Profits were down for

Sovereign Bank

(SOV)

year-over-year, but up sequentially as the bank beat expectations and delivered a respectable second quarter.

The Philadelphia-based bank reported net income of $127.4 million or 22 cents per diluted share. This is a slide of 13.6% from last year's second quarter figure of $147.5 million, or 29 cents per diluted share, but an increase from the profit of 20 cents a share last quarter. The number easily beat analyst's estimates of 16 cents a share, according to Thomson Reuters.

"Sovereign is on solid financial footing as we manage through the current uncertain economic climate," CEO Joseph P. Campanelli said in a company statement. "Given the challenging operating environment, I am pleased with our results for the second quarter of 2008, which are consistent with our expectations.

The stock is shooting up 8.7% to $9.48 in recent trading.

The quarter was boosted by an issuance of $1.39 billion of common stock in May of this year. On another positive note, the percentage of non-performing assets dropped from the first quarter. These assets were 12.2% at the end of March, declining to 9.9% at the end of June.

Allowance for credit losses increased to 1.47% over last year's 0.92%, as the bank struggles along with the rest of the market to digest the credit meltdown. The bank's provision for loan losses was down to $132 million, vs. $135 million in the first quarter, though both far outpaced the $52 million provision in the year-ago period.

The company booked $37.9 million in mortgage banking revenues, a nice jump over the $26.5 million posted in the year-ago quarter. Capital markets revenues for the second quarter of 2008 were $7.2 million up from last year's $6 million.

Standard & Poor's analyst Kevin Coles thinks the shares are fairly valued at the $9-price range. And while he has a hold rating on the stock, he still has positives comments on its outlook.

"We believe

Sovereign's total revenue will rise 14% in 2008, helped by a higher net interest margin," Coles writes.

The bank is mostly located in the Northeast, a region where real estate values have not been devastated to the extremes seen by Florida and some markets in California. The stock's value has tumbled 56% over the past year, but insiders have been actively buying shares.

The results come in contrast to several other regional banks -- particularly in areas of the country hardest hit by declining home values -- that missed expectations Tuesday. They include Midwest banks

Fifth Third Bancorp

(FITB) - Get Report

and

Keycorp

(KEY) - Get Report

and Birmingham, Ala.-based

Regions Financial

(RF) - Get Report

.