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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 9, 1998
POPULAR, INC.
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(Exact name of registrant as specified in its charter)
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<S> <C> <C>
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 July 9, 1998, Popular, Inc. (the "Corporation") announced by way of
a news release, its operational results for the quarter and six-month period
ended June 30, 1998. A copy of the Corporation's release, dated July 9, 1998,
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 9, 1998, announcing the Corporation and
subsidiaries earnings for the quarter and six-month period ended June 30, 1998.
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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 10 1998 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 99(a)
[POPULAR LETTERHEAD]
For additional information contact:
Mr. Jorge A. Junquera
Senior Executive Vice President
Telephone (787) 754-1685
July 9, 1998 News Release
POPULAR, INC. EARNINGS FOR THE QUARTER AND SIX-MONTH PERIOD ENDED JUNE 30, 1998
Popular, Inc. (the Corporation) announced net income of $57.5 million
for the second quarter of 1998, an increase of $6.4 million or 12.5% over the
$51.1 million reported for the second quarter of 1997. Earnings per common share
(EPS) for the quarter, after adjusting for the stock split in the form of a
dividend of one share for each share outstanding effective on July l, 1998, were
$0.41 per common share, a 10.7% increase over the $0.37 per common share
reported for the same period a year earlier. Average shares outstanding used in
the above computations were 135,497,786 for the second quarter of 1998 and
132,700,596 for the same quarter of 1997. Net earnings for the first quarter of
1998 were $54.8 million, or $0.39 per common share, based on 135,435,096 average
shares then outstanding.
The Corporation's return on assets (ROA) and return on common equity
(ROE) for the second quarter of 1998 were 1.16% and 15.50%, respectively,
compared with 1.16% and 16.07% for the same period in 1997 and 1.14% and 15.36%
for the first quarter of 1998.
For the first six months of 1998, the Corporation's net earnings
reaches $112.3 million, compared with $100.6 million for the same period in
1997. EPS for the first six months of 1998, were $0.80 compared with $0.73 for
the same period of 1997. ROA and ROE for the first six months of 1998 were 1.15%
and 15.43%, respectively. For the same period of 1997, these ratios were 1.17%
and 16.20%.
On April 23, 1998, the Board of Directors authorized a two-for-one
common stock split the form of a dividend, bringing total outstanding shares to
135,497,786. The new shares were distributed on July 1, 1998, to shareholders
of record as of June 12, 1998. As mentioned above, all per share data included
herein has been adjusted to reflect the stock split.
The Corporation's results of operations for the quarter ended June 30,
1998, when compared with the same quarter of 1997, reflected an increase of
$23.8 million in net interest income coupled
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2 - POPULAR, INC. 1998 SECOND QUARTER RESULTS
with an increase of $16.7 million in other revenues. These improvements were
partially tempered by rises of $8.1 million in the provision for loan losses,
$23.0 million in operating expenses and $3.0 million in income taxes.
Net interest income for the second quarter of 1998 amounted to $214.4
million, an increase of 12.5% over the same period in 1997. The growth in net
interest income was primarily due to loan growth, particularly in commercial
loans, and to higher levels in the investment portfolio. The acquisitions made
on April 30, and May 31, 1997, in Florida and Illinois, respectively, together
with the acquisition of Roig Commercial Bank (RCB) on June 30, 1997, accounted
for most of the increase in average earning assets. The net interest yield for
the quarter ended June 30, 1998, was 4.57%, compared with 4.56% for the second
quarter of 1997. For the first quarter of 1998 the net interest yield was
4.66%. For the first six months of 1998, the net interest yield was 4.59%,
compared with 4.54% for the same period of 1997.
The provision for loan losses for the second quarter of 1998 amounted
to $33.5 million compared with $25.4 million for the second quarter of 1997.
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,
1998, were $27.2 million or 0.94% of average loans compared with $22.9 million
or 0.90% for the second quarter of 1997, and $27.5 million or 0.96% for the
first quarter of 1998. As a percentage of average loans, net charge-offs were
0.95% and 0.82% for the six-month periods ended on June 30, 1998 and 1997,
respectively. The increase in net charge-offs was primarily 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 $222 million or 1.89% of loans at June 30, 1998,
compared with $211 million or 1.94%, at the end of the second quarter of 1997,
and $213 million or 1.85% at March 31, 1998. The rise in non-performing assets
from June 30, 1997, was mainly reflected in non-performing consumer loans and
other real estate owned, partially offset by a reduction in non-performing
commercial loans. As reported before, the Corporation reports non-performing
assets on a more conservative basis than most U.S. banks. The standard industry
practice is to place non-performing commercial loans on non-accrual status when
payments of principal or interest are delinquent 90 days. However, the
Corporation's policy is to place commercial loans on non-accrual status when
payments of principal
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3 - POPULAR, INC. 1998 SECOND QUARTER RESULTS
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.
Total non-interest income grew $16.7 million or 29.6%, from $56.2
million for the second quarter of 1997 to $72.9 million for the same period in
1998. The growth in non-interest income was led by an increase of $7.1 million
in other revenues, $4.0 million in other service fees, and $3.3 million in
service charges on deposit accounts. There was an increase in other operating
income resulting from the recording during the second quarter of 1997, of a
loss of $3.6 million in the market value of a real property which was finally
sold later in 1997, and higher gains on loans sold for the quarter ended June
30, 1998. Other service fees amounted to $28.8 million for the three-month
period ended June 30, 1998, compared with $24.8 million for the same period a
year earlier, reflecting a rise of $1.5 million in credit card fees and
discounts due to increased merchant activity and card usage. Debit card fees
rose $0.7 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 $0.8 million mainly as a
result of the fees earned by the retail division of Popular Securities, which
started operations at the end of the second quarter of 1997. Service charges
on deposit accounts increased due to higher activity on commercial and retail
accounts and a higher volume of deposits.
Personnel costs increased $8.2 million as compared with the second
quarter of 1997. Most of the increase was due to the acquisitions made since the
second quarter of 1997 and annual merit increases. Full-time equivalents (FTE)
amounted to 9,148 at the end of this quarter, up 366 from 8,782 FTEs at the
same date in 1997.
Other operating expenses increased $14.8 million, reaching $92.4
million for the second quarter of 1998. This increase was mostly reflected in
net occupancy expenses, professional fees, amortization of intangibles and
equipment expenses. Net occupancy expenses grew $3.0 million, due in part to
the sale of the income-producing real property previously mentioned and the
Corporation's growth and expansion. Professional fees rose $2.9 million
reflection higher consulting and technical support fees for business expansion
and costs incurred in relation to the Coporation's action plan to address the
Year 2000 Issue. Amortization of intangibles increased $2.0 million, mostly
related to the premiums paid on the operations acquired during the second
quarter of 1997.
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4 - POPULAR, INC. 1998 SECOND QUARTER RESULTS
The increase in equipment expenses resulted from the Corporation's business and
geographic expansion and expenditures associated with new technology and
systems enhancements.
The Corporation's total assets at June 30, 1998, amounted to $20.0
billion, compared with $19.1 billion at June 30, 1997. Total assets at March
31, 1998, were also $20.0 billion. The Corporation's earning assets reached
$18.7 billion at June 30, 1998, compared with $17.8 billion and $18.7 billion
at June 30, 1997 and March 31, 1998, respectively.
Total loans were $11.8 billion at June 30, 1998, or $844 million more
than the June 30, 1997 level of $10.9 billion and $210 million over the March
31, 1998 level of $11.5 billion. Commercial loans accounted for the largest
growth since June 30, 1997, increasing $500 million. The growth mostly resulted
from marketing efforts directed to the retail and middle market and the
Corporation's expansion in the U.S.
The allowance for loan losses at June 30, 1998, amounted to $224
million or 1.91% of loans. This amount compares with $207 million or 1.89% at
June 30, 1997, and $218 million or 1.89% at March 31, 1998. At June 30, 1998,
the allowance for loan losses as a percentage of non-performing assets was
100.8% compared with 97.9% at June 30, 1997, and 102.0% at March 31, 1998. 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 $12.l billion at June 30, 1998, from $11.4
billion at June 30, 1997. Most of the growth was realized in savings and time
deposits, which increased $268 million and $339 million, respectively. At March
31, 1998, total deposits amounted to $12.0 billion. Total deposits in Puerto
Rico, the Corporation's principal place of business, increased to $8.7 billion
at June 30, 1998, from $8.6 billion at March 31, 1998, notwithstanding the
decrease of $62 million in 936 deposits.
Borrowed funds, including subordinated notes and capital securities,
amounted to $5.9 billion at June 30, 1998 and 1997,compared with $6.1 billion at
March 31, 1998.
At June 30, 1998, stockholders' equily totaled $1.59 billion, compared
with $1.42 billion at the same date last year. Stockholders' equity was $1.55
billion at March 31, 1998. Unrealized holding gains on securities
available-for-sale, net of deferred taxes, amounted to $42.3 million at June
30, 1998, compared with $6.3 million and $37.1 million at June 30, 1997 and
March 31, 1998,
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5 - POPULAR, INC. 1998 SECOND QUARTER RESULTS
respectively.
The market value of the Corporation's common stock at June 30, 1998,
atter considering the stock split in the form of a dividend, was $33.25 per
share, compared with $20.19 at June 30, 1997, and $29.34 at March 31, 1998.
The Corporation's market capitalization at June 30, 1998, was $4.5 billion,
compared with $2.8 billion at June 30, 1997, and $4.0 billion at March 31,
1998. At June 30, 1998, the Corporation's common stock had a book value per
share of $11.02.
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POPULAR, INC.
FINANCIAL SUMMARY
(In thousands, except per share data)
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<CAPTION>
Second FOR THE SIX MONTHS ENDED
1998 1997 Quarter JUNE 30
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SECOND First Second Percent Percent
QUARTER Quarter Quarter Variance 1998 1997 Variance
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SUMMARY OF OPERATIONS
Interest income $ 402,864 $ 396,368 $ 359,005 12.22% $ 799,232 $ 693,270 15.28%
Interest expense 188,472 183,664 168,399 11.92 372,136 322,020 15.56
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Net interest income 214,392 212,704 190,606 12.48 427,096 371,250 15.04
Provision for loan losses 33,524 33,565 25,413 31.92 67,089 49,100 36.64
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Net interest income after provision
for loan losses 180,868 179,139 165,193 9.49 360,007 322,150 11.75
Other operating income 68,526 66,415 54,124 26.61 134,941 109,606 23.11
Gain (loss) on sale of securities 3,049 867 1,286 3,916 (374)
Trading account profit 1,311 669 817 1,980 1,250
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Total other income 72,886 67,951 56,227 29.63 140,837 110,482 27.48
Salaries and benefits 76,393 77,711 67,651 12.92 154,104 132,696 16.13
Profit sharing 6,264 5,683 6,788 - 7.72 11,947 13,228 - 9.68
Amortization of intangibles 6,849 6,784 4,841 41.48 13,633 9,279 46.92
Other operating expenses 85,539 82,202 72,766 17.55 167,741 138,968 20.70
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Total operating expenses 175,045 172,380 152,046 15.13 347,425 294,171 18.10
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Income before income tax 78,709 74,710 69,374 13.46 153,419 138,461 10.80
Income tax 21,248 19,915 18,283 16.22 41,163 37,831 8.81
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Net income $ 57,461 $ 54,795 $ 51,091 12.47 $ 112,256 $ 100,630 11.55
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Net income applicable to common stock $ 55,374 $ 52,708 $ 49,003 13.00 $ 108,081 $ 96,455 12.05
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Earnings per common share:
Net income $ 0.41 $ 0.39 $ 0.37 10.67 $ 0.80 $ 0.73 9.60
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Average common shares outstanding* 135,497,786 135,435,096 132,700,596 135,466,614 132,499,878
Common shares outstanding at end of period* 135,497,786 135,435,096 136,472,096 135,497,786 136,472,096
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* Restated to reflect the stock split in the form of a dividend of one share for
each share outstanding effective on July 1, 1998.
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POPULAR, INC.
FINANCIAL SUMMARY
(In thousands)
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<CAPTION>
Second FOR THE SIX MONTHS ENDED
1998 1997 Quarter JUNE 30,
--------------------------------------------- 1998-1997 --------------------------------------
Second First Second Percent Percent
Quarter Quarter Quarter Variance 1998 1997 Variance
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SELECTED AVERAGE
BALANCES
Total assets $19,934,645 $19,485,912 $17,624,817 13.11 $19,711,518 $17,272,791 14.12
Loans 11,615,054 11,466,638 10,164,122 14.28 11,541,256 9,972,014 15.74
Earning assets 18,769,875 18,340,991 16,728,780 12.20 18,556,618 16,294,637 13.88
Interest-bearing
liabilities 15,338,018 15,032,597 13,746,479 11.58 15,186,151 13,448,432 12.92
Stockholders' equity 1,533,036 1,492,184 1,322,946 15.88 1,512,723 1,301,369 16.24
PERFORMANCE RATIOS
Net interest yield* 4.57% 4.66% 4.56% 4.59% 4.54%
Return on assets 1.16 1.14 1.16 1.15 1.17
Return on common equity 15.50 15.36 16.07 15.43 16.20
CREDIT QUALITY DATA
Nonperforming assets $ 222,258 $ 213,366 $ 211,228 5.22 $ 222,258 $ 211,228 5.22
Net loans charged-off 27,186 27,508 22,886 18.79 54,694 40,787 34.10
Allowance for loan losses 224,045 217,708 206,719 8.38 224,045 206,719 8.38
Nonperforming assets to
total assets 1.11% 1.07% 1.10% 1.11% 1.10%
Allowance for losses
to loans 1.91 1.89 1.89 1.91 1.89
SELECTED FINANCIAL DATA
AT PERIOD-END
Total assets $19,997,636 $20,018,220 $19,997.636 $19,145,844 4.45
Loans.................... 11,753,213 11,543,169 11,753,213 10,909,365 7.74
Earning assets........... 18,725,774 18,748,873 18,725,774 17,771,069 5.37
Interest-bearing
liabilities............. 15,467,424 15,619,792 15,467,424 14,850,507 4.15
Stockholders' equity..... 1,593,693 1,546,238 1,593,683 1,424,130 11.91
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*Not on a taxable equivalent basis
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