Financial Highlights
-- Net income for 2005 was $676 million, up 49% from $454 million in
2004. Earnings per diluted share for 2005 were $1.77, up 31% from
$1.36 in 2004. Net income for the fourth quarter of 2005 was $165
million, up 20% from $137 million in the same quarter a year ago.
Earnings per diluted share for the fourth quarter of 2005 were $.44,
up 16% from $.38 per diluted share in the fourth quarter of 2004.
-- Operating/cash earnings per diluted share were $1.93 in 2005, up 5%
from $1.83 in 2004. Operating/cash earnings per diluted share for the
fourth quarter of 2005 were $.48 per share, unchanged from the fourth
quarter of 2004.
-- Efficiency ratio was 49.0% in 2005 as compared to 50.3% in 2004.
-- Positive operating leverage of 1.2 times in 2005.
-- Average annual deposit growth of 16%, including acquisitions, from
the fourth quarter of 2004; average annual core deposit (excluding
time deposits) growth of 8%, including acquisitions.
-- Average deposits increased to $37.9 billion during the quarter, an
annualized organic growth rate of 8%; average core deposits
(excluding time deposits) increased to $27.5 billion during the
quarter, an annualized organic growth rate of 2%.
-- Average annual loan growth of 21%, including acquisitions, from the
fourth quarter of 2004.
-- Average loans increased to $43.5 billion during the quarter, an
annualized organic growth rate of 11%.
-- Return on average assets of 1.11% in 2005 as compared to .90% in
2004.
-- Operating/cash return on average assets of 1.26% in 2005 as compared
to 1.19% in 2004.
-- Return on average tangible shareholders' equity of 24.52% in 2005 as
compared to 19.54% in 2004.
-- Operating/cash return on tangible shareholders' equity of 27.71% in
2005 as compared to 25.94% in 2004.
-- Net charge-offs decreased to .20% of average loans in 2005 as
compared to .36% in 2004. Annualized net charge-offs decreased to
.21% of average loans in the fourth quarter of 2005 as compared to
.28% in the fourth quarter of 2004.
-- Sovereign repurchased one million shares during the quarter through
our previously announced repurchase program, and a total of 21
million shares for the twelve months ended December 31, 2005.
PHILADELPHIA, Jan. 17 /PRNewswire-FirstCall/ -- Sovereign Bancorp, Inc.
("Sovereign") (NYSE: SOV), parent company of Sovereign Bank ("Bank"), today
reported for the year ended December 31, 2005 net income of $676 million, up
49% from $454 million in 2004, and earnings per diluted share of $1.77, up 31%
from $1.36 in 2004. Net income in 2005 included the full year impact of the
Seacoast and Waypoint acquisitions, which closed in the third quarter of 2004
and the first quarter of 2005, respectively, as well as stock based
compensation expense of $.05 per share. Sovereign adopted FAS 123 in 2002 and
as a result has been expensing stock options since that time. Sovereign's net
income for 2005 produced returns on average assets and average tangible equity
of 1.11% and 24.52%, respectively, as compared to .90% and 19.54%,
respectively, in 2004.
For the fourth quarter 2005, Sovereign reported net income of $165
million, or $.44 per diluted share, as compared to $137 million, or $.38 per
diluted share, for the fourth quarter of 2004. Net income in the fourth
quarter of 2005 included charges related to proxy and related professional
fees of $3.8 million, after-tax, or $.01 per share; net income in the fourth
quarter of 2004 included a non-cash other-than-temporary impairment charge on
FNMA and FHLMC preferred stock of $20.9 million, after-tax, or $.06 per share.
Sovereign's net income for the fourth quarter of 2005 produced annualized
returns on average assets and average tangible equity of 1.03% and 23.67%,
respectively, as compared to 1.00% and 21.86%, respectively, in the same
period a year ago.
Effective in the fourth quarter of 2004, Sovereign combined its definition
of operating earnings and cash earnings and the related per share amounts into
one number which excludes amortization of core deposit intangibles, in
addition to special items. Since some of these special items are difficult to
predict and make the results of normal operations less clear, management
believes the presentation of financial measures excluding the impact of these
items provides useful supplemental information in evaluating the operating
results of Sovereign's core businesses.
Operating/cash earnings in 2005 were $1.93 per diluted share as compared
$1.83 per diluted share in 2004. Operating/cash earnings in 2005 excluded
after-tax charges related to mergers and acquisitions, restructuring charges,
proxy and related professional fees, and amortization of intangible assets.
In 2004, operating/cash earnings excluded after-tax charges related to mergers
and acquisitions, loan loss provision related to acquisitions, charges
associated with the early redemption of high-cost debt, accounting changes
related to the adoption of EITF 04-08, a non-cash other-than-temporary
impairment charge on FNMA and FHLMC preferred stock, and amortization of
intangible assets. Operating/cash earnings for 2005 produced operating/cash
return on average assets and average tangible equity of 1.26% and 27.71%,
respectively, as compared to 1.19% and 25.94%, respectively, in 2004. 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.
For the quarter ended December 31, 2005, Sovereign's operating/cash
earnings per diluted share were $.48, which excluded the above mentioned proxy
and related professional fee charges and $11.5 million, or $.03 per share,
related to amortization of intangible assets, as compared to $.48 per diluted
share a year ago, which excluded the above mentioned impairment charge and
$12.6 million, or $.04 per share, related to amortization of intangible assets
as well as merger related and integration cost reversals of $3.4 million or
$.01 per share. Operating/cash earnings for the fourth quarter of 2005
produced annualized operating/cash return on average assets and average
tangible equity of 1.17% and 26.78%, respectively, as compared to 1.22% and
26.65%, respectively, in the fourth quarter of 2004.
Commenting on results for the full year 2005 and the fourth quarter of
2005, Jay S. Sidhu, Sovereign's Chairman and Chief Executive Officer, said,
"Despite a challenging rate environment, 2005 results include many positives
for Sovereign. We saw improvement in our operating metrics - operating/cash
return on average assets expanded to 1.26% in 2005 from 1.19% in 2004,
operating/cash return on average tangible equity expanded to 27.71% from
25.94% in 2004, and our efficiency ratio improved 134 basis points to 49.0%.
We had robust growth across most of our lending areas with net charge-offs at
historically low levels, while fee-based revenues grew 36% over 2004 levels.
We successfully integrated our acquisition of Waypoint and moved to our new
market-based delivery model. In the fourth quarter of 2005, we announced our
pending acquisition of Independence Community Bank Corp. and Santander's
pending $2.4 billion investment in Sovereign at $27.00 per share."
Net Interest Income and Margin
Sovereign reported net interest income of $392 million for the fourth
quarter of 2005, an increase of $5 million, or 1%, compared to the fourth
quarter of 2004. Sovereign's average loan portfolio increased during the
fourth quarter by $1.2 billion to $43.5 billion, reflecting an annualized
growth rate of 11%. Sovereign's average deposits increased $719 million during
the quarter, reflecting an annualized growth rate of 8%. Average core deposits
(excludes time deposits) increased during the quarter by approximately $153
million to $27.5 billion, reflecting an annualized growth rate of 2%.
On an average for the year, net interest margin declined 15 basis points
to 3.09% as compared to 3.24% for 2004. Net interest margin was 2.93% for the
fourth quarter of 2005 as compared to 3.04% in the third quarter primarily as
a result of loan growth outpacing deposit growth and the prolonged flatness of
the yield curve, which is facing the entire industry. Commercial loan yields
expanded 34 basis points during the quarter and the yield of total loans
increased 23 basis points, while total deposit costs (including non-interest
bearing DDA) increased 31 basis points during the same period.
Non-Interest Income
Consumer and commercial banking fees were very strong during the quarter,
up 7% and 52%, respectively, from a year ago. Consumer banking fees increased
by $5.1 million to $72.8 million, or 8%, compared to the same period in 2004,
primarily driven by growth in loan and deposit fees. Commercial banking fees
increased by $17.0 million to $49.8 million, or 52%, over the same period a
year ago, primarily driven by growth in loan fees and cash management fees as
well as revenues of $5.5 million related to the dealer floor plan
securitization. Excluding this securitization, which will generate
approximately $3.0 million per quarter in fee-based revenues going forward,
commercial banking fees were up 26% from a year ago.
Mortgage banking revenues for the quarter were $26.8 million, compared to
$29.0 million last quarter and $4.7 million in the same quarter a year ago.
Mortgage banking revenue remained strong in the fourth quarter reflecting
sales of mortgage and home equity loans and a reversal of mortgage servicing
right impairment reserves of $3.9 million.
Non-Interest Expense
G&A expenses for the quarter were $282 million, including acquisitions, as
compared to $257 million a year ago. On a linked quarter basis, G&A expenses
were up $4.9 million due primarily to increased technology expense resulting
from higher transaction charges and increased utilization of web-based
products, seasonality in real estate costs and increased costs in outside
services related to a servicing conversion in our consumer loan group. "For
2005, G&A expenses were 3.5% favorable to our budget with positive operating
leverage of 1.2 times, resulting in a 133 basis points improvement in our
efficiency ratio over 2004. Our efficiency ratio was 49.0% for 2005 as
compared to 50.3% in 2004," commented Mark R. McCollom, Sovereign's Chief
Financial Officer.
Asset Quality
Sovereign continued to see improvement in net charge-offs during 2005.
Annualized net charge-offs increased slightly to .21% of average loans for the
fourth quarter, compared to .18% in the third quarter and decreased from .28%
in the fourth quarter of 2004. NPAs to total assets were up slightly from
third quarter levels at .32%. Sovereign's provision for credit losses was
$26.0 million this quarter compared to $20.0 million in the third quarter and
$27.0 million in the fourth quarter of 2004. The allowance for credit losses
to total loans decreased slightly to 1.00% at December 31, 2005, as compared
to 1.02% at September 30, 2005 and 1.12% at December 31, 2004. The allowance
for credit losses to non-performing loans now stands at 231%, as compared to
257% at September 30, 2005 and 285% at December 31, 2004.
Capital
During the quarter, Sovereign repurchased one million shares under a
previously announced repurchase program. For 2005, Sovereign repurchased 21
million shares, or more than 5% of fully diluted shares outstanding.
Sovereign's Tier 1 leverage ratio was 6.68% at December 31, 2005. Tangible
common equity to tangible assets, excluding other comprehensive income
("OCI"), was 5.05% and including OCI was 4.73%. The equity to assets ratio was
9.13% at December 31, 2005. Sovereign Bank's Tier 1 leverage ratio was 6.84%
and the Bank's risk-based capital ratio was 10.68% at December 31, 2005.
Based upon our January 13 stock price of $22.20, Sovereign is trading at a
P/E of 11.5x analysts mean 2006 estimate. The book value per share at December
31, 2005 was $16.21.
About Sovereign
Sovereign Bancorp, Inc., ("Sovereign") (NYSE: SOV), is the parent company
of Sovereign Bank, a $64 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 19th 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 Fourth Quarter 2005 earnings call on Tuesday, January 17
beginning at 5:00 p.m. ET at http://www.sovereignbank.com >Investor Relations >News
>Conference Calls/Webcasts; or
http://phx.corporate-ir.net/phoenix.zhtml?p=irol-
eventDetails&c=67999&eventID=1181767. The web-cast and replay can be accessed
anytime from 5:00 p.m. ET on Tuesday, January 17 through 9:00 p.m. ET on
Monday, March 31, 2006. Questions may be submitted during the call via email
to investor@sovereignbank.com . A telephone replay will be accessible from
7:00 p.m. ET on Tuesday, January 17, 2006 through 12:00 a.m. ET (midnight) on
Tuesday, January 24, 2006 by dialing 800-642-1687, confirmation id #4181166.
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 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
Dec. 31 Sept. 30 June 30 Mar. 31 Dec. 31
2005 2005 2005 2005 2004
(dollars in millions, except
per share data)
Operating Data
Net income $165.5 $181.0 $183.5 $146.2 $137.4
Net income for EPS purposes 171.8 187.4 189.8 152.5 143.7
Operating/cash earnings
for EPS purposes (1) 187.2 197.2 196.5 183.3 167.5
Net interest income 391.7 395.6 402.9 398.2 387.0
Provision for credit losses 26.0 20.0 22.0 22.0 27.0
Total fees and other income before
securities transactions 171.5 171.0 158.9 133.4 126.5
Net gain (loss) on investment
securities (1.3) 1.7 3.4 8.0 (24.7)
G&A expense 281.8 276.9 273.4 257.1 257.3
Other expenses 40.0 32.6 27.1 63.8 30.5
Performance Statistics
Bancorp
Net interest margin 2.93% 3.04% 3.13% 3.26% 3.29%
Return on average assets 1.03% 1.17% 1.22% 1.03% 1.00%
Operating/cash return on average
assets (1) 1.17% 1.27% 1.31% 1.29% 1.22%
Return on average equity 11.49% 12.61% 12.92% 10.61% 11.16%
Operating/cash return on average
equity (1) 13.00% 13.74% 13.84% 13.30% 13.61%
Return on average tangible equity 23.67% 26.24% 27.15% 21.09% 21.86%
Operating/cash return on average
tangible equity (1) 26.78% 28.58% 29.09% 26.45% 26.65%
Annualized net loan charge-offs to
average loans 0.21% 0.18% 0.19% 0.20% 0.28%
Efficiency ratio (2) 50.04% 48.87% 48.67% 48.36% 50.10%
Per Share Data
Basic earnings per share $0.46 $0.50 $0.50 $0.40 $0.40
Diluted earnings per share 0.44 0.48 0.47 0.38 0.38
Operating/cash earnings per
share (1) 0.48 0.50 0.49 0.46 0.48
Dividend declared per share .060 .040 .040 .030 .030
Book value (3) 16.21 $15.81 15.70 15.22 14.41
Common stock price:
High 23.49 24.72 22.70 23.73 22.61
Low 20.63 21.69 20.13 21.89 21.14
Close $21.62 $22.04 $22.34 $22.16 $22.55
Weighted average common shares:
Basic 357.8 360.3 367.9 368.9 345.6
Diluted 390.1 393.1 400.4 401.3 377.6
End-of-period common shares:
Basic 358.4 358.5 365.8 374.8 346.1
Diluted 390.5 390.7 398.3 407.4 378.2
NOTES:
(1) Operating/cash earnings represent net income excluding the after-tax
effects of special items, such as significant gains or losses that are
unusual in nature or are associated with acquiring or integrating
businesses, losses on the early retirement of debt, other than
temporary impairment charges on Fannie Mae and Freddie Mac preferred
equity securities, amortization of intangible assets, proxy and
related professional fees, and certain restructuring charges.
Additionally, for 2004, operating/cash earnings excludes the impact of
EITF 04-8. See page I and J for a reconciliation of GAAP and Non-GAAP
measures.
(2) 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.
(3) Book value equals stockholders' equity at period-end divided by common
shares outstanding.
Year to Date
Dec. 31 Dec. 31
2005 2004
(dollars in millions, except
per share data)
Operating Data
Net income $676.2 $453.6
Net income for EPS purposes 701.6 474.8
Operating/cash earnings
for EPS purposes (1) 764.2 602.3
Net interest income 1,588.3 1,404.8
Provision for credit losses 90.0 127.0
Total fees and other income before
securities transactions 634.8 468.1
Net gain (loss) on investment
securities 11.7 14.2
G&A expense 1,089.2 942.7
Other expenses 163.4 236.2
Performance Statistics
Bancorp
Net interest margin 3.09% 3.24%
Return on average assets 1.11% 0.90%
Operating/cash return on average
assets (1) 1.26% 1.19%
Return on average equity 11.92% 10.74%
Operating/cash return on average
equity (1) 13.47% 14.26%
Return on average tangible equity 24.52% 19.54%
Operating/cash return on average
tangible equity (1) 27.71% 25.94%
Annualized net loan charge-offs to
average loans 0.20% 0.36%
Efficiency ratio (2) 49.00% 50.33%
Per Share Data
Basic earnings per share $1.86 $1.41
Diluted earnings per share 1.77 1.36
Operating/cash earnings per share (1) 1.93 1.83
Dividend declared per share 0.170 0.115
Book value (3) 16.21 14.41
Common stock price:
High 24.72 24.51
Low 20.13 19.51
Close $21.62 $22.55
Weighted average common shares:
Basic 363.7 322.3
Diluted 396.2 350.3
End-of-period common shares:
Basic 358.4 346.1
Diluted 390.5 378.2
NOTES:
(1) Operating/cash earnings represent net income excluding the after-tax
effects of special items, such as significant gains or losses that are
unusual in nature or are associated with acquiring or integrating
businesses, losses on the early retirement of debt, other than
temporary impairment charges on Fannie Mae and Freddie Mac preferred
equity securities, amortization of intangible assets, proxy and
related professional fees, and certain restructuring charges.
Additionally, for 2004, operating/cash earnings excludes the impact of
EITF 04-8. See page I and J for a reconciliation of GAAP and Non-GAAP
measures.
(2) 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.
(3) Book value equals stockholders' equity at period-end divided by common
shares outstanding.
Sovereign Bancorp, Inc. and Subsidiaries
FINANCIAL HIGHLIGHTS
(unaudited)
Quarter Ended
Dec. 31 Sept. 30 June 30 Mar. 31 Dec. 31
2005 2005 2005 2005 2004
(dollars in millions)
Financial Condition Data:
General
Total assets $63,679 $62,960 $59,940 $58,942 $54,489
Loans 43,804 42,692 41,267 40,320 36,631
Total deposits and customer
related accounts: 37,978 37,333 36,102 36,686 32,556
Core deposits and other
customer related
accounts 26,639 27,395 26,683 27,225 25,441
Time deposits 11,339 9,937 9,419 9,461 7,114
Borrowings 18,733 18,897 17,069 15,555 16,140
Minority interests 206 205 205 204 204
Stockholders' equity 5,811 5,668 5,743 5,705 4,988
Goodwill 2,717 2,714 2,714 2,721 2,125
Core deposit intangible 214 232 250 269 257
Asset Quality
Non-performing assets $205.6 $181.1 $173.2 $186.9 $160.1
Non-performing loans $189.5 $169.9 $162.4 $171.9 $143.6
Non-performing assets to
total assets 0.32% 0.29% 0.29% 0.32% 0.29%
Non-performing loans to
total loans 0.43% 0.40% 0.39% 0.43% 0.39%
Allowance for credit
losses (2) $437.8 $436.8 $442.5 $437.7 $408.7
Allowance for credit losses
to total loans (2) 1.00% 1.02% 1.07% 1.09% 1.12%
Allowance for credit losses
to non-performing loans (2) 231% 257% 272% 255% 285%
Capitalization - Bancorp (1)
Stockholders' equity to
total assets 9.13% 9.00% 9.58% 9.68% 9.16%
Tier 1 leverage capital
ratio 6.68% 6.48% 6.86% 6.96% 7.05%
Tangible equity to tangible
assets, excluding OCI 5.05% 4.84% 5.13% 5.22% 5.25%
Tangible equity to tangible
assets, including OCI 4.73% 4.54% 4.88% 4.86% 5.00%
Capitalization - Bank (1)
Stockholders' equity to
total assets 10.61% 10.46% 11.30% 11.59% 10.77%
Tier 1 leverage capital
ratio 6.84% 6.58% 7.16% 7.44% 7.21%
Tier 1 risk-based capital
ratio 8.21% 7.91% 8.64% 8.93% 8.79%
Total risk-based capital
ratio 10.68% 10.42% 11.27% 11.59% 11.64%
(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.
(2) Effective in the fourth quarter of 2005, Sovereign reclassified its
reserve for unfunded commitments from the allowance for loan losses to
other liabilities. Prior periods have been reclassified to conform to
the current period presentation. We have defined the allowance for
credit losses as the sum of the allowance for loan losses and the
reserve for unfunded commitments.
Sovereign Bancorp, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(unaudited)
Dec. 31 Sept. 30 June 30
(dollars in thousands) 2005 2005 2005
Assets
Cash and amounts due
from depository institutions $1,131,936 $1,438,240 $1,176,891
Investments:
Available-for-sale 7,258,402 7,547,170 6,919,987
Held-to-maturity 4,647,627 4,500,881 4,055,135
Other investments (1) 651,299 696,859 609,977
Total investments 12,557,328 12,744,910 11,585,099
Loans:
Commercial 16,635,646 16,222,920 16,152,017
Consumer 27,168,201 26,468,719 25,115,462
Total loans 43,803,847 42,691,639 41,267,479
Less allowance for loan losses (2) (419,599) (418,353) (424,711)
Total loans, net 43,384,248 42,273,286 40,842,768
Premises and equipment, net 412,017 401,868 391,140
Accrued interest receivable 286,300 265,120 247,505
Goodwill 2,716,826 2,714,073 2,713,894
Core deposit intangible 213,975 231,740 250,025
Bank owned life insurance 1,018,125 1,006,820 996,645
Other assets 1,957,971 1,884,316 1,736,089
Total assets $63,678,726 $62,960,373 $59,940,056
Liabilities and Stockholders' Equity
Liabilities:
Deposits and other customer related
accounts:
Core and other customer related
accounts $26,639,246 $27,395,257 $26,682,873
Time deposits 11,338,460 9,937,334 9,418,691
Total 37,977,706 37,332,591 36,101,564
Borrowings and other debt
obligations 18,732,486 18,897,237 17,068,806
Other liabilities (2) 952,175 857,530 822,136
Total liabilities 57,662,367 57,087,358 53,992,506
Minority interests 205,660 205,176 204,721
Stockholders' equity:
Common Stock 3,657,543 3,649,507 3,636,750
Warrants and stock options 337,346 337,156 339,517
Unallocated ESOP shares (21,396) (23,707) (23,707)
Treasury stock (478,734) (467,265) (280,223)
Accumulated other comprehensive loss (170,798) (170,619) (105,727)
Retained earnings 2,486,738 2,342,767 2,176,219
Total stockholders' equity 5,810,699 5,667,839 5,742,829
Total liabilities and
stockholders' equity $63,678,726 $62,960,373 $59,940,056
(1) Effective in the fourth quarter of 2005, Sovereign reclassified its
investments in FHLB stock to other investments from available for
sale. Prior periods have been restated to conform to the current
presentation.
(2) Effective in the fourth quarter of 2005, Sovereign reclassified its
reserve for unfunded commitments from the allowance for loan losses to
other liabilities. Prior periods have been reclassified to conform to
the current period presentation. We have defined the allowance for
credit losses as the sum of the allowance for loan losses and the
reserve for unfunded commitments.
Mar. 31 Dec. 31
(dollars in thousands) 2005 2004
Assets
Cash and amounts due
from depository institutions $981,674 $1,160,922
Investments:
Available-for-sale 7,134,372 7,065,379
Held-to-maturity 3,839,848 3,904,319
Other investments (1) 574,981 577,179
Total investments 11,549,201 11,546,877
Loans:
Commercial 15,363,592 13,864,240
Consumer 24,956,412 22,766,839
Total loans 40,320,004 36,631,079
Less allowance for loan losses (2) (421,446) (391,003)
Total loans, net 39,898,558 36,240,076
Premises and equipment, net 394,604 353,337
Accrued interest receivable 258,849 226,012
Goodwill 2,720,651 2,125,081
Core deposit intangible 268,528 256,694
Bank owned life insurance 992,426 885,807
Other assets 1,877,557 1,694,220
Total assets $58,942,048 $54,489,026
Liabilities and Stockholders' Equity
Liabilities:
Deposits and other customer related
accounts:
Core and other customer related
accounts $27,224,877 $25,441,145
Time deposits 9,460,879 7,114,373
Total 36,685,756 32,555,518
Borrowings and other debt obligations 15,554,598 16,140,128
Other liabilities (2) 792,191 601,102
Total liabilities 53,032,545 49,296,748
Minority interests 204,286 203,906
Stockholders' equity:
Common Stock 3,609,269 2,949,870
Warrants and stock options 346,116 317,842
Unallocated ESOP shares (23,707) (23,707)
Treasury stock (64,495) (19,136)
Accumulated other comprehensive loss (169,312) (108,092)
Retained earnings 2,007,346 1,871,595
Total stockholders' equity 5,705,217 4,988,372
Total liabilities and
stockholders' equity $58,942,048 $54,489,026
(1) Effective in the fourth quarter of 2005, Sovereign reclassified its
investments in FHLB stock to other investments from available for
sale. Prior periods have been restated to conform to the current
presentation.
(2) Effective in the fourth quarter of 2005, Sovereign reclassified its
reserve for unfunded commitments from the allowance for loan losses to
other liabilities. Prior periods have been reclassified to conform to
the current period presentation. We have defined the allowance for
credit losses as the sum of the allowance for loan losses and the
reserve for unfunded commitments.
Sovereign Bancorp, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Quarter Ended
Dec. 31 Sept. 30 June 30 Mar. 31 Dec. 31
2005 2005 2005 2005 2004
(dollars in thousands,
except per share data)
Interest and dividend
income:
Interest on interest-
earning deposits $2,605 $2,022 $1,896 $2,233 $1,721
Interest on
investment
securities
Available for sale 91,163 86,411 91,123 90,995 99,432
Held to maturity 51,225 47,624 45,091 45,119 45,512
Other 4,971 4,443 4,755 3,889 3,513
Interest on loans 649,492 607,966 566,936 518,820 474,010
Total interest
and dividend
income 799,456 748,466 709,801 661,056 624,188
Interest expense:
Deposits and related
customer accounts 201,449 169,084 139,879 114,178 91,731
Borrowings 206,344 183,817 167,047 148,700 145,445
Total interest
expense 407,793 352,901 306,926 262,878 237,176
Net interest
income 391,663 395,565 402,875 398,178 387,012
Provision for credit
losses 26,000 20,000 22,000 22,000 27,000
Net interest
income after
provision for
credit losses 365,663 375,565 380,875 376,178 360,012
Non-interest income:
Consumer banking
fees 72,838 74,992 73,063 66,555 67,759
Commercial banking
fees 49,826 42,745 35,531 33,008 32,843
Mortgage banking
revenue (1) 26,812 28,967 21,547 11,932 4,726
Capital markets
revenue 4,053 5,382 3,700 4,686 6,548
Bank owned life
insurance income 11,398 12,066 12,918 10,903 10,136
Other 6,538 6,856 12,092 6,351 4,480
Total fees and other
income before
security gains 171,465 171,008 158,851 133,435 126,492
Net gain/(loss) on
securities (1,296) 1,675 3,355 7,979 (24,728)
Total non-
interest income 170,169 172,683 162,206 141,414 101,764
Non-interest expense:
General and administrative
Compensation and
benefits 137,452 140,532 135,803 125,125 123,967
Occupancy and
equipment 61,679 61,096 61,348 62,870 59,221
Technology expense 22,562 21,349 21,606 18,668 21,486
Outside services 17,174 15,362 13,805 14,648 13,901
Marketing expense 15,103 14,455 11,757 11,047 13,089
Other
administrative
expenses 27,828 24,107 29,072 24,756 25,587
Total general and
administrative 281,798 276,901 273,391 257,114 257,251
Other expenses:
Amortization of
core deposit
intangibles 17,766 18,284 18,815 18,956 17,670
Other minority
interest expense 5,951 5,837 5,752 5,668 5,630
Equity method
investments 10,268 11,656 10,966 10,770 11,875
Loss on debt
extinguishment 187 - - - 500
Proxy and
professional fees 5,827 - - - -
Restructuring
charges - (1,222) - 5,204 -
Merger-related and
integration charges - (2,000) (8,447) 23,191 (5,169)
Total other
expenses 39,999 32,555 27,086 63,789 30,506
Total non-
interest
expense 321,797 309,456 300,477 320,903 287,757
Income before
income taxes 214,035 238,792 242,604 196,689 174,019
Income tax expense 48,540 57,749 59,133 50,538 36,590
Net income $165,495 $181,043 $183,471 $146,151 $137,429
(1) Mortgage banking
activity is summarized
below:
Gains on sale of
mortgage loans,
mortgage backed
securities, and home
equity loans (2) $22,708 $21,274 $28,371 $6,377 $2,438
Net gains/(loss)
recorded under SFAS 133 (1,039) 717 314 653 (111)
Mortgage servicing fees,
net of mortgage
servicing rights
amortization 1,225 139 1,627 948 664
Mortgage servicing right
(impairments)/
recoveries 3,918 6,837 (8,765) 3,954 1,735
Total mortgage
banking revenues $26,812 $28,967 $21,547 $11,932 $4,726
(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.
Year to Date
Dec. 31 Dec. 31
2005 2004
(dollars in thousands, except per
share data)
Interest and dividend income:
Interest on interest-earning deposits $8,756 $4,734
Interest on investment securities
Available for sale 359,692 492,682
Held to maturity 189,059 152,680
Other 18,058 8,789
Interest on loans 2,343,214 1,565,259
Total interest and dividend income 2,918,779 2,224,144
Interest expense:
Deposits and related customer accounts 624,590 303,045
Borrowings 705,908 516,282
Total interest expense 1,330,498 819,327
Net interest income 1,588,281 1,404,817
Provision for credit losses 90,000 127,000
Net interest income after
provision for credit losses 1,498,281 1,277,817
Non-interest income:
Consumer banking fees 287,448 242,587
Commercial banking fees 161,110 123,837
Mortgage banking revenue (1) 89,258 22,509
Capital markets revenue 17,821 19,943
Bank owned life insurance income 47,285 39,272
Other 31,837 19,921
Total fees and other income before
security gains 634,759 468,069
Net gain/(loss) on securities 11,713 14,229
Total non-interest income 646,472 482,298
Non-interest expense:
General and administrative
Compensation and benefits 538,912 448,142
Occupancy and equipment 246,993 220,673
Technology expense 84,185 77,359
Outside services 60,989 53,315
Marketing expense 52,362 46,523
Other administrative expenses 105,763 96,649
Total general and administrative 1,089,204 942,661
Other expenses:
Amortization of core deposit
intangibles 73,821 72,635
Other minority interest expense 23,208 22,006
Equity method investments 43,660 31,471
Loss on debt extinguishment 187 63,761
Proxy and professional fees 5,827 -
Restructuring charges 3,982 -
Merger-related and integration charges 12,744 46,359
Total other expenses 163,429 236,232
Total non-interest expense 1,252,633 1,178,893
Income before income taxes 892,120 581,222
Income tax expense 215,960 127,670
Net income $676,160 $453,552
(1) Mortgage banking activity is
summarized below:
Gains on sale of mortgage loans,
mortgage backed securities, and home
equity loans (2) $78,730 $25,805
Net gains/(loss) recorded under SFAS 133 645 (2,020)
Mortgage servicing fees, net of mortgage
servicing rights amortization 3,939 516
Mortgage servicing right
(impairments)/recoveries 5,944 (1,792)
Total mortgage banking revenues $89,258 $22,509
(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
December 31, 2005
Average Yield/
(dollars in thousands) Balance Interest (1) Rate
Earning assets:
Investment securities $12,700,310 $165,785 5.22%
Loans:
Commercial 16,515,988 274,797 6.61%
Consumer:
Residential mortgages 11,859,646 164,378 5.54%
Home equity loans and lines of
credit 10,176,307 142,248 5.56%
Total consumer loans secured by real
estate 22,035,953 306,626 5.55%
Auto Loans 4,454,501 60,423 5.38%
Other 490,069 9,395 7.61%
Total Consumer 26,980,523 376,444 5.56%
Total loans 43,496,511 651,241 5.96%
Allowance for loan losses (434,593)
Total earning assets 55,762,228 $817,026 5.84%
Other assets 7,707,153
Total assets $63,469,381
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 1,080,518
Total liabilities 57,756,678
Stockholders' equity 5,712,703
Total liabilities and
stockholders' equity $63,469,381
Net interest income $409,233
Interest rate spread 2.68%
Contribution from interest free funds 0.25
Net interest margin 2.93%
(1) Tax equivalent basis
Quarter Ended
September 30, 2005
Average Yield/
(dollars in thousands) Balance Interest (1) Rate
Earning assets:
Investment securities $11,974,043 $153,802 5.14%
Loans:
Commercial 16,440,068 259,500 6.27%
Consumer:
Residential mortgages 10,663,656 142,308 5.34%
Home equity loans and lines of
credit 10,321,853 139,150 5.36%
Total consumer loans secured by
real estate 20,985,509 281,458 5.35%
Auto Loans 4,400,376 58,359 5.26%
Other 515,522 10,147 7.81%
Total Consumer 25,901,407 349,964 5.38%
Total loans 42,341,475 609,464 5.73%
Allowance for loan losses (441,930)
Total earning assets 53,873,588 $763,266 5.64%
Other assets 7,709,265
Total assets $61,582,853
Funding liabilities:
Deposits and other customer related
accounts:
NOW accounts $8,991,339 $42,601 1.88%
Customer repurchase agreements 903,053 6,630 2.91%
Savings accounts 3,753,311 6,452 0.68%
Money market accounts 8,294,441 35,390 1.69%
Core and other customer related
accounts 21,942,144 91,073 1.65%
Time deposits 9,810,041 78,011 3.15%
Total 31,752,185 169,084 2.11%
Borrowings:
Federal Home Loan Bank advances 12,581,448 130,270 4.11%
Fed funds and repurchase agreements 1,096,237 10,214 3.72%
Other borrowings 4,250,969 43,333 4.06%
Total borrowings 17,928,654 183,817 4.08%
Total funding liabilities 49,680,839 352,901 2.82%
Non-interest bearing DDA 5,393,736
Other liabilities 813,383
Total liabilities 55,887,958
Stockholders' equity 5,694,895
Total liabilities and
stockholders' equity $61,582,853
Net interest income $410,365
Interest rate spread 2.82%
Contribution from interest free funds 0.22
Net interest margin 3.04%
(1) Tax equivalent basis
Quarter Ended
December 31, 2004
Average Yield/
(dollars in thousands) Balance Interest (1) Rate
Earning assets:
Investment securities $13,040,062 $160,592 4.93%
Loans:
Commercial 13,599,851 179,698 5.26%
Consumer:
Residential mortgages 8,199,190 107,327 5.24%
Home equity loans and lines of
credit 9,245,711 125,012 5.39%
Total consumer loans secured by
real estate 17,444,901 232,339 5.32%
Auto Loans 4,266,466 54,009 5.04%
Other 508,705 9,285 7.26%
Total Consumer 22,220,072 295,633 5.31%
Total loans 35,819,923 475,331 5.29%
Allowance for loan losses (407,518)
Total earning assets 48,452,467 $635,923 5.24%
Other assets 6,297,437
Total assets $54,749,904
Funding liabilities:
Deposits and other customer related
accounts:
NOW accounts $7,544,694 $20,536 1.08%
Customer repurchase agreements 851,928 3,044 1.42%
Savings accounts 3,821,004 5,802 0.60%
Money market accounts 8,082,448 24,599 1.21%
Core and other customer related
accounts 20,300,074 53,981 1.06%
Time deposits 7,221,061 37,750 2.08%
Total 27,521,135 91,731 1.33%
Borrowings:
Federal Home Loan Bank advances 10,416,303 101,436 3.88%
Fed funds and repurchase agreements 2,383,245 15,208 2.55%
Other borrowings 3,600,008 28,801 3.19%
Total borrowings 16,399,556 145,445 3.53%
Total funding liabilities 43,920,691 237,176 2.15%
Non-interest bearing DDA 5,103,981
Other liabilities 827,078
Total liabilities 49,851,750
Stockholders' equity 4,898,154
Total liabilities and
stockholders' equity $54,749,904
Net interest income $398,747
Interest rate spread 3.09%
Contribution from interest free funds 0.20
Net interest margin 3.29%
(1) Tax equivalent basis
Sovereign Bancorp, Inc. and Subsidiaries
AVERAGE BALANCE, INTEREST AND YIELD/RATE ANALYSIS
(unaudited)
Year to Date
December 31, 2005
Average Yield/
(dollars in thousands) Balance Interest (1) Rate
Earning assets:
Investment securities $12,246,225 $626,822 5.12%
Loans:
Commercial 15,904,425 971,626 6.11%
Consumer:
Residential mortgages 10,588,935 567,690 5.36%
Home equity loans and lines of
credit 10,157,824 544,641 5.36%
Total consumer loans secured by
real estate 20,746,759 1,112,331 5.36%
Auto loans 4,356,121 225,359 5.17%
Other 535,616 40,468 7.56%
Total Consumer 25,638,496 1,378,158 5.38%
Total loans 41,542,921 2,349,784 5.66%
Allowance for loan losses (438,548)
Total earning assets 53,350,598 $2,976,606 5.58%
Other assets 7,363,707
Total assets $60,714,305
Funding liabilities:
Deposits and other customer related
accounts:
NOW accounts $8,732,791 $153,277 1.76%
Customer repurchase agreements 887,614 24,230 2.73%
Savings accounts 3,779,333 25,347 0.67%
Money market accounts 8,244,406 131,354 1.59%
Core and other customer related
accounts 21,644,144 334,208 1.54%
Time deposits 9,581,336 290,382 3.03%
Total 31,225,480 624,590 2.00%
Borrowings:
Federal Home Loan Bank advances 12,123,306 495,528 4.09%
Fed funds and repurchase
agreements 1,336,040 44,462 3.33%
Other borrowings 4,247,821 165,918 3.91%
Total borrowings 17,707,167 705,908 3.99%
Total funding liabilities 48,932,647 1,330,498 2.72%
Demand deposit accounts 5,294,135
Other liabilities 813,627
Total liabilities 55,040,409
Stockholders' equity 5,673,896
Total liabilities and
stockholders' equity $60,714,305
Net interest income $1,646,108
Interest rate spread 2.86%
Contribution from interest free funds 0.23
Net interest margin 3.09%
(1) Tax equivalent basis
Year to Date
December 31, 2004
Average Yield/
(dollars in thousands) Balance Interest (1) Rate
Earning assets:
Investment securities $14,242,255 $699,481 4.91%
Loans:
Commercial 12,530,293 613,541 4.90%
Consumer:
Residential mortgages 6,215,557 328,625 5.29%
Home equity loans and lines of
credit 7,828,671 392,450 5.01%
Total consumer loans secured by
real estate 14,044,228 721,075 5.13%
Auto loans 3,891,325 203,472 5.23%
Other 465,908 34,107 7.32%
Total Consumer 18,401,461 958,654 5.21%
Total loans 30,931,754 1,572,195 5.08%
Allowance for loan losses (375,581)
Total earning assets 44,798,428 $2,271,676 5.07%
Other assets 5,744,518
Total assets $50,542,946
Funding liabilities:
Deposits and other customer related
accounts:
NOW accounts $6,744,813 $56,503 0.84%
Customer repurchase agreements 834,636 7,462 0.89%
Savings accounts 3,498,539 19,417 0.56%
Money market accounts 7,633,932 81,992 1.07%
Core and other customer related
accounts 18,711,920 165,374 0.88%
Time deposits 6,599,223 137,671 2.09%
Total 25,311,143 303,045 1.20%
Borrowings:
Federal Home Loan Bank advances 9,132,898 346,461 3.79%
Fed funds and repurchase
agreements 2,720,426 46,361 1.70%
Other borrowings 3,738,577 123,460 3.30%
Total borrowings 15,591,901 516,282 3.31%
Total funding liabilities 40,903,044 819,327 2.00%
Demand deposit accounts 4,698,584
Other liabilities 718,195
Total liabilities 46,319,823
Stockholders' equity 4,223,123
Total liabilities and
stockholders' equity $50,542,946
Net interest income $1,452,349
Interest rate spread 3.07%
Contribution from interest free funds 0.17
Net interest margin 3.24%
(1) Tax equivalent basis
Sovereign Bancorp, Inc. and Subsidiaries
SUPPLEMENTAL INFORMATION
(unaudited)
NON-PERFORMING ASSETS
Dec. 31 Sept. 30 June 30 Mar. 31 Dec. 31
(dollars in thousands) 2005 2005 2005 2005 2004
Non-accrual loans:
Consumer:
Residential mortgages $30,393 $33,427 $31,717 $37,669 $33,656
Home equity loans and
lines of credit 55,543 37,051 35,007 33,383 26,801
Auto loans 476 462 365 539 632
Other consumer loans 1,913 2,873 3,013 3,715 588
Total consumer loans 88,325 73,813 70,102 75,306 61,677
Commercial 100,372 95,303 91,358 95,528 80,799
Total non-accrual loans 188,697 169,116 161,460 170,834 142,476
Restructured loans 777 822 939 1,026 1,097
Total non-performing loans 189,474 169,938 162,399 171,860 143,573
Real estate owned, net 11,411 6,107 8,494 11,286 12,276
Other repossessed assets 4,678 5,083 2,302 3,709 4,247
Total non-performing assets 205,563 181,128 173,195 186,855 160,096
Non-performing loans as a
percentage of total loans 0.43% 0.40% 0.39% 0.43% 0.39%
Non-performing assets as a
percentage of total assets 0.32% 0.29% 0.29% 0.32% 0.29%
Non-performing assets as a
percentage of total loans,
real estate owned and
repossessed assets 0.47% 0.42% 0.42% 0.46% 0.44%
Allowance for credit losses
as a percentage of non-
performing loans (1) 231% 257% 272% 255% 285%
NET LOAN CHARGE-OFFS
Dec. 31 Sept. 30 June 30 Mar. 31 Dec. 31
Quarters ended (in thousands) 2005 2005 2005 2005 2004
Commercial real estate $564 $219 $294 $(492) $614
Commercial and industrial
and other 4,877 6,209 8,964 7,200 10,357
Total Commercial 5,441 6,428 9,258 6,708 10,971
Residential mortgages 554 109 72 43 444
Home equity loans and lines
of credit 6,998 4,319 3,115 1,831 1,268
Total consumer loans secured
by real estate 7,552 4,428 3,187 1,874 1,712
Auto loans 9,137 7,539 5,851 9,557 10,769
Other consumer loans 1,079 1,059 1,126 1,449 1,444
Total Consumer 17,768 13,026 10,164 12,880 13,925
Total $23,209 $19,454 $19,422 $19,588 $24,896
COMPONENTS OF THE PROVISION OF CREDIT LOSSES AND ALLOWANCE FOR CREDIT
LOSSES
Quarters ended (in Dec. 31 Sept. 30 June 30 Mar. 31 Dec. 31
thousands) 2005 2005 2005 2005 2004
Provision for loan
losses 26,263 19,298 20,442 23,498 23,705
Provision/(recoveries)
for unfunded
commitments (263) 702 1,558 (1,498) 3,295
Total provision for
credit losses $26,000 $20,000 $22,000 $22,000 $27,000
Allowance for loan
losses 419,599 418,353 424,711 421,446 391,003
Reserve for unfunded
commitments 18,212 18,475 17,773 16,215 17,713
Total allowance for
credit losses $437,811 $436,828 $442,484 $437,661 $408,716
(1) Effective in the fourth quarter of 2005, Sovereign reclassified its
reserve for unfunded commitments from the allowance for loan losses to
other liabilities. Prior periods have been reclassified to conform to
the current period presentation. We have defined the allowance for
credit losses as the sum of the allowance for loan losses and the
reserve for unfunded commitments.
Sovereign Bancorp, Inc. and Subsidiaries
SUPPLEMENTAL INFORMATION
(unaudited)
DEPOSIT AND OTHER CUSTOMER RELATED ACCOUNT COMPOSITION - End of period
Dec. 31 Sept. 30 June 30
Quarters ended (in thousands) 2005 2005 2005
Demand deposit accounts 5,331,659 $5,414,212 $5,378,465
NOW accounts 8,844,875 9,170,052 8,269,183
Customer repurchase agreements 1,012,574 959,024 875,203
Savings accounts 3,460,292 3,684,423 3,807,967
Money market accounts 7,989,846 8,167,546 8,352,055
Certificates of deposits 11,338,460 9,937,334 9,418,691
Total $37,977,706 $37,332,591 $36,101,564
Mar. 31 Dec. 31
Quarters ended (in thousands) 2005 2004
Demand deposit accounts $5,377,378 $5,087,531
NOW accounts 8,422,725 7,838,584
Customer repurchase agreements 828,388 837,643
Savings accounts 3,922,642 3,807,099
Money market accounts 8,673,744 7,870,288
Certificates of deposits 9,460,879 7,114,373
Total $36,685,756 $32,555,518
LOAN COMPOSITION - End of period
Dec. 31 Sept. 30 June 30
Quarters ended (in thousands) 2005 2005 2005
Commercial real estate $7,209,180 $7,151,189 $6,946,477
Commercial industrial loans 9,426,466 9,071,731 9,205,540
Total commercial loans 16,635,646 16,222,920 16,152,017
Residential mortgages 12,462,802 11,198,366 9,997,066
Home equity loans and lines of
credit 9,793,124 10,301,161 10,300,629
Total consumer loans secured by
real estate 22,255,926 21,499,527 20,297,695
Auto loans 4,434,021 4,463,931 4,285,537
Other consumer loans 478,254 505,261 532,230
Total consumer loans 27,168,201 26,468,719 25,115,462
Total loans $43,803,847 $42,691,639 $41,267,479
Mar. 31 Dec. 31
Quarters ended (in thousands) 2005 2004
Commercial real estate $6,837,814 $5,824,133
Commercial industrial loans 8,525,778 8,040,107
Total commercial loans 15,363,592 13,864,240
Residential mortgages 9,782,953 8,497,496
Home equity loans and lines of
credit 10,280,735 9,577,656
Total consumer loans secured by real
estate 20,063,688 18,075,152
Auto loans 4,296,296 4,205,547
Other consumer loans 596,428 486,140
Total consumer loans 24,956,412 22,766,839
Total loans $40,320,004 $36,631,079
DEPOSIT AND OTHER CUSTOMER RELATED ACCOUNT COMPOSITION - Average
Dec. 31 Sept. 30 June 30
Quarters ended (in thousands) 2005 2005 2005
Demand deposit accounts $5,340,623 $5,393,736 $5,276,428
NOW accounts 9,454,176 8,991,339 8,425,311
Customer repurchase agreements 1,007,347 903,053 795,418
Savings accounts 3,573,771 3,753,311 3,864,148
Money market accounts 8,112,584 8,294,441 8,417,965
Certificates of deposits 10,376,654 9,810,041 9,458,184
Total $37,865,155 $37,145,921 $36,237,454
Mar. 31 Dec. 31
Quarters ended (in thousands) 2005 2004
Demand deposit accounts $5,162,704 $5,103,981
NOW accounts 8,041,978 7,544,694
Customer repurchase agreements 842,657 851,928
Savings accounts 3,930,308 3,821,004
Money market accounts 8,152,525 8,082,448
Certificates of deposits 8,659,080 7,221,061
Total $34,789,252 $32,625,116
LOAN COMPOSITION - Average
Dec. 31 Sept. 30 June 30
Quarters ended (in thousands) 2005 2005 2005
Commercial real estate $7,203,433 $7,019,781 $6,909,795
Commercial industrial loans 8,273,795 8,499,513 8,008,968
Other 1,038,760 920,774 849,487
Total commercial loans 16,515,988 16,440,068 15,768,250
Residential mortgages 11,859,646 10,663,656 10,634,549
Home equity loans and lines of
credit 10,176,307 10,321,853 10,127,012
Total consumer loans secured by
real estate 22,035,953 20,985,509 20,761,561
Auto loans 4,454,501 4,400,376 4,262,377
Other consumer loans 490,069 515,522 559,544
Total consumer loans 26,980,523 25,901,407 25,583,482
Total loans $43,496,511 $42,341,475 $41,351,732
Mar. 31 Dec. 31
Quarters ended (in thousands) 2005 2004
Commercial real estate $6,494,572 $5,788,936
Commercial industrial loans 7,522,968 6,953,564
Other 852,977 857,351
Total commercial loans 14,870,517 13,599,851
Residential mortgages 9,167,485 8,199,190
Home equity loans and lines of credit 10,002,411 9,245,711
Total consumer loans secured by real
estate 19,169,896 17,444,901
Auto loans 4,305,100 4,266,466
Other consumer loans 578,520 508,705
Total consumer loans 24,053,516 22,220,072
Total loans $38,924,033 $35,819,923
Sovereign Bancorp, Inc. and Subsidiaries
RECONCILIATION OF OPERATING/CASH EARNINGS TO REPORTED EARNINGS
(unaudited)
Operating/cash earnings for 2005 EPS purposes represents net income
adjusted for the after-tax effects of merger-related and integration charges,
proxy and related professional fees, certain restructuring charges and the
amortization of intangible assets. Operating/cash earnings for 2004 represent
net income adjusted for the after-tax effects of merger-related and
integration charges and the loss on early extinguishment of debt, the fourth
quarter adoption of EITF 04-8, other-than-temporary non-cash impairment
charges on Fannie Mae and Freddie Mac preferred equity securities and the
amortization of intangible assets. The table below reconciles our GAAP
earnings to operating/cash earnings for EPS purposes.
(dollars in thousands,
except per share data -
all amounts are after
tax) Quarter Ended
Total dollars
Dec. 31 Sep. 30 Jun. 30 Mar. 31 Dec. 31
2005 2005 2005 2005 2004
Net income as reported $165,495 $181,043 $183,471 $146,151 $137,429
Contingently convertible
trust preferred
interest expense, net
of tax 6,354 6,344 6,335 6,394 6,318
Net income/(loss) for
EPS purposes $171,849 $187,387 $189,806 $152,545 $143,747
Weighted average diluted
shares for GAAP EPS 390,077 393,110 400,371 401,339 377,625
Reconciliation to
operating/cash earnings
for EPS purposes
Weighted average diluted
shares for GAAP EPS 390,077 393,110 400,371 401,339 377,625
Exclude dilutive effect
of EITF 04-8 on
contingently
convertible debt - - - - (26,082)
Adjusted weighted
average diluted shares
for operating/cash EPS 390,077 393,110 400,371 401,339 351,543
Net income and EPS as
reported based on
adjusted share count $171,849 $187,387 $189,806 $152,545 $137,429
Business acquisitions:
Merger related and
integration costs - (1,300) (5,490) 15,074 (3,360)
Provision for loan loss - - - - -
Loss on debt
extinguishment - - - - -
Impairment charges on
FNMA and FHLMC
Preferred Stock - - - - 20,891
Restructuring charges - (794) - 3,382 -
Proxy and professional
fees 3,788 - - - -
Amortization of
intangibles 11,548 11,885 12,229 12,322 12,562
Operating/cash earnings
for EPS purposes $187,185 $197,178 $196,545 $183,323 $167,522
(dollars in thousands,
except per share data -
all amounts are after
tax) Quarter Ended
Per share
Dec. 31 Sep. 30 Jun. 30 Mar. 31 Dec. 31
2005 2005 2005 2005 2004
Net income as reported
Contingently convertible trust
preferred interest expense,
net of tax
Net income/(loss)
for EPS purposes $0.44 $0.48 $0.47 $0.38 $0.38
Weighted average diluted shares
for GAAP EPS
Reconciliation to operating/cash
earnings for EPS purposes
Weighted average diluted shares
for GAAP EPS
Exclude dilutive effect of EITF
04-8 on contingently convertible
debt
Adjusted weighted average diluted
shares for operating/cash EPS
Net income and EPS as reported
based on adjusted share count $0.44 $0.48 $0.47 $0.38 $0.39
Business acquisitions:
Merger related and
integration costs - (0.00) (0.01) 0.04 (0.01)
Provision for loan loss - - - - -
Loss on debt extinguishment - - - - -
Impairment charges on FNMA
and FHLMC Preferred Stock - - - - 0.06
Restructuring charges - (0.00) - 0.01 -
Proxy and professional fees 0.01 - - - -
Amortization of intangibles 0.03 0.03 0.03 0.03 0.04
Operating/cash earnings
for EPS purposes $0.48 $0.50 $0.49 $0.46 $0.48
(dollars in thousands, except per
share data - all amounts are after
tax) Year to Date
Total dollars Per Share
Dec. 31 Dec. 31 Dec. 31 Dec. 31
2005 2004 2005 2004
Net income as reported $676,160 $453,552
Contingently convertible trust
preferred interest expense, net of
tax 25,427 21,212
Net income/(loss) for EPS purposes $701,587 $474,764 $1.77 $1.36
Weighted average diluted shares for
GAAP EPS 396,187 350,296
Reconciliation to operating/cash
earnings for EPS purposes
Weighted average diluted shares for
GAAP EPS 396,187 350,296
Exclude dilutive effect of EITF 04-8
on contingently convertible debt - (21,736)
Adjusted weighted average diluted
shares for operating/cash EPS 396,187 328,560
Net income and EPS as reported based
on adjusted share count $701,587 $453,552 $1.77 $1.38
Business acquisitions:
Merger related and
integration costs 8,284 30,134 0.02 0.09
Provision for loan loss - 3,900 - 0.01
Loss on debt extinguishment - 42,605 - 0.13
Impairment charges on FNMA and
FHLMC Preferred Stock - 20,891 - 0.06
Restructuring charges 2,589 - 0.01 -
Proxy and professional fees 3,788 - 0.01 -
Amortization of intangibles 47,984 51,186 0.12 0.16
Operating/cash earnings
for EPS purposes $764,232 $602,268 $1.93 $1.83
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
Dec. 31 Sept. 30 June 30 Mar. 31 Dec. 31
2005 2005 2005 2005 2004
Average
Equity $5,712,703 $5,694,895 $5,697,656 $5,588,703 $4,898,154
Average
Goodwill (2,714,150) (2,714,148) (2,725,526) (2,507,849) (2,118,673)
Average
CDI (225,049) (243,149) (261,854) (270,193) (278,319)
Average
Tangible
Equity 2,773,504 2,737,598 2,710,276 2,810,661 2,501,162
Operating
Return on
Average
Equity 13.00% 13.74% 13.84% 13.30% 13.61%
Effect of
Goodwill 12.72% 13.62% 13.91% 11.87% 11.53%
Effect of
CDI 1.05% 1.22% 1.34% 1.28% 1.51%
Tangible
Return on
Average
Equity 26.78% 28.58% 29.09% 26.45% 26.65%
Year-to-Date
Dec. 31 Dec. 31
2005 2004
Average Equity 5,673,896 4,223,123
Average Goodwill (2,666,113) (1,625,533)
Average CDI (249,934) (276,193)
Average Tangible Equity 2,757,849 2,321,397
Operating Return on Average Equity 13.47% 14.26%
Effect of Goodwill 13.02% 9.98%
Effect of CDI 1.22% 1.70%
Tangible Return on Average Equity 27.71% 25.94%
Sovereign Bancorp, Inc. and Subsidiaries
SUPPLEMENTAL INFORMATION
(unaudited)
Purchase of Waypoint Financial Corp Inc. ("Waypoint")
On January 21, 2005 Sovereign completed the purchase of Waypoint for
approximately $953 million. A cash payment of $269.9 million was made in
connection with the transaction with the remaining consideration consisting of
the issuance of 29.8 million shares of common stock and stock options (to
convert outstanding Waypoint stock options into Sovereign stock options). The
preliminary purchase price was allocated to acquired assets and liabilities of
Waypoint based on fair value as of January 21, 2005. Sovereign is in the
process of finalizing these values and as such the allocation of the purchase
price is subject to revision.
Assets and Liabilities Acquired from Waypoint:
(dollars in millions)
Assets Liabilities
Investments $379.2 Deposits:
Loans: Core $1,503.7
Commercial 1,299.0 Time 1,384.6
Consumer 991.3 Total deposits 2,888.3
Residential mortgages 313.8 Borrowings and other debt
obligations 668.2
Total loans 2,604.1 Other liabilities 67.6
Less allowance for loan
losses (26.5)
Total loans, net 2,577.6 Total liabilities $3,624.1
Federal funds and cash 324.2
Premises and equipment,
net 33.0
Bank owned life insurance 97.0
Other assets 262.8
Core deposit intangible 31.1
Goodwill 601.8
Total assets $4,306.7
SOURCE Sovereign Bancorp, Inc.
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Related links:
http://www.sovereignbank.com
CONTACT:
FINANCIAL CONTACTS: Mark McCollom,
+1-610-208-6426, mmccollo@sovereignbank.com, or Stacey Weikel,
+1-610-208-6112, sweikel@sovereignbank.com, or MEDIA CONTACT: Ed
Shultz, +1-610-378-6159, eshultz1@sovereignbank.com, all of
Sovereign Bancorp
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