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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): July 7, 1997
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Popular, Inc.
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(Exact Name of registrant as specified in its charter)
COMMONWEALTH OF PUERTO RICO NO. 0-13818 NO. 66-0416582
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(State or other jurisdiction of (Commission (IRS Employer
incorporation File Number) Identification No.)
209 MUNOZ RIVERA AVENUE
HATO REY, PUERTO RICO 00918
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (787) 765-9800
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(Former name or former address, if changed since last report)
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Item 5. Other Events
On July 7, 1997, Popular, Inc. (the "Corporation") announced by way of a news
release, its operational results for the quarter and six-month period ended
June 30, 1997. A copy of the Corporation's release, dated July 7, 1997, is
attached hereto as Exhibit 99(a) and is hereby incorporated by reference.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits
(c) Exhibits
99(a) News release, dated July 7, 1997, announcing the Corporation and
subsidiaries earnings for the quarter and six-month period ended June 30, 1997.
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Exhibit Index
Exhibit Number Description
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99(a) News release, dated July 7, 1997
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
POPULAR, INC.
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(Registrant)
Date: July 7, 1997 By: /s/ Amilcar L. Jordan
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Name: Amilcar L. Jordan, Esq.
Title: Senior Vice President and Comptroller
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[POPULAR, INC. LETTERHEAD]
Exhibit 99(a)
For additional information contact: News Release
Mr. Jorge A. Junquera
Senior Executive Vice President
Telephone (787) 754-1685
July 7, 1997
POPULAR, INC. EARNINGS FOR THE QUARTER AND SIX-MONTH PERIOD ENDED JUNE 30, 1997
Popular, Inc. (the Corporation) announced net income of $51.1 million
for the second quarter of 1997 for an increase of $5.0 million or 10.9% over
the $46.1 million reported for the second quarter of 1996. On a per share
basis, earnings (EPS) were $0.74 per common share, a 10.5% increase over the
$0.67 per common share reported for the same period a year earlier. Average
shares outstanding used in the above computations were 66,350,298 for the second
quarter of 1997 and 66,001,180 for the same quarter of 1996. Net earnings for
the first quarter of 1997 were $49.5 million, or $0.72 per common share, based
on 66,121,855 average shares then outstanding.
Return on assets (ROA) and return on common equity (ROE) for the second
quarter of 1997 were 1.16% and 16.03%%, respectively, compared with 1.16% and
16.56% for the same period in 1996 and 1.19% and 16.32% for the first quarter
of 1997.
For the first six months of 1997, the Corporation's net earnings
reached $100.6 million, compared with $91.2 million for the same period of
1996. EPS for the first six months of 1997 were $1.46 compared with $1.32 for
the same period of 1996. ROA and ROE for the first six months of 1997 were
1.17% and 16.17%, respectively. For the same period of 1996 these ratios were
1.16% and 16.48%.
The Corporation's results of operations for the quarter ended June 30,
1997, when compared with the same quarter of 1996, reflectd an increase of
$22.4 million in net interest income coupled with an increase of $7.0 million
in other revenues. These improvements were partially tempered by rises of $3.7
million in the provision for loan losses, $20.2 million in operating expenses
and $0.3 million in income taxes.
Net interest income for the second quarter of 1997 amounted to $190.6
million, an increase of 13.3% over the same period in 1996 and 5.5% higher than
the first quarter of 1997. The growth in net interest income, when compared
with the second quarter of 1996, was primarily due to the
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2 - POPULAR, INC. 1997 SECOND QUARTER RESULTS
sustained loan growth, particularly in commercial loans, and to higher levels
in the investment portfoliio, which contributed to an improvement of 31 basis
points in the yield on earning assets. The improvement in the yield on earning
assets was partially offset by a rise in the cost of interest-bearing
liabilities, resulting from a higher volume of borrowings due to the decrease
of $531 million and $329 million, respectively, in the average volume of
certificates of deposits and borrowings from 936 companies and also due to
arbitrage opportunities undertaken during the quarter. The net interest yield
for the quarter ended June 30, 1997, was 4.56%, compared wth 4.48% for the
second quarter of 1996. For the first quarter of 1997 the net interest yield
was 4.58%. For the first six months of 1997, the net interest yield was 4.57%,
compared with 4.47% for the same period of 1996.
The provision for loan losses for the second quarter of 1997 amounted
to $25.4 million compared with $21.7 million for the second quarter of 1996, for
an increase of $3.7 million or 17.3%. The increase resulted from the growth in
the loan portfolio, non-performing assets and net charge-offs. Net charge-offs
for the quarter ended June 30, 1997, were $22.9 million or 0.90% of average
loans compared with $18.1 million or 0.80% for the second quarter of 1996, and
$17.9 million or 0.73% for the first quarter of 1997. As a percentage of
averae loans, net charge-offs were 0.82% and 0.74% for the six-month periods
ended June 30, 1997 and 1996, respectively. The increase in net charge-offs
was primariy reflected in the consumer loan category, particularly personal
loans, and is mostly related to higher delinquency levels and bankruptcies in
both the U.S. and Puerto Rico. Non-performing assets were $212 million or 1.94%
of loans at June 30, 1997, compared with $152 million or 1.64%, at the end of
the second quarter of 1996 and $174 million or 1.76% at March 31, 1997. The
rise in non-performing assets from June 30, 1996, was mainly attributed to an
increase of $22 million in non-performing assets at Equity One reflecting the
growth in its portfolio and the increased level of personal bankruptcy filings.
Non-performing assets at Banco Popular de Puerto Rico (BPPR) also rose $16
million principally as a result of the classification on non-accrual of an $11
million commercial income-producing real estate loan in the Virgin Islands. In
addition, the non-performing assets of the banks acquired during the quarter
ended June 30, 1997, accounted for $23 million of the increase. As has been
reported before, the Corporation reports non-performing assets on more
conservative basis than most U.S. banks. The standard industry practice is to
place non-performing commercial loans on non-accrual status when
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3-POPULAR, INC. 1997 SECOND QUARTER RESULTS
payments of principal or interest are deliquent 90 days. However, the
Corporation's policy is to place commercial loans on non-accrual status when
payments of principal or interest are delinquent 60 days. Lease financing,
conventional mortgage and closed-end consumer loans are placed on non-accrual
status when payments are delinquent 90 days.
Other operating income rose $3.4 million over the second quarter of
1996, to $54.1 million, led by an increase of $5.4 million in other service
fees and $0.8 million in service charges on deposit accounts, partially offset
by a decrease of $2.8 million in other income. Other service fees amounted to
$24.8 million for the three-month period ended June 30, 1997, compared with
$19.4 million for the same period a year earlier, reflecting a rise of $1.5
million in credit card fees due to increased merchant activity and card usage.
Debit card fees rose $1.4 million principally as a result of the sustained
growth in the volume of transactions at point-of-sale (POS) terminals, while
fees related to the sale and administration of investment products rose $0.7
million mainly as a result of the sale of the Puerto Rico Investors Tax-Free
Fund V. The decrease of $2.8 million in other income resulted from the
recording of a loss of $3.6 million in the market value of a building which is
held for sale.
Personnel costs increased $7.0 million as compared with the second
quarter of 1996. Most of the increase was mainly due to annual merit
increases, business expansion and increased medical plan costs. In addition,
the operations of Banco Popular N.A. (California), acquired in September 1996,
plus the operations acquired during this quarter and the cost of personnel in
the Florida credit card operations accounted for $2.2 million of the total
increase. Other operating expenses increased $13.3 million, mostly in
professional fees, other taxes, business promotion and equipment expenses.
Professional fees rose $3.4 million reflecting higher consulting and technical
support fees for business expansion and projects designed to enhance revenue
growth. Other taxes increased $1.8 million as a result of the growth in the
Corporation's business volume and the increase in the tax rate for personal
property tax in the municipality of San Juan, Puerto Rico, where the
corporation's headquarters are located. The rise in business promotion and
equipment expenses reflected the development and promotion of new products and
services, the costs related to the expansion of the electronic payment system
and the institutional campaign launched in the continental U.S.
The Corporation's total assets at June 30, 1997, amounted to $19.2
billion, compared with $16.4 billion at June 30, 1996. BPPR accounted for $2.1
billion of that growth, largely as a result
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4-POPULAR, INC. 1997 SECOND QUARTER RESULTS
of the acquisition of Roig Commercial Bank effective on June 30, 1997. Also,
National Bancorp. Inc. and CBC Bancorp, Ltd., acquired in May 1997, contributed
with $524 million in assets. Total assets at March 31, 1997, were $17.4
billion.
Total loans were $10.9 billion at June 30, 1997, or $1.6 billion more
than the June 30, 1996 level of $9.3 billion and $1.0 billion over the March 31,
1997 level of $9.9 billion. Commercial loans accounted for the largest growth,
particularly at BPPR, which increased $554 million. The merger with Roig
Commercial Bank contributed $361 million of the loan portfolio increase at
BPPR.
The allowance for Loan losses at June 30, 1997, amounted to $207
million, or 1.89% of loans. This amount compares with $178 million or 1.92% at
June 30, 1996, and $191 million or 1.94% at March 31, 1997. At June 30, 1997,
the allowance for loan losses as a percentage of non-performing assets was
97.6% compared with 117.0% at June 30, 1996, and 110.0% at March 31, 1997. The
Corporation has consistently increased its allowance for loan losses to keep
pace with the loan growth, the level of charge-offs and the increase in
non-performing loans.
Total deposits grew to $11.4 billion at June 30, 1997, from $10.6
billion at June 30, 1996, notwithstanding the reduction of $696 million in 936
deposits at BPPR. The acquisitions completed during the second quarter of 1997
contributed $1.0 billion in deposits. In addition, deposits at BPPR, excluding
936 deposits, rose $357 million. At March 31, 1997 total deposits amounted to
$10.5 billion.
Borrowed funds increased to $5.9 billion at June 30, 1997, compared
with $4.4 billion at the same date a year earlier and $5.3 billion at March 31,
1997. Borrowed funds were used primarily to finance loan growth and arbitrage
activities. Moreover, on May 23, 1997, the Corporation and two of its
subsidiaries, filed a "shelf" registration with the Securities and Exchange
Commission, which allow them to issue medium-term notes, unsecured debt
securities and preferred stock in an aggregate amount of up to $1 billion. As
of June 30, 1997, the Corporation had issued $30 million in medium-term notes
under the new "shelf registration".
At June 30, 1997, stockholders' equity totaled $1.42 billion, compared
with $1.19 billion at the same date last year. Stockholders' equity was $1.29
billion at March 31, 1997. On May 8, 1997, the Board of Directors approved a
stock repurchase program of up to 3 million shares of the
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5 - POPULAR, INC. 1997 SECOND QUARTER RESULTS
outstanding common stock of the Corporation. As of June 30, 1997, the
Corporation had purchased 380,000 shares under this program.
The market value of the Corporation's common stock at June 30, 1997, was
$40.375 per share, compared with $22.50 at June 30, 1996, and $35.50 at March
31, 1997. The Corporation's market capitalization at June 30, 1997, was $2.8
billion, compared with $1.5 billion at June 30, 1996, and $2.4 billion at March
31, 1997. at June 30, 1997, the Corporation's common stock had a book value
per share of $19.41. During this quarter the Corporation issued 2,462,272
common shares in connection with the acquisitions of National Bancorp, Inc. and
Roig Commercial Bank.
As previously mentioned, during this quarter Banco Popular made progress
toward its strategic plan of becoming the bank for the Hispanic population in
the continental U.S. The Corporation acquired the operations of Seminole
National Bank, now Banco Popular, N.A. (Florida), on April 30, 1997, which
operates three branches in Sanford and Orlando, and launched a new credit card.
In May 1997, the Corporation acquired National Bancorp, Inc. and CBC Bancorp,
Ltd. National Bancorp, Inc. is the holding company of American Midwest Bank &
Trust which operates two branches in Chicago, Illinois. CBC Bancorp has two
banking subsidiaries, Capitol Bank & Trust and Capitol Bank of Westmont. These
acquisitions in the continental U.S. added $272 million in loans and $441
million deposits. Besides these acquisitions, on April 25, 1997, the
Corporation's shareholders approved the change of the Corporation's name to
Popular, Inc. and Banco Popular began a national campaign emphasizing its
corporate image and cultural strength in order to attract the Hispanic segment.
Furthermore, in Puerto Rico, the Corporation completed the acquisition of Roig
Commercial Bank on June 30, 1997, with its branch network of 25 branches mostly
located in the eastern part of the island. The total loans and deposits
acquired amounted to $361 million and $584 million, respectively.
***
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<TABLE>
<CAPTION>
POPULAR, INC.
FINANCIAL SUMMARY
(In thousands, except per share data) Second For the six months ended
1997 1996 Quarter June 30
------------------------------------ 1997-1996 -----------------------------------
Second First Second Percent Percent
Quarter Quarter Quarter Variance 1997 1996 Variance
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<S> <C> <C> <C> <C> <C> <C> <C>
Summary of Operations
Interest income $359,005 $334,265 $309,975 15.82% $693,270 $612,902 13.11%
Interest expense 168,399 153.621 141,767 18.79 322,020 282,234 14.10
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Net interest income 190,606 180,644 168,208 13.32 371,250 330.668 12.27
Provision for loan losses 25,413 23,687 21,672 17.26 49,100 42,945 14.33
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Net interest income after provision
for loan losses 165,193 156,957 146,536 12.73 322,150 287,723 11.97
Other operating income 54,124 55,482 50,718 6.72 109.606 101,043 8.47
Gain (loss) on sale of securities 1,286 (1,660) (20) (374) 709
Trading account profit (loss) 878 433 (1,383) 1,311 (445)
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Total other income 56,288 54,255 49,315 14.14 110,543 101,307 9.12
Salaries and benefits 67,651 65,045 61,766 9.53 132,696 123,499 7.45
Profit sharing 6,788 6,440 5,685 19.40 13,228 11,755 12.53
Other operating expenses 77,668 70,640 64,393 20.62 148,308 127,289 16.51
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Total operating expenses 152,107 142,125 131,844 15.37 294,232 262,543 12.07
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Income before income tax 69,374 69,087 64,007 8.39 138,461 126,487 9.47
Income tax 18,283 19,548 17,952 1.84 37,831 35,290 7.20
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Net income $51,091 $49,539 $46,055 10.93 $100,630 $91,197 10.34
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Net income applicable to common stock $49,004 $47,452 $43,967 11.46 $96,455 $87,022 10.84
Earnings per common stock ------------------------------------ --------- -----------------------------------
New income $0.74 $0.72 $0.67 10.87 $1.46 $1.32 10.40
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Average common shares outstanding 66,350,298 66,121,855 66,001,180 66,235,718 65,975,526
Common shares outstanding at end of period 68,236,048 66,121,855 66,001,180 68,236,048 66,001,180
</TABLE>
6
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POPULAR, INC.
FINANCIAL SUMMARY
(In thousands)
<TABLE>
<CAPTION>
SECOND FOR THE SIX MONTHS ENDED
1997 1998 QUARTER JUNE 30,
-------------------------------------- 1997-1996 ---------------------------------
SECOND FIRST SECOND PERCENT PERCENT
QUARTER QUARTER QUARTER VARIANCE 1997 1996 VARIANCE
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SELECTED AVERAGE BALANCES
<S> <C> <C> <C> <C> <C> <C> <C>
Total assets $17,625,911 $16,916,854 $15,988,100 10.24 $17,273,341 $15,772,465 9.52
Loans 10,164,122 9,777,772 9,033,179 12.52 9,972,014 8,890,918 12.16
Earning assets 16,732,491 15,855,669 15,020,119 11.40 16,296,502 14,825,513 9.92
Interest-bearing liabilities 13,726,865 13,147,072 12,464,300 10.13 13,438,570 12,336,934 8.93
Stockholders' equity 1,326,195 1,279,553 1,167,856 13.56 1,303,003 1,162,372 12.10
PERFORMANCE RATIOS
Net interest yield 4.56% 4.58% 4.48% 4.57% 4.47%
Return on assets 1.16 1.19 1.16 1.17 1.16
Return on common equity 16.03 16.32 16.56 16.17 16.48
CREDIT QUALITY DATA
Nonperforming assets $ 211,737 $ 173,979 $ 152,401 38.93 $ 211,737 $ 152,401 38.93
Net loans charged-off 22,886 17,901 18,066 26.68 40,787 33,008 23.57
Allowance for loan losses 206,695 191,360 178,330 15.91 206,695 178,330 15.91
Nonperforming assets to total assets 1.11% 1.00% 0.93% 1.11% 0.93%
Allowance for losses to loans 1.89 1.94 1.92 1.89 1.92
SELECTED FINANCIAL DATA AT PERIOD-END
Total assets $19,151,559 $17,401,458 $19,151,559 $16,442,137 16.48
Loans................................ 10,909,368 9,889,254 10,909,368 9,279,332 17.57
Earning assets....................... 17,774,469 16,336,734 17,774,469 15,333,607 15.92
Interest-bearing liabilities......... 14,851,191 13,560,511 14,851,191 12,833,828 15.72
Stockholders' equity ................. 1,424,131 1,287,515 1,424,131 1,187,138 19.96
</TABLE>
*Not on a taxable equivalent basis
