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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
July 13, 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 July 13, 1999, Commonwealth Bancorp, Inc. (the "Company") reported net
income of $4.4 million, or a record $0.33 per common share on a diluted basis,
for the second quarter of 1999. For the six months ended June 30, 1999, net
income was $8.5 million, or $0.63 per common share on a diluted basis. For
additional information, reference is made to the Press Release, dated July 13,
1999, 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 July 13, 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: July 15, 1999 By: /s/Charles M. Johnston
---------------------------------
Charles M. Johnston
Chief Financial Officer
3
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Exhibit 99
[COMMONWEALTH BANCORP LOGO]
For release: IMMEDIATELY
Contact: Charles M. Johnston, Chief Financial Officer (610) 313-2189
COMMONWEALTH BANCORP, INC. REPORTS RECORD EARNINGS PER SHARE FOR SECOND QUARTER
1999
NORRISTOWN, PA, JULY 13, 1999 - COMMONWEALTH BANCORP, INC. (NASDAQ: CMSB), today
reported net income of $4.4 million, or a record $0.33 per common share on a
diluted basis, for the second quarter of 1999. The second quarter 1999 financial
results reflected a $0.7 million (after-tax) gain on the sale of two branches in
Lebanon County, Pennsylvania. This gain was offset, in part, by a $0.3 million
(after-tax) charge relating to certain assets acquired in the 1996 acquisition
of 12 branches in Lebanon and Berks Counties, Pennsylvania. Exclusive of these
items, net income would have been $4.0 million, or $0.30 per share on a diluted
basis, for the three months ended June 30, 1999.
For the six months ended June 30, 1999, net income was $8.5 million, or $0.63
per common share on a diluted basis. Exclusive of the above items which affected
the second quarter 1999 financial results, net income would have been $8.1
million, or $0.60 per share on a diluted basis, for the six months ended June
30, 1999.
Net income was $1.5 million, or $0.10 per common share on a diluted basis, in
the second quarter of 1998. The second quarter 1998 financial results were
affected by a $1.9 million (after-tax) valuation adjustment relating to an
equity investment in a mortgage servicing partnership; a $0.5 million
(after-tax) charge relating to a policy change in accounting for compensation
expense; and a $0.5 million (after-tax) net gain on sale of securities.
Exclusive of these items, net income would have been $3.4 million, or $0.22 per
share on a diluted basis, for the second quarter of 1998.
For the six months ended June 30, 1998, net income was $5.3 million, or $0.34
per common share on a diluted basis. In addition to the above factors affecting
the second quarter 1998 results, net income for the six months of 1998 included
a $0.4 million (after-tax) reversal of a deferred tax liability in the first
quarter of 1998. Exclusive of these items, net income would have been $6.9
million, or $0.45 per share on a diluted basis, for the six months ended June
30, 1998.
"Commonwealth's core businesses of retail, commercial and mortgage banking have
achieved outstanding results thus far in 1999," stated Charles H. Meacham,
Chairman and Chief Executive Officer. He added, "Compared to last year's second
quarter, average consumer loans increased by 26% to $270 million, average
commercial loans increased by 23% to $149 million, and average demand and money
market deposits increased by 19% to $742 million in the second quarter of 1999.
In addition, the year-to-date net gain on sale of mortgage loans generated by
our mortgage banking business was $6.8 million, or 40% above the first six
months of 1998."
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Net interest income was $17.8 million in the second quarter of 1999, compared to
$17.7 million in the second quarter of 1998. For the first six months of 1999,
net interest income was $35.3 million, versus $35.2 million for the comparable
period in 1998. The increases were primarily attributable to a higher net
interest margin, offset, in part, by a decrease in average interest-earning
assets.
The net interest margin on a fully taxable equivalent basis was 3.56% in the
second quarter of 1999, compared to 3.15% in the second quarter of 1998. The
increase was primarily attributable to a 0.53% decrease in the cost of
interest-bearing liabilities, offset, in part, by a 0.04% reduction in the fully
taxable equivalent yield on interest-earning assets. 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 5.51% in the second
quarter of 1998 to 5.09% in the second 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. The reduction in the yield on interest-earning assets was primarily
due to lower yields on the Company's mortgage-backed and investment securities
portfolios.
For the six months ended June 30, 1999, the net interest margin on a fully
taxable equivalent basis was 3.51%, versus 3.24% in the comparable 1998 period.
The increase was primarily attributable to 0.46% decrease in the cost of
interest-bearing liabilities, offset, in part, by a 0.13% reduction in the yield
on interest-earning assets. The decrease in the cost of interest-bearing
liabilities and the yield on interest-earning assets, relative to the comparable
periods in 1998, was primarily attributable to the same factors responsible for
the decrease in the second quarter of 1999.
Average interest-earning assets totaled $2.0 billion for both the second quarter
and six months ended June 30, 1999. This compared to $2.2 billion for both the
second quarter and six months ended June 30, 1998. The decreases in
interest-earning assets were due primarily to decreases in the Company's
mortgage-backed securities portfolio.
Noninterest income totaled $7.7 million in the second quarter of 1999, compared
to $7.4 million in the second quarter of 1998. The increase primarily reflected
a $1.0 million gain on the sale of two branches in Lebanon County, Pennsylvania.
This increase was partially offset by the effect of a $0.7 million net gain on
the sale of securities during the second quarter of 1998.
Noninterest income was $15.6 million for the first six months of 1999, compared
to $13.4 million for the same 1998 period. In addition to the factors relating
to the second quarter, the increase was also attributable to a $1.9 million
increase in the net gain on sale of mortgage loans, relating to an increase in
loans sold on a servicing released basis. Also impacting the comparison was 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 second quarter of 1999, compared to
$21.8 million in the second quarter of 1998. The decrease was primarily
attributable to a $2.7 million valuation adjustment in the second quarter of
1998 relating to an equity investment in a mortgage servicing partnership. Also
reflected in noninterest expense in the second quarter of 1998 was a $0.8
million one-time charge related to a policy change in accounting for
compensation expense, including commissions on mortgage originations. 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.
Noninterest expense was $37.0 million for the six months ended June 30, 1999,
compared to $39.2 million for the same period in 1998. The decrease was
primarily attributable to the same factors responsible for the decrease in the
second quarter of 1999, as well as a $0.3 million decrease in the amortization
of intangible assets. Partially offsetting these decreases was an increase in
mortgage banking expenses and higher expenses relating to the accelerated
vesting of certain stock benefit plans due to retirements, as well as the
opening of supermarket and traditional branch offices.
Provision for loan losses totaled $1.0 million and $2.0 million in the second
quarter and six months ended June 30, 1999, respectively. The provision for loan
losses totaled $1.0 million and $1.5 million in the second quarter and six
months ended June 30, 1998, respectively. At June 30, 1999, the allowance for
loan losses totaled $10.0 million, or 0.75% of loans, compared to $9.5 million,
or 0.70%, at June 30, 1998, and $9.6 million, or 0.71%, at December 31, 1998.
Net credit losses totaled $1.0 million, or 0.29% of average loans in the second
quarter of 1999. This compared to $0.5 million, or 0.16% of average loans in the
second quarter of 1998. For the six months ended June 30, 1999, net credit
losses totaled $1.6 million, or 0.24% of average loans, compared to $1.0
million, or 0.16%, in the same 1998 period.
Nonperforming assets totaled $8.0 million, or 0.38% of assets at June 30, 1999,
compared to $9.7 million, or 0.41%, at June 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 second quarter of 1999, compared to $0.8 million, or 34%, in the
second quarter of 1998. For the first six months of 1999, provision for income
taxes was $3.5 million, or 29% of income before income taxes, compared to $2.6
million, or 32%, in the first six months of 1998. The decrease in the tax rate
in the second quarter and first six 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 6.5% and 12.2%, respectively,
at June 30, 1999. This compared to 6.0% and 12.1% at June 30, 1998 and 5.9% and
11.6% at December 31, 1998.
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Commonwealth Bancorp, Inc., with consolidated assets of $2.1 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.
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.
<PAGE> 5
Commonwealth Bancorp, Inc. and Subsidiaries
Consolidated Statements of Income
(in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
For the Quarter For the Six Months
Ended June 30, Ended June 30,
1998 1998 1999 1998
--------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Interest income:
Interest on loans $26,184 $26,527 $52,443 $51,910
Interest and dividends on deposits
and money market investments 855 775 1,896 1,458
Interest on investment securities 2,485 609 3,862 1,352
Interest on mortgage-backed securities 6,559 12,750 14,489 25,020
----------- ----------- ----------- -----------
Total interest income 36,083 40,661 72,690 79,740
Interest expense:
Interest on deposits 13,552 14,949 27,336 29,893
Interest on notes payable and other borrowings 4,744 8,017 10,030 14,637
----------- ----------- ----------- -----------
Total interest expense 18,296 22,966 37,366 44,530
----------- ----------- ----------- -----------
Net interest income 17,787 17,695 35,324 35,210
Provision for loan losses 1,000 1,000 2,000 1,500
----------- ----------- ----------- -----------
Net interest income after
provision for loan losses 16,787 16,695 33,324 33,710
Noninterest income:
Deposit fees and related income 2,493 2,275 4,680 4,326
Servicing fees 1,051 1,027 1,945 2,074
Net gain on sale of mortgage loans 2,606 2,745 6,767 4,837
Net gain on sale of securities - 687 - 687
Other 1,572 645 2,222 1,461
----------- ----------- ----------- -----------
Total noninterest income 7,722 7,379 15,614 13,385
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Noninterest expense:
Compensation and employee benefits 9,198 10,130 18,816 19,119
Occupancy and office operations 2,688 2,569 5,505 5,169
FDIC premium 190 195 380 388
Advertising and promotion 490 542 904 979
Amortization of intangible assets 1,221 1,417 2,510 2,834
Valuation adjustment relating to an equity
investment in a mortgage servicing
partnership - 2,733 - 2,733
Other 4,521 4,262 8,899 7,997
----------- ----------- ----------- -----------
Total noninterest expense 18,308 21,848 37,014 39,219
----------- ----------- ----------- -----------
Income before income taxes 6,201 2,226 11,924 7,876
Income tax provision 1,798 757 3,458 2,555
----------- ----------- ----------- -----------
Net income $4,403 $1,469 $8,466 $5,321
=========== =========== =========== ===========
Basic weighted average number of
shares outstanding 12,933,582 14,661,101 13,144,806 14,821,577
=========== =========== =========== ===========
Basic earnings per share $0.34 $0.10 $0.64 $0.36
=========== =========== =========== ===========
Diluted weighted average number of
shares outstanding 13,342,552 15,427,517 13,516,984 15,533,608
=========== =========== =========== ===========
Diluted earnings per share $0.33 $0.10 $0.63 $0.34
=========== =========== =========== ===========
</TABLE>
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Commonwealth Bancorp, Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
Assets: ------------ --------------
<S> <C> <C>
Cash and due from banks $51,652 $58,028
Interest-bearing deposits 29,904 43,829
Short-term investments available for sale 676 4,820
Mortgage loans held for sale 54,723 120,642
Investment securities
Securities available for sale (cost of $140,252
and $34,407, respectively), at market value 139,925 34,515
Mortgage-backed securities
Securities held to maturity (market value of $107,077
and $133,735, respectively), at cost 106,354 132,105
Securities available for sale (cost of $253,360
and $388,349, respectively), at market value 252,855 392,036
Loans receivable, net 1,310,435 1,338,177
Accrued interest receivable, net 10,216 11,260
FHLB stock, at cost 18,400 18,400
Premises and equipment, net 16,676 16,887
Intangible assets 35,362 39,830
Mortgage servicing rights 8,934 9,969
Other assets, including net deferred taxes of $4,465
and $2,508, respectively 40,952 37,001
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Total assets $2,077,064 $2,257,499
============= =============
Liabilities:
Deposits $1,556,409 $1,605,299
Notes payable and other borrowings:
Secured notes due to Federal Home Loan Bank of Pittsburgh 128,000 240,500
Securities sold under agreements to repurchase 140,000 166,000
Other borrowings 14,363 0
Advances from borrowers for taxes and insurance 32,368 28,960
Accrued interest payable, accrued expenses and other liabilities 31,624 24,562
------------- -------------
Total liabilities 1,902,764 2,065,321
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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;
18,068,127 shares issued and 13,363,582 outstanding at June 30, 1999
18,054,315 shares issued and 14,721,408 outstanding at December 31, 1998 1,807 1,806
Additional paid-in capital 135,965 135,588
Retained earnings 130,055 123,917
Unearned stock benefit plan compensation (9,395) (10,666)
Unrealized (loss) gain on marketable securities, net (541) 2,467
Treasury stock, at cost; 4,704,545 and 3,332,907 shares respectively (83,591) (60,934)
------------- -------------
Total shareholders' equity 174,300 192,178
------------- -------------
Total liabilities and shareholders' equity $2,077,064 $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
--------------------------------------------
June 30, 1999 June 30, 1998
BALANCE SHEET DATA: (Unaudited) (Unaudited)
--------------------------------------------
<S> <C> <C>
Average Loans $1,364,251 $1,415,728
Average Interest-Earning Assets 2,010,652 2,249,766
Average Assets 2,161,240 2,405,360
Average Deposits 1,606,987 1,577,233
Average Interest-Bearing Liabilities 1,934,705 2,133,442
Average Shareholders' Equity 183,770 210,614
OPERATING DATA:
Annualized Return on Assets 0.82% 0.24%
Annualized Return on Equity 9.61% 2.80%
Mortgage Originations $179,330 $270,543
Average Yield on Loans (a) 7.71% 7.52%
Average Yield on Interest-Earning Assets (a) 7.21% 7.25%
Average Cost of Interest-Bearing Liabilities 3.79% 4.32%
Net Interest Margin (a) 3.56% 3.15%
</TABLE>
<TABLE>
<CAPTION>
For the Six Months Ended
--------------------------------------------
June 30, 1999 June 30, 1998
BALANCE SHEET DATA: (Unaudited) (Unaudited)
--------------------------------------------
<S> <C> <C>
Average Loans $1,380,962 $1,372,601
Average Interest-Earning Assets 2,033,759 2,192,088
Average Assets 2,187,324 2,348,286
Average Deposits 1,601,613 1,572,886
Average Interest-Bearing Liabilities 1,952,739 2,080,963
Average Shareholders' Equity 186,650 213,509
OPERATING DATA:
Annualized Return on Assets 0.78% 0.46%
Annualized Return on Equity 9.15% 5.03%
Mortgage Originations $368,996 $564,717
Average Yield on Loans (a) 7.66% 7.63%
Average Yield on Interest-Earning Assets (a) 7.21% 7.34%
Average Cost of Interest-Bearing Liabilities 3.86% 4.32%
Net Interest Margin (a) 3.51% 3.24%
</TABLE>
<TABLE>
<CAPTION>
As of
--------------------------------------------
June 30, 1999 December 31, 1998
(Unaudited)
--------------------------------------------
<S> <C> <C>
Book Value Per Share $13.04 $13.05
Tangible Book Value Per Share 10.40 10.35
Nonperforming Loans 6,873 10,012
Nonperforming Assets 7,974 11,061
(a) Taxable equivalent basis
</TABLE>
