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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
January 18, 2000
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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 Janaury 18, 2000, Commonwealth Bancorp, Inc. (the "Company") reported
net income of $3.8 million, or $0.34 per common share on a diluted basis, for
the fourth quarter of 1999. This compared to net income of $2.9 million, or
$0.21 per common share on a diluted basis, for the fourth quarter of 1998. For
the full year 1999, net income was $16.7 million, or a record $1.32 per common
share on a diluted basis. This compared to net income of $10.9 million, or $0.73
per common share on a diluted basis, for the full year 1998. For additional
information, reference is made to the Press Release, dated January 18, 2000,
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 Press Release dated January 18, 2000
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: January 20, 2000 By: /s/Charles M. Johnston
----------------------
Charles M. Johnston
Chief Financial Officer
3
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Exhibit 99
[COMMONWEALTH BANCORP, INC. LOGO]
For release: IMMEDIATELY
Contact: Charles M. Johnston, Chief Financial Officer (610) 313-2189
COMMONWEALTH BANCORP, INC. REPORTS RECORD EARNINGS FOR 1999
NORRISTOWN, PA, JANUARY 18, 2000 - COMMONWEALTH BANCORP, INC. (NASDAQ: CMSB),
today reported net income of $3.8 million, or $0.34 per common share on a
diluted basis, for the fourth quarter of 1999. This compared to net income of
$2.9 million, or $0.21 per common share on a diluted basis, for the fourth
quarter of 1998. For the full year 1999, net income was $16.7 million, or a
record $1.32 per common share on a diluted basis. This compared to net income of
$10.9 million, or $0.73 per common share on a diluted basis, for the full year
1998.
The results for the full year 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 Year Ended
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December 31, December 31,
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1999 1998 1999 1998
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(in millions)
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After-Tax After-Tax After-Tax After-Tax
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<S> <C> <C> <C> <C>
Reported net income $3.8 $2.9 $16.7 $10.9
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Net gain on sale of mortgage servicing rights 1.2
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Charge primarily relating to computer hardware/software upgrades (0.4)
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(Loss)/gain on sale of securities (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 (2.4)
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Other (0.2)
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Adjusted net income $3.8 $2.9 $15.7 $12.9
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</TABLE>
Exclusive of the above items, net income for the full year 1999 would have been
$15.7 million, or $1.25 per common share on a diluted basis, compared to $12.9
million, or $0.86 per common share on a diluted basis, for the full year 1998.
"Commonwealth enjoyed one of the best years in its history in 1999," stated
Charles H. Meacham, Commonwealth's Chairman and Chief Executive Officer. He
added, "The Company achieved outstanding results in its key business areas of
retail, commercial and mortgage banking. Compared to 1998, average consumer
loans increased by 27% to $278 million, average commercial loans increased by
30% to $158 million, and average demand and money market deposits increased by
16% to $729 million. In addition, the net gain on sale of mortgage loans
generated by our mortgage banking business was $11.7 million in 1999, or 8%
above 1998."
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Net interest income was $17.6 million for both the fourth quarter of 1999 and
1998. For the full year 1999, net interest income was $70.6 million, compared to
$70.7 million for the full year 1998. Compared to the comparable periods in
1998, net interest income in the fourth quarter and full year 1999 reflected a
decrease in average interest earning assets offset by a higher net interest
margin.
The net interest margin on a fully taxable equivalent basis was 3.97% in the
fourth quarter of 1999, compared to 3.34% in the fourth quarter of 1998. The
increase was primarily attributable to a 0.50% decrease in the cost of
interest-bearing liabilities. The decrease in the cost of interest-bearing
liabilities, relative to the fourth quarter of 1998, was primarily related to a
reduction in the average cost of certificates of deposit, which decreased from
5.37% in the fourth quarter of 1998 to 5.00% in the fourth 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 full year 1999, the net interest margin on a fully taxable equivalent
basis was 3.67%, versus 3.27% in the full year 1998. The increase was primarily
attributable to a 0.49% decrease in the cost of interest-bearing liabilities.
The decrease in the cost of interest-bearing liabilities, relative to the full
year 1998, was primarily attributable to the same factors responsible for the
decrease in the fourth quarter of 1999.
Average interest-earning assets totaled $1.8 billion and $1.9 billion for the
fourth quarter and full year 1999, respectively. This compared to $2.1 billion
and $2.2 billion for the fourth quarter and full year 1998, respectively. The
decreases in interest-earning assets were due primarily to decreases in the
Company's mortgage-backed securities portfolio.
Noninterest income totaled $6.7 million in the fourth quarter of 1999, compared
to $7.1 million in the fourth quarter of 1998. During the fourth quarter of
1999, the net gain on sale of mortgage loans decreased $0.7 million relating to
a decrease in loans sold on a servicing released basis. Also during the fourth
quarter of 1999, servicing fees decreased by $0.4 million relating to the sale
of mortgage servicing rights during the third quarter of 1999. The above
decreases were partially offset by a $0.6 million increase in deposit fees and
related income, primarily relating to an increase in transaction accounts.
Noninterest income was $30.1 million for the full year 1999, compared to $26.9
million for the full year 1998. The increase primarily reflected a $1.6 million
net gain on sale on mortgage servicing rights during the third quarter of 1999
and a $1.3 million increase in deposit fees and related income. The latter
increase was primarily attributable to an increase in transaction accounts. 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 $0.8
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. These increases were offset, in part, by a $1.2 million
decrease in the net gain on sale of securities and a $0.3 million decrease in
servicing fees. The decrease in servicing fees was attributable to the sale of
mortgage servicing rights during the third quarter of 1999.
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Noninterest expense was $17.9 million in the fourth quarter of 1999, compared to
$19.5 million in the fourth quarter of 1998. The decrease was primarily
attributable to reduced mortgage banking expenses, including a $0.9 million
decrease in commissions on mortgage originations given the substantial decrease
in volumes. This decrease was partially offset by higher expenses relating to an
increase in transaction accounts.
Noninterest expense was $73.3 million for the full year 1999, compared to $77.9
million for the full year 1998. In addition to the factors relating to the
fourth quarter, the decrease was also attributable to a $3.5 million charge
relating to an equity investment in a mortgage servicing partnership. Also
contributing to the decrease was a $0.6 million reduction in the amortization of
intangible assets and a $0.4 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, and 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.
Provision for loan losses totaled $1.0 million and $4.0 million in the fourth
quarter and full year 1999, respectively. The provision for loan losses totaled
$1.0 million and $3.5 million in the fourth quarter and full year 1998,
respectively. At December 31, 1999, the allowance for loan losses totaled $10.5
million, or 0.76% of loans, compared to $9.6 million, or 0.71%, at December 31,
1998.
Net credit losses totaled $0.7 million, or 0.20% of average loans in the fourth
quarter of 1999. This compared to $1.0 million, or 0.26% of average loans in the
fourth quarter of 1998. For the full year 1999, net credit losses totaled $3.1
million, or 0.23% of average loans, compared to $2.9 million, or 0.21%, in 1998.
Nonperforming assets totaled $10.4 million, or 0.54% of assets at December 31,
1999, compared to $11.1 million, or 0.49%, at December 31, 1998.
Provision for income taxes was $1.6 million, or 29% of income before income
taxes in the fourth quarter of 1999, compared to $1.3 million, or 32%, in the
fourth quarter of 1998. For the full year 1999, provision for income taxes was
$6.8 million, or 29% of income before income taxes, compared to $5.3 million, or
33%, in the full year 1998. The decrease in the tax rate in the fourth quarter
and full year 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 6.4% and 11.3%, respectively,
at December 31, 1999, compared to 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 60 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.
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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 Year
Ended December 31, Ended December 31,
1999 1998 1999 1998
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<S> <C> <C> <C> <C>
Interest income:
Interest on loans $26,658 $27,571 $105,371 $106,827
Interest and dividends on deposits and money
market investments 712 635 3,633 2,604
Interest on investment securities 823 464 6,301 2,313
Interest on mortgage-backed securities 5,259 9,823 25,467 46,360
------------ ------------ ------------ ------------
Total interest income 33,452 38,493 140,772 158,104
Interest expense:
Interest on deposits 12,742 14,226 52,989 58,946
Interest on notes payable and other borrowings 3,061 6,629 17,170 28,508
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Total interest expense 15,803 20,855 70,159 87,454
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Net interest income 17,649 17,638 70,613 70,650
Provision for loan losses 1,000 1,000 4,000 3,500
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Net interest income after provision for loan losses 16,649 16,638 66,613 67,150
Noninterest income:
Deposit fees and related income 2,876 2,264 10,113 8,822
Servicing fees 463 891 3,281 3,594
Net gain on sale of mortgage loans 2,638 3,296 11,681 10,842
Net (loss) gain on sale of securities - - (250) 985
Other 701 639 5,302 2,703
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Total noninterest income 6,678 7,090 30,127 26,946
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Noninterest expense:
Compensation and employee benefits 8,627 9,517 36,655 37,866
Occupancy and office operations 2,526 3,037 11,201 10,907
Amortization of intangible assets 1,157 1,289 4,823 5,413
Valuation adjustment relating to an equity investment
in a mortgage servicing partnership - 50 - 3,533
Other 5,603 5,579 20,585 20,151
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Total noninterest expense 17,913 19,472 73,264 77,870
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Income before income taxes 5,414 4,256 23,476 16,226
Income tax provision 1,570 1,347 6,808 5,294
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Net income $3,844 $2,909 $16,668 $10,932
============ ============ ============ ============
Basic weighted average number of shares outstanding 11,063,633 13,620,571 12,202,004 14,307,132
============ ============ ============ ============
Basic earnings per share $0.35 $0.21 $1.37 $0.76
============ ============ ============ ============
Diluted weighted average number of shares outstanding 11,431,233 13,958,109 12,604,768 14,891,545
============ ============ ============ ============
Diluted earnings per share $0.34 $0.21 $1.32 $0.73
============ ============ ============ ============
</TABLE>
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Commonwealth Bancorp, Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
December 31, December 31,
1999 1998
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<S> <C> <C>
Assets:
Cash and due from banks $54,677 $58,028
Interest-bearing deposits 3,499 43,829
Short-term investments available for sale 3,575 4,820
Mortgage loans held for sale 24,005 120,642
Investment securities
Securities available for sale (cost of $68,301
and $34,407, respectively), at market value 68,219 34,515
Mortgage-backed securities
Securities held to maturity (market value of $92,965
and $133,735, respectively), at cost 93,674 132,105
Securities available for sale (cost of $202,076
and $388,349, respectively), at market value 197,280 392,036
Loans receivable, net 1,361,430 1,338,177
Accrued interest receivable, net 9,499 11,260
FHLB stock, at cost 18,400 18,400
Premises and equipment, net 15,535 16,887
Intangible assets 33,048 39,830
Mortgage servicing rights - 9,969
Other assets, including net deferred taxes of $7,259
and $2,508, respectively 39,555 37,001
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Total assets $1,922,396 $2,257,499
============ ============
Liabilities:
Deposits $1,503,746 $1,605,299
Notes payable and other borrowings:
Secured notes due to Federal Home Loan Bank of Pittsburgh 127,000 240,500
Securities sold under agreements to repurchase 100,000 166,000
Other borrowings 9,076 -
Advances from borrowers for taxes and insurance 9,326 28,960
Accrued interest payable, accrued expenses and other liabilities 20,883 24,562
------------ ------------
Total liabilities 1,770,031 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 11,934,695 outstanding at December 31, 1999
18,054,315 shares issued and 14,721,408 outstanding at December 31, 1998 1,807 1,806
Additional paid-in capital 136,966 135,588
Retained earnings 135,780 123,917
Unearned stock benefit plan compensation (8,504) (10,666)
Unrealized (loss) gain on marketable securities, net (3,171) 2,467
Treasury stock, at cost; 6,133,432 and 3,332,907 shares, respectively (110,513) (60,934)
------------ ------------
Total shareholders' equity 152,365 192,178
------------ ------------
Total liabilities and shareholders' equity $1,922,396 $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 Year Ended
------------------------- ------------------------
12/31/99 12/31/98 12/31/99 12/31/98
------------------------- ------------------------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Average Mortgage Loans $879,208 $1,093,194 $936,997 $1,066,998
Average Consumer Loans 307,722 237,173 277,545 219,076
Average Commercial Loans 180,742 126,642 158,356 121,697
Average Loans 1,367,672 1,457,009 1,372,898 1,407,771
Average Interest-Earning Assets 1,775,763 2,095,113 1,933,010 2,159,841
Average Assets 1,918,327 2,255,577 2,084,679 2,316,686
Average Core Deposits 947,304 890,642 956,414 858,706
Average Certificates of Deposit 566,851 664,779 609,574 707,858
Average Deposits 1,514,155 1,555,421 1,565,988 1,566,564
Average Interest-Bearing Liabilities 1,727,769 2,005,647 1,865,443 2,057,197
Average Shareholders' Equity 150,761 188,679 170,796 202,727
OPERATING DATA:
Annualized Return on Assets 0.79% 0.51% 0.80% 0.47%
Annualized Return on Equity 10.12% 6.12% 9.76% 5.39%
Mortgage Originations $108,029 $314,248 $620,715 $1,111,396
Average Yield on Mortgage Loans (a) 7.17% 7.02% 7.18% 7.19%
Average Yield on Consumer Loans (a) 8.92% 9.14% 8.89% 9.01%
Average Yield on Commercial Loans (a) 8.61% 8.67% 8.59% 8.53%
Average Yield on Loans (a) 7.76% 7.51% 7.69% 7.59%
Average Yield on Interest-Earning Assets (a) 7.50% 7.29% 7.30% 7.32%
Average Cost of Core Deposits 2.35% 2.33% 2.31% 2.36%
Average Cost of Certificates of Deposit 5.00% 5.37% 5.06% 5.46%
Average Cost of Deposits 3.34% 3.63% 3.38% 3.76%
Average Cost of Interest-Bearing Liabilities 3.63% 4.13% 3.76% 4.25%
Net Interest Margin (a) 3.97% 3.34% 3.67% 3.27%
Period End Book Value Per Share $12.77 $13.05 $12.77 $13.05
Period End Tangible Book Value Per Share 10.00 10.35 10.00 10.35
Period End Nonperforming Loans 7,779 10,012 7,779 10,012
Period End Nonperforming Assets 10,402 11,061 10,402 11,061
(a) Taxable equivalent basis
</TABLE>
