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
JULY 16, 1997
(Date of earliest event reported)
Commonwealth Bancorp, Inc.
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 0-27942 23-2828883
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
2 WEST LAFAYETTE STREET, NORRISTOWN, PENNSYLVANIA 19401
(Address of principal executive offices) (Zip Code)
(610) 251-1600
(Registrant's telephone number, including area code)
NOT APPLICABLE
(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>
ITEM 5. OTHER EVENTS
On July 15, 1997, Commonwealth Bancorp. Inc. (the "Company"), reported
net income of $3.7 million for the second quarter of 1997 compared to net
income of $3.2 million for the second quarter of 1996. For the six months
ended June 30, 1997, net income was $8.4 million, compared to $5.8 million
for the six months ended June 30, 1996. For additional information,
reference is made to the Press Release, dated July 15, 1997, which are
attached hereto as Exhibits 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 July 15, 1997
2
<PAGE>
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: July 16, 1997 By: /S/ CHARLES M. JOHNSTON
Charles M. Johnston
Chief Financial Officer
3
For Release: IMMEDIATELY
Contact: Charles M. Johnston, Chief Financial Officer (610) 313-2189
COMMONWEALTH BANCORP, INC. REPORTS EARNINGS FOR SECOND QUARTER 1997
NORRISTOWN, PA, JULY 15, 1997 - Commonwealth Bancorp, Inc. (NASDAQ:
CMSB), today reported net income of $3.7 million for the second quarter of
1997. Net income was $3.2 million for the second quarter of 1996. For the
six months ended June 30, 1997, net income was $8.4 million, compared to
$5.8 million for the six months ended June 30, 1996.
Earnings per share of common stock were $0.23 in the second quarter of
1997, compared to $0.33 in the second quarter of 1996. Earnings per share
of common stock were $0.51 for the six months ended June 30, 1997, compared
to $0.66 for the six months ended June 30, 1996. The decrease in earnings
per share was primarily attributable to an increase in the number of common
shares outstanding after the completion of the Company's Conversion,
Reorganization and Stock Offering in June 1996. As part of that
transaction, former holders of Commonwealth Bank common stock exchanged
each of their shares for 2.0775 shares of Commonwealth Bancorp, Inc. common
stock.
"Commonwealth continued to make solid progress in the second quarter of
1997," stated Charles H. Meacham, Chairman and Chief Executive Officer. He
added, "During the quarter, we expanded our retail banking franchise to 56
branches through the opening of our sixteenth and seventeenth supermarket
branch offices. In addition, we continued to experience growth in our
mortgage banking and business banking activities." Mr. Meacham also noted,
"During the second quarter, we announced our plan to repurchase up to 0.9
million shares of the Company's common stock. This repurchase program
reflects management's continuing belief that the current price of the
Company's common stock does not adequately reflect its long-term business
and earnings prospects."
Commonwealth's earnings for the three months and six months ended June 30,
1997 reflected $1.6 million and $3.2 million, respectively, of non-cash
expenses relating to the amortization of goodwill and core deposit
intangibles acquired in various acquisitions and accounted for under the
purchase method of accounting. This compares to $0.6 million and $1.1
million of such expenses for the same periods in 1996. In addition to the
effect of reported earnings on tangible book value, amortization of
goodwill and core deposit intangibles increased tangible book value by
$0.09 and $0.18 per share, respectively, in the second quarter and first
six months of 1997. This compares to $0.03 and $0.06 for the respective
periods in 1996.
Net interest income was $17.9 million in the second quarter of 1997, an
increase of 27% compared to $14.1 million in the second quarter of 1996.
For the six months ended June 30, 1997, net interest income increased by
35%, to $35.8 million, versus $26.5 million for the same period in 1996.
The increases were primarily attributable to sharply higher
interest-earning asset levels, offset, in part, by a lower net interest
margin.
Average interest-earning assets totaled $2.1 billion for both the second
quarter and six months ended June 30, 1997. This compared to $1.6 billion
and $1.5 billion in the second quarter and six months ended June 30, 1996,
respectively. The increases were due primarily to the June 1996
acquisition of 12 branch offices located in Berks and Lebanon Counties, PA
("Berks Acquisition"), and to the leveraging of capital raised in the
Company's Conversion, Reorganization and Stock Offering. In addition,
growth in supermarket banking and business banking contributed to the
increase in interest-earning assets.
The net interest margin was 3.41% in the second quarter of 1997, down from
3.58% in the second quarter of 1996. The decrease was primarily
attributable to a 0.19% reduction in the spread between the yield on
interest-earning assets and the cost of interest-bearing liabilities (net
interest spread). The reduction in the second quarter net interest spread
was primarily due to an increase in the average cost of the Bank's
certificates of deposit, which, in turn, was primarily attributable to the
maturity of favorably priced certificates of deposit. The decrease in the
net interest spread was offset, in part, by a 0.02% increase in the
favorable effect relating to interest free funds. The 0.02% increase in
the favorable effect relating to interest free funds in the second quarter
of 1997 was net of a 0.05% unfavorable effect relating to the Company's
repurchase of common stock.
For the six months ended June 30, 1997, the net interest margin was 3.49%,
versus 3.53% in the comparable 1996 period. The decrease was attributable
to a 0.07% decrease in the net interest spread, offset, in part, by a 0.03%
increase in the favorable effect relating to interest free funds. The
reduction in the net interest spread for the first six months of 1997, was
attributable to the same factors responsible for the second quarter
decrease. The 0.03% increase in the favorable effect relating to interest
free funds in the first six months of 1997 was net of a 0.04% unfavorable
effect relating to the Company's repurchase of common stock.
Noninterest income totaled $4.0 million in the second quarter of 1997,
compared to $3.0 million in the second quarter of 1996. The increase
reflected a $0.8 million increase in the net gain on sale of mortgage
loans, which was primarily attributable to an increase in servicing
released premiums on loans originated through five mortgage production
offices of Homestead Mortgage, Inc. ("Homestead") acquired in the first
quarter of 1997. Also contributing to the increase in noninterest income
in the second quarter of 1997 was a $0.6 million increase in deposit fees.
The increase in deposit fees was primarily attributable to the Berks
Acquisition, growth in supermarket banking, expansion of Commonwealth's
business banking activities, and increased ATM fees. These increases were
partially offset by a $0.3 million decrease in mortgage servicing fees and
a $0.2 million net loss on the sale of mortgage-backed securities in the
second quarter of 1997. The sale of mortgage-backed securities was related
to a restructuring of the Company's mortgage-backed securities portfolio,
which was undertaken to improve future earnings from the portfolio.
Noninterest income was $9.3 million for the six months ended June 30, 1997,
compared to $6.4 million for the same 1996 period. The increase reflected
a $1.5 million net gain on the sale of the Company's previous headquarters
building and the sale of a branch property. Also contributing to the
increase in noninterest income for the six months ended June 30, 1997 was a
$1.1 million increase in deposit fees and a $0.6 million increase in the
net gain on sale of mortgage loans. These increases were primarily
attributable to the same factors responsible for the increases in the
second quarter of 1997. Partially offsetting the preceding favorable
effects, was a $0.3 million decrease in servicing fees and a $0.2 million
net loss on the sale of mortgage-backed securities.
Noninterest expense was $16.1 million in the second quarter of 1997,
compared to $12.2 million in the second quarter of 1996. The increase was
primarily attributable to higher expenses relating to the Berks Acquisition
and the acquisition of the Homestead mortgage production offices, as well
as to expenses related to growth in supermarket banking and expansion of
business banking activities. The increase in noninterest expense was
offset, in part, by a $0.5 million decrease in FDIC premium expense. This
decrease was related to a reduction in deposit insurance premiums from
$0.23 to approximately $0.06 per $100 of deposits. Also partially
offsetting the increase in noninterest expense was the $0.4 million
reversal of the Bank's pension liability, and the $0.4 million reversal of
a liability relating to a contract with the Company's data processing
provider. During the second quarter of 1997, the Bank terminated its
defined benefit pension plan, and replaced it with a target benefit plan.
Noninterest expense was $31.8 million for the six months ended June 30,
1997, compared to $23.9 million for the same period in 1996. The increase
was primarily attributable to the same factors responsible for the increase
in the second quarter of 1997. The increase in noninterest expense was
offset, in part, by a $1.1 million decrease in FDIC premium expense,
relating to a reduction in deposit insurance premiums and to a $0.2 million
refund of prior year FDIC premiums received in the first quarter of 1997.
Provision for credit losses totaled $0.3 million and $0.6 million in the
second quarter and six months ended June 30, 1997, respectively. The
provision for credit losses totaled $0.1 million in the second quarter and
six months ended June 30, 1996. At June 30, 1997, the allowance for credit
losses totaled $9.8 million, or 0.82% of loans, compared to $9.9 million,
or 0.98%, at June 30, 1996 and $10.0 million, or 0.89%, at December 31,
1996. The decrease in the allowance for loan losses was primarily
attributable to net credit losses on loans acquired in the Berks
Acquisition, which were provided for at the time of the purchase.
Net credit losses totaled $0.5 million, or 0.19% of average loans in the
second quarter of 1997. This compared to $0.1 million, or 0.03% of average
loans in the second quarter of 1996. For the six months ended June 30,
1997, net credit losses totaled $0.8 million, or 0.14% of average loans,
compared to $0.1 million, or 0.01%, in the same 1996 period. The increase
in net credit losses was primarily related to loans acquired in the Berks
Acquisition.
Nonperforming assets totaled $11.3 million, or 0.50% of assets at June 30,
1997, compared to $8.1 million, or 0.40%, at June 30, 1996 and $9.1
million, or 0.43%, at December 31, 1996. The increase in nonperforming
assets was primarily related to loans acquired in the Berks Acquisition.
Provision for income taxes was $1.8 million, or 33% of income before income
taxes in the second quarter of 1997, compared to $1.7 million, or 35%, in
the second quarter of 1996. For the first six months of 1997, provision
for income taxes was $4.3 million, or 34% of income before income taxes,
compared to $3.2 million, or 35%, in the first six months of 1996. The
decrease in the income tax rate in the second quarter and first six months
of 1997 was primarily attributable to low income housing tax credits in
1997.
The Bank's core capital ratio was 6.7% at June 30, 1997. This compared to
6.6% at June 30 and December 31, 1996.
Commonwealth Bancorp, Inc., with consolidated assets of $2.3 billion, is
the holding company for Commonwealth Bank, which has branches throughout
southeast Pennsylvania. ComNet Mortgage Services, a division of
Commonwealth Bank, has offices in Pennsylvania, Connecticut, Maryland, New
Jersey and Rhode Island.
Detailed supplemental information follows.
<PAGE>
Commonwealth Bancorp, Inc and Subsidiaries
Consolidated Statements of Income
(in thousands, except share amounts)
<TABLE>
<CAPTION>
For the Quarter For the Six Months
Ended June 30, Ended June 30,
1997 1996 1997 1996
---- ---- ---- ----
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Interest income:
Interest on loans $23,049 $17,315 $45,104 $33,695
Interest and dividends on deposits
and money market investments 589 787 1,154 1,388
Interest on investment securities 1,234 781 2,248 1,503
Interest on mortgage-backed securities 14,246 10,401 28,067 19,371
------ ------ ------ ------
Total interest income 39,118 29,284 76,573 55,957
Interest expense:
Interest on deposits 14,511 10,965 28,426 21,505
Interest on notes payable and other
borrowings 6,693 4,175 12,385 7,925
----- ----- ------ -----
Total interest expense 21,204 15,140 40,811 29,430
------ ------ ------ ------
Net interest income 17,914 14,144 35,762 26,527
Provision for loan losses 300 100 600 100
--- --- --- ---
Net interest income
after provision for
loan losses 17,614 14,044 35,162 26,427
Noninterest income:
Deposit fees and related income 1,763 1,134 3,297 2,206
Servicing Fees 1,124 1,461 2,326 2,627
Net gain on sales of mortgage loans 913 126 1,632 998
Net loss on sales of securities (175) 0 (175) 0
Net loss on sales of foreclosed real
estate (32) (71) (101) (126)
Other 368 365 2,350 715
--- --- ----- ---
Total noninterest income 3,961 3,015 9,329 6,420
----- ----- ----- -----
Noninterest expense:
Compensation and employee benefits 7,883 5,944 15,821 11,666
Occupancy and office operations 2,594 1,984 5,021 3,931
FDIC premium 197 648 166 1,261
Advertising and promotion 464 419 882 736
Amortization of intangible assets 1,578 564 3,156 1,137
Other 3,399 2,625 6,796 5,151
----- ----- ----- -----
Total noninterest expense 16,115 12,184 31,842 23,882
------ ------ ------ ------
Income before income taxes 5,460 4,875 12,649 8,965
Income tax provision 1,780 1,706 4,299 3,158
----- ----- ----- -----
Net income $3,680 $3,169 $8,350 $5,807
===== ===== ===== =====
Weighted average number of shares
outstanding 16,068,527 9,695,017 16,311,200 8,862,186
========== ========= ========== =========
Earnings per share $0.23 $0.33 $0.51 $0.66
==== ==== ==== ====
</TABLE>
Commonwealth Bancorp, Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
---- ----
Assets: (Unaudited)
<S> <C> <C>
Cash and due from banks $47,162 $39,268
Interest-bearing deposits - 15,111
Short-term investments available
for sale 1,069 5,723
Mortgage loans held for sale 37,771 17,335
Investment securities
Securities available for sale
(cost of $82,340 and $53,815,
respectively), at market value 82,545 53,935
Mortgage-backed securities
Securities held to maturity
(market value of $219,601 and
$239,447, respectively), at cost 217,810 237,743
Securities available for sale
(cost of $590,800 and $511,833,
respectively), at market value 592,884 514,964
Loans receivable, net 1,188,511 1,113,114
Accrued interest receivable, net 14,016 13,339
FHLB stock, at cost 14,175 11,159
Premises and equipment, net 16,072 25,369
Intangible assets 48,078 51,220
Mortgage servicing rights 7,738 7,677
Other assets, including net deferred
taxes of $1,488 and $1,144,
respectively 21,155 14,004
------ ------
Total assets $2,288,986 $2,119,961
========= =========
Liabilities:
Deposits $1,518,915 $1,491,450
Notes payable and other borrowings:
Secured notes due to Federal
Home Loan Bank of Pittsburgh 234,000 175,000
Securities sold under
agreements to repurchase 238,572 176,674
Advances from borrowers for taxes
and insurance 34,672 23,883
Accrued interest payable, accrued
expenses and other liabilities 42,422 21,030
Total liabilities 2,068,581 1,888,037
--------- ---------
Commitments and contingencies
Shareholders' equity:
Preferred stock, $0.10 par
value; 5,000,000 shares
authorized; none issued - -
Common stock, $0.10 par value;
30,000,000 shares authorized;
17,993,315 shares issued and
17,095,715 outstanding at
June 30, 1997; 17,953,613 shares
issued and outstanding at
December 31, 1996 1,800 1,795
Additional paid-in capital 133,015 132,931
Retained earnings 111,731 105,577
Unearned stock benefit plan
compensation (13,885) (10,510)
Unrealized gain on marketable
securities, net 1,511 2,131
Treasury stock, at cost; 897,600
shares at June 30, 1997 (13,767) -
------- ------
Total shareholders' equity 220,405 231,924
------- -------
Total liabilities and shareholders'
equity $2,288,986 $2,119,961
========= =========
</TABLE>
Commonwealth Bancorp, Inc.
Selected Financial Highlights
(dollars in thousands, except per share data)
<TABLE>
<CAPTION>
For the Quarter Ended
-----------------------------------
BALANCE SHEET DATA: June 30, 1997 June 30, 1996
(Unaudited) (Unaudited)
-----------------------------------
<S> <C> <C>
Average Loans $1,127,236 $ 847,373
Average Interest-Earning Assets 2,107,112 1,588,530
Average Assets 2,256,548 1,692,581
Average Deposits 1,523,646 1,210,007
Average Interest-Bearing
Liabilities 1,986,756 1,501,740
Average Shareholders' Equity 213,849 156,329
</TABLE>
<TABLE>
<CAPTION>
For the Six Months Ended
-----------------------------------
June 30, 1997 June 30, 1996
(Unaudited) (Unaudited)
-----------------------------------
<S> <C> <C>
Average Loans $1,116,213 $ 822,924
Average Interest-Earning Assets 2,064,714 1,511,669
Average Assets 2,209,960 1,611,002
Average Deposits 1,510,614 1,163,118
Average Interest-Bearing
Liabilities 1,943,080 1,433,406
Average Shareholders' Equity 218,724 146,581
</TABLE>
<TABLE>
<CAPTION>
As of
---------------------------------------
June 30, 1997 December 31, 1996
(Unaudited)
---------------------------------------
<S> <C> <C>
Book Value Per Share $12.89 $12.92
Tangible Book Value Per Share 10.08 10.07
Non-performing Loans 10,415 8,058
Non-performing Assets 11,342 9,148
</TABLE>
<TABLE>
<CAPTION>
For the Quarter Ended
-----------------------------------
OPERATING DATA: June 30, 1997 June 30, 1996
(Unaudited) (Unaudited)
-----------------------------------
<S> <C> <C>
Annualized Return on Assets 0.65% 0.75%
Annualized Return on Equity 6.90% 8.15%
ComNet Mortgage Originations $172,030 $128,003
Net Income Per Share 0.23 0.33
</TABLE>
<TABLE>
<CAPTION>
For the Six Months Ended
-----------------------------------
June 30, 1997 June 30, 1996
(Unaudited) (Unaudited)
-----------------------------------
<S> <C> <C>
Annualized Return on Assets 0.76% 0.72%
Annualized Return on Equity 7.70% 7.97%
ComNet Mortgage Originations $270,229 $257,274
Net Income Per Share 0.51 0.66
</TABLE>
<TABLE>
<CAPTION>
As of
---------------------------------------
CAPITAL RATIOS: * June 30, 1997 December 31, 1996
(Unaudited)
---------------------------------------
<S> <C> <C>
Core Capital 6.7% 6.6%
Risk Based Capital 14.2% 14.2%
* Represent ratios of Commonwealth Bank.
</TABLE>
