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FORM 10-KSB
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
/x/ ANNUAL REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1995
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/ / TRANSITION REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-13312
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THE FIRST JERMYN CORP.
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(Exact name of small business registrant as specified in its charter)
Commonwealth of Pennsylvania 23-2275242
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(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
645 Washington Ave; P.O. Box 39; Jermyn, Pennsylvania 18433-0039
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(Address of principal executive offices) (Zip-Code)
Registrant's telephone number 717-876-6500
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Securities registered under Section 12 (b) of the Exchange Act:
Title of each class Name of each exchange on which registered
NONE NONE
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Securities registered pursuant to Section 12 (g) of the Act:
Common Stock, $1.25 par value
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(Title of class)
Indicate by checkmark 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 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 .
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Indicate by checkmark if the disclosure of delinquent filers pursuant to Item
405 of Regulation S-B 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-KSB or any
amendment to this Form 10-KSB. /X/
State issuer's revenues for its most recent year. $ 22,074,000
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Based on the closing sales price of March 15, 1996, the aggregate market value
of the voting stock held by non-affiliates (which includes all common stock,
$1.25 par value other than shares beneficially owned by directors or officers)
of the registrant was $23,095,842.
The number of shares outstanding of the registrant's common stock, $1.25 par
value was 884,680 at March 15, 1996.
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FORM 10-KSB
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
DOCUMENTS INCORPORATED BY REFERENCE
(1) Portions of the annual report to shareholders for the year ended
December 31, 1995 are incorporated by reference into Part I, Part II, Part III,
and Part IV.
(2) Portions of the definitive annual meeting proxy statement to be filed,
pursuant to regulation 14A, within 120 days after December 31, 1995 are
incorporated by reference into Part I and Part III.
Transitional Small Business Disclosure Format. Yes No X .
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THE FIRST JERMYN CORP.
FORM 10-KSB
TABLE OF CONTENTS
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Page
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PART I
ITEM 1. Description of Business 1-4
ITEM 2. Description of Property 5
ITEM 3. Legal Proceedings 5
ITEM 4. Submission of Matters to a Vote of Security Holders 5
PART II
ITEM 5. Market for Common Equity and Related Shareholder Matters 6
ITEM 6. Management's Discussion and Analysis or Plan of Operation 6
ITEM 7. Financial Statements 6
ITEM 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures 6
PART III
ITEM 9. Directors, Executive Officers, Promoters and Control Persons; Compliance with
Section 16 (a) of the Exchange Act 7
ITEM 10. Executive Compensation 7
ITEM 11. Security Ownership of Certain Beneficial Owners and Management 7
ITEM 12. Certain Relationships and Related Transactions 7
PART IV
ITEM 13. Exhibits and Reports on Form 8-K 8
SIGNATURES 9
</TABLE>
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
The registrant, The First Jermyn Corp. (Company), is a Pennsylvania
corporation organized on February 13, 1984. The Company is a bank holding
company registered under the Bank Holding Company Act of 1956, as amended. The
Company conducts its principal activities through its bank subsidiary, The
First National Bank of Jermyn (the Bank), located in Lackawanna County,
Pennsylvania.
On July 2, 1984, The First Jermyn Corp. Became an active bank holding
company when the Agreement and Plan of Reorganization by and among The First
Jermyn Corp., The First National Bank of Jermyn, and FNBJ National Bank, a
Pennsylvania banking corporation wholly-owned by The First Jermyn Corp., was
consummated. As a result of the consummation, The First National Bank of
Jermyn became a wholly-owned subsidiary of The First Jermyn Corp.
The Company's principal activities consist of owning and supervising
the Bank, which engages in full-service wholesale and retail banking business.
As of December 31, 1995, the Company's subsidiary employed approximately 110
persons on a full-time equivalent basis. Through the Bank, the Company
derives substantially all of its income from the furnishing of banking and
banking related services.
SUBSIDIARIES
The Bank (a Pennsylvania chartered commercial bank) was established in
1902. The operations of the Bank are conducted from four offices located in
Lackawanna County, Pennsylvania. The Bank's main office is located in Jermyn,
Pennsylvania. It has offices operating in the Keyser Oak and Minooka sections
of Scranton, Pennsylvania, Carbondale, Pennsylvania and an office in Jessup,
Pennsylvania.
Through its branch system, the Bank provides various domestic lending
and depository services to fit both commercial and individual needs. Lending
services include commercial and individual real estate mortgage and
construction loans, secured and unsecured loans and lines of credit. Demand
for the Bank's loan products tends not to be affected by seasonality to a
significant degree, but is significantly impacted by the level and trend of
market interest rates. Deposit services include savings, clubs, money market,
NOWS, checking and certificates of deposit accounts. The Bank has a relatively
stable deposit base and no material amount of deposits is obtained from a
single depositor or group of depositors, including governmental entities. The
Bank has not experienced any significant seasonal fluctuations in the amount of
its deposits.
The Company formed a subsidiary, First of Jermyn Realty Company,
Inc., in May 1990. This subsidiary has been inactive since its inception.
COMPETITION
The Bank experiences stiff competition in all phases of its business
from other bank holding companies and commercial banks, savings and loan
institutions, credit unions, brokerage and insurance companies, and other
financial service providers. The Bank competes for loans and deposits in its
market area (which is concentrated in the primary trade areas of the branch
locations) with both Pennsylvania and out-of-state banks and other financial
service companies which have been given authority to compete within
Pennsylvania boundaries.
SUPERVISION AND REGULATION
Bank holding companies and banks are extensively regulated under both
federal and state law. To the extent that the following information describes
statutory and regulatory provision, it is qualified in its entirety by
reference to the particular statutory and regulatory provision. Any change in
applicable laws or regulations may have a material effect on the business and
prospects of the Company and the Bank.
1
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The Company
The Company is registered as a bank holding company under the Bank
Holding Company Act of 1956, as amended (the "Holding Company Act") and, is,
therefore, subject to supervision and examination by the Federal Reserve Board
under the Holding Company Act. The Company is subject to certain annual
reporting requirements regarding its business operations.
The Company is under the jurisdiction of the Securities and Exchange
Commission and various state securities commissions for matters relating to the
offering and sale of its securities and is subject to the periodic reporting
requirements of the Securities and Exchange Commission.
The Bank
The Bank, as a national bank, is subject to the National Bank Act.
The Bank is also subject to the supervision of, and is regularly examined by,
the Comptroller of the Currency of the United States (the "Comptroller") and is
required to furnish quarterly reports to the Comptroller. The approval of the
Comptroller is required for the establishment of additional branch offices by
any national bank, subject to applicable state law restrictions. Under present
applicable Pennsylvania law, effective March 1990, a federally chartered bank
(such as the Bank) may, with prior approval of the Comptroller, establish
branches generally within any county in the Commonwealth.
The Bank is a member of the FDIC and a member of Federal Reserve
System and, therefore, is subject to additional regulation by these agencies.
Some of the aspects of the lending and deposit business of the Bank which are
regulated by these agencies include personal lending, mortgage lending,
interest rates as they relate to lending, and reserve requirements. These
agencies are primarily concerned with the safety and soundness of individual
banks, but are also involved with the general oversight of the activities of a
bank directed toward the determination that the bank is operating competitively
and constructively, in accordance with applicable regulations and statutes.
The operations of the Bank are also subject to numerous federal, state
and local laws and regulations which set forth specific restrictions and
procedure requirements with respect to the extension of credit, credit
practices, the disclosure of credit terms and discrimination in credit
transactions.
The Bank is subject to certain restrictions on loans and extensions of
credit to the Company, investment in the stock or securities of the Company,
and acceptance of the stock or securities of the Company as collateral for
loans. As a consequence of the extensive regulation of commercial banking
activities in the United States, the Bank's business is particularly
susceptible to being affected by federal and state legislation and regulation
which may have the effect of increasing the costs of doing business as well as
limiting the business activities of the Bank.
In December 1991, Congress enacted the Federal Deposit Insurance
Corporation Improvement Act (FDICIA). This Act substantially revised the bank
regulatory and funding provisions of the Federal Deposit Insurance Act and made
revisions to several other federal banking statutes. Additional discussion of
FDICIA's impact on capital requirements is contained in Management's Discussion
and Analysis, "Capital Adequacy" on page 17 of the Company's Annual Report to
Shareholders which is incorporated by reference.
In addition, FDICIA directs that each federal banking agency prescribe
standards of 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, a maximum ratio of classified assets to capital, minimum earnings
sufficient to absorb losses, a minimum ratio of market calue to book value for
publicly traded shares (if feasible) and such other standards as the agency
deems appropriate. To date, these regulations have not resulted in any
material cost to the Company or any significant changes to the Company's
operations.
FDICIA also contains a variety of other provisions that affected 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, 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 brokered deposits by depository institutions that are
not well capitalized or are adequately capitalized and have not received a
waiver from the FDIC. To date, compliance with this regulation has not imposed
material costs on the Company.
2
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Prompt Corrective Action
FDICIA was signed into law on December 19, 1991. Regulations
implementing the prompt corrective action provision of FDICIA became effective
on December 19, 1992. In addition to the prompt corrective action
requirements, FDICIA includes significant changes to the legal and regulatory
environment for insured depository institutions, including reductions in
insurance coverage for certain kinds of deposits, increased supervision by the
federal regulatory agencies, increased reporting requirements for insured
institutions, and new regulations concerning internal controls, accounting, and
operations. The prompt corrective action regulations define specific capital
categories based on an institution's capital ratios. The capital categories,
in declining order, are "well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized," and "critically
undercapitalized." Institutions categorized as "undercapitalized" or worse are
subject to certain restriction, including the requirement to file a capital
plan with its primary federal regulator, prohibitions on the payment of
dividends and management fees, restrictions on executive compensation, and
increased supervisory monitoring, among other things. Other restrictions may
be imposed on the institution either by its primary federal regulator or by the
FDIC, including requirements to raise additional capital, sell assets, or sell
the entire institution. Once an institution becomes "critically
undercapitalized," it must generally be placed in receivership or
conservatorship within 90 days. To be considered "well capitalized," an
institution must generally have a leverage ratio of at least 5%, a Tier 1
risk-based capital ratio of at least 6%, and a total risk-based capital ratio
of at least 10%. An institution is deemed to be "critically undercapitalized"
if it has a tangible equity ratio of 2% or less. The Bank meets the definition
of "well capitalized" at December 31, 1995.
3
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Interstate Banking
The Riegle-Neal Interstate Banking and Branching Efficiency Act of
1994 (the "Interstate Banking Act"), enacted on September 29, 1994, permits
bank holding companies to acquire banks in any state beginning in 1995.
Beginning in 1997, acquired banks in different states may be merged into a
single bank, and thereafter merged banks may establish and acquire additional
branches anywhere the acquiree could have branched. States may opt out of
interstate branching until June 1, 1997, but if so, their domestic institutions
will also be prohibited from branching interstate. States may also enact laws
permitting interstate merger transactions and interstate de novo branching
before June 1, 1997. Limited branch purchases are still subject to state laws.
Bank management anticipates that the Interstate Banking Act may
increase competitive pressures in the Bank's market by permitting entry of
additional competitors.
Deposit Insurance Assessments
The Bank's deposit obligations are insured by the "Bank Insurance
Fund" ("BIF") administered by the FDIC and the Bank is obligated to pay deposit
insurance premiums semiannually. The FDIC computes the Bank's rate based upon
the FDIC's evaluation of the Bank's risk, based principally on the Bank's
capital level and the extent of supervisory risk which bank regulators judge
the Bank to represent.
The Bank's FDIC insurance assessment decreased by $244,000 in 1995
compared to 1994 as a result of a refund of premiums and a reduction of the
Bank's FDIC assessment. The Bank expects to experience reduced FDIC insurance
costs for the foreseeable future due to the BIF having reached its goal of
1.25% of insured deposits.
4
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ITEM 2. DESCRIPTION OF PROPERTY
Two of the Bank's offices are leased under a long-term capital lease
agreement which expires (after three annual renewable periods) in the year
ended December 31, 2004. The main office (15,584 square feet) located at 645
Washington Avenue, Jermyn, Pennsylvania, is leased under such agreement. The
office (13,284 square feet) located in the Keyser Oak Plaza, Scranton,
Pennsylvania, is also leased under such agreement. The Bank has the option of
purchasing the leased facilities at the end of the lease term for the fair
market value of the leased property. The Bank also has the option to renew the
lease for four additional terms of five years each at the expiration of the
original lease term. The present value of the minimum lease payments
associated with these properties was $891,000 at December 31, 1995.
The Jessup office is owned and not subject to any mortgage debt. The
office contains approximately 7,000 square feet.
The Bank constructed an office (approximately 5,500 square feet
excluding unfinished basement) in the Minooka section of Scranton,
Pennsylvania. This office is not subject to any mortgage debt.
In January 1995, the Bank purchased a building and parking lot in
Carbondale, Pennsylvania. This office serves as a full service community bank
with drive up windows and a drive up automatic teller machine. The office
contains 11,090 square feet of space, is owned by the Bank, and is not subject
to any mortgage debt.
ITEM 3. LEGAL PROCEEDINGS
The Company and the Bank are not involved in any pending legal
proceedings other than routine nonmaterial legal proceedings occurring in the
ordinary course of business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
5
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Information pertaining to The First Jermyn Corp's quarterly common
stock price ranges, dividends declared per share data, any limitations on
future dividend paying abilities, and number of shareholders are found in the
Company's Annual Report to Shareholders and is hereby incorporated by
reference.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The information required herein is incorporated by reference from
pages 9 to 18 of the Company's Annual Report.
ITEM 7. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
INDEX TO CONSOLIDATED FINANCIAL ANNUAL REPORT
STATEMENTS AND SUPPLEMENTARY TO SHAREHOLDERS
FINANCIAL DATA PAGE REFERENCE
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Consolidated Balance Sheets,
December 31, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Consolidated Statements of Income,
Years Ended December 31, 1995, 1994 and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Consolidated Statements of Changes in Shareholders' Equity,
Years Ended December 31, 1995, 1994 and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Consolidated Statements of Cash Flows,
Years Ended December 31, 1995,1994 and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23-32
</TABLE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
During 1994, the Company engaged KPMG Peat Marwick LLP as its
independent auditors for the fiscal year ended December 31, 1994. Prior to
1994, the Company's auditors were Cavalari, McHale, Matlowski & Company. There
were no disagreements with Cavalari, McHale, Matlowski & Company on any matter
of accounting practices, financial statement disclosure or auditing scope or
procedures at the time of their dismissal. The Company's audit committee
approved the selection of KPMG Peat Marwick LLP.
6
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PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16 (a) OF THE EXCHANGE ACT
Information concerning directors and executive officers of the
registrant is incorporated herein by reference from the Company's definitive
proxy statement to be filed pursuant to Regulation 14A, within 120 days after
December 31, 1995, for the annual meeting of shareholders.
ITEM 10. EXECUTIVE COMPENSATION
Executive Compensation information is incorporated by reference from
the Company's definitive proxy statement to be filed, pursuant to Regulation
14A, within 120 days after December 31, 1995, for the annual meeting of
shareholders.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information concerning the security ownership of certain beneficial
owners and management is incorporated herein by reference from the Company's
definitive proxy statement to be filed pursuant to Regulation 14A, within 120
days after December 31, 1995, for the annual meeting of shareholders.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information concerning certain relationships and related transactions
with regard to indebtedness of management is incorporated herein by reference
from the Company's definitive proxy statement to be filed pursuant to
Regulation 14A, within 120 days after December 31, 1995, for the annual meeting
of shareholders and Note 4 - Loans of the Notes to Consolidated Financial
Statements of the 1995 Annual Report to Shareholders.
7
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PART IV
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ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
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(a) (1) The following financial statements are included in Part II Item 7:
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33*
Former Independent Auditor's Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33a
Financial Statements:
Consolidated Balance Sheets, December 31, 1995 and 1994 . . . . . . . . . . . . . . . . . 19*
Consolidated Statements of Income,
Years Ended December 31, 1995 , 1994 and 1993 . . . . . . . . . . . . . . . . . . . . 20*
Consolidated Statement of Changes in Shareholders' Equity,
Years Ended December 31, 1995, 1994 and 1993 . . . . . . . . . . . . . . . . . . . . . 21*
Consolidated Statement of Cash Flows,
Years Ended December 31, 1995, 1994 and 1993 . . . . . . . . . . . . . . . . . . . . . 22*
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . 23-32*
Selected Quarterly Financial Data-
Years Ended December 31, 1995, and 1994 . . . . . . . . . . . . . . . . . . . . . . . 18*
</TABLE>
All other schedules are omitted because they are not
applicable or the required information is shown in the
financial statements or notes thereto.
(2) Exhibits included here in or incorporated by reference herein:
3 (a) Registrant's By-Laws, as amended on June 8, 1987, filed
with Form 10-K for the year ended December 31, 1987 and
incorporated herein by reference
3 (b) Registrant's Articles of Incorporation filed with the
Form 10-K for the year ended December 31, 1984 and
incorporated herein by reference
3 (c) Amendment No 1 to Form S-4, Registration Statement under
The Securities Act of 1933 (File No. 33-22383) dated
July 15, 1988 and incorporated herein by reference
3 (d) Articles of Merger and Certificate of Merger of First
Jessup, Corp. With and into The First Jermyn Corp.
Filed with Form 10-K for the year ended December 31,
1989 and incorporated herein by reference
3 (e) Comptroller of the Currency approval of merger of First
National Bank of Jessup with and into The First National
Bank of Jessup, filed with Form 10-K for the year ended
December 31, 1989 and incorporated herein by reference
3 (f) Registrant's Articles of Amendment effective December
29, 1989, filed with Form 10-K for the year ended
December 31, 1989, and incorporated herein by reference
3 (g) First of Jermyn Realty Company, Inc. Articles of
Incorporation incorporated herein by reference
3 (h) First of Jermyn Realty Company, Inc. By-Laws
incorporated herein by reference
10 Lease Agreement, Option Agreement and Memorandum of
Lease made the 29th day of August 1974 by and between
Sterling Industrial Corp. and The First National Bank of
Jermyn for the Bank's office buildings located in Jermyn
and the Keyser Oak section of Scranton, Pennsylvania,
filed with the Form 10-K for the year ended December 31,
1993 and incorporated by reference
13 Annual Report to Shareholder for the Year Ended December
31, 1995 (included herewith)
* Refers to page numbers in Annual Report to Shareholders incorporated by
reference
(b) None
8
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S I G N A T U R E S
Pursuant to the requirements of Section 13 or 15 (d) 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.
The First Jermyn Corp.
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(Registrant)
<TABLE>
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By /S/ William M. Davis Chairman, President and Director March 29, 1996
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William M. Davis
(Principal Executive Officer)
By/S/ Martha Myshak Treasurer March 29, 1996
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Martha Myshak
(Principal Financial Officer)
By/S/ Donald J. Gibbs Vice President, Finance\ March 29, 1996
---------------------------------------------- Control Division Manager
Donald J. Gibbs
(Principal Accounting Officer)
</TABLE>
Pursuant of 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.
<TABLE>
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/S/ Peter A. Sabia Director March 29, 1996
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Peter A. Sabia
/S/ Kuzma Leschak, Jr. Director March 29, 1996
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Kuzma Leschak, Jr.
/S/ Robert T. Kelly Director March 29, 1996
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Robert T. Kelly
/S/ David M. Epstein Director March 29, 1996
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David M. Epstein
/S/ I. Leo Moskovitz Director March 29, 1996
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I. Leo Moskovitz
/S/ Dr. Edmund J. Biancarelli Director March 29, 1996
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Dr. Edmund J. Biancarelli
/S/ Garfield G. Thomas Secretary and Director March 29, 1996
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Garfield G. Thomas
/S/ William M. Davis Chairman, President and Director March 29, 1996
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William M. Davis
</TABLE>
9
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[THE FIRST OF JERMYN LOGO]
1995 ANNUAL REPORT
THE FIRST NATIONAL BANK OF JERMYN
Subsidiary of The First Jermyn Corp.
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2
TABLE OF CONTENTS
<TABLE>
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Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Letter from the President . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Financial Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . 9
CONSOLIDATED FINANCIALSTATEMENTS:
Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Consolidated Statements of Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Consolidated Statements of Changes in Shareholders' Equity . . . . . . . . . . . . . . . . . . . . 21
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
</TABLE>
A copy of the First Jermyn Corp. 10-K without exhibits may be obtained
without charge by writing to:
Martha Myshak, Treasurer - The First Jermyn Corp. - 645 Washington
Avenue - Jermyn, PA 18433
<PAGE> 3
3
ANNUAL REPORT 1995
[THE FIRST OF JERMYN LOGO]
FINANCIAL HIGHLIGHTS
FINANCIAL HIGHLIGHTS
(Dollars In Thousands, Except Share Data)
<TABLE>
<CAPTION>
FOR THE YEAR 1995 1994 1993
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Total interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 21,492 $ 18,103 $ 17,401
Total interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,282 7,197 7,127
Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,210 10,906 10,274
Provision for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . 365 454 1,403
Non-interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 582 577 500
Non-interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,804 6,726 6,284
Federal income tax provision . . . . . . . . . . . . . . . . . . . . . . . . . 1,369 1,366 927
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,254 2,937 2,160
Cash dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,018 930 885
AT YEAR END
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $309,986 $278,015 $263,427
Loans, gross . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174,470 168,808 163,585
Allowance for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,015 2,835 2,849
Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114,898 92,464 83,307
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 281,298 250,842 239,007
Shareholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,209 23,164 22,506
SHARE DATA
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3.68 $ 3.32 $ 2.44
Cash dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.15 1.05 1.00
Book value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29.63 26.18 25.44
Number of shares outstanding, net . . . . . . . . . . . . . . . . . . . . . . . 884,680 884,680 884,680
SELECTED RATIOS
Return on assets (net income divided by average total assets) . . . . . . . . . 1.12% 1.10% 0.85%
Return on equity (net income divided by average equity) . . . . . . . . . . . . 13.20% 12.83% 9.90%
Common stock dividend payout rate (dividends declared divided by net income) . 31.28% 31.66% 40.97%
Equity to assets ratio (average equity divided by average total assets) . . . . 8.48% 8.56% 8.62%
Leverage Ratio (shareholders' equity divided by average total assets) . . . . . 9.02% 8.66% 8.90%
Risk-Based Capital Ratio, Tier I . . . . . . . . . . . . . . . . . . . . . . . 16.54% 16.08% 15.18%
Risk-Based Capital Ratio, Total . . . . . . . . . . . . . . . . . . . . . . . . 17.79% 17.34% 16.43%
</TABLE>
<PAGE> 4
4
[FIRST OF JERMYN LOGO]
LETTER FROM THE PRESIDENT
Dear Shareholders:
It is with great pride that we share the operating results of The First Jermyn
Corporation and its wholly owned subsidiary, The First National Bank of Jermyn,
for the year 1995.
What a year! A new office, renovations to existing offices, and the best
performing year First of Jermyn ever had.
On December 11, 1995, a new chapter in our history began with the opening of
our fifth location, known as the Liberty Office, located in Carbondale. After
extensive evaluations, we determined that a real need existed for the values
and integrity of community banking in the Carbondale area. Our response was
the establishment of this new office.
After months of planning, the physical renovations of our Liberty Office began.
By the time of our "Open House," the building had been completely refurbished.
The office features seven teller windows, three drive up windows, a drive up
automatic teller machine, a walk up window, convenient customer parking and a
new time and temperature sign. Since the "Grand Opening," the acceptance of
our Liberty Office has been tremendous. We are thrilled with its performance,
it surpassed all the goals that had been established.
We also completed major renovations to our Jermyn and Jessup offices. The
exteriors of both locations were completely cleaned and painted, in addition to
a wide array of other improvements. These efforts resulted in our Jermyn
Office receiving the Scranton Chamber of Commerce's Pride and Progress Award.
Of course none of these events would be possible without a solid financial
performance, and 1995 was the most successful year in First of Jermyn's
history. The net income amounted to $3,254,000, an increase of $317,000, and a
10.8% increase over the prior year's earnings. This increased our return on
assets to 1.12% for the year 1995. Return on equity amounted to 13.20%, an
increase of 3% over the previous year's return on equity.
The total assets of the Bank increased to $309,986,000 at year end 1995, an
increase of $31,971,000 and a 11.50% increase over the prior year's total
assets of $278,015,000. The deposits increased to $281,298,000 at year end
1995, an increase of $30,456,000 and a 12.14% increase over the prior year's
total deposits of $250,842,000. Year end 1995 loans increased to $174,470,000,
an increase of $5,662,000 and a 3.35% increase over the prior year's total
loans of $168,808,000.
The securities portfolio at year end amounted to $114,898,000. This was an
increase of $22,434,000 and a 24.26% increase over the previous year end total
of $92,464,000. Shareholder's equity at year end 1995 was $26,209,000. This
was an increase of $3,045,000 and a 13.15% increase over the prior year end
total of $23,164,000. Book value per share of stock at year end was $29.63.
This was an increase of $3.45 and a 13.18% increase over the prior year end
total of $26.18.
The success of our Bank is dependent upon our employees. Our success begins
and ends with their dedication. They are our most valuable asset and their
commitment to customer service is the main reason for our continued success.
[PHOTO]
During the past year, several employees received promotions. They are:
Patricia Calabro, Community Office Manager; Dolores Coviello, Data Processing
Manager; Helen Sudlesky, Maryann Smith, Donna Davis, Customer Service Officers
and Nolan Ayres, Head Teller. These employees are to be congratulated on their
achievements.
Our past is something that we look back at with pride. We learn from it and
build on its principles to make a better First of Jermyn in the future. You
can help with that growth by recommending us to your family, friends and
business acquaintances. This is your Bank, let it serve you.
Sincerely,
/s/ WILLIAM M. DAVIS
William M. Davis, President and CEO
<PAGE> 5
5
ANNUAL REPORT 1995
[FIRST OF JERMYN LOGO]
GROWTH
[6 INDIVIDUAL PHOTOS]
LIBERTY
At First of Jermyn, our primary goal is providing the most reliable, convenient
banking to the communities we serve. As more and more people from the
Carbondale Area traveled to Jermyn and our other locations to do business with
us, we determined that a Carbondale Office was important in meeting that goal.
We again demonstrated our commitment to reinvesting in the communities we serve
by completely renovating our Liberty Office in Carbondale. This new office
features seven teller windows, three drive up windows, a convenient walk up
window, a drive up automatic teller machine together with convenient parking.
On the weekend of December 9th and 10th, 1995, we conducted an "Open House" to
meet our new Carbondale neighbors and the response was tremendous. The Bank's
officers, directors and employees, along with the entire Liberty Staff, mingled
with our new and potential customers, detailing First of Jermyn's many
services, showing them through the newly renovated building and enjoying
refreshments that were served. On December 11th, we officially opened for
business and were thrilled with the response received.
It demonstrated once again, the appreciation people have for the values of true
community banking and the solid reputation that First of Jermyn has earned over
the years. The effort and hard work of 1995 has laid the foundation for 1996
to be the best operating year in our history. We look forward to the coming
year with great anticipation and thank everyone involved with the Liberty
project.
<PAGE> 6
6
LIBERTY OFFICE STAFF
We would like to highlight the employees at our Liberty Office in Carbondale.
The staff consists of highly experienced individuals who have demonstrated a
commitment to the community. We are excited about the new office and the
exceptional staff.
[PHOTO]
Manager; Helen Sudlesky, Customer Service Officer and Nolan Ayres, Head Teller,
(back row) Ann Karkheck, Teller; Marian E. Mazza, Teller; Cynthia McGraw,
Teller; Christine West, Receptionist; Donna Vetrosky, Teller and Mary Kay
Kelly, Teller.
[PHOTO]
Patricia Calabro
Community Office Manager
Liberty Office
[PHOTO]
Dolores Coviello
Data Processing Manager
Jermyn Office
PROMOTIONS
[PHOTO]
Helen Sudlesky
Customer Service Officer
Liberty Office
[PHOTO]
Nolan Ayres
Head Teller
Liberty Office
[PHOTO]
Donna Davis
Customer Service Officer
Minooka Office
[PHOTO]
Maryann Smith
Customer Service Officer
Jermyn Office
<PAGE> 7
7
RENOVATIONS
In addition to improving our community, we are continuously striving to improve
ourselves as well. In 1995, First of Jermyn undertook "site improvement
projects" at three of our locations. Our Jermyn Office received a great deal
of attention, with the installation of a new drive up automatic teller machine,
in addition to an expanded and renovated drive up window canopy. The exterior
of the building was cleaned and several areas refinished. The parking lot was
enlarged and completely paved. The project also included new exterior
lighting, a flagpole, new sidewalks and fresh landscaping.
But, we didn't stop there. Renovations were also completed at our Jessup
Office, that included the installation of a new roof, cleaning, painting the
exterior of the building, and a new MAC sign.
Of course, The Liberty Office received the most attention. In addition to the
extensive interior remodeling, a new roof was installed, the exterior of the
building was cleaned, the parking lot received site improvements and paving.
Across the street, Liberty's annex and drive in lanes were refurbished and a
new automatic teller machine installed. As a finishing touch, a new "time and
temperature" sign was installed and brass plaques were added to the building
exterior.
It is this dedication to self improvement that makes First of Jermyn a better
community bank. Being at our best means we can offer the best service to our
valued customers and that, after all, is our primary goal.
[PHOTO]
JERMYN OFFICE
[PHOTO]
JESSUP OFFICE
[PHOTO]
LIBERTY ANNEX
[PHOTO]
LIBERTY OFFICE
<PAGE> 8
8
COMMERCIAL BUSINESS
For over 90 years, First of Jermyn has played a role in the growth of our
communities. During this past year, our lending personnel assisted many
businesses with their renovation and expansion projects. We feel it's
noteworthy to mention a few examples of our commitment to the economic
development of Northeastern Pennsylvania.
When the Carbondale Library Association contacted us about a plan for their new
facility, we were ready to help meet their financing needs. This reinvestment
in the community ensures that future generations will benefit from a state of
the art library facility. On a differing scale, First of Jermyn provided
financing for the Tink's entertainment complex and a new McDonald's Restaurant,
both located in downtown Scranton. These projects have added to the increasing
economic vitality taking place in the downtown area.
Our commitment to community growth is further evidenced by other expansion
projects. During this past summer, TR Associates of Archbald, added a 5000
square foot addition which will house their computer manufacturing and
warehouse functions. First of Jermyn was also there to provide funds for Road
Scholar Transport, a major trucking firm located in Dunmore. With our help,
Road Scholar has broadened their customer base by purchasing a terminal
facility in Lynchburg, Virginia. Lastly, our staff worked with the Lackawanna
Heritage Valley Authority to complete a financing package for the expansion of
their facility in Mayfield. The funds, in conjunction with state and federal
grants, will be used to construct space for the National Institute for
Environmental Renewal. Trichilo Wholesale Foods, with our help, recently
expanded the size of their building adding additional freezer space for the
business to operate.
Through all of these projects differ in some respect, they all represent a
significant impact on the economy of Lackawanna County. We are proud to work
with these and other customers to promote success and generate new jobs for our
community.
Since our inception, First of Jermyn has been recognized as a leader in
community involvement. We will continue to instill growth in the communities
we serve and provide assistance to business and organizations interested in
their own expansion.
[PHOTO]
CARBONDALE PUBLIC LIBRARY
[PHOTO]
TINK'S, SCRANTON
[PHOTO]
MCDONALD'S RESTAURANT, SCRANTON
[PHOTO]
TR ASSOCIATES, ARCHBALD
[PHOTO]
ROAD SCHOLAR, DUNMORE
[PHOTO]
TRICHILO WHOLESALE FOODS, CARBONDALE
[PHOTO]
LACKAWANNA HERITAGE VALLEY AUTHORITY, MAYFIELD
<PAGE> 9
ANNUAL REPORT 1995
[FIRST OF JERMYN LOGO]
FINANCIAL
FINANCIAL REVIEW
Selected Financial Data
(Dollars In Thousands, Except Share Data)
<TABLE>
<CAPTION>
FOR THE YEAR 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Total interest income . . . . . . . . . . . . . . . . . . . . . . . . $ 21,492 $ 18,103 $ 17,401 $ 18,442 $ 20,150
Total interest expense . . . . . . . . . . . . . . . . . . . . . . . 10,282 7,197 7,127 8,598 11,854
Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . 11,210 10,906 10,274 9,844 8,296
Provision for loan losses . . . . . . . . . . . . . . . . . . . . . 365 454 1,403 1,483 906
Non-interest income . . . . . . . . . . . . . . . . . . . . . . . . . 582 577 500 797 337
Non-interest expense . . . . . . . . . . . . . . . . . . . . . . . . 6,804 6,726 6,284 5,962 5,280
Federal income tax provision . . . . . . . . . . . . . . . . . . . . 1,369 1,366 927 895 545
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,254 2,937 2,160 2,301 1,902
Cash dividends paid . . . . . . . . . . . . . . . . . . . . . . . . 1,018 930 885 796 796
AT YEAR END
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $309,986 $278,015 $263,427 $242,899 $241,137
Loans, gross . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174,470 168,808 163,585 175,505 175,056
Allowance for loan losses . . . . . . . . . . . . . . . . . . . . . . 3,015 2,835 2,849 2,382 2,002
Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114,898 92,464 83,307 47,762 51,906
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 281,298 250,842 239,007 215,454 218,738
Shareholders' equity . . . . . . . . . . . . . . . . . . . . . . . . 26,209 23,164 22,506 21,231 19,726
SHARE DATA
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3.68 $ 3.32 $ 2.44 $ 2.60 $ 2.15
Cash dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.15 1.05 1.00 0.90 0.90
Book value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29.63 26.18 25.44 24.00 22.30
Number of shares outstanding, net . . . . . . . . . . . . . . . . . . 884,680 884,680 884,680 884,680 884,680
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION
INTRODUCTION AND BUSINESS
The following discussion and analysis presents the significant changes in the
results of operations and financial condition for the periods shown. The
discussion should be read in conjunction with the consolidated financial
statements and notes included elsewhere in this report. Tabular information is
presented in thousands of dollars, except as indicated.
The First Jermyn Corp. (Company) owns all of the outstanding common stock of
its only bank subsidiary, The First National Bank of Jermyn (Bank). The Company
formed a non-bank subsidiary, First of Jermyn Realty Company, Inc. (Realty),
during 1990. Realty has been inactive since inception. The Company is subject
to supervision of the Federal Reserve System. The Bank is chartered as a
national bank and is subject to supervision of the Comptroller of the Currency
and the Federal Deposit Insurance Corporation. The Bank operates offices in
Jermyn and Jessup and two offices in Scranton (Keyser Oak Plaza and Minooka
Section), Pennsylvania. The Bank opened a fifth office, located in Carbondale,
Pennsylvania during 1995. The Bank offers all services normally provided by a
community bank, including deposit, safekeeping and loan functions through its
branch system.
<PAGE> 10
MCKINNEY/ESSEX
IS VERY PROUD
TO SUPPORT THE BOYS AND GIRLS CLUB
OF SCRANTON.
McKinney/Essex extends congratulations on
a job well done to all the alumni of the Boys and
Girls Club of Scranton. Many thanks to
MRS. WILMA BAILEY, REP. GAYNOR CAWLEY,
MR. WILLIAM LYDON, DR. JOSEPH MOWAD,
ATTY. PAT RYAN AND MR. JOHN WILLS for fulfilling a
great service to the young people of our community,
and best wishes for many years to come.
[MCKINNEY/ESSEX LOGO]
820 Davis Street, Scranton, PA 18505
1591 Indiana Street, San Francisco, CA 94107
<PAGE> 11
10
RESULTS OF OPERATIONS
The consolidated net income for 1995 was $3,254,000, an increase of 10.8% from
the prior year. The net income for 1994 (2,937,000) increased 36% from 1993.
The following table (Table I) presents the amount and percentage of increase
(decrease) for the major components of net income for the years under review.
TABLE I
Increase (Decrease)
<TABLE>
<CAPTION>
1995 vs. 1994 1994 vs. 1993
Amount Percent Amount Percent
------ -------- ------ -------
<S> <C> <C> <C> <C>
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,389 18.7% $702 4.0%
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . 3,085 42.9% 70 1.0%
------ -----
Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . 304 2.8% 632 6.2%
Provision for loan losses . . . . . . . . . . . . . . . . . . . . . . (89) (19.6%) (949) (67.6%)
------ -----
Net interest income after provision for loan losses . . . . . . . . . 393 3.8% 1,581 17.8%
Non-interest income . . . . . . . . . . . . . . . . . . . . . . . . 5 0.9% 77 15.4%
Non-interest expense . . . . . . . . . . . . . . . . . . . . . . . . 78 1.2% 442 7.0%
------ -----
Income before Federal income tax provision . . . . . . . . . . . . . 320 7.4% 1,216 39.4%
Federal income tax provision . . . . . . . . . . . . . . . . . . . . 3 - 439 47.4%
------ -----
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 317 10.8% $777 36.0%
------ -----
</TABLE>
[FIGURE 1]
NET INTEREST INCOME
Table II illustrates average balances and the average tax-equivalent yield
earned by the Bank on its interest-earning assets and the average interest rate
associated with its interest-bearing liabilities for 1995, 1994, and 1993.
Table III exhibits the volume and yield/rate variances for interest-earning
assets and interest-bearing liabilities.
TABLE II
AVERAGE BALANCES AND RATES
<TABLE>
<CAPTION>
1995 1994
---------------------------- ------------------------------
Average Revenue/ Yield/ Average Revenue/ Yield/
Balance Expense Rate Balance Expense Rate
---------------------------- ------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans:
Commercial, financial and
agricultural . . . . . . . . . . . . . . . . . . . . $ 38,124 $3,532 9.26% $ 43,625 $3,394 7.78%
Real estate - commercial
and residential mortgage . . . . . . . . . . . . . . 105,368 9,087 8.62% 100,341 8,072 8.04%
Installment - net . . . . . . . . . . . . . . . . . 25,678 2,158 8.40% 17,415 1,502 8.62%
Fees on loans . . . . . . . . . . . . . . . . . . . . - 164 - - 211 -
------- ------ ----- -------- ------ -----
Total loans (including fees) . . . . . . . . . . . . 169,170 14,941 8.83% 161,381 13,179 8.17%
Securities:
Taxable . . . . . . . . . . . . . . . . . . . . . . . 94,586 5,979 6.32% 87,270 4,814 5.52%
Tax-exempt . . . . . . . . . . . . . . . . . . . . . 6,960 568 8.16% 1,635 131 8.01%
-------- ------ ----- -------- ------ -----
Total securities . . . . . . . . . . . . . . . . . 101,546 6,547 6.45% 88,905 4,945 5.56%
Federal funds sold . . . . . . . . . . . . . . . . . . 5,520 325 5.89% 3,463 146 4.22%
-------- ------ ----- -------- ------ -----
Total interest-earning assets . . . . . . . . . . . 276,236 21,813 7.90% 253,749 18,270 7.20%
------ ------
Non-interest-earning assets . . . . . . . . . . . . . . . . 14,341 13,682
--------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . $290,577 $267,431
-------- --------
</TABLE>
<TABLE>
<CAPTION>
1993
------------------------------
Average Revenue/ Yield/
Balance Expense Rate
------------------------------
<S> <C> <C> <C>
Interest-earning assets:
Loans:
Commercial, financial and
agricultural . . . . . . . . . . . . . . . . . . . . $51,823 $3,552 6.85%
Real estate - commercial
and residential mortgage . . . . . . . . . . . . . . 100,346 7,963 7.94%
Installment - net . . . . . . . . . . . . . . . . . 16,552 1,621 9.79%
Fees on loans . . . . . . . . . . . . . . . . . . . . - 259 -
-- --- -
Total loans (including fees) . . . . . . . . . . . . 168,721 13,395 7.94%
Securities:
Taxable . . . . . . . . . . . . . . . . . . . . . . . 65,637 4,020 6.12%
Tax-exempt . . . . . . . . . . . . . . . . . . . . . 958 77 8.04%
---- -- -----
Total securities . . . . . . . . . . . . . . . . . 66,595 4,097 6.15%
Federal funds sold . . . . . . . . . . . . . . . . . . 3,481 106 3.05%
----- --- ------
Total interest-earning assets . . . . . . . . . . . 238,797 17,598 7.37%
------
Non-interest-earning assets . . . . . . . . . . . . . . . . 14,174
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . $252,971
--------
</TABLE>
[FIGURE 2]
<PAGE> 12
11
TABLE II (CONTINUED)
<TABLE>
<CAPTION>
1995 1994
-------------------------- ----------------------------------
Average Revenue/ Yield/ Average Revenue/ Yield/
Balance Expense Rate Balance Expense Rate
-------------------------- ----------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest-bearing liabilities:
Deposits:
Savings, Club, NOW, and
money market accounts . . . . . . . . . . $ 95,969 $ 2,403 2.50% $107,131 $ 2,711 2.53%
Certificates of deposit . . . . . . . . . . 142,012 7,787 5.48% 110,997 4,383 3.95%
-------- ------- -------- -------
Total deposits . . . . . . . . . . . . . . 237,981 10,190 4.28% 218,128 7,094 3.25%
Federal funds purchased . . . . . . . . . . . 18 1 5.56% 131 6 4.58%
Capitalized lease obligation . . . . . . . . . 920 91 9.89% 981 97 9.89%
-------- ------- -------- -------
Total interest-bearing liabilities . . . . 238,919 10,282 4.30% 219,240 7,197 3.28%
------- -------
Non-interest-bearing liabilities . . . . . . . . 27,009 25,296
Shareholders' equity . . . . . . . . . . . . . . 24,649 22,895
-------- --------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY . . . . . . . . . . . $290,577 $267,431
-------- --------
Net interest income . . . . . . . . . . . . . . . $11,531 $11,073
------- -------
Margin analysis:
Interest income/interest - earning assets . . 7.90% 7.20%
Interest expense/interest - earning assets . . 3.72% 2.84%
----- -----
Net interest income/interest - earning assets 4.18% 4.36%
----- -----
Tax equivalent adjustments:
Loans . . . . . . . . . . . . . . . . . . . . $ 128 $ 121
Securities . . . . . . . . . . . . . . . . . 193 46
-------- --------
Total . . . . . . . . . . . . . . . . . . . $ 321 $ 167
-------- --------
</TABLE>
<TABLE>
<CAPTION>
1993
------------------------------
Average Revenue/ Yield/
Balance Expense Rate
------------------------------
<S> <C> <C> <C>
Interest-bearing liabilities:
Deposits:
Savings, Club, NOW, and
money market accounts . . . . . . . . . . $102,636 $ 3,061 2.98%
Certificates of deposit . . . . . . . . . . 103,585 3,964 3.83%
-------- -------
Total deposits . . . . . . . . . . . . . . 206,221 7,025 3.41%
Federal funds purchased . . . . . . . . . . . 5 - -
Capitalized lease obligation . . . . . . . . . 1,038 102 9.83%
-------- -------
Total interest-bearing liabilities . . . . 207,264 7,127 3.44%
-------
Non-interest-bearing liabilities . . . . . . . . 23,890
Shareholders' equity . . . . . . . . . . . . . . 21,817
--------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY . . . . . . . . . . . $252,971
--------
Net interest income . . . . . . . . . . . . . . . $10,471
-------
Margin analysis:
Interest income/interest - earning assets . . 7.37%
Interest expense/interest - earning assets . . 2.98%
-----
Net interest income/interest - earning assets 4.39%
-----
Tax equivalent adjustments:
Loans . . . . . . . . . . . . . . . . . . . . $ 171
Securities . . . . . . . . . . . . . . . . . 26
--------
Total . . . . . . . . . . . . . . . . . . . $ 197
--------
</TABLE>
1. Installment loans are stated net of unearned income.
2. Average loan balances include non-accrual loans.
3. Tax-exempt income has been adjusted to a tax-equivalent basis using an
incremental rate of 34% for each of the three years.
4. Average balances represent average daily balances.
5. Yields on securities available for sale were computed using historical
amortized cost.
TABLE III
VOLUME AND YIELD/RATE VARIANCES
<TABLE>
<CAPTION>
1995 Compared to 1994 1994 Compared to 1993
----------------------------- --------------------------------
Yield/ Yield/
Volume Rate Net Volume Rate Net
-------- ------ ------ -------- ------ ---
<S> <C> <C> <C> <C>
Interest income:
Loans . . . . . . . . . . . . . . . . . . . . $655 $1,107 $1,762 ($593) $377 ($216)
Securities:
Taxable . . . . . . . . . . . . . . . . . . 425 740 1,165 1,224 (430) 794
Tax-exempt . . . . . . . . . . . . . . . . 435 2 437 54 - 54
Federal funds sold . . . . . . . . . . . . 107 72 179 (1) 41 40
----- ----- ----- ------ ----- -----
Total interest-earning assets . . . . . . 1,622 1,921 3,543 684 (12) 672
----- ----- ----- ------ ----- -----
Interest expense:
Savings, Club, NOW, and money market
accounts . . . . . . . . . . . . . . . . . (280) (28) (308) 130 (480) (350)
Certificates of deposit . . . . . . . . . . . 1,424 1,980 3,404 290 129 419
Federal funds purchased . . . . . . . . . . . (6) 1 (5) 5 - 5
Capitalized lease obligation . . . . . . . . . (6) - (6) (6) 2 (4)
----- ----- ----- ------ ----- -----
Total interest-bearing liabilities . . . . 1,132 1,953 3,085 419 (349) 70
----- ----- ----- ------ ----- -----
Net interest income . . . . . . . . . . . . $490 ($32) $458 $265 337 $602
----- ----- ----- ------ ----- -----
</TABLE>
1. The change in interest due to both volume and yield/rate has been allocated
to change due to volume and change due to yield/rate in proportion to the
absolute value of the change in each.
2. Balances of non-accrual loans and related income recognized have been
included for computation purposes.
3. Tax-exempt income has been converted to a tax-equivalent basis using an
incremental rate of 34% in each of the three years.
<PAGE> 13
12
The increase in 1995 tax equivalent net interest income were primarily due to
the growth in the loans and securities portfolios. Also contributing to the
increase in net interest income in 1995 were $320,000 of recoveries on
non-accrual loans of which one loan accounted for $172,000. The Bank's
successful efforts made in collections compare favorably to 1994 when total
recoveries on non-accrual loans were $89,000.
As shown in Table II and III, 1995 taxable-equivalent net interest income
increased $458,000 (4.1%) over 1994. Interest income increased $3,543,000 and
interest expense increased $3,085,000. The 1995 net interest margin was 4.18%
(eighteen basis points below 1994). Yields/rates increased for total
interest-earning assets and total interest-bearing liabilities. Net interest
income as a percentage of interest income has fallen in 1995 compared to 1994
due to increased competition in the local retail banking market. The 1995
versus 1994 increase in average interest-bearing deposits ($19,853,000) was
invested in loans and securities.
Taxable-equivalent net interest income for 1994 increased $602,000 (5.8%) over
1993. Interest income increased $672,000 and interest expense increased
$70,000. The 1994 net interest margin was 4.36% (three basis points below
1993). Yields/rates decreased for total interest-earning assets and total
interest-bearing liabilities. The 1994 versus 1993 decrease in average loan
balances ($7,340,000) and increased average interest-bearing deposits
($11,907,000) were invested in securities.
ALLOWANCE AND PROVISION FOR LOAN LOSSES
The allowance for loan losses is established through a provision for loan
losses charged to expense. The allowance is an amount that management believes
will be adequate to absorb known and inherent losses in the existing loan
portfolio. See Note 1 to the consolidated financial statements with regard to
the Bank's policy for its provision and allowance for loan losses.
The allowance for loan losses was $3,015,000 at December 31, 1995 as compared
to $2,835,000 at December 31, 1994, an increase of 6.35%. The allowance was
1.74% of total loans (net of unearned discount and fees) at December 31, 1995
and 1.69% at December 31, 1994. There is no foreign loan exposure in the Bank's
loan portfolio. The provision for loan losses was $365,000, $454,000 and
$1,403,000 in 1995, 1994 and 1993, respectively. The decreases in the 1995 and
1994 provisions were due to the Bank's continued efforts to resolve and collect
problem loans. These efforts are reflected in a significant drop in
non-performing loans during both 1995 and 1994. (See Table IX)
A significant portion of the Bank's loans are collateralized by residential and
commercial real estate located in Northeastern Pennsylvania with a primary
concentration in Lackawanna County. The Bank's primary concentration of credit
risk is related to the real estate market in the aforementioned area. The
ultimate collectibility of most of the Bank's loan portfolio is greatly
affected by the economic conditions within Northeastern Pennsylvania.
Management is not aware of any other significant concentrations of credit risk
within its loan portfolio.
Table IV illustrates the changes in allowance for loan losses for the previous
five years including charge-offs, recoveries and percent of net charge-offs to
average loans outstanding during each period. Table V illustrates the
allocation of the allowance for loans for each period. These allocations are no
more than estimates and are subject to revision as conditions change.
TABLE IV
CHANGES IN ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
Years Ended December 31
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Average loans, net of unearned discount . . . . . . . $169,170 $161,381 $168,721 $175,198 $163,816
Allowance for loan losses at beginning of period . . . $2,835 $2,849 $2,382 $2,002 $1,388
Charge-offs:
Domestic:
Commercial, financial and agricultural . . . . . . 53 249 931 915 264
Real estate- commercial and residential
mortgage . . . . . . . . . . . . . . . . . . . . 193 293 22 170 26
Installment . . . . . . . . . . . . . . . . . . . . 28 25 60 98 91
------- -------- ------- -------- --------
Total. . . . . . . . . . . . . . . . . . . . . . 274 567 1,013 1,183 381
------- -------- ------- -------- --------
Recoveries:
Domestic:
Commercial, financial and agricultural . . . . . . 76 93 51 38 84
Real estate- commercial and residential mortgage - - - - -
Installment . . . . . . . . . . . . . . . . . . . . 13 6 26 42 5
------- -------- ------- -------- --------
Total . . . . . . . . . . . . . . . . . . . . . 89 99 77 80 89
------- -------- ------- -------- --------
Net charge-offs . . . . . . . . . . . . . . . . . . . . 185 468 936 1,103 292
Additions charged to operations . . . . . . . . . . . 365 454 1,403 1,483 906
------- -------- ------- -------- --------
Allowance for loan losses at end of period . . . . . . $3,015 $2,835 $2,849 $2,382 $2,002
------- -------- ------- -------- --------
Percentage of net charge-offs during the period
to average loans outstanding during the period . . . 0.11% 0.29% 0.55% 0.63% 0.18%
Percentage of allowance for loan losses to total loans -
net of unearned discount and fees, period end . . . 1.74% 1.69% 1.75% 1.37% 1.15%
------- -------- ------- -------- --------
</TABLE>
<PAGE> 14
13
TABLE V
ALLOCATION OF ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
December 31
1995 1994 1993
% Of Loans In % Of Loans In % Of Loans In
Each Category Each Category Each Category
Amount To Total Loans Amount To Total Loans Amount To Total Loans
---------------------- ----------------------- -----------------------
<S> <C> <C> <C> <C> <C> <C>
Domestic:
Commercial, financial and
agricultural $680 18% $718 22% $1,242 28%
Real estate- commercial and
residential mortgage . . 977 66% 1,037 65% 1,368 63%
Installment . . . . . . . . 86 16% 59 13% 54 9%
Unallocated . . . . . . . . 1,272 - 1,021 - 185 -
------- ------- ------- ------- ------- -------
Total . . . . . . . . $3,015 100% $2,835 100% $2,849 100%
------- ------- ------- ------- ------- -------
</TABLE>
<TABLE>
<CAPTION>
December 31
1992 1991
% Of Loans In % Of Loans In
Each Category Each Category
Amount To Total Loans Amount To Total Loans
----------------------- ----------------------
<S> <C> <C> <C> <C>
Domestic:
Commercial, financial and
agricultural $1,116 28% $881 33%
Real estate- commercial and
residential mortgage . . 543 61% 734 55%
Installment . . . . . . . . 16 11% 37 12%
Unallocated . . . . . . . . 707 - 350 -
------- ------- ------- -------
Total . . . . . . . . $2,382 100% $2,002 100%
------- ------- ------- -------
</TABLE>
Allocations for commercial, financial and agricultural loans are determined by
reviewing significant or unusual loans. Allocated provisions for real estate
and consumer loans are based on historical losses, delinquency trends and
current economic conditions. The unallocated portion is established by
management to absorb inherent losses in the portfolio. The increase in the
unallocated allowance at December 31, 1995 and 1994 are due to the decreases in
non-accrual loans.
NON-INTEREST INCOME
Non-interest income consists principally of service charges on deposits, fees
for customer services, fees from the Small Business Administration and gains on
sales of loans. The gain on sale of loans, increase in service charges and fees
and other income accounted for a $98,000 non-interest income increase in 1995.
However, the reduction in the receipt of the Bank's capital shares tax refund
of $93,000 in 1995 compared to 1994 offset the increase and resulted in an
overall increase in non-interest income of $5,000 in 1995. The receipt of the
Bank's capital shares tax refund accounts for all of the $79,000 non-interest
income increase in 1994.
NON-INTEREST EXPENSE
The following table (Table VI) summarizes the major components of non-interest
expense for the periods shown.
TABLE VI
NON-INTEREST EXPENSE
<TABLE>
<CAPTION>
1995 1994 1993
Percent To Total Percent To Total Percent To Total
Interest Earning Interest Earning Interest Earning
Amount Assets Amount Assets Amount Assets
------------------------- --------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C>
Salaries and benefits . . . . . $3,315 1.16% $3,077 1.21% $2,885 1.21%
Occupancy costs . . . . . . . . 469 0.16% 452 0.18% 454 0.19%
Furniture and equipment expense 521 0.18% 484 0.20% 431 0.18%
Data processing services and
programs and supplies . . . . . 424 0.15% 418 0.16% 429 0.18%
FDIC insurance . . . . . . . . 288 0.10% 532 0.21% 492 0.20%
Other expense . . . . . . . . . 1,787 0.62% 1,763 0.69% 1,593 0.67%
------- ------- ------- ------- ------- -------
Total . . . . . . . . . . . . . $6,804 2.37% $6,726 2.65% $6,284 2.63%
------- ------- ------- ------- ------- -------
</TABLE>
Salaries and benefits have increased throughout the periods presented due to
salary adjustments and increases in related benefits. Total full-time
equivalent employees numbered 110 at December 31, 1995, 106 at December 31,
1994 and 107 at December 31, 1993. The increase in full-time equivalent
employees at December 31, 1995 is due primarily to the addition of the
Carbondale Office.
Occupancy costs increased in 1995 primarily as a result of the increased costs
associated with the purchase and occupancy of the Carbondale Office. Occupancy
costs remained relatively level between 1994 and 1993. The 1995 increase in
furniture and equipment expense was due to the increased depreciation
associated with the installation of the MAC machine at the Jermyn Office in
addition to increased machine and maintenance costs. The 1994 increase in
furniture and equipment expense was primarily attributed to remodeling at the
Keyser Oak Office as well as new computer equipment. Data processing costs
increased in 1995 due to the purchase of new computer software and
applications. Data processing costs in 1994 remained relatively level between
1994 and 1993. The Bank's FDIC insurance assessment decreased $244,000 in 1995
compared to 1994 as a result of a refund of premiums and a reduction of the
Bank's FDIC insurance assessment. The Bank expects to experience reduced FDIC
insurance costs for the foreseeable future due to the Bank Insurance Fund
(which provides coverage for the Bank) having reached its goal of 1.25% of
insured deposits. The Bank's FDIC insurance assessment increased in 1994
primarily as a result of higher deposit balances. Other expense increased in
1995 due to additional advertising, business development, miscellaneous and
office expenses which were partially offset by a decrease in legal and
collection costs as well as costs associated with real estate owned. Other
expense increased in 1994 due to additional advertising, legal and collection
costs incurred which were partially offset by a decrease in costs associated
with real estate owned.
<PAGE> 15
14
FEDERAL INCOME TAX PROVISION
Fluctuations in the 1995 and 1994 Federal income tax provisions result from the
changes in taxable income and a significant increase in tax-free income on
securities and loans. The provision for income taxes includes federal, state
and local income taxes currently payable and those deferred because of
temporary differences between the financial statement and tax bases of assets
and liabilities.
The deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the periods in which those temporary
differences are expected to be recovered or settled.
SECURITIES
On January 1, 1994, the Bank adopted Statement of Financial Accounting
Standards No. 115, Accounting for Certain Investments in Debt and Equity
Securities (SFAS No. 115). Upon implementation of SFAS No. 115, the Bank's
strategy was to classify all securities as available for sale in order to
provide maximum liquidity and flexibility. During the first six months of
1994, the Bank monitored closely its liquidity position and asset/liability gap
position using new modeling techniques. Based on these analyses, the Bank
redefined its determination of liquidity needs and identified approximately
$45,000,000 of securities (consisting of all municipal bonds, U.S. Treasury
securities with maturities generally greater than two years, and various other
securities with maturities generally greater than two years) which the Bank
believes it has the ability and intent to hold to maturity. As a result, on
June 30, 1994, the Bank transferred these securities to the investment
securities held to maturity portfolio at fair value in accordance with
Paragraph 15 of SFAS No. 115. The remaining unrealized loss of $487,000, net
of tax, continues to be reported as a component of shareholders' equity and is
being amortized over the remaining lives of the individual securities as an
adjustment to yield. In addition, none of the securities reclassified to the
investment securities held to maturity portfolio at June 30, 1994 were
subsequently transferred to securities available for sale in connection with
the FASB's issuance of its Special Report in November 1995.
The significant increase in state and municipal securities to $18,226,000 at
December 31, 1995 from $2,837,000 at December 31,1994 is a result of the Bank's
strategy to invest in higher yielding tax-exempt securities.
The following table (Table VII) shows maturity data and related
weighted-average yields as of December 31, 1995 and carrying values as of
December 31, 1995, 1994 and 1993. Yields on available for sale securities are
computed using historical amortized cost.
TABLE VII
SECURITIES PORTFOLIO
<TABLE>
<CAPTION>
December 31, 1995
One year After one After five After ten
or less through five years through ten years years Total
-------- ------------------ ----------------- --------- -----
<S> <C> <C> <C> <C> <C>
SECURITIES AVAILABLE FOR SALE
U.S. Treasury & other U.S. government
securities
Market value . . . . . . . . . . . $3,012 $10,213 $ - $ - $13,225
Yield (2) . . . . . . . . . . . . . 6.12% 6.48% - - 6.40%
Other Securities
Market value . . . . . . . . . . . . - - - 150 150
Yield (2) . . . . . . . . . . . . . - - -
------- ------- ------- ------- -------
Total Market Value . . . . . . . . . . . $3,012 $10,213 $ - $150 $13,375
------- ------- ------- ------- -------
Weighted average yield . . . . . . . . . 6.12% 6.48% - 6.00% 6.39%
------- ------- ------- ------- -------
INVESTMENT SECURITIES HELD TO MATURITY
U.S. Treasury & other U.S. government
securities
Carrying value . . . . . . . . . . . $20,044 $36,555 $ - $ - $56,599
Yield . . . . . . . . . . . . . . . 6.61% 6.21% - - 6.35%
States and municipal securities
Carrying value . . . . . . . . . . . - 163 2,040 16,063 18,266
Yield (1) . . . . . . . . . . . . . - 7.56% 8.06% 8.23% 8.21%
Other securities
Carrying value . . . . . . . . . . . 250 202 - - 452
Yield . . . . . . . . . . . . . . . 8.50% 9.63% - - 9.01%
------- ------- ------- ------- -------
Total carrying value . . . . . . . . . . $20,294 $36,920 $2,040 $16,063 $75,317
------- ------- ------- ------- -------
Weighted average yield . . . . . . . . . 6.63% 6.23% 8.06% 8.23% 6.82%
------- ------- ------- ------- -------
</TABLE>
(1) Yields are presented on a taxable equivalent basis utilizing an effective
tax rate of 34% for all maturities.
(2) Yields on securities available for sale are computed using historical
amortized costs.
<PAGE> 16
15
TABLE VII (CONTINUED)
<TABLE>
<CAPTION>
December 31, 1995
One year After one After five After ten
or less through five years through ten years years Total
------ ------------------ ----------------- --------- --------
<S> <C> <C> <C> <C> <C>
MORTGAGE-BACKED SECURITIES AVAILABLE
FOR SALE
Mortgage-backed securities
Market value . . . . . . . . . . . . $ - $149 $ - $12,155 $12,304
Yield . . . . . . . . . . . . . . . - 6.80% - 6.40% 6.40%
Collateralized mortgage obligations of U.S.
government agencies
Market value . . . . . . . . . . . . - - - 13,902 13,902
Yield . . . . . . . . . . . . . . . - - - 6.15% 6.15%
-------- -------- -------- -------- --------
Total market value . . . . . . . . . . . $ - $149 $ - $26,057 $26,206
-------- -------- -------- -------- --------
Weighted average yield . . . . . . . . . - 6.80% - 6.27% 6.27%
-------- -------- -------- -------- --------
</TABLE>
<TABLE>
<CAPTION>
December 31
SECURITIES AVAILABLE FOR SALE 1995 1994 1993
------- ------- --------
<S> <C> <C> <C>
U.S. Treasuries and other U.S. government agencies . . . . . . . . . . $13,225 $15,821 -
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150 150 -
------- ------- --------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $13,375 $15,971 -
------- ------- --------
INVESTMENT SECURITIES HELD TO MATURITY
U.S. Treasuries and other U.S. government agencies . . . . . . . . . $56,599 $58,832 $71,811
States and municipal . . . . . . . . . . . . . . . . . . . . . . . . . 18,266 2,837 400
Mortgage-backed securities . . . . . . . . . . . . . . . . . . . . . . - - 1,033
Collateralized mortgage obligations of U.S. government agencies . . . - - 9,277
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 452 557 786
------- ------- --------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $75,317 $62,226 $83,307
------- ------- --------
MORTGAGE-BACKED SECURITIES AVAILABLE FOR SALE
Mortgage-backed securities . . . . . . . . . . . . . . . . . . . . . . $12,304 $6,324 -
Collateralized mortgage obligations of U.S. government agencies. . . . 13,902 7,938 -
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 5 -
------- ------- --------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $26,206 $14,267 -
------- ------- --------
</TABLE>
LOANS
Net loans grew $5,830,000 to $173,342,000 at December 31, 1995. Increases of
$5,886,000 and $7,227,000 occurred in commercial and residential mortgage and
installment loan portfolios, respectively. Declines in commercial loans of
$6,475,000 and real estate construction loans of $976,000 partially offset
these increases. The increase in real estate loans was primarily due to
aggressive pricing strategies employed by the Bank. Installment loans have
increased due to the Banks larger advertising budget which has been successful
in attracting new home equity and automobile loans.
Net loans grew $5,153,000 to $167,512,000 at December 31, 1994. Increases of
$6,621,000, $6,272,000 and $1,354,000 occurred in commercial and residential
mortgage, installment and real estate construction loan portfolios,
respectively. Declines in commercial loans of $9,024,000 partially offset these
increases. The increase in real estate loans was primarily due to customers
addressing their need for mortgages as interest rates moved upward.
The following table (Table VIII) shows consolidated loans at December 31, 1995,
1994, 1993, 1992 and 1991 (including non-accrual loans) and summarizes the
maturity data for loans - gross (net of non-accrual loans) as of December 31,
1995.
TABLE VIII
LOANS
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
-------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Real estate- commercial and residential mortgage . . . . . . $113,334 $107,448 $100,827 $107,658 $96,935
Commercial, financial and agricultural . . . . . . . . . . . 30,679 37,154 46,178 49,402 56,825
Installment . . . . . . . . . . . . . . . . . . . . . . . . . 28,635 21,408 15,136 18,445 21,296
Real estate- construction . . . . . . . . . . . . . . . . . . 1,822 2,798 1,444 - -
-------- -------- -------- -------- --------
Total loans- gross. . . . . . . . . . . . . . . . . . . . . 174,470 168,808 163,585 175,505 175,056
Less unearned discount and fees . . . . . . . . . . . . . . . (1,128) (1,296) (1,226) (1,116) (888)
-------- -------- -------- -------- --------
Total gross loans, net of unearned
discount and fees . . . . . . . . . . . . . . . . . $173,342 $167,512 $162,359 $174,389 $174,168
-------- -------- -------- -------- --------
</TABLE>
<PAGE> 17
16
<TABLE>
<CAPTION>
December 31, 1995
-----------------
After One
Year but
Within Within Over
One Year Five Years Five Years Total
--------- ----------- ---------- --------
<S> <C> <C> <C> <C>
Commercial, financial and agricultural . . . . . . . . . . . $19,904 $ 4,879 $ 5,315 $ 30,098
Real estate - construction . . . . . . . . . . . . . . . . . 1,822 - - 1,822
Real estate - mortgage . . . . . . . . . . . . . . . . . . . 48,070 4,161 59,706 111,937
Installment loans . . . . . . . . . . . . . . . . . . . . . . 798 21,995 5,842 28,635
------- ------- ------- --------
Total loans - gross (net of non-accrual) . . . . . . . . $70,594 $31,035 $70,863 $172,492
------- ------- ------- --------
Fixed Rate . . . . . . . . . . . . . . . . . . . . . . . . . 2,138 26,937 70,863 99,938
Variable Rate . . . . . . . . . . . . . . . . . . . . . . . . 68,456 4,098 - 72,554
------- ------- ------- --------
Total loans - gross (net of non-accrual) . . . . . . . . . . 70,594 31,035 70,863 172,492
</TABLE>
Management is not aware of any trends or uncertainties within its loan
portfolio which it reasonably expects will materially impact future operating
results on capital resources nor is management aware of any information which
would cause it to have serious doubts as to the ability of its performing
borrowers to comply with current loan repayment terms.
Table IX summarizes the Bank's non-performing assets at December 31, 1995,
1994, 1993, 1992 and 1991.
TABLE IX
NON-PERFORMING ASSETS
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Non-accrual loans (1) . . . . . . . . . . . . . . . . . $1,978 $3,043 $5,595 $2,281 $3,337
Loans past due 90 days or more and still accruing . . . 511 185 448 1,567 1,860
Restructured loans . . . . . . . . . . . . . . . . . . - - - - -
------ ------ ------ ------ ------
Total non-performing loans . . . . . . . . . 2,489 3,228 6,043 3,848 5,197
Real estate owned other than bank premises . . . . . . 296 574 516 976 130
------ ------ ------ ------ ------
Total . . . . . . . . . . . . . . . . . . . . $2,785 $3,802 $6,559 $4,824 $5,327
------ ------ ------ ------ ------
</TABLE>
(1) See Note 4 to the consolidated financial statements concerning interest
income on non-accruing loans and Note 1 to the consolidated financial
statements - Loans caption - concerning the Bank's policy with regard to
accrual of interest.
The increase in loans past due 90 days or more and still accruing in 1995
relates primarily to residential mortgages which are fully secured and in the
process of collection.
An analysis of non-accrual loans as of December 31, 1995, 1994, 1993, 1992 and
1991 is as follows:
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Real estate- commercial and residential mortgage . . . $1,397 $1,939 $3,075 $1,141 $991
Commercial . . . . . . . . . . . . . . . . . . . . . . 581 1,104 2,520 1,140 2,346
------ ------ ------ ------ ------
Total . . . . . . . . . . . . . . . . . . . . $1,978 $3,043 $5,595 $2,281 $3,337
------ ------ ------ ------ ------
</TABLE>
DEPOSITS
Table X summarizes the average deposits and rates paid on deposit categories of
average total deposits for the last three years.
TABLE X
AVERAGE DEPOSITS AND RATES
<TABLE>
<CAPTION>
1995 1994 1993
Average Average Average Average Average Average
Deposits Rates Deposits Rates Deposits Rates
-------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Deposits:
Domestic:
NOW accounts . . . . . . . . . . . . . . . . . $17,739 2.47% $17,754 2.49% $14,707 2.92%
Savings deposits . . . . . . . . . . . . . . . 56,373 2.51% 61,892 2.54% 57,891 2.99%
Other time deposits . . . . . . . . . . . . . . 1,829 2.99% 1,579 2.97% 1,539 3.44%
Money market accounts . . . . . . . . . . . . . 20,028 2.49% 25,905 2.51% 28,499 2.98%
Certificates of deposit . . . . . . . . . . . . 142,012 5.48% 110,997 3.95% 103,585 3.83%
-------- -------- --------
Total interest bearing . . . . . . . . . . $237,981 4.28% $218,127 3.25% $206,221 3.41%
Non interest bearing demand . . . . . . . . . . 25,503 24,115 22,733
-------- -------- --------
Total . . . . . . . . . . . . . . . . . . . $263,484 $242,242 $228,954
</TABLE>
[FIGURE 3]
<PAGE> 18
17
Table XI summarizes the maturity distribution of time deposits greater than
$100,000 at December 31, 1995 (including open time deposits and savings
accounts).
TABLE XI
MATURITY DISTRIBUTION OF TIME DEPOSITS GREATER THAN $100,000
<TABLE>
<CAPTION>
Domestic:
Certificates of deposit: December 31, 1995 December 31, 1994
----------------- -----------------
<S> <C> <C>
Three months or less . . . . . . . . . . . . . $16,569 $8,757
Over three months through six months . . . . . 5,949 4,316
Over six months through twelve months . . . . 2,903 2,152
Over twelve months . . . . . . . . . . . . . . 1,372 626
------- -------
Total certificates of deposit . . . . . . . 26,793 15,851
Open-account time deposits and savings accounts 4,582 4,058
------- -------
Total . . . . . . . . . . . . . . . . . $31,375 19,909
------- -------
</TABLE>
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 $3,045,000 to $26,209,000 at December 31, 1995. 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 framework and by monitoring compliance with
minimum leverage ratio guidelines. The minimum ratio of total risk-based
capital to risk-adjusted assets is 8% at December 31,1995, of which 4% must be
Tier 1 capital. The Company's total risk-based capital ratio was 17.79% at
December 31, 1995 and 17.34% at December 31,1994. The Company's Tier 1
risk-based capital ratio was 16.54% at December 31, 1995 and 16.08% at December
31, 1994.
In addition, the Federal Reserve Board has established minimum leverage ratio
guidelines for bank holding companies. These 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 9.02% at December 31, 1995
and 8.66% at December 31, 1994.
The Federal Deposit Insurance Corporation Improvement Act (FDICIA), as well as
other requirements, establishes 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 institution's 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 regulation adopted, for an institution to be well
capitalized it must have a total risk-based capital ratio of at least 10%, a
Tier 1 risk-based capital ratio of at least 6%, and a Tier 1 leverage ratio of
at least 5%, and not be subject to any specific capital order or directive.
At December 31, 1995, the Bank is classified as well-capitalized with total
risk-based capital, Tier 1 risk-based capital and Tier 1 leverage ratios of
17.79%, 16.54% and 9.02% respectively.
The following table (Table XII) summarizes the Bank's sensitivity to interest
rate fluctuations for certain interest sensitivity periods.
<TABLE>
<CAPTION>
TABLE XII Zero to Over three months Over six months After one year but After five
three months to six months to one year within five years years
------------ ----------------- --------------- ------------------ ----------
<S> <C> <C> <C> <C> <C>
Interest-earning assets:
Securities . . . . . . . . . . . . . . $3,729 $4,661 $14,916 $47,282 $44,160
Loans (net of unearned discount
and deferred fees) . . . . . . . . . 61,663 3,544 5,670 31,318 71,147
Federal funds sold . . . . . . . . . . 1,860 - - - -
-------- -------- -------- -------- --------
Total . . . . . . . . . . . . 67,252 8,205 $20,586 $78,600 $115,307
-------- -------- -------- -------- --------
Interest-bearing liabilities:
Interest-bearing DDA . . . . . . . . . 4,862 753 $1,507 $12,055 -
Money market accounts . . . . . . . . . 3,254 1,394 2,789 11,156 -
Savings (1) . . . . . . . . . . . . . . 5,649 3,386 2,251 - 45,143
Time . . . . . . . . . . . . . . . . 36,531 40,959 33,210 20,535 -
Time >100M . . . . . . . . . . . . . . 16,524 6,101 2,796 1,372 -
-------- -------- -------- -------- --------
Total . . . . . . . . . . . . 66,820 52,593 $42,553 $45,118 $45,143
-------- -------- -------- -------- --------
Interest rate sensitivity gap . . . . . $432 ($44,388) ($21,967) $33,482 $70,164
-------- -------- -------- -------- --------
Cumulative interest rate
sensitivity gap . . . . . . . . . . . $432 ($43,956) ($65,923) ($32,441) $37,723
-------- -------- -------- -------- --------
Cumulative interest rate
sensitivity ratio (2) . . . . . . . . 0.1% (14.2%) (21.3%) (10.5%) 12.2%
-------- -------- -------- -------- --------
</TABLE>
<TABLE>
<CAPTION>
TABLE XII
Total
--------
<S> <C>
Interest-earning assets:
Securities . . . . . . . . . . . . . . $114,748
Loans (net of unearned discount
and deferred fees) . . . . . . . . . 173,342
Federal funds sold . . . . . . . . . . 1,860
--------
Total . . . . . . . . . . . . $289,950
--------
Interest-bearing liabilities:
Interest-bearing DDA . . . . . . . . . $19,177
Money market accounts . . . . . . . . . 18,593
Savings (1) . . . . . . . . . . . . . . 56,429
Time . . . . . . . . . . . . . . . . 131,235
Time >100M . . . . . . . . . . . . . . 26,793
--------
Total . . . . . . . . . . . . $252,227
--------
Interest rate sensitivity gap . . . . . $37,723
--------
Cumulative interest rate
sensitivity gap . . . . . . . . . . . $ -
--------
Cumulative interest rate
sensitivity ratio (2) . . . . . . . . -
--------
</TABLE>
(1) The amount shown as repricing within 1 to 90 days is that portion which,
based upon average balances, is considered sensitive to changes in interest
rates. The Company's historical experience has been that total savings account
balances exhibit minimal movement with changes in interest rates. Accordingly, a
large percentage of the Company's savings account balances are not as rate
sensitive and are classified in the "Beyond five Years" category.
(2) Represents the cumulative interest rate sensitivity gap as a percentage of
total assets.
<PAGE> 19
18
As shown above, the Bank has a negative gap (interest-sensitive assets are less
than interest-sensitive liabilities) which generally indicates that an increase
in rates may lead to a decrease in net interest income and a decrease in rates
may lead to an increase in net interest income. Although, the Company is
substantially liability sensitive, management believes that customer patterns
and product pricing allow the Company to reduce interest rate risk to
acceptable levels.
ACCOUNTING DEVELOPMENTS
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 selling costs.
The required adoption of SFAS 121 in 1996 is not expected to materially effect
the Bank's results of operations, share holders' equity or financial condition.
In May 1995, the FASB issued SFAS No. 122 Accounting for Mortgage Servicing
Rights. This Statement will prospectively require the Bank, which services
mortgage loans for others in return for a servicing fee, to recognize these
servicing rights as assets, regardless of how such assets were acquired.
Additionally, the Bank would be required to assess the fair value of these
assets at each reporting date to determine impairment. The required adoption
of SFAS 122 in 1996 is not expected to materially effect the Bank's results of
operations, share holders' 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 all stock-based compensation issued to employees. Further, in the event
that fair value accounting is not adopted, the Statement requires pro-forma
disclosure of net income and earnings per share as if fair value accounting had
been adopted. The Bank does not anticipate adopting the fair value accounting
standards of SFAS 123, and will instead provide the required pro-forma
disclosures beginning in 1996, as permitted.
CHANGE IN INDEPENDENT AUDITORS
During 1994, the Company engaged KPMG Peat Marwick LLP as its independent
auditors for the fiscal year ended December 31,1994. Prior to 1994, the
Company's auditors were Cavalari, McHale, Matlowski & Company. There were no
disagreements with Cavalari, McHale, Matlowski & Company on any matter of
accounting practices, financial statement disclosure or auditing scope or
procedures at the time of their dismissal.
QUARTERLY FINANCIAL DATA
A comparison of quarterly financial information for 1995 and 1994 is provided
in the following table.
<TABLE>
<CAPTION>
1995
QUARTER ENDED DECEMBER 31 SEPTEMBER 30 JUNE 30 MARCH 31
---------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest income . . . . . . . . . . . . $5,708 $5,442 $5,307 $5,035
Interest expense . . . . . . . . . . . 2,788 2,730 2,572 2,192
Net interest income . . . . . . . . . . 2,920 2,712 2,735 2,843
Provision for loan losses . . . . . . . 92 92 91 90
Net income . . . . . . . . . . . . . . 935 794 706 819
Earnings per share . . . . . . . . . . $1.06 $0.90 $0.80 $0.93
</TABLE>
<TABLE>
<CAPTION>
1994
QUARTER ENDED DECEMBER 31 SEPTEMBER 30 JUNE 30 MARCH 31
---------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest income . . . . . . . . . . . . $4,880 $4,625 $4,335 $4,263
Interest expense . . . . . . . . . . . 2,041 1,852 1,667 1,637
Net interest income . . . . . . . . . . 2,839 2,773 2,668 2,626
Provision for loan losses . . . . . . . 46 46 182 180
Net income . . . . . . . . . . . . . . 922 790 596 629
Earnings per share . . . . . . . . . . $1.04 $0.90 $0.67 $0.71
</TABLE>
FOURTH QUARTER RESULTS - 1995 VERSUS 1994
Net income for the fourth quarter of 1995 increased $13,000 ($.02 per share)
from the fourth quarter of 1994. The primary reason for the increase in net
income was the increase in net interest income due to recoveries net of the
increased provision for possible loan losses due to increased loan growth.
MARKET FOR THE FIRST JERMYN CORP. COMMON STOCK
The stock of the First Jermyn Corp. is not listed or traded on a recognized
securities exchange and is inactively traded. Range of sale prices is gained
when available from purchaser or seller at time of transfer for sales of 100
shares or more. Quarterly highs and lows are presented below:
<TABLE>
<CAPTION>
1995 1994 1993
Quarter High Low High Low High Low
------------------ ------------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
First . . . . . . . . . . . . . . . . . $33.50 $31.63 $30.00 $28.50 $28.00 $28.00
Second . . . . . . . . . . . . . . . . $33.75 $32.00 $31.00 $31.00 $28.75 $28.75
Third . . . . . . . . . . . . . . . . . $34.50 $32.25 $32.00 $32.00 $29.00 $28.00
Fourth . . . . . . . . . . . . . . . . $36.00 $33.50 $32.00 $31.00 $30.00 $28.50
</TABLE>
<PAGE> 20
19
CONSOLIDATED BALANCE SHEETS
(In Thousands of Dollars, Except Per Share Information)
<TABLE>
<CAPTION>
December 31
1995 1994
-------- --------
<S> <C> <C>
ASSETS:
Cash and due from banks . . . . . . . . . . . . . . . . . . . . . . . $12,341 $10,659
Federal funds sold . . . . . . . . . . . . . . . . . . . . . . . . . 1,860 -
Securities available for sale . . . . . . . . . . . . . . . . . . . . 13,375 15,971
Mortgage-backed securities available
for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,206 14,267
Investment securities total market
value - (1995 - $77,394, 1994 - $60,662) . . . . . . . . . . . . . 75,317 62,226
-------- --------
Loans, gross . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174,470 168,808
-------- --------
Less:
Unearned discount and origination fees . . . . . . . . . . . . . (1,128) (1,296)
Allowance for loan losses . . . . . . . . . . . . . . . . . . . . (3,015) (2,835)
-------- --------
Loans, net . . . . . . . . . . . . . . . . . . . . . . . . 170,327 164,677
-------- --------
Accrued interest receivable . . . . . . . . . . . . . . . . . . . . . 2,551 2,191
Bank premises, leasehold improvements
and furniture and equipment - net . . . . . . . . . . . . . . . . 5,190 4,719
Real estate owned other than bank premises . . . . . . . . . . . . . 296 574
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,523 2,731
-------- --------
Total assets . . . . . . . . . . . . . . . . . . . . . . $309,986 $278,015
-------- --------
LIABILITIES:
Deposits:
Non-interest-bearing demand . . . . . . . . . . . . . . . . . . . $29,071 $26,439
Interest-bearing . . . . . . . . . . . . . . . . . . . . . . . . 252,227 224,403
Total deposits . . . . . . . . . . . . . . . . . . . . . 281,298 250,842
Federal funds purchased . . . . . . . . . . . . . . . . . . . . . . . - 1,900
Capitalized lease obligation . . . . . . . . . . . . . . . . . . . . 891 954
Accrued interest payable . . . . . . . . . . . . . . . . . . . . . . 1,106 732
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 482 423
-------- --------
Total liabilities . . . . . . . . . . . . . . . . . . 283,777 254,851
-------- --------
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 . . . . . . . . . . . . . . . . . . . . . . . . . 21,944 19,708
Unrealized loss on securities available for sale, net of tax . . . . (540) (1,349)
Less: Treasury stock - at cost (15,205 shares) . . . . . . . . . . . (196) (196)
-------- --------
Total shareholders' equity . . . . . . . . . . . . . . 26,209 23,164
-------- --------
Total liabilities and shareholders' equity . . . . $309,986 $278,015
-------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 21
20
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands of Dollars, Except Per Share Information)
<TABLE>
<CAPTION>
For the Year Ended December 31
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Interest income:
Interest and fees on loans . . . . . . . . . . . . . . . . . . $14,813 $13,058 $13,224
Interest and dividends on securities:
U.S. Treasury . . . . . . . . . . . . . . . . . . . . . . . 4,710 4,133 3,789
U.S. government agencies . . . . . . . . . . . . . . . . . 5 6 24
Collateralized mortgage obligations of U.S.
government agencies and corporations . . . . . . . . . 1,209 623 132
State and political subdivisions . . . . . . . . . . . . . 375 86 51
Other taxable debt . . . . . . . . . . . . . . . . . . . . 46 42 66
Taxable equity . . . . . . . . . . . . . . . . . . . . . . 9 9 9
Interest on Federal funds sold . . . . . . . . . . . . . . . . . 325 146 106
------- ------- -------
Total interest income . . . . . . . . . . . . . . 21,492 18,103 17,401
------- ------- -------
Interest expense:
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,190 7,094 7,025
Federal funds purchased . . . . . . . . . . . . . . . . . . . . 1 6 -
Capitalized lease obligation . . . . . . . . . . . . . . . . . . 91 97 102
------- ------- -------
Total interest expense . . . . . . . . . . . . . 10,282 7,197 7,127
------- ------- -------
Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . 11,210 10,906 10,274
Provision for loan losses . . . . . . . . . . . . . . . . . . . . . 365 454 1,403
------- ------- -------
Net interest income after provision for loan losses . . . . . . . . . 10,845 10,452 8,871
Non-interest income:
Service charges and fees . . . . . . . . . . . . . . . . . . . . 539 484 498
Security gains - net . . . . . . . . . . . . . . . . . . . . . - - 2
Gain on sale of loans - net . . . . . . . . . . . . . . . . . . 10 - -
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 93 -
------- ------- -------
Total non-interest income . . . . . . . . . . . . 582 577 500
------- ------- -------
Non-interest expense:
Salaries and benefits . . . . . . . . . . . . . . . . . . . . . 3,315 3,077 2,885
Net occupancy and furniture/equipment expense . . . . . . . . . 990 936 885
Data processing services . . . . . . . . . . . . . . . . . . . . 424 418 429
FDIC insurance . . . . . . . . . . . . . . . . . . . . . . . . . 288 532 492
Other expense . . . . . . . . . . . . . . . . . . . . . . . . . 1,787 1,763 1,593
------- ------- -------
Total non-interest expense . . . . . . . . . . . 6,804 6,726 6,284
------- ------- -------
Income before Federal income tax provision . . . . . . . . . . . . . 4,623 4,303 3,087
Federal income tax provision . . . . . . . . . . . . . . . . . . . . 1,369 1,366 927
------- ------- -------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,254 $2,937 $2,160
------- ------- -------
Per share information:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . $3.68 $3.32 $2.44
------- ------- -------
Weighted average shares outstanding . . . . . . . . . . . . . . 884,680 884,680 884,680
------- ------- -------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 22
21
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(In Thousands of Dollars, Except Per Share and Par Value Amounts)
<TABLE>
<CAPTION>
Common
Stock
Par Value Retained
$1.25 Surplus Earnings
--------- ------- --------
<S> <C> <C> <C>
Balance, January 1, 1993 . . . . . . . . . . . . . . . . . . . . . . $1,125 3,876 16,426
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - - 2,160
Cash dividends ($1.00 per share) . . . . . . . . . . . . . . . . . . - - (885)
------- ------- -------
Balance, December 31, 1993 . . . . . . . . . . . . . . . . . . . . . $1,125 3,876 17,701
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - - 2,937
Cash dividends ($1.05 per share) . . . . . . . . . . . . . . . . . . - - (930)
Effect of initial adoption of SFAS No. 115, net of tax . . . . . . . - - -
Net unrealized losses on
securities available for sale, net of tax . . . . . . . . . . . - - -
------- ------- -------
Balance, December 31, 1994 . . . . . . . . . . . . . . . . . . . . . $1,125 3,876 19,708
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - - 3,254
Cash dividends ($1.15 per share) . . . . . . . . . . . . . . . . . . - - (1,018)
Net unrealized gains on
securities available for sale, net of tax . . . . . . . . . . . - - -
------- ------- -------
Balance, December 31, 1995 . . . . . . . . . . . . . . . . . . . . . $1,125 3,876 21,944
------- ------- -------
</TABLE>
<TABLE>
<CAPTION>
Net Unrealized
Losses On
Securities
Available Treasury
For Sale Stock Total
-------- ----- -----
<S> <C> <C> <C>
Balance, January 1, 1993 . . . . . . . . . . . . . . . . . . . . . . - (196) 21,231
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - - 2,160
Cash dividends ($1.00 per share) . . . . . . . . . . . . . . . . . . - - (885)
------- ------- -------
Balance, December 31, 1993 . . . . . . . . . . . . . . . . . . . . . - (196) 22,506
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - - 2,937
Cash dividends ($1.05 per share) . . . . . . . . . . . . . . . . . . - - (930)
Effect of initial adoption of SFAS No. 115, net of tax . . . . . . . 1,185 - 1,185
Net unrealized losses on
securities available for sale, net of tax . . . . . . . . . . . (2,534) - (2,534)
------- ------- -------
Balance, December 31, 1994 . . . . . . . . . . . . . . . . . . . . . (1,349) (196) 23,164
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - - 3,254
Cash dividends ($1.15 per share) . . . . . . . . . . . . . . . . . . - - (1,018)
Net unrealized gains on
securities available for sale, net of tax . . . . . . . . . . . 809 - 809
------- ------- -------
Balance, December 31, 1995 . . . . . . . . . . . . . . . . . . . . . (540) (196) 26,209
------- ------- -------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 23
22
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands of Dollars)
<TABLE>
<CAPTION>
For the Year Ended December 31
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,254 $ 2,937 $ 2,160
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses . . . . . . . . . . . . . . . . . 365 454 1,403
Depreciation and amortization of investment
securities, bank premises, leasehold improvements
and furniture and equipment . . . . . . . . . . . . . 461 441 1,025
Deferred income tax benefit . . . . . . . . . . . . . . . - (40) (203)
Gain on calls of securities - net . . . . . . . . . . . . - - (2)
Gain on sales of loans - net . . . . . . . . . . . . . . . (10) - -
Loss on disposition of real estate . . . . . . . . . . . . 21 41 129
Increase in interest receivable and other assets . . . . . (152) (651) (211)
Increase (decrease) in interest payable and other liabilities 433 253 (248)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . - 40 -
---------- ---------- --------
Net cash provided by operating activities . . . . 4,372 3,475 4,053
---------- ---------- --------
INVESTING ACTIVITIES:
Maturities of securities available for sale . . . . . . . . . . 13,241 13,237 -
Maturities of mortgage-backed securities available for sale . . 510 - -
Maturities of investment securities . . . . . . . . . . . . . . 3,633 - 17,422
Purchases of securities available for sale . . . . . . . . . . . (10,443) (9,175) -
Purchases of mortgage-backed securities available for sale . . . (11,944) (3,952) -
Purchases of investment securities . . . . . . . . . . . . . . . (16,622) (10,616) (53,549)
Net (increase) decrease in loans . . . . . . . . . . . . . . . . (6,315) (6,350) 10,968
Purchases of bank premises, leasehold improvements
and furniture and equipment - net . . . . . . . . . . (932) (231) (292)
Sales of assets acquired through foreclosure . . . . . . . . . . 567 589 457
---------- ---------- --------
Net cash used in investing activities . . . . . . (28,305) (16,498) (24,994)
---------- ---------- --------
FINANCING ACTIVITIES:
Net increase in non-interest-bearing demand deposits
and interest-bearing deposits . . . . . . . . . . . . . . . 30,456 11,835 19,553
Proceeds from Federal funds purchased . . . . . . . . . . . . . - 1,900 -
Repayment of Federal funds purchased . . . . . . . . . . . . . . (1,900) - -
Principal payments on capitalized lease obligation . . . . . . . (63) (58) (52)
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . (1,018) (930) (885)
---------- ---------- --------
Net cash provided by financing activities . . . . 27,475 12,747 18,616
---------- ---------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS . . . . . . . . . . $ 3,542 $ (276) $ (2,325)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR . . . . . . . . . . . $ 10,659 $ 10,935 $ 13,260
---------- ---------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR . . . . . . . . . . . . . . $ 14,201 $ 10,659 $ 10,935
---------- ---------- --------
CASH PAID DURING THE YEAR:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,908 $ 6,999 $ 7,130
---------- ---------- --------
Federal income taxes . . . . . . . . . . . . . . . . . . . . . $ 1,372 $ 1,425 $ 1,430
---------- ---------- --------
NON CASH TRANSACTIONS
Change in unrealized (gains) losses on securities available for
sale, net of tax . . . . . . . . . . . . . . . . . . . . . $ (809) $ 1,349 $ -
---------- ---------- --------
Transfers of loans to real estate owned other than
bank premises . . . . . . . . . . . . . . . . . . . . . . . $ 310 $ 688 $ 126
---------- ---------- --------
Transfer of securities from available for sale to
investment securities . . . . . . . . . . . . . . . . . . . $ - $ 45,000 $ -
---------- ---------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 24
23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The First Jermyn Corp. is a bank holding company whose principal subsidiary is
The First National Bank of Jermyn which operates 5 offices in Lackawanna
County, PA. The Bank provides a range of banking services typically
associated with a community bank, the most important of which are the taking of
deposits and granting of loans to both individuals and corporations within its
market area.
PRINCIPLES OF CONSOLIDATION AND PRESENTATION
The accompanying consolidated financial statements of The First Jermyn Corp.
and subsidiaries (Company) include the accounts of The First Jermyn Corp., The
First National Bank of Jermyn (Bank) and First of Jermyn Realty Company, Inc.
(inactive since inception). All significant intercompany balances and
transactions have been eliminated in consolidation. Prior period amounts are
reclassified when necessary to conform with the current year's presentation.
Material estimates that are particularly susceptible to significant change in
the near-term relate to the determination of the allowance for possible loan
losses, the valuation of real estate acquired in connection with foreclosures
or in satisfaction of loans, and the valuation of deferred tax assets. In
connection with the determination of the allowances for possible loan losses
and real estate owned, management obtains independent appraisals for
significant properties to the extent considered practical.
CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, cash and cash equivalents include cash,
due from banks and federal funds sold. Generally, federal funds are sold for
periods ranging up to thirty days.
SECURITIES
Securities include investment and mortgage-backed securities, corporate bonds
and certain equity securities.
Effective January 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 115, Accounting for Certain Investments in Debt and
Equity Securities (SFAS No. 115). SFAS No. 115 requires that investments in
equity securities that have a readily determinable fair value and investments
in debt securities be classified into categories and accounted for as follows:
- Debt securities that the Company positively intends to hold to maturity
are classified as "held-to-maturity" and are reported at amortized
cost.
- Debt and equity securities purchased with the intention of selling them
in the near future are classified as "trading securities" and are
reported at fair value, with unrealized gains and losses included in
net income.
- Debt and equity securities not classified in either of the above are
classified as "available-for-sale securities" and are reported at fair
value, with unrealized gains and losses excluded from earnings and
reported, net of tax, as a separate component of shareholders' equity.
There were no investment or mortgage-backed securities classified as "trading"
during 1995 or 1994.
Prior to 1994, investment and mortgage-backed securities held for investment
were carried at cost, adjusted for amortization of premium and accretion of
discount, because the Company had the ability and management had the intent to
hold such securities to maturity.
Premiums and discounts on debt securities are recognized as interest income
using a level yield over the period to maturity. Declines in the fair value of
individual held-to-maturity and available-for-sale securities below their cost
that are other than temporary result in write-downs of the individual
securities to their fair value. The related write-downs are included in
earnings as realized losses. The specific identification method is used to
determine realized gains and losses on sales of investment and mortgage-backed
securities.
LOANS
Loans are stated net of deferred fees and costs and unearned discount. Loan
interest income is accrued using various methods which approximate a constant
yield. Loan origination and commitment fees and direct loan origination costs
are deferred and recognized over the life of the related loans.
Non-accrual loans are those on which the accrual of interest has ceased. Loans
are placed on non-accrual status if, in the opinion of management, collection
is doubtful, or when principal or interest is past due 90 days or more and
collateral is insufficient to cover principal and interest. Interest accrued,
but not collected at the date a loan is placed on non-accrual status, is
reversed and charged against interest income. In addition, the amortization of
net deferred loan fees is suspended when a loan is placed
<PAGE> 25
24
on non-accrual status. Subsequent cash receipts are applied either to the
outstanding principal or recorded as interest income, depending on management's
assessment of ultimate collectibility of principal and interest. Loans are
returned to an accrual status when the borrower's ability to make periodic
principal and interest payments has returned to normal (i.e. brought current
with respect to principal or interest or restructured) and the paying capacity
of the borrower and/or the underlying collateral is deemed sufficient to cover
principal and interest in accordance with the Company's previously established
loan-to-value policies.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is established through a provision for loan
losses charged to expenses. Loans are charged against the allowance for loan
losses when management believes that the collectibility of the principal is
unlikely. The allowance is an amount that management believes will be adequate
to absorb possible losses on existing loans that may become uncollectible,
based on evaluations of the collectibility of loans and prior loan loss
experience. The evaluations take into consideration 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.
While management utilizes the latest available information to determine the
potential for losses on loans, future additions to the allowance may be
necessary based on changes in economic conditions as well as adverse changes in
the financial condition of borrowers. In addition, various regulatory agencies,
as an integral part of their examination process, periodically review the
allowance. Such agencies may require the Company or the Bank to recognize
additions to the allowance based on their judgments of information available to
them at the time of their examination.
Effective in the first quarter of 1995, the Company adopted SFAS No. 114,
Accounting by Creditors for Impairment of a Loan, and SFAS No. 118, Accounting
by Creditors for Impairment of a Loan-Income Recognition and Disclosures, which
require that impaired loans be measured based on the present value of expected
future cash flows discounted at the loans effective interest rate, the loans'
observable market price, or the fair value of the underlying collateral. The
adoption of SFAS No. 114 and SFAS No. 118 did not have a material impact on the
Company's financial position, shareholders' equity or results of operations for
the year ended December 31, 1994.
PREMISES AND EQUIPMENT
Premises and equipment are stated at cost less accumulated depreciation and
amortization. Costs of major replacements, improvements and additions are
capitalized. Depreciation expense is computed on the straight line basis over
the estimated useful lives of the assets, (ranging from 5 to 40 years), or for
leasehold improvements, over the life of the related lease if less than the
estimated useful life. Accelerated methods are used in depreciating certain
assets for income tax purposes.
REAL ESTATE OWNED OTHER THAN BANK PREMISES
Real estate owned is recorded at the lower of the recorded investment in the
loan or fair value less estimated disposal costs. Costs subsequently incurred
to improve the assets are included in the carrying value provided that the
resultant carrying value does not exceed fair value less estimated disposal
costs. Costs relating to holding the assets are charged to expense in the
current period. An allowance for estimated losses is provided when declines in
fair value below the carrying value are identified. Net costs of assets
acquired through foreclosure includes costs of holding and operating the
assets, net gains or losses on sales of these assets and provisions for losses
to reduce such assets to fair value less estimated disposal costs.
INCOME TAXES
The Company accounts for income taxes in accordance with SFAS No. 109,
Accounting for Income Taxes. Under SFAS No. 109, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the periods in which those temporary differences are expected to be
recovered or settled.
The First Jermyn Corp. and its subsidiaries file a consolidated Federal income
tax return and the amount of income tax expense or benefit is computed and
allocated on a separate return basis.
RETIREMENT PLAN
The First National Bank of Jermyn has a retirement plan which covers
substantially all employees. The provisions of SFAS No. 87, Employers'
Accounting for Pensions are utilized to calculate net pension cost.
EARNINGS PER COMMON SHARE
Earnings per common share are computed based on the weighted average number of
shares outstanding during each period.
2. RESTRICTIONS ON CASH AND DUE FROM BANKS
The Bank is required to maintain average reserve balances with the Federal
Reserve Bank based on a percentage of deposits. The average amounts of those
reserve balances approximated $ 1,158,000 and $ 1,115,000 in 1995 and 1994,
respectively.
<PAGE> 26
25
3. SECURITIES
The amortized cost and fair value of securities is shown below (in thousands):
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ----------- -------
<S> <C> <C> <C> <C>
SECURITIES AVAILABLE FOR SALE:
DECEMBER 31, 1995
U.S. Treasury . . . . . . . . . . . . . . . . . . . . . . . . $13,046 $179 $ - $13,225
Marketable equity . . . . . . . . . . . . . . . . . . . . . . 150 - - 150
------- ------- ------- -------
$13,196 $179 $ - $13,375
------- ------- ------- -------
MORTGAGE-BACKED SECURITIES AVAILABLE FOR SALE:
DECEMBER 31, 1995
Collateralized mortgage obligations
of U.S. government agencies and and corporations . . . . . . $14,353 $25 ($476) $13,902
Mortgage-backed securities . . . . . . . . . . . . . . . . . 12,113 200 (9) 12,304
------- ------- ------- -------
$26,466 $225 ($485) $26,206
------- ------- ------- -------
INVESTMENT SECURITIES HELD TO MATURITY:
DECEMBER 31, 1995
U.S. Treasury . . . . . . . . . . . . . . . . . . . . . . . . $56,538 $1,697 ($7) $58,228
U.S. government agencies . . . . . . . . . . . . . . . . . . . 61 - - 61
Obligations of states and political subdivisions . . . . . . . 18,266 394 (10) 18,650
Corporate obligations . . . . . . . . . . . . . . . . . . . . 202 3 - 205
Foreign debt . . . . . . . . . . . . . . . . . . . . . . . . . 250 - - 250
------- ------- ------- -------
$75,317 $2,094 ($17) $77,394
------- ------- ------- -------
SECURITIES AVAILABLE FOR SALE:
DECEMBER 31, 1994
U.S. Treasury . . . . . . . . . . . . . . . . . . . . . . . . $15,948 $3 ($130) $15,821
Marketable equity . . . . . . . . . . . . . . . . . . . . . . 150 - - 150
------- ------- ------- -------
$16,098 $3 ($130) $15,971
------- ------- ------- -------
MORTGAGE-BACKED SECURITIES AVAILABLE FOR SALE:
DECEMBER 31, 1994
Collateralized mortgage obligations of U.S. government agencies
and corporations . . . . . . . . . . . . . . . . . . . . . . . $8,703 $ - ($765) $7,938
Collateralized mortgage obligations of private corporation . 5 - - 5
Mortgage-backed securities . . . . . . . . . . . . . . . . . 6,583 - (259) 6,324
------- ------- ------- -------
$15,291 $ - ($1,024) $14,267
------- ------- ------- -------
INVESTMENT SECURITIES HELD TO MATURITY:
DECEMBER 31, 1994
U.S. Treasury . . . . . . . . . . . . . . . . . . . . . . . . $58,770 $ - ($1,444) $57,326
U.S. government agencies . . . . . . . . . . . . . . . . . . . 62 - - 62
Obligations of states and political subdivisions . . . . . . . 2,837 - (113) 2,724
Corporate obligations . . . . . . . . . . . . . . . . . . . . 307 - (7) 300
Foreign debt . . . . . . . . . . . . . . . . . . . . . . . . . 250 - - 250
------- ------- ------- -------
$62,226 $ - ($1,564) $60,662
------- ------- ------- -------
</TABLE>
Upon implementation of SFAS No. 115, the Bank's strategy was to classify all
securities in the investment portfolio as available for sale in order to
provide maximum liquidity and flexibility. During the first six months of
1994, the Bank monitored closely its liquidity position and asset/liability gap
position using new modeling techniques. Based on these analyses, the Bank
redefined its determination of liquidity needs and identified approximately
$45,000,000 of securities (consisting of all municipal bonds, U.S. Treasury
securities with maturities generally greater than two years, and various other
securities with maturities generally greater than two years) which the Bank
believes it has the ability and intent to hold to maturity. As a result, on
June 30, 1994, the Bank transferred these securities to the investment
securities held to maturity portfolio at fair value in accordance with
Paragraph 15 of SFAS No. 115. The remaining unrealized loss of $487,000, net
of tax, continues to be reported as a component of shareholders' equity and is
being amortized over the remaining lives of the individual securities as an
adjustment to yield. In addition, none of the securities reclassified to the
investment securities held to maturity portfolio at June 30, 1994 were
subsequently transferred to securities available for sale in connection with
the FASB's issuance of its Special Report in November 1995.
<PAGE> 27
26
The amortized cost and fair value of securities at December 31, 1995, by
contractual maturity, are shown below (in thousands). Expected maturities may
differ from contractual maturities because borrowers may have the right to call
or prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Held-to-maturity Available-for-sale
Amortized Cost Fair Value Amortized Cost Fair Value
-------------- ---------- -------------- ----------
<S> <C> <C> <C> <C>
Within one year . . . . . . . . . . . . . . $20,294 $20,445 $2,996 $3,012
After one year but within five years . . . 36,921 38,467 10,050 10,213
After five years but within ten years . . . 2,040 2,096 - -
After ten years . . . . . . . . . . . . . . 16,062 16,386 - -
Marketable equity . . . . . . . . . . . . . - - 150 150
------- ------- ------- -------
Total . . . . . . . . . . . . . . . . . . . $75,317 $77,394 $13,196 $13,375
------- ------- ------- -------
</TABLE>
Proceeds, gross realized gains, and gross realized losses on sales/calls of
securities were $0, $0, and $0 for 1995 and 1994, respectively; and $0, $2,000
and $0 for 1993, respectively.
At December 31, 1995 and 1994, securities with an amortized cost of
approximately $16,697,161 and $7,381,461 (fair value of approximately
$17,429,348 and $7,211,264), respectively, were pledged to secure public
deposits as required or permitted by law.
4. LOANS AND REAL ESTATE OWNED OTHER THAN BANK PREMISES
The following is a summary of the Bank's loan portfolio on December 31, 1995
and 1994 (in thousands):
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Real estate - mortgage . . . . . . . . . . $113,334 $107,448
Commercial, financial and agricultural . . 30,679 37,154
Installment loans . . . . . . . . . . . . . 28,635 21,408
Real estate-construction . . . . . . . . . 1,822 2,798
-------- --------
Total loans - gross . . . . . . . . . $174,470 $168,808
-------- --------
Less Unearned income . . . . . . . . . . . 1,128 1,296
Allowance for loan losses . . . . . . . . . 3,015 2,835
-------- --------
Net loans . . . . . . . . . . . . . . . . $170,327 $164,677
-------- --------
</TABLE>
A significant portion of the Bank's loans are collateralized by residential and
commercial real estate located in Northeastern Pennsylvania with a primary
concentration in Lackawanna County. The Bank's primary concentration of credit
risk is related to the real estate market in the aforementioned area. The
ultimate collectibility of most of the Bank's loan portfolio is greatly
affected by the economic conditions within Northeastern Pennsylvania.
Management is not aware of any other significant concentrations of credit risk
within its loan portfolio.
Presented below are total non-accruing loans of the Bank at December 31, 1995,
1994 and 1993. Also shown is the approximate related amount of interest
recorded as income and interest not recorded as income for the years ended
December 31, 1995, 1994 and 1993 (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Non-accrual loans . . . . . . . . . . . . . $1,978 $3,043 $5,595
------ ------ ------
Interest income recorded . . . . . . . . . $92 $29 $141
Interest income not recorded . . . . . . . 141 258 363
------ ------ ------
Total possible interest income . . . . $233 $287 $504
------ ------ ------
</TABLE>
At December 31, 1995, the Bank had impaired loans totalling approximately
$1,423,000, all of which had a related allowance for impairment. The allowance
for losses on impaired loans totalled $238,000 at December 31, 1995. The
average balance of impaired loans for 1995 was $1,649,000. There were no
charge-offs or recoveries on impaired loans during 1995. The Bank recognizes
interest income on impaired loans on a cash basis method. Total interest
income recognized on impaired loans totalled $31,000 for the year ended
December 31, 1995.
The following table presents the amounts due the Bank from principal officers,
directors and their related businesses in excess of $60,000 as of each December
31. The indebtedness was incurred in the ordinary course of business,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with other persons (in thousands):
<PAGE> 28
27
<TABLE>
<CAPTION>
Year Ended
1995 1994
------ ------
<S> <C> <C>
Balance, at beginning of year . . . . . . . $3,418 $3,743
Reclassification of beginning balance . . . - 223
Additions . . . . . . . . . . . . . . . . . 1,298 27
Repayments . . . . . . . . . . . . . . . (1,987) (575)
------ ------
Balance, at end of year . . . . . . . . . . $2,729 $3,418
------ ------
</TABLE>
An analysis of real estate owned other than Bank premises for 1995 and 1994
follows (in thousands):
<TABLE>
<CAPTION>
Year Ended
1995 1994
---- ----
<S> <C> <C>
Balance, at beginning of year . . . . . . . $574 $516
Transfers from real estate -
commercial and real estate loans category 310 688
Real estate sales . . . . . . . . . . . . . (567) (589)
Loss on disposition of real estate . . . (21) (41)
---- ----
Balance, at end of year . . . . . . . . . . $296 $574
---- ----
</TABLE>
5. ALLOWANCE FOR LOAN LOSSES
A summary of the transactions in the Bank's allowance for loan losses is as
follows (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Balance, January 1 . . . . . . . . . . . . $2,835 $2,849 $2,382
Recoveries credited to allowance . . . . . 89 99 77
Provision charged to operations . . . . . . 365 454 1,403
Losses charged to allowance . . . . . . . . (274) (567) (1,013)
------ ------ ------
Balance, December 31 . . . . . . . . . . . $3,015 $2,835 $2,849
------ ------ ------
</TABLE>
6. BANK PREMISES, LEASEHOLD IMPROVEMENTS, AND FURNITURE AND EQUIPMENT
A summary of the Company's bank premises, leasehold improvements and furniture
and equipment is as follows (in thousands):
<TABLE>
<CAPTION>
December 31
1995 1994
------ ------
<S> <C> <C>
Land and buildings . . . . . . . . . . . . $3,964 $3,306
Land under capitalized lease . . . . . . . 302 302
Bank premises and leasehold improvements
under capitalized lease . . . . . . . 1,708 1,708
Furniture and equipment . . . . . . . . . . 2,586 2,488
Total at cost . . . . . . . . . . 8,560 7,804
Less: Accumulated depreciation and
amortization . . . . . . . . . . (3,370) (3,085)
------ ------
Net bank premises, leasehold improvements
and furniture and equipment . . . . . $5,190 $4,719
------ ------
</TABLE>
The provision for depreciation and amortization of bank premises and leasehold
improvements under capitalized lease was $440,000, $431,000 and $433,000 in
1995, 1994 and 1993 respectively.
7. DEPOSITS
Interest-bearing deposits at December 31, 1995 and 1994 includes NOW accounts
of $19,177,000 and $18,996,000 respectively.
The following table summarizes the maturity distribution of certificates of
deposit greater than $100,000 at December 31, 1995 and 1994 (in thousands):
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Three months or less . . . . . . . . . . . $16,569 $ 8,757
Over three months through twelve months . . 8,852 6,468
Over one year through five years . . . . . 1,372 626
------- -------
Total . . . . . . . . . . . . . . $26,793 $15,851
------- -------
</TABLE>
Interest expense approximated $1,214,000, $559,000, and $517,000 for
certificates of deposit greater than $100,000 in the years ended December 31,
1995, 1994 and 1993, respectively.
<PAGE> 29
28
8. CAPITALIZED LEASE OBLIGATION
The Bank has capitalized a noncancelable lease for two office buildings which
expires in the year 2004. The lease requires payment of property taxes,
maintenance costs and insurance on the properties.
Future minimum payments, by year and in the aggregate, under the capitalized
lease obligation are as follows (in thousands):
<TABLE>
<S> <C>
1996 . . . . . . . . . . . . . . . . . . . $ 155
1997 . . . . . . . . . . . . . . . . . . . $ 155
1998 . . . . . . . . . . . . . . . . . . . $ 155
1999 . . . . . . . . . . . . . . . . . . . $ 155
Thereafter . . . . . . . . . . . . . . . . $ 720
-------
Total minimum lease payments . . . . . . . $ 1,340
Less amount representing interest . . . . . $ (449)
-------
Present value of net minimum lease payments $ 891
-------
</TABLE>
9. RETIREMENT PLAN
The Bank has a noncontributory defined benefit retirement plan which covers all
eligible employees. The Bank's plan provides retirement benefits based upon
years of service and average compensation during the three years preceding
retirement. The Bank's annual funding policy is to contribute an amount that
can be deducted for Federal income tax purposes, using an actuarial cost method
(Aggregate Cost Method) and assumptions, which differ from those used for
financial reporting. Contributions are intended to provide not only for
benefits attributable to service to date, but also for those benefits expected
to be earned in the future. The contributions for 1995, 1994 and 1993
approximated $221,000, $204,000 and $202,000, respectively.
The following table sets forth the Bank's plan's funded status as of December
31, 1995 and 1994 and amounts recognized in the consolidated balance sheets at
December 31, 1994 and 1993 (in thousands):
<TABLE>
<CAPTION>
December 31
Projected benefit obligation: 1995 1994
<S> <C> <C>
Accumulated benefit obligation:
Vested benefits . . . . . . . . . . . . . . . . $3,062 $2,511
Non-vested benefits . . . . . . . . . . . . . . 243 77
------ ------
Accumulated benefit obligation total . 3,305 2,588
Effect of projected future compensation levels . . . . . . 1,499 1,158
------ ------
Projected benefit obligation total . . . . . . . . . . . . . . . . . 4,804 3,746
Plan assets at fair value . . . . . . . . . . . . . . . . . . . . . . 4,894 3,973
------ ------
Projected benefit obligation total less than plan assets at fair value 90 227
Unrecognized net (gain) loss . . . . . . . . . . . . . . . . . . . . (175) (368)
------ ------
Unrecognized transaction obligation . . . . . . . . . . . . . . . . . 53 57
------ ------
Accrued pension cost included on consolidated balance sheet . . . . $ (32) $ (84)
------ ------
</TABLE>
Net pension cost for 1995, 1994 and 1993 included the following
components (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Service cost . . . . . . . . . . . . . . . . . . . . $149 $167 $136
Interest cost . . . . . . . . . . . . . . . . . . . . 310 286 278
Actual return on plan assets . . . . . . . . . . . . (825) 4 (303)
Amortization of transitional obligation . . . . . . . 4 4 1
Amortization of unrecognized net gain . . . . . . . . - - -
Asset gain (loss) deferred . . . . . . . . . . . . . 531 (299) 31
---- ---- ----
Net pension cost . . . . . . . . . . . . . . . . . . $169 $162 $143
---- ---- -----
</TABLE>
In determining the estimated costs of the plan, the weighted-average discount
rate used was 7.00%, 8.06% and 6.95% for 1995, 1994 and 1993, respectively.
The weighted-average rate of increase in compensation levels was 4.50%,
compounded annually for 1995 and 1994 and 4.25% for 1993. The weighted-average
expected long-term rate of return on plan assets used in determining net
periodic pension cost was 7.50%. The plan's assets consist primarily of common
trust funds (Employee Benefit Income Fund) and short-term investments (Trust
for United States Treasury Obligations) administered by an independent bank.
<PAGE> 30
29
10. INCOME TAXES
The components of federal income tax expense (benefits) are as follows (in
thousands):
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Current . . . . . . . . . . . . . . . . . . . . . . . $1,380 $1,406 $1,130
Deferred . . . . . . . . . . . . . . . . . . . . . . (11) (40) (203)
------ ------ ------
$1,369 $1,366 $ 927
------ ------ ------
</TABLE>
A reconciliation of the income tax expense in the accompanying statements of
income with the amount computed by applying the statutory federal income tax
rate to income before income taxes is as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Tax expense at 34% rate . . . . . . . . . . . . . . . $1,572 $1,463 $1,050
Interest from tax exempt loans and investments, net . (204) (98) (124)
Other, net . . . . . . . . . . . . . . . . . . . . . 1 1 1
------ ------ ------
Income tax expense . . . . . . . . . . . . . . . . . $1,369 $1,366 $ 927
------ ------ ------
</TABLE>
The tax effect of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities at December 31, 1995
and 1994, in accordance with SFAS No. 109 are presented below (in thousands):
<TABLE>
<CAPTION>
1995 1994
------ ------
<S> <C> <C>
Deferred tax assets:
Unrealized losses on securities
available for sale . . . . . . . $ 278 $ 693
Allowance for loan losses . . . . 716 655
Deferred loan fees . . . . . . . . 373 438
Deferred directors fees . . . . . 69 59
Others, net . . . . . . . . . . . 166 150
------ ------
Total gross deferred tax assets . . . . . . 1,602 1,995
Less valuation allowance . . . . . . . . . - -
Net deferred tax assets . . . . . . . . . . 1,602 1,995
------ ------
Deferred tax liabilities:
Depreciation . . . . . . . . . . . (125) (130)
Prepaid Pension . . . . . . . . . (16) -
------ ------
Total gross deferred tax liabilities . . . (141) (130)
------ ------
Net deferred tax asset . . . . . . . . . . $1,461 $1,865
------ ------
</TABLE>
Based on the Company's current and past taxable history and the anticipated
level of future taxable income, management of the Company believes the existing
deductible temporary differences will, more likely than not, reverse in future
periods in which the Company generates net taxable income. Accordingly, the
Company does not believe a valuation allowance is necessary at December 31,
1995. There can be no assurance, however, that the Company will generate any
earnings or any specific level of continued earnings.
11. FUNDS FLOW RESTRICTIONS
National bank regulations limit the amount of dividends that may be paid
without prior approval of the Bank's regulatory agency. Under this limitation,
the payment in any year is limited to the net profits (as defined by the
regulations) for that year plus the retained net profits (as defined by the
regulations) for the preceding two years. The Company and Bank are also
subject to minimum capital levels which could minimize payment of dividends.
The Company and Bank currently have capital levels which are in excess of
minimum capital level ratios required by the Company or Bank. The limit on
dividends by the Bank to the Company as of December 31, 1995, was approximately
$5,518,000.
Federal bank laws and regulations prohibit the Bank from extending credit to
the Company in excess of its capital and surplus (as defined by the
regulations). The Bank limit on extension of credit to the Company was
approximately $4,452,000 as of December 31, 1995.
<PAGE> 31
30
12. COMMITMENTS AND CONTINGENT LIABILITIES
In the normal course of business, the Bank makes various commitments and incurs
certain contingent liabilities that are not presented in the accompanying
financial statements. The commitments include various commitments to extend
credit. At December 31, 1995, approximate unused commitments were as follows
(in thousands):
<TABLE>
<S> <C>
Revolving home equity lines . . . . $ 2,715
Real estate-mortgages . . . . . . . 1,265
Standby letters of credit . . . . . 1,007
Other . . . . . . . . . . . . . . . 1,010
-------
Total . . . . . . . . $ 5,997
-------
</TABLE>
The Bank does not anticipate any material losses as a result of its
commitments.
Legal Proceedings
In the normal course of business, various legal proceedings are incurred.
While it is difficult to predict or determine the ultimate outcome, in the
opinion of management, there are no current proceedings which are expected to
materially affect the Company's financial position, operating results and/or
liquidity.
Concentrations of Credit Risk
The Bank considers its primary market area for lending and savings activities
to be the Northeastern region of Pennsylvania. Although the Bank has a
diversified loan portfolio, a substantial factor in its debtor's ability to
honor their contractual obligation is the economic stability of the region.
13. PENNSYLVANIA CAPITAL SHARES TAX
During 1983, the Commonwealth of Pennsylvania (Commonwealth) passed a Single
Excise Tax to offset capital shares tax refunds allowed by a Commonwealth court
case. The 1983 Commonwealth court case confirmed that the capital shares tax
base must be reduced by United States government obligations. During 1989, the
Commonwealth Court declared the Single Excise Tax unconstitutional. To offset
the significant refunds due banks operating within the Commonwealth as a result
of the unconstitutional tax, the Commonwealth increased the capital shares tax
rate from 1.075% to 10.77% for 1989.
The Bank paid its increased 1989 capital shares tax in October, 1989, and
April, 1990. In 1989, the Bank also filed a petition for a cash refund of its
1983 Single Excise Tax amounting to approximately $715,000 (excluding interest
income) and reflected the $715,000 claim for refund as an asset. In March,
1991, the Commonwealth's Board of Finance and Revenue denied its petition for a
cash refund of its 1983 Single Excise Tax. The Bank filed a Petition for
Review of the Determination of the Commonwealth's Board of Finance and Revenue
in April, 1991. The Petition for Review of the Determination was accepted and
the original denial of the cash refund was overturned. In 1994, the Bank
received its refund of $715,000 plus interest on the balance due to the Bank in
the amount of approximately $92,500. The $92,500 was recognized as other
non-interest income in 1994.
<PAGE> 32
31
14. PARENT COMPANY FINANCIAL STATEMENTS - THE FIRST JERMYN CORP.
(Parent Corporation Only)
BALANCE SHEETS AT DECEMBER 31, 1995 AND 1994
(In Thousands of Dollars)
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
ASSETS:
Investment in subsidiaries . . . . . $26,134 $23,079
Cash . . . . . . . . . . . . . . . . 3 4
Other Assets . . . . . . . . . . . . 72 81
------- -------
Total assets . . . . . . . . . $26,209 $23,164
------- -------
SHAREHOLDERS' EQUITY: . . . . . . . . . . . $26,209 $23,164
------- -------
</TABLE>
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(In Thousands of Dollars)
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
EARNINGS OF SUBSIDIARIES
Dividends received . . . . . . . . . . . . . . . $1,018 $930 $905
Undistributed net income . . . . . . . . . . . . 2,237 2,011 1,269
OTHER EXPENSES - NET . . . . . . . . . . . . . . . . (1) (6) (20)
FEDERAL INCOME TAX BENEFIT . . . . . . . . . . . . . - 2 6
------ ------ ------
NET INCOME . . . . . . . . . . . . . . . . . . . . . $3,254 $2,937 $2,160
------ ------ ------
</TABLE>
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(In Thousands of Dollars)
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . $3,254 $2,937 $2,160
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation . . . . . . . . . . . . . . . - - 1
Increase in other assets . . . . . . . . . - - (4)
Equity in undistributed net income of subsidiaries (2,237) (2,011) (1,269)
------ ------ ------
Net cash provided by operating
activities . . . . . . . . . . 1,017 926 888
------ ------ ------
FINANCING ACTIVITIES:
Dividends paid to shareholders . . . . . . . . (1,018) (930) (885)
------ ------ ------
Net cash used in financing activities (1,018) (930) (885)
------ ------ ------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS . . (1) (4) 3
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR . . . 4 8 5
------ ------ ------
CASH AND CASH EQUIVALENTS AT END OF YEAR . . . . . . $3 $4 $8
------ ------ ------
NON-CASH TRANSACTIONS
Transfer of other assets between parent and
subsidiary . . . . . . . . . . . . . . . . . . $(9) $6 $ -
------ ------ ------
</TABLE>
<PAGE> 33
32
15. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, Disclosures about Fair
Value of Financial Instruments, as amended by SFAS No. 119, requires the Bank
to disclose estimated fair value of its financial instruments.
CASH, DUE FROM BANKS AND FEDERAL FUNDS SOLD
For cash, due from banks, and federal funds sold the carrying amount is a
reasonable estimate of fair value.
INVESTMENT SECURITIES AND SECURITIES AVAILABLE FOR SALE
For securities held as investments, fair value equals quoted market price, if
available. If a quoted market price is not available, fair value is estimated
using quoted market prices for similar securities.
LOANS
Fair values are estimated for portfolios of loans with similar characteristics.
Loans are segregated by type; commercial, commercial mortgages, construction,
residential mortgages and consumer. The fair value of residential mortgage
loans are estimated using quoted market prices for sales of whole loans with
similar characteristics such as repricing dates, product type and size. For
residential loans that reprice frequently, the carrying amount approximates
fair value. The fair value of other types of loans for which quoted market
prices are not available is estimated by discounting expected future cash flows
using the current rates at which similar loans would be made to borrowers with
comparable credit ratings and for similar remaining maturities. The fair value
of non-performing loans is based on recent external appraisals. Estimated cash
flows, discounted using a rate commensurate with the risk associated with the
estimated cash flow are utilized if appraisals are not available.
DEPOSIT LIABILITIES
SFAS No. 107 defined the fair value of deposits with no stated maturity, such
as non-interest-bearing demand deposits, money market and interest-bearing
demand deposits and savings deposits, to be equal to the amount payable on
demand as of December 31, 1995. The fair value of the remaining time deposits
is based on the discounted value of the contractual cash flows. The discount
rate is estimated using the rates currently offered for deposits with
comparable remaining maturities.
BORROWED FUNDS
Rates currently available to the Company for debt with similar terms and
remaining maturities are used to estimate fair value of existing debt.
OFF-BALANCE SHEET INSTRUMENTS
The fair value of off-balance sheet instruments, including commitments to
extend credit and stand-by letters of credit, is estimated using the fees
currently charged to enter into similar agreements with comparable remaining
terms and reflect the present creditworthiness of the counterparties.
The carrying amount and estimated fair value of the Company's financial
instruments are as follows (in thousands):
<TABLE>
<CAPTION>
December 31
1995 1994
Carrying Fair Carrying Fair
Amount Value Amount Value
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Financial assets:
Cash and short-term investments . . . . . $14,201 $14,201 $10,659 $10,659
Securities available for sale . . . . . . 13,375 13,375 15,971 15,971
Mortgage-backed
securities available for sale . . . . . 26,206 26,206 14,267 14,267
Investment securities . . . . . . . . . . 75,317 77,394 62,226 60,662
Loans, net . . . . . . . . . . . . . . . 170,327 170,661 164,677 160,733
Financial liabilities:
Deposits . . . . . . . . . . . . . . . . $281,298 $281,797 $250,842 $249,847
Borrowed funds . . . . . . . . . . . . . - - 1,900 1,900
</TABLE>
The fair values of the Bank's off-balance sheet financial instruments at
December 31, 1995 and 1994 are as follows (in thousands):
<TABLE>
<CAPTION>
December 31
1995 1994
Contract Fair Contract Fair
Value Value Value Value
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Off balance sheet instruments:
Commitments to extend credit . . . . . $3,980 $80 $4,001 $80
Standby letters of credit . . . . . . 1,007 - 952 -
Other . . . . . . . . . . . . . . . . 1,010 - 670 -
</TABLE>
<PAGE> 34
33
INDEPENDENT AUDITORS' REPORT
[KPMG PEAT MARWICK LLP LETTERHEAD]
To the Shareholders and Board of Directors of The First Jermyn Corp.:
We have audited the accompanying consolidated balance sheets of The First
Jermyn Corp. and subsidiaries as of December 31, 1995 and 1994, and the related
consolidated statements of income, shareholders' equity, and cash flows for the
years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits. The
accompanying consolidated financial statements of The First Jermyn Corp. for
the year ended December 31, 1993 were audited by other auditors whose report
thereon, dated February 17, 1994, expressed an unqualified opinion on those
statements.
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 provide a reasonable basis
for our opinion.
In our opinion, the 1995 and 1994 consolidated financial statements referred to
above present fairly, in all material respects, the financial position of The
First Jermyn Corp. and subsidiaries as of December 31, 1995 and 1994, and the
results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, the Company
adopted the provisions of the Financial Accounting Standards Board's Statement
of Financial Accounting Standards No. 115, Accounting for Certain Investments
in Debt and Equity Securities in 1994.
/s/ KPMG PEAT MARWICK LLP
Philadelphia, Pennsylvania
February 9, 1996
<PAGE> 35
33A
[CAVALARI, MCHALE, MATLOWSKI & COMPANY LETTERHEAD]
INDEPENDENT AUDITOR'S REPORT
To the Shareholders and Board of Directors
of The First Jermyn Corp.:
We have audited the accompanying consolidated balance sheets of The First
Jermyn Corp. and subsidiaries as of December 31, 1993 and 1992, and the related
consolidated statements of income, changes in shareholders' equity and cash
flows for each of the years in the three-year period ended December 31, 1993.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
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 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 provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of The First
Jermyn Corp. and subsidiaries as of December 31, 1993 and 1992, and the results
of its operations and its cash flows for each of the years in the three-year
period ended December 31, 1993 in conformity with generally accepted accounting
principles.
/s/ CAVALARI, MCHALE, MATLOWSKI & COMPANY
Wilkes-Barre, Pennsylvania
February 17, 1994
<PAGE> 36
34
THE FIRST NATIONAL BANK OF JERMYN
OFFICERS
<TABLE>
<S> <C>
EXECUTIVE OFFICERS
William M. Davis . . . . . . . . . . . . . . . . . . . . . . . . . . . President and CEO
Steven R. Tokach . . . . . . . . . . . . . . . . . . . . . . . . Executive Vice President
Martha Myshak . . . . . . . . . . . . . Vice President & Cashier, Community Office Manager
Donald J. Gibbs . . . . . . . . . . . . . Vice President, Finance/Control Division Manager
Joseph P. D'Oro, Jr. . . . . . . . . . Vice President, Support Services Division Manager
COMMERCIAL LENDING
Joseph Tomko . . . . . . . . . . . . . Senior Vice President, Commercial Services Officer
J. Randall Palko . . . . . . . . . . . . . . Vice President, Commercial Services Officer
David H. Lencicki . . . . . . . . . Assistant Vice President, Commercial Services Officer
COMMUNITY OFFICE MANAGERS
Martha Myshak . . . . . . . . . . . . . . . . . . . . . . . . . . Vice President & Cashier
Jeanne M. Hodak . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vice President
Theresa A. Daley . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vice President
David C. Griffin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vice President
Patricia M. Calabro . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Manager
DEALER SERVICES
Samuel DeStefano . . . . . . . . . . . . . . . . . . . . . . . . Vice President, Manager
Richard Rossi . . . . . . . . . . . . . . . . Assistant Vice President, Assistant Manager
CUSTOMER SERVICE OFFICERS
Florence Lepri
Helen Sudlesky
Maryann Smith
Donna Davis
LOAN ADMINISTRATION - QUALITY CONTROL
Paul Pizzichemi . . . . . . . . . . . . . . . . . . . . . . . . . Vice President, Manager
Mary Caviston . . . . . . . . . . . . . . . Vice President, Credit Administration Manager
Joan Lasichak . . . . . . . . . . . . . . . . . . . . Assistant Vice President, Supervisor
DEPOSIT OPERATIONS
Mary Tracewski . . . . . . . . . . . . . . . . . . . . Assistant Vice President, Manager
DATA PROCESSING OPERATIONS
Dolores Coviello . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Manager
AUDIT
Vincent Munley . . . . . . . . . . . . . . . . . . . . . . . . . Vice President, Auditor
HUMAN RESOURCES
Carol Scriven . . . . . . . . . . . . . . . . . . . . . Assistant Vice President, Manager
LOAN REVIEW
Nancy Mastrucci . . . . . . . . . . . . . . . . . . . Vice President, Loan Review Officer
</TABLE>
<PAGE> 37
35
THE FIRST NATIONAL BANK OF JERMYN
DIRECTORS
Kuzma Leschak, Jr. Edmund J. Biancarelli, M.D.
Chairman of Board Medical Doctor
Retired
David M. Epstein, Esquire Robert T. Kelly
Vice Chairman of Board Certified Public Accountant
Attorney at Law
William M. Davis I. Leo Moskovitz
President and CEO Retired
Garfield G. Thomas Peter A. Sabia
Secretary President
Retired Valley Dodge Truck Center
ADVISORY BOARD - JESSUP OFFICE
Edmund J. Biancarelli, M.D.
Raymond Alunni
Marie Kushmerick
Thomas J. Munley, Esquire
THE FIRST JERMYN CORP.
AND FIRST OF JERMYN REALTY COMPANY, INC.
DIRECTORS AND OFFICERS
William M. Davis Robert T. Kelly, C.P.A.
Chairman, President and Director
CEO and Director
Garfield G. Thomas Kuzma Leschak, Jr.
Secretary and Director Director
Edmund J. Biancarelli, M.D. I. Leo Moskovitz
Director Director
David M. Epstein, Esquire Peter A. Sabia
Director Director
Martha Myshak
Treasurer
<PAGE> 38
[FIRST JERMYN LOGO]
[MEMBER FDIC LOGO]
JERMYN OFFICE
645 WASHINGTON AVE.
JERMYN, PA 18433
876-6500
KEYSER OAK
PLAZA OFFICE
SCRANTON, PA 18503
343-1211
JESSUP OFFICE
210 CHURCH ST.
JESSUP, PA 18434
489-4736
MINOOKA OFFICE
500 DAVIS ST.
SCRANTON, PA 18505
341-5555
LIBERTY OFFICE
67 SALEM AVENUE
CARBONDALE, PA 18407
282-9390
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000741562
<NAME> FIRST JERMYN CORP.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 12,341
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 1,860
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 39,581
<INVESTMENTS-CARRYING> 75,317
<INVESTMENTS-MARKET> 77,394
<LOANS> 174,470
<ALLOWANCE> 3,015
<TOTAL-ASSETS> 309,986
<DEPOSITS> 281,298
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,588
<LONG-TERM> 891
1,125
0
<COMMON> 0
<OTHER-SE> 25,084
<TOTAL-LIABILITIES-AND-EQUITY> 309,986
<INTEREST-LOAN> 14,861
<INTEREST-INVEST> 6,680
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 21,541
<INTEREST-DEPOSIT> 10,191
<INTEREST-EXPENSE> 10,283
<INTEREST-INCOME-NET> 11,258
<LOAN-LOSSES> 365
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 6,852
<INCOME-PRETAX> 4,623
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,254
<EPS-PRIMARY> 3.68
<EPS-DILUTED> 3.68
<YIELD-ACTUAL> 3.55
<LOANS-NON> 1,978
<LOANS-PAST> 511
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,835
<CHARGE-OFFS> 274
<RECOVERIES> 89
<ALLOWANCE-CLOSE> 3,015
<ALLOWANCE-DOMESTIC> 1,743
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,272
</TABLE>
