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 June 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 (I.R.S. 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 June 30, 1999 1,128,081
<PAGE>
<TABLE>
PART I - Financial Information
This is the consolidated balance sheet for Southern Jersey Bancorp.
All dollar amounts are in thousands.
6/30/99 6/30/98 12/31/98
<S> <C> <C> <C>
ASSET
Cash and due from banks 20,625 19,642 18,879
Interest Bearing Deposits 450 4,000 2,450
Investment Securities Held to Maturity
0 59,362 0
Investment Securities Available for Sale
114,148 40,393 98,974
Fair Value: Securities Held-to-Maturity
6/30/99 0
6/30/98 59,870
12/31/98 0
Loan: Net of Unearned Income 242,194 289,582 268,894
Less: Allowance for loan losses 9,182 7,054 10,137
------ ------- -----
Net Loans 233,012 282,528 258,757
------ ------- -----
Federal Funds Sold 49,600 46,100 67,700
Bank Premises and Equipment - Net
6,969 6,450 6,994
Other Assets 27,613 23,860 28,911
----- ------ -----
Total Assets 452,417 482,335 482,665
======= ======= ======
LIABILITIES 6/30/99 6/30/98 12/31/98
Deposits - Interest Bearing 357,001 377,500 380,179
Non-Interest Bearing Deposits 62,108 61,456 65,387
------- ------- ------
Total Deposits 419,109 438,956 445,566
Funds Purchased - - -
Other Liabilities 5,151 5,059 5,010
------ ------- ------
Total Liabilities 424,260 444,015 450,576
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 29,095 37,588 29,549
------ ------- ------
34,538 41,977 34,992
Less: Treasury Stock at cost
179,602 Common Shares 6-30-99
179,525 Common Shares 6-30-98
180,202 Common Shares 12-31-98
3,824 3,806 3,839
----- ------- ------
30,714 38,171 31,153
Allowance for unrealized gain/losses
on Available for Sale Securities
(2,557) 149 936
----- ------- ------
Total Shareholder's Equity 28,157 38,320 32,089
----- ------- -----
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
452,417 482,335 482,665
======= ======= =======
</TABLE>
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<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>
Six Months Second Quarter
<S> <C> <C> <C> <C>
INTEREST INCOME
Int. on Securities:
Taxable int. income 3,251 2,111 1,739 1,022
Tax-Exempt int. inc. 1 710 (1) 358
Interest and Fees on Loans 9,463 13,126 4,606 6,697
Interest on Interest Bearing Deposits
32 114 6 114
Federal Funds Sold 1,752 1,184 811 657
Lease Income 0 0 0 0
---- ---- ---- -----
Total Int. Income 14,499 17,245 7,161 8,848
INTEREST EXPENSE
Interest on Deposit Savings 2,548 2,757 1,291 1,379
Certificates of Deposit $100,000 and over
1,261 2,163 593 1,106
Federal Funds Purchased - - - -
Other Time Deposits 4,626 4,235 2,360 2,117
----- ----- ---- -----
Total Int. Expense 8,435 9,155 4,244 4,602
NET INTEREST INCOME 6,064 8,090 2,917 4,246
Provision for Loan Losses 1,060 2,900 494 1,700
----- ----- ---- ---
Net Interest Income After Provision for Loan Loss
5,004 5,190 2,423 2,546
OTHER OPERATING INCOME
Service charges on deposit accounts
865 834 432 423
Trust Department Income 453 399 230 209
Comm., collection
Charges and fees 403 524 186 270
Investment Security gains/(losses)
553 0 0 0
Other Non-Interest Income 0 0 0 0
----- ----- ---- ----
Total Other Operating Income 2,274 1,757 848 902
OTHER OPERATING EXPENSES
Salaries and Wages 2,836 2,457 1,352 1,363
Pension and other benefits 656 697 346 369
Occupancy and Equipment 1,002 969 523 519
FDIC Assessment 89 94 29 54
Postage, stationary and supplies
245 265 170 114
Professional Fees 936 737 609 395
Other Oper. Expen. 1,968 2,580 1,051 1,518
----- ----- ----- -----
Total Other Oper. Expenses 7,732 7,799 4,080 4,332
Income Before Income Taxes (454) (852) (809) (884)
Applicable Income Taxes 0 0 (99) (10)
---- ----- ---- -----
NET INCOME (454) (852) (710) (874)
=== ===== ==== =====
Earnings Per Common Share (0.40) (0.70) (0.63) (0.72)
</TABLE>
<PAGE>
<TABLE>
SOUTHERN JERSEY BANCORP OF DELAWARE, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS (Dollars in Thousands)
Six Months Ended
June 30
1999 1998
<S> <C> <C>
Cash Flows from Operating Activities
Net Income (454) (852)
Adjustments to reconcile net income to
net cash provided by oper. activities
Amortization of Organization Expenses 0 0
Depreciation of Premises and Equip. 392 264
Net Loan Charge-Offs (2,016) (1,082)
Provision for Loan Losses 1,060 2,900
Premium Amortization net of discount accretion
0 0
Gain or (Loss) on Sale of Securities 553 0
Gain on Other Real Estate 0 (3)
Gain on Sale of Bank Premises & Equipment 0 0
(Increase)/decrease in Other Assets 1,298 (3,405)
Increase/(decrease) in Other Liabilities 141 (272)
Increase/(decrease) in Borrowed Funds 0 0
------ -----
Net Cash Provided by Operating Activities 974 (2,450)
Cash Flows from Investing Activities
Net (increase)/decrease in Int Bearing deposits
2,000 114
Net (increase)/decrease in federal funds sold
18,100 (5,150)
Purchase of Investment Securities (65,988) (32,390)
Proceeds from Sale of Invest. Secur. 0 0
Proceeds from Maturities of Invest. Securities
56,697 24,971
(Increase)/Decease in Loans 26,700 15,974
Bank Premises and Equipment (315) (361)
Proceeds from Sale of Bank Premises and Equipment
0 0
Proceeds from Sale of Other Real Estate 20 155
----- ----
Net Cash Used for Investing Activities 37,214 3,313
Cash Flows from Financing Activities
(Decrease)/Increase in Total Deposits (36,457) 492
Cash Dividends 0 (329)
Purchase of Treasury Stock 0 (174)
Sale of Treasury Stock 15 225
----- ----
Net Cash Provided by Financing Activities
(36,442) 214
Net Increase/(Decrease) in Cash and Cash Equivalents
1,746 1,077
Cash and Equivalents at the Beginning of the Year
18,879 18,565
------ -----
Cash and Equivalents at End of the Quarter
20,625 19,642
===== =====
Supplementary Schedule of Non-Cash Investing and
Financing Activities
Loans, Net of Charge-Offs transferred to
Other Real Estate Owned: 1,026 399
</TABLE>
<PAGE>
SOUTHERN JERSEY BANCORP OF DELAWARE, INC.
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED JUNE 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 June 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: August 16, 1999
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF
RESULTS IN OPERATIONS
Six Months Ended June 30, 1999
The Company had a net loss of $454,000 for the first six months of 1999
as compared to net loss of $852,000 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.
The Company had $242,194,000 in total loans at June 30, 1999 as compared to
$289,582,000 in total loans at June 30, 1998. The 16.4% decrease in total loans
for the first six 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
$14,499,000 for the first six month period ended June 30, 1999 as compared to
$17,264,000 for the comparable period in 1998. This 19.1% decrease in interest
income is primarily attributable to the $47,388,000 decrease in loans at the
Company. As a result of fewer loans booked at the Company, its net interest
income fell 33.7% from $8,109,000 for the first six months of 1998 to
$6,064,000 for the comparable period in 1999.
The Company's non-interest income held steady for the first six months of
1999 with the Company earning $1,721,000 as compared to $1,739,000 during the
first six months of 1998.
The Company's non-interest expense increased for the first six months of
1999 with the Company expensing $7,534,000 as compared to $7,166,000 during
the first six months of 1998. This increase was primarily a result of a
$303,000 increase in legal and professional fees incurred due to problem
assets in the first six months of 1999 as compared to the comparable period
in 1998.
The Company had $419,109,000 in total deposits for the first six months
of 1999 as compared to $438,956,000 for the first six months of 1998. This
4.7% 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 increase in the Company's Allowance for Loan and Lease Losses of
$2,128,000 from $7,054,000 as of June 30, 1998 to $9,182,000 as of June 30,
1999 was a result of the $9,476,000 (108.8%) increase in non-performing loans
experienced by the Company in the first six months 1999 as compared to the
first six months of 1998. The increase in the amount of loans on non-performing
status is a result of the Company's internal loan review of its commercial
portfolio and the classifications resulting therefrom.
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 June 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.
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.
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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1999
<S> <C>
<CASH> 20,625
<INT-BEARING-DEPOSITS> 450
<FED-FUNDS-SOLD> 49,600
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 114,148
<INVESTMENTS-MARKET> 114,148
<LOANS> 242,194
<ALLOWANCE> 9,182
<TOTAL-ASSETS> 452,417
<DEPOSITS> 419,109
<SHORT-TERM> 0
<LIABILITIES-OTHER> 5,151
<LONG-TERM> 0
<COMMON> 2,184
0
0
<OTHER-SE> 29,095
<TOTAL-LIABILITIES-AND-EQUITY> 452,417
<INTEREST-LOAN> 9,463
<INTEREST-INVEST> 3,284
<INTEREST-OTHER> 1,752
<INTEREST-TOTAL> 14,499
<INTEREST-DEPOSIT> 8,435
<INTEREST-EXPENSE> 8,435
<INTEREST-INCOME-NET> 6,064
<LOAN-LOSSES> 1,060
<SECURITIES-GAINS> 553
<EXPENSE-OTHER> 7,732
<INCOME-PRETAX> (454)
<INCOME-PRE-EXTRAORDINARY> (454)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (454)
<EPS-BASIC> (0.40)
<EPS-DILUTED> (0.35)
<YIELD-ACTUAL> 2.85
<LOANS-NON> 18,182
<LOANS-PAST> 1,110
<LOANS-TROUBLED> 3,850
<LOANS-PROBLEM> 12,149
<ALLOWANCE-OPEN> 10,136
<CHARGE-OFFS> 3,221
<RECOVERIES> 1,205
<ALLOWANCE-CLOSE> 9,182
<ALLOWANCE-DOMESTIC> 9,182
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
