SANTANDER BANCORP - 10-Q Quarterly Report

Back to GetFilings.com

UNITED STATES OF AMERICA

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C., 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OF THE SECURITIES

EXCHANGE ACT OF 1934

For the Quarterly Period ended June 30, 2004

Commission File: 001-15849

SANTANDER BANCORP

(Exact name of Corporation as specified in its charter)

Commonwealth of Puerto Rico		66-0573723
_____________________________________________		__________________________________
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

207 Ponce de Leon Avenue, Hato Rey, Puerto Rico		00917
_____________________________________________		__________________________________
(Address of principal executive offices)		(Zip Code)

Registrant's telephone number, including area code:

(787) 759-7070

Indicate by check mark whether the Corporation (1) has filed all reports required to be filed by Section 13 of the Securities Exchange act of 1934 during the preceding 12 months (or for such shorter period that the Corporation was required to file such reports), and (2) has been subject to such filing requirement for the past 90 days.

Yes X No______

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).

Yes X No______

Indicate the number of shares outstanding of each of the Registrant's classes of common stock as of the last practicable date.

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:

Title of each class	Outstanding as of July 10, 2004

Common Stock, $2.50 par value	42,398,954

SANTANDER BANCORP

CONTENTS

			Page No.
Part I:	Financial Information
	Item 1.	Financial Statements
		Consolidated Balance Sheets	1
		Consolidated Statements of Income	2
		Consolidated Statements of Changes in Stockholders' Equity	3
		Consolidated Statements of Comprehensive Income	4
		Consolidated Statements of Cash Flows	5
		Notes to Consolidated Financial Statements	7
	Item 2.	Management's Discussion and Analysis of Financial Condition and
		Results of Operations	24
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	44
	Item 4.	Controls and Procedures	48
Part II:	Other Information
	Item 1.	Legal Proceedings	49
	Item 2.	Use of Proceeds and Issuer Purchases of Equity Securities	49
	Item 3.	Defaults upon Senior Securities	49
	Item 4.	Submission of Matters to a Vote of Security Holders	49
	Item 5.	Other Information	49
	Item 6.	Exhibits and Reports on Form 8-K	50
Signatures			51

Forward Looking Statements. When used in this Form 10-Q or future filings by Santander BanCorp (the "Corporation") with the Securities and Exchange Commission, in the Corporation's press releases or other public or shareholder communications, or in oral statements made with the approval of an authorized executive officer, the word or phrases "would be", "will allow", "intends to", "will likely result", "are expected to", "will continue", "is anticipated", "estimate", "project", "believe", or similar expressions are intended to identify "forward looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995.

The future results of the Corporation could be affected by subsequent events and could differ materially from those expressed in forward looking statements. If future events and actual performance differ from the Corporation's assumptions, the actual results could vary significantly from the performance projected in the forward looking statements.

The Corporation wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made, and to advise readers that various factors, including regional and national conditions, substantial changes in levels of market interest rates, credit and other risks of lending and investment activities, competitive and regulatory factors and legislative changes, could affect the Corporation's financial performance and could cause the Corporation's actual results for future periods to differ materially from those anticipated or projected. The Corporation does not undertake, and specifically disclaims any obligation, to update any forward-looking statements to reflect occurrences or unanticipated events or circumstances after the date of such statements.

PART I - ITEM 1

FINANCIAL STATEMENTS

SANTANDER BANCORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
AS OF JUNE 30, 2004 AND DECEMBER 31, 2003
(Dollars in thousands, except per share data)

		June 30,		December 31,
ASSETS		2004		2003
		_______________		_______________
CASH AND CASH EQUIVALENTS:
Cash and due from banks	$	157,982	$	99,183
Interest-bearing deposits		14,233		15,300
Federal funds sold and securities purchased under agreements to resell		241,150		278,750
		____________		____________
Total cash and cash equivalents		413,365		393,233
		____________		____________
INTEREST BEARING DEPOSITS		300		10,000
TRADING SECURITIES		42,945		42,547
INVESTMENT SECURITIES AVAILABLE FOR SALE, at fair value:
Securities pledged that can be repledged		1,077,244		1,227,627
Other investment securities available for sale		477,441		436,684
		____________		____________
Total investment securities available for sale		1,554,685		1,664,311
		____________		____________
INVESTMENT SECURITIES HELD TO MATURITY, at amortized cost:
Securities pledged that can be repledged		681,834		687,184
Other investment securities held to maturity		163,543		145,943
		____________		____________
Total investment securities held to maturity		845,377		833,127
		____________		____________
LOANS HELD FOR SALE, net		291,068		297,201
LOANS, net		4,554,497		3,846,994
PREMISES AND EQUIPMENT, net		50,283		61,107
ACCRUED INTEREST RECEIVABLE		36,943		36,398
GOODWILL		34,791		34,791
INTANGIBLE ASSETS		4,251		4,662
OTHER ASSETS		122,589		142,050
		____________		____________
	$	7,951,094	$	7,366,421
		===========		=============
LIABILITIES AND STOCKHOLDERS' EQUITY
DEPOSITS:
Non-interest bearing	$	697,319	$	700,413
Interest-bearing		3,704,886		3,441,815
		____________		____________
Total deposits		4,402,205		4,142,228
		____________		____________
FEDERAL FUNDS PURCHASED AND OTHER BORROWINGS		427,000		350,000
SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE		1,669,033		1,808,238
COMMERCIAL PAPER ISSUED		574,636		254,904
TERM NOTES		174,113		165,966
SUBORDINATED CAPITAL NOTES		15,925		15,925
ACCRUED INTEREST PAYABLE		18,867		18,728
OTHER LIABILITIES		177,520		129,600
		____________		____________
Total Liabilities		7,459,299		6,885,589
		____________		____________
STOCKHOLDERS' EQUITY:
Series A Preferred stock, $25 par value; 10,000,000 shares authorized, none outstanding		-		-
Common stock, $2.50 par value; 200,000,000 shares authorized;46,410,214 shares
issued;42,398,954 shares outstanding in June 2004 and December 2003.		116,026		116,026
Capital paid in excess of par value		211,742		211,742
Treasury stock at cost, 4,011,260 shares in June 2004 and December 2003.		(67,552)		(67,552)
Accumulated other comprehensive loss, net of taxes		(40,428)		(19,465)
Retained earnings-
Reserve fund		119,432		119,432
Undivided profits		152,575		120,649
		____________		____________
Total stockholders' equity		491,795		480,832
		____________		____________
	$	7,951,094	$	7,366,421
		===========		=============

The accompanying notes are an integral part of these financial statements

SANTANDER BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
FOR THE SIX MONTH PERIODS AND THE QUARTERS ENDED JUNE 30, 2004 AND 2003
(Dollars in thousands, except per share data)

		For the six months ended				For the quarters ended
		______________________________________				_________________________________
				As restated					As restated
		June 30,		June 30,		June 30,			June 30,
		2004		2003		2004			2003
		______________________________________				______________________________________
INTEREST INCOME:
Loans	$	118,753	$	121,535	$	60,853	$		61,274
Investment securities		51,747		35,045		24,532			16,892
Interest bearing deposits		234		410		102			192
Federal funds sold and securities purchased under
agreements to resell		1,219		956		639			566
		____________		____________		____________			____________
Total interest income		171,953		157,946		86,126			78,924
		____________		____________		____________			____________
INTEREST EXPENSE:
Deposits		26,711		30,135		13,531			14,069
Securities sold under agreements to repurchase and other borrowings		37,607		37,888		18,958			18,778
Subordinated capital notes		28		405		7			186
		____________		____________		____________			____________
Total interest expense		64,346		68,428		32,496			33,033
		____________		____________		____________			____________
Net interest income		107,607		89,518		53,630			45,891

PROVISION FOR LOAN LOSSES		14,750		25,780		6,000			13,715
		____________		____________		____________			____________
Net interest income after provision for loan losses		92,857		63,738		47,630			32,176
		____________		____________		____________			____________
OTHER INCOME:
Bank service charges, fees and other		19,224		19,916		9,579			9,685
Broker-dealer, asset management and insurance fees		25,265		21,218		12,814			9,874
Gain on sale of securities		9,003		10,008		100			5,339
Gain (loss) on sale of loans		157		4,013		(55)			3,723
Gain on sale of building		2,754		-		-			-
Other income		3,205		5,216		644			3,140
		____________		____________		____________			____________
Total other income		59,608		60,371		23,082			31,761
		____________		____________		____________			____________
OTHER OPERATING EXPENSES:
Salaries and employee benefits		46,229		43,211		22,680			21,386
Occupancy costs		6,670		6,622		3,270			3,346
Equipment expenses		3,602		3,770		1,838			1,915
EDP servicing, and technical amortization expenses		16,097		19,132		7,466			10,353
Communication expenses		4,590		3,662		2,482			2,144
Business promotion		4,312		3,243		2,632			1,217
Other taxes		4,525		5,157		2,251			2,588
Other operating expenses		22,702		24,246		12,039			11,713
		____________		____________		____________			____________
Total other operating expenses		108,727		109,043		54,658			54,662
		____________		____________		____________			____________
Income before provision for income tax		43,738		15,066		16,054			9,275

PROVISION FOR INCOME TAX		2,477		2,905		8			2,253
		____________		____________		____________		____________
NET INCOME		41,261		12,161		16,046			7,022
DIVIDENDS TO PREFERRED SHAREHOLDERS		-		2,284		-			1,142
		____________		____________		____________			____________
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS	$	41,261	$	9,877	$	16,046	$		5,880
		===========		===========		===========			=========
BASIC AND DILUTED EARNINGS PER COMMON SHARE*	$	0.88	$	0.21	$	0.34	$		0.13
		===========		===========		===========			=========
* After giving retroactive effect to the 10% stock dividend declared on July 9, 2004.


The accompanying notes are an integral part of these financial statements

SANTANDER BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)
FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2004 AND THE YEAR ENDED DECEMBER 31, 2003
(Dollars in thousands)


		June 30, 2004		December 31, 2003
		_____________________		_______________________
Preferred Stock:
Balance at beginning of period	$	-	$	65,250
Preferred stock redemption		-		(65,250)
		____________		____________
Balance at end of period		-		-
		____________		____________
Common Stock:
Balance at beginning of period		116,026		116,026
Balance at end of period		116,026		116,026
		____________		____________
Capital Paid in Excess of Par Value:
Balance at beginning of period		211,742		211,742
		____________		____________
Balance at end of period		211,742		211,742
		____________		____________
Treasury Stock at cost:
Balance at beginning of period		(67,552)		(65,268)
Stock repurchased at cost		-		(2,284)
		____________		____________
Balance at end of period		(67,552)		(67,552)
		____________		____________
Accumulated Other Comprehensive Income, net of taxes:
Balance at beginning of period		(19,465)		(12,692)
Unrealized net gain (loss) on investment securities available
for sale, net of tax		(22,930)		(2,789)
Unrealized net gain on cash flow hedges, net of tax		1,967		1,739
Minimum pension liability, net of tax		-		(5,723)
		____________		____________
Balance at end of period		(40,428)		(19,465)
		____________		____________
Reserve Fund:
Balance at beginning of period		119,432		116,482
Transfer from undivided profits		-		2,950
		_______		_________
Balance at end of period		119,432		119,432
		____________		____________
Undivided Profits:
Balance at beginning of period		120,649		172,415
Net income		41,261		39,445
Transfers		-		(2,950)
Deferred tax benefit amortization		(8)		(60)
Common stock cash dividends		(9,327)		(19,087)
Preferred stock cash dividends		-		(4,504)
Preferred stock redemption premium		-		(2,610)
Return of capital on corporate reorganization		-		(62,000)
		____________		____________
Balance at end of period		152,575		120,649
		_______________		_________________
Total stockholders' equity	$	491,795	$	480,832
		===============		================


The accompanying notes are an integral part of these financial statements

SANTANDER BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
FOR THE SIX MONTH PERIODS AND THE QUARTERS ENDED JUNE 30, 2004 AND 2003
(Dollars in thousands)

		For the six months ended				For the quarters ended
	____________________________________________________________________
				As restated				As restated
		June 30,		June 30,		June 30,		June 30,
		2004		2003		2004		2003
		_________________		________________		____________________		__________________

Net income	$	41,261	$	12,161	$	16,046	$	7,022