Popular, Inc. Reports Financial Results for the Quarter and Nine Months Ended September 30, 2009
Published In: Business, Puerto Rico 
Monday, October 19, 2009 8:00 AM
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SAN JUAN, Puerto Rico, Oct. 19 /PRNewswire-FirstCall/ -- Popular, Inc.
("the Corporation") (Nasdaq: BPOP) reported a net loss of $125.0 million for
the quarter ended September 30, 2009, compared with a net loss of
$183.2 million for the quarter ended June 30, 2009, and a net loss of
$668.5 million for the quarter ended September 30, 2008. For the nine months
ended September 30, 2009, the Corporation's net loss totaled $360.7 million,
compared to a net loss of $541.0 million for the same period in 2008.

Refer to the accompanying Exhibit A - Financial Summary for "per common
share" information and key performance ratios. Also, refer to Exhibit B for
credit quality information and to Exhibit C for summarized income statement
information by reportable segment. As indicated in previous filings, in 2008,
the Corporation discontinued the operations of its U.S. mainland-based
subsidiary Popular Financial Holdings ("PFH"), and thus the results of PFH are
presented as part of "Loss from discontinued operations, net of income tax" in
Exhibit A.

"Third-quarter results still reflect the effects of a deepening recession
and rising unemployment in Puerto Rico. The island's residential construction
market remains stagnant with low absorption rates, requiring a high level of
provisioning," said Richard L. Carrion, Chairman of the Board and Chief
Executive Officer of Popular, Inc.

Carrion continued, "While some U.S. economic indicators have shown some
improvement, our consumer and mortgage portfolios are still feeling the impact
of job losses on the U.S. mainland. We expect these economic trends,
particularly in Puerto Rico, to continue for the foreseeable future. We
continue to work on improving our U.S. franchise and maintaining our dominant
position in Puerto Rico for the turn of the cycle."

During the third quarter of 2009, the Corporation took steps to increase
its capital position that resulted in total additions of $1.4 billion to Tier
1 common equity.

On August 25, 2009, the Corporation completed the settlement of its
previously announced Exchange Offer to issue up to 390 million shares of its
common stock in exchange for its Series A and Series B preferred stock and for
its trust preferred securities. As part of the Exchange Offer, the Corporation
issued over 357 million new shares of common stock for a total of over 639
million common shares outstanding. This Exchange Offer resulted in an increase
in common stockholders' equity of $919.1 million, resulting from the exchange
of Series A and Series B preferred stock and trust preferred securities into
common stock. This included newly issued common stock and surplus of $608.4
million and a favorable impact to accumulated deficit of $310.7 million,
including $80.3 million in gains on the extinguishment of trust preferred
securities recorded in the consolidated statement of operations for the
quarter ended September 30, 2009.

Also, as announced on August 10, 2009, the Corporation agreed with the
U.S. Treasury to exchange all $935 million of its outstanding shares of Series
C preferred stock of the Corporation for $935 million of newly issued trust
preferred securities (the "New Trust Preferred Securities"). The New Trust


Preferred Securities have a distribution rate of 5% until December 5, 2013 and
9% thereafter (which is the same as the dividend rate on the previously
outstanding Series C preferred stock). The transaction with the U.S. Treasury
settled on August 24, 2009. The particular exchange with the U.S. Treasury
resulted in a favorable impact to accumulated deficit of $485.3 million
resulting from the excess of (1) the carrying amount of the securities
surrendered (the Series C preferred stock) over (2) the fair value of the
consideration exchanged (the New Trust Preferred Securities).

The Corporation's Tier 1 common equity to risk-weighted assets ratio
increased from 2.45% as of June 30, 2009 to 6.88% as of September 30, 2009 as
a result of the transactions described above. See "Reconciliation of Non-GAAP
Financial Measure" for a reconciliation of Tier 1 common equity to common
stockholders' equity and a discussion of our use of this non-GAAP financial
measure in this press release.

The above transactions also impacted earnings per common share favorably.
The following table provides a reconciliation of earnings (losses) per common
share ("EPS") for the quarters ended September 30, 2009, June 30, 2009 and
September 30, 2008 and for the nine-month periods ended September 30, 2009 and
2008:


Quarter ended Nine months ended
Sept. 30, June 30, Sept. 30, Sept. 30, Sept. 30
2009 2009 2008 2009 2008
(In thousands,
except per share
information)
Net loss from
continuing
operations ($121,561) ($176,583) ($211,173) ($340,720) ($52,761)
Net loss from
discontinued
operations (3,427) (6,599) (457,370) (19,972) (488,242)
Preferred stock
dividends* 5,974* (22,915) (11,229) (39,857) (20,210)
Favorable impact
from exchange
of Series A
and B preferred
stock 230,388 - - 230,388 -
Favorable
impact from
exchange of
Series C
preferred
stock 485,280 - - 485,280 -
Preferred
stock
discount
accretion (1,040) (1,713) - (4,515) -
Net income
(loss)
applicable
to common
stock $595,614 ($207,810) ($679,772) $310,604 ($561,213)
Average
common
shares
outstanding 425,672,578 281,888,394 281,489,469 330,325,348 280,841,638
Average
potential
common
shares - - - - -
Average
common
shares
outstanding -
assuming
dilution 425,672,578 281,888,394 281,489,469 330,325,348 280,841,638
Basic and
diluted
earnings
(losses)
per common
share from
continuing
operations $1.41 ($0.71) ($0.79) $1.00 ($0.27)
Basic and
diluted losses
per common
share from
discontinued
operations ($0.01) ($0.03) ($1.63) ($0.06) ($1.73)
Total basic
and diluted
earnings
(losses) per
common
share $1.40 ($0.74) ($2.42) $0.94 ($2.00)


* Amount presented for the quarter ended September 30, 2009 represents the
reversal of dividends on Series C preferred stock considered accrued as of
June 30, 2009 for EPS purposes only. These cumulative dividends were not paid
as dividends to the Series C preferred stock holder given the terms of the
exchange agreement to New Trust Preferred Securities, which was effected in
August 2009.


The Corporation's continuing operations reported a net loss of
$121.6 million for the quarter ended September 30, 2009, compared with a net
loss of $176.6 million for the quarter ended June 30, 2009, and a net loss of
$211.2 million for the quarter ended September 30, 2008. For the nine months
ended September 30, 2009, the Corporation's net loss from continuing
operations totaled $340.7 million, compared to a net loss of $52.8 million for
the same period in 2008.

The principal items impacting the continuing operations' financial results
for the quarter ended September 30, 2009, when compared to the quarter ended
June 30, 2009, were as follows:

* Gains of $80.3 million on the extinguishment of debt related to the
aforementioned exchange of trust preferred securities for common stock.

* Non-interest income was lower by $65.8 million when compared to the
quarter ended June 30, 2009, principally as a result of lower gains on the
sale of investment securities. During the third quarter of 2009, the
Corporation realized $9.1 million in losses on the valuation of investment
securities compared to gains of $53.7 million in the second quarter of 2009
principally associated with the sale of equity securities.

* Total operating expenses, excluding the aforementioned gain of
$80.3 million on the extinguishment of debt, were $29.7 million lower in the
quarter ended September 30, 2009 compared with the second quarter of 2009,
mainly as a result of lower FDIC insurance assessments on deposits by
$19.8 million since the second quarter of 2009 included the impact of a
special assessment of approximately $16.7 million.

* The provision for loan losses for the third quarter of 2009 decreased by
$18.4 million when compared with the quarter ended June 30, 2009. The lower
total provision was the net result of a $28.3 million decrease in the
provision related to the Puerto Rico operations because of a higher provision
for specific construction loans in the second quarter of 2009, and a
$9.9 million increase in the provision related to the U.S. mainland
portfolios. The allowance for loan losses increased from June 30, 2009 to
September 30, 2009 by $61 million. The allowance for loan losses to loans
held-in-portfolio was 4.95% as of September 30, 2009, compared to 4.66% as of


June 30, 2009. Refer to Exhibit A for certain credit quality ratios and
Exhibit B for other specific credit quality information.


Net Loss from Continuing Operations:

This press release should be read in conjunction with the accompanying
Exhibits A, B and C which are an integral part of this report. The discussions
that follow pertain to Popular, Inc.'s continuing operations, unless otherwise
indicated.


Net Interest Income


Net interest income for the third quarter of 2009 was $276.4 million,
compared with $283.1 million for the second quarter of 2009 and $324.3 million
for the same quarter of 2008.

The following table summarizes the principal changes in average earning
assets and funding sources and their corresponding yields and costs for the
quarter ended September 30, 2009, compared with the quarter ended June 30,
2009 and the quarter ended September 30, 2008.




Average balances Average Yields / Costs
3rd 2nd 3rd 3rd 2nd 3rd
Quarter Quarter Quarter Quarter Quarter Quarter
2009 2009 2008 2009 2009 2008
(Dollars in
billions)

Money market,
trading and
investment
securities $9.0 $9.6 $9.4 3.69% 3.72% 4.17%
Loans:
Commercial* 15.0 15.4 15.9 4.85 4.87 5.82
Mortgage 4.5 4.5 4.6 6.15 6.30 6.97
Consumer 4.3 4.4 4.8 9.75 9.91 10.24
Lease
financing 0.7 0.7 1.1 8.29 8.30 7.81
Total loans 24.5 25.0 26.4 6.04 6.12 6.90
Total
earning
assets $33.5 $34.6 $35.8 5.41% 5.45% 6.19%

Interest
bearing
deposits $22.4 $22.7 $23.2 2.11% 2.27% 2.85%
Borrowings 5.4 5.9 7.1 4.38 4.02 3.66
Total interest
bearing
liabilities 27.8 28.6 30.3 2.55 2.63 3.04
Non-interest
bearing sources
of funds 5.7 6.0 5.5
Total funds $33.5 $34.6 $35.8 2.11% 2.18% 2.57%
Net interest
spread 2.86% 2.82% 3.15%
Net interest
yield 3.30% 3.27% 3.62%

* Includes commercial construction loans


The reduction in average earning assets for the quarter ended September
30, 2009, compared with the quarter ended June 30, 2009 was mostly due to the
reduction in excess liquidity in the money market accounts as well as a
decrease in the trading portfolio resulting from the sale of mortgage-backed
securities during the second quarter of 2009 along with a decline in the loan
portfolio in part due to the slowdown of loan origination activity, as well as
a higher volume of loans charged off. Furthermore, there were reductions in
the consumer loan portfolio of Banco Popular North America ("BPNA"), including
E-LOAN, primarily due to the runoff mode of its home equity lines of credit
and closed-end second mortgages. As a result of the decline in average earning
assets, the Corporation is deleveraging its balance sheet through a reduction
in borrowings, principally repurchase agreements, accompanied by a decrease in
notes payable mainly due to the maturity of unsecured senior debt of Popular
North America.

Net interest yield improved for the quarter ended September 30, 2009 when
compared to the quarter ended June 30, 2009 mainly driven by a reduction in
the Corporation's average cost of funds resulting from a reduction in the cost
of deposits due to management actions to lower the rates paid on certain
deposits and a lower cost on brokered certificates of deposit. The net
interest yield was also favorably impacted by a decrease in interest expense
of approximately $2.9 million due to the exchange of the Corporation's trust
preferred securities into common stock. Offsetting this positive variance was
additional interest expense during the quarter ended September 30, 2009 of
approximately $6.8 million resulting from the previously mentioned New Trust
Preferred Securities, which was formerly accounted for as a dividend prior to
the exchange of the Series C preferred stock. Also, affecting negatively the
net interest yield was the increase in funding cost of $350 million of term
notes with interest rates that increased prospectively by 225 basis points as
a result of the Corporation's senior debt rating downgrades by the major
rating agencies in April 2009 and June 2009.

The decrease in net interest income for the third quarter of 2009,
compared with the same quarter of 2008, was primarily due to lower average
balances of interest-earning assets, principally loans, due to the sale of
most of the lease financing portfolio and the downsizing or discontinuance of
certain loan origination units in the U.S. mainland operations and the
slowdown of loan origination activity due to current market conditions. The
Corporation's borrowings also decreased driven by the reduction in the earning
assets they fund. Contributing to the reduction in net interest income was the
decrease by the Federal Reserve ("Fed") of the federal funds target rate from
2.00% in September 30, 2008 to between 0% and 0.25% as of September 30, 2009.
This reduction in short-term market rates impacted the yield of several of the
Corporation's earning assets during that period, including the yield on
commercial and construction loans with floating or adjustable rates and
floating rate collateralized mortgage obligations, as well as the yield of
newly originated loans in a declining interest rate environment. On the
positive side, the decrease in rates contributed to the decrease in the cost
of interest-bearing deposits and short-term borrowings. Other factors
impacting negatively the Corporation's net interest income for the quarter
ended September 30, 2009 when compared with the same quarter in 2008 were the
increase in non-performing loans with their related reversal of interest, and,
as discussed above, the exchange of $935 million of Series C preferred stock
for trust preferred securities and the increase in the cost of $350 million in
term notes due to rating downgrades. Offsetting this negative variance was the
exchange of the Corporation's trust preferred securities into common stock.


Credit Risk and Provision for Loan Losses

The Corporation's allowance for loan losses increased to $1.2 billion as
of September 30, 2009, an increase of $61 million from June 30, 2009. The
Corporation's allowance for loan losses represented 4.95% of loans held-in-
portfolio as of September 30, 2009, compared with 4.66% as of June 30, 2009
and 2.76% as of September 30, 2008. As compared to the previous quarter, the
allowance for loan losses increased during the third quarter of 2009 despite
the decrease of $210 million in loans held-in-portfolio.

The increase in the allowance for loan losses from June 30, 2009 to
September 30, 2009 was primarily attributable to increased reserves for
commercial loans. Although commercial losses decreased during the third
quarter of 2009, the commercial sector continued reporting deteriorating
results, particularly in the U.S. small business segment, which reflected


higher non-performing loans and net charge-offs. The total allowance for loan
losses for construction loans decreased by approximately $4.5 million from
June 30, 2009 to September 30, 2009 after charging-off $95.9 million in the
third quarter of 2009 and considering a portfolio reduction of $151 million.
The allowance to construction loans held-in-portfolio was 18.03% as of
September 30, 2009 compared with 16.91% as of June 30, 2009. The construction
loan portfolio maintains the highest allowance coverage due to the continued
deterioration of the economic and housing market conditions in Puerto Rico,
and also in the U.S. mainland. The most significant specific reserves for
impaired loans during the third quarter of 2009 pertain to particular
construction borrowers. The Corporation also recorded higher reserves to cover
inherent losses in the mortgage and consumer loan portfolios, mainly in the
U.S. home equity lines of credit portfolios. Exhibits A and B provide credit
quality data, including certain key credit quality metrics and a breakdown of
the allowance for loan losses by loan type.

As of September 30, 2009, there were $1.5 billion of impaired loans with a
related specific allowance for loan losses of $313 million, compared with
impaired loans of $1.4 billion and a specific allowance for loan losses of
$313 million as of June 30, 2009. The Corporation's specific allowance for
loan losses as of September 30, 2009 remained at the same level when compared
to the previous quarter after recording approximately $108.4 million in
charge-offs, of which $86.7 million pertained to the construction loan
portfolio, principally from the Banco Popular de Puerto Rico reportable
segment. As of September 30, 2008, there were $753 million of impaired loans
with a related specific allowance for loan losses of $131 million. Refer to
Exhibit B for information concerning the composition of the Corporation's
allowance for loan losses as of September 30, 2009 and June 30, 2009 by loan
category.

The main factor driving the Corporation's net losses in 2009 has been the
increasing credit costs from several segments of the loan portfolio. The
sustained deterioration in the credit and economic conditions in the markets
in which the Corporation operates have continued to negatively affect the
Corporation's provision for loan losses in the third quarter of 2009. The
provision for loan losses totaled $331.1 million or 123% of net charge-offs
for the quarter ended September 30, 2009, compared with $349.4 million or 134%
of net charge-offs for the quarter ended June 30, 2009, and $252.2 million or
148% of net charge-offs for the third quarter of 2008.

The decline in the provision for loan losses in the third quarter of 2009
when compared with the second quarter of 2009 was in part attributable to the
Banco Popular de Puerto Rico loan portfolios, which in the previous quarter
required higher specific reserves for certain impaired loans. This was
partially offset by an increase in the Corporation's general reserve
requirements, which accounts for the increase reported in the Corporation's
total allowance for loan losses as of September 30, 2009.

Net charge offs for the quarter ended September 30, 2009 increased by
$9.6 million when compared to the previous quarter. This increase in net
charge-offs was mainly in construction loans ($19.4 million) and mortgage
loans ($9.7 million), partially offset by decreases in net charge-offs for
commercial loans ($10.8 million), consumer loans ($8.6 million) and leases
($0.2 million). The rise in construction loans net charge-offs in the third
quarter of 2009 was primarily related to a partial charge-off of a particular
construction borrower in the Banco Popular de Puerto Rico reportable segment.
The increase in mortgage loans net charge-offs was mainly related to Puerto
Rico and the U.S. mainland non-conventional mortgage business. The
Corporation's net charge-off ratios for mortgages in Puerto Rico and the U.S.
mainland operations for the quarter ended September 30, 2009 were 0.72% and
7.51%, respectively, compared to 0.14% and 5.85% for the quarter ended June
30, 2009. As in the U.S. mainland, the continued recessionary environment in
Puerto Rico has negatively impacted property values, thus increasing the level
of losses. The decrease in commercial net charge-offs was attributed to the
Banco Popular de Puerto Rico portfolio, while the reduction in consumer net
charge-offs was mostly related to the Banco Popular North America reportable
segment. Despite the decreases in commercial and consumer loan net charge-offs
for the quarter ended September 30, 2009 when compared to the second quarter


of 2009, the reserves were increased to cover inherent losses in these loan
portfolios.

The increase in the provision for loan losses for the quarter ended
September 30, 2009 compared to the same quarter in 2008 was the result of
higher general reserve requirements for commercial loans, construction loans,
U.S. mainland non-conventional residential mortgages and home equity lines of
credit, combined with specific reserves recorded for loans considered
impaired. Net charge-offs from the continuing operations for the quarter ended
September 30, 2009, when compared with the third quarter in 2008, increased by
$99.4 million, mainly in construction loans ($43.6 million), commercial loans
($22.6 million), mortgage loans ($22.5 million) and consumer loans
($11.0 million).

Non-performing assets attributable to continuing operations totaled
$2.2 billion as of September 30, 2009, compared to $2.1 billion as of June 30,
2009 and $1.1 billion as of September 30, 2008. The increase in non-performing
assets from June 30, 2009 to September 30, 2009 was primarily related to
increases in commercial loans ($90 million), mortgage loans ($42 million),
other real estate ($24 million) and consumer loans ($5 million). The increases
in non-performing loans were concentrated in portfolios secured by real
estate. As of September 30, 2009, non-performing loans secured by real estate
amounted to $1.3 billion or 14.0% of total loans secured by real estate in the
Puerto Rico operations and $572 million or 8.7%, respectively, in the U.S.
mainland operations. These figures compare to $1.2 billion or 13.3% in Puerto
Rico and $529 million or 7.8% in the U.S. mainland operations as of June 30,
2009. Commercial non-performing loans increased both in Puerto Rico and the
U.S. mainland across all sectors as a result of weakened economic conditions.
The construction portfolio did not report significant increases in non-
performing loans during the third quarter of 2009 due to portfolio reduction
resulting from net charge-offs and minimal new volume activity. The
construction loans in non-performing status are primarily residential real
estate construction loans which have been adversely impacted by general market
conditions, decreases in property values and oversupply in certain areas. The
higher level of non-performing residential mortgage loans was principally
attributed to BPNA's non-conventional mortgage business and Puerto Rico's
residential mortgage portfolio. Deteriorating economic conditions have
impacted the mortgage delinquency rates and have increased pressure in home
prices. Nonetheless, the Puerto Rico housing market has not experienced the
level of losses affecting some regions in the U.S. mainland. In terms of
reserves, the total allowance for loan losses to non-performing loans from
continuing operations represented 57.07% as of September 30, 2009, which
remained stable when compared to 57.94% as of June 30, 2009 after considering
an increase in non-performing loans of approximately $137 million during the
third quarter of 2009.

The Corporation's commercial loan portfolio secured by commercial real
estate ("CRE"), excluding construction loans, amounted to $7.4 billion as of
September 30, 2009, of which $3.4 billion was secured with owner occupied
properties. CRE non-performing loans amounted to $474 million, or 6.45% of
CRE loans as of September 30, 2009. The CRE non-performing loans ratios for
the Corporation's Puerto Rico and U.S. mainland operations were 7.93% and
4.73%, respectively, as of September 30, 2009, compared with 7.58% and 3.94%,
respectively, as of June 30, 2009.

Non-performing assets from continuing operations increased by $1.1 billion
from September 30, 2008 to the same date in 2009. The increases were reflected
in construction loans ($534 million), commercial loans ($336 million) and
mortgage loans ($202 million).

Given the existing adverse economic conditions, it is likely that the
Corporation will continue to experience heightened credit losses, higher
levels of non-performing assets and significant levels of provision for loan
losses.


Non-interest Income

Non-interest income from continuing operations totaled $160.0 million for
the quarter ended September 30, 2009, compared with $225.8 million for the
quarter ended June 30, 2009 and $187.9 million for the quarter ended September
30, 2008.

As previously explained, the variance in non-interest income for the
quarter ended September 30, 2009 compared with the quarter ended June 30, 2009
was principally due to a decrease in the net gains on the sale and valuation
adjustments of investment securities of $62.8 million due to the sale of
equity securities during the second quarter of 2009 which resulted in a gain
of $53.7 million for that quarter. Other factors also impacted these results,
including a decrease of $9.3 million in trading account profit and a favorable
variance of $4.7 million in loss on sale and valuation adjustments on loans
held-for-sale.

The decrease in non-interest income for the quarter ended September 30,
2009 compared with the same quarter in 2008 was principally due to losses on
the sale and valuation adjustments on loans held-for-sale for the quarter
ended September 30, 2009 of $8.7 million, compared to gains of $6.5 million
for the quarter ended September 30, 2008. Other non-interest income as
presented in Exhibit A declined by $13.6 million mostly as a result of
$21.1 million in gains on the sale of real estate properties booked in the
third quarter of 2008.


Operating Expenses

Operating expenses totaled $220.6 million for the quarter ended September
30, 2009, a decrease of $110.0 million, compared with $330.6 million for the
second quarter of 2009. Operating expenses for the quarter ended September 30,
2008 totaled $322.9 million.

The decrease in operating expenses for the quarter ended September 30,
2009 when compared with the second quarter of 2009 was principally due to the
gain on the extinguishment of debt of $80.3 million from the aforementioned
exchange of the trust preferred securities for common stock. Also contributing
to this variance were lower FDIC insurance costs, which included the $16.7
million FDIC special assessment in the second quarter of 2009, and a $5.7
million decrease in personnel costs, mainly related to salaries costs.

The decrease of $102.3 million in operating expenses for the quarter ended
September 30, 2009 when compared to the same quarter of the previous year was
principally due to the favorable impact of the aforementioned extinguishment
of debt and lower personnel costs by $17.7 million due to downsizing of the
U.S. operations, partially offset by higher FDIC insurance costs.


Income Taxes

Income tax expense from continuing operations amounted to $6.3 million for
the quarter ended September 30, 2009, compared with an income tax expense of
$5.4 million for the quarter ended June 30, 2009 and income tax expense of
$148.3 million for the quarter ended September 30, 2008.

The variance in income tax expense for the third quarter of 2009 when
compared to the same quarter in 2008 was primarily due to the recognition
during the third quarter of 2008 of a $189.2 million adjustment to recognize a
valuation allowance on part of the deferred tax assets related to the U.S.
continuing operations.


Balance Sheet Comments:

The accompanying Exhibit A provides information on principal categories of
the Corporation's balance sheet as of September 30, 2009, June 30, 2009 and
September 30, 2008, and the following sections provide more detailed
information.


Investment securities

The Corporation's portfolio of investment securities available-for-sale
and held-to-maturity totaled $7.2 billion as of September 30, 2009, compared
with $7.6 billion as of June 30, 2009. The Corporation holds investment
securities primarily for liquidity, yield enhancement and interest rate risk
management. The portfolio primarily includes very liquid, high quality
securities.


Loans

A breakdown of the Corporation's total loan portfolio at period-end, which
represents the principal category of earning assets, follows:



September 30, June 30, Variance September 30, Variance
(In billions) 2009 2009 2008

Commercial $13.1 $13.1 - $13.9 ($0.8)
Construction 1.9 2.0 ($0.1) 2.1 (0.2)
Mortgage 4.6 4.7 (0.1) 4.7 (0.1)
Consumer 4.2 4.3 (0.1) 4.8 (0.6)
Lease financing 0.7 0.7 - 1.1 (0.4)
Sub-total 24.5 24.8 (0.3) 26.6 (2.1)
PFH discontinued
operations - - - 0.6 (0.6)
Total $24.5 $24.8 ($0.3) $27.2 ($2.7)


The reduction in construction loans between June 30, 2009 and September
30, 2009 was principally due to the increased level of charge-offs, which was
described earlier in the Provision for Loans Losses and Credit Quality
section. Net charge-offs in the construction loan portfolio amounted to
$95.9 million for the quarter ended September 30, 2009.

The decline in the consumer loan portfolio from the end of the second
quarter of 2009 to September 30, 2009 was mainly related to run-off of
existing portfolios originated by Popular Finance, E-LOAN or exited lines of
businesses at the BPNA operations, as well as the reduction caused by the
consumer loans net charge-offs of $76.6 million recorded during the third
quarter of 2009.

The reductions in various loan categories when comparing September 30,
2009 with the same quarter of 2008 are mainly associated with the same factors
described above along with the exiting or downsizing certain business lines at
the Corporation's subsidiaries, primarily BPNA. The reduction in the lease
financing portfolio for the quarter ended September 30, 2009 compared to the
same period of the previous year was the result of loan sales by Popular
Equipment Finance, a subsidiary of BPNA, principally during the first quarter
of 2009. The current financial environment has required us to strengthen our
underwriting standards. As a result, together with caution being exercised by
customers, and our decision to exit selected businesses on the mainland United
States, we have seen a reduction in the volume of loan applications, thus
contributing to overall decline in our loan portfolios when comparing the
current quarter with the quarter ended September 30, 2008.


Deposits
A breakdown of the Corporation's deposits at period-end follows:

(In billions) September 30, June 30, Variance September 30, Variance
2009 2009 2008

Demand * $4.9 $5.1 ($0.2) $4.7 $0.2
Savings 9.5 9.6 (0.1) 9.9 (0.4)
Time 12.0 12.2 (0.2) 13.3 (1.3)
Total
deposits $26.4 $26.9 ($0.5) $27.9 ($1.5)

* Includes non-interest and interest bearing demand deposits


Brokered certificates of deposit, which are included as time deposits,
amounted to $2.8 billion as of September 30, 2009 compared with $2.7 billion
as of June 30, 2009 and $3.1 billion as of September 30, 2008.

The decrease in time deposits from June 30, 2009 to September 30, 2009
occurred principally in the Corporation's U.S. mainland operations in part due
to deleveraging strategies, including the closure and consolidation of
branches, as well as a gradual reduction in the pricing of deposits, including
internet deposits. The decrease in demand deposits was principally experienced
in the Corporation's Puerto Rico banking operations.

The decrease in time deposits from September 30, 2008 to the same date in
2009 was reflected in both the Corporation's U.S. mainland and Puerto Rico
banking operations. This reduction was also associated to the factors
described in the previous paragraph as well as the deleveraging of the
Corporation's balance sheet mostly due to lower balances of loans and
investment securities from September 30, 2008 to the same date in 2009. Also,
there was a reduction in brokered certificates of deposit.


Borrowings and capital

The accompanying Exhibit A also provides information on borrowings and
stockholders' equity as of September 30, 2009, June 30, 2009 and September 30,
2008.

The Corporation's borrowings amounted to $5.5 billion as of September 30,
2009, compared with $5.6 billion as of June 30, 2009.

Stockholders' equity totaled $2.7 billion as of September 30, 2009,
compared with $2.9 billion as of June 30, 2009. The decrease in stockholders'
equity from June 30, 2009 to September 30, 2009 is mainly related to the net
loss of $125.0 million recorded during the quarter. During the quarter ended
September 30, 2009, the Corporation did not declare dividends on its preferred
or common stock.

Below is a summary of the Corporation's regulatory capital ratios as of
September 30, 2009 and June 30, 2009.


September 30, June 30, Minimum required
2009 2009
Tier 1 risk-based
capital 10.23% 10.73% 4.00%
Total risk-based
capital 11.53% 12.02% 8.00%
Tier 1 leverage 7.93% 8.26% 3.00% - 4.00%


Regulatory capital requirements for banking institutions are based on Tier
1 and Total capital, which include both common stock and certain qualifying
preferred stock.


Reconciliation of Non-GAAP Financial Measure:

The table below presents a reconciliation of Tier 1 common equity (also
referred to as Tier 1 common) to common stockholders' equity. Ratios
calculated based upon Tier 1 common equity have become a focus of regulators
and investors, and management believes ratios based on Tier 1 common equity
assist investors in analyzing the Corporation's capital position. In
connection with the Supervisory Capital Assessment Program ("SCAP"), the
Federal Reserve began supplementing its assessment of the capital adequacy of
a bank holding company based on a variation of Tier 1 capital, known as Tier 1
common equity. Because Tier 1 common equity is not formally defined by GAAP
or, unlike Tier 1 capital, codified in the federal banking regulations, this
measure is considered to be a non-GAAP financial measure.

Non-GAAP financial measures have inherent limitations, are not required to
be uniformly applied and are not audited. To mitigate these limitations, the
Corporation has procedures in place to calculate these measures using the
appropriate GAAP or regulatory components. Although these non-GAAP financial
measures are frequently used by stakeholders in the evaluation of a company,
they have limitations as analytical tools, and should not be considered in
isolation, or as a substitute for analyses of results as reported under GAAP.


The following table provides a reconciliation of common stockholders'
equity (GAAP) to Tier 1 common equity (non-GAAP):



(In thousands) September 30, June 30,
2009 2009
Common stockholders' equity $2,692,296 $1,412,701
Less: Unrealized gains on available
for sale securities, net of tax (1) (121,735) (48,296)
Less: Disallowed deferred tax assets (2) (195,894) (167,223)
Less: Intangible assets:
Goodwill (606,508) (607,164)
Other disallowed intangibles (21,873) (25,797)
Less: Aggregate adjusted carrying
value of all non-financial equity
investments (2,362) (2,147)
Add: Pension liability adjustment,
net of tax and accumulated net
losses on cash flow hedges (3) 119,007 120,256
Total Tier 1 common equity $1,862,931 $682,330


(1) In accordance with regulatory risk-based capital guidelines, Tier 1
capital excludes net unrealized gains (losses) on available-for-sale debt
securities and net unrealized gains on available-for-sale equity securities
with readily determinable fair values. In arriving at Tier 1 capital,
institutions are required to deduct net unrealized losses on available-for-
sale equity securities with readily determinable fair values, net of tax.

(2) Approximately $167 million of the Corporation's $381 million of net
deferred tax assets as of September 30, 2009 ($193 million and $390 million,
respectively as of June 30, 2009), were included without limitation in
regulatory capital pursuant to the risk-based capital guidelines, while
approximately $196 million of such assets as of September 30, 2009 ($167
million as of June 30, 2009) exceeded the limitation imposed by these
guidelines and, as "disallowed deferred tax assets," were deducted in arriving
at Tier 1 capital. The remaining $18 million of the Corporation's other net
deferred tax assets as of September 30, 2009 ($30 million as of June 30, 2009)
represented primarily the following items (a) the deferred tax effects of
unrealized gains and losses on available-for-sale debt securities, which are
permitted to be excluded prior to deriving the amount of net deferred tax
assets subject to limitation under the guidelines; (b) the deferred tax asset
corresponding to the pension liability adjustment recorded as part of
accumulated other comprehensive income; and (c) the deferred tax liability
associated with goodwill and other intangibles

(3) The Federal Reserve Bank has granted interim capital relief for the
impact of pension liability adjustment.


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 that might cause such a difference include, but
are not limited to (i) the rate of declining growth in the economy and
employment levels, as well as general business and economic conditions;
(ii) changes in interest rates, as well as the magnitude of such changes;
(iii) the fiscal and monetary policies of the federal government and its
agencies; (iv) changes in federal bank regulatory and supervisory policies,
including required levels of capital; (v) the relative strength or weakness of
the consumer and commercial credit sectors and of the real estate markets in
Puerto Rico and the other markets in which borrowers are located; (vi) the
performance of the stock and bond markets; (vii) competition in the financial
services industry; (viii) possible legislative, tax or regulatory changes; and
(ix) difficulties in combining the operations of acquired entities. For a
discussion of such factors and certain risks and uncertainties to which the
Corporation is subject, see the Corporation's Annual Report on Form 10-K for
the year ended December 31, 2008 as well as its filings with the U.S.
Securities and Exchange Commission. Other than to the extent required by
applicable law, including the requirements of applicable securities laws, the
Corporation assumes no obligation to update any forward-looking statements to
reflect occurrences or unanticipated events or circumstances after the date of
such statements.


Founded in 1893, Popular, Inc. (NASDAQ: BPOP) is the No. 1 bank by both
assets and deposits in Puerto Rico and ranks 33rd by assets among U.S. banks.
In the United States, Popular has established a community-banking franchise
providing a broad range of financial services and products with branches in
New York, New Jersey, Illinois, Florida and California.

Popular also continues to expand its expertise in processing technology
through its subsidiary EVERTEC, which processes approximately 1.1 billion
transactions annually in the Caribbean and Latin America.


An electronic version of this press release can be found at the
Corporation's website, www.popular.com.


Exhibits A, B and C follow

EXHIBIT A

POPULAR, INC.
Financial Summary
(Unaudited)


Quarter 3rd Quarter Quarter 3rd Quarter
ended 2009 ended 2009
September 30, vs 2008 June 30, vs 2nd Quarter
2009 2008 $ Variance 2009 $ Variance
Summary of
Operations
(In thousands,
except share
information)

Interest
income $454,463 $555,481 ($101,018) $471,046 ($16,583)
Interest
expense 178,074 231,199 (53,125) 187,986 (9,912)

Net interest
income 276,389 324,282 (47,893) 283,060 (6,671)
Provision for
loan losses 331,063 252,160 78,903 349,444 (18,381)

Net interest
income after
provision for
loan losses (54,674) 72,122 (126,796) (66,384) 11,710

Net (loss)
gain on sale
and valuation
adjustments of
investment
securities (9,059) (9,132) 73 53,705 (62,764)
Trading account
profit 7,579 6,669 910 16,839 (9,260)
(Loss) gain on
sale of loans
and valuation
adjustments
on loans
held-for-sale (8,728) 6,522 (15,250) (13,453) 4,725
Other
non-interest
income 170,252 183,869 (13,617) 168,748 1,504

Total
non-interest
income 160,044 187,928 (27,884) 225,839 (65,795)

Personnel
costs 130,547 148,230 (17,683) 136,206 (5,659)
Gain on
debt
extinguishment
related to
trust
preferred
securities (80,259) - (80,259) - (80,259)
Other
operating
expenses 170,312 174,685 (4,373) 194,439 (24,127)

Total
operating
expenses 220,600 322,915 (102,315) 330,645 (110,045)

Loss from
continuing
operations
before income
tax (115,230) (62,865) (52,365) (171,190) 55,960
Income tax
expense 6,331 148,308 (141,977) 5,393 938

Loss from
continuing
operations,
net of
income tax (121,561) (211,173) 89,612 (176,583) 55,022
Loss from
discontinued
operations,
net of
income tax (3,427) (457,370) 453,943 (6,599) 3,172

Net loss ($124,988) ($668,543) $543,555 ($183,182) $58,194

Net income
(loss)
applicable
to common
stock (1) $595,614 ($679,772) $1,275,386 ($207,810) $803,424

Earnings
(losses)
per common share: (1)
Basic and diluted
earnings (losses)
per common share
from continuing
operations $1.41 ($0.79) ($0.71)
Basic and
diluted losses
per common
share from
discontinued
operations ($0.01) ($1.63) ($0.03)
Basic and
diluted
earnings
(losses)
per common
share - Total $1.40 ($2.42) ($0.74)

Dividends
declared per
common share - $0.08 -


Average common
shares
out-
standing 425,672,578 281,489,469 281,888,394
Average
common
shares
outstanding -
assuming
dilution 425,672,578 281,489,469 281,888,394
Common
shares
outstanding
at end of
period 639,541,515 281,708,260 282,031,548

Market value
per common
share $2.83 $8.29 $2.20
Book value
per common
share $4.21 $8.59 $5.01

Market
Capitalization
In millions) $1,810 $2,335 $620

Selected
Average
Balances - (In
millions)
Total assets $35,813 $40,634 ($4,821) $37,048 ($1,235)
Stockholders'
equity 2,771 3,471 (700) 3,002 (231)

Selected
Financial Data
at Period-End
(In millions)
Total assets $35,638 $40,390 ($4,752) $36,499 ($861)
Loans (2) 24,472 27,207 (2,735) 24,850 (378)
Earning
assets(2) 33,398 36,483 (3,085) 34,070 (672)
Deposits 26,383 27,911 (1,528) 26,913 (530)
Borrowings (2) 5,461 8,646 (3,185) 5,587 (126)
Interest bearing
liabilities
(2) 27,562 32,492 (4,930) 28,092 (530)
Stockholders'
equity 2,742 3,007 (265) 2,900 (158)

Performance
Ratios
Net interest
yield from
continuing
operations (3) 3.30% 3.62% 3.27%
Return on
assets (1.38) (6.55) (1.98)
Return on
common
equity (26.24) (93.32) (53.48)

Credit Quality
Data
(Dollars in
millions)
Net loans
charged-off,
excluding
write-downs
on loans
transferred to
held-for-
sale (4) $269.9 $170.5 $99.4 $260.3 $9.6
Allowance for
loan losses 1,207 726 481 1,146 61
Non-performing
loans from
continuing
operations 2,115.5 1,028.4 1,087.1 1,978.2 137.3
Non-performing
loans from
discontinued
operations - 75.0 (75.0) 1.0 (1.0)
Non-performing
loans -
total 2,115.5 1,103.4 1,012.1 1,979.2 136.3
Non-performing
loans to loans
held-in-
portfolio
(5)(6) 8.67% 3.90% 8.04%
Allowance for
loan losses to
non-performing
loans(5) 57.07 70.64 57.94
Allowance for
loan
losses to
loans held
-in-portfolio(6) 4.95 2.76 4.66


(1) Refer to table included in press release for a reconciliation of
(losses) earnings per common share.
(2) Includes assets/liabilities from discontinued operations, principally
$626 million in loans, $630 million in earning assets and $166 million
in borrowings and interest-bearing liabilities as of September 30,
2008.
(3) Not on a taxable equivalent basis.
(4) Excludes net charge-offs from discontinued operations.
(5) Non-performing loans ("NPL") exclude NPL accounted pursuant to the
fair value option and NPL from discontinued operations.
(6) Loans held-in-portfolio exclude loans held-for-sale and loans
accounted pursuant to the fair value option.


Notes: Certain reclassifications have been made to prior periods to
conform with this quarter presentation.



EXHIBIT A (CONTINUED)

POPULAR, INC.
Financial Summary
(Unaudited)


For the nine months ended
September 30,
2009 2008 $ Variance
Summary of Operations (In
thousands, except share information)

Interest income $1,414,701 $1,732,581 ($317,880)
Interest expense 582,766 742,243 (159,477)

Net interest income 831,935 990,338 (158,403)
Provision for loan losses 1,053,036 602,561 450,475

Net interest income after provision
for loan losses (221,101) 387,777 (608,878)

Net gain on sale and valuation
adjustments of investment securities 220,792 69,430 151,362
Trading account profit 31,241 38,547 (7,306)
(Loss) gain on sale of loans and
valuation adjustments on loans held-
for-sale (35,994) 25,696 (61,690)
Other non-interest income 504,575 554,804 (50,229)

Total non-interest income 720,614 688,477 32,137

Personnel costs 412,044 459,515 (47,471)
Gain on debt extinguishment related
to trust preferred securities (80,259) - (80,259)
Other operating expenses 523,657 517,033 6,624

Total operating expenses 855,442 976,548 (121,106)

(Loss) income from continuing
operations before income tax (355,929) 99,706 (455,635)
Income tax (benefit) expense (15,209) 152,467 (167,676)

Loss from continuing operations, net
of income tax (340,720) (52,761) (287,959)
Loss from discontinued operations,
net of income tax (19,972) (488,242) 468,270

Net loss ($360,692) ($541,003) $180,311

Net income (loss) applicable to
common stock (1) $310,604 ($561,213) $871,817

Earnings (losses) per common share:
(1)
Basic and diluted earnings
(losses) per common share from
continuing operations $1.00 ($0.27)
Basic and diluted losses per
common share from discontinued
operations ($0.06) ($1.73)
Basic and diluted earnings
(losses) per common share -
Total $0.94 ($2.00)

Dividends declared per common share $0.02 $0.40

Average common shares outstanding 330,325,348 280,841,638
Average common shares outstanding -
assuming dilution 330,325,348 280,841,638
Common shares outstanding at end of
period 639,541,515 281,708,260

Market value per common share $2.83 $8.29
Book value per common share $4.21 $8.59

Market Capitalization - (In
millions) $1,810 $2,335

Selected Average Balances - (In
millions)
Total assets $37,090 $41,392 ($4,302)
Stockholders' equity 2,961 3,440 (479)

Performance Ratios
Net interest yield from continuing
operations (2) 3.21% 3.65%
Return on assets (1.30) (1.75)
Return on common equity (31.48) (24.57)

Credit Quality Data - (Dollars in
millions)
Net loans charged-off, excluding
write-downs on loans transferred to
held-for-sale (3) $728.4 $376.3 $352.1
Allowance for loan losses 1,207 726 481
Non-performing loans from continuing
operations 2,115.5 1,028.4 1,087.1
Non-performing loans from
discontinued operations - 75.0 (75.0)
Non-performing loans - total 2,115.5 1,103.4 1,012.1
Non-performing loans to loans held-
in-portfolio (4)(5) 8.67% 3.90%
Allowance for loan losses to non-
performing loans (4) 57.07 70.64
Allowance for loan losses to loans
held-in-portfolio (5) 4.95 2.76


(1) Refer to table included in press release for a reconciliation of
(losses) earnings per common share.
(2) Not on a taxable equivalent basis.
(3) Excludes net charge-offs from discontinued operations.
(4) Non-performing loans ("NPL") exclude NPL accounted pursuant to the
fair value option and NPL from discontinued operations.
(5) Loans held-in-portfolio exclude loans held-for-sale and loans
accounted pursuant to the fair value option.

Notes: Certain reclassifications have been made to prior periods to
conform with this quarter presentation.


EXHIBIT B

POPULAR, INC.
Credit Quality Information
(Unaudited)
For the For the
Quarter Quarter Quarter nine months nine months
ended ended ended ended ended
Sept. 30, June 30, Sept. 30, Sept. 30, Sept. 30,
2009 2009 2008 2009 2008

Net loans charged-off,
excluding write-downs
on loans transferred
to held-for-sale
(In thousands)
Commercial $59,114 $69,878 $36,541 $170,328 $105,208
Construction 95,941 76,534 52,339 217,283 57,529
Mortgage 34,322 24,633 11,809 90,103 30,497
Consumer 76,590 85,165 65,598 237,716 169,313
Lease
financing 3,934 4,120 4,246 13,012 13,734
Total $269,901 $260,330 $170,533 $728,442 $376,281

For the For the
Quarter Quarter Quarter nine months nine months
ended ended ended ended ended
Sept. 30, June 30, Sept. 30, Sept. 30, Sept. 30,
2009 2009 2008 2009 2008

Annualized Net
Charge-Offs to
Average Loans
Held-in-Portfolio
Commercial 1.81% 2.11% 1.06% 1.71% 1.03%
Construction 19.45 14.46 9.82 13.83 3.76
Mortgage 3.16 2.27 1.07 2.75 0.90
Consumer 7.18 7.73 5.48 7.17 4.65
Lease financing 2.23 2.25 1.52 2.40 1.66
Total 4.43% 4.19% 2.60% 3.91% 1.92%


Non-performing
Loans from Continuing
Operations
(In thousands) Sept. 30 As a % June 30, As a %
2009 of loans 2009 of loans
held-in-portfolio held-in-portfolio

Commercial $776,027 5.9% $686,150 5.2%
Construction 768,987 40.9 767,029 37.7
Mortgage 484,219 10.6 441,773 9.9
Consumer 75,992 1.8 71,413 1.7
Lease financing 10,309 1.5 11,825 1.6
Total $2,115,534 8.7% $1,978,190 8.0%


September 30, 2009 June 30, 2009
Impaired loans
evaluated for
specific reserves
(In millions) Specific Specific
Allowance for Allowance for
Recorded loan losses Recorded loan losses
Investment (ALLL) Investment (ALLL)

Impaired loans with
ALLL required $1,134.5 $313.2 $1,034.4 $313.1
Impaired loans
with no ALLL
required 404.9 - 410.5 -
Total impaired
loans $1,539.4 $313.2 $1,444.9 $313.1


For the quarter For the quarter ended
ended September 30, 2009 June 30, 2009
Construction Commercial Mortgage Construction Commercial Mortgage
Loans Loans Loans Loans Loans Loans

Activity
in the
specific
reserves for
impaired loans
(In thousands)
Specific ALLL
at beginning
of period $ 197,898 $ 85,608 $ 29,584 $ 177,208 $ 79,927 $ 22,061
Provision
for
impaired
loans 59,814 41,004 7,743 90,894 29,102 9,375
Net
charge-offs 86,681 19,911 1,835 70,204 23,421 1,852
Specific
ALLL at
end of
period $ 171,031 $ 106,701 $ 35,492 $ 197,898 $ 85,608 $ 29,584


EXHIBIT B (CONTINUED
POPULAR, INC.
Credit Quality Information
(Unaudited)

Composition of the Allowance for Loan Losses (ALLL) by Category

September 30, 2009 (Dollars in thousands)

Lease
Commercial Construction Financing Mortgage Consumer Total
Specific
ALLL $ 106,701 $171,031 $- $ 35,492 $- $ 313,224

Impaired
loans $ 619,544 $751,976 $- $167,863 $- $1,539,383

Specific
ALLL
to
impaired
loans 17.22% 22.74% - 21.14% - 20.35%
General
ALLL $ 266,563 $168,309 $24,609 $108,848 $325,848 $ 894,177

Loans
held-in-
port-
folio,
excluding
impaired
loans $12,456,324 $1,130,093 $699,350 $4,379,509 $4,191,410 $22,856,686
General
ALLL
to loans
held-in-
port-
folio,
excluding
impaired
loans 2.14% 14.89% 3.52% 2.49% 7.77% 3.91%
Total
ALLL $ 373,264 $339,340 $24,609 $144,340 $325,848 $1,207,401

Total loans
held-in-
port-
folio $13,075,868 $1,882,069 $699,350 $4,547,372 $4,191,410 $24,396,069
ALLL to
Monday, October 19, 2009 8:00 AM

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