-----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, VFNnKkPiKECmY01UV9eOkSePhlg7Qd3wxytxTpLTv64kcxjzqS6u6V2rlxCHrwX4 mc5Q/xbKzQD1n6TeugrV4g== 0000835345-96-000003.txt : 19960517 0000835345-96-000003.hdr.sgml : 19960517 ACCESSION NUMBER: 0000835345-96-000003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19960515 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: 96566388 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 MARCH 31, 1996 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, 1996 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, 20,407,332 shares outstanding as of March 31, 1996. Part I Item 1 COLLECTIVE BANCORP, INC. AND SUBSIDIARY STATEMENTS OF CONSOLIDATED FINANCIAL CONDITION
March 31 June 30 1996 1995 -------------- -------------- ASSETS (Dollar amounts in thousands) Cash $ 57,282 $ 66,256 Federal funds sold 3,680 3,717 -------------- -------------- Total cash and cash equivalents 60,962 69,973 Trading securities, at market value - 13,328 Loans held for sale, at amortized cost (market value of $8,010 and $5,836) 8,009 5,815 Securities available for sale, at market value 145,923 113,635 Investment securities, at amortized cost (market value of $271,093 and $317,221) 273,457 315,879 Loans receivable, net 2,438,936 2,373,706 Mortgage-backed securities, at amortized cost (market value of $1,934,300 and $2,027,783) 2,019,040 2,100,344 Real estate acquired in settlement of loans, net 4,632 6,476 Land, office buildings and equipment, net 39,170 39,313 Other assets 43,069 43,072 Core deposit premium 8,786 10,873 Goodwill 16,613 18,103 -------------- -------------- Total assets $5,058,597 $5,110,517 ============== ============== LIABILITIES AND STOCKHOLDERS' EQUITY Deposits: Demand deposits, non-interest bearing $ 86,167 $ 76,705 Demand deposits, interest bearing 474,966 451,350 Savings and investment accounts 834,906 833,041 Savings certificates 1,747,317 1,916,727 -------------- -------------- Total deposits 3,143,356 3,277,823 Federal Home Loan Bank advances - 395,000 Other borrowed funds 1,509,051 1,052,920 Payable to brokers for securities purchased - 7,600 Advance payments by borrowers for taxes and insurance 23,693 29,462 Other liabilities 26,049 19,920 -------------- -------------- Total liabilities 4,702,149 4,782,725 -------------- -------------- Stockholders' equity: Common stock, par value $.01 per share; authorized - 37,000,000 shares; issued - 20,412,332 shares in March 1996 and 20,356,768 shares in June 1995; outstanding - 20,407,332 shares in March 1996 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 59,653 59,299 Treasury stock, at cost; 5,000 shares (132) - ESOP debt (6,085) (6,892) Securities valuation 2,154 2,136 Retained earnings, substantially restricted 300,654 273,045 -------------- -------------- Total stockholders' equity 356,448 327,792 -------------- -------------- Total liabilities and stockholders' equity $5,058,597 $5,110,517 ============== ==============
2 COLLECTIVE BANCORP, INC. AND SUBSIDIARY STATEMENTS OF CONSOLIDATED OPERATIONS
Three Months Ended Nine Months Ended March 31 March 31 1996 1995 1996 1995 -------------- -------------- -------------- -------------- (Dollar amounts in thousands except per share data) INTEREST AND DIVIDEND INCOME: Interest on mortgage loans $43,738 $37,486 $130,404 $105,095 Interest on other loans 3,812 4,925 12,140 13,782 Interest on mortgage-backed securities 34,841 36,705 106,171 110,867 Interest and dividends on investments 6,056 6,744 17,558 17,914 -------------- -------------- -------------- -------------- Total interest and dividend income 88,447 85,860 266,273 247,658 -------------- -------------- -------------- -------------- INTEREST EXPENSE: Interest on deposits 32,103 29,706 99,131 83,014 Interest on Federal Home Loan Bank advances and other borrowed funds 20,127 22,990 62,699 57,542 -------------- -------------- -------------- -------------- Total interest expense 52,230 52,696 161,830 140,556 -------------- -------------- -------------- -------------- Net interest income before provision for loan losses 36,217 33,164 104,443 107,102 Provision for loan losses 410 - 1,099 240 -------------- -------------- -------------- -------------- Net interest income after provision for loan losses 35,807 33,164 103,344 106,862 -------------- -------------- -------------- -------------- OTHER INCOME: Loan servicing 1,239 946 3,167 2,952 (Loss) Gain on sale of loans and securities (162) (17) 1,032 (308) Financial service fees and other income 2,453 2,211 7,390 6,331 -------------- -------------- -------------- -------------- Total other income 3,530 3,140 11,589 8,975 -------------- -------------- -------------- -------------- Total income before other expense 39,337 36,304 114,933 115,837 -------------- -------------- -------------- -------------- OTHER EXPENSE: Compensation and employee benefits 7,463 7,081 21,377 20,369 Occupancy expense 2,806 2,525 8,036 7,440 Advertising 380 221 915 878 Deposit insurance 1,521 1,731 4,572 5,021 Computer services 1,113 1,148 3,667 3,323 Loan expense 732 563 2,347 1,861 Real estate operations 326 (79) 495 (739) Amortization of intangibles 1,178 1,005 3,578 3,063 Other expenses 2,787 2,610 7,890 7,572 -------------- -------------- -------------- -------------- Total other expense 18,306 16,805 52,877 48,788 -------------- -------------- -------------- -------------- INCOME BEFORE INCOME TAXES 21,031 19,499 62,056 67,049 INCOME TAXES 7,508 6,549 22,215 23,132 -------------- -------------- -------------- -------------- NET INCOME $13,523 $12,950 $39,841 $43,917 ============== ============== ============== ============== PER SHARE DATA: Primary and fully diluted net income per share $0.66 $0.63 $1.95 $2.14 Dividends per common share $0.20 $0.15 $0.60 $0.45 Average primary shares outstanding 20,457,753 20,563,121 20,446,517 20,567,836 Average fully diluted shares outstanding 20,457,780 20,563,121 20,448,803 20,567,836
3 COLLECTIVE BANCORP, INC. AND SUBSIDIARY STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY
Additonal Common Paid-In Treasury ESOP Securities Retained Stock Capital Stock 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 39,841 39,841 Stock options exercised 354 354 Dividends on common stock - $.60 per share (12,232) (12,232) Purchase of treasury shares $(132) (132) ESOP debt repayment 807 807 Securities valuation 18 18 ---------------------------------------------------------------------------------------- BALANCE MARCH 31, 1996 $204 $59,653 $(132) $(6,085) $2,154 $300,654 $356,448 ========================================================================================
4 COLLECTIVE BANCORP, INC. AND SUBSIDIARY STATEMENTS OF CONSOLIDATED CASH FLOWS
Nine Months Ended March 31 --------------------------------- 1996 1995 --------------- --------------- (Dollar amounts in thousands) OPERATING ACTIVITIES: Interest received $ 262,163 $ 236,219 Interest paid (159,794) (140,175) Operating expenses (52,273) (49,352) Sale of trading securities 13,328 - Loan fees 3,721 6,562 Other income received 11,791 8,974 Income taxes paid (16,075) (14,293) --------------- --------------- Net cash provided by operating activities 62,861 47,935 --------------- --------------- INVESTING ACTIVITIES: Loan originations (412,467) (526,283) Purchases of loans (17,224) (86,748) Purchases of mortgage-backed securities (14,042) (128,306) Repayment of loan principal 269,403 217,654 Repayment of mortgage-backed security principal 99,181 135,937 Sale of loans receivable 98,367 25,923 Purchases of investment securities (294,630) (120,648) Sale of investment securities available for sale - 18,961 Purchases of mortgage-backed securities available for sale (90,854) (16,339) Sale of mortgage-backed securities available for sale 55,157 108,305 Repayment of principal on mortgage-backed securities available for sale 13,020 17,966 Maturities of investment securities 318,960 7,502 Net decrease in real estate owned 1,844 1,578 Net change in loans maturing in three months or less (6,500) - Other investing, net 1,846 (3,951) --------------- --------------- Net cash provided by (used for) investing activities 22,061 (348,449) --------------- --------------- FINANCING ACTIVITIES: Net change in deposits (134,467) 83,345 Net change in Federal Home Loan Bank advances (395,000) (103,000) Net change in other borrowed funds 456,131 332,234 Net decrease in advance payments by borrowers for taxes and insurance (5,769) (11,848) Dividends paid (12,222) (9,122) Other financing, net (2,606) 427 --------------- --------------- Net cash (used for) provided by financing activities (93,933) 292,036 --------------- --------------- NET DECREASE IN CASH AND CASH EQUIVALENTS (9,011) (8,478) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 69,973 70,950 --------------- --------------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 60,962 $ 62,472 =============== =============== RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES: Net income $ 39,841 $ 43,917 Net change in trading securities 13,328 - Amortization and accretion of deferred charges and credits, net (2,166) (2,395) Amortization of intangibles 3,578 3,063 Accrued income and expense 14,067 8,408 Deferred income and expense (11,347) (9,137) Provision for loan and real estate owned losses 1,239 345 Depreciation and amortization 3,514 3,095 ESOP debt repayment 807 639 --------------- --------------- Net cash provided by operations $ 62,861 $ 47,935 =============== ===============
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 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, 1996 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 proposals, 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 $52 million during the nine months ended March 31, 1996. The decline, primarily 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 decreased $9 million from the amount held on June 30, 1995 because cash used in financing activities exceeded cash provided by operating and investing activities. Trading securities decreased $13 million during the nine months ended March 31, 1996 as the fiscal 1995 year-end inventory was sold. The increase in securities available for sale consisted of $11 million in Federal National Mortgage Association ("FNMA") preferred stock and $21 million in mortgage-backed securities. The newly-acquired mortgage-backed securities were classified as available for sale for interest-rate risk management purposes. Investment securities decreased $42 million from the amount held on June 30, 1995. The decrease resulted primarily from maturities and repayments of U.S. agency securities, partially offset by an increased investment in Federal Home Loan Bank ("FHLB") stock required because of increased borrowings (reverse repurchase agreements) from the FHLB. Many of the U.S. agency securities were redeemed as the issuing agencies exercised call options during the current period. Loans receivable, net increased $65 million as loan originations and purchases exceeded loan repayments. The decrease in mortgage-backed securities of $81 million was comprised of principal repayments of $99 million less purchases of $14 million and discount accretion of $4 million. The decrease occurred as Collective continued its strategy of relying more on loans and less on collateralized mortgage obligations ("CMO's") as investment vehicles. 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. 7 Liabilities Deposits decreased $134 million during the nine months ended March 31, 1996. The decrease was comprised of a decrease in certificates of deposit ("CD's") of $169 million, offset in part by increases in demand deposits and savings and investment accounts of $33 million and $2 million, respectively. During the nine months ended March 31, 1996, Collective continued its effort to retain maturing deposits through the use of special products, such as 8, 9, 12, 18 and 24-month CD's at attractive rates. During that period, deposits in those categories increased by $161 million. Offsetting those increases were reductions in other retail CD's of $213 million as customers transferred funds to the special product offerings or withdrew funds. During the nine-month period, Collective sustained a $117 million reduction in CD's in excess of $100,000 ("jumbo CD's") because of maturities near the end of December 1995 and March 1996. Collective had offered attractive rates on jumbo CD's during those six and nine-month periods as a less expensive source of funds compared to short-term borrowings. Total borrowings increased $61 million during the nine months ended March 31, 1996 as Collective sought alternative sources of funding to offset the deposit outflows. FHLB advances decreased $395 million and other borrowed funds increased $456 million during the period. The shift in the source of borrowed funds occurred because reverse repurchase agreements became a more attractive borrowing vehicle to Collective than FHLB advances. Advance payments by borrowers for taxes and insurance decreased $6 million during the nine months ended March 31, 1996 primarily from annual tax payments in December 1995 on certain out-of-state mortgage loans. The increase in other liabilities of $6 million from June 30, 1995 to March 31, 1996 is attributable to additional accrued interest on borrowings and an increase in accrued and deferred income taxes. Stockholders' Equity Retained earnings increased $28 million during the period primarily as a result of net earnings of $40 million, less dividends on common stock of $12 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 nine months ended March 31, 1996, the Bank was in compliance with that regulation and at that date had an overall liquidity ratio of 6.97% and a short-term ratio of 4.19%. 8 At March 31, 1996, capital resources were sufficient to meet outstanding loan origination commitments of $124 million and commitments on unused lines of credit of $102 million. Loans originated or purchased during the nine months ended March 31, 1996 were funded from normal sources including investment security maturities, amortization of the existing loan and mortgage-backed securities portfolios, and borrowings. 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 March 31, 1996, the Bank exceeded those requirements as follows:
(In Thousands) Percent Tangible Capital: Actual $ 336,368 6.68% Required 75,495 1.50% ----------- ------ Excess $ 260,873 5.18% ----------- ------ Core Capital: Actual $ 336,368 6.68% Required 150,990 3.00% ----------- ------ Excess $ 185,378 3.68% ----------- ------ Risk-based Capital: Actual $ 342,766 17.83% Required 153,822 8.00% ----------- ------- Excess $ 188,944 9.83% ----------- -------
Three Months Ended March 31, 1996 Compared to Three Months Ended March 31, 1995 Net income for the three months ended March 31, 1996 increased $573,000 compared to net income for the three months ended March 31, 1995. The increase in net income was comprised of a $3.053 million increase in net interest income before provision for loan losses, a $410,000 increase in the provision for loan losses, a $390,000 increase in other income, a $1.501 million increase in other expense, and a $959,000 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 2.61% for the 1995 period to 2.78% for the 1996 period, combined with an increase in average interest-earning assets of $120 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 2.77% for the 1995 period to 2.97% for the 1996 period. The increase in net interest spread consisted of a 1 basis point increase in the yield on interest-earning assets coupled with a 16 basis point decrease in the cost of funds. The improvement in yield on interest-earning assets occurred because Collective obtained a higher yield on the portion of the proceeds from investment security and mortgage-backed security repayments that was reinvested in loans receivable. The reinvestment occurred primarily in the first mortgage, commercial, and home equity loan categories. The cost of funds decreased in the 1996 period compared to the 1995 period because of lower short-term interest rates. Although the cost of deposits was 11 basis points higher in the 1996 period (because of the movement of deposits into higher-costing special deposit products) this increase was more than offset by a 69 basis point decrease in the cost of borrowings. Contributing to the lower cost of borrowings was the shifting of FHLB advances to lower-costing reverse repurchase agreements. The average balance of FHLB advances, costing 5.98%, was $304 million in the 1995 quarter. In the 1996 quarter, those advances were replaced by dollar rolls and reverse repurchase agreements costing 71 basis points less. 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. (The yield curve is a reflection of the difference between long-term interest rates, represented by the 30-year U.S. Treasury Bond, and short-term interest rates, represented by the 3-month U.S. Treasury Bill.) 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. During the 1996 quarter, the yield curve expanded 61 basis points compared to a compression of 61 basis points during the 1995 quarter, which had a positive impact on 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 $9 million higher in the 1996 quarter than they were in the 1995 quarter. The $390,000 increase in other income was comprised of increases in loan servicing and financial service fee income. The increase in loan servicing income resulted from growth in the volume of loans serviced for others as Collective continued to sell, with servicing retained, a substantial portion of its loan originations as part of its interest-rate risk management activity. The increase in fee income consisted primarily 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. The ratio of operating expense to average assets was 1.33% in the 1996 quarter compared to 1.28% in the 1995 quarter. The increase in income taxes resulted from higher pre-tax income. The effective income tax rate was 36% in the 1996 quarter compared to 34% in the 1995 period. Nine Months Ended March 31, 1996 Compared to Nine Months Ended March 31, 1995 Net income for the nine months ended March 31, 1996 decreased $4.076 million compared to net income for the nine months ended March 31, 1995. The decrease in net income was comprised of a $2.659 million decrease in net interest income before provision for loan losses, a $859,000 increase in the provision for loan losses, a $2.614 million increase in other income, a $4.089 million increase in other expense, and a $917,000 decrease in income taxes. 10 The decrease in net interest income resulted from a decrease in net interest spread from 2.95% for the 1995 period to 2.70% for the 1996 period, partially offset by an increase of $238 million in average interest-earning assets. The combination of decreased net interest spread and increased interest-earning assets caused the net interest margin to decrease from 3.09% in the 1995 period to 2.89% for the 1996 period. The decrease in net interest spread was comprised of a 15 basis point increase in the yield on interest-earning assets combined with a 40 basis point increase in the cost of funds. The increase in cost of funds resulted from a 46 basis point increase in the cost of deposits and a 29 basis point increase in the cost of borrowings. 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 average balances and increased cost of jumbo CD's, and an increased amount and cost of borrowings compared to the 1995 period. During the nine months ended March 31, 1996, the average balance of jumbo CD's was $91 million compared to $44 million in the 1995 period. The cost of those deposits was 5.42% in the 1996 period compared to 4.58% in 1995. Despite the increased cost of jumbo CD's, their cost remained below that of borrowings and, during the 1996 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 deposits was 4.09% in the 1996 period compared to 3.63% in 1995 and the average balance of deposits was $168 million higher in 1996. The average cost of borrowings was 5.55% in the 1996 period compared to 5.26% in the 1995 period and the average balance of borrowings was $36 million higher in the 1996 period. The increase in average interest-earnings 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 nine months ended March 31, 1996, the yield curve compressed approximately 122 basis points from the 1995 period, which had a negative impact on 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 the 1996 period than they were in the 1995 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 activity as Collective securitized and sold a greater percentage of loans originated. Sales of securitized loans amount to $98 million during the nine months ended March 31, 1996 compared to $43 million in the 1995 period. The percentage of loan originations that met Collective's criteria for long-term investment decreased from 96% in the 1995 period to 85% in the current period. The decrease occurred because the percentage of adjustable-rate loan originations decreased from 55% of total originations in the 1995 period to 18% in the 1996 period. During the past fourteen months, virtually all of Collective's conforming 30-year, fixed-rate loan production was sold in the secondary market. The increase in fee income consisted primarily of non-sufficient funds 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 1.28% in both the 1996 and 1995 periods. The decrease in income taxes resulted from reduced pre-tax income. The effective income tax rate was 36% in the 1996 period compared to 35% in the 1995 period. The effective rate was lower in 1995 because of certain unanticipated income tax refunds. 11 COLLECTIVE BANCORP, INC. AND SUBSIDIARY MATURITY AND RATE SENSITIVITY ANALYSIS (1)
March 31, 1996 ---------------- --------------- --------------- ---------------- 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 $ 752,839 $ 347,593 $ 226,333 $ 1,326,765 Fixed rate mortgages 173,023 (2) 395,222 387,377 955,622 Mortgage-backed securities 399,669 (3) 1,205,424 512,934 2,118,027 Consumer and other commercial loans 127,983 34,112 2,463 164,558 Federal funds sold 3,680 - - 3,680 Investment securities 319,964 (4) - 429 320,393 ---------------- --------------- --------------- ---------------- Total rate sensitive assets $ 1,777,158 $ 1,982,351 $ 1,129,536 $ 4,889,045 ================ =============== =============== ================ Liabilities: Fixed maturity deposits $ 1,196,265 $ 532,554 18,498 1,747,317 NOW accounts - 474,966 - 474,966 Money market demand accounts 281,626 - - 281,626 Passbook accounts 98,507 233,715 221,058 553,280 Other borrowings 1,509,051 - - 1,509,051 ---------------- --------------- --------------- ---------------- Total rate sensitive liabilities $ 3,085,449 $ 1,241,235 $ 239,556 $ 4,566,240 ================ =============== =============== ================ Dollar gap (5) $(1,308,291) $ 741,116 $ 889,980 $ 322,805 ================ =============== =============== ================ (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 $8,009 of loans classified as available for sale. (3) Includes $98,987 of mortgage-backed securities classified as available for sale. (4) Includes $46,936 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 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 May 15, 1996 Edward J. McColgan -------------- Vice Chairman & Chief Financial Officer BERNARD H. BERKMAN Date May 15, 1996 Bernard H. Berkman ------------ Executive Vice President & Chief Accounting Officer 13 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 1996 1995 1996 1995 ---------------------------------- ------------------------------- EARNINGS: Net income $13,523,486 $12,950,190 $39,841,366 $43,916,721 ================================== =============================== SHARES: Weighted average number of common shares outstanding 20,185,571 20,292,000 20,162,006 20,277,000 Assuming exercise of options reduced by the number of shares which could have been purchased with the proceeds from exercise of such options (1) 272,182 271,121 284,511 290,836 ---------------------------------- ------------------------------- Weighted average number of common shares outstanding as adjusted 20,457,753 20,563,121 20,446,517 20,567,836 ================================== =============================== Primary earnings per share of common stock $0.66 $0.63 $1.95 $2.14 ================================== =============================== ASSUMING FULL DILUTION EARNINGS: Net income $13,523,486 $12,950,190 $39,841,366 $43,916,721 ================================== =============================== SHARES: Weighted average number of common shares outstanding 20,185,571 20,292,000 20,162,006 20,277,000 Assuming exercise of options reduced by the number of shares which could have been purchased with the proceeds from exercise of such options (2) 272,209 271,121 286,797 290,836 ---------------------------------- ------------------------------- Weighted average number of common shares outstanding as adjusted 20,457,780 20,563,121 20,448,803 20,567,836 ================================== =============================== Primary earnings per share of common stock $0.66 $0.63 $1.95 $2.14 ================================== =============================== (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 March 31, 1996 (Unaudited) and the Statements of Consolidated Operations for the nine months ended March 31, 1996 (Unaudited) and is qualified in its entirety by reference to such financial statements. 1000 9-MOS JUN-30-1996 JUL-01-1995 MAR-31-1996 57282 0 3680 0 281466 2292497 2205393 2438936 0 5058597 3143356 1509051 49742 0 0 0 204 356244 5058597 142544 123729 0 266273 99131 62699 104443 1099 1032 52877 62056 62056 0 0 39841 1.95 1.95 7.22 26009 0 0 0 13230 349 204 13085 0 0 0
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