Popular Inc Annual Report 2005

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FY2005 Annual Report · Popular Inc

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2 0 0 5 A N N U A L R E P O R T

Connect

1 We Connect

Popular, Inc., a financial holding company with $48.6 billion in assets, is a

2 Letter to Shareholders

8 Banco Popular de Puerto Rico

12 Banco Popular North America

16 Popular Financial Holdings

20 EVERTEC

24 Our Community

complete financial services provider with operations in Puerto Rico, the United States,

the Caribbean and Latin America. As the leading financial institution in Puerto Rico

with over 280 branches and offices, the Corporation offers retail and commercial

banking services through its banking subsidiary, Banco Popular de Puerto Rico, as well

as investment banking, auto and equipment leasing and financing, mortgage loans,

consumer lending, insurance and information processing through specialized

subsidiaries. In the United States, the Corporation has established the largest Hispanic-

29 Institutional Values

owned financial services franchise, providing complete financial solutions to all the

30 Corporate Leadership Circle

31 Board of Directors, Popular, Inc.

32 Financial Summary

36 Corporate Information

communities it serves. Banco Popular North America operates over 135 branches in

California, Texas, Illinois, New York, New Jersey and Florida. The Corporation’s finance

subsidiary in the United States, Popular Financial Holdings (PFH), operates nearly

200 retail lending locations offering mortgage and personal loans, and also maintains

a substantial wholesale broker network, a warehouse lending division, loan servicing,

and an assets acquisition unit. PFH, through its newly acquired subsidiary E-LOAN,

provides online consumer direct lending to obtain mortgage, auto and home equity

loans. The Corporation continues to use its expertise in technology and electronic

banking as a competitive advantage in its Caribbean and Latin America expansion,

through the financial transaction processing company, EVERTEC. The Corporation is

exporting 112 years of experience through the region while continuing its commitment

to meet the needs of retail and business clients through innovation, and to fostering

growth in the communities it serves.

Popular, Inc.

We connect.

Popular, Inc. began investing in today’s information age years ago, at a time when such

investments appeared to carry more risk than reward. Such foresight enabled us to

offer a greater range of financial products and services, using both new and traditional

channels, to a growing circle of customers and partners. As that circle grows, the need

to keep pace with changing technology and the information needs that arise becomes

more and more challenging. It’s not just the resources required, but the need for

people on both sides of the transaction to adapt, stay current and find opportunity in

the unfamiliar. At Popular, we work hard to anticipate what lies ahead by staying

connected with our customers, business partners and the industry as a whole. As this

report explains, we are only as strong as each of these individual connections. From

these connections come new choices, greater efficiency and more satisfied customers.

The details change from sector to sector, but, as you will discover, we are learning

and growing together, across the full breadth of Popular.

Letter to Shareholders

CONNECT

Great organizations are those that can keep their focus in

spite of difficult times. The challenges that we faced during

2005, rather than discourage us, strengthened our resolve

and made us concentrate on executing the plans we had

charted for ourselves. I believe that, despite all the head-

winds, we were able to deliver results and took important

steps in all of our businesses that place the organization

as a whole in an even stronger position.

The financial services industry experienced rising

short-term interest rates and a flattening yield curve,

which resulted in us facing a sharp compression of

Richard L. Carrión, Chairman, President, Chief Executive Officer

our net interest margin. It was also a particularly difficult

year for the sector in Puerto Rico. Accounting issues

At Popular, we have carefully reviewed our accounting

related to mortgage loan transactions led four institutions

of this type of transaction and we are confident that

to announce the restatement of their financial results.

our previously filed financial statements are fairly stated

This instability had a substantial impact in the market

and that no restatement is necessary. However, the

value of local financial institutions.

uncertainty created by this situation probably affected

our stock price. Popular’s stock closed at $21.15 on

December 30, 2005, a decline of 27% when compared

to the closing price of 2004.

W E C O N N E C T

ROA and ROE

Assets and
Net Income Growth

1.5%

1.2%

0.9%

0.6%

0.3%

● ROA
● ROE

25%

20%

15%

10%

$60

$50

$40

$30

$20

$10

$600

$500

$400

$300

$200

$100

● ASSETS (dollars in billions)
● NET INCOME (dollars in millions)

During 2005, we took important steps

to expand our franchise into new markets

and new businesses.

Despite the difficult year, our shareholders demonstrated

During 2005, we took important steps to expand our

their long-term outlook and the trust they have in Popular

franchise into new markets and new businesses.

when they fully subscribed approximately $220 million

In November of 2005, we acquired E-LOAN, an online

in newly issued common shares in a subscription rights

consumer direct lender that originated approximately

offering that closed on December 19, 2005. Even though

$5.4 billion in mortgage, auto and home equity loans in

subscription rights offerings have fallen out of style,

2005. E-LOAN connects us to additional customers, giving

our vision remains to allow shareholders who own the

us a new online distribution and origination channel.

company to have a preference whenever we need to

When we first looked at E-LOAN, we were impressed

increase capital. We are proud of our shareholders’ response

with their innovative approach, their technology capabilities,

and, at the same time, conscious of the responsibility that

the strength of their brand and their focus on excellent

their trust entails.

customer service. We knew immediately it would be a

Net income for 2005 reached $540.7 million, an

great fit with Popular. Through this merger, Popular will

increase of 10.4% over 2004. The results for the year

further expand its penetration into the U.S. market,

include $67.4 million in gains on the sale of investment

complement its existing non-prime businesses and sig-

securities, compared with $15.3 million in 2004. Net

nificantly enhance its technology platform to support its

income represented a return on assets (ROA) of 1.17%

growth strategy. E-LOAN’s senior management is part of

and a return on equity (ROE) of 17.12%. Earnings per

our Popular Financial Holdings team and we are excited

common share (EPS), for 2005 were $1.98 basic and

about the opportunities that this partnership presents.

$1.97 diluted, compared to $1.79 for both in 2004.

We also committed to invest approximately $125

million to acquire 19.99% of UBCI, holding company

P O P U L A R 2 0 0 5

2/3

With the same level of discipline and
focus on execution, we will continue to
thrive in the years ahead.

for Grupo Cuscatlán, the second largest financial group

Secrecy Act (BSA) compliance, coupled with our decision

in Central America. This investment will give us the

to remain outside the payday lending business, impacted

opportunity to participate more actively in commercial

PCE’s profitability. Nevertheless, we will remain an active

banking activities in Central America, a growing banking

participant in the industry as a lender and servicer to

market, and better positions us to further expand our

other retail check cashing institutions and we will continue

processing services in the region.

to collaborate with regulators and lawmakers to accelerate

We believe that initiatives such as these, which take

the integration of unbanked individuals into mainstream

us into new markets, products and delivery channels,

financial services.

coupled with the strength of our existing businesses will

allow us to continue strengthening our franchise and

delivering strong financial results for our shareholders.

Each of our four business circles successfully executed the

key initiatives we had identified for 2005.

We also made some difficult decisions in 2005. After

Banco Popular de Puerto Rico:

carefully weighing the benefits and risks associated with

WE CONNECT WITH OPTIONS

the business, we sold substantially all of the assets of

Banco Popular de Puerto Rico focused on leveraging its

Popular Cash Express (PCE), our wholly-owned check

position as the institution that meets all the financial needs

cashing operation in the U.S. We found ourselves

of its customers and enhancing customer service. The

constrained in our ability to compete against non-bank

integration of all financial services in Puerto Rico under

owned check cashers, which are less regulated than

one umbrella has facilitated collaboration among units.

banking institutions. The requirements related to Bank

These efforts, combined with a renewed emphasis on sales

productivity, resulted in an increase in market share in

almost every segment. Despite our remarkable success in

W E C O N N E C T

Return to Shareholders
15 years

Total Return Including Dividend
and Dividend Reinvestment

1,500%

1,200%

900%

600%

300%

4
.
0
2

0
.
9
1

8
.
7
1

2
.
7
1

4
.
2
1

25%

20%

15%

10%

15
YEARS

● S&P Bank Index
● S&P 500

● Popular, Inc.

this market, there is always room for growth. We will

to take steps to improve going forward. Despite these

continue to execute our strategies with the intention of

challenges, PFH had a record-breaking year in terms of

becoming the leader in each and every financial service

production, with originations reaching $9.9 billion, added

business in Puerto Rico.

38 stores to its retail franchise and successfully entered the

Banco Popular North America:

WE CONNECT TO DREAMS

third party servicing business, achieving the highest servicer

rating from Standard & Poor’s.

Banco Popular North America successfully integrated

EVERTEC:

and converted two acquisitions announced in 2004 –

WE CONNECT WITH TECHNOLOGY

Quaker City Bancorp and Kislak National Bank – and

EVERTEC, Popular’s processing and technology out-

continued with its two-pronged strategy of becoming

sourcing company, completed its first full year of

the premier community bank in the markets it serves,

operations in 2005, delivering excellent results. The

as well as developing niche businesses where it can add

acquisition of ScanData Puerto Rico, a financial services

value. Its customer acquisition program continued to bring

processing company, provides EVERTEC with the

in new customers and significant checking account growth,

opportunity to expand its item processing services to

and specialized lending initiatives such as SBA, middle

other financial institutions and to market image technology

market and construction lending produced solid results in

in the Americas. EVERTEC also reinforced its business

2005. Financial results were in line with our expectations,

in Central America, giving the local operation more

with net income growing 82% over 2004.

autonomy to better respond to client needs and enhancing

Popular Financial Holdings:

WE CONNECT WITH OPPORTUNITY

Popular Financial Holdings (PFH), our consumer finance,

mortgage and servicing business in the United States, had

a difficult year due to the impact that competition and the

flattening of the yield curve had on its net interest margin

and, consequently, on its financial results. We continue

our technology infrastructure by consolidating our Central

American processing facilities in Costa Rica. Excellent

performance across business units resulted in a net income

increase of 74% when compared to the previous year.

P O P U L A R 2 0 0 5

4/5

Our Community:

WE CONNECT TO PEOPLE

The accomplishments that I have shared are a direct

result of the hard work and dedication of more than

Connecting with our communities is a critical part of what

13,000 employees that every day strive to create and

we do as an organization. That vision was very much

maintain meaningful connections with every person and

present when we were founded more than 112 years ago,

group touched by Popular. We are also fortunate to have

and it has remained paramount throughout our history. We

the guidance of a Board of Directors deeply committed

do it through our business activities, and we do it through

to our organization and its future. This year, Mr. Félix J.

philanthropic initiatives in all of the markets we serve. Our

Serrallés Nevares will retire from the Banco Popular de

employees contribute financial resources as well as their

Puerto Rico Board of Directors upon reaching the manda-

time and expertise through volunteer activities. USA Today

tory retirement age. As a Director of BanPonce Corporation

recognized Popular by giving us a national Make a

since 1966, and later joining the Banco Popular and

Difference Day Award for our participation in 2004. In

Popular, Inc. Boards, Mr. Serrallés has been advising this

2005, once again, more than 4,000 employees mobilized

organization for 40 years. We are very grateful for his

and touched people in need in communities from Puerto

support and important contributions throughout the years.

Rico all the way to California. Fundación Banco Popular

The outlook for 2006 points to another challenging

in Puerto Rico and the Banco Popular Foundation in the

year, but we are optimistic and expect that, with the

United States granted $927,585 and more than $200,000,

same level of discipline and focus on execution, we will

respectively, to over 60 non-profit organizations engaged

continue to thrive in the years ahead.

in educational and community development projects.

During the first quarter of 2005, we entered into a five-

year agreement to be the official bank of the New York

Mets, the largest sports marketing partnership in Popular’s

112 year history. This agreement includes substantial

advertising and community outreach opportunities for

RICHARD L. CARRIÓN

Banco Popular, including the operation of all ATMs at

Chairman

Shea Stadium. We firmly believe that this sort of initiative

President

strengthens our brand and allows us to better connect

Chief Executive Officer

with the communities we serve.

W E C O N N E C T

Connect: In thousands of locations
and in hundreds of ways, the people
of Popular connect each day with
customers, the community and each
other. Those connections bind us,
make us strong, and allow us to
continue building relationships that
will chart Popular’s course for years
to come.

6/7

W E C O N N E C T

Banco Popular de Puerto Rico

We connect with options.

Being the market leader and Puerto Rico’s largest financial institution makes

us no less aggressive when it comes to identifying, competing for and retaining

new business. Customers expect and deserve the highest possible levels of

choice and service. Banco Popular de Puerto Rico delivers a complete array

of individual and commercial banking services to people across the island,

day and night, whether they are banking at home or at one of our hundreds

of locations. Our value as a company rests with our front-line staff, well

trained and eager to go the extra mile. We attract customers with very compet-

itive rates on a range of savings, checking, and loan products. We keep and

build upon that client base with a responsive, customer-first approach.

P O P U L A R 2 0 0 5

8/9

BPPR Monthly Sales

BPPR Transactions
in millions

BPPR 2005 Transactions
in millions

Internet
5.9

TelePago
6.7

250

200

150

100

$350

$300

$250

$200

$150

$100

$50

Banco Popular de Puerto Rico

● Employee Average Sales
● Branch Average Sales

● POS
● ATM
● Teller

● TelePago
● Internet

● POS
● ATM
● Teller

● TelePago
● Internet

POS
149

ATM
88

Teller
61.6

Banco Popular de Puerto Rico, the leading financial

institution in Puerto Rico, connects customers to

countless options to cover their financial needs.

Through our comprehensive network of delivery

channels, our customers can reach us at any time.

In 2005, we held fast to our resolve to remain the

leading financial institution on the island and delivered

superior results amidst the challenging environment

surrounding Puerto Rico’s banking industry.

Throughout the year, we significantly grew our deposit

and loan portfolios, despite a difficult interest rate scenario

and aggressive competition. Deposit market share grew

David H. Chafey Jr., Senior Executive Vice President, Popular, Inc.
President, Banco Popular de Puerto Rico

to 32.6% and loan market share resulted in 23% for 2005.

Through Sonrisa, we trained our entire sales staff in con-

We also enhanced our credit policies to reflect a renewed

sultative sales and customer service, better preparing them

strategy, increasing our portfolio profitability without

to keep fulfilling our customers’ demanding standards.

sacrificing credit-worthiness.

Sales per month per employee increased 20% in 2005.

Our branch network continues to offer convenience

We also launched the Branch Service Index to measure

to our customers. We remodeled over 10% of branches

service standards at every branch.

and added three new ones. This brings our total number

Meanwhile, more customers than ever expressed satis-

of branches to 194, by far the largest network in Puerto

faction with Banco Popular de Puerto Rico; 73% intend

Rico. We also improved our online banking website, Mi

to acquire more of our products and services, 93% will

Banco (My Bank), and launched a mobile banking platform.

continue banking with us, and nine out of 10 customers

To further enhance customer satisfaction, we focused

would recommend us to a friend, a reflection of the trust

intently on our retail service initiative Sonrisa (Smile).

our customers continue to place on us.

Through our commercial banking centers and branches,

we consulted small and middle market business owners,

W E C O N N E C T

BPPR Loans, includes LHFS
in millions

BPPR Deposits
in millions

BPPR 2005 Highlights

$15,000

$12,000

$9,000

$6,000

$3,000

$15,000

$12,000

$9,000

$6,000

$3,000

• $26.5 billion in assets; largest Popular, Inc.

subsidiary

• 305 financial offices in Puerto Rico and

the Virgin Islands

• 1.3 million Popular clients

• 93%* of customers are satisfied or
extremely satisfied with Popular

• 6,493 Employees (full time equivalent)

● Commercial
● Leases

● Consumer
● Mortgage

● Demand
● Savings

● Time

*According to internal surveys

Being Puerto Rico’s largest financial institution

has not made us any less aggressive when it comes

to identifying and competing for new business.

leading to a loan portfolio growth of 12% over 2004.

lending and installment loans experienced the highest

Because this is an important segment for the bank, we

increase in volume. Total mortgage loan originations

continued to streamline our underwriting process to

climbed to $1.8 billion in 2005 or 24% over 2004.

improve ease of doing business with us, while lowering

Popular Finance positioned itself for future growth

our expenses. We also reached out to real estate developers

by reinforcing internal capabilities, expanding its branch

on the island, notably increasing our construction loan

network by seven branches during the second half of the

portfolio by $193 million over 2004.

year, and rolling out a platform for the indirect lending

Our commercial customers now enjoy an improved

program, which will boost competitiveness in this impor-

online banking experience by accessing real-time deposit

tant segment.

account balances, transaction information, and applying

The Financial Services and Investments unit had a

for letters of credit. They also enjoy greater fraud preven-

good year, completing the acquisition of a financial

tion security when using electronic services thanks to

advisory and investment management firm, Financial

the implementation of the positive pay modules. Internet-

Planning Group Corp. Popular Asset Management

initiated wire transfers now require password-generating

increased assets under management by $295 million.

tokens, which are considered one of the safest authen-

Popular Insurance continued to penetrate the insurance

tication systems in the industry. The Merchant Acquisition

market by increasing premiums written to $144 million

group also had a strong year, increasing revenues 13%

versus $138 million in 2004, representing a 4% increase.

and adding over 260 customers per month. All these efforts

Encouraged by our strong performance in 2005,

allowed Popular to grow non-interest bearing commercial

we will continue to provide strong financial results and

deposits 7.4% in 2005.

will seek to connect clients to our extensive distribution

Meanwhile, our Consumer Lending group spearheaded

network and variety of first-class financial services.

significant accomplishments. Total loan portfolio growth

for the group totaled $432 million. Our credit card, auto

P O P U L A R 2 0 0 5

10/11

W E C O N N E C T

Banco Popular North America

We connect to dreams.

Popular continues to expand our franchise in the United States by offering

the most complete financial services in the communities we serve, while

leveraging our unique advantages in the Hispanic market. In March 2005,

Banco Popular North America entered into a five-year agreement to become

the official bank of the New York Mets. The agreement includes the operation

of all ATMs at Shea Stadium, along with multiple branding and sponsorship

opportunities. BPNA enticed new customers with a Mets ticket offer to all

who opened a new account at a New York area branch. BPNA will also play

a significant role in the Mets’ community outreach efforts, co-sponsoring

the Mets’ summer reading program with the New York Public Library, and

spearheading a ticket distribution program to community organizations.

P O P U L A R 2 0 0 5

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BPNA Performance
dollars in millions

BPNA Net Income per FTE
Increased Productivity

$500

$400

$300

$200

$100

100%

2,500

80%

60%

40%

20%

2,000

1,500

1,000

500

$90,000

$72,000

$54,000

$36,000

$18,000

● Revenues
● Efficiency Ratio

● Expenses

● Full Time Equivalent Employee
● Net Income/FTE

Roberto R. Herencia, Executive Vice President, Popular, Inc.
President, Banco Popular North America

Banco Popular North America

Throughout 2005, Banco Popular North America

(BPNA) connected with communities; guided by our

New Day strategic roadmap and focusing on our

goal to make dreams happen for our neighbors

in the communities we serve, we effectively laid

down the foundation to continue building a strong

franchise in the United States.

BPNA delivered significant growth in 2005, with net

income reaching $99.2 million from $54.5 million in

2004 – an increase of 82%. Loans jumped 15%, deposits

increased 19% and fee income grew 20% during 2005.

Organic growth (excluding acquisitions) was supple-

mented by the successful integration and systems

conversion of two recent acquisitions (Quaker City Bank

Market lending also proved very profitable with loans

and Kislak National Bank). Organic loan and customer

increasing from $280 million in 2004 to $390 million

deposit growth rates were 13% and 8%, respectively. Loans

in 2005 – an increase of 39%. Another success story for

and deposits from the two acquisitions grew by 10% and

BPNA is our “non-conventional” mortgage program,

3%, respectively – a solid showing for the first year.

which expanded to 11 states and achieved $241 million

Key niche lending initiatives experienced double-digit

in originations, or a 57% increase over 2004.

growth. Our Small Business Administration (SBA) lending

In 2005, we launched our Got Passion? customer

group was restructured and new leadership re-energized

campaign, raising awareness about our commitment to

lending efforts that continued to move the needle on BPNA’s

customers and creating multiple channels for their feedback

goal of becoming a top three SBA lender in the markets we

to better address their needs. Our customers responded

serve. SBA loan originations went from $165 million in

well to the further refining of our Value Proposition: deliv-

2004 to $254 million in 2005 – an increase of 54%. Middle

ering an extraordinary customer experience. As a reflection

of our effort, retail checking account openings increased

by 71% over 2004 and business accounts grew by 29%.

W E C O N N E C T

BPNA Financial Performance
dollars in billions

BPNA 2005 Highlights

• $12 billion in assets

• 136 branches in six

states

• 2,146 full time

equivalent employees

• 73% overall employee

engagement

$14

$12

$10

● Assets
● Deposits

● Loans

With the 2005–2008 strategic plan,

Seize the Future, we begin our next stage

of development.

During the first quarter of 2005, we entered into a

The period from 2001 through 2005 was marked

five-year agreement to be the official bank of the New York

by the launch, execution and successful completion of

Mets. This agreement includes substantial advertising and

our New Day initiative, a time when BPNA faced great

community outreach opportunities for Banco Popular,

challenges and opportunities. As an organization, we

including the operation of all ATMs at Shea Stadium.

dreamt big and took our achievements to a new level,

We also provided Our People, better known as

boldly responding with results that tell the story.

DreamMakers, with best-in-class Human Resources

The Shared Agreement process that began in 2001

practices that were acknowledged by receiving regional

effectively aligned employee actions and goals with our

Best Company recognitions in Chicago and Orlando for

company’s vision and business goals. As a result, assets

BPNA, and in St. Louis for Popular Leasing, U.S.A. Our

more than doubled from $5.7 billion in 2001 to $12 billion

efforts in this area successfully produced a more engaged

in 2005; non-performing assets to total loans dropped to

and effective workforce.

0.72%; net income almost doubled to reach $99.2 million,

In 2005 we also had to make some difficult decisions.

and market share grew within our footprint. All the while

Having analyzed the benefits and risks associated with

employee headcount remained unvarying – even after

the business, the Corporation sold most of the assets of

two acquisitions.

Popular Cash Express (PCE), a wholly-owned check

With the 2005–2008 strategic plan, Seize the Future,

cashing operation in the United States. It became hard to

we begin our next stage of development, with the goal to

compete against non-bank owned check cashers, which

substantially grow our customer base, revenues and earnings.

are less regulated than us. The requirements related to

BPNA will continue to improve financial performance by

Bank Secrecy Act (BSA) compliance, along with our

creating daring goals for our next round of dreams.

decision to remain outside the payday lending business,

impacted PCE’s profitability. We will, however, remain

an active participant in the industry as a lender and servicer

to other retail check cashing institutions.

P O P U L A R 2 0 0 5

14/15

W E C O N N E C T

Popular Financial Holdings

We connect with opportunity.

Successful communities rely on inclusive and widespread home ownership,

vibrant commercial districts and sustainable job generators. Popular Financial

Holdings enables neighborhood growth and renewal by serving retail

customers directly through its Equity One subsidiary, producer of prime and

non-prime mortgage loans, unsecured loans and sales finance. Popular

Financial Services, LLC and Popular Warehouse Lending, LLC work with

mortgage bankers at the wholesale level. A newly acquired subsidiary, E-LOAN,

provides online consumer direct lending to obtain mortgage, auto and home

equity loans. All four primary businesses share centralized support and

a strategy calling for increased cross selling, geographic expansion and an

increasingly diversified loan portfolio.

P O P U L A R 2 0 0 5

16/17

PFH Offices and States
2001 – 2005

250

200

150

100

● States
● Offices

Popular Financial Holdings

In 2005, Popular Financial Holdings (PFH), Popular’s

consumer finance, mortgage, and servicing group

in the United States, connected to opportunities for

future growth in support of its mission to be the

lender of choice for customers. PFH moved forward

and achieved important origination goals, even

when faced with the difficulties in the mortgage

lending industry and the adverse effects of a

flattening yield curve. These factors resulted in

earnings for 2005 being well below our earnings

in 2004 and our expectations for the year.

Bill Williams, Executive Vice President, Popular, Inc.
President, Popular Financial Holdings

With the restructuring of PFH last year, the Corporation

The acquisition of Infinity Mortgage, which we

opened the door to stimulate its growth. Throughout 2005,

completed in November, complements our existing

we seized every opportunity to do so, successfully achieving

direct mail efforts by adding a national call center. The

our expansion goals. We began by opening 38 new branch

partnerships with E-LOAN and Infinity Mortgage also

offices in six states, along with acquisitions, which also

provide an opportunity to expand our loan servicing

fueled growth during 2005.

business. Following the acquisitions, PFH’s network of

Popular, Inc. acquired online consumer direct lender

operations now stands at 213 offices in 34 states; we

E-LOAN in November, aligning both companies to reap

are also licensed to do business in all 50 states.

great benefits from the partnership. Thanks to the

PFH also entered two new businesses: manufactured

acquisition, PFH will expand its national footprint and

housing and third party servicing. Through Popular

significantly improve its technology platform and Internet

Housing Services, we offer manufactured housing loans

presence, while E-LOAN will gain access to Popular, Inc.’s

in 14 states. Third party servicing, which won its first

financial and capital markets and PFH’s non-prime products.

bid this year, allows us to generate income without the

collateral risk of owning a loan portfolio.

W E C O N N E C T

PFH Servicing Portfolio
dollars in billions

PFH Origination Volume
dollars in billions

PFH 2005 Highlights

$12

$10

• $9.7 billion in assets

• 213 offices in 34 states

• Mortgage servicer rating upgrade

by Moody’s to “Above Average” and
Standard & Poor’s to “Strong”

• Four call centers covering continental U.S.

• 2005 E-LOAN originations were over

$5.4 billion

We garnered an upgrade of our servicer ratings

from Moody’s to “Above Average” and from

Standard & Poor’s to “Strong.”

In 2005, PFH reorganized into four business groups

loan amount closed per account manager increased by 21%

in order to incorporate growth and best execute its mission.

in 2005. The profitability of the Asset Acquisitions group,

The groups Retail Operations, Wholesale Operations,

however, was significantly below our expectations, due to

E-LOAN and Commercial Operations – each with its own

the continued flattening of the yield curve in 2005.

leader – will give each business the autonomy to react to

Popular Warehouse Lending, which targets small and

market demands by operating in a more entrepreneurial

mid-sized mortgage bankers by providing revolving lines

style while remaining in a corporate environment,

of credit to finance mortgage loans, originated $2.6 billion

combining the best of both worlds.

in 2005. The combined production of all our units resulted

PFH also connected to opportunities to grow its core

in $9.9 billion in originations in 2005, a record year for us.

business of mortgage loan originations. Retail Operations,

PFH’s managed portfolio surpassed the $10 billion

which represent 20% of the PFH mortgage loan portfolio,

mark, heading the company toward its ambitious goal

originated more than $1.7 billion of mortgage loans in

of $25 billion by 2010. We also garnered an upgrade of

2005, a 23% increase over 2004. Retail Operations also

our servicer ratings from Moody’s to “Above Average” and

increased the number of loan officers by 25% over 2004,

from Standard & Poor’s to “Strong,” an outstanding vote

and the average loan amount closed per officer increased

of confidence in our ability to best serve the market.

by 18% over 2004. As a key element of this group, the

We will continue to connect to and seek opportunities

Consumer Services lending operation originated $762

that fully support our mission of being the preeminent

million in mortgage secured and unsecured personal loans.

employer, lender and investment of choice. We will con-

Wholesale Operations, which represent 80% of our

tinue to execute on our goal of providing an exceptional

mortgage loan portfolio, had total originations of $4.3

customer experience and doing things the right way,

billion. Wholesale volume, through our broker network,

every day.

experienced an increase of 50% over 2004. The average

P O P U L A R 2 0 0 5

18/19

W E C O N N E C T

EVERTEC

We connect with technology.

Ongoing investment in electronic transaction infrastructure continues to

quicken the pace of change for both financial institutions and their customers.

EVERTEC, the financial transaction processing arm of Popular, offers its

experience in technology and electronic banking throughout Latin America

and the Caribbean. EVERTEC provides the software, hardware and services

businesses need to be successful and profitable. By always identifying and

pursuing the leading edge of technology, we help clients do more in less time.

As the cost of communication and information technology decline, new

scaleable and flexible solutions for acquiring, processing, and storing

information are found. This allows financial markets to expand and deepen,

and new opportunities to emerge.

P O P U L A R 2 0 0 5

20/21

ATMs and POS Terminals
in ATH Network

ATH Network Transactions
in millions

5,000

4,000

3,000

2,000

1,000

90,000

72,000

54,000

36,000

18,000

500

400

300

200

100

● POS Terminals
● ATMs

● ATH BPNA
● ATH El Salvador
● ATH Costa Rica

● CONTADO, S.A.
● ATH Puerto Rico

Félix M. Villamil, Executive Vice President, Popular, Inc.
President, EVERTEC, Inc.

EVERTEC

EVERTEC keeps its customers connected to the world

by providing dynamic information technology solutions

that eradicate barriers, shorten distances, and open

doors to new markets. In 2005, EVERTEC completed

its first full year of operation, focusing on growing

core revenues and increasing operational efficiency.

We also grew through acquisitions, strategic alliances

and the expansion into new service areas.

In May, we acquired 100% of all issued outstanding shares

of ScanData Puerto Rico, an item processing provider.

With the acquisition, EVERTEC processes close to 60%

of all checks in Puerto Rico. We also gained the rights

to provide ScanData’s proprietary imaging technology in

On August 18, 2005, EVERTEC acquired all of Valiant

the Americas. ScanData’s Atril technology facilitates the

Inc.’s contracts in Puerto Rico. Valiant, Inc. is a software

digital processing of checks as permitted under the Check

development company specializing in workforce time

21 Act and can also be used for processing, storing, sending

management solutions. The addition of Valiant’s software

and revising documents. This acquisition further solidifies

to EVERTEC’s service offering portfolio allows us to further

our geographical expansion and effectively gives EVERTEC

expand our customer base and provides EVERTEC with

the potential to expand our document processing offering

an additional source of fee based income.

beyond check imaging.

At year end, our flagship ATH network, which spans

Popular also signed an agreement for the acquisition of a

Puerto Rico, Costa Rica and the Dominican Republic, had

19.99% equity participation in UBCI, the holding company

processed more than 460,158,944 transactions through

of Grupo Cuscatlán and the second largest financial institu-

4,374 ATMs and 85,292 POS terminals. We also increased

tion in Central America. This agreement advances Popular,

by 7% the number of affiliated financial institutions in 2005.

Inc.’s objectives to offer high-quality technological services

In Puerto Rico, we celebrated a landmark in the history

and participate in the economic growth of the Central

of the ATH network, its 21st anniversary. Two decades after

American region.

W E C O N N E C T

its inception, the ATH network has grown to include

1,439 ATMs and 49,466 POS terminals across the island.

EVERTEC Total Revenue
dollars in millions

EVERTEC 2005 Highlights

IT
Consulting
48.1

Cash
Processing
9.5

Business
Process
Outsourcing
73.3

Transaction
Processing
72.8

Application
Processing
17.0

• Leading provider of processing

and outsourcing services including
application processing, business
process outsourcing, IT consulting,
and cash processing to third parties
and Popular companies

• Serves clients in Puerto Rico,

United States, Dominican Republic,

Costa Rica, Venezuela, Haiti,
El Salvador, Honduras, Bermuda,
Belice and Nicaragua

• Over 866.4 million transactions

processed

• 4,374 ATMs

• 85,292 POS terminals

In Puerto Rico, we celebrated a

landmark in the history of the ATH® network,

its 21st anniversary.

In Costa Rica, we experienced significant growth,

program to test the integration of several banking delivery

servicing 23 institutions and operating 728 ATMs and 5,785

channels to our centralized customer data integrator, the

POS terminals. In El Salvador, we integrated the Serfin, S.A.

Transaction Vault (TV), the design of which was completed

switch into Costa Rica’s platform, after having acquired

the previous year. Full implementation of the TV and its

31% of the operation the previous year. In that market, we

connection to delivery channels for all Banco Popular de

serviced five institutions and operated 710 ATMs and 4,700

Puerto Rico customers is planned for 2006. The TV will

POS terminals. In the Dominican Republic, Consorcio de

provide a consistent and single customer view that will

Tarjetas Dominicanas (CONTADO) closed the year with

enable the Bank to identify and address service and sales

1,316 ATMs and 25,341 POS terminals, processing

opportunities at the point of contact with its customers,

64,663,980 transactions.

regardless of the delivery channel they select. We also

This year, EVERTEC expanded its healthcare transaction

streamlined the areas of cash and item processing and

processing business with the launch of EVERGate, a

printing, changes that required a small capital investment

universal clearinghouse for health insurance transactions.

but will result in greater cost efficiency.

The system, which is compatible with all medical insurance

As we continue to expand our processing business, we

programs, sends and receives electronic transactions in a

will not falter in our commitment to the highest standards

single connection. With EVERGate, we have raised the bar

of quality and service. We remain focused on connecting

for electronic healthcare transaction processing in Puerto

our customers to the latest, most advanced and cost efficient

Rico, providing our customers with a system that offers the

technology available to enable the transformation of their

utmost convenience and simplicity.

business processes and enhance, simplify and improve

The redesign of our banking technology infrastructure,

their lives.

one of Popular’s most important long-term investments,

continues on track. During 2005, we launched a pilot

P O P U L A R 2 0 0 5

22/23

W E C O N N E C T

Our Community

We connect to people.

At Popular we believe we are much more than a financial institution. We are a

proud member and a reflection of every community we serve. Popular and its

employees connect with the community in a variety of ways. At the corporate

level, we direct donations and sponsor programs that focus on our three primary

philanthropic goals: education, financial literacy and economic development.

We also work to enrich the lives of our customers and all community members

through the arts, cultural awareness and sports as a means to foster the spirit of

achievement among our youth. The spirit of giving and a shared commitment

to community is one of the core leadership qualities we seek in each of our

employees. Our desire to be engaged with the community, both inside and

outside the doors of our offices, is a critical component of what we stand for.

P O P U L A R 2 0 0 5

24/25

Our Community

Throughout its 112-year history, Popular has held the

institutional value of social commitment paramount.

We believe that our best investment is the one

we make to support the education and development

of the communities we serve. As such, we are

committed to proactively contribute to the social and

economic well-being of our communities through

our philanthropic endeavors and the collective efforts

of our employees.

In 2005, Our People showed this commitment in the
aftermath of the worst tragedy to hit the United States in
a long time. Moved by the devastation in the Gulf Coast
following hurricane Katrina, our employees and customers
rallied to contribute to the relief effort. We raised more
than $366,000 across the Corporation, which was donated
to the American Red Cross and launched a company-wide
drive to collect emergency items for the displaced families.
The solidarity campaign with the victims of hurricane
Katrina resulted in the donation of over 25,000 pounds
of emergency items to Katrina refugees in Texas.

Regulators recognized our commitment to community
development by granting BPPR and BPNA an “Outstanding”
Community Reinvestment Act (CRA) rating in 2005.

Puerto Rico

Fundación Banco Popular, Popular’s philanthropic arm
in Puerto Rico, invested $927,585 to support 46 not-
for-profit organizations that champion education and
community development. Our contribution sponsors

W E C O N N E C T

such initiatives as after school programs, mentorship,
high school dropout prevention, and education through
the arts. Our investment also supported community self
help efforts, leadership development and organizational
training for community leaders.

Popular employees in Puerto Rico showed their
dedication to community development, donating time
and funds to various organizations. Through our Volunteers
in Action program, more than 4,000 employees and their
family and friends participated in various volunteer service
activities for more than 15,000 hours served. For the third
consecutive year, Popular joined the nationwide Make a
Difference Day, when more than 3,500 employees donated
11,250 hours of volunteer service to 140 projects. On
this day, Popular employees made a difference in the lives
of more than 7,000 members of the community and the
Corporation invested approximately $100,000 towards
their projects.

Our contribution to the Jóvenes de Puerto Rico en Riesgo

(Puerto Rico Youth at Risk) organization is a shining
example of our strong pledge to the progress of our com-
munities. Of the 30 mentors involved in the organization,
12 are Popular employees. Fundación Banco Popular

We are committed to proactively

contribute to the social and economic

well-being of our communities.

donated $85,000 this year to the organization, which
helps lower the incidence of high school dropouts,
teenage pregnancies, and drug use through mentorship
in high-risk communities.

The voluntary payroll deduction program reached
61% participation this year and raised $483,277. Also,
61% of the organizations that received funding this year
have employee liaisons that serve as volunteers or board
members and represent the organization before the
Fundación Banco Popular Board of Trustees.

Fundación Banco Popular strengthened its commitment

to education by adding the Rafael Carrión Jr. Academic
Excellence Award to our existing scholarships program. In
conjunction with the College Board, we granted 85 students
$1,000 awards for having achieved the highest scores
in the local college entrance examination. In addition,
Fundación Banco Popular granted $50,000 toward an
endowment for scholarships to the Berklee College
of Music in Boston, Massachusetts.

The Rafael Carrión Jr. Scholarship Fund entered its 14th
year of providing scholarships to the children of Popular
employees and retirees. In 2005, 122 scholarships were
granted for a total of $173,600. Since 1994, Popular has
also provided scholarships for 14 Puerto Rican students
to attend the Wharton School of the University of
Pennsylvania, an investment of $370,500.

In October, Fundación Banco Popular forged an alliance

with the Leader to Leader Institute, Sagrado Corazón
University, and Fundación Compromiso de Argentina to
present the self-evaluation model developed by renowned
author and managerial theorist Peter Drucker to not-for-
profit organizations in Puerto Rico. One hundred and forty
people representing 40 organizations participated in the
first event, where we offered the self-evaluation model called
Excellence in Performance: The Drucker Self-Assessment
Tool for Nonprofit Organizations. In addition, five organiza-
tions remain engaged in the self-assessment process until
May, 2006.

P O P U L A R 2 0 0 5

26/27

Fundación Banco Popular also continues to run the
Rafael Carrión Pacheco Exhibition Hall, where Algo de valor:
una exhibición sobre el dinero para niños y adultos (Something
of Value: an exhibit about money for children and adults)
is currently on display. This year, we hosted photography
workshops that asked young people to exalt what they
most value of their surroundings, their communities. This
sustained educational program has achieved the attendance
of more than 28,000 visitors to the current exhibition.

United States

In the United States, we celebrated the first year of the
Banco Popular Foundation, which was established to carry
on Popular’s philanthropic tradition in the communities
served by Banco Popular North America (BPNA).

Our Foundation made dreams happen for 16 not-for-

profit organizations across the United States, investing
more than $200,000 in the areas of education and youth
($105,000), health and supported living ($78,000) and
community development ($22,000). These grants were
made possible by the generosity of Our People, with 12%
of BPNA employees participating in our matching gift
program. We also made contributions to other organiza-
tions which foster education and community development,
including Junior Achievement ($118,000 raised at our
Bowl-A-Thons) and the Puerto Rican Day Parade
Scholarship Fund in New York ($20,000).

In addition, hundreds of our employees took advantage
of their 16 hours of community service paid time off to give
back to their communities. Through the It’s in Our Hands
Volunteer Program, Our People invested 32,400 hours in
local projects and initiatives and nearly 70% of our officers
are actively engaged in community service.

W E C O N N E C T

BPNA participated in the 2005 Make a Difference Day,
sponsored by USA Weekly Magazine and the Points of Light
Foundation, with more than 500 employees volunteering at
40 different locations for a total of 2,344 service hours. Our
subsidiaries also contributed significantly to our community
involvement goals. Popular Leasing, U.S.A. (PLUSA), for
example, was named a winner in the 2005 Greater St. Louis
Top 50 Businesses Shaping Our Future thanks to their
commitment to the community. A total of 84% of PLUSA’s
employees volunteered more than 3,000 hours in the St.
Louis community in 2005.

The work of Fundación Banco Popular and Banco
Popular Foundation, along with the support of Popular
employees continues to make a difference towards the
improvement of the communities we serve. It is our goal to
establish long-lasting, productive connections to improve
the lives of the people who make up those communities.

O U R C R E E D

I N S T I T U T I O N A L VA LU E S

S T R AT E G I C O B J E C T I V E S

Puerto Rico
Strengthen our competitive position in
our main market by offering the best and
most complete financial services in an
efficient and convenient manner. Our
services will respond to the needs of all
segments of the market in order to earn
their trust, satisfaction and loyalty.

United States
Expand our franchise in the United States
by offering the most complete financial
services to the communities we serve
while capitalizing on our strengths in the
Hispanic market.

Processing
Provide added value by offering
integrated technological solutions
and financial transaction processing.

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
requirement of the most progressive
community of the world.

These words, written in 1928 by Don Rafael
Carrión Pacheco, Executive Vice President and
President (1927–1956), embody the philosophy
of Popular, Inc.

O U R P E O P L E

The men and women who work for our
institution, from the highest executive
to the employees who handle the most
routine tasks, feel a special pride in
serving our customers with care and
dedication. All of them feel the personal
satisfaction of belonging to the “Banco
Popular Family,” which fosters affection
and understanding among its members,
and which at the same time firmly
complies with the highest ethical and
moral standards of behavior.

Social Commitment
We are committed to work actively
in promoting the social and economic
well-being of the communities
we serve.

Customer
We achieve satisfaction for our
customers and earn their loyalty by
adding value to each interaction.
Our relationship with the customer
takes precedence over any particular
transaction.

Integrity
We are guided by the highest standards
of ethics, integrity and morality. Our
customers’ trust is of utmost importance
to our institution.

Excellence
We believe there is only one way to
do things: the right way.

Innovation
We foster a constant search for new
solutions as a strategy to enhance our
competitive advantage.

Our People
We strive to attract, develop, compensate
and retain the most qualified people
in a work environment characterized by
discipline and affection.

These words by Don Rafael Carrión Jr., President
and Chairman of the Board (1956 –1991),
were written in 1988 to commemorate the 95th
anniversary of Banco Popular de Puerto Rico, and
reflect our commitment to human resources.

Shareholder Value
Our goal is to produce high and
consistent financial returns for our share-
holders, based on a long-term view.

P O P U L A R 2 0 0 5

28/29

Corporate Leadership Circle

ROBERTO R. HERENCIA
Executive Vice President, Popular, Inc.
President, Banco Popular North America

DAVID H. CHAFEY JR.
Senior Executive Vice President, Popular, Inc.
President, Banco Popular de Puerto Rico

RICHARD L. C ARRIÓN
Chairman
President
Chief Executive Officer
Popular, Inc.

BRUNILDA SANTOS DE ÁLVAREZ, ESQ.
Executive Vice President, Chief Legal Counsel
Popular, Inc.

JORGE A. JUNQUERA
Senior Executive Vice President
Chief Financial Officer
Popular, Inc.

BILL WILLIAMS
Executive Vice President, Popular, Inc.
President, Popular Financial Holdings

TERE LOUBRIEL
Executive Vice President
People, Communications and Planning
Popular, Inc.

AMÍLC AR JORDÁN, ESQ.
Executive Vice President
Risk Management
Popular, Inc.

FÉLIX M. VILL AMIL
Executive Vice President, Popular, Inc.
President, EVERTEC, Inc.

W E C O N N E C T

Board of Directors, Popular, Inc.

WILLIAM J. TEUBER JR.
Chief Financial Officer, EMC Corporation

MARÍA LUISA FERRÉ
Executive Vice President, Grupo Ferré Rangel

SAMUEL T. CÉSPEDES, ESQ.
Secretary of the Board of Directors
Popular, Inc.

RICHARD L. C ARRIÓN
Chairman
President
Chief Executive Officer
Popular, Inc.

JOSÉ R. VIZC ARRONDO
President and Chief Executive Officer
Desarrollos Metropolitanos, S.E.

FREDERIC V. SALERNO
Investor

MANUEL MORALES JR.
President, Parkview Realty, Inc.

JOSÉ B. C ARRIÓN JR.
President, Collosa Corporation

FRANCISCO M. REXACH JR.
President, Capital Assets, Inc.

JUAN J. BERMÚDEZ
Partner, Bermúdez & Longo, S.E.

P O P U L A R 2 0 0 5

30/31

Condensed Consolidated Statements of Condition

(In thousands)

Assets
Cash and due from banks
Money market investments
Trading securities, at market value
Investment securities available-for-sale, at market value
Investment securities held-to-maturity, at amortized cost
Other investment securities, at lower of cost or realizable value
Loans held-for-sale, at lower of cost or market

Loans held-in-portfolio

Less – Unearned income

Allowance for loan losses

Premises and equipment
Other real estate
Accrued income receivable
Other assets
Goodwill
Other intangible assets

Liabilities and Stockholders’ equity
Liabilities:

Deposits:

Non-interest bearing
Interest bearing

Federal funds purchased and assets sold under agreements to repurchase
Other short-term borrowings
Notes payable
Subordinated notes
Other liabilities

Minority interest in consolidated subsidiaries

Stockholders’ equity:
Preferred stock
Common stock
Surplus
Retained earnings
Treasury stock – at cost
Accumulated other comprehensive (loss) income, net of tax

At December 31,

2005

2004

906,397
749,423
519,338
11,716,586
153,104
319,103
699,181

31,308,639
297,613
461,707

30,549,319

596,571
79,008
245,646
1,325,800
653,984
110,208

716,459
879,640
385,139
11,162,145
340,850
302,440
750,728

28,253,923
262,390
437,081

27,554,452
545,681
59,717
207,542
1,046,374
411,308
39,101

$ 48,623,668

$ 44,401,576

3,958,392
18,679,613

$ 4,173,268
16,419,892

22,638,005
8,702,461
2,700,261
9,893,577
—
1,240,002

45,174,306

115

186,875
1,736,443
452,398
1,456,612
(207,081)
(176,000)

3,449,247

$ 48,623,668

20,593,160
6,436,853
3,139,639
10,180,710
125,000
821,491

41,296,853

102

186,875
1,680,096
278,840
1,129,793
(206,437)
35,454

3,104,621
$ 44,401,576

W E C O N N E C T

Condensed Consolidated Statements of Income

(In thousands, except per share information)

2005

2004

2003

Year ended December 31,

Interest income

Loans
Money market investments
Investment securities
Trading securities

Interest expense
Deposits
Short-term borrowings
Long-term debt

Net interest income
Provision for loan losses
Net interest income after provision for loan losses
Service charges on deposit accounts
Other service fees
Net gain on sale and valuation adjustment of investment securities
Trading account profit (loss)
Gain on sale of loans
Other operating income

Operating expenses
Personnel costs
Net occupancy expenses
Equipment expenses
Other taxes
Professional fees
Communications
Business promotion
Printing and supplies
Other operating expenses
Amortization of intangibles

$2,116,299
30,736
488,814
30,010

2,665,859

430,813
349,203
461,636

1,241,652

1,424,207
195,272

1,228,935
181,749
331,501
52,113
30,051
83,297
106,564

2,014,210

622,689
108,386
124,276
39,197
119,281
63,395
100,434
18,378
122,585
9,579

$1,751,150
25,660
413,492
25,963

2,216,265

330,351
165,425
344,978

840,754
1,375,511
178,657
1,196,854
165,241
295,551
15,254
(159)
44,168
88,716

1,805,625

571,018
89,821
108,823
40,260
95,084
60,965
75,708
17,938
103,551
7,844

$1,550,036
25,881
422,295
36,026

2,034,238

342,891
147,456
259,203

749,550
1,284,688
195,939
1,088,749
161,839
284,392
71,094
(10,214)
53,572
65,327

1,714,759

526,444
83,630
104,821
37,904
82,325
58,038
73,277
19,111
119,689
7,844

1,328,200

1,171,012

1,113,083

Income before income tax, minority interest and cumulative effect

of accounting change

Income tax
Net gain of minority interest

Income before cumulative effect of accounting change
Cumulative effect of accounting change, net of tax

Net income

Net income applicable to common stock

Net income per common share – basic, after cumulative effect

of accounting change

Net income per common share – diluted, after cumulative effect

of accounting change

Dividends declared per common share

686,010
148,915
—

537,095
3,607

$ 540,702

$ 528,789

1.98

1.97

0.64

634,613
144,705
—

489,908
—

601,676
130,326
(435)

470,915
—

$ 489,908

$ 477,995

$ 470,915

$ 460,996

1.79

0.62

1.74

0.51

For a complete set of audited consolidated financial statements in conformity with accounting principles generally accepted in the United States of America, refer
to Popular, Inc.’s 2005 Financial Review and Supplementary Information to Stockholders incorporated by reference in Popular, Inc.’s Annual Report on Form 10-K
for the year ended December 31, 2005.

P O P U L A R 2 0 0 5

32/33

Historical Financial Summary – 25 Years

(Dollars in millions, except per share data)

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

Selected Financial Information

Net Interest Income
Non-Interest Income
Operating Expenses
Net Income
Assets
Net Loans
Deposits
Stockholders’ Equity
Market Capitalization
Return on Assets (ROA)
Return on Equity (ROE)

Per Common Share 1

Net Income – Basic
Net Income – Diluted
Dividends (Declared)
Book Value
Market Price

$ 135.9
15.8
109.4
24.3
2,677.9
1,007.6
2,111.7
142.3
66.4
0.90%
18.36%

$
$

0.17
0.17
0.03
0.97
0.46

$ 151.7
15.9
121.2
27.3
2,727.0
976.8
2,208.2
163.5
99.0
0.96%
17.99%

$ 144.9
19.6
127.3
26.8
2,974.1
1,075.7
2,347.5
182.2
$ 119.3

$ 156.8
19.0
137.2
29.8
3,526.7
1,373.9
2,870.7
203.5
$ 159.8

$ 174.9
26.8
156.0
32.9
4,141.7
1,715.7
3,365.3
226.4
$ 216.0

$ 184.2
41.4
168.4
38.3
4,531.8
2,271.0
3,820.2
283.1
$ 304.0

$ 207.7
41.0
185.7
38.3
5,389.6
2,768.5
4,491.6
308.2
$ 260.0

$ 232.5
54.9
195.6
47.4
5,706.5
3,096.3
4,715.8
341.9
$ 355.0

$ 260.9
63.3
212.4
56.3
5,972.7
3,320.6
4,926.3
383.0
$ 430.1

$ 284.2
70.9
229.6
63.4
8,983.6
5,373.3
7,422.7
588.9
$ 479.1

$ 407.8
131.8
345.7
64.6
8,780.3
5,195.6
7,207.1
631.8
$ 579.0

0.95%
15.86%

0.94%
15.83%

0.89%
15.59%

0.88%
15.12%

0.76%
13.09%

0.85%
14.87%

0.99%
15.87%

1.09%
15.55%

0.72%
10.57%

$
$

0.19
0.19
0.04
1.11
0.69

$
$

0.19
0.19
0.06
1.24
0.83

$
$

0.21
0.21
0.06
1.38
1.11

$
$

0.23
0.23
0.07
1.54
1.50

$
$

0.25
0.25
0.08
1.73
2.00

$
$

0.24
0.24
0.09
1.89
1.67

$
$

0.30
0.30
0.09
2.10
2.22

$
$

0.35
0.35
0.10
2.35
2.69

$
$

0.40
0.40
0.10
2.46
2.00

$
$

0.27
0.27
0.10
2.63
2.41

Assets by Geographical Area

Puerto Rico
United States
Caribbean and Latin America

95%
5%

Total

100%

Traditional Delivery System

94%
5%
1%

100%

112
3
6

121

91%
8%
1%

100%

113
3
9

125

92%
7%
1%

100%

115
3
9

127

92%
7%
1%

100%

124
3
9

136

110
1
7

118

110
2
7

119

Banking Branches
Puerto Rico
Virgin Islands
United States

Subtotal
Non-Banking Offices

Popular Financial Holdings
Popular Cash Express
Popular Finance
Popular Auto
Popular Leasing, U.S.A.
Popular Mortgage
Popular Securities
Popular Insurance
Popular Insurance Agency U.S.A.
Popular Insurance, V.I.
EVERTEC

Subtotal

Total

Electronic Delivery System

ATMs2

Owned and Driven
Puerto Rico
Caribbean
United States

Subtotal

Driven

Puerto Rico
Caribbean

Subtotal
Total

Transactions (in millions)

Electronic Transactions3
Items Processed

Employees (full-time equivalent)

118

119

121

125

127

136

6
84

36
130

113

51
164

94%
5%
1%

100%

126
3
9

138

93%
6%
1%

100%

126
3
10

139

152

136
3

139

55
194

156

153
3

156

68
224

92%
6%
2%

100%

89%
9%
2%

100%

87%
11%
2%

100%

128
3
10

141

18
4

163

151
3

154

65
219

173
3
24

200

26
9

235

211
3

214

54
268

161
3
24

188

26
9

250

206
3

209

73
282

96.9

3,891

98.5

3,816

0.6
102.1

3,832

4.4
110.3

4,110

7.0
123.8

4,314

8.3
134.0

4,400

12.7
139.1

4,699

14.9
159.8

5,131

16.1
161.9

5,213

18.0
164.0

7,023

23.9
166.1

7,006

1 Per common share data adjusted for stock splits.
2 Does not include host-to-host ATMs (1,649 in 2005) which are neither owned nor driven, but are part of the ATH Network.
3 From 1981–2003, electronic transactions include ACH, Direct Payment, TelePago, Internet Banking and ATH Network transactions in Puerto Rico. Since 2004, these numbers were adjusted to include ATH Network
transactions in the Dominican Republic, Costa Rica, El Salvador and United States, health care transactions, wire transfers, and other electronic payment transactions in addition to those previously stated.

W E C O N N E C T

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

$ 440.2
124.5
366.9
85.1
10,002.3
5,252.1
8,038.7
752.1
$ 987.8

$ 492.1
125.2
412.3
109.4
11,513.4
6,346.9
8,522.7
834.2
$ 1,014.7

0.89%
12.72%

1.02%
13.80%

535.5
141.3
447.8
124.7
12,778.4
7,781.3
9,012.4
1,002.4
923.7
1.02%
13.80%

584.2
173.3
486.8
146.4
15,675.5
8,677.5
9,876.7
1,141.7
$ 1,276.8

681.3
205.5
541.9
185.2
16,764.1
9,779.0
10,763.3
1,262.5
$ 2,230.5

784.0
247.6
636.9
209.6
19,300.5
11,376.6
11,749.6
1,503.1
$ 3,350.3

873.0
291.2
720.4
232.3
23,160.4
13,078.8
13,672.2
1,709.1
$ 4,611.7

953.7
372.9
837.5
257.6
25,460.5
14,907.8
14,173.7
1,661.0
$ 3,790.2

982.8
464.1
876.4
276.1
28,057.1
16,057.1
14,804.9
1,993.6
$ 3,578.1

$ 1,056.8
491.8
926.2
304.5
30,744.7
18,168.6
16,370.0
2,272.8
$ 3,965.4

$ 1,160.2
543.8
1,029.0
351.9
33,660.4
19,582.1
17,614.7
2,410.9
$ 4,476.4

$ 1,284.7
626.0
1,113.1
470.9
36,434.7
22,602.2
18,097.8
2,754.4
$ 5,960.2

$ 1,375.5
608.8
1,171.0
489.9
44,401.6
28,742.3
20,593.2
3,104.6
$ 7,685.6

$ 1,424.2
785.3
1,328.2
540.7
48,623.7
31,710.2
22,638.0
3,449.2
$ 5,836.5

1.04%
14.22%

1.14%
16.17%

1.14%
15.83%

1.14%
15.41%

1.08%
15.45%

1.04%
15.00%

1.09%
14.84%

1.11%
16.29%

1.36%
19.30%

1.23%
17.60%

1.17%
17.12%

$ 0.35
$ 0.35
0.10
2.88
$ 3.78

$
$

0.42
0.42
0.12
3.19
3.88

$
$

0.46
0.46
0.13
3.44
3.52

$
$

0.53
0.53
0.15
3.96
4.85

$
$

0.67
0.67
0.18
4.40
8.44

$
$

0.75
0.75
0.20
5.19
12.38

$
$

0.83
0.83
0.25
5.93
17.00

$
$

0.92
0.92
0.30
5.76
13.97

$
$

0.99
0.99
0.32
6.96
13.16

$
$

1.09
1.09
0.38
7.97
14.54

$
$

1.31
1.31
0.40
9.10
$ 16.90

$
$

1.74
1.74
0.51
9.66
22.43

$
$

1.79
1.79
0.62
10.95
28.83

$
$

1.98
1.97
0.64
11.82
21.15

87%
10%
3%

100%

79%
16%
5%

100%

76%
20%
4%

100%

75%
21%
4%

100%

74%
22%
4%

100%

74%
23%
3%

100%

71%
25%
4%

100%

71%
25%
4%

100%

72%
26%
2%

100%

68%
30%
2%

100%

66%
32%
2%

100%

62%
36%
2%

100%

55%
43%
2%

100%

53%
45%
2%

100%

162
3
30

195

26
9

271

211
3
6

220

81
301

165
8
32

205

26
8

297

234
8
11

253

86
339

166
8
34

208

28
10

111

319

262
8
26

296

88
384

166
8
40

214

31
9

134

348

281
8
38

327

120

120
447

178
8
44

230

102

39
8

3
1

153

383

327
9
53

389

162
97

259
648

201
8
63

272

117

44
10
7
3
2

183

455

391
17
71

479

170
192

362
841

28.6
170.4

7,024

33.2
171.8

7,533

43.0
174.5

7,606

56.6
175.0

7,815

78.0
173.7

7,996

111.2
171.9

8,854

198
8
89

295

128
51
48
10
8
11
2

258

553

421
59
94

574

187
265

199
8
91

298

137
102
47
12
10
13
2

327

625

442
68
99

609

102
851

199
8
95

302

136
132
61
12
11
21
3
2

382

684

478
37
109

624

118
920

196
8
96

300

149
154
55
20
13
25
4
2
1

427

727

524
39
118

681

155
823

195
8
96

299

153
195
36
18
13
29
7
2
1
1
5

460

759

539
53
131

723

174
926

452
1,026

130.5
170.9

953
1,562

159.4
171.0

1,038
1,662

199.5
160.2

978
1,659

206.0
149.9

1,100
1,823

236.6
145.3

193
8
97

298

181
129
43
18
11
32
8
2
1
1
5

431

729

557
57
129

743

176
1,110

1,286
2,029

255.7
138.5

192
8
128

328

183
114
43
18
15
30
9
2
1
1
7

423

751

568
59
163

790

167
1,216

1,383
2,173

618.2
133.9

194
8
136

338

213
4
49
17
14
33
12
2
1
1
8

354

692

583
61
181

825

212
1,726

1,938
2,763

666.1
128.2

10,549

11,501

10,651

11,334

11,037

11,474

12,139

13,210

P O P U L A R 2 0 0 5

34/35

S U B S I D I A R I E S

S T O C K H O L D E R S ’ I N F O R M AT I O N

Banco Popular de Puerto Rico

Independent Registered Public Accounting Firm

PricewaterhouseCoopers LLP

Additional Information

The Annual Report to the Securities and

Exchange Commission on Form 10-K and any

other financial information may also be viewed

by visiting our web site www.popular.com.

Popular Mortgage, Inc.

Popular Auto, Inc.

Popular Finance, Inc.

Popular Securities, Inc.

Popular Insurance, Inc.

Popular Life Re

Popular Insurance V.I., Inc.

Banco Popular North America

Popular Cash Express

Popular Leasing, U.S.A.

Banco Popular, National Association

Popular North America, Inc.

Popular Insurance Agency U.S.A., Inc.

Popular FS, LLC

Popular International Bank, Inc.

Popular Financial Holdings, Inc.

Equity One, Inc.

E-LOAN

EVERTEC, Inc.

ATH Costa Rica, S.A./CreST, S.A.

EVERTEC de Venezuela, C.A.

EVERTEC República Dominicana, S.A.

EVERTEC, U.S.A., Inc.

ScanData Puerto Rico, Inc.

Design: BD&E Inc., Pittsburgh, Pennsylvania

Photography: Ernesto Robles, Félix Rivera

Printing: Hoechstetter Printing, an RR Donnelley Company