Exhibit 99.1
Sovereign Bancorp PRESS RELEASE
January 24, 2001 Dennis S. Marlo (610) 320-8437
Immediate Release Dmarlo@Sovereignbank.com
Mark R. McCollom (610) 208-6426
Mmccollo@Sovereignbank.com
Robert E. Bond (610) 988-0300
Rbond@Sovereignbank.com
Sovereign Website
Sovereignbank.com
Corporate Headquarters: 2000 Market Street, Philadelphia, PA
SOVEREIGN ANNOUNCES 2000
CASH EARNINGS OF $309 MILLION
CASH EPS UP 10%
OPERATING EARNINGS OF $240 MILLION
Cash EPS of $1.48; up 10% from prior year
Management's assessment of the allowance for loan losses results
in a $28.5 million loan loss provision for the fourth quarter
Fourth quarter cash earnings increased 34% to $80.4 million up
from $59.8 million in 1999; fourth quarter operating earnings of
$55.6 million, or $.25 per diluted share
Year over year core revenue growth 48%; Revenue per share up 22%
from prior year
Year over year operating net interest margin improvement of 31
basis points to 3.19%
Balance sheet repositioning continues, overall borrowing levels
reduced $1.3 billion or 18% during fourth quarter; $6.1 billion
or 50% for the year
New structure, revenue enhancement and expense reduction
projects progress
Sovereign Bank New England deposit retention exceeds
expectations
PHILADELPHIA, PA...Sovereign Bancorp, Inc. ("Sovereign")
(NASDAQ/NMS: SVRN), parent company of Sovereign Bank, today
reported cash earnings for 2000 of $308.6 million, or $1.48 per
diluted share, up from $231.5 million and $1.34 per diluted
share reported in 1999. Cash earnings are operating earnings
excluding amortization of intangible assets and ESOP related
expenses. Cash return on tangible equity was 46.9% in 2000,
compared with 26.6% in 1999. For 2000, cash return on average
equity and cash return on average assets were 18.3% and .99%
respectively, up from 17.7% and .97% reported for the past year.
Cash earnings for the fourth quarter ended December 31,
2000 of $80.4 million, or $.35 per diluted share, up from $59.8
million and $.33 per diluted share reported for the same period
in 1999. Cash return on tangible equity was 70.1% for the
quarter ended December 31, 2000 versus 25.6 % for the fourth
quarter of 1999.
On an operating basis, earnings for 2000 were $239.9
million, up from $202.3 million for the same period last year.
For the year ended 2000, operating EPS was $1.15. Operating
earnings for the quarter ended December 31, 2000 were $55.6
million or $.25 per diluted share; an increase of 7% as compared
to $52.2 million for the quarter ended December 31, 1999.
Operating earnings include certain one-time tax benefits and
exclude special charges for one-time restructuring and merger-
related costs. Restructuring and merger-related costs include
organizational restructuring charges, securities losses related
to balance sheet restructuring, systems and integration charges
related to recent acquisitions, expenses related to a non-
solicitation agreement with Fleet Boston Financial Corporation
("FleetBoston"), and the impact on net interest income and
shares outstanding from early issuance of certain debt and
equity instruments issued to finance Sovereign's New England
retail banking and middle market lending acquisition ("Sovereign
Bank New England", "New England", or "SBNE"). The net impact of
the tax benefits and special charges for the year ended
December 31, 2000 were $243.8 million after-tax and for the
quarter ended December 31, 2000 were $50.7 million after-tax.
In reporting year-end 2000 operating results, Jay S. Sidhu,
Sovereign's President and Chief Executive Officer, said, "We are
very pleased with the company's many accomplishments in 2000 and
the contributions made by Sovereign team members. We exceeded
all expectations with the integration of our New England
franchise and customer base into Sovereign. With the successful
integration of New England, the realignment of our
organizational structure, the restructuring of our balance
sheet, and by closely watching over our asset quality, we are
now positioned to grow our revenues and improve our productivity
levels over the coming quarters." Sovereign's 2000 net income,
which includes the special charges noted above, was a loss of
$30.2 million, or $.13 per share. Fourth quarter 2000 Sovereign
net loss, which includes the special charges noted above, was
$3.3 million, or $.01 per diluted share.
Revenue Growth and Loan Origination
For the year 2000, core revenue (operating net interest
income plus non-interest income, excluding securities
transactions) was $1.1 billion, an increase of 48.0% from 1999
core revenue of $743 million. For the fourth quarter 2000, core
revenue was $334 million, an increase of 67.4% from fourth
quarter 1999 core revenue of $199 million, and up from third
quarter 2000 core revenue of $316 million.
Sovereign's core revenue for 2000 was $5.26 per diluted
share, up 22.2% from $4.31 per diluted share reported in 1999.
For the fourth quarter 2000, core revenue was $1.47 per diluted
share, a 34.4% increase from $1.09 per diluted share for the
fourth quarter of 1999.
Commercial loan originations for the year were $2.0 billion
and were $594 million for the fourth quarter of 2000. At
December 31, 2000, commercial loans totaled $7.8 billion
representing 36% of the loan portfolio, compared to $4.1 billion
and 29% of the loan portfolio at December 31, 1999.
Consumer loans originated during the year of 2000 totaled
$2.1 billion and $573 million during the fourth quarter.
Sovereign's consumer loan portfolio (including home equity loans
and lines of credit, automobile loans, and other consumer loans)
totaled $6.1 billion at December 31, 2000 compared to $4.5
billion at December 31, 1999. At December 31, 2000, consumer
loans comprised 28% of Sovereign's loan portfolio compared to
31% at December 31, 1999.
Residential mortgage loans during the year increased $2.2
billion. During the quarter, residential mortgage loans
declined $580 million due primarily to a $549 million
securitization. At December 31, 2000, residential mortgage
loans totaled $8.0 billion, representing 36% of Sovereign's loan
portfolio as compared to 40% at December 31, 1999.
Non-interest income excluding securities transactions for
the year ended December 31, 2000 was $229.7 million, an 82%
increase from $126.0 million reported in 1999. Retail banking
fees were $91.3 million for the year as compared to $49.2
million reported in 1999.
Non-interest income excluding securities transactions for
the quarter ended December 31, 2000 was $79.5 million, a 148%
increase from $32.0 million reported in 1999. Retail banking
fees were $31.6 million for the quarter as compared to $13.5
million reported in 1999 and $28.1 million reported in the third
quarter 2000.
Deposit Growth
The retail-banking group finished the year posting solid
sales. As a result of targeted promotions, checking and money
market deposit growth for the year excluding the SBNE
acquisition and branch sales was a net increase of $684 million,
or a growth rate of 16.4%. Overlaying deposit retention efforts
in New England, total deposit balances increased $12.5 billion
for the year. Core deposits, which include checking, savings,
and money market accounts increased $8.8 billion for the year.
Sovereign Bank New England Banking Fundamentals
As previously announced, Sovereign has effectively had no
net deposit run-off for the FleetBoston branch and line of
business acquisition. Net deposit retention for the New England
acquisition at year-end was 99.8%.
During the quarter, SBNE total deposits increased by $280
million for a 9.4% annualized increase. Core deposits increased
$213 million on a linked quarter basis, or a 10% annualized
increase.
In reporting fourth quarter operating results for SBNE,
John P. Hamill, Sovereign Bank New England Chairman and Chief
Executive Officer, said "At the outset of the FleetBoston branch
and line of business acquisition, we recognized the importance
of customer retention. Team member efforts in this area have
been tremendous contributing to a 99.8% net deposit retention
rate through year-end and well ahead of our expectations."
Core Business Improvements
On an operating basis, net interest margin was 3.19% for
2000 and 3.50% for the quarter, compared to 2.88% for 1999 and
2.97% for the fourth quarter last year and 3.47% for the third
quarter of 2000. "The improved net interest margin is the
result of a full quarter impact of the conversion of SBNE.
While the economic and competitive environment is challenging,
Sovereign continued to see a modest widening of its net interest
margin as a result of the low-cost deposits acquired during the
year, an improved interest rate risk position and other balance
sheet restructuring initiatives," stated Dennis S. Marlo,
Sovereign's Chief Financial Officer and Treasurer.
The core bank margin (total loan yield less cost of
deposits) was 4.50% for the year ended December 31, 2000, and
4.56% for the fourth quarter of 2000, compared with 4.08% for
1999 and 4.10% for the fourth quarter of 1999.
Balance Sheet Initiatives
During the quarter, proceeds of $1.5 billion from deposit
growth and the securitization and sale of loans contributed to a
reduction of borrowings of $1.3 billion.
During the quarter, Sovereign sold residential mortgages
and student loans totaling $199 million and $215 million
respectively. In addition, Sovereign securitized $549 million
in residential mortgages and also securitized and sold $600
million and $369 million in automotive floor plan and home
equity lines of credit, respectively. For the year, Sovereign
has transformed its balance sheet by selling investment
securities and loans with the proceeds used to reduce wholesale
borrowings. "This deleveraging throughout the year achieves
our long-term goal of reducing our earnings reliance on interest
sensitive, lower margin investments and wholesale borrowings,"
stated Marlo.
"This balance sheet restructuring has also contributed to
an improved liquidity position for the organization as reflected
by a loan to deposit ratio of 89% at December 31, 2000, a
decrease from 119% a year ago," Marlo included.
For the year, capital levels were favorably impacted by the
sale of real estate to a third party, sales of investment
securities, sales of retail banking offices in non-strategic
areas of Sovereign's market, asset securitizations and sales,
and the issuance of preferred stock in Sovereign Real Estate
Investment Trust, a subsidiary of Sovereign Bank. These
transactions have resulted in an increase to Sovereign's Tier 1
leverage ratio from a pro forma .38% as forecasted including
SBNE and previously disclosed in November 1999 to 3.09%
currently. Sovereign Bank, Sovereign's banking subsidiary,
remains well capitalized with Tier 1 leverage and total risk-
based capital ratios of 6.92% and 10.35%, respectively at
December 31, 2000.
Operating Expenses
Including special charges, general and administrative
expenses for 2000 were $731.5 million and $185.8 million for the
fourth quarter 2000, compared to $392.9 million and $132.5
million for the same periods last year. Excluding special
charges, general and administrative expenses were $582.2 million
for 2000 and $185.8 million for the quarter ended December 31,
2000. "The organizational streamlining and restructuring effort
announced in November is progressing as planned and benefits
from this initiative are already being realized," stated Marlo.
Asset Quality
Management's assessment of the allowance for loan losses
incorporating the current economic environment has resulted in a
$28.5 million loan loss provision in the fourth quarter. This
compares with a $7.5 million provision in the fourth quarter
last year and a $10 million provision in the third quarter of
2000.
The non-performing assets ratio at December 31, 2000
increased to .56% from .39% at September 30, 2000 due to a $48.7
million increase in non-performing loans. The higher non-
performing loans primarily resulted from increased delinquencies
of commercial and residential loans. Contributing to the
increase in part is the seasoning of the loans acquired in the
FleetBoston line of business acquisition. Additionally, an
isolated cash flow syndicated loan portfolio has negatively
impacted commercial non-performing loans. The total amount of
syndicated cash flow loans at Sovereign at December 31, 2000 was
$249 million, down from $275 million at September 30, 2000.
During the quarter, Sovereign increased its allowance for
loan losses by $14 million (net of loan charge-offs of $31.7
million) through a quarterly provision of $28.5 million and the
final SBNE purchase accounting adjustments of $17.2 million. The
allowance for loans as a percentage of loans was 1.17% at year-
end, up from .93% a year ago. The allowance for loan losses as a
percentage of non-performing loans was 143% at year-end,
compared with 168% a year ago.
For the year 2000, net charge-offs to average net loans was
.35% compared with .28% for 1999. For the quarter, net charge-
offs to average net loans was .56% compared with .31% for 2000's
third quarter and .26% for 1999's fourth quarter. The increase
in net charge-offs to average loans was primarily limited to the
charge-offs of several large corporate loans totaling $15.7
million. "Although our non-performing assets and net charge-
offs have been negatively impacted by an isolated structured
finance portfolio, asset quality overall remains good and in-
line with regional bank peers, " stated Marlo.
Sidhu added, "We are committed to strong asset quality and
have directed resources to address the isolated asset quality
issue. Annualized net loan charge-offs excluding the large
corporate loans were .29%, an improvement on a linked quarter
basis."
Looking Ahead
Sidhu stated, "2000 was a year of significant transition
for Sovereign. We doubled our deposit franchise, widened our
net interest margin, and completely transformed our balance
sheet. Most importantly, we successfully integrated the largest
mandated divestiture in U.S. banking history. We are hopeful
that 2001 will reap the rewards of the strong platform we have
created. Our goals for the coming year include meaningful
improvement in our capital levels, and achieving above average
EPS growth."
Profile
Sovereign is a $33 billion financial institution with
approximately 575 community-banking offices and over 1,000 ATMs
in Pennsylvania, Delaware, New Jersey, Connecticut, New
Hampshire, Rhode Island and Massachusetts and currently ranks
third largest among financial institutions headquartered in
Pennsylvania and third in New England market share. Sovereign's
common stock closed at $7.72 on Wednesday, January 24, 2001,
reflecting a price to earnings ratio of 6.72 to the last twelve
months operating earnings and 5.26 to the last twelve months
cash earnings.
Investors will have the opportunity to listen to a
broadcast detailing year-end earnings on the Internet via VCALL.
The message can be accessed anytime from 8:30 a.m. ET Thursday,
January 25, 2001 through 6:00 p.m. Friday, February 9, 2001. To
access the broadcast, please connect to VCALL via the Internet
at http://www.sovereignbank.com through the Investor Relations
page. Questions will be answered via email, accessible from the
Internet broadcast site.
Note:
This press release contains statements of Sovereign's
strategies, plans, and objectives, as well as estimates of
future operating results for 2001 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. Operating earnings, cash earnings,
and certain other measures as defined, are not a substitute
for other financial measures determined in accordance with
generally accepted accounting principles. Because all
companies do not calculate these measures in the same
fashion, these measures as presented may not be comparable
to other similarly titled measures of other companies.
Sovereign Bancorp, Inc.
FINANCIAL HIGHLIGHTS
(unaudited)
Quarter Ended Year to Date
Dec. 31 Sept. 30 June 30 Mar. 31 Dec. 31 Dec. 31 Dec. 31
(dollars in millions, 2000 2000 2000 2000 1999 2000 1999
except per share data)
_____________________________________________________________________________________________________________
Operating Data
Cash earnings (1) $80.4 $96.0 $71.9 $60.4 $59.8 $308.6 $231.5
Operating earnings (1) 55.6 74.1 57.3 52.8 52.2 239.9 202.3
Net income (3.3) (15.9) (48.7) 37.7 29.2 (30.2) 179.3
Net interest income 254.3 254.4 186.8 159.3 165.7 854.8 614.7
Provision for loan losses 28.5 10.0 10.0 8.0 7.5 56.5 30.0
Non-interest income 84.5 14.6 (11.7) 21.3 29.8 108.6 130.3
Total fee based revenues 50.8 38.5 30.1 25.1 20.0 144.5 88.0
G&A expense 185.7 223.7 208.1 113.9 132.5 731.5 392.9
G&A expense (excluding
special charges) 185.7 176.7 118.0 101.7 101.7 582.2 362.1
Other operating expense 141.4 92.0 29.7 18.4 16.2 281.6 53.5
Performance Statistics
Net interest margin -
operating basis (2) 3.50% 3.47% 2.97% 2.82% 2.97% 3.19% 2.88%
Cash return on average
assets (1) 0.95% 1.09% 0.94% 0.96% 0.94% 0.99% 0.97%
Operating return on
average assets (1) 0.65% 0.84% 0.75% 0.84% 0.82% 0.77% 0.85%
Cash return on average
equity (1) 16.69% 20.89% 18.08% 17.20% 17.12% 18.32% 17.70%
Operating return on
average equity (1) 11.55% 16.14% 14.42% 15.15% 14.96% 14.24% 15.51%
Cash return on tangible
equity (1) 70.09% 75.90% 38.52% 25.89% 25.63% 46.94% 26.57%
Average equity to
average assets 5.64% 5.29% 5.86% 6.72% 6.19% 5.82% 5.67%
Net loan charge-offs to
avg loans 0.56% 0.31% 0.26% 0.21% 0.26% 0.35% 0.28%
Efficiency ratio (3) 55.93% 55.80% 49.05% 54.9 % 51.96% 54.31% 48.64%
Per Share Data
Cash earnings per
share (1) $0.35 $0.43 $0.36 $0.33 $0.33 $1.48 $1.34
Operating earnings per
share (1) 0.25 0.33 0.29 0.29 0.29 1.15 1.18
Diluted earnings per
share (0.01) (0.07) (0.22) 0.17 0.14 (0.13) 1.01
Dividend declared per
share 0.025 0.025 0.025 0.025 0.025 0.100 0.100
Book value (4) 8.60 8.41 8.19 8.42 8.08 8.60 8.08
Common stock price:
High 9.47 9.88 8.00 7.91 9.36 9.88 17.50
Low 6.78 7.03 6.44 6.69 7.19 6.44 7.19
Close 8.13 9.25 7.03 7.56 7.45 8.13 7.45
Common shares outstanding 226.5 226.1 225.9 225.6 225.5 226.5 225.5
1 Dilutive shares outstanding 227.7 227.2 226.8 226.6 226.7 227.8 226.5
<FN>
NOTES: (1) Operating earnings include certain one-time tax benefits and exclude the following special
charges for 2000: merger-related and integration charges related to acquisitions, as well as the
impact on net interest income and shares outstanding from the early issuance of certain debt and
equity instruments issued to finance Sovereign's New England retail banking and middle market
lending acquisition. Cash earnings are operating earnings excluding amortization of intangible
assets and ESOP- related expense.
(2) Net interest margin excludes negative carry from escrowed financing proceeds and reduced income
from net proceeds of equity offerings.
(3) 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
excluding the negative carry from escrowed financing proceeds plus non-interest income excluding
securities transactions.
(4) Book value equals equity divided by common shares outstanding.
Sovereign Bancorp, Inc.
FINANCIAL HIGHLIGHTS
(unaudited)
Quarter Ended
Dec. 31 Sept. 30 June 30 Mar. 31 Dec. 31
(dollars in millions) 2000 2000 2000 2000 1999
__________________________________________________________________________________________
Financial Condition Data:
General
Total assets $ 33,458 $ 34,648 $ 35,860 $ 30,878 $ 26,607
Loans 21,912 23,047 21,381 17,303 14,288
Goodwill and other intangibles 1,455 1,450 1,027 818 434
Total deposits: 24,499 24,470 20,025 16,128 12,013
Core 15,229 15,032 12,153 8,564 6,449
Non-core 9,270 9,438 7,872 7,564 5,564
Borrowings 6,240 7,574 13,438 12,368 12,370
Trust preferred securities and
minority interest 458 455 318 317 316
Stockholders' equity 1,949 1,902 1,851 1,900 1,821
Asset Quality
Non-performing assets $187.4 $136.1 $113.7 $98.4 $84.5
Non-performing assets to
total assets 0.56% 0.39% 0.32% 0.32% 0.32%
Allowance for loan losses $256.4 $242.4 $200.7 $175.4 $133.0
Allowance for loan losses
to total loans 1.17% 1.05% 0.94% 1.01% 0.93%
Allowance for loan losses
to non-performing loans 143.1% 185.9% 187.6% 190.2% 168.0%
Non-performing loans to
total loans 0.82% 0.57% 0.50% 0.53% 0.55%
Capitalization - Bancorp (1)
Shareholders' equity to
total assets 5.82% 5.49% 5.16% 6.15% 6.85%
Tangible equity to tangible
assets 1.66% 1.63% 2.67% 4.08% 6.28%
Tier 1 leverage capital ratio 3.09% 3.00% 4.23% 5.90% 7.52%
Capitalization - Bank (1)
Shareholders' equity to
total assets 10.47% 9.34% 9.24% 8.12% 9.12%
Tangible equity to tangible
assets 6.92% 6.04% 6.96% 6.02% 8.20%
Tier 1 leverage capital ratio 6.92% 6.04% 6.96% 6.02% 8.20%
Tier 1 risk-based capital ratio 9.77% 8.97% 10.67% 9.59% 13.69%
Total risk based capital ratio 10.35% 10.01% 11.55% 10.55% 14.55%
<FN>
(1) All capital ratios are calculated based upon end of period assets consistent with OTS
guidelines.
Sovereign Bancorp, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(unaudited)
Dec. 31 Sept. 30 Dec. 31
(dollars in millions) 2000 2000 1999
___________________________________________________________________________
Assets
Cash and amounts due from
depository institutions $ 945.2 $ 898.8 $ 374.0
Securities:
Investments available-for-sale 5,315.6 5,447.6 8,030.2
Investments held-to-maturity 1,978.3 1,541.1 2,362.1
Total securities, net 7,293.9 6,988.7 10,392.3
Loans
Residential mortgages 7,978.9 8,559.3 5,744.5
Commercial 7,831.4 8,052.5 4,075.3
Consumer 6,101.9 6,434.8 4,468.6
Total loans 21,912.2 23,046.6 14,288.4
Less allowance for loan losses (256.4) (242.4) (133.0)
Total loans, net 21,655.8 22,804.2 14,155.4
Premises and equipment, net 290.1 286.6 119.2
Goodwill and other intangible assets 1,455.3 1,449.6 434.1
Other assets 1,817.4 2,219.6 1,132.1
Total assets $33,457.7 $34,647.5 $26,607.1
Liabilities and Stockholders' Equity
Liabilities:
Deposits:
Core $15,229.2 $15,032.3 $6,448.8
Time 9,269.7 9,438.0 5,563.9
Total deposits 24,498.9 24,470.3 12,012.7
Borrowings:
Short-term 1,913.6 2,912.1 6,609.4
Long-term 4,326.7 4,661.9 5,760.7
Total borrowings 6,240.3 7,574.0 12,370.1
Other liabilities 311.4 245.5 86.5
Total liabilities 31,050.6 32,289.8 24,469.3
Redeemable capital securities and
minority interest 458.2 455.5 316.3
Stockholders' equity:
Common Stock 1,259.4 1,258.1 1,254.0
Warrants 91.5 91.5 91.5
Unallocated ESOP shares (33.2) (36.3) (36.3)
Treasury stock (3.8) (3.7) (3.6)
Accumulated other comprehensive income (38.6) (90.7) (210.9)
Retained earnings 673.6 683.2 726.8
Total stockholders' equity 1,948.9 1,902.2 1,821.5
Total liabilities and
stockholders' equity $33,457.7 $34,647.5 $26,607.1
Sovereign Bancorp, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Quarter Ended Year Ended
(dollars in millions, except Dec. 31 Sept. 30 June 30 Mar. 31 Dec. 31 Dec. 31
per share data) 2000 2000 2000 2000 1999 2000 1999
___________________________________________________________________________________________________________
Interest and dividend income:
Interest on interest-earning
deposits $3.5 $8.5 $7.9 $2.3 $0.9 $22.2 $4.7
Securities
Available for sale 95.9 118.0 135.9 137.7 148.1 487.4 543.6
Held to maturity 32.7 24.2 38.3 37.2 26.9 132.4 99.8
Interest on loans 473.4 484.0 375.5 294.6 270.1 1,627.7 959.2
Total interest and dividend
income 605.5 634.7 557.6 471.8 446.0 2,269.7 1,607.3
Interest expense:
Deposits 235.1 217.8 163.9 114.4 111.5 735.1 440.8
Borrowings 116.1 162.5 206.9 198.2 168.8 679.8 551.8
Total interest expense 351.2 380.3 370.8 312.6 280.3 1,414.9 992.6
Net interest income 254.3 254.4 186.8 159.2 165.7 854.8 614.7
Provision for loan losses 28.5 10.0 10.0 8.0 7.5 56.5 30.0
Net interest income after
provision for loan losses 225.8 244.4 176.8 151.2 158.2 798.3 584.7
Non-interest income:
Fee-based revenues:
Retail banking fees 31.6 28.1 17.9 13.8 13.5 91.3 49.2
Mortgage banking revenue 8.1 4.4 7.4 5.3 3.6 25.2 29.9
Loan fees and service charges 5.6 4.6 4.4 2.3 2.9 16.9 8.9
Capital markets revenue 5.5 1.4 0.4 3.7 0.0 11.1 0.0
Total fee-based revenues 50.8 38.5 30.1 25.1 20.0 144.5 88.0
Gain(loss) on sale of loans
and securities 5.0 (45.1) (58.2) (22.9) (2.2) (121.1) 4.3
Other 28.7 21.2 16.4 19.1 12.0 85.2 38.0
Total non-interest income 84.5 14.6 (11.7) 21.3 29.8 108.6 130.3
Non-interest expense:
General and administrative
Compensation and benefits 73.8 81.7 69.1 46.1 40.9 270.8 154.9
Occupancy and equipment 56.9 49.8 31.0 20.8 17.8 158.6 67.6
Outside services 34.7 54.3 55.0 22.3 43.1 166.2 93.3
Other administrative expenses 20.3 37.9 53.0 24.7 30.7 135.9 77.1
Total general and
administrative 185.7 223.7 208.1 113.9 132.5 731.5 392.9
Other operating expenses
Amortization of goodwill and
other acquisition-related
intangibles 36.2 32.6 20.5 9.7 10.0 98.9 38.0
Trust preferred securities
expense 14.6 11.4 9.3 8.9 6.3 44.3 15.4
Real estate owned losses/
(gains), net (0.1) 0.1 (0.1) (0.2) 0.0 (0.2) 0.1
Restructuring 18.5 - - - - 18.5 -
Non-solicitation expense 72.2 47.9 - - - 120.1 -
Total other operating
expenses 141.4 92.0 29.7 18.4 16.3 281.6 53.5
Total non-interest expense 327.1 315.7 237.8 132.3 148.8 1,013.1 446.4
Income before income taxes (16.9) (56.8) (72.7) 40.2 39.1 (106.2) 268.6
Income tax expense/ (benefit) (13.6) (40.9) (24.0) 13.3 9.9 (65.2) 89.3
Income/(loss) before
extraordinary item (3.3) (15.9) (48.7) 26.9 29.2 (41.0) 179.3
Gain on sale of FHLB advances
(net of tax of $5.2) - - - 10.8 - 10.8 -
Net income/(loss) ($3.3) ($15.9) ($48.7) $37.7 $29.2 ($30.2) $179.3
Net operating income $55.6 $74.2 $57.3 $52.8 $52.2 $239.9 $202.3
Diluted earnings/(loss)
per common share ($0.01) ($0.07) ($0.22) $0.12 $0.14 ($0.13) $1.01
Average common shares:
Basic 226.1 226.0 225.8 225.6 203.9 225.9 176.0
Diluted 226.1 226.0 225.8 226.7 205.1 225.9 178.2
Merger-related charges reflected
in G&A expense above - $47.0 $90.1 $12.2 $30.8 $149.3 $30.8
Sovereign Bancorp, Inc. and Subsidiaries
AVERAGE BALANCE, INTEREST AND YIELD/RATE ANALYSIS
(unaudited)
Quarter Ended
December 31, 2000 September 30, 2000 December 31, 1999______
Average Yield/ Average Yield/ Average Yield/
(dollars in millions) Balance Interest Rate Balance Interest Rate Balance Interest Rate
Earning assets:
Investment Securities $7,242.7 $132.1 7.42% $7,906.4 $150.7 7.74% $10,147.7 $175.9 7.02%
Loans:
Residential mortgages 8,182.2 162.3 7.93% 8,845.7 173.7 7.85% 5,731.2 102.2 7.13%
Commercial 7,746.1 173.7 8.92% 7,656.1 174.9 9.09% 3,760.0 79.2 8.36%
Consumer 6,523.7 137.5 8.39% 6,335.0 135.4 8.51% 4,380.7 88.7 8.04%
Total loans 22,452.0 473.5 8.40% 22,836.8 484.0 8.45% 13,871.9 270.1 7.75%
Allowance for loan losses (237.8) (212.2) (131.8)
Total earning assets 29,456.9 $605.6 8.23% 30,531.1 $634.7 8.32% 23,887.8 $446.0 7.48%
Other assets 4,321.5 4,657.6 1,912.2
Total assets $33,778.4 $35,188.7 $25,799.9
Funding liabilities
Deposits:
Core $14,963.3 $94.9 2.52% $14,282.3 $88.4 2.46% $6,442.3 $38.9 2.40%
Time 9,362.3 140.2 5.95% 8,916.5 129.4 5.77% 5,659.6 72.6 5.08%
Total deposits 24,325.6 235.1 3.84% 23,198.8 217.8 3.74% 12,101.9 111.5 3.65%
Borrowings
Federal Home Loan
Bank advances 4,705.4 69.2 5.75% 6,543.1 98.8 5.90% 9,099.5 124.5 5.36%
Repurchase agreements 783.7 12.6 6.30% 1,520.1 25.1 6.46% 1,793.2 25.0 5.54%
Other borrowings 1,359.9 34.3 10.07% 1,484.3 38.6 10.38% 827.0 19.3 9.31%
Total borrowings 6,849.0 116.1 6.67% 9,547.5 162.5 6.69% 11,719.7 168.8 5.67%
Total funding liabilities 31,174.6 $351.2 4.46% 32,746.3 $380.3 4.60% 23,821.6 $280.3 4.64%
Other liabilities 697.6 582.5 382.1
Total liabilities 31,872.2 33,328.8 24,203.7
Stockholders' equity 1,906.2 1,859.9 1,596.2
Total liabilities and
stockholders' equity $33,778.4 $35,188.7 $25,799.9
Net interest income $254.3 $254.4 $165.7
Interest rate spread 3.06% 2.95% 2.64%
Net interest margin 3.50% 3.40% 2.85%
Net interest margin
- operating basis 3.50% 3.47% 2.97%
Sovereign Bancorp, Inc. and Subsidiaries
AVERAGE BALANCE, INTEREST AND YIELD/RATE ANALYSIS
(unaudited)
December 31, 2000 December 31, 1999
Year Ended Average Yield/ Average Yield/
(dollars in millions) Balance Interest Rate Balance Interest Rate
Earning assets:
Investment Securities $8,928.8 $642.0 7.30% $9,535.8 $648.1 6.90%
Loans:
Residential mortgages 7,342.9 567.1 7.72% 5,340.5 379.9 7.11%
Commercial 6,428.3 571.5 8.89% 3,055.2 251.9 8.33%
Consumer 5,826.5 489.1 8.39% 4,116.8 327.3 7.95%
Total loans 19,597.7 1,627.7 8.30% 12,512.5 959.2 7.69%
Allowance for loan losses (185.8) (133.3)
Total earning assets 28,340.7 $2,269.7 8.04% 21,915.0 $1,607.3 7.39%
Other assets 3,600.7 2,027.0
Total assets $31,941.4 $23,942.0
Funding liabilities
Deposits:
Core $11,269.6 $281.9 2.46% $6,369.8 $144.1 2.26%
Time 7,935.9 453.2 5.70% 5,836.8 296.7 5.08%
Total deposits 19,205.5 735.1 3.80% 12,206.6 440.8 3.61%
Borrowings
Federal Home Loan Bank advances 7,854.2 464.8 5.89% 8,096.8 422.8 5.22%
Repurchase agreements 980.0 63.3 6.36% 1,512.0 87.6 5.79%
Other borrowings 1,504.4 151.8 10.09% 493.2 41.5 8.40%
Total borrowings 10,338.6 679.9 6.54% 10,102.0 551.9 5.46%
Total funding liabilities 29,544.1 $1,415.0 4.76% 22,308.6 $992.7 4.45%
Other liabilities 537.3 274.9
Total liabilities 30,081.4 22,583.5
Stockholders' equity 1,860.0 1,358.5
Total liabilities and
stockholders' equity $31,941.4 $23,942.0
Net interest income $854.8 $614.6
Interest rate spread 2.73% 2.62%
Net interest margin 3.08% 2.86%
Net interest margin - operating basis 3.19% 2.88%
Sovereign Bancorp, Inc. and Subsidiaries
SUPPLEMENTAL INFORMATION
(unaudited)
NON-PERFORMING ASSETS
Dec. 31 Sept. 30 June 30 Mar. 31 Dec. 31
Quarter ended(dollars in millions) 2000 2000 2000 2000 1999__
Non-accrual loans:
Residential mortgages $70.2 $52.0 $38.2 $30.7 $32.4
Commercial real estate 12.4 12.6 9.2 9.4 4.1
Commercial 69.8 27.6 19.2 10.9 12.6
Consumer 23.0 34.5 36.6 37.4 26.3
Total non-accrual loans $175.4 $126.7 $103.2 $88.4 $75.4
Restructured loans 3.8 3.8 3.8 3.8 3.8
Total non-performing loans 179.2 130.5 107.0 92.2 79.2
Real estate owned, net 4.4 3.2 5.5 4.5 3.5
Other repossessed assets 3.8 2.4 1.2 1.7 1.8
Total non-performing assets $187.4 $136.1 $113.7 $98.4 $84.5
Non-performing loans as a percentage
of total loans 0.82% 0.57% 0.50% 0.53% 0.55%
Non-performing assets as a percentage
of total assets 0.56% 0.39% 0.32% 0.32% 0.32%
Non-performing assets as a percentage
of total loans and real estate owned 0.85% 0.59% 0.53% 0.57% 0.59%
Allowance for loan losses as a
percentage of non-performing loans 143.1% 185.9% 187.6% 190.2% 168.0%
Allowance for loan losses as a percentage
of total non-performing assets 136.8% 178.1% 176.5% 178.3% 157.4%
NET LOAN CHARGE-OFFS (RECOVERIES)
Dec. 31 Sept. 30 June 30 Mar. 31 Dec. 31
Quarter ended (in millions) 2000 2000 2000 2000 1999__
Residential mortgages $6.3 $1.9 $0.9 $0.7 $3.2
Commercial real estate - - - (0.1) -
Commercial 18.4 9.8 2.9 1.3 1.1
Consumer 7.0 6.3 6.7 5.7 4.8
Total $31.7 $18.0 $10.5 $7.6 $9.1
DEPOSIT COMPOSITION
Dec. 31 Sept. 30 June 30 Mar. 31 Dec. 31
Quarter ended (in millions) 2000 2000 2000 2000 1999__
Demand deposit accounts $3,476.0 $3,351.5 $2,363.1 $1,553.2 $1,089.5
NOW accounts 4,247.2 4,119.4 2,929.7 2,184.2 1,871.3
Savings accounts 2,953.0 3,103.7 2,909.0 2,763.2 2,142.7
Money market accounts 4,553.0 4,457.7 3,951.3 2,063.3 1,345.3
Retail certificates 8,371.9 8,389.2 7,295.0 6,768.9 4,708.1
Jumbo certificates 897.8 1,048.8 576.9 795.3 855.8
Total $24,498.9 $24,470.3 $20,025.0 $16,128.1 $12,012.7
LOAN COMPOSITION
Dec. 31 Sept. 30 June 30 Mar. 31 Dec. 31
Quarter ended (in millions) 2000 2000 2000 2000 1999__
Total residential loans $7,978.9 $8,559.3 $8,395.8 $5,947.5 $5,744.5
Commercial real estate loans 2,793.6 2,787.4 2,383.1 1,917.1 1,517.0
Other 5,037.8 5,265.1 4,448.9 3,814.3 2,558.3
Total commercial loans $7,831.4 $8,052.5 $6,832.0 $5,731.4 $4,075.3
Home equity loans 3,255.9 3,415.1 3,157.2 2,950.7 1,957.9
Auto loans 2,309.7 2,267.1 2,276.0 2,015.9 1,936.9
Other 536.3 752.6 719.6 657.0 573.8
Total consumer loans $6,101.9 $6,434.8 $6,152.8 $5,623.6 $4,468.6
Total loans $21,912.2 $23,046.6 $21,380.6 $17,302.5 $14,288.4
Sovereign Bancorp, Inc. and Subsidiaries
RECONCILEMENT OF OPERATING TO REPORTED EARNINGS
(unaudited)
(dollars in millions, except per share data - all
amounts are after tax) Quarter Ended Year Ended
Total dollars Per share Total dollars Per share
Dec. 31 Sept. 30 Dec. 31 Dec. 31 Sept. 30 Dec. 31 Dec. 31 Dec. 31 Dec. 31 Dec. 31
2000 2000 1999 2000 2000 1999 2000 1999 2000 1999
Net income/(loss) as reported ($3.3) ($15.9) $29.2 ($0.01) ($0.07) $0.14 ($30.2) $179.3 ($0.13) $1.01
Net negative carry on escrowed
bond proceeds (1) - 1.6 3.1 - 0.01 0.02 18.6 3.1 0.08 0.02
Net merger related and
integration costs recorded
during the period - 29.0 20.6 - 0.13 0.10 97.1 20.6 0.43 0.12
Expense on convertible trust
preferred securities ("PIERS") (1) - 0.1 2.1 - - 0.01 6.5 2.1 0.03 0.01
Loss on securities due to
restructuring of the balance sheet - 28.4 - - 0.12 - 67.0 - 0.29 -
Restructuring 12.0 - - 0.05 - - 12.0 - 0.05 -
Non-solicitation expense 46.9 31.1 - 0.21 0.13 - 78.0 - 0.35 -
Assumed interest exp. reduction
due to paydown of borrowings
with net proceeds of common
equity and PIERS (1) - (0.2) (2.8) - - (0.01) (9.1) (2.8) (0.04) (0.02)
Impact of additional shares
outstanding for 1999 common
stock offerings (2) - 0.01 0.03 0.09 0.04
Operating earnings (2) 55.6 74.1 52.2 0.25 0.33 0.29 239.9 202.3 1.15 1.18
Cash earnings (2) 80.4 96.0 59.8 0.35 0.43 0.33 308.6 231.5 1.48 1.34
Average shares before adjustment
for offering 227.3 226.0 205.1 227.0 178.2
Average shares after adjustment
for offering (2) 227.3 223.8 182.5 208.8 172.4
<FN>
(1) As a part of the agreement to purchase Sovereign Bank New England, Sovereign raised $1.8 billion of debt
and equity capital in November and December, 1999 of which $1.3 billion of debt proceeds were in escrow
with limited ability to reinvest the proceeds until the acquisition was completed on July 21, 2000.
Consequently, the excess of negative carry and trust preferred expense over interest expense reduction
realized on the raised capital resulted in a net reduction in pre-tax income of $2.9 million ($1.5
million after tax) and $24.7 million ($16.0 million after tax) comprised of the following components for
the three month period ended September 30, 2000, and the year ended December 31, 2000, a) a reduction of
net interest income of $3.1 million ($1.6 million after tax) and $28.6 million ($18.6 million after tax),
respectively; b) expense of $.5 million ($.1 million after tax) and $10.0 million ($6.5 million after
tax) associated with PIERS issued in November, 1999; c) an assumed $.6 million ($.2 million after tax)
and $13.9 million ($9.1 million after tax) of interest expense reduction from the assumed paydown of
other borrowings with the proceeds of the Trust Preferred Securities and the common stock offerings.
(2) Operating earnings per share and cash earnings per share are calculated using a weighted average number
of shares which include, for the three month period ended September 30, 2000 and the year ended
December 31, 2000, a pro rata portion of the shares issued in November, 1999 in proportion to deposits
acquired on March 24, 2000, June 16, 2000, and July 21, 2000 over total estimated SBNE deposits acquired
in each phase of the SBNE acquisition.
Note:
This press release contains statements of Sovereign's strategies, plans, and objectives, as estimates of
future operating results for 2000, 2001 and beyond for Sovereign Bancorp, Inc as well as estimates of
financial condition, operating efficiencies and revenue creation. 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.
Operating earnings, cash earnings and core revenues, as defined, are not a substitute for other financial
measures determined in accordance with generally accepted accounting principles. Because all companies
do not calculate such measures in the same fashion, these measures as presented may not be comparable to
other similarly titled measures of other companies.