SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
[ X ] Annual Report pursuant to Section 15(d) of the
Securities Exchange Act of 1934 for the fiscal year
ended December 31, 1999.
or
[ ] Transition Report pursuant to Section 15(d) of the
Securities Exchange Act of 1934 for the transition
period from __________ to __________.
Commission File Number: 0-16533
Sovereign Bancorp, Inc. Retirement Savings Plan
(Full title of the plan)
Sovereign Bancorp, Inc.
1130 Berkshire Boulevard
Wyomissing, PA 19610
(Name of issuer of the securities held pursuant to the plan and
the address of its principal executive office.)
Registrant's telephone number, including
area code: (610) 320-8400
Notices and communications from the Securities and Exchange
Commission relating to this report should be forwarded to:
Sovereign Bancorp, Inc.
1130 Berkshire Boulevard
Wyomissing, PA 19610
Attention: Lawrence M. Thompson, Jr.
With a copy to:
Wesley R. Kelso, Esquire
Stevens & Lee
One Penn Square
P.O. Box 1594
Lancaster, PA 17608-1594
Item 1. Financial Statements and Exhibits
a. Financial Statements
1. Report of Ernst & Young LLP.
2. Statements of Net Assets Available for
Benefits as of December 31, 1999 and 1998.
3. Statements of Changes in Net Assets Available
for Benefits for each of the years in the two
year period ended December 31, 1999.
4. Notes to Financial Statements.
b. Exhibits
1. Consent of Ernst & Young LLP.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Administrative Committee of the Sovereign Bancorp,
Inc. Retirement Savings Plan has duly caused this annual report
to be signed on its behalf by the undersigned thereunto duly
authorized.
SOVEREIGN BANCORP, INC.
RETIREMENT SAVINGS PLAN
Date: June 28, 2000 By /s/ Lawrence M. Thompson, Jr.
Chief Administrative Officer
and Secretary
Financial Statements and Schedules
Sovereign Bancorp, Inc. 401(k) Retirement Savings Plan
Years ended December 31, 1999 and 1998
with Report of Independent Auditors
Sovereign Bancorp, Inc. 401(k) Retirement Savings Plan
Financial Statements and Schedules
Years ended December 31, 1999 and 1998
Contents
Report of Independent Auditors 1
Audited Financial Statements
Statements of Net Assets Available for Benefits 2
Statements of Changes in Net Assets Available for 3
Benefits
Notes to Financial Statements 4
Schedules
Schedule of Assets Held for Investment Purposes at End 11
of Year
Schedule of Reportable Transactions 12
Report of Independent Auditors
The Pension Committee
Sovereign Bancorp, Inc.
We have audited the accompanying statements of net assets
available for benefits of the Sovereign Bancorp, Inc. 401(k)
Retirement Savings Plan as of December 31, 1999 and 1998, and
the related statements of changes in net assets available for
benefits for the years then ended. These financial statements
are the responsibility of the Plan's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States. Those standards require
that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the net assets
available for benefits of the Plan at December 31, 1999 and
1998, and the changes in its net assets available for benefits
for the years then ended, in conformity with accounting
principles generally accepted in the United States.
Our audits were performed for the purpose of forming an opinion
on the financial statements taken as a whole. The accompanying
supplemental schedules of assets held for investment purposes at
end of year as of December 31, 1999, and reportable transactions
for the year then ended, are presented for purposes of
additional analysis and are not a required part of the financial
statements but are supplementary information required by the
Department of Labor's Rules and Regulations for Reporting and
Disclosure under the Employee Retirement Income Security Act of
1974. These supplemental schedules are the responsibility of the
Plan's management. The supplemental schedules have been
subjected to the auditing procedures applied in our audits of
the financial statements and, in our opinion, are fairly stated
in all material respects in relation to the financial statements
taken as a whole.
June 16, 2000
Sovereign Bancorp, Inc. 401(k) Retirement Savings Plan
Statements of Net Assets Available for Benefits
December 31
1999 1998
Assets
Investments $42,936,928 $23,869,634
Cash - 117,967
Receivables:
Participants' contribution - 256,202
Employer's contribution 1,937,258 1,193,940
Investment income - 52,083
Total receivables 1,937,258 1,502,225
Total assets 44,874,186 25,489,826
Liabilities
Other liabilities - 9,293
Total liabilities - 9,293
Net assets available for benefits $44,874,186 $25,480,533
See accompanying notes.
Sovereign Bancorp, Inc. 401(k) Retirement Savings Plan
Statements of Changes in Net Assets Available for Benefits
Year ended December 31
1999 1998
Additions:
Investment income:
Net realized and
unrealized depreciation
in fair value of
investments $(8,234,911) $(1,288,706)
Interest and dividends 1,183,633 286,558
(7,051,278) (1,002,148)
Rollovers in 25,381,491 582,105
Contributions:
Participants 5,073,655 3,179,888
Employer 1,937,258 1,190,537
7,010,913 4,370,425
Transfers from plan mergers 489,302 5,597,357
Total additions 25,830,428 9,547,739
Deductions:
Benefits paid to participants 6,398,613 2,762,926
Administrative expenses 38,162 -
Total deductions 6,436,775 2,762,926
Net increase 19,393,653 6,784,813
Net assets available for
benefits:
Beginning of year 25,480,533 18,695,720
End of year $44,874,186 $25,480,533
See accompanying notes.
Sovereign Bancorp, Inc. 401(k) Retirement Savings Plan
Notes to Financial Statements
December 31, 1999
1. Description of Plan
The following brief description of the Sovereign Bancorp, Inc.
401(k) Retirement Savings Plan (the Plan) is provided for
general information purposes only. Participants should refer to
the Plan agreement for more complete information.
General
The Plan is a defined contribution plan covering all full-time
employees and certain part-time employees of Sovereign Bancorp,
Inc. and its affiliates (the Sponsor). Employees can begin
participation after meeting the eligibility criteria of
completion of six months of service and attainment of age 21.
The Plan is subject to the provisions of the Employee Retirement
Income Security Act of 1974 (ERISA).
In June of 1999 the Plan changed service providers by replacing
the trustee and plan administrator. Prior to June 1999, Wheat
First Union served as trustee and
Conrad M. Siegle Inc. served as plan administrator. In June of
1999 Putnam Fiduciary Trust Company became trustee and plan
administrator for the Plan.
Plan Mergers and Rollovers In
In May of 1999, approximately $24.1 million of assets were
rolled into the Plan as a result of the acquisition of 93 former
CoreStates branches and the associated employee base by the
Sponsor, and in December of 1999, approximately $.4 million of
assets were transferred into the Plan as a result of merging the
savings plan of The Network Companies, which was acquired by the
Sponsor.
In July of 1998, approximately $1.5 million of assets were
transferred into the Plan as a result of merging the savings
plans of West Jersey Bancshares and First State Financial
Services, and in November and December of 1998 approximately
$3.6 million and $500 thousand, respectively, of assets were
transferred into the Plan as a result of merging the savings
plans of ML Bancorp, Inc. and Carnegie Bancorp, Inc., all
institutions acquired by the Sponsor.
Contributions
A participant may direct the Sponsor to make contributions to
the participant's account of up to 12% of compensation on a
before-tax basis.
Employer matching contributions are made to participant accounts
for all participants employed on December 31 of each Plan year.
The Sponsor will contribute a matching percentage, determined
annually by the Sponsor, which was 50% of a participant's
contributions in 1999 and 1998. The employer's matching
percentage is applied to the lower of (1) the participant's
contributions or (2) 6% of the participant's compensation for
the year. Employer contributions may be made only from its
profits of the current year and/or its accumulated retained
earnings. Currently, matching employer contributions are
invested solely in Sovereign Bancorp, Inc. common stock.
Participant Accounts
Each participant's account is credited with the participant's
contributions and allocations of (a) the Company's contributions
and (b) Plan earnings. The Company's contribution is allocated
to participant's accounts by multiplying the lower of a
participant's contributions or 6% of the participant's
compensation for the year by the Company's matching percentage.
Plan earnings from each investment option are allocated to
participant's accounts according to their ownership interest in
each investment option. The benefit to which a participant is
entitled is the benefit that can be provided from the
participant's account.
Vesting
Participants are immediately vested in their contributions and
the Company's matching contributions, plus actual earnings
thereon.
Investment Options
Upon enrollment in the Plan, a participant may direct employee
contributions in any of the Plan's options.
Participants may change their investment options at any time.
Each participant may transfer all or a portion of his or her
balance in any one or more funds to another fund or funds.
Also, the trustee may, at its discretion, invest any portion of
a fund in cash or other short-term investments.
Participant Notes Receivable
Participants may borrow from their fund accounts a minimum of
$1,000 up to a maximum of the lesser of $50,000 or 50% of their
account balance. Loan terms range from 1-5 years. The loans are
secured by the balance in the participant's account. Interest
rates are set at the current prime rate plus 1%. Principal and
interest is paid ratably through bi-weekly payroll deductions.
Payment of Benefits
On termination of service, a participant may receive a lump-sum
amount equal to the vested value of his or her account
(mandatory for account balances less than $5,000), elect to
receive annual installments over a ten-year period, or have any
vested portion of his or her account rolled over into an
eligible retirement plan.
2. Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States
requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those
estimates.
Valuation of Investments
The Plan's investments are stated at fair value. Securities
traded on a national securities exchange are valued at the last
reported sales price on the last business day of the plan year;
investments traded in the over-the-counter market and listed
securities for which no sale was reported on that date are
valued at the average of the last reported bid and ask prices.
The shares of registered investment companies are valued at
quoted market prices which represent the net asset values of
shares held by the Plan at year end. The participant notes
receivable are valued at their outstanding balances, which
approximate fair value.
Purchases and sales of securities are recorded on a trade-date
basis. Interest income is recorded on the accrual basis.
Dividends are recorded on the ex-dividend date.
Administration
Putnam Fiduciary Trust Company is the trustee for the Plan.
During 1996, the Charter FSB Bancorp 401(k) Plan's ("Charter")
assets and participants (whose plan sponsor had previously been
acquired by the Sponsor) merged into the Plan. Upon the merger
of this plan, the participants of Charter continued to hold
their investment balances in the original Charter Investments,
however, they were required to direct future contributions into
the Plan's investment options. Retirement Systems Group, Inc. is
the trustee for the assets of the former Charter FSB Bancorp
401(k) Plan.
Administrative expenses incurred by the Plan are paid by the
Plan to the extent the expenses are not paid by the Sponsor.
Reclassification
Certain 1998 amounts have been reclassified to conform to 1999
presentation.
3. Investments
The fair value of individual investments that represent 5% or
more of the Plan's net assets are as follows:
December 31, 1999
Sovereign Bancorp, Inc. Common Stock* -
1,084,396 shares
(stock of Plan sponsor, a party-in-interest
to the Plan) $8,082,137
First Union Corporation Common Stock -
155,749 shares 5,120,726
Putnam Investors Fund - 470,455 shares 9,009,219
Putnam Stable Value Fund - 7,150,906 shares 7,150,906
S&P 500 Fund - 246,775 shares 8,622,313
December 31, 1998
Sovereign Bancorp, Inc. Common Stock* - 914,452 shares
(stock of Plan sponsor, a
party-in-interest to the Plan) $13,030,941
* Portion of which is nonparticipant-directed
During 1999 and 1998, the Plan's investments (including
investments bought, sold, as well as held during the year)
appreciated/(depreciated) in fair value as determined by quoted
market prices as follows:
Year ended December 31
1999 1998
Registered investment companies $ 2,585,087 $946,542
Common stocks (10,819,998) (2,235,248)
$(8,234,911) $(1,288,706)
4. Nonparticipant-Directed Investments
The only nonparticipant-directed investment is in the Sponsor's
common stock. The administrator does not track the amount of the
Sponsor's common stock that is participant directed and
nonparticipant-directed.
December 31
Net assets: 1999 1998
Investments at fair value:
Sovereign Bancorp, Inc.
common stock $8,082,137 $13,030,941
Short-term Investment Fund - 238,969
Total investments 8,082,137 13,269,910
Contributions receivable 1,937,258 1,332,432
Interfund transfers receivable - 104,729
Other liabilities - (102)
$10,019,395 $14,706,969
Year ended December 31
1999 1998
Change in net assets:
Contributions $ 4,577,064 $ 3,155,971
Interest and dividends 99,509 63,605
Net depreciation in fair value (7,010,187) (2,235,248)
Distributions to participants (1,981,377) (1,417,994)
Interfund transfers (361,276) (114,908)
Administrative expense (11,307) -
Transfers from plan mergers - 2,082,119
$(4,687,574) $1,533,545
5. Plan Termination
Although the Sponsor currently has no intention to do so, it has
the authority to discontinue contributions at any time and to
terminate the Plan subject to the provisions of ERISA. If the
Plan were to be terminated, participants would become fully
vested in their accounts.
6. Income Tax Status
The Plan has received a determination letter from the Internal
Revenue Service dated January 29, 1996, stating that the Plan is
qualified under Section 401(a) of the Internal Revenue Code
(IRC) and, therefore, the related trust is exempt from taxation.
Once qualified, the Plan is required to operate in conformity
with the IRC to maintain its qualification. The pension
committee believes that the Plan is qualified and the related
trust is tax-exempt.
7. Transactions with Parties-In-Interest
During 1999 and 1998, the Plan received $98,434 and $58,915 in
dividends from the Sponsor, respectively. Fees paid during the
year by the Plan for other services rendered by parties-in-
interest were based on customary and reasonable rates for such
services.
The Plan held 1,084,396 and 914,452 shares of common stock of
the Sponsor at December 31, 1999 and 1998, respectively.
Sovereign Bancorp, Inc. 401(k) Retirement Savings Plan**
Schedule H, Line 4i -
Schedule of Assets Held for Investment Purposes at End of Year
December 31, 1999
<TABLE>
<CAPTION>
Identity of Issuer Description of investment Cost Current value
<S> <C> <C> <C>
First Union Corporation Common stock $5,120,726
Sovereign Bancorp, Inc.* Common stock $12,042,128 8,082,137
13,202,863
Putnam Fund for Growth and Income Registered Investment Company 1,028,535
Putnam Investors Fund Registered Investment Company 9,009,219
Putnam Asset Allocation - Balanced Registered Investment Company 2,089,656
Putnam Asset Allocation - Conservative Registered Investment Company 84,462
Putnam Stable Value Fund Registered Investment Company 7,150,906
S&P 500 Fund Registered Investment Company 8,622,313
RSI - Core Equity Fund Registered Investment Company 284,514
RSI - Emerging Growth Equity Fund Registered Investment Company 106,038
RSI - Value Equity Fund Registered Investment Company 47,446
RSI - Short-Term Investment Fund Registered Investment Company 90,757
RSI - Intermediate Term Bond Fund Registered Investment Company 58,216
RSI - Actively Managed Bond Fund Registered Investment Company 27,468
28,599,530
Participant loans* Interest rates ranging from 5.75%
to 9.25% 1,134,535
$42,936,928
</TABLE>
* Indicates party-in-interest to the Plan.
** Plan identification number 002/EIN number 23-2453088.
Sovereign Bancorp, Inc. 401(k) Retirement Savings Plan
Schedule H, Line 4j -
Schedule of Reportable Transactions
Year ended December 31, 1999
<TABLE>
<CAPTION>
Current
Value
of Asset
on
Identity of Party Description of Purchase Selling Cost of Transaction Net
Involved Asset Price Price Asset Date Gain/(Loss)
<S> <C> <C> <C> <C> <C> <C>
Category (iii)-Series of transactions in excess of 5% of plan assets
Sovereign Bancorp, Inc. Sovereign Bancorp,
Inc. Common Stock $4,699,868 $ - $4,699,868 $4,699,868 $ -
- 1,401,824 187,115 - 1,214,709
</TABLE>
* Transactions made on the market.
There were no category (i), (ii), or (iv) reportable
transactions during 1999.
Supplemental Schedules
Exhibit Index
Exhibit
1. Consent of Ernst & Young LLP
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statement (Form S-8 No. 33-29038) pertaining to the Sovereign
Bancorp, Inc. 401(k) Retirement Savings Plan of our report dated
June 16, 2000, with respect to the financial statements and
schedules of the Sovereign Bancorp, Inc. 401(k) Retirement
Savings Plan included in this Annual Report (Form 11-K) for the
year ended December 31, 1999.
/s/ ERNST & YOUNG LLP
Philadelphia, Pennsylvania
June 28, 2000
