* Net income for the quarter ended September 30, 2005 reached $17.1 million, or $0.37 per share, compared to net income of $21.9 million, or $0.47 per share reported for the third quarter of 2004. SAN JUAN, Puerto Rico, Oct. 27 /PRNewswire-FirstCall/ -- Santander BanCorp (NYSE: SBP; LATIBEX: XSBP) ("the Company"), reported today its unaudited financial results for the quarter and the nine-month period ended September 30, 2005. Net income for the quarter ended September 30, 2005 reached $17.1 million, compared to net income of $21.9 million reported during the third quarter of 2004. The decrease in net income for the quarter ended September 30, 2005 compared to the same period in 2004 was principally due to an increase in income tax expense. For the nine-month period ended September 30, 2005, net income amounted to $61.8 million, as compared to net income of $63.1 million for the nine-month period ended September 30, 2004. Net income for the quarter ended September 30, 2005 reached $17.1 million or $0.37 per common share compared to net income for the quarter ended September 30, 2004 of $21.9 million or $0.47 per common share. Annualized Return on Average Common Equity (ROE) and Return on Average Assets (ROA) were 11.84% and 0.80%, respectively, for the quarter ended September 30, 2005, compared to 17.1% and 1.10%, respectively, for the third quarter of 2004. Net income before income taxes for the quarter ended September 30, 2005 amounted to $23.2 million, reflecting a slight decline over net income before income taxes of $23.5 million for the same quarter of 2004. The provision for income tax amounted to $6.1 million for the third quarter of 2005, increasing the effective tax rate to 26.3% from 6.8% for the same quarter of 2004. The income tax provision for the quarter ended September 30, 2004 amounted to $1.6 million. The increase in the 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, which would increase the maximum marginal tax rate from 39% to 41.5%. The provision for income tax for the quarter and nine-month period ended September 30, 2005 includes the retroactive effect of this adjustment in the amount of $1.3 million. The Efficiency Ratio(1) for the quarters ended September 30, 2005 and 2004 were 66.25% and 61.97%, respectively. Net income for the nine-month period ended September 30, 2005 reached $61.8 million or $1.33 per common share as compared to $63.1 million or $1.35 per common share for the same period in 2004. Annualized ROE and ROA were 14.20% and 1.00%, respectively, for the nine-month period ended September 30, 2005, compared to ROE and ROA of 17.21% and 1.12%, respectively, for the same period in 2004. Net income before income taxes for the nine-month period ended September 30, 2005 reached $83.0 million, a 23.5% increase over $67.2 million for the nine-month period ended September 30, 2004. The provision for income tax amounted $21.2 million for the nine month period ended September 30, 2005, increasing the effective tax rate to 25.5% from 6.1% for the same nine-month period of 2004. The income tax provision for the nine-month period ended September 30, 2004 amounted to $4.1 million. The Efficiency Ratio(1) for the nine-month period ended September 30, 2005 reflected an improvement of 124 basis points, reaching 63.41% compared to 64.65% for the nine-month period ended September 30, 2004. Income Statement The $4.8 million reduction in net income for the quarter ended September 30, 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 $2.1 million. These changes were partially offset by a lower provision for loan losses of $2.4 million. The decline of $1.3 million in net income for the nine-month period ended September 30, 2005 compared to the amount reported for the same period in 2004 was principally due to increments of $17.1 million in income tax expense and $3.4 million in operating expenses. These increments were partially offset by a reduction of $6.4 million or 29.3% in the provision for loan losses, and increases in non-interest income of $12.2 million or 13.9% and of $0.7 million in net interest income. Net interest margin(1) for the third quarter of 2005 was 2.80% compared with 3.19% for the third quarter of 2004. This decrease of 39 basis points in net interest margin(1) was mainly due to a rise of 103 basis points in the average cost of interest bearing liabilities due to short-term interest rate increases as a result of the revisions by the Federal Reserve of the discount rate by a total of 275 basis points during the period from June 2004 to September 2005. The average yield on interest earning assets increased 49 basis points also as a result of the higher interest rate scenario. This improvement was a result of an increase in the yield on average net loans and interest bearing deposits, partially offset by a decrease in the yield of the investment portfolio. Compared to the sequential quarter ended June 30, 2005, the decline in the net interest margin(1) was 14 basis points. This reduction was mainly due to an increase of 21 basis points in the cost of funding earning assets, and a reduction of 45 basis points in the average yield of the investment securities portfolio, which was offset by an increment of 22 basis points in the average yield of the loan portfolio for a total increase of 8 basis points in the average yield of earning assets. Also, there was an increase of 26 basis points in the cost of funds of average time deposits which impacted the yield on average interest bearing liabilities. The decline in net interest margin(1) was partly due to rising short-term interest rates and a flattening yield curve, which caused borrowing costs to increase at a faster rate than the yield on earning assets. For the third quarter of 2005 average interest earning assets grew by $467.1 million and average interest bearing liabilities increased $392.9 million compared to the same period in 2004. The increment in average interest earning assets compared to the third quarter of 2004 was driven by an increase in average net loans of $1.2 billion which was partially offset by a decrease in average investment securities of $0.7 million. The reduction in investment securities is mainly attributed to the sale of $785 million of securities during the first quarter of 2005 resulting in a decline in the yield on investment securities of 78 basis points from 4.94% for the quarter ended September 30, 2004 to 4.16% for the quarter ended September 30, 2005, which further explains the reduction in net interest income for the quarter. The above mentioned sale generated a gain of $16.9 million that was partially offset by a loss of $6.7 million on the extinguishment of certain term repo transactions that were funding part of the securities sold. The increase in average interest bearing liabilities of $392.9 million was driven by an increase in average time deposits of $1.2 billion, partially offset by a decrease in average borrowings of $775.1 million as compared to the quarter ended September 30, 2004. Net interest margin(1) for the nine-month period ended September 30, 2005 was 2.94% compared with 3.28% for the same period in 2004. This decline of 34 basis points in net interest margin(1) was mainly due to an increment of 82 basis points in the average cost of interest bearing liabilities due to short- term interest rate increases, while the average yield of interest earnings assets increased by 37 basis points. Average net loans increased $1.3 billion or 27.7% for the nine-month period ended September 30, 2005 compared to the same period in 2004. This increment was partially offset by a reduction in average investment securities of $626.2 million and an increment in average interest bearing liabilities of $577.5 or 9.3% as compared to September 30, 2004. The provision for loan losses reflected a reduction of $2.4 million or 33.8% from $7.0 million for the quarter ended September 30, 2004 to $4.7 million for the third quarter in 2005. For the nine-month period ended September 30, 2005, the reduction in the provision for loan losses was $6.4 million or 29.3% compared to the same period in 2004. The reduction in the provision for loan losses was due to a 52.7% decrease in non-performing loans (excluding mortgage loans(2) which are down to $27.1 million as of September 30, 2005, from $57.3 million as of September 30, 2004, and $51.3 million as of December 31, 2004. For the quarter ended September 30, 2005, other income reached $28.7 million compared to $28.4 million reported for the same period in 2004. There were increases of 9.4% in bank charges, fees and others and 10.1% in broker- dealer, asset management and insurance fees, that were offset by lower gains on sale of securities, gains on mortgage servicing rights ("MSRs") recognized on loans sold with servicing retained and losses on derivatives. For the nine-month period ended September 30, 2005, other income increased $12.2 million or 13.9% to $100.2 million from $88.0 million compared to the same period in 2004. This increase was the result of higher gain on 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 term repo transactions that were funding part of the securities sold. During the nine-month period ended September 30, 2005, there was a higher gain on sale of loans of $8.0 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 increment in other income for the nine-month period ended September 30, 2005, there was an increase in the gain on derivatives of $1.7 million and higher broker-dealer, asset management and insurance fees of $2.4 million. These gains were partially offset by a loss on extinguishment of debt of $6.0 million and nonrecurring gains on sale of building (in 2004) of $2.8 million. For the quarters ended September 30, 2005 and 2004, the Efficiency Ratio(3) was 66.25% and 61.97%, respectively. This increase was mainly the result of lower revenues and higher operating expenses during the third quarter of 2005. For the nine-month period ended September 30, 2005, the Efficiency Ratio(3) improved 124 basis points to 63.41% from 64.65% for the same period in 2004. This improvement was the result of higher revenues partially offset by an increase of $3.4 million in other operating expenses. Operating expenses increased $2.1 million or 3.9% from $53.9 million for the quarter ended September 30, 2004 to $55.9 million for the quarter ended September 30, 2005. This increase was due to an increase in salaries and employee benefits of $1.2 million together with an increase in other operating expenses of $0.9 million. The increase in salaries and employee benefits was due to an increase of $0.4 million in commissions and bonuses, of $0.2 million in salaries and a decrease of $0.6 million in expenses deferred as loan origination costs (as a result of lower standard costs of originating consumer loans). Other operating expenses reflected an increase of $0.9 million as a result of increases in occupancy costs, EDP servicing expense, business promotion and provision for repossessed assets and related expenses that were partially offset by decreases in professional fees and collections and related legal costs. For the nine-month period ended September 30, 2005, operating expenses increased $3.4 million or 2.1% when compared to the same period in 2004. There was an increase of $3.3 million in salaries and employee benefits and an increase of $0.2 million in other operating expenses. The increase in salaries and employee benefits was due to a decrease of $2.4 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 $0.9 million. Balance Sheet Total assets as of September 30, 2005 increased by $738.1 million or 9.3% to $8.7 billion compared to $8.0 billion as of September 30, 2004, and $357.3 million or 4.3% compared to total assets of $8.3 billion as of December 31, 2004. As of September 30, 2005, there was an increase of $942.4 million in net loans, including loans held for sale (further explained below) compared to September 30, 2004 balances and $629.2 million compared to December 31, 2004 balances. The investment securities portfolio decreased by $182.2 million, from $1.9 billion as of September 30, 2004 to $1.7 billion as of September 30, 2005. The net loan portfolio, including loans held for sale, reflected an increase of 18.1% or $942.4 million, reaching $6.1 billion at September 30, 2005, compared to the figures reported as of September 30, 2004. Compared to December 31, 2004, the net loan portfolio grew by $629.2 million or 11.4% from $5.5 billion. The mortgage loan portfolio at September 30, 2005 grew $624.3 million or 25.9% compared to September 30, 2004 and $450.5 million or 17.5% compared to December 31, 2004. The commercial loan portfolio (including construction loans) and the consumer loan portfolio also reflected growth of $220.3 million or 9.1% and $93.2 million or 20.8%, respectively, as of September 30, 2005, compared to September 30, 2004. Compared to December 31, 2004 the commercial and consumer loan portfolios reflected increases of $88.7 million or 3.5% and $86.9 million or 19.1%, respectively. Compared to the sequential quarter ended June 30, 2005, the annualized growth in the mortgage, commercial and consumer loan portfolio was 18.4%, 0.4% and 23.2%, respectively. The annualized growth in the consumer loan portfolio is attributable to an increment of 38.9% and 16.8% in credit cards and other consumer loans, respectively. Mortgage loans originated during the third quarter of 2005 reached $179.5 million and net purchases were $113.2 million, comprised of $200.1 million of loans purchased and $87.0 million of loans sold. Mortgage loan originations for the nine-month period ended September 30, 2005 reached $556.9 million and net purchases were $257.7 million comprised of $490.0 million loans purchased and $232.4 million loans sold. Deposits at September 30, 2005 reflected an increase of $1.4 billion or 30.0%, compared to deposits of $4.5 billion as of September 30, 2004 and $1.1 billion or 23.6%, compared to deposits of $4.7 billion as of December 31, 2004, respectively. Total borrowings at September 30, 2005 (comprised of federal funds purchased and other borrowings, securities sold under agreements to repurchase, commercial paper issued, and term and capital notes) decreased $752.3 million or 27.2% and $852.4 million or 29.8%, compared to borrowings at September 30, 2004 and December 31, 2004, respectively. Financial Strength Non-performing loans to total loans as of September 30, 2005 was 1.15%, a 69 basis point improvement over the reported 1.84% as of September 30, 2004, and a 42 basis point improvement over the reported 1.57% as of December 31, 2004. Non-performing loans at September 30, 2005 amounted to $71.2 million, a 26.5% improvement compared to $96.8 million as of September 30, 2004, and an 18.7% 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 nine- month period ended September 30, 2005 improved 18 basis points to 0.42% from 0.60% reported for the nine-month period ended September 30, 2004. The allowance for loan losses to total non-performing loans at September 30, 2005 improved to 92.82% compared to 73.05% at September 30, 2004 and 79.05% at December 31, 2004. Excluding non-performing mortgage loans(4) (for which the Company has historically had a minimal loss experience) this ratio is 243.9% at September 30, 2005 compared to 123.4% as of September 30, 2004 and 135.0% as of December 31, 2004. The allowance for loan losses represents 1.06% of total loans as of September 30, 2005, a 28 basis point reduction over 1.34% reported as of September 30, 2004 and an 18 basis point reduction over the 1.24% reported as of December 31, 2004. The allowance for loan losses to total loans excluding mortgage loans as of September 30, 2005 was 2.08% compared to 2.47% at September 30, 2004 and 2.30% at December 31, 2004. As of September 30, 2005, total capital to risk-adjusted assets (BIS ratio) reached 11.88% and Tier I capital to risk-adjusted assets and leverage ratios were 9.41% and 6.38%, respectively. Customer Financial Assets Under Control As of September 30, 2005, the Company had $13.6 billion in Customer Financial Assets Under Control, which represents a 12.6% or $1.5 billion increase over balances as of September 30, 2004. 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. Shareholder Value During the nine-month period ended September 30, 2005, Santander BanCorp declared a cash dividend of 48 cents per common share, resulting in a current annualized dividend yield of 2.60%. Market capitalization reached approximately $1.1 billion (including affiliated holdings) as of September 30, 2005. There were no stock repurchases during 2005 and 2004 under the Stock Repurchase Program. As of September 30, 2005, 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 (SBP) and on Latibex (Madrid Stock Exchange) (XSBP). 89% of the outstanding common stock of Santander BanCorp is owned by Banco Santander Central Hispano, S.A (Santander). The Company 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 nearly three decades. It offers a full array of services through 64 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 9th largest bank in the world by market capitalization and the largest in the Euro Zone. Founded in 1857, Santander has 63 million customers, 10,099 offices and a presence in over 40 countries. It is the largest financial group in Spain and Latin America, and is a major player elsewhere in Europe, including the United Kingdom through its Abbey subsidiary and Portugal, where it is the third largest banking group. Through Santander Consumer it also operates a leading consumer finance franchise in Germany, Italy, Spain and nine other European countries. In 3Q05, Santander recorded 3.878 million euro in net attributable profits, 36.8% more than in the previous year. In Latin America, Santander manages over US$140 billion in banking business volumes (loans, deposits and mutual funds) through 4,100 offices in 10 countries. Projected calendar for SBP reporting 2005 quarterly financial results Fourth quarter results - January 27, 2006 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. (2) Mortgage loans include residential mortgages, commercial loans with real estate collateral, 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. (4) Mortgage loans include residential mortgages, commercial loans with real estate collateral, consumer loans with real estate collateral. They exclude construction loans. SANTANDER BANCORP CONSOLIDATED BALANCE SHEETS (UNAUDITED) AS OF SEPTEMBER 30, 2005 AND 2004 AND DECEMBER 31, 2004 (Dollars in thousands, except share data) ASSETS Variance 09/05- 30-Sep-05 30-Sep-04 31-Dec-04 12/04 CASH AND CASH EQUIVALENTS: Cash and due from banks $130,584 $153,049 $110,148 18.55% Interest bearing deposits 9,839 45,452 42,612 -76.91% Federal funds sold and securities purchased under agreements to resell 248,585 339,150 326,650 -23.90% Total cash and cash equivalents 389,008 537,651 479,410 -18.86% INTEREST BEARING DEPOSITS 101,044 50,000 50,000 102.09% TRADING SECURITIES 51,088 13,423 34,184 49.45% INVESTMENT SECURITIES AVAILABLE FOR SALE, at fair value 1,678,532 1,051,852 1,978,132 -15.15% INVESTMENT SECURITIES HELD TO MATURITY, at amortized cost - 846,368 - N/A OTHER INVESTMENT SECURITIES, at amortized cost 37,500 - 37,500 0.00% LOANS HELD FOR SALE, net 220,591 283,017 271,596 -18.78% LOANS, net 5,988,980 4,988,793 5,311,936 12.75% ALLOWANCE FOR LOAN LOSSES (66,051) (70,731) (69,177) -4.52% PREMISES AND EQUIPMENT, net 55,257 49,930 52,854 4.55% ACCRUED INTEREST RECEIVABLE 64,116 45,354 44,682 43.49% GOODWILL 34,791 34,791 34,791 0.00% INTANGIBLE ASSETS 9,895 5,949 8,003 23.64% OTHER ASSETS 134,346 124,638 107,869 24.55% $8,699,097 $7,961,035 $8,341,780 4.28% LIABILITIES AND STOCKHOLDERS' EQUITY DEPOSITS: Non-interest bearing $651,853 $699,993 $744,019 -12.39% Interest bearing 5,216,845 3,816,200 4,004,120 30.29% Total deposits 5,868,698 4,516,193 4,748,139 23.60% FEDERAL FUNDS PURCHASED AND OTHER BORROWINGS 650,000 722,000 780,334 -16.70% SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE 1,018,187 1,301,627 1,349,444 -24.55% COMMERCIAL PAPER ISSUED 229,852 599,376 629,544 -63.49% TERM NOTES 39,902 124,281 31,457 26.85% CAPITAL NOTES 72,985 15,925 72,588 0.55% ACCRUED INTEREST PAYABLE 49,527 23,246 22,666 118.51% OTHER LIABILITIES 202,820 132,150 151,605 33.78% 8,131,971 7,434,798 7,785,777 4.45% 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 September 2005, 2004 and December 2004. 126,626 126,626 126,626 0.00% Capital paid in excess of par value 304,171 304,171 304,171 0.00% Treasury stock at cost, 4,011,260 shares in September 2005, 2004 and December 2004. (67,552) (67,552) (67,552) 0.00% Accumulated other comprehensive loss, net of taxes (35,134) (22,719) (6,818) 415.31% Retained earnings- Reserve fund 127,086 119,432 127,086 0.00% Undivided profits 111,929 66,279 72,490 54.41% Total stockholders' equity 567,126 526,237 556,003 2.00% $8,699,097 $7,961,035 $8,341,780 4.28% SANTANDER BANCORP CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) FOR THE NINE MONTH PERIODS AND THE QUARTERS ENDED SEPTEMBER 30, 2005 AND 2004 (Dollars in thousands, except per share data) For the nine months For the quarters ended ended September September September September 30, 30, 30, 30, 2005 2004 2005 2004 INTEREST INCOME: Loans $255,206 $184,995 $93,628 $66,242 Investment securities 54,723 76,817 16,309 25,070 Interest bearing deposits 2,740 573 1,194 338 Federal funds sold and securities purchased under agreements to resell 3,490 2,018 822 799 Total interest income 316,159 264,403 111,953 92,449 INTEREST EXPENSE: Deposits 88,386 42,115 35,172 15,404 Securities sold under agreements to repurchase and other borrowings 61,481 58,688 20,926 21,081 Subordinated capital notes 2,094 54 795 25 Total interest expense 151,961 100,857 56,893 36,510 Net interest income 164,198 163,546 55,060 55,939 PROVISION FOR LOAN LOSSES 15,400 21,770 4,650 7,020 Net interest income after provision for loan losses 148,798 141,776 50,410 48,919 OTHER INCOME: Bank service charges, fees and other 31,267 28,949 10,640 9,725 Broker/dealer, asset management and insurance fees 40,558 38,176 14,219 12,911 Gain on sale of securities 17,838 11,465 462 2,462 (Loss) gain on extinguishment of debt (5,959) - 784 - Gain on sale of mortgage servicing rights 69 284 14 88 Gain on sale of loans 7,874 (84) 666 (240) Gain on sale of building - 2,754 - - Other income 8,593 6,463 1,883 3,452 Total other income 100,240 88,007 28,668 28,398 OPERATING EXPENSES: Salaries and employee benefits 72,288 69,037 23,998 22,808 Occupancy costs 12,581 10,109 4,193 3,439 Equipment expenses 2,703 2,848 903 963 EDP servicing, amortization and technical expenses 23,727 25,688 8,338 7,873 Communication expenses 6,200 6,792 2,004 2,202 Business promotion 8,239 7,140 3,198 2,828 Other taxes 6,293 6,574 2,105 2,049 Other operating expenses 33,992 34,390 11,187 11,689 Total operating expenses 166,023 162,578 55,926 53,851 Income before provision for income tax 83,015 67,205 23,152 23,466 PROVISION FOR INCOME TAX 21,186 4,075 6,087 1,597 NET INCOME AVAILABLE TO COMMON SHAREHOLDERS $61,829 $63,130 $17,065 $21,869 EARNINGS PER COMMON SHARE $1.33 $1.35 $0.37 $0.47 SANTANDER BANCORP SELECTED CONSOLIDATED FINANCIAL INFORMATION: (DOLLARS IN THOUSANDS) For the Quarters Ended Sept. Sept. June 3Q05/ 3Q05/ 30, 30, 30, 3Q04 2Q05 2005 2004 2005 Variation Variation Interest Income $111,953 $92,449 $103,456 21.1% 8.2% Tax equivalent adjustment 1,931 5,025 2,786 -61.6% -30.7% Interest income on a tax equivalent basis 113,884 97,474 106,242 16.8% 7.2% Interest expense 56,893 36,510 49,788 55.8% 14.3% Net interest income on a tax equivalent basis 56,991 60,964 56,454 -6.5% 1.0% Provision for loan losses 4,650 7,020 4,050 -33.8% 14.8% Net interest income on a tax equivalent basis after provision 52,341 53,944 52,404 -3.0% -0.1% Other operating income 27,540 26,176 25,942 5.2% 6.2% Gain on sale of securities 462 2,462 415 -81.2% 11.3% Gain on sale of loans 666 (240) 6,127 -377.5% -89.1% Gain on sale of building - - N/A N/A Other operating expenses 55,926 53,851 54,706 3.9% 2.2% Income on a tax equivalent basis before income taxes 25,083 28,491 30,182 -12.0% -16.9% Provision (credit) for income taxes 6,087 1,597 8,141 281.2% -25.2% Tax equivalent adjustment 1,931 5,025 2,786 -61.6% -30.7% NET INCOME (LOSS) $17,065 $21,869 $19,255 -22.0% -11.4% SELECTED RATIOS: Per share data (1): Earnings (loss) per common share $0.37 $0.47 $0.41 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 $0.11 $0.16 Nine Months Ended September 30, 2005 2004 Variation Interest Income $316,159 $264,403 19.6% Tax equivalent adjustment 9,251 14,141 -34.6% Interest income on a tax equivalent basis 325,410 278,544 16.8% Interest expense 151,961 100,857 50.7% Net interest income on a tax equivalent basis 173,449 177,687 -2.4% Provision for loan losses 15,400 21,770 -29.3% Net interest income on a tax equivalent basis after provision 158,049 155,917 1.4% Other operating income 74,528 73,872 0.9% Gain on sale of securities 17,838 11,465 55.6% Gain on sale of loans 7,874 (84) -9473.8% Gain on sale of building - 2,754 -100.0% Other operating expenses 166,023 162,578 2.1% Income on a tax equivalent basis before income taxes 92,266 81,346 13.4% Provision (credit) for income taxes 21,186 4,075 419.9% Tax equivalent adjustment 9,251 14,141 -34.6% NET INCOME (LOSS) $61,829 $63,130 -2.1% SELECTED RATIOS: Per share data (1): Earnings (loss) per common share $1.33 $1.35 Average common shares outstanding ** 46,639,104 46,639,104 Common shares outstanding at end of period ** 46,639,104 46,639,104 Cash Dividends per Share $0.48 $0.33 (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. ** After giving retroactive effect to the stock dividend declared on July 9, 2004 SANTANDER BANCORP 2004 YTD QTD QTD YTD QTD Sept. Sept. June Sept. Sept. 30, 30, 30, 30, 30, SELECTED RATIOS 2005 2005 2005 2004 2004 Net interest margin (1) 2.94% 2.80% 2.94% 3.28% 3.19% Return on average assets (2) 1.00% 0.80% 0.95% 1.12% 1.10% Return on average common equity (2) 14.20% 11.84% 12.57% 17.21% 17.14% Efficiency Ratio (1,3) 63.41% 66.25% 61.79% 64.65% 61.97% Non-interest income to revenues 24.07% 20.39% 23.90% 24.97% 23.50% Capital: Total capital to risk- adjusted assets - 11.88% 12.34% - 10.87% Tier I capital to risk- adjusted assets - 9.41% 9.75% - 9.32% Leverage ratio - 6.38% 6.52% - 6.13% Non-performing loans to total loans - 1.15% 1.27% - 1.84% Non-performing loans plus accruing loans past-due 90 days or more to loans - 1.25% 1.32% - 1.89% Allowance for loan losses to non- performing loans - 92.82% 85.64% - 73.05% Allowance for loans losses to period- end loans - 1.06% 1.09% - 1.34% OTHER SELECTED FINANCIAL DATA 9/30/2005 9/30/2004 12/31/2004 (dollars in millions) Customer Financial Assets Under Control: Bank deposits (excluding brokered deposits) $4,602.1 $4,116.7 $4,275.4 Broker-dealer customer accounts 4,953.0 4,393.3 4,543.3 Mutual fund and assets managed 2,892.0 2,308.0 2,640.0 Trust, institutional and private accounts assets under management 1,137.0 1,247.0 1,369.0 Total $13,584.1 $12,065.0 $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/

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