Sovereign Reports Mortgage-Related Loss

Sovereign Bancorp Inc., Philadelphia, has reported a mortgage-related loss of $51.7 million ($0.11 per share) for the second quarter, down from net earnings of $183 million ($0.45 per share) a year earlier.The loss for the quarter included a $43.9 million ($0.10 per share) after-tax, noncash, non-operating impairment charge in the value of Fannie Mae and Freddie Mac preferred stock. Other charges included $4.1 million after-tax ($0.01 per share) for merger and integration expenses plus $8.1 million ($0.02) after-tax for credit losses related to the acquisition of Independence Community Bank Corp., Brooklyn, N.Y., a mortgage warehouse and commercial real estate lender. The Independence acquisition was part of a three-way transaction that led to Banco Santander Central Hispano SA, Madrid, taking an equity position in Sovereign. Mortgage banking revenues at Sovereign totaled $4.5 million for the quarter, down from $13.0 million in the first quarter and $21.3 million in the second quarter of 2005. The drop in revenue was due to keeping more mortgage originations -- those of higher credit quality -- on its balance sheet.