<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
January 23, 1997
- --------------------------------------------------------------------------------
(Date of earliest event reported)
Commonwealth Bancorp, Inc.
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(Exact name of registrant as specified in its charter)
Pennsylvania 0-27942 23-2828883
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(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
P.O. Box 2100
70 Valley Stream Parkway, Valley Forge, Pennsylvania 19482
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(Address of principal executive offices) (Zip Code)
(610) 251-1600
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name, former address and former fiscal year,
if changed since last report)
Page 1 of 10 Pages.
Exhibit Index appears on page 2.
<PAGE> 2
ITEM 5. OTHER EVENTS
On January 23, 1997, Commonwealth Bancorp. Inc. (the "Company"), announced
earnings for the fourth quarter of 1996 and the implementation of a common
stock repurchase program. For additional information, reference is made to the
Press Release, dated January 23, 1997, which is attached hereto as Exhibit 99
and is incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements.
Not Applicable.
(b) Pro Forma Financial Information.
Not Applicable
(c) Exhibits:
99 Press Release, dated January 23, 1997
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COMMONWEALTH BANCORP, INC.
Date: January 27, 1997 By: /s/Patrick J. Ward
-----------------------------------------
Patrick J. Ward
President and Chief Operating Officer
<PAGE> 1
For release: IMMEDIATELY
Contact: Charles M. Johnston, Chief Financial Officer (610) 313-2189
COMMONWEALTH BANCORP, INC. ANNOUNCES RECORD EARNINGS FOR FOURTH QUARTER 1996
AND COMMON STOCK REPURCHASE PROGRAM
VALLEY FORGE, PA, JANUARY 23, 1997 - COMMONWEALTH BANCORP, INC. (NASDAQ: CMSB),
today reported net income of $4.2 million, or $.25 per share of common stock,
for the fourth quarter of 1996. Net income was $2.7 million for the fourth
quarter of 1995.
For the full year 1996, net income was $9.3 million, or $.72 per share of
common stock. Net income was $11.3 million for the full year 1995. The decrease
in net income in 1996, compared to 1995, was primarily due to a $4.5 million
after-tax charge relating to the recapitalization of the Savings Association
Insurance Fund (SAIF) in the third quarter of 1996. Exclusive of this one-time
charge, net income would have been $13.9 million, or $1.06 per common share, in
1996.
Earnings per share for current periods are based on the weighted average number
of shares outstanding during the applicable period, adjusted to reflect the
exchange and issuance of shares involved in the Company's conversion and
reorganization, completed in June 1996. Earnings per share for prior periods
are not reported because of the lack of comparability to current periods.
The Company also announced today that the Board of Directors authorized the
repurchase of up to .9 million shares, or approximately 5%, of its common
stock. This repurchase program, which was recently approved by the Office of
Thrift Supervision, is in addition to the recently completed repurchase of .4
million shares of common stock to fund the Recognition and Retention Plan.
Repurchases are authorized to be made by the Company from time to time in open
market transactions as, in the opinion of management, market conditions
warrant. The repurchased shares will be held as treasury stock and will be
available for general corporate purposes.
Charles H. Meacham, Chairman and Chief Executive Officer of the Company,
stated, "The past year was one of outstanding progress for Commonwealth. The
Company experienced significant growth and, exclusive of the one-time charge to
recapitalize the SAIF, achieved record earnings in its third year of public
ownership." Mr. Meacham added, "The repurchase program reflects management's
belief that the current price of the Company's common stock does not adequately
reflect its long-term business and earnings prospects. Commonwealth's strong
capital position provides the financial flexibility which allows it to
demonstrate confidence in its future prospects."
Commonwealth's 1996 earnings reflected $3.2 million in non-cash expenses (after
tax) relating to the amortization of goodwill and core deposit intangibles
acquired in various acquisitions and accounted for under the purchase method of
accounting. This compared to $1.4 million of such expenses in 1995. Management
believes that this is important because it indicates that "cash" earnings are
significantly higher than "reported" earnings.
<PAGE> 2
In 1996, Commonwealth completed its conversion and reorganization from the
mutual holding company form of ownership to its current public stock holding
company form. The first step in that process was completed in 1994 with the
initial public offering of approximately 45% of the shares of common stock of
the Bank. The second step occurred in June 1996 with the completion of a public
offering of shares representing the remaining portion of the Bank's common
stock. As part of the second transaction, shares outstanding from the original
offering were each exchanged for 2.0775 shares of Commonwealth Bancorp, Inc. The
second offering generated net proceeds to Commonwealth of $88.8 million and
resulted in a total of 18.0 million shares of common stock outstanding at that
time.
Net interest income was $17.6 million in the fourth quarter of 1996, an
increase of 50% compared to $11.8 million in the fourth quarter of 1995. For
the full year 1996, net interest income increased by 28%, to $61.0 million,
versus $47.5 million in 1995. The increases were primarily attributable to
sharply higher interest-earning asset levels.
Average interest-earning assets were $2.0 billion and $1.7 billion,
respectively, in the fourth quarter and full year 1996. This compared to $1.4
billion and $1.2 billion in the fourth quarter and full year 1995,
respectively. The increases were due primarily to the acquisition of 12 former
Meridian branches and to the leveraging of the capital raised by Commonwealth
in its conversion and reorganization completed in June 1996.
The net interest margin was 3.59% in the fourth quarter of 1996, up slightly
from 3.45% in the fourth quarter of 1995. The increase was primarily
attributable to a .11% improvement in the spread between the yield on
interest-earning assets and the cost of interest-bearing liabilities (net
interest spread). The improvement in the fourth quarter net interest spread was
primarily due to a higher average spread on the Company's mortgage-backed
securities portfolio. An increase in the favorable effect relating to interest
free funds accounted for the remaining .03% improvement in the fourth quarter
net interest margin.
For the full year 1996, the net interest margin was 3.54%, compared to 3.80% in
1995. The decrease was attributable to a .25% decrease in the net interest
spread and a .01% decrease in the favorable effect relating to interest free
funds. The decrease in the full year net interest spread was primarily
attributable to a lower average spread on the Company's residential mortgage
loan portfolio, which, in part, was due to a less favorable interest rate
environment in 1996.
Noninterest income totalled $4.5 million in the fourth quarter of 1996,
compared to $3.9 million in the fourth quarter of 1995. The increase reflected
a $.7 million increase in deposit fees primarily relating to the Meridian
branch acquisition, growth in supermarket branches and expansion of
Commonwealth's business banking activities. Also contributing to the increase
in noninterest income in the fourth quarter of 1996 was the $.5 million
favorable effect relating to the sale of a branch property and the reversal of
a contingent liability. These favorable effects were offset, in part, by a $.5
million reduction in the net gain on sales of mortgage loans.
<PAGE> 3
Noninterest income was $15.7 million for the full year 1996, compared to $12.8
million in 1995. The increase was attributable, in part, to a $1.5 million
increase in deposit fees. The increase in full year deposit fees was
attributable to the same factors responsible for the increase in fourth quarter
deposit fees. The net gain on sales of mortgage loans increased by $1.1 million,
primarily as a result of the capitalization of mortgage servicing rights
relating to the January 1, 1996 implementation of SFAS No. 122, "Accounting for
Mortgage Servicing Rights". Other income for the twelve months ended December
31, 1996 increased by $1.7 million, as compared to the same period in 1995,
primarily due to a favorable litigation settlement, the sale of a branch
property and the reversal of a contingent liability. The foregoing increases in
noninterest income more than offset a $1.1 million decrease in gain on sales of
foreclosed real estate and the $.5 million gain relating to the sale of two
branch properties during 1995.
Noninterest expense was $15.6 million in the fourth quarter of 1996, compared
to $11.2 million in the fourth quarter of 1995. The increase was primarily
attributable to higher expenses relating to the Meridian branch acquisition,
as well as expenses related to growth in supermarket branches and expansion of
business banking activities. In addition, Commonwealth recorded a one-time
nonrecurring charge of $.3 million in the fourth quarter of 1996, relating to a
previously announced management reorganization.
Noninterest expense was $61.9 million for the full year 1996, compared to $42.3
million for the full year 1995. The increase was due, in part, to a $7.1
million increase in FDIC premiums, $6.8 million of which represented a one-time
charge to recapitalize the SAIF. Higher expenses relating to the Meridian
branch acquisition, growth in supermarket branches and expansion of business
banking activities also contributed to the increase in noninterest expense in
1996. During 1996, Commonwealth also recorded approximately $.8 million in
one-time expenses associated with the Meridian branch acquisition, and a
one-time charge of $.3 million, related to a previously announced management
reorganization.
Provision for credit losses totalled $.3 million and $.6 million in the fourth
quarter and full year 1996, respectively. This was essentially unchanged from
the $.3 million and $.6 million recorded in the fourth quarter and full year
1995. At December 31, 1996, the allowance for credit losses totalled $10.0
million, or .89% of loans. The allowance for credit losses was $7.5 million, or
.93% of loans at year end 1995. The increase in the allowance for credit losses
in 1996 was primarily due to $2.4 million in allowance acquired in the Meridian
branch acquisition.
Net credit losses totalled $.4 million, or .13% of average loans in the fourth
quarter of 1996. This compared to $.3 million, or .18% of average loans in the
fourth quarter of 1995. For the full year 1996, net credit losses totalled $.5
million, or .05% of average loans, compared to $.4 million, or .06%, in 1995.
Nonperforming assets totalled $9.1 million, or .43% of assets at December 31,
1996, compared to $7.4 million, or .51%, at December 31, 1995.
<PAGE> 4
The Bank's core capital ratio was 6.6% at December 31, 1996. This compared to
8.2% at December 31, 1995. The decrease was primarily attributable to the
increase in intangibles related to the Meridian branch purchase. In 1996, the
Board of Directors authorized the repurchase of .4 million shares to fund the
1996 Recognition and Retention Plan. Of that amount, .1 million shares were
repurchased in December 1996 and .3 million were repurchased in January 1997.
Commonwealth Bancorp, Inc., with consolidated assets in excess of $2.1 billion,
is the holding company for Commonwealth Bank, which has branches throughout
southeastern Pennsylvania. ComNet Mortgage Services, a division of Commonwealth
Bank, has offices in Pennsylvania, New Jersey and Rhode Island.
Detailed supplemental information follows.
<PAGE> 5
COMMONWEALTH BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
December 31
-----------
1996 1995
---------- ----------
ASSETS: (Unaudited)
<S> <C> <C>
Cash and due from banks $ 39,268 $ 31,994
Interest-bearing deposits 15,111 7,637
Short-term investments available for sale 5,723 10,546
Mortgage loans held for sale 17,335 26,001
Investment securities
Securities available for sale (cost of $53,815 and
$46,364, respectively), at market value 53,935 46,896
Mortgage-backed securities
Securities held to maturity (market value of $239,447
and $254,352, respectively), at cost 237,743 251,330
Securities available for sale (cost of $511,833 and
$208,464, respectively), at market value 514,964 212,023
Loans receivable, net 1,113,114 796,735
Accrued interest receivable, net 13,339 9,060
FHLB stock, at cost 11,159 8,912
Premises and equipment, net 25,369 20,687
Intangible assets 51,220 17,279
Mortgage servicing rights 7,677 6,855
Other assets, including net deferred taxes of $2,274
and $1,579, respectively 14,004 9,745
---------- ----------
Total assets $2,119,961 $1,455,700
========== ==========
Liabilities:
Deposits $1,491,450 $1,076,549
Notes payable and other borrowings:
Secured notes due to Federal Home Loan Bank
of Pittsburgh 175,000 120,614
Securities sold under agreements to repurchase 176,674 81,112
Other borrowings 0 1,554
Advances from borrowers for taxes and insurance 23,883 25,797
Accrued interest payable, accrued expenses and
other liabilities 21,030 13,038
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Total liabilities 1,888,037 1,318,664
Shareholders' Equity:
Preferred stock, $0.10 par value; 5,000,000 shares
authorized; none issued -- --
Common stock, $0.10 par value; 30,000,000 and 20,000,000
shares authorized; 17,953,613 and 8,628,884 issued
at December 31, 1996 and December 31, 1995, respectively 1,795 863
Additional paid-in capital 132,931 36,686
Retained earnings 105,577 99,165
Unearned stock benefit plan compensation (10,510) (2,337)
Unrealized gain on marketable securities, net 2,131 2,659
---------- ----------
Total shareholders' equity 231,924 137,036
---------- ----------
Total liabilities and shareholders' equity $2,119,961 $1,455,700
========== ==========
</TABLE>
<PAGE> 6
COMMONWEALTH BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share amounts)
<TABLE>
<CAPTION>
For the Three Months For the Year
Ended December 31, Ended December 31,
1996 1995 1996 1995
---------- -------- ---------- -------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Interest income:
Interest on loans $ 21,699 $16,307 $ 75,602 $58,004
Interest on investment securities 892 789 3,386 3,754
Interest and dividends on deposits and money 589 518 2,847 1,808
market investments
Interest on mortgage-backed securities 13,393 8,105 45,471 33,587
---------- ------- ---------- -------
Total interest income 36,573 25,719 127,306 97,153
---------- ------- ---------- -------
Interest expense:
Interest on deposits 14,094 10,725 49,358 35,753
Interest on notes payable and other borrowings 4,844 3,211 16,994 13,938
---------- ------- ---------- -------
Total interest expense 18,938 13,936 66,352 49,691
---------- ------- ---------- -------
Net interest income 17,635 11,783 60,954 47,462
Provision for loan losses 300 340 601 578
---------- ------- ---------- -------
Net interest income after provision for
loan losses 17,335 11,443 60,353 46,884
Noninterest income:
Deposit fees and related income 1,747 1,030 5,414 3,877
Servicing fees 1,205 1,393 5,155 5,531
Net gain on sales of mortgage loans 571 1,114 2,056 939
Net (loss) gain on sales of foreclosed real estate (41) 2 (245) 862
Other 1,059 377 3,293 1,550
---------- ------- ---------- -------
Total noninterest income 4,541 3,916 15,673 12,759
---------- ------- ---------- -------
Noninterest expense:
Compensation and employee benefits 6,966 5,082 25,584 20,484
Occupancy and office operations 2,612 2,066 8,891 7,474
FDIC premium 523 617 9,239 2,174
Advertising and promotion 520 233 1,816 1,423
Amortization of intangible assets 1,682 547 4,542 1,598
Other 3,317 2,684 11,835 9,111
---------- ------- ---------- -------
Total noninterest expense 15,620 11,229 61,907 42,264
---------- ------- ---------- -------
Income before income taxes 6,256 4,130 14,119 17,379
Income tax provision 2,046 1,476 4,781 6,124
---------- ------- ---------- -------
Net income $ 4,210 $ 2,654 $ 9,338 $11,255
========== ======= ========== =======
Weighted-average number of shares outstanding 17,149,120 N/A 13,033,566 N/A
========== ======= ========== =======
Earnings per share(1) $ .25 N/A $ .72 N/A
========== ======= ========== =======
</TABLE>
(1) Per share information for the prior period is not comparable as the
Company did not complete its stock offering June 14, 1996.
<PAGE> 7
COMMONWEALTH BANCORP, INC.
Selected Financial Highlights
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
For the Quarter Ended
-------------------------------------
BALANCE SHEET DATA: December 31, 1996 December 31, 1995
(Unaudited)
-------------------------------------
<S> <C> <C>
Average Loans $1,071,231 $754,238
Average Assets 2,108,576 1,444,527
Average Deposits 1,491,894 1,077,479
Average Shareholders' Equity 228,717 132,063
<CAPTION>
For the Year Ended
-------------------------------------
December 31, 1996 December 31, 1995
(Unaudited)
-------------------------------------
<S> <C> <C>
Average Loans $932,200 $654,195
Average Assets 1,847,445 1,329,769
Average Deposits 1,322,844 953,791
Average Shareholders' Equity 187,838 125,748
<CAPTION>
As of
-------------------------------------
December 31, 1996 December 31, 1995
(Unaudited)
-------------------------------------
<S> <C> <C>
Book Value Per Share Based on
Total Outstanding Shares $12.92 $15.88
Tangible Book Value Per Share Based on
Total Outstanding Shares 10.07 13.88
Total Non-performing Loans 8,058 6,193
Non-performing Assets 9,148 7,365
<CAPTION>
For the Quarter Ended
-------------------------------------
OPERATING DATA: December 31, 1996 December 31, 1995
(Unaudited)
-------------------------------------
<S> <C> <C>
Annualized Return on Assets 0.79% 0.73%
Annualized Return on Equity 7.32% 7.97%
ComNet Mortgage Originations $94,009 $131,454
Net Income Per Share (1) 0.25 N/A
<CAPTION>
For the Year Ended
-------------------------------------
December 31, 1996 December 31, 1995
(Unaudited)
-------------------------------------
<S> <C> <C>
Annualized Return on Assets 0.51% 0.85%
Annualized Return on Equity 4.97% 8.95%
ComNet Mortgage Originations $465,317 $496,310
Net Income Per Share (1) 0.72 N/A
<CAPTION>
As of
-------------------------------------
CAPITAL RATIOS: December 31, 1996 December 31, 1995
(Unaudited)
-------------------------------------
<S> <C> <C>
Core Capital 6.6% 8.2%
Risk Based Capital 14.2% 19.1%
</TABLE>
(1) Per share information for the prior period is not comparable as the
Company did not complete its stock offering until June 14, 1996.
