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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) July 15, 1996
SOVEREIGN BANCORP, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 0-16533 23-2453088
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Ident. No.)
1130 Berkshire Boulevard, Wyomissing, Pennsylvania 19610
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (610) 320-8400
N/A
(Former name or former address, if changed since last report.)
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<PAGE>
Item 5. Other Events.
The press release of Sovereign Bancorp, Inc. dated July 15,
1996 is attached as Exhibit 99 hereto and is incorporated herein
by reference.
Item 7. Financial Statements and Exhibits.
(a) Exhibits.
The following exhibits are filed herewith:
99 Press Release, dated July 15, 1996, of Sovereign
Bancorp, Inc.
<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 hereunto duly authorized.
SOVEREIGN BANCORP, INC.
Dated: July 29, 1996
By /s/ Karl D. Gerhart
Karl D. Gerhart
Chief Financial Officer and
Treasurer
<PAGE>
EXHIBIT INDEX
Exhibit Number
99 Press Release, dated July 15, 1996,
of Sovereign Bancorp, Inc.
Exhibit 99
SOVEREIGN BANCORP
NEWS RELEASE
July 15, 1996
SOVEREIGN ANNOUNCES 2ND QUARTER
NET INCOME UP 19%
WYOMISSING, PA. Sovereign Bancorp, Inc. ("Sovereign")
(NASDAQ/NMS:SVRN), announced that second quarter net income
increased 19% to $16.8 million from second quarter 1995 net
income of $14.1 million. Earnings per share ("EPS") for the
second quarter of 1996 were $0.28, an increase of 12% compared to
$0.25 per share for the second quarter of 1995. Sovereign's
year-to-date net income increased 24% to $32.5 million as
compared to $26.3 million for the same period last year. EPS for
the six months ended June 30, 1996 was $0.55, an increase of 12%
from EPS for the six months ended June 30, 1995 of $0.49.
Reported results include the impact of Sovereign's
May 31, 1996 acquisition of West Jersey Bancshares, a community
oriented commercial bank headquartered in Fairfield, New Jersey
which was accounted for as a pooling-of-interests.
For the second quarter of 1996, return on average
equity ("ROE") was 14.9% and return on average assets ("ROA") was
0.77% compared to 15.4% and 0.82%, respectively for the same
period last year. For six months ended June 30, 1996, ROE was
0.77% and ROA was 14.6% compared to 0.76% and 15.3% respectively
for the six months ended June 30, 1995.
"We are very pleased with the quality of the Company's
results for the second quarter and our progress toward becoming a
SUPER COMMUNITY BANK through the execution of our strategic
initiatives," stated Jay S. Sidhu, Sovereign's President and
Chief Executive Officer. These strategic initiatives involve
efforts to increase interest income, lower interest expense,
control operating expenses and increase fee income. Sovereign's
strategy targets the consumer and small business markets with the
introduction of new products and services to grow the Bank's
penetration among the households it currently serves.
One of Sovereign's strategic initiatives to increase
interest income is to expand its lending focus to include
consumer and commercial originations. Consumer loans originated
during the second quarter of 1996, including the purchase of
$200 million of government guaranteed student loans, totalled
$273.4 million compared to $49.5 million in the second quarter of
1995. Sovereign's commercial banking division produced loan
originations of $27.4 million during the second quarter of 1996.
This increased 1996 year-to-date commercial originations to
$42.4 million as compared to $3.1 million for the same period
last year.
In addition to these results produced by Sovereign's
expanded lending initiatives, Sovereign generated record levels
of residential mortgage closings. During the second quarter of
1996, Sovereign closed $779 million of residential mortgage loans
of which approximately 87% were adjustable rate loans, as
compared to $134 million of residential originations during the
second quarter of 1995. At June 30, 1996 the pipeline of
mortgage loans was approximately $510 million, compared to
$683 million at March 31, 1996, which may indicate a lower level
of closings over the remainder of 1996.
Net interest income for second quarter of 1996 was
$54.9 million compared to $41.4 million for the same period last
year, an increase of 33%. The net interest spread was 2.56% of
average assets for the second quarter of 1996 compared to 2.41%
for the second quarter 1995 and 2.54% for year-to-date ended
June 30, 1996.
As a result of pursuing Sovereign's strategic
initiatives to increase fee income, total deposit fee income
reported for the second quarter of 1996 was $2.7 million versus
$1.9 million for the second quarter of 1995. Total other income
increased to $5.4 million for the second quarter of 1996, an
increase of 29% when compared to other income exclusive of non-
recurring items for the second quarter of 1995. Total other
income for the second quarter of 1995 was $9.3 million which
included $5.1 million in gains from the sale of servicing and one
branch office. Sovereign's year-to-date other income was
$10.3 million, an increase of 14% when compared to $9.0 million
for the same period last year exclusive of the non-recurring
items.
Another strategic initiative implemented by Sovereign
is to control expenses through process improvements and
technological initiatives. The results of these programs are
reflected in Sovereign's ratio of general and administrative
expenses to average assets, which was 1.39% for the second
quarter of 1996, a significant improvement from 1.50% for the
second quarter 1995. The ratio has also improved to 1.37% the
six months ended June 30, 1996 from 1.50% for the same period of
1996. "These results have been achieved in spite of investing
heavily in people and systems during the first half of 1996,"
Sidhu commented.
For the second quarter 1996, Sovereign's efficiency
ratio (all general and administrative expenses as a percentage of
net interest income and recurring non-interest income) improved
to 49.6% from 56.5% for the same period last year. The year-to-
date efficiency ratio decreased to 49.0% for six months ended
June 30, 1996, down from 54.7% for the six months ended June 30,
1995.
Continuing Sovereign's commitment to high asset quality
and maintaining conservative levels of reserves, Sovereign
provided $516,000 for possible loan losses during the second
quarter of 1996. The ratio of non-performing assets to total
assets improved to 0.49% at June 30, 1996 as compared to 0.54% at
December 31, 1995. Sovereign's total 30 day + delinquencies to
total loans at June 30, 1996 were 1.21% as compared to 1.32% at
December 31, 1995.
Total assets at June 30, 1996 were $9.2 billion, as
compared to total assets at December 31, 1995 of $8.1 billion.
"This growth in assets is almost entirely due to a 22% growth in
loans since December 1995," Sidhu commented. Total deposits and
shareholders' equity were $5.0 billion and $461.5 million,
respectively at June 30, 1996, compared to $5.0 billion and
$427.0 million, respectively at December 31, 1995.
Total deposits remained relatively consistent during
the second quarter of 1996 as Sovereign continued to emphasize
relationship selling rather than relying strictly on rates to
sell products. However, core deposits (total deposits less
certificates of deposit) grew to $2.3 billion at June 30, 1996,
from $2.0 billion to December 31, 1995.
Commenting on Sovereign's performance, Richard E. Mohn,
Sovereign's Chairman said, "Sovereign remains committed to
building shareholder value by executing its strategic plans.
Sovereign's long-term vision is to double its earnings over 1995
levels by the year 2000."
Sovereign is a $9.2 billion financial institution with
122 community banking offices in marketing divisions in eastern
Pennsylvania, northern Delaware and New Jersey. Now the fourth
largest bank headquartered in Pennsylvania, Sovereign's common
stock closed Friday, July 12, 1996 at $10.00 per share and its
preferred stock closed at $56.31 per share.
THE END
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<TABLE>
KEY STATISTICS
<CAPTION>
3 Months 6 Months
Ended Ended
June 30 June 30
<S> <C> <C> <C> <C>
PERFORMANCE STATISTICS 1996 1995 1996 1995
Return on Average Assets 0.77% 0.82% 0.77% 0.76%
Return no Average Equity 14.94% 15.38% 14.57% 15.25%
General & Administrative
Expenses on Average
Assets 1.39% 1.50% 1.37% 1.50%
Efficiency Ratio (1) 49.64% 56.49% 48.98% 54.74%
<CAPTION>
CONTROL STATISTICS At June 30, 1996 At Dec 31, 1995
<S> <C> <C>
Stockholders' Equity to
Total Assets 5.02% 5.29%
Allowance for Loan Losses
to Total Loans 0.60% 0.73%
Non-Performing Assets to
Total Assets 0.49% 0.54%
General Reserves for Loan
Losses to Non-Performing
Loans 82.40% 88.05%
Non-Performing Loans to
Total Loans 0.72% 0.83%
FTE Employees 1,507 1,412
<CAPTION>
STOCK STATISTICS (2) At June 30, 1996 At Dec 31, 1995
<S> <C> <C>
Preferred Shares
Outstanding 2,000,000 2,000,000
Common Shares Outstanding 49,573,278 47,737,828
Fully Diluted Shares
Outstanding 59,551,326 57,715,876
Book Value Per Share (3) $7.75 $7.40
Tangible Book Value Per
Share Net of Tax
Benefit (4) $6.22 $5.73
NOTES:
<FN>
(1) Efficiency Ratio equals all general and administrative
expenses as a percentage of net interest income and
recurring non-interest income.
(2) Restated for all Stock Splits/Dividends declared through
December 20, 1995.
(3) Book Value equals Equity divided by Common Shares and if
converted Preferred Shares.
(4) Computed Net of Tax Benefit on certain Intangible Assets.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONDENSED FINANCIAL INFORMATION
(In Thousands)
BALANCE SHEET At June 30, 1996 At December 31, 1995
<S> <C> <C>
Total Assets $9,183,447 $8,078,287
Loans 5,717,061 4,674,364
Investments & MBSs 3,065,046 2,966,721
Total Liabilities 8,721,981 7,651,262
Deposits 4,941,897 5,039,143
Stockholders' Equity 461,466 427,025
<CAPTION>
3 Months 6 Months
Ended Ended
INCOME STATEMENT June 30 June 30
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net Interest Income $54,862 $41,375 $105,793 $84,111
Loan Loss Provisions 516 250 1,016 500
Other Income 5,432 9,294 10,298 14,161
Gen & Adm Expenses 29,929 25,743 56,856 51,006
Other Expenses 2,778 3,186 5,838 6,715
Income Before Taxes 27,071 21,490 52,381 40,051
Income Tax Provision 10,276 7,347 19,905 13,778
Net Income 16,795 14,143 32,476 26,273
EARNINGS PER SHARE $0.28 $0.25 $0.55 $0.49
</TABLE>
