Popular, Inc.

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Popular, Inc.

209 Avenida Muñoz Rivera
Hato Rey, Puerto Rico 00918
Telephone: (787)765-9800
Toll Free: (888)724-3650
Fax: (787)751-2137
Web site: http://www.popularinc.com

Public Company
Incorporated: 1893 as Sociedad Anomina de Economias y Prestamos: Banco Popular
Employees: 10,651
Total Assets: $1.45 billion (2000)
Stock Exchanges: NASDAQ
Ticker Symbol: BPOP
NAIC: 52211 Commercial Banking; 52231 Mortgage and Other Loan Business; 522291 Consumer Lending; 52311 Investment Banking and Securities Dealing; 52312 Securities Brokerage; 52421 Insurance Agencies and Brokerages

Popular, Inc. is a bank holding company whose principal subsidiary is Banco Popular, Puerto Ricos largest bank. This bank also operates branches in the U.S. and British Virgin Islands, and in New York City. Through subsidiaries, it also operates Puerto Ricos largest vehicle-leasing and daily-rental company, and makes mortgage and other loans. Another subsidiary of the parent holding company operates bank branches in six U.S. states, offers services such as check cashing and money transfers, makes loans, provides small ticket-equipment leasing, and engages in automatic teller-machine (ATM) switching and driving services in Costa Rica. A third subsidiary is a securities broker-dealer in Puerto Rico. The fourth provides electronic data-processing and consulting services, sale and rental of such equipment, and sale and maintenance of computer software to clients in ten countries. While most of Populars assets remain in Puerto Rico, it greatly expanded its mainland U.S. operations in the 1990s to serve the burgeoning Hispanic population there.

The First Century For a Major Puerto Rican Financial Institution

Popular, Inc. was founded in 1893 in Puerto Ricos capital, San Juan, as the Sociedad Anonima de Economias y Prestamos: Banco Popular (Savings and Loan Corporation: The Peoples Bank). Its goal, as set forth in the first article of incorporation, was to foster the spirit of economy in all social classes, and especially in that of the poor, by means of savings. Fifty-two stockholders provided the initial capital of 5,000 Mexican silver pesos. The number of shareholders tripled in the first four years, and the institution prospered by making loans, including mortgage loans. With regard to savings, however, fewer than 5 percent of the depositors belonged to the working class.

Five years later, the United States occupied and annexed Puerto Rico in the Spanish-American War of 1898. Banco Populars deposits dropped by two-thirds in that year, and a hurricane devastated the island in 1899. The following year, Congress declared the Puerto Rican peso worth only 60 cents (rather than a dollar), reducing the banks capital funds to only $18,000.

In 1906 the bank introduced checking accounts, and in 1912 it circulated piggy banks for savings accounts; only the bank could open them with a key. Representatives of Spanish-import trading houses were the main stockholders and customers in this period (and still among the banks largest customers 35 years later). Deposits of $921,090.98 in 1913 set a record not surpassed for more than a decade thereafter. Banco Popular was the first, and for many years the only, bank to make loans to the Puerto Rican government and to many island municipalities.

In order to conform to the islands first banking law, Banco Popular de Puerto Rico was founded again as a commercial bank (rather than a savings bank) in 1923. Rafael Carrion Pacheco became the majority stockholder in 1927. Personal loans were made available without collateral the following year. Banco Popular survived the banking crisis of the Great Depression while many other banks fell into receivership; in fact, it purchased Banco Comercial de Puerto Rico, the oldest and most respected banking institution on the island. In 1937 Banco Popular became the biggest bank in Puerto Rico, taking in $8.82 million in deposits that year. Work began on an Art Deco headquarters building that was completed in 1939.

Banco Popular established its first branch in 1934, and had eight on the island by 1942. In 1951 it established a mobile bank-on-wheels at Fort Buchanan. This format was adopted to serve much of Puerto Rico, including even remote mountain villages, between 1957 and 1974. The number of fixed branches reached 20 in 1954. Auto loans were introduced in 1957.

By this time, a vast post-World War II migration had created a large Puerto Rican community in New York City. In 1961 Banco Popular opened its first U.S. mainland branch, in the citys borough of the Bronx. A second one, in Manhattans Rockefeller Center, was established in 1964. That year the bank also established its first foreign branch, in the Dominican Republic. Rafael Carrion, Jr., succeeded his father as president of Banco Popular in 1965. Also that year, the bank moved its headquarters to a newly constructed building in Hato Rey, a suburb of San Juan.

Banco Popular established its first U.S. branch outside New York City in 1973, and its first outside the metropolitan areain Los Angelesin 1975. It joined the Visa credit-card system in 1975. The bank acquired the insolvent Banco Credito y Ahorro Ponceno (Ponce Credit and Savings Bank) in 1978, including 36 of that banks 50 branches. With $1.7 billion in deposits, Banco Popular had grown to be included among the list of the 60 largest U.S. banks.

There were 110 branches in 1980. The following year, the company opened a branch in Saint Croix, which was the capital of the U.S. Virgin Islands. It entered Chicago in 1984 by purchasing a locally owned failed Hispanic bank there from federal regulators. Richard L. Carrion, son of Rafael Carrion, Jr., became the chief executive of Banco Popular in 1985.

Rapid Growth in Puerto Rico and on the Mainland: 19892001

Banco Popular had grown to 125 branches in 1989, including 10 on the U.S. mainland and three in the Virgin Islands. That year, it purchased BanPonce Corporation for cash and stock valued at between $278 and $324 million. Founded in 1971 as Banco de Ponce, BanPonce was the fourth-largest Puerto Rican bank, with 40 branches on the island and 14 in New Yorkwhere it was the pioneering Puerto Rican bank. The acquired branches took the Banco Popular name, but a new holding company was established bearing the BanPonce Corp. name until 1997, when this parent firm was renamed Popular, Inc.

Banco Popular enhanced its position as the leading choice for New York Citys growing Hispanic population in 1991, when it purchased the failed Bronx-based New York Capital Bank. New York Capital was an institution with five New York branches. The following year, Banco Popular acquired seven American Savings Bank branches in Manhattan and Brooklyn, bringing its number of New York branches to 28. At that point, Banco Popular had $1.5 billion in deposits in New York and had, in addition to making mortgage loans, become the citys top originator of federal Small Business Administration loans. These small business loans were made primarily to taxi owners, but also to importers, distributors, and wholesalers seeking to borrow less than $500,000.

In order to continue to thrive, the New York operation was looking beyond Hispanic customers after commissioning a study that showed more than one-fourth of its depositors were born in the United States. Furthermore, the study showed that fewer than one-third were from Puerto Rico. Also in 1992, BanPonce became a publicly traded stock, on the Nasdaq exchange.

Banco Popular began selling mutual funds and annuities in its New York branches in 1994. By the fall of 1997, it had six branches in neighboring New Jersey as well as 29 in New York. That fall, it also made its Texas debut by purchasing Citizens National Bank, which had been serving Houstons blue-collar Hispanic population. The bank also entered Florida that year by acquiring Seminole National Bank in Sanford, and by the spring of 1999 held eight branches in that state. It opened its first Miami branch in 2001 and announced plans to establish at least 20 more in south Florida.

Meanwhile, Popular had purchased Chicagos Pioneer Bank in 1993 and soon added two others, enhancing its presence in the city to 13 locations. It also chose Chicago as its official U.S. headquarters in 1997. In 1998, Banco Popular began offering a check-cashing service in the United States which was named Popular Cash Express. A mainland-U.S. credit-card operation based in Orlando, Florida was already in existence, with nearly 200,000 customers.

In 1999 Banco Popular launched a nationwide mortgage-loan program aimed at the Hispanic market. It was supported by a national advertising campaign featuring the banks existing national spokesman, Don Francisco. Francisco was well known, having also served at the time as the master of ceremonies of the popular Saturday-night variety show, Sábado Gigante, telecast on Univision, the leading Spanish-language network in the United States.

Company Perspectives:

Banco Popular is a local institution dedicating its efforts exclusively to the enhancement of the social and economic conditions in Puerto Rico and inspired by the most sound principles and fundamental practices of good banking. Banco Popular pledges its efforts and resources to the development of a banking service for Puerto Rico within strict commercial practices and so efficient that it could meet the requirements of the most progressive community of the world.

Banco Populars U.S. credit-card operation was sold to Metris Companies Inc. in 2000. That year, the North American subsidiaryby then headquartered in Melrose Park, Illinois, a suburb of Chicagowas cited for providing payday loans at triple-digit interest rates to people who could not obtain funds through conventional loans. These payday loans were available in California, Florida, and Texas through the banks Cash Express outlets. In Texas, it was purportedly charging an annual rate of 456 percent. A spokesman for the bank told Julie Johnsson of Crains Chicago Business that its Texas payday lending was a pilot program that the bank was not at liberty to discuss.

Popular in the New Millennium

Popular, Inc. was the 35th largest bank-holding company in the United States at the end of 2000, with consolidated assets of $28.1 billion and total deposits of $14.8 billion. Its income that year of $1.45 billion and net income of $276.1 million were both company records. By geographical area, Puerto Rico accounted for 72 percent of its assets, and the continental United States for 26 percent (compared to only 4 percent in 1980). Of the companys 302 banking branches, 199 were in Puerto Rico, 95 in the continental United States, and 8 in the Virgin Islands. Of the 382 non-banking offices, Equity One had 136; Popular Cash Express, 132; Popular Finance, 61; Popular Mortgage, 21; Popular Leasing & Rental, 12; and Popular Leasing, U.S.A., 11 (during 2000 a subsidiary sold its investment in Banco Fiduciario, S.A., a commercial bank in the Dominican Republic with 31 branches in 1999).

Banco Popular de Puerto Rico, Popular, Inc.s principal subsidiary, was operating seven branches in the U.S. Virgin Islands, one branch in the British Virgin Islands, and one branch in New York, as well as its 199 branches in Puerto Rico. It included as its subsidiaries both Popular Leasing & Rental and Popular Finance, incorporated in 1989, and Popular Mortgage, incorporated in 1995. Popular Leasing & Rental was Puerto Ricos largest vehicle-leasing and daily-rental company. Popular Finance offered small loans and second mortgages. Popular Mortgage offered mortgage loans.

Popular Securities, a subsidiary of the parent company, was a securities broker-dealer in Puerto Rico with financial advisory, investment, and security brokerage operations for institutional and retail customers. GM Group, incorporated in 1989, was providing electronic data processing and consulting services, sale and rental of electronic data-processing equipment, and sale and maintenance of computer software to clients in 10 countries. Popular, Inc. also held an 85 percent interest in Newco Mortgage Holding Corp., a mortgage-banking organization with operations in Puerto Rico.

The other subsidiary of the parentPopular International Bank, incorporated in 1992held as its main subsidiary Popular North America. This was a holding company incorporated in 1991 for Banco Popular North America, a full-service commercial bank with branches in six states. Banco Popular North America, incorporated in 1998, held, in turn, as its subsidiary Popular Leasing U.S.A., which was incorporated in 1997 and was providing small-ticket-equipment leasing in offices in eight states. The other direct subsidiaries of Popular North America were Equity One, incorporated in 1980, which was granting personal and mortgage loans and providing dealer financing through offices in 30 states; Popular Cash Express, incorporated in 1997 and offering services such as check cashing, money transfers to other countries, money-order sales and processing of payments through offices and units in five states and the District of Columbia; Popular Insurance, incorporated in 2000 to offer insurance products in Puerto Rico; and Banco Popular National Association, a full-service commercial bank chartered in Orlando, Florida, that commenced operations in 2000. Popular International Bank also owned ATH Costa Rica and Crest, which were providing ATM switching and driving services in San Jose, Costa Rica.

Popular, Inc.s largest shareholder in 2001 consisted of the employee retirement and profit-sharing plans that owned 8.1 percent of the common stock. Next largest was State Farm Mutual Automobile Insurance Co., which owned 6.4 percent of the common stock. Of the companys offices, branch premises, and other facilities, the majority were leased rather than owned.

Principal Subsidiaries

Banco Popular de Puerto Rico (including Popular Finance, Inc.; Popular Leasing & Rental, Inc.; and Popular Mortgage, Inc.); GM Group, Inc.; Popular International Bank, Inc. (including Banco Popular North America,; Equity One, Inc.; and Popular Cash Express, Inc.); Popular Securities, Inc.

Principal Competitors

Banco Bilbao Vizcaya Argentaria Puerto Rico, S.A.; First Ban-Corp; Banco Santander Central Hispano, S.A.

Key Dates:

Banco Popular is founded as a savings bank.
Banco Popular is founded again as a commercial bank.
Banco Popular becomes the largest bank in Puerto Rico.
Banco Popular opens its first mainland U.S. branch, in New York City.
Banco Popular acquires Banco de Ponce, Puerto Ricos fourth-largest bank.
The parent company makes its initial public offering of common stock.
Popular has 302 bank branches and 382 non-bank offices.

Further Reading

Baralt, Guillermo A., Tradition into the Future: The First Century of the Banco Popular de Puerto Rico: 18931993, San Juan: Banco Popular de Puerto Rico, 1993.

Flynn, Barry, Puerto Ricos Banco Popular Adds Florida Operations in Manageable Pieces, Knight-Ridder/Tribune Business News, April 5, 1999.

Hemlock, Doreen, Puerto Rican Banking Firm Opens First Branch in Miami, Knight-Ridder/Tribune Business News, January 24, 2001.

Johnsson, Julie, Banks Bid for Payday Loan Riches, Crains Chicago Business, February 14, 2000, pp. 1, 60.

Leuchter, Miriam, A Banks Popular Moves, Crains New York Business, May 24, 1993, pp. 3, 37.

Penn, Monica, Hispanic Banks Go Head to Head, Houston Business Journal, March 12, 1999, pp. Al +.

Quint, Michael, Generosity Leads To a Bank Merger, New York Times, October 26, 1989, p. D2.

Rose, Barbara, Pioneer Buy a Foothold for Puerto Rico Bank, Crains Chicago Business, September 20, 1993, p. 44.

Wahl, Melissa, Banco Popular Becoming Just That, Chicago Tribune, June 24, 1999, Sec. 3, pp. 1, 4.

, San Juan Bank Picks Chicago as U.S. Base, Chicago Tribune, June 11, 1998, Sec. 3, pp. 1, 3.

Robert Halasz

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Popular, Inc.