Exhibit 99.1
[LOGO] Sovereign Bancorp NEWS RELEASE
Corporate Headquarters: 1500 Market Street, Philadelphia, Pa.
FOR IMMEDIATE RELEASE
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DATE: 1/21/03 FINANCIAL CONTACTS
Jim Hogan 610-320-8496 jhogan@sovereignbank.com
Mark McCollom 610-208-6426 mmccollo@sovereignbank.com
Tye Barnhart 610-988-0300 tbarnhar@sovereignbank.com
MEDIA CONTACT:
Ed Shultz 610-371-3201 eshultz@soverignbank.com
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Sovereign Announces Fourth Quarter 2002 EPS of $.33 and
Net Income of $93.1 Million
Quarterly Financial Highlights
o Net income of $93.1 million versus $73.5 million in 4Q01; up 27%
o Earnings per fully diluted share of $.33 versus $.28 in 4Q01; up 18%
o Cash earnings of $110.8 million versus $95.5 million in 4Q01; up 16%
o Net interest margin of 3.49% versus 3.69% in 4Q01; down 5%
o Core deposits grew by $480 million from September 30, 2002; up 10%
annualized
o Consumer banking fee income up 19% from 4Q01 o Commercial banking
fee income up 31% from 4Q01
o Provision for loan losses of $36 million versus $32 million in 4Q01
and $38 million in 3Q02; provision exceeded net charge-offs by $3.5
million in the fourth quarter
o Allowance for loan losses to total loans was 1.29% compared to 1.30%
at December 31, 2001 and 1.31% at September 30, 2002
o Non-performing assets ("NPAs") improved by $19.6 million from $276.7
million at September 30, 2002 to $257.1 million at December 31,
2002. NPAs to total assets improved by 5 basis points from 0.70% at
September 30, 2002 to 0.65% at December 31, 2002.
o Holding Company equity to assets ratio of 6.99% and Tier I leverage
ratio of 5.01% versus 6.21% and 4.21% respectively, at December 31,
2001
o Sovereign Bank equity to assets ratio of 10.39% and Tier I leverage
ratio of 7.56%
1
Full Year Highlights
o Net income of $342.0 million or $1.23 per share versus $116.8
million or $.45 per share in 2001
o Operating earnings of $356.2 million versus $287.0 million in 2001;
up 24%
o Cash earnings of $422.1 million versus $378.3 million in 2001; up
12%
o Core deposits up $3.7 billion or 22.9%; same store core deposits up
$3.2 billion or 20%
o Consumer banking fee income up $21.9 million or 14%
o Commercial banking fee income up $19.3 million or 25%
o G&A Expenses (adjusted for the Main Street acquisition and expensing
of options) were essentially flat from 2001 to 2002.
o Holding company Tier I capital grew by 80 basis points to 5.01%.
Tangible common equity grew by $537 million during 2002.
o Paid-off $145 million of holding company debt in 2002; since
November 1999 (New England acquisition financing), paid-off $543
million or 34% of holding company debt
o SOV common stock up 15% for the year 2002
o Book value per share up 19% to $10.57 at December 31, 2002
o Successfully closed and integrated the Main Street Bancorp
acquisition
PHILADELPHIA, PA. Sovereign Bancorp, Inc. ("Sovereign") (NYSE: SOV),
parent company of Sovereign Bank ("Bank"), today reported net income for the
fourth quarter 2002 of $93.1 million, or $.33 per diluted share. Fourth quarter
2002 net income and earnings per share were equal to the third quarter amounts,
and exceeded fourth quarter 2001 net income and earnings per share of $73.5
million and $.28 per share, respectively. Cash earnings increased to $110.8
million, up 16% compared to $95.5 million for the fourth quarter of 2001. A
reconciliation of net income, operating earnings and cash earnings is included
in a later section of this release.
For the year ended December 31, 2002, Sovereign reported net income of
$342.0 million, or $1.23 per share, compared to $116.8 million, or $.45 per
share, for 2001. Full year 2002 net income includes after-tax merger-related
charges of $14.2 million or $.05 per diluted share related to Sovereign's March
2002 acquisition of Main Street Bancorp. Excluding these charges, operating
earnings were $356.2 million, an increase of 24% over 2001 operating earnings of
$287.0 million. In 2001, operating earnings excluded the loss on extinguishment
of debt of $6.5 million, restructuring costs associated with the closure of 14
branches of $5.5 million and $158 million of non-solicitation expenses related
to the FleetBoston acquisition. Cash earnings increased 12% to $422.1 million
from $378.3 million in 2001. As previously announced, Sovereign adopted
Statement of Financial Accounting Standards No. 123 (expensing of stock options)
and No. 142 (cessation of goodwill amortization) in 2002.
Commenting on fourth quarter and full year 2002 results, Jay S. Sidhu,
Sovereign's Chairman and Chief Executive Officer, said, " We are pleased to
report another strong and transparent quarter of earnings. We have delivered on
our earnings guidance for the quarter and for the full year of 2002. We have
also exceeded our goal of 5.00% Tier I capital at the holding company. The
banking sector faced a very challenging economic environment in 2002, and we are
proud of the performance of Sovereign and all of its team members."
2
Net Interest Income and Margin
Sovereign reported fourth quarter net interest income of $293.1 million,
up $15.5 million from the fourth quarter of 2001 driven by a higher level of
earning assets, mitigated somewhat by margin contraction. On a linked quarter
basis, net interest income declined by $4.4 million driven by mild asset
sensitivity and the direction of market rates during the fourth quarter of 2002.
James D. Hogan, Sovereign's Chief Financial Officer, said, "Sovereign would
clearly benefit from a rising rate environment based on our balance sheet
characteristics at this time."
Sovereign reported fourth quarter net interest margin of 3.49% compared to
3.62% in the third quarter of 2002 and 3.69% in the fourth quarter of 2001.
Hogan said, "Our net interest margin declined by 13 basis points on a linked
quarter basis and by 20 basis points versus the prior year period. The margin
was negatively impacted by our mild asset sensitivity and by reinvestment yields
continuing to be materially lower than the yields on maturing assets."
Non-Interest Income and Expense
Consumer banking fees for the fourth quarter of 2002 were $48.9 million,
which represents an increase of $7.9 million, or 19%, over the same period in
2001. Increases in the number of deposit accounts, higher transaction volumes,
and new programs and initiatives drove the growth in these revenues. Commercial
banking fees were $23.8 million, an increase of $5.6 million or 31%, versus the
same period a year ago. Increases in loan and deposit fees were fueled by
aggressive cross-selling, enhanced product platforms and by expanding market
share across the entire franchise.
Mortgage banking revenues were $8.3 million in the fourth quarter of 2002,
down $4.8 million from the fourth quarter of 2001. Included in the fourth
quarter of 2002 was a charge for impairment of servicing rights of $4.5 million.
At December 31, 2002, net mortgage servicing rights were $55.5 million. Capital
markets revenues increased by $2.5 million versus the same period a year ago due
to an expanded customer base and product offerings. Fourth quarter 2002 gains on
investments and related derivatives transactions were $14.4 million, net of
impairments of $4.8 million related to our retained interests in securitized
assets. This compares to $12.7 million in the third quarter of 2002 and a loss
of $2.0 million in the fourth quarter of 2001. Hogan said, "In a record low rate
environment, the opportunity to take gains while improving the duration of the
investment portfolio is a sound asset-liability strategy."
G&A expenses, on a linked-quarter basis, grew by $5.7 million, primarily
driven by increases in compensation and marketing costs as well as $2.6 million
of accelerated depreciation charges on certain equipment that was replaced by
more current technology. The corporation's efficiency ratio increased on a
linked-quarter basis; however, the full year 2002 efficiency ratio improved by
26 basis points to 53.23% from 53.49% the prior year. The efficiency ratio for
the fourth quarter and full year were negatively affected by the expensing of
stock options in 2002. Hogan said, "Excluding expenses related to the Main
Street acquisition and our decision to expense stock options, G&A expenses were
essentially flat from 2001 to 2002. Expense control remains a daily focus at
Sovereign."
Franchise Growth
During the fourth quarter, core deposits grew by $480 million or 10% on an
annualized basis. Commercial loans increased by $436 million, consumer loans
increased by $391 million and residential loans declined by $173 million. The
following table depicts Sovereign's loan composition as of December 31, 2002 ($
in millions):
3
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Loan Category Ending Balance 4Q02 Yield % of Total Loans
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Commercial $10,260 5.52% 44%
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Consumer 8,519 6.45% 37%
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Residential Mortgages 4,348 6.38% 19%
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Total Loans $23,127 6.03% 100%
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Sovereign also improved the cost and mix of its deposits during the quarter. The
following table depicts Sovereign's deposit composition as of December 31, 2002
($ in millions):
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Deposit Category Ending Balance 4Q02 Cost % of Total Deposits
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Checking $11,036 0.91% 41%
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Other Core (MMDA & Savings) 8,729 1.40% 33%
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Time Deposits 7,020 3.11% 26%
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Total Deposits $26,785 1.66% 100%
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Sovereign's cost of deposits was 1.66% in the fourth quarter of 2002 versus
1.82% in the third quarter and 2.16% in the fourth quarter of 2001. Fourth
quarter 2002 loan to deposit spread was 4.37%, and the loan to deposit ratio
stood at 86% on December 31, 2002.
Asset Quality
Sovereign's provision for loan losses was $36.0 million this quarter
compared to $38 million in the third quarter of 2002 and $32.0 million in the
fourth quarter of 2001. Sovereign reported $32.5 million in net charge-offs
(NCOs), an increase of $2 million over the third quarter of 2002. Provision for
loan losses exceeded net charge-offs by $3.5 million. Non-performing assets
("NPAs") improved by $19.6 million from $276.7 million at September 30, 2002 to
$257.1 million at December 31, 2002. NPAs to total assets improved by 5 basis
points from 0.70% at September 30, 2002 to 0.65% at December 31, 2002. NPAs were
$244.7 million, and NPAs to total assets were 0.69% at December 31, 2001.
Allowance for loan losses to total loans was 1.29% at December 31, 2002 versus
1.30% at December 31, 2001 and 1.31% at September 30, 2002.
"We realized our first sizeable reduction in non-performing loans ("NPLs")
in the past six quarters, while continuing to increase our total allowance for
loan losses and our key coverage ratios," stated Dennis S. Marlo, Sovereign's
Chief Risk Management Officer. "Throughout the year, we experienced results in
our NPLs and net charge-offs ("NCOs") in line with our guidance, and we continue
to believe that Sovereign's credit quality remains stable during this sluggish
economic climate due to the quality and diversification of our overall loan
portfolio. Our slightly higher than usual NCOs in the residential portfolio is
due to an accelerated disposition of troubled loans that were part of our 2000
acquisition from FleetBoston and had continued to be serviced by other
providers. We approach 2003 with optimism that an economic stimulus program and
a sustained economic recovery may favorably impact the latter part of 2003, but
remain vigilant that many uncertainties must dissipate before this stable growth
pattern is manifested," continued Marlo.
Capital
Sovereign's capital ratios continued to improve during the fourth quarter.
Holding Company equity to assets ratio grew by 14 basis points to 6.99% at
December 31, 2002 from 6.85% at September 30, 2002. The holding company's Tier I
leverage ratio grew by 31 basis points to 5.01% at December 31, 2002 from 4.70%
at September 30, 2002. Tangible common equity to tangible assets increased to
3.61% from 3.29% at September 30, 2002.
4
Closing Comments
"We delivered on all our financial goals for 2002. We remain focused and
committed to delivering on our goals for the coming years and reiterate our 2003
guidance for operating earnings of between $1.40 and $1.45 per fully diluted
share," Sidhu concluded.
Other Highlights
o Sovereign Bank stepped forward to help convince a company that caters to
outdoor enthusiasts to construct a superstore near Reading, Pa. The
Cabela's superstore, the biggest store planned by the Nebraska company, is
expected to attract an estimated 6 million people annually to the Berks
County area, which would make it the largest tourist attraction in
Pennsylvania. Sovereign agreed to provide $750,000 to Tilden Township,
where the Cabela's store will be located. Township officials said the
money would offset some of the real estate taxes the township agreed to
give up in order to lure Cabela's.
The contribution, which will be paid over three years, shows how
partnerships between business and government can solve community problems
and spark economic growth in a community impacted recently by significant
job losses. The Cabela's store is expected to spur links to outlet
centers, lead to road improvements and attract new businesses beyond the
hotels and restaurants that typically follow construction of this type of
retail establishment. Sovereign expects to develop a significant business
relationship with Cabela's.
o Sovereign Bank and the Boston-based Disability Law Center, Inc. (DLC)
announced Nov. 21 that the bank had launched several major initiatives
intended to provide easier access to its banking services to individuals
with visual impairments as well as other customers. These initiatives
include the installation of Talking ATMs, a more user-friendly format on
Sovereign's Internet Web site, www.sovereignbank.com, and greater
accessibility to printed materials.
o Sovereign team members wrote another uplifting chapter in giving back to
the community by holding their annual Holiday Book Drive in New England
between December 2 and December 27, which resulted in the collection of
more than 13,000 books. This was the third year that Sovereign collected
new and gently used children's books at all of its Community Banking
Offices in New England. The books were distributed to children through
United Way partner agencies in Massachusetts, Connecticut, Rhode Island
and New Hampshire.
o During the fourth quarter, Sovereign announced the appointment of Lawrence
F. Delp as executive vice president/managing director for central and
northern Pennsylvania. Delp's responsibilities include driving growth and
earnings in commercial banking in these areas.
o Delp has 28 years of executive banking experience in the areas of
corporate lending, strategic planning, change management, relationship
management, and retail management. Prior to joining Sovereign, he was
executive vice president of Commercial and Government Banking at First
Union National Bank. He was responsible for managing loan and deposit
growth for the commercial and government banking groups within
Pennsylvania and Delaware.
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 measures of Operating
Earnings and Cash Earnings in their analysis of the company's performance. These
measures typically adjust 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 in 2002 and 2001
represents net
5
income adjusted for the after-tax effect effects of merger-related and
integration charges, loss on debt extinguishments and restructuring charges.
Cash earnings are operating earnings plus the tax-effected add-back of
intangible assets amortization and stock option and ESOP expenses. Since 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 which may be presented
by other companies.
Sovereign Bancorp, Inc., ("Sovereign") headquartered in Philadelphia,
Pennsylvania, is the parent company of Sovereign Bank, a $40 billion financial
institution with approximately 530 community banking offices, over 1,000 ATMs
and about 7,500 team members in Connecticut, Massachusetts, New Hampshire, New
Jersey, New York, Pennsylvania, and Rhode Island. Sovereign is among the 25
largest banking institutions in the United States. For more information on
Sovereign Bank, visit 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 fourth quarter earnings call on January 22, 2003 beginning at
8:30 a.m. EST via www.sovereignbank.com, VCALL or PRNewswire. The web-cast
replay can be accessed anytime from 11:00 a.m. on January 22, 2003 through 6:00
p.m. ET February 10, 2003. Questions will be answered via email, accessible from
the Internet broadcast site. A replay can also be accessed during the above
timeframe by dialing 800-642-1687, conference id# 7417071.
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Note:
This press release contains statements of Sovereign's strategies, plans, and
objectives, as well as estimates of future operating results for 2003 and beyond
for Sovereign Bancorp, Inc. as well as estimates of financial condition,
operating 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; and other economic, competitive, governmental,
regulatory, and technological factors affecting the Company's operations,
pricing, products and services.
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6
Sovereign Bancorp, Inc. and Subsidiaries
FINANCIAL HIGHLIGHTS
(unaudited)
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Quarter Ended
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Dec. 31 Sept. 30 June 30 Mar. 31 Dec. 31
2002 2002 2002 2002 2001
(dollars in millions, except per share data) As Adjusted (1) As Adjusted (1)
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Operating Data
Net income $ 93.1 $ 93.1 $ 90.3 $ 65.4 $ 73.5
Operating earnings (2) 93.1 93.1 90.3 79.6 73.5
Cash earnings (3) 110.8 109.3 106.8 95.2 95.5
Net interest income 293.1 297.6 297.0 271.9 277.7
Provision for loan losses 36.0 38.0 28.0 44.5 32.0
Total fees and other income before
securities transactions 104.2 97.5 92.4 86.9 90.4
Gain/(loss) on investments and related
derivatives transactions 14.4 12.7 3.8 20.6 (2.0)
G&A expense 213.1 207.3 205.7 194.0 196.4
Other operating expense (4) 35.6 35.3 36.4 51.7 47.4
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Performance Statistics
Net interest margin 3.49% 3.62% 3.72% 3.64% 3.69%
Cash return on average assets (3) 1.11% 1.13% 1.14% 1.10% 1.07%
Operating return on average assets (2) 0.93% 0.96% 0.97% 0.92% 0.82%
Cash return on average equity (3) 16.06% 16.65% 17.25% 16.96% 17.32%
Operating return on average equity (2) 13.49% 14.18% 14.59% 14.18% 13.32%
Annualized net loan charge-offs to
average loans 0.56% 0.55% 0.50% 0.72% 0.48%
Efficiency ratio (5) 53.62% 52.48% 52.82% 54.07% 53.34%
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Per Share Data
Diluted earnings per share 0.33 0.33 0.32 0.24 0.28
Dividend declared per share .025 .025 .025 .025 .025
Book value (6) 10.57 10.38 9.74 9.24 8.90
Common stock price:
High 14.72 15.57 15.48 14.35 12.43
Low 11.31 12.19 14.00 11.85 8.73
Close 14.05 12.90 14.95 14.05 12.24
Weighted average common shares:
Basic 261.3 261.0 260.5 250.6 247.1
Diluted 281.5 281.0 281.2 269.0 262.5
End-of-period common shares:
Basic 261.6 261.2 260.9 260.0 247.5
Diluted 282.2 279.1 281.7 279.8 265.7
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Year to Date
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Dec. 31 Dec. 31
2002 2001
(dollars in millions, except per share data)
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Operating Data
Net income $ 342.0 $ 116.8
Operating earnings (2) 356.2 287.0
Cash earnings (3) 422.1 378.3
Net interest income 1,159.6 1,054.3
Provision for loan losses 146.5 97.1
Total fees and other income before
securities transactions 381.1 398.9
Gain/(loss) on investments and related
derivatives transactions 51.4 15.5
G&A expense 820.1 777.3
Other operating expense (4) 159.0 444.4
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Performance Statistics
Net interest margin 3.61% 3.57%
Cash return on average assets (3) 1.12% 1.10%
Operating return on average assets (2) 0.94% 0.83%
Cash return on average equity (3) 16.67% 17.83%
Operating return on average equity (2) 14.07% 13.53%
Annualized net loan charge-offs to
average loans 0.58% 0.42%
Efficiency ratio (5) 53.23% 53.49%
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Per Share Data
Diluted earnings per share 1.23 0.45
Dividend declared per share 0.100 0.100
Book value (6) 10.57 8.90
Common stock price:
High 15.57 13.22
Low 11.31 7.66
Close 14.05 12.24
Weighted average common shares:
Basic 258.5 244.6
Diluted 279.0 256.9
End-of-period common shares:
Basic 261.6 247.5
Diluted 282.2 265.7
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NOTES: (1) Expense provisions of SFAS 123 were adopted in the quarter ended
September 30, 2002 for options granted in 2002. Previously
reported amounts for the quarters ended June 30, 2002 and March
31, 2002 have been adjusted to reflect the adoption of this
change in accounting principle in accordance with the transition
provisions of SFAS 123. 2001 periods do not reflect compensation
expense for stock options under SFAS 123. The adoption of SFAS
123 reduced net income by $3.7 million in the fourth quarter and
$9.2 million, or $0.03 per share, for the year ended December
31, 2002. See page J for a more complete discussion related to
the impact on the first and second quarter of 2002.
(2) Operating earnings for the year ended December 31, 2002 exclude
the after-tax effect of special items related to the acquisition
of Main Street Bancorp of $14.2 million, or $0.05 per share.
(3) Cash earnings represents operating earnings excluding the
after-tax effects of non-cash charges for amortization of
intangible assets, stock option expense and ESOP expense. For
the quarter and year-ended December 31, 2002, these non-cash
charges totaled $17.7 million ($0.06 per share) and $65.9
million ($0.24 per share), respectively.
(4) 2001 earnings include amortization of goodwill which was
discontinued January 1, 2002 upon adoption of SFAS 142. If the
new standards had been applied beginning January 1, 2001, net
income would have been increased by $7.5 million and $29.3
million for the fourth quarter and year-ended 2001.
(5) Efficiency Ratio equals general and administrative expenses
excluding merger-related and other integration charges as a
percentage of total revenue, defined as the sum of net interest
income and total fees and other income before securities
transactions.
(6) Book value equals stockholders' equity divided by common shares
outstanding.
A
Sovereign Bancorp, Inc. and Subsidiaries
FINANCIAL HIGHLIGHTS
(unaudited)
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Quarter Ended
Dec. 31 Sept. 30 June 30 Mar. 31 Dec. 31
2002 2002 2002 2001 2002
(dollars in millions) As Adjusted (1) As Adjusted (1)
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Financial Condition Data:
General
Total assets $ 39,524 $ 39,563 $ 38,239 $ 36,833 $ 35,475
Loans 23,127 22,473 21,938 21,791 20,400
Goodwill 1,025 1,025 1,025 1,025 955
Core deposit intangible 343 363 383 403 389
Total deposits: 26,785 26,536 25,603 24,816 23,298
Core (2) 19,765 19,285 18,052 17,121 16,076
Time (2) 7,020 7,251 7,551 7,694 7,222
Borrowings 8,925 9,115 9,007 8,502 8,940
Trust preferred securities and
minority interests 597 598 603 614 605
Stockholders' equity 2,764 2,711 2,541 2,403 2,202
Asset Quality
Non-performing assets (3) $257.1 $276.7 $256.4 $248.8 $244.7
Non-performing loans (3) $231.4 $255.3 $240.0 $232.2 $225.8
Non-performing assets to total assets (3) 0.65% 0.70% 0.67% 0.68% 0.69%
Non-performing loans to total loans (3) 1.00% 1.14% 1.09% 1.07% 1.11%
Allowance for loan losses $298.8 $295.3 $287.7 $287.0 $264.7
Allowance for loan losses
to total loans 1.29% 1.31% 1.31% 1.32% 1.30%
Allowance for loan losses (3)
to non-performing loans 129% 116% 120% 124% 117%
Capitalization - Bancorp (4)
Shareholders' equity to total assets 6.99% 6.85% 6.64% 6.52% 6.21%
Tangible equity to tangible assets 3.61% 3.29% 3.04% 2.88% 2.59%
Tangible equity to tangible assets,
net of tax 4.63% 4.37% 4.17% 4.07% 3.87%
Tier 1 leverage capital ratio 5.01% 4.70% 4.54% 4.47% 4.21%
Capitalization - Bank (4)
Shareholders' equity to total assets 10.39% 10.40% 10.38% 10.48% 10.26%
Tangible equity to tangible assets 7.56% 7.36% 7.37% 7.41% 7.19%
Tier 1 leverage capital ratio 7.56% 7.36% 7.39% 7.43% 7.21%
Tier 1 risk-based capital ratio 9.68% 9.65% 9.64% 9.64% 9.67%
Total risk based capital ratio 10.67% 10.62% 10.65% 10.67% 10.68%
(1) Expense provisions of SFAS 123 were adopted in the quarter ended
September 30, 2002 for options granted in 2002. Previously reported
amounts for the quarters ended June 30, 2002 and March 31, 2002 have
been adjusted to reflect the adoption of this change in accounting
principle in accordance with the transition provisions of SFAS 123.
See page J for a more complete discussion.
(2) Certain balances in prior quarters have been reclassified to conform
with the December 31, 2002 presentation.
(3) In prior quarters, the balance of non-performing loans (NPL) was
reduced by reserves provided for specific loans. As of December 31,
2002, the balance of NPL was not reduced by specific reserves. The
balances and ratios for prior quarters have been adjusted to conform
with the December 31, 2002 presentation.
(4) All capital ratios are calculated based upon adjusted end of period
assets consistent with OTS guidelines. The current quarter ratios
are estimated as of December 31, 2002.
B
Sovereign Bancorp, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(unaudited)
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Dec. 31 Sept. 30 June 30 Mar. 31 Dec. 31
(dollars in thousands) 2002 2002 2002 2002 2001
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Assets
Cash and amounts due
from depository institutions $ 972,614 $ 1,236,040 $ 1,061,575 $ 974,793 $ 907,279
Investments:
Available-for-sale 10,733,564 11,067,631 10,735,785 9,597,001 9,581,679
Held-to-maturity 632,513 704,750 761,480 820,642 883,437
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Total investments 11,366,077 11,772,381 11,497,265 10,417,643 10,465,116
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Loans:
Commercial 10,260,647 9,824,515 9,627,037 9,384,505 8,563,603
Consumer 8,519,166 8,127,756 7,863,344 7,647,314 6,830,762
Residential mortgages 4,347,512 4,520,535 4,447,232 4,758,914 5,005,219
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Total loans 23,127,325 22,472,806 21,937,613 21,790,733 20,399,584
Less allowance for loan losses (298,750) (295,259) (287,741) (287,015) (264,667)
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Total loans, net 22,828,575 22,177,547 21,649,872 21,503,718 20,134,917
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Premises and equipment, net 281,427 280,615 276,660 278,178 251,587
Accrued interest receivable 175,291 183,773 195,982 182,616 183,913
Goodwill 1,025,292 1,025,292 1,025,292 1,024,292 954,688
Core deposit intangible 343,305 362,885 382,889 403,346 389,216
Bank owned life insurance 765,534 756,518 722,806 714,258 724,242
Other assets 1,766,078 1,768,112 1,426,740 1,335,075 1,463,880
- --------------------------------------------------------------------------------------------------------------------------------
Total assets $39,524,193 $39,563,163 $38,239,081 $36,833,919 $35,474,838
========================================================================================
Liabilities and Stockholders'
Equity
Liabilities:
Deposits:
Core $19,764,959 $19,285,040 $18,052,334 $17,121,424 $16,075,487
Time 7,020,021 7,250,861 7,550,601 7,694,126 7,222,087
- --------------------------------------------------------------------------------------------------------------------------------
Total deposits 26,784,980 26,535,901 25,602,935 24,815,550 23,297,574
- --------------------------------------------------------------------------------------------------------------------------------
Borrowings 8,925,326 9,114,880 9,007,218 8,502,109 8,939,770
Other liabilities 452,612 603,964 484,425 498,948 430,485
- --------------------------------------------------------------------------------------------------------------------------------
Total liabilities 36,162,918 36,254,745 35,094,578 33,816,607 32,667,829
- --------------------------------------------------------------------------------------------------------------------------------
Redeemable capital securities
and other minority interests 596,957 597,710 602,613 613,862 604,528
Stockholders' equity:
Common Stock 1,580,282 1,576,354 1,573,942 1,569,274 1,416,267
Warrants 91,500 91,500 91,500 91,500 91,500
Options Outstanding 10,392 7,617 4,861 2,079 --
Unallocated ESOP shares (21,313) (23,177) (23,177) (23,177) (30,945)
Treasury stock (1,832) (2,027) (2,215) (3,562) (515)
Unvested restricted stock (4,228) (4,228) (4,256) (6,272) (6,272)
Accumulated other
comprehensive income/ (loss) 28,009 69,619 (7,299) (51,196) (33,135)
Retained earnings 1,081,508 995,050 908,534 824,804 765,581
- --------------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 2,764,318 2,710,708 2,541,890 2,403,450 2,202,481
- --------------------------------------------------------------------------------------------------------------------------------
Total liabilities and
stockholders' equity $39,524,193 $39,563,163 $38,239,081 $36,833,919 $35,474,838
=========================================================================================
C
Sovereign Bancorp, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
- ----------------------------------------------------------------------------------------------------------------------------------
Quarter Ended
----------------------------------------------------------------
Dec. 31 Sept. 30 June 30 Mar. 31 Dec. 31
2002 2002 2002 As 2002 As 2001
(dollars in thousands, except per share data) Adjusted(1) Adjusted(1)
- ----------------------------------------------------------------------------------------------------------------------------------
Interest and dividend income:
Interest on interest-earning deposits $787 $915 $978 $1,940 $872
Interest on investment securities
Available for sale 154,331 161,094 158,638 140,698 153,226
Held to maturity 9,611 11,472 12,351 13,533 14,886
Interest on loans 349,865 350,862 353,809 338,656 352,697
- ----------------------------------------------------------------------------------------------------------------------------------
Total interest and dividend income 514,594 524,343 525,776 494,827 521,681
- ----------------------------------------------------------------------------------------------------------------------------------
Interest expense:
Deposits 111,562 119,420 116,295 111,010 126,261
Borrowings 109,900 107,373 112,476 111,888 117,761
- ----------------------------------------------------------------------------------------------------------------------------------
Total interest expense 221,462 226,793 228,771 222,898 244,022
- ----------------------------------------------------------------------------------------------------------------------------------
Net interest income 293,132 297,550 297,005 271,929 277,659
Provision for loan losses 36,000 38,000 28,000 44,500 32,000
- ----------------------------------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 257,132 259,550 269,005 227,429 245,659
- ----------------------------------------------------------------------------------------------------------------------------------
Non-interest income:
Consumer banking fees 48,853 47,743 44,243 38,563 40,971
Commercial banking fees 23,802 24,976 23,554 22,751 18,223
Mortgage banking revenue 8,251 4,245 6,609 9,466 13,131
Capital markets revenue 5,414 4,436 1,808 3,337 2,959
Bank owned life insurance income 11,801 10,722 10,644 10,289 12,708
Other 6,069 5,367 5,588 2,564 2,407
- ----------------------------------------------------------------------------------------------------------------------------------
Total fees and other income before
securities transactions 104,190 97,489 92,446 86,970 90,399
Gain/(loss) on investments and related
derivatives transactions 14,356 12,668 3,841 20,566 (1,997)
- ----------------------------------------------------------------------------------------------------------------------------------
Total non-interest income 118,546 110,157 96,287 107,536 88,402
- ----------------------------------------------------------------------------------------------------------------------------------
Non-interest expense:
General and administrative
Compensation and benefits (1) 93,084 91,460 92,258 86,011 81,900
Occupancy and equipment 55,057 54,716 49,984 50,287 53,003
Technology expense 17,575 17,494 17,715 16,640 19,086
Outside services 12,942 12,210 12,631 11,452 12,162
Other administrative expenses 34,392 31,445 33,105 29,649 30,186
- ----------------------------------------------------------------------------------------------------------------------------------
Total general and administrative 213,050 207,325 205,693 194,039 196,337
Other expenses
Amortization of goodwill and other intangibles (2) 19,580 20,003 20,457 20,234 32,131
Trust preferred securities and other
minority interest expense 16,058 15,313 15,906 15,558 15,313
Merger-related and integration charges -- -- -- 15,871 --
Non-solicitation and restructuring expenses -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Total other expenses 35,638 35,316 36,363 51,663 47,444
- ----------------------------------------------------------------------------------------------------------------------------------
Total non-interest expense 248,688 242,641 242,056 245,702 243,781
- ----------------------------------------------------------------------------------------------------------------------------------
Income before income taxes (1) 126,990 127,066 123,236 89,263 90,280
Income tax expense (1) 33,905 33,927 32,892 23,845 16,820
- ----------------------------------------------------------------------------------------------------------------------------------
Income before extraordinary items 93,085 93,139 90,344 65,418 73,460
Loss on the early extinguishment of debt
(net of tax of $3,526) -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Net income (1) $93,085 $93,139 $90,344 $65,418 $73,460
- ----------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------
Diluted earnings per share (1) $0.33 $0.33 $0.32 $0.24 $0.28
----------------------------------------------------------------
Weighted average shares:
Basic 261,269 261,015 260,513 250,619 247,089
Diluted (1) 281,467 281,007 281,237 268,981 262,514
- -------------------------------------------------------------------------------------------
Year Ended
--------------------------
Dec. 31 Dec. 31
2002 2001
(dollars in thousands, except per share data)
- -------------------------------------------------------------------------------------------
Interest and dividend income:
Interest on interest-earning deposits $4,620 $2,522
Interest on investment securities
Available for sale 614,761 538,318
Held to maturity 46,967 68,607
Interest on loans 1,393,192 1,613,028
- -------------------------------------------------------------------------------------------
Total interest and dividend income 2,059,540 2,222,475
- -------------------------------------------------------------------------------------------
Interest expense:
Deposits 458,287 705,886
Borrowings 441,637 462,307
- -------------------------------------------------------------------------------------------
Total interest expense 899,924 1,168,193
- -------------------------------------------------------------------------------------------
Net interest income 1,159,616 1,054,282
Provision for loan losses 146,500 97,100
- -------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 1,013,116 957,182
- -------------------------------------------------------------------------------------------
Non-interest income:
Consumer banking fees 179,402 157,502
Commercial banking fees 95,083 75,825
Mortgage banking revenue 28,571 69,509
Capital markets revenue 14,995 11,185
Bank owned life insurance income 43,456 42,671
Other 19,588 42,200
- -------------------------------------------------------------------------------------------
Total fees and other income before
securities transactions 381,095 398,892
Gain/ (loss) on investments and related
derivatives transactions 51,431 15,511
- -------------------------------------------------------------------------------------------
Total non-interest income 432,526 414,403
- -------------------------------------------------------------------------------------------
Non-interest expense:
General and administrative
Compensation and benefits (1) 362,813 318,686
Occupancy and equipment 210,044 208,648
Technology expense 69,424 71,654
Outside services 49,235 53,109
Other administrative expenses 128,591 125,188
- -------------------------------------------------------------------------------------------
Total general and administrative 820,107 777,285
Other expenses
Amortization of goodwill and other intangibles (2) 80,274 133,551
Trust preferred securities and other
minority interest expense 62,835 59,063
Merger-related and integration charges 15,871 8,500
Non-solicitation and restructuring expenses -- 243,241
- -------------------------------------------------------------------------------------------
Total other expenses 158,980 444,355
- -------------------------------------------------------------------------------------------
Total non-interest expense 979,087 1,221,640
- -------------------------------------------------------------------------------------------
Income before income taxes (1) 466,555 149,945
Income tax expense (1) 124,570 26,575
- -------------------------------------------------------------------------------------------
Income before extraordinary items 341,985 123,370
Loss on the early extinguishment of debt
(net of tax of $3,526) -- (6,549)
- -------------------------------------------------------------------------------------------
Net income (1) $341,985 $116,821
- -------------------------------------------------------------------------------------------
--------------------------
Diluted earnings per share (1) $1.23 $0.45
--------------------------
Weighted average shares:
Basic 258,461 244,643
Diluted (1) 279,039 256,895
(1) Expense provisions of SFAS 123 were adopted in the quarter ended September
30, 2002 for options granted in 2002. Previously reported amounts for the
quarters ended June 30, 2002 and March 31, 2002 have been adjusted to reflect
the adoption of this change in accounting principle in accordance with the
existing transition provisions of SFAS 123. 2001 and prior periods do not
reflect compensation expense for stock options under SFAS No. 123. See page J
for a more complete discussion.
(2) 2001 values include amortization of goodwill which was discontinued January
1, 2002 upon adoption of SFAS 141/142.
D
Sovereign Bancorp, Inc. and Subsidiaries
AVERAGE BALANCE, INTEREST AND YIELD/RATE ANALYSIS
(unaudited)
- ---------------------------------------------------------------------------------------------------------------
Quarter Ended
----------------------------------------------------------------------
December 31, 2002 September 30, 2002
--------------------------------- --------------------------------
Average Yield/ Average Yield/
(dollars in thousands) Balance Interest(1) Rate Balance Interest(1) Rate
- ---------------------------------------------------------------------------------------------------------------
Earning assets:
Investment securities $11,398,146 $168,614 5.92% $11,544,459 $177,384 6.15%
Loans:
Commercial 10,011,388 140,036 5.52% 9,693,023 143,023 5.83%
Consumer 8,236,400 133,822 6.45% 7,983,446 133,543 6.64%
Residential mortgages 4,844,516 77,229 6.38% 4,467,594 75,491 6.76%
--------------------------------- -------------------------------
Total loans 23,092,304 351,087 6.03% 22,144,063 352,057 6.31%
--------------------------------- -------------------------------
Allowance for loan losses (293,024) (289,692)
--------------------------------- -------------------------------
Total earning assets 34,197,426 $519,701 6.05% 33,398,830 $529,441 6.31%
----------------- ----------------
Other assets 5,438,366 5,231,164
----------- -----------
Total assets $39,635,792 $38,629,994
=========== ===========
Funding liabilities
Deposits:
Core $19,556,573 $55,533 1.13% $18,567,828 $58,166 1.24%
Time 7,152,274 56,029 3.11% 7,427,418 61,253 3.27%
--------------------------------- --------------------------------
Total deposits 26,708,847 111,562 1.66% 25,995,246 119,419 1.82%
--------------------------------- --------------------------------
Borrowings
Federal Home Loan Bank
advances 5,846,287 78,854 5.30% 6,001,042 74,309 4.86%
Fed funds and repurchase
agreements 1,125,331 3,363 1.17% 749,018 3,900 2.04%
Other borrowings 1,914,646 27,683 5.73% 1,941,260 29,164 5.95%
--------------------------------- -------------------------------
Total borrowings 8,886,264 109,900 4.87% 8,691,320 107,373 4.86%
--------------------------------- -------------------------------
Total funding liabilities 35,595,111 $221,462 2.46% 34,686,566 $226,792 2.58%
--------------------------------- -------------------------------
Other liabilities 1,303,996 1,317,814
----------- -----------
Total liabilities 36,899,107 36,004,380
----------- -----------
Stockholders' equity 2,736,685 2,625,614
----------- -----------
Total liabilities and
stockholders' equity $39,635,792 $38,629,994
=========== ===========
Net interest income $298,239 $302,649
======== ========
Interest rate spread 3.01% 3.13%
Net interest margin 3.49% 3.62%
- ----------------------------------------------------------------------------------------------
Quarter Ended
--------------------------------
December 31, 2001
--------------------------------
Average Yield/
(dollars in thousands) Balance Interest(1) Rate
- ----------------------------------------------------------------------------------------------
Earning assets:
Investment securities $10,549,379 $171,633 6.51%
Loans:
Commercial 8,334,244 135,907 6.44%
Consumer 6,811,664 124,096 7.24%
Residential mortgages 5,110,753 93,934 7.35%
---------------------------------
Total loans 20,256,661 353,937 6.94%
---------------------------------
Allowance for loan losses (258,154)
---------------------------------
Total earning assets 30,547,886 $525,570 6.85%
-----------------
Other assets 4,784,210
-----------
Total assets $35,332,096
===========
Funding liabilities
Deposits:
Core $15,696,738 $44,192 1.12%
Time 7,446,634 82,069 4.37%
---------------------------------
Total deposits 23,143,372 126,261 2.16%
---------------------------------
Borrowings
Federal Home Loan Bank
advances 6,314,031 78,860 4.90%
Fed funds and repurchase
agreements 1,035,780 6,877 2.60%
Other borrowings 1,657,122 32,024 7.73%
---------------------------------
Total borrowings 9,006,933 117,761 5.15%
---------------------------------
Total funding liabilities 32,150,305 $244,022 3.00%
---------------------------------
Other liabilities 993,691
-----------
Total liabilities 33,143,996
-----------
Stockholders' equity 2,188,100
-----------
Total liabilities and
stockholders' equity $35,332,096
===========
Net interest income $281,548
========
Interest rate spread 3.19%
Net interest margin 3.69%
(1) Tax equivalent basis
E
Sovereign Bancorp, Inc. and Subsidiaries
AVERAGE BALANCE, INTEREST AND YIELD/RATE ANALYSIS
(unaudited)
- -------------------------------------------------------------------------------------------------------------------
Year Ended
-----------------------------------------------------------------------
December 31, 2002 December 31, 2001
- ------------------------------------------------------------------------------- ----------------------------------
Average Yield/ Average Yield/
(dollars in thousands) Balance Interest(1) Rate Balance Interest(1) Rate
- -------------------------------------------------------------------------------------------------------------------
Earning assets:
Investment Securities $11,030,458 $681,760 6.18% $9,056,538 $619,657 6.84%
Loans:
Commercial 9,482,973 559,152 5.90% 8,222,120 624,301 7.59%
Consumer 7,745,575 520,216 6.71% 6,613,153 513,572 7.77%
Residential mortgages 4,729,353 318,760 6.74% 6,285,920 480,149 7.64%
---------------------------------- ----------------------------------
Total loans 21,957,901 1,398,128 6.37% 21,121,193 1,618,022 7.66%
---------------------------------- ----------------------------------
Allowance for loan losses (287,141) (255,555)
---------------------------------- ----------------------------------
Total earning assets 32,701,218 $2,079,888 6.36% 29,922,176 $2,237,679 7.48%
-------------------- -------------------
Other assets 5,060,035 4,552,095
----------- -----------
Total assets $37,761,253 $34,474,271
=========== ===========
Funding liabilities
Deposits:
Core $17,997,216 $205,613 1.14% $15,325,258 $273,217 1.78%
Time 7,363,772 252,674 3.43% 8,194,940 432,670 5.28%
----------------------------------- -----------------------------------
Total deposits 25,360,988 458,287 1.81% 23,520,198 705,887 3.00%
----------------------------------- -----------------------------------
Borrowings
Federal Home Loan
Bank advances 5,996,370 306,825 5.12% 5,954,048 311,453 5.23%
Fed funds and repurchase
agreements 694,640 13,015 1.87% 624,155 22,150 3.55%
Other borrowings 1,954,471 121,797 6.23% 1,410,636 128,703 9.12%
---------------------------------- ----------------------------------
Total borrowings 8,645,481 441,637 5.11% 7,988,839 462,306 5.79%
---------------------------------- ----------------------------------
Total funding liabilities 34,006,469 $899,924 2.65% 31,509,037 $1,168,193 3.71%
---------------------------------- ----------------------------------
Other liabilities 1,222,385 843,660
----------- -----------
Total liabilities 35,228,854 32,352,697
----------- -----------
Stockholders' equity 2,532,399 2,121,574
----------- -----------
Total liabilities and
stockholders' equity $37,761,253 $34,474,271
=========== ===========
Net interest income $1,179,964 $1,069,486
========== ==========
Interest rate spread 3.12% 3.10%
Net interest margin 3.61% 3.57%
(1) Tax equivalent basis
F
Sovereign Bancorp, Inc. and Subsidiaries
SUPPLEMENTAL INFORMATION
(unaudited)
- --------------------------------------------------------------------------------------------------------------------------------
NON-PERFORMING ASSETS
- --------------------------------------------------------------------------------------------------------------------------------
Dec. 31 Sept. 30 June 30 Mar. 31 Dec. 31
(dollars in thousands) 2002 2002 2002 2002 2001
- --------------------------------------------------------------------------------------------------------------------------------
Non-accrual loans: (1)
Commercial $160,806 $169,268 $151,981 $140,736 $119,769
Consumer 32,844 31,066 29,010 29,555 28,032
Residential mortgages 36,849 53,919 57,693 60,400 76,737
- --------------------------------------------------------------------------------------------------------------------------------
Total non-accrual loans 230,499 254,253 238,684 230,691 224,538
Restructured loans 893 1,087 1,305 1,498 1,280
- --------------------------------------------------------------------------------------------------------------------------------
Total non-performing loans 231,392 255,340 239,989 232,189 225,818
Real estate owned, net 19,007 14,128 10,728 10,594 12,076
Other repossessed assets 6,663 7,281 5,711 5,989 6,852
- --------------------------------------------------------------------------------------------------------------------------------
Total non-performing assets $257,062 $276,749 $256,428 $248,772 $244,746
Non-performing loans as a percentage
of total loans 1.00% 1.14% 1.09% 1.07% 1.11%
Non-performing assets as a percentage
of total assets 0.65% 0.70% 0.67% 0.68% 0.69%
Non-performing assets as a percentage
of total loans and real estate owned 1.11% 1.23% 1.17% 1.14% 1.20%
Allowance for loan losses as a percentage
of non-performing loans 129% 116% 120% 124% 117%
NET LOAN CHARGE-OFFS (RECOVERIES)
- --------------------------------------------------------------------------------------------------------------------------------
Dec. 31 Sept. 30 June 30 Mar. 31 Dec. 31
Quarters ended (in thousands) 2002 2002 2002 2002 2001
- --------------------------------------------------------------------------------------------------------------------------------
Commercial $18,564 $20,430 $17,056 $23,798 $12,978
Consumer 10,889 9,576 9,742 9,577 11,312
Residential mortgages 3,056 476 476 3,653 152
- --------------------------------------------------------------------------------------------------------------------------------
Total $32,509 $30,482 $27,274 $37,028 $24,442
DEPOSIT COMPOSITION (2)
- --------------------------------------------------------------------------------------------------------------------------------
Dec. 31 Sept. 30 June 30 Mar. 31 Dec. 31
Quarters ended (in thousands) 2002 2002 2002 2002 2001
- --------------------------------------------------------------------------------------------------------------------------------
Demand deposit accounts $4,067,784 $4,032,345 $3,848,820 $3,766,905 $3,719,829
NOW accounts 6,967,973 6,494,376 5,376,952 4,499,282 4,414,123
Savings accounts 2,971,779 2,945,108 3,031,326 3,068,113 2,930,987
Money market accounts 5,757,423 5,813,211 5,795,236 5,787,124 5,010,548
Retail certificates 6,736,443 6,925,561 7,177,838 7,267,550 6,959,877
Jumbo certificates 283,578 325,300 372,763 426,576 262,210
- --------------------------------------------------------------------------------------------------------------------------------
Total $26,784,980 $26,535,901 $25,602,935 $24,815,550 $23,297,574
LOAN COMPOSITION
- --------------------------------------------------------------------------------------------------------------------------------
Dec. 31 Sept. 30 June 30 Mar. 31 Dec. 31
Quarters ended (in thousands) 2002 2002 2002 2002 2001
- --------------------------------------------------------------------------------------------------------------------------------
Commercial real estate $ 3,883,421 $ 3,873,405 $ 3,682,366 $ 3,623,838 $ 2,987,747
Commercial industrial loans 5,007,045 4,849,320 4,758,043 4,629,240 4,506,198
Other 1,370,181 1,101,790 1,186,628 1,131,427 1,069,658
- --------------------------------------------------------------------------------------------------------------------------------
Total commercial loans $10,260,647 $9,824,515 $9,627,037 $9,384,505 $8,563,603
- --------------------------------------------------------------------------------------------------------------------------------
Home equity loans 5,165,834 4,747,633 4,589,610 4,419,321 3,756,391
Auto loans 3,038,976 3,057,071 2,952,784 2,890,785 2,733,106
Other 314,356 323,052 320,950 337,206 341,265
- --------------------------------------------------------------------------------------------------------------------------------
Total consumer loans (3) 8,519,166 8,127,756 7,863,344 7,647,314 6,830,762
- --------------------------------------------------------------------------------------------------------------------------------
Total residential loans 4,347,512 4,520,535 4,447,232 4,758,914 5,005,219
- --------------------------------------------------------------------------------------------------------------------------------
Total loans $23,127,325 $22,472,806 $21,937,613 $21,790,733 $20,399,584
- --------------------------------------------------------------------------------------------------------------------------------
(1) In prior quarters, the balance of non-performing loans (NPL's) was reduced
by reserves provided for specific loans. As of December 31, 2002, the
balance of NPL's was not reduced by specific reserves. The balances and
ratios for prior quarters have been adjusted to conform with the December
31, 2002 presentation.
(2) Prior period deposit composition balances have been reclassified to
conform to the current period presentation.
(3) Prior period consumer loan composition was reclassified to conform to
current period presentation.
G
Sovereign Bancorp, Inc. and Subsidiaries
RECONCILIATION OF CASH AND OPERATING EARNINGS TO REPORTED EARNINGS
(unaudited)
- --------------------------------------------------------------------------------
Operating earnings for 2002 exclude the after tax effects of loan loss provision
and merger expenses related to the Main Street acquisition. Operating earnings
for 2001 exclude the after tax effects of special charges for restructuring
costs associated with the closure of 14 branches, early extinguishment of debt,
and expense related to a non-solicitation agreement with FleetBoston. Final
payment under the non-solicitation agreement was made to FleetBoston in
September 2001. Cash earnings are operating earnings excluding the after-tax
effects of non-cash charges for amortization of intangible assets, stock option
expense, and ESOP expense.
- ---------------------------------------------------------------------------------------------------------
(dollars in thousands, net of tax) Quarter Ended Year Ended
- ---------------------------------------------------------------------------------------------------------
Total dollars Total dollars
--------------------------------- ---------------------
Dec. 31 Sept. 30 Dec. 31 Dec. 31 Dec. 31
2002 2002 2001 2002 2001
--------- ---------- --------- ---------- ----------
Net income as reported $ 93,085 $ 93,139 $73,460 $341,985 $116,821
-------- -------- ------- -------- --------
Loss on the early extinguishment of debt -- -- -- -- 6,549
-------- -------- ------- -------- --------
Main Street Bancorp acquisition:
Net merger related and integration costs -- -- -- 10,316 --
Provision for loan loss -- -- -- 3,900 --
-------- -------- ------- -------- --------
Restructuring -- -- -- -- 5,525
-------- -------- ------- -------- --------
Non-solicitation expense -- -- -- -- 158,106
-------- -------- ------- -------- --------
Operating earnings $ 93,085 $ 93,139 $73,460 $356,201 $287,001
-------- -------- ------- -------- --------
Amortization of intangibles(1) 13,269 13,545 21,535 54,121 89,408
-------- -------- ------- -------- --------
Stock option expense(2) 3,666 2,020 -- 9,249 --
-------- -------- ------- -------- --------
ESOP expense 736 641 502 2,554 1,906
-------- -------- ------- -------- --------
Cash earnings $110,756 $109,345 $95,497 $422,125 $378,315
-------- -------- ------- -------- --------
Weighted average fully diluted shares 281,467 281,007 262,514 279,039 256,895
-------- -------- ------- -------- --------
(1) 2001 earnings include amortization of goodwill which was discontinued
January 1, 2002 upon adoption of SFAS 142. If the new standards had been
applied beginning January 1, 2001, net income would have been increased by
$7.5 million and $29.3 million for the fourth quarter and year-ended 2001.
(2) Expense provisions of SFAS 123 were adopted in the quarter ended September
30, 2002 for options granted in 2002. 2001 amounts do not include
compensation expense for stock options under SFAS No. 123. See page J for
a more complete discussion.
H
Sovereign Bancorp, Inc. and Subsidiaries
SUPPLEMENTAL INFORMATION
(unaudited)
- --------------------------------------------------------------------------------
Rollforward of Weighted Average Diluted Shares
- --------------------------------------------------------------------------------
(in millions)
Quarter Ended Year Ended
----------------- -----------------
December 31, 2002 December 31, 2002
----------------- -----------------
Weighted average diluted
shares at beginning of period 281.0 256.9
Average shares issued, net
of treasury:
Main Street Bancorp acquisition
(net shares issued 11.4) -- 9.3
Other 0.9 4.5
Dilutive average effect of
warrants and stock-based
compensation plans:
Warrants (0.4) 7.0
Stock-based compensation plans -- 1.3
----- -----
Weighted average diluted
shares at end of period 281.5 279.0
Dilutive Effect of Warrants - Convertible Trust Preferred Securities (PIERS)
- --------------------------------------------------------------------------------
(in millions, except for share price)
- --------------------------------------------------------------------------------
Share Dilutive effect of
Price PIERS
- --------------------------------------------------------------------------------
$10.00 11.9
$11.00 13.6
$12.00 15.0
$13.00 16.2
$13.74 17.0 - Average share price 4Q '02
$14.00 17.2
$14.12 17.4 - Average share price 3Q '02
$15.00 18.1
$16.00 18.9
$17.00 19.6
$18.00 20.2
$19.00 20.8
$20.00 21.3
I
Sovereign Bancorp, Inc. and Subsidiaries
SUPPLEMENTAL INFORMATION
(unaudited)
- --------------------------------------------------------------------------------
The following table represents the impact resulting from the adoption of SFAS
123 on our financial results for the first and second quarters.
(dollars in millions, except per June 30, 2002 June 30, 2002
share amounts and ratios) As Reported As Adjusted
- -------------------------------- ------------- -------------
Other assets $ 1,425.4 $ 1,426.7
Total assets 38,237.8 38,239.1
Retained earnings 912.1 908.5
Stockholders' Equity 2,540.6 2,541.9
Compensation and benefits 89.5 92.3
Net income 92.4 90.3
Operating earnings 92.4 90.3
Diluted EPS 0.33 0.32
Weighted average diluted shares (in millions) 282.2 281.2
Efficiency ratio 52.10% 52.48%
(dollars in millions, except per March 31, 2002 March 31, 2002
share amounts and ratios) As Reported As Adjusted
- -------------------------------- -------------- --------------
Other assets $ 1,376.8 $ 1,377.4
Total assets 36,833.4 36,834.0
Retained earnings 826.3 824.8
Stockholders' Equity 2,402.9 2,403.4
Compensation and benefits 83.9 86.0
Net income 66.9 65.4
Operating earnings 81.2 79.6
Diluted EPS 0.25 0.24
Weighted average diluted shares (in millions) 269.9 269.0
Efficiency ratio 53.48% 54.07%
J