POPULAR, INC. 
By
(Dollars in millions, Quarter ended Year ended
except per share Dec. 31 Dec. 31 Dec. 31 Dec. 31
information) 2008 2007 2008 2007
(Loss) income from
continuing operations,
net of tax ($627.7) ($150.5) ($680.5) $202.5
Loss from discontinued
operations, net of tax (75.2) (143.6) (563.4) (267.0)
Net loss ($702.9) ($294.1) ($1,243.9) ($64.5)
Basic and diluted (losses)
earnings per share:
(Loss) income from
continuing operations ($2.28) ($0.55) ($2.55) $0.68
Loss from discontinued
operations (0.27) (0.51) (2.00) (0.95)
Total ($2.55) ($1.06) ($4.55) ($0.27)
"Our disappointing results reflect deteriorating economic conditions both
in the U.S. mainland and
Carrion added: "The integration of the U.S. mainland franchise and our
The following principal items impacted the Corporation's continuing
operations financial results for the quarter ended
-- higher provision for loan losses by $267.1 million as a result of
higher credit losses and increased specific reserves for impaired
loans;
-- valuation allowance on the Corporation's deferred tax assets related to
the U.S. operations of $462.8 million recorded during the fourth
quarter of 2008; and
-- lower goodwill and trademark impairment losses by $199.3 million due to
$211.8 million in impairment losses related to E-LOAN's goodwill and
trademark recognized in the fourth quarter of 2007, compared to losses
of $12.5 million in the fourth quarter of 2008, consisting principally
of $10.9 million in losses related to E-LOAN's trademark. The trademark
impairment losses recorded in 2008 resulted from E-LOAN ceasing to
operate as a direct lender in the fourth quarter of 2008.
The Corporation's net loss for the quarter and year ended
Quarter ended December 31, 2008
Total Dis-
BPPR BPNA EVERTEC Corp- contin- contin-
report- report- report- orate uing ued
(Dollars in able able able and opera- opera- Popular,
millions) segment segment segment Other tions tions Inc.
(Loss) income
before tax ($5.7) ($268.2) $15.3 ($60.0) ($318.6) ($58.3) ($376.9)
Income tax
(benefit)
expense(a) (18.1) 81.3 5.4 240.5 309.1 16.9 326.0
Net income
(loss) $12.4 ($349.5) $9.9 ($300.5) ($627.7) ($75.2) ($702.9)
(a) Income tax for the quarter ended December 31, 2008 includes the effect
of the recording of a valuation allowance on deferred tax assets of
the U.S. operations during the fourth quarter of 2008 as follows:
Discontinued operations - $37.8 million and Continuing operations -
$462.8 million. The latter amount consists principally of BPNA -
$200.1 million and Corporate and Other - $262.8 million.
Year ended December 31, 2008
Total Dis-
BPPR BPNA EVERTEC Corp- contin- contin-
report- report- report- orate uing ued
(Dollars in able able able and opera- opera- Popular,
millions) segment segment segment Other tions tions Inc.
Income (loss)
before tax $260.5 ($410.2) $63.1 ($132.4) ($219.0) ($548.5) ($767.5)
Income tax
expense(a) 21.4 114.6 19.5 306.0 461.5 14.9 476.4
Net income
(loss) $239.1 ($524.8) $43.6 ($438.4) ($680.5) ($563.4) ($1,243.9)
(a) Income tax for the year ended December 31, 2008 includes the effect of
the recording of a valuation allowance on deferred tax assets of the
U.S. operations as follows: Discontinued operations - $209.0 million
and Continuing operations - $652.0 million. The latter amount consists
principally of BPNA - $294.5 million and Corporate and Other - $357.4
million and EVERTEC (USA) - $0.1 million.
-- Net income for the Banco Popular de
BPPR's reportable segment net interest income for the fourth quarter of
2008 declined
-- Banco Popular North America ("BPNA") reportable segment reported net
losses of
During the quarter ended
The integration of both banking subsidiaries, BPPR and BPNA, under one
management continues to be implemented, as part of the previously announced
restructuring plan for the U.S. operations. The business divisions of retail
banking and commercial banking, in addition to administrative and operational
personnel, at Banco Popular North America, are now reporting to management in
-- Losses of
Net Loss from Continuing Operations - Fourth Quarter 2008 compared to Fourth Quarter 2007:
This press release should be read in conjunction with the accompanying Financial Summary (Exhibit A), which is an integral part of this report. The Corporation retrospectively adjusted certain information to exclude results from discontinued operations from prior periods presented in this press release for comparability purposes. The discussions that follow pertain to Popular, Inc.'s continuing operations, unless otherwise indicated.
Net Interest Income
Net interest income for the fourth quarter of 2008 was
The following table summarizes the principal changes in average earning
assets and funding sources and their corresponding yields and costs for the
quarter ended
Average balances Average Yields / Costs
4th 4th Dollar % 4th 4th
(Dollars in Quarter Quarter Vari- Vari- Quarter Quarter
billions) 2008 2007 ance ance 2008 2007 Variance
Money market,
trading and
investment
securities $9.4 $10.9 ($1.5) (14%) 4.03% 4.63% (0.60%)
Loans:
Commercial* 16.0 15.3 0.7 5 5.69 7.43 (1.74)
Mortgage 4.6 4.9 (0.3) (6) 6.88 7.26 (0.38)
Consumer 4.7 4.8 (0.1) (2) 9.92 10.43 (0.51)
Lease
financing 1.1 1.2 (0.1) (8) 8.11 7.92 0.19
Total loans 26.4 26.2 0.2 1 6.75 7.97 (1.22)
Total earning
assets $35.8 $37.1 ($1.3) (4%) 6.04% 6.99% (0.95%)
Interest bearing
deposits $24.0 $23.2 $0.8 3% 2.85% 3.64% (0.79%)
Borrowings 7.0 8.2 (1.2) (15) 4.64 4.89 (0.25)
Total interest
bearing
liabilities 31.0 31.4 (0.4) (1) 3.25 3.97 (0.72)
Non-interest
bearing sources
of funds 4.8 5.7 (0.9) (16)
Total funds $35.8 $37.1 ($1.3) (4%) 2.81% 3.36% (0.55%)
Net interest
spread 2.79% 3.02% (0.23%)
Net interest
yield 3.23% 3.63% (0.40%)
* Includes commercial construction loans
The decline in average earning assets was due mostly to the runoff of investment securities as part of a strategy of delevering the balance sheet. The reduction in the average balance of investment securities was used to repay short-term borrowings, including repurchase agreements. In the loan portfolio, an increase in average commercial loans outstanding was offset in part by declines in mortgage and auto loans.
The decline in the net interest yield was driven by a reduction in the
yield of earning assets. This was caused primarily by the decline in the yield
of commercial loans, which have a significant amount of floating rate loans
whose yield decreased as the Fed cut the funds rate in 2008. The Fed lowered
the federal funds target rate between 400 and 425 basis points from
Provision for Loan Losses and Credit Quality
The provision for loan losses in the continuing operations totaled
The higher level of provision for the quarter ended
Exhibit A provides credit quality data, including certain key credit
quality metrics. The allowance for loan losses represented 3.43% of loans
held-in-portfolio at
Non-performing assets of the continuing operations totaled
Non-interest Income
Non-interest income from continuing operations totaled
Operating Expenses
Operating expenses for the continuing operations totaled
As indicated earlier in this press release, E-LOAN and BPNA commenced to
carry out further restructuring of its operations during the fourth quarter of
2008. For the quarter ended
Income Taxes
Income tax expense from continuing operations amounted to
The Corporation's net deferred tax assets (prior to deducting the
valuation allowance) amounted to
The Corporation's U.S. mainland operations are in a cumulative loss
position for the three-year period ended
Balance Sheet Comments:
The accompanying Exhibit A provides information on principal categories of
the Corporation's balance sheet at
Investment securities
The Corporation's portfolio of investment securities available-for-sale
and held-to-maturity totaled
Loans
A breakdown of the Corporation's total loan portfolio at period-end, which represents the principal category of earning assets, follows:
Dec. 31, Sept. 30, Vari- Dec. 31, Vari-
(In billions) 2008 2008 ance 2007 ance
Commercial $13.7 $13.9 ($0.2) $13.5 $0.2
Construction 2.2 2.1 0.1 1.9 0.3
Mortgage 4.6 4.7 (0.1) 5.0 (0.4)
Consumer 4.7 4.8 (0.1) 5.0 (0.3)
Lease financing 1.1 1.1 - 1.2 (0.1)
Sub-total 26.3 26.6 (0.3) 26.6 (0.3)
PFH discontinued
operations - 0.6 (0.6) 3.3 (3.3)
Total $26.3 $27.2 ($0.9) $29.9 ($3.6)
Deposits
A breakdown of the Corporation's deposits at period-end follows:
Dec. 31, Sept. 30, Vari- Dec. 31, Vari-
(In billions) 2008 2008 ance 2007 ance
Demand* $4.9 $4.7 $0.2 $5.1 ($0.2)
Savings 9.6 9.9 (0.3) 9.8 (0.2)
Time 13.1 13.3 (0.2) 13.4 (0.3)
Total deposits $27.6 $27.9 ($0.3) $28.3 ($0.7)
* Includes non-interest and interest bearing demand deposits
Brokered certificates of deposit, which are included as part of time
deposits, amounted to
Borrowings and capital
The accompanying Exhibit A also provides information on borrowings and
stockholders' equity at
Stockholders' equity totaled
The reduction in stockholders' equity from the end of 2007 to
Below is a summary of the Corporation's estimated regulatory capital
ratios as of
December 31, September 30, Minimum
2008 2008 required
Tier I risk-based capital 10.47% 9.09% 4.00%
Total risk-based capital 11.74% 10.35% 8.00%
Tier I leverage 8.20% 7.17% 3.00% - 4.00%
Other matters:
The Corporation continues, along with its subsidiaries Banco Popular of
Through the TLG Program, the FDIC will provide unlimited deposit insurance
coverage for all non-interest bearing transaction accounts through
In addition, Popular also has the option under the TLG Program to issue
senior unsecured debt fully guaranteed by the FDIC on or before
Forward-Looking Statements:
The information included in this press release may contain certain
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements are based on management's
current expectations and involve certain risks and uncertainties that may
cause actual results to differ materially from those expressed in forward-
looking statements. Factors such as changes in interest rate environment, as
well as general changes in business market and economic conditions may cause
actual results to differ from those contemplated by such forward-looking
statements. For a discussion of such risks and uncertainties, see the
Corporation's Annual Report on Form 10-K for the year ended
* * *
Popular, Inc. is a full service financial services provider based in
* * *
An electronic version of this press release can be found at the Corporation's website, www.popular.com.
* * *
Exhibit A follows
* * *
EXHIBIT A
POPULAR, INC.
Financial Summary
(Unaudited)
4th Quarter
Quarter 4th Quarter Quarter 2008 vs
ended 2008 vs ended 3rd Quarter
Dec. 31, 2007 Sept. 30, 2008
2008 2007 $ Variance 2008 $ Variance
Summary of
Operations --
(In thousands,
except share
information)
Interest income $541,542 $651,407 ($109,865) $555,481 ($13,939)
Interest expense 252,676 314,091 (61,415) 231,199 21,477
Net interest income 288,866 337,316 (48,450) 324,282 (35,416)
Provision for loan
losses 388,823 121,742 267,081 252,160 136,663
Net interest income
after provision for
loan losses (99,957) 215,574 (315,531) 72,122 (172,079)
Net gain (loss) on
sale and valuation
adjustments of
investment securities 286 (11,973) 12,259 (9,132) 9,418
Trading account profit 5,098 7,432 (2,334) 6,669 (1,571)
(Loss) gain on sale
of loans and valuation
adjustments on loans
held-for-sale (19,678) 19,822 (39,500) 6,522 (26,200)
Other non-interest
income 155,791 175,336 (19,545) 183,869 (28,078)
Total non-interest
income 141,497 190,617 (49,120) 187,928 (46,431)
Personnel costs 148,950 162,986 (14,036) 148,230 720
Goodwill and
trademark
impairment
losses 12,480 211,750 (199,270) - 12,480
Other operating
expenses 198,750 197,354 1,396 174,685 24,065
Total operating
expenses 360,180 572,090 (211,910) 322,915 37,265
Loss from
continuing
operations before
income tax (318,640) (165,899) (152,741) (62,865) (255,775)
Income tax expense
(benefit) 309,067 (15,434) 324,501 148,308 160,759
Loss from continuing
operations, net of
income tax (627,707) (150,465) (477,242) (211,173) (416,534)
Loss from
discontinued
operations, net of
income tax (75,193) (143,628) 68,435 (457,370) 382,177
Net loss ($702,900) ($294,093) ($408,807) ($668,543) ($34,357)
Net loss applicable
to common stock ($717,987) ($297,071) ($420,916) ($679,772) ($38,215)
Losses per common
share:
Basic and
diluted losses
per common
share from
continuing
operations
($2.28) ($0.55) ($0.79)
Basic and
diluted losses
per common
share from
discontinued
operations ($0.27) ($0.51) ($1.63)
Basic and
diluted losses
per common share
- Total ($2.55) ($1.06) ($2.42)
Dividends declared
per common share $0.08 $0.16 $0.08
Average common
shares
outstanding 281,786,725 279,905,592 281,489,469
Average common
shares
outstanding -
assuming
dilution 281,786,725 279,905,592 281,489,469
Common shares
outstanding at
end of period 282,004,713 280,029,215 281,708,260
Market value
per common share $5.16 $10.60 $8.29
Book value per
common share $6.33 $12.12 $8.59
Market
Capitalization
-- (In millions) $1,455 $2,968 $2,335
Selected
Average
Balances
-- (In millions)
Total assets $39,531 $46,918 ($7,387) $40,634 ($1,103)
Stockholders' equity 3,114 3,834 (720) 3,471 (357)
Selected Financial
Data at Period-End
-- (In millions)
Total assets $38,883 $44,411 ($5,528) $40,390 ($1,507)
Loans(1) 26,276 29,911 (3,635) 27,207 (931)
Earning assets(1) 36,154 40,902 (4,748) 36,483 (329)
Deposits 27,550 28,334 (784) 27,911 (361)
Borrowings(1) 6,943 11,561 (4,618) 8,646 (1,703)
Interest bearing
liabilities(1) 30,200 35,384 (5,184) 32,492 (2,292)
Stockholders' equity 3,268 3,582 (314) 3,007 261
Performance Ratios
Net interest yield
from continuing
operations(2) 3.23% 3.63% 3.62%
Return on assets (7.07) (2.49) (6.55)
Return on common
equity (123.03) (32.32) (93.32)
Credit Quality Data
-- (Dollars in
millions)
Net loans
charged-off,
excluding
write-downs
on loans
transferred to
held-for-sale(3) $223.7 $77.5 $146.2 $170.5 $53.2
Allowance for loan
losses 883 549 334 726 157
Non-performing loans
from continuing
operations(4) 1,203 571 632 1,028 175
Non-performing loans
from discontinued
operations(5) 11 200 (189) 75 (64)
Non-performing loans
- total 1,214 771 443 1,103 111
Non-performing loans
to loans held-in-
portfolio(6)(7) 4.67% 2.75% 3.90%
Allowance for loan
losses to non-
performing loans(6) 73.40 71.21 70.64
Allowance for loan
losses to loans
held-in-portfolio(7) 3.43 1.96 2.76
(1) Includes assets/liabilities from discontinued operations as follows:
December 31, 2008 - $7 million in loans and earning assets; September
30, 2008 - $626 million in loans, $630 million in earning assets, and
$166 million in borrowings and interest bearing liabilities.
(2) Not on a taxable equivalent basis. Periods prior to December 31, 2008
were retrospectively adjusted to conform to the December 31, 2008
presentation.
(3) Excludes net charge-offs from discontinued operations. Periods prior
to December 31, 2008 were retrospectively adjusted to conform to the
December 31, 2008 presentation.
(4) Periods prior to December 31, 2008 exclude discontinued operations on
a pro-forma basis for comparative purposes.
(5) Periods prior to December 31, 2008 include discontinued operations on
a pro-forma basis for comparative purposes.
(6) Non-performing loans ("NPL") exclude NPL accounted pursuant to the
fair value option of SFAS No. 159. Also, for the periods ended
December 31, 2008 and September 30, 2008, NPL exclude NPL from
discontinued operations.
(7) Loans held-in-portfolio exclude loans held-for-sale and loans
accounted pursuant to the fair value option of SFAS No. 159. Loans
from discontinued operations are considered held-for-sale as of
December 31, 2008 and September 30, 2008.
Notes: Certain reclassifications have been made to prior periods to
conform with this quarter.
EXHIBIT A (CONTINUED)
POPULAR, INC.
Financial Summary
(Unaudited)
For the year ended
December 31,
2008 2007 $ Variance
Summary of Operations --
(In thousands, except share
information)
Interest income $2,274,123 $2,552,235 ($278,112)
Interest expense 994,919 1,246,577 (251,658)
Net interest income 1,279,204 1,305,658 (26,454)
Provision for loan losses 991,384 341,219 650,165
Net interest income after provision
for loan losses 287,820 964,439 (676,619)
Net gain on sale and valuation
adjustments of investment
securities 69,716 100,869 (31,153)
Trading account profit 43,645 37,197 6,448
Gain on sale of loans and valuation
adjustments on loans held-for-sale 6,018 60,046 (54,028)
Other non-interest income 710,595 675,583 35,012
Total non-interest income 829,974 873,695 (43,721)
Personnel costs 608,465 620,760 (12,295)
Goodwill and trademark impairment
losses 12,480 211,750 (199,270)
Other operating expenses 715,783 712,952 2,831
Total operating expenses 1,336,728 1,545,462 (208,734)
(Loss) income from continuing
operations before income tax (218,934) 292,672 (511,606)
Income tax expense 461,534 90,164 371,370
(Loss) income from continuing
operations, net of income tax (680,468) 202,508 (882,976)
Loss from discontinued operations,
net of income tax (563,435) (267,001) (296,434)
Net loss ($1,243,903) ($64,493) ($1,179,410)
Net loss applicable to common stock ($1,279,200) ($76,406) ($1,202,794)
(Losses) earnings per common share:
Basic and diluted (losses)
earnings per common share from
continuing operations ($2.55) $0.68
Basic and diluted losses per
common share from discontinued
operations ($2.00) ($0.95)
Basic and diluted losses per
common share - Total ($4.55) ($0.27)
Dividends declared per common share $0.48 $0.64
Average common shares outstanding 281,079,201 279,494,150
Average common shares outstanding
- assuming dilution 281,079,201 279,552,502
Common shares outstanding at
end of period 282,004,713 280,029,215
Market value per common share $5.16 $10.60
Book value per common share $6.33 $12.12
Market Capitalization --
(In millions) $1,455 $2,968
Selected Average Balances --
(In millions)
Total assets $40,924 $47,105 ($6,181)
Stockholders' equity 3,358 3,861 (503)
Performance Ratios
Net interest yield from continuing
operations(1) 3.55% 3.59%
Return on assets (3.04) (0.14)
Return on common equity (44.47) (2.08)
Credit Quality Data --
(Dollars in millions)
Net loans charged-off, excluding
write-downs on loans transferred
to held-for-sale(2) $600.0 $250.6 $349.4
Allowance for loan losses 883 549 334
Non-performing loans from
continuing operations(3) 1,203 571 632
Non-performing loans from
discontinued operations(4) 11 200 (189)
Non-performing loans - total 1,214 771 443
Non-performing loans to loans held-
in-portfolio(5)(6) 4.67% 2.75%
Allowance for loan losses to non-
performing loans(5) 73.40 71.21
Allowance for loan losses to loans
held-in-portfolio(6) 3.43 1.96
(1) Not on a taxable equivalent basis. Periods prior to December 31, 2008
were retrospectively adjusted to conform to the December 31, 2008
presentation.
(2) Excludes net charge-offs from discontinued operations. Periods prior
to December 31, 2008 were retrospectively adjusted to conform to the
December 31, 2008 presentation.
(3) Periods prior to December 31, 2008 exclude discontinued operations on
a pro-forma basis for comparative purposes.
(4) Periods prior to December 31, 2008 include discontinued operations on
a pro-forma basis for comparative purposes.
(5) Non-performing loans ("NPL") exclude NPL accounted pursuant to the
fair value option of SFAS No. 159. Also, for the period ended
December 31, 2008, NPL exclude NPL from discontinued operations.
(6) Loans held-in-portfolio exclude loans held-for-sale and loans
accounted pursuant to the fair value option of SFAS No. 159. Loans
from discontinued operations are considered held-for-sale as of
December 31, 2008.
Notes: Certain reclassifications have been made to prior periods to conform with this period.
SOURCE Popular, Inc.
