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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): April 7, 1998
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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 (Commission (IRS Employer
of 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 April 7, 1998, Popular, Inc. (the "Corporation") announced by way
of a news release, its operational results for the quarter ended March 31,
1998. A copy of the Corporation's release, dated April 7, 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 April 7, 1998, announcing the Corporation
and subsidiaries earnings for the quarter ended March 31, 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: April 8, 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 Index
Exhibit Number Description
99(a) News release, dated April 7, 1998
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EXHIBIT 99(a)
[LETTERHEAD]
For additional information contact:
Mr. Jorge A. Junquera
Senior Executive Vice President
Telephone (787) 754-1685
April 7, 1998 News Release
POPULAR, INC. EARNINGS FOR THE QUARTER ENDED MARCH 31, 1998
Popular, Inc. (the Corporation) net income for the first quarter of
1998 was $54.8 million as compared with $49.5 million reported for the same
quarter of 1997, an increase of $5.3 million or 10.6%. Earning per common share
(EPS) for the quarter were $0.78, based on 67,717,548 average shares
outstanding, or 8.5% higher than $0.72 for the quarter ended March 31, 1997,
based on 66,121,855 average shares outstanding. Net earnings for the last
quarter of 1997 were $55.3 million, or $0.78 per share, based on 67,682,704
average shares then outstanding.
The Corporation's return on assets (ROA) and return on common equity
(ROE) for the first quarter of 1998 were 1.14% and 15.36%, respectively. For the
same period of 1997, the Corporation reported ROA and ROE of 1.19% and 16.32%,
respectively. For the last quarter of 1997, these ratios were 1.11% and 15.56%.
The rise in the Corporation's net income for the first quarter of 1998,
when compared with the same period a year ago, was driven by an increase of
$32.1 million in net interest income and $13.7 million in other revenues,
partially offset by a rise of $30.3 million in operating expenses and increases
of $9.9 million and $0.3 million in the provision for loan losses and income
taxes, respectively.
Net interest income, the principle source of earnings for the
Corporation, grew to $212.7 million, primarily as a result of an increase of
$1.7 billion in the average volume of loans. The average balance of the
commercial and consumer loan portfolios rose $946 million and $392 million,
respectively. The increase in the volume of earnings assets was funded through a
higher volume of deposits and borrowings. The net interest yield for the
quarter ended March 31, 1998, was 4.66% compared with 4.57% for the first
quarter of 1997. The improvement in the net interest yield was driven by a rise
of 21 basis points in the average yield on earning assets, particularly in
commercial
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2- POPULAR, INC. 1998 FIRST QUARTER RESULTS
loans and the investment portfolio. The increase in the average yield on
earnings assets was partially offset by a rise of 13 basis points in the cost of
funding these assets. For the last quarter of 1997, the net interest yield was
4.48%.
The increase in the provision for loan losses resulted from a rise
in the Corporation's loan portfolio and increases in net charge-offs and
non-performing assets. Net charge-offs for the quarter ended March 31, 1998,
were $27.5 million or 0.96% of average loans compared with $17.9 million or
0.73% for the first quarter of 1997, and $25.5 million or 0.91% for the fourth
quarter of 1997. The increase in net charge-offs from the first quarter of
1997, was principally reflected in the consumer loan portfolio, mostly as a
result of the increased level of personal bankruptcies. Non-performing assets
were $217 million or 1.88% of ending loans at March 31, 1998, compared with
$174 million or 1.76% at the end of the first quarter of 1997, and $212 million
or 1.87% at December 31, 1997.
Total non-interest income, excluding securities and trading
transactions, grew $10.9 million or 19.7%, from $55.5 million for the first
quarter of 1997 to $66.4 million for the same period in 1998. The growth in
other operating revenues was attributed to an increase of $4.0 million in other
service fees and $3.5 million in service charges on deposit accounts. The
increase in other service fees was realized in credit cards fees and discounts,
rising $1.5 million, due to the growth in credit card net sales and a higher
number of credit card active accounts. Also, debit card fees rose $0.7
million, reflecting the addition of new merchants, point of sale (POS)
terminals and growth in transactions. In addition, fees related to the sale and
administration of investment products rose $1.2 million driven by the
performance of a new retail division created in May 1997 by Popular Securities,
the Corporation's broker/dealer subsidiary. Service charges on deposit accounts
increased due to a higher activity on commercial and retail accounts and a
higher volume of deposits. Furthermore, there was an increase of $3.4 million
in other operating income mainly resulting from a non-recurring income as the
corporation recovered most of its investment in stock of Citizens Bank of
Jamaica, written down during the first quarter of 1997.
The Corporation recognized a net gain of $0.9 million on the sale of
securities for the first quarter of 1998, compared with a net loss of $1.7
million in the same quarter last year. Also, during the first three months of
1998, the Corporation realized a net profit on trading transactions of $0.7
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3-POPULAR, INC. 1998 FIRST QUARTER RESULTS
million compared with $0.4 million in the same quarter last year.
Personnel costs increased $11.9 million as compared with the first quarter
of 1997, of which $10.9 million was reflected in the salary expense category.
The acquisitions made after March 31, 1997, of Roig Commercial Bank in Puerto
Rico, Seminole National Bank in Florida, National Bancorp, Inc. and CBC Bancorp
in Illinois and Houston Bancorporation in Texas accounted for more than $5.0
million of the increase in salary expense. Pension and other benefits increased
$1.7 million reflecting the impact of the increase in salaries and higher health
insurance expenses.
Other operating expenses increased $18.4 million, reaching $89.0 million
for the first quarter of 1998. This increase was reflected in most expense
categories, mainly as a result of the Corporation's acquisitions and continued
growth. Equipment expenses grew $3.2 million mostly due to the investment
needed to support the growth of the Corporation's business activity and
geographical expansion, including costs related to the expansion of the
electronic payment system and new technology. Professional fees increased $3.0
million, including expenses related to the business expansion in the U.S. and
costs incurred in relation to the Corporation's action plan to address the Year
2000 issue. Net occupancy expenses increased $2.6 million mostly as a result
of the Corporation's growth and expansion and the sale, during the fourth
quarter of 1997, of an income-producing property. Business promotion rose $2.3
million as part of the institutional campaign launched in the continental U.S.
to emphasize Banco Popular's image as a Hispanic bank and the promotional
efforts related to the credit card program in the U.S. The amortization of
intangibles also reflected an increase of $2.3 million related to the premium
paid on the operations acquired after March 31, 1997.
The Corporation's total assets at March 31, 1998, amounted to $20.0
billion, compared with $17.4 billion at March 31, 1997. Most of the growth
relates to the acquisitions in Puerto Rico, Florida, Illinois and Texas. At
their respective acquisition dates, these operations had $1.4 billion in total
assets. Total assets at December 31, 1997, were $19.3 billion. At March 31,
1998, total loans amounted to $11.5 billion compared with $9.9 billion a year
ago and $11.4 billion at December 31, 1997. Commercial loans reflected the
largest growth, increasing $947 million from the amount recorded at
March 31, 1997.
The allowance for loan losses amounted to $218 million as of March 31,
1998, or 1.89% of
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4-POPULAR, INC. 1998 FIRST QUARTER RESULTS
loans, compared with $191 million or 1.94% at the same date in 1997. At
December 31, 1997, the allowance for loan losses totaled $212 million or 1.86%
of loans. The allowance as a percentage of non-performing assets was 100.2% at
March 31, 1998, compared with 110.0% at the end of the first quarter of 1997
and 99.6% at December 31, 1997.
Total deposits rose to $12.0 billion at March 31, 1998, compared with
$10.5 billion at March 31, 1997, notwithstanding the reduction of $152 million
in 936 deposits at Banco Popular de Puerto Rico. The acquisitions completed
after the first quarter of 1997 contributed $1.1 billion in deposits at
acquisition dates. At December 31, 1997 total deposits amounted to $11.7
billion. At the end of the first quarter of 1998, the Corporation had deposits
of $8.6 billion in Puerto Rico, $2.9 billion in the United States and $509
million in the U.S. and British Virgin Islands.
Borrowed funds increased to $6.1 billion at March 31, 1998, compared with
$5.3 billion at the same date a year earlier. At December 31, 1997 borrowed
funds totaled $5.7 billion. Borrowed funds were used to finance loan growth
and arbitrage activities.
At March 31, 1998, stockholders' equity was $1.55 billion, compared with
$1.29 billion at the same date last year. Stockholders' equity was $1.50
billion at December 31, 1997. Unrealized holding gains on securities
available-for-sale, net of deferred taxes, amounted to $37.1 million at March
31, 1998, compared with an unrealized loss of $9.9 million a year ago. At the
end of 1997, unrealized holding gains on securities available-for-sale, net of
taxes, amounted to $33.3 million.
The market value of the Corporation's common stock at March 31, 1998, was
$58.69 per share, compared with $35.50 at March 31, 1997, and $49.50 at
December 31, 1997. The Corporation's market capitalization at March 31, 1998
was $4.0 billion, compared with $2.3 billion at March 31, 1997, and $3.4
billion at December 31, 1997. At March 31, 1998, the Corporation's common
stock had a book value per share of $21.36. During the quarter ended on March
31, 1998, the Corporation did not repurchase shares of common stock under its
repurchase program.
Continuing with the strategic expansion plan in the United States, the
Corporation opened two new banking branches during the first quarter of 1998.
Banco Popular, N.A. (Florida) opened one branch in Orlando, while Banco
Popular, N.A. (California) acquired one branch in Wilmington, Los Angeles. The
addition of these two new branches brings the total of branches to seven in
Florida and seven in California, for a total of 65 banking branches in the
continental United States at March
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5- POPULAR, INC. 1998 FIRST QUARTER RESULTS
31, 1998. In addition, during this quarter, Equity One opened three new offices
reaching a total of 120 offices in 30 states.
Popular, Inc. recently announced an agreement to become the principal
shareholder of Banco Gerencial & Fiduciario Dominicano, S.A. This bank is among
the four largest banks in the Dominican Republic with $389 million in assets
and over $31 million in equity. It operates 23 branches throughout the country
and 35 automated teller machines that will soon be connected to the network of
"ATH Dominicana" of which the Corporation is a founding partner.
Also, on April 2, 1998, the Corporation received regulatory approval
to begin operations of a new subsidiary that will provide check cashing and
other financial services in the U.S. mainland, mainly aimed toward the unbanked
sector of the population. This new subsidiary will operate under the name of
Popular Cash Express and will be offering such services as check cashing, money
transfers to other countries, money order sales and processing of payments. The
Corporation is planning to open various Popular Cash Express offices in the
U.S. mainland during 1998.
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POPULAR, INC.
FINANCIAL SUMMARY
(In thousands, except per share data)
<TABLE>
<CAPTION>
Quarter ended First
March 31 Quarter
-------------------------- 1998-1997 Fourth
Percent Quarter
1998 1997 Variance 1997
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<S> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Interest income $ 386,368 $ 334,265 18.58% $ 404,619
Interest expense 183,664 153,621 19.56 194,919
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Net interest income 212,704 180,644 17.75 209,700
Provisions for loan losses 33,565 23,687 41.70 31,657
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Net interest income after provision
for loan losses 179,139 156,957 14.13 178,043
Other operating income 66,414 55,482 19.70 66,960
Gain (loss) on sale of securities 867 (1,660) 2,122
Trading account profit 669 433 54.50 1,724
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Total other income 67,950 54,255 25.24 70,806
Salaries and benefits 77,711 65,045 19.47 75,140
Profit sharing 5,683 6,440 (11.75) 6,292
Other operating expenses 88,985 70,640 25.97 93,976
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Total operating expenses 172,379 142,125 21.29 175,408
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Income before income tax 74,710 69,087 8.14 73,441
Income tax 19,915 19,548 1.88 18,119
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Net income $ 54,795 $ 49,539 10.61 $ 55,322
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Net income applicable to common stock $ 52,708 $ 47,452 11.08 $ 53,234
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Earnings per common share:
Net income* $ 0.78 $ 0.72 8.46 $ 0.78
Average common shares outstanding 67,717,548 66,121,855 67,682,704
Common shares outstanding at end of period 67,717,548 66,121,855 67,682,704
</TABLE>
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POPULAR, INC.
FINANCIAL SUMMARY
(In thousands)
<TABLE>
<CAPTION>
Quarter ended First
March 31 Quarter
-------------------------- 1998-1997 Fourth
Percent Quarter
1998 1997 Variance 1997
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<S> <C> <C> <C> <C>
SELECTED AVERAGE BALANCES
Total assets $19,485,912 $16,916,854 15.19 $19,745,399
Loans 11,466,638 9,777,772 17.27 11,196,123
Earning assets 18,340,992 15,855,669 15.67 18,697,852
Interest-bearing liabilities 15,032,597 13,147,072 14.34 15,716,913
Stockholders' equity 1,492,184 1,279,553 16.62 1,457,037
PERFORMANCE RATIOS
Net interest yield* 4.66% 4.57% 4.48%
Return on assets 1.14 1.19 1.11
Return on common equity 15.36 16.32 15.56
CREDIT QUALITY DATA
Nonperforming assets $ 217,301 $ 173,979 24.90 $ 212,460
Net loans charged-off 27,508 17,901 53.67 25,489
Allowance for loan losses 217,708 191,360 13.77 211,651
Non performing assets to total assets 1.09% 1.00% 1.10%
Allowance for losses to loans 1.89 1.94 1.86
SELECTED FINANCIAL DATA AT PERIOD-END
Total assets....................... $20,018,220 $17,401,458 15.04 $19,300,507
Loans.............................. 11,543,169 9,889,254 16.72 11,376,607
Earning assets..................... 18,748,873 16,336,734 14.77 18,060,998
Interest-bearing liabilities....... 15,619,791 13,560,511 15.19 14,892,210
Stockholders' equity............... 1,546,238 1,287,515 20.09 1,503,092
</TABLE>
* Not on a taxable equivalent basis
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