SAN JUAN, Puerto Rico, May 16 /PRNewswire-FirstCall/ -- Santander BanCorp (NYSE: SBP; LATIBEX: XSBP) ("the Corporation") reported a net income of $17.7 million for the three-month period ended March 31, 2008, compared with net income of $11.7 million for the same period in 2007. For the three months ended March 31, 2008 and 2007, net income and other selected financial information, as reported are the following:
Quarter ended ($ in thousands, except earnings per share) 31-Mar-08 31-Mar-07 Net Income $17,722 $11,729 EPS(*) $0.38 $0.25 ROA 0.78% 0.53% ROE 12.90% 8.20% Efficiency Ratio (**) 55.76% 62.28% (*) Per share data is based on the average number of shares outstanding during the periods. (**) 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.
The Corporation's financial results for the three-month period ended March 31, 2008 were impacted by the following:
-- The provision for loan losses increased $17.6 million or 79.7% for the quarter ended March 31, 2008 compared to the same period in 2007. The $179.2 million allowance for loan losses as of March 31, 2008 represent 2.52% of total loans, 57.06% of non-performing loans and 85.92% of non-performing loans excluding loans secured by real estate; -- The provision for loan losses represented 144.56% of the net charge-offs for the three months ended March 31, 2008; -- The Corporation experienced an increment of 18 basis points on net interest margin, on a tax equivalent basis, to 4.12% for the quarter ended March 31, 2008 versus 3.94% for the same period in 2007; -- An increase of $18.3 million or 53.8% in non-interest income for the quarter ended March 31, 2008 basically attributed to higher fees in broker-dealer, asset management and insurance fees of $5.7 million, a favorable market valuation adjustment on derivatives of approximately $3.9 million resulting from the adoption of new accounting standards, an increase in gains on sale of securities and loans of approximately $2.0 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 offset by a unfavorable fair value adjustment of approximately of $1.6 million for mortgage loans held for sale; -- The operating expenses experienced a decreased of $0.6 million or 0.8% for the quarter ended March 31, 2008, when compared to the same periods in 2007. Net Interest Income
The Corporation's net interest income for the three months ended March 31, 2008 was $84.6 million, an increase of $5.2 million, or 6.6%, compared with $79.4 million for the three months ended March 31, 2007. This improvement was mainly due to a decrease in interest expense of $13.2 million or 15.1% when compared with the same period in prior year. The average cost of funds on interest-bearing liabilities experienced a decrease of 80 basis points from 4.79% for the first quarter ended March 31, 2007 to 3.99% for the first quarter ended March 31, 2008. The interest income reflected reduction of $8.1 million or 4.8% for the three months ended March 31, 2008 compared to the same period in 2007 due to decreases of $4.7 million or 3.2% and $2.8 million or 16.5% in interest income on loans and investment securities, respectively.
For the three-month period ended March 31, 2008, net interest margin, on a tax equivalent basis, was 4.12% compared to net interest margin, on a tax equivalent basis, of 3.94% for the same period in 2007. The 18 basis points increase in net interest margin, on a tax equivalent basis, was mainly due a decrease in interest expense on average interest-bearing liabilities of $13.2 million or 15.1% principally due to decrease in the cost of average interest-bearing liabilities of 80 basis points. This reduction in interest expense was principally due to the significant reduction of 135 basis points in the cost of funds of federal funds purchased and other borrowings and FHLB Advances from 5.55% for the first quarter of 2007 to 4.20% for the first quarter of 2008. There was a decrease in the yield on average interest-earning assets of 49 basis points resulting in a decrease of $8.8 million in interest income, on a tax equivalent basis, on average interest-earning assets.
For the three months ended March 31, 2008 average interest-earning assets decreased $1.9 million when compared with figures reported at March 31, 2007. This change was composed of an increase of $145.3 million in average net loans and $14.9 million in average interest-bearing deposits partially offset by decrease of $162.1 million in average investment securities mainly due to a sale of $125 million of certain investment securities available for sale during the first quarter of 2008. The increase in average net loans was mainly due to an increase of $141.8 million or 4.7% in average commercial loans. This improvement was composed of increases in corporate banking, middle market and construction portfolios of $95.0 million, $72.6 million and $16.8 million, respectively. There was also an increase of $37.0 million or 3.0% in the average consumer loan portfolio as a result of an increase in average credit card outstanding of $46.0 million and a decrease in average consumer finance loans of $12.5 million. These improvements were offset by a $40.2 million decrease in the average leasing portfolio. The average mortgage loan portfolio reflected an increase of $25.1 million for the three months ended March 31, 2008 compared with the same period the prior year.
Provision for Loan Losses
The Corporation's provision for loan losses increased $17.6 million or 79.7% from $22.0 million for the three months ended March 31, 2007 to $39.6 million for the same period in 2008. 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 reserve for loan losses. There was an increase of $188.4 million in past-due loans (non-performing loans and accruing loans past-due 90 days or more) which reached $323.8 million as of March 31, 2008, from $135.4 million as of March 31, 2007, and $301.6 million as of December 31, 2007. Non-performing loans were $314.0 million as of March 31, 2008, an increase of $195.3 million or 164.6%, compared to non-performing loans as of March 31, 2007.
Other Income
For the quarter ended March 31, 2008, other income reached $52.4 million, a $18.3 million or 53.8% increase when compared to $34.1 million for the same period in 2007. The other income was impacted by the following:
-- Broker-dealer, asset management and insurance fees reflected an increase of $ 5.7 million, due to increases in broker-dealer and asset management fees of $7.5 million for the three-month period ended March 31, 2008 when compared to the same period in 2007 offset by a decrease of $1.8 million in insurance fees due to a reduction in credit life commissions generated from the Santander Financial Services operation. Santander Securities Corporation business includes securities underwriting and distribution, sales, trading, financial planning, investment advisory services and securities brokerage services. In addition, Santander Securities provides portfolio management services through its wholly owned subsidiary, Santander Asset Management Corporation. The Broker-dealer, asset management and insurance operations contributed 42.0% to the Corporation's other income for the quarter ended March 31, 2008 and 47.8% to the same period in 2007; -- The Corporation reported a higher gain on derivatives instruments of $4.0 million for the three months ended March 31, 2008 compared with the same period in prior year due to the net effect of Corporation's credit risk standing and counterparty risk, both incorporated in the derivative market valuation methodology pursuant the new adoption of SFAS 157. -- There was an increase in gain on sale of securities available for sale of $2.9 million due to sale of $125 million securities sold during the first quarter of 2008, partially offset by $0.3 million on the extinguishment of certain repurchases agreements that were funding part of the securities sold; -- There was a $0.9 million decrease in gain on sale of loans of residential mortgage loans and a $0.5 million decrease in mortgage servicing rights recognized due to a $51.9 million decrease in mortgage loans sold for the first quarter of 2008 compared with the same period in 2007; -- A gain of $8.6 million on the sale of part of the investment in Visa, Inc. in connection with its initial public offering; -- An unfavorable fair value adjustment of $1.6 million for loans held for sale was recorded through earnings during the first quarter of 2008. Operating Expenses
For the three-month period ended March 31, 2008, operating expenses decreased $0.6 million to $71.4 million when compared with the figures reported in prior year. The variances in operating expenses were described below:
-- During the first quarter of 2008, total salaries and other employee benefits reflected a decrease of $1.8 million when compared with the same period the prior year. A $5.5 million decrease in stock incentive plans expense was partially offset by an increase of $3.3 million in other employee benefits mainly due to a $3.0 million increase in commissions and bonuses; -- The non-personnel expenses reflected an increase of $1.2 million compared with the first quarter ended March 31, 2007. There was an increase of $1.1 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. Other increases were $0.9 million in professional fees, $0.8 million in occupancy cost due to the sale and leaseback of the Corporation's two principal properties in December 2007 and $0.7 million in EDP servicing expenses, amortization and technical services and $0.3 million in other taxes. These increases were partially offset by $1.9 million decrease in credit card expenses due to the sale of the Corporation's merchant business during the first quarter of 2007 and $1.5 million decrease in business promotion related to cost efficiencies obtained from the merger of Banco Santander Puerto Rico and Santander Mortgage as of January 1, 2008 and ongoing strict expense control.
The Efficiency Ratio, on a tax equivalent basis, for the three months ended March 31, 2008 and 2007 was 55.76% and 62.28%, respectively, reflecting an improvement of 652 basis points. For the three months ended March 31, 2008 there was a decrease of $5.5 million in compensation expense pursuant to a Long Term Incentive Plan to certain employees sponsored by Santander Spain due to a favorable change in Long Term Incentive Pan valuation during the three months ended March 31, 2008. Excluding the stock incentive plan expense, the Efficiency Ratio, on a tax equivalent basis, would have been 58.15% and 60.14% for the first quarter of 2008 and 2007, respectively reflecting an improvement of 199 basis points over the same period in 2007.
Balance Sheet
The Corporation's assets reached $9.3 billion as of March 31, 2008, a 1.6% or an increase of $144.8 million compared to total assets of $9.2 billion at December 31, 2007 and a 1.2% or $110.5 million increase compared to total assets of $9.2 billion at March 31, 2007. Total cash and cash equivalents reflected an increase of $275.1 million as of March 31, 2008 compare with December 31, 2007, basically due to an increase of $208.4 million in federal funds sold and securities purchased under agreement to resell. This increase was partially offset by a $201.8 million decrease in investment securities due to the sale of $125 million of certain investment securities available for sale during the first quarter of 2008 and portfolio repayments. The net loan portfolio, including loans held for sale, reached $6.9 billion, an increase of $6.7 million at March 31, 2008. Other assets also reflected an increase of $67.5 million which consist principally of $42.0 million and $23.1 million increments in derivatives assets and accounts receivable, respectively, compared to December 31, 2007 balances.
Loans
The following table reflects the period end loan balances as March 31, 2008 and 2007 and December 31, 2007:
March08/March07 Mar-08 Mar-07 $ Var % Var ($ in thousands) Commercial: Retail $1,951,227 1,944,569 $6,658 0.3% Corporate 702,881 672,653 30,228 4.5% Construction 471,151 484,989 (13,838) -2.9% 3,125,259 3,102,211 23,048 0.7% Consumer: Consumer 661,952 647,082 14,870 2.3% Consumer finance 607,838 612,448 (4,610) -0.8% 1,269,790 1,259,530 10,260 0.8% Mortgage (mainly residential, including loans held for sale) 2,702,178 2,681,941 20,237 0.8% Gross Loans 7,097,227 7,043,682 53,545 0.8% Allowance for loan losses 179,150) (115,171) (63,979) 55.6% Net Loans $6,918,077 $6,928,511 $(10,434) -0.2% Mar08/Dec07 Dec-07 $ Var % Var ($ in thousands) Commercial: Retail $1,857,361 $93,866 5.1% Corporate 765,310 (62,429) -8.2% Construction 484,237 (13,086) -2.7% 3,106,908 18,351 0.6% Consumer: Consumer 674,349 (12,397) -1.8% Consumer finance 611,113 (3,275) -0.5% 1,285,462 (15,672) -1.2% Mortgage (mainly residential, including loans held for sale) 2,685,962 16,216 0.6% Gross Loans 7,078,332 18,895 0.3% Allowance for loan losses (166,952) (12,198) 7.3% Net Loans $6,911,380 $6,697 0.1%
The net loan portfolio, including loans held for sale, reflected an increase of $6.7 million, reaching $6.9 billion at March 31, 2008, compared to the figures reported as of December 31, 2007 and a decrease of $10.4 million when compared to March 31, 2007. The mortgage loan portfolio at March 31, 2008 grew $16.2 million or 0.6% compared to December 31, 2007 and $20.2 million or 0.8% compared to March 31, 2007. Residential mortgage loan origination for the first quarter of 2008 was $107.8 million or 39.5% less than the $178.1 million originated during the same quarter last year. Total mortgage loans sold during the first quarter of 2008 were $34.8 million compared to $86.7 million during the same quarter in 2007. Construction loans decreased $13.1 million or 2.7% as of March 31, 2008 compared to December 31, 2007, and $13.8 million or 2.8% compared to March 31, 2007. The consumer loan portfolio (including consumer finance) also reflected a decrease of $15.7 million or 1.2%, as of March 31, 2008, compared to December 31, 2007. Compared to March 31, 2007, the consumer loan portfolio reflected growth of $10.3 or 0.8%. The commercial loan portfolio (including leasing) increased $31.4 million and $36.9 million compared with December 31, 2007 and March 31, 2007, respectively.
Allowance for Loan Losses
The Corporation's allowance for loan losses was $179.2 million or 2.52% of period-end loans at March 31, 2008, a 88 basis point increase compared to $115.2 million, or 1.64% of period-end loans at March 31, 2007. The $179.2 million in the allowance for loan losses is comprised of $109.5 million related to commercial banking and $69.7 million to the consumer finance operations with a provision for loan losses of $22.7 million and $16.9 million for each respective segment for the quarter ended March 31, 2008. At March 31, 2007, the $115.2 million in the allowance for loan losses is comprised of $49.8 million related to the consumer finance operations with a provision for loan losses of $14.5 million and $65.4 million for commercial banking with a provision for loan losses of $7.5 million for the same period.
The increment in the allowance for loan losses to period-end loan was partially due to increases in non-performing loans and loans past due 90 days or more of $188.4 million or 139.1%, from $135.4 million at March 31, 2007 to $323.8 million at March 31, 2008.
The ratio of allowance for loan losses to non-performing loans and accruing loans past due 90 days or more was 55.32% and 85.05% at March 31, 2008 and March 31, 2007, respectively, decreasing 29.73 percentage points. At March 31, 2008, this ratio remain basically flat when compare with 55.36% at December 31, 2007. Excluding non-performing mortgage loans (for which the Corporation has historically had a minimal loss experience) this ratio is 82.03% at March 31, 2008 compared to 166.95% as of March 31, 2007 and 79.51% as of December 31, 2007.
The annualized ratio of net charge-offs to average loans for the three-month period ended March 31, 2008 increased 74 basis points to 1.54% from 0.80% for the same period in 2007. This change was due to an increment in net charge-offs of $13.7 million during 2008 when compared with the same period in 2007.
At March 31, 2008, impaired loans (loans evaluated individually for impairment) with related allowance amounted to approximately $225.2 million and $25.6 million, respectively. At December 31, 2007 impaired loans with related allowance amounted to $205.6 million and $25.6 million, respectively.
Although the Corporation's provision and allowance for loan losses will fluctuate from time to time based on economic conditions, net charge-off levels and changes in the level and mix of the loan portfolio, management considers that the allowance for loan losses is adequate to absorb probable losses on its loan portfolio.
Non-performing Assets and Past Due Loans
The following table presents the major categories of non-performing loans and the variances for the periods indicated:
Var Var Mar08/ Mar08/ Mar-08 Dec-07 Mar-07 Mar07 Dec07 ($ in thousands) Past-due loans: Non performing loans: Residential Mortgage $94,984 $80,805 $56,304 $38,680 $14,179 Consumer 12,926 10,818 8,155 4,771 2,108 Consumer finance 35,938 37,412 25,429 10,509 (1,474) Commercial, construction and other 170,108 165,403 28,764 141,344 4,705 313,956 294,438 118,652 195,304 19,518 Accruing loans past-due 90 days or more 9,877 7,162 16,768 (6,891) 2,715 Total past due loans $323,833 $301,600 $135,420 $188,413 $22,233
As of March 31, 2008, the Corporation's total non-performing loans (excluding other real estate owned) reached $314.0 million or 4.42% of total loans from $294.4 million or 4.16% of total loans as of December 31, 2007 and from $118.7 million or 1.68% of total loans as of March 31, 2007. The Corporation's non-performing loans (excluding Island Finance non-performing loans of $35.9 million) reflected an increase of $184.8 million or 198.2% compared to non-performing loans as of March 31, 2007 (excluding Island Finance non-performing loans of $25.4 million) and $21.0 million compared to non-performing loans as of December 31, 2007 (excluding Island Finance non-performing loans of $37.4 million). The increase in non-performing loans (excluding Island Finance non-performing loans) is principally due to non-performing construction loans, which increased $138.5 million and residential mortgages, which increased $38.7 million compared to March 31, 2007. Compared to December 31, 2007, non-performing loans (excluding Island Finance non-performing loans) reflected an increase of $21.0 million or 8.2%. This increase was composed of increases in non-performing residential mortgages, commercial loans (including construction and leasing) and consumer loans of $14.2 million, $4.7 million and $2.1 million, respectively.
The Corporation continuously monitors non-performing assets and has deployed significant resources to manage the non-performing loan portfolio. Management expects to continue to improve its collection efforts by devoting more full time employees and outside resources.
Liabilities
As of March 31, 2008, total liabilities reached $8.7 billion, an increase of $114.5 million compared to December 31, 2007. This increase in total liabilities was principally due to an increase in total deposits of $393.0 million at March 31, 2008 from $5.2 billion at December 31, 2007. This increase was partially offset by a decrease in total borrowings (comprised of federal funds purchased and other borrowings, securities sold under agreements to repurchase, commercial paper issued, and term and capital notes) of $295.6 million or 9.4% to $2.8 billion as of March 31, 2008.
Total deposits of $5.6 billion as of March 31, 2008 were composed of $1.3 billion in brokered deposits and $4.3 billion of customer deposits. Compared to December 31, 2007, brokered deposits reflected a decrease of $188.9 million or 13.0% and customer deposits reflected increases of $581.9 million, or 15.7% as of March 31, 2008. The increase in customer deposits was due to a certificate of deposit for the amount of $640 million opened by Banco Santander, S.A. in Banco Santander Puerto Rico.
Customer Financial Assets under Control
As of March 31, 2008, the Corporation had $14.1 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 March 31, 2008, the Corporation's common stock price per share was $10.11, resulting in a market capitalization of $471.5 million, including affiliated holdings.
During the quarter ended March 31, 2008, Santander BanCorp declared a cash dividend of 10 cents per common share, resulting in a current annualized dividend yield of 4.0%.
There were no stock repurchases during 2007 and 2006 under the Stock Repurchase Program. As of March 31, 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 March 31, 2008, the Corporation was well capitalized under the regulatory framework for prompt corrective action. At March 31, 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 March 31, 2008 were 7.70% and 10.74%, respectively, and the leverage ratio was 5.83%.
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 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 69 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 "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 MARCH 31, 2008 AND 2007 AND DECEMBER 31, 2007 (Dollars in thousands, except share data) ASSETS Variance 03/08- 31-Mar-08 31-Mar-07 31-Dec-07 12/07 CASH AND CASH EQUIVALENTS: Cash and due from banks $184,960 $124,870 $118,096 56.62% Interest-bearing deposits 1,059 841 1,167 -9.25% Federal funds sold and securities purchased under agreements to resell 290,803 53,279 82,434 252.77% Total cash and cash equivalents 476,822 178,990 201,697 136.41% INTEREST-BEARING DEPOSITS 9,134 56,517 5,439 67.94% TRADING SECURITIES, at fair value 61,874 45,050 68,500 -9.67% INVESTMENT SECURITIES AVAILABLE FOR SALE, at fair value 1,073,020 1,366,023 1,268,198 -15.39% OTHER INVESTMENT SECURITIES, at amortized cost 70,184 50,710 64,559 8.71% LOANS HELD FOR SALE, net 142,452 191,096 141,902 0.39% LOANS, net 6,954,775 6,852,586 6,936,430 0.26% ALLOWANCE FOR LOAN LOSSES (179,150) (115,171) (166,952) 7.31% ACCRUED INTEREST RECEIVABLE 67,412 93,423 80,029 -15.77% PREMISES AND EQUIPMENT, net 30,416 54,861 29,523 3.02% GOODWILL 121,482 148,300 121,482 0.00% INTANGIBLE ASSETS 29,904 47,212 30,203 -0.99% OTHER ASSETS 446,693 224,965 379,203 17.80% $9,305,018 $9,194,562 $9,160,213 1.58% LIABILITIES AND STOCKHOLDERS' EQUITY DEPOSITS: Non interest-bearing $809,197 $773,289 $755,457 7.11% Interest-bearing 4,744,468 4,395,266 4,405,246 7.70% Total deposits 5,553,665 5,168,555 5,160,703 7.61% FEDERAL FUNDS PURCHASED AND OTHER BORROWINGS 1,422,330 1,585,030 1,952,110 -27.14% SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE 575,000 823,012 635,597 -9.53% COMMERCIAL PAPER ISSUED 583,179 438,457 284,482 105.00% TERM NOTES 19,518 41,853 19,371 0.76% SUBORDINATED CAPITAL NOTES 243,069 244,709 247,170 -1.66% ACCRUED INTEREST PAYABLE 58,744 85,620 77,356 -24.06% OTHER LIABILITIES 282,664 221,447 246,888 14.49% 8,738,169 8,608,683 8,623,677 1.33% 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 313,884 304,171 308,373 1.79% Treasury stock at cost, 4,011,260 shares (67,552) (67,552) (67,552) 0.00% Accumulated other comprehensive loss, net of taxes (15,951) (41,296) (24,478) -34.84% Retained earnings: Reserve fund 139,250 137,511 139,250 0.00% Undivided profits 70,592 126,419 54,317 29.96% Total stockholders' equity 566,849 585,879 536,536 5.65% $9,305,018 $9,194,562 $9,160,213 1.58% SANTANDER BANCORP CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007 (Dollars in thousands, except per share data) For the three months ended March 31, March 31, 2008 2007 INTEREST INCOME: Loans $143,670 $148,355 Investment securities 14,120 16,908 Interest-bearing deposits 451 1,150 Federal funds sold and securities purchased under agreements to resell 788 666 Total interest income 159,029 167,079 INTEREST EXPENSE: Deposits 39,206 45,964 Securities sold under agreements to repurchase and other borrowings 31,559 37,779 Subordinated capital notes 3,665 3,934 Total interest expense 74,430 87,677 Net interest income 84,599 79,402 PROVISION FOR LOAN LOSSES 39,575 22,024 Net interest income after provision for loan losses 45,024 57,378 OTHER INCOME: Bank service charges, fees and other 12,425 12,317 Broker-dealer, asset management and insurance fees 21,987 16,288 Gain on sale of securities, net 2,874 - Gain on sale of loans 1,438 2,348 Other income 13,635 3,099 Total other income 52,359 34,052 OPERATING EXPENSES: Salaries and employee benefits 29,987 31,829 Occupancy costs 6,416 5,574 Equipment expenses 1,193 1,165 EDP servicing, amortization and technical assistance 10,178 9,434 Communication expenses 2,535 2,685 Business promotion 1,965 3,453 Goodwill and other intangibles impairment charges - - Other taxes 3,406 3,106 Other operating expenses 15,764 14,801 Total operating expenses 71,444 72,047 Income before provision for income tax 25,939 19,383 PROVISION FOR INCOME TAX 8,217 7,654 NET INCOME AVAILABLE TO COMMON SHAREHOLDERS $17,722 $11,729 EARNINGS PER COMMON SHARE $0.38 $0.25 SANTANDER BANCORP SELECTED CONSOLIDATED FINANCIAL INFORMATION: (DOLLARS IN THOUSANDS) For the Quarter Ended 31-Mar 31-Mar 31-Dec 1Q08/1Q07 1Q08/4Q07 2008 2007 2007 Variation Variation Interest Income $159,029 $167,079 $168,742 -4.8% -5.8% Tax equivalent adjustment 1,434 2,224 1,551 -35.5% -7.5% Interest income on a tax equivalent basis 160,463 169,303 170,293 -5.2% -5.8% Interest expense 74,430 87,677 90,701 -15.1% -17.9% Net interest income on a tax equivalent basis 86,033 81,626 79,592 5.4% 8.1% Provision for loan losses 39,575 22,024 47,600 79.7% -16.9% Net interest income on a tax equivalent basis after provision 46,458 59,602 31,992 -22.1% 45.2% Other operating income 48,047 31,704 49,098 51.5% -2.1% Gain on sale of securities 2,874 - 1,026 N/A 180.1% Gain on sale of loans 1,438 2,348 1,538 N/A -6.5% Goodwill and other intangibles impairment charges - - 3,644 N/A N/A Other operating expenses 71,444 72,047 80,378 -0.8% -11.1% Income on a tax equivalent basis before income taxes 27,373 21,607 (368) 26.7% -7538.3% Provision for income taxes 8,217 7,654 52 7.4% 15701.9% Tax equivalent adjustment (1,434) (2,224) (1,551) -35.5% -7.5% NET INCOME $17,722 $11,729 $(1,971) 51.1% -999.1% SELECTED RATIOS: Per share data (1): Earnings per common share $0.38 $0.25 $(0.04) 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 $0.16 (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 2008 2007 2007 2007 Net interest margin (1) 4.12% 3.94% 3.74% 3.70% Return on average assets (2) 0.78% 0.53% (0.39)% (0.08)% Return on average common equity (2) 12.90% 8.20% (6.32)% (1.44)% Efficiency Ratio (1,3) 55.76% 62.28% 66.32% 68.16% Non-interest income to revenues 24.77% 16.93% 18.01% 23.44% Capital: Total capital to risk-adjusted assets 7.70 7.88% - 7.43% Tier I capital to risk-adjusted assets 10.74 10.96% - 10.56% Leverage ratio 5.83 5.88% - 5.38% Non-performing loans to total loans 4.42 1.68% - 4.16% Non-performing loans plus accruing loans past-due 90 days or more to loans 4.56% 1.92% - 4.26% Allowance for loan losses to non-performing loans 57.06% 97.07% - 56.70% Allowance for loans losses to period-end loans 2.52% 1.64% - 2.36% OTHER SELECTED FINANCIAL DATA 3/31/2008 3/31/2007 12/31/2007 (dollars in millions) Customer Financial Assets Under Control: Bank deposits (excluding brokered deposits) $4,287.0 $3,845.0 $3,705.0 Broker-dealer customer accounts 5,910.0 5,845.0 5,855.0 Mutual fund and assets managed 3,210.0 2,997.0 3,066.0 Trust, institutional and private accounts assets under management 689.0 1,544.0 637.0 Total $14,096.0 $14,231.0 $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.
