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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, 2000
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 28, 2001 the Corporation had 136,111,025 shares of common stock
outstanding. The aggregate market value of the common stock held by
non-affiliates of the Corporation was $3,709,025,000 based upon the reported
closing price of $27.25 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, 2000 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 2001
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
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
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
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 .......................................................... 18
Item 13 Certain Relationships and Related Transactions ............................ 18
PART IV
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 $28.1 billion, total deposits of $14.8 billion
and stockholders' equity of $2.0 billion at December 31, 2000. Based on total
assets at December 31, 2000, the Corporation was the 35th 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 consolidated total assets of $19.8 billion, deposits of $10.7
billion and stockholders' equity of $1.3 billion at December 31, 2000. The Bank
accounted for 70% of the total consolidated assets of the Corporation at
December 31, 2000. A consumer-oriented bank, Banco Popular has the largest
retail franchise in Puerto Rico, operating 199 branches and 478 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 61 offices
in Puerto Rico, and Popular Mortgage, Inc., a mortgage loan company with 21
offices in Puerto Rico. In May 2000, the Corporation acquired Centro Finance, a
small finance company in Puerto Rico that subsequently merged into Popular
Finance, Inc. Centro Finance had nine offices and a loan portfolio of
approximately $27 million at acquisition date.
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 the outstanding stock of Popular North America, Inc. ("PNA"), ATH Costa
Rica and CREST. The last two corporations provide ATM switching and driving
services in San Jose, Costa Rica. GM Group, Inc. 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 through offices in Puerto Rico, Venezuela, Miami and the
Dominican Republic. At December 31, 2000, GM Group, Inc. had total assets of
$72.2 million. In addition, Popular, Inc. has an 85% investment in Newco
Mortgage Holding Corporation (d/b/a Levitt Mortgage), a mortgage banking
organization with operations in Puerto Rico. At December 31, 2000, the assets of
Levitt Mortgage totaled $7.3 million. On August 24, 2000, PIB sold its total
investment in Banco Fiduciario, S.A., a commercial bank in the Dominican
Republic, to the larger Banco Hipotecario Dominicano, but retained an option to
acquire up to 20% of the resulting institution.
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, 2000, PNA had five direct subsidiaries, all of which were
wholly-
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owned: Banco Popular North America ("BPNA"), a full service commercial
bank incorporated in New York State, Equity One, Inc. a diversified consumer
finance company, Popular Cash Express, Inc., a retail financial services
company, BanPonce Trust I, a statutory business trust, and Banco Popular,
National Association ("Banco Popular, N.A.") chartered in Orlando, Florida.
Banco Popular, N.A. commenced operations as a full service commercial bank on
July 1, 2000. As of December 31, 2000, it operated one branch, its assets
amounted to $21 million and it had deposits of $11.5 million. Popular Insurance,
Inc., a wholly-owned non-bank subsidiary of Banco Popular, N.A. and an indirect
subsidiary of PNA, also commenced operations on July 1, 2000. Popular Insurance,
Inc. is a general insurance agency that offers insurance products in Puerto
Rico. As of December 31, 2000, its assets amounted to $9 million. Popular
Holdings USA, Inc., which previously was the holding company of BPNA, merged
with and into PNA on November 1 , 2000.
The banking operations of BPNA in the mainland United States are based
in six states. In New York, BPNA operated 32 branches, which accounted for
aggregate assets of $2.1 billion and total deposits of $1.9 billion at December
31, 2000. BPNA also operated 21 branches in Illinois and 16 in California with
total assets of $1.8 billion and $451 million, respectively, and deposits of
$1.2 billion and $388 million, respectively. In addition, BPNA had 12 branches
in New Jersey with total assets of $457 million and deposits of $417 million as
of December 31, 2000 and nine branches in Florida with aggregate total assets of
$200 million and deposits of $172 million. In Texas, BPNA operates five branches
with aggregate assets of $273 million and total deposits of $97 million at the
same date. In July 2000, the Corporation acquired Aurora National Bank in
Chicago, Illinois which was merged into BPNA. Aurora Bank had two branches and
approximately $111 million in deposits at acquisition date.
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 11 offices in eight states and total assets of $105 million as of
December 31, 2000.
Equity One, Inc., a wholly owned subsidiary of PNA, is engaged in the
business of granting personal and mortgage loans and providing dealer financing
through 136 offices in 30 states. It had total assets of $2.1 billion as of
December 31, 2000. Popular Cash Express, Inc., a wholly owned subsidiary of PNA,
offers services such as check cashing, money transfers to other countries, money
order sales and processing of payments through 86 offices and 46 mobile check
cashing units in five states in the United States and in Washington, D.C. Its
assets totaled $57.2 million as of December 31, 2000.
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
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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-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 17 of the
Business Review Section of the Annual Report to Shareholders for the year ended
December 31, 2000, which is incorporated herein by reference.
REGULATION AND SUPERVISION
GENERAL
The Corporation, PIB and PNA 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 were 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 generally have 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 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, BPNA and Banco Popular, N.A. 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, in the case of BPNA, the
Federal Reserve Board and the New York State Banking Department and in the case
of Banco Popular, N.A., the Office of Comptroller of the Currency ("OCC"). Banco
Popular, BPNA and Banco Popular, N.A. 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 other types of 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, BPNA and Banco Popular, N.A. See "- Financial Services
Modernization" below for information about recent legislation that changed these
rules. In addition to the impact of
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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.
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 were
implemented by Banco Popular prior to the date the agreement was signed. These
requirements resulted in part from the activities of a former customer of Banco
Popular who is under indictment for money laundering. Law enforcement
authorities are conducting an ongoing investigation relating principally to the
circumstances surrounding those activities and Banco Popular is cooperating
fully in that investigation.
F D I C I A
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 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, 2000, Banco Popular, BPNA and Banco Popular, N.A. were
all 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.
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The capital-based prompt corrective action provisions of FDICIA apply
to FDIC-insured depository institutions such as Banco Popular, BPNA and Banco
Popular, N.A. but they are not directly applicable to holding companies such as
the Corporation, PIB and PNA, 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, BPNA and Banco Popular, N.A. are subject to restrictions
under federal law that limit the transfer of funds by any of them to the
Corporation, PIB, PNA, or 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, BPNA and Banco
Popular, N.A. to any of the Corporation, PIB, PNA, 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 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, any 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 or PNA 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, BPNA and Banco Popular, N.A. are currently
the only depository institution subsidiaries of the Corporation, PIB and PNA.
Because the Corporation, PIB and PNA 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 or PNA, 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 whose deposits 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, BPNA and Banco Popular, N.A. are 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
depository institution's cross-guarantee liability with respect to commonly
controlled FDIC-insured depository institutions.
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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 may 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, 2000, Banco Popular could have declared a dividend of approximately $205
million without the approval of the Federal Reserve Board
The payment of dividends by Banco Popular, BPNA and Banco Popular, N.A.
may also be affected by other regulatory 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
FDIC-insured depository institutions are subject to the capital-based
limitations required by the FDICIA. See "FDICIA" above.
See "-Puerto Rico Regulation-General" below for a description of
certain restrictions on Banco Popular's ability to pay dividends under Puerto
Rico law.
FDIC INSURANCE ASSESSMENTS
Banco Popular, BPNA and Banco Popular, N.A. 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
FDIC-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.
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.
The Deposit Insurance Funds Act of 1996 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 1.96 cents per $100 of deposits. As of
December 31, 2000, the Corporation had a BIF deposit assessment base of
approximately $14.2 billion.
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BROKERED DEPOSITS
FDIC regulations adopted under 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, BPNA or Banco Popular, N.A.
CAPITAL ADEQUACY
Information about the capital composition of the Corporation as of
December 31, 2000 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).
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 are required to maintain a
leverage ratio of 4%. The guidelines also provide that banking organizations
experiencing internal growth or making acquisitions are 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. Banco Popular, N.A.
is subject to substantially similar requirements of the OCC. See Consolidated
Financial Statements, Note 19 "Regulatory Capital Requirements" on pages F-47
and F-48 for the capital ratios of the Corporation, Banco Popular and BPNA.
Failure to meet capital guidelines could subject the Corporation and its
depository institution 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
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prior to May 31, 1997 expressly prohibiting interstate mergers. States are also
allowed to permit de novo interstate branching. Once a bank has established
branches in a state through an interstate merger transaction, the bank may
establish or 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 (if permitted under
state laws) 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 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 institution subsidiaries must be well-capitalized (as described
above) and well-managed and (ii) it must file a declaration with the Federal
Reserve Board that it elects to be a "financial holding company." A depository
institution is deemed to be "well managed" if at its most recent inspection,
examination or subsequent review by the appropriate federal banking agency (or
the appropriate state banking agency), the depository institution received at
least a "satisfactory" composite rating and at least a "satisfactory" rating for
management. 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
subsidiary 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").
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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 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 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, 2000, the legal lending limit for the Bank under this provision was
approximately $93.7 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.
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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
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 statements 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, 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, 2000, the Corporation employed 10,651 persons. None of
its employees are represented by a collective bargaining group.
SEGMENT DISCLOSURE
Note 30 to the Financial Statements, "Segment Reporting" on pages F-57
and F-58 is herein incorporated by reference.
The principal market for the Corporation is Puerto Rico, where the
Corporation had $20 billion or 72% of its total assets as of December 31, 2000
and received $1.8 billion or 69% 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, 2000 were estimated at $86 billion, $40
billion and $34 billion, respectively. At that date the Corporation's commercial
banking operation in the island had an estimated market share of 28% and 31% 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 52% market share, while the mortgage and small loan company operations
have market shares of approximately 22% and 11%, respectively.
ITEM 2. PROPERTIES
As of December 31, 2000, Banco Popular owned (and wholly or partially
occupied) approximately 80 properties including centralized offices, operations,
branch premises and other facilities throughout the Commonwealth of Puerto Rico.
Banco Popular also owned 10 lots in Puerto Rico used as parking facilities for
premises or held for future expansion or branches relocation and one building in
the U.S. Virgin Island. In addition, as of such date, Banco Popular leased
properties for branch operations in approximately 136 locations in Puerto Rico
and 7 locations in the U.S. Virgin Islands. At December 31, 2000, BPNA had 116
offices (principally bank branches) of which 55 were owned and 61 were leased.
These offices were located throughout New York, Illinois, New Jersey,
California, Texas and Florida. The Corporation's management
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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 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.
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 operation department, 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.
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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 for each
quarterly period during 2000 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 28, 2001, the Corporation had 9,061 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 $27.25 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, leaving $1.25 billion aggregate amount of
securities available for future issuance 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, 2000. 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).
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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.
A United States citizen who is a 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: ------------------------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
Excluding Interest on Deposits 1.6 1.7 1.8 1.8 2.0
Including Interest on Deposits 1.3 1.4 1.4 1.4 1.4
Ratio of Earnings to Fixed Charges and
Preferred Stock Dividends:
Excluding Interest on Deposits 1.6 1.7 1.8 1.8 2.0
Including Interest on Deposits 1.3 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:
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Year ended December 31,
-----------------------------------------------------------------------
(In thousands) 2000 1999 1998 1997 1996
---------- ---------- ---------- ---------- ----------
Long-term obligations $1,451,912 $2,127,599 $1,582,160 $1,678,696 $1,111,713
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-18 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 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-68, 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, 2001 (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.
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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 Corporation's 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:
(1) Financial Statements:
Report of Independent Accountants
Consolidated Statements of Condition as of December 31, 2000
and 1999
Consolidated Statements of Income for each of the years in
the three-year period ended December 31, 2000
Consolidated Statements of Cash Flows for each of the years in
the three-year period ended December 31, 2000
Consolidated Statements of Changes in Stockholders' Equity
for each of the years in the three-year period ended
December 31, 2000
Consolidated Statements of Comprehensive Income for each of
the years in the three-year period ended December 31, 2000
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, 2000.
Dated: October 11, 2000
Filed: October 16, 2000
Items reported: Item 5 - Other Events (Operational results for the
quarter and nine month period ended September 30, 2000)
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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: 02-07-2001 (Principal Executive Officer)
--------------
By: S\JORGE A. JUNQUERA
--------------------------------
Jorge A. Junquera
Senior Executive Vice President
Dated: 02-07-2001 (Principal Financial Officer)
-----------------
By: S\AMILCAR L. JORDAN
--------------------------------
Amilcar L. Jordan
Senior Vice President
Dated: 02-07-2001 (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 02-07-2001
------------
- --------------------------- Vice Chairman of
Antonio Luis Ferre the Board
------------
S\JUAN J. BERMUDEZ
- ---------------------------
Juan J. Bermudez Director 02-07-2001
------------
S\FRANCISCO J. CARRERAS
- ---------------------------
Francisco J. Carreras Director 02-07-2001
------------
S\DAVID H. CHAFEY, JR.
- ---------------------------
David H. Chafey Jr. Director 02-07-2001
------------
S\HECTOR R. GONZALEZ
- ---------------------------
Hector R. Gonzalez Director 02-07-2001
------------
S\JORGE A. JUNQUERA
- ---------------------------
Jorge A. Junquera Director 02-07-2001
------------
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S/MANUEL MORALES JR
- ---------------------------
Manuel Morales Jr. Director 02-07-2001
------------
S\ALBERTO M. PARACCHINI
- ---------------------------
Alberto M. Paracchini Director 02-07-2001
------------
S\FRANCISCO M. REXACH, JR.
- ---------------------------
Francisco M. Rexach Jr. Director 02-07-2001
------------
S/FELIX J. SERRALLES JR
- ---------------------------
Felix J. Serralles Jr. Director 02-07-2001
------------
S/JULIO E. VIZCARRONDO JR
- ---------------------------
Julio E. Vizcarrondo Jr. Director 02-07-2001
------------
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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).
4.11 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).
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).
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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).
4.21 Junior Subordinated Indenture, among BanPonce Financial Corp., (Popular North America, Inc.)
BanPonce Corporation (Popular, Inc) and the First National Bank of Chicago, as Debenture
Trustee (incorporated herein by reference to Exhibit (4)(a) of Popular's Current Report on
Form 8-K (File No. 0-13818), dated and file on February 19, 1997).
4.22 Amended and Restated Trust Agreement of BanPonce Trust I, among BanPonce Financial Corp.,
(Popular North America, Inc.) as Depositor, BanPonce Corporation, (Popular, Inc.) as
Guarantor, The First National Bank of Chicago, as Property Trustee, First Chicago Delaware,
Inc., as Delaware Trustee, and the Administrative Trustee named therein (incorporated herein
by reference to Exhibit (4)(f) of Popular's Current Report on Form 8-K (File No. 0-13818)
dated and file on February 19, 1997).
4.23 Form of Capital Security Certificate for BanPonce Trust I (incorporated herein by reference
to Exhibit (4)(g) of Popular's Current Report on Form 8-K (File No. 0-13818) dated and file
on February 19, 1997).
4.24 Guarantee Agreement relating to BanPonce Trust I, by and among BanPonce Financial Corp.,
(Popular North America, Inc.) as Guarantor, BanPonce Corporation, (Popular, Inc.)as
Additional Guarantor, and the First National Bank of Chicago, as Guarantee Trustee
(incorporated herein by reference to Exhibit (4)(h) of Popular's Current Report on Form 8-K
(File No. 0-13818) dated and file on February 19, 1997).
4.25 Form of Junior Subordinated Deferrable Interest Debenture for BanPonce Financial Corp.
(Popular North America, Inc.) (incorporated herein by reference to Exhibit (4)(i) of
Popular's Current Report on Form 8-K (File No. 0-13818) dated and file on February 19,
1997).
4.26 Form of Subordinated Note of Popular, Inc. (incorporated herein by reference to Exhibit 4.10
of Popular's Annual Report on Form 10-K for the fiscal year ended December 31, 1999 (File
No. 0-13818).
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)).
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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).
10.8 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).
10.13 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).
10.15 Banco Popular de Puerto Rico Employees' Stock Plan (Puerto Rico) (incorporated herein by
reference to Popular's Registration Statement on Form S-8 (333-80169), dated June 8, 1999).
10.15a Certificate of Resolution of the Board of Director of Banco Popular de Puerto Rico,
authorizing Amendments to the Banco Popular de Puerto Rico Employees' Stock Plan (Puerto
Rico).
10.16 Distribution Agreement of the Banco Popular de Puerto Rico Bank Notes, dated September 24,
1996, among Banco Popular de Puerto Rico, Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner
& Smith Incorporated, Bear Stearns & Co. Inc. and Credit Suisse First Boston Corporation.
10.17 Amendment, dated May 12, 2000, to The Distribution Agreement, dated September 24, 1996,
among Banco Popular de Puerto Rico, Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner &
Smith Incorporated, Bear Stearns & Co., Inc. and Credit Suisse First Boston Corporation.
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10.18 Issuing and Paying Agency Agreement of the Banco Popular de Puerto Rico Bank Notes, dated
September 24, 1996, among Banco Popular de Puerto Rico and The Chase Manhattan Bank.
10.19 Amendment No. 1, dated May 12, 2000 to Issuing and Paying Agency Agreement, dated September
24, 1996, among Banco Popular de Puerto Rico and The Chase Manhattan Bank.
10.20 Interest Calculation Agreement of the Banco Popular de Puerto Rico Notes, dated September
24, 1996, among Banco Popular de Puerto Rico and The Chase Manhattan Bank.
10.21 Amendment No. 1, dated May 12, 2000 to the Interest Calculation Agreement, dated September
24, 1996, among Banco Popular de Puerto Rico and The Chase Manhattan Bank.
10.22 Amended Administrative Procedures for Fixed and Floating Rate Bank Notes, dated May 12, 2000
to the Exhibit G of The Distribution Agreement, dated September 24, 1996, among Banco
Popular de Puerto Rico, Merrill Lynch & Co., Merrill Lynch Pierce, Fenner & Smith
Incorporated, Bear Stearns & Co., Inc. and Credit Suisse First Boston Corporation.
10.23 Form of Global Fixed and Floating Rate Bank Note of the Banco Popular de Puerto Rico Bank
Notes, dated September 24, 1996.
10.24 Amended and Restated Credit Agreement, dated October 13, 2000, among Popular, Inc., Popular
North America, Inc., The Lenders named Herein, The Chase Manhattan Bank, as Administrative
Agent for The Lenders and Bank One, N.A. and Barclays Bank PLC-Miami Agency, as Agents for
the Lenders and Chase Securities, Inc., as advisor, arranger and book manager.
10.25 Distribution Agreement, dated October 6, 1995, among BanPonce Corporation (Popular, Inc.),
Merrill Lynch, Pierce, Fenner & Smith Incorporated, CS First Boston Corporation and First
Chicago Capital Markets, Inc. (incorporated herein by reference to Exhibit 10.7 of Popular's
Annual Report on Form 10-K for the fiscal year ended December 31, 1999 (File No. 0-13818).
10.26 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. (Popular North America, Inc.), BanPonce Corporation (Popular,
Inc.), Merrill Lynch, Pierce, Fenner & Smith Incorporated, CS First Boston Corporation and
First Chicago Capital Markets, Inc. (incorporated herein by reference to Exhibit 10.12 of
Popular's Annual Report on Form 10-K for the fiscal year ended December 31, 1999 (File No.
0-13818).
12.1 Computation of Ratio of Earnings to Fixed Charges.
13.1 Popular's Annual Report to Shareholders for the year ended December 31, 2000.
21.1 Schedule of Subsidiaries of Popular, Inc.
23.1 Consents of Independent Accountants.
99.1 Popular's Proxy Statement for the April 23, 2001 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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