<PAGE>
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- -----
EXCHANGE ACT OF 1934
For the quarter ended March 31, 1995
OR
_____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 34-16533
SOVEREIGN BANCORP, INC.
(Exact name of Registrant as specified in its charter)
Pennsylvania 23-2453088
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1130 Berkshire Boulevard, Wyomissing, Pennsylvania 19610
(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (610) 320-8400
N/A
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X . No .
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at May 10, 1995
Common Stock (no par value) 47,486,991 shares
<PAGE>
SOVEREIGN BANCORP, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page
PART I. FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets at March 31, 1995
and December 31, 1994 2 - 3
Consolidated Statements of Operations for the three-
month periods ended March 31, 1995 and 1994 4 - 5
Consolidated Statements of Cash Flows for the three-
month periods ended March 31, 1995 and 1994 5 - 6
Notes to Consolidated Financial Statements 6 - 14
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition 14 - 24
</TABLE>
PART II. OTHER INFORMATION
<TABLE>
<S> <C>
Item 6. Reports on Form 8-K 25
SIGNATURES 25
</TABLE>
<PAGE>
SOVEREIGN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
(Unaudited) (Note)
(in thousands, except
per share data)
<S> <C> <C>
ASSETS
Cash and amounts due from
depository institutions $ 83,348 $ 110,270
Interest-earning deposits 32,026 29,131
Loans held for resale (approximate fair
value of $3,920 and $7,666 at
March 31, 1995 and December 31, 1994,
respectively) 3,832 7,666
Investment and mortgage-backed securities
available-for-sale 61,656 87,128
Investment and mortgage-backed securities
held-to-maturity (approximate fair value
of $1,901,915 and $1,701,143 at March 31,
1995 and December 31, 1994, respectively) 1,962,726 1,816,840
Loans 4,421,422 4,350,898
Allowance for possible loan losses (35,669) (36,289)
Premises and equipment 54,040 48,096
Real estate owned 9,804 9,191
Accrued interest receivable 32,866 30,369
Goodwill and other intangible assets 129,194 64,553
Other assets 48,335 46,229
---------- ----------
TOTAL ASSETS $6,803,580 $6,564,082
========== ==========
LIABILITIES
Deposits $5,007,649 $4,027,119
Borrowings:
Short-term 1,163,663 1,722,726
Long-term 250,797 439,861
Advance payments by borrowers
for taxes and insurance 24,138 25,893
Other liabilities 45,100 44,583
---------- ----------
TOTAL LIABILITIES 6,491,347 6,260,182
---------- ----------
STOCKHOLDERS' EQUITY
Preferred stock; 7,500,000 shares
authorized; none outstanding - -
Common stock; no par value;
100,000,000 shares authorized;
45,742,791 shares issued at March 31,
1995 and 45,566,971 shares issued at
December 31, 1994 226,191 224,958
Unallocated common stock held by the Employee
Stock Ownership Plan at cost;
465,000 shares at March 31, 1995 (4,195) -
Unrecognized loss on investment
and mortgage-backed securities
available-for-sale, net of tax (138) (887)
Retained earnings 90,375 79,829
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 312,233 303,900
---------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $6,803,580 $6,564,082
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
Note: The balance sheet at December 31, 1994 is taken from the audited financial
statements at that date but does not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements.
<PAGE>
SOVEREIGN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three-Month Period
Ended March 31,
1995 1994
---- ----
(in thousands, except
per share data)
<S> <C> <C>
Interest income:
Interest and dividends on investment
and mortgage-backed securities
and other interest-earning assets $ 34,202 $ 24,189
Interest and fees on loans 77,207 52,504
-------- --------
Total interest income 111,409 76,693
-------- --------
Interest expense:
Interest on deposits 49,378 25,497
Interest on borrowings 19,295 14,835
-------- --------
Total interest expense 68,673 40,332
-------- --------
Net interest income 42,736 36,361
Provision for possible loan losses 250 1,537
-------- --------
Net interest income after provision for
possible loan losses 42,486 34,824
-------- --------
Other income:
Other loan fees and service charges 1,245 1,046
Deposit fees 2,261 1,108
Gain on sale of loans and investment
and mortgage-backed securities
available-for-sale 111 202
Gain on sale of loans held for resale 640 371
Miscellaneous income 610 450
-------- --------
Total other income 4,867 3,177
-------- --------
General and administrative expenses:
Salaries and employee benefits 10,617 8,324
Occupancy and equipment expenses 4,656 4,102
Outside services 1,444 2,026
Deposit insurance premiums 2,817 1,570
Advertising 569 675
Other administrative expenses 5,160 2,674
-------- --------
Total general and administrative expenses 25,263 19,371
-------- --------
Other operating expenses:
Amortization of goodwill and other intangibles 3,027 1,159
Real estate owned losses/(gains), net 502 (1)
-------- --------
Total other operating expenses 3,529 1,158
-------- --------
Income before income taxes 18,561 17,472
Income tax provision 6,431 6,546
-------- --------
Net Income $ 12,130 $ 10,926
======== ========
Earnings per share (1) $.25 $.23
======== ========
Dividends per share (1) $.0219 $.0353
======== ========
</TABLE>
(1) Per share amounts have been adjusted to reflect all stock dividends and
stock splits.
See accompanying notes to consolidated financial statements.
<PAGE>
SOVEREIGN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three-Month Period
Ended March 31,
1995 1994
(in thousands)
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 12,130 $ 10,926
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for possible loan losses and deferred taxes 1,108 1,703
Depreciation 1,224 787
Amortization 81 3,585
Loss on sale of loans, investment and mortgage-
backed securities and real estate owned 391 45
Net change in:
Loans held for resale 3,834 38,170
Other liabilities 517 (4,981)
Other assets (7,910) (2,474)
--------- ---------
Net cash provided by operating activities 11,375 47,761
--------- ---------
Cash Flows from Investing Activities:
Proceeds from sales of investment
and mortgage-backed securities:
Available-for-sale 33,424 338,526
Proceeds from repayments and maturities of investment
and mortgage-backed securities:
Available-for-sale - 1,590
Held-to-maturity 38,817 156,494
Purchases of investment and mortgage-backed securities:
Available-for-sale (6,635) (7,083)
Held-to-maturity (182,586) (421,893)
Proceeds from sales of loans 995 1,608
Purchase of loans (272) (60,042)
Net change in loans other than purchases and sales (72,221) (122,828)
Proceeds from sales of premises and equipment 494 1,896
Purchases of premises and equipment (7,831) (1,197)
Proceeds from sale of real estate owned 1,709 1,446
Other, net - (4,394)
--------- ---------
Net cash used by investing activities (194,106) (115,877)
--------- ---------
Cash Flows from Financing Activities:
Assumption of deposits 842,410 -
Net increase in deposits 71,305 4,595
Net decrease in short-term borrowings (747,191) (36,496)
Proceeds from long-term borrowings - 75,000
Prepayments of long-term borrowings (714) (2,304)
Net (decrease)/increase in advance payments by
borrowers for taxes and insurance (1,755) 5,345
Proceeds from issuance of common stock 688 1,238
Cash dividends paid (1,039) (1,656)
Purchase of the Employee Stock Ownership Plan (5,000) -
--------- ---------
Net cash provided by financing activities 158,704 45,722
--------- ---------
Net change in cash and cash equivalents (24,027) (22,394)
Cash and cash equivalents at beginning of period 139,401 130,267
--------- ---------
Cash and cash equivalents at end of period $ 115,374 $ 107,873
========= =========
Reconciliation of Cash and Cash Equivalents to Consolidated
Balance Sheets:
Cash and amounts due from depository institutions $ 83,348 $ 62,835
Interest-earning deposits and federal funds sold 32,026 45,038
--------- ---------
$ 115,374 $ 107,873
========= =========
</TABLE>
Supplemental Disclosures:
Income tax payments totaled $440,000 for the three-month period ended March
31, 1995 and $3.0 million for the same period in 1994. Interest payments
totaled $74.7 million for the three-month period ended March 31, 1995 and
$40.5 million for the same period in 1994. Noncash activity consisted of
mortgage loan securitization of $10.9 million for the three-month period
ended March 31, 1995 and $105.9 million for the same period in 1994;
reclassification of long-term borrowings to short-term borrowings of $176.4
million for the three-month period ended March 31, 1995 and $175.0 million
for the same period in 1994; reclassification of mortgage loans to real
estate owned of $3.1 million for the three-month period ended March 31,
1995 and $990,000 for the same period in 1994.
See accompanying notes to consolidated financial statements.
<PAGE>
SOVEREIGN BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) GENERAL
The accompanying financial statements of Sovereign Bancorp, Inc. and
Subsidiaries ("Sovereign") include the accounts of the parent company, Sovereign
Bancorp, Inc. and its wholly-owned subsidiaries: Sovereign Bank, F.S.B.
("Sovereign Bank") and Sovereign Investment Company. All material intercompany
balances and transactions have been eliminated in consolidation. These financial
statements have been prepared in accordance with the instructions for Form 10-Q
and therefore do not include certain information or footnotes necessary for the
presentation of financial condition, results of operations, and cash flows in
conformity with generally accepted accounting principles. However, in the
opinion of management, the consolidated financial statements reflect all
adjustments (which consist of normal recurring accruals) necessary for a fair
presentation of the results for the unaudited periods. The results of operations
for the three-month period ended March 31, 1995 are not necessarily indicative
of the results which may be expected for the entire year. The consolidated
financial statements should be read in conjunction with the annual report on
Form 10-K for the year ended December 31, 1994.
<PAGE>
(2) EARNINGS PER SHARE
Earnings per share have been computed based on the weighted average number
of common and common equivalent shares (dilutive stock options) outstanding
during the periods. Fully diluted shares for the three-month periods ended March
31, 1995 and 1994 were 49.0 million and 48.9 million, respectively. Earnings per
share have been adjusted to reflect all stock dividends and stock splits.
(3) INVESTMENT AND MORTGAGE-BACKED SECURITIES AVAILABLE-FOR-SALE
The following table presents the composition and fair value of
investmentand mortgage-backed securities available-for-sale at the dates
indicated: (dollars in thousands)
<TABLE>
<CAPTION>
March 31, 1995
Amortized Unrealized Unrealized Fair
Cost Appreciation Depreciation Value
<S> <C> <C> <C> <C>
Equity Securities $ 61,882 $ 585 $ 811 $ 61,656
======== ===== ====== ========
</TABLE>
<TABLE>
<CAPTION>
December 31, 1994
Amortized Unrealized Unrealized Fair
Cost Appreciation Depreciation Value
<S> <C> <C> <C> <C>
Equity Securities $ 88,583 $ 366 $1,821 $ 87,128
======== ===== ====== ========
</TABLE>
SOVEREIGN BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Continued)
(4) INVESTMENT AND MORTGAGE-BACKED SECURITIES HELD-TO-MATURITY
The following table presents the composition and fair value of investment
and mortgage-backed securities held-to-maturity at the dates indicated:
(dollars in thousands)
<PAGE>
<TABLE>
<CAPTION>
March 31, 1995
Amortized Unrealized Unrealized Fair
Cost Appreciation Depreciation Value
<S> <C> <C> <C> <C>
Investments:
U.S. Treasury and
government agency $ 159,176 $ 6 $ 8,187 $ 150,995
Corporate securities 4,018 - 26 3,992
Other securities 419 - 3 416
Mortgage-backed Securities:
FHLMC 330,709 555 14,756 316,508
FNMA 310,616 179 16,921 293,874
GNMA 236,112 7,508 163 243,457
RTC 32,045 - 5,035 27,010
Private issues 265,349 6 13,762 251,593
Collateralized mortgage
obligations 624,282 1,785 11,997 614,070
--------- ------- ------- ----------
Total investment and
mortgage-backed securities
held-to-maturity $1,962,726 $10,039 $70,850 $1,901,915
========= ======= ======= ==========
</TABLE>
<TABLE>
<CAPTION>
December 31, 1994
Amortized Unrealized Unrealized Fair
Cost Appreciation Depreciation Value
<S> <C> <C> <C> <C>
Investments:
U.S. Treasury and
government agency $ 159,353 $ 17 $ 12,675 $ 146,695
Corporate securities 4,025 - 43 3,982
Other securities 420 - 4 416
Mortgage-backed Securities:
FHLMC 336,556 396 26,506 310,446
FNMA 316,968 17 26,390 290,595
GNMA 237,308 147 2,877 234,578
RTC 33,976 - 5,227 28,749
Private issues 272,833 10 20,502 252,341
Collateralized mortgage
obligations 455,401 6,801 28,861 433,341
---------- ------- -------- ----------
Total investment and
mortgage-backed securities
held-to-maturity $1,816,840 $ 7,388 $123,085 $1,701,143
========== ======= ======== ==========
</TABLE>
<PAGE>
SOVEREIGN BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Continued)
(5) COMPOSITION OF LOAN PORTFOLIO
The following table presents the composition of the loan portfolio by
type of loan and by fixed and adjustable rates at the dates indicated:
(dollars in thousands)
<TABLE>
<CAPTION>
March 31, 1995 December 31, 1994
Amount Percent Amount Percent
<S> <C> <C> <C> <C>
Residential real estate loans $3,782,994 85.56% $3,710,150 85.27%
Real estate construction loans:
Residential (net of loans in process
of $28,083 and $33,095, respectively) 42,772 .97 49,094 1.13
Residential development (net of loans
in process of $957 and $1,382,
respectively) 2,384 .06 3,226 .08
Multi-family loans 88,557 2.00 95,216 2.19
Home equity loans 425,908 9.63 413,037 9.49
---------- ------ --------- ------
Total Residential Loans 4,342,615 98.22 4,270,723 98.16
Commercial real estate loans 41,005 .93 39,717 .91
Commercial loans 5,439 .12 5,730 .13
Consumer loans 32,363 .73 34,728 .80
---------- ------ ---------- ------
Total Loans $4,421,422 100.00% $4,350,898 100.00%
========== ====== ========== ======
Total Loans with:
Fixed rates $1,109,522 25.09% $1,097,469 25.22%
Variable rates 3,311,900 74.91 3,253,429 74.78
---------- ------ ---------- ------
Total Loans $4,421,422 100.00% $4,350,898 100.00%
========== ====== ========== ======
</TABLE>
<PAGE>
SOVEREIGN BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Continued)
(6) DEPOSIT PORTFOLIO COMPOSITION
The following table presents the composition of deposits at the dates
indicated: (dollars in thousands)
<TABLE>
<CAPTION>
March 31, 1995 December 31, 1994
Weighted Weighted
Average Average
Account Type Amount Percent Rate Amount Percent Rate
<S> <C> <C> <C> <C> <C> <C>
Retail certificates $2,976,764 59.44% 5.15% $2,207,531 54.82% 4.75%
Jumbo certificates 74,088 1.48 5.25 78,794 1.96 4.86
Savings accounts 960,920 19.19 2.32 925,667 22.98 2.34
Demand deposit accounts 134,697 2.69 - 118,346 2.94 -
NOW accounts 351,941 7.03 1.26 308,202 7.65 1.82
Money market accounts 509,239 10.17 3.64 388,579 9.65 2.44
---------- ------ ---- ---------- ------ ----
Total Deposits $5,007,649 100.00% 4.04% $4,027,119 100.00% 3.61%
========== ====== ==== ========== ====== ====
</TABLE>
(7) BORROWINGS
The following table presents information regarding borrowings at the
dates indicated: (dollars in thousands)
<TABLE>
<CAPTION>
March 31, 1995 December 31, 1994
Weighted Weighted
Average Average
Balance Rate Balance Rate
<S> <C> <C> <C> <C>
Securities sold under
repurchase agreements $ 438,909 6.18% $ 608,810 5.72%
FHLB advances 856,485 5.32 1,434,081 5.25
Other borrowings 119,066 7.75 119,696 7.71
---------- ----- ---------- -----
Total Borrowings $1,414,460 5.79% $2,162,587 5.52%
========== ===== ========== =====
</TABLE>
<PAGE>
SOVEREIGN BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Continued)
(8) INTEREST RATE EXCHANGE AGREEMENTS
Amortizing and non-amortizing interest rate swaps are generally used to
convert fixed rate assets and liabilities to variable rate assets and
liabilities and vice versa. Interest rate caps are generally used to limit the
exposure from the repricing and maturity of liabilities. Interest rate floors
are generally used to limit the exposure from repricing and maturity of assets.
Interest rate caps and floors are also used to limit the exposure created by
other interest rate swaps. In certain cases, interest rate caps or floors are
simultaneously bought and sold to create a range of protection against changing
interest rates while limiting the cost of that protection. The following table
presents information regarding interest rate exchange agreements at the dates
indicated (in thousands):
<TABLE>
<CAPTION>
March 31, 1995
Weighted
Average
Notional Book Estimated Maturity
Amount Value Fair Value In Years
<S> <C> <C> <C> <C>
Amortizing interest rate
swaps-pay variable
receive fixed (1) $1,084,859 $ - $ (49,588) 3.7
Non-amortizing interest
rate swaps-pay variable
receive fixed (2) 250,000 - (5,186) 1.2
Interest rate caps (3) 1,446,000 13,845 1,260 1.8
--------- ------- ---------
$2,780,859 $13,845 $ (53,514)
========== ======= =========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
December 31, 1994
Weighted
Average
Notional Book Estimated Maturity
Amount Value Fair Value In Years
<S> <C> <C> <C> <C>
Amortizing interest rate
swaps-pay variable
receive fixed (1) $1,085,645 $ - $ (84,349) 3.9
Non-amortizing interest
rate swaps-pay variable
receive fixed (2) 250,000 - (7,931) 1.5
Interest rate caps (3) 450,000 2,310 14,595 1.6
---------- ------- ---------
$1,785,645 $ 2,310 $ (77,685)
========== ======= =========
</TABLE>
(1) The weighted average pay rate was 6.49% and 6.28% and the weighted average
receive rate was 5.91% at March 31, 1995 and December 31, 1994,
respectively.
(2) The weighted average pay rate was 6.53% and 6.59% and the
weighted average receive rate was 5.73% at March 31, 1995 and December 31,
1994, respectively.
(3) The weighted average contract rate was 5.50% at March 31, 1995 and
December 31, 1994.
SOVEREIGN BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Continued)
The following table summarizes by notional amounts the activity of
Sovereign's interest rate exchange agreements (in thousands):
<TABLE>
<CAPTION>
Amortizing Non-Amortizing Interest
Interest Interest Rate
Rate Swaps Rate Swaps Caps
<S> <C> <C> <C>
Balance, December 31, 1994 $1,085,645 $250,000 $ 450,000
---------- -------- ----------
Additions - - 996,000
Maturities/Amortization 786 - -
Terminations - - -
---------- -------- ---------
Balance, March 31, 1995 $1,084,859 $250,000 $1,446,000
========== ======== ==========
</TABLE>
<PAGE>
(9) BUSINESS COMBINATIONS
On April 21, 1995, Sovereign Bank completed its sale of
seven southern New Jersey offices with related deposits totalling
$106.7 million to Collective Bancorp ("Collective") headquartered
in Egg Harbor, New Jersey. In addition, Sovereign acquired $7.0
million of deposits from Collective's Wilmington, Delaware branch
office. As a result of this transaction, Sovereign reduced its
core deposit intangible by approximately $6.0 million.
On March 23, 1995, Sovereign executed an Agreement and Plan
of Merger to purchase Colonial State Bank ("Colonial"), a New
Jersey chartered commercial bank, headquartered in Freehold, New
Jersey, with approximately $45 million in assets and one branch
office. Upon consummation of the acquisition, Colonial will
convert to a savings bank and remain a separate subsidiary of
Sovereign.
On January 1, 1995, Sovereign acquired 23 offices located in
New Jersey and Delaware with $909.3 million of related deposits
and a small amount of related deposit loans from Berkeley Federal
Bank & Trust, FSB ("Berkeley") for a premium of $66.6 million.
The acquisition was accounted for as a purchase.
On November 1, 1994, Sovereign acquired Charter FSB Bancorp,
Inc. ("Charter") of Randolph, New Jersey. Charter has 10
community banking offices located in Morris and Sussex counties,
New Jersey. In accordance with the merger agreement, Charter
common shareholders received 3.4 shares of Sovereign common stock
in exchange for each share of Charter common stock. Sovereign
issued a total of 7.0 million new shares (7.3 million shares as
adjusted for all subsequent stock dividends) to complete the
acquisition. The transaction was tax free to Sovereign, Charter
and Charter shareholders and was accounted for as a
pooling-of-interests. Accordingly, the consolidated financial
statements have been restated to include the accounts of Charter
for all periods presented. At September 30, 1994, Charter had
total assets, deposits and stockholders' equity of approximately
$405.8 million, $341.4 million and $41.7 million, respectively.
On September 16, 1994, Sovereign acquired the Chadds Ford,
Pennsylvania office and related deposits of Second National
Federal Savings Association ("Second National") from the
Resolution Trust Corporation ("RTC"), receiver for Second
National. Sovereign assumed approximately $14.4 million of
deposits from the Chadds Ford office for a premium of $675,000.
SOVEREIGN BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Continued)
On August 5, 1994, Sovereign acquired Shadow Lawn Savings
Bank ("Shadow Lawn"), a state chartered financial institution
from Rochester Community Savings Bank, in a transaction accounted
for as a purchase. Shadow Lawn has 17 community banking offices
located in Monmouth and Ocean counties, New Jersey. Sovereign
acquired $787.5 million of assets consisting principally of
investment and mortgage-backed securities and loans. Sovereign
also assumed
<PAGE>
approximately $730.6 million of deposit liabilities. Sovereign
acquired Shadow Lawn in exchange for an estimated purchase price
of $78.4 million of cash. This transaction added a core deposit
intangible of $13.0 million and goodwill of $26.7 million to
Sovereign's balance sheet.
(10) STOCKHOLDERS' EQUITY
On February 18, 1994, Sovereign filed a "Shelf Registration
Statement" with the Securities and Exchange Commission to
register $150.0 million of various debt and equity securities
which Sovereign may issue in the future to provide additional
funds for general corporate purposes, including, without
limitation, funding investments in or extensions of credit to,
its subsidiaries, repayments of obligations, redemption of
outstanding indebtedness and financing possible future
acquisitions.
On April 20, 1995, Sovereign announced that it expects to
offer for sale $75 million of convertible preferred stock
pursuant to this shelf registration. The 6 1/4% cumulative
Convertible Preferred Stock is convertible at a conversion rate
of 4.752 shares of common stock for each share of preferred
stock, equivalent to a conversion price of $10.523 per share of
common stock. The sale is expected to close on or about May 16,
1995.
On November 21, 1994, Sovereign's Board of Directors
authorized an amendment to Sovereign's tax-qualified Employee
Stock Ownership Plan ("ESOP") to add a leverage feature to
purchase up to 4.2 million shares of Sovereign's outstanding
common stock, in the open market or in negotiated transactions.
As of March 31, 1995, Sovereign has advanced $5.0 million to the
Employee Stock Ownership Plan and it had purchased 465,000 shares
at a cost of $4.2 million. The cost of these shares is reported
as a reduction of equity on the balance sheet. These shares are
not considered outstanding for the earnings per share
calculation.
<PAGE>
SOVEREIGN BANCORP, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
RESULTS OF OPERATIONS
General
Net income for the three-month period ended March 31, 1995 was
$12.1 million, an increase of 11% when compared to net income of
$10.9 million for the three-month period ended March 31, 1994.
Earnings per share for the three-month period ended March 31,
1995 were $.25 per share, an increase of 9% when compared to $.23
for the same period in 1994. Earnings per share have been
adjusted to reflect all stock dividends and stock splits
including the 5% stock dividend declared on February 22, 1995.
Return on average equity and return on average assets were
15.12% and .70%, respectively, for the three-month period ended
March 31, 1995 compared to 16.07% and .88%, respectively, for the
same period in 1994.
Net Interest Income
Net interest income for the three-month period ended March 31,
1995 was $42.7 million compared to $36.4 million for the same
period in 1994. The increase is attributable to an increase in
average balances resulting from recent acquisitions and internal
growth. Sovereign's interest rate spread (the difference between
the yield on total assets and the cost of total liabilities and
stockholders' equity) was 2.50% for the three-month period ended
March 31, 1995 compared to 2.97% for the same period in 1994.
Interest and dividends on investment and mortgage-backed
securities and other interest-earning assets were $34.2 million
for the three-month period ended March 31, 1995 compared to $24.2
million for the same period in 1994. The average balance of
investment and mortgage-backed securities and other
interest-earning assets was $1.99 billion with an average yield
of 6.90% for the three-month period ended March 31, 1995 compared
to an average balance of $1.67 billion with an average yield of
5.83% for the same period in 1994. The increase in the average
balance of investment and mortgage-backed securities and other
assets was primarily due to the Shadow Lawn acquisition. The
increase in yield is the result of generally higher interest
rates.
Interest and fees on loans were $77.2 million for the
three-month period ended March 31, 1995 compared to $52.5 million
for the same period in 1994. The average balance of loans was
$4.40 billion with an average yield of 7.03% for the three-month
period ended March 31, 1995 compared to an average balance of
$3.01 billion with an average yield of 7.01% for the same period
in 1994. The increase in the average balance of loans is due to
the origination of variable rate mortgage loans and the Shadow
Lawn acquisition.
Interest on deposits was $49.4 million for the three-month
period ended March 31, 1995 compared to $25.5 million for the
same period in 1994. The average balance of deposits was $4.97
billion with an average cost of 4.03% for the three-month period
ended March 31, 1995 compared to an average balance
<PAGE>
of $3.18 billion with an average cost of 3.25% for the same
period in 1994. The increase in the average balance of deposits
is primarily due to recent acquisitions. The cost of deposits has
increased due to a general rise in interest rates.
SOVEREIGN BANCORP, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Interest on borrowings was $19.3 million for the three-month
period ended March 31, 1995 compared to $14.8 million for the
same period in 1994. The average balance of borrowings was $1.38
billion with an average cost of 5.64% for the three-month period
ended March 31, 1995 compared to an average balance of $1.32
billion with an average cost of 4.53% for the same period in
1994. The cost of borrowings has increased due to the rise in
interest rates.
Provision for Possible Loan Losses
The provision for possible loan losses was $250,000 for the
three-month period ended March 31, 1995 compared to $1.5 million
for the same period in 1994. See "Financial Condition and Loan
Portfolio" for a discussion of credit quality of Sovereign's loan
portfolio.
The following table presents the activity in the allowance for
possible loan losses for the periods indicated: (dollars in
thousands)
<TABLE>
<CAPTION>
Three-Month Period Ended March 31,
1995 1994
<S> <C> <C>
Allowance, beginning of period $36,289 $33,099
Charge-offs:
Residential 293 517
Consumer 132 134
Commercial Real Estate 472 -
------- ------
Total Charge-offs 897 651
------- -------
Recoveries:
Residential 18 4
Consumer 9 17
Commercial Real Estate - 4
------- -------
Total Recoveries 27 25
------- -------
Charge-offs, net of recoveries 870 626
Provision for possible loan losses 250 1,538
Acquired reserves and other additions - (6)
------- -------
Allowance, end of period $35,669 $34,005
======= =======
</TABLE>
<PAGE>
Other Income
Other income was $4.9 million for the three-month period
ended March 31, 1995, compared to $3.2 million for the same
period in 1994.
Other loan fees and service charges were $1.2 million for
the three-month period ended March 31, 1995 compared to $1.0
million for the same period in 1994. Other loan fees and service
charges result primarily from Sovereign's loan servicing
portfolio. Sovereign serviced $3.98 billion of its own loans and
$1.10 billion of loans for others at March 31, 1995 compared to
$2.84 billion of its own loans and $1.30 billion of loans for
others at March 31, 1994.
Deposit fees were $2.3 million for the three-month period
ended March 31, 1995 compared to $1.1 million for the same period
in 1994. This increase was primarily the result of the Shadow
Lawn and Berkeley acquisitions.
SOVEREIGN BANCORP, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Gain on sale of loans and investment and mortgage-backed
securities available-for-sale was $111,000 for the three-month
period ended March 31, 1995 compared to $202,000 for the same
period in 1994.
Gain on sale of loans held for resale was $640,000 for the
three-month period ended March 31, 1995 compared to $371,000 for
the same period in 1994.
General and Administrative Expenses
Total general and administrative expenses were $25.3 million for the
three-month period ended March 31, 1995 compared to $19.4 million
for the same period in 1994. The ratio of general and
administrative expenses to average assets for the three-month
period ended March 31, 1995 was 1.50% compared to 1.59% for the
same period in 1994. This decrease in the expense ratio is the
result of efficiencies realized from recent acquisitions and an
increase in average balances.
Other operating expenses were $3.5 million for the
three-month period ended March 31, 1995 compared to $1.2 million
for the same period in 1994. This increase was primarily due to
the amortization of goodwill and intangible assets resulting from
recent acquisitions and write downs of REO.
Income Tax Provision
The income tax provision was $6.4 million for the
three-month period ended March 31, 1995 compared to $6.5 million
for the same period in 1994. The effective tax rate for the
three-month period ended March 31, 1995 was 34.6% compared to
37.5% for the same period in 1994.
<PAGE>
SOVEREIGN BANCORP, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
FINANCIAL CONDITION
Loan Portfolio
Loans at March 31, 1995 were $4.42 billion compared to $4.35
billion at December 31, 1994. During the three-month period ended
March 31, 1995, Sovereign closed approximately $151.4 million of
first mortgage loans including approximately $121.5 million of
variable rate mortgage loans which were retained in Sovereign's
loan portfolio.
Sovereign's primary loan products are variable rate mortgage
loans on owner occupied residential real estate. As a result of
Sovereign's focus on these products, 98.2% of Sovereign's total
loan portfolio is secured by residential real estate and 75.0% of
the total loan portfolio is comprised of variable rate loans. At
March 31, 1995, Sovereign's total loan portfolio included $3.78
billion of first mortgage loans secured primarily by liens on
owner occupied one-to-four family residential properties and
$425.9 million of home equity loans secured primarily by second
mortgages on owner occupied one-to-four family residential
properties. At March 31, 1995, Sovereign's loan portfolio also
included $88.6 million of multi-family loans. The remaining loans
in Sovereign's portfolio are gradually declining although recent
acquisitions have added a limited amount of commercial real
estate loans. Sovereign has no commercial construction loans and
only $2.4 million in residential development loans. For
additional information on the composition of the loan portfolio,
see Note 5 in the Notes to Consolidated Financial Statements.
Sovereign places all loans 90 days or more delinquent
(except guaranteed student loans) on non-performing status. At
March 31, 1995, Sovereign's non-performing assets were $38.4
million compared to $40.5 million at December 31, 1994. The ratio
of non-performing assets to total assets was .56% at March 31,
1995 compared to .62% at December 31, 1994.
At March 31, 1995, 82.94% of non-performing assets consisted
of loans or real estate owned (REO) related to residential real
estate compared to 85.01% at December 31, 1994. Historically,
losses on disposition of non-performing residential real estate
have been much lower than non-performing commercial and
commercial real estate loans. Non-performing assets at March 31,
1995 include $9.80 million of REO which is carried at lower of
cost or estimated fair market value less estimated disposal
costs.
<PAGE>
SOVEREIGN BANCORP, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
The following table presents the composition of non-performing assets at
the dates indicated: (dollars in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
<S> <C> <C>
Non-Accrual Loans:
Past due 90 or more days
as to interest or principal:
Residential $25,509 $25,379
Other 1,775 2,892
Past due less than 90 days
as to interest and principal:
Residential 1,172 2,980
------- -------
Total Non-Accrual Loans 28,456 31,251
Restructured Loans 98 99
------- -------
Total Non-Performing Loans 28,554 31,350
------- -------
Real Estate Owned:
Residential 5,134 6,104
Other 4,670 3,087
------- -------
Total Real Estate Owned 9,804 9,191
------- -------
TOTAL NON-PERFORMING ASSETS $38,358 $40,541
======= =======
Non-Performing Assets as a
percentage of Total Assets .56% .62%
Non-Performing Loans as a
percentage of Total Loans .65% .72%
Non-Performing Assets as a
percentage of Total Loans
and Real Estate Owned .86% .93%
Allowance for Possible Loan
Losses as a percentage of
Total Non-Performing Assets 92.14% 88.24%
Allowance for Possible Loan
Losses as a percentage of
Total Non-Performing Loans 123.77% 114.11%
</TABLE>
Management constantly evaluates the adequacy of its
allowance for possible loan losses. Management's evaluation of
the adequacy of the allowance to absorb potential loan losses
takes into consideration the risks inherent in the loan
portfolio, past loan loss experience, specific loans which could
have loss potential, geographic and industry concentrations,
delinquency trends, economic conditions and other relevant
factors. At March 31, 1995, the allowance for possible loan
losses was $35.7 million or .81% of loans compared to $36.3
million or .83% of loans at December 31, 1994.
<PAGE>
SOVEREIGN BANCORP, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
The following table presents the allocation of the allowance
for possible loan losses and the percentage of such allocation to
each loan type for the dates indicated: (dollars in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
Balance at End of -------------------------------------------------------
Period Attributable to Amount Percent Amount Percent
<S> <C> <C> <C> <C>
Residential real estate $10,567 29.63% $10,540 29.05%
Commercial real estate 506 1.42 657 1.81
Commercial 126 .35 164 .45
Consumer 4,437 12.44 4,435 12.22
Unallocated 20,033 56.16 20,493 56.47
------- ------ ------- ------
Total $35,669 100.00% $36,289 100.00%
======= ====== ====== ======
</TABLE>
Potential problem loans (consisting of loans as to which
management has serious doubts as to the ability of such borrowers
to comply with present repayment terms, although not currently
classified as non-performing loans) amounted to approximately
$3.9 million. These loans consist of $2.8 million of multi-family
loans and $987,000 of commercial real estate loans.
Investment and Mortgage-backed Securities
Investment securities consist primarily of U.S. Treasury and
government agency securities, corporate debt securities and stock
in the Federal Home Loan Bank of Pittsburgh ("FHLB").
Mortgage-backed securities consist of obligations issued by
FHLMC, FNMA, GNMA, RTC or private issuers. Sovereign's
mortgage-backed securities are generally either guaranteed as to
principal and interest by the issuer or rated "AAA" or "AA" by
Standard and Poor's or Moody's. At March 31, 1995, total
investment and mortgage-backed securities were $2.02 billion
compared to $1.90 billion at December 31, 1994. For additional
information on the investment and mortgage-backed securities, see
Notes 3 and 4 in the Notes to Consolidated Financial Statements.
Goodwill and Other Intangible Assets
Total goodwill and other intangible assets at March 31, 1995
were $129.2 million compared to $64.6 million at December 31,
1994. The increase is the result of the Berkeley acquisition.
Deposits
Deposits are attracted from within Sovereign's primary
market area through the offering of various deposit instruments
including NOW accounts, money market accounts, savings accounts,
certificates of deposit and retirement savings plans.
<PAGE>
Total deposits at March 31, 1995 were $5.01 billion,
compared to $4.03 billion at December 31, 1994. This increase is
the result of the assumption of Berkeley deposits. For additional
information on the deposit portfolio composition, see Note 6 in
the Notes to Consolidated Financial Statements.
SOVEREIGN BANCORP, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Borrowings
Sovereign utilizes borrowings as a source of funds for its
asset growth. Collateralized advances are available from the FHLB
provided certain standards related to creditworthiness have been
met. Another source of funds for Sovereign is reverse repurchase
agreements. Reverse repurchase agreements are short-term
obligations collateralized by a security interest in U.S.
Treasury securities or securities fully guaranteed as to
principal and interest by the U.S. Government or an agency
thereof.
Total borrowings at March 31, 1995 were $1.41 billion of
which $1.16 billion were short-term compared to $2.16 billion of
which $1.72 billion were short-term at December 31, 1994. This
decrease is the result of the use of funds received from the
Berkeley deposits to pay down borrowings. For additional
information on the borrowings, see Note 7 in the Notes to
Consolidated Financial Statements.
Stockholders' Equity
Total stockholders' equity at March 31, 1995 was $312.2
million compared to $303.9 million at December 31, 1994. This
increase is primarily attributable to the retention of earnings.
LIQUIDITY AND CAPITAL RESOURCES
Sovereign Bank is required under applicable federal
regulations to maintain specified levels of "liquid" investments
in cash and U.S. Treasury and other qualifying investments.
Regulations currently in effect require Sovereign Bank to
maintain liquid assets of not less than 5% of its net
withdrawable accounts plus short-term borrowings, of which
short-term liquid assets must consist of not less than 1%. These
levels are changed from time to time by the OTS to reflect
economic conditions. Sovereign Bank's liquidity ratio was 5.83%
for March 31, 1995.
Sovereign's primary financing sources are deposits obtained
in its own market area and borrowings in the form of securities
sold under repurchase agreements and advances from the FHLB. At
March 31, 1995, Sovereign had $1.14 billion in unpledged
investments and mortgage-backed securities which
<PAGE>
could be used to collateralize additional borrowings. Sovereign
Bank can also borrow from the FHLB, subject to required
collateralization. Other sources of funds include operating
activities, repayments of principal on investment and
mortgage-backed securities, repayment of principal on loans and
other investing activities.
The Financial Institutions Reform, Recovery and Enforcement
Act ("FIRREA"), requires the OTS to prescribe uniformly
applicable capital standards for all savings associations. These
standards require savings associations to maintain a minimum
tangible capital ratio of not less than 1.5%, a minimum leverage
capital ratio of not less than 3% of tangible assets and not less
than 4% of risk adjusted assets and a minimum risk-based capital
ratio (based upon credit risk) of not less than 8%. In all cases,
these standards are to be no less stringent than the capital
standards that are applicable to national banks. The OTS has
issued a regulation that requires a minimum leverage capital
requirement of 3% for associations rated composite 1 under the
OTS MACRO rating system. For all other savings associations, the
minimum leverage capital requirement will be 3% plus at least an
additional 100 to 200 basis points.
SOVEREIGN BANCORP, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
The OTS issued its final regulations on the incorporation of
an interest rate risk component into its risk-based capital
requirements. Under the regulation, savings associations which
are deemed to have an "above normal" level of interest rate risk
must deduct a portion of that risk from total capital for
regulatory capital purposes. Implementation of this interest rate
risk capital deduction has been delayed by the OTS until further
notification.
The Federal Deposit Insurance Corporation Improvement Act
("FDICIA"), established five capital tiers: well capitalized,
adequately capitalized, under capitalized, significantly under
capitalized and critically under capitalized. A depository
institution's capital tier depends upon its capital levels in
relation to various relevant capital measures, which include
leverage and risk-based capital measures and certain other
factors. Depository institutions that are not classified as well
capitalized are subject to various restrictions regarding capital
distributions, payment of management fees, acceptance of brokered
deposits and other operating activities.
At March 31, 1995, Sovereign Bank is classified as
adequately capitalized and is in compliance with all capital
requirements. Management anticipates that Sovereign Bank will
continue to be in compliance with all capital requirements.
The following table sets forth the capital ratios of
Sovereign Bank and Sovereign Bancorp and the current regulatory
requirements at March 31, 1995:
<PAGE>
<TABLE>
<CAPTION>
Sovereign Sovereign
Bancorp(1) Bank Requirement
<S> <C> <C> <C>
Stockholders' equity to
total assets 4.59% 6.10% None
Tangible capital to tangible
assets 2.78 4.27 1.50%
Leverage (core) capital to
tangible assets 2.78 4.27 3.00
Leverage (core) capital to
risk adjusted assets 5.90 9.21 4.00
Risk-based capital to risk
adjusted assets 10.60 10.14 8.00
</TABLE>
(1) OTS capital regulations do not apply to savings and loan
holding companies. These ratios are computed as if those
regulations did apply to Sovereign Bancorp.
ASSET AND LIABILITY MANAGEMENT
The objective of Sovereign's asset and liability management
is to identify, manage and control its interest rate risk in
order to produce consistent earnings that are not largely
contingent upon favorable trends in interest rates. Sovereign
manages its assets and liabilities to attain a stable net
interest margin across a wide spectrum of interest rate
environments. This is accomplished by monitoring the levels of
interest rates, the relationships between the rates earned on
assets and the rates paid on liabilities, the absolute amount of
assets and liabilities which reprice or mature over similar
periods, off-balance sheet positions and the effect of all of
these factors on the estimated level of net interest income.
SOVEREIGN BANCORP, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
There are a number of industry standards used to measure an
institution's interest rate risk position. Most common among
these is the one year gap which is the ratio representing the
difference between assets, liabilities and off-balance sheet
positions which will mature or reprice within one year expressed
as a percentage of total assets. Using management's estimates of
asset prepayments, core deposit decay and borrowing repricing in
its computation, Sovereign estimates that its cumulative one year
gap position was a negative 3.8% at March 31, 1995.
Sovereign also utilizes income simulation modeling in
measuring its interest rate risk and managing its interest rate
sensitivity. Income simulation considers not only the impact of
changing market interest rates on forecasted net interest income,
but also other factors such as yield curve relationships, the
volume and mix of assets and liabilities, customer preferences
and general market conditions.
Pursuant to its interest rate risk management strategy, Sovereign enters
<PAGE>
into off-balance sheet transactions which involve interest rate
exchange agreements (swaps, caps and floors) for interest rate
risk management purposes. Sovereign's objective in managing its
interest rate risk is to provide sustainable levels of net
interest income while limiting the impact changes in interest
rates have on net interest income. For additional information on
Interest Rate Exchange Agreements, see Note 8 in the Notes to
Consolidated Financial Statement.
Amortizing and non-amortizing interest rate swaps are
generally used to convert fixed rate assets and liabilities to
variable rate assets and liabilities and vice versa. Sovereign
utilizes amortizing interest rate swaps to convert discounted
adjustable rate loans to fixed rate for a period of time. The
amortization of the notional amount of the interest rate swaps
are tied to the level of an index such as the One Year Treasury
Constant Maturity, LIBOR, or a prepayment rate of a pool of
mortgage-backed securities. In order for interest rate swaps to
achieve the desired objective, Sovereign selects interest rate
swaps that will have a high degree of correlation to the related
financial instrument. Sovereign utilizes non-amortizing swaps to
convert fixed rate liabilities to floating rate, to reduce
Sovereign's overall cost of funds.
Interest rate caps are generally used to limit the exposure
from the repricing and maturity of liabilities and interest rate
floors are generally used to limit the exposure from repricing
and maturity of assets. Interest rate caps and floors are also
used to limit the exposure created by other interest rate swaps.
In certain cases, interest rate caps or floors are simultaneously
bought and sold to create a range of protection against changing
interest rates while limiting the cost of that protection.
Due to competitive conditions, Sovereign originates fixed
rate residential mortgages. It exchanges the majority of these
loans with FHLMC, FNMA and private investors. The loans are
exchanged for marketable fixed rate mortgage-backed securities
which are generally sold, or cash. This helps insulate Sovereign
from the interest rate risk associated with these fixed rate
assets. Sovereign uses forward sales, cash sales and options on
mortgage-backed securities as means of hedging loans in the
mortgage pipeline which are originated for resale.
SOVEREIGN BANCORP, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Sovereign's primary funding source is deposits obtained in
its own marketplace. Deposit programs at Sovereign are priced to
meet management's asset/liability objectives, while taking into
account the rates available on investment opportunities and also
considering the cost of alternative funding sources. Borrowings
are a significant funding source for Sovereign and have primarily
been in the form of securities sold under repurchase agreements
and advances from the FHLB. Since borrowings are not subject to
the market constraints to which deposits are, Sovereign uses
borrowings to add flexibility to its interest rate risk position.
<PAGE>
SOVEREIGN BANCORP, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
Items 1 through 5 are not applicable or the responses are
negative.
Item 6 - Reports on Form 8-K.
Report on Form 8-K, dated January 17, 1995 (date of earliest event -
January 3, 1995), described the consummation of Sovereign's
acquisition of 23 offices and related deposits from Berkeley Federal
Bank and Trust, FSB pursuant to a Branch Purchase and Deposit
Assumption Agreement dated September 19, 1994.
Report on Form 8-K, dated March 24, 1995 (date of earliest event -
March 7, 1995), described the termination of Sovereign's planned
acquisition of Patriot Savings Bank and announced the signing of an
Agreement and Plan of Merger dated March 23, 1995 pursuant to which
Sovereign will acquire Colonial State Bank.
Report on Form 8-K, dated April 20, 1995 (date of earliest event -
April 20, 1995), contained a press release announcing Sovereign's
intention to offer Convertible Preferred Stock.
Report on Form 8-K, dated April 28, 1995 (date of earliest event -
April 24, 1995), described the election of Richard E. Mohn as
Chairman of the Board to succeed Frederick J. Jaindl who resigned as
Chairman and as a Director of Sovereign earlier that day.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
SOVEREIGN BANCORP, INC.
-----------------------------------------
(Registrant)
Date May 10, 1995 /s/ Karl D. Gerhart
--------------------- -----------------------------------------
Karl D. Gerhart
Chief Financial Officer
Date May 10, 1995 /s/ Richard A. Elko
--------------------- ----------------------------------------
Richard A. Elko
Chief Accounting Officer
