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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) January 18, 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
January 18, 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 January 18, 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: February 13, 1996
By/s/ Karl D. Gerhart
Karl D. Gerhart
Chief Financial Officer and
Treasurer
<PAGE>
EXHIBIT INDEX
Exhibit Number
99 Press Release, dated January 18, 1996,
of Sovereign Bancorp, Inc.
SOVEREIGN ANNOUNCES
1995 NET INCOME UP 22%
WYOMISSING, PA, Sovereign Bancorp, Inc. (NASDAQ/NMS:SVRN),
parent company of Sovereign Bank, FSB ("Sovereign"), announced
that 1995 Net Income increased 22% to $56.4 million from 1994 Net
Income of $46.4 million. Earnings Per Share ("EPS") for 1995
prior to the adjustment for the recently announced Special 5%
Stock Dividend, payable on February 15, 1996 were $1.05, an
increase of 10%, compared to $0.95 per share for 1994. EPS
adjusted to reflect the 5% Stock Dividend for 1995 were $1.00 as
compared to $0.90 for 1994.
For 1995, Return on Average Equity was 14.95% and Return on
Average Assets was 0.78% compared to 16.47% and 0.84%,
respectively for 1994.
"We are pleased with Sovereign's 1995 earnings growth,
particularly given the very difficult operating environment due
to the relatively flat yield curve," stated Jay S. Sidhu,
Sovereign's President and Chief Executive Officer. "Sovereign's
1995 results reflect the Company's continued commitment to
building Shareholder value by consistently increasing earnings,
continuing to explore strategic acquisitions and executing
strategic initiatives for developing high quality, low risk
assets," Sidhu continued.
Sovereign's 4th Quarter 1995 Net Income increased 32% to
$15.7 million from $11.9 million for 4th Quarter 1994. The 4th
Quarter 1995 fully diluted EPS were $0.28, an increase of 17%
compared to $0.24 for 4th Quarter 1994. As adjusted for the
pending 5% Stock Dividend, 4th Quarter 1995 EPS were $0.27
compared to $0.22 for 4th Quarter 1994.
Originations during the 4th Quarter of 1995 were $224.1
million, of which approximately 51% were variable rate loans.
Total Year-to-Date Originations were $749.8 million. Net
Interest Income for 4th Quarter 1995 was $46.4 million compared
to $41.5 million for 4th Quarter 1994, an increase of 12%. The
Net Interest Spread was 2.41% of Average Assets for 4th Quarter
of 1995 and 2.42% for year ended December 31, 1995.
Other Income was $6.8 million for 4th Quarter 1995, an
increase of 42% compared to $4.7 million for 4th Quarter of 1994.
Other Income includes an approximately $1.1 million gain from the
sale of one branch office. Sovereign's ratio of General and
Administrative Expenses to Average Assets was 1.30% for the 4th
Quarter 1995, an improvement from 1.54% for the 4th Quarter 1994.
Sovereign provided $250,000 for possible Loan Losses during
the 4th Quarter of 1995 the same level of provision that it has
provided in each of the previous three quarters in 1995. This
reflects Sovereign's ongoing strategy toward above average asset
quality and conservative level of reserves. The ratio of Non-
Performing Assets to Total Assets improved to .54% at
December 31, 1995 from .62% at December 31, 1994. Sovereign's
total 30 Day plus Delinquencies to Total Loans at December 31,
1995 were 1.32% as compared to 1.27% at September 30, 1995 and
1.16% at December 31, 1994.
Total Assets at December 31, 1995 were $8.0 billion, as
compared to Total Assets at December 31, 1994 of $6.6 billion.
Total Deposits and Shareholders' Equity were $5.0 billion and
$427.0 million, respectively at December 31, 1995, compared to
$4.0 billion and $303.9 million, respectively at December 31,
1994. Most of Sovereign's growth in deposits was due to the
early 1995 acquisition of $900 million in deposits. In mid-1995,
Sovereign issued $100 million of Convertible Preferred Stock to
strengthen its Capital.
In pursing Sovereign's growth strategy, Sovereign recently
completed the acquisition of Colonial State Bank ("Colonial") and
announced the planned acquisition of West Jersey Bancshares
("West Jersey"). "These two commercial bank acquisitions,
coupled with the recent hiring of a team of very experienced
Commercial Lenders with over 100 years of Commercial Lending
experience are expected to provide a strong foundation for
Sovereign to build a new, highly focused Commercial Banking
Company," continued Sidhu. This company will provide loans to
professionals and small to mid-sized businesses. Sovereign's
primary focus, however, remains our Homeowners. "The major sale
of large banks in New Jersey and eastern Pennsylvania to out-of-
market area banks has provided Sovereign significant
opportunities to hire very experienced staff that can bring
quality business with them." Sidhu continued, "We are poised to
take advantages from the fallout."
"In reviewing Sovereign's 1995 results, of a 22% increase in
Net Income and a 10% increase in EPS we remain somewhat
frustrated with the relatively low valuations of Sovereign as
compared to other financial institutions. We believe that the
execution of Sovereign's strategic initiatives, including the
development of Sovereign's Commercial Banking Company,
introduction of the Tax Deductible Credit Card, enhancement of
Sovereign's deposit products and Touch-Tone Banking System as
well as the alternative lending venture have laid a strong
foundation for future growth," commented Richard E. Mohn,
Sovereign's Chairman of the Board.
Sovereign is a $8.0 billion Company with 120 Community
Banking Offices operating in marketing divisions in eastern
Pennsylvania, northern Delaware and New Jersey. Now the 4th
largest bank headquartered in Pennsylvania, Sovereign's closing
price of its Common Stock on Wednesday, January 17, 1996 was
$9.875 per share and its Preferred Stock closed at $56.50 per
share.
<PAGE>
SOVEREIGN BANCORP, INC. AND SUBSIDIARIES
KEY STATISTICS
<TABLE>
<CAPTION>
3 MONTHS ENDED 3 MONTHS ENDED
December 31 December 31
Performance Statistics 1995 1994 1995 1994
<S> <C> <C> <C> <C>
Return on average assets 0.82% 0.76% 0.78% 0.84%
Return on average equity 15.34% 15.79% 14.95% 16.47%
Gen. & admin. exp. on
average assets 1.30% 1.54% 1.39% 1.53%
Coverage ratio (1) 183.51% 175.40% 176.36% 187.44%
<CAPTION>
Control Statistics At December 31, 1995 At December 31, 1994
<S> <C> <C>
Stockholders' equity to
total assets 5.29% 4.63%
Allowance for loan losses to
total loans 0.73% 0.83%
Non-performing assets $43,673,529 $40,540,842
Non-performing assets to total
assets 0.54% 0.62%
General reserves for loan
losses to non-performing
loans 88.05% 114.11%
Non-performing loans to total
loans 0.83% 0.72%
<CAPTION>
Stock Statistics (2) At December 31, 1995 At December 31, 1994
<S> <C> <C>
Preferred shares outstanding 2,000,000 N/A
Common shares outstanding 45,464,598 47,845,320
Fully diluted shares outstanding 55,878,197 48,947,224
Book value per share (3) $7.40 $6.05
<FN>
(1) Coverage Ratio = net interest income and recurring non-interest income
as a percentage of all general and administrative expenses.
(2) Restated for all stock splits/dividends declared through December 20,
1995.
(3) Book value = Equity divided and by common shares and if converted
preferred shares.
</TABLE>
<PAGE>
SOVEREIGN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, December 31,
1995 1994
(Unaudited) (Audited)
(in thousands, except
per share data)
<S> <C> <C>
ASSETS
Cash and amounts due from
depository institutions $130,841 $110,270
Interest-earning deposits 16,930 29,131
Loans held for resale (approximate
fair value of $71,297 and $7,666
at December 31, 1995 and
December 31, 1994, respectively) 70,512 7,666
Investment and mortgage-backed
securities available-for-sale 889,509 87,128
Investment and mortgage-backed
securities held-to-maturity 2,077,212 1,816,840
Loans 4,674,364 4,350,898
Allowance for possible loan losses (34,856) (36,289)
Premises and equipment 56,951 48,096
Real estate owned 4,514 9,191
Accrued interest receivable 42,785 30,369
Goodwill and other intangible assets 123,243 64,553
Other assets 26,282 46,229
TOTAL ASSETS $8,078,287 $6,564,082
LIABILITIES
Deposits $5,039,143 $4,027,119
Borrowings:
Short-term 1,524,726 1,722,726
Long-term 1,005,930 439,861
Advance payments by borrowers for
taxes and insurance 22,117 25,893
Other liabilities 59,346 44,583
TOTAL LIABILITIES 7,651,262 6,260,182
STOCKHOLDERS' EQUITY
Preferred stock; 7,500,000 shares
authorized; 2,000,000 shares
issued at December 31, 1995 95,446 0
Common stock; no par value;
100,000,000 shares authorized;
48,438,944 shares issued at
December 31, 1995 and 45,566,971
shares issued at December 31, 1994 248,875 224,958
Unallocated common stock held by
ESOP at cost; 2,974,346 shares at
December 31, 1995 (28,772) --
Unrecognized gain on investment and
mortgage-backed securities
available-for-sale, net of tax 3,988 (877)
Retained earnings 106,488 79,829
TOTAL STOCKHOLDERS' EQUITY 427,025 303,900
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $8,078,287 $6,564,082
</TABLE>
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.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three-Month Period Ended December 31, Twelve-Month Period Ended December 31,
1995 1994 1995 1994
(in thousands, except per share data)
<S> <C> <C> <C>
Interest Income:
Interest and dividends on
investment and mortgage-backed
securities and other interest-
earning assets $50,363 $28,652 $165,581 $105,425
Interest and fees on loans 86,212 73,715 327,450 248,718
Total Interest income 136,575 102,367 493,031 354,141
Interest expense:
Interest on deposits 54,849 37,296 210,267 121,812
Interest on borrowings 35,288 23,585 108,538 76,929
Total Interest expense 90,137 60,881 318,805 198,741
Net Interest Income 46,438 41,486 174,226 155,400
Provision for possible loan losses 250 600 1,000 4,100
Net interest income after provision
for possible loan losses 46,188 40,886 173,226 151,300
Other Income:
Other loan fees and service charges 1,096 1,462 4,445 5,018
Deposit fees 3,031 2,128 9,427 5,755
Gain on sale of loans and
investment and mortgage-backed
securities available-for-sale 247 454 419 1,595
Mortgage banking gains 533 180 6,079 385
Miscellaneous income 1,867 525 5,459 1,801
Total other income 6,774 4,749 25,829 14,554
General and administrative expenses:
Salaries and employee benefits 10,861 8,553 41,158 33,896
Occupancy and equipment expenses 4,917 4,116 19,286 15,908
Outside services 2,912 1,755 10,890 7,627
Deposit insurance premiums 1,964 2,343 10,423 7,627
Advertising 1,411 1,214 4,602 4,013
Other administrative expenses 3,515 6,050 13,908 15,319
Total general and administrative
expenses 25,580 24,031 100,267 84,390
Other operating expenses:
Amortization of goodwill and
other intangibles 3,106 2,384 12,184 6,508
Real estate owned losses/gains,
net 254 329 657 91
Total other operating expenses 3,360 2,713 12,841 6,599
Income before income taxes 24,022 18,891 85,947 74,865
Income tax provision 8,325 6,964 29,539 28,467
Net income $ 15,697 $ 11,927 $ 56,408 $ 46,398
Net income Applicable to Common
Stock $ 14,134 $ 11,927 $ 51,719 $ 46,398
Earnings per share (1) $ 0.27 $ 0.22 $ 1.00 $ 0.90
Dividends per share (1) $ 0.021 $ 0.021 $ 0.084 $ 0.106
<FN>
(1) Per share amounts have been adjusted to reflect all stock
dividends and stock splits.
</TABLE>
