<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON DC 20549
SCHEDULE 13E-3
Rule 13e-3 Transaction Statement
(Pursuant to Section 13(e) of the Securities Exchange Act of 1934)
SOUTHERN JERSEY BANCORP OF DELAWARE, INC.
(Name of the Issuer and Person Filing Statement)
COMMON STOCK, $1.67 PAR VALUE
(Title of Class of Securities)
NONE
(CUSIP Number of Class of Securities)
Clarence D. McCormick, Jr. Steven R. Block, P.C., Esq.
President Block & Balestri, P.C.
Southern Jersey Bancorp of Delaware, Inc. 15851 Dallas Parkway, Suite 1020
53 South Laurel, Bridgeton, NJ 08302 Dallas, Texas 75248
(609) 453-3002 (972) 788-2700
(Name, Address and Telephone Number of Person(s) Authorized to Receive Notices
and Communications on Behalf of Person(s) Filing Statement)
This statement is filed in connection with (check the
appropriate box):
a. [ ] The filing of solicitation materials or an
information statement subject to Regulation
14A, Regulation 14C or Rule 13e-3(c) under
the Securities Exchange Act of 1934.
b. [ ] The filing of a registration statement under
the Securities Act of 1933.
c. [ ] A tender offer.
d. [X] None of the above.
Check the following box if the soliciting materials or information
statement referred to in checking box (a) are preliminary copies: [ ]
CALCULATION OF FILING FEE
<TABLE>
<CAPTION>
Transaction Valuation(*) Amount of Filing Fee
------------------------ --------------------
<S> <C>
$12,914,127 $2,582.83
</TABLE>
(*)Based upon purchase of 211,707 shares at $61 per share.
[ ] Check box if any part of the fee is offset as provided by Rule
0-11(a)(2) and identify the filing with which the offsetting fee was previously
paid. Identify the previous filing by registration statement number, or the
form or schedule and the date of its filing.
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ITEM 1. ISSUER AND CLASS OF SECURITY SUBJECT TO THE TRANSACTION.
(a). The name of the issuer is Southern Jersey Bancorp of Delaware,
Inc. (the "Company"). The address of the principal executive offices of the
Company is 53 South Laurel, Bridgeton, New Jersey 08302. The Company is the
bank holding company parent and sole stockholder of The Farmers and Merchants
National Bank of Bridgeton, Bridgeton, New Jersey (the "Bank").
(b). This Statement relates to the purchase by the Company of
211,707 shares of common stock, $1.67 par value per share (the "Company Common
Stock") for $61.00 per share. As of September 11, 1997, 1,275,000 shares of
Company Common Stock were issued and 1,089,757 shares were outstanding and held
of record by 460 persons.
(c). The Company Common Stock is inactively traded on a local
basis, and the range of sales prices known to management of the Company are
based on quotes from the National Quotation Bureau or from information gleaned
through the Bank, which acts as the transfer agent for the Company Common
Stock. The high and low sales prices for each quarter of the two most recent
fiscal years are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
HIGH LOW HIGH LOW HIGH LOW
---- --- ---- --- ---- ---
<S> <C> <C> <C> <C> <C> <C>
First Quarter $41.25 $40.00 $38.25 $35.00 $31.50 $31.25
Second Quarter 45.00 41.25 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
</TABLE>
(d). The Company paid the following dividends on the following date
during the last two fiscal years on its shares of Company Common Stock:
<TABLE>
<CAPTION>
Year RECORD DATE PAYMENT DATE AMOUNT
- ---- ----------- ------------ ------
<S> <C> <C> <C>
1997 6/24/97 7/1/97 $.60
1996 12/27/95 1/1/96 $.55
6/25/96 7/1/96 $.55
1995 12/22/94 1/1/95 $.50
6/19/95 7/1/95 $.50
</TABLE>
The ability of the Company to pay dividends to its stockholders is
subject to restrictions set forth in the Delaware General Corporation Law (the
"DGCL"). Section 170 of the DGCL limits the payment of dividends to (1) the
surplus of the Company or (2) the net profits of the Company for the fiscal
year in which the dividend is paid and the immediately preceding fiscal year.
Further, as a bank holding company, the Company is subject to the supervision
and regulation of the Board of Governors of the Federal Reserve System (the
"Fed") and the Federal Reserve Bank of Philadelphia (the "Reserve Bank"). The
Fed has imposed certain minimum capital guidelines that a bank holding company
such as the Company must maintain, including a risk-based capital measure that
requires the Company to
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achieve a minimum ratio of qualifying total capital-to-weighted risk assets of
8%, of which 4% shall be in the form of Tier 1 capital (defined as the sum of
core capital elements less goodwill and other intangible assets). In addition,
the Fed requires a bank holding company to have a minimum level of tier 1
capital-to-total assets of 3%. The primary source of income from which the
Company has funds to pay dividends are dividends it receives from the Bank.
The payment of dividends from the Bank is regulated by the Office of the
Comptroller of the Currency (the "OCC").
The OCC restricts a national bank, such as the Bank, to paying
dividends only from its current year's earnings and its net retained earnings
from its two most recently completed fiscal years. In addition, the Bank's
tier 1 capital-to-assets ratio must meet the OCC's regulatory guideline of 4.0%
and its risk based capital measure must be at least 8.0%.
(e). Not applicable.
(f). The following table sets forth the purchases of Company Common
Stock by the Company between January 1, 1995, and the date of this Schedule
13E-3:
<TABLE>
<CAPTION>
Number of Shares of Company Range of Price Paid Average Purchase
Common Stock Purchased Per Share Price Per Share
-------------------------- ------------------- ------------------
<S> <C> <C> <C>
1995:
First Quarter 0 N/A N/A
Second Quarter 2,500 $31.95 $31.95
Third Quarter 14,834 32.00 to 35.00 33.23
Fourth Quarter 6,472 35.00 to 35.25 35.01
1996:
First Quarter 100 35.00 35.00
Second Quarter 1,816 39.00 to 39.25 39.16
Third Quarter 4,000 40.00 40.00
Fourth Quarter 4,221 40.00 40.00
1997:
First Quarter 890 40.00 40.00
Second Quarter 1,260 43.00 to 44.50 43.43
</TABLE>
ITEM 2. IDENTITY AND BACKGROUND.
This Statement is being filed by the Company, which is the issuer of
the equity securities that are the subject of the Rule 13e-3 transaction. The
Company, a Delaware corporation, is the registered bank holding company of the
Bank. The address of the Company is 53 South Laurel, Bridgeton, New Jersey
08302.
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The controlling stockholders, directors and executive officers of the
Company are as follows:
Clarence D. McCormick: Chairman of the Board of Directors and Chief
Executive Officer
Clarence D. McCormick, Jr.: President and Director
Ralph A. Cocove, Sr.: Executive Vice President and Cashier
Russell Chappius, Sr.: Senior Vice President and Operations Officer
Charles S. Kessler: Senior Vice President and Data Processing
Manager
Simon Aman: Senior Vice President and Senior Trust
Officer
Paul J. Ritter, III Senior Vice President, Comptroller, and
Treasurer
Harry W. Bullock: Secretary and Director
Keron D. Chance Director
Henry L. Backenson Director
Louis Pizzo Director
Alfred F. Caggiano Director
Donald E. Strang Director
Frank LoBiondo Director
James H. Carll Director
Anthony M. Sparacio, Jr. Director
(a)-(d) and (g). The information required by this Item 2 with respect
to each of the above-named persons is attached hereto as Exhibit 1, and is
incorporated herein by this reference. The information disclosed in Exhibit 1
is included pursuant to General Instruction D to Schedule 13E-3.
(e) and (f). During the last five years, neither the Company nor, to
its knowledge, any of the directors or executive officers thereof has been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors) or was a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction as a result of which any such
person was or is subject to a judgement, decree, or final order enjoining
further violations of, or prohibiting activities subject to, federal or state
securities laws or finding any violation of those laws.
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ITEM 3. PAST CONTRACTS, TRANSACTIONS OR NEGOTIATIONS.
(a). Not applicable.
ITEM 4. TERMS OF THE TRANSACTION.
(a)-(b). At a meeting of the Board of Directors of the Company held on
September 11, 1997, the Board adopted resolutions authorizing the going-private
transaction that is the subject of this Schedule 13E-3, the number of shares of
Company Common Stock to be acquired by the Company in the following-described
merger, and the price to be paid for such shares. The Board also conditionally
approved, pursuant to Section 251 of the DGCL the merger (the "Merger") of the
Company with Southern Jersey Merger Corp., a newly-organized Delaware
corporation (the "Merger Corp."). Pursuant to the Merger, the Company will
acquire 211,707 shares of Company Common Stock. A copy of the Reorganizational
Merger Agreement is attached hereto as Exhibit 2 (the "Merger Agreement") and
is incorporated herein by this reference. The Merger is conditioned upon,
pursuant to the Board resolutions, the receipt of an updated fairness opinion
from Alex Sheshunoff & Co. Investment Banking ("Sheshunoff") immediately prior
to the announcement of the Merger. The Board of Directors of the Merger Corp.
also adopted resolutions on September 11, 1997, approving the Merger.
Pursuant to the Merger Agreement and the corporate laws of Delaware,
the Merger Corp. will merge with and into the Company with the Company being
the surviving entity of the Merger and the corporate identity and existence of
the Merger Corp., separate and apart from the Company, will cease on
consummation of the Merger. At the effective time of the Merger (the
"Effective Time"), each share of Company Common Stock issued and outstanding as
of September 11, 1997 (the "Record Date"), and held of record by persons owning
1,100 or fewer shares of Company Common Stock (the "Cash Stockholders") will be
converted into the right to receive cash in the amount of $61.00 (the "Merger
Consideration"). To the extent shares of Company Common Stock are held in
street name, all such shares shall be deemed held by persons owning 1,100 or
less shares, and unless demonstrated otherwise, will be converted into the
Merger Consideration. Each share of Company Common Stock held by any other
person shall remain issued and outstanding with all rights, powers, and
privileges currently enjoyed. At the Effective Time, all shares of Company
Common Stock held by the Cash Stockholders, by virtue of the Merger and without
any action on the part of the holders thereof, will no longer be outstanding
and will be canceled and retired and will cease to exist. Each Cash
Stockholder's Certificate or Certificates (the "Certificates"), which
immediately prior to the Effective Time represented outstanding shares of
Company Common Stock, will thereafter cease to have any rights with respect to
such shares, except the right to receive, without interest, the Merger
Consideration upon surrender of such Certificate or Certificates to the Bank,
which will act as the paying agent (the "Paying Agent") in the Merger.
Cash Stockholders who do not want to accept the Merger Consideration
may dissent from the Merger and exercise their appraisal rights pursuant to
Section 262 of the DGCL. Pursuant to this law, Cash Stockholders may request
the Delaware Court of Chancery to appraise the Company Common Stock and
establish the fair value of such stockholder's shares.
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ITEM 5. PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE.
(a)-(c). Not applicable.
(d). The Company has no plans or intentions to change its present
dividend policy or incur any indebtedness as a result of the Merger. The
Company does plan to raise $13,000,000 in new capital to fund the Merger
Consideration. Specifically, the Company intends to sell, through its
wholly-owned Delaware statutory business trust (the "Trust Subsidiary"), shares
of $_____ par value preferred stock (the "Trust Preferred Stock") in a private
offering. The statutory business trust will, in turn, invest the proceeds of
the Trust Preferred Stock sale in __% junior subordinated deferrable interest
debentures (the "Company Debentures") to be issued by the Company. The
issuance of the Trust Preferred Stock will increase the Company's total
capital, on a consolidated basis, by $13,000,000 immediately prior to closing
the Merger. The Company's total capital, on a consolidated basis, will, at
consummation of the Merger, then decrease by the $12,914,127 paid as Merger
Consideration.
(e). Not applicable.
(f)-(g). As a result of the Merger, the Company will be eligible to
terminate its registration with the SEC under Section 12(g)(4) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and suspend
its reporting obligations to file reports with the SEC pursuant to Section
15(d) of the Exchange Act.
ITEM 6. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a). The Company intends to fund the Merger Consideration through
the sale through the Trust Subsidiary, in a private offering, of newly-issued
preferred securities with par value and liquidation value of $___ per share and
a dividend rate of ___%. The Trust Subsidiary will be organized for the sole
purpose of issuing the Trust Preferred Stock and investing the proceeds thereof
in the Company Debentures. The Company will use the proceeds of the sale of
the Company Debentures to the Trust Subsidiary to fund the Merger
Consideration.
(b). The Company anticipates that it will incur expenses of
approximately $61,500 in connection with the Merger, including legal fees of
$7,500, appraisal fees of $53,000, and printing and mailing fees of
approximately $1,000. These fees do not include professional fees incurred in
connection with the preparation of this Schedule 13E-3 and the going-private
transaction.
(c). Not applicable.
(d). Not applicable.
ITEM 7. PURPOSE(S), ALTERNATIVES, REASONS AND EFFECTS.
(a). The purpose of this Rule 13e-3 going private transaction to be
accomplished through the Merger is to suspend the Company's obligation to file
reports under, and to terminate the registration of the Company Common Stock
from, the Exchange Act.
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(b). The Company considered two alternative means to accomplish its
objective of once again becoming a private company. It should be noted that
the Company never intended to become a publicly-reporting company, but was
required to report publicly as a result of becoming the registered bank holding
company for the Bank. The Merger will enable the Cash Stockholders to sell
their shares of Company Common Stock at a fair price and without the usual
transaction costs associated with market sales, before the Company Common Stock
is deregistered under the Exchange Act. The Company believes that, even as a
public stock, there is a very limited market for the shares of Company Common
Stock, especially for sales of large blocks of such shares, and that the
Company's stockholders derive little benefit from the Company's status as a
publicly-held corporation.
TENDER OFFER. The Company considered making a tender offer for its
shares of Company Common Stock and believes it would have been successful in
acquiring an equal amount of shares of Company Common Stock as are to be
acquired in the Merger. This alternative was viewed as undependable, however,
because it was not certain that the Company would sufficiently reduce the
number of its record stockholders. The purpose of the Merger is to reduce the
number of record stockholders of the Company. Tendering for Company Common
Stock, in all likelihood, would not accomplish that objective and tendering for
record stockholders is not a plausible alternative.
REVERSE STOCK SPLIT. The Company next considered a reverse stock
split, which alternative would accomplish the objective of reducing the number
of record stockholders of the Company, assuming approval of the reverse stock
split by the Company's stockholders. In a reverse stock split, the interest of
the Cash Stockholders would be acquired by the Company pursuant to an amendment
to the Company's Certificate of Incorporation to reduce the number of issued
and outstanding shares of Company Common Stock such that the Cash Stockholders
would own less than one full share of Company Common Stock. The Company would
then distribute cash for the resulting fractional share interests. To amend
its Certificate of Incorporation, the Company would have to hold a special
stockholders meeting. The Merger, as structured, does not require the Company
to call a special stockholders meeting pursuant to Section 251(f) of DGCL.
Since the reverse stock split and the Merger would both achieve the same
objective of reducing the number of record stockholders, the Company chose the
Merger as the superior method as it would avoid the time and expense of holding
a special meeting of stockholders and preparing a proxy statement. In
addition, the Merger proposal would ensure that the Cash Stockholders would
receive dissenters' appraisal rights under Section 262 of the DGCL.
(c). The funds required to pay for the shares of Company Common
Stock to be acquired from the Cash Stockholders in the Merger will be raised in
a private offering of the Trust Preferred Stock. The Company will issue its
Company Debentures to its Trust Subsidiary in consideration for the proceeds
realized from the sale of the Trust Preferred Stock. No borrowings from any
outside or third party is contemplated to effect the Merger and purchase of
Company Common Stock from the Cash Stockholders.
(d). As described above, upon consummation of the Merger, the
number of record stockholders of the Company will be reduced from 460 to
approximately 145 (depending upon the number of shares of Company Common Stock
held in street name to be acquired), and the Company will achieve the purposes
of the Merger described above. The Company incurs costs related to its status
as a public reporting corporation under the federal securities laws including
indirect costs as a result of, among other things, the executive time expended
to prepare and review various filings,
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furnish information to stockholders, and attend to other stockholders matters.
Termination of registration as a public company eliminates the costs and
expenses of various federal securities filings incurred with respect to
regulatory and reporting requirements of the Company and reduces the amount of
time devoted by management in connection therewith. The Company estimates
that, upon consummation of the Merger, it will achieve savings within a range
of approximately $108,000 to $213,000 annually from no longer being required to
file reports under the Exchange Act. The Company Common Stock is not traded on
any nationally recognized securities exchange and is very thinly traded. The
Company does not believe the liquidity or trading of its shares of Company
Common Stock will be negatively effected as a result of the Merger. The
Company has traditionally been the primary market maker in the shares of
Company Common Stock.
Also as described above, upon consummation of the Merger, each share of
Company Common Stock issued and outstanding immediately prior to the Effective
Time and held of record by the Cash Stockholders will be converted into the
right to receive the Merger Consideration. The following description of the
federal income tax consequences of the Merger is included solely for the
general information of the Company's stockholders. The tax consequences for
any particular stockholder may be affected by matters not discussed herein, and
stockholders should consult their personal tax advisors in determining the
consequences of the application of state and local tax law. The conversion of
shares of Company Common Stock into the right to receive the Merger
Consideration pursuant to the Merger will be a taxable transaction for federal
income tax purposes. Each holder of shares of Company Common Stock will
recognize gain or loss upon the surrender of that stockholder's Company Common
Stock equal to the difference, if any, between (i) the amount of the cash
payment of $61.00 per share received in exchange for a share of Company Common
Stock and (ii) that stockholder's tax basis in that share of Company Common
Stock acquired. Any gain or loss will be treated as a capital gain or loss if
the Company Common Stock exchanged was held as a capital asset in the hands of
the Cash Stockholder. Holders of Company Common Stock are urged to consult
their personal tax advisors as to the tax consequences of the Merger under
federal, state, local and any other applicable laws.
The cash payments due to the holders of shares of Company Common Stock
upon the exchange thereof pursuant to the Merger (other than certain exempt
entities and persons) will be subject to a backup withholding tax at the rate
of 31% under federal income tax law unless certain requirements are met.
Generally, the Paying Agent will be required to deduct and withhold the tax on
cash payments due at the Effective Time of the Merger if (i) the Cash
Stockholder fails to furnish a taxpayer identification number ("TIN" the TIN of
an individual stockholder is his or her Social Security number) to the Paying
Agent or fails to certify under penalty of perjury that such TIN is correct;
(ii) the Internal Revenue Service ("IRS") notifies the Paying Agent that the
TIN furnished by the Cash Stockholder is incorrect; (iii) the IRS notifies the
Paying Agent that the Cash Stockholder has failed to report interest,
dividends, or original issue discount in the past; or (iv) there has been a
failure by the Cash Stockholder to certify under penalty of perjury that such
stockholder is not subject to the backup withholding tax. Any amounts withheld
by the Paying Agent in collection of the backup withholding tax will reduce the
federal income tax liability of the Cash Stockholders from whom such tax was
withheld.
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ITEM 8. FAIRNESS OF THE TRANSACTION.
(a). The Company believes that the Merger is fair to the
stockholders of the Company, and the Board of Directors of the Company has
unanimously approved the Merger, with no member of the Board of Directors
dissenting or abstaining from voting on the Merger.
(b). A special committee (so called herein) of the Board of
Directors of the Company retained Alex Sheshunoff & Co. Investment Banking
("Sheshunoff") by letter agreement dated August 15, 1997, to act as its
financial advisor and to render its opinion to the Company's Board of Directors
as to the fairness of the Merger Consideration, from a financial point of view,
to the Cash Stockholders.
Sheshunoff delivered its written opinion on September 11, 1997, to the
Board of Directors of the Company to the effect that, as of such date, the
Merger Consideration was fair, from a financial point of view, to the Cash
Stockholders. [Sheshunoff also has delivered an updated written opinion, dated
as of the date notice of the Merger was first mailed to the Company's
stockholders (the "Notice Date"), to the Company's Board of Directors to the
effect that, as of such date, the Merger Consideration was fair, from a
financial point of view, to the Cash Stockholders]. No restrictions were
imposed by the Special Committee or the Board of Directors of the Company upon
Sheshunoff with respect to the investigations made or procedures followed by
Sheshunoff in rendering its opinions.
The full text of Sheshunoff's fairness opinion, which is summarized in
response to Item 9 of this Schedule 13E-3, dated September 11, 1997, which sets
forth certain assumptions made, certain procedures followed, and certain
matters considered by Sheshunoff, is attached hereto as Exhibit 3.
In addition to the conclusions contained in the Sheshunoff report, the
Board of Directors reviewed certain additional factors, including the
historical and current market values of the Company Common Stock. In this
regard, the Company's Board of Directors noted that there had been very few
transactions in shares of Company Common Stock during the past year and that
the book value per share of Company Common Stock as of June 30, 1997, was
$38.38.
The Board of Directors of the Company also considered the dissenters'
appraisal rights that would be afforded to the Cash Stockholders as an
established opportunity to seek another opinion as to the fairness of the
Merger Consideration. The Company's Board of Directors further considered the
lack of any material benefit to the Company remaining a publicly reporting
corporation and the direct and indirect cost savings to be realized by the
Company from deregistering the Company Common Stock under the Exchange Act,
and the benefits to be derived by the remaining Company stockholders therefrom.
In reaching its determination as to the fairness of the Merger and the
Merger Consideration, the Board of Directors of the Company did not assign any
relative or specific weights to the foregoing factors.
(c). Section 251(f) of the DGCL provides that, unless required by
its certificate of incorporation, no vote of stockholders of a corporation
surviving a merger shall be necessary to authorize a merger if (i) the
agreement of merger does not amend in any respect the certificate of
incorporation of the surviving corporation; (ii) each share of stock of the
surviving corporation
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outstanding immediately prior to the effective date of the merger is to be an
identical outstanding or treasury share of the surviving corporation after the
effective date of the merger; and (iii) no shares of common stock of the
surviving corporation and no shares, securities, or obligations convertible
into such stock are to be issued or delivered under the plan of merger. The
Merger has been structured not to require any stockholder approval.
Accordingly, the approval of a majority of the unaffiliated stockholders of the
Company is not required.
(d). The decision to retain Sheshunoff to prepare a report
concerning the fairness of the Merger and the Merger Consideration was
initially made by management of the Company and reaffirmed by the Special
Committee. The Special Committee was established by the Board of Directors of
the Company to act solely on behalf of the unaffiliated stockholders of the
Company for purposes of reviewing the desirability of undertaking the "going
private" transaction subject of this Schedule 13E-3.
(e). The Board of Directors of the Company unanimously approved the
Merger, which vote included a majority of the non-employee directors of the
Company.
(f). During the 18 month period preceding the date of this Schedule
13E-3, the Company has not received any firm offers from any unaffiliated
person for (a) the merger or consolidation of the Company into or with any
person, (b) the sale or other transfer of all or any substantial part of the
assets of the Company, or (c) securities of the Company which would enable the
holder thereof to exercise control of the Company.
ITEM 9. REPORTS, OPINIONS, APPRAISALS, AND CERTAIN NEGOTIATIONS
(a) and (b). On August 15, 1997, the Special Committee retained the
services of Sheshunoff to perform an appraisal of the Company and to present a
valuation of the Company Common Stock and render its opinion as to the fairness
of the Merger Consideration, from a financial point of view, to be paid to the
Cash Stockholders.
Alex Sheshunoff & Co. Investment Banking is recognized for its
valuation and mergers and acquisition expertise in the financial services
industry. Sheshunoff's Investment Banking Group advises clients on a variety
of issues including strategic planning, mergers and acquisitions, fairness
opinions, capital adequacy and efficiency, finance, securities issuance in
initial public offerings, primary shares offerings, preemptive rights offerings,
conversion mergers and mutual to stock conversion valuations, dividend and
capital policies, fair market valuations as well as many other services. In
addition, Sheshunoff is recognized as a "Valuation Expert" by the Internal
Revenue Service, various state and federal courts, and bank regulatory agencies
(FDIC, OCC, the Fed, and the Office of Thrift Supervision). Over the past
eleven years, Sheshunoff has become a recognized merger and acquisition leader
among regional and community banks and thrifts by completing over 300 merger
and acquisition transactions and 3,200 stock valuations. No principal, staff
member, or any affiliate of Sheshunoff currently owns, of record or
beneficially, any shares of Company Common Stock, nor is any such persons
affiliated with the Company in any way.
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THE FULL TEXT OF SHESHUNOFF'S OPINION (THE "OPINION") WHICH SETS FORTH,
AMONG OTHER THINGS, ASSUMPTIONS MADE, PROCEDURES FOLLOWED, MATTERS CONSIDERED,
AND LIMITATIONS ON THE REVIEW UNDERTAKEN, IS ATTACHED AS EXHIBIT 3 TO THIS
FILING. THE COMPANY'S STOCKHOLDERS ARE URGED TO READ THE SHESHUNOFF OPINION
CAREFULLY AND IN ITS ENTIRETY. SHESHUNOFF'S OPINION IS ADDRESSED TO THE
COMPANY'S BOARD.
In connection with rendering its written opinion dated as of the date
of this filing. Sheshunoff, among other things: (i) analyzed certain internal
financial statements and other financial and operating data concerning the
Company prepared by the management of the Company; (ii) analyzed certain
publicly available financial statements, both audited and unaudited, and other
information of the Company, including those in the Company's annual reports for
the three years ended December 31, 1996, and quarterly reports for the periods
ended March 31, 1997, and June 30, 1997; (iii) analyzed certain financial
projections of the Company prepared by the management of the Company; (iv)
discussed the past and current operations and financial condition of the
Company with senior executives; (v) reviewed the reported stock prices and
trading activity for the Company Common Stock; (vi) compared the financial
performance of the Company's price and trading activity with that of certain
other comparable publicly-traded companies and their securities; (vii) reviewed
the financial terms, to the extent publicly available of certain acquisitions
of companies which were deemed as comparable transactions, and (viii) performed
such other studies, analyses, inquiries, and investigations as deemed
appropriate.
In connection with its review, Sheshunoff relied upon and assumed the
accuracy and completeness of all of the foregoing information provided to it or
made publicly available, and Sheshunoff has not assumed any responsibility for
independent verification of such information. With respect to the financial
projections, Sheshunoff assumed that they have been reasonably prepared on the
basis reflecting the best currently available estimates and judgments of the
future financial performance of the Company. Sheshunoff has not made any
independent valuation or appraisal of the assets or liabilities of the Company,
nor has Sheshunoff been furnished with any such appraisals, and Sheshunoff has
not examined any individual loan files of the Company. Sheshunoff is not an
expert in the evaluation of loan portfolios for the purposes of assessing the
adequacy of the allowance for losses with respect thereto and has assumed that
such allowances are in the aggregate, adequate to cover such losses.
Sheshunoff's opinion is necessarily based on economic, market and other
conditions as in effect on, and the information made available to Sheshunoff as
of, the date of the opinion.
In connection with rendering its opinion, Sheshunoff performed a
variety of financial analyses. The preparation of a fairness opinion involves
various determinations as to the most appropriate and relevant methods of
financial analysis and the application of those methods to the particular
circumstances and, therefore, such an opinion is not readily susceptible to
partial analysis or summary description. Moreover, the evaluation of the
fairness, from a financial point of view, of the Merger Consideration received
by the Cash Stockholders of the Company was to some extent a subjective one
based on the experience and judgment of Sheshunoff and not merely the result of
mathematical analysis of financial data. Accordingly, notwithstanding the
separate factors
10
<PAGE> 12
summarized below, Sheshunoff believes that its analyses must be considered as a
whole and that selecting portions of its analyses and of the factors considered
by it, without considering all analyses and factors, could create an incomplete
view of the evaluation process underlying its opinion. The ranges of valuation
resulting from any particular analysis described below should not be taken to
be Sheshunoff's view of the actual value of Company.
In performing its analyses, Sheshunoff made numerous assumptions with
respect to industry performance, business, and economic conditions and other
matters, many of which are beyond the control of Company. The analyses
performed by Sheshunoff are not necessarily indicative of actual values or
future results, which may be significantly more or less favorable than
suggested by such analyses. The analyses do not purport to be appraisals or to
reflect the prices at which a company might actually be sold. In addition,
Sheshunoff's analyses should not be viewed as determinative of the Company's
Board's or Company's Management's opinion with respect to the value of the
Company.
The following is a summary of the analyses performed by Sheshunoff in
connection with its opinion delivered to the Company's Board of Directors on
September 11, 1997.
ANALYSIS OF SELECTED TRANSACTIONS. Sheshunoff performed an analysis of
premiums paid in selected comparable pending or recently completed acquisitions
of banking organizations for cash in the New England and Mid-Atlantic States.
The comparable transactions were comprised to reflect transactions where the
seller possessed similar asset size, regional location, and form of
consideration. The guideline transactions specifically consisted of 10 mergers
and acquisitions of banking organizations from January 13, 1995, to August 25,
1997, with seller's total assets ranging from $100 million to $500 million.
The analysis yielded ratios of the transactions' purchase price as a multiple
of: (i) book value ranging from 1.36 times to 2.23 times with an average of
1.74 times and a median of 1.62 times (compared to the Merger Consideration of
1.59 times the Company's June 30, 1997, book value); (ii) trailing last 12
months earnings ranging from 5.72 times to 23.67 times with an average of 15.04
times and a median of 14.25 times (compared to the Merger Consideration of
12.24 times the Company's last 12 months earnings as of June 30, 1997); (iii)
assets ranging from 10.63% to 22.03% (compared to the Merger Consideration of
14.83% of the Company's total assets) and (iv) seller's average and median
equity to asset ratio of 9.03% and 7.91%, respectively, compared to 9.33% for
the Company.
DISCOUNTED CASH FLOW ANALYSIS. Using discounted cash flow analysis,
Sheshunoff estimated the present value of the future stream of after-tax cash
flow that the Company could produce through the year 2001, under various
circumstances, assuming that the Company performed in accordance with the
earnings/return projections of management. Sheshunoff utilized two separate
terminal values for the Company at the end of the period by applying multiples
of earnings ranging from 10 times to 20 times and multiples of book value
ranging from 1.20 times to 2.20 times. Sheshunoff then discounted the cash
flow streams (assuming all excess capital and earnings are paid out as
dividends while maintaining a 6.0% leverage ratio to remain a well-capitalized
institution) and terminal values using discount rates ranging from 12.0% to
18.0% chosen to reflect different assumptions regarding the required rates of
return for Company and the inherent risk surrounding the underlying projection.
This discounted cash flow analysis indicated a range of $46.14 per share
11
<PAGE> 13
to $84.41 per share utilizing multiples of earnings as residual values and
$39.51 per share to $63.13 per share utilizing multiples of book value. This
compares favorably to the Merger Consideration of $61.00 per share.
COMPARABLE COMPANY ANALYSIS. Sheshunoff compared selected balance
sheet data, asset quality, capitalization, and profitability ratios and market
statistics using financial data at or for the twelve months ended June 30,
1997, and market data as of August 22, 1997, for the Company to a group of
selected banks and bank holding companies which Sheshunoff deemed to be
relevant, including ACNB Corporation, Chemung Financial Corporation, CNB
Financial Corporation, Community Banks Inc., Drovers Bancshares Corporation,
First National Community Bank, First United Corporation, Heritage Bancorp Inc.,
Hanover Bancorp Inc., Iroquois Bancorp Inc., Penn Security B&TC, Vista Bancorp
Inc., and Yardville National Bancorp, all being banks or bank holding companies
in the northeastern United States with assets between $350 million and $650
million, (collectively, the "Comparable Composite"). This comparison, among
other things, showed that: (i) the Company's equity to asset ratio was 9.33%,
compared to an average of 9.16% and a median of 8.48% for the Comparable
Composite; (ii) for the twelve-month period ended June 30, 1997, the Company's
return on average assets was 1.25%, compared to an average of 1.18% and a
median of 1.19% for the Comparable Composite; (iii) for the twelve-month period
ended June 30, 1997, the Company's return on average equity was 13.61% compared
to an average of 12.86% and a median of 12.55% for the Comparable Composite;
(iv) at June 30, 1997, the Company's nonperforming loans to net loans ratio was
1.30%, compared to an average of 0.73% and a median of 0.57% for the Comparable
Composite; (v) the Company's price per share to book value per share at June
30, 1997, was 1.23 times, compared to an average of 1.76 times and median of
1.81 times for the Comparable Composite; (vi) the Company's price per share to
earnings per share at June 30, 1997, was 9.40 times, compared to an average of
14.46 times and median of 15.03 times for the Comparable Composite; and (vii)
at June 30, 1997, Company's dividend yield was 2.25%, compared to an average of
2.70% and a median of 2.75% for the Comparable Composite.
Sheshunoff further narrowed the Comparable Composite group to five
companies that more specifically reflect similar economic and trading
characteristics as the Company. Again Sheshunoff compared selected balance
sheet data, asset quality, capitalization and profitability ratios and market
statistics using financial data at or for the twelve months ended June 30, 1997
and market data as of August 22, 1997 for Company to these five companies which
include: Chemung Financial Corporation, CNB Financial Corporation, Drovers
Bancshares Corporation, First National Community Bank, and Penn Security B&TC
(the "Specific comparable Composite"). This comparison, among other things,
showed that: (i) Company's equity to asset ratio was 9.33%, compared to an
average of 8.95% and a median of 8.48% for the Specific Comparable Composite;
(ii) for the twelve-month period ended June 30, 1997, Company's return on
average assets was 1.25%, compared to an average of 1.20% and a median of 1.19%
for the Specific Comparable Composite; (iii) for the twelve-month period ended
June 30, 1997, Company's return on average equity was 13.61%, compared to an
average of 13.58% and a median of 13.89% for the Specific Comparable Composite;
(iv) at June 30, 1997 Company's nonperforming loans to net loans ratio was
1.30%, compared to an average of 0.46% and a median of 0.46% for the Specific
Comparable Composite; (v) the Company's price per share to book value per share
at June 30, 1997 was 1.23 times, compared to an average of 1.50 times and
median of 1.32 times for the Specific Comparable
12
<PAGE> 14
Composite; (vi) to an average of 11.65 times and median of 11.71 times for the
comparable composite; and (vii) at June 30, 1997, Company's dividend yield was
2.55%, compared to an average of 2.89% and a median of 3.20% for the Specific
Comparable Composite.
HISTORICAL TRADING ANALYSIS. Sheshunoff reviewed the weekly trading
prices of the Company Common Stock from January 1, 1994, to August 22, 1997.
Sheshunoff also compared the weekly trading prices of the Company Common Stock
versus the Comparable Composite, the SNL Bank Stock Index and the S&P 500.
Sheshunoff noted that the price of the Company Common Stock traded in a range
of $26.00 to $33.50 per share during 1994, $31.25 to $38.00 per share during
1995, $37.00 to $41.75 per share during 1996, and $40.00 to $47.00 per share
from January 1, 1997, to August 22, 1997. Sheshunoff also noted that the Merger
Consideration represented a premium of approximately 31% and 33% to the average
closing stock price for the one month and three month ending periods,
respectively, prior to August 22, 1997.
No company or transaction used in the comparable company and comparable
transaction analyses is identical to the Company or the Merger. Accordingly,
an analysis of the results of the foregoing necessarily involves complex
considerations and judgements concerning differences in financial and operating
characteristics of the Company and other factors that could affect the public
trading value of the companies to which they are being compared. Mathematical
analysis (such as determining the average or median) is not in itself a
meaningful method of using comparable transaction data or comparable company
data.
As part of its investment banking business, Sheshunoff is regularly
engaged in the valuation of securities in connection with mergers and
acquisitions, private placements, and valuations for estate, corporate and
other purposes. The Company's Board of Directors decided to retain Sheshunoff
based on its experience as a financial advisor in mergers and acquisitions of
financial institutions, and its knowledge of financial institutions.
Pursuant to an engagement letter dated August 15, 1997, between the
Company and Sheshunoff, Company agreed to pay Sheshunoff a fee of $25,000 for
rendering its opinion in connection with the Merger. The Company has also
agreed to indemnify and hold harmless Sheshunoff and its officers and employees
against certain liabilities in connection with its services under the
engagement letter, except for liabilities resulting from the gross negligence
of Sheshunoff.
(c). Sheshunoff's report will be made available for inspection and
copying at the principal executive offices of the Company during its regular
business hours by any interested equity security holder of the Company or his
or her representative who has been so designated in writing. A copy of such
report will be transmitted by the Company to any interested equity security
holder of the Company or his or her representative who has been so designated
in writing upon written request and at the expense of the requesting equity
security holder.
13
<PAGE> 15
ITEM 10. INTEREST IN SECURITIES OF THE ISSUER.
(a). As of the date of this Schedule 13E-3, the record and
beneficial ownership (except for beneficial ownership disclaimed as set forth
in applicable footnotes) of the Company Common Stock, the percentage of the
total number of issued and outstanding Company Common Stock, and the number of
shares of Company Common Stock that there is a right to acquire of the person
filing this Schedule, together with any pension plan, profit or similar plan,
and by each executive officer, director, and each controlling stockholder are
as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
NAME NUMBER OF SHARES PERCENTAGE RIGHTS TO ACQUIRE
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Clarence D. McCormick 72,377 6.64 20,338
- ---------------------------------------------------------------------------------------------------------------
Clarence D. McCormick, Jr. 13,521 1.24 54,480
- ---------------------------------------------------------------------------------------------------------------
Ralph A. Cocove, Sr. 6,520 .60 0
- ---------------------------------------------------------------------------------------------------------------
Russell Chappius, Sr. 1,900 .17 0
- ---------------------------------------------------------------------------------------------------------------
Charles S. Kessler 1,170 .11 0
- ---------------------------------------------------------------------------------------------------------------
Simon Aman 100 .01 0
- ---------------------------------------------------------------------------------------------------------------
Paul J. Ritter 1,200 .11 4,500
- ---------------------------------------------------------------------------------------------------------------
Harry W. Bullock 4,323 .40 0
- ---------------------------------------------------------------------------------------------------------------
Keron D. Chance 25,883 2.38 0
- ---------------------------------------------------------------------------------------------------------------
Henry L. Backenson 15,024 1.38 0
- ---------------------------------------------------------------------------------------------------------------
Louis Pizzo 23,422 2.15 0
- ---------------------------------------------------------------------------------------------------------------
Alfred F. Caggiano 30,623 2.81 0
- ---------------------------------------------------------------------------------------------------------------
Donald E. Strang 5,324 .49 0
- ---------------------------------------------------------------------------------------------------------------
Frank LoBiondo 4,524 .42 0
- ---------------------------------------------------------------------------------------------------------------
James H. Carll 2,602 .24 0
- ---------------------------------------------------------------------------------------------------------------
Anthony M. Sparacio, Jr. 10,500 .96 0
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(b). No transactions in shares of Company Common Stock have been
effected by any of the foregoing persons or entities during the 60 days
immediately preceding the date of this Schedule 13E-3.
14
<PAGE> 16
ITEM 11. CONTRACTS, ARRANGEMENTS, OR UNDERSTANDINGS WITH RESPECT TO THE
ISSUER'S SECURITIES.
Other than as described in this Schedule 13E-3, there is no contract,
arrangement, understanding, or relationship (whether or not legally
enforceable) in connection with the Merger between any of the executive
officers, directors, or controlling stockholders of the Company or, to the
knowledge of the person filing this Schedule, any other person with respect to
any securities of the Company.
ITEM 12. PRESENT INTENTION AND RECOMMENDATION OF CERTAIN PERSON WITH REGARD TO
THE TRANSACTION.
(a). To the knowledge of Mr. Clarence D. McCormick, Jr. after
making reasonable inquiry, no person listed in the table provided in Item 10(a)
above owns fewer than 1,101 shares of Company Common Stock and therefore will
not constitute a Cash Stockholder as a result of the Merger other than Messrs.
Aman and Carll. Mr. Aman has record ownership of 100 shares and Mr. Carll has
record ownership of 600 shares of Company Common Stock.
Certain affiliates or related persons of the individuals listed in Item
10(a) will have their Company Common Stock acquired as a result of the Merger.
The following table sets forth the names of the Cash Stockholders who are
related to Item 10(a) individuals, their respective relationships and the
number of shares of Company Common Stock owned:
<TABLE>
<CAPTION>
Name Relationship Number of Shares
- ---- ------------ ----------------
<S> <C> <C>
Debra Strang Daughter(1) 625
Cynthia Strang Daughter(1) 625
Donald C. Strang Son(2) 625
James H. Carll Director 600
Paul J. Ritter, Jr. Father(3) 300
John Ritter Brother(4) 60
Marian LoBiondo Daughter-in-Law(5) 500
Josephine Dicter Mother-in-Law(6) 500
Richard Chappius Brother(7) 150
Russell Chappius, Jr. Son(8) 100
Scott Chappius Son(8) 100
</TABLE>
- ------------------------------------
(1) Daughter of Director Donald E. Strang.
(2) Son of Director Donald E. Strang.
(3) Father of Paul J. Ritter, III, Senior Vice President,
Comptroller, and Treasurer.
(4) Brother of Paul J. Ritter, III.
(5) Daughter-in-Law of Director Frank LoBiondo
(6) Mother-in-Law of Russell Chappius, Sr., Senior Vice
President and Operating Officer.
(7) Brother of Russell Chappius, Sr.
(8) Son of Russell Chappius, Sr.
15
<PAGE> 17
Since no vote of the Company's stockholders is required to approve or
consummate the Merger, the persons listed in the table provided in Item 10(a)
will not be required to vote or solicit proxies in connection with the Merger.
To the knowledge of Mr. Clarence D. McCormick, Jr. after making reasonable
inquiry, each of the persons listed in the table provided in Item 10(a) support
and recommend the Merger.
(b). The Board of Directors of the Company, including the Special
Committee, has unanimously approved the Merger.
ITEM 13. OTHER PROVISIONS OF THE TRANSACTION.
(a). Pursuant to Section 262 of the DGCL, the Cash Stockholders,
but no other stockholders of the Company, will be afforded dissenters'
appraisal rights. A detailed description of a Cash Stockholders dissenters
rights is attached hereto as Exhibit 4 which is incorporated herein by this
reference.
(b). The Company has not made any arrangement to allow unaffiliated
stockholders to obtain access to corporate files of the Company or to obtain
counsel or appraisal services at the expense of the Company.
(c). The Merger does not contemplate the exchange of debt
securities for equity securities of the Company.
ITEM 14. FINANCIAL INFORMATION.
(a)(1)-(2). See attached Exhibit 5 which is incorporated herein by
this reference.
(3). The ratio of earnings to fixed charges for the two
most recent fiscal years and the interim periods provided under Item 14(a)(2)
above were 48.40% in 1995, 51.44% in 1996, and 50.10% and 54.40% for the six
month periods ended June 30, 1997 and 1996.
(4). The book values per share of Company Common Stock were
$36.64 as of December 31, 1996, and $38.38 as of June 30, 1997.
(b)(1) and (2). As a result of the payment of the Merger Consideration
to the Cash Stockholders, the pro forma effect of the Merger as of December 31,
1996, and June 30, 1997, is reflected in the pro forma balance sheet and
statement of income, earnings per share amounts, and ratio of earnings to fixed
changes attached hereto as Exhibit 6 which is incorporated herein by this
reference.
(3). As a result of the payment of the Merger Consideration
to the Cash Stockholders, the pro forma effect of the Merger on the book value
per share of Company Common Stock as of December 31, 1996, and June 30, 1997,
was $24.59 and $ 26.34 per share, respectively.
16
<PAGE> 18
ITEM 15. PERSONS AND ASSETS EMPLOYED, RETAINED, OR UTILIZED.
(a). No officer, employee, class of employee, or corporate asset of
the Company has been or is proposed to be employed, availed of, or utilized by
the Company in connection with the Merger.
(b). No person will be employed, retained, or compensated by the
Company, or by any person on behalf of the Company to make solicitations or
recommendations in connection with the Merger.
ITEM 16. ADDITIONAL INFORMATION.
There is no additional material information required to be filed with
this Schedule 13E-3 necessary to make the information in this Schedule, in
light of the circumstances under which it is presented, not materially
misleading.
ITEM 17. MATERIAL TO BE FILED AS EXHIBITS.
(a). Not applicable.
(b). See Exhibit 3 attached hereto.
(c). Not applicable.
(d). Not applicable.
(e). See Exhibit 4 attached hereto.
(f). Not applicable.
17
<PAGE> 19
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete, and
correct.
Dated: October 7, 1997
---------------------------------
By: /s/ CLARENCE D. MCCORMICK, JR.
------------------------------------
Clarence D. McCormick, Jr.
President
18
<PAGE> 20
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
99.1 Identity and Background of Directors and
Executive Officers of Southern Jersey
Bancorp of Delaware, Inc.
99.2 Merger Agreement
99.3 Opinion Letter of Alex Sheshunoff & Company
Investment Banking Dated September 11, 1997
and Fairness Value Analysis of a Minority
Interest in the Outstanding Common Stock
of Southern Jersey Bancorp of Delaware, Inc.
as of June 30, 1997, Prepared by Alex
Shenshunoff & Co. Investment Banking
99.4 Summary of Delaware Appraisal Rights
99.5 Audited Consolidated Statements of Financial
Condition, Income, and Shareholders' Equity
for the Years Ended December 31, 1996, and
1995
99.6 Historical and Pro Forma Balance Sheet,
Income Statement, Earnings Per Share Analysis
For the Periods Ended December 31, 1996 and
June 1997
</TABLE>
<PAGE> 1
EXHIBIT 99.1
IDENTIFY AND BACKGROUND OF DIRECTORS AND
EXECUTIVE OFFICERS OF SOUTHERN JERSEY
BANCORP OF DELAWARE, INC.
<PAGE> 2
IDENTIFY AND BACKGROUND OF DIRECTORS AND
EXECUTIVE OFFICERS OF SOUTHERN JERSEY
SOUTHERN JERSEY BANCORP OF DELAWARE, INC.
State Other Place of Organization: Delaware
Principal Business: Bank Holding Company
Address of Principal Business: 53 South Laurel
Bridgeton, New Jersey 08302
CLARENCE D. MCCORMICK (CHAIRMAN OF THE BOARD OF DIRECTORS AND CHIEF EXECUTIVE
OFFICER)
Residence or Business Address: 53 South Laurel
Bridgeton, New Jersey 08302
Principal Occupation or
Employment: Financial Services
Name of Employer: Southern Jersey Bancorp of Delaware,
Inc.
Principal Business: Bank Holding Company
Address: 53 South Laurel
Bridgeton, New Jersey 08302
Citizenship: U.S.A.
CLARENCE D. MCCORMICK, JR. (PRESIDENT AND DIRECTOR)
Residence or Business Address: 53 South Laurel
Bridgeton, New Jersey 08302
Principal Occupation or
Employment: Financial Services
Name of Employer: Southern Jersey Bancorp of Delaware,
Inc.
Principal Business: Bank Holding Company
Address: 53 South Laurel
Bridgeton, New Jersey 08302
Citizenship: U.S.A.
1-1
<PAGE> 3
RALPH A. COCOVE, SR. (EXECUTIVE VICE PRESIDENT AND CASHIER)
Residence or Business Address: 53 South Laurel
Bridgeton, New Jersey 08302
Principal Occupation or
Employment: Financial Services
Name of Employer: Southern Jersey Bancorp of Delaware,
Inc.
Principal Business: Bank Holding Company
Address: 53 South Laurel
Bridgeton, New Jersey 08302
Citizenship: U.S.A.
HARRY W. BULLOCK (SECRETARY AND DIRECTOR)
Residence or Business Address: 53 South Laurel
Bridgeton, New Jersey 08302
Principal Occupation or
Employment: Retired
Name of Employer: Southern Jersey Bancorp of Delaware,
Inc.
Principal Business: Bank Holding Company
Address: 53 South Laurel
Bridgeton, New Jersey 08302
Citizenship: U.S.A.
1-2
<PAGE> 4
RUSSELL CHAPPIUS, SR. (SENIOR VICE PRESIDENT AND OPERATIONS OFFICER)
Residence or Business Address: 53 South Laurel
Bridgeton, New Jersey 08302
Principal Occupation or
Employment: Financial Services
Name of Employer: Southern Jersey Bancorp of Delaware,
Inc.
Principal Business: Bank Holding Company
Address: 53 South Laurel
Bridgeton, New Jersey 08302
Citizenship: U.S.A.
CHARLES S. KESSLER (SENIOR VICE PRESIDENT AND DATA PROCESSING MANAGER)
Residence or Business Address: 53 South Laurel
Bridgeton, New Jersey 08302
Principal Occupation or
Employment: Financial Services
Name of Employer: Southern Jersey Bancorp of Delaware,
Inc.
Principal Business: Bank Holding Company
Address: 53 South Laurel
Bridgeton, New Jersey 08302
Citizenship: U.S.A.
1-3
<PAGE> 5
SIMON AMAN (SENIOR VICE PRESIDENT AND SENIOR TRUST OFFICER)
Residence or Business Address: 53 South Laurel
Bridgeton, New Jersey 08302
Principal Occupation or
Employment: Financial Services
Name of Employer: Southern Jersey Bancorp of Delaware,
Inc.
Principal Business: Bank Holding Company
Address: 53 South Laurel
Bridgeton, New Jersey 08302
Citizenship: U.S.A.
PAUL J. RITTER (SENIOR VICE PRESIDENT, COMPTROLLER, AND TREASURER)
Residence or Business Address: 53 South Laurel
Bridgeton, New Jersey 08302
Principal Occupation or
Employment: Financial Services
Name of Employer: Southern Jersey Bancorp of Delaware,
Inc.
Principal Business: Bank Holding Company
Address: 53 South Laurel
Bridgeton, New Jersey 08302
Citizenship: U.S.A.
1-4
<PAGE> 6
KERON D. CHANCE (DIRECTOR)
Residence or Business Address: 201 West Commerce Street
Bridgeton, New Jersey 08302
Principal Occupation or
Employment: Attorney
Name of Employer: Chance & McCann
Principal Business: Law
Position: Partner
Address: 201 West Commerce Street
Bridgeton, New Jersey 08302
Citizenship: U.S.A.
HENRY L. BACKENSON (DIRECTOR)
Residence or Business Address: 53 South Laurel
Bridgeton, New Jersey 08302
Principal Occupation or
Employment: Retired
Name of Employer: Southern Jersey Bancorp of Delaware,
Inc.
Principal Business: Bank Holding Company
Address: 53 South Laurel
Bridgeton, New Jersey 08302
Citizenship: U.S.A.
1-5
<PAGE> 7
LOUIS PIZZO (DIRECTOR)
Residence or Business Address: 53 South Laurel
Bridgeton, New Jersey 08302
Principal Occupation or
Employment: Retired
Name of Employer: Southern Jersey Bancorp of Delaware,
Inc.
Principal Business: Bank Holding Company
Address: 53 South Laurel
Bridgeton, New Jersey 08302
Citizenship: U.S.A.
ALFRED F. CAGGIANO (DIRECTOR)
Residence or Business Address: 400 Greenwich Road
Bridgeton, New Jersey 08302
Principal Occupation or
Employment: Apple and Peach grower
Name of Employer: Sunny Slope Farms of New Jersey
Principal Business: Agriculture
Position: President
Address: 400 Greenwich Road
Bridgeton, New Jersey 08302
Citizenship: U.S.A.
1-6
<PAGE> 8
DONALD E. STRANG (DIRECTOR)
Residence or Business Address: 122 Old Cohansey Road
Shiloh, New Jersey 08353
Principal Occupation or
Employment: Farm Equipment Sales
Name of Employer: Farm-Rite, Inc.
Principal Business: Farm Equipment Sales
Position: Chairman of the Board
Address: 122 Old Cohansey Road
Shiloh, New Jersey 08353
Citizenship: U.S.A.
FRANK LOBIONDO (DIRECTOR)
Residence or Business Address: 715 Landis Avenue
Rosenhayn, New Jersey 08345
Principal Occupation or
Employment: Trucking
Name of Employer: LoBiondo Brothers Trucking
Principal Business: Trucking
Position: Chairman of the Board
Address: 715 Landis Avenue
Rosenhayn, New Jersey 08345
Citizenship: U.S.A.
1-7
<PAGE> 9
JAMES H. CARLL (DIRECTOR)
Residence or Business Address: One Centennial Square
Haddonfield, New Jersey 08033
Principal Occupation or
Employment: Attorney
Name of Employer: Archer & Greiner
Principal Business: Law
Position: Partner
Address: One Centennial Square
Haddonfield, New Jersey 08033
Citizenship: U.S.A.
ANTHONY M. SPARACIO, JR. (DIRECTOR)
Residence or Business Address: 716 Maple Avenue
Rasenhayn, New Jersey 08352
Principal Occupation or
Employment: Fuel Distribution
Name of Employer: S&L Petroleum, Inc.
Principal Business: Retail fuel distributor
Position: President
Address: 716 Maple Avenue
Rasenhayn, New Jersey 08352
Citizenship: U.S.A.
1-8
<PAGE> 1
EXHIBIT 99.2
MERGER AGREEMENT
<PAGE> 2
MERGER AGREEMENT
This Merger Agreement dated effective as of ____________, 1997 (this
"Agreement"), is entered into by and between Southern Jersey Bancorp of
Delaware, Inc., a Delaware corporation (the "Company"), and Southern Jersey
Merger Corp., a Delaware corporation ("Merger Corp.").
WITNESSETH
WHEREAS, the Company is a business corporation duly incorporated and
validly existing under the laws of the State of Delaware, having its registered
office in Wilmington, Delaware, with authorized capital stock consisting of
___________ shares of common stock, $1.67 par value per share (the "Company
Stock"), of which 1,275,000 shares were issued and 1,084,920 shares are
outstanding; and
WHEREAS, Merger Corp. is a corporation duly organized and validly
existing under the laws of the State of Delaware having its registered office
in Wilmington, Delaware, with authorized capital stock consisting of 75,000
shares of common stock, $0.01 par value per share (the "Merger Corp. Stock"),
none of the shares of which are issued and outstanding; and
WHEREAS, the boards of directors of the Company and Merger Corp. have
approved the terms and conditions of this Agreement pursuant to which Merger
Corp. will be merged with and into the Company (the "Merger") with the Company
surviving the Merger;
NOW, THEREFORE, in consideration of the foregoing premises and of the
mutual covenants and undertakings contained herein, and for such other good and
valuable consideration the receipt and sufficiency of which are hereby
acknowledged, the parties to this Agreement hereby agree as follows:
ARTICLE I
MERGER
1.01. GENERAL. At the Effective Time (as defined in Article VIII
below) of the Merger and pursuant to the provisions of this Agreement, the
corporate existence of Merger Corp. will be merged with and into the Company
(hereinafter referred to as the "Surviving Company" whenever reference is made
to it as of the Effective Time or thereafter) and continued in the Surviving
Company, and the Surviving Company shall be deemed to be a continuation of the
entities and identities of Merger Corp. and the Company.
2-1
<PAGE> 3
1.02. NAME AND ORGANIZATION. The name of the Surviving Company shall
remain and thereafter be "Southern Jersey Bancorp of Delaware, Inc." The
Certificate of Incorporation and Bylaws of the Company in effect at the
Effective Time shall remain the Certificate of Incorporation and Bylaws of the
Surviving Company until changed as provided therein or by law. The established
offices and facilities of the Company shall remain the established offices and
facilities of the Surviving Company. The registered office and registered
agent of the Company shall remain the registered office and registered agent of
the Surviving Company.
1.03. RIGHTS AND INTERESTS. At the Effective Time, all rights,
franchises, and interests of the Company and Merger Corp., respectively, in and
to every type of property shall be transferred to and vested in the Surviving
Company by virtue of the Merger without any deed or other transfer. The
Surviving Company at the Effective Time, and without any order or other action
on the part of any court or otherwise, shall hold and enjoy all rights of
property, franchises, and interests, including appointments, powers,
designations, and nominations, and all other rights and interests as trustee,
executor, administrator, agent, transfer agent, registrar of stocks and bonds,
administrator of estates, assignee, and receiver, and in every other fiduciary
and agency capacity in the same manner and to the same extent as such rights,
franchises, and interests were held or enjoyed by the Company and Merger Corp.,
respectively, immediately prior to the Effective Time.
1.04. LIABILITIES AND OBLIGATIONS. Except as otherwise provided
herein, the Surviving Company shall be liable for all liabilities of the
Company and Merger Corp. All debts, liabilities, obligations, and contracts of
the Company and Merger Corp., matured or unmatured, whether accrued, absolute,
contingent, or otherwise, and whether or not reflected or reserved against on
the balance sheets, books of account, or records of the Company or Merger
Corp., as the case may be, shall be those of, and are hereby expressly assumed
by, the Surviving Company and shall not be released or impaired by the Merger.
All rights of creditors and other obligees and all liens on property of either
the Company or Merger Corp. shall be preserved unimpaired.
1.05. DIRECTORS AND OFFICERS. The directors, advisory directors, and
officers of the Surviving Company at the Effective Time shall be those persons
who were directors, advisory directors, and officers, respectively, of the
Company immediately before the Effective Time. The committees of the Board of
the Surviving Company, if any, at the Effective Time shall be the same as, and
shall be composed of the same persons who were serving on, the committees
appointed by the Board of Directors of the Company as they existed immediately
before the Effective Time.
1.06. ADOPTION. Unless contrary to the laws of the State of Delaware
or the United States of America or other applicable laws, all corporate acts,
plans, policies, applications, agreements, orders, registrations, licenses,
approvals, and authorizations of the Company and
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<PAGE> 4
Merger Corp., their respective stockholders, boards of directors, committees
elected or appointed by their boards of directors or officers, and agents that
were valid and effective immediately before the Effective Time shall be taken
for all purposes at and after the Effective Time as the acts, plans, policies,
applications, agreements, orders, registrations, licenses, approvals, and
authorizations of the Surviving Company and shall be effective and binding
thereon as the same were with respect to the Company and Merger Corp.
immediately before the Effective Time.
ARTICLE II
TERMS OF THE MERGER
2.01. GENERAL. The manner of exchanging and converting the issued and
outstanding shares of Merger Corp. Stock shall be as hereinafter provided in
this Article II.
2.02. CONVERSION AND CANCELLATION OF MERGER CORP. STOCK. At the
Effective Time, (a) all outstanding shares of Company Stock held of record by
persons holding 1,100 or fewer shares shall, without any action on the part of
the holder thereof, be converted into the right to receive cash equal to $61.00
per share of Company Stock (the "Merger Consideration"); (b) all outstanding
shares of Company Stock held of record in street name shall, without any action
on the part of the holder thereof, be converted into the right to receive the
Merger Consideration; provided, however, that in the event that a holder of
shares of Company Stock held in street name is able to demonstrate to the
Company that such shares are held of record by a person or persons holding
1,101 or greater shares, such shares will not be converted into the Merger
Consideration as provided herein; (c) each outstanding share of Company Stock
held by any other person shall remain outstanding with all rights, privileges,
and powers existing immediately before the Effective Time; and (d) the sole
outstanding share of Merger Corp. Stock shall, without any action on the part
of the holder thereof, be converted into one share of Company Stock and shall
be thereafter canceled.
2.03. APPRAISAL RIGHTS OF STOCKHOLDERS RECEIVING MERGER CONSIDERATION.
Those stockholders who do not want to accept the Merger Consideration may
dissent from the Merger and exercise their appraisal rights pursuant to Section
262 of the Delaware General Corporate Law. Pursuant to this law, such
stockholders may request the Delaware Court of Chancery to appraise the Company
Stock and establish the fair value of such stockholder's shares.
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ARTICLE III
REPRESENTATIONS, WARRANTIES, AND COVENANTS
OF THE COMPANY
The Company hereby represents, warrants, and covenants to and with
Merger Corp. as of the date of this Agreement and as of the Closing Date (as
defined in Article VIII below) as follows:
3.01. ORGANIZATION. The Company is a business corporation duly
incorporated, validly existing, and in good standing under the laws of the
State of Delaware. The Company's subsidiary bank, The Farmers and Merchants
National Bank of Bridgeton (the "Bank") is a national banking association duly
incorporated, validly existing, and in good standing under the laws of the
United States of America. The Company and the Bank have the corporate power to
carry on their respective businesses as are presently being conducted and are
qualified to do business in every jurisdiction in which the character and
location of the assets owned by them or the nature of the businesses transacted
by them requires qualification. The Company and the Bank will deliver to
Merger Corp. upon its request complete and correct copies of their Certificate
of Incorporation, Articles of Association, and Bylaws as in effect on the date
thereof. There will be no changes in such Certificate of Incorporation,
Articles of Association, or Bylaws between the date hereof and the Effective
Time without the prior written consent of Merger Corp.
3.02. GOVERNMENTAL AUTHORIZATIONS. The Company and the Bank are each
in compliance in all material respects with all applicable federal, state, and
local laws, rules, regulations, and orders, including, without limitation,
those imposing taxes. The approval, execution, delivery, and performance of
this Agreement, and the consummation of the transactions contemplated hereby,
subject to the receipt of the consents and approvals of Articles 5.01 and 5.02
below, will not violate in any material respect any provision of, or constitute
a default under, any applicable law, rule, or regulation of any governmental
agency or instrumentality, either domestic or foreign.
3.03. NO CONFLICT WITH OTHER INSTRUMENTS. The consummation of the
Merger in accordance with the terms, conditions, and provisions of this
Agreement will not conflict with, or result in a breach of, any term,
condition, or provision of, or constitute a default under, any indenture,
mortgage, deed of trust, or other material agreement or instrument to which the
Company or the Bank is a party, and will not conflict with any provisions of
the Certificate of Incorporation, Articles of Association, or Bylaws of the
Company or the Bank, and will not constitute an event that with the lapse of
time or action by a third party could result in any default under any of the
foregoing, or result in the creation of any lien, charge, or encumbrance upon
any of the assets or properties of the Company or the Bank or upon the Company
Stock.
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<PAGE> 6
3.04. NO CONFLICT WITH JUDGMENTS OR DECREES. The consummation of the
transactions in accordance with the terms, conditions, and provisions of this
Agreement will not conflict with, or result in a breach of, any term,
condition, or provision of any judgment, order, injunction, decree, writ, or
ruling of any court or tribunal, either domestic or foreign.
3.05. APPROVAL OF AGREEMENTS. The board of directors of the Company
has approved this Agreement and the transactions contemplated hereby and has
authorized the execution and delivery of this Agreement by the Company. The
Company has full corporate power, authority, and legal right to enter into this
Agreement.
3.06. CAPITAL STOCK. The authorized capital stock of the Company and
the Bank consists solely of the Company Stock and the common stock of the Bank,
all of the shares of which are validly issued, fully paid, and not issued in
violation of the preemptive rights of any stockholder. There are no
outstanding subscriptions, warrants, options, or rights of any kind to acquire
from the Company or the Bank any shares of Company Stock or the capital stock
of the Bank, other equity securities, or debt securities except for
arrangements or commitments to issue certificates of deposit, letters of
credit, cashier's checks, and any similar debt instruments made in the ordinary
course of the Bank's businesses consistent with prior practice.
3.07. SUBSIDIARIES OR AFFILIATES. Other than the Bank, the Company
does not own of record or beneficially, and is not obligated to acquire any
capital stock, other equity securities, debt securities, or other interest of
or in any corporation, government, or other entity. The Bank neither owns of
record or beneficially, or is obligated to acquire any capital stock, other
equity securities, debt securities, or other interest of or in any corporation,
government, or other entity, other than any such securities or interests
acquired by the Bank through foreclosure or otherwise incident to the normal
conduct of its business. Between the date hereof and the Effective Time, the
Company and the Bank will not create or acquire any subsidiaries without the
prior written consent of Merger Corp.
3.08. ACCURACY OF STATEMENTS. Neither this Agreement nor any
statement, list, certificate, schedule, exhibit, or other information
furnished, or to be furnished, in writing to Merger Corp. by the Company and
the Bank, or any of their respective agents, employees, associates, or other
affiliates in connection with this Agreement or any of the transactions
contemplated hereby contains or will contain an untrue statement of a material
fact, or omits or will omit to state a material fact necessary to make the
statements contained herein or therein taken as a whole with all other such
statements, lists, certificates, or other information furnished as above in
light of the circumstances in which they are made, not misleading.
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<PAGE> 7
ARTICLE IV
REPRESENTATIONS, WARRANTIES, AND COVENANTS
OF MERGER CORP.
Merger Corp. hereby represents, warrants, and covenants to and with the
Company as of the date of this Agreement and as of the Closing Date as follows:
4.01. ORGANIZATION. Merger Corp. is a Delaware corporation duly
chartered, validly existing, and in good standing under the laws of the State
of Delaware. Merger Corp. has the corporate power and authority to carry on
its business as is presently being conducted and is qualified to do business in
every jurisdiction in which the character and location of the assets owned by
it or the nature of the businesses conducted by it requires qualification.
Merger Corp. will deliver to the Company upon its request complete and correct
copies of its Certificate of Incorporation and Bylaws as in effect on the date
thereof. There will be no changes in such Certificate of Incorporation or
Bylaws between the date hereof and the Effective Time without the prior written
consent of the Company.
4.02. CAPITAL STOCK. The authorized capital stock of Merger Corp.
consists solely of the Merger Corp. Stock, none of the shares of which are
currently issued. Any shares of Merger Corp. Stock will only be issued if
fully paid and not issued in violation of the preemptive rights of any
stockholder. There are no outstanding subscriptions, warrants, options, or
rights of any kind to acquire from Merger Corp. any shares of Merger Corp.
Stock, other equity securities, or debt securities.
4.03. SUBSIDIARIES OR AFFILIATES. Merger Corp. does not own of record
or beneficially, and is not obligated to acquire any capital stock, other
equity securities, debt securities, or other interest of or in any corporation,
government, or other entity. Between the date hereof and the Effective Time,
Merger Corp. will not create or acquire any subsidiaries without the prior
written consent of the Company.
4.04. APPROVAL OF AGREEMENTS. The Board of Directors of Merger Corp.
has approved this Agreement and the transactions contemplated hereby and has
authorized the execution and delivery by Merger Corp. of this Agreement.
Merger Corp. has full corporate power, authority, and legal right to enter into
this Agreement and, upon appropriate vote of the stockholders of Merger Corp.,
to approve this Agreement and consummate the transactions contemplated hereby.
4.05. ACCURACY OF STATEMENTS. Neither this Agreement nor any
statement, list, certificate, schedule, exhibit, or other information
furnished, or to be furnished, in writing to the Company by Merger Corp., or
any of its respective agents, employees, associates, or other
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<PAGE> 8
affiliates in connection with this Agreement or any of the transactions
contemplated hereby contains or will contain an untrue statement of a material
fact, or omits or will omit to state a material fact necessary to make the
statements contained herein or therein taken as a whole with all other such
statements, lists, certificates, or other information furnished as above in
light of the circumstances in which they are made, not misleading.
ARTICLE V
CONDITIONS TO OBLIGATIONS OF MERGER CORP.
The obligations of Merger Corp. to cause the Merger to be consummated
shall be subject to the satisfaction on or before the Closing Date of all of
the following conditions, except as Merger Corp. may waive such conditions in
writing:
5.01. LITIGATION. On the Closing Date, there shall not be pending or
threatened litigation in any court or any proceeding by any governmental
commission, board, or agency with a view to seeking, or in which it is sought,
to restrain or prohibit consummation of the Merger, or in which it is sought to
obtain divestiture, rescission, or damages in connection with the Merger or the
consummation of the Merger, and to the knowledge of any of the parties hereto,
no investigation by any governmental agency shall be pending or threatened that
might result in any such suit, action, or other proceeding.
5.02. REPRESENTATIONS AND WARRANTIES. All representations and
warranties of Merger Corp. contained in this Agreement, other than any
representations and warranties as to future events, shall be true in all
material respects on and as of the Closing Date as if such representations and
warranties were made on and as of the Closing Date, and Merger Corp. shall
have performed all agreements and covenants required by this Agreement to be
performed by it on or prior to the Closing Date.
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF THE COMPANY
The obligation to cause the Merger to be consummated shall be subject to
the satisfaction on or before the Closing Date of all the following conditions,
except as the Company may waive such conditions in writing:
6.01. LITIGATION. On the Closing Date, there shall not be pending or
threatened litigation in any court or any proceeding by any governmental
commission, board, or agency with a view to seeking, or in which it is sought,
to restrain or prohibit consummation of the Merger, or in which it is sought to
obtain divestiture, rescission, or damages in connection with the Merger
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<PAGE> 9
or the consummation of the Merger, and to the knowledge of any of the parties
hereto, no investigation by any governmental agency shall be pending or
threatened that might result in any such suit, action, or other proceeding.
6.02. REPRESENTATIONS AND WARRANTIES. All representations and
warranties of the Company contained in this Agreement, other than any
representations and warranties as to future events, shall be true in all
material respects on and as of the Closing Date as if such representations and
warranties were made on and as of the Closing Date, and the Company shall have
performed all agreements and covenants required by this Agreement to be
performed by it on or prior to the Closing Date.
6.03. ADVERSE CHANGES. Except as contemplated in this Agreement, there
shall have been no changes after June 30, 1997, in the results of operations
(as compared with the prior fiscal year), assets, liabilities, financial
condition, or affairs of the Company that, in the aggregate, are materially
adverse.
ARTICLE VII
EXPENSES
Costs and expenses relating to the negotiation and drafting of this
Agreement and the transactions contemplated hereby shall be borne and paid by
the Company.
ARTICLE VIII
CLOSING DATE AND EFFECTIVE TIME
The closing of this Agreement and the transactions contemplated hereby
shall be held on the Closing Date (as defined in this Article VIII) at the main
office of the Company, 53 South Laurel Street, Bridgeton, New Jersey 08302, at
such time as the parties hereto may mutually agree upon. The "Closing Date"
shall be such date as the Chief Executive Officers of the Company and Merger
Corp., respectively, may agree upon. Subject to the terms and upon
satisfaction on or before the Closing Date of all requirements of law and
conditions specified in this Agreement, the Company and Merger Corp. shall, at
the Closing Date, execute, acknowledge, and deliver such other documents and
instruments and take such further action as may be necessary or appropriate to
consummate the Merger. The "Effective Time" is the date on which the Merger is
effective, which shall be on the date specified in the certificate of merger to
be issued by the Secretary of State of Delaware, and if no date is specified in
such certificate, then the Effective Time shall be the time of the opening of
business on the date the certificate of merger is recorded by the Secretary of
State of Delaware.
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<PAGE> 10
ARTICLE IX
AMENDMENTS
This Agreement may be amended only by written agreement duly authorized
by the boards of directors of the parties hereto prior to the Closing Date,
provided that any amendments that are not material to the transactions
contemplated by this Agreement may be approved by written agreement executed by
the Chief Executive Officers of the Company and Merger Corp., respectively.
ARTICLE X
TERMINATION
This Agreement shall terminate automatically if the Merger shall not
become effective on or prior to March 31, 1998, unless the parties hereto,
acting pursuant to the authority of their respective boards of directors, shall
have otherwise agreed in writing on or prior to that date to extend such date.
This Agreement may be terminated at any time prior to the Effective Time as
follows:
(a) By mutual consent of the Company and Merger Corp. acting
pursuant to the authority of their respective boards of directors;
(b) By the Company if any of the representations and
warranties of Merger Corp. contained in this Agreement shall be false in
any material respect as of the Closing Date, or Merger Corp. shall, as
of the Closing Date, have failed to comply with any of its agreements or
covenants contained in this Agreement to be performed at or prior to the
Closing Date, or any conditions to the obligation of the Company
contained in this Agreement shall not have been satisfied or waived as
of the Closing Date; or
(c) By Merger Corp., if any of the representations and
warranties of the Company contained in this Agreement shall be false in
any material respect as of the Closing Date, or the Company shall, as of
the Closing Date, have failed to comply with any of its respective
agreements or covenants contained in this Agreement to be performed at
or prior to the Closing Date, or if any of the conditions to the
obligations of Merger Corp. contained in this Agreement shall not have
been satisfied or waived as of the Closing Date.
Should this Agreement be terminated for any reason, such termination
shall not prevent the respective Boards of Directors of the Company and Merger
Corp. from renegotiating the terms of this Agreement. An election by a party
to this Agreement to terminate this Agreement and abandon the Merger as
provided in Paragraphs (a) through (c) above shall be exercised on
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<PAGE> 11
behalf of the Company or Merger Corp. by its Board of Directors and shall
become effective when conveyed in writing the other party hereto. In the event
of a termination of this Agreement pursuant to Paragraphs (a) through (c)
above, this Agreement shall become void and shall have no effect and create no
liability on the part of any of the parties hereto or their respective
directors, officers, or stockholders.
ARTICLE XI
NOTICES
All notices, requests, demands, and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given at
the time either personally delivered or sent by registered or certified mail,
postage prepaid, as follows:
If to the Company Clarence D. McCormick
Southern Jersey Bancorp of Delaware, Inc.
53 South Laurel Street
Bridgeton, New Jersey 08302
with a copy to: Steven R. Block, P.C.
Block & Balestri, P.C.
15851 Dallas Parkway
Suite 1020
Dallas, Texas 75248
If to Merger Corp: Clarence D McCormick, Jr.
Southern Jersey Merger Corp.
53 South Laurel Street
Bridgeton, New Jersey 08302
ARTICLE XII
MISCELLANEOUS
12.01. FURTHER ASSURANCES. Each party hereto agrees to perform any
further acts and to execute and deliver any further documents that may be
reasonably necessary to carry out the provisions of this Agreement.
12.02. SEVERABILITY. In the event that any of the provisions, or
portions thereof, of this Agreement are held to be illegal, unenforceable, or
invalid by any court of competent jurisdiction, the legality, enforceability,
and validity of the remaining provisions, or portions thereof, shall not be
affected thereby, and, in lieu of the illegal, unenforceable, or invalid
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<PAGE> 12
provision, or portion thereof, there shall be added a new legal, enforceable,
and valid provision as similar in scope and effect as is necessary to
effectuate the results intended by the deleted provision or portion.
12.03. CONSTRUCTION. Whenever used herein, the singular number shall
include the plural, and the plural number shall include the singular.
12.04. GENDER. Any references herein to the masculine gender, or to
the masculine form of any noun, adjective, or possessive, shall be construed to
include the feminine or neuter gender and form, and vice versa.
12.05. HEADINGS. The headings contained in this Agreement are for
purposes of reference only and shall not limit or otherwise affect the meaning
of any of the provisions contained herein.
12.06. MULTIPLE COUNTERPARTS. This Agreement may be executed in
multiple counterparts, each of which shall be deemed to be an original but all
of which together shall constitute one and the same instrument.
12.07. GOVERNING LAW. THIS AGREEMENT HAS BEEN EXECUTED IN AND SHALL BE
GOVERNED BY THE LAWS OF THE STATE OF DELAWARE, WITHOUT GIVING EFFECT TO THE
CONFLICT OF LAWS RULES THEREOF OR OF ANY STATE.
12.08. COURT COSTS AND ATTORNEYS' FEES. If any action at law or in
equity, including an action for declaratory relief, is brought to enforce or
interpret the provisions of this Agreement, the prevailing party shall be
entitled to recover costs of court and reasonable attorneys' fees from the
other party or parties to such action, which fees may be set by the court in
the trial of such action or may be enforced in a separate action brought for
that purpose, and which fees shall be in addition to any other relief that may
be awarded.
12.09. INUREMENT. Subject to any restrictions against transfer or
assignment as may be contained herein, the provisions of this Agreement shall
inure to the benefit of, and shall be binding on, the assigns and successors in
interest of each of the parties hereto.
12.10. WAIVERS. No waiver of any provision or condition of this
Agreement shall be valid unless executed in writing and signed by the party to
be bound thereby, and then only to the extent specified in such waiver. No
waiver of any provision or condition of this Agreement shall be construed as a
waiver of any other provision or condition of this Agreement, and no present
waiver of any provision or condition of this Agreement shall be construed as a
future waiver of such provision or condition.
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<PAGE> 13
12.11. ENTIRE AGREEMENT. This Agreement contains the entire
understanding between the parties hereto concerning the subject matter
contained herein. There are no representations, agreements, arrangements, or
understandings, oral or written, between or among the parties hereto relating
to the subject matter of this Agreement that are not fully expressed herein.
[The remainder of this page is left intentionally blank.]
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<PAGE> 14
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
by all of its directors as of the date first written above.
SOUTHERN JERSEY BANCORP OF
DELAWARE, INC.
ATTEST:
- -------------------------------- ----------------------------------
Paul J. Ritter, Secretary Clarence D. McCormick, Chairman of
the Board and Chief Executive
Officer
----------------------------------
Clarence D. McCormick, Jr.
----------------------------------
Henry L. Backenson
----------------------------------
Alfred F. Caggiano
----------------------------------
Harry W. Bullock
----------------------------------
Keron D. Chance
----------------------------------
Frank LoBiondo
----------------------------------
Louis Pizzo
----------------------------------
Donald E. Strang
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<PAGE> 15
IN WITNESS WHEREOF, Merger Corp. has caused this Agreement to be
executed by its sole director as of the date first written above.
SOUTHERN JERSEY MERGER CORP.
ATTEST:
- -------------------------------------- -------------------------------------
Clarence D. McCormick, Jr., Secretary Clarence D. McCormick, Jr.,
President and Sole Director
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<PAGE> 1
EXHIBIT 99.3
OPINION LETTER OF ALEX SHESHUNOFF & COMPANY
INVESTMENT BANKING DATED SEPTEMBER 11, 1997
AND
FAIRNESS VALUE ANALYSIS OF A MINORITY INTEREST
IN THE OUTSTANDING COMMON STOCK OF
SOUTHERN JERSEY BANCORP OF DELAWARE, INC.
AS OF JUNE 30, 1997, PREPARED BY
ALEX SHESHUNOFF & CO. INVESTMENT BANKING
<PAGE> 2
[ALEX SHESHUNOFF & CO. LETTERHEAD]
September 11, 1997
Board of Directors
Southern Jersey Bancorp of Delaware, Inc.
53 South Laurel
Bridgeton, NJ 08302
Members of the Board:
At a meeting of the Board of Directors of Southern Jersey Bancorp of Delaware,
Inc. ("Southern") held on September 11, 1997, the Board adopted resolutions
authorizing a going-private transaction. To accomplish the going private
transaction the Board also conditionally approved pursuant to Section 251 of
the Delaware General Corporation Law the Merger (the "Merger") of Southern with
Southern Jersey Merger Corp., a newly-organized Delaware corporation (the
"Merger Corp."). Pursuant to the Merger Southern will acquire 211,707 shares of
Southern Common Stock (the "Southern Common Stock"). The Merger will be
effected pursuant to a Reorganization and Merger Agreement (the "Merger
Agreement"). The Board of Directors of the Merger Corp. also adopted
resolutions on September 11, 1997, approving the Merger.
Pursuant to the Merger Agreement and the corporate laws of Delaware, the Merger
Corp. will merge with and into Southern with Southern being the surviving
entity of the Merger and the corporate identity and existence of the Merger
Corp., separate and apart from Southern, will cease on consummation of the
Merger. At the effective time of the Merger (the "Effective Time"), each share
of Southern Common Stock issued and outstanding as of September 11, 1997 and
held of record by persons owning 1,100 or fewer shares of Southern Common
Stock (the "Cash Shareholders") will be converted into the right to receive
cash in the amount of $61.00 (the "Merger Consideration"). To the extent shares
of Southern Common Stock are held in street name, all such shares shall be
deemed held by persons owning 1,100 or less shares, and unless demonstrated
otherwise, will be converted into the Merger Consideration. Each share of
Southern Common Stock held by any other person (the "Remaining Shares") shall
remain issued and outstanding with all rights, powers, and privileges currently
enjoyed. At the Effective Time, all shares of Southern Common Stock held by the
Cash Shareholders, by virtue of the Merger and without any action on the part
of the holders thereof, will no longer be outstanding and will be canceled and
retired and will cease to exist. Each Cash Shareholder's Certificate or
Certificates (the "Certificates"), which immediately prior to the Effective
Time represented outstanding shares of Southern Common Stock, will thereafter
cease to have any rights with respect to such shares, except the right to
receive, without interest, the Merger Consideration upon surrender of such
Certificate of Certificates to Farmers and Merchants National Bank, Bridgeton,
New Jersey, which will act as the paying agent in the Merger.
<PAGE> 3
Board of Directors
Southern Jersey Bancorp of Delaware, Inc.
9/11/97
Page 2
You have requested our opinion as to the fairness from a financial point of view
of the Merger Consideration to be received by the Cash Shareholders. You have
not requested, and we express no opinion on the underlying business decision to
enter into the going private transaction. We express no opinion as to the
fairness of the going-private transaction to any holder of Remaining Shares of
Southern nor on the value of any Remaining Shares at the time of the
transaction or at any future time. It is our understanding that no vote of the
shareholders is required to approve or consummate the going-private transaction
or the Merger and that Southern does not intend to seek shareholder approval of
the going-private transaction or Merger.
For purposes of this opinion and in connection with our review of the proposed
transaction, we have, among other things: (i) analyzed certain internal
financial statements and other financial and operating data concerning Southern
prepared by the management of Southern; (ii) analyzed certain publicly
available financial statements, both audited and unaudited, and other
information of Southern, including those in Southern's Annual Reports for the
three years ended December 31, 1996, and Quarterly Reports for the periods
ended March 31, 1997 and June 30, 1997; (iii) analyzed certain financial
projections of Southern prepared by the management of Southern; (iv) discussed
the past and current operations and financial condition of Southern with senior
executives; (v) reviewed the reported stock prices and trading activity for
Southern's Common Stock; (vi) compared the financial performance of Southern's
price and trading activity with that of certain other comparable
publicly-traded companies and their securities; (vii) reviewed the financial
terms, to the extent publicly available of certain acquisitions of companies
which were deemed as comparable companies, and (vii) performed such other
studies, analyses, inquires and investigations as deemed appropriate.
We have assumed and relied upon, without independent verification, the accuracy
and completeness of the information reviewed by us for the purposes of this
opinion. We have not made an independent evaluation of the assets or liabilities
of Southern, nor have we been furnished with any such appraisals. With respect
to financial forecasts, we have assumed that they have been reasonably prepared
and reflect the best currently available estimates and judgments of management
of Southern as to the future financial performance of Southern. We have
assumed such forecasts and projections will be realized in the amounts and at
the times contemplated thereby. We are not experts in the evaluation of loan
portfolios for the purposes of assessing the adequacy of the allowance for
losses with respect thereto and have assumed that such allowances are in he
aggregate, adequate to cover such losses.
Our opinion is necessarily based on economic, market and other conditions as in
effect on, and the information made available to us as of, the date hereof.
Events occurring after the date hereof could materially affect the assumptions
used in preparing this opinion.
Our opinion is limited solely to the fairness, from a financial point of view,
to the Cash Shareholders of Southern Common Stock of the Merger Consideration
to be received as stated in the Merger Agreement and does not address
Southern's underlying business decision
<PAGE> 4
Board of Directors
Southern Jersey Bancorp of Delaware, Inc.
9/11/97
Page 3
to undertake the Merger. It is understood that this letter is for the
information of the Board of Directors of Southern and may not be used for any
other purpose without our prior written consent, except that this opinion may
be included in its entirety in any filing made by Southern with the Securities
and Exchange Commission with respect to the Merger.
Based on the foregoing and such other matters we have deemed relevant, we are
of the opinion as of the date hereof that the Merger Consolidation is fair,
from a financial point of view, to the Cash Shareholders of Southern Common
Stock.
Respectfully submitted,
/s/ ALEX SHESHUNOFF & CO. INVESTMENT BANKING
ALEX SHESHUNOFF & CO.
INVESTMENT BANKING
<PAGE> 5
FAIR VALUE ANALYSIS
OF A MINORITY INTEREST IN
THE OUTSTANDING COMMON STOCK OF
SOUTHERN JERSEY BANCORP OF DELAWARE, INC.
AS OF JUNE 30, 1997
FAIR VALUE DISCUSSION
<TABLE>
<CAPTION>
EXHIBITS
- --------
<S> <C>
I. HISTORICAL AND PROJECTED FINANCIALS
II. STOCK PRICE HISTORY
III. COMPARABLE GUIDELINE COMPANIES AND TRANSACTIONS
IV. DISCOUNTED CASH FLOW ANALYSIS
V. SELF TENDERS AND BUYBACKS
VI. FAIR VALUE SUMMARY RANGE
</TABLE>
THIS MATERIAL REPRESENTS OUR OPINION, BASED ON INTERPRETATION AND ANALYSIS OF
INFORMATION GENERALLY AVAILABLE TO THE PUBLIC OR SPECIFICALLY RELEASED BY THE
COMPANY OR ON ITS BEHALF. WE HAVE NOT INDEPENDENTLY VERIFIED ANY OF THE DATA
PRESENTED IN THIS REPORT. WE BELIEVE THAT OUR SOURCES OF INFORMATION ARE
RELIABLE; HOWEVER, WE DO NOT ASSUME ANY LIABILITY FOR THE ACCURACY OR
COMPREHENSIVENESS OF THE INFORMATION. IN ADDITION, THIS REPORT INCLUDES
CERTAIN ESTIMATES PROVIDED BY THE COMPANY WITH RESPECT TO ITS ANTICIPATED
FUTURE PERFORMANCE. SUCH ESTIMATES REFLECT VARIOUS ASSUMPTIONS BY THE COMPANY
CONCERNING ANTICIPATED RESULTS, WHICH MAY OR MAY NOT PROVE TO BE CORRECT. ALEX
SHESHUNOFF & CO. INVESTMENT BANKING MAKES NO REPRESENTATIONS OR WARRANTIES AS
TO THE ACCURACY OF SUCH ESTIMATES. FURTHERMORE, ALEX SHESHUNOFF & CO.
INVESTMENT BANKING'S OPINION RENDERED HEREIN DOES NOT CONSTITUTE AN INVESTMENT
RECOMMENDATION TO CURRENT OR PROSPECTIVE INVESTORS. UNLESS REQUESTED, ALEX
SHESHUNOFF & CO. INVESTMENT BANKING WILL NOT UPDATE THE OPINION RENDERED
HEREIN. THIS REPORT IS NOT TO BE REPRODUCED IN WHOLE OR IN PART WITHOUT OUR
SPECIFIC WRITTEN PERMISSION.
COPYRIGHT 1997 / ALEX SHESHUNOFF & CO. INVESTMENT BANKING
301 CONGRESS AVENUE, SUITE 710
AUSTIN, TEXAS 78701
(512) 479-8200
October 23, 1997
<PAGE> 6
FAIR VALUE ANALYSIS
OF A MINORITY INTEREST IN
THE OUTSTANDING COMMON STOCK OF
SOUTHERN JERSEY BANCORP OF DELAWARE, INC.
AS OF JUNE 30, 1997
DESCRIPTION OF ASSIGNMENT
Alex Sheshunoff & Co. Investment Banking ("Sheshunoff") has been engaged by the
Special Committee to the Board of Directors of Southern Jersey Bancorp of
Delaware, Inc. (the "Company") to determine an estimated range for the fair
value of a minority interest in the voting common stock of the Company (the
"Minority Shares") as of June 30, 1997.
Our valuation was prepared based upon the financial statements, financial
projections and other information provided to us by the Company. Sheshunoff
has relied upon the accuracy and completeness of such information without
independent verification and assumed it to be accurate in all material
respects. Sheshunoff did not independently value the assets and liabilities of
the Company and has not been furnished with appraisals. With respect to the
financial projections, Sheshunoff has assumed that they have been reasonably
prepared by the management of the Company and reflect the best currently
available estimates and judgments of management as to its future financial
performance. We have assumed such projections will be realized in the amounts
and at the times contemplated thereby. Sheshunoff makes no representations or
warranties as to the accuracy of such estimates. In appraising the Company,
Sheshunoff also utilized other publicly available information regarding the
market for bank and bank holding company common stock and economic conditions
in the Company's market area. We believe such publicly available information
to be accurate; however, we cannot guarantee the accuracy of such information.
In preparing our valuation, we conducted an analysis of: (1) the Company's
operating performance and financial condition for the years ended December 31,
1994, December 31, 1995 December 31, 1996, and the six months ending June 30,
1997; (2) the projected income, dividends, asset growth and book value of the
Company for the five years ending December 31, 2001; (3) the market for the
Company's common stock; (4) the competitive environment in which the Company
operates; (5) the ownership composition of the Company; and (6) the general
economic conditions impacting the Company's operations and business prospects.
Our valuation is limited by the conditions stated herein and should be read in
its entirety to fully understand our conclusion.
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Alex Sheshunoff & Co. Investment Banking 1
<PAGE> 7
QUALIFICATIONS OF ALEX SHESHUNOFF & CO. INVESTMENT BANKING
Sheshunoff is recognized for its valuation and mergers and acquisition
expertise in the financial services industry, its commitment and continuity of
consulting and educational services to the industry, and its leading investment
banking role. Sheshunoff, and its affiliates, employ approximately 90 persons
engaged exclusively in the financial services industry. Sheshunoff provides
investment banking services, business valuations, management consulting, and
executive peer group management forums through its headquarters in Austin,
Texas.
Sheshunoff advises clients on issues of business and financial strategies and
tactics, mergers and acquisitions, fairness opinions, evaluation of capital
adequacy and efficiency, finance, capitalization structure, securities issuance
in initial public offerings, primary shares offerings, preemptive rights
offerings, conversion mergers and mutual to stock conversion valuations,
dividend and capital policies, fair market valuations, investor/shareholder
relations and corporate governance, i.e. defense from hostile takeovers.
Alex Sheshunoff Management Services, Inc. provides consulting services for
organizational, operational, management, policy, process, procedures, risk
management, distribution, products, services, marketing and technology issues
and business line issues for de novo and established financial institutions
faced with institutional and industry change. An affiliation program
administered by Alex Sheshunoff Management Services, Inc. facilitates executive
peer group management forums on a semi-annual basis to discuss management
issues. The program has among its participants over 700 chief executives, 300
senior credit officers and 200 finance, technology and operations managers.
Sheshunoff offers clients a unique combination of independent, objective
services unencumbered by the inherent conflicts-of-interest arising from the
underwriting of securities offerings in either an initial public offering,
primary or secondary securities offering, proprietary stock dealings, and
increasingly conflicted relationships among providers of investment banking,
management consulting, actuarial and accounting/financial advice for a fee.
Sheshunoff is able to offer clients a tradition of independent, objective and
impartial counsel in today's increasing complex business environment.
VALUATION EXPERTISE
Sheshunoff's valuation expertise is continually used in rendering securities
valuation opinions for the following purposes:
<TABLE>
<S> <C>
o Employee Stock Ownership Plans o Exchange Ratio Determinations
o Tax and Estate Planning o Reverse Stock Splits
o Private Placements o Fairness Opinions
o Buy / Sell Agreements o Public Offerings
o Dissenters' Rights Proceedings o Mergers & Acquisitions
</TABLE>
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Alex Sheshunoff & Co. Investment Banking 2
<PAGE> 8
In addition, Sheshunoff is recognized as a "Valuation Expert" by the Internal
Revenue Service, various state and federal courts, and bank regulatory agencies
(FDIC, OCC, FRB, OTS). Employees of Sheshunoff in their current and prior
capacities have provided numerous conversion valuations to the Office of Thrift
Supervision (SAIF insured institutions), Federal Deposit Insurance Corporation,
and various state banking departments (BIF insured institutions).
CUMULATIVE BANK STOCK VALUATIONS
BY
ALEX SHESHUNOFF & CO. INVESTMENT BANKING
- -------------------------------------------------------------------------------
4000
3500 3030 3283
---- ----
3000 2683
----
2500 2215
----
2000 1852
----
1500
1491
1000 1132 ----
830 ----
500 572 ---
339 ---
0 168 ---
---
- -------------------------------------------------------------------------------
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
Over the past eleven years, Sheshunoff has become a recognized merger and
acquisition leader among regional and community banks and thrifts by completing
over 300 merger and acquisition transactions and 3,283 stock valuations. In
addition, Sheshunoff professionals have investment banking experience in the
insurance industry.
OVERVIEW OF THE COMPANY
The Company is a one bank holding company with operations and headquarters in
Bridgeton, New Jersey. Currently, the Company operates as a C Corporation
under Delaware Corporate Law. As of June 30, 1997, the Company owned 100% of
the outstanding stock of Farmers and Merchants National Bank, Bridgeton, New
Jersey (the "Bank"). The Bank operates as a community bank providing a full
range of banking services to individual and corporate customers in its primary
market area of Cumberland County, New Jersey and surrounding counties. The
principal asset of the Company consists of its investment in the Bank. Other
than its investment in the Bank, the Company's
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Alex Sheshunoff & Co. Investment Banking 3
<PAGE> 9
operations are essentially immaterial to its overall financial condition. The
Company's projected and historical operating performance and financial
condition are displayed in Exhibits I and IV, respectively.
BALANCE SHEET ANALYSIS
As of June 30, 1997, the Company reported total consolidated assets of $447
million, total consolidated liabilities of $405 million, and net worth of $41.7
million. The Company's asset base was primarily composed of cash totaling
$35.5 million, securities totaling $94.6 million and gross loans totaling
$296.0 million. As of June 30, 1997, gross loans represented 74.2% of total
deposits.
Asset growth has been steady over the last three years. Overall, total assets
increased 4.0% in 1994, 8.4% in 1995, 6.5% in 1996 and 7.72% through June 30,
1997. As of December 31, 1996, gross loans increased 25% from December 31,
1995 reflecting an increase in installment loans. Overall, total loans
increased 27.2% in 1994, 20.62% in 1995, 25.3% in 1996 and 3.5% through June
30, 1997. Loan growth has largely been concentrated in real estate and
consumer loans.
The Company's loan portfolio consisted primarily real estate loans which
represented 46.6% of total loans and consumer loans which represented 30.9% of
total loans as of June 30, 1997. Overall, residential mortgage loans
represented 21.5% of total loans, commercial real estate loans represented
24.1% of total loans, and construction loans represented 1.0% of total loans.
The Company's exposure to commercial and industrial loans represented
approximately 21.4% of total loans.
As of June 30, 1997, the Company's securities' portfolio totaled $94.6 million
with $55.4 million held until maturity and $39.2 million held for sale. The
portfolio included $13.5 million of treasury securities, $37.2 million of
agency obligations, and $28.5 million of tax exempt securities.
PROFITABILITY
As of June 30, 1997, net income totaled $2.7 million. For the 12 months ended
December 31, 1994, 1995, and 1996, net income totaled $4.5 million, $4.9
million, and $5.3 million, respectively. Returns on average assets were 1.23%,
1.25%, and 1.28% for 1994, 1995, and 1996, respectively. Returns on average
equity were 14.47%, 14.02%, and 13.95% for 1994, 1995, and 1996, respectively.
The relative in ROAE reflect increasing amounts of retained capital.
EARNINGS GROWTH
The Company has experienced consistent earnings growth over the past three
years. Net income before extraordinary items increased 10.1% in 1994, 8.4% in
1995, and 9.8% in 1996. Annual compound earnings growth approximated 5.6% over
the last three year period. Net income for the six month period ending June
30, 1997 equaled $2.66 million compared to $2.57 million for the six months
ended June 30, 1996.
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Alex Sheshunoff & Co. Investment Banking 4
<PAGE> 10
Overall, the Company reported higher net interest income and fee income for the
twelve months ending December 31, 1996, but was negated by substantial
increases in loan loss provisions. Going forward, management projects earnings
growth of approximately 7%.
ASSET QUALITY
As of June 30, 1997, the Company reported total nonperforming loans of $3.9
million and total OREO of $1.8 million. Nonperforming loans represented 1.32%
of gross loans. Total nonperforming loans increased 68.2% since December 31,
1996. Problem loans are concentrated in real estate and commercial loans.
Loan loss reserves totaled $3.7 million representing 94.9% of nonperforming
loans. Net charge-offs to average loans at December 31, 1996 and June 30, 1997
equaled 0.39% and 0.13%, respectively. Overall, net charge-offs represented
5.29% of loan loss reserves at June 30, 1997.
CAPITAL
As of June 30, 1997, the Company reported stockholders' equity of $41.7 million
representing 9.32% of total assets. The Company is considered to be a well
capitalized institution per the standards set by FIRREA. The Company's core
and risk based capital ratios were 12.8% and 13.8% as of December 31, 1996.
THE ECONOMY
NATIONAL
The United States economy grew at a brisk 5.6% annual growth rate in the first
quarter of 1997, the strongest in a decade, as consumers nearly doubled their
rate of spending, as reported by the Commerce Department. Consumer spending
grew at a 6.4% rate, which was the fastest since the first quarter of 1988, and
a substantial increase over the 3.4% rate in the fourth quarter of 1996. The
gain in the overall Gross Domestic Product translated into an increase of $96.1
billion, bringing the economics' inflation-adjusted output to an annual figure
of $7.09 trillion. On March 25, 1997, the Federal Reserve Board increased
short-term interest rates up by 0.25%, and with factories operating at high
levels of capacity and unemployment at a seven year low, the Federal Reserve's
likely goal is to slow economic growth below its long-term potential, which
analysts estimated to be in the 2.0% to 2.5% range.
Preliminary reports from the Commerce Department indicated that the annualized
growth rate during the second quarter of 1997 is expected to be 2% or less.
Given the strong growth achieved during the first quarter of 1997, economists
are expecting a growth rate of approximately 4% for the first half of 1997.
The consumer price index, the Government's main inflation gauge, rose at an
annual rate of just 2.2% in May of
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Alex Sheshunoff & Co. Investment Banking 5
<PAGE> 11
1997 and has been running at an annualized rate of 1.4% for the first six
months of the year. Economists expect the economy to achieve healthy growth,
low interest rates and little inflation during the second half of 1997.
MARKET INDICATORS
The Dow Jones Industrial Average was volatile during the first quarter of 1997
and grew by 2.1% from December 31, 1996 to March 31, 1997. During the prior
period, the Dow was down 4.3% but increased 17.8% during the prior 52 week
period. Strong economic reports triggered plunges in the market as investors
felt the Federal Reserve would take measures to quell inflationary pressures.
During the second quarter of 1997 the stock market responded enthusiastically
to the strength of the economy and corporate profits. After a temporary
decline in the market in April, the three year old bull market achieved new
highs in June. At June 30, 1997 the Dow had posted a year-to-date gain of
1224.54 points, or 18.99% to reach 7672.69 while the S&P 500 recorded a
first-half gain of 144.4 points, or 19.4% to close at 885.14.
COUNTY DEMOGRAPHICS
Cumberland County represents the Company's primary market area. At June 30,
1997, Cumberland County had 53 bank branches, 8 thrift branches, and 5 credit
union branches. The Company held 20.95% of county deposits as of June 30,
1997. Overall, no growth in population is expected in Cumberland County from
1996 through 2001. The population is expected to remain at approximately
138,000. Per capita income is anticipated to increase by 21.16% from $16,040
to $19,434. In comparison, the per capita income for the state of New Jersey
is approximately 46% higher than that Cumberland County, which is primarily due
to the high unemployment rate experienced in the area. In further comparison,
the state projects a higher population growth rate of 3.0% and similar per
capita income growth of 19.38% than what is expected for Cumberland County.
MARKET FOR BANK HOLDING COMPANY STOCKS
The market for bank stocks remained strong during 1996. As measured by the SNL
index of all publicly traded bank and bank holding company common stock, prices
rose 35% during 1996. The index of small institutions rose a more modest 26%.
In comparison, the S&P 500 index rose 20% during 1996. The first six months of
1997 have been volatile for the market. The SNL index of all publicly traded
bank stocks increased 20.88% during the first six months of 1997 with the index
increasing during the prior 52 weeks to 49.11%. The index for institutions
with assets less than $500 million increased 20.74% through June 30, 1997.
Future market performance will largely be driven by expectations over interest
rate increases, continued industry consolidation, and concerns over consumer
delinquency trends. Although bank
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Alex Sheshunoff & Co. Investment Banking 6
<PAGE> 12
stocks are considered among the market leaders, small, closely held banks are
expected to continue to exhibit market performance below the general market for
all bank equities.
METHODS OF VALUATION
In determining the fair value of the Minority Shares of the Company, we
utilized the market and discounted cash flow approaches. The market approach
estimates value by means of comparing trading characteristics of publicly
traded banking organizations in New Jersey and the surrounding Mid-Atlantic
states with similar financial characteristics and examining recent prices paid
for a controlling interest in banking organizations in the Company's general
geographic area. The discounted cash flow approach produces a range of values
based on projected free cash flows which are expected to be generated by the
Company over the next five years. The market approach primarily gauges the
current demand for banks and bank holding companies which are similar to the
Company while the discounted cash flow method measures the intrinsic value of
the Company. We did not utilize the net asset value approach, which derives a
value by determining the market value of the individual components of the
balance sheet, since we valued the Company as a going concern and assume that
the Company would continue to operate as a banking concern under its current
business strategy and not on a liquidation basis.
a. MARKET APPROACH - MINORITY VALUE
This form of the market approach estimates a value by examining the relevant
market pricing characteristics of similar securities which are publicly traded.
This produces a market value as if the securities were exchanged in the open
market on a minority interest basis, or a freely traded value. Sheshunoff
selected a group of banks and bank holding companies which we believe investors
would likely compare to the Company when making a decision to purchase the
Company's common stock. In selecting the guideline companies, Sheshunoff
employed two sets of comparable guideline companies (the "Guideline
Companies"). The first set of Guideline Companies selected reflect publicly
traded banking organizations located in New Jersey with total assets less than
$1.5 billion, returns on average equity greater than 5.0% and not subject to
announced or rumored acquisition (the "New Jersey Comparables"). The second
set of Guideline Companies were comprised to reflect publicly traded banking
organizations in the Northeastern States with total assets ranging from $350
million to $650 million, reporting returns of average equity greater than 10%,
and not subject to announced or rumored acquisition (the "Regional
Comparables"). A list of the Guideline Companies is displayed in Exhibit III.
b. MARKET APPROACH - CONTROL VALUE
The control value market approach estimates a value by examining the relevant
market pricing characteristics of similar banking organizations which have
sold. In determining a control value of the Company, we selected two guideline
transaction groups. The first group of guideline transactions included banking
organizations which sold from January 1, 1995 through August 25, 1997 where the
consideration used was cash
- --------------------------------------------------------------------------------
Alex Sheshunoff & Co. Investment Banking 7
<PAGE> 13
and the selling institution was located in the New England and Mid-Atlantic
States, had total assets of $100 million to $1.0 billion, and positive earnings
(the "Cash Guideline Transactions"). The second group of guideline
transactions possessed the exact criteria, but utilized stock as the purchase
consideration (the "Stock Guideline Transactions"). We believe investors would
likely compare the guideline transactions selected to the Company when making a
decision to purchase a controlling interest in the Company's common stock. A
listing of these guideline transactions are displayed in Exhibit III.
c. THE COMPANY'S RECENT STOCK TRADES
Another measure of fair value is the recent trading activity in the Company's
common stock. The Company's shares are traded via the OTC - Bulletin Board.
Over the last twelve months the Company's stock has traded as high as $47 per
share and low as $38.75 per share. The volume in the Company's stock is
relatively low with average daily trading volume of 65 shares, according to SNL
Securities Corp. At June 30, 1997 the Company's stock was priced at xx.x per
share
d. DISCOUNTED CASH FLOW APPROACH
In order to give an indication as to the intrinsic value of the Company, we
employed the discounted cash flow approach. Management estimated projected net
income and dividends for the Company over a five year period assuming growth in
total assets ranging from 5% to 10%. To properly estimate a minority and
control intrinsic value range, we utilized two distinctive methods of
determining the appropriate cash flow. The first method utilized free cash
flows (the "Free Cash Flow" method), which is defined as the dividend paying
capacity available to common shareholders while maintaining an acceptable
equity to assets ratio. For the Free Cash Flow analysis, we assumed the
Company would payout all capital in excess of 6.00% of total assets at the
beginning of 1997 and retain only those portions of earnings required to
maintain a minimum 6.00% equity to assets ratio annually. The nature of the
Free Cash Flow method produces an estimated range of control value, as it
assumes shareholders have the authority to maximize dividend payments. The
second method for determining cash flow was based on anticipated dividends to
shareholders (the "Dividend Discount Model"). This approach is a widely
recognized method for estimating minority values, as it estimates value to an
investor who has no control over dividend policy.
Next, we determined an appropriate range of residual values. The residual
value of an investment is difficult to measure given the uncertainty regarding
future earnings and book value. We chose a range of residual values which
estimate the likely value of the Company's common shares over the long term.
In performing our analysis, we considered the Company's residual value to range
from 1.2 to 2.2 times estimated core book value in 2001. Values ranging from
1.2 times through 1.4 times book value are considered the trading range for the
shares, while values ranging from 1.6 times through 2.2 times book are
considered the acquisition range. We also discounted the future benefits to be
received by the shareholders as measured by projected earnings and utilized a
range of residual values from 10 times through 20 times last
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Alex Sheshunoff & Co. Investment Banking 8
<PAGE> 14
twelve months earnings as of June 30, 1997. Values ranging from 10 times
through 14 times earnings are considered the trading range for the shares,
while values ranging from 16 times through 20 times earnings are considered the
acquisition range.
Important to the discounted cash flow approach is the determination of the
appropriate discount rate. The discount rate was estimated by comparing the
Company's average return on equity, the average return on equity for the New
Jersey and Regional Comparables, and the equity risk premium over the risk-free
rate which incorporates investors' expectations. We utilized the yield on the
30 year Treasury Bond as an estimate of the risk-free rate in deriving the
discount rate. As of the valuation date, the risk-free rate was 6.44%. In
deriving the market risk premium, we utilized the average return for common
stocks in the S&P 500 Index above the risk-free rate over the past 69 years.(2)
This market risk premium was determined to be 7.40%.
As part of the discount rate derivation, we also examined the risk inherent in
specifically owning bank stocks. This risk is often quantified by a measure of
systematic risk, or beta. Our analysis focused in particular on the betas of
publicly traded community banks with assets less than $500 million. These
betas ranged from 0.03 to 1.28 with an average of 0.31. Stocks with a beta
less than one have risk levels that are lower than that of the overall equity
market. Thus we have estimated the equity risk premium for owning bank stock
to be 2.33%, as shown on the following page.
We also considered possible adjustments to the risk-free and implied equity
risk premium which may be due to the small size of the Company's market value
and risk inherent in holding the Company's stock. In general, a size premium
is requisite for companies with small market capitalizations. The size premium
was determined to be 3.60%.(2) Additionally, Sheshunoff considered an adjustment
to reflect the risk associated with holding common stocks of the Company (as
compared to a well diversified portfolio of stock). The relatively consistent
earnings of the Company were considered in estimating the specific company risk
premium of 3.50%
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Alex Sheshunoff & Co. Investment Banking 9
<PAGE> 15
<TABLE>
<S> <C>
Comparative Returns on Equity
-----------------------------
The Company's LTM ROE - 6/30/97 13.61%
State Guideline Companies' Average ROE 12.73%
Regional Guideline Companies' Average ROE 12.86%
Average ROE of Publicly Traded Banks Under $500 Million 12.50%
Discount Rate
-------------
Risk-Free Rate (30 year T-Bond) 6.44%
Equity Risk Premium (7.40% x beta of 0.31) 2.29%
Size Premium 3.60%
Company Specific Risk 2.50%
------
Discount Rate 14.83%
Discount Rate Range 12.0% - 18.0%
</TABLE>
A full range of the values created under the various cash flow methods, growth
rates, residual values, and discount rates are displayed in Exhibit IV.
e. SELF TENDERS AND BUYBACKS
In determining the estimated fair value range of the Company's shares, we also
examined self tenders and buybacks of capital stock conducted by similar
banking organizations. Specifically, the group consisted of 26 banking
organizations who repurchased less than $50 million of their common stock from
the market during the period of August 1, 1995 through August 6, 1997. This
analysis showed that on average, the companies in this group repurchased their
shares at a 6% premium over the market value of their stock four weeks prior to
the announcement date with the average purchase price totaling 1.33 times book
value. Analysis of the selected group is displayed in Exhibit V.
RANGE OF VALUE
No company or transaction used in the comparable company and comparable
transaction analyses is identical to the Company. In addition, mathematical
analysis (such as determining the average or median) is not in itself a
meaningful method of using comparable transaction data or comparable company
data. Accordingly, an analysis of the results of the foregoing necessarily
involves complex considerations and judgments concerning differences in
financial and operating characteristics of the Company and other factors that
could affect the public trading value and/or transaction value of the companies
to which they are being compared. Moreover, the estimate of the fair value of
the Minority Shares
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Alex Sheshunoff & Co. Investment Banking 10
<PAGE> 16
is to some extent a subjective one based on the experience and judgment of
Sheshunoff and not merely the result of mathematical analysis of financial
data. Furthermore, Sheshunoff believes that its analyses must be considered as
a whole and that selecting portions of its analyses and of the factors
considered by it, without considering all analyses and factors, could create an
incomplete view of the evaluation process underlying its opinion. The ranges
of valuations resulting from any particular analysis described above should not
be taken to be Sheshunoff's view of the actual value of the Minority Shares.
Exhibit VI presents a summary of the range of values produced under various
valuation methods.
CONCLUSION
In arriving at our opinion of the fair value of the Minority Shares, we
considered the financial performance and condition of the Company including
future earnings and dividend paying capacity, the economic outlook of the trade
area and the banking industry in general, previous sales of the Company's
common stock, the market price of selected comparable banking institutions and
the lack of a market and trading volume in the Company's common stock, sales of
comparable banking organizations in the Company's region and self tenders and
buybacks conducted by banking organizations.
It is our opinion that as of June 30, 1997, the estimated fair value range of
the Minority Shares was $60 to $70 per share. Our estimate of fair value must
not be construed as a valuation of all of the shares of the Company and is not
a recommendation with respect to the purchase or sale of the common stock of
the Company. Our valuation is solely our estimate of the fair value of the
Company's common stock and may be materially different at any date other than
the valuation date indicated herein.
This analysis is provided to you solely for the confidential, internal use of
the Special Committee to the Board of Directors of the Company. Without prior
written consent of Sheshunoff, it may not be used for any other purpose than
that stated above and may not be quoted in whole or in part, or otherwise
referred to in any report or document, or furnished or otherwise communicated
to any other person.
Respectfully Submitted,
[DRAFT STAMP]
ALEX SHESHUNOFF & CO. INVESTMENT BANKING
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Alex Sheshunoff & Co. Investment Banking 11
<PAGE> 17
EXHIBITS
<PAGE> 18
I. Historical and Projected
Financials
<PAGE> 19
SOUTHERN JERSEY BANCORP OF DELAWARE, INC.
HISTORICAL AND PROJECTED(1) BALANCE SHEET AND INCOME STATEMENT
FOR THE PERIODS ENDING DECEMBER 31, 1994-2000
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE SHEET DATA 1994 1995 1996 BUDGETED-1997 PROJECTED-1998 PROJECTED-1999 PROJECTED-2000
- ---------------------------------- ---- ---- ---- ------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest earning assets
Funds & interest bearing deposits 32,232 46,781 31,247 34,491 37,940 41,734 45,908
Investments 138,144 114,320 96,669 106,705 117,376 129,113 142,025
Loans 190,372 229,700 287,695 317,563 349,320 384,252 422,677
-------- -------- -------- -------- -------- -------- --------
Total interest earning assets 360,748 390,801 415,611 458,760 504,635 555,099 610,609
Other assets 12,148 13,439 14,713 16,240 17,865 19,651 21,616
-------- -------- -------- -------- -------- -------- --------
Total Assets $372,896 $404,240 $430,324 $475,000 $522,500 $574,750 $632,225
======== ======== ======== ======== ======== ======== ========
Liabilities
Deposits 337,223 363,433 385,384 425,278 467,342 513,613 564,511
Notes Payable -- -- -- -- -- -- --
Other Liabilities 3,118 4,164 5,189 5,728 6,300 6,931 7,624
-------- -------- -------- -------- -------- -------- --------
Total Liabilities 340,341 367,597 390,573 431,005 473,642 520,543 572,134
Common Equity 32,555 36,643 39,751 43,995 48,858 54,207 60,091
-------- -------- -------- -------- -------- -------- --------
Total Equity $372,896 $404,240 $430,324 $475,000 $522,500 $574,750 $632,225
======== ======== ======== ======== ======== ======== ========
INCOME STATEMENT DATA 1994 1995 1996 BUDGETED-1997 PROJECTED-1998 PROJECTED-1999 PROJECTED-2000
- ---------------------------------- ---- ---- ---- ------------- -------------- -------------- --------------
Net interest income 13,885 15,098 15,520 16,482 18,887 20,775 22,853
Provision for possible loan losses 725 1,266 1,805 1,917 2,197 2,416 2,658
-------- -------- -------- -------- -------- -------- --------
Other income:
Service fees 1,258 1,428 1,677 1,781 2,041 2,245 2,469
Trust department income 620 652 694 737 845 929 1,022
Other 430 303 460 489 560 616 677
Net investment securities gains -- 360 415 441 505 556 611
-------- -------- -------- -------- -------- -------- --------
Total other income 2,308 2,743 3,246 3,447 3,950 4,345 4,780
Other expense:
Salaries & wages 4,164 4,388 4,497 4,776 5,472 6,020 6,622
Employee benefits 1,070 1,321 1,101 1,169 1,340 1,474 1,621
Occupancy & equipment 1,593 1,704 1,777 1,887 2,162 2,379 2,617
OCC and FDIC 806 473 98 104 119 131 144
Postage, stationery & supplies 332 422 469 498 571 628 691
Professional fees 337 478 647 687 787 866 953
Other operating expenses 1,278 1,237 1,768 1,878 2,152 2,367 2,603
-------- -------- -------- -------- -------- -------- --------
Total other expense 9,580 10,023 10,357 10,999 12,604 13,684 15,250
-------- -------- -------- -------- -------- -------- --------
Income before taxes 5,888 6,552 6,604 7,013 8,037 8,840 9,724
Taxes 1,411 1,700 1,276 1,355 1,553 1,708 1,879
-------- -------- -------- -------- -------- -------- --------
Net income $ 4,477 $ 4,852 $ 5,328 $ 5,658 $ 6,484 $ 7,132 $ 7,845
======== ======== ======== ======== ======== ======== ========
Dividends $ 1,054 $ 1,093 $ 1,195 $ 1,415 $ 1,621 $ 1,783 $ 1,961
(1) Assumes total assets grow at 10% per year and Earnings produce a 1.30% ROAA
</TABLE>
<PAGE> 20
Historical Financial Highlights
<PAGE> 21
SOUTHERN JERSEY BANCORP OF DELAWARE, INCORPORATED (SOJB)
HISTORICAL FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS) FY 12/94 FT 12/95 FY 12/96 YTD 6/97
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HIGHLIGHTS
Total Assets 372,896 404,240 430,324 446,926
Net Income 4,477 4,852 5,382 2,657
Return on Average(%) 1.23 1.25 1.28 1.20
Tangible Equity/Assets(%) 8.73 9.06 9.24 9.33
Nonperforming Assets/Assets(%) 1.22 1.31 1.00 0.86
High-Risk RE/Assets(%)(09/96) 17.24
BALANCE SHEET
Total Assets 372,896 404,240 430,324 446,926
Loans 192,518 232,113 290,885 296,021
Deposits 337,223 363,433 385,384 399,027
Loans/Deposits(%) 57.09 63.87 75.48 74.19
ASSET QUALITY
Nonperforming Loans 3,455 4,360 2,287 3,846
Real Estate Owned 1,094 946 2,016 NA
NPAs + Loans 90 Days Past Due 5,655 7,349 5,591 6,623
NPAs + 90s/Assets(%) 1.52 1.82 1.30 1.48
Reserves/NPAs + 90s(%) 37.95 32.83 57.06 55.17
CAPITAL
Total Equity 32,555 36,643 39,751 41,693
Tangible Equity 32,555 36,643 39,751 41,693
Equity/Assets(%) 8.73 9.06 9.24 9.33
Tangible Equity/Assets(%) 8.73 9.06 9.24 9.33
Tier 1 Capital Ratio(%) 14.30 13.90 12.80 NA
Risk Based Capital Ratio(%) 15.20 14.80 13.80 NA
Publicly Reported Book Value($) 29.62 33.78 36.64 38.38
Tangible Publicly Rep Book($) 29.62 33.78 36.64 38.38
Shares Outstanding(Actual) 1,099,233 1,084,807 1,084,804 1,086,231
</TABLE>
<PAGE> 22
SOUTHERN JERSEY BANCORP OF DELAWARE, INCORPORATED (SOJB)
HISTORICAL FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS) FY 12/94 FT 12/95 FY 12/96 YTD 6/97
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Loans/Deposits(%) 57.09 63.87 75.48 74.19
Reserves/Loans(%) 1.11 1.04 1.10 1.23
One-year Gap/Assets(%) (19.90) (21.75) NA NA
Loans Serviced for Others 0 0 0 NA
FTE Employees (Actual) 215 183 195 NA
ANNUALIZED GROWTH RATES
Asset Growth Rate(%) 3.97 8.41 6.45 7.72
Loan Growth Rate(%) 27.21 20.57 25.32 3.53
Deposit Growth Rate(%) 3.04 7.77 6.04 7.08
AVERAGE BALANCES
Average Gross Loans 169,025 210,327 261,499 297,187
Average Earning Assets 335,922 355,542 375,480 399,173
Average Assets 364,521 388,568 417,282 443,613
Average Interest Bearing Liabs 235,238 251,207 267,300 284,103
Average Preferred Equity 0 0 0 0
Average Common Equity 30,937 34,599 38,197 40,701
Average Equity 30,937 34,599 38,197 40,701
INCOME STATEMENT
Interest Income 24,616 28,212 30,390 16,279
Interest Expense 10,731 13,114 14,870 7,901
Net Interest Income 13,885 15,098 15,520 8,378
Loan Loss Provision 725 1,266 1,805 660
Trading Account Income 0 0 0 0
Foreign Exchange Income 0 0 0 0
Trust Revenue 620 652 694 359
Service Charges on Deposits 1,258 1,428 1,677 827
Gain on Sale of Loans 0 0 0 0
Other Noninterest Income 430 303 460 194
Total Noninterest Income 2,308 2,383 2,831 1,380
</TABLE>
<PAGE> 23
SOUTHERN JERSEY BANCORP OF DELAWARE, INCORPORATED (SOJB)
HISTORICAL FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
(DOLLARS IN THOUSANDS) FY 12/94 FY12/95 FY 12/96 YTD 6/97
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C>
EARNINGS
Net Income 4,477 4,852 5,328 2,657
ROAA (%) 1.23 1.25 1.28 1.20
ROAE (%) 14.47 14.02 13.95 13.06
Net Interest Margin (%) 4.27 4.42 4.27 4.26
Net Oper Exp/ Avg Assets (%) 1.99 1.97 1.80 1.77
Earnings per Share ($) 4.07 4.47 4.91 2.45
Dividends per Share ($) 0.96 1.00 1.10 0.60
BALANCE SHEET
Cash and Equivalents 32,232 46,781 31,247 35,457
Total Investment Securities 138,144 114,320 96,669 94,631
Total Cash & Securities 170,376 161,101 127,916 130,088
Gross Loans 192,518 232,113 290,885 296,021
Loan Loss Reserves 2,146 2,413 3,190 3,654
Net Loans 190,372 229,700 287,695 292,367
Loans Held for Sale 0 0 0 0
Real Estate Owned 1,094 946 2,016 NA
Total Intangibles 0 0 0 0
Loan Servicing Rights 0 0 0 0
Purchased Credit Card Receivable 0 0 0 0
Total Assets 372,896 404,240 430,324 446,926
Deposits 337,223 363,433 385,384 399,027
Borrowings 0 0 0 0
Preferred Equity 0 0 0 0
Common Equity 32,555 36,643 39,751 41,693
Total Equity 32,555 36,643 39,751 41,693
BALANCE SHEET ANALYSIS
Loans/ Assets (%) 51.63 57.42 67.60 66.23
</TABLE>
<PAGE> 24
SOUTHERN JERSEY BANCORP OF DELEWARE, INCORPORATED (SOJB)
HISTORICAL FINANCIAL HIGHLIHGTS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS) FY 12/94 FY 12/95 FY 12/96 YTD 6/97
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Securities Gains 0 360 415 0
Total Nonrecurring Income 0 0 0 0
Net Interest Income, FTE 14,346 15,707 16,035 NA
INCOME STATEMENT
Compensation and Benefits 5,234 5,709 5,598 3,079
Occupancy and Equipment 1,593 1,704 1,777 890
Amortization of Intangibles 0 0 0 0
Other Noninterest Expense 2,753 2,610 2,982 1,332
Noninterest Expense before REO NA NA NA NA
Foreclosed Property Expense NA NA NA NA
Total Noninterest Expense 9,580 10,023 10,357 5,301
Minority Interest 0 0 0 0
Nonrecurring Expense 0 0 0 0
Net Income Before Taxes 5,888 6,552 6,604 3,797
Provision for Taxes 1,411 1,700 1,276 1,140
Extraordinary Items 0 0 0 0
Net Income 4,477 4,852 5,328 2,657
Earnings per Share ($) 4.07 4.47 4.91 2.45
EPS vs. Year-Ago Period (%) 11.14 8.31 10.84 3.81
Preferred Dividends 0 0 0 0
Net Income Available to Common 4,477 4,852 5,328 2,657
PROFITABILITY RATIOS
Return on Average Assets (%) 1.23 1.25 1.28 1.20
Return on Average Equity (%) 14.47 14.02 13.95 13.06
Return on Avg. Common Equity (%) 14.47 14.02 13.95 13.06
Net Interest Margin (%) 4.27 4.42 4.27 4.26
</TABLE>
<PAGE> 25
SOUTHERN JERSEY BANCORP OF DELAWARE, INCORPORATED (SOJB)
HISTORICAL FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS) FY 12/94 FY 12/95 FY 12/96 YTD 6/97
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Yield on Earning Assets (%) 7.33 7.93 8.09 8.16
Cost of Funds (%) 4.56 5.22 5.56 5.56
Spread (%) 2.77 2.71 2.53 2.60
Net Interest Inc/ Avg Assets (%) 3.81 3.89 3.72 3.78
G&A Expense/ Avg Assets (%) 2.63 2.58 2.48 2.39
Noninterest Inc/ Avg Assets (%) 0.63 0.61 0.68 0.62
Net Oper Exp/ Avg Assets (%) 1.99 1.97 1.80 1.77
Overhead Ratio (%) 50.69 48.64 46.93 46.09
Efficiency Ratio (%) 57.52 55.41 54.90 53.62
Compensation/ G&A Exp (%) 54.63 56.96 54.05 58.08
Nonrecurring/ NIBT (%) 0.00 5.49 6.28 0.00
CORE INCOME
- -----------
Core Income 4,477 4,618 5,058 2,657
Core EPS ($) 4.07 4.47 4.91 2.45
Core Income/ Avg Assets (%) 1.23 1.19 1.21 1.20
Core Income/ Avg Equity (%) 14.47 13.35 13.24 13.06
SHARE AND PER SHARE INFORMATION
- -------------------------------
Primary EPS Bef Extra Item ($) 4.07 4.47 4.91 2.45
Primary EPS After Extra Item ($) 4.07 4.47 4.91 2.45
Fully Dil EPS Bef Extra Item ($) 4.07 4.47 4.91 2.45
Fully Dil EPS After Extra Item ($) 4.07 4.47 4.91 2.45
Dividends per Share ($) 0.9600 1.0000 1.1000 0.6000
Payout Ratio (%) 23.47 22.57 22.40 24.49
Avg Fully Dil Shares (Actual) 1,095,796 1,094,802 1,085,310 NA
Shares Outstanding (Actual 1,099,233 1,084,807 1,084,804 1,086,231
Publicly Reported Book Value ($) 29.62 33.78 36.64 38.38
Tangible Publicly Rep Book ($) 29.62 33.78 36.64 38.38
</TABLE>
17
<PAGE> 26
SOUTHERN JERSEY BANCORP OF DELAWARE, INCORPORATED (SOJB)
HISTORICAL FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS) FY 12/94 FY 12/95 FY 12/96 YTD 6/97
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CAPITAL ADEQUACY
Preferred Equity 0 0 0 0
Common Equity 32,555 36,643 39,751 41,693
Total Equity 32,555 36,643 39,751 41,693
Intangible Assets 0 0 0 0
Tangible Equity 32,555 36,643 39,751 41,693
Memo: FASB 115 Adjustment 56 929 22 (90)
Equity/Assets (%) 8.73 9.06 9.24 9.33
Tangible Equity/Assets (%) 8.73 9.06 9.24 9.33
Tier 1 Capital Ratio (%) 14.30 13.90 12.80 NA
Risk Based Capital Ratio (%) 15.20 14.80 13.80 NA
Tier 1 Leverage Ratio (%) 8.80 9.10 8.80 NA
MARKET INFORMATION
Stock Price at End of Period ($) 31.250 37.000 41.250 46.000
EOP Price/ Earnings (x) 7.64 8.35 8.40 9.39
EOP Price/ LTM Earnings (x) 7.64 8.35 8.40 NM
EOP Price/ Book Value (%) 105.50 109.53 112.58 119.85
EOP Price/ Tangible Book (%) 105.50 109.53 112.58 119.85
High Price for the Period ($) 33.500 38.000 41.750 46.000
Low Price for the Period ($) 26.000 31.250 37.000 40.000
SNL Bank Index at Period End 137.604 207.606 280.103 333.299
S&P 500 at Period End 459.270 615.930 740.740 885.150
DJIA at Period End 3,834.440 5,117.120 6,448.270 7,672.790
ASSET QUALITY
Nonaccrual Loans 2,298 3,133 2,287 3,192
Renegotiated Loans 1,147 1,227 0 654
</TABLE>
<PAGE> 27
SOUTHERN JERSEY BANCORP OF DELAWARE, INCORPORATED (SOJB)
HISTORICAL FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS) FY 12/94 FY 12/95 FY 12/96 YTD 6/97
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Nonperforming Loans 3,445 4,360 2,287 3,846
Other Real Estate Owned 1,094 946 2,016 NA
Nonperforming Assets 4,539 5,306 4,303 3,846
Accruing Loans 90 Days Past Due 1,116 2,043 1,288 2,777
NPAs + 90s 5,655 7,349 5,591 6,623
Loan Loss Reserves 2,146 2,413 3,190 3,654
Net Chargeoffs 714 999 1,028 196
NPAs/ Assets (%) 1.22 1.31 1.00 0.86
NPAs + 90s/ Assets (%) 1.52 1.82 1.30 1.48
NPAs/ Loans + REO (%) 2.34 2.28 1.47 NA
Reserves/ Nonperforming Lns (%) 62.29 55.34 139.48 95.01
Reserves/ NPAs + 90 (%) 37.95 32.83 57.06 55.17
NPAs+90s/ Equity + Reserves (%) 16.30 18.82 13.02 14.61
NCOs/ Average Loans (%) 0.42 0.47 0.39 0.13
Loan Loss Provision/ NCOs (%) 101.54 126.73 175.58 336.73
ASSET QUALITY BY LOAN TYPE
Nonaccruals
Construction and Development 0 0
Commercial Real Estate 830 1.19
1-4 Family Mortgage 1,272 2.08
All Real Estate 2,155 1.61
Commercial 600 1.24
Credit Card - 0.00
Other Consumer 325 0.34
Total Nonaccruals/Tot Loans 3,137 1.12
90 Days Past and Still Accruing
Construction and Development 0 0
Commercial Real Estate 0 0
1-4 Family Mortgage 344 0.56
All Real Estate 404 0.30
</TABLE>
<PAGE> 28
II. Stock Price History
<PAGE> 29
SOUTHERN JERSEY BANCORP OF DELAWARE, INC. PRICE HISTORY
FOR MONTHS ENDING DECEMBER 1994 TO JULY 1997
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
JAN95 FEB95 MAR95 APR95 MAY95 JUN95 JUL95 AUG95 SEP95 OCT95 NOV95 DEC95 JAN96 FEB96
SOJB 31.50 31.50 31.50 31.50 31.50 31.50 32.00 32.50 33.00 34.00 35.00 37.00 37.75 37.75
MAR96 APR96 MAY96 JUN96 JUL96 AUG96 SEP96 OCT96 NOV96 DEC96 JAN97 FEB97 MAR97 APR97
SOJB 38.50 38.50 38.50 38.50 38.50 38.50 38.75 41.25 39.00 39.00 42.00 43.00 43.50 41.50
MAY97 JUN97 JUL97 AUG97
SOJB 44.50 46.00 46.00 47.00
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
MARKET INFORMATION YR 1994 YR 1995 YR 1996 2-Sep-97
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Stock Price at End of Period($) $31.25 $37.00 $41.25 $47.00
EOP Price/Earnings(x) 7.64x 8.35x 8.40x 9.43x
EOP Price/LTM Earnings(x) 7.64x 8.35x 8.40x 9.43x
EOP Price/Book Value(%) 1.06x 1.10x 1.13x 1.26x
EOP Price/Tangible Book(%) 1.06x 1.10x 1.13x 1.26x
High Price for the Period($) $33.50 $38.00 $41.75 $47.00
Low Price for the Period($) $26.00 $31.25 $37.00 $40.00
SNL Bank Index at Period End 137.604 207.606 280.103 NA
S&P 500 at Period End 459.27 615.93 740.74 927.58
DJIA at Period End 3,834.44 5,117.12 6,448.27 7,879.78
</TABLE>
<PAGE> 30
III. Comparable Guideline
Companies & Transactions
<PAGE> 31
a. Comparable Guideline
Companies (trading)
<PAGE> 32
REGIONAL COMPARABLES
<PAGE> 33
SOUTHERN JERSEY BANCORP
Financial & Market Summary of Selected Guideline Financial Institutions
<TABLE>
<CAPTION>
MARKET & PER SHARE DATA
-----------------------------------------------------------------------------------------
PRICE TO MARKET
YEAR LTM MARKET PRICE TO
TO DATE STOCK BOOK DIVIDEND EARNINGS PRICE TO TANGIBLE
STOCK FINANCIAL PRICE PRICE VALUE YIELD MULTIPLE BOOK VALUE BOOK VALUE
COMPANY CITY, STATE SYMBOL DATA CHANGE 9/22/97 ($) (%) (x) (x) (x)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ACNB Corp. Gettysburg, PA ACNB 6/30/97 29.69% $20.75 9.66 3.47 14.72 214.80 214.80
Chemung Financial
Corp. Elmira, NY CHMG 6/30/97 0.00% $34.75 28.09 3.57 11.47 123.71 140.92
CNB Financial Corp. Canajoharie, NY CNBF 6/30/97 28.10% $24.13 13.35 2.16 12.70 180.71 180.85
Community Banks Inc. Millersburg, PA CTY 6/30/97 46.90% $36.38 16.33 2.31 18.46 222.75 230.81
Drovers Bancshares
Corp. York, PA DROV 6/30/97 21.99% $26.00 14.31 2.31 13.83 181.69 181.69
First National
Community Bank Dunmore, PA FDNM 3/31/97 3.88% $33.50 25.39 3.22 8.57 131.94 131.94
First United Corp. Oakland, MD FUNC 6/30/97 20.83% $18.13 9.02 3.09 18.31 200.94 200.94
Heritage Bancorp
Inc. Pottsville, PA HBCI 6/30/97 57.30% $17.50 8.67 2.97 15.91 201.85 201.85
Hanover Bancorp Inc. Hanover, PA HOVB 6/30/97 1.37% $18.50 10.91 2.60 15.16 169.57 169.57
Iroquois Bancorp
Inc. Auburn, NY IROQ 6/30/97 48.53% $25.25 13.58 1.58 15.98 185.94 202.49
Penn Security B&TC Scranton, PA PSBT 3/31/97 10.96% $100.00 76.15 3.20 11.71 131.32 131.32
Vista Bancorp Inc. Phillipsburg, NJ VBNJ 6/30/97 12.28% $16.00 9.76 2.75 16.16 163.93 165.63
Yardville National
Bancorp Trenton, NJ YANB 6/30/97 41.03% $27.50 15.22 1.89 15.03 180.68 180.80
------------------------------------------------------------------------------
HIGH 57.30% $100.00 $76.15 3.57% 18.46x 222.75x 230.81x
LOW 0.00% $16.00 $8.67 1.58% 8.57x 123.71x 131.32x
AVERAGE 24.84% $30.64 $19.26 2.70% 14.46x 176.14x 179.51x
MEDIAN 21.99% $25.25 $13.58 2.75% 15.03x 180.71x 180.85x
------------------------------------------------------------------------------
Southern Jersey
Bancorp of DE Bridgeton, NJ SOJB 6/30/97 13.94% $47.00 38.38 2.55 9.40 122.46 122.46
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------
AVERAGE POTENTIAL
POTENTIAL VALUES AMOUNT MULTIPLE VALUE
- ------------------------------------------------------------
<S> <C> <C> <C>
LTM EPS 6/30/97 $5.00 8.57x $42.84
Estimated EPS 12-97 $5.21 8.57x $44.64
Book Value 6/30/97 $38.38 1.76x $67.60
Estimated Book Value 12-97 $40.50 1.76x $71.34
- ------------------------------------------------------------
</TABLE>
<PAGE> 34
SOUTHERN JERSEY BANCORP
Financial & Market Summary of Selected Guideline Financial Institutions
<TABLE>
<CAPTION>
PROFITABILITY & LEVERAGE RATIOS
--------------------------------------------------------------------------------
NET RETURN RETURN EQUITY
INTEREST EFFICIENCY ON ON LEVERAGE TO
FINANCIAL MARGIN RATIO ASSETS EQUITY RATIO ASSETS
COMPANY CITY, STATE DATA (%) (%) (%) (%) (%) (%)
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ACNB Corp. Gettysburg, PA 6/30/97 4.57 47.40 1.59 15.26 10.94 10.88
Chemung Financial Corp. Elmira, NY 6/30/97 4.88 61.21 1.19 11.39 8.93 10.60
CNB Financial Corp. Canajoharie, NY 6/30/97 5.05 54.28 1.26 15.21 8.69 8.48
Community Banks Inc. Millersburg, PA 6/30/97 4.91 55.91 1.43 12.55 10.57 10.96
Drovers Bancshares Corp. York, PA 6/30/97 3.87 61.96 1.19 13.89 8.08 8.19
First National Community Bank Dunmore, PA 3/31/97 3.79 57.24 1.19 16.05 7.39 7.16
First United Corp. Oakland, MD 6/30/97 4.84 64.35 1.21 11.10 10.46 10.46
Heritage Bancorp Inc. Pottsville, PA 6/30/97 5.04 54.71 1.58 13.33 NA 11.77
Hanover Bancorp Inc. Hanover, PA 6/30/97 4.30 66.92 1.01 11.34 8.55 8.25
Iroquois Bancorp Inc. Auburn, NY 6/30/97 4.42 55.06 0.88 12.12 NA 7.41
Penn Security B&TC Scranton, PA 3/31/97 4.49 69.74 1.15 11.38 10.19 10.31
Vista Bancorp Inc. Phillipsburg, NJ 6/30/97 3.80 64.57 0.80 10.66 7.57 7.46
Yardville National Bancorp Trenton, NJ 6/30/97 4.08 57.79 0.91 12.93 7.16 7.16
------------------------------------------------------------------------------------
HIGH 5.05% 69.74% 1.59% 16.05% 10.94% 11.77%
LOW 3.79% 47.40% 0.80% 10.66% 7.16% 7.16%
AVERAGE 4.46% 59.34% 1.18% 12.86% 8.96% 9.16%
MEDIAN 4.49% 57.79% 1.19% 12.55% 8.69% 8.48%
------------------------------------------------------------------------------------
Southern Jersey Bancorp of DE Bridgeton, NJ 6/30/97 4.30 55.05 1.25 13.61 NA 9.33
10000.00%
</TABLE>
<PAGE> 35
SOUTHERN JERSEY BANCORP
Financial & Market Summary of Selected Guideline Financial Institutions
<TABLE>
<CAPTION>
ASSET QUALITY
---------------------------------------------------------------------------------
NPAs +
NPAs 90 DAYS
NCO'S LOAN NPLs TO TO
TO LOSS TO LOANS, EQUITY
AVERAGE NET RESERVE LOANS, PLUS &
FINANCIAL LOANS CHARGE-OFF'S RATIO NPLs NET NPAs ORE RESERVES
COMPANY CITY, STATE DATA (%) ($000) (%) ($000) (%) ($000) (%) (%)
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ACNB Corp. Gettysburg, PA 6/30/97 0.07 58 0.93 3,726 0.53 2,171 0.64 7.57
Chemung Financial Corp. Elmira, NY 6/30/97 0.28 206 1.36 1,425 0.31 1,505 0.51 3.23
CNB Financial Corp. Canajoharie, NY 6/30/97 -0.57 -462 2.69 3,317 0.61 2,964 0.92 7.14
Community Banks Inc. Millersburg, PA 6/30/97 0.29 183 1.13 3,962 1.22 3,629 1.42 8.62
Drovers Bancshares Corp. York, PA 6/30/97 0.06 42 1.12 1,761 0.60 2,386 0.82 5.53
First National Community Bank Dunmore, PA 3/31/97 0.02 16 1.22 -- NA NA NA NA
First United Corp. Oakland, MD 6/30/97 0.12 117 0.53 1,592 0.14 920 0.22 3.24
Heritage Bancorp Inc. Pottsville, PA 6/30/97 0.08 41 1.41 2,129 0.43 1,380 0.62 5.74
Hanover Bancorp Inc. Hanover, PA 6/30/97 0.11 71 0.97 928 0.15 463 0.18 2.86
Iroquois Bancorp Inc. Auburn, NY 6/30/97 1.16 1,025 0.82 4,989 1.40 5,742 1.61 14.44
Penn Security B&TC Scranton, PA 3/31/97 0.05 30 0.95 1,183 0.32 1,632 0.65 4.66
Vista Bancorp Inc. Phillipsburg, NJ 6/30/97 0.22 168 1.22 3,512 1.04 4,475 1.42 10.74
Yardville National Bancorp Trenton, NJ 6/30/97 0.14 119 1.50 7,629 1.99 7,881 2.23 19.81
-------------------------------------------------------------------------------------
HIGH 1.16% $1,025 2.69% $7,629 1.99% $7,881 2.23% 19.81%
LOW -0.57% -$ 462 0.53% $ 0 0.14% $ 463 0.18% 2.86%
AVERAGE 0.16% $ 124 1.22% $2,781 0.73% $2,929 0.94% 7.80%
MEDIAN 0.11% $ 71 1.13% $2,129 0.57% $2,279 0.74% 6.44%
-------------------------------------------------------------------------------------
Southern Jersey Bancorp of DE Bridgeton, NJ 6/30/97 0.14 101 1.23 6,623 1.30 3,846 NA 14.61
</TABLE>
<PAGE> 36
SOUTHERN JERSEY BANCORP
Financial & Market Summary of Selected Guideline Financial Institutions
<TABLE>
<CAPTION>
FINANCIAL DATA
--------------------------------------------------------------------------------
LOAN LOSS TOTAL INTANGIBLES TOTAL TOTAL TOTAL
FINANCIAL LOANS, NET RESERVE DEPOSITS (GOODWILL) BORROWINGS EQUITY ASSETS
COMPANY CITY, STATE DATA (%) ($000) ($000) ($000) ($000) ($000) ($000)
=================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ACNB Corp. Gettysburg, PA 6/30/97 333,013 3,170 399,075 -- 13,567 50,731 466,342
Chemung Financial Corp. Elmira, NY 6/30/97 292,891 4,024 457,491 7,109 22,974 58,215 549,117
CNB Financial Corp. Canajoharie, NY 6/30/97 313,350 8,666 527,340 52 24,209 51,690 609,312
Community Banks Inc. Millersburg, PA 6/30/97 251,651 1,887 352,395 1,706 43,995 49,201 449,119
Drovers Bancshares Corp. York, PA 6/30/97 287,721 3,260 391,546 -- 53,892 40,204 490,601
First National Community Bank Dunmore, PA 3/31/97 269,869 3,331 325,541 -- 29,963 27,686 386,556
First United Corp. Oakland, MD 6/30/97 412,675 2,188 472,381 -- 13,000 57,267 547,497
Heritage Bancorp Inc. Pottsville, PA 6/30/97 217,640 3,106 257,583 -- 50,392 41,383 351,591
Hanover Bancorp Inc. Hanover, PA 6/30/97 260,430 2,538 325,944 -- 26,752 32,069 388,561
Iroquois Bancorp Inc. Auburn, NY 6/30/97 353,879 2,938 428,052 2,618 29,529 36,824 496,903
Penn Security B&TC Scranton, PA 3/31/97 249,471 2,400 347,887 -- 4,445 40,890 396,528
Vista Bancorp Inc. Phillipsburg, NJ 6/30/97 309,330 3,834 473,594 426 21,624 40,179 538,783
Yardville National Bancorp Trenton, NJ 6/30/97 347,657 5,284 414,830 31 68,139 37,629 525,720
-------------------------------------------------------------------------------
HIGH $412,675 $8,666 $527,340 $7,109 $68,139 $58,215 $609,312
LOW $217,640 $2,188 $257,583 $ 0 $4,445 $27,686 $351,591
AVERAGE $300,275 $3,664 $397,974 $ 919 $30,960 $46,382 $476,664
MEDIAN $292,891 $3,170 $399,075 $3,170 $26,752 $40,890 $490,601
-------------------------------------------------------------------------------
Southern Jersey Bancorp of DE Bridgeton, NJ 6/30/97 292,367 3,654 399,027 -- -- 41,693 446,926
</TABLE>
<PAGE> 37
NEW JERSEY COMPARABLES
<PAGE> 38
SOUTHERN JERSEY BANCORP
Financial & Market Summary of Selected Guideline Financial Institutions
<TABLE>
<CAPTION>
MARKET & PER SHARE DATA
-----------------------------------------------------------------------------------------
PRICE TO MARKET
YEAR LTM MARKET PRICE TO
TO DATE STOCK BOOK DIVIDEND EARNINGS PRICE TO TANGIBLE
STOCK FINANCIAL PRICE PRICE VALUE YIELD MULTIPLE BOOK VALUE BOOK VALUE
COMPANY CITY, STATE SYMBOL DATA CHANGE 9/22/97 ($) (%) (x) (%) (%)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Broad National
Bancorp. Newark, NJ BNBC 6/30/97 53.19% $18.00 8.58 2.22 13.43 209.79 209.79
Carnegie Bancorp Princeton, NJ CBNJ 6/30/97 17.60% $21.00 12.22 2.67 18.92 171.85 171.85
Center Bancorp Inc. Union, NJ CNBC 6/30/97 30.00% $26.00 13.43 3.08 14.86 193.60 217.94
Covenant Bancorp
Inc. Haddonfield, NJ CNSK 6/30/97 30.46% $17.88 7.63 0.00 38.86 234.27 234.27
Greater Community
Bancorp Totowa, NJ GFLS 6/30/97 29.13% $20.25 10.91 1.58 19.47 185.61 NA
Interchange
Financial Services Saddle Brook, NJ ISB 6/30/97 37.05% $22.50 11.03 2.40 13.24 203.99 209.89
Prestige Financial
Corp. Flemington, NJ PRFN 6/30/97 28.42% $15.25 5.33 1.97 19.81 286.12 286.12
Ramapo Financial
Corp. Wayne, NJ RMPO 6/30/97 37.50% $6.88 3.71 1.75 16.37 185.31 189.92
Sun Bancorp Inc. Vineland, NJ SNBC 6/30/97 31.25% $26.25 14.94 0.00 18.49 175.70 261.71
United National
Bancorp Bridgewater, NJ UNBJ 6/30/97 20.83% $21.75 11.69 2.76 15.54 186.06 206.95
Vista Bancorp Inc. Phillipsburg, NJ VBNJ 6/30/97 12.28% $16.00 9.76 2.75 16.16 163.93 165.63
Yardville National
Bancorp Trenton, NJ YANB 6/30/97 41.03% $27.50 15.22 1.89 15.03 180.68 180.80
------------------------------------------------------------------------------
HIGH 50.00% $28.75 $15.22 3.17% 38.89x 281.43x 281.43x
LOW 7.10% $6.47 $3.63 0.00% 12.94x 160.58x 160.58x
AVERAGE 28.61% $19.68 $10.19 1.93% 18.30x 197.87x 207.84x
MEDIAN 27.63% $19.56 $10.78 2.14% 16.44x 191.80x 205.42x
------------------------------------------------------------------------------
Southern Jersey
Bancorp of DE Bridgeton, NJ SOJB 6/30/97 13.94% $47.00 38.38 2.55 9.40 122.46 122.46
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------
AVERAGE POTENTIAL
POTENTIAL VALUES AMOUNT MULTIPLE VALUE
- ------------------------------------------------------------
<S> <C> <C> <C>
LTM EPS 6/30/97 $5.00 18.30x $91.52
Estimated EPS 12-97 $5.21 18.30x $95.37
Book Value 6/30/97 $38.38 1.98x $75.94
Estimated Book Value 12-97 $40.50 1.98x $80.14
- ------------------------------------------------------------
</TABLE>
<PAGE> 39
SOUTHERN JERSEY BANCORP
Financial & Market Summary for Selected Guideline Financial Institutions
<TABLE>
<CAPTION>
PROFITABILITY & LEVERAGE RATIOS
------------------------------------------------------------------------
NET RETURN RETURN EQUITY
INTEREST EFFICIENCY ON ON LEVERAGE TO
FINANCIAL MARGIN RATIO ASSETS EQUITY RATIO ASSETS
COMPANY CITY, STATE DATA (%) (%) (%) (%) (%) (%)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Broad National Bancorp. Newark, NJ 6/30/97 4.79 63.11 1.19 16.89 8.86 6.78
Carnegie Bancorp Princeton, NJ 6/30/97 4.43 65.94 0.76 10.71 7.08 7.06
Center Bancorp Inc. Union, NJ 6/30/97 3.72 62.58 0.89 13.59 5.78 6.59
Covenant Bancorp Inc. Haddonfield, NJ 6/30/97 3.80 65.99 0.54 7.63 7.30 6.79
Greater Community Bancorp Totowa, NJ 6/30/97 4.51 67.64 0.99 12.36 10.54 7.96
Interchange Financial Services Saddle Brook, NJ 6/30/97 5.02 58.96 1.46 16.52 8.78 8.91
Prestige Financial Corp. Flemington, NJ 6/30/97 4.59 59.50 1.14 16.54 7.01 6.74
Ramapo Financial Corp. Wayne, NJ 6/30/97 5.31 63.39 1.32 12.14 10.50 10.87
Sun Bancorp Inc. Vineland, MJ 6/30/97 4.19 66.21 0.68 11.54 NA 4.97
United National Bancorp Bridgewater, NJ 6/30/97 5.01 58.37 1.06 12.37 9.66 8.39
Vista Bancorp Inc. Phillipsburg, NJ 6/30/97 3.80 64.57 0.80 10.66 7.57 7.46
Yardville National Bancorp Trenton, NJ 6/30/97 4.08 57.79 0.91 12.93 7.16 7.16
-----------------------------------------------------------------------
HIGH 5.23% 68.24% 1.46% 16.89% 10.40% 10.97%
LOW 3.73% 57.79% 0.51% 7.07% 5.87% 5.96%
AVERAGE 4.50% 62.49% 0.98% 12.73% 7.98% 7.52%
MEDIAN 4.59% 62.99% 0.96% 12.34% 7.71% 7.01%
-----------------------------------------------------------------------
Southern Jersey Bancorp of DE Brigeton, 6/30/97 4.30 55.05 1.25 13.61 NA 9.33
</TABLE>
<PAGE> 40
Southern JERSEY BANCORP
Financial & Market Summary for Selected Guideline Financial Institutions
<TABLE>
<CAPTION>
ASSET QUALITY
------------------------------------------------------------------------
NPAs +90
NCO'S TO NET LOAN LOSS NPLs TO NPAs TO DAYS TO
AVERAGE CHARGE- RESERVE LOANS, LOANS, EQUITY &
FINANCIAL LOANS OFF'S RATIO NPLS NET NPAS PLUS ORE RESERVES
COMPANY CITY, STATE DATA (%) ($000) (%) ($000) (%) ($000) (%) (%)
- --------------------------------------------------------- ------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Broad National Bancorp. Newark, NJ 6/30/97 0.43 321 2.94 11,815 3.50 11,362 3.77 26.19
Carnegie Bancorp Princeton, NJ 6/30/97 -0.05 -36 1.08 5,008 1.84 5,652 2.07 19.36
Center Bancorp Inc. Union, NJ 6/30/97 0.05 16 1.01 216 0.10 129 0.10 0.66
Covenant Bancorp Inc. Haddonfield, NJ 6/30/97 0.28 182 1.07 4,004 0.84 2,963 1.12 14.13
Greater Community Bancorp Totowa, NJ 6/30/97 0.36 132 1.79 3,761 1.73 3,093 2.06 16.83
Interchange Financial Services Saddle Brook, NJ 6/30/97 -0.04 -40 1.22 2,607 0.71 2,605 0.71 5.10
Prestige Financial Corp. Flemington, NJ 6/30/97 0.39 127 1.28 1,342 0.59 791 0.59 7.04
Ramapo Financial Corp. Wayne, NJ 6/30/97 1.28 522 2.86 2,739 1.51 4,190 2.50 12.70
Sun Bancorp Inc. Vineland, NJ 6/30/97 0.02 21 0.91 2,632 0.30 1,763 0.48 10.17
United National Bancorp Bridgewater, NJ 6/30/97 0.64 979 1.23 9,034 1.25 9,393 1.50 9.68
Vista Bancorp Inc. Phillipsburg, NJ 6/30/97 0.22 168 1.22 3,512 1.04 4,475 1.42 10.74
Yardville National Bancorp Trenton, NJ 6/30/97 0.14 119 1.50 7,629 1.99 7,881 2.23 19.81
-----------------------------------------------------------------------------------
High 0.64% $979 3.20% $11,815 3.50% $11,632 3.77% 26.19%
Low 0.00% -40 0.92% $ 0 0.11% $ 129 0.11% 0.93%
Average 0.18% $1.59% 1.44 $ 4,463 1.44% $ 5,030 1.80% 14.13%
Median 0.11% 66% 1.23% $ 3,556 1.25% $ 4,475 1.50% 16.03%
-----------------------------------------------------------------------------------
Southern Jersey Bancorp of DE Brigeton, 6/30/97 0.14 101 1.23 6,623 1.30 3,846 NA 14.61
</TABLE>
<PAGE> 41
SOUTHERN JERSEY BANCORP
Financial & Market Summary of Selected Guideline Financial Institutions
<TABLE>
<CAPTION>
FINANCIAL DATA
------------------------------------------------------------------------------------
LOAN LOSS TOTAL INTANGIBLES TOTAL TOTAL TOTAL
FINANCIAL LOANS, NET RESERVE DEPOSITS (GOODWILL) BORROWINGS EQUITY ASSETS
COMPANY CITY, STATE DATA (%000) ($000) ($000) ($000) ($000) ($000) ($000)
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Broad National Bancorp Newark, NJ 6/30/97 298,858 9,037 517,036 -- 3,506 39,356 580,272
Carnegie Bancorp Princeton, NJ 6/30/97 269,685 2,947 326,910 -- 14,425 26,243 371,602
Center Bancorp Inc. Union, NJ 6/30/97 124,658 1,277 422,218 3,545 23,482 31,644 480,251
Covenant Bancorp Inc. Haddonfield, NJ 6/30/97 260,031 2,817 301,783 -- 117,242 30,812 453,971
Greater Community Bancorp Totowa, NJ 6/30/97 146,625 2,678 220,840 NA 14,872 22,703 285,196
Interchange Financial Services Saddle Brook, NJ 6/30/97 364,174 4,515 451,196 1,312 21,732 46,610 523,403
Prestige Financial Corp. Flemington, NJ 6/30/97 131,928 1,704 238,984 16 -- 17,347 257,551
Ramapo Financial Corp. Wayne, NJ 6/30/97 161,274 4,752 243,582 726 2 30,073 276,767
Sun Bancorp Inc. Vineland, NJ 6/30/97 363,705 3,351 467,394 9,558 86,176 29,070 585,219
United National Bancorp Bridgewater, NJ 6/30/97 615,762 7,682 941,022 10,299 139,595 102,161 1,217,755
Vista Bancorp Inc. Phillipsburg, NJ 6/30/97 309,330 3,834 473,594 426 21,624 40,179 538,783
Yardville National Bancorp Trenton, NJ 6/30/97 347,657 5,284 414,830 31 68,139 37,629 525,720
-------------------------------------------------------------------------------------
HIGH $615,762 $9,037 $941,022 $10,299 $139,595 $102,161 $1,217,755
LOW $119,393 $1,293 $223,229 $0 $0 $17,347 $257,551
AVERAGE $276,568 $4,156 $411,729 $1,960 $36,185 $37,223 $494,296
MEDIAN $282,618 $3,414 $393,048 $426 $20,069 $30,058 $471,153
-------------------------------------------------------------------------------------
Southern Jersey Bancorp of DE Bridgeton, NJ 6/30/97 292,367 3,654 399,027 -- -- 41,693 446,926
</TABLE>
<PAGE> 42
b. Comparable Guideline
Transactions (sale)
<PAGE> 43
CASH TRANSACTIONS
<PAGE> 44
January 1, 1995 through August 25, 1997 Mergers and
Acquisitions of Banking Organizations
in the New England and Mid-Atlantic States
With Seller's Total Assets $100MM - $1,000MM, Positive Earnings and
Cash used as the Transaction Consideration
Ranked by Announcement Date
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
TYPE OF
DATE CONSID-
BUYER CITY ST SELLER CITY ST ANNOUNCED ERATION
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Peoples Heritage Fin Portland ME Atlantic Bancorp Portland ME 06/24/97 Cash
Citizens Fin'l Group Providence RI BNH Bancshares Inc New Haven CT 04/08/97 Cash
BostonFed Bancorp Burlington MA Broadway Capital Crp Chelsea MA 09/23/96 Cash
Hubco, Inc Mahwah NJ UST Bank/Connecticut Bridgeport CT 08/16/96 Cash
Collective Bancorp Egg Harbor NJ Continental Bancorp. Laurel Springs NJ 05/21/96 Cash
Hubco, Inc Mahwah NJ Hometown Bancorp. Darien CT 04/29/96 Cash
North Fork Bancorp Melville NY Extebank Stony Brook NY 09/19/95 Cash
BT Financial Corp Johnstown PA Huntington Nat'l PA Uniontown PA 08/03/95 Cash
BayBanks, Inc Boston MA Cornerstone Finc'l Derry NH 03/24/95 Cash
Staten Island SB Staten Island NY Gateway Bancorp Staten Island NY 01/13/95 Cash
Southern Jersey Bancorp of DE 06/30/97
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
NON-PERFORM. PURCHASE PURCHASE RETURN RETURN PURCHASE
TOTAL ASSETS TO PRICE TO EQUITY/ PRICE TO ON ON PRICE TO
ASSETS TOTAL ASSETS TOTAL ASSETS ASSETS EQUITY ASSETS EQUITY EARNINGS
BUYER ($000) (%) (%) (%) (x) (%) (%) (x)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Peoples Heritage Fin $469,780 1.21 15.26 9.41 1.62 0.73 7.56 21.91
Citizens Fin'l Group $342,229 1.70 17.04 7.48 2.23 3.27 54.21 5.72
BostonFed Bancorp $121,330 1.02 18.13 13.29 1.36 1.62 12.45 12.23
Hubco, Inc $111,178 0.91 12.59 8.34 1.51 0.03 9.48 NA
Collective Bancorp $187,132 NA 13.63 6.10 2.07 0.53 9.11 NA
Hubco, Inc $229,220 1.14 13.92 7.34 1.80 0.59 8.92 23.67
North Fork Bancorp $442,000 NA 10.63 6.79 1.57 NA NA NA
BT Financial Corp $115,773 0.00 22.03 13.68 1.61 1.47 11.00 14.25
BayBanks, Inc $142,891 3.33 13.23 6.24 2.08 1.36 22.99 10.00
Staten Island SB $297,539 4.79 18.65 11.67 1.58 1.21 10.47 17.50
---------------------------------------------------------------------------------------------------------
HIGH 469,780 4.79% 22.03% 13.68% 2.23x 3.27% 54.21% 23.67x
LOW 111,178 0.00% 10.63% 6.10% 1.36x 0.03% 7.56% 5.72x
MEDIAN 208,176 1.18% 14.59% 7.91% 1.62x 1.21% 10.47% 14.25x
AVERAGE 245,907 1.76% 15.51% 9.03% 1.74x 1.20% 16.24% 15.04x
---------------------------------------------------------------------------------------------------------
$446,926 0.01 NA 9.33 NA 1.25 13.61 NA
</TABLE>
- -----------------------------------------------------------------------
AVERAGE POTENTIAL
POTENTIAL VALUES AMOUNT MULTIPLE VALUE
- -----------------------------------------------------------------------
LTM EPS 6/30/97 $5.00 15.04x $75.20
Estimated EPS 12-97 $5.21 15.04x $78.36
Book Value 6/30/97 $38.38 1.74x $66.89
Estimated Book Value 12-97 $40.50 1.74x $70.59
- -----------------------------------------------------------------------
<PAGE> 45
STOCK TRANSACTIONS
<PAGE> 46
January 1, 1995 through August 25, 1997 Mergers and
Acquisitions of Banking Organizations
in the New England and Mid-Atlantic States
With Seller's Total Assets $100MM - $1,000MM, Positive Earnings and
Stock used as the Transaction Consideration
Ranked by Announcement Date
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
TYPE OF
DATE CONSID-
BUYER CITY ST SELLER CITY ST ANNOUNCED ERATION
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
HUBCO, Inc Mahwah NJ Bank of Southington Southington CT 08/18/97 Com Stock
SIS Bancorp, Inc Springfield MA Glastonbury Bank Glastonbury CT 08/18/97 Com Stock
Fulton Fin'l Corp Lancaster PA Keystone Heritage Lebanon PA 08/15/97 Com Stock
First Union Corp Charlotte NC Covenant Bancorp Haddonfield NJ 08/05/97 Com Stock
Bank Boston Corp. Boston MA Pacific National Crp Nantucket MA 05/27/97 Com Stock
Berlin City Bank Berlin NH Pemi Bancorp Plymouth NH 03/14/97 Com Stock
S&T Bancorp Indiana PA Peoples Bnk of Unity Pittsburg PA 11/26/96 Com Stock
Sun Bancorp, Inc Selingsgrove PA Bucktail B&TC Emporium PA 11/06/96 Com Stock
Commerce Bancorp Cherry Hill NJ Independence Bancorp Ramsey NJ 10/14/96 Com Stock
Fulton Fin'l Corp Lancaster PA Woodstown NB&TC Woodstown NJ 09/30/96 Com Stock
Valley Nat'l Bancorp Wayne NJ Midland Bancorp. Paramus NJ 09/13/96 Com Stock
JeffBanks, Inc Philadelphia PA United Valley Bncp Philadelphia PA 09/05/96 Com Stock
Summit Bancorp. Princeton NJ BMJ Financial Corp. Bordentown NJ 08/29/96 Com Stock
Susquehanna Bcshrs Lititz PA Atcorp Inc. Atco NJ 07/18/96 Com Stock
Prime Bancorp, Inc Philadelphia PA First Sterling Bncrp Devon PA 06/12/96 Com Stock
F&M National Corp Winchester VA Allegiance Banc Corp Bethesda MD 04/22/96 Com Stock
HUBCO, Inc Mahwah NJ Lafayette American Bridgeport CT 02/06/96 Com Stock
CFX Corporation Keene NH Safety Fund Corp. Fitchburg MA 01/05/96 Com Stock
BT Financial Corp Johnstown PA Moxham Bank Corp. Johnstown PA 11/21/95 Com Stock
Republic Bancorp. Philadelphia PA ExecuFirst Bancorp Philadelphia PA 11/17/95 Com Stock
Fulton Fin'l Corp Lancaster PA Gloucester County Woodbury NJ 10/25/95 Com Stock
Peoples Heritage Fin Portland ME Bank of NH Corp Manchester NH 10/25/95 Com Stock
Chittenden Corp Burlington VT Flagship B&T Worcester MA 09/19/95 Com Stock
Carnegie Bancorp Princeton NJ Regent Bancshares Philadelphia PA 08/31/95 Com Stock
HUBCO, Inc Mahwah NJ Growth Fin'l Corp Basking Ridge NJ 08/21/95 Com Stock
UJB Financial Princeton NJ Flemington NB&TC Flemington NJ 08/02/95 Com Stock
Keystone Financial Harrisburg PA Nat'l American Bncrp Towanda PA 07/28/95 Com Stock
Summit Bancorp. Chatham NJ Garden State Bncshrs Jackson NJ 06/14/95 Com Stock
Bank of New York New York NY Putnam Trust Co Greenwich CT 03/27/95 Com Stock
New England Comm Bcp Windsor CT Equity Bank Wethersfield CT 03/14/95 Com Stock
HUBCO, Inc Mahwah NJ Urban National Bank Franklin Lakes NJ 02/14/95 Com Stock
United National Branchburg NJ New Era Bank Franklin Township NJ 02/02/95 Com Stock
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
NON-PERFORM. PURCHASE PURCHASE RETURN RETURN PURCHASE
TOTAL ASSETS TO PRICE TO EQUITY/ PRICE TO ON ON PRICE TO
ASSETS TOTAL ASSETS TOTAL ASSETS ASSETS EQUITY ASSETS EQUITY EARNINGS
BUYER ($000) (%) (%) (%) (%) (%) (%) (%)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
HUBCO, Inc $130,296 2.00 20.49 8.40 2.38 0.58 6.66 23.33
SIS Bancorp, Inc $261,298 0.97 15.54 6.87 2.26 0.99 14.59 15.10
Fulton Fin'l Corp $634,112 0.18 33.39 10.31 3.19 1.77 17.26 20.80
First Union Corp $427,761 0.83 19.22 6.85 2.54 0.86 12.21 NA
Bank Boston Corp. $102,385 0.57 23.83 10.72 2.22 1.69 16.62 14.02
Berlin City Bank $130,080 0.81 14.84 9.24 1.61 1.07 11.13 15.13
S&T Bancorp $292,028 0.64 32.50 16.35 1.99 1.92 11.42 17.71
Sun Bancorp, Inc $119,478 0.26 13.64 7.29 1.87 0.78 10.88 20.50
Commerce Bancorp $358,209 0.90 20.46 5.47 2.79 1.00 17.93 15.68
Fulton Fin'l Corp $261,741 0.96 22.43 8.90 2.52 1.60 17.81 16.21
Valley Nat'l Bancorp $405,027 NA 25.01 8.36 2.84 1.08 13.25 20.67
JeffBanks, Inc $127,318 1.62 17.99 9.55 1.88 0.75 8.07 NA
Summit Bancorp. $650,090 1.04 26.16 10.10 2.51 1.43 13.41 17.28
Susquehanna Bcshrs $204,213 0.46 10.48 5.12 2.05 0.82 14.56 16.04
Prime Bancorp, Inc $211,820 1.00 13.69 5.65 2.22 0.84 14.72 17.95
F&M National Corp $138,090 NA 20.20 8.70 2.16 0.83 9.47 24.59
HUBCO, Inc $735,405 1.80 18.67 8.09 2.22 2.71 39.60 7.19
CFX Corporation $293,056 1.24 15.01 6.81 2.17 0.60 8.99 NA
BT Financial Corp $241,758 0.61 17.29 8.02 2.13 0.63 8.17 NA
Republic Bancorp. $123,746 NA NA 6.10 NA 0.37 5.65 NA
Fulton Fin'l Corp $185,323 NA 19.48 7.20 2.46 1.44 20.36 13.98
Peoples Heritage Fin $960,052 1.82 17.78 8.34 2.13 1.31 15.78 15.50
Chittenden Corp $258,296 0.75 14.67 6.24 2.35 1.15 18.00 14.10
Carnegie Bancorp $263,288 1.06 NA 3.91 NA 0.33 8.45 NA
HUBCO, Inc $127,338 NA 21.05 10.80 1.80 0.83 7.42 24.40
UJB Financial $287,709 1.19 16.65 6.60 2.52 0.77 11.75 21.55
Keystone Financial $152,673 NA 23.06 11.30 2.01 1.16 11.32 19.33
Summit Bancorp. $316,253 3.17 21.88 8.41 2.55 0.82 10.00 NA
Bank of New York $686,406 0.40 20.54 8.22 2.48 1.35 15.57 15.27
New England Comm Bcp $109,442 2.32 NA 8.22 NA 0.87 9.31 NA
HUBCO, Inc $220,676 3.25 15.68 5.49 2.86 0.66 11.84 NA
United National $104,816 2.59 21.56 8.80 2.15 1.24 14.27 21.98
</TABLE>
<PAGE> 47
January 1, 1995 through August 25, 1997 Mergers and
Acquisitions of Banking Organizations
in the New England and Mid-Atlantic States
With Seller's Total Assets $100MM - $1,000MM, Positive Earnings and
Stock used as the Transaction Consideration
Ranked by Announcement Date
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
TYPE OF
DATE CONSID-
BUYER CITY ST SELLER CITY ST ANNOUNCED ERATION
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Southern Jersey Bancorp of DE 06/30/97
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
NON-PERFORM. PURCHASE PURCHASE RETURN RETURN PURCHASE
TOTAL ASSETS TO PRICE TO EQUITY/ PRICE TO ON ON PRICE TO
ASSETS TOTAL ASSETS TOTAL ASSETS ASSETS EQUITY ASSETS EQUITY EARNINGS
BUYER ($000) (%) (%) (%) (x) (%) (%) (x)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------
HIGH 960,052 3.25% 33.39% 16.35% 3.19x 2.71% 39.60% 24.59x
LOW 102,385 0.18% 10.48% 3.91% 1.61x 0.33% 5.65% 7.19x
MEDIAN 250,027 0.99% 19.48% 8.22% 2.22x 0.93% 12.03% 17.28x
AVERAGE 297,506 1.25% 19.77% 8.14% 2.31x 1.07% 13.33% 17.75%
---------------------------------------------------------------------------------------------------------
$446,926 0.01 NA 9.33 NA 1.25 13.61 NA
</TABLE>
- -----------------------------------------------------------------------
AVERAGE POTENTIAL
POTENTIAL VALUES AMOUNT MULTIPLE VALUE
- -----------------------------------------------------------------------
LTM EPS 6/30/97 $5.00 17.75x $88.76
Estimated EPS 12-97 $5.21 17.75x $92.49
Book Value 6/30/97 $38.38 2.31x $88.51
Estimated Book Value 12-97 $40.50 2.31x $93.39
- -----------------------------------------------------------------------
<PAGE> 48
IV. Discounted Cash Flow
Analysis
<PAGE> 49
a. Dividend Discount Analysis
<PAGE> 50
i. 5% Growth Assumption
<PAGE> 51
SUMMARY FINANCIAL PROJECTIONS FOR DIVIDEND DISCOUNT ANALYSIS
SOUTHERN JERSEY BANCORP OF DELAWARE, INC.
BRIDGETON, NEW JERSEY
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
COMMON & PREFERRED
NET -------------------
TOTAL ASSET NET INCOME RETURN RETURN DIVIDEND TOTAL
ASSETS GROWTH INCOME GROWTH ON AVG. ON AVG. DIVIDENDS PAYOUT EQUITY
YEAR $(000) RATE $(000) RATE ASSETS EQUITY $(000) RATIO $(000)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Historical
- ------------------------------------------------------------------------------------------------
1994 $372,869 3.97% $4,477 10.08% 1.22% 14.47% $1,054 23.54% $32,555
1995 $404,240 8.41% $4,852 8.38% 1.25% 14.02% $1,093 22.53% $36,643
1996 $430,324 6.45% $5,328 9.81% 1.28% 13.95% $1,195 22.43% $39,751
1997(2) $475,000 5.00% $5,658 6.20% 1.25% 13.51% $1,415 25.00% $43,995
- ------------------------------------------------------------------------------------------------
Projected
- ------------------------------------------------------------------------------------------------
1998 $498,750 5.00% $6,329 11.86% 1.30% 13.65% $1,582 25.00% $48,742
1999 $523,688 5.00% $6,646 5.00% 1.30% 12.97% $1,661 25.00% $53,726
2000 $549,872 5.00% $6,978 5.00% 1.30% 12.39% $1,745 25.00% $58,960
2001 $577,365 5.00% $7,327 5.00% 1.30% 11.87% $1,832 25.00% $64,455
- ------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------
LOAN PER SHARE YEAR-END
LOSS INTANG- EST. LONG ---------------------------- PRIMARY
RESERVE IBLE TIER 1 EQUITY TERM COMMON COMMON
$(000) ASSETS LEVERAGE TO ASSET DEBT LTM COMMON DIVI- SHARES
YEAR *1* $(000) RATIO RATIO $(000) EARNINGS EQUITY DENDS OUTSTANDING
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Historical
- ------------------------------------------------------------------------------------------------
1994 $2,146 $0 8.90% 8.73% $0 $4.073 $29.616 $0.959 $1,099,233
1995 $2,413 $0 9.43% 9.06% $0 $4.473 $33.778 $1.008 $1,084,807
1996 $3,190 $0 9.53% 9.24% $0 $4.911 $36.643 $1.102 $1,084,804
1997(2) $3,521 $0 9.72% 9.26% $0 $5.209 $40.502 $1.302 $1,086,231
- ------------------------------------------------------------------------------------------------
Projected
- ------------------------------------------------------------------------------------------------
1998 $3,697 $0 10.01% 9.77% $0 $5.827 $44.872 $1.457 $1,086,231
1999 $3,882 $0 10.51% 10.26% $0 $6.118 $49.461 $1.530 $1,086,231
2000 $4,076 $0 10.98% 10.72% $0 $6.424 $54.279 $1.606 $1,086,231
2001 $4,280 $0 11.44% 11.16% $0 $6.745 $59.338 $1.686 $1,086,231
- ------------------------------------------------------------------------------------------------
</TABLE>
--------------------------------------------------------
Average Shares Outstanding in 1997 $1,084,806
Average Shares Outstanding from 1997-2001 $1,085,993
--------------------------------------------------------
*1* The Loan Reserve is assumed to increase at the same growth rate as Total
Assets unless a projected Loan Loss Reserve to Total Assets ratio is input,
which would cause the Loan Loss Reserve to change in accordance with the
specified Loan Loss Reserve to Total Assets ratio.
*2* Based on 1997 budgeted figures
<PAGE> 52
SOUTHERN JERSEY BANCORP OF DELAWARE, INC.
BRIDGETON, NEW JERSEY
NET PRESENT VALUE ANALYSIS:
DISCOUNTED DIVIDEND ANALYSIS THROUGH 2001(1), WITH RESIDUAL AS A MULTIPLE
OF BOOK VALUE IN 2001(2)
($ PER SHARE)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
DIVIDENDS PAYABLE TO COMMON SHAREHOLDERS
- ---------------------------------------------------------------------------------------------------------------------------
1997 1998 1999 2000 2001
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
$1.30 $1.46 $1.53 $1.61 $1.69
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
DISCOUNT RATE
- ---------------------------------------------------------------------------------------------------------------------------
Book Multiple 12% 14% 16% 18%
------------- --- --- --- ---
<S> <C> <C> <C> <C> <C>
Trading 1.2x $41.47 $37.56 $34.10 $31.02
Range 1.4x $47.48 $42.97 $38.97 $35.42
1.6x $53.49 $48.38 $43.84 $39.82
Acquisition 1.8x $59.50 $53.78 $48.71 $44.21
Range 2.0x $65.52 $59.19 $53.58 $48.61
2.2x $71.53 $64.60 $58.46 $53.00
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Defined as dividends payable to common shareholders.
(2) Residual calculated as a multiple of book value in the year 2001. Present
value calculated as the after tax cash flow payable per share plus the
residual value discounted to the present value at the stated discount
range.
<PAGE> 53
SOUTHERN JERSEY BANCORP OF DELAWARE, INC.
BRIDGETON, NEW JERSEY
NET PRESENT VALUE ANALYSIS:
DISCOUNTED DIVIDEND ANALYSIS THROUGH 2001(1), WITH RESIDUAL AS A MULTIPLE
OF EARNINGS IN 2001(2)
($ PER SHARE)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
DIVIDENDS PAYABLE TO COMMON SHAREHOLDERS
- ---------------------------------------------------------------------------------------------------------------------------
1997 1998 1999 2000 2001
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
$1.30 $1.46 $1.53 $1.61 $1.69
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
DISCOUNT RATE
- ---------------------------------------------------------------------------------------------------------------------------
Earnings Multiple 12% 14% 16% 18%
----------------- --- --- --- ---
<S> <C> <C> <C> <C> <C>
Trading 10x $39.56 $35.85 $32.56 $29.63
Range 12x $46.40 $42.00 $38.10 $34.63
14x $53.23 $48.15 $43.64 $39.63
Acquisition 16x $60.07 $54.29 $49.17 $44.63
Range 18x $66.90 $60.44 $54.71 $49.62
20x $73.74 $66.58 $60.25 $54.62
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Defined as dividends payable to common shareholders.
(2) Residual calculated as a multiple of earnings in the year 2001. Present
value calculated as the after tax cash flow payable per share plus the
residual value discounted to the present value at the stated discount
range.
<PAGE> 54
ii. 7% Growth Assumption
<PAGE> 55
SUMMARY FINANCIAL PROJECTIONS FOR DIVIDEND DISCOUNT ANALYSIS
SOUTHERN JERSEY BANCORP OF DELAWARE, INC.
BRIDGETON, NEW JERSEY
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
COMMON & PREFERRED
NET -------------------
TOTAL ASSET NET INCOME RETURN RETURN DIVIDEND TOTAL
ASSETS GROWTH INCOME GROWTH ON AVG. ON AVG. DIVIDENDS PAYOUT EQUITY
YEAR $(000) RATE $(000) RATE ASSETS EQUITY $(000) RATIO $(000)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Historical
- ------------------------------------------------------------------------------------------------
1994 $372,869 3.97% $4,477 10.08% 1.22% 14.47% $1,054 23.54% $32,555
1995 $404,240 8.41% $4,852 8.38% 1.25% 14.02% $1,093 22.53% $36,643
1996 $430,324 6.45% $5,328 9.81% 1.28% 13.95% $1,195 22.43% $39,751
1997(2) $475,000 7.00% $5,658 6.20% 1.25% 13.51% $1,415 25.00% $43,995
- ------------------------------------------------------------------------------------------------
Projected
- ------------------------------------------------------------------------------------------------
1998 $508,250 7.00% $6,391 12.95% 1.30% 13.78% $1,598 25.00% $48,788
1999 $543,828 7.00% $6,839 7.00% 1.30% 13.32% $1,710 25.00% $53,917
2000 $581,895 7.00% $7,317 7.00% 1.30% 12.91% $1,829 25.00% $59,405
2001 $622,628 7.00% $7,829 7.00% 1.30% 12.56% $1,957 25.00% $65,277
- ------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------
LOAN PER SHARE YEAR-END
LOSS INTANG- EST. LONG ---------------------------- PRIMARY
RESERVE IBLE TIER 1 EQUITY TERM COMMON COMMON
$(000) ASSETS LEVERAGE TO ASSET DEBT LTM COMMON DIVI- SHARES
YEAR *1* $(000) RATIO RATIO $(000) EARNINGS EQUITY DENDS OUTSTANDING
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Historical
- ------------------------------------------------------------------------------------------------
1994 $2,146 $0 8.90% 8.73% $0 $4.073 $29.616 $0.959 $1,099,233
1995 $2,413 $0 9.43% 9.06% $0 $4.473 $33.778 $1.008 $1,084,807
1996 $3,190 $0 9.53% 9.24% $0 $4.911 $36.643 $1.102 $1,084,804
1997(2) $3,521 $0 9.72% 9.26% $0 $5.209 $40.502 $1.302 $1,086,231
- ------------------------------------------------------------------------------------------------
Projected
- ------------------------------------------------------------------------------------------------
1998 $3,768 $0 9.92% 9.60% $0 $5.884 $44.915 $1.471 $1,086,231
1999 $4,031 $0 10.25% 9.91% $0 $6.296 $49.637 $1.574 $1,086,231
2000 $4,314 $0 10.55% 10.21% $0 $6.736 $54.689 $1.684 $1,086,231
2001 $4,616 $0 10.84% 10.48% $0 $7.208 $60.095 $1.802 $1,086,231
- ------------------------------------------------------------------------------------------------
</TABLE>
--------------------------------------------------------
Average Shares Outstanding in 1997 $1,084,806
Average Shares Outstanding from 1997-2001 $1,085,993
--------------------------------------------------------
*1* The Loan Reserve is assumed to increase at the same growth rate as Total
Assets unless a projected Loan Loss Reserve to Total Assets ratio is input,
which would cause the Loan Loss Reserve to change in accordance with the
specified Loan Loss Reserve to Total Assets ratio.
*2* Based on 1997 budgeted figures
<PAGE> 56
SOUTHERN JERSEY BANCORP OF DELAWARE, INC.
BRIDGETON, NEW JERSEY
NET PRESENT VALUE ANALYSIS:
DISCOUNTED DIVIDEND ANALYSIS THROUGH 2001(1), WITH RESIDUAL AS A MULTIPLE
OF BOOK VALUE IN 2001(2)
($ PER SHARE)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
DIVIDENDS PAYABLE TO COMMON SHAREHOLDERS
- ---------------------------------------------------------------------------------------------------------------------------
1997 1998 1999 2000 2001
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
$1.30 $1.47 $1.57 $1.68 $1.80
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
DISCOUNT RATE
- ---------------------------------------------------------------------------------------------------------------------------
Book Multiple 12% 14% 16% 18%
------------- --- --- --- ---
<S> <C> <C> <C> <C> <C>
Trading 1.2x $42.08 $38.12 $34.61 $31.49
Range 1.4x $48.17 $43.60 $39.54 $35.94
1.6x $54.26 $49.07 $44.48 $40.39
Acquisition 1.8x $60.35 $54.55 $49.41 $44.84
Range 2.0x $66.44 $60.03 $54.34 $49.30
2.2x $72.53 $65.50 $59.28 $53.75
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Defined as dividends payable to common shareholders.
(2) Residual calculated as a multiple of book value in the year 2001 Present
value calculated as the after tax cash flow payable per share plus the
residual value discounted to the present value at the stated discount
range.
<PAGE> 57
SOUTHERN JERSEY BANCORP OF DELAWARE, INC.
BRIDGETON, NEW JERSEY
NET PRESENT VALUE ANALYSIS:
DISCOUNTED DIVIDEND ANALYSIS THROUGH 2001(1), WITH RESIDUAL AS A MULTIPLE
OF EARNINGS IN 2001(2)
($ PER SHARE)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
DIVIDENDS PAYABLE TO COMMON SHAREHOLDERS
- ---------------------------------------------------------------------------------------------------------------------------
1997 1998 1999 2000 2001
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
$1.30 $1.47 $1.57 $1.68 $1.80
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
DISCOUNT RATE
- ---------------------------------------------------------------------------------------------------------------------------
Earnings Multiple 12% 14% 16% 18%
----------------- --- --- --- ---
<S> <C> <C> <C> <C> <C>
Trading 10x $42.07 $38.11 $34.60 $31.47
Range 12x $49.37 $44.68 $40.51 $36.81
14x $56.67 $51.24 $46.43 $42.15
Acquisition 16x $63.98 $57.81 $52.35 $47.49
Range 18x $71.28 $64.38 $58.26 $52.83
20x $78.58 $70.95 $64.18 $58.17
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Defined as dividends payable to common shareholders.
(2) Residual calculated as a multiple of earnings in the year 2001. Present
value calculated as the after tax cash flow payable per share plus the
residual value discounted to the present value at the stated discount range.
<PAGE> 58
iii. 10% Growth Assumption
<PAGE> 59
SUMMARY FINANCIAL PROJECTIONS FOR DIVIDEND DISCOUNT ANALYSIS
SOUTHERN JERSEY BANCORP OF DELAWARE, INC.
BRIDGETON, NEW JERSEY
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
COMMON & PREFERRED
NET -------------------
TOTAL ASSETS NET INCOME RETURN RETURN DIVIDEND TOTAL
ASSETS GROWTH INCOME GROWTH ON AVG. ON AVG. DIVIDENDS PAYOUT EQUITY
YEAR $(000) RATE $(000) RATE ASSETS EQUITY $(000) RATIO $(000)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Historical
- ------------------------------------------------------------------------------------------------
1994 $372,896 3.97% $4,477 10.08% 1.22% 14.47% $1,054 23.54% $32,555
1995 $404,240 8.41% $4,852 8.38% 1.25% 14.02% $1,093 22.53% $36,643
1996 $430,324 6.45% $5,328 9.81% 1.28% 13.95% $1,195 22.43% $39,751
1997(2) $475,000 10.00% $5,658 6.20% 1.25% 13.51% $1,415 25.00% $43,995
- ------------------------------------------------------------------------------------------------
Projected
- ------------------------------------------------------------------------------------------------
1998 $522,500 10.00% $6,484 14.59% 1.30% 13.97% $1,621 25.00% $48,858
1999 $574,750 10.00% $7,132 10.00% 1.30% 13.84% $1,783 25.00% $54,207
2000 $632,225 10.00% $7,845 10.00% 1.30% 13.73% $1,961 25.00% $60,091
2001 $695,448 10.00% $8,630 10.00% 1.30% 13.63% $2,157 25.00% $66,563
- ------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------
LOAN PER SHARE YEAR-END
LOSS INTANG- EST. LONG ---------------------------- PRIMARY
RESERVE IBLE TIER 1 EQUITY TERM COMMON COMMON
$(000) ASSETS LEVERAGE TO ASSET DEBT LTM COMMON DIVI- SHARES
YEAR *1* $(000) RATIO RATIO $(000) EARNINGS EQUITY DENDS OUTSTANDING
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Historical
- ------------------------------------------------------------------------------------------------
1994 $2,146 $0 8.90% 8.73% $0 $4.073 $29.616 $0.959 $1,099,233
1995 $2,413 $0 9.43% 9.06% $0 $4.473 $33.778 $1.008 $1,084,807
1996 $3,190 $0 9.53% 9.24% $0 $4.911 $36.643 $1.102 $1,084,804
1997(2) $3,521 $0 9.72% 9.26% $0 $5.209 $40.502 $1.302 $1,086,231
- ------------------------------------------------------------------------------------------------
Projected
- ------------------------------------------------------------------------------------------------
1998 $3,873 $0 9.80% 9.35% $0 $5.969 $44.979 $1.492 $1,086,231
1999 $4,261 $0 9.88% 9.43% $0 $6.566 $49.903 $1.641 $1,086,231
2000 $4,687 $0 9.96% 9.50% $0 $7.223 $55.320 $1.806 $1,086,231
2001 $5,155 $0 10.03% 9.57% $0 $7.945 $61.279 $1.986 $1,086,231
- ------------------------------------------------------------------------------------------------
</TABLE>
--------------------------------------------------------
Average Shares Outstanding in 1997 $1,084,806
Average Shares Outstanding from 1997-2001 $1,085,993
--------------------------------------------------------
*1* The Loan Loss Reserve is assumed to increase at the same growth rate as
Total Assets unless a projected Loan Loss Reserve to Total Assets ratio is
input, which would cause the Loan Loss Reserve to change in accordance
with the special Loan Loss Reserve to Total Assets ratio.
*2* Based on 1997 budgeted figures
<PAGE> 60
SOUTHERN JERSEY BANCORP OF DELAWARE, INC.
BRIDGETON, NEW JERSEY
NET PRESENT VALUE ANALYSIS:
DISCOUNTED DIVIDEND ANALYSIS THROUGH 2001(1), WITH RESIDUAL AS A MULTIPLE
OF BOOK VALUE IN 2001(2)
($ PER SHARE)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
DIVIDENDS PAYABLE TO COMMON SHAREHOLDERS
- ---------------------------------------------------------------------------------------------------------------------------
1997 1998 1999 2000 2001
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
$1.30 $1.49 $1.64 $1.81 $1.99
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
DISCOUNT RATE
- ---------------------------------------------------------------------------------------------------------------------------
Book Multiple 12% 14% 16% 18%
------------- --- --- --- ---
<S> <C> <C> <C> <C> <C>
Trading 1.2x $43.05 $39.00 $35.41 $32.21
Range 1.4x $49.26 $44.58 $40.44 $36.75
1.6x $55.47 $50.17 $45.47 $41.29
Acquisition 1.8x $61.68 $55.75 $50.50 $45.83
Range 2.0x $67.89 $61.33 $55.53 $50.37
2.2x $74.10 $66.92 $60.56 $54.91
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Defined as dividends payable to common shareholders.
(2) Residual calculated as a multiple of book value in the year 2001. Present
value calculated as the after tax cash flow payable per share plus the
residual value discounted to the present value at the stated discount range.
<PAGE> 61
SOUTHERN JERSEY BANCORP OF DELAWARE, INC.
BRIDGETON, NEW JERSEY
NET PRESENT VALUE ANALYSIS:
DISCOUNTED DIVIDEND ANALYSIS THROUGH 2001(1), WITH RESIDUAL AS A MULTIPLE
OF EARNINGS IN 2001(2)
($ PER SHARE)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
DIVIDENDS PAYABLE TO COMMON SHAREHOLDERS
- ---------------------------------------------------------------------------------------------------------------------------
1997 1998 1999 2000 2001
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
$1.30 $1.49 $1.64 $1.81 $1.99
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
DISCOUNT RATE
- ---------------------------------------------------------------------------------------------------------------------------
Earnings Multiple 12% 14% 16% 18%
----------------- --- --- --- ---
<S> <C> <C> <C> <C> <C>
Trading 10x $46.05 $41.69 $37.83 $34.40
Range 12x $54.10 $48.93 $44.36 $40.29
14x $62.15 $56.17 $50.88 $46.18
Acquisition 16x $70.20 $63.41 $57.40 $52.06
Range 18x $78.25 $70.65 $63.92 $57.95
20x $86.30 $77.89 $70.44 $63.83
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Defined as dividends payable to common shareholders.
(2) Residual calculated as a multiple of earnings in the year 2001. Present
value calculated as the after tax cash flow payable per share plus the
residual value discounted to the present value at the stated discount range.
<PAGE> 62
b. Discounted Free Cash Flow
Analysis
<PAGE> 63
i. 5% Growth Assumption
<PAGE> 64
SUMMARY FINANCIAL PROJECTION FOR CASH FLOW DETERMINATION
SOUTHERN JERSEY BANCORP OF DELAWARE, INC.
BRIDGETON, NEW JERSEY
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
NET POTENTIAL
TOTAL ASSETS NET INCOME RETURN RETURN AMORT. CASH FLOW
ASSETS GROWTH INCOME GROWTH ON AVG. ON AVG. AND TO COMMON
YEAR $(000) RATE $(000) RATE ASSETS EQUITY DEPREC. *2*
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Historical
- -----------------------------------------------------------------------------------
1994 $372,896 3.97% $4,477 10.08% 1.22% 14.47% $396 NA
1995 $404,240 8.41% $4,852 8.38% 1.25% 14.02% $401 NA
1996 $430,324 6.45% $5,328 9.81% 1.28% 13.95% $482 NA
1997(1) $475,000 10.38% $5,658 6.20% 1.25% 16.58% $482 $17,391
- -----------------------------------------------------------------------------------
Projected
- -----------------------------------------------------------------------------------
1998 $480,489 5.00% $6,098 14.45% 1.30% 17.78% $482 $6,250
1999 $504,514 5.00% $6,403 5.00% 1.30% 21.67% $482 $5,443
2000 $529,739 5.00% $6,723 5.00% 1.30% 21.67% $482 $5,691
2001 $556,226 5.00% $7,059 5.00% 1.30% 21.67% $482 $5,952
- -----------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------
LOAN PER SHARE
LOSS LONG -----------------------------
TOTAL RESERVE EQUITY TERM CASH FLOW COMMON
EQUITY $(000) TO ASSET DEBT LTM COMMON TO SHARES
YEAR $(000) *3* RATIO $(000) EARNINGS EQUITY COMMON OUTSTANDING
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Historical
- -----------------------------------------------------------------------------------------
1994 $32,555 $2,146 8.73% $0 $4.073 $29.616 NA 1,099,233
1995 $36,643 $2,413 9.06% $0 $4.473 $33.778 NA 1,084,807
1996 $39,751 $3,190 9.24% $0 $4.905 $36.643 NA 1,084,804
1997(1) $28,500 $3,521 6.00% $0 $5.209 $26.238 $16.011 1,086,231
- -----------------------------------------------------------------------------------------
Projected
- -----------------------------------------------------------------------------------------
1998 $28,829 $3,562 6.00% $0 $5.614 $26.541 $5.754 1,086,231
1999 $30,271 $3,740 6.00% $0 $5.894 $27.868 $5.011 1,086,231
2000 $31,784 $3,927 6.00% $0 $6.189 $29.261 $5.239 1,086,231
2001 $33,374 $4,123 6.00% $0 $6.498 $30.724 $5.479 1,086,231
- -----------------------------------------------------------------------------------------
</TABLE>
------------------------------------------------------
Average Shares Outstanding in 1997 1,084,806
Average Shares Outstanding from 1997-2001 1,086,231
------------------------------------------------------
*1* Based on 1997 budgeted figures
*2* Cash flow equals excess capital after year end earnings, debt retirement,
preferred dividend payments, and retained earnings required to maintain
targeted equity to asset ratio.
*3* The Loan Loss Reserve is assumed to increase at the same growth rate as
Total Assets unless a projected Loan Loss Reserve to Total Assets ratio
is input, which would cause the Loan Loss Reserve to change in accordance
with the special Loan Loss Reserve to Total Assets ratio.
<PAGE> 65
SOUTHERN JERSEY BANCORP OF DELAWARE, INC.
BRIDGETON, NEW JERSEY
NET PRESENT VALUE ANALYSIS:
DISCOUNTED CASH FLOW ANALYSIS THROUGH 2001(1), WITH RESIDUAL AS A MULTIPLE
OF BOOK VALUE IN 2001(2)
($ PER SHARE)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
AFTER TAX CASH FLOW PER SHARE
- ---------------------------------------------------------------------------------------------------------------------------
1997 1998 1999 2000 2001
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
$16.01 $5.75 $5.01 $5.24 $5.48
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
DISCOUNT RATE
- ---------------------------------------------------------------------------------------------------------------------------
Book Multiple 12% 14% 16% 18%
------------- --- --- --- ---
<S> <C> <C> <C> <C> <C>
Trading 1.2x $47.57 $44.60 $41.92 $39.51
Range 1.4x $50.68 $47.40 $44.45 $41.78
1.6x $53.79 $50.20 $46.97 $44.06
Acquisition 1.8x $56.91 $53.00 $49.49 $46.33
Range 2.0x $60.02 $55.80 $52.01 $48.61
2.2x $63.13 $58.60 $54.53 $50.89
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Defined as after tax cash flow available to common shareholders.
(2) Residual calculated as a multiple of book value in the year 2001. Present
value calculated as the after tax cash flow payable per share plus the
residual value discounted to the present value at the stated discount range.
<PAGE> 66
SOUTHERN JERSEY BANCORP OF DELAWARE, INC.
BRIDGETON, NEW JERSEY
NET PRESENT VALUE ANALYSIS:
DISCOUNTED CASH FLOW ANALYSIS THROUGH 2001(1), WITH RESIDUAL AS A MULTIPLE
OF EARNINGS IN 2001(2)
($ PER SHARE)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
AFTER TAX CASH FLOW PER SHARE
- ---------------------------------------------------------------------------------------------------------------------------
1997 1998 1999 2000 2001
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
$16.01 $5.75 $5.01 $5.24 $5.48
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
DISCOUNT RATE
- ---------------------------------------------------------------------------------------------------------------------------
Earnings Multiple 12% 14% 16% 18%
----------------- --- --- --- ---
<S> <C> <C> <C> <C> <C>
Trading 10x $56.65 $52.76 $49.28 $46.14
Range 12x $62.20 $57.76 $53.78 $50.20
14x $67.75 $62.75 $58.28 $54.26
Acquisition 16x $73.30 $67.74 $62.77 $58.32
Range 18x $78.85 $72.73 $67.27 $62.38
20x $84.41 $77.73 $71.77 $66.44
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Defined as after tax cash flow available to common shareholders.
(2) Residual calculated as a multiple of earnings in the year 2001. Present
value calculated as the after tax cash flow payable per share plus the
residual value discounted to the present value at the stated discount range.
<PAGE> 67
ii. 7% Growth Assumption
<PAGE> 68
SUMMARY FINANCIAL PROJECTION FOR CASH FLOW DETERMINATION
SOUTHERN JERSEY BANCORP OF DELAWARE, INC.
BRIDGETON, NEW JERSEY
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
NET POTENTIAL
TOTAL ASSETS NET INCOME RETURN RETURN AMORT. CASH FLOW
ASSETS GROWTH INCOME GROWTH ON AVG. ON AVG. AND TO COMMON
YEAR $(000) RATE $(000) RATE ASSETS EQUITY DEPREC. *2*
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Historical
- --------------------------------------------------------------------------------------
1994 $372,896 3.97% $4,477 10.08% 1.22% 14.47% $396 NA
1995 $404,240 8.41% $4,852 8.38% 1.25% 14.02% $401 NA
1996 $430,324 6.45% $5,328 9.81% 1.28% 13.95% $482 NA
1997(1) $475,000 10.38% $5,658 6.20% 1.25% 16.58% $482 $17,391
- --------------------------------------------------------------------------------------
Projected
- --------------------------------------------------------------------------------------
1998 $489,641 7.00% $6,157 15.56% 1.30% 17.78% $482 $5,761
1999 $523,916 7.00% $6,588 7.00% 1.30% 21.67% $482 $5,014
2000 $560,590 7.00% $7,049 7.00% 1.30% 21.67% $482 $5,331
2001 $599,832 7.00% $7,543 7.00% 1.30% 21.67% $482 $5,670
- --------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------------
LOAN PER SHARE
LOSS LONG ----------------------------
TOTAL RESERVE EQUITY TERM CASH FLOW COMMON
EQUITY $(000) TO ASSET DEBT LTM COMMON TO SHARES
YEAR $(000) *3* RATIO $(000) EARNINGS EQUITY COMMON OUTSTANDING
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Historical
- --------------------------------------------------------------------------------------
1994 $32,555 $2,146 8.73% $0 $4.073 $29.616 NA 1,099,233
1995 $36,643 $2,413 9.06% $0 $4.473 $33.778 NA 1,084,807
1996 $39,751 $3,190 9.24% $0 $4.905 $36.643 NA 1,084,804
1997(1) $28,500 $3,521 6.00% $0 $5.209 $26.238 $16.011 1,086,231
- --------------------------------------------------------------------------------------
Projected
- --------------------------------------------------------------------------------------
1998 $29,378 $3,630 6.00% $0 $5.668 $27.046 $5.303 1,086,231
1999 $31,435 $3,884 6.00% $0 $6.065 $28.939 $4.616 1,086,231
2000 $33,635 $4,156 6.00% $0 $6.460 $30.965 $4.908 1,086,231
2001 $35,990 $4,447 6.00% $0 $6.944 $33.133 $5.220 1,086,231
- --------------------------------------------------------------------------------------
</TABLE>
-------------------------------------------------------
Average Shares Outstanding in 1997 1,084,806
Average Shares Outstanding from 1997-2001 1,086,231
-------------------------------------------------------
*1* Based on 1997 budgeted figures
*2* Cash flow equals excess capital after year end earnings, debt retirement,
preferred dividend payments, and retained earnings required to maintain
targeted equity to asset ratio.
*3* The Loan Loss Reserve is assumed to increase at the same growth rate as
Total Assets unless a projected Loan Loss Reserve to Total Assets ratio is
input, which would cause the Loan Loss Reserve to change in accordance with
the special Loan Loss Reserve to Total Assets ratio.
<PAGE> 69
SOUTHERN JERSEY BANCORP OF DELAWARE, INC.
BRIDGETON, NEW JERSEY
NET PRESENT VALUE ANALYSIS:
DISCOUNTED CASH FLOW ANALYSIS THROUGH 2001(1), WITH RESIDUAL AS A MULTIPLE
OF BOOK VALUE IN 2001(2)
($ PER SHARE)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
AFTER TAX CASH FLOW PER SHARE
- ---------------------------------------------------------------------------------------------------------------------------
1997 1998 1999 2000 2001
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
$16.01 $5.30 $4.62 $4.91 $5.22
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
DISCOUNT RATE
- ---------------------------------------------------------------------------------------------------------------------------
Book Multiple 12% 14% 16% 18%
------------- --- --- --- ---
<S> <C> <C> <C> <C> <C>
Trading 1.2x $48.03 $44.97 $42.22 $39.73
Range 1.4x $51.39 $47.99 $44.94 $42.18
1.6x $54.75 $51.01 $47.65 $44.64
Acquisition 1.8x $58.10 $54.03 $50.37 $47.09
Range 2.0x $61.46 $57.05 $53.09 $49.55
2.2x $64.82 $60.07 $55.81 $52.00
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Defined as after tax cash flow available to common shareholders.
(2) Residual calculated as a multiple of book value in the year 2001. Present
value calculated as the after tax cash flow payable per share plus the
residual value discounted to the present value at the stated discount range.
<PAGE> 70
SOUTHERN JERSEY BANCORP OF DELAWARE, INC.
BRIDGETON, NEW JERSEY
NET PRESENT VALUE ANALYSIS:
DISCOUNTED CASH FLOW ANALYSIS THROUGH 2001(1), WITH RESIDUAL AS A MULTIPLE
OF EARNINGS IN 2001(2)
($ PER SHARE)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
AFTER TAX CASH FLOW PER SHARE
- ---------------------------------------------------------------------------------------------------------------------------
1997 1998 1999 2000 2001
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
$16.01 $5.30 $4.62 $4.91 $5.22
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
DISCOUNT RATE
- ---------------------------------------------------------------------------------------------------------------------------
Earnings Multiple 12% 14% 16% 18%
----------------- --- --- --- ---
<S> <C> <C> <C> <C> <C>
Trading 10x $54.34 $50.64 $47.32 $44.34
Range 12x $59.63 $55.40 $51.61 $48.20
14x $64.91 $60.15 $55.89 $52.07
Acquisition 16x $70.20 $64.91 $60.18 $55.94
Range 18x $75.49 $69.67 $64.46 $59.81
20x $80.78 $74.42 $68.75 $63.67
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Defined as after tax cash flow available to common shareholders.
(2) Residual calculated as a multiple of earnings in the year 2001. Present
value calculated as the after tax cash flow payable per share plus the
residual value discounted to the present value at the stated discount range.
<PAGE> 71
iii. 10% Growth Assumption
<PAGE> 72
SUMMARY FINANCIAL PROJECTION FOR CASH FLOW DETERMINATION
SOUTHERN JERSEY BANCORP OF DELAWARE, INC.
BRIDGETON, NEW JERSEY
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
NET POTENTIAL
TOTAL ASSETS NET INCOME RETURN RETURN AMORT. CASH FLOW
ASSETS GROWTH INCOME GROWTH ON AVG. ON AVG. AND TO COMMON
YEAR $(000) RATE $(000) RATE ASSETS EQUITY DEPREC. *2*
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Historical
- --------------------------------------------------------------------------------------
1994 $372,896 3.97% $4,477 10.08% 1.22% 14.47% $396 NA
1995 $404,240 8.41% $4,852 8.38% 1.25% 14.02% $401 NA
1996 $430,324 6.45% $5,328 9.81% 1.28% 13.95% $482 NA
1997(1) $475,000 10.38% $5,658 6.20% 1.25% 16.58% $482 $17,391
- --------------------------------------------------------------------------------------
Projected
- --------------------------------------------------------------------------------------
1998 $503,370 10.00% $6,246 17.24% 1.30% 17.86% $482 $5,026
1999 $553,707 10.00% $6,871 10.00% 1.30% 21.67% $482 $4,333
2000 $609,077 10.00% $7,558 10.00% 1.30% 21.67% $482 $4,718
2001 $669,985 10.00% $8,314 10.00% 1.30% 21.67% $482 $5,141
- --------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------------
LOAN PER SHARE
LOSS LONG ----------------------------
TOTAL RESERVE EQUITY TERM CASH FLOW COMMON
EQUITY $(000) TO ASSET DEBT LTM COMMON TO SHARES
YEAR $(000) *3* RATIO $(000) EARNINGS EQUITY COMMON OUTSTANDING
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Historical
- --------------------------------------------------------------------------------------
1994 $32,555 $2,146 8.73% $0 $4.073 $29.616 NA 1,099,233
1995 $36,643 $2,413 9.06% $0 $4.473 $33.778 NA 1,084,807
1996 $39,751 $3,190 9.24% $0 $4.905 $36.643 NA 1,084,804
1997(1) $28,500 $3,521 6.00% $0 $5.209 $26.238 $16.011 1,086,231
- --------------------------------------------------------------------------------------
Projected
- --------------------------------------------------------------------------------------
1998 $30,202 $3,731 6.00% $0 $5.750 $27.805 $4.627 1,086,231
1999 $33,222 $4,105 6.00% $0 $6.326 $30.585 $3.989 1,086,231
2000 $36,545 $4,515 6.00% $0 $6.958 $33.644 $4.343 1,086,231
2001 $40,199 $4,967 6.00% $0 $7.654 $37.008 $4.733 1,086,231
- --------------------------------------------------------------------------------------
</TABLE>
-------------------------------------------------------
Average Shares Outstanding in 1997 1,084,806
Average Shares Outstanding from 1997-2001 1,086,231
-------------------------------------------------------
*1* Based on 1997 budgeted figures
*2* Cash flow equals excess capital after year end earnings, debt retirement,
preferred dividend payments, and retained earnings required to maintain
targeted equity to asset ratio.
*3* The Loan Loss Reserve is assumed to increase at the same growth rate as
Total Assets unless a projected Loan Loss Reserve to Total Assets ratio is
input, which would cause the Loan Loss Reserve to change in accordance with
the special Loan Loss Reserve to Total Assets ratio.
<PAGE> 73
SOUTHERN JERSEY BANCORP OF DELAWARE, INC.
BRIDGETON, NEW JERSEY
NET PRESENT VALUE ANALYSIS:
DISCOUNTED CASH FLOW ANALYSIS THROUGH 2001(1), WITH RESIDUAL AS A MULTIPLE
OF BOOK VALUE IN 2001(2)
($ PER SHARE)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
AFTER TAX CASH FLOW PER SHARE
- ---------------------------------------------------------------------------------------------------------------------------
1997 1998 1999 2000 2001
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
$16.01 $4.63 $3.99 $4.34 $4.73
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
DISCOUNT RATE
- ---------------------------------------------------------------------------------------------------------------------------
Book Multiple 12% 14% 16% 18%
------------- --- --- --- ---
<S> <C> <C> <C> <C> <C>
Trading 1.2x $48.77 $45.56 $42.68 $40.08
Range 1.4x $52.52 $48.93 $45.71 $42.82
1.6x $56.27 $52.30 $48.75 $45.56
Acquisition 1.8x $60.02 $55.68 $51.79 $48.30
Range 2.0x $63.77 $59.05 $54.83 $51.05
2.2x $67.52 $62.42 $57.87 $53.79
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Defined as after tax cash flow available to common shareholders.
(2) Residual calculated as a multiple of book value in the year 2001. Present
value calculated as the after tax cash flow payable per share plus the
residual value discounted to the present value at the stated discount range.
<PAGE> 74
SOUTHERN JERSEY BANCORP OF DELAWARE, INC.
BRIDGETON, NEW JERSEY
NET PRESENT VALUE ANALYSIS:
DISCOUNTED CASH FLOW ANALYSIS THROUGH 2001(1), WITH RESIDUAL AS A MULTIPLE
OF EARNINGS IN 2001(2)
($ PER SHARE)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
AFTER TAX CASH FLOW PER SHARE
- ---------------------------------------------------------------------------------------------------------------------------
1997 1998 1999 2000 2001
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
$16.01 $4.63 $3.99 $4.34 $4.73
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
DISCOUNT RATE
- ---------------------------------------------------------------------------------------------------------------------------
Earnings Multiple 12% 14% 16% 18%
----------------- --- --- --- ---
<S> <C> <C> <C> <C> <C>
Trading 10x $50.25 $46.89 $43.88 $41.16
Range 12x $55.05 $51.20 $47.76 $44.67
14x $59.84 $55.52 $51.65 $48.18
Acquisition 16x $64.64 $59.83 $55.53 $51.68
Range 18x $69.43 $64.14 $59.42 $55.19
20x $74.23 $68.46 $63.30 $58.70
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Defined as after tax cash flow available to common shareholders.
(2) Residual calculated as a multiple of earnings in the year 2001. Present
value calculated as the after tax cash flow payable per share plus the
residual value discounted to the present value at the stated discount range.
<PAGE> 75
SUMMARY DCF ANLYSIS
<PAGE> 76
DISCOUNTED CASH FLOW ANALYSIS SUMMARY
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
I. Dividend Discount Analysis Per Share Values
----------------
14.0x Earnings 1.8x Book Value
- -------------------------------------------------------------------------------
<S> <C> <C>
5% GROWTH RATE:
12% Discount Rate 53.23 59.5
14% Discount Rate 48.15 53.78
7% GROWTH RATE:
12% Discount Rate 56.67 60.35
14% Discount Rate 51.24 54.55
10% GROWTH RATE:
12% Discount Rate 62.15 61.68
14% Discount Rate 56.17 55.75
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
II. Free Cash Flow Analysis Per Share Values
----------------
14.0x Earnings 1.8x Book Values
- -------------------------------------------------------------------------------
<S> <C> <C>
5% GROWTH RATE:
12% Discount Rate 67.75 56.91
14% Discount Rate 62.75 53
7% GROWTH RATE:
12% Discount Rate 64.91 58.1
14% Discount Rate 60.15 54.03
10% GROWTH RATE:
12% Discount Rate 59.84 60.02
14% Discount Rate 55.52 55.68
</TABLE>
<PAGE> 77
V. Self Tenders and Buybacks
<PAGE> 78
PENDING AND COMPLETED U.S. SELF TENDERS AND
PRIVATELY NEGOTIATED REPURCHASES
BELOW 50 MILLION
ANNOUNCED 8/1/95 - 8/6/97
<TABLE>
<CAPTION>
================================================================================================================================
PREMIUM PREMIUM
1 DAY 1 WEEK
OFFERING PRIOR TO PRIOR TO PREMIUM
VALUE OF PRICE PRICE ANNOUNCE- ANNOUNCE- 4 WEEKS
DATE DATE TRANSACTION PER EARNINGS MENT MENT PRIOR TO
EFFECTIVE ANNOUNCED TARGET NAME ($ MIL) SHARE RATIO DATE DATE ANN. DATE
-------- --------- ----------------- ----------- ----- ----- ---- ---- -----
================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
04/18/95 01/30/95 1st United Bancorp, FL 1.3 7.20 17.1 10.769 17.551 22.553
02/21/96 04/25/95 Valley National Bancorp, NJ 12.1 24.13 12.3 0 -- -4.455 -5.854
02/28/96 07/27/95 Fort Bend Holding, Rosenberg, TX 0.8 18.37 9.4 4.971 8.059 6.493
07/28/95 07/28/95 USBANCORP Inc 4.3 -- 11.7 -- -- --
08/26/96 10/13/95 Albion Banc Corp 0.2 17.75 24.6 0 -- -2.74 -2.74
01/31/96 12/14/95 Ohio Savings Financial Corp 4.9 975.00 4.4 -- -- --
12/27/95 12/27/95 Beverly Corp 11.5 65.00 np -- -- --
08/02/96 01/02/96 CKF Bancorp Inc 1.0 19.73 27.3 2.494 3.842 -2.568
01/12/96 01/12/96 Suffolk Bancorp 7.3 31.25 12.9 0 -- -0.794 -12.587
06/28/96 01/17/96 St. Paul Bancorp Inc 22.4 24.24 13.2 -0.041 0.477 -3.522
03/08/96 01/23/96 FCB Financial Corp, Neena, WI 2.4 18.25 19.2 0 -- 1.389 -1.351
09/18/96 02/21/96 Valley National Bancorp, NJ 19.0 24.63 13.9 0 -- 0.51 -1.005
04/26/96 04/26/96 Bedford Bancshares 1.1 -- 15.2 -- -- --
06/17/96 05/15/96 Pulse Bancorp Inc 14.7 17.75 13.6 10.938 22.414 10.938
07/08/96 06/28/96 Charter Financial Inc, Illinois 2.9 11.62 16.5 2.154 2.154 -0.043
07/15/96 Midwest Federal Financial Corp 3.2 18.50 16.4 16.535 16.535 20.325
</TABLE>
<TABLE>
<CAPTION>
==============================================================================================
OFFERING VALUE SHARES SHARES DUTCH
PRICE/ TENDER REPURCHASED OUT. AUCTION PRIVATELY
BOOK OFFER TO SHARES ACTUAL TENDER NEGOTIATED
VALUE ($MIL) OUTSTANDING (MIL) ACQUISITION TECHNIQUE OFFER PURCHASES
----- ----- ------ ---- ------------------- ----- ---------
==============================================================================================
<C> <C> <S> <C> <C> <C> <C>
Repurchase
Repurchase
1.8 -- 2.91% 6.20 Privately Negotiated Purchase No Yes
Repurchase
2.4 -- 1.64% 30.63 Open Market Purchase No Yes
Privately Negotiated Purchase
Repurchase
0.9 -- 5.06% 0.86 Open Market Purchase No Yes
Privately Negotiated Purchase
Repurchase
1.0 -- NA 5.60 Open Market Purchase No Yes
Privately Negotiated Purchase
Repurchase
0.8 -- 4.33% 0.26 Open Market Purchase No Yes
Privately Negotiated Purchase
Repurchase
0.9 -- 2.79% 0.18 Dutch Auction Tender Offer Yes No
Self-Tender
Tender Offer
19.02% 0.93 Privately Negotiated Purchase No Yes
-- Repurchase
Privately Negotiated Purchase
1.2 -- 5.07% 1.00 Open Market Purchase No Yes
Privately Negotiated Purchase
Repurchase
1.5 -- 6.33% 3.69 Privately Negotiated Purchase No Yes
Repurchase
1.2 -- 4.94% 18.70 Open Market Purchase No Yes
Privately Negotiated Purchase
Repurchase
1.0 -- 5.00% 2.63 Open Market Purchase No Yes
Privately Negotiated Purchase
Repurchase
2.3 -- 1.99% 38.72 Open Market Purchase No Yes
Privately Negotiated Purchase
Repurchase
1.1 -- NA 1.19 Privately Negotiated Purchase No Yes
Repurchase
1.3 14.7 21.29% 3.89 Dutch Auction Tender Offer Yes No
Self-Tender
Tender Offer
0.9 -- 5.02% 4.97 Open Market Purchase No Yes
Privately Negotiated Purchase
Repurchase
1.8 -- 9.88% 1.75 Open Market Purchase No Yes
Privately Negotiated Purchase
Repurchase
Tender Offer
</TABLE>
<PAGE> 79
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PREMIUM PREMIUM
1 DAY 1 WEEK
OFFERING PRIOR TO PRIOR TO PREMIUM
VALUE OF PRICE PRICE ANNOUNCE- ANNOUNCE- 4 WEEKS
DATE DATE TRANSACTION PER EARNINGS MENT MENT PRIOR TO
EFFECTIVE ANNOUNCED TARGET NAME ($ MIL) SHARE RATIO DATE DATE ANN. DATE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
11/26/96 07/25/96 North Bancshares Inc 0.9 - 24.4
05/23/97 08/13/96 Financial Federal Corp 1.6 - 14.8
11/01/96 09/26/96 Jefferson Bankshares Inc, Va 34.2 28.00 15.7 14.286 15.464 21.081
09/30/96 09/30/96 CNB Financial Corp, Canajoharie 2.8 28.00 np 3.704 4.673 0
11/26/96 10/24/96 First Shenango Bancorp, PA 4.7 23.75 32.3 10.465 11.765 11.765
03/31/97 10/31/96 First Bergen Bancorp 1.8 11.63 13.3 0 -2.105 5.682
12/20/96 11/20/96 FFY Financial Corp 21.0 26.00 19.4 2.97 4 6.122
02/06/97 11/22/96 First Mutual Bancorp, Illinois 3.4 14.50 23.5 0 3.571 6.422
02/25/97 01/10/97 Santa Barbara Bancorp, CA 2.0 30.00 np 3.448 8.597 6.195
03/14/97 03/14/97 Pamrapo Bancorp Inc, Bayonne, NJ 6.6 23.50 25.6 1.075 10.588 17.5
- -------------------------------------------------------------------------------------------------------------------------------
High 34.20 975.00 32.30 16.54 22.41 22.55
Low 0.20 7.20 4.40 -0.04 -4.46 -12.59
Median 3.30 23.63 15.70 3.70 3.92 6.12
Average 7.23 66.31 17.25 6.44 6.07 5.55
- -------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
OFFERING VALUE SHARES SHARES DUTCH
PRICE/ TENDER REPURCHASED OUT AUCTION PRIVATELY
DATE DATE BOOK OFFER TO SHARES ACTUAL TENDER NEGOTIATED
EFFECTIVE ANNOUNCED VALUE ($ MIL) OUTSTANDING (MIL) ACQUISITION TECHNIQUE OFFER PURCHASES
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
11/26/96 07/25/96 0.8 - NA 1.06 Open Market Purchase No Yes
Privately Negotiated Purchase
Repurchased
05/23/97 08/13/96 2.0 - NA 9.96 Open Market Purchase No Yes
Privately Negotiated Purchase
Repurchase
11/01/96 09/26/96 1.9 34.2 8.05% 15.17 Dutch Auction Tender Offer Yes No
Self-Tender
Tender Offer
09/30/96 09/30/96 - 3.73% 2.68 Privately Negotiated Purchase No Yes
Repurchase
11/26/96 10/24/96 1.7 4.7 8.76% 2.26 Dutch Auction Tender Offer Yes No
Self-Tender
Tender Offer
03/31/97 10/31/96 0.6 - 4.88% 3.17 Open Market Purchase No Yes
Privately Negotiated Purchase
Repurchase
12/20/96 11/20/96 1.3 21.0 15.78% 5.12 Dutch Auction Tender Offer Yes No
Self-Tender
Tender Offer
02/06/97 11/22/96 0.9 - 5.62% 4.17 Open Market Purchase No Yes
Privately Negotiated Purchase
Repurchase
02/25/97 01/10/97 2.0 0.87% 7.63 Self-Tender No No
Tender Offer
03/14/97 03/14/97 1.4 - 8.89% 3.16 Privately Negotiated Purchase No Yes
Repurchase
- --------------------------------------------------------------------------
High 2.40 34.20 21.29% 38.72
Low 0.60 2.00 0.87% 0.18
Median 1.20 14.70 5.04% 3.43
Average 1.33 15.32 6.90% 6.75
- ---------------------------------------------------------------------------
</TABLE>
<PAGE> 80
VI. Summary
<PAGE> 81
VALUATION SUMMARY*
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
I. Market Valuations GUIDELINE COMPANIES NEW JERSEY
Data as of 8-22-97 SOJB High Low Median High Low Median
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Price/Earnings 9.40x 18.46x 8.57x 15.03x 38.89x 12.94x 16.44x
Price/Book 1.22x 2.23x 1.24x 1.81x 2.81x 1.61x 1.92x
Earnings Per Share (Budgeted 12/31/97) $ 5.21
Book Value Per Share (Budgeted 12/31/91) S 40.50
Current Market Value (as of 8/22/97) $ 46.00
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
II. Discounted Cash Flow Analysis Dividend Discount Analysis Free Cash Flow Analysis
14.0x Earnings 1.8x Book Value 14.0x Earnings 1.8x Book Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
5% GROWTH RATE:
12% Discount Rate 53.23 59.5 67.75 56.91
14% Discount Rate 48.15 53.78 62.75 53.00
7% GROWTH RATE:
12% Discount Rate 56.67 60.35 64.91 58.10
14% Discount Rate 51.24 54.55 60.15 54.03
10% GROWTH RATE:
12% Discount Rate 62.15 61.68 59.84 60.02
14% Discount Rate 56.17 55.75 55.52 55.68
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
III. Self Tenders-Buybacks Potential Potential Potential
High Value Low Value Median Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Premium to Market Value (4 weeks prior
to announcement) 22.55% $ 56.37 NM NA 61.12% $ 48.82
Premium to Earnings 32.30x $ 168.25 4.40x $ 22.92 15.70x $ 81.78
Premium to Book Value 2.40x $ 97.21 0.60x $ 24.30 1.20x $ 48.60
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
IV. M & A Valuation Potential Potential Potential
Data from 1-95 to 8-22-97 High Value Low Value Median Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Cash Transactions - Regional
-----------------------------
Price to Earnings 23.67x $ 123.30 5.72x $ 29.80 14.25x $ 74.23
Price to Book Value 2.23x $ 90.46 1.36x $ 55.27 1.62x $ 65.44
Stock Transactions - Regional
-----------------------------
Price to Earnings 24.59x $ 128.09 7.19x $ 37.45 17.75x $ 92.47
Price to Book Value 3.19x $ 129.39 1.61x $ 65.07 2.31x $ 93.40
</TABLE>
<PAGE> 1
EXHIBIT 99.4
SUMMARY OF DELAWARE APPRAISAL RIGHTS
<PAGE> 2
DELAWARE APPRAISAL RIGHTS
Section 262(a) of the DGCL provides that any stockholder of a Delaware
corporation holding shares of stock on the date demand is made pursuant to
Section 262(d) of the DGCL with respect to such shares, who holds such shares
through the effective date of the merger, and who has neither voted in favor of
the merger nor consented thereto in writing shall be entitled to an appraisal
by the Delaware Court of Chancery (the "Court") of the fair value of the
stockholder's shares of stock.
Section 262(d)(1) of the DGCL provides that if a proposed merger for
which appraisal rights are provided is to be submitted for approval at a
meeting of stockholders, the corporation shall notify each of its stockholders,
not less than 20 days prior to the meeting, that such appraisal rights are
available. As previously stated herein, the Merger, as structured, does not
require the Company to call a special stockholders meeting pursuant to Section
251(f) of the DGCL. The Company, therefore, will provide notice to the Cash
Stockholders, not less than 20 days prior to the Effective Time, that such
appraisal rights are available. If any Cash Stockholder elects to have an
appraisal of his or her shares, he or she must deliver to the Company, before
the Effective Time, a written demand for such an appraisal. This written
demand will be sufficient if it reasonably informs the Company of the identity
of the Cash Stockholder and that the Cash Stockholder intends to demand an
appraisal of his or her shares. Within 10 days of the Effective Time, the
Company must notify each Cash Stockholder who has complied with Section
262(d)(1) of the DGCL that the Merger has become effective and the date on
which it occurred.
Within 120 days after the Effective Time, the Company or any Cash
Stockholder who has complied with Section 262(a) and (d) of the DGCL, may file
a petition in the Court demanding a determination of the value of the Company
Common Stock. At any time within 60 days after the Effective Time, any Cash
Stockholder who has made formal written demand for an appraisal of his or her
shares, may withdraw his or her respective demand for appraisal and accept the
Merger Consideration. Within 120 days after the Effective Time, any Cash
Stockholder who has complied with Section 262(a) and (d) of the DGCL, upon
written request, shall be entitled to receive from the Company a statement
setting forth the aggregate number of holders of shares that have demanded an
appraisal of his or her respective shares. The Company shall be required to
mail such statement to the Cash Stockholder within the later of (i) 10 days
after his or her written request for such statement is received by the Company;
or (ii) 10 days after expiration of the period for delivery of demands for
appraisal under DGCL Section 262(d).
In the event a Cash Stockholder files a petition in the Court, service
of a copy of such petition must be made upon the Company. Within 20 days after
such service, the Company must file in the office of the Register in Chancery
in which such petition was filed, a duly
4-1
<PAGE> 3
verified list containing the names and addresses of all Cash Stockholders who
have demanded payment for their shares and with whom agreements as to the value
of their shares have not been reached by the Company. If the petition is filed
by the Company, then such verified list must accompany the petition. The
Register in Chancery, if ordered by the Court, shall give notice of the time
and place of the hearing by registered or certified mail to the Company and to
the Cash Stockholders shown on the list at the addresses provided therein.
Such notice shall also be given by one or more publications at least one week
before the day of the hearing, in a newspaper of general circulation published
in the City of Wilmington, Delaware or such publication as the Court deems
advisable. The forms of the notices by mail and by publication shall be
approved by the Court, and the costs associated therewith shall be borne by the
Company.
At the hearing on such petition, the Court shall determine the Cash
Stockholders who have complied with the provisions of Section 262 of the DGCL
and who are entitled to appraisal rights. After determining the Cash
Stockholders entitled to an appraisal, the Court shall appraise the Company
Common Stock, determining the fair value exclusive of any element of value
arising from the consummation of the Merger, together with a fair rate of
interest, if any, to be paid upon the amount determined to be the fair value.
In determining the fair value, the Court shall take into account all relevant
factors. The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the Company to the Cash Stockholders
entitled to receive such payment.
The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a Cash Stockholder, the Court may order all or a portion of the
expenses incurred by any Cash Stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
4-2
<PAGE> 1
EXHIBIT 99.5
AUDITED CONSOLIDATED STATEMENTS OF
FINANCIAL CONDITION, INCOME, AND SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, AND 1995
<PAGE> 2
================================================================================
INDEPENDENT AUDITOR'S REPORT
================================================================================
[WILLIAM THOS. ATHEY & COMPANY LETTERHEAD]
To the Stockholders and Board of Directors
Southern Jersey Bancorp of Delaware, Inc.
Bridgeton, New Jersey 08302
We have audited the consolidated statements of financial condition of
Southern Jersey Bancorp of Delaware, Inc., and its subsidiaries as of December
31, 1996 and 1995, and the related consolidated statements of income,
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 management. 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 consolidated 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 perform 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 subsidiaries 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.
January 22, 1997
Bridgeton, New Jersey /s/ WILLIAM THOS. ATHEY & COMPANY
================================================================================
================================================================================
<PAGE> 3
SOUTHERN JERSEY BANCORP OF DELAWARE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
===============================================================================
<TABLE>
<CAPTION>
DECEMBER 31
-----------
1996 1995
---- ----
<S> <C> <C>
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
1935-$81,486)(Notes 1 and 3) 61,765 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
-------- --------
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 (Note 6) $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-500,000;
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 40,421
Less:Treasury stock at cost -
190,196 shares in 1996
and 190,193 shares in 1995 3,896 3,778
-------- --------
Total Shareholders' Equity 39,751 36,643
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $430,324 $404,240
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE> 4
SOUTHERN JERSEY BANCORP OF DELAWARE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
===============================================================================
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
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
------- ------- -------
NON-INTEREST 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 NON-INTEREST INCOME 3,246 2,743 2,308
------- ------- -------
NON-INTEREST 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 NON-INTEREST 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
======= ======= =======
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
<PAGE> 5
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)
================================================================================
<TABLE>
<CAPTION>
ADDITIONAL UNREALIZED
COMMON PAID-IN RETAINED TREASURY GAINS/
STOCK CAPITAL EARNINGS STOCK (LOSSES) TOTAL
----- ------ -------- ----- -------- -----
<S> <C> <C> <C> <C> <C> <C>
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) 926 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
====== ====== ======= ======= ======== =======
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
<PAGE> 6
SOUTHERN JERSEY BANCORP OF DELAWARE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
===============================================================================
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net Income $ 5,328 $ 4,852 $ 4,477
Adjustment to reconcile income to net cash
provided by operating activities:
Amortization of organization expenses 0 0 0
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 37,084 502
Proceeds from maturities of investment
securities 19,538 16,984 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 $ 1,775 $ 1,172 $ 1,478
======== ======== ========
Other non-cash activities:
Transfer of loans, net of charge-offs
to other real estate owned $ 2,760 $ 164 $ 233
======== ======== ========
Increase (decrease) in unrealized gain on
investment securities available for sale $ (907) $ 873 $ 56
======== ======== ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE> 7
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
their 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 business loans, real
estate loans, and installment loans.
(b) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated in consolidation.
(c) USE OF ESTIMATES
The preparation of 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 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 allowances for losses on loans and
foreclosed real estate. Such agencies may require the Bank to recognize
additions to the allowances based on their judgments about information
available to them at the time of their examination. Because of these
factors, it is reasonably possible that the allowances for losses on loans
and foreclosed real estate may change materially in the near term.
(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 and 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 anticipates 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.
<PAGE> 8
(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 principal 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 the 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 allowance 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) 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.
Under the 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. The Bank's self-funded liability is also accrued monthly based on
amounts provided by the Plan's administrator.
(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 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 is
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 to the effect of current economic and
lending conditions.
Deposit Liabilities - The fair values 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
<PAGE> 9
how 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 standings.
Limitations - Fair value estimates are made at a specific point in time,
based on relevant market information and information about the financial
instrument. 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 judgments 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 judgment 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 Bank 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)
<TABLE>
<CAPTION>
DECEMBER 31
- ---------------------------------------------------------------------------------------------------------------------------------
1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
GROSS GROSS GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED MARKET AMORTIZED UNREALIZED UNREALIZED MARKET
AVAILABLE FOR SALE SECURITIES COST GAINS LOSSES VALUE COST GAINS LOSSES VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury securities $ 2,994 $163 $ -- $ 3,157 $10,916 $1,060 $ -- $11,976
U.S. governmental agencies 31,876 109 (238) 31,747 21,431 347 -- 21,778
- ---------------------------------------------------------------------------------------------------------------------------------
Total $34,870 $272 $(238) $ 34,904 $32,347 $1,407 $ -- $33,754
- ---------------------------------------------------------------------------------------------------------------------------------
Securities Held to Maturity
U.S. Treasury securities $13,543 $ -- $ (97) $ 13,447 $13,610 $ 26 $ (10) $13,626
U.S. governmental agencies 2,000 -- (91) 1,909 10,523 22 (94) 10,451
Obligations of states and
political subdivisions 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
- ---------------------------------------------------------------------------------------------------------------------------------
Total $61,765 $527 $(392) $ 61,901 $80,566 $1,108 $(188) $81,486
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The scheduled maturities of securities held to maturity and securities
available-for-sale at December 31, 1996 are as follows:
<PAGE> 10
<TABLE>
<CAPTION>
AVAILABLE FOR SALE HELD TO MATURITY
---------------------------------------------
AMORTIZED MARKET AMORTIZED MARKET
COST VALUE COST VALUE
----------------------------------------------
<S> <C> <C> <C> <C>
Due in one year or less $ 1,000 $ 1,021 $14,310 $14,561
Due after one year through five years 10,492 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
</TABLE>
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, the proceeds from the call or maturity 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 loans in the Consolidated Statements of Financial Condition
are as follows: (In Thousands)
<TABLE>
<CAPTION>
DECEMBER 31
-----------
1996 1995
---- ----
<S> <C> <C>
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
======== ========
</TABLE>
An analysis of the change in the allowance for loan losses is as follows:
(In Thousands)
<TABLE>
<CAPTION>
DECEMBER 31
-----------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
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
====== ====== ======
</TABLE>
Non-accrual loans totaled $2,287,000 and $3,133,000 as of December 31, 1996
and 1995, respectively.
NOTE 5 - PREMISES AND EQUIPMENT
A summary of premises and equipment as of December 31, 1996 and 1995, is as
follows: (In Thousands)
<TABLE>
<CAPTION>
DECEMBER 31
ESTIMATED -----------
YEARS 1996 1995
----- ---- ----
<S> <C> <C> <C>
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
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
======= =======
</TABLE>
Depreciation charged to operating expenses amounted to $482,000 in 1996,
$401,000 in 1995 and $380,000 in 1994.
<PAGE> 11
NOTE 6-DEPOSITS
The aggregate amount of time deposit accounts, including certificates
of deposit, was approximately $153,679,000 and $120,287,000 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)
<TABLE>
<S> <C>
1997 $103,951
1998 19,545
1999 25,743
2000 2,885
2001 and Thereafter 1,555
--------
$153,679
========
</TABLE>
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.
(b) PREFERRED STOCK
The Company has 500,000 shares of no par value preferred stock
authorized, of which none are issued or outstanding.
(c) 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.
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 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.
<PAGE> 12
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 stock options were satisfied with reissuance of treasury stock.
The following table summarizes the options activity.
<TABLE>
<CAPTION>
RANGE OF
SHARES OPTION PRICES
------- -------------
<S> <C> <C>
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 cancelled (Plan #1) (1,000) $18.00
-------
Options outstanding at December 31, 1995 96,233
-------
Options exercised (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
=======
</TABLE>
At December 31, 1996, the Company had reserved 90,888 shares of common stock
to cover grants under the plans.
NOTE 8 - RETIREMENT PLANS
(a) 401(K) PROFIT SHARING PLAN
Effective January 1, 1995, the Bank 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 Bank 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 Bank's
contributions to the 401(K) plan were $72,000 and $75,000 for the years
ended December 31, 1996 and 1995.
(b) 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:
<TABLE>
<CAPTION>
(IN THOUSANDS) DECEMBER 31
-----------
1996 1995
---- ----
<S> <C> <C>
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(gain) loss (164) 69
-------- -------
Prepaid pension cost recognized in the
accompanying balance sheets $ 96 $ 225
======== =======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31
-----------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
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
==== ==== ====
</TABLE>
A summary of the significant assumptions used are as follows:
<TABLE>
<CAPTION>
DECEMBER 31
-----------
1996 1995
---- ----
<S> <C> <C>
Annual discount rate 7.5% 7.5%
Annual rate of increase in compensation levels 5.0% 5.0%
Annual expected long-term rate of return on assets 8.0% 8.0%
</TABLE>
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 with 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.
<PAGE> 13
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 notional 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 commitment amounts do not necessarily represent
future cash requirements. The Bank's experience has been that approximately 95
percent of 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 creditworthiness 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
conditions 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 transactions. 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 been required to perform on 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)
<TABLE>
<CAPTION>
1996 1995
---- ----
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Financial Assets:
Cash and Short-Term $ 31,247 $ 31,247 $ 46,781 $ 46,781
Investments
Investments Securities 96,669 96,805 114,320 115,240
Loans 287,695 289,000 229,700 231,657
Accrued Interest
Receivable 3,283 3,283 3,381 3,381
--------- --------- --------- ---------
$ 418,894 $ 420,335 $ 394,182 $ 397,059
========= ========= ========= =========
Financial Liabilities:
Deposits $ 385,384 $ 370,054 $ 363,433 $ 352,178
========= ========= ========= =========
</TABLE>
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:
<TABLE>
<CAPTION>
NATIONAL AMOUNT
---------------
1996 1995
---- ----
<S> <C> <C>
Commitments to Extend Credit $13,205,000 $13,930,000
Letters of Credit $ 3,649,000 $ 3,061,000
</TABLE>
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
method in 1996 and anticipates using the same method in 1997.
The consolidated provision for income taxes consisted of the following
for the years ended December 31, 1996 and 1995:
<PAGE> 14
(In Thousands)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------
1996 1995 1994
------- ------ -------
<S> <C> <C> <C>
Current tax provision:
Federal $ 2,118 $1,026 $ 1,491
Deferred income tax (benefit) expense (842) 674 (80)
------- ------ -------
Provision for income taxes $ 1,276 $1,700 $ 1,411
======= ====== =======
</TABLE>
The reasons for the differences between the statutory federal income tax
rates and the effective tax rates are summarized as follows: (In Thousands)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
---------------------------------------------------------------
1996 1995 1994
---------------------------------------------------------------
Amount % Amount % Amount %
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
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) -- 18 --
Other (231) (3) 141 2 28 1
------- ---- ------- ---- ------- ----
Provision for income tax $ 1,276 19 $ 1,700 26 $ 1,411 24
======= ==== ======= ==== ======= ====
</TABLE>
Deferred tax assets and liabilities included in other assets as of December
31, 1996 and 1995, consist of the following: (In Thousands)
<TABLE>
<CAPTION>
DECEMBER 31
-------------------
1996 1995
-------- --------
<S> <C> <C>
Deferred Tax Assets:
Allowed for loan losses $ 735 $ 513
Deferred compensation 299 308
Other -- 8
Total deferred tax assets 1,034 829
Deferred Tax Liabilities:
Accumulated Depreciation 251 248
Accrued Pension costs 33 77
Lease receivables -- 597
Net unrealized appreciation
on investment securities 11 478
Total Deferred Tax Liabilities 295 1,400
------ ------
Net Deferred Tax Asset Liability $ 739 $ (571)
====== ======
</TABLE>
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
$4,663,0000, 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 14 - 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 consolidated 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.
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 material effect on the Bank's
consolidated financial statements. Under the regulatory capital adequacy
guidelines and the regulatory framework for prompt
<PAGE> 15
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
judgments 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
regulations), 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)
<TABLE>
<CAPTION>
TO BE WELL CAPITALIZED
FOR CAPITAL UNDER PROMPT CORRECTIVE
ACTUAL ADEQUACY PURPOSES ACTION PROVISIONS
------------------ ---------------------------------- --------------------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AS OF DECEMBER 31, 1996:
Total Risk-Based Capital
(to Risk-Weighted Assets) $42,666 13.8% $24,653 > or equal to 8.0% $30,816 > or equal to 10.0%
Tier 1 Capital
(to Risk-Weighted Assets) $39,476 12.8% $12,327 > or equal to 4.0% $18,490 > or equal to 6.0%
Tier 1 Capital
(to Adjusted Total Assets) $39,476 8.8% $17,977 > or equal to 4.0% $22,472 > or equal to 5.0%
AS OF DECEMBER 31, 1995:
Total Risk-Based Capital
(to Risk-Weighted Assets) $39,060 13.9% $21,064 > or equal to 8.0% $26,329 > or equal to 10.0%
Tier 1 Capital
(to Risk-Weighted Assets) $36,647 14.8% $10,532 > or equal to 4.0% $15,798 > or equal to 6.0%
Tier 1 Capital
(to Adjusted Total Assets) $36,647 9.1% $16,175 > or equal to 4.0% $20,218 > or equal to 5.0%
</TABLE>
NOTE 17 - CONDENSED FINANCIAL INFORMATION - PARENT COMPANY ONLY
SOUTHERN JERSEY BANCORP OF DELAWARE, INC. (Parent Company Only)
CONDENSED STATEMENT OF FINANCIAL CONDITION
(In Thousands Except Share and Per Share Data)
<TABLE>
<CAPTION>
DECEMBER 31,
------------
1996 1995
---- ----
<S> <C> <C>
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 40,421
Less: Treasury stock at cost - 190,196 shares in 1996
and 190,193 shares in 1995 3,896 3,778
------- -------
Total Shareholders' Equity 39,751 36,643
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $40,349 $37,194
======= =======
</TABLE>
<PAGE> 16
Southern Jersey Bancorp of Delaware, Inc. (Parent Company Only)
CONSOLIDATED STATEMENT OF INCOME
(In Thousands)
================================================================================
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Income:
Cash dividends from subsidiary $1,595 $1,593 $1,554
Expenses:
Operating Expenses 88 135 116
______ ______ ______
Income before equity in undistributed
earnings of subsidiaries 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
====== ====== ======
</TABLE>
CONDENSED STATEMENT OF CASH FLOWS
(In Thousands)
================================================================================
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
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 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
------- ------- -------
$ 667 $ 667 $ 628
======= ======= =======
</TABLE>
<PAGE> 17
FIVE YEAR FINANCIAL DATA
- -----------------------------------------------------------------------------
The following table sets forth selected financial data derived from the
consolidated financial statements of Southern Jersey Bancorp of Delaware, Inc.,
audited by William Thos. Athey & Co., CPA's, P.A., for the five years ended
December 31, 1992 to December 31, 1996. This information should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included in the Company's Annual Reports on Form
10-K and the financial statements and related notes thereto.
(In Thousands)
FIVE YEAR SUMMARY OF OPERATIONS
<TABLE>
<CAPTION>
December 31
-----------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Earnings Summary
Total Operating Income $31,831 $29,689 $26,199 $24,693 $24,650
Total Operating Expense 25,227 23,137 20,311 19,215 20,164
------- ------- ------- ------- -------
Income before Income Tax 6,604 6,552 5,888 5,478 4,486
Applicable 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
Shares Outstanding (000 Omitted) 1,085 1,085 1,099 1,096 1,116
Net Income $ 4.91 $ 4.43 $ 4.09 $ 3.68 $ 3.18
Cash Dividend Per Share $ 1.10 $ 1.00 $ .96 $ .90 $ .80
</TABLE>
(In Thousands, Except Per Share Data)
STATEMENT OF FINANCIAL CONDITION SUMMARY
<TABLE>
<S> <C> <C> <C> <C> <C>
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
Capital Accounts $ 39,751 $ 36,643 $ 32,555 $ 29,026 $ 26,554
Book Value Per Share $ 36.64 $ 33.78 $ 29.62 $ 26.49 $ 23.72
</TABLE>
The common stock is inactively traded, and the range of sales prices
known to Management for each quarter during the two most recent years are as
follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
High Low High Low
---- --- ---- ---
<S> <C> <C> <C> <C>
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
</TABLE>
Dividends were payable at the following rates:
<TABLE>
<S> <C> <C>
1996 1995
---- ----
June 30th $ .55 $ .50
December 31st $ .55 $ .50
</TABLE>
<PAGE> 1
EXHIBIT 99.6
HISTORICAL AND PRO FORMA BALANCE SHEET,
INCOME STATEMENT, EARNINGS PER SHARE ANALYSIS
FOR THE PERIODS ENDED DECEMBER 31, 1996, AND JUNE 30, 1997
<PAGE> 2
PART I-Financial Information
This is the consolidated balance sheet for Southern Jersey Bancorp.
All dollar amounts are in thousands.
<TABLE>
<CAPTION>
6/30/97 6/30/96 12/31/96
------- ------- --------
<S> <C> <C> <C>
ASSET
Cash and due from banks 16,557 18,171 18,347
Interest bearing deposits 0 0 0
Investment securities held to maturity 55,428 72,184 61,765
Investment securities available for sale 39,203 42,736 34,904
Market Value
6-30-97 55,434
6-30-96 71,875
12-31-96 61,901
Loan net of unearned income 296,021 270,386 290,895
Less: Allowance for loan losses 3,654 2,689 3,190
------- ------- -------
Net Loans 292,367 267,697 297,695
------- ------- -------
Federal funds sold 18,900 4,800 12,900
Bank premises and equipment - net 6,064 6,274 6,214
Other assets 18,407 8,702 8,499
------- ------- -------
Total Assets 446,926 420,554 430,324
======= ======= =======
LIABILITIES
Deposits-interest bearing 349,824 325,381 330,041
Non-interest bearing deposits 50,203 32,738 55,343
------- ------- -------
Total Deposits 388,027 378,149 355,384
Federal Funds Purchased 0 0 0
Other Liabilities 6,206 4,848 5,185
------- ------- -------
Total Liabilities 405,233 382,967 390,573
Shareholder's Equity
Common stock par value $1.67 per share
Authorized 5,000,000 shares;
Issued 1,275,000 shares 2,129 2,129 2,129
Surplus 2,260 2,223 2,260
Undivided profits 41,341 37,075 39,236
------- ------- -------
45,630 42,437 43,625
Less: Treasury stock at cost
188,769 Common Shares 6-30-97
187,732 Common Shares 6-30-96
190,196 Common Shares 12-31-96 3,847 3,679 3,895
------- ------- -------
41,783 37,749 39,729
Allowance for unrealized gain/losses
on Available for Sale Securities (90) (151) 22
------- ------- -------
Total Shareholders' Equity 41,693 37,597 39,751
------- ------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 446,926 420,554 430,324
======= ======= =======
</TABLE>
<PAGE> 3
This is the consolidated statement of earnings sheet for Southern Jersey
Bancorp. All dollar amounts are in thousands except for per share data.
<TABLE>
<CAPTION>
Six Months Second Qtr.
Ended Ended
June 30 June 30
---------------- ---------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest on securities:
Taxable interest income 2,242 2,773 1,154 1,464
Tax-exempt interest income 725 766 363 329
Interest and fees on loans 12,762 10,321 6,548 5,411
Interest and interest bearing deposits 0 0 0 0
Federal funds sold 550 583 270 190
Lease income 0 223 0 0
------ ------ ----- -----
Total interest income 16,279 14,674 8,335 7,394
INTEREST EXPENSE
Interest on deposits
Savings 2,748 2,694 1,561 1,555
Certificates of deposit $100,000
and over 1,747 1,288 876 655
Fed Funds Purchased 0 0 0 0
Other time deposits 3,406 3,926 1,569 1,339
------ ----- -----
Total interest expense 7,901 7,108 4,006 3,549
NET INTEREST INCOME
Provision for loan losses 8,378 7,566 4,329 3,845
Net Interest Income After 660 615 315 315
Provision for Loan Losses ------ ------ ----- -----
7,718 6,951 4,014 3,530
OTHER OPERATING INCOME
Service charges on deposit accounts 827 784 419 406
Trust Department Income 359 341 178 172
Commissions, collection
Charges and fees 192 216 58 98
Investment security gains (losses) 0 0 0 0
Other Non-Interest Income 2 42 2 42
------ ------ ----- -----
Total Other Operating Income 1,380 1,363 697 716
OTHER OPERATING EXPENSES
Salaries and wages 2,499 3,218 1,318 1,172
Pension and other benefits 580 573 279 321
Occupancy and equipment 890 799 507 426
FDIC Assessments 67 48 34 24
Postage, stationery and supplies 242 117 103 50
Professional Fees 215 240 103 134
Other operating expenses 909 720 423 386
------ ------ ----- -----
Total Other Operating Expenses 5,301 4,715 2,767 2,513
Income Before Income Taxes 3,797 3,619 1,944 1,735
Applicable Income Taxes 1,140 1,050 540 600
------ ------ ----- -----
NET INCOME 2,657 2,569 1,404 1,135
====== ====== ===== =====
Earnings per Common Share 2.45 2.36 1.30 1.04
</TABLE>
<PAGE> 4
SOUTHERN JERSEY BANCORP OF DELAWARE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in Thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30
----------------
1997 1996
---- ----
<S> <C> <C>
Cash flow from operating activities
Net Income 2,657 2,569
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization of organization expenses 0 0
Depreciation of premises and equipment 232 213
Net Loan charge offs (196) (339)
Provision of loan losses 660 615
Premium Amortization net of discount accretion 78 72
Gain or (Loss) on sale of securities 0 0
Gain on other real estate 2 0
Gain on sale of bank premises and equipment 0 (42)
Increase in other assets (9,920) (1,189)
Increase/(decrease) in other liabilities 1,017 684
Increase/(decrease) in borrowed funds 0 0
------- -------
Net cash provided by operating activities (5,470) 2,589
Cash flows from investing activities
Interest bearing deposits 0 0
Purchase of investment securities (11,823) (14,282)
Proceeds from sales of investment securities 5,463 0
Proceeds from maturities of investment securities 6,662 12,260
Increase in loans (5,136) (38,217)
Bank premises and equipment 82 (576)
Proceeds from sale of bank premises and equipment 80 42
Proceeds from sale of other real estate 312 224
------- -------
(3,360) (40,549)
Net cash used for investing activities
Cash flows from financing activities
(Decrease)/Increase in total deposits 13,643 14,686
Cash dividends (652) (598)
Purchase of Treasury stock (90) (75)
Sale of Treasury stock 139 137
------- -------
Net Cash provided by financing activities 13,040 14,150
Net increase/(decrease) in cash and cash equivalents 4,210 (23,810)
Cash and equivalents at beginning of year 31,347 46,701
------- -------
Cash and Cash equivalent at end of quarter 35,457 22,971
======= =======
Supplementary Schedule of NonCash Investing
and Financing Activities
Loans, Net of Chargeoffs transferred to Other
Real Estate Owned: 0 62
</TABLE>
<PAGE> 5
SOUTHERN JERSEY BANCORP OF DELAWARE, INC.
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1997
1) Principles of Consolidation: The consolidated financial statements
reflect the account of Southern Jersey Bancorp of Delaware, Inc. and its
subsidiary, The Farmers and Merchants National Bank of Bridgeton, after
the elimination of all intercompany balances and transactions.
2) There have been no significant changes in the account policies of the
registrant since December 31, 1996, the date of the most recent annual
report to security holders, nor have there occurred events which have
had a material impact on the disclosures herein.
3) The interim financial statements contained herein reflect all
adjustments which are, in the opinion of management, necessary to a fair
statement of the results for the interim periods presented.
4) In accordance with Rule 10-01(b)(8), the Unaudited interim financial
statements filed under cover of Form 10-Q for June 30, 1997, reflect
adjustments that are of a normal recurring nature which are, in the
opinion of Management, necessary to a fair statement of the results for
the interim periods presented.
<PAGE> 6
SOUTHERN JERSEY BANCORP OF DELAWARE, INC.
HISTORICAL AND PROFORMA BALANCE SHEET
FOR THE PERIODS ENDING DECEMBER 31, 1996 AND JUNE 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
=====================================================================================
ACTUAL PROFORMA ACTUAL PROFORMA
BALANCE SHEET DATA DEC-96 DEC-96 JUN-97 JUN-97
=====================================================================================
<S> <C> <C> <C> <C>
Interest earning assets
Funds & interest bearing deposits 31,247 31,170 35,457 35,380
Investments 96,669 96,669 94,631 94,631
Loans 287,695 287,695 292,367 292,367
--------- --------- --------- ---------
Total interest earning assets 415,611 415,534 422,455 422,378
Other assets 14,713 14,713 24,471 24,471
--------- --------- --------- ---------
Total assets 430,324 430,247 446,926 446,849
========= ========= ========= =========
Liabilities
Deposits 385,384 385,384 399,027 399,027
Notes Payable - 13,000 - 13,000
Other Liabilities 5,189 5,189 6,206 6,206
--------- --------- --------- ---------
Total Liabilities 390,573 403,573 405,233 418,233
Common Equity 39,751 26,674 41,693 28,616
--------- --------- --------- ---------
Total Liabilities and Equity 430,324 430,247 446,926 446,849
========= ========= ========= =========
</TABLE>
<PAGE> 7
SOUTHERN JERSEY BANCORP OF DELAWARE, INC.
HISTORICAL AND PROFORMA INCOME STATEMENT DATA
FOR THE PERIODS ENDING DECEMBER 31, 1996 AND JUNE 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
=====================================================================================
ACTUAL PROFORMA ACTUAL PROFORMA
INCOME STATEMENT DEC-96 DEC-96 JUN-97 JUN-97
=====================================================================================
<S> <C> <C> <C> <C>
Net interest income 15,520 14,220 8,378 7,728
Provision for possible loan losses 1,805 1,805 660 660
Other income:
Service fees 1,677 1,677 827 827
Trust department income 694 694 359 359
Other 460 460 194 194
Net investment securities gains 415 415 - 1
--------- --------- --------- ---------
Total other income 3,246 3,246 1,380 1,381
Other expense:
Salaries & wages 5,598 5,598 3,079 3,079
Occupancy & equipment 1,777 1,778 890 890
Other operating expenses 2,982 2,882 1,332 1,283
--------- --------- --------- ---------
Total other expense 10,357 10,258 5,301 5,252
--------- --------- --------- ---------
Income before taxes 6,604 5,403 3,797 3,197
Taxes 1,276 1,044 1,140 960
--------- --------- --------- ---------
Net income 5,328 4,359 2,657 2,237
</TABLE>
<PAGE> 8
SOUTHERN JERSEY BANCORP OF DELAWARE, INC.
HISTORICAL AND PROFORMA PER SHARE SUMMARY ANALYSIS
FOR THE PERIODS ENDING DECEMBER 31, 1996 AND JUNE 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
=====================================================================================
ACTUAL PROFORMA ACTUAL PROFORMA
PER SHARE DATA DEC-96 DEC-96 JUN-97 JUN-97
=====================================================================================
<S> <C> <C> <C> <C>
PER SHARE DATA
Common Shares Outstanding 1,084,804 1,084,804 1,086,231 1,086,231
Earnings Per Shares $4.91 $4.02 $2.45 $2.06
Stockholders' Equity Per Share $36,64 $24.59 $38.38 $26.34
</TABLE>
