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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
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[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (Fee Required)
For the Fiscal Year Ended December 31, 1999
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (No Fee Required)
Commission File No. 0-13818
POPULAR, INC.
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Incorporated in the Commonwealth of Puerto Rico
IRS Employer Identification No. 66-0416582
Principal Executive Offices:
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209 Munoz Rivera Avenue
Hato Rey, Puerto Rico 00918
Telephone Number: (787) 765-9800
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock ($6.00 par value)
8.35% Non-Cumulative Monthly Income Preferred Stock,
1994 Series A (Liquidation Preference $25.00 Per Share)
Series A Participating Cumulative Preferred Stock Purchase Rights
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ].
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ ]
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As of February 29, 2000 the Corporation had 135,763,765 shares of common stock
outstanding. The aggregate market value of the common stock held by
non-affiliates of the Corporation was $3,028,890,000 based upon the reported
closing price of $22.31 on the NASDAQ National Market System on that date.
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DOCUMENTS INCORPORATED BY REFERENCE
(1) Portions of the Corporation's Annual Report to Shareholders for the
fiscal year ended December 31, 1999 are incorporated herein by reference in
response to Item 1 of Part I, Items 5 through 8 of Part II and Item 14(a)(1) of
Part IV.
(2) Portions of the Corporation's Proxy Statement relating to the 2000
Annual Meeting of Stockholders of the Corporation are incorporated herein by
reference in response to Items 10 through 13 of Part III.
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TABLE OF CONTENTS
Page
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PART I
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Item 1 Business 4
Item 2 Properties 13
Item 3 Legal Proceedings 14
Item 4 Submission of Matters to a Vote of Security Holders 14
PART II
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Item 5 Market for Registrant's Common Stock and Related
Stockholder Matters 15
Item 6 Selected Financial Data 16
Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations 17
Item 7A Quantitative and Qualitative Disclosures About Market Risk 17
Item 8 Financial Statements and Supplementary Data 17
Item 9 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 17
PART III
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Item 10 Directors and Executive Officers of the Registrant 17
Item 11 Executive Compensation 17
Item 12 Security Ownership of Certain Beneficial Owners
and Management 17
Item 13 Certain Relationships and Related Transactions 17
PART IV
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Item 14 Exhibits, Financial Statement Schedules, and
Reports on Form 8-K 18
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PART I
POPULAR, INC.
ITEM 1 BUSINESS
Popular, Inc. (the "Corporation") is a diversified, publicly owned
bank holding company, registered under the Bank Holding Company Act of 1956, as
amended (the "BHC Act") and, accordingly, subject to the supervision and
regulation of the Board of Governors of the Federal Reserve System ("the
Federal Reserve Board"). The Corporation was incorporated in 1984 under the
laws of the Commonwealth of Puerto Rico and is the largest financial
institution in Puerto Rico, with consolidated assets of $25.5 billion, total
deposits of $14.2 billion and stockholders' equity of $1.7 billion at December
31, 1999. Based on total assets at December 31, 1999, the Corporation was the
37th largest bank holding company in the United States.
The Corporation's principal subsidiary, Banco Popular de Puerto Rico
("Banco Popular" or the "Bank"), was incorporated in 1893 and is Puerto Rico's
largest bank with total assets of $18.3 billion, deposits of $10.4 billion and
stockholders' equity of $1.0 billion at December 31, 1999. The Bank accounted
for 72% of the total consolidated assets of the Corporation at December 31,
1999. A consumer-oriented bank, Banco Popular has the largest retail franchise
in Puerto Rico, operating 199 branches and 442 automated teller machines. The
Bank has the largest trust operation in Puerto Rico. The Bank also operates
seven branches in the U.S. Virgin Islands, one branch in the British Virgin
Islands and one branch in New York. Banco Popular's deposits are insured under
the Bank Insurance Fund ("BIF") of the Federal Deposit Insurance Corporation
(the "FDIC"). Banco Popular has three subsidiaries, Popular Leasing & Rental,
Inc., Puerto Rico's largest vehicle leasing and daily rental company, Popular
Finance, Inc., a small-loan and second mortgage company with 47 offices in
Puerto Rico, and Popular Mortgage, Inc., a mortgage loan company with 13
offices in Puerto Rico.
The Corporation has three other principal subsidiaries: Popular
Securities, Inc., Popular International Bank, Inc. ("PIB") and GM Group, Inc.
Popular Securities, Inc. is a securities broker-dealer in Puerto Rico with
financial advisory, investment and security brokerage operations for
institutional and retail customers. Popular International Bank, Inc. ("PIB"),
owns all of the outstanding stock of Popular North America, Inc. ("PNA") and
ATH Costa Rica. The latter provides ATM switching and driving services in San
Jose, Costa Rica. In addition, PIB owns 57% of the outstanding stock of Banco
Fiduciario, S. A. ("BF"), a commercial bank in the Dominican Republic with
total assets of $436 million as of December 31, 1999. In July 1999 the
Corporation acquired GM Group, Inc., which provides electronic data processing
and consulting services, sale and rental of electronic data processing
equipment, and sale and maintenance of computer software to clients in ten
countries and through offices in Puerto Rico, Venezuela, Miami and the
Dominican Republic. At December 31, 1999 GM Group, Inc. had total assets of $58
million. In August 1999 the Corporation acquired 85% of Newco Mortgage Holding
Corporation (d/b/a Levitt Mortgage), a mortgage banking organization with
operations in Puerto Rico, as part of the strategic initiative of enhancing its
mortgage business in Puerto Rico. At December 31, 1999, the assets of Levitt
Mortgage totaled $10 million.
PIB is a wholly-owned subsidiary of the Corporation organized in 1992
that operates as an "international banking entity" under the International
Banking Center Regulatory Act of Puerto Rico (the "IBC Act"). PIB is a
registered bank holding company under the BHC Act and is principally engaged in
providing managerial services to its subsidiaries.
PNA, a wholly-owned subsidiary of PIB and an indirect wholly-owned
subsidiary of the Corporation, was organized in 1991 under the laws of the
State of Delaware and is a registered bank holding company under the BHC Act.
PNA functions as a holding company for the Corporation's mainland U.S.
operations. As of December 31, 1999, PNA had four direct subsidiaries, all of
which were wholly-owned: Popular Holdings USA, Inc. ("PHUSA"), the holding
company of Banco Popular North America
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("BPNA") and Banco Popular, N.A. (Texas), Equity One, Inc. a diversified
consumer finance company, Popular Cash Express, Inc., a retail financial
services company and BanPonce Trust 1, a statutory business trust. Banco
Popular, N.A. (Texas) merged with and into BPNA on January 1, 2000.
The banking operations of BPNA in the mainland United States are based
in six states. In New York, BPNA operates 32 branches, which accounted for
aggregate assets of $2.0 billion and total deposits of $1.7 billion at December
31, 1999. BPNA also operates 19 branches in Illinois and 17 in California with
total assets of $1.9 billion and $448 million, respectively, and deposits of
$1.6 billion and $324 million, respectively. In addition, BPNA has 10 branches
in New Jersey with total assets of $440 million and deposits of $354 million as
of December 31, 1999 and eight branches in Florida with aggregate total assets
of $328 million and $132 million in deposits at the same date.
At December 31, 1999, Banco Popular, N.A. (Texas)'s banking operations
had $186 million in assets and $146 million in deposits through five branches.
The deposits of BPNA are insured under BIF by the FDIC.
In addition, BPNA owned all of the outstanding stock of Popular
Leasing, USA, a non-banking subsidiary that offers small ticket equipment
leasing with 10 offices in seven states and total assets of $74 million as of
December 31, 1999.
Equity One, Inc. is engaged in the business of granting personal and
mortgage loans and providing dealer financing through 138 offices in 32 states
with total assets of $1.6 billion as of December 31, 1999. Popular Cash
Express, Inc. offers services such as check cashing, money transfers to other
countries, money order sales and processing of payments through 64 offices and
38 mobile check cashing units in four states in the United States. Its assets
totaled $43 million as of December 31, 1999.
REORGANIZATION
In 1998, the Corporation commenced a program to reorganize and
streamline its operations in the mainland United States. The reorganization
allows the Corporation to take advantage of recent changes in U.S. federal
banking laws involving branch banking across state lines. The reorganization,
which was largely completed on January 1, 1999, was finalized on January 1,
2000 with the merger of Banco Popular, N.A. (Texas) with and into BPNA.
COMPETITION
The business of banking is highly competitive. In addition to
competition from other commercial banks, banks face significant competition
from nonbank financial institutions. Savings associations compete aggressively
with commercial banks for deposits and loans. Credit unions and finance
companies are significant players in the consumer loan market. Investment firms
and retailers are significant competitors for some types of business. Banks
compete for deposits with a broad spectrum of other types of investments such
as mutual funds, stocks and debt securities of corporations, and debt
securities of the federal government, state governments and their respective
agencies. The principal methods of competition for financial services are price
(interest rates paid on deposits, interest rates charged on borrowings, and
fees charged for services) and service (convenience and quality of services
rendered to customers).
FORWARD-LOOKING STATEMENTS
This report contains certain forward-looking statements with respect
to the adequacy of the allowance for loan losses, the Corporation's market risk
and the effect of legal proceedings on the Corporation's financial condition
and results of operations. These forward-looking statements involve certain
risks, uncertainties, estimates and assumptions by management.
Various factors could cause actual results to differ from those
contemplated by such forward-
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looking statements. With respect to the adequacy of the allowance for loan
losses and market risk, these factors include, among others; the rate of growth
in the economy, the relative strength and weakness in the consumer and
commercial credit sectors and in the real estate markets, the performance of
the stock and bond markets and the magnitude of interest rate changes.
Moreover, the outcome of litigation, as discussed in "Part I, Item 3. Legal
Proceedings" is inherently uncertain and depends on judicial interpretations of
law and the findings of judges and juries.
The Corporation's business is described on pages 1 through 19 of the
Business Review Section of the Annual Report to Shareholders for the year ended
December 31, 1999, which is incorporated herein by reference.
REGULATION AND SUPERVISION
GENERAL
The Corporation, PIB, PNA and PHUSA are bank holding companies subject
to supervision and regulation by the Federal Reserve Board under the BHC Act.
Under the BHC Act prior to recent legislation that significantly altered these
rules, bank holding companies activities and those of their banking and
non-banking subsidiaries have been limited to the business of banking and
activities closely related to banking, and no bank holding company could
directly or indirectly acquire the ownership or control of more than 5% of any
class of voting shares or substantially all of the assets of any company in the
United States, including a bank, without the prior approval of the Federal
Reserve Board. In addition, bank holding companies have generally been
prohibited under the BHC Act from engaging in non-banking activities, subject
to certain exceptions. See "Financial Services Modernization below for
information about the recent legislation that changed these rules."
Banco Popular is considered a foreign bank for purposes of the
International Banking Act of 1978 (the "IBA"). Under the IBA, Banco Popular is
not permitted to operate a branch or agency that is located outside of its
"home state", except to the extent that a national bank with the same home
state is permitted to do so as described under "Interstate Banking and
Legislation" below. Puerto Rico is not considered a state for purposes of these
geographic limitations. Banco Popular has designated the state of New York as
its home state.
Banco Popular and BPNA are subject to supervision and examination by
applicable federal and state banking agencies including, in the case of Banco
Popular, the Federal Reserve Board and the Office of the Commissioner of
Financial Institutions of Puerto Rico and in the case of BPNA, the Federal
Reserve Board and the New York State Banking Department. Banco Popular and BPNA
are subject to requirements and restrictions under federal and state law,
including requirements to maintain reserves against deposits, restrictions on
the types and amounts of loans that may be granted and the interest that may be
charged thereon, and limitations on the types of other investments that may be
made and the types of services that may be offered. Various consumer laws and
regulations also affect the operations of Banco Popular and BPNA. In addition
to the impact of regulations, commercial banks are affected significantly by
the actions of the Federal Reserve Board as it attempts to control the money
supply and credit availability in order to influence the economy. See-
"Financial Services Modernization" below for information about recent
legislation that changed these rules.
On March 9, 2000 Banco Popular entered into an agreement with the
Federal Reserve Bank of New York that imposed a number of compliance, reporting
and control requirements. A substantial portion of the required controls had
been implemented by Banco Popular prior to the date the agreement was signed.
FDICIA
Under the Federal Deposit Insurance Corporation Improvement Act of
1991 and the regulations promulgated thereunder ("FDICIA"), the federal banking
regulators must take prompt corrective action in respect of depository
institutions that do not meet minimum capital requirements. FDICIA establishes
five
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capital tiers: "well capitalized", "adequately capitalized,"
"undercapitalized", "significantly undercapitalized", and "critically
undercapitalized". A depository institution is deemed well capitalized if it
maintains a leverage ratio of at least 5%, a risk-based Tier 1 capital ratio of
at least 6% and a risk-based total capital ratio of at least 10% and is not
subject to any written agreement or directive to meet a specific capital level.
A depository institution is deemed adequately capitalized if it is not well
capitalized but maintains a leverage ratio of at least 4% (or at least 3% if
given the highest regulatory rating and not experiencing or anticipating
significant growth), a risk-based Tier 1 capital ratio of at least 4% and a
risk-based total capital ratio of at least 8%. A depository institution is
deemed undercapitalized if it fails to meet the standards for adequately
capitalized institutions (unless it is deemed significantly or critically
undercapitalized). An institution is deemed significantly undercapitalized if
it has a leverage ratio of less than 3%, a risk-based Tier 1 capital ratio of
less than 3% or a risk-based total capital ratio of less than 6%. An
institution is deemed critically undercapitalized if it has tangible equity
equal to 2% or less of total assets. A depository institution may be deemed to
be in a capitalization category that is lower than is indicated by its actual
capital position if it receives a less than satisfactory examination rating in
any one of four categories.
At December 31, 1999, Banco Popular and BPNA were well capitalized. An
institution's capital category, as determined by applying the prompt corrective
action provisions of law, may not constitute an accurate representation of the
overall financial condition or prospects of the Corporation or its banking
subsidiaries, and should be considered in conjunction with other available
information regarding the Corporation's financial condition and results of
operations.
FDICIA generally prohibits a depository institution from making any
capital distribution (including payment of a dividend) or paying any management
fee to its holding company if the depository institution would thereafter be
undercapitalized. Undercapitalized depository institutions are subject to
restrictions on borrowing from the Federal Reserve System. In addition,
undercapitalized depository institutions are subject to growth limitations and
are required to submit capital restoration plans. A depository institution's
holding company must guarantee the capital plan, up to an amount equal to the
lesser of 5% of the depository institution's assets at the time it becomes
undercapitalized or the amount of the capital deficiency when the institution
fails to comply with the plan. The federal banking agencies may not accept a
capital plan without determining, among other things, that the plan is based on
realistic assumptions and is likely to succeed in restoring the depository
institution's capital. If a depository institution fails to submit an
acceptable plan, it is treated as if it is significantly undercapitalized.
Significantly undercapitalized depository institutions may be subject to a
number of requirements and restrictions, including orders to sell sufficient
voting stock to become adequately capitalized, requirements to reduce total
assets and cessation of receipt of deposits from correspondent banks.
Critically undercapitalized depository institutions are subject to appointment
of a receiver or conservator.
The capital-based prompt corrective action provisions of FDICIA apply
to FDIC-insured depository institutions such as the subsidiaries of the
Corporation, Banco Popular, BPNA and before January 1, 2000, Banco Popular,
N.A. (Texas), but they are not directly applicable to holding companies such as
the Corporation, PIB, PNA and PHUSA which control such institutions. However,
federal banking agencies have indicated that, in regulating holding companies,
they may take appropriate action at the holding company level based on their
assessment of the effectiveness of supervisory actions imposed upon subsidiary
insured depository institutions pursuant to such provisions and regulations.
HOLDING COMPANY STRUCTURE
Banco Popular and BPNA are subject to restrictions under federal law
that limit the transfer of funds among them and the Corporation, PIB, PNA,
PHUSA and any of the Corporation's other non-banking subsidiaries, whether in
the form of loans, other extensions of credit, investments or asset purchases.
Such transfers by Banco Popular and BPNA to any of the Corporation, PIB, PNA,
PHUSA or any non-banking subsidiaries, are limited in amount to 10% of the
transferring institution's capital stock and surplus and, with respect to the
Corporation and all of its non-banking subsidiaries, to an aggregate of 20% of
the
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transferring institution's capital stock and surplus. For these purposes an
institution's capital stock and surplus includes its total risk-based capital
plus the balance of its allowance for loan losses not included therein.
Furthermore, such loans and extensions of credit are required to be secured in
specified amounts.
Under the Federal Reserve Board policy, a bank holding company such as
the Corporation, PIB, PNA or PHUSA is expected to act as a source of financial
strength to each of its subsidiary banks and to commit resources to support
each subsidiary bank. This support may be required at times when, absent such
policy, the bank holding company might not otherwise provide such support. In
addition, any capital loans by a bank holding company to any of its subsidiary
depository institutions are subordinated in right of payment to deposits and to
certain other indebtedness of such subsidiary depository institution. In the
event of a bank holding company's bankruptcy, any commitment by the bank
holding company to a federal bank regulatory agency to maintain the capital of
a subsidiary depository institution will be assumed by the bankruptcy trustee
and entitled to a priority of payment. Banco Popular and BPNA are currently the
only depository institution subsidiaries of the Corporation, PIB, PNA and
PHUSA.
Because the Corporation, PIB, PNA and PHUSA are holding companies,
their right to participate in the assets of any subsidiary upon the latter's
liquidation or reorganization will be subject to the prior claims of the
subsidiary's creditors (including depositors in the case of subsidiary
depository institutions) except to the extent that the Corporation, PIB, PNA or
PHUSA, as the case may be, may itself be a creditor with recognized claims
against the subsidiary.
Under the Federal Deposit Insurance Act (the "FDIA"), a depository
institution, the deposits of which are insured by the FDIC can be held liable
for any loss incurred by, or reasonably expected to be incurred by, the FDIC in
connection with (i) the default of a commonly controlled FDIC-insured
depository institution or (ii) any assistance provided by the FDIC to any
commonly controlled FDIC-insured depository institution "in danger of default".
"Default" is defined generally as the appointment of a conservator or a
receiver, and "in danger of default" is defined generally as the existence of
certain conditions indicating that a default is likely to occur in the absence
of regulatory assistance. Banco Popular and BPNA are both currently
FDIC-insured depository institution subsidiaries of the Corporation. In some
circumstances (depending upon the amount of the loss or anticipated loss
suffered by the FDIC), cross-guarantee liability may result in the ultimate
failure or insolvency of one or more insured depository institutions in a
holding company structure. Any obligation or liability owed by a subsidiary
depository institution to its parent company is subordinated to the subsidiary
bank's cross-guarantee liability with respect to commonly controlled
FDIC-insured depository institutions.
DIVIDEND RESTRICTIONS
The principal source of cash flow for the Corporation is dividends
from Banco Popular. Various statutory provisions limit the amount of dividends
Banco Popular can pay to the Corporation without regulatory approval. As a
member bank subject to the regulation of the Federal Reserve Board, Banco
Popular must obtain the approval of the Federal Reserve Board for any dividend
if the total of all dividends declared by the member bank in any calendar year
would exceed the total of its net profits, as defined by the Federal Reserve
Board, for that year, combined with its retained net profits for the preceding
two years. In addition, a member bank may not pay a dividend in an amount
greater than its undivided profits then on hand after deducting its losses and
bad debts. For this purpose, bad debts are generally defined to include the
principal amount of loans that are in arrears with respect to interest by six
months or more unless such loans are fully secured and in the process of
collection. Moreover, for purposes of this limitation, a member bank is not
permitted to add the balance in its allowance for loan losses account to its
undivided profits then on hand. A member bank may, however, net the sum of its
bad debts, as defined, against the balance in its allowance for loan losses
account and deduct from undivided profits only bad debts, as so defined, in
excess of that account. At December 31, 1999, Banco Popular could have declared
a dividend of approximately $182 million without the approval of the Federal
Reserve Board.
The payment of dividends by Banco Popular and BPNA may also be
affected by other regulatory
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requirements and policies, such as the maintenance of adequate capital. If, in
the opinion of the applicable regulatory authority, a depository institution
under its jurisdiction is engaged in, or is about to engage in, an unsafe or
unsound practice (that, depending on the financial condition of the depository
institution, could include the payment of dividends), such authority may
require, after notice and hearing, that such depository institution cease and
desist from such practice. In addition, all insured depository institutions are
subject to the capital-based limitations required by the FDICIA. See "FDICIA".
See "Puerto Rico Regulation-General" for a description of certain
restrictions on Banco Popular's ability to pay dividends under Puerto Rico law.
FDIC INSURANCE ASSESSMENTS
Banco Popular and BPNA are subject to FDIC deposit insurance
assessments. Pursuant to the FDICIA, the FDIC has adopted a risk-based
assessment system, under which the assessment rate for an insured depository
institution varies according to the level of risk incurred in its activities.
An institution's risk category is based partly upon whether the institution is
well capitalized, adequately capitalized or less than adequately capitalized.
Each insured depository institution is also assigned to one of the following
"supervisory subgroups": "A", "B" or "C". Group "A" institutions are
financially sound institutions with only a few minor weaknesses; Group "B"
institutions are institutions that demonstrate weaknesses that, if not
corrected, could result in significant deterioration; and Group "C"
institutions are institutions for which there is a substantial probability that
the FDIC will suffer a loss in connection with the institution unless effective
action is taken to correct the areas of weakness.
The FDIC reduced the insurance premiums it charges on bank deposits
insured by the BIF to the statutory minimum of $2,000.00 for "well capitalized"
banks, effective January 1, 1996. On September 30, 1996, the Deposit Insurance
Funds Act of 1996 ("DIFA") was signed into law. DIFA repealed the statutory
minimum premium, and currently premiums related to deposits assessed by both
the BIF and the Savings Association Insurance Fund ("SAIF") are to be assessed
at an annual rate of between 0 cents and 27 cents per $100.00 of deposits.
DIFA also separated the Financing Corporation ("FICO") assessment to
service the interest on its bond obligations from the BIF and SAIF assessments.
The amount assessed on individual institutions by the FICO is in addition to
the amount, if any, paid for deposit insurance according to the FDIC's
risk-related assessment rate schedules. The current FICO annual assessment rate
is 2.12 cents per $100 of deposits. As of December 31, 1999, the Corporation
had a BIF deposit assessment base of approximately $14 billion.
BROKERED DEPOSITS
FDIC regulations adopted under the FDICIA govern the receipt of
brokered deposits. Under these regulations, a bank cannot accept, roll over or
renew brokered deposits (which term is defined also to include any deposit with
an interest rate more than 75 basis points above prevailing rates) unless (i)
it is well capitalized or (ii) it is adequately capitalized and receives a
waiver from the FDIC. A bank that is adequately capitalized may not pay an
interest rate on any deposits in excess of 75 basis points over certain
prevailing market rates specified by regulation. There are no such restrictions
on a bank that is well capitalized. The Corporation does not believe the
brokered deposits regulation has had or will have a material effect on the
funding or liquidity of Banco Popular and BPNA.
CAPITAL ADEQUACY
Information about the capital composition of the Corporation as of
December 31, 1999 and for the four previous years is presented in Table H
"Capital Adequacy Data", on page F-14 in the "Management Discussion and
Analysis of Financial Condition and Results of Operations" (MD&A) and is
incorporated herein by reference.
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Under the Federal Reserve Board's risk-based capital guidelines for
bank holding companies and member banks, the minimum guidelines for the ratio
of qualifying total capital ("Total Capital") to risk-weighted assets
(including certain off-balance sheet items, such as standby letters of credit)
is 8%. At least half of the Total Capital is to be comprised of common equity,
retained earnings, minority interest in equity accounts of consolidated
subsidiaries, non-cumulative perpetual preferred stock and a limited amount of
cumulative perpetual preferred stock less goodwill and certain other intangible
assets ("Tier 1 Capital"). The remainder may consist of a limited amount of
subordinated debt, other preferred stock, certain other instruments and a
limited amount of loan and lease loss reserves ("Tier 2 Capital").
In addition, the Federal Reserve Board has established minimum
leverage ratio guidelines for bank holding companies and member banks. These
guidelines provide for a minimum ratio of Tier 1 Capital to total assets, less
goodwill and certain other intangible assets discussed below (the "leverage
ratio") of 3% for bank holding companies and member banks that have the highest
regulatory rating or have implemented the Federal Reserve Board's market risk
capital measure. All other bank holding companies and member banks will be
required to maintain a leverage ratio of 4%. The guidelines also provide that
banking organizations experiencing internal growth or making acquisitions will
be expected to maintain strong capital positions substantially above the
minimum supervisory levels, without significant reliance on intangible assets.
Furthermore, the guidelines indicate that the Federal Reserve Board will
continue to consider a "tangible Tier 1 leverage ratio" and other indicia of
capital strength in evaluating proposals for expansion or new activities. The
tangible Tier 1 leverage ratio is the ratio of a banking organization's Tier 1
Capital less all intangibles, to total assets less all intangibles.
Banco Popular and BPNA are subject to the risk-based and leverage
capital requirements adopted by the Federal Reserve Board. See Consolidated
Financial Statements, Note 18 "Regulatory Capital Requirements" on pages F-49
and F-50, for the capital ratios of the Corporation, Banco Popular and BPNA.
Failure to meet capital guidelines could subject the Corporation and its
depository institutions subsidiaries to a variety of enforcement remedies,
including the termination of deposit insurance by the FDIC and to certain
restrictions on its business. See - "FDICIA".
INTERSTATE BANKING LEGISLATION
The Riegle-Neal Interstate Banking and Branching Efficiency Act of
1994 permits a bank holding company, with Federal Reserve Board approval, to
acquire banks located in states other than the holding company's home state
without regard to whether the transaction is prohibited under state law. In
addition, national and state banks with different home states are permitted to
merge across state lines, with approval of the appropriate federal banking
agency, unless the home state of a participating bank passed legislation prior
to May 31, 1997 expressly prohibiting interstate mergers. States were allowed
to "opt in" to permit interstate branching by merger prior to June 1, 1997 and
to permit de novo interstate branching. Once a bank has established branches in
a state through an interstate merger transaction, the bank may establish and
acquire additional branches at any location in the state where any bank
involved in the interstate merger transaction could have established or
acquired branches under applicable federal or state law. A bank that has
established a branch in a state through de novo branching may establish and
acquire additional branches in such state in the same manner and to the same
extent as a bank having a branch in such state as a result of an interstate
merger. If a state opted out of interstate branching within the specified time
period, no bank in any other state may establish a branch in the state which
has opted out, whether through an acquisition or de novo. A foreign bank, like
Banco Popular, may branch interstate by merger or de novo to the same extent as
domestic banks in the foreign bank's home state, which, in the case of Banco
Popular, is New York.
FINANCIAL SERVICES MODERNIZATION
On November 12, 1999, the President signed the Gramm-Leach-Bliley Act.
Among other things, the Gramm-Leach-Bliley Act: (i) allows bank holding
companies whose subsidiary depository institutions
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meet management, capital and Community Reinvestment Act standards to engage in
a substantially broader range of nonbanking activities than was previously
permissible, including insurance underwriting and making merchant banking
investments in commercial and financial companies; (ii) allows insurers and
other financial services companies to acquire banks; (iii) removes various
restrictions that previously applied to bank holding company ownership of
securities firms and mutual fund advisory companies; and (iv) establishes the
overall regulatory structure applicable to bank holding companies that also
engage in insurance and securities operations. This part of the
Gramm-Leach-Bliley Act became effective on March 11, 2000.
In order for a bank holding company to engage in the broader range of
activities that are permitted by the Gramm-Leach-Bliley Act. (i) all of its
depository institutions must be well-capitalized and well-managed and (ii) it
must file a declaration with the Federal Reserve Board that it elects to be a
"financial holding company." In addition, to commence any new activity
permitted by the Gramm-Leach-Bliley Act and to acquire any company engaged in
any new activities permitted by the Gramm-Leach-Bliley Act, each insured
depository institution of the financial holding company must have received at
least a "satisfactory" rating in its most recent examination under the
Community Reinvestment Act.
The Gramm-Leach-Bliley Act also modified other laws, including laws
related to financial privacy and community reinvestment. The new financial
privacy provisions generally prohibit financial institutions, including the
Corporation's bank subsidiaries, from disclosing nonpublic personal financial
information to third parties unless customers have the opportunity to "opt out"
of the disclosure.
Various other legislation, including proposals to limit the
investments that a depository institution may make with insured funds, is from
time to time introduced in Congress. The Corporation cannot determine the
ultimate effect that such potential legislation, if enacted, or implementing
regulations, would have upon its financial condition or results of operations.
PUERTO RICO REGULATION
GENERAL
As a commercial bank organized under the laws of Puerto Rico, Banco
Popular is subject to supervision, examination and regulation by the Office of
the Commissioner of Financial Institutions of Puerto Rico (the "Office of the
Commissioner"), pursuant to the Puerto Rico Banking Act of 1933, as amended
(the "Banking Law").
Section 27 of the Banking Law requires that at least ten percent (10%)
of the yearly net income of Banco Popular be credited annually to a reserve
fund. This apportionment must be done every year until the reserve fund is
equal to the total of paid-in capital on common and preferred stock. At the end
of its most recent fiscal year, Banco Popular had a fund established in
compliance with these requirements.
Section 27 of the Banking Law also provides that when the expenditures
of a bank are greater than its receipts, the excess of the former over the
latter must be charged against the undistributed profits of the bank, and the
balance, if any, must be charged against the reserve fund, as a reduction
thereof. If the reserve fund is not sufficient to cover such balance in whole
or in part, the outstanding amount must be charged against the capital account
and no dividend may be declared until said capital has been restored to its
original amount and the reserve fund to 20% of the original capital.
Section 16 of the Banking Law requires every bank to maintain a legal
reserve that, except as otherwise provided by the Office of the Commissioner,
may not be less than 20% of its demand liabilities, excluding government
deposits (federal, state and municipal) which are secured by actual collateral.
If a bank is authorized to establish one or more bank branches in a State of
the United States or in a foreign country, where such branches are subject to
the reserve requirements of that state or country, the Office of the
Commissioner may exempt said branch or branches from the reserve requirements
of Section 16. Pursuant to an order of the Federal Reserve Board dated November
24, 1982, Banco Popular has been
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exempted from the reserve requirements of the Federal Reserve System, with
respect to deposits payable in Puerto Rico.
Section 17 of the Banking Law permits a bank to make loans to any one
person, firm, partnership or corporation, up to an aggregate amount of fifteen
percent 15% of the paid-in capital and reserve fund of the bank. As of December
31, 1999, the legal lending limit for the Bank under this provision was
approximately $91 million. The above limitations do not apply to loans which
are secured by collateral worth at least 25% more than the amount of the loan
up to a maximum aggregate amount of one third of the paid-in capital of the
bank, plus its reserve fund. If the institution is well capitalized and had
been rated 1 in the last examination performed by the Office of the
Commissioner or any regulatory agency, its legal lending limit shall also
include 15% of 50% of its undivided profits and for loans secured by collateral
worth at least 25% more than the amount of the loan, the capital of the bank
shall also include 33 1/3% of 50% of its undivided profits. Institutions rated
2 in their last regulatory examination may include this additional component in
their legal lending limit only with the previous authorization of the Office of
the Commissioner. There are no restrictions under Section 17 on the amount of
loans that are wholly secured by bonds, securities and other evidence of
indebtedness of the Government of the United States or Puerto Rico, or by
current debt bonds, not in default, of municipalities or instrumentalities of
Puerto Rico.
Section 14 of the Banking Law authorizes a bank to conduct certain
financial and related activities directly or through subsidiaries, including
finance leasing of personal property, originating and servicing mortgage loans
and operating a small loan company. Banco Popular engages in these activities
through its wholly-owned subsidiaries, Popular Leasing & Rental, Inc., Popular
Mortgage, Inc. and Popular Finance, Inc., respectively, all of which are
organized and operate in Puerto Rico.
The Finance Board, which is a part of the Office of the Commissioner,
but also includes as its members the Secretary of the Treasury, the Secretary
of Commerce, the Secretary of Consumer Affairs, the President of the Planning
Board, and the President of the Government Development Bank for Puerto Rico,
has the authority to regulate the maximum interest rates and finance charges
that may be charged on loans to individuals and unincorporated businesses in
Puerto Rico. The current regulations of the Finance Board provide that the
applicable interest rate on loans to individuals and unincorporated businesses
(including real estate development loans but excluding certain other personal
and commercial loans secured by mortgages on real estate properties and finance
charges on retail installment sales and for credit card purchases) is to be
determined by free competition.
IBC ACT
Under the IBC Act, without the prior approval of the Office of the
Commissioner, PIB may not amend its articles of incorporation or issue
additional shares of capital stock or other securities convertible into
additional shares of capital stock unless such shares are issued directly to
the shareholders of PIB previously identified in the application to organize
the international banking entity, in which case notification to the Office of
the Commissioner must be given within ten business days following the date of
the issue. Pursuant to the IBC Act, without the prior approval of the Office of
the Commissioner, PIB may not initiate the sale, encumbrance, assignment,
merger or other transfer of shares if by such transaction a person or persons
acting in concert could acquire direct or indirect control of 10% or more of
any class of the PIB's stock. Such authorization must be requested at least 30
days prior to the transaction.
PIB must submit to the Office of the Commissioner a report of its
condition and results of operation on a quarterly basis and its annual audited
financial statement at the close of its fiscal year. Under the IBC Act, PIB may
not deal with "domestic persons" as such term is defined in the IBC Act. Also,
it may only engage in those activities authorized in the IBC Act, the
regulations adopted thereunder and its license.
The IBC Act empowers the Office of the Commissioner to revoke or
suspend, after a hearing, the license of an international banking entity if,
among other things, it fails to comply with the IBC Act,
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regulations issued by the Office of the Commissioner or the terms of its
license or if the Office of the Commissioner finds that the business of the
international banking entity is conducted in a manner not consistent with the
public interest.
EMPLOYEES
At December 31, 1999, the Corporation employed 11,501 persons. None of
its employees are represented by a collective bargaining group.
SEGMENT DISCLOSURE
Note 27 to the Financial Statements, "Segment Reporting" on pages F-59
and F-60 is herein incorporated by reference.
The principal market for the Corporation is Puerto Rico, where the
Corporation had $18 billion or 72% of its total assets as of December 31, 1999
and earned $1.6 billion or 70% of its total revenues for the year then ended.
Total assets, loans and deposits of commercial banks and financial institutions
in Puerto Rico as of September 30, 1999 were estimated at $74 billion, $36
billion and $32 billion, respectively. At that date the Corporation's
commercial banking operation in the island had an estimated market share of 25%
and 30% in loans and deposits, respectively. As previously mentioned, the
Corporation's leasing operation in Puerto Rico is the largest one in the island
with an estimated 38% market share, while the mortgage and consumer operations
have market shares of approximately 24% and 9%, respectively.
The Corporation has a 57% investment in BF in the Dominican Republic.
As of the December 31, 1999, BF operation had $436 million, $290 million and
$295 million in assets, loans and deposits, respectively, representing
approximately 2% each of the consolidated figures of the Corporation.
ITEM 2. PROPERTIES
As of December 31, 1999, Banco Popular owned (and wholly or partially
occupied) approximately 73 branch premises and other facilities throughout the
Commonwealth and one building in the U.S. Virgin Islands. In addition, as of
such date, Banco Popular leased properties for branch operations in
approximately 130 locations in Puerto Rico and 7 locations in the U.S. Virgin
Islands. At December 31, 1999, BPNA had 112 offices (principally bank branches)
of which 59 were owned and 53 were leased. These offices were located
throughout New York, Illinois, New Jersey, California and Florida. Banco
Popular, N.A. (Texas) had six offices rented and owned one building. The
Corporation's management believes that each of its facilities is well
maintained and suitable for its purpose. The principal properties owned by the
Corporation for banking operations and other services are described below:
Popular Center, the San Juan metropolitan area headquarters, located
at 209 Munoz Rivera Avenue, Hato Rey, Puerto Rico, a 20 story office building.
Approximately 56% of the office space is leased to outside tenants.
Cupey Center Complex, three buildings, one of three stories, and two
of two stories each, located in Cupey, Rio Piedras, Puerto Rico. The computer
center, operational and support services, and a recreational center for
employees are some of the main activities conducted at these facilities. The
facilities are fully occupied by Banco Popular's personnel. An adjacent
two-story building is held for future expansion of the complex and is currently
leased to an outside tenant.
Stop 22 - Santurce building, a twelve-story structure located in
Santurce, Puerto Rico. A branch, the accounting department, the human resources
division and the auditing department are the main activities conducted at this
facility, which is fully occupied by Banco Popular personnel.
Old San Juan building, a twelve-story structure located at Old San
Juan, Puerto Rico. Banco
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Popular occupies approximately 27% of the building for a branch operation, a
regional office, an exhibit room and other facilities. The rest of the building
is rented to outside tenants.
Mortgage Loan Center, a six-story building, a four story building, and
a one story building, located at 153, 167 and 157 Ponce de Leon Avenue, Hato
Rey, Puerto Rico, respectively, are fully occupied by Popular Mortgage, Inc.
and Banco Popular's mortgage servicing departments.
Banco Popular Virgin Islands Center, a three-story building housing a
Banco Popular branch and centralized offices. The building is fully occupied by
Banco Popular personnel.
Dominican Republic building, an eight-story building located at 27 de
febrero Avenue, Santo Domingo. BF's full service branch, the executive offices,
corporate and retail banking division, finance and treasury division, credit
review area and the human resources division, are the main activities conducted
at this facility.
Dominican Republic Parking Lot, a six-story building located at El
Vergel Street #75 in Santo Domingo. This parking lot is used by BF's employees
and customers.
New York building, a nine-story structure with two underground levels
located at 7 West 51st Street, New York City. BPNA occupies approximately 92%
of the office space. The remaining space is rented or available for rent to
outside tenants.
Chicago building, a four-story building located at 4000-4008 West
North Avenue, Chicago, Illinois. BPNA's full service branch, as well as BPNA's
executive offices, human resources division and its operation department, are
the main activities conducted at this facility.
Orlando building, a two-story building located at 5551 Vanguard
Street, Orlando, Florida. BPNA's Credit Card operations, finance and accounting
department and BPNA's operation services are the main activities conducted at
this facility.
Houston building, a one-story building located at 1615 Little York
Road, Houston, Texas. A full service branch of BPNA and its administrative
offices are located at this facility.
ITEM 3. LEGAL PROCEEDINGS
The Corporation and its subsidiaries are defendants in various
lawsuits arising in the ordinary course of business. Management believes, based
on the opinion of legal counsel, that the aggregate liabilities, if any,
arising from such actions would not have a material adverse effect on the
financial position and results of operations of the Corporation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The Corporation`s common stock (the "Common Stock") is traded on the
National Association of Securities Dealers Automated Quotation System (NASDAQ)
National Market System under the symbol BPOP. Information concerning the range
of high and low sales prices for the Corporation's common shares
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for each quarterly period during 1999 and the previous four years, as well as
cash dividends declared is contained under Table I, "Common Stock Performance",
on page F-15 and under the caption "Stockholders' Equity" on page F-14 in the
MD&A, and is incorporated herein by reference.
Information concerning legal or regulatory restrictions on the payment
of dividends by the Corporation and Banco Popular is contained under the
caption "Regulation and Supervision" in Item 1 herein.
As of February 29, 2000, the Corporation had 9,130 stockholders of
record of its Common Stock, not including beneficial owners whose shares are
held in record names of brokers or other nominees. The last sales price for the
Corporation's Common Stock on such date, as quoted on the NASDAQ was $22.31 per
share.
On August 4, 1999, a shelf registration statement filed by the
Corporation, PIB and PNA with the Securities and Exchange Commission became
effective. This shelf registration statement allows the Corporation, PIB and
PNA to issue medium-term notes, debt securities and preferred stock in an
aggregate amount of up to $1.5 billion. On September 7, 1999, PNA issued $250
million aggregate principal amount of medium-term notes due September 15, 2001
under this registration statement. These medium-term notes of PNA are, and any
additional securities of PNA of PIB issued under the registration statement
will be, fully and unconditionally guaranteed by the Corporation.
The Corporation currently has outstanding $125 million aggregate
principal amount of subordinated notes due December 15, 2005 with interest
payable semi-annually at 6.75%. These notes are unsecured, subordinated
obligations which are subordinated in right of payment in full to all present
and future senior indebtedness of the Corporation. These notes do not provide
for any sinking fund.
On February 5, 1997, BanPonce Trust I, a statutory business trust
created under the laws of the State of Delaware that is wholly-owned by PNA and
indirectly wholly-owned by the Corporation, sold to institutional investors
$150,000,000 of its 8.327% Capital Securities Series A (liquidation amount
$1,000 per Capital Security) ("Capital Securities") through certain
underwriters. The proceeds of the issuance, together with the proceeds of the
purchase by PNA of $4,640,000 of BanPonce Trust I's 8.327% common securities
(liquidation amount $1,000 per common security) were used to purchase
$154,640,000 aggregate principal amount of PNA's 8.327% Junior Subordinated
Deferrable Interest Debentures, Series A (the "Junior Subordinated
Debentures"). The Capital Securities qualify as Tier 1 capital, are fully and
unconditionally guaranteed by the Corporation, and are presented in the
Consolidated Statements of Condition as "Guaranteed Preferred Beneficial
Interest in Popular North America's Subordinated Debentures." The obligations
of PNA under the Junior Subordinated Debentures and its guarantees of the
obligations of BanPonce Trust I are fully and unconditionally guaranteed by the
Corporation. The assets of BanPonce Trust I consist of $154,640,000 of Junior
Subordinated Debentures and a related accrued interest receivable of $4,292,000
as of December 31, 1999. The Junior Subordinated Debentures mature on February
1, 2027; however, under certain circumstances, the maturity of the Junior
Subordinated Debentures may be shortened (which shortening would result in a
mandatory redemption of the Capital Securities).
The Puerto Rico Internal Revenue Code of 1994, as amended, generally
imposes a withholding tax on the amount of any dividends paid by corporations
to individuals, whether residents of Puerto Rico or not, trusts, estates and
special partnerships at a special 10% withholding tax rate. If the recipient is
a foreign corporation or partnership not engaged in trade or business within
Puerto Rico the withholding tax is also 10%.
Prior to the first dividend distribution for the taxable year,
individuals who are residents of Puerto Rico may elect to be taxed on the
dividends at the regular rates, in which case the special 10% tax will not be
withheld from such year's distributions.
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United States citizen who is non-resident of Puerto Rico will not be
subject to Puerto Rico tax on dividends if said individual's gross income from
sources within Puerto Rico during the taxable year does not exceed $1,300 if
single, or $3,000 if married, and form AS 2732 of the Puerto Rico Treasury
Department,"Withholding Tax Exemption Certificate for the Purpose of Section
1147", is filed with the withholding agent.
U.S. income tax law permits a credit against U.S. income tax
liability, subject to certain limitations, for certain foreign income taxes
paid or deemed paid with respect to such dividends.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item appears in Table C, "Selected
Financial Data", on pages F-4 and F-5 and the text under the caption "Earnings
Analysis" on page F-7 in the MD&A, and is incorporated herein by reference.
The Corporation's ratio of earnings to fixed charges on a consolidated
basis for each of the last five years is as follows:
Year ended December 31,
-----------------------
Ratio of Earnings to Fixed Charges:
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
Excluding Interest on Deposits 1.7 1.8 1.8 2.0 2.0
Including Interest on Deposits 1.4 1.4 1.4 1.4 1.4
Ratio of Earnings to Fixed Charges and
Preferred Stock Dividends:
Excluding Interest on Deposits 1.7 1.8 1.8 2.0 2.0
Including Interest on Deposits 1.4 1.4 1.4 1.4 1.4
For purposes of computing these consolidated ratios, earnings
represent income before income taxes, plus fixed charges. Fixed charges
represent all interest expense (ratios are presented both excluding and
including interest on deposits), the portion of net rental expense which is
deemed representative of the interest factor and the amortization of debt
issuance expense.
The Corporation's long-term senior debt and preferred stock on a
consolidated basis as of December 31 of each of the last five years is:
Year ended December 31,
-----------------------
(In thousands) 1999 1998 1997 1996 1995
---- ---- ---- ---- ----
Long-term obligations $2,127,599 $1,582,161 $1,678,696 $1,111,713 $885,428
Non-Cumulative preferred
stock of the Corporation 100,000 100,000 100,000 100,000 100,000
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The information required by this item appears on page F-2 through F-28
under the caption "MD&A", and is incorporated herein by reference.
Table K, "Maturity Distribution of Earning Assets", on page F-19 in
the MD&A, has been prepared on the basis of expected maturities. The
Corporation does not have a policy with respect to rolling over maturing loans,
but rolls over loans only on a case-by-case basis after review of such loans in
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accordance with the Corporation's lending criteria.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information regarding the market risk of the Corporation's
investments appears on page F-16 through F-18 under the caption " MD&A", and is
incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item appears on pages F-29 through
F-67, and on page F-28 under the caption "Statistical Summary - Quarterly
Financial Data" in the MD&A and is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information contained under the captions "Shares Beneficially
Owned by Directors, Nominees and Executive Officers of the Corporation",
"Beneficial Ownership Reporting Compliance", "Board of Directors and
Committees" including the "Nominees for Election as Directors" and "Executive
Officers" of the Corporation's definitive proxy statement to be filed with the
Securities and Exchange Commission on or about March 15, 2000 (the "Proxy
Statement") is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information under the captions "Executive Compensation Program"
and "Popular, Inc. Performance Graph" of the Proxy Statement is incorporated
herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information under the captions "Principal Stockholders" and
"Shares Beneficially Owned by Directors, Nominees and Executive Officers of the
Corporation and its Subsidiaries" of the Proxy Statement is incorporated herein
by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information under the caption "Family Relationships" and "Other
Relationships, Transactions and Events" of the Corporation's Proxy Statement is
incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
A. The following financial statements and reports included on pages F-29
through F-67 of the financial review section of the Corporation's
Annual Report to Shareholders, are incorporated herein by reference:
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(1) Financial Statements:
Report of Independent Accountants
Consolidated Statements of Condition as of December 31, 1999
and 1998
Consolidated Statements of Income for each of the
years in the three-year period ended
December 31, 1999
Consolidated Statements of Cash Flows for each of the years in
the three-year period ended December 31, 1999
Consolidated Statements of Changes in Stockholders' Equity for
each of the years in the three-year period ended December
31, 1999
Consolidated Statements of Comprehensive Income for each of the
years in the three-year period ended December 31, 1999
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules: No schedules are presented
because the information is not applicable or is included in
the Consolidated Financial Statements described in A.1 above
or in the notes thereto.
(3) Exhibits
The exhibits listed on the Exhibits Index on page 21 of this
report are filed herewith or are incorporated herein by
reference.
B. The Corporation filed one report on Form 8-K during the quarter ended
December 31, 1999.
Dated: October 8, 1999
Filed: October 14, 1999
Items reported: Item 5 - Other Events (Operational results for the
quarter and nine month period ended September 30, 1999)
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
POPULAR, INC.
(Registrant)
By: /s/ RICHARD L. CARRION
--------------------------------
Richard L. Carrion
Chairman of the Board, President
and Chief Executive Officer
Dated: 02-10-2000 (Principal Executive Officer)
----------
By: /s/ JORGE A. JUNQUERA
--------------------------------
Jorge A. Junquera
Senior Executive Vice President
Dated: 02-10-2000 (Principal Financial Officer)
----------
By: /s/ AMILCAR L. JORDAN
--------------------------------
Amilcar L. Jordan
Senior Vice President
Dated: 02-10-2000 (Principal Accounting Officer)
----------
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/s/ RICHARD L. CARRION Chairman of the Board,
- ------------------------------------ President and Chief
Richard L. Carrion Executive Officer 02-10-2000
--------------
/s/ ALFONSO F. BALLESTER
- ------------------------------------ Vice Chairman of
Alfonso F. Ballester the Board 02-10-2000
--------------
/s/ ANTONIO LUIS FERRE
- ------------------------------------ Vice Chairman of
Antonio Luis Ferre the Board 02-10-2000
--------------
/s/ JUAN J. BERMUDEZ
- ------------------------------------
Juan J. Bermudez Director 02-10-2000
--------------
/s/ FRANCISCO J. CARRERAS
- ------------------------------------
Francisco J. Carreras Director 02-10-2000
--------------
/s/ DAVID H. CHAFEY, JR.
- ------------------------------------
David H. Chafey Jr. Director 02-10-2000
--------------
- ------------------------------------
Luis E. Dubon Jr. Director
--------------
/s/ HECTOR R. GONZALEZ
- ------------------------------------
Hector R. Gonzalez Director 02-10-2000
--------------
/s/ JORGE A. JUNQUERA
- ------------------------------------
Jorge A. Junquera Director 02-10-2000
--------------
/s/ MANUEL MORALES JR
- ------------------------------------
Manuel Morales Jr. Director 02-10-2000
--------------
/s/ ALBERTO M. PARACCHINI
- ------------------------------------
Alberto M. Paracchini Director 02-10-2000
--------------
/s/ FRANCISCO M. REXACH, JR.
- ------------------------------------
Francisco M. Rexach Jr. Director 02-10-2000
--------------
/s/ J. ADALBERTO ROIG, JR.
- ------------------------------------
J. Adalberto Roig Jr. Director 02-10-2000
--------------
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/s/ FELIX J. SERRALLES JR
- ------------------------------------
Felix J. Serralles Jr. Director 02-10-2000
--------------
/s/ JULIO E. VIZCARRONDO JR
- ------------------------------------
Julio E. Vizcarrondo Jr. Director 02-10-2000
--------------
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- --------------------------------------------------------------------------------
3.1 Restated Certificate of Incorporation of Popular, Inc., as
amended (English Translation) (incorporated herein by
reference to Exhibit 4(a) to Popular's Registration Statement
No. 333-26941 dated May 12, 1997).
3.2 Bylaws of Popular, Inc., as amended (incorporated herein by
reference to Exhibit 4.2 of Popular's Registration Statement
dated June 8, 1999).
3.3 Form of Certificate representing Popular, Inc.'s common
stock, par value $6.00 (incorporated herein by reference to
Exhibit 4.1 of Popular's Annual Report on Form 10-K for the
fiscal year ended December 31, 1998 (File No. 0-13818)).
4.2 Form of Certificate representing the Popular, Inc.'s 8.35%
non-cumulative monthly Income Preferred Stock, 1994 Series
A, Liquidation Preference $25.00 per share.
4.3 Stockholder Protection Rights Agreement, dated as of August
13, 1998, between Popular, Inc. and Banco Popular de Puerto
Rico as Rights Agent, including Form of Rights Certificate
attached as Exhibit B thereto (incorporated herein by
reference to Exhibit 4.1 of Popular's Current Report on Form
8-K (File No. 0-13818), dated August 13, 1998 and filed on
August 21, 1998).
4.4 Certificate of Designation, Preference and Rights of
Popular, Inc.'s Series A Participating Cumulative Preferred
Stock (incorporated herein by reference to Exhibit 99.1 of
Popular's Current Report on Form 8-K dated and filed on
August 3, 1999).
4.5 Indenture, dated February 15, 1995, as supplemented by the
First Supplemental Indenture thereto, dated May 8, 1997,
each between Popular, Inc. and First National Bank of
Chicago, as Trustee (incorporated herein by reference to
Exhibit 4(d) of Popular's Registration Statement No.
333-26941 dated May 12, 1997).
4.6 Second Supplemental Indenture, dated as of August 8, 1999,
to Popular's Indenture, dated as of February 15, 1995, each
between Popular, Inc. and The First National Bank of
Chicago, as Trustee (incorporated herein by reference to
Exhibit 4(e) of Popular's Current Report on Form 8-K (File
No. 0-13818), dated August 5, 1999 and filed on August 17,
1999).
4.7 Subordinated Indenture dated as of November 30, 1995,
between Popular, Inc. and First National Bank of Chicago, as
Trustee (incorporated herein by reference to Exhibit 4(e) of
Popular's Registration Statement No. 333-26941, dated May
12, 1997).
4.8 Indenture, dated as of October 1, 1991, among Popular North
America, Inc., Popular, Inc., as Guarantor, and The First
National Bank of Chicago, as Trustee, as supplemented by the
First Supplemental Indenture thereto, dated February 28,
1995, and by the Second Supplemental Indenture thereto,
dated as of May 8, 1997 (incorporated herein by reference to
Exhibit 4(f) of Popular's Registration Statement No.
333-26941, dated May 12, 1997).
4.9 Third Supplemental Indenture to Popular's Indenture dated as
of October 1, 1991, dated as of August 8, 1999, among
Popular North America, Inc., Popular, Inc. as Guarantor, and
The First National Bank of Chicago, as Trustee (incorporated
herein by reference to Exhibit 4(h) of Popular's Current
Report on Form 8-K (File No. 0-13818), dated August 5, 1999
and filed on August 17, 1999).
4.10 Form of Subordinated Note of Popular, Inc. (incorporated
herein by reference to Exhibit 4(p) of Popular's Current
Report on Form 8-K (File No. 0-13818), dated December 7, 1995
and filed on December 13, 1995).
4.11 Form of Fixed Rate Medium-Term Note, Series 3, of Popular,
Inc. (incorporated herein by reference to Exhibit 4(l) of
Popular's Current Report on Form 8-K (File No. 0-13818),
dated May 23, 1997 and filed on June 11, 1997).
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4.12 Form of Floating Rate Medium-Term Note, Series 3, of
Popular, Inc. (incorporated herein by reference to Exhibit
4(m) of Popular's Current Report on Form 8-K (File No.
0-13818), dated May 23, 1997 and filed on June 11, 1997).
4.13 Form of Fixed Rate Medium-Term Note, Series D, of Popular
North America, Inc., guaranteed by Popular, Inc.
(incorporated herein by reference to Exhibit 4(n) of
Popular's Current Report on Form 8-K (File No. 0-13818),
dated May 23, 1997 and filed on June 11, 1997).
4.14 Form of Floating Rate Medium-Term Note, Series D, of Popular
North America, Inc., guaranteed by Popular, Inc.
(incorporated herein by reference to Exhibit 4(o) of
Popular's Current Report on Form 8-K (File No. 0-13818),
dated May 23, 1997 and filed on June 11, 1997).
4.15 Form of Fixed Rate Medium-Term Note, Series 4, of Popular,
Inc. (incorporated herein by reference to Exhibit 4(o) of
Popular's Current Report on Form 8-K (File No. 0-13818),
dated August 5, 1999 and filed on August 17, 1999).
4.16 Form of Floating Rate Medium-Term Note, Series 4, of
Popular, Inc. (incorporated by reference to Exhibit (4)(p)
of Popular's Current Report on Form 8-K (File No. 0-13818),
dated August 5, 1999 and filed August 17, 1999).
4.17 Form of Fixed Rate Medium-Term Note, Series E, of Popular
North America, Inc., endorsed with the guarantee of Popular,
Inc. (incorporated herein by reference to Exhibit 4(q) of
Popular's Current Report on Form 8-K (File No. 0-13818),
dated August 5, 1999 and filed on August 17, 1999).
4.18 Form of Floating Rate Medium-Term Note, Series E, of Popular
North America, Inc., endorsed with the guarantee of Popular,
Inc. (incorporated herein by reference to Exhibit 4(r) of
Popular's Current Report on Form 8-K (File No. 0-13818),
dated August 5, 1999 and filed on August 17, 1999).
4.19 Administrative Procedures governing Medium-Term Notes,
Series 4, of Popular, Inc. (incorporated herein by reference
to Exhibit 10(a) of Popular's Current Report on Form 8-K
(File No. 0-13818), dated August 5, 1999 and filed on August
17, 1999).
4.20 Administrative Procedures governing Medium-Term Notes,
Series E, of Popular North America, Inc., guaranteed by
Popular, Inc. (incorporated herein by reference to Exhibit
10(b) of Popular's Current Report on Form 8-K (File No.
0-13818), dated August 5, 1999 and filed on August 17,
1999).
10.1 Annual Management Incentive Compensation Plan for certain
Division Supervisors approved in January, 1987 (incorporated
herein by reference to Exhibit 10.8 of Popular's Annual
Report on Form 10-K for the fiscal year ended December 31,
1998 (File No. 0-13818)).
10.2 Amendment to Popular, Inc. Senior Executive Long-Term
Incentive Plan, dated April 23, 1998 (incorporated herein by
reference to Exhibit 10.8.2. of Popular's Annual Report on
Form 10-K for the fiscal year ended December 31, 1998 (File
No. 0-13818)).
10.3 Stock Deferment Plan for Popular's outside directors,
effective August 15, 1996 (incorporated herein by reference
to Exhibit 10.9 of Popular's Annual Report on Form 10-K for
the fiscal year ended December 31, 1996 (file No. 0-13818)).
10.4 Amended and Restated 364-day Credit Agreement dated as of
October 18, 1999 among Popular, Inc. and Popular North
America, Inc., the lenders named therein and The Chase
Manhattan Bank as Administrative Agent for an aggregate
principal amount of $445,000,000.
10.5 Interest Calculation Agency Agreement, dated as of August 6,
1999, between Popular, Inc. and The First National Bank of
Chicago (incorporated herein by reference to Exhibit 10(c)
of Popular's Current Report on Form 8-K (File No. 0-13818),
dated August 5, 1999 and filed on August 17, 1999).
10.6 Interest Calculation Agency Agreement, dated as of August 6,
1999, between Popular North America, Inc. and The First
National Bank of Chicago (incorporated herein by reference
to Exhibit 10(d) of Popular's Current Report on Form 8-K
(File No. 0-13818), dated August 5, 1999 and filed on August
17, 1999).
10.7 Distribution Agreement, dated October 6, 1995, among
BanPonce Corporation, Merrill Lynch, Pierce, Fenner & Smith
Incorporated, CS First Boston Corporation and First Chicago
Capital Markets, Inc. (incorporated herein by reference to
Exhibit 1(b) of BanPonce's Current Report on Form 8-K (File
No. 0-13818), dated and filed on October 6, 1995).
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10.8 Amendment No. 1, dated May 23, 1997, to the Distribution
Agreement, dated October 6, 1995, among Popular, Inc.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Chase
Securities Inc., Credit Suisse First Boston Corporation and
First Chicago Capital Markets, Inc. (incorporated herein by
reference to Exhibit 1(c) of Popular's Current Report on
Form 8-K (File No. 0-13818), dated May 23, 1997, and filed
on June 11, 1997).
10.9 Amendment No. 2, dated August 6, 1999, to the Distribution
Agreement, dated October 6, 1995, among Popular, Inc.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Credit
Suisse First Boston Corporation, Chase Securities Inc. and
Popular Securities, Inc. (incorporated herein by reference
to Exhibit 1(d) of Popular's Current Report on Form 8-K
(File No. 0-13818), dated August 5, 1999 and filed on August
17, 1999).
10.10 Distribution Agreement, dated October 11, 1991, among
BanPonce Financial Corp., BanPonce Corporation, Merrill
Lynch, Pierce, Fenner & Smith Incorporated and The First
Boston Corporation (incorporated herein by reference to
Exhibit 1(d) of Popular's Current Report on Form 8-K (File
No. 0-13818), dated May 23, 1997 and filed on June 11,
1997).
10.11 Amendment No. 1, dated December 2, 1993, to the Distribution
Agreement, dated October 11, 1991, among BanPonce Financial
Corp., BanPonce Corporation, Merrill Lynch, Pierce, Fenner &
Smith Incorporated and Credit Suisse First Boston
Corporation (incorporated herein by reference to Exhibit
1(d) of Popular's Current Report on Form 8-K (File No.
0-13818), dated May 23, 1997 and filed on June 11, 1997).
10.12 Amendment No. 2, dated October 6, 1995, to the Distribution
Agreement, dated October 11, 1991, as amended on December 2,
1993, and supplemented on June 16, 1993 and August 1, 1994,
among BanPonce Financial Corp., BanPonce Corporation,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, CS First
Boston Corporation and First Chicago Capital Markets, Inc.
(incorporated herein by reference to Exhibit 1(c) of
BanPonce's Current Report on Form 8-K (File No. 0-13818),
dated and filed on October 6, 1995).
10.13 Amendment No. 3, dated May 23, 1997, to the Distribution
Agreement, dated October 11, 1991, among Popular North
America, Inc., Popular, Inc., Merrill Lynch, Pierce, Fenner
& Smith Incorporated, Chase Securities Inc., Credit Suisse
First Boston Corporation and First Chicago Capital Markets,
Inc. (incorporated herein by reference to Exhibit 1(d) of
Popular's Current Report on Form 8-K (File No. 0-13818),
dated May 23, 1997 and filed on June 11, 1997).
10.14 Amendment No. 4, dated August 6, 1999, to the Distribution
Agreement, dated October 6, 1991, among Popular North
America, Inc., Popular, Inc., Merrill Lynch, Pierce, Fenner
& Smith Incorporated, Credit Suisse First Boston
Corporation, Chase Securities Inc. and Popular Securities,
Inc. (incorporated herein by reference to Exhibit 1(i) of
Popular's Current Report on Form 8-K (File No. 0-13818),
dated August 5, 1999 and filed on August 17, 1999).
12.1 Computation of Ratio of Earnings to Fixed Charges.
13.1 Popular's Annual Report to Shareholders for the year ended
December 31, 1999.
21.1 Schedule of Subsidiaries of Popular, Inc.
23.1 Consents of Independent Accountants.
27.1 Financial Data Schedule.
99.1 Popular's Proxy Statement for the April 25, 2000 Annual
Meeting of Stockholders. Popular, Inc. hereby agrees to
furnish upon request to the Commission a copy of each
instrument defining the rights of holders of senior and
subordinated debt of Popular, Inc., or of any of its
consolidated subsidiaries.
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