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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File No. 0-13818
POPULAR, INC.
Incorporated in the Commonwealth of Puerto Rico
IRS Employer Identification No. 66-0416582
Principal Executive Offices:
209 Munoz Rivera Avenue
Hato Rey, Puerto Rico 00918
Telephone Number: (809) 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)
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, 2002 the Corporation had 136,475,530 shares of common stock
outstanding. The aggregate market value of the common stock held by
non-affiliates of the Corporation was $3,960,520,000 based upon the reported
closing price of $29.02 on the NASDAQ National Market System on that date.
DOCUMENTS INCORPORATED BY REFERENCE
(1) Portions of the Corporation's Annual Report to Shareholders for the
fiscal year ended December 31, 2001 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 2002
Annual Meeting of Stockholders of the Corporation are incorporated herein by
reference in response to Items 10 through 13 of Part III.
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 or weakness in the consumer and commercial credit
sectors and in the real estate markets,
- - the performance of the stock and bond markets,
- - possible new bank regulations 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. All
forward-looking statements included in this document are based upon information
available to the Corporation as of the date of this document, and we assume no
obligation to update or revise any such forward-looking statements.
2
TABLE OF CONTENTS
Page
----
PART I
Item 1 Business .................................................................. 4
Item 2 Properties ................................................................ 14
Item 3 Legal Proceedings ......................................................... 15
Item 4 Submission of Matters to a Vote of Security Holders........................ 15
PART II
Item 5 Market for Registrant's Common Stock and Related
Stockholder Matters...................................................... 15
Item 6 Selected Financial Data ................................................... 17
Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations...................................... 17
Item 7A Quantitative and Qualitative Disclosures About Market Risk................. 18
Item 8 Financial Statements and Supplementary Data .............................. 18
Item 9 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure ..................................... 18
PART III
Item 10 Directors and Executive Officers of the Registrant ........................ 18
Item 11 Executive Compensation .................................................... 18
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
3
PART I
POPULAR, INC.
ITEM 1. BUSINESS
GENERAL
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 $30.7 billion, total deposits of $16.4 billion
and stockholders' equity of $2.3 billion at December 31, 2001. Based on total
assets at December 31, 2001, 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 $20.5 billion, deposits of $11.6
billion and stockholders' equity of $1.4 billion at December 31, 2001. The Bank
accounted for 66% of the total consolidated assets of the Corporation at
December 31, 2001. A consumer-oriented bank, Banco Popular has the largest
retail franchise in Puerto Rico, operating 196 branches and 524 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 Auto,
Inc., (formerly Popular Leasing and Rental, Inc.), Puerto Rico's largest vehicle
financing, leasing and daily rental company, Popular Finance, Inc., a small-loan
and second mortgage company with 56 offices in Puerto Rico, and Popular
Mortgage, Inc., a mortgage loan company with 25 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. 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 the United States, the Caribbean and Latin
America through offices in Puerto Rico, Venezuela, Miami and the Dominican
Republic. At December 31, 2001, GM Group, Inc. had total assets of $81.2
million. In addition, Popular, Inc. has an 85% investment in Newco Mortgage
Holding Corporation (d/b/a Levitt Mortgage), a mortgage loan company with
operations in Puerto Rico. At December 31, 2001, the assets of Levitt Mortgage
totaled $9.8 million. On May 30, 2001, PIB acquired 19.99% of Centro Financiero
BHD, S.A., a diversified financial company in the Dominican Republic.
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, 2001, PNA had five direct subsidiaries, all of which were
wholly-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
4
Association ("Banco Popular, N.A."), a federally chartered national bank with
its main office in Orlando, Florida. Banco Popular, N.A. commenced operations as
a full service commercial bank on July 1, 2000. As of December 31, 2001, it
operated one branch, its assets amounted to $33 million and it had deposits of
$14.9 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, 2001, its assets
amounted to $16.1 million.
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 $2.3 billion and total deposits of $2.1 billion at December
31, 2001. BPNA also operated 21 branches in Illinois and 16 in California with
total assets of $1.5 billion and $518 million, respectively, and deposits of
$1.3 billion and $466 million, respectively. In addition, BPNA had 12 branches
in New Jersey with total assets of $580 million and deposits of $537 million as
of December 31, 2001 and ten branches in Florida with total assets of $240
million and deposits of $233 million. In Texas, BPNA operated five branches with
aggregate assets of $340 million and total deposits of $137 million at the same
date. The deposits of BPNA are insured under the 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 12 offices in ten states and total assets of $137 million as of
December 31, 2001. On August 14, 2001, Popular FS, LLC ("PFS") was formed as a
wholly owned subsidiary of BPNA. PFS will make, purchase, sell, service and
warehouse loans and other extensions of credit, or interests therein, for its
own account and the account of others. On September 25, 2001, Popular Insurance
Agency USA, Inc. was formed as a wholly owned subsidiary of BPNA. Popular
Insurance Agency USA, Inc. acts as an agent or broker for issuing insurance.
Popular Insurance Agency USA, Inc. began operations in January 2002.
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 149 offices in 28 states. It had total assets of $3.4 billion as of
December 31, 2001. 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 96 offices and 52 mobile check
cashing units in five states and in Washington, D.C. Its assets totaled $59.8
million as of December 31, 2001.
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).
The Corporation's business is described on pages 1 through 27 of the
Business Review Section of the Annual Report to Shareholders for the year ended
December 31, 2001, which is incorporated herein by reference.
5
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 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, unless they were found by the Federal Reserve Board
to be closely related to banking. 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 the 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 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 a written agreement with
the Federal Reserve Bank of New York, which imposed a number of compliance,
reporting and control requirements. All of these compliance, reporting and
control requirements are now in place.
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 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
6
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, 2001, 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
institution, and the capital condition of the Corporation's banking subsidiaries
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 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.
In addition, federal law requires that any transaction between Banco Popular,
BPNA or Banco Popular, N.A., on the one hand, and the Corporation, PIB, PNA or
any of the Corporation's other non-banking subsidiaries, on the other hand, be
carried out on an arm's length basis.
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
7
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 and subject
to this cross-guarantee liability. 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.
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, 2001, Banco Popular could have declared a dividend of approximately $83
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
8
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 1.97 cents per $100 of deposits. As of
December 31, 2001, the Corporation had a BIF deposit assessment base of
approximately $15.7 billion.
Because of favorable loss experience and a healthy reserve ratio in
the BIF, well capitalized and well managed banks, including the Corporation's
bank subsidiaries, have in recent years paid no premiums for FDIC insurance. A
number of factors suggest that as early as the second half of 2002, even well
capitalized and well managed banks will be required to pay premiums on deposit
insurance. The amount of any such premiums will depend on the outcome of
legislative and regulatory initiatives as well as the BIF loss experience and
other factors, none of which the Corporation is in a position to predict at
this time.
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, 2001 and for the four previous years is presented in Table H
"Capital Adequacy Data" on page 15 in the "Management's 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 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
9
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 minimum
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 51 and
52 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".
The U.S. federal bank regulatory agencies' risk-capital guidelines are
based upon the 1988 capital accord of the Basel Committee on Banking Supervision
(the "BIS"). The BIS is a committee of central banks and bank
supervisors/regulators from the major industrialized countries that develops
broad policy guidelines that each country's supervisors can use to determine the
supervisory policies they apply. In January 2001 the BIS released a proposal to
replace the 1988 capital accord with a new capital accord that would set capital
requirements for operational risk and refine the existing capital requirements
for credit risk and market risk exposures. Operational risk is defined to mean
the risk of direct or indirect loss resulting from inadequate or failed internal
processes, people and systems or from external events. The 1988 capital accord
does not include separate capital requirements for operational risk. The events
of September 11, 2001 demonstrate the importance for financial institutions of
managing operational risks, including two standardized approaches and an
"internal measurement approach" tailored to individual institutions'
circumstances. The BIS has stated that its objective is to finalize a new
capital accord in 2002 and for member countries to implement the new accord in
2005. The ultimate timing for a new accord, and the specifics of capital
assessments for addressing operational risk, are uncertain. However, the
Corporation expects that a new capital accord addressing operational risk will
eventually be adopted by the BIS and implemented by the U.S. federal bank
regulatory agencies. The Corporation cannot determine whether new capital
requirements that may arise out of a new BIS capital accord will increase or
decrease minimum capital requirements applicable to the Corporation and its
subsidiaries.
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 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
10
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 that has
opted out, whether through an acquisition or de novo. A foreign bank, like Banco
Popular, may establish branches 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
The Gramm-Leach-Bliley Act was enacted on November 12, 1999. 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.
In January 2002, the federal bank regulators adopted rules, effective
April 1, 2002, governing the regulatory capital treatment of equity investments
in nonfinancial companies. The federal rules require a series of marginal
capital charges on covered equity investments that increase with the level of
those investments as a percentage of the Corporation's Tier 1 capital. With
certain exceptions, the rules require that the Corporation and its bank
subsidiaries deduct from Tier 1 capital the appropriate percentage set out
below:
Aggregate Carrying Value of Required Deductions From
Covered Nonfinancial Equity Tier 1 Capital as a
Investments as a percentage of percentage of the Carrying
Tier 1 Capital Value of the Investments
------------------------------ --------------------------
<15% 8%
> 15% but <25% 12%
- >25% 25%
-
The Corporation does not expect the rule will have a material effect on
its capital requirements or strategic plan.
11
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.
On October 26, 2001, the President signed into law comprehensive
anti-terrorism legislation known as the USA Patriot Act. Title III of the USA
Patriot Act requires financial institutions, including the Corporation's bank
and broker-dealer subsidiaries, to help prevent, detect and prosecute
international money laundering and the financing of terrorism. The Corporation's
bank and broker-dealer subsidiaries have adapted their systems and procedures
to accomplish this. The Secretary of the Treasury has proposed additional
regulations to further implement Title III. Although the Corporation cannot
predict when and in what form these regulations will be adopted, the Corporation
believes that the cost of compliance with Title III of the USA Patriot Act is
not likely to be material to the Corporation.
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 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. Accordingly, Banco
Popular is subject to the reserve requirements prescribed by the Banking Law.
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, 2001, 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
12
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 Auto, Inc., Popular Mortgage,
Inc. and Popular Finance, Inc., respectively, all of which are organized and
operate in Puerto Rico.
The Finance Board, which includes as its members the Commissioner of
Financial Institutions, 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
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, 2001, the Corporation employed directly 11,334 persons.
None of its employees is represented by a collective bargaining group.
SEGMENT DISCLOSURE
Note 31 to the Financial Statements, "Segment Reporting" on pages 61
and 62 is herein incorporated by reference.
13
The principal market for the Corporation is Puerto Rico, where the
Corporation had $20.8 billion or 68% of its total assets as of December 31, 2001
and earned $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 December 31, 2001 were estimated at $61 billion, $34
billion and $36 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.
ITEM 2. PROPERTIES
As of December 31, 2001, Banco Popular owned (and wholly or partially
occupied) approximately 80 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 125 locations in Puerto Rico and 7 locations in the U.S. Virgin
Islands. At December 31, 2001, BPNA had 110 offices (principally bank branches)
of which 50 were owned and 60 were leased. These offices were located throughout
New York, Illinois, New Jersey, California, Texas and Florida. 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 55% 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 held for future expansion is partially occupied by Banco
Popular personnel.
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 33% of the building for
a branch operation, a regional office, an exhibit room and other facilities. The
rest of the building is rented or available for rent 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.
Popular Auto, Inc. - Hato Rey, a two story building, and one story
building located at 159 Ponce de Leon Avenue were recently acquired for future
relocation of Popular Auto, Inc., Hato Rey facilities.
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 its operation department, are
the main activities conducted at this facility.
14
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.
Banco Popular has been cooperating fully with an investigation by
federal law enforcement authorities. The investigation relates principally to
the circumstances surrounding the activities of a former customer of Banco
Popular, including Banco Popular reporting and compliance efforts. The former
customer has been indicted for money laundering, including in connection with
transactions through an account at Banco Popular. Banco Popular believes based
on the information available to it that there was no knowing participation by
Banco Popular or any Banco Popular employee in the former customer's activities.
The law enforcement investigation could result in adverse consequences to the
Corporation and Banco Popular including the possibility of civil and criminal
claims being brought against Banco Popular. The Corporation cannot predict when
or on what basis the investigation will conclude or its effects, if any, on the
Corporation or Banco Popular.
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 for each
quarterly period during 2001 and the previous four years, as well as cash
dividends declared is contained under Table I, "Common Stock Performance", on
page 16 and under the caption "Stockholders' Equity" on page 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, 2002, the Corporation had 10,860 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 $29.02 per
share.
Effective January 22, 2002, Popular, Inc. redeemed all of the
outstanding shares of its 8.35% Non-Cumulative Monthly Income Preferred Stock,
1994 Series A (NASDAQ: BPOPP). The redemption payment was $25.6276 per share of
the Series A Preferred Stock, consisting of the redemption price plus an amount
representing accrued and unpaid dividends for the current monthly dividend
period up to, but excluding, the Redemption Date.
On November 19, 2001, a shelf registration statement filed by the
Corporation, PIB and PNA with the Securities and Exchange Commission on November
13, 2001, became effective. This shelf registration
15
statement allows the Corporation, PIB and PNA to issue debt securities and
preferred stock in an aggregate amount of up to $2.0 billion. On October 15,
2001, PNA issued $700 million 6 1/8% notes due October 15, 2006 and $450 million
Floating Rate Notes due October 15, 2003 under its medium-term note program. The
medium-term notes of PNA and any additional securities of PNA or of PIB issued
under the new registration statement are fully and unconditionally guaranteed by
the Corporation.
The Corporation currently has $125 million in subordinated notes
outstanding 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, 2001. 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). As of December 31, 2001, the Corporation's broker/dealer
subsidiary maintained $920,000 of the capital securities in its inventory. This
amount represents an intercompany transaction for consolidation purposes.
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
foreign corporations or partnerships not engaged in trade or business within
Puerto Rico at a special 10% withholding tax rate. If the recipient is a foreign
corporation or partnership engaged in trade or business within Puerto Rico in a
domestic corporation the dividend will be taxed at regular rates but will be
allowed an 85% dividend received deduction.
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.
16
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item appears in Table C, "Selected
Financial Data", on pages 4 and 5 and the text under the caption "Earnings
Analysis" on page 6 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
Year ended December 31,
------------------------------------------------
Ratio of Earnings to Fixed Charges:
2001 2000 1999 1998 1997
------------------------------------------------
Excluding Interest on Deposits 1.8 1.6 1.7 1.8 1.8
Including Interest on Deposits 1.4 1.3 1.4 1.4 1.4
Ratio of Earnings to Fixed Charges and
Preferred Stock Dividends:
Excluding Interest on Deposits 1.8 1.6 1.7 1.8 1.8
Including Interest on Deposits 1.4 1.3 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) 2001 2000 1999 1998 1997
----------------------------------------------------------------------------------
Long-term obligations $4,009,211 $1,451,912 $2,127,599 $1,582,160 $1,678,696
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 2 through 29
under the caption "MD&A", and is incorporated herein by reference.
Table K, "Maturity Distribution of Earning Assets", on page 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 accordance
with the Corporation's lending criteria.
17
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information regarding the market risk of the Corporation's
investments appears on page 16 through 19 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 31 through 72,
and on page 30 under the caption "Statistical Summary - 2000-2001 Quarterly
Financial Data" in the Annual Report 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 18, 2002 (the "Proxy Statement") is
incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information under the caption "Executive Compensation Program" and
under the caption "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 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 31
through 72 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, 2001
and 2000
18
Consolidated Statements of Income for each of the years in the
three-year period ended December 31, 2001
Consolidated Statements of Cash Flows for each of the years in
the three-year period ended December 31, 2001
Consolidated Statements of Changes in Stockholders' Equity for
each of the years in the three-year period ended December 31,
2001
Consolidated Statements of Comprehensive Income for each of
the years in the three-year period ended December 31, 2001
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 22 of this
report are filed herewith or are incorporated herein by
reference.
B. The Corporation filed two reports on Form 8-K during the quarter ended
December 31, 2001.
Dated: October 10, 2001
Filed: October 10, 2001
Items reported: Item 5 - Other Events (Operational results for the
quarter and nine month period ended September 30, 2001)
Dated: December 21, 2001
Filed: December 28, 2001
Items reported: Item 5 - Other Events (Redemption of all of the
outstanding shares of the 8.35% Non-Cumulative Monthly Income Preferred
Sock, 1994 Series A).
19
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: 03-13-02 (Principal Executive Officer)
---------------
By: S\JORGE A. JUNQUERA
--------------------------------
Jorge A. Junquera
Senior Executive Vice President
Dated: 03-13-02 (Principal Financial Officer)
---------------
By: S\AMILCAR L. JORDAN
--------------------------------
Amilcar L. Jordan
Senior Vice President
Dated: 03-13-02 (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 03-13-02
----------
S\ANTONIO LUIS FERRE Vice Chairman of
- ------------------------------- the Board 03-13-02
Antonio Luis Ferre ----------
S\JUAN J. BERMUDEZ
- -------------------------------
Juan J. Bermudez Director 03-13-02
----------
S\FRANCISCO J. CARRERAS
- -------------------------------
Francisco J. Carreras Director 03-13-02
----------
S/JOSE B. CARRION
- -------------------------------
Jose B. Carrion Jr. Director 03-13-02
----------
S\DAVID H. CHAFEY
- -------------------------------
David H. Chafey Jr. Director 03-13-02
----------
S\HECTOR R. GONZALEZ
- -------------------------------
Hector R. Gonzalez Director 03-13-02
----------
20
S\JORGE A. JUNQUERA
- -------------------------------
Jorge A. Junquera Director 03-13-02
----------
S\MANUEL MORALES
- -------------------------------
Manuel Morales Jr. Director 03-13-02
----------
S\ALBERTO M. PARACCHINI
- -------------------------------
Alberto M. Paracchini Director 03-13-02
----------
S\FRANCISCO M. REXACH
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Francisco M. Rexach Jr. Director 03-13-02
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S\FELIX J. SERRALLES
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Felix J. Serralles Jr. Director 03-13-02
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S\JULIO E. VIZCARRONDO
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Julio E. Vizcarrondo Jr. Director 03-13-02
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21
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
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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)).
4.3 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).
4.5 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 5, 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).
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).
22
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 filed 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 filed 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 filed 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 filed 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)).
10.3 Popular, Inc. 2001 Stock Option Plan (incorporated by
reference to Exhibit 4.4 of Popular's Registration Statement
on Form S-8, dated May 10, 2001).
10.4 Amended and Restated 364-day Credit Agreement, dated as of
October 10, 2001, 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 $315,000,000.
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).
23
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 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).
10.8 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).
10.9 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).
10.10 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).
10.11 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).
10.12 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).
10.13 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).
(Incorporated herein by reference to Exhibit 10.15 of Popular's
Annual Report on Form 10-K for the fiscal year ended December 31,
2000).
10.13a 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).
(Incorporated herein by reference to Exhibit 10.15a of Popular's
Annual Report on Form 10-K for the fiscal year ended December 31,
2000).
10.14 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. (Incorporated herein by reference to Exhibit
10.16 of Popular's Annual Report on Form 10-K for the fiscal year
ended December 31, 2000).
10.15 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. (Incorporated herein by reference to Exhibit
10.17 of Popular's Annual Report on Form 10-K for the fiscal year
ended December 31, 2000).
10.16 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. (Incorporated herein by
reference to Exhibit 10.18 of Popular's Annual Report on Form 10-K
for the fiscal year ended December 31, 2000).
10.17 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. (Incorporated herein by
reference to Exhibit 10.19 of Popular's Annual Report on Form 10-K
for the fiscal year ended December 31, 2000). (Incorporated herein
by reference to Exhibit 10.19 of Popular's Annual Report on Form
10-K for the fiscal year ended December 31, 2000).
10.18 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. (Incorporated herein by
reference to Exhibit 10.20 of Popular's Annual Report on Form 10-K
for the fiscal year ended December 31, 2000).
24
10.19 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. (Incorporated herein by
reference to Exhibit 10.21 of Popular's Annual Report on Form 10-K
for the fiscal year ended December 31, 2000).
10.20 Amended Administrative Procedures for Fixed and Floating Rate Bank
Notes, dated May 12, 2000 to 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. (Incorporated herein by reference to Exhibit
10.22 of Popular's Annual Report on Form 10-K for the fiscal year
ended December 31, 2000).
10.21 Form of Global Fixed and Floating Rate Bank Note of the Banco
Popular de Puerto Rico Bank Notes, dated September 24, 1996 and
amended through Administrative Procedures, dated May 12, 2000.
(Incorporated herein by reference to Exhibit 10.23 of Popular's
Annual Report on Form 10-K for the fiscal year ended December 31,
2000).
10.22 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. (Incorporated herein by
reference to Exhibit 10.24 of Popular's Annual Report on Form 10-K
for the fiscal year ended December 31, 2000).
10.23 Distribution Agreement, dated October 6, 1995, among BanPonce
Corporation (Popular, Inc.), Merrill Lynch, Pierce, Fenner &
Smith Incorporated, Credit Suisse 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).
10.24 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, Credit Suisse 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, 2001.
21.1 Schedule of Subsidiaries of Popular, Inc.
23.1 Consent of Independent Accountants.
99.1 Popular's Proxy Statement for the April 30, 2002 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.
25