UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30,1999
Commission File Number 0-12635
SOUTHERN JERSEY BANCORP OF DELAWARE, INC.
(Exact Name of Registrant as specified in Charter)
Delaware 22-2983654
(State of Other Jurisdiction (IRS Employer
Of Incorporation or Organization) Identification Number)
53 South Laurel Street
Bridgeton, New Jersey 08302
(Address of Principal Executive Offices)
(609) 453-3000
(Registrant's Area Code and Telephone Number)
Registrant has filed all reports required to be filed by Section 13 or
15(d) of the Securities and Exchange Act of 1934 during the period it
has been subject to such filing requirements.
[X] YES [] NO
Common Stock outstanding as of September 30, 1999 1,130,495
<PAGE>
<TABLE>
PART I - Financial Information
This is the consolidated balance sheet for Southern Jersey Bancorp.
All dollar amounts are in thousands.
9/30/99 9/30/98 12/31/98
<S> <C> <C> <C>
ASSET
Cash and due from banks 19,811 24,867 18,879
Interest Bearing Deposits 450 2,000 2,450
Investment Securities Held to Maturity
0 0 0
Investment Securities Available for Sale
111,349 113,549 98,974
Fair Value: Securities Held-to-Maturity
9/30/99 0
9/30/98 0
12/31/98 0
Loan: Net of Unearned Income 227,343 284,324 268,894
Less: Allowance for loan losses 7,950 10,697 10,137
------ ------- -----
Net Loans 219,393 273,627 258,757
------ ------- -----
Federal Funds Sold 42,250 22,000 67,700
Bank Premises and Equipment - Net
6,688 7,232 6,994
Other Assets 25,674 23,982 28,911
----- ------ -----
Total Assets 425,615 467,257 482,665
======= ======= ======
LIABILITIES 9/30/99 9/30/98 12/31/98
Deposits - Interest Bearing 332,026 362,493 380,179
Non-Interest Bearing Deposits 62,933 64,299 65,387
------- ------- ------
Total Deposits 394,959 426,792 445,566
Funds Purchased - - -
Other Liabilities 3,585 5,290 5,010
------ ------- ------
Total Liabilities 398,544 432,082 450,576
Shareholder's Equity
Common Stock Par Value $1.67 per share
Authorized 5,000,000 shares;
Issued 1,307,683 shares 2,184 2,129 2,184
Surplus 3,259 2,260 3,259
Undivided Profits 28,361 34,119 29,549
------ ------- ------
33,804 38,508 34,992
Less: Treasury Stock at cost
177,188 Common Shares 9-30-99
179,962 Common Shares 9-30-98
180,202 Common Shares 12-31-98
3,824 3,829 3,839
----- ------- ------
29,980 34,679 31,153
Allowance for unrealized gain/losses
on Available for Sale Securities
(2,909) 496 936
----- ------- ------
Total Shareholder's Equity 27,071 35,175 32,089
----- ------- -----
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
425,615 467,257 482,665
======= ======= =======
</TABLE>
<PAGE>
<TABLE>
This is the consolidated balance sheet for Southern Jersey Bancorp of
Delaware, Inc. All dollar amounts are shown in thousands except for
the per share data.
<CAPTION>
Nine Months Third Quarter
<S> <C> <C> <C> <C>
INTEREST INCOME
Int. on Securities:
Taxable int. income 5,057 3,117 1,806 1,006
Tax-Exempt int. inc. 1 1,069 0 359
Interest and Fees on Loans 14,069 19,030 4,606 5,904
Interest on Interest Bearing Deposits
36 167 4 53
Federal Funds Sold 2,448 2,023 696 839
Lease Income 0 0 0 0
---- ---- ---- -----
Total Int. Income 21,611 25,406 7,112 8,161
INTEREST EXPENSE
Interest on Deposit Savings 3,656 4,222 1,108 1,465
Certificates of Deposit $100,000 and over
1,759 3,145 498 982
Federal Funds Purchased - - - -
Other Time Deposits 6,736 6,257 2,110 2,022
----- ----- ---- -----
Total Int. Expense 12,151 13,624 3,716 4,469
NET INTEREST INCOME 9,460 11,782 3,396 3,692
Provision for Loan Losses 1,400 7,874 340 4,974
----- ----- ---- ---
Net Interest Income after Provision for Loan Loss
8,060 3,908 3,056 (1,282)
OTHER OPERATING INCOME
Service charges on deposit accounts
1,247 1,287 382 453
Trust Department Income 684 608 231 209
Comm., collection
Charges and fees 603 777 200 253
Investment Security gains/(losses)
553 0 0 0
Other Non-Interest Income 0 0 0 0
----- ----- ---- ----
Total Other Operating Income 3,087 2,672 813 915
OTHER OPERATING EXPENSES
Salaries and Wages 4,357 3,612 1,521 1,155
Pension and other benefits 878 899 222 202
Occupancy and Equipment 1,679 1,485 677 516
FDIC Assessment 352 165 263 71
Postage, stationary and supplies
366 375 121 110
Professional Fees 1,449 1,119 513 382
Other Oper. Expen. 3,254 3,246 1,286 666
----- ----- ----- -----
Total Other Oper. Expenses 12,335 10,901 4,603 3,102
Income Before Income Taxes (1,188) (4,321) (734) (3,469)
Applicable Income Taxes 0 0 0 0
---- ----- ---- -----
NET INCOME (1,188)(4,321) (734) (3,469)
=== ===== ==== =====
Earnings Per Common Share (1.05) (3.95) (0.65) (3.17)
</TABLE>
<PAGE>
<TABLE>
SOUTHERN JERSEY BANCORP OF DELAWARE, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS (Dollars in Thousands)
Nine Months Ended
September 30
1999 1998
<S> <C> <C>
Cash Flows from Operating Activities
Net Income (1,188) (4,321)
Adjustments to reconcile net income to
net cash provided by operating activities
Amortization of Organization Expenses 0 0
Depreciation of Premises and Equipment 611 452
Net Loan Charge-Offs (3,588) (2,413)
Provision for Loan Losses 1,400 7,874
Premium Amortization net of discount accretion
0 0
Gain or (Loss) on Sale of Securities 553 0
Gain on Other Real Estate 0 0
Gain on Sale of Bank Premises & Equipment 0 0
(Increase)/decrease in Other Assets 3,237 (3,509)
Increase/(decrease) in Other Liabilities (1,425) (41)
Increase/(decrease) in Borrowed Funds 0 0
------ -----
Net Cash Provided by Operating Activities (400) (1,958)
Cash Flows from Investing Activities
Net (increase)/decrease in Int Bearing deposits
2,000 2,000
Net (increase)/decrease in federal funds sold
25,450 18,950
Purchase of Investment Securities (65,988) (56,508)
Proceeds from Sale of Invest. Securities 0 0
Proceeds from Maturities of Invest. Securities
57,633 35,034
(Increase)/Decease in Loans 33,601 21,232
Bank Premises and Equipment (917) (879)
Proceeds from Sale of Bank Premises and Equipment
0 0
Proceeds from Sale of Other Real Estate 155 358
----- ----
Net Cash Used for Investing Activities 51,934 20,187
Cash Flows from Financing Activities
(Decrease)/Increase in Total Deposits (50,607) (11,672)
Cash Dividends (10) (329)
Purchase of Treasury Stock 0 (174)
Sale of Treasury Stock 15 248
----- ----
Net Cash Provided by Financing Activities (50,602) (11,927)
Net Increase/(Decrease) in Cash and Cash Equivalents
932 6,302
Cash and Equivalents at the Beginning of the Year
18,879 18,565
------ -----
Cash and Equivalents at End of the Quarter 19,811 24,867
===== ======
Supplementary Schedule of Non-Cash Investing and
Financing Activities
Loans, Net of Charge-Offs transferred to
Other Real Estate Owned: 40 100
</TABLE>
<PAGE>
SOUTHERN JERSEY BANCORP OF DELAWARE, INC.
NOTES TO FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 1999
1. Principals of Consolidation: The consolidated financial statements
reflect the account of Southern Jersey Bancorp of Delaware, Inc. and its
subsidiary The Farmers and Merchants National Bank of Bridgeton, after
the elimination of all inter-company balances and transactions.
2. There have been no significant changes in the accounting policies of
the Registrant the date the most recent annual report to security holders,
nor have there occurred events, which have material impact on the disclosures
herein.
3. The interim financial statements contained herein reflect all
adjustments which are, in the opinion of management, necessary to a fair
statement of the results for the interim period presented.
4. In accordance with Rule 10-01(b)(8), the unaudited interim financial
statements filed under cover of Form 10-Q for September 30, 1999, reflect
adjustments that are of a normal recurring nature which are, in the
opinion of Management, necessary to a fair statement of the results
for the interim periods presented.
SOUTHERN JERSEY BANCORP OF DELAWARE, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
SOUTHERN JERSEY BANCORP OF DELAWARE, INC.
(Registrant)
Paul J. Ritter, III
Treasurer
Clarence D. McCormick
Chairman/CEO
DATE: November 15, 1999
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF
RESULTS IN OPERATIONS
Nine Months Ended September 30, 1999
The Company had a net loss of $1,188,000 for the first nine months of 1999
as compared to net loss of $4,321,000 for the comparable period of 1998. The
decrease in the net loss is primarily a result of the gain realized on the
sale of the investment securities classified available for sale totaling
approximately $553,000 and the reduction in the Provision for Loan Losses
expense totaling approximately $6,474,000. This gain was partially offset
by the reduction of approximately $2,322,000 in net interest income and an
increase in Other Operating Expenses totaling approximately $1,434,000.
The Company had $227,343,000 in total loans at September 30, 1999 as
compared to $284,324,000 in total loans at September 30, 1998. The 20.0%
decrease in total loans for the first nine months of 1999 is a result
of the Company's tightening of credit standards and the continued
implementation of its revised loan policy with its stricter
underwriting guidelines.
The Company had interest income from its loans and investment securities
of $21,611,000 for the first nine month period ended September 30, 1999 as
compared to $25,406,000 for the comparable period in 1998. This 14.9%
decrease in interest income is primarily attributable to the $56,981,000
decrease in loans at the Company. As a result of fewer loans booked
at the Company, its net interest income fell 19.7% from $11,782,000
for the first nine months of 1998 to $9,460,000 for the comparable
period in 1999.
The Company's non-interest income increased for the first nine months of
1999 with the Company earning $3,087,000 as compared to $2,672,000 during the
first nine months of 1998. This was primarily as a result of the sale of
investment securities classified as Available for Sale totaling
approximately $553,000.
The Company's non-interest expense increased for the first nine months of
1999 with the Company expensing $12,335,000 as compared to $10,901,000 during
the first nine months of 1998. This increase was primarily a result of a
$330,000 increase in legal and professional fees and $745,000 increase
in salaries and wages incurred due to problem asset remediation in
the first nine months of 1999 as compared to the comparable period
in 1998.
The Company had $394,959,000 in total deposits for the first nine months
of 1999 as compared to $426,792,000 for the first nine months of 1998. This
7.5% decrease is primarily a result of the deposit run-off experienced by the
Company after it lowered the interest rates it paid on deposits in the second
quarter of 1999.
The decrease in the Company's Allowance for Loan and Lease Losses of
$2,747,000 from $10,697,000 as of September 30, 1998 to $7,950,000 as of
September 30, 1999 was primarily a result of reduction of the loan portfolio
by approximately $56,981,000 or 20.0% thereby reducing the amount required
for the Allowance for Loan Losses.
Year 2000
In the past, many computer systems were designed only to recognize
a six-digit date structure (i.e. two digits for each of the month, day, and
year). Many of these programs and systems may not be able to interpret and
process accurately a six-digit date ending with "00". To the extent these
systems are unable to process into the year 2000, inaccurate results may
be produced.
The Company utilizes computer hardware and software programs to conduct
and support its ongoing operations. Management implemented a plan (the
"Plan") in January 1997 to address the Company's Year 2000 situation. To
implement the Plan, management established a task force responsible for
overseeing the implementation of the Plan to completion. The Plan includes
the estimated costs of repairing or replacing computer systems or software
as necessary and is expected to cost between approximately $1.5 million
and $2.0 million. To date, the Company has expended approximately $1.8 million
to effectuate the Plan.
The Plan is comprised of several phases. The first phase involved
the assessment of the Company's current systems and vendors to determine
their Y2K compliance. The Company reviewed all of its software vendors,
both banking specific and general software applications; hardware vendors;
Trust Department vendors; third party service providers; and infrastructure
issues. During this evaluation, the Company made the determination of what
systems needed to be updated or replaced.
After the completion of this assessment, the Company began the upgrade or
replacement of any systems that were identified as non-Y2K compliant in
the assessment phase. This included the replacement of the Company's core
accounting system hardware and software. The Company formed a committee to
monitor this process. The conversion was completed by the end of the third
quarter of 1998. The Company also performed several other replacements and
upgrades to ensure year 2000 compliance. These upgrades have been completed.
The Company has completed the validation phase of the project. The Company
prioritized its systems based on the critical nature of each. Those
of higher priorities were tested and the results reviewed for accuracy.
A Y2K Test Committee was formed to complete this phase of the project.
This committee consisted of members of the Company's management representing
the various departments of the Company. The testing of internal applications
was completed by March 31, 1999. The testing of external vendor
relationships was completed by June 30, 1999.
Although the Company has developed and is implementing its Plan to
address the Year 2000 issue, no assurances can be made that the Plan will
be fully implemented within the estimated timeframe and cost; nor can any
assurances be given, regardless of whether the Plan is fully and timely
implemented, that the efforts of the Company will be, either partially or
wholly, successful. Much of the Company's success in implementing its Plan
will rely on third parties who are beyond the Company's control. The complete
failure of the Company's Plan to address the Year 2000 situation may have a
material adverse effect on the operations of the Company. As of September 30,
1999, the Company is uncertain of the magnitude of the impact the Year 2000
issue will have on its operations. Management has prepared contingency
plans to address the partial or complete failure of the Plan, and/or the
failure of third parties with whom the Company does business to address
timely and successfully the Year 2000 issue. These contingency plans were
completed by June 30, 1999. The testing of the Contingency Plan was completed
on October 15, 1999.
Recent Developments
On June 28,1999, the Company entered into a merger agreement with Hudson
United Bancorp in Mahwah, New Jersey. The merger terms provide for the
Conversion of each share of Company common stock into 1.26 shares of Hudson
United common stock. This Merger is expected to be completed by the fourth
quarter of 1999.
On September 15, 1999, Hudson United announced that it has entered into
a merger agreement with Dime Bancorp, Inc. The transaction is structured
as a "merger of equals." Dime is to be the surviving corporation with the
new name "Dime United Bancorp, Inc." Each share of Hudson United common stock
is to become one share of Dime United common stock and each share of Dime
common stock is to become 0.585 shares of Dime United common stock.
The foregoing discussion contains forward-looking statements that
involve risks and uncertainties. The Company's actual results could differ
materially from those anticipated in these forward-looking statements
as a result of certain factors, including the performance of the Company's
marine loan portfolio, the commercial and industrial loans and the banking
industry performance in general.
<PAGE>
PART II - OTHER INFORMATION
EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
Exhibit 27. Financial Data Schedule
B. Reports on Form 8-K
No reports have been filed on Form 8-K during this quarter.
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1999
<S> <C>
<CASH> 19,811
<INT-BEARING-DEPOSITS> 450
<FED-FUNDS-SOLD> 42,250
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 111,349
<INVESTMENTS-MARKET> 111,349
<LOANS> 227,343
<ALLOWANCE> 7,950
<TOTAL-ASSETS> 425,615
<DEPOSITS> 398,544
<SHORT-TERM> 0
<LIABILITIES-OTHER> 3,585
<LONG-TERM> 0
<COMMON> 2,184
0
0
<OTHER-SE> 28,361
<TOTAL-LIABILITIES-AND-EQUITY> 425,615
<INTEREST-LOAN> 14,069
<INTEREST-INVEST> 5,094
<INTEREST-OTHER> 2,448
<INTEREST-TOTAL> 21,611
<INTEREST-DEPOSIT> 12,151
<INTEREST-EXPENSE> 12,151
<INTEREST-INCOME-NET> 8,060
<LOAN-LOSSES> 1,400
<SECURITIES-GAINS> 553
<EXPENSE-OTHER> 12,335
<INCOME-PRETAX> (1,188)
<INCOME-PRE-EXTRAORDINARY> (1,188)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,188)
<EPS-BASIC> (3.95)
<EPS-DILUTED> (3.60)
<YIELD-ACTUAL> (3.60)
<LOANS-NON> 19,165
<LOANS-PAST> 935
<LOANS-TROUBLED> 3,815
<LOANS-PROBLEM> 971
<ALLOWANCE-OPEN> 10,136
<CHARGE-OFFS> 5,494
<RECOVERIES> 1,906
<ALLOWANCE-CLOSE> 7,950
<ALLOWANCE-DOMESTIC> 7,950
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
