<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended June 30, 1994 Commission File Number 0-8415
------------- ------
DAUPHIN DEPOSIT CORPORATION
- - --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 23-1938831
- - --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
213 Market Street, Harrisburg, Pennsylvania 17105
- - --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (717) 255-2121
------------------
NOT APPLICABLE
- - --------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last
report.
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
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at July 29, 1994
- - -------------------------- ----------------------------
Common Stock, $5 Par Value 31,950,909 Shares
<PAGE>
DAUPHIN DEPOSIT CORPORATION
---------------------------
FORM 10-Q
---------
For the Quarter Ended June 30, 1994
Contents
--------
PART I - FINANCIAL INFORMATION
- - -------------------------------
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 1994 and 1993
and December 31, 1993
Consolidated Statements of Income for the Three Month
and Six Month Periods Ended June 30, 1994 and 1993
Consolidated Statements of Cash Flows for the Six
Month Periods Ended June 30, 1994 and 1993
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
PART II - OTHER INFORMATION
- - ---------------------------
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
- - ----------
2
<PAGE>
Part I
------
For the Quarter Ended June 30, 1994
Item 1. Financial Statements
Dauphin Deposit Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Dollars in thousands)
June 30, December 31, June 30,
1994 1993 1993
------------ ------------ ------------
(Unaudited) (Audited) (Unaudited)
<S> <C> <C> <C>
ASSETS
Cash and due from banks $178,666 $151,845 $170,472
------------ ------------ ------------
Short-term investments
Interest bearing deposits 3,631 13,573 4,346
Federal funds sold and securities purchased under agreements to resell 19,232 2,950 9,100
------------ ------------ ------------
Total short-term investments 22,863 16,523 13,446
------------ ------------ ------------
Investment securities
(Approximate fair value $1,873,767, $2,105,942 and $2,126,094, respectively) 1,873,767 2,041,204 2,049,722
Assets held for sale 4,273 9,203 27,127
Loans (net of unearned income) 2,642,403 2,586,085 2,450,828
Allowance for loan losses (39,287) (39,182) (37,431)
------------ ------------ ------------
Total net loans 2,603,116 2,546,903 2,413,397
------------ ------------ ------------
Bank premises and equipment 65,540 64,348 66,874
Other assets 91,245 86,829 89,828
------------ ------------ ------------
Total assets $4,839,470 $4,916,855 $4,830,866
============ ============ ============
LIABILITIES
Deposits
Non-interest bearing $420,212 $423,641 $395,453
Interest bearing 3,105,494 3,162,494 3,133,903
------------ ------------ ------------
Total deposits 3,525,706 3,586,135 3,529,356
------------ ------------ ------------
Short-term borrowings
Federal funds purchased and securities sold under agreements to repurchase 621,139 628,100 619,032
U.S. Treasury tax and loan notes 50,956 52,286 54,798
------------ ------------ ------------
Total short-term borrowings 672,095 680,386 673,830
------------ ------------ ------------
Long-term debt 92,014 92,454 92,541
Accrued expenses and taxes 50,647 51,805 48,480
------------ ------------ ------------
Total liabilities 4,340,462 4,410,780 4,344,207
------------ ------------ ------------
STOCKHOLDERS' EQUITY
Preferred stock, $25 par value; 10,000,000 shares authorized but unissued
Common stock, $5 par value; 200,000,000 shares authorized,
32,641,614 shares issued of which 652,929, 134,200,
and 152,291 shares are held as treasury stock, respectively 163,208 163,208 163,208
Surplus 11,706 11,213 11,153
Retained earnings 354,832 333,774 314,670
Unrealized gains (losses) on securities available-for-sale, net of deferred taxes (14,559)
------------ ------------ ------------
515,187 508,195 489,031
Less: Treasury stock - at cost (16,179) (2,120) (2,372)
------------ ------------ ------------
Total stockholders' equity 499,008 506,075 486,659
------------ ------------ ------------
Total liabilities and stockholders' equity $4,839,470 $4,916,855 $4,830,866
============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
Dauphin Deposit Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
<TABLE>
<CAPTION>
(Dollars in thousands, except per share data)
Three Months Six Months
Ended June 30, Ended June 30,
-------------------------- --------------------------
1994 1993 1994 1993
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Interest income
Interest and fees on loans $50,094 $47,797 $97,035 $95,588
Interest and dividends on investment securities
Taxable 24,737 27,285 49,844 55,082
Exempt from federal income taxes 6,082 5,815 12,247 11,664
Interest on deposits 89 49 181 102
Interest on assets held for sale 187 456 369 904
Interest on federal funds sold and other
short-term investments 26 53 34 119
----------- ----------- ----------- -----------
Total interest income 81,215 81,455 159,710 163,459
----------- ----------- ----------- -----------
Interest expense
Interest on deposits
Savings deposits 9,183 10,874 18,394 22,283
Time deposits 14,855 16,596 29,700 34,133
Time deposits in denominations of
$100,000 or more 3,555 3,686 6,556 7,267
----------- ----------- ----------- -----------
27,593 31,156 54,650 63,683
Interest on short-term borrowings 7,168 4,378 13,003 8,666
Interest on long-term borrowings 1,675 1,684 3,338 3,358
----------- ----------- ----------- -----------
Total interest expense 36,436 37,218 70,991 75,707
----------- ----------- ----------- -----------
Net interest income 44,779 44,237 88,719 87,752
Provision for loan losses 1,870 2,499 3,754 4,945
----------- ----------- ----------- -----------
Net interest income after provision for loan losses 42,909 41,738 84,965 82,807
----------- ----------- ----------- -----------
Non-interest income
Fiduciary activities 4,118 4,022 8,186 7,967
Service charges on deposit accounts 2,975 3,303 5,806 6,381
Other service charges and fees 3,070 2,530 5,496 4,609
Broker/dealer commissions and fees 2,092 3,380 3,992 5,678
Securities gains, net 586 1,145 2,124 2,593
Other 865 1,221 1,776 2,771
----------- ----------- ----------- -----------
Total non-interest income 13,706 15,601 27,380 29,999
----------- ----------- ----------- -----------
Non-interest expense
Salaries and employee benefits 16,855 17,415 33,484 33,933
Net occupancy expense 2,046 2,093 4,385 4,223
Furniture and equipment expense 2,240 2,215 4,570 4,539
Deposit insurance 1,989 2,065 3,980 4,130
Other 9,677 10,578 18,394 19,496
----------- ----------- ----------- -----------
Total non-interest expense 32,807 34,366 64,813 66,321
----------- ----------- ----------- -----------
Income before income taxes 23,808 22,973 47,532 46,485
Provision for income taxes 5,841 5,565 11,664 11,324
----------- ----------- ----------- -----------
Net income $17,967 $17,408 $35,868 $35,161
=========== =========== =========== ===========
Net income per share $0.56 $0.54 $1.11 $1.08
Cash dividends declared per share $0.23 $0.20 $0.46 $0.40
Weighted average number of shares outstanding 32,251,108 32,597,453 32,446,897 32,593,983
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
Dauphin Deposit Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
<TABLE>
<CAPTION>
(Dollars in thousands)
Six Months Ended
June 30,
---------------------
1994 1993
--------- ---------
<S> <C> <C>
Operating activities
Net income $35,868 $35,161
Adjustments:
Provision for loan losses 3,754 4,945
Provision for depreciation, amortization and accretion 5,106 6,018
Deferred income taxes 293 (325)
Securities gains, net (2,124) (2,593)
(Increase) decrease in interest receivable (672) 2,094
Increase (decrease) in accrued expenses and taxes 6,203 (1,713)
Capitalized interest on deposits 20,990 23,582
Other, net (8,141) (10,243)
--------- ---------
Net cash provided by operating activities 61,277 56,926
--------- ---------
Investing activities
Proceeds from investment securities (including
proceeds from sales of $149,642 and $42,710, respectively) 411,011 415,193
Purchases of investment securities (273,212) (388,593)
Net (increase) decrease in assets held for sale 4,930 (18,624)
Net increase in loans (64,095) (38,915)
Net purchases of bank premises and equipment (4,715) (1,733)
Net proceeds from sale of subsidiary, Farmers Savings Bank, FSB 797
--------- ---------
Net cash provided (used) by investing activities 74,716 (32,672)
--------- ---------
Financing activities
Net increase (decrease) in demand deposits and savings accounts 4,912 (53,803)
Net decrease in time deposits (75,490) (131,496)
Net increase (decrease) in short-term borrowings (8,291) 65,504
Net decrease in long-term debt (40) (37)
Issuance of treasury stock 1,693 1,763
Acquisition of treasury stock (15,675)
Cash dividends (14,331) (12,655)
--------- ---------
Net cash used by financing activities (107,222) (130,724)
--------- ---------
Increase (decrease) in cash and cash equivalents 28,771 (106,470)
Cash and cash equivalents at beginning of period 152,295 283,542
--------- ---------
Cash and cash equivalents at end of period $181,066 $177,072
========= =========
</TABLE>
Total interest paid amounted to $51,750 and $54,839, respectively.
Total income taxes paid amounted to $19,395 and $13,821, respectively.
Total loan sales amounted to $45,628 and $45,220, respectively.
See accompanying notes to consolidated financial statements.
5
<PAGE>
Note 1 - Accounting Policies
The consolidated financial statements include the accounts of Dauphin
Deposit Corporation and subsidiaries (Dauphin), including its banking
subsidiaries, Dauphin Deposit Bank and Trust Company, which includes the Bank of
Pennsylvania, Farmers Bank and Valleybank Divisions. All material intercompany
balances and transactions have been eliminated in consolidation.
The information contained in the financial statements is unaudited. In the
opinion of management, all adjustments, consisting of normal recurring accruals,
necessary for a fair presentation of the results of interim periods have been
made. Operating results for the six month period ended June 30, 1994 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1994.
The accounting policies followed in the presentation of interim financial
results are the same as those followed on an annual basis, with the exception of
the accounting policies related to investment securities which are discussed
further in Note 3. These policies are presented on pages 33 through 35 of the
1993 Securities and Exchange Commission Form 10-K included in the Annual Report
to Stockholders.
Note 2 - Acquisitions
On January 1, 1994, Dauphin acquired all the outstanding stock of Valley
Bancorp., Inc. (Valley) in exchange for 2,600,643 shares of Dauphin's common
stock, along with cash of $16,000 in lieu of fractional shares, consummating the
merger announced in June 1993. Valley's principal subsidary was Valley Bank and
Trust Company. The acquisition was accounted for as a pooling-of-interests.
Accordingly, financial data presented for prior periods has been restated to
reflect this acquisition as if it had occurred at the beginning of the periods
presented.
Effective July 1, 1994, Dauphin acquired Eastern Mortgage Services, Inc.
(EMS), a mortgage banking company headquartered in Trevose, Pennsylvania, for
approximately $20 million in cash pursuant to a definitive agreement signed in
May 1994. The acquisition will be accounted for using the purchase method of
accounting. Therefore, the results of operations of EMS from the date of
acquisition will be included with the results of Dauphin in future reporting
periods.
6
<PAGE>
Note 3 - Investment Securities
Dauphin adopted Statement of Financial Accounting Standards No. 115 (SFAS
115), "Accounting for Certain Investments in Debt and Equity Securities" on
January 1, 1994. SFAS 115 addresses the accounting and reporting for investments
in equity securities that have readily determinable fair values and for all
investments in debt securities. These investments are to be classified in one of
three categories and accounted for as follows: 1) debt securities that a company
has the positive intent and ability to hold to maturity are classified as held-
to-maturity securities and reported at amortized cost; 2) debt and equity
securities that are bought and held principally for the purpose of selling them
in the near term are classified as trading securities and reported at fair
value, with unrealized gains and losses included in earnings; and 3) debt and
equity securities not classified as either held-to-maturity or trading
securities are classified as available-for-sale securities and reported at fair
value, with unrealized gains and losses excluded from earnings and reported as a
separate component of stockholders' equity.
Management has determined that the entire investment securities portfolio
is classified as available-for-sale. At June 30, 1994 the impact of this change
resulted in a decrease in investment securities of $22,399,000 and a decrease in
stockholders' equity of $14,559,000, representing the after tax impact.
A summary of investment securities at June 30, 1994, December 31, 1993 and
June 30, 1993 is as follows:
<TABLE>
<CAPTION>
(Dollars in thousands)
June 30, 1994 December 31, 1993 June 30, 1993
----------------------- ----------------------- -----------------------
Amortized Fair Amortized Fair Amortized Fair
Cost Value Cost Value Cost Value
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury and other U.S. $676,634 $669,643 $732,722 $750,997 $741,146 $768,924
government agencies and corporations
Obligations of states and political subdivision 405,413 413,233 406,241 434,581 369,667 396,291
Debt securities issued by foreign governments 2,407 2,403 1,899 1,920 3,888 3,950
Corporate securities 73,431 73,813 83,336 85,992 121,509 124,843
Mortgage-backed securities 724,675 700,987 803,252 818,020 799,097 816,999
---------- ---------- ---------- ---------- ---------- ----------
Total debt securities 1,882,560 1,860,079 2,027,450 2,091,510 2,035,307 2,111,007
Equity securities 13,606 13,688 13,754 14,432 14,415 15,087
---------- ---------- ---------- ---------- ---------- ----------
Total investment securities $1,896,166 $1,873,767 $2,041,204 $2,105,942 $2,049,722 $2,126,094
========== ========== ========== ========== ========== ==========
</TABLE>
7
<PAGE>
Note 4 - Income Taxes
Income tax expense includes a provision for deferred taxes which are
related to income and expense items being recognized in one accounting period
for financial reporting purposes and another period for income tax reporting
purposes.
A reconciliation between the effective income tax rate and the statutory
rate follows:
<TABLE>
<CAPTION>
Percentage of pre-tax income
-----------------------------------
Three months Six months
ended June 30, ended June 30,
---------------- ----------------
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Statutory federal income tax rate 35.0% 34.0% 35.0% 34.0%
Tax exempt income (10.6) (10.2) (10.6) (10.2)
Other, net 0.1 0.4 0.1 0.6
------- ------- ------- -------
Effective income tax rate 24.5% 24.2% 24.5% 24.4%
======= ======= ======= =======
</TABLE>
Note 5 - Commitments and Contingent Liabilities
In the normal course of business, there are commitments and contingent
liabilities which are not presented in the accompanying financial statements.
The commitments and contingent liabilities include various guarantees,
commitments to extend credit and letters of credit. Dauphin does not
anticipate any material losses as a result of the commitments.
Various legal actions or proceedings are pending involving Dauphin or its
subsidiaries. Management believes that the aggregate liability or loss, if any,
will not be material.
The contingent liability at June 30, 1994 represented by letters of credit
issued to customers amounted to approximately $119.1 million.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This section presents management's discussion and analysis of the financial
condition and results of operations of Dauphin Deposit Corporation and
subsidiaries (Dauphin), including Dauphin Deposit Bank and Trust Company, which
includes the Bank of Pennsylvania, Farmers Bank and Valleybank Divisions. This
discussion and analysis should be read in conjunction with the financial
statements which appear elsewhere in this report.
On January 1, 1994, Dauphin acquired all the outstanding stock of Valley
Bancorp., Inc. (Valley) in exchange for 2,600,643 shares of Dauphin's common
stock, along with cash of $16,000 in lieu of fractional shares, consummating the
merger announced in June 1993. At December 31, 1993 Valley had total assets,
deposits and equity of $324,164,000, $285,310,000 and $33,948,000, respectively.
Valley's principal subsidiary was Valley Bank and Trust Company. The
acquisition was accounted for as a pooling-of-interests. Accordingly, financial
data presented for prior periods has been restated to reflect this acquisition
as if it had occurred at the beginning of the periods presented.
On August 23, 1993 Dauphin entered into an agreement to sell 100% of the
stock of Farmers Savings Bank, a Federal Savings Bank (FSB), for $797,000. The
sale was consummated on February 1, 1994. FSB had total assets of $11,674,000
at January 31, 1994. The sale of FSB will not have a material impact on the
financial condition or results of operations for Dauphin in 1994.
On January 1, 1994, Dauphin adopted Statement of Financial Accounting
Standards No. 115 (SFAS 115), "Accounting for Certain Investments in Debt and
Equity Securities". SFAS 115 addresses the accounting and reporting for
investments in equity securities that have readily determinable fair values and
for all investments in debt securities. These investments are to be classified
in one of three categories and accounted for as follows: 1) debt securities
that a company has the positive intent and ability to hold to maturity are
classified as held-to-maturity securities and reported at amortized cost; 2)
debt and equity securities that are bought and held principally for the purpose
of selling them in the near term are classified as trading securities and
reported at fair value, with unrealized gains and losses included in earnings;
and 3) debt and equity securities not classified as either held-to-maturity or
trading securities are classified as available-for-sale securities and reported
at fair value, with unrealized gains and losses excluded from earnings and
reported as a separate component of stockholders' equity.
Management has determined that the entire investment securities portfolio
is classified as available-for-sale. On June 30, 1994 this change resulted in a
decrease in investment securities of $22.4 million and a decrease in
stockholders' equity of $14.6 million, representing the after tax impact.
9
<PAGE>
SUMMARY
Dauphin recorded net income for the second quarter of 1994 of $18.0
million, compared with $17.4 million recorded for the same quarter of 1993. Net
income per share for the second quarter of 1994 amounted to $.56, compared with
$.54 for the same period in 1993, an increase of 3.7%. Net income for the first
six months of 1994 amounted to $35.9 million compared with $35.2 million
recorded for the same period of 1993. Net income per share for the first six
months of 1994 amounted to $1.11, compared with $1.08 for the same period of
1993, an increase of 2.8%.
Dauphin's return on average total assets was 1.46% for the second quarter
of 1994, compared with 1.45% for the second quarter of 1993. For the first six
months of 1994, the return on average assets was 1.46%, compared with 1.48% for
the same period of 1993. Return on average stockholders' equity was 14.20% for
the second quarter of 1994, compared with 14.63% for the same period of 1993.
Return on average stockholders' equity was 14.27% for the first six months of
1994, compared with 15.04% for the same period of 1993. Return on average
stockholders' equity, including the SFAS 115 adjustment, was 14.27% for the
second quarter of 1994, Return on average stockholders' equity, including the
SFAS 115 adjustment, amounted to 13.80% for the first six months of 1994.
NET INTEREST INCOME
Net interest income is the product of the volume of average earning assets
and the average rates earned on them, less the volume of average interest
bearing liabilities and the average rates paid thereon. The amount of net
interest income is effected by changes in interest rates, account balances, or
volume, and the mix of earning assets and interest bearing liabilities.
For analytical purposes, net interest income is adjusted to a taxable
equivalent basis. This adjustment facilitates performance comparisons among
taxable and tax exempt assets by increasing tax exempt income by an amount
equivalent to the federal income taxes which would have been paid if this income
were taxable at the statutory rate of 35%.
Table 1 presents the net interest income on a fully taxable equivalent
basis for the second quarter and the first six months of 1994 and 1993. Net
interest income on a fully taxable equivalent basis totaled $48.7 million for
the second quarter of 1994, an increase of $.7 million or 1.4% from $48.0
million for the same period of 1993. For the first six months of 1994, net
interest income amounted to $96.6 million, an increase of $1.3 million or 1.3%
from $95.3 million for 1993.
Table 2 analyzes the changes attributable to the volume and rate components
of net interest income. Table 3 presents average balances, taxable equivalent
interest income and expense and rates for Dauphin's assets and liabilities.
10
<PAGE>
During the second quarter of 1994, as compared with the second quarter of
1993, as shown in Table 2, there was an increase in net interest income of $2.6
million due to changes in volume and a decrease of $1.9 million due to changes
in rate. During the first six months of 1994, as compared with the same period
of 1993, there was an increase of $1.8 million due to changes in volume and a
decrease of $.5 million due to changes in rate.
The effect on the net interest margin attributable to interest rates can be
understood by analyzing the interest rate spread and the net interest margin on
earning assets. While the interest rate spread considers only the difference
between the average rate earned on earning assets and the average rate paid on
interest bearing liabilities, the net interest margin takes into account the
contribution of assets funded by interest free sources.
Average earning assets increased to $4.6 billion for the second quarter of
1994 from $4.5 billion for the second quarter of 1993, an increase of 2.1%. For
the first six months of 1994, average earning assets increased 3.1% to $4.7
billion from $4.5 billion for the same period of 1993. The interest rate spread
for the second quarter of 1994 was 3.68% compared with 3.70% for the second
quarter of 1993. The net interest margin was 4.21% for the second quarter of
1994 compared with 4.23% for 1993. For the first six months, the interest rate
spread decreased to 3.62% from 3.70% while the net interest margin decreased to
4.16% from 4.24%.
Interest rates during 1994 were higher than the rates experienced in 1993.
The average prime rate for the second quarter of 1994 was 6.90% and the first
six months of 1994 was 6.46% compared with 6.00% for the same periods in 1993.
The average federal funds rate increased to 3.92% for the second quarter of 1994
compared with 3.00% for the same period in 1993. For the first six months of
1994 the average federal funds rate was 3.57% compared with 3.02% for 1993.
During the second quarter of 1994, compared with the same period of 1993, the
average yield on earning assets decreased 16 basis points while the average cost
of interest bearing liabilities decreased 14 basis points, resulting in a
decrease in the interest rate spread of 2 basis points. For the first six
months of 1994 compared with 1993, the yield on earning assets decreased 38
basis points while the average cost of interest bearing liabilities decreased 30
basis points, resulting in a decrease in the interest rate spread of 8 basis
points. The yield on the investment securities portfolio decreased 21 basis
points for the second quarter and 42 basis points for the first six months
primarily due to the reinvestment of maturities at significantly lower rates.
Average loans, which represent the highest yielding earning assets, increased
$181.1 million or 7.5% for the second quarter of 1994 compared with the second
quarter of 1993. For the first six months of 1994, the increase was $170.6
million or 7.1% compared with the same period in 1993. The declining rates in
1993, with new loans issued at the then current market levels, was the primary
reason for the decrease of 21 basis points for the second quarter and 43 basis
points for the first six months in the overall average loan yield. The cost of
interest bearing deposits decreased 34 basis points for the second quarter of
1994 compared with the second quarter of 1993. For the first six months of
11
<PAGE>
1994 compared with 1993 the decrease was 45 basis points. The overall interest
rates for these deposits continued to decline during 1994 although the interest
on certificates of deposit have recently increased. Additionally, the mix of
these deposits changed as depositors allowed longer-term certificates of deposit
to mature and decided to reinvest these proceeds into shorter-term investments.
The increase in the cost of short-term borrowings was caused primarily by the
rise in the federal funds rate.
INTEREST RATE SENSITIVITY
Interest rate sensitivity management seeks to avoid fluctuating net
interest margins and to enhance consistent growth of net interest income through
periods of changing interest rates.
Rates on different assets and liabilities within a single maturity category
adjust to changes in interest rates to varying degrees and over varying periods
of time. The relationships between prime rates and rates paid on purchased
funds are not constant over time. The rate of growth in interest free sources
of funds will influence the level of interest sensitive funding sources. In
addition, the absolute level of interest rates will affect the volume of earning
assets and funding sources. As a result of these limitations, the interest
sensitivity gap is only one factor to be considered in estimating the net
interest margin.
Table 4 presents an interest sensitivity analysis of Dauphin's assets and
liabilities at June 30, 1994 for several time intervals. This table reflects
the interest sensitivity gap in two formats. The detailed presentation
represents management's position on certain interest bearing deposits, such as
passbook savings accounts, as not being subject to immediate repricing.
Management is of the opinion that historical interest rate movements indicate
that these products do not reprice in direct relation to the change in the
interest rate environment. Additionally, these products have provided Dauphin
with a stable core deposit base. Therefore, the detailed presentation within
Table 4 attempts to reflect these products in the appropriate interest
sensitivity time interval based on their interest sensitivity to the movement of
other interest rates. Also included in Table 4 is a summary of the gap, as
viewed by certain regulatory authorities, which presents these interest bearing
deposits as being subject to immediate repricing.
An interest sensitivity analysis is measured as of a specified date and,
therefore, is subject to almost immediate change as the maturities of assets are
reinvested and liabilities, such as deposits and short-term borrowings, are
received or mature. The mismatch of assets and liabilities in a specific time
frame is referred to as a sensitivity gap. An asset sensitive gap will benefit
Dauphin during periods of rising interest rates, while a liability sensitive gap
will benefit Dauphin during declining rates. The gap reflects Dauphin's
sensitivity to rate changes over a period of time. Dauphin continuously
monitors and adjusts the gap position, taking into consideration current
interest rate projections, and maintaining flexibility if rates move contrary to
expectations.
12
<PAGE>
PROVISION AND ALLOWANCE FOR LOAN LOSSES
The provision for loan losses charged to earnings was $1.9 million for the
second quarter of 1994 compared with $2.5 million for the second quarter of
1993. The provision for the first six months of 1994 was $3.8 million compared
with $4.9 million for 1993. The provision is based on management's estimate of
the amount needed to maintain an adequate allowance for loan losses. This
estimate is based on the review of the loan portfolio, the level of net credit
losses, past loan loss experience, the general economic outlook and other
factors that management feels are appropriate. Table 5 reflects an analysis of
the allowance for loan losses for the second quarter and the first six months of
1994 and 1993.
NON-PERFORMING ASSETS
Table 6 reflects Dauphin's non-performing assets at June 30, 1994, December
31, 1993 and June 30, 1993. Dauphin's policy is to discontinue the accrual of
interest on commercial loans on which principal or interest is past due 90 days
or more and on commercial mortgages on which principal or interest is past due
120 days or more. Consumer loans, excluding residential mortgages, which are
150 days past due are charged off. Residential mortgages are placed on non-
accrual status after becoming 180 days past due. When a loan is placed on non-
accrual status, any unpaid interest is generally charged against income. Other
real estate owned represents property acquired through foreclosure or considered
to be in an in-substance foreclosure status.
NON-INTEREST INCOME
Non-interest income decreased $1.9 million or 12.1% for the second quarter
of 1994 when compared with the second quarter of 1993. Exclusive of securities
gains, the decrease was $1.3 million or 9.2%. Non-interest income decreased
$2.6 million or 8.7% for the first six months of 1994 as compared with the same
period of 1993. Exclusive of securities gains, the decrease for the first six
months of 1994 compared with 1993 was $2.2 million or 7.8%. The results of
operations of Dauphin's broker/dealer subsidiary, Hopper Soliday & Co., Inc.
(Hopper Soliday), decreased non-interest income by $1.3 million for the second
quarter and decreased non-interest income by $1.7 million for the first six
months of 1994 compared with 1993. The Hopper Soliday decrease was primarily
caused by the increased interest rate environment which negatively effected the
volume of transactions. The decrease in service charges on deposit accounts was
due to a lower number of fees assessed for services. The decreases in other
non-interest income was due primarily to decreased gains from the sale of fixed
rate residential mortgages.
NON-INTEREST EXPENSE
Non-interest expense decreased $1.6 million or 4.5% from the second quarter
of 1993 to the second quarter of 1994. For the first six months of 1994,
compared
13
<PAGE>
with the same period of 1993, non-interest expenses decreased $1.5 million or
2.3%. This decrease was primarily salaries and benefits savings due to the
operations consolidation of Farmers Bank and Trust Company of Hanover.
Additionally, other non-interest expenses decreased due to reduced computer
services, consultant, legal and other merger-related expenses.
Salaries and employee benefits decreased $.6 million or 3.2% for the second
quarter of 1994. For the first six months of 1994, compared with the same
period of 1993 salaries and employee benefits decreased $.4 million or 1.3%.
Not including Hopper Soliday, salaries and employee benefits increased $.4
million or 2.6% and $.6 million or 2.0% for the second quarter and first six
months of 1994, respectively, compared with the same periods of 1993. This
salary increase was due to normal salary adjustments and increased benefits
costs, which were partially offset by the operations consolidation. Full-time
equivalent employees decreased 1.1% to 2,057 at June 30, 1994 compared with
2,079 at June 30, 1993.
INCOME TAXES
Dauphin's effective tax rate for the second quarter of 1994 was 24.5%,
compared with 24.2% for the second quarter of 1993. The effective tax rate for
the first six months of 1994 was 24.5%, compared with 24.4% for the same period
of 1993. For a reconciliation of reported income tax expense to the amount
computed by applying the federal statutory rate to income before income taxes,
refer to Note 4 of the Notes to Consolidated Financial Statements.
CAPITAL MANAGEMENT
In January 1994, Dauphin announced that the Board of Directors authorized
the repurchase of up to 1,000,000 shares of the outstanding common stock.
Dauphin expects to use available cash to fund the share repurchases which will
be made from time to time on the open market or in privately negotiated
transactions. Dauphin will use the shares for general corporate purposes,
including the Employee Stock Purchase Plan, Stock Option Plan, the Dividend
Reinvestment and Stock Purchase Plan and other appropriate uses. During the
first six months of 1994 Dauphin repurchased 633,700 shares for $15.7 million.
Common measures of adequate capitalization for banking institutions are
ratios of capital to assets. These ratios indicate the proportion of permanently
committed funds to the total asset base. Guidelines issued by federal regulatory
authorities require both banks and bank holding companies to meet minimum risk-
based capital ratios in an effort to make regulatory capital more responsive to
the risk exposure related to a bank's on- and off-balance sheet items. Risk-
based capital guidelines redefine the components of capital, categorize assets
into different risk classes and include certain off-balance sheet items in the
calculation of capital requirements. The components of risk-based capital are
segregated as Tier 1 and Tier 2 capital. Tier 1 capital is composed of total
stockholders' equity reduced by goodwill and other
14
<PAGE>
intangible assets. Tier 2 capital is the allowance for loan losses (with
certain limitations) and qualifying debt obligations. Regulators have also
adopted minimum Tier 1 leverage ratio standards. Tier 1 capital for the
leverage ratio is the same as the Tier 1 capital definition in the risk-based
capital guidelines. At June 30, 1994, Dauphin and its banking subsidiaries
exceeded all capital requirements.
NEW ACCOUNTING STANDARDS
In May 1993, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 114, "Accounting by Creditors for Impairment
of a Loan" (SFAS 114).
SFAS 114 addresses the accounting by creditors for impairment of certain
loans. SFAS 114 requires that impaired loans that are within the scope of the
Statement be measured based on the present value of expected future cash flows
discounted at the loan's effective interest rate or, at the loan's market price
or the fair value of the collateral if the loan is collateral dependent.
Management presently does not know and cannot reasonably estimate the impact of
SFAS 114 on its financial statements.
SFAS 114 is effective for fiscal years beginning after December 15, 1994
and earlier adoption is permitted. The Corporation expects to adopt SFAS 114 in
January 1995.
ACQUISITION
Effective July 1, 1994, Dauphin acquired Eastern Mortgage Services, Inc.
(EMS), a mortgage banking company headquartered in Trevose, Pennsylvania, for
approximately $20 million in cash pursuant to a definitive agreement signed in
May 1994. The acquisition will be accounted for using the purchase method of
accounting. Therefore, the results of operations of EMS from the date of
acquisition will be included with the results of Dauphin in future reporting
periods.
15
<PAGE>
TABLE 1 - Net Interest Income
<TABLE>
<CAPTION>
(Dollars in thousands)
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ----------------------
1994 1993 1994 1993
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Total interest income $ 81,215 $ 81,455 $159,710 $163,459
Total interest expense 36,436 37,218 70,991 75,707
-------- -------- -------- --------
Net interest income 44,779 44,237 88,719 87,752
Tax equivalent adjustment 3,887 3,741 7,838 7,547
-------- -------- -------- --------
Net interest income (fully taxable equivalent) $ 48,666 $ 47,978 $ 96,557 $95,299
======== ======== ======== ========
</TABLE>
TABLE 2 - Rate-Volume Analysis of Changes in Net Interest Income
<TABLE>
<CAPTION>
(Dollars in thousands)
Three Months Ended Six Months Ended
June 30, June 30,
1994/1993 1994/1993
---------------------------- ----------------------------
Change due to Change due to
----------------- Total ----------------- Total
Volume Rate Change Volume Rate Change
------- -------- --------- ------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
(Taxable equivalent)
Interest income
Short-term investments ($18) $30 $12 ($78) $71 ($7)
Investment securities (556) (1,533) (2,089) 857 (5,110) (4,253)
Assets held for sale (494) 225 (269) (878) 345 (533)
Loans 3,702 (1,450) 2,252 7,022 (5,687) 1,335
------ ------- ------ ------ ------- ------
Total interest income 2,634 (2,728) (94) 6,923 (10,381) (3,458)
------ ------- ------ ------ ------- ------
Interest expense
Interest bearing deposits (1,367) (2,196) (3,563) (2,552) (6,481) (9,033)
Short-term borrowings 1,403 1,387 2,790 7,691 (3,354) 4,337
Long-term borrowings (9) (9) (19) (1) (20)
------ ------- ------ ------ ------- ------
Total interest expense 27 (809) (782) 5,120 (9,836) (4,716)
------ ------- ------ ------ ------- ------
Net interest income $2,607 ($1,919) $688 $1,803 ($545) $1,258
====== ======= ====== ====== ======= ======
</TABLE>
Note: The changes not due solely to change in volume or solely to change in rate
are allocated proportionally to both change in volume and rate.
<PAGE>
TABLE 3 - Average Balances, Rates and Interest Income and Expense Summary
(Taxable Equivalent Basis) (Dollars in thousands)
<TABLE>
<CAPTION>
Second Quarter 1994 Second Quarter 1993
------------------------------ ------------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
---------- --------- ------- ---------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Short-term investments
Interest bearing deposits $4,805 $89 7.43% $4,557 $50 4.40%
Federal funds sold and securities
purchased under agreements to resell 2,925 26 3.57 5,207 53 4.08
---------- ------- ---------- -------
Total short-term investments 7,730 115 5.97 9,764 103 4.23
---------- ------- ---------- -------
Investment securities
U.S. government and agency obligations 1,483,757 22,510 6.07 1,534,245 24,063 6.28
State and municipals 415,587 9,989 9.61 369,629 9,437 10.21
Other securities 99,264 1,615 6.51 154,340 2,703 7.01
---------- ------- ---------- -------
Total investment securities 1,998,608 34,114 6.83 2,058,214 36,203 7.04
---------- ------- ---------- -------
Assets held for sale 11,713 191 6.53 36,792 460 5.01
---------- ------- ---------- -------
Loans (1)
Commercial 1,443,486 27,713 7.70 1,396,694 25,866 7.43
Residential mortgages (2) 680,299 13,350 7.86 632,530 13,190 8.35
Consumer (3) 482,516 9,619 8.00 396,023 9,374 9.49
---------- ------- ---------- -------
Total loans 2,606,301 50,682 7.80 2,425,247 48,430 8.01
---------- ------- ---------- -------
Total earning assets 4,624,352 85,102 7.37 4,530,017 85,196 7.53
------- -------
Other assets 305,260 284,392
---------- ----------
Total assets $4,929,612 6.92% $4,814,409 7.09%
========== ===== ========== =====
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest bearing deposits
Demand deposits and savings deposits $1,650,522 $9,183 2.23% $1,663,236 10,874 2.62%
Time deposits of $100,000 or more 283,339 3,555 5.03 311,534 3,686 4.75
Other time deposits 1,179,722 14,855 5.05 1,235,963 16,596 5.39
---------- ------- ---------- -------
Total interest bearing deposits 3,113,583 27,593 3.55 3,210,733 31,156 3.89
Short-term borrowings 759,928 7,168 3.78 593,112 4,378 2.96
Long-term borrowings 92,023 1,675 7.29 92,549 1,684 7.29
---------- ------- ---------- -------
Total interest bearing liabilities 3,965,534 36,436 3.69 3,896,394 37,218 3.83
------- -------
Non-interest bearing demand deposits 402,718 396,418
Other liabilities 56,484 44,488
Stockholders' equity 504,876 477,109
---------- ----------
Total liabilities and
stockholders' equity $4,929,612 2.96% $4,814,409 3.10%
========== ===== ========== =====
Interest rate spread 3.68% 3.70%
Effect of non-interest bearing funds 0.53 0.53
----- -----
Net interest income/margin $48,666 4.21% $47,978 4.23%
======= ===== ======= =====
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended June 30,
--------------------------------------------------------------
1994 1993
------------------------------ ------------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
---------- --------- ------- ---------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Short-term investments
Interest bearing deposits $5,352 $181 6.82% $5,582 $103 3.72%
Federal funds sold and securities
purchased under agreements to resell 1,998 34 3.43 6,225 119 3.85
---------- ------- ---------- -------
Total short-term investments 7,350 215 5.90 11,807 222 3.79
---------- ------- ---------- -------
Investment securities
U.S. government and agency obligations 1,527,599 45,255 5.93 1,521,731 48,199 6.35
State and municipals 424,600 20,073 9.46 368,663 18,933 10.27
Other securities 103,763 3,404 6.56 164,892 5,853 7.10
---------- ------- ---------- -------
Total investment securities 2,055,962 68,732 6.69 2,055,286 72,985 7.11
---------- ------- ---------- -------
Assets held for sale 11,694 377 6.46 36,561 910 5.00
---------- ------- ---------- -------
Loans (1)
Commercial 1,430,490 52,778 7.44 1,387,506 51,649 7.51
Residential mortgages (2) 677,531 26,556 7.87 626,446 26,397 8.46
Consumer (3) 469,220 18,890 8.12 392,699 18,843 9.68
---------- ------- ---------- -------
Total loans 2,577,241 98,224 7.68 2,406,651 96,889 8.11
---------- ------- ---------- -------
Total earning assets 4,652,247 167,548 7.24 4,510,305 171,006 7.62
------- -------
Other assets 290,555 284,200
---------- ----------
Total assets $4,942,802 6.81% $4,794,505 7.17%
========== ===== ========== =====
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest bearing deposits
Demand deposits and savings deposits $1,656,836 $18,394 2.24% $1,642,866 22,283 2.74%
Time deposits of $100,000 or more 276,007 6,556 4.79 311,634 7,267 4.70
Other time deposits 1,174,944 29,700 5.10 1,253,934 34,133 5.49
---------- ------- ---------- -------
Total interest bearing deposits 3,107,787 54,650 3.55 3,208,434 63,683 4.00
Short-term borrowings 756,683 13,003 3.47 588,085 8,666 2.97
Long-term borrowings 92,106 3,338 7.28 92,568 3,358 7.28
---------- ------- ---------- -------
Total interest bearing liabilities 3,956,576 70,991 3.62 3,889,087 75,707 3.92
------- -------
Non-interest bearing demand deposits 403,671 389,213
Other liabilities 58,379 44,629
Stockholders' equity 524,176 471,576
---------- ----------
Total liabilities and
stockholders' equity $4,942,802 2.90% $4,794,505 3.18%
========== ===== ========== =====
Interest rate spread 3.62% 3.70%
Effect of non-interest bearing funds 0.54 0.54
----- -----
Net interest income/margin $96,557 4.16% $95,299 4.24%
======= ===== ======= =====
</TABLE>
The tax-equivalent adjustment was computed based on federal income tax rate of
35% for all periods presented.
(1) Includes fees on loans. Average loan balances include non-accruing loans.
(2) Includes home equity loans.
(3) Loans outstanding net of unearned income.
17
<PAGE>
TABLE 4 - Interest Sensitivity Analysis
<TABLE>
<CAPTION>
(Dollars in thousands)
June 30, 1994
----------------------------------------------------------------
Interest Sensitivity Period
----------------------------------------------------------------
Month Quarter Six Months Annual 5 Years
------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Earning assets:
Short-term investments $20,363 $22,863 $22,863 $22,863 $22,863
Investment securities 415,414 477,559 684,427 956,678 1,712,786
Assets held for sale 4,273 4,273 4,273 4,273 4,273
Loans 1,045,309 1,259,338 1,390,971 1,631,952 2,380,796
------------ ----------- ----------- ----------- -----------
Total $1,485,359 $1,764,033 $2,102,534 $2,615,766 $4,120,718
============ =========== =========== =========== ===========
Interest bearing liabilities:
Deposits $1,313,384 $1,485,958 $1,653,889 $1,879,813 $2,369,570
Short-term borrowings 654,499 672,095 672,095 672,095 672,095
Long-term borrowings 292 300 312 51,336 91,803
------------ ----------- ----------- ----------- -----------
Total $1,968,175 $2,158,353 $2,326,296 $2,603,244 $3,133,468
============ =========== =========== =========== ===========
Interest sensitivity gap ($482,816) ($394,320) ($223,762) $12,522 $987,250
Interest sensitive assets to interest
sensitive liabilities ratio 0.75 0.82 0.90 1.00 1.32
Regulatory presentation:
Interest sensitivity gap ($1,009,009) ($920,513) ($749,955) ($513,671) $461,057
Interest sensitive assets to interest
sensitive liabilities ratio 0.60 0.66 0.74 0.84 1.13
</TABLE>
TABLE 5 - Analysis of Allowance for Loan Losses
<TABLE>
<CAPTION>
(Dollars in thousands)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------- -----------------------
1994 1993 1994 1993
------------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Balance, beginning of period $39,046 $36,724 $39,182 $36,227
Provision charged to operating expenses 1,870 2,499 3,754 4,945
Allowance of subsidiary sold (101)
Total loans charged off 2,302 2,464 4,744 5,025
Total recoveries 673 672 1,196 1,284
------------- ----------- ---------- -----------
Net charge-offs 1,629 1,792 3,548 3,741
------------- ----------- ---------- -----------
Balance, end of period $39,287 $37,431 $39,287 $37,431
============= =========== ========== ===========
Total loans:
Average $2,606,301 $2,425,247 $2,577,241 $2,406,651
Period-end 2,642,403 2,450,828 2,642,403 2,450,828
Ratios:
Net charge-offs to average loans (annualized) 0.25% 0.30% 0.28% 0.31%
Allowance for loan losses to period-end loans 1.49 1.53 1.49 1.53
</TABLE>
18
<PAGE>
TABLE 6 - Non-Performing Assets
<TABLE>
<CAPTION>
(Dollars in thousands)
June 30, December 31, June 30,
1994 1993 1993
-------- -------- --------
<S> <C> <C> <C>
Non-accrual loans $12,351 $17,450 $16,684
Restructured loans 7,251 7,352 6,724
-------- -------- --------
Total non-performing loans 19,602 24,802 23,408
Other real estate owned 3,125 2,981 4,053
-------- -------- --------
Total non-performing assets $22,727 $27,783 $27,461
======== ======== ========
Ratios:
Non-performing loans to total loans 0.74% 0.96% 0.96%
Non-performing assets to total loans and
other real estate owned 0.86 1.07 1.12
Allowance for loan losses to non-performing
loans 200.42 157.98 159.91
Loans past due 90 or more days as to
interest or principal $2,620 $2,823 $4,163
======== ========= =======
</TABLE>
19
<PAGE>
PART II - OTHER INFORMATION
---------------------------
For the Quarter Ended June 30, 1994
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Shareholders of the Corporation was held on April
18, 1994. At the Annual Meeting, the shareholders elected as directors of the
Corporation the 17 nominees set forth in the Corporation's Proxy Statement dated
as of March 18, 1994.
The number of votes cast for or withheld in the election of directors
is as follows:
<TABLE>
<CAPTION>
Election of Directors:
VOTES
NAME FOR WITHHELD
---- --- --------
<S> <C> <C>
William H. Alexander 26,174,680 315,669
---------- -------
John A. Arnold 26,248,679 241,670
---------- -------
Jeffrey J. Burdge 26,245,998 244,351
---------- -------
James O. Green 26,221,662 268,687
---------- -------
Alfred G. Hemmerich 26,237,072 253,277
---------- -------
Lee H. Javitch 26,231,542 258,807
---------- -------
Christopher R. Jennings 26,241,695 248,654
---------- -------
William J. King 26,221,288 269,061
---------- -------
William T. Kirchhoff 26,219,647 270,702
---------- -------
Lawrence J. LaMaina, Jr. 26,222,289 268,060
---------- -------
James E. Marley 26,224,671 265,678
---------- -------
Robert F. Nation 26,231,617 258,732
---------- -------
Elmer E. Naugle 26,237,352 252,997
---------- -------
Walter F. Raab 26,240,816 249,533
---------- -------
Paul C. Raub 26,245,282 245,067
---------- -------
Henry W. Rhoads 26,214,270 276,079
---------- -------
R. Champlin Sheridan, Jr. 26,231,802 258,547
---------- -------
</TABLE>
20
<PAGE>
PART II - OTHER INFORMATION
---------------------------
For the Quarter Ended June 30, 1994
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11 Statement regarding Computation of Per Share
Earnings.
15(a) Report of KPMG Peat Marwick regarding unaudited
interim financial information of the Corporation for the
quarter ended June 30, 1994.
15(b) Letter of KPMG Peat Marwick regarding unaudited interim
financial information of the Corporation for the quarter
ended June 30, 1994.
(b) Reports on Form 8-K
A current report on Form 8-K dated May 26, 1994 was filed with the
Securities and Exchange Commission on or about June 1, 1994. The
report was filed under Item 5 - "Other Events" and disclosed that
the Corporation, through its wholly-owned bank subsidiary, Dauphin
Deposit Bank and Trust Company, had entered into an agreement to
acquire 100% of the outstanding stock of Eastern Mortgage
Services, Inc., a closely-held mortgage banking company
headquartered in Trevose, Pennsylvania.
There were no other reports on Form 8-K filed for the three months
ended June 30, 1994.
21
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dauphin Deposit Corporation
---------------------------
(Registrant)
Date: August 3, 1994 /s/William J. King
- - ------------------------- ---------------------------------
William J. King, Chairman of
the Board and Chief Executive
Officer
Date: August 3, 1994 /s/Dennis L. Dinger
- - ------------------------- ----------------------------------
Dennis L. Dinger, Executive
Vice President and Chief
Financial Officer
22
<PAGE>
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Exhibit Sequential
Number Page Number
- - ------- -----------
<S> <C> <C>
11 Statement regarding Computation of Per Share Earnings
15(a) Report of KPMG Peat Marwick regarding unaudited interim
financial information of the Corporation for the
quarter ended June 30, 1994
15(b) Letter of KPMG Peat Marwick regarding unaudited interim
financial information of the Corporation for the
quarter ended June 30, 1994
</TABLE>
<PAGE>
Statement regarding computation of per share earnings
<TABLE>
<CAPTION>
Three Months Ended
June 30, 1994 June 30, 1993
------------- -------------
<S> <C> <C>
Net income $17,967,000 $17,408,000
Shares outstanding
Primary 32,251,108 32,597,453
Fully diluted 32,595,529 32,952,061
Earnings per share
Primary $0.56 $0.54
Fully diluted $0.55 $0.53
<CAPTION>
Six Months Ended
June 30, 1994 June 30, 1993
------------- -------------
<S> <C> <C>
Net income $35,868,000 $35,161,000
Shares outstanding
Primary 32,446,897 32,593,983
Fully diluted 32,791,882 32,949,837
Earnings per share
Primary $1.11 $1.08
Fully diluted $1.09 $1.07
</TABLE>
Exhibit 11
<PAGE>
[LETTERHEAD OF KPMG PEAT MARWICK APPEARS HERE]
Independent Accountants' Report
-------------------------------
The Board of Directors
Dauphin Deposit Corporation:
We have reviewed the consolidated balance sheets of Dauphin Deposit Corporation
and subsidiaries as of June 30, 1994 and 1993, and the related consolidated
statement of income for the three-month and six-month periods ended June 30,
1994 and 1993, and the consolidated statements of cash flows for the six-month
periods ended June 30, 1994 and 1993. These financial statements are the
responsibility of Dauphin's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying consolidated financial statements for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Dauphin Deposit Corporation and
subsidiaries as of December 31, 1993, and the related consolidated statements of
income, stockholders' equity, and cash flows for the year ended (not presented
herein); and in our report dated January 28, 1994, we expressed and unqualified
opinion on those consolidated financial statements. In our opinion, the
information set forth in the accompanying consolidated balance sheet as of
December 31, 1993 is fairly presented, in all material respects, in relation to
the consolidated balance sheet from which it has been derived.
/s/ KPMG Peat Marwick
KPMG PEAT MARWICK
July 13, 1994
Exhibit 15(a)
<PAGE>
[LETTERHEAD OF KPMG PEAT MARWICK APPEARS HERE]
The Board of Directors
Dauphin Deposit Corporation
Re: Registration Statements No. 33-53793
33-17401
33-50172
33-61848
2-73258
With respect to the subject registration statements, we acknowledge our
awareness of the use therein of our reports dated April 13 and July 13, 1994
related to our reviews of interim financial information.
Pursuant to Rule 436(c) under the Securities Act of 1933, such reports are not
considered a part of a registration statement prepared or certified by an
accountant or a report prepared or certified by an accountant within the meaning
of sections 7 and 11 of the Act.
/s/ KPMG Peat Marwick
KPMG PEAT MARWICK
Harrisburg, Pennsylvania
August 8, 1994
Exhibit 15(b)
