For immediate release

The Federal Reserve Board today announced its approval of the proposal of Popular, Inc, Banco Popular de Puerto Rico, Popular Transition Bank, all of Hato Rey, Puerto Rico, and Banco Popular, New York, New York, New York, to reorganize the banking operations of Popular, Inc., under two de novo banks that would become members of the Federal Reserve System; to establish a branch and an agency in the United States; and to establish three agreement corporations. Attached is the Board's Order relating to this action.

Popular, Inc. Hato Rey, Puerto Rico Banco Popular de Puerto Rico Hato Rey, Puerto Rico Popular Transition Bank Hato Rey, Puerto Rico Banco Popular, New York New York, New York Order Approving the Acquisition of Banks, Merger of Banks, Establishment of Branches and an Agency, and Membership in the Federal Reserve System

Popular, Inc., Hato Rey, Puerto Rico ("Popular"), a bank holding company within the meaning of the Bank Holding Company Act ("BHC Act"), and its subsidiaries propose to reorganize their holdings in a manner that requires the Board's approval under section 3 of the BHC Act (12 U.S.C. § 1842) and section 18(c) of the Federal Deposit Insurance Act (12 U.S.C. § 1828(c)) ("Bank Merger Act"). As part of this proposal, Popular would reorganize its banking operations under two de novo banks, one organized under the laws of Puerto Rico and the other organized under the laws of New York, that propose to become members of the Federal Reserve System pursuant to sections 9 and 19(h) of the Federal Reserve Act ("FRA") (12 U.S.C. § § 321 and 466). The Puerto Rican de novo bank, Popular Transition Bank, Hato Rey, Puerto Rico ("New Banco Popular"), also proposes to operate a branch and agency in the United States pursuant to section 7(d) of the International Banking Act ("IBA") (12 U.S.C. § 3105(d)),1 and to establish three agreement corporations pursuant to section 25 of the FRA.2 Notice of the proposal, affording interested persons an opportunity to submit comments, has been published (60 Federal Register 52,273 (1998)).3 As required by the Bank Merger Act, reports on the competitive effects of the merger were requested from the U.S. Attorney General, the Office of the Comptroller of the Currency ("OCC"), and the Federal Deposit Insurance Corporation. The time for filing comments has expired, and the Board has considered the applications and notices and all comments received in light of the factors set forth in the Bank Merger Act, the BHC Act, the FRA, and the IBA. Popular, the top-tier parent holding company of Banco Popular de Puerto Rico, Hato Rey, Puerto Rico ("Banco Popular"), has total consolidated assets of approximately $20 billion and total consolidated deposits of approximately $12 billion.4 Banco Popular, with total consolidated assets of approximately $16 billion, is the largest commercial banking organization in Puerto Rico, controlling total consolidated deposits of approximately $8 billion, representing approximately 35 percent of total deposits in Puerto Rico.5 Banco Popular has approximately 200 branches in Puerto Rico, as well as branches in the U.S. Virgin Islands and the British Virgin Islands. Banco Popular's U.S. banking operations include branches in New York State and an agency in Chicago, Illinois (the "Chicago Agency"). In addition to Banco Popular, Popular controls nine insured depository institutions in California, Florida, Illinois, New Jersey, and Texas. As part of the reorganization, Popular proposes to merge certain of its current U.S. banking operations into a single state-chartered bank, Banco Popular, New York ("Banco Popular-New York"). Popular also proposes to transfer Banco Popular's current operations in Puerto Rico, the U.S. Virgin Islands and the British Virgin Islands, and a proposed state-licensed branch in New York, New York (the "New NY Branch"), and the Chicago Agency (collectively, the "Purchased Operations"), to New Banco Popular. Both Banco Popular-New York and New Banco Popular have requested approval to become members of the Federal Reserve System.6 Interstate Analysis Under the proposal, Banco Popular-New York would operate branches in its home state of New York and in California, Florida, Illinois, and New Jersey at locations where the bank's predecessors currently operate branches.7 Under section 9 of the FRA and section 44 of the Federal Deposit Insurance Act ("FDI Act"), a state member bank may acquire and operate branches outside the bank's home state provided certain conditions are met.8 None of the home states of the depository institutions involved in the proposed depository institution mergers have enacted laws that prohibit the proposed mergers.9 In addition, the Board has determined that each bank involved in the proposal would be adequately capitalized and adequately managed on consummation of the transaction, and that all other applicable conditions of section 9 of the FRA and section 44 of the FDI Act are met by this proposal.10 Popular has notified the relevant state authorities in New York, California, Florida, Illinois, and New Jersey of its proposal to consolidate banking operations and provided a copy of its Bank Merger Act application to all the relevant state agencies. Representatives from all the states involved in the proposal have indicated that this transaction would comply with their state laws on interstate bank mergers. In light of the foregoing, it appears that the proposal complies with the interstate banking requirements of section 9 of the FRA and section 44 of the FDI Act.11 Under section 5(a)(7) of the IBA, a foreign bank, with the approval of the Board, may establish an agency outside its home state, provided the establishment and operation of the agency is expressly permitted by the state in which the agency is to be established.12 For purposes of the IBA, New Banco Popular's home state would be New York, and New Banco Popular proposes to operate the Chicago Agency as an agency of the bank. After a review of section 5 of the IBA and the relevant state law of Illinois, the Board has determined that New Banco Popular may operate the Chicago Agency at this location, subject to the condition that New Banco Popular also receive the approval of the OCC. Other Factors In reviewing this proposal under the FRA, the Bank Merger Act and section 3 of the BHC Act, the Board has considered the financial and managerial resources and future prospects of the companies and banks involved, the convenience and needs of the communities to be served, and certain supervisory factors. The Board has reviewed these factors in light of the facts of record, including supervisory reports of examination assessing the financial and managerial resources of the organizations and financial information provided by Popular. The Board notes that the resulting institutions would be well-capitalized on consummation of the proposal. Based on all the facts of record, the Board concludes that the financial and managerial resources and future prospects of the holding companies and their subsidiaries are consistent with approval, as are the other supervisory factors the Board must consider under the FRA, the Bank Merger Act and section 3 of the BHC Act. In considering the convenience and needs factor, the Board reviewed the records of the relevant depository institutions under the Community Reinvestment Act ("CRA").13 As provided in the CRA, the Board has evaluated this factor in light of examinations by the primary federal supervisors of the relevant institutions. All the insured depository institutions controlled by Popular received "outstanding" or "satisfactory" CRA performance ratings in their most recent CRA examinations by their primary federal supervisors. Based on a review of the entire record, the Board concludes that convenience and needs considerations, including the CRA performance records of the institutions involved, are consistent with approval of the proposal. The Board also considered the competitive effects of the proposal as required by the Bank Merger Act and section 3 of the BHC Act. Based on all the facts of record, including the fact that this transaction is a corporate reorganization, the Board concludes that consummation of the proposal would not have a significantly adverse effect on competition or on the concentration of banking resources in any relevant banking market. Accordingly, the Board concludes that competitive considerations are consistent with approval. In addition, the Board has considered the factors it is required to evaluate under the IBA for New Banco Popular to operate the Chicago Agency and the New NY Branch. New Banco Popular would engage directly in the business of banking outside the United States through its banking operations in Puerto Rico and elsewhere. Popular has provided the Board with the information necessary to assess the application through submissions that address the relevant issues. In addition, New Banco Popular would be subject to comprehensive consolidated supervision by the appropriate federal and Puerto Rican bank supervisory agencies. The Board also has determined that the other standards required by the IBA are met in this case and that all factors under section 25 of the FRA are consistent with approval. Conclusion Based on the foregoing, including the commitments made to the Board by Popular and its subsidiaries in connection with these applications and notices, and in light of all the facts of record, the Board has determined that these applications and notices should be, and hereby are, approved. The Board's approval is specifically conditioned on compliance by the applicants with all commitments made in connection with these applications and notices and the conditions discussed in this order. The acquisition and merger of Popular's subsidiary banks shall not be consummated before the fifteenth calendar day following the effective date of this order or later than three months following the effective date of this order, unless such period is extended for good cause by the Board or by the Federal Reserve Bank of New York, acting pursuant to delegated authority.

By order of the Board of Governors,14 effective November 16, 1998. (signed) Robert deV. Frierson Robert deV. Frierson Associate Secretary of the Board

Appendix Applications and Notices Submitted to the Board in connection with the Reorganization of Popular, Inc. Membership of New Banco Popular in the Federal Reserve System under section 19(h) of the Federal Reserve Act (12 U.S.C. § 466). Membership of Banco Popular-New York in the Federal Reserve System under section 9 of the Federal Reserve Act (12 U.S.C. § 321). Acquisition by Popular and its intermediate holding companies of control of Banco Popular-New York under section 3(a)(3) of the Bank Holding Company Act (12 U.S.C. § 1842(a)(3)). Acquisition by Popular and its intermediate holding companies of control of New Banco Popular under section 3(a)(3) of the Bank Holding Company Act (12 U.S.C. § 1842(a)(3)). Retention of ownership by Popular and its intermediate holding companies, under section 3(a)(3) of the Bank Holding Company Act, of Banco Popular, F.S.B., after its conversion from a federal savings association to a national banking association (12 U.S.C. § 1842(a)(3)). Acquisition by Banco Popular North America, Inc. of control of Banco Popular, N.A. (Texas) under section 3(a)(3) of the Bank Holding Company Act (12 U.S.C. § 1842(a)(3)). Acquisition by New Banco Popular of the Purchased Operations from Banco Popular under the Bank Merger Act (12 U.S.C. § 1828(c)). Merger of Banco Popular (with only New York operations) with and into Banco Popular-New York under the Bank Merger Act (12 U.S.C. § 1828(c)). Merger of Banco Popular, F.S.B. (after its conversion to a national banking association) with and into Banco Popular-New York under the Bank Merger Act (12 U.S.C. § 1828(c)). Merger of Banco Popular, Illinois with and into Banco Popular-New York under the Bank Merger Act (12 U.S.C. § 1828(c)). Merger of Banco Popular, N.A. (California) with and into Banco Popular-New York under the Bank Merger Act (12 U.S.C. § 1828(c)). Merger of Banco Popular, N.A. (Florida) with and into Banco Popular-New York under the Bank Merger Act (12 U.S.C. § 1828(c)). Merger of First State Bank of Southern California with and into Banco Popular-New York under the Bank Merger Act (12 U.S.C. § 1828(c)). Merger of Bronson-Gore Bank with and into Banco Popular-New York under the Bank Merger Act (12 U.S.C. § 1828(c)). Merger of Irving Bank with and into Banco Popular-New York under the Bank Merger Act (12 U.S.C. § 1828(c)). Establishment of branches at the locations of the predecessor institutions of New Banco Popular and Banco Popular-New York under section 9 of the Federal Reserve Act (12 U.S.C. § 321). Merger of Water Tower Bank with and into Banco Popular-New York under the Bank Merger Act (12 U.S.C. § 1828(c)). Establishment by New Banco Popular of an agency in Chicago, Illinois, under section 7(d) of the International Banking Act (12 U.S.C. § 3105(d)). Establishment by New Banco Popular of a branch in New York, New York, under section 7(d) of the International Banking Act (12 U.S.C. § 3105(d)). Redemption of capital stock and reduction of capital of Banco Popular under sections 9(6) and 9(11) of the Federal Reserve Act (12 U.S.C. § § 324 and 329), resulting from a distribution to Popular consisting of all the outstanding shares of common stock of New Banco Popular. Reduction of capital of Banco Popular-New York, under sections 9(6) and 9(11) of the Federal Reserve Act (12 U.S.C. § § 324 and 329), resulting from a dividend to Popular North America, Inc., consisting of all the outstanding shares of common stock of Equity One, Inc. Acquisition by New Banco Popular of all the outstanding shares of Popular Leasing & Rental, Inc., Popular Mortgage, Inc., and Popular Finance, Inc. as agreement corporations under section 211.4(f) of Regulation K (12 C.F.R. 211.4(f)). Establishment by Banco Popular-New York of an international banking facility under 12 C.F.R. 204.8(a)(1). Establishment by New Banco Popular of its first two branches in foreign countries, under section 25 of the Federal Reserve Act (12 U.S.C. § 601) and section 211.3(a)(1) of Regulation K (12 C.F.R. 211.3(a)(1)).

Footnotes 1 For purposes of the application under the IBA, New Banco Popular is considered a "foreign bank" as defined in section 1(b)(7) of the IBA. See 12 U.S.C. § 3101(7). 2 The applications filed with the Board in connection with the proposed reorganization are listed in the Appendix. 3 Notices of the various applications submitted in connection with the proposal were also published in newspapers of general circulation in the relevant communities. 4 Asset and deposit data are as of June 30, 1998, unless otherwise noted. In September 1998, Popular received approval under the BHC Act to acquire First State Bank of Southern California, Sante Fe Springs, California, and Bronson-Gore Bancorp, and thereby acquire its subsidiary banks, Bronson-Gore Bank, Prospect Heights, Illinois; Irving Bank, Chicago, Illinois; and Water Tower Bank, Chicago, Illinois. Popular consummated these acquisitions on October 31, 1998. 5 Banco Popular deposit data and ranking are as of June 30, 1997. 6 New Banco Popular proposes to continue to operate branches in Puerto Rico at locations where Banco Popular currently operates branches. 7 The following insured depository institutions would be merged into Banco Popular-New York: Banco Popular, N.A. (California), City of Commerce, California; First State Bank of Southern California, Santa Fe Springs, California; Banco Popular, N.A. (Florida), Sanford, Florida; Banco Popular, Illinois, Irving Bank, and Water Tower Bank, all of Chicago, Illinois; and Bronson-Gore Bank, Prospect Heights, Illinois. In addition, Popular proposes to merge Banco Popular, F.S.B., Newark, New Jersey ("BP-FSB"), into Banco Popular-New York through a series of steps that require approval under section 5(d)(3) of the FDI Act (12 U.S.C. § 1815(d)(3)). All the factors under section 5(d)(3) of the FDI Act are met in this proposal. 8 See 12 U.S.C. § § 321 and 1831u. Section 9 of the FRA governs the locations where a bank that is or becomes a state member bank may establish and operate branches. That section incorporates the restrictions contained in section 44 of the FDI Act. Section 44 also governs branches that may be acquired by any state member bank in an interstate merger transaction. 9 See Cal. Fin. Code § 3824 (West 1998); Fla. Stat. Ann. § 658.2953 (West 1998); 205 Ill. Comp. Stat. Ann. 5/21.1 (West 1998); and N.J. Stat. Ann. § 17:9A-133.1 (West 1998). 10 See 12 U.S.C. § 1831u(b). 11 All the conditions for an interstate acquisition enumerated in section 3(d) of the BHC Act also would be met in this case. 12 See 12 U.S.C. § 3103(a)(7). 13 12 U.S.C. § 2901 et seq. 14 Voting for this action: Chairman Greenspan, Vice Chair Rivlin, and Governors Kelley, Meyer, Ferguson, and Gramlich.

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1998 Orders on banking applications