BPOP

Popular, Inc.

Popular is a diversified, publicly owned bank holding company, registered under the Bank Holding Company Act of 1956, as amended (the “BHC Act”) and, accordingly, subject to the supervision and regulation of the Board of Governors of the Federal Reserve System (“the Federal Reserve Board”). Popular was incorporated in 1984 under the laws of the Commonwealth of Puerto Rico and is the largest financial institution based in Puerto Rico, with consolidated assets of $34.7 billion, total deposits of $25.9 billion and stockholders’ equity of $2.5 billion at December 31, 2009. At December 31, 2009, we ranked 38th among bank holding companies based on total assets according to information gathered and disclosed by the Federal Reserve System.

We operate in three target markets: Puerto Rico, the United States mainland and providing processing and other technology services in Puerto Rico, Florida, Venezuela, the Dominican Republic, El Salvador and Costa Rica.
Puerto Rico

We offer in Puerto Rico a complete array of retail and commercial banking services through our principal bank subsidiary, Banco Popular de Puerto Rico (“Banco Popular” or the “Bank”). Banco Popular was organized in 1893 and is Puerto Rico’s largest bank with consolidated total assets of $23.3 billion, deposits of $17.8 billion and stockholder’s equity of $1.9 billion at December 31, 2009. The Bank accounted for 67% of our total consolidated assets at December 31, 2009. Banco Popular has the largest retail franchise in Puerto Rico, with 173 branches and over 580 automated teller machines. The Bank also operates seven branches in the U.S. Virgin Islands, one branch in the British Virgin Islands and one branch in New York. Banco Popular’s deposits are insured under the Deposit Insurance Fund (“DIF”) of the Federal Deposit Insurance Corporation (the “FDIC”).

Banco Popular has three subsidiaries: Popular Auto, Inc., a vehicle financing, leasing and daily rental company, Popular Mortgage, Inc., a mortgage loan company with over 30 offices in Puerto Rico and BP Sirenusa International, LLC, a limited liability company holding certain assets acquired in satisfaction of debts previously contracted by Banco Popular relating to a real estate development property in the U.S. Virgin Islands.

Our Puerto Rico operations also provide financial advisory, investment and securities brokerage services for institutional and retail customers through Popular Securities, Inc., a wholly-owned subsidiary of Popular. Popular Securities, Inc. is a securities broker-dealer with operations in Puerto Rico. As of December 31, 2009, Popular Securities had $272 million in total assets and over $4.0 billion in assets under management.

We offer insurance services through Popular Insurance, Inc. Popular Insurance is a general insurance agency and Popular Life RE, a reinsurance company, with total revenues of $20 million and $21 million, respectively, for the year ended December 31, 2009. Also, Popular owns in Puerto Rico Popular Risk Services, Inc., an insurance broker. Insurance services are also provided through Popular Insurance V.I., Inc., a wholly-owned subsidiary of Popular International Bank, Inc. (“PIB”) and an insurance agency.

We have four other wholly-owned subsidiaries. The first, PIB was organized in 1992 and operates as an “international banking entity” under the International Banking Center Regulatory Act of Puerto Rico (the “IBC Act”). PIB is a registered bank holding company under the BHC Act and is principally engaged in providing managerial services to its subsidiaries. The other three subsidiaries are Popular Capital Trust I, Popular Capital Trust II and Popular Capital Trust III, statutory business trusts.

United States Mainland

Popular North America, Inc. (“PNA”) functions as a holding company for Popular’s operations in the United States mainland. PNA, a wholly owned subsidiary of PIB and an indirect wholly-owned subsidiary of Popular, was organized in 1991 under the laws of the State of Delaware and is a registered bank holding company under the BHC Act. As of December 31, 2009, PNA had two direct subsidiaries all of which were wholly-owned:
Banco Popular North America (“BPNA”), a full service commercial bank incorporated in the state of New York; Popular Financial Holdings, Inc. (“PFH”), a consumer finance company; The banking operations of BPNA in the United States mainland are based in five states.

In addition, BPNA has a mortgage operation with $1.2 billion in assets at December 31, 2009, in Houston, Texas. In the last quarter of 2009, BPNA sold six bank branches in New Jersey with approximately $225 million in deposits. No loans were sold in this transaction.

BPNA also owns all of the outstanding stock of E-LOAN, Inc. (“E-LOAN”), Popular Equipment Finance, Inc., and Popular Insurance Agency USA, Inc. E-LOAN provides an online platform to raise deposits for BPNA. All direct lending activities at E-LOAN were ceased during the fourth quarter of 2008. At December 31, 2009, E-LOAN’s total assets amounted to $561 million. Popular Equipment Finance, Inc. sold a substantial portion of its lease financing portfolio during the quarter ended March 31, 2009 and also ceased originations as part of the BPNA restructuring plan implemented in late 2008. As a result of these initiatives the total assets of Popular Equipment Finance, Inc. were reduced to $58 million at December 31, 2009. Popular Insurance Agency USA, Inc. acts as an insurance agent or broker for issuing insurance across the BPNA branch network. Revenues of Popular Insurance Agency USA, Inc. for the year ended December 31, 2009 totaled $6 million.

PFH has two direct subsidiaries: Equity One, Inc. (“Equity One”) and Popular Mortgage Servicing, Inc. During the third quarter of 2008, Popular discontinued the operations of PFH. As of December 31, 2009, PFH had total remaining assets of $19 million.

Processing and Other Technology Services

Our financial transaction processing and technology services are provided through EVERTEC, Inc., ATH Costa Rica, S.A., EVERTEC LATINOAMÉRICA, SOCIEDAD ANÓNIMA and T.I.I. Smart Solutions Inc. (“EVERTEC reportable segment”). EVERTEC, Inc., a wholly-owned subsidiary of Popular uses its expertise in technology to provide services in the United States, the Caribbean, Latin America, and internally servicing many of our subsidiaries’ system infrastructures and transactional processing businesses. ATH Costa Rica, S.A. and EVERTEC LATINOAMÉRICA, SOCIEDAD ANÓNIMA, wholly- owned subsidiaries of PIB, provide ATM switching and driving services in San José, Costa Rica. T.I.I. Smart Solutions Inc., also a wholly-owned subsidiary of PIB, is a technology company based also in Costa Rica that develops financial processing software applications and sells hardware products (ATM, POS and communication products). For the year ended December 31, 2009, revenues of EVERTEC reportable segment totaled $257 million and its net income totaled $50 million.

In addition, PIB, a wholly owned subsidiary of Popular, has equity investments in Consorcio de Tarjetas Dominicanas (“CONTADO”), the largest merchant acquirer and ATM network in the Dominican Republic and in Servicios Financieros, S.A. (“Serfinsa”), one of the largest ATM network in El Salvador, which are part of EVERTEC reportable segment. PIB also has an equity investment in Banco Hipotecario Dominicano (“BHD”) in the Dominican Republic.
Significant Events During 2009

During 2009, we carried out a series of actions designed to improve our U.S. operations, address credit quality, contain controllable costs, maintain well-capitalized ratios and improve capital and liquidity positions. These actions included the following: Sale or closing, throughout the year, of unprofitable businesses and the consolidation of branches in the United States and Puerto Rico markets resulting in a net reduction of 46 branches. The latter includes the sale in October 2009 of six New Jersey bank branches of BPNA with approximately $225 million in deposits; Implementation of cost-cutting measures such as the hiring and pension plan freezes and the suspension of matching contributions to retirement plans; Restructuring our credit divisions, working with clients to find individual solutions and heightening our focus on collection processes; Suspension of dividends on Popular’s common stock (“common stock”) and Series A and B preferred stock in June 2009; Completion in August 2009 of the exchange offer, which resulted in the issuance of over 357 million in new shares of common stock and increased our Tier 1 common equity by $1.4 billion.