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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
April 21, 1998
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(Date of earliest event reported)
Commonwealth Bancorp, Inc.
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(Exact name of registrant as specified in its charter)
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<S> <C> <C>
Pennsylvania 0-27942 23-2828883
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(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
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2 West Lafayette Street, Norristown, Pennsylvania 19401
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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)
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ITEM 5. OTHER EVENTS
On April 21, 1998, Commonwealth Bancorp. Inc. (the "Company") reported
net income of $3.9 million, or $0.25 per common share, for the first quarter of
1998, compared to $4.7 million, or $0.28 per common share, for the first quarter
of 1997. For additional information, reference is made to the Press Release,
dated April 21, 1998, 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 April 21, 1998
2
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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: April 22, 1998 By: /s/Charles M. Johnston
----------------------
Charles M. Johnston
Chief Financial Officer
3
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Commonwealth Bancorp, Inc. and Subsidiaries
Consolidated Statements of Income
(in thousands, except share amounts)
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<CAPTION>
For the Quarter
Ended March 31,
--------------------------------
1998 1997
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(Unaudited)
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Interest income:
Interest on loans $25,383 $22,055
Interest and dividends on deposits and money
market investments 683 565
Interest on investment securities 743 1,014
Interest on mortgage-backed securities 12,270 13,821
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Total interest income 39,079 37,455
Interest expense:
Interest on deposits 14,944 13,915
Interest on notes payable and other borrowings 6,620 5,692
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Total interest expense 21,564 19,607
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Net interest income 17,515 17,848
Provision for loan losses 500 300
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Net interest income after provision for loan losses 17,015 17,548
Noninterest income:
Deposit fees and related income 2,051 1,534
Servicing fees 1,047 1,202
Net gain on sale of mortgage loans 2,092 719
Net loss on sale of foreclosed real estate (32) (69)
Other 848 1,982
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Total noninterest income 6,006 5,368
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Noninterest expense:
Compensation and employee benefits 8,989 7,938
Occupancy and office operations 2,600 2,427
FDIC premium 193 (31)
Advertising and promotion 437 418
Amortization of intangible assets 1,417 1,578
Other 3,735 3,397
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Total noninterest expense 17,371 15,727
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Income before income taxes 5,650 7,189
Income tax provision 1,798 2,519
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Net income $3,852 $4,670
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Basic weighted average number of shares outstanding 14,983,836 16,117,662
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Basic earnings per share $0.26 $0.29
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Diluted weighted average number of shares outstanding 15,640,878 16,556,570
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Diluted earnings per share $0.25 $0.28
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Commonwealth Bancorp, Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands, except share amounts)
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<CAPTION>
March 31, December 31,
1998 1997
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Assets: (Unaudited)
Cash and due from banks $38,819 $43,251
Interest-bearing deposits - 4,391
Short-term investments available for sale 6,995 6,296
Mortgage loans held for sale 96,655 37,574
Investment securities
Securities available for sale (cost of $50,945
and $50,428, respectively), at market value 51,834 51,326
Mortgage-backed securities
Securities held to maturity (market value of $186,661
and $199,048, respectively), at cost 183,708 196,213
Securities available for sale (cost of $565,161
and $534,573, respectively), at market value 568,583 539,078
Loans receivable, net 1,314,381 1,259,596
Accrued interest receivable, net 13,794 13,271
FHLB stock, at cost 14,900 14,175
Premises and equipment, net 17,970 18,590
Intangible assets 43,826 45,244
Mortgage servicing rights 8,497 8,039
Other assets, including net deferred taxes of $1,445
and $482, respectively 30,455 31,551
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Total assets $2,390,417 $2,268,595
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Liabilities:
Deposits $1,579,284 $1,552,824
Notes payable and other borrowings:
Secured notes due to Federal Home Loan Bank of Pittsburgh 293,000 213,000
Securities sold under agreements to repurchase 218,076 246,099
Advances from borrowers for taxes and insurance 29,578 24,071
Accrued interest payable, accrued expenses and other liabilities 52,335 17,749
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Total liabilities 2,172,273 2,053,743
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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;
18,016,063 shares issued and 16,264,463 outstanding at March 31, 1998;
17,998,736 shares issued and 16,247,136 outstanding at December 31, 1997 1,802 1,800
Additional paid-in capital 134,277 133,541
Retained earnings 120,205 117,582
Unearned stock benefit plan compensation (12,260) (12,900)
Unrealized gain on marketable securities, net 2,803 3,512
Treasury stock, at cost; 1,751,600 shares at March 31, 1998 (28,683) (28,683)
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Total shareholders' equity 218,144 214,852
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Total liabilities and shareholders' equity $2,390,417 $2,268,595
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Commonwealth Bancorp, Inc.
Selected Financial Highlights
(dollars in thousands, except per share data)
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For the Quarter Ended
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BALANCE SHEET DATA: March 31, 1998 March 31, 1997
(Unaudited) (Unaudited)
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Average Loans $1,259,459 $1,105,066
Average Interest-Earning Assets 2,132,501 2,021,841
Average Assets 2,290,597 2,160,499
Average Deposits 1,568,469 1,495,072
Average Interest-Bearing Liabilities 2,027,879 1,896,554
Average Shareholders' Equity 216,442 223,654
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As of
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March 31, 1998 December 31, 1997
(Unaudited)
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Book Value Per Share $13.41 $13.22
Tangible Book Value Per Share 10.72 10.44
Non-performing Loans 8,868 8,938
Non-performing Assets 9,958 9,564
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For the Quarter Ended
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OPERATING DATA: March 31, 1998 March 31, 1997
(Unaudited) (Unaudited)
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Annualized Return on Assets 0.68% 0.88%
Annualized Return on Equity 7.22% 8.47%
ComNet - Homestead Mortgage Originations $294,173 $98,199
Diluted Earnings Per Share 0.25 0.28
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<CAPTION>
As of
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CAPITAL RATIOS: (a) March 31, 1998 December 31, 1997
(Unaudited)
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Core Capital 6.5% 6.6%
Risk Based Capital 13.3% 13.4%
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(a) Represent ratios of Commonwealth Bank.
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[COMMONWEALTH BANCORP, INC. LOGO]
For release: IMMEDIATELY
Contact: Charles M. Johnston, Chief Financial Officer (610) 313-2189
COMMONWEALTH BANCORP, INC. REPORTS EARNINGS
FOR FIRST QUARTER 1998
NORRISTOWN, PA, APRIL 21, 1998 - COMMONWEALTH BANCORP, INC. (NASDAQ: CMSB),
today reported net income of $3.9 million, or $0.25 per common share, in the
first quarter of 1998, compared to $4.7 million, or $0.28 per common share, in
the first quarter of 1997. The decrease in net income in the first quarter of
1998, compared to the first quarter of 1997, was primarily attributable to a
$1.0 million (after-tax) nonrecurring net gain in the first quarter of 1997
relating to the sale of the Company's previous headquarters building and a
branch property. Exclusive of the gain, earnings per common share would have
been $0.22 in the first quarter of 1997.
"We achieved significant growth in each of our core businesses of retail
banking, commercial banking, and particularly mortgage banking, which increased
originations by 200% in the first quarter of 1998, compared to the first quarter
of 1997," stated Charles H. Meacham, Chairman and Chief Executive Officer. He
added, "Other highlights thus far in 1998 include the opening of our 57th branch
office in Wyomissing, Pennsylvania and the expansion of our mortgage banking
business through the acquisition of selected assets of Edmunds Financial
Corporation d/b/a Service First Mortgage, a mortgage company headquartered in
Annandale, Virginia. In addition, Commonwealth increased its quarterly dividend
by 14%, to $0.08 per share, and, subsequent to quarter end, announced a program
to repurchase up to 0.8 million common shares."
Commonwealth's earnings for the first quarter of 1998 reflected $1.4 million 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. On a pre-tax basis, these non-cash charges
represented $0.09 per share in the first quarter of 1998. On a comparable basis
in 1997, amortization of goodwill and core deposit intangibles were $1.6
million, or $0.10 per share.
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Commonwealth Bancorp, Inc.
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Net interest income was $17.5 million in the first quarter of 1998, a decrease
of 2% compared to $17.8 million in the first quarter of 1997. The decrease was
primarily attributable to a lower net interest margin, offset, in part, by an
increase in average interest earning assets.
Average interest-earning assets totaled $2.1 billion in the first quarter of
1998, compared to $2.0 billion in the first quarter of 1997. The increase in
interest-earning assets was due primarily to increases in the Company's loan
portfolio. Compared to the first quarter of 1997, average mortgage loans
increased 13% to $945.9 million, average consumer loans increased 17% to $197.1
million, and average commercial loans increased 18% to $116.5 million in the
first quarter of 1998. The increase in average loans in the first quarter of
1998 was primarily attributable to growth in the Company's core businesses of
mortgage banking, retail banking, and commercial banking.
The net interest margin was 3.33% in the first quarter of 1998, compared to
3.58% in the first quarter of 1997. The decrease was primarily attributable to a
0.08% reduction in the yield on interest-earning assets and a 0.12% increase in
the cost of interest-bearing liabilities. The decrease in the yield on
interest-earning assets was, in large part, due to generally lower market
interest rates. The increase in the cost of interest-bearing liabilities in the
first quarter was primarily due to a 0.21% increase in the average cost of the
Company's certificates of deposit, reflecting the continued competitive
environment for this product in southeast Pennsylvania.
Noninterest income totaled $6.0 million in the first quarter of 1998, compared
to $5.4 million in the first quarter of 1997. The increase reflected a $1.4
million increase in the net gain on sale of mortgage loans. Also contributing to
the increase in noninterest income in the first quarter of 1998 was a $0.5
million increase in deposit fees and a $0.4 million reversal of a deferred tax
liability. The increase in deposit fees was primarily attributable to growth in
supermarket banking, expansion of Commonwealth's commercial banking activities,
and increased ATM fees. These increases were partially offset by the effect of a
$1.5 million net gain on the sale of the Company's previous headquarters
building and the sale of a branch property.
Noninterest expense was $17.4 million in the first quarter of 1998, compared to
$15.7 million in the first quarter of 1997. The increase was primarily
attributable to higher expenses relating to growth in mortgage banking,
supermarket banking, and commercial banking activities, as well as higher
expenses relating to certain benefit plans. In addition, FDIC premiums increased
$0.2 million primarily a result of a refund of prior year FDIC premiums received
in the first quarter of 1997.
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Commonwealth Bancorp, Inc.
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Provision for credit losses totaled $0.5 million in the first quarter of 1998,
compared to $0.3 million in the first quarter of 1997. At March 31, 1998, the
allowance for credit losses totaled $9.0 million, or 0.68% of loans, compared to
$10.0 million, or 0.89%, at March 31, 1997, and $9.0 million, or 0.71%, at
December 31, 1997. The decrease in the allowance for credit losses between March
31, 1997 and March 31, 1998 was primarily attributable to net credit losses
relating to loans acquired in the Berks Acquisition. The Company acquired a $2.4
million allowance for credit losses as part of the Berks Acquisition. Through
March 31, 1998, essentially all of that reserve had been utilized through net
credit losses.
Net credit losses totaled $0.5 million, or 0.16% of average loans in the first
quarter of 1998. This compared to $0.2 million, or 0.08% of average loans in the
first quarter of 1997. Nonperforming assets totaled $10.0 million, or 0.42% of
assets at March 31, 1998, compared to $9.4 million, or 0.42%, at March 31, 1997
and $9.6 million, or 0.42%, at December 31, 1997.
Provision for income taxes was $1.8 million, or 32% of income before income
taxes in the first quarter of 1998, compared to $2.5 million, or 35%, in the
first quarter of 1997. The decrease in the income tax rate in the first quarter
of 1998 was primarily attributable to low income housing tax credits and the
reversal of a deferred tax valuation allowance.
The Bank's core capital ratio was 6.5% at both March 31, 1998 and March 31, 1997
and 6.6% at December 31, 1997.
Commonwealth Bancorp, Inc., with consolidated assets of $2.4 billion, is the
holding company for Commonwealth Bank, which has 57 branches throughout
southeast Pennsylvania. ComNet Mortgage Services, a division of Commonwealth
Bank, has offices in Pennsylvania, Connecticut, New Jersey, Rhode Island, and
Virginia. ComNet operates under the trade name of Homestead Mortgage in
Maryland.
Detailed supplemental information follows.
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