Sovereign Bancorp Inc. said Friday that it has agreed to acquire Charter FSB Bancorp, based in New Jersey, for $75 million in stock.

Wyomissing, Pa.-based Sovereign, with $4.5 billion in assets, is rapidly expanding in eastern Pennsylvania and central New Jersey.

Both Sovereign and Charter specialize in home mortgages for residences with up to four families and pursue low interest rate risk strategies.

"Sovereign was the best fit for us," said Patrick J. Petrone, president and chief executive of Charter, based in Randolph, N.J.

Charter has assets of about $390 million and 10 banking offices in upscale Morris and Sussex counties.

Charter to Be Separate Unit

Once the merger is completed, Charter will operate as a separate division of Sovereign Bank under the name Charter Federal Savings Bank. Mr. Petrone will continue to run Charter and will become vice chairman of Sovereign.

The boards of both institutions have signed a letter of intent, but shareholder and regulatory approvals are still pending.

The exchange ratio for the stock transaction would be 3.4 shares of Sovereign stock for each share of Charter stock, based on the average of the last 10 days' closing price for Sovereign shares.

Sovereign has two other deals pending: the acquisition of $775 million-asset Shadow Lawn Bank, West Long Branch, N.J., and the acquisition and conversion of $230 million-asset Patriot Savings Bank, Pottstown, Pa.

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