UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
------------- -------------
Commission file number 0-17515
COLLECTIVE BANCORP, INC.
(Exact name of registrant as specified in its charter)
Delaware 22-2942769
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
716 West White Horse Pike
Cologne , New Jersey 08213
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (609) 625-1110
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [ X ] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common stock, par value $.01 per share, 20,371,572 shares outstanding as
of December 31, 1995.
<PAGE>
PART 1
Item 1
COLLECTIVE BANCORP, INC. AND SUBSIDIARY
STATEMENTS OF CONSOLIDATED FINANCIAL CONDITION
<TABLE>
<CAPTION>
December 31 June 30
1995 1995
----------------- ------------------
<S> <C> <C>
ASSETS (Dollar amounts in thousands)
Cash $ 55,070 $ 66,256
Federal funds sold 23,681 3,717
----------------- ------------------
Total cash and cash equivalents 78,751 69,973
Trading securities, at market value - 13,328
Loans held for sale, at amortized cost (market
value of $13,041 and $5,836) 12,796 5,815
Securities available for sale, at market value 107,993 113,635
Investment securities, at amortized cost (market
value of $255,905 and $317,221) 255,217 315,879
Loans receivable, net 2,427,682 2,373,706
Mortgage-backed securities, at amortized cost
(market value of $1,981,323 and $2,027,783) 2,025,126 2,100,344
Real estate acquired in settlement of loans, net 5,219 6,476
Land, office buildings and equipment, net 39,951 39,313
Other assets 50,035 43,072
Core deposit premium 9,468 10,873
Goodwill 17,110 18,103
----------------- ------------------
Total assets $5,029,348 $5,110,517
================= ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Demand deposits, non-interest bearing $ 84,338 $ 76,705
Demand deposits, interest bearing 492,461 451,350
Savings and investment accounts 820,405 833,041
Savings certificates 1,792,590 1,916,727
----------------- ------------------
Total deposits 3,189,794 3,277,823
Federal Home Loan Bank advances - 395,000
Other borrowed funds 1,413,405 1,052,920
Payable to brokers for securities purchased 33,000 7,600
Advance payments by borrowers for taxes and insurance 20,967 29,462
Other liabilities 24,487 19,920
----------------- ------------------
Total liabilities 4,681,653 4,782,725
----------------- ------------------
Stockholders' equity:
Common stock, par value $.01 per share; authorized 37,000,000 shares;
issued and outstanding 20,371,572 shares in December 1995 and
20,356,768 shares in June 1995 204 204
Preferred stock, par value $.01 per share;
authorized-2,500,000 shares; none outstanding - -
Additional paid-in capital 59,440 59,299
ESOP debt (6,354) (6,892)
Securities valuation 3,190 2,136
Retained earnings, substantially restricted 291,215 273,045
----------------- ------------------
Total stockholders' equity 347,695 327,792
----------------- ------------------
Total liabilities and stockholders' equity $5,029,348 $5,110,517
================= ==================
</TABLE>
2
<PAGE>
COLLECTIVE BANCORP, INC. AND SUBSIDIARY
STATEMENTS OF CONSOLIDATED OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31 December 31
1995 1994 1995 1994
------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
(Dollar amounts in thousands except per share data)
INTEREST AND DIVIDEND INCOME:
Interest on mortgage loans $43,792 $35,062 $86,666 $67,610
Interest on other loans 4,185 4,543 8,328 8,857
Interest on mortgage-backed securities 35,166 36,531 71,330 74,161
Interest and dividends on investments 5,815 5,773 11,502 11,170
------------- ------------- ------------- -------------
Total interest and dividend income 88,958 81,909 177,826 161,798
------------- ------------- ------------- -------------
INTEREST EXPENSE:
Interest on deposits 33,750 27,681 67,029 53,308
Interest on Federal Home Loan Bank
advances and other borrowed funds 20,688 18,489 42,571 34,552
------------- ------------- ------------- -------------
Total interest expense 54,438 46,170 109,600 87,860
------------- ------------- ------------- -------------
Net interest income before provision for loan losses 34,520 35,739 68,226 73,938
Provision for loan losses 403 5 690 240
------------- ------------- ------------- -------------
Net interest income after provision for loan losses 34,117 35,734 67,536 73,698
------------- ------------- ------------- -------------
OTHER INCOME:
Loan servicing 979 981 1,928 2,006
Gain (Loss) on sale of loans and securities 560 (48) 1,195 (292)
Financial service fees and other income 2,471 2,450 4,936 4,120
------------- ------------- ------------- -------------
Total other income 4,010 3,383 8,059 5,834
------------- ------------- ------------- -------------
Total income before other expense 38,127 39,117 75,595 79,532
------------- ------------- ------------- -------------
OTHER EXPENSE:
Compensation and employee benefits 6,935 6,680 13,914 13,288
Occupancy expense 2,552 2,541 5,230 4,915
Advertising 281 388 536 657
Deposit insurance 1,627 1,645 3,051 3,290
Computer services 1,312 1,092 2,554 2,176
Loan expense 900 707 1,615 1,298
Real estate operations 192 (199) 169 (660)
Amortization of intangibles 1,195 1,023 2,399 2,058
Other expenses 2,625 2,533 5,103 4,960
------------- ------------- ------------- -------------
Total other expense 17,619 16,410 34,571 31,982
------------- ------------- ------------- -------------
INCOME BEFORE INCOME TAXES 20,508 22,707 41,024 47,550
INCOME TAXES 7,387 7,729 14,706 16,583
------------- ------------- ------------- -------------
NET INCOME $13,121 $14,978 $26,318 $30,967
============= ============= ============= =============
PER SHARE DATA:
Primary and fully diluted net income per share $0.64 $0.73 $1.29 $1.51
Dividends per common share $0.20 $0.15 $0.40 $0.30
Average primary shares outstanding 20,451,792 20,544,325 20,444,689 20,569,395
Average fully diluted shares outstanding 20,451,792 20,544,325 20,449,014 20,569,395
</TABLE>
3
<PAGE>
COLLECTIVE BANCORP, INC. AND SUBSIDIARY
STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Additonal
Common Paid-In ESOP Securities Retained
Stock Capital Debt Valuation Earnings Total
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
(Dollar amounts in thousands except per share data)
BALANCE JUNE 30, 1994 $203 $58,618 $(7,800) $228,707 $279,728
Net income for the year 57,542 57,542
Stock options exercised 1 681 682
Dividends on common
stock - $.65 per share (13,204) (13,204)
ESOP debt repayment 908 908
Securities valuation $2,136 2,136
------------------------------------------------------------------------------------
BALANCE JUNE 30, 1995 204 59,299 (6,892) 2,136 273,045 327,792
Net income fiscal year to date 26,318 26,318
Stock options exercised 141 141
Dividends on common
stock - $.40 per share (8,148) (8,148)
ESOP debt repayment 538 538
Securities valuation 1,054 1,054
------------------------------------------------------------------------------------
BALANCE DECEMBER 31, 1995 $204 $59,440 $(6,354) $3,190 $291,215 $347,695
====================================================================================
</TABLE>
4
<PAGE>
COLLECTIVE BANCORP, INC. AND SUBSIDIARY
STATEMENTS OF CONSOLIDATED CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
December 31
----------------------------------
1995 1994
---------------- --------------
<S> <C> <C>
(Dollar amounts in thousands)
OPERATING ACTIVITIES:
Interest received $ 176,711 $ 154,704
Interest paid (107,165) (87,698)
Operating expenses (31,761) (30,520)
Sales of trading securities 68,485 16,339
Loan fees 2,792 4,129
Loans originated for sale (68,815) (18,760)
Sales of loans held for sale 61,833 23,043
Securitization of loans held for sale (56,601) (16,339)
Repayment of principal on trading securities 1,242 -
Other income received 8,261 5,834
Income taxes paid (13,046) (10,841)
---------------- --------------
Net cash provided by operating activities 41,936 39,891
---------------- --------------
INVESTING ACTIVITIES:
Loan originations (200,695) (335,113)
Purchases of loans (16,686) (43,813)
Purchases of mortgage-backed securities - (79,118)
Repayment of loan principal 162,899 142,673
Repayment of mortgage-backed security principal 77,479 117,276
Purchases of investment securities (184,886) (116,020)
Sales of investment securities available for sale - 18,361
Repayment of principal on mortgage-backed securities available for sale 6,719 14,295
Maturities of investment securities 270,960 7,082
Net decrease in real estate owned 1,257 2,357
Other investing, net (9,826) (2,611)
---------------- --------------
Net cash provided by (used for) investing activities 107,221 (274,631)
---------------- --------------
FINANCING ACTIVITIES:
Net change in deposits (88,030) 60,035
Net change in Federal Home Loan Bank advances (395,000) 35,000
Net change in other borrowed funds 360,485 161,346
Net decrease in advance payments by borrowers
for taxes and insurance (8,495) (4,404)
Dividends paid (8,145) (6,080)
Other financing, net (1,194) 1,821
---------------- --------------
Net cash (used for) provided by financing activities (140,379) 247,718
---------------- --------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 8,778 12,978
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 69,973 70,950
---------------- --------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 78,751 $ 83,928
================ ==============
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED
BY OPERATING ACTIVITIES:
Net income $ 26,318 $ 30,967
Net change in trading securities 13,328 -
Net change in loans available for sale (6,982) 4,283
Amortization and accretion of deferred charges and credits, net (408) (852)
Amortization of intangibles 2,399 2,058
Accrued income and expense 9,578 5,847
Deferred income and expense (5,833) (5,238)
Provision for loan and real estate owned losses 660 348
Depreciation and amortization 2,338 2,052
ESOP debt repayment 538 426
---------------- --------------
Net cash provided by operations $ 41,936 $ 39,891
================ ==============
</TABLE>
5
<PAGE>
COLLECTIVE BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The unaudited interim consolidated financial statements of Collective
Bancorp, Inc. and subsidiary ("Collective") included herein should be read
in conjunction with the audited financial statements for the year ended
June 30, 1995 included in Collective's 1995 Annual Report and incorporated
by reference in the Form 10-K for the year then ended. The unaudited
interim financial statements reflect all adjustments which are, in the
opinion of management, necessary for a fair presentation of the results for
the periods presented. Such adjustments consist only of normal recurring
accruals. The results of operations for the three and six- month periods
ended December 31, 1995 are not necessarily indicative of the results to be
expected for the fiscal year ending June 30, 1996.
2. Legislation pending in Congress would impose a one-time assessment,
currently estimated at between 75 and 85 basis points, on the amount of
deposits held as of March 31, 1995 by Savings Association Insurance Fund
("SAIF")-member institutions, including Collective Bank, a wholly-owned
subsidiary of Collective, to recapitalize the SAIF to the required level of
1.25% of insured deposits. If the assessment is made at the 85 basis point
proposed rate, the effect on Collective Bank would be a pre-tax charge of
approximately $22 million, or $14 million after tax (36% assumed tax rate).
Certain proposed legislation also would require the recapitalized SAIF to
be merged with the Bank Insurance Fund into a new Deposit Insurance Fund no
later than January 1, 1998, provided the thrift charter has been eliminated
by that date. The elimination of the thrift charter, by requiring thrifts,
including Collective Bank, to convert to state or national commercial bank
charters, would be effected via separate legislation enacted by the end of
calendar 1997.
The proposed legislation would repeal Section 593 of the Internal Revenue
Code for taxable years beginning after December 31, 1995. Section 593
allows certain thrift institutions, including Collective Bank, to use a
percentage-of-taxable income bad debt accounting method, if more favorable
than the specific charge-off method, for Federal income tax purposes. Since
1993, Collective has used the percentage-of-taxable income method in its
income tax returns. Therefore, elimination of the availability of such
method could cause Collective's effective income tax rate to increase,
thereby negatively impacting net income.
Management cannot predict whether such proposed, or similar, legislation
will be enacted, or if enacted, the ultimate effect on Collective's
financial condition or results of operations, except as indicated above.
6
<PAGE>
Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General Financial Institution Legislation and Regulation
Collective's primary subsidiary, Collective Bank (the "Bank"),
is subject to extensive regulation, supervision and examination by the Office of
Thrift Supervision ("OTS"), as its chartering authority and primary federal
regulator, and by the Federal Deposit Insurance Corporation ("FDIC"), which
insures its deposits up to applicable limits. Such regulation and supervision
establish a comprehensive framework of activities in which an institution can
engage and are intended primarily for the protection of the insurance fund and
depositors. The regulatory structure also gives the regulatory authorities
extensive discretion in connection with their supervisory and enforcement
activities. Any change in such regulation, whether by the OTS, FDIC or the
Congress, could have a material impact on the Bank and its operations. See Note
2 to the consolidated financial statements.
Assets
Total assets decreased $81 million during the six months ended December
31, 1995. The decline, in interest-earning assets, resulted from accelerated
repayments of certain investment securities, and repayments of mortgage-backed
securities, partially offset by growth in loans receivable. The net repayment
proceeds were used to pay maturing certificates of deposit.
Cash and cash equivalents increased $9 million from June 30, 1995
because cash provided by operating and investing activities exceeded cash used
in financing activities.
Trading securities decreased $13 million during the period as the
fiscal 1995 year-end inventory of originated, securitized loans held for sale
was sold.
Investment securities decreased $61 million from June 30, 1995. The
decrease resulted from maturities and repayments of U.S. agency securities,
partially offset by an increased investment in FHLB stock. Many of the U.S.
agency securities were redeemed as the issuing agencies exercised call options
during the current period. Loans receivable, net increased $54 million as loan
originations and purchases exceeded loan repayments. Mortgage-backed securities
decreased $75 million from principal repayments. No mortgage-backed securities
were purchased during the six-month period.
Collective has the positive intent and ability to hold its investment
and mortgage-backed securities portfolios to maturity under all foreseeable
economic conditions. Therefore, it is not expected that any gains or losses will
be realized from sales of securities from Collective's held-to-maturity
portfolios. In recent years, since authoritative guidance and/or accounting
standards have been developed for the definitive classification of securities,
Collective has not sold securities from its held-to-maturity portfolios.
Collective has always been able to satisfy its liquidity needs from the cash
flows from operating and financing activities, and there is no present
indication that Collective will not be able to do so in the future. Unrealized
gains or losses in Collective's held-to-maturity securities portfolios are
primarily a function of the interest-rate environment at any given point in time
and, therefore, are only temporary in nature. If presently unforeseen economic
conditions should result in the sale of these securities at some future date,
any realized gain or loss will be determined by their market value when sold.
7
<PAGE>
Other assets increased $7 million from June 30, 1995, primarily as the
result of a receivable from brokers for trading securities sold in December
1995. This receivable was collected in January 1996.
Liabilities
Deposits decreased $88 million during the six months ended December 31,
1995. The decrease was comprised of decreases in savings and investment accounts
and certificates of deposit ("CD's") of $13 million and $124 million,
respectively, offset in part by an increase in demand deposits of $49 million.
During the six months ended December 31, 1995, Collective continued its
effort to retain maturing deposits through the use of special products, such as
7, 8, and 20-month CD's at attractive rates. During this period, deposits in
those categories increased by $129 million. Offsetting those increases were
reductions in other retail CD's of $176 million as customers transferred funds
to the special product offerings or withdrew funds. The six-month period also
reflected a reduction in CD's in excess of $100,000 ("jumbo CD's") of $77
million because of maturities near the end of December. Collective had offered
attractive rates on jumbo CD's during this period as a less expensive source of
funds compared to short-term borrowings.
Federal Home Loan Bank advances decreased $395 million and other
borrowed funds increased $360 million during the six months ended December 31,
1995. The shift in the source of borrowed funds occurred because reverse
repurchase agreements became a more attractive borrowing vehicle to Collective
than FHLB advances. The payable to brokers at December 31, 1995 was for
purchased, but not settled, U.S. agency notes. Advance payments by borrowers for
taxes and insurance decreased $8 million during the six months ended December
31, 1995 primarily from annual tax payments in December 1995 on certain
out-of-state mortgage loans. The increase in other liabilities of $5 million
from June 30, 1995 to December 31, 1995 is attributable to additional accrued
interest on borrowings and an increase in accrued and deferred income taxes.
Stockholders' Equity
Retained earnings increased $18 million during the period primarily as
a result of net earnings of $26 million, less dividends on common stock of $8
million.
Liquidity and Capital Resources
The Bank is required by regulation to maintain certain levels of
liquidity. Regulations currently in effect require the Bank to maintain liquid
assets of not less than 5% of its net withdrawable deposits and short-term
borrowings, of which at least 1% must be short-term liquid assets. Throughout
the six months ended December 31, 1995, the Bank was in compliance with that
regulation and at that date had an overall liquidity ratio of 5.34% and a
short-term ratio of 3.42%.
At December 31, 1995, capital resources were sufficient to meet
outstanding loan origination commitments of $93 million and commitments on
unused lines of credit of $100 million. Loans originated or purchased during the
six months ended December 31, 1995 were funded from normal sources including
investment security maturities, amortization of the existing loan and
mortgage-backed securities portfolios, and borrowings.
8
<PAGE>
The Bank is subject to capital requirements mandated by the Financial
Institutions Reform, Recovery and Enforcement Act ("FIRREA"). Under FIRREA,
thrift institutions must have tangible capital equal to 1.5% of tangible assets,
core capital equal to 3% of adjusted tangible assets and risk-based capital
equal to 8% of risk-weighted assets. At December 31, 1995, the Bank exceeded
those requirements as follows:
<TABLE>
<CAPTION>
Tangible Capital: (In Thousands) Percent
-------------- -------
<S> <C> <C>
Actual $ 326,012 6.56%
Required 74,563 1.50%
-------------- -------
Excess $ 251,449 5.06%
-------------- -------
Core Capital:
Actual $ 326,012 6.56%
Required 149,126 3.00%
-------------- -------
Excess $ 176,886 3.56%
-------------- -------
Risk-based Capital:
Actual $ 332,708 17.36%
Required 153,299 8.00%
-------------- -------
Excess $ 179,409 9.36%
-------------- -------
</TABLE>
Three Months Ended December 31, 1995
Compared to Three Months Ended December 31, 1994
Net income for the three months ended December 31, 1995 decreased $1.857 million
compared to net income for the three months ended December 31, 1994. The
decrease in net income was comprised of a $1.219 million decrease in net
interest income before provision for loan losses, a $398,000 increase in the
provision for loan losses, a $627,000 increase in other income, a $1.209 million
increase in other expense, and a $342,000 decrease in income taxes.
The decrease in net interest income resulted from a reduction in net interest
margin from 3.16% for the 1994 period to 2.86% for the 1995 period, partially
offset by an increase in average interest-earning assets of $270 million. The
decrease in net interest margin was comprised of a 14 basis point increase in
the yield on interest-earning assets while the cost of funds increased 44 basis
points. The improvement in yield on interest-earning assets occurred because the
portion of the proceeds from investment security and mortgage-backed security
repayments that was reinvested in loans receivable resulted in a higher yield on
those reinvested funds. The reinvestment occurred primarily in the first
mortgage, commercial, and home equity loan categories. The increase in cost of
funds resulted from the shifting of CD's to higher-costing special product CD's
discussed under Liabilities herein, increased balances and cost of jumbo CD's
during the period, and an increased amount and cost of borrowings compared to
the 1994 period. During the three months ended December 31, 1995, the average
balance of jumbo CD's was $119 million compared to $39 million in the 1994
period. The cost of those deposits was 5.45% in the 1995 quarter compared to
4.38% in 1994. During the 1995 period, management chose to use lower costing
jumbo CD's as a source of funds rather than higher costing borrowings whenever
possible. The average cost of borrowings was 5.61% in the 1995 quarter compared
to 5.21% in the 1994 period and the average balance of borrowings was $40
million greater in 1995. The increase in average interest-earning assets was
comprised of increases in virtually all loan categories, but primarily in first
mortgage loans. Those increases were funded largely by increased average
deposits and the increased borrowings (reverse repurchase agreements) referred
to above.
9
<PAGE>
Collective's net interest income tends to decrease in periods of rising interest
rates because its interest-bearing liabilities generally reprice faster than its
interest-earning assets. (See the "Maturity and Rate Sensitivity Analysis", page
12.) Collective's net interest income also tends to decrease in periods when
there is a relatively flat yield curve. Conversely, Collective's net interest
income tends to increase in periods of falling interest rates and in periods
when there is a relatively steep yield curve because the difference between the
yields Collective receives on its longer-term loans and securities and the rates
it pays on its shorter-term deposits and borrowings increases. The yield curve
in the 1995 quarter was approximately 160 basis points flatter than it was in
the 1994 quarter, thereby negatively impacting Collective's net interest income.
The provision for loan losses increased because of growth in the loan portfolio
and increased loan payment delinquencies. Average delinquencies were
approximately $5 million higher in 1995 quasrter than they were in the 1994
quarter.
The increase in other income, primarily consisting of gain on sale of loans and
securities, resulted from declining longer-term interest rates and increased
trading account activity as Collective securitized and sold a greater percentage
of loans originated. Sales of securitized loans amounted to $28 million during
the three months ended December 31, 1995 compared to $7 million in the 1994
period. The percentage of loan originations that met the criteria for long-term
investment decreased from 99% in the 1994 quarter to 78% in the current period.
The decrease occurred because the percentage of adjustable-rate loan
originations decreased from 68% of total originations in the 1994 period to 26%
in the 1995 quarter. During the past eleven months, virtually all of
Collective's conforming 30-year, fixed-rate loan production was sold in the
secondary market.
Other expense increased primarily because of asset growth. Despite that
increase, the ratio of operating expense to average assets was 1.28% in the 1995
quarter compared to 1.30% in the 1994 quarter.
The decrease in income taxes resulted from reduced pre-tax income. The effective
income tax rate was 36% in the 1995 quarter compared to 34% in the 1994 period.
The effective rate was lower in 1994 because of certain unanticipated income tax
refunds.
Six Months Ended December 31, 1995
Compared to Six Months Ended December 31, 1994
Net income for the six months ended December 31, 1995 decreased $4.649 million
compared to net income for the six months ended December 31, 1994. The decrease
in net income was comprised of a $5.712 million decrease in net interest income
before provision for loan losses, a $450,000 increase in the provision for loan
losses, a $2.225 million increase in other income, a $2.589 million increase in
other expense, and a $1.877 million decrease in income taxes.
The decrease in net interest income resulted from a reduction in net interest
margin from 3.26 % for the 1994 period to 2.84% for the 1995 period, partially
offset by an increase in interest-earning assets of $297 million. The decrease
in net interest margin was comprised of a 21 basis point increase in the yield
on interest-earning assets while the cost of funds increased 63 basis points.
The improvement in yield on interest-earning assets occurred because the portion
of the proceeds from investment security and mortgage-backed security repayments
that was reinvested in loans receivable resulted in a higher yield on those
reinvested funds. The reinvestment occurred primarily in the first mortgage,
commercial, and home equity loan categories. The increase in cost of funds
resulted from the shifting of CD's to higher-costing special product CD's
10
<PAGE>
discussed under Liabilities herein, increased average balances and cost of jumbo
CD's, and an increased amount and cost of borrowings compared to the 1994
period. During the six months ended December 31, 1995, the average balance of
jumbo CD's was $99 million compared to $30 million in the 1994 period. The cost
of those deposits was 5.45% in the 1995 period compared to 3.88% in 1994. During
the 1995 period, management chose to use lower costing jumbo CD's as a source of
funds rather than higher costing borrowings whenever possible. The average cost
of borrowings was 5.69% in the 1995 period compared to 4.86% in the 1994 period
and the average balance of borrowings was $66 million higher in the 1995 period.
The increase in average interest-earning assets was comprised of increases in
virtually all loan categories, but primarily in first mortgage loans. Those
increases were funded largely by increased deposits and the increased borrowings
(reverse repurchase agreements) referred to above.
During the six months ended December 31, 1995, the yield curve was approximately
180 basis points flatter than it was in the 1994 period, thereby negatively
impacting Collective's net interest income.
The provision for loan losses increased because of growth in the loan portfolio
and increased loan payment delinquencies. Average delinquencies were
approximately $3 million higher in the 1995 period than they were in the 1994
period.
The increase in other income was comprised of gain on sale of loans and fees
relating to deposit accounts. The increased gain on sale resulted from declining
longer-term interest rates and increased trading account activity as Collective
securitized and sold a greater percentage of loans originated. Sales of
securitized loans amounted to $68 million during the six months ended December
31, 1995 compared to $19 million in the 1994 period. The percentage of loan
originations that met the criteria for long-term investment decreased from 95%
in the 1994 period to 75% in the current period. The decrease occurred because
the percentage of adjustable-rate loan originations decreased from 61% of total
originations in the 1994 period to 22% in the 1995 period. During the past
eleven months, virtually all of Collective's conforming 30-year, fixed-rate loan
production was sold in the secondary market. The increase in fee income
primarily consisted of non-sufficient fund charges as Collective continued its
campaign to charge and collect more deposit account fees.
Other expense increased primarily because of asset growth. Despite that
increase, the ratio of operating expense to average assets was 1.26% in the 1995
period compared to 1.28% in the 1994 period.
The decrease in income taxes resulted from reduced pre-tax income. The effective
income tax rate was 36% in the 1995 period compared to 35% in the 1994 period.
The effective rate was lower in 1994 because of certain unanticipated income tax
refunds.
11
<PAGE>
COLLECTIVE BANCORP, INC. AND SUBSIDIARY
MATURITY AND RATE SENSITIVITY ANALYSIS (1)
<TABLE>
<CAPTION>
December 31, 1995
---------------- ---------------- --------------- ---------------
1 Year 1 Year Over
or Less to 5 Years 5 Years Total
---------------- ---------------- --------------- ---------------
<S> <C> <C> <C> <C>
Assets: (Dollar amounts in thousands)
Mortgage loans:
Balloon and adjustable rate first
mortgages $ 763,212 $ 315,756 $260,420 $ 1,339,388
Fixed rate mortgages 206,177 (2) 339,487 374,894 920,558
Mortgage-backed securities 367,391 (3) 1,501,530 227,060 2,095,981
Consumer and commercial loans 145,522 33,593 1,417 180,532
Federal funds sold 23,681 - - 23,681
Investment securities 258,903 (4) - 452 259,355
---------------- ---------------- --------------- ---------------
Total rate sensitive assets $ 1,764,886 $ 2,190,366 $864,243 $ 4,819,495
================ ================ =============== ===============
Liabilities:
Fixed maturity deposits $ 1,249,913 $ 524,938 $ 17,739 $ 1,792,590
NOW accounts - 492,461 - 492,461
Money market demand accounts 273,526 - - 273,526
Passbook accounts 95,007 232,222 219,650 546,879
Other borrowings 1,413,405 - - 1,413,405
---------------- ---------------- --------------- ---------------
Total rate sensitive liabilities $ 3,031,851 $ 1,249,621 $237,389 $ 4,518,861
================ ================ =============== ===============
Dollar gap (5) $(1,266,965) $ 940,745 $626,854 $ 300,634
================ ================ =============== ===============
<FN>
(1) As presented in the above table, the Bancorp calculates interest rate
sensitivity information employing techniques developed by the Office of
Thrift Supervision.
(2) Includes $12,796 of loans classified as available for sale.
(3) Includes $70,855 of mortgage-backed securities classified as available for
sale.
(4) Includes $37,138 of securities classified as available for sale, but
excludes $33,000 of outstanding commitments to purchase U.S. agency
securities.
(5) Rate sensitive assets less rate sensitive liabilities.
</FN>
</TABLE>
PART II
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(11) Statement Re Computation of Per Share Earnings
(27) Financial Data Schedule
12
<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.
COLLECTIVE BANCORP, INC.
EDWARD J. MCCOLGAN
Date February 14, 1996 Edward J. McColgan
Vice Chairman & Chief Financial Officer
BERNARD H. BERKMAN
Date February 14, 1996 Bernard H. Berkman
Executive Vice President & Chief Accounting Officer
13
COLLECTIVE BANCORP, INC.
COMPUTATION OF EARNINGS PER SHARE OF COMMON STOCK
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31 December 31
PRIMARY 1995 1994 1995 1994
----------------------------------- ---------------------------------------
<S> <C> <C> <C> <C>
EARNINGS:
Net income $13,120,557 $14,977,973 $26,317,881 $30,966,531
=================================== =======================================
SHARES:
Weighted average number of
common shares outstanding 20,158,061 20,272,000 20,154,061 20,269,000
Assuming exercise of options reduced by
the number of shares which could have been
purchased with the proceeds from exercise
of such options (1) 293,731 272,325 290,628 300,395
----------------------------------- ---------------------------------------
Weighted average number of common
shares outstanding as adjusted 20,451,792 20,544,325 20,444,689 20,569,395
=================================== =======================================
Primary earnings per share of
common stock $0.64 $0.73 $1.29 $1.51
=================================== =======================================
ASSUMING FULL DILUTION
EARNINGS:
Net income $13,120,557 $14,977,973 $26,317,881 $30,966,531
================================== ======================================
SHARES:
Weighted average number of
common shares outstanding 20,158,061 20,272,000 20,154,061 20,268,964
Assuming exercise of options reduced by
the number of shares which could have been
purchased with the proceeds from exercise
of such options (2) 293,731 272,325 294,953 300,395
---------------------------------- --------------------------------------
Weighted average number of common
shares outstanding as adjusted 20,451,792 20,544,325 20,449,014 20,569,359
================================== ======================================
Fully diluted earnings per share of
common stock $0.64 $0.73 $1.29 $1.51
================================== ======================================
<FN>
(1) Assumes the proceeds obtained from the exercise of options were used to
purchase common shares at the average market price during the quarter.
(2) Assumes the proceeds obtained from the exercise of stock options were used
to purchase common shares at the market price at the close of the quarter
if such price was higher than the average price during the quarter.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND> 1000
This schedule contains summary financial information extracted from the
Statements of Consolidated Financial Condition as of December 31, 1995
(Unaudited) and the Statements of Consolidated Operations for the six months
ended December 31, 1995 (Unaudited) and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 55070
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 23681
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 120789
<INVESTMENTS-CARRYING> 2280343
<INVESTMENTS-MARKET> 2237228
<LOANS> 2427682
<ALLOWANCE> 0
<TOTAL-ASSETS> 5029348
<DEPOSITS> 3189794
<SHORT-TERM> 1446405
<LIABILITIES-OTHER> 45454
<LONG-TERM> 0
0
0
<COMMON> 204
<OTHER-SE> 347491
<TOTAL-LIABILITIES-AND-EQUITY> 5029348
<INTEREST-LOAN> 94994
<INTEREST-INVEST> 82832
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 177826
<INTEREST-DEPOSIT> 67029
<INTEREST-EXPENSE> 42571
<INTEREST-INCOME-NET> 68226
<LOAN-LOSSES> 690
<SECURITIES-GAINS> 1195
<EXPENSE-OTHER> 34571
<INCOME-PRETAX> 41024
<INCOME-PRE-EXTRAORDINARY> 41024
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26318
<EPS-PRIMARY> 1.29
<EPS-DILUTED> 1.29
<YIELD-ACTUAL> 7.27
<LOANS-NON> 25532
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 13575
<CHARGE-OFFS> 345
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 13230
<ALLOWANCE-DOMESTIC> 13230
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
