Santander Holdings USA (SOV) 8-K Sovereign Bancorp, Inc. Announces 2005 Third Quarter Net Income of $181 Million and Operating/Cash Earnings of $197 Million

Exhibit 99.1

Sovereign Bancorp, Inc. Announces 2005 Third Quarter Net Income
of $181 Million and Operating/Cash Earnings of $197 Million

GAAP EPS of $.48, up 100%, and Operating/Cash EPS of $.50, up 9%

Financial Highlights
—	Net income was $181 million, up 119% from $83 million in the same quarter a year ago. Earnings per diluted share for the third quarter of 2005 were $.48, up 100% from $.24 per diluted share in the third quarter of 2004.
—	Operating/cash earnings were $197 million, up 25% from $158 million in the same quarter a year ago. Operating/cash earnings per diluted share were $.50 per share, up 9% from $.46 per share in the third quarter of 2004.
—	Efficiency ratio was 48.9% in the third quarter of 2005 as compared to 50.4% in the third quarter of 2004.
—	Positive operating leverage of 1.2 times year-over-year.
—	Average deposits increased to $37.1 billion during the quarter, an annualized organic growth rate of 10%; average core deposits (excluding time deposits) increased to $27.3 billion during the quarter, an annualized organic growth rate of 8%.
—	Average loans increased to $42.3 billion during the quarter, an annualized organic growth rate of 10%.
—	Operating/cash return on average assets of 1.27% compared to 1.17% in the third quarter of 2004.
—	Operating/cash return on tangible common equity of 28.58% compared to 26.96% a year ago.
—	Annualized net charge-offs decreased to .18% of average loans at September 30, 2005, versus .19% at June 30, 2005 and .25% at September 30, 2004.
—	Sovereign repurchased eight million shares during the quarter through our previously announced repurchase program, and a total of 20 million shares for the nine months ending September 30, 2005.

          PHILADELPHIA, Oct. 18 /PRNewswire-FirstCall/ -- Sovereign Bancorp, Inc. (“Sovereign”) (NYSE: SOV), parent company of Sovereign Bank (“Bank”), today reported third quarter 2005 net income in accordance with generally accepted accounting principles of $181 million, or $.48 per diluted share, as compared to $83 million, or $.24 per diluted share, for the third quarter of 2004. Net income in the third quarter of 2004 included merger and integration charges related to the Seacoast Financial Services Corporation acquisition of $18.2 million, after-tax, or $.05 per share, and a debt extinguishment charge of $42.6 million after-tax, or $.12 per share.

          For the quarter ended September 30, 2005, Sovereign’s reported operating/cash earnings increased 25% to $197 million, or $.50 per diluted share, which excluded $11.9 million, or $.03 per share, related to amortization of intangible assets, as compared to $158 million, or $.46 per diluted share, a year ago, which excluded the above mentioned merger and integration and debt extinguishment charges and $14.6 million, or $.04 per share, related to amortization of intangible assets.  Effective in the fourth quarter of 2004, Sovereign combined its definition of operating earnings and cash earnings and the related per share amounts into one number which excludes amortization of core deposit intangibles, in addition to special items.  Since some of these special 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/cash earnings, as well as the related earnings per share amounts, is included in a later section of this release.

          Sovereign’s net income for the third quarter of 2005 produced annualized returns on average assets and average shareholders’ equity of 1.21% and 13.05%, respectively.  Operating/cash earnings for the third quarter of 2005 produced annualized operating/cash return on average assets and average tangible shareholders’ equity of 1.27% and 28.58%, respectively.

          Commenting on results for the third quarter of 2005, Jay S. Sidhu, Sovereign’s Chairman and Chief Executive Officer, said, “We are pleased to show improvement in our core competencies this quarter.  Average core deposits grew 8% annualized from second quarter levels, while total deposits increased 10%.  While remaining disciplined in our underwriting, commercial loan growth remained very strong at 17%, annualized, and our consumer loan portfolio increased 5%, annualized, from second quarter levels.  Credit quality continues to be strong, as annualized net charge-offs were down slightly from second quarter levels to 18 basis points.  We repurchased eight million shares of our common stock during the quarter, bringing our year-to-date repurchases through quarter-end to 20 million shares,” concluded Sidhu.

          Net Interest Income and Margin
          Sovereign reported net interest income of $396 million for the third quarter of 2005, an increase of $33 million, or 9%, compared to the third quarter of 2004.  Sovereign’s average loan portfolio increased during the third quarter by $990 million to $42.3 billion, reflecting an annualized growth rate of 10%.  Included in period-end commercial loan balances was the effect of a securitization of $832 million of dealer floor plan loans, which was completed on September 30, 2005.  Sovereign’s average deposits increased $908 million during the quarter, reflecting an annualized growth rate of 10%. Average core deposits (excludes time deposits) increased during the quarter by approximately $557 million to $27.3 billion, reflecting an annualized growth rate of 8%, with the majority of the growth in zero- or lower-cost checking deposits.

          Net interest margin was 3.04% for the third quarter of 2005, compared to 3.17% in the third quarter of 2004.  “The prolonged flatness of the yield curve facing the entire industry has continued to put pressure on our net interest margin in the near-term.  As we believe this interest rate environment may persist in the near-term, we have taken several steps and are currently evaluating several options to stabilize or improve our net interest margin going forward,” stated Mark R. McCollom, Sovereign’s Chief Financial Officer.  “Loan yields on our commercial loan portfolio expanded nicely during the quarter, up 35 basis points from second quarter levels, while total deposit costs (including non-interest bearing DDA) increased 25 basis points during the same period.”

          Non-Interest Income
          Consumer and commercial banking fees again reached all-time highs during the quarter, up 3% and 20%, respectively, from second quarter 2005 levels and 19% and 35%, respectively, from a year ago.  Consumer banking fees increased by $12.2 million to $75.0 million, or 19%, compared to the same period in 2004, primarily driven by growth in loan and deposit fees.  Commercial banking fees increased by $11.0 million to $42.7 million, or 35%, over the same period a year ago, primarily driven by growth in loan fees and cash management fees as well as a gain of $3.9 million on the previously mentioned dealer floor plan securitization completed during the third quarter.  Excluding this gain, commercial banking fees were up 9% from last quarter and 22% from a year ago.

          Mortgage banking revenues for the quarter were $29.0 million, compared to $21.5 million last quarter and a loss of $4.1 million in the same quarter a year ago.  Mortgage banking revenue increased $7.4 million from second quarter levels reflecting sales of mortgage and home equity loans and a reversal of mortgage servicing right impairment reserves of $6.8 million.  Mortgage banking results are detailed in the financial tables attached to this release. As of September 30, 2005, mortgage servicing rights, net of reserves of $3.9 million, were $87.6 million and our servicing portfolio was $7.3 billion, with a capitalized cost of 121 basis points.

          Non-Interest Expense
          G&A expenses for the quarter were $277 million, including acquisitions, as compared to $238 million a year ago.  On a linked quarter basis, G&A expenses were up $3.5 million mostly as a result of increased marketing efforts. “Year-to-date G&A expenses continue to be favorable to our plan.  Operating leverage remains positive, resulting in a 157 basis points improvement in our efficiency ratio from a year ago.  Our efficiency ratio was 48.9% in the third quarter of 2005,” commented McCollom.

          On a GAAP basis, Sovereign’s effective tax rate was 24.1% in the third quarter; on an operating basis, it was 24.8%.

          Asset Quality
          Sovereign continued to see improvement in net charge-offs during the third quarter of 2005.  Annualized net charge-offs decreased to .18% of average loans at September 30, 2005, compared to .19% at June 30, 2005 and .25% at September 30, 2004.  Non-performing assets (“NPAs”) increased $7.9 million during the quarter to $181 million at September 30, 2005.  NPAs to total assets were unchanged from second quarter levels at .29%.  Sovereign’s provision for loan losses was $20.0 million this quarter compared to $22.0 million in the second quarter and $25.0 million in the third quarter of 2004.  The allowance for loan losses to total loans decreased slightly to 1.02% at September 30, 2005, as compared to 1.07% at June 30, 2005 and 1.15% at September 30, 2004.  The allowance for loan losses to non-performing loans now stands at 257%, as compared to 272% at June 30, 2005 and 276% at September 30, 2004.

          Capital
          During the quarter, Sovereign repurchased eight million shares under a previously announced repurchase program.  Year-to-date Sovereign has repurchased 20 million shares, or more than 5% of fully diluted shares outstanding.  Sovereign’s Tier 1 leverage ratio was 6.48% at September 30, 2005.  Tangible common equity to tangible assets, excluding other comprehensive income (“OCI”), was 4.84% and including OCI was 4.54%.  The equity to assets ratio was 9.00% at September 30, 2005.  Sovereign Bank’s Tier 1 leverage ratio was 6.58% and the Bank’s risk-based capital ratio was 10.33% at September 30, 2005.  “Management remains committed to its capital allocation discipline.  In addition to share repurchases during the quarter, the Board of Directors also declared a 50% increase to our cash dividend,” commented McCollom.

          Looking Ahead
          “In closing, we were pleased with third quarter loan and deposit growth trends, credit quality continues to be strong, revenues are growing at a faster pace than expenses resulting in positive operating leverage, and we continue to generate and deploy $200 million of tangible common equity per quarter.  Year-to-date we have returned 98% of net income to our shareholders through cash dividends and share repurchases.  The interest rate environment remains a challenge, and we acknowledge it is unlikely we will achieve our stretch goal of $2.00 in operating/cash earnings per share for 2005.  However, we are currently achieving that run rate with $.50 of operating/cash earnings per share in the third quarter.  We remain very focused on maintaining our interest rate, credit risk and capital management discipline through this difficult interest rate environment and on achieving an operating earnings growth rate of 10% or higher over the long-term,” Sidhu concluded.

          Based upon our October 17 stock price of $21.55, Sovereign is trading at a P/E of 11.8x analysts mean 2005 estimate and 136% of current book value.  The book value per share at September 30, 2005 was $15.81.

          Sovereign Bancorp, Inc., (“Sovereign”) (NYSE: SOV), is the parent company of Sovereign Bank, a $63 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 Third Quarter 2005 earnings call on Wednesday, October 19 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=1138948.  The web-cast replay can be accessed anytime from 11:00 a.m. ET on Wednesday, October 19, 2005 through 12:00 a.m. ET on Monday, December 19, 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, October 19, 2005 through 12:00 a.m. ET (midnight) on Monday, October 24, 2005 by dialing 800-642-1687, confirmation id #9788706.

          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/Cash 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/cash earnings for the first, second and third quarters 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.  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; other economic, competitive, governmental, regulatory, and technological factors affecting the Company’s operations, integrations, pricing, products and services; and acts of God, including natural disasters.

          Sovereign Bancorp is followed by several market analysts.  Please note that any opinions, estimates, forecasts, or predictions regarding Sovereign Bancorp’s performance or recommendations regarding Sovereign’s securities made by these analysts are theirs alone and do not represent opinions, estimates, forecasts, predictions or recommendations of Sovereign Bancorp or its management.  Sovereign Bancorp does not by its reference to any analyst opinions, estimates, forecasts regarding Sovereign’s performance or recommendations regarding Sovereign’s securities imply Sovereign’s endorsement of or concurrence with such information, conclusions or recommendations.

Sovereign Bancorp, Inc. and Subsidiaries
FINANCIAL HIGHLIGHTS
 (unaudited)

	Quarter Ended
(dollars in millions, except per share data)	Sept. 30 2005			June 30 2005			Mar. 31 2005			Dec. 31 2004			Sept. 30 2004
Operating Data
Net income	$	181.0		$	183.5		$	146.2		$	137.4		$	82.5
Net income for EPS purposes (1)		187.4			189.8			152.5			143.7			88.9
Operating/cash earnings (2)		197.2			196.5			183.3			167.5			157.9
Net interest income		395.6			402.9			398.2			387.0			363.0
Provision for loan losses		20.0			22.0			22.0			27.0			25.0
Total fees and other income before securities transactions		171.0			158.9			133.4			126.5			108.3
Net gain (loss) on investment securities		1.7			3.4			8.0			(24.7	)		20.2
G&A expense		276.9			273.4			257.1			257.3			237.7
Other expenses		32.6			27.1			63.8			30.5			129.1
Performance Statistics
Bancorp
Net interest margin		3.04	%		3.13	%		3.26	%		3.29	%		3.17	%
Operating/cash return on average assets  (2)		1.27	%		1.31	%		1.29	%		1.22	%		1.17	%
Operating/cash return on average equity  (2)		13.74	%		13.84	%		13.30	%		13.61	%		13.82	%
Operating/cash return on average tangible equity (2)		28.58	%		29.09	%		26.45	%		26.65	%		26.96	%
Annualized net loan charge-offs to average loans		0.18	%		0.19	%		0.20	%		0.28	%		0.25	%
Efficiency ratio (3)		48.87	%		48.67	%		48.36	%		50.10	%		50.44	%
Per Share Data
Basic earnings per share	$	0.50		$	0.50		$	0.40		$	0.40		$	0.25
Diluted earnings per share (1)		0.48			0.47			0.38			0.38			0.24
Operating/cash earnings per share (2)		0.50			0.49			0.46			0.48			0.46
Dividend declared per share		.040			.040			.030			.030			.030
Book value (4)		15.81			15.70			15.22			14.41			13.95
Common stock price:
High		24.72			22.70			23.73			22.61			22.48
Low		21.69			20.13			21.89			21.14			20.48
Close	$	22.04		$	22.34		$	22.16		$	22.55		$	21.82
Weighted average common shares:
Basic		360.3			367.9			368.9			345.6			335.6
Diluted (1)		393.1			400.4			401.3			377.6			367.8
End-of-period common shares:
Basic		358.5			365.8			374.8			346.1			345.3
Diluted (1)		390.7			398.3			407.4			378.2			377.3

	Year to Date
(dollars in millions, except per share data)	Sept. 30 2005			Sept. 30 2004
Operating Data
Net income	$	510.7		$	316.1
Net income for EPS purposes (1)		529.7			331.0
Operating/cash earnings (2)		577.0			434.7
Net interest income		1,196.6			1,017.8
Provision for loan losses		64.0			100.0
Total fees and other income before securities transactions		463.3			341.6
Net gain (loss) on investment securities		13.0			39.0
G&A expense		807.4			685.4
Other expenses		123.4			205.7
Performance Statistics
Bancorp
Net interest margin		3.14	%		3.23	%
Operating/cash return on average assets (2)		1.29	%		1.18	%
Operating/cash return on average equity (2)		13.63	%		14.53	%
Operating/cash return on average tangible equity (2)		28.03	%		25.68	%
Annualized net loan charge-offs to average loans		0.20	%		0.39	%
Efficiency ratio (3)		48.64	%		50.42	%
Per Share Data
Basic earnings per share	$	1.40		$	1.01
Diluted earnings per share (1)		1.33			0.97
Operating/cash earnings per share (2)		1.45			1.36
Dividend declared per share		0.110			0.085
Book value (4)		15.81			13.95
Common stock price:
High		24.72			24.51
Low		20.13			19.51
Close	$	22.04		$	21.82
Weighted average common shares:
Basic		365.6			314.4
Diluted (1)		398.2			341.1
End-of-period common shares:
Basic		358.5			345.3
Diluted (1)		390.7			377.3

NOTES:
(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 required to be restated.  We have excluded the impact of this pronouncement in our calculation of 2004 operating/cash earnings per share.
(2)	Operating/cash 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/cash earnings excludes the impact of EITF 04-8.  See page I and J for a reconciliation of GAAP and Non-GAAP measures.
(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.
(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)	Sept. 30 2005			June 30 2005			Mar. 31 2005			Dec. 31 2004			Sept. 30 2004
Financial Condition Data:
General
Total assets	$	62,942		$	59,922		$	58,926		$	54,471		$	55,755
Loans		42,692			41,267			40,320			36,631			35,262
Total deposits and customer related accounts:		37,333			36,102			36,686			32,556			33,102
Core deposits and other customer related accounts		27,395			26,683			27,225			25,441			25,744
Time deposits		9,937			9,419			9,461			7,114			7,358
Borrowings		18,897			17,069			15,555			16,140			16,919
Minority interests		205			205			204			204			203
Stockholders’ equity		5,668			5,743			5,705			4,988			4,815
Goodwill		2,714			2,714			2,721			2,125			2,103
Core deposit intangible		232			250			269			257			305
Asset Quality
Non-performing assets	$	181.1		$	173.2		$	186.9		$	160.1		$	168.8
Non-performing loans	$	169.9		$	162.4		$	171.9		$	143.6		$	147.5
Non-performing assets to total assets		0.29	%		0.29	%		0.32	%		0.29	%		0.30	%
Non-performing loans to total loans		0.40	%		0.39	%		0.43	%		0.39	%		0.42	%
Allowance for loan losses	$	436.8		$	442.5		$	437.7		$	408.7		$	406.6
Allowance for loan losses to total loans		1.02	%		1.07	%		1.09	%		1.12	%		1.15	%
Allowance for loan losses to non-performing loans		257	%		272	%		255	%		285	%		276	%
Capitalization - Bancorp (1)
Stockholders’ equity to total assets		9.00	%		9.58	%		9.68	%		9.16	%		8.64	%
Tier 1 leverage capital ratio		6.48	%		6.86	%		6.96	%		7.05	%		6.56	%
Tangible equity to tangible assets, excluding OCI		4.84	%		5.13	%		5.22	%		5.25	%		4.77	%
Tangible equity to tangible assets, including OCI		4.54	%		4.88	%		4.86	%		5.00	%		4.51	%
Capitalization - Bank (1)
Stockholders’ equity to total assets		10.46	%		11.30	%		11.58	%		10.77	%		10.20	%
Tier 1 leverage capital ratio		6.58	%		7.16	%		7.44	%		7.21	%		6.66	%
Tier 1 risk-based capital ratio		7.83	%		8.64	%		8.93	%		8.79	%		8.51	%
Total risk-based capital ratio		10.33	%		11.27	%		11.59	%		11.64	%		11.43	%

(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)	Sept. 30 2005			June 30 2005			Mar. 31 2005
Assets
Cash and amounts due from depository institutions	$	1,438,240		$	1,176,891		$	981,674
Investments:
Available-for-sale		8,244,029			7,529,964			7,709,353
Held-to-maturity		4,500,881			4,055,135			3,839,848
Total investments		12,744,910			11,585,099			11,549,201
Loans:
Commercial		16,222,920			16,152,017			15,363,592
Consumer		26,468,719			25,115,462			24,956,412
Total loans		42,691,639			41,267,479			40,320,004
Less allowance for loan losses		(436,828	)		(442,484	)		(437,661	)
Total loans, net		42,254,811			40,824,995			39,882,343
Premises and equipment, net		401,868			391,140			394,604
Accrued interest receivable		265,120			247,505			258,849
Goodwill		2,714,073			2,713,894			2,720,651
Core deposit intangible		231,740			250,025			268,528
Bank owned life insurance		1,006,820			996,645			992,426
Other assets		1,884,316			1,736,089			1,877,557
Total assets	$	62,941,898		$	59,922,283		$	58,925,833
Liabilities and Stockholders’ Equity
Liabilities:
Deposits and other customer related accounts:
Core and other customer related accounts	$	27,395,257		$	26,682,873		$	27,224,877
Time deposits		9,937,334			9,418,691			9,460,879
Total		37,332,591			36,101,564			36,685,756
Borrowings and other debt obligations		18,897,237			17,068,806			15,554,598
Other liabilities		839,055			804,363			775,976
Total liabilities		57,068,883			53,974,733			53,016,330
Minority interests		205,176			204,721			204,286
Stockholders’ equity:
Common Stock		3,649,507			3,636,750			3,609,269
Warrants and stock options		337,156			339,517			346,116
Unallocated ESOP shares		(23,707	)		(23,707	)		(23,707	)
Treasury stock		(467,265	)		(280,223	)		(64,495	)
Accumulated other comprehensive loss		(170,619	)		(105,727	)		(169,312	)
Retained earnings		2,342,767			2,176,219			2,007,346
Total stockholders’ equity		5,667,839			5,742,829			5,705,217
Total liabilities and stockholders’ equity	$	62,941,898		$	59,922,283		$	58,925,833

(dollars in thousands)	Dec. 31 2004			Sept. 30 2004
Assets
Cash and amounts due from depository institutions	$	1,160,922		$	1,266,044
Investments:
Available-for-sale		7,642,558			10,111,845
Held-to-maturity		3,904,319			4,027,472
Total investments		11,546,877			14,139,317
Loans:
Commercial		13,864,240			13,445,735
Consumer		22,766,839			21,815,966
Total loans		36,631,079			35,261,701
Less allowance for loan losses		(408,716	)		(406,612	)
Total loans, net		36,222,363			34,855,089
Premises and equipment, net		353,337			352,089
Accrued interest receivable		226,012			225,918
Goodwill		2,125,081			2,103,158
Core deposit intangible		256,694			304,754
Bank owned life insurance		885,807			879,189
Other assets		1,694,220			1,629,450
Total assets	$	54,471,313		$	55,755,008
Liabilities and Stockholders’ Equity
Liabilities:
Deposits and other customer related accounts:
Core and other customer related accounts	$	25,441,145		$	25,743,796
Time deposits		7,114,373			7,357,882
Total		32,555,518			33,101,678
Borrowings and other debt obligations		16,140,128			16,919,164
Other liabilities		583,389			715,326
Total liabilities		49,279,035			50,736,168
Minority interests		203,906			203,488
Stockholders’ equity:
Common Stock		2,949,870			2,934,733
Warrants and stock options		317,842			318,874
Unallocated ESOP shares		(23,707	)		(26,078	)
Treasury stock		(19,136	)		(19,767	)
Accumulated other comprehensive loss		(108,092	)		(136,645	)
Retained earnings		1,871,595			1,744,235
Total stockholders’ equity		4,988,372			4,815,352
Total liabilities and stockholders’ equity	$	54,471,313		$	55,755,008

Sovereign Bancorp, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)

	Quarter Ended
(dollars in thousands, except per share data)	Sept. 30 2005			June 30 2005			Mar. 31 2005		Dec. 31 2004			Sept. 30 2004
Interest and dividend income:
Interest on interest-earning deposits	$	2,022		$	1,896		$	2,233	$	1,721		$	1,505
Interest on investment securities
Available for sale		90,854			95,878			94,884		102,945			124,803
Held to maturity		47,624			45,091			45,119		45,512			46,470
Interest on loans		607,966			566,936			518,820		474,010			412,771
Total interest and dividend income		748,466			709,801			661,056		624,188			585,549
Interest expense:
Deposits and related customer accounts		169,084			139,879			114,178		91,731			83,160
Borrowings		183,817			167,047			148,700		145,445			139,439
Total interest expense		352,901			306,926			262,878		237,176			222,599
Net interest income		395,565			402,875			398,178		387,012			362,950
Provision for loan losses		20,000			22,000			22,000		27,000			25,000
Net interest income after provision for loan losses		375,565			380,875			376,178		360,012			337,950
Non-interest income:
Consumer banking fees		74,992			73,063			66,555		67,759			62,771
Commercial banking fees		42,745			35,531			33,008		32,843			31,757
Mortgage banking revenue (1)		28,967			21,547			11,932		4,726			(4,080	)
Capital markets revenue		5,382			3,700			4,686		6,548			3,409
Bank owned life insurance income		12,066			12,918			10,903		10,136			9,922
Other		6,856			12,092			6,351		4,480			4,498
Total fees and other income before security gains		171,008			158,851			133,435		126,492			108,277
Net gain/(loss) on securities		1,675			3,355			7,979		(24,728	)		20,247
Total non-interest income		172,683			162,206			141,414		101,764			128,524
Non-interest expense:
General and administrative
Compensation and benefits		140,532			135,803			125,125		123,967			114,871
Occupancy and equipment		61,096			61,348			62,870		59,221			54,976
Technology expense		21,349			21,606			18,668		21,486			18,935
Outside services		15,362			13,805			14,648		13,901			14,332
Marketing expense		14,455			11,757			11,047		13,089			11,983
Other administrative expenses		24,107			29,072			24,756		25,587			22,583
Total general and administrative		276,901			273,391			257,114		257,251			237,680
Other expenses:
Amortization of core deposit intangibles		18,284			18,815			18,956		17,670			19,836
Other minority interest expense		5,837			5,752			5,668		5,630			5,502
Equity method investments		11,656			10,966			10,770		11,875			10,257
Loss on debt extinguishment		—			—			—		500			65,546
Restructuring charges		(1,222	)		—			5,204		—			—
Merger-related and integration charges		(2,000	)		(8,447	)		23,191		(5,169	)		27,941
Total other expenses		32,555			27,086			63,789		30,506			129,082
Total non- interest expense		309,456			300,477			320,903		287,757			366,762
Income before income taxes		238,792			242,604			196,689		174,019			99,712
Income tax expense		57,749			59,133			50,538		36,590			17,170
Net income	$	181,043		$	183,471		$	146,151	$	137,429		$	82,542

(1) Mortgage banking activity is summarized below:

Gains on sale of mortgage loans, mortgage backed securities, and home equity loans (2)	$	21,274	$	28,371		$	6,377	$	2,438		$	4,090
Net gains/(loss) recorded under SFAS 133		717		314			653		(111	)		(112	)
Mortgage servicing fees, net of mortgage servicing rights amortization		139		1,627			948		664			1,343
Mortgage servicing right (impairments)/recoveries		6,837		(8,765	)		3,954		1,735			(9,401	)
Total mortgage banking revenues	$	28,967	$	21,547		$	11,932	$	4,726		$	(4,080	)

(2) Third quarter 2005 results include a gain of $13.1 million related to the sale of $503 million of home equity loans.

	Year to Date
(dollars in thousands, except per share data)	Sept. 30 2005		Sept. 30 2004
Interest and dividend income:
Interest on interest-earning deposits	$	6,151	$	3,013
Interest on investment securities
Available for sale		281,616		398,526
Held to maturity		137,834		107,168
Interest on loans		1,693,722		1,091,249
Total interest and dividend income		2,119,323		1,599,956
Interest expense:
Deposits and related customer accounts		423,141		211,314
Borrowings		499,564		370,837
Total interest expense		922,705		582,151
Net interest income		1,196,618		1,017,805
Provision for loan losses		64,000		100,000
Net interest income after provision for loan losses		1,132,618		917,805
Non-interest income:
Consumer banking fees		214,610		174,828
Commercial banking fees		111,284		90,994
Mortgage banking revenue (1)		62,446		17,783
Capital markets revenue		13,768		13,395
Bank owned life insurance income		35,887		29,136
Other		25,299		15,441
Total fees and other income before security gains		463,294		341,577
Net gain/(loss) on securities		13,009		38,957
Total non-interest income		476,303		380,534
Non-interest expense:
General and administrative
Compensation and benefits		401,460		324,175
Occupancy and equipment		185,314		161,452
Technology expense		61,623		55,873
Outside services		43,815		39,414
Marketing expense		37,259		33,434
Other administrative expenses		77,935		71,062
Total general and administrative		807,406		685,410
Other expenses:
Amortization of core deposit intangibles		56,055		54,965
Other minority interest expense		17,257		16,376
Equity method investments		33,392		19,596
Loss on debt extinguishment		—		63,261
Restructuring charges		3,982		—
Merger-related and integration charges		12,744		51,528
Total other expenses		123,430		205,726
Total non-interest expense		930,836		891,136
Income before income taxes		678,085		407,203
Income tax expense		167,420		91,080
Net income	$	510,665	$	316,123

(1) Mortgage banking activity is summarized below:

Gains on sale of mortgage loans, mortgage backed securities, and home equity loans (2)	$	56,022	$	23,367
Net gains/(loss) recorded under SFAS 133		1,684		(1,909	)
Mortgage servicing fees, net of mortgage servicing rights amortization		2,714		(148	)
Mortgage servicing right (impairments)/recoveries		2,026		(3,527	)
Total mortgage banking revenues	$	62,446	$	17,783

(2) Third quarter 2005 results include a gain of $13.1 million related to the sale of $503 million of home equity loans.

Sovereign Bancorp, Inc. and Subsidiaries
AVERAGE BALANCE, INTEREST AND YIELD/RATE ANALYSIS
(unaudited)

	Quarter Ended September 30, 2005
(dollars in thousands)	Average Balance			Interest (1)		Yield/ Rate
Earning assets:
Investment securities	$	11,974,043		$	153,802		5.14	%
Loans:
Commercial		16,440,068			259,500		6.27	%
Consumer:
Residential mortgages		10,663,656			142,308		5.34	%
Home equity loans and lines of credit		10,321,853			139,150		5.36	%
Total consumer loans secured by real estate		20,985,509			281,458		5.35	%
Auto Loans		4,400,376			58,359		5.26	%
Other		515,522			10,147		7.81	%
Total Consumer		25,901,407			349,964		5.38	%
Total loans		42,341,475			609,464		5.73	%
Allowance for loan losses		(441,930	)
Total earning assets		53,873,588		$	763,266		5.64	%
Other assets		7,709,266
Total assets	$	61,582,854
Funding liabilities:
Deposits and other customer related accounts:
NOW accounts	$	8,991,339		$	42,601		1.88	%
Customer repurchase agreements		903,053			6,630		2.91	%
Savings accounts		3,753,311			6,452		0.68	%
Money market accounts		8,294,441			35,390		1.69	%
Core and other customer related accounts		21,942,144			91,073		1.65	%
Time deposits		9,810,041			78,011		3.15	%
Total		31,752,185			169,084		2.11	%
Borrowings:
Federal Home Loan Bank advances		12,581,448			130,270		4.11	%
Fed funds and repurchase agreements		1,096,237			10,214		3.72	%
Other borrowings		4,250,969			43,333		4.06	%
Total borrowings		17,928,654			183,817		4.08	%
Total funding liabilities		49,680,839			352,901		2.82	%
Non-interest bearing DDA (2)		5,393,736
Other liabilities		813,383
Total liabilities		55,887,958
Stockholders’ equity		5,694,895
Total liabilities and stockholders’ equity	$	61,582,853
Net interest income		��		$	410,365
Interest rate spread							2.82	%
Contribution from interest free funds							0.22
Net interest margin							3.04	%

	Quarter Ended June 30, 2005
(dollars in thousands)	Average Balance			Interest (1)		Yield/ Rate
Earning assets:
Investment securities	$	12,178,325		$	154,041		5.06	%
Loans:
Commercial		15,768,250			232,919		5.92	%
Consumer:
Residential mortgages		10,634,549			138,329		5.20	%
Home equity loans and lines of credit		10,127,012			132,418		5.24	%
Total consumer loans secured by real estate		20,761,561			270,747		5.22	%
Auto Loans		4,262,377			53,717		5.05	%
Other		559,544			10,680		7.66	%
Total Consumer		25,583,482			335,144		5.25	%
Total loans		41,351,732			568,063		5.50	%
Allowance for loan losses		(444,761	)
Total earning assets		53,085,296		$	722,105		5.45	%
Other assets		7,103,038
Total assets	$	60,188,334
Funding liabilities:
Deposits and other customer related accounts:
NOW accounts	$	8,425,311		$	31,835		1.52	%
Customer repurchase agreements		795,418			4,790		2.42	%
Savings accounts		3,864,148			6,243		0.65	%
Money market accounts		8,417,965			31,034		1.48	%
Core and other customer related accounts		21,502,842			73,902		1.38	%
Time deposits		9,458,184			65,977		2.80	%
Total		30,961,026			139,879		1.81	%
Borrowings:
Federal Home Loan Bank advances		11,775,740			116,767		3.98	%
Fed funds and repurchase agreements		1,614,427			12,167		3.02	%
Other borrowings		4,164,200			38,113		3.67	%
Total borrowings		17,554,367			167,047		3.81	%
Total funding liabilities		48,515,393			306,926		2.54	%
Non-interest bearing DDA (2)		5,276,428
Other liabilities		698,857
Total liabilities		54,490,678
Stockholders’ equity		5,697,656
Total liabilities and stockholders’ equity	$	60,188,334
Net interest income				$	415,179
Interest rate spread							2.91	%
Contribution from interest free funds							0.22
Net interest margin							3.13	%

	Quarter Ended September 30, 2004
(dollars in thousands)	Average Balance			Interest (1)		Yield/ Rate
Earning assets:
Investment securities	$	15,045,842		$	183,007		4.86	%
Loans:
Commercial		13,006,393			162,723		4.91	%
Consumer:
Residential mortgages		6,675,476			86,906		5.21	%
Home equity loans and lines of credit		8,177,146			101,600		4.95	%
Total consumer loans secured by real estate		14,852,622			188,506		5.06	%
Auto Loans		4,198,175			53,553		5.07	%
Other		544,404			10,349		7.52	%
Total Consumer		19,595,201			252,408		5.14	%
Total loans		32,601,594			415,131		5.05	%
Allowance for loan losses		(395,427	)
Total earning assets		47,252,009		$	598,138		5.03	%
Other assets		6,223,444
Total assets	$	53,475,453
Funding liabilities:
Deposits and other customer related accounts:
NOW accounts	$	7,117,978		$	16,366		0.91	%
Customer repurchase agreements		821,182			1,977		0.96	%
Savings accounts		3,621,567			4,966		0.55	%
Money market accounts		8,256,017			24,040		1.16	%
Core and other customer related accounts		19,816,744			47,349		0.95	%
Time deposits		6,985,446			35,811		2.04	%
Total		26,802,190			83,160		1.23	%
Borrowings:
Federal Home Loan Bank advances		9,759,462			87,986		3.54	%
Fed funds and repurchase agreements		2,797,876			16,206		2.31	%
Other borrowings		3,921,692			35,247		3.56	%
Total borrowings		16,479,030			139,439		3.34	%
Total funding liabilities		43,281,220			222,599		2.05	%
Non-interest bearing DDA (2)		4,936,996
Other liabilities		713,062
Total liabilities		48,931,278
Stockholders’ equity		4,544,175
Total liabilities and stockholders’ equity	$	53,475,453
Net interest income				$	375,539
Interest rate spread							2.98	%
Contribution from interest free funds							0.19
Net interest margin							3.17	%

(1)	Tax equivalent basis
(2)	In the third quarter of 2005, Sovereign reclassified its non-interest earning deposits to be shown as a separate component of other liabilities to be consistent with industry practice.  This change had no impact to Sovereign’s historically reported net interest margin.

Sovereign Bancorp, Inc. and Subsidiaries
AVERAGE BALANCE, INTEREST AND YIELD/RATE ANALYSIS
(unaudited)

	Year to Date September 30, 2005
(dollars in thousands)	Average Balance			Interest (1)		Yield/ Rate
Earning assets:
Investment securities	$	12,093,200		$	461,037		5.08	%
Loans:
Commercial		15,698,330			696,827		5.93	%
Consumer:
Residential mortgages		10,160,711			403,313		5.29	%
Home equity loans and lines of credit		10,151,595			402,393		5.30	%
Total consumer loans secured by real estate		20,312,306			805,706		5.29	%
Auto loans		4,322,967			164,936		5.10	%
Other		550,965			31,073		7.54	%
Total Consumer		25,186,238			1,001,715		5.31	%
Total loans		40,884,568			1,698,542		5.55	%
Allowance for loan losses		(439,881	)
Total earning assets		52,537,887		$	2,159,579		5.49	%
Other assets		7,247,966
Total assets	$	59,785,853
Funding liabilities:
Deposits and other customer related accounts:
NOW accounts	$	8,489,687		$	99,891		1.57	%
Customer repurchase agreements		847,264			15,436		2.44	%
Savings accounts		3,848,607			18,826		0.65	%
Money market accounts		8,288,830			91,910		1.48	%
Core and other customer related accounts		21,474,388			226,063		1.41	%
Time deposits		9,313,316			197,078		2.83	%
Total		30,787,704			423,141		1.84	%
Borrowings:
Federal Home Loan Bank advances		11,761,895			351,972		4.00	%
Fed funds and repurchase agreements		1,382,706			31,918		3.08	%
Other borrowings		4,190,575			115,674		3.69	%
Total borrowings		17,335,176			499,564		3.85	%
Total funding liabilities		48,122,880			922,705		2.56	%
Demand deposit accounts  (2)		5,278,467
Other liabilities		723,684
Total liabilities		54,125,031
Stockholders’ equity		5,660,822
Total liabilities and stockholders’ equity	$	59,785,853
Net interest income				$	1,236,874
Interest rate spread							2.93	%
Contribution from interest free funds							0.21
Net interest margin							3.14	%

	Year to Date September 30, 2004
(dollars in thousands)	Average Balance			Interest (1)		Yield/ Rate
Earning assets:
Investment securities	$	14,645,912		$	538,827		4.90	%
Loans:
Commercial		12,171,171			433,788		4.69	%
Consumer:
Residential mortgages		5,549,520			221,298		5.32	%
Home equity loans and lines of credit		7,352,876			267,437		4.86	%
Total consumer loans secured by real estate		12,902,396			488,735		5.05	%
Auto loans		3,765,366			149,463		5.30	%
Other		451,538			24,822		7.32	%
Total Consumer		17,119,300			663,020		5.16	%
Total loans		29,290,471			1,096,808		4.97	%
Allowance for loan losses		(364,857	)
Total earning assets		43,571,526		$	1,635,635		4.99	%
Other assets		5,558,865
Total assets	$	49,130,391
Funding liabilities:
Deposits and other customer related accounts:
NOW accounts	$	6,476,239		$	35,968		0.74	%
Customer repurchase agreements		828,830			4,417		0.71	%
Savings accounts		3,390,266			13,615		0.54	%
Money market accounts		7,483,336			57,393		1.02	%
Core and other customer related accounts		18,178,671			111,393		0.82	%
Time deposits		6,390,430			99,921		2.09	%
Total		24,569,101			211,314		1.15	%
Borrowings:
Federal Home Loan Bank advances		8,701,974			245,027		3.72	%
Fed funds and repurchase agreements		2,833,640			31,153		1.46	%
Other borrowings		3,785,105			94,657		3.31	%
Total borrowings		15,320,719			370,837		3.20	%
Total funding liabilities		39,889,820			582,151		1.95	%
Demand deposit accounts (2)		4,562,465
Other liabilities		681,635
Total liabilities		45,133,920
Stockholders’ equity		3,996,471
Total liabilities and stockholders’ equity	$	49,130,391
Net interest income				$	1,053,484
Interest rate spread							3.04	%
Contribution from interest free funds							0.19
Net interest margin							3.23	%

(1)	Tax equivalent basis
(2)	In the third quarter of 2005, Sovereign reclassified its non-interest earning deposits to be shown as a separate component of other liabilities to be consistent with industry practice.  This change had no impact to Sovereign’s historically reported net interest margin.

Sovereign Bancorp, Inc. and Subsidiaries
SUPPLEMENTAL INFORMATION
(unaudited)

NON-PERFORMING ASSETS

(dollars in thousands)	Sept. 30 2005			June 30 2005			Mar. 31 2005			Dec. 31 2004			Sept. 30 2004
Non-accrual loans:
Consumer:
Residential mortgages	$	33,427		$	31,717		$	37,669		$	33,656		$	32,858
Home equity loans and lines of credit		37,051			35,007			33,383			26,801			23,217
Auto loans		462			365			539			632			649
Other consumer loans		2,873			3,013			3,715			588			551
Total consumer loans		73,813			70,102			75,306			61,677			57,275
Commercial		95,303			91,358			95,528			80,799			89,061
Total non-accrual loans		169,116			161,460			170,834			142,476			146,336
Restructured loans		822			939			1,026			1,097			1,205
Total non-performing loans		169,938			162,399			171,860			143,573			147,541
Real estate owned, net		6,107			8,494			11,286			12,276			16,397
Other repossessed assets		5,083			2,302			3,709			4,247			4,824
Total non-performing assets		181,128			173,195			186,855			160,096			168,762
Non-performing loans as a percentage of total loans		0.40	%		0.39	%		0.43	%		0.39	%		0.42	%
Non-performing assets as a percentage of total assets		0.29	%		0.29	%		0.32	%		0.29	%		0.30	%
Non-performing assets as a percentage of total loans, real estate owned and repossessed assets		0.42	%		0.42	%		0.46	%		0.44	%		0.48	%
Allowance for loan losses as a percentage of non-performing loans		257	%		272	%		255	%		285	%		276	%

NET LOAN CHARGE-OFFS

Quarters ended (in thousands)	Sept. 30 2005		June 30 2005		Mar. 31 2005			Dec. 31 2004		Sept. 30 2004
Commercial real estate	$	219	$	294	$	(492	)	$	614	$	(1,064	)
Commercial and industrial and other		6,209		8,964		7,200			10,357		10,823
Total Commercial		6,428		9,258		6,708			10,971		9,759
Residential mortgages		109		72		43			444		326
Home equity loans and lines of credit		4,319		3,115		1,831			1,268		1,630
Total consumer loans secured by real estate		4,428		3,187		1,874			1,712		1,956
Auto loans		7,539		5,851		9,557			10,769		7,619
Other consumer loans		1,059		1,126		1,449			1,444		1,136
Total Consumer		13,026		10,164		12,880			13,925		10,711
Total	$	19,454	$	19,422	$	19,588		$	24,896	$	20,470

DEPOSIT AND OTHER CUSTOMER RELATED ACCOUNT COMPOSITION - End of period

Quarters ended (in thousands)	Sept. 30 2005		June 30 2005		Mar. 31 2005
Demand deposit accounts	$	5,414,212	$	5,378,465	$	5,377,378
NOW accounts		9,170,052		8,269,183		8,422,725
Customer repurchase agreements		959,024		875,203		828,388
Savings accounts		3,684,423		3,807,967		3,922,642
Money market accounts		8,167,546		8,352,055		8,673,744
Certificates of deposits		9,937,334		9,418,691		9,460,879
Total	$	37,332,591	$	36,101,564	$	36,685,756

Quarters ended (in thousands)	Dec. 31 2004		Sept. 30 2004
Demand deposit accounts	$	5,087,531	$	5,072,090
NOW accounts		7,838,584		7,748,012
Customer repurchase agreements		837,643		848,890
Savings accounts		3,807,099		3,667,116
Money market accounts		7,870,288		8,407,688
Certificates of deposits		7,114,373		7,357,882
Total	$	32,555,518	$	33,101,678

LOAN COMPOSITION - End of period

Quarters ended (in thousands)	Sept. 30 2005		June 30 2005		Mar. 31 2005
Commercial real estate	$	7,151,189	$	6,946,477	$	6,837,814
Commercial industrial loans		9,071,731		9,205,540		8,525,778
Total commercial loans		16,222,920		16,152,017		15,363,592
Residential mortgages		11,198,366		9,997,066		9,782,953
Home equity loans and lines of credit		10,301,161		10,300,629		10,280,735
Total consumer loans secured by real estate		21,499,527		20,297,695		20,063,688
Auto loans		4,463,931		4,285,537		4,296,296
Other consumer loans		505,261		532,230		596,428
Total consumer loans		26,468,719		25,115,462		24,956,412
Total loans	$	42,691,639	$	41,267,479	$	40,320,004

Quarters ended (in thousands)	Dec. 31 2004		Sept. 30 2004
Commercial real estate	$	5,824,133	$	5,800,536
Commercial industrial loans		8,040,107		7,645,199
Total commercial loans		13,864,240		13,445,735
Residential mortgages		8,497,496		7,958,974
Home equity loans and lines of credit		9,577,656		8,988,139
Total consumer loans secured by real estate		18,075,152		16,947,113
Auto loans		4,205,547		4,340,487
Other consumer loans		486,140		528,366
Total consumer loans		22,766,839		21,815,966
Total loans	$	36,631,079	$	35,261,701

Sovereign Bancorp, Inc. and Subsidiaries
SUPPLEMENTAL INFORMATION
(unaudited)

DEPOSIT AND OTHER CUSTOMER RELATED ACCOUNT COMPOSITION - Average

Quarters ended (in thousands)	Sept. 30 2005		June 30 2005		Mar. 31 2005
Demand deposit accounts	$	5,393,736	$	5,276,428	$	5,162,704
NOW accounts		8,991,339		8,425,311		8,041,978
Customer repurchase agreements		903,053		795,418		842,657
Savings accounts		3,753,311		3,864,148		3,930,308
Money market accounts		8,294,441		8,417,965		8,152,525
Certificates of deposits		9,810,041		9,458,184		8,659,080
Total	$	37,145,921	$	36,237,454	$	34,789,252

LOAN COMPOSITION - Average

Quarters ended (in thousands)	Sept. 30 2005		June 30 2005		Mar. 31 2005
Commercial real estate	$	7,019,781	$	6,909,795	$	6,494,572
Commercial industrial loans		8,499,513		8,008,968		7,522,968
Other		920,774		849,487		852,977
Total commercial loans		16,440,068		15,768,250		14,870,517
Residential mortgages		10,663,656		10,634,549		9,167,485
Home equity loans and lines of credit		10,321,853		10,127,012		10,002,411
Total consumer loans secured by real estate		20,985,509		20,761,561		19,169,896
Auto loans		4,400,376		4,262,377		4,305,100
Other consumer loans		515,522		559,544		578,520
Total consumer loans		25,901,407		25,583,482		24,053,516
Total loans	$	42,341,475	$	41,351,732	$	38,924,033

DEPOSIT AND OTHER CUSTOMER RELATED ACCOUNT COMPOSITION - Average

Quarters ended (in thousands)	Dec. 31 2004		Sept. 30 2004
Demand deposit accounts	$	5,103,981	$	4,936,996
NOW accounts		7,544,694		7,117,978
Customer repurchase agreements		851,928		821,182
Savings accounts		3,821,004		3,621,567
Money market accounts		8,082,448		8,256,017
Certificates of deposits		7,221,061		6,985,446
Total	$	32,625,116	$	31,739,186

LOAN COMPOSITION - Average

Quarters ended (in thousands)	Dec. 31 2004		Sept. 30 2004
Commercial real estate	$	5,788,936	$	5,621,144
Commercial industrial loans		6,953,564		6,534,378
Other		857,351		850,871
Total commercial loans		13,599,851		13,006,393
Residential mortgages		8,199,190		6,675,476
Home equity loans and lines of credit		9,245,711		8,177,146
Total consumer loans secured by real estate		17,444,901		14,852,622
Auto loans		4,266,466		4,198,175
Other consumer loans		508,705		544,404
Total consumer loans		22,220,072		19,595,201
Total loans	$	35,819,923	$	32,601,594

Sovereign Bancorp, Inc. and Subsidiaries
RECONCILIATION OF OPERATING/CASH EARNINGS TO REPORTED EARNINGS
(unaudited)

          Operating/cash earnings for 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/cash 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/cash 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/cash earnings.

          (dollars in thousands, except per share data - all amounts are after tax)

	Quarter Ended Total dollars
	Sep. 30 2005			Jun. 30 2005			Mar. 31 2005		Dec. 31 2004			Sep. 30 2004
Net income as reported	$	181,043		$	183,471		$	183,471	$	137,429		$	82,542
Contingently convertible trust preferred interest expense, net of tax (1)		6,344			6,335			6,394		6,318			6,310
Net income/(loss) for EPS purposes	$	187,387		$	189,806		$	189,865	$	143,747		$	88,852
Weighted average diluted shares for GAAP EPS		393,110			400,371			401,339		377,625			367,782
Reconciliation to operating/cash earnings Weighted average diluted shares for GAAP EPS		393,110			400,371			401,339		377,625			367,782
Exclude dilutive effect of EITF 04-8 on contingently convertible debt (1)		—			—			—		(26,082	)		(26,082	)
Adjusted weighted average diluted shares for Operating/cash EPS		393,110			400,371			401,339		351,543			341,700
Net income and EPS as reported based on adjusted share count (1)	$	187,387		$	189,806		$	152,545	$	137,429		$	82,542
Business acquisitions:
Merger related and integration costs		(1,300	)		(5,490	)		15,074		(3,360	)		18,162
Provision for loan loss		—			—			—		—			—
Loss on debt extinguishment		—			—			—		—			42,605
Impairment charges on FNMA and FHLMC Preferred Stock		—			—			—		20,891			—
Restructuring charges		(794	)		—			3,382		—			—
Amortization of intangibles		11,885			12,229			12,322		12,562			14,578
Operating/cash earnings	$	197,178		$	196,545		$	183,323	$	167,522		$	157,887

	Per share
	Sep. 30 2005			Jun.30 2005			Mar.31 2005		Dec.31 2004			Sep.30 2004c
Net income as reported Contingently convertible trust preferred interest expense, net of tax (1) Net income/(loss) for EPS purposes	$	0.48		$	0.47		$	0.47	$	0.47		$	0.24
Weighted average diluted shares for GAAP EPS
Reconciliation to operating/cash 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/cash EPS
Net income and EPS as reported based on adjusted share count (1)	$	0.48		$	0.47		$	0.38	$	0.39		$	0.24
Business acquisitions:
Merger related and integration costs		(0.00	)		(0.01	)		0.04		(0.01	)		0.05
Provision for loan loss		—			—			—		—			—
Loss on debt extinguishment		—			—			—		—			0.12
Impairment charges on FNMA and FHLMC
Preferred Stock		—			—			—		0.06			—
Restructuring charges		(0.00	)		—			0.01		—			—
Amortization of intangibles		0.03			0.03			0.03		0.04			0.04
Operating/cash earnings	$	0.50		$	0.49		$	0.46	$	0.48		$	0.46

	Year to Date									Forward- Looking Per Share 2005
	Total dollars					Per Share
	Sep.30 2005		Sep. 30 2004			Sep.30 2005		Sep.30 2004
Net income as reported	$	510,665	$	316,123
Contingently convertible trust preferred interest expense, net of tax (1)		19,074		14,895
Net income/(loss) for EPS purposes	$	529,739	$	331,018		$	1.33	$	0.97	$	1.84
Weighted average diluted shares for GAAP EPS		398,223		341,078
Reconciliation to operating/cash earnings
Weighted average diluted shares for GAAP EPS		398,223		341,078
Exclude dilutive effect of EITF 04-8 on contingently convertible debt (1)		—		(20,827	)
Adjusted weighted average diluted shares for Operating/cash EPS		398,223		320,251
Net income and EPS as reported based on adjusted share count (1)	$	529,739	$	316,123		$	1.33	$	0.99
Business acquisitions:
Merger related and integration costs		8,284		33,493			0.02		0.10		0.03
Provision for loan loss		—		3,900			—		0.01		—
Loss on debt extinguishment		—		42,605			—		0.13		—
Impairment charges on FNMA and FHLMC Preferred Stock		—		—			—		—		—
Restructuring charges		2,589		—			0.01		—		0.01
Amortization of intangibles		36,436		38,624			0.09		0.12		0.12
Operating/cash earnings	$	577,048	$	434,745		$	1.45	$	1.36	$	2.00

(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/cash earnings per share, however it is included in our calculation for 2005 operating/cash earnings per share.

Sovereign Bancorp, Inc. and Subsidiaries
RECONCILIATION OF AVERAGE EQUITY TO AVERAGE TANGIBLE EQUITY AND RELATED
OPERATING RETURN ON AVERAGE TANGIBLE EQUITY
(unaudited)

Reconciliation of Equity to Tangible Equity and Operating Return on
Average Equity to Tangible Returns on Average Equity

	Quarter Ended
	Sept. 30 2005			June 30 2005			Mar. 31 2005
Average Equity	$	5,694,895		$	5,697,656		$	5,588,703
Average Goodwill		2,714,148			2,725,526			2,507,849
Average CDI		243,149			261,854			270,193
Average Tangible Equity		2,737,599			2,710,276			2,810,661
Operating Return on Average Equity		13.74	%		13.84	%		13.30	%
Effect of Goodwill		13.62	%		13.91	%		11.87	%
Effect of CDI		1.22	%		1.34	%		1.28	%
Tangible Return on Average Equity		28.58	%		29.09	%		26.45	%

	Dec. 31 2004			Sept. 30 2004
Average Equity	$	4,898,154		$	4,544,175
Average Goodwill		2,118,673			1,908,030
Average CDI		278,319			298,094
Average Tangible Equity		2,501,162			2,338,051
Operating Return on Average Equity		13.61	%		13.82	%
Effect of Goodwill		11.53	%		11.36	%
Effect of CDI		1.51	%		1.78	%
Tangible Return on Average Equity		26.65	%		26.96	%

	Year-to-Date
	Sept. 30 2005			Sept. 30 2004
Average Equity		5,660,822			3,996,471
Average Goodwill		2,649,925			1,459,983
Average CDI		258,320			275,445
Average Tangible Equity		2,752,577			2,261,043
Operating Return on Average Equity		13.63	%		14.53	%
Effect of Goodwill		13.12	%		9.38	%
Effect of CDI		1.28	%		1.77	%
Tangible Return on Average Equity		28.03	%		25.68	%

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 for approximately $950 million.  A cash payment of $269.9 million was made in connection with the transaction with the remaining consideration consisting of the issuance of 29.8 million shares of common stock and stock options (to convert outstanding Waypoint stock options into Sovereign stock options).  The preliminary purchase price was allocated to acquired assets and liabilities of Waypoint based on fair value as of January 21, 2005.  Sovereign 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		67.6
Less allowance for loan losses		(26.5	)
Total loans, net		2,577.6		Total liabilities	$	3,624.1
Federal funds and cash		324.2
Premises and equipment, net		34.2
Bank owned life insurance		97.0
Other assets		263.9
Core deposit intangible		31.1
Goodwill		598.5
Total assets	$	4,305.7

          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-                                                                                 10/18/2005

          /CONTACT:  FINANCIAL CONTACTS: Mark McCollom, +1-610-208-6426 or mmccollo@sovereignbank.com, or Stacey Weikel, +1-610-208-6112 or sweikel@sovereignbank.com, or MEDIA CONTACT: Ed Shultz, +1-610-378-6159 or eshultz1@sovereignbank.com, all of Sovereign Bancorp/
          /Web site:  http://www.sovereignbank.com/ 
            _