<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended June 30, 1995 Commission File Number 0-8415
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DAUPHIN DEPOSIT CORPORATION
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(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
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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 July 26, 1995
-------------------------- ----------------------------
Common Stock, $5 Par Value 30,687,264 Shares
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DAUPHIN DEPOSIT CORPORATION
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FORM 10-Q
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For the Quarter Ended June 30, 1995
Contents
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PART I - FINANCIAL INFORMATION
-------------------------------
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 1995 and 1994 and
December 31, 1994
Consolidated Statements of Income for the Three Month
and Six Month Periods Ended June 30, 1995 and 1994
Consolidated Statements of Cash Flows for the Six
Month Periods Ended June 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 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
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2
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Part I
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For the Quarter Ended June 30, 1995
Item 1. Financial Statements
Dauphin Deposit Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Dollars in thousands)
June 30, December 31, June 30,
1995 1994 1994
----------- ----------- -----------
(Unaudited) (Audited) (Unaudited)
<S> <C> <C> <C>
ASSETS
Cash and due from banks $192,354 $202,911 $178,666
----------- ----------- -----------
Short-term investments
Interest bearing deposits 6,045 3,738 3,631
Federal funds sold and securities purchased under agreements to resell 9,000 11,302 19,232
----------- ----------- -----------
Total short-term investments 15,045 15,040 22,863
----------- ----------- -----------
Investment securities available-for-sale, at fair value 1,666,022 1,783,803 1,873,767
Assets held for sale, primarily mortgage loans held for sale 100,617 46,222 4,273
Loans (net of unearned income) 2,904,652 2,861,133 2,642,403
Allowance for loan losses (41,350) (40,216) (39,287)
----------- ----------- -----------
Total net loans 2,863,302 2,820,917 2,603,116
----------- ----------- -----------
Bank premises and equipment 68,210 67,088 65,540
Other assets 102,339 134,371 91,245
----------- ----------- -----------
Total assets $5,007,889 $5,070,352 $4,839,470
=========== =========== ===========
LIABILITIES
Deposits
Non-interest bearing $478,893 $464,919 $420,212
Interest bearing 3,339,699 3,049,965 3,105,494
----------- ----------- -----------
Total deposits 3,818,592 3,514,884 3,525,706
----------- ----------- -----------
Short-term borrowings
Federal funds purchased and securities sold under agreements to repurchase 453,936 894,511 621,139
U.S. Treasury tax and loan notes 100,036 46,266 50,956
----------- ----------- -----------
Total short-term borrowings 553,972 940,777 672,095
----------- ----------- -----------
Long-term debt 40,809 91,954 92,014
Accrued expenses and taxes 73,943 56,088 50,647
----------- ----------- -----------
Total liabilities 4,487,316 4,603,703 4,340,462
----------- ----------- -----------
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 1,853,172, 1,696,447,
and 652,929 shares are held as treasury stock, respectively 163,208 163,208 163,208
Surplus 10,832 11,770 11,706
Retained earnings 389,806 373,921 354,832
Unrealized gains (losses) on securities available-for-sale, net of deferred taxes 1,723 (41,036) (14,559)
----------- ----------- -----------
565,569 507,863 515,187
Less: Treasury stock - at cost (44,996) (41,214) (16,179)
----------- ----------- -----------
Total stockholders' equity 520,573 466,649 499,008
----------- ----------- -----------
Total liabilities and stockholders' equity $5,007,889 $5,070,352 $4,839,470
=========== =========== ===========
</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 Six Months
Ended June 30, Ended June 30,
------------------------ ------------------------
1995 1994 1995 1994
---------- --------- --------- ---------
<S> <C> <C> <C> <C>
Interest income
Interest and fees on loans $61,173 $50,094 $120,933 $97,035
Interest and dividends on investment securities
Taxable 23,058 24,737 47,150 49,844
Exempt from federal income taxes 4,599 6,082 9,710 12,247
Interest on deposits 65 89 173 181
Interest on assets held for sale 1,589 187 2,943 369
Interest on federal funds sold and other
short-term investments 178 26 365 34
--------- --------- --------- ---------
Total interest income 90,662 81,215 181,274 159,710
--------- --------- --------- ---------
Interest expense
Interest on deposits
Savings deposits 8,694 9,183 17,511 18,394
Time deposits 21,984 14,855 40,060 29,700
Time deposits in denominations of
$100,000 or more 6,894 3,555 11,885 6,556
--------- --------- --------- ---------
37,572 27,593 69,456 54,650
Interest on short-term borrowings 9,043 7,168 21,852 13,003
Interest on long-term borrowings 1,104 1,675 2,763 3,338
--------- --------- --------- ---------
Total interest expense 47,719 36,436 94,071 70,991
--------- --------- --------- ---------
Net interest income 42,943 44,779 87,203 88,719
Provision for loan losses 1,246 1,870 3,116 3,754
--------- --------- --------- ---------
Net interest income after provision for loan losses 41,697 42,909 84,087 84,965
--------- --------- --------- ---------
Non-interest income
Fiduciary activities 4,358 4,118 8,749 8,186
Service charges on deposit accounts 2,800 2,975 5,466 5,806
Other service charges and fees 3,097 2,880 5,826 5,158
Broker/dealer commissions and fees 1,472 2,092 3,148 3,992
Mortgage banking 4,638 206 7,350 448
Securities gains, net 1,464 586 1,470 2,124
Other 597 849 1,580 1,666
--------- --------- --------- ---------
Total non-interest income 18,426 13,706 33,589 27,380
--------- --------- --------- ---------
Non-interest expense
Salaries and employee benefits 18,992 16,855 38,462 33,484
Net occupancy expense 2,469 2,046 4,967 4,385
Furniture and equipment expense 2,624 2,240 5,390 4,570
Deposit insurance 1,957 1,989 3,915 3,980
Other 12,385 9,677 23,191 18,394
--------- --------- --------- ---------
Total non-interest expense 38,427 32,807 75,925 64,813
--------- --------- --------- ---------
Income before income taxes 21,696 23,808 41,751 47,532
Provision for income taxes 5,619 5,841 10,455 11,664
--------- --------- --------- ---------
Net income $16,077 $17,967 $31,296 $35,868
========= ========= ========= =========
Net income per share $0.52 $0.56 $1.01 $1.11
Cash dividends declared per share $0.25 $0.23 $0.50 $0.46
Weighted average number of shares outstanding 30,955,397 32,251,108 31,007,223 32,446,897
</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)
Six Months Ended
June 30,
--------------------------
1995 1994
--------- ---------
<S> <C> <C>
Operating activities
Net income $31,296 $35,868
Adjustments:
Provision for loan losses 3,116 3,754
Provision for depreciation, amortization and accretion 3,774 4,638
Amortization of goodwill 813 468
Deferred income taxes 76 293
Securities gains, net (1,470) (2,124)
(Increase) decrease in interest receivable 2,554 (672)
Increase in accrued expenses and taxes 17,855 6,203
Capitalized interest on deposits 26,538 20,990
Amortization of purchased and excess mortgage servicing rights 1,386 287
Gain on sale of mortgage loans held for sale (2,273) (138)
Sale of mortgages loans held for sale 266,498 45,628
Loans originated for sale (303,189) (53,711)
Purchase of mortgage loans held for sale (12,969)
Other, net (1,045) (8,428)
--------- ---------
Net cash provided by operating activities 32,960 53,056
--------- ---------
Investing activities
Proceeds from sales of investment securities 93,545 149,642
Proceeds from maturities of investment securities 177,209 261,369
Purchases of investment securities (87,569) (273,212)
Net increase in assets held for sale, other than loans held for sale (2,462) (960)
Net increase in loans (79,399) (63,957)
Sale of residential mortgage and other consumer loans 39,507 13,973
Net proceeds from sale of subsidiary, Farmers Savings Bank, FSB 797
Net purchases of bank premises and equipment (4,863) (4,715)
--------- ---------
Net cash provided by investing activities 135,968 82,937
--------- ---------
Financing activities
Net increase (decrease) in demand deposits and savings accounts (136,435) 4,912
Net increase (decrease) in time deposits 413,605 (75,490)
Net decrease in short-term borrowings (386,805) (8,291)
Net decrease in long-term debt (51,145) (40)
Issuance of common stock and treasury stock 4,177 1,693
Acquisition of treasury stock (8,921) (15,675)
Cash dividends paid (15,461) (14,331)
--------- ---------
Net cash used by financing activities (180,985) (107,222)
--------- ---------
Increase (decrease) in cash and cash equivalents (12,057) 28,771
Cash and cash equivalents at beginning of period 210,911 152,295
--------- ---------
Cash and cash equivalents at end of period $198,854 $181,066
========= =========
Total interest paid $62,827 $51,750
Total income taxes paid 9,950 11,573
Schedule of non-cash investing and financing activities:
Loans charged off 4,090 4,744
Net loan transfers to other real estate owned 800 3,546
Conversion of convertible subordinated debentures 90 400
</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 six month period ended June 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
further in Note 5 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.
These 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 June 30, 1995, December 31, 1994 and
June 30, 1994 is as follows:
<TABLE>
<CAPTION>
(Dollars in thousands)
June 30, 1995 December 31, 1994 June 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. $620,059 $621,073 $687,005 $665,520 $676,634 $669,643
government agencies and corporations
Obligations of states and political subdivision 315,744 326,383 369,061 366,712 405,413 413,233
Debt securities issued by foreign governments 900 895 900 896 2,407 2,403
Corporate securities 59,577 59,898 79,032 78,283 73,431 73,813
Mortgage-backed securities 647,798 638,516 698,035 659,493 724,675 700,987
---------- ---------- ---------- ---------- ---------- ----------
Total debt securities 1,644,078 1,646,765 1,834,033 1,770,904 1,882,560 1,860,079
Equity securities 19,292 19,257 12,903 12,899 13,606 13,688
---------- ---------- ---------- ---------- ---------- ----------
Total investment securities $1,663,370 $1,666,022 $1,846,936 $1,783,803 $1,896,166 $1,873,767
========== ========== ========== ========== ========== ==========
</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 Six months
ended June 30, ended June 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 (9.2) (10.6) (10.0) (10.6)
Other, net 0.1 0.1 0.1
------ ------ ------ ------
Effective income tax rate 25.9% 24.5% 25.0% 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 June 30, 1995 represented by letters of credit
issued to customers amounted to approximately $125.8 million.
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Note 5 - New Accounting Standards
Effective January 1, 1995, Dauphin adopted Statement of Financial
Accounting Standards No. 122, "Accounting for Mortgage Servicing Rights, an
amendment of FASB Statement No. 65" (SFAS 122). SFAS 122 amended Statement 65 to
require an institution to recognize as separate assets the rights to service
mortgage loans for others when a mortgage loan is sold or securitized and
servicing rights retained. When capitalizing mortgage servicing rights, an
institution shall allocate the total cost of the mortgage loans (the recorded
investment in the mortgage loans including net deferred fees or costs and any
purchase premium or discount) to the mortgage servicing rights and the loans
(without the mortgage servicing rights) based on their relative fair values.
Mortgage servicing rights are amortized in proportion to, and over the period
of, estimated net servicing income.
SFAS 122 also requires an entity to measure the impairment of servicing
rights based on the difference between the carrying amount of the servicing
rights and their current fair value. Impairment of servicing rights is
recognized through a valuation allowance. The amount of impairment recognized is
the amount by which the capitalized mortgage servicing rights exceed their fair
value. Subsequent to the initial measurement of impairment, the valuation
allowance is adjusted to reflect changes in the measurement of impairment. Fair
value in excess of the amount capitalized as mortgage servicing rights (net of
amortization), however, is not recognized.
Dauphin recognizes the fair value of servicing rights retained at the time
a mortgage loan is sold or securitized. Such fair value is primarily based on
observable market prices. For the purpose of evaluating and measuring impairment
of capitalized mortgage servicing rights, Dauphin stratifies those rights based
on the predominant risk characteristics of the underlying loans. Dauphin
primarily stratifies mortgage servicing rights by loan type (e.g. conventional
or government guaranteed and adjustable-rate or fixed-rate mortgage loans).
Valuation techniques for measuring fair value incorporate assumptions that
market participants use in estimating future servicing income and expense,
including assumptions about prepayment, default and interest rates.
The amount of originated mortgage servicing rights from January 1 through
June 30, 1995 was $1,723,000. At June 30, 1995, the total amount of capitalized
mortgage servicing rights (including mortgage servicing rights purchased) was
$8,611,000. The fair value of such rights was approximately $9,000,000. There
was no valuation allowance for impairment related to such rights.
8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
This section presents management's discussion and analysis of the financial
condition and results of operations of Dauphin Deposit Corporation and
subsidiaries (Dauphin), including Dauphin Deposit Bank and Trust Company, which
includes the Bank of Pennsylvania, Farmers Bank and Valleybank Divisions. This
discussion and analysis should be read in conjunction with the financial
statements which appear elsewhere in this report.
On 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 second quarter of 1995 of $16.1
million, compared with $18.0 million recorded for the same quarter of 1994. Net
income per share for the second quarter of 1995 amounted to $.52, compared with
$.56 for the same period in 1994, a decrease of 7.1%. Net income for the first
six months of 1995 amounted to $31.3 million compared with $35.9 million
recorded for the same period of 1994. Net income per share for the first six
months of 1995 amounted to $1.01, compared with $1.11 for the same period of
1994, a decrease of 9.0%.
Dauphin's return on average total assets was 1.30% for the second quarter
of 1995, compared with 1.46% for the second quarter of 1994. For the first six
months of 1995, the return on average assets was 1.26%, compared with 1.46% for
the same period of 1994. Return on average stockholders' equity was 12.41% for
the second quarter of 1995, compared with 14.20% for the same period of 1994.
Return on average stockholders' equity was 12.28% for the first six months of
1995, compared with 14.27% for the same period of 1994. Return on average
stockholders' equity, including the SFAS 115 adjustment, was 12.60% for the
second
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quarter of 1995 compared with 14.27% for the second quarter to 1994. Return on
average stockholders' equity, including the SFAS 115 adjustment, amounted to
12.74% for the first six months of 1995 compared with 13.80% for the first six
months of 1994.
NET INTEREST INCOME
Net interest income is the product of the volume of average earning assets
and the average rates earned on them, less the volume of average interest
bearing liabilities and the average rates paid thereon. The amount of net
interest income is 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 second quarter and the first six months of 1995 and 1994. Net
interest income on a fully taxable equivalent basis totaled $46.0 million for
the second quarter of 1995, a decrease of $2.6 million or 5.4% from $48.6
million for the same period of 1994. For the first six months of 1995, net
interest income amounted to $93.7 million, a decrease of $2.9 million or 3.0%
from $96.6 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 second quarter of 1995, as compared with the second quarter of
1994, as shown in Table 2, there was a decrease in net interest income of $1.7
million due to changes in volume and a decrease of $.9 million due to changes in
rate. During the first six months of 1995, as compared with the same period of
1994, there was a decrease of $3.4 million due to changes in volume and an
increase of $.5 million due to changes in rate.
The effect on the net interest margin attributable to
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interest rates can be understood by analyzing the interest rate spread and the
net interest margin on earning assets. While the interest rate spread considers
only the difference between the average rate earned on earning assets and the
average rate paid on interest bearing liabilities, the net interest margin takes
into account the contribution of assets funded by interest free sources.
Average earning assets increased to $4.7 billion for the second quarter of
1995 from $4.6 billion for the second quarter of 1994, an increase of 1.2%. For
the first six months of 1995, average earning assets were $4.7 billion for 1995
and 1994. The interest rate spread for the second quarter of 1995 was 3.23%
compared with 3.68% for the second quarter of 1994. The net interest margin
was 3.94% for the second quarter of 1995 compared with 4.21% for 1994. For the
first six months, the interest rate spread decreased to 3.33% from 3.62% while
the net interest margin decreased to 3.99% from 4.16%.
Interest rates during 1995 were higher than the rates experienced in 1994.
The average prime rate for the second quarter of 1995 was 9.00% and the first
six months of 1995 was 8.91% compared with 6.90% and 6.46% for the same periods
in 1994. The average federal funds rate increased to 6.02% for the second
quarter of 1995 compared with 3.92% for the same period in 1994. For the first
six months of 1995 the average federal funds rate was 5.91% compared with 3.57%
for 1994. During the second quarter of 1995, compared with the same period of
1994, the average yield on earning assets increased 66 basis points while the
average cost of interest bearing liabilities increased 111 basis points,
resulting in a decrease in the interest rate spread of 45 basis points. For the
first six months of 1995 compared with 1994, the yield on earning assets
increased 78 basis points while the average cost of interest bearing liabilities
increased 107 basis points, resulting in a decrease in the interest rate spread
of 29 basis points. The yield on the investment securities portfolio increased
19 basis points for the second quarter and 43 basis points for the first six
months primarily due to the reinvestment of maturities at significantly higher
rates. Average loans, which represent the highest yielding earning assets,
increased $269.1 million or 10.3% for the second quarter of 1995 compared with
the second quarter of 1994. For the first six months of 1995, the increase was
$291.2 million or 11.3% compared with the same period in 1994. The increased
rates in 1995, with new loans issued at the then current market levels,
11
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was the primary reason for the increase of 82 basis points for the second
quarter and 90 basis points for the first six months in the overall average loan
yield. The cost of interest bearing deposits increased 102 basis points for the
second quarter of 1995 compared with the second quarter of 1994. For the first
six months of 1995 compared with 1994 the increase was 84 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 45 basis points for the second quarter was partially offset by an
increase in the value of non-interest bearing funds which resulted in a 27 basis
point decline in the net interest margin. For the first six months, the interest
rate spread decreased 29 basis points which was partially offset by an increase
in the value of non-interest bearing funds which resulted in a 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 relationships between prime rates and rates paid on purchased
funds are not constant over time. The rate of growth in interest free sources
of funds will influence the level of interest sensitive funding sources. In
addition, the absolute level of interest rates will affect the volume of earning
assets and funding sources. As a result of these limitations, the interest
sensitivity gap is only one factor to be considered in estimating the net
interest margin.
Table 4 presents an interest sensitivity analysis of Dauphin's assets and
liabilities at June 30, 1995 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
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<PAGE>
as passbook savings accounts, as not being subject to immediate repricing.
Management is of the opinion that historical interest rate movements indicate
that these products do not reprice in direct relation to the change in the
interest rate environment. Additionally, these products have provided Dauphin
with a stable core deposit base. Therefore, the detailed presentation within
Table 4 attempts to reflect these products in the appropriate interest
sensitivity time interval based on their interest sensitivity to the movement of
other interest rates. Also included in Table 4 is a summary of the gap, as
viewed by certain regulatory authorities, which presents these interest bearing
deposits as being subject to immediate repricing.
An interest sensitivity analysis is measured as of a specified date and,
therefore, is subject to almost immediate change as the maturities of assets are
reinvested and liabilities, such as deposits and short-term borrowings, are
received or mature. The mismatch of assets and liabilities in a specific time
frame is referred to as a sensitivity gap. Generally, 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 at June 30,
1995 reflects Dauphin's sensitivity to rate changes over future periods of time.
However, the mix of assets and liabilities also impact Dauphin's future 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.
PROVISION AND ALLOWANCE FOR LOAN LOSSES
The provision for loan losses charged to earnings was $1.2 million for the
second quarter of 1995 compared with $1.9 million for the second quarter of
1994. The provision for the first six months of 1995 was $3.1 million compared
with $3.8 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 second quarter and the first six months of
1995 and 1994.
NON-PERFORMING ASSETS
Table 6 reflects Dauphin's non-performing assets at June 30,
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1995, December 31, 1994 and June 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.
NON-INTEREST INCOME
Non-interest income increased $4.7 million or 34.4% for the second quarter
of 1995 when compared with the second quarter of 1994. Exclusive of securities
gains, the increase was $3.8 million or 29.3%. Non-interest income increased
$6.2 million or 22.7% for the first six months of 1995 as compared with the same
period of 1994. Exclusive of securities gains, the increase for the first six
months of 1995 compared with 1994 was $6.9 million or 27.2%. The results of
operations of Dauphin's broker/dealer subsidiary, Hopper Soliday & Co., Inc.
(Hopper Soliday), decreased non-interest income by $.6 million for the second
quarter and decreased non-interest income by $.8 million for the first six
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 $4.4 million in mortgage banking income
for the second quarter of 1995 compared with the second quarter of 1994 and the
increase of $6.9 million for the six months of 1995 compared with 1994 is due
to the acquisition of Eastern Mortgage, a full service mortgage banking
operation, as of July 1, 1994. Prior year's income included a limited mortgage
banking operation within other subsidiaries.
Effective January 1, 1995, Dauphin adopted Statement of Financial
Accounting Standards No. 122, "Accounting for Mortgage Servicing Rights, an
amendment of FASB Statement No. 65" (SFAS 122). SFAS 122 amended Statement 65
to require an institution to recognize as separate assets the rights to service
mortgage loans for others when a mortgage loan is sold or securitized and
servicing rights retained. Refer to Note 5 of the Notes to Consolidated
Financial Statements for additional information. The amount of originated
mortgage servicing rights included in
14
<PAGE>
mortgage banking income for the six months ended June 30, 1995 was $1.7 million.
NON-INTEREST EXPENSE
Non-interest expense increased $5.6 million or 17.1% from the second
quarter of 1994 to the second quarter of 1995. For the first six months of
1995, compared with the same period of 1994, non-interest expenses increased
$11.1 million or 17.1%. Excluding the results of operations of Hopper Soliday
and Eastern Mortgage, non-interest expense increased $1.3 million or 4.3% for
the second quarter of 1995 compared with 1994 and a $2.5 million or 4.0% for the
six months of 1995 compared with 1994.
Salaries and employee benefits increased $2.1 million or 12.7% for the
second quarter of 1995. For the first six months of 1995, compared with the
same period of 1994 salaries and employee benefits increased $5.0 million or
14.9%. Excluding Hopper Soliday and Eastern Mortgage, salaries and employee
benefits decreased $1.0 million or 6.7% and $1.4 million or 4.6% for the second
quarter and the first six months of 1995, respectively, compared with the same
periods of 1994. This salary decrease 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 11.3% to 2,290 at June 30, 1995 compared with 2,057 at June 30, 1994.
All other non-interest expense increased $3.5 million or 21.8% for the
second quarter and $6.1 million or 19.6% for the six 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 $2.4 million or 15.4% for the
second quarter and $3.9 million or 12.9% for the six months of 1995, compared
with the same period of 1994. These increased expenses primarily reflect
strategic initiatives being implemented in 1995, which are important to
Dauphin's continued future growth and profitability.
INCOME TAXES
Dauphin's effective tax rate for the second quarter of 1995 was 25.9%,
compared with 24.5% for the second quarter of 1994. The effective tax rate for
the first six months of 1995 was 25.0%, compared with 24.5% for the same period
of 1994. For a
15
<PAGE>
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.
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 first six months of 1995 and 1994, Dauphin
repurchased 368,000 shares for $8.9 million and 633,700 shares for $15.7
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 definition in the risk-based capital guidelines. At June 30,
1995, Dauphin and its banking subsidiary exceeded all capital requirements.
16
<PAGE>
TABLE 1 - Net Interest Income
<TABLE>
<CAPTION>
(Dollars in thousands)
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------- ------------------------
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Total interest income $90,662 $81,215 $181,274 $159,710
Total interest expense 47,719 36,436 94,071 70,991
-------- -------- -------- --------
Net interest income 42,943 44,779 87,203 88,719
Tax equivalent adjustment 3,096 3,887 6,478 7,838
-------- -------- -------- --------
Net interest income (fully taxable equivalent) $46,039 $48,666 $93,681 $96,557
======== ======== ======== ========
</TABLE>
TABLE 2 - Rate-Volume Analysis of Changes in Net Interest Income
<TABLE>
<CAPTION>
(Dollars in thousands)
Three Months Ended Six Months Ended
June 30, June 30,
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 $113 $15 $128 $266 $57 $323
Investment securities (6,026) 2,044 (3,982) (12,659) 6,055 (6,604)
Assets held for sale 1,383 25 1,408 2,520 61 2,581
Loans 4,539 6,563 11,102 10,985 12,919 23,904
-------- -------- -------- -------- -------- --------
Total interest income 9 8,647 8,656 1,112 19,092 20,204
-------- -------- -------- -------- -------- --------
Interest expense
Interest bearing deposits 3,904 6,075 9,979 4,870 9,936 14,806
Short-term borrowings (1,331) 3,206 1,875 397 8,452 8,849
Long-term borrowings (886) 315 (571) (773) 198 (575)
-------- -------- -------- -------- -------- --------
Total interest expense 1,687 9,596 11,283 4,494 18,586 23,080
-------- -------- -------- -------- -------- --------
Net interest income ($1,678) ($949) ($2,627) ($3,382) $506 ($2,876)
======== ======== ======== ======== ======== ========
</TABLE>
Note: The changes not due solely to change in volume or solely to change in rate
are allocated proportionally to both change in volume and rate.
<PAGE>
TABLE 3 - Average Balances, Rates and Interest Income and Expense Summary
(Taxable Equivalent Basis) (Dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended June 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 $5,130 $65 5.08% $4,805 $89 7.43%
Federal funds sold and securities
purchased under agreements to resell 10,017 178 7.13 2,925 26 3.57
----------- -------- ---------- --------
Total short-term investments 15,147 243 6.43 7,730 115 5.97
----------- -------- ---------- --------
Investment securities
U.S. government obligations 214,789 3,019 5.64 260,446 3,762 5.79
U.S. government agencies 1,095,687 18,102 6.61 1,223,311 18,748 6.13
State and municipals 330,720 7,710 9.33 415,587 9,989 9.61
Other securities 77,304 1,301 6.73 99,264 1,615 6.51
----------- -------- ---------- --------
Total investment securities 1,718,500 30,132 7.02 1,998,608 34,114 6.83
----------- -------- ---------- --------
Assets held for sale 71,072 1,599 9.00 11,713 191 6.53
----------- -------- ---------- --------
Loans (1)
Commercial 966,579 21,648 8.98 882,932 16,221 7.37
Commercial mortgage 522,553 12,082 9.27 560,554 11,492 8.22
Residential mortgages(2) 797,220 16,194 8.14 680,299 13,350 7.86
Consumer (3) 589,039 11,860 8.08 482,516 9,619 8.00
----------- -------- ---------- --------
Total loans 2,875,391 61,784 8.62 2,606,301 50,682 7.80
----------- -------- ---------- --------
Total earning assets 4,680,110 93,758 8.03 4,624,352 85,102 7.37
-------- --------
Other assets 296,736 305,260
----------- ----------
Total assets $4,976,846 7.55% $4,929,612 6.92%
============ ======= =========== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest bearing deposits
Demand deposits and savings deposits $1,421,308 8,694 2.45% $1,650,522 9,183 2.23%
Time deposits of $100,000 or more 396,398 6,894 6.98 283,339 3,555 5.03
Other time deposits 1,478,946 21,984 5.96 1,179,722 14,855 5.05
----------- -------- ---------- --------
Total interest bearing deposits 3,296,652 37,572 4.57 3,113,583 27,593 3.55
Short-term borrowings 634,633 9,043 5.72 759,928 7,168 3.78
Long-term borrowings 54,491 1,104 8.11 92,023 1,675 7.29
----------- -------- ---------- --------
Total interest bearing deposits 3,985,776 47,719 4.80 3,965,534 36,436 3.69
-------- --------
Non-interest bearing demand deposits 427,834 402,718
Other liabilities 51,616 56,484
Stockholders' equity 511,620 504,876
----------- ----------
Total liabilities and
stockholders' equity $4,976,846 3.85% $4,929,612 2.96%
============ ======= =========== =======
Interest rate spread 3.23% 3.68%
Effect of non-interest bearing funds 0.71 0.53
------- -------
Net interest income/margin $46,039 3.94% $48,666 4.21%
======== ======= ======== =======
<CAPTION>
Six Months Ended June 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 $5,142 $173 6.78% $5,352 $181 6.82%
Federal funds sold and securities
purchased under agreements to resell 10,978 365 6.70 1,998 34 3.43
-------- -------- -------- --------
Total short-term investments 16,120 538 6.73 7,350 215 5.90
-------- -------- -------- --------
Investment securities
U.S. government obligations 224,113 6,297 5.67 260,967 7,469 5.77
U.S. government agencies 1,093,724 36,608 6.69 1,266,632 37,786 5.97
State and municipals 343,879 16,356 9.51 424,600 20,073 9.46
Other securities 84,363 2,867 6.80 103,763 3,404 6.56
--------- -------- --------- --------
Total investment securities 1,746,079 62,128 7.12 2,055,962 68,732 6.69
--------- -------- --------- --------
Assets held for sale 72,876 2,958 8.13 11,694 377 6.46
--------- -------- --------- --------
Loans (1)
Commercial 946,666 41,896 8.92 890,661 31,132 7.05
Commercial mortgage 522,765 23,960 9.24 539,829 21,646 8.09
Residential mortgages(2) 809,149 32,641 8.10 677,531 26,556 7.87
Consumer (3) 589,878 23,631 8.08 469,220 18,890 8.12
--------- --------- --------- ---------
Total loans 2,868,458 122,128 8.58 2,577,241 98,224 7.68
--------- --------- -------- ---------
Total earning assets 4,703,533 187,752 8.02 4,652,247 167,548 7.24
--------- ---------
Other assets 302,640 290,555
-------- --------
Total assets $5,006,173 7.54% $4,942,802 6.81%
========== ======= ========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest bearing deposits
Demand deposits and savings deposits $1,451,930 17,511 2.43% $1,656,836 18,394 2.24%
Time deposits of $100,000 or more 352,262 11,885 6.80 276,007 6,556 4.79
Other time deposits 1,384,992 40,060 5.83 1,174,944 29,700 5.10
---------- -------- ---------- --------
Total interest bearing deposits 3,189,184 69,456 4.39 3,107,787 54,650 3.55
Short-term borrowings 779,113 21,852 5.66 756,683 13,003 3.47
Long-term borrowings 73,093 2,763 7.58 92,106 3,338 7.28
--------- -------- --------- --------
Total interest bearing liabilities 4,041,390 94,071 4.69 3,956,576 70,991 3.62
-------- --------
Non-interest bearing demand deposits 420,914 403,671
Other liabilities 48,615 58,379
Stockholders' equity 495,254 524,176
-------- --------
Total liabilities and
stockholders' equity $5,006,173 3.79% $4,942,802 2.90%
========== ======= ========== ========
Interest rate spread 3.33% 3.62%
Effect of non-interest bearing funds 0.66 0.54
------- --------
Net interest income/margin $93,681 3.99% $96,557 4.16%
======== ======= ======== ========
</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)
June 30, 1995
--------------------------------------------------------------------
Interest Sensitivity Period
--------------------------------------------------------------------
Month Quarter Six Months Annual 5 Years
------------ ----------- ------------ ---------- -----------
<S> <C> <C> <C> <C> <C>
Earning assets:
Short-term investments $15,045 $15,045 $15,045 $15,045 $15,045
Investment securities 440,912 544,089 686,638 954,901 1,486,390
Assets held for sale 100,617 100,617 100,617 100,617 100,617
Loans 1,244,966 1,470,817 1,594,028 1,865,907 2,645,566
------------ ----------- ------------ ----------- -----------
Total $1,801,540 $2,130,568 $2,396,328 $2,936,470 $4,247,618
============ =========== ============ =========== ===========
Interest bearing liabilities:
Deposits $1,121,913 $1,284,225 $1,559,016 $1,927,147 $2,657,338
Short-term borrowings 553,972 553,972 553,972 553,972 553,972
Long-term borrowings 8 24 48 96 39,422
------------ ----------- ------------ ----------- -----------
Total $1,675,893 $1,838,221 $2,113,036 $2,481,215 $3,250,732
============ =========== ============ =========== ===========
Interest sensitivity gap $125,647 $292,347 $283,292 $455,255 $996,886
Interest sensitive assets to interest
sensitive liabilities ratio 1.07 1.16 1.13 1.18 1.31
Regulatory presentation:
Interest sensitivity gap ($322,034) ($155,334) ($164,389) $7,574 $549,205
Interest sensitive assets to interest
sensitive liabilities ratio 0.85 0.93 0.94 1.00 1.15
</TABLE>
TABLE 5 - Analysis of Allowance for Loan Losses
<TABLE>
<CAPTION>
(Dollars in thousands)
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------- -----------------------------
1995 1994 1995 1994
------------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
Balance, beginning of period $40,936 $39,046 $40,216 $39,182
Provision charged to operating expenses 1,246 1,870 3,116 3,754
Allowance of subsidiary sold (101)
Total loans charged off 1,897 2,302 4,090 4,744
Total recoveries 1,065 673 2,108 1,196
------------ ------------ ------------- ------------
Net charge-offs 832 1,629 1,982 3,548
------------ ------------ ------------- ------------
Balance, end of period $41,350 $39,287 $41,350 $39,287
============ ============ ============= ============
Total loans:
Average $2,875,391 $2,606,301 $2,868,458 $2,577,241
Period-end 2,904,652 2,642,403 2,904,652 2,642,403
Ratios:
Net charge-offs to average loans (annualized) 0.12% 0.25% 0.14% 0.28%
Allowance for loan losses to period-end loans 1.42 1.49 1.42 1.49
</TABLE>
19
<PAGE>
TABLE 6 - Non-Performing Assets
<TABLE>
<CAPTION>
(Dollars in thousands)
June 30, December 31, June 30,
1995 1994 1994
------------ ------------ ------------
<S> <C> <C> <C>
Non-accrual loans $8,400 $9,569 $12,351
Restructured loans 5,607 5,599 7,251
------------ ------------ ------------
Total non-performing loans 14,007 15,168 19,602
Other real estate owned 1,798 3,056 3,125
------------ ------------ ------------
Total non-performing assets $15,805 $18,224 $22,727
============ ============ ============
Ratios:
Non-performing loans to total loans 0.48% 0.53% 0.74%
Non-performing assets to total loans and
other real estate owned 0.54 0.64 0.86
Allowance for loan losses to non-performing
loans 295.21 265.14 200.42
Loans past due 90 or more days as to
interest or principal $1,856 $5,149 $2,620
============ ============ ============
</TABLE>
20
<PAGE>
PART II - OTHER INFORMATION
---------------------------
For the Quarter Ended June 30, 1995
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Shareholders of Dauphin was held on April
17, 1995. At the Annual Meeting, the shareholders elected as directors
of Dauphin the 18 nominees set forth in Dauphin's Proxy Statement dated
as of March 17, 1995.
The number of votes cast for or withheld in the election of
directors is as follows:
Election of Directors:
<TABLE>
<CAPTION>
VOTES
NAME FOR WITHHELD
---- --- --------
<S> <C> <C>
Robert L. Fryer, Jr. 23,990,420 18,622
---------- ------
James O. Green 23,996,157 12,885
---------- ------
Derek C. Hathaway 23,987,966 21,076
---------- ------
Alfred G. Hemmerich 23,794,740 214,302
---------- -------
Lee H. Javitch 24,001,920 7,122
---------- -----
Christopher R. Jennings 23,963,118 45,924
---------- ------
William J. King 23,982,384 26,658
---------- ------
William T. Kirchhoff 24,005,584 3,458
---------- -----
Lawrence J. LaMaina, Jr. 23,961,291 47,751
---------- ------
Andrew Maier, II 24,006,535 2,507
---------- -----
James E. Marley 23,590,460 418,582
---------- -------
Robert F. Nation 23,980,279 28,763
---------- ------
Elmer E. Naugle 23,985,007 24,035
---------- ------
Walter F. Raab 23,771,268 237,774
---------- -------
Paul C. Raub 24,004,014 5,028
---------- -----
Henry W. Rhoads 23,974,397 34,645
---------- ------
Jean D. Seibert 23,988,174 20,868
---------- ------
R. Champlin Sheridan, Jr. 24,005,348 3,694
---------- -----
</TABLE>
The shareholders also approved the adoption of the Dauphin Deposit
Corporation 1995 Stock Incentive Plan by the following vote:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN BROKER NON-VOTES
<S> <C> <C> <C>
18,021,580 3,103,652 632,593 143,200
---------- --------- ------- -------
</TABLE>
21
<PAGE>
PART II - OTHER INFORMATION
---------------------------
For the Quarter Ended June 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 June 30, 1995.
15(b) Letter of KPMG Peat Marwick LLP regarding
unaudited interim financial information of Dauphin
for the quarter ended June 30, 1995.
27 Financial Data Schedule regarding unaudited
interim financial information of Dauphin for the
quarter ended June 30, 1995.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed for the three
months ended June 30, 1995.
22
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dauphin Deposit Corporation
---------------------------
(Registrant)
Date: August 2, 1995 /s/Christopher R. Jennings
------------------------- --------------------------------
Christopher R. Jennings
Chairman of the Board and
Chief Executive Officer
Date: August 2, 1995 /s/Dennis L. Dinger
------------------------- ----------------------------------
Dennis L. Dinger, Senior Executive
Vice President and Chief Fiscal
and Administrative Officer
23
<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
June 30, 1995
15(b) Letter of KPMG Peat Marwick LLP regarding
unaudited interim financial information
of Dauphin for the quarter ended
June 30, 1995
27 Financial Data Schedule regarding unaudited
interim financial information of Dauphin for
the quarter ended June 30, 1995
24
<PAGE>
Statement Regarding Computation of Per Share Earnings
<TABLE>
<CAPTION>
Three Months Ended June 30,
----------------------------
1995 1994
---- ----
<S> <C> <C>
PRIMARY EARNINGS PER COMMON SHARE
---------------------------------
Earnings
Net income $16,077,000 $17,967,000
=========== ===========
Shares
Weighted average common shares outstanding 30,819,440 32,069,990
Stock options considered to be common stock equivalents 135,957 181,118
----------- -----------
Weighted average common stock and common stock equivalents outstanding 30,955,397 32,251,108
=========== ===========
Primary earnings per common share $0.52 $0.56
=========== ===========
FULLY DILUTED EARNINGS PER COMMON SHARE
---------------------------------------
Earnings
Net income $16,077,000 $17,967,000
After tax interest expense applicable to convertible debentures 74,942 76,708
----------- -----------
$16,151,942 $18,043,708
=========== ===========
Shares
Weighted average common shares outstanding 30,819,440 32,069,990
Assumed conversion of 9.00% convertible debentures issued June 30, 1989 320,411 326,588
Stock options considered to be common stock equivalents 135,957 198,951
----------- -----------
Weighted average common stock and common stock equivalents outstanding 31,275,808 32,595,529
=========== ===========
Fully diluted earnings per common share $0.51 $0.55
=========== ===========
<CAPTION>
Six Months Ended June 30,
----------------------------
1995 1994
---- ----
<S> <C> <C>
PRIMARY EARNINGS PER COMMON SHARE
---------------------------------
Earnings
Net income $31,296,000 $35,868,000
=========== ===========
Shares
Weighted average common shares outstanding 30,868,401 32,271,542
Stock options considered to be common stock equivalents 138,822 175,355
----------- -----------
Weighted average common stock and common stock equivalents outstanding 31,007,223 32,446,897
=========== ===========
Primary earnings per common share $1.01 $1.11
=========== ===========
FULLY DILUTED EARNINGS PER COMMON SHARE
---------------------------------------
Earnings
Net income $31,296,000 $35,868,000
After tax interest expense applicable to convertible debentures 150,378 153,416
----------- -----------
$31,446,378 $36,021,416
=========== ===========
Shares
Weighted average common shares outstanding 30,868,401 32,271,542
Assumed conversion of 9.00% convertible debentures issued June 30, 1989 321,251 331,129
Stock options considered to be common stock equivalents 186,839 189,211
----------- -----------
Weighted average common stock and common stock equivalents outstanding 31,376,491 32,791,882
=========== ===========
Fully diluted earnings per common share $1.00 $1.10
=========== ===========
</TABLE>
Exhibit 11
<PAGE>
[LETTERHEAD OF KPMG PEAT MARWICK LLP APPEARS HERE]
Independent Accountant's Report
-------------------------------
The Board of Directors
Dauphin Deposit Corporation:
We have reviewed the accompanying consolidated balance sheets of Dauphin Deposit
Corporation and subsidiaries as of June 30, 1995 and 1994, and the related
consolidated statements of income for the three-month and six-month periods
ended June 30, 1995 and 1994, and the consolidated statements of cash flows for
the six-month periods ended June 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
July 14, 1995
Exhibit 15(a)
<PAGE>
[LETTERHEAD OF KPMG PEAT MARWICK LLP APPEARS HERE]
The Board of Directors
Dauphin Deposit Corporation
Re: Registration Statements 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 and July 14, 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
August 9, 1995
Exhibit 15(b)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<CURRENCY> U S DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<EXCHANGE-RATE> 1
<CASH> 192,354
<INT-BEARING-DEPOSITS> 6,045
<FED-FUNDS-SOLD> 9,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,666,022
<INVESTMENTS-CARRYING> 1,663,370
<INVESTMENTS-MARKET> 1,666,022
<LOANS> 2,904,652
<ALLOWANCE> 41,350
<TOTAL-ASSETS> 5,007,889
<DEPOSITS> 3,818,592
<SHORT-TERM> 553,972
<LIABILITIES-OTHER> 73,943
<LONG-TERM> 40,809
<COMMON> 163,208
0
0
<OTHER-SE> 357,365
<TOTAL-LIABILITIES-AND-EQUITY> 5,007,889
<INTEREST-LOAN> 120,933
<INTEREST-INVEST> 56,860
<INTEREST-OTHER> 3,481
<INTEREST-TOTAL> 181,274
<INTEREST-DEPOSIT> 69,456
<INTEREST-EXPENSE> 94,071
<INTEREST-INCOME-NET> 87,203
<LOAN-LOSSES> 3,116
<SECURITIES-GAINS> 1,470
<EXPENSE-OTHER> 75,925
<INCOME-PRETAX> 41,751
<INCOME-PRE-EXTRAORDINARY> 31,296
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 31,296
<EPS-PRIMARY> 1.01
<EPS-DILUTED> 1.00
<YIELD-ACTUAL> 8.02
<LOANS-NON> 8,400
<LOANS-PAST> 1,856
<LOANS-TROUBLED> 5,607
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 0
<CHARGE-OFFS> 4,090
<RECOVERIES> 2,108
<ALLOWANCE-CLOSE> 41,350
<ALLOWANCE-DOMESTIC> 41,350
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
