<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
Commission file number 0-133312
THE FIRST JERMYN CORP.
(Exact name of small business issuer as specified in its charter)
Pennsylvania 23-2275242
- ------------ ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
645 Washington Avenue; P.O. Box 39; Jermyn Pennsylvania 18433-0039
- ------------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number 717-876-6500
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act of 1934 during the past 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 [ ]
State the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
Class Outstanding at October 21, 1996
----- -------------------------------
<S> <C>
Common stock, $1.25 par value 884,680
</TABLE>
<PAGE> 2
THE FIRST JERMYN CORP. AND SUBSIDIARIES
FORM 10-QSB
INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED):
Consolidated Balance Sheets - September 30, 1996 and December 31, 1995 1
Consolidated Statements of Income - Three Months and Nine Months
Ended September 30, 1996 and 1995 2
Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 1996 and 1995 3
Notes to Consolidated Financial Statements 4
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 6
PART II - OTHER INFORMATION 11
SIGNATURES 12
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
THE FIRST JERMYN CORP. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands of dollars, except per share information)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
September 30, December 31,
ASSETS 1996 1995
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash and due from banks $9,077 12,341
Federal funds sold --- 1,860
Securities available for sale 26,200 13,375
Mortgage backed securities available for sale 25,374 26,206
Investment securities (total market value - 1996 - $65,608,
1995 - $77,394) 64,869 75,317
Loans, gross 190,380 174,470
Less: Unearned discount and origination fees (1,009) (1,128)
Allowance for loan losses (3,104) (3,015)
- -------------------------------------------------------------------------------------------------------------
Loans, net 186,267 170,327
Accrued interest receivable 2,681 2,551
Bank premises, leasehold improvements and furniture and equipment-net 5,060 5,190
Real estate owned other than bank premises 324 296
Other assets 2,369 2,523
- -------------------------------------------------------------------------------------------------------------
Total assets $322,221 309,986
=============================================================================================================
LIABILITIES
- -------------------------------------------------------------------------------------------------------------
Deposits:
Noninterest-bearing demand $28,530 29,071
Interest-bearing 259,716 252,227
- -------------------------------------------------------------------------------------------------------------
Total deposits 288,246 281,298
- -------------------------------------------------------------------------------------------------------------
Federal funds purchased 3,100 ---
Capitalized lease obligation 839 891
Accrued interest payable 1,189 1,106
Other liabilities 312 482
- -------------------------------------------------------------------------------------------------------------
Total liabilities 293,686 283,777
- -------------------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
- -------------------------------------------------------------------------------------------------------------
Common stock, $1.25 par value, authorized 2,500,000 shares;
Outstanding 899,885 shares 1,125 1,125
Surplus 3,876 3,876
Retained earnings 24,381 21,944
Unrealized loss on securities available for sale, net of tax (651) (540)
Less treasury stock-at cost (15,205 shares) (196) (196)
- -------------------------------------------------------------------------------------------------------------
Total shareholders' equity 28,535 26,209
- -------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $322,221 309,986
=============================================================================================================
</TABLE>
*See accompanying notes to consolidated financial statements.
1
<PAGE> 4
THE FIRST JERMYN CORP. AND SUBSIDIARIES
Consolidated Statements of Income
(In thousands of dollars, except per share information)
<TABLE>
<CAPTION>
Three months Nine months
Ended September 30 Ended September 30
1996 1995 1996 1995
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans 3,862 3,691 11,240 10,948
Interest and dividends on securities
U.S. Treasury 1,177 1,200 3,592 3,565
U.S. government agencies 2 2 5 4
CMO's of U.S. government agencies
and corporations 414 350 1,277 839
State and political subdivisions 247 87 742 162
Other taxable debt 5 11 18 35
Taxable equity 3 3 7 7
Interest on federal funds sold 6 98 193 224
- -------------------------------------------------------------------------------------------------------------
Total interest income 5,716 5,442 17,074 15,784
- -------------------------------------------------------------------------------------------------------------
Interest expense:
Deposits 2,772 2,707 8,400 7,424
Federal funds purchased 15 0 17 1
Capitalized lease obligations 22 23 65 69
- -------------------------------------------------------------------------------------------------------------
Total interest expense 2,809 2,730 8,482 7,494
- -------------------------------------------------------------------------------------------------------------
Net interest income 2,907 2,712 8,592 8,290
Provision for loan losses 46 92 137 273
- -------------------------------------------------------------------------------------------------------------
Net interest income after provision for
loan losses 2,861 2,620 8,455 8,017
- -------------------------------------------------------------------------------------------------------------
Noninterest income:
Service charges and fees 108 135 307 384
Gain on legal settlement --- --- 600 ---
Other 31 36 86 60
- -------------------------------------------------------------------------------------------------------------
Total noninterest income 139 171 993 444
- -------------------------------------------------------------------------------------------------------------
Noninterest expense:
Salaries and benefits 917 832 2,680 2,414
Net occupancy and furniture/
equipment expenses 291 272 893 740
Data processing services 106 122 317 343
Advertising 66 43 182 117
Other expenses 451 390 1,341 1,503
- -------------------------------------------------------------------------------------------------------------
Total noninterest expense 1,831 1,659 5,413 5,117
- -------------------------------------------------------------------------------------------------------------
Income before federal income
tax provision 1,169 1,132 4,035 3,344
Federal income tax provision 295 338 1,068 1,025
- -------------------------------------------------------------------------------------------------------------
Net income 874 794 2,967 2,319
=============================================================================================================
Per share information:
Net income $.99 $.90 $3.35 $2.62
Weighted average shares
outstanding 884,680 884,680 884,680 884,680
=============================================================================================================
</TABLE>
*The accompanying notes are an integral part of the consolidated financial
statements.
2
<PAGE> 5
THE FIRST JERMYN CORP. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands of dollars)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Nine months ended September 30,
1996 1995
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operating activities:
Net income $ 2,967 $2,319
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for loan losses 137 273
Depreciation and amortization of investment securities, bank
premises, leasehold improvements and furniture
and equipment 390 333
Increase in interest receivable and other assets (119) (567)
Increase in interest payable and other liabilities 1 161
Other --- 1
- -------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 3,376 2,520
- -------------------------------------------------------------------------------------------------------------
Investing activities:
Purchases of securities (18,248) (26,762)
Proceeds from maturities of securities 16,649 13,659
Net increase in loans (16,127) (2,817)
Purchases of bank premises, leasehold improvements and
furniture and equipment-net (260) (644)
Proceeds from sales of assets acquired through foreclosure 21 497
Proceeds from sales of equipment --- ---
- -------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (17,965) (16,067)
- -------------------------------------------------------------------------------------------------------------
Financing activities:
Net increase in noninterest-bearing demand deposits
and interest-bearing deposits 6,948 19,487
Increase in (repayment of ) federal funds purchased 3,100 (1,900)
Principal payments on capitalized lease obligation (52) (47)
Dividends paid (531) (487)
- -------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 9,465 17,053
- -------------------------------------------------------------------------------------------------------------
Increase in cash and cash equivalents (5,124) 3,506
Cash and cash equivalents at beginning of period 14,201 10,659
- -------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $9,077 $14,165
=============================================================================================================
Cash paid during the period:
Interest 8,334 7,066
Taxes 1,087 952
=============================================================================================================
Noncash transactions
Transfer of loans to real estate owned --- 200
Change in unrealized loss on securities
available for sale, net of tax 111 737
=============================================================================================================
</TABLE>
*The accompanying notes are an integral part of the consolidated financial
statement.
3
<PAGE> 6
FIRST JERMYN CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying consolidated financial statements of First Jermyn
Corp and subsidiaries (the Company) were prepared in accordance with
instructions to Form 10-QSB, and therefore, do not include information
or footnotes necessary for a complete presentation of financial
position, results of operations and cash flows In conformity with
generally accepted accounting principles. However, all normal,
recurring adjustments which, in the opinion of management, are
necessary for a fair presentation of the financial statements, have
been included. These financial statements should be read in
conjunction with the audited financial statements and the notes
thereto included in the Company's Annual Report for the period ended
December 31, 1995. The results for the nine months ended September 30,
1996 are not necessarily indicative of the results that may be
expected for the year ended December 31, 1996.
BUSINESS
The Company's principal subsidiary, The First National Bank of Jermyn
(the Bank), conducts business from its branch bank system located in
Lackawanna County, Pennsylvania. The Bank is subject to competition
from other financial institutions and other companies which provide
financial services. The Bank is subject to the regulations of certain
federal agencies and undergoes periodic examinations by those
regulatory authorities.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of all of
the Company's wholly-owned subsidiaries. All significant intercompany
transactions have been eliminated in consolidation. Additionally,
certain reclassifications have been made in order to conform with the
current year's presentation. The accompanying consolidated financial
statements have been prepared on an accrual basis.
(2) EARNINGS PER SHARE
Earnings per share were $.99 and $3.35 for the three-month and nine
month periods ended September 30, 1996 as compared to $.90 and $2.62
for the three month and nine month periods ended September 30, 1995.
Earnings per share was computed based on the weighted average number
of shares outstanding during each period.
4
<PAGE> 7
(3) RECENT ACCOUNTING PRONOUNCEMENTS
In March 1995, the FASB issued SFAS No. 121, Accounting for the
Impairment of Long-lived Assets and for Long-Lived Assets to be
Disposed of. This statement requires that long-lived assets and
certain identifiable intangibles to be held and used by an entity be
reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable,
and that any related impairment be based on the fair value of the
asset. In addition, long-lived assets to be disposed of must
generally be reported at the lower of carrying amount or fair value,
less cost to sell. SFAS No. 121 has been adopted by the Company
effective January 1, 1996. The adoption of this statement did not
materially effect the Company's results of operations, equity, or
financial condition.
In May 1995, the FASB issued SFAS No. 122, Accounting for Mortgage
Servicing Rights and Excess Servicing Receivables and for
Securitization of Mortgage Loans. This statement will prospectively
require the Company, which services mortgage loans for others in
return for a fee, to recognize these servicing assets, regardless of
how they were acquired. Additionally, the Company will be required to
assess the fair value of the assets at each reporting date to
determine impairment. SFAS No. 122 was adopted by the Company
effective January 1, 1996. The adoption of this statement did not
materially effect the Company's results of operations, equity, or
financial condition.
In October 1995, the FASB issued SFAS No. 123, Accounting for
Stock-based Compensation. This statement encourages the adoption of
fair value accounting for stock options issued to employees. Further,
in the event that fair value accounting is not adopted, the statement
requires proforma disclosure of net income and earnings per share as
if fair value accounting had been adopted. The Bank does not offer
stock-based compensation, and, therefore, the adoption of this
statement as of January 1, 1996 did not effect the Company's results
of operation, equity, or financial condition.
In June 1996, the FASB Issued SFAS No. 125, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities"
("SFAS 125"). This statement provides accounting and reporting
standards for transfers and servicing of financial assets and
extinguishments of liabilities based on consistent application of a
financial-components approach that focuses on control. It
distinguishes transfers of financial assets that are sales from
transfers that are secured borrowings. Under the financial-components
approach, after a transfer of financial assets, an entity recognizes
all financial and servicing assets it controls and liabilities it has
incurred and derecognizes financial assets it no longer controls and
liabilities that have been extinguished. The approach focuses on the
assets and liabilities that exist after the transfer. If a transfer
does not meet the criteria for a sale, the transfer is accounted for
as a secured borrowing with pledge of collateral. The Company has not
yet determined the effect, if any, that SFAS 125 will have on its
financial statements and will adopt SFAS 125 prospectively, effective
January 1, 1997, the required date of adoption.
5
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
OVERVIEW
The Company's net income for the three month and nine month periods ended
September 30, 1996 was $874,000 and $2,967,000 or $.99 and $3.35 per share,
respectively, compared to $794,000 and $2,319,000 or $.90 and $2.62,
respectively, in the same three month and nine-month periods in the preceding
year. The increase in net income for the three month period ended September
30, 1996 is primarily attributable to the increase in net interest income
combined with a decrease in the provision for loan losses and a lower effective
tax rate. For the nine month period ended September 30, 1996, the increase is
also due to a gain on a legal settlement.
At September 30, 1996, the Company had total assets of $322 million compared to
$310 million at December 31, 1995. The growth in total assets substantially
consists of growth in the loan portfolios which were primarily funded by
deposit growth.
The Company improved on certain ratios that measure overall profitability,
namely, return on average assets and return on average equity. The Company
recorded an annualized return on average assets of 1.25% for the nine-month
period ending September 30, 1996, compared to 1.08% for the same period in
1995. Return on average equity of 14.54% was recorded for the nine-month
period ended September 30, 1996, compared to 12.78% for the same period in
l995.
The Company continues to build its allowance for loan losses, providing $46,000
and $137,000 for the three-month and nine-month periods ended September 30,
1996, which increased the allowance for loan losses to $3,104,000 at September
30, 1996 from $3,015,000 at December 31, 1995.
The Company is susceptible to a continued increasing interest rate environment
that may erode the net interest margin. Strategies to enhance earnings and
improve the interest rate exposure of the Company will be considered, such as
the sale of existing mortgage-related securities and purchasing higher
yielding, rate sensitive assets with the proceeds. Additionally, the Company
will be seeking to enhance its net interest margin by increasing the higher
yielding loan portfolio with the cash flows from the repayments on the
mortgage-related and investment securities portfolios.
The Company is attempting to increase market penetration through branch
expansion. The branch expansion has begun with the opening of a new branch in
Carbondale in December 1995. The Company plans to open a branch in Daleville
in December 1996.
FINANCIAL CONDITION
CASH AND DUE FROM BANKS AND FEDERAL FUNDS SOLD
Cash and Due From Banks and Federal Funds Sold declined to approximately $9.1
million at September 30, 1996 from $14.2 million at December 31, 1995 due to
normal fluctuations resulting from the conduct of customer business.
6
<PAGE> 9
SECURITIES AVAILABLE FOR SALE
Securities available for sale, including mortgage backed securities available
for sale, have increased $12 million or 30% to $51.6 million from $39.6 million
at December 31, 1995. This increase was primarily driven by the purchase of
short-term Treasury Notes, which were funded by the related increase in savings
deposits.
INVESTMENT SECURITIES
Investment Securities have decreased $10.4 million or 14% to $64.9 million at
September 30, 1996 from $75.3 million in December 31, 1995. The decrease
related to proceeds from maturities. The funds which became available were
reinvested in securities available for sale.
LOANS RECEIVABLE, NET
Aggregate loans receivable totaled $186.3 million at September 30, 1996, an
increase of $16 million or 9.4% from $170.3 million at December 31, 1995. The
mix of loans is substantially unchanged at those dates. The Company attributes
this growth to its increased advertising and enhanced marketing effort driven
by the employees.
NON-PERFORMING ASSETS
The Company's total non-performing assets increased from $2.8 million or .90 of
total assets at December 31, 1995 to $4.1 million or l.26% of total assets at
September 30, 1996. Nonaccrual loans increased from $1,978,000 at December
31, 1995 to $2,943,000 at September 30, 1996. These delinquencies consist
primarily of commercial and residential real estate loans in the process of
collection.
Real estate owned, increased $28,000 or 9.8% from $296,000 as of December 31,
1995 to $324,000 as of September 30, 1996, due to the foreclosure of property
securing one credit. There were no significant gains or losses on the sale of
real estate owned.
<TABLE>
<CAPTION>
9/30/96 12/31/95 9/30/95
-------- -------- -------
<S> <C> <C> <C>
Nonaccrual 2,943,000 1,978,000 2,272,000
Loans 90 days of more delinquent 795,000 511,000 962,000
Restructured --- --- ---
--------- --------- ---------
Total non-performing loans 3,738,000 2,489,000 3,234,000
Other real estate owned other than
Bank premises 324,000 296,000 277,000
------- ------- -------
Total non-performing assets 4,062,000 2,785,000 3,511,000
</TABLE>
7
<PAGE> 10
At September 30, 1996, the Company's allowance for loan losses amounted to
$3.10 million or 1.63% of gross loans receivable. At December 31, 1995, the
Company's allowance for loan losses was $3.02 million or l.73% of gross loans
receivable.
DEPOSITS
Deposits increased $6.9 million or 2.5% from $281.3 million at December 31,
1995 to $288.2 million at September 30, 1996. The increase in deposits was
primarily due to an increase in certificates of deposit from the local market.
The Company believes this increase is due to the Bank's competitive rates.
EQUITY
At September 30, 1996, total equity was $28.5 million or 8.8% of total assets
compared to $26.2 million or 8.5% of total assets as of December 31, 1995.
Total equity increased primarily due to the retention of net income during the
intervening period less dividends paid.
RESULTS OF OPERATIONS
NET INCOME
The Company's net income increased $80,000 to $874,000 for the three months
ended September 30, 1996, compared to $794,000 recorded in the comparable
period of the prior year. For the nine-month period ended September 30, 1996,
net income increased $648,000 or approximately 28% compared to $2,319,000 for
the nine-months ended September 30, 1995. Earnings for the nine-month period
of 1996 have improved primarily due to increased net interest income, a reduced
provision for loan losses, an increase in noninterest income related to a gain
on legal settlement and a reduction in the Company's effective tax rate.
NET INTEREST INCOME
Net interest income before provision for loan losses amounted to $2.9 million
and $8.6 million for the three-month and nine month periods ended September 30,
1996 as compared to $2.7 million and $8.3 million for the respective periods in
1995. Interest income in 1996 increased for income on securities and loans but
was somewhat offset by interest on an enlarged deposit base.
Total interest income increased to $5,716,000 and $17,074,000 for the three
month and nine month periods ended September 30, 1996 from $5,442,000 and
$15,784,000 during the comparable prior periods. The increase was primarily
the result of an increase in the average interest- earning assets of
$32,246,000 for the nine months ended September 30, 1996 or 11.3% compared to
the nine months ended September 30, 1995. Additionally, the yield earned on
average interest-earning assets decreased 20 basis points during the nine
months ended September 30, 1996 compared to the 1995 period.
Total interest expense increased by $79,000 and $988,000 to $2,809,000 and
$8,482,000 for the three and nine months ended September 30, 1996 from
$2,730,000 and $7,494,000 for the comparable prior periods. The increase was
due to an increase in interest expense associated with deposits, where the
average balance increased by $28,543,000 or 11% during the nine months ended
September 30, 1996 compared to the 1995 period. The increase in interest
expense on deposits was also caused by a 6 basis point increase in the average
rates paid for the six months ended September 30, 1996 over the comparable 1995
period.
8
<PAGE> 11
PROVISION FOR LOAN LOSSES
The Company establishes a provision for loan losses, which is charged to
operations, in order to maintain the allowance for loan losses at a level which
is deemed to be appropriate based upon an assessment of prior loss experience,
the volume and type of lending presently being conducted by the Company,
industry standards, past due loans, economic conditions in the Company's market
area generally and other factors related to the collect ability of the
Company's loan portfolio. For the three month and nine month periods ended
September 30, 1996, the provision for loan losses amounted to $46,000 and
$137,000. This represents a decrease of $46,000 for the three months ended
September 30, 1996 compared to 1995. For the nine months ended September 30,
1996 a decrease of $136,000 in the provision for loan losses was noted when
compared to the corresponding period of the previous year. After considering
the decrease in the provision expense the Company's allowance for loan losses
increased by $89,000 to $3,104,000 at September 30, 1996 compared to December
31, 1995, in part due to the reduction in net charge offs from $102,000 for the
nine months ended September 30, 1995 to $48,000 for the nine months ended
September 30,1996.
Although management utilizes its best judgment in providing for possible
losses, there can be no assurance that the Company will not have to increase
its provision for loan losses in the future as a result of the future increases
in non-performing loans or for other reasons which could adversely affect the
Company's results of operations. In addition, various regulatory agencies, as
an integral part of their examination process, periodically review the
allowance for loan losses. Such agencies may require the Company to recognize
additions to the allowance for loan losses based on their judgments of
information which is available to them at the time of their examination.
NONINTEREST INCOME
Noninterest income for the nine months ending September 30, 1996 increased
approximately $549,000 and $993,000 from the comparable prior period, due to a
one-time gain on a legal settlement in the Company's favor which was recorded
in the first quarter of 1996. Noninterest income decreased $32,000 primarily
related to deposit services fees, for the three month period ended September
30, 1996 to $139,000 compared to $171,000 for the same period in the prior
year.
NONINTEREST EXPENSES
Noninterest expenses for the nine month period ending September 30, 1996
increased approximately 5.8% from the comparable prior period, with the
biggest increase occurring in salaries and benefits and net occupancy and
furniture/equipment expenses as a result of normal merit increases and
personnel and facilities related to the opening of the Carbondale office.
Non interest expense for the three month period ending September 30, 1996
increased $172,000 to $1,831,000 from $1,659,000 for the nine months ended
September 30, 1995. The largest factor in this change was an $85,000 increase
in salaries and benefits, primarily relating to the additional personnel in the
Carbondale office.
INCOME TAXES
Income tax expense totaled $295,000 and $1,068,000 for the three-month and
nine-month periods ended September 30, 1996 compared to $338,000 and
$1,025,000 for the comparable prior periods. These amounts resulted in
effective tax rates of 25% and 26% respectively, compared to 30% and 31%,
respectively. The increase in tax expense during the nine-month period ending
September 30, 1996 was due to an increase in income before the federal income
tax provision. The effective tax rate
9
<PAGE> 12
declined in both the three and nine month periods due primarily to an increase
in tax-exempt income.
CAPITAL ADEQUACY
A strong capital position is important to the continued profitability of the
Company and promotes depositor and investor confidence. The Company's capital
consists of shareholders' equity, which provides a basis for future growth and
expansion and also provides a buffer against unexpected losses. Shareholders'
equity increased $2,325,000 to $28,535,000 at September 30, 1996, as a result
of income retained during the nine-months ended September 30, 1996 partially
offset by an increase in the net unrealized loss on securities available for
sale. It is management's intention to continue paying a reasonable return on
shareholders' investment while retaining adequate earnings to allow for
continued growth.
The Federal Reserve Board measures capital adequacy for bank holding companies
by using a risk-based capital frame-work and by monitoring compliance with
minimum leverage ratio guidelines. The minimum ratio of total risk-based
capital to risk-adjusted assets is 8% at September 30, 1996, of which 4% must
be Tier 1 capital. The Company's total risk-based capital ratio was 18.44% at
September 30, 1996. The Company's Tier 1 risk-based capital ratio was 17.18%
at September 30, 1996.
In addition, the Federal Reserve Board has established minimum leverage ratio
guidelines for bank holding companies. Those guidelines provide for a minimum
leverage ratio of 3% for bank holding companies that meet certain criteria,
including that they maintain the highest regulatory rating. All other bank
holding companies are required to maintain a leverage ratio of 3% plus an
additional cushion of at least 100 to 200 basis points. The Federal Reserve
Board has not advised the Company of any specific minimum leverage ratio
applicable to it. The Company's leverage ratio was 9.08% at September 30,
1996.
In December 1991, the Federal Deposit Insurance Corporation Improvement Act
(FDICIA) was enacted, which substantially revises the bank regulatory and
funding provisions of the Federal Deposit Insurance Act and makes revisions to
several other federal banking statutes.
The Act establishes minimum capital requirements for all depository
institutions and established five capital tiers: "well capitalized",
"adequately capitalized", "under-capitalized", "significantly
under-capitalized", and "critically under-capitalized". FDICIA imposes
significant restrictions on the operations of a bank which is not at least
adequately capitalized. A depository institutions' capital tier will depend
upon where its capital levels are in relation to various other capital measures
which include a risk-based capital measure, a leverage ratio capital measure
and other factors. Under regulations adopted, for an institution to be well
capitalized it must have a total risk-based capital ratio of at least 10%, a
Tier I risk-based capital ratio of at least 6%, and a Tier I leverage ratio of
at least 5%, and not be subject to any specific capital order or directive.
At September 30, 1996, the Bank's total risk-based capital, Tier I risk-based
capital and Tier I leverage ratios were 18.44%, 17.18% and 9.08%, respectively.
10
<PAGE> 13
FIRST JERMYN CORP. AND SUBSIDIARIES
September 30, 1996
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a): Exhibits:
None
(b): Reports on Form 8-K:
None
11
<PAGE> 14
FIRST JERMYN CORP. AND SUBSIDIARIES
September 30, 1996
SIGNATURES
In accordance with requirement of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
THE FIRST JERMYN CORP.
----------------------
(Registrant)
Date November 06, 1996 By /s/ William M. Davis
----------------- ------------------------------
William M. Davis
Chairman, President and
Director (Principal Executive
Officer)
Date November 06, 1996 By /s/ Martha Myshak
----------------- ------------------------------
Martha Myshak
(Principal Financial Officer
and Treasurer)
Date November 06, 1996 By /s/ Donald J. Gibbs
------------------------------
Donald J. Gibbs
(Principal Accounting Officer
and Vice President, Finance/
Control Division Manager)
12
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 9,077
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
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0
0
<COMMON> 1,125
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<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,482
</TABLE>
