-----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, IP069GkmvCsW/Fp5XIy6bdc1mMpMtIZ0ElR+uJ/ZJypumwPF4i3btXBJtIRmb8tc cNmFg63UWp4n6c/PjrgCDg== 0000835345-96-000002.txt : 19960216 0000835345-96-000002.hdr.sgml : 19960216 ACCESSION NUMBER: 0000835345-96-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960214 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: COLLECTIVE BANCORP INC CENTRAL INDEX KEY: 0000835345 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] 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: 96518890 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 10-Q FOR SIX MONTHS ENDED DECEMBER 31, 1995 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. PART 1 Item 1 COLLECTIVE BANCORP, INC. AND SUBSIDIARY STATEMENTS OF CONSOLIDATED FINANCIAL CONDITION
December 31 June 30 1995 1995 ----------------- ------------------ 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 ================= ==================
2 COLLECTIVE BANCORP, INC. AND SUBSIDIARY STATEMENTS OF CONSOLIDATED OPERATIONS
Three Months Ended Six Months Ended December 31 December 31 1995 1994 1995 1994 ------------- ------------- -------------- ------------- (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
3 COLLECTIVE BANCORP, INC. AND SUBSIDIARY STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY
Additonal Common Paid-In ESOP Securities Retained Stock Capital Debt Valuation Earnings Total ------------------------------------------------------------------------------------ (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 ====================================================================================
4 COLLECTIVE BANCORP, INC. AND SUBSIDIARY STATEMENTS OF CONSOLIDATED CASH FLOWS
Six Months Ended December 31 ---------------------------------- 1995 1994 ---------------- -------------- (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 ================ ==============
5 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 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 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 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:
Tangible Capital: (In Thousands) Percent -------------- ------- 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% -------------- -------
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 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 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 COLLECTIVE BANCORP, INC. AND SUBSIDIARY MATURITY AND RATE SENSITIVITY ANALYSIS (1)
December 31, 1995 ---------------- ---------------- --------------- --------------- 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 $ 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 ================ ================ =============== =============== (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.
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 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 EX-11 2 COMPUTAION OF PER SHARE EARNINGS COLLECTIVE BANCORP, INC. COMPUTATION OF EARNINGS PER SHARE OF COMMON STOCK
Three Months Ended Six Months Ended December 31 December 31 PRIMARY 1995 1994 1995 1994 ----------------------------------- --------------------------------------- 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 ================================== ====================================== (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.
EX-27 3 FDS
9 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. 1000 6-MOS JUN-30-1996 JUL-01-1995 DEC-31-1995 55070 0 23681 0 120789 2280343 2237228 2427682 0 5029348 3189794 1446405 45454 0 0 0 204 347491 5029348 94994 82832 0 177826 67029 42571 68226 690 1195 34571 41024 41024 0 0 26318 1.29 1.29 7.27 25532 0 0 0 13575 345 0 13230 13230 0 0
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