1. 1 9 9 9 A N N U A L R E P O R T
SOVEREIGN
BANCORP
14 YEAR RECORD
OF CONSISTENTLY
1999
HIGHER EARNINGS
ANNUAL
A pro forma
$35 billion bank with
REPORT
a small community
bank touch
600 community
banking offices, over
1,000 ATMs extending
from north of Boston
to south of Philadelphia
Internet and technology
savvy company

2. 1999
C O M PA N Y P R O F I L E
S overeign Bancorp, Inc., is a pro forma $35 billion company whose
•
principal subsidiary is Sovereign Bank. Sovereign is the third largest
REPORT
financial institution headquartered in Pennsylvania. Sovereign has
successfully completed 23 acquisitions since 1989, and all of
these acquisitions have accelerated Sovereign’s earnings growth.
In September 1999, Sovereign announced its pending acquisition of
approximately $12 billion of deposits, $9 billion of loans, and 285 branches
ANNUAL
from FleetBoston and in February 2000, Sovereign announced a restructuring
of the acquisition which addresses system conversions, and team member and customer
retention issues, and provides Sovereign with additional capital. After giving pro forma effect
to this acquisition, Sovereign’s extensive network will include approximately 600 community
banking offices reaching from north of Boston to south of Philadelphia. Sovereign will become the
SOVEREIGN
third largest bank in New England, among the largest commercial lenders in the region, and
about the 25th largest financial institution in the country.
PRO FORMA 2000 VISION
When consumers and businesses think of a World Class
• $35 billion financial institution
financial services provider they choose Sovereign.
• 600 branch and over 1,000 ATM franchise extending
from north of Boston to south of Philadelphia
MISSION
• Deposits of $24 billion
Sovereign is a World Class financial services provider,
- 27% checking
committed to helping our customers succeed by
- 34% savings
understanding and anticipating their individual
- 39% CD’s
financial needs and providing customized solutions,
• Loans of $24 billion
resulting in an average customer having 4+ services
- 31% commercial loans
- 29% consumer loans with the Bank.
- 40% residential loans
WORLD CLASS COMMITMENT TO:
• Internet and technology savvy company
• Focus on clearly defined Critical Success Factors Customers . . . . . . . . . . . . . . . . . . . . . . Page 4
Team Members . . . . . . . . . . . . . . . . . . . Page 9
• Strong, experienced management team
Community . . . . . . . . . . . . . . . . . . . . . Page 15
• 9.5% insider ownership (after giving effect
to the exercise of options) Shareholders . . . . . . . . . . . . . . . . . . . . Page 16
FORWARD-LOOKING STATEMENTS
The following discussion and other portions of this Annual Report contain various forward-looking statements. Please refer to
page 18 in this Annual Report for a discussion of various factors that could cause our actual results to differ materially from those
expressed in such forward-looking statements.

3. TA B L E O F C O N T E N T S
SOVEREIGN 4 SUPER REGIONAL BANK
14 YEAR RECORD OF CONSISTENTLY
5
HIGHER EARNINGS
10 MAJOR LINES OF BUSINESS
14
INTERNET TECHNOLOGY
Sovereign Franchise . . . . . . . . . . . . . . . . . 4 Financial Summary . . . . . . . . . . . . . . . . 17
Executive Summary . . . . . . . . . . . . . . . . . 6 Management’s Discussion
and Analysis . . . . . . . . . . . . . . . . . . . . . 18
Critical Success Factors . . . . . . . . . . . . . . . 8
Financial Statements and
Major Lines of Business . . . . . . . . . . . . . . 10 Supplementary Data . . . . . . . . . . . . . . . . 44
Building Franchise Value . . . . . . . . . . . . . 13 Board of Directors
and Corporate Officers . . . . . . . . . . . . . . . 81
Internet Technology . . . . . . . . . . . . . . . . 14
Corporate
Sovereign In The New Millennium . . . . . . 16 Information . . . . . . . . . . . Inside Back Cover
3

4. 1999
T H E O N LY S U P E R - R E G I O N A L B A N K F R O M N O R T H
OF BOSTON TO SOUTH OF PHILADELPHIA
•
REPORT
We continually strive to build World Class relationships with our customers by
continuously striving to provide excellent service through understanding and
anticipating our customers’ needs and exceeding their expectations. Sovereign
customers can count on us to deliver customized solutions, products
ANNUAL
and services to help them achieve their personal and business goals.
COMMUNITY
Sovereign Bank
BANKING
Locations
ME
OFFICES ATMs
• Pennsylvania 159 283
• New Jersey 141 173
SOVEREIGN
• Delaware 6 14
Maryland 0 4
New York 0 8
• MID ATLANTIC 306 482
Connecticut 37 73
v
NH
Massachusetts 185 376
v
New Hampshire 13 22
v
VT
Rhode Island 50 89
v
Vermont 0 18
v NEW ENGLAND(1) 285 578
TOTAL 591 1,060
MA
(1) Pending FleetBoston purchase.
BOSTON
Key: • Sovereign Bank
PROVIDENCE
v Sovereign Bank New England
HARTFORD
RI
CT
NY
PA
NJ
Pro Forma Franchise Facts
ALLENTOWN
STATE COLLEGE
NYC
• 3rd largest banking franchise
headquartered in Pennsylvania
READING
• 5th largest banking franchise in New Jersey
TRENTON
• Among largest small business lenders in U.S.
• 3rd largest banking franchise in New England
• #3 market share in Massachusetts
PHILADELPHIA
• 160+ branches in Boston area
• Leading small business lender in Boston area
MD • #3 market share in Rhode Island
DE • #5 market share in New Hampshire
4 • Strategic concentration in Connecticut

5. FINANCIAL HIGHLIGHTS
EARNINGS(1) YEAR ENDED DECEMBER 31,
“1999 was
($ in thousands except per share data)
1999 1998 % Change
Operating Earnings $ 202,296 $ 169,988 19%
the 14th
Diluted EPS 1.01 0.85 19%
Operating EPS 1.18 1.06 11%
Cash EPS 1.34 1.17 15%
consecutive
(1) Excludes special charges described in the Table: “Reconciliation of Net Income to Operating Earnings” on page 19 of Management’s
Discussion and Analysis.
BALANCE SHEET AT DECEMBER 31,
year of record
($ in thousands)
1999 1998 % Change
Total Assets $ 26,607,112 $ 21,913,873 21%
Loans 14,226,540 11,285,840 26%
202.3
earnings.”
Checking Deposits(2) 2,960,760 2,522,992 17%
Total Deposits 11,719,646 12,322,716 (5)%
Stockholders’ Equity 1,821,495 1,204,068 51%
(2) Includes sweep accounts.
REVENUE STATISTICS YEAR ENDED DECEMBER 31,
170.0
($ in thousands, except per share data)
1999 1998 % Change
Total Revenue $ 744,998 $ 598,793 24%
Non-Interest Income 130,342 105,181 24%
Revenue per share 4.35 3.73 17%
GOALS AND PERFORMANCE (1)
1999 5 YEAR AVG. 114.4
Higher than Industry OPERATING EARNINGS
(in millions of dollars,
EPS Growth 11.3% 13.5%
as originally reported)
15% or Higher Average
Annual Return on Average Equity 15.5% 14.6%
1% or Higher Return 68.7
on Average Risk Adjusted Assets 1.5% 1.6%
56.4
Meet or Exceed Regulatory
Capital Requirements Exceeded Exceeded
46.4
(1) Excluding special charges
35.4
14.0
7.8
5.5
5.4
4.5 5.0
4.3
‘86 ‘87 ‘88 ‘89 ‘90 ‘91 ‘92 ‘93 ‘94 ‘95 ‘96 ‘97 ‘98 ‘99
5

6. 1999
EXECUTIVE SUMMARY
Nineteen ninety-nine was another monumental year for Sovereign. Operating earnings per share increased 11%,
and diluted earnings per share were up 19%, while Sovereign took numerous steps to improve its franchise.
•
We are proud to highlight just a few of our team’s main accomplishments during 1999, which have presented
REPORT
new opportunities to our customers and shareholders, as well as exciting challenges for our team members:
• Sovereign achieved solid earnings growth bank in the country, up from about 40th to take our commitment of World Class
for the 14th consecutive year. Sovereign’s largest at present time. customer service to a higher level.
1999 net operating income was $202.3 Sovereign’s goal is to remain committed
• We successfully integrated Carnegie,
million, an increase of 19% from 1998 to achieving above average financial results
First Home and Peoples Bancorp
ANNUAL
net operating income of $170.0 million by following a clearly defined corporate
acquisitions onto our operating system
excluding merger-related charges. Operating strategy. This strategy is to be a Super
and into our culture.
earnings per share for the year ended 1999 Regional Bank which closely monitors
• We continued our initiative of keeping
were $1.18, an increase of 11% compared to asset quality, manages interest rate risk,
on the cutting edge of technology,
$1.06 reported for 1998. Cash earnings per controls overhead and maintains a high
by launching 1stwebbankdirect.com,
share were $1.34, up 15% for the year. level of productivity while emphasizing
our own internet-only banking initiative. World Class customer service delivered
• We announced the pending purchase of This virtual bank offers a unique, by highly motivated and well-trained
SOVEREIGN
approximately $12 billion of deposits, personalized banking experience to team members.
$9 billion of loans and 285 branches from local and national corporations, It is with an eye to the future that
FleetBoston and later a restructuring which organizations, and other affinity groups. In Sovereign appreciates its past. The dedication
addresses system conversions, customer addition, several significant improvements of our team members, and the support and
and team member retention issues and were made to eSovereign for both loyalty of our shareholders and customers
provides Sovereign with additional consumer and business customers. has been, and will continue to be, crucial to
capital. In addition, we are acquiring fully • Sovereign successfully completed the the success of Sovereign.
functioning business units, with the transition to the year 2000 without any Looking ahead, Sovereign intends
management, relationship officers, support interruption of service to our customers. to remain a highly focused growth
staffs, and other infrastructure necessary for
company, while striving to improve
• We introduced our enhanced corporate
the acquired loans and deposits to be fully
financial results and shareholder value.
culture initiative, “The Sovereign Way”,
serviced. This acquisition will create an
unparalleled growth opportunity for
Sovereign and its shareholders. We are
continuing to work diligently on the
objectives necessary to complete the
acquisition and effect a smooth transition.
Upon the completion of this acquisition, we
will be about the 25th largest
Sovereign
Bancorp, Inc.
Officers
Pictured (l to r):
Dennis S. Marlo,
Chief Financial Officer and Treasurer
Richard E. Mohn,
Chairman of the Board
Lawrence M. Thompson, Jr., Esq.,
Corporate Secretary
Jay S. Sidhu,
President and Chief Executive Officer
6

7. OPPORTUNITIES IN THE NEW ENGLAND MARKET
On September 7, 1999, Sovereign approximately $35 billion, position us team supported by dedicated team
announced the signing of a definitive as one of the strongest lenders to small members, with experience in the New
purchase and assumption agreement and mid-sized businesses and consumers England marketplace, to manage and run
to acquire from FleetBoston about in the region, plus provide compelling the Sovereign Bank New England
$12 billion in deposits, $9 billion in value enhancement for shareholders. The operations. Our ability to draw upon
loans, and 285 retail banking offices businesses we are acquiring meet or their best practices and procedures,
creating Sovereign Bank New England. enhance all of our critical success factors. together with our proven success in
In February 2000, we announced As a result of this acquisition, integrating acquisitions, will help to
a restructuring of the acquisition Sovereign will have the third largest banking assure that we realize the full benefit
which addresses system conversions, presence in New England and we are of this transaction for our shareholders.
customer and team member retention delighted to bring our proven brand of Sovereign has completed more than 23
issues and provides Sovereign with community banking, delivered with a acquisitions since 1989, which have all
additional capital. This acquisition personal touch, to this region. We will exceeded initial earnings projections.
represents the entire former Fleet continue to distinguish ourselves on the
Bank retail banking and middle basis of superior customer service. Service ACCELERATE TRANSFORMATION
market lending franchise in eastern standards have been introduced to INTO A SUPER-REGIONAL BANK
Massachusetts, including Boston customers to reinforce our commitment The acquisition should accelerate our
(expected to close June 2000), the to World Class customer service. transformation into a super-regional bank
former BankBoston consumer and Following the closing, we expect and result in a loan and deposit mix that
middle market franchise in Connecticut Sovereign to be a leading force in a region is more characteristic of a high performing
and Rhode Island (expected to close with powerful market demographics, and commercial bank. Sovereign believes that
March 2000) and selected FleetBoston the only competitor with a franchise changes in our loan and deposit mix will
franchises in central Massachussets and reaching from south of Philadelphia to help us:
New Hampshire (expected to close north of Boston. We are a very customer • lower the cost of our funding;
July 2000). and shareholder-oriented company, with • improve our net interest margin;
We expect that this transaction, the ability, experience and desire to be • increase our non-interest income; and
when successfully completed and a strong competitor in New England. • improve our operating earnings.
integrated, will establish Sovereign as We have built a talented management
a ‘super regional’ bank with assets of
“This transaction will establish
Sovereign as a ‘super regional’
bank with assets of
approximately $35 billion. ”
Sovereign Bank
New England
Office of the
Chairman
(l to r)
Joseph P. Campanelli,
Division President & C.O.O.,
Sovereign Bank New England
John P. Hamill,
Division Chairman & C.E.O.,
Sovereign Bank New England 7

8. 1999
FOCUSON
•
REPORT
CLEARLY DEFINED CRITICAL SUCCESS FACTORS
ANNUAL
NON-PERFORMING
ASSETS TO
1.06
TOTAL ASSETS
0.94 (percent)
SOVEREIGN
0.78
Back in 1987, Sovereign defined its four critical success factors as superior asset quality,
low interest rate risk, high level of productivity, emphasis on sales and service and growth
0.61
of team members. These have been our consistent and enduring themes. 0.53
Superior Asset Quality
S uperior asset quality has been, and will alwaysa be, a top priority at Sovereign. The Company’s 0.32
extensive quality control procedures include team that is independent from the loan
officers to review the credit ratings, reviewing corporate credits on at least an annual basis, and
performing stress tests on the entire loan portfolio. Sovereign has also created a deep, experienced team
of relationship officers and credit risk officers who work very closely with our customers. This
personalized service allows Sovereign to better understand the customer’s business and their
94 95 96 97 98 99
financial needs which in turn helps to maintain strong, healthy loan relationships. As the
Company continues the transformation of its balance sheet, continued emphasis will be placed
on managing asset quality, including building higher levels of loan allowances consistent with the
transformation of the loan portfolio.
Low Interest Rate Risk
I nterest rate risk management will always be an important focus at Sovereign. The Company
believes in consistency of earnings, and that earnings must not be materially affected by
changes in interest rates. Sovereign’s primary strategy to lower interest rate risk has been to
transform the Company’s loan and deposit portfolio mix while managing yield curve risk. Sovereign
utilizes sophisticated asset and liability modeling to manage interest rate risk under numerous
scenarios. Sovereign Bank’s interest rate risk position will be improved by the acquisition of the
Sovereign Bank New England franchise. On a pro forma basis, replacing certain borrowings with
longer duration core deposits will neutralize Sovereign’s interest rate risk position. This positioning
will reduce the reliance on wholesale borrowings on a forward-looking basis. Following the closing
of Sovereign Bank New England, a 25 to 75 basis point further interest rate tightening is not
Mike Haney,
expected to have a material impact on Sovereign’s net interest income. Financial Analyst, Treasury
8

9. High Level of Productivity
P cornerstone of Sovereign’s success. Alland efficient manneracutely aware of the
roviding quality service in a low-cost continues to be a
team members are
importance of having a highly productive company. For the year ended December 31,
We expect nothing but the
1999, Sovereign’s operating efficiency ratio (all general & administrative expenses
excluding special charges as a percentage of net
best from our team members
interest income and recurring non-interest income
and in return show extreme
– the lower the number, the more efficient you are)
was 48.6%. Sovereign’s goal is to maintain an
respect for each team
efficiency ratio in the mid to high 40s even after our
acquisition of Sovereign Bank New England, while member. We encourage
most banks have efficiency ratios in the 50s.
open communication and
Sovereign maintains this high degree of efficiency
by entering into strategic outsourcing arrangements
an entrepreneurial spirit,
for certain costly functions, and by maintaining a
flat corporate structure that fights and minimizes always seeking and
bureaucracy.
implementing ideas and
Barbara J. Fischer,
Vice President, Conversion & System Operations
innovations which help
S a l e s , S e r v i c e a n d Te a m M e m b e r Sovereign to excel. Our
G r o w t h , “ T h e S o v e r e i g n Wa y ” environment supports
T company grows. Weis understand that the way is the foundationjobs has a direct
he Sovereign Way our company culture. It from which our personal growth and
we perform our
continuous learning for all
impact on how a customer views Sovereign Bank. We believe team member performance
is a major contributor to the success of this company. Our goal is to stand out among our
team members.
competitors. Sovereign is dedicated to becoming the bank with whom people want to do
business. When consumers and businesses think of a World Class
financial services provider, we want them to choose Sovereign.
“The Sovereign Way” process is helping us build upon our
corporate culture. It’s not a way to deliver customer service, but a
way of life. The program is comprised of five modules, each module
building upon the other, layering skills and strategies for providing
World Class service. The modules cover Customer Relationships,
Listening and Communication Skills, Accuracy and Productivity,
Customized Solutions and Customer Satisfaction. Each module is
studied for a minimum of four weeks and team members are
observed by leaders during that period to make sure that the
concepts are being absorbed and implemented. Certification is
given for each module that is successfully completed.
The Sovereign Way is Sovereign Bank. It brings the Company’s
mission and corporate values to life. We believe that these values are
ultimately responsible for producing growth in shareholder wealth.
As our company expands into new regions, these values are more
important than ever before. Sovereign believes that our continued
success is dependent upon World Class team members offering Fay A. Dautrich,
Vice President - Manager,
World Class service. Team Member Support Services
9

10. 1999
MAJOR LINES OF BUSINESS
•
REPORT
COMMERCIAL BANKING
C o m m e rc i a l B a n k i n g
Commercial loan volume
Traditional Loans
of $3.2 billion in 1999
S overeign offers a full array of commercial products to
ANNUAL
small and medium sized businesses, including traditional Average corporate credit
Lines of Credit
loans and lines of credit, asset-based lending, plus cash of $1.0 million
management, electronic banking, international banking
and private banking services. Sovereign differentiates itself Cash management fees
Cash Management Services
grew 37% in 1999
on the basis of quality personalized service delivered by very
experienced relationship managers who understand and
anticipate customers’ financial needs. Sovereign has emerged Electronic Banking E-Commerce over the Net
SOVEREIGN
as a leading commercial banking service provider in the
Mid-Atlantic market, with
International Supporting business
commercial loans outstanding for 4,075
COMMERCIAL Trade Financing customers
1999 totaling $4.1 billion, up LOANS
from $2.3 billion in 1998. ($ in millions)
As Sovereign continues to Middle market focus
Capital Markets
increase its commercial loan
activity, it remains committed to a environments. Sovereign’s business portfolio is industry
2,299
strong, conservative credit culture. diverse, and we expect that the pending acquisition in
As mentioned previously, one of New England will further reduce Sovereign’s risk to local or
Sovereign’s primary critical success regional economies.
1,417
factors is superior asset quality, Additionally, most of Sovereign’s relationship managers
884
and the Company is continually have in excess of fifteen years of commercial lending experience.
656
evaluating itself to ensure that its This veteran group of lending professionals have been through
credit standards stay near the top several credit cycles, and this experience helps maintain
of the industry. All of Sovereign’s Sovereign’s strong credit quality. This experience also provides
large commercial loans are 95 96 97 98 99 our customers the piece of mind that they are dealing with a
reviewed and rated annually, and bank that can also be their business advisor, helping them
evaluated under various economic and interest rate achieve success and reach their personal financial goals.
Having only started its commercial banking unit four years
ago, Sovereign is now recognized as one of the top business
“Sovereign is now banks in its market area. In 2000, Sovereign intends to continue
to build this line of business and become an even stronger
recognized as one of
commercial banking competitor in its markets.
the top business banks
in its market area.” TRANSFORMING TO A HIGHER PERFORMING LOAN MIX
s Commercial
40.0%
59.8%
s Residential
s 31.5%
12.5%
Consumer
27.7% 28.5%
Joseph J. Whalen,
President, Sovereign Commercial
Banking Division
(1) Including the New (1)
December 1997 Pro forma 2000
England acquisition.
10

11. of Sovereign’s sales and service training plus the commitment
Consumer Lending & of its team members, Sovereign continued to make
Community Banking meaningful progress in transitioning its deposit
base. During 1999, checking accounts and
other demand deposit accounts grew about
17%, and now total 24.6% of Sovereign’s total
“Checking deposits customer deposits.
This success is due to Sovereign’s sales
grew 17% in 1999.”
and service program, called Star Power. The
Star Power retail process is used to measure
and track product sales throughout our
Melissa A. Gettler,
Vice President,
community banking offices.
Associate Director of Creative Services
Since Star Power was initiated three
years ago, it has become an integral part of
our corporate culture. It is a powerful tool that Sovereign uses
S lending division
overeign’s consumer to manage its retail banking sales process. More importantly,
it is also a well-established means of providing customized
continued to grow solutions and World Class customer service to our customers.
during 1999 through Sovereign’s focused efforts on transitioning the deposit
increased emphasis on base have resulted in lowering its deposit funding cost by
home equity loans and approximately 55 basis points in 1999 as compared to 1998.
highly targeted marketing techniques. Sovereign’s emphasis on
sales and service resulted in the cross-selling of many
CONSUMER LENDING &
consumer loan products to deposit customers. By taking
COMMUNITY BANKING
advantage of these techniques and an alliance with
LendingTree.com® Sovereign has also been able to substantially
,
increase loan originations via the Internet. At December 31,
Consumer loan
1999, the consumer loan portfolio was $4.5 billion and
portfolio grew to
comprised 31% of Sovereign’s loan portfolio, up from
$4.5 billion
$3.8 billion at December 31, 1998.
Consumer Lending Web & phone-based
At year-end 1999, Sovereign’s branch network consisted of
origination platforms
306 community banking offices, plus an extensive network
Emphasizes home
of over 450 ATMs throughout eastern and northcentral
equity loans
Pennsylvania, New Jersey, and northern Delaware. Sovereign’s
extensive community banking network is staffed with
eSovereign
approximately 2,400 well-trained team members. As a result Web Banking
1stwebbankdirect.com
TRANSFORMING TO A STABLE LOW COST DEPOSIT MIX
High Touch Supported Personalized service
By High Tech with latest technology
s Checking
s 38.9%
56.4%
Time Deposits
s Other Core 26.9%
14.0%
Pro forma
34.2%
29.6% Community Banking 600 community
Delivery Channels banking offices and
over 1,000 ATMs
(1) Including the New (1)
December 1997 Pro forma 2000
England acquisition.
11

12. 1999
MAJOR LINES OF BUSINESS continued
•
Mortgage Banking
REPORT
Trust & Investment Management Services
• Living Trust • Investment
“Sovereign has emerged
Management
• Trust Under Wills
as the #2 mortgage • Investment Advisory
• Charitable Trusts
• Custody
• Standby Trusts
lender in the
Estate Settlement, Estate Planning, Institutional Trust
Philadelphia Area.”
ANNUAL
Services and Rollover IRAs are also available.
Joseph M. Blaston,
PRODUCT OFFERINGS
Executive Vice President,
Director of Mortgage Banking
In addition to Sovereign’s extensive
franchise, Sovereign offers both traditional
SOVEREIGN
and state of the art products to businesses,
government units and consumers.
S conventional, jumbo,rangeincome and other non-including COMMERCIAL SERVICES
overeign offers a full of mortgage products
low
Full Range of Commercial Auto Finance
conforming loans. Sovereign markets and sells these products
Banking Services Commercial Real Estate
through diversified delivery channels such as Sovereign’s
Small Business Internet Banking
community banking network, the internet, retail loan production
Banking Services
offices and correspondent networks. Government Banking
A significant focus of mortgage banking is to generate Cash Management Capital Equipment &
non-interest income by selling a portion of loan originations. Commercial Vehicle
International Banking
When Sovereign originates certain residential loans and sells Lease Funding
Services/Trade Financing
them to a third party, it continues to service these loans to ensure
Capital Markets
Asset-Based Lending
quality of service to its customers. Mortgage banking revenues
for 1999 were very strong at $29.9 million, up from $28.2
PERSONAL SERVICES
million for 1998.
Consumer Banking Mortgage Banking
Due to planned strategic initiatives and the current interest rate
environment, Sovereign’s residential loan portfolio continues to Insurance Services
Private Banking
play a less significant role within the total loan portfolio. While at Investment Services
Trust and Investment
December 31, 1999, residential loans increased by $500 million
Management Services eSovereign
from 1998, and now represent only 40% of the total loan portfolio.
With Sovereign’s emphasis on commercial and consumer loan
originations, it is the Company’s goal to have residential loans
“A large full-service
equal to less than one-third of the loan portfolio by the year 2002.
bank with a small
MORTGAGE BANKING bank touch, committed
to out-local the
nationals and
Total revenues of $29.9
Loan Originations
out-national
million in 1999
the locals.”
Home equity &
Cross-Selling Missy Orlando,
deposit accounts
Chief Marketing Officer,
Executive Vice President
$6 billion portfolio
Servicing
12

13. BUILDING Bill Belekewicz,
Vice President,
Sovereign Bank New England,
FRANCHISE
Structured Finance Group
Financial Manager
VALUE
I n 1996, Sovereign unveiled its
“super-community banking”
strategy, and outlined several strategic
goals to be achieved by 2000. A Tammy Sibalic,
Assistant Vice President,
cornerstone of this strategy was
Budget/Profitability
developing a loan and deposit mix Manager
that is more characteristic of a high
performing commercial bank. We
have exceeded this goal by focusing
on building or acquiring businesses
that meet or enhance all of our critical
success factors: superior asset quality,
low interest rate risk, high productivity
and a commitment to a strong sales
and service culture.
By focusing on asset and deposit
purchases, as opposed to whole-bank
acquisitions, Sovereign has transformed
its balance sheet and enhanced its million of commercial and consumer complete our super-community banking
revenue stream without paying the high loans, furthering the Company’s transformation. The Sovereign Bank
acquisition premiums that the market migration to a commercial bank New England acquisition will extend
has recently commanded. In 1997, balance sheet. our banking system from south of
Sovereign started this transformation On September 7, 1999, Sovereign Philadelphia to north of Boston, creating
with the purchase of Fleet’s auto finance announced the pending acquisition the third largest bank in New England.
division, which brought the Company of $12 billion in deposits and 285 In addition to the announcement
$2.0 billion of commercial and branches from FleetBoston. In February of the Sovereign Bank New England
consumer loans, a fully functioning 2000, Sovereign announced a acquisition, the Company completed
origination and servicing unit, and restructuring of this acquisition which two other acquisitions during the year
layers of management depth. In 1998, addresses system conversions, and which enhanced Sovereign’s franchise.
the 93 branch acquisition from customer and team member retention On June 15, 1999, Sovereign acquired
CoreStates Financial added $2.2 billion issues and provides Sovereign with The Network Companies with unique
of commercial bank deposits and $725 additional capital. This acquisition will products that provide funding for the
purchase or lease of equipment and
specialty vehicles plus other specialty
Sovereign’s Growth products for other businesses.
On June 30, 1999, Sovereign
completed its acquisition of Peoples
1986(1) 1999 Pro forma (2)
Bancorp, Inc., a $1.4 billion financial
Assets $660 million $27 billion $35 billion institution. This acquisition included 14
branch offices that are a strong strategic
Branches 19 306 591
fit with Sovereign’s existing franchise in
central New Jersey, and also added solid
Market Position 20th in PA 40th largest 25th largest
in US in US trust and money management
capabilities to Sovereign.
(1) As originally reported.
(2) Including the New England Acquisition.
13

14. Cliff Lavin,
President & Managing Director,
1stwebbankdirect.com
1999
INTERNET TECHNOLOGY
•
and is also in negotiations with
several other large organizations.
REPORT
The strategic objective of the
Focusing on the Internet Bank is to generate bottom line
value for Sovereign through increased
Affinity Market sales revenue resulting in long-term
On September 1, 1999, Sovereign’s value for our shareholders. The Internet
Internet Bank, 1stwebbankdirect, had its Bank will operate under the same four
test site launched and during the fourth critical success factors that have guided
eSovereign
ANNUAL
quarter of 1999 it became fully opera- Sovereign throughout the years: superior
tional. 1stwebbankdirect is a virtual internet asset quality, low interest rate risk, high
Products
and telephone bank, focusing on “affinity productivity and emphasis on sales,
marketing.” It focuses on developing service quality and team member
personalized banking relationships with Netbanking
growth. It is our vision to create a similar
entireorganizations. Sovereign has been type of market with affinity banking Sovereign customers can bank on-line
introducing this unique delivery relationships for the Internet Bank that any time of day or night with our
SOVEREIGN
system to corporations, universities and national credit card companies have Netbanking product. They can check
balances, see account histories, transfer
not-for-profit organizations. Currently, developed over the past few years. Sovereign
funds between accounts, pay bills and
Sovereign has entered into definitive is pleased with the response and interest in
much more. Banking on-line with
agreements with multiple affinity groups 1stwebbankdirect thus far and will continue
Sovereign provides secure transactions
(with over 8 million potential customers) its focused marketing campaign.
so a customer can conduct business
transactions with peace of mind.
eSovereign–Technology in AT M
the New Millennium Sovereign has a large network of ATMs
available 24 hours a day, 7 days a week,
and is expanding that network into New
T successfully Technology Team
he Internet envelope and enhanced on-line calculators
England. Including the acquisition,
transformed the called “Visual Planners”, regular and sustained
Sovereign ATMs will total over 1,000
www.sovereignbank.com website this submission of our URLs to the major search
machines.
year into a “Web Suite”, a very successful engines, and redesign of the site to make it
one-stop shopping experience where the user-friendly. To maintain this momentum CheckCard
customer can find all of the information Sovereign Bank is developing a revised Customers can use the Sovereign
and products they need to reach their financial marketing strategy to target potential clients CheckCard to make purchases just as
goals without ever leaving their home or and customers. they would a check but without the
office. Customers will now find our online In addition, Sovereign introduced its hassle of writing the check and
applications all in one place - whether they new Customized Solutions Center in presenting identification. Plus, the
are looking to open a checking account or November 1999, an interactive kiosk featuring Sovereign CheckCard doubles as an
ATM card allowing the customer fast
would like to apply for an auto loan. a computer and telephone. A pilot version
access to their money at almost any ATM.
They will find the applications right where of the Customized Solutions Center is now
they need them while reading about our located in the Bell Tower Community
Te l e p h o n e B a n k i n g
product information. Office, 1717 Arch Street in Philadelphia. The
A customer can access an account from
This alternative delivery channel generated Customized Solutions Center offers quick,
any touch-tone telephone - at home, the
business equivalent to several community easy-to-use Internet access and telephone
office, on the road or on vacation.
banking offices. Last year, $68 million in banking, as well as mortgage and auto loan
Telephone banking allows a customer to
on-line applications were submitted resulting information, financial calculators, Sovereign’s request information on both Sovereign
in $24 million of loans recorded. Several home website (sovereignbank.com) and deposit accounts as well as Sovereign
factors contributed to this success: banner KidsBank.com, which is a tutorial banking loans, including mortgage loans, simply
advertising and targeted direct marketing to website for children. The Customized Solu- by calling 1-877-SOV-BANK.
promote discounted on-line Home Equity tions Center is designed to offer convenient
loans, our new Home Equit-e-Loan virtual banking options for the on-the-go customer.
14

15. The SovNet Connection
S isovNet, Sovereign’s Intranet site, and much, much more.
designed as a comprehensive SovNet is an excellent
information vehicle to provide team reference source for our team
members with access to information members to stay informed
regarding all of Sovereign’s products and about the many changes that
teams. SovNet provides our team occur within the various teams
members with the capability to order and to obtain up-to-date
supplies on-line, locate fellow team information on these changes. At members the ability to connect with
members at the touch of their finger tips, Sovereign we have increased our focus on teams outside of their own and learn
view internal newsletters detailing the team member Intranet use. We feel that it about what other areas have to offer.
latest news, review sales materials sent to contributes to our ability to deliver World When you know more, you do
customers, access rate sheets, calculators Class customer service by giving our team more and that’s The Sovereign Way.
A COMMITMENT TO OUR COMMUNITY
the Caron Foundation and The Children’s Home of
Sovereign has been expanding by more than just
Reading. We were also named the official
acquisitions. As World Class
SOVEREIGN bank of the Philadelphia Eagles football
service providers, Sovereign
team for the 2000, 2001 and 2002 seasons
and its team members look
and continue as the sponsor of
for, and find ways, to grow
the Channel 6 ABC Philadelphia
and enrich the communities
SUCCESS Thanksgiving Day parade. In
where we work and live.
CLASSIC addition, Sovereign Bank New
Sovereign believes in the
England has been named the
revitalization and success of
official bank sponsor of the
our communities, and to FEATURING
demonstrate our commitment L P G A P L A Y E R S Boston Red Sox radio network.
Along with all this, our
Sovereign sought and was
individual banking offices and
awarded the financing and naming rights
support service teams continue
for the Civic Center in downtown Reading,
to support fundraising for local
Pennsylvania and the naming rights for the
organizations helping to
Mercer County Arena in Trenton, New Jersey.
improve the quality of
The new facility in Reading is scheduled to
life in our communities.
open in 2001 and will be called the “Sovereign
Center”. The facility in Trenton was opened in
October of 1999 and is named the “Sovereign
Bank Arena”. At Sovereign we believe that community
projects bring together joint partnerships between
private, public and community enterprises. These
Sovereign is a committed, socially responsible
partnerships lead to sustainable economic development
corporate citizen, supporting worthwhile
for the city and county. In addition, Sovereign
sponsored the Second Annual Sovereign Success community activities and encouraging our
Classic, a pro-am tournament with LPGA players
team members to be actively involved in
which raised $80,000 for two local children’s
charities. In 1999, $40,000 was awarded each to our communities.
15

16. 1999
SOVEREIGN IN THE NEW MILLENNIUM
S overeign believes long-term performance belongs to The Sovereign Team, team members and directors, has
growth companies that have a clear cut, highly focused and embraced these strategic goals. As a team, we are committed to
•
disciplined strategy. The Company’s goal over the past decade producing growth in shareholder value through meeting or
has been to deliver an above average growth rate in exceeding these strategic goals. Sovereign’s Team owned
REPORT
operating earnings while increasing franchise and shareholder approximately 10% of outstanding shares of Sovereign common
value. Over the past five years, Sovereign’s operating earnings stock (after giving effect to the exercise of options) at December
have grown at an average annual rate of 19% and shareholder 31, 1999, making them the largest shareholder group of the
value has grown at an average annual rate of 20%. Company, and clearly aligning Sovereign Team’s interest with
Following are the main strategic goals Sovereign plans to those of its shareholders.
achieve and improve upon over the next 12 to 18 months:
ANNUAL
s Focus on completing and successfully integrating the 1.34
CASH EPS(1)
New England franchise.
1.17
s Continue to focus on critical success factors by:
• Maintaining asset quality with above average coverage 0.99
of non-performing loans
0.87
• Managing interest rate risk
0.75
• Maintaining an efficiency ratio in the 40’s
SOVEREIGN
• Focusing on superior service and sales culture
s Continue to increase tangible capital levels, which may result in:
• Higher P/E
• Improved credit ratings
s Continue to improve the quality of the balance sheet by
lowering borrowings, having higher core deposits and loans,
and higher capital ratios.
s Build upon our philosophy of being a “Marketing Company 95 96 97 98 99
with a Bank Charter”- building our “brick and click” model (1) Cash earnings are operating
earnings excluding amortization
and delivering World Class service. of intangible assets and ESOP
related expenses.
s Strive to continuously achieve these key ratio targets:
• ROA = 1.2% to 1.4% Linda A. Hagginbothom
Assistant Vice President,
• ROE = 15% to 18%
Investor Relations
• EPS Growth = above industry average
Our Beliefs & Principles
We achieve our mission and practice our values in an ethical, moral
and legal atmosphere, where mutual trust and understanding are practiced.
Sovereign is a driven
We keep our promises, admit our mistakes and abide by these basic principles
in decision making and the way we do business:
World Class financial
• We encourage all team members to have a Business Plan and a Personal
Development Plan, suggesting and supporting stretch goals. services provider,
• We give individuals the authority to use their capabilities to the fullest
continually striving to
to provide solutions for our customers’ needs.
• We communicate frequently with candor, listening to each other,
outperform the market
regardless of level or position or tenure.
in terms of quality of
• We focus on situation, issue or behavior, not on the person.
• We acknowledge problems openly and honestly and deal with
earnings, growth in earnings,
conflicts as they arise.
• We believe in maintaining the self-confidence and self-esteem of others. and return on equity.
• We always strive to make things better, while maintaining constructive
relationships and leading by example.
16

17. FINANCIAL SUMMARY
(1)
BALANCE SHEET DATA AT DECEMBER 31,
($ in thousands)
1999 1998 1997 1996 1995
______________ _____________ ______________ _____________ _____________
Total assets $ 26,607,112 $ 21,913,873 $ 17,655,455 $ 15,298,690 $ 13,082,579
Loans 14,226,540 11,285,840 11,324,122 9,595,495 7,591,107
Deposits 11,719,646 12,322,716 9,515,294 8,660,684 8,548,888
Borrowings 12,663,138 7,902,239 6,863,643 5,599,109 3,566,857
Stockholders’ equity 1,821,495 1,204,068 1,047,795 889,751 843,733
STOCK STATISTICS(2) AT DECEMBER 31,
(in thousands)
1999 1998 1997 1996 1995
______________ _____________ ______________ _____________ _____________
Common shares outstanding 225,470 159,727 141,218 134,000 130,762
Common share price at end of period $ 7 29/64 $ 14 1/4 $ 17 5/16 $ 9 1/8 $ 6 11/16
Book value per share at end of period(3) 8.08 7.54 7.42 6.64 6.45
Dividends paid per common share (4)
0.098 0.084 0.114 0.140 0.119
Dividend payout ratio(4) 9.7% 9.9% 17.3% 23.7% 18.0%
SUMMARY STATEMENT
OF OPERATIONS YEAR ENDED DECEMBER 31,
(2)
($ in thousands, except per share data)
1999 1998 1997 1996 1995
______________ _____________ ______________ _____________ _____________
Total interest income $ 1,607,329 $ 1,355,371 $ 1,178,777 $ 1,016,826 $ 838,261
Total interest expense 992,673 861,759 746,695 629,860 518,483
_________ _________ _________ _________ _________
Net interest income (5)
614,656 493,612 432,082 386,966 319,778
Provision for loan losses(6) 30,000 27,961 41,125 22,685 13,119
_________ _________ _________ _________ _________
Net interest income after provision for loan losses 584,656 465,651 390,957 364,281 306,659
_________ _________ _________ _________ _________
Other income 130,342 105,181 48,688 63,379 42,908
Other expenses 446,384 309,694 250,559 249,625 199,647
Merger-related charges - 49,932 19,224 - -
Non-recurring SAIF assessment - - - 40,148 -
_________ _________ _________ _________ _________
Income before taxes 268,614 211,206 169,862 137,887 149,920
Income tax provision 89,315 74,751 67,324 47,509 51,051
_________ _________ _________ _________ _________
Net income $ 179,299 $ 136,455 $ 102,538 $ 90,378 $ 98,869
_________ _________ _________ _________ _________
_________ _________ _________ _________ _________
Operating Earnings(7) $ 202,296 $ 169,988 $ 139,270 $ 115,265 $ 98,869
_________ _________ _________ _________ _________
_________ _________ _________ _________ _________
Diluted EPS $ 1.01 $ 0.85 $ 0.66 $ 0.59 $ 0.66
Operating EPS 1.18 1.06 0.89 0.76 0.66
Cash EPS (8)
1.34 1.17 0.99 0.87 0.75
(1) All financial summary numbers have been restated to reflect all acquisitions which have been accounted for under the pooling-of-interests method of accounting.
(2) All per share data have been adjusted to reflect all stock dividends and stock splits.
(3) Book value is calculated using equity divided by common shares outstanding at end of period.
(4) The higher dividend rate and higher dividend payout ratio in prior periods is the result of acquisitions which were accounted for as a pooling-of-interests.
(5) Included in net interest income is $4.7 million of negative carry from escrowed financing proceeds relating to the pending acquisition of Sovereign Bank New England. Sovereign was required to raise $1.8 billion of debt
and equity capital by December 15, 1999. Substantially all of the proceeds were required to be escrowed with limited ability to reinvest between closing of the financings and the assumption of the FleetBoston branches.
(6) For 1997, includes $24.9 million (after-tax) of merger-related charges classified as provision for loan losses resulting from acquisitions during the year.
(7) See a “Recociliation of Net Income to Operating Earnings” in Management’s Discussion and Analysis for explanation of special charges excluded from operating earnings.
(8) Cash earnings are operating earnings excluding amortization of intangible assets and ESOP–related expense.
17