provision for loan losses for the quarter ended June 30, 1995 decreased to
$12.6 million compared with $14 million for the same period in 1994. For the
first quarter of 1995, the provision for loan losses amounted to $11.7 million.
For the six-month period ended June 30, 1995, the provision for loan losses
decreased $3.4 million to $24.3 million, from $27.7 million for the same period
of 1994. This decline is mostly related to the strength of the Corporation's
allowance for loan losses and the significant share of real estate and other
secured loans in the recently originated loans.
As Table B shows, net charge-offs for the second quarter of 1995 totaled
$11.4 million or 0.56% of average loans, as compared with $8.6 million or
0.49% for the same quarter in 1994 and $8 million or 0.41% for the first
quarter of 1995. Commercial loans net charge-offs reflected a rise of $1.9
million during the second quarter of 1995 totaling $7 million, compared with
$5.1 million a year ago and $4.1 million for the first quarter of 1995.
Consumer loans net charge-offs increased $1.2 million for the quarter ended
June 30, 1995, from $2.3 million for the second quarter of 1994 to $3.5
million. Mortgage loans net charge-offs increased slightly to $0.3 million for
the quarter ended June 30, 1995 from $0.2 million for the same period in 1994.
Lease financing and construction loans net charge-offs showed decreases of $0.1
million and $0.3 million, respectively, as compared with the same period of
1994.
<TABLE>
<CAPTION>
Table B
----------------------------------------------------------------------
Quarter Provision for Net Allowance for
Ended Loan Losses Charge-offs Loan Losses
----------------------------------------------------------------------
(In millions)
<S> <C> <C> <C>
June 30, 1995 $12.6 $ 11.4 $158.7
March 31, 1995 11.7 8.0 157.5
December 31, 1994 12.5 8.2 153.8
September 30, 1994 13.5 10.5 149.4
June 30, 1994 14.0 8.6 146.4
</TABLE>
For the six-month period ended June 30, 1995, net charge-offs amounted to $19.4
million, reflecting a rise of 6.7% as compared with $18.2 million re-
7
<PAGE> 9
corded a year ago. However, net charge-offs as a percentage of average loans
decreased to 0.49% from 0.54% for the six-month period ended June 30, 1994.
For the same period, commercial loans net charge-offs increased $1.1 million,
while consumer and mortgage losses increased $0.9 million and $0.2 million,
respectively. Lease financing and construction loans net charge-offs reflected
decreases of $0.7 million and $0.3 million, respectively.
<TABLE>
<CAPTION>
Table C
Allowance for Loan Losses and Selected Loan Losses Statistics
Second Quarter First six months
(Dollars in thousands) 1995 1994 1995 1994
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at beginning of period . . . . . . . . . . . $157,467 $140,949 $ 153,798 $133,437
Allowances purchased . . . . . . . . . . . . . . . . . 3,473
Provision for loan losses . . . . . . . . . . . . . . . 12,646 14,037 24,344 27,700
------------------------------------------
170,113 154,986 178,142 164,610
------------------------------------------
Losses charged to the allowance
Commercial . . . . . . . . . . . . . . . . . . . . . 8,580 7,285 14,435 13,411
Construction . . . . . . . . . . . . . . . . . . . . 100 200
Lease financing . . . . . . . . . . . . . . . . . . . 1,609 1,731 2,804 3,358
Mortgage . . . . . . . . . . . . . . . . . . . . . . 326 227 662 338
Consumer. . . . . . . . . . . . . . . . . . . . . . . 7,802 6,826 14,760 14,385
------------------------------------------
18,317 16,169 32,661 31,692
------------------------------------------
Recoveries . . . . . . . . . . . . . . . . . . . . . .
Commercial . . . . . . . . . . . . . . . . . . . . . 1,518 2,140 3,273 3,311
Construction . . . . . . . . . . . . . . . . . . . . 232 41 286 231
Lease financing . . . . . . . . . . . . . . . . . . . 860 896 1,573 1,455
Mortgage . . . . . . . . . . . . . . . . . . . . . . 48 127
Consumer. . . . . . . . . . . . . . . . . . . . . . . 4,980 4,524 7,994 8,503
------------------------------------------
6,938 7,601 13,253 13,500
------------------------------------------
Net loans charged-off . . . . . . . . . . . . . . . . . 11,379 8,568 19,408 18,192
------------------------------------------
Balance at end of periiod . . . . . . . . . . . . . . . $158,734 $146,418 $158,734 $146,418
==========================================
Ratios:
Allowance for losses to loans . . . . . . . . . . . . 1.94% 2.03% 1.94% 2.03%
Allowance to non-performing assets . . . . . . . . . 107.09 126.35 107.09 126.35
Allowance to non-performing loans . . . . . . . . . . 117.09 153.26 117.09 153.26
Non-performing assets to loans . . . . . . . . . . . 1.81 1.60 1.81 1.60
Non-performing assets to total assets . . . . . . . . 1.02 0.91 1.02 0.91
Net charge-offs to average loans . . . . . . . . . . 0.56 0.49 0.49 0.54
Provision to net charge-offs . . . . . . . . . . . . 1.11x 1.64x 1.25x 1.52x
Net charge-offs earnings coverage . . . . . . . . . . 5.08 6.71 5.90 6.04
</TABLE>
At June 30, 1995, the allowance for loan losses amounted to $158.7 million,
representing 1.94% of loans, as compared with $146.4 million or 2.03% at June
30, 1994. At March 31, 1995, the allowance was $157.5 million or 1.97% of
loans. Although the ratio of allowance to loans shows a slight decrease, the
Corporation continues enjoying a strong allowance position since a significant
portion of the increase in loans has been attained in mortgage and other
secured loans where the Corporation historically has not experienced
significant losses.
Table C presents the movement in the allowance for loan losses and shows
selected loan loss statistics for the three and six-month periods ended June
30, 1995 and 1994.
Effective January 1, 1995 the Corporation adopted the Statement of
Financial Accounting Standards (SFAS) 114, "Accounting by Creditors for
Impairment of a Loan", as amended by SFAS 118, "Accounting by Creditors for
Impairment of a Loan - Income Recognition and Disclosures." SFAS 114 which
defines impaired loans, requires creditors to set up a
8
<PAGE> 10
valuation allowance with a corresponding charge to the provision for loan
losses for loans considered to be impaired. The loan impairment is measured
based on the present value of expected future cash flows discounted at the
loan's effective rate, on the loan's observable market price, or the fair value
of the collateral if the loan is collateral dependent. The Corporation had
$89.2 million in loans considered impaired which required an allowance of $20.7
million as of June 30, 1995. For the first and second quarters of 1995, no
increase in the provision for loan losses was necessary as a result of the
impairment measurement. As allowed by SFAS 118, the Corporation continued using
current practices of recognizing income on impaired loans.
CREDIT QUALITY
Non-performing assets consist of past-due loans on which no interest income is
being accrued, renegotiated loans and other real estate. The Corporation
reports its non-performing assets on a more conservative basis than most U.S.
banks. The Corporation's policy is to place commercial loans on non-accrual
status when payments of principal or interest are delinquent 60 days rather
than the standard industry practice of 90 days. Lease financing, conventional
mortgage and closed-end consumer loans are placed on non-accrual status when
payments are delinquent 90 days. Closed-end consumer loans are charged-off
against the allowance when delinquent 120 days. Open-end (revolving credit)
consumer loans are charged-off when payments are delinquent 180 days. Certain
loans which would be treated as non-accrual loans pursuant to the foregoing
policy, are treated as accruing loans when they are considered well secured and
in the process of collection. Under the standard industry practice, closed-end
consumer loans are charged-off when delinquent 120 days, but these consumer
loans are not customarily placed on non-accrual status prior to being
charged-off.
As of June 30, 1995, non-performing assets (NPA) amounted to $148.2 million
or 1.81% of loans, compared with $115.9 million or 1.60% at June 30, 1994. NPA
were $124.1 million or 1.55% of loans at March 31, 1995.
Non-performing loans amounted to $135.6 million at the end of the second
quarter of 1995 compared with $95.5 million as of June 30, 1994. These loans
amounted to $113.0 million as of March 31, 1995. Most of the increase was
reflected in non-performing commercial and construction loans which increased
$32.3 million. During this quarter a major loan was classified as a
non-performing loan, accounting for more than 30% of the increase in
non-performing commercial loans. At June 30, 1995 the Corporation had over
50,000 commercial lending relationships and only 30 of these relationships had
loans outstanding over $10 million. Other reasons for the rise in
non-performing loans were the growth in the commercial and construction
portfolios which increased $331.2 million or 11.6% as compared with June 30,
1994 and the adoption, as previously mentioned, of SFAS 114. This statement
requires that a loan for which foreclosure of collateral is probable should
continue to be accounted for as a loan and not as an in-substance foreclosed
asset. Based on this requirement the Corporation reclassified $3.5 million of
in-substance foreclosed assets to non-performing commercial loans. In addition,
non-performing mortgage loans increased $8.0 million, partially offset by a
reduction of $0.3 million in non-performing lease financing. Non-performing
consumer loans remained steady as compared with prior year, despite an increase
of 11% in the loan portfolio. The increase in non-performing mortgage loans was
mainly due to the growth in the portfolio, attained primarily at Banco Popular
and Equity One. Renegotiated loans decreased $5.5 million, from $8.4 million at
June 30, 1994 to $2.9 million at the end of the second quarter of 1995. Other
real estate decreased $2.2 million mainly due to the reclassification of
in-substance foreclosed assets mentioned above. Table D presents NPA for the
current and previous four quarters.
Assuming the standard industry practice of placing commercial loans on
non-accrual status when payments are past due 90 days or more and excluding
Table D
<TABLE>
<CAPTION>
--------------------------------------------------------------
NPA Allowance
as a % as a %
Date NPA of Loans of NPA
--------------------------------------------------------------
(Dollars in millions)
<S> <C> <C> <C>
June 30, 1995 $148.2 1.81% 107.1%
March 31, 1995 124.1 1.55 126.9
December 31, 1994 107.6 1.38 142.9
September 30, 1994 142.9 1.57 126.7
June 30, 19941 15.9 1.60 126.4
</TABLE>
9
<PAGE> 11
the closed-end consumer loans from non-accruing loans, non-performing assets as
of June 30, 1995, amounted to $107.7 million or 1.31% of loans, and the
allowance for loan losses would be 147.39% of non-performing assets. At June
30, 1994 and March 31, 1995 adjusted non-performing assets would have been
$83.3 million or 1.15% of loans and $95.0 million or 1.19% of loans,
respectively.
Accruing loans that are contractually past-due 90 days or more as to
principal or interest as of June 30, 1995, amounted to $12.8 million as
compared with $13.2 million at June 30, 1994, and $9.5 million at March 31,
1995.
OTHER OPERATING INCOME
Other operating income, including securities and trading gains, rose to $40.4
million for the second quarter of 1995 from $34.4 million reported for the same
period in 1994. For the first quarter of 1995 these revenues totaled $37.6
million. For the six-month periods ended June 30, 1995 and 1994, these revenues
were $77.9 million and $67.5 million, respectively.
Service charges on deposit accounts, which represented 48.4% of other
operating income, amounted to $19.6 million for the second quarter of 1995, an
increase of $1.5 million or 8.3% when compared with $18.1 million reported for
the second quarter of 1994. This increase is principally attributed to
revisions made to the fee structure and higher activity on commercial accounts,
the growth in the customer base due to the introduction of new products and
services and higher fees collected on returned checks. For the six-month period
ended June 30, 1995, service charges on deposit accounts totaled $37.6 million,
increasing $2.4 million from the $35.2 million reported for the same period in
1994.
Other service fees accounted for the largest portion of the increase in
other operating income, rising $3.1 million to $15.6 million for the second
quarter of 1995 from $12.5 million for the same period in 1994, primarily due
to higher mortgage servicing fees in Banco Popular. The increase in mortgage
servicing fees resulted mainly from the acquisition of a $1.8 billion servicing
portfolio of Puerto Rico Home Mortgage on March 31, 1995. At June 30, 1995, the
servicing portfolio of Banco Popular reached approximately $3.5 billion making
it the largest servicing portfolio on the Island. Other factors such as the
rise in credit card fees, credit life insurance fees, and other fees collected
on the growing volume of transactions at point-of-sale (POS) terminals and
other electronic transactions also contributed to the increase. Furthermore,
Banco Popular and BP Capital realized additional revenues on the sale of $62
million in shares of the second Puerto Rico Investors Tax Free Fund during May.
For the first six months of 1995, other service fees amounted to $29.4 million
compared with $23.4 million for the same period last year.
Other operating income rose $1.1 million reaching $4.8 million for the
second quarter of 1995, compared with $3.7 million for the second quarter of
1994. This growth resulted mainly from the sale of most of the student loan
portfolio of Banco Popular and higher gains realized on the sale of mortgage
loans by Equity One and Banco Popular. For the six-month periods ended June
30, 1995 and 1994, other operating revenues were $10.5 million and $8.3
million, respectively.
The gains on sale of securities and trading transactions for the quarter
ended June 30, 1995 amounted to $0.4 million compared with $0.2 million for the
same period of 1994.
OPERATING EXPENSES
Operating expenses for the second quarter of 1995 were $124.7 million compared
with $112.4 million for the same quarter in 1994, an increase of $12.3 million.
For the first six months of 1995, operating expenses increased to $243.0
million from $219.0 million for the same period in 1994.
Personnel costs, the principal component of operating expenses, totaled
$64.3 million for the second quarter of 1995, increasing $7.4 million from
$56.9 million for the same period of 1994. For the six-month period ended June
30, 1995, these expenses were $124.7 million compared with $112.2 million for
the same period of 1994. Salaries increased $2.8 million or 7.1% to $42.7
million for the quarter ended June 30, 1995, compared with $39.9 million for
the same period in 1994. This increase is basically due to annual merit
increases and the salaries of the Corporation's new subsidiaries Banco
Popular, FSB, BP Capital and Popular Mortgage. In addition, profit
10
<PAGE> 12
sharing expense rose $0.9 million due to the improvement in Banco Popular's
profitability ratios.
Pension and other benefits totaled $15.1 million for the second quarter of
1995, an increase of $3.7 million from $11.4 million reported for the second
quarter of 1994. Most of the increase was experienced in Banco Popular, as a
result of the implementation of a voluntary early retirement plan for
employees meeting certain eligibility requirements, which had a total cost of
$1.9 million for this quarter. This plan was available until May 1, 1995 and
had a total cost for the Corporation of $4.6 million for the six-month period.
Moreover during this quarter, Banco Popular implemented a 401(k) savings plan
covering substantially all its regular employees, which resulted in additional
costs of approximately $0.2 million. Medical plan, pension costs and
postretirement benefits also reflected increases for the quarter ended June 30,
1995 compared with the same quarter last year. The increase in pension costs
and postretirement benefits is related to changes in various actuarial
assumptions and changes in the demographic data composition of plan
participants.
Other operating expenses, excluding personnel costs, increased $4.8
million, reaching $60.4 million for the quarter ended June 30, 1995, compared
with $55.6 million for the same quarter in 1994. Occupancy expense reflected
the major increase as a result of the Corporation's growth and expansion costs.
Meanwhile, the Corporation has intensified its efforts in its electronic
payment system initiative, by installing 971 additional POS terminals during
this quarter compared with 499 during the second quarter of 1994. This resulted
in higher equipment and communication expenses. Business promotion also
increased as a result of the development of new products and services and the
promotion of the electronic payment system. In addition, the operations of
Banco Popular, FSB, Popular Mortgage and BP Capital accounted for $1.7 million
of other operating expenses for this quarter. For the six-month period ended
June 30, 1995, other operating expenses reached $118.3 million from $106.8
million reported for the same period in 1994.
The income tax expense for the quarter ended June 30, 1995 amounted to
$11.0 million, a decrease of $0.6 million compared with $11.6 million recorded
for the same quarter of 1994. The decrease results mainly from the reversal of
a deferred tax liability on real property that was distributed by Banco Popular
to its parent company in the form of a dividend. This transaction resulted in a
net reduction of approximately $4 million in the income tax expense of the
Corporation after considering the additional tax for the dividend income at the
parent company. Partially offsetting this reduction were higher income before
taxes and a lower share of exempt assets this quarter compared with the same
quarter last year. For the six-month period ended June 30, 1995, income tax
expense reached $22.4 million, compared with $21.4 million reported for the
same period in 1994.
BALANCE SHEET COMMENTS
At June 30, 1995, the Corporation's total assets reached $14.6 billion,
reflecting an increase of 14.3% when compared with $12.8 billion at June 30,
1994. Total assets at December 31, 1994 were also $12.8 billion. Average assets
for the first six months of 1995 were $13.3 billion compared with $12.0
billion for the same period in 1994. Average assets for the year ended December
31, 1994 were $12.2 billion.
Earning assets at June 30, 1995 amounted to $13.6 billion compared with
$11.9 billion at June 30, 1994. Total loans amounted to $8.2 billion at June
30, 1995 compared with $7.2 billion a year ago. All loan categories showed
increases. Mortgage loans rose $361.8 million or 18.5% as compared with June
30, 1994 reaching $2.3 billion as of June 30, 1995. Most of the increase was
in Equity One, rising $161.9 million and in Banco Popular with a $128 million
increase. Commercial and construction loans also reflected growth, increasing
from $2.9 billion at June 30, 1994 to $3.2 billion at June 30, 1995, a rise of
$331.2 million or 11.6%. Consumer loans increased $216.6 million or 11.0% and
the lease financing portfolio rose $69.5 million or 16.5% as compared with June
30, 1994, reflecting the incentive programs and strong marketing efforts. Total
loans at the end of 1994 reached $7.8 billion.
Investment securities as of June 30, 1995, totaled $4.6 billion compared
with $4.3 billion as of June 30, 1994. These figures include $1.2 billion in
investment securities available-for-sale as of June 30, 1995 and $724.6 million
as of June 30, 1994. Most of the increase is related to the operations of the
new subsidiaries, Banco Popular, FSB and Popular Mortgage.
11
<PAGE> 13
The increase of $190.1 million in the trading portfolio is related to the
acquisition of BP Capital.
Total deposits were $9.6 billion at June 30, 1995, compared with $9.1
billion at June 30, 1994, an increase of $539 million. Most of the growth was
attained at Banco Popular. Banco Popular, FSB, also contributed to the increase
with deposits of $177.4 million at June 30, 1995. Total deposits at December
31, 1994 were $9.0 billion.
Borrowings increased $1.1 billion as compared with the prior year. This
rise is mainly due to the operation of BP Capital with $783 million in
borrowings at the end of this quarter, and an increase in medium-term notes
issued by BanPonce Financial and the Corporation to finance the growth in
operations of their subsidiaries. Subordinated notes decreased to $50 million
from $62 million outstanding a year ago due to the prepayment in July 1994 of
an 8.50% note due in 1996.
Stockholders' equity at June 30, 1995, amounted to $1.1 billion, compared
with $969.8 million at June 30, 1994. The increase is mainly due to earnings
retention and the reversal from a negative position in the allowance required
by SFAS 115. The Corporation's stockholders' equity at June 30, 1995 includes
an allowance of $4.3 million, net of deferred taxes, in unrealized holding
gains on securities available-for-sale, as required by SFAS 115, compared with
unrealized holding losses of $6.6 million and $19.4 million a year ago and at
December 31, 1994, respectively.
The market value of the Corporation's common stock at June 30, 1995 was
$35.50, compared with $31.25 at June 30, 1994 and $31.50 at March 31, 1995. The
Corporation's market capitalization at June 30, 1995 was $1.2 billion. Book
value per common share increased to $29.59 as of June 30, 1995, compared with
$26.53 as of the same date last year. The Corporation's Tier I, total capital
and leverage ratios at June 30, 1995 were 11.58%, 12.85% and 7.07%,
respectively, as compared with 12.66%, 14.11% and 7.43%, at June 30, 1994.
Effective March 31, 1995, a portion of the deferred tax asset of the
Corporation is disallowed in the computation of Tier I capital as required by
regulatory agencies. This new requirement does not have a material effect on
the Corporation's capital ratios which continue well above the minimum
standards established by regulatory agencies.
The Corporation's dividend payout ratio to common stockholders for the
quarter ended June 30, 1995 was 25.70%, compared with 25.85% for the same
quarter last year. On its April 1995 meeting, the Board of Directors of the
Corporation approved an increase of $0.05 per common share in the quarterly
cash dividend paid on July 3, 1995. This represents a 20% increase over the
$0.25 per common share paid in previous quarters.
12
<PAGE> 14
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CONDITION
----------------------------------------------------------------------------------------------------------
June 30,
(In thousands) 1995 1994
----------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks . . . . . . . . . . . . . . . . . . . . $ 411,428 $ 398,894
-------------------------------
Money market investments:
Federal funds sold and securities and mortgages
purchased under agreements to resell . . . . . . . . . . . 623,118 351,600
Time deposits with other banks . . . . . . . . . . . . . . . 5,255 3,100
Bankers' acceptances . . . . . . . . . . . . . . . . . . . . . 866 251
-------------------------------
629,239 354,951
Investment securities held-to-maturity, -------------------------------
at cost (Notes 3 and 4) . . . . . . . . . . . . . . . . . . . 3,384,693 3,539,899
Investment securities available-for-sale,
at market (Notes 3 and 4) . . . . . . . . . . . . . . . . . . 1,186,292 724,636
Trading account securities, at market . . . . . . . . . . . . . 200,527 10,399
Loans held-for-sale . . . . . . . . . . . . . . . . . . . . . . 27,706
Loans (Note 4) . . . . . . . . . . . . . . . . . . . . . . . . 8,483,950 7,520,107
Less--Unearned income . . . . . . . . . . . . . . . . . . . 311,328 298,927
Allowance for loan losses. . . . . . . . . . . . . . . . 158,734 146,418
-------------------------------
8,013,888 7,074,762
-------------------------------
Premises and equipment . . . . . . . . . . . . . . . . . . . . 327,194 316,179
Other real estate . . . . . . . . . . . . . . . . . . . . . . . 9,767 11,953
Customers' liabilities on acceptances . . . . . . . . . . . . . 1,411 1,433
Accrued income receivable . . . . . . . . . . . . . . . . . . . 101,991 77,221
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . 124,342 105,571
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . 154,832 135,371
-------------------------------
$14,573,302 $12,751,269
===============================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Non-interest bearing . . . . . . . . . . . . . . . . . . . $ 1,840,835 $ 2,020,249
Interest bearing . . . . . . . . . . . . . . . . . . . . . . 7,767,104 7,048,877
-------------------------------
9,607,939 9,069,126
Federal funds purchased and securities sold
under agreements to repurchase (Note 4) . . . . . . . . . . 2,135,591 1,356,692
Other short-term borrowings . . . . . . . . . . . . . . . . . 773,366 720,880
Notes payable . . . . . . . . . . . . . . . . . . . . . . . 674,009 358,552
Senior debentures . . . . . . . . . . . . . . . . . . . . . . 30,000 30,000
Acceptances outstanding . . . . . . . . . . . . . . . . . . . 1,411 1,433
Other liabilities. . . . . . . . . . . . . . . . . . . . . . . 227,816 182,751
-------------------------------
13,450,132 11,719,434
-------------------------------
Subordinated notes (Note 6). . . . . . . . . . . . . . . . . . 50,000 62,000
-------------------------------
Stockholders' equity (Note 8):
Preferred stock . . . . . . . . . . . . . . . . . . . . . . 100,000 100,000
Common stock . . . . . . . . . . . . . . . . . . . . . . . . 197,364 196,708
Surplus . . . . . . . . . . . . . . . . . . . . . . . . . . 410,687 384,560
Retained earnings . . . . . . . . . . . . . . . . . . . . . . 318,000 250,916
Unrealized gains (losses) on securities available-for-sale,
net of deferred taxes (Note 2) . . . . . . . . . . . . . . . 4,262 (6,635)
Capital reserves . . . . . . . . . . . . . . . . . . . . . . . 42,887 44,286
-------------------------------
1,073,170 969,835
-------------------------------
$14,573,302 $12,751,269
===============================
</TABLE>
The accompanying notes are an integral part of these financial statements.
13
<PAGE> 15
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
----------------------------------------------------------------------------------------------------------
Quarter ended For the six months ended
June 30, June 30,
(Dollars in thousands, except per common share information) 1995 1994 1995 1994
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans . . . . . . . . . . . . . . . . . . . . . . . . $ 200,530 $ 162,667 $ 391,080 $310,470
Money market investments . . . . . . . . . . . . . . 3,596 1,209 4,582 3,349
Investment securities . . . . . . . . . . . . . . . . 63,567 56,081 122,135 105,540
Trading account securities. . . . . . . . . . . . . . 1,125 43 1,240 52
--------------------------------------------
268,818 220,000 519,837 419,411
--------------------------------------------
INTEREST EXPENSE:
Deposits . . . . . . . . . . . . . . . . . . . . . . 84,585 60,722 161,650 114,901
Short-term borrowings . . . . . . . . . . . . . . . 29,246 17,283 54,620 31,301
Long-term debt. . . . . . . . . . . . . . . . . . . . 12,867 6,421 23,119 11,852
--------------------------------------------
126,698 84,426 239,389 158,054
--------------------------------------------
Net interest income . . . . . . . . . . . . . . . . . 142,120 135,574 279,648 261,357
Provision for loan losses . . . . . . . . . . . . . . 12,646 14,037 24,344 27,700
--------------------------------------------
Net interest income after provision for loan losses 129,474 121,537 255,304 233,657
Service charges on deposit accounts . . . . . . . . . 19,552 18,050 37,642 35,225
Other service fees . . . . . . . . . . . . . . . . . 15,565 12,480 29,376 23,391
Gain on sale of securities . . . . . . . . . . . . . 66 112 272
Trading account profit . . . . . . . . . . . . . . . 350 161 300 331
Other operating income. . . . . . . . . . . . . . . . 4,839 3,716 10,495 8,312
--------------------------------------------
169,846 155,944 333,229 301,188
--------------------------------------------
OPERATING EXPENSES:
Personnel costs:
Salaries . . . . . . . . . . . . . . . . . . . . . 42,681 39,857 84,211 78,899
Profit sharing . . . . . . . . . . . . . . . . . . 6,506 5,624 9,833 10,615
Pension and other benefits. . . . . . . . . . . . . 15,122 11,416 30,683 22,702
--------------------------------------------
64,309 56,897 124,727 112,216
Net occupancy expense . . . . . . . . . . . . . . . . 8,254 6,927 16,022 13,830
Equipment expenses . . . . . . . . . . . . . . . . . 9,953 8,760 19,337 16,963
Other taxes . . . . . . . . . . . . . . . . . . . . . 5,094 4,667 10,725 9,099
Professional fees . . . . . . . . . . . . . . . . . . 9,218 9,202 16,772 16,052
Communications . . . . . . . . . . . . . . . . . . . 5,689 4,989 11,292 9,893
Business promotion . . . . . . . . . . . . . . . . . 4,170 3,539 7,962 7,229
Printing and supplies . . . . . . . . . . . . . . . 2,517 2,311 5,298 4,412
Other operating expenses . . . . . . . . . . . . . . 10,414 10,659 20,865 20,473
Amortization of intangibles . . . . . . . . . . . . . 5,104 4,502 10,040 8,863
--------------------------------------------
124,722 112,453 243,040 219,030
--------------------------------------------
Income before tax and dividends on preferred stock of
Banco Popular . . . . . . . . . . . . . . . . . . . 45,124 43,491 90,189 82,158
Income tax . . . . . . . . . . . . . . . . . . . . . 11,063 11,622 22,387 21,367
--------------------------------------------
Income before dividends on preferred stock of
Banco Popular . . . . . . . . . . . . . . . . . . . 34,061 31,869 67,802 60,791
Dividends on preferred stock of Banco Popular (Note 7) 192 385
--------------------------------------------
NET INCOME . . . . . . . . . . . . . . . . . . . . . $ 34,061 $ 31,677 $67,802 $60,406
============================================
NET INCOME APPLICABLE TO COMMON STOCK . . . . . . . . $ 31,973 $ 31,677 $63,627 $60,406
============================================
EARNINGS PER COMMON SHARE (Note 9): . . . . . . . . . $ 0.98 $ 0.96 $ 1.94 $ 1.84
============================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
14
<PAGE> 16
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------------------------------------------------------------------------------
For the six months ended
June 30,
(In thousands) 1995 1994
-------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . . . . . $ 67,802 $ 60,406
---------------------------------
Adjustments to reconcile net income to cash provided by
operating activities:
Depreciation and amortization of premises and equipment . 21,008 18,208
Provision for loan losses . . . . . . . . . . . . . . . . 24,344 27,700
Amortization of intangibles . . . . . . . . . . . . . . . . 10,040 8,863
Gain on sale of investment securities available-for-sale . (112) (272)
Loss (gain) on disposition of premises and equipment . . . 199 (792)
Gain on sale of loans . . . . . . . . . . . . . . . . . . . (3,749) (1,800)
Amortization of premiums and accretion of discounts
on investments . . . . . . . . . . . . . . . . . . . . . (1,764) 5,648
Amortization of deferred loan fees and costs . . . . . . . 1,280 1,707
Net increase in postretirement benefit obligation . . . . 4,009 2,063
Net increase in trading securities . . . . . . . . . . . . (36,183) (7,382)
Net (increase) decrease in interest receivable . . . . . . (12,830) 4,156
Net decrease (increase) in other assets . . . . . . . . . . 1,267 (7,329)
Net decrease in interest payable . . . . . . . . . . . . . (1,203) (383)
Net (decrease) increase in current and deferred taxes . . (11,539) 4,464
Net decrease in other liabilities . . . . . . . . . . . . . (494) (3,663)
---------------------------------
Total adjustments . . . . . . . . . . . . . . . . . . . . . . (5,727) 51,188
---------------------------------
Net cash provided by operating activities . . . . . . . . . . 62,075 111,594
---------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES: . . . . . . . . . . . .
Net decrease (increase) in money market investments . . . . 213,776 (86,859)
Purchases of investment securities held-to-maturity . . . . (10,727,840) (3,982,242)
Maturities of investment securities held-to-maturity . . . 10,333,862 3,761,409
Purchases of investment securities available-for-sale . . . (413,993) (228,208)
Maturities of investment securities available-for-sale . . 24,097
Sales of investment securities available-for-sale . . . . . 152,217 329,674
Net disbursements on loans . . . . . . . . . . . . . . . . (604,324) (690,918)
Proceeds from sale of loans . . . . . . . . . . . . . . . . 177,718 56,271
Acquisition of mortgage loan portfolios . . . . . . . . . . (39,231) (76,700)
Decrease in loans held-for-sale . . . . . . . . . . . . . 3,751
Assets acquired, net of cash . . . . . . . . . . . . . . . (29,189) (17,557)
Acquisition of premises and equipment . . . . . . . . . . (27,185) (32,518)
Proceeds from sale of premises and equipment . . . . . . . . 4,155 3,542
---------------------------------
Net cash used in investing activities . . . . . . . . . . . . (932,186) (964,106)
---------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits . . . . . . . . . . . . . . . . . 412,124 252,926
Net deposits acquired . . . . . . . . . . . . . . . . . . . 163,637
Net (decrease) increase in federal funds purchased
and securities sold under agreements to repurchase . . . . (93,906) 399,959
Net increase in other short-term borrowings . . . . . . . . 177,132 54,107
Proceeds from issuance of notes payable . . . . . . . . . 306,757 104,702
Payments of notes payable . . . . . . . . . . . . . . . . . (107,505) (5)
Dividends paid . . . . . . . . . . . . . . . . . . . . . . (20,601) (16,372)
Proceeds from issuance of common stock . . . . . . . . . . 1,577 1,562
Proceeds from issuance of preferred stock . . . . . . . . . 96,690
Redemption of preferred stock . . . . . . . . . . . . . . . (11,000)
---------------------------------
Net cash provided by financing activities . . . . . . . . . . 893,215 882,569
---------------------------------
Net (decrease) increase in cash and due from banks . . . . . (30,896) 30,057
Cash and due from banks at beginning of period . . . . . . . 442,316 368,837
---------------------------------
Cash and due from banks at end of period . . . . . . . . . . $ 411,420 $ 398,894
=================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
15
<PAGE> 17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
NOTE 1 - CONSOLIDATION
The consolidated financial statements of BanPonce Corporation include the
balance sheet of the Corporation and its wholly-owned subsidiaries, Velco, BP
Capital Markets, Popular International Bank, Inc. and its wholly-owned
subsidiaries BanPonce Financial Corp., Banco Popular, FSB, and Pioneer Bancorp,
Inc. (second tier subsidiaries) and Equity One, Inc., and Banco Popular de
Puerto Rico and its wholly-owned subsidiaries, Popular Leasing and Rental,
Inc., Popular Consumer Services, Inc. and Popular Mortgage, Inc., as of June
30, 1995 and 1994, and their related statements of income and cash flows for
the six-month period then ended. These statements are, in the opinion of
management, a fair statement of the results of the periods presented. These
results are unaudited, but include all necessary adjustments for a fair
presentation of such results.
NOTE 2 - ACCOUNTING CHANGES
Effective January 1, 1995 the Corporation adopted the Statement of Financial
Accounting Standards (SFAS) 114, "Accounting by Creditors for Impairment of a
Loan" as amended by SFAS 118, "Accounting by Creditors for Impairment of a Loan
- Income Recognition and Disclosures." SFAS 114 which defines impaired loans,
requires creditor to set up a valuation allowance with a corresponding charge
to the provision for loan losses for loans considered to be impaired. The loan
impairment is measured based on the present value of expected future cash flows
discounted at the loan's effective rate, on the loan observable market price,
or the fair value of the collateral if the loan is collateral dependent. The
Corporation had $89,208 in loans considered impaired which required an
allowance of $20,670 as of June 30, 1995. For the first six months of 1995, no
increase in the provision for loan losses was necessary as a result of the
impairment measurement. As allowed by SFAS 118, the Corporation continued using
current practices of recognizing income on impaired loans.
During the first quarter of 1994 the Corporation adopted SFAS 115
"Accounting for Certain Investments in Debt and Equity Securities." SFAS 115
requires financial institutions to divide their securities holdings among three
categories: held-to-maturity, available-for-sale and trading securities. Those
securities which management has the positive intent and ability to hold to
maturity will be classified as held-to-maturity and will be carried at cost.
Those that are bought and held principally for the purpose of selling them in
the near term, will be classified as trading and will continue to be reported
at fair value with unrealized gains and losses included in earnings. All other
securities will be classified as available-for-sale and will be reported at
fair value with unrealized gains and losses excluded from earnings and reported
as a separate component of shareholders' equity. As a result of the adoption of
this statement, the Corporation's stockholders' equity at June 30, 1995
includes unrealized holding gains on securities available-for-sale of $4,262,
net of deferred taxes, as compared with $6,635 in unrealized losses at June 30,
1994.
16
<PAGE> 18
NOTE 3 - INVESTMENT SECURITIES
THE MATURITIES AS OF JUNE 30, 1995 AND MARKET VALUE FOR THE FOLLOWING
INVESTMENT SECURITIES ARE: Investments Securities held-to-maturity:
<TABLE>
<CAPTION>
JUNE 30,
1995 1994
Book Value Market Value Book Value Market Value
----------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury (average maturity of
1 year) $2,318,157 $2,324,459 $2,074,308 $2,057,542
Obligations of other U.S. Government
agencies and corporations (average
maturity of 1 year and 9 months) 247,333 245,097 539,333 535,486
Obligations of Puerto Rico, States and
political subdivisions (average
maturity of 3 years and 2 months) 215,185 219,866 250,499 254,603
Collateralized mortgage obligations
(average maturity of 1 year and 8 months) 409,640 404,225 446,770 462,028
Mortgage-backed securities (average
maturity of 4 years and 7 months) 138,618 137,731 174,301 139,361
Others (average maturity of 7 years
and 1 month) 55,760 55,795 54,688 54,789
------------------------------------------------
$3,384,693 $3,387,173 $3,539,899 $3,503,809
================================================
Investments securities available-for-sale:
<CAPTION>
JUNE 30,
1995 1994
Amortized Cost Market Value Amortized Cost Market Value
-------------------------------------------------------------
U.S. Treasury (average maturity
of 1 year and 11 months) $ 678,002 $ 679,583 $557,115 $549,945
Obligations of other U.S. Government
agencies and corporations (average
maturity of 1 year and 6 months) 150,135 151,110 56,261 56,647
Obligations of Puerto Rico, States and
political subdivisions (average
maturity of 2 years and 11 months) 31,154 31,201 26,916 26,916
Collateralized mortgage obligations (average
maturity of 2 years and 10 months) 41,953 41,826 48,967 48,849
Mortgage-backed securities (average maturity
of 6 years and 4 months) 215,082 214,722 29,937 29,326
Others (average maturity of 9 months) 63,464 67,850 12,953 12,953
-----------------------------------------------------------
$1,179,790 $1,186,292 $732,149 $724,636
===========================================================
</TABLE>
NOTE 4 - PLEDGED ASSETS
Securities and insured mortgage loans of the Corporation of $2,523,419 (1994 -
$2,373,775) are pledged to secure public and trust deposits and securities and
mortgages sold under repurchase agreements.
NOTE 5 - COMMITMENTS
In the normal course of business there are letters of credit outstanding and
stand-by letters of credit which at June 30, 1995 amounted to $21,982 and
$74,487, respectively. There are also outstanding other commitments and
contingent liabilities, such as guarantees and commitments to extend credit,
which are not reflected in the accompanying financial statements. No losses are
anticipated as a result of these transactions.
17
<PAGE> 19
NOTE 6 - SUBORDINATED NOTES
Subordinated notes consist of the following:
<TABLE>
<S> <C>
8.875% Fixed Rate Notes series A, due in 1996 $15,000
8.6875% Fixed Rate Notes series B, due in 1996 15,000
Floating Rate Notes series A with interest
payable at 88% of LIBID rate, due in 1996 19,000
Floating Rate Notes series B with interest
payable at 86% of LIBID rate, due in 1996 1,000
-------
$50,000
=======
</TABLE>
NOTE 7 - PREFERRED STOCK OF BANCO POPULAR
Banco Popular has 200,000 shares of authorized preferred stock with a par
value of $100. Of these, 110,000 were issued and outstanding until June 30,
1994, when the shares were redeemed at par value.
NOTE 8 - STOCKHOLDERS' EQUITY
Authorized common stock is 90,000,000 shares with a par value of $6 per share
of which 32,893,968 are issued and outstanding at June 30, 1995. On June 27,
1994, the Corporation issued 4,000,000 shares of non-cumulative preferred stock
with a dividend rate of 8.35% and a liquidation preference value of $25 per
share. Authorized preferred stock is 10,000,000 shares without par value.
NOTE 9 - EARNINGS PER COMMON SHARE
Earnings per common share (EPS) are calculated based on net income applicable
to common stockholders which amounted to $63,627 and $60,406 for the six months
ended June 30, 1995 and 1994, respectively, after deducting the dividends on
preferred stock. EPS are based on 32,880,371 and 32,770,562 average shares
outstanding during the first six months of 1995 and 1994, respectively.
NOTE 10 - SUPPLEMENTAL DISCLOSURE ON THE CONSOLIDATED STATEMENTS OF CASH FLOWS
During the six-month period ended June 30, 1995 the Corporation paid interest
and income taxes amounting to $233,396 and $28,750, respectively (1994 -
$156,701 and $14,849). In addition, the loans receivable transferred to other
real estate and other property for the period ended June 30, 1995, amounted to
$1,843 and $4,084, respectively (1994 - $931 and $1,414). The Corporation's
stockholders' equity at June 30, 1995 includes $4,262, in unrealized holding
gains on securities available-for-sale, net of deferred taxes, as compared with
unrealized losses of $6,635 at June 30, 1994.
18
<PAGE> 20
DIRECTORS AND OFFICERS
<TABLE>
<CAPTION>
<S> <C>
BOARD OF DIRECTORS OFFICES (CONT.)
Richard L. Carrion, Chairman LOS ANGELES OFFICE
Alfonso F. Ballester, Vice Chairman 354 South Spring St.
Antonio Luis Ferre, Vice Chairman Los Angeles, California 90013
Juan A. Albors Hernandez * Telephone: (213) 626-1160
Salustiano Alvarez Mendez *
Jose A. Bechara Bravo * VIRGIN ISLANDS OFFICE
Juan J. Bermudez 80 Kronprindsens Gade
Esteban D. Bird * Kronprindsens Quarter
Francisco J. Carreras Charlotte Amalie, St. Thomas
David H. Chafey, Jr. * U.S. Virgin Islands 00802
Waldemar del Valle ** Telephone: (809) 774-2300
Luis E. Dubon, Jr.
Roberto W. Esteves * SUBSIDIARIES
Hector R. Gonzalez ** VEHICLE EQUIPMENT LEASING COMPANY, INC.
Jorge A. Junquera Diez State Road #2 Km. 6.8
Franklin A. Mathias Villa Caparra
Manuel Morales, Jr. Guaynabo, Puerto Rico 00966
Alberto M. Paracchini Telephone: (809) 792-9292
Francisco Perez, Jr. **
Francisco M. Rexach, Jr. POPULAR LEASING AND RENTAL, INC.
Jose E. Rossi * M-1046 Federico Costa St.
Felix J. Serralles Nevares Tres Monjitas Industrial Development
Emilio Jose Venegas ** San Juan, Puerto Rico 00903
Julio E. Vizcarrondo, Jr. Telephone: (809) 751-4848
Samuel T. Cespedes, Secretary POPULAR CONSUMER SERVICES, INC.
10 Salud Street
* Director of Banco Popular de Puerto Rico only El Senorial Condominium, Suite 613
** Director of BanPonce Corporation only Ponce, Puerto Rico 00731
Telephone: (809) 844-2860
EXECUTIVE OFFICERS
Richard L. Carrion, Chairman of the Board, EQUITY ONE, INC.
President and Chief Executive Officer 523 Fellowship Road, Suite 220
Jorge A. Junquera Diez, Executive Vice President Mt. Laurel, New Jersey 08054
Maria Isabel Burckhart, Executive Vice President Telephone: (609) 273-1119
David H. Chafey, Jr., Executive Vice President
Larry Kesler, Executive Vice President PIONEER BANCORP, INC.
Humberto Martin, Executive Vice President 4000 West North Avenue
Emilio E. Pinero, Executive Vice President Chicago, Illinois 60639
Telephone: (312) 292-4777
OFFICES
BANCO POPULAR, FSB
CENTRAL OFFICE 500 Bloomfield Avenue
Banco Popular Center, Hato Rey Newark, New Jersey 07107
209 Munoz Rivera Avenue Telephone: (201) 484-6525
San Juan, Puerto Rico 00918
Telephone: (809) 765-9800 POPULAR MORTGAGE, INC.
268 Ponce de Leon Avenue
NEW YORK OFFICE San Juan, Puerto Rico 00918
7 West 51st St. Telephone: (809) 753-0245
New York, N.Y. 10019
Telephone: (212) 315-2800 BP Capital Markets
1020 Popular Center
Hato Rey, Puerto Rico 00918
Telephone: (809) 766-4200
</TABLE>
19
<PAGE> 21
BANPONCE
CORPORATION
P.O. Box 362708
San Juan, Puerto Rico 00936-2708
(Logo)
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF BANPONCE CORPORATION FOR THE SIX MONTHS ENDED DECEMBER
31, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<EXCHANGE-RATE> 1,000
<CASH> 411,420
<INT-BEARING-DEPOSITS> 5,255
<FED-FUNDS-SOLD> 623,118
<TRADING-ASSETS> 200,527
<INVESTMENTS-HELD-FOR-SALE> 1,186,292
<INVESTMENTS-CARRYING> 3,384,693
<INVESTMENTS-MARKET> 3,387,173
<LOANS> 8,200,328
<ALLOWANCE> 158,734
<TOTAL-ASSETS> 14,573,302
<DEPOSITS> 9,607,939
<SHORT-TERM> 2,908,957
<LIABILITIES-OTHER> 227,816
<LONG-TERM> 704,009
<COMMON> 0
100,000
197,364
<OTHER-SE> 775,806
<TOTAL-LIABILITIES-AND-EQUITY> 14,573,302
<INTEREST-LOAN> 391,080
<INTEREST-INVEST> 122,135
<INTEREST-OTHER> 5,822
<INTEREST-TOTAL> 519,037
<INTEREST-DEPOSIT> 161,650
<INTEREST-EXPENSE> 239,389
<INTEREST-INCOME-NET> 279,648
<LOAN-LOSSES> 24,344
<SECURITIES-GAINS> 112
<EXPENSE-OTHER> 243,040
<INCOME-PRETAX> 90,189
<INCOME-PRE-EXTRAORDINARY> 67,802
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 67,802
<EPS-PRIMARY> $1.94
<EPS-DILUTED> 0
<YIELD-ACTUAL> 4.82
<LOANS-NON> 135,562
<LOANS-PAST> 12,820
<LOANS-TROUBLED> 2,894
<LOANS-PROBLEM> 109,781
<ALLOWANCE-OPEN> 153,798
<CHARGE-OFFS> 32,661
<RECOVERIES> 13,253
<ALLOWANCE-CLOSE> 158,734
<ALLOWANCE-DOMESTIC> 158,382
<ALLOWANCE-FOREIGN> 352
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
