Dear Clients and Shareholders,

With more than five full years of operating history now complete, our Board of Directors and executive management offer our sincere gratitude for your contributions to the ongoing success of Sovereign Bank.

Founded in August 2004 with an initial capital raise of $38 million, Sovereign Bank has grown to $761 million in assets and ten branch locations in Austin and the DFW Metroplex as of December 31, 2009. This phenomenal growth has been purely organic in nature with no acquisitions of other banking institutions during this period.

In 2009, Sovereign operated amidst the worst economic period faced by the United States since the Great Depression. While these times have proven challenging for all financial institutions, we are proud to report Sovereign ended its fiscal year reporting positive earnings even higher than fiscal 2008 and with an uptick in total assets from the prior year end. For perspective on the accomplishments of our institution, 119 banks received their FDIC charter in 2004 including Sovereign Bank. As of September 30, 2009 (the most recent data available as of this writing), 101 of these banks were still in operation with the remainder having either gone out of business or were absorbed by other institutions.

Of these 101 banks, Sovereign ranked as the second largest in terms of total assets and the third most profitable for the applicable nine-month operating period. Reflective of today’s challenging economic environment, more than half the banks in our peer group reported net losses for this period, many of which are substantial.

Sovereign Bank’s relative strength to our peers has been achieved through the rigorous and consistent application of the sound principles long-held by our Board and executive management. Since inception, Sovereign Bank has maintained a conservative business model whereby loans – whether real estate or commercial or oil and gas – were underwritten to the highest standards possible. This model will continue to dictate our credit decisions going forward as it has served us well in these virtually unprecedented times.

Of course, within every challenge lies opportunity. To potentially capitalize on the expected after-effects of the banking industry’s downturn, Sovereign has aligned itself with Cogent Opportunity Fund I, L.P., an entity independent of Sovereign Bank but with an investment strategy designed to forward Sovereign’s growth through potential acquisitions of failed banks from the FDIC.

With a target capital raise of $100 million scheduled to close on March 31, 2010 (date subject to change depending on opportunities coming available), Cogent’s principals are quite pleased with the evidence of enthusiasm among Sovereign’s shareholder base and the outside investor community. The fund continues to actively review potential transactions in the financial markets, though the most promising opportunities to bid on a failed bank meeting the fund’s conditional parameters may not occur until the latter half of the year.

While 2010 will certainly continue to present challenges, Sovereign’s Board and executive management are excited about the overall potential for the bank and hope you are as well. To our valued clients and shareholders, we thank you for your ongoing patronage of Sovereign for your banking business. And, as always, we appreciate your ongoing referrals of both depository and loan prospects. We look forward to continuing to serve you.