-- | Net income, including after-tax merger and integration and restructuring charges of $18.5 million, was $146 million, up 43% from $102 million, including after-tax merger and integration charges and additional loan loss provision of $19.2 million related to the acquisition of First Essex Bancorp, a year ago. Earnings per diluted share for the first quarter of 2005, including the above-mentioned charges of $.05 per share, were $.38, up 15% from $.33 per diluted share, including the above-mentioned charges of $.06 per share, in the first quarter of 2004. |
| |
-- | Operating earnings were $183 million, up 37% from $133 million in the same quarter a year ago. Operating earnings per share were $.46 per share, up 5% from $.44 per share in the first quarter of 2004. The first quarter of 2005 was negatively impacted by $.015 per share due to an accounting change related to EITF 04-08 “Accounting Issues Related to Certain Features of Contingently Convertible Debt and the Effect on Diluted Earnings per Share,” which did not impact operating earnings in prior quarters. |
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-- | Total revenue increased 23% from a year ago and 14% annualized from the fourth quarter of 2004 while operating expenses increased only 15% from a year ago and decreased .20% annualized from the fourth quarter of 2004. |
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-- | Net interest margin was 3.26% as compared to 3.29% in the fourth quarter of 2004 and 3.28% in the first quarter of 2004. |
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-- | Efficiency ratio of 48.4% in the first quarter of 2005, an improvement of 331 basis points from the first quarter of 2004 and 174 basis points from the fourth quarter of 2004. |
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-- | The provision for loan losses was $22.0 million in this quarter. The provision exceeded net charge-offs by $2.4 million. |
| |
-- | Annualized net charge-offs decreased to .20% of average loans at March 31, 2005, versus .28% at December 31, 2004 and .51% at March 31, 2004. |
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-- | Sovereign repurchased 2 million shares during the quarter through our previously announced repurchase program. Sovereign may repurchase up to approximately 18 million additional shares under its repurchase program and anticipates accelerating repurchase efforts in the second quarter of 2005. |
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-- | Sovereign increased its cash dividend by 33%, resulting in an annual cash dividend of $.16 per share. |
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-- | Despite the deployment of capital during the quarter for the acquisition of Waypoint Financial Corp. on January 21, 2005, share repurchases and an increase in the cash dividend, the Tier 1 leverage ratio was 6.96% at March 31, 2005 versus 7.05% at December 31, 2004 and 7.12% at March 31, 2004. |
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-- | Sovereign successfully completed the acquisition of Waypoint Financial Corp. on January 21, 2005. Systems conversion was successfully completed by February 13, 2005. |
PHILADELPHIA, April 19 /PRNewswire-FirstCall/ -- Sovereign Bancorp, Inc. (“Sovereign”) (NYSE: SOV), parent company of Sovereign Bank (“Bank”), today reported first quarter 2005 net income in accordance with generally accepted accounting principles of $146 million, or $.38 per diluted share, as compared to $102 million, or $.33 per diluted share, for the first quarter of 2004. Net income included an after-tax restructuring charge and a merger and integration charge related to our acquisition of Waypoint Financial Corp. (“Waypoint”), which closed on January 21, 2005, which together totaled $18.5 million or $.05 per share in the first quarter of 2005 and an after-tax merger and integration charge of $15.3 million and incremental loan loss provision of $3.9 million associated with the acquisition of First Essex Bancorp in the first quarter of 2004.
For the quarter ended March 31, 2005, Sovereign’s reported operating earnings increased 37% to $183 million, or $.46 per diluted share, which excluded the above mentioned restructuring and merger and integration charges and $12.3 million or $.03 per share related to amortization of intangible assets, as compared to $133 million, or $.44 per diluted share a year ago, which excluded the above mentioned merger and integration charges and incremental loan loss provision plus $12.0 million or $.04 per share related to amortization of intangible assets. Effective in the fourth quarter of 2004, Sovereign redefined its definition of operating earnings and the related per share amount to exclude most non-cash, non-operating charges; such as, after-tax merger and integration charges, the after-tax effect of amortization of intangible assets, in addition to special items. Since most of these items are difficult to predict and make the results of normal operations less clear, management believes the presentation of financial measures excluding the impact of these items provides useful supplemental information in evaluating the operating results of Sovereign’s core businesses. A reconciliation of net income to operating earnings, as well as the related earnings per share amounts, is included in a later section of this release.
Commenting on results for the first quarter of 2005, Jay S. Sidhu, Sovereign’s Chairman and Chief Executive Officer, said, “We are pleased we were able to maintain our margin and saw improvement in most performance metrics during the first quarter. Net charge-offs declined to 20 basis points from 28 basis points in the fourth quarter, net interest margin was relatively stable, our efficiency ratio improved almost 175 basis points, and operating return on assets expanded 8 basis points from 1.22% to 1.30%. These improvements occurred despite challenges in the market, as we faced a flattening yield curve along with competitive deposit pricing pressures. Consistent with our new local market banking strategy, we have remained focused on improving interest earning asset yields while increasing our core deposit base. As a result of where the yield curve has been, we have been reluctant to accept loan business that does not meet our spread criteria. We believe this discipline should benefit our profitability in the coming quarters. We successfully repurchased 2 million shares during the quarter, increased our cash dividend 33%, and still exceeded our capital targets for the quarter. Lastly, we are pleased to welcome Waypoint’s customers, shareholders and team members to Sovereign, as we successfully closed and converted this acquisition during the quarter,” concluded Sidhu.
Net Interest Income and Margin
Sovereign reported net interest income of $398 million for the first quarter of 2005, an increase of $75 million, or 23%, compared to the first quarter of 2004. On a linked-quarter basis, net interest income increased by $11 million, or 3%, in spite of a $2.6 billion reduction in the investment portfolio during the fourth quarter of 2004 and a $1.8 billion reduction in investments during the first quarter in connection with the acquisition of Waypoint.
Sovereign’s total loan portfolio increased during the first quarter by $3.7 billion to $40.3 billion. Excluding acquisitions, the total loan portfolio increased $1.1 billion, reflecting an annualized growth rate of 12%. Total deposits increased during the first quarter by $4.1 billion to $36.7 billion. Excluding acquisitions, total deposits increased $1.2 billion, reflecting an annualized growth rate of 15%. Core deposits increased during the quarter by $1.7 billion to $27.2 billion. Excluding acquisitions, core deposits increased modestly during the quarter, reflecting an annualized growth rate of 4%.
Net interest margin was 3.26% for the first quarter of 2005, compared to 3.29% in the fourth quarter of 2004 and 3.28% in the first quarter of 2004, comparing very favorably to the average year-over-year change in net interest margin for the top 50 banks in the U.S. who have reported thus far. “As we have repeatedly mentioned, we expect that as rates rise, our deposit costs will reprice at approximately 25% of the increase in short-term interest rates,” stated James D. Hogan, Sovereign’s Chief Financial Officer. “To date, we have been successful in limiting the increase in the cost of core deposits to 20.5% and the cost of total deposits to 24.5% of the 175 basis point increase in short-term rates that has occurred. We have been fortunate to be able to maintain our net interest margin within a few basis points of the fourth and first quarters of 2004 as a result of our slightly asset-sensitive position in addition to remaining focused and disciplined on our loan and deposit pricing.”
Non-Interest Income
Consumer banking fees increased by $12.6 million to $66.6 million, or 23%, compared to the same period in 2004, primarily driven by growth in loan and deposit fees. Commercial banking fees increased $4.3 million to $33.0 million, or 15%, over the same period a year ago, primarily driven by growth in loan fees. Fee revenues for the quarter were impacted by seasonal factors typically present in the first quarter of each year, as well as the waiver of certain fees for newly acquired Waypoint customers.
Mortgage banking revenues for the quarter were $11.9 million, compared to $4.7 million last quarter and $5.4 million in the same quarter a year ago. Due to changes in prepayment speeds and interest rates during the quarter, a $4.0 million reversal of a valuation reserve for mortgage servicing rights was recorded. This compares to a reversal of $1.7 million recorded in the fourth quarter of 2004 and an impairment charge of $11.3 million in the first quarter of 2004. Mortgage banking results are detailed in the financial tables attached to this release. As of March 31, 2005, mortgage servicing rights, net of reserves of $2.6 million, were $84.6 million and our servicing portfolio was $6.8 billion, with a capitalized cost of 124 basis points.
Non-Interest Expense
G&A expenses for the quarter were $257 million, which were relatively flat compared to the fourth quarter of 2004 and up 15%, including acquisitions, from $223 million a year ago. “We were obviously pleased with our expense control during the quarter, as we were able to keep expenses relatively flat on a linked quarter basis despite adding the Waypoint acquisition into our expense base for most of the quarter. We continue to grow revenues at a faster pace than expenses, further improving our efficiency ratio. Our efficiency ratio was 48.4% in the first quarter of 2005, a 174 basis point improvement over the fourth quarter and 331 basis point improvement from one year ago,” commented Hogan.
On a GAAP basis, Sovereign’s effective tax rate was 25.7% in the first quarter; on an operating basis, it was 27.5%.
Asset Quality
Sovereign continued to see improvement in net charge-offs during the first quarter of 2005. Annualized net charge-offs decreased to .20% of average loans at March 31, 2005, compared to .28% at December 31, 2004 and .51% at March 31, 2004. Non-performing assets (“NPAs”) increased $26.8 million during the quarter to $187 million at March 31, 2005. NPAs to total assets were .32%, compared to .29% at December 31, 2004. Sovereign’s provision for loan losses was $22.0 million this quarter compared to $27.0 million in the fourth quarter and $43.0 million in the first quarter of 2004. The allowance for loan losses to total loans decreased slightly to 1.09% at March 31, 2005, as compared to 1.12% at December 31, 2004 and 1.27% at March 31, 2004. The allowance for loan losses to non-performing loans now stands at 255%, as compared to 285% at December 31, 2004 and 186% at March 31, 2004.
Capital
During the quarter, Sovereign repurchased two million shares under a previously announced repurchase program. Sovereign also increased its annual cash dividend to $.16. Sovereign’s Tier 1 leverage ratio was 6.96% at March 31, 2005. Tangible common equity to tangible assets, excluding other comprehensive income (“OCI”), was 5.22% and including OCI was 4.86%. The equity to assets ratio was 9.68% at March 31, 2005. Sovereign Bank’s Tier 1 leverage ratio was 7.44% and the bank’s risk-based capital ratio was 11.55% at March 31, 2005. “We are very satisfied with our capital ratios this quarter given the acquisition of Waypoint and the share repurchase completed to date. In this environment, we feel it is important to maintain our loan and deposit margins, and by sticking to our discipline we saw less balance sheet growth during the quarter than anticipated. This resulted in meaningfully higher capital ratios at the end of the first quarter versus our plan. We anticipate using approximately $100 million of this excess capital to fund additional share repurchases in the second quarter,” commented Hogan.
Looking Ahead
“Overall, we felt the first quarter contained several positives - maintained margin, improved profitability metrics, and reduced loan charge- offs; however, there are key obstacles that remain in this challenging interest rate and competitive environment. While it is too early to draw any meaningful conclusions from April’s data, over the last few weeks we have seen good loan and deposit growth, which has been typical in the second quarter of prior years. Keep in mind, 2005 will be adversely impacted by two changes which did not impact operating earnings in prior years - accounting for contingently convertible debt and stock-based compensation, as Sovereign is no longer carving these items out of operating earnings. Combined, these two items will adversely impact Sovereign’s earnings by $.09 to $.11 per share in 2005. Given the high level of tangible common equity we are generating, we are hopeful that we will be able to repurchase enough shares during 2005 to completely mitigate the dilution from our convertible debt for 2006. With that being said, management’s goal continues to be to strive to earn about $2.00 in operating earnings per share for 2005, excluding after-tax one-time charges of $.05 per share and amortization of intangible assets of approximately $.12 per share. We are totally focused on doing everything we can to achieve this goal while we remain disciplined about our risk management practices,” Sidhu concluded.
Based upon our April 18 stock price of $21.16, Sovereign is trading at a P/E of 11.2x analysts mean 2005 estimate and 139% of current book value. The book value per share at March 31, 2005 was $15.22.
Sovereign Bancorp, Inc., (“Sovereign”) (NYSE: SOV), is the parent company of Sovereign Bank, a $59 billion financial institution with more than 650 community banking offices, over 1,000 ATMs and approximately 10,000 team members with principal markets in the Northeast United States. Sovereign offers a broad array of financial services and products including retail banking, business and corporate banking, cash management, capital markets, trust and wealth management and insurance. Sovereign is the 19th largest banking institution in the United States. For more information on Sovereign Bank, visit http://www.sovereignbank.com or call 1-877-SOV-BANK.
Interested parties will have the opportunity to listen to a live web-cast of Sovereign’s First Quarter 2005 earnings call on Wednesday, April 20 beginning at 8:30 a.m. ET at http://www.sovereignbank.com >Investor Relations >News >Conference Calls/Webcasts; or http://phx.corporate-ir.net/phoenix.zhtml?p=irol- eventDetails&c=67999&eventID=1045113. The web-cast replay can be accessed anytime from 11:00 a.m. ET on Wednesday, April 20, 2005 through 9:00 p.m. ET on June 30, 2005. Questions may be submitted during the call via email to investor@sovereignbank.com . A telephone replay will be accessible from 11:00 a.m. ET on Wednesday, April 20, 2005 through 12:00 a.m. ET (midnight) on April 25, 2005 by dialing 800-642-1687, confirmation id #5239840.
Note:
This press release contains financial information determined by methods other than in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”). Sovereign’s management uses the non-GAAP measure of Operating Earnings, and the related per share amount, in their analysis of the company’s performance. This measure, as used by Sovereign, adjusts net income determined in accordance with GAAP to exclude the effects of special items, including significant gains or losses that are unusual in nature or are associated with acquiring and integrating businesses, and certain non-cash charges. Operating earnings for the first quarter of 2005 represent net income adjusted for the after-tax effects of merger-related and integration charges, certain restructuring charges and the amortization of intangible assets. Operating earnings for 2004 represent net income adjusted for the after-tax effects of merger-related and integration charges and the loss on early extinguishment of debt, the fourth quarter adoption of EITF 04-8, other- than-temporary non-cash impairment charges on Fannie Mae and Freddie Mac preferred equity securities and the amortization of intangible assets. Management’s operating earnings goal for 2005 excludes the after-tax effects of merger-related and integration charges, certain restructuring charges and the amortization of intangible assets. Since certain of these items and their impact on Sovereign’s performance are difficult to predict, management believes presentations of financial measures excluding the impact of these items provide useful supplemental information in evaluating the operating results of Sovereign’s core businesses. These disclosures should not be viewed as a substitute for net income determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.
This press release contains statements of Sovereign’s strategies, plans, and objectives, as well as estimates of future operating results for 2005 for Sovereign Bancorp, Inc. as well as estimates of financial condition, operating and cash efficiencies and revenue generation. These statements and estimates constitute forward-looking statements (within the meaning of the Private Securities Litigation Reform Act of 1995), which involve significant risks and uncertainties. Actual results may differ materially from the results discussed in these forward-looking statements. Factors that might cause such a difference include, but are not limited to, general economic conditions, changes in interest rates, deposit flows, loan demand, real estate values and competition; changes in accounting principles, policies, or guidelines; changes in legislation or regulation; Sovereign’s ability in connection with any acquisition to complete such acquisition and to successfully integrate assets, liabilities, customers, systems and management personnel Sovereign acquires into its operations and to realize expected cost savings and revenue enhancements within expected time frame; the possibility that expected one time merger-related charges are materially greater than forecasted or that final purchase price allocations based on the fair value of acquired assets and liabilities and related adjustments to yield and/or amortization of the acquired assets and liabilities at any acquisition date are materially different from those forecasted; and other economic, competitive, governmental, regulatory, and technological factors affecting the Company’s operations, integrations, pricing, products and services.
Sovereign Bancorp, Inc. and Subsidiaries
FINANCIAL HIGHLIGHTS
(unaudited)
| | Quarter Ended | |
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| |
(dollars in millions, except per share data) | | Mar. 31
2005 | | Dec. 31
2004 | | Sept.30
2004 | | June 30
2004 | | Mar. 31
2004 | |
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Operating Data | | | | | | | | | | | | | | | | |
Net income | | $ | 146.2 | | $ | 137.4 | | $ | 82.5 | | $ | 131.4 | | $ | 102.2 | |
Net income for EPS purposes (1) | | | 152.5 | | | 143.7 | | | 88.9 | | | 137.7 | | | 104.5 | |
Operating earnings (2) | | | 183.3 | | | 167.5 | | | 157.9 | | | 143.4 | | | 133.5 | |
Net interest income | | | 398.2 | | | 387.0 | | | 363.0 | | | 332.0 | | | 322.8 | |
Provision for loan losses | | | 22.0 | | | 27.0 | | | 25.0 | | | 32.0 | | | 43.0 | |
Total fees and other income before securities transactions | | | 133.4 | | | 126.5 | | | 108.3 | | | 124.2 | | | 109.1 | |
Net gain (loss) on investment securities | | | 8.0 | | | (24.7 | ) | | 20.2 | | | 0.8 | | | 17.9 | |
G&A expense | | | 257.1 | | | 257.3 | | | 237.7 | | | 224.6 | | | 223.1 | |
Other expenses | | | 63.8 | | | 30.5 | | | 129.1 | | | 28.1 | | | 48.6 | |
Performance Statistics | | | | | | | | | | | | | | | | |
Bancorp | | | | | | | | | | | | | | | | |
Net interest margin | | | 3.26 | % | | 3.29 | % | | 3.17 | % | | 3.22 | % | | 3.28 | % |
Operating return on average assets (2) | | | 1.30 | % | | 1.22 | % | | 1.17 | % | | 1.20 | % | | 1.17 | % |
Operating return on average equity (2) | | | 13.34 | % | | 13.61 | % | | 13.82 | % | | 14.87 | % | | 15.08 | % |
Operating return on average tangible equity (2) | | | 26.52 | % | | 26.65 | % | | 26.96 | % | | 24.75 | % | | 25.42 | % |
Annualized net loan charge-offs to average loans | | | 0.20 | % | | 0.28 | % | | 0.25 | % | | 0.43 | % | | 0.51 | % |
Efficiency ratio (3) | | | 48.36 | % | | 50.10 | % | | 50.44 | % | | 49.22 | % | | 51.67 | % |
Per Share Data | | | | | | | | | | | | | | | | |
Basic earnings per share | | $ | 0.40 | | $ | 0.40 | | $ | 0.25 | | $ | 0.43 | | $ | 0.34 | |
Diluted earnings per share (1) | | | 0.38 | | | 0.38 | | | 0.24 | | | 0.41 | | | 0.33 | |
Operating earnings per share (2) | | | 0.46 | | | 0.48 | | | 0.46 | | | 0.46 | | | 0.44 | |
Dividend declared per share | | | .030 | | | .030 | | | .030 | | | .030 | | | .025 | |
Book value (4) | | | 15.22 | | | 14.41 | | | 13.95 | | | 12.46 | | | 12.78 | |
Common stock price: | | | | | | | | | | | | | | | | |
High | | | 23.73 | | | 22.61 | | | 22.48 | | | 22.10 | | | 24.51 | |
Low | | | 21.89 | | | 21.14 | | | 20.48 | | | 19.51 | | | 20.37 | |
Close | | $ | 22.16 | | $ | 22.55 | | $ | 21.82 | | $ | 22.10 | | $ | 21.42 | |
Weighted average common shares: | | | | | | | | | | | | | | | | |
Basic | | | 368.9 | | | 345.6 | | | 335.6 | | | 306.1 | | | 300.7 | |
Diluted (1) | | | 401.3 | | | 377.6 | | | 367.8 | | | 337.8 | | | 316.8 | |
End-of-period common shares: | | | | | | | | | | | | | | | | |
Basic | | | 374.8 | | | 346.1 | | | 345.3 | | | 306.2 | | | 306.4 | |
Diluted (1) | | | 407.4 | | | 378.2 | | | 377.3 | | | 338.2 | | | 337.8 | |
NOTES:
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|
| (1) | Effective in the fourth quarter of 2004, Sovereign adopted EITF 04-8 “Accounting Issues Related to Certain Features of Contingently Convertible Debt and the Effect on Diluted Earnings per Share”. This EITF requires the potential dilution from contingently convertible debt be included in the calclution of diluted earnings per share upon the issuance of the debt and that the after tax impact of the interest expense on this debt be added back to net income for earnings per share purposes. Sovereign issued $800 million of contingently convertible trust preferred equity income redeemable securities in the first quarter of 2004. Prior period earnings per share were required to be restated. We have excluded the impact of this pronouncement in our calculation of 2004 operating earnings per share. |
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| (2) | Operating earnings represent net income excluding the after-tax effects of special items, such as significant gains or losses that are unusual in nature or are associated with acquiring or integrating businesses, losses on the early retirement of debt, other than temporary impairment charges on Fannie Mae and Freddie Mac preferred equity securities, amortization of intangible assets, and certain restructuring charges. Additionally, for 2004, operating earnings excludes the impact of EITF 04-8. See page I for a reconcilation of GAAP and Non- GAAP earnings. |
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| (3) | Efficiency ratio equals general and administrative expense as a percentage of total revenue, defined as the sum of net interest income and total fees and other income before securities transactions. |
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| (4) | Book value equals stockholders’ equity at period-end divided by common shares outstanding. |
Sovereign Bancorp, Inc. and Subsidiaries
FINANCIAL HIGHLIGHTS
(unaudited)
| | Quarter Ended | |
| |
| |
(dollars in millions) | | | Mar. 31
2005 | | | Dec. 31
2004 | | | Sept. 30
2004 | | | June 30
2004 | | | Mar. 31
2004 | |
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Financial Condition Data: | | | | | | | | | | | | | | | | |
General | | | | | | | | | | | | | | | | |
Total assets | | $ | 58,926 | | $ | 54,471 | | $ | 55,755 | | $ | 48,687 | | $ | 47,043 | |
Loans | | | 40,320 | | | 36,631 | | | 35,262 | | | 29,130 | | | 27,739 | |
Total deposits and customer related accounts: | | | 36,686 | | | 32,556 | | | 33,102 | | | 29,001 | | | 28,118 | |
Core deposits and other customer related accounts | | | 27,225 | | | 25,441 | | | 25,744 | | | 22,824 | | | 21,939 | |
Time deposits | | | 9,461 | | | 7,114 | | | 7,358 | | | 6,176 | | | 6,179 | |
Borrowings | | | 15,555 | | | 16,140 | | | 16,919 | | | 15,157 | | | 14,262 | |
Minority interests | | | 204 | | | 204 | | | 203 | | | 203 | | | 203 | |
Stockholders’ equity | | | 5,705 | | | 4,988 | | | 4,815 | | | 3,815 | | | 3,916 | |
Goodwill | | | 2,721 | | | 2,125 | | | 2,103 | | | 1,289 | | | 1,293 | |
Core deposit intangible | | | 269 | | | 257 | | | 305 | | | 249 | | | 262 | |
Asset Quality | | | | | | | | | | | | | | | | |
Non-performing assets | | $ | 186.9 | | $ | 160.1 | | $ | 168.8 | | $ | 176.1 | | $ | 212.0 | |
Non-performing loans | | $ | 171.9 | | $ | 143.6 | | $ | 147.5 | | $ | 152.2 | | $ | 188.6 | |
Non-performing assets to total assets | | | 0.32 | % | | 0.29 | % | | 0.30 | % | | 0.36 | % | | 0.45 | % |
Non-performing loans to total loans | | | 0.43 | % | | 0.39 | % | | 0.42 | % | | 0.52 | % | | 0.68 | % |
Allowance for loan losses | | $ | 437.7 | | $ | 408.7 | | $ | 406.6 | | $ | 352.6 | | $ | 351.0 | |
Allowance for loan losses to total loans | | | 1.09 | % | | 1.12 | % | | 1.15 | % | | 1.21 | % | | 1.27 | % |
Allowance for loan losses to non-performing loans | | | 255 | % | | 285 | % | | 276 | % | | 232 | % | | 186 | % |
Capitalization - Bancorp (1) | | | | | | | | | | | | | | | | |
Stockholders’ equity to total assets | | | 9.68 | % | | 9.16 | % | | 8.64 | % | | 7.84 | % | | 8.32 | % |
Tier 1 leverage capital ratio | | | 6.96 | % | | 7.05 | % | | 6.56 | % | | 7.13 | % | | 7.12 | % |
Tangible equity to tangible assets, excluding OCI | | | 5.22 | % | | 5.25 | % | | 4.77 | % | | 5.28 | % | | 5.19 | % |
Tangible equity to tangible assets, including OCI | | | 4.86 | % | | 5.00 | % | | 4.51 | % | | 4.83 | % | | 5.19 | % |
Capitalization - Bank (1) | | | | | | | | | | | | | | | | |
Stockholders’ equity to total assets | | | 11.58 | % | | 10.77 | % | | 10.20 | % | | 9.12 | % | | 9.60 | % |
Tier 1 leverage capital ratio | | | 7.44 | % | | 7.21 | % | | 6.66 | % | | 6.85 | % | | 6.82 | % |
Tier 1 risk-based capital ratio | | | 8.89 | % | | 8.79 | % | | 8.51 | % | | 8.92 | % | | 8.82 | % |
Total risk-based capital ratio | | | 11.55 | % | | 11.64 | % | | 11.43 | % | | 12.12 | % | | 12.13 | % |
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(1) | All capital ratios are calculated based upon adjusted end of period assets consistent with OTS guidelines. The current quarter ratios are estimated as of the date of this earnings release. |
Sovereign Bancorp, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(unaudited)
(dollars in thousands) | | Mar. 31
2005 | | Dec. 31
2004 | | Sept. 30
2004 | | June 30
2004 | | Mar. 31
2004 | |
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Assets | | | | | | | | | | | | | | | | |
Cash and amounts due from depository institutions | | $ | 981,674 | | $ | 1,160,922 | | $ | 1,266,044 | | $ | 1,026,719 | | $ | 893,193 | |
Investments: | | | | | | | | | | | | | | | | |
Available-for- sale | | | 7,709,353 | | | 7,642,558 | | | 10,111,845 | | | 10,493,897 | | | 11,912,292 | |
Held-to- maturity | | | 3,839,848 | | | 3,904,319 | | | 4,027,472 | | | 4,007,041 | | | 2,489,030 | |
Total investments | | | 11,549,201 | | | 11,546,877 | | | 14,139,317 | | | 14,500,938 | | | 14,401,322 | |
Loans: | | | | | | | | | | | | | | | | |
Commercial | | | 15,363,592 | | | 13,864,240 | | | 13,445,735 | | | 12,251,456 | | | 11,919,975 | |
Consumer | | | 15,173,459 | | | 14,269,343 | | | 13,856,992 | | | 11,986,107 | | | 11,012,103 | |
Residential mortgages | | | 9,782,953 | | | 8,497,496 | | | 7,958,974 | | | 4,892,305 | | | 4,806,494 | |
Total loans | | | 40,320,004 | | | 36,631,079 | | | 35,261,701 | | | 29,129,868 | | | 27,738,572 | |
Less allowance for loan losses | | | (437,661 | ) | | (408,716 | ) | | (406,612 | ) | | (352,637 | ) | | (351,007 | ) |
Total loans, net | | | 39,882,343 | | | 36,222,363 | | | 34,855,089 | | | 28,777,231 | | | 27,387,565 | |
Premises and equipment, net | | | 394,604 | | | 353,337 | | | 352,089 | | | 286,682 | | | 289,517 | |
Accrued interest receivable | | | 258,849 | | | 226,012 | | | 225,918 | | | 196,347 | | | 188,002 | |
Goodwill | | | 2,720,651 | | | 2,125,081 | | | 2,103,158 | | | 1,289,340 | | | 1,292,809 | |
Core deposit intangible | | | 268,528 | | | 256,694 | | | 304,754 | | | 249,169 | | | 261,582 | |
Bank owned life insurance | | | 992,426 | | | 885,807 | | | 879,189 | | | 851,155 | | | 841,568 | |
Other assets | | | 1,877,557 | | | 1,694,220 | | | 1,629,450 | | | 1,509,296 | | | 1,487,657 | |
Total assets | | $ | 58,925,833 | | $ | 54,471,313 | | $ | 55,755,008 | | $ | 48,686,877 | | $ | 47,043,215 | |
Liabilities and Stockholders’ Equity Liabilities: | | | | | | | | | | | | | | | | |
Deposits and other customer related accounts: | | | | | | | | | | | | | | | | |
Core and other customer related accounts | | $ | 27,224,877 | | $ | 25,441,145 | | $ | 25,743,796 | | $ | 22,824,310 | | $ | 21,939,435 | |
Time deposits | | | 9,460,879 | | | 7,114,373 | | | 7,357,882 | | | 6,176,310 | | | 6,178,871 | |
Total | | | 36,685,756 | | | 32,555,518 | | | 33,101,678 | | | 29,000,620 | | | 28,118,306 | |
Borrowings and other debt obligations | | | 15,554,598 | | | 16,140,128 | | | 16,919,164 | | | 15,157,017 | | | 14,261,686 | |
Other liabilities | | | 775,976 | | | 583,389 | | | 715,326 | | | 511,131 | | | 545,084 | |
Total liabilities | | | 53,016,330 | | | 49,279,035 | | | 50,736,168 | | | 44,668,768 | | | 42,925,076 | |
Minority interests | | | 204,286 | | | 203,906 | | | 203,488 | | | 202,919 | | | 202,513 | |
Stockholders’ equity: | | | | | | | | | | | | | | | | |
Common Stock | | | 3,609,269 | | | 2,949,870 | | | 2,934,733 | | | 2,105,312 | | | 2,102,183 | |
Warrants and stock options | | | 346,116 | | | 317,842 | | | 318,874 | | | 306,594 | | | 305,297 | |
Unallocated ESOP shares | | | (23,707 | ) | | (23,707 | ) | | (26,078 | ) | | (26,078 | ) | | (26,078 | ) |
Treasury stock | | | (64,495 | ) | | (19,136 | ) | | (19,767 | ) | | (20,242 | ) | | (22,190 | ) |
Accumulated other comprehensive (loss)/ income | | | (169,312 | ) | | (108,092 | ) | | (136,645 | ) | | (222,499 | ) | | 6,349 | |
Retained earnings | | | 2,007,346 | | | 1,871,595 | | | 1,744,235 | | | 1,672,103 | | | 1,550,065 | |
Total stockholders’ equity | | | 5,705,217 | | | 4,988,372 | | | 4,815,352 | | | 3,815,190 | | | 3,915,626 | |
Total liabilities and stockholders’ equity | | $ | 58,925,833 | | $ | 54,471,313 | | $ | 55,755,008 | | $ | 48,686,877 | | $ | 47,043,215 | |
Sovereign Bancorp, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
| | Quarter Ended | |
| |
| |
(dollars in thousands, except per share data) | | Mar. 31
2005 | | Dec. 31
2004 | | Sept. 30
2004 | | June 30
2004 | | Mar. 31
2004 | |
| |
| |
| |
| |
| |
| |
Interest and dividend income: | | | | | | | | | | | | | | | | |
Interest on interest-earning deposits | | $ | 2,233 | | $ | 1,721 | | $ | 1,505 | | $ | 980 | | $ | 528 | |
Interest on investment securities | | | | | | | | | | | | | | | | |
Available for sale | | | 94,884 | | | 102,945 | | | 124,803 | | | 136,497 | | | 137,226 | |
Held to maturity | | | 45,119 | | | 45,512 | | | 46,470 | | | 31,879 | | | 28,819 | |
Interest on loans | | | 518,820 | | | 474,010 | | | 412,771 | | | 345,288 | | | 333,190 | |
Total interest and dividend income | | | 661,056 | | | 624,188 | | | 585,549 | | | 514,644 | | | 499,763 | |
Interest expense: | | | | | | | | | | | | | | | | |
Deposits and related customer accounts | | | 114,178 | | | 91,731 | | | 83,160 | | | 63,142 | | | 65,012 | |
Borrowings | | | 148,700 | | | 145,445 | | | 139,439 | | | 119,463 | | | 111,935 | |
Total interest expense | | | 262,878 | | | 237,176 | | | 222,599 | | | 182,605 | | | 176,947 | |
Net interest income | | | 398,178 | | | 387,012 | | | 362,950 | | | 332,039 | | | 322,816 | |
Provision for loan losses | | | 22,000 | | | 27,000 | | | 25,000 | | | 32,000 | | | 43,000 | |
Net interest income after provision for loan losses | | | 376,178 | | | 360,012 | | | 337,950 | | | 300,039 | | | 279,816 | |
Non-interest income: | | | | | | | | | | | | | | | | |
Consumer banking fees | | | 66,555 | | | 67,759 | | | 62,771 | | | 58,072 | | | 53,985 | |
Commercial banking fees | | | 33,008 | | | 32,843 | | | 31,757 | | | 30,552 | | | 28,685 | |
Mortgage banking revenue (1) | | | 11,932 | | | 4,726 | | | (4,080 | ) | | 16,436 | | | 5,427 | |
Capital markets revenue | | | 4,686 | | | 6,548 | | | 3,409 | | | 5,099 | | | 4,887 | |
Bank owned life insurance income | | | 10,903 | | | 10,136 | | | 9,922 | | | 9,588 | | | 9,626 | |
Other | | | 6,351 | | | 4,480 | | | 4,498 | | | 4,499 | | | 6,444 | |
Total fees and other income before security gains | | | 133,435 | | | 126,492 | | | 108,277 | | | 124,246 | | | 109,054 | |
Net gain/(loss) on securities | | | 7,979 | | | (24,728 | ) | | 20,247 | | | 829 | | | 17,881 | |
Total non- interest income | | | 141,414 | | | 101,764 | | | 128,524 | | | 125,075 | | | 126,935 | |
Non-interest expense: | | | | | | | | | | | | | | | | |
General and administrative | | | | | | | | | | | | | | | | |
Compensation and benefits | | | 125,125 | | | 123,967 | | | 114,871 | | | 105,224 | | | 104,080 | |
Occupancy and equipment | | | 62,870 | | | 59,221 | | | 54,976 | | | 52,097 | | | 54,379 | |
Technology expense | | | 18,668 | | | 21,486 | | | 18,935 | | | 19,333 | | | 17,605 | |
Outside services | | | 14,648 | | | 13,901 | | | 14,332 | | | 12,746 | | | 12,336 | |
Marketing expense | | | 11,047 | | | 13,089 | | | 11,983 | | | 10,751 | | | 10,700 | |
Other administrative expenses | | | 24,756 | | | 25,587 | | | 22,583 | | | 24,433 | | | 24,046 | |
Total general and administrative | | | 257,114 | | | 257,251 | | | 237,680 | | | 224,584 | | | 223,146 | |
Other expenses: | | | | | | | | | | | | | | | | |
Amortization of core deposit intangibles | | | 18,956 | | | 17,670 | | | 19,836 | | | 17,576 | | | 17,553 | |
Trust preferred securities and other minority interest expense | | | 5,668 | | | 5,630 | | | 5,502 | | | 5,438 | | | 5,436 | |
Equity method investments (2) | | | 10,770 | | | 11,875 | | | 10,257 | | | 7,327 | | | 2,012 | |
Loss/(gain) on debt extinguishment | | | — | | | 500 | | | 65,546 | | | (2,285 | ) | | — | |
Restructuring charges | | | 5,204 | | | — | | | — | | | — | | | — | |
Merger-related and integration charges | | | 23,191 | | | (5,169 | ) | | 27,941 | | | — | | | 23,587 | |
Total other expenses | | | 63,789 | | | 30,506 | | | 129,082 | | | 28,056 | | | 48,588 | |
Total non- interest expense | | | 320,903 | | | 287,757 | | | 366,762 | | | 252,640 | | | 271,734 | |
Income before income taxes | | | 196,689 | | | 174,019 | | | 99,712 | | | 172,474 | | | 135,017 | |
Income tax expense | | | 50,538 | | | 36,590 | | | 17,170 | | | 41,120 | | | 32,790 | |
Net income | | $ | 146,151 | | $ | 137,429 | | $ | 82,542 | | $ | 131,354 | | $ | 102,227 | |
|
(1) Mortgage banking activity is summarized below: | | | | | | | | | |
Gains on sale of mortgage loans and mortgage backed securities | | $ | 6,377 | | $ | 2,438 | | $ | 4,090 | | $ | 2,808 | | $ | 16,469 | |
Net gains/(loss) recorded under SFAS 133 | | | 653 | | | (111 | ) | | (112 | ) | | (1,878 | ) | | 81 | |
Mortgage servicing fees, net of mortgage servicing rights amortization | | | 948 | | | 664 | | | 1,343 | | | (1,628 | ) | | 137 | |
Mortgage servicing right (impairments)/ recoveries | | | 3,954 | | | 1,735 | | | (9,401 | ) | | 17,134 | | | (11,260 | ) |
Total mortgage banking revenues | | $ | 11,932 | | $ | 4,726 | | $ | (4,080 | ) | $ | 16,436 | | $ | 5,427 | |
(2) | During the second quarter of 2004, Sovereign made a $60 million investment in a synthetic fuel partnership which is accounted for as an equity method investment. As a result of the increasing significance of our equity method investment portfolios, Sovereign reclassified the income statement effects of these items to other expenses. |
Sovereign Bancorp, Inc. and Subsidiaries
AVERAGE BALANCE, INTEREST AND YIELD/RATE ANALYSIS
(unaudited)
| | Quarter Ended
March 31, 2005 | |
| |
| |
(dollars in thousands) | | Average
Balance | | Interest (1) | | Yield/
Rate | |
| |
|
| |
|
| |
|
| |
Earning assets: | | | | | | | | | | |
Investment securities | | $ | 12,128,935 | | $ | 153,197 | | | 5.06 | % |
Loans: | | | | | | | | | | |
Commercial | | | 14,870,517 | | | 204,413 | | | 5.56 | % |
Consumer | | | 14,886,031 | | | 193,931 | | | 5.27 | % |
Residential mortgages | | | 9,167,485 | | | 122,676 | | | 5.35 | % |
Total loans | | | 38,924,033 | | | 521,020 | | | 5.40 | % |
Allowance for loan losses | | | (432,852 | ) | | | | | | |
Total earning assets | | | 50,620,116 | | $ | 674,217 | | | 5.37 | % |
Other assets | | | 6,922,971 | | | | | | | |
Total assets | | $ | 57,543,087 | | | | | | | |
Funding liabilities: | | | | | | | | | | |
Deposits and other customer related accounts: | | | | | | | | | | |
Demand deposit accounts | | $ | 5,162,704 | | $ | — | | | 0.00 | % |
NOW accounts | | | 8,041,978 | | | 25,455 | | | 1.28 | % |
Customer repurchase agreements | | | 842,657 | | | 4,016 | | | 1.93 | % |
Savings accounts | | | 3,930,308 | | | 6,131 | | | 0.63 | % |
Money market accounts | | | 8,152,525 | | | 25,487 | | | 1.27 | % |
Core and other customer related accounts | | | 26,130,172 | | | 61,089 | | | 0.95 | % |
Time deposits | | | 8,659,080 | | | 53,089 | | | 2.49 | % |
Total | | | 34,789,252 | | | 114,178 | | | 1.33 | % |
Borrowings: | | | | | | | | | | |
Federal Home Loan Bank advances | | | 10,910,131 | | | 104,938 | | | 3.89 | % |
Fed funds and repurchase agreements | | | 1,441,246 | | | 9,538 | | | 2.66 | % |
Other borrowings | | | 4,155,507 | | | 34,224 | | | 3.32 | % |
Total borrowings | | | 16,506,884 | | | 148,700 | | | 3.64 | % |
Total funding liabilities | | | 51,296,136 | | | 262,878 | | | 2.07 | % |
Other liabilities | | | 658,248 | | | | | | | |
Total liabilities | | | 51,954,384 | | | | | | | |
Stockholders’ equity | | | 5,588,703 | | | | | | | |
Total liabilities and stockholders’ equity | | $ | 57,543,087 | | | | | | | |
Net interest income | | | | | $ | 411,339 | | | | |
Interest rate spread | | | | | | | | | 2.87 | % |
Net interest margin | | | | | | | | | 3.26 | % |
Sovereign Bancorp, Inc. and Subsidiaries
AVERAGE BALANCE, INTEREST AND YIELD/RATE ANALYSIS
(unaudited)
| | December 31, 2004 | |
| |
| |
(dollars in thousands) | | Average
Balance | | Interest (1) | | Yield/
Rate | |
| |
|
| |
|
| |
|
| |
Earning assets: | | | | | | | | | | |
Investment securities | | $ | 13,040,062 | | $ | 160,592 | | | 4.93 | % |
Loans: | | | | | | | | | | |
Commercial | | | 13,599,851 | | | 179,698 | | | 5.26 | % |
Consumer | | | 14,020,882 | | | 188,307 | | | 5.35 | % |
Residential mortgages | | | 8,199,190 | | | 107,327 | | | 5.24 | % |
Total loans | | | 35,819,923 | | | 475,332 | | | 5.29 | % |
Allowance for loan losses | | | (407,518 | ) | | | | | | |
Total earning assets | | | 48,452,467 | | $ | 635,924 | | | 5.24 | % |
Other assets | | | 6,297,437 | | | | | | | |
Total assets | | $ | 54,749,904 | | | | | | | |
Funding liabilities: | | | | | | | | | | |
Deposits and other customer related accounts: | | | | | | | | | | |
Demand deposit accounts | | $ | 5,103,981 | | $ | — | | | 0.00 | % |
NOW accounts | | | 7,544,694 | | | 20,536 | | | 1.08 | % |
Customer repurchase agreements | | | 851,928 | | | 3,044 | | | 1.42 | % |
Savings accounts | | | 3,821,004 | | | 5,802 | | | 0.60 | % |
Money market accounts | | | 8,082,448 | | | 24,599 | | | 1.21 | % |
Core and other customer related accounts | | | 25,404,055 | | | 53,981 | | | 0.85 | % |
Time deposits | | | 7,221,061 | | | 37,750 | | | 2.08 | % |
Total | | | 32,625,116 | | | 91,731 | | | 1.12 | % |
Borrowings: | | | | | | | | | | |
Federal Home Loan Bank advances | | | 10,416,303 | | | 101,436 | | | 3.88 | % |
Fed funds and repurchase agreements | | | 2,383,245 | | | 15,208 | | | 2.55 | % |
Other borrowings | | | 3,600,008 | | | 28,801 | | | 3.19 | % |
Total borrowings | | | 16,399,556 | | | 145,445 | | | 3.53 | % |
Total funding liabilities | | | 49,024,672 | | | 237,176 | | | 1.93 | % |
Other liabilities | | | 827,078 | | | | | | | |
Total liabilities | | | 49,851,750 | | | | | | | |
Stockholders’ equity | | | 4,898,154 | | | | | | | |
Total liabilities and stockholders’ equity | | $ | 54,749,904 | | | | | | | |
Net interest income | | | | | $ | 398,748 | | | | |
Interest rate spread | | | | | | | | | 2.91 | % |
Net interest margin | | | | | | | | | 3.29 | % |
Sovereign Bancorp, Inc. and Subsidiaries
AVERAGE BALANCE, INTEREST AND YIELD/RATE ANALYSIS
(unaudited)
| | March 31, 2004 | |
| |
| |
(dollars in thousands) | | Average
Balance | | Interest (1) | | Yield/
Rate | |
| |
|
| |
|
| |
|
| |
Earning assets: | | | | | | | | | | |
Investment securities | | $ | 14,120,951 | | $ | 176,374 | | | 5.00 | % |
Loans: | | | | | | | | | | |
Commercial | | | 11,413,060 | | | 132,325 | | | 4.60 | % |
Consumer | | | 10,472,369 | | | 135,709 | | | 5.21 | % |
Residential mortgages | | | 5,105,900 | | | 66,743 | | | 5.23 | % |
Total loans | | | 26,991,329 | | | 334,777 | | | 4.95 | % |
Allowance for loan losses | | | (343,684 | ) | | | | | | |
Total earning assets | | | 40,768,596 | | $ | 511,151 | | | 5.01 | % |
Other assets | | | 5,087,754 | | | | | | | |
Total assets | | $ | 45,856,350 | | | | | | | |
Funding liabilities: | | | | | | | | | | |
Deposits and other customer related accounts: | | | | | | | | | | |
Demand deposit accounts | | $ | 4,239,684 | | $ | — | | | 0.00 | % |
NOW accounts | | | 5,990,184 | | | 9,132 | | | 0.61 | % |
Customer repurchase agreements | | | 880,544 | | | 1,336 | | | 0.61 | % |
Savings accounts | | | 3,217,946 | | | 4,261 | | | 0.53 | % |
Money market accounts | | | 7,017,860 | | | 16,932 | | | 0.97 | % |
Core and other customer related accounts | | | 21,346,218 | | | 31,661 | | | 0.60 | % |
Time deposits | | | 6,108,153 | | | 33,351 | | | 2.19 | % |
Total | | | 27,454,371 | | | 65,012 | | | 0.95 | % |
Borrowings: | | | | | | | | | | |
Federal Home Loan Bank advances | | | 8,063,115 | | | 77,815 | | | 3.83 | % |
Fed funds and repurchase agreements | | | 2,554,957 | | | 7,418 | | | 1.15 | % |
Other borrowings | | | 3,563,656 | | | 26,702 | | | 2.98 | % |
Total borrowings | | | 14,181,728 | | | 111,935 | | | 3.14 | % |
Total funding liabilities | | | 41,636,099 | | | 176,947 | | | 1.70 | % |
Other liabilities | | | 660,321 | | | | | | | |
Total liabilities | | | 42,296,420 | | | | | | | |
Stockholders’ equity | | | 3,559,930 | | | | | | | |
Total liabilities and stockholders’ equity | | $ | 45,856,350 | | | | | | | |
Net interest income | | | | | $ | 334,204 | | | | |
Interest rate spread | | | | | | | | | 2.91 | % |
Net interest margin | | | | | | | | | 3.28 | % |
Sovereign Bancorp, Inc. and Subsidiaries
SUPPLEMENTAL INFORMATION
(unaudited)
NON-PERFORMING ASSETS
(dollars in thousands) | | Mar. 31
2005 | | Dec. 31
2004 | | Sept. 30
2004 | | June 30
2004 | | Mar. 31
2004 | |
| |
| |
| |
| |
| |
| |
Non-accrual loans: | | | | | | | | | | | | | | | | |
Commercial | | $ | 95,528 | | $ | 80,799 | | $ | 89,061 | | $ | 90,370 | | $ | 113,734 | |
Consumer | | | 37,637 | | | 28,021 | | | 24,417 | | | 27,923 | | | 31,573 | |
Residential mortgages | | | 37,669 | | | 33,656 | | | 32,858 | | | 32,635 | | | 41,925 | |
Total non-accrual loans | | | 170,834 | | | 142,476 | | | 146,336 | | | 150,928 | | | 187,232 | |
Restructured loans | | | 1,026 | | | 1,097 | | | 1,205 | | | 1,262 | | | 1,378 | |
Total non-performing loans | | | 171,860 | | | 143,573 | | | 147,541 | | | 152,190 | | | 188,610 | |
Real estate owned, net | | | 11,286 | | | 12,276 | | | 16,397 | | | 19,609 | | | 18,349 | |
Other repossessed assets | | | 3,709 | | | 4,247 | | | 4,824 | | | 4,268 | | | 5,006 | |
Total non-performing assets | | $ | 186,855 | | $ | 160,096 | | $ | 168,762 | | $ | 176,067 | | $ | 211,965 | |
Non-performing loans as a percentage of total loans | | | 0.43 | % | | 0.39 | % | | 0.42 | % | | 0.52 | % | | 0.68 | % |
Non-performing assets as a percentage of total assets | | | 0.32 | % | | 0.29 | % | | 0.30 | % | | 0.36 | % | | 0.45 | % |
Non-performing assets as a percentage of total loans, real estate owned and repossessed assets | | | 0.46 | % | | 0.44 | % | | 0.48 | % | | 0.60 | % | | 0.76 | % |
Allowance for loan losses as a percentage of non-performing loans | | | 255 | % | | 285 | % | | 276 | % | | 232 | % | | 186 | % |
NET LOAN CHARGE-OFFS
Quarters ended (in thousands) | | Mar. 31
2005 | | Dec. 31
2004 | | Sept. 30
2004 | | June 30
2004 | | Mar. 31
2004 | |
| |
| |
| |
| |
| |
| |
Commercial real estate | | $ | (492 | ) | $ | 614 | | $ | (1,064 | ) | $ | 6,117 | | $ | 3,558 | |
Commercial and industrial and other | | | 7,200 | | | 10,357 | | | 10,823 | | | 14,502 | | | 19,767 | |
Total Commercial | | | 6,708 | | | 10,971 | | | 9,759 | | | 20,619 | | | 23,325 | |
Auto loans | | | 9,557 | | | 10,641 | | | 7,615 | | | 6,418 | | | 7,408 | |
Home equity loans and other | | | 3,280 | | | 2,840 | | | 2,770 | | | 3,268 | | | 3,605 | |
Total Consumer | | | 12,837 | | | 13,481 | | | 10,385 | | | 9,686 | | | 11,013 | |
Residential mortgages | | | 43 | | | 444 | | | 326 | | | 65 | | | 209 | |
Total | | $ | 19,588 | | $ | 24,896 | | $ | 20,470 | | $ | 30,370 | | $ | 34,547 | |
DEPOSIT AND OTHER CUSTOMER RELATED ACCOUNT COMPOSITION - End of period
Quarters ended (in thousands) | | Mar. 31
2005 | | Dec. 31
2004 | | Dec. 31
2004 | |
| |
| |
| |
| |
Demand deposit accounts | | $ | 5,377,378 | | $ | 5,087,531 | | $ | 5,072,090 | |
NOW accounts | | | 8,422,725 | | | 7,838,584 | | | 7,748,012 | |
Customer repurchase agreements | | | 828,388 | | | 837,643 | | | 848,890 | |
Savings accounts | | | 3,922,642 | | | 3,807,099 | | | 3,667,116 | |
Money market accounts | | | 8,673,744 | | | 7,870,288 | | | 8,407,688 | |
Certificates of deposits | | | 9,460,879 | | | 7,114,373 | | | 7,357,882 | |
Total | | $ | 36,685,756 | | $ | 32,555,518 | | $ | 33,101,678 | |
Quarters ended (in thousands) | | June 30
2004 | | Mar. 31
2004 | |
| |
| |
| |
Demand deposit accounts | | $ | 4,698,610 | | $ | 4,481,546 | |
NOW accounts | | | 6,554,831 | | | 6,248,412 | |
Customer repurchase agreements | | | 810,062 | | | 789,524 | |
Savings accounts | | | 3,303,890 | | | 3,317,836 | |
Money market accounts | | | 7,456,917 | | | 7,102,117 | |
Certificates of deposits | | | 6,176,310 | | | 6,178,871 | |
Total | | $ | 29,000,620 | | $ | 28,118,306 | |
LOAN COMPOSITION - End of period
Quarters ended (in thousands) | | Mar. 31
2005 | | Dec. 31
2004 | | Sep. 30
2004 | |
| |
| |
| |
| |
Commercial real estate | | $ | 6,837,814 | | $ | 5,824,133 | | $ | 5,800,536 | |
Commercial industrial loans | | | 8,525,778 | | | 8,040,107 | | | 7,645,199 | |
Total commercial loans | | | 15,363,592 | | | 13,864,240 | | | 13,445,735 | |
Home equity loans | | | 10,280,735 | | | 9,577,656 | | | 8,988,139 | |
Auto loans | | | 4,296,296 | | | 4,205,547 | | | 4,340,487 | |
Other | | | 596,428 | | | 486,140 | | | 528,366 | |
Total consumer loans | | | 15,173,459 | | | 14,269,343 | | | 13,856,992 | |
Total residential loans | | | 9,782,953 | | | 8,497,496 | | | 7,958,974 | |
Total loans | | $ | 40,320,004 | | $ | 36,631,079 | | $ | 35,261,701 | |
Quarters ended (in thousands) | | June 30
2004 | | Mar. 31
2004 | |
| |
| |
| |
Commercial real estate | | $ | 5,050,915 | | $ | 4,993,700 | |
Commercial industrial loans | | | 7,200,541 | | | 6,926,275 | |
Total commercial loans | | | 12,251,456 | | | 11,919,975 | |
Home equity loans | | | 7,790,049 | | | 6,971,401 | |
Auto loans | | | 3,631,153 | | | 3,621,169 | |
Other | | | 564,905 | | | 419,533 | |
Total consumer loans | | | 11,986,107 | | | 11,012,103 | |
Total residential loans | | | 4,892,305 | | | 4,806,494 | |
Total loans | | $ | 29,129,868 | | $ | 27,738,572 | |
Sovereign Bancorp, Inc. and Subsidiaries
SUPPLEMENTAL INFORMATION
(unaudited)
DEPOSIT AND OTHER CUSTOMER RELATED ACCOUNT COMPOSITION - Average
Quarters ended (in thousands) | | Mar. 31
2005 | | Dec. 31
2004 | | Sept. 30
2004 | |
| |
| |
| |
| |
Demand deposit accounts | | $ | 5,162,704 | | $ | 5,103,981 | | $ | 4,936,996 | |
NOW accounts | | | 8,041,978 | | | 7,544,694 | | | 7,117,978 | |
Customer repurchase agreements | | | 842,657 | | | 851,928 | | | 821,182 | |
Savings accounts | | | 3,930,308 | | | 3,821,004 | | | 3,621,567 | |
Money market accounts | | | 8,152,525 | | | 8,082,448 | | | 8,256,017 | |
Certificates of deposits | | | 8,659,080 | | | 7,221,061 | | | 6,985,446 | |
Total | | $ | 34,789,252 | | $ | 32,625,116 | | $ | 31,739,186 | |
Quarters ended (in thousands) | | June 30
2004 | | Mar. 31
2004 | |
| |
| |
| |
Demand deposit accounts | | $ | 4,506,601 | | $ | 4,239,684 | |
NOW accounts | | | 6,313,501 | | | 5,990,184 | |
Customer repurchase agreements | | | 784,850 | | | 880,544 | |
Savings accounts | | | 3,328,743 | | | 3,217,946 | |
Money market accounts | | | 7,167,639 | | | 7,017,860 | |
Certificates of deposits | | | 6,070,703 | | | 6,108,153 | |
Total | | $ | 28,172,037 | | $ | 27,454,371 | |
LOAN COMPOSITION - Average
Quarters ended (in thousands) | | Mar. 31
2005 | | Dec. 31
2004 | | Sept. 30
2004 | |
| |
| |
| |
| |
Commercial real estate | | $ | 6,494,572 | | $ | 5,788,936 | | $ | 5,621,144 | |
Commercial industrial loans | | | 7,522,968 | | | 6,953,564 | | | 6,534,378 | |
Other | | | 852,977 | | | 857,351 | | | 850,871 | |
Total commercial loans | | | 14,870,517 | | | 13,599,851 | | | 13,006,393 | |
Home equity loans | | | 10,002,411 | | | 9,245,711 | | | 8,177,146 | |
Auto loans | | | 4,305,100 | | | 4,266,466 | | | 4,198,175 | |
Other | | | 578,520 | | | 508,705 | | | 544,404 | |
Total consumer loans | | | 14,886,031 | | | 14,020,882 | | | 12,919,725 | |
Total residential loans | | | 9,167,485 | | | 8,199,190 | | | 6,675,476 | |
Total loans | | $ | 38,924,033 | | $ | 35,819,923 | | $ | 32,601,594 | |
Quarters ended (in thousands) | | June 30
2004 | | Mar. 31
2004 | |
| |
| |
| |
Commercial real estate | | $ | 5,014,765 | | $ | 4,869,200 | |
Commercial industrial loans | | | 6,214,663 | | | 5,669,558 | |
Other | | | 855,453 | | | 874,302 | |
Total commercial loans | | | 12,084,881 | | | 11,413,060 | |
Home equity loans | | | 7,206,082 | | | 6,666,343 | |
Auto loans | | | 3,636,061 | | | 3,457,105 | |
Other | | | 460,269 | | | 348,921 | |
Total consumer loans | | | 11,302,412 | | | 10,472,369 | |
Total residential loans | | | 4,854,811 | | | 5,105,900 | |
Total loans | | $ | 28,242,104 | | $ | 26,991,329 | |
Sovereign Bancorp, Inc. and Subsidiaries
RECONCILIATION OF OPERATING EARNINGS TO REPORTED EARNINGS
(unaudited)
Operating earnings for the first quarter of 2005 represents net income adjusted for the after-tax effects of merger-related and integration charges, certain restructuring charges and the amortization of intangible assets. Operating earnings for 2004 represent net income adjusted for the after-tax effects of merger-related and integration charges and the loss on early extinguishment of debt, the fourth quarter adoption of EITF 04-8, other-than-temporary non-cash impairment charges on Fannie Mae and Freddie Mac preferred equity securities and the amortization of intangible assets. Management’s operating earnings goal for 2005 excludes the after-tax effects of merger-related and integration charges, certain restructuring charges and the amortization of intangible assets. The table below reconciles our GAAP earnings to operating earnings.
| | Quarter Ended
Total dollars | |
| |
| |
(dollars in thousands, except per share data - all amounts are after tax) | | Mar. 31
2005 | | Dec. 31
2004 | | Sep. 30
2004 | | Jun. 30
2004 | | Mar. 31
2004 | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Net income as reported | | $ | 146,151 | | $ | 137,429 | | $ | 82,542 | | $ | 131,354 | | $ | 102,227 | |
Contingently convertible trust preferred interest expense, net of tax (1) | | | 6,394 | | | 6,318 | | | 6,310 | | | 6,301 | | | 2,285 | |
Net income/(loss) for EPS purposes | | $ | 152,545 | | $ | 143,747 | | $ | 88,852 | | $ | 137,655 | | $ | 104,512 | |
Weighted average diluted shares for GAAP EPS | | | 401,339 | | | 377,625 | | | 367,782 | | | 337,771 | | | 316,827 | |
Reconciliation to operating earnings Weighted average diluted shares for GAAP EPS | | | 401,339 | | | 377,625 | | | 367,782 | | | 337,771 | | | 316,827 | |
Exclude dilutive effect of EITF 04-8 on contingently convertible debt (1) | | | — | | | (26,082 | ) | | (26,082 | ) | | (26,082 | ) | | (10,149 | ) |
Adjusted weighted average diluted shares for Operating EPS | | | 401,339 | | | 351,543 | | | 341,700 | | | 311,689 | | | 306,678 | |
Net income and EPS as reported based on adjusted share count (1) | | $ | 152,545 | | $ | 137,429 | | $ | 82,542 | | $ | 131,354 | | $ | 102,227 | |
Business acquisitions: | | | | | | | | | | | | | | | | |
Merger related and integration costs | | | 15,074 | | | (3,360 | ) | | 18,162 | | | — | | | 15,332 | |
Provision for loan loss | | | — | | | — | | | — | | | — | | | 3,900 | |
Loss on debt extinguishment | | | — | | | — | | | 42,605 | | | — | | | — | |
Impairment charges on FNMA and FHLMC Preferred Stock | | | — | | | 20,891 | | | — | | | — | | | — | |
Restructuring charges (2) | | | 3,382 | | | — | | | — | | | — | | | — | |
Amortization of intangibles | | | 12,322 | | | 12,562 | | | 14,578 | | | 12,047 | | | 11,999 | |
Operating earnings | | $ | 183,323 | | $ | 167,522 | | $ | 157,887 | | $ | 143,401 | | $ | 133,458 | |
| | Quarter Ended
Per share | | Forward-
Looking
Per Share
2005 | |
| |
| | |
(dollars in thousands, except per share data - all amounts are after tax) | | Mar. 31
2005 | | Dec. 31
2004 | | Sep. 30
2004 | | Jun. 30
2004 | | Mar. 31
2004 | | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Net income as reported Contingently convertible trust preferred interest expense, net of tax (1) | | | | | | | | | | | | | | | | | | | |
Net income/(loss) for EPS purposes | | $ | 0.38 | | $ | 0.38 | | $ | 0.24 | | $ | 0.41 | | $ | 0.33 | | $ | 1.84 - $1.94 | |
Weighted average diluted shares for GAAP EPS | | | | | | | | | | | | | | | | | | | |
Reconciliation to operating earnings | | | | | | | | | | | | | | | | | | | |
Weighted average diluted shares for GAAP EPS | | | | | | | | | | | | | | | | | | | |
Exclude dilutive effect of EITF 04-8 on contingently convertible debt (1) | | | | | | | | | | | | | | | | | | | |
Adjusted weighted average diluted shares for Operating EPS | | | | | | | | | | | | | | | | | | | |
Net income and EPS as reported based on adjusted share count (1) | | $ | 0.38 | | $ | 0.39 | | $ | 0.24 | | $ | 0.42 | | $ | 0.33 | | | | |
Business acquisitions: | | | | | | | | | | | | | | | | | | | |
Merger related and integration costs | | | 0.04 | | | (0.01 | ) | | 0.05 | | | — | | | 0.05 | | | .04 - .06 | |
Provision for loan loss | | | — | | | — | | | — | | | — | | | 0.01 | | | — | |
Loss on debt extinguishment | | | — | | | — | | | 0.12 | | | — | | | — | | | — | |
Impairment charges on FNMA and FHLMC Preferred Stock | | | — | | | 0.06 | | | — | | | — | | | — | | | | |
Restructuring charges (2) | | | 0.01 | | | — | | | — | | | — | | | — | | | | |
Amortization of intangibles | | | 0.03 | | | 0.04 | | | 0.04 | | | 0.04 | | | 0.04 | | | 0.12 | |
Operating earnings | | $ | 0.46 | | $ | 0.48 | | $ | 0.46 | | $ | 0.46 | | $ | 0.44 | | $ | 2.00 - $2.12 | |
|
(1) | Effective in the fourth quarter of 2004, Sovereign adopted EITF 04-8 “Accounting Issues Related to Certain Features of Contingently Convertible Debt and the Effect on Diluted Earnings per Share.” This EITF requires the potential dilution from contingently convertible debt be included in the calculation of diluted earnings per share upon the issuance of the debt and that the after tax impact of the interest expense on this debt be added back to net income for earnings per share purposes. Sovereign issued $800 million of contingently convertible trust preferred equity income redeemable securities in the first quarter of 2004. Prior period earnings per share were restated. We have excluded the impact of this pronouncement in our calculation of 2004 operating earnings per share, however it is included in our calculation for 2005 operating earnings per share. |
(2) | Sovereign incurred restructuring charges related to contract termination costs on a loan servicing agreement and a charge related to vacating certain underutilized real estate. |
Sovereign Bancorp, Inc. and Subsidiaries
SUPPLEMENTAL INFORMATION
(unaudited)
Purchase of Waypoint Financial Corp Inc. (“Waypoint”)
On January 21, 2005 Sovereign completed the purchase of Waypoint and the results of its operations are included from purchase date through March 31,
2005. Sovereign issued 29.8 million shares of common stock and exchanged Sovereign stock options for existing Waypoint stock options, whose combined value totaled $677.9 million and made cash payments of $269.9 million to acquire and convert all outstanding Waypoint shares and stock options and pay associated fees. The preliminary purchase price was allocated to acquired assets and liabilities of Waypoint based on fair value as of January 21, 2005. The company is in the process of finalizing these values and as such the allocation of the purchase price is subject to revision.
Assets and Liabilities Acquired from Waypoint:
(dollars in millions)
Assets | | | | | | Liabilities | | | |
Investments | | $ | 379.2 | | | Deposits: | | | |
Loans: | | | | | | Core | $ | 1,503.7 | |
Commercial | | | 1,299.0 | | | Time | | 1,384.6 | |
Consumer | | | 991.3 | | | Total deposits | | 2,888.3 | |
Residential mortgages | | | 313.8 | | | Borrowings and other debt obligations | | 668.2 | |
Total loans | | | 2,604.1 | | | Other liabilities | | 85.3 | |
Less allowance for loan losses | | | (26.5 | ) | | | | | |
Total loans, net | | | 2,577.6 | | | Total liabilities | $ | 3,641.8 | |
Federal funds and cash | | | 324.2 | | | | | | |
Premises and equipment, net | | | 44.2 | | | | | | |
Bank owned life insurance | | | 97.0 | | | | | | |
Other assets | | | 266.8 | | | | | | |
Core deposit intangible | | | 30.8 | | | | | | |
Goodwill | | | 600.0 | | | | | | |
Total assets | | $ | 4,319.8 | | | | | | |
In connection with the Waypoint acquisition, Sovereign recorded charges against its earnings for the three month period ended March 31, 2005 for merger related expenses of $24.7 million pretax ($16.0 million net of tax).
SOURCE Sovereign Bancorp, Inc.
-0- 04/19/2005
/CONTACT: FINANCIAL: Jim Hogan, +1-610-320-8496, or
jhogan@sovereignbank.com, or Mark McCollom, +1-610-208-6426, or
mmccollo@sovereignbank.com, or Stacey Weikel, +1-610-208-6112, or
sweikel@sovereignbank.com; or MEDIA: Ed Shultz, +1-610-378-6159, or
eshultz1@sovereignbank.com, all of Sovereign Bancorp/
/Web site: http://www.sovereignbank.com /
