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 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 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.
SOURCE Santander BanCorp