SOVEREIGN BANCORP INC, DEF 14A, 2000-03-24

SOVEREIGN BANCORP INC
DEF 14A, 2000-03-24
SAVINGS INSTITUTION, FEDERALLY CHARTERED

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PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934

Filed by the Registrant [X]

Filed by a Party other than the Registrant [ ]

Check the appropriate box:

[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12

SOVEREIGN BANCORP, INC.
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(Name of Registrant as Specified in its Charter)

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(Name of Person(s) Filing Proxy Statement)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

1) Title of each class of securities to which transaction applies:

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2) Aggregate number of securities to which transaction applies:

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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):

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4) Proposed maximum aggregate value of transaction:

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5) Total fee paid:

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[ ] Fee paid previously with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.

1) Amount Previously Paid:

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[LOGO]

March 27, 2000

Dear Shareholder:

Sovereign Bancorp will hold its 2000 Annual Meeting of Shareholders on
Thursday, April 27, 2000 at 3:30 p.m. in the Regency Ballroom of The Sheraton
Reading Hotel, Route 422 West, Paper Mill Road Exit, Wyomissing, Pennsylvania.
For your convenience, directions to The Sheraton Reading Hotel are included on
the back cover of the Proxy Statement.

Sovereign's Board of Directors believes that it is important for
Sovereign's shareholders to participate personally in the process by which
Sovereign's directors are elected. The election of diligent, active, involved
and responsible directors is the cornerstone of corporate governance at
Sovereign. Sovereign's Board actively chooses, directs and compensates
Sovereign's senior management, establishes programs to oversee Sovereign's
compliance with laws and reviews corporate plans, policies and commitments with
a view to representing all of Sovereign's stakeholders, including its
shareholders, customers, team members, and the communities Sovereign serves.

THE NOTICE AND PROXY STATEMENT, WHICH ARE SET FORTH IN THE FOLLOWING PAGES,
DESCRIBE THE BUSINESS TO BE CONDUCTED AT THE MEETING. PROPOSALS 1 AND 2 TO BE
ACTED ON AT THE MEETING HAVE BEEN UNANIMOUSLY APPROVED AND RECOMMENDED BY
SOVEREIGN'S BOARD OF DIRECTORS. PLEASE CAREFULLY READ THE DESCRIPTION OF THE
PROPOSALS AND VOTE FOR THEIR ADOPTION.

Your vote is important regardless of the number of shares you own. Whether
or not you plan to attend the Meeting, we urge you to complete, sign, date and
return the enclosed proxy card as soon as possible in the enclosed envelope.
This will not prevent you from voting in person at the Meeting but will assure
that your vote is counted if you are unable to attend.

ADMISSION TO THE MEETING WILL BE BY TICKET ONLY. IF YOU ARE A REGISTERED
SHAREHOLDER PLANNING TO ATTEND THE MEETING, PLEASE RETAIN THE BOTTOM PORTION OF
THE PROXY CARD AS YOUR ADMISSION TICKET. IF YOUR SHARES ARE HELD THROUGH AN
INTERMEDIARY SUCH AS A BANK OR BROKER, FOLLOW THE INSTRUCTIONS IN THE PROXY
STATEMENT TO OBTAIN A TICKET. IF YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE
AND RETURN THE ATTENDANCE/RESERVATION CARD INCLUDED INSIDE THE PROXY STATEMENT
AND RETURN IT AS SOON AS POSSIBLE. WE WILL BASE ADMITTANCE TO THE MEETING UPON
AVAILABILITY OF SEATING.

We urge you to participate in the Meeting in person or by proxy. Thank you
very much for your continued interest in Sovereign.

Sincerely,

/s/ Richard E. Mohn
-------------------------------------
Richard E. Mohn
Chairman of the Board

/s/ Jay S. Sidhu
-------------------------------------
Jay S. Sidhu
President and Chief Executive Officer

<PAGE>

[LOGO]

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NOTICE
OF
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 27, 2000

------------------------

NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders (the
"Meeting") of Sovereign Bancorp, Inc. ("Sovereign") will be held on Thursday,
April 27, 2000, at 3:30 p.m. (Eastern Time) in the Regency Ballroom of The
Sheraton Reading Hotel, Route 422 West, Paper Mill Road Exit, Wyomissing,
Pennsylvania for the following purposes:

(1) To elect two (2) Class I directors of Sovereign to serve for a
term of three years and until their successors shall have been elected and
qualified;

(2) To ratify the appointment by Sovereign's Board of Directors of
Ernst & Young LLP as Sovereign's independent auditors for the fiscal year
ending December 31, 2000;

(3) If presented, to consider and act upon a shareholder proposal
opposed by the Board of Directors; and

(4) To transact such other business as may properly be presented at
the Meeting.

Shareholders of record at the close of business on March 1, 2000, are
entitled to notice of, and to vote at the Meeting.

WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, PLEASE SIGN, DATE,
AND RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED.

BY ORDER OF THE BOARD OF DIRECTORS

/s/ Lawrence M. Thompson, Jr.
-------------------------
LAWRENCE M. THOMPSON, JR.
SECRETARY

Wyomissing, Pennsylvania
March 27, 2000

<PAGE>

SOVEREIGN BANCORP, INC.

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PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
APRIL 27, 2000

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GENERAL INFORMATION

SOLICITATION OF PROXIES. The Board of Directors of Sovereign Bancorp, Inc.
("Sovereign"), parent company of Sovereign Bank, is providing this Proxy
Statement to solicit proxies for use at Sovereign's annual meeting of
shareholders to be held April 27, 2000, or any adjournment thereof (the
"Meeting"). Sovereign is first mailing this Proxy Statement and the accompanying
proxy on or about March 27, 2000. Sovereign will pay the expense of soliciting
proxies. Sovereign expects to solicit proxies primarily by mail. Sovereign's
directors, officers and team members may also solicit proxies personally, by
telephone and by telegraph. In addition, Sovereign has retained Georgeson &
Company, Inc. to assist with the solicitation of proxies at an estimated cost of
$7,500, plus reasonable out-of-pocket expenses.

VOTING AND REVOCATION OF PROXIES. The execution and return of the enclosed
proxy will not affect a shareholder's right to attend the Meeting and vote in
person. Any shareholder giving a proxy may revoke it at any time before it is
exercised by submitting written notice of its revocation or a subsequently
executed proxy bearing a later date to the Secretary of Sovereign, or by
attending the Meeting and electing to vote in person. Shareholders of record at
the close of business on March 1, 2000 (the "Record Date"), are entitled to
notice of, and to vote at, the Meeting. On the Record Date, there were
230,437,610 shares of Sovereign common stock outstanding, each of which will be
entitled to one vote at the Meeting.

If the enclosed proxy is appropriately marked, signed and returned in time
to be voted at the Meeting, the shares represented by the proxy will be voted in
accordance with the instructions marked thereon. Signed proxies not marked to
the contrary will be voted "FOR" the election, as directors, of the Board of
Directors' nominees; "FOR" the ratification of Ernst & Young LLP as Sovereign's
independent auditors for 2000; and "AGAINST" approval of the shareholder
proposal described below. Signed proxies will be voted "FOR" or "AGAINST" any
other matter that properly comes before the Meeting or any adjournment thereof,
in the discretion of the persons named as proxyholders, including with respect
to any matters not complying with the advance notice provisions set forth in
Sovereign's Bylaws.

QUORUM. The presence, in person or by proxy, of shareholders entitled to
cast at least a majority of the votes that all shareholders are entitled to cast
will constitute a quorum at the Meeting. Abstentions with respect to one or more
proposals voted upon at the Meeting will be included for purposes of determining
the presence of a quorum at the Meeting.

ATTENDANCE AT THE MEETING. Attendance at the Meeting will be limited to
shareholders as of the Record Date, their authorized representatives and guests
of Sovereign. Admission will be by ticket only. For registered shareholders, the
bottom portion of the proxy card enclosed with the Proxy Statement is their
admission ticket. Beneficial owners with shares held through an intermediary,
such as a bank or broker, should request tickets in writing from Investor
Relations, Sovereign Bancorp, Inc., 1130 Berkshire Boulevard, Wyomissing,
Pennsylvania 19610, and include proof of ownership, such as a bank or brokerage
firm account statement, or a letter from the broker, trustee, bank or nominee
holding their stock, confirming beneficial ownership. Tickets may be issued to
others at the discretion of Sovereign. We will base admittance to the Meeting on
the availability of seating. If you plan to attend the Meeting, please provide
the information requested on the attendance card included inside the Proxy
Statement and return it in the enclosed envelope as soon as possible.

<PAGE>

INFORMATION CONCERNING THE BOARD OF DIRECTORS,
SOVEREIGN'S GOVERNANCE PROCEDURES
AND COMMITTEES OF THE BOARD OF DIRECTORS

Sovereign's Articles of Incorporation provide that the number of Sovereign
directors shall consist of not less than six nor more than twenty members, as
fixed by the Board of Directors from time to time. The Articles also divide the
Board into three classes, which under applicable law, must be, in terms of the
number of directors in each class, as nearly equal as possible.

Effective November 1, 1999, the Board of Directors increased the size of
the Board from seven members to eight members, and Mr. Brian Hard was elected as
a Class II director to fill the vacancy created by the increase in the size of
the Board. Mr. Patrick J. Petrone, a Class I director, has elected to retire,
effective upon the election of his successor, at the Meeting. Effective upon Mr.
Petrone's retirement, the number of members of the Board of Directors will be
reduced from eight members to seven members, and in order to comply with the
requirement set forth in Sovereign's Articles of Incorporation that the number
of directors in each Class be as nearly equal in number as possible, the Board
of Directors has unanimously nominated Mr. Brian Hard for reelection as a Class
I director to fill the vacancy which will result from Mr. Petrone's retirement.

Consistent with its perception of good principles of corporate governance,
Sovereign historically has required that the preponderance of its Board consist
of outside, non-employee directors, and has delegated important policy making
and oversight functions to committees which also consist predominantly of
outside directors. A description of the committees which possess significant
corporate governance responsibilities is set forth below.

o Sovereign's Audit Committee consists of five directors, all of whom are
outside directors. Sovereign's Audit Committee serves as the principal
liaison among the Board of Directors, Sovereign's independent auditors
and Sovereign's internal audit function. It is responsible for, among
other things, reporting to Sovereign's Board on the results of the annual
audit. The Committee reviews and evaluates the scope of the audit,
accounting policies and reporting practices, internal auditing, internal
controls, security procedures and other matters considered appropriate.
The Committee also reviews the performance of Sovereign's independent
auditors in connection with the audit of Sovereign's financial
statements. Importantly, from a corporate governance perspective, the
Audit Committee also regularly evaluates the independent auditors'
independence from Sovereign and Sovereign's management. Depending on the
nature of matters under review, the outside auditors, and such officers
and other team members, as necessary, attend all or part of the meetings
of the Committee. Sovereign's Audit Committee met three times during
1999.

o Sovereign's Nominating Committee consists of seven directors, six of whom
are outside directors. Sovereign's Bylaws provide for both shareholder
and Board nomination of director candidates. The Committee has the
important task of taking the first step toward assuring good corporate
governance by identifying, reviewing and recommending, to the full Board,
potential nominees for submission to Sovereign's shareholders for
election as directors of Sovereign or for election to fill vacancies on
the Board. The Committee strives to identify, review and recommend only
those nominees who appear to possess (i) the highest personal and
professional ethics, integrity and values; (ii) sufficient education and
breadth of experience to understand, evaluate and suggest solutions to
the many problems facing financial institutions in an increasingly
competitive environment; (iii) a reasoned and balanced commitment to
Sovereign's social responsibilities; (iv) an interest in and the
availability of time to be involved in Sovereign's affairs over a
sustained period; (v) the reputation and stature required to represent
Sovereign in the communities Sovereign serves, as well as before
Sovereign's shareholders and other stakeholders; (vi) a willingness to
objectively appraise management performance in the interest of Sovereign
and its stakeholders; (vii) an open mind on all policy issues affecting
the overall interests of Sovereign and its stakeholders; and (viii)
involvement only in other activities or interests which do not create a
conflict, or the appearance of a conflict, with the director's
responsibilities to Sovereign and its stakeholders. The Committee's
review of candidates is performed without regard to

<PAGE>

gender, race or religious affiliation. One of the objectives of this
review is to have a Board which consists of members with a mix of diverse
backgrounds, skills, experiences and personalities which will foster, not
only good decision making, but also the chemistry to create an
environment encouraging active, constructive, and informed participation
among Board members. The Committee met once during 1999.

o Sovereign's Ethics and Corporate Governance Committee, which Sovereign
believes to be one of the few such Board committees in the United States,
consists of seven directors, six of whom are outside directors. The
Committee monitors, oversees and reviews compliance, by Sovereign's
directors, officers and team members with Sovereign's Code of Conduct.
Sovereign's Code of Conduct regulates potential conflicts of interest and
transactions between Sovereign and its affiliates, the possible misuse or
abuse of confidential information by Sovereign affiliates, and trading in
Sovereign stock by Sovereign affiliates. The Committee function,
therefore, is to assure, to the extent practicable, that Sovereign's
directors, management, other affiliates and team members act in
accordance with the highest standards of professional and ethical
conduct. When exercising its authority, the Committee is required to
consider Sovereign's mission, vision and values, including the impact of
its actions on Sovereign's stakeholders, including Sovereign's
shareholders, customers and team members, and the communities Sovereign
serves. The Committee also is required to periodically review Sovereign's
Code of Conduct and to make recommendations to the Board with respect to
modification. During 1996 Sovereign expanded the scope of the
responsibility of this Committee to specifically include corporate
governance matters. The Committee met once during 1999.

o Sovereign's Compensation Committee consists of six directors, all of whom
are outside directors. This Committee is responsible for the important
task of studying and making recommendations to the Board on compensating
and providing incentive to executive management, principally Sovereign's
Chief Executive Officer. Among other responsibilities, the Committee
makes appraisals of the Chief Executive Officer. In addition, the
Committee reviews Sovereign's executive compensation structure in an
effort to ensure that executive compensation (i) is competitive and (ii)
is closely linked to Sovereign's financial performance. The Committee
also attempts to assure, through programs which are substantially
weighted in favor of the use of Sovereign stock as a compensation medium,
that the interests of executive management are aligned, to the extent
practicable, with the interests of Sovereign's shareholders. This
Committee met three times during 1999.

Sovereign also maintains a number of other important committees, including
Sovereign's Merger and Acquisition Committee, Sovereign's Pension Committee and
Sovereign's Executive Committee. Sovereign's Merger and Acquisition Committee,
which met once during 1999, consists of four directors, three of whom are
outside directors. The Committee reviews and recommends to Sovereign's Board of
Directors candidates for acquisition by Sovereign. Sovereign's Pension
Committee, which met three times during 1999, presently consists of six
directors, five of whom are outside directors. This Committee administers
Sovereign's Pension Plan, Employee Stock Ownership Plan, Stock Purchase Plan,
401(k) Retirement Plan and Sovereign's Long Term Deferred Compensation Plans and
Programs. This Committee also approves Sovereign's investment policy and
guidelines, reviews investment performance, and appoints and retains trustees
and investment managers for Sovereign's retirement plans. The Board of Directors
also has an Executive Committee, which has the ability to exercise all of the
powers of the Board in the management and direction of the business and affairs
of Sovereign between Board meetings, except those, which by statute, are
reserved to the Board of Directors. This Committee, which met twice during 1999,
consists of five directors, four of whom are outside directors.

Also consistent with its perception of good corporate governance,
Sovereign's board, working with management, has established a series of
practices and procedures to assure a flow of information about Sovereign's
business to its directors in an effort to maximize continued active interest,
involvement and participation by Board members, as well as diligent and
effective Board decision making.

<PAGE>

New Sovereign directors receive manuals which include information on
Sovereign's vision, mission, values and style, as well as copies of Sovereign's
Bylaws, policies, procedures and guidelines. They are also provided with an
opportunity to meet with Sovereign's management and visit Sovereign's
facilities.

Pre-meeting materials are routinely distributed to Board members in advance
of meetings. These materials include in-depth reports on each of Sovereign's
critical success factors, including reports on asset quality, cost containment,
interest rate and other risks. These materials also include reports for
Sovereign's major business units, consisting not only of financial data, but
also production, sales and marketing data and information on market and industry
trends, as well. These materials also include background and write-ups on items
coming before the Board. In an effort to be informed, directors also
periodically visit sites of new branches and acquisitions, as well as other
Sovereign locations germane to the decision making process.

Senior and executive officers routinely attend at least a portion of every
Board meeting and they, and other members of management, frequently brief and
seek advice from the Board, not only on items coming before the Board, but also
on new products, marketing strategies and human resource initiatives. The Board
periodically invites professionals and representatives of securities firms to
make presentations to the Board in order to make the Board more aware, among
other things, of investor perceptions of Sovereign. The Board also periodically
meets with Sovereign's regulators in order for these regulators to make the
Board more aware of the changing regulatory environment, and industry trends, as
well as to discuss their assessment of Sovereign. Board members take these and
other opportunities to actively discuss Sovereign specific and industry specific
information and trends with these officers and other visitors.

Sovereign's Board meets once or twice each year, over a two-day period,
with Sovereign's executive management team to review Sovereign's business plans,
discuss corporate strategy and evaluate Sovereign's strengths, weaknesses,
opportunities and threats, as well as to review Sovereign's progress against
Sovereign's vision, mission, values and critical success factors.

Sovereign's Board also extensively studies Sovereign's strategic
alternatives including sale, continuing its current strategy, or engaging in a
merger of equals at least once a year. Sovereign has pursued this policy for the
past several years and expects to continue it in the future, particularly in
light of rapidly changing competitive conditions. Investment banking firms are
usually asked to provide material for and/or to make presentations to or
otherwise assist the Board at these sessions.

In addition, Sovereign's Board has identified the following areas of Board
and Board Committee involvement and responsibility as its principal areas of
focus in its efforts to achieve good corporate governance and to represent
Sovereign's stakeholders effectively:

o Ongoing active and participatory review of Sovereign's strategic plan and
its long range goals and of Sovereign's performance against such plan and
goals, and the evaluation of the desirability, as appropriate, of
modifications to such plans and goals;

o Monitoring of Sovereign's activities which may pose significant risks to
Sovereign and of Sovereign's programs to respond to and contain such
risks;

o Ongoing review and monitoring of Sovereign's progress in achieving its
critical success factors, including assessment of the development of
Sovereign's key team members;

o Periodic, independent and objective review of the performance and
development of the Chief Executive Officer and other members of executive
management and their compensation relative to such performance;

o Ongoing review of Sovereign's adherence to its corporate "Mission,"
"Vision" and "Values," which include Sovereign's articulation of its
responsibilities to its stakeholders, including its shareholders,
customers, team members, and the communities Sovereign serves;

o Periodic study, using outside resources, of Sovereign's strategic
alternatives, including sale, continuing its current strategy, or
engaging in a merger of equals;

<PAGE>

o Ongoing review of, and compliance with, Sovereign's policies and
procedures, particularly its Code of Conduct, and other policies designed
to assure compliance by Sovereign with law and regulation;

o Review of the selection process for nominees for election to Sovereign's
Board and the overall quality, interest, diligence, participation and
contribution of its members; and

o The availability, dissemination and explanation of the information which
the Board and management believe is needed for the Board to perform its
duties diligently and effectively in the interest of Sovereign's
stakeholders.

The Board met 17 times during 1999. Each director attended at least 75% of
the total number of meetings of the Board and its Committees on which the
director served during 1999 based on the number of such meetings held during the
period for which each person served as a director or on a Committee.

In addition to consisting principally of outside directors, Sovereign's
Board occasionally excludes management directors from meetings. It also
otherwise acts in an independent manner and considers itself to be interested,
diligent, actively involved in Sovereign's affairs and otherwise dedicated to
principles of good corporate governance.

In what it perceives as an important action from the perspective of
Sovereign's shareholders, Sovereign's Board, in January 1998, adopted a policy
which requires directors, and certain key officers to own, by certain dates, a
specified dollar value of Sovereign stock geared generally to their degree of
responsibility or salary levels. Under this policy, Sovereign directors,
Sovereign Bank directors, Sovereign's CEO and Sovereign executive management are
required to beneficially own shares of common stock having a value of $100,000,
$50,000, six times base salary, and three times base salary, respectively, at
all times during their tenure with Sovereign. Sovereign directors and
Sovereign's CEO achieved the ownership requirement by December 31, 1999 as
mandated by the policy, except Mr. Brian Hard, who, as a new director of
Sovereign, has until December 31, 2002 to achieve the ownership requirement.
Sovereign's executive management have already achieved the ownership requirement
before the mandated completion date of December 31, 2002. The completion date
for Sovereign Bank directors was December 31, 1999, except Sovereign's Board, in
accordance with the terms of the policy, granted an exception through December
31, 2000 to certain Sovereign Bank directors who, due to restrictions imposed
under federal securities laws, were unable to purchase Sovereign common stock
during a substantial portion of 1999 as a result of Sovereign's merger,
acquisition and related activities during the year. Senior management and
members of Sovereign's Strategy and Policy Committee are required to
beneficially own shares of Sovereign common stock having a value of two times
base salary by December 31, 2003. Shares of Sovereign common stock subject to
unexercised stock options and shares allocated to the account of a Sovereign
employee under Sovereign's Employee Stock Ownership Plan are not considered
beneficially owned for purposes of the Policy. Sovereign's Board took this
action, with the concurrence of its Ethics and Corporate Governance Committee,
in an effort to assure that the interests of directors, officers and certain key
employees are more completely aligned with those of Sovereign's shareholders.

ELECTION OF DIRECTORS

Sovereign's Board of Directors currently consists of eight members and is
divided into three classes: Class II directors, whose term expires in 2001;
Class III directors, whose term expires in 2002; and Class I directors, whose
present term expires in 2000 at the Meeting and, if and when elected at the
Meeting, whose term will expire in 2003.

<PAGE>

nominated Mr. Brian Hard for reelection as a Class I director to fill the
vacancy which will result from Mr. Petrone's retirement.

The Board of Directors has also unanimously nominated Cameron C. Troilo,
Sr. for election as a Class I director of Sovereign. Each of the nominees has
consented to being named in this Proxy Statement and to serve if elected. If any
of the nominees become unable to accept nomination or election, the persons
named in the proxy may vote for a substitute nominee selected by the Board of
Directors. Sovereign's management, however, has no present reason to believe
that any nominee listed below will be unable to serve as a director, if elected.

The two nominees who receive the highest number of votes cast at the
Meeting will be elected Class I directors. Shares represented by properly
executed proxies in the accompanying form will be voted for the Class I nominees
named below unless otherwise specified in the proxy by the shareholder. Any
shareholder who wishes to withhold authority from the proxyholders to vote for
the election of directors or to withhold authority to vote for any individual
nominee may do so by marking his or her proxy to that effect. Shareholders
cannot cumulate their votes for the election of directors. No proxy may be voted
for a greater number of persons than the number of nominees named.

The following table sets forth certain information concerning (i) the
nominees for election as Class I directors of Sovereign, (ii) the continuing
Class II and Class III directors of Sovereign, (iii) each named present or
former executive officer of Sovereign identified in the summary compensation
table on page 15, and (iv) all Sovereign directors and executive officers as a
group, including their beneficial ownership of shares of common stock of
Sovereign as of the Record Date. Unless otherwise indicated, each such Sovereign
director and each such named executive officer holds sole voting and investment
power over the shares listed as beneficially owned and the shares listed
constitute less than 1% of the outstanding shares. Unless otherwise indicated in
a footnote, shares indicated as being subject to options are shares issuable
pursuant to options outstanding and vested under Sovereign's stock option plans.
Time in service for certain directors includes time served as a director of
Sovereign's and Sovereign Bank's predecessor institutions.

<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF PERCENT OF
DIRECTOR BENEFICIAL COMMON
NAME AGE SINCE OWNERSHIP(1) STOCK
- ---- --- -------- ------------ ----------
<S> <C> <C> <C> <C>
NOMINEES AS CLASS I DIRECTORS
TO SERVE UNTIL 2003
Brian Hard............................................ 54 1999 2,488 --
Cameron C. Troilo, Sr................................. 61 1974 685,822(2) --

CONTINUING AS CLASS II DIRECTORS
TO SERVE UNTIL 2001
Rhoda S. Oberholtzer.................................. 69 1979 96,465(3) --
Daniel K. Rothermel................................... 61 1976 151,396(4) --

CONTINUING CLASS III DIRECTORS
TO SERVE UNTIL 2002
Richard E. Mohn....................................... 68 1981 516,954(5) --
Jay S. Sidhu.......................................... 48 1987 2,921,369(6) 1.3%
G. Arthur Weaver...................................... 66 1971 99,606(7) --

EXECUTIVE OFFICERS
Dennis S. Marlo (8)................................... 57 N/A 1,170,090(9) --
Lawrence M. Thompson, Jr.............................. 47 N/A 532,315(10) --
All Sovereign Directors and executive officers as a
group (nine persons)................................ N/A N/A 6,176,505(11)(12) 2.7%
</TABLE>

<PAGE>

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(1) The table reflects data supplied by each director and executive officer.
The table also reflects shares of Sovereign common stock owned by the
trustee of the Sovereign Employee Stock Ownership Plan (the "Sovereign
ESOP") which have been allocated to the accounts of the executive officers
identified in the table, and as a group.

(2) Mr. Troilo holds shared voting and investment power over 487,054 shares.
Shares and percent include 48,000 shares subject to vested options.

(3) Mrs. Oberholtzer holds shared voting and investment power over 525 shares.
Shares and percent include 48,000 shares subject to vested options.

(4) Mr. Rothermel holds shared voting and investment power over 7,927 shares.
Shares and percent include 3,341 shares held by Mr. Rothermel's spouse with
respect to which Mr. Rothermel disclaims beneficial ownership. Shares and
percent include 82,151 shares subject to vested options.

(5) Mr. Mohn holds shared voting and investment power over 166,340 shares.
Shares and percent include 103,324 shares subject to vested options.

(6) Mr. Sidhu holds shared voting and investment power over 665,391 shares.
Shares and percent include 983,115 shares subject to vested options and
28,658 shares held by Sovereign's 401(k) Retirement Plan that are allocated
to Mr. Sidhu's account and over which he exercises voting power. Shares and
percent include 20,606 shares purchased and held by the Sovereign ESOP
which are allocated to Mr. Sidhu's account and over which he exercises
voting power.

(7) Mr. Weaver holds shared voting and investment power over 18,518 shares.
Shares and percent include 66,751 shares subject to vested options.

(8) Upon completion of Sovereign's acquisition of ML Bancorp, Inc. on February
28, 1998. Mr. Marlo, the former President and Chief Executive Officer of ML
Bancorp, Inc., served as President of the Pennsylvania Division of
Sovereign Bank from February 28, 1998 until he was appointed Chief
Financial Officer and Treasurer of Sovereign effective May 18, 1998.

(9) Mr. Marlo holds shared voting and investment power over 28,903 shares. Mr.
Marlo's shares and percent include 624,740 shares subject to vested options
and 488 shares held by Sovereign's 401(k) Retirement Plan which are
allocated to Mr. Marlo's account and over which he exercises voting power.
Shares and percent include 758 shares purchased and held by the Sovereign
ESOP that are allocated to Mr. Marlo's account and over which he exercises
voting power.

(10) Mr. Thompson holds shared voting and investment power over 117,090 shares.
Mr. Thompson's shares and percent include 318,595 shares subject to vested
options and 5,692 shares held by Sovereign's 401(k) Retirement Plan which
are allocated to Mr. Thompson's account and over which he exercises voting
power. Shares and percent include 15,841 shares purchased and held by the
Sovereign ESOP that are allocated to Mr. Thompson's account and over which
he exercises voting power.

(11) In the aggregate, these persons hold shared voting and investment power
over 1,491,748 shares. Shares and percent include 2,274,676 shares subject
to vested options and 34,838 shares held by Sovereign's 401(k) Retirement
Plan allocated to the executive officers' accounts and over which they
exercise voting power. Shares and percent include 37,205 shares purchased
and held by the Sovereign ESOP that are allocated to participant accounts
and over which they exercise voting power.

(12) Under a policy adopted by Sovereign's Board in January 1998, Sovereign's
non-employee directors, Mr. Sidhu, Mr. Marlo and Mr. Thompson are required
to beneficially own shares of Sovereign common stock having a value of
$100,000, six times base salary, and three times base salary, respectively,
at all times during their tenure with Sovereign. Non-employee directors
achieved the ownership requirement by December 31, 1999 as mandated by the
policy, except for Mr. Brian Hard who, as a new director of Sovereign, has
until December 31, 2002 to achieve the ownership requirement. Mr. Sidhu
achieved the ownership requirement by December 31, 1999 as mandated by the
policy. Messrs. Marlo and Thompson have already achieved the ownership
requirement before the mandated completion date of December 31, 2002.
Shares of Sovereign common stock subject to unexercised stock options and
shares allocated to the account of Messrs. Sidhu, Marlo and Thompson under
Sovereign's ESOP are not considered beneficially owned for purposes of the
policy.

<PAGE>

The principal occupation and business experience during the last five years of,
and other information with respect to, each nominee for election as a director
of Sovereign and of each continuing director of Sovereign is as follows:

[PHOTO] BRIAN HARD. Mr. Hard became President of Penske Truck Leasing in 1988.
The company is one of the largest transportation services companies in
North America; employing 15,000 people and operating more than 130,000
commercial trucks. He was elected to Sovereign's Board effective
November 1, 1999, and has served as a director of Sovereign Bank since
1996. Mr. Hard has been active in several Sovereign Board committees
since his appointment as a director.

[PHOTO] RICHARD E. MOHN. Mr. Mohn became Chairman of the Board of Sovereign
Bank in November, 1989, and Chairman of Sovereign in May 1995. Mr.
Mohn is the retired Chairman of Cloister Spring Water Company,
Lancaster, Pennsylvania. Mr. Mohn serves as a member of Sovereign's
Executive, Compensation, Ethics and Corporate Governance, Merger and
Acquisition and Pension Committees and also serves as Chairman of
Sovereign's Nominating Committee. Mr. Mohn has served on Sovereign's,
Sovereign Bank's or predecessor institutions' boards, committees, or
advisory boards for 25 years.

[PHOTO] RHODA S. OBERHOLTZER. Mrs. Oberholtzer is a civic and community
leader. She was Manager of Stauffer's of Kissel Hill, a family owned
multi-location retail store in Lititz, Pennsylvania until her
retirement in 1996. Mrs. Oberholtzer serves on Sovereign's Audit,
Compensation, Pension, Nominating, and also serves as Chairperson of
Sovereign's Ethics and Corporate Governance Committee.

[PHOTO] DANIEL K. ROTHERMEL. Mr. Rothermel became President and Chief
Executive Officer of Cumru Associates, Inc., a private holding company
in 1989. He retired, in 1989, as Vice President, General Counsel and
Secretary of Carpenter Technology Corporation, a publicly held
specialty steel manufacturer, a position he held for more than ten
years. Mr. Rothermel serves as Chairman of the Executive Committee and
also serves as a member of Sovereign's Audit, Compensation, Ethics and
Corporate Governance, Merger and Acquisition and Nominating
Committees.

<PAGE>

[PHOTO] JAY S. SIDHU. Mr. Sidhu became President and Chief Executive Officer
of Sovereign in November 1989, and was named President and Chief
Executive Officer of Sovereign Bank in March 1989. Mr. Sidhu
previously served as Treasurer and Chief Financial Officer of
Sovereign since the organization of Sovereign in 1987. Mr. Sidhu is a
member of the Board of Directors of Old Guard Group, Inc., a publicly
held holding company for several property and casualty insurance
companies. Mr. Sidhu serves as a member of Sovereign's Executive,
Ethics and Corporate Governance, Pension Nominating Committees, and
also serves as Chairman of Sovereign's Merger and Acquisition
Committee.

[PHOTO] CAMERON C. TROILO, SR. Mr. Troilo is the President and Chief Executive
Officer of Cameron C. Troilo, Inc., a privately held holding company
for entities engaged in the construction, building material supply,
and real estate management businesses. Mr. Troilo previously served as
Vice Chairman of Yardley Savings & Loan Association, which was
acquired by Sovereign Bank in 1989. He presently serves on the Audit,
Ethics and Corporate Governance, Merger and Acquisition, Nominating
and Pension Committees, and also serves as Chairman of Sovereign's
Compensation Committee.

[PHOTO] G. ARTHUR WEAVER. Mr. Weaver is a real estate and insurance executive
with the George A. Weaver Company, New Holland, Pennsylvania. Mr.
Weaver is a member of the Board of Directors of Old Guard Group, Inc.,
a publicly held holding company for several property and casualty
insurance companies. Mr. Weaver serves on Sovereign's Executive,
Audit, Compensation, Ethics and Corporate Governance and Nominating
Committees, and also serves as Chairman of Sovereign's Pension
Committee.

<PAGE>

COMPENSATION PAID TO DIRECTORS

Sovereign believes that the amount, form and methods used to determine
compensation are important ingredients in (i) attracting and maintaining
directors who are independent, interested, diligent and actively involved in
Sovereign's affairs, and (ii) more substantially aligning the interests of
Sovereign's directors with the interests of Sovereign's stakeholders.

In 1996, shareholders approved the Non-Employee Director Compensation Plan
as a means of compensating non-employee directors of Sovereign and Sovereign
Bank for all services rendered as directors. The Non-Employee Director
Compensation Plan requires that, on a quarterly basis, all non-employees serving
as directors of Sovereign and/or Sovereign Bank receive a fixed number of shares
of Sovereign common stock, plus, except for the Chairman, $600 cash for each
Sovereign Board meeting which the director attends and an additional $600 cash
for each Sovereign Bank Board meeting which the director attends if the director
is also a director of Sovereign Bank. Sovereign's Chairman must receive the
total amount of his compensation in Sovereign common stock. During the year
ended December 31, 1999, individuals who served as non-employee directors of
Sovereign and Sovereign Bank for the full year received 1,992 shares of
Sovereign common stock, plus $600 for each Board meeting which they attended.
Sovereign's Chairman's compensation for his service in 1999 was 7,680 shares of
Sovereign common stock. In addition, the Board set, in early 1999, financial
goals and hurdles to be met by executive management with respect to Sovereign's
operations. Because the primary hurdle of $1.16 in primary earnings per share
was met and exceeded in 1999, each non-employee director is eligible to receive
a $15,000 bonus which must be used to purchase Sovereign common stock.

In 1998, shareholders approved the Sovereign Bancorp, Inc. 1997
Non-Employee Directors' Stock Option Plan. In accordance with Sovereign's policy
of creating and maintaining a long-term mutuality of interests between
non-employee directors and Sovereign's shareholders, the Plan provides
non-employee directors of Sovereign (and not Sovereign Bank) with non-qualified
stock options as a portion of their compensation as directors. Each eligible
director receives 24,000 stock options each year (as adjusted pursuant to the
terms of the plan) for a period of five years. Each eligible director received
24,000 stock options in 1999.

Also, in accordance with Sovereign's policy of creating and maintaining
this long-term mutuality of interest, Sovereign adopted, in January 1998, a
policy under which all Sovereign's non-employee directors, as well as
Sovereign's CEO, who is a management director, are required to beneficially own
shares of Sovereign common stock having a value of $100,000 and six times base
salary, respectively, at all times during their tenure with Sovereign.
Non-employee directors achieved the ownership requirement by December 31, 1999
as mandated by the policy, except for Mr. Brian Hard who, as a new director, has
until December 31, 2002 to achieve the ownership requirement. Sovereign's CEO
achieved the ownership requirement by December 31, 1999 as mandated by the
policy. The value of unexercised stock options and the value of shares allocated
to an officer's account under Sovereign's ESOP are not considered for purposes
of the ownership policy.

In July 1999, Sovereign's Board of Directors adopted the Sovereign Bancorp,
Inc. Non-Employee Directors Services Compensation Plan (the "Services
Compensation Plan"). The Services Compensation Plan provides that individuals
who are non-employee directors of Sovereign on the date their service as a
Sovereign director ends are eligible to receive a cash payment in an amount
equal to three years' annual compensation based upon the highest annual retainer
paid to such director during his or her term of service. The base for the
payment amount does not include any other incentive compensation or other awards
that may have been paid to a non-employee director during the course of any
year. To be eligible, a non-employee director must have ten or more years of
service as a director with Sovereign, Sovereign Bank or an affiliate. Credit is
given for past service as a non-employee director on the board of any merged or
acquired holding company, bank, or other affiliate. Payments under the Services
Compensation Plan are made in one lump sum or in installments at the discretion
of the Board. The Plan further provides that, in the event a director dies
before receiving all benefits to which he or she is entitled, the director's
surviving spouse is entitled to receive any remaining benefits. Upon a change in
control, the Services Compensation Plan

<PAGE>

provides that each non-employee director then sitting on the Sovereign Board,
notwithstanding the length of time served as a director, becomes entitled to
receive an amount equal to three years' annual compensation based upon the
highest annual retainer that such non-employee director had been paid. The
definition of change in control for purposes of the Services Compensation Plan
is identical to the definition of that term contained in the Sovereign Bancorp,
Inc. 1996 Stock Option Plan.

REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION

Sovereign Bancorp, Inc.'s Executive Compensation Program is administered by
the Compensation Committee of the Board of Directors. The Compensation Committee
is composed entirely of non-employee Directors. The Executive Compensation
Program is structured and administered to support Sovereign's mission, which is
to be a highly focused, quality-driven, market-led and results-oriented company,
seeking continually to outperform the market in terms of consistency, growth in
earnings, quality of earnings and return on equity. The program is also
structured to link executive compensation to Sovereign's performance and,
through programs which are substantially weighted in favor of the use of
Sovereign stock as a compensation medium, to more closely align the interests of
executive management with those of Sovereign's shareholders.

The Compensation Committee evaluates and recommends, to the Board of
Directors, compensation and awards for the Chief Executive Officer. The Chief
Executive Officer, Jay S. Sidhu, evaluates and approves compensation and awards
for the other executive officers. Such compensation and awards are based upon
Sovereign's performance and each individual's performance in meeting personal
and team objectives.

COMPENSATION PHILOSOPHY

The Executive Compensation Program of Sovereign has been designed to:

o Align the interests of executives with the long-term interests of
shareholders through award opportunities which result in ownership of
common stock;

o Motivate key team members to achieve a superior level of quality
performance and financial results by rewarding them for their
achievement;

o Support a pay-for-performance policy that supplements overall company
compensation amounts based on company-wide results, team oriented results
and individual performance; and

o Provide the executive with an appropriate level of retirement income
through the use of a combination of both qualified and nonqualified
deferred compensation programs.

COMPONENTS OF COMPENSATION

At present, the Executive Compensation Program is comprised of salary,
annual cash incentive opportunities, long-term incentive opportunities in the
form of options to acquire Sovereign stock, deferred compensation and employee
benefits, which are also significantly stock based. As an executive's level of
responsibility increases, a greater portion of his or her potential total
compensation opportunity is based on performance incentives and less on salary
and employee benefits, causing greater variability in the individual's absolute
compensation from year-to-year. Base salary levels for the executive officers of
Sovereign are set below average compared to other companies within its peer
group because executives can have the opportunity for total compensation to
exceed the average salary for peer group companies upon Sovereign's achievement
of predetermined financial goals and objectives set by the Compensation
Committee and the Board of Directors. The intent is to have incentive
compensation tied to performance results. In 1998, Sovereign engaged a
compensation consultant to review and analyze Sovereign's base salary structure.
As a result of such review, adjustments were made to the annual base salaries of
certain employees and executive officers in October 1998 to reflect the
competitive salary market. Mr. Sidhu's annual base salary increased at that time
to $450,000. In accordance with Sovereign's policy, the increased base salary
levels remain below

<PAGE>

average compared to other companies within its peer group. The 1998 salary
increases were based primarily on the review and analysis of Sovereign's salary
structure compared to other companies within its peer group, and were not based
on any mathematical formula or directly related to any quantitative criteria.

SHORT-TERM INCENTIVE COMPENSATION

Incentive compensation awards in 2000 were based on a review of Sovereign's
1999 performance. This review included an assessment of Sovereign's results of
operations for 1999 and of performance against financial hurdles, set in early
1999, relating to return on equity, critical success factors, earnings and
capital levels for 1999. The hurdles reflected the Board of Directors'
determination of the appropriate goals for a growth oriented company. No bonuses
would have been paid to executive management if Sovereign had not achieved these
financial goals. Because Sovereign exceeded the goals and hurdles previously
established by the Board, Mr. Sidhu was eligible to receive an incentive
compensation award for 1999.

The amount of the incentive compensation award payable to Mr. Sidhu was
determined solely on the basis of the performance criteria established by the
Board in early 1999. Under these criteria, Mr. Sidhu was eligible to receive a
bonus of $500,000 in cash and $500,000 of compensation deferred under the Bonus
Deferral Plan (described under "Long-Term Incentive Compensation") in the event
that primary earnings per share for 1999 achieved a minimum of $1.16 per share.
If this goal were not met, no bonus would have been paid. In addition, since
primary earnings per share reached the Board's "super hurdle" of $1.18 per
share, Mr. Sidhu received an additional bonus in the form of 25,000 stock
options. Under the terms of the Bonus Deferral Plan, the deferred compensation
component was applied by Sovereign, together with a matching amount, to purchase
shares of Sovereign Common Stock.

The Compensation Committee determined the amount of bonus paid to Mr.
Sidhu, and Mr. Sidhu determined the bonuses paid to the other named executives.

LONG-TERM INCENTIVE COMPENSATION

Sovereign's shareholders approved the Sovereign Bancorp, Inc. 1996 Stock
Option Plan at the 1996 Annual Meeting of Shareholders. The 1996 Plan, like its
predecessor plans, is a long-term plan designed not only to provide incentive to
management, but also to align a significant portion of the Executive
Compensation Program with shareholder interests. The 1996 Plan permits Sovereign
to grant certain officers and employees a right to purchase shares of stock at
the fair market value per share at the date the option is granted. In granting
stock options to Mr. Sidhu and the other executive officers, the Compensation
Committee took into account Sovereign's financial performance. Sovereign's
long-term strategic goal of increasing shareholder value, the executive's level
of responsibility and his continuing contributions to Sovereign. Effective as of
November 19, 1998, the Board of Directors amended the 1996 Stock Option Plan to
permit the limited transfer of nonqualified stock options to a member of the
optionee's immediate family, a trust for the exclusive benefit of a family
member or pursuant to a domestic relations order. At the same time, the Board of
Directors also amended the 1986 Stock Option Plan to permit the limited transfer
of nonqualified stock options on the same terms as described above. A number of
options granted under the 1986 Plan remain outstanding.

The Sovereign Bancorp, Inc. Bonus Recognition and Retention Plan (the
"Bonus Deferral Plan") permits a selected executive employee of Sovereign or
certain of its subsidiaries to annually defer receipt of 25% to 50% of his or
her bonus for a given year. The deferred amount is placed in a grantor trust and
invested in Sovereign common stock. A 100% matching contribution is made to the
trust by the employer on behalf of the participant and is likewise invested in
Sovereign common stock. Earnings on the deferral and match are reinvested in
such stock as well. A participant becomes 100% vested in the aggregate of each
year's deferral, match and earnings thereon five years after the initial funding
of such year's contributions to the trust. A participant also vests in the
account balance in the event of termination of employment by reason of death,
disability, retirement, involuntary termination or the occurrence of a change of
control (as such terms are defined). Termination for cause (as defined) or
voluntary termination of employment prior to the expiration of the five-year
vesting period generally results in the forfeiture of the entire account
balance,

<PAGE>

including the amount initially deferred by the participant. Payment of vested
account balances is made, in stock, in accordance with the election of the
participant or, in certain cases, at other times specified by the plan document.
To the extent permitted by law, a participant is entitled to vote all shares of
Sovereign common stock comprising his or her account balance. Otherwise, such
shares are voted by the trustee in its discretion. Mr. Sidhu was required to and
Messrs. Marlo and Thompson have each elected to defer receipt of 50% of their
respective bonuses for 1999 under this plan.

Under the Sovereign Bonus Award Program, selected management employees may
direct that 50% or more of their bonus be used to purchase shares of Sovereign
common stock at fair market value. In such event, the dollar amount of bonus
which is used to purchase shares of Sovereign common stock is increased by 25%
to 30%, the percentage within this range varying based on the amount of the
bonus directed for the purchase of shares of stock. Shares issuable under this
plan are distributed to the participating employee ratably over a three-year
period. With respect to an employee who elected to participate in the Bonus
Deferral Plan, this 50% is incremental to the 25% to 50% of bonus which may be
deferred under that plan. In addition, participating employees are granted
options to purchase one share of Sovereign common stock for each $10 of cash
bonus directed for the purchase of Sovereign common stock under this Plan.
Vesting and forfeiture provisions with respect to shares not yet distributed to
a participant in the event of a participant's death, disability, retirement,
termination of employment or a change in control are substantially similar to
the vesting and forfeiture provisions with respect to the Bonus Deferral Plan
referred to above. This Plan is effective for the year beginning January 1,
1998. Messrs. Marlo and Thompson each directed that 50% of their respective
remaining bonuses for 1999 not deferred under the Bonus Deferral Plan be used to
purchase shares of Sovereign common stock under this Plan.

In addition to the three qualified pension benefit plans maintained by
Sovereign and certain of its subsidiaries for the benefit of their eligible
employees, three additional nonqualified plans are maintained to, among other
things, supplement benefits that may be limited by certain provisions of the
Internal Revenue Code of 1986, as amended (the "Code"). The qualified plans are
the Sovereign Pension Plan, the 401(k) Retirement Plan, and the Sovereign ESOP.
Benefit accruals ceased under the Sovereign Pension Plan on March 31, 1999. No
participant could accrue any additional benefits thereafter. The Sovereign
Pension Plan is being terminated effective March 31, 2000. The three
nonqualified plans are described below.

Effective as of June 1, 1997, the Board of Directors adopted the Sovereign
Bancorp, Inc. Enhanced Executive Retirement Plan (the "Enhanced Retirement
Plan"). Under the Enhanced Retirement Plan, a selected executive employee of
Sovereign or certain of its subsidiaries, who satisfies such plan's
requirements, will be entitled to an enhanced defined benefit pension to the
extent the pension from the qualified defined benefit retirement plan and
certain other sources is less than a targeted level. Such targeted level is an
annual pension equal to 60% of his or her average compensation (which includes
salary, bonus, deferred compensation but excludes income from the exercise of
stock options). The actual supplemental pension to which an eligible executive
is entitled to receive under the Enhanced Retirement Plan is reduced, but not
below zero, by the sum of his or her (i) pension under the qualified defined
benefit retirement plan, (ii) calculated Social Security benefit, and (iii)
pension under the Supplemental Retirement Plan described below. In order to vest
in the enhanced pension, an eligible executive must remain employed by Sovereign
until age 55 and attain 5 years of service under the qualified retirement plan.
Provision is made for a reduction in the plan benefit for a participant who
terminates before age 60 or who has completed less than 15 years of service, but
in no event will the targeted level be reduced below 30% of average
compensation. Provision is also made by the plan document for enhanced
survivor's and disability retirement benefits. In the case of a change in
control (as defined), special provisions apply, including immediate 100% vesting
and the elimination of the reduction in benefit for age and years of service
below the general plan requirements. Under certain circumstances (such as
defined misconduct and a breach of any applicable covenant not to compete),
enhanced plan benefits may be forfeited. Currently, only Messrs. Sidhu and
Thompson have been selected to participate in the Enhanced Retirement Plan.

Effective as of January 1, 1997, the Board of Directors adopted the
Sovereign Bancorp, Inc. Supplemental Executive Retirement Plan (the
"Supplemental Retirement Plan"). The purpose of the Supplemental Retirement Plan
is to replace, for selected employees, those benefits under the qualified
defined

<PAGE>

benefit retirement plan that are limited by certain provisions of the Code. In
general, selected employees will receive supplemental pensions equal to such
limited amount, subject generally to the provisions, conditions and other
limitations of the qualified plan document. Immediate 100% vesting is provided,
however, upon the occurrence of a change in control (as defined). Plan benefits
are provided through a grantor trust. Messrs. Sidhu, Marlo and Thompson
participate in the Supplemental Retirement Plan.

The Sovereign Bancorp, Inc. Nonqualified Deferred Compensation Plan (the
"Deferred Compensation Plan") is intended to serve two primary purposes. First,
it is intended to replace, for selected employees, those benefits under the
401(k) Retirement Plan that are limited by certain provisions of the Code. A 50%
matching contribution is made on behalf of a participant who defers receipt of
at least the required minimum amount of his or her compensation, subject to the
condition that matching contributions under the two plans will not be made with
respect to more than 6% of compensation. Second, the Deferred Compensation plan
is intended to provide a vehicle for selected employees and directors of
Sovereign and certain of its subsidiaries to defer receipt of compensation
generally. The minimum and maximum annual deferrals permitted under the Deferred
Compensation Plan for employee-participants are $2,600 and 75% of base salary
and bonus, respectively. Participating directors may defer receipt of any
portion of their fees. Interest is credited on all account balances at rates
determined from time to time in accordance with the provisions of the plan
document. Participants are always 100% vested in their account balances. Payment
of plan benefits is generally made following termination of employment under the
option (which may include a lump sum) selected by the participant. Deferrals
under the Deferred Compensation Plan ceased effective December 31, 1999. As a
result of enhancements made to the Sovereign 401(k) Retirement Plan and the
pending termination of the Sovereign Pension Plan, the articulated purposes of
the Deferred Compensation Plan were rendered obsolete.

The following tables, and the accompanying narrative and footnotes, reflect
the decisions covered by the above discussion. This report has been furnished by
the Compensation Committee whose members are:

Cameron C. Troilo, Sr., Chairman
Richard E. Mohn
Rhoda S. Oberholtzer
Patrick J. Petrone
Daniel K. Rothermel
G. Arthur Weaver

<PAGE>

COMPENSATION OF EXECUTIVE OFFICERS

The following table sets forth information concerning the annual and
long-term compensation awarded to, earned by or paid for services in all
capacities to Sovereign with respect to the fiscal years ended December 31,
1999, 1998 and 1997, of those persons who during 1999, (i) served as Sovereign's
chief executive officer or (ii) were executive officers (other than the chief
executive officer) whose total annual salary and bonus exceeded $100,000
(collectively with the chief executive officer, the "Executive Officers"):

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
--------------------------- ---------------------
SECURITIES UNDERLYING ALL OTHER
SALARY(1) BONUS(2) OPTIONS/SARS COMPENSATION(3)(4)
NAME AND PRINCIPAL POSITION YEAR ($) ($) (#) ($)
- --------------------------- ---- --------- -------- --------------------- ------------------
<S> <C> <C> <C> <C> <C>
Jay S. Sidhu 1999 $450,000 $500,000 350,000 $ 0
President and 1998 450,000 450,000 135,600 0
Chief Executive Officer 1997 291,154 454,000 217,800 4,750

Dennis S. Marlo 1999 $330,000 $ 37,500 118,500 $ 4,800
Chief Financial 1998 330,000 70,000 30,000 2,400
Officer and Treasurer(5) 1997 N/A N/A N/A N/A

Lawrence M. Thompson, Jr. 1999 $300,000 $ 37,500 124,115 $10,223
Chief Administrative 1998 217,692 91,154 59,950 2,273
Officer and Secretary 1997 163,462 75,478 105,120 4,750
</TABLE>

- ------------------
(1) Messrs. Sidhu and Marlo did not receive a salary increase in 1999. Mr.
Thompson received a salary increase to $300,000 in July 1999. Mr. Marlo
served as the President of the Pennsylvania Division of Sovereign Bank from
February 28, 1998 until he was appointed Chief Financial Officer and
Treasurer of Sovereign on May 18, 1998.

(2) Amounts shown for Messrs. Sidhu, Marlo and Thompson for 1999 reflect 50%,
25% and 25% respectively, of the bonus amount actually awarded because Mr.
Sidhu was required to, and Messrs. Marlo and Thompson each elected to defer
and subject to a substantial risk of forfeiture, receipt of 50% of their
respective bonuses under the Bonus Deferral Plan. Amounts shown for Messrs.
Sidhu and Thompson for 1998 reflect 50% of the bonus amount actually awarded
because they each elected to defer, and subject to a substantial risk of
forfeiture receipt of the remaining 50% of their respective bonuses under
the Bonus Deferral Plan. The deferred amount, as well as Sovereign's
matching contribution, are subject to such risk of forfeiture for five
years. See "Long-Term Incentive Compensation" above for a more complete
description of the Bonus Deferral Plan. Messrs. Marlo and Thompson each
directed that 25% of his bonus for 1999 be used to purchase, at fair market
value, shares of Sovereign common stock under the terms of the Sovereign
Bonus Award Program. Each of Mr. Sidhu and Mr. Thompson directed that the
remaining 50% of his bonus for 1998 (the bonus amounts shown for such
individuals in the table) be used to purchase, at fair market value, shares
of Sovereign common stock under the terms of the Sovereign Bonus Award
Program. Mr. Marlo elected to defer 50% of his bonus for 1998 under the
Bonus Award Program. Under the terms of the Bonus Award Program, bonus
amounts for management employees who direct that all or a portion of their
cash bonuses be used to purchase common stock are increased by up to 30% and
such increased amount is also used to purchase common stock at fair market
value. Employees who participate in the Bonus Award Program are also granted
additional stock options based on the amount of bonus directed to be used to
purchase Sovereign common stock. See "Long Term Incentive Compensation."

(3) Does not include the value of the 994, 754 and 938 shares of Sovereign
Common Stock allocated to the accounts of each of Messrs. Sidhu, Marlo and
Thompson, respectively, under the terms of Sovereign's Employee Stock
Ownership Plan for 1999.

<PAGE>

(4) Amounts appearing in this column are Sovereign's contributions on behalf of
each named person to the Sovereign Bancorp, Inc. 401(k) Retirement Plan,
and, in the case of Mr. Thompson includes Sovereign's contribution to the
Sovereign Bancorp, Inc. Nonqualified Deferred Compensation Plan.

(5) Upon completion of Sovereign's acquisition of ML Bancorp, Inc. on February
28, 1998, Mr. Marlo, the former President and Chief Executive Officer of ML
Bancorp, Inc., served as President of the Pennsylvania Division of Sovereign
Bank from February 28, 1998 until he was appointed Chief Financial Officer
and Treasurer of Sovereign effective May 18, 1998.

The following table sets forth information concerning grants of stock
options during the fiscal year ended December 31, 1999 to the named executive
officers.

OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------- POTENTIAL REALIZABLE
NUMBER OF % OF TOTAL VALUE AT ASSUMED
SECURITIES OPTIONS ANNUAL RATES OF
UNDERLYING GRANTED TO EXERCISE PRICE APPRECIATION
OPTIONS EMPLOYEES OR BASE FOR OPTION TERM(3)
GRANTED(1) IN FISCAL PRICE(2) EXPIRATION -----------------------
NAME (#) YEAR ($/SH) DATE 5%($) 10%($)
---- ---------- ---------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Jay S. Sidhu................... 53,163 3.0% $12.25 2/18/09 $ 409,565 $1,037,919
71,837 4.1 12.25 3/18/09 553,430 1,402,499
225,000 12.7 8.28 12/18/09 1,171,631 2,969,142

Dennis S. Marlo................ 11,663 0.7 12.25 2/18/09 89,851 227,701
31,837 1.8 12.25 3/18/09 245,271 621,565
75,000 4.2 8.28 12/18/09 390,544 989,714

Lawrence M. Thompson, Jr....... 17,278 1.0 12.25 2/18/09 133,109 337,324
31,837 1.8 12.25 3/18/09 245,271 621,565
75,000 4.2 8.28 12/18/09 390,544 989,714
</TABLE>

- ------------------

(1) Terms of outstanding incentive stock options are for a period of ten years
and nonqualified stock options are for a period of ten years and one month
from the date the option is granted. An option may only be exercised after
the holder has been an employee of Sovereign or one of its subsidiaries for
a period of from one to five years from the date the option is granted.
Options were granted to Messrs. Sidhu, Marlo and Thompson in the amount of
350,000, 118,500, and 124,115, respectively. Options are not exercisable
following an optionee's voluntary termination of employment other than by
reason of retirement or disability.

(2) Under the terms of the plan, the exercise price per share must equal the
fair market value on the date the option is granted. The exercise price may
be paid in cash, in shares of Sovereign common stock valued at fair market
value on the date of exercise or pursuant to a cashless exercise procedure
under which the optionee provides irrevocable instructions to a brokerage
firm to sell the purchased shares and to remit to Sovereign, out of the sale
proceeds, an amount equal to the exercise price plus all applicable
withholding taxes.

(3) The dollar amounts set forth under these columns are the result of
calculations made at the 5% and 10% appreciation rates set forth in
Securities and Exchange Commission regulations and are not intended to
indicate future price appreciation, if any, of Sovereign common stock.

<PAGE>

The following table sets forth information concerning exercised and
unexercised options to purchase Sovereign common stock:

AGGREGATED OPTIONS EXERCISED IN LAST YEAR AND DECEMBER 31, 1999 OPTION VALUE

<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT OPTIONS AT
ACQUIRED ON VALUE REALIZED DECEMBER 31, 1999 (#) DECEMBER 31, 1999 ($)
NAME EXERCISE (#) ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ------------ -------------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Jay S. Sidhu................. 103,949 $873,068 858,115/350,000 $1,680,539/0
19,611 134,997
72,198 426,239
Dennis S. Marlo.............. 50,000 304,900 581,240/118,500 $1,780,982/0
Lawrence M. Thompson, Jr. ... 19,774 166,082 269,480/124,115 $ 377,791/0
</TABLE>

Sovereign maintained, until its termination on March 31, 2000, a defined
benefit retirement plan for all employees who attained age 21 and completed one
year of eligibility service. The following table sets forth the estimated annual
benefits payable upon retirement to participants at normal retirement age, in
the average annual salary and years of service classifications specified
determined as of March 31, 1999, the date benefit accruals ceased under the
Plan. No additional benefits accrued and no additional service was credited in
1999.

SOVEREIGN BANCORP, INC. PENSION PLAN
ILLUSTRATION OF BENEFITS AT DECEMBER 31, 1999

FIVE YEAR BENEFITS PAYABLE PER YEARS OF SERVICE(1)(2)
AVERAGE ---------------------------------------------------
REMUNERATION(3) 15 20 25 30 35
--------------- ------- ------- ------- ------- -------
$ 60,000 $11,273 $15,031 $18,789 $22,547 $26,305
80,000 16,973 22,631 28,289 33,947 39,605
100,000 22,673 30,231 37,789 45,347 52,905
120,000 28,373 37,831 47,289 56,747 66,205
140,000 34,073 45,431 56,789 68,147 79,505
160,000 39,773(4) 53,031(4) 66,289(4) 79,547(4) 92,805(4)
180,000 39,773(4) 53,031(4) 66,289(4) 79,547(4) 92,805(4)
200,000 39,773(4) 53,031(4) 66,289(4) 79,547(4) 92,805(4)
220,000 39,773(4) 53,031(4) 66,289(4) 79,547(4) 92,805(4)
240,000 39,773(4) 53,031(4) 66,289(4) 79,547(4) 92,805(4)

- ------------------
(1) The following are the years of credited service under Sovereign's pension
plan for the persons named in the cash compensation table: Mr. Sidhu -- 12
years; Mr. Marlo -- 1 year; and Mr. Thompson -- 13 years.

(2) Benefits are computed in single life annuity amounts on the basis of an
assumed year of birth of 1950 and without any deduction for Social Security
or other offset amounts.

(3) Represents the highest average remuneration received over a consecutive
five-year period during the last ten years, excluding deferred compensation
other than 401(k) Retirement Plan contributions, subject in the cases of
Messrs. Sidhu, Marlo and Thompson to a compensation limit of $160,000 in
1999.

(4) The maximum annual benefit permitted when the Internal Revenue Code's annual
compensation limit of $160,000 and maximum annual benefit limit are applied
to the pension plan's benefit formula.

<PAGE>

CERTAIN TRANSACTIONS

EMPLOYMENT AGREEMENTS

JAY S. SIDHU. Sovereign and Sovereign Bank entered into an employment
agreement, dated March 1, 1997, with Jay S. Sidhu, which superseded, in its
entirety, Mr. Sidhu's then existing employment agreement. Mr. Sidhu's agreement
has an initial term of five years and, unless terminated as set forth therein,
is automatically extended annually to provide a new term of five years except
that, at certain times, notice of nonextension may be given, in which case the
agreement will expire at the end of its then current term. No such notice has
been given.

The agreement provides a base salary which, if increased by action of the
Board of Directors, becomes the new base salary provided thereafter by the
agreement. In addition, the agreement provides, among other things, a right to
participate in any bonus plan approved by the Board of Directors and insurance,
vacation, pension and other fringe benefits for Mr. Sidhu.

If Mr. Sidhu's employment is terminated without cause (as defined), or if
Mr. Sidhu voluntarily terminates employment for "good reason," Mr. Sidhu becomes
entitled to severance benefits under the agreement. The term good reason
includes the assignment of duties and responsibilities inconsistent with Mr.
Sidhu's status as President and Chief Executive Officer, a reduction in salary
or benefits or a reassignment which requires Mr. Sidhu to move his principal
residence more than 100 miles from Sovereign's principal executive office. If
any such termination occurs, Mr. Sidhu will be paid an amount equal to five
times the sum of (i) his highest annual base salary under the agreement, and
(ii) the average of his annual bonuses with respect to the three calendar years
immediately preceding his termination. Such amount will be payable in sixty
equal monthly installments. In addition, in the event of such termination, Mr.
Sidhu will be entitled to continuation of certain insurance and other specified
benefits for sixty months or until he secures substantially similar benefits
through other employment, whichever shall first occur. Further, Mr. Sidhu will
be entitled to additional retirement benefits to which he would have been
entitled had his employment continued through the then remaining term of the
agreement. If the payments and benefits under the agreement, when aggregated
with other amounts received from Sovereign and Sovereign Bank, are such that Mr.
Sidhu becomes subject to excise tax on excess parachute payments under Code
Sections 4999 and 28OG of the Internal Revenue Code, he will receive additional
payments equal to such excise tax and any incremental income taxes he may be
required to pay by reason of the receipt of additional amounts under the
agreement. Sovereign estimates that, if Mr. Sidhu had terminated employment as
of March 1, 2000 under circumstances entitling him to the above-described
severance benefits, he would have been entitled to receive $6.4 million,
exclusive of the non-cash benefits, additional retirement benefits, and any
potential excise tax-related payments.

If Mr. Sidhu's employment terminates by reason of his disability, he will
be entitled to continuation of 80% of the annual base salary and bonus described
above, less amounts payable under any disability plan of Sovereign, until the
earliest of (i) his return to employment, (ii) his attainment of age 65, or
(iii) his death. Provision is also made generally for the continuation of
insurance and other specified benefits for such period, as well as additional
credits for retirement benefit purposes.

The agreement contains provisions restricting Mr. Sidhu's right to compete
with Sovereign and Sovereign Bank during the period he is receiving severance or
disability benefits thereunder, except under certain circumstances.

DENNIS S. MARLO. In connection with Sovereign's completion of the
acquisition of ML Bancorp, Inc. in February 1998, Sovereign agreed to honor the
employment agreements between Mr. Dennis S. Marlo, the former President and
Chief Executive Officer of ML Bancorp, Inc., and each of ML Bancorp, Inc. and
Main Line Bank (the "Holding Company Agreement" and "Bank Agreement,"
respectively).

The Holding Company Agreement and the Bank Agreement had initial terms of
three years and, unless terminated as set forth therein, are automatically
extended annually for one additional year.

<PAGE>

Both the Holding Company Agreement and the Bank Agreement contain terms
specifying Mr. Marlo's rights to base salary, bonus, pension and welfare
benefits, vacation, use of an automobile and replacement thereof every three
years, membership dues at one club of his choice, post-employment continuation
of medical insurance coverage for him and his spouse until age 66, and certain
death benefits. In addition, he is entitled to reimbursement of expenses
incurred in furtherance of his employers' businesses.

As a result of the merger of ML Bancorp, Inc. with and into Sovereign
Bancorp, Inc. and the merger of Main Line Bank with and into Sovereign Bank, Mr.
Marlo is entitled to terminate his employment at any time during the term of his
Agreement, including any extension period. In such event he is entitled, in the
aggregate, to receive the following amounts and benefits: (i) payment of three
times his then base salary, payable in 36 equal monthly installments, and (ii)
continuation, at no cost to him, for a maximum period of 36 months of specified
employee benefits to which he theretofore was entitled under his employers'
plans, programs and arrangements. In addition, in the event that provision of
such termination payments and benefits causes the imposition of an excise tax
under Section 4999 of the Internal Revenue Code of 1986, as amended, he is
entitled to receipt of such additional payment (payable over 36 months) as are
necessary to neutralize the effect on him of the imposition of such tax.

LAWRENCE M. THOMPSON, JR. Sovereign has also entered into an employment
agreement with Lawrence M. Thompson, Jr., dated September 25, 1997, which
superseded Mr. Thompson's then-existing employment agreement. The agreement, has
an initial term of three years and, unless terminated as set forth therein, is
automatically extended at certain dates to provide a new term of three years
except that at certain times notice of nonextension may be given, in which case
the agreement will expire at the end of its then current term. The agreement
provides a base salary which, if increased by action of the Board of Directors,
becomes the new base salary provided thereafter by the agreement. In addition,
the agreement provides, among other things, a right to participate in any bonus
plan approved by the Board of Directors and insurance, vacation, pension and
other fringe benefits for the executive.

If Mr. Thompson's employment is terminated without cause (as defined),
whether or not a change in control (as defined) of Sovereign has occurred, or if
Mr. Thompson voluntarily terminates employment for good reason (as defined)
following a change in control, Mr. Thompson becomes entitled to severance
benefits under the agreement. The benefits are continuation of salary, bonus
(equal to the average bonus for the three prior years), and insurance and other
fringe benefits for three years. If, in the absence of a change in control, Mr.
Thompson's employment is terminated without cause, cash benefits payable under
the agreement are reduced by an amount equal to 25% of any compensation received
from another employer. The agreement contains a provision restricting Mr.
Thompson's right to compete, for a period of 12 months, after a voluntary
termination of employment without good reason or any termination for cause; in
all other circumstances, after termination of employment, there is no covenant
not to compete. In the event severance payments and benefits under the
agreement, when added to all other benefits in the nature of "parachute
payments" under Code Section 280G, payable to Mr. Thompson would cause the
excise tax provisions of Code Section 4999 to apply then the payments and
benefits under such agreement will be reduced to the minimum extent necessary to
avoid such tax.

INDEMNIFICATION

The Bylaws of Sovereign provide for (1) indemnification of directors,
officers, employees and agents of Sovereign and its subsidiaries and (2) the
elimination of a director's liability for monetary damages, each to the fullest
extent permitted by Pennsylvania law. Pennsylvania law provides that a
Pennsylvania corporation may indemnify directors, officers, employees and agents
of the corporation against liabilities they may incur in such capacities for any
action taken or any failure to act, whether or not the corporation would have
the power to indemnify the person under any provision of law, unless such action
or failure to act is determined by a court to have constituted recklessness or
willful misconduct. Pennsylvania law also permits the adoption of a Bylaw
amendment, approved by shareholders, providing for the elimination of a
director's liability for monetary damages for any action taken or any failure to
take any action unless (1) the director has breached or failed to perform the
duties of his office and (2) the breach or failure to perform constitutes
self-dealing, willful misconduct or recklessness.

<PAGE>

Directors and officers of Sovereign are also insured against certain
liabilities for their actions, as such, by an insurance policy obtained by
Sovereign. The premium for 1999 was $346,255.

On December 21, 1993, Sovereign Bank entered into an Indemnification
Agreement (the "Indemnification Agreement") with Mr. Sidhu. The Indemnification
Agreement provides that Sovereign Bank will indemnify Mr. Sidhu to the fullest
extent permitted by applicable law and regulation for all expenses, judgments,
fines and penalties incurred in connection with, and amounts paid in settlement
of, any claim relating to, among other things, the fact that Mr. Sidhu is or was
a director or officer of Sovereign or Sovereign Bank (an "Indemnifiable Claim").
Sovereign Bank will also advance expenses upon Mr. Sidhu's request in connection
with any Indemnifiable Claim.

Sovereign Bank's indemnification obligations are subject to the condition
that a Reviewing Party (as defined in the Indemnification Agreement) shall not
have determined that Mr. Sidhu would not be permitted to be indemnified under
applicable law. To the extent that it is subsequently determined that Mr. Sidhu
is not entitled to indemnification, he is required to reimburse Sovereign Bank
for any amounts previously paid.

Upon a Change in Control (as defined in the Indemnification Agreement) of
Sovereign or Sovereign Bank, all determinations regarding Sovereign Bank's
indemnification obligations under the Indemnification Agreement will be made by
Independent Legal Counsel (as defined in the Indemnification Agreement). Upon a
Potential Change in Control (as defined in the Indemnification Agreement) of
Sovereign or Sovereign Bank, Sovereign Bank will, upon written request by Mr.
Sidhu, create and fund a trust for the benefit of Mr. Sidhu in order to ensure
satisfaction of Sovereign Bank's indemnification obligations under the
Indemnification Agreement.

INDEBTEDNESS OF MANAGEMENT

As permitted by applicable federal banking laws, Sovereign Bank offered
consumer loans and residential mortgage loans to directors and employees of
Sovereign and its subsidiaries with at least one year of continuous service at
preferential terms with respect to interest rates and loan fees. Specifically,
interest rates offered to such persons were up to 1% lower than rates offered to
nonaffiliated persons for similar transactions, and certain loan origination
fees were waived. None of such loans were granted to directors or executive
officers of Sovereign on terms that were preferential to the terms applicable to
employees of Sovereign and Sovereign Bank at the time any such loan was made.
All other loans to directors and executive officers of Sovereign (i) were made
in the ordinary course of business, (ii) were made on substantially the same
terms, including interest rates and collateral, as those prevailing at the time
for comparable transactions by Sovereign Bank with non-affiliated parties,
except as permitted by applicable federal banking law and as described above,
and (iii) did not involve more than the normal risk of repayment or present
other unfavorable features, except as otherwise described below.

In November 1999, Sovereign's Board of Directors, with only outside
directors voting, established a program pursuant to which Sovereign is permitted
to make demand loans available to a limited number of Sovereign's senior
executive officers. This program was established due to a confluence of economic
circumstances which adversely affected the ability of these senior executive
officers to obtain alternative financing from other sources, including: (i) the
lack of ability to borrow money from Sovereign Bank because of bank regulatory
restrictions; (ii) the lack of time available to them to obtain financing from
other banks due to the press of Sovereign's businesses relating to the
Sovereign's pending New England Acquisition, including the financing thereof;
(iii) the inability to sell Sovereign securities during the pendency of
Sovereign's recent public offerings and during a period following completion of
such public offerings; (iv) the necessity of paying taxes resulting from
elections with respect to the Sovereign Bonus Award Program; and (v) the
necessity to fund margin calls resulting from the dramatic decrease in the
market price for the common stock of financial institutions, including
Sovereign. Under the loan program approved by the Board of Directors, Mr. Sidhu,
Mr. Marlo and Mr. Thompson each accepted loans from Sovereign in the amounts of
$6.2 million, $414,565 and $917,200, respectively. The terms of these loans
provide that principal is payable on demand by Sovereign and interest accrues at
a rate equal to the short-term Applicable Federal Rate under the Internal
Revenue Code. Each loan is secured and is fully recourse to the executive, and

<PAGE>

Sovereign possesses a right of set-off against all amounts Sovereign and
Sovereign Bank owe to Messrs. Sidhu, Marlo and Thompson, including salary, bonus
or other forms of compensation and amounts under any time, demand or other
deposit accounts.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires Sovereign's officers and directors, and any persons
owning ten percent or more of Sovereign's common stock, to file in their
personal capacities initial statements of beneficial ownership, statements of
changes in beneficial ownership and annual statements of beneficial ownership
with the Securities and Exchange Commission (the "SEC"). Persons filing such
beneficial ownership statements are required by SEC regulation to furnish
Sovereign with copies of all such statements filed with the SEC. The rules of
the SEC regarding the filing of such statements require that "late filings" of
such statements be disclosed in Sovereign's proxy statement. Based solely on
Sovereign's review of any copies of such statements received by it, and on
written representations from Sovereign's existing directors and officers that no
annual statements of beneficial ownership were required to be filed by such
persons, Sovereign believes that all such statements were timely filed in 1999,
except for (i) Multiple Statements of Changes in Beneficial Ownership with
respect to sales by a broker of common stock which Mr. Weaver had pledged as
collateral under the terms of a brokerage account and other sales by Mr. Weaver,
and an Annual Statement of Changes in Beneficial Ownership which was
inadvertently filed late in connection with 1,992 shares of Sovereign common
stock and 24,000 stock options received by Mr. Weaver in 1999 as compensation
for his service as a director of Sovereign and Sovereign Bank and (ii) an
Initial Statement of Beneficial Ownership of Securities which was inadvertently
filed late by Mr. Brian Hard.

OTHER

Cameron C. Troilo, a Class I director, leases space to Sovereign Bank for
its branch and commercial lending facilities located in Newtown, Bucks County,
Pennsylvania. The aggregate annual rental for these facilities in 1999 was
$406,458, excluding operating expenses and reimbursement for electricity.
Sovereign believes that the amount of rent charged by Mr. Troilo is not in
excess of the amount of rent charged by unrelated parties for similar premises
in the area.

In December 1999, Mr. Troilo purchased from Sovereign Bank the corporate
offices of the former Trenton Savings Bank for $2,907,000. Management of
Sovereign believes that the purchase price paid by Mr. Troilo is in the price
range that Sovereign Bank would have received from unrelated third parties for
the property.

<PAGE>

PERFORMANCE GRAPH

Set forth below is a graph and table comparing the yearly percentage change
in the cumulative total shareholder return on Sovereign's common stock against
the cumulative total return on (1) the S&P 500 Index, (2) NASDAQ Bank Index and
(3) the S&P Savings & Loan Index for the five-year period commencing January 1,
1995, and ending December 31, 1999.

Cumulative total return on Sovereign's common stock, the S&P 500 Index, the
NASDAQ Bank Index and the S&P Savings & Loan Index equals the total increase in
value since January 1, 1995, assuming reinvestment of all dividends. The graph
and table were prepared assuming that $100 was invested on January 1, 1995 in
Sovereign's common stock, the S&P 500, the NASDAQ Bank Index and the S&P Savings
& Loan Index.

SOVEREIGN BANCORP, INC.
FIVE-YEAR PERFORMANCE GRAPH

[GRAPHIC]

In the printed version of the document, a line graph appears which depicts
the following plot points:

<TABLE>
<CAPTION>
DEC-94 DEC-95 DEC-96 DEC-97 DEC-98 DEC-99
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Sovereign Bancorp Inc................. $100 $139 $190 $363 $300 $158
S&P 500(R)............................ 100 138 169 226 290 351
NASDAQ Bank Index..................... 100 149 197 329 327 314
S&P(R) Savings & Loan Cos Index....... 100 165 197 349 326 252
</TABLE>

<PAGE>

SHAREHOLDER PROPOSAL

Set forth below is a proposal received from a shareholder who, as of
November 22, 1999, owned 105,383 shares of Sovereign's common stock, which as of
March 1, 2000, represented less than one tenth of one percent of Sovereign. The
proposal recommends to the Board of Directors that it take the necessary steps
to achieve a sale or merger of Sovereign. This proposal is included in the Proxy
Statement in accordance with the rules of the Securities and Exchange Commission
and is not endorsed by the Board of Directors.

THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "AGAINST" APPROVAL
OF THE SHAREHOLDER PROPOSAL FOR THE FOLLOWING REASONS, EACH OF WHICH IS
DISCUSSED IN MORE DETAIL BELOW:

o THE PROPOSAL IS INCONSISTENT WITH ACTION TAKEN BY THE BOARD OF DIRECTORS
EARLIER THIS YEAR AND THEREFORE IS UNNECESSARY FROM A CORPORATE
GOVERNANCE PERSPECTIVE. The Board of Directors, in connection with what
is perceives to be good corporate governance, has each year regularly
evaluated all of Sovereign's strategic alternatives, including the sale
of Sovereign. Earlier this year, after study, the Board determined that a
sale of Sovereign would not be in the best interests of Sovereign, and it
is extremely unlikely, for the reasons set forth below, that the Board
will reverse this view.

o THE PROPOSAL IS ILL-TIMED FROM A STRATEGIC POINT OF VIEW. A sale of
Sovereign at this time would be premature. Sovereign is in the process of
assuming approximately $12 billion of deposits and acquiring
approximately $9 billion of performing loans and 285 branches and other
related assets in the attractive New England marketplace in furtherance
of its strategy of maximizing shareholder value by becoming a "regional
commercial bank." Sovereign has devoted substantial financial and
managerial resources to this acquisition (the "New England Acquisition").
The shareholder proposal is inconsistent with this strategy and this
transaction.

o THE PROPOSAL IS ILL-TIMED FROM A MARKET POINT OF VIEW. A sale of
Sovereign at this time would be ill-advised because of current conditions
in the market for the capital stock valuation of financial institutions
like Sovereign.

o THE PROPOSAL IS BASED ON VALUATION METHODOLOGY WHICH IS FUNDAMENTALLY
FLAWED.

THE PROPOSAL IS INCONSISTENT WITH ACTION TAKEN BY THE BOARD OF DIRECTORS
EARLIER THIS YEAR AND IS UNNECESSARY FROM A CORPORATE GOVERNANCE PERSPECTIVE.

In a continuing effort to achieve what it perceives to be good corporate
governance and to represent Sovereign's stakeholders effectively in a constantly
changing and increasingly competitive environment, Sovereign's Board of
Directors meets regularly to extensively study Sovereign's strategic
alternatives, including sale, continuing its current strategy or engaging in a
merger of equals. Sovereign has conducted these strategic planning meetings once
or twice each year for the past several years and expects to continue to conduct
these meetings in the future. Investment banking firms and other advisors are
usually asked to provide material for and/or to make presentations to or
otherwise assist the Board at these sessions.

As part of this corporate governance process, Sovereign's Board has
conducted two strategic planning meetings over the last 12 months, the most
recent occurring in March, to review Sovereign's strategic plan in light of
Sovereign's strengths, weaknesses, opportunities and threats, as well as to
review Sovereign's progress against Sovereign's vision, mission, values and
critical success factors. These sessions culminated in a determination by the
Board to remain independent and pursue its present strategy of transforming
Sovereign into a "regional commercial bank." It is unlikely that Sovereign's
Board will reverse this strategy in light of the pending New England Acquisition
discussed below.

In connection with determining whether the shareholder proposal has merit
in light of existing Board action and Board processes, Sovereign shareholders
should consider that Sovereign's policy is to assure that the financial
interests of directors and executive officers are clearly and tangibly aligned
with the interests of Sovereign's other shareholders.

<PAGE>

As of March 1, 2000, Sovereign's directors and executive officers, in the
aggregate, owned or controlled, after giving effect to the exercise of both
vested and nonvested options, approximately 6,925,506 shares as of March 1,
2000, representing approximately 3% of the outstanding shares of the common
stock of Sovereign, after giving effect to the exercise of these options. As of
November 22, 1999, the proponent was the beneficial owner of only 105,383 shares
of common stock which, as of March 1, 2000, represented less than one tenth of
one percent of Sovereign.

THE PROPOSAL IS ILL-TIMED FROM A STRATEGIC PERSPECTIVE.

The Board of Directors also opposes the shareholder proposal because it is
ill-timed from a strategic perspective. On September 3, 1999, Sovereign entered
into a Purchase and Assumption Agreement pursuant to which Sovereign plans to
assume approximately $12 billion of deposits (with a low average cost) and
acquire approximately $9 billion of performing loans and 285 branch banks from
Fleet Boston Corporation.

Upon completion of the New England Acquisition, Sovereign will have over
$35 billion in assets, $24 billion of deposits, 590 community bank offices,
8,000 team members and over 3.6 million customer accounts. Sovereign will be the
third largest financial institution in New England and the fifth largest in New
Jersey and the third largest headquartered in Pennsylvania and will have one of
the most attractive banking franchises in the northeastern United States.

More importantly, this acquisition should accelerate Sovereign's strategy
of transforming itself into a "regional commercial bank" by favorably changing
Sovereign's deposit and loan mix to one more characteristic of a commercial bank
holding company. Historically, commercial bank holding companies have traded in
the public markets at earnings per share multiples considerably higher than
those of thrift holding companies. Thus, the successful completion and
integration of this acquisition should have an immediate and long-term favorable
impact on the quality of Sovereign's earnings and on Sovereign's stock price and
"takeout" value. Shareholders should note, however, that the successful
completion and integration of the New England Acquisition poses risks which can
be minimized only by spending substantial, intense time and effort on these
tasks without diversion. Therefore, the Board believes a sale of Sovereign at
this time would be inconsistent with the New England Acquisition and would
divert Board and management attention away from the task of completing and
integrating the New England Acquisition.

THE PROPOSED IS ILL-TIMED FROM A MARKET POINT OF VIEW.

The Board does not contest the proponent's assertion that a sale of
Sovereign might produce a premium over current market prices.

The Board of Directors does contest the premise on which the Board believes
it is based -- that Sovereign should be sold at a time when the current market
price of Sovereign's common stock, due to the pendency of the New England
Acquisition, and stock prices throughout the financial services industry, are
trading at historically low P/E ratios.

The Board's view of current market conditions is based principally on the
following facts.

o During the first quarter of 2000, Sovereign's common stock price traded
at its lowest levels since 1996, as adjusted for all stock splits and
stock dividends (notwithstanding strong earnings).

o The index value of all publicly traded savings and loans has declined
from 814.07 to 562.39, or 30.9%, from December 31, 1997 to December 31,
1999.(1)

o The NASDAQ Bank Index has declined from 2,083.22 to 1,691.29, or 18.81%,
from December 31, 1997 to December 31, 1999.(2)

o The S&P Savings and Loan Company Index has declined from 171.16 to
119.06, or 30.44%, from December 31, 1997 to December 31, 1999.(2)

- ------------------
(1) Source: SNL Securities, LC.
(2) Source: Bloomberg L.P.

<PAGE>

Sovereign also contests the proponent's assertion, implicit in the
proponent's proposal, that the premium over Sovereign's current market value in
connection with a hypothetical sale of Sovereign at the present time would be
substantial. Because of depressed stock prices in the industry, Sovereign
believes that there are few, if any, potential acquirers, whose shares are
trading at a price which would permit such acquirers to use such shares as
currency to pay to Sovereign such a premium, without incurring substantial
dilution from an earnings perspective.

THE PROPOSAL IS BASED ON VALUATION METHODOLOGY WHICH IS FLAWED.

The proponent's data reflects only generic peer groups in a vacuum, and
fails to present any empirical data on the impact a large, pending strategic
acquisition, such as the New England Acquisition, would have on potential
acquisition prices for Sovereign. The Board believes the proponent's failure to
present relevant peer group data showing the impact of pending acquisitions, as
well as the proponent's failure to present pro forma data for Sovereign with
respect to the New England Acquisition, or the impact of Sovereign's
transformation to a "regional commercial bank"-- like financial institution as a
result of the New England Acquisition cause the proponent's data to be
misleading and largely irrelevant when considering potential acquisition prices
for Sovereign.

Moreover, the acquisition values for Sovereign's common stock presented in
the proponent's supporting statement may not represent realizable values without
regard to the effect of the New England Acquisition. The valuation methodologies
used in the proponent's supporting statement rely on the average price earnings
multiples of a number of thrift acquisition transactions to produce implied
ranges of acquisition values for Sovereign which, at best, is an incomplete
method of deriving a realistic estimate of a bank's acquisition value.

In addition, the methodology presented by the proponent in support of its
proposal fails to consider circumstances unique to Sovereign which, in the
Board's view, would adversely affect Sovereign's ability to realize an
appropriate price as a result of the proposed action at this time. The Board
believes the pending New England Acquisition would cause potential acquirers to
decline to bid for Sovereign or to steeply discount a bid for Sovereign until
such time as Sovereign completes the New England Acquisition and eliminates the
integration and conversion risks Sovereign faces.

------------------------

FOR THE REASONS INDICATED ABOVE, THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS THAT THE SHAREHOLDERS VOTE AGAINST APPROVAL OF THE SHAREHOLDER
PROPOSAL.

The shareholder proposal, and the statement of the proponent in support of
the proposal is quoted below. Sovereign assumes no responsibility for the
content of this statement. The name of the proponent is Jewelcor Management,
Inc. You should note that the proponent made similar proposals, which were
unsuccessful, with respect to at least four other financial institutions over
the past several years.

"PROPOSAL

"RESOLVED, it is recommended that the Board of Directors of Sovereign
Bancorp, Inc. (the "Company") take the necessary steps to achieve a sale or
merger of the Company on terms that will maximize shareholder value.

"SUPPORTING STATEMENT

"Based on the analyses below, Jewelcor Management, Inc. ("JMI") believes
that the Company could potentially achieve an acquisition price of $18.00 to
$30.71 per share if the Board of Directors took the necessary steps to achieve a
sale or merger. In JMI's opinion, the following acquisition valuations provide a
reasonable basis for estimating a potential acquisition price of the Company
well in excess of the current stock price.(1)

<PAGE>

"ANALYSIS

"JMI compared the Company's book value and earnings per share ("EPS") with
the acquisition ratios for three of the Company's relevant peer groups: (1)
"Regional Peer Group," (2) "Asset-Size Peer Group" and (3) "National Industry
Peer Group."(2) Based upon summary statistics for mergers announced in 1999, JMI
derived the Average Announced Price/Book Ratio ("Price/Book") and the Median
Announced Price/Last Twelve Months EPS Ratio ("Price/EPS") for each of the three
peer groups. JMI then derived an average of the three peer groups' respective
Price/Book ("Peer Group Average Price/Book") and Price/EPS ("Peer Group Average
Price/EPS") and multiplied the applicable Peer Group Average ratios times the
Company's (a) book value and (b) last twelve months diluted EPS ("Company
EPS").(3)

"BOOK VALUE APPROACH

"Company Stock Price (11/16/99)............................. $ 8.72
Company Book Value (9/30/99)................................ $ 7.98
Company Price/Book.......................................... 109.27%
Peer Group Average Price/Book............................... 225.56%
Company's Potential Acquisition Price....................... $ 18.00

"EARNINGS APPROACH

"Company EPS (9/30/99)...................................... $ 1.16
Company's Price/EPS......................................... 7.52X
Peer Group Average Price/EPS................................ 26.47X
Company's Potential Acquisition Price....................... $ 30.71

"Your Vote is Important. Please vote YES on this Proposal.

- ------------------
"(1) JMI's analyses are not the only ways to predict the Company's potential
acquisition price. Moreover, they do not reflect the unrecognized expenses
and cost savings associated with a potential transaction, since expenses
and cost savings depend, in part, on the overlap in markets and
subsidiaries present in a particular transaction.

"(2) "Regional Peer Group": All thrifts in DC, DE, MD, NJ, NY, PA and PR with
mergers announced in 1999.

"Asset-Size Peer Group": All banks with an asset range greater than $10
billion with mergers announced in 1999.

"National Industry Peer Group": All publicly traded thrifts with mergers
announced in 1999. Source: SNL Securities LC.

"(3) Although the Company could possibly achieve any of the individual
acquisition ratios achieved by the peer groups, JMI believes that the most
reliable method for determining potential acquisition values is to compare
the average ratios across peer groups."

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE
"AGAINST" APPROVAL OF THIS PROPOSAL. The affirmative vote of a majority of all
votes cast at the Meeting is required to approve the proposal. Abstentions and
broker non-votes will not constitute or be counted as "votes" cast for purposes
of the Meeting. All proxies will be voted "AGAINST" approval of the proposal
unless a shareholder specifies to the contrary on such shareholder's proxy card.

<PAGE>

PROPOSAL TO RATIFY APPOINTMENT OF
INDEPENDENT AUDITORS

The Board of Directors of Sovereign has appointed Ernst & Young LLP,
independent auditors, as Sovereign's independent auditors for the fiscal year
ending December 31, 2000. No determination has been made as to what action
Sovereign's Board of Directors would take if shareholders do not ratify the
appointment.

Ernst & Young LLP has conducted the audit of the financial statements of
Sovereign and its subsidiaries for the year ended December 31, 1999.
Representatives of Ernst & Young LLP are expected to be present at the Meeting,
will be given an opportunity to make a statement if they desire to do so, and
will be available to answer appropriate questions from shareholders.

THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE
APPOINTMENT OF ERNST & YOUNG LLP AS SOVEREIGN'S INDEPENDENT AUDITORS FOR THE
2000 FISCAL YEAR. The affirmative vote of a majority of all votes cast at the
Meeting is required to ratify the appointment. Abstentions and broker non-votes
will not constitute or be counted as "votes" cast for purposes of the Meeting.
All proxies will be voted "FOR" ratification of the appointment unless a
shareholder specifies to the contrary on such shareholder's proxy card.

SHAREHOLDER PROPOSALS FOR 2001 ANNUAL MEETING

Sovereign's 2001 Annual Meeting of Shareholders will be held on or about
April 26, 2001.

In accordance with the Bylaws of Sovereign, a shareholder who desires to
propose a matter for consideration at an annual meeting of shareholders must
provide notice thereof in writing, delivered or mailed by first-class United
States mail, postage prepaid, to the Secretary of Sovereign, not less than 90
days nor more than 150 days prior to such annual meeting. For the 2001 Annual
Meeting of Shareholders, this period will begin on November 27, 2000 and end on
January 26, 2001.

Any shareholder who desires to submit a proposal to be considered for
inclusion in Sovereign's proxy materials relating to its 2001 Annual Meeting of
Shareholders in accordance with the rules of the Securities and Exchange
Commission must submit such proposal in writing, addressed to Sovereign Bancorp,
Inc. at 1130 Berkshire Boulevard, Wyomissing, Pennsylvania 19610 (Attn:
Secretary), on or before November 28, 2000.

DIRECTOR NOMINATIONS BY SHAREHOLDERS

In accordance with the Bylaws of Sovereign, any shareholder entitled to
vote for the election of directors may nominate candidates for election to the
Board provided that the shareholder has given notice of the nomination in
writing, delivered or mailed by first-class United States mail, postage prepaid,
to the Secretary of Sovereign not less than 90 days nor more than 120 days prior
to such annual meeting. For the 2001 Annual Meeting of Shareholders, this period
will begin on December 27, 2000 and end on January 26, 2001.

Shareholders may also recommend qualified persons for consideration by the
Board of Directors to be included in Sovereign's proxy materials as a nominee of
the Board of Directors. Shareholders making a recommendation must submit the
same information as that required to be included by Sovereign in its Proxy
Statement with respect to nominees of the Board of Directors. The shareholder
recommendation should be submitted in writing, addressed to Sovereign Bancorp,
Inc. at 1130 Berkshire Boulevard, Wyomissing, Pennsylvania 19610 (Attn:
Secretary), on or before January 26, 2001.

<PAGE>

ANNUAL REPORT

Sovereign's Annual Report to the Shareholders for the year ended December
31, 1999 is enclosed herewith. Sovereign's Annual Report is furnished to
shareholders for their information. No part of the Annual Report is incorporated
by reference herein.

UPON WRITTEN REQUEST OF ANY SHAREHOLDER, A COPY OF SOVEREIGN'S ANNUAL
REPORT ON FORM 10-K FOR ITS FISCAL YEAR ENDED DECEMBER 31, 1999, INCLUDING A
LIST OF THE EXHIBITS THERETO, REQUIRED TO BE FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 13a-1 UNDER THE SECURITIES EXCHANGE ACT OF
1934, MAY BE OBTAINED, WITHOUT CHARGE, FROM LAWRENCE M. THOMPSON, JR.,
SECRETARY, SOVEREIGN BANCORP, INC., 1130 BERKSHIRE BOULEVARD, WYOMISSING,
PENNSYLVANIA 19610. EACH REQUEST MUST SET FORTH A GOOD FAITH REPRESENTATION
THAT, AS OF THE RECORD DATE, THE PERSON MAKING THE REQUEST WAS A BENEFICIAL
OWNER OF SOVEREIGN'S COMMON STOCK ENTITLED TO VOTE AT THE MEETING.

BY ORDER OF THE BOARD OF DIRECTORS

/s/ Lawrence M. Thompson, Jr.
-------------------------
LAWRENCE M. THOMPSON, JR.
Secretary

PLEASE REMEMBER TO MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD IN THE
ENCLOSED POSTAGE-PAID ENVELOPE SO THAT YOUR IMPORTANT VOTE WILL BE COUNTED AT
THE ANNUAL MEETING.

<PAGE>

DIRECTIONS TO THE SHERATON READING HOTEL
(ROUTE 422 WEST & PAPER MILL ROAD EXIT), 1741 PAPER MILL ROAD
WYOMISSING (READING), PA 19610-1207

FROM:

MANHATTAN, NY -- Take Lincoln Tunnel to NJ Turnpike South to Exit 14. Take I-78
West to 222 South. Follow 222 South to 422 West, then take Paper Mill Road Exit.
Sheraton is straight ahead and to the right.

ASBURY PARK/TRENTON, NJ -- Take I-95 South to NJ Turnpike South. Take Exit 6 to
the PA Turnpike. Follow turnpike to Exit 22 Morgantown. Exit here, and follow
signs to I-176 North 9 miles to 422 West Reading. Take Lebanon Exit and then
take Paper Mill Road Exit. The Sheraton is straight ahead and to the right.

PHILADELPHIA, PA -- Take I-76 West to PA Turnpike West to Exit 22 Morgantown.
Follow signs to I-176 North 9 miles to 422 West Reading. Take Lebanon Exit and
then take Paper Mill Road Exit. The Sheraton is straight ahead and to the right.

PITTSBURGH/HARRISBURG, PA -- Take PA Turnpike East to Exit 21 Reading/Denver.
Follow signs for 222 North. Get onto 422 West and take Lebanon Exit. Then take
Paper Mill Road Exit. The Sheraton is straight ahead and to the right.

SCRANTON/WILKES-BARRE, PA -- Take I-81 South to 61 South to 222 South to 422
West to the Paper Mill Road Exit. The Sheraton is straight ahead and to the
right.

DOVER, DE -- Take 13 North to Wilmington to 141 North to I-95 North to 202 North
to 100 North to 422 West. Take Lebanon Exit and then take Paper Mill Road Exit.
(Alternatively, after taking 100 North, follow to PA Turnpike West and take Exit
22 Morgantown. Follow signs for I-176 North 9 miles to 422 West Reading to
Lebanon Exit to Paper Mill Road Exit.) The Sheraton is straight ahead and to the
right.

<PAGE>

SOVEREIGN BANCORP, INC.

I/We hereby appoint Dennis S. Marlo, David A. Silverman and Patricia Zong,
or any one of them acting in the absence of the other, as proxyholders, each
with the power to appoint his or her substitute, and hereby authorize them to
represent and to vote, as designated on the reverse side, all the shares of
common stock of Sovereign Bancorp, Inc. ("Sovereign") held of record by me/us on
March 1, 2000, at the Annual Meeting of Shareholders to be held on April 27,
2000, or any adjournment thereof.

This proxy when properly executed will be voted in the manner directed on
the reverse side. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE
ELECTION OF CLASS I DIRECTORS, FOR THE RATIFICATION OF INDEPENDENT AUDITORS, AND
AGAINST THE SHAREHOLDER PROPOSAL. This proxy will be voted, in the discretion of
the proxyholders, upon such other business as may properly come before the
Annual Meeting of Shareholders or any adjournment thereof as provided in the
rules of the Securities and Exchange Commission.

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.

Please vote and sign on the other side.

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(up arrow) FOLD AND DETACH HERE (up arrow)

RETURN PROXY CARD IN ENCLOSED ENVELOPE AFTER COMPLETING, SIGNING AND DATING

Admission Ticket

[LOGO] Sovereign Bancorp, Inc.

2000 Annual Meeting of Shareholders

Thursday, April 27, 2000
3:30 PM

The Sheraton Reading Hotel
Route 422 West
Paper Mill Road Exit
1741 Paper Mill Road
Wyomissing, Pennsylvania
PLEASE ADMIT Non-Transferable

<PAGE>

Please mark
your votes as /X/
indicated in
this example

- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
MATTER NO. 1: FOR all nominees listed WITHHOLD AUTHORITY
ELECTION OF CLASS I DIRECTORS below (except as marked to vote for all nominees
TO SERVE UNTIL 2003 to the contrary below) listed below

/_/ /_/
</TABLE>

Brian Hard; Cameron C. Troilo, Sr.

(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A
LINE THROUGH HIS NAME IN THE ABOVE LIST.)

MATTER NO. 2: FOR AGAINST ABSTAIN
RATIFY THE APPOINTMENT OF ERNST & YOUNG LLP
AS SOVEREIGN'S INDEPENDENT AUDITORS FOR THE /_/ /_/ /_/
FISCAL YEAR ENDING DECEMBER 31, 2000
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST"
- --------------------------------------------------------------------------------

MATTER NO. 3: FOR AGAINST ABSTAIN
SHAREHOLDER PROPOSAL
REGARDING SALE OR MERGER /_/ /_/ /_/
- --------------------------------------------------------------------------------

Signature(s) ________________________________________________ Date _____________

NOTE: Please sign as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such.

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(up arrow) FOLD AND DETACH HERE (up arrow)