UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C. 20549
FORM 10-K
( X ) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from.................to.....
Commission file number 0-12635
SOUTHERN JERSEY BANCORP OF DELAWARE, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 22-2983654
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
53 South Laurel Street, Bridgeton, New Jersey 08302-1293
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (609) 451-2222
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
NONE NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $1.67
(Title of Class)
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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (Sec. 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of Registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. (______)
As of March 14, 1997, Registrant has 5,000,000 shares of $1.67 par
value common stock authorized, with 1,084,920 shares outstanding, which is
the only class of common stock or voting stock of the Registrant. As of
that date, the aggregate market value of the shares of common stock held
by non-affiliates of the Registrant (based on most recent sales prices
known to Management) was approximately $42,854,340.
DOCUMENTS INCORPORATED BY REFERENCE
PART III - The information called for by Part III is incorporated by
reference to the definitive Proxy Statement for the Annual Meeting of the
Shareholders of the Registrant to be held April 10, 1997, and which will be
filed with the Securities and Exchange Commission not later than 120 days
after December 31, 1996.
<PAGE>
PART I
Item 1. Business
Background
Southern Jersey Bancorp of Delaware, Inc. (Registrant), a bank
holding company, was organized under the laws of the State of Delaware on
June 9, 1989. On July 17, 1989, Registrant acquired all the outstanding
common shares of Southern Jersey Bancorp, a bank holding company organized
under the laws of the State of New Jersey (predecessor Registrant). As of
this same date, Southern Jersey Bancorp was merged into Registrant.
Registrant's wholly-owned subsidiary, Farmers and Merchants
National Bank of Bridgeton (the Bank), is a commercial bank which was first
organized under the laws of the State of New Jersey and the United States
Government in 1909, and all outstanding shares of the Bank were acquired by
the predecessor Registrant on May 22,1984.
The Bank has three wholly-owned subsidiaries. F&M Investment
Company (Investment Company), was organized under the laws of the State of
Delaware in 1984 for the purpose of holding and managing investment securities.
Woulf Asset Holdings, Inc. and AMFDCM, Inc. were organized under the laws of
the State of New Jersey in 1996 for the purpose of holding and managing
real estate.
Description of Business
Registrant is engaged in the business of managing or controlling
its wholly-owned subsidiary bank and other such businesses related to banking
as may be authorized under federal and state banking laws.
The Bank provides traditional services that are standard to the
commercial banking industry and maintains a Trust Department that provides
traditional fiduciary and agency services standard to the banking industry.
The Bank operates in the Counties of Cumberland, Gloucester and
Salem in Southern New Jersey through branch offices with the main office
situated in Bridgeton, New Jersey. Within the market area in which the Bank
operates, there are numerous commercial banks, savings and loan associations,
credit unions, etc. The number of competitors cannot be reasonably estimated.
The Bank is one of the largest independently owned financial institution in
the market area and is one of the most profitable financial institutions in
the State of New Jersey. During 1996, the Bank opened two new branch
offices in New Jersey. The principal methods of competition are those
that are standard to the banking industry, such as interest rates and
customer services.
Environmental and Safety Regulations
In the opinion of Registrant, compliance with current laws
and regulations pertaining to the environment, health and safety has
not materially affected its business or financial condition, and
Registrant believes that such matters will not have a material effect
on its business or financial condition in the foreseeable future.
After giving effect to pending programs for environmental compliance,
the Registrant expects to be in material compliance with currently
applicable environmental, health and safety laws and regulations.
General
Employees - Registrant employs approximately 233 people who are
not covered by collective bargaining agreements with any unions.
In general, relationships with employees have been satisfactory.
<PAGE>
Customers - Registrant is not dependent upon any single customer
or upon any single group of customers, the loss of which would have
a material adverse effect on Registrant.
Other - Registrant does not have research and development
expenditures, backlog of orders and inventory, patents or trademarks, any
seasonality of business, business under government contracts subject to
renegotiation of profits or contract termination or reportable industry
segments as described in SFAS 14, and does not use raw materials.
The banking business of Registrant and the Bank is subject
to comprehensive and detailed regulation by federal supervisory agencies;
in particular, the Office of the Comptroller of Currency, the Federal Deposit
Insurance Corporation, and the Federal Reserve Board, as well as the
Securities and Exchange Commission. These agencies have broad
administrative authority which includes, but is not limited to, dividends,
expansion of locations, acquisitions and mergers, interest rates,
reserves against deposits, terms, amounts and charges to borrowers,
investments, ownership of certain companies by bank holding companies.
The banking business of Registrant and the Bank is also subject to the
banking laws of the States of New Jersey and Delaware.
The federal banking regulatory authorities (The Board of
Governors of the Federal Reserve System, the Office of the Comptroller
of the Currency, and the Federal Deposit Insurance Corporation) may
take action against the Registrant and the Bank for failure to maintain
minimum levels of capital and minimum leverage ratios and failure to
comply with regulations promulgated under the FDIC Improvement
Act of 1991 (FDICIA) and the Financial Institutions Reform, Recovery
and Enforcement Act of 1989 (FIRREA). The Bank's Tier 1 and risk
weighted capital ratios at December 31, 1996 are 12.8% and 13.8%,
respectively. This is well in excess of the minimum required of 4%
and 8%.
FDICIA generally prohibits a depository institution from
making any capital distribution (including payment of dividends) or paying
any management fee to its holding company if the depository institution
would thereafter be undercapitalized. Undercapitalized depository
institutions are subject to growth limitations, prohibitions on the payment
of interest rates in excess of 75 basis points above the average market yields
for comparable deposits, and are required to submit a capital restoration
plan. The federal banking agencies may not accept a capital plan without
determining, among other things, that the plan is based on realistic
assumptions and is likely to succeed in restoring the depository institution's
capital. In addition, for a capital restoration plan to be acceptable, the
depository institution's parent holding company must guarantee that the
institution will comply with such capital restoration plan. The aggregate
liability of the parent holding company is limited to the lesser of (i) an
amount equal to 5% of the depository institution's total assets at the
time it became undercapitalized and (ii) the amount which is necessary
or would have been necessary to bring the institution into compliance
with all capital standards applicable with respect to such institution as
of the time it fails to comply with the plan. If a depository institution
that is required to submit a capital restoration plan fails to submit an
acceptable plan, it is treated as if it is significantly undercapitalized.
Significantly, undercapitalized depository institutions may be
subject to a number of requirements and restrictions including orders to sell
sufficient voting stock to become adequately capitalized, requirements to
reduce total assets, or desist accepting deposits from correspondent banks,
and restrictions on senior executive compensation and on inter-affiliate
transactions. Critical undercapitalization institutions are subject to a
number of additional restrictions including the appointment of a receiver
or conservator.
<PAGE>
Regulations promulgated under FDICIA also require that an
institution monitor its capital levels closely and notify its appropriate
federal banking regulators within 15 days of any material events that
affect the capital position of the institution.
FDICIA directs that each federal banking agency prescribe the
standards for depository institutions and depository institution holding
companies relating to internal controls, information systems, internal
audit systems, loan documentation, credit underwriting, interest rate
exposure, asset growth, and a maximum ratio of classified assets to
capital, minimum earnings sufficient to absorb losses, a minimum ratio
of market value to book value for publicly traded shares, and other such
standards as the agency deems appropriate. FDICIA also contains a
variety of other provisions that could affect the operations of the Company
including new reporting requirements, regulatory standards for real
estate lending, "truth-in-savings" provisions, the requirement that a
depository institution give 90 days prior notice to customers and
regulatory authorities before closing any branch, certain restrictions
on investments and activities of state chartered insured banks and their
subsidiaries, limitations on credit exposure between banks, restrictions
on loans to a bank's insiders, guidelines governing regulatory
examinations, and a prohibition on the acceptance or renewal of brokerage
deposits by depository institutions that are not well capitalized or
are adequately capitalized and have not received a waiver from the
FDIC. Based on the regulations existing in perspective, none of
the aforementioned requirements are expected to impose a material
cost on the Company or to result in significant changes to the Company's
operations.
Under FIRREA, a depository institution insured by the FDIC can
be held liable for any loss incurred by or reasonably expected to be incurred
by the FDIC after August 9, 1989, in connection with (i) the default of
commonly controlled FDIC insured depository institution or (ii) any
assistance provided by the FDIC to a commonly controlled FDIC insured
depository institution in danger of default. "Default" is defined
generally as the appointment of a conservator or receiver, and "in
danger of default" is defined generally as the existence of certain
conditions indicating that a default is likely to occur in the absence
of regulatory assistance. FIRREA and the Crime Control Act of 1990
expand the enforcement powers available to federal banking regulators
including providing greater flexibility to impose enforcement action,
expanding the category of persons dealing with a bank or subject to
enforcement action, increasing the potential civil and criminal
penalties. In addition, in the event of a holding company insolvency,
the Crime Control Act of 1990 affords a priority in respect of capital
commitments made by a holding company on behalf of subsidiary banks.
As more fully discussed in Item 7, Management's Discussion
and Analysis, and the Notes to the Consolidated Financial Statements,
the Registrant and the Bank are deemed "well capitalized" as it
significantly exceeds the minimum level required by regulation
for each relevant capital measure.
Registrant has only domestic operations which are primarily
concentrated in Cumberland and Salem Counties of New Jersey.
Item 1a. Executive Officers of Registrant
Set forth below are the names, ages, and titles of
persons with Registrant and present and past positions of the persons
serving as executive officers of Registrant and its subsidiaries.
Unless otherwise stated, each officer has served in his present
position since April, 1993.
<PAGE>
NAME AND AGE OFFICE AND EXPERIENCE
Clarence D. McCormick, Sr. 67 President and Chief Executive Officer
of Southern Jersey Bancorp of
Delaware, Inc., President of F&M
Investment Company, Chief Executive
Officer of Farmers and Merchants
National Bank of Bridgeton, NJ
Clarence D. McCormick, Jr. 36 Vice President of F&M Investment
Company and President of Farmers and
Merchants National Bank of Bridgeton,
NJ since April 20, 1995
Ralph A. Cocove, Sr. 58 Executive Vice President and Cashier
of Farmers and Merchants National
Bank of Bridgeton, NJ
Robert C. Wolf 53 Executive Vice President of
Administration of Farmers and Merchants
National Bank of Bridgeton, NJ since May
13, 1993. Prior to 1993, Mr. Wolf was an
officer of United Jersey Bank/South for
20 years.
Paul J. Ritter 36 Senior Vice President and Comptroller
of Farmers and Merchants National Bank
of Bridgeton, NJ since April 20, 1995
Treasurer of Southern Jersey Bancorp
of Delaware, Inc.
Harry W. Bullock 70 Secretary of Southern Jersey Bancorp
of Delaware, Inc.
Russell Chappius, Sr. 55 Senior Vice President and Operations
Officer of Farmers and Merchants
National Bank of Bridgeton, NJ
Charles S. Kessler 58 Senior Vice President and Data
Processing Manager of Farmers and
Merchants National Bank of
Bridgeton, NJ
Simon Aman 60 Senior Vice President and Senior
Trust Officer of Farmers and Merchants
National Bank of Bridgeton, NJ, and
Investment Officer of F&M Investment
Company since May 16, 1994. Prior to
1994, Mr. Aman was a Trust Officer
with Central National Bank in
Canajohaire, New York for 3 1/2 years
and Union National Bank in
Albany, New York for 15 years.
Gunars Sietinsons 57 Senior Vice President / Commercial
Lending Since April 16, 1996. Prior to
1996, Mr. Sietinsons was a loan officer
of Farmers and Merchants National Bank
for over 10 years.
J. Kevin Danna 42 Senior Vice President since December
1996.Prior to 1996, Mr. Danna was a
loan officer of Farmers and Merchants
National Bank for over 10 years.
Set forth below are the names and beneficial stock ownership of persons
serving as executive officers of Registrant and its subsidiaries.
Shares of Stock Owned Percentage of Outstanding
Name And Beneficially Owned Common Stock
Clarence D. McCormick 162,249 14.95
Clarence D. McCormick, Jr. 67,860 6.25
Harry W. Bullock 4,300 .40
Ralph A. Cocove, Sr. 6,520 .60
Robert C. Wolf 609 .05
Paul J. Ritter, III 5,700 .52
Russell Chappius, Sr. 2,100 .19
Charles S. Kesler 1,170 .10
Simon Aman 100 .01
Gunars Sietinsons 2,000 .18
J. Kevin Danna 1,000 .09
<PAGE>
STATISTICAL DISCLOSURES UNDER GUIDE 3
Schedule I
Item I(A) Average Balance Sheets
December 31
1996 1995 1994
ASSETS
Cash and due from banks $15,818 $15,561 $16,348
Interest-bearing deposits 0 2,342 1,540
Federal funds sold 21,670 16,113 21,221
Investment securities
-Taxable 73,642 88,496 103,456
Investment securities
-Tax Exempt 37,339 38,264 42,266
Loans net of unearned
income 263,904 210,327 169,025
Less: Allowance for
loan losses 2,785 2,349 2,283
Net loans 261,119 207,978 166,742
Bank premises
and equipment - net 6,250 5,819 5,109
Other assets 9,238 8,525 7,839
------- ------- -------
TOTAL ASSETS $425, 076 $383,098 $364,521
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Interest-bearing demand deposits $91,500 $67,548 $58,201
Savings accounts 159,848 146,401 152,539
CD's - Over $100,000 62,152 37,258 24,498
Non-interest bearing deposits 65,727 92,076 95,719
------- ------- -------
Total Deposits 379,227 343,283 330,957
Other liabilities 6,051 2,813 2,627
------- ------- ------
Total Liabilities 385,278 346,096 333,584
Shareholders' Equity
Preferred stock 0 0 0
Common stock 2,129 2,129 2,129
Additional paid-in capital 2,241 2,241 2,252
Retained earnings 38,771 35,175 29,729
Allowance for unrealized
(losses)/gains 475 750 125
----- ------- ----
43,616 40,295 34,235
Less: Treasury stock 3,818 3,293 3,298
Total Shareholders' Equity 39,798 37,002 30,937
TOTAL LIAB. & ------- ------ -----
SHAREHOLDERS' EQUITY $425,076 $383,098 $364,521
<PAGE>
GUIDE 3
Schedule II
Item I(B) Analysis of Interest Earnings
For The Years Ended December 31(In Thousands)
1996 1995 1994
Interest % Interest % Interest %
INTEREST EARNING ASSETS:
Interest bearing deposits 0 N/A $164 7.00% $77 5.00%
Federal funds sold 1,147 5.29% 943 5.85% 876 4.13%
Investment securities
Taxable 5,141 6.98% 5,720 6.46% 6,435 6.22%
Tax-exempt 1,661 4.45% 1,989 5.20% 2,218 5.25%
Loans 22,441 8.59% 19,396 9.33% 15,010 9.00%
------ ----- ------- ----- ------- ---
Average Yield $30,390 7.72% $28,212 7.99% $24,616 7.34%
INTEREST BEARING LIABILITIES:
Interest on deposits:
Demand & time
deposits $2,644 2.89% $2,837 4.20% $2,358 4.05%
Savings 9,332 5.84% 8,311 5.68% 7,018 4.60%
CD's - $100,000 or more 2,894 4.66% 1,966 5.28% 1,355 5.53%
------ ----- ------ ----- ------ ----
Average Effective Rate Pd.$14,870 4.74% $13,114 5.22% $10,731 4.56%
NET YIELD ON
INTEREST-EARNING ASSETS $15,520 3.89% $15,098 4.22% $13,885 4.09%
NOTES:
(1) Non-accrual loans are not included in the "Loans net of unearned
income" amount used in the yield computation.
(2) No out-of-period items included in the calculation of the changes
in interest income and interest expense.
(3) Loan fees are immaterial.
(4) Tax exempt income is not calculated on a tax equivalent basis.
<PAGE>
GUIDE 3
Schedule III
Item I(C)(1) Schedules of Interest Income & Expense Variance
For The Years Ended December 31
(In Thousands) 1996 1995
INTEREST VARIANCE INTEREST VARIANCE
INTEREST INCOME:
Interest-bearing deposits $ 0 $ (164) $164 $87
Federal funds sold 1,147 204 943 67
Investment securities
Taxable 5,141 (579) 5,720 (715)
Tax-exempt 1,661 (328) 1,989 (229)
Loans 22,441 3,045 19,396 4,386
------- ------ ------- -----
TOTAL INTEREST INCOME $30,390 $2,178 $28,212 $3,596
Item I(C)(2)
INTEREST EXPENSE:
Interest on deposits:
Demand & time deposits $2,644 $ (193) $2,837 $479
Savings 9,332 1,021 8,311 1,293
CD's - $100,000 or more 2,894 928 1,966 611
------- ------ ------- ------
TOTAL INTEREST EXPENSE $14,870 $1,756 $13,114 $2,383
<PAGE>
Schedule IV
Item I(C)(2)(a) and (b) Schedules of Volume Variance and Rate Variance
For The Years Ended December 31
(In Thousands) 1996 1995
VARIANCE
VOLUME RATE VOLUME RATE
(a) (b) (a) (b)
INTEREST INCOME:
Interest-bearing deposits $(164) $ 0 $40 $31
Federal funds sold 325 (90) (211) 366
Investment securities
Taxable (960) 460 (931) 103
Tax-exempt (48) (287) (210) 0
Loans 4,999 (1,556) 3,718 548
----- ------ ---- -----
TOTAL INTEREST INCOME $4,152 $(1,473) $2,406 $1,048
INTEREST EXPENSE:
Interest on deposits:
Demand & time deposits $1,006 $ (885) $379 $86
Savings 764 234 (282) 1,641
CD's - $100,000 or more 1,314 (231) 706 (62)
---- ----- ----- ----
TOTAL INTEREST EXPENSE $3,084 $ (882) $803 $1,665
<PAGE>
GUIDE 3
Schedule V
Item I(C)(2)(c) Schedules of Changes in Rate/Volume
December 31, 1996
(In Thousands) TOTAL VOLUME RATE RATES/VOL
VARIANCE VARIANCE VARIANCE VARIANCE
-------- -------- -------- --------
INTEREST INCOME:
Interest-bearing deposits $(164) $(164) $ 0 $ 0
Federal funds sold 204 325 90 (31)
Investment securities
Taxable (579) (960) 460 (79)
Tax-exempt (328) (48) (287) 7
Loans 3,045 4,999 (1,556) (398)
------ ------ ------ ----
TOTAL INTEREST INCOME $2,178 $4,152 $(1,473) $(501)
INTEREST EXPENSE:
Interest on deposits:
Demand & time deposits (193) 1,006 $ (885) $(314)
Savings 1,021 764 234 23
CD's - $100,000 or more 928 1,314 (231) (155)
----- ---- ------ -----
TOTAL INTEREST EXPENSE $1,756 $3,084 $(882) $(446)
December 31, 1995
(In Thousands) TOTAL VOLUME RATE RATES/VOL
VARIANCE VARIANCE VARIANCE VARIANCE
-------- -------- -------- --------
INTEREST INCOME:
Interest-bearing deposits $87 $40 $31 $16
Federal funds sold 67 (211) 366 (88)
Investment securities
Taxable (715) (931) 103 113
Tax-exempt (229) (210) 0 (19)
Loans 4,386 3,718 548 120
------ ---- ------ -----
TOTAL INTEREST INCOME $3,596 $2,406 $1,048 $142
INTEREST EXPENSE:
Interest on deposits:
Demand & time deposits $479 $379 $86 $14
Savings 1,293 (282) 1,641 (66)
CD's - $100,000 or more 611 706 (62) (33)
----- ---- ------ ----
TOTAL INTEREST EXPENSE $2,383 $803 $1,665 $(85)
<PAGE>
GUIDE 3
Schedule VI
Item II(A) and (B) Investment Portfolio
December 31,
(In Thousands) 1996 1995 1994
Book Average Book Book
Value Yield Value Value
U.S. Treasury Securities:
Maturing within 1 year $6,026 7.1094% $0 $18,117
Maturing between 1-5 years 10,512 5.9430% 24,527 27,560
Maturing between 6-10 years 0 N/A 0 1,991
TOTAL 16,538 N/A $24,527 47,668
U.S. Government Agencies:
Maturing within 1 year 1,998 7.1483% 4,013 0
Maturing between 1-5 years 10,488 6.3673% 8,995 14,529
Maturing between 6-10 years 21,390 7.0544% 18,946 6,484
TOTAL 33,876 31,954 21,013
State and Political Subdivisions:
Maturing within 1 year 4,528 5.9974% 4,785 10,727
Maturing between 1-5 yrs 21,727 5.2374% 16,420 14,460
Maturing between 6-10 yrs 2,840 4.7573% 12,021 16,154
Maturing over 10 years 64 6.8011% 73 72
TOTAL 29,159 33,299 41,413
Federal Reserve Stock 128 6.000% 128 128
Other Securities:
Maturing within 1 year 4,763 6.5860% 6,013 1,999
Maturing between 1-5 years 12,172 6.1666% 15,917 19,266
Maturing between 6-10 years 0 N/A 1,075 6,572
TOTAL 16,935 23,005 27,837
Equity Securities
Maturing within 1 year
Maturing between 1-5 years
Maturing between 6-10 years
TOTAL 0 0 0
Total Before Allowance For
Unrealized Gains 96,336 112,913 138,059
Less: Allowance for
Unrealized Gains 33 1,407 85
TOTAL SECURITIES $ 96,669 $114,320 $138,144
Item II(C) Securities With One Issuer Exceeding Ten Percent of
Stockholders' Equity - NONE
<PAGE>
GUIDE 3
Schedule VII Analysis of Loans
Item III(A) - Types of Loans:
December 31
(In Thousands) 1996 1995 1994 1993 1992
Real estate loans:
1-4 Family Residential $61,668 $52,673 $48,443 $46,175 $48,231
Farmers 2,098 2,337 1,832 1,370 1,054
Other 72,492 28,695 31,161 49,310 33,538
Loans to farmers 1,310 1,148 1,601 3,069 1,032
Commercial and industrial
loans 50,548 83,672 74,165 26,179 41,630
Loans to individuals:
Credit cards 1,799 1,661 1,562 1,281 814
Other 101,688 53,121 35,645 27,406 21,013
Lease financing receivables 17 10,059 219 507 564
Total Loans 291,620 233,366 194,628 155,297 147,876
Less: Unearned income 735 1,253 2,110 3,955 6,282
Allowance for loan losses 3,190 2,413 2,146 2,135 1,888
Net Loans $287,695 $229,700 $190,372 $149,207 $139,706
Item III(B) - Maturities and Sensitivities of Loans to Changes in Interest
Rates at December 31, 1996:
(In Thousands)
Domestic: Total Loans Interest Rates
Predetermined Floating
Commercial, Financial and
Agricultural
Due in 1 year or less $18,838 $10,599 $8,239
Due after 1 year through 5 years 21,992 19,913 2,079
Due after 5 years 11,028 10,438 590
$51,858 $40,950 $10,908
Item III(C) - Risk Elements
1. Non-accrual, Past Due and Restructured Loans
December 31
1996 1995 1994 1993 1992
(1)(a)
Total non-accrual
l $2,287,000 $3,133,000 $2,298,000 $1,842,000 $2,080,000
(1)(b)
Accruing loans past due
90 or more days$1,288,000 $2,043,000 $1,116,000 786,000 $0
(1)(c)
Troubled debt
restructuring $0 $1,226,000 $1,147,000 $643,000 424,000
(2)(I)
Interest income
that would have been
recorded on
non-accrual loans$334,600 $144,000 $104,000 $166,000 $139,000
(2)(ii)
Interest recorded on
non-accrual loans
included in net income
for the period $0 $0 $15,000 $12,000 $4,000
(3) Registrant's policy for placing loans on non-accrual status - See
Summary of Significant Accounting Policies under heading "Loans"
on Registrant's Consolidated Financial Statements for the year ended
December 31, 1996, included in Item 8 of Form 10-K.
2. Potential Problem Loans - None
Any loans classified for regulatory purposes as loss, doubtful,
substandard, or special mention that have not been disclosed under
Item III of Industry Guide 3 do not represent or result from trends
or uncertainties which Management reasonably expects will materially
impact future operating results, liquidity, or capital resources or
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.
3. Foreign Outstanding Loans - None
4. Loan Concentrations - See Item III (A)
<PAGE>
GUIDE 3
Schedule VIII(a)
Item III (C)(1)
THE FARMERS AND MERCHANTS NATIONAL BANK OF BRIDGETON, NJ
CHARTER 9498 ANALYSIS OF REPRICING OPPORTUNITIES DECEMBER 31, 1996
REPRICING OPPORTUNITIES
FOR: 3 Mo. 3-6 Mo. 6 Mo-1 Yr 1-3 YRS. 3-5 YRS 5 +
Total Loans and Leases $30,346 $4,957 $9,899 $83,247 $84,744 $76,140
Debt Securities 4,431 1,818 10,592 21,958 24,165 33,577
Trading Account Assets 0 0 0 0 0 0
Other Interest-Bearing
Assets 12,900 0 0 0 0 0
Total Interest- ------- ------ ------ ------ ------- -----
Bearing Assets 47,677 6,775 20,491 105,205 108,909 109,717
Loan and Lease Loss
Reserve 0 0 0 0 0 0
Non-Accrual Loans 0 0 0 0 0 0
All Other Assets
Including Cash 18,347 0 0 0 0 0
------ ---- ------ ----- ----- -----
Total Assets 66,024 6,775 20,491 105,205 108,909 109,717
Deposits in Foreign Officer 0 0 0 0 0 0
CDs over $100,000 17,744 17,695 7,808 13,300 700
Other Time Deposits 41,325 18,835 22,446 32,235 3,740
MMDA 3,599 3,599 10,799 17,998 0
Other Savings 6,345 6,345 6,345 19,036 12,691 12,690
NOW** 10,953 5,477 5,477 10,953 10,953 10,953
Treasury Notes 0 0 0 0 0 0
Mortgages & Capitalized Leases 0 0 0 0 0 0
Other Nondeposit Interest
-Bearing Liabilities 0 0 0 0 0 0
----- ------ ----- ----- ---- ----
Total Interest-
Bearing Liabilities $79,966 $51,951 $52,875 $93,522 $28,084 $23,643
Demand Deposits 15,278 24,039 11,069 4,957
All Other Liabilities ---- ----- ------ ----- ----- ----
Total Liabilities $95,244 $51,951 $52,875 $117,561 $39,153$28,600
Total Equity
(Excluding Limited Life
Pref.Stock)
Total Liab. & Capital $95,244 $51,951 $52,875 $117,561 $39,153 $28,600
Net Pos.-Total Assets -29,220 -45,176 -32,384 -12,356 69,756 81,117
Less: Liabilities and
Capital
Cumulative Position Ratios 0.49 0.47 .062 0.86 1.08
Total Assets 66,204 72,799 93,290 198,495 307,404 417,121
Total Liab. & Capital 95,244 147,195 200,070 317,631 356,784 385,384
------ ------ ------ ------ ------ -----
Total Assets Less
Liab & Capital $-29,220$-74,396 $-106,780 $-119,136 $-49,380 $31,737
GAAP TABLE FOOTNOTES**
1.) These items are generally considered to be non-interest sensitive due to
their infrequent repricing characteristics.
2.) In addition to the rate sensitivity characteristics of assets and support
ing funds, sensitivity balances include assumptions for the potential balance
volatility of certain deposit categories.
Regular savings balances are generally considered to be non-interest
sensitive due to their infrequent repricing characteristics. However, in order
to account for possible internal transfers to other deposit categories or
the possibility of deposit disintermediation, a measure of variation has been
determined for certain non-interest sensitive deposits. Consequently, an
amount representing this measure of variation for savings accounts has been
treated as interest rate sensitive within three months, six months and one
year and the remainder has been considered non-interest sensitive.
REPRICING OPPORTUNITIES
All Total
FOR: Other Assets %
Total Loans and Leases 0 $289,333 67.24
Debt Securities 128 96,669 22.46
Trading Account Assets 0 0 0
Other Interest-Bearing
Assets 0 12,900 3.00
Total Interest- ----- ------ ------
Bearing Assets 128 398,902 92.70
Loan and Lease Loss
Reserve -3,190 -3,190 -0.74
Non-Accrual Loans 2,287 2,287 .53
All Other Assets
Including Cash 13,978 32,325 7.51
------ ------- ------
Total Assets $13,203 $430,324 100.00
Deposits in Foreign Offices 0 0 0
CDs over $100,000 0 $57,247 13.30
Other Time Deposits 0 118,581 27.56
MMDA 0 35,995 8.36
Other Savings 0 63,452 14.75
NOW** 0 54,766 12.73
Treasury Notes 0 0 0
Mortgages & Capitalized Leases 0 0 0
Other Nondeposit Interest
-Bearing Liabilities 0 0 0
---- ------ -----
Total Interest-
Bearing Liabilities $0 $330,041 76.70
Demand Deposits 0 $55,343 12.86
All Other Liabilities 5,189 5,189 1.21
----- ------ ------
Total Liabilities $5,189 $390,573 90.76
Total Equity
(Excluding Limited Life
Pref.Stock) $39,751 $39,751 9.24
------ -------- ------
Total Liabilities & Capital $44,940 $430,324 100.00
Net Positions-Total Assets $-31,737
Less: Liabilities and
Capital
Cumulative Position Ratios
Total Assets 430,324
Total Liabilities & Capital 430,324
------ ------ ------
Total Assets Less
Liabilities & Capital $0
G A A P TABLE FOOTNOTES**
1.) These items are generally considered to be non-interest sensitive
due to their infrequent repricing characteristics.
2.) In addition to the rate sensitivity characteristics of assets and
supporting funds, sensitivity balances include assumptions for the
potential balance volatility of certain deposit categories.
Regular savings balances are generally considered to be non-interest
sensitive due to their infrequent repricing characteristics.
However, in order to account for possible internal transfers to other
deposit categories or the possibility of deposit disintermediation, a
measure of variation has been determined for certain non-interest
sensitive deposits. Consequently, an amount representing this measure
of variation for savings accounts has been treated as interest rate
sensitive within three months, six months and one year and the remainder
has been considered non-interest sensitive.
THE FARMERS AND MERCHANTS NATIONAL BANK OF BRIDGETON, NJ
CHARTER 9498 ANALYSIS OF REPRICING OPPORTUNITIES DECEMBER 31, 1995
REPRICING OPPORTUNITIES
FOR: 1 Day 3 Mo. 3-6 Mo. 6 Mo-One Yr. 1-5YRS
Total Loans and Leases $7,947 $13,592 $11,796 $8,257 $127,571
Debt Securities 0 3,024 1,464 10,353 65,183
Trading Account Assets 0 0 0 0 0
Other Interest-Bearing
Assets 27,800 0 0 0 0
Total Interest- ------- ------ ------ ------ -------
Bearing Assets 35,747 16,616 13,260 18,610 192,754
Loan and Lease Loss
Reserve 0 0 0 0 0
Non-Accrual Loans 0 0 0 0 0
All Other Assets
Including Cash 18,981 0 0 0 0
------- ------- ------- ------- --------
Total Assets $54,728 $16,616 $13,260 $18,610 $192,754
Deposits in Foreign Offices 0 0 0 0 0
CDs over $100,000 0 $12,376 $8,729 $9,829 $10,008
Other Time Deposits 0 35,516 16,770 22,560 25,257
MMDA Savings &
Unregulated NOW 13,554 8,987 17,830 40,370
Other Savings, ATS & Reg.
NOW** 0 5,520 5,520 5,520 27,599
Treasury Notes 0 0 0 0 0
Mortgages & Capitalized Leases 0 0 0 0 0
Other Nondeposit Interest
-Bearing Liabilities 0 0 0 0 0
------ ------ ------ ------ -------
Total Interest-
Bearing Liabilities $0 $66,966 $40,006 $55,739 $103,234
Demand Deposits 0 $28,416 0 0 $44,804
All Other Liabilities
------ ------ ------ ------ -------
Total Liabilities $0 $95,382 $40,006 $55,739 $148,038
Total Equity
(Excluding Limited Life
Pref.Stock)
Total Liabilities & Capital $0 $95,382 $40,006 $55,739 $148,038
Net Positions-Total Assets $54,728 $-78,766 $-26,746 $-37,129 $44,716
Less: Liabilities and
Capital
Cumulative Position Ratios 0.75 0.62 0.54 0.87
Total Assets 54,728 71,344 84,604 103,214 295,968
Total Liabilities & Capital 0 95,382 135,388 191,127 339,165
------ ------ ------ ------ -------
Total Assets Less
Liabilities & Capital $54,728 $-24,038 $-50,784 $-87,913 $-43,197
REPRICING OPPORTUNITIES
All Total
FOR: 5 Yrs+ Other Assets %
Total Loans and Leases $61,070 0 $230,233 56.95
Debt Securities 34,168 128 114,320 28.28
Trading Account Assets 0 0 0 0
Other Interest-Bearing
Assets 0 0 27,800 6.88
Total Interest- ------- ------ ------ ------
Bearing Assets 95,238 128 372,353 92.11
Loan and Lease Loss
Reserve 0 -2,413 -2,413 -0.60
Non-Accrual Loans 0 3,133 3,133 .78
All Other Assets
Including Cash 0 12,186 31,167 7.71
------- ------- ------- ------
Total Assets $95,238 $13,034 $404,240 100.00
Deposits in Foreign Offices 0 0 0 0
CDs over $100,000 0 0 $40,942 10.13
Other Time Deposits 0 0 100,103 24.76
MMDA Savings &
Unregulated NOW 9,132 0 89,873 22.23
Other Savings, ATS & Reg.
NOW** 11,040 0 55,199 13.66
Treasury Notes 0 0 0 0
Mortgages & Capitalized Leases 0 0 0 0
Other Nondeposit Interest
-Bearing Liabilities 0 0 0 0
------ ------ ------ ------
Total Interest-
Bearing Liabilities $20,172 $0 $286,117 70.78
Demand Deposits $4,096 0 $77,316 19.13
All Other Liabilities 0 4,164 4,164 1.03
------ ------ ------ ------
Total Liabilities $24,268 $4,164 $367,597 90.94
Total Equity
(Excluding Limited Life
Pref.Stock) 0 $36,643 $36,643 9.06
------- -------- -------- ----
Total Liabilities & Capital $24,268 $40,807 $404,240 100.00
Net Positions-Total Assets $70,970 $-27,773
Less: Liabilities and
Capital
Cumulative Position Ratios 1.08
Total Assets 391,206 404,240
Total Liabilities & Capital 363,433 404,240
------ ------ ------ ------
Total Assets Less
Liabilities & Capital $27,773 0
G A A P TABLE FOOTNOTES**
1.) These items are generally considered to be non-interest sensitive
due to their infrequent repricing characteristics.
2.) In addition to the rate sensitivity characteristics of assets and
supporting funds, sensitivity balances include assumptions for the
potential balance volatility of certain deposit categories.
Regular savings balances are generally considered to be non-interest
sensitive due to their infrequent repricing characteristics.
However, in order to account for possible internal transfers to other
deposit categories or the possibility of deposit disintermediation, a
measure of variation has been determined for certain non-interest
sensitive deposits. Consequently, an amount representing this measure
of variation for savings accounts has been treated as interest rate
sensitive within three months, six months and one year and the remainder
has been considered non-interest sensitive.
GUIDE 3
Schedule VIII(a)
Item III (C)(1)
THE FARMERS AND MERCHANTS NATIONAL BANK OF BRIDGETON, NJ
CHARTER 9498 ANALYSIS OF REPRICING OPPORTUNITIES DECEMBER 31, 1994
REPRICING OPPORTUNITIES
FOR: 1 Day 3 Mo. 3-6 Mo. 6 Mo-One Yr. 1-5YRS
Total Loans and Leases $7,155 $12,925 $5,191 $10,264 $98,292
Debt Securities 0 5,842 8,040 18,958 73,163
Trading Account Assets 0 0 0 0 0
Other Interest-Bearing
Assets 11,250 0 0 0 0
Total Interest- ------- ------ ------ ------ -------
Bearing Assets 18,405 18,767 13,231 289,222 171,455
Loan and Lease Loss
Reserve 0 0 0 0 0
Non-Accrual Loans
All Other Assets
Including Cash 20,982 0 0 0 0
------- ------- ------- ------- --------
Total Assets $39,387 $18,767 $13,231 $29,222 $171,455
Deposits in Foreign Offices $0 0 0 0 0
CDs over $100,000 0 6,633 5,707 4,655 5,148
Other Time Deposits 0 34,419 14,459 13,375 24,371
MMDA Savings &
Unregulated NOW 0 44,458 17,611 17,611 0
Other Savings, ATS & Reg.
NOW** 0 5,049 5,049 5,049 0
Treasury Notes 0 0 0 0 0
Mortgages & Capitalized
Leases 0 0 0 0 0
Other Nondeposit Interest
-Bearing Liabilities
------ ------ ------ ------ -------
Total Interest-
Bearing Liabilities $0 $90,559 $42,826 $40,690 $29,519
Demand Deposits 0 0 0 0 0
All Other Liabilities 0 0 0 0 0
------ ------ ------ ------ -------
Total Liabilities $0 $90,559 $42,826 $40,690 $29,519
Total Equity
(Excluding Limited Life
Pref.Stock) 0 0 0 0 0
------ ------ ------ ------ -------
Total Liabilities & Capital $0 $90,559 $42,826 $40,690 $29,519
Net Positions-Total Assets $38,634 $-71,792 $-29,595 $-11,468 $141,936
Less: Liabilities and
Capital 0 0 0 0 0
Cumulative Position Ratios 0.63 0.53 0.57 1.33
Total Assets 38,634 57,401 70,632 99,854 217,309
Total Liabilities & Capital 0 90,559 133,385 174,075 203,594
------ ------ ------ ------ -------
Total Assets Less
Liabilities & Capital $38,634 $-33,158 $-62,753 $-74,221 $67,715
REPRICING OPPORTUNITIES
All Total
FOR: 5 Yrs+ Other Assets %
Total Loans and Leases $58,503 0 $191,330 51.58
Debt Securities 31,853 288 138,144 37.05
Trading Account Assets 0 0 0 0
Other Interest-Bearing
Assets 0 0 12,250 3.02
Total Interest- ------ ------ ------ ------
Bearing Assets 90,356 288 341,724 91.64
Loan and Lease Loss
Reserve 0 -2,146 -2,146 -0.58
Non-Accrual Loans 0 2,298 2,298 0.62
All Other Assets
Including Cash 0 10,038 31,020 8.32
------- ------- ------- ------
Total Assets $90,356 $10,478 $372,896 100.00
Deposits in Foreign Offices 0 0 0 0
CDs over $100,000 0 0 22,153 5.94
Other Time Deposits 0 0 86,624 23.23
MMDA Savings &
Unregulated NOW 0 0 79,680 21.37
Other Savings, ATS & Reg.
NOW** 0 45,446 60,593 16.25
Treasury Notes 0 0 0 0
Mortgages & Capitalized Leases 0 0 0 0
Other Nondeposit Interest
-Bearing Liabilities 0 0 0 0
------ ------ ------ ------
Total Interest-
Bearing Liabilities $0 $45,446 $249,040 66.79
Demand Deposits $0 $88,133 $88,183 23.65
All Other Liabilities 0 3,118 3,138 0.84
------ ------ ------ ------
Total Liabilities $0 $136,747 $340,341 91.27
Total Equity
(Excluding Limited Life
Pref.Stock) 0 $32,555 $32,555 8.73
------- -------- -------- ----
Total Liabilities & Capital $0 $169,302 $372,896 100.00
Net Positions-Total Assets $90,356 -158,071
Less: Liabilities and
Capital
Cumulative Position Ratios 1.78
Total Assets 361,655 372,499
Total Liabilities & Capital 203,594 372,499
------ ------ ------ ------
Total Assets Less
Liabilities & Capital $158,071 0
G A A P TABLE FOOTNOTES**
1.) These items are generally considered to be non-interest sensitive
due to their infrequent repricing characteristics.
2.) In addition to the rate sensitivity characteristics of assets and
supporting funds, sensitivity balances include assumptions for the
potential balance volatility of certain deposit categories.
Regular savings balances are generally considered to be non-interest
sensitive due to their infrequent repricing characteristics.
However, in order to account for possible internal transfers to other
deposit categories or the possibility of deposit disintermediation, a
measure of variation has been determined for certain non-interest
sensitive deposits. Consequently, an amount representing this measure
of variation for savings accounts has been treated as interest rate
sensitive within three months, six months and one year and the remainder
has been considered non-interest sensitive.
<PAGE>
GUIDE 3
Schedule VIII(a)
Item III (C)(1)
THE FARMERS AND MERCHANTS NATIONAL BANK OF BRIDGETON, NJ
CHARTER 9498 ANALYSIS OF REPRICING OPPORTUNITIES DECEMBER 31, 1993
REPRICING OPPORTUNITIES
FOR: 1 Day 3 Mo. 3-6 Mo. 6 Mo-One Yr. 1-5YRS
Total Loans and Leases $8,676 $7,928 $5,046 $7,181 $72,159
Debt Securities 0 4,379 11,797 18,749 76,172
Trading Account Assets 0 0 0 0 0
Other Interest-Bearing
Assets 29,800 0 0 0 0
Total Interest- ------ ------ ------ ------ -------
Bearing Assets 38,476 12,307 16,843 25,930 148,331
Loan and Lease Loss
Reserve 0 0 0 0 0
Non-Accrual Loans 0 0 0 0 0
All Other Assets
Including Cash 17,353 0 0 0 0
------- ------- ------- ------- --------
Total Assets $55,829 $12,307 $16,843 $25,930 $148,331
Deposits in Foreign Offices $0 0 0 0 0
CDs over $100,000 0 5,588 3,525 5,258 12,057
Other Time Deposits 0 33,908 14,616 12,293 25,268
MMDA Savings &
Unregulated NOW 0 83,152 0 0 0
Other Savings, ATS & Reg.
NOW** 0 4,883 4,883 4,883 0
Treasury Notes 0 0 0 0 0
Mortgages & Capitalized
Leases 0 0 0 0 0
Other Nondeposit Interest
-Bearing Liabilities 0 0 0 0 0
------ ------ ------ ------ -------
Total Interest-
Bearing Liabilities $0 127,531 $23,024 $22,434 $37,325
Demand Deposits 0 0 0 0 0
All Other Liabilities 0 0 0 0 0
------ ------ ------ ------ -------
Total Liabilities $0 127,531 $23,024 $22,434 $37,325
Total Equity
(Excluding Limited Life
Pref.Stock) 0 0 0 0 0
------ ------ ------ ------ -------
Total Liabilities & Capital $0 127,531 $23,024 $22,434 $37,325
Net Positions-Total Assets $55,829 -115,224 $-6,181 $3,496 $111,006
Less: Liabilities and
Capital 0 0 0 0 0
Cumulative Position Ratios 0.53 0.56 0.64 1.23
Total Assets 55,829 68,136 54,979 110,909 259,240
Total Liabilities & Capital 0 127,531 150,555 172,989 210,314
------ ------ ------ ------ -------
Total Assets Less
Liabilities & Capital $55,829 $-59,395 $-65,576 $-62,080 $48,926
REPRICING OPPORTUNITIES
All Total
FOR: 5 Yrs+ Other Assets %
Total Loans and Leases $52,465 0 $153,455 42.79
Debt Securities 39,428 128 150,653 42.01
Trading Account Assets 0 0 0 0
Other Interest-Bearing
Assets 0 0 29,800 8.30
Total Interest- ------ ------ ------ ------
Bearing Assets 91,893 128 333,908 93.10
Loan and Lease Loss
Reserve 0 -2,135 -2,135 -0.51
Non-Accrual Loans 0 2,298 2,298 0.62
All Other Assets
Including Cash 0 7,684 25,037 6.99
------- ------- ------- ------
Total Assets $91,893 $7,519 $358,652 100.00
Deposits in Foreign Offices 0 0 0 0
CDs over $100,000 0 0 26,428 7.34
Other Time Deposits 0 0 86,085 24.00
MMDA Savings &
Unregulated NOW 0 0 83,152 23.19
Other Savings, ATS & Reg.
NOW** 0 43,953 58,602 16.34
Treasury Notes 0 0 0 0
Mortgages & Capitalized Leases 0 0 0 0
Other Nondeposit Interest
-Bearing Liabilities 0 0 0 0
----- ------ ------ ------
Total Interest-
Bearing Liabilities $0 $43,953 $254,267 70.90
Demand Deposits $0 $72,994 $72,994 20.35
All Other Liabilities 0 2,365 2,365 0.66
------ ------ ------ ------
Total Liabilities $0 $119,312 $329,626 91.91
Total Equity
(Excluding Limited Life
Pref.Stock) 0 $29,026 $29,026 8.09
------- -------- -------- ----
Total Liabilities & Capital $0 $148,338 358,652 100.00
Net Positions-Total Assets $91,893 -140,819
Less: Liabilities and
Capital
Cumulative Position Ratios 1.67
Total Assets 351,133 358,652
Total Liabilities & Capital 210,314 358,652
------ ------ ------ ------
Total Assets Less
Liabilities & Capital $140,819 0
G A A P TABLE FOOTNOTES**
1.) These items are generally considered to be non-interest sensitive
due to their infrequent repricing characteristics.
2.) In addition to the rate sensitivity characteristics of assets and
supporting funds, sensitivity balances include assumptions for the
potential balance volatility of certain deposit categories.
Regular savings balances are generally considered to be non-interest
sensitive due to their infrequent repricing characteristics.
However, in order to account for possible internal transfers to other
deposit categories or the possibility of deposit disintermediation, a
measure of variation has been determined for certain non-interest
sensitive deposits. Consequently, an amount representing this measure
of variation for savings accounts has been treated as interest rate
sensitive within three months, six months and one year and the remainder
has been considered non-interest sensitive.
<PAGE>
GUIDE 3
Schedule VIII(a)
Item III (C)(1)
THE FARMERS AND MERCHANTS NATIONAL BANK OF BRIDGETON, NJ
CHARTER 9498 ANALYSIS OF REPRICING OPPORTUNITIES DECEMBER 31, 1992
REPRICING OPPORTUNITIES
FOR: 1 Day 3 Mo. 3-6 Mo. 6 Mo-One Yr. 1-5YRS
Total Loans and Leases $13,427 $7,397 $6,629 $6,629 $73,880
Debt Securities 5,159 6,875 11,373 10,210 63,827
Trading Account Assets 0 0 0 0 0
Other Interest-Bearing
Assets 37,100 0 0 0 0
Total Interest- ------ ------ ------ ------ -------
Bearing Assets 55,686 14,269 15,420 16,839 137,707
Loan and Lease Loss
Reserve 0 0 0 0 0
Non-Accrual Loans
All Other Assets
Including Cash 19,235 0 0 0 0
------- ------- ------ ------- --------
Total Assets $74,921 $14,269 $15,420 $16,839 $137,707
Deposits in Foreign Offices $0 0 0 0 0
CDs over $100,000 0 17,563 4,581 2,050 15,640
Other Time Deposits 0 37,557 16,555 10,514 20,354
MMDA Savings &
Unregulated NOW 0 64,550 0 0 0
Other Savings, ATS & Reg.
NOW** 0 0 0 0 0
Treasury Notes 0 0 0 0 0
Mortgages & Capitalized
Leases 0 0 0 0 0
Other Nondeposit Interest
-Bearing Liabilities
------ ------ ------ ------ -------
Total Interest-
Bearing Liabilities $0 119,670 $21,136 $12,564 $35,994
Demand Deposits 0 0 0 0 0
All Other Liabilities 0 0 0 0 0
------ ------ ------ ------ -------
Total Liabilities $0 119,670 $21,136 $12,564 $35,994
Total Equity
(Excluding Limited Life
Pref.Stock) 0 0 0 0 0
------ ------ ------ ------ -------
Total Liabilities & Capital $0 119,670 $21,136 $12,564 $35,994
Net Positions-Total Assets $74,921 -105,401 $-5,716 $4,275 $101,713
Less: Liabilities and
Capital 0 0 0 0 0
Cumulative Position Ratios 0.75 0.74 0.79 1.37
Total Assets 74,921 89,190 104,610 121,449 259,156
Total Liabilities & Capital 0 119,670 140,806 153,370 189,364
------ ------ ------ ------ -------
Total Assets Less
Liabilities & Capital $74,921 $-30,480 $-36,196 $-31,921 $69,792
REPRICING OPPORTUNITIES
All Total
FOR: 5 Yrs+ Other Assets %
Total Loans and Leases $40,329 0 $145,709 44.32
Debt Securities 23,827 128 121,396 39.92
Trading Account Assets 0 0 0 0
Other Interest-Bearing
Assets 0 0 37,100 11.28
Total Interest- ------ ------ ------ ------
Bearing Assets 64,156 128 304,205 92.53
Loan and Lease Loss
Reserve 0 -1,888 -1,888 -0.57
Non-Accrual Loans 0 2,080 2,080 0.63
All Other Assets
Including Cash 0 5,137 24,732 7.41
------ ------ ------- ------
Total Assets $64,156 $5,457 $328,769 100.00
Deposits in Foreign Offices 0 0 0 0
CDs over $100,000 0 0 39,834 12.12
Other Time Deposits 0 0 84,980 25.85
MMDA Savings &
Unregulated NOW 0 0 64,550 19.63
Other Savings, ATS & Reg.
NOW** 0 44,870 44,870 13.65
Treasury Notes 0 0 0 0
Mortgages & Capitalized Leases 0 0 0 0
Other Nondeposit Interest
-Bearing Liabilities 0 0 0 0
------ ------ ------ ------
Total Interest-
Bearing Liabilities $0 $44,870 $234,234 71.25
Demand Deposits $0 $66,909 $66,909 20.35
All Other Liabilities 0 1,637 1,637 0.50
------ ------ ------ ------
Total Liabilities $0 $113,416 $302,780 92.10
Total Equity
(Excluding Limited Life
Pref.Stock) 0 $25,989 $25,989 7.90
------- -------- -------- ----
Total Liabilities & Capital $0 $139,405 328,769 100.00
Net Positions-Total Assets $64,156 -133,948
Less: Liabilities and
Capital
Cumulative Position Ratios 1.71
Total Assets 323,312 328,769
Total Liabilities & Capital 189,364 328,769
------ ------ ------ ------
Total Assets Less
Liabilities & Capital $133,948 0
G A A P TABLE FOOTNOTES**
1.) These items are generally considered to be non-interest sensitive
due to their infrequent repricing characteristics.
2.) In addition to the rate sensitivity characteristics of assets and
supporting funds, sensitivity balances include assumptions for the
potential balance volatility of certain deposit categories.
Regular savings balances are generally considered to be non-interest
sensitive due to their infrequent repricing characteristics.
However, in order to account for possible internal transfers to other
deposit categories or the possibility of deposit disintermediation, a
measure of variation has been determined for certain non-interest
sensitive deposits. Consequently, an amount representing this measure
of variation for savings accounts has been treated as interest rate
sensitive within three months, six months and one year and the remainder
has been considered non-interest sensitive.
<PAGE>
<PAGE>
GUIDE 3
Schedule IX
Item IV (A)(1)
SUMMARY OF LOAN LOSS EXPERIENCE
(In Thousands) For The Years Ended December 31,
1996 1995 1994 1993 1992
Balances at beginning of year $2,413 $2,146 $2,135 $1,888 $1,288
Loan charge-offs:
Mortgage loans 63 17 151 288 14
Installment loans 239 414 265 116 231
Commercial loans 909 638 383 296 413
Total charge-offs 1,211 1,069 799 700 658
Recoveries of loans previously
charged off:
Mortgage loans 0 2 2 33 0
Installment loans 104 51 49 62 52
Commercial loans 79 17 34 52 215
Total recoveries 183 70 85 147 267
NET CHARGE-OFFS 1,028 999 714 553 391
Allowance charged to operations 1,805 1,266 725 800 991
Balances at end of year $3,190 $2,413 $2,146 $2,135 $1,888
Average loans outstanding
during year $262,100 $211,398 $171,887 $149,842 $164,172
Ratio of net charge-offs to
average loans outstanding
during the year 0.0392% 0.473% 0.415% 0.369% 0.238%
Item IV(B) Allocation of Allowance for Loan Losses
The allowance for loan losses is maintained at a level considered by
Management to be adequate to provide for losses which may be incurred on
loans currently held based on a detailed evaluation of the loan portfolio,
historical experience, current economic trends and other factors relevant to
the collectibility of the loans in the portfolio. Credit risk, the risk
that a borrower will fail to perform to the loan agreement, is managed by
limiting the total amount of loans outstanding and by applying normal credit
policies to all lending activities. Collateral is obtained based on
Management's credit assessment of the customer. Loans are further subject
to interest rate risk and risk from geographic concentration of lending
activities. Interest rate risk is managed through various asset/liability
management techniques. Loan policies and administration are designed to
provide assurance that loans will only be granted to creditworthy borrowers,
although credit losses are expected to occur because of subjective factors
and factors beyond the control of the Bank. The Bank is mandated by the
Community Reinvestment Act and other regulations to conduct most of its
lending activities within the geographic area where it is located. As a
result, the Bank and its borrowers may be vulnerable to the consequences of
changes in the local economy. Anticipated amounts of loan charge-offs for
the fiscal year are estimated to be an amount equal to the current
fiscal year.
<PAGE>
GUIDE 3
Schedule X
Item V(A) - Average Deposits
December 31
(In Thousands) 1996 1995 1994
AVG. AMT. % AVG. AMT. % AVG. AMT. %
Non-interest bearing
demand deposits $65,727 0.0 $92,076 0.0 $95,719 0.0
Interest bearing
demand deposits 91,500 2.9 67,548 4.2 58,201 4.1
Savings accounts 159,848 5.8 146,401 5.7 152,539 4.6
CD's - Over $100,000 62,152 4.7 37,258 5.3 24,498 5.5
Total Average Deposits $379,227 4.7 $343,283 5.2 $330,957 4.6
Item V(D) - Deposits
Summary
(In Thousands) 1996
----
Demand deposits
Non-interest bearing $55,343
Interest bearing 90,761
(Money Market and N.O.W. Accounts)
Savings deposits 63,453
Time deposits 175,827
Total Deposits $385,384
The remaining maturity on certificates of deposit of $100,000 or
more is presented below:
(In Thousands) 1996
Maturity ----
3 months or less $17,744
3 months to 6 months 17,695
6 to 12 months 7,808
Over 12 months to 5 years 14,000
Over 5 years 0
-------
Total $57,247
<PAGE>
GUIDE 3
Schedule XI
Item VI - Return on Equity and Assets
December 31
1996 1995 1994
(1) Return on assets 1.25% 1.27% 1.23%
(2) Return on equity 13.39% 13.11% 14.47%
(3) Dividend payout ratio 22.40% 22.57% 23.47%
(4) Equity to assets ratio 9.36% 9.66% 8.49%
<PAGE>
Item 2. Properties
The following table sets forth the location and principal offices
of Registrant and its subsidiary.
Location Use
Bridgeton, New Jersey Executive Offices and Main Bank Office
Bridgeton, New Jersey Branch Office (West Broad Street)
Bridgeton, New Jersey Operations Center and Computer Facilities
*Upper Deerfield, New Jersey Branch Office (Carll's Corner)
Upper Deerfield, New Jersey Branch Office (Seabrook)
Fairton, New Jersey Branch Office
Penns Grove, New Jersey Branch Office
Pennsville, New Jersey Branch Office
Rosenhayn, New Jersey Branch Office
*Vineland, New Jersey Branch Office (Landis Avenue)
*Millville, New Jersey Branch Office
Millville (Airport), New Jersey Branch Office
Wilmington, Delaware Administrative Office for F&M Investment
Company
*Salem City, New Jersey Branch Office
Washington Township, New Jersey Branch Office
Cedarville, New Jersey Branch Office
*Elmer, New Jersey Branch Office
*Leased Property
Registrant owns substantially all properties used in its business
Branch office leases are less than $100,000 annually, and Management does
not foresee any material changes in terms or amounts of leased property or
the ability to renew applicable leases.
None of the owned principal properties are subject to any major
encumbrance material to the operations of Registrant.
All facilities are in good condition and are adequate and
suitable for Registrant's business. Management believes that the
capacity of the offices is such that no additional office space will
be needed in the foreseeable future for administration purposes.
Additional branch offices may be opened in the future when management
deems it necessary for meeting customer needs, expansion and growth.
Item 3. Legal Proceedings
None
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of security holders of
Registrant during the fourth quarter of fiscal year 1996.
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters
Market Information for Common Stock.
Registrant's common stock is inactively traded on a local basis,
and the range of sales prices known to Management based on quotes
from the National Quotation Bureau and transactions noted in the
transfer and issuance of Registrant's common stock certificates,
for each quarter during the two most recent years are as follows:
<PAGE>
1996 1995
High Low High Low
First Quarter $38.25 $37.00 $31.50 $31.25
Second Quarter $38.50 $38.25 $31.50 $31.25
Third Quarter $39.00 $38.50 $33.50 $31.50
Fourth Quarter $40.00 $39.00 $37.00 $33.00
Holders
At March 14, 1997, there were 509 holders of record of
Registrant's common stock.
Dividends
Registrant declared cash dividends of $0.55 per share
payable to its common shareholders on June 30, 1996 and December 31,
1996, for a total of $1.10 per share or approximately $1,195,000.
Registrant declared cash dividends of $.50 per share payable
to its common shareholders on June 30, 1995 and December 31, 1995,
respectively, for a total of $1.00 per share or approximately $1,093,000.
For restriction on dividends, see Note 7 to the consolidated
financial statements.
Item 6. Selected Financial Data
The following table presents selected financial data of the
Registrant. The historical data should be read in conjunction
with the consolidated financial statements and the related notes
thereon in Item 8 and "Management's Discussion and Analysis
of Financial Condition and Results of Operations" in Item 7.
(In Thousands Except Per Share Data)
1996 1995 1994 1993 1992
Operating Revenue $31,831 $29,689 $26,199 $24,693 $24,650
Operating Expense $25,227 $23,137 $20,311 $19,215 $20,164
Income Taxes $1,276 $1,700 $1,411 $1,411 $935
Net Income $5,328 $4,852 $4,477 $4,067 3,551
Earnings Per Common
Share $4.91 $4.43 $4.09 $3.68 $3.18
Cash Dividend Per
Share $1.10 $1.00 $.96 $.90 $.80
Investment
Securities $ 96,669 $114,320 $138,144 150,653 $121,446
Loans - Net $287,695 $229,700 $190,372 $149,207 $139,706
Total Assets $430,324 $404,240 $372,896 $358,652 $329,924
Total Deposits $385,384 $363,433 $337,223 $327,261 $301,143
Stockholders' Equity $39,751 $36,643 $32,555 $29,026 $26,554
Book Value Per Share $36.64 $33.78 $29.62 $26.49 $23.72
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
THE FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OF THE COMPANY AND OF THE BANK
The following discussion and analysis presents the more significant
factors affecting the financial condition and results of operations of
the Company and the Bank for the years ended December 31, 1994, 1995, and
1996.
This discussion and analysis should be read in conjunction with the
financial statements, footnotes and other financial information appearing
elsewhere in this filing. All numbers have been rounded to the nearest
thousand. The term "Company" for all purposes includes the "Bank" which
is the Company's only subsidiary.
Financial Performance Overview
Return on assets ("ROA") and return on equity ("ROE"), are key
indicative profitability factors of the Company.
ROA for the Company was 1.25% in 1996, as compared to 1.27% in 1995,
and 1.23% in 1994. ROE for the Company was 13.39% in 1996, as compared to
13.11% in 1995, and 14.47% in 1994. The decrease in the 1996 ROA is
attributable to the growth in Average Total Assets outpacing net income
resulting from the increase in the Company's loan to deposit ratio as
more assets moved from lower interest earning investment securities to
higher interest earning loans. The current level of ROA was largely a
result of higher net interest income as well as an increase in service
fee income and net investment security gains partly offset by the
increased administration costs and provision for loan losses in handling
a substantial increase in Total Loans and the Company's larger branch
network. The increase in ROE in 1996 fro 1995 was largely a result of the
Company's continued strong net income growth.
The steady increase in the Allowance for Loan Losses account
indicates that the Company has experienced an increase in the amount of
total loans, which are primarily secured by collateral, and made adequate
provisions thereto. The Allowance for Loan Losses increased by $777,000 or
32.20% in 1996, $267,000 or 12.44% in 1995, $11,000 or 0.52% in 1994 from
their respective preceding years. Net interest income after
provision for loan losses decreased by $117,000 or .85% in 1996, after
increasing $672,000 or 5.11% in 1995, and $1,080,000 or 8.94% in 1994.
This was primarily the result of the increase in the provision for loan
losses in 1996 and is further detailed below. Total Non-Interest Income
increased $503,000 or an 18.34% increase in 1996 as compared to 1995
and $435,000 or an 18.85% increase in 1995 as compared to 1994. Total
Non-Interest Expenses increased $334,000 or 3.33% in 1996 from 1995
and $443,000 or 4.62% in 1995 as compared to 1994 and is further
detailed below.
Results of Operations
The Company had consolidated net income of $5,328,000 in 1996 and
$4,852,000 in 1995 and as compared to consolidated net income of $4,477,000
for the year ended December 31, 1994.
<PAGE>
The 9.81% increase in net income in 1996 as compared to 1995 was
primarily a result of the increased net interest income resulting from
the movement of new deposits and maturing investments into a higher
yielding loan portfolio and the decrease in the provision for income taxes.
Additionally, the Bank realized a net gain on the sale of investment
securities. These factors were partially offset by the increased
administration costs and an increase in the provision for loan losses
attributable to handling a larger loan base and an increased branch network.
The following is a comparison of the consolidated earnings per share
of Common Stock of the Company for the years ended December 31, 1996,
1995, and 1994.
Year ended December 31,
1996 1995 1994
Earnings Per Share $4.91 $4.43 $4.09
Management is not aware of any trends, events or uncertainties that
are reasonably likely to have a material effect on the liquidity, capital
resources or operations of the Company.
Loans
The Company had $291,620,000 in Total Loans at December 31, 1996,
$233,366.00 in Total Loans at December 31, 1995, $194,628,000 in Total
Loans at December 31, 1994.
The majority of the Company's loans are made in Gloucester, Salem
and Cumberland Counties which constitute its primary service area.
Although the Company's business is concentrated in three counties, its
loan portfolio is diversified and well collateralized. The Company
grants agribusiness, commercial, residential, consumer loans, and lease
financing.
Standby letters of credit amounting to $3,649,000, $3,061,000, and
$2,841,000 were outstanding as of December 31, 1996, 1995 and 1994,
respectively. Loan commitments and unused lines of credit outstanding as
of December 31, 1996, 1995 and 1994 were $13,205,000, $13,930,000,
$12,526,000 respectively.
During 1996, 4,160 new loans totaling $112,829,000 were booked which
includes refinancing of existing loans.
The increase in the amount of total loans over last year reflects an
increased demand for credit in the Company's market area despite a local
economy that continues to be weak. Loan growth exceeded deposit growth
resulting in the Company's decreased investment in securities at a
lower rate of return and an increased placement of funds in a higher
yielding loans.
The Company's loan portfolio is distributed as follows: Real Estate
Mortgage Loans 46.72%, Agricultural and Commercial Loans 17.78%,
Installment and Consumer Credit 35.50%.
Interest Income
The interest income of the Company is composed of interest earned on
loans and credit cards and interest earned and dividends received on its
investment securities. The Company had consolidated interest income from
its loans and investment securities of $30,390,000, $28,212,000, and
$24,616,000 for the years ended December 31, 1996, 1995 and 1994,
respectively. The Company's interest income increased 7.72% in 1996 from
1995 and increased 14.61% in 1995 from 1994. The increase in interest
income in 1996 is mainly attributable to a $3,045,000 increase in
interest income earned on loans and leases as a result of the increase in
deposits and reinvestment of maturing securities being utilized for
lending purposes.
The Company's investment portfolio decreased by $17,651,000 or
15.44% in 1996 from 1995. Interest income on investment securities
decreased in the amount of $907,000 or 11.77% in 1996. This decrease in
interest income on investment securities was a result of a smaller
investment portfolio which produced smaller earnings. In 1995, the
Company's investment portfolio decreased by $23,824,000 or 17.25% over
1994, and interest income decreased in the amount of $944,000 or 10.91%
in 1995.
The moderate increase in total deposits in 1996, along with substantial
increase in the demand for loans, resulted in a large portion of deposits,
both old and new, and maturing investments being placed in the Company's
loan portfolio with the remainder placed in federal funds sold.
This loan demand resulted from the economy of the Company's service
area emerging from a recessionary period and demonstrating improved
moderate growth.
Net Interest Income
"Net Interest Income", the difference between interest income and
interest expense, is a significant component of performance of a banking
organization. Net interest income was $15,520,000 for the year ended
December 31, 1996, an increase of $422,000 or 2.80% over 1995. Net
interest income was $15,098,000 for the year ended December 31, 1995, an
increase of $1,213,000 or 8.74% over the net interest income of
$13,885,000 for the year ended December 31, 1994.
<PAGE>
Management attributes the reasons for the increases in net interest
income in 1996 primarily to the substantial increase in the amount of
interest income on higher yielding loans and the moderate increase in the
amount of interest expense paid on total time deposits. The increase in time
deposits interest expense was primarily a result of an increase in the amount
of time deposits added to the balance sheet and the shift of deposits from
non-interest bearing to interest bearing in 1996. The substantial increase
in total loans with their higher yields along with the repricing of the
loans at a more rapid rate than deposits resulted in the increase in the
amount of net interest income.
Non-Interest Income
"Non-Interest Income" consists primarily of service fees on deposit
accounts, Trust Department income, commissions, collection fees, credit
card fees, and rental income from safe deposit boxes. The Company's non-
interest income was $3,246,000 for the year ended December 31, 1996. The
Company's non-interest income was $2,743,000 for the year ended December
31, 1995, and $2,308,000 for the year ended December 31, 1994. The
Company's non-interest income has increased during the three-year period
ended December 31, 1996, and included $415,000 and $360,000 gains on the
sale of securities enjoyed by the Company in 1996 and 1995, respectively.
This increase in non-interest income was primarily a result of increased
service fees on deposit accounts, but also includes increases in all areas
of non-interest income including the Trust Department, net securities gains,
and other income.
Non-Interest Expenses
"Non-Interest Expenses" consist of salaries and employee benefits,
occupancy, equipment, FDIC assessments and other miscellaneous expenses
such as stationery and supplies, professional fees, postage, advertising,
etc. The Company's non-interest expense was $10,357,000, $10,023,000, and
$9,580,000 for the years ended December 31, 1996, 1995, and 1994,
respectively. The 3.33% increase in non-interest expense in 1996 from
1995 was mainly a result of increases in payroll expense and occupancy
and equipment expenses. These expenses increased primarily as a result
of the costs to administer the increased loans and deposits realized by
the Company in 1996 from 1995 and the costs associated with expanding the
Company's branch facilities in 1996 and 1995. Additionally, new branch banks
at Vineland and Elmer, New Jersey, were established and opened for business in
1996.
The opening of new branch locations results in a substantial
increase in initial costs such as building and personnel expense. These
costs will be recouped over time by future revenues generated by these
locations.
Income Tax Expense
Income tax expense was $1,276,000, $1,170,000, $1, 411,000 in the
years ended 1996, 1195 and 1994, respectively. Income tax expense was $424,000
lower in 1996 than in 1995. This result was primarily because of the increased
percentage of the provision for loan losses that was deductible in 1996 as
compared to 1995 under applicable tax rules. The increased amount of loan
losses booked in 1996 permitted the increase in the amount of the provision
for loan losses that was deductible under the applicable tax regulations.
<PAGE>
Deposit Accounts
"Total Deposit Accounts" is composed of demand (non-interest
bearing) deposits, Money Market accounts, Super NOW accounts, savings
accounts, jumbo ($100,000 and over) time accounts and other time
deposits. The Company had $385,384,000 in total deposits in 1996, an
increase of $21,951,000 or 6.04%, $363,433,000 in total deposits at year
end 1995, a $26,210,000 increase or 7.77% increase from the $337,223,000
total deposits at year end 1994.
The Company's total deposits continued to increase in 1996. The
increase was due to the Company's strong capital position, which is
attracting new deposits resulting from the merger of several large regional
banks. Additionally, the opening of several new branches by the Company
has expanded the Bank's overall market area. The Company expects its
total deposits to continue to have moderate growth in 1997.
Allowance for Loan and Lease Losses
The Company's allowance for loan and lease losses as a percentage of
gross total outstanding loans was 1.09% at December 31, 1996, 1.03% at
December 31, 1995, and 1.10% at December 31, 1994. Management estimates
the required allowance for possible loan loss and the provision thereto
on a monthly basis and any deficiency in the loan loss reserve account is
made up by charging current operating income. The increase in the
percentage of allowance for loan and lease losses as a percentage of
gross total outstanding loans was a result of the allowance for loan and lease
losses outpacing loan growth.
In determining the loan loss reserves required, management applies
such factors as a review of the loan portfolio, past loan loss
experience, current economic conditions, evaluation of borrower capacity
to repay based on financial statements, sources of cash flow, guarantees
and other similar information and current appraisals or internal
evaluations of collateral. The methodology of the Allowance
for Loan and Lease Losses is reviewed annually by the Company's
independent auditors and its banking regulators.
The increase in the allowance for loan and lease losses to $3,190,000
in 1996 from $2,413,000 in 1995 was a result of the Company maintaining
approximately the same allowance for loan and lease losses to total loans
as in prior year in light of an increasing loan portfolio and increased
charge offs in 1996. The loan provision would have been significantly
lower if the Bank did not have to charge off one large commercial credit
in the amount of approximately $750,000 in 1996.
The Company had $2,287,000 or 0.78% of total loans outstanding on a
non-accrual status on December 31, 1996, $3,133,000 or 1.34% of total
loans outstanding on non-accrual status on December 31, 1995, and
$2,298,000 or 1.18% of total loans outstanding on a non-accrual status on
December 31, 1994. Non-accrual loans are those loans from which, in
management's opinion, the collection of additional interest is
questionable.
The decrease in the amount of loans on a non-accrual status is
attributable to management's efforts to obtain deeds in lieu of foreclosure
thereby reducing the period of time necessary to obtain title to real
estate collateral due to bankruptcy and litigation delays.
During 1996, loans that were on non-accrual status totaling $548,000
were either pad off or the collateral was foreclosed upon. Also, during 1996,
32 mortgage loans totaling $1,829,000 were in various stages of foreclosure.
Minimum loss is expected due to the collateralization of these loans.
Loan charge-offs were $1,211,000 or 0.42% of total loans, $1,069,000
or 0.46% of total loans, $799,000 or 0.41% of total loans,
respectively, for the years ended December 31, 1996, 1995 and 1994. The
increase from 1994 to 1996 in charge-offs was a result of the increased
size of the loan portfolio but charge-offs as a percentage of total loans
has decreased in 1996, which reflects management's efforts to maintain an
adequately collateralized loan portfolio despite the weakness in the local
business climate with its concomitant adverse effect on businesses and
consumers.
Asset and Liability Management
The major objectives of the Company's asset and liability management
are to (1) manage exposure to changes in the interest rate environment to
achieve a neutral interest sensitivity position within reasonable ranges,
(2) ensure adequate liquidity and funding, (3) maintain a strong capital
base, and (4) maximize net interest income opportunities. The Company
manages these objectives centrally through Management's Asset and
Liability Committee. Members of the Committee meet monthly to develop
balance sheet pricing strategies affecting the future level of net
interest income, liquidity, and capital. Factors that are considered in
asset and liability management include forecasts of balance sheet mix,
the economic environment and anticipated direction of interest rates, and
the Company's earning sensitivity to changes in these rates.
Liquidity
The Company must maintain adequate liquidity, ensure the
availability of funds for loan growth, purchase of investment securities,
deposit withdrawals, and maturing liabilities. Cash and cash
equivalents, cash and due from banks, interest-bearing time deposits and
federal funds sold are the Company's most liquid assets.
<PAGE>
The Company had Federal Funds Sold of $12,900,000 for the year ended
December 31, 1996, $27,800,000 for the year ended December 31, 1995,
$11,250,000 for the year ended December 31, 1994. The decrease in
Federal Funds Sold from 1996 to 1995 of 53.60% is mainly attributable to
the transfer of the funds realized from an increase in total deposits and
investment maturities to the loan category to maximize interest income.
The Company's investment securities portfolio, in addition to the
earnings it generates, supplies needed liquidity. As of December 31,
1996, the Company had $15,331,000 or 15.85% of the portfolio maturing in
one year or less, $54,033,000 or 55.89% maturing in over one year and
within five years, $27,107,000 or 28.04% maturing in over five years and
within ten years and $197,000 or 0.22% maturing in over ten years.
By maintaining adequate liquidity in its investment portfolio, the
Company has positioned itself to take advantage of changes in interest
rates and increased loan demand.
Additionally, 15.62% of the Company's loan portfolio has a maturity
date of one year or less. This permits the Company to utilize repricing
opportunities arising from changing interest rates. The remaining
portion of the loan portfolio includes a significant number of loans that
the Company is able to reprice in a time frame after the repricing of
deposits which does not material adverse affect the Company's net
interest income margin.
Management believes that the Company's liquidity position is strong,
based on its high level of cash, cash equivalents, core deposits, the
stability of its other funding sources and the support provided by its
capital base.
Interest Rate Sensitivity
The Company analyzes its interest sensitivity position to manage the
risk associated with interest rate movements through the use of "gap
analysis" and "simulation". Interest rate risk arises from mismatches in
the repricing of assets and liabilities within a given time period. A
"negative" gap results when the amount of interest-sensitive liabilities
exceeds that of interest-sensitive assets.
While gap analysis is a general indicator of the potential effect
that changing interest rates may have on net interest income, the gap
itself does not present a complete picture of interest rate sensitivity.
The Company, therefore, also uses simulation techniques to project
future net interest income streams incorporating the current "gap"
position, the forecast balance sheet mix, and the anticipated spread
relationships between market rates and bank products under a variety of
interest rate scenarios. The Company's interest sensitivity in 1996 was
essentially liability sensitive within reasonable ranges.
<PAGE>
Capital Adequacy
The maintenance of appropriate levels of capital is a management
priority. Overall capital adequacy and dividend policy are monitored on
an ongoing basis by management and are reviewed monthly by the Company's
Board of Directors. Management discusses the Company's capital plans
with the Board of Directors on a frequent basis. The Company's principal
capital planning goals are to provide an attractive return to
stockholders while maintaining the capital levels of the Company above
the current well capitalized level and thus provide a sufficient base
from which to provide for future growth.
The Company's Tier 1 and total risk based capital ratios along with
Total Leverage Ratio substantially exceeded the minimum ratios required by
the Office of the Comptroller (OCC), the Company's primary regulator, as
demonstrated in the following chart:
Risk Weighted Capital Ratios
1996 1995 1994 Required
Tier 1 Risk-Based
Capital Ratio
(Tier 1 Risk Based
Capital to Risk-
Weighted Assets) 12.8 13.9 14.3 4.0
Total Risk-Based
Capital Ratio
(Total Risk Based
Capital to Risk-
Weighted Assets) 13.8 14.8 15.2 8.0
Total Leverage Ratio
(Stockholders'
Equity to Adjusted
Total Assets) 8.8 9.1 8.8 4.0
During 1996, the Company's Board of Directors authorized the
purchase by the Company of up to $2,000,000 of its own Common Stock for
the purpose of reissuance under the Company's stock option plans, as well
as to increase the amount of treasury shares held by the Company for
future use. As of December 31, 1996, 10,137 shares were purchased for
$403,464, an average of $39.80 per share.
Investment Securities
The Company's securities portfolio is comprised of U.S. government
and federal agency securities, the tax-exempt issues of states and
municipalities, and equity and other securities. The portfolios generate
substantial interest income and provide liquidity. In 1994 the Company
implemented FASB 115 in accounting for its security portfolio.
On January 1, 1994, Statement of Financial Accounting Standards No.
115, "Accounting for Certain Investments in Debt and Equity Securities"
(SFAS No. 115) was adopted. This statement required the classification
of securities into one of three categories: trading, available for sale
or held to maturity. Investment securities available for sale are held
for an indefinite period of time and may be sold in response to changing
market and interest rate conditions as part of the asset/liability
<PAGE>
management strategy. Effective January 1, 1994, these securities are
reported at fair value with unrealized gains and losses, net of tax,
included as a separate component of shareholders' equity.
In anticipation of the January 1, 1994 adoption of SFAS No. 115, the
Company transferred $24,000,000 of U.S. Treasuries from the held-to-
maturity portfolio to the available-for-sale portfolio as of December 31,
1993. On November 17, 1995, the Bank transferred $6,500,000 out of its
held-to-maturity portfolio to its available-for-sale portfolio pursuant
to FASB 115 supplemental guidance. This redeployment provides the Company
with more flexibility to reinvest the funds in higher yielding loans
if the demand exists and enhances the Company's ability to manage the
investment portfolio. At December 31, 1996, these securities totaled
$34,904,000 and the available-for-sale portfolio had pre-tax unrealized
gain of $34,000 which, when reduced by the deferred income tax of $12,000,
results in a net unrealized gain of $22,000. Additionally in 1996, the
Company realized a net gain of $415,000 on the sale of investment securities
out of the available-for-sale category.
Asset Quality
The Board of Directors grants lending authority to individual
officers and to loan committees. The Chairman of the Board is empowered
to appoint members to the various loan committees. There are two
committees appointed annually by the Chairman as follows: 1) The
Management Loan Committee. The Chairman of this committee is the
President or, in his absence, one of the Executive Vice Presidents of the
Company. This Committee meets weekly, approves or rejects loans up to
$2,500,000, and recommends loans to the Directors' Loan Committee or the
Board of Directors for loan requests over that amount; 2) The Directors
Loan Committee. This committee is comprised of four outside board
members, one of whom is appointed Chairman and, for loan approval or
rejection purposes, is joined by two members (Senior Vice President or
higher) of the Management Loan Committee. In addition to approving loans
over $2,500,000 and up to $4,000,000 or recommending or passing loans to
the full Board of Directors, the following are also functions of the
Directors Loans Committee: a) to review and recommend loan policies to
the Board of Directors; b) to review allowance for loan and lease losses;
c) to review charge-offs, delinquent loans and action plans; d) to review
other loan reports as submitted by management; e) to recommend guidelines
for management pertaining to market and economic conditions.
All authority to make loans is delegated by the Board of Directors
to specific officers. Therefore, the Board must annually pass a
resolution granting authority to various officers in various dollar
amounts. Generally speaking, the Company's philosophy is to serve
customers through relatively high lending authority to Committees of
senior officers or Board members but to limit individual authority.
Individual lenders may only combine their own authority with that of an
Executive Vice President or the President. When approving a loan, the
total borrowings at the Company, when combined with the new loan request,
must be within the lending authority of the approving officer or
committees. Individual limits of lending authority are up to $500,000
secured and $200,000 unsecured.
<PAGE>
The Company's independent loan review function is also an integral
part of its overall loan administration. The loan review department is
responsible for the evaluation of credit extensions with respect to
quality, documentation and risk criteria. This department's direct
reporting line to the Loan Committee of the Company's Board of Directors
is intended to maintain its independence and to provide assurance that
troubled situations will be identified and proper procedures followed to
establish corrective measures. The loan review and risk rating systems
are designed to provide the Company with an early warning mechanism to
detect loans to customers with deteriorating financial conditions or
loans that may represent potentially troubled situations.
In addition, the Company's internal audit department reviews loan
documentation and collateral as part of its regular audit procedures.
The Company's Other Real Estate Owned portfolio of foreclosed
properties was increased from $946,000 in 1995 to $2,016,000 in 1996 or
113.1%. This increase was a result of management's efforts to obtain deeds
in lieu of foreclosure for real estate collateral instead of completing the
foreclosure process with its inherent costs and delays. In addition, other
real estate owned increased as a result of three years worth of real estate
that previously were in various states of foreclosure and were acquired either
through the acquisition of deeds in lieu of foreclosure or the completion of
the foreclosure process.
Regulatory Matters
The Company is not aware of any current recommendations by the
regulatory authorities which, if they were to be implemented, would have
a material effect on the liquidity, capital resources, or operation of
the Company.
<PAGE>
Item 8. Financial Statements and Supplementary Data.
SOUTHERN JERSEY BANCORP OF DELAWARE, INC.
Index to Consolidated Financial Statements
Page
Independent Auditor's Report 35
Consolidated Balance Sheets 36
Consolidated Statements of Operations 37
Consolidated Statements of Shareholders'
Equity 38
Consolidated Statements of Cash Flow 39
Notes to Consolidated Financial Statements 40
Independent Auditor's Report
- F&M Investment Company 58
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To The Stockholders and Board of Directors
Southern Jersey Bancorp of Delaware, Inc.
Bridgeton, New Jersey 08302
We have audited the consolidated balance sheets of Southern
Jersey Bancorp of Delaware, Inc., and its subsidiaries as of
December 31, 1996 and 1995, and the related consolidated statements
of operations, shareholders' equity, and cash flows for each of the
years in the three year period ended December 31, 1996. These
financial statements are the responsibility of the Company's manage-
ment. Our responsibility is to express an opinion on these
financial statements based on our audits. We did not audit the
financial statements of F&M Investment Company, a consolidated
subsidiary whose statements reflect total assets of 23% and 28% as
of December 31, 1996 and 1995, respectively, and total interest
income revenues of 22%, 25% and 31% for each of the years in the
three year period ended December 31, 1996, of the related consoli-
dated totals. Those statements were audited by other auditors
whose reports have been furnished to us, and our opinion, insofar
as it relates to the amounts included for the F&M Investment
Company, is based solely upon the reports of the other auditors.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and per-
form the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits and
the reports of other auditors provide a reasonable basis for our
opinion.
In our opinion, based upon our audits and the reports of other
auditors, the consolidated financial statements referred to above
present fairly in all material respects the consolidated financial
position of Southern Jersey Bancorp of Delaware, Inc., and subsi-
diaries at December 31, 1996 and 1995, and the consolidated results
of their operations and cash flows for each of the years in the
three year period ended December 31, 1996, in conformity with
generally accepted accounting principles.
s/ WILLIAM THOS. ATHEY & COMPANY
-----------------------------
January 22, 1997
Bridgeton, New Jersey
<PAGE>
Southern Jersey Bancorp of Delaware, Inc. And Subsidiaries
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share and Per Share Data)
December 31
1996 1995
ASSETS
Cash and due from banks (Note 2) $18,347 $18,981
Federal funds sold 12,900 27,800
Cash and Cash Equivalents 31,247 46,781
Investment securities
Available for sale (Notes 1 and 3) 34,904 33,754
Held to maturity
(Market value: 1996-$61,901
1995-$81,486) (Notes 1 and 3) 61,795 80,566
Loans (Notes 1 and 4) 291,620 233,366
Less: Allowance for loan losses 3,190 2,413
Unearned income 735 1,253
Net Loans 287,695 229,700
Bank premises and equipment
- net (Notes 1 and 5) 6,214 5,916
Other assets 8,499 7,523
TOTAL ASSETS $430,324 $404,240
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits Interest bearing deposits $330,041 $286,117
Non-interest bearing deposits 55,343 77,316
Total Deposits 385,384 363,433
Other liabilities 5,189 4,164
Total Liabilities 390,573 367,597
Shareholders' Equity (Note 7)
Preferred stock, no par value;
shares authorized - 500,000;
no shares issued Common stock,
par value $1.67 per share; shares
authorized - 5,000,000; shares
issued - 1,275,000 2,129 2,129
Additional paid-in-capital 2,260 2,260
Retained earnings 39,236 35,103
Net unrealized gains on securities
Available-for-sale, net of tax
Of $11 in 1996 and $478 in 1995
(Note 1) 22 929
43,647 40,384
Less: Treasury stock at
cost - 190,196 shares in 1996 and
190,193 shares in 1995 3,896 3,741
Total Shareholders' Equity 39,751 36,643
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $430,324 $404,240
The accompanying notes are an integral part of the consolidated
financial statement.
<PAGE>
Southern Jersey Bancorp of Delaware, Inc. And Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Data)
Year Ended December 31
1996 1995 1994
INTEREST INCOME:
Investment securities:
Taxable $5,141 $5,720 $6,435
Tax-Exempt 1,661 1,989 2,218
Loans and leases (Note 1) 22,441 19,396 15,010
Interest-bearing deposits
With depository
institutions 0 164 77
Federal funds sold 1,147 943 876
TOTAL INTEREST INCOME 30,390 28,212 24,616
INTEREST EXPENSE:
Deposits 14,870 13,114 10,731
NET INTEREST INCOME 15,520 15,098 13,885
PROVISION FOR LOAN LOSSES
(NOTES 1 AND 4) 1,805 1,266 725
NET INTEREST INCOME AFTER
PROVISION
FOR LOAN LOSSES 13,715 13,832 13,160
OTHER INCOME:
Service fees 1,677 1,428 1,258
Trust department income 694 652 620
Other 460 303 430
Net investment security
gains(Notes 1 and 3) 415 360 0
TOTAL OTHER INCOME 3,246 2,743 2,308
OTHER EXPENSES:
Salaries and wages 4,497 4,388 4,164
Employee benefits
(Notes 1, 8 and 9) 1,101 1,321 1,070
Occupancy and equipment
expenses 1,777 1,704 1,593
OCC Exam and FDIC
assessments 98 473 806
Postage, stationary
and supplies 469 422 332
Professional fees 647 478 337
Other operating expenses 1,768 1,237 1,278
TOTAL OTHER EXPENSES 10,357 10,023 9,580
INCOME BEFORE INCOME TAXES 6,604 6,552 5,888
PROVISION FOR INCOME TAXES
(NOTE 12) 1,276 1,700 1,411
NET INCOME $5,328 $4,852 $4,477
EARNINGS PER COMMON SHARE
(NOTE 1) $4.91 $4.43 $4.09
<PAGE>
Southern Jersey Bancorp of Delaware, Inc. And Subsidiaries
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For The Three Years Ended December 31, 1996
(In Thousands, Except Share and Per Share Data)
Additional
Common Paid-in Retained Treasury Unrealized
Stock Capital Earning Stock Gain/Loss Total
Balances at January
1, 1994 2,129 2,260 27,921 (3,284) 0 29,026
Year Ended
December 31, 1994
Net Income 4,477 4,477
Increase in
Unrealized Gains
on Securities 56 56
Cash Dividends
($.96 per share) (1,054) (1,054)
Addition of 5,970
shares to
The Treasury (156) (156)
Issuance of
9,304 shares from
The Treasury 206 206
Balances at ----- ----- ------ ------- -- ------
December 31, 1994 2,129 2,260 31,344 (3,234) 56 32,555
Year Ended
December 31, 1995
Net Income 4,852 4,852
Increase in
Unrealized Gains
on Securities 873 873
Cash Dividends
($1.00 per share) (1,093) (1,093)
Addition of
23,806 shares to
The Treasury (800) (800)
Issuance of
9,380 shares from
The Treasury 256 256
BALANCES AT ------ ------ ------- -------- --- -------
DECEMBER 31, 1995 $2,129 $2,260 $35,103 $(3,778) 929 $36,643
Year Ended
December 31, 1996
Net Income 5,328 5,328
Decrease in Unrealized
Gains on Securities (907) (907)
Cash Dividends
($1.10 per share) (1,195) (1,195)
Addition of 10,137
shares to The
Treasury (404) (404)
Issuance of 10,134
shares from The
Treasury 286 286
BALANCES AT ------ ------ -------- ----- ---- ------
DECEMBER 31, 1996 $2,129 $2,260 $39,236 $(3,896) 22 $39,751
<PAGE>
Southern Jersey Bancorp of Delaware, Inc. And Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
Year Ended December 31
1996 1995 1994
Cash flows from operating activities
Net income $5,328 $4,852 $4,477
Adjustments to reconcile net
income to net cash provided
by operating activities:
Amortization of organization expenses 0 0 16
Depreciation of premises and equipment 482 401 380
Provision for loan losses 1,805 1,266 725
Premium amortization net of discount
accretion 49 264 68
Gains on sales of securities (415) (360) 0
Increase in other assets (976) (683) (214)
Increase in other liabilities 1,025 1,046 753
Net cash provided by operating activities 7,298 6,786 6,205
Cash flows from investing activities
(Increase)/Decrease in interest
bearing deposits in other banks 0 3,000 (1,000)
Purchase of investment securities (18,823) (29,561) (25,149)
Proceeds from sales of investment
securities 14,858 19,426 502
Proceeds from maturities of
investment securities 19,538 34,642 36,281
Net increase in loans (59,800) (40,594) 41,890)
Purchase bank premises and equipment (883) (1,035) (689)
Proceeds from sale of other real
estate 1,640 312 861
Net cash used for investing activities (43,470) (13,810) (31,084)
Cash flows from financing activities
Net increase in deposits 21,951 26,210 9,962
Cash dividends (1,195) (1,093) (1,054)
Purchase of Treasury stock (404) (800) (156)
Sale of Treasury stock 286 256 206
Net cash provided by financing activities 20,638 24,573 8,958
Net increase/(decrease) in cash and cash
equivalents (15,534) 17,549 (15,921)
Cash and cash equivalents at beginning
of year 46,781 29,232 45,153
Cash and cash equivalents at end of year $31,247 $46,781 $29,232
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Interest $14,282 $12,493 $10,612
Income Taxes 1,175 1,172 1,478
Other non-cash activities:
Transfer of loans, net of charge-offs
to other real estate owned 2,760 164 233
Unrealized gain on investment securities
available for sale (907) 873 56
<PAGE>
Southern Jersey Bancorp of Delaware, Inc. And Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies followed by Southern Jersey
Bancorp of Delaware, Inc. and subsidiaries, and the methods of
applying those policies conform to generally accepted accounting
principles and to general practice within the banking industry. A
summary of these policies is as follows:
(a) Nature of Operations:
Southern Jersey Bancorp of Delaware, Inc. (Company) is a bank-holding
company which owns all of the outstanding common stock of The Farmers and
Merchants National Bank of Bridgeton (Bank) and the Bank's wholly-owned
subsidiaries, F&M Investment Company, Woulf Asset Holdings, Inc. and
AMFDCM, Inc. The Bank provides a variety of financial services through
branches located in Southern New Jersey. The Bank's primary deposit products
are demand deposits, savings accounts, and certificates of deposit. Their
primary lending products are commercial loans, real estate loans, and
installment loans.
(b) Principles of Consolidation:
The consolidated financial statements include the accounts of
Southern Jersey Bancorp of Delaware, Inc. (Company), and its wholly-
owned subsidiary bank, The Farmers and Merchants National Bank of
Bridgeton (Bank), and the Bank's wholly-owned subsidiary, F&M
Investment Company. All significant intercompany balances and
transactions have been eliminated in consolidation.
(c) Use of Estimates:
The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Material estimates that are particularly susceptible to significant
change relate to the determination of the allowance for losses and
on loans and the valuation of real estate acquired in connection with
foreclosures or in satisfaction of loans. In connection with the
determination of the allowances for losses on loans and foreclosed
real estate, management obtains independent appraisals for significant
properties.
While management uses available information to recognize losses
on loans and foreclosed real estate, future additions to the allowances
may be necessary based on changes in local economic conditions. In
addition, regulatory agencies, as an integral part of their examination
process periodically review the Bank's allowance for losses on
loans and foreclosed real estate. Such agencies may require the Bank
to recognize additions to the allowances based on their judgements
about information available at the time of their examination. Because
of these factors, it is reasonably possible tat the allowance for losses
on loans and foreclosed real estate may change materially in the near
future.
(d) Cash and Cash Equivalents:
Cash and cash equivalents include cash on hand, amounts due from
banks, and Federal Funds sold. Generally, Federal Funds are
purchased or sold for one-day periods.
(e) Securities Held to Maturity;
Bonds, notes, and debentures for which the Bank has the positive
intent and ability to hold to maturity are reported at cost, adjusted
for premiums and discounts that are recognized in interest income using
the interest method over the period to maturity.
(f) Securities Available for Sale:
Available-for-sale securities consist of bonds, notes, debentures,
and certain equity securities not classified as trading securities
nor as held-to-maturity securities.
Unrealized holding gains or losses, net of tax, on available-for-sale
securities are reported as a net amount in a separate component of
shareholders' equity until realized.
Gains and losses on the sale of available-for-sale securities are determined
using the specific-identification method.
Declines in the fair value of individual held-to-maturity and
available-for-sale securities below their cost that are other than temporary
are recorded as write-downs of the individual securities to their fair value.
The related write-downs are included in earnings as realized losses. There
have been no declines in the fair value of individual securities that
management deems to be other than temporary.
Premiums and discounts are recognized in interest income using the
interest method over the period to maturity.
(g) Trading securities:
Management has not classified any investment securities as trading
securities, as the Bank has not historically nor anticipate buying
investment securities and holding them principally for the purpose
of selling them in the near term with the objective of generating
profits on short-term differences in price.
(h) Loans:
Loans that management has the intent and ability to hold for the
foreseeable future or until maturity or pay off are reported at
their outstanding principle adjusted for any charge-offs, the
allowance for loan losses, and unearned income.
The interest method is used to amortize unearned income on
installment loans and interest on all other loans is recognized
based on principal balance outstanding.
Loan origination fees and other direct origination costs are
immaterial.
The accrual of interest on impaired loans is discontinued when,
in management's opinion, the borrower may be unable to meet
payments as they become due. When interest accrual is
discontinued, all unpaid accrued interest is reversed. Interest
income is subsequently recognized only to the extent cash
payments are received.
The allowance for loan losses is increased by charges to income
and decreased by charge-offs (net of recoveries). Management's
periodic evaluation of the adequacy of the allowance is based
on the Bank's past loan loss experience, known and inherent risks
in the portfolio, adverse situations that may affect the borrower's
ability to repay, the estimated value of any underlying collateral,
and current economic conditions.
(i) Foreclosed Real Estate:
Real estate properties acquired through, or in lieu of, loan
foreclosure are to be sold and are initially recorded at fair
value at the date of foreclosure establishing a new cost basis.
After foreclosure, valuations are periodically performed by
management and the real estate is carried at the lower of carrying
amount or fair value less cost to sell. Revenue and expenses from
operations and changes in the valuation allowances are included in
loss on foreclosed real estate. The historical average holding
period for such properties is one year. The balances of $2.016,000
and $946,000 at December 31, 1996 and 1995, respectively, are included
in other assets in the consolidated statements of financial condition.
(j) Bank Premises and Equipment:
Land is carried at cost. Bank premises, furniture and equipment,
and leasehold improvements are carried at cost, less accumulated
depreciation and amortization computed principally by the straight-
line and declining balance methods.
Property under capital lease is recorded at the present value of the
minimum lease payments and is amortized using the straight-line
method over the term of the lease.
(k) Employee Benefit Plans:
The Bank has a non-contributory defined benefit pension plan
which covers substantially all salaried employees. Benefits under
this plan are based on the employees' highest consecutive five
years' compensation in the last ten years prior to retirement.
The Bank's general funding policy is to contribute amounts when
deductible for federal income tax purposes.
Effective January 1, 1995, the Bank has a profit sharing retirement
plan under which eligible employees may defer a portion of their
annual compensation, pursuant to Section 401(K) of the Internal
Revenue Code. (See Note 8)
<PAGE>
Under Farmers and Merchants National Bank of Bridgeton, New Jersey
Flexible Benefits/Health Plan, employees are provided comprehensive
health care coverage. Contributions to the Plan are made by
participant salary reduction agreements. The Plan includes coverage
by both the Bank and the Plan's underwriter. Premiums due the
underwriter are accrued and paid monthly. Bank's self-funded
liability is also accrued monthly based on amounts provided by
the Plan's administrator. (See Note 12)
(l) Fair Values of Financial Instruments:
The following fair value estimates, methods and assumptions were used
to estimate the fair value of financial instruments as disclosed
herein:
Cash and short-term instruments - The carrying amounts of cash and
cash short-term instruments approximate their fair value.
Available-for-sale and held-to-maturity securities - Fair values
for securities, excluding restricted equity securities, are based on
quoted market prices. The fair value of certain state and municipal
securities are not readily available through market sources other
than dealer quotations, so fair value estimates are based on quoted
market prices of similar instruments, adjusted for differences between
the quoted instruments and the instruments being valued.
Loans - Fair values are estimated for portfolios of loans with
similar financial characteristics. The fair value of loans is calculated
by discounting scheduled cash flows through the estimated maturity
using estimated market discount rates that reflect the credit and interest
rate risk inherent in the loan. The estimate of maturity is based on the
Bank's historical experience with repayments for each loan classification,
modified, as required, by an estimate of the effect of current economic
and lending conditions.
Deposit liabilities - The fair values of disclosed for demand deposits
are, by definition, equal to the amount payable on demand at the reporting
date. The carrying amounts of variable-rate, fixed-term money-market
accounts and certificates of deposit (Cds) approximate their fair values
at the reporting date. Fair values for fixed-rate CDs are estimated
using a discounted cash flow calculation that applies interest rates
currently being offered on certificates to a schedule of aggregated
expected monthly maturities on time deposits.
Accrued interest - The carrying amounts of accrued interest
approximate their fair values.
Off-balance -sheet instruments - Fair values for off-balance-sheet
lending commitments are based on fees currently charged to enter into
similar agreements, taking into account the remaining terms of the
agreements and the counterparties' credit standing.
Limitations - Fair value estimates are made at a specific point in
time, based on relevant market information and information about the
financial instruments. These estimates do not reflect any premium or
discount that could result from offering for sale at one time the Company's
entire holdings of a particular financial instrument. Because no market
exists for a significant portion of the Company's financial instruments,
fair value estimates are based on judgements regarding future expected
loss experience, current economic conditions, risk characteristics of
various financial instruments, and other factors. These estimates are
subjective in nature and involve uncertainties and matters of significant
judgement and therefore cannot be determined with precision. Changes in
assumptions could significantly affect the estimates.
(m) Income Taxes:
Deferred tax assets and liabilities are reflected at currently
enacted income tax rates applicable to the period in which the
deferred tax assets or liabilities are expected to be realized
or settled. As changes in tax laws or rates are enacted, deferred
tax assets and liabilities are adjusted through the provision
for income taxes.
(n) Earnings Per Common Share:
Earnings per common share is computed based upon the weighted
average number of common shares outstanding during the period.
Fully diluted and primary earnings per common share are the same
amounts for each of the periods presented. Common equivalent shares
consist of stock options (calculated using the treasury stock method).
Common equivalent shares are excluded as the effect would not be
dilutive. Shares used in computing net income per share are 1,085,310
in 1996, 1,094,802 in 1995, and 1,095,796 in 1994.
(o) Trust Fees
Trust fees are recorded on the accrual basis.
NOTE 2 - CASH AND DUE FROM BANKS
The Company maintains various deposits in other banks. The
withdrawal or usage restrictions on these balances do not have a
significant impact on the consolidated operations of the Company.
Aggregate reserves of $7,655,000 and $9,418,000 were maintained at
the Federal Reserve Bank of Philadelphia as of December 31, 1996 and
1995, respectively, to satisfy federal regulatory requirements.
NOTE 3 - INVESTMENT SECURITIES
Investment securities have been classified in the Consolidated Statements
of Financial Condition according to management's intent and ability to
hold to maturity. The carrying amounts of securities and their approximate
fair values at December 31, 1996 and 1995 are as follows: (in thousands)
<PAGE>
AC=AMORTIZED COST
GUG=GROSS UNREALIZED GAIN
GUL=GROSS UREALIZED LOST
MV=MARKET VALUE
December 31,
1995 1994
AC GUG GUL MV AC GUG GUL MV
U.S. Treasury
securities $2,994 $ 163 $ 0 $3,157 $10,916 $1,060 $0 $11,976
U.S. governmental
agencies 31,876 109 (238) 31,747 21,431 347 0 21,778
Securities Avail.
for Sale $34,870 $272 $(238)$34,904 $32,347 $1,407 $0 $33,754
U.S. Treasury
securities $13,543 $ 0 $(97)$13,447 $13,610 $26 (10) $13,626
U.S. governmental
agencies 2,000 0 (91) 1,909 10,523 22 (94) 10,451
Obligations of
states and poli-
tical sub-
divisions 29,159 474 (43) 29,590 33,299 760 (46) 34,013
Other securities 17,063 53 (161) 16,955 23,134 300 (38) 23,396
Securities held
to maturity $ 61,765 $527 $(392)$ 61,901$ 80,566 $1,108 (188) $81,486
The scheduled maturities of securities held to maturity and securities
available-for-sale at December 31, 1996 are as follows:
Available for Sale Held to Maturity
Amortized Market Amortized Market
Cost Value Cost Value
Due in one year or less $1,000 $1,021 $14,310 $14,561
Due after one year through five years 10,482 10,615 43,418 43,287
Due after five years through ten
years 23,388 23,267 3,840 3,845
Due after ten years 0 0 197 208
------- ------- ------- -------
$34,870 $34,903 $61,765 $61,901
During 1996, the Bank's proceeds from the sale, call or maturity of
securities available-for-sale were approximately $14,858,000,
resulting in gross realized gains of approximately $424,000 and no
gross realized losses. During 1995, the Bank's proceeds from the sale,
call or maturity of securities available-for-sale were approximately
$37,084,000, resulting in gross realized gains of approximately
$271,000 and gross realized losses of approximately $28,000.
During 1996, proceeds from sales and maturities of securities
held-to-maturity were approximately $19,538,000, resulting in
gross realized gains of approximately $6,000 and gross realized
losses of approximately $15,000. During 1995, the Bank's proceeds
from call or maturity of securities held-to-maturity were approximately
$16,984,000, resulting in gross realized gains of approximately
$117,000 and no gross realized losses.
Investment securities with a market value of $26,909,000 and
$18,899,000 and a carrying value of $26,667,000 and $18,250,000 were
pledged at December 31, 1996 and 1995, respectively, to secure
public funds, customer deposits, and for other purposes required by
law.
NOTE 4 - LOANS
The components of the loans in the Consolidated Statements of Financial
Condition are as follows: (In Thousands)
December 31
1996 1995
Commercial and agriculture $51,858 $84,820
Real estate mortgages 136,258 83,705
Installment and consumer credit 103,487 54,782
Lease financing 17 10,059
Total $291,620 $233,366
<PAGE>
An analysis of the changes in the allowance for loan losses is as follows:
(In Thousands) December 31
1996 1995 1994
Balances at beginning of year $2,413 $2,146 $2,135
Provision charged to operations 1,805 1,266 725
Recoveries of loans previously
charged off:
Mortgage loans 0 2 2
Installment loans 104 51 49
Commercial loans 79 17 34
Total recoveries 183 70 85
Loan charge offs:
Mortgage loans (63) (17) (151)
Installment loans (239) (414) (265)
Commercial loans (909) (638) (383)
Total charge offs (1,211) (1,069) (799)
BALANCES AT END OF YEAR $3,190 $2,413 $2,146
Non-accrual loans totaled 42,187,000 and $3,133,000 as of December 31,
1996 and 1995, respectively.
NOTE 5 - PREMISES AND EQUIPMENT
A summary of bank premises and equipment as of December 31, 1996 and
1995, is as follows:
(In Thousands) Estimated December 31
Years 1996 1995
Land $463 $565
Buildings and improvements 10-80 years 4,607 4,378
Leasehold improvements 5-31 years 1,003 1,025
Furniture, fixtures and equipment 5-10 years 5,197 4,674
Leased equipment under capital
lease 7 years 324 324
------ -----
11,594 10,966
Less:
Accumulated depreciation and
amortization 5,380 5,050
Net Bank Premises and Equipment $6,214 $5,916
Depreciation charged to operating expenses amounted to $482,000 in
1996, $401,000 in 1995 and $380,000 in 1994.
<PAGE>
NOTE 6 - DEPOSITS
The aggregate amount of time deposit accounts, including certificates of
deposits, was approximately $153,679,000 and 4120,287,000 as of December
31, 1996 and 1995, respectively.
As of December 31, 1996, the scheduled maturities of certificates of
deposit are as follows: (In Thousands)
1997 $103,951
1998 19,545
1999 25,743
2000 2,885
2001 and Thereafter 1,555
$153,679
NOTE 7 - SHAREHOLDERS' EQUITY
(a) Common Stock:
The Company has 5,000,000 shares of $1.67 par value common stock
authorized with 1,275,000 shares issued and 1,084,804 shares
outstanding at December 31, 1996, and 1,275,000 shares issued and
1,084,807 shares outstanding at December 31, 1995. Treasury stock
totaled 190,196 shares and 190,193 shares at December 31, 1996 and
1995, respectively, and is accounted for under the cost method.
Preferred Stock:
The Company has 500,000 shares of no par value preferred stock
authorized, of which none are issued or outstanding.
Stock Rights:
Pursuant to a shareholder rights plan adopted by the Company on
November 30, 1989, the Company distributed common stock purchase
rights to the shareholders of record on November 30, 1989. Each
Right entitles the registered holder thereof to purchase from the
Company following the Distribution Date, one one-hundredth of a
share of Series A Preferred Stock, no par value, at a Purchase Price
of $70.00 per one one-hundredth share, subject to adjustment, or,
upon the occurrence of certain events, Common Stock of the Company
or common stock of an entity that acquires the Company.
A Distribution Date will occur upon the earlier of 10 days following
a public announcement that a Person or group of affiliated or
associated Persons has acquired, or obtained the right to acquire,
beneficial ownership of 20% or more of the outstanding shares of
Common Stock; or 10 days following the commencement of a tender
offer or exchange offer that would result in a Person or group
beneficially owning 30% or more of such outstanding shares of Common
Stock.
The Rights are not exercisable until the Distribution Date and will
expire at the close of business on November 30, 1999, unless
redeemed earlier by the Company.
In the event that, at any time following the Distribution Date, the
Company is the surviving corporation in a merger with an Acquiring
Person and the Company's Common Stock is not changed or exchanged; a
Person becomes the beneficial owner of more than 30% of the then
outstanding shares of Common Stock (except pursuant to an offer for
all outstanding shares of Common Stock that the Continuing Directors
determine to be fair to and otherwise in the best interests of the
Company and its stockholders); an Acquiring Person engages in one or
more "self-dealing" transactions; or during such time as there is an
Acquiring Person, an event occurs that results in such Acquiring
Person's ownership interest being increased by more than one
percentage point, each holder of a Right will thereafter have the
right to receive, upon exercise thereof and in lieu of Preferred
Stock, Common Stock (or, in certain circumstances, cash, property,
or other securities of the Company) having a value equal to twice
the Purchase Price of the Right.
In the event that, at any time following the Stock Acquisition Date,
the Company is acquired in a merger or other business combination
transaction in which the Company is not the surviving corporation;
or 50% or more of the Company's assets or earning power is sold or
transferred to any Person other than a subsidiary of the Company,
each holder of a Right shall thereafter have the right to receive,
upon exercise thereof and in lieu of Preferred Stock, common stock
of the acquiring Person having a value equal to twice the Purchase
Price of the Right.
<PAGE>
At any time prior to the earlier of November 30, 1999, or 10 days
following the Stock Acquisition Date, the Company may redeem the
Rights in whole, but not in part, at a price of $0.01 per Right
(payable in cash, Common Stock, or other consideration deemed
appropriate by the Board of Directors).
Until a Right is exercised, the holder will have no rights as a
shareholder of the Company, including, without limitation, the right
to vote or to receive dividends.
(d) Stock Option and Stock Appreciation Rights Plan:
On August 7, 1988, the Company initiated a stock option and stock
appreciation rights plan (Plan #1) for sale or award to key
employees as incentive stock options, non-qualified stock options or
stock appreciation rights, and may not be exercised later than ten
years from the date of the grant. The options exercise price is
$18.00 per share.
On March 25, 1993, the Company initiated a second stock option and
stock appreciation rights plan (Plan #2) with the same terms and
conditions as the first plan with the options exercise price at
$20.00 per share.
On December 8, 1994, the Company initiated a third stock option and
stock appreciation rights plan (Plan #3) with the same terms and
conditions as the previous two plans with the options exercise price
at $31.00 per share.
The following table summarizes the options activity.
Shares Range of Option Prices
Options outstanding at January 1, 1994 37,568
Options granted (Plan #3) 69,500 $31.00
Options exercised (Plan #1) (4,179) $18.00
Options exercised (Plan #2) (1,825) $20.00
Options outstanding at December 31, 1994 101,064
Options exercised (Plan #1) (3,061) $18.00
Options exercised (Plan #2) (770) $20.00
Options canceled (Plan #1) (1,000) $18.00
Options outstanding at December 31, 1995 96,233
Options granted (Plan #1) (3,095) $18.00
Options exercised (Plan #2) (2,250) $20.00
Options outstanding at December 31, 1996 90,888
Options exercisable at December 31, 1996 90,888
At December 31, 1996, the Company had reserved 90,888 shares of
common stock to cover grants under the plans.
NOTE 8 - RETIREMENT PLANS
401(K) Profit Sharing Plan:
Effective January 1, 1995, the Company started a profit sharing
retirement plan under which eligible employees may defer a portion
of their annual compensation, pursuant to Section 401(K) of the
Internal Revenue Code. The Company matches employee contributions
at a designated rate times elective contribution. All employees
with at least one year of service and who have attained the age of
21 are eligible to participate. The Company's contributions to the
401(K) plan were $72,000 and$75,000 for the years ended December
31, 1996 and 1995.
Defined Benefit Pension Plan:
Pension expense of $130,000, $138,000, and $106,000 was recognized in
1996, 1995 and 1994, respectively. The following table sets forth
the plan's funded status and amounts recognized in the consolidated
financial statements:
December 31
(In Thousands) 1996 1995
Actuarial present values of
benefit obligations:
Vested benefit obligation $2,693 $2,428
Accumulated benefit obligation $2,729 $2,485
Projected benefit obligation $(3,657) $(3,526)
Plan assets at fair value 4,083 3,892
Plan assets in excess of projected
benefit obligation 426 366
Unrecognized net assets
at January 1, 1990,
being recognized
over 11 years (166) (210)
Unrecognized net loss (164) 69
Prepaid pension cost recognized
in the accompanying balance sheets $ 96 $225
December 31
(In Thousands) 1996 1995 1994
Net pension expense includes the
following: Normal service cost $219 $219 $171
Interest cost on projected benefit
obligation 251 205 275
Actual return on plan assets (516) (803) (188)
Net amortization and deferral 176 517 (152)
Net pension expense $130 $138 $106
<PAGE>
A summary of the significant assumptions used are as follows:
December 31
1996 1995
Annual discount rate 7.5% 7.5%
Annual rate of increase in
Compensation levels 5.0% 5.0%
Annual expected long-term
Rate on return of assets 8.0% 8.0%
The significant majority of plan assets is invested in common
stocks, treasury securities and corporate obligations, with the
balance in cash and short-term investments. Investment in the
Company's stock as of December 31, 1996 and 1995, was 20,544 shares
valued at $821,760 and $760,000, respectively.
NOTE 9 - DEFERRED COMPENSATION
The Bank has a deferred compensation plan for the benefit of key
employees. Under the plan, upon retirement after age 65, the
employee shall receive a minimum of fifty percent of his then
monthly salary for one hundred twenty months. This amount will be
reduced by one-half of one percent for each month that retirement is
prior to age 65 with the minimum age for retirement at age 60. If a
covered employee dies while employed by the Bank, a death benefit of
fifty percent of the employee's then annual salary is payable to the
employee's beneficiary over ten years. The expense charged to
operations for future obligations was $11,000, $137,000, and
$101,000 in 1996, 1995 and 1994, respectively.
NOTE 10 - FINANCIAL INSTRUMENTS
The Bank is a party to financial instruments with off-balance-sheet risk
in the normal course of business to meet the financing needs of its
customers and to reduce its own exposure to fluctuations in interest rates.
These financial instruments include commitments to extend credit, standby
letters of credit and financial guarantees. Those instruments involve, to
varying degrees, elements of credit and interest-rate risk in excess of the
amount recognized in the Consolidated Statements of Financial Condition.
The contract or national amounts of those instruments reflect the extent
of the Bank's involvement in particular classes of financial instruments.
The Bank's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit,
standby letters of credit, and financial guarantees written is represented
by the contractual notional amount of those instruments. The Bank uses the
same credit policies in making commitments and conditional obligations
as it does for on-balance-sheet instruments.
Commitments to Extend Credit and Financial Guarantees - Commitments to
extend credit are agreements to lend to a customer as long as there is
no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and
may require payment of a fee. Since many of the commitments are expected
to expire without being drawn upon, the total commitments amounts do not
necessarily represent future cash requirements. The Bank's experience
has been that approximately 95 percent of the loan commitments are
drawn upon by customers. While approximately 5 percent of commercial
letters of credit are utilized, a significant portion of such utilization
is on an immediate payment basis. The Bank evaluates each customer's credit-
worthiness on a case-by-case basis. The amount of collateral obtained,
if it is deemed necessary by the Bank upon extension of credit is based
on management's credit evaluation of the counterparty. Collateral held
varies but may include accounts receivable; inventory, property, plant,
and equipment; and income-producing commercial properties.
Standby letters of credit and financial guarantees written are conditional
commitments issued by the Bank to guarantee the performance of a customer
to a third party. Those guarantees are primarily issued to support public
and private borrowing arrangements, including commercial paper, bond
financing, and similar transaction. Most guarantees extend for one year
or less. The credit risk involved in issuing letters of credit is
essentially the same as that involved in extending loan facilities to
customers. The Bank holds marketable securities as collateral supporting
those commitments for which collateral is deemed necessary.
The Bank has not bee required to perform an any financial guarantees
during the past two years. The Bank has not incurred any losses on its
commitments in either 1996 or 1995.
The estimated fair values of the Company's financial instruments are as
follows:(In Thousands)
1996 1995
Carrying Fair Carrying Fair
Amount Value Amount Value
Financial Assets:
Cash and Short-Term Investments $31,247 $31,247 $46,781 $46,781
Investment Securities 96,669 96,805 114,320 115,240
Loans 287,695 289,000 232,113 231,657
Accrued Interest Receivable 3,283 3,283 3,381 3,381
$418,894 $420,335 $390,801 $393,678
Financial Liabilities:
Deposits $385,384 $370,054 $363,433 $352,178
A summary of the notional amounts of the Bank's financial instruments
with off-balance sheet risk at December 31, 1996 and 1995, is as follows:
Notional Amount
1996 1995
Commitments to Extend Credit $13,205,000 $13,930,000
Letters of Credit $ 3,649,000 $ 3,061,000
NOTE 11 - SIGNIFICANT CONCENTRATIONS OF CREDIT RISK
Most of the Bank's business activity is with customers located within the
Bank's geographical area. The Bank is mandated by the Community
Reinvestment Act and other regulations to conduct most of its lending
activities within the geographical area where it is located. As a result,
the Bank and its borrowers may be vulnerable to the consequences of
changes in the local economy. Investments in state and municipal
securities involve governmental entities within the Bank's
geographical area.
The distribution of commitments to extend credit approximates the
distribution of loans outstanding. Commercial and standby letters of credit
were granted primarily to commercial borrowers.
The contractual amounts of credit-related financial instruments, such as
commitments to extend credit and letters of credit, represent the amounts
of potential accounting loss should the contract be fully drawn upon,
the customer default and the value of any existing collateral become
worthless.
NOTE 12 - INCOME TAXES
The Company and its subsidiaries file consolidated federal income
tax returns on a calendar year basis. The Bank is allowed a special
bad debt deduction based on specified experience formulas. The Bank used
the experience formula method in 1996 and anticipates using the same
method in 1997.
The consolidated provision for income taxes is consisted of the following
for years ended December 31, 1996 and 1995: (In Thousands)
Year Ended December 31
(In Thousands) 1996 1995 1994
Current income tax expense:
Federal $2,118 $1,026 $1,491
State 0 0 0
2,118 1,026 1,491
Deferred income tax (benefit)/expense (842) 674 (80)
Provision for income tax $1,276 $1,700 $1,411
The reasons for the differences between the statutory federal income
tax rates and the effective tax rates are summarized as follows: (In
Thousands)
Year Ended December 31
1996 1995 1994
Amount % Amount % Amount %
Income taxes at the
statutory rate $2,245 34 $2,228 34 $2,002 34
Increase/(decrease) in
federal tax expense
resulting from:
Tax exempt income (566) (9) (636) (10) (637) (11)
Prior year underaccrual/
(overaccrual) (172) (3) (33) 0 18 0
Other (231) (3) 141 2 28 1
Provision for income tax $1,276 19 $1,700 26 $1,411 24
<PAGE>
Deferred tax assets and liabilities included in other assets as of December
31, 1996 and 1995, consist of the following: (In Thousands)
December 31
1996 1995
Deferred Tax Assets:
Loan loss reserve $ 735 $ 513
Deferred compensation 299 308
Interest income 0 8
Total deferred tax assets 1,024 829
Deferred Tax Liabilities:
Depreciation 251 248
Pension costs 33 77
Lease receivables 0 597
Fair value adjustment,
available for sale
securities 11 478
---- ---
739 1,400
Net Deferred Assets/
(Liabilities) $(571) $564
NOTE 13 - RELATED PARTIES
Loans have been made to directors, principal officers, principal
shareholders, and their related interests in the ordinary course of
business. All loans and commitments to loans in such transactions were
made on substantially the same terms, including collateral and interest
rates as those prevailing at the time for comparable transactions with
unrelated persons. In the opinion of Management, these transactions
do not involve more than normal risk of collectibility nor present
other unfavorable features. It is anticipated that such further
extension of credit will be made in the future.
As of December 31, 1996 and 1995, such loans aggregated $4,468,000
and $4,663,000 respectively. Activity with said parties during 1996
included principal repayments of $645,000 and new loans of $450,000.
Loans that are guaranteed by said parties for which they are contingently
liable as of December 31, 1996 and 1995 was $63,000 and $119,000,
respectively.
NOTE 12 - COMMITMENTS AND CONTINGENCIES
In the ordinary course of business, the Bank has various outstanding
commitments and contingent liabilities that are not reflected
in the accompanying financial statements. In addition, the Bank
is a defendant in certain claims and legal actions arising in the
ordinary course of business. In the opinion of management, after
consultation with legal counsel, the ultimate disposition of these
matters is not expected to have a material adverse effect on the
consolidated financial condition of the Bank.
The Bank provides self-funded comprehensive health care coverage
to substantially all of its employees. The plan is covered by an
umbrella policy for catastrophic illnesses. The Bank's maximum
liability is $35,000 per participant for 1996 and 1995, with an
overall maximum liability of $490,000 for 1996 and $489,000 for
1995.
<PAGE>
NOTE 15 - RESTRICTION ON RETAINED EARNINGS
The Company is subject to certain restrictions on the amount of dividends
that it may declare without prior regulatory approval. At December 31,
1996, approximately $12,510,000 of retained earnings were available
for dividend declaration without prior regulatory approval.
NOTE 16 - REGULATORY MATTERS
The Bank is subject to various regulatory capital requirements administered
by its primary federal regulator, the Office of Comptroller of the
Currency (OCC). Failure to meet the minimum regulatory capital requirements
can initiate certain mandatory, and possible additional discretionary
actions by regulators, that if undertaken, could have a direct effect
on the Bank's consolidated financial statements. Under the regulatory
capital adequacy guidelines and the regulatory framework for prompt
corrective action, the Bank must meet specific capital guidelines that
involve quantitative measures of the Bank's assets, liabilities, and
certain off-balance-sheet items as calculated under regulatory accounting
practices. The Bank's capital amounts and classification are also subject
to qualitative judgements by the regulators about components, risk
weightings, and other factors.
Quantitative measures established by regulation to ensure capital
adequacy require the Bank to maintain minimum amounts and ratios of
total risk-based capital and Tier 1 capital to risk-weighted assets (as
defined in the regulation), and Tier 1 capital to adjusted total
assets (as defined). Management believes, as of December 31, 1996, that
the Bank meets all the capital adequacy requirements to which it
is subject.
As of December 31, 1996, the most recent notification from the OCC, the
Bank was categorized as well-capitalized under the regulatory framework
for prompt corrective action. To remain as well capitalized, the Bank
will have to maintain a minimum total risk-based, Tier 1 risk-based, and
Tier 1 leverage ratios as disclosed in the table below. There are no
conditions or events since the most recent notification that management
believes have changed the Bank's prompt corrective action category.
(In Thousands)
<PAGE>
For Capital To Be Well
Adequacy Capitalized Under
Prompt Corrective
Actual Purposes Action Provision
Amount Ratio Amount Ratio Amount Ratio
As of December 31, 1996
Total Risk-Based Capital
(to Risk-Weighted Assets)$42,666 13.8% $24,653>= 8.0% $30,816>= 10.0%
Tier 1 Capital
(to Risk-Weighted Assets)$39,476 12.8% $12,327>= 4.0% $30,816>= 6.0%
Tier 1 Capital
(to Adjusted Total Assets) $39,476 8.8% $17,977>= 4.0% $22,472>= 5.0%
As of December 31, 1995
Total Risk-Based Capital
(to Risk-Weighted Assets) $39,060 13.9% $21,064>= 8.0% $26,329>= 10.0%
Tier 1 Capital
(to Risk-Weighted Assets) $36,647 14.8% $10,532>= 4.0% $15,798>= 6.0%
Tier 1 Capital
(to Adjusted Total Assets) $36,647 9.1% $16,175>= 4.0% $20,218>= 5.0%
NOTE 17 - CONDENSED FINANCIAL INFORMATION - PARENT COMPANY ONLY
SOUTHERN JERSEY BANCORP OF DELAWARE, INC. (Parent Company Only)
CONDENSED BALANCE SHEET
(In Thousands Except Share and Per Share Data)
December 31 1996 1995
ASSETS
Cash and due from banks $667 $667
Investment in bank subsidiary 39,192 36,277
Other assets 490 250
TOTAL ASSETS $40,349 $37,194
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Dividends Payable $598 $542
Other Liabilities 0 9
Total Liabilities 598 551
SHAREHOLDERS' EQUITY
Preferred stock, no par value;
shares authorized - 500,000;
no shares issued Common stock,
par value $1.67 per share;
shares authorized - 5,000,000;
shares issued - 1,275,000 2,129 2,129
Additional paid-in-capital 2,260 2,260
Retained earnings 39,236 35,103
Unrealized gains on securities 22 929
------ ------
43,647 40,384
Less: Treasury stock at cost -
190,193 shares in 1995 and 175,767
shares in 1994 3,896 3,741
Total Shareholders' Equity 39,751 36,643
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $40,349 $37,194
<PAGE>
SOUTHERN JERSEY BANCORP OF DELAWARE, INC.
(Parent Company Only)
CONDENSED STATEMENT OF INCOME
(In Thousands) Year Ended December 31
1996 1995 1994
Income:
Cash dividends from
subsidiary $1,595 $1,593 $1,554
Expenses:
Operating Expenses 88 135 116
Income before income taxes 1,507 1,458 1,438
Equity in undistributed
earnings of subsidiaries 3,821 3,394 3,039
NET INCOME $5,328 $4,852 $4,477
CONDENSED STATEMENT OF CASH FLOWS
(In Thousands) Year Ended December 31
1996 1995 1994
Cash flows from operating
activities:
Net income $5,328 $4,852 $4,477
Adjustments to reconcile
income from continuing
operations to net cash
provided by operating
activities:
Equity in net earnings of
subsidiary (3,821) (3,394) (3,039)
Amortization of organization
costs 0 0 16
(Increase)/decrease in other
assets (240) 200 (450)
Increase in liabilities 46 18 12
Net cash provided by operating
activities 1,313 1,676 1,016
Cash flows from investing
activities:
Net cash used for
investing activities 0 0 0
Cash flows from financing
activities:
Cash dividends (1,195) (1,093) 1,054)
Purchase of Treasury stock (404) (800) (156)
Sale of Treasury stock 286 256 206
Net cash used for financing
activities (1,313) (1,637) (1,004)
Net increase in cash and
cash equivalents 0 39 12
Cash and cash equivalents at
beginning of year 667 628 616
Cash and cash equivalents at
end of year $667 $667 $628
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors of
F & M Investment Company
We have audited the balance sheets of F & M Investment
Company, (a wholly-owned subsidiary of Farmers & Merchants National
Bank) as of December 31, 1996 and 1995 and the related statements of
stockholders' equity, income and cash flows for the years then
ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether
the financial statements are free from material misstatement. An
audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position of
F & M Investment Company, as of December 31, 1996 and 1995 and the
results of its operations and cash flows for the years then ended,
in conformity with generally accepted accounting principles.
s/ Belfint, Lyons & Shuman, P.A.
_______________________________________
January 30, 1997
Wilmington, Delaware
<PAGE>
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None
PART III
Item 10. Directors and Executive Officers of Registrant
Information regarding Directors of Registrant will be set
forth in the Southern Jersey Bancorp of Delaware, Inc. Proxy
Statement for the annual meeting of shareholders to be held April
10, 1997, and is incorporated herein by reference. Information
regarding executive officers of Registrant is set forth under the
caption "Executive Officers" in Item 1(a) hereof.
Item 11. Executive Compensation
Information regarding executive compensation will be set
forth in the Southern Jersey Bancorp of Delaware, Inc. Proxy
Statement for the annual meeting of shareholders to be held April
10, 1997, and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
Information regarding security ownership of certain
beneficial owners and Management will be set forth in the Southern
Jersey Bancorp of Delaware, Inc. Proxy Statement for the annual
meeting of shareholders to be held April 10, 1997, and is
incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
Information regarding certain relationships and related
transactions will be set forth in the Southern Jersey Bancorp of
Delaware, Inc. Proxy Statement for the annual meeting of
shareholders to be held April 10, 1997, and is incorporated herein
by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K
(1) Financial Statements
The financial statements filed as a part of this report
are listed on the Index to Consolidated Financial Statements on Page
34.
<PAGE>
(2) Financial Statement Schedules
All other schedules have been omitted because the required
information is shown in the Consolidated Financial Statements or
notes thereto, the statistical information in Item 1, pursuant to
Industry Guide 3, or they are not applicable.
(3) (a) Exhibits (numbered in accordance with Item 601
of Regulation S-K)
Exhibit
Number Description
3A Form of Certificate of Incorporation of
the Registrant -
Incorporation by reference to Definitive
Proxy Statement filed and dated June 16, 1989
3B Form of Bylaws of the Registrant -
Incorporation by reference to Definitive
Proxy Statement filed and dated June 16, 1989
4A Form of Common Stock Certificate -
Incorporation by reference to Definitive
Proxy Statement filed and dated June 16, 1989
4B Instruments Defining the Rights of
Security Holders -
Incorporation by reference to Form 8-A
filed
November 30, 1989
10A Stock Option and Stock Appreciation
Rights Plan -
Incorporated by reference to the
Registrant's Definitive Proxy Statement
filed February 27, 1987, and the
Registrant's Annual Report on Form 10-K for
the fiscal year Ended December 31, 1987,
filed March 31, 1988.
21 Subsidiaries of the Registrant -
Included under Item 1, Page 2 of this
filing.
(3) (b) Reports on Form 8-K
No reports on Form 8-K have been filed by the
Registrant during the quarter ended December 31, 1996.
(3) (c) Form of Deferred Compensation Agreement for named
executive officers, Clarence D. McCormick, Sr., Harry
W. Bullock, and Ralph Cocove is incorporated by
reference to Form 10-K filed March 31, 1989.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities and Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
SOUTHERN JERSEY BANCORP OF DELAWARE, INC.
Dated:March 28, 1997 By:s/ Clarence D. McCormick
----------------------
Clarence D. McCormick
Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates
indicated.
Signatures Title Date
s/ Henry L. Backenson Vice Chairman March 28, 1997
- -----------------------------
Henry L. Backenson
s/ Alfred F. Caggiano Vice Chairman March 28, 1997
- -----------------------------
Alfred F. Caggiano
s/ James H. Carll Director March 28, 1997
- -----------------------------
James H. Carll
s/ Keron D. Chance Director March 28, 1997
- -----------------------------
Keron D. Chance, Esq.
s/ Harry W. Bullock Director March 28, 1997
- -----------------------------
Harry W. Bullock
s/ Frank LoBiondo Director March 28, 1997
- -----------------------------
Frank LoBiondo
s/ Clarence D. McCormick, Jr. Director March 28, 1997
- -----------------------------
Clarence D. McCormick, Jr.
s/ Louis Pizzo Director March 28, 1997
- -----------------------------
Louis Pizzo
s/ Donald Strang Director March 28, 1997
- ----------------------
Donald Strang
s/ Anthony M. Sparacio, Jr. Director March 28, 1997
--------------------------
Anthony M. Sparacio, Jr.
<PAGE>
PART II - OTHER INFORMATION
EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
Exhibit 27. Financial Data Schedule
B. Reports on Form 8-K
No reports have been filed on form 8-K during this quarter.
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 18,347
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 12,900
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 34,904
<INVESTMENTS-CARRYING> 61,901
<INVESTMENTS-MARKET> 96,805
<LOANS> 290,885
<ALLOWANCE> 3,190
<TOTAL-ASSETS> 430,324
<DEPOSITS> 385,384
<SHORT-TERM> 0
<LIABILITIES-OTHER> 5,189
<LONG-TERM> 0
<COMMON> 2,129
0
0
<OTHER-SE> 34,904
<TOTAL-LIABILITIES-AND-EQUITY> 430,324
<INTEREST-LOAN> 22,441
<INTEREST-INVEST> 6,802
<INTEREST-OTHER> 1,147
<INTEREST-TOTAL> 30,390
<INTEREST-DEPOSIT> 14,870
<INTEREST-EXPENSE> 14,870
<INTEREST-INCOME-NET> 13,715
<LOAN-LOSSES> 1,805
<SECURITIES-GAINS> 415
<EXPENSE-OTHER> 10,357
<INCOME-PRETAX> 6,604
<INCOME-PRE-EXTRAORDINARY> 6,604
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,328
<EPS-PRIMARY> 4.91
<EPS-DILUTED> 4.91
<YIELD-ACTUAL> 4.40
<LOANS-NON> 2,287
<LOANS-PAST> 1,288
<LOANS-TROUBLED> 983
<LOANS-PROBLEM> 550
<ALLOWANCE-OPEN> 2,413
<CHARGE-OFFS> 1,211
<RECOVERIES> 183
<ALLOWANCE-CLOSE> 3,190
<ALLOWANCE-DOMESTIC> 3,190
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
