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 March 31,1999
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 March 31, 1999 1,127,481
<PAGE>
<TABLE>
PART I - Financial Information
This is the consolidated balance sheet for Southern Jersey Bancorp.
All dollar amounts are in thousands.
3/31/99 3/31/98 12/31/98
<S> <C> <C> <C>
ASSET
Cash and due from banks 17,558 21,673 18,879
Interest Bearing Deposits 450 4,000 2,450
Investment Securities Held to Maturity
0 58,105 0
Investment Securities Available for Sale
106,140 35,237 98,974
Fair Value: Securities Held-to-Maturity
3/31/99 0
3/31/98 58,568
12/31/98 0
Loan: Net of Unearned Income 240,782 295,517 268,894
Less: Allowance for loan losses 9,327 6,055 10,137
------ ------- -----
Net Loans 231,455 289,462 258,757
------ ------- -----
Federal Funds Sold 75,350 38,800 67,700
Bank Premises and Equipment - Net
7,071 6,505 6,994
Other Assets 27,422 23,824 28,911
----- ------ -----
Total Assets 465,446 477,606 482,665
======= ======= ======
LIABILITIES 3/31/99 3/31/98 12/31/98
Deposits - Interest Bearing 368,878 375,382 380,179
Non-Interest Bearing Deposits 60,551 57,052 65,387
------- ------- ------
Total Deposits 429,429 432,434 445,566
Funds Purchased 0 0 0
Other Liabilities 5,032 5,703 5,010
------ ------- ------
Total Liabilities 434,461 438,137 450,576
Shareholder's Equity
Common Stock Par Value $1.67 per share
Authorized 5,000,000 shares;
Issued 1,275,000 shares 2,184 2,129 2,184
Surplus 3,259 2,260 3,259
Undivided Profits 29,805 38,789 29,549
------ ------- ------
35,248 43,178 34,992
Less: Treasury Stock at cost
180,202 Common Shares 3-31-99
181,195 Common Shares 3-31-98
180,202 Common Shares 12-31-98
3,839 3,820 3,839
----- ------- ------
31,409 39,358 31,153
Allowance for unrealized gain/losses
on Available for Sale Securities(424) 111 936
----- ------- ------
Total Shareholder's Equity 30,985 39,469 32,089
----- ------- -----
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
465,446 477,606 482,665
======= ======= =======
</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>
Three Months First Quarter
<S> <C> <C> <C> <C>
INTEREST INCOME
Int. on Securities:
Taxable int. income 1,512 1,089 1,512 1,089
Tax-Exempt int. inc. 2 352 2 352
Interest and Fees on Loans 4,857 6,429 4,857 6,429
Interest on Interest Bearing Deposits
26 0 26 0
Federal Funds Sold 941 527 941 527
Lease Income 0 0 0 0
---- ---- ---- -----
Total Int. Income 7,338 8,397 7,338 8,397
INTEREST EXPENSE
Interest on Deposit Savings 1,257 1,378 1,257 1,378
Certificates of Deposit $100,000 and over
668 1,057 668 1,057
Federal Funds Purchased 0 0 0 0
Other Time Deposits 2,266 2,118 2,266 2,118
----- ----- ---- -----
Total Int. Expense 4,191 4,553 4,191 4,553
NET INTEREST INCOME 3,147 3,844 3,147 3,844
Provision for Loan Losses 566 1,200 566 1,200
----- ----- ---- ---
Net Interest Income after Provision for Loan Loss
2,581 2,644 2,581 2,644
OTHER OPERATING INCOME
Service charges on deposit accounts
433 411 433 411
Trust Department Income 223 190 223 190
Comm., collection
Charges and fees 217 254 217 254
Investment Security gains/(losses)
553 0 553 0
Other Non-Interest Income 0 0 0 0
----- ----- ---- ----
Total Other Operating Income 1,426 855 1,426 855
OTHER OPERATING EXPENSES
Salaries and Wages 1,484 1,094 1,484 1,094
Pension and other benefits 310 328 310 328
Occupancy and Equipment 479 450 479 450
FDIC Assessment 60 40 60 40
Postage, stationary and supplies
75 151 75 151
Professional Fees 327 342 327 342
Other Oper. Expen. 917 1,062 917 1,062
----- ----- ----- -----
Total Other Oper. Expenses 3,652 3,467 3,652 3,467
Income Before Income Taxes 355 32 355 32
Applicable Income Taxes 99 10 99 10
---- ----- ---- -----
NET INCOME 256 22 256 22
=== ===== ==== =====
Earnings Per Common Share 0.23 0.02 0.23 0.02
</TABLE>
<PAGE>
<TABLE>
SOUTHERN JERSEY BANCORP OF DELAWARE, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS (Dollars in Thousands)
Three Months Ended
March 31
1999 1998
<S> <C> <C>
Cash Flows from Operating Activities
Net Income 256 22
Adjustments to reconcile net income to
net cash provided by operating activities
Amortization of Organization Expenses 0 0
Depreciation of Premises and Equipment 157 132
Net Loan Charge-Offs (1,377) (381)
Provision for Loan Losses 566 1,200
Premium Amortization net of discount accretion
0 0
Gain or (Loss) on Sale of Securities 553 0
Gain on Other Real Estate 0 (8)
Gain on Sale of Bank Premises & Equipment 0 0
(Increase)/decrease in Other Assets 1,489 (3,360)
Increase/(decrease) in Other Liabilities 22 372
Increase/(decrease) in Borrowed Funds 0 0
------ -----
Net Cash Provided by Operating Activities 1,666 (2,023)
Cash Flows from Investing Activities
Net (increase)/decrease in Int Bearing deposits
2,000 0
Net (increase)/decrease in federal funds sold
(7,650) 2,150
Purchase of Investment Securities (46,988) (15,457)
Proceeds from Sale of Invest Securities 29,302 0
Proceeds from Maturities of Invest. Securities
8,608 14,622
(Increase)/Decease in Loans 28,112 10,039
Bank Premises and Equipment (234) (284)
Proceeds from Sale of Bank Premises and Equipment
0 0
Proceeds from Sale of Other Real Estate 0 155
----- ----
Net Cash Used for Investing Activities 13,150 11,225
Cash Flows from Financing Activities
(Decrease)/Increase in Total Deposits (16,137) (6,030)
Cash Dividends 0 0
Purchase of Treasury Stock 0 (201)
Sale of Treasury Stock 0 137
----- ----
Net Cash Provided Financing Activities (16,137) (6,094)
Net Increase/(Decrease) in Cash and Cash Equivalents
(1,321) 3,108
Cash and Equivalents at the Beginning of the Year
18,879 18,565
------ -----
Cash & Equivalents at End of the Quarter 17,558 21,673
===== =====
Supplementary Schedule of Non-Cash Investing and
Financing Activities
Loans, Net of Charge-Offs transferred to
Other Real Estate Owned: 0 149
</TABLE>
<PAGE>
SOUTHERN JERSEY BANCORP OF DELAWARE, INC.
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 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 March 31, 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)
Clarence D. McCormick
Chairman/CEO
Paul J. Ritter, III
Treasurer
DATE: May 15, 1999
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF
RESULTS IN OPERATIONS
Three Months Ended March 31, 1999
The net operating profit of $256,000 for the first three months of
1999 is a $234,000 increase from the net operating income of $22,000
for the same period for the prior year.
The increase in net income through the first three months of 1999
is primarily due to the decrease in the loan loss provision expense to
$566,000 as compared to $1,602,000 for the first three months of 1998.
This decrease of 64.67% in the loan loss provision expense is partially
attributable to the substantial decrease in the amount of marine installment
loans required to be reserved for due to the sale of approximately
$19,700,000 in marine loans in the first quarter of 1999. The discount
and related cost of the marine loan portfolio sale totaled approximately
$250,000. However this decrease in the loan loss provision expense
was offset by a decrease in interest income resulting from the increase of
approximately $14,000,000 in non-accrual loans at March 31, 1999 as compared to
March 31, 1998. The discount and related costs of the marine loan portfolio
sale totaled approximately $250,000. Additionally, the Company realized a
gain of approximately $552,000 on the sale of its municipal investment
portfolio in the first quarter of 1999. The proceeds of the sale totaling
approximately $28,000,000 were deployed into other types of higher yielding
investment securities. The Company had a total of approximately $1,829,000 of
repossessed marine collateral at March 31, 1999. The current balance of the
reserve for repossessed collateral as of March 31, 1999 is $616,000.
The substantial increase in legal and professional fees of approximately
$138,000 as of March 31, 1999 as compared to March 31, 1998 is primarily
due to the collection costs associated with the non-performing and
delinquent loans.
There have been the following significant changes in charge-offs,
recoveries, non-accruing or non-performing loans in the first three
months of 1999:
An increase in loans 30-89 days past due and still accruing
from the fourth quarter of 1998 to the first quarter of 1999 of
approximately $6,536,000 in loans secured by real estate.
An increase from the fourth quarter of 1998 to the first quarter
of 1999 of approximately $2,449,000 for the loans secured by real estate
past due 90 days or more and still accruing. An increase from the
fourth quarter of 1998 to the first quarter of 1999 of approximately
$851,000 for the loans secured by real estate that are non-accrual.
An increase from the fourth quarter of 1998 to the first quarter
of 1999 of approximately $4,902,000 in commercial and industrial
loans that are non-accrual. An increase from the fourth quarter of 1998
to the first quarter of 1999 of approximately $251,000 in
loans to individuals for household, family and other personal
expenditures that have been placed on non-accrual status. Real estate
and other collateral secure a portion of these delinquent loans. The
increase in commercial and industrial loans and real estate loans that
are non-accrual is primarily a result of the continuing efforts of the
Company to recognize impaired assets as quickly and accurately as possible.
Charge offs for the first three months of 1999 totaled
approximately $1,943,000 while total recoveries during the same
period were $566,000. These charge offs included a total of
$1,058,000 in charge offs of loans to individuals for household,
family and other personal expenditures which includes installment
marine retail loans.
The Company has adopted FASB 133 effective September 30, 1998 and
is now carrying all of its investment securities at their market value
and these securities are all classified as "Available for Sale."
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 Bank 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 Bank'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 Bank has expended approximately $1.7 million
to effectuate the Plan.
The Plan is comprised of several phases. The first phase involved
the assessment of the Bank's current systems and vendors to determine
their Y2K compliance. The Bank 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 Bank made the determination of what
systems needed to be updated or replaced.
After the completion of this assessment, the Bank 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 Bank's core
accounting system hardware and software. The Bank formed a committee to
monitor this process. The conversion was completed by the end of the third
quarter of 1998. The Bank also performed several other replacements and
upgrades to ensure year 2000 compliance. These upgrades have been completed.
The Bank has completed the validation phase of the project. The Bank
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 Bank's management representing
the various departments of the Bank. The testing of internal applications
was completed by March 31, 1999. The testing of external vendor relationships
is expected to be completed by June 30, 1999.
Although the Bank 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 Bank will be, either partially or
wholly, successful. Much of the Bank's success in implementing its Plan
will rely on third parties who are beyond the Bank's control. The complete
failure of the Bank's Plan to address the Year 2000 situation may have a
material adverse effect on the operations of the Bank. As of March 31,
1999, the Bank is uncertain of the magnitude of the impact the Year 2000
issue will have on its operations. Management is attempting to prepare
contingency plans to address the partial or complete failure of the Plan,
and/or the failure of third parties with whom the Bank does business to
address timely and successfully the Year 2000 issue. These contingency
plans are expected to be completed by June 30, 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1999
<S> <C>
<CASH> 17,558
<INT-BEARING-DEPOSITS> 450
<FED-FUNDS-SOLD> 75,350
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 106,140
<INVESTMENTS-MARKET> 106,140
<LOANS> 240,782
<ALLOWANCE> 9,327
<TOTAL-ASSETS> 465,446
<DEPOSITS> 429,429
<SHORT-TERM> 0
<LIABILITIES-OTHER> 5,032
<LONG-TERM> 0
<COMMON> 2,184
0
0
<OTHER-SE> 29,805
<TOTAL-LIABILITIES-AND-EQUITY> 465,446
<INTEREST-LOAN> 4,857
<INTEREST-INVEST> 1,514
<INTEREST-OTHER> 967
<INTEREST-TOTAL> 7,338
<INTEREST-DEPOSIT> 4,191
<INTEREST-EXPENSE> 4,191
<INTEREST-INCOME-NET> 3,147
<LOAN-LOSSES> 566
<SECURITIES-GAINS> 553
<EXPENSE-OTHER> 3,652
<INCOME-PRETAX> 355
<INCOME-PRE-EXTRAORDINARY> 355
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 256
<EPS-PRIMARY> 0.23
<EPS-DILUTED> 0.23
<YIELD-ACTUAL> 0.23
<LOANS-NON> 22,200
<LOANS-PAST> 3,948
<LOANS-TROUBLED> 1,186
<LOANS-PROBLEM> 12,618
<ALLOWANCE-OPEN> 10,137
<CHARGE-OFFS> 1,943
<RECOVERIES> 566
<ALLOWANCE-CLOSE> 9,327
<ALLOWANCE-DOMESTIC> 9,327
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
