SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the quarterly period
ended June 30, 1995
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the transition
period from _________ to __________
Commission File Number 0-13899
DELAWARE NATIONAL BANKSHARES CORP.
(Exact name of registrant as specified in its charter)
Delaware 51-0281753
(state of incorporation (IRS Employer
or organization) Identification No.)
Rt. 113 & Edwards St., P.O. Box 520, Georgetown, DE 19947
(address of principal executive offices) (Zip Code)
(302) 855-2400
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former year, if changed since
last report)
Indicate by check mark 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 preceding 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 [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at July 31, 1995
(Common Stock, $5 par value) 763,351
INDEX
PART 1 - FINANCIAL INFORMATION
PAGE NO.
Condensed Consolidated Balance Sheet -
June 30, 1995, and December 31, 1994 4
Condensed Consolidated Statement of Income -
Three and Six Months Ended June 30, 1995 & 1994 6
Condensed Consolidated Statement of Changes in Stockholders Equity -
Six Months Ended June 30, 1995 & 1994 8
Statement of Cash Flows -
Six Months Ended June 30, 1995 & 1994 9
Notes to Consolidated Condensed Financial Statements - 11
Management's' Discussion and Analysis of Financial Condition
and Results of Operations - 13
PART II - OTHER INFORMATION
Item 1. Legal Proceedings N/A
Item 2. Changes in Securities N/A
Item 3. Defaults Upon Senior Securities N/A
Item 4. Submissions of Matters to a vote of Security Holders Page 15
Item 5. Other Information N/A
Item 6. Exhibits and Reports on Form 8K N/A
DELAWARE NATIONAL BANKSHARES CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
JUNE 30, 1995 AND DECEMBER 31, 1994
June 30, December 31,
1995 1994
ASSETS:
Cash and due from banks $4,227,663 $3,492,676
Interest-bearing deposits in banks 2,200,000 200,000
Investment securities:
Available for sale 0 3,229,936
Held to maturity
(Market values at 6/30/95 -
$12,130,226 & 12/31/94 -
$10,150,751) 12,101,491 10,340,373
Federal funds sold 8,400,000 6,075,000
Loans, net - domestic 72,527,960 68,197,369
Property on operating leases, net 0 4,920
Premises and equipment, net 2,746,113 2,913,981
Other real estate owned 341,919 453,630
Other assets 999,753 1,158,765
TOTAL ASSETS $103,544,899 $96,066,650
LIABILITIES
Deposits - Domestic:
Noninterest-bearing $15,286,313 $14,774,359
Interest-bearing 79,500,493 73,540,562
TOTAL DEPOSITS 94,786,806 88,314,921
Other liabilities 1,217,853 597,464
TOTAL LIABILITIES 96,004,659 88,912,385
STOCKHOLDERS' EQUITY
Common Stock
Par value $5 per share;
Authorized: 1,250,000 shares:
Issued 766,913 shares at 6/30/95
and 734,540 shares at 12/31/94 3,834,565 3,672,700
Paid in surplus 1,627,545 1,480,449
Undivided profits 2,158,224 2,096,776
Net gains (losses) on securities
available for sale 731 (14,835)
Treasury stock:
(151 shares at $27.00)
(3411 shares at $22.50) (80,825) (80,825)
TOTAL STOCKHOLDERS' EQUITY 7,540,240 7,154,265
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $103,544,899 $96,066,650
see accompanying notes
DELAWARE NATIONAL BANKSHARES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1995 AND 1994
3 Months Ended 3 Months Ended 6 Months Ended 6 Months Ended
June 30, 1995 June 30, 1994 June 30, 1995 June 30, 1994
INTEREST INCOME:
Loans including fees $1,683,093 $1,433,057 $3,275,922 $2,809,347
Investment securities:
Taxable 166,092 124,172 330,035 254,446
Exempt from federal tax 12,615 15,710 25,769 32,020
Deposits in banks 39,910 4,057 60,117 5,625
Federal funds sold 84,291 1,787 173,835 8,260
Equity Securities 6,986 0 6,986 0
TOTAL INTEREST INCOME 1,992,987 1,578,783 3,872,664 3,109,698
INTEREST EXPENSE:
Deposits 889,970 538,288 1,682,844 1,073,219
Short-term borrowing and
federal funds purchased 0 6,817 0 7,532
TOTAL INTEREST EXPENSE 889,970 545,105 1,682,844 1,080,751
NET INTEREST INCOME 1,103,017 1,033,678 2,189,820 2,028,947
PROVISION FOR LOAN LOSSES 0 30,000 0 60,000
NET INTEREST INCOME
AFTER PROVISION FOR
LOAN LOSSES 1,031,017 1,003,678 2,189,820 1,968,947
OTHER INCOME:
Dividends on FRB stock 1,024 1,024 2,049 2,049
Service charges and fees 100,352 103,748 202,906 195,354
Other operating income 108,386 11,225 114,258 17,428
TOTAL OTHER INCOME 209,762 115,997 319,213 214,831
OTHER EXPENSES:
Salaries, employee
benefits, and
director fees 537,707 456,008 990,286 873,354
Net occupancy and
equipment expense 146,663 136,340 327,862 274,383
Other operating expenses 395,929 259,577 729,700 496,682
TOTAL OTHER EXPENSES 1,080,299 851,925 2,047,848 1,644,419
INCOME BEFORE
INCOME TAXES 232,480 267,750 461,185 539,359
PROVISION FOR
INCOME TAXES 122,841 84,379 208,899 170,686
NET INCOME 109,639 183,371 252,286 368,673
EARNINGS PER COMMON SHARE
AND COMMON STOCK EQUIVALENTS
Primary $0.14 $0.25 $0.33 $0.50
Fully diluted $0.14 $0.24 $0.33 $0.49
Primary Shares:
Weighted average number
of shares actually
outstanding 763,351 729,118 756,925 726,498
Stock options 11,680 18,341 13,959 17,038
Total 775,031 747,459 770,884 743,536
Fully Diluted Shares:
Weighted average number
of shares actually
outstanding 763,351 729,118 756,925 726,498
Stock options 16,239 21,836 13,959 20,712
Total 779,590 750,954 770,884 747,210
see accompanying notes
<TABLE>
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<CAPTION>
Gain(Loss)
Avail. for
Capital Undivided Sale Treasury
Total Stock Surplus Profits Securities Stock
<S> <C> <C> <C> <C> <C> <C>
Bal 12/31/93 6,897,505 3,575,690 1,395,486 2,007,154 0 (80,825)
Net Income -
Six Months
Ended 6/30/94 368,673 368,673
Proceeds from
Stock Options
Exercised
(15,441 sh.) 123,477 77,205 46,272
Net Gain(Loss)
on Inv. Securities
Available for Sale (434) (434)
Dividends Paid
($.25 per share) (180,278) (180,278)
Bal 6/30/94 7,208,943 3,652,895 1,441,758 2,195,549 (434) (80,825)
Bal 12/31/94 7,154,265 3,672,700 1,480,449 2,096,776 (14,835) (80,825)
Net Income -
Six Months
Ended 6/30/95 252,286 252,286
Proceeds from
Stock Options
Exercised
(32,373 sh.) 308,961 161,865 147,096
Net Gain(Loss)
on Inv. Securities
Available for Sale 15,566 15,566
Dividends Paid
($.25 per share) (190,838) (190,838)
Bal 6/30/95 7,540,240 3,834,565 1,627,545 2,158,224 731 (80,825)
</TABLE>
DELAWARE NATIONAL BANKSHARES CORP. AND SUBSIDIARIES
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994
June 30, 1995 June 30, 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Interest received from earning assets $3,816,590 $3,073,256
Fees and commissions received 202,906 195,354
Interest paid (1,357,482) (1,083,385)
Cash paid to suppliers and employees (1,613,774) (1,560,671)
Income taxes paid (22,333) (218,611)
Other income 14,674 14,945
Rent from operating leases 356 4,532
_________ _________
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,040,937 425,420
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of investment securities (1,995,343) (327,900)
Proceeds from maturities of
investment securities 3,496,784 1,438,014
Purchase of certificates of deposit (2,000,000) 0
Net loans made to customers (4,319,185) (2,673,645)
Capital expenditures (18,300) (512,117)
Federal funds sold, net (2,325,000) 3,700,000
Proceeds from sale of property 265,086 0
_________ _________
NET CASH (USED) PROVIDED BY
INVESTING ACTIVITIES (6,895,958) 1,624,352
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in deposit accounts 6,471,885 (1,694,785)
Short-term unsecured borrowing, net 0 1,000,000
Dividends paid (190,838) (180,278)
Proceeds from stock options exercised 308,961 123,477
_________ _________
NET CASH PROVIDED BY FINANCING ACTIVITIES 6,590,008 (751,586)
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 734,987 1,298,186
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 3,492,676 2,851,342
_________ _________
CASH AND CASH EQUIVALENTS AT END OF PERIOD $4,227,663 $4,149,528
see accompanying notes
DELAWARE NATIONAL BANKSHARES CORP. AND SUBSIDIARIES
STATEMENT OF CASH FLOWS - CONTINUED
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
June 30, 1995 June 30, 1994
Net income $252,286 $368,673
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization 134,070 107,401
Provision for loan losses 0 60,000
(Increase) decrease in interest receivable (45,525) (38,407)
(Increase) decrease in other assets 191,543 (17,018)
Increase (decrease) in interest payable 325,362 (2,634)
Increase (decrease) in other liabilities 108,461 (6,635)
Amort. of investment prem.(disc.), net (10,549) 1,965
(Gain) Loss on Sale of Assets (101,277) 0
Provision for deferred taxes 186,566 (47,925)
________ ________
NET CASH PROVIDED BY
OPERATING ACTIVITIES $1,040,937 $425,420
DELAWARE NATIONAL BANKSHARES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - CONSOLIDATED FINANCIAL STATEMENTS
The consolidated balance sheet as ofJune 30, 1995, the consolidated
statements of income for the three and six months ended June 30, 1995
and 1994, and the consolidated statements of changes in stockholders'
equity, and cash flows for the six months ended June 30, 1995 and 1994,
have been prepared by the Company, without audit. In the opinion of
management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position, results
of operations and cash flows presented have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been omitted. It is suggested that these consolidated
financial statements be read in conjunction with the financial statements
and notes thereto included in the Company's December 31, 1993 annual report
to shareholders and December 31, 1994 form 10-K. The results of operations
for the periods ended June 30, 1995 and 1994 are not necessarily indicative
of the results for the full year.
NOTE 2 - ADOPTION OF SFAS 114 - ACCOUNTING BY CREDITORS FOR IMPAIRMENT
OF A LOAN
On January 1, 1995, the Company adopted the provisions of 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," an amendment to SFAS No. 114. The new standards require that
impaired loans, within the scope of the Statement, be measured based on the
present value of expected future cash flows, discounted at the loan's
effective interest rate, or the fair value of the collateral if the loan is
collateral dependent. Implementation of these new standards did not have a
material impact on the Company's results of operations or financial
position.
NOTE 3 - PROPOSED AFFILIATION
In early 1995, the board of directors of the Company entered into an
agreement and plan of affiliation and share exchange with Fulton Financial
Corporation. The transaction is subject to approval of stockholders and
regulatory authorities. On June 19, 1995, the merger was approved by the
stockholders of the Corporation.
DELAWARE NATIONAL BANK
CAPITAL ADEQUACY AND REQUIREMENTS
June 30, 1995 June 30, 1994
TIER 1 CAPITAL 6,468,611 6,208,247
TIER 2 CAPITAL 752,030 637,864
TOTAL CAPITAL 7,220,641 6,846,111
RISK-WEIGHTED ASSETS 60,162,424 51,029,049
RISK-BASED CAPITAL RATIOS AND REQUIREMENTS:
6/30/95 6/30/94
ACTUAL ACTUAL REQUIRED
TIER 1 CAPITAL / RISK-WEIGHTED ASSETS 10.752% 12.166% 4.000%
TOTAL CAPITAL / RISK-WEIGHTED ASSETS 12.002% 13.416% 8.000%
DELAWARE NATIONAL BANKSHARES CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following is management's discussion and analysis of certain significant
factors which have affected the Company's financial position and operating
results during the periods included in the accompanying condensed financial
statements.
DELAWARE NATIONAL BANKSHARES CORP.
ASSETS
The assets of the Corporation have increased from $96,066,650 at year end
1994 to $103,544,899 on June 30, 1995. The 7.8% increase is attributable
to changes on the balance sheet of the Corporation's only active subsidiary,
Delaware National Bank. Loans increased 6.4% from $68,197,369 at year end
1994 to $72,527,960 on June 30, 1995. Investment securities decreased
nearly 10.8% from the December 1994 total of $13,570,309 to $12,101,491 as
of June 30, 1995.
CAPITAL
Capital on June 30, 1995 was $7,540,240, a 5.4% increase over year end
figures of $7,154,265. This is a result of retained earnings for the first
two quarters of 1995 and proceeds from stock options exercised during the
year, less the payment of a $.25 per share dividend.
Earnings for the first two quarters of 1995 were $252,286, compared to
$368,673 the first two quarters of 1994. The reduction in earnings is
primarily due to legal fees pertaining to the proposed merger with Fulton
Financial Corporation and additional occupancy expense related to the
establishment of an operations / administration facility.
Management is aware of the sale price in some, but not all, of the sales of
stock of the Corporation. The most recent price of which it is aware is
$19.50 per share. This price was provided by Ferris Baker Watts, Inc. and
may not reflect all sales of the Corporation's stock for the quarter.
As of year end 1994, the corporation listed its stock with four independent
market makers. Listed below are the names of those who list Delaware
National Bankshares Corp. stock:
Ferris Baker Watts, Inc. Wheat First Securities, Inc.
1-800-753-3321 1-800-777-8714
F.J. Morrissey, Inc. A.G. Edwards & Sons, Inc.
1-800-842-8928 1-800-568-5408
DELAWARE NATIONAL BANK
There have been no material changes in financial condition not directly
related or attributable to the growth of or change in the Corporation's
only active subsidiary, Delaware National Bank, or the market or economic
conditions affecting it. There have been no significant changes of income
or losses from continuing operations which are not representative of the
ongoing business.
GROWTH
Deposits of the Bank on June 30, 1995 were $94,786,806, compared to
$88,314,921 on December 31, 1994. This is an increase of 7.3%.
The Bank maintains its policy of not soliciting brokered certificates of
deposit. As of June 30, 1995, the Bank held $99,000 in brokered deposits.
These will not be renewed upon their maturity.
CAPITAL
Under the risk based capital guidelines, the minimum capital requirements
are set at 8% of total risk weighted assets. Risk based capital ratio for
the Bank at June 30, 1995, was 12.00%, at December 31, 1994 it was 12.20%
and at June 30, 1994 it was 13.42%. Total tier 1 capital to total assets
must exceed 4%. Tier 1 capital at June 30, 1995 was 10.75%, compared to
10.95% at December 31, 1994, and 12.17% at June 30, 1994.
LIQUIDITY
The Bank's liquidity is measured at 25.21% on June 30, 1995, compared to
the average for the year 1994 of 19.51%. Liquidity is reviewed by the
Board's ALCO committee. An important function of the ALCO committee is
the analysis of the adequacy of its sources of liquidity. Measuring
liquidity involves analysis of deposit and other liability maturities, new
loan generation forecasts, maturities of the loan portfolio, market
conditions, economic forecasts and the institution's investment and funding
sources. These analyses must balance the critical factors of time and cost.
Cash flows from operating activities increased by $615,517 from the
comparable quarter in 1994, primarily from income received from earning
assets. Cash flows from investing activities decreased significantly due
to the purchase of certificates of deposit and loans made to customers.
Cash flows from financing activities increased due to increases in deposit
accounts.
ASSET QUALITY
Loans appearing on the Bank's "watch sheet" are monitored to determine
possibility of charge off. The amount of potential charge off loans at
June 30, 1995 is $45,803. The delinquency ratio at June 30, 1995, was
0.97%, compared to 0.51% at June 30, 1994. The average delinquency ratio
for 1994 was 0.91%. Other than these targeted loans, the quality of the
bank's loan and investment portfolio remains high with no adverse trends or
deterioration in quality.
INFLATION
The monetary nature of the majority of the Bank's assets and liabilities
differs from that of other business entities. Because of this, inflation
does not have a determinable effect on the assets, liabilities, capital or
earnings of the Bank.
The FDIC has proposed an insurance premium reduction. This would impact
Delaware National Bank's future quarterly earnings. The FDIC assessment
imposed on Delaware Nation is currently 23.5% of the net income for the first
two quarters of 1995. This is only a proposal and the exact affect on future
income cannot be determined at this time.
There have been no other significant changes in financial statements or
operation in the first two quarters of 1995 or in the twelve months
preceding, other than those disclosed within this document or otherwise
stipulated in notes to financial statements filed with the report and
incorporated herein by reference.
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Shareholders was held on June 19, 1995.
#1 - Proposal to approve and adopt the Agreement of Reorganization and
Merger, dated Feb. 9, 1995, as amended, between Fulton Financial
Corporation and DNB providing, among other things, for the merger of DNB
with and into Fulton Financial Corporation and for the automatic
conversion of each share of the common stock of DNB into 1.244 shares
of Fulton Financial Corporation Common Stock:
Shares voting FOR the proposal 631,955
Shares voting AGAINST the proposal 8,234
Shares ABSTAINING 31,908
#2 - Shareholder proposal to amend the Bylaws of DNB:
Shares voting FOR the proposal 180,191
Shares voting AGAINST the proposal 460,414
Shares ABSTAINING 31,395
#3 - Election of Directors of DNB for a term of three years, or until
their successors are elected and qualified:
Election of Everett T. Conaway:
Shares voting FOR the proposal 510,740
Shares WITHHELD 162,599
Election of Barbara-Cherrix O'Leary:
Shares voting FOR the proposal 370,021
Shares WITHHELD 303,318
Election of Gordon E. Wood:
Shares voting FOR the proposal 600,532
Shares WITHHELD 72,807
#4 - Selection of Rowles & Co. as independent public accountants of DNB
for fiscal year 1995:
Shares voting FOR the proposal 669,332
Shares voting AGAINST the proposal 1,244
Shares ABSTAINING 2,763
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed on its behalf by the undersigned thereunto duly
authorized.
Date: August 11, 1995
DELAWARE NATIONAL BANKSHARES CORP.
______________________________________
(Lynda A. Messick, Treasurer)
(Duly Authorized Officer)
___________________________________
(Linda C. Betts, Assistant Treasurer)
