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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 20, 1997
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 releases of Sovereign Bancorp, Inc. ("Sovereign"),
dated January 20, 1997 and January 23, 1997, respectively,
attached hereto as Exhibits 99.1 and 99.2, respectively, are
incorporated herein by reference.
Item 7. Financial Statements and Exhibits.
(a) Exhibits.
The following exhibits are filed herewith:
99.1 Press Release, dated January 20, 1997, of
Sovereign Bancorp, Inc.
99.2 Press Release, dated January 23, 1997, 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 3, 1997
By/s/ Mark R. McCollom
Mark R. McCollom
Chief Accounting Officer
<PAGE>
EXHIBIT INDEX
Exhibit Number
99.1 Press Release, dated January 20, 1997,
of Sovereign Bancorp, Inc.
99.2 Press Release, dated January 23, 1997, of Sovereign
Bancorp, Inc.
EXHIBIT 99.1
FOR IMMEDIATE RELEASE CONTACT:
Karl D. Gerhart (610) 320-8437
INTERNET: [email protected]
Mark R. McCollom (610) 208-6426
Linda Hagginbothom (610) 320-8498
January 20, 1997
SOVEREIGN ANNOUNCES
1996 NET OPERATING INCOME
UP 22%
WYOMISSING, PA.....Sovereign Bancorp, Inc.
("Sovereign") (NASDAQ/NMS:SVRN), parent company of Sovereign Bank
(the "Bank"), today announced that 1996 net operating income
increased 22% to a record $68.7 million from 1995 net operating
income of $56.4 million. Operating earnings per share
("Operating EPS") for 1996 prior to the adjustment for the
recently announced Special 20% Stock Split, payable February 14,
1997 were $1.15, an increase of 15% compared to $1.00 per share
for 1995. Adjusted for the 20% stock split, Operating EPS for
1996 were $0.96 as compared to $0.83 for 1995.
For 1996, Return on Average Equity was 15.14% and Return on
Average Assets was 0.78% compared to 14.95% and 0.78%,
respectively for 1995. The amounts presented exclude a non-
recurring after tax charge of $17.2 million paid to the FDIC
during 1996 for the recapitalization of the Savings Association
Insurance Fund ("SAIF").
Reported net income for the year ended 1996, including the
impact of the nonrecurring item described above and adjusting for
the stock split, was $51.5 million resulting in reported year-end
earnings per share ("EPS") of $0.72.
Sovereign's fourth quarter 1996 net income increased 23% to
$19.0 million from $15.7 million for the fourth quarter of 1995.
Prior to the stock split, fourth quarter EPS were $0.31 compared
to $0.27 in 1995. As adjusted for the pending 20% stock split,
fourth quarter 1996 EPS were $0.26 compared to $0.22 for fourth
quarter 1995.
On a cash basis, which adds back the non-cash expense of
goodwill amortization, Sovereign's net income for the fourth
quarter of 1996 was $21.3 million or $0.35 share compared to
$18.2 million or $0.31 share for the fourth quarter of 1995.
This represents an increase of 17% and 13% respectively over the
prior year's fourth quarter. For the fourth quarter of 1996,
return on tangible equity was 24.51%, compared to 24.80% for the
same period in 1995.
For 1996, Sovereign's net operating income on a cash basis
was $78.0 million or $1.30 per share compared to $66.1 million or
$1.17 per share in 1995. This represents an increase of 18% and
11% over 1995, respectively. Return on tangible equity for 1996
was 23.24% compared to 26.04% in 1995.
"We are pleased with Sovereign's 1996 results which
represent the eleventh straight year of increased earnings,"
stated Jay S. Sidhu, Sovereign's President and Chief Executive
Officer. "Sovereign's 1996 results reflect the Company's
continued commitment to building shareholder value by
consistently increasing earnings and executing strategic
initiatives to transform Sovereign into a Super Community Bank,
having a product line and sales culture of a commercial bank with
the cost structure of a thrift," Sidhu continued.
In early 1996, Sovereign outlined its plan to become a Super
Community Bank. Sovereign has made significant progress toward
building a strong infrastructure to obtain this goal through the
execution of several strategic initiatives.
One of Sovereign's strategic initiatives is to further
increase net interest income by increasing its penetration in the
higher spread consumer and commercial banking business. Consumer
loans funded during the fourth quarter of 1996 totaled
$258.5 million, increasing 1996 year-to-date fundings to
$665.1 million, up from $256.6 million for the year ended 1995.
Sovereign's commercial banking division produced loan
originations of $34.1 million during the fourth quarter of 1996
which increased 1996 year-to-date commercial originations to
$117.2 million as compared to $7.1 million for the same period
last year.
During the fourth quarter of 1996, Sovereign closed
$259.2 million of residential mortgages of which approximately
69% were adjustable rate loans, primarily those with adjustment
periods of one year or less, as compared to $407.6 million of
residential originations during the fourth quarter of 1995. For
1996, residential originations were $2.1 billion, with adjustable
rate loans accounting for 81% of the total.
As a result of these initiatives, Sovereign's fourth quarter
net interest income increased to $55.7 million, a 20% increase
over 1995's fourth quarter net interest income. The net interest
margin for the fourth quarter was 2.42% compared to 2.41% in
1995's fourth quarter and 2.44% in the third quarter of 1996.
"We are encouraged that the volumes of new business coming into
Sovereign through the consumer and commercial banking divisions
will help increase the net interest margin in 1997," stated
Sidhu.
As a result of Sovereign's emphasis on increasing core
deposits, deposit fee income reported for the fourth quarter of
1996 was $4.0 million, an increase of 33% when compared to
$3.0 million for the fourth quarter of 1995. Other income was
$9.7 million for the fourth quarter 1996, an increase of 43%
compared to $6.8 million reported for the fourth quarter of 1995.
For 1996, deposit fee income grew to $12.0 million, an increase
of 27% over 1995.
Sovereign continued to pursue its strategic initiatives of
improving productivity and controlling expenses through process
improvements and technological initiatives. Due to investments
made in 1996 to transform Sovereign into a Super Community Bank,
Sovereign's ratio of general and administrative expenses to
average assets was 1.31% for the fourth quarter of 1996, a slight
increase from 1.30% for the fourth quarter 1995 but down from
1.32% in the third quarter of 1996 and 1.39% in the second
quarter of 1996. The year-to-date ratio has improved to 1.34%
for 1996 from 1.39% for the same period of 1995.
For the fourth quarter of 1996, Sovereign's efficiency ratio
(all general and administrative expenses as a percentage of net
interest income and recurring non-interest income) was 49%,
consistent with the same period last year. The year-to-date
efficiency ratio was 49% for year ended 1996, down from 51% for
year ended 1995. As another example of the commitment to cost
control, Sovereign's total headcount at December 31, 1996 was
1,456 compared to 1,412 at December 31, 1995, an increase of 3%
despite an increase in assets of 16%.
Continuing Sovereign's ongoing strategy toward above average
asset quality, Sovereign provided $1 million for possible loan
losses during the fourth quarter of 1996 compared to an average
provision for loan losses of $500,000 in each of the previous
three quarters. The ratio of non-performing assets to total
assets was 0.54% at December 31, 1996, consistent with the same
period last year. Excluding government guaranteed student loans
for which Sovereign retains minimal credit risk, Sovereign's
total 30-day+ delinquencies to total loans at December 31, 1996
were 1.27%, an improvement from 1.32% at December 31, 1995.
Total assets at December 31, 1996 were $9.4 billion, as
compared to total assets at December 31, 1995 of $8.1 billion.
At December 31, 1996, total loans were $6.2 billion, a 30%
increase over the total loans outstanding at December 31, 1995.
Within the loan portfolio, single family mortgage loans grew by
$973.7 million or 24%, consumer loans grew by $400.1 million or
81% and commercial loans grew by $61.5 million or 42%. The
investment portfolio declined. Total deposits, core deposits and
shareholders' equity were $5.1 billion, $2.3 billion and
$475.8 million, respectively at December 31, 1996, compared to
$5.0 billion, $2.2 billion and $427.0 million, respectively at
December 31, 1995. "As indicated by the recent announcement on
the 6 for 5 stock split and the 15% increase in the cash
dividend, the Board is pleased with progress in 1996 toward a
Super Community Bank and optimistic about Sovereign's prospects
in 1997," stated Richard E. Mohn, Sovereign's Chairman of the
Board.
Sovereign continues progress on its acquisition of First
State Financial Services ("First State"), a $600 million savings
bank headquartered in West Caldwell, New Jersey. First State
operates 14 banking offices in northern and central New Jersey.
<PAGE>
<TABLE>
<CAPTION>
CONDENSED FINANCIAL INFORMATION
(in Thousands)
BALANCE SHEET At December 31, 1996 At December 31, 1995
<S> <C> <C>
Total Assets $ 9,433,154 $ 8,078,287
Loans 6,156,322 4,674,364
Investments & MBSs 2,196,287 2,966,721
Total Liabilities 8,957,339 7,651,262
Deposits 5,052,441 5,039,143
Stockholders' Equity $ 475,815 $ 427,025
<CAPTION>
3 Months 12 Months
Ended Ended
INCOME STATEMENT December 31 December 31
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net Interest Income $55,701 $46,438 $216,710 $174,226
Loan Loss Provisions 1,000 250 2,516 1,000
Other Income 9,651 6,774 26,683 25,829
Gen & Adm Expenses 30,785 25,580 118,191 100,267
Other Expenses 2,976 3,360 11,862 12,841
Non-Recurring Items(1) -0- -0- 27,818 -0-
Income Before Taxes 30,591 24,022 83,006 85,947
Income Tax Provision 11,632 8,325 31,543 29,539
Net Income $18,959 $15,697 $ 51,463 $ 56,408
======= ======= ======== ========
EARNINGS PER SHARE ("EPS") $ 0.26 $ 0.22 $ 0.72 $ 0.83
======= ======= ======= =======
NET INCOME BEFORE NON-
RECURRING ITEMS $18,959 $15,697 $ 68,710 $ 56,408
======= ======= ======== ========
EPS BEFORE NON-RECURRING
ITEMS(2) $ 0.26 $ 0.22 $ 0.96 $ 0.83
======= ======= ======= =======
</TABLE>
(1) Non-recurring Item includes $17.2 million (after tax) for a
one-time assessment charged for the recapitalization of the
SAIF insurance fund.
(2) Restated for all stock split\dividends declared through
January 1997.
<PAGE>
<TABLE>
<CAPTION>
KEY STATISTICS
3 Months 12 Months
Ended Ended
PERFORMANCE STATISTICS December 31 December 31
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Return on Average Assets (1) 0.82% 0.82% 0.78% 0.78%
Return on Average Equity (1) 16.55% 15.34% 15.14% 14.95%
General & Administrative
Expenses on Average Assets 1.31% 1.30% 1.34% 1.39%
Efficiency Ratio (2) 49% 49% 49% 51%
<CAPTION>
CONTROL STATISTICS At Dec. 31, 1996 At Dec. 31, 1995
<S> <C> <C>
Shareholders' Equity to
Total Assets 5.04% 5.29%
Tangible Shareholders' Equity
to Tangible Assets (3) 3.91% 3.82%
Allowance for Loan Losses
to Total Loans 0.55% 0.73%
Non-Performing Assets
to Total Assets 0.54% 0.54%
General Reserves for Loan Losses
to Non-Performing Loans 74.15% 88.05%
Non-Performing Loans
to Total Loans 0.72% 0.83%
FTE Employees 1,456 1,412
<CAPTION>
STOCK STATISTICS At Dec. 31, 1996 At Dec. 31, 1995
<S> <C> <C>
Preferred Shares Outstanding 2,000,000 2,000,000
Common Shares Outstanding 49,701,094 47,737,828
Fully Diluted Shares Outstanding 60,660,026 57,715,876
Book Value Per Share (4 & 5) $ 6.64 $ 6.17
Tangible Book Value Per Share
Net of Tax Benefit (3 & 4) $ 5.44 $ 4.78
</TABLE>
NOTES:
(1) Excluding Non-Recurring one=time SAIF assessment. This
ratio including the one-time charge is not meaningful.
(2) Efficiency Ratio equals all general and administrative
expenses as a percentage of net interest income and
recurring non-interest income.
(3) Computed Net of Tax Benefit on certain Intangible
Assets.
(4) Restated for all Stock Splits/Dividends declared
through January 1997.
(5) Book Value equals Equity divided by Common Shares and
if-converted Preferred Shares.
EXHIBIT 99.2
FOR IMMEDIATE RELEASE CONTACT:
Karl D. Gerhart (610) 320-8437
INTERNET: [email protected]
Mark R. McCollom (610) 208-6426
Linda Hagginbothom (610) 320-8498
January 23, 1997
SOVEREIGN AMENDS
6 for 5 STOCK SPLIT
WYOMISSING, PA.....Sovereign Bancorp, Inc.
("Sovereign") (NASDAQ/NMS:SVRN), parent company of Sovereign Bank
(the "Bank"), today announced that its Board of Directors has
amended the timing of the 6 for 5 Stock split (20% Stock Split)
on its common stock.
"This change is being made to alleviate shareholder
confusion concerning the dates of the stock split, which was
declared on January 16, 1997" stated Karl D. Gerhart, Sovereign's
Chief Financial Officer and Treasurer.
The common stock split will be effective in the form of one
additional new share of common stock distributed for every five
shares of common stock owned and a check payable to the
shareholder for any fractional shares created by the dividend.
The additional shares will be distributed on March 14, 1997 to
common stock shareholders of record on March 3, 1997.
"This will not affect the 15% increase in the cash dividend
payable on February 14, 1997 to common stock shareholders of
record as of January 29, 1997," Gerhart continued. The 15%
increase in the common stock cash dividend payable on
February 14, 1997 equates to $0.024 per share and will be
adjusted to $0.02 per share for the 20% stock split in future
quarters.
Today, Thursday, January 23, 1997, Sovereign's common stock
closed at $15.00 and its preferred stock closed at $77.75.
- THE END -
