Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

On September 24, 2008, Santander BanCorp (the "Corporation") and Santander Financial Services, Inc., a wholly owned subsidiary of the Corporation ("Santander Financial"), entered into a collateralized loan agreement (the "Loan Agreement") with Banco Santander Puerto Rico (the "Bank"). Under the Loan Agreement, the Bank advanced $200 million and $430 million (the "Loans") to the Corporation and Santander Financial, respectively. The proceeds of the Loans were used to refinance the outstanding indebtedness incurred under the previously announced loan agreement among the Corporation, Santander Financial and the Bank, and for general corporate purposes. The Loans are collateralized by a certificate of deposit in the amount of $630 million opened by Banco Santander, S.A., the parent of the Corporation, at the Bank and provided as security for the Loans pursuant to the terms of a Security Agreement, Pledge and Assignment between the Bank and Banco Santander, S.A. The Corporation and Santander Financial have agreed to pay an annual fee of 0.10% net of taxes, deductions and withholdings to Banco Santander, S.A. in connection with its agreement to collateralize the Loans with the deposit.
The Loans bear interest at a fixed rate of 4.4343% per annum. Interest is payable at maturity of the Loans. The Corporation and Santander Financial did not pay any fee or commission to the Bank in connection with the Loans. The entire principal balance of the Loans is due and payable on September 24, 2009.
Upon the occurrence and during the continuance of an Event of Default (as defined in the Loan Agreement) under the Loan Agreement, the Bank shall have the right to declare the outstanding balance of the Loans, together with accrued interest and any other amount owing to the Bank, due and payable on demand or immediately due for payment. In addition, the Corporation and Santander Financial will be required to pay interest on any overdue amounts at a default rate that is equal to the fixed interest rate payable on the Loans plus 2% per annum.
The Corporation's and Santander Financial's obligations to pay interest and principal under the Loan Agreement are several and not joint. However, the Corporation and Santander Financial are jointly and severally responsible for all other amounts payable under the Loan Agreement, including any indemnification payments due to the Bank thereunder.
The foregoing description is qualified in its entirety by reference to the Loan Agreement, a copy of which is filed herewith as Exhibit 10.1 and incorporated by reference to this Item 2.03. Item 9.01 Financial Statements and Exhibits.

(d) Exhibits
10.1 Loan Agreement among Santander BanCorp, Santander Financial Services, Inc. and Banco Santander Puerto Rico.

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