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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, 1998
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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, 1998, Popular, Inc. (the "Corporation") announced by way of
a news release, its operational results for the quarter and nine-month period
ended September 30, 1998. A copy of the Corporation's release, dated October 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 October 7, 1998, announcing the Corporation and
subsidiaries earnings for the quarter and nine-month period ended September 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: October 8, 1998 By: AmiLcar L. Jordan, Esq.
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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, 1998
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(LOGO) [POPULAR, INC. LETTERHEAD]
EXHIBIT 99(a)
October 7, 1998
For additional information contact:
Jorge A. Junquera
Senior Executive Vice President
(787) 754-1685
News Release
POPULAR, INC. EARNINGS FOR THE QUARTER AND NINE-MONTH PERIOD ENDED SEPTEMBER 30,
1998.
Popular, Inc. (the Corporation) reported net income of $57.6 million for
the third quarter of 1998, compared with $53.6 million reported for the same
quarter of 1997, an increase of $4.0 million or 7.4%. Earnings per common share
(EPS) for the quarter were $0.41, based on 135,555,652 average shares
outstanding, compared with $0.38, based on 135,732,567 average shares
outstanding for the quarter ended September 30, 1997, an increase of 7.8%. Net
earnings for the first and second quarter of 1998 were $54.8 million and $57.5
million, respectively, or $0.39 and $0.41 per common share, based on
135,435,096 and 135,497,786 average shares outstanding, respectively.
Return on assets (ROA) and return on common equity (ROE) for the third
quarter of 1998 were 1.12% and 14.94%, respectively. For the same period of
1997, the Corporation reported ROA and ROE of 1.10% and 15.46%, respectively.
For the second quarter of 1998 these ratios were 1.16% and 15.50%.
For the first nine months of 1998, the Corporation's net earnings amounted
to $169.8 million, compared with $154.2 million for the same period in 1997.
EPS for the first nine months of 1998 were $1.21, compared with $1.11 for the
same period of 1997. ROA and ROE for the first nine months of 1998 amounted to
1.14% and 15.26%, respectively. For the same period of 1997, these ratios were
1.15% and 15.93%.
The Corporation's results of operations for the quarter ended September
30, 1998, reflected increases of $12.0 million in net interest income and $4.3
million in other revenues when compared with the same quarter of 1997. These
improvements were partially offset by increases of $11.3 million in operating
expenses and $4.8 million in the provision for loan losses.
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2-POPULAR, INC. 1998 THIRD QUARTER RESULTS
The net interest income for the third quarter of 1998 increased 5.9% when
compared with the same period of 1997. The growth in net interest income over
the third quarter of 1997, was principally due to an increase of $899 million
in average earning assets partially offset by a lower yield. The net interest
margin for the quarter ended on September 30, 1998, was 4.45%, compared with
4.42% for the third quarter of 1997, mostly due to a lower cost of funding
earning assets. For the first and second quarter of 1998 the net interest
margin was 4.66% and 4.57%, respectively. The decrease in net interest margin
since the first and second quarter results from a lower interest rate scenario
and a higher volume of arbitrage activities. For the first nine months of 1998,
the net interest margin was 4.56% compared with 4.51% for the same period of
1997.
The provision for loan losses totaled $34.7 million for the third quarter
of 1998, an increase of 16.1% when compared with the same quarter of 1997. The
increase in the provision for loan losses was primarily due to the growth in
the loan portfolio and non-performing assets. Net charge-offs for the quarter
ended September 30, 1998, were $27.7 million or 0.93% of average loans compared
with $31.5 million or 1.14% for the third quarter of 1997, and $27.2 million or
0.94% for the second quarter of 1998. For the nine-month periods ended
September 30, 1998 and 1997, net charge-offs totaled $82.4 million and $72.3
million, respectively, representing 0.94% and 0.93% of average loans.
Non-interest income, excluding securities and trading transactions, rose
$4.3 million over the third quarter of 1997, to $69.2 million, as a result of
an increase of $3.3 million in other service fees and $2.0 million in service
charges on deposit accounts. The increase in service charges on deposit
accounts was due to a higher volume of deposits and to increases in fees
collected on commercial deposits with account analysis. Other service fees
amounted to $28.6 million for the three-month period ended September 30, 1998,
compared with $25.3 million for the same period a year earlier. This increase
was primarily due to rises in credit card fees and debit card fees principally
as a result of the sustained growth in the volume of transactions at
point-of-sale (POS) terminals and fees earned in the Corporation's check
cashing subsidiary in the U.S. mainland. Other income had a decrease of $0.9
million as a result of a prior year loan securitization of $102 million at
Equity One, which resulted in a pretax gain of $3.4 million.
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3-POPULAR, INC. 1998 THIRD QUARTER RESULTS
The Corporation showed an increase of $4.0 million in gains on sale of
securities as a result of gains realized in the quarter ended September 30,
1998, on the sale of equity securities by the Corporation's holding company.
Personnel costs increased $4.8 million as compared with the third quarter
of 1997. This rise resulted from increased employment levels due to the
Corporation's continued growth and expansion and annual merit increases. Other
operating expenses increased $6.5 million, mostly in professional fees,
equipment and net occupancy expenses. Professional fees increased $2.3 million
reflecting expenditures associated with system developments and technical
support. The rise in equipment and net occupancy expense reflected the costs
related to the expansion of the electronic payment system and the network of
automated teller machines and POS terminals, and also the business expansion in
the U.S. mainland.
On September 30, 1998, the Corporation completed the acquisition of 49.9%
in newly issued stock of Banco Gerencial & Fiduciario (BGF), the fourth largest
bank in the Dominican Republic, with $496 million in total assets and $320
million in total deposits. As a result of this transaction the Corporation
became the major stockholder of BGF and BGF's assets, liabilities and the
related minority interest are presented in the Corporation's consolidated
statement of condition as of September 30, 1998.
The Corporation's total assets at September 30, 1998, amounted to $21.3
billion, compared with $19.9 billion at September 30, 1997. Most of the
increase was reflected in total loans. Total assets at June 30, 1998, were
$20.0 billion.
Total loans reached $12.4 billion at September 30, 1998, or $1.2 billion
higher than the level of $11.2 billion at September 30, 1997, and $609 million
over the level of $11.8 billion at June 30, 1998. Commercial loans accounted
for the largest growth increasing $781 million as compared with September 30,
1997.
The allowance for loan losses amounted to $245 million as of September 30,
1998, or 1.98% of loans and included $14.3 million in the allowance of BGF,
compared with $205 million or 1.83% at the same date in 1997. At June 30, 1998,
the allowance for loan losses totaled $224 million or 1.91% of loans. The
allowance as a percentage of non-performing assets was 87.2% at September 30,
1998, compared with 96.4% at the end of the third quarter of 1997 and 99.8% at
June 30, 1998.
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4-POPULAR, INC. 1998 THIRD QUARTER RESULTS
The reduction in the allowance coverage ratios is primarily attributed to the
inclusion of $34 million in non-performing assets of BGF.
Non-performing assets were $282 million or 2.28% of loans at September 30,
1998, compared with $213 million or 1.90%, at the end of the third quarter of
1997, and $225 million or 1.91% at June 30, 1998. Aside from the increase of
$34 million in non-performing assets of BGF, the increase of $23 million from
June 30, 1998, was reflected in non-performing commercial, consumer and
mortgage loans resulting from growth in these portfolios and a higher level of
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 a more conservative practice 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.
Total deposits were $12.5 billion at September 30, 1998, compared with
$11.2 billion at September 30, 1997, and $12.1 billion at the end of the second
quarter of 1998.
Borrowed funds amounted to $6.6 billion at September 30, 1998, compared
with $6.9 billion at the same date a year earlier and $6.0 billion at June 30,
1998.
At September 30, 1998, stockholders' equity totaled $1.70 billion,
compared with $1.45 billion at the same date last year. These figures include
unrealized gains on securities available-for-sale, net of deferred taxes, of
$107 million as of September 30, 1998, and $20 million as of the same date last
year. Stockholders' equity was $1.59 billion at June 30, 1998.
The market value of the Corporation's common stock at September 30, 1998,
was $28.38 per share, compared with $26.50 at September 30, 1997, and $33.25 at
June 30, 1998. The Corporation's market capitalization at September 30, 1998,
was $3.8 billion, compared with $3.6 billion at September 30, 1997, and $4.5
billion at June 30, 1998. At September 30, 1998, the Corporation's common
stock had a book value per share of $11.80.
On September 21, 1998, Puerto Rico, the Corporation's principal place of
business, was hit by hurricane Georges. Total losses and lost production in
Puerto Rico were estimated by private economists in excess of $5.0 billion due
to the hurricane, including losses to the infrastructure, agriculture, hotels
and private properties. However, after this initial impact a significant
inflow of
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5 - POPULAR, INC. 1998 THIRD QUARTER RESULTS
funds to the economy is expected from insurance companies and various federal
agencies, which should have a positive impact on the economy. The Corporation's
business operations and properties were not affected significantly as a result
of the hurricane. Three days after the hurricane more than 75% of the branches
were operating and approximately 98% of them are currently fully operational.
* * *
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POPULAR, INC.
FINANCIAL SUMMARY
(in thousands)
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Third For the nine months ended
1998 1997 Quarter September 30,
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Third Second Third Percent Percent
Quarter Quarter Quarter Variance 1998 1997 Variance
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SELECTED AVERAGE BALANCES
Total assets............................. $20,343,839 $19,934,645 $19,348,214 5.15 $19,924,608 $17,972,201 10.86
Loans.................................... 11,928,198 11,615,054 11,033,888 8.11 11,671,654 10,329,862 12.99
Earning assets........................... 19,214,551 18,769,875 18,315,054 4.91 18,778,339 16,975,510 10.62
Interest-bearing liabilities............. 15,796,220 15,338,018 15,638,842 1.01 15,391,742 14,186,592 8.49
Stockholders' equity..................... 1,573,201 1,533,036 1,421,890 10.64 1,533,104 1,341,984 14.24
PERFORMANCE RATIOS
Net interest yield*...................... 4.45% 4.57% 4.42% 4.56% 4.51%
Return on assets......................... 1.12 1.16 1.10 1.14 1.15
Return on common equity.................. 14.94 15.50 15.46 15.26 15.93
CREDIT QUALITY DATA
Nonperforming assets..................... $ 281,508 $ 224,521 $ 212,775 32.30 $ 281,508 $ 212,775 32.30
Net loans charged-off.................... 27,663 27,187 31,491 (12.16) 82,357 72,278 13.94
Allowance for loan losses................ 245,382 224,045 205,077 19.65 245,382 205,077 19.65
Nonperforming assets to total assets..... 1.32% 1.12% 1.07% 1.32% 1.07%
Allowance for losses to loans............ 1.98 1.91 1.83 1.98 1.83
SELECTED FINANCIAL DATA AT
PERIOD-END
Total assets............................. $21,273,593 $19,997,636 $19,896,785 $21,273,593 $19,896,785 6.92
Loans.................................... 12,362,527 11,753,213 11,182,061 12,362,527 11,182,061 10.56
Earning assets........................... 19,860,591 18,725,774 18,581,082 19,860,591 18,581,082 6.89
Interest-bearing liabilities............. 16,467,620 15,467,420 15,823,339 16,467,620 15,823,339 4.07
Stockholders' equity..................... 1,699,890 1,593,693 1,449,780 1,699,890 1,449,780 17.25
*Not on a taxable equivalent basis
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POPULAR, INC.
FINANCIAL SUMMARY
(IN THOUSANDS, EXCEPT PER SHARE DATA)
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THIRD FOR THE NINE MONTHS ENDED
1998 1997 QUARTER SEPTEMBER 30
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THIRD SECOND THIRD PERCENT PERCENT
QUARTER QUARTER QUARTER VARIANCE 1998 1997 VARIANCE
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Summary of Operations
Interest income................... $ 410,822 $ 402,865 $ 393,414 4.42% $ 1,210,054 $ 1,086,684 11.35%
Interest expense.................. 195,782 188,473 190,409 2.82 567,917 512,429 10.83
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Net interest income............... 215,040 214,392 203,005 5.93 642,137 574,255 11.82
Provision for loan losses......... 34,667 33,524 29,849 16.14 101,756 78,949 28.89
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Net interest income after
provision for loan losses....... 180,373 180,868 173,156 4.17 540,381 495,306 9.10
Other operating income............ 69,163 68,526 64,831 6.68 204,103 174,437 17.01
Gain on sale of securities........ 4,552 3,049 519 8,469 145
Trading account profit............ 506 1,311 959 2,486 2,209
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Total other income................ 74,221 72,886 66,309 11.93 215,058 176,791 21.65
Salaries and benefits............. 78,700 76,393 73,372 7.26 232,804 206,068 12.97
Profit sharing.................... 5,618 6,264 6,164 -8.86 17,565 19,392 -9.42
Amortization of intangibles....... 6,890 6,849 6,810 1.17 20,523 16,089 27.56
Other operating expenses.......... 87,409 85,539 80,995 7.92 255,151 219,963 16.00
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Total operating expenses.......... 178,617 175,045 167,341 6.74 526,043 461,512 13.98
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Income before income tax.......... 75,977 78,709 72,124 5.34 229,396 210,585 8.93
Income tax........................ 18,397 21,248 18,511 -0.62 59,560 56,342 5.71
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Net income........................ $ 57,580 $ 57,461 $ 53,613 7.40 $ 169,836 $ 154,243 10.11
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Net income applicable to common
stock........................... $ 55,493 $ 55,374 $ 51,526 7.70 $ 163,574 $ 147,981 10.54
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Earnings per common share:
Net income...................... $ 0.41 $ 0.41 $ 0.38 7.84 $ 1.21 $ 1.11 8.98
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Average common shares
outstanding*.................... 135,555,652 135,497,786 135,732,567 135,496,620 133,589,283
Common shares outstanding at end
of period*...................... 135,555,652 135,497,786 135,312,332 135,555,652 135,312,332
* 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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