Santander BanCorp Reports Record Earnings for the First Quarter of 2004

Santander BanCorp Reports Record Earnings for the First Quarter
of 2004
* Net income for the quarter ended March 31, 2004 reached a historical high of
$25.2 million, a 391% improvement over the net income of $5.1 million reported
in the first quarter of 2003, and a 60% improvement over net income of $15.7
million reported for the fourth quarter of 2003.


SAN JUAN, Puerto Rico, April 21  /PRNewswire-FirstCall/ -- Santander BanCorp
(NYSE: SBP; LATIBEX: XSBP), reported today its unaudited financial results for
the period ended March 31, 2004. The financial results for the first quarter of
2004 reflect record net income reaching a historical high of $25.2 million, a
391% improvement over net income of $5.1 million reported during the first
quarter of 2003.

For the quarter ended March 31, 2004, net income amounted to $25.2 million or
$0.59 per common share compared to net income of $5.1 million or $0.09 per
common share for the first quarter of 2003. Return on Average Common Equity
(ROE) and Return on Average Assets (ROA) were 21.01% and 1.40%, respectively,
for the quarter ended March 31, 2004, compared to 3.02% and 0.32%,
respectively, for the first quarter of 2003. The Efficiency Ratio(1) improved
to 67.71% for the first quarter of 2004, compared to 75.62% reported during the
first quarter of 2003. The improvement in the efficiency ratio during the first
quarter of 2004, when compared to the same quarter of 2003, is a direct result
of higher revenues.

The consolidated Balance Sheet and Income Statement Data for the quarter ended
March 31, 2003, has been restated to give retroactive effect to the acquisition
of Santander Securities Corporation by Santander BanCorp on December 30, 2003.

Income Statement

The $20.1 million improvement in net income for the first quarter of 2004
compared to the same period in 2003 was principally due to an increase of $10.3
million in net interest income, an increase of $4.0 million in gain on sale of
investment securities, a $2.8 million gain on sale of a building, an increase
of $1.1 million in fee and other income, and a reduction of $3.3 million in the
provision for loan losses. These changes were partially offset by an increase
of $1.8 million in the provision for income taxes.

For the quarter ended March 31, 2004, net interest income(1) amounted to $58.7
million, an increase of 22.3% compared to $48.0 million for the first quarter
in 2003. There was an increase in net interest margin(1) of 25 basis points
from 3.17% for the first quarter of 2003 to 3.42% for the same period in 2004.
The improvement in net interest income(1) was principally due to an increase in
average interest earning assets of $768 million or 12.5% and a decrease in
total cost of funds of 63 basis points.

The provision for loan losses reflected a decrease of $3.3 million or 27.5%
from $12.1 million for the quarter ended March 31, 2003 to $8.8 million for the
first quarter of 2004. The reduction in the provision for loan losses was due
to a 21% decrease in non-performing loans which are down to $93.7 million as of
March 31, 2004 from $118.1 as of March 31, 2003. A 41% reduction in net
charge-offs from $11.1 million during the first quarter of 2003 compared to
$6.5 million for the first quarter of 2004 also had a favorable impact on the
provision for loan losses.

Other income, excluding gain on sale of a building, reached $33.9 million for
the quarter ended March 31, 2004, a 17.9% improvement compared to $28.7 million
for the quarter ended March 31, 2003. This increment was related to an increase
of $4 million in gain on sale securities and growth in fee income from the
broker/dealer, asset management and insurance operations of $1.1 million or
9.5%.

In March 2004, the Corporation sold a building to an unrelated third party in a
sales-leaseback transaction and recognized a gain of $2.8 million. A deferred
gain of $4.0 million was recorded and will be amortized as a reduction of rent
expense over the term of the related leases through January 2009.

For the quarter ended March 31, 2004, the Efficiency Ratio(1) improved 791
basis points to 67.71%, compared to 75.62% for the quarter ended March 31,
2003. This improvement was mainly a result of higher revenues (excluding gains
on sales of securities and a gain on sale of building during the first quarter
of 2004) and a decrease of $0.3 million in other operating expenses during the
quarter ended March 31, 2004.

Operating expenses reflected a decrease of $0.3 million for the quarter ended
March 31, 2004 compared to the same quarter in 2003. This reduction was due
mostly to a decrease in amortization of intangibles of $1.2 million as a result
of having fully amortized core deposit intangibles at the beginning of 2004, a
reduction of $0.6 million in expenses related to loan collections as a result
of the in-sourcing of this operation within the Corporation, and a reduction of
$0.6 million in the provision for repossessed assets. These decreases were
partially offset by an increase in personnel costs of $1.7 million. This
increment was due to an increase in salaries and the in-sourcing of the
collection operations by the Corporation. These increases were partially offset
by an increment in deferred loan origination costs.

Balance Sheet

Total assets as of March 31, 2004 remained relatively constant at $7.4 billion
when compared to December 31, 2003. There was an increase of $85 million in
cash and cash equivalents, a decrease in investment securities of $318 million
primarily due to the sale of $275 million in mortgage backed securities. There
was also an increase of $226 million in net loans, including loans held for
sale (further explained below) and a decrease of $9.4 million in premises and
equipment due to the sale of a building with a book value of approximately $7.7
million, and normal depreciation for the period. There was an increase of $36.5
million in other assets due to an increment in securities sold but not
delivered.  Deposits also reflected an increase of $6.5 million while total
borrowings decreased $22.5 million.

As a result of management's efforts to increase market share, the net loan
portfolio, including loans held for sale, reflected a $226 million or 5.4%
increase, reaching $4.4 billion at March 31, 2004, compared to the figures
reported at December 31, 2003.  Mortgage loan production continued to grow
during the first quarter of 2004 resulting in an increase of $225.1 million or
15.4%, in the mortgage loan portfolio. There was a 16.5% increase in mortgage
loan production as of March 31, 2004 compared to the quarter ended December 31,
2003. The growth in mortgage loan production for the quarter ended March 31,
2004 compared to the same period in 2003 was 19.2%. The commercial loan
portfolio (including construction loans) also reflected an increase of $23.3
million or 1.0% for the first quarter of 2004. These increases were partially
offset by a $20.5 million or 5.1% decrease in the consumer loan portfolio due
to more selective lending criteria and to the runoff of the auto loan portfolio
as a result of the Company's decision in 2001 to withdraw from that market.

Financial Strength

Non-performing loans to total loans as of March 31, 2004 amounted to 2.11%, a
22 basis point reduction of the reported 2.33% as of December 31, 2003.
Non-performing loans at March 31, 2004 amounted to $93.7 million, a 4.8%
improvement compared to $98.4 million at December 31, 2003. There has been an
improving trend in this indicator during 2003, which is continuing through the
first quarter of 2004.

The annualized ratio of net charge-offs to average loans for the quarter ended
March 31, 2004 decreased to 0.62% from 1.16% reported for the quarter ended
March 31, 2003. Net charge offs for the first quarter of 2004 decreased $4.5
million, or 41.0%, compared to the first quarter of 2003. The Company's efforts
are directed to continue improving this ratio.

The allowance for loan losses represents 1.64% of total loans as of March 31,
2004, a slight decrease over the 1.67% reported as of December 31, 2003. The
allowance for loan losses to total non-performing loans at March 31, 2004
reached 77.74% compared to 71.74% at December 31, 2003 and 49.94% at March 31,
2003. Excluding non-performing mortgage loans (for which the Company has
historically had a minimal loss experience) this ratio is 165.76%. The Company
has adjusted its allowance for loan losses through periodic charges to the
provision for loan losses. This item is reviewed on a recurring basis
considering an ongoing assessment of the Company's credit exposure and a number
of other relevant variables. The level of the allowance for loan losses is
subject to changes in internal and external factors affecting the level of
non-performing loans and credit risk of the loan portfolio.

As of March 31, 2004, total capital to risk-adjusted assets (BIS ratio) reached
10.97% and Tier I capital to risk-adjusted assets and leverage ratios were
9.39% and 6.33%, respectively.

Customer Financial Assets Under Control

Santander BanCorp is a client-focused organization that seeks to earn the trust
of customers to manage their financial assets. As of March 31, 2004, the
Company had over $11.2 billion in Customer Financial Assets Under Control,
which represents a $564 million increase over balances as of December 31, 2003.
This is a significant part of the financial assets of Puerto Rico households
and reflects the Company's strong positioning in its primary market. Customer
Financial Assets Under Control include bank deposits (excluding brokered
deposits), broker-dealer customer accounts, mutual fund assets managed, and
trust, institutional and private accounts under management. The growth in
customer financial assets and the stability of customer deposits is a strong
indication of Company's successful efforts to regain market share and
reposition itself as a leading provider of financial services.

Shareholder Value

During the first quarter of 2004, the Company's common stock price per share
increased from $24.35 to $27.50, representing growth of 13% or a $134 million
increase in aggregate shareholder value.

During the first quarter of 2004, Santander BanCorp declared a cash dividend of
11 cents per common share to its shareholders of record as of March 5, 2004,
payable on April 1, 2004, resulting in an annualized dividend yield of 1.60%.

There were no stock repurchases during the last three quarters of 2003 and the
first quarter of 2004 under the Stock Repurchase Program.  As of March 31,
2004, the Company had acquired, as treasury stock, a total of 4,011,260 shares
of common stock, amounting to $67.6 million.

Institutional Background

Santander BanCorp is a publicly held financial holding company that is traded
on the New York Stock Exchange and on Latibex (Madrid Stock Exchange). It has
three wholly owned subsidiaries, Banco Santander Puerto Rico, Santander
Securities Corporation and Santander Insurance Agency. Banco Santander Puerto
Rico has been operating in Puerto Rico for 27 years. It offers a full array of
services through 67 branches in the areas of commercial, mortgage and consumer
banking, supported by a team of over 1,400 employees. .Santander Securities
offers securities brokerage services and provides portfolio management services
through its wholly owned subsidiary Santander Asset Management Corporation. 
Santander Insurance Agency offers life, health and disability coverage as a
corporate agent and also operates as a general agent. For more information,
visit the Company's website at http://www.santandernet.com/.

Santander (SAN.MC, STD.N) is the main financial group in Spain and Latin
America, and the second in the Euro Zone by market capitalization. Founded in
1857, it has forged important business initiatives, including a 15-year old
alliance with The Royal Bank of Scotland.  The Santander Group also holds the
third largest financial group in Portugal, as well as Santander Consumer
Finance, a leading consumer finance franchise in Germany, Italy and eight other
European countries.

In Latin America, Santander is the leading banking franchise. In this region,
the Group manages a business volume of more than 104,000 million Euros (in
loans, deposits, securities and on and off-balance sheet funds), maintains
4,052 offices, 12 million individual clients and over half a million business
clients.  In 2003, Santander obtained a net attributable profit of US$1.489
million in Latin America, a 14.3% increase over the year 2002.

This news release contains forward-looking statements that are based on current
expectations, estimates, forecasts and projections about the industry in which
the Company operates, its beliefs and its management's assumptions. Words such
as "expects," "anticipates," "targets," "goals," "projects," "intends,"
"plans," "believes," "seeks," "estimates" and variations of such words and
similar expressions are intended to identify such forward-looking statements. 
These statements are not guarantees of future performance and involve certain
risks, uncertainties and assumptions that are difficult to predict.  Therefore,
actual outcomes and results may differ materially from what is expressed or
forecast in such forward-looking statements. Except as otherwise required under
federal securities laws and the rules and regulations of the SEC, the Company
does not have any intention or obligation to update or revise any
forward-looking statements, whether as a result of new information, future
events, changes in assumptions or otherwise.

  (1)  On a tax equivalent basis.


  SANTANDER BANCORP

  SELECTED CONSOLIDATED FINANCIAL INFORMATION:

  (DOLLARS IN THOUSANDS)

                           QTD      QTD       QTD
                                           As restated
                        Mar. 31,   Dec. 31,   Mar. 31,  1Q04/4Q03  1Q04/1Q03
                         2004       2003       2003     Variation  Variation


   Interest Income      $85,827    $86,140    $79,022      -0.4%      8.6%
   Tax equivalent
    adjustment            4,740      5,184      4,391      -8.6%      7.9%
   Interest income on
    a tax equivalent
    basis                90,567     91,324     83,413      -0.8%      8.6%
   Interest expense      31,851     31,384     35,395       1.5%    -10.0%
   Net interest income
    on a tax equivalent
    basis                58,716     59,940     48,018      -2.0%     22.3%
   Provision for
    loan losses           8,750     15,000     12,065     -41.7%    -27.5%

   Net interest income
    on a tax equivalent
    basis after
    provision            49,966     44,940     35,953      11.2%     39.0%
   Other operating
    income               24,763     24,053     23,976       3.0%      3.3%
   Gain on sale
    of securities         8,903        779      4,669    1042.9%     90.7%
   Gain on sale
    of loans                212      2,982        290     -92.9%    -26.9%
   Gain on sale
    of building           2,754        -          -          N/A       N/A
   Other operating
    expenses             54,174     57,532     54,509      -5.8%     -0.6%
   Income on a tax
    equivalent basis
    before income taxes  32,424     15,222     10,379     113.0%    212.4%
   Provision (credit)
    for income taxes      2,469     (5,704)       652    -143.3%    278.7%
   Tax equivalent
    adjustment            4,740      5,184      4,391      -8.6%      7.9%
   NET INCOME (LOSS)    $25,215    $15,742     $5,336      60.2%    372.5%


   SELECTED RATIOS:

   Per share data (1):
   Earnings (loss)
    per common share      $0.59      $0.28      $0.09
   Average common
    shares
    outstanding      42,398,954  42,398,954  42,258,960
   Common shares
    outstanding
    at end of
    period           42,398,954  42,398,954  42,398,954
   Cash Dividends
    per Share:
      Preferred Stock*    $   -      $1.41      $0.44
      Common Stock        $0.11      $0.11      $0.11

   (1) Per share data is based on the average number of shares outstanding
       during the period.
       Basic and diluted earnings per share are the same.

   * Including redemption premium in Dec. 2003

                            SANTANDER BANCORP
                       CONSOLIDATED BALANCE SHEETS
           AS OF MARCH 31, 2004 AND 2003 AND DECEMBER 31, 2003
              (Dollars in thousands, except per share data)

                          ASSETS

                                    As restated
                       (Unaudited)   (Unaudited)    (Audited)     Variance
                        31-Mar-04     31-Mar-03    31-Dec-03    03/04-12/03

  CASH AND CASH EQUIVALENTS:
   Cash and due
    from banks           $131,001     $121,552      $99,183       32.08%
   Interest bearing
    deposits               51,671      197,782       15,300      237.72%
   Federal funds sold
    and securities
    purchased under
    agreements to resell  295,725      342,350      278,750        6.09%
     Total cash and
      cash equivalents    478,397      661,684      393,233       21.66%
  INTEREST BEARING
   DEPOSITS                10,000            -       10,000          N/A

  TRADING SECURITIES       57,808       20,259       42,547       35.87%
  INVESTMENT SECURITIES
   AVAILABLE FOR SALE,
   at fair value        1,347,181      964,660    1,664,311      -19.05%
  INVESTMENT SECURITIES
   HELD TO MATURITY,
   at amortized cost      832,627      905,574      833,127       -0.06%
  LOANS HELD
   FOR SALE, net          294,874      226,311      297,201       -0.78%
  LOANS, net            4,147,714    3,873,606    3,917,566        5.87%
  ALLOWANCE FOR
   LOAN LOSSES            (72,802)     (58,967)     (70,572)       3.16%
  PREMISES AND
   EQUIPMENT, net          51,747       62,646       61,107      -15.32%
  ACCRUED INTEREST
   RECEIVABLE              36,472       38,481       36,398        0.20%
  GOODWILL                 34,791       34,791       34,791        0.00%
  INTANGIBLE ASSETS         4,454        5,864        4,662       -4.46%
  OTHER ASSETS            178,587      115,155      142,050       25.72%
                       $7,401,850   $6,850,064  $ 7,366,421        0.48%

               LIABILITIES AND STOCKHOLDERS' EQUITY

  DEPOSITS:
  Non-interest bearing  $704,974      $627,604     $700,413        0.65%
  Interest bearing     3,443,773     3,393,197    3,441,815        0.06%
   Total deposits      4,148,747     4,020,801    4,142,228        0.16%
  FEDERAL FUNDS
   PURCHASED AND OTHER
   BORROWINGS            315,000       224,700      350,000      -10.00%
  SECURITIES SOLD UNDER
   AGREEMENTS TO
   REPURCHASE          1,686,090     1,270,492    1,808,238       -6.76%
  COMMERCIAL PAPER
   ISSUED                374,753       249,798      254,904       47.02%
  TERM NOTES             180,750       304,794      165,966        8.91%
  CAPITAL NOTES           15,925        28,925       15,925        0.00%
  ACCRUED INTEREST
   PAYABLE                23,884        26,994       18,728       27.53%
  OTHER LIABILITIES      148,377       121,643      129,600       14.49%

                       6,893,526     6,248,147    6,885,589        0.12%


  STOCKHOLDERS' EQUITY:
   Series A Preferred
    stock, $25 par
    value; 10,000,000
    shares authorized;
    2,610,008 shares
    issued and outstanding
    in March 2003              -        65,250            -         N/A
   Common stock,
    $2.50 par value;
    200,000,000 shares
    authorized;
    46,410,214 shares
    issued; 42,398,954
    shares outstanding
    in March 2004, 2003
    and December 2003.   116,026       116,026      116,026        0.00%
   Capital paid in
    excess of par value  211,742       211,742      211,742        0.00%
   Treasury stock at
    cost, 4,011,260
    shares in March
    2004, 2003 and
    December 2003.       (67,552)      (67,552)     (67,552)       0.00%

   Accumulated other
    comprehensive loss,
    net of taxes         (12,521)      (11,341)     (19,465)     -35.67%
   Retained earnings-
     Reserve fund        119,432       116,482      119,432        0.00%

    Undivided profits    141,197       171,310      120,649       17.03%

     Total stockholders'
      equity             508,324       601,917      480,832        5.72%

                      $7,401,850    $6,850,064   $7,366,421        0.48%


                            SANTANDER BANCORP
                  CONSOLIDATED STATEMENTS OF OPERATIONS
              FOR THE QUARTERS ENDED MARCH 31, 2004 AND 2003

              (Dollars in thousands, except per share data)

                                                For the quarters ended
                                                               As restated
                                              (Unaudited)       (Unaudited)
                                               March 31,         March 31,
                                                  2004              2003
  INTEREST INCOME:
    Loans                                        $57,900           $60,262
    Investment securities                         27,215            18,153
    Interest bearing deposits                        132               217
    Federal funds sold and securities
     purchased under agreements to resell            580               390
            Total interest income                 85,827            79,022

  INTEREST EXPENSE:
    Deposits                                      13,180            16,067
    Securities sold under agreements to
     repurchase and other borrowings              18,649            19,110
    Subordinated capital notes                        22               218
            Total interest expense                31,851            35,395

            Net interest income                   53,976            43,627

  PROVISION FOR LOAN LOSSES                        8,750            12,065
            Net interest income after
             provision for loan losses            45,226            31,562

  OTHER INCOME:
    Bank service charges, fees and other           9,645            10,231
    Broker/dealer, asset management and
     insurance fees                               12,556            11,471
    Gain on sale of securities                     8,903             4,669
    Gain on sale of mortgage servicing rights         91               125
    Gain on sale of loans                            212               290
    Gain on sale of building                       2,754                 -
    Other income                                   2,471             1,951
            Total other income                    36,632            28,737

  OTHER OPERATING EXPENSES:
    Salaries and employee benefits                23,549            21,825
    Occupancy costs                                3,400             3,276
    Equipment expenses                             2,164             2,344
    EDP servicing, amortization and
     technical expenses                            8,231             8,301
    Communication expenses                         2,109             1,599
    Business promotion                             1,680             2,026
    Other taxes                                    2,275             2,569
    Other operating expenses                      10,766            12,569
            Total other operating expenses        54,174            54,509

            Income before provision for
             income tax                           27,684             5,790

  PROVISION FOR INCOME TAX                         2,469               652

  NET INCOME                                      25,215             5,138
  DIVIDENDS TO PREFERRED SHAREHOLDERS                -               1,142
  NET INCOME AVAILABLE TO COMMON
   SHAREHOLDERS                                   25,215             3,996
  EARNINGS PER COMMON SHARE                        $0.59             $0.09


  SANTANDER BANCORP

                                       QTD       QTD             2003
                                              As restated
                                   March 31,   March 31,   Year to   Fourth
  SELECTED RATIOS                     2004       2003        Date    Quarter

  Net interest margin (1)             3.42%      3.17%      3.30%      3.48%
  Return on average assets (2)        1.40%      0.32%      0.59%      0.87%
  Return on average
   common equity (2)                 21.01%      3.02%      6.08%      8.89%
  Efficiency Ratio (1,3)             67.71%     75.62%     70.10%     66.15%
  Fee income to revenues             29.95%     26.67%     26.92%     24.41%
  Capital:
     Total capital to risk-adjusted
      assets                         10.97%     13.16%        -       10.41%
     Tier I capital to risk-adjusted
      assets                          9.39%     11.91%        -        8.84%
     Leverage ratio                   6.33%      8.29%        -        6.04%
  Non-performing loans to total loans 2.11%      2.88%        -        2.33%
  Non-performing loans plus accruing
   loans past-due 90 days or
   more to loans                      2.18%      2.94%        -        2.39%
  Allowance for loan losses to
   non-performing loans              77.74%     49.94%        -       71.74%
  Allowance for loans losses
   to period-end loans                1.64%      1.44%        -        1.67%


  OTHER SELECTED FINANCIAL DATA          3/31/2004   3/31/2003  12/31/2003
                                               (dollars in millions)
  Customer Financial Assets Under Control:
  Bank deposits (excluding brokered
   deposits)                               $3,788.7   $3,755.6    $3,782.8
  Broker-dealer customer accounts           4,053.1    3,176.8     3,727.4
  Mutual fund and assets managed            2,065.8    1,360.5     1,859.0
  Trust, institutional and private
   accounts assets under management         1,326.4      929.9     1,300.6
  Total                                   $11,234.0   $9,222.8   $10,669.7

  (1)  On a tax-equivalent basis.
  (2)  Ratios for the quarters are annualized.
  (3)  Operating expenses divided by net interest income, on a tax
       equivalent basis, plus other income, excluding gain on sale of
       securities (and gain on sale of building for 1Q04).


DATASOURCE: Santander BanCorp



CONTACT:  Puerto Rico, Maria Calero, [phone], Evelyn Vega,

[phone], both for Santander BanCorp



Web site:  http://www.santandernet.com/

Copyright