EX-99.1 2 c74023exv99w1.htm EXHIBIT 99.1 Filed by Bowne Pure Compliance
Exhibit 99.1
(SOVEREIGN BANCORP LOGO)
Sovereign Bancorp, Inc. Announces Second Quarter 2008 Results
PHILADELPHIA, PA...Sovereign Bancorp, Inc. (“Sovereign or the Company”) (NYSE: SOV), parent company of Sovereign Bank (“Bank”), today reported net income for the quarter ended June 30, 2008 of $127.4 million or $.22 per diluted share as compared to $100.1 million or $.20 per diluted share in the first quarter of 2008 and $147.5 million or $.29 per diluted share in the second quarter of 2007. Net income for the six months ended June 30, 2008 was $227.6 million or $0.42 per diluted share compared to $195.5 million or $0.39 per diluted share for the six months ending June 30, 2007.
Highlights for the second quarter of 2008 were as follows:
  •   On May 16, 2008 the Company issued $1.39 billion of common stock which increased Sovereign’s tangible common equity ratio and tangible book value per share to 6.04% and $6.90 at June 30, 2008 compared to 3.81% and $6.20 at March 31, 2008.
  •   For the sixth consecutive quarter Sovereign’s net interest margin has expanded and now stands at 3.06%, an increase of 18 basis points from the first quarter of 2008 and 35 basis points from the similar quarter in 2007.
  •   Loan balances at March 31, 2008, declined by 2.57% on a linked-quarter basis primarily due to the securitization of $780 million in residential mortgages and a 7.5% decline in auto loans.
  •   Deposit mix continued to improve with retail and commercial deposits comprising 81.2% of total deposits up from 75.4% a year ago.
  •   Sovereign’s allowance for credit losses as a percentage of total loans increased to 1.47% at June 30, 2008, compared to 1.36% at March 31, 2008 and .92% at June 30, 2007.
  •   Sovereign’s non-performing assets as a percentage of tangible equity and allowance for loan losses was 9.9% at June 30, 2008 compared to 12.2% at March 31, 2008 and 8.1% at June 30, 2007.
“Sovereign is on solid financial footing as we manage through the current uncertain economic climate,” said Sovereign’s President and CEO Joseph P. Campanelli. “Given the challenging operating environment, I am pleased with our results for the second quarter of 2008, which are consistent with our expectations. They reflect the prudent and proactive strategies we employed in the last year and demonstrate progress in reducing our risk profile, improving the quality of our earnings, and strengthening our operating metrics.”

 

 

 

Net Interest Income and Margin
For the second quarter of 2008, Sovereign reported net interest income of $506 million as compared to $482 million in the first quarter of 2008 and $453 million in the similar quarter of 2007. The Company’s net interest margin expanded 35 basis points during the second quarter of 2008 to 3.06% from the similar quarter a year ago. The main drivers of this expansion have been a reduction in the cost of deposits and short-term borrowings resulting from lower short-term market interest rates coupled with a shift in deposit mix to lower-cost categories.
On a linked-quarter basis, average loan balances were relatively unchanged at $58.2 billion with growth in commercial loans of 2.9% and direct home equity loans of 2.8% which was offset by declines in residential mortgage loans of 5.1% and auto loans of 5.7%. During the second quarter, the Company completed a mortgage securitization which converted $780 million of residential real estate loans into investment securities. This securitization will reduce credit risk and required levels of risk based capital as well as enhance liquidity. Sovereign’s average loan balances increased $1.4 billion from the second quarter of 2007 primarily as a result of growth in commercial loans offset by declines in residential mortgage loans.
Sovereign’s average deposits on a linked quarter basis declined by $1.1 billion which was primarily driven by decreases in costlier wholesale and government deposits of $1.2 billion. Sovereign’s average retail and commercial deposits increased $285 million during the quarter due to growth in demand deposit accounts which was offset by declines in higher cost retail time deposits. Sovereign’s average deposits decreased $3.2 billion from the second quarter of 2007 as the Bank grew retail and commercial deposits $1.2 billion and reduced its reliance on wholesale deposit sources by $4.4 billion.
Non-Interest Income
Consumer and commercial banking fees were $134.7 million, an increase of $5.4 million or 4.2% from a year ago and $7.1 million on a linked quarter basis. The increase from the prior periods is primarily attributable to increased sales of annuity products from our investment services group and higher commercial and consumer deposit fees.
Mortgage banking revenues for the quarter were $37.9 million, compared to a loss of $5.1 million on a linked quarter basis and $26.5 million in the same quarter a year ago. The loss in the prior quarter was attributed to mortgage and multi-family servicing right impairments of $23.6 million which were driven primarily by lower interest rates and higher market prepayment speed assumptions. In the second quarter of 2008, $20.5 million of this impairment was reversed as a result of the normalization in market prepayment speed assumptions at June 30, 2008.
Capital markets revenues for the second quarter of 2008 were $7.2 million compared to $10.4 million in the first quarter of 2008 and $6.0 million in the second quarter of 2007. The decline in revenues on a linked quarter basis was driven by higher volumes of derivative sales to our customers related to the rapid reduction in interest rates earlier in the year by the Federal Reserve.
Net investment gains of $1.9 million in the second quarter of 2008 were due to a gain of $6.5 million related to the sale of MasterCard stock which was partially offset, by a write-down of $4.6 million in the Company’s residual interests in certain off-balance sheet home equity securitizations. Sovereign’s maximum risk of loss on the remaining retained interests for these home equity securitizations is $2 million. The first quarter of 2008 included a net investment gain of $14.1 million related to the mandatory partial redemption of the VISA IPO shares.

 

 

 

Non-Interest Expense
General and administrative expenses were $382 million for the second quarter of 2008, as compared to $359 million in the first quarter of 2008 and $337 million in the similar quarter a year ago. Included in the first quarter of 2008 was a reduction in legal expense of $6.4 million related to the release of reserves established for the VISA litigation. As compared to the first quarter of 2008, the second quarter of 2008 included higher compensation and benefits expenses of $7.6 million primarily due to severance charges and a full quarter of merit increases, higher loan workout/collection and other real estate owned expenses of $5.3 million, and increased marketing expense of $3.5 million.
The increase in general and administrative expenses of $45 million from the second quarter of 2007 was primarily due to increased compensation and benefits expense of $21.2 million, driven by the aforementioned severance charges and merit increases in the second quarter of 2008 as well as higher incentive compensation accruals as a result of changes in the incentive compensation structure for retail and corporate plans to be better aligned with the marketplace. In addition, the Company incurred higher deposit insurance premiums of $7.7 million, higher legal, loan and other real estate owned expenses of $11.1 million related to the challenging credit environment and increased marketing expense of $2.6 million.
Other expenses totaled $42.8 million in the second quarter of 2008 compared to $37.5 million in the first quarter of 2008 and $79.5 million a year ago. Second quarter 2008 results included a decline in the fair market value on one of the Company’s equity method investments of $6.4 million. The second quarter of 2007 results included restructuring charges of $32.7 million related to branch closings, freezing of the Company’s ESOP plan and severance charges.
Asset Quality
Sovereign’s provision for credit losses was $132 million in the second quarter of 2008, compared to $135 million in the first quarter of 2008 and $51 million in the second quarter of 2007. Sovereign increased its allowance for credit losses to $843.5 million, a $45.1 million increase from March 31, 2008, primarily due to continued deterioration in asset quality for the commercial portfolios, particularly in the for-sale housing segment. Sovereign’s allowance for credit losses to total loans at June 30, 2008 increased to 1.47% up from 1.36% at March 31, 2008 and .92% at June 30, 2007.
Net charge-offs were $86.9 million this quarter versus $74.3 million in the prior quarter and $25.7 million in the similar quarter a year ago. Annualized net charge-offs were .60% of average loans for the current quarter, compared to .51% linked quarter and .18% a year ago. Approximately 34% of net charge-offs this quarter were attributable to run-off loan portfolios, net charge-offs related to the indirect auto portfolio outside the Company’s footprint and correspondent home equity loans were $23.3 million and $6.2 million, respectively. This compares to 43% in the first quarter of 2008 as charge-offs on these two portfolios were $28.3 million and $4.0 million, respectively.
Non-performing loans increased to $490.5 million at June 30, 2008 compared to $417.8 million at March 31, 2008 and $282.4 million at June 30, 2007. The increase in non-performing loans on a linked quarter basis was driven primarily by real estate related loan categories: for-sale housing, Alt-A residential and one multi family loan. Non-performing loans to total loans increased 14 basis points to .85% at June 30, 2008 compared to .71% at March 31, 2008 and .52% at June 30, 2007.

 

 

 

Capital
Sovereign’s tangible equity to tangible assets including other comprehensive income (“OCI”) was 6.29% at June 30, 2008 compared to 4.06% at March 31, 2008 and 4.69% a year ago. Tangible common equity to tangible assets including OCI was 6.04% at the end of the second quarter of 2008 compared to 3.81% on a linked quarter basis and 4.44% a year ago. Sovereign’s Tier 1 leverage ratio was 8.34% at June 30, 2008, as compared to 6.21% at March 31, 2008 and 6.40% a year ago. Sovereign Bank’s Tier 1 leverage ratio was 7.27% compared to 6.93% at June 30, 2007. The Bank’s total risk-based capital ratio was 11.41% at June 30, 2008 compared to 10.45% a year ago. The increase in various capital ratios was due to the common stock offering and subordinated debt issuance on May 16, 2008, increased retained earnings and smaller asset size.
About Sovereign
Sovereign Bancorp, Inc., (“Sovereign”) (NYSE: SOV), is the parent company of Sovereign Bank, a financial institution with principal markets in the Northeastern United States. Sovereign Bank has 750 community banking offices, over 2,300 ATMs and approximately 12,000 team members. Sovereign offers a broad array of financial services and products including retail banking, business and corporate banking, cash management, capital markets, wealth management and insurance. For more information on Sovereign Bank, visit <http://www.sovereignbank.com> or call 1-877-SOV-BANK.
Investors, analysts and other interested parties will have the opportunity to listen to a live web-cast of Sovereign’s Second Quarter 2008 earnings call on Wednesday, July 23, 2008 beginning at 10:30 a.m. ET at www.sovereignbank.com <http://www.sovereignbank.com> >Investor Relations >Events &Webcasts; or http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=67999&eventID=1882657. International parties are invited to dial into the conference call at 706-679-7706. The webcast can be accessed at 10:30 a.m. ET on Wednesday, July 23, 2008. Questions may be submitted during the call via email accessible from Sovereign Bancorp’s broadcast and Investor Relations sites. A webcast replay will remain available via Sovereign’s Investor Relations site. A telephone replay will be accessible from 12:30 p.m. ET on Wednesday, July 23, 2008 through 12:00 a.m. ET (midnight) on Wednesday, July 30, 2008 by dialing 1-800-642-1687 in the U.S., international 706-645-9291, confirmation id # 53252875. 
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Note:
This press release contains statements with respect to Sovereign’s vision, mission, strategies, goals, beliefs, plans, objectives, expectations, anticipations, estimates, intentions, financial condition, results of operations, future performance and business of Sovereign. These statements constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although Sovereign believes that the expectations reflected in these forward-looking statements are reasonable, these statements are not guarantees of future performance and involve risks and uncertainties which are subject to change based on various important factors (some of which are beyond Sovereign’s control). Among the factors which would cause Sovereign’s financial performance to differ materially from that expressed in the forward-looking statements are: the strength of the United States economy in general and the strength of the regional and local economies in which Sovereign conducts operations; the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System; inflation, interest rate, market and monetary fluctuations; adverse changes in the securities markets, including those related to the financial condition of significant issuers in our investment portfolio; the impact of changes in financial services policies, laws and regulations, including laws, regulations and policies concerning taxes, banking, capital, liquidity, proper accounting treatment, securities and insurance, and the application thereof by regulatory bodies and the impact of changes in and interpretation of generally accepted accounting principles in the United States; changes in asset quality; and Sovereign’s success in managing the risks involved in the foregoing. If one or more of the factors affecting Sovereign’s forward-looking information and statements proves incorrect, then Sovereign’s actual results, performance or achievements could differ materially from those expressed in, or implied by, forward-looking information and statements. Any forward looking statements only speak as of the date hereof. Sovereign does not intend to update any forward-looking information and statements, whether written or oral, to reflect any change.
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.

 

 

 

CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
                                                         
    Quarter Ended     Year to Date  
    June 30     Mar. 31     Dec. 31     Sept. 30     June 30     June 30     June 30  
(dollars in thousands, except per share data)   2008     2008     2007     2007     2007     2008     2007  
Interest and dividend income:
                                                        
Interest on interest-earning deposits
   $ 997     $ 2,964     $ 1,615     $ 7,117     $ 4,144     $ 3,961     $ 10,380  
Interest on investment securities
                                                        
Available for sale
     156,164       168,109       173,803       177,125       180,252       324,273       370,087  
Other
     6,671       9,820       14,279       11,886       11,179       16,491       25,480  
Interest on loans
     837,988       895,276       949,643       954,014       943,860       1,733,264       1,960,827  
 
                                          
Total interest and dividend income
     1,001,820       1,076,169       1,139,340       1,150,142       1,139,435       2,077,989       2,366,774  
 
                                          
Interest expense:
                                                        
Deposits and related customer accounts
     228,546       315,103       395,768       408,680       409,616       543,649       822,867  
Borrowings
     267,144       278,886       277,548       284,701       276,435       546,030       602,670  
 
                                          
Total interest expense
     495,690       593,989       673,316       693,381       686,051       1,089,679       1,425,537  
 
                                          
Net interest income
     506,130       482,180       466,024       456,761       453,384       988,310       941,237  
Provision for credit losses
     132,000       135,000       148,192       162,500       51,000       267,000       97,000  
 
                                          
Net interest income after provision for credit losses
     374,130       347,180       317,832       294,261       402,384       721,310       844,237  
 
                                          
Non-interest income:
                                                        
Consumer banking fees
     80,969       73,191       77,420       73,113       77,268       154,160       145,282  
Commercial banking fees (2)
     53,747       54,453       56,695       44,155       52,046       108,200       101,454  
Mortgage banking revenue (1)
     37,897       (5,133 )     9,161       3,752       26,500       32,764       (80,705 )
Capital markets revenue
     7,209       10,393       (18,310 )     (12,627 )     5,982       17,602       11,671  
Bank owned life insurance income
     19,065       19,424       20,633       24,439       20,274       38,489       40,783  
Other
     6,322       5,297       7,584       8,557       8,227       11,619       17,694  
 
                                          
Total fees and other income before investment gains/(losses)
     205,209       157,625       153,183       141,389       190,297       362,834       236,179  
Net gain/(loss) on investments (3)
     1,908       14,135       (179,209 )     1,884       —       16,043       970  
 
                                          
Total non-interest income
     207,117       171,760       (26,026 )     143,273       190,297       378,877       237,149  
 
                                          
Non-interest expense:
                                                        
General and administrative
                                                       
Compensation and benefits (4)
     192,760       185,112       155,856       172,319       171,557       377,872       345,353  
Occupancy and equipment
     74,868       78,013       77,325       75,217       75,637       152,881       156,156  
Technology expense
     25,728       24,498       25,177       23,940       23,812       50,226       47,148  
Outside services
     15,542       15,630       18,828       16,434       16,969       31,172       32,247  
Marketing expense
     19,699       16,246       13,881       16,296       17,092       35,945       25,924  
Other administrative expenses (5)
     53,266       39,765       46,537       37,440       31,525       93,031       59,760  
 
                                          
Total general and administrative
     381,863       359,264       337,604       341,646       336,592       741,127       666,588  
Other expenses:
                                                        
Core deposit & other intangibles
     28,106       29,122       30,141       31,066       32,257       57,228       65,510  
Goodwill impairment
     —       —       1,576,776       —       —       —       —  
Other minority interest expense and equity method expense (6)
     14,719       8,339       27,448       6,913       14,487       23,058       32,902  
Proxy and related professional fees
     —       —       —       —       (125 )     —       (516 )
Restructuring, other employee severance and debt repurchase charges
     —       —       —       6,029       35,938       —       55,970  
ESOP expense related to freezing of plan
     —       —       —       —       (3,266 )     —       40,119  
Merger-related and integration charges
     —       —       —       —       166       —       2,242  
 
                                          
Total other expenses
     42,825       37,461       1,634,365       44,008       79,457       80,286       196,227  
 
                                          
Total non-interest expense
     424,688       396,725       1,971,969       385,654       416,049       821,413       862,815  
 
                                          
Income/ (loss) before income taxes
     156,559       122,215       (1,680,163 )     51,880       176,632       278,774       218,571  
Income tax expense/ (benefit)
     29,120       22,080       (77,180 )     (6,330 )     29,180       51,200       23,060  
 
                                          
Net income/ (loss)
   $ 127,439     $ 100,135     $ (1,602,983 )   $ 58,210     $ 147,452     $ 227,574     $ 195,511  
 
                                          
(1)    Mortgage banking activity is summarized below:
 
                                                        
Gains/(losses) on sale of mortgage loans and related securities and home equity loans (7)
   $ 4,999     $ 3,977     $ 4,560     $ 3,971     $ 3,317     $ 8,977     $ (111,028 )
Net gains/(losses) recorded under
SFAS 133
     1,602       1,370       (2,125 )     1,781       783       2,972       395  
Mortgage servicing fees, net of mortgage servicing rights amortization
     1,148       3,848       1,948       972       2,224       4,995       2,471  
Mortgage servicing right recoveries/(impairments)
     19,837       (18,703 )     (2,071 )     —       656       1,134       656  
Net gains on sale of multifamily loans
     9,676       9,231       7,515       2,383       5,748       18,906       16,305  
Net gains/(losses) recorded on commercial mortgage backed securitization
     —       —       (666 )     (5,355 )     13,772       —       10,496  
Multifamily servicing right recoveries/(impairments)
     635       (4,856 )     —       —       —       (4,220 )     —  
 
                                          
Total mortgage banking revenues
   $ 37,897     $ (5,133 )   $ 9,161     $ 3,752     $ 26,500     $ 32,764     $ (80,705 )
 
                                          
     
(2)   The third quarter of 2007 includes a LOCOM adjustment of $6.2 million on our loan syndication trading portfolio.
 
(3)   The first quarter of 2008 includes a $14.1 million gain on our membership share allocation of VISA’s IPO shares. Results for the fourth quarter of 2007 include a $180.5 million other-than-temporary impairment charge on FNMA & FHLMC preferred stock.
 
(4)   Second quarter of 2008 results include severance charges of $5.3 million for recently terminated executives. Fourth quarter of 2007 results include $18.7 million of incentive compensation accrual reversals due to corporate objectives not being achieved in 2007.
 
(5)   Other administrative expenses increased from first quarter 2008 levels due to the $6.4 million legal contingency reversal associated with the VISA IPO recorded in the first quarter as well as increased REO expense and loan expenses of $5.3 million.
 
(6)   Second quarter of 2008 results included a fair value adjustment of $6.4 million on one of our equity method investments.
 
(7)   First quarter of 2007 results include a LOCOM adjustment of $119.9 million on correspondent home equity loans that were not sold as of March 31, 2007.

 

A

 

Sovereign Bancorp, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(unaudited)  
                                         
    June 30     Mar. 31     Dec. 31     Sept. 30     June 30  
(dollars in thousands)   2008     2008     2007     2007     2007  
Assets
                                        
Cash and amounts due from depository institutions
   $ 1,140,965     $ 1,957,403     $ 3,130,770     $ 3,992,731     $ 1,867,294  
Investments:
                                        
Available-for-sale
     11,118,184       10,958,419       13,941,847       14,307,929       13,303,432  
Other investments
     944,606       1,134,805       1,200,545       981,921       798,452  
 
                              
Total investments
     12,062,790       12,093,224       15,142,392       15,289,850       14,101,884  
 
                              
Loans:
                                        
Commercial
     32,435,333       32,181,592       30,912,972       29,912,883       29,547,839  
Consumer
     24,970,453       26,690,190       26,866,807       27,235,481       26,979,279  
 
                              
Total loans
     57,405,786       58,871,782       57,779,779       57,148,364       56,527,118  
Less allowance for loan losses
     (808,748 )     (775,441 )     (709,444 )     (629,747 )     (503,685 )
 
                              
Total loans, net
     56,597,038       58,096,341       57,070,335       56,518,617       56,023,433  
 
                              
Premises and equipment, net
     559,986       555,773       562,332       559,040       570,074  
Accrued interest receivable
     298,741       322,760       350,534       384,812       368,849  
Goodwill
     3,430,653       3,430,290       3,426,246       5,003,022       5,003,195  
Core deposit and other intangibles
     314,888       342,994       372,116       402,257       433,164  
Bank owned life insurance
     1,820,403       1,806,631       1,794,099       1,773,829       1,764,137  
Other assets
     2,971,985       3,307,303       2,897,572       2,683,170       2,605,061  
 
                              
Total assets
   $ 79,197,449     $ 81,912,719     $ 84,746,396     $ 86,607,328     $ 82,737,091  
 
                              
 
                                        
Liabilities and Stockholders’ Equity
                                        
Liabilities:
                                        
Deposits and other customer related accounts:
                                        
Retail and commercial deposits
   $ 38,405,724     $ 39,292,245     $ 38,350,632     $ 37,838,296     $ 37,578,525  
Wholesale deposits
     3,177,527       3,756,952       4,807,369       5,605,720       6,120,340  
Government deposits
     3,190,784       3,314,420       4,003,224       3,927,346       3,619,838  
Customer repurchase agreements
     2,520,073       2,633,112       2,754,680       2,726,686       2,525,932  
 
                              
Total deposits
     47,294,108       48,996,729       49,915,905       50,098,048       49,844,635  
 
                              
Borrowings and other debt obligations
     22,050,359       24,348,829       26,126,082       26,161,337       22,461,638  
Other liabilities
     1,471,894       1,743,380       1,565,654       1,475,954       1,504,788  
 
                              
Total liabilities
     70,816,361       75,088,938       77,607,641       77,735,339       73,811,061  
 
                              
Minority interests
     147,139       146,784       146,430       146,075       145,742  
Stockholders’ equity:
                                        
Preferred Stock
     195,445       195,445       195,445       195,445       195,445  
Common Stock (1)
     7,701,024       6,298,254       6,295,572       6,277,292       6,253,146  
Warrants and employee stock options issued
     348,844       348,878       348,365       347,630       346,278  
Treasury stock
     (10,531 )     (11,438 )     (19,853 )     (20,359 )     (21,303 )
Accumulated other comprehensive loss
     (720,036 )     (749,556 )     (326,133 )     (218,155 )     (121,184 )
Retained earnings
     719,203       595,414       498,929       2,144,061       2,127,906  
 
                              
Total stockholders’ equity
     8,233,949       6,676,997       6,992,325       8,725,914       8,780,288  
 
                              
Total liabilities and stockholders’ equity
   $ 79,197,449     $ 81,912,719     $ 84,746,396     $ 86,607,328     $ 82,737,091  
 
                              
     
(1)   June 30, 2008 balance reflects proceeds of $1.39 billion from the issuance of 179.7 million shares of common stock on May 16, 2008.

 

B

 

Sovereign Bancorp, Inc. and Subsidiaries
FINANCIAL HIGHLIGHTS
(unaudited)
                                                         
    Quarter Ended     Year to Date  
    June 30     Mar. 31     Dec. 31     Sept. 30     June 30     June 30     June 30  
(dollars in millions, except per share data)   2008     2008     2007     2007     2007     2008     2007  
     
                                                          
Per Share Data
                                                        
 
                                                        
Basic earnings (loss) per share
   $ 0.22     $ 0.20     $ (3.34 )   $ 0.11     $ 0.30     $ 0.42     $ 0.39  
Diluted earnings (loss) per share
     0.22       0.20       (3.34 )     0.11       0.29       0.42       0.39  
Dividend declared per share
     —       —       0.08       0.08       0.08       —       0.16  
Common book value per share (1)
     12.13       13.43       14.12       17.76       17.92       12.13       17.92  
Tangible common book value per share (2)
     6.90       6.20       6.82       7.11       7.19       6.90       7.19  
Tangible common book value per share excluding OCI
     7.99       7.75       7.50       7.57       7.44       7.99       7.44  
Common stock price:
                                                        
High
   $ 9.89     $ 13.07     $ 17.73     $ 21.94     $ 25.16     $ 13.07     $ 26.42  
Low
     7.14       9.28       10.08       16.58       21.14       7.14       21.14  
Close
     7.36       9.32       11.40       17.04       21.14       7.36       21.14  
Weighted average common shares:
                                                        
Basic (3)
     570.1       482.2       481.2       480.2       478.3       527.2       476.7  
Diluted (3) (4)
     571.4       482.2       481.2       480.2       512.6       528.8       511.1  
End-of-period common shares:
                                                        
Basic
     662.6       482.4       481.4       480.4       479.1       662.6       479.1  
Diluted
     691.3       511.5       511.0       512.4       512.3       691.3       512.3  
 
                                          
 
                                                        
Performance Statistics
                                                        
 
                                                        
Bancorp
                                                        
 
                                                        
Net interest margin
     3.06 %     2.88 %     2.77 %     2.74 %     2.71 %     2.97 %     2.71 %
Return on average assets
     0.64 %     0.50 %     -7.74 %     0.28 %     0.72 %     0.57 %     0.47 %
Return on average tangible assets
     0.67 %     0.52 %     -8.25 %     0.30 %     0.77 %     0.59 %     0.50 %
Return on average equity
     6.73 %     5.78 %     -72.92 %     2.63 %     6.71 %     6.28 %     4.49 %
Return on average tangible equity
     12.44 %     11.67 %     -174.96 %     6.34 %     16.17 %     12.09 %     10.93 %
Annualized net loan charge-offs to average loans
     0.60 %     0.51 %     0.42 %     0.24 %     0.18 %     0.55 %     0.08 %
Efficiency ratio (5)
     53.68 %     56.15 %     54.52 %     57.12 %     52.29 %     54.85 %     56.61 %
NOTES:
     
(1)   Common book value per share equals common stockholders’ equity at period-end divided by common shares outstanding.
 
(2)   Tangible book value per share equals common stockholders’ equity at period-end excluding goodwill and core deposits and other intangibles, net of any associated deferred tax liabilities divided by common shares outstanding.
 
(3)   On May 16th, 2008, Sovereign issued 179.7 million shares of common stock which raised net proceeds of $1.39 billion to enhance its capital and liquidity positions. As a result, this increased our weighted average shares outstanding during the second quarter by 90.8 million. Therefore, our weighted average share count in the third quarter will increase due to the full quarter impact of this transaction by approximately 88.9 million shares.
 
(4)   The conversion of warrants and equity awards and the after-tax add back of Sovereign’s contingently convertible trust preferred interest expense was excluded from Sovereign’s GAAP diluted earnings per share calculation for the majority of the periods above since the result would have been anti-dilutive.
 
(5)   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 security gains.

 

C

 

Sovereign Bancorp, Inc. and Subsidiaries
FINANCIAL HIGHLIGHTS
(unaudited)
                                         
    Quarter Ended  
    June 30     Mar. 31     Dec. 31     Sept. 30     June 30  
(dollars in millions)   2008     2008     2007     2007     2007  
 
                                        
Financial Condition Data:
                                        
 
                                        
Asset Quality
                                        
Non-performing assets
   $ 553.9     $ 484.4     $ 361.6     $ 336.7     $ 334.0  
Non-performing loans
     490.5       417.8       304.3       282.4       291.5  
Non-performing assets to total assets (1)
     0.70 %     0.59 %     0.43 %     0.39 %     0.40 %
Non-performing loans to loans (1)
     0.85 %     0.71 %     0.53 %     0.49 %     0.52 %
Non-performing assets as a percentage of tangible equity and allowance for loan losses
     9.9 %     12.2 %     8.6 %     7.9 %     8.1 %
Allowance for credit losses
   $ 843.5     $ 798.4     $ 737.7     $ 650.0     $ 521.1  
Allowance for credit losses to total loans (1)
     1.47 %     1.36 %     1.28 %     1.14 %     0.92 %
Allowance for credit losses to non-performing loans
     172 %     191 %     242 %     230 %     179 %
 
                                        
Capitalization — Bancorp (2)
                                        
Tier 1 leverage ratio
     8.34 %     6.21 %     5.89 %     6.03 %     6.40 %
Tangible equity to tangible assets excluding OCI (3)
     7.18 %     4.97 %     4.67 %     4.69 %     4.84 %
Tangible equity to tangible assets including OCI (3)
     6.29 %     4.06 %     4.28 %     4.43 %     4.69 %
Tangible common equity to tangible assets excluding OCI (3)
     6.92 %     4.72 %     4.43 %     4.45 %     4.59 %
Tangible common equity to tangible assets including OCI (3)
     6.04 %     3.81 %     4.04 %     4.19 %     4.44 %
 
                                        
Capitalization — Bank (2)
                                        
Tier 1 leverage ratio
     7.27 %     6.85 %     6.54 %     6.63 %     6.93 %
Tier 1 risk-based ratio
     7.85 %     7.49 %     7.54 %     7.66 %     7.83 %
Total risk-based ratio
     11.41 %     10.24 %     10.40 %     10.37 %     10.45 %
     
(1)   The calculation of this ratio at June 30, 2007 excluded approximately $491 million of correspondent home equity loans that were marked down to fair value as of March 31, 2007.
 
(2)   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.
 
(3)   On May 16, 2008, Sovereign issued 179.7 million shares of common stock which raised net proceeds of $1.39 billion to bolster its capital and liquidity positions. This increased the ratios above by 182 to 184 basis points.

 

D

 

Sovereign Bancorp, Inc. and Subsidiaries
AVERAGE BALANCE, INTEREST AND YIELD/RATE ANALYSIS
(unaudited)
                                                                         
    Quarter Ended  
    June 30, 2008     March 31, 2008     June 30, 2007  
                    Yield/                     Yield/                     Yield/  
(dollars in thousands)   Average Balance     Interest (1)     Rate     Average Balance     Interest (1)     Rate     Average Balance     Interest (1)     Rate  
Earning assets:
                                                                        
Investment securities
   $ 12,109,209     $ 183,895       6.08 %   $ 13,034,150     $ 200,922       6.17 %   $ 14,041,230     $ 215,663       6.15 %
Loans:
                                                                        
Commercial real estate
     13,052,692       188,933       5.81 %     12,593,687       197,816       6.31 %     11,737,900       205,159       7.01 %
Commercial and industrial loans (C&I)
     13,005,216       169,266       5.23 %     12,760,425       193,990       6.11 %     12,146,382       225,039       7.43 %
Other
     1,756,432       30,300       6.90 %     1,754,382       30,604       6.98 %     1,586,118       28,565       7.20 %
 
                                                      
Total Commercial
     27,814,340       388,499       5.61 %     27,108,494       422,410       6.26 %     25,470,400       458,763       7.22 %
Multi-family
     4,506,471       66,984       5.95 %     4,316,489       65,907       6.12 %     4,637,577       72,186       6.23 %
Residential
     12,598,466       179,025       5.69 %     13,272,189       187,088       5.64 %     14,429,334       203,581       5.64 %
Home equity loans and lines of credit
     6,389,801       88,669       5.58 %     6,217,574       96,072       6.21 %     5,933,285       101,804       6.88 %
 
                                                      
Total consumer loans secured by real estate
     18,988,267       267,694       5.65 %     19,489,763       283,160       5.82 %     20,362,619       305,385       6.00 %
Auto Loans
     6,568,725       113,047       6.92 %     6,967,076       121,196       7.00 %     5,926,390       102,865       6.96 %
Other
     306,297       5,592       7.34 %     314,006       6,404       8.20 %     388,325       8,293       8.57 %
 
                                                      
Total Consumer
     25,863,289       386,333       5.99 %     26,770,845       410,760       6.16 %     26,677,334       416,543       6.25 %
 
                                                      
Total loans
     58,184,100       841,816       5.81 %     58,195,828       899,077       6.20 %     56,785,311       947,492       6.69 %
Allowance for loan losses
     (785,983 )                     (721,543 )                     (493,621 )                
 
                                                      
Total earning assets
     69,507,326     $ 1,025,711       5.92 %     70,508,435     $ 1,099,999       6.26 %     70,332,920     $ 1,163,155       6.63 %
 
                                                            
Other assets
     10,294,424                       10,422,253                       11,608,001                  
 
                                                                  
Total assets
   $ 79,801,750                     $ 80,930,688                     $ 81,940,921                  
 
                                                                  
       
Funding liabilities:
                                                                        
Deposits and other customer related accounts:
                                                                        
NOW accounts
   $ 5,209,957     $ 10,656       0.82 %   $ 5,319,562     $ 12,682       0.96 %   $ 5,935,760     $ 15,791       1.07 %
Savings accounts
     4,107,321       6,461       0.63 %     3,813,768       5,827       0.61 %     4,437,785       7,184       0.65 %
Money market accounts
     11,348,987       57,077       2.02 %     10,967,638       82,965       3.04 %     9,687,237       84,086       3.48 %
Time deposits
     11,258,950       109,354       3.91 %     11,927,984       134,980       4.55 %     11,004,592       128,170       4.67 %
 
                                                      
Total retail and commercial deposits
     31,925,215       183,548       2.31 %     32,028,952       236,454       2.97 %     31,065,374       235,231       3.04 %
NOW accounts- wholesale
     139,664       790       2.27 %     88,574       743       3.38 %     133,590       1,776       5.33 %
Money market accounts- wholesale
     1,547,158       9,034       2.35 %     1,396,481       12,260       3.53 %     2,521,820       34,620       5.51 %
Time deposits- wholesale
     1,588,172       6,614       1.68 %     2,406,387       19,594       3.27 %     4,425,195       59,703       5.41 %
 
                                                      
Total wholesale deposits
     3,274,994       16,438       2.02 %     3,891,442       32,597       3.37 %     7,080,605       96,099       5.45 %
Total government deposits
     3,257,652       19,533       2.41 %     3,819,399       30,337       3.19 %     4,040,559       51,692       5.13 %
Customer repurchase agreements
     2,571,241       9,027       1.41 %     2,739,973       15,715       2.31 %     2,389,302       26,594       4.46 %
 
                                                      
Total deposits and other customer related accounts
     41,029,102       228,546       2.24 %     42,479,766       315,103       2.98 %     44,575,840       409,616       3.69 %
Borrowings:
                                                                        
Wholesale borrowings
     19,061,915       211,195       4.44 %     19,816,254       224,236       4.54 %     15,396,099       194,074       5.05 %
Other borrowings
     3,794,900       55,949       5.90 %     3,625,668       54,650       6.04 %     5,227,113       82,361       6.29 %
 
                                                      
Total borrowings
     22,856,815       267,144       4.69 %     23,441,922       278,886       4.77 %     20,623,212       276,435       5.37 %
 
                                                      
Total funding liabilities
     63,885,917       495,690       3.12 %     65,921,688       593,989       3.62 %     65,199,052       686,051       4.22 %
 
                                                      
Non-interest bearing DDA
     6,731,967                       6,342,945                       6,421,910                  
Other liabilities
     1,593,912                       1,722,005                       1,503,851                  
 
                                                                  
Total liabilities
     72,211,796                       73,986,638                       73,124,813                  
 
                                                                  
Stockholders’ equity
     7,589,954                       6,944,050                       8,816,108                  
 
                                                                  
Total liabilities and stockholders’ equity
   $ 79,801,750                     $ 80,930,688                     $ 81,940,921                  
 
                                                                  
Net interest income
           $ 530,021                     $ 506,010                     $ 477,104          
 
                                                                  
Interest rate spread
                     2.80 %                     2.64 %                     2.41 %
Contribution from interest free funds
                     0.26 %                     0.24 %                     0.30 %
 
                                                                  
Net interest margin
                     3.06 %                     2.88 %                     2.71 %
 
                                                                  
     
(1)   Tax equivalent basis

 

E

 

Sovereign Bancorp, Inc. and Subsidiaries
AVERAGE BALANCE, INTEREST AND YIELD/RATE ANALYSIS
(unaudited)
                                                 
    Year to Date  
    June 30, 2008     June 30, 2007  
    Average             Yield/     Average             Yield/  
(dollars in thousands)   Balance     Interest (1)     Rate     Balance     Interest (1)     Rate  
Earning assets:
                                                
Investment securities
   $ 12,571,679     $ 384,816       6.13 %   $ 14,605,167     $ 446,257       6.12 %
Loans:
                                                
Commercial real estate
     12,823,189       386,749       6.06 %     11,626,074       401,753       6.95 %
Commercial and industrial loans (C&I)
     12,882,821       363,257       5.67 %     11,857,822       439,519       7.47 %
Other
     1,755,407       60,904       6.94 %     1,553,606       55,650       7.16 %
 
                                    
Total Commercial
     27,461,417       810,910       5.93 %     25,037,502       896,922       7.21 %
Multi-family
     4,411,480       132,892       6.03 %     5,260,766       170,970       6.51 %
Residential
     12,935,327       366,113       5.66 %     15,007,930       426,604       5.69 %
Home equity loans and lines of credit
     6,303,688       184,741       5.89 %     7,705,765       267,154       6.98 %
 
                                    
Total consumer loans secured by real estate
     19,239,015       550,854       5.74 %     22,713,695       693,758       6.13 %
Auto Loans
     6,767,900       234,243       6.96 %     5,558,312       189,007       6.86 %
Other
     310,151       11,996       7.78 %     405,150       17,114       8.52 %
 
                                    
Total Consumer
     26,317,066       797,093       6.08 %     28,677,157       899,879       6.30 %
 
                                    
Total loans
     58,189,963       1,740,895       6.00 %     58,975,425       1,967,771       6.71 %
Allowance for loan losses
     (753,763 )                     (484,122 )                
 
                                    
Total earning assets
     70,007,879     $ 2,125,711       6.09 %     73,096,470     $ 2,414,028       6.63 %
 
                                      
Other assets
     10,358,340                       11,665,137                  
 
                                            
Total assets
   $ 80,366,219                     $ 84,761,607                  
 
                                            
       
Funding liabilities:
                                                
Deposits and other customer related accounts:
                                                
NOW accounts
   $ 5,136,814     $ 22,109       0.87 %   $ 5,965,077     $ 32,231       1.09 %
Savings accounts
     4,088,490       13,517       0.66 %     4,504,675       14,363       0.64 %
Money market accounts
     11,158,312       140,043       2.52 %     9,420,306       158,346       3.39 %
Time deposits
     11,593,466       244,333       4.24 %     11,123,501       255,676       4.64 %
 
                                    
Total retail and commercial deposits
     31,977,082       420,002       2.64 %     31,013,559       460,616       3.00 %
NOW accounts- wholesale
     114,119       1,533       2.70 %     308,759       8,185       5.35 %
Money market accounts- wholesale
     1,471,819       21,294       2.91 %     3,077,336       84,231       5.52 %
Time deposits- wholesale
     1,997,280       26,208       2.64 %     4,464,453       119,945       5.41 %
 
                                    
Total wholesale deposits
     3,583,218       49,035       2.75 %     7,850,548       212,361       5.45 %
 
                                    
Total government deposits
     3,538,526       49,870       2.83 %     3,830,241       97,401       5.13 %
Customer repurchase agreements
     2,655,607       24,742       1.87 %     2,326,334       52,489       4.55 %
 
                                    
Total deposits and other customer related accounts
     41,754,433       543,649       2.62 %     45,020,682       822,867       3.69 %
Borrowings:
                                                
Wholesale borrowings
     19,439,085       435,431       4.49 %     17,607,062       443,338       5.06 %
Other borrowings
     3,710,284       110,599       5.97 %     5,318,968       159,332       6.00 %
 
                                    
Total borrowings
     23,149,369       546,030       4.73 %     22,926,030       602,670       5.28 %
 
                                    
Total funding liabilities
     64,903,802       1,089,679       3.37 %     67,946,712       1,425,537       4.22 %
 
                                    
Non-interest bearing DDA
     6,537,456                       6,378,845                  
Other liabilities
     1,657,959                       1,660,284                  
 
                                            
Total liabilities
     73,099,217                       75,985,841                  
 
                                            
Stockholders’ equity
     7,267,002                       8,775,766                  
 
                                            
Total liabilities and stockholders’ equity
   $ 80,366,219                     $ 84,761,607                  
 
                                            
Net interest income
           $ 1,036,032                     $ 988,491          
 
                                            
Interest rate spread
                     2.72 %                     2.41 %
Contribution from interest free funds
                     0.25 %                     0.30 %
 
                                            
Net interest margin
                     2.97 %                     2.71 %
 
                                            
     
(1)   Tax equivalent basis

 

F

 

Sovereign Bancorp, Inc. and Subsidiaries
SUPPLEMENTAL INFORMATION
(unaudited)
NON-PERFORMING ASSETS
                                         
    June 30     Mar. 31     Dec. 31     Sept. 30     June 30  
(dollars in thousands)   2008     2008     2007     2007     2007  
Non-accrual loans:
                                        
Consumer:
                                        
Residential — Alt-A
   $ 85,460     $ 64,763     $ 51,783     $ 42,310     $ 25,402  
Residential — Other
     47,654       44,039       39,098       37,599       43,990  
Home equity loans and lines of credit
     20,407       17,669       16,684       12,508       12,875  
Correspondent home equity
     44,806       42,618       39,415       41,466       51,659  
Auto loans
     1,155       876       1,359       730       620  
Other consumer loans
     1,595       1,541       2,087       2,076       1,714  
 
                              
Total consumer loans
     201,077       171,506       150,426       136,689       136,260  
Commercial real estate
     117,251       95,363       61,750       63,975       69,345  
Multi-family loans
     42,230       10,367       6,336       3,002       4,732  
C&I and other
     129,693       140,270       85,406       78,251       80,706  
 
                              
Total non-accrual loans
     490,251       417,506       303,918       281,917       291,043  
Restructured loans
     280       324       370       443       503  
 
                              
Total non-performing loans
     490,531       417,830       304,288       282,360       291,546  
Real estate owned, net
     48,228       49,668       43,226       43,517       34,724  
Other repossessed assets
     15,168       16,888       14,062       10,861       7,755  
 
                              
Total non-performing assets
   $ 553,927     $ 484,386     $ 361,576     $ 336,738     $ 334,025  
 
                              
 
                                        
Non-performing loans as a percentage of loans (1)
     0.85 %     0.71 %     0.53 %     0.49 %     0.52 %
Non-performing assets as a percentage of total assets (1)
     0.70 %     0.59 %     0.43 %     0.39 %     0.40 %
Non-performing assets as a percentage of total loans, real estate owned and repossessed assets (1)
     0.96 %     0.82 %     0.63 %     0.59 %     0.59 %
Allowance for credit losses as a percentage of non-performing loans
     172 %     191 %     242 %     230 %     179 %
Non-performing assets as a percentage of tangible equity and allowance for loan losses (1)
     9.9 %     12.2 %     8.6 %     7.9 %     8.1 %
NET LOAN CHARGE-OFFS
                                         
    June 30     Mar. 31     Dec. 31     Sept. 30     June 30  
Quarters ended (in thousands)   2008     2008     2007     2007     2007  
Commercial real estate
   $ 7,748     $ 3,339     $ 4,591     $ 2,401     $ 2,766  
Multi-family loans
     227       —       —       —       —  
C&I and other
     25,246       11,789       13,647       8,387       6,820  
 
                              
Total commercial
     33,221       15,128       18,238       10,788       9,586  
Residential — Alt-A
     2,289       2,135       1,766       807       362  
Residential — Other
     2,340       2,718       1,865       908       1,196  
Home equity loans and lines of credit
     4,399       5,351       3,808       883       1,934  
Correspondent home equity
     6,189       4,014       —       —       —  
 
                              
Total consumer loans secured by real estate
     15,217       14,218       7,439       2,598       3,492  
Auto loans — In market
     13,317       14,488       14,918       10,162       7,953  
Auto loans — Out of market
     23,287       28,276       19,427       9,286       4,352  
Other consumer loans
     1,895       2,186       469       734       291  
 
                              
Total consumer
     53,716       59,168       42,253       22,780       16,088  
 
                              
       
Total loan charge-offs
   $ 86,937     $ 74,296     $ 60,491     $ 33,568     $ 25,674  
 
                              
COMPONENTS OF THE PROVISION OF CREDIT LOSSES AND ALLOWANCE FOR CREDIT LOSSES
                                         
    June 30     Mar. 31     Dec. 31     Sept. 30     June 30  
Quarters ended (in thousands)   2008     2008     2007     2007     2007  
Provision for loan losses
   $ 120,244     $ 140,293     $ 140,188     $ 159,630     $ 49,589  
Provision/(recoveries) for unfunded commitments
     11,756       (5,293 )     8,004       2,870       1,411  
 
                              
Total provision for credit losses
   $ 132,000     $ 135,000     $ 148,192     $ 162,500     $ 51,000  
 
                              
 
                                        
Allowance for loan losses
   $ 808,748     $ 775,441     $ 709,444     $ 629,747     $ 503,685  
Reserve for unfunded commitments
     34,764       23,008       28,301       20,297       17,427  
 
                              
Total allowance for credit losses
   $ 843,512     $ 798,449     $ 737,745     $ 650,044     $ 521,112  
 
                              
     
(1)   The calculation of this ratio at June 30, 2007 excluded approximately $491 million of correspondent home equity loans that were marked down to fair value as of March 31, 2007.

 

G

 

Sovereign Bancorp, Inc. and Subsidiaries
SUPPLEMENTAL INFORMATION
(unaudited)
ADDITIONAL CREDIT QUALITY STATISTICS
                                                                         
    Loan Composition-End of Period ($)     Net Loan Charge-Offs ($)     Total Past Dues Excluding Non-Accruals ($)  
          Annualized Net Loan        
    % of Total Loans     Charge-Offs to Average Loans (%)     Total Past Dues to Total Loans (%)  
    June 30     Mar. 31     June 30     June 30     Mar. 31     June 30     June 30     Mar. 31     June 30  
Quarters ended (in thousands)   2008     2008     2007     2008     2008     2007     2008     2008     2007  
Commercial real estate (1)
   $ 13,271,241     $ 12,882,292     $ 11,741,479     $ 7,748     $ 3,339     $ 2,766     $ 63,624     $ 53,486     $ 52,730  
 
     23 %     22 %     21 %     0.24 %     0.11 %     0.09 %     0.48 %     0.42 %     0.45 %
 
                                                      
Multi-family
     4,669,017       4,331,075       4,000,527       227       —       —       49,866       27,769       19,177  
 
     8 %     7 %     7 %     0.02 %     0.00 %     0.00 %     1.07 %     0.64 %     0.48 %
 
                                                      
C&I and other commercial
     14,495,075       14,968,225       13,805,833       25,246       11,789       6,820       75,395       57,635       50,065  
 
     25 %     25 %     24 %     0.68 %     0.32 %     0.20 %     0.52 %     0.39 %     0.36 %
 
                                                      
Residential — Alt-A
     2,836,902       2,975,648       3,182,538       2,289       2,135       362       158,111       122,094       103,830  
 
     5 %     5 %     5 %     0.32 %     0.29 %     0.05 %     5.57 %     4.10 %     3.26 %
 
                                                      
Residential — Other
     9,019,532       10,302,260       11,204,804       2,340       2,718       1,196       233,188       212,551       169,069  
 
     15 %     18 %     20 %     0.10 %     0.11 %     0.04 %     2.59 %     2.06 %     1.51 %
 
                                                      
Home equity loans and lines of credit
     6,088,654       5,844,326       5,442,035       4,399       5,351       1,934       28,150       29,568       27,916  
 
     11 %     10 %     10 %     0.30 %     0.37 %     0.15 %     0.46 %     0.51 %     0.51 %
 
                                                      
Correspondent home equity loans (2) (3)
     416,084       439,180       512,890       6,189       4,014       —       34,585       60,072       59,907  
 
     1 %     1 %     1 %     5.80 %     3.56 %     0.00 %     8.31 %     13.68 %     11.68 %
 
                                                      
Auto loans — In Market
     4,103,058       4,375,816       4,393,649       13,317       14,488       7,953       80,203       83,610       65,709  
 
     7 %     7 %     8 %     1.25 %     1.32 %     0.73 %     1.95 %     1.91 %     1.50 %
 
                                                      
Auto loans — Out of Market (3)
     2,203,426       2,439,841       1,926,361       23,287       28,276       4,352       79,750       74,534       25,032  
 
     4 %     4 %     3 %     4.01 %     4.41 %     1.12 %     3.62 %     3.05 %     1.30 %
 
                                                      
Other consumer
     302,797       313,119       317,002       1,895       2,186       291       11,477       8,820       10,425  
 
     1 %     1 %     1 %     2.47 %     2.78 %     0.30 %     3.79 %     2.82 %     3.29 %
 
                                                      
Total
     57,405,786       58,871,782       56,527,118       86,937       74,296       25,674       814,349       730,139       583,860  
 
     100 %     100 %     100 %     0.60 %     0.51 %     0.18 %     1.42 %     1.24 %     1.03 %
 
                                                      
     
(1)   Balance includes $907 million and $982 million of residential construction loans at June 30, 2008 and March 31, 2008, respectively.
 
(2)   At June 30, 2008 and March 31, 2008, this portfolio has $308.2 million and $321.5 million, respectively, of first lien loans and $107.9 million and $117.6 million, respectively, of second lien loans which have reserves for credit losses of $51.2 million and $59.4 million, respectively.
 
(3)   Note that Sovereign ceased originating correspondent home equity loans in the first quarter of 2006 and effective January 31, 2008 out of market indirect auto loans.

 

H

 

Sovereign Bancorp, Inc. and Subsidiaries
SUPPLEMENTAL INFORMATION
(unaudited)
DEPOSIT AND OTHER CUSTOMER RELATED ACCOUNT COMPOSITION — End of period
                                         
    June 30     Mar. 31     Dec. 31     Sept. 30     June 30  
Quarters ended (in thousands)   2008     2008     2007     2007     2007  
Demand deposit accounts
   $ 7,205,686     $ 6,761,773     $ 6,444,338     $ 6,272,412     $ 6,313,408  
NOW accounts
     5,367,012       5,462,791       5,546,280       5,352,228       5,950,960  
Money market accounts
     11,328,406       11,334,428       10,655,978       10,258,960       10,005,554  
Savings accounts
     4,113,002       3,841,083       3,831,636       3,984,551       4,312,492  
Time deposits
     10,391,618       11,892,170       11,872,400       11,970,145       10,996,111  
 
                              
Total retail and commercial deposits
     38,405,724       39,292,245       38,350,632       37,838,296       37,578,525  
NOW accounts- wholesale
     306,937       388,604       15,082       396,318       44,638  
Money market accounts- wholesale
     1,577,987       1,385,308       1,761,693       1,553,114       1,948,679  
Time deposits- wholesale
     1,292,603       1,983,040       3,030,594       3,656,288       4,127,023  
 
                              
Total wholesale deposits
     3,177,527       3,756,952       4,807,369       5,605,720       6,120,340  
Total government deposits
     3,190,784       3,314,420       4,003,224       3,927,346       3,619,838  
Customer repurchase agreements
     2,520,073       2,633,112       2,754,680       2,726,686       2,525,932  
 
                              
Total deposits and other customer related accounts
   $ 47,294,108     $ 48,996,729     $ 49,915,905     $ 50,098,048     $ 49,844,635  
 
                              
LOAN COMPOSITION — End of period
                                         
    June 30     Mar. 31     Dec. 31     Sept. 30     June 30  
Quarters ended (in thousands)   2008     2008     2007     2007     2007  
Commercial real estate
   $ 13,271,241     $ 12,882,292     $ 12,306,914     $ 11,821,651     $ 11,741,479  
C&I
     12,746,829       13,209,614       12,594,652       12,355,754       12,186,379  
Multi-family loans
     4,669,017       4,331,075       4,246,370       4,038,333       4,000,527  
Other
     1,748,246       1,758,611       1,765,036       1,697,145       1,619,454  
 
                              
Total commercial loans
     32,435,333       32,181,592       30,912,972       29,912,883       29,547,839  
Residential
     11,856,434       13,277,908       13,341,193       14,009,891       14,387,342  
Home equity loans and lines of credit
     6,504,738       6,283,506       6,197,148       6,058,143       5,954,925  
 
                              
Total consumer loans secured by real estate
     18,361,172       19,561,414       19,538,341       20,068,034       20,342,267  
Auto loans
     6,306,484       6,815,657       7,028,894       6,853,381       6,320,010  
Other consumer loans
     302,797       313,119       299,572       314,066       317,002  
 
                              
Total consumer loans
     24,970,453       26,690,190       26,866,807       27,235,481       26,979,279  
 
                              
       
Total loans
   $ 57,405,786     $ 58,871,782     $ 57,779,779     $ 57,148,364     $ 56,527,118  
 
                              
DEPOSIT AND OTHER CUSTOMER RELATED ACCOUNT COMPOSITION — Average
                                         
    June 30     Mar. 31     Dec. 31     Sept. 30     June 30  
Quarters ended (in thousands)   2008     2008     2007     2007     2007  
Demand deposit accounts
   $ 6,731,967     $ 6,342,945     $ 6,399,359     $ 6,403,572     $ 6,421,910  
NOW accounts
     5,209,957       5,319,562       5,297,687       5,497,403       5,935,760  
Money market accounts
     11,348,987       10,967,638       10,530,726       10,224,580       9,687,237  
Savings accounts
     4,107,321       3,813,768       3,889,735       4,144,517       4,437,785  
Time deposits
     11,258,950       11,927,984       11,955,486       11,323,566       11,004,592  
 
                              
Total retail and commercial deposits
     38,657,182       38,371,897       38,072,993       37,593,638       37,487,284  
NOW accounts- wholesale
     139,664       88,574       46,146       137,919       133,590  
Money market accounts- wholesale
     1,547,158       1,396,481       1,764,249       1,858,681       2,521,820  
Time deposits- wholesale
     1,588,172       2,406,387       3,466,108       4,068,060       4,425,195  
 
                              
Total wholesale deposits
     3,274,994       3,891,442       5,276,503       6,064,660       7,080,605  
Total government deposits
     3,257,652       3,819,399       3,955,764       3,691,557       4,040,559  
Customer repurchase agreements
     2,571,241       2,739,973       2,877,569       2,643,836       2,389,302  
 
                              
Total deposits and other customer related accounts
   $ 47,761,069     $ 48,822,711     $ 50,182,829     $ 49,993,691     $ 50,997,750  
 
                              
LOAN COMPOSITION — Average
                                         
    June 30     Mar. 31     Dec. 31     Sept. 30     June 30  
Quarters ended (in thousands)   2008     2008     2007     2007     2007  
Commercial real estate
   $ 13,052,692     $ 12,593,687     $ 12,139,086     $ 11,746,854     $ 11,737,900  
C&I
     13,005,216       12,760,425       12,311,586       12,049,755       12,146,382  
Multi-family loans
     4,506,471       4,316,489       4,154,457       3,975,580       4,637,577  
Other
     1,756,432       1,754,382       1,722,710       1,632,878       1,586,118  
 
                              
Total commercial loans
     32,320,811       31,424,983       30,327,839       29,405,067       30,107,977  
Residential
     12,598,466       13,272,189       13,744,182       14,357,561       14,429,334  
Home equity loans and lines of credit
     6,389,801       6,217,574       6,116,026       5,974,643       5,933,285  
 
                              
Total consumer loans secured by real estate
     18,988,267       19,489,763       19,860,208       20,332,204       20,362,619  
Auto loans
     6,568,725       6,967,076       6,996,034       6,616,774       5,926,390  
Other consumer loans
     306,297       314,006       312,253       320,848       388,325  
 
                              
Total consumer loans
     25,863,289       26,770,845       27,168,495       27,269,826       26,677,334  
 
                              
       
Total loans
   $ 58,184,100     $ 58,195,828     $ 57,496,334     $ 56,674,893     $ 56,785,311  
 
                              

 

I

 

Sovereign Bancorp, Inc. and Subsidiaries
SUPPLEMENTAL INFORMATION
(unaudited)
CALCULATION OF TANGIBLE EQUITY TO TANGIBLE ASSETS RATIOS
                                         
    Quarter Ended  
    June 30     Mar. 31     Dec. 31     Sept. 30     June 30  
(dollars in thousands)   2008     2008     2007     2007     2007  
 
                                        
Total Equity
   $ 8,233,949     $ 6,676,997     $ 6,992,325     $ 8,725,914     $ 8,780,288  
Goodwill
     (3,430,653 )     (3,430,290 )     (3,426,246 )     (5,003,022 )     (5,003,195 )
CDI and other intangibles
     (314,888 )     (342,994 )     (372,116 )     (402,257 )     (433,164 )
Deferred tax liability on CDI
     104,033       113,581       123,472       133,712       144,294  
Deferred tax liability on other intangibles
     6,042       6,265       6,489       6,719       6,892  
Deferred tax liability on tax deductible goodwill
     168,400       162,678       156,956       151,234       145,512  
 
                              
Total tangible equity including OCI
   $ 4,766,882     $ 3,186,238     $ 3,480,880     $ 3,612,300     $ 3,640,627  
 
                                        
Total assets
   $ 79,197,449     $ 81,912,719     $ 84,746,396     $ 86,607,328     $ 82,737,091  
Goodwill
     (3,430,653 )     (3,430,290 )     (3,426,246 )     (5,003,022 )     (5,003,195 )
CDI and other intangibles
     (314,888 )     (342,994 )     (372,116 )     (402,257 )     (433,164 )
Deferred tax liability on CDI
     104,033       113,581       123,472       133,712       144,294  
Deferred tax liability on other intangibles
     6,042       6,265       6,489       6,719       6,892  
Deferred tax liability on tax deductible goodwill
     168,400       162,678       156,956       151,234       145,512  
 
                              
Total tangible assets including OCI
   $ 75,730,382     $ 78,421,960     $ 81,234,951     $ 81,493,714     $ 77,597,430  
 
                                        
Tangible equity to tangible assets including OCI
     6.29 %     4.06 %     4.28 %     4.43 %     4.69 %
 
                                        
Total tangible equity including OCI
   $ 4,766,882     $ 3,186,238     $ 3,480,880     $ 3,612,300     $ 3,640,627  
Accumulated other comprehensive loss
     720,036       749,556       326,133       218,155       121,184  
 
                              
Total tangible equity excluding OCI
   $ 5,486,918     $ 3,935,794     $ 3,807,013     $ 3,830,455     $ 3,761,811  
 
                                        
Total tangible assets including OCI
   $ 75,730,382     $ 78,421,960     $ 81,234,951     $ 81,493,714     $ 77,597,430  
Accumulated other comprehensive loss
     720,036       749,556       326,133       218,155       121,184  
 
                              
Total tangible assets excluding OCI
   $ 76,450,418     $ 79,171,516     $ 81,561,084     $ 81,711,869     $ 77,718,614  
 
                                        
Tangible equity to tangible assets excluding OCI
     7.18 %     4.97 %     4.67 %     4.69 %     4.84 %
 
                                        
Total tangible equity including OCI
   $ 4,766,882     $ 3,186,238     $ 3,480,880     $ 3,612,300     $ 3,640,627  
Preferred stock
     (195,445 )     (195,445 )     (195,445 )     (195,445 )     (195,445 )
 
                              
Total tangible common equity including OCI
   $ 4,571,437     $ 2,990,793     $ 3,285,435     $ 3,416,855     $ 3,445,182  
 
                                        
Total tangible equity including OCI
   $ 75,730,382     $ 78,421,960     $ 81,234,951     $ 81,493,714     $ 77,597,430  
 
                                        
Tangible common equity to tangible assets including OCI
     6.04 %     3.81 %     4.04 %     4.19 %     4.44 %
 
                                        
Total tangible common equity including OCI
   $ 4,571,437     $ 2,990,793     $ 3,285,435     $ 3,416,855     $ 3,445,182  
Accumulated other comprehensive loss
     720,036       749,556       326,133       218,155       121,184  
 
                              
Total tangible common equity excluding OCI
   $ 5,291,473     $ 3,740,349     $ 3,611,568     $ 3,635,010     $ 3,566,366  
 
                                        
Total tangible equity excluding OCI
   $ 76,450,418     $ 79,171,516     $ 81,561,084     $ 81,711,869     $ 77,718,614  
 
                                        
Tangible common equity to tangible assets excluding OCI
     6.92 %     4.72 %     4.43 %     4.45 %     4.59 %
CALCULATION OF TANGIBLE BOOK VALUE PER SHARE
                                         
    June 30     Mar. 31     Dec. 31     Sept. 30     June 30  
(dollars and shares in thousands)   2008     2008     2007     2007     2007  
Total tangible common equity including OCI
   $ 4,571,437     $ 2,990,793     $ 3,285,435     $ 3,416,855     $ 3,445,182  
 
                                        
Common shares outstanding
     662,641       482,443       481,404       480,436       479,150  
 
                                        
Tangible common book value per share including OCI
   $ 6.90     $ 6.20     $ 6.82     $ 7.11     $ 7.19  
 
                                        
Total tangible common equity excluding OCI
   $ 5,291,473     $ 3,740,349     $ 3,611,568     $ 3,635,010     $ 3,566,366  
 
                                        
Common shares outstanding
     662,641       482,443       481,404       480,436       479,150  
 
                                        
Tangible common book value per share including OCI
   $ 7.99     $ 7.75     $ 7.50     $ 7.57     $ 7.44  

 

J

 

Sovereign Bancorp, Inc. and Subsidiaries
SUPPLEMENTAL INFORMATION
(unaudited)
CALCULATION OF RETURN ON AVERAGE TANGIBLE EQUITY AND RETURN ON AVERAGE TANGIBLE ASSETS
                                                         
    Quarter Ended     Year-to-Date  
    June 30     Mar. 31     Dec. 31     Sept. 30     June 30     June 30     June 30  
(dollars in thousands)   2008     2008     2007     2007     2007     2008     2007  
 
                                                        
Total average equity
   $ 7,589,954     $ 6,944,050     $ 8,721,714     $ 8,773,451     $ 8,816,108     $ 7,267,002     $ 8,775,766  
Average goodwill
     (3,430,304 )     (3,427,259 )     (4,985,883 )     (5,003,137 )     (5,005,116 )     (3,428,782 )     (5,005,118 )
Average CDI and other intangibles
     (332,165 )     (361,229 )     (391,628 )     (421,895 )     (453,528 )     (346,697 )     (469,781 )
Average deferred tax liability on intangibles
     281,626       285,996       290,838       295,632       300,888       283,811       306,920  
 
                                          
Total tangible average equity including OCI
   $ 4,109,111     $ 3,441,558     $ 3,635,041     $ 3,644,051     $ 3,658,352     $ 3,775,334     $ 3,607,787  
 
                                                        
Return on average equity
     6.73 %     5.78 %     -72.92 %     2.63 %     6.71 %     6.28 %     4.49 %
Effect of goodwill
     5.62 %     5.76 %     -100.02 %     3.62 %     9.18 %     5.70 %     6.23 %
Effect of CDI and other intangibles
     0.54 %     0.61 %     -7.86 %     0.30 %     0.83 %     0.58 %     0.59 %
Effect of deferred tax asset
     -0.46 %     -0.48 %     5.83 %     -0.21 %     -0.55 %     -0.47 %     -0.38 %
 
                                          
Tangible return on average equity including OCI
     12.44 %     11.67 %     -174.96 %     6.34 %     16.17 %     12.09 %     10.93 %
 
                                          
 
                                                        
Total average assets
   $ 79,801,750     $ 80,930,688     $ 82,190,883     $ 81,597,168     $ 81,940,921     $ 80,366,219     $ 84,761,607  
Average goodwill
     (3,430,304 )     (3,427,259 )     (4,985,883 )     (5,003,137 )     (5,005,116 )     (3,428,782 )     (5,005,118 )
Average CDI and other intangibles
     (332,165 )     (361,229 )     (391,628 )     (421,895 )     (453,528 )     (346,697 )     (469,781 )
Average deferred tax liability on intangibles
     281,626       285,996       290,838       295,632       300,888       283,811       306,920  
 
                                          
Total tangible average equity including OCI
   $ 76,320,907     $ 77,428,196     $ 77,104,210     $ 76,467,768     $ 76,783,165     $ 76,874,551     $ 79,593,628  
 
                                                        
Return on Average assets
     0.64 %     0.50 %     -7.74 %     0.28 %     0.72 %     0.57 %     0.47 %
Effect of goodwill
     0.03 %     0.02 %     -0.50 %     0.02 %     0.05 %     0.03 %     0.03 %
Effect of CDI and other intangibles
     0.00 %     0.00 %     -0.04 %     0.00 %     0.00 %     0.00 %     0.00 %
Effect of deferred tax asset
     0.00 %     0.00 %     0.03 %     0.00 %     0.00 %     0.00 %     0.00 %
 
                                          
Tangible return on average assets including OCI
     0.67 %     0.52 %     -8.25 %     0.30 %     0.77 %     0.59 %     0.50 %
 
                                          

 

K