José González de Castejón (787) Ana Calvo de Luis (212) Margie Alvarez (787)

Transcription

1 Santander BanCorp Press release For more information contact: Puerto Rico New York José González de Castejón (787) Ana Calvo de Luis (212) Margie Alvarez (787) SANTANDER BANCORP REPORTS EARNINGS FOR THE FIRST QUARTER OF 2001 Net income amounted to $11.8 million for the quarter ended March 31, 2001, after the effect of the net transition adjustment recorded pursuant to the recently required implementation of SFAS No Net income for the first quarter of 2001 before the transition adjustment, reached $20.0 million, compared to $19.5 million for the same period in Earnings per common share during this quarter, excluding the transition adjustment, reached 46 cents, compared to 43 cents per share for the same period in 2000, an increase of 7%. Net interest margin for this first quarter of 2001, increased to 3.82% compared to 3.67% for the same period in For the first quarter of 2001, operational expenses decreased slightly when compared to the same period in Deposits as of March 31, 2001 reached $3.83 billion, an increase of 2% when compared to $3.75 billion reported for the same period in As in the past eight quarters, a cash dividend of 11 cents per share was declared during the first quarter of 2001, for shareholders of record as of March 9, 2001, resulting in a dividend pay out ratio of 37.8%. 1

2 San Juan, Puerto Rico, April 11, Santander BanCorp (NYSE: SBP; LATIBEX: XSBP), reported today its unaudited financial results for the first quarter of For the quarter ended March 31, 2001, net income amounted to $11.8 million or 26 cents per share. Before the effect of the net transition adjustment recently required by the implementation of the accounting pronouncement SFAS No as of January 1, 2001, net income for the first quarter of 2001 reached $20.0 million or 46 cents per share, compared to $19.5 million or 43 cents per share reported for the same quarter in As of March 31, 2001, Return on Average Common Equity (ROE) and Return on Average Assets (ROA) reached 8.09% and.63%, respectively. Excluding the transition adjustment, ROE and ROA were 14.35% and 1.07%, respectively. The Efficiency Ratio 2 reached 52.97% when compared to 52.08% for the same period in Net income has been affected by the transition adjustment that resulted from application of the recently implemented accounting pronouncement, SFAS 133. Consequently, as of January 1, 2001, the Company recognized the transition adjustment that amounted to a loss of approximately $8,246,000 net of the effect of the related tax benefit of approximately $5,272,000. Also, the Company recorded as part of other comprehensive income, a loss of approximately $1,507,000, net of its tax benefit of approximately $964,000. The primary effect of this adjustment is to accelerate the amortization of approximately $11.4 million (before tax) of premium on Caps that the Company would have had to charge off throughout the year Income Statement For the first quarter of 2001 net interest income 2 was $67.8 million, compared to $69.6 million reported for the same period in The decrease of approximately $1.8 million in net interest income 2 is mostly related to lower volume in average earnings assets that accounts for a $6.6 million decrease in net interest income, offset by an improvement of $5.1 million in cost of funds resulting from a reduction in the average interest bearing liabilities. The decrease in the volume of average earning assets resulted from the Company s decision to sell some of the securities classified as available for sale as part of the effort to manage its interest rate risk. The change in interest rate environment resulted in the call of over $300 million of securities in the investment portfolio. The net interest margin for the quarter ended March 31, 2001 increased fifteen basis (15) points to 3.82%, compared to 3.67% reported for the same period in On January 1, 2001, the Company implemented the provision of Statement of Financial Accounting Standards No. 133 (SFAS No. 133), Accounting for Derivative Instruments and Hedging Activities as amended, which establishes accounting and reporting standards for derivative instruments and hedging activities. It requires that entities recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. 2 On a tax equivalent basis. 2

3 Other operating income for the quarter ended March 31, 2001 increased to $13.6 million from $13.3 million in 2000, representing a 2.6% increase. This improvement was mainly due to an increase in credit cards and mortgage servicing fees as well as to the recognition of a gain on sale of mortgage loans and recognition of mortgage servicing rights retained. There was also a gain realized on property sold. These gains were partially offset by a loss realized on valuation of derivative instruments. For the quarter ended March 31, 2001, operational expenses had a slight decrease of $199,000 when compared to the same period in This enhancement is a direct result of continuing our aggressive cost control program and improving our productivity during this period. Balance Sheet Performance Total assets as of March 31, 2001 reached $7.3 billion, a reduction of 8.02% compared to $7.9 billion as of March 31, 2000, primarily due to a decrease in the investment portfolio. Commenting on the Company s strategies, Arenado explained that Anticipating the Federal Reserve Bank s decrease of the Fed fund rate, we invested in medium term US Agency Bonds, which we sold with a capital gain of $4.9 million once the rates were lowered. We will continue to follow closely the performance of the securities in the market. The loan portfolio remained at $4.5 billion for the first quarter of 2001, in spite of the Company s decision to withdraw from auto lending and tighter credit criteria. The commercial and industrial segments are still the backbone of the lending activity. As of March 31, 2001, these segments represented 59.8% of the total loan portfolio. Construction lending for the first quarter of 2001 grew from $383.8 million to $393.1 million, an increase of 2.41% over the same period last year. Mortgage loans increased from $944.2 million in 2000 to $1.03 billion in the first quarter of The credit card portfolio increased from $100.8 million to $113.2 million, an increase of 12.3% over the same period in Deposits as of March 31, 2001 reached $3.8 billion, an increase of 2% when compared to $3.75 reported for the same period in The first phase of our new Preferred Banking program was concluded during this first quarter. The service program emphasizes personal contact through a financial advisor, backed by Santander BanCorp s products and services. Our Internet page is being revised to be more effective and user friendly and better serve our growing number of customers, which have increased by 200% since our website was launched. The Santander Channel, an Internet Service Provider, product of our alliance with Ice Network Inc., now has over 6,000 customers and we are now offering the service not only to individuals but also to institutional customers, such as schools and associations. Arenado further stated that in keeping with our educational commitment, we are expanding our outreach to the community and have given several complimentary subscriptions of Santander Channel Internet accounts to the Peninsula de Cantera community library, which will be primarily used by underprivileged school children. 3

4 Asset Quality and Financial Strength The level of non-performing loans to total loans stands at 1.81% as compared to 1.11% as of March 31, The coverage ratio (allowance for loan losses to total non-performing loans) as of March 31, 2001 was 58.58% compared to % for the same period in When real estate collateral is considered, this ratio reflects coverage of %. Notwithstanding, our credit quality remained above the industry average. As of March 31, 2001, commercial and mortgage loans represent $68 million or 83% of the total non-performing loans. Of these, $55 million are collateralized by real estate properties. The consumer products area has undergone a restructuring that has impacted the first month of this quarter, resulting in an increase in losses and the level of non performing loans. Nevertheless, there has been a positive trend during the month of February and March of this quarter. As of March 31, 2001, Tier I capital to risk-adjusted assets, total capital to risk-adjusted assets (BIS ratio) and leverage ratios reached 11.18%, 12.19% and 7.65%, respectively. Dividend Distributions During the first quarter of 2001, the Board of Directors declared a cash dividend of 11 cents per share for those shareholders on record as of March 9, This is the ninth consecutive quarter that Santander BanCorp has declared a cash dividend, for dividend pay out ratio of 37.8%. 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 two wholly owned subsidiaries, Banco Santander Puerto Rico and Santander Insurance Agency. Banco Santander Puerto Rico has been operating in Puerto Rico for 24 years. It offers a full array of services in the areas of commercial, mortgage and consumer banking supported by a team of over 1,500 employees. Banco Santander Puerto Rico has 76 branches. Santander Insurance Agency offers life, health and disability insurance as a corporate agent and also operates as a general agent. For more information, visit the Bank s website at BSCH Institutional Background Banco Santander Central Hispano is the leading financial group in Spain and Latin America, the third largest by market capitalization in the Euro Zone and among the fifteen largest in the world. As of December 31, 2000, it has more than $324 billion in assets and serves 35 million customers through more than 10,800 offices in 42 countries. Management s philosophy is focused on creating value for shareholders through a model of personalized banking services combined with rigorous standards of productivity and efficiency. In addition to its leading role in Latin America, Banco Santander Central Hispano has established important alliances in Europe with leading banks: The Royal Bank of Scotland in the UK, Société Générale in France, San Paolo-IMI in Italy and Commerzbank in Germany. It also has subsidiaries in Germany and Portugal as well as offices in Africa, Asia and Australia. Santander Central Hispano is a world leader in mutual and investment funds, and is among the most active banks in Internet 4

5 banking and in developing New Economy projects. By December 31, 2000 it has more than 1,200,000 web customers. Leading Financial Group in Latin America Banco Santander Central Hispano is the leading financial group in Latin America, with a policy of combining global balance sheet strength with local management and regional training. Founded in 1857, the Group has a long connection with Latin America and a firm commitment that is reflected in the $15 billion invested in the region to date. The Group is present in 12 countries representing 98% of the region s GDP: Argentina, Bolivia, Brazil, Colombia, Chile, Mexico, Panama, Paraguay, Peru, Puerto Rico, Uruguay and Venezuela. The franchise comprises 17 banks, 9 pension fund managers, 13 mutual funds, 10 insurance companies, 12 brokerages and 9 leasing and factoring companies. In all, it has 23 million customers in the region and more than 4,600 offices. According to latest available data, at the end of December 31, 2000, total deposits in the region reached $57.5 billion. Santander Central Hispano was managing a total of $15.7 billion in investment funds and $11.9 billion in pension funds, with a 10.0% market share in the region. The Group s rigorous risk policy has enabled its non-performing loan ratio in the region to stay well below the average for the sector This earnings report may contain certain forward-looking statements with respect to the financial condition, results of operations and business of Santander BanCorp that are subject to various risk factors which could cause future results to differ materially from current management expectations or estimates. Such factors include, but are not limited, to the possibility that adverse general economic conditions or that an adverse interest rate environment could develop. 5

6 SANTANDER BANCORP CONSOLIDATED BALANCE SHEETS-MARCH 31, 2001 AND 2000 AND DECEMBER 31, 2000 (Dollars in thousands, except per share data) ASSETS 31-Mar Mar Dec-00 Variance (Unaudited) (Unaudited) (Audited) 3/01-3/00 CASH AND CASH EQUIVALENTS: Cash and due from banks $ 130,933 $ 135,330 $ 199, % Interest bearing deposits 17,322 20,466 20, % Federal funds sold and securities purchased under agreements to resell 35,000 77,000 51, % Total cash and cash equivalents 183, , , % INTEREST BEARING DEPOSITS INVESTMENT SECURITIES AVAILABLE FOR SALE, at market value 1,132,346 1,183,348 1,032, % INVESTMENT SECURITIES HELD TO MATURITY, at cost 1,277,927 1,752,108 1,651, % LOANS, net 4,514,545 4,553,140 4,488, % ALLOWANCE FOR LOAN LOSSES (47,970) (53,110) (51,526) -9.68% BANK PREMISES AND EQUIPMENT, net 69,935 80,308 71, % ACCRUED INTEREST RECEIVABLE 60,590 65,526 58, % OTHER ASSETS 100, , , % $ 7,290,771 $ 7,926,523 $ 7,642, % LIABILITIES AND STOCKHOLDERS' EQUITY DEPOSITS: Demand $ 828,921 $ 816,612 $ 889, % Savings 1,188,752 1,289,123 1,197, % Time 1,811,526 1,647,347 2,834, % Total deposits 3,829,199 3,753,082 4,921, % FEDERAL FUNDS PURCHASED AND OTHER BORROWINGS 485, , , % SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE 868,122 1,465,872 1,163, % COMMERCIAL PAPER ISSUED 957, ,929 69, % SUBORDINATED CAPITAL NOTES 20,000 20,000 20, % TERM NOTES 434, , , % ACCRUED INTEREST PAYABLE 31,616 31,052 39, % OTHER LIABILITIES 69,637 75,039 73, % 6,695,354 7,367,030 7,046, % STOCKHOLDERS' EQUITY: Preferred stock $25 par value; 10,000,000 shares authorized, 2,610,008 outstanding 65,250 65,250 65, % Common stock, $2.50 par value; 200,000,000 shares authorized, 42,484,870 and 38,622,651 shares issued and outstanding in 2000 and 1999, respectively 106, , , % Capital paid in excess of par value 122, , , % Treasury stock-at cost, 2,024,200 shares (32,575) - (23,251) % Accumulated other comprehensive income (loss) (4,558) (27,107) (7,316) % Retained earnings- Reserve fund 109, , , % Undivided profits 228, , , % Total stockholders' equity 595, , , % $ 7,290,771 $ 7,926,523 $ 7,642, %

7 SANTANDER BANCORP CONSOLIDATED STATEMENTS OF INCOME FOR THE QUARTERS ENDED MARCH 31, 2001 AND 2000 (Dollars in thousands, except per share data) For the quarters ended March 31, March 31, INTEREST INCOME: Loans $ 101,645 $ 104,468 Investment securities 40,011 44,920 Interest bearing deposits Federal funds sold and securities purchased under agreements to resell Total interest income 142, ,026 INTEREST EXPENSE: Deposits 41,138 36,422 Securities sold under agreements to repurchase and other borrowings 39,871 50,764 Subordinated capital notes Total interest expense 81,299 87,488 Net interest income 61,332 63,538 PROVISION FOR LOAN LOSSES 13,145 7,750 Net interest income after provision for loan losses 48,187 55,788 OTHER INCOME: Service charges, fees and other 9,744 9,262 Gain (loss) on sale of securities 5,010 (3,821) Gain on sale of mortgage servicing rights Other 3,911 4,052 Total other income 18,783 9,978 OTHER OPERATING EXPENSES: Salaries and employee benefits 17,962 18,132 Occupancy costs 3,713 3,765 Equipment expenses 2,918 3,367 Other operating expenses 18,631 18,159 Total other operating expenses 43,224 43,423 Income before provision for income tax 23,746 22,343 PROVISION FOR INCOME TAX 3,730 2,888 INCOME before transition adjustment 20,016 19,455 TRANSITION ADJUSTMENT LOSS, net of defered taxes of $5,272 (8,246) $ - NET INCOME $ 11,770 $ 19,455 INCOME AVAILABLE TO COMMON SHAREHOLDERS $ 10,628 $ 18,313 EARNINGS PER COMMON SHARE BEFORE TRANSITION ADJUSTMENT $ 0.46 $ 0.43 TRANSITION ADJUSTMENT (0.20) - NET INCOME $ 0.26 $ 0.43

8 SANTANDER BANCORP First First Year Fourth SELECTED RATIOS Quarter Quarter to Date Quarter Net interest margin (1) 3.82% 3.67% 3.65% 3.55% Return on average assets (2) 0.63% 0.98% 0.98% 0.91% Return on average assets (before transition adjusment)(2) 1.07% 0.98% 0.98% 0.91% Return on average common equity (2) 8.09% 12.39% 14.28% 12.45% Return on average common equity (before transition adjusment)(2) 14.35% 12.39% 14.28% 12.45% Efficiency Ratio (1,3) 52.97% 52.08% 52.64% 54.47% Capital: Tier I capital to risk-adjusted assets 11.18% 10.25% % Total capital to risk-adjusted assets 12.19% 11.39% % Leverage ratio 7.65% 6.87% % Non-performing loans to total loans 1.81% 1.11% % Non-performing loans plus accruing loans past-due 90 days or more to loans 1.86% 1.21% % Allowance for loan losses to nonperforming loans 58.58% % % Allowance for loans losses to periodend loans 1.06% 1.17% % (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.

9 SANTANDER BANCORP SELECTED CONSOLIDATED FINANCIAL INFORMATION: (DOLLARS IN THOUSANDS) Quarter ended March 31, Variation Interest Income $ 142,631 $ 151, % Tax equivalent adjustment 6,503 6, % 149, , % Interest expense 81,299 87, % Net interest income 67,835 69, % Provision for loan losses 13,145 7, % Net interest income after provision 54,690 61, % Other operating income 13,655 13, % Gain on sale of MSRs % Gain on sale of securities 5,010 (3,821) % Other operating expenses 43,224 43, % Income before income taxes 30,249 28, % Provision for income taxes 3,730 2, % Tax equivalent adjustment 6,503 6, % INCOME before transition adjusment 20,016 19, % TRANSITION ADJUSTMENT (8,246) - - NET INCOME $ 11,770 $ 19, % SELECTED RATIOS: Per share data (1): Earnings per common share(before transition adjusment) $ 0.46 $ 0.43 Average common shares outstanding 40,761,793 42,484,870 Common shares outstanding at end of period 40,460,670 42,484,870 Cash Dividend per Share: Preferred Stock $ 0.44 $ 0.44 Common Stock $ - $ 0.11 (1) Per share data are based on the average number of shares outstanding during the period giving retroactive effect to the stock dividend declared January 11, Basic and diluted earnings per share are the same.