Sovereign Bancorp, Inc. RBC Capital Markets 2004 Financial Institutions Conference September 29, 2004

1
Sovereign Bancorp, Inc.RBC Capital Markets
2004 Financial Institutions ConferenceSeptember
29, 2004
2
Forward Looking Statement

• This presentation contains statements of
  Sovereigns vision, mission, strategies, goals,
  beliefs, plans, objectives, expectations,
  anticipations, estimates, intentions, financial
  condition, results of operation, estimates of
  future operating results for Sovereign Bancorp,
  Inc. as well as estimates of financial condition,
  operating efficiencies, revenue creation and
  shareholder value.
• These statements and estimates constitute
  forward-looking statements (within the meaning of
  the Private Securities Litigation Reform Act of
  1995) which involve significant risks and
  uncertainties. Actual results may differ
  materially from the results discussed in these
  forward-looking statements.
• Factors that might cause such a difference
  include, but are not limited to general economic
  conditions changes in interest rates inflation
  deposit flows loan demand real estate values
  competition changes in accounting principles,
  policies, or guidelines integration of acquired
  assets, liabilities, customers, systems and
  management personnel into Sovereigns operations
  and the ability to realize the related revenue
  synergies and cost savings within expected time
  frames possibility that expected merger-related
  charges are materially greater than forecasted or
  that final purchase price allocations based on
  fair value of the acquired assets and liabilities
  at acquisition date and related adjustments to
  yield and/or amortization of the acquired assets
  and liabilities are materially different from
  those forecasted deposit attrition, customer
  loss, revenue loss and business disruption
  following Sovereigns acquisitions, including
  adverse effects on relationships with employees
  may be greater than expected anticipated
  acquisitions may not close on the expected
  closing date or it may not close the conditions
  to closing anticipated acquisitions, including
  stockholder and regulatory approvals, may not be
  satisfied Sovereigns timely development of
  competitive new products and services in a
  changing environment and the acceptance of such
  products and services by customers the
  willingness of customers to substitute
  competitors products and services and vice
  versa the ability of Sovereign and its third
  party processing and related systems on a timely
  and acceptable basis and within projected cost
  estimates the impact of changes in financial
  services policies, laws and regulations,
  including laws, regulations, policies and
  practices concerning taxes, banking, capital,
  liquidity, proper accounting treatment,
  securities and insurance, and the application
  thereof by regulatory bodies and the impact of
  changes in and interpretation of generally
  accepted accounting principles technological
  changes changes in consumer spending and saving
  habits unanticipated regulatory or judicial
  proceedings changes in asset quality employee
  retention reserve adequacy changes in
  legislation or regulation or policy or the
  application thereof and other economic,
  competitive, governmental, regulatory, and
  technological factors affecting the Companys
  operations, pricing, products and services.

3
Additional Information About Waypoint Merger

• Sovereign and Waypoint will be filing documents
  concerning the merger with the Securities and
  Exchange Commission, including a registration
  statement on Form S-4 containing a
  prospectus/proxy statement which will be
  distributed to shareholders of Waypoint.
  Investors are urged to read the registration
  statement and the proxy statement/prospectus
  regarding the proposed transaction when it
  becomes available and any other relevant
  documents filed with the SEC, as well as any
  amendments or supplements to those documents,
  because they will contain important information.
  Investors will be able to obtain a free copy of
  the proxy statement/prospectus, as well as other
  filings containing information about Sovereign
  and Waypoint, free of charge on the SEC's
  Internet site (http//www.sec.gov). In addition,
  documents filed by Sovereign with the SEC,
  including filings that will be incorporated by
  reference in the prospectus/proxy statement, can
  be obtained, without charge, by directing a
  request to Sovereign Bancorp, Inc., Investor
  Relations, 1130 Berkshire Boulevard, Wyomissing,
  Pennsylvania 19610 (Tel [phone]). In
  addition, documents filed by Waypoint with the
  SEC, including filings that will be incorporated
  by reference in the prospectus/proxy statement,
  can be obtained, without charge, by directing a
  request to Waypoint Financial Corp., 235 North
  Second Street, Harrisburg, Pennsylvania 17101,
  Attn Richard C. Ruben, Executive Vice President
  and Corporate Secretary (Tel [phone]).
  Directors and executive officers of Waypoint may
  be deemed to be participants in the solicitation
  of proxies from the shareholders of Waypoint in
  connection with the merger. Information about
  the directors and executive officers of Waypoint
  and their ownership of Waypoint common stock is
  set forth in Waypoints proxy statement for its
  2003 annual meeting of shareholders, as filed
  with the SEC on April 21, 2003. Additional
  information regarding the interests of those
  participants may be obtained by reading the
  prospectus/proxy statement regarding the proposed
  merger transaction when it becomes available.
  INVESTORS SHOULD READ THE PROSPECTUS/PROXY
  STATEMENT AND OTHER DOCUMENTS TO BE FILED WITH
  THE SEC CAREFULLY BEFORE MAKING A DECISION
  CONCERNING THE MERGER. 

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Non-GAAP Financial Measures

• This report contains Financial information
  determined by methods other than in accordance
  with U.S. Generally Accepted Accounting
  Principles (GAAP). Sovereigns management uses
  the non-GAAP measures of Operating Earnings and
  Cash Earnings, and the related per share amounts,
  in their analysis of the company's performance.
  These measures, as used by Sovereign, adjust net
  income determined in accordance with GAAP to
  exclude the effects of special items, including
  significant gains or losses that are unusual in
  nature or are associated with acquiring or
  integrating businesses, and certain non-cash
  charges. Operating earnings represent net income
  adjusted for after tax effects of merger-related
  and integration charges and the loss on early
  extinguishment of debt. Cash earnings are
  operating earnings excluding the after-tax effect
  of amortization of intangible assets and
  stock-based compensation expense associated with
  stock options, restricted stock, bonus deferral
  plans and ESOP awards. Since certain of these
  items and their impact on Sovereigns performance
  are difficult to predict, management believes
  presentations of financial measures excluding the
  impact of these items provide useful supplemental
  information in evaluating the operating results
  of Sovereigns core businesses. These disclosures
  should not be viewed as a substitute for net
  income determined in accordance with GAAP, nor
  are they necessarily comparable to non-GAAP
  performance measures that may be presented by
  other companies.

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Reconciliation of Cash and Operating Earnings to
GAAP Earnings
( in thousands, all numbers shown net of tax)
6
Reconciliation of Cash and Operating Earnings to
GAAP Earnings
(Per Share)
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Overview of Sovereign
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An Exceptional Franchise Serving from South of
Philadelphia to Boston and Beyond

• 60 billion bank
• pro forma for Waypoint
• 665 branches
• pro forma 1,200 ATMs
• 17th largest independent bank in the U.S.
• (pro forma all deals)
• Top 15 Small Business Lenders in the U.S.

Market Share Massachusetts 3 Rhode
Island 3 New Hampshire 5
Pennsylvania 5 New Jersey
6 Connecticut 10
Maryland 39 Pro forma for
Waypoint
Key Sovereign Branches
Waypoint Branches
Source SNL DataSource
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Sovereigns Footprint
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Sovereigns Footprint

• We have the second most affluent footprint
  amongst all large banks

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Sovereigns Footprint

• We have strong market share in the more
  consolidated states, and are able to grow in the
  more fragmented states

12
Northeastern US Banking Climate

• Aside from New York money center banks, the
  Northeastern US market is controlled by 3 large
  out-of-market consolidators (Bank of America,
  Wachovia and Royal Bank of Scotland), and a
  handful of regional banks competing for market
  share

1) Excludes New York City headquartered
institutions. Data as of 06/30/2004. Assets and
Deposits are pro forma for all pending deals.
13
Total US Banking Climate

• Conclusion The northeastern United States has
  created an opportunity for a super-regional to
  emerge, similar to Fifth Third Bancorp in the
  Midwest and BBT in the South

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Core Deposits as Compared to Peers
As of June 30, 2004
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Strong Loan and Deposit Mix
Loan Mix
17
41

• 6/04 Balance - 29.1 billion
• 6/04 Yield 4.90

42
Deposit Mix
21
6/04 Balance - 29.0 billion 6/04 Cost of Funds
.90
42
37
16
Sovereigns Historical Performance
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Second Quarter 2004 Financial Highlights

• Net income of 131 million, up 26 from 2003
  earnings per share of .42, up 14 from 2003
• Cash earnings of 147 million, up 23 from 2003
  cash earnings per share of .47, up 12 from 2003
• Consumer and Commercial loans increased 30 and
  14, respectively, from the second quarter of
  2003
• Consumer and Commercial fee revenues of 58
  million and 31 million, up 9 and 14,
  respectively, from a year earlier
• Core deposits up 8.4 from 2003 and 4 from the
  first quarter of 2004
• Sovereign is positioned for higher short-term
  interest rates

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Non-Financial Highlights

• Sovereign Bancorp was added to the SP 500 index
  in June
• Named to The Forbes Platinum 400
• Identified as one of the most admired financial
  industry companies in the nation by Fortune for
  the third consecutive year
• Obtained a major banking services contract with
  the state of Massachusetts, taking the business
  away from FleetBoston
• Received an outstanding CRA rating from the OTS
• Completed in February of 2004 the acquisition of
  First Essex Bancorp and in July of 2004 the
  acquisition of Seacoast Financial Services
  Corporation
• Announced in March 2004 the acquisition of
  Waypoint Financial Corp., expected to close in
  January 2005

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Strengthened Balance Sheet

• Sovereign Bancorp (BHC)
• All high-cost debt removed from structure by end
  of 3Q04
• 500 million secured senior note at approximately
  8.00 all-in redeemed
• Replaced with 300 million unsecured senior note
  at 3-month LIBOR 33 bps
• 800 million TCE generation in 2005 provides
  additional flexibility
• Maintain double-leverage ratio at 120
• Strive for further rating agency upgrades
• Sovereign Bank (Bank)
• Maintain bank capital at 500 million cushion to
  well-capitalized guidelines
• Strive for further rating agency upgrades

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Strong Earnings Growth
5 year Operating Earnings CAGR of 20
5 year Cash Earnings CAGR of 21
21
1-Year Stock Price Performance
9/2/04 closing price of 21.98
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3-Year Stock Price Performance
9/2/04 closing price of 21.98
23
5-Year Stock Price Performance
9/2/04 closing price of 21.98
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Comparative Shareholder Returns
25

Sovereigns Valuation Discount

26
Sovereigns Business Strategy
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Sovereigns Business Strategy

• Combining the best of a large bank with the best
  of a smaller community bank.

• Best of a Large Bank
• Products
• Services
• Technology
• Brand
• Delivery channels / distribution system
• Talent
• Diversification
• Sophistication of risk management

• Best of a Small Bank
• Flatter structure
• Divided into 10 geographic markets
• Local decision making
• Active community involvement culture
• Cross functional lines to deliver bank to
  customer
• Treat customers as individuals

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Sovereigns Banking Structure
Market CEO
Commercial Real Estate Lenders
Commercial Lenders
Small Business Lenders
Cash Management Representatives
Financial Consultants
Retail Branches
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Absolute Clarity Regarding Target Markets

• Consumer ? Middle Income Households
• We target mass market with average household
  income of about 75,000
• We differentiate on the basis of relationship
  selling and service delivered with high-touch and
  supported by convenience of technology
• Goal to become dominant in all micro markets
• Goal to cross-sell 6 services to every household
  to entrench relationship and dramatically improve
  Bank profits

30

Absolute Clarity Regarding Target Markets

• Commercial/Business ? Small to Middle Market
• We target in-market businesses with revenues of
  1 - 100 million
• We differentiate on the basis of quality of
  relationship managers, localized quick decision
  making, supported by superior products and
  technology
• Goal to cross-sell 6 services to entrench
  relationship and dramatically improve Bank profits

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Strategy. With Clear Purpose and Direction.

• There is nothing complicated about our strategy
  for moving forward
• We are clear about our strategy, as well as our
  values, mission and goals
• As we execute, we will remain committed to our
  critical success factors of
• Superior asset quality
• Superior risk management
• Strong sales and service culture that aligns team
  member performance with a recognition and rewards
  system
• High level of productivity through revenue growth
  and efficient expense control

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Critical Success Factor Superior Asset Quality
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Superior Loan Quality
At June 30th non-performing assets and net
charge-offs levels were the lowest levels in more
than four years

• Classified and Internally Criticized Loans have
  shown improvement for 8 successive quarters

( in millions) 12/31/02 12/31/03
3/31/04 6/30/04 Non-Accruals 231
198 187 151 Non-Accruals of
Loans 1.00 .76 .67
.52 NPAs 257 220 212
176 NPAs of Assets .65 .51
.45 .36
Includes addition of First Essex Bank
non-accruals of 7.4 million
34

Credit Quality

• All asset quality measures are pointing toward
  improved net charge-offs, continuing in 3Q and 4Q
  of 2004
• Recent Acquisition of Seacoast and pending
  acquisition of Waypoint both improve our credit
  risk profile
• Lower NCOs forecasted and lower credit risk
  profile will reduce our need for annual loan loss
  provisioning in coming periods
• NCOs anticipated to decrease to 40 basis point
  range for 2005 and beyond
• Unless loan risk profile changes, anticipate
  maintaining ALLL at 1.20 to 1.30 of total loans

35
Critical Success Factor Superior Risk Management
36
Net Interest Income Sensitivity at 6/30/04
Superior Risk Management
Sovereign continues to be well positioned for
rising interest rates
3.6
3.8
2.3
2.3
-.51
-4.1
37

Current A/L Position

• Mildly asset sensitive
• Net interest income increases 3.8 in a 200 bp
  shock test at 6/30/04
• However, net interest income will expand faster
  than net interest margin
• Reinvestment of cash flows still at lower yields
  than maturing assets
• 100 basis points of rate moves needed to
  meaningfully move our net interest margin, but
  net interest income increases immediately
• Defined as the expected 12 month impact of an
  instantaneous 200bp parallel increase to all
  points of the existing Treasury curve

38

Why Are We Asset Sensitive? At June 30th

• 13.9 billion of assets tied to Prime,LIBOR, or
  CMT resets within 1 month following an increase
  or decrease in rates
• Only 10.7 billion of liabilities tied to
  short-term indices

Other
Treasuries 2.3b 53 Investments 39 Residential
Prime 6.0b 56 Commercial 43 Consumer
Libor 5.5b 100 Commercial
39

Why Are We Asset Sensitive? Core Deposit Base

• 4.5 billion, or 16 of deposits at zero cost
• 15.2 billion, or 52 of total deposits at
  administered rates on average, move at 25 of
  interest rate movements in a rising rate scenario
• Growing equity base increases asset sensitive bias

CDs 22 or 6.2 bn
Interest Bearing DDA 25 or 7.4 bn
Non-Interest Bearing DDA 16 or 4.7 bn
Money Market 26 or 7.4 bn
Savings 11 or 3.3 bn
40

Asset/Liability Management

• Long-range forecast assumes 3.50 - 4.00 Fed
  Funds rate, with 100 bp or more flattening of
  Treasury curve
• Assuming 200 bp or additional moves by 2007,
  current profile picks up 6.00 (interpolated),
  or 125 million to net interest income
• Recent debt redemption and new issuance will add
  5 to 6 basis points to net interest margin
  going forward
• Core deposit bias allows for pricing lag as
  rates rise assumed to move at 25 of overall
  rise in rates (on average will vary by category)

41
Critical Success Factor Strong Sales and Service
42
Strong Sales and Service Culture
Retail Accounts and Services per Household
Including First Essex, excluding First Essex
5.32 in 1Q04 and 2Q04
43
Red Carpet Service Guarantees

• Red Carpet Service was unveiled in January 2002
  as a unique program that differentiates Sovereign
  from the competition
• Six customer service guarantees were introduced
  at that time, and backed by 5 if Sovereign
  failed to uphold those guarantees
• Red Carpet Service Guarantees were recently
  expanded to include other business lines within
  the bank, over 24 guarantees now exist
• Guarantees exist within the following business
  units
• Community Banking
• Consumer Lending
• Mortgage Banking
• ATMs
• Research/Records
• Netbanking

44
Critical Success Factor Productivity
andExpense Control
45
Productivity and Expense Control
On track to improve the efficiency ratio more
than 100 basis points in 2004
Efficiency Ratio
Efficiency ratio equals GA expenses as a
percentage of total revenue, excluding securities
gains
46

Operating Efficiency

• Strategic outsourcing arrangements (Account, Item
  and Card processing) limits Sovereigns need for
  large technological capital
• Have consistently delivered efficiency
  improvements each of last 3 years
• Rate of growth in GA and total expenses is far
  below revenue growth

( in millions)
47
Our Earnings Goals for 2004 through 2007
48

What to Expect for the Remainder of 2004

• Net income of 1.38 - 1.43 per fully diluted
  share
• Operating earnings of 1.65 to 1.70 per diluted
  share 14-17 implied growth (excludes .14 of
  assumed merger integration charges and .13 of
  debt restructuring charges)
• Cash earnings of 1.83 to 1.88
• Net interest margin should stabilize, should see
  net interest income increase
• Credit quality net charge-offs at close to 1H04
  levels, but other credit metrics continue to
  improve
• Expect stronger commercial loan and core deposit
  growth during the second half of 2004 after
  considering acquisition effects
• Net charge-off run rate hopefully in the low 40s
  basis point range by year-end
• 100 basis point improvement in efficiency ratio
  from 2003

49

Assumed Earnings Drivers 2005 through 2007

• Excess Capital Generation,
• Improved Credit Quality,
• Balanced Asset/Liability Profile with long-term
  asset sensitive bias,
• Continued Operating Efficiency,
• Continued Tax Efficiency,
• Manageable levels of Balance Sheet growth for
  loans, deposits and fee revenue,
• Potential for sustained, strong double-digit
  earnings growth

50

Excess Capital Generation

• Sovereign produces strong organic capital growth
  in 2005 and beyond
• While a wide range of uses for this excess
  capital may emerge, multiple scenarios produce
  EPS accretion of .06 - .10 for 2006
• Current dividend rate is assumed for illustrative
  purposes only
• Assumed 4.0 billion of balance sheet growth in
  2006 on starting balance sheet of 60 billion, or
  7 growth

( in millions)
51

Putting It All Together Earnings Momentum 2005
- 2007

• Top-line revenue growth of only 5.9 will sustain
  double digit EPS growth 3-year average annual
  revenue growth (2000-2003) has been 22
• Anticipated rate increases through 2007 widen net
  interest margin
• Maintain neutral to mildly asset-sensitive
  balance sheet
• Continue to grow operating expenses at half the
  rate of net revenues, or better
• Effective tax rate held at 30
• Excess Capital deployment adds 2 - 4 to EPS
  each year, at a minimum

52

Earnings Goals 2004 through 2007
Managements Operating Goal
Actual/Street Mean Estimate
Operating EPS Growth

• 2002 1.25 - 1.30
  1.28 14
• 2003 1.40 - 1.45
  1.45 13
• 2004 1.65 - 1.70
  1.68 14
• 2005 1.90 - 2.00
  1.88 15
• 2006 2.10 - 2.20 or higher
  N/A 10 15
• 2007 2.40 or higher
  N/A 10 15

Management is comfortable with 2005 mean
estimate of 1.90 operating EPS managements
goal remains to strive for between 1.90 - 2.00
operating EPS in 2005
53

Our Goals for 2004 and Beyond

• We will continue to strive for
• Double-digit average annual growth in earnings
  per share, seeking to achieve 1.65-1.701 per
  share in operating earnings for 2004
• We envision earning about 2.40 or higher in
  operating earnings per share by 2007
• Significant progress in our journey from Good to
  Great in all areas of the bank
• Further improvement upon our Red Carpet Service
  guarantees
• Significant improvement in our asset quality
• Positioning our company for improved
  profitability as interest rates rise

1 Excludes merger and integration charges for
completed acquisition of First Essex Bancorp and
Seacoast Financial, in addition to debt
restructuring charges
54

In Closing

• Sovereign has consistently delivered on its
  promises
• On earnings 21 compound annual growth rate in
  operating earnings since 2000
• On capital 1.9 billion in TCE growth 384
  basis points of ratio improvement since 3Q00
• On its underlying business metrics- loan,
  deposit, fee income growth and efficiency ratio
  improvements
• The stage is set to deliver strong financial
  results for the next several years
• Sovereigns franchise is very unique and cannot
  be duplicated
• Significant insider ownership
• SOV is currently trading at 11.6x 05 operating
  EPS mean, 10.7x 05 implied cash mean, and 176
  of current book value as of September 2, 2004