<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
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Commission file number 0-133312
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THE FIRST JERMYN CORP.
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(Exact name of small business issuer as specified in its charter)
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<S> <C>
Pennsylvania 23-2275242
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
645 Washington Avenue; P.O. Box 39; Jermyn Pennsylvania 18433-0039
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number 717-876-6500
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Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act of 1934 during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes X No
- --
State the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
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<S> <C>
Class Outstanding at October 24, 1997
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Common stock, $1.25 par value 884,680
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THE FIRST JERMYN CORP. AND SUBSIDIARIES
FORM 10-QSB
INDEX
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PAGE
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PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED):
Consolidated Balance Sheets - September 30, 1997 and
December 31, 1996 1
Consolidated Statements of Income - Three Months and Nine Months
Ended September 30, 1997 and 1996 2
Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 1997 and 1996 3
Notes to Consolidated Financial Statements 4
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II - OTHER INFORMATION 13
SIGNATURES 14
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PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
THE FIRST JERMYN CORP. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands of dollars, except per share information)
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<CAPTION>
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September 30, December 31,
ASSETS 1997 1996
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<S> <C> <C>
Cash and due from banks $ 7,681 8,103
Interest bearing balances 1,178 ---
Federal funds sold 4,100 1,900
Securities available for sale 10,149 24,235
Mortgage backed securities available for sale 39,998 25,006
Investment securities (total market value - 1997 - $49,941, 1996 - $58,849) 48,075 57,827
Loans, gross 201,879 197,598
Less: Unearned discount and origination fees (880) (988)
Allowance for loan losses (2,883) (3,111)
- ---------------------------------------------------------------------------------------------------------------
Loans, net 198,116 193,499
Accrued interest receivable 2,309 2,470
Bank premises, leasehold improvements and furniture and equipment -net 4,852 5,067
Real estate owned other than bank premises 300 199
Other assets 2,797 3,257
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Total assets $ 319,555 321,563
===============================================================================================================
LIABILITIES
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Deposits:
Noninterest-bearing demand $ 26,704 30,437
Interest-bearing 259,475 259,678
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Total deposits 286,179 290,115
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Capitalized lease obligation 763 821
Accrued interest payable 1,330 1,250
Other liabilities 258 703
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Total liabilities 288,530 292,889
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SHAREHOLDERS' EQUITY
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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 26,383 24,343
Unrealized loss on securities available for sale, net of tax (163) (474)
Less treasury stock-at cost (15,205 shares) (196) (196)
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Total shareholders' equity 31,025 28,674
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Total liabilities and shareholders' equity $ 319,555 321,563
===============================================================================================================
</TABLE>
*See accompanying notes to consolidated financial statement
1
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THE FIRST JERMYN CORP. AND SUBSIDIARIES
Consolidated Statements of Income
(In thousands of dollars, except per share information)
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<CAPTION>
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Three months Nine months
Ended September 30 Ended September 30
1997 1996 1997 1996
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<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans 4,088 3,862 12,085 11,240
Interest on balances with banks 3 --- 3 ---
Interest and dividends on securities
U.S. Treasury 690 1,177 2,439 3,592
U.S. government agencies --- 2 --- 5
CMO's of U.S. government agencies
and corporations 523 414 1,318 1,277
State and political subdivisions 238 247 716 742
Other taxable debt --- 5 1 18
Taxable equity 3 3 7 7
Interest on federal funds sold 125 6 280 193
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Total interest income 5,670 5,716 16,849 17,074
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Interest expense:
Deposits 2,820 2,772 8,317 8,400
Federal funds purchased --- 15 --- 17
Capitalized lease obligations 19 22 58 65
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Total interest expense 2,839 2,809 8,375 8,482
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Net interest income 2,831 2,907 8,474 8,592
Provision for loan losses 45 46 135 137
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Net interest income after provision for
loan losses 2,786 2,861 8,339 8,455
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Noninterest income:
Service charges and fees 144 108 378 307
Gain on legal settlement --- --- --- 600
Other 30 31 85 86
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Total noninterest income 174 139 463 993
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Noninterest expense:
Salaries and benefits 971 917 2,763 2,680
Net occupancy and furniture/
equipment expenses 318 291 971 893
Data processing services 103 106 323 317
Fidelity (recovery)/loss --- --- (372) ---
Other expenses 474 517 1,430 1,523
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Total noninterest expense 1,866 1,831 5,115 5,413
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Income before federal income tax provision 1,094 1,169 3,687 4,035
Federal income tax provision 300 295 1,028 1,068
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Net income 794 874 2,659 2,967
========================================================================================================================
Per share information:
Net income $.90 $.99 $3.01 $3.35
Weighted average shares outstanding 884,680 884,680 884,680 884,680
=========================================================================================================================
</TABLE>
*The accompanying notes are an integral part of the consolidated financial
statements.
2
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THE FIRST JERMYN CORP. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands of dollars)
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<CAPTION>
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Nine months ended September 30,
1997 1996
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Operating activities:
Net income 2,659 2,967
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for loan losses 135 137
Depreciation and amortization of investment securities, bank
premises, leasehold improvements and furniture and equipment 339 390
Decrease/(Increase) in interest receivable and other assets 461 (119)
(Decrease)/Increase in interest payable and other liabilities (365) 1
- -----------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 3,229 3,376
Investing activities:
Purchases of securities (21,023) (18,248)
Proceeds from maturities of securities 30,340 16,649
Net increase in loans (4,943) (16,127)
Purchases of bank premises, leasehold improvements and
furniture and equipment-net (124) (260)
Proceeds from sales of assets acquired through foreclosure 90 21
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Net cash provided (used) in investing activities 4,340 (17,965)
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Financing activities:
Net (Decrease)/ Increase in noninterest-bearing demand deposits
and interest-bearing deposits (3,936) 6,948
Increase in (repayment of ) federal funds purchased --- 3,100
Principal payments on capitalized lease obligation (58) (52)
Dividends paid (619) (531)
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Net cash (used) provided by financing activities (4,613) 9,465
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Decrease/(Increase) in cash and cash equivalents 2,956 (5,124)
Cash and cash equivalents at beginning of period 10,003 14,201
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Cash and cash equivalents at end of $12,959 $9,077
===========================================================================================================
Cash paid during the period:
Interest 8,353 8,334
Taxes 1,054 1087
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Noncash transactions
Transfer of loans to real estate owned 191 ---
Change in unrealized loss on securities available for sale, net of tax 311 111
===========================================================================================================
</TABLE>
*The accompanying notes are an integral part of the consolidated financial
statement.
3
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FIRST JERMYN CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
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(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying consolidated financial statements of First Jermyn
Corp and subsidiaries (the Company) were prepared in accordance with
instructions to Form 10-QSB, and therefore, do not include information
or footnotes necessary for a complete presentation of financial
position, results of operations and cash flows in conformity with
generally accepted accounting principles. However, all normal,
recurring adjustments which, in the opinion of management, are
necessary for a fair presentation of the financial statements, have
been included. These financial statements should be read in
conjunction with the audited financial statements and the notes
thereto included in the Company's Annual Report for the period ended
December 31, 1996. The results for the nine months ended September
30, 1997 are not necessarily indicative of the results that may be
expected for the year ended December 31, 1997.
BUSINESS
The Company's principal subsidiary, The First National Bank of Jermyn
(the Bank), conducts business from its branch bank system located in
Lackawanna County, Pennsylvania. The Bank is subject to competition
from other financial institutions and other companies which provide
financial services. The Bank is subject to the regulations of certain
federal agencies and undergoes periodic examinations by those
regulatory authorities.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of all of
the Company's wholly-owned subsidiaries. All significant
intercompany transactions have been eliminated in consolidation.
Additionally, certain reclassifications have been made in order to
conform with the current year's presentation. The accompanying
consolidated financial statements have been prepared on an accrual
basis.
(2) EARNINGS PER SHARE
Earnings per share were $.90 and $3.01 for the three-month and nine
month periods ended September 30, 1997 as compared to $.99 and $3.35
for the three month and nine month periods ended September 30,1996.
Earnings per share was computed based on the weighted average number
of shares outstanding during each period.
4
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(3) RECENT ACCOUNTING PRONOUNCEMENTS
In June 1996, the FASB Issued SFAS No. 125, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities"
("SFAS 125"). This statement provides accounting and reporting
standards for transfers and servicing of financial assets and
extinguishments of liabilities based on consistent application of a
financial-components approach that focuses on control. It
distinguishes transfers of financial assets that are sales from
transfers that are secured borrowings. Under the financial-components
approach, after a transfer of financial assets, an entity recognizes
all financial and servicing assets it controls and liabilities it has
incurred and derecognizes financial assets it no longer controls and
liabilities that have been extinguished. The approach focuses on the
assets and liabilities that exist after the transfer. If a transfer
does not meet the criteria for a sale, the transfer is accounted for
as a secured borrowing with pledge of collateral. The Company has
adopted SFAS 125 prospectively, effective January 1, 1997, the
required date of adoption. The adoption of SFAS 125 did not have a
material impact on the Company's financial condition, equity, or
results of operation.
In February 1997, the FASB issued SFAS No. 128, Earnings Per Share.
This statement establishes standards for computing and presenting
earnings per share (EPS) and applies to entities with publicly held
common stock or potential common stock. This Statement simplifies the
standards for computing earnings per share previously found in APB
Opinion NO. 15, Earnings per Share, and makes them comparable to
international EPS standards. It replaces the presentation of primary
EPS with a presentation of basic EPS. It also requires dual
presentation of basic and diluted EPS on the face of the income
statement for all entities with complex capital structures and
requires a reconciliation of the numerator and denominator of the
basic EPS computation to the numerator and denominator of the diluted
EPS computation. This Statement is effective for financial statements
issued for periods ending after December 15, 1997, including interim
periods; earlier application is not permitted. This Statement
requires restatement of all prior-period EPS data presented. Because
the Company currently has no securities which constitute potential
common stock, adoption of this statement will not have any impact on
the Company's EPS disclosure.
In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard ("SFAS") No. 130,
Reporting Comprehensive Income. This statement establishes standards
for the reporting and display of comprehensive income and its
components in a full set of general-purpose financial statements.
SFAS No. 130 requires that all items that are required to be
recognized as components of comprehensive income be reported in a
financial statement that is displayed with the same prominence as
other financial statements. The statement does not require a specific
format for that financial statement but requires that an enterprise
display an amount representing total comprehensive income for the
period in that financial statement. SFAS No. 130 is effective for
fiscal years beginning after December 15, 1997. The Company will
include this new reporting information in its 1998 consolidated
financial statements as required.
In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard ("SFAS") No 131,
Disclosures About Segments of an Enterprise and Related Information.
SFAS No. 131 establishes standards for the way that public business
enterprises report information about operating segments in annual
financial statements and requires that those enterprises report
selected information about operating segments in interim financial
reports issued to shareholders. It also establishes standards for
related disclosures about products and services, geographic areas, and
major customers. SFAS No. 131 is effective for financial statements
for periods beginning after December 15, 1997. Management has not yet
determined the impact, if any, of this statement on the Company.
5
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(4) SUBSEQUENT EVENT
On October 15, 1997 the Company announced its agreement to acquire
Upper Valley Bancorp, Inc. and its wholly owned subsidiary, NBO
National Bank. Upper Valley Bancorp, Inc. had 266.3 million in assets
and 190.9 million in deposits at September 30, 1997. The transaction,
which is subject to regulatory and shareholder approval, is projected
to be consummated during the first quarter of 1998.
6
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
OVERVIEW
The Company's net income for the three month and nine month periods ended
September 30, 1997 was $794,000 and $2,659,000 or $.90 and $3.01 per share,
respectively, compared to $874,000 and $2,967,000 or $.99 and $3.35,
respectively, in the same three month and nine-month periods in the preceding
year. Earnings for the nine-month period of 1997 have declined primarily due to
a decrease in the net interest margin, and a decrease in non interest income
related to a one time gain on a legal settlement recognized in 1996.
At September 30, 1997, the Company had total assets of $320 million compared to
$322 million at December 31, 1996. The composition of total assets reflects
growth in the loan portfolio which was primarily funded by maturities in the
investment portfolio.
The Company recorded an annualized return on average assets of 1.12% for the
nine-month period ending September 30, 1997, compared to 1.25% for the same
period in 1996. Return on average equity of 12.03% was recorded for the
nine-month period ended September 30, 1997, compared to 14.54% for the same
period in l996.
The Company is susceptible to a continued increasing interest rate environment
that may erode the net interest margin. Strategies to enhance earnings and
improve the interest rate exposure of the Company will be considered, such as
the sale of existing securities available for sale and purchasing higher
yielding, rate sensitive assets with the proceeds. Additionally, the Company
will be seeking to enhance its net interest margin by increasing the higher
yielding loan portfolio with the cash flows from the repayments on the
mortgage-related and investment securities portfolios.
The Company will be increasing its market penetration through the proposed
acquisition of Upper Valley Bancorp, Inc. and its wholly owned subsidiary, NBO
National Bank. Upper Valley Bancorp, Inc. had total assets of 266.3 million and
total deposits of 190.9 million at September 30, 1997. After completion of the
acquisition, The First Jermyn Corp's wholly owned subsidiary, The First National
Bank of Jermyn, will be one of the largest community banks in Northeastern
Pennsylvania with total assets of approximately $600 million.
FINANCIAL CONDITION
CASH AND DUE FROM BANKS, INTEREST BEARING BALANCES, AND FEDERAL FUNDS SOLD
Cash and Due From Banks declined to approximately $7.7 million at September 30,
1997 from $8.1 million at December 31, 1996 due to normal fluctuations
resulting from the conduct of customer business.
Interest bearing balances were $1.2 million at September 30, 1997 compared to
zero at December 31, 1996 as a result of the Company placing deposits with the
FHLB of Pittsburgh. The majority of these funds will be invested in FHLB stock
during the fourth quarter of 1997.
Federal Funds sold increased $2.2 million to $4.1 million at September 30,
1997 as a result of excess liquidity caused by maturities in the securities
available for sale portfolio.
7
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SECURITIES AVAILABLE FOR SALE
Securities available for sale, including mortgage backed securities available
for sale, have increased $.9 million or 2% to $50.1 million from $49.2 million
at December 31, 1996. During the first nine months of 1997, securities
available for sale representing short-term Treasury Notes matured and were
reinvested in higher yielding mortgage backed securities available for sale.
INVESTMENT SECURITIES
Investment Securities have decreased $9.8 million or 17% to $48.1 million at
September 30, 1997 from $57.8 million in December 31, 1996. The decrease
related to proceeds from maturities. The funds which became available were
reinvested in loans, federal funds sold, and securities available for sale.
LOANS RECEIVABLE, NET
Aggregate loans receivable totaled $198.1 million at September 30, 1997, an
increase of $4.6 million or 2.4% from $193.5 million at December 31, 1996. The
mix of loans is substantially unchanged at those dates. The Company attributes
this growth to its increased advertising and enhanced marketing effort driven
by the employees.
NON-PERFORMING ASSETS
The Company's total non-performing assets decreased from $3.7 million or 1.20%
of total assets at December 31, 1996 to $2.1 million or .65% of total assets at
September 30, 1997. Nonaccrual loans decreased from $3,080,000 at December
31, 1996 to $1,390,000 at September 30, 1997. The decrease was primarily
casued by $435,000 of charge-offs and $370,000 of transfers to accrual status.
These delinquencies consist primarily of commercial and residential real estate
loans in the process of collection.
Real estate owned, increased $101,000 or 51% from $199,000 as of December 31,
1996 to $300,000 as of September 30, 1997, due to the foreclosure of property
securing three credits partially offset by the sale of three foreclosed
properties. There were no significant gains or losses on the sale of real
estate owned.
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<CAPTION>
9/30/97 12/31/96 9/30/96
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<S> <C> <C> <C>
Nonaccrual $1,390,000 3,080,000 2,943,000
Loans 90 days of more delinquent 388,000 468,000 795,000
Restructured --- --- ---
--------- --------- ---------
Total non-performing loans 1,788,000 3,548,000 3,738,000
Other real estate owned other than
Bank premises 300,000 199,000 324,000
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Total non-performing assets $2,078,000 3,747,000 4,062,000
========= ========= =========
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At September 30, 1997, the Company's allowance for loan losses amounted to
$2.88 million or 1.42% of gross loans receivable. At December 31, 1996, the
Company's allowance for loan losses was $3.11 million or l.57% of gross loans
receivable. Management believes that the allowance is adequate given the asset
quality of the institution. The table below describes the roll forward of the
allowance for loan losses for the nine month periods ended September 30, 1997
and 1996.
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9/30/97 9/30/96
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Balance at end of period $3,111,000 3,015,000
Recoveries 72,000 72,000
Provision for land and lease losses 135,000 137,000
Charge-offs 435,000 120,000
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Balance at end of period $2,883,000 3,104,000
=========== =========
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DEPOSITS
Deposits decreased $3.9 million or 1.3% from $290.1 million at December 31,
1996 to $286.2 million at September 30, 1997. The largest single factor
affecting the decrease in deposits was a drop in non interest bearing demand
deposits caused by a large commercial customer who temporarily deposited
liquidity balances in their demand account at December 31, 1996.
EQUITY
At September 30, 1997, total equity was $31.0 million or 9.7% of total assets
compared to $28.7 million or 8.9% of total assets as of December 31, 1996.
Total equity increased primarily due to the retention of net income during the
intervening period less dividends paid and due to a decline in the unrealized
loss on securities available for sale, net of tax, as a result of changing
market conditions.
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RESULTS OF OPERATIONS
NET INCOME
The Company's net income decreased $80,000 to $794,000 for the three months
ended September 30, 1997, compared to $874,000 recorded in the comparable
period of the prior year. For the nine-month period ended September 30, 1997,
net income decreased $308,000 or approximately 10% compared to $2,967,000 for
the nine-months ended September 30, 1996. Earnings for the nine-month period
of 1996 have declined primarily due to a decrease in the net interest margin,
and an increase in noninterest income related to a gain on legal settlement.
NET INTEREST INCOME
Net interest income before provision for loan losses amounted to $2.8 million
and $8.5 million for the three-month and nine month periods ended September 30,
1997 as compared to $2.9 million and $8.6 million for the respective periods in
1996. Interest income in 1997 decreased for income on securities and was
compounded by an increase in interest on the deposit base.
Total interest income decreased to $5,670,000 and $16,849,000 for the three
month and nine month periods ended September 30, 1997 from $5,716,000 and
$17,074,000 during the comparable prior periods. The decrease was primarily
the result of a decrease in the average interest-earning assets of $398,000 for
the nine months ended September 30, 1997 or 13.1% compared to the nine months
ended September 30, 1996. Additionally, the yield earned on average
interest-earning assets decreased 6 basis points during the nine months ended
September 30, 1997 compared to the 1996 period.
Total interest expense increased by $30,000 to $2,839,000 to $2,809,000 for the
three months ended September 30, 1997 from $2,809,000 for the comparable prior
period. Total expense decreased by $107,000 to $8,375,000 for the nine months
ended September 30, 1997 from $8,482,000 for the comparable prior period. The
decrease for the nine months was due to a decrease in interest expense
associated with deposits, where the average balance increased by $1,948,000 or
7.5% during the nine months ended September 30, 1997 compared to the 1996
period. The decrease in interest expense on deposits was also caused by a 1
basis point decrease in the average rates paid for the nine months ended
September 30, 1997 over the comparable 1996 period.
PROVISION FOR LOAN LOSSES
The Company establishes a provision for loan losses, which is charged to
operations, in order to maintain the allowance for loan losses at a level which
is deemed to be appropriate based upon an assessment of prior loss experience,
the volume and type of lending presently being conducted by the Company,
industry standards, past due loans, economic conditions in the Company's market
area generally and other factors related to the collect ability of the
Company's loan portfolio. For the three month and nine month periods ended
September 30, 1997, the provision for loan losses amounted to $45,000 and
$135,000. This amount is consistent with the $46,000 and $137,000 reported in
the three and nine month periods of the prior year. The Company's allowance
for loan losses decreased by $228,000 to $2,883,000 at September 30, 1997
compared to December 31, 1996, in part due to an increase in net charge offs
from $48,000 for the nine months ended September 30, 1996 to $363,000 for the
nine months ended September 30,1997. The largest single factor contributing to
this increase was a $185,00 net charge off on a single commercial real estate
loan.
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<PAGE> 13
Athough management utilizes its best judgment in providing for possible losses,
there can be no assurance that the Company will not have to increase its
provision for loan losses in the future as a result of the future increases in
non-performing loans or for other reasons which could adversely affect the
Company's results of operations. In addition, various regulatory agencies, as
an integral part of their examination process, periodically review the
allowance for loan losses. Such agencies may require the Company to recognize
additions to the allowance for loan losses based on their judgments of
information which is available to them at the time of their examination.
NONINTEREST INCOME
Noninterest income for the nine months ending September 30, 1997 decreased
approximately $530,000 to $463,000 from the comparable prior period, due to a
one-time gain on a legal settlement in the Company's favor which was recorded
in the first quarter of 1996. Noninterest income increased $35,000 primarily
related to ATM surcharge fees, for the three month period ended September 30,
1997 to $174,000 compared to $139,000 for the same period in the prior year.
NONINTEREST EXPENSES
Noninterest expenses for the nine month period ending September 30, 1997
decreased approximately 5.5% from the comparable prior period. The largest
factor contributing to the decrease was a $372,000 recovery on an employee
fidelity loss which was received by the company in the second quarter of 1997.
Non interest expense for the three month period ending September 30, 1997
increased $35,000 to $1,866,000 from $1,831,000 for the three months ended
September 30, 1996. The largest factor in this change was an $54,000 increase
in salaries and benefits, primarily relating to an increase in the number of
full-time equivalent employees to 124 at September 30, 1997 as compared to 117
at September 30, 1996.
INCOME TAXES
Income tax expense totaled $300,000 and $1,028,000 for the three-month and
nine-month periods ended September 30, 1997 compared to $295,000 and
$1,068,000 for the comparable prior periods. These amounts resulted in
effective tax rates of 27% and 28% respectively, compared to 25% and 26%,
respectively.
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CAPITAL ADEQUACY
A strong capital position is important to the continued profitability of the
Company and promotes depositor and investor confidence. The Company's capital
consists of shareholders' equity, which provides a basis for future growth and
expansion and also provides a buffer against unexpected losses. Shareholders'
equity increased $2,351,000 to $31,025,000 at September 30, 1997, as a result
of income retained during the nine-months ended September 30, 1997 and a
decrease in the net unrealized loss on securities available for sale. It is
management's intention to continue paying a reasonable return on shareholders'
investment while retaining adequate earnings to allow for continued growth.
The Federal Reserve Board measures capital adequacy for bank holding companies
by using a risk-based capital frame-work and by monitoring compliance with
minimum leverage ratio guidelines. The minimum ratio of total risk-based
capital to risk-adjusted assets is 8% at September 30, 1997, of which 4% must
be Tier 1 capital. The Company's total risk-based capital ratio was 18.31% at
September 30, 1997. The Company's Tier 1 risk-based capital ratio was 17.07%
at September 30, 1997.
In addition, the Federal Reserve Board has established minimum leverage ratio
guidelines for bank holding companies. Those guidelines provide for a minimum
leverage ratio of 3% for bank holding companies that meet certain criteria,
including that they maintain the highest regulatory rating. All other bank
holding companies are required to maintain a leverage ratio of 3% plus an
additional cushion of at least 100 to 200 basis points. The Federal Reserve
Board has not advised the Company of any specific minimum leverage ratio
applicable to it. The Company's leverage ratio was 9.53% at September 30,
1997.
The Federal Deposit Insurance Corporation Improvement Act (FDICIA) establishes
minimun capital requirements for all depository institutions and established
five capital tiers: "well capitalized", "adequately capitalized",
"under-capitalized", "significantly under-capitalized", and "critically
under-capitalized". FDICIA imposes significant restrictions on the operations
of a bank which is not at least adequately capitalized. A depository
institutions' capital tier will depend upon where its capital levels are in
relation to various other capital measures which include a risk-based capital
measure, a leverage ratio capital measure and other factors. Under regulations
adopted, for an institution to be well capitalized it must have a total
risk-based capital ratio of at least 10%, a Tier I risk-based capital ratio of
at least 6%, and a Tier I leverage ratio of at least 5%, and not be subject to
any specific capital order or directive.
At September 30, 1997, the Bank's total risk-based capital, Tier I risk-based
capital and Tier I leverage ratios were 18.32%, 17.07% and 9.53%, respectively.
12
<PAGE> 15
FIRST JERMYN CORP. AND SUBSIDIARIES
September 30, 1997
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a): Exhibits:
None
(b): Reports on Form 8-K:
The company filed a current report on form
8-K dated November 11, 1997 to report the
execution of an agreement and plan of merger
with Upper Valley Bancorp, Inc.
13
<PAGE> 16
FIRST JERMYN CORP. AND SUBSIDIARIES
September 30, 1997
SIGNATURES
In accordance with requirement of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
THE FIRST JERMYN CORP.
----------------------
(Registrant)
Date November 11, 1997 By /s/ William M. Davis
----------------- ----------------
William M. Davis
Chairman, President and Director
(Principal Executive Officer)
Date November 11, 1997 By /s/ Martha Myshak
----------------- -------------------------
Martha Myshak
(Principal Financial Officer and
Treasurer)
Date November 11, 1997 By /s/ Donald J. Gibbs
----------------- -------------------------
Donald J. Gibbs
(Principal Accounting Officer
and Vice President, Finance/
Control Division Manager)
14
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