PonceBank Reports 1997 Third Quarter Results, Announces Appointment of Two New Directors and Adoption of Stock Repurchase Program.

PONCE, Puerto Rico--(BUSINESS WIRE)--Oct. 8, 1997--PonceBank (NYSE: PBK) today announced earnings of $2,255,715 or 36 cents per share and $8,562,640 or $1.39 per share for the three and nine-month periods ended September 30, 1997, respectively, compared to $1,367,890 or 23 cents per share and $7,823,898 or $1.31 per share for the respective three and nine-month periods ended September 30, 1996.

The Bank's annualized return on equity ("ROE") and return on assets ("ROA") in 1997's third quarter were 9.85 percent and .80 percent, respectively, compared to 6.58 percent and .48 percent, respectively, in 1996's third quarter. For the nine-month period ended September 30, 1997 the Bank's annualized ROE and ROA were 12.78 percent and 1.02 percent, respectively, compared to 12.96 percent and .97 percent, respectively, in the comparable 1996 period.

The amounts and ratios for the quarter and nine-month period ended September 30, 1996, include a special one-time industrywide assessment of $2.6 million (net of tax benefit) made by the Federal Deposit Insurance Corporation to recapitalize the Savings Association Insurance Fund (the "special SAIF assessment"). The Bank's 1997 third quarter net interest income increased by $134,000 or .97 percent, from $13.8 million for the third quarter of 1996 to $13.9 million for the third quarter of 1997. Such increase, together with an increase in other income of $370,000 and a gain on sale of loans and investment securities of $398,000, were offset by an increase of $3.2 million in the provision for possible loan losses.

The increase in net interest income for the 1997 third quarter, compared to the 1996 third quarter, reflects the increase in net interest margin on the Bank's average interest-earning assets during the 1997 period. During the 1997 third quarter PonceBank's net interest margin increased by 3 percent, from 5.05 percent in the third quarter of 1996 to 5.21 percent in 1997's third quarter, offsetting a reduction of $24 million or 2 percent in average interest-earning assets ($1,068 million in 1997's third quarter compared to $1,092 million in 1996's third quarter).

The Bank's net interest income for the first nine months of 1997 increased by $4.3 million or 11 percent, from $38.6 million for the nine month period ended September 30, 1996 to $42.9 million for the comparable period of 1997. Such increase together with an increase in other income of $609,000 and a gain on sale of loans and mortgage-backed and investment securities of $2.4 million, were offset by an increase of $8.9 million in the provision for possible loan losses ($10.9 million in the 1997 period compared to $2.0 million in the 1996 period).

The increase in net interest income for the nine month period ended September 30, 1997, compared to the nine month period ended September 30, 1996, reflects the higher level of interest-earning assets and net interest margin in the 1997 period. For the 1997 nine month period, the Bank had $34 million or 3 percent more in average interest-earning assets ($1,073 million in 1997's first nine months compared to $1,039 million in 1996's first nine months) and the Bank's net interest margin increased by 7 percent, from 4.96 percent in 1996's first nine months to 5.33 percent in 1997's first nine months.

The increase in the provision for loan losses for the three and nine month periods ended September 30, 1997, compared to the similar year ago periods, primarily was the result of increases in net charge-offs and non-performing loans as well as an increase in the size of the loan portfolio generally and, in particular, the consumer loan portfolio. Net charge-offs for the quarter ended September 30, 1997 were $3.3 million or 1.53 percent (annualized) of average loans, compared to $1.5 million or .73 percent (annualized) of average loans for the third quarter of 1996. For the first nine months of 1997 net charge-offs were $8.1 million or 1.25 percent (annualized) of average loans, compared to $2.2 million or .39 percent of average loans during the nine months ended September 30, 1996.

In Puerto Rico, similar to the U.S. mainland, the banking industry generally is experiencing increased delinquencies and charge-offs in consumer loans as a result of record levels of personal bankruptcies filed and the high level of credit by consumers. As a retail oriented financial institution, PonceBank's consumer loan portfolio is sensitive to such trends in consumer behavior. In September 1996 management adopted additional measures in line with the current financial environment: underwriting standards were tightened; collection efforts were increased; and the provision for possible loan losses was increased. During the quarter ended March 31, 1997, management adopted even stricter underwriting and collection measures. Management is of the opinion that, positive results are showing in the form of significantly lower delinquency ratios for the portfolios originated since October 1996.

Non-performing assets, which consist of past due loans, foreclosed real estate properties and other repossessed assets (primarily automobiles), amounted to $39.9 million at September 30, 1997, or $200,000 over the $39.7 million reported at June 30, 1997. Non-performing assets at September 30,

1997 consist to a large extent of non-accruing auto loans classified as "status" account, which are loans secured by the vehicle being financed. Auto loans are classified as "status" mainly when in process of legal repossession, insurance claim or bankruptcy proceeding.

The allowance for possible loan losses amounted to $17.2 million at September 30, 1997 or 2.03 percent of loans, up $900,000 from the $16.3 million or 1.89 percent of loans at June 30, 1997. At September 30, 1996 the allowance for possible loan losses amounted to $13.7 million or 1.68 percent of loans. The allowance for possible loan losses as a percentage of non-performing loans was 45.2, 42.8, 42.1 and 47.2 as of September 30, June 30 and March 31, 1997, and September 30, 1996, respectively. As part of its asset/liability management process, during the first quarter of 1997 the Bank sold most of the mortgage-backed securities in its investment portfolio. PonceBank realized a net gain of $1.3 million (net of tax) from such sales, which was used entirely to increase the Bank's allowance for loan losses in the first quarter of 1997.

The operating results for the 1997 three and nine-month periods, when compared to the similar year ago periods, reflect the control over the infrastructure costs associated with the Bank's additional investment in personnel and technological resources to accommodate its plan to expand the Bank's asset base through an increase in the loan portfolio. Non-interest expense increased by only $118,000 or 1 percent for the third quarter of 1997, compared to the third quarter of 1996, and increased by only $531,000 or 2 percent for the nine months ended September 30, 1997, compared to the similar period a year ago. The Bank improved its efficiency ratio to 57 percent and 58 percent for 1997's third quarter and first nine months, respectively, from 58 percent and 63 percent for 1996's respective comparable periods (excluding the special SAIF assessment).

The Bank maintains a well capitalized position. As of September 30, 1997 PonceBank's leverage capital ratio was 8.30 percent (versus a 5 percent requirement). The Bank's Tier 1 and Total risk-based capital ratios stood at 10.31 percent and 11.56 percent, respectively (versus requirements of 6 percent and 10 percent, respectively).

On September 23, 1997, the Bank added two new members to its Board of Directors: Messrs. Hector M. Mayol, Jr. and Bartolomi Gamundi. Mr. Mayol is a former Commissioner of Financial Institutions of

Puerto Rico, has had a long association with the commercial and investment banking sectors in Puerto Rico and is presently a Senior Vice President of Eagle Asset Management, Inc., an affiliate of Raymond James and Associates. Mr. Gamundi is a former President of the Puerto Rico Manufacturers Association and is currently a member of the Governor's Council on Science and Technology. He is widely recognized as a leader in the industrial sector and is the Vice President of Manufacturing and General Manager of Electro-Biology, Inc., a manufacturer of medical equipment.

PonceBank also announced today that on September 23, 1997, its Board of Directors adopted a program designed to repurchase up to 10% of the Bank's common stock, pursuant to a recent modification of the Banking Law of Puerto Rico. The stock repurchase program is described in the Bank's proxy statement dated March 21, 1997 and is subject to, among other things, approval by the Bank's regulatory agencies.

PonceBank is a commercial banking corporation organized under the laws of the Commonwealth of Puerto Rico on October 31, 1994. Prior to said date, it was the second largest thrift institution operating in Puerto Rico under the name Ponce Federal Bank, F.S.B. It is a full-service financial institution specializing in retail banking, headquartered in the southern coastal city of Ponce, Puerto Rico, and maintains an island-wide network of 26 branches as well as administrative offices in both Ponce and San Juan. -0-

                     -Statistical Tables Follow-

                              PonceBank
                   FINANCIAL CONDITION HIGHLIGHTS

                                     Sep. 30, 1997        Dec. 31, 1996
Assets                              $1,113,503,057       $1,116,880,365
Loans Receivable - net                $845,007,678         $842,463,491
Allowance for Loan Losses              $17,158,162          $14,384,655
Deposits                              $863,650,238         $844,002,409
Stockholders' Equity                   $92,319,777          $86,417,480
Common Shares Outstanding                6,181,754            6,107,615
Book Value Per Share                        $14.93               $14.15
Stockholders' Equity/Assets                  8.29%                7.74%


                              PonceBank
                 FINANCIAL OPERATING HIGHLIGHTS
              (In Thousands, except Per Share Data)


                                                 Quarter Ended
                                                 September 30,
                                                 1997      1996

Net interest income                             $13,921   $13,787
Provision for losses on loans                     4,180     1,012
 Net interest income after provision for
  losses on loans                                 9,741    12,775
Non-interest income:
 Gain on sale of loans and investment securities    398         0
 Service charges, fees and other                  1,316       946
 Total non-interest income                        1,714       946
Non-interest expense                              8,701     8,583
Special SAIF assessment                               0     4,332
Income before income taxes                        2,754       806
Income tax expense (benefit)                        498      (562)
 Net income                                     $ 2,256   $ 1,368
Net Income Per Share                              $0.36     $0.23
Weighted Average Shares Outstanding               6,181     6,043


                                                 Nine-Months Ended
                                                    September 30,
                                                  1997       1996

Net interest income                             $42,886     $38,641
Provision for losses on loans                    10,896       2,014
 Net interest income after provision for
  losses on loans                                31,990      36,627
Non-interest income:
 Gain on sale of loans, and mortgage-backed
   and investment securities                      2,359           0
 Service charges, fees and other                  3,665       3,056
 Total non-interest income                        6,024       3,056
Non-interest expense                             26,840      26,309
Special SAIF assessment                               0       4,332
Income before income taxes                       11,174       9,042
Income tax expense                                2,611       1,218
 Net income                                     $ 8,563     $ 7,824
Net Income Per Share                              $1.39       $1.31
Weighted Average Shares Outstanding               6,153       5,977


                                 PonceBank
                           NON-PERFORMING ASSETS
                           (Dollars In Thousands)


                                As of           As of           As of
                                Sep 30,         Jun 30,         Dec 31,
                                 1997            1997            1996

Past due loans:
   Real estate loans:
      Residential properties   $ 4,000         $ 4,085         $ 4,981
      Commercial properties      4,477           5,042           5,584
      Construction and land        396             396             396
   Commercial business loans         4               0              81
   Consumer (mostly auto) loans 29,076          28,483          22,012
   Total non-performing loans   37,953          38,006          33,054
Foreclosed properties and in-substance
  foreclosed assets              1,456           1,274           1,147
Other non-performing assets        539             438             534
Total non-performing assets    $39,948         $39,718         $34,735

Allowances for possible losses on:
   Loans                       $17,158         $16,275         $14,385
   Foreclosed, in-substance
    foreclosed and other assets    655             531             391
Total valuation allowances     $17,813         $16,806         $14,776

Allowances for possible losses on
   loans as a percentage of
   non-performing loans         45.21%          42.82%          43.52%

Allowances for possible losses on
   loans, in-substance foreclosed
   assets, foreclosed assets,
   and other assets as a percentage
   of non-performing assets     44.59%          42.31%          42.54%

Non-performing loans as a percentage
   of total loans                4.49%           4.41%           3.92%
-0-

CONTACT: PonceBank

Rafael Blanco 

[phone]

or

Kehoe, White, Savage & Company, Inc.

John P. Kehoe/Van Negris

[phone]