<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
October 19, 1999
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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)
Pennsylvania 0-27942 23-2828883
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(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
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 October 19, 1999, Commonwealth Bancorp, Inc. (the "Company") announced
net income of $4.4 million, or a record $0.36 per common share on a diluted
basis, for the third quarter of 1999. This compared to net income of $2.7
million, or $0.19 per common share on a diluted basis, for the third quarter of
1998. For the nine months ended September 30, 1999, net income was $12.8
million, or $0.99 per common share on a diluted basis. This compared to net
income of $8.0 million, or $0.53 per common share on a diluted basis, for the
comparable period last year. For additional information, reference is made to
the Press Release, dated October 19, 1999, which is attached hereto as Exhibit
99.1 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:
99.1 Press Release dated October 19, 1999
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: October 21, 1999 By: /s/Charles M. Johnston
----------------------
Charles M. Johnston
Chief Financial Officer
3
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EXHIBIT 99.1
For release: IMMEDIATELY
Contact: Charles M. Johnston, Chief Financial Officer (610) 313-2189
COMMONWEALTH BANCORP, INC. REPORTS THIRD CONSECUTIVE RECORD EARNINGS PER SHARE
NORRISTOWN, PA, OCTOBER 19, 1999 - COMMONWEALTH BANCORP, INC. (NASDAQ: CMSB),
today reported net income of $4.4 million, or a record $0.36 per common share on
a diluted basis, for the third quarter of 1999. This compared to net income of
$2.7 million, or $0.19 per common share on a diluted basis, for the third
quarter of 1998. For the nine months ended September 30, 1999, net income was
$12.8 million, or $0.99 per common share on a diluted basis. This compared to
net income of $8.0 million, or $0.53 per common share on a diluted basis, for
the comparable period last year.
The results for the third quarter and first nine months of 1999 and 1998
included a number of significant factors which affected the comparability of the
reported results, including the following:
<TABLE>
<CAPTION>
For the Quarter Ended For the Nine Months Ended
--------------------------------- --------------------------------
September 30, September 30,
--------------------------------- --------------------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
(in millions)
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After-Tax After-Tax After-Tax After-Tax
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Reported net income $4.4 $2.7 $12.8 $8.0
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Net gain on sale of mortgage servicing rights 1.2 1.2
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Charge primarily relating to computer hardware/software upgrades (0.4) (0.4)
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(Loss)/gain on sale of securities (0.2) 0.2 (0.2) 0.6
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Gain on sale of two branches 0.7
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Charge involving assets acquired in a 1996 branch acquisition (0.3)
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Charge relating to an equity investment (0.5) (2.4)
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Other (0.1) (0.1)
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Adjusted net income $3.8 $3.0 $11.9 $9.9
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</TABLE>
Exclusive of the above items, net income in the third quarter of 1999 would have
been $3.8 million, or $0.32 per common share on a diluted basis, compared to
$3.0 million, or $0.21 per common share on a diluted basis, in the third quarter
of 1998. For the nine months ended September 30, 1999, net income would have
been $11.9 million, or $0.91 per common share on a diluted basis, compared to
$9.9 million, or $0.65 per common share on a diluted basis, for the comparable
period last year.
"Commonwealth's core retail, commercial and mortgage banking businesses
demonstrated outstanding progress in the third quarter of 1999, as we continued
to transition the Company's business mix from that of a traditional thrift to
one more indicative of a community bank," stated Charles H. Meacham,
Commonwealth's Chairman and Chief Executive Officer. He added, "Compared to last
year's third quarter, average consumer loans increased by 27% to $288 million,
average commercial loans increased by 37% to $167 million, and average demand
and money market deposits increased by 16% to $739 million in the third quarter
of 1999. In addition, the year-to-date net gain on sale of mortgage loans
generated by our mortgage banking business was $9.0 million, or 20% above the
first nine months of 1998."
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Net interest income was $17.6 million in the third quarter of 1999, compared to
$17.8 million in the third quarter of 1998. The decrease was primarily
attributable to a decrease in average interest-earning assets offset, in part,
by a higher net interest margin. Net interest income was $53.0 million for both
the first nine months of 1999 and 1998.
The net interest margin on a fully taxable equivalent basis was 3.73% in the
third quarter of 1999, compared to 3.27% in the third quarter of 1998. The
increase was primarily attributable to a 0.57% decrease in the cost of
interest-bearing liabilities. The decrease in the cost of interest-bearing
liabilities was primarily related to a reduction in the average cost of
certificates of deposit, which decreased from 5.46% in the third quarter of 1998
to 5.01% in the third quarter of 1999. Also contributing to the decrease in the
cost of interest-bearing liabilities was a favorable change in funding mix,
involving an increase in lower costing demand and money market deposits, and a
decrease in higher costing certificates and wholesale borrowings.
For the nine months ended September 30, 1999, the net interest margin on a fully
taxable equivalent basis was 3.58%, versus 3.25% in the comparable 1998 period.
The increase was primarily attributable to 0.49% decrease in the cost of
interest-bearing liabilities offset, in part, by a 0.09% reduction in the yield
on interest-earning assets. The decrease in the cost of interest-bearing
liabilities, relative to the comparable period in 1998, was primarily
attributable to the same factors responsible for the decrease in the third
quarter of 1999. The reduction in the yield on interest-earning assets, relative
to the comparable period in 1998, was primarily due to lower yields on the
Company's mortgage-backed and investment securities portfolios.
Average interest-earning assets totaled $1.9 billion and $2.0 billion for the
third quarter and nine months ended September 30, 1999, respectively. This
compared to $2.2 billion for both the third quarter and nine months ended
September 30, 1998. The decreases in interest-earning assets were due primarily
to decreases in the Company's mortgage-backed securities portfolio.
Noninterest income totaled $7.8 million in the third quarter of 1999, compared
to $6.5 million in the third quarter of 1998. The increase primarily reflected a
$1.6 million net gain on sale on mortgage servicing rights. This gain was lower
than previously estimated because of higher than expected portfolio payments in
1999, higher than anticipated costs of transfer, and other adjustments. During
the third quarter of 1999, deposit fees and related income increased $0.3
million, primarily relating to an increase in transaction accounts. The above
increases were partially offset by a $0.5 million decrease in both the net gain
on sale of securities and the net gain on sale of mortgage loans.
Noninterest income was $23.4 million for the first nine months of 1999, compared
to $19.9 million for the comparable 1998 period. The increase primarily
reflected a $1.6 million net gain on sale on mortgage servicing rights during
the third quarter of 1999, and a $1.5 million increase in the net gain on sale
of mortgage loans. The latter was primarily attributable to favorable pricing on
forward delivery contracts with the ultimate servicer. Also impacting the
comparison was a $1.0 million gain on the sale of two branches in Lebanon
County, Pennsylvania during the second quarter of 1999 and a $0.7 million
increase in deposit fees and related income. The increase in deposit fees was
primarily attributable to an increase in transaction accounts. These increases
were offset, in part, by a $1.2 million decrease in the net gain on sale of
securities and a $0.4 million reversal of a deferred tax liability in the first
quarter of 1998.
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Noninterest expense was $18.3 million in the third quarter of 1999, compared to
$19.2 million in the third quarter of 1998. The decrease was primarily
attributable to a $0.8 million charge in the third quarter of 1998 relating to
an equity investment in a mortgage servicing partnership and a $0.3 million
decrease in advertising and promotion expense. These decreases were partially
offset by a $0.6 million charge during the third quarter of 1999, primarily
relating to computer hardware and software upgrades.
Noninterest expense was $55.4 million for the nine months ended September 30,
1999, compared to $58.4 million for the comparable period in 1998. In addition
to the factors relating to the third quarter, the decrease was also attributable
to a $2.7 million charge relating to an equity investment in a mortgage
servicing partnership and a $0.8 million one-time charge related to a policy
change in accounting for compensation expense in the second quarter of 1998.
Also contributing to the decrease was a $0.5 million reduction in the
amortization of intangible assets and a $0.3 million reduction in the
amortization of purchased mortgage servicing rights. These decreases were
partially offset by a $0.5 million nonrecurring charge in the second quarter of
1999 relating to certain assets acquired in the 1996 acquisition of 12 branches
in Lebanon and Berks Counties, Pennsylvania and higher expenses relating to an
increase in transaction accounts.
Provision for loan losses totaled $1.0 million and $3.0 million in the third
quarter and nine months ended September 30, 1999, respectively. The provision
for loan losses totaled $1.0 million and $2.5 million in the third quarter and
nine months ended September 30, 1998, respectively. At September 30, 1999, the
allowance for loan losses totaled $10.2 million, or 0.76% of loans, compared to
$9.5 million, or 0.69%, at September 30, 1998, and $9.6 million, or 0.71%, at
December 31, 1998.
Net credit losses totaled $0.8 million, or 0.24% of average loans in the third
quarter of 1999. This compared to $0.9 million, or 0.26% of average loans in the
third quarter of 1998. For the nine months ended September 30, 1999, net credit
losses totaled $2.4 million, or 0.24% of average loans, compared to $2.0
million, or 0.19%, in the comparable 1998 period.
Nonperforming assets totaled $8.2 million, or 0.42% of assets at September 30,
1999, compared to $10.5 million, or 0.46%, at September 30, 1998 and $11.1
million, or 0.49%, at December 31, 1998.
Provision for income taxes was $1.8 million, or 29% of income before income
taxes in the third quarter of 1999, compared to $1.4 million, or 34%, in the
third quarter of 1998. For the first nine months of 1999, provision for income
taxes was $5.2 million, or 29% of income before income taxes, compared to $3.9
million, or 33%, in the first nine months of 1998. The decrease in the tax rate
in the third quarter and first nine months of 1999, relative to the comparable
periods in 1998, was primarily attributable to historic and low income housing
tax credits.
The Bank's core and risk-based capital ratios were 6.1% and 11.0%, respectively,
at September 30, 1999. This compared to 6.0% and 11.9% at September 30, 1998 and
5.9% and 11.6% at December 31, 1998.
Commonwealth Bancorp, Inc., with consolidated assets of $1.9 billion, is the
holding company for Commonwealth Bank, which has 59 branches throughout
southeast Pennsylvania. ComNet Mortgage Services, a division of Commonwealth
Bank, has offices in Pennsylvania, Maryland, New Jersey, and Virginia.
ComNet also operates under the trade name of Homestead Mortgage in Maryland.
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Certain statements contained herein may not be based on historical facts and are
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. Actual results could differ materially from those indicated in such
statements due to risks, uncertainties and changes with respect to a variety of
market and other factors.
Detailed supplemental information follows.
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Commonwealth Bancorp, Inc. and Subsidiaries
Consolidated Statements of Income
(in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
For the Quarter For the Nine Months
Ended September 30, Ended September 30,
1999 1998 1999 1998
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Interest income:
Interest on loans $26,270 $27,346 $78,713 $79,256
Interest and dividends on deposits and money
market investments 1,025 511 2,921 1,969
Interest on investment securities 1,616 497 5,478 1,849
Interest on mortgage-backed securities 5,719 11,517 20,208 36,537
------------ ------------ ----------- -----------
Total interest income 34,630 39,871 107,320 119,611
Interest expense:
Interest on deposits 12,911 14,827 40,247 44,720
Interest on notes payable and other borrowings 4,079 7,242 14,109 21,879
------------ ------------ ------------ -----------
Total interest expense 16,990 22,069 54,356 66,599
------------ ------------ ------------ -----------
Net interest income 17,640 17,802 52,964 53,012
Provision for loan losses 1,000 1,000 3,000 2,500
------------ ------------ ------------ -----------
Net interest income after provision for loan losses 16,640 16,802 49,964 50,512
Noninterest income:
Deposit fees and related income 2,557 2,232 7,237 6,558
Servicing fees 873 629 2,818 2,703
Net gain on sale of mortgage loans 2,276 2,709 9,043 7,546
Net (loss) gain on sale of securities (250) 298 (250) 985
Other 2,379 603 4,601 2,064
------------ ------------ ------------ ------------
Total noninterest income 7,835 6,471 23,449 19,856
------------ ------------ ------------ ------------
Noninterest expense:
Compensation and employee benefits 9,212 9,230 28,028 28,349
Occupancy and office operations 3,170 2,701 8,675 7,870
FDIC premium 189 196 569 584
Advertising and promotion 360 694 1,264 1,673
Amortization of intangible assets 1,156 1,290 3,666 4,124
Valuation adjustment relating to an equity investment
in a mortgage servicing partnership - 750 - 3,483
Other 4,250 4,318 13,149 12,315
------------ ------------ ----------- ------------
Total noninterest expense 18,337 19,179 55,351 58,398
------------ ------------ ----------- ------------
Income before income taxes 6,138 4,094 18,062 11,970
Income tax provision 1,780 1,392 5,238 3,947
------------ ------------ ----------- ------------
Net income $4,358 $2,702 $12,824 $8,023
============ ============ ============ ============
Basic weighted average number of shares outstanding 11,485,514 13,981,578 12,585,631 14,538,500
============ ============ ============ ============
Basic earnings per share $0.38 $0.19 $1.02 $0.55
============ ============ ============ ============
Diluted weighted average number of shares outstanding 11,983,616 14,561,792 13,000,245 15,206,110
============ ============ ============ ============
Diluted earnings per share $0.36 $0.19 $0.99 $0.53
============ ============ ============ ============
</TABLE>
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Commonwealth Bancorp, Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
----------------------- -----------------------
<S> <C> <C>
Assets:
Cash and due from banks $43,440 $58,028
Interest-bearing deposits 35,445 43,829
Short-term investments available for sale 6,755 4,820
Mortgage loans held for sale 26,484 120,642
Investment securities
Securities available for sale (cost of $63,089
and $34,407, respectively), at market value 62,748 34,515
Mortgage-backed securities
Securities held to maturity (market value of $98,272
and $133,735, respectively), at cost 98,376 132,105
Securities available for sale (cost of $221,869
and $388,349, respectively), at market value 219,492 392,036
Loans receivable, net 1,329,305 1,338,177
Accrued interest receivable, net 10,166 11,260
FHLB stock, at cost 18,400 18,400
Premises and equipment, net 15,574 16,887
Intangible assets 34,205 39,830
Mortgage servicing rights - 9,969
Other assets, including net deferred taxes of $5,126
and $2,508, respectively 42,262 37,001
----------------------- -----------------------
Total assets $1,942,652 $2,257,499
======================= =======================
Liabilities:
Deposits $1,512,878 $1,605,299
Notes payable and other borrowings:
Secured notes due to Federal Home Loan Bank of Pittsburgh 97,000 240,500
Securities sold under agreements to repurchase 130,000 166,000
Other borrowings 11,492 -
Advances from borrowers for taxes and insurance 8,856 28,960
Accrued interest payable, accrued expenses and other liabilities 32,133 24,562
----------------------- -----------------------
Total liabilities 1,792,359 2,065,321
----------------------- -----------------------
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;
18,068,127 shares issued and 11,946,024 outstanding at September 30, 1999
18,054,315 shares issued and 14,721,408 outstanding at December 31, 1998 1,807 1,806
Additional paid-in capital 136,124 135,588
Retained earnings 133,397 123,917
Unearned stock benefit plan compensation (8,886) (10,666)
Unrealized (loss) gain on marketable securities, net (1,767) 2,467
Treasury stock, at cost; 6,122,103 and 3,332,907 shares, respectively (110,382) (60,934)
----------------------- -----------------------
Total shareholders' equity 150,293 192,178
----------------------- -----------------------
Total liabilities and shareholders' equity $1,942,652 $2,257,499
======================= =======================
</TABLE>
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Commonwealth Bancorp, Inc. and Subsidiaries
Selected Financial Data
(in thousands, except per share data)
<TABLE>
<CAPTION>
For the Quarter Ended For the Nine Months Ended
----------------------------- -----------------------------
9/30/99 9/30/98 9/30/99 9/30/98
----------------------------- -----------------------------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Average Mortgage Loans $907,437 $1,078,937 $956,210 $1,058,170
Average Consumer Loans 287,957 226,593 267,501 212,977
Average Commercial Loans 166,830 122,190 150,937 120,030
Average Loans 1,362,224 1,427,720 1,374,648 1,391,177
Average Interest-Earning Assets 1,885,497 2,160,109 1,985,330 2,181,654
Average Assets 2,043,914 2,315,620 2,140,055 2,337,279
Average Core Deposits 966,150 862,088 959,353 847,956
Average Certificates of Deposit 580,739 703,258 623,788 722,376
Average Deposits 1,546,889 1,565,346 1,583,141 1,570,332
Average Interest-Bearing Liabilities 1,829,756 2,062,068 1,911,264 2,074,582
Average Shareholders' Equity 159,434 195,561 177,479 207,462
OPERATING DATA:
Annualized Return on Assets 0.85% 0.46% 0.80% 0.46%
Annualized Return on Equity 10.84% 5.48% 9.66% 5.17%
Mortgage Originations $143,690 $232,431 $512,686 $797,148
Average Yield on Mortgage Loans (a) 7.15% 7.13% 7.19% 7.25%
Average Yield on Consumer Loans (a) 8.78% 9.19% 8.87% 8.96%
Average Yield on Commercial Loans (a) 8.62% 8.77% 8.57% 8.48%
Average Yield on Loans (a) 7.67% 7.60% 7.67% 7.62%
Average Yield on Interest-Earning Assets (a) 7.31% 7.32% 7.24% 7.33%
Average Cost of Core Deposits 2.29% 2.37% 2.30% 2.37%
Average Cost of Certificates of Deposit 5.01% 5.46% 5.08% 5.49%
Average Cost of Deposits 3.31% 3.76% 3.40% 3.81%
Average Cost of Interest-Bearing Liabilities 3.68% 4.25% 3.80% 4.29%
Net Interest Margin (a) 3.73% 3.27% 3.58% 3.25%
Period End Book Value Per Share $12.58 $12.93 $12.58 $12.93
Period End Tangible Book Value Per Share 9.72 10.14 9.72 10.14
Period End Nonperforming Loans 7,470 9,662 7,470 9,662
Period End Nonperforming Assets 8,190 10,450 8,190 10,450
</TABLE>
(a) Taxable equivalent basis
