Exhibit 99
SOVEREIGN BANCORP - News Release
October 22, 1996
SOVEREIGN ANNOUNCES
3RD QUARTER OPERATING NET INCOME UP 20%
WYOMISSING, PA. . . .Sovereign Bancorp, Inc. ("Sovereign")
(NASDAQ/NMS:SVRN), announced that third quarter operating net
income increased 20% to $17.3 million from third quarter 1995 net
income of $14.4 million. Operating earnings per share
("Operating EPS") for the third quarter of 1996 was $0.29, an
increase of 21% compared to $0.24 per share for the third quarter
of 1995. Sovereign's year-to-date operating net income increased
22% to $49.8 million compared to $40.7 million for the same
period last year. Operating EPS for the nine months ended
September 30, 1996 was $0.84, an increased of 15% from earnings
per share ("EPS") for the nine months ended September 30, 1995 of
$0.73. The amounts presented exclude a non-recurring after tax
charge of $17.2 million to be paid to the FDIC for the
recapitalization of the Savings Association Insurance Fund
("SAIF").
Actual net income for the third quarter of 1996, which
includes the impact of the non-recurring item described above,
was $28,000. Hence, Sovereign's reported net income for the nine
months ended September 30, 1996 was $32.5 million and EPS was
$0.55.
For the third quarter of 1996 and excluding the non-
recurring charge, return on average tangible equity ("Tangible
ROE") was 22.66% compared to 23.55% for the same period last
year.
On September 30, 1996 the BIF/SAIF resolution was signed
into law resulting in a one-time charge to all banks and thrifts
in the nation which have SAIF-insured FDIC deposits. Sovereign's
one-time after tax charge was $17.2 million. "We are pleased
that Congress acted to reduce the BIF/SAIF disparity and are glad
to compete with all other banks on a more level playing field,"
commented Jay S. Sidhu, Sovereign's President and Chief Executive
Officer.
As a result of this significant industry event, Sovereign
continues to evaluate the possible impairment of certain of its
intangible assets. However, it is unable to determine whether an
impairment has occurred at this time or if so, the amount of the
charge, which could even be considerably lower than the
previously estimated $65 million after tax charge.
"This is an extremely complex accounting issue," commented
Sidhu. "Out management team is working very closely with outside
advisors to assure that the analysis properly addresses all
considerations. If any impairment has occurred, it will be
recorded in accordance with generally accepted accounting
principles. However, regardless of the results of this analysis,
it is important to recognize that these entries only impact the
non-cash component of Sovereign's earnings stream. Cash earnings
and tangible ROE would remain unaffected regardless of the
results of the analysis," Sidhu continued. "This study is
expected to be completed over the next two to three weeks," Sidhu
added.
The reduction of SAIF insurance premiums will increase
Sovereign's earnings in 1997 and future years. Sovereign plans
to reinvest these increased earnings to accelerate its
transformation into a Super Community Bank. "The Super Community
Bank strategy combines the best of a local Community Bank while
bringing the services of a regional bank to the local community,
resulting in improved and differentiated franchise value and
higher returns for shareholders," commented Sidhu. "However, we
will not deviate from our Critical Success Factors of superior
asset quality, low interest rate risk, higher productivity and a
unique corporate culture," Sidhu continued.
Sovereign outlined its plan to become a Super Community Bank
early in 1996 and has made significant progress toward building a
strong infrastructure to obtain this goal. The strategy targets
consumer and small business markets with quality service,
innovative products and improved delivery systems to increase
Sovereign's wallet share. Sovereign continued to pursue this
transformation through the execution of several strategic
initiatives.
One of Sovereign's strategic initiatives is to further
increase interest income by increasing its penetration in the
higher spread consumer and commercial banking business. Consumer
loans originated during the third quarter of 1996 totalled $85.2
million compared to $49.0 million in the third quarter of 1995.
Year-to-date consumer loans outstanding are up $236 million.
Sovereign's commercial banking division produced loan
originations of $40.7 million during the third quarter of 1996,
compared to almost none in 1995. This increased 1996 year-to-
date commercial originations to $69.6 million as compared to $3.1
million for the same period last year.
During the third quarter of 1996, Sovereign closed $446.9
million of residential mortgage loans of which approximately 85%
were adjustable rate loans, primarily those with adjustment
periods of one year or less, as compared to $367.1 million of
residential originations during the third quarter of 1995. At
September 30, 1996, the pipeline of mortgage loans was
approximately $314 million, compared to $510 million at June 30,
1996, which may indicate a lower level of mortgage closings
during the fourth quarter of 1996.
Net interest income for the third quarter of 1996 was $55.2
million compared to $43.7 million for the same period last year,
an increase of 26%. The net interest spread was 2.44% of average
assets for the third quarter of 1996 compared to 2.39% for the
third quarter 1995 and 2.50% of the nine months ended
September 30, 1996. The compression of net interest spread was
primarily caused by teaser-rate adjustable rate mortgage fundings
and Sovereign's strategy to extend liabilities to further
decrease interest rate risk. Looking ahead, Sovereign hopes to
gradually increase its net interest spread.
Another strategic initiative is to increase fee income.
Total deposit fee income reported for the third quarter of 1996
was $2.9 million, an increase of 32% when compared to $2.2
million for the third quarter of 1995. Total other income
increased to $6.7 million for the third quarter of 1996, an
increase of 38% when compared to other income exclusive of non-
recurring items for the third quarter of 1995.
Sovereign continues to pursue its strategic initiatives of
improving productivity and controlling expenses through process
improvements and technological initiatives. Due to investments
made in 1996 to transform Sovereign into a Super Community Bank,
Sovereign's ratio of general and administrative expenses to
average assets was 1.32% for the third quarter of 1996, a slight
increase from 1.27% for the third quarter 1995 but down from
1.39% in the second quarter of 1996 and 1.35% in the first
quarter of 1996. The year-to-date ratio has improved to 1.35%
for the nine months ended September 30, 1996 from 1.42% for the
same period of 1995.
For the third quarter of 1996, Sovereign's efficiency ratio
(all general and administrative expenses as a percentage of net
interest income and recurring non-interest income) was 49%,
consistent with the same period last year. The year-to-date
efficiency ratio was 49% for the nine months ended September 30,
1996, down from 51% for the nine months ended September 30, 1995.
Continuing Sovereign's commitment to high asset quality and
maintaining conservative levels of reserves, Sovereign provided
$500,000 for possible loan losses during the third quarter of
1996. This amount is a 100% increase in reserves from the 1995
levels. The ratio of non-performing assets to total assets was
0.55% at September 30, 1996 as compared to 0.54% at December 31,
1995. Excluding government-guaranteed loans, Sovereign's total
30 day+ delinquencies to total loans at September 30, 1996, were
1.31% as compared to 1.32% at December 31, 1995.
Total assets at September 30, 1996 were $9.4 billion, as
compared to total assets at December 31, 1995 of $8.1 billion.
Total deposits, core deposits and shareholders' equity were $5.0
billion, $2.2 billion and $460.1 million, respectively at
September 30, 1996, compared to $5.0 billion, $2.0 billion and
$427.0 million, respectively at December 31, 1995.
Commenting on Sovereign's performance, Richard E. Mohn,
Sovereign's Chairman said, "Sovereign remains committed to
building shareholder value by executing its strategic plans and
continuing to focus on its critical success factors of high asset
quality, low interest rate risk and low overhead while delivering
innovative products through a well-trained team of professional
bankers."
Sovereign is a $9.4 billion financial institution with
122 community banking offices operating in eastern Pennsylvania,
northern Delaware and New Jersey. Now the fourth largest bank
headquartered in Pennsylvania, Sovereign's common stock closed
Monday, October 21, 1996 at $12.00 per share and its preferred
stock closed at $64.50 per share.
- THE END -
KEY STATISTICS
3 MONTHS ENDED 9 MONTHS ENDED
SEPT. 30 SEPT. 30
--------------- ---------------
PERFORMANCE STATISTICS 1996 1995 1996 1995
---- ---- ---- ----
Return on Average Assets (1) 0.76% 0.80% 0.77% 0.77%
Return on Average Equity (1) 15.06% 14.39% 14.69% 14.88%
General & Administrative
Expenses on Average Assets 1.32% 1.27% 1.36% 1.42%
Efficiency Ratio (2) 49.00% 49.00% 49.00% 51.00%
CONTROL STATISTICS AT SEPT. 30, 1996 AT DEC. 31, 1995
- ------------------ ----------------- ----------------
Shareholders' Equity to
Total Assets 4.91% 5.29%
Tangible Shareholders'
Equity to Tangible
Assets (3) 3.74% 3.79%
Allowance for Loan Losses
to Total Loans 0.57% 0.73%
Non-Performing Assets to
Total Assets 0.55% 0.54%
General Reserves for Loan
Losses to Non-Performing
Loans 71.30% 88.05%
Non-Performing Loans to
Total Loans 0.78% 0.83%
FTE Employees 1,433 1,412
STOCK STATISTICS (4) AT SEPT. 30, 1996 AT DEC. 31, 1995
- -------------------- ----------------- ----------------
Preferred Shares Outstanding 2,000,000 2,000,000
Common Shares Outstanding 49,333,762 47,737,828
Fully Diluted Shares
Outstanding 60,305,205 57,715,876
Book Value Per Share (5) $7.76 $7.40
Tangible Book Value Per
Share Net of Tax
Benefit (3) $6.26 $5.73
NOTES:
(1) Excluding Non-Recurring one-time SAIF assessment. This
ratio including the one-time charge is not meaningful.
(2) Efficiency Ratio equals all general and administrative
expenses as a percentage of net interest income and
recurring non-interest income.
(3) Computed Net of Tax Benefit on certain Intangible
Assets.
(4) Restated for all Stock Splits/Dividends declared
through December 20, 1995.
(5) Book Value equals Equity divided by Common Shares and
if-converted Preferred Shares.
CONDENSED FINANCIAL INFORMATION
(In Thousands)
At September 30, At December 31,
BALANCE SHEET 1996 1995
------------- ---------------- ---------------
Total Assets $9,364,636 $8,078,287
Loans 5,990,552 4,674,364
Investments & MBSs 3,004,939 2,966,721
Total Liabilities 8,904,555 7,651,262
Deposits 5,007,118 5,039,143
Stockholders' Equity $ 460,081 $ 427,025
3 Months 9 Months
INCOME STATEMENT Ended Sept. 30 Ended Sept. 30
---------------- ----------------- -------------------
1996 1995 1996 1995
---- ---- ---- ----
Net Interest Income $55,216 $43,677 $161,009 $127,788
Loan Loss Provision 500 250 1,516 750
Other Income 6,734 4,894 17,032 19,055
Gen & Adm Expenses 30,550 23,681 87,406 74,687
Other Expenses 3,048 2,766 8,886 9,481
Non-Recurring Item (1) 27,818 -0- 27,818 -0-
Income Before Taxes 34 21,874 52,415 61,925
Income Tax Provision 6 7,436 19,911 21,214
Net Income $ 28 $14,438 $32,504 $ 40,711
EARNINGS PER SHARE
("EPS") N/M $0.24 $0.55 $0.73
NET INCOME BEFORE NON-
RECURRING ITEMS $17,275 $14,438 $49,751 $ 40,711
EPS BEFORE NON-
RECURRING ITEMS $0.29 $0.24 $0.84 $0.73
(1) Non-Recurring Item includes $17.2 million (after tax) for a
one-time assessment charged for the recapitalization of the
SAIF insurance fund.