A letter from Thomas Mastor, Chairman of Sovereign Bank

Dear Clients and Shareholders,

For fiscal year 2011, Sovereign Bank recorded its most profitable year to date and continues to report a healthy balance sheet with strong capitalization ratios.

As of December 31, 2011, Sovereign reported total assets of $847 million, a 15% increase since the year ending December 31, 2010. Driving this growth was a year-over-year expansion of Sovereign’s loan portfolio by roughly 19%, an impressive achievement in a year characterized by stagnant or even negative growth by many other banks. Meanwhile, Sovereign continued to report strong operating performance with the Fourth Quarter of 2011 representing Sovereign’s 24th consecutive quarter of positive earnings.

The success of Sovereign Bank has been the result of maintaining a conservative credit culture while earning meaningful relationships with the bank’s valued clients. The former allowed Sovereign to avoid the significant losses due to nonperforming loans that many banks in the industry have experienced. Meanwhile, Sovereign’s strong client relationships have allowed the bank to grow within existing markets and pave the way for successful expansion efforts.

Sovereign’s growth strategy has been recently highlighted by the bank’s successful expansion into Houston and the opening of loan production offices at 777 Post Oak Boulevard, near the Houston Galleria. Led by Houston Area CEO Gary Olander, Sovereign’s banking team serves a diverse array of financial needs throughout the community including commercial real estate, private banking and energy lending. Efforts are also progressing to open Sovereign bank branches during 2012 in the Houston area as well.

Beyond geographic expansion, 2011 proved an exciting year for growth within Sovereign’s existing markets. Sovereign’s Energy Lending division continued to enjoy success with loan growth of more than 40% during Fiscal 2011. Sovereign also became an approved Small Business Administration (“SBA”) Lender and now actively participates in SBA loan programs throughout the Texas business community. This division represents a significant growth area for the bank and has already met with terrific success with SBA “Preferred Lender” status expected to be achieved during 2012.

Sovereign’s Board and executive management team would like to thank you for your continued support and your contributions to the achievements of the bank. Your business and your referrals remain integral to our success. We look forward to continuing to serve you throughout 2012 and in the years to come.

Thomas J. Mastor
Chairman & CEO