-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FLKthKnJUZZKfq9UGpEbeuHO9ysd6MMbhIAaZlZulXmLcjeXNG1pDMgiYWHrI8Hy 33rb14mvhEjdCPox2JP5HA== 0000835345-97-000004.txt : 19970520 0000835345-97-000004.hdr.sgml : 19970520 ACCESSION NUMBER: 0000835345-97-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970515 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: COLLECTIVE BANCORP INC CENTRAL INDEX KEY: 0000835345 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTION, FEDERALLY CHARTERED [6035] IRS NUMBER: 222942769 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-17515 FILM NUMBER: 97608862 BUSINESS ADDRESS: STREET 1: 158 PHILADELPHIA AVE CITY: EGG HARBOR CITY STATE: NJ ZIP: 08215 BUSINESS PHONE: 6096251110 MAIL ADDRESS: STREET 1: C/O BERNARD BERKMAN 158 PHILADELPHIA AVE STREET 2: PO BOX 316 CITY: EGG HARBOR CITY STATE: NJ ZIP: 08215 10-Q 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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 March 31, 1997 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, 20,496,019 shares outstanding as of March 31, 1997. ================================================================================ ================================================================================ Part 1 Item 1
COLLECTIVE BANCORP, INC. AND SUBSIDIARY STATEMENTS OF CONSOLIDATED FINANCIAL CONDITION March 31 June 30 1997 1996 --------------- --------------- ASSETS (Dollar amounts in thousands except per share data) Cash $ 65,936 $ 65,084 Federal funds sold 19,595 3,646 Securities purchased under agreement to resell 35,000 - --------------- --------------- Total cash and cash equivalents 120,531 68,730 Loans held for sale, at amortized cost, market value of $3,774 and $5,231 3,600 5,186 Securities available for sale, at market value 235,951 162,284 Investment securities, at amortized cost, market value of $302,573 and $271,650 307,534 276,171 Loans receivable 2,876,031 2,561,041 Less allowance for loan losses (13,461) (12,891) --------------- --------------- Loans receivable, net 2,862,570 2,548,150 Mortgage-backed securities, at amortized cost, market value of $1,727,576 and $1,896,831 1,860,461 1,973,642 Real estate acquired in settlement of loans, net 4,165 5,427 Land, office buildings and equipment, net 41,096 39,239 Other assets 44,810 42,335 Core deposit premium 9,980 8,191 Goodwill 26,890 16,116 --------------- --------------- Total assets $5,517,588 $5,145,471 =============== =============== LIABILITIES AND STOCKHOLDERS' EQUITY Deposits: Demand deposits, non-interest bearing $ 140,083 $ 95,792 Demand deposits, interest bearing 602,199 508,295 Savings and investment accounts 863,144 845,199 Savings certificates 1,893,233 1,805,101 --------------- --------------- Total deposits 3,498,659 3,254,387 Short-term borrowings 1,573,385 1,467,633 Long-term borrowings 5,486 5,815 Advance payments by borrowers for taxes and insurance 25,536 26,852 Other liabilities 28,367 26,480 --------------- --------------- Total liabilities 5,131,433 4,781,167 --------------- --------------- Stockholders' Equity: Common stock, par value $.01 per share; authorized - 37,000,000 shares; issued - 20,496,019 shares in March 1997 and 20,418,641 shares in June 1996; outstanding - 20,446,519 shares in March 1997 and 20,374,141 shares in June 1996 205 204 Preferred stock, par value $.01 per share; authorized - 2,500,000 shares; none outstanding - - Additional paid-in capital 60,490 59,699 Treasury stock, at cost; 49,500 shares in March 1997 and 44,500 shares in June 1996 (1,230) (1,093) ESOP debt (5,008) (5,816) Unrealized appreciation on available for sale securities, net of tax 1,311 1,090 Retained earnings, substantially restricted 330,387 310,220 --------------- --------------- Total stockholders' equity 386,155 364,304 --------------- --------------- Total liabilities and stockholders' equity $5,517,588 $5,145,471 =============== ===============
COLLECTIVE BANCORP, INC. AND SUBSIDIARY STATEMENTS OF CONSOLIDATED OPERATIONS Three Months Ended Nine Months Ended March 31 March 31 1997 1996 1997 1996 --------------- ---------------- --------------- ---------------- (Dollar amounts in thousands except per share data) INTEREST INCOME: Interest on mortgage loans $51,736 $43,738 $150,078 $130,404 Interest on other loans 4,154 3,812 11,870 12,140 Interest on mortgage-backed securities 32,754 34,841 99,439 106,171 Interest and dividends on investments 7,110 6,056 20,711 17,558 --------------- ---------------- --------------- ---------------- Total interest and dividend income 95,754 88,447 282,098 266,273 --------------- ---------------- --------------- ---------------- INTEREST EXPENSE: Interest on deposits 35,521 32,103 105,614 99,131 Interest on borrowed funds 20,275 20,127 60,672 62,699 --------------- ---------------- --------------- ---------------- Total interest expense 55,796 52,230 166,286 161,830 --------------- ---------------- --------------- ---------------- NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES 39,958 36,217 115,812 104,443 PROVISION FOR LOAN LOSSES 1,010 410 2,554 1,099 --------------- ---------------- --------------- ---------------- NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 38,948 35,807 113,258 103,344 --------------- ---------------- --------------- ---------------- OTHER INCOME: Loan servicing 1,063 1,239 3,021 3,167 Gain (Loss) on sale of loans and securities 266 (162) 375 1,032 Financial service fees and other income 3,328 2,453 9,492 7,390 --------------- ---------------- --------------- ---------------- Total other income 4,657 3,530 12,888 11,589 --------------- ---------------- --------------- ---------------- Total income before other expense 43,605 39,337 126,146 114,933 --------------- ---------------- --------------- ---------------- OTHER EXPENSE: Compensation and employee benefits 7,900 7,463 22,592 21,377 Occupancy expense 2,966 2,806 8,444 8,036 Advertising 345 380 1,012 915 Deposit insurance 491 1,521 3,269 4,572 SAIF recapitalization assessment - - 16,653 - Computer services 1,119 1,113 3,242 3,667 Loan expense 735 732 2,240 2,347 Real estate operations (33) 326 82 495 Amortization of intangibles 1,627 1,178 4,302 3,578 Other expenses 3,194 2,787 8,977 7,890 --------------- ---------------- --------------- ---------------- Total other expense 18,344 18,306 70,813 52,877 --------------- ---------------- --------------- ---------------- INCOME BEFORE INCOME TAXES 25,261 21,031 55,333 62,056 INCOME TAXES 9,264 7,508 19,857 22,215 --------------- ---------------- --------------- ---------------- NET INCOME $15,997 $13,523 $35,476 $39,841 =============== ================ =============== ================ PER SHARE DATA: Primary and fully diluted net income per share $0.78 $0.66 $1.73 $1.95 Dividends per common share $0.25 $0.20 $0.75 $0.60 Average primary shares outstanding 20,510,349 20,457,753 20,473,728 20,446,517 Average fully diluted shares outstanding 20,514,570 20,457,780 20,500,714 20,448,803
COLLECTIVE BANCORP, INC. AND SUBSIDIARY STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY Unrealized Appreciation Additonal on Available Common Paid-In Treasury ESOP for Sale Retained Stock Capital Stock Debt Securities Earnings Total ------------------------------------------------------------------------------------------- (Dollar amounts in thousands except per share data) BALANCE JUNE 30, 1995 $204 $59,299 - $(6,892) $2,136 $273,045 $327,792 Net income for the year - - - - - 54,500 54,500 Stock options exercised - 279 - - - - 279 Dividends on common stock - $.85 per share - - - - - (17,325) (17,325) Purchase of treasury stock - - $(1,093) - - - (1,093) ESOP debt repayment - - - 1,076 - - 1,076 ESOP shares released - 121 - - - - 121 Securities valuation - - - - (1,046) - (1,046) ------------------------------------------------------------------------------------------- BALANCE JUNE 30, 1996 204 59,699 (1,093) (5,816) 1,090 310,220 364,304 Net income fiscal year to date - - - - - 35,476 35,476 Stock options exercised 1 548 - - - - 549 Dividends on common stock - $.75 per share - - - - - (15,309) (15,309) Purchase of treasury stock - - (137) - - - (137) ESOP debt repayment - - - 808 - - 808 ESOP shares released - 243 - - - - 243 Securities valuation - - - - 221 - 221 ------------------------------------------------------------------------------------------- BALANCE MARCH 31, 1997 $205 $60,490 $(1,230) $(5,008) $1,311 $330,387 $386,155 ===========================================================================================
COLLECTIVE BANCORP, INC. AND SUBSIDIARY STATEMENTS OF CONSOLIDATED CASH FLOWS Nine Months Ended March 31 ------------------------------- 1997 1996 ------------- ------------- (Dollar amounts in thousands) OPERATING ACTIVITIES: Interest received $ $ 284,073 262,163 Interest paid (165,042) (159,794) Operating expenses (71,072) (52,273) Sales of trading securities - 13,328 Loan fees 3,299 3,721 Other income received 12,888 11,791 Income taxes paid (21,024) (16,075) ------------- ------------- Net cash provided by operating activities 43,122 62,861 ------------- ------------- INVESTING ACTIVITIES: Loan originations (633,880) (412,467) Purchases of loans (659) (17,224) Purchases of mortgage-backed securities (64) (14,042) Repayment of loan principal 339,465 269,403 Repayment of mortgage-backed security principal 120,327 99,181 Sales of loans held for sale 41,520 98,367 Purchases of investment securities (109,253) (294,630) Sales of investment securities available for sale 48,060 - Purchases of mortgage-backed securities available for sale (36,177) (90,854) Sales of mortgage-backed securities available for sale 7,018 55,157 Repayment of principal on mortgage-backed securities available for sale 14,860 13,020 Maturities of investment securities 41,211 318,960 Net decrease in real estate owned 1,893 1,844 Net change in loans maturing in 3 months or less 5,000 (6,500) Purchase of Continental Bancorporation (25,703) - Cash obtained from Continental Bancorporation acquisition 11,264 - Other investing, net 2,265 1,846 ------------- ------------- Net cash (used for) provided by investing activities (172,853) 22,061 ------------- ------------- FINANCING ACTIVITIES: Net change in deposits 114,452 (134,467) Net change in short-term borrowings 87,126 61,938 Net change in long-term borrowings (1,421) (807) Net decrease in advance payments by borrowers for taxes and insurance (1,408) (5,769) Dividends paid (15,326) (12,222) Other financing, net (1,891) (2,606) ------------- ------------- Net cash provided by (used for) financing activities 181,532 (93,933) ------------- ------------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 51,801 (9,011) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 68,730 69,973 ------------- ------------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ $ 60,962 120,531 ============= ============= RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES: Net income $ 35,476 $ 39,841 Net change in trading securities - 13,328 Amortization and accretion of deferred charges and credits, net (92) (2,166) Amortization of intangibles 4,302 3,578 Accrued income and expense 6,924 14,067 Deferred income and expense (10,713) (11,347) Provision for loan and real estate owned losses 2,761 1,239 Depreciation and amortization 3,656 3,514 ESOP debt repayment 808 807 ------------- ------------- Net cash provided by operations $ 43,122 $ 62,861 ============= =============
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, 1996 included in Collective's 1996 Annual Report and incorporated by reference in the Form 10-K for that year. 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 nine-month periods ended March 31, 1997 are not necessarily indicative of the results to be expected for the fiscal year ending June 30, 1997. 2. On February 27, 1997, Collective entered into an Agreement and Plan of Merger with Summit Bancorp. ("Summit") pursuant to which Collective will be merged with and into Summit and shares of Collective's common stock will be converted into whole shares of Summit's common stock and cash in lieu of fractional shares based on an exchange ratio of Summit common to Collective common of .895. The merger is subject to approval by Collective's stockholders and certain regulatory agencies. The merger is expected to be consummated during the third calendar quarter of 1997. 3. In connection with the enactment of the Deposit Insurance Funds Act of 1996 ("DIFA") on September 30, 1996, Collective Bank, a wholly-owned subsidiary of Collective Bancorp, Inc., was required to pay a one-time special assessment of $16.653 million to the Federal Deposit Insurance Corporation ("FDIC") to capitalize the Savings Association Insurance Fund ("SAIF") to its required reserve ratio. The special assessment rate of 65.7 cents per $100 of SAIF-assessable deposits was applied as of March 31, 1995. The assessment was paid in November 1996. DIFA also requires the Financing Corporation ("FICO") bond obligation to be shared by insured depository institutions pro rata beginning in the year 2000. For the transition period from January 1, 1997 to December 31, 1999, banks will pay one-fifth of the assessment rate imposed upon thrifts. During this period, the FICO assessment rates are estimated to be 1.3 basis points for banks calculated on their Bank Insurance Fund ("BIF") deposit base and 6.4 basis points for thrifts, such as Collective Bank calculated on their SAIF deposit base. DIFA directs the Treasury Department to present a report to Congress by March 31, 1997 regarding the development of a common charter for all depository institutions. The report is to include a recommendation for legislative and administrative action. DIFA requires that the BIF and the SAIF be merged into a single new fund (the Deposit Insurance Fund) on January 1, 1999, provided "no insured depository institution is a savings association on that date". 4. On August 20, 1996, the Small Business Job Protection Act of 1996 ("SBJPA") was enacted, which included a repeal of the thrift bad debt reserve method (percentage-of-taxable income method) under section 593 of the Internal Revenue Code. The repeal is effective for Collective's 1997 fiscal year. Since 1993, Collective has used the percentage-of-taxable income method in its income tax returns. Effective July 1, 1996, Collective was required to change from the reserve method to the specific charge-off method to calculate its bad debt deduction. The change in bad debt tax accounting methods has not had, nor is it expected to have, a material impact on Collective's results of operations. The SBJPA also provided for the recapture of a thrift's post-1987 excess bad debt reserve resulting from the use of the reserve method for calculating the bad debt deduction. Pre-1988 excess bad debt reserves are not subject to recapture. The recaptured amount must be taken into taxable income ratably over a six-year period commencing with the thrift's tax year beginning in 1996. The timing of the recapture may be delayed for a one-or two-year period provided the residential loan requirement is met. Collective expects to meet the residential loan requirement for its 1996 and 1997 tax years. Therefore, its estimated tax liability of approximately $5.5 million, resulting from the recapture, will be payable over a six-year period commencing with Collective's 1999 fiscal year. The excess bad debt reserve recapture is not expected to have a material impact on Collective's results of operations or financial position because Collective has recorded deferred income tax provisions on its excess bad reserves since 1987. 5. On October 1, 1996, Collective acquired the outstanding capital stock of Continental Bancorporation for $25.7 million in cash pursuant to an agreement entered into on May 21, 1996. Simultaneously with the acquisition, Continental Bancorporation was liquidated and its subsidiary, Continental Bank of New Jersey ("Continental"), became a subsidiary of Collective. Continental's name was changed subsequently to Collective Bank of New Jersey. Collective Bank of New Jersey was a state-chartered, BIF-insured commercial bank with total assets of $161.3 million and deposits of $129.5 million on the date of acquisition. The acquisition was accounted for by the purchase method. It has not had, nor is it expected to have, a material effect on Collective's results of operations or financial position. Collective Bank of New Jersey was merged into Collective Bank in February 1997. Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General Financial Institution Legislation and Regulation Collective's subsidiary, Collective 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 Collective Bank and its operations. See note 3 to the consolidated financial statements. Assets Total assets increased $372 million during the nine months ended March 31, 1997. The net increase, primarily in interest-earning assets, was comprised of increases in loans receivable, net of $314 million, cash and cash equivalents of $52 million, securities available for sale of $74 million, investment securities of $31 million and goodwill of $11 million and a decrease in mortgage-backed securities of $113 million. All other assets combined increased $3 million. Loans receivable, net increased because loan originations and purchases exceeded loan repayments and sales by $254 million. The increase occurred as Collective continued its strategy of relying more on loans and less on collateralized mortgage obligations ("CMO's") as investment vehicles. Also, the Continental Bancorporation ("Continental") acquisition increased loans receivable by $64 million. The elements of the increase were as follows (in millions):
Residential first mortgage $ 112 Commercial 123 Home equity 81 Construction 16 Other (18) --------- Total $314 =========
Collective's strategy to increase loans as a percentage of total earning assets (from 51.4% at June 30, 1996 to 53.8% at March 31, 1997) was implemented through more aggressive advertising and marketing initiatives combined with more competitive pricing. The growth in Collective's loan portfolio was funded primarily by deposit growth, CMO principal repayments and borrowings. Cash and cash equivalents increased because cash provided by operating and financing activities exceeded cash used in investing activities. The increase in securities available for sale resulted from the Continental acquisition, and the increase in investment securities primarily from the addition of medium-term U.S. agency structured notes and Federal Home Loan Bank of New York ("FHLB of NY") stock. The stock purchases were required because of increased borrowings from the FHLB of NY and, to a lesser extent, asset growth. 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 those securities at some future date, any realized gain or loss will be determined by their market value when sold. Liabilities The increase in liabilities of $350 million from June 30, 1996 to March 31, 1997 was comprised primarily of increases in deposits of $244 million and borrowings of $105 million. Other liabilities increased $1 million. The increase in deposits resulted from more aggressive marketing and pricing initiatives as Collective sought to fund asset growth with lower cost deposits rather than borrowings. Also, the Continental acquisition added deposits of $129 million. The deposit increase occurred in the following categories (in millions):
Non-interest bearing demand $ 44 Interest bearing demand 94 Savings and Investment Accounts 8 Savings certificates 88 ------- Total $ 244 =======
The increase in non-interest bearing demand deposits consisted of commercial checking accounts, and the increase in interest bearing demand deposits was comprised of cash management accounts, primarily with municipalities. Certificates of deposit with maturities of twelve months and eighteen months primarily comprised the increase in savings certificates as Collective attractively priced these CD's to induce holders of shorter-term certificates into longer-term maturities. Stockholders' Equity The increase in stockholders' equity during the nine months ended March 31, 1997 resulted primarily from increased retained earnings. The increase in retained earnings was comprised of net income of $35.5 million less dividends of $15.3 million. Liquidity and Capital Resources Collective Bank is required by regulation to maintain certain levels of liquidity. Regulations currently in effect require Collective 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 three months ended March 31, 1997, Collective Bank was in compliance with that regulation and at that date had an overall liquidity ratio of 5.72% and a short-term ratio of 2.56%. At March 31, 1997, capital resources were sufficient to meet outstanding loan origination commitments of $96 million and commitments on unused lines of credit of $143 million. Loans originated or purchased during the nine months ended March 31, 1997 were funded from normal sources including investment security maturities, amortization of the existing loan and mortgage-backed securities portfolios and borrowings. Collective 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 March 31, 1997, Collective Bank exceeded those requirements as follows:
Tangible Capital: (In Thousands) Percent Actual $ 358,303 6.52% Required 82,471 1.50 ------------------ ------------ Excess $ 275,832 5.02% ------------------ ------------ Core Capital: Actual $ 358,303 6.52% Required 164,941 3.00 ------------------ ------------ Excess $ 193,362 3.52% ------------------ ------------ Risk-based Capital: Actual $ 367,638 16.48% Required 178,427 8.00 ------------------ ------------ Excess $ 189,211 8.48% ------------------ ------------
Collective Bank is considered well-capitalized (the highest capital category) under the Prompt Corrective Action regulations resulting from the Federal Deposit Insurance Corporation Improvement Act of 1991. Three Months Ended March 31, 1997 Compared to Three Months Ended March 31, 1996 Net income for the three months ended March 31, 1997 increased $2.474 million compared to net income for the quarter ended March 31, 1996. The increase in net income was comprised of a $3.741 million increase in net interest income before provision for loan losses, a $600,000 increase in the provision for loan losses, a $1.127 million increase in other income, a $38,000 increase in other expense and a $1.756 million increase in income taxes. The increase in net interest income resulted from an increase in net interest spread (the difference between the weighted average yield on interest-earning assets and the weighted average rate paid on interest-bearing liabilities) from 2.78% for the 1996 period to 2.81% for the 1997 period, combined with an increase in average interest-earning assets of $382 million. The combination of the increases in net interest spread and interest-earning assets caused net interest margin (net interest income divided by average interest-earning assets) to rise from 2.97% for the 1996 period to 2.99% for the 1997 period. The increase in net interest spread resulted from an increase in the yield on interest-earning assets of 5 basis points which was partially offset by a 2 basis point increase in the cost of funds. The increase in yield occurred because loans, which are the highest-yielding category of interest-earning assets, increased from 49.5% of average earning assets in the 1996 quarter to 54.3% in the 1997 quarter. The largest increase in loan assets occurred in the commercial loan category which generally bears higher interest rates than other types of loans. The increase in cost of funds during the 1997 quarter primarily resulted from a greater reliance on jumbo certificates of deposit than in the 1996 quarter. The average balance of jumbo CD's was $132 million higher in 1997. The cost of borrowings also was slightly higher in the 1997 quarter because of a 25 basis point increase in the federal funds rate in March 1997. Collective's net interest income tends to increase in periods of declining interest rates because its shorter-term interest-bearing liabilities generally reprice faster than its longer-term interest-earning assets. (See the "Maturity and Rate Sensitivity Analysis", page 13.) Conversely, Collective's net interest income tends to decrease in periods of rising interest rates. Substantially higher long-term interest rates in the 1997 quarter compared to the 1996 period more than offset the marginally higher short-term rates in 1997 resulting in a steeper yield curve which contributed to the increased net interest spread and margin in the 1997 quarter. Although Collective's classified asset ratio decreased from 0.44% at March 31, 1996 to 0.33% at March 31, 1997, the loan loss provision was higher during the 1997 quarter because of increased general loss provisions for the growing loan portfolio, particularly the commercial loan segment. Gain on sale of loans and securities increased from a loss of $162,000 in the 1996 period to a gain of $266,000 in the 1997 quarter because of the sale of securitized Small Business Administration ("SBA") loans acquired in the Continental acquisition. The increase in financial service fees and other income resulted primarily from increased fee income from the growth in demand deposit balances and a more aggressive strategy in charging and collecting fees related to deposit accounts. Other expense was virtually unchanged because increases resulting from the Continental acquisition and other asset growth were offset by reduced deposit insurance premiums resulting from the Deposit Insurance Funds Act of 1996. (See note 3 to the consolidated financial statements, page 6.) Collective's ratio of operating expenses to assets was 1.22% in the 1997 quarter compared to 1.32% for the 1996 period. The increase in income taxes resulted from the increased pre-tax income. The effective income tax rate was 36.7% for the three months ended March 31, 1997 compared to 35.7% for the three months ended March 31, 1996. The effective tax rate increased in the 1997 quarter because of the Continental acquisition. The intangible asset amortization resulting from the acquisition is not deductible for income tax purposes. Also, Continental's income was taxed at a higher rate than Collective Bank's income by the State of New Jersey. Nine Months Ended March 31, 1997 Compared to Nine Months Ended March 31, 1996 Net income for the nine months ended March 31, 1997 decreased $4.365 million compared to net income for the nine months ended March 31, 1996. Without the SAIF recapitalization assessment (see note 3 to the consolidated financial statements), which reduced net income by $10.500 million, net income would have been $45.976 million for the 1997 period, an increase of $6.135 million over the 1996 period. The actual decrease in net income was comprised of a $11.369 million increase in net interest income, a $1.455 million increase in the provision for loan losses, a $1.299 million increase in other income, a $17.936 million increase in other expense and a $2.358 million decrease in income taxes. The increase in net interest income resulted from an increase in net interest spread (the difference between the weighted average yield on interest-earning assets and the weighted average rate paid on interest-bearing liabilities) from 2.70% for the 1996 period to 2.79% for the 1997 period, combined with an increase in average interest-earning assets of $301 million. The combination of the increases in net interest spread and interest-earning assets caused net interest margin (net interest income divided by average interest-earning assets) to rise from 2.89% for the 1996 period to 2.98% for the 1997 period. The increase in net interest spread resulted from a 9 basis point decrease in the cost of funds. The overall yield on interest-earning assets was the same for both the 1997 and 1996 periods. Although the yields on loans, mortgage-backed securities and investment securities all were slightly lower in 1997, the lower yields were offset by the fact that loans made up a greater portion of average interest-earning assets in the 1997 period. Loans, which are the highest-yielding component of interest-earning assets, increased from 49.4% of earning assets in the 1996 period to 53.3% in the 1997 period. The lower cost of funds in the 1997 period resulted from a 23 basis point reduction in the cost of borrowings compared to 1996. Collective's borrowings are primarily short-term, and changes in the cost of its borrowings usually correlate with changes in the federal funds rate. The federal funds rate was approximately 35 basis points lower in the 1997 period than it was in the 1996 period. The average cost of deposits was 4.08% for the 1997 period compared to 4.09% for the 1996 period. A steeper yield curve in the nine-month period ended March 31, 1997, when compared to the 1996 period, contributed to the increased net interest spread and margin in the 1997 period. Although Collective's classified asset ratio decreased from 0.44% at March 31, 1996 to 0.33% at March 31, 1997, the loan loss provision was higher during the 1997 period because of increased general loss provisions for the growing loan portfolio, particularly the commercial loan segment. Gain on sale of loans and securities decreased from $1.032 million in the 1996 period to $375,000 in the 1997 period. Because longer-term interest rates were higher in the 1997 period than in the comparable 1996 period, the percentage of residential first mortgage loan origination's that met the criteria for long-term investment increased from 85% in the 1996 period to 94% in the 1997 period. Another contributing factor was that 76% of such originations were adjustable rate loans in the 1997 period compared to 18% in 1996. All adjustable rate loan originations are placed in the held-to-maturity portfolio. Therefore, sales of securitized loans decreased from $55 million in 1996 to $7 million in 1997. Most of the gain in the 1997 period resulted from the sale of securitized SBA loans acquired in the Continental acquisition (see page 11). The increase in financial service fees and other income resulted primarily from increased fee income from the growth in demand deposit balances and a more aggressive strategy in charging and collecting fees related to deposit accounts. The increase in other expense resulted primarily from the SAIF recapitalization assessment and the Continental acquisition, partially offset by the reduced deposit insurance premiums, previously discussed. Collective's ratio of operating expenses to assets was 1.23% in the 1997 period, excluding the SAIF assessment, compared to 1.28% for the 1996 period. The decrease in income taxes resulted from the reduced pre-tax income. The effective income tax rate was 35.9% for the nine months ended March 31, 1997 compared to 35.8% for the nine months ended March 31, 1996. The effective rate for the 1997 period was reduced because the marginal tax benefit rate for the SAIF assessment deduction was higher than Collective's effective tax rate without such deduction. However, such benefit was more than offset by factors resulting from the Continental acquisition (see page 11).
COLLECTIVE BANCORP, INC. AND SUBSIDIARY MATURITY AND RATE SENSITIVITY ANALYSIS (1) March 31, 1997 --------------- -------------- --------------- --------------- 1 Year 1 Year Over or Less to 5 Years 5 Years Total --------------- -------------- --------------- --------------- Assets: (Dollar amounts in thousands) Mortgage loans: Balloon and adjustable rate first mortgages $ 694,742 $ 649,403 $147,298 $ 1,491,443 Fixed rate mortgages 187,314 (2) 561,026 449,636 1,197,976 Mortgage-backed securities 419,110 (3) 1,198,015 363,501 1,980,626 Consumer and other commercial loans 138,217 34,920 3,614 176,751 Federal funds sold 19,595 - - 19,595 Repurchase agreements 35,000 - - 35,000 Investment securities 423,181 (4) - 139 423,320 --------------- -------------- --------------- --------------- Total rate sensitive assets 1,917,159 2,443,364 964,188 5,324,711 --------------- -------------- --------------- --------------- Liabilities: Fixed maturity deposits $ 1,424,508 $ 453,876 $ 14,847 $ 1,893,233 Demand deposits, interest bearing - 602,199 - 602,199 Money market demand accounts 302,810 - - 302,810 Passbook accounts 100,320 236,405 223,609 560,334 Borrowings 1,573,385 5,486 - 1,578,871 --------------- -------------- --------------- --------------- Total rate sensitive liabilities 3,401,023 1,297,968 238,456 4,937,447 --------------- -------------- --------------- --------------- Dollar gap (5) $(1,483,864) $1,145,396 $725,732 $ 387,264 =============== ============== =============== =============== (1) As presented in the above table, Collective calculates interest rate sensitivity information employing techniques developed by the Office of Thrift Supervision. (2) Includes $3,600 of loans classified as held for sale. (3) Includes $120,165 of mortgage-backed securities classified as available for sale. (4) Includes $115,786 of securities classified as available for sale. (5) Rate sensitive assets less rate sensitive liabilities.
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 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 May 15, 1997 Edward J. McColgan Vice Chairman & Chief Financial Officer BERNARD H. BERKMAN Date May 15, 1997 Bernard H. Berkman Executive Vice President & Chief Accounting Officer EX-11 2 COMPUTATION OF PER SHARE EARNINGS
COLLECTIVE BANCORP, INC. COMPUTATION OF EARNINGS PER SHARE OF COMMON STOCK Three Months Ended Nine Months Ended March 31 March 31 PRIMARY 1997 1996 1997 1996 - ------- ------------------------------------ ------------------------------------ EARNINGS: Net income................................... $15,997,440 $13,523,486 $35,475,680 $39,841,366 ==================================== ==================================== SHARES: Weighted average number of common shares outstanding.................. 20,252,963 20,185,571 20,211,210 20,162,006 Assuming exercise of options reduced by the number of shares which could have been purchased with the proceeds from exercise of such options(1)................ 257,386 272,182 262,518 284,511 ------------------------------------ ------------------------------------ Weighted average number of common shares outstanding as adjusted............. 20,510,349 20,457,753 20,473,728 20,446,517 ==================================== ==================================== Primary earnings per share of common stock................................. $0.78 $0.66 $1.73 $1.95 ==================================== ==================================== ASSUMING FULL DILUTION EARNINGS: Net income................................... $15,997,440 $13,523,486 $35,475,680 $39,841,366 ==================================== ==================================== SHARES: Weighted average number of common shares outstanding.................. 20,252,963 20,185,571 20,211,210 20,162,006 Assuming exercise of options reduced by the number of shares which could have been purchased with the proceeds from exercise of such options(2)................ 261,607 272,209 289,504 286,797 ------------------------------------ ------------------------------------ Weighted average number of common shares outstanding as adjusted............. 20,514,570 20,457,780 20,500,714 20,448,803 ==================================== ==================================== Fully diluted earnings per share of common stock................................. $0.78 $0.66 $1.73 $1.95 ==================================== ==================================== (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 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.
EX-27 3 FDS
9 This schedule contains summary financial information extracted from the Statement of Consolidated Financial Condition as of March 31, 1997 (Unaudited) and the Statement of Consolidated Operations for the nine months ended March 31, 1997 (Unaudited) and is qualified in its entirety by reference to such financial statements. 1000 9-mos JUN-30-1997 JUL-01-1996 MAR-31-1997 65936 0 54595 0 239551 2167995 2030149 2862570 0 5517588 3498659 1573384 53903 5487 0 0 205 385950 5517588 161948 120150 0 282098 105614 60672 115812 2554 375 70813 55333 35476 0 0 35476 1.73 1.73 7.25 20374 0 0 0 12891 1984 0 13461 13461 0 0
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