UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from..........to.........
Commission file number 0-12635
SOUTHERN JERSEY BANCORP OF DELAWARE, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 22-298365
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
53 South Laurel Street, Bridgeton, New Jersey 08302-1293
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (609)451-2222
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
registered
NONE NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $1.67
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (Sec. 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of Registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. (______)
As of March 26, 1998, Registrant has 5,000,000 shares of $1.67 par value
common stock authorized, with 1,093,805 shares outstanding, which is the only
class of common stock or voting stock of the Registrant. As of that date, the
aggregate market value of the shares of common stock held by non-affiliates
of the Registrant (based on most recent sales prices known to Management)
was approximately $66,722,105.
DOCUMENTS INCORPORATED BY REFERENCE
PART III - The information called for by Part III is incorporated by
reference to the definitive Proxy Statement for the Annual Meeting of the
Shareholders of the Registrant to be held May 7, 1998, and which will be
filed with the Securities and Exchange Commission not later than 120 days
after December 31, 1997.
Page 1 of 62 pages
PART I
Item 1. Business
Background
Southern Jersey Bancorp of Delaware, Inc. (Registrant), a
bank holding company, was organized under the laws of the State of
Delaware on June 9, 1989. On July 17, 1989, Registrant acquired all the
outstanding common shares of Southern Jersey Bancorp, a bank holding
company organized under the laws of the State of New Jersey (predecessor
Registrant). As of this same date, Southern Jersey Bancorp was merged into
Registrant.
Registrant has two wholly-owned subsidiaries. Farmers and Merchants
National Bank of Bridgeton (the Bank) is a commercial bank which was first
organized under the laws of the State of New Jersey and the United States
Government in 1909, and all outstanding shares of the Bank were acquired by
the predecessor Registrant on May 22, 1984. AMFDCM, Inc. was organized
under the laws of the State of New Jersey in 1996 for the purpose of holding
and managing real estate and other repossessed assets.
The Bank has two wholly-owned subsidiaries. F&M Investment
Company(Investment Company) was organized under the laws of the State of
Delaware in 1984 for the purpose of holding and managing investment
securities. Woulf Asset Holdings, Inc. was organized under the laws of the
State of New Jersey in 1996 for the purpose of holding and managing real
estate.
Description of Business
Registrant is engaged in the business of managing or controlling its wholly-
owned subsidiary bank and other such businesses related to banking as may be
authorized under federal and state banking laws.
The Bank provides traditional services that are standard to the commercial
banking industry and maintains a Trust Department that provides traditional
fiduciary and agency services standard to the banking industry.
The Bank operates in the Counties of Cumberland, Gloucester and Salem
in Southern New Jersey through branch offices with the main office situated in
Bridgeton, New Jersey. Within the market area in which the Bank operates,
there are numerous commercial banks, savings and loan associations,
credit unions, etc. The number of competitors cannot be reasonably estimated.
The Bank is one of the largest independently owned financial
institutions in the market area and is one of the most profitable financial
institutions in the State of New Jersey. The principal methods of
competition are those that are standard to the banking industry, such as
interest rates and customer services.
Environmental and Safety Regulations
In the opinion of Registrant, compliance with current laws and regulations
pertaining to the environment, health and safety has not materially affected
its business or financial condition, and Registrant believes that such matters
will not have a material effect on its business or financial condition in the
foreseeable future. After giving effect to pending programs for environmental
compliance, the Registrant expects to be in material compliance with
currently applicable environmental, health and safety laws and regulations.
General
Employees - Registrant employs approximately 201 people who are not
covered by collective bargaining agreements with any unions. In general,
relationships with employees have been satisfactory.
Customers - Registrant is not dependent upon any single customer or upon
any single group of customers, the loss of which would have a material
adverse effect on Registrant.
Other - Registrant does not have research and development expenditures,
backlog of orders and inventory, patents or trademarks, any seasonality
of business, business under government contracts subject to renegotiation
of profits or contract termination or reportable industry segments as
described in SFAS 14, and does not use raw materials.
The banking business of Registrant and the Bank is subject to
comprehensive and detailed regulation by federal supervisory agencies;
in particular, the Office of the Comptroller of Currency, the Federal
Deposit Insurance Corporation, and the Federal Reserve Board, as well
as the Securities and Exchange Commission. These agencies have broad
administrative authority which includes, but is not limited to, dividends,
expansion of locations, acquisitions and mergers, interest rates, reserves
against deposits, terms, amounts and charges to borrowers, investments,
ownership of certain companies by bank holding companies. The banking
business of Registrant and the Bank is also subject to the banking laws
of the States of New Jersey and Delaware.
The federal banking regulatory authorities (The Board of Governors
of the Federal Reserve System, the Office of the Comptroller of the
Currency, and the Federal Deposit Insurance Corporation) may take action
against the Registrant and the Bank for failure to maintain minimum
levels of capital and minimum leverage ratios and failure to comply
with regulations promulgated under the FDIC Improvement Act of 1991
(FDICIA) and the Financial Institutions Reform, Recovery and
Enforcement Act of 1989(FIRREA). The Bank's Tier 1 and risk weighted
capital ratios at December 31, 1997 are 11.3% and 12.5%, respectively. This
is well in excess of the minimum required of 4% and 8%.
FDICIA generally prohibits a depository institution from making
any capital distribution (including payment of dividends) or paying any
management fee to its holding company if the depository institution
would thereafter be undercapitalized. Undercapitalized depository
institutions are subject to growth limitations, prohibitions on the payment
of interest rates in excess of 75 basis points above the average market
yields for comparable deposits, and are required to submit a capital
restoration plan. The federal banking agencies may not accept
a capital plan without determining, among other things, that the
plan is based on realistic assumptions and is likely to succeed in
restoring the depository institution's capital. In addition, for a capital
restoration plan to be acceptable, the depository institution's parent
holding company must guarantee that the institution will comply with
such capital restoration plan. The aggregate liability of the parent holding
company is limited to the lesser of (i) an amount equal to 5% of the
depository institution's total assets at the time it became under-
capitalized and (ii) the amount which is necessary or
would have been necessary to bring the institution into compliance
with all capital standards applicable with respect to such institution
as of the time it fails to comply with the plan. If a depository institution
that is required to submit a capital restoration plan fails to submit an
acceptable plan, it is treated as if it is significantly undercapitalized.
Significantly undercapitalized depository institutions may be subject
to a number of requirements and restrictions including orders to sell
sufficient voting stock to become adequately capitalized, requirements to
reduce total assets, or desist accepting deposits from correspondent banks,
and restrictions on senior executive compensation and on inter- affiliate
transactions. Critical undercapitalization institutions are subject to
a number of additional restrictions including the appointment of a receiver
or conservator.
Regulations promulgated under FDICIA also require that an
institution monitor its capital levels closely and notify its appropriate
federal banking regulators within 15 days of any material events that affect
the capital position of the institution.
FDICIA directs that each federal banking agency prescribe the
standards for depository institutions and depository institution holding
companies relating to internal controls, information systems, internal
audit systems, loan documentation, credit underwriting, interest rate
exposure, asset growth, and a maximum ratio of classified assets to
capital, minimum earnings sufficient to absorb losses, a minimum ratio
of market value to book value for publicly traded shares, and other such
standards as the agency deems appropriate. FDICIA also contains a variety
of other provisions that could affect the operations of the Company
including new reporting requirements, regulatory standards for real estate
lending, "truth-in-savings" provisions, the requirement that a depository
institution give 90 days prior notice to customers and regulatory authorities
before closing any branch, certain restrictions on investments and
activities of state chartered insured banks and their subsidiaries,
limitations on credit exposure between banks, restrictions on loans
to a bank's insiders, guidelines governing regulatory examinations,
and a prohibition on the acceptance or renewal of brokerage deposits by
depository institutions that are not well capitalized or are adequately
capitalized and have not received a waiver from the FDIC. Based on the
regulations existing in perspective, none of the aforementioned
requirements are expected to impose a material cost on the Company
or to result in significant changes to the Company's operations.
Under FIRREA, a depository institution insured by the FDIC can
be held liable for any loss incurred by or reasonably expected to be
incurred by the FDIC after August 9, 1989, in connection with (i) the
default of commonly controlled FDIC insured depository institution
or (ii) any assistance provided by the FDIC to a commonly controlled
FDIC insured depository institution in danger of default. "Default" is
defined generally as the appointment of a conservator or receiver, and
"in danger of default" is defined generally as the existence of certain
conditions indicating that a default is likely to occur in the absence
of regulatory assistance. FIRREA and the Crime Control Act of 1990
expand the enforcement powers available to federal banking regulators
including providing greater flexibility to impose enforcement action,
expanding the category of persons dealing with a bank or subject
to enforcement action, increasing the potential civil and criminal penalties.
In addition, in the event of a holding company insolvency, the Crime Control
Act of 1990 affords a priority in respect of capital commitments made by
a holding company on behalf of subsidiary banks.
As more fully discussed in Item 7, Management's Discussion and
Analysis, and the Notes to the Consolidated Financial Statements, the
Registrant and the Bank are deemed "well capitalized" as it significantly
exceeds the minimum level required by regulation for each relevant capital
measure.
Registrant has only domestic operations which are primarily
concentrated in Cumberland and Salem Counties of New Jersey.
Item 1a. Executive Officers of Registrant
Set forth below are the names, ages, and titles of persons with Registrant
and present and past positions of the persons serving as executive officers
of Registrant and its subsidiaries. Unless otherwise stated, each officer
has served in his present position since April, 1993.
NAME AND AGE OFFICE AND EXPERIENCE
Clarence D. McCormick, Sr. 68 Chairman of the Board and Chief Executive
Officer of Southern Jersey Bancorp
of Delaware, Inc., Vice President
of F&M Investment Company since August 8,
1997, Chairman of the Board and Chief
Executive Officer of Farmers and Merchants
National Bank of Bridgeton, NJ
Clarence D. McCormick, Jr. 37 President of Southern Jersey Bancorp of
Delaware, Inc., President of F&M Investment
Company since August 8, 1997, and
President of Farmers and Merchants National
Bank of Bridgeton, NJ since April 20,1995
Ralph A. Cocove, Sr. 59 Executive Vice President of Administration
and Cashier of Farmers and Merchants
National Bank of Bridgeton, NJ
Paul J. Ritter, III 37 Senior Vice President and Comptroller of
Farmers and Merchants National Bank
of Bridgeton, NJ and Treasurer of Southern
Jersey Bancorp of Delaware, Inc. since
April 20, 1995
Harry W. Bullock 71 Secretary of Southern Jersey Bancorp of
Delaware, Inc.
Russell Chappius, Sr. 56 Senior Vice President and Operations
Officer of Farmers and Merchants
National Bank of Bridgeton, NJ
Charles S. Kesler 59 Senior Vice President and Data Processing
Manager of Farmers and Merchants
National Bank of Bridgeton, NJ
Simon Aman 61 Senior Vice President and Senior Trust
Officer of Farmers and Merchants
National Bank of Bridgeton, NJ, and
Investment Officer of F&M Investment
Company since May 16, 1994. Prior to
1994, Mr. Aman was a Trust Officer with
Central National Bank in Canajohaire,
New York for 3 1/2 years and Union
National Bank in Albany, New York for
15 years.
Gunars Sietinsons 58 Senior Vice President/Lending since January
1998, Senior Vice President/President/
Commercial Lending since April 16, 1996.
Prior to 1996, Mr. Sietinsons was a loan
officer of Farmers & Merchants National Bank
for over ten years.
J. Kevin Danna 43 Senior Vice President since December 1996.
Prior to 1996, Mr. Danna was a loan
officer of Farmers & Merchants National
Bank for over 10 years.
Set forth below are the names and beneficial stock ownership of
persons serving as executive officers of Registrant and its subsidiaries.
Name Shares of Stock Owned Percentage of Outstanding
and Beneficially Owned Common Stock
Clarence D. McCormick 159,535 14.62
Clarence D. McCormick, Jr. 68,449 6.27
Harry W. Bullock 4,367 .40
Ralph A. Cocove, Sr. 6,520 .60
Paul J. Ritter, III 5,700 .52
Russell Chappius, Sr. 1,900 .17
Charles S. Kesler 1,170 .11
Simon Aman 100 .01
Gunars Sietinsons 2,000 .18
J. Kevin Danna 1,000 .09
STATISTICAL DISCLOSURES UNDER GUIDE 3
Schedule I
Item I(A) Average Balance Sheets
December 31
1997 1996 1995
ASSETS
Cash and due from banks $17,445 $ 15,818 $ 15,561
Interest-bearing deposits 0 0 2,342
Federal funds sold 32,923 21,670 16,113
Investment securities - Taxable
65,125 73,642 88,496
Investment securities - Tax Exempt
29,319 37,339 38,264
Loans net of unearned income
302,354 263,904 210,327
Less: Allowance for loan losses
3,574 2,785 2,349
Net loans 298,780 261,119 207,978
Bank premises and equipment - net
6,385 6,250 5,819
Other assets 16,144 9,238 8,525
TOTAL ASSETS $466,121 $425,076 $383,098
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Interest-bearing demand deposits
$ 99,022 $ 91,500 $ 67,548
Savings accounts and CD's under $100,000
193,431 159,848 146,401
CDs $100,000 or more 64,758 62,152 37,258
Non-interest bearing deposits
57,940 65,727 92,076
Total Deposits 415,151 379,227 343,283
Other liabilities 7,224 6,051 2,813
Total Liabilities 422,375 385,278 346,096
Shareholders' Equity
Preferred stock 0 0 0
Common stock 2,129 2,129 2,129
Additional paid-in capital 2,260 2,241 2,241
Retained earnings 43,070 38,771 35,175
Allowance for unrealized (losses)/gains
90 475 750
47,549 43,616 40,295
Less: Treasury stock 3,803 3,818 3,293
Total Shareholders' Equity
43,746 39,798 37,002
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY
$466,121 $425,076 $383,098
GUIDE 3
Schedule II
Item I(B) Analysis of Interest Earnings
For The Years Ended December 31
(In Thousands) 1997 1996 1995
Interest % Interest % Interest %
INTEREST EARNING ASSETS:
Interest bearing deposits
$ 0 N/A $ 0 N/A $ 164 7.00%
Federal funds sold 1,830 5.56% 1,147 5.29% 943 5.85%
Investment securities:
Taxable 4,253 6.53% 5,141 6.98% 5,720 6.46%
Tax-exempt 1,870 6.38% 1,661 4.45% 1,989 5.20%
Loans 25,847 8.65% 22,441 8.59% 19,396 9.33%
Average Yield
$33,800 7.93% $30,390 7.72% $28,212 7.99%
INTEREST BEARING LIABILITIES:
Interest on deposits:
Demand deposits $2,642 2.67% $ 2,644 2.89% $2,837 4.20%
Savings and CDs under $100,000
10,863 5.62% 9,332 5.84% 8,311 5.68%
CDs $100,000 or more
3,654 5.64% 2,894 4.66% 1,966 5.28%
Average Effective Rate Paid
$17,159 4.80% $14,870 4.74% $13,114 5.22%
NET YIELD ON INTEREST-EARNING
ASSETS $16,641 3.84% $15,520 3.89% $15,098 4.22%
NOTES:
(1) Non-accrual loans are not included in the "Loans net
of unearned income" amount used in the yield
computation.
(2) No out-of-period items included in the calculation of
the changes in interest income and interest expense.
(3) Loan fees are immaterial.
(4) Tax exempt income is not calculated on a tax
equivalent basis.
GUIDE 3
Schedule III
Item I(C)(1) Schedules of Interest Income & Expense Variance
For The Years Ended December 31
(In Thousands) 1997 1996
INTEREST VARIANCE INTEREST VARIANCE
INTEREST INCOME:
Interest-bearing deposits
$ 0 $ 0 $ 0 $ (164)
Federal funds sold 1,830 683 1,147 204
Investment securities:
Taxable 4,253 (888) 5,141 (579)
Tax-exempt 1,870 209 1,661 (328)
Loans 25,847 3,406 22,441 3,045
TOTAL INTEREST INCOME
$33,800 $3,410 $30,390 $2,178
Item I(C)(2)
INTEREST EXPENSE:
Interest on deposits:
Demand deposits
$ 2,642 $ (2) $ 2,644 $ (193)
Savings and CDs under $100,000
10,863 1,531 9,332 1,021
CDs $100,000 or more
3,654 760 2,894 928
TOTAL INTEREST EXPENSE
$17,159 $2,289 $14,870 $1,756
GUIDE 3
Schedule IV
Item I(C)(2)(a) and (b)
Schedules of Volume Variance and Rate Variance
For The Years Ended December 31
(In Thousands) 1997 1996
VARIANCE
VOLUME RATE VOLUME RATE
(a) (b) (a) (b)
INTEREST INCOME:
Interest-bearing deposits
$ 0 $ 0 $ (164) $ 0
Federal funds sold 595 59 325 (90)
Investment securities
Taxable (594) (331) (960) 460
Tax-exempt (357) 721 (48) (287)
Loans 3,303 158 4,999 (1,556)
TOTAL INTEREST INCOME
$2,947 $ 607 $4,152 $(1,473)
INTEREST EXPENSE:
Interest on deposits:
Demand deposits $ 217 $ (201) $1,006 $ (885)
Savings and CDs under $100,000
1,961 (352) 764 234
CDs $100,000 or more 121 609 1,314 (231)
TOTAL INTEREST EXPENSE
$2,299 $ 56 $3,084 $(882)
GUIDE 3
Schedule V
Item I(C)(2)(c) Schedules of Changes in Rate/Volume
December 31, 1997
(In Thousands) TOTAL VOLUME RATE RATE/VOL
VARIANCE VARIANCE VARIANCE VARIANCE
INTEREST INCOME:
Interest-bearing deposits
$ 0 $ 0 $ 0 $ 0
Federal funds sold 683 595 59 29
Investment securities:
Taxable (888) (594) (331) 37
Tax-exempt 209 (357) 721 (155)
Loans 3,406 3,303 158 (55)
TOTAL INTEREST INCOME
$3,410 $2,947 $ 607 $ (144)
INTEREST EXPENSE:
Interest on deposits:
Demand deposits
$ (2) $ 217 $ (201) $ (18)
Savings and CDs under $100,000
1,531 1,961 (352) (78)
CDs $100,000 or more
760 121 609 30
TOTAL INTEREST EXPENSE
$2,289 $2,299 $ 56 $ (66)
December 31, 1996
(In Thousands) TOTAL VOLUME RATE RATE/VOL
VARIANCE VARIANCE VARIANCE VARIANCE
INTEREST INCOME:
Interest-bearing deposits
$ (164) $ (164) $ 0 $ 0
Federal funds sold 204 325 (90) (31)
Investment securities:
Taxable (579) (960) 460 (79)
Tax-exempt (328) (48) (287) 7
Loans 3,045 4,999 (1,556) (398)
TOTAL INTEREST INCOME
$2,178 $4,152 $(1,473) $(501)
INTEREST EXPENSE:
Interest on deposits:
Demand deposits
$ (193) $1,006 $ (885) $(314)
Savings and CDs under $100,000
1,021 764 234 23
CDs $100,000 or more
928 1,314 (231) (155)
TOTAL INTEREST EXPENSE
$1,756 $3,084 $(882) $(446)
GUIDE 3
Schedule VI
Item II(A) and (B) Investment Portfolio
December 31,
(In Thousands) 1997 1996 1995
Book Average Book Book
Value Yield Value Value
U.S. Treasury Securities:
Maturing within 1 year $ 8,509 5.2355% $ 6,026 $ 0
Maturing between 1-5 years
4,002 7.5262% 10,512 24,527
TOTAL 12,511 16,538 $24,527
U.S. Government Agencies:
Maturing within 1 year 2,000 5.1783% 1,998 4,013
Maturing between 1-5 years
5,982 6.1762% 10,488 8,995
Maturing between 6-10 years
29,426 7.0038% 21,390 18,946
TOTAL 37,408 33,876 31,954
State and Political Subdivisions:
Maturing within 1 year 5,737 5.5131% 4,528 4,785
Maturing between 1-5 years
18,594 4.7920% 21,727 16,420
Maturing between 6-10 years
6,138 4.7687% 2,840 12,021
Maturing over 10 years 69 4.8433% 64 73
TOTAL 30,538 29,159 33,299
Federal Reserve Stock 128 6.0000% 128 128
Other Securities:
Maturing within 1 year 3,056 6.4646% 4,763 6,013
Maturing between 1-5 years
9,068 6.0572% 12,172 15,917
Maturing between 6-10 years 743 6.9416% 0 1,075
TOTAL 12,867 16,935 23,005
Equity Securities
Maturing within 1 year
Maturing between 1-5 years
Maturing between 6-10 years
TOTAL 0 0 0
Total Before Allowance For
Unrealized Gains 93,452 96,636 112,913
Add: Unrealized Gains 241 33 1,407
TOTAL SECURITIES $93,693 $96,669 $114,320
Item II(C) Securities With One Issuer Exceeding Ten Percent of
Stockholders' Equity - NONEGUIDE 3
Schedule VI
Item II(A) and (B) Investment Portfolio - Available For Sale
December 31,
(In Thousands) 1997 1996 1995
Book Average Book Book
Value Yield Value Value
U.S. Treasury Securities:
Maturing within 1 year $ 0 $ 1,000 $ 0
Maturing between 1-5 years
4,002 7.5262% 1,995 10,916
TOTAL 4,002 2,995 10,916
U.S. Government Agencies:
Maturing within 1 year 0 7.7864% 1,998 1,000
Maturing between 1-5 years
4,482 6.1641% 8,488 3,495
Maturing between 6-10 years
28,426 7.0342% 21,390 16,936
TOTAL 32,908 31,876 21,431
State and Political Subdivisions:
Maturing within 1 year
Maturing between 1-5 years
Maturing between 6-10 years
Maturing over 10 years
TOTAL 0 0 0
Federal Reserve Stock 0 0 0
Other Securities:
Maturing within 1 year
Maturing between 1-5 years
Maturing between 6-10 years
TOTAL 0 0 0
Equity Securities
Maturing within 1 year
Maturing between 1-5 years
Maturing between 6-10 years
TOTAL 0 0 0
Total Before Allowance For
Unrealized Gains/(Losses)
36,910 34,871 32,347
Add: Unrealized Gains 241 33 1,407
TOTAL SECURITIES
$37,151 $34,904 $33,754
GUIDE 3
Schedule VI
Item II(A) and (B) Investment Portfolio - Held to Maturity
December 31,
(In Thousands) 1997 1996 1995
Book Average Book Book
Value Yield Value Value
U.S. Treasury Securities:
Maturing within 1 year
$ 8,509 5.2355% $ 5,026 $ 0
Maturing between 1-5 years
0 8,517 13,611
TOTAL 8,509 13,543 13,611
U.S. Government Agencies:
Maturing within 1 year
2,000 3.8760% 0 3,013
Maturing between 1-5 years
1,500 6.2850% 2,000 5,500
Maturing between 6-10 years
0 6.2800% 0 2,010
TOTAL 3,500 2,000 10,523
State and Political Subdivisions:
Maturing within 1 year
5,737 5.5131% 4,528 4,785
Maturing between 1-5 years
18,594 4.7920% 21,727 16,420
Maturing between 6-10 years
6,138 4.7671% 2,840 12,021
Maturing over 10 years 69 4.8433% 64 73
TOTAL 30,538 29,159 33,299
Federal Reserve Stock 128 6.0000% 128 128
Other Securities:
Maturing within 1 year
3,056 6.4646% 4,763 6,013
Maturing between 1-5 years
9,068 6.0572% 12,172 15,917
Maturing between 6-10 years
743 6.9416% 0 1,075
TOTAL 12,867 16,935 23,005
Equity Securities
Maturing within 1 year
Maturing between 1-5 years
Maturing between 6-10 years
TOTAL 0 0 0
Total Before Allowance For
Unrealized Gains/(Losses)
55,542 61,765 80,566
Add: Unrealized Gains
TOTAL SECURITIES $55,542 $61,765 $80,566
GUIDE 3
Schedule VII Analysis of Loans
Item III(A) - Types of Loans: December 31
(In Thousands) 1997 1996 1995 1994 1993
Real estate loans:
1-4 Family Residential $66,041 $61,668 $52,673 $48,443 $46,175
Farmers 2,342 2,098 2,337 1,832 1,370
Commercial 75,484 72,492 28,695 31,161 49,310
Loans to farmers 1,449 1,310 1,148 1,601 3,069
Commercial and industrial loans
72,555 50,548 83,672 74,165 26,179
Loans to individuals:
Credit cards 1,834 1,799 1,661 1,562 1,281
Consumer installment loans
86,304 101,688 53,121 35,645 27,406
Lease financing receivables 17 17 10,059 219 507
Total Loans 306,026 291,620 233,366 194,628 155,297
Less: Unearned income 470 735 1,253 2,110 3,955
Allowance for loan losses
5,236 3,190 2,413 2,146 2,135
Net Loans $300,320 $287,695 $229,700 $190,372 $149,207
Item III(B) - Maturities and Sensitivities of Loans to Changes in
Interest Rates at December 31, 1997:
(In Thousands)
Domestic: Total Interest Rates
Loans Predetermined Floating
Commercial, Financial and Agricultural
Due in 1 year or less
$ 25,168 $ 16,444 $ 8,724
Due after 1 year through 5 years
37,549 34,113 3,436
Due after 5 years 11,287 10,414 873
$ 74,004 $ 60,971 $ 13,033
Item III(C) - Risk Elements
1. Non-accrual, Past Due and Restructured Loans
(In Thousands) December 31
1997 1996 1995 1994 1993
(1)(a) Total non-accrual loans
$3,971 $2,287 $3,133 $2,298 $1,842
(1)(b) Accruing loans past due
90 or more days
$2,447 $1,288 $2,043 $1,116 $ 786
(1)(c) Troubled debt restructuring
$2,892 $ 983 $1,226 $1,147 $ 643
(2)(i) Interest income that would
have been recorded on
non-accrual loans
$ 259 $ 122 $ 158 $ 104 $ 166
(2)(ii) Interest recorded on
non-accrual loans
included in net income
for the period
$ 38 $ 17 $ 21 $ 15 $ 12
(3) Registrant's policy for placing loans on non-accrual status
- See Summary of Significant Accounting Policies under
heading "Loans" on Registrant's Consolidated Financial
Statements for the year ended December 31, 1997, included in
Item 8 of Form 10-K.
2. Potential Problem Loans - None
Any loans classified for regulatory purposes as loss,
doubtful, substandard, or special mention that have not
been disclosed under Item III of Industry Guide 3 do not
represent or result from trends or uncertainties which
Management reasonably expects will materially impact
future operating results, liquidity, or capital resources
or represent material credits about which Management is
aware of any information which causes Management to have
serious doubts as to the ability of such borrowers to
comply with the loan repayment terms.
3. Foreign Outstanding Loans - None
4. Loan Concentrations - See Item III (A)
GUIDE 3
Schedule VIII(a)
Item III (C)(1)
SOUTHERN JERSEY BANCORP OF DELAWARE, INC.
CHARTER 9498 ANALYSIS OF REPRICING OPPORTUNITIES
DECEMBER 31, 1997
REPRICING OPPORTUNITIES FOR:
Three Three- Six Mo.- One- Three- Five All Total
Mo. Six Mo. One Yr. Three Yr. Five Yrs Yrs+ Other Assets %
Total Loans and Leases
$40,548 $6,306 $11,962 $88,006 $78,296 $76,937 $302,055 62.49%
Debt Securities
6,185 1,650 12,405 20,297 15,170 36,858 $128 92,693 19.18%
Trading Account Assets 0 0.00%
Other Interest-Bearing Assets
40,950 40,950 8.47%
Total Interest-Bearing Assets
$87,683 $7,956 $24,367 $108,303 $93,466 $113,795 $128 $435,698
Loan and Lease Loss Reserve
$-5,236 $ -5,236 -1.08%
Non-Accrual Loans 3,971 3,971 0.82%
All Other Assets Including Cash
$22,565 26,356 48,921 10.12%
Total Assets
$110,248 $7,956 $24,367 $108,303 $93,466 $113,795 $25,219 $483,354 100.0%
Deposits in Foreign Offices $ 0 0.00%
CDs over $100,000
$11,103 $15,919 $14,184 $12,526 $17,181 70,913 14.67%
OtherTime Deposits
41,864 18,617 17,243 30,517 37,052 145,293 30.06%
MMDA
3,908 3,908 11,724 19,541 39,081 8.09%
Other Savings**
6,410 6,410 6,410 19,230 12,820 12,820 64,099 13.26%
NOW**
11,596 5,798 5,798 11,596 11,595 11,595 57,978 11.99%
Mortgages & Capitalized Leases &
Treasury Notes 0 0.00%
Other Nondeposit Interest-Bearing Liabilities 0 0.00%
Total Interest-Bearing Liabilities
$74,881 $50,652 $55,359 $93,410 $78,648 $24,415 $0 $377,364 78.07%
Demand Deposits
$18,477 $25,574 $12,219 $4,829 $61,100 12.64%
All Other Liabilities $5,331 5,331 1.10%
Total Liabilities
$93,358 $50,652 $55,359 $118,984 $90,867 $29,244 $5,331 $443,795 91.82%
Total Equity (Excluding Limited Life Pref.Stock)
$39,559 $39,559 8.18%
Total Liabilities & Capital
$93,358 $50,652 $55,359 $118,984 $90,867 $29,244 $44,890 $483,354 100.00%
Net Positions - Total Assets
$16,890 $-42,696 $-30,992 $-10,681 $2,599 $84,551 $-19,671
Less: Liabilities and Capital
Cumulative Position Ratios
0.82 0.72 0.79 0.84 1.04
Total Assets
110,248 118,204 142,571 250,874 344,340 458,135 483,354
Total Liabilities & Capital
$93,358 $144,010 $199,369 $318,353 $409,220 $438,464 $483,354
Total Assets Less Liabilities & Capital
$16,890 $-25,806 $-56,978 $-67,479 $-64,880 $19,671 0
G A P TABLE FOOTNOTES**
1.) These items are generally considered to be non-interest
sensitive due to their infrequent repricing characteristics.
2.) In addition to the rate sensitivity characteristics of assets
and supporting funds, sensitivity balances include
assumptions for the potential balance volatility of certain
deposit categories.
Regular savings balances are generally considered to be non-
interest sensitive due to their infrequent repricing
characteristics.
However, in order to account for possible internal transfers
to other deposit categories or the possibility of deposit
disintermediation, a measure of variation has been determined
for certain non-interest sensitive deposits. Consequently,
an amount representing this measure of variation for savings
accounts has been treated as interest rate sensitive within
three months, six months and one year and the remainder has
been considered non-interest sensitive.
GUIDE 3
Schedule IX
Item IV (A)(1)
SUMMARY OF LOAN LOSS EXPERIENCE
(In Thousands) For The Years Ended December 31,
1997 1996 1995 1994 1993
Balances at beginning of year
$ 3,190 $ 2,413 $ 2,146 $ 2,135 $ 1,888
Loan charge-offs:
Real estate loans:
1-4 family residential
65 46 2 98 46
Farmers 0 0 0 0 0
Commercial 0 37 17 53 243
Loans to farmers 24 0 10 91 0
Commercial and industrial loans
703 862 508 142 296
Loans to individuals:
Credit cards 114 67 75 40 10
Consumer installment loans
6,933 199 317 225 105
Lease financing receivables
0 0 140 150 0
Total Charge-offs
7,839 1,211 1,069 799 700
Recoveries of loans previously
charged off:
Real estate loans:
1-4 Family residential
1 0 3 2 33
Farmers 0 0 0 0 0
Commercial 0 1 0 0 0
Loans to farmers 0 0 0 2 0
Commercial and industrial loans
1 15 13 32 52
Loans to individuals:
Credit cards 17 27 7 2 2
Consumer installment loans
1,899 140 47 47 60
Lease financing receivables
0 0 0 0 0
Total recoveries
1,918 183 70 85 147
NET CHARGE-OFFS
5,921 1,028 999 714 553
Allowance charged to operations
7,967 1,805 1,266 725 800
Balances at end of year
$ 5,236 $ 3,190 $ 2,413 $ 2,146 $ 2,135
Average loans outstanding
during year
$302,354 $263,904 $210,327 $169,025 $145,232
Ratio of net charge-offs to
average loans outstanding during
year 1.958% 0.390% 0.475% 0.422% 0.381%
Item IV(B) Allocation of Allowance for Loan Losses
The allowance for loan losses is maintained at a level
considered by Management to be adequate to provide for losses
which may be incurred on loans currently held based on a
detailed evaluation of the loan portfolio, historical experience,
current economic trends and other factors relevant to the
collectibility of the loans in the portfolio. Credit risk, the risk
that a borrower will fail to perform to the loan agreement,
is managed by limiting the total amount of loans outstanding and
by applying normal credit policies to all lending activities.
Collateral is obtained based on Management's credit assessment
f the customer. Loans are further subject to interest rate
risk and risk from geographic concentration of lending
activities. Interest rate risk is managed through various
asset/liability management techniques. Loan policies and
administration are designed to provide assurance that loans
will only be granted to creditworthy borrowers, although
credit losses are expected to occur because of subjective factors
and factors beyond the control of the Bank. The Bank is
mandated by the Community Reinvestment Act and other
regulations to conduct most of its lending activities within
the geographic area where it is located. As a result, the
Bank and its borrowers may be vulnerable to the consequences
of changes in the local economy. Anticipated amounts of loan
charge-offs for the fiscal year are estimated to be an amount equal
to the current fiscal year.
GUIDE 3
Schedule X
Item V(A) - Average Deposits
December 31
(In Thousands) 1997 1996 1995
AVG.AMT. % AVG.AMT. % AVG.AMT. %
Non-interest bearing demand deposits
$57,940 0.0 $65,727 0.0 $92,076 0.0
Interest bearing demand deposits
99,022 2.79 1,500 2.9 67,548 4.2
Savings accounts and CDs under $100,000
193,431 5.61 59,848 5.8 146,401 5.7
CDs $100,000 or more 64,758 5.66 2,152 4.7 37,258 5.3
Total Average Deposits
$415,151 4.8 $379,227 4.7 $343,283 5.2
Item V(D) - Deposits Summary
(In Thousands) 1997
Demand deposits:
Non-interest bearing $61,100
Interest bearing 57,977
(Money Market and N.O.W. Accounts)
Savings deposits 103,180
Time deposits under $100,000 145,294
Time deposits $100,000 or more 70,913
Total Deposits $438,464
The remaining maturity on certificates of deposit of
$100,000 or more is presented below:
(In Thousands) 1997
Maturity
3 months or less $11,103
3 months to 6 months 15,909
6 to 12 months 14,184
Over 12 months to 5 years 29,707
Over 5 years 0
Total $70,903
GUIDE 3
Schedule XI
Item VI - Return on Equity and Assets
December 31
1997 1996 1995
(1) Return on assets 0.18% 1.25% 1.27%
(2) Return on equity 1.91% 13.39% 13.11%
(3) Dividend payout ratio 156.03% 22.40% 22.57%
(4) Equity to assets ratio 9.39% 9.36% 9.66%
Item 2. Properties
The following table sets forth the location and principal
offices of Registrant and its subsidiary.
Location Use
Bridgeton, New Jersey Executive Offices and Main Bank
Office
Bridgeton, New Jersey Branch Office (West Broad
Street)
Bridgeton, New Jersey Operations Center and Computer
Facilities
*Upper Deerfield, New Jersey Branch Office (Carll's Corner)
Upper Deerfield, New Jersey Branch Office (Seabrook)
Fairton, New Jersey Branch Office
Penns Grove, New Jersey Branch Office
Pennsville, New Jersey Branch Office
Rosenhayn, New Jersey Branch Office
*Vineland, New Jersey Branch Office (Landis Avenue)
*Millville, New Jersey Branch Office
Millville (Airport), New Jersey
Branch Office
Wilmington, Delaware Administrative Office for F&M
Investment Company
*Salem City, New Jersey Branch Office
*Washington Township, New Jersey
Branch Office
Cedarville, New Jersey Branch Office
*Elmer, New Jersey Branch Office
*Leased Property
Registrant owns substantially all properties used in its business.
Branch office leases are less than $100,000 annually, and
Management does not foresee any material changes in terms or
amounts of leased property or the ability to renew applicable leases.
None of the owned principal properties are subject to any major
encumbrance material to the operations of Registrant.
All facilities are in good condition and are adequate and
suitable for Registrant's business. Management believes that the
capacity of the offices is such that no additional office space will
be needed in the foreseeable future for administration purposes.
Additional branch offices may be opened in the future when
Management deems it necessary for meeting customer needs,
expansion and growth.
Item 3. Legal Proceedings
None
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of security holders
of Registrant during the fourth quarter of fiscal year 1997.
PART II
Item 5. Market for the Registrant's Common Equity and
Related Stockholder Matters
Market Information for Common Stock.
Registrant's common stock is inactively traded on a local
basis, and the range of sales prices known to Management
based on quotes from the National Quotation Bureau and
transactions noted in the transfer and issuance of Registrant's
common stock certificates, for each quarter during the two
most recent years are as follows:
1997 1996
High Low High Low
First Quarter $41.25 $40.00 $38.25 $37.00
Second Quarter $45.00 $41.25 $38.50 $38.25
Third Quarter $45.50 $45.00 $39.00 $38.50
Fourth Quarter $60.50 $45.50 $40.00 $39.00
Holders
At March 26, 1998, there were 497 holders of record
of Registrant's common stock.
Dividends
Registrant declared cash dividends of $.60 per share payable
to its common shareholders on June 30, 1997 and December 31,
1997, for a total of $1.20 per share or approximately $1,306,000.
Registrant declared cash dividends of $.55 per share payable
to its common shareholders on June 30, 1996 and December 31,
1996, for a total of $1.10 per share or approximately $1,195,000.
For restriction on dividends, see Note 7 to the consolidated
financial statements.
Item 6. Selected Financial Data
The following table presents selected financial data of the
Registrant. The historical data should be read in conjunction
with the consolidated financial statements and the related
notes thereon in Item 8 and "Management's Discussion and
Analysis of Financial Condition and Results of Operations"
in Item 7.
In Thousands except per share data
Year Ended December 31
1997 1996 1995 1994 1993
Interest income $33,800 $30,390 $28,212 $24,616 $23,236
Interest expense 17,159 14,870 13,114 10,731 10,356
Net interest income
16,641 15,520 15,098 13,885 12,880
Provision for loan losses
7,967 1,805 1,266 725 800
Net interest income after provision for
loan losses 8,674 13,715 13,832 13,160 12,080
Non-interest income 3,043 3,246 2,743 2,308 2,256
Non-interest expenses
11,590 10,357 10,023 9,580 8,858
Income before income taxes
127 6,604 6,552 5,888 5,478
Provision(benefit) for income taxes
(710) 1,276 1,700 1,411 1,411
Net Income 837 5,328 4,852 4,477 4,067
Cash dividends declared on common stock
1,306 1,195 1,093 1,054 997
Dividend pay-out ratio
156.0% 22.4% 22.5% 23.5% 24.5%
Per Common Share Amounts
Basic earnings per share
$.77 $4.91 $4.43 $4.09 $3.68
Diluted earnings per share
$.75 $4.80 $4.38 $4.07 $3.66
Cash dividends declared on common stock
$ 1.20 $1.10 $1.00 $ .96 $0.90
Year-End Balances
Total assets
$483,354 $430,324 $404,240 $372,896 $358,652
Investment securities
92,693 96,669 114,320 138,144 150,653
Loans, net of unearned income
305,556 290,885 232,113 192,518 151,342
Deposits 438,464 385,384 363,433 337,223 327,261
Shareholders' equity
39,559 39,751 36,643 32,555 29,026
Selected Share Data
Common shares outstanding
1,091 1,085 1,085 1,099 1,096
Average common shares outstanding
1,088 1,085 1,095 1,096 1,106
At December 31:
Book value per common share
$36.26 $36.64 $33.78 $29.62 $26.49
MANAGEMENT'S DISCUSSION AND ANALYSIS
THE FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OF THE COMPANY AND OF THE BANK
The following discussion and analysis presents the more
significant factors affecting the financial condition and results
of operations of the Company and its wholly owned bank subsidiary,
hereafter referred to as the "Bank" for the years ended December 31,
1997, 1996 and 1995.
This discussion and analysis should be read in conjunction
with the financial statements, footnotes, and other financial
information appearing elsewhere in this filing. All numbers
have been rounded to the nearest thousand and cover the twelve
month periods ended December 31, 1997, 1996, and 1995. The
term "Company" for all purposes includes the "Bank" and
AMFDCM, Inc., which are the Company's only subsidiaries.
Financial Performance Overview
The Company's results of operations for the twelve months ended
December 31, 1997, were materially and adversely impacted as the
result of a series of related credits that became seriously troubled in
the third and fourth quarters of 1997. The Company made loans to a
Maryland-based marina (so called herein) in the amount of $184,000
for floor plan financing of new boats and $155,000 for two
equipment leases and six retail installment contracts. The Company
made loans to the owner of the Marina in the amounts of $875,000
secured by a mortgage on the Marina and $309,000 secured by
a mortgage on the owner's personal residence. In addition, the
Company provided the Marina and its owner with a $500,000 line
of credit that was fully drawn down in 1997 that, as a result
of the Marina's Chapter 11 bankruptcy filing in September 1997,
will likely be found to be unsecured.
The Company was also actively involved in purchasing boat loans
from the Marina. As of December 31, 1997, the Company had
acquired a total of approximately $23,860,000 in face value boat
loans from the Marina. Many of these loans, as is discussed further
below, were charged off as a result of the Marina's failure to
discharge existing indebtedness on boat loans sold to the Company
and the Marina's subsequent bankruptcy filing. Upon further
investigation of that credit, it was discovered that fraudulent sales
activities were taking place at the dealership. The Bank, as a buyer
of third party paper, suffered losses due to these fraudulent activities.
During this same period of time, two of our loan officers had
lowered their underwriting standards without authority from
management to do so, thus creating further losses. These individuals
are no longer employed at F&M.
The Company's poor performance in the third and fourth quarters
of 1997, as demonstrated in more detail below, is largely
attributable to the Marina's reorganization and its concomitant
domino effect on related loans thereto.
ROA for the Company was 0.18% in 1997 as compared
to 1.25% in 1996 and 1.27% in 1995. The Company's ROE
was 1.91%, 13.39%, and 13.11% for the years 1997, 1996,
and 1995, respectively.
The Company had net income after tax of $837,000 for the
twelve months of 1997 which was $4,491,000 or 84.3%
below the Company's net operating income of $5,328,000 for
the same period in 1996.
The decrease in net income in 1997 is primarily due
to the $7,967,000 provision for loan losses expense which
resulted in an increase in the loan loss provision expense of
$6,162,000 or 341% greater than the $1,805,000 loan loss
provision for 1996. The increase in the loan loss provision
expense was necessitated by the substantial amount of
marine and other installment loans charged off in the third
and fourth quarters of 1997. The extraordinary amount
charged off required the Company to increase its allowance
for loan losses to comply with regulatory requirements.
There have been the following significant changes in
charge offs, recoveries, and non-accruing or non-performing
loans in 1997 as compared to 1996:
An increase from 1996 to 1997 of approximately $3,249,000 in loans to
individuals past due 30 through 89 days and still accruing, an increase
of $288,000 in commercial and industrial loans past due 30 through 89
days and still accruing, and an increase of $1,238,000 in commercial
and industrial loans and $461,000 in loans secured by real estate on
a nonaccrual basis; and, for loans past due 90 days or more and still
accruing, an increase of $594,000 for loans secured by real estate,
and an increase of individuals for household, family, and other personal
expenditures.
All of these foregoing loans are secured by real estate of other
collateral and minimal loss is expected at this time. The increase
in the past due loans in 1997 is primarily a result of the Marina
filing for bankruptcy in the third quarter of 1997.
Charge offs in 1997 totaled $7,839,000 while total
recoveries during the same period were $1,918,000. Total
charge offs for 1996 were $1,211,000 and recoveries were
$183,000. In the fourth quarter of 1997 alone, there was a
total of $5,192,000 in charge offs of installment loans to
individuals for household, family and personal expenditures.
The significant increase in charge offs experienced by the
Company in the third and fourth quarters of 1997 is substantially
attributable to the failure of the Marina in which the Company
financed approximately 1,060 boat loans.
The Company had approximately $4,194,000 in installment
marine retail loans from the Marina that were 120 days or
more delinquent. Of these loans, approximately $2,436,000
was charged off in 1997, and the balance of $1,758,000 was
repossessed in the form of marine collateral. To the extent
that the Company realizes more or less than $1,758,000 from
the sale of the marine collateral, it will increase or decrease the
Company's loss.
In addition to the $4,194,000 in marine loans discussed
above, the Company had at December 31, 1997 an
additional amount of delinquent retail installment marine
loans generated from the Marina as follows: $1,536,000
that are 30-59 days delinquent, $280,000 that are 60-89 days
delinquent, and $435,000 that are 90 days to 119 days
delinquent. There are approximately $15,000,000 of retail
installment marine loans that are current and performing that
were generated from the Marina.
The substantial increase in the Allowance for Loan
Losses (the "ALL") account resulted from the growth in
total loans and the necessity to increase reserves to account
for such growth. In addition, the increased net charge
offs from $1,028,000 in 1996 to $3,318,000 in 1997
experienced by the Company in 1997 influenced the
Company's decision to increase the percentage of total
loans covered by the ALL. The ALL increased by $2,046,000
or 64.14% in 1997. Net interest income after provision for
loan losses decreased by $5,041,000 or 367.55% in 1997
as compared to 1996. This was primarily the result of the
increase in the provision for loan losses in 1997 and is further
detailed below. Total Non-Interest Income decreased $203,000
or 6.25% in 1997 as compared to 1996. Total Non-Interest
Expenses increased $1,233,000 or 11.90% at December 1997
compared to December 1996.
Results of Operations
The Company had consolidated net income of $837,000
the twelve months ended December 31, 1997, as compared
to $5,328,000 for the comparable period of 1996. The
$4,491,000 decrease in net income is primarily attributable
to the installment loan charge offs which included substantial
marine loans including loans from the Marina discussed above.
The following is a comparison of the consolidated basic
earnings per share of Common Stock of the Company for
the years ended December 31, 1997, 1996, and 1995.
Year ended December 31
1997 1996 1995
Basic Earnings Per Share $.77 $4.91 $4.43
Diluted Earnings Per Share
$.75 $4.80 $4.38
Loans
The Company had $306,026,000 in Total Loans at December 31,
1997, as compared to $291,620,000 in Total Loans at December 31,
1996 and $233,366,000 at December 31, 1995. The 4.9% increase in
total loans is a result of the Company's maturing securities and new
deposits being invested in higher yielding loans as opposed to
investment securities or federal funds sold.
The majority of the Company's loans are made in Cumberland,
Salem, and Gloucester Counties, New Jersey, which constitutes the
Company's primary service area. Although the Company's business
is concentrated in three counties, its loan portfolio is diversified
and well collateralized. The Company grants agribusiness,
commercial, residential, and consumer loans, as well as lease financing.
Standby letters of credit amounting to $5,960,000 and $3,649,000
were outstanding as of December 31, 1997 and 1996 respectively.
Loan commitments and unused lines of credit outstanding as of
December 31, 1997 and 1996 were $17,332,000, $13,205,000
respectively.
During the year 1997, 4,073 new loans totaling $111,829,000
were booked which includes refinancings and renewals of existing
loans. Loan volume has also increased as a result of a larger branch
network and the entry by the Company into additional lending
areas. These lending areas include marine lending and equipment
leasing and transcend the Company's primary lending areas of
Cumberland, Salem, and Gloucester Counties, New Jersey.
The Company's loan portfolio as of December 31, 1997, is classified
as follows: Real Estate Mortgage Loans - 47.01%; Agricultural
and Commercial Loans - 24.18%; and Installment and Consumer
Credit - 28.81%.
Interest Income
The Company had consolidated interest income from its
loans and investment securities of $33,800,000, $30,390,000,
and $28,212,000, for the years ended December 31, 1997, 1996,
and 1995 respectively, or an 11.22% increase for the comparable
period of 1996 to 1997. The $3,406,000 increase in interest income
as of December 31, 1997, is mainly attributable to an increase in
interest income earned on loans as a result of investing new
deposit growth and maturing securities into loans as opposed to
other lower earning assets.
The Company's investment portfolio decreased by $3,976,000
or 4.12% at December 31, 1997, from December 31, 1996.
Interest income on investment securities decreased in the amount
of $679,000 or 9.98% from December 31, 1996, to December 31,
1997. This decrease in interest income on investment
securities resulted from a smaller investment portfolio.
Maturing securities were reinvested in loans, which
accordingly produced lower earnings.
The loan demand experienced by the Company is a result
of the improved although moderate growth in the economy
of the Company's primary service area.
Net Interest Income
Net Interest Income, the difference between interest income
and interest expense, is a significant component of performance of a
banking organization. Net interest income was $16,641,000 for the
year ended December 31, 1997, an increase of $1,121,000 or 7.22%
over net interest income earned during 1996. Net interest income was
$15,520,000 for the year ended December 31, 1996, an increase of
$422,000 or 2.79% over the net interest income of $15,098,000 for the
year ended December 31, 1995.
Management attributes the increase in net interest income for 1997
primarily to the substantial increase in the amount of interest income
earned on loans which return a higher yield to the Company than interest
earned on investment securities and the increased volume of Federal Funds
sold coupled with the moderate increase in the amount of interest expense
paid by the Company on its time deposits. The increase in time deposit
interest expense was primarily a result of an increase in the amount of time
deposits added to the balance sheet. The increase in total loans with their
higher yields along with the repricing of existing loans at a more rapid rate
than deposits resulted in an increase in net interest income for the Company.
Non-Interest Income
Non-Interest Income consists primarily of service fees on deposit
accounts, Trust Department income, commissions, collection fees,
credit card fees, and rental income from safe deposit boxes. The
Company's non-interest income was $3,043,000 for the year
ended December 31, 1997, as compared to $3,246,000 for the year
ended December 31, 1996. The Company's non-interest income was
lower for the twelve months of 1997 as compared to the same
period in 1996 because the Company had only $5,000 in gains on
sales of securities in that period of 1997 as compared to $415,000
gains as of December 31, 1996. However, increases in non-
interest income resulted from increased service fees on deposit
accounts, and increases in virtually all other areas of non-interest
income in the Company including Trust Department fees and other
income.
Non-Interest Expenses
Non-Interest Expenses consist of salaries and employee benefits,
occupancy, equipment, FDIC assessments and other miscellaneous
expenses such as stationary and supplies, professional fees,
postage, advertising, etc. The Company's non-interest
expense was $11,590,000 and $10,357,000 for the years ended
December 31, 1997 and 1996 respectively. The 11.9% increase
in non-interest expense from December 31, 1996 to December 31,
1997, was mainly a result of increases in personnel, legal, and
professional expenses. These expenses increased primarily as a
result of the costs to administer the increased business of the
Company reflected in its growth in loans and deposits for the
year ended December 31, 1997.
Provision (Benefit) for Income Taxes
Provision (benefit) for income taxes was ($710,000),
$1,276,000, $1,700,000 for the years ended December 31,
1997, 1996 and 1995 respectively. Income tax expense was
$1,986,000 lower in 1997 than in 1996 because of the decrease
in the Company earnings before tax as a result of the Marina
bankruptcy and installment marine loan charge offs.
Deposit Accounts
Total Deposit Accounts are composed of demand (non-interest
bearing) deposits, Money Market accounts, Super NOW
accounts, savings accounts, jumbo ($100,000 and over) time
accounts, and other time deposits. The Company had $438,464,000
in total deposits at year end 1997, an increase of $53,080,000 or
13.8% over the $385,384,000 in total deposits at year end
1996 which was a $21,951,000 increase or 6.04% over the
$363,433,000 total deposits at year end 1995.
The Company's total deposits continued to increase in 1997
because of the Company's strong capital position, which
is attracting new deposits from customers of the several
large regional banks that recently merged. Additionally, the
opening of several new branches by the Company has expanded
the Company's penetration in its primary market area. The
Company also aggressively obtained five year term time
deposits in the third quarter of 1997. The Company expects
its total deposits to continue to have moderate growth in 1997.
Allowance for Loan and Lease Losses
The Company's Allowance for Loan and Lease Losses
(ALL) as a percentage of gross total outstanding loans was
1.71% at December 31, 1997, 1.09% at December 31, 1996,
and 1.03% at December 31, 1995. Management estimates
the required ALL and makes the necessary provisions
thereto on a monthly basis and any deficiency in the
ALL is made up by charging current operating income.
In determining the ALL required, management applies
such factors as a review of the loan portfolio, past
loan loss experience, current economic conditions,
evaluation of borrower capacity to repay based on
financial statements, sources of cash flow, guarantees
and other similar information, and current appraisals
or internal evaluations of collateral. The methodology
of the ALL is reviewed annually by the Company's
independent auditors and its banking regulators.
The increase in the ALL of $2,046,000 from
$3,190,000 as of December 31, 1996, to $5,236,000 as of
December 31, 1997, was a result of the Company's larger
loan portfolio, management's desire to increase the ALL
percentage of total loans from 1.09% to 1.71%, and the
increased charge-offs experienced by the Company in the
third and fourth quarters of 1997.
The Company had $3,971,000 or 1.29% of total loans
outstanding on a non-accrual status on December 31, 1997,
$2,287,000 or 0.78% of total loans outstanding on non-
accrual status on December 31, 1996, and $3,133,000 or
1.34% of total loans outstanding on a non-accrual status
on December 31, 1995. Non-accrual loans are those loans
from which, in management's opinion, the collection of
additional interest is questionable.
The increase in the amount of loans on a nonaccrual
status is attributable to management's efforts to repossess
marine collateral as quickly as possible despite increasing
marine retail installment loan delinquencies as compared
to December 31, 1996.
Loan charge-offs were $7,839,000 or 2.56% of total
loans and $1,211,000 or 0.42% of total loans, and $1,069,000
or .46% of total loans respectively for the years ended
December 31, 1997, 1996, and 1995. The increase
from 1996 to 1997 in charge-offs was primarily a result
of the non-performing installment retail loans which
included the bankrupt Marina and other marine loans.
Asset and Liability Management
The major objectives of the Company's asset and
liability management are to (1) manage exposure to
changes in the interest rate environment to achieve a
neutral interest sensitivity position within reasonable
ranges, (2) ensure adequate liquidity and funding, (3)
maintain a strong capital base, and (4) maximize
net interest income opportunities. The Company
manages these objectives centrally through Management's
Asset and Liability Committee. Members of the Committee
meet monthly to develop balance sheet pricing strategies
affecting the future level of net interest income, liquidity,
and capital. Factors that are considered in asset and
liability management include forecasts of balance sheet
mix, the economic environment, the anticipated direction
of interest rates, and the Company's earnings sensitivity to
changes in these rates.
Liquidity
The Company must maintain adequate liquidity
to ensure the availability of funds for loan growth,
the purchase of investment securities, deposit
withdrawals, and maturing liabilities. Cash and
cash equivalents, cash and due from banks, interest
bearing time deposits at other depository institutions
and federal funds sold are the Company's most liquid
assets.
The Company had federal funds sold of $40,950,000
at December 31, 1997, as compared to $12,900,000 at
December 31, 1996, and $27,800,000 at December 31,
1995. The increase of 217.44% in federal funds sold
as of December 31, 1997, as compared to December 31,
1996, is mainly attributable to a new deposit product (a
five year Certificate of Deposit paying 7.0% interest)
that was offered during the summer of 1997. This new
deposit product generated $42,000,000 in long term
deposits which were used to fund the growing loan portfolio.
The Company's investment securities portfolio, in
addition to the earnings it generates, supplies needed liquidity.
As of December 31, 1997, the Company had $19,304,000 or
20.82% of the portfolio maturing in one year or less, $37,778,000
or 40.75% maturing in over one year and within five years,
$35,414,000 or 38.22% maturing in over five years and within
ten years, and $197,000 or 0.21% maturing in over ten years.
By maintaining adequate liquidity in its investment portfolio,
the Company has positioned itself to take advantage of changes
in interest rates and increased loan demand.
Additionally, 15.90% of the Company's loan portfolio has
a maturity date of one year or less. This permits the Company
to utilize re-pricing opportunities arising from changing interest
rates. The remaining portion of the loan portfolio includes a
significant number of loans that the Company is able to reprice
quickly enough that any repricing of deposits would not have
a material adverse effect on the Company's net interest income
margin.
Management believes that the Company's liquidity position
is strong based on its high level of cash, cash equivalents, core
deposits, the stability of its other funding sources, and the support
provided by its capital base.
Interest Rate Sensitivity
The Company analyzes its interest sensitivity position
to manage the risk associated with interest rate movements
through the use of "gap analysis" and "simulation". Interest
rate risk arises from mismatches in the re-pricing of assets
and liabilities within a given time period. A "negative" gap
results when this amount of interest-sensitive liabilities exceeds
that of interest-sensitive assets.
While gap analysis is a general indicator of the potential
effect that changing interest rates may have on net interest income,
the gap itself does not present a complete picture of interest
rate sensitivity. The Company, therefore, also uses simulation
techniques to project future net interest income streams incorporating
the current "gap" position, the forecast balance sheet mix,
and the anticipated spread relationships between market rates and
bank products under a variety of interest rate scenarios. The
Company's interest sensitivity at December 31, 1997, was
essentially liability sensitive within reasonable ranges.
Capital Adequacy
The maintenance of appropriate levels of capital is
a management priority. Overall capital adequacy and
dividend policy are monitored on an ongoing basis by
management and are reviewed monthly by the Company's
Board of Directors. Management discusses the Company's
capital plans with the Board of Directors on a frequent basis.
The Company's principal capital planning goals are to provide an
attractive return to stockholders while maintaining the capital
levels of the Company above the current well capitalized level
and thus provide a sufficient base from which to provide for future
growth.
The Company's Tier I and Total risk based capital ratios along
with the Total Leverage Ratio substantially exceeded the
minimum ratios required by the Office of the Comptroller
of the Currency (OCC), the Bank's primary regulator, as
demonstrated in the following chart:
Capital Ratios
1997 1996 1995 Required
Tier 1 Risk Based Capital Ratio
(Tier 1 Risk based Capital to Risk-Weighted Assets)
11.3 12.5 13.9 4.0
Total Risk Based Capital Ratio
(Total Risk Based Capital to Risk-Weighted Assets)
12.5 13.6 14.8 8.0
Total Leverage Ratio
(Stockholders' Equity to Adjusted Total Assets)
8.2 8.9 9.1 4.0
Investment Securities
The Company's securities portfolio is comprised of U.S.
government and federal agency securities, the tax-exempt issues
of states and municipalities, and equity and other securities. The
portfolios generate substantial interest income and provide liquidity.
In 1994 the Company implemented FASB 115 in accounting for
its securities portfolio.
On January 1, 1994, Statement of Financial Accounting
Standards No.115, "Accounting for Certain Investments in
Debt and Equity Securities" (SFAS No.115) was adopted.
This statement required the classification of securities into one
of three categories: trading, available for sale or held to
maturity. Investment securities available for sale are held for
an indefinite period of time and may be sold in response to
changing market and interest rate conditions as part of the
asset/liability management strategy. Effective January 1,
1994, these securities are reported at fair value with
unrealized gains and losses, net of tax, included as a separate
component of shareholders' equity.
In anticipation of the January 1, 1994 adoption of SFAS
No.115, the Company transferred $24,000,000 of U.S.
Treasuries from the held-to-maturity portfolio to the available-
for-sale portfolio as of December 31, 1993. On November
17, 1995, the bank transferred $6,500,000 out of its held-to-
maturity portfolio to its Available-for-Sale portfolio pursuant
to an FASB 115 supplemental guidance. This re-deployment
provides the Company with more flexibility to reinvest the
funds in higher yielding loans if the demand exists and
enhances the Company's ability to manage the investment
portfolio. At December 31, 1997, these securities totaled
$37,278,000 and the available-for-sale portfolio had a
pre-tax unrealized gain of $159,000. Additionally in 1997,
the Company realized a net gain of $5,000 on the sale
of investment securities out of the Available-for-Sale category.
Asset Quality
The Board of Directors grants lending authority to
individual officers and to loan committees. The Chairman
of the Board is empowered to appoint members to the
various loan committees. There are two committees
appointed annually by the Chairman as follows: 1) The
Management Loan Committee. The Chairman of this
committee is the President or, in his absence, one of the
Executive Vice Presidents of the Company. This Committee
meets weekly, approves or rejects loans up to $2,500,000, and
recommends loans to the Directors Loan Committee or the
Board of Directors for loan requests over that amount; 2) The
Directors Loan Committee. This committee is comprised of
four outside board members, one of whom is appointed
Chairman and, for loan approval or rejection purposes, is
joined by two members (Senior Vice President or higher)
of the Management Loan Committee. In addition to approving
loans over $2,500,000 and up to $4,000,000 or recommending
or passing loans to the full Board of Directors, the following
are also functions of the Directors Loan Committee: a) to
review and recommend loan policies to the Board of Directors;
b) to review the allowance for loan losses; c) to review charge
offs, delinquent loans and action plans; d) to review other
loan reports as submitted by management; e) to recommend
guidelines for management pertaining to market and economic
conditions; and (f) review reports from loan review officers
as to the condition of the loan portfolio.
All authority to make loans is delegated by the Board
of Directors to specific officers. Therefore, the Board must
annually pass a resolution granting authority to various
officers in various dollar amounts. Generally speaking, the
Company's philosophy is to serve customers through
relatively high lending authority to Committees of senior officers
or Board members but to limit individual authority. Individual
lenders may only combine their own authority with that of an
Executive Vice President or the President. When approving a
loan, the total borrowings at the Company, when combined with
the new loan request, must be within the lending authority
of the approving officer or committees. Individual limits of lending
authority are up to $500,000 secured and $200,000 unsecured.
The Company's independent loan review function is also
an integral part of its overall loan administration. The loan
review department is responsible for the evaluation of credit
extensions with respect to quality, documentation and risk
criteria. This department's direct reporting line to the Loan
Committee of the Company's Board of Directors is intended to
maintain its independence and to provide assurance that troubled
situations will be identified and proper procedures followed to
establish corrective measures. The loan review and risk rating
systems are designed to provide the Company with an early
warning mechanism to detect loans to customers with deteriorating
financial conditions or loans that may represent potentially troubled
situations.
In addition, the Company's internal audit department
reviews loan documentation and collateral as part of its regular
audit procedures.
The Company's Other Real Estate Owned portfolio of
foreclosed properties was decreased from $2,016,000 at
December 31, 1996 to $1,820,000 at December 31, 1997, or
9.7%. This decrease was a result of management's efforts to
aggressively market and sell these properties.
YEAR 2000 COMPLIANCE
The Company, through its servicing subsidiary, established
a "Year 2000 Team" which is responsible for ensuring the
implementation of the required change to the Date of Century
format for all software programs used by the Company. The
management of the Company anticipates that the Company
will be in Year 2000 compliance before the beginning of 1999.
The Company expects the cost for new software and hardware to
be approximately $1.5 million.
Item 8. Financial Statements and Supplementary Data.
SOUTHERN JERSEY BANCORP OF DELAWARE, INC.
Index to Consolidated Financial Statement
Page
Independent Auditor's Report 32
Consolidated Balance Sheets 33
Consolidated Statements of Operations 34
Consolidated Statements of Shareholders' Equity 35
Consolidated Statements of Cash Flow 36
Notes to Consolidated Financial Statements 37
Independent Auditor's Report - F&M Investment Company
59
INDEPENDENT AUDITOR'S REPORT
To The Stockholders and Board of Directors
Southern Jersey Bancorp of Delaware, Inc.
We have audited the consolidated statements of financial condition of
Southern Jersey Bancorp of Delaware, Inc., and its subsidiaries as of
December 31, 1997 and 1996, 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, 1997. 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 19% and 23% as of December 31, 1997
and 1996, respectively, and total interest income revenues of 17%,
22% and 25% for each of the years in the three year period ended
December 31, 1997, 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, 1997 and 1996,
and the consolidated results of their operations and cash flows
for each of the years in the three year period ended December 31,
1997, in conformity with generally accepted accounting principles.
s/Athey & Company
Bridgeton, New Jersey
January 22, 1998
Southern Jersey Bancorp of Delaware, Inc. And Subsidiaries
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In Thousands, Except Share and Per Share Data)
December 31
1997 1996
ASSETS
Cash and due from banks $ 22,565 $ 18,347
Federal funds sold 40,950 12,900
Cash and Cash Equivalents 63,515 31,247
Investment securities
Available for sale 37,278 34,904
Held to maturity (Fair value: 1997-$55,956
1996-$61,900)
55,415 61,765
Investment Securities 92,693 96,669
Loans 306,026 291,620
Less: Allowance for loan losses
(5,236) (3,190)
Unearned income (470) (735)
Net Loans 300,320 287,695
Premises and equipment - net 6,353 6,214
Other real estate owned 1,820 2,016
Other assets 18,653 6,483
TOTAL ASSETS $483,354 $430,324
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Non-interest bearing deposit
$ 61,100 $ 55,343
Interest bearing deposits
377,364 330,041
Total Deposits 438,464 385,384
Other liabilities 5,331 5,189
Total Liabilities 443,795 390,573
Commitments and contingencies (Notes 11 and 15)
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 38,767 39,236
Net unrealized gains on securities available-for-sale,
net of tax of $82 in 1997 and $11 in 1996
159 22
43,315 43,647
Less: Treasury stock at cost -
183,927 shares in 1997
and 190,196 shares in 1996
3,756 3,896
Total Shareholders' Equity
39,559 39,751
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$483,354 $430,324
Southern Jersey Bancorp of Delaware, Inc. And Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Data)
Year Ended December 31
1997 1996 1995
INTEREST INCOME:
Investment securities:
Taxable $ 4,253 $ 5,141 $ 5,720
Tax-Exempt 1,870 1,661 1,989
Loans 25,847 22,441 19,396
Interest-bearing deposits with
depository institutions 0 0 164
Federal funds sold 1,830 1,147 943
TOTAL INTEREST INCOME
33,800 30,390 28,212
INTEREST EXPENSE:
Deposits 17,159 14,870 13,114
NET INTEREST INCOME
16,641 15,520 15,098
PROVISION FOR LOAN LOSSES
7,967 1,805 1,266
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES
8,674 13,715 13,832
NON-INTEREST INCOME:
Service fees 1,693 1,677 1,428
Trust department income 745 694 652
Other 600 460 303
Net investment security gains
5 415 360
TOTAL NON-INTEREST INCOME
3,043 3,246 2,743
NON-INTEREST EXPENSES:
Salaries and wages 4,919 4,497 4,388
Employee benefits 1,335 1,101 1,321
Occupancy and equipment expenses
1,973 1,777 1,704
OCC Exam and FDIC assessments
143 98 473
Postage, stationary and supplies
499 469 422
Professional fees 977 647 478
Other operating expenses 1,744 1,768 1,237
TOTAL NON-INTEREST EXPENSES
11,590 10,357 10,023
INCOME BEFORE INCOME TAXES 127 6,604 6,552
PROVISION(BENEFIT) FOR INCOME TAXES
(710) 1,276 1,700
NET INCOME $ 837 $ 5,328 $ 4,852
BASIC EARNINGS PER SHARE
$ .77 $ 4.91 $ 4.43
DILUTED EARNINGS PER SHARE
$ .75 $ 4.80 $ 4.38
Southern Jersey Bancorp of Delaware, Inc. And Subsidiaries
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For The Three Years Ended December 31, 1997
(In Thousands, Except Share and Per Share Data)
Additional Unrealized
Common Paid-in Retained Treasury Gains/
Stock Capital Earnings Stock (Losses) Total
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 available-for-sale
investment securities,
net of tax 873 873
Cash dividends ($1.00 per share)
(1,093) (1,093)
Addition of 23,806 shares to
The Treasury (800) (800)
Issuance of 9,380 shares from
The Treasury
_____ _____ ______ 256 _____ 256
Balances at December 31, 1995
2,129 2,260 35,103 (3,778) 929 36,643
Year Ended December 31, 1996
Net income 5,328 5,328
Decrease in unrealized gains
on available-for-sale
investment securities,
net of tax (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
Year Ended December 31, 1997
Net income 837 837
Increase in unrealized gains
on available-for-sale
investment securities,
net of tax 137 137
Cash dividends ($1.20 per share)
(1,306) (1,306)
Addition of 3,520 shares to
The Treasury (166) (166)
Issuance of 9,789 shares from
The Treasury
_____ _____ ______ 306 ______ 306
BALANCES AT DECEMBER 31, 1997
$2,129 $2,260 $38,767 $(3,756) $ 159 $39,559
Southern Jersey Bancorp of Delaware, Inc. And Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
Year Ended December 31
1997 1996 1995
Cash flows from operating activities:
Net income $ 837 $ 5,328 $ 4,852
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation of premises and equipment
556 482 401
Provision for loan losses
7,967 1,805 1,266
Deferred income tax provision(benefit)
(457) (842) 674
Gains on sales of investment securities
(5) (415) (360)
Increase in other assets
(11,678) (212) (903)
Increase in other liabilities
155 1,025 475
Provision for losses on other real estate
68 78 117
Amortization of premium on investment securities
160 237 398
Accretion of discount on investment securities
(36) (73) (63)
Loss on disposal of bank premises and equipment
2 0 0
Gain on disposal of other real estate owned
(78) (20) 0
Net cash provided by(used in) operating activities
(2,509) 7,393 6,857
Cash flows from investing activities:
Decrease in interest bearing deposits in
other banks 0 0 3,000
Purchase of available-for-sale investment securities
(16,490) (15,923) (1,587)
Sales and maturities of available-for-sale investment
securities 12,465 14,858 37,084
Purchase of held-to-maturity investment securities
(9,306) (1,986) (28,121)
Maturities and calls of held-to-maturity investment
securities 17,277 19,538 16,984
Net increase in loans made to customers
(21,046) (60,829) (40,518)
Purchase bank premises and equipment
(1,293) (883) (1,035)
Proceeds from the sale of other real estate owned
661 1,660 312
Proceeds from sales of premises and equipment
595 0 0
Net cash used for investing activities
(17,137) (43,565) (13,881)
Cash flows from financing activities:
Net increase in deposits
53,080 21,951 26,210
Cash dividends (1,306) (1,195) (1,093)
Purchase of treasury stock
(166) (404) (800)
Sale of treasury stock 306 286 256
Net cash provided by financing activities
51,914 20,638 24,573
Net increase(decrease) in cash and cash
equivalents 32,268 (15,534) 17,549
Cash and cash equivalents at beginning of year
31,247 46,781 29,232
Cash and cash equivalents at end of year
$ 63,515 $31,247 $46,781
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 17,089 $14,282 $12,493
Income Taxes $ 1,615 $ 1,775 $ 1,172
Other non-cash activities:
Transfer of loans, net of charge-offs to
other real estate owned
$ 455 $ 2,789 $ 164
Increase(decrease) in unrealized gain on
available-for-sale investment securities
$ 137 $ (907) $ 873
Southern Jersey Bancorp of Delaware, Inc. And Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting principles followed and the methods of applying
those principles conform to generally accepted accounting
principles and to general practices in the banking industry.
The significant policies are summarized as follows:
(a) Nature of Operations
Southern Jersey Bancorp of Delaware, Inc. (the
Company) is a bank holding company whose principal
activity is the ownership and management of its wholly-
owned subsidiary, The Farmers and Merchants National
Bank of Bridgeton (the Bank). The Bank generates
commercial (including agricultural), mortgage and
consumer loans and receives deposits from customers
located primarily in Southern New Jersey and the
surrounding areas.
(b) Principles of Consolidation
The consolidated financial statements include the
accounts of Southern Jersey Bancorp of Delaware, Inc.
and its wholly-owned subsidiaries, The Farmers and
Merchants National Bank of Bridgeton and AMFDCM, Inc.,
and the Bank's wholly-owned subsidiaries, F&M Investment
Company and Woulf Asset Holdings, Inc., after elimination of
all material inter-company transactions and balances.
(c) Basis of Financial Statement Presentation
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 changes 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 Equivalents
For the purpose of presentation in the consolidated
statements of cash flows, cash and cash equivalents are
defined as those amounts included in the balance sheet
caption "cash and due from banks" and "federal funds
sold."
(e) Investment Securities
Debt securities that the Bank has the intent and ability
to hold until maturity are classified as "held-to-
maturity" and are carried at historical cost, adjusted
for any amortization of premiums or accretion of
discounts. Trading securities are those held
principally for the purpose of selling in the near
future and are carried at fair value, with unrealized
gains and losses included in earnings. Marketable
equity securities and debt securities that are not
classified as held-to-maturity or trading are classified
as "available-for-sale" and are carried at fair value,
with the unrealized gains and losses, net of tax,
reported as a separate component of stockholders'
equity. The Bank currently has no trading securities.
Realized gains and losses and declines in value judged
to be other than temporary are included in earnings.
The specific identification method is utilized in
determining the cost of a security that has been sold.
Premiums and discounts are amortized and accreted,
respectively, as an adjustment of the securities yield
using the interest method, adjusted for the effects of
prepayment on the underlying collateral.
(f) 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.
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.
(g) Allowance for Loan Losses
The allowance for loan losses is maintained at level
considered by management to be adequate to provide for
potential loan losses. The allowance is increased by
provisions charged to operations and reduced by net
charge-offs. The level of the allowance is based on
management's evaluation of potential losses in the
portfolio, after consideration of such factors as
changes in the nature and volume of the loan portfolio,
overall portfolio quality, review of specific
problem loans and current economic conditions that may
affect the borrowers' ability to pay.
(h) Premises and Equipment
Premises and equipment are carried at cost, less
accumulated depreciation and amortization computed on
the straight-line method over the estimated useful lives
of the assets.
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.
(i) Other Real Estate Owned
Real estate acquired in satisfaction of a loan is
recorded at the lower of cost or fair value less
disposition costs. Properties acquired by foreclosure or
deed in lieu of foreclosure are transferred to other
real estate owned and recorded at the lower of cost or
fair value less disposition cost based on their
appraised value at the date actually or constructively
received. Losses arising from the acquisition of such
property are charged against the allowance for loan
losses. Subsequent adjustments to the carrying values
of other real estate owned are charged to operating
expenses.
(j) Income Taxes
Income taxes are provided for the tax effects of the
transactions reported in the financial statements and
consist of taxes currently due plus deferred taxes
related primarily to differences between the basis of
the allowance for loan losses and accumulated
depreciation. The deferred tax assets and liabilities
represent the future tax return consequences of those
differences which will either be taxable or deductible
when the assets and liabilities are recovered or
settled. Deferred tax assets and liabilities are
reflected at 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. The Company files consolidated income tax
returns with its subsidiaries.
(k) Earnings per Share
Effective January 1, 1997, the Company adopted SFAS No.
128,"Earnings Per Share." This statement establishes
financial accounting and reporting standards for
earnings per share and diluted earnings per share.
Basic earnings per share are computed by dividing
earnings available to common stockholders by the
weighted average number of common shares outstanding
during the period. Diluted earnings per share reflect
per share amounts that would have resulted if dilutive
potential common stock had been converted to common
stock.
Basic earnings per share and diluted earnings per share
have been restated for 1996 and 1995. Management
believes that the adoption of the standard will not have
a material impact on the Company's financial position or
results of operations.
(l) Trust Fees
Trust fees are recorded on the accrual basis.
(m) Reclassifications
Certain reclassifications have been made to the 1996 and
1995 amounts in order to conform with 1997 presentation.
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 $7,195,000 and $7,655,000
were maintained at the Federal Reserve Bank of Philadelphia
as of December 31, 1997 and 1996, 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,
1997 and 1996 were as follows (In Thousands):
Gross Gross Gross
Amortized Unrealized Unrealized Fair
At December 31, 1997 Cost Gains Losses Value
Available-for-sale:
U.S. Treasury securities
$ 4,003 $ 140 $ 0 $ 4,143
U.S. Government agencies
32,908 133 (34) 33,007
Other securities 128 0 0 128
Securities available-for-sale
$37,039 $ 273 $ (34) $37,278
Held-to-maturity:
U.S. Treasury securities
$ 8,508 $ 0 $ (22) $ 8,486
U.S. Government agencies
3,500 0 (35) 3,465
State and municipal 30,537 588 (1) 31,124
Other securities 12,870 48 (37) 12,881
Securities held-to-maturity
$55,415 $ 636 $ (95) $55,956
At December 31, 1996
Available-for-sale:
U.S. Treasury securities
$ 2,994 $ 163 $ 0 $ 3,157
U.S. Government agencies
31,876 109 (238) 31,747
Securities available-for-sale
$34,870 $ 272 $ (238) $34,904
Held-to-maturity:
U.S. Treasury securities
$13,543 $ 0 $ (97) $13,446
U.S. Government agencies
2,000 0 (91) 1,909
State and municipal 29,159 474 (43) 29,590
Other securities 17,063 53 (161) 16,955
Securities held-to maturity
$61,765 $ 527 $ (392) $61,900
The scheduled maturities of securities held to maturity and
securities available-for-sale at December 31, 1997 were as
follows (In Thousands):
Amortized Fair
Cost Value
Securities available-for-sale:
Within one year $ 0 $ 0
After one year but within five years 8,485 8,616
After five years but within ten years 28,426 28,534
After ten years 128 128
$37,039 $37,278
Securities held to maturity:
Within one year $19,304 $19,308
After one year but within five years 29,162 29,466
After five years but within ten years 6,880 7,099
After ten years 69 83
$55,415 $55,956
Total debt securities $92,454 $93,234
The gross realized gains and gross realized losses on investment
securities transactions are summarized below (In Thousands):
Available-for-saleHeld-to-maturity
December 31, 1997
Gross gains $ 13 $ 2
Gross losses (9) (1)
Net $ 4 $ 1
December 31, 1996
Gross gains $424 $ 6
Gross losses 0 (15)
Net $424 $(9)
December 31, 1995
Gross gains $271 $117
Gross losses (28) 0
Net $243 $117
Gross realized gains and gross realized losses on held-to-maturity
investment securities are a result of calls prior to maturity.
Investment securities with a fair value of $36,464,000 and
$26,909,000 and a carrying value of $35,996,000 and $26,600,000
were pledged at December 31, 1997 and 1996, 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 were as follows (In Thousands):
December 31
1997 1996
Commercial and agriculture $ 74,021 $ 51,875
Real estate mortgages 143,867 136,258
Installment and consumer credit 88,138 103,487
Total $306,026 $291,620
As of December 31, 1997 and 1996, the Bank had related party
loans to officers, directors, significant shareholders and
their affiliated interests. The terms of these loans are
substantially the same as those prevailing at the time for
comparable unrelated transactions. A summary of the related
party loans outstanding as of December 31, 1997 and 1996
is as follows (In Thousands):
December 31
1997 1996
Balance, January 1, $4,468 $4,662
New loans 4,041 450
Loan payments (4,169) (644)
Balance, December 31, $4,340 $4,468
An analysis of the change in the allowance for loan losses
is as follows (In Thousands):
December 31
1997 1996 1995
Balances at beginning of year
$ 3,190 $2,413 $2,146
Provision charged to operations 7,967 1,805 1,266
Recoveries of loans previously charged off:
Mortgage loans 1 1 3
Installment loans 1,916 167 54
Commercial loans 1 15 13
Total recoveries 1,918 183 70
Loan charge offs:
Mortgage loans (65) (83) (19)
Installment loans (7,047) (266) (392)
Commercial loans (727) (862) (658)
Total charge offs (7,839) (1,211) (1,069)
BALANCES AT END OF YEAR $ 5,236 $3,190 $2,413
A significant portion of loan charge-offs were in the
fourth quarter of 1997.
Non-performing assets include non-performing loans and other
real estate owned. The non-performing loan category includes
loans on which accrual of interest has been discontinued with
subsequent interest payments credited to principal or income
as received and loans 90 days past due or greater on which
interest is still accruing. Other real estate owned consists
of properties acquired through foreclosure.
Non-performing loans as a percentage of total loans was 2.1%
and 1.2% as of December 31, 1997 and 1996, respectively.
A summary of non-performing assets as of December 31, 1997
and 1996 is as follows:
December 31
1997 1996
Non-accruing loans:
Commercial and agriculture $1,384 $ 206
Real estate mortgages 2,123 1,661
Installment and consumer credit 464 420
Total non-accruing loans 3,971 2,287
Past due 90 days or more (accruing):
Commercial and agriculture 379 361
Real estate mortgages 969 375
Installment and consumer credit 1,099 552
Total past due 90 days or more (accruing)
2,447 1,288
Total non-performing loans 6,418 3,575
Other real estate owned 1,820 2,016
Total non-performing assets $8,238 $5,591
As of December 31, 1997 and 1996, the recorded investment in loans
considered to be impaired under FASB Statement No. 114,
"Accounting by Creditors for Impairment of a Loan" totaled
$2,462,000 and $1,166,000, respectively, all of which were
included in non-performing loans. As permitted, all homogenous
smaller balance consumer and residential mortgage loans were
excluded from individual review for impairment. The majority of
impaired loans were measured using the fair value of collateral.
The total allowance for loan losses related to these loans
was $812,000 and $315,000 on December 31, 1997 and 1996, respectively.
During 1997 and 1996, impaired loans averaged approximately
$1,814,000 and $1,335,000, respectively. Interest income of
approximately $259,000, $122,000 and $158,000 would have
been recorded on non-performing loans (including impaired
loans) in accordance with their original terms in 1997, 1996
and 1995, respectively. Actual interest income recorded on
these loans amounted to $38,000, $17,000 and $21,000 during
1997, 1996 and 1995, respectively.
The Bank is not committed to lending additional funds to debtors
whose loans have been modified.
NOTE 5 - PREMISES AND EQUIPMENT
A summary of premises and equipment as of December 31, 1997
and 1996, is as follows (In Thousands):
Estimated December 31
Lives 1997 1996
Land $ 463 $ 463
Buildings and improvements 10-80 years 5,172 4,607
Leasehold improvements 5-31 years 511 1,003
Furniture, fixtures and equipment
5-10 years 5,809 5,197
Equipment under capital lease 7 years 324 324
12,279 11,594
Less:
Accumulated depreciation and
amortization 5,926 5,380
Net Bank Premises and Equipment $ 6,353 $ 6,214
Depreciation charged to operating expenses amounted to $556,000
in 1997, $482,000 in 1996, and $401,000 in 1995.
NOTE 6 - DEPOSITS
Deposits as of December 31, 1997 and 1996, were as follows (In Thousands):
December 31
1997 1996
Non-interest bearing:
Demand $ 61,100 $ 55,343
Interest-bearing:
Demand 57,977 54,766
Savings 103,180 99,448
Time 145,294 116,151
Time of $100 or more 70,913 59,676
$438,464 $385,384
As of December 31, 1997, the scheduled maturities of time deposits
are as follows (In Thousands):
1998 $118,931
1999 30,160
2000 12,883
2001 6,232
2002 and Thereafter 48,001
$216,207
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 1,091,073
shares outstanding at December 31, 1997, and 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. Treasury stock totaled 183,927 shares
and 190,196 shares at December 31, 1997 and 1996,
respectively, and was accounted for under the cost method.
(b) Earnings per Share
The following reconciles amounts reported in the financial
statements (In Thousands except per share data):
For the Year Ended December 31, 1997
Income Shares Per-share
(Numerator) (Denominator) Amount
Income available to common stock-
holders--basic earnings per share
$ 837 1,088 $ .77
Effect of dilutive securities Options
--- 30
Income available to common stock-
holders--diluted earnings per share
$ 837 1,118 $ .75
For the Year Ended December 31, 1996
Income Shares Per-share
(Numerator) (Denominator) Amount
Income available to common stock-
holders--basic earnings per share
$5,328 1,085 $ 4.91
Effect of dilutive securities
Options --- 25
Income available to common stock-
holders--diluted earnings per share
$5,328 1,110 $ 4.80
For the Year Ended December 31, 1995
Income Shares Per-share
(Numerator) (Denominator) Amount
Income available to common stock-
holders--basic earnings per share
$4,852 1,095 $ 4.43
Effect of dilutive securities
Options --- 14
Income available to common stock-
holders--diluted earnings per share
$4,852 1,109 $ 4.38
(c) Preferred Stock
The Company has 500,000 shares of no par value preferred
stock authorized, of which none are issued or outstanding.
(d) 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 a price of
$0.01 per Right (payable in cash, Common Stock, or other
consideration deemed appropriate by the Board of Directors).
Until a Right is exercised, the holder will have no rights
as a shareholder of the Company, including, without
limitation, the right to vote or to receive dividends.
(e) Stock Option and Stock Appreciation Rights Plan
On August 7, 1988, the Company initiated a stock option and
stock appreciation rights plan (Plan #1) for sale or award
to key employees as incentive stock options, non-qualified
stock options or stock appreciation rights, and may not be
exercised later than ten years from the date of the grant.
The options exercise price is $18.00 per share.
On March 25, 1993, the Company initiated a second stock
option and stock appreciation rights plan (Plan #2) with the
same terms and conditions as the first plan with the options
exercise price at $20.00 per share.
On December 8, 1994, the Company initiated a third stock
option and stock appreciation rights plan (Plan #3) with the
same terms and conditions as the previous two plans with the
options exercise price at $31.00 per share.
The Company accounts for the stock option plans under
Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," and related interpretations.
Accordingly, no compensation expense has been recognized for
the stock options. All options were granted prior to the
adoption date of FASB Statement No. 123, "Accounting for
Stock-Based Compensation." Therefore, the Company is not
required to adopt the fair value provisions on present
proforma financial information.
The stock options were satisfied with reissuance of treasury
stock. The following table summarizes the options activity.
Weighted Average
Shares Option Price
Options outstanding at
January 1, 1995
101,064 $27.18
Options exercised (Plan #1) (3,061) $18.00
Options exercised (Plan #2) (770) $20.00
Options canceled (Plan #1) (1,000) $18.00
Options outstanding at
December 31, 1995 96,233 $27.62
Options exercised (Plan #1) (3,095) $18.00
Options exercised (Plan #2) (2,250) $20.00
Options outstanding at
December 31, 1996 90,888 $28.14
Options exercised (Plan #1) (3,305) $18.00
Options exercised (Plan #2) (1,500) $20.00
Options canceled (Plan #2) (400) $20.00
Options outstanding at
December 31, 1997 85,683 $28.71
Options exercisable at
December 31, 1997 85,683 $28.71
At December 31, 1997, the Company had reserved 85,683 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 $82,000, $72,000 and $75,000 for the years ended
December 31, 1997, 1996 and 1995.
(b) Defined Benefit Pension Plan
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 policy has been to fund the
pension plan on a current basis to the extent deductible
under existing tax regulations.
Pension expense in the amount of $112,000, $130,000 and
$138,000 was recognized for the years ended 1997, 1996 and
1995, respectively. The following table sets forth the
plan's funded status and amounts recognized in the
consolidated financial statements (In Thousands):
December 31
1997 1996
Actuarial present values of benefit obligations:
Vested benefit obligation $ 2,913 $ 2,693
Accumulated benefit obligation $ 2,945 $ 2,729
Projected benefit obligation $(3,958) $(3,657)
Plan assets at fair value 5,067 4,083
Plan assets in excess of projected benefit obligation
1,109 426
Unrecognized net assets at January 1, 1990,
being recognized over 11 years (122) (166)
Unrecognized net (gain)loss (1,004) (164)
Prepaid(accrued) pension cost recognized in the
accompanying Consolidated Statement of Condition
$ (17) $ 96
December 31
1997 1996 1995
Net pension expense includes
the following:
Normal service cost $ 208 $ 219 $ 219
Interest cost on projected benefit obligation
265 251 205
Actual return on plan assets (1,212) (516) (803)
Net amortization and deferral 851 176 517
Net pension expense $ 112 $ 130 $ 138
A summary of the significant assumptions used is as follows:
December 31
1997 1996
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%
Plan assets are 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, 1997 and 1996, was 20,544 shares valued
at $1,243,000 and $822,000, respectively.
NOTE 9 - DEFERRED COMPENSATION
The Bank has a deferred compensation plan for the benefit of
key employees. Under the plan, upon retirement after age 65,
the employee shall receive a minimum of fifty percent of his then
monthly salary for one hundred twenty months. This amount will
be reduced by one-half of one percent for each month that retirement
is prior to age 65 with the minimum age for retirement at age 60.
If a covered employee dies while employed by the Bank, a death
benefit of fifty percent of the employee's then annual salary
is payable to the employee's beneficiary over ten years. The
expense charged to operations for future obligations was
$15,000, $11,000 and $137,000 in 1997, 1996 and 1995,
respectively.
NOTE 10 - CASH SURRENDER VALUE OF LIFE
INSURANCE
Commencing in 1997, the Bank maintains life insurance
policies on certain officers. The policies are of three
types: officer supplemental life insurance/split-dollar plan,
group term replacement/split-dollar plan, and salary
continuation plan. Under the officer supplemental life insurance/
split-dollar plan and the group term replacement/split-dollar plan,
the Bank pays the premium and receives, upon termination of the
policy or the death of the insured, the cash surrender value of
the policy, and the insured or a designated beneficiary receives
the balance of benefits paid. The salary continuation plan is a
deferred compensation for key employees (See Note 9). The
Bank is the owner and beneficiary of the policy. The insurance
purchased is designed to offset the Bank's contractual obligations
under deferred compensation agreements.
As of December 31, 1997 and 1996, the cash surrender value of
life insurance included in other assets in the consolidated
statements of financial condition was $8,164,000 and $0,
respectively.
NOTE 11 - FINANCIAL INSTRUMENTS WITH OFF-
BALANCE SHEET RISK
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 f
inancial 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 non-
performance 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 97 percent of loan commitments are
drawn upon by customers. While approximately 3 percent
of performance 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 conditional
commitments issued by the Bank to guarantee the performance of a
customer to a third party. Those guarantees are primarily issued to
support public and private borrowing arrangements, including
commercial paper, bond financing, and similar 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 percentage of collateral held
for those commitments was approximately 19%.
During 1997, the Bank had $163,000 letters of credit drawn upon.
The Bank had not been required to perform on any financial
guarantees during 1996 and 1995, and had not incurred any losses
on its commitments in 1997, 1996 or 1995.
A summary of the notional amounts of the Bank's financial
instruments with off-balance sheet risk at December 31, 1997
and 1996, is as follows:
Notional Amount
1997 1996
Commitments to Extend Credit $17,332,000 $13,205,000
Letters of Credit $ 5,960,000 $ 3,649,000
NOTE 12 - FAIR VALUES OF FINANCIAL
INSTRUMENTS
FASB Statement No. 107, "Disclosures about Fair Value of
Financial Instruments" (FAS 107), requires disclosure of fair
value information about financial instruments, whether or not
recognized in the balance sheet, for which it is practicable to
estimate that value. In cases where quoted market prices are
not available, fair values are based on estimates using
present value or other valuation techniques. Those techniques
are significantly affected by the assumptions used, including the
discount rate and estimates of future cash flows. In that regard,
the derived fair value estimates cannot be substantiated by
comparison to independent markets and, in many cases,
could not be realized in immediate settlement of the instrument.
FAS 107 excludes certain financial instruments and all non-
financial instruments from its disclosure requirements. Accordingly,
the aggregate fair value amounts presented do not represent
the underlying value of the Company.
The following methods and assumptions were used by the Company
in estimating its fair value disclosures for financial instruments:
Cash and cash equivalents - The carrying amounts of cash and
cash equivalents approximate their fair value.
Investment securities - Fair values for investment securities are
based on quoted market prices. If quoted market prices are not
available, fair values are based on quoted market prices of
comparable instruments.
Loans - Fair values are estimated for portfolios of loans with
similar financial characteristics. The fair value of loans is
calculated by discounting scheduled cash flows through the
estimated maturity using estimated market discount rates that
reflect the credit and interest rate risk inherent in the loan. The
estimate of maturity is based on the Bank's historical experience
with repayments for each loan classification, modified, as required,
by an estimate of the effect of current economic and lending conditions.
Deposit liabilities - The fair values 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 reportingdate. Fair values for
fixed-rate CDs are estimated using a discounted cash flow calculation
that applies interest rates currently being offered on certificates
to a schedule of aggregated expected monthly maturities on time
deposits.
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. The estimated fair values of the Company's
financial instruments were as follows (In Thousands):
December 31
1997 1996
Carrying Fair Carrying Fair
Amount Value Amount Value
Financial Assets:
Cash and cash equivalents
$ 63,515 $ 63,515 $ 31,247 $ 31,247
Investment Securities 92,693 93,234 96,669 96,804
Loans 300,320 299,407 287,695 289,000
Accrued Interest Receivable
3,625 3,625 3,283 3,283
$460,153 $459,781 $418,894 $420,334
Financial Liabilities:
Deposits $438,464 $439,938 $385,384 $370,054
NOTE 13 - 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 14 - INCOME TAXES
Significant components of the Bank's deferred tax assets
and liabilities were as follows (In Thousands):
December 31
1997 1996
Deferred Tax Assets:
Allowance for loan losses $1,012 $ 735
Deferred compensation 283 299
Accrued pension cost 18 0
Non-accrual loan interest 63 0
Federal operating loss 94 0
Total deferred tax assets 1,470 1,034
Deferred Tax Liabilities:Accumulated depreciation
263 251
Accrued pension costs 0 33
Net unrealized appreciation on
investment securities 82 11
Total deferred tax liabilities 345 295
Net deferred tax asset $1,125 $ 739
The significant components of the consolidated provision
(benefit) for income taxes were as follows (In Thousands):
Year Ended December 31
1997 1996 1995
Current tax provision(benefit):
Federal $(253) $2,118 $1,026
Deferred income tax (benefit)expense
(457) (842) 674
Provision(benefit) for income taxes
$(710) $1,276 $1,700
A reconciliation of the provision for income taxes, as reported,
with the federal income tax at the statutory rate of 34 percent
for the years ended December 31, is as follows (In Thousands):
Year Ended December 31
1997 1996 1995
Amount Amount Amount
Income taxes at the statutory rate
$ 43 $2,245 $2,228
Increase(decrease) in federal
tax expense resulting from:
Tax-exempt income (538) (566) (636)
Other (215) (403) 108
Provision(benefit) for income tax
$ (710) $1,276 $1,700
As of December 31, 1997, a net operating loss in the
amount of $278,000 is available for carryforward, and if
not utilized, will expire on December 31, 2012.
NOTE 15 - 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
1997 and 1996, with an overall maximum liability of $476,000
for 1997 and $490,000 for 1996.
During 1997, the Bank has undertaken an assessment and
selection process by which it will replace the current mainframe
computer system of the Bank, as well as its software components.
This operating system will function properly with respect to dates
in the year 2000 and thereafter, and is expected to be fully
implemented no later than December 31, 1998. The Bank
expects the net replacement cost plus system maintenance to
be approximately $1,400,000.
NOTE 16 - DIVIDEND RESTRICTION AND REGULATORY
MATTERS
Permission from the Comptroller of the Currency is required
if the total of dividends declared in a calendar year exceeds the
total of its net profits, as defined by the Comptroller, for that year,
combined with its retained net profits of the two preceding years.
The retained net profits of the Company available for dividends are
approximately $8,729,000 as of December 31, 1997. The Company
and its bank subsidiary (the Companies) are subject to various
regulatory capital requirements administered by federal banking
agencies. Failure to meet the minimum capital requirements can
initiate certain mandatory, and possibly additional discretionary
actions by regulators that, if undertaken, could have a direct
material effect on the Company's consolidated financial statements.
Under capital adequacy guidelines and the regulatory framework
for prompt corrective action, the Companies must meet specific
capital guidelines that involve quantitative measures of assets,
liabilities, and certain off-balance-sheet items as calculated
under regulatory accounting practices. 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 Companies to maintain minimum
amounts and ratios (set forth in the table below) of total and
Tier I capital (as defined in the regulations) to risk-weighted
assets (as defined), and of Tier I capital (as defined) to average
assets (as defined). Management believes, as of December 31, 1997,
that the Companies meet all the capital adequacy requirements
to which they are subject.
As of December 31, 1997, the most recent notifications
from applicable regulatory agencies indicate that the
Companies were categorized as well-capitalized under
the regulatory framework for prompt corrective action. To
be categorized as well capitalized, an entity must maintain
a minimum total risk-based, Tier I risk-based, and Tier I
leverage ratios as set forth in the table below. There are
no conditions or events since the most recent notification
that management believes have changed the institution's
category.
The Companies' actual capital amounts and ratios are
presented in the following table (In Thousands):
For To Be Well
Capital Capitalized Under
Adequacy Prompt Corrective
Actual Purposes Action Provisions
Amount Ratio Amount Ratio Amount Ratio
As of December 31, 1997:
Total Capital to
Risk-Weighted Assets:
Southern Jersey Bancorp
of Delaware, Inc.
$43,775 12.5% $27,929 > 8.0% $34,911 > 10.0%
Farmers and Merchants
National Bank
40,365 11.7% 27,689 > 8.0% 34,612 > 10.0%
Tier I Capital to
Risk-Weighted Assets:
Southern Jersey Bancorp
of Delaware, Inc.
39,400 11.3% 13,964 > 4.0% 20,946 > 6.0%
Farmers and Merchants
National Bank
36,030 10.4% 13,844 > 4.0% 20,767 > 6.0%
Tier I Capital to
Average Assets:
Southern Jersey Bancorp
of Delaware, Inc.
39,400 8.2% 19,318 > 4.0% 24,148 > 5.0%
Farmers and Merchants
National Bank
36,030 7.5% 19,318 > 4.0% 24,148 > 5.0%
For To Be Well
Capital Capitalized Under
Adequacy Prompt Corrective
Actual Purposes Action Provisions
Amount Ratio Amount Ratio Amount Ratio
As of December 31, 1996:
Total Capital to
Risk-Weighted Assets:
Southern Jersey Bancorp
of Delaware, Inc.
$42,919 13.6% $25,330 > 8.0% $31,663 > 10.0%
Farmers and Merchants
National Bank
41,854 13.2% 25,292 > 8.0% 31,616 > 10.0%
Tier I Capital to
Risk-Weighted Assets:
Southern Jersey Bancorp
of Delaware, Inc.
39,729 12.5% 12,665 > 4.0% 18,998 > 6.0%
Farmers and Merchants
National Bank
39,164 12.4% 12,646 > 4.0% 18,970 > 6.0%
Tier I Capital to
Average Assets:
Southern Jersey Bancorp
of Delaware, Inc.
39,729 8.9% 17,862 > 4.0% 22,327 > 5.0%
Farmers and Merchants
National Bank
39,164 8.8% 17,862 > 4.0% 22,327 > 5.0%
NOTE 17 - SOUTHERN JERSEY BANCORP OF DELAWARE,
INC. (PARENT COMPANY ONLY) - CONDENSED
FINANCIAL INFORMATION
CONDENSED STATEMENT OF FINANCIAL CONDITION
(In Thousands Except Share and Per Share Data)
December 31
1997 1996
ASSETS
Cash and due from banks $ 685 $ 667
Investment in subsidiaries 39,189 39,192
Other assets 340 490
TOTAL ASSETS $40,214 $40,349
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Dividends Payable $ 655 $ 598
Total Liabilities 655 598
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 38,767 39,236
Unrealized gains on securities 159 22
43,315 43,647
Less: Treasury stock at cost -
183,927 shares in 1997 and
190,196 shares in 1996 3,756 3,896
Total Shareholders' Equity 39,559 39,751
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $40,214 $40,349
SOUTHERN JERSEY BANCORP OF DELAWARE, INC.
(Parent Company Only) -
CONDENSED FINANCIAL INFORMATION
CONDENSED STATEMENT OF INCOME
(In Thousands) Year Ended December 31
1997 1996 1995
Income:
Cash dividends from subsidiary
$4,306 $1,595 $1,593
Expenses:
Operating Expenses 330 88 135
Income before equity in
undistributed net income(loss)
of subsidiaries 3,976 1,507 1,458
Equity in undistributed net income(loss)
of subsidiaries (3,139) 3,821 3,394
NET INCOME $ 837 $5,328 $4,852
CONDENSED STATEMENT OF CASH FLOWS
(In Thousands)Year Ended December 31
1997 1996 1995
Cash flows from operating activities:
Net income $ 837 $5,328 $4,852
Adjustments to reconcile income from
continuing operations to net cash
provided by operating activities:
Equity in (net income)loss of
subsidiary 3,139 (3,821) (3,394)
(Increase)/decrease in other assets
150 (240) 200
Increase in liabilities 58 46 18
Net cash provided by
operating activities 4,184 1,313 1,676
Cash flows from investing activities:
Investment in subsidiary (3,000) 0 0
Net cash used in investing activities
(3,000) 0 0
Cash flows from financing activities:
Cash dividends (1,306) (1,195) (1,093)
Purchase of Treasury stock (166) (404) (800)
Sale of Treasury stock 306 286 256
Net cash used for financing activities
(1,166) (1,313) (1,637)
Net increase in cash and
cash equivalents 18 0 39
Cash and cash equivalents at
beginning of year 667 667 628
Cash and cash equivalents at end of year
$ 685 $ 667 $ 667
SELECTED FINANCIAL DATA
The following table sets forth selected financial data derived
from the consolidated financial statements of Southern Jersey
Bancorp of Delaware, Inc. and Subsidiaries audited by Athey
& Company, Certified Public Accountants, P.A., for the five
years ended December 31, 1997. 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 except per share data
Year Ended December 31 1997 1996 1995 1994 1993
Interest income $33,800 $30,390 $28,212 $24,616 $23,236
Interest expense 17,159 14,870 13,114 10,731 10,356
Net interest income 16,641 15,520 15,098 13,885 12,880
Provision for loan losses 7,967 1,805 1,266 725 800
Other income 3,043 3,246 2,743 2,308 2,256
Other expenses 11,590 10,357 10,023 9,580 8,858
Income before income taxes 127 6,604 6,552 5,888 5,478
Provision(benefit) for income taxes
(710) 1,276 1,700 1,411 1,411
Net Income 837 5,328 4,852 4,477 4,067
Cash dividends declared on common stock
1,306 1,195 1,093 1,054 997
Dividend payout ratio 156.0% 22.4% 22.5% 23.5% 24.5%
Per Common Share Amounts
Basic earnings per share $ .77 $4.91 $4.43 $4.09 $ 3.68
Diluted earnings per share $ .75 $4.80 $4.38 $4.07 $ 3.66
Cash dividends declared on common stock
$ 1.20 $1.10 $1.00 $ .96 $ .90
Year-End Balances
Total assets $483,354 $430,324$404,240$372,896$358,652
Investment securities 92,693 96,669 114,320 138,144 150,653
Loans, net of unearned income
305,556 290,885 232,113 192,518 151,342
Deposits 438,464 385,384 363,433 337,223 327,261
Shareholders' equity 39,559 39,751 36,643 32,555 29,026
SELECTED SHARE DATA
Common shares outstanding 1,091 1,085 1,085 1,099 1,096
Average common shares outstanding
1,088 1,085 1,095 1,096 1,106
At December 31:
Book value per common share
$36.26 $36.64 $33.78 $29.62 $26.49
The common stock is inactively traded, and the range of sales
prices known to Management for each quarter during the two
most recent years were as follows:
1997 1996
High Low High Low
First Quarter $41.25 $40.00 $38.25 $37.00
Second Quarter $45.00 $41.25 $38.50 $38.25
ThirdQuarter $45.50 $45.00 $39.00 $38.50
Fourth Quarter $60.50 $45.50 $40.00 $39.00
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors of
F & M Investment Company
We have audited the balance sheets of F & M Investment
Company,(a wholly-owned subsidiary of Farmers & Merchants
National Bank) as of December 31, 1997 and 1996, and the related
statements of stockholders' equity, income and cash flows for
the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free from material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing
the accounting principles used and significant estimates
made by management, as well as evaluating the overall
financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to
above present fairly, in all material respects, the
financial position of F & M Investment Company, as
of December 31, 1997 and 1996, and the results of its
operations and cash flows for the years then ended,
in conformity with generally accepted accounting principles.
s/Belfint, Lyons & Shuman, P.A.
February 5, 1998
Wilmington, Delaware
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None
PART III
Item 10. Directors and Executive Officers of Registrant
Information regarding Directors of Registrant will be set forth
in the Southern Jersey Bancorp of Delaware, Inc. Proxy Statement
for the annual meeting of shareholders to be held May 7, 1998,
and is incorporated herein by reference. Information regarding executive
officers of Registrant is set forth under the caption "Executive Officers"
in Item 1(a) hereof.
Item 11. Executive Compensation
Information regarding executive compensation will be set forth
in the Southern Jersey Bancorp of Delaware, Inc. Proxy Statement
for the annual meeting of shareholders to be held May 7, 1998, and
is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
Information regarding security ownership of certain beneficial
owners and Management will be set forth in the Southern Jersey
Bancorp of Delaware, Inc. Proxy Statement for the annual meeting
of shareholders to be held May 7, 1998, and is incorporated herein
by reference.
Item 13. Certain Relationships and Related Transactions
Information regarding certain relationships and related
transactions will be set forth in the Southern Jersey Bancorp
of Delaware, Inc. Proxy Statement for the annual meeting
of shareholders to be held May 7, 1998, and is incorporated
herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on
Form 8-K
(1) Financial Statements
The financial statements filed as a part of this report are
listed on the Index to Consolidated Financial Statements on
Page 31.
(2) Financial Statement Schedules
All other schedules have been omitted because the required
information is shown in the Consolidated Financial Statements
or notes thereto, the statistical information in Item 1, pursuant
to Industry Guide 3, or they are not applicable.
(3) (a) Exhibits (numbered in accordance with Item 601 of
Regulation S-K)
Exhibit
Number Description
3A Form of Certificate of Incorporation of the
Registrant - Incorporation by reference to
Definitive Proxy Statement filed and dated
June 16, 1989
3B Form of Bylaws of the Registrant -
Incorporation by reference to Definitive Proxy
Statement filed and dated June 16, 1989
4A Form of Common Stock Certificate -
Incorporation by reference to Definitive Proxy
Statement filed and dated June 16, 1989
4B Instruments Defining the Rights of Security
Holders - Incorporation by reference to Form
8-A filed November 30, 1989
10A Stock Option and Stock Appreciation Rights
Plan - Incorporated by reference to the
Registrant's Definitive Proxy Statement filed
February 27, 1987, and the Registrant's Annual
Report on Form 10-K for the fiscal year ended
December 31, 1987, filed March 31, 1988.
21 Subsidiaries of the Registrant -
Included under Item 1, Page 2 of this filing.
(3)(b) Reports on Form 8-K
No reports on Form 8-K have been filed by the
Registrant during the quarter ended December
31, 1997.
(3)(c) Form of Deferred Compensation Agreement for
named executive officers, Clarence D.
McCormick, Sr., Harry W. Bullock, and Ralph
Cocove is incorporated by reference to Form
10-K filed March 31, 1989.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities and Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
SOUTHERN JERSEY BANCORP OF DELAWARE, INC.
Dated: March 27, 1998 By: s/ Clarence D. McCormick
Clarence D. McCormick
Chairman of the Board
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the
following persons on behalf of the Registrant and in the
capacities and on the dates indicated.
Signatures Title Date
s/ Henry L. Backenson Vice Chairman March 27, 1998
Henry L. Backenson
s/ Alfred F. Caggiano Vice Chairman March 27, 1998
Alfred F. Caggiano
s/ James H. Carll Director March 27, 1998
James H. Carll, Esq.
s/ Keron D. Chance Director March 27, 1998
Keron D. Chance, Esq.
s/ Harry W. Bullock Director March 27, 1998
Harry W. Bullock
s/ Frank LoBiondo Director March 27, 1998
Frank LoBiondo
s/ Clarence D. McCormick, Jr. Director March 27, 1998
Clarence D. McCormick, Jr.
s/ Louis Pizzo Director March 27, 1998
Louis Pizzo
s/ Donald Strang Director March 27, 1998
Donald Strang
s/ Anthony M. Sparacio, Jr. Director March 27, 1998
Anthony M. Sparacio, Jr.
PART II - OTHER INFORMATION
EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
Exhibit 27. Financial Data Schedule
B. Reports on Form 8-K
No reports have been filed on Form 8-K during this quarter.
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<PERIOD-END> DEC-31-1997
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