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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): October 7, 1997
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POPULAR, INC.
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(Exact name of registrant as specified in its charter)
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COMMONWEALTH OF PUERTO RICO NO. 0-13818 NO. 66-0416582
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(State or other jurisdiction of incorporation (Commission (IRS Employer
File Number) Identification No.)
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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 October 7, 1997, Popular, Inc. (the "Corporation") announced by way of a
news release, its operational results for the quarter and nine-month period
ended September 30, 1997. A copy of the Corporation's release, dated October
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 October 7, 1997, announcing the Corporation and
subsidiaries earnings for the quarter and nine-month period ended September 30,
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: October 8, 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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Exhibit Index
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Exhibit Number Description
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99(a) News release, dated October 7, 1997
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EXHIBIT 99(a)
[POPULAR, INC. LETTERHEAD]
For additional information contact:
Jorge A. Junquera
Senior Executive Vice President
(787)754-1685
October 7, 1997 NEWS RELEASE
POPULAR, INC. EARNINGS FOR THE QUARTER AND NINE-MONTH PERIOD ENDED
SEPTEMBER 30, 1997
Popular, Inc. (the Corporation) reported net income of $53.6 million
for the third quarter of 1997, compared with $46.3 million reported for the
same quarter of 1996, an increase of $7.3 million or 15.9%. Earnings per common
share (EPS) for the quarter were $0.76, based on 67,866,284 average shares
outstanding, compared with $0.67, based on 66,048,673 average shares
outstanding for the quarter ended September 30, 1996, an increase of 13.4%.
Net earnings for the first and second quarter of 1997 were $49.5 million and
$51.1 million, respectively, or $0.72 and $0.74 per common share, based on
66,121,855 and 66,376,616 average shares outstanding, respectively.
Return on assets (ROA) and return on common equity (ROE) for the third
quarter of 1997 were 1.10% and 15.46%, respectively. For the same period of
1996, the Corporation reported ROA and ROE of 1.10% and 15.94%, respectively.
For the second quarter of 1997 these ratios were 1.16% and 16.07%.
For the first nine months of 1997, the Corporation's net earnings
amounted to $154.2 million, compared with $137.5 million for the same period in
1996. EPS for the first nine months of 1997 were $2.22, compared with $1.99
for the same period of 1996. ROA and ROE for the first nine months of 1997
amounted to 1.15% and 15.93%, respectively. For the same period of 1996, these
ratios were 1.14% and 16.29%.
The Corporation's results of operations for the quarter ended September
30, 1997, reflected increases of $30.8 million in net interest income and
$14.9 million in other revenues when compared with the same quarter of 1996.
These improvements were partially offset by increases of $31.9 million in
operating expenses and $7.4 million in the provision for loan losses.
The net interest income for the third quarter of 1997 increased 17.9%
when compared with the same period of 1996 and 6.5% over the second quarter of
1997, totaling $203.0 million. The increase in net interest income over the
third quarter of 1996, was principally due to an increase of
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2-POPULAR, INC. 1997 THIRD QUARTER RESULTS
$2.5 billion in average earning assets and an improvement in the yield on loans
and investment securities. The acquisitions completed after the third
quarter of 1996 contributed to the increase in earning assets, particularly the
increase in loans. 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 $697
million and $473 million in the average volume of certificates of deposits and
borrowings from 936 companies, respectively, and also due to arbitrage
opportunities undertaken during the quarter. The net interest margin for the
quarter ended on September 30, 1997, was 4.42%, compared with 4.36% for the
third quarter of 1996. For the first and second quarter of 1997 the net
interest margin was 4.59% and 4.56%, respectively. For the first nine months
of 1997, the net interest margin was 4.51% compared with 4.43% for the same
period of 1996.
The increase in the provision for loan losses was basically due to the
growth in the loan portfolio, and the increase in net charge-offs and
non-performing assets. The provision for loan losses totaled $29.8 million for
the third quarter of 1997, an increase of $7.4 million or 33.0% when compared
with the same quarter of 1996. Net charge-offs for the quarter ended September
30, 1997, were $31.5 million or 1.14% of average loans compared with $18.8
million or 0.80% for the third quarter of 1996, and $22.9 million or 0.90% for
the second quarter of 1997. For the nine-month periods ended September 30,
1997 and 1996, and net charge-offs as a percentage of average loans were 0.93%
and 0.76%, respectively. The increase experienced during 1997 has been
principally in the commercial and consumer loan categories, particularly
personal loans, and is mostly related to higher delinquency levels and
bankruptcies in both the U.S. and Puerto Rico and the implementation of the
Corporation's more conservative charge-off policy at the acquired banks.
Non-performing assets were $213 million or $1.90% of loans at September
30, 1997, compared with $153 million or 1.60%, at the end of the third quarter
of 1996 and $211 million or 1.94% at June 30, 1997. The increase of $59.3
million from September 30, 1996, was mainly reflected in the commercial and
mortgage non-performing loans. The increase of $30 million in the commercial
non-performing portfolio was the result of the classification on non-accrual
of a $9.8 million commercial income-producing real estate loan in the U.S.
Virgin Islands, the non-performing loans of the banks acquired during the
quarter ended June 30, 1997, and the higher loan volume. The
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3-POPULAR, INC. 1997 THIRD QUARTER RESULTS
increase of $17 million in non-performing mortgage loans was mostly reflected
in Equity One, as a result of the growth in its portfolio and the increased
level of personal bankruptcy filings. The Corporation's policy is to place
commercial loans on non-accrual status when payments of principal or interest
are delinquent 60 days, which is more conservative than most U.S. banks that
place commercial loans in non-accrual status when payments of principal or
interest are delinquent 90 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, excluding securities and trading transactions,
rose $18.1 million over the third quarter of 1996, to $64.8 million, as a
result of an increase of $8.9 million in other income, $6.2 million in other
service fees and $3.0 million in service charges on deposit accounts. Banco
Popular de Puerto Rico (BPPR) accounted for most of the increase in service
charges on deposit accounts, mainly due to the higher volume of deposits,
driven by the acquisition of Roig Commercial Bank (RCB). Other service fees
amounted to $25.2 million for the three-month period ended September 30, 1997,
compared with $19.0 million for the same period a year earlier, primarily due
to rises in credit card fees due to increased merchant activity and card usage,
in debit card fees principally as a result of the sustained growth in the
volume of transactions at point-of-sale (POS) terminals and higher fees related
to the sale and administration of investment products. The increase of $8.9
million in other income was the result of a securitization of $103 million of
loans at Equity One, resulting in a pretax gain of $3.4 million, and higher
gains on sale of mortgage loans.
The Corporation showed a decrease of $4.4 million in gains on sale of
securities as a result of gains realized in the quarter ended September 30,
1996, on the sale of equity securities by one of the Corporation's subsidiaries.
Personnel costs increased $11.4 million as compared with the third
quarter of 1996. Most of the increase was mainly due to the operations
acquired since the third quarter of 1996, business expansion, including the
launching of a credit card program in the U.S., annual merit increases and
increased medical plan costs. Other operating expenses increased $20.5
million, mostly in other taxes, business promotion and equipment expenses.
Other taxes increased $2.4 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
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4-POPULAR, INC. 1997 THIRD QUARTER RESULTS
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, the institutional campaign
launched in the continental U.S. to emphasize Banco Popular's presence and
image as a Hispanic bank, and the promotional efforts related to the new credit
card program in the U.S. Also, there was an increase in the amortization of
intangible assets resulting from the acquisitions made by the Corporation after
the third quarter of 1996.
The Corporation's total assets at September 30, 1997, amounted to $19.9
billion, compared with $16.8 billion at September 30, 1996. BPPR accounted for
most of the increase as a result of the acquisition of RCB on June 30, 1997, and
a higher volume of investment securities. Also, National Bancorp, Inc. and CBC
Bancorp, Ltd., acquired in May 1997, contributed to the increase. Total assets
at June 30, 1997, were $19.1 billion.
Total loans reached $11.2 billion at September 30, 1997, or $1.6 billion
higher than the level of $9.6 billion at September 30, 1996, and $277 million
over the level of $10.9 billion at June 30, 1997. Commercial loans accounted
for the largest growth, particularly at BPPR, which increased $630 million. The
banks acquired after September 30, 1996, contributed significantly to the
increase in the Corporation's commercial loan portfolio.
The allowance for loan losses amounted to $205 million as of September
30, 1997, or 1.83% of loans, compared with $182 million or 1.90% at the same
date in 1996. At June 30, 1997, the allowance for loan losses totaled $207
million or 1.89% of loans. The allowance as a percentage of non-performing
assets was 96.4% at September 30, 1997, compared with 118.9% at the end of the
third quarter of 1996 and 97.9% at June 30, 1997. The reduction in the
allowance coverage ratios is primarily attributed to the large increase in the
level of non-performing mortgage loans at Equity One, a portfolio with minimal
charge-offs given the nature of its collateral.
Total deposits were $11.2 billion at September 30, 1997, compared with
$10.6 billion at September 30, 1996, and $11.4 billion at the end of the second
quarter of 1997. The increase in deposits since September 30, 1996, was
achieved in spite of a reduction of $700 million in 936 deposits. The increase
was mostly due to the acquisition of $584 million in total deposits of RCB on
June 30, 1997, and the acquisitions of National Bancorp and CBC Bancorp in May
1997, with deposits of $142 million and $263 million, respectively, at
September 30, 1997.
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5- POPULAR, INC. 1997 THIRD QUARTER RESULTS
Borrowed funds increased to $6.9 billion at September 30, 1997,
compared with $4.7 billion at the same date a year earlier and $5.9 billion at
June 30, 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 September 30, 1997, the Corporation had issued $130 million in medium-term
notes under the new "shelf" registration.
At September 30, 1997, stockholders' equity totaled $1.45 billion,
compared with $1.22 billion at the same date last year. Stockholders' equity
was $1.42 billion at June 30, 1997. On May 8, 1997, the Board of Directors
approved a stock repurchase program of up to 3 million shares of the
outstanding common stock of the Corporation, when market conditions so warrant.
As of September 30, 1997, the Corporation had purchased 988,800 shares under
this program with a total cost of $39.6 million. In addition, on August 14,
1997, the Board of Directors of Popular, Inc. declared a cash dividend of $0.22
per common share payable on October 1, 1997, to shareholders of record as of
September 12, 1997. This represents a 22.2% increase over the $0.18 per share
paid in previous quarterly dividends.
The market value of the the Corporation's common stock at September 30,
1997, was $53.00 per share, compared with $27.00 at September 30, 1996, and
$40.375 at June 30, 1997. The Corporation's market capitalization at September
30, 1997, was $3.6 billion, compared with $1.8 billion at September 30, 1996,
and $2.8 billion at June 30, 1997. At September 30, 1997, the Corporation's
common stock had a book value per share of $19.95.
During this quarter, Banco Popular continued making progress toward
accomplishing its goal of becoming the number one Hispanic bank in the United
States. On September 11, 1997, the Corporation announced the signing of a
definitive agreement to acquire all of the common stock of Houston
Bancorporation, which is the bank holding company of Citizens National Bank in
Houston, Texas. This bank, which had total assets of $51 million and total
deposits of $39 million as of August 31, 1997, is one of few Houston banks
marketing primarily to ethnic minorities, a leader in the origination of
low-moderate income housing loans in the area, and has been one of the
country's highest performing community banks for the past five years. Pending
regulatory approval, the
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6- POPULAR, INC. 1997 THIRD QUARTER RESULTS
transaction is expected to close during the fourth quarter of 1997. Also
during this quarter, Banco Popular, N.A. (Florida) opened two new branches,
increasing to five the number of branches in Florida.
On September 12, 1997, the integration of Roig branches, products and
services with those of BPPR took place. After that date, 17 out of 25 branches
still operating as Roig since the merger, became part of BPPR branch network,
while the remaining eight branches were consolidated into existing branches of
BPPR. Furthermore, in Illinois, the Corporation will be integrating by the end
of October the four banking subsidiaries currently operating in that state.
***
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POPULAR, INC.
FINANCIAL SUMMARY
(in thousands, except per share data)
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FOR THE NINE MONTHS ENDED
1997 1996 Third SEPTEMBER 30
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1997-1996
Third Second Third Percent Percent
Quarter Quarter Quarter Variance 1997 1996 Variance
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SUMMARY OF OPERATIONS
Interest income $ 393,414 $ 359,005 $ 327,097 20.27% $ 1,086,684 $ 939,999 15.60%
Interest expense 190,409 168,399 154,861 22.95 512,429 437,095 17.24
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Net interest income 203,005 190,606 172,236 17.86 574,255 502,904 14.19
Provision for loan losses 29,849 25,413 22,436 33.04 78,949 65,381 20.75
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Net interest income after
provision for loan losses 173,156 165,193 149,800 15.59 495,306 437,523 13.21
Other operating income 64,832 54,124 46,704 38.81 174,438 147,747 18.07
Gain (loss) on sale of
securities 519 1,286 4,911 145 5,620
Trading account profit (loss) 959 817 (216) 2,209 (661)
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Total other income 66,310 56,227 51,399 29.01 176,792 152,706 15.77
Salaries and benefits 73,372 67,651 62,304 17.76 206,068 185,803 10.91
Profit sharing 6,165 6,788 5,789 6.50 19,393 17,544 10.54
Other operating expenses 87,805 77,607 67,360 30.35 236,052 194,649 21.27
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Total operating expenses 167,342 152,046 135,453 23.54 461,513 397,996 15.96
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Income before income tax 72,124 69,374 65,746 9.70 210,585 192,233 9.55
Income tax 18,511 18,283 19,473 -4.94 56,342 54,763 2.88
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Net income $ 53,613 $ 51,091 $ 46,273 15.86 $ 154,243 $ 137,470 12.20
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Net income applicable to
common stock $ 51,526 $ 49,003 $ 44,186 16.61 $ 147,981 $ 131,208 12.78
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Earnings per common share:
Net income $ 0.76 $ 0.74 $ 0.67 13.49 $ 2.22 $ 1.99 11.69
Average common shares
outstanding 67,866,284 66,376,616 66,048,673 66,794,641 66,000,086
Common shares outstanding
at end of period 67,656,166 68,236,048 66,048,673 67,656,166 68,048,673
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POPULAR, INC.
FINANCIAL SUMMARY
(in thousands)
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FOR THE NINE MONTHS ENDED
1997 1996 Third SEPTEMBER 30
------------------------------------------- Quarter --------------------------------------
1997-1996
Third Second Third Percent Percent
Quarter Quarter Quarter Variance 1997 1996 Variance
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SELECTED AVERAGE BALANCE
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Total assets $19,347,847 $17,624,817 $16,796,305 15.19 $17,972,077 $16,116,236 11.52
Loans 11,033,765 10,164,122 9,386,931 17.54 10,329,820 9,057,462 14.05
Earning assets 18,314,931 16,728,780 15,769,433 16.14 16,975,468 15,142,449 12.11
Interest-bearing liabilities 15,306,879 13,736,508 13,285,087 15.22 14,074,722 12,655,292 11.22
Stockholders' equity 1,421,890 1,322,946 1,202,292 18.26 1,341,984 1,175,776 14.14
PERFORMANCE RATIOS
Net interest yield* 4.42% 4.56% 4.36% 4.51% 4.43%
Return on assets 1.10 1.16 1.10 1.15 1.14
Return on common equity 15.46 16.07 15.94 15.93 16.29
CREDIT QUALITY DATA
Nonperforming assets 212,776 $ 211,228 $ 153,400 38.71 $ 212,775 153,400 38.71
Net loans charged-off 31,491 22,886 18,796 67.54 72,278 51,804 39.52
Allowance for loan losses 205,077 206,719 182,372 12.45 205,077 182,372 12.45
Nonperforming assets
to total assets 1.07% 1.10% 0.92% 1.07% 0.92%
Allowance for losses to loans 1.83 1.89 1.90 1.83 1.90
SELECTED FINANCIAL DATA
AT PERIOD-END
Total Assets $19,893,600 $19,145,299 $19,893,600 $16,755,578 18.73
Loans.......................... 11,186,320 10,909,365 11,186,320 9,589,288 16.65
Earning assets................. 18,583,339 17,771,069 18,583,339 15,666,003 18.62
Interest-bearing liabilities... 15,820,136 14,850,393 16,820,136 13,158,716 20,23
Stockholders' equity........... 1,449,780 1,424,130 1,449,780 1,220,105 18.82
*Not on a taxable equivalent basis
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