Popular Inc. CEO Richard Carrion said Tuesday that the Puerto Rican banking company is in the last leg of an 18-month overhaul of its lagging operations on the U.S. mainland.

"I think we are coming to the end," Carrion said a day after the company announced an exchange offer to boost capital. "I don't think there is much in the way of restructuring left."

After conducting what Carrion described as its own internal stress test, the $37.7 billion-asset company is suspending its dividend and plans to issue up to 390 million common shares for preferred shares and trust-preferred securities. The move is expected to boost its Tier 1 common equity by as much as $1.2 billion, bumping its Tier 1 ratio to a range of 6.5% to 7.5%, up from 3.13% at March 31.

Eliminating the 2-cent dividend and interest payments on the preferred shares should save up to $100 million annually, Carrion said.

Popular is making the offer, he said, to get "ahead of the curve" of regulatory focus on capital levels since the government's stress testing of the nation's 19 largest banks.

Joe Gladue, a senior analyst at B. Riley & Co. Inc., described the exchange offer as a bitter but necessary pill for Popular and its shareholders, whose holdings are to be diluted as much as 58%. On the other hand, he said, it will increase tangible common equity to an estimated 6.02%, from 2.67% at March 31.

"It's unpleasant for the company and for common shareholders," Gladue said, "but I think it's something they needed to do to get their capital ratios in line with what the regulators are looking for."

The market reacted poorly, sending Popular's shares down 10 cents, to close at $2.45 a share on Tuesday.

Gladue said the offer would put Popular in a better position to repay the $935 million it received under the Troubled Asset Relief Program last year. Though Carrion said the company would eventually like to repay its Tarp funds, he did not see that happening "at this moment," given its capital needs.

The offer is just the latest in a series of tough choices Popular has had to make in the last two years as it has set out to fix its mainland division, Banco Popular North America.

The San Juan-based company has remained profitable in its home market, Puerto Rico, but it has been badly bruised by the recession on the mainland after ill-fated expansions into new businesses like online mortgage lending and consumer finance. It has left those businesses.

Popular's mainland division lost $213.5 million in the first quarter, up from a loss of about $2 million a year earlier. Its Puerto Rico arm, meanwhile, earned $179.8 million in the quarter, up from $98.8 million a year earlier.

Banco Popular North America in Chicago has undergone a dramatic face-lift since January 2008, when it sold its Texas branches as part of a plan to retrench in key metropolitan markets with high concentrations of Spanish speakers. The paring continued through last month, when Popular announced that it would sell six sites in New Jersey and shut 22 in-store branches in California.

Carrion said the company acquired the in-store branches with its 2004 deal for Quaker City Bancorp Inc., hoping that they would be a good deposit source as its in-store sites have been in Puerto Rico.

"The in-store model has not worked for us in the States," he said. "It has worked here. But here we have a very dominant market share."

Popular now has about 104 offices in New York, New Jersey, Illinois, California and Florida. The company may shut fewer than 10 more underperforming sites, Carrion said. With most of the cuts behind him, he said, the company will focus on attracting deposits and making loans in the United States.

"We probably stretched a little too far in doing ancillary things," he said. "We're going back to basics. Most of the banks are."

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