<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 September 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 October 31, 1994
- - - -------------------------- -------------------------------
Common Stock, $5 Par Value 31,809,760 Shares
1
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DAUPHIN DEPOSIT CORPORATION
---------------------------
FORM 10-Q
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For the Quarter Ended September 30, 1994
Contents
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<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
- - - -------------------------------
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets as of September 30, 1994 and
1993 and December 31, 1993
Consolidated Statements of Income for the Three Month
and Nine Month Periods Ended September 30, 1994 and
1993
Consolidated Statements of Cash Flows for the Nine
Month Periods Ended September 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 6. Exhibits and Reports on Form 8-K
SIGNATURES
- - - ----------
</TABLE>
2
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Part I
------
For the Quarter Ended September 30, 1994
Item 1. Financial Statements
Dauphin Deposit Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Dollars in thousands)
September 30, December 31, September 30,
1994 1993 1993
--------------- -------------- ---------------
(Unaudited) (Audited) (Unaudited)
<S> <C> <C> <C>
ASSETS
Cash and due from banks $201,543 $151,845 $162,321
--------------- -------------- ---------------
Short-term investments
Interest bearing deposits 6,479 13,573 6,537
Federal funds sold and securities purchased under
agreements to resell 22,600 2,950 8,400
--------------- -------------- ---------------
Total short-term investments 29,079 16,523 14,937
--------------- -------------- ---------------
Investment securities
(Approximate Fair value $1,841,398, $2,105,942 and
$2,107,689, respectively 1,841,398 2,041,204 2,029,123
Assets held for sale 52,677 9,203 44,516
Loans (net of unearned income) 2,715,569 2,586,085 2,514,004
Allowance for loan losses (39,856) (39,182) (38,079)
--------------- -------------- ---------------
Total net loans 2,675,713 2,546,903 2,475,925
--------------- -------------- ---------------
Bank premises and equipment 66,960 64,348 66,260
Other assets 117,109 86,829 90,225
--------------- -------------- ---------------
Total assets $4,984,479 $4,916,855 $4,883,307
=============== ============== ===============
LIABILITIES
Deposits
Non-interest bearing $415,478 $423,641 $394,057
Interest bearing 3,040,235 3,162,494 3,098,386
--------------- -------------- ---------------
Total deposits 3,455,713 3,586,135 3,492,443
--------------- -------------- ---------------
Short-term borrowings
Federal funds purchased and securities sold under
agreements to repurchase 826,137 628,100 693,766
U.S. Treasury tax and loan notes 46,573 52,286 53,284
--------------- -------------- ---------------
Total short-term borrowings 872,710 680,386 747,050
--------------- -------------- ---------------
Long-term debt 91,971 92,454 92,473
Accrued expenses and taxes 70,304 51,805 53,626
--------------- -------------- ---------------
Total liabilities 4,490,698 4,410,780 4,385,592
--------------- -------------- ---------------
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 754,968, 134,200,
and 136,740 shares are held as treasury stock, respectively 163,208 163,208 163,208
Surplus 11,656 11,213 11,151
Retained earning 364,835 333,774 325,511
Unrealized gains (losses) on securities available-for-sale,
net of deferred taxes (27,148)
--------------- -------------- ---------------
512,551 508,195 499,870
Less: Treasury stock - at cost (18,770) (2,120) (2,155)
--------------- -------------- ---------------
Total stockholders' equity 493,781 506,075 497,715
--------------- -------------- ---------------
Total liabilities and stockholders' equity $4,984,479 $4,916,855 $4,883,307
=============== ============== ===============
</TABLE>
See accompanying notes to consolidated financial statements.
3
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Dauphin Deposit Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
<TABLE>
<CAPTION>
(Dollars in thousands, except per share data)
Three Months Nine Months
Ended September 30, Ended September 30,
-------------------------------- --------------------------------
1994 1993 1994 1993
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Interest income
Interest and fees on loans $53,331 $48,376 $150,366 $143,964
Interest and dividends on investment securities
Taxable 23,132 27,071 72,976 82,153
Exempt from federal income taxes 5,824 5,828 18,071 17,492
Interest on deposits 78 58 259 160
Interest on assets held for sale 822 653 1,191 1,557
Interest on federal funds sold and other
short-term investments 421 118 455 237
------------- ------------- -------------- --------------
Total interest income 83,608 82,104 243,318 245,563
------------- ------------- -------------- --------------
Interest expense
Interest on deposits
Savings deposits 9,205 10,461 27,599 32,744
Time deposits 15,683 16,000 45,383 50,133
Time deposits in denominations of
$100,000 or more 4,045 3,371 10,601 10,638
------------- ------------- -------------- --------------
28,933 29,832 83,583 93,515
Interest on short-term borrowings 8,469 5,705 21,472 14,371
Interest on long-term borrowings 1,675 1,689 5,013 5,047
------------- ------------- -------------- --------------
Total interest expense 39,077 37,226 110,068 112,933
------------- ------------- -------------- --------------
Net interest income 44,531 44,878 133,250 132,630
Provision for loan losses 1,870 2,372 5,624 7,317
------------- ------------- -------------- --------------
Net interest income after provision for loan losses 42,661 42,506 127,626 125,313
------------- ------------- -------------- --------------
Non-interest income
Fiduciary activities 4,102 3,805 12,288 11,772
Service charges on deposit accounts 2,926 3,177 8,732 9,558
Other service charges and fees 3,103 2,401 8,261 6,639
Broker/dealer commissions and fees 1,723 2,835 5,715 8,513
Mortgage banking 3,799 688 4,247 2,085
Securities gains, net 130 261 2,254 2,854
Other 786 695 2,452 2,440
------------- ------------- -------------- --------------
Total non-interest income 16,569 13,862 43,949 43,861
------------- ------------- -------------- --------------
Non-interest expense
Salaries and employee benefits 19,514 17,174 52,998 51,107
Net occupancy expense 2,308 2,125 6,693 6,348
Furniture and equipment expense 2,376 2,221 6,946 6,760
Deposit insurance 1,961 1,987 5,941 6,117
Other 10,177 9,730 28,571 29,226
------------- ------------- -------------- --------------
Total non-interest expense 36,336 33,237 101,149 99,558
------------- ------------- -------------- --------------
Income before income taxes 22,894 23,131 70,426 69,616
Provision for income taxes 5,556 5,940 17,220 17,264
------------- ------------- -------------- --------------
Net income $17,338 $17,191 $53,206 $52,352
============= ============= ============== ==============
Net income per share $0.54 $0.52 $1.65 $1.60
Cash dividends declared per share $0.23 $0.20 $0.69 $0.60
Weighted average number of shares outstanding 32,121,090 32,674,768 32,337,102 32,621,207
</TABLE>
See accompanying notes to consolidated financial statements.
4
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Dauphin Deposit Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
<TABLE>
<CAPTION>
(Dollars in thousands)
Nine Months Ended
September 30,
----------------------------------
1994 1993 *
--------------- ----------------
<S> <C> <C>
Operating activities
Net income $53,206 $52,352
Adjustments:
Provision for loan losses 5,624 7,317
Provision for depreciation, amortization and accretion 7,108 8,135
Provision for amortization of goodwill 900 702
Deferred income taxes (512) (625)
Securities gains, net (2,254) (2,854)
Increase in interest receivable (4,930) (3,009)
Increase in accrued expenses and taxes 26,181 3,433
Capitalized interest on deposits 31,930 35,186
Amortization of purchase and excess mortgage servicing rights 741 475
Gain on sale of mortgages and loans held for sale (1,397) (1,371)
Sale of mortgage loans held for sale 141,034 72,818
Loans originated for sale (137,311) (80,715)
Purchase of mortgage loans held for sale (7,001)
Other, net (7,917) (11,446)
--------------- ---------------
Net cash provided by operating activities 105,402 80,398
--------------- ---------------
Investing activities
Proceeds from sales of investment securities 175,556 48,864
Proceeds from maturities of investment securities 339,064 526,889
Purchases of investment securities (373,152) (531,568)
Net increase in assets held for sale, other than residential mortgages (3,547) (32,992)
Net increase in loans (177,218) (97,287)
Sale of residential mortgage and other consumer loans 42,863 4,876
Net purchases of bank premises and equipment (6,322) (2,769)
Net proceeds from sale of subsidiary, Farmers Savings Bank, FSB 797
Purchase of Eastern Mortgage Services, Inc. (21,038)
--------------- ---------------
Net cash used by investing activities (22,997) (83,987)
--------------- ---------------
Financing activities
Net decrease in demand deposits and savings accounts (63,805) (76,090)
Net decrease in time deposits (87,706) (157,236)
Net increase in short-term borrowings 156,802 138,724
Net decrease in long-term debt (105) (55)
Issuance of treasury stock 2,495 1,929
Acquisition of treasury stock (19,149)
Cash dividends (21,689) (19,004)
--------------- ---------------
Net cash used by financing activities (33,157) (111,732)
--------------- ---------------
Increase (decrease) in cash and cash equivalents 49,248 (115,321)
Cash and cash equivalents at beginning of period 152,295 283,542
--------------- ---------------
Cash and cash equivalents at end of period $201,543 $168,221
=============== ===============
</TABLE>
Total interest paid amounted to $77,162 and $78,766, respectively.
Total income taxes paid amounted to $15,131 and $18,379, respectively.
* Reclassifications have been made to various line items within this report.
See accompanying notes to consolidated financial statements.
5
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Note 1 - Accounting Policies
The consolidated financial statements include the accounts of Dauphin
Deposit Corporation and subsidiaries (Dauphin), including its banking
subsidiary, 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 in 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 nine month period ended September 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.
On July 1, 1994, Dauphin acquired Eastern Mortgage Services, Inc. (EMS), a
mortgage banking company headquirtered in Trevose, Pennsylvania, for
approximately $20.5 million in cash pursuant to a definitive agreement signed in
May 1994. The acquisition was accounted for using the purchase method of
accounting. Therefore, the results of operations of EMS from the date of
acquisition are included with the results of Dauphin. The excess of the
purchase price over the fair value of the net identifiable assets acquired of
$11.9 million has been recorded as goodwill and is being amortized on a
straight-line basis over 15 years. The acquisition is not material to the
financial position and results of operations, accordingly, pro forma information
is deemed not necessary.
6
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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 September 30, 1994 the impact of this
change resulted in a decrease in investment securities of $41,766,000 and a
decrease in stockholders' equity of $27,148,000, representing the after tax
impact.
A summary of investment securities at September 30, 1994, December 31, 1993
and September 30, 1993 is as follows:
<TABLE>
<CAPTION>
(Dollars in thousands)
September 30, 1994 December 31, 1993 September 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. $692,385 $681,348 $732,722 $750,997 $720,883 $746,040
government agencies and corporations
Obligations of states and political subdivisions 385,253 390,206 406,241 434,581 369,073 398,663
Debt securities issued by foreign governments 1,402 1,398 1,899 1,920 3,891 3,929
Corporate securities 82,847 82,867 83,336 85,992 109,811 113,007
Mortgage-backed securities 707,470 671,491 803,252 818,020 811,637 831,565
----------- ----------- ----------- ----------- ----------- -----------
Total debt securities 1,869,357 1,827,310 2,027,450 2,091,510 2,015,295 2,093,204
Equity securities 13,807 14,088 13,754 14,432 13,828 14,485
----------- ----------- ----------- ----------- ----------- -----------
Total investment securities $1,883,164 $1,841,398 $2,041,204 $2,105,942 $2,029,123 $2,107,689
=========== =========== =========== =========== =========== ===========
</TABLE>
7
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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 Nine months
ended September 30, ended September 30,
------------------------- ------------------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Statutory federal income 35.0% 35.0% 35.0% 35.0%
Tax exempt income (10.5) (10.5) (10.6) (10.5)
Other, net (0.2) 1.2 0.1 0.3
-------- -------- -------- --------
Effective income tax rate 24.3% 25.7% 24.5% 24.8%
======== ======== ======== ========
</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 September 30, 1994 represented by letters of
credit issued to customers amounted to approximately $117.1 million.
8
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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 July 1, 1994, Dauphin acquired Eastern Mortgage Services, Inc.
(Eastern Mortgage), a mortgage banking company headquartered in Trevose,
Pennsylvania, for approximately $20.5 million in cash pursuant to a definitive
agreement signed in May 1994. The acquisition was accounted for using the
purchase method of accounting. Therefore, the results of operations of Eastern
Mortgage from the date of acquisition are included with the results of Dauphin.
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
9
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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 September 30, 1994 this change resulted
in a decrease in investment securities of $41.8 million and a decrease in
stockholders' equity of $27.1 million, representing the after tax impact.
SUMMARY
Dauphin recorded net income for the third quarter of 1994 of $17.3
million, compared with $17.2 million recorded for the same quarter of 1993. Net
income per share for the third quarter of 1994 amounted to $.54, compared with
$.52 for the same period in 1993, an increase of 3.8%. Net income for the nine
months of 1994 amounted to $53.2 million compared with $52.4 million recorded
for the same period of 1993. Net income per share for the nine months of 1994
amounted to $1.65, compared with $1.60 for the same period of 1993, an increase
of 3.1%.
Dauphin's return on average total assets was 1.40% for the third quarter
of 1994, compared with 1.39% for the third quarter of 1993. For the nine months
of 1994, the return on average assets was 1.44%, compared with 1.45% for the
same period of 1993. Return on average stockholders' equity, excluding the SFAS
115 adjustment, was 13.39% for the third quarter of 1994, compared with 13.93%
for the same period of 1993. Return on average stockholders' equity, excluding
the SFAS 115 adjustment, was 13.97% for the nine months of 1994, compared with
14.66% for the same period of 1993. Return on average stockholders' equity,
including the SFAS 115 adjustment, was 13.72% for the third quarter of 1994 and
13.77% for the nine 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 third quarter and the nine months of 1994 and 1993. Net interest
income on a fully taxable equivalent basis totaled $48.3 million for the third
quarter of 1994, a decrease
10
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of $.4 million or .8% from $48.7 million for the same period of 1993. For the
nine months of 1994, net interest income amounted to $144.8 million, an increase
of $.8 million or .6% from $144.0 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.
During the third quarter of 1994, as compared with the third quarter of
1993, as shown in Table 2, there was an increase in net interest income of $1.3
million due to changes in volume and a decrease of $1.7 million due to changes
in rate. During the nine months of 1994, as compared with the same period of
1993, there was an increase of $7.9 million due to changes in volume and a
decrease of $7.0 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 were $4.6 billion for the third quarter of 1994
and 1993. For the nine months of 1994, average earning assets increased 2.1% to
$4.6 billion from $4.5 billion for the same period of 1993. The interest rate
spread for the third quarter of 1994 was 3.62% compared with 3.70% for the third
quarter of 1993. The net interest margin was 4.18% for the third quarter of 1994
compared with 4.22% for the same period of 1993. For the nine months, the
interest rate spread decreased to 3.62% from 3.69% while the net interest margin
decreased to 4.17% from 4.23%.
Interest rates during 1994 were higher than the rates experienced in
1993. The average prime rate for the third quarter of 1994 was 7.50% and the
nine months of 1994 was 6.81% compared with 6.00% for the same periods in 1993.
The average federal funds rate increased to 4.48% for the third quarter of 1994
compared with 3.06% for the same period in 1993. For the nine months of 1994 the
average federal funds rate was 3.88% compared with 3.26% for 1993. During the
third quarter of 1994, compared with the same period of 1993, the average yield
on earning assets increased 12 basis points while the average cost of interest
bearing liabilities increased 20 basis points, resulting in a decrease in the
interest rate spread of 8 basis points. For the nine months of 1994 compared
with 1993, the yield on earning assets decreased 21 basis points while the
average cost of interest bearing liabilities decreased 14 basis points,
resulting in a decrease in the interest rate spread of 7 basis points. The yield
on the investment securities portfolio decreased 9 basis points for the third
quarter and 31 basis points for the nine months of 1994 compared with 1993,
principally due to the reinvestment of maturities at significantly lower rates
when compared with the yield of the security maturing. Average loans, which
represent the
11
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highest yielding earning assets, increased $186.5 million or 7.5% for the third
quarter of 1994 compared with the third quarter of 1993. For the nine months of
1994, the increase was $176.0 million or 7.2% compared with the same period in
1993. The significant increase in the prime rate has advanced the loan yield 18
basis points in the third quarter of 1994 compared with the third quarter of
1993. This increase is impacted by the mix of commercial, residential mortgages
and consumer loans, since some loans do not reprice directly with the movement
of the prime interest rate.
The declining rates in 1993, with new loans issued at the then current
market levels, was the primary reason for the decrease in loan yields for the
nine months of 1994 compared with 1993. The cost of interest bearing deposits
decreased 8 basis points for the third quarter of 1994 compared with the third
quarter of 1993. For the nine months of 1994 compared with 1993 the decrease was
33 basis points. The overall interest rates offered for these deposits have
recently been increasing. 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 September 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.
12
<PAGE>
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.
PROVISION AND ALLOWANCE FOR LOAN LOSSES
The provision for loan losses charged to earnings was $1.9 million for
the third quarter of 1994 compared with $2.4 million for the same period of
1993. The provision for the nine months of 1994 was $5.6 million compared with
$7.3 million for the same period of 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 third quarter and the nine months of 1994
and 1993.
NON-PERFORMING ASSETS
Table 6 reflects Dauphin's non-performing assets at September 30, 1994,
December 31, 1993 and September 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 increased $2.7 million or 19.5% for the third quarter
of 1994 when compared with the third quarter of 1993. Exclusive of securities
gains, the increase was $2.8 million or 20.9%. Non-interest income increased $.1
million or .2% for the nine months of 1994 as compared with the same period of
1993. Exclusive of securities gains, the increase for the nine months of 1994
compared with 1993 was $.7 million or 1.7%. The results of operations of
Dauphin's broker/dealer subsidiary, Hopper Soliday & Co., Inc. (Hopper Soliday),
decreased non-interest income by $1.1 million and $2.8 million for the third
quarter and nine months of 1994, respectively. The Hopper Soliday decrease was
primarily caused by the increased interest rate environment which negatively
affected the volume of transactions. The results of
13
<PAGE>
Dauphin's mortgage banking operations, which includes Eastern Mortgage (as of
July 1, 1994), Farmers Mortgage Company and Dauphin Bank's mortgage division,
increased by $3.1 million and $2.2 million for the third quarter and nine months
of 1994, respectively. The decrease in service charges on deposit accounts was
due to a lower number of fees assessed for services. The increase in other
service charges and fees was primarily due to the increased volume of merchant
credit card processing.
NON-INTEREST EXPENSE
Non-interest expense increased $3.1 million or 9.3% from the third
quarter of 1993 to the third quarter of 1994. For the nine months of 1994,
compared with the same period of 1993, the increase was $1.6 million or 1.6%.
This increase was primarily salaries and benefits costs due to the acquisition
of Eastern Mortgage. Additionally, other non-interest expenses decreased due to
reduced consultant, legal and other merger-related expenses.
Salaries and employee benefits increased $2.3 million or 13.6% for the
third quarter and $1.9 million or 3.7% for the nine months of 1994, compared
with the same periods of 1993. Not including Hopper Soliday and Eastern Mortgage
subsidiaries, salaries and employee benefits remained level in the third quarter
of 1994 compared with 1993 and increased $.6 million or 1.3% for the nine months
of 1994 compared with the same period of 1993. This slight increase was
primarily due to normal salary adjustments and increased benefits costs, which
were partially offset by the operations consolidation. Full-time equivalent
employees amounted to 2,293 at September 30, 1994 compared with 2,127 at
September 30, 1993. This increase included 281 employees from the newly acquired
Eastern Mortgage subsidiary.
INCOME TAXES
Dauphin's effective tax rate for the third quarter of 1994 was 24.3%,
compared with 25.7% for the third quarter of 1993. The effective tax rate for
the nine months of 1994 was 24.5%, compared with 24.8% 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 nine
months of 1994 Dauphin repurchased 770,200 shares for $19.1 million. In October
1994, Dauphin announced
14
<PAGE>
that the Board of Directors authorized an additional repurchase of up to
1,000,000 shares of the outstanding common stock.
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 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 September
30, 1994, Dauphin and its banking subsidiary 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 does not believe the adoption will have a significant impact 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.
15
<PAGE>
TABLE 1 - Net Interest Income
<TABLE>
<CAPTION>
(Dollars in thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------- -----------------------------
1994 1993 1994 1993
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Total interest income $83,608 $82,104 $243,318 $245,563
Total interest expense 39,077 37,226 110,068 112,933
-------------- -------------- -------------- --------------
Net interest income 44,531 44,878 133,250 132,630
Tax equivalent adjustment 3,719 3,777 11,557 11,324
-------------- -------------- -------------- --------------
Net interest income (fully taxable equivalent) $48,250 $48,655 $144,807 $143,954
============== ============== ============== ==============
</TABLE>
TABLE 2 - Rate-Volume Analysis of Changes in Net Interest Income
<TABLE>
<CAPTION>
(Dollars in thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
1994/1993 1994/1993
---------------------------------------------------- -------------------------------------------------
Change due to Total Change due to Total
--------------------------------- ------------------------------
Volume Rate Change Volume Rate Change
----------- ----------- ----------- ------------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
(Taxable equivalent)
Interest income
Short-term investments $199 $124 $323 $90 $226 $316
Investment securities (2,824) (1,137) (3,961) (1,987) (6,227) (8,214)
Assets held for sale (239) 405 166 (986) 619 (367)
Loans 3,773 1,145 4,918 10,803 (4,550) 6,253
----------- ---------- ----------- ---------- -------- -----------
Total interest income 909 537 1,446 7,920 (9,932) (2,012)
----------- ---------- ----------- ---------- -------- -----------
Interest expense
Interest bearing deposits (546) (353) (899) (2,973) (6,959) (9,932)
Short-term borrowings 214 2,550 2,764 3,005 4,096 7,101
Long-term borrowings (12) (2) (14) (28) (6) (34)
----------- ---------- ----------- ---------- -------- -----------
Total interest expense (344) 2,195 1,851 4 (2,869) (2,865)
----------- ---------- ----------- ---------- -------- -----------
Net interest income $1,253 ($1,658) ($405) $7,916 ($7,063) $853
=========== ========== =========== ========== ======== ===========
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.
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
TABLE 3 Average Balances, Rates and Interest Income and Expense Summary
(Taxable Equivalent Basis) (Dollars in thousands)
Third Quarter 1994 Third 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 $5,865 $78 5.28% $5,444 $58 4.23%
Federal funds sold and securities
purchased under agreements to resell 31,386 421 5.32 14,513 118 3.23
----------- --------- ----------- ---------
Total short-term investments 37,251 499 5.31 19,957 176 3.50
----------- --------- ----------- ---------
Investment securities
U.S. government and agency obligations 1,352,574 20,945 6.19 1,538,175 23,970 6.22
State and municipals 407,482 9,646 9.47 371,492 9,568 10.30
Other securities 92,601 1,513 6.54 142,099 2,527 7.11
----------- --------- ----------- ---------
Total investment securities 1,852,657 32,104 6.93 2,051,766 36,065 7.02
----------- --------- ----------- ---------
Assets held for sale 43,900 825 7.52 50,836 659 5.16
----------- --------- ----------- ---------
Loans (1)
Commercial 1,462,410 29,750 8.07 1,419,156 26,152 7.31
Residential mortgages (2) 697,461 13,852 7.91 651,062 13,391 8.20
Consumer (3) 515,089 10,297 7.93 418,249 9,438 8.95
----------- --------- ----------- ---------
Total loans 2,674,960 53,899 8.00 2,488,467 48,981 7.82
----------- --------- ----------- ---------
Total earning assets 4,608,768 87,327 7.54 4,611,026 85,881 7.42
--------- ---------
Other assets 310,943 285,713
Total assets ----------- -----------
$4,919,711 7.07% $4,896,739 6.98%
=========== ======== =========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest bearing deposits
Demand deposits and savings deposits $1,603,971 9,205 2.28% $1,648,178 10,461 2.52%
Time deposits of $100,000 or more 293,219 4,045 5.47 282,305 3,371 4.74
Other time deposits 1,201,025 15,683 5.18 1,202,350 16,000 5.28
----------- ---------- ----------- --------
Total interest bearing deposits 3,098,215 28,933 3.70 3,132,833 29,832 3.78
Short-term borrowings 769,612 8,469 4.37 742,660 5,705 3.05
Long-term borrowings 92,018 1,675 7.25 92,488 1,689 7.28
----------- ---------- ----------- ---------
Total interest bearing liabilities 3,959,845 39,077 3.92 3,967,981 37,226 3.72
---------- ---------
Non-interest bearing demand deposits 404,537 393,690
Other liabilities 54,135 45,572
Stockholders' equity 501,194 489,496
Total liabilities and ----------- -----------
stockholders' equity $4,919,711 3.15% $4,896,739 3.02%
=========== ======== =========== ========
Interest rate spread 3.62% 3.70%
Effect of non-interest bearing funds 0.56 0.52
-------- --------
Net interest income/margin $48,250 4.18% $48,655 4.22%
========== ======== ========= ========
Nine Months Ended September 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 $5,525 $259 6.27% $5,532 $161 3.89
Federal funds sold and securities
purchased under agreements to resell 11,903 455 5.11 9,017 237 3.51
----------- ---------- ----------- ---------
Total short-term investments 17,428 714 5.48 14,549 398 3.66
----------- ---------- ----------- ---------
Investment securities
U.S. government and agency obligations 1,468,614 66,200 6.01 1,527,272 72,169 6.30
State and municipals 418,832 29,719 9.46 369,617 28,501 10.28
Other securities 100,001 4,917 6.56 157,210 8,380 7.11
----------- ----------- ----------- ---------
Total investment securities 1,987,447 100,836 6.77 2,054,099 109,050 7.08
----------- ----------- ----------- ---------
Assets held for sale 22,548 1,202 7.11 41,372 1,569 5.07
Loans(1) ----------- ----------- ----------- ---------
Commercial 1,441,036 82,528 7.66 1,398,173 77,801 7.44
Residential mortgages (2) 684,247 40,408 7.88 634,741 39,788 8.37
Consumer (3) 484,891 29,187 8.05 401,310 28,281 9.42
----------- ----------- ----------- ---------
Total loans 2,610,174 152,123 7.79 2,434,224 145,870 8.01
----------- ---------- ----------- ---------
Total earning assets 4,637,597 254,875 7.34 4,544,244 256,887 7.55
---------- ---------
Other assets 297,446 284,708
----------- -----------
Total assets $4,935,043 6.90% $4,828,952 7.10%
=========== ======== =========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest bearing deposits
Demand deposits and savings deposits $1,639,026 27,599 2.25% $1,644,652 32,744 2.66%
Time deposits of $100,000 or more 281,807 10,601 5.03 301,696 10,638 4.71
Other time deposits 1,183,734 45,383 5.13 1,236,604 50,133 5.42
----------- ----------- ------------ ----------
Total interest bearing deposits 3,104,567 83,583 3.60 3,182,952 93,515 3.93
Short-term borrowings 761,039 21,472 3.77 640,175 14,371 3.00
Long-term borrowings 92,076 5,013 7.27 92,541 5,047 7.28
----------- ---------- ----------- ---------
Total interest bearing liabilities 3,957,682 110,068 3.72 3,915,668 112,933 3.86
---------- ---------
Non-interest bearing demand deposit 403,962 390,723
Other liabilities 56,970 44,947
Stockholders' equity 516,429 477,614
----------- ------------
Total liabilities and $4,935,043 2.98% $4,828,952 3.13%
stockholders' equity =========== ======== ============ =======
Interest rate spread 3.62% 3.69%
Effect of non-interest bearing funds 0.55 0.54
-------- -------
Net interest income/margin $144,807 4.17% $143,954 4.23%
=========== ======== ========= =======
</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)
September 30, 1994
---------------------------------------------------------------------------------------------
Interest Sensitivity Period
---------------------------------------------------------------------------------------------
Month Quarter Six Months Annual 5 Years
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Earning assets:
Short-term investments $29,079 $29,079 $29,079 $29,079 $29,079
Investment securities 440,551 548,604 664,164 956,146 1,711,991
Assets held for sale 52,677 52,677 52,677 52,677 52,677
Loans 1,154,919 1,259,301 1,414,898 1,663,903 2,398,826
------------ ------------- ------------- ------------- -------------
Total $1,677,226 $1,889,661 $2,160,818 $2,701,805 $4,192,573
============ ============= ============= ============= =============
Interest bearing liabilities:
Deposits $1,217,626 $1,385,233 $1,615,459 $1,781,255 $2,309,461
Short-term borrowings 872,710 872,710 872,710 872,710 872,710
Long-term borrowings 8 51,032 90,979
------------- ------------- ------------- ------------- -------------
Total $2,090,336 $2,257,943 $2,488,177 $2,704,997 $3,273,150
============= ============= ============= ============= =============
Interest sensitivity gap ($413,110) ($368,282) ($327,359) ($3,192) $919,423
Interest sensitive assets to interest
sensitive liabilities ratio 0.80 0.84 0.87 1.00 1.28
Regulatory presentation:
Interest sensitivity gap ($926,236) ($881,408) ($840,485) ($516,318) $406,297
Interest sensitive assets to interest
sensitive liabilities ratio 0.64 0.68 0.72 0.84 1.11
</TABLE>
TABLE 5 - Analysis of Allowance for Loan Losses
<TABLE>
<CAPTION>
(Dollars in thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------- ---------------------------
1994 1993 1994 1993
------------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Balance, beginning of period $39,287 $37,431 $39,182 $36,227
Provision charged to operating expenses 1,870 2,372 5,624 7,317
Allowance of subsidiary sold (101)
Total loans charged off 2,117 2,451 6,861 7,476
Total recoveries 816 727 2,012 2,011
------------- ------------- ------------ -------------
Net charge-offs 1,301 1,724 4,849 5,465
------------- ------------- ------------ -------------
Balance, end of period $39,856 $38,079 $39,856 $38,079
============= ============= ============ =============
Total loans:
Average $2,674,960 $2,488,467 $2,610,174 $2,434,224
Period-end 2,715,569 2,514,004 2,715,569 2,514,004
Ratios:
Net charge-offs to average loans (annualized) 0.19% 0.27% 0.25% 0.30%
Allowance for loan losses to period-end loans 1.47 1.51 1.47 1.51
</TABLE>
18
<PAGE>
TABLE 6 - Non-Performing Assets
<TABLE>
<CAPTION>
(Dollars in thousands)
September 30, December 31, September 30,
1994 1993 1993
------------- ------------ -------------
<S> <C> <C> <C>
Non-accrual loans $12,171 $17,450 $17,374
Restructured loans 5,644 7,352 8,216
------------- ------------ -------------
Total non-performing loans 17,815 24,802 25,590
Other real estate owned 2,936 2,981 3,510
------------- ------------ -------------
Total non-performing assets $20,751 $27,783 $29,100
============= ============ =============
Ratios:
Non-performing loans to total loans 0.66% 0.96% 1.02%
Non-performing assets to total loans and
other real estate owned 0.76 1.07 1.16
Allowance for loan losses to non-performing
loans 223.72 157.98 148.80
Loans past due 90 or more days as to
interest or principal $5,560 $2,823 $5,671
============= ============ =============
</TABLE>
19
<PAGE>
PART II - OTHER INFORMATION
---------------------------
For the Quarter Ended September 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 September 30, 1994.
15(b) Letter of KPMG Peat Marwick regarding unaudited
interim financial information of the Corporation
for the quarter ended September 30, 1994.
27 Financial Data Schedule regarding unaudited
interim financial information of the Corporation
for the quarter ended September 30, 1994.
(b) Reports on Form 8-K
A current report on Form 8-K dated July 1, 1994 was filed with the
Securities and Exchange Commission on July 5, 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 consummated its previously
announced acquisition of 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 September 30, 1994.
20
<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: November 7, 1994 /s/William J. King
- - - --------------------------- ---------------------------------
William J. King, Chairman of
the Board and Chief Executive
Officer
Date: November 7, 1994 /s/Dennis L. Dinger
- - - --------------------------- ----------------------------------
Dennis L. Dinger, Sr. Executive
Vice President and Chief Fiscal
and Administrative Officer
21
<PAGE>
EXHIBIT INDEX
-------------
Exhibit Sequential
Number Page Number
- - - ------- -----------
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 September 30,
1994
15(b) Letter of KPMG Peat Marwick regarding
unaudited interim financial information
of the Corporation for the quarter ended
September 30, 1994
27 Financial Data Schedule regarding unaudited
interim financial information of the Corporation
for the quarter ended September 30, 1994
<PAGE>
Statement regarding computation of per share earnings
<TABLE>
<CAPTION>
Three Months Ended
September 30, 1994 September 30, 1993
------------------ ------------------
<S> <C> <C>
Net income $17,338,000 $17,191,000
Shares outstanding
Primary 32,121,090 32,674,768
Fully diluted 32,445,741 33,026,731
Earnings per share
Primary $0.54 $0.52
Fully diluted $0.54 $0.52
<CAPTION>
Nine Months Ended
September 30, 1994 September 30, 1993
------------------ ------------------
<S> <C> <C>
Net income $53,206,000 $52,352,000
Shares outstanding
Primary 32,337,102 32,621,207
Fully diluted 32,663,965 32,975,740
Earnings per share
Primary $1.65 $1.60
Fully diluted $1.64 $1.60
</TABLE>
Exhibit 11
<PAGE>
(LETTERHEAD OF KPMG PEAT MARWICK LLP APPEARS HERE)
Independent Accountants' Report
-------------------------------
The Board of Directors
Dauphin Deposit Corporation:
We have reviewed the accompanying consolidated balance sheets of Dauphin Deposit
Corporation and subsidiaries as of September 30, 1994 and 1993, and the related
consolidated statements of income for the three-month periods ended September
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 then ended (not
presented herein); and in our report dated January 28, 1994, we expressed an
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.
KPMG Peat Marwick LLP
October 13, 1994
Exhibit 15(a)
<PAGE>
(LETTERHEAD OF KPMG PEAT MARWICK LLP 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, July 13 and October
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.
KPMG Peat Marwick LLP
Harrisburg, Pennsylvania
November 10, 1994
Exhibit 15(b)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> SEP-30-1994
<EXCHANGE-RATE> 1
<CASH> 201,543
<INT-BEARING-DEPOSITS> 6,479
<FED-FUNDS-SOLD> 22,600
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,841,398
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 2,715,569
<ALLOWANCE> 39,856
<TOTAL-ASSETS> 4,984,479
<DEPOSITS> 3,455,713
<SHORT-TERM> 872,710
<LIABILITIES-OTHER> 70,304
<LONG-TERM> 91,971
<COMMON> 163,208
0
0
<OTHER-SE> 330,573
<TOTAL-LIABILITIES-AND-EQUITY> 4,984,479
<INTEREST-LOAN> 150,366
<INTEREST-INVEST> 91,047
<INTEREST-OTHER> 1,905
<INTEREST-TOTAL> 243,318
<INTEREST-DEPOSIT> 83,583
<INTEREST-EXPENSE> 110,068
<INTEREST-INCOME-NET> 133,250
<LOAN-LOSSES> 5,624
<SECURITIES-GAINS> 2,254
<EXPENSE-OTHER> 101,149
<INCOME-PRETAX> 70,426
<INCOME-PRE-EXTRAORDINARY> 53,206
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 53,206
<EPS-PRIMARY> 1.65
<EPS-DILUTED> 1.64
<YIELD-ACTUAL> 7.34
<LOANS-NON> 12,171
<LOANS-PAST> 5,560
<LOANS-TROUBLED> 5,644
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 39,182
<CHARGE-OFFS> 6,861
<RECOVERIES> 2,012
<ALLOWANCE-CLOSE> 39,856
<ALLOWANCE-DOMESTIC> 39,856
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
