<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, 1995 Commission File Number 0-8415
------------------ ------
DAUPHIN DEPOSIT CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 23-1938831
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
213 Market Street, Harrisburg, Pennsylvania 17105
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (717) 255-2121
-----------------
NOT APPLICABLE
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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 25, 1995
- -------------------------- -------------------------------
Common Stock, $5 Par Value 30,738,521 Shares
<PAGE>
DAUPHIN DEPOSIT CORPORATION
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FORM 10-Q
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For the Quarter Ended September 30, 1995
Contents
--------
PART I - FINANCIAL INFORMATION
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Item 1. Financial Statements
Consolidated Balance Sheets as of September 30,1995 and 1994 and
December 31,1994
Consolidated Statements of Income for the Three Month
and Nine Month Periods Ended September 30, 1995 and 1994
Consolidated Statements of Cash Flows for the Nine Month Periods
Ended September 30, 1995 and 1994
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
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2
<PAGE>
Part I
------
For the Quarter Ended September 30, 1995
Item 1. Financial Statements
Dauphin Deposit Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Dollars in thousands)
September 30, December 31, September 30,
1995 1994 1994
------------- ------------ -------------
(Unaudited) (Audited) (Unaudited)
<S> <C> <C> <C>
ASSETS
Cash and due from banks $187,486 $202,911 $201,543
------------ ------------ ------------
Short-term investments
Interest bearing deposits 6,521 3,738 6,479
Federal funds sold (including term federal funds sold of $50,000, $0, and
$0, respectively) and securities purchased under agreements to resell 55,650 11,302 22,600
Commercial paper 75,102 0 0
------------ ------------ ------------
Total short-term investments 137,273 15,040 29,079
------------ ------------ ------------
Investment securities available-for-sale, at fair value 1,623,704 1,783,803 1,841,398
Assets held for sale, primarily mortgage loans held for sale 88,266 46,222 52,677
Loans (net of unearned income) 2,939,677 2,861,133 2,715,569
Allowance for loan losses (41,671) (40,216) (39,856)
------------ ------------ ------------
Total net loans 2,898,006 2,820,917 2,675,713
------------ ------------ ------------
Bank premises and equipment 69,373 67,088 66,960
Other assets 100,585 134,371 117,109
------------ ------------ ------------
Total assets $5,104,693 $5,070,352 $4,984,479
============ ============ ============
LIABILITIES
Deposits
Non-interest bearing $453,114 $464,919 $415,478
Interest bearing 3,380,642 3,049,965 3,040,235
------------ ------------ ------------
Total deposits 3,833,756 3,514,884 3,455,713
------------ ------------ ------------
Short-term borrowings
Federal funds purchased and securities sold under agreements to repurchase 554,679 894,511 826,137
U.S. Treasury tax and loan notes 67,963 46,266 46,573
------------ ------------ ------------
Total short-term borrowings 622,642 940,777 872,710
------------ ------------ ------------
Long-term debt 40,621 91,954 91,971
Accrued expenses and taxes 76,729 56,088 70,304
------------ ------------ ------------
Total liabilities 4,573,748 4,603,703 4,490,698
------------ ------------ ------------
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 1,929,664, 1,696,447,
and 754,968 shares are held as treasury stock, respectively 163,208 163,208 163,208
Additional paid-in capital 10,994 11,770 11,656
Retained earnings 399,002 373,921 364,835
Unrealized gains (losses) on securities available-for-sale, net of deferred taxes 4,609 (41,036) (27,148)
------------ ------------ ------------
577,813 507,863 512,551
Less: Treasury stock - at cost (46,868) (41,214) (18,770)
------------ ------------ ------------
Total stockholders' equity 530,945 466,649 493,781
------------ ------------ ------------
Total liabilities and stockholders' equity $5,104,693 $5,070,352 $4,984,479
============ ============ ============
</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,
----------------------- -----------------------
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Interest income
Interest and fees on loans $62,195 $53,331 $183,128 $150,366
Interest and dividends on investment securities
Taxable 22,333 23,132 69,483 72,976
Exempt from federal income taxes 4,349 5,824 14,059 18,071
Interest on deposits 91 78 264 259
Interest on assets held for sale 1,118 822 4,061 1,191
Interest on federal funds sold and other
short-term investments 186 421 551 455
-------- -------- -------- --------
Total interest income 90,272 83,608 271,546 243,318
-------- -------- -------- --------
Interest expense
Interest on deposits
Savings deposits 7,905 9,205 25,416 27,599
Time deposits 24,040 15,683 64,100 45,383
Time deposits in denominations of
$100,000 or more 7,306 4,045 19,191 10,601
-------- -------- -------- --------
39,251 28,933 108,707 83,583
Interest on short-term borrowings 6,414 8,469 28,266 21,472
Interest on long-term borrowings 893 1,675 3,656 5,013
-------- -------- -------- --------
Total interest expense 46,558 39,077 140,629 110,068
-------- -------- -------- --------
Net interest income 43,714 44,531 130,917 133,250
Provision for loan losses 1,246 1,870 4,362 5,624
-------- -------- -------- --------
Net interest income after provision for loan losses 42,468 42,661 126,555 127,626
-------- -------- -------- --------
Non-interest income
Fiduciary activities 4,060 4,102 12,809 12,288
Service charges on deposit accounts 2,671 2,926 8,137 8,732
Other service charges and fees 3,396 3,103 9,222 8,261
Broker/dealer commissions and fees 1,423 1,723 4,571 5,715
Mortgage banking 4,764 3,799 12,114 4,247
Securities gains, net 624 130 2,094 2,254
Other 1,296 786 2,876 2,452
-------- -------- -------- --------
Total non-interest income 18,234 16,569 51,823 43,949
-------- -------- -------- --------
Non-interest expense
Salaries and employee benefits 21,361 19,514 59,823 52,998
Net occupancy expense 2,089 2,308 7,056 6,693
Furniture and equipment expense 2,721 2,376 8,111 6,946
Deposit insurance (194) 1,961 3,721 5,941
Other 11,589 10,177 34,780 28,571
-------- -------- -------- --------
Total non-interest expense 37,566 36,336 113,491 101,149
-------- -------- -------- --------
Income before income taxes 23,136 22,894 64,887 70,426
Provision for income taxes 6,261 5,556 16,716 17,220
-------- -------- -------- --------
Net income $16,875 $17,338 $48,171 $53,206
======== ======== ======== ========
Net income per share $0.55 $0.54 $1.56 $1.65
Cash dividends declared per share $0.25 $0.23 $0.75 $0.69
Weighted average number of shares outstanding 30,893,446 32,121,090 30,968,881 32,337,102
</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,
-------------------------
1995 1994
---------- ----------
<S> <C> <C>
Operating activities
Net income $ 48,171 $ 53,206
Adjustments:
Provision for loan losses 4,362 5,624
Provision for depreciation, amortization and accretion 5,592 7,108
Amortization of goodwill 1,218 900
Deferred income taxes 52 (512)
Securities gains, net (2,094) (2,254)
(Increase) decrease in interest receivable 3,104 (4,930)
Increase in accrued expenses and taxes 20,641 26,181
Capitalized interest on deposits 43,080 31,930
Amortization of purchased and excess mortgage servicing rights 1,252 741
Gain on sale of mortgage loans held for sale (1,592) (1,397)
Sale of mortgages loans held for sale 503,063 141,034
Loans originated for sale (520,799) (137,311)
Purchase of mortgage loans held for sale (17,488) (7,001)
Other, net (3,135) (7,917)
-------- --------
Net cash provided by operating activities 85,427 105,402
-------- --------
Investing activities
Proceeds from sales of investment securities 196,163 175,556
Proceeds from maturities of investment securities 267,924 339,064
Purchases of investment securities (322,262) (373,152)
Net increase in assets held for sale, other than loans held for sale (5,228) (3,547)
Net increase in loans (150,123) (177,218)
Sale of residential mortgage and other consumer loans 39,507 42,863
Net proceeds from sale of subsidiary, Farmers Savings Bank, FSB 797
Purchase of Eastern Mortgage Services, Inc. (21,038)
Net purchases of bank premises and equipment (7,918) (6,322)
-------- --------
Net cash provided (used) by investing activities 18,063 (22,997)
-------- --------
Financing activities
Net decrease in demand deposits and savings accounts (188,575) (63,805)
Net increase (decrease) in time deposits 464,367 (87,706)
Net increase (decrease) in short-term borrowings (318,135) 156,802
Net decrease in long-term debt (51,075) (105)
Issuance of common stock and treasury stock 5,088 2,495
Acquisition of treasury stock (12,277) (19,149)
Cash dividends paid (23,158) (21,689)
-------- --------
Net cash used by financing activities (123,765) (33,157)
-------- --------
Increase (decrease) in cash and cash equivalents (20,275) 49,248
Cash and cash equivalents at beginning of period 210,911 152,295
-------- --------
Cash and cash equivalents at end of period $190,636 $201,543
======== ========
Total interest paid $ 86,627 $ 77,162
Total income taxes paid 9,947 15,131
Schedule of non-cash investing and financing activities:
Loans charged off 6,193 6,861
Net loan transfers to other real estate owned 929 4,129
Conversion of convertible subordinated debentures 258 432
Securitization of mortgage loans 36,991
</TABLE>
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 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 nine month period ended September 30, 1995 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 1995.
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 mortgage servicing rights which are discussed
in Dauphin's Form 10-Q for the quarter ended June 30, 1995 and the accounting
policies relating to impairment of loans which are discussed in Dauphin's Form
10-Q for the quarter ended March 31, 1995. All other accounting policies are
presented on pages 35 through 38 of the 1994 Securities and Exchange Commission
Form 10-K included in the Annual Report to Stockholders.
Note 2 - Investment Securities
A summary of investment securities at September 30, 1995, December 31, 1994
and September 30, 1994 is as follows:
<TABLE>
<CAPTION>
(Dollars in thousands)
September 30, 1995 December 31, 1994 September 30, 1994
---------------------- --------------------- -----------------------
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. $ 605,153 $ 607,544 $ 687,005 $ 665,520 $ 692,385 $ 681,348
government agencies and corporations
Obligations of states and political subdivision 301,689 312,417 369,061 366,712 385,253 390,206
Debt securities issued by foreign governments 900 897 900 896 1,402 1,398
Corporate securities 48,102 48,367 79,032 78,283 82,847 82,867
Mortgage-backed securities 641,496 635,210 698,035 659,493 707,470 671,491
---------- ---------- ---------- ---------- ---------- ----------
Total debt securities 1,597,340 1,604,435 1,834,033 1,770,904 1,869,357 1,827,310
Equity securities 19,272 19,269 12,903 12,899 13,807 14,088
---------- ---------- ---------- ---------- ---------- ----------
Total investment securities $1,616,612 $1,623,704 $1,846,936 $1,783,803 $1,883,164 $1,841,398
========== ========== ========== ========== ========== ==========
</TABLE>
6
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Note 3 - 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,
------------------- -------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Statutory federal income tax rate 35.0% 35.0% 35.0% 35.0%
Tax exempt income (8.3) (10.5) (9.4) (10.6)
Other, net 0.4 (0.2) 0.2 0.1
-------- -------- -------- --------
Effective income tax rate 27.1% 24.3% 25.8% 24.5%
======== ======== ======== ========
</TABLE>
Note 4 - 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, 1995 represented by letters of
credit issued to customers amounted to approximately $130.0 million.
7
<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 July 1, 1994, Dauphin acquired Eastern Mortgage Services, Inc. (Eastern
Mortgage), a mortgage banking company headquartered in Trevose, Pennsylvania,
for approximately $21.0 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.
SUMMARY
Dauphin recorded net income for the third quarter of 1995 of $16.9 million,
compared with $17.3 million recorded for the same quarter of 1994. Net income
per share for the third quarter of 1995 amounted to $.55, compared with $.54 for
the same period in 1994, an increase of 1.9%. Net income for the first nine
months of 1995 amounted to $48.2 million compared with $53.2 million recorded
for the same period of 1994. Net income per share for the first nine months of
1995 amounted to $1.56, compared with $1.65 for the same period of 1994, a
decrease of 5.5%.
Dauphin's return on average total assets was 1.36% for the third quarter of
1995, compared with 1.40% for the third quarter of 1994. For the nine months of
1995, the return on average assets was 1.29%, compared with 1.44% for the same
period of 1994. Return on average stockholders' equity was 12.84% for the third
quarter of 1995 compared with 13.72% for the third quarter of 1994. Return on
average stockholders' equity amounted to 12.78% for the nine months of 1995
compared with 13.77% for the nine months of 1994.
8
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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 affected 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 1995 and 1994. Net interest
income on a fully taxable equivalent basis totaled $46.7 million for the third
quarter of 1995, a decrease of $1.5 million or 3.2% from $48.2 million for the
same period of 1994. For the nine months of 1995, net interest income amounted
to $140.4 million, a decrease of $4.4 million or 3.0% from $144.8 million for
1994.
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 1995, as compared with the third quarter of
1994, as shown in Table 2, there was a decrease in net interest income of $1.1
million due to changes in volume and a decrease of $.4 million due to changes in
rate. During the nine months of 1995, as compared with the same period of 1994,
there was a decrease of $4.3 million due to changes in volume and a decrease of
$.1 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
9
<PAGE>
into account the contribution of assets funded by interest free sources.
Average earning assets were $4.6 billion for the third quarter of 1995 and
the third quarter of 1994. For the nine months of 1995, average earning assets
were $4.7 billion compared with $4.6 billion for 1994. The interest rate spread
for the third quarter of 1995 was 3.29% compared with 3.62% for the third
quarter of 1994. The net interest margin was 4.03% for the third quarter of 1995
compared with 4.18% for 1994. For the nine months, the interest rate spread
decreased to 3.32% from 3.62% while the net interest margin decreased to 4.00%
from 4.17%.
Interest rates during 1995 were higher than the rates experienced in 1994.
The average prime rate for the third quarter of 1995 was 8.77% compared with
7.50% for the same period in 1994. For the nine months of 1995 the average prime
rate was 8.86% compared 6.81% for the same period in 1994. The average federal
funds rate increased to 5.80% for the third quarter of 1995 compared with 4.48%
for the same period in 1994. For the nine months of 1995 the average federal
funds rate was 5.87% compared with 3.88% for 1994. During the third quarter of
1995, compared with the same period of 1994, the average yield on earning assets
increased 49 basis points while the average cost of interest bearing liabilities
increased 82 basis points, resulting in a decrease in the interest rate spread
of 33 basis points. For the nine months of 1995 compared with 1994, the yield on
earning assets increased 69 basis points while the average cost of interest
bearing liabilities increased 99 basis points, resulting in a decrease in the
interest rate spread of 30 basis points. The yield on the investment securities
portfolio increased 7 basis points for the third quarter and 35 basis points for
the nine months primarily due to the reinvestment of maturities at significantly
higher rates. Average loans, which represent the highest yielding earning
assets, increased $215.7 million or 8.1% for the third quarter of 1995 compared
with the third quarter of 1994. For the nine months of 1995, the increase was
$265.8 million or 10.2% compared with the same period in 1994. The increased
rates in 1995, with new loans issued at the then current market levels, was the
primary reason for the increase of 63 basis points for the third quarter and 80
basis points for the nine months in the overall average loan yield. The cost of
interest bearing deposits increased 90 basis points for the third quarter of
1995 compared with the third quarter of 1994. For the nine months of 1995
compared with 1994 the
10
<PAGE>
increase was 86 basis points. In addition to the increase in interest rates
offered for these deposits during 1995, the mix of these deposits changed as
depositors invested in longer term certificates of deposit, moving from shorter
term instruments which typically have lower rates. The increase in the cost of
short-term borrowings was caused primarily by the rise in the federal funds
rate. The decrease in the interest rate spread of 33 basis points for the third
quarter was partially offset by an increase in the value of non-interest bearing
funds resulting in a net 15 basis point decline in the net interest margin. For
the nine months, the interest rate spread decreased 30 basis points which was
partially offset by an increase in the value of non-interest bearing funds
resulting in a net 17 basis point decline in the net interest margin.
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 rate of growth in interest free sources of funds will influence the
level of interest sensitive funding sources. In addition, the 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 changes in net interest margin.
Table 4 presents an interest sensitivity analysis of Dauphin's assets and
liabilities at September 30, 1995 for several time intervals. This table
reflects the interest sensitivity gap in two formats. The detailed presentation
represents management's assumption 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
11
<PAGE>
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. The gap at September 30, 1995
reflects Dauphin's sensitivity at a point in time to rate changes over future
periods of time. Generally, an asset sensitive gap will increase Dauphin's net
interest income during periods of rising interest rates. A liability sensitive
gap will increase Dauphin's net interest income during declining rates. The
lower the amount of this gap, the less sensitive Dauphin's earnings are to
interest rate changes. Dauphin's assets and liabilities with similar maturities
or repricing will react differently in varying interest rate environments.
Therefore, the interest sensitivity gap does not accurately predict the actual
impact of market rate changes. The volume and mix of future assets and
liabilities changes will also impact Dauphin's net interest income. Dauphin
continuously monitors and adjusts the gap position, taking into consideration
current interest rate projections, and maintaining flexibility if rates move
contrary to expectations. Dauphin uses on-balance sheet financial instruments,
such as investments classified as available-for-sale, to provide flexibility in
managing the interest sensitivity gap.
PROVISION AND ALLOWANCE FOR LOAN LOSSES
The provision for loan losses charged to earnings was $1.2 million for the
third quarter of 1995 compared with $1.9 million for the third quarter of 1994.
The provision for the nine months of 1995 was $4.4 million compared with $5.6
million for 1994. 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 1995 and 1994.
12
<PAGE>
NON-PERFORMING ASSETS
Table 6 reflects Dauphin's non-performing assets at September 30, 1995,
December 31, 1994 and September 30, 1994. 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.
At September 30, 1995, management is not aware of any loans not disclosed
in Table 6 that (i) represent or result from trends or uncertainties which
management reasonably expects will materially impact future operating results,
liquidity, or capital resources, or (ii) represent material credits about which
management is aware of any information which causes management to have serious
doubts as to the ability of such borrowers to comply with the loan repayment
terms.
NON-INTEREST INCOME
Non-interest income increased $1.7 million or 10.0% for the third quarter
of 1995 when compared with the third quarter of 1994. Exclusive of securities
gains, the increase was $1.2 million or 7.1%. Non-interest income increased $7.9
million or 17.9% for the nine months of 1995 as compared with the same period of
1994. Exclusive of securities gains, the increase for the nine months of 1995
compared with 1994 was $8.0 million or 19.3%. The results of operations of
Dauphin's broker/dealer subsidiary, Hopper Soliday & Co., Inc. (Hopper Soliday),
decreased non-interest income by $.3 million for the third quarter and decreased
non-interest income by $1.1 million for the nine months of 1995 compared with
1994. The Hopper Soliday decrease was primarily caused by the increased interest
rate environment which negatively effected the volume of transactions. The
increase of $1.0 million in mortgage banking income for the third quarter of
1995 compared with the third quarter of 1994 was due to the increased volume of
loans closed. The increase of $7.9 million for the nine months of 1995 compared
with 1994 is due to the acquisition of Eastern Mortgage, a full service
13
<PAGE>
mortgage banking operation, as of July 1, 1994. Prior year's income included a
limited mortgage banking operation within other subsidiaries.
NON-INTEREST EXPENSE
Non-interest expense increased $1.2 million or 3.4% from the third quarter
of 1994 to the third quarter of 1995. For the nine months of 1995, compared with
the same period of 1994, non-interest expenses increased $12.3 million or 12.2%.
Excluding the results of operations of Hopper Soliday and Eastern Mortgage, non-
interest expense increased $.9 million or 3.1% for the third quarter of 1995
compared with 1994 and $3.4 million or 3.7% for the nine months of 1995 compared
with 1994.
Salaries and employee benefits increased $1.8 million or 9.5% for the third
quarter of 1995. For the nine months of 1995, compared with the same period of
1994 salaries and employee benefits increased $6.8 million or 12.9%. Excluding
Hopper Soliday and Eastern Mortgage, salaries and employee benefits increased
$.5 million or 3.1% and decreased $.9 million or 2.0% for the third quarter and
the nine months of 1995, respectively, compared with the same periods of 1994.
The salary increase in the third quarter 1995 compared with the third quarter
1994 was due to normal salary adjustments. The salary decrease in the nine
months of 1995 compared with the same period of 1994 was primarily due to cost
savings from the operations consolidation of the Farmers Bank and Valleybank
divisions which were partially offset by normal salary adjustments. Full-time
equivalent employees increased 4.1% to 2,388 at September 30, 1995 compared with
2,293 at September 30, 1994.
All other non-interest expense decreased $.6 million or 3.7% for the third
quarter and $5.5 million or 11.5% for the nine months of 1995, compared with the
same period of 1994. Without the effect of Hopper Soliday and Eastern Mortgage,
all other non-interest expense increased $.5 million or 3.1% for the third
quarter and $4.3 million or 9.7% for the nine months of 1995, compared with the
same period of 1994. These increased expenses reflect strategic initiatives
being implemented in 1995, which are important to Dauphin's continued future
growth and profitability. These increases were offset by the industry-wide
reduction of FDIC insurance premiums. Dauphin received a refund of $2.2 million
in September 1995, reflecting the change in the assessment rate effective June
1, 1995.
14
<PAGE>
INCOME TAXES
Dauphin's effective tax rate for the third quarter of 1995 was
27.1%,compared with 24.3% for the third quarter of 1994. The effective tax rate
for the nine months of 1995 was 25.8%, compared with 24.5% for the same period
of 1994. 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 3 of the Notes to Consolidated Financial Statements. The increase
in the effective tax rate was primarily due to the reduction in the level of tax
free investments.
CAPITAL MANAGEMENT
During 1994, Dauphin announced that the Board of Directors authorized the
repurchase of up to 2,000,000 shares of the outstanding stock. In February 1995,
an additional 1,500,000 shares were authorized for repurchase. Available
investments are being used to fund the share repurchases. 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 1995 and 1994, Dauphin
repurchased 505,000 shares for $12.3 million and 770,200 shares for $19.1
million, respectively.
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
15
<PAGE>
definition in the risk-based capital guidelines. At September 30, 1995, Dauphin
and its banking subsidiary exceeded all capital requirements.
NEW ACCOUNTING STANDARDS
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (SFAS 123). SFAS 123 establishes a new method of accounting for
stock-based compensation arrangements with employees. The new method is a fair
value based method rather than the intrinsic value based method that is
currently utilized. However, SFAS 123 does not require an entity to adopt the
new fair value based method for purposes of preparing basic financial
statements. If an entity chooses not to adopt the fair value based method, SFAS
123 requires an entity to display in the footnotes pro forma net income and
earnings per share information as if the fair value based method had been
adopted.
Currently, Dauphin has not determined whether it will adopt the fair value
based method and accordingly, cannot estimate the impact on the basic financial
statements that SFAS 123 will have upon adoption.
SFAS 123 is effective for financial statements with fiscal years beginning
after December 15, 1995.
16
<PAGE>
TABLE 1 - Net Interest Income
<TABLE>
<CAPTION>
(Dollars in thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
-----------------------------------------------
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Total interest income $90,272 $83,608 $271,546 $243,318
Total interest expense 46,558 39,077 140,629 110,068
-------- -------- -------- --------
Net interest income 43,714 44,531 130,917 133,250
Tax equivalent adjustment 3,002 3,719 9,480 11,557
-------- -------- -------- --------
Net interest income (fully taxable equivalent) $46,716 $48,250 $140,397 $144,807
======== ======== ======== ========
</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,
1995/1994 1995/1994
------------------------------------ ------------------------------------
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 ($431) $225 ($206) ($70) $171 $101
Investment securities (4,510) 1,014 (3,496) (16,012) 6,366 (9,646)
Assets held for sale 761 (6) 755 2,885 (3) 2,882
Loans 4,105 4,789 8,894 15,718 17,096 32,814
---------- ---------- ---------- ---------- ---------- ----------
Total interest income (75) 6,022 5,947 2,521 23,630 26,151
---------- ---------- ---------- ---------- ---------- ----------
Interest expense
Interest bearing deposits 6,207 4,111 10,318 11,312 13,812 25,124
Short-term borrowings (3,855) 1,800 (2,055) (2,701) 9,495 6,794
Long-term borrowings (1,360) 578 (782) (1,818) 461 (1,357)
---------- ---------- ---------- ---------- ---------- ----------
Total interest expense 992 6,489 7,481 6,793 23,768 30,561
---------- ---------- ---------- ---------- ---------- ----------
Net interest income ($1,067) ($467) ($1,534) ($4,272) ($138) ($4,410)
========== ========== ========== ========== ========== ==========
</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.
17
<PAGE>
TABLE 3 - Average Balances, Rates and Interest Income and Expense Summary
(Taxable Equivalent Basis) (Dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended September 30,
-----------------------------------------------------------------------
1995 1994
--------------------------------- -----------------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
----------- ---------- -------- ------------ ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Short-term investments
Interest bearing deposits $7,805 $107 5.44% $5,865 $78 5.28%
Federal funds sold and securities
purchased under agreements to resell 6,436 159 9.80 31,386 421 5.32
Commercial paper 1,627 27 6.59
------------ --------- ------------ -----------
Total short-term investments 15,868 293 7.33 37,251 499 5.31
------------ --------- ------------ -----------
Investment securities
U.S. government obligations 178,928 2,579 5.72 245,439 3,470 5.61
U.S. government agencies 1,057,521 17,401 6.58 1,107,135 17,475 6.31
State and municipals 321,929 7,367 9.15 407,482 9,646 9.47
Other securities 74,160 1,261 6.80 92,601 1,513 6.54
------------ --------- ------------ -----------
Total investment securities 1,632,538 28,608 7.00 1,852,657 32,104 6.93
------------ --------- ------------ -----------
Assets held for sale 84,363 1,580 7.49 43,900 825 7.52
------------ --------- ------------ -----------
Loans (1)
Commercial 969,039 21,550 8.82 905,569 17,937 7.86
Commercial mortgage 547,673 12,496 9.05 556,841 11,813 8.42
Residential mortgages (2) 760,795 16,101 8.43 697,461 13,852 7.91
Consumer (3) 613,193 12,646 8.20 515,089 10,297 7.93
------------ --------- ------------ -----------
Total loans 2,890,700 62,793 8.63 2,674,960 53,899 8.00
------------ --------- ------------ -----------
Total earning assets 4,623,469 93,274 8.03 4,608,768 87,327 7.54
--------- -----------
Other assets 296,486 310,943
------------ ------------
Total assets $4,919,955 7.55% $4,919,711 7.07%
============ ======= ============ =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest bearing deposits
Demand deposits and savings deposits $1,389,604 7,905 2.26% $1,603,971 9,205 2.28%
Time deposits of $100,000 or more 421,797 7,306 6.87 293,219 4,045 5.47
Other time deposits 1,575,621 24,040 6.05 1,201,025 15,683 5.18
------------ --------- ------------ -----------
Total interest bearing deposits 3,387,022 39,251 4.60 3,098,215 28,933 3.70
Short-term borrowings 465,715 6,414 5.46 769,612 8,469 4.37
Long-term borrowings 40,702 893 8.77 92,018 1,675 7.25
------------ --------- ------------ -----------
Total interest bearing liabilities 3,893,439 46,558 4.74 3,959,845 39,077 3.92
--------- -----------
Non-interest bearing demand deposits 441,889 404,537
Other liabilities 63,025 54,135
Stockholders' equity 521,602 501,194
------------ ------------
Total liabilities and
stockholders' equity $4,919,955 3.75% $4,919,711 3.15%
============ ======= ============ =======
Interest rate spread 3.29% 3.62%
Effect of non-interest bearing funds 0.74 0.56
------- -------
Net interest income/margin $46,716 4.03% $ 48,250 4.18%
========= ======= =========== =======
<CAPTION>
Nine Months Ended September 30,
-----------------------------------------------------------------------
1995 1994
--------------------------------- -----------------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
----------- ---------- -------- ------------ ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Short-term investments
Interest bearing deposits $6,039 $264 5.84% $5,525 $259 6.27%
Federal funds sold and securities
purchased under agreements to resell 9,448 524 7.42 11,903 455 5.11
Commercial paper 548 27 6.59
------------ --------- ------------ -----------
Total short-term investments 16,035 815 6.80 17,428 714 5.48
------------ --------- ------------ -----------
Investment securities
U.S. government obligations 208,886 8,876 5.68 255,733 10,939 5.72
U.S. government agencies 1,081,523 54,463 6.71 1,212,881 55,261 6.07
State and municipals 336,482 23,723 9.40 418,832 29,719 9.46
Other securities 80,924 4,128 6.80 100,001 4,917 6.56
------------ --------- ------------ -----------
Total investment securities 1,707,815 91,190 7.12 1,987,447 100,836 6.77
------------ --------- ------------ -----------
Assets held for sale 76,748 4,084 7.10 22,548 1,202 7.11
------------ --------- ------------ -----------
Loans (1)
Commercial 953,705 63,446 8.89 895,474 49,069 7.33
Commercial mortgage 531,545 36,456 9.17 545,562 33,459 8.20
Residential mortgages (2) 792,856 48,758 8.21 684,247 40,408 7.88
Consumer (3) 597,848 36,277 8.11 484,891 29,187 8.05
------------ --------- ------------ -----------
Total loans 2,875,954 184,937 8.59 2,610,174 152,123 7.79
------------ --------- ------------ -----------
Total earning assets 4,676,552 281,026 8.03 4,637,597 254,875 7.34
--------- -----------
Other assets 300,564 297,446
------------ ------------
Total assets $4,977,116 7.54% $4,935,043 6.90%
============ ======= =========== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest bearing deposits
Demand deposits and savings deposits $1,430,926 25,416 2.37% $1,639,026 27,599 2.25%
Time deposits of $100,000 or more 375,689 19,191 6.83 281,807 10,601 5.03
Other time deposits 1,449,240 64,100 5.91 1,183,734 45,383 5.13
------------ --------- ------------ -----------
Total interest bearing deposits 3,255,855 108,707 4.46 3,104,567 83,583 3.60
Short-term borrowings 673,500 28,266 5.61 761,039 21,472 3.77
Long-term borrowings 62,177 3,656 7.85 92,076 5,013 7.27
------------ --------- ------------ -----------
Total interest bearing liabilities 3,991,532 140,629 4.71 3,957,682 110,068 3.72
--------- -----------
Non-interest bearing demand deposits 427,983 403,962
Other liabilities 53,468 56,970
Stockholders' equity 504,133 516,429
------------ ------------
Total liabilities and
stockholders' equity $4,977,116 3.78% $4,935,043 2.98%
============ ======= ============ =======
Interest rate spread 3.32% 3.62%
Effect of non-interest bearing funds 0.68 0.55
------- -------
Net interest income/margin $140,397 4.00% $144,807 4.17%
========= ======= =========== =======
</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.
18
<PAGE>
TABLE 4 - Interest Sensitivity Analysis
<TABLE>
<CAPTION>
(Dollars in thousands)
September 30, 1995
---------------------------------------------------------------------------------------
Interest Sensitivity Period
---------------------------------------------------------------------------------------
Month Quarter Six Months Annual 5 Years
-------------- -------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Earning assets:
Short-term investments $137,053 $137,163 $137,273 $137,273 $137,273
Investment securities 475,937 551,536 680,971 952,074 1,463,740
Assets held for sale 88,266 88,266 88,266 88,266 88,266
Loans 1,549,605 1,778,245 1,901,883 2,059,358 2,804,831
-------------- -------------- ------------ ------------ ------------
Total $2,250,861 $2,555,210 $2,808,393 $3,236,971 $4,494,110
============== ============== ============ ============ ============
Interest bearing liabilities:
Deposits $1,193,860 $1,382,573 $1,746,045 $2,049,102 $2,705,932
Short-term borrowings 622,642 622,642 622,642 622,642 622,642
Long-term borrowings 7 21 42 84 39,362
-------------- -------------- ------------ ------------ ------------
Total $1,816,509 $2,005,236 $2,368,729 $2,671,828 $3,367,936
============== ============== ============ ============ ============
Interest sensitivity gap $434,352 $549,974 $439,664 $565,143 $1,126,174
Interest sensitive assets to interest
sensitive liabilities ratio 1.24 1.27 1.19 1.21 1.33
Interest sensitivity gap as a
percent of total assets 8.51% 10.77% 8.61% 11.07% 22.06%
Regulatory presentation:
Interest sensitivity gap ($666) $114,956 $4,646 $130,125 $691,156
Interest sensitive assets to interest
sensitive liabilities ratio 1.00 1.05 1.00 1.04 1.18
Interest sensitivity gap as a
percent of total assets -0.01% 2.25% 0.09% 2.55% 13.54%
</TABLE>
TABLE 5 - Analysis of Allowance for Loan Losses
<TABLE>
<CAPTION>
(Dollars in thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------- --------------------------
1995 1994 1995 1994
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Balance, beginning of period $41,350 $39,287 $40,216 $39,182
Provision charged to operating expenses 1,246 1,870 4,362 5,624
Allowance of subsidiary sold (101)
Total loans charged off 2,103 2,117 6,193 6,861
Total recoveries 1,178 816 3,286 2,012
------------ ----------- ----------- -----------
Net charge-offs 925 1,301 2,907 4,849
------------ ----------- ----------- -----------
Balance, end of period $41,671 $39,856 $41,671 $39,856
============ =========== =========== ===========
Total loans:
Average $2,890,700 $2,674,960 $2,875,954 $2,610,174
Period-end 2,939,677 2,715,569 2,939,677 2,715,569
Ratios:
Net charge-offs to average loans (annualized) 0.13% 0.19% 0.14% 0.25%
Allowance for loan losses to period-end loans 1.42 1.47 1.42 1.47
</TABLE>
19
<PAGE>
TABLE 6 - Non-Performing Assets
<TABLE>
<CAPTION>
(Dollars in thousands)
September 30, December 31, September 30,
1995 1994 1994
-------------- ------------ -------------
<S> <C> <C> <C>
Non-accrual loans $9,415 $9,569 $12,171
Loans past due 90 or more days as to
principal or interest payments 5,915 5,149 5,560
Restructured loans 5,436 5,599 5,644
-------------- ------------ -------------
Total non-performing loans 20,766 20,317 23,375
Other real estate owned 1,600 3,056 2,936
-------------- ------------ -------------
Total non-performing assets $22,366 $23,373 $26,311
============== ============ =============
Ratios:
Non-performing loans to total loans 0.71% 0.71% 0.86%
Non-performing assets to total loans and
other real estate owned 0.76 0.82 0.97
Allowance for loan losses to non-performing
loans 200.67 197.94 223.72
</TABLE>
20
<PAGE>
PART II - OTHER INFORMATION
---------------------------
For the Quarter Ended September 30, 1995
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 LLP regarding unaudited
interim financial information of Dauphin for the quarter
ended September 30, 1995.
15(b) Letter of KPMG Peat Marwick LLP regarding unaudited
interim financial information of Dauphin for the quarter
ended September 30, 1995.
27 Financial Data Schedule regarding unaudited interim
financial information of Dauphin for the quarter ended
September 30, 1995.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed for the three months ended
September 30, 1995.
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: November 2, 1995 /s/Christopher R. Jennings
- -------------------------- --------------------------------
Christopher R. Jennings
Chairman of the Board and
Chief Executive Officer
Date: November 2, 1995 /s/Dennis L. Dinger
- -------------------------- ----------------------------------
Dennis L. Dinger, Senior Executive
Vice President and Chief Fiscal
and Administrative Officer
22
<PAGE>
EXHIBIT INDEX
-------------
Exhibit Sequential
Number Page Number
- ------- -----------
11 Statement regarding Computation of Per
Share Earnings
15(a) Report of KPMG Peat Marwick LLP regarding
unaudited interim financial information
of Dauphin for the quarter ended
September 30, 1995
15(b) Letter of KPMG Peat Marwick LLP regarding
unaudited interim financial information
of Dauphin for the quarter ended
September 30, 1995
27 Financial Data Schedule regarding unaudited
interim financial information of Dauphin for
the quarter ended September 30, 1995
<PAGE>
Statement Regarding Computation of Per Share Earnings
<TABLE>
<CAPTION>
Three Months Ended September 30,
--------------------------------
1995 1994
---- ----
<S> <C> <C>
PRIMARY EARNINGS PER COMMON SHARE
- ---------------------------------
Earnings
Net income $16,875,000 $17,338,000
=========== ===========
Shares
Weighted average common shares outstanding 30,708,288 31,936,906
Stock options and other stock incentive plans
considered to be common stock equivalents 185,158 184,184
----------- -----------
Weighted average common stock and common stock equivalents outstanding 30,893,446 32,121,090
=========== ===========
Primary earnings per common share $0.55 $0.54
=========== ===========
FULLY DILUTED EARNINGS PER COMMON SHARE
- ---------------------------------------
Earnings
Net income $16,875,000 $17,338,000
After tax interest expense applicable to convertible debentures 72,467 76,240
----------- -----------
$16,947,467 $17,414,240
=========== ===========
Shares
Weighted average common shares outstanding 30,708,288 31,936,906
Assumed conversion of 9.00% convertible debentures issued June 30, 1989 313,001 324,595
Stock options and other stock incentive plans
considered to be common stock equivalents 187,936 184,240
----------- -----------
Weighted average common stock and common stock equivalents outstanding 31,209,225 32,445,741
=========== ===========
Fully diluted earnings per common share $0.55 $0.54
=========== ===========
<CAPTION>
Nine Months Ended September 30,
-------------------------------
1995 1994
---- ----
<S> <C> <C>
PRIMARY EARNINGS PER COMMON SHARE
- ---------------------------------
Earnings
Net income $48,171,000 $53,206,000
=========== ===========
Shares
Weighted average common shares outstanding 30,814,443 32,158,771
Stock options and other stock incentive plans
considered to be common stock equivalents 154,438 178,331
----------- -----------
Weighted average common stock and common stock equivalents outstanding 30,968,881 32,337,102
=========== ===========
Primary earnings per common share $1.56 $1.65
=========== ===========
FULLY DILUTED EARNINGS PER COMMON SHARE
- ---------------------------------------
Earnings
Net income $48,171,000 $53,206,000
After tax interest expense applicable to convertible debentures 222,845 229,657
----------- -----------
$48,393,845 $53,435,657
=========== ===========
Shares
Weighted average common shares outstanding 30,814,443 32,158,771
Assumed conversion of 9.00% convertible debentures issued June 30, 1989 318,471 329,082
Stock options and other stock incentive plans
considered to be common stock equivalents 187,429 176,112
----------- -----------
Weighted average common stock and common stock equivalents outstanding 31,320,343 32,663,965
=========== ===========
Fully diluted earnings per common share $1.55 $1.64
=========== ===========
</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, 1995 and 1994, and the related
consolidated statements of income for the three-month and nine-month periods
ended September 30, 1995 and 1994, and the consolidated statements of cash flows
for the nine-month periods ended September 30, 1995 and 1994. 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 referred to above
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, 1994, 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 27, 1995, 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, 1994 is fairly presented, in all material respects, in relation to
the consolidated balance sheet from which it has been derived.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Harrisburg, Pennsylvania
October 12, 1995
Exhibit 15(a)
<PAGE>
[LETTERHEAD OF KPMG PEAT MARWICK LLP APPEARS HERE]
The Board of Directors
Dauphin Deposit Corporation
Re: Registration Statement No. 33-59941
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 14, July 14, and October
12, 1995 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 LLP
KPMG Peat Marwick LLP
Harrisburg, Pennsylvania
November 9, 1995
Exhibit 15(b)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<EXCHANGE-RATE> 1
<CASH> 187,486
<INT-BEARING-DEPOSITS> 6,521
<FED-FUNDS-SOLD> 55,650
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,623,704
<INVESTMENTS-CARRYING> 1,616,612
<INVESTMENTS-MARKET> 1,623,704
<LOANS> 2,939,677
<ALLOWANCE> 41,671
<TOTAL-ASSETS> 5,104,693
<DEPOSITS> 3,833,756
<SHORT-TERM> 622,642
<LIABILITIES-OTHER> 76,729
<LONG-TERM> 40,621
<COMMON> 163,208
0
0
<OTHER-SE> 367,737
<TOTAL-LIABILITIES-AND-EQUITY> 5,104,693
<INTEREST-LOAN> 183,128
<INTEREST-INVEST> 83,542
<INTEREST-OTHER> 4,876
<INTEREST-TOTAL> 271,546
<INTEREST-DEPOSIT> 108,707
<INTEREST-EXPENSE> 140,629
<INTEREST-INCOME-NET> 130,917
<LOAN-LOSSES> 4,362
<SECURITIES-GAINS> 2,094
<EXPENSE-OTHER> 113,491
<INCOME-PRETAX> 64,887
<INCOME-PRE-EXTRAORDINARY> 48,171
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 48,171
<EPS-PRIMARY> 1.56
<EPS-DILUTED> 1.55
<YIELD-ACTUAL> 8.03
<LOANS-NON> 9,415
<LOANS-PAST> 5,915
<LOANS-TROUBLED> 5,436
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 0
<CHARGE-OFFS> 6,193
<RECOVERIES> 3,286
<ALLOWANCE-CLOSE> 41,671
<ALLOWANCE-DOMESTIC> 41,671
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
