SANTANDER HOLDINGS USA INC. 
By Highlights for the third quarter of 2008 were as follows:
-- Sovereign Bank remains well capitalized by all regulatory measures.
Sovereign Bank's Tier 1 leverage ratio was 6.77% compared to 6.63% at
-- Sovereign has
-- Stable net interest margin of 3.02%, an increase of 28 basis points from the similar quarter in 2007 and a slight decrease of 4 basis points from the second quarter of 2008.
-- Loan balances at
-- Deposit mix continued to shift away from higher cost wholesale sources as retail and commercial deposits now comprise 83.4% of total deposits up from 75.5% a year ago.
-- Sovereign's period end deposit balances have declined
-- Sovereign increased its allowance for credit losses to
Sovereign Bancorp, Inc., ("Sovereign") (NYSE: SOV), is the parent company
of Sovereign Bank, a financial institution with principal markets in the
Note:
This press release contains statements with respect to Sovereign's vision,
mission, strategies, goals, beliefs, plans, objectives, expectations,
anticipations, estimates, intentions, financial condition, results of
operations, future performance and business of Sovereign. These statements
constitute forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Although Sovereign believes that
the expectations reflected in these forward-looking statements are reasonable,
these statements are not guarantees of future performance and involve risks
and uncertainties which are subject to change based on various important
factors (some of which are beyond Sovereign's control). Among the factors
which would cause Sovereign's financial performance to differ materially from
that expressed in the forward-looking statements are: the strength of
Sovereign Bancorp is followed by several market analysts. Please note that any opinions, estimates, forecasts, or predictions regarding Sovereign Bancorp's performance or recommendations regarding Sovereign's securities made by these analysts are theirs alone and do not represent opinions, estimates, forecasts, predictions or recommendations of Sovereign Bancorp or its management. Sovereign Bancorp does not by its reference to any analyst opinions, estimates, forecasts regarding Sovereign's performance or recommendations regarding Sovereign's securities imply Sovereign's endorsement of or concurrence with such information, conclusions or recommendations.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Quarter Ended
(dollars in thousands, Sept. 30 June 30 Mar. 31 Dec. 31 Sept. 30
except per share data) 2008 2008 2008 2007 2007
Interest and dividend
income:
Interest on interest-
earning deposits $561 $997 $2,964 $1,615 $7,117
Interest on investment
securities
Available for
sale 134,108 156,164 168,109 173,803 177,125
Other 8,407 6,671 9,820 14,279 11,886
Interest on loans 816,746 837,988 895,276 949,643 954,014
Total interest
and dividend
income 959,822 1,001,820 1,076,169 1,139,340 1,150,142
Interest expense:
Deposits and
related customer
accounts 196,887 228,546 315,103 395,768 408,680
Borrowings 271,781 267,144 278,886 277,548 284,701
Total interest
expense 468,668 495,690 593,989 673,316 693,381
Net interest
income 491,154 506,130 482,180 466,024 456,761
Provision for credit
losses 304,000 132,000 135,000 148,192 162,500
Net interest
income after
provision for
credit losses 187,154 374,130 347,180 317,832 294,261
Non-interest income:
Consumer banking
fees 81,149 80,969 73,191 77,420 73,113
Commercial banking
fees (2) 52,589 53,747 54,453 56,695 44,155
Mortgage banking
revenue (1) 1,520 37,897 (5,133) 9,161 3,752
Capital markets
revenue 4,695 7,209 10,393 (18,310) (12,627)
Bank owned life
insurance income 18,175 19,065 19,424 20,633 24,439
Other 4,714 6,322 5,297 7,584 8,557
Total fees and
other income
before investment
gains/(losses) 162,842 205,209 157,625 153,183 141,389
Net gain/(loss) on
investments (3) (1,158,578) 1,908 14,135 (179,209) 1,884
Total
non-interest
income (995,736) 207,117 171,760 (26,026) 143,273
Non-interest expense:
General and administrative
Compensation and
benefits (4) 196,611 192,760 185,112 155,856 172,319
Occupancy and
equipment 76,724 74,868 78,013 77,325 75,217
Technology expense 25,632 25,728 24,498 25,177 23,940
Outside services 15,608 15,542 15,630 18,828 16,434
Marketing expense 19,771 19,699 16,246 13,881 16,296
Other administrative
expenses (5) 53,155 53,266 39,765 46,537 37,440
Total general and
administrative 387,501 381,863 359,264 337,604 341,646
Other expenses:
Core deposit & other
intangibles 25,373 28,106 29,122 30,141 31,066
Goodwill impairment - - - 1,576,776 -
Other minority interest
expense and equity
method expense (6) 20,075 14,719 8,339 27,448 6,913
Proxy and related
professional fees - - - - -
Restructuring, other
employee severance and
debt repurchase charges - - - - 6,029
ESOP expense related to
freezing of plan - - - - -
Merger-related and
integration charges - - - - -
Total other
expenses 45,448 42,825 37,461 1,634,365 44,008
Total non-
interest
expense 432,949 424,688 396,725 1,971,969 385,654
Income/(loss)
before income
taxes (1,241,531) 156,559 122,215 (1,680,163) 51,880
Income tax
expense/(benefit) (259,940) 29,120 22,080 (77,180) (6,330)
Net income/
(loss) $(981,591) $127,439 $100,135 $(1,602,983) $58,210
(1) Mortgage banking activity is summarized below:
Gains/(losses) on sale
of mortgage loans and
related securities and
home equity loans (7) $5,997 $4,999 $3,977 $4,560 $3,971
Net gains/(losses)
recorded under SFAS 133 (2,289) 1,602 1,370 (2,125) 1,781
Mortgage servicing fees,
net of mortgage servicing
rights amortization 4,462 1,148 3,848 1,948 972
Mortgage servicing right
recoveries/(impairments) 14 19,837 (18,703) (2,071) -
Net gains/(losses) on
sale of multifamily
loans (8) (8,197) 9,676 9,231 7,515 2,383
Net gains/(losses)
recorded on commercial
mortgage backed
securitization - - - (666) (5,355)
Multifamily servicing
right recoveries/
(impairments) 1,533 635 (4,856) - -
Total mortgage
banking revenues $1,520 $37,897 $(5,133) $9,161 $3,752
(2) The third quarter of 2007 includes a LOCOM adjustment of
(3) The third quarter of 2008 includes a
(4) Third quarter results include a
(5) Other administrative expenses increased from first quarter 2008 levels
due to the
(6) Third quarter 2008 results included lower earnings of
(7) First quarter of 2007 results include a LOCOM adjustment of
(8) The third quarter of 2008 includes a
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Year to Date
(dollars in thousands, except per Sept. 30 Sept. 30
share data) 2008 2007
Interest and dividend income:
Interest on interest-earning deposits $4,522 $17,497
Interest on investment securities
Available for sale 458,381 547,212
Other 24,898 37,366
Interest on loans 2,550,010 2,914,841
Total interest and dividend income 3,037,811 3,516,916
Interest expense:
Deposits and related customer accounts 740,536 1,231,547
Borrowings 817,811 887,371
Total interest expense 1,558,347 2,118,918
Net interest income 1,479,464 1,397,998
Provision for credit losses 571,000 259,500
Net interest income after
provision for credit losses 908,464 1,138,498
Non-interest income:
Consumer banking fees 235,309 218,395
Commercial banking fees (2) 160,789 145,609
Mortgage banking revenue (1) 34,284 (76,953)
Capital markets revenue 22,297 (956)
Bank owned life insurance income 56,664 65,222
Other 16,333 26,251
Total fees and other income before
investment gains/(losses) 525,676 377,568
Net gain/(loss) on investments (3) (1,142,535) 2,854
Total non-interest income (616,859) 380,422
Non-interest expense:
General and administrative
Compensation and benefits (4) 574,483 517,672
Occupancy and equipment 229,605 231,373
Technology expense 75,858 71,088
Outside services 46,780 48,681
Marketing expense 55,716 42,220
Other administrative expenses (5) 146,186 97,200
Total general and administrative 1,128,628 1,008,234
Other expenses:
Core deposit & other intangibles 82,601 96,576
Goodwill impairment - -
Other minority interest expense and
equity method expense (6) 43,133 39,815
Proxy and related professional fees - (516)
Restructuring, other employee
severance and debt repurchase charges - 61,999
ESOP expense related to freezing of plan - 40,119
Merger-related and integration charges - 2,242
Total other expenses 125,734 240,235
Total non-interest expense 1,254,362 1,248,469
Income/(loss) before income taxes (962,757) 270,451
Income tax expense/(benefit) (208,740) 16,730
Net income/(loss) $(754,017) $253,721
(1) Mortgage banking activity is summarized below:
Gains/(losses) on sale of mortgage loans and
related securities and home equity loans (7) $14,974 $(107,057)
Net gains/(losses) recorded under SFAS 133 683 2,176
Mortgage servicing fees, net of mortgage
servicing rights amortization 9,456 3,443
Mortgage servicing right
recoveries/(impairments) 1,148 656
Net gains/(losses) on sale of
multifamily loans (8) 10,710 18,688
Net gains/(losses) recorded on commercial
mortgage backed securitization - 5,141
Multifamily servicing right
recoveries/(impairments) (2,687) -
Total mortgage banking revenues $34,284 $(76,953)
(2) The third quarter of 2007 includes a LOCOM adjustment of
(3) The third quarter of 2008 includes a
(4) Third quarter results include a
(5) Other administrative expenses increased from first quarter 2008 levels
due to the
(6) Third quarter 2008 results included lower earnings of
(7) First quarter of 2007 results include a LOCOM adjustment of
(8) The third quarter of 2008 includes a
Sovereign Bancorp, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(unaudited)
Sept. 30 June 30 Mar. 31
(dollars in thousands) 2008 2008 2008
Assets
Cash and amounts due
from depository institutions (1) $2,525,696 $1,140,965 $1,957,403
Investments:
Available-for-sale 8,604,927 11,118,184 10,958,419
Other investments 949,075 944,606 1,134,805
Total investments 9,554,002 12,062,790 12,093,224
Loans:
Commercial 32,517,171 32,435,333 32,181,592
Consumer 24,396,717 24,970,453 26,690,190
Total loans 56,913,888 57,405,786 58,871,782
Less allowance for loan losses (957,864) (808,748) (775,441)
Total loans, net 55,956,024 56,597,038 58,096,341
Premises and equipment, net 555,093 559,986 555,773
Accrued interest receivable 269,258 298,741 322,760
Goodwill 3,430,965 3,430,653 3,430,290
Core deposit and other intangibles 289,514 314,888 342,994
Bank owned life insurance 1,835,178 1,820,403 1,806,631
Other assets 2,905,676 2,971,985 3,307,303
Total assets $77,321,406 $79,197,449 $81,912,719
Liabilities and Stockholders' Equity
Liabilities:
Deposits and other customer related
accounts:
Retail and commercial deposits $35,985,656 $38,405,724 $39,292,245
Wholesale deposits 3,130,820 3,177,527 3,756,952
Government deposits 2,080,716 3,190,784 3,314,420
Customer repurchase agreements 1,925,982 2,520,073 2,633,112
Total deposits 43,123,174 47,294,108 48,996,729
Borrowings and other debt
obligations (1) 25,213,772 22,050,359 24,348,829
Other liabilities 1,498,016 1,471,894 1,743,380
Total liabilities 69,834,962 70,816,361 75,088,938
Minority interests 147,603 147,139 146,784
Stockholders' equity:
Preferred Stock 195,445 195,445 195,445
Common Stock (2) 7,713,181 7,701,024 6,298,254
Warrants and employee stock options
issued 349,666 348,844 348,878
Treasury stock (9,661) (10,531) (11,438)
Accumulated other comprehensive loss (643,752) (720,036) (749,556)
Retained earnings (266,038) 719,203 595,414
Total stockholders' equity 7,338,841 8,233,949 6,676,997
Total liabilities and
stockholders' equity $77,321,406 $79,197,449 $81,912,719
Dec. 31 Sept. 30
(dollars in thousands) 2007 2007
Assets
Cash and amounts due
from depository institutions (1) $3,130,770 $3,992,731
Investments:
Available-for-sale 13,941,847 14,307,929
Other investments 1,200,545 981,921
Total investments 15,142,392 15,289,850
Loans:
Commercial 30,912,972 29,912,883
Consumer 26,866,807 27,235,481
Total loans 57,779,779 57,148,364
Less allowance for loan losses (709,444) (629,747)
Total loans, net 57,070,335 56,518,617
Premises and equipment, net 562,332 559,040
Accrued interest receivable 350,534 384,812
Goodwill 3,426,246 5,003,022
Core deposit and other intangibles 372,116 402,257
Bank owned life insurance 1,794,099 1,773,829
Other assets 2,897,572 2,683,170
Total assets $84,746,396 $86,607,328
Liabilities and Stockholders' Equity
Liabilities:
Deposits and other customer related
accounts:
Retail and commercial deposits $38,350,632 $37,838,296
Wholesale deposits 4,807,369 5,605,720
Government deposits 4,003,224 3,927,346
Customer repurchase agreements 2,754,680 2,726,686
Total deposits 49,915,905 50,098,048
Borrowings and other debt obligations (1) 26,126,082 26,161,337
Other liabilities 1,565,654 1,475,954
Total liabilities 77,607,641 77,735,339
Minority interests 146,430 146,075
Stockholders' equity:
Preferred Stock 195,445 195,445
Common Stock (2) 6,295,572 6,277,292
Warrants and employee stock options issued 348,365 347,630
Treasury stock (19,853) (20,359)
Accumulated other comprehensive loss (326,133) (218,155)
Retained earnings 498,929 2,144,061
Total stockholders' equity 6,992,325 8,725,914
Total liabilities and stockholders'
equity $84,746,396 $86,607,328
(1) Sovereign held cash deposits of
(2)
Sovereign Bancorp, Inc. and Subsidiaries
FINANCIAL HIGHLIGHTS
(unaudited)
Quarter Ended
Sept. 30 June 30 Mar. 31 Dec. 31 Sept. 30
2008 2008 2008 2007 2007
(dollars in millions, except
per share data)
Per Share Data
Basic earnings/(loss) per share $(1.48) $0.22 $0.20 $(3.34) $0.11
Diluted earnings/(loss) per
share (1.48) 0.22 0.20 (3.34) 0.11
Dividend declared per share - - - 0.08 0.08
Common book value per share (1) 10.76 12.13 13.43 14.12 17.76
Tangible common book value per
share (2) 5.57 6.90 6.20 6.82 7.11
Tangible common book value per
share excluding OCI 6.54 7.99 7.75 7.50 7.57
Common stock price:
High $10.69 $9.89 $13.07 $17.73 $21.94
Low 2.33 7.14 9.28 10.08 16.58
Close 3.95 7.36 9.32 11.40 17.04
Weighted average common shares:
Basic (3) 663.6 570.1 482.2 481.2 480.2
Diluted (3) (4) 663.6 571.4 482.2 481.2 480.2
End-of-period common shares:
Basic 663.8 662.6 482.4 481.4 480.4
Diluted 692.3 691.3 511.5 511.0 512.4
Performance Statistics
Bancorp
Net interest margin 3.02% 3.06% 2.88% 2.77% 2.74%
Return on average assets -5.02% 0.64% 0.50% -7.74% 0.28%
Return on average tangible
assets -5.25% 0.67% 0.52% -8.25% 0.30%
Return on average equity -48.18% 6.73% 5.78% -72.92% 2.63%
Return on average tangible
equity -84.19% 12.44% 11.67% -174.96% 6.34%
Annualized net loan charge-offs
to average loans (5) 0.91% 0.60% 0.51% 0.42% 0.24%
Efficiency ratio (6) 59.25% 53.68% 56.15% 54.52% 57.12%
Year to Date
Sept. 30 Sept. 30
2008 2007
(dollars in millions, except per share data)
Per Share Data
Basic earnings/(loss) per share $(1.33) $0.51
Diluted earnings/(loss) per share (1.33) 0.51
Dividend declared per share - 0.24
Common book value per share (1) 10.76 17.76
Tangible common book value per share (2) 5.57 7.11
Tangible common book value per share
excluding OCI 6.54 7.57
Common stock price:
High $13.07 $26.42
Low 2.33 16.58
Close 3.95 17.04
Weighted average common shares:
Basic (3) 573.4 477.9
Diluted (3) (4) 573.4 477.9
End-of-period common shares:
Basic 663.8 480.4
Diluted 692.3 512.4
Performance Statistics
Bancorp
Net interest margin 2.98% 2.72%
Return on average assets -1.26% 0.41%
Return on average tangible assets -1.32% 0.43%
Return on average equity -13.32% 3.87%
Return on average tangible equity -24.73% 9.37%
Annualized net loan charge-offs to
average loans (5) 0.67% 0.19%
Efficiency ratio (6) 56.29% 56.78%
(1) Common book value per share equals common stockholders' equity at period-end divided by common shares outstanding.
(2) Tangible book value per share equals common stockholders' equity at period-end excluding goodwill and core deposits and other intangibles, net of any associated deferred tax liabilities divided by common shares outstanding.
(3) On
(4) The conversion of warrants and equity awards and the after-tax add back of Sovereign's contingently convertible trust preferred interest expense was excluded from Sovereign's GAAP diluted earnings per share calculation for the majority of the periods above since the result would have been anti- dilutive.
(5) The third quarter of 2008 includes a
(6) Efficiency ratio equals general and administrative expense as a percentage of total revenue, defined as the sum of net interest income and total fees and other income before security gains.
Sovereign Bancorp, Inc. and Subsidiaries
FINANCIAL HIGHLIGHTS
(unaudited)
Quarter Ended
Sept. 30 June 30 Mar. 31 Dec. 31 Sept. 30
2008 2008 2008 2007 2007
(dollars in millions)
Financial Condition Data:
Asset Quality
Non-performing assets $706.0 $553.9 $484.4 $361.6 $336.7
Non-performing loans 638.5 490.5 417.8 304.3 282.4
Non-performing assets to total
assets 0.91% 0.70% 0.59% 0.43% 0.39%
Non-performing loans to loans 1.12% 0.85% 0.71% 0.53% 0.49%
Non-performing assets as a
percentage of tangible equity
and allowance for loan losses 14.6% 9.9% 12.2% 8.6% 7.9%
Allowance for credit losses $1,018.4 $843.5 $798.4 $737.7 $650.0
Allowance for credit losses
to total loans 1.79% 1.47% 1.36% 1.28% 1.14%
Allowance for credit losses
to non-performing loans 160% 172% 191% 242% 230%
Capitalization - Bancorp (1)
Tier 1 leverage ratio 6.60% 8.34% 6.21% 5.89% 6.03%
Tangible equity to tangible
assets excluding OCI 6.09% 7.18% 4.97% 4.67% 4.69%
Tangible equity to tangible
assets including OCI 5.27% 6.29% 4.06% 4.28% 4.43%
Tangible common equity to
tangible assets excluding OCI 5.83% 6.92% 4.72% 4.43% 4.45%
Tangible common equity to
tangible assets including OCI 5.01% 6.04% 3.81% 4.04% 4.19%
Capitalization - Bank (1)
Tier 1 leverage ratio 6.77% 7.28% 6.85% 6.54% 6.63%
Tier 1 risk-based ratio 7.29% 7.86% 7.49% 7.54% 7.66%
Total risk-based ratio 10.87% 11.41% 10.24% 10.40% 10.37%
(1) All capital ratios are calculated based upon adjusted end of period assets consistent with OTS guidelines. The current quarter ratios are estimated as of the date of this earnings release.
Sovereign Bancorp, Inc. and Subsidiaries
AVERAGE BALANCE, INTEREST AND YIELD/RATE ANALYSIS
(unaudited)
Quarter Ended
September 30, 2008
Yield/
(dollars in thousands) Average Balance Interest(1) Rate
Earning assets:
Investment securities $11,228,969 $157,892 5.62%
Loans:
Commercial real estate 13,260,855 189,538 5.69%
Commercial and industrial
loans (C&I) 12,598,813 162,728 5.14%
Other 1,730,810 29,366 6.79%
Total Commercial 27,590,478 381,632 5.51%
Multi-family 4,785,006 70,734 5.90%
Residential 11,643,926 163,773 5.63%
Home equity loans and lines
of credit 6,598,160 91,587 5.52%
Total consumer loans secured
by real estate 18,242,086 255,360 5.59%
Auto Loans 6,076,959 107,252 7.02%
Other 299,082 5,835 7.76%
Total Consumer 24,618,127 368,447 5.97%
Total loans 56,993,611 820,813 5.74%
Allowance for loan losses (832,446)
Total earning assets 67,390,134 $978,705 5.79%
Other assets 10,249,872
Total assets $77,640,006
Funding liabilities:
Deposits and other customer related
accounts:
NOW accounts $5,173,571 $10,707 0.82%
Savings accounts 4,010,997 6,121 0.61%
Money market accounts 10,892,952 54,868 2.00%
Time deposits 10,246,622 79,808 3.10%
Total retail and commercial
deposits 30,324,142 151,504 1.99%
NOW accounts- wholesale 151,306 803 2.11%
Money market accounts-
wholesale 1,531,141 8,568 2.23%
Time deposits- wholesale 1,340,559 9,561 2.84%
Total wholesale deposits 3,023,006 18,932 2.49%
Total government deposits 3,008,951 18,281 2.42%
Customer repurchase agreements and
Eurodollar deposits 2,428,151 8,170 1.34%
Total deposits and other customer
related accounts 38,784,250 196,887 2.02%
Borrowings:
Wholesale borrowings 18,747,782 210,370 4.48%
Other borrowings 3,948,802 61,411 6.21%
Total borrowings 22,696,584 271,781 4.78%
Total funding liabilities 61,480,834 468,668 3.04%
Non-interest bearing DDA 6,664,444
Other liabilities 1,411,449
Total liabilities 69,556,727
Stockholders' equity 8,083,279
Total liabilities and stockholders'
equity $77,640,006
Net interest income $510,037
Interest rate spread 2.75%
Contribution from interest free funds 0.27%
Net interest margin 3.02%
Quarter Ended
June 30, 2008
Average Yield/
(dollars in thousands) Balance Interest(1) Rate
Earning assets:
Investment securities $12,109,209 $183,895 6.08%
Loans:
Commercial real estate 13,052,692 188,933 5.81%
Commercial and industrial
loans (C&I) 13,005,216 169,266 5.23%
Other 1,756,432 30,300 6.90%
Total Commercial 27,814,340 388,499 5.61%
Multi-family 4,506,471 66,984 5.95%
Residential 12,598,466 179,025 5.69%
Home equity loans and lines
of credit 6,389,801 88,669 5.58%
Total consumer loans secured by real
estate 18,988,267 267,694 5.65%
Auto Loans 6,568,725 113,047 6.92%
Other 306,297 5,592 7.34%
Total Consumer 25,863,289 386,333 5.99%
Total loans 58,184,100 841,816 5.81%
Allowance for loan losses (785,983)
Total earning assets 69,507,326 $1,025,711 5.92%
Other assets 10,294,424
Total assets $79,801,750
Funding liabilities:
Deposits and other customer related
accounts:
NOW accounts $5,209,957 $10,656 0.82%
Savings accounts 4,107,321 6,461 0.63%
Money market accounts 11,348,987 57,077 2.02%
Time deposits 11,258,950 109,354 3.91%
Total retail and commercial
deposits 31,925,215 183,548 2.31%
NOW accounts- wholesale 139,664 790 2.27%
Money market accounts- wholesale 1,547,158 9,034 2.35%
Time deposits- wholesale 1,588,172 6,614 1.68%
Total wholesale deposits 3,274,994 16,438 2.02%
Total government deposits 3,257,652 19,533 2.41%
Customer repurchase agreements and
Eurodollar deposits 2,571,241 9,027 1.41%
Total deposits and other customer
related accounts 41,029,102 228,546 2.24%
Borrowings:
Wholesale borrowings 19,061,915 211,195 4.44%
Other borrowings 3,794,900 55,949 5.90%
Total borrowings 22,856,815 267,144 4.69%
Total funding liabilities 63,885,917 495,690 3.12%
Non-interest bearing DDA 6,731,967
Other liabilities 1,593,912
Total liabilities 72,211,796
Stockholders' equity 7,589,954
Total liabilities and stockholders'
equity $79,801,750
Net interest income $530,021
Interest rate spread 2.80%
Contribution from interest free funds 0.26%
Net interest margin 3.06%
Quarter Ended
September 30, 2007
Average Yield/
(dollars in thousands) Balance Interest(1) Rate
Earning assets:
Investment securities $13,850,369 $216,252 6.24%
Loans:
Commercial real estate 11,746,854 207,526 7.02%
Commercial and industrial
loans (C&I) 12,049,755 228,310 7.52%
Other 1,632,878 29,148 7.14%
Total Commercial 25,429,487 464,984 7.26%
Multi-family 3,975,580 61,708 6.20%
Residential 14,357,561 203,676 5.67%
Home equity loans and lines
of credit 5,974,643 102,033 6.78%
Total consumer loans secured by real
estate 20,332,204 305,709 6.00%
Auto Loans 6,616,774 118,324 7.09%
Other 320,848 7,042 8.71%
Total Consumer 27,269,826 431,075 6.30%
Total loans 56,674,893 957,767 6.72%
Allowance for loan losses (522,102)
Total earning assets 70,003,160 $1,174,019 6.68%
Other assets 11,594,008
Total assets $81,597,168
Funding liabilities:
Deposits and other customer related
accounts:
NOW accounts $5,497,403 $15,225 1.10%
Savings accounts 4,144,517 6,914 0.66%
Money market accounts 10,224,580 93,751 3.64%
Time deposits 11,323,566 134,570 4.72%
Total retail and commercial
deposits 31,190,066 250,460 3.19%
NOW accounts- wholesale 137,919 1,812 5.21%
Money market accounts- wholesale 1,858,681 25,159 5.37%
Time deposits- wholesale 4,068,060 54,196 5.29%
Total wholesale deposits 6,064,660 81,167 5.31%
Total government deposits 3,691,557 48,184 5.18%
Customer repurchase agreements and
Eurodollar deposits 2,643,836 28,869 4.33%
Total deposits and other customer
related accounts 43,590,119 408,680 3.72%
Borrowings:
Wholesale borrowings 17,654,582 225,169 5.08%
Other borrowings 3,736,339 59,532 6.32%
Total borrowings 21,390,921 284,701 5.30%
Total funding liabilities 64,981,040 693,381 4.24%
Non-interest bearing DDA 6,403,572
Other liabilities 1,439,105
Total liabilities 72,823,717
Stockholders' equity 8,773,451
Total liabilities and stockholders'
equity $81,597,168
Net interest income $480,638
Interest rate spread 2.44%
Contribution from interest free funds 0.30%
Net interest margin 2.74%
(1) Tax equivalent basis
Sovereign Bancorp, Inc. and Subsidiaries
AVERAGE BALANCE, INTEREST AND YIELD/RATE ANALYSIS
(unaudited)
Year to Date
September 30, 2008
Average Yield/
(dollars in thousands) Balance Interest(1) Rate
Earning assets:
Investment securities $12,120,843 $542,710 5.97%
Loans:
Commercial real estate 12,970,143 576,288 5.93%
Commercial and industrial
loans (C&I) 12,787,460 525,985 5.49%
Other 1,747,148 90,269 6.89%
Total Commercial 27,504,751 1,192,542 5.79%
Multi-family 4,536,897 203,626 5.99%
Residential 12,501,718 529,885 5.65%
Home equity loans and lines
of credit 6,402,562 276,327 5.76%
Total consumer loans secured by real
estate 18,904,280 806,212 5.69%
Auto Loans 6,535,905 341,495 6.98%
Other 306,435 17,831 7.77%
Total Consumer 25,746,620 1,165,538 6.04%
Total loans 57,788,268 2,561,706 5.92%
Allowance for loan losses (780,182)
Total earning assets 69,128,929 $3,104,416 5.99%
Other assets 10,321,919
Total assets $79,450,848
Funding liabilities:
Deposits and other customer related
accounts:
NOW accounts $5,149,156 $32,817 0.85%
Savings accounts 4,062,470 19,638 0.65%
Money market accounts 11,069,213 194,910 2.35%
Time deposits 11,141,241 324,141 3.89%
Total retail and commercial
deposits 31,422,080 571,506 2.43%
NOW accounts- wholesale 126,605 2,337 2.47%
Money market accounts-
wholesale 1,491,737 29,863 2.67%
Time deposits- wholesale 1,776,775 35,768 2.69%
Total wholesale deposits 3,395,117 67,968 2.67%
Total government deposits 3,360,712 68,151 2.71%
Customer repurchase agreements and
Eurodollar deposits 2,579,235 32,911 1.70%
Total deposits and other customer
related accounts 40,757,144 740,536 2.43%
Borrowings:
Wholesale borrowings 19,206,968 645,800 4.49%
Other borrowings 3,790,370 172,011 6.05%
Total borrowings 22,997,338 817,811 4.75%
Total funding liabilities 63,754,482 1,558,347 3.26%
Non-interest bearing DDA 6,580,094
Other liabilities 1,575,189
Total liabilities 71,909,765
Stockholders' equity 7,541,083
Total liabilities and stockholders'
equity $79,450,848
Net interest income $1,546,069
Interest rate spread 2.73%
Contribution from interest free funds 0.25%
Net interest margin 2.98%
Year to Date
September 30, 2007
Average Yield/
(dollars in thousands) Balance Interest (1) Rate
Earning assets:
Investment securities $14,359,545 $662,500 6.15%
Loans:
Commercial real estate 11,666,776 609,282 6.98%
Commercial and industrial
loans (C&I) 11,922,503 667,827 7.49%
Other 1,580,320 84,797 7.15%
Total Commercial 25,169,599 1,361,906 7.23%
Multi-family 4,827,663 232,677 6.43%
Residential 14,788,758 630,279 5.68%
Home equity loans and lines
of credit 7,122,383 369,186 6.93%
Total consumer loans secured by real
estate 21,911,141 999,465 6.09%
Auto Loans 5,915,010 307,332 6.95%
Other 376,740 24,156 8.57%
Total Consumer 28,202,891 1,330,953 6.30%
Total loans 58,200,153 2,925,536 6.71%
Allowance for loan losses (496,921)
Total earning assets 72,062,777 $3,588,036 6.65%
Other assets 11,632,426
Total assets $83,695,203
Funding liabilities:
Deposits and other customer related
accounts:
NOW accounts $5,812,672 $47,456 1.09%
Savings accounts 4,383,303 21,277 0.65%
Money market accounts 9,691,344 252,097 3.48%
Time deposits 11,190,921 390,246 4.67%
Total retail and commercial
deposits 31,078,240 711,076 3.06%
NOW accounts- wholesale 251,187 9,997 5.32%
Money market accounts-
wholesale 2,666,654 109,389 5.48%
Time deposits- wholesale 4,330,871 174,142 5.38%
Total wholesale deposits 7,248,712 293,528 5.41%
Total government deposits 3,783,505 145,585 5.14%
Customer repurchase agreements and
Eurodollar deposits 2,433,331 81,358 4.47%
Total deposits and other customer
related accounts 44,543,788 1,231,547 3.70%
Borrowings:
Wholesale borrowings 17,623,077 668,508 5.07%
Other borrowings 4,785,627 218,863 6.10%
Total borrowings 22,408,704 887,371 5.29%
Total funding liabilities 66,952,492 2,118,918 4.23%
Non-interest bearing DDA 6,381,978
Other liabilities 1,585,747
Total liabilities 74,920,217
Stockholders' equity 8,774,986
Total liabilities and stockholders'
equity $83,695,203
Net interest income $1,469,118
Interest rate spread 2.42%
Contribution from interest free funds 0.30%
Net interest margin 2.72%
(1) Tax equivalent basis
Sovereign Bancorp, Inc. and Subsidiaries
SUPPLEMENTAL INFORMATION
(unaudited)
NON-PERFORMING ASSETS
Sept. 30 June 30 Mar. 31 Dec. 31 Sept. 30
(dollars in thousands) 2008 2008 2008 2007 2007
Non-accrual loans:
Consumer:
Residential -
Alt-A $116,522 $85,460 $64,763 $51,783 $42,310
Residential - Other 57,823 47,654 44,039 39,098 37,599
Home equity loans
and lines of
credit 16,649 20,407 17,669 16,684 12,508
Correspondent home
equity 49,995 44,806 42,618 39,415 41,466
Auto loans 1,034 1,155 876 1,359 730
Other consumer loans 1,856 1,595 1,541 2,087 2,076
Total consumer loans 243,879 201,077 171,506 150,426 136,689
Commercial real
estate 201,594 117,251 95,363 61,750 63,975
Multi-family loans 37,221 42,230 10,367 6,336 3,002
C&I and other 155,497 129,693 140,270 85,406 78,251
Total non-accrual
loans 638,191 490,251 417,506 303,918 281,917
Restructured loans 260 280 324 370 443
Total non-performing
loans 638,451 490,531 417,830 304,288 282,360
Real estate owned, net 45,604 48,228 49,668 43,226 43,517
Other repossessed
assets 21,987 15,168 16,888 14,062 10,861
Total non-performing
assets $706,042 $553,927 $484,386 $361,576 $336,738
Non-performing loans
as a percentage of
loans 1.12% 0.85% 0.71% 0.53% 0.49%
Non-performing assets
as a percentage of
total assets 0.91% 0.70% 0.59% 0.43% 0.39%
Non-performing assets
as a percentage of
total loans, real
estate owned and
repossessed assets 1.24% 0.96% 0.82% 0.63% 0.59%
Allowance for credit
losses as a
percentage of non-
performing loans 160% 172% 191% 242% 230%
Non-performing assets
as a percentage of
tangible equity and
allowance for loan
losses 14.6% 9.9% 12.2% 8.6% 7.9%
NET LOAN CHARGE-OFFS
Quarters ended (in Sept. 30 June 30 Mar. 31 Dec. 31 Sept. 30
thousands) 2008 2008 2008 2007 2007
Commercial real
estate $(50) $7,748 $3,339 $4,591 $2,401
Multi-family loans 5,101 227 - - -
C&I and other (1) 63,960 25,246 11,789 13,647 8,387
Total commercial 69,011 33,221 15,128 18,238 10,788
Residential - Alt-A 2,889 2,289 2,135 1,766 807
Residential - Other 2,538 2,340 2,718 1,865 908
Home equity loans and
lines of credit 4,694 4,399 5,351 3,808 883
Correspondent home
equity 5,717 6,189 4,014 - -
Total consumer loans
secured by real
estate 15,838 15,217 14,218 7,439 2,598
Auto loans - In
market 15,075 13,317 14,488 14,918 10,162
Auto loans - Out of
market 26,968 23,287 28,276 19,427 9,286
Other consumer loans 2,248 1,895 2,186 469 734
Total consumer 60,129 53,716 59,168 42,253 22,780
Total loan charge-offs $129,140 $86,937 $74,296 $60,491 $33,568
COMPONENTS OF THE
PROVISION OF CREDIT
LOSSES AND ALLOWANCE
FOR CREDIT LOSSES
Quarters ended (in Sept. 30 June 30 Mar. 31 Dec. 31 Sept. 30
thousands) 2008 2008 2008 2007 2007
Provision for loan
losses $278,255 $120,244 $140,293 $140,188 $159,630
Provision/(recoveries)
for unfunded
commitments 25,745 11,756 (5,293) 8,004 2,870
Total provision for
credit losses $304,000 $132,000 $135,000 $148,192 $162,500
Allowance for loan
losses $957,864 $808,748 $775,441 $709,444 $629,747
Reserve for unfunded
commitments 60,509 34,764 23,008 28,301 20,297
Total allowance for
credit losses $1,018,373 $843,512 $798,449 $737,745 $650,044
(1) The third quarter of 2008 includes a
Sovereign Bancorp, Inc. and Subsidiaries
SUPPLEMENTAL INFORMATION
(unaudited)
Loan Composition-End of Period ($)
ADDITIONAL CREDIT
QUALITY STATISTICS % of Total Loans
Sept. 30 June 30 Sept. 30
Quarters ended (in thousands) 2008 2008 2007
Commercial real estate (1) $13,280,520 $13,271,241 $11,821,651
23% 23% 21%
Multi-family 4,887,540 4,669,017 4,038,333
9% 8% 7%
C&I and other commercial 14,349,111 14,495,075 14,052,899
25% 25% 25%
Residential - Alt-A 2,746,797 2,836,902 3,071,307
5% 5% 4%
Residential - Other 8,768,218 9,019,532 10,938,584
14% 15% 19%
Home equity loans and lines of
credit 6,335,961 6,088,654 5,573,178
11% 11% 10%
Correspondent home equity loans (3)
(4) 395,800 416,084 484,965
1% 1% 1%
Auto loans - In Market 3,856,580 4,103,058 4,373,994
7% 7% 8%
Auto loans - Out of Market (4) 1,997,350 2,203,426 2,479,387
4% 4% 4%
Other consumer 296,011 302,797 314,066
1% 1% 1%
Total (4) 56,913,888 57,405,786 57,148,364
100% 100% 100%
Net Loan Charge-Offs($)
ADDITIONAL CREDIT Annualized Net Loan
QUALITY STATISTICS Charge-Offs to Average Loans (%)
Sept. 30 June 30 Sept. 30
Quarters ended (in thousands) 2008 2008 2007
Commercial real estate (1) $(50) $7,748 $2,401
0.00% 0.24% 0.08%
Multi-family 5,101 227 -
0.43% 0.02% 0.00%
C&I and other commercial 63,960 25,246 8,387
1.79% 0.68% 0.25%
Residential - Alt-A 2,889 2,289 807
0.42% 0.32% 0.10%
Residential - Other 2,538 2,340 908
0.11% 0.10% 0.03%
Home equity loans and lines of credit 4,694 4,399 883
0.30% 0.30% 0.06%
Correspondent home equity loans (3)
(4) 5,717 6,189 -
5.62% 5.80% 0.00%
Auto loans - In Market 15,075 13,317 10,162
1.52% 1.25% 0.92%
Auto loans - Out of Market (4) 26,968 23,287 9,286
5.13% 4.01% 1.67%
Other consumer 2,248 1,895 734
3.01% 2.47% 0.92%
Total (4) 129,140 86,937 33,568
0.91% 0.60% 0.24%
Total Past Dues Excluding
ADDITIONAL CREDIT Non-Accruals ($)
QUALITY STATISTICS Total Past Dues to Total Loans (%)
Sept. 30 June 30 Sept. 30
Quarters ended (in thousands) 2008 2008 2007
Commercial real estate (1) $82,467 $63,624 $93,848
0.62% 0.48% 0.79%
Multi-family 21,349 49,866 2,767
0.44% 1.07% 0.07%
C&I and other commercial 109,237 75,395 70,216
0.76% 0.52% 0.50%
Residential - Alt-A 175,905
