-- Net interest income for the quarter ended March 31, 2007
increased $16.6 million or 26.5% compared to the first quarter of
2006, and $4.2 million or 5.5% compared to the previous quarter.
SAN JUAN, Puerto Rico, May 10 /PRNewswire-FirstCall/ -- Santander
BanCorp (NYSE: SBP; LATIBEX: XSBP) ("the Corporation") reported
today its unaudited financial results for the quarter ended March
31, 2007. Net income for the first quarter of 2007 reached $11.7
million, or $0.25 per share, compared to net income of $13.4
million, or $0.29 per share, reported during the first quarter of
2006 and net income of $10.1 million, or $0.22 per share for the
fourth quarter of 2006. The Corporation's net income for the first
quarter of 2007 included an after-tax compensation expense of $1.5
million associated with a long-term incentive plan sponsored by
Santander BanCorp's parent company, Banco Santander Central
Hispano, S.A. (BSCH). The plan becomes exercisable in January 2008.
The cost of the plan will be reimbursed to the Corporation by BSCH,
at which time it would be recognized as a capital contribution.
Excluding the compensation cost related to the long-term incentive
plan, Santander BanCorp's earnings would have been $13.2 million,
or $0.28 per share. Net interest margin on a tax equivalent basis
increased by 70 basis points to 3.94% for the quarter ended March
31, 2007, compared to the first quarter of 2006, and 27 basis
points compared to 3.67% for the fourth quarter of 2006. The $1.6
million decrease in net income for the quarter ended March 31, 2007
when compared to the same period in 2006, was principally due to:
(i) an increase in operating expenses of $12.3 million (of which
$7.3 million relate to Santander Financial Services, Inc. ("Island
Finance") and $2.5 million relate to the long term incentive plan
described above); (ii) partially offset by a $2.1 million increase
in net interest income after provision for loan losses, a $7.6
million increase in other income and a $0.9 million decrease in
income tax expense. Increases in net interest income, provision for
loan losses and operating expenses were mainly due to the
operations of Island Finance. Financial Results The Corporation's
financial results for the quarter ended March 31, 2007 were
impacted by the following: -- The Corporation experienced a net
interest margin(1) expansion of 70 basis points to 3.94% for the
quarter ended March 31, 2007 versus the same period in the prior
year. -- For the quarter ended March 31, 2007, other income
increased $7.6 million or 28.9% primarily due to: an increase in
gain on sale of residential mortgage and charged-off loans of $2.4
million, an increase in broker-dealer, asset management and
insurance fees of $1.2 million, increase in credit card fees of
$0.6 million, trading gains of $0.4 million, mortgage servicing
rights recognized of $0.9 million, decrease in loss on valuation of
mortgage loans held for sale of $0.7 million, an increment in gain
on sale of equipment and Real Estate Owned ("REO") of $0.2 and $0.3
million, respectively, and increases in other fees of $0.3 million.
-- The Corporation experienced an increase in operating expenses
related to the Island Finance operation and to a long term
incentive plan sponsored by the Corporation's parent company.
Excluding the Island Finance operation and expenses related to the
long term incentive plan, operating expenses increased by $2.5
million or 4.7% for the quarter ended March 31, 2007. This
increment is mainly due to increases of $1.1 in business promotion
expense and $1.0 million in provision for repossessed assets and
related expenses. -- The Corporation's net income for the first
quarter of 2007 included an after-tax compensation expense of $1.5
million associated with a long- term incentive plan sponsored by
BSCH. The plan becomes exercisable in January 2008. The cost of the
plan will be reimbursed to the Corporation by BSCH, at which time
it would be recognized as a capital contribution. -- The
Corporation's income tax expense decreased $0.9 million for the
three month period ended March 31, 2007. This decrease was due to
lower net income before tax and the elimination of the temporary
surtaxes imposed by the Commonwealth of Puerto Rico for fiscal
years 2005 and 2006. The effective income tax rate was 39.5% for
the quarter ended March 31, 2007 versus 39.2% for the same period
in 2006. -- The Corporation grew its net loan portfolio by 14.5%
year over year, excluding the commercial loans secured by
mortgages. Net income for the quarter ended March 31, 2007 was
$11.7 million or $0.25 per common share compared to net income for
the quarter ended March 31, 2006 of $13.4 million or $0.29 per
common share. Annualized Return on Average Common Equity (ROE) and
Return on Average Assets (ROA) were 8.20% and 0.53%, respectively,
for the quarter ended March 31, 2007, compared to 10.07% and 0.65%,
respectively, for the first quarter of 2006. The Efficiency
Ratio(2) for the quarters ended March 31, 2007 and 2006 was 62.28%
and 65.50%, respectively. Excluding the effect of the long term
incentive plan that will be reimbursed to the Corporation, ROE, ROA
and the Efficiency Ratio(2) for the first quarter of 2007 would
have been 9.25%, 0.59% and 60.14%, respectively. Excluding the long
term incentive compensation expense for the first quarter of 2007
and the fourth quarter of 2006, the Corporation reflected an
improvement of 205 basis points, 13 basis points and 624 basis
points in its ROE, ROA and the Efficiency Ratio(2), respectively,
for the first quarter of 2007 compared to the same ratios for the
fourth quarter of 2006. Income Statement The $1.6 million or 12.2%
reduction in net income for the quarter ended March 31, 2007
compared to the same period in 2006 was principally due to
increases in the provision for loan losses of $14.5 million and
operating expenses of $12.3 million. These changes were partially
offset by increases in net interest income of $16.6 million and
$7.6 million in other income, as well as a decrease in the
provision for income tax of $0.9 million. Excluding the $1.5
million net effect of the long term incentive plan that will be
reimbursed to the Corporation, the net income reduction for the
quarter ended March 31, 2007 compared to the same period in 2006
was $0.1 million or less than 1%. Net interest margin(3) for the
first quarter of 2007 was 3.94% compared with 3.24% for the first
quarter of 2006. This increase of 70 basis points in net interest
margin(3) was mainly due to an increase of 145 basis points in the
yield on average interest earning assets and an increase in average
interest earning assets of $313.3 million, primarily as a result of
the acquisition of the assets of Island Finance on February 28,
2006. There was an increase of 84 basis points in the average cost
of interest bearing liabilities and an increase in average interest
bearing liabilities of $303.8 million. Interest income(3) increased
$35.3 million or 26.3% during the first quarter of 2007 compared to
the same period in 2006, while interest expense increased $18.4
million or 26.5%. For the first quarter of 2007 average interest
earning assets increased $313.3 million or 3.9% and average
interest bearing liabilities increased $303.8 million or 4.3%
compared to the same period in 2006. The increase in average
interest earning assets compared to the first quarter of 2006 was
driven by an increase in average net loans of $660.9 million, which
was partially offset by a decrease in average investments of $272.1
million and average interest bearing deposits of $75.5 million. The
increase in average net loans was due to an increase of $490.4
million or 22.5% in average mortgage loans as a result of the
Corporation's continued emphasis on growing this portfolio by
strengthening its residential mortgage production capabilities.
There was also an increase of $444.5 million or 55.9% in the
average consumer loan portfolio primarily as a result of the
acquisition of Island Finance. These increases were partially
offset by a decrease in the average commercial loan portfolio of
$245.4 million or 7.5% due primarily to the settlement with Doral
of $608.2 million of commercial loans secured by mortgages during
the second quarter of 2006. Excluding the loans settled with Doral
in 2006, the average commercial loan portfolio grew $384.8 million
or 14.6%. The increase in average interest bearing liabilities of
$303.8 million for the quarter ended March 31, 2007, was driven by
an increase in average borrowings of $360.6 million compared to the
quarter ended March 31, 2006. This increase was due to an increase
in borrowings of $215.7 million incurred in connection with to the
acquisition of Island Finance and the refinancing of other existing
debt of the Corporation, an increase in average FHLB Advances of
$391.9 million partially offset by reductions in average repurchase
agreements of $111.6 million and average commercial paper of $135.4
million. The improvement of 27 basis points in net interest margin
on a tax equivalent basis for the first quarter of 2007 compared to
the fourth quarter of 2006 was primarily due to a decrease in
average interest bearing liabilities of $140.7 million together
with an increase in the yield on average interest earning assets of
25 basis points and a change in the composition of average interest
earning assets. There was a decrease in average interest bearing
deposits of $160.9 million and of $42.1 million in notes payable,
partially offset by an increase in average borrowings of $62.2
million for the first quarter of 2007 compared to the fourth
quarter of 2006. Although there was a decrease of $36.8 million in
average interest earning assets over the same periods, there was a
shift from lower yielding average interest bearing deposits and
average investment securities, which decreased $139.1 million and
$33.9 million, respectively, to higher yielding average net loans
which increased $136.2 million. The provision for loan losses
increased $14.5 million or 192.2% from $7.5 million for the quarter
ended March 31, 2006 to $22.0 million for the first quarter in
2007. The increase in the provision for loan losses was due
primarily to the Island Finance operation which registered an
increase in the provision for loan losses of $11.5 million for the
quarter ended March 31, 2007. For the quarter ended March 31, 2007,
other income reached $34.1 million compared to $26.4 million
reported for the same period in 2006. This $7.6 million or 28.9%
increase in non-interest income for the first quarter of 2007
compared to the same period in 2006, was mainly due to: an increase
in gain on sale of residential mortgage and charged-off loans of
$2.4 million, an increase in broker-dealer, asset management and
insurance fees of $1.2 million (mainly related to insurance fees
generated from credit life commissions related to the Island
Finance operation), increase in credit card fees of $0.6 million,
trading gains of $0.4 million, mortgage servicing rights recognized
of $0.9 million, decrease in loss on valuation of mortgage loans
held for sale of $0.7 million, an increase in gain on sale of
equipment and REOs of $0.2 and $0.3 million, respectively, and an
increase in other fees of $0.3 million. The Efficiency Ratio(4) for
the quarters ended March 31, 2007 and 2006 was 62.28% and 65.50%,
respectively, reflecting an improvement of 322 basis points. This
improvement was mainly the result of higher operating income.
During the first quarter of 2007 the Corporation recognized
compensation expense of $2.5 million pursuant to a Long Term
Incentive Plan to certain employees. The Corporation is accruing
the bonus which will be reimbursed by the Parent Company and such
reimbursement will be reflected in the Corporation's capital when
the target cash bonuses are paid to employees in January 2008.
Excluding the effect of this incentive plan the Efficiency Ratio(4)
would have been 60.14% a 536 basis point improvement over the same
quarter of 2006. Operating expenses increased $12.3 million or
20.7% from $59.7 million for the quarter ended March 31, 2006 to
$72.0 million for the quarter ended March 31, 2007. This increase
was due primarily to the Island Finance operation which contributed
an increase in operating expenses of $7.3 million for the quarter
ended March 31, 2007 compared to March 31, 2006 (first month of
operations of Island Finance with the Corporation), and $2.5
million associated with the long-term incentive plan. The following
table presents the major variances in operating expenses between
the first quarter of 2007 and 2006. Mar07/Mar06 Quarter Variance ($
in thousands) Operating Expenses Salaries and employee benefits:
Increase due to Island Finance operations* $ 3.3 Long-term
Compensation Plan expense** 2.5 Net decrease in personnel expense
due to a reduction plan instituted by the Corporation in 2006 and
others (0.5) Total increase in salaries and employee benefits 5.3
Other operating expenses: Increase due to Island Finance
operations* 4.0 Increase in business promotion 1.1 Increase in
repossessed assets provision and related expenses 1.0 EDP servicing
amortization and technical services 0.4 Credit card expenses 0.5
Total increase in other operating expenses 7.0 TOTAL $ 12.3 * The
first quarter of 2006 only includes one month of the Island Finance
operation since it was acquired on February 28, 2006. **Long-term
Compensation Plan will be reimbursed to the Corporation by BSCH.
Excluding the Island Finance operation and expenses related to the
long term incentive plan, operating expenses increased by $2.6
million or 4.7% for the quarter ended March 31, 2007 when compared
to the same period in 2006. Island Finance The table below presents
condensed results of operations and selected financial information
of Island Finance for the quarters ended March 31, 2007 and 2006
including certain adjustments that are non GAAP such as insurance
commissions related to the Island Finance loan portfolio and
interest expense mark-up charged by the Corporation. Quarter Ended
Santander Financial Services Mar-07 Mar-06* Condensed Statement of
Income ($ in thousands) Interest income $ 36,471 $ 12,386 Interest
expense (9,790) (3,565) Net interest income 26,681 8,821 Provision
for loan losses (14,524) (3,038) Net interest income after
provision for loan losses 12,157 5,783 Other income 732 35
Operating expenses (12,453) (5,143) Net income before tax 436 675
Income tax expense (175) (355) Net income $ 261 $ 320 Other
indirect benefits derived from Santander Financial Services: Credit
insurance commissions, net of income tax $ 1,136 $ 169 Interest
expense mark-up, net of income tax $ 191 $ 266 Other Selected
Information Mar-07 Mar-06 Total Assets $ 769,343 $ 767,087 Net
loans 562,618 579,146 Allowance for loan losses 49,830 19,817 Non
performing loans 25,429 -- Net interest margin 17.22% 15.28% (*)
includes one month of operations Balance Sheet Total assets as of
March 31, 2007 increased $41.0 million or 0.5% to $9.19 billion
compared to total assets of $9.15 billion as of March 31, 2006, and
$6.4 million or 0.1% compared to total assets of $9.19 billion as
of December 31, 2006. As of March 31, 2007, there was an increase
of $260.2 million in net loans, including loans held for sale
(further explained below) compared to March 31, 2006 balances and
$91.8 million compared to December 31, 2006 balances. The
investment securities portfolio decreased $194.4 million, from $1.6
billion as of March 31, 2006 to $1.4 billion as of March 31, 2007.
The net loan portfolio, including loans held for sale, reflected an
increase of 3.9% or $260.2 million, reaching $6.9 billion at March
31, 2007, compared to the figures reported as of March 31, 2006.
Compared to December 31, 2006, the net loan portfolio grew by $91.8
million. The following table reflects the period end loan balances
as March 31, 2007 and 2006. Mar07/Mar06 Mar-07 Mar-06 $ Var % Var
($ in thousands) Commercial: Retail $ 1,944,569 1,887,780 $ 56,789
3.0% Corporate 672,653 578,781 93,872 16.2% Commercial loan secured
by mortgages settled in 2Q06 -- 618,790 (618,790) -100.0%
Construction 484,989 249,696 235,293 94.2% 3,102,211 3,335,047
(232,836) -7.0% Consumer: Consumer 647,082 542,188 104,894 19.3%
Consumer Finance 612,448 598,964 13,484 2.3% 1,259,530 1,141,152
118,378 10.4% Mortgage (mainly residential, including loans held
for sale) 2,681,941 2,279,785 402,156 17.6% Gross Loans 7,043,682
6,755,984 287,698 4.3% Allowance for loan losses (115,171) (87,717)
(27,454) 31.3% Net Loans $ 6,928,511 $ 6,668,267 $ 260,244 3.9% Net
Loans (excl. settled loans) $ 6,928,511 $ 6,049,477 $ 879,034 14.5%
The Corporation experienced net loan growth of 14.5% year over
year, excluding commercial loans secured by mortgages to Doral at
March 31, 2006 that were subsequently settled. This growth was
primarily due to corporate and construction loans with a combined
growth in these two segments of $329 million, credit cards and
personal installment loans at Banco Santander Puerto Rico with a
growth of $105 million, and residential mortgages with a growth of
$402 million. Combined, these five segments achieved double digit
loan growth consistent with the business strategy of the
Corporation and represented 95% of the 14.5% annual growth. The
growth in the construction loan and residential mortgage portfolio
were driven by the opportunity to regain a leading role as a
residential construction lender and the enhanced mortgage
distribution capabilities. The corporate portfolio benefited from a
client by client business plan that yielded new relationships and
opportunities with existing clients. The consumer portfolio at
Banco Santander grew as a result of successful campaigns launched
in credit cards and personal installment loans to increase
cross-selling to the existing client base and attract new clients.
Residential mortgage loan origination for the first quarter of 2007
was $178 million or 2.8% less than the $183 million originated
during the same quarter last year. The total of mortgage loans sold
during the first quarter 2007 was $94 million versus $0.6 million
during the first quarter of 2006. Deposits of $5.2 billion at March
31, 2007 reflected a decrease of 3.5%, compared to deposits of $5.4
billion as of March 31, 2006 and a decrease of 2.7% compared to
deposits of $5.3 billion as of December 31, 2006. Total borrowings
at March 31, 2007 (comprised of federal funds purchased and other
borrowings, securities sold under agreements to repurchase,
commercial paper issued, and term and capital notes) increased
$233.8 million or 8.1% and $178.5 million or 6.0% compared to
borrowings at March 31, 2006 and December 31, 2006, respectively.
Financial Strength The ratio of non-performing loans and accruing
loans past-due 90 days or more (past-due loans) to total loans as
of March 31, 2007 was 1.92%, a 32 basis point and an 8 basis point
increase compared to the 1.60% reported as of March 31, 2006, and
1.84% reported as of December 31, 2006, respectively. Non-
performing loans and accruing loans past-due 90 days or more at
March 31, 2007 amounted to $135.4 million comprised of $36.0
million at Island Finance and $99.4 million at the Bank. The
Corporation's non-performing loans and accruing loans past-due 90
days or more (excluding Island Finance non-performing loans)
reflected an increase of $21.3 million or 27.3% compared to March
31, 2006. The following table presents the major categories of
non-performing loans and the variances for the periods indicated:
Var Var Mar07/ Mar07/ Mar.07 Dec.06 Mar.06 Mar06 Dec06 ($ in
thousands) Past-due loans excluding Island Finance: Non performing
loans: Residential Mortgage $ 35,138 $ 31,263 $ 24,195 $ 10,943
$3,875 Consumer 8,519 7,590 5,631 2,888 929 Commercial and other
49,566 43,268 44,492 5,074 6,298 93,223 82,121 74,318 18,905 11,102
Accruing loans past-due 90 days or more 6,225 11,344 3,827 2,398
(5,119) Total past due loans, excluding Consumer Finance 99,448
93,465 78,145 21,303 5,983 Past-due loans Island Finance: Consumer
Finance - Non performing loans 25,429 24,731 -- 25,429 698 Accruing
loans past-due 90 days or more 10,543 9,594 29,955 (19,412) 949
Consumer Finance Past due loans 35,972 34,325 29,955 6,017 1,647
Total past-due loans $135,420 $127,790 $108,100 $27,320 $7,630
Island Finance loans acquired pursuant to the Asset Purchase
Agreement on February 28, 2006 are subject to a guarantee by Wells
Fargo of up to $21.0 million (maximum reimbursement amount) for net
losses in excess of $34.0 million, occurring on or prior to the
15th month anniversary of the acquisition. The Corporation is
provided with an additional guarantee of up to $7.0 million for net
losses incurred in the acquired loan portfolio in excess of $34.0
million during months 16 to 18 of the anniversary, subject to the
maximum aggregate reimbursement amount of $21.0 million. As of
March 31, 2007, the Corporation had $4.8 million available under
this guarantee, which it expects to claim reimbursement during the
next quarter. The allowance for loan losses represents 1.64% of
total loans as of March 31, 2007, a 34 basis point increase over
the 1.30% reported as of March 31, 2006, and a 10 basis point
increase over the 1.54% reported as of December 31, 2006. The
allowance for loan losses to total loans excluding mortgage loans
as of March 31, 2007 was 2.64% compared to 1.96% at March 31, 2006
and 2.49% as of December 31, 2006. The allowance for loan losses to
total non-performing loans and accruing loans past due 90 days or
more at March 31, 2007 increased 391 basis points to 85.05%
compared to 81.14% at March 31, 2006. As of December 31, 2006, this
ratio was 83.62%, a 143 basis point increase. Excluding
non-performing mortgage loans(5) (for which the Corporation has
historically had a minimal loss experience) this ratio is 167.0% at
March 31, 2007 compared to 139.7% as of March 31, 2006 and 161.3%
as of December 31, 2006. As of March 31, 2007, total capital to
risk-adjusted assets (BIS ratio) reached 10.96% and Tier I capital
to risk-adjusted assets and leverage ratios were 7.88% and 5.88%,
respectively. Customer Financial Assets under Control As of March
31, 2007, 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. Included in
the $14.2 billion referred to above, approximately $1.1 billion
from the trust business recently sold would be transferred either
to the acquiring financial institution or any other institution
that the trust client elects during the second and third quarters
of 2007. Shareholder Value During the quarter ended March 31, 2007,
Santander BanCorp declared a cash dividend of 16 cents per common
share, resulting in a current annualized dividend yield of 3.6%.
Market capitalization reached approximately $0.8 billion (including
affiliated holdings) as of March 31, 2007. There were no stock
repurchases during 2007 and 2006 under the Stock Repurchase
Program. As of March 31, 2007, the Corporation had acquired, as
treasury stock, a total of 4,011,260 shares of common stock,
amounting to $67.6 million. 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 Central Hispano, 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 nearly three decades. It
offers a full array of services through 61 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 70 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 seventh
in the world by profit. Founded in 1857, Santander has EUR 833,873
million in assets and EUR 1,000,996 million in managed funds, 67
million customers, 10,852 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 operates in Portugal, where it is the third largest
banking group. Through Santander Consumer Finance, it also operates
a leading consumer finance franchise in Germany, Italy, Spain and
nine other European countries. In 2006, Santander registered ?7,596
million in net attributable profits, an increase of 22% from the
previous year. In Latin America, Santander manages over US$250
billion in banking business volumes (loans, deposits, mutual funds,
pension funds and managed funds) through 4,370 offices. In 2006,
Santander reported US$1,409 million in net attributable income in
Latin America, 29% 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. 1 On a tax-equivalent basis. 2 On a
tax-equivalent basis, excluding gains on sale of securities. Also
excluding in 4Q06 FDIC assessment credits and gain on tax credits
purchased. 3 On a tax-equivalent basis. 4 On a tax-equivalent
basis, excluding gains on sale of securities. 5 Mortgage loans
include residential mortgages, commercial loans with real estate
collateral and consumer loans with real estate collateral. They
exclude construction loans. SANTANDER BANCORP CONSOLIDATED BALANCE
SHEETS (UNAUDITED) AS OF MARCH 31, 2007 AND 2006 AND DECEMBER 31,
2006 (Dollars in thousands, except share data) ASSETS Variance
03/07- 31-Mar-07 31-Mar-06 31-Dec-06 12/06 CASH AND CASH
EQUIVALENTS: Cash and due from banks $124,870 $133,996 $125,077
-0.17% Interest-bearing deposits 841 816 780 7.82% Federal funds
sold and securities purchased under agreements to resell 53,279
86,514 73,407 -27.42% Total cash and cash equivalents 178,990
221,326 199,264 -10.17% INTEREST-BEARING DEPOSITS 56,517 51,366
51,455 9.84% TRADING SECURITIES, at fair value 45,050 47,146 50,792
-11.30% INVESTMENT SECURITIES AVAILABLE FOR SALE, at fair value
1,366,023 1,569,238 1,409,789 -3.10% OTHER INVESTMENT SECURITIES,
at amortized cost 50,710 41,862 50,710 0.00% LOANS HELD FOR SALE,
net 191,096 295,296 196,277 -2.64% LOANS, net 6,852,586 6,460,688
6,747,279 1.56% ALLOWANCE FOR LOAN LOSSES (115,171) (87,717)
(106,863) 7.77% ACCRUED INTEREST RECEIVABLE 93,423 96,988 102,244
-8.63% PREMISES AND EQUIPMENT, net 54,861 56,944 56,299 -2.55%
GOODWILL 148,300 152,049 148,300 0.00% INTANGIBLE ASSETS 47,212
50,424 47,427 -0.45% OTHER ASSETS 224,965 197,919 235,195 -4.35%
$9,194,562 $9,153,529 $9,188,168 0.07% LIABILITIES AND
STOCKHOLDERS' EQUITY DEPOSITS: Non interest-bearing $773,289
$656,870 $746,089 3.65% Interest-bearing 4,395,266 4,698,376
4,567,885 -3.78% Total deposits 5,168,555 5,355,246 5,313,974
-2.74% FEDERAL FUNDS PURCHASED AND OTHER BORROWINGS 1,585,030
1,375,000 1,628,400 -2.66% SECURITIES SOLD UNDER AGREEMENTS TO
REPURCHASE 823,012 921,989 830,569 -0.91% COMMERCIAL PAPER ISSUED
438,457 319,194 209,549 109.24% TERM NOTES 41,853 40,525 41,529
0.78% SUBORDINATED CAPITAL NOTES 244,709 242,579 244,468 0.10%
ACCRUED INTEREST PAYABLE 85,620 80,377 91,245 -6.16% OTHER
LIABILITIES 221,447 256,049 249,214 -11.14% 8,608,683 8,590,959
8,608,948 0.00% 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
304,171 304,171 304,171 0.00% Treasury stock at cost, 4,011,260
shares (67,552) (67,552) (67,552) 0.00% Accumulated other
comprehensive loss, net of taxes (41,296) (53,440) (44,213) -6.60%
Retained earnings: Reserve fund 137,511 133,759 137,511 0.00%
Undivided profits 126,419 119,006 122,677 3.05% Total stockholders'
equity 585,879 562,570 579,220 1.15% $9,194,562 $9,153,529
$9,188,168 0.07% SANTANDER BANCORP CONSOLIDATED STATEMENTS OF
INCOME (UNAUDITED) FOR THE THREE MONTHS ENDED MARCH 31, 2007 AND
2006 (Dollars in thousands, except per share data) For the three
months ended March 31, March 31, 2007 2006 INTEREST INCOME: Loans
$148,355 $111,526 Investment securities 16,908 18,268
Interest-bearing deposits 1,150 959 Federal funds sold and
securities purchased under agreements to resell 666 1,331 Total
interest income 167,079 132,084 INTEREST EXPENSE: Deposits 45,964
38,637 Securities sold under agreements to repurchase and other
borrowings 37,779 28,247 Subordinated capital notes 3,934 2,414
Total interest expense 87,677 69,298 Net interest income 79,402
62,786 PROVISION FOR LOAN LOSSES 22,024 7,538 Net interest income
after provision for loan losses 57,378 55,248 OTHER INCOME (LOSS):
Bank service charges, fees and other 12,317 11,670 Broker-dealer,
asset management and insurance fees 16,288 15,045 Gain on sale of
mortgage servicing rights 69 3 Gain (loss) on sale of loans 2,348
(2) Other income (loss) 3,030 (302) Total other income 34,052
26,414 OPERATING EXPENSES: Salaries and employee benefits 31,829
26,556 Occupancy costs 5,574 4,649 Equipment expenses 1,165 1,040
EDP servicing, amortization and technical assistance 9,406 8,053
Communication expenses 2,685 2,318 Business promotion 3,453 2,581
Other taxes 3,106 2,376 Other operating expenses 14,829 12,139
Total operating expenses 72,047 59,712 Income before provision for
income tax 19,383 21,950 PROVISION FOR INCOME TAX 7,654 8,594 NET
INCOME AVAILABLE TO COMMON SHAREHOLDERS $11,729 $13,356 EARNINGS
PER COMMON SHARE $0.25 $0.29 SANTANDER BANCORP SELECTED
CONSOLIDATED FINANCIAL INFORMATION: (DOLLARS IN THOUSANDS) For the
Quarters Ended 1Q07/ 1Q07/ 1Q06 4Q06 31-Mar 31-Mar 31-Dec Vari-
Vari- 2007 2006 2006 ation ation Interest Income $167,079 $132,084
$165,616 26.5% 0.9% Tax equivalent adjustment 2,225 1,960 2,850
13.5% -21.9% Interest income on a tax equivalent basis 169,304
134,044 168,466 26.3% 0.5% Interest expense 87,677 69,298 90,360
26.5% -3.0% Net interest income on a tax equivalent basis 81,627
64,746 78,106 26.1% 4.5% Provision for loan losses 22,024 7,538
21,670 192.2% 1.6% Net interest income on a tax equivalent basis
after provision 59,603 57,208 56,436 4.2% 5.6% Other operating
income 31,704 26,416 33,569 20.0% -5.6% Gain on sale of securities
- - - N/A N/A Gain on sale of loans 2,348 (2) 1,809 N/A 29.8% Other
operating expenses 72,047 59,712 73,281 20.7% -1.7% Income on a tax
equivalent basis before income taxes 21,608 23,910 18,533 -9.6%
16.6% Provision for income taxes 7,654 8,594 5,624 -10.9% 36.1% Tax
equivalent adjustment (2,225) (1,960) (2,850) 13.5% -21.9% NET
INCOME $11,729 $13,356 $10,059 -12.2% 16.6% SELECTED RATIOS: Per
share data (1): Earnings per common share $0.25 $0.29 $0.22 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 $0.16 $0.16 $0.16 (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 QTD QTD YTD QTD 31-Mar 31-Mar 31-Dec 31-Dec
SELECTED RATIOS 2007 2006 2006 2006 Net interest margin (1) 3.94%
3.24% 3.63% 3.67% Return on average assets (2) 0.53% 0.65% 0.49%
0.44% Return on average common equity (2) 8.20% 10.07% 7.66% 6.86%
Efficiency Ratio (1,3) 62.28% 65.50% 66.82% 65.66% Non-interest
income to revenues 16.93% 16.67% 16.08% 17.60% Capital: Total
capital to risk- adjusted assets 10.96% 10.62% - 10.93% Tier I
capital to risk- adjusted assets 7.88% 7.60% - 7.87% Leverage ratio
5.88% 6.11% - 5.81% Non-performing loans to total loans 1.74% 1.10%
- 1.54% Non-performing loans plus accruing loans past-due 90 days
or more to loans 1.92% 1.60% - 1.84% Allowance for loan losses to
non-performing loans 93.89% 118.03% - 100.01% Allowance for loans
losses to period-end loans 1.64% 1.30% - 1.54% OTHER SELECTED
FINANCIAL DATA 03/31/2007 03/31/2006 12/31/2006 (dollars in
millions) Customer Financial Assets Under Control: Bank deposits
(excluding brokered deposits) $3,844.8 $4,092.4 $3,968.6
Broker-dealer customer accounts 5,845.0 5,002.0 5,648.0 Mutual fund
and assets managed 2,997.0 2,941.0 2,936.0 Trust, institutional and
private accounts assets under management 1,544.0 1,143.0 1,601.0
Total $14,230.8 $13,178.4 $14,153.6 (1) On a tax-equivalent basis.
(2) Ratios for the quarters are annualized. (3) Operating expenses
divided by net interest income, on a tax equivalent basis, plus
other income, excluding gain on sale of securities. Also excluding
for 4Q06 FDIC assessment credits and gain on tax credits purchased.
DATASOURCE: Santander BanCorp CONTACT: Maria Calero,
+1-787-777-4437, or Evelyn Vega, +1-787-777-4546, both of Santander
BanCorp Web site: http://www.santandernet.com/
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