<PAGE> 1
EXHIBIT 19
TO OUR STOCKHOLDERS
It is a pleasure to report our progress during our latest quarter.
For the quarter that ended on September 30, 2000, Popular, Inc.'s net
income had an increase of $7.1 million or 11.0% over the amount reported for the
same quarter of 1999. For this third quarter of 2000, Popular, Inc.'s net income
amounted to $71.3 million. For the same quarter of 1999, the Corporation's net
income had amounted to $64.2 million.
On a per share basis, our net income grew to $0.51 in the third quarter
of 2000 from $0.46 for the same period in 1999. The results for the third
quarter of 2000 represented an annualized return on assets (ROA) of 1.05% and a
return on common equity (ROE) of 15.24%. While for the same quarter in 1999,
these profitability ratios were 1.06% and 15.23%, respectively, compared with
1.01% and 14.43%, for the second quarter of 2000.
For the nine-month period ended September 30, 2000, the Corporation's
net income amounted to $200.6 million or $1.43 per common share, while the ROA
and ROE were 1.02% and 14.75%, respectively. These figures compare with a net
income of $191.9 million, or $1.37 per common share, and a ROA of 1.09 % and a
ROE of 15.59% for the same period in 1999.
This growth in earnings of $7.1 million over the third quarter of 1999
was led by a rise of $10.1 million in net interest income, together with an
increase of $23.7 million in other income. These improvements were partially
offset by an increase of $12.6 million in the provision for loan losses, $6.2
million in operating expenses and $6.8 million in income tax expense.
Our net interest income for the quarter that ended September 30, 2000
rose to $248.9 million from $238.8 million for the same period last year. This
growth in net interest income was fueled by an increase of $3.0 billion in
average earning assets, principally a $2.2 billion growth in loans, partially
offset by a decrease in the net interest yield. For the third quarter of 2000,
the net interest yield, on a taxable equivalent basis, was 4.16%, compared with
4.59% for the same period last year. The reduction in the net interest yield was
driven by an increase in the cost of interest bearing liabilities, as a result
of a higher interest rate scenario coupled with an increase in the proportion of
short-term borrowings to total interest bearing liabilities. This unfavorable
variance was partially tempered by a higher yield on earning assets,
particularly commercial loans, money market and investment securities. For the
second quarter of 2000, the net interest yield on a taxable equivalent basis was
4.30%.
For the third quarter of 2000, the provision for loan losses rose to
$49.7 million, compared with $37.1 million for the third quarter of 1999, driven
by the growth in the loan portfolio as well as the rise in non-performing assets
and net charge-offs. Net charge-offs for the third quarter of 2000 were $42.5
million or 1.04% of average loans, compared with $31.6 million or 0.89% for the
same period in 1999. Net charge-offs for the second quarter of 2000 were $38.1
million or 0.97% of average loans. The increase in net charge-offs was primarily
experienced in the commercial loan portfolio.
Other operating income, excluding securities and trading transactions,
for the third quarter of 2000 grew 23.5% to $120.6 million compared with $97.7
million for the same period in 1999. Categories such as processing fees, credit
card fees and discounts, debit card fees, service charges on deposit accounts
and other income all reflected an increase, mainly as a result of continued
business growth as well as the electronic payment expansion and the
implementation of new charges in deposit and credit card accounts. Moreover,
insurance fees also grew reflecting the operations of Popular Insurance that
began in July 1, 2000. The rise in other income resulted from the sale of the
credit card operations in the U.S. mainland and our equity investment in Banco
Fiduciario, in the Dominican Republic.
<PAGE> 2
2
Our operating expenses amounted to $220.9 million for the third quarter
of 2000, compared with $214.7 million for the third quarter of 1999. The rise in
operating expenses was mainly attributed to an increase in equipment, net
occupancy and other operating expenses. The increase in equipment expenses, led
by depreciation of software packages, reflected the continued investment in
technology. In addition, net occupancy expenses rose largely reflecting
increased operating costs resulting from business expansion. Moreover, higher
interchange expenses related to the growing volume of credit card transactions
drove the rise in other operating expenses.
Income tax expense rose to $27.7 million for the third quarter of 2000
from $20.9 million for the same period in 1999 primarily as a result of higher
pre-tax earnings. The effective tax rate for the third quarter of 2000 was 27.9%
compared with 24.9% for the same period in 1999.
Popular, Inc.'s total assets grew to $27.2 billion at September 30,
2000, compared with $24.3 billion at the same date in 1999 and $26.5 billion as
of June 30, 2000. Loans rose 15.2%, from $14.1 billion at September 30, 1999, to
$16.2 billion at September 30, 2000. The mortgage and commercial loan portfolios
both reflected an increase of $1.1 billion and $854 million, respectively. At
June 30, 2000, loans amounted to $15.8 billion.
At September 30, 2000, the allowance for loan losses was $295 million
or 1.82% of loans compared with $288 million or 2.05% and $306 million or 1.94%
at September 30, 1999 and June 30, 2000, respectively. Non-performing assets
amounted to $344 million at September 30, 2000, compared with $333 million at
the same date last year and $380 million at the end of the second quarter of
2000.
Our deposits grew to $14.6 billion at September 30, 2000, from $13.8
billion a year earlier and $14.5 billion at June 30, 2000. Deposit growth during
the period was primarily in time deposits. The moderate growth in deposits since
the second quarter of 2000 was also impacted by the sale of Banco Fiduciario,
which had $293 million in total deposits at June 30, 2000. Borrowings were $10.4
billion at the end of the third quarter of 2000, compared with $8.4 billion a
year earlier and $9.8 billion at June 30, 2000.
As a stockholder your equity as of September 30, 2000, was $1.84
billion, up $158 million or 9.4% from $1.68 billion at the same date a year
earlier. Included in stockholders' equity at the end of the third quarter of
2000 was $100 million in unrealized losses on securities available-for-sale, net
of tax, compared with $83 million last year. At June 30, 2000, stockholders'
equity amounted to $1.74 billion, including $150 million in unrealized losses on
securities available-for-sale, net of tax.
The Corporation's stock market value per common share was $27.06 at the
end of the quarter, compared with $19.06 at June 30, 2000 and $27.75 at
September 30, 1999. At the end of the third quarter of 2000, the Corporation had
a market capitalization of $3.7 billion and a book value per share of $12.77.
As part of a merger agreement between Banco Fiduciario (BF) and another local
financial institution in the Dominican Republic, the Corporation sold its
ownership in BF on August 23, 2000. The Corporation retained an option to
acquire a minority interest in the merged financial institution. In addition,
the Corporation sold its credit card operations in the United States effective
August 21, 2000, to Metris Companies, Inc. This signed agreement enables the
Corporation to continue offering credit cards, particularly in the Hispanic
market.
/s/ Richard L. Carrion
Chairman
President
Chief Executive Officer
<PAGE> 3
3
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
At September 30, Average for the nine months
BALANCE SHEET HIGHLIGHTS 2000 1999 Change 2000 1999 Change
---------------------------------------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Money market investments $ 879,651 $ 837,600 $ 42,051 $ 932,578 $ 683,173 $ 249,405
Investment and trading securities 8,520,136 7,587,577 932,559 7,945,071 7,612,418 332,653
Loans 16,237,687 14,097,081 2,140,606 15,674,947 13,674,777 2,000,170
Total assets 27,230,263 24,275,583 2,954,680 26,240,525 23,493,991 2,746,534
Deposits 14,557,878 13,770,048 787,830 14,447,585 13,732,917 714,668
Borrowings 10,390,202 8,386,463 2,003,739 9,434,291 7,597,218 1,837,073
Stockholders' equity 1,835,734 1,677,322 158,412 1,859,882 1,691,540 168,342
---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Third quarter Nine months
OPERATING HIGHLIGHTS 2000 1999 Change 2000 1999 Change
---------------------------------------------------------------------------------------------------------------------------------
(In thousands, except per share information)
<S> <C> <C> <C> <C> <C> <C>
Net interest income $ 248,856 $ 238,792 $ 10,064 $ 737,012 $ 713,881 $ 23,131
Provision for loan losses 49,666 37,080 12,586 148,398 109,482 38,916
Fees and other income 120,726 97,023 23,703 345,737 271,007 74,730
Other expenses, net of minority interest 248,624 234,525 14,099 733,747 683,555 50,192
Net income $ 71,292 $ 64,210 $ 7,082 $ 200,604 $ 191,851 $ 8,753
Net income applicable to common stock $ 69,205 $ 62,123 $ 7,082 $ 194,342 $ 185,589 $ 8,753
Earnings per common share 0.51 0.46 0.05 1.43 1.37 0.06
---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Third quarter Nine months
SELECTED STATISTICAL INFORMATION 2000 1999 2000 1999
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMON STOCK DATA
Market price
High $27.06 $31.00 $27.06 $37.88
Low 19.63 25.81 18.63 25.81
End 27.06 27.75 27.06 27.75
Book value at period end 12.77 11.62 12.77 11.62
Dividends declared 0.16 0.16 0.48 0.44
Dividend payout ratio 31.42% 30.48% 33.54% 30.67%
Price/earnings ratio 14.24X 15.33x 14.24X 15.33x
---------------------------------------------------------------------------------------------------------------------------------
PROFITABILITY RATIOS
Return on assets 1.05% 1.06% 1.02% 1.09%
Return on common equity 15.24 15.23 14.75 15.59
Net interest spread (taxable equivalent) 3.33 3.80 3.41 3.84
Net interest yield (taxable equivalent) 4.16 4.59 4.25 4.65
Effective tax rate 27.94 24.86 25.45 25.09
Overhead ratio 40.26 49.28 43.56 49.14
Efficiency ratio 61.29 63.81 62.99 63.09
---------------------------------------------------------------------------------------------------------------------------------
CAPITALIZATION RATIOS
Equity to assets 6.99% 7.12% 7.09% 7.20%
Tangible equity to assets 5.99 6.01 6.02 6.11
Equity to loans 11.69 12.15 11.87 12.37
Internal capital generation 9.95 9.40 9.26 9.93
Tier I capital to risk-adjusted assets 10.29 10.32 10.29 10.32
Total capital to risk-adjusted assets 12.33 12.49 12.33 12.49
Leverage ratio 6.29 6.36 6.29 6.36
---------------------------------------------------------------------------------------------------------------------------------
CREDIT QUALITY RATIOS
Allowance for losses to loans 1.82% 2.05% 1.82% 2.05%
Allowance to non-performing assets 85.85 86.56 85.85 86.56
Allowance to non-performing loans 91.57 94.48 91.57 94.48
Non-performing assets to loans 2.12 2.36 2.12 2.36
Non-performing assets to total assets 1.26 1.37 1.26 1.37
Net charge-offs to average loans 1.04 0.89 1.10 0.86
Provision to net charge-offs 1.17X 1.17x 1.15X 1.23x
Net charge-offs earnings coverage 3.49 3.83 3.22 4.09
</TABLE>
<PAGE> 4
4
ADDITIONAL INFORMATION
BOARD OF DIRECTORS
Richard L. Carrion, Chairman
Antonio Luis Ferre, Vice Chairman **
Juan A. Albors Hernandez *
Alfonso F. Ballester *
Jose A. Bechara Bravo *
Salustiano Alvarez Mendez*
Juan J. Bermudez
Francisco J. Carreras
Jose B. Carrion Jr. *
David H. Chafey Jr.
Maria Luisa Ferre *
Hector R. Gonzalez
Jorge A. Junquera Diez **
Manuel Morales Jr.
Alberto M. Paracchini
Francisco M. Rexach Jr.
J. Adalberto Roig Jr. *
Felix J. Serralles Nevares
Julio E. Vizcarrondo Jr.
Samuel T. Cespedes, Secretary
* Director of Banco Popular de Puerto Rico only
** Director of Popular, Inc. only
EXECUTIVE OFFICERS
Richard L. Carrion, Chairman of the Board,
President and Chief Executive Officer
David H. Chafey Jr., Senior Executive Vice President
Jorge A. Junquera Diez, Senior Executive Vice President
Maria Isabel P. de Burckhart, Executive Vice President
Roberto R. Herencia, Executive Vice President
Larry B. Kesler, Executive Vice President
Humberto Martin, Executive Vice President
Emilio E. Pinero, Executive Vice President
Carlos J. Vazquez, Executive Vice President
SHAREHOLDER INFORMATION
SHAREHOLDER ASSISTANCE: Shareholders requiring a change of address, records or
information about lost certificates, dividend checks or dividend reinvestment
should contact:
Banco Popular de Puerto Rico
Popular Center Building - 4th Floor
Trust Division (725)
209 Munoz Rivera Ave.
Hato Rey, Puerto Rico 00918
PUBLICATIONS: For printed material (annual and quarterly reports, 10-K and 10-Q
reports), contact Mr. Amilcar L. Jordan at the Comptroller's Division at (787)
765-9800 ext. 6101, or VISIT OUR WEB SITE AT HTTP://WWW.POPULARINC.COM.
DIVIDEND REINVESTMENT PLAN: The Corporation has a dividend reinvestment plan
that provides the shareholder a simple, convenient and cost-effective way to
acquire Popular, Inc. common stock.
- Dividends can be automatically reinvested in additional shares at 95%
of the Average Market Price.
- Participants may make optional cash payments of at least $25 and not
more than $10,000 per calendar month for investment in additional
shares.
- No brokerage commissions are charged on purchases under this plan.
- Participant's funds will be fully invested, because the plan permits
fractions of shares to be credited to a participant's account.
If you would like more information on this plan, please contact our Trust
Division at (787) 756-3908 or (787) 765-9800 exts. 5637, 5525 and 5897.
<PAGE> 5
5
CONSOLIDATED STATEMENTS OF CONDITION
<TABLE>
<CAPTION>
September 30,
Dollars in thousands 2000 1999
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 573,396 $ 719,681
---------------------------------------------------------------------------------------------------------------------------------
Money market investments:
Federal funds sold and securities purchased
under agreements to resell 868,513 789,592
Time deposits with other banks 10,638 47,501
Bankers' acceptances 500 507
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879,651 837,600
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Investment securities available-for-sale, at market value 7,979,951 6,938,363
Investment securities held-to-maturity, at amortized cost 376,540 311,914
Trading account securities, at market value 163,645 337,300
Loans held-for-sale, at lower of cost or market 688,226 526,263
---------------------------------------------------------------------------------------------------------------------------------
Loans 15,902,964 13,945,910
Less - Unearned income 353,503 375,092
Allowance for loan losses 295,177 288,382
---------------------------------------------------------------------------------------------------------------------------------
15,254,284 13,282,436
---------------------------------------------------------------------------------------------------------------------------------
Premises and equipment 401,975 442,162
Other real estate 21,494 27,926
Customers' liabilities on acceptances 1,904 10,488
Accrued income receivable 200,638 159,415
Other assets 401,123 371,268
Intangible assets 287,436 310,767
---------------------------------------------------------------------------------------------------------------------------------
$ 27,230,263 $ 24,275,583
---------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Non-interest bearing $ 2,945,057 $ 2,994,189
Interest bearing 11,612,821 10,775,859
---------------------------------------------------------------------------------------------------------------------------------
14,557,878 13,770,048
Federal funds purchased and securities sold under agreements to repurchase 5,236,644 4,157,275
Other short-term borrowings 3,444,129 2,294,827
Notes payable 1,434,429 1,659,361
Acceptances outstanding 1,904 10,488
Other liabilities 443,707 407,981
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25,118,691 22,299,980
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Subordinated notes 125,000 125,000
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Preferred beneficial interest in Popular North America's junior subordinated
deferrable interest debentures guaranteed by the Corporation 150,000 150,000
---------------------------------------------------------------------------------------------------------------------------------
Minority interest in consolidated subsidiaries 838 23,281
---------------------------------------------------------------------------------------------------------------------------------
Stockholders' equity:
Preferred stock 100,000 100,000
Common stock 829,729 827,045
Surplus 249,238 237,892
Retained earnings 823,418 656,407
Treasury stock, at cost (66,214) (60,151)
Accumulated other comprehensive loss, net of deferred taxes (100,437) (83,871)
---------------------------------------------------------------------------------------------------------------------------------
1,835,734 1,677,322
---------------------------------------------------------------------------------------------------------------------------------
$ 27,230,263 $ 24,275,583
=================================================================================================================================
</TABLE>
<PAGE> 6
6
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Quarter ended Nine months ended
September 30, September 30,
Dollars in thousands, except per share information 2000 1999 2000 1999
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest Income:
Loans $ 414,677 $ 349,295 $ 1,183,634 $ 1,011,067
Money market investments 18,187 8,272 45,743 23,705
Investment securities 125,109 105,736 351,863 316,581
Trading account securities 3,201 5,229 10,509 14,775
---------------------------------------------------------------------------------------------------------------------------
561,174 468,532 1,591,749 1,366,128
---------------------------------------------------------------------------------------------------------------------------
Interest Expense:
Deposits 140,811 113,303 392,684 334,273
Short-term borrowings 139,757 84,071 356,266 226,584
Long-term debt 31,750 32,366 105,787 91,390
---------------------------------------------------------------------------------------------------------------------------
312,318 229,740 854,737 652,247
---------------------------------------------------------------------------------------------------------------------------
Net interest income 248,856 238,792 737,012 713,881
Provision for loan losses 49,666 37,080 148,398 109,482
---------------------------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 199,190 201,712 588,614 604,399
Service charges on deposit accounts 32,558 29,935 93,612 87,915
Other service fees 58,181 44,374 160,989 121,974
Gain on sale of securities 147 39 13,740 775
Trading account profit (loss) (50) (698) 1,460 (1,561)
Other operating income 29,890 23,373 75,936 61,904
---------------------------------------------------------------------------------------------------------------------------
319,916 298,735 934,351 875,406
---------------------------------------------------------------------------------------------------------------------------
Operating Expenses:
Personnel costs:
Salaries 78,104 75,153 233,999 215,294
Profit sharing 5,197 5,485 14,897 17,888
Pension and other benefits 17,078 18,752 52,918 56,883
---------------------------------------------------------------------------------------------------------------------------
100,379 99,390 301,814 290,065
Net occupancy expenses 17,610 15,469 50,346 44,442
Equipment expenses 25,294 22,908 73,807 65,199
Other taxes 8,507 8,717 25,423 24,923
Professional fees 16,290 17,090 50,794 49,758
Communications 11,661 10,831 34,497 32,240
Business promotion 9,694 11,916 36,353 35,125
Printing and supplies 5,351 5,321 15,836 15,139
Other operating expenses 17,289 14,949 51,952 41,602
Amortization of intangibles 8,829 8,113 25,958 23,319
---------------------------------------------------------------------------------------------------------------------------
220,904 214,704 666,780 621,812
---------------------------------------------------------------------------------------------------------------------------
Income before income tax and minority interest 99,012 84,031 267,571 253,594
Income tax 27,662 20,887 68,103 63,623
Net loss (gain) of minority interest 58 (1,066) (1,136) (1,880)
---------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 71,292 $ 64,210 $ 200,604 $ 191,851
---------------------------------------------------------------------------------------------------------------------------
NET INCOME APPLICABLE TO COMMON STOCK $ 69,205 $ 62,123 $ 194,342 $ 185,589
---------------------------------------------------------------------------------------------------------------------------
EARNINGS PER COMMON SHARE (BASIC AND DILUTED) $ 0.51 $ 0.46 $ 1.43 $ 1.37
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 7
7
SUBSIDIARIES
CENTRAL OFFICE
Popular Center
209 Munoz Rivera Avenue
San Juan, Puerto Rico 00918
Telephone: (787) 765-9800
BANCO POPULAR DE PUERTO RICO
Puerto Rico Office
Popular Center
209 Munoz Rivera Avenue
San Juan, Puerto Rico 00918
Telephone: (787) 765-9800
Virgin Islands Office
193 Estate Altona & Welgunst
St. Thomas, Virgin Islands 00802
Telephone: (340) 693-2777
BANCO POPULAR NORTH AMERICA
4000 West North Avenue
Chicago, Illinois 60639
Telephone: (773) 772-8600
BANCO POPULAR, NATIONAL ASSOCIATION
5551 Vanguard Street
Suite 100
Orlando, Florida 32819
Telephone: (407) 370-7482
ATH COSTA RICA / CREST, S.A.
Costado Este del Banco Central
Calle 2 Entre Ave. Central y Primera
San Jose Centro, Costa Rica
Telephone: (011) 506-257-4112
GM GROUP, INC.
1590 Ponce de Leon Avenue
San Juan, Puerto Rico 00926
Telephone: (787) 751-4343
EQUITY ONE, INC.
Marlton Crossing Office Park
400 Lippincott Drive
Marlton, New Jersey 08053
Telephone: (856) 396-2600
POPULAR MORTGAGE, INC.
268 Ponce de Leon Avenue
San Juan, Puerto Rico 00918
Telephone: (787) 753-0245
LEVITT MORTGAGE
Galeria San Patricio
B-5 Tabonuco St.
Suite 207
Guaynabo, Puerto Rico 00968
Telephone: (787) 749-8787
POPULAR LEASING & RENTAL, INC.
M-1046 Federico Costa St.
Tres Monjitas Industrial
Development
San Juan, Puerto Rico 00903
Telephone: (787) 751-4848
<PAGE> 8
8
POPULAR LEASING, USA
16296 Westwood
Business Parkdrive
Ellisville, Missouri 63021
Telephone: (609) 273-1119
POPULAR FINANCE, INC.
10 Salud Street
El Senorial Condominium
Suite 613
Ponce, Puerto Rico 00731
Telephone: (787) 844-2860
POPULAR CASH EXPRESS, INC.
6200 North Hiawatha
Suite 200
Chicago, Illinois 60646
Telephone: (773) 205-8300
POPULAR SECURITIES, INC.
Popular Center
209 Munoz Rivera Avenue
Suite 1020
San Juan, Puerto Rico 00918
Telephone: (787) 766-4200
POPULAR INSURANCE, INC.
270 Munoz Rivera Avenue
McConnell Bldg. 6th Floor
Hato Rey, Puerto Rico 00918
Telephone: (787) 759-0080
