<PAGE> 1
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): January 9, 1998
---------------
POPULAR, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
COMMONWEALTH OF PUERTO RICO NO. 0-13818 NO. 66-0416582
- --------------------------- ----------- --------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
209 MUNOZ RIVERA AVENUE
HATO REY, PUERTO RICO 00918
- ----------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (787) 765-9800
--------------
-------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE> 2
Item 5. Other Events
On January 9, 1998, Popular, Inc. (the "Corporation") announced by way of
a news release, its operational results for the quarter and year ended December
31, 1997. A copy of the Corporation's release, dated January 9, 1998, is
attached hereto to 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 January 9, 1998, announcing the Corporation and
subsidiaries earnings for the quarter and year ended December 31, 1997.
<PAGE> 3
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.
--------------
(Registrant)
Date: January 13, 1998 By: /s/ Amilcar L. Jordan
---------------- ---------------------------------------
Name : Amilcar L. Jordan, Esq.
Title : Senior Vice President and Comptroller
<PAGE> 4
Exhibit Index
<TABLE>
<CAPTION>
Exhibit Number Description
- -------------- -----------
<S> <C>
99(a) News release, dated January 9, 1998
</TABLE>
<PAGE> 1
<TABLE>
<S> <C>
[COMPANY LOGO] POPULAR, Inc. ------------------------
For additional information contact: POPULAR, INC.
Mr. Jorge A. Junquera PO Box 362708
Senior Executive Vice President San Juan, Puerto Rico 00936-2708
(787) 754-1685 Tel. (787) 765-9800
</TABLE>
EXHIBIT 99(A)
January 9, 1998 News Release
POPULAR, INC. EARNINGS FOR THE QUARTER AND YEAR ENDED DECEMBER 31, 1997
Popular, Inc. (the Corporation) reported net income of $209.6 million for
the year ended December 31, 1997, an increase of $24.4 million or 13.2% over the
net income of $185.2 million obtained in 1996. Earnings per common share (EPS)
for the year were $3.00, based on 67,018,482 average shares outstanding,
compared with $2.68 for 1996, based on 66,022,312 average shares outstanding.
The net income for 1997 represented a return on assets (ROA) of 1.14% and a
return on common equity (ROE) of 15.83%. In 1996, the Corporation reported ROA
and ROE of 1.14% and 16.15%, respectively.
Net earnings for the last quarter of 1997 reached $55.3 million or $0.78
per common share, based on 67,682,704 average shares outstanding, compared with
$53.6 million or $0.76 per common share for the third quarter of 1997, based on
67,866,284 average shares outstanding. Net earnings for the fourth of 1996,
totaled $47.7 million or $0.69 per common share, based on 66,088,506 average
shares outstanding. The results for the fourth quarter of 1997 represented a ROA
of 1.11% and a ROE of 15.56%, compared with 1.13% and 15.76%, respectively, for
the same period in 1996. For the third quarter of 1997 these ratios were 1.10%
and 15.46%.
The Corporation's results of operations for the quarter ended December
31, 1997, reflected an increase of $31.3 million in net interest income and an
increase of $18.0 million in other revenues, when compared with the quarter
ended on December 31, 1996. These increases were partially offset by increases
of $31.5 million in operating expenses, $8.2 million in the provision for loan
losses and $2.0 million in income taxes.
The earnings performance for the year ended on December 31, 1997, when
compared with 1996, reflects a growth of $102.6 million in net interest income
along with an improvement of $42.1 million in non-interest revenues, tempered
by a rise of $95.0 million in operating expenses, $21.8 million in the provision
for loan losses and $3.5 million in income taxes.
<PAGE> 2
2-POPULAR, INC. 1997 FOURTH QUARTER RESULTS
The rise in net interest income resulted mainly from the growth of $2.1
billion in the average volume of earnings assets driven primarily by a $1.1
billion increase in investment securities together with an increase of $740
million in commercial loans. The yield on earning assets for 1997 was 8.57%
compared to 8.32% in 1996. The repeal of Section 936 of the U.S. Internal
Revenue Code in August 1996, caused a reduction in the volume of 936 funds
during the latter part of 1996 and the year 1997. Most of the funds withdrawn
were replaced with conventional funds carrying a higher cost, moving the cost of
funds upward during 1997. The average cost of interest liabilities rose 26 basis
points. The net interest yield for the year ended December 31, 1997, was 4.51%
compared with 4.46% for 1996. The net interest yield for the last quarter of
1997, was 4.48% compared with 4.51% for the quarter ended September 30, 1997.
The provision for loan losses rose to $110.6 million for year ended 1997,
compared with $88.8 million a year earlier. The increase in the provision, which
is in line with the rises in the loan portfolio, delinquency levels and net
charge-offs, was considered necessary to maintain the adequacy of the allowance
for loan losses to absorb potential write-offs in the portfolio. Net charge-offs
for the year ended December 31, 1997, were $97.8 million or 0.93% of average
loans, compared with $72.1 million or 0.78% of average loans for 1996. The
increase in net charge-offs was mostly reflected in the consumer and commercial
loan portfolios.
Total non-interest income, including securities and trading gains,
amounted to $247.6 million for 1997, compared with $205.5 million a year
earlier, resulting in an increase of $42.1 million or 20.5%. This increase was
fueled by a rise of $21.6 million in other service fees, $9.3 million in other
operating income and $8.3 million in service charges on deposit accounts. The
rise in other service fees is primarily attributable to a higher volume of
electronic services provided by Banco Popular de Puerto Rico (BPPR), including
rent of point-of-sale terminals, debit card fees, merchant transaction fees and
ATM interchange income. Also, investment product fees, mainly resulting from the
sale and administration of mutual funds, rose $1.6 million, The Corporation's
leasing subsidiary accounted for a portion of the increase in other operating
income principally as a result of higher revenues related to the daily rental
business. Also, there was an increase in gains on sale of mortgage loans mostly
at Equity One, BPPR and Popular Home Mortgage. Service
<PAGE> 3
3-POPULAR, INC. 1997 FOURTH QUARTER RESULTS
charges on deposit accounts increased $8.3 million, largely reflecting a higher
volume of deposits and a broader variety of services offered to commercial
accounts at BPPR.
The gains on sale of investment securities available-for-sale for 1997
amounted to $2.3 million, compared with $3.1 million for 1996. Trading profits
totaled $3.9 million in 1997 compared with $0.1 million the year before.
Operating expenses for 1997 reached $636.9 million, compared with $541.9
million in 1996. This increase was largely reflected in the personnel costs
category, which grew $33.6 million principally as a result of the Corporation's
expansion, including the launching of a credit card program in the U.S., annual
merit increases and incentive pay to compensate sales efforts. Pension costs and
other fringe benefits also increased, reflecting a rise in medical plan costs
and in payroll taxes. Profit sharing expense also increased as a result of
higher eligible salaries and stronger profitability ratios.
Other operating expenses rose $61.4 million to $330.0 million for 1997,
compared with $268.6 million in 1996. The rise in other operating expenses was
primarily in equipment expenses, other taxes, business promotion and
communication expenses. These increases are directly related to the growth and
expansion of the Corporation's business activities, development of new products
and services, and the costs associated with the continued enhancement of
existing products, technological capabilities and delivery channels. Other taxes
increased $7.1 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 increase in income tax mostly results from a higher pre-tax income.
The Corporation's non interest expense for the fourth quarter of 1997
includes charges incurred in connection with making its computer systems and
applications Year 2000 compliant. The Corporation has established a company wide
task force and developed a preparation and action plan that is currently being
implemented that addresses the Year 2000 issue. The Corporation will continue
incurring costs related to this project, through the year 2000, although these
costs, on an incremental basis, are not expected to materially impact its
results of operations in any single period.
The Corporation's total assets at December 31, 1997, amounted to $19.3
billion, compared with $16.8 billion at December 31, 1996 and $19.9 billion at
September 30, 1997. Most of the
<PAGE> 4
4-POPULAR, INC. 1997 FOURTH QUARTER RESULTS
growth in total assets since 1996 pertains to BPPR, principally as a result of
the acquisition of Roig Commercial Bank on June 30, 1997. The decrease in total
assets of $597 million when compared with September 30, 1997 relates to a lower
amount of arbitrage activities which are less attractive under the prevailing
interest rate scenario.
Total loans amounted to $11.4 billion at December 31, 1997, compared with
$9.8 billion a year ago. Commercial loans reflected the largest growth, followed
by consumer loans. The banks acquired after December 31, 1996, contributed with
$193 million to the increase in the Corporation's commercial loan portfolio.
The allowance for loan losses amounted to $211.7 million as of December
31, 1997, or 1.86% of loans and 99.9% of non-performing assets, compared with
$185.6 million or 1.90% and 119.9% at the same date in 1996. At September 30,
1997, the allowance for loan losses amounted to $205 million or 1.83% of loans
and 96.4% of non-performing assets. The reduction in the allowance coverage
ratios when compared to December 31, 1996, 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 and the
higher amount of other real estate owned.
Non-performing assets were $211.9 million or 1.86% of loans at December
31, 1997, compared with $154.8 million or 1.58%, at the same date in 1996 and
$213 million or 1.90% at September 30, 1997. The increase of $57.1 million from
December 31, 1996, was reflected in the commercial mortgage and consumer
non-performing loans and other real estate owned. The rise of $25 million in the
commercial non-performing portfolio was principally a result of the
classification on non-accrual of a $11 million commercial income-producing real
estate loan in the U.S. Virgin Islands and increases of $12.7 million in the
continental U.S. banking operations of the Corporation partially related to the
acquisitions and the higher loan volume. The rise of $9.5 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 non-performing consumer loans increased principally in BPPR, whose
non-performing consumer loans increased $11.0 million. The latter also resulted
from a higher level of bankruptcies in the island and a higher volume of loans.
Other real estate owned grew $11.9 million, mostly in BPPR and Equity One.
<PAGE> 5
5-POPULAR, INC. FOURTH QUARTER RESULTS
The Corporation places commercial loans on non-accrual status on a more
conservative basis than the industry. U.S. banks standard practice is to place
non-performing commercial loans on non-accrued status when payments of
principal or interest are delinquent 90 days. The Corporation's policy,
however, is to place commercial loans on non-accrual status when payments of
principal or interest are delinquent 60 days. Lease financing, conventional
mortgage and close-end consumer loans are placed on non-accrual status when
payments are delinquent 90 days.
Total deposits were $11.7 billion at December 31, 1997, compared with
$10.8 billion at December 31, 1996. A significant portion of the increase was
attained at BPPR, where total deposits increased $457.5 million, principally as
a result of the acquisition of Roig Commercial Bank. At December 31, 1997, the
Corporation maintained $1.8 billion in 936 funds or 9.9% of its liabilities,
compared with $2.1 billion or 13.7% at the end of the 1996.
Borrowed funds increased to $5.7 billion at December 31, 1997, compared
with $4.4 billion at the same date a year earlier. At September 30, 1997,
borrowed funds totaled $7.0 billion. 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 to issue medium-term notes,
unsecured debt securities and preferred stock in an aggregate amount of up to $1
billion. As of December 31, 1997, the Corporation had issued $230 million in
medium-term notes under that "shelf" registration.
At December 31, 1997, stockholders' equity was $1.50 billion, compared
with $1.26 billion at December 31, 1996. Stockholders' equity was $1.45 billion
at September 30, 1997. On May 8, 1997, the Board of Directors approved a stock
repurchase program of up to 3 million shares of the outstanding stock of the
Corporation, when market conditions so warrant. As of December 31, 1997, the
Corporation had purchased 988,800 shares under this program with a total cost of
$39.6 million. The allowance for unrealized holding gains on securities
available-for-sale, net of deferred taxes, amounted to $33.3 million at December
31, 1997, compared with $1.7 million a year ago.
The market value of the Corporation's common stock at December 31,
1997, was $49.50 per share, compared with $33.75 at December 31, 1996. The
Corporation's market capitalization at December 31, 1997, was $3.4 billion,
compared with $2.2 billion at December 31, 1996. At
<PAGE> 6
6-POPULAR, INC. 1997 FOURTH QUARTER RESULTS
December 31, 1997, the Corporation's common stock had a book value per share of
$20.73. On November 13, 1997, the Board of Directors of Popular, Inc. declared a
cash dividend of $0.22 per common share payable on January 2, 1998, to
shareholders of record as of December 12, 1997.
In August 1997, BPPR entered into an agreement with American Express to
launch the new Banco Popular American Express card. This credit card will be
first marketed in Puerto Rico, the Virgin Islands and the Caribbean and will be
accepted by every merchant in the world-wide network of American Express.
As previously announced, on December 1, 1997, the Corporation completed
the acquisition of Citizens National Bank, operating one branch in Houston,
Texas. Total loans and deposits acquired amounted to $39 million and $41
million, respectively. Meanwhile, the Corporation continued expanding its
presence in the United States opening 8 new branches, increasing its banking
branch network to 63 from 54 at September 30, 1997. At December 31, 1997, the
Corporation's banking operations in the mainland included 29 bank branches in
New York, 8 in New Jersey, 13 in Chicago, 6 in California, 6 in Florida and the
one recently acquired in Texas.
* * *
<PAGE> 7
POPULAR, INC.
FINANCIAL SUMMARY
(In thousands)
<TABLE>
<CAPTION>
1997 1996 Fourth FOR THE YEAR ENDED
---------------------------------------- Quarter DECEMBER 31,
1997-1996 ---------------------------------
Fourth Third Fourth Percent Percent
Quarter Quarter Quarter Variance 1997 1996 Variance
---------------------------------------- ---------- ----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED AVERAGE BALANCES
Total assets $19,745,466 $19,348,214 $16,851,600 17.17 $18,419,161 $16,301,082 12.99
Loans 11,196,122 11,033,888 9,668,133 15.80 10,548,207 9,210,964 14.52
Earning assets 18,697,853 18,315,054 15,794,338 18.38 17,409,634 15,306,311 13.74
Interest-bearing liabilities 15,585,858 15,307,246 13,145,395 18.57 14,455,703 12,778,488 13.13
Stockholders' equity 1,457,038 1,421,888 1,250,311 16.53 1,370,984 1,194,511 14.77
PERFORMANCE RATIOS
Net interest yield* 4.48% 4.42% 4.51% 4.51% 4.46%
Return on assets 1.11 1.10 1.13 1.14 1.14
Return on common equity 15.56 15.46 15.76 15.83 16.15
CREDIT QUALITY DATA
Nonperforming assets $ 211,870 $ 212,775 $ 154,792 36.87 $ 211,870 $ 154,792 36.87
Net loans charged-off 25,489 31,491 20,256 25.83 97,767 72,060 35.67
Allowance for loan losses 211,651 205,077 185,574 14.05 211,651 185,574 14.05
Nonperforming assets to total assets 1.10% 1.07% 0.92% 1.10% 0.92%
Allowance for losses to loans 1.86 1.83 1.90 1.86 1.90
SELECTED FINANCIAL DATA AT
PERIOD-END
Total assets $19,300,148 $19,896,785 $19,300,148 $16,764,103 15.13
Loans 11,376,607 11,182,061 11,376,607 9,779,028 16.34
Earning assets 18,060,998 18,581,082 18,060,998 15,484,454 16.64
Interest-bearing liabilities 14,892,217 15,823,339 14,892,217 12,853,755 15.86
Stockholders' equity 1,503,092 1,449,780 1,503,092 1,262,532 19.05
</TABLE>
Not on a taxable equivalent basis
<PAGE> 8
POPULAR, INC.
FINANCIAL SUMMARY
(In thousands, except per share data)
<TABLE>
<CAPTION>
1997 1996 Fourth FOR THE YEAR ENDED
-------------------------------------- Quarter DECEMBER 31
1997-1996 --------------------------------
Fourth Third Fourth Percent Percent
Quarter Quarter Quarter Variance 1997 1996 Variance
-------------------------------------- ---------- --------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Interest Income $ 404,619 $ 393,414 $ 332,854 21.56% $ 1,491,303 $ 1,272,853 17.16%
Interest expense 194,918 190,409 154,445 26.21 707,347 591,540 19.58
-------------------------------------- -------- --------------------------------
Net Interest income 209,701 203,005 178,409 17.54 783,956 681,313 15.07
Provision for loan losses 31,657 29,849 23,458 34.95 110,606 88,839 24.50
-------------------------------------- -------- ----------------------------------
Net interest income after provision
for loan losses 178,044 173,156 154,951 14.90 673,350 592,474 13.65
Other operating income 66,959 64,831 54,522 22.81 241,396 202,270 19.34
Gain (loss) on sale of securities 2,123 519 (2,525) 2,268 3,094
Grading account profit (loss) 1,724 959 769 3,933 108
-------------------------------------- -------- ----------------------------------
Total other income 70,806 66,309 52,766 34.19 247,597 205,472 20.50
Salaries and benefits 75,140 73,372 64,752 16.04 281,208 250,555 12.23
Profit sharing 6,292 6,164 5,148 22.22 25,684 22,692 13.19
Other operating expenses 93,976 87,805 74,023 26.96 330,028 268,672 22.84
-------------------------------------- -------- ----------------------------------
Total operating expenses 175,408 167,341 143,923 21.88 636,920 541,919 17.53
-------------------------------------- -------- ----------------------------------
Income before Income tax 73,442 72,124 63,794 15.12 284,027 256,027 10.94
Income tax 18,120 18,511 16,114 12.45 74,462 70,877 5.06
-------------------------------------- -------- ----------------------------------
Net income $ 55,322 $ 53,613 47,680 16.03 $ 209,565 $ 185,150 13.19
====================================== ======== ==================================
Net income applicable to common stock $ 53,235 $ 51,526 $ 45,593 16.76 $ 201,215 $ 176,800 13.81
====================================== ======== ==================================
Earnings per common share:
Net income $ 0.78 $ 0.76 $ 0.69 12.56 $ 3.00 $ 2.68 12.12
----------- ----------- ---------- ----- ----------- ---------- -----
Average common shares outstanding 67,682,704 67,866,284 66,088,506 67,018,482 66,022,312
Common shares outstanding at end or period 67,682,704 67,656,166 66,088,506 67,682,704 66,088,506
</TABLE>
