EX-99.1 2 sb5437ex991.txt EXHIBIT 99.1 Exhibit 99.1 [LOGO OF SOVEREIGN BANCORP] NEWS RELEASE Corporate Headquarters: 1500 Market Street, Philadelphia, Pa. FOR IMMEDIATE RELEASE -------------------------------------------------------------------------------- DATE: April 18, 2006 FINANCIAL CONTACTS: Mark McCollom 610-208-6426 mmccollo@sovereignbank.com Stacey Weikel 610-208-6112 sweikel@sovereignbank.com MEDIA CONTACT Ed Shultz 610-378-6159 eshultz1@sovereignbank.com
-------------------------------------------------------------------------------- SOVEREIGN BANCORP, INC. ANNOUNCES 2006 FIRST QUARTER EPS OF $.38 AND OPERATING/CASH EARNINGS OF $.43 PER SHARE FLAT TO INVERTED YIELD CURVE IMPACTED COMPANY'S EARNINGS DURING THE QUARTER FINANCIAL HIGHLIGHTS -------------------- o Net income for the first quarter of 2006 was $141 million. Earnings per diluted share for the first quarter of 2006 were $.38, unchanged from a year ago. o Operating/cash earnings per diluted share for the first quarter of 2006 were $.43 per share. o Efficiency ratio was 52.01% in the first quarter of 2006. o Total average assets, investments and borrowings remained relatively unchanged from fourth quarter 2005 levels. o Net interest margin remained flat from the fourth quarter of 2005. o Average deposits increased to $38.4 billion, a growth rate of 10% from a year ago; average core deposits (excluding time deposits) increased to $26.8 billion, a growth rate of 3% from a year ago. o Average loans increased to $44.2 billion, an annualized growth rate of 14% from a year ago. o Mortgage banking revenues were $13 million in the first quarter of 2006, down from $26 million in the fourth quarter of 2005. o Return on average assets of .90% as compared to 1.03% a year ago. o Operating/cash return on average assets of 1.05% as compared to 1.29% a year ago. o Return on average tangible stockholders' equity of 19.3% as compared to 21.1% a year ago. o Operating/cash return on tangible stockholders' equity of 22.7% as compared to 26.5% a year ago. o Annualized net charge-offs of .26% of average loans in the first quarter of 2006. o Tangible common equity ratio increased to 5.16% (excluding OCI) and book value per share to $16.42. o Cash dividends increased by 33% during the quarter. Sovereign also declared a 5% stock dividend. PHILADELPHIA, PA...Sovereign Bancorp, Inc. ("Sovereign") (NYSE: SOV), parent company of Sovereign Bank ("Bank"), today reported for the first quarter 2006, net income of $141 million, or $.38 per diluted share, as compared to $146 million, or $.38 per diluted share, for the first quarter of 2005. Net income in the first quarter of 2006 included charges related to proxy and related professional fees of $9.3 million, after-tax, or $.02 per share; net income in the first quarter of 2005 included merger and integration charges of $15.1 million, after-tax, or $.04 per share in addition to lease and contract termination charges of $3.4 million, after-tax, or $.01 per share. Sovereign's net income for the first quarter of 2006 produced annualized returns on average assets and average tangible equity of .90% and 19.3%, respectively, as compared to 1.03% and 21.1%, respectively, in the same period a year ago. For the quarter ended March 31, 2006, Sovereign's operating/cash earnings per diluted share were $.43, which excluded the above mentioned proxy and related professional fee charges as well as $1.8 million of merger related and integration cost reversals and $11.2 million, or $.03 per share, related to amortization of intangible assets, as compared to $.46 per diluted share a year ago, which excluded the above mentioned merger and integration charges and $12.3 million, or $.03 per share, related to amortization of intangible assets. Operating/cash earnings for the first quarter of 2006 produced annualized operating/cash return on average assets and average tangible equity of 1.05% and 22.7%, respectively, as compared to 1.29% and 26.5%, respectively, in the first quarter of 2005. A reconciliation of net income to operating/cash earnings, as well as the related earnings per share amounts, is included in a later section of this release. Commenting on results for the first quarter of 2006, Jay S. Sidhu, Sovereign's Chairman and CEO, stated, "Due to the prolonged flatness to slight inversion in the yield curve, the company is focused on stabilizing our net interest margin, controlling expense growth and maximizing generation of capital. We are disappointed that operating/cash EPS were lower than a year ago but are hopeful this trend will change by the second half of 2006." NET INTEREST INCOME AND MARGIN During the first quarter of 2006, Sovereign reclassified prepayment and late fees from non-interest income to interest income as a result of a classification change made by the Office of Thrift Supervision to include prepayment and late fees in net interest margin rather than fee income on regulatory reports, consistent with commercial bank call reports. Including this retroactive reclass, Sovereign reported net interest income of $404 million for the first quarter of 2006 as compared to $407 million in the first quarter of 2005. Sovereign's average loan portfolio increased by $5.3 billion over last year and $726 million on a linked quarter basis to $44.2 billion, reflecting an annualized growth rate of 7%. Sovereign's average deposits increased $3.6 billion over last year and $572 million linked quarter to $38.4 billion, reflecting an annualized growth rate of 6%. Net interest margin was 3.00% for the first quarter of 2006 as compared to 3.01% in the fourth quarter of 2005 and 3.34% in the first quarter of 2005. The year-over-year compression in net interest margin is primarily as a result of the prolonged flatness of the yield curve, which continues to challenge the entire industry. NON-INTEREST INCOME Consumer and commercial banking fees increased 10% from a year ago. Consumer banking fees increased to $60.8 million, primarily driven by growth in loan fees and investment service fees. Commercial banking fees increased by $8.7 million to $39.0 million primarily driven by growth in loan fees and precious metal revenues. Fee revenues on a linked quarter basis were impacted by seasonal factors typically present in the first quarter of each year. Mortgage banking revenues for the quarter were $13.0 million, compared to $26.5 million last quarter and $11.7 million in the same quarter a year ago. Mortgage banking revenue in the fourth quarter of 2005 included sales of mortgage and home equity loans of $22.7 million and a reversal of mortgage servicing right impairment reserves of $3.9 million; the first quarter of 2005 included a reversal of mortgage servicing right impairment of $4.0 million. NON-INTEREST EXPENSE G&A expenses for the quarter were $280 million, down on a linked quarter basis by $1.8 million. "Expense control in this yield curve environment remains a top priority," stated Mark R. McCollom, Sovereign's Chief Financial Officer. "Until the yield curve environment changes, we will remain particularly focused on expense control and only invest in areas where there is a compelling increase in near term revenues." ASSET QUALITY Asset quality remained strong in the first quarter of 2006. Annualized net charge-offs were .26% of average loans for the first quarter, compared to .21% in the fourth quarter of 2005. Non-performing assets to total assets decreased slightly from fourth quarter levels to .31%. Sovereign's provision for credit losses was $29.0 million this quarter compared to $26.0 million in the fourth quarter of 2005 and $22.0 million in the first quarter of 2005. The allowance for credit losses to total loans decreased slightly to .97% at March 31, 2006, as compared to 1.00% at December 31, 2005 and 1.09% at March 31, 2005. The allowance for credit losses to non-performing loans now stands at 239%, as compared to 231% at December 31, 2005 and 255% at March 31, 2005. CAPITAL Sovereign's Tier 1 leverage ratio was 6.74% at March 31, 2006. Tangible common equity to tangible assets, excluding other comprehensive income ("OCI"), was 5.16% and including OCI was 4.81%. The equity to assets ratio was 9.07% at March 31, 2006. Sovereign Bank's Tier 1 leverage ratio was 6.96% and the Bank's risk-based capital ratio was 10.95% at March 31, 2006. Based upon our April 17 stock price of $21.70, Sovereign is trading at a P/E of 11.9x analysts mean 2006 estimate. The book value per share at March 31, 2006 was $16.42. ABOUT SOVEREIGN Sovereign Bancorp, Inc., ("Sovereign") (NYSE: SOV), is the parent company of Sovereign Bank, a $65 billion financial institution with more than 650 community banking offices, over 1,000 ATMs and approximately 10,000 team members with principal markets in the Northeast United States. Sovereign offers a broad array of financial services and products including retail banking, business and corporate banking, cash management, capital markets, trust and wealth management and insurance. Sovereign is the 18th largest banking institution in the United States. For more information on Sovereign Bank, visit (http://www.sovereignbank.com) or call 1-877-SOV-BANK. Interested parties will have the opportunity to listen to a live web-cast of Sovereign's First Quarter 2006 earnings call on Tuesday, April 18 beginning at 5:00 p.m. ET at www.sovereignbank.com >Investor Relations >News >Conference Calls/Webcasts; or The web-cast and replay can be accessed anytime from 5:00 p.m. ET on Tuesday, April 18 through 12:00 a.m. ET on Wednesday, July 19, 2006. Questions may be submitted during the call via email to investor@sovereignbank.com . A telephone replay will be accessible from 6:00 p.m. ET on Tuesday, April 18, 2006 through 12:00 a.m. ET (midnight) on Monday, April 24 by dialing 800-642-1687, confirmation id #7005624. --END-- Note: This press release contains financial information determined by methods other than in accordance with U.S. Generally Accepted Accounting Principles ("GAAP"). Sovereign's management uses the non-GAAP measure of Operating/Cash Earnings, and the related per share amount, in their analysis of the company's performance. This measure, as used by Sovereign, adjusts net income determined in accordance with GAAP to exclude the effects of special items, including significant gains or losses that are unusual in nature or are associated with acquiring and integrating businesses, and certain non-cash charges. Operating/cash earnings for 2005 and 2006 EPS purposes represent net income adjusted for the after-tax effects of merger-related and integration charges, certain restructuring charges, proxy and related professional fees and the amortization of intangible assets. Since certain of these items and their impact on Sovereign's performance are difficult to predict, management believes presentations of financial measures excluding the impact of these items provide useful supplemental information in evaluating the operating results of Sovereign's core businesses. These disclosures should not be viewed as a substitute for net income determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. This press release contains statements of Sovereign's strategies, plans, and objectives, as well as estimates of financial condition, operating and cash efficiencies and revenue generation. These statements and estimates constitute forward-looking statements (within the meaning of the Private Securities Litigation Reform Act of 1995), which involve significant risks and uncertainties. Actual results may differ materially from the results discussed in these forward-looking statements. Factors that might cause such a difference include, but are not limited to, general economic conditions, changes in interest rates, deposit flows, loan demand, real estate values and competition; changes in accounting principles, policies, or guidelines; changes in legislation or regulation; Sovereign's ability in connection with any acquisition to complete such acquisition and to successfully integrate assets, liabilities, customers, systems and management personnel Sovereign acquires into its operations and to realize expected cost savings and revenue enhancements within expected time frame; the possibility that expected one time merger-related charges are materially greater than forecasted or that final purchase price allocations based on the fair value of acquired assets and liabilities and related adjustments to yield and/or amortization of the acquired assets and liabilities at any acquisition date are materially different from those forecasted; other economic, competitive, governmental, regulatory, and technological factors affecting the Company's operations, integrations, pricing, products and services; and acts of God, including natural disasters. Sovereign Bancorp is followed by several market analysts. Please note that any opinions, estimates, forecasts, or predictions regarding Sovereign Bancorp's performance or recommendations regarding Sovereign's securities made by these analysts are theirs alone and do not represent opinions, estimates, forecasts, predictions or recommendations of Sovereign Bancorp or its management. Sovereign Bancorp does not by its reference to any analyst opinions, estimates, forecasts regarding Sovereign's performance or recommendations regarding Sovereign's securities imply Sovereign's endorsement of or concurrence with such information, conclusions or recommendations. SOVEREIGN BANCORP, INC. AND SUBSIDIARIES FINANCIAL HIGHLIGHTS (unaudited) ================================================================================
QUARTER ENDED ------------------------------------------------------------------- (dollars in millions, except MAR. 31 DEC. 31 SEPT. 30 JUNE 30 MAR. 31 per share data) 2006 2005 2005 2005 2005 -------------------------------------------------------------------------------------------------------------- OPERATING DATA -------------- Net income $ 141.4 $ 165.5 $ 181.0 $ 183.5 $ 146.2 Net income for EPS purposes 147.7 171.8 187.4 189.8 152.5 Operating/cash earnings for EPS purposes (1) 166.4 187.2 197.2 196.5 183.3 Net interest income (2) 404.0 403.2 408.3 413.2 407.3 Provision for credit losses 29.0 26.0 20.0 22.0 22.0 Total fees and other income before securities transactions (2) 134.3 159.9 158.2 148.6 124.3 Net gain (loss) on investment securities 0.0 (1.3) 1.7 3.4 8.0 G&A expense 280.0 281.8 276.9 273.4 257.1 Other expenses 44.8 40.0 32.6 27.1 63.8 -------------------------------------------------------------------------------------------------------------- PERFORMANCE STATISTICS ---------------------- BANCORP Net interest margin (2) 3.00% 3.01% 3.13% 3.21% 3.34% Return on average assets 0.90% 1.03% 1.17% 1.22% 1.03% Operating/cash return on average assets (1) 1.05% 1.17% 1.27% 1.31% 1.29% Return on average equity 9.72% 11.49% 12.61% 12.92% 10.61% Operating/cash return on average equity (1) 11.45% 13.00% 13.74% 13.84% 13.30% Return on average tangible equity 19.29% 23.67% 26.24% 27.15% 21.09% Operating/cash return on average tangible equity (1) 22.71% 26.78% 28.58% 29.09% 26.45% Annualized net loan charge-offs to average loans 0.26% 0.21% 0.18% 0.19% 0.20% Efficiency ratio (3) 52.01% 50.04% 48.87% 48.67% 48.36% PER SHARE DATA -------------- Basic earnings per share $ 0.39 $ 0.46 $ 0.50 $ 0.50 $ 0.40 Diluted earnings per share 0.38 0.44 0.48 0.47 0.38 Operating/cash earnings per share (1) 0.43 0.48 0.50 0.49 0.46 Dividend declared per share .060 .060 .040 .040 .030 Book value (4) 16.42 $ 16.21 15.81 15.70 15.22 Common stock price: High 22.61 23.49 24.72 22.70 23.73 Low 20.55 20.63 21.69 20.13 21.89 Close $ 21.91 $ 21.62 $ 22.04 $ 22.34 $ 22.16 Weighted average common shares: Basic 358.9 357.8 360.3 367.9 368.9 Diluted 390.8 390.1 393.1 400.4 401.3 End-of-period common shares: Basic 359.3 358.4 358.5 365.8 374.8 Diluted 391.1 390.5 390.7 398.3 407.4 --------------------------------------------------------------------------------------------------------------
NOTES: (1) Operating/cash earnings represent net income excluding the after-tax effects of certain items, such as significant gains or losses that are unusual in nature or are associated with acquiring or integrating businesses, amortization of intangible assets, proxy and related professional fees, and certain other charges. See page H and I for a reconciliation of GAAP and Non-GAAP measures. (2) In accordance with regulatory reporting guidance issued in the first quarter of 2006, Sovereign reclassified loan prepayment fees and late fees from non-interest income to interest income. Prior periods were reclassified to conform to the current period presentation. (3) Efficiency ratio equals general and administrative expense as a percentage of total revenue, defined as the sum of net interest income and total fees and other income before securities transactions. (4) Book value equals stockholders' equity at period-end divided by common shares outstanding. SOVEREIGN BANCORP, INC. AND SUBSIDIARIES FINANCIAL HIGHLIGHTS (unaudited) ================================================================================
QUARTER ENDED ------------------------------------------------------------------- MAR. 31 DEC. 31 SEPT. 30 JUNE 30 MAR. 31 (dollars in millions) 2006 2005 2005 2005 2005 -------------------------------------------------------------------------------------------------------------- FINANCIAL CONDITION DATA: ------------------------- GENERAL ------- Total assets $ 65,060 $ 63,679 $ 62,960 $ 59,940 $ 58,942 Loans 45,164 43,804 42,692 41,267 40,320 Total deposits and customer related accounts: 38,820 37,978 37,333 36,102 36,686 Core deposits and other customer related accounts 27,143 26,639 27,395 26,683 27,225 Time deposits 11,678 11,339 9,937 9,419 9,461 Borrowings 19,216 18,721 18,897 17,069 15,555 Minority interests 206 206 205 205 204 Stockholders' equity 5,900 5,811 5,668 5,743 5,705 Goodwill 2,715 2,717 2,714 2,714 2,721 Core deposit intangible 197 214 232 250 269 ASSET QUALITY ------------- Non-performing assets $ 200.5 $ 205.6 $ 181.1 $ 173.2 $ 186.9 Non-performing loans $ 183.5 $ 189.5 $ 169.9 $ 162.4 $ 171.9 Non-performing assets to total assets 0.31% 0.32% 0.29% 0.29% 0.32% Non-performing loans to total loans 0.41% 0.43% 0.40% 0.39% 0.43% Allowance for credit losses $ 438.5 $ 437.8 $ 436.8 $ 442.5 $ 437.7 Allowance for credit losses to total loans 0.97% 1.00% 1.02% 1.07% 1.09% Allowance for credit losses to non-performing loans 239% 231% 257% 272% 255% CAPITALIZATION - BANCORP (1) ---------------------------- Stockholders' equity to total assets 9.07% 9.13% 9.00% 9.58% 9.68% Tier 1 leverage capital ratio 6.74% 6.68% 6.48% 6.86% 6.96% Tangible equity to tangible assets, excluding OCI 5.16% 5.05% 4.84% 5.13% 5.22% Tangible equity to tangible assets, including OCI 4.81% 4.73% 4.54% 4.88% 4.86% CAPITALIZATION - BANK (1) ------------------------- Stockholders' equity to total assets 10.59% 10.61% 10.46% 11.30% 11.59% Tier 1 leverage capital ratio 6.96% 6.84% 6.58% 7.16% 7.44% Tier 1 risk-based capital ratio 8.50% 8.21% 7.91% 8.64% 8.93% Total risk-based capital ratio 10.95% 10.66% 10.42% 11.27% 11.59%
(1) All capital ratios are calculated based upon adjusted end of period assets consistent with OTS guidelines. The current quarter ratios are estimated as of the date of this earnings release. SOVEREIGN BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (unaudited) ================================================================================
MAR. 31 DEC. 31 SEPT. 30 (dollars in thousands) 2006 2005 2005 ------------------------------------------------------------------------------------------- ASSETS Cash and amounts due from depository institutions $ 997,447 $ 1,131,936 $ 1,438,240 Investments: Available-for-sale 7,063,492 7,258,402 7,547,170 Held-to-maturity 4,936,066 4,647,627 4,500,881 Other investments 670,353 651,299 696,859 ------------------------------------------------------------------------------------------- Total investments 12,669,911 12,557,328 12,744,910 ------------------------------------------------------------------------------------------- Loans: Commercial 17,250,897 16,635,646 16,222,920 Consumer 27,913,516 27,168,201 26,468,719 ------------------------------------------------------------------------------------------- Total loans 45,164,413 43,803,847 42,691,639 Less allowance for loan losses (421,860) (419,599) (418,353) ------------------------------------------------------------------------------------------- Total loans, net 44,742,553 43,384,248 42,273,286 ------------------------------------------------------------------------------------------- Premises and equipment, net 408,119 412,017 401,868 Accrued interest receivable 275,343 286,300 265,120 Goodwill 2,715,217 2,716,826 2,714,073 Core deposit intangible 196,756 213,975 231,740 Bank owned life insurance 1,027,403 1,018,125 1,006,820 Other assets 2,027,191 1,957,971 1,884,316 ------------------------------------------------------------------------------------------- Total assets $ 65,059,940 $ 63,678,726 $ 62,960,373 ================================================ LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Deposits and other customer related accounts: Core and other customer related accounts $ 27,142,655 $ 26,639,246 $ 27,395,257 Time deposits 11,677,492 11,338,460 9,937,334 ------------------------------------------------------------------------------------------- Total 38,820,147 37,977,706 37,332,591 ------------------------------------------------------------------------------------------- Borrowings and other debt obligations 19,216,159 18,720,897 18,897,237 Other liabilities 917,661 963,764 857,530 ------------------------------------------------------------------------------------------- Total liabilities 58,953,967 57,662,367 57,087,358 ------------------------------------------------------------------------------------------- Minority interests 206,141 205,660 205,176 Stockholders' equity: Common Stock 3,657,038 3,657,543 3,649,507 Warrants and stock options 335,717 337,346 337,156 Unallocated ESOP shares (21,396) (21,396) (23,707) Treasury stock (466,328) (478,734) (467,265) Accumulated other comprehensive loss (211,760) (170,798) (170,619) Retained earnings 2,606,561 2,486,738 2,342,767 ------------------------------------------------------------------------------------------- Total stockholders' equity 5,899,832 5,810,699 5,667,839 ------------------------------------------------------------------------------------------- Total liabilities and stockholders' equity $ 65,059,940 $ 63,678,726 $ 62,960,373 ================================================
JUNE 30 MAR. 31 (dollars in thousands) 2005 2005 -------------------------------------------------------------------------- ASSETS Cash and amounts due from depository institutions $ 1,176,891 $ 981,674 Investments: Available-for-sale 6,919,987 7,134,372 Held-to-maturity 4,055,135 3,839,848 Other investments 609,977 574,981 -------------------------------------------------------------------------- Total investments 11,585,099 11,549,201 -------------------------------------------------------------------------- Loans: Commercial 16,152,017 15,363,592 Consumer 25,115,462 24,956,412 -------------------------------------------------------------------------- Total loans 41,267,479 40,320,004 Less allowance for loan losses (424,711) (421,446) -------------------------------------------------------------------------- Total loans, net 40,842,768 39,898,558 -------------------------------------------------------------------------- Premises and equipment, net 391,140 394,604 Accrued interest receivable 247,505 258,849 Goodwill 2,713,894 2,720,651 Core deposit intangible 250,025 268,528 Bank owned life insurance 996,645 992,426 Other assets 1,736,089 1,877,557 -------------------------------------------------------------------------- Total assets $ 59,940,056 $ 58,942,048 =============================== LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Deposits and other customer related accounts: Core and other customer related accounts $ 26,682,873 $ 27,224,877 Time deposits 9,418,691 9,460,879 -------------------------------------------------------------------------- Total 36,101,564 36,685,756 -------------------------------------------------------------------------- Borrowings and other debt obligations 17,068,806 15,554,598 Other liabilities 822,136 792,191 -------------------------------------------------------------------------- Total liabilities 53,992,506 53,032,545 -------------------------------------------------------------------------- Minority interests 204,721 204,286 Stockholders' equity: Common Stock 3,636,750 3,609,269 Warrants and stock options 339,517 346,116 Unallocated ESOP shares (23,707) (23,707) Treasury stock (280,223) (64,495) Accumulated other comprehensive loss (105,727) (169,312) Retained earnings 2,176,219 2,007,346 -------------------------------------------------------------------------- Total stockholders' equity 5,742,829 5,705,217 -------------------------------------------------------------------------- Total liabilities and stockholders' equity $ 59,940,056 $ 58,942,048 ===============================
SOVEREIGN BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) ================================================================================
QUARTER ENDED ------------------------------------------------------------------------ (dollars in thousands, except MAR. 31 DEC. 31 SEPT. 30 JUNE 30 MAR. 31 per share data) 2006 2005 2005 2005 2005 ----------------------------------------------------------------------------------------------------------- INTEREST AND DIVIDEND INCOME: Interest on interest-earning deposits $ 2,116 $ 2,605 $ 2,022 $ 1,896 $ 2,233 Interest on investment securities Available for sale 90,095 91,163 86,411 91,123 90,995 Held to maturity 53,553 51,225 47,624 45,091 45,119 Other 5,603 4,971 4,443 4,755 3,889 Interest on loans 688,166 661,072 620,742 577,220 527,988 ----------------------------------------------------------------------------------------------------------- Total interest and dividend income 839,533 811,036 761,242 720,085 670,224 ----------------------------------------------------------------------------------------------------------- INTEREST EXPENSE: Deposits and related customer accounts 231,837 201,449 169,084 139,879 114,178 Borrowings 203,738 206,344 183,817 167,047 148,700 ----------------------------------------------------------------------------------------------------------- Total interest expense 435,575 407,793 352,901 306,926 262,878 ----------------------------------------------------------------------------------------------------------- Net interest income 403,958 403,243 408,341 413,159 407,346 Provision for credit losses 29,000 26,000 20,000 22,000 22,000 ----------------------------------------------------------------------------------------------------------- Net interest income after provision for credit losses 374,958 377,243 388,341 391,159 385,346 ----------------------------------------------------------------------------------------------------------- NON-INTEREST INCOME: Consumer banking fees 60,798 64,696 65,738 65,833 60,349 Commercial banking fees 39,016 46,699 39,519 32,734 30,323 Mortgage banking revenue (1) 12,992 26,501 28,671 21,290 11,655 Capital markets revenue 3,889 4,053 5,382 3,700 4,686 Bank owned life insurance income 11,327 11,398 12,066 12,918 10,903 Other 6,319 6,538 6,856 12,092 6,351 ----------------------------------------------------------------------------------------------------------- Total fees and other income before security gains 134,341 159,885 158,232 148,567 124,267 Net gain/(loss) on securities - (1,296) 1,675 3,355 7,979 ----------------------------------------------------------------------------------------------------------- Total non-interest income 134,341 158,589 159,907 151,922 132,246 ----------------------------------------------------------------------------------------------------------- NON-INTEREST EXPENSE: General and administrative Compensation and benefits 143,778 137,452 140,532 135,803 125,125 Occupancy and equipment 64,193 61,679 61,096 61,348 62,870 Technology expense 21,566 22,562 21,349 21,606 18,668 Outside services 14,755 17,174 15,362 13,805 14,648 Marketing expense 10,222 15,103 14,455 11,757 11,047 Other administrative expenses 25,465 27,828 24,107 29,072 24,756 ----------------------------------------------------------------------------------------------------------- Total general and administrative 279,979 281,798 276,901 273,391 257,114 OTHER EXPENSES: Amortization of core deposit intangibles 17,219 17,766 18,284 18,815 18,956 Other minority interest expense 5,992 5,951 5,837 5,752 5,668 Equity method investments 10,042 10,268 11,656 10,966 10,770 Loss on debt extinguishment - 187 - - - Proxy and professional fees 14,337 5,827 - - - Lease and contract termination charges - - (1,222) - 5,204 Merger-related and integration charges (2,798) - (2,000) (8,447) 23,191 ----------------------------------------------------------------------------------------------------------- Total other expenses 44,792 39,999 32,555 27,086 63,789 ----------------------------------------------------------------------------------------------------------- Total non-interest expense 324,771 321,797 309,456 300,477 320,903 ----------------------------------------------------------------------------------------------------------- Income before income taxes 184,528 214,035 238,792 242,604 196,689 Income tax expense 43,130 48,540 57,749 59,133 50,538 ----------------------------------------------------------------------------------------------------------- Net income $ 141,398 $ 165,495 $ 181,043 $ 183,471 $ 146,151 =========================================================================================================== (1) Mortgage banking activity is summarized below: Gains on sale of mortgage loans, mortgage backed securities, and home equity loans (2) $ 9,762 $ 22,708 $ 21,274 $ 28,371 $ 6,377 Net gains/(loss) recorded under SFAS 133 1,090 (1,039) 717 314 653 Mortgage servicing fees, net of mortgage servicing rights amortization 2,140 914 (157) 1,370 671 Mortgage servicing right (impairments)/ recoveries - 3,918 6,837 (8,765) 3,954 ----------------------------------------------------------------------------------------------------------- Total mortgage banking revenues $ 12,992 $ 26,501 $ 28,671 $ 21,290 $ 11,655 ===========================================================================================================
(2) The results for the fourth quarter and third quarter of 2005 include gains of $18.4 million and $13.1 million related to the sale of $898 million and $503 million of home equity loans. SOVEREIGN BANCORP, INC. AND SUBSIDIARIES AVERAGE BALANCE, INTEREST AND YIELD/RATE ANALYSIS (unaudited)
========================================================================================= QUARTER ENDED ============================================== MARCH 31, 2006 ----------------------------------------------------------------------------------------- YIELD/ (dollars in thousands) AVERAGE BALANCE INTEREST (1) RATE ----------------------------------------------------------------------------------------- Earning assets: Investment securities $ 12,715,041 $ 168,049 5.29% Loans: Commercial 16,884,583 290,843 6.98% Consumer: Residential mortgages 12,777,623 176,652 5.53% Home equity loans and lines of credit 9,673,570 151,660 6.32% ---------------------------------------------- Total consumer loans secured by real estate 22,451,193 328,312 5.87% Auto Loans 4,409,850 61,383 5.65% Other 476,946 9,185 7.81% ---------------------------------------------- Total Consumer 27,337,989 398,880 5.87% ---------------------------------------------- Total loans 44,222,572 689,723 6.29% ---------------------------------------------- Allowance for loan losses (419,386) ---------------------------------------------- Total earning assets 56,518,227 $ 857,772 6.11% ============================ Other assets 7,521,366 --------------- Total assets $ 64,039,593 =============== Funding liabilities: Deposits and other customer related accounts: NOW accounts $ 9,124,514 $ 54,509 2.42% Customer repurchase agreements 1,025,807 9,898 3.91% Savings accounts 3,411,827 6,388 0.76% Money market accounts 8,190,873 48,068 2.38% ---------------------------------------------- Core and other customer related accounts 21,753,021 118,863 2.22% Time deposits 11,597,261 112,974 3.95% ---------------------------------------------- Total 33,350,282 231,837 2.82% ---------------------------------------------- Borrowings: Federal Home Loan Bank advances 13,551,387 143,083 4.27% Fed funds and repurchase agreements 613,518 6,635 4.33% Other borrowings 4,415,349 54,020 4.93% ---------------------------------------------- Total borrowings 18,580,254 203,738 4.43% ---------------------------------------------- Total funding liabilities 51,930,536 435,575 3.39% --------------- ============================ Non-interest bearing DDA 5,086,989 Other liabilities 1,125,329 --------------- Total liabilities 58,142,854 --------------- Stockholders' equity 5,896,739 --------------- Total liabilities and stockholders' equity $ 64,039,593 =============== Net interest income $ 422,197 =============== Interest rate spread 2.72% Contribution from interest free funds 0.28% ---------- Net interest margin 3.00% ==========
(1) Tax equivalent basis
========================================================================================= QUARTER ENDED ============================================== DECEMBER 31, 2005 ----------------------------------------------------------------------------------------- YIELD/ (dollars in thousands) AVERAGE BALANCE INTEREST (1) RATE ----------------------------------------------------------------------------------------- Earning assets: Investment securities $ 12,700,310 $ 165,785 5.22% Loans: Commercial 16,515,988 277,924 6.68% Consumer: Residential mortgages 11,859,646 164,689 5.55% Home equity loans and lines of credit 10,176,307 148,285 5.80% ---------------------------------------------- Total consumer loans secured by real estate 22,035,953 312,974 5.67% Auto Loans 4,454,501 62,528 5.57% Other 490,069 9,395 7.61% ---------------------------------------------- Total Consumer 26,980,523 384,897 5.69% ---------------------------------------------- Total loans 43,496,511 662,821 6.06% ---------------------------------------------- Allowance for loan losses (416,118) ---------------------------------------------- Total earning assets 55,780,703 $ 828,606 5.92% ============================ Other assets 7,707,153 --------------- Total assets $ 63,487,856 =============== Funding liabilities: Deposits and other customer related accounts: NOW accounts $ 9,454,176 $ 53,385 2.24% Customer repurchase agreements 1,007,347 8,794 3.46% Savings accounts 3,573,771 6,521 0.72% Money market accounts 8,112,584 39,444 1.93% ---------------------------------------------- Core and other customer related accounts 22,147,878 108,144 1.94% Time deposits 10,376,654 93,305 3.57% ---------------------------------------------- Total 32,524,532 201,449 2.46% ---------------------------------------------- Borrowings: Federal Home Loan Bank advances 13,195,754 143,558 4.32% Fed funds and repurchase agreements 1,197,563 12,545 4.18% Other borrowings 4,417,688 50,241 4.53% ---------------------------------------------- Total borrowings 18,811,005 206,344 4.36% ---------------------------------------------- Total funding liabilities 51,335,537 407,793 3.15% --------------- ============================ Non-interest bearing DDA 5,340,623 Other liabilities 1,098,993 --------------- Total liabilities 57,775,153 --------------- Stockholders' equity 5,712,703 --------------- Total liabilities and stockholders' equity $ 63,487,856 =============== Net interest income $ 420,813 =============== Interest rate spread 2.77% Contribution from interest free funds 0.24% ---------- Net interest margin 3.01% ==========
(1) Tax equivalent basis
========================================================================================= QUARTER ENDED ============================================== MARCH 31, 2005 ----------------------------------------------------------------------------------------- YIELD/ (dollars in thousands) AVERAGE BALANCE INTEREST (1) RATE ----------------------------------------------------------------------------------------- Earning assets: Investment securities $ 12,128,935 $ 153,197 5.06% Loans: Commercial 14,870,517 207,098 5.64% Consumer: Residential mortgages 9,167,485 122,953 5.37% Home equity loans and lines of credit 10,002,411 134,955 5.45% ---------------------------------------------- Total consumer loans secured by real estate 19,169,896 257,908 5.41% Auto Loans 4,305,100 54,935 5.18% Other 578,520 10,247 7.18% ---------------------------------------------- Total Consumer 24,053,516 323,090 5.41% ---------------------------------------------- Total loans 38,924,033 530,188 5.50% ---------------------------------------------- Allowance for loan losses (416,637) ---------------------------------------------- Total earning assets 50,636,331 $ 683,385 5.44% ============================ Other assets 6,922,971 --------------- Total assets $ 57,559,302 =============== Funding liabilities: Deposits and other customer related accounts: NOW accounts $ 8,041,978 $ 25,455 1.28% Customer repurchase agreements 842,657 4,016 1.93% Savings accounts 3,930,308 6,131 0.63% Money market accounts 8,152,525 25,487 1.27% ---------------------------------------------- Core and other customer related accounts 20,967,468 61,089 1.18% Time deposits 8,659,080 53,089 2.49% ---------------------------------------------- Total 29,626,548 114,178 1.56% ---------------------------------------------- Borrowings: Federal Home Loan Bank advances 10,910,131 104,938 3.89% Fed funds and repurchase agreements 1,441,246 9,538 2.66% Other borrowings 4,155,507 34,224 3.32% ---------------------------------------------- Total borrowings 16,506,884 148,700 3.64% ---------------------------------------------- Total funding liabilities 46,133,432 262,878 2.31% --------------- ============================ Non-interest bearing DDA 5,162,704 Other liabilities 674,463 --------------- Total liabilities 51,970,599 --------------- Stockholders' equity 5,588,703 --------------- Total liabilities and stockholders' equity $ 57,559,302 =============== Net interest income $ 420,507 =============== Interest rate spread 3.13% Contribution from interest free funds 0.21% ---------- Net interest margin 3.34% ==========
(1) Tax equivalent basis SOVEREIGN BANCORP, INC. AND SUBSIDIARIES SUPPLEMENTAL INFORMATION (unaudited) ================================================================================ NON-PERFORMING ASSETS
============================================================================================================== MAR. 31 DEC. 31 SEPT. 30 JUNE 30 MAR. 31 (dollars in thousands) 2006 2005 2005 2005 2005 -------------------------------------------------------------------------------------------------------------- Non-accrual loans: Consumer: Residential mortgages $ 31,874 $ 30,393 $ 33,427 $ 31,717 $ 37,669 Home equity loans and lines of credit 61,078 55,543 37,051 35,007 33,383 Auto loans 363 476 462 365 539 Other consumer loans 1,920 1,913 2,873 3,013 3,715 ------------------------------------------------------------------- Total consumer loans 95,235 88,325 73,813 70,102 75,306 Commercial 87,566 100,372 95,303 91,358 95,528 ------------------------------------------------------------------- Total non-accrual loans 182,801 188,697 169,116 161,460 170,834 Restructured loans 692 777 822 939 1,026 -------------------------------------------------------------------------------------------------------------- Total non-performing loans 183,493 189,474 169,938 162,399 171,860 Real estate owned, net 13,622 11,411 6,107 8,494 11,286 Other repossessed assets 3,352 4,678 5,083 2,302 3,709 -------------------------------------------------------------------------------------------------------------- Total non-performing assets 200,467 205,563 181,128 173,195 186,855 =================================================================== Non-performing loans as a percentage of total loans 0.41% 0.43% 0.40% 0.39% 0.43% Non-performing assets as a percentage of total assets 0.31% 0.32% 0.29% 0.29% 0.32% Non-performing assets as a percentage of total loans, real estate owned and repossessed assets 0.44% 0.47% 0.42% 0.42% 0.46% Allowance for credit losses as a percentage of non- performing loans 239% 231% 257% 272% 255%
NET LOAN CHARGE-OFFS
============================================================================================================== MAR. 31 DEC. 31 SEPT. 30 JUNE 30 MAR. 31 Quarters ended (in thousands) 2006 2005 2005 2005 2005 -------------------------------------------------------------------------------------------------------------- Commercial real estate $ (744) $ 564 $ 219 $ 294 $ (492) Commercial and industrial and other 8,948 4,877 6,209 8,964 7,200 -------------------------------------------------------------------------------------------------------------- Total Commercial 8,204 5,441 6,428 9,258 6,708 Residential mortgages 159 554 109 72 43 Home equity loans and lines of credit 10,654 6,998 4,319 3,115 1,831 -------------------------------------------------------------------------------------------------------------- Total consumer loans secured by real estate 10,813 7,552 4,428 3,187 1,874 Auto loans 7,995 9,137 7,539 5,851 9,557 Other consumer loans 1,286 1,079 1,059 1,126 1,449 -------------------------------------------------------------------------------------------------------------- Total Consumer 20,094 17,768 13,026 10,164 12,880 ------------------------------------------------------------------- Total $ 28,298 $ 23,209 $ 19,454 $ 19,422 $ 19,588 ===================================================================
COMPONENTS OF THE PROVISION OF CREDIT LOSSES AND ALLOWANCE FOR CREDIT LOSSES
============================================================================================================== Quarters ended (in MAR. 31 DEC. 31 SEPT. 30 JUNE 30 MAR. 31 thousands) 2006 2005 2005 2005 2005 -------------------------------------------------------------------------------------------------------------- Provision for loan losses 30,559 26,263 19,298 20,442 23,498 Provision/(recoveries) for unfunded commitments (1,559) (263) 702 1,558 (1,498) ------------------------------------------------------------------- Total provision for credit losses $ 29,000 $ 26,000 $ 20,000 $ 22,000 $ 22,000 =================================================================== Allowance for loan losses 421,860 419,599 418,353 424,711 421,446 Reserve for unfunded commitments 16,653 18,212 18,475 17,773 16,215 ------------------------------------------------------------------- Total allowance for credit losses $ 438,513 $ 437,811 $ 436,828 $ 442,484 $ 437,661 ===================================================================
SOVEREIGN BANCORP, INC. AND SUBSIDIARIES SUPPLEMENTAL INFORMATION (unaudited) ================================================================================ DEPOSIT AND OTHER CUSTOMER RELATED ACCOUNT COMPOSITION - End of period ================================================================================ MAR. 31 DEC. 31 SEPT. 30 Quarters ended (in thousands) 2006 2005 2005 -------------------------------------------------------------------------------- Demand deposit accounts 5,165,140 $ 5,331,659 $ 5,414,212 NOW accounts 9,110,005 8,844,875 9,170,052 Customer repurchase agreements 1,086,010 1,012,574 959,024 Savings accounts 3,397,183 3,460,292 3,684,423 Money market accounts 8,384,317 7,989,846 8,167,546 Certificates of deposits 11,677,492 11,338,460 9,937,334 -------------------------------------------------------------------------------- Total $ 38,820,147 $ 37,977,706 $ 37,332,591 ========================================== ================================================================= JUNE 30 MAR. 31 Quarters ended (in thousands) 2005 2005 ----------------------------------------------------------------- Demand deposit accounts $ 5,378,465 $ 5,377,378 NOW accounts 8,269,183 8,422,725 Customer repurchase agreements 875,203 828,388 Savings accounts 3,807,967 3,922,642 Money market accounts 8,352,055 8,673,744 Certificates of deposits 9,418,691 9,460,879 ----------------------------------------------------------------- Total $ 36,101,564 $ 36,685,756 =========================== LOAN COMPOSITION - END OF PERIOD ================================================================================ MAR. 31 DEC. 31 SEPT. 30 Quarters ended (in thousands) 2006 2005 2005 -------------------------------------------------------------------------------- Commercial real estate $ 7,128,116 $ 7,209,180 $ 7,151,189 Commercial industrial loans 10,122,781 9,426,466 9,071,731 -------------------------------------------------------------------------------- Total commercial loans 17,250,897 16,635,646 16,222,920 -------------------------------------------------------------------------------- Residential mortgages 13,161,773 12,462,802 11,198,366 Home equity loans and lines of credit 9,892,235 9,793,124 10,301,161 -------------------------------------------------------------------------------- Total consumer loans secured by real estate 23,054,008 22,255,926 21,499,527 Auto loans 4,400,980 4,434,021 4,463,931 Other consumer loans 458,528 478,254 505,261 -------------------------------------------------------------------------------- Total consumer loans 27,913,516 27,168,201 26,468,719 -------------------------------------------------------------------------------- Total loans $ 45,164,413 $ 43,803,847 $ 42,691,639 ========================================== ================================================================= JUNE 30 MAR. 31 Quarters ended (in thousands) 2005 2005 ----------------------------------------------------------------- Commercial real estate $ 6,946,477 $ 6,837,814 Commercial industrial loans 9,205,540 8,525,778 ----------------------------------------------------------------- Total commercial loans 16,152,017 15,363,592 ----------------------------------------------------------------- Residential mortgages 9,997,066 9,782,953 Home equity loans and lines of credit 10,300,629 10,280,735 ----------------------------------------------------------------- Total consumer loans secured by real estate 20,297,695 20,063,688 Auto loans 4,285,537 4,296,296 Other consumer loans 532,230 596,428 ----------------------------------------------------------------- Total consumer loans 25,115,462 24,956,412 ----------------------------------------------------------------- Total loans $ 41,267,479 $ 40,320,004 =========================== DEPOSIT AND OTHER CUSTOMER RELATED ACCOUNT COMPOSITION - AVERAGE ================================================================================ MAR. 31 DEC. 31 SEPT. 30 Quarters ended (in thousands) 2006 2005 2005 -------------------------------------------------------------------------------- Demand deposit accounts $ 5,086,989 $ 5,340,623 $ 5,393,736 NOW accounts 9,124,514 9,454,176 8,991,339 Customer repurchase agreements 1,025,807 1,007,347 903,053 Savings accounts 3,411,827 3,573,771 3,753,311 Money market accounts 8,190,873 8,112,584 8,294,441 Certificates of deposits 11,597,261 10,376,654 9,810,041 -------------------------------------------------------------------------------- Total $ 38,437,271 $ 37,865,155 $ 37,145,921 ========================================== ================================================================= JUNE 30 MAR. 31 Quarters ended (in thousands) 2005 2005 ----------------------------------------------------------------- Demand deposit accounts $ 5,276,428 $ 5,162,704 NOW accounts 8,425,311 8,041,978 Customer repurchase agreements 795,418 842,657 Savings accounts 3,864,148 3,930,308 Money market accounts 8,417,965 8,152,525 Certificates of deposits 9,458,184 8,659,080 ----------------------------------------------------------------- Total $ 36,237,454 $ 34,789,252 =========================== LOAN COMPOSITION - AVERAGE ================================================================================ MAR. 31 DEC. 31 SEPT. 30 Quarters ended (in thousands) 2006 2005 2005 -------------------------------------------------------------------------------- Commercial real estate 7,193,994 $ 7,203,433 $ 7,019,781 Commercial industrial loans 8,603,198 8,273,795 8,499,513 Other 1,087,391 1,038,760 920,774 ------------------------------------------ Total commercial loans 16,884,583 16,515,988 16,440,068 ------------------------------------------ Residential mortgages 12,777,623 11,859,646 10,663,656 Home equity loans and lines of credit 9,673,570 10,176,307 10,321,853 ------------------------------------------ Total consumer loans secured by real estate 22,451,193 22,035,953 20,985,509 Auto loans 4,409,850 4,454,501 4,400,376 Other consumer loans 476,946 490,069 515,522 ------------------------------------------ Total consumer loans 27,337,989 26,980,523 25,901,407 -------------------------------------------------------------------------------- Total loans $ 44,222,572 $ 43,496,511 $ 42,341,475 ========================================== ================================================================= JUNE 30 MAR. 31 Quarters ended (in thousands) 2005 2005 ----------------------------------------------------------------- Commercial real estate $ 6,909,795 $ 6,494,572 Commercial industrial loans 8,008,968 7,522,968 Other 849,487 852,977 --------------------------- Total commercial loans 15,768,250 14,870,517 --------------------------- Residential mortgages 10,634,549 9,167,485 Home equity loans and lines of credit 10,127,012 10,002,411 --------------------------- Total consumer loans secured by real estate 20,761,561 19,169,896 Auto loans 4,262,377 4,305,100 Other consumer loans 559,544 578,520 --------------------------- Total consumer loans 25,583,482 24,053,516 ----------------------------------------------------------------- Total loans $ 41,351,732 $ 38,924,033 =========================== SOVEREIGN BANCORP, INC. AND SUBSIDIARIES RECONCILIATION OF OPERATING/CASH EARNINGS TO REPORTED EARNINGS (unaudited) ================================================================================ Operating/cash earnings for EPS purposes represents net income excluding the after-tax effects of certain items, such as significant gains or losses that are unusual in nature or are associated with acquiring or integrating businesses, amortization of intangible assets, proxy and related professional fees, and certain other charges. The table below reconciles our GAAP earnings to operating/cash earnings for EPS purposes.
========================================================================================================= QUARTER ENDED ======================================================================== TOTAL DOLLARS (dollars in thousands, except ------------------------------------------------------------------------ per share data - all amounts MAR. 31 DEC. 31 SEPT. 30 JUNE 30 MAR. 31 are after tax) 2006 2005 2005 2005 2005 ------------------------------ ------------ ------------ ------------ ------------ ------------ Net income as reported $ 141,398 $ 165,495 $ 181,043 $ 183,471 $ 146,151 Contingently convertible trust preferred interest expense, net of tax 6,327 6,354 6,344 6,335 6,394 ------------ ------------ ------------ ------------ ------------ Net income for EPS purposes $ 147,725 $ 171,849 $ 187,387 $ 189,806 $ 152,545 ============ ============ ============ ============ ============ Weighted average diluted shares for EPS 390,825 390,077 393,110 400,371 401,339 Reconciliation to operating/cash earnings EPS Net income for EPS purposes and EPS as reported $ 147,725 $ 171,849 $ 187,387 $ 189,806 $ 152,545 Merger related and integration costs (1,819) - (1,300) (5,490) 15,074 Lease and contract termination charges - - (794) - 3,382 Proxy and professional fees 9,319 3,788 - - - Amortization of intangibles 11,192 11,548 11,885 12,229 12,322 ------------ ------------ ------------ ------------ ------------ Operating/cash earnings for EPS purposes $ 166,417 $ 187,185 $ 197,178 $ 196,545 $ 183,323 ============ ============ ============ ============ ============ ========================================================================================================= QUARTER ENDED ======================================================================== PER SHARE ------------------------------------------------------------------------ MAR. 31 DEC. 31 SEPT. 30 JUNE 30 MAR. 31 2006 2005 2005 2005 2005 ------------ ------------ ------------ ------------ ------------ Net income as reported Contingently convertible trust preferred interest expense, net of tax ------------ ------------ ------------ ------------ ------------ Net income for EPS purposes $ 0.38 $ 0.44 $ 0.48 $ 0.47 $ 0.38 ============ ============ ============ ============ ============ Weighted average diluted shares for EPS Reconciliation to operating/cash earnings EPS Net income for EPS purposes and EPS as reported $ 0.38 $ 0.44 $ 0.48 $ 0.47 $ 0.38 Merger related and integration costs (0.00) - (0.00) (0.01) 0.04 Lease and contract termination charges - - (0.00) - 0.01 Proxy and professional fees 0.02 0.01 - - - Amortization of intangibles 0.03 0.03 0.03 0.03 0.03 ------------ ------------ ------------ ------------ ------------ Operating/cash earnings for EPS purposes $ 0.43 $ 0.48 $ 0.50 $ 0.49 $ 0.46 ============ ============ ============ ============ ============
SOVEREIGN BANCORP, INC. AND SUBSIDIARIES RECONCILIATION OF AVERAGE EQUITY TO AVERAGE TANGIBLE EQUITY AND RELATED OPERATING RETURN ON AVERAGE TANGIBLE EQUITY (unaudited) ================================================================================ Reconciliation of Equity to Tangible Equity and Operating Return on Average Equity to Tangible Returns on Average Equity
QUARTER ENDED ====================================================================================== MAR. 31 DEC. 31 SEPT. 30 2006 2005 2005 -------------------------------------------------------------------------------------- Average Equity $ 5,896,739 $ 5,712,703 $ 5,694,895 Average Goodwill (2,716,324) (2,714,150) (2,714,148) Average CDI (207,908) (225,049) (243,149) --------------------------------------------- Average Tangible Equity 2,972,507 2,773,504 2,737,598 ============================================= Operating Return on Average Equity 11.45% 13.00% 13.74% Effect of Goodwill 10.46% 12.72% 13.62% Effect of CDI 0.80% 1.05% 1.22% --------------------------------------------- Tangible Return on Average Equity 22.71% 26.78% 28.58% ============================================= ======================================================================== JUNE 30 MAR. 31 2005 2005 ------------------------------------------------------------------------ Average Equity $ 5,697,656 $ 5,588,703 Average Goodwill (2,725,526) (2,507,849) Average CDI (261,854) (270,193) ----------------------------- Average Tangible Equity 2,710,276 2,810,661 ============================= Operating Return on Average Equity 13.84% 13.30% Effect of Goodwill 13.91% 11.87% Effect of CDI 1.34% 1.28% ----------------------------- Tangible Return on Average Equity 29.09% 26.45% =============================