SAN JUAN, Puerto Rico, Aug. 8 /PRNewswire-FirstCall/ -- Santander
BanCorp (NYSE: SBP; LATIBEX: XSBP) ("the Corporation") reported a
net income of $24.2 million and $6.5 million for the six-month and
three-month periods ended June 30, 2008, compared with net income
of $15.8 million and $4.1 million for the same periods in 2007. For
the six and three months ended June 30, 2008 and 2007, net income
and other selected financial information, as reported are the
following: Six months ended Three months ended ($ in thousands,
except earnings per share) 30-Jun-08 30-Jun-07 30-Jun-08 30-Jun-07
Net Income $24,238 $15,825 $6,516 $4,096 EPS $0.52 $0.34 $0.14
$0.09 ROA 0.53% 0.35% 0.28% 0.18% ROE 8.66% 5.42% 4.58% 2.76%
Efficiency Ratio (*) 58.64% 64.06% 65.55% 65.78% Net Interest
Margin, on a tax equivalent basis 4.23% 3.86% 4.34% 3.79% (*)
Operating expenses divided by net interest income on a tax
equivalent basis, plus other income excluding gain on sale of
securities, gain on equity securities and extinguishment of
liabilities and derivatives. The Corporation's financial results
for the semester and quarter ended June 30, 2008 were impacted by
the following: -- The provision for loan losses increased $25.2
million or 47.7% for the semester ended June 30, 2008 compared to
the same period in 2007 and $7.7 million or 24.9% for the quarter
ended June 30, 2008 compared to the same period in the prior year.
The allowance for loan losses of $186.9 million as of June 30, 2008
represented 2.74% of total loans, 67.11% of non-performing loans
and 114.66% of non-performing loans excluding loans secured by real
estate. The increase in the provision for loan losses reflects the
current recessionary cycle in Puerto Rico affecting the loan
portfolio, including construction and commercial loans; -- The
provision for loan losses represented 134.28% and 125.15% of the
net charge-offs for the six and three months ended June 30, 2008;
-- The Corporation experienced an increment of 37 basis points in
net interest margin, on a tax equivalent basis, to 4.23% for the
semester ended June 30, 2008 versus 3.86% for the same period in
2007 and an increment of 55 basis points to 4.34% for the quarter
ended June 30, 2008 compared to 3.79% for the same quarter in 2007.
-- Non-interest income for the six months ended June 30, 2008
increased $17.4 million or 26.4% as compared to the same period in
prior year, basically due to higher broker-dealer, asset management
and insurance fees of $9.6 million, an increase in gains on sale of
securities of $2.6 million, an increase in gain on derivatives of
$2.1 million and a gain of $8.6 million on the sale of a portion of
the Corporation's investment in Visa, Inc. in connection with its
initial public offering. These increases were partially offset by a
decrease in gain on sale of loans of $2.1 million and an
unfavorable valuation adjustment of $4.0 million for loans held for
sale recorded through earnings for the semester ended June 30,
2008. The non- interest income for the quarter ended June 30, 2008
remained basically flat when compared with the same quarter in
prior year. -- Operating expenses experienced an increase of $1.9
million or 1.3% and $2.5 million or 3.4% for the semester and
quarter ended June 30, 2008, respectively, when compared to the
same periods in 2007; -- During the quarter ended June 30, 2008,
the Corporation sold certain impaired loans to an affiliate for
$91.3 million in cash. These loans had a net book value of $91.3
million comprised of an outstanding principal balance of $96.8
million and a specific valuation allowance of $5.5 million. The
type of loans by net book value was $76.8 million in construction
loans and $14.5 million in commercial loans. No gain or loss was
recognized on this transaction. -- The common stock dividend for
the six-month period ended June 30, 2008 was $0.20 resulting in a
current annualized dividend yield of 3.77%. Net Interest Income The
Corporation's net interest income for the six months ended June 30,
2008 was $175.6 million, an increase of $18.0 million, or 11.5%,
compared with $157.6 million for the six months ended June 30,
2007. For the six-month period ended June 30, 2008, net interest
margin, on a tax equivalent basis, was 4.23% compared to net
interest margin, on a tax equivalent basis, of 3.86% for the same
period in 2007, a 37 basis points increase. This improvement was
mainly due to a decrease in interest expense of $40.9 million or
23.0% when compared with the same period in the prior year. The
average cost of funds on interest-bearing liabilities experienced a
decrease of 113 basis points from 4.77% for the first semester
ended June 30, 2007 to 3.64% for the same period in 2008. This was
influenced by the reduction in federal funds rates made by the
Federal Reserve since June 2007 which resulted in a lower cost of
short term borrowings. Interest income, on a tax equivalent basis,
reflected a reduction of $24.7 million or 7.3% for the six months
ended June 30, 2008 compared to the same period in 2007 mainly due
to decreases of $17.3 million or 5.7% in interest income on loans
and $7.3 million or 20.4% in interest income on investment
securities, reflecting a 61 basis points decrease in yield on the
average interest-earning assets. The average interest-earning
assets at June 30, 2008 increased $4.1 million when compared with
figures reported at June 30, 2007. This change was composed of an
increase of $152.9 million in average interest bearing deposits
partially offset by a decrease of $117.1 million in average
investment securities due to a sale of $125 million of investment
securities available for sale during the first quarter of 2008.
There was a decrease of $31.7 million in average net loans for the
six months ended June 30, 2008 compared with the same period in
2007. The decrease in average net loans was due to decreases in the
leasing and construction loans portfolios of $38.4 million and
$34.4 million, respectively. The decrease in construction loans was
due to the sale of $82.9 million to an affiliate during the
quarter. These decreases were partially offset by increases of
$16.4 million in average consumer loans, $14.6 million in average
mortgage loans and $68.6 million in average commercial loans. The
increase in average interest-bearing liabilities of $52.1 million
for the six-month period ended June 30, 2008, was driven by an
increase in average total interest-bearing deposits of $319.7
million offset by a decrease in average borrowings of $243.8
million when compared to the six-month period ended June 30, 2007.
The increase in average total interest-bearing deposits was
composed of $203.8 million and $173.3 million in average other time
deposits and average brokered deposits, respectively, offset by a
$57.3 million decrease in average savings and NOW accounts. The
decrease in average borrowings of $243.8 million was composed of a
decrease in average federal funds and other borrowings of $419.0
million mainly due to the payment of the outstanding indebtedness
incurred under a bridge facility agreement among the Corporation,
Santander Financial Services, Inc. (a wholly-owned subsidiary of
the Corporation operating under the trade name "Island Finance")
and National Australia Bank Limited. Average Federal Home Loan Bank
(FHLB) advances reflected an increase of $380.6 million offset by
reductions in average repurchase agreements of $204.8 million.
There was also an increase in average term notes of $22.3 million
for the semester ended June 30, 2008 compared with the same period
in 2007. The Corporation's net interest income for the three months
ended June 30, 2008 reached $91.0 million compared with $78.2
million for the same period in 2007, reflecting an increase of
$12.8 million, or 16.4%. The interest margin, on a tax equivalent
basis, reflected an increase of 55 basis points from 3.79% for the
quarter ended June 30, 2007 to 4.34% for the quarter ended June 30,
2008. The 55 basis points increase in net interest margin, on a tax
equivalent basis, was mainly due to a decrease in interest expense
of $27.7 million or 30.7% when compared with the same period the
prior year. This reduction was due to a decrease in average cost of
149 basis points from 4.78% to 3.29% for the quarter ended June 30,
2008, reflecting the Federal Reserve's interest rate cuts. This
decrease was offset by a 77 basis points decrease in yield on the
average interest-earning assets. Interest income, on a tax
equivalent basis, reflected a reduction of $15.9 million or 9.3%
for the quarter ended June 30, 2008 from $170.3 million for the
quarter ended June 30, 2007 to $154.4 million for the quarter ended
June 30, 2008 mainly due $12.2 million or 8.11% decrease in
interest income on average loans. For the three months ended June
30, 2008, average interest-earning assets increased $53.3 million
when compared to same period the prior year. This improvement was
mainly due to an increase of $290.9 million or 220.8% in average
interest-bearing deposits partially offset by decreases of $165.3
million or 2.4% in average net loans and $72.3 million or 5.0% in
average investment securities due to a sale of $125 million of
investment securities available for sale during the first quarter
of 2008. The decrease in average net loans was driven principally
by an $85.4 million decrease in average construction loans as a
result of the sale of loans with a principal value of $82.9 million
to an affiliate and a $36.7 million decrease in average lease
financing portfolio. Also there was an increase in average
allowance for loan losses of $58.3 million for the quarter. Average
commercial loans reflected an increase of $14.9 million for the
quarter ended June 30, 2008 compared with the quarter ended June
30, 2007. The $69.6 million increase in average interest-bearing
liabilities for the quarter ended June 30, 2008, was driven by an
increase in average other time deposits and average brokered
deposits of $484.5 million and $363.8 million, respectively. The
increase in average interest bearing deposits was offset by $759.1
million decrease in average borrowings and $22.4 million in average
term notes. The reduction in average borrowings was driven by
decreases of $713.9 million in average federal funds purchased and
other borrowings, $189.1 million in average commercial paper and
$180.5 in average securities sold under agreements to repurchase.
These decreases were partially offset by an increase in average
FHLB advances of $324.5 million for the quarter ended June 30, 2008
compared with the same period in 2007. Provision for Loan Losses
The Corporation's provision for loan losses increased $25.2 million
or 47.7% from $52.9 million for the six months ended June 30, 2007
to $78.1 million for the same period in 2008 and $7.7 million or
24.9% for the quarter ended June 30, 2008 when compared with the
same period in prior year. The increase in the provision for loan
losses was due primarily to increases in non-performing loans due
to the deterioration in economic conditions in Puerto Rico,
requiring the Corporation to increase the level of its allowance
for loan losses. There was an increase of $142.6 million in
past-due loans (non- performing loans and accruing loans past-due
90 days or more) which reached $289.8 million as of June 30, 2008,
from $147.3 million as of June 30, 2007, and $301.6 million as of
December 31, 2007. Non-performing loans were $278.5 million as of
June 30, 2008, an increase of $141.5 million or 103.3%, compared to
non-performing loans as of June 30, 2007. Other Income For the six
months ended June 30, 2008, other income reached $83.4 million, a
$17.4 million or 26.4% increase when compared to $66.0 million for
the same period in 2007. For the quarter ended June 30, 2008, other
income remained basically flat when compare to the figures reported
for the same period the prior year. The other income was impacted
by the following: -- Broker-dealer, asset management and insurance
fees reflected an increase of $ 9.6 million for the six-month
period ended June 30, 2008, due to increases in broker-dealer and
asset management fees of $12.1 million partially offset by a
decrease of $2.5 million in insurance fees due to a reduction in
credit life commissions generated from the Island Finance
operation. For the quarter ended June 30, 2008, the $4.6 million
increase in broker-dealer and asset management fees was partially
offset by a $0.7 million decrease in insurance fees. The
broker-dealer operation is carried out through Santander Securities
Corporation ("Santander Securities"), a wholly-owned subsidiary of
the Corporation, whose business includes securities underwriting
and distribution, sales, trading, financial planning and securities
brokerage services. In addition, Santander Securities provides
investment management services through its wholly-owned subsidiary,
Santander Asset Management Corporation. The broker-dealer, asset
management and insurance operations contributed 50.35% and 64.48%
to the Corporation's other income for the semester and quarter
ended June 30, 2008, respectively, and 49.07% and 50.39% to the
semester and quarter ended June 30, 2007. -- There was an increase
in gain on sale of securities available for sale of $2.6 million
for the six months ended June 30, 2008 due to the sale of $125
million in securities during the first quarter of 2008, partially
offset by a loss of $0.4 million on the extinguishment of certain
repurchase agreements that were funding part of the securities
sold. -- The Corporation reported an increase in gain on derivative
instruments of $2.1 million for the six months ended June 30, 2008
compared with the same period during the prior year due to the net
effect of incorporating the Corporation's credit risk in the
derivative fair value calculation methodology pursuant the adoption
of SFAS 157. For the quarter ended June 30, 2008, there was an
increase in losses on derivative instruments of $1.9 million when
compared with the quarter ended June 30, 2007 mostly resulting from
a loss of $1.7 million arising from the credit risk component
incorporated into the fair value calculation of a subordinated note
recognized during the quarter pursuant to SFAS. -- There were
decreases in gain on sale of residential mortgage loans of $2.1
million and $1.2 million in gain on sale of residential mortgage
loans for the six-month and three-month periods ended June 30,
2008, respectively, compared with the same periods the prior year,
due to a decrease in mortgage loans sold of $87.8 million and $35.9
million for the semester and quarter ended June 30, 2008,
respectively compared with the same period in 2007 -- During the
first quarter of 2008 a gain of $8.6 million on the sale of part of
the investment in Visa, Inc. in connection with its initial public
offering was recognized through earnings. -- An unfavorable
valuation adjustment of $4.0 million and $2.2 million for loans
held for sale was recorded through earnings for the semester and
quarter ended June 30, 2008. Operating Expenses The Corporation's
operating expenses reflected increases of $1.9 million and $2.5
million for the six-month and three-month periods ended June 30,
2008 when compared with six-month and three-month periods ended
June 30, 2007. The variances in operating expenses are described
below: -- During the first semester of 2008, total salaries and
other employee benefits reflected a decrease of $4.4 million
compared with the same period the prior year. A $10.4 million
decrease in expense for stock incentive plans was partially offset
by an increase of $5.3 million in other compensation. The increase
in other compensation is mainly due to a $5.4 million increment in
commissions and bonuses. For the quarter ended June 30, 2008, total
salaries and other employee benefits decreased $2.5 million
compared with the quarter ended June 30, 2007. This decrease was
mainly due to a $4.9 million reduction in stock incentive plans
expense partially offset by $2.0 increase in other employee
benefits. -- The Corporation's non-personnel expenses increased
$6.3 million and $5.0 million for the six months and three months
ended June 30, 2008 compared with the same period in prior year.
There were increases of $3.0 million in EDP servicing expenses,
amortization and technical services mainly due to an increase in
technical assistance expense charged by affiliates for software
development; $2.8 million in professional fees principally due to
an increment in consulting fees regarding the adoption of new
accounting pronouncements and review of other operational
procedures; $2.0 million in FDIC assessment due to the 2007
assessment systems implemented under the Federal Deposit Insurance
Reform Act of 2005 ("the Reform Act") that imposed insurance
premiums based on factors such as capital level, supervisory
rating, certain financial ratios and risk information; $1.7 million
in occupancy cost due to the sale and leaseback of the
Corporation's two principal properties in December 2007; and $1.8
million in other taxes. These increases were partially offset by a
$4.2 million decrease in business promotion expenses and a $1.9
million decrease in credit card expenses due to the sale of the
Corporation's merchant business during the first quarter of 2007.
-- For the quarter ended June 30, 2008, non-personnel expenses
increased $5.0 million compared with the quarter ended June 30,
2007. This increment was due to increases in EDP servicing
expenses, amortization and technical services of $2.2 million,
professional fees of $1.9 million, other taxes of $1.5 million,
FDIC assessment due of $1.0 million and occupancy cost of $0.9
million. These increases were partially offset by $2.7 million
decrease in business promotion. The Efficiency Ratio, on a tax
equivalent basis, for the six months ended June 30, 2008 and 2007
was 58.64% and 64.06%, respectively, reflecting an improvement of
542 basis points. For the six months ended June 30, 2008 there was
a decrease of $10.4 million in compensation expense due to a
favorable change in Long Term Incentive Plan valuation and because
the majority of the options granted were exercised under this plan
during the six months ended June 30, 2008, which result in no
additional valuation adjustments. The Efficiency Ratio, on a tax
equivalent basis, for the three months ended June 30, 2008 and 2007
was 65.55% and 65.78%, respectively, reflecting an improvement of
23 basis points. For the three months ended June 30, 2008 there was
a decrease of $4.9 million in compensation expense mostly
attributed to the fact that during 2007 Banco Santander, S.A. (the
"Santander Group", the Corporation's majority shareholders) granted
100 shares of its stock to all employees of the Santander Group as
part of the celebration of its 150th anniversary and during the
quarter ended June 30, 2008 the majority of the options granted to
certain employees under a Long Term Incentive Plan sponsored by the
Santander Group were exercised, which resulted in no additional
valuation adjustments. Further, there a favorable change in Long
Term Incentive Plan valuation occurred during the quarter ended
June 30, 2008. Balance Sheet The Corporation's assets reached $8.8
billion as of June 30, 2008, a 3.5% or $321.5 million decrease
compared to total assets of $9.2 billion at December 31, 2007 and a
3.9% or $357.4 million decrease compared to total assets of $9.2
billion at June 30, 2007. This reduction was mainly due to a
decrease in net loan portfolio of $286.4 million as of June 30,
2008 compared with December 31, 2007 and a decrease of $140.8
million in investment securities due to the sale of $125 million of
certain investment securities available for sale during the first
quarter of 2008. These decreases were partially offset by an
increase in cash and cash equivalents of $118.6 million. Loans The
following table reflects the period end loan balances, including
loans held for sale, as June 30, 2008 and 2007 and December 31,
2007: June08 / June07 Jun-08 Jun-07 $ Var % Var ($ in thousands)
Commercial: Retail $1,796,136 1,883,252 $(87,116) -4.6% Corporate
689,610 632,129 57,481 9.1% Construction 383,704 500,328 (116,624)
-23.3% 2,869,450 3,015,709 (146,259) -4.8% Consumer: Consumer
649,560 670,367 (20,807) -3.1% Consumer finance 606,327 613,924
(7,597) -1.2% 1,255,887 1,284,291 (28,404) -2.2% Mortgage (mainly
residential, including loans held for sale) 2,686,556 2,710,573
(24,017) -0.9% Gross Loans 6,811,893 7,010,573 (198,680) -2.8%
Allowance for loan losses (186,889) (127,916) (58,973) 46.1% Net
Loans $6,625,004 $6,882,657 $(257,653) -3.7% Jun08 / Dec07 Dec-07 $
Var % Var Commercial: Retail $1,857,361 $(61,225) -3.3% Corporate
765,310 (75,700) -9.9% Construction 484,237 (100,533) -20.8%
3,106,908 (237,458) -7.6% Consumer: Consumer 674,349 (24,789) -3.7%
Consumer finance 611,113 (4,786) -0.8% 1,285,462 (29,575) -2.3%
Mortgage (mainly residential, including loans held for sale)
2,685,962 594 0.0% Gross Loans 7,078,332 (266,439) -3.8% Allowance
for loan losses (166,952) (19,937) 11.9% Net Loans $6,911,380
$(286,376) -4.1% The net loan portfolio, including loans held for
sale, reflected a decrease of $286.4 million or 4.1%, reaching $6.6
billion at June 30, 2008, compared to the figures reported as of
December 31, 2007, and a decrease of $257.7 million or 3.7%, when
compared to June 30, 2007. The reduction in net loan portfolio was
basically due to the sale of $96.8 million of certain impaired
commercial and construction loans to an affiliate and repayments of
approximately of $226.3 million in the retail and corporate loan
portfolio during the six months ended June 30, 2008. The mortgage
loan portfolio, at June 30, 2008, remained basically flat when
compared to December 31, 2007 and reflected a decrease of $24.0
million when compared to June 30, 2007. Residential mortgage loan
origination for the semester ended June 30, 2008 was $214.9
million, $127.4 million or 37.2% less than the $342.3 million
originated during the same period in 2007. Total mortgage loans
sold and securitized during the six months ended June 30, 2008 were
$96.0 million compared to $167.2 million during the same period in
2007. The consumer loan portfolio (including consumer finance) also
reflected a decrease of $29.6 million or 2.3% as of June 30, 2008,
compared to December 31, 2007. Compared to June 30, 2007, the
consumer loan portfolio reflected a decrease of $28.4 million or
2.2%. The commercial loan portfolio (including leasing) decreased
$136.9 million or 5.2% and $29.6 million or 1.2% compared with
December 31, 2007 and June 30, 2007, respectively. Allowance for
Loan Losses The following table sets forth an analysis of the
allowance for loan losses during the periods indicated: For the six
months For the three months ended ended June 30, June 30, June 30,
June 30, 2008 2007 2008 2007 (Dollars in (Dollars in thousands)
thousands) Balance at beginning of period $166,952 $106,863
$179,150 $115,171 Provision for loan losses 78,090 52,874 38,515
30,850 245,042 159,737 217,665 146,021 Losses charged to the
allowance 60,055 34,026 31,703 18,917 Recoveries (1,902) (2,205)
(927) (812) Net loans charged-off 58,153 31,821 30,776 18,105
Balance at end of period $186,889 $127,916 $186,889 $127,916 The
Corporation's allowance for loan losses was $186.9 million or 2.74%
of period-end loans at June 30, 2008, a 92 basis point increase
compared to $127.9 million, or 1.82% of period-end loans at June
30, 2007. The $186.9 million in the allowance for loan losses is
comprised of $117.3 million related to commercial banking and $69.6
million to the consumer finance operations, with a provision for
loan losses of $48.1 million and $30.0 million for each respective
segment for the six months ended June 30, 2008. At June 30, 2007,
the $127.9 million in the allowance for loan losses is comprised of
$68.0 million related to commercial banking and $59.9 million to
the consumer finance operations, with a provision for loan losses
of $18.8 million and $34.1 million for the same period for each
respective segment. The increment in the allowance for loan losses
to period-end loan was due to the increase in non-performing loans
and loans past due 90 days or more of $142.6 million from $147.3
million at June 30, 2007 to $289.8 million at June 30, 2008. The
ratio of allowance for loan losses to non-performing loans and
accruing loans past due 90 days or more was 64.48% and 86.87% at
June 30, 2008 and June 30, 2007, respectively, a decrease of 22.39
percentage points. At June 30, 2008, this ratio increased 9.12
percentage points when compared to 55.36% at December 31, 2007.
Excluding non-performing mortgage loans (for which the Corporation
has historically had a minimal loss experience) this ratio was
107.18% at June 30, 2008 compared to 181.39% as of June 30, 2007
and 79.51% as of December 31, 2007. The annualized ratio of net
charge-offs to average loans for the six-month period ended June
30, 2008 was 1.66%, increasing 74 basis points from 0.92% for the
same period in 2007. This change was due to an increment in net
charge-offs of $26.3 million during 2008 when compared with the
same period in 2007. At June 30, 2008, impaired loans (loans
evaluated individually for impairment) with related allowance
amounted to approximately $184.0 million and $30.9 million,
respectively. At December 31, 2007 impaired loans with related
allowance amounted to $205.6 million and $25.6 million,
respectively. Non-performing Assets and Past Due Loans The
following table presents the major categories of non-performing
loans and the variances for the periods indicated: Var Var Jun08/
Jun08/ Jun-08 Dec-07 Jun-07 Jun07 Dec07 ($ in thousands) Past-due
loans: Non performing loans: Residential Mortgage $105,062 $80,805
$65,923 $39,139 $24,257 Consumer 13,569 10,818 8,513 5,056 2,751
Consumer finance 34,337 37,412 33,615 722 (3,075) Commercial,
construction and other 125,512 165,403 28,914 96,598 (39,891)
278,480 294,438 136,965 141,515 (15,958) Accruing loans past-due 90
days or more 11,369 7,162 10,293 1,076 4,207 Total past due loans
$289,849 $301,600 $147,258 $142,591 $(11,751) As of June 30, 2008,
the Corporation's total non-performing loans (excluding other real
estate owned) reached $278.5 million or 4.09% of total loans from
$294.4 million or 4.16% of total loans as of December 31, 2007 and
from $137.0 million or 1.95% of total loans as of June 30, 2007.
The Corporation's non-performing loans reflected an increase of
$141.5 million or 103.3% compared to non-performing loans as of
June 30, 2007 and a decrease of $16.0 million or 5.4% compared to
non-performing loans as of December 31, 2007. The increase in
non-performing loans was principally due to the $87.5 million
increase in nonperforming construction loans and the $39.1 million
increase in non-performing residential mortgages when compared to
June 30, 2007. Compared to December 31, 2007, the increase was
composed mainly of increases in non-performing residential
mortgages of $24.3 million or 30.0% partially offset by $49.6
million decrease in non-performing construction loans mainly due to
the sale of $82.9 million of certain impaired construction loans to
an affiliate. Liabilities The Corporation's total liabilities
reached $8.3 billion as of June 30, 2008, reflecting a decrease of
$346.1 million compared to December 31, 2007. This reduction in
total liabilities was principally due to a decrease in total
borrowings (comprised of federal funds purchased and other
borrowings, securities sold under agreements to repurchase,
commercial paper issued, federal home loan advances, term and
capital notes) of $1.1 billion or 35.4% at June 30, 2008 from $3.1
billion at December 31, 2007 mainly due to the refinancing of the
outstanding indebtedness incurred under bridge facility agreement
among the Corporation, Santander Financial Services, Inc. and
National Australia Bank Limited. This decrease was partially offset
by an increase in total deposits of $817.6 million or 15.8% to $6.0
billion as of June 30, 2008 from $5.2 billion as of June 30, 2007.
The $817.6 million increase in total deposits was principally due
to a certificate of deposit for the amount of $640 million opened
by Banco Santander, S.A. at Banco Santander Puerto Rico. Customer
Financial Assets under Control As of June 30, 2008, the Corporation
had $14.2 billion in Customer Financial Assets under Control.
Customer Financial Assets under Control include bank deposits
(excluding brokered deposits), broker-dealer customer accounts,
mutual fund assets managed, and trust, institutional and private
accounts under management. Shareholder Value As of June 30, 2008,
the Corporation's common stock price per share was $10.61,
resulting in a market capitalization of $494.8 million, including
affiliated holdings compared to book value equity of $561.1
million. During the quarter ended June 30, 2008, Santander BanCorp
declared a cash dividend of 10 cents per common share, resulting in
a current annualized dividend yield of 3.77%. There were no stock
repurchases during the first semesters of 2008 and 2007 under the
Stock Repurchase Program. As of June 30, 2008, the Corporation had
acquired, as treasury stock, a total of 4,011,260 shares of common
stock, amounting to $67.6 million. As of June 30, 2008, the
Corporation was well capitalized under the regulatory framework for
prompt corrective action. At June 30, 2008 the Corporation
continued to exceed the regulatory risk-based capital requirements
for well-capitalized institutions. Tier I capital to risk-adjusted
assets and total capital ratios at June 30, 2008 were 8.08% and
11.18%, respectively, and the leverage ratio was 5.68%.
Availability on Website The Corporation makes available additional
financial information on the Corporation's website at
http://www.santandernet.com/, and can be accessed by clicking on
"Investor Relations" on the website main page and clicking on
"Financial Highlights on Excel". Institutional Background Santander
BanCorp is a publicly held financial holding company that is traded
on the New York Stock Exchange (SBP) and on Latibex (Madrid Stock
Exchange) (XSBP). 91% of the outstanding common stock of Santander
BanCorp is owned by Banco Santander, S.A (Santander). The
Corporation has five wholly owned subsidiaries, Banco Santander
Puerto Rico, Santander Securities Corporation, Santander Financial
Services, Inc., Santander Insurance Agency, Inc. and Island
Insurance Corporation. Banco Santander Puerto Rico has been
operating in Puerto Rico for thirty-two years. It offers a full
array of services through 57 branches in the areas of commercial,
mortgage and consumer banking, supported by a team of over 1,100
employees. Santander Securities offers securities brokerage
services and provides portfolio management services through its
wholly owned subsidiary Santander Asset Management Corporation.
Santander Financial Services, Inc. offers consumer finance products
through its network of 68 branches throughout the Island. Santander
Insurance Agency offers life, health and disability coverage as a
corporate agent and also operates as a general agent. For more
information, visit the Company's website at
http://www.santandernet.com/. Santander (SAN.MC, STD.N) is the
largest bank in the euro zone by market capitalization and fifth in
the world by profit. Founded in 1857, Santander has EUR 912,915
million in assets and EUR 1,063,892 million in managed funds, 65
million customers, 11,178 branches and a presence in 40 countries.
It is the largest financial group in Spain and Latin America, and
is the sixth largest bank in the United Kingdom, through its Abbey
subsidiary, and is the third largest banking group in Portugal.
Through Santander Consumer Finance, it also operates a leading in
12 European countries (Germany, Italy and Spain, among others) and
the United States. In 2007, Santander registered euro 9,060 million
in net attributable profits, an increase of 19% from the previous
year. In Latin America, Santander manages over US$300 billion in
business volumes (loans, deposits, mutual funds and managed funds)
through 4,498 offices. In 2007, Santander reported $3,648 million
in net attributable income in Latin America, 27% higher than the
prior year. This news release contains forward-looking statements
that are based on current expectations, estimates, forecasts and
projections about the industry in which the Company operates, its
beliefs and its management's assumptions. Words such as "expects,"
"anticipates," "targets," "goals," "projects," "intends," "plans,"
"believes," "seeks," "estimates" and variations of such words and
similar expressions are intended to identify such forward-looking
statements. These statements are not guarantees of future
performance and involve certain risks, uncertainties and
assumptions that are difficult to predict. Therefore, actual
outcomes and results may differ materially from what is expressed
or forecast in such forward-looking statements. Except as otherwise
required under federal securities laws and the rules and
regulations of the SEC, the Company does not have any intention or
obligation to update or revise any forward-looking statements,
whether as a result of new information, future events, changes in
assumptions or otherwise. SANTANDER BANCORP CONSOLIDATED BALANCE
SHEETS (UNAUDITED) AS OF JUNE 30, 2008 AND 2007 AND DECEMBER 31,
2007 (Dollars in thousands, except share data) ASSETS Variance
06/08- 30-Jun-08 30-Jun-07 31-Dec-07 12/07 CASH AND CASH
EQUIVALENTS: Cash and due from banks $148,441 $149,736 $118,096
25.70% Interest-bearing deposits 3,228 2,544 1,167 176.61% Federal
funds sold and securities purchased under agreements to resell
168,597 113,948 82,434 104.52% Total cash and cash equivalents
320,266 266,228 201,697 58.79% INTEREST-BEARING DEPOSITS 7,866
50,000 5,439 44.62% TRADING SECURITIES, at fair value 69,385 46,088
68,500 1.29% INVESTMENT SECURITIES AVAILABLE FOR SALE, at fair
value 1,127,409 1,329,829 1,268,198 -11.10% OTHER INVESTMENT
SECURITIES, at amortized cost 56,907 50,159 64,559 -11.85% LOANS
HELD FOR SALE, net 136,745 164,916 141,902 -3.63% LOANS, gross
6,675,148 6,845,657 6,936,430 -3.77% ALLOWANCE FOR LOAN LOSSES
(186,889) (127,916) (166,952) 11.94% ACCRUED INTEREST RECEIVABLE
53,631 79,335 80,029 -32.99% PREMISES AND EQUIPMENT, net 30,553
53,424 29,523 3.49% GOODWILL 121,482 148,300 121,482 0.00%
INTANGIBLE ASSETS 29,949 46,652 30,203 -0.84% OTHER ASSETS 396,239
243,487 379,203 4.49% $8,838,691 $9,196,159 $9,160,213 -3.51%
LIABILITIES AND STOCKHOLDERS' EQUITY DEPOSITS: Non interest-bearing
$754,371 $628,647 $755,457 -0.14% Interest-bearing 5,223,885
4,651,485 4,405,246 18.58% Total deposits 5,978,256 5,280,132
5,160,703 15.84% FEDERAL FUNDS PURCHASED AND OTHER BORROWINGS
53,790 756,500 707,110 -92.39% SECURITIES SOLD UNDER AGREEMENTS TO
REPURCHASE 583,875 768,831 635,597 -8.14% COMMERCIAL PAPER ISSUED
49,779 382,662 284,482 -82.50% FEDERAL HOME LOAN BANK ADVANCES
1,080,000 825,000 1,245,000 -13.25% TERM NOTES 19,665 42,149 19,371
1.52% SUBORDINATED CAPITAL NOTES 240,067 240,033 247,170 -2.87%
ACCRUED INTEREST PAYABLE 46,810 72,879 77,356 -39.49% OTHER
LIABILITIES 225,363 256,127 246,888 -8.72% 8,277,605 8,624,313
8,623,677 -4.01% STOCKHOLDERS' EQUITY: Series A Preferred stock,
$25 par value; 10,000,000 shares authorized, none issued or
outstanding - - - N/A Common stock, $2.50 par value; 200,000,000
shares authorized; 50,650,364 shares issued; 46,639,104 shares
outstanding 126,626 126,626 126,626 0.00% Capital paid in excess of
par value 316,065 304,171 308,373 2.49% Treasury stock at cost,
4,011,260 shares (67,552) (67,552) (67,552) 0.00% Accumulated other
comprehensive loss, net of taxes (25,747) (51,962) (24,478) 5.18%
Retained earnings: Reserve fund 139,250 137,511 139,250 0.00%
Undivided profits 72,444 123,052 54,317 33.37% Total stockholders'
equity 561,086 571,846 536,536 4.58% $8,838,691 $9,196,159
$9,160,213 -3.51% SANTANDER BANCORP CONSOLIDATED STATEMENTS OF
INCOME (UNAUDITED) FOR THE SIX AND THREE MONTHS ENDED JUNE 30, 2008
AND 2007 (Dollars in thousands, except per share data) For the six
For the three months ended months ended June 30, June 30, June 30,
June 30, 2008 2007 2008 2007 INTEREST INCOME: Loans $281,807
$298,189 138,137 $149,834 Investment securities 27,316 33,649
13,196 16,742 Interest-bearing deposits 576 2,260 126 1,110 Federal
funds sold and securities purchased under agreements to resell
2,765 1,222 1,977 556 Total interest income 312,464 335,320 153,436
168,242 INTEREST EXPENSE: Deposits 80,168 92,828 40,963 46,864
Securities sold under agreements to repurchase and other borrowings
49,807 77,007 18,249 39,229 Subordinated capital notes 6,844 7,886
3,179 3,952 Total interest expense 136,819 177,721 62,391 90,045
Net interest income 175,645 157,599 91,045 78,197 PROVISION FOR
LOAN LOSSES 78,090 52,874 38,515 30,850 Net interest income after
provision for loan losses 97,555 104,725 52,530 47,347 OTHER
INCOME: Bank service charges, fees and other 23,525 24,452 11,101
12,134 Broker-dealer, asset management and insurance fees 41,973
32,369 19,986 16,081 Gain on sale of securities, net 2,874 238 - 49
Gain on sale of loans 2,267 4,338 829 1,990 Other income (loss)
12,716 4,568 (920) 1,658 Total other income 83,355 65,965 30,996
31,912 OPERATING EXPENSES: Salaries and employee benefits 61,512
65,902 31,525 34,073 Occupancy costs 13,222 11,488 6,806 5,914
Equipment expenses 2,252 2,241 1,059 1,076 EDP servicing,
amortization and technical assistance 21,061 18,074 10,883 8,640
Communication expenses 5,181 5,451 2,646 2,766 Business promotion
3,786 8,000 1,821 4,548 Goodwill and other intangibles impairment
charges - - Other taxes 6,756 4,948 3,349 1,843 Other operating
expenses 33,919 29,697 18,156 14,894 Total operating expenses
147,689 145,801 76,245 73,754 Income before provision for income
tax 33,221 24,889 7,281 5,505 PROVISION FOR INCOME TAX 8,983 9,064
765 1,409 NET INCOME AVAILABLE TO COMMON SHAREHOLDERS $24,238
$15,825 $6,516 $4,096 EARNINGS PER COMMON SHARE $0.52 $0.34 $0.14
$0.09 SANTANDER BANCORP SELECTED CONSOLIDATED FINANCIAL
INFORMATION: (DOLLARS IN THOUSANDS) For the Quarters Ended 30-Jun
30-Jun 31-Mar 2Q08/2Q07 2Q08/1Q08 2008 2007 2008 Variation
Variation Interest Income $153,436 $168,242 $159,029 -8.8% -3.5%
Tax equivalent adjustment 998 2,056 1,434 -51.5% -30.4% Interest
income on a tax equivalent basis 154,434 170,298 160,463 -9.3%
-3.8% Interest expense 62,391 90,045 74,430 -30.7% -16.2% Net
interest income on a tax equivalent basis 92,043 80,253 86,033
14.7% 7.0% Provision for loan losses 38,515 30,850 39,575 24.8%
-2.7% Net interest income on a tax equivalent basis after provision
53,528 49,403 46,458 8.3% 15.2% Other operating income 30,167
29,873 48,047 1.0% -37.2% Gain on sale of securities - 49 2,874 N/A
-100.0% Gain on sale of loans 829 1,990 1,438 N/A -42.4% Goodwill
and other intangibles impairment charges - - - N/A N/A Other
operating expenses 76,245 73,754 71,444 3.4% 6.7% Income on a tax
equivalent basis before income taxes 8,279 7,561 27,373 9.5% -69.8%
Provision for income taxes 765 1,409 8,217 -45.7% -90.7% Tax
equivalent adjustment (998) (2,056) (1,434) -51.5% -30.4% NET
INCOME $6,516 $4,096 $17,722 59.1% -63.2% SELECTED RATIOS: Per
share data (1): Earnings per common share $0.14 $0.09 $0.38 Average
common shares outstanding 46,639,104 46,639,104 46,639,104 Common
shares outstanding at end of period 46,639,104 46,639,104
46,639,104 Cash Dividends per Share $0.10 $0.16 $0.10 Six
Month-Periods ended June 30, 2008 2007 Variation Interest Income
$312,464 $335,320 -6.8% Tax equivalent adjustment 2,474 4,281
-42.2% Interest income on a tax equivalent basis 314,938 339,601
-7.3% Interest expense 136,819 177,721 -23.0% Net interest income
on a tax equivalent basis 178,119 161,880 10.0% Provision for loan
losses 78,090 52,874 47.7% Net interest income on a tax equivalent
basis after provision 100,029 109,006 -8.2% Other operating income
78,214 61,389 27.4% Gain on sale of securities 2,874 238 1107.6%
Gain on sale of loans 2,267 4,338 N/A Goodwill and other
intangibles impairment charges - - N/A Other operating expenses
147,689 145,801 1.3% Income on a tax equivalent basis before income
taxes 35,695 29,170 22.4% Provision for income taxes 8,983 9,064
-0.9% Tax equivalent adjustment (2,474) (4,281) -42.2% NET INCOME
$24,238 $15,825 53.2% SELECTED RATIOS: Per share data (1): Earnings
per common share $0.52 $0.34 Average common shares outstanding
46,639,104 46,639,104 Common shares outstanding at end of period
46,639,104 46,639,104 Cash Dividends per Share $0.20 $0.32 (1) Per
share data is based on the average number of shares outstanding
during the period. Basic and diluted earnings per share are the
same. SANTANDER BANCORP YTD QTD QTD YTD QTD 30-Jun 30-Jun 31-Mar
30-Jun 30-Jun SELECTED RATIOS 2008 2008 2008 2007 2007 Net interest
margin (1) 4.23% 4.34% 4.12% 3.86% 3.79% Return on average assets
(2) 0.53% 0.28% 0.78% 0.35% 0.18% Return on average common equity
(2) 8.66% 4.58% 12.90% 5.42% 2.76% Efficiency Ratio (1,3) 58.64%
65.55% 55.76% 64.06% 65.78% Non-interest income to revenues 21.06%
16.81% 24.77% 16.44% 15.94% Capital: Total capital to risk-adjusted
assets - 8.08 7.70 - 7.78% Tier I capital to risk-adjusted assets -
11.18 10.74 - 10.81% Leverage ratio - 5.68 5.83 - 5.69%
Non-performing loans to total loans - 4.09% 4.42% - 1.95%
Non-performing loans plus accruing loans past-due 90 days or more
to loans - 4.26% 4.56% - 2.10% Allowance for loan losses to
non-performing loans - 67.11% 57.06% - 93.39% Allowance for loans
losses to period-end loans - 2.74% 2.52% - 1.82% OTHER SELECTED
FINANCIAL DATA 6/30/2008 6/30/2007 12/31/2007 (dollars in millions)
Customer Financial Assets Under Control: Bank deposits (excluding
brokered deposits) $4,360.0 $3,856.0 $3,705.0 Broker-dealer
customer accounts 5,933.0 5,907.0 5,855.0 Mutual fund and assets
managed 3,217.0 3,041.0 3,066.0 Trust, institutional and private
accounts assets under management 679.0 764.0 637.0 Total $14,189.0
$13,568.0 $13,263.0 (1) On a tax-equivalent basis. (2) Ratios for
the quarters are annualized. (3) Operating expenses, excluding
goodwill and other intangible impairment charges for 4Q07, divided
by net interest income, on a tax equivalent basis, plus other
income, excluding gain on sale of securities, gain on equity
security and extinguishment of liabilities. Also excluding for 4Q07
gain on sale of POS and TRUST. DATASOURCE: Santander BanCorp
CONTACT: Maria Calero, +1-787-777-4437, or Michelle Balaguer,
+1-787-777-4186, both of Santander BanCorp Web site:
http://www.santandernet.com/
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