Santander BanCorp Reports Record Earnings for the First Quarter of
2004 * Net income for the quarter ended March 31, 2004 reached a
historical high of $25.2 million, a 391% improvement over the net
income of $5.1 million reported in the first quarter of 2003, and a
60% improvement over net income of $15.7 million reported for the
fourth quarter of 2003. SAN JUAN, Puerto Rico, April 21
/PRNewswire-FirstCall/ -- Santander BanCorp (NYSE: SBP; LATIBEX:
XSBP), reported today its unaudited financial results for the
period ended March 31, 2004. The financial results for the first
quarter of 2004 reflect record net income reaching a historical
high of $25.2 million, a 391% improvement over net income of $5.1
million reported during the first quarter of 2003. For the quarter
ended March 31, 2004, net income amounted to $25.2 million or $0.59
per common share compared to net income of $5.1 million or $0.09
per common share for the first quarter of 2003. Return on Average
Common Equity (ROE) and Return on Average Assets (ROA) were 21.01%
and 1.40%, respectively, for the quarter ended March 31, 2004,
compared to 3.02% and 0.32%, respectively, for the first quarter of
2003. The Efficiency Ratio(1) improved to 67.71% for the first
quarter of 2004, compared to 75.62% reported during the first
quarter of 2003. The improvement in the efficiency ratio during the
first quarter of 2004, when compared to the same quarter of 2003,
is a direct result of higher revenues. The consolidated Balance
Sheet and Income Statement Data for the quarter ended March 31,
2003, has been restated to give retroactive effect to the
acquisition of Santander Securities Corporation by Santander
BanCorp on December 30, 2003. Income Statement The $20.1 million
improvement in net income for the first quarter of 2004 compared to
the same period in 2003 was principally due to an increase of $10.3
million in net interest income, an increase of $4.0 million in gain
on sale of investment securities, a $2.8 million gain on sale of a
building, an increase of $1.1 million in fee and other income, and
a reduction of $3.3 million in the provision for loan losses. These
changes were partially offset by an increase of $1.8 million in the
provision for income taxes. For the quarter ended March 31, 2004,
net interest income(1) amounted to $58.7 million, an increase of
22.3% compared to $48.0 million for the first quarter in 2003.
There was an increase in net interest margin(1) of 25 basis points
from 3.17% for the first quarter of 2003 to 3.42% for the same
period in 2004. The improvement in net interest income(1) was
principally due to an increase in average interest earning assets
of $768 million or 12.5% and a decrease in total cost of funds of
63 basis points. The provision for loan losses reflected a decrease
of $3.3 million or 27.5% from $12.1 million for the quarter ended
March 31, 2003 to $8.8 million for the first quarter of 2004. The
reduction in the provision for loan losses was due to a 21%
decrease in non-performing loans which are down to $93.7 million as
of March 31, 2004 from $118.1 as of March 31, 2003. A 41% reduction
in net charge-offs from $11.1 million during the first quarter of
2003 compared to $6.5 million for the first quarter of 2004 also
had a favorable impact on the provision for loan losses. Other
income, excluding gain on sale of a building, reached $33.9 million
for the quarter ended March 31, 2004, a 17.9% improvement compared
to $28.7 million for the quarter ended March 31, 2003. This
increment was related to an increase of $4 million in gain on sale
securities and growth in fee income from the broker/dealer, asset
management and insurance operations of $1.1 million or 9.5%. In
March 2004, the Corporation sold a building to an unrelated third
party in a sales-leaseback transaction and recognized a gain of
$2.8 million. A deferred gain of $4.0 million was recorded and will
be amortized as a reduction of rent expense over the term of the
related leases through January 2009. For the quarter ended March
31, 2004, the Efficiency Ratio(1) improved 791 basis points to
67.71%, compared to 75.62% for the quarter ended March 31, 2003.
This improvement was mainly a result of higher revenues (excluding
gains on sales of securities and a gain on sale of building during
the first quarter of 2004) and a decrease of $0.3 million in other
operating expenses during the quarter ended March 31, 2004.
Operating expenses reflected a decrease of $0.3 million for the
quarter ended March 31, 2004 compared to the same quarter in 2003.
This reduction was due mostly to a decrease in amortization of
intangibles of $1.2 million as a result of having fully amortized
core deposit intangibles at the beginning of 2004, a reduction of
$0.6 million in expenses related to loan collections as a result of
the in-sourcing of this operation within the Corporation, and a
reduction of $0.6 million in the provision for repossessed assets.
These decreases were partially offset by an increase in personnel
costs of $1.7 million. This increment was due to an increase in
salaries and the in-sourcing of the collection operations by the
Corporation. These increases were partially offset by an increment
in deferred loan origination costs. Balance Sheet Total assets as
of March 31, 2004 remained relatively constant at $7.4 billion when
compared to December 31, 2003. There was an increase of $85 million
in cash and cash equivalents, a decrease in investment securities
of $318 million primarily due to the sale of $275 million in
mortgage backed securities. There was also an increase of $226
million in net loans, including loans held for sale (further
explained below) and a decrease of $9.4 million in premises and
equipment due to the sale of a building with a book value of
approximately $7.7 million, and normal depreciation for the period.
There was an increase of $36.5 million in other assets due to an
increment in securities sold but not delivered. Deposits also
reflected an increase of $6.5 million while total borrowings
decreased $22.5 million. As a result of management's efforts to
increase market share, the net loan portfolio, including loans held
for sale, reflected a $226 million or 5.4% increase, reaching $4.4
billion at March 31, 2004, compared to the figures reported at
December 31, 2003. Mortgage loan production continued to grow
during the first quarter of 2004 resulting in an increase of $225.1
million or 15.4%, in the mortgage loan portfolio. There was a 16.5%
increase in mortgage loan production as of March 31, 2004 compared
to the quarter ended December 31, 2003. The growth in mortgage loan
production for the quarter ended March 31, 2004 compared to the
same period in 2003 was 19.2%. The commercial loan portfolio
(including construction loans) also reflected an increase of $23.3
million or 1.0% for the first quarter of 2004. These increases were
partially offset by a $20.5 million or 5.1% decrease in the
consumer loan portfolio due to more selective lending criteria and
to the runoff of the auto loan portfolio as a result of the
Company's decision in 2001 to withdraw from that market. Financial
Strength Non-performing loans to total loans as of March 31, 2004
amounted to 2.11%, a 22 basis point reduction of the reported 2.33%
as of December 31, 2003. Non-performing loans at March 31, 2004
amounted to $93.7 million, a 4.8% improvement compared to $98.4
million at December 31, 2003. There has been an improving trend in
this indicator during 2003, which is continuing through the first
quarter of 2004. The annualized ratio of net charge-offs to average
loans for the quarter ended March 31, 2004 decreased to 0.62% from
1.16% reported for the quarter ended March 31, 2003. Net charge
offs for the first quarter of 2004 decreased $4.5 million, or
41.0%, compared to the first quarter of 2003. The Company's efforts
are directed to continue improving this ratio. The allowance for
loan losses represents 1.64% of total loans as of March 31, 2004, a
slight decrease over the 1.67% reported as of December 31, 2003.
The allowance for loan losses to total non-performing loans at
March 31, 2004 reached 77.74% compared to 71.74% at December 31,
2003 and 49.94% at March 31, 2003. Excluding non-performing
mortgage loans (for which the Company has historically had a
minimal loss experience) this ratio is 165.76%. The Company has
adjusted its allowance for loan losses through periodic charges to
the provision for loan losses. This item is reviewed on a recurring
basis considering an ongoing assessment of the Company's credit
exposure and a number of other relevant variables. The level of the
allowance for loan losses is subject to changes in internal and
external factors affecting the level of non-performing loans and
credit risk of the loan portfolio. As of March 31, 2004, total
capital to risk-adjusted assets (BIS ratio) reached 10.97% and Tier
I capital to risk-adjusted assets and leverage ratios were 9.39%
and 6.33%, respectively. Customer Financial Assets Under Control
Santander BanCorp is a client-focused organization that seeks to
earn the trust of customers to manage their financial assets. As of
March 31, 2004, the Company had over $11.2 billion in Customer
Financial Assets Under Control, which represents a $564 million
increase over balances as of December 31, 2003. This is a
significant part of the financial assets of Puerto Rico households
and reflects the Company's strong positioning in its primary
market. 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. The growth in customer financial
assets and the stability of customer deposits is a strong
indication of Company's successful efforts to regain market share
and reposition itself as a leading provider of financial services.
Shareholder Value During the first quarter of 2004, the Company's
common stock price per share increased from $24.35 to $27.50,
representing growth of 13% or a $134 million increase in aggregate
shareholder value. During the first quarter of 2004, Santander
BanCorp declared a cash dividend of 11 cents per common share to
its shareholders of record as of March 5, 2004, payable on April 1,
2004, resulting in an annualized dividend yield of 1.60%. There
were no stock repurchases during the last three quarters of 2003
and the first quarter of 2004 under the Stock Repurchase Program.
As of March 31, 2004, the Company 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 and on Latibex (Madrid Stock Exchange). It has three
wholly owned subsidiaries, Banco Santander Puerto Rico, Santander
Securities Corporation and Santander Insurance Agency. Banco
Santander Puerto Rico has been operating in Puerto Rico for 27
years. It offers a full array of services through 67 branches in
the areas of commercial, mortgage and consumer banking, supported
by a team of over 1,400 employees. .Santander Securities offers
securities brokerage services and provides portfolio management
services through its wholly owned subsidiary Santander Asset
Management Corporation. 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 main financial group in Spain and Latin
America, and the second in the Euro Zone by market capitalization.
Founded in 1857, it has forged important business initiatives,
including a 15-year old alliance with The Royal Bank of Scotland.
The Santander Group also holds the third largest financial group in
Portugal, as well as Santander Consumer Finance, a leading consumer
finance franchise in Germany, Italy and eight other European
countries. In Latin America, Santander is the leading banking
franchise. In this region, the Group manages a business volume of
more than 104,000 million Euros (in loans, deposits, securities and
on and off-balance sheet funds), maintains 4,052 offices, 12
million individual clients and over half a million business
clients. In 2003, Santander obtained a net attributable profit of
US$1.489 million in Latin America, a 14.3% increase over the year
2002. 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. SANTANDER
BANCORP SELECTED CONSOLIDATED FINANCIAL INFORMATION: (DOLLARS IN
THOUSANDS) QTD QTD QTD As restated Mar. 31, Dec. 31, Mar. 31,
1Q04/4Q03 1Q04/1Q03 2004 2003 2003 Variation Variation Interest
Income $85,827 $86,140 $79,022 -0.4% 8.6% Tax equivalent adjustment
4,740 5,184 4,391 -8.6% 7.9% Interest income on a tax equivalent
basis 90,567 91,324 83,413 -0.8% 8.6% Interest expense 31,851
31,384 35,395 1.5% -10.0% Net interest income on a tax equivalent
basis 58,716 59,940 48,018 -2.0% 22.3% Provision for loan losses
8,750 15,000 12,065 -41.7% -27.5% Net interest income on a tax
equivalent basis after provision 49,966 44,940 35,953 11.2% 39.0%
Other operating income 24,763 24,053 23,976 3.0% 3.3% Gain on sale
of securities 8,903 779 4,669 1042.9% 90.7% Gain on sale of loans
212 2,982 290 -92.9% -26.9% Gain on sale of building 2,754 - - N/A
N/A Other operating expenses 54,174 57,532 54,509 -5.8% -0.6%
Income on a tax equivalent basis before income taxes 32,424 15,222
10,379 113.0% 212.4% Provision (credit) for income taxes 2,469
(5,704) 652 -143.3% 278.7% Tax equivalent adjustment 4,740 5,184
4,391 -8.6% 7.9% NET INCOME (LOSS) $25,215 $15,742 $5,336 60.2%
372.5% SELECTED RATIOS: Per share data (1): Earnings (loss) per
common share $0.59 $0.28 $0.09 Average common shares outstanding
42,398,954 42,398,954 42,258,960 Common shares outstanding at end
of period 42,398,954 42,398,954 42,398,954 Cash Dividends per
Share: Preferred Stock* $ - $1.41 $0.44 Common Stock $0.11 $0.11
$0.11 (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. * Including redemption premium in Dec. 2003 SANTANDER
BANCORP CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 2004 AND 2003
AND DECEMBER 31, 2003 (Dollars in thousands, except per share data)
ASSETS As restated (Unaudited) (Unaudited) (Audited) Variance
31-Mar-04 31-Mar-03 31-Dec-03 03/04-12/03 CASH AND CASH
EQUIVALENTS: Cash and due from banks $131,001 $121,552 $99,183
32.08% Interest bearing deposits 51,671 197,782 15,300 237.72%
Federal funds sold and securities purchased under agreements to
resell 295,725 342,350 278,750 6.09% Total cash and cash
equivalents 478,397 661,684 393,233 21.66% INTEREST BEARING
DEPOSITS 10,000 - 10,000 N/A TRADING SECURITIES 57,808 20,259
42,547 35.87% INVESTMENT SECURITIES AVAILABLE FOR SALE, at fair
value 1,347,181 964,660 1,664,311 -19.05% INVESTMENT SECURITIES
HELD TO MATURITY, at amortized cost 832,627 905,574 833,127 -0.06%
LOANS HELD FOR SALE, net 294,874 226,311 297,201 -0.78% LOANS, net
4,147,714 3,873,606 3,917,566 5.87% ALLOWANCE FOR LOAN LOSSES
(72,802) (58,967) (70,572) 3.16% PREMISES AND EQUIPMENT, net 51,747
62,646 61,107 -15.32% ACCRUED INTEREST RECEIVABLE 36,472 38,481
36,398 0.20% GOODWILL 34,791 34,791 34,791 0.00% INTANGIBLE ASSETS
4,454 5,864 4,662 -4.46% OTHER ASSETS 178,587 115,155 142,050
25.72% $7,401,850 $6,850,064 $ 7,366,421 0.48% LIABILITIES AND
STOCKHOLDERS' EQUITY DEPOSITS: Non-interest bearing $704,974
$627,604 $700,413 0.65% Interest bearing 3,443,773 3,393,197
3,441,815 0.06% Total deposits 4,148,747 4,020,801 4,142,228 0.16%
FEDERAL FUNDS PURCHASED AND OTHER BORROWINGS 315,000 224,700
350,000 -10.00% SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
1,686,090 1,270,492 1,808,238 -6.76% COMMERCIAL PAPER ISSUED
374,753 249,798 254,904 47.02% TERM NOTES 180,750 304,794 165,966
8.91% CAPITAL NOTES 15,925 28,925 15,925 0.00% ACCRUED INTEREST
PAYABLE 23,884 26,994 18,728 27.53% OTHER LIABILITIES 148,377
121,643 129,600 14.49% 6,893,526 6,248,147 6,885,589 0.12%
STOCKHOLDERS' EQUITY: Series A Preferred stock, $25 par value;
10,000,000 shares authorized; 2,610,008 shares issued and
outstanding in March 2003 - 65,250 - N/A Common stock, $2.50 par
value; 200,000,000 shares authorized; 46,410,214 shares issued;
42,398,954 shares outstanding in March 2004, 2003 and December
2003. 116,026 116,026 116,026 0.00% Capital paid in excess of par
value 211,742 211,742 211,742 0.00% Treasury stock at cost,
4,011,260 shares in March 2004, 2003 and December 2003. (67,552)
(67,552) (67,552) 0.00% Accumulated other comprehensive loss, net
of taxes (12,521) (11,341) (19,465) -35.67% Retained earnings-
Reserve fund 119,432 116,482 119,432 0.00% Undivided profits
141,197 171,310 120,649 17.03% Total stockholders' equity 508,324
601,917 480,832 5.72% $7,401,850 $6,850,064 $7,366,421 0.48%
SANTANDER BANCORP CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE
QUARTERS ENDED MARCH 31, 2004 AND 2003 (Dollars in thousands,
except per share data) For the quarters ended As restated
(Unaudited) (Unaudited) March 31, March 31, 2004 2003 INTEREST
INCOME: Loans $57,900 $60,262 Investment securities 27,215 18,153
Interest bearing deposits 132 217 Federal funds sold and securities
purchased under agreements to resell 580 390 Total interest income
85,827 79,022 INTEREST EXPENSE: Deposits 13,180 16,067 Securities
sold under agreements to repurchase and other borrowings 18,649
19,110 Subordinated capital notes 22 218 Total interest expense
31,851 35,395 Net interest income 53,976 43,627 PROVISION FOR LOAN
LOSSES 8,750 12,065 Net interest income after provision for loan
losses 45,226 31,562 OTHER INCOME: Bank service charges, fees and
other 9,645 10,231 Broker/dealer, asset management and insurance
fees 12,556 11,471 Gain on sale of securities 8,903 4,669 Gain on
sale of mortgage servicing rights 91 125 Gain on sale of loans 212
290 Gain on sale of building 2,754 - Other income 2,471 1,951 Total
other income 36,632 28,737 OTHER OPERATING EXPENSES: Salaries and
employee benefits 23,549 21,825 Occupancy costs 3,400 3,276
Equipment expenses 2,164 2,344 EDP servicing, amortization and
technical expenses 8,231 8,301 Communication expenses 2,109 1,599
Business promotion 1,680 2,026 Other taxes 2,275 2,569 Other
operating expenses 10,766 12,569 Total other operating expenses
54,174 54,509 Income before provision for income tax 27,684 5,790
PROVISION FOR INCOME TAX 2,469 652 NET INCOME 25,215 5,138
DIVIDENDS TO PREFERRED SHAREHOLDERS - 1,142 NET INCOME AVAILABLE TO
COMMON SHAREHOLDERS 25,215 3,996 EARNINGS PER COMMON SHARE $0.59
$0.09 SANTANDER BANCORP QTD QTD 2003 As restated March 31, March
31, Year to Fourth SELECTED RATIOS 2004 2003 Date Quarter Net
interest margin (1) 3.42% 3.17% 3.30% 3.48% Return on average
assets (2) 1.40% 0.32% 0.59% 0.87% Return on average common equity
(2) 21.01% 3.02% 6.08% 8.89% Efficiency Ratio (1,3) 67.71% 75.62%
70.10% 66.15% Fee income to revenues 29.95% 26.67% 26.92% 24.41%
Capital: Total capital to risk-adjusted assets 10.97% 13.16% -
10.41% Tier I capital to risk-adjusted assets 9.39% 11.91% - 8.84%
Leverage ratio 6.33% 8.29% - 6.04% Non-performing loans to total
loans 2.11% 2.88% - 2.33% Non-performing loans plus accruing loans
past-due 90 days or more to loans 2.18% 2.94% - 2.39% Allowance for
loan losses to non-performing loans 77.74% 49.94% - 71.74%
Allowance for loans losses to period-end loans 1.64% 1.44% - 1.67%
OTHER SELECTED FINANCIAL DATA 3/31/2004 3/31/2003 12/31/2003
(dollars in millions) Customer Financial Assets Under Control: Bank
deposits (excluding brokered deposits) $3,788.7 $3,755.6 $3,782.8
Broker-dealer customer accounts 4,053.1 3,176.8 3,727.4 Mutual fund
and assets managed 2,065.8 1,360.5 1,859.0 Trust, institutional and
private accounts assets under management 1,326.4 929.9 1,300.6
Total $11,234.0 $9,222.8 $10,669.7 (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 (and gain on
sale of building for 1Q04). DATASOURCE: Santander BanCorp CONTACT:
Puerto Rico, Maria Calero, +1-787-751-6640, Evelyn Vega,
+1-787-777-4546, both for Santander BanCorp Web site:
http://www.santandernet.com/
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