WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- -----
EXCHANGE ACT OF 1934
For the quarter ended September 30, 1995
OR
_____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 34-16533
SOVEREIGN BANCORP, INC.
-----------------------
(Exact name of Registrant as specified in its charter)
Pennsylvania 23-2453088
- ------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1130 Berkshire Boulevard, Wyomissing, Pennsylvania 19610
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (610) 320-8400
N/A
- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes __X__ . No ___.
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at November 13, 1995
- ---------------------------- ---------------------------------
Common Stock (no par value) 45,498,015 shares
Preferred Stock (no par value) 2,000,000 shares
SOVEREIGN BANCORP, INC. AND SUBSIDIARIES
INDEX
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets at September 30, 1995
and December 31, 1994 3
Consolidated Statements of Operations for the three-
month and nine-month periods ended September 30, 1995
and 1994 4
Consolidated Statements of Cash Flows for the nine-
month periods ended September 30, 1995 and 1994 5
Notes to Consolidated Financial Statements 6 - 12
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition
PART II. OTHER INFORMATION
Item 6. Reports on Form 8-K 23
PART III. FINANCIAL DATA SCHEDULE 24
SIGNATURES 25
SOVEREIGN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
1995 1994
------------ ------------
(Unaudited) (Note)
(in thousands, except
per share data)
ASSETS
Cash and amounts due from
depository institutions $116,406 $ 110,270
Interest-earning deposits 13,001 29,131
Loans held for resale (approximate fair
value of $40,365 and $7,666 at
September 30, 1995 and December 31, 1994,
respectively) 39,780 7,666
Investments available-for-sale 118,218 87,128
Investment and mortgage-backed securities
held-to-maturity (approximate fair value
of $2,714,226 and $1,701,143 at September 30,
1995 and December 31, 1994, respectively) 2,726,861 1,816,840
Loans 4,621,351 4,350,898
Allowance for possible loan losses (34,480) (36,289)
Premises and equipment 49,469 48,096
Real estate owned 7,423 9,191
Accrued interest receivable 41,166 30,369
Goodwill and other intangible assets 117,751 64,553
Other assets 37,111 46,229
---------- ----------
TOTAL ASSETS $7,854,057 $6,564,082
========== ==========
LIABILITIES
Deposits $4,987,862 $4,027,119
Borrowings:
Short-term 1,450,588 1,722,726
Long-term 932,812 439,861
Advance payments by borrowers
for taxes and insurance 19,416 25,893
Other liabilities 48,373 44,583
---------- ----------
TOTAL LIABILITIES 7,439,051 6,260,182
---------- ----------
STOCKHOLDERS' EQUITY
Preferred stock; no par value;
$50 liquidation preference;
7,500,000 shares authorized;
2,000,000 shares issued and outstanding
at September 30, 1995 96,660 --
Common stock; no par value;
100,000,000 shares authorized;
48,365,124 shares issued at September 30,
1995 and 45,566,971 shares issued at
December 31, 1994 248,311 224,958
Unallocated common stock held by the Employee
Stock Ownership Plan at cost;
2,526,334 shares at September 30, 1995 (23,708) --
Unrecognized gain/(loss) on investment
and mortgage-backed securities
available-for-sale, net of tax 602 (887)
Retained earnings 93,141 79,829
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 415,006 303,900
---------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $7,854,057 $6,564,082
========== ==========
See accompanying notes to consolidated financial statements.
Note: The balance sheet at December 31, 1994 is taken from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
SOVEREIGN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three-Month Period Nine-Month Period
Ended September 30, Ended September 30,
------------------- -------------------
1995 1994 1995 1994
---- ---- ---- ----
(in thousands, except
per share data)
Interest income:
Interest and dividends on investment
and mortgage-backed securities
and other interest-earning assets $ 44,496 $ 27,529 $115,218 $ 76,773
Interest and fees on loans 84,331 66,837 241,238 175,001
-------- -------- -------- --------
Total interest income 128,827 94,366 356,456 251,774
-------- -------- -------- --------
Interest expense:
Interest on deposits 53,678 32,447 155,418 84,516
Interest on borrowings 31,472 21,424 73,250 53,344
-------- -------- -------- --------
Total interest expense 85,150 53,871 228,668 137,860
-------- -------- -------- --------
Net interest income 43,677 40,495 127,788 113,914
Provision for possible loan losses 250 950 750 3,500
-------- -------- -------- --------
Net interest income after provision for
possible loan losses 43,427 39,545 127,038 110,414
-------- -------- -------- --------
Other income:
Other loan fees and service charges 1,053 1,379 3,349 3,556
Deposit fees 2,211 1,490 6,396 3,627
Gain on sale of loans and investment
and mortgage-backed securities
available-for-sale 36 580 172 1,141
Mortgage banking gains 757 131 5,546 565
Miscellaneous income 837 436 3,592 1,276
-------- -------- -------- --------
Total other income 4,894 4,016 19,055 10,165
-------- -------- -------- --------
General and administrative expenses:
Salaries and employee benefits 9,960 9,163 30,297 25,343
Occupancy and equipment expenses 4,526 3,972 14,369 11,792
Outside services 2,213 2,209 7,978 5,872
Deposit insurance premiums 2,867 2,155 8,459 5,284
Advertising 724 852 3,191 2,799
Other administrative expenses 3,391 3,001 10,393 9,269
-------- -------- -------- --------
Total general and administrative expenses 23,681 21,352 74,687 60,359
Other operating expenses:
Amortization of goodwill and other intangibles 2,998 1,761 9,078 4,124
Real estate owned losses/(gains), net (232) 24 403 (238)
-------- -------- -------- --------
Total other operating expenses 2,766 1,785 9,481 3,886
-------- -------- -------- --------
Income before income taxes 21,874 20,424 61,925 56,334
Income tax provision 7,436 8,188 21,214 21,503
-------- -------- -------- --------
Net Income $ 14,438 $ 12,236 $ 40,711 $ 34,831
======== ======== ======== ========
Net Income Applicable to Common Stock $ 12,875 $ 12,236 $ 37,585 $ 34,831
======== ======== ======== ========
Earnings per share (1) $.26 $.24 $.77 $.71
======== ======== ======== ========
Dividends per common share (1) $.022 $.027 $.066 $.089
======== ======== ======== ========
(1) Per share amounts have been adjusted to reflect all stock dividends and
stock splits. See accompanying notes to consolidated financial statements.
SOVEREIGN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine-Month Period
Ended September 30,
---------------------------
1995 1994
---- ----
(in thousands)
Cash Flows from Operating Activities:
Net income $ 40,711 $ 34,831
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for possible loan losses and deferred taxes 3,936 3,300
Depreciation 3,734 3,760
Amortization 1,331 (2,761)
Gain on sale of deposits, loans, investment and
mortgage-backed securities and real estate owned (1,480) (1,370)
Net change in:
Loans held for resale (32,114) 25,131
Other liabilities 3,790 4,232
Other assets (6,276) (69,057)
----------- ---------
Net cash provided/(used) by operating activities 13,632 (1,934)
----------- ---------
Cash Flows from Investing Activities:
Proceeds from sales of investment
and mortgage-backed securities:
Available-for-sale 36,285 675,176
Proceeds from repayments and maturities of investment
and mortgage-backed securities:
Available-for-sale -- 3,277
Held-to-maturity 179,127 296,040
Purchases of investment and mortgage-backed securities:
Available-for-sale (64,719) (245,752)
Held-to-maturity (1,082,382) (434,237)
Proceeds from sales of loans 5,954 5,577
Purchase of loans (228,449) (72,143)
Net change in loans other than purchases and sales (52,523) (812,068)
Proceeds from sales of premises and equipment 10,497 2,045
Purchases of premises and equipment (11,946) (3,958)
Proceeds from sale of real estate owned 4,328 7,249
Other, net -- 42,265
----------- ---------
Net cash used by investing activities (1,203,828) (536,529)
----------- ---------
Cash Flows from Financing Activities:
Assumption of deposits (net) 748,631 13,687
Net increase in deposits 152,958 161,442
Net (decrease)/increase in short-term borrowings (509,309) 259,043
Proceeds from long-term borrowings 732,499 75,000
Prepayments of long-term borrowings (714) (3,019)
Net (decrease)/increase in advance payments by
borrowers for taxes and insurance (6,477) 879
Proceeds from issuance of common stock 2,238 3,108
Proceeds from issuance of preferred stock 96,660 -
Cash dividends paid (6,284) (4,222)
Advance to the Employee Stock Ownership Plan (30,000) -
----------- --------
Net cash provided by financing activities 1,180,202 505,918
----------- ---------
Net change in cash and cash equivalents (9,994) (32,545)
Cash and cash equivalents at beginning of period 139,401 130,267
----------- ---------
Cash and cash equivalents at end of period $ 129,407 $ 97,722
=========== =========
Reconciliation of Cash and Cash Equivalents to Consolidated
Balance Sheets:
Cash and amounts due from depository institutions $ 116,406 $ 94,677
Interest-earning deposits and federal funds sold 13,001 3,045
----------- ---------
$ 129,407 $ 97,722
=========== =========
Supplemental Disclosures:
Income tax payments totaled $12.1 million for the nine-month period
ended September 30, 1995 and $17.5 million for the same period in 1994.
Interest payments totaled $215.3 million for the nine-month period ended
September 30, 1995 and $135.2 million for the same period in 1994. Noncash
activity consisted of mortgage loan securitization of $112.3 million for
the nine-month period ended September 30, 1995 and $149.2 million for the
same period in 1994; reclassification of long-term borrowings to short-term
borrowings of $226.4 million for the nine-month period ended September 30,
1995 and $319.0 million for the same period in 1994; reclassification of
mortgage loans to real estate owned of $4.2 million for the nine-month
period ended September 30, 1995 and $5.6 million for the same period in
1994.
See accompanying notes to consolidated financial statements.
SOVEREIGN BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) GENERAL
The accompanying financial statements of Sovereign Bancorp, Inc. and
Subsidiaries ("Sovereign") include the accounts of the parent company,
Sovereign Bancorp, Inc. and its wholly-owned subsidiaries: Sovereign Bank,
F.S.B. ("Sovereign Bank") and Sovereign Investment Company. All material
intercompany balances and transactions have been eliminated in
consolidation. These financial statements have been prepared in accordance
with the instructions for Form 10-Q and therefore do not include certain
information or footnotes necessary for the presentation of financial
condition, results of operations, and cash flows in conformity with
generally accepted accounting principles. However, in the opinion of
management, the consolidated financial statements reflect all adjustments
(which consist of normal recurring accruals) necessary for a fair
presentation of the results for the unaudited periods. The results of
operations for the three-month and nine-month periods ended September 30,
1995 are not necessarily indicative of the results which may be expected
for the entire year. The consolidated financial statements should be read
in conjunction with the annual report on Form 10-K for the year ended
December 31, 1994.
(2)EARNINGS PER SHARE
Earnings per share have been computed on a fully diluted basis based
on the weighted average number of common shares (including assumed
conversion of preferred shares) and common equivalent shares (dilutive
stock options) outstanding during the periods. Fully diluted shares for the
three-month and nine-month periods ended September 30, 1995 were 56.7
million and 53.1 million, compared to 49.0 million and 48.9 million for the
same periods in 1994. Earnings per share have been adjusted to reflect all
stock dividends and stock splits.
(3)INVESTMENTS AVAILABLE-FOR-SALE
The following table presents the composition and fair value of
investments available-for-sale at the dates indicated:
(dollars in thousands)
September 30, 1995
------------------
Amortized Unrealized Unrealized Fair
Cost Appreciation Depreciation Value
----------- ------------- ------------ -----
Equity Securities $117,232 $1,156 $ 170 $118,218
======== ====== ====== ========
December 31, 1994
------------------
Amortized Unrealized Unrealized Fair
Cost Appreciation Depreciation Value
----------- ------------- ------------ -----
Equity Securities $ 88,583 $ 366 $1,821 $ 87,128
======== ====== ====== ========
SOVEREIGN BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Continued)
(4) INVESTMENT AND MORTGAGE-BACKED SECURITIES HELD-TO-MATURITY
The following table presents the composition and fair value of
investment and mortgage-backed securities held-to-maturity at the dates
indicated: (dollars in thousands)
September 30, 1995
------------------
Amortized Unrealized Unrealized Fair
Cost Appreciation Depreciation Value
----------- ------------- ------------ -----
Investments:
U.S. Treasury and
government agency $ 150,219 $ 71 $ 3,902 $ 146,388
Corporate Securities 1,011 39 -- 1,050
Other securities 483 -- 1 482
Mortgage-backed Securities:
FHLMC 336,420 1,598 8,679 329,339
FNMA 367,163 1,505 7,248 361,420
GNMA 231,214 9,803 11 241,006
RTC 29,900 -- 4,536 25,364
Private issues 294,673 11 7,016 287,668
Collateralized mortgage
obligations 1,315, 778 8,048 2,317 1,321,509
------ --- ----- ----- ---------
Total investment and
mortgage-backed securities
held-to-maturity $2,726,861 $21,075 $33,710 $2,714,226
========== ======= ======= ==========
December 31, 1994
------------------
Amortized Unrealized Unrealized Fair
Cost Appreciation Depreciation Value
----------- ------------- ------------ -----
Investments:
U.S. Treasury and
government securities $ 159,353 $ 17 $ 12,675 $ 146,695
Corporate securities 4,025 -- 43 3,982
Other securities 420 -- 4 416
Mortgage-backed Securities:
FHLMC 336,556 396 26,506 310,446
FNMA 316,968 17 26,390 290,595
GNMA 237,308 147 2,877 234,578
RTC 33,976 -- 5,227 28,749
Private issues 272,833 10 20,502 252,341
Collateralized mortgage
obligations 455,401 6,801 28,861 433,341
------- ----- ------ -------
Total investment and
mortgage-backed securities
held-to-maturity $1,816,840 $ 7,388 $123,085 $1,701,143
========== ======= ======== ==========
SOVEREIGN BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Continued)
(5) COMPOSITION OF LOAN PORTFOLIO
The following table presents the composition of the loan portfolio by
type of loan and by fixed and adjustable rates at the dates indicated:
(dollars in thousands)
September 30, 1995
------------------
Amortized Unrealized Unrealized Fair
Cost Appreciation Depreciation Value
----------- ------------- ------------ -----
Residential real estate loans $3,971,438 85.94% $3,710,150 85.27%
Real estate construction loans:
Residential (net of loans
in process of $24,284 and
$33,095, respectively) 36,923 .80 49,094 1.13
Residential development
(net of loans in process of
$868 and $1,382,
respectively) 1,692 .04 3,226 .08
Multi-family loans 83,681 1.81 95,216 2.19
Home equity loans 452,364 9.79 413,037 9.49
---------- ------ ---------- ------
Total Residential Loans 4,546,098 98.38 4,270,723 98.16
Commercial real estate loans 37,907 .82 39,717 .91
Commercial loans 8,035 .17 5,730 .13
Consumer loans 29,311 .63 34,728 .80
---------- ------ ---------- ------
Total Loans $4,621,351 100.00% $4,350,898 100.00%
========== ====== ========== ======
Total Loans with:
Fixed rates $1,115,467 24.14% $1,097,469 25.22%
Variable rates 3,505,884 75.86 3,253,429 74.78
---------- ------ ---------- ------
Total Loans $4,621,351 100.00% $4,350,898 100.00%
========== ====== ========== ======
SOVEREIGN BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Continued)
(6) DEPOSIT PORTFOLIO COMPOSITION
The following table presents the composition of deposits at the dates
indicated: (dollars in thousands)
September 30, 1995 December 31, 1994
------------------ -----------------
Weighted Weighted
Average Average
Account Type Amount Percent Rate Amount Percent Rate
------------ ------ ------- --------- ------ ------- --------
Retail certificates $2,833,581 56.81% 5.54% $2,207,531 54.82% 4.75%
Jumbo certificates 140,731 2.82 5.73 78,794 1.96 4.86
Savings acccounts 897,556 18.00 2.33 925,667 22.98 2.34
Demand deposit accounts 150,214 3.01 -- 118,346 2.94 --
NOW accounts 340,737 6.83 1.44 308,202 7.65 1.82
Money market accounts 625,043 12.53 3.37 388,579 9.65 2.44
---------- ------ ---- ---------- ------ ----
Total Deposits $4,987,862 100.00% 4.25% $4,027,119 100.00% 3.61%
========== ====== ==== ========== ====== ====
(7) BORROWINGS
The following table presents information regarding borrowings at the
dates indicated: (dollars in thousands)
September 30, 1995 December 31, 1994
------------------ -----------------
Weighted Weighted
Average Average
Balance Rate Balance Rate
------- --------- ------- --------
Securities sold under
repurchase agreements $ 608,044 6.16% $ 608,810 5.72%
FHLB advances 1,607,489 5.73 1,434,081 5.25
Other borrowings 167,867 7.48 119,696 7.71
---------- ---- ---------- ----
Total Borrowings $2,383,400 5.97% $2,162,587 5.52%
========== ==== ========== ====
SOVEREIGN BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Continued)
(8) INTEREST RATE EXCHANGE AGREEMENTS
Amortizing and non-amortizing interest rate swaps are generally used
to convert fixed rate assets and liabilities to variable rate assets and
liabilities and vice versa. Interest rate caps are generally used to limit
the exposure from the repricing and maturity of liabilities. Interest rate
floors are generally used to limit the exposure from repricing and maturity
of assets. Interest rate caps and floors are also used to limit the
exposure created by other interest rate swaps. In certain cases, interest
rate caps or floors are simultaneously bought and sold to create a range of
protection against changing interest rates while limiting the cost of that
protection. The following table presents information regarding interest
rate exchange agreements at the dates indicated: (dollars in thousands)
September 30, 1995
------------------
Weighted
Average
Notional Book Estimated Maturity
Amount Value Fair Value In Years
-------- ------ ---------- --------
Amortizing interest rate
swaps-pay variable
receive fixed (1) $ 765,018 $ -- $(18,825) 3.85
Non-amortizing interest
rate swaps-pay variable
receive fixed (2) 50,000 -- (2,079) 4.86
Non-amortizing interest
rate swaps-pay fixed
receive variable (3) 280,000 -- 369 2.03
Interest rate caps (4) 1,446,000 13,134 4,901 1.85
---------- ------- --------- ----
$2,541,018 $13,134 $ (15,634)
========== ======= =========
December 31, 1994
------------------
Weighted
Average
Notional Book Estimated Maturity
Amount Value Fair Value In Years
-------- ------ ---------- --------
Amortizing interest rate
swaps-pay variable
receive fixed fixed (1) $1,085,645 $ -- $ (84,349) 3.9
Non-amortizing interest
rate swaps-pay variable
receive fixed (2) 250,000 -- (7,931) 1.5
Interest rate caps (4) 450,000 2,310 14,595 1.6
---------- ------- --------- ----
$1,785,645 $ 2,310 $ (77,685)
========== ======= =========
(1) The weighted average pay rate was 5.83% and 6.28% and the weighted average
receive rate was 5.63% and 5.91% at September 30, 1995 and December 31,
1994, respectively.
(2) The weighted average pay rate was 7.28% and 6.59% and the weighted average
receive rate was 6.75% and 5.73% at September 30, 1995 and December 31,
1994, respectively.
(3) The weighted average pay rate was 5.90% and the weighted average receive
rate was 5.89% at September 3 , 1995.
(4) The weighted average contract rate was 6.36% and 5.50% at September 30,
1995 and December 31, 1994, respectively.
SOVEREIGN BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Continued)
The following table summarizes by notional amounts the activity of
Sovereign's interest rate exchange agreements: (dollars in thousands)
Amortizing Non-Amortizing Interest
Interest Interest Rate
Rate Swaps Rate Swaps Caps
----------- ------------- --------
Balance, December 31, 1994 $1,085,645 $250,000 $ 450,000
---------- -------- ----------
Additions -- -- 996,000
Maturitities/Amortization 786 -- --
Terminations -- -- --
---------- -------- ----------
Balance, March 31, 1995 $1,084,859 $250,000 $1,446,000
---------- -------- ----------
Additions -- 190,000 --
Maturitities/Amortization 300,532 200,000 --
Terminations -- -- --
---------- -------- ----------
Balance, June 30, 1995 $ 784,327 $240,000 $1,446,000
---------- -------- ----------
Additions -- 90,000 --
Maturitities/Amortization 19,309 -- --
Terminations -- -- --
---------- -------- ----------
Balance, September 30, 1995 $ 765,018 $330,000 $1,446,000
========== ======== ==========
(9) ACQUISITIONS
On October 2, 1995, Sovereign executed a Definitive Agreement to acquire
West Jersey Bancshares, Inc. West Jersey is a $100 million commercial bank
headquartered in Fairfield, New Jersey. The terms of the Agreement call for
Sovereign to exchange $8.40 in Sovereign Common Stock (subject to adjustment)
for each share of West Jersey Common Stock. The transaction will be tax free and
accounted for as a pooling-of-interests. The transaction is subject to
regulatory approval and approval of West Jersey shareholders, and is expected to
close during the second quarter of 1996.
On August 16, 1995, Sovereign announced its planned acquisition of the
deposits and related assets of two offices from Berkeley Federal Bank and Trust,
FSB in New Jersey, having deposits of approximately $112.9 million. The
transaction will be accounted for as a purchase and is expected to close
November 17, 1995.
On March 23, 1995, Sovereign executed an Agreement and Plan of Merger to
purchase Colonial State Bank ("Colonial"), a New Jersey chartered commercial
bank, headquartered in Freehold, New Jersey, with approximately $45 million in
assets and one branch office. This transaction will be accounted for as a
purchase and is expected to close on November 15, 1995.
SOVEREIGN BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Continued)
(10) ACCOUNTING CHANGES
Effective July 1, 1995, Sovereign prospectively adopted SFAS No. 122
"Accounting for Mortgage Servicing Rights". SFAS No. 122 requires the
recognition of, as separate assets, rights to service mortgage loans for others,
however those servicing rights are acquired and that the total cost of mortgage
loans, either purchased or originated, be allocated to the loans and the
mortgage servicing rights based on their relative fair value. The adoption of
SFAS 122 has not had a significant effect on Sovereign and no significant effect
is anticipated for the future.
(11) RECENT DEVELOPMENTS
In proposed legislation to recapitalize the Savings Association Insurance
Fund ("SAIF") and merge the thrift fund with the Bank Insurance a one-time
special assessment of at least .85% of deposits appears almost certain. It is
expected that this one-time special assessment will cost Sovereign approximately
$22 million after taxes with an anticipated reduction in the Federal Deposit
Insurance Corporation ("FDIC") premiums of almost $6 million after taxes each
year.
SOVEREIGN BANCORP, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS
General
Net income for the three-month period ended September 30, 1995 was $14.4
million, an increase of 18% when compared to net income of $12.2 million for the
three-month period ended September 30, 1994. Earnings per share for the
three-month period ended September 30, 1995 were $.26 per share, an increase of
8% when compared to $.24 for the same period in 1994. Net income for the
nine-month period ended September 30, 1995 was $40.7 million or $.77 per share
compared to $34.8 million or $.71 per share for the same period in 1994.
Earnings per share have been adjusted to reflect all stock dividends and stock
splits.
Return on average equity and return on average assets were 14.88% and .77%,
respectively, for the nine-month period ended September 30, 1995 compared to
16.75% and .87%, respectively, for the same period in 1994.
Net Interest Income
Net interest income for the three-month and nine-month periods ended
September 30, 1995 was $43.7 million and $127.8 million compared to $40.5
million and $113.9 million for the same periods in 1994. The increase is
attributable to an increase in average balances resulting from recent
acquisitions and internal growth partially offset by a decline in Sovereign's
interest rate spread (the difference between the yield on total assets and the
cost of total liabilities and stockholders' equity) to 2.43% for the nine-month
period ended September 30, 1995 from 2.87% for the same period in 1994.
Interest and dividends on investment and mortgage-backed securities and
other interest-earning assets were $44.5 million and $115.2 million for the
three-month and nine-month periods ended September 30, 1995 compared to $27.6
million and $76.8 million for the same periods in 1994. The average balance of
investment and mortgage-backed securities and other interest-earning assets was
$2.21 billion with an average yield of 6.97% for the nine-month period ended
September 30, 1995 compared to an average balance of $1.69 billion with an
average yield of 6.09% for the same period in 1994. The increase in the average
balance of investment and mortgage-backed securities and other assets was due to
recent purchases of mortgage-backed securities and to the Shadow Lawn
acquisition on August 5, 1994 in which Sovereign acquired $787.5 million of
assets and assumed $730.6 million of deposit liabilities of Shadow Lawn Savings
Bank. The increase in yield is the result of increasing rates on the variable
rate portfolio and higher rates on new purchases.
Interest and fees on loans were $84.3 million and $241.2 million for the
three-month and nine-month periods ended September 30, 1995 compared to $66.8
million and $175.0 million for the same periods in 1994. The average balance of
loans was $4.48 billion with an average yield of 7.18% for the nine-month period
ended September 30, 1995 compared to an average balance of $3.41 billion with an
average yield of 6.86% for the same period in 1994. The increase in the average
balance of loans is due to the origination of new mortgage loans and the Shadow
Lawn acquisition.
Interest on deposits was $53.7 million and $155.4 million for the
three-month and nine-month periods ended September 30, 1995 compared to $32.4
million and $84.5 million for the same periods in 1994. The average balance of
deposits was $4.93 billion with an average cost of 4.22% for the nine-month
period ended September 30, 1995 compared to an average balance of $3.42 billion
with an average cost of 3.31% for the same period in 1994.
SOVEREIGN BANCORP, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
The increase in the average balance of deposits is primarily due to the
Shadow Lawn acquisition and the assumption of $909.3 million of deposits from
Berkeley Federal Bank and Trust, FSB on January 1, 1995 . The cost of deposits
has increased due to a general rise in interest rates.
Interest on borrowings was $31.5 million and $73.3 million for the
three-month and nine-month periods ended September 30, 1995 compared to $21.4
million and $53.3 million for the same periods in 1994. The average balance of
borrowings was $1.66 billion with an average cost of 5.87% for the nine-month
period ended September 30, 1995 compared to an average balance of $1.52 billion
with an average cost of 4.68% for the same period in 1994. The cost of
borrowings has increased due to the rise in interest rates.
Provision for Possible Loan Losses
The provision for possible loan losses was $250,000 and $750,000 for the
three-month and nine-month periods ended September 30, 1995 compared to $950,000
and $3.5 million for the same periods in 1994. See "Financial Condition and Loan
Portfolio" for a discussion of credit quality of Sovereign's loan portfolio.
The following table presents the activity in the allowance for possible
loan losses for the periods indicated: (dollars in thousands)
Nine-Month Period Ended September 30,
1995 1994
-------------------------------------
Allowance, beginning of period $36,289 $33,099
Charge-offs:
Residential 2,048 1,772
Consumer 363 496
Commercial Real Estate 486 115
------- -------
Total Charge-offs 2,897 2,383
------- -------
Recoveries:
Residential 291 142
Consumer 19 23
Commercial -- 1
Commercial Real Estate 28 42
------- -------
Total Recoveries 338 208
------- -------
Charge-offs, net of recoveries 2,559 2,175
Provision for possible loan losses 750 3,500
Acquired reserves and other additions -- 4,712
------- -------
Allowance, end of period $34,480 $39,136
======= =======
Other Income
Other income was
$4.9 million and $19.1 million for the three-month and nine-month periods
ended September 30, 1995, compared to $4.0 million and $10.2 million for the
same periods in 1994.
Other loan fees and service charges were $1.1 million and $3.3 million for
the three-month and nine-month periods ended September 30, 1995 compared to $1.4
million and $3.6 million for the same periods in 1994. Other loan fees and
service charges result primarily from Sovereign's loan servicing portfolio.
Sovereign serviced $4.03 billion of its own loans and $891.9 million of loans
for others at September 30, 1995 compared to $3.99 billion of its own loans and
$1.14 billion of loans for others at September 30, 1994.
SOVEREIGN BANCORP, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
Deposit fees were $2.2 million
and $6.4 million for the three-month and nine-month periods ended September
30, 1995 compared to $1.5 million and $3.6 million for the same periods in 1994.
This increase was primarily the result of the Shadow Lawn and Berkeley
acquisitions.
Gain on sale of loans and investment and mortgage-backed securities
available-for-sale was $36,000 and $172,000 for the three-month and nine-month
periods ended September 30, 1995 compared to $580,000 and $1.1 million for the
same periods in 1994.
Mortgage banking gains were $757,000 and $5.5 million for the three-month
and nine-month periods ended September 30, 1995 compared to $131,000 and
$565,000 for the same periods in 1994. The nine-month period increase is due to
a gain of $3.6 million from the sale of $238.5 million of mortgage servicing
rights in May, 1995.
Miscellaneous income was $837,000 and $3.6 million for the three-month and
nine-month periods ended September 30, 1995 compared to $436,000 and $1.3
million for the same periods in 1994. The nine-month period increase includes a
$1.5 million gain on the April 21, 1995 sale of deposits totaling $106.7
million.
General and Administrative Expenses
Total general and administrative expenses were $23.7 million and $74.7
million for the three-month and nine-month periods ended September 30, 1995
compared to $21.4 million and $60.4 million for the same periods in 1994. The
ratio of general and administrative expenses to average assets for the
three-month period ended September 30, 1995 was 1.27% compared to 1.45% for the
same period in 1994. This improvement in the expense ratio is the result of
efficiencies realized from recent acquisitions and an increase in average
balances.
Other operating expenses were $2.8 million and $9.5 million for the
three-month and nine-month periods ended September 30, 1995 compared to $1.8 and
$3.9 million for the same periods in 1994. This increase was primarily due to
the amortization of goodwill and intangible assets resulting from recent
acquisitions and write downs of REO.
Income Tax Provision
The income tax provision was $7.4 million and $21.2 million for the
three-month and nine-month periods ended September 30, 1995 compared to $8.2
million and $21.5 million for the same periods in 1994. The effective tax rate
for the three-month and nine-month periods ended September 30, 1995 was 34.0%
and 34.3% compared to 40.1% and 38.2% for the same periods in 1994.
SOVEREIGN BANCORP, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
FINANCIAL CONDITION
Loan Portfolio
Loans at September 30, 1995 were $4.62 billion compared to $4.35 billion at
December 31, 1994. During the nine-month period ended September 30, 1995,
Sovereign closed approximately $525.7 million of first mortgage loans including
approximately $288.9 million of variable rate mortgage loans the majority of
which were retained in Sovereign's loan portfolio.
Sovereign's primary loan products are variable rate mortgage loans on owner
occupied residential real estate. As a result of Sovereign's focus on these
products, 85.94% of Sovereign's total loan portfolio is secured by residential
real estate and 75.86% of the total loan portfolio is comprised of variable rate
loans. At September 30, 1995, Sovereign's total loan portfolio included $3.97
billion of first mortgage loans secured primarily by liens on owner occupied
one-to-four family residential properties and $452.4 million of home equity
loans secured primarily by second mortgages on owner occupied one-to-four family
residential properties.
Sovereign places substantially all loans 90 days or more delinquent on
non-performing status. At September 30, 1995, Sovereign's non-performing assets
were $43.8 million compared to $40.5 million at December 31, 1994. The ratio of
non-performing assets to total assets was .56% at September 30, 1995 compared to
.62% at December 31, 1994.
At September 30, 1995, 81.16% of non-performing assets consisted of loans
or real estate owned (REO) related to residential real estate compared to 85.01%
at December 31, 1994. Historically, losses on disposition of non-performing
residential real estate have been lower than non-performing commercial and
commercial real estate loans. Non-performing assets at September 30, 1995
include $7.4 million of REO which is carried at lower of cost or estimated fair
market value less estimated disposal costs.
SOVEREIGN BANCORP, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
The following table presents the composition of non-performing assets at
the dates indicated: (dollars in thousands)
September 30, December 31,
1995 1994
------------ -----------
Non-Accrual Loans:
Past due 90 or more days
as to interest or principal:
Residential $ 30,977 $ 25,379
Other 3,736 2,892
Past due less than 90 days as to
interest and principal:
Residential 1,386 2,980
-------- --------
Total Non-Accrual Loans 36,099 31,251
Restructured Loans 296 99
-------- --------
Total Non-Performing Loans 36,395 31,350
-------- --------
Real Estate Owned:
Residential 3,201 6,104
Other 4,221 3,087
-------- --------
Total Real Estate Owned 7,422 9,191
-------- --------
TOTAL NON-PERFORMING ASSETS $43,817 $ 40,541
======== ========
Non-Performing Assets as a
percentage of Total Assets .56% .62%
Non-Performing Loans as a
percentage of Total Loans .78% .72%
Non-Performing Assets as a
percentage of Total Loans
and Real Estate Owned .94% .93%
Allowance for Possible Loan
Losses as a percentage of
Total Non-Performing Assets 77.98% 88.24%
Allowance for Possible Loan
Losses as a percentage of
Total Non-Performing Loans 93.88% 114.11%
Management constantly evaluates the adequacy of its allowance for possible
loan losses. Management's evaluation of the adequacy of the allowance to absorb
potential loan losses takes into consideration the risks inherent in the loan
portfolio, past loan loss experience, specific loans which could have loss
potential, geographic and industry concentrations, delinquency trends, economic
conditions and other relevant factors. At September 30, 1995, the allowance for
possible loan losses was $34.5 million or .75% of loans compared to $36.3
million or .83% of loans at December 31, 1994.
SOVEREIGN BANCORP, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
The following table presents the allocation of the allowance for possible
loan losses and the percentage of such allocation to each loan type for the
dates indicated: (dollars in thousands)
September 30, December 31,
Balance at End of 1995 1994
Period Amounttable to Amount Percent Amount Percent
- -------------------------- -------- --------- --------- ----------
Resideential real estate $11,451 33.21% $10,540 29.05%
Commercial real estate 547 1.59 657 1.81
Commercial 137 .40 164 .45
Consumer 4,565 13.24 4,435 12.22
Unallocated 17,780 51.56 20,493 56.47
------- ------ ------- ------
Total $34,480 100.00% $36,289 100.00%
======= ====== ======= ======
Potential problem loans (consisting of loans as to which management has
serious doubts as to the ability of such borrowers to comply with present
repayment terms, although not currently classified as non-performing loans)
amounted to approximately $2.5 million. These loans consist of $2.3 million of
multi-family loans and $224,000 of commercial real estate loans.
Investment and Mortgage-backed Securities
Investment securities consist primarily of U.S. Treasury and government
agency securities, corporate debt securities and stock in the Federal Home Loan
Bank of Pittsburgh ("FHLB"). Mortgage-backed securities consist of obligations
issued by FHLMC, FNMA, GNMA, RTC or private issuers. Sovereign's mortgage-backed
securities are generally either guaranteed as to principal and interest by the
issuer or rated "AAA" or "AA" by Standard and Poor's or Moody's. At September
30, 1995, total investment and mortgage-backed securities were $2.85 billion
compared to $1.90 billion at December 31, 1994. For additional information on
the investment and mortgage-backed securities, see Notes 3 and 4 in the Notes to
Consolidated Financial Statements.
Goodwill and Other Intangible Assets
Total goodwill and other intangible assets at September 30, 1995 were
$117.8 million compared to $64.6 million at December 31, 1994. The increase is
the result of the Berkeley acquisition of January l, 1995.
Deposits
Deposits are attracted from within Sovereign's primary market area through
the offering of various deposit instruments including NOW accounts, money market
accounts, savings accounts, certificates of deposit and retirement savings
plans.
Total deposits at September 30, 1995 were $4.99 billion, compared to $4.03
billion at December 31, 1994. This increase is the result of the assumption of
Berkeley deposits. For additional information on the deposit portfolio
composition, see Note 6 in the Notes to Consolidated Financial Statements.
SOVEREIGN BANCORP, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
Borrowings
Sovereign utilizes borrowings as a source of funds for its asset growth.
Collateralized advances are available from the FHLB provided certain standards
related to creditworthiness have been met. Another source of funds for Sovereign
is reverse repurchase agreements. Reverse repurchase agreements are short-term
obligations collateralized by a security interest in U.S. Treasury securities or
securities fully guaranteed as to principal and interest by the U.S. Government
or an agency thereof.
Total borrowings at September 30, 1995 were $2.38 billion of which $1.45
billion were short-term compared to $2.16 billion of which $1.72 billion were
short-term at December 31, 1994. This decrease in short-term borrowings is the
result of the use of funds received from the Berkeley deposits to pay down
borrowings. For additional information on the borrowings, see Note 7 in the
Notes to Consolidated Financial Statements.
Stockholders' Equity
Total stockholders' equity at September 30, 1995 was $415.0 million
compared to $303.9 million at December 31, 1994. This increase is primarily
attributable to the retention of earnings and the issuance of preferred stock.
LIQUIDITY AND CAPITAL RESOURCES
Sovereign Bank is required under applicable federal regulations to maintain
specified levels of "liquid" investments in cash and U.S. Treasury and other
qualifying investments. Regulations currently in effect require Sovereign Bank
to maintain liquid assets of not less than 5% of its net withdrawable accounts
plus short-term borrowings, of which short-term liquid assets must consist of
not less than 1%. These levels are changed from time to time by the OTS to
reflect economic conditions. Sovereign Bank's liquidity ratio was 6.03% for
September 30, 1995.
Sovereign's primary financing sources are deposits obtained in its own
market area and borrowings in the form of securities sold under repurchase
agreements and advances from the FHLB. At September 30, 1995, Sovereign had
$1.77 billion in unpledged investments and mortgage-backed securities which
could be used to collateralize additional borrowings. Sovereign Bank can also
borrow from the FHLB, subject to required collateralization. Other sources of
funds include operating activities, repayments of principal on investment and
mortgage-backed securities, repayment of principal on loans and other investing
activities.
For the nine-month period ended September 30, 1995, cash and cash
equivalents decreased $10.0 million. Net cash provided by operating activities
was $13.6 million for the nine-month period ended September 30, 1995. Net cash
used by investing activities for the nine-month period ended September 30, 1995,
was $1.20 billion consisting primarily of purchases of mortgage-backed
securities which are classified as held-to-maturity. The considerable flattening
of the yield curve has diminished the market for originating adjustable rate
mortgage loans. As a result, Sovereign has focused on the mortgage-backed
security portfolio to provide earning assets. Net cash provided by financing
activities for the nine-month period ended September 30, 1995, was $1.18 billion
which includes the assumption of $748.6 million of deposits from recent
acquisitions and proceeds from long-term borrowings of $732.5 million which was
partially offset by a decrease in short-term borrowings due to Sovereign's
effort to extend borrowings to manage its interest rate risk.
SOVEREIGN BANCORP, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
The Financial Institutions Reform, Recovery and Enforcement Act ("FIRREA"),
requires the OTS to prescribe uniformly applicable capital standards for all
savings associations. These standards require savings associations to maintain a
minimum tangible capital ratio of not less than 1.5%, a minimum leverage capital
ratio of not less than 3% of tangible assets and not less than 4% of risk
adjusted assets and a minimum risk-based capital ratio (based upon credit risk)
of not less than 8%. In all cases, these standards are to be no less stringent
than the capital standards that are applicable to national banks. The OTS has
issued a regulation that requires a minimum leverage capital requirement of 3%
for associations rated composite 1 under the OTS MACRO rating system. For all
other savings associations, the minimum leverage capital requirement will be 3%
plus at least an additional 100 to 200 basis points.
The OTS issued its final regulations on the incorporation of an interest
rate risk component into its risk-based capital requirements. Under the
regulation, savings associations which are deemed to have an "above normal"
level of interest rate risk must deduct a portion of that risk from total
capital for regulatory capital purposes. Implementation of this interest rate
risk capital deduction has been delayed by the OTS until further notification.
The Federal Deposit Insurance Corporation Improvement Act ("FDICIA"),
established five capital tiers: well capitalized, adequately capitalized, under
capitalized, significantly under capitalized and critically under capitalized. A
depository institution's capital tier depends upon its capital levels in
relation to various relevant capital measures, which include leverage and
risk-based capital measures and certain other factors. Depository institutions
that are not classified as well capitalized are subject to various restrictions
regarding capital distributions, payment of management fees, acceptance of
brokered deposits and other operating activities.
At September 30, 1995, Sovereign Bank is classified as well capitalized and
is in compliance with all capital requirements. Management anticipates that
Sovereign Bank will continue to be classified as well capitalized and will be in
compliance with all capital requirements.
The following table sets forth the capital ratios of Sovereign Bank and
Sovereign Bancorp and the current regulatory requirements at September 30, 1995:
Sovereign Sovereign
Bancorp(1) Bank Requirement
---------- --------- -----------
Stockholders' equity to
total assets 5.28% 6.46% None
Tangible capital to tangible
assets 3.91 5.02 1.50%
Leverage (core) capital to
tangible assets 3.91 5.02 3.00
Leverage (core) capital to
risk adjusted assets 8.78 11.53 4.00
Risk-based capital to risk
adjusted assets 14.50 12.38 8.00
(1) OTS capital regulations do not apply to savings and loan holding
companies. These ratios are computed as if those regulations did apply to
Sovereign Bancorp.
SOVEREIGN BANCORP, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
ASSET AND LIABILITY MANAGEMENT
The objective of Sovereign's asset and liability management is to identify,
manage and control its interest rate risk in order to produce consistent
earnings that are not largely contingent upon favorable trends in interest
rates. Sovereign manages its assets and liabilities to attain a stable net
interest margin across a wide spectrum of interest rate environments. This is
accomplished by monitoring the levels of interest rates, the relationships
between the rates earned on assets and the rates paid on liabilities, the
absolute amount of assets and liabilities which reprice or mature over similar
periods, off-balance sheet positions and the effect of all of these factors on
the estimated level of net interest income.
There are a number of industry standards used to measure an institution's
interest rate risk position. Most common among these is the one year gap which
is the ratio representing the difference between assets, liabilities and
off-balance sheet positions which will mature or reprice within one year
expressed as a percentage of total assets. Using management's estimates of asset
prepayments, core deposit decay and borrowing repricing in its computation,
Sovereign estimates that its cumulative one year gap position was a positive .8%
at September 30, 1995.
Sovereign also utilizes income simulation modeling in measuring its
interest rate risk and managing its interest rate sensitivity. Income simulation
considers not only the impact of changing market interest rates on forecasted
net interest income, but also other factors such as yield curve relationships,
the volume and mix of assets and liabilities, customer preferences and general
market conditions.
Pursuant to its interest rate risk management strategy, Sovereign enters
into off-balance sheet transactions which involve interest rate exchange
agreements (swaps, caps and floors) for interest rate risk management purposes.
Sovereign's objective in managing its interest rate risk is to provide
sustainable levels of net interest income while limiting the impact changes in
interest rates have on net interest income. For additional information on
Interest Rate Exchange Agreements, see Note 8 in the Notes to Consolidated
Financial Statement.
Amortizing and non-amortizing interest rate swaps are generally used to
convert fixed rate assets and liabilities to variable rate assets and
liabilities and vice versa. Sovereign utilizes amortizing interest rate swaps to
convert discounted adjustable rate loans to fixed rate for a period of time. The
amortization of the notional amount of the interest rate swaps are tied to the
level of an index such as the One Year Treasury Constant Maturity, LIBOR, or a
prepayment rate of a pool of mortgage-backed securities. In order for interest
rate swaps to achieve the desired objective, Sovereign selects interest rate
swaps that will have a high degree of correlation to the related financial
instrument. Sovereign generally utilizes non-amortizing swaps to convert fixed
rate liabilities to floating rate, to reduce Sovereign's overall cost of funds.
Interest rate caps are generally used to limit the exposure from the
repricing and maturity of liabilities and interest rate floors are generally
used to limit the exposure from repricing and maturity of assets. Interest rate
caps and floors are also used to limit the exposure created by other interest
rate swaps. In certain cases, interest rate caps or floors are simultaneously
bought and sold to create a range of protection against changing interest rates
while limiting the cost of that protection.
SOVEREIGN BANCORP, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
Due to competitive conditions, Sovereign originates fixed rate residential
mortgages. It exchanges the majority of these loans with FHLMC, FNMA and private
investors. The loans are exchanged for marketable fixed rate mortgage-backed
securities which are generally sold, or cash. This helps insulate Sovereign from
the interest rate risk associated with these fixed rate assets. Sovereign uses
forward sales, cash sales and options on mortgage-backed securities as means of
hedging loans in the mortgage pipeline which are originated for resale.
Sovereign's primary funding source is deposits obtained in its own
marketplace. Deposit programs at Sovereign are priced to meet management's
asset/liability objectives, while taking into account the rates available on
investment opportunities and also considering the cost of alternative funding
sources. Borrowings are a significant funding source for Sovereign and have
primarily been in the form of securities sold under repurchase agreements and
advances from the FHLB. Since borrowings are not subject to the market
constraints to which deposits are, Sovereign uses borrowings to add flexibility
to its interest rate risk position.
SOVEREIGN BANCORP, INC. AND SUBSIDIARIES
PART II -- OTHER INFORMATION
Items 1 through 5 are not applicable or the responses are negative.
Item 6 - Reports on Form 8-K.
Report on Form 8-K, dated July 10, 1995 (date of earliest event -
July 6, 1995), announced the resignation of a member of the Company's
Board of Directors.
Report on Form 8-K, dated July 13, 1995 (date of earliest event -
July 13, 1995), contained a press release announcing the Company's
expected earnings for the second quarter of 1995.
Report on Form 8-K, dated October 23, 1995 (date of earliest event -
October 18, 1995), contained a press release announcing the Company's
earnings for the third quarter of 1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SOVEREIGN BANCORP, INC.
--------------------------------------------
( Registrant)
Date November 13, 1995 /s/ Karl D. Gerhart
----------------------- ----------------------------------------------
Karl D. Gerhart
Chief Financial Officer
Date November 13, 1995 /s/ Richard A. Elko
----------------------- ----------------------------------------------
Richard A. Elko
Chief Accounting Officer