-1x Bp (LSE:SBP)
Historical Stock Chart
From Jul 2019 to Jul 2024
![Click Here for more -1x Bp Charts. Click Here for more -1x Bp Charts.](/p.php?pid=staticchart&s=L%5ESBP&p=8&t=15)
- Santander BanCorp also announces restatement of financial information for each of the five years in the period ended December 31, 2004 and for the first, second and third quarters of 2004 and 2005
SAN JUAN, Puerto Rico, March 7 /PRNewswire-FirstCall/ -- Santander BanCorp (NYSE: SBP; LATIBEX: XSBP) ("the Company"), reported today its unaudited financial results for the quarter and the year ended December 31, 2005. Net income for the quarter ended December 31, 2005 reached $16.9 million, compared to net income of $21.8 million* reported during the fourth quarter of 2004. The decrease in net income for the quarter ended December 31, 2005 compared to the same period in 2004 was principally due to an increase in income tax expense. For the year ended December 31, 2005, net income amounted to $79.8 million, as compared to net income of $86.9 million* for the year ended December 31, 2004.
Net income for the quarter ended December 31, 2005 reached $16.9 million or $0.36 per common share, compared to net income for the quarter ended December 31, 2004 of $21.8 million or $0.47* per common share. Annualized Return on Average Common Equity (ROE) and Return on Average Assets (ROA) were 11.83% and 0.80%, respectively, for the quarter ended December 31, 2005, compared to 16.46%* and 1.10%*, respectively, for the fourth quarter of 2004. The Efficiency Ratio(1) for the quarters ended December 31, 2005 and 2004 was 63.00% and 59.98%*, respectively. Income before income taxes for the quarter ended December 31, 2005 amounted to $25.8 million, reflecting a slight decline as compared to income before income taxes of $26.1 million* for the same quarter of 2004. Provision for income tax amounted to $8.9 million for the fourth quarter of 2005, increasing the effective tax rate to 34.5% from 16.7%* for the same quarter of 2004. Provision for income tax for the quarter ended December 31, 2004 amounted to $4.4 million*. The increase in provision for income tax during 2005 was due in part to higher taxable income in 2005 than in 2004, due to a change in the composition of the Corporation's taxable and tax-exempt assets over those periods. Additionally, during the third quarter of 2005, the Legislature of Puerto Rico approved a temporary, two-year surtax of 2.5% for corporations effective for taxable years beginning after December 31, 2004. This surtax effectively increases the maximum marginal tax rate from 39% to 41.5%. Provision for income tax for the year ended December 31, 2005 includes the effect of this surtax in the amount of $1.9 million.
Net income for the year ended December 31, 2005 reached $79.8 million or $1.71 per common share as compared to $86.9 million or $1.86* per common share for the year ended December 31, 2004. Annualized ROE and ROA were 13.85% and 0.96%, respectively, for the year ended December 31, 2005, compared to ROE and ROA of 17.53%* and 1.14%*, respectively, for the year ended December 31, 2004. The Efficiency Ratio(1) for the year ended December 31, 2005 was 62.97% compared to 62.78%* for the year ended December 31, 2004. Income before income taxes for the year ended December 31, 2005 reached $110.6 million, a 14.4% increase over $96.7 million* for the year ended December 31, 2004. The provision for income tax amounted $30.8 million for the year ended December 31, 2005, increasing the effective tax rate to 27.8% from 10.1%* for the year ended December 31, 2004. Income tax provision for the year ended December 31, 2004 amounted to $9.7 million*.
Income Statement
The $4.9 million reduction in net income for the quarter ended December 31, 2005 compared to the same period in 2004* was principally due to an increase of $4.5 million in income tax expense and an increase in operating expenses of $0.5 million. There was also a decrease in provision for loan losses of $0.5 million, and a decrease in non interest income of $4.1 million that was partially offset by an increase in net interest income of $4.8 million.
The decline of $7.1 million in net income for the year ended December 31, 2005 compared to the amount* reported for the year ended December 31, 2004 was principally due to an increase of $21.1 million in income tax expense and $4.0 million in operating expenses. These increases were partially offset by a reduction of $5.9 million, or 22.3%, in provision for loan losses, and increases in non-interest income of $8.1 million, or 6.9%, and of $4.0 million, or 1.8%, in net interest income.
Net interest margin(1) for the fourth quarter of 2005 was 3.16% compared with 3.29%* for the fourth quarter of 2004. This decrease of 13 basis points in net interest margin(1) was mainly due to a rise of 106 basis points in the average cost of interest-bearing liabilities. This rise was, in turn, attributable to short-term interest rate increases caused by the Federal Reserve's increases to the discount rate. The average yield on interest- earning assets increased 82 basis points also as a result of the higher interest rate scenario. This increase was partially offset by a decrease in the yield of the investment portfolio. The net interest margin(1) for the fourth quarter of 2005 includes a $6.0 million termination penalty from a commercial loan, secured by mortgage notes, to an unrelated financial institution which was repaid in November 2005. Excluding this termination penalty, the net interest margin(1) for the fourth quarter of 2005 would have been 2.86%.
For the fourth quarter of 2005, average interest-earning assets grew by $345.1 million, or 4.6%, and average interest-bearing liabilities increased $372.6 million, or 5.7%, compared to the same period in 2004*. The increase in average interest earning assets compared to the fourth quarter of 2004* was driven by an increase in average net loans of $789.7 million, which, in turn, was attributable mainly to an increase in average mortgage loans of $600.5 million, or 39.7%, and an increase in consumer loans of $104.7 million, or 23.2%, when compared to the same period in 2004*. This increase was partially offset by a decrease in average investment securities of $341.1 million. The reduction in investment securities is mainly attributable to the sale of $785 million of securities during the first quarter of 2005. This sale resulted in a decline in the yield on investment securities of 87 basis points from 5.32%* for the quarter ended December 31, 2004 to 4.45% for the quarter ended December 31, 2005, which further explains the reduction in net interest income for the quarter. The above-mentioned sale generated a gain of $16.9 million, which was partially offset by a loss of $6.7 million on the extinguishment of certain long-term repo transactions that funded portion of the securities sold. The increase in average interest-bearing liabilities of $372.6 million was driven by an increase in average time deposits of $1.2 billion, partially offset by a decrease in average borrowings of $781.0 million as compared to the quarter ended December 31, 2004*.
Net interest margin(1) for the year ended December 31, 2005 was 3.02% compared with 3.33%* for the same period in 2004. This decline of 31 basis points in net interest margin(1) was mainly due to an increase of 88 basis points in the average cost of interest-bearing liabilities due to short-term interest rate increases, while the average yields of interest-earnings assets increased by 46 basis points. The net interest margin for the year ended December 31, 2005 includes a $6.0 million termination penalty from a commercial loan secured by mortgage notes as explained above. Excluding this termination penalty, the net interest margin(1) for the year ended December 31, 2005 would have been 2.94%.
The provision for loan losses reflected an increase of $0.5 million or 11.1% from $4.5 million for the quarter ended December 31, 2004 to $5.0 million for the fourth quarter in 2005. For the year ended December 31, 2005, the reduction in the provision for loan losses was $5.9 million or 22.3%, compared to the same period in 2004. The reduction in the provision for loan losses was due to a 44.6% decrease in non-performing loans (excluding mortgage loans(2)) which are down to $28.4 million as of December 31, 2005, from $51.3 million as of December 31, 2004. The revised accounting classification of the purchases of mortgage loans as commercial loans, described below, did not result in any changes to the allowance for loan losses.
For the quarter ended December 31, 2005, other income reached $25.1 million compared to $29.2* million reported for the same period in 2004. There was an increase of $1.0 million, or 9.8%, in bank charges, fees and other that was offset by a decrease of $0.5 million in gains on sale of loans, $3.2 million in derivative gains, $2.1 million in broker-dealer fees, and increases of $0.3 million in asset management fees and $1.3 million in insurance commissions.
For the year ended December 31, 2005, other income increased $8.1 million or 6.9% to $125.4 million from $117.2 million* in the year ended December 31, 2004. This increase was the result of higher gains on the sale of securities of $6.4 million. During March 2005, the Company sold $785 million of investment securities and realized a gain of $16.9 million. This gain was partially offset by a loss of $6.7 million on the extinguishment of certain long-term repo transactions that funded a portion of the securities sold. During the year ended December 31, 2005, there was a higher gain on sale of loans of $7.4 million as a result of sales of mortgage loans and the sale of certain previously charged off consumer loans to an unrelated third party. Further explaining the increase in other income for the year ended December 31, 2005, were higher bank service charges, fees and other of $3.3 million and higher broker-dealer, asset management and insurance fees of $1.9 million. These gains were partially offset by a loss on extinguishment of debt of $6.0 million and nonrecurring gains on sale of a building (in 2004) of $2.8 million.
For the quarters ended December 31, 2005 and 2004, the Efficiency Ratio(3) was 63.00% and 59.98%*, respectively. This increase was mainly the result of lower revenues and slightly higher operating expenses during the fourth quarter of 2005. For the year ended December 31, 2005 and 2004, the Efficiency Ratio(3) was 62.97% and 62.78%*, respectively.
Operating expenses increased $0.5 million, or 0.9%, from $54.9 million* for the quarter ended December 31, 2004 to $55.4 million for the quarter ended December 31, 2005. For the year ended December 31, 2005, operating expenses increased $4.0 million, or 1.8%, when compared to the same period in 2004*. There was an increase of $3.4 million in salaries and employee benefits and an increase of $0.6 million in other operating expenses. The increase in salaries and employee benefits was due to a decrease of $2.9 million in expenses deferred as loan origination costs (as a result of lower standard costs of originating consumer loans) and an increase in salaries of $1.2 million, partially offset by a decrease in pension and other benefits of $0.7 million.
Balance Sheet
Total assets as of December 31, 2005 compared to December 31, 2004* decreased 0.6%. As of December 31, 2005, there was an increase of $464.8 million in net loans, including loans held for sale (further explained below) compared to December 31, 2004*. The investment securities portfolio decreased by $414.1 million from $2.0 billion as of December 31, 2004 to $1.6 billion as of December 31, 2005.
The net loan portfolio, including loans held for sale, reflected an increase of 8.4% or $464.8 million, reaching $6.0 billion at December 31, 2005, compared to the figures reported as of December 31, 2004*. The mortgage loan portfolio at December 31, 2005 grew $556.4 million or 37.5% compared to December 31, 2004*. The commercial loan portfolio (including construction loans) decreased $206.9 million or 5.7% and the consumer loan portfolio increased by $112.9 million, or 24.9% as of December 31, 2005, compared to December 31, 2004*. The growth in the consumer loan portfolio is attributable to an increase of 31.7% and 24.4% in credit cards and personal installment loans, respectively.
Mortgage loans originated during the fourth quarter of 2005 reached $191.1 million and sales were $1.0 million. Mortgage loan originations for the year ended December 31, 2005 reached $748.1 million. Net purchases for the year 2005 were $56.5 million, comprised of $289.9 million loans purchased and $233.3 million loans sold.
Deposits at December 31, 2005 reflected an increase of $595.4 million, or 12.5%, compared to deposits of $4.7 billion* as of December 31, 2004. Total borrowings at December 31, 2005 (comprised of federal funds purchased and other borrowings, securities sold under agreements to repurchase, commercial paper issued, and term and capital notes) decreased $770.0 million, or 26.9%, compared to borrowings at December 31, 2004*.
Financial Strength
The ratio of non-performing loans to total loans as of December 31, 2005 was 1.22%, a 35 basis point improvement over the reported 1.57% as of December 31, 2004*. Non-performing loans at December 31, 2005 amounted to $73.7 million, a 15.8% improvement compared to $87.5 million as of December 31, 2004. There had been an improving trend in this indicator during 2004, which has continued throughout 2005.
The annualized ratio of net charge-offs to average loans for the year ended December 31, 2005 improved 18 basis points to 0.38% from 0.56% reported for the year ended December 31, 2004*.
The allowance for loan losses to total non-performing loans at December 31, 2005 improved to 90.72% compared to 79.05%* at December 31, 2004. Excluding non-performing mortgage loans(2) (for which the Company has historically had a minimal loss experience) this ratio is 235.5% at December 30, 2005 compared to 135.0%* as of December 31, 2004. The allowance for loan losses represents 1.11% of total loans as of December 31, 2005, a 13 basis point reduction over 1.24%(4) reported as of December 31, 2004.
As of December 31, 2005, total capital to risk-adjusted assets (BIS ratio) reached 12.19% and Tier I capital to risk-adjusted assets and leverage ratios were 9.01% and 6.51%, respectively.
Customer Financial Assets Under Control
As of December 31, 2005, the Company had $13.0 billion in Customer Financial Assets under Control, which represents a 1.0% or $0.1 billion increase over balances as of December 31, 2004. 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
During the year ended December 31, 2005, Santander BanCorp declared a cash dividend of 64 cents per common share, resulting in a current annualized dividend yield of 2.55%. Market capitalization reached approximately $1.2 billion (including affiliated holdings) as of December 31, 2005.
There were no stock repurchases during 2005 and 2004 under the Stock Repurchase Program. As of December 31, 2005, the Company had acquired, as treasury stock, a total of 4,011,260 shares of common stock, amounting to $67.6 million.
Restatement for each of the five years in the period ended December 31, 2004 and for the first, second and third quarters of 2005 and quarters for 2004
As a result of an internal review undertaken in light of current events in the Puerto Rico financial services industry related to the accounting for transfers of mortgage loans, the Company's management and Audit Committee determined that it was appropriate to reassess the accounting and financial reporting of certain of these transactions to which certain of the Company's subsidiaries were a party. Accordingly, the Company has concluded that the previously reported annual consolidated financial information for each of the five years in the period ended December 31, 2004 will be restated. The consolidated financial statements for each of the five years in the period ended December 31, 2004 and related independent registered public accountants' reports on such statements shall not be relied upon. Further, the previously filed interim consolidated financial statements of the Company for the first, second and third quarters of 2004 and 2005 will be restated.
The cumulative effect+ of all the restatement adjustments described below is a reduction of common stockholders' equity as of December 31, 2005 by approximately $1.2 million, or 0.22%.
-- During 2000 and first half of 2001, the Company entered into
contemporaneous purchases and sales of mortgage loans of approximately
equal amounts with an unrelated local financial institution in the
aggregate principal amount of approximately $445 million, subject to a
recourse provision for the repurchase of delinquent loans as specified
in the contracts. The transactions were not accompanied by sufficient
documentation concerning their business purpose, and the counterparty
to the transactions subsequently repurchased certain quantities of the
loans sold to the Company beyond the counterparty's written recourse
obligation. For these reasons, the Company determined to reverse any
gains previously recognized with respect to these sales and any other
effects of these transactions on the income statements for said years
and recognize such transactions as financing transactions. These
purchases of mortgage loans in 2000 and 2001 will now be classified as
commercial loans, secured by mortgage notes, to said counterparty and
our sales of mortgage loans will be classified as commercial loans,
secured by mortgage notes, from said counterparty. As of December 31,
2005, the balance of these commercial loans to the counterparty
amounted to $22.9 million.
-- During 2003, the Company acquired the outstanding balance of the
mortgage loans previously sold during 2000 and 2001 to the same
counterparty mentioned in the preceding paragraph at a fair value of
$235 million, resulting in a premium paid of approximately $13.6
million. It also sold the mortgage servicing rights of said portfolio
to the same counterparty for $4.0 million. Since the purchases of loans
in 2000 and 2001 will now be accounted as a financing, the acquisition
of mortgage loans in 2003 will be accounted for as a repayment of the
commercial loan and the premium paid will be accounted for as a debt
extinguishment loss in the 2003 statement of income.
-- During 2003, 2004 and the first quarter of 2005, the Company purchased
mortgage loans amounting to $441 million from one unrelated local
financial institution and $750 million from another unrelated financial
institution. The transactions included guarantees of payment of an
uncapped floating pass-through rate of interest and other guarantees to
the purchaser of mortgage loans. The Company believed at the time of
the transactions that they qualified as "true sales" and the
transactions were recorded on the Company's balance sheet as
acquisitions of mortgage loans. On the basis of a subsequent review of
the written terms and conditions included in such contracts and the
absence of other written terms and conditions that may be customary to
such transactions, legal counsel recently retained by the Company has
been unable to opine that the transactions constitute "true sales" of
the relevant assets under applicable Puerto Rico law. Accordingly, such
transactions will be reversed and accounted for as financings secured
by mortgage notes and reported in the consolidated financial statements
as commercial loans. As of December 31, 2005 the current outstanding
balance of such loans is $638 million and is related to only one
unrelated local financial institution. This restatement has no effect
on net income or shareholders' equity.
Because the commercial loans, secured by mortgages notes, discussed above would exceed the maximum amount that can be loaned to a single borrower under Puerto Rico law, Banco Santander Puerto Rico, a wholly owned subsidiary of the Company (the "Bank"), has formally requested that the Office of the Commissioner of Financial Institutions of the Commonwealth of Puerto Rico (the "Commissioner") issue an administrative determination in order to avoid a violation of these statutory limits with respect to these transactions. The Bank is in receipt of a letter from the Commissioner stating that he has reviewed the Bank's request and that he has no objection to the Bank's request. In addition, the Commissioner states in that letter that the formal approval of the Bank's request will be issued within a week.
The following table summarizes the adjustments to restate net income, common stockholders' equity and basic and diluted earnings per share in the annual consolidated financial statements for each of the five years in the period ended December 31, 2004.
Financial Statements Line Items
($ in thousands) 2000 2001 2002 2003 2004
Common Stockholders' Equity -
as previously reported $551,990 $548,544 $538,705 $480,832 $556,003
Net Income -
as Previously Reported $75,860 $52,758 $25,752 $39,445 $84,459
Reversal of Gains on
Sales of Mortgage Loans (5,414) (3,009) - - -
Reversal of Mortgage
Servicing Rights (MSR)
Recognized (5,912) (3,186) - - -
Premium amortization
and Net interest
income Adjustments 163 1,651 2,063 9,942 3,892
Reversal of
Amortization of
MSR & Net Servicing
Fee Income (Expense) 251 2,290 2,086 240 156
Recognition of gain on
sale of MSR - - - 4,068 -
Reversal of premium on
loans purchased &
related amortization - - - (13,637) -
Provision (Benefit) for
Income Tax on the
above adjustments 4,256 879 (1,618) (239) (1,579)
Net Income - as Restated $69,204 $51,383 $28,283 $39,819 $86,928
Accumulated restatement
adjustment $(6,656) $(8,031) $(5,500) $(5,126) $(2,657)
Common Stockholders' Equity
- as restated $545,334 $540,513 $533,205 $475,706 $553,346
Basic and Diluted Earnings
per Share as Previously
Reported $1.42 $1.00 $0.45 $0.69 $1.81
Basic and Diluted Earnings
per Share as Restated $1.28 $0.97 $0.50 $0.70 $1.86
The following table summarizes the adjustments to restate net income, common stockholders' equity and basic and diluted earnings per share on the interim consolidated financial statements for the quarterly periods ended March 31, June 30 and September 30, 2005 and 2004, and December 31, 2004.
Financial Statements Line Items 1Q05 2Q05 3Q05
($ in thousands)
Common Stockholders' Equity - as
Previously Reported $544,946 $571,309 $567,126
Net Income - as Previously Reported $25,509 $19,255 $17,065
Premium amortization and Net interest
income Adjustments 638 594 517
Reversal of Amortization of MSR &
Amortization of reversed gains 25 26 23
Provision (Benefit) for Income Tax on
the above adjustments (258) (242) (210)
Net Income - as Restated $25,914 $19,633 $17,395
Accumulated Effect of restatement on
Common Stockholders' Equity $(2,252) $(1,874) $(1,544)
Common Stockholders' Equity - as
Restated $542,694 $569,435 $565,582
Basic and Diluted Earnings per Share
as Previously Reported $0.55 $0.41 $0.37
Basic and Diluted Earnings per Share
as Restated $0.55 $0.42 $0.37
Financial Statements Line Items 1Q04 2Q04 3Q04 4Q04
($ in thousands)
Common Stockholders' Equity - as
Previously Reported $508,324 $491,795 $526,237 $556,003
Net Income - as Previously
Reported $25,214 $16,046 $21,869 $21,330
Premium amortization and Net
interest income Adjustments 1,205 1,123 870 694
Reversal of Amortization of MSR &
Amortization of reversed gains 48 40 36 32
Provision (Benefit) for Income Tax
on the above adjustments (489) (454) (353) (283)
Net Income - as Restated $25,978 $16,755 $22,422 $21,773
Accumulated Effect of restatement
on Common Stockholders' Equity $(4,362) $(3,653) $(3,100) $(2,657)
Common Stockholders' Equity - as
Restated $503,962 $488,142 $523,137 $553,346
Basic and Diluted Earnings per
Share as Previously Reported $0.54 $0.34 $0.47 $0.46
Basic and Diluted Earnings per Share
as Restated $0.56 $0.36 $0.48 $0.47
As noted above, the Company is restating certain transactions previously recorded as purchases of mortgage loans. Certain transactions are being restated because the Company has found insufficient evidence that the transactions qualify for treatment as purchases under the criteria for sale accounting. The effect of restating these transactions is: (i) to present such purchase transactions as commercial loans secured by mortgage notes instead of loan purchases, (ii) to reverse any premium paid and related amortization with respect to such purchases, (iii) to revise the related disclosures in the notes to the Company's consolidated financial statements, (iv) to revise the cash flows from investing activities of the Company's Statements of Cash Flows to reflect the outflow resulting from the origination of loans rather than from the purchase of loans, although total cash flows from investing activities will not change, (v) to reverse all or a portion of the related balance guaranteed swap derivative associated with such transactions, if applicable, and (vi) for regulatory capital requirement purposes, to increase the risk weighting factor on the outstanding balance on such transactions from 50% to 100%.
In the case of sales of mortgage loans, the effect of restating such transactions that did not meet the criteria for sale accounting on the Company's financial statements is: (i) to present such transactions as secured borrowings, (ii) to reverse any gain initially recognized on such transactions, (iii) to reverse any recognition of servicing assets and related amortization, (iv) to reverse any related servicing income, (v) to revise the related disclosures in the notes to the Company's consolidated financial statements, and (vi) to revise the Company's Statements of Cash Flows to reflect the cash inflow from a secured borrowing as a financing activity and reverse the gain and the cash inflow from the proceeds from sales of mortgage loans as an operating activity.
The revised accounting and financial reporting of these mortgage transfer transactions did not result in the need for additional reserves, and the Company has remained well capitalized. Tier I capital, total capital to risk- based capital assets and leverage ratios at December 31, 2005 were 9.66%, 13.06% and 6.53%, respectively, before net effect of the restatement adjustment and 9.01%, 12.19% and 6.51%, respectively, after the restatement.
The Company intends to include restated financial statements at and for the years ended December 31, 2003 and December 31, 2004 and restated financial information at and for the years ended December 31, 2001 and December 31, 2002 in its annual report on Form 10-K for the year ended December 31, 2005, which the Company expects to file on or before March 30, 2006. The Forms 10-Q for the quarters ended March 30, 2005, June 30, 2005 and September 30, 2005 will be amended to reflect the restated the first, second and third quarter of 2005 and 2004.
On December 8, 2005, the Company received a subpoena from the Securities and Exchange Commission for the production of documents concerning its mortgage loan transactions with an unrelated local financial institution. The Company has commenced providing documents and information to the SEC in response to the subpoena and concerning the transactions that are being restated as described herein. The Company is cooperating fully with the SEC in connection with these inquiries.
Transactions Currently Under Review
Pursuant to an arrangement discussed between the parties, during the first quarter of 2005 the Company sold to an unrelated financial institution mortgage loans with an approximate principal balance of $87.2 million and subsequently, in the second quarter of 2005, purchased from the same financial institution two pools of mortgage loans with approximate principal balances of $60 million and $29.7 million. Although the Company has received an opinion from independent legal counsel stating that the transactions constitute "true sales" under applicable Puerto Rico law, the Company is in the process of analyzing the business purpose of the transactions and the relevance of business purpose under U.S. GAAP in the context of roughly contemporaneous purchase and sale transactions. The Company is considering whether it should account for these transactions as purchases and sales of mortgage loans (as they were in the Company's previously filed quarterly financial statements), or not. If the Company determines that the transactions should not be accounted as a sale and purchase of financial assets, the gain of $1.7 million realized on the sale of the mortgage loans and the related servicing rights of $1.1 million recognized during the first quarter of 2005 would be reversed. Further, the premium paid of $1.7 million on the mortgage loans purchased by the Company during the second quarter of 2005 would be reversed. If the Company concludes that it should restate the financial statements for these transactions, the effect of these possible adjustments will be a reduction in net income of $1.7 million, or $0.04 per share, in the first quarter of 2005 and an increase in net income of approximately $0.2 million for the second, third and fourth quarters of 2005 combined, for a total reduction of net income for the full year 2005 of $1.5 million, or $0.03 per share.
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). Banco Santander Central Hispano, S.A (Santander) owns 91% of the outstanding common stock of Santander BanCorp. The Company has four wholly owned subsidiaries, Banco Santander Puerto Rico, Santander Securities Corporation, Santander Insurance Agency and Santander Financial Services, Inc. Banco Santander Puerto Rico (the Bank) has been operating in Puerto Rico for nearly three decades. It offers a full array of services through 63 branches in the areas of commercial, mortgage and consumer banking, supported by a team of over 1,400 employees. The Bank through its wholly owned subsidiary, Santander Mortgage Corporation, has 6 additional offices to offer mortgage banking products and services. 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. Santander Financial Services, Inc. through, Island Finance, its recently acquired business unit, provides consumer loans and real estate-secured loans to customers through its 70 stores in Puerto Rico, as well as sales finance contracts through retail merchants. For more information, visit the Company's website at http://www.santandernet.com/.
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.
* As Restated
+ Net of income tax.
(1) on a tax equivalent basis
(2) "Mortgage loans" include residential mortgages, commercial loans with
real estate collateral and consumer loans with real estate
collateral. They exclude construction loans.
(3) On a tax equivalent basis, excluding gains on sales of securities,
loss on extinguishment of debt during 2005, and gain on the sale of a
building during 2004.
SANTANDER BANCORP
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
AS OF DECEMBER 31, 2005 AND 2004
(Dollars in thousands, except share data)
ASSETS
As Restated Variance
31-Dec-05 31-Dec-04 12/05-12/04
CASH AND CASH EQUIVALENTS:
Cash and due from banks $136,731 $110,148 24.13%
Interest bearing deposits 8,833 42,612 -79.27%
Federal funds sold and
securities purchased under
agreements to resell 92,429 326,650 -71.70%
Total cash and cash
equivalents 237,993 479,410 -50.36%
INTEREST BEARING DEPOSITS 101,034 50,000 102.07%
TRADING SECURITIES 37,679 34,184 10.22%
INVESTMENT SECURITIES AVAILABLE
FOR SALE, at fair value 1,559,681 1,978,132 -21.15%
OTHER INVESTMENT SECURITIES, at
amortized cost 41,862 37,500 11.63%
LOANS HELD FOR SALE, net 213,102 271,596 -21.54%
LOANS, net 5,808,630 5,287,701 9.35%
ALLOWANCE FOR LOAN LOSSES (66,842) (69,177) -3.38%
PREMISES AND EQUIPMENT, net 55,867 52,854 5.70%
ACCRUED INTEREST RECEIVABLE 77,962 44,682 74.48%
GOODWILL 34,791 34,791 0.00%
INTANGIBLE ASSETS 10,092 8,003 26.10%
OTHER ASSETS 160,097 113,971 48.42%
$8,271,948 $8,323,647 -0.84%
LIABILITIES AND STOCKHOLDERS' EQUITY
DEPOSITS:
Non-interest bearing $672,225 $744,019 -9.65%
Interest bearing 4,671,271 4,004,120 16.66%
Total deposits 5,343,496 4,748,139 12.54%
FEDERAL FUNDS PURCHASED AND
OTHER BORROWINGS 650,000 780,334 -16.70%
SECURITIES SOLD UNDER
AGREEMENTS TO REPURCHASE 947,767 1,349,444 -29.77%
COMMERCIAL PAPER ISSUED 334,319 629,544 -46.90%
TERM NOTES 40,215 31,457 27.84%
CAPITAL NOTES 121,098 72,588 66.83%
ACCRUED INTEREST PAYABLE 65,160 22,666 187.48%
OTHER LIABILITIES 201,366 136,129 32.82%
7,703,421 7,770,301 -1.06%
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
in December 2005 and 2004 126,626 126,626 0.00%
Capital paid in excess of par
value 304,171 304,171 0.00%
Treasury stock at cost,
4,011,260 shares in December
2005 and 2004 (67,552) (67,552) 0.00%
Accumulated other
comprehensive loss, net of
taxes (41,591) (6,818) 510.02%
Retained earnings-
Reserve fund 133,759 126,820 5.25%
Undivided profits 113,114 70,099 56.04%
Total stockholders'
equity 568,527 553,346 2.25%
$8,271,948 $8,323,647 -0.84%
SANTANDER BANCORP
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
FOR THE YEARS AND THE QUARTERS ENDED DECEMBER 31, 2005 AND 2004
(Dollars in thousands, except per share data)
For the years For the quarters
ended ended
As Restated As Restated
December December December December
31, 31, 31, 31,
2005 2004 2005 2004
INTEREST INCOME:
Loans $359,415 $261,744 $102,461 $73,551
Investment securities 71,938 97,901 17,215 21,084
Interest bearing deposits 4,065 1,054 1,324 480
Federal funds sold and
securities purchased under
agreements to resell 4,187 3,123 697 1,106
Total interest income 439,605 363,822 121,697 96,221
INTEREST EXPENSE:
Deposits 126,057 60,279 37,671 18,164
Securities sold under
agreements to repurchase
and other borrowings 83,124 79,901 21,643 21,213
Subordinated capital notes 3,402 582 1,308 528
Total interest expense 212,583 140,762 60,622 39,905
Net interest income 227,022 223,060 61,075 56,316
PROVISION FOR LOAN LOSSES 20,400 26,270 5,000 4,500
Net interest income
after provision for
loan losses 206,622 196,790 56,075 51,816
OTHER INCOME:
Bank service charges,
fees and other 42,272 38,977 11,005 10,027
Broker/dealer, asset
management and insurance fees 53,016 51,113 12,457 12,936
Gain on sale of securities, net 17,842 11,475 4 10
(Loss) gain on extinguishment
of debt (5,959) - - -
Gain on sale of mortgage
servicing rights 83 400 14 116
Gain on sale of loans 7,876 431 2 515
Gain on sale of building - 2,754 - -
Other income 10,228 12,089 1,635 5,628
Total other income 125,358 117,239 25,117 29,232
OPERATING EXPENSES:
Salaries and employee benefits 95,002 91,582 22,715 22,544
Occupancy costs 16,811 13,959 4,230 3,850
Equipment expenses 3,802 3,775 1,099 927
EDP servicing, amortization
and technical expenses 31,589 34,462 7,862 8,774
Communication expenses 8,232 8,976 2,032 2,183
Business promotion 11,065 10,435 2,826 3,294
Other taxes 8,443 8,584 2,150 2,010
Other operating expenses 46,442 45,604 12,523 11,340
Total operating
expenses 221,386 217,377 55,437 54,922
Income before provision
for income tax 110,594 96,652 25,755 26,126
PROVISION FOR INCOME TAX 30,788 9,724 8,891 4,353
NET INCOME AVAILABLE TO COMMON
SHAREHOLDERS $79,806 $86,928 $16,864 $21,773
EARNINGS PER COMMON SHARE $1.71 $1.86 $0.36 $0.47
SANTANDER BANCORP
SELECTED CONSOLIDATED FINANCIAL INFORMATION:
(DOLLARS IN THOUSANDS)
For the Quarters Ended
As As
Restated Restated
Dec. 31, Dec. 31, Sept. 30, 4Q05/4Q04 Q05/3Q05
2005 2004 2005 Variation Variation
Interest Income $121,697 $96,221 $112,470 26.5% 8.2%
Tax equivalent
adjustment 1,807 6,022 1,931 -70.0% -6.4%
Interest income on a tax
equivalent basis 123,504 102,243 114,401 20.8% 8.0%
Interest expense 60,622 39,905 56,893 51.9% 6.6%
Net interest income on a
tax equivalent basis 62,882 62,338 57,508 0.9% 9.3%
Provision for loan losses 5,000 4,500 4,650 11.1% 7.5%
Net interest income on
a tax equivalent basis
after provision 57,882 57,838 52,858 0.1% 9.5%
Other operating income 25,111 28,707 27,541 -12.5% -8.8%
Gain on sale of
securities 4 10 462 -60.0% -99.1%
Gain on sale of loans 2 515 666 -99.6% -99.7%
Gain on sale of building - - - N/A N/A
Other operating expenses 55,437 54,922 55,903 0.9% -0.8%
Income on a tax equivalent
basis before income
taxes 27,562 32,148 25,624 -14.3% 7.6%
Provision (credit) for
income taxes 8,891 4,353 6,298 104.2% 41.2%
Tax equivalent adjustment 1,807 6,022 1,931 -70.0% -6.4%
NET INCOME (LOSS) $16,864 $21,773 $17,395 -22.5% -3.1%
SELECTED RATIOS:
Per share data (1):
Earnings (loss) per
common share $0.36 $0.47 $0.37
Average common shares
outstanding 46,639,104 46,639,104 46,639,104
Common shares
outstanding at end
of period 46,639,104 46,639,104 46,639,104
Cash Dividends
per Share $0.16 $0.16 $0.16
Years Ended December 31,
As Restated
2005 2004 Variation
Interest Income $439,605 $363,822 20.8%
Tax equivalent adjustment 11,059 20,163 -45.2%
Interest income on a tax
equivalent basis 450,664 383,985 17.4%
Interest expense 212,583 140,762 51.0%
Net interest income on a tax
equivalent basis 238,081 243,223 -2.1%
Provision for loan losses 20,400 26,270 -22.3%
Net interest income on a tax
equivalent basis after provision 217,681 216,953 0.3%
Other operating income 99,640 102,579 -2.9%
Gain on sale of securities 17,842 11,475 -55.5%
Gain on sale of loans 7,876 431 -1727.4%
Gain on sale of building - 2,754 -100.0%
Other operating expenses 221,386 217,377 1.8%
Income on a tax equivalent basis
before income taxes 121,653 116,815 4.1%
Provision (credit) for income
taxes 30,788 9,724 216.6%
Tax equivalent adjustment 11,059 20,163 -45.2%
NET INCOME (LOSS) $79,806 $86,928 -8.2%
SELECTED RATIOS:
Per share data (1):
Earnings (loss) per common share $1.71 $1.86
Average common shares 46,639,104 46,639,104
outstanding
Common shares outstanding
at end of period 46,639,104 46,639,104
Cash Dividends per Share $0.64 $0.49
(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
As restated 2004
As restated
YTD QTD QTD YTD QTD
Dec. 31 Dec. 31 Sept. 30, Dec. 31, Dec. 31,
SELECTED RATIOS 2005 2005 2005 2004 2004
Net interest margin (1) 3.02% 3.16% 2.84% 3.33% 3.29%
Return on average
assets (2) 0.96% 0.80% 0.82% 1.14% 1.10%
Return on average
common equity(2) 13.85% 11.83% 12.10% 17.53% 16.46%
Efficiency Ratio (1,3) 62.97% 63.00% 64.63% 62.78% 59.98%
Non-interest income to
revenues 22.19% 17.11% 20.31% 24.37% 23.30%
Capital:
Total capital to risk-
adjusted assets - 12.19% 10.80% - 10.95%
Tier I capital to risk-
adjusted assets - 9.01% 8.55% - 8.55%
Leverage ratio - 6.51% 6.36% - 6.44%
Non-performing loans to total
loans - 1.22% 1.15% - 1.57%
Non-performing loans plus
accruing loans past-due
90 days or more to loans - 1.27% 1.25% - 1.63%
Allowance for loan losses to
non-performing loans - 90.72% 92.82% - 79.05%
Allowance for loans losses to
period-end loans - 1.11% 1.06% - 1.24%
OTHER SELECTED FINANCIAL DATA 12/31/2005 12/31/2004
(dollars in millions)
Customer Financial
Assets Under Control:
Bank deposits
(excluding brokered
deposits) $4,084.0 $4,275.4
Broker-dealer
customer accounts 4,923.0 4,543.3
Mutual fund and
assets managed 2,795.0 2,640.0
Trust, institutional
and private accounts
assets under management 1,158.0 1,369.0
Total $12,960.0 $12,827.7
(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, loss on extinguishment of debt in 2005 and gain on sale
of building for 1Q04.
DATASOURCE: Santander Bancorp
CONTACT: Evelyn Vega, +1-787-777-4546, or Maria Calero, +1-787-777-4437,
both of Santander Bancorp
Web site: http://www.santandernet.com/