Item 1. Business
Background
Southern Jersey Bancorp of Delaware, Inc. (Registrant), a bank holding company, was organized under the laws of the State of Delaware on June 9, 1989. On July 17, 1989, Registrant acquired all the outstanding common shares of Southern Jersey Bancorp, a bank holding company organized under the laws of the State of New Jersey (predecessor Registrant). As of this same date, Southern Jersey Bancorp was merged into Registrant.
Registrant's wholly-owned subsidiary, Farmers and Merchants National Bank of Bridgeton (the Bank), is a commercial bank which was first organized under the laws of the State of New Jersey and the United States Government in 1909, and all outstanding shares of the Bank were acquired by the predecessor Registrant on May 22,1984.
The Bank's wholly-owned subsidiary, F&M Investment Company (Investment Company), was organized under the laws of the State of Delaware in 1984 for the purpose of holding and managing investment securities.
Description of Business
Registrant is engaged in the business of managing or controlling its wholly-owned subsidiary bank and other such businesses related to banking as may be authorized under federal and state banking laws.
The Bank provides traditional services that are standard to the commercial banking industry and maintains a Trust Department that provides traditional fiduciary and agency services standard to the banking industry.
The Bank operates in the Counties of Cumberland, Gloucester and Salem in Southern New Jersey through branch offices with the main office situated in Bridgeton,New Jersey. Within the market area in which the Bank operates, there are numerouscommercial banks, savings and loan associations, credit unions, etc. The number of competitors cannot be reasonably estimated. The Bank is one of the largest independently owned financial institution in the market area and is one of the most profitable financial institutions in the State of New Jersey. During 1995, the Bank opened two new branch offices in New Jersey. The principal methods of competition are those that are standard to the banking industry, such as interest rates and customer services.
Environmental and Safety Regulations
In the opinion of Registrant, compliance with current laws and regulations pertaining to the environment, health and safety has not materially affected its business or financial condition, and Registrant believes that such matters will not have a material effect on its business or financial condition in the foreseeable future. After giving effect to pending programs for environmental compliance, Registrant expects to be in material compliance with currently applicable environmental, health and safety laws and regulations.
General
Employees - Registrant employs approximately 211 people who are not covered by collective bargaining agreements with any unions. In general, relationships with employees have been satisfactory.
Customers - Registrant is not dependent upon any single customer or upon any single group of customers, the loss of which would have a material adverse effect on Registrant.
Other - Registrant does not have research and development expenditures, backlog of orders and inventory, patents or trademarks, any seasonality of business, business under government contracts subject to renegotiation of profits or contract termination or reportable industry segments as described in SFAS 14, and does not use raw materials.
The banking business of Registrant and the Bank is subject tocomprehensive and detailed regulation by federal supervisory agencies; in particular, the Office of the Comptroller of Currency, the Federal Deposit Insurance Corporation, and the Federal Reserve Board, as well as the Securities and Exchange Commission. These agencies have broad administrative authority which includes, but is not limited to, dividends, expansion of locations, acquisitions and mergers, interest rates, reserves against deposits, terms, amounts and charges to borrowers, investments, ownership of certain companies by bank holding companies. The banking business of Registrant and the Bank is also subject to the banking laws of the States of New Jersey and Delaware.
The federal banking regulatory authorities (The Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation) may take action against the Registrant and the Bank for failure to maintain minimum levels of capital and minimum leverage ratios and failure to comply with regulations promulgated under the FDIC Improvement Act of 1991 (FDICIA) and the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA). The Bank's Tier 1 and risk weighted capital ratios at December 31, 1995 are 13.9% and 14.8%, respectively. This is well in excess of the minimum required of 4% and 8%.
FDICIA generally prohibits a depository institution from making any capital distribution (including payment of dividends) or paying any management fee to its holding company if the depository institution would thereafter be undercapitalized. Undercapitalized depository institutions are subject to growth limitations, prohibitions on the payment of interest rates in excess of 75 basis points above the average market yields for comparable deposits, and are required to submit a capital restoration plan. The federal banking agencies may not accept a capital plan without determining, among other things, that the plan is based on realistic assumptions and is likely to succeed in restoring the depository institution's capital. In addition,for a capital restoration plan to be acceptable, the depository institution's parent holding company must guarantee that the institution will comply with such capital restoration plan. The aggregate liability of the parent holding company is limited to the lesser of (i) an amount equal to 5% of the depository institution's total assets at the time it became undercapitalized and (ii) the amount which is necessary or would have been necessary to bring the institution into compliance with all capital standards applicable with respect to such institution as of the time it fails to comply with the plan. If a depository institution that is required to submit a capital restoration plan fails to submit an acceptable plan, it is treated as if it is significantly undercapitalized.
Significantly, undercapitalized depository institutions may be subject to a number of requirements and restrictions including orders to sell sufficient voting stock to become adequately capitalized, requirements to reduce total assets, or desist accepting deposits from correspondent banks, and restrictions on senior executive compensation and on interaffiliate transactions. Critical undercapitalization institutions are subject to a number of additional restrictions including the appointment of a receiver or conservator.
Regulations promulgated under FDICIA also require that an institution monitor its capital levels closely and notify its appropriate federal banking regulators within 15 days of any material events that affect the capital position of the institution.
FDICIA directs that each federal banking agency prescribe the standards for 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, and a maximum ratio of classified assets to capital, minimum earnings sufficient to absorb losses, a minimum ratio of market value to book value for publicly traded shares, and other such standards as the agency deems appropriate. FDICIA also contains a variety of other provisions that could affect 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, certain restrictions on investments and activities of state chartered insured banks and their subsidiaries, 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 brokerage deposits by depository institutions that arenot well capitalized or are adequately capitalized and have not received a waiver from the FDIC. Based on the regulations existing in perspective,none of the aforementioned requirements are expected to impose a material cost on the Company or to result in significant changes to the Company's operations.
Under FIRREA, a depository institution insured by the FDIC can be held liable for any loss incurred by or reasonably expected to be incurred by the FDIC after August 9, 1989, in connection with (i) the default of commonly controlled FDIC insured depository institution or (ii) any assistance provided by the FDIC to a commonly controlled FDIC insured depository institution in danger of default. "Default" is defined generally as the appointment of a conservator or receiver, and "in danger of default" is defined generally as the existence of certain conditions indicating that a default is likely to occur in the absence of regulatory assistance. FIRREA and the Crime Control Act of 1990 expand the enforcement powers available to federal banking regulators including providing greater flexibility to impose enforcement action, expanding the category of persons dealing with a bank or subject to enforcement action, increasing the potential civil and criminal penalties. In addition, in the event of a holding company insolvency, the Crime Control Act of 1990 affords a priority in respect of capital commitments made by a holding company on behalf of subsidiary banks.
			As more fully discussed in Item 7, Management's Discussion and Analysis, and the Notes to the Consolidated Financial Statements, the Registrant and the Bank are deemed "well capitalized" as it significantly exceeds the minimum level required by regulation for each relevant capital measure.
			Registrant has only domestic operations which are primarily concentrated in Cumberland and Salem Counties of New Jersey.
Item 1a.

Item 1a. Executive Officers of Registrant
			Set forth below are the names, ages, and titles of persons with Registrant and present and past positions of the persons serving as executive officers of Registrant and its subsidiaries. Unless otherwise stated, each officer has served in his present position since April, 1993.
NAME AND AGE OFFICE AND EXPERIENCE
Clarence D. McCormick, Sr. 66 President and Chief Executive Officer of Southern Jersey Bancorp of Delaware, Inc., President of F&M Investment Company,Chief Executive Officer of Farmers and Merchants National Bank of Bridgeton, NJ
Clarence D. McCormick, Jr. 35 Vice President of F&M Investment Company and President of Farmers and Merchants National Bank of Bridgeton, NJ since April 20, 1995
Ralph A. Cocove, Sr. 57 Executive Vice President and Cashier of Farmers and Merchants National Bank of Bridgeton, NJ
Robert C. Wolf 52 Executive Vice President of Administration of Farmers and Merchants National Bank of Bridgeton, NJ since May 13, 1993. Prior to 1993, Mr. Wolf was an officer of United Jersey Bank/South for 20 years.
Paul J. Ritter 35 Senior Vice President and Comptroller of Farmers and Merchants National Bank of Bridgeton, NJ since April 20, 1995
Harry W. Bullock 69 Secretary and Treasurer of Southern Jersey Bancorp of Delaware, Inc., Senior Vice President and Assistant Comptroller of Farmers and Merchants National Bank of Bridgeton, NJ since April 20, 1995
Russell Chappius, Sr. 54 Senior Vice President and Operations Officer of Farmers and Merchants National Bank of Bridgeton, NJ
Charles S. Kessler 57 Senior Vice President and Data Processing Manager of Farmers and Merchants National Bank of Bridgeton, NJ
Simon Aman 59 Senior Vice President and Senior Trust Officer of Farmers and Merchants National Bank of Bridgeton, NJ, and Investment Officer of F&M Investment Company since May 16, 1994. Prior to 1994, Mr. Aman was a Trust Officer with Central National Bank in Canajohaire, New York for 3 1/2 years and Union National Bank in Albany, New York for 15 years.
STATISTICAL DISCLOSURES UNDER GUIDE 3
Schedule I
Item I(A) Average Balance Sheets
December 31 1995 1994 1993 ASSETS Cash and due from banks $15,561 $16,348 $15,876 Interest-bearing deposits 2,342 1,540 1,970 Federal funds sold 16,113 21,221 32,341 Investment securities -Taxable 88,496 103,456 99,453 Investment securities -Tax Exempt 38,264 42,266 36,232 Loans net of unearned income 210,327 169,025 145,232 Less: Allowance for loan losses 2,349 2,283 2,076 Net loans 207,978 166,742 143,156 Bank premises and equipment - net 5,819 5,109 5,038 Other assets 8,525 7,839 7,999 ------- ------- ------- TOTAL ASSETS $383,098 $364,521 $342,065
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits Interest-bearing demand deposits $67,548 $58,201 $69,612 Savings accounts 146,401 152,539 140,599 CD's - Over $100,000 37,258 24,498 26,853 Non-interest bearing deposits 92,076 95,719 74,168 ------- ------- ------- Total Deposits 343,283 330,957 311,232 Other liabilities 2,813 2,627 2,555 ------- ------- ------- Total Liabilities 346,096 333,584 313,787
Shareholders' Equity Preferred stock 0 0 0 Common stock 2,129 2,129 2,129 Additional paid-in capital 2,241 2,252 2,210 Retained earnings 35,175 29,729 26,920 Allowance for unrealized (losses)/gains 750 125 0 ------- ------- ------- 40,295 34,235 31,259 Less:Treasury stock 3,293 3,298 2,981 Total Shareholders' Equity 37,002 30,937 28,278 TOTAL LIAB. & ------- ------- ------- SHAREHOLDERS' EQUITY $383,098 $364,521 $342,065
GUIDE 3
Schedule II
Item I(B) Analysis of Interest Earnings
For The Years Ended December 31 (In Thousands) 1995 1994 1993 Interest % Interest % Interest % INTEREST EARNING ASSETS: Interest bearing deposits $164 7.00% $77 5.00% $72 3.65% Federal funds sold 943 5.85% 876 4.13% 968 2.99% Investment securities Taxable 5,720 6.46% 6,435 6.22% 6,477 6.51% Tax-exempt 1,989 5.20% 2,218 5.25% 1,965 5.42% Loans 19,396 9.33% 15,010 9.00% 13,754 9.61% ------- ----- ------- ----- ------- ----- Average Yield $28,212 7.99% $24,616 7.34% $23,236 7.42% INTEREST BEARING LIABILITIES: Interest on deposits: Demand & time deposits $2,837 4.20% $2,358 4.05% $3,168 4.55% Savings 8,311 5.68% 7,018 4.60% 5,707 4.06% CD's - $100,000 or more 1,966 5.28% 1,355 5.53% 1,481 5.52% ------ ----- ------ ----- ------ ----- Average Effective Rate Paid $13,114 5.22% $10,731 4.56% $10,356 4.37% NET YIELD ON INTEREST-EARNING ASSETS $15,098 4.22% $13,885 4.09% $12,880 4.06%
NOTES:
(1) Non-accrual loans are not included in the "Loans net of unearned income" amount used in the yield computation. (2) No out-of-period items included in the calculation of the changes in interest income and interest expense. (3) Loan fees are immaterial. (4) Tax exempt income is not calculated on a tax equivalent basis.
GUIDE 3
Schedule III
Item I(C)(1) Schedules of Interest Income & Expense Variance
For The Years Ended December 31 (In Thousands) 1995 1994 INTEREST VARIANCE INTEREST VARIANCE INTEREST INCOME: Interest-bearing deposits $164 $87 $77 $5 Federal funds sold 943 67 876 (92) Investment securities Taxable 5,720 (715) 6,435 (42) Tax-exempt 1,989 (229) 2,218 253 Loans 19,396 4,386 15,010 1,256 ------- ------ ------- ------ TOTAL INTEREST INCOME $28,212 $3,596 $24,616 $1,380
Item I(C)(2) INTEREST EXPENSE:
Interest on deposits: Demand & time deposits $2,837 $479 $2,358 $(810) Savings 8,311 1,293 7,018 1,311 CD's - $100,000 or more 1,966 611 1,355 (126) ------- ------ ------- ------ TOTAL INTEREST EXPENSE $13,114 $2,383 $10,731 $ 375
Schedule IV
Item I(C)(2)(a) and (b) Schedules of Volume Variance and Rate Variance
For The Years Ended December 31 (In Thousands) 1995 1994 VARIANCE VOLUME RATE VOLUME RATE (a) (b) (a) (b) INTEREST INCOME: Interest-bearing deposits $40 $31 $(16) $27 Federal funds sold (211) 366 (333) 367 Investment securities Taxable (931) 103 261 (291) Tax-exempt (210) 0 327 (64) Loans 3,718 548 2,286 880 ------ ------ ------ ------ TOTAL INTEREST INCOME $2,406 $1,048 $2,525 $(841)
INTEREST EXPENSE: Interest on deposits: Demand & time deposits $379 $86 $(519) $(348) Savings (282) 1,641 485 762 CD's - $100,000 or more 706 (62) (130) 4 ---- ------ ------- ---- TOTAL INTEREST EXPENSE $803 $1,665 $ (164) $418
GUIDE 3
Schedule V
Item I(C)(2)(c) Schedules of Changes in Rate/Volume
December 31, 1995 (In Thousands) TOTAL VOLUME RATE RATES/VOL VARIANCE VARIANCE VARIANCE VARIANCE -------- -------- -------- -------- INTEREST INCOME: Interest-bearing deposits $87 $40 $31 $16 Federal funds sold 67 (211) 366 (88) Investment securities Taxable (715) (931) 103 113 Tax-exempt (229) (210) 0 (19) Loans 4,386 3,718 548 120 ------ ------ ------ ---- TOTAL INTEREST INCOME $3,596 $2,406 $1,048 $142 INTEREST EXPENSE: Interest on deposits: Demand & time deposits $479 $379 $86 $14 Savings 1,293 (282) 1,641 (66) CD's - $100,000 or more 611 706 (62) (33) ------ ---- ------ ----- TOTAL INTEREST EXPENSE $2,383 $803 $1,665 $(85)
December 31, 1994 (In Thousands) TOTAL VOLUME RATE RATES/VOL VARIANCE VARIANCE VARIANCE VARIANCE -------- -------- -------- -------- INTEREST INCOME: Interest-bearing deposits $5 $(16) $27 $(6) Federal funds sold (92) (333) 367 (126) Investment securities Taxable (42) 261 (291) (12) Tax-exempt 253 327 (64) (10) Loans 1,256 2,282 (880) (146) ------ ---- ------ ----- TOTAL INTEREST INCOME $1,380 $2,521 $(841) $(300) INTEREST EXPENSE: Interest on deposits: Demand & time deposits $(810) $(519) $(348) $57 Savings 1,311 485 762 64 CD's - $100,000 or more (126) (130) 4 0 ------ ---- ------ ----- TOTAL INTEREST EXPENSE $ 375 $(164) $418 $121
GUIDE 3
Schedule VI
Item II(A) and (B) Investment Portfolio
December 31, (In Thousands) 1995 1994 1993 Book Average Book Book Value Yield Value Value U.S. Treasury Securities: Maturing within 1 year $0 $18,117 $13,729 Maturing between 1-5 years 24,527 6.7158% 27,560 32,982 Maturing between 6-10 years 0 1,991 9,879 TOTAL $24,527 47,668 56,590
U.S. Government Agencies: Maturing within 1 year 4,013 6.1120% 0 2,000 Maturing between 1-5 years 8,995 5.8487% 14,529 11,074 Maturing between 6-10 years 18,946 7.0253% 6,484 4,512 TOTAL 31,954 21,013 17,586 State and Political Subdivisions: Maturing within 1 year 4,785 6.2427% 10,727 10,948 Maturing between 1-5 yrs 16,420 5.5512% 14,460 13,209 Maturing between 6-10 yrs 12,021 6.0727% 16,154 17,349 Maturing over 10 years 73 6.8011% 72 72 TOTAL 33,299 41,413 41,578 Federal Reserve Stock 128 5.8600% 128 128 Other Securities: Maturing within 1 year 6,013 7.0736% 1,999 8,248 Maturing between 1-5 years 15,917 6.2955% 19,266 18,907 Maturing between 6-10 years 1,075 6.0727% 6,572 7,616 TOTAL 23,005 27,837 34,771 Equity Securities Maturing within 1 year Maturing between 1-5 years Maturing between 6-10 years TOTAL 0 0 0 Total Before Allowance For Unrealized Gains 112,913 138,059 150,653 Less: Allowance for Unrealized Gains 1,407 85 0 TOTAL SECURITIES $114,320 $138,144 $150,653
Item II(C) Securities With One Issuer Exceeding Ten Percent of Stockholders' Equity - NONE
GUIDE 3
Schedule VII Analysis of Loans
Item III(A) - Types of Loans: December 31 (In Thousands) 1995 1994 1993 1992 1991 Real estate loans: 1-4 Family Residential $52,673 $48,443 $46,175 $48,231 $47,220 Farmers 2,337 1,832 1,370 1,054 905 Other 28,695 31,161 49,310 33,538 31,126 Loans to farmers 1,148 1,601 3,069 1,032 1,250 Commercial and industrial loans 83,672 74,165 26,179 41,630 45,558 Loans to individuals: Credit cards 1,661 1,562 1,281 814 579 Other 53,121 35,645 27,406 21,013 23,469 Lease financing receivables 10,059 219 507 564 454 Total Loans 233,366 194,628 155,297 147,876 150,561 Less: Unearned income 1,253 2,110 3,955 6,282 8,039 Allowance for loan losses 2,413 2,146 2,135 1,888 1,288 Net Loans $229,700 $190,372 $149,207 $139,706 $141,234
Item III(B) - Maturities and Sensitivities of Loans to Changes in Interest Rates at December 31, 1995: (In Thousands) Domestic: Total Loans Interest Rates Predetermined Floating Commercial, Financial and Agricultural Due in 1 year or less $23,005 $13,592 $9,413 Due after 1 year through 5 years 42,333 39,191 3,142 Due after 5 years 19,482 17,508 1,974 $84,820 $70,291 $14,529 Item III(C) - Risk Elements 1. Non-accrual, Past Due and Restructured Loans December 31 1995 1994 1993 1992 1991 (1)(a) Total non-accrual loans $3,133,000 $2,298,000 $1,842,000 $2,080,000 $2,805,000 (1)(b) Accruing loans past due 90 or more days $2,043,000 $1,116,000 786,000 $0 $0 (1)(c) Troubled debt restructuring $1,226,000 $1,147,000 $643,000 424,000 $0 (2)(I) Interest income that would have been recorded on non-accrual loans $144,000 $104,000 $166,000 $139,000 $276,000 (2)(ii) Interest recorded on non-accrual loans included in net income for the period $0 $15,000 $12,000 $4,000 $24,000
(3) Registrant's policy for placing loans on non-accrual status - See Summary of Significant Accounting Policies under heading "Loans" on Registrant's Consolidated Financial Statements for the year ended December 31, 1995, included in Item 8 of Form 10-K. 2. Potential Problem Loans - None Any loans classified for regulatory purposes as loss, doubtful, substandard, or special mention that have not been disclosed under Item III of Industry Guide 3 do not represent or result from trends oruncertainties which Management reasonably expects will materially impact future operating results, liquidity, or capital resources or represent material credits about which Management is aware of any information which causes Management to have serious doubts as to the ability of such borrowers to comply with the loan repayment terms.
3. Foreign Outstanding Loans - None
4. Loan Concentrations - See Item III (A)
GUIDE 3 Schedule VIII(a) Item III (C)(1)
THE FARMERS AND MERCHANTS NATIONAL BANK OF BRIDGETON, NJ
CHARTER 9498 ANALYSIS OF REPRICING OPPORTUNITIES DECEMBER 31, 1995
REPRICING OPPORTUNITIES FOR: 1 Day 3 Mo. 3-6 Mo. 6 Mo-One Yr. 1-5YRS Total Loans and Leases $7,947 $13,592 $11,796 $8,257 $127,571 Debt Securities 0 3,024 1,464 10,353 65,183 Trading Account Assets 0 0 0 0 0 Other Interest-Bearing Assets 27,800 0 0 0 0 Total Interest- ------- ------ ------ ------ ------- Bearing Assets 35,747 16,616 13,260 18,610 192,754 Loan and Lease Loss Reserve 0 0 0 0 0 Non-Accrual Loans 0 0 0 0 0 All Other Assets Including Cash 18,981 0 0 0 0 ------- ------- ------- ------- -------- Total Assets $54,728 $16,616 $13,260 $18,610 $192,754
Deposits in Foreign Offices 0 0 0 0 0 CDs over $100,000 0 $12,376 $8,729 $9,829 $10,008 Other Time Deposits 0 35,516 16,770 22,560 25,257 MMDA Savings & Unregulated NOW 13,554 8,987 17,830 40,370 Other Savings, ATS & Reg. NOW** 0 5,520 5,520 5,520 27,599 Treasury Notes 0 0 0 0 0 Mortgages & Capitalized Leases 0 0 0 0 0 Other Nondeposit Interest -Bearing Liabilities 0 0 0 0 0 ------ ------ ------ ------ ------- Total Interest- Bearing Liabilities $0 $66,966 $40,006 $55,739 $103,234
Demand Deposits 0 $28,416 0 0 $44,804 All Other Liabilities ------ ------ ------ ------ ------- Total Liabilities $0 $95,382 $40,006 $55,739 $148,038 Total Equity (Excluding Limited Life Pref.Stock) Total Liabilities & Capital $0 $95,382 $40,006 $55,739 $148,038 Net Positions-Total Assets $54,728 $-78,766 $-26,746 $-37,129 $44,716 Less: Liabilities and Capital Cumulative Position Ratios 0.75 0.62 0.54 0.87 Total Assets 54,728 71,344 84,604 103,214 295,968 Total Liabilities & Capital 0 95,382 135,388 191,127 339,165 ------ ------ ------ ------ ------- Total Assets Less Liabilities & Capital $54,728 $-24,038 $-50,784 $-87,913 $-43,197
REPRICING OPPORTUNITIES All Total FOR: 5 Yrs+ Other Assets %
Total Loans and Leases $61,070 0 $230,233 56.95 Debt Securities 34,168 128 114,320 28.28 Trading Account Assets 0 0 0 0 Other Interest-Bearing Assets 0 0 27,800 6.88 Total Interest- ------- ------ ------ ------ Bearing Assets 95,238 128 372,353 92.11 Loan and Lease Loss Reserve 0 -2,413 -2,413 -0.60 Non-Accrual Loans 0 3,133 3,133 .78 All Other Assets Including Cash 0 12,186 31,167 7.71 ------- ------- ------- ------ Total Assets $95,238 $13,034 $404,240 100.00
Deposits in Foreign Offices 0 0 0 0 CDs over $100,000 0 0 $40,942 10.13 Other Time Deposits 0 0 100,103 24.76 MMDA Savings & Unregulated NOW 9,132 0 89,873 22.23 Other Savings, ATS & Reg. NOW** 11,040 0 55,199 13.66 Treasury Notes 0 0 0 0 Mortgages & Capitalized Leases 0 0 0 0 Other Nondeposit Interest -Bearing Liabilities 0 0 0 0 ------ ------ ------ ------ Total Interest- Bearing Liabilities $20,172 $0 $286,117 70.78
Demand Deposits $4,096 0 $77,316 19.13 All Other Liabilities 0 4,164 4,164 1.03 ------ ------ ------ ------ Total Liabilities $24,268 $4,164 $367,597 90.94 Total Equity (Excluding Limited Life Pref.Stock) 0 $36,643 $36,643 9.06
------- -------- -------- ---- Total Liabilities & Capital $24,268 $40,807 $404,240 100.00
Net Positions-Total Assets $70,970 $-27,773 Less: Liabilities and Capital Cumulative Position Ratios 1.08 Total Assets 391,206 404,240 Total Liabilities & Capital 363,433 404,240 ------ ------ ------ ------ Total Assets Less Liabilities & Capital $27,773 0
G A A P TABLE FOOTNOTES**
1.) These items are generally considered to be non-interest sensitive due to their infrequent repricing characteristics.
2.) In addition to the rate sensitivity characteristics of assets and supporting funds, sensitivity balances include assumptions for the potential balance volatility of certain deposit categories.
Regular savings balances are generally considered to be non-interest sensitive due to their infrequent repricing characteristics. However, in order to account for possible internal transfers to other deposit categories or the possibility of deposit disintermediation, a measure of variation has been determined for certain non-interest sensitive deposits. Consequently, an amount representing this measure of variation for savings accounts has been treated as interest rate sensitive within three months, six months and one year and the remainder has been considered non-interest sensitive.
GUIDE 3 Schedule VIII(a) Item III (C)(1)
THE FARMERS AND MERCHANTS NATIONAL BANK OF BRIDGETON, NJ
CHARTER 9498 ANALYSIS OF REPRICING OPPORTUNITIES DECEMBER 31, 1994
REPRICING OPPORTUNITIES FOR: 1 Day 3 Mo. 3-6 Mo. 6 Mo-One Yr. 1-5YRS Total Loans and Leases $7,155 $12,925 $5,191 $10,264 $98,292 Debt Securities 0 5,842 8,040 18,958 73,163 Trading Account Assets 0 0 0 0 0 Other Interest-Bearing Assets 11,250 0 0 0 0 Total Interest- ------- ------ ------ ------ ------- Bearing Assets 18,405 18,767 13,231 289,222 171,455 Loan and Lease Loss Reserve 0 0 0 0 0 Non-Accrual Loans All Other Assets Including Cash 20,982 0 0 0 0 ------- ------- ------- ------- -------- Total Assets $39,387 $18,767 $13,231 $29,222 $171,455
Deposits in Foreign Offices $0 0 0 0 0 CDs over $100,000 0 6,633 5,707 4,655 5,148 Other Time Deposits 0 34,419 14,459 13,375 24,371 MMDA Savings & Unregulated NOW 0 44,458 17,611 17,611 0 Other Savings, ATS & Reg. NOW** 0 5,049 5,049 5,049 0 Treasury Notes 0 0 0 0 0 Mortgages & Capitalized Leases 0 0 0 0 0 Other Nondeposit Interest -Bearing Liabilities ------ ------ ------ ------ ------- Total Interest- Bearing Liabilities $0 $90,559 $42,826 $40,690 $29,519 Demand Deposits 0 0 0 0 0 All Other Liabilities 0 0 0 0 0 ------ ------ ------ ------ ------- Total Liabilities $0 $90,559 $42,826 $40,690 $29,519 Total Equity (Excluding Limited Life Pref.Stock) 0 0 0 0 0 ------ ------ ------ ------ ------- Total Liabilities & Capital $0 $90,559 $42,826 $40,690 $29,519
Net Positions-Total Assets $38,634 $-71,792 $-29,595 $-11,468 $141,936 Less: Liabilities and Capital 0 0 0 0 0 Cumulative Position Ratios 0.63 0.53 0.57 1.33 Total Assets 38,634 57,401 70,632 99,854 217,309 Total Liabilities & Capital 0 90,559 133,385 174,075 203,594 ------ ------ ------ ------ ------- Total Assets Less Liabilities & Capital $38,634 $-33,158 $-62,753 $-74,221 $67,715
REPRICING OPPORTUNITIES All Total FOR: 5 Yrs+ Other Assets %
Total Loans and Leases $58,503 0 $191,330 51.58 Debt Securities 31,853 288 138,144 37.05 Trading Account Assets 0 0 0 0 Other Interest-Bearing Assets 0 0 12,250 3.02 Total Interest- ------ ------ ------ ------ Bearing Assets 90,356 288 341,724 91.64 Loan and Lease Loss Reserve 0 -2,146 -2,146 -0.58 Non-Accrual Loans 0 2,298 2,298 0.62 All Other Assets Including Cash 0 10,038 31,020 8.32 ------- ------- ------- ------ Total Assets $90,356 $10,478 $372,896 100.00
Deposits in Foreign Offices 0 0 0 0 CDs over $100,000 0 0 22,153 5.94 Other Time Deposits 0 0 86,624 23.23 MMDA Savings & Unregulated NOW 0 0 79,680 21.37 Other Savings, ATS & Reg. NOW** 0 45,446 60,593 16.25 Treasury Notes 0 0 0 0 Mortgages & Capitalized Leases 0 0 0 0 Other Nondeposit Interest -Bearing Liabilities 0 0 0 0 ------ ------ ------ ------ Total Interest- Bearing Liabilities $0 $45,446 $249,040 66.79
Demand Deposits $0 $88,133 $88,183 23.65 All Other Liabilities 0 3,118 3,138 0.84 ------ ------ ------ ------ Total Liabilities $0 $136,747 $340,341 91.27 Total Equity (Excluding Limited Life Pref.Stock) 0 $32,555 $32,555 8.73
------- -------- -------- ---- Total Liabilities & Capital $0 $169,302 $372,896 100.00
Net Positions-Total Assets $90,356 -158,071 Less: Liabilities and Capital Cumulative Position Ratios 1.78 Total Assets 361,655 372,499 Total Liabilities & Capital 203,594 372,499 ------ ------ ------ ------ Total Assets Less Liabilities & Capital $158,071 0
G A A P TABLE FOOTNOTES**
1.) These items are generally considered to be non-interest sensitive due to their infrequent repricing characteristics.
2.) In addition to the rate sensitivity characteristics of assets and supporting funds, sensitivity balances include assumptions for the potential balance volatility of certain deposit categories.
Regular savings balances are generally considered to be non-interest sensitive due to their infrequent repricing characteristics. However, in order to account for possible internal transfers to other deposit categories or the possibility of deposit disintermediation, a measure of variation has been determined for certain non-interest sensitive deposits. Consequently, an amount representing this measure of variation for savings accounts has been treated as interest rate sensitive within three months, six months and one year and the remainder has been considered non-interest sensitive.
GUIDE 3 Schedule VIII(a) Item III (C)(1)
THE FARMERS AND MERCHANTS NATIONAL BANK OF BRIDGETON, NJ
CHARTER 9498 ANALYSIS OF REPRICING OPPORTUNITIES DECEMBER 31, 1993
REPRICING OPPORTUNITIES FOR: 1 Day 3 Mo. 3-6 Mo. 6 Mo-One Yr. 1-5YRS Total Loans and Leases $8,676 $7,928 $5,046 $7,181 $72,159 Debt Securities 0 4,379 11,797 18,749 76,172 Trading Account Assets 0 0 0 0 0 Other Interest-Bearing Assets 29,800 0 0 0 0 Total Interest- ------ ------ ------ ------ ------- Bearing Assets 38,476 12,307 16,843 25,930 148,331 Loan and Lease Loss Reserve 0 0 0 0 0 Non-Accrual Loans 0 0 0 0 0 All Other Assets Including Cash 17,353 0 0 0 0 ------- ------- ------- ------- -------- Total Assets $55,829 $12,307 $16,843 $25,930 $148,331
Deposits in Foreign Offices $0 0 0 0 0 CDs over $100,000 0 5,588 3,525 5,258 12,057 Other Time Deposits 0 33,908 14,616 12,293 25,268 MMDA Savings & Unregulated NOW 0 83,152 0 0 0 Other Savings, ATS & Reg. NOW** 0 4,883 4,883 4,883 0 Treasury Notes 0 0 0 0 0 Mortgages & Capitalized Leases 0 0 0 0 0 Other Nondeposit Interest -Bearing Liabilities 0 0 0 0 0 ------ ------ ------ ------ ------- Total Interest- Bearing Liabilities $0 127,531 $23,024 $22,434 $37,325 Demand Deposits 0 0 0 0 0 All Other Liabilities 0 0 0 0 0 ------ ------ ------ ------ ------- Total Liabilities $0 127,531 $23,024 $22,434 $37,325 Total Equity (Excluding Limited Life Pref.Stock) 0 0 0 0 0 ------ ------ ------ ------ ------- Total Liabilities & Capital $0 127,531 $23,024 $22,434 $37,325
Net Positions-Total Assets $55,829 -115,224 $-6,181 $3,496 $111,006 Less: Liabilities and Capital 0 0 0 0 0 Cumulative Position Ratios 0.53 0.56 0.64 1.23 Total Assets 55,829 68,136 54,979 110,909 259,240 Total Liabilities & Capital 0 127,531 150,555 172,989 210,314 ------ ------ ------ ------ ------- Total Assets Less Liabilities & Capital $55,829 $-59,395 $-65,576 $-62,080 $48,926
REPRICING OPPORTUNITIES All Total FOR: 5 Yrs+ Other Assets %
Total Loans and Leases $52,465 0 $153,455 42.79 Debt Securities 39,428 128 150,653 42.01 Trading Account Assets 0 0 0 0 Other Interest-Bearing Assets 0 0 29,800 8.30 Total Interest- ------ ------ ------ ------ Bearing Assets 91,893 128 333,908 93.10 Loan and Lease Loss Reserve 0 -2,135 -2,135 -0.51 Non-Accrual Loans 0 2,298 2,298 0.62 All Other Assets Including Cash 0 7,684 25,037 6.99 ------- ------- ------- ------ Total Assets $91,893 $7,519 $358,652 100.00
Deposits in Foreign Offices 0 0 0 0 CDs over $100,000 0 0 26,428 7.34 Other Time Deposits 0 0 86,085 24.00 MMDA Savings & Unregulated NOW 0 0 83,152 23.19 Other Savings, ATS & Reg. NOW** 0 43,953 58,602 16.34 Treasury Notes 0 0 0 0 Mortgages & Capitalized Leases 0 0 0 0 Other Nondeposit Interest -Bearing Liabilities 0 0 0 0 ----- ------ ------ ------ Total Interest- Bearing Liabilities $0 $43,953 $254,267 70.90
Demand Deposits $0 $72,994 $72,994 20.35 All Other Liabilities 0 2,365 2,365 0.66 ------ ------ ------ ------ Total Liabilities $0 $119,312 $329,626 91.91 Total Equity (Excluding Limited Life Pref.Stock) 0 $29,026 $29,026 8.09
------- -------- -------- ---- Total Liabilities & Capital $0 $148,338 358,652 100.00
Net Positions-Total Assets $91,893 -140,819 Less: Liabilities and Capital Cumulative Position Ratios 1.67 Total Assets 351,133 358,652 Total Liabilities & Capital 210,314 358,652 ------ ------ ------ ------ Total Assets Less Liabilities & Capital $140,819 0
G A A P TABLE FOOTNOTES**
1.) These items are generally considered to be non-interest sensitive due to their infrequent repricing characteristics.
2.) In addition to the rate sensitivity characteristics of assets and supporting funds, sensitivity balances include assumptions for the potential balance volatility of certain deposit categories.
Regular savings balances are generally considered to be non-interest sensitive due to their infrequent repricing characteristics. However, in order to account for possible internal transfers to other deposit categories or the possibility of deposit disintermediation, a measure of variation has been determined for certain non-interest sensitive deposits. Consequently, an amount representing this measure of variation for savings accounts has been treated as interest rate sensitive within three months, six months and one year and the remainder has been considered non-interest sensitive.
GUIDE 3 Schedule VIII(a) Item III (C)(1)
THE FARMERS AND MERCHANTS NATIONAL BANK OF BRIDGETON, NJ
CHARTER 9498 ANALYSIS OF REPRICING OPPORTUNITIES DECEMBER 31, 1992
REPRICING OPPORTUNITIES FOR: 1 Day 3 Mo. 3-6 Mo. 6 Mo-One Yr. 1-5YRS Total Loans and Leases $13,427 $7,397 $6,629 $6,629 $73,880 Debt Securities 5,159 6,875 11,373 10,210 63,827 Trading Account Assets 0 0 0 0 0 Other Interest-Bearing Assets 37,100 0 0 0 0 Total Interest- ------ ------ ------ ------ ------- Bearing Assets 55,686 14,269 15,420 16,839 137,707 Loan and Lease Loss Reserve 0 0 0 0 0 Non-Accrual Loans All Other Assets Including Cash 19,235 0 0 0 0 ------- ------- ------ ------- -------- Total Assets $74,921 $14,269 $15,420 $16,839 $137,707
Deposits in Foreign Offices $0 0 0 0 0 CDs over $100,000 0 17,563 4,581 2,050 15,640 Other Time Deposits 0 37,557 16,555 10,514 20,354 MMDA Savings & Unregulated NOW 0 64,550 0 0 0 Other Savings, ATS & Reg. NOW** 0 0 0 0 0 Treasury Notes 0 0 0 0 0 Mortgages & Capitalized Leases 0 0 0 0 0 Other Nondeposit Interest -Bearing Liabilities ------ ------ ------ ------ ------- Total Interest- Bearing Liabilities $0 119,670 $21,136 $12,564 $35,994 Demand Deposits 0 0 0 0 0 All Other Liabilities 0 0 0 0 0 ------ ------ ------ ------ ------- Total Liabilities $0 119,670 $21,136 $12,564 $35,994 Total Equity (Excluding Limited Life Pref.Stock) 0 0 0 0 0 ------ ------ ------ ------ ------- Total Liabilities & Capital $0 119,670 $21,136 $12,564 $35,994
Net Positions-Total Assets $74,921 -105,401 $-5,716 $4,275 $101,713 Less: Liabilities and Capital 0 0 0 0 0 Cumulative Position Ratios 0.75 0.74 0.79 1.37 Total Assets 74,921 89,190 104,610 121,449 259,156 Total Liabilities & Capital 0 119,670 140,806 153,370 189,364 ------ ------ ------ ------ ------- Total Assets Less Liabilities & Capital $74,921 $-30,480 $-36,196 $-31,921 $69,792
REPRICING OPPORTUNITIES All Total FOR: 5 Yrs+ Other Assets %
Total Loans and Leases $40,329 0 $145,709 44.32 Debt Securities 23,827 128 121,396 39.92 Trading Account Assets 0 0 0 0 Other Interest-Bearing Assets 0 0 37,100 11.28 Total Interest- ------ ------ ------ ------ Bearing Assets 64,156 128 304,205 92.53 Loan and Lease Loss Reserve 0 -1,888 -1,888 -0.57 Non-Accrual Loans 0 2,080 2,080 0.63 All Other Assets Including Cash 0 5,137 24,732 7.41 ------ ------ ------- ------ Total Assets $64,156 $5,457 $328,769 100.00
Deposits in Foreign Offices 0 0 0 0 CDs over $100,000 0 0 39,834 12.12 Other Time Deposits 0 0 84,980 25.85 MMDA Savings & Unregulated NOW 0 0 64,550 19.63 Other Savings, ATS & Reg. NOW** 0 44,870 44,870 13.65 Treasury Notes 0 0 0 0 Mortgages & Capitalized Leases 0 0 0 0 Other Nondeposit Interest -Bearing Liabilities 0 0 0 0 ------ ------ ------ ------ Total Interest- Bearing Liabilities $0 $44,870 $234,234 71.25
Demand Deposits $0 $66,909 $66,909 20.35 All Other Liabilities 0 1,637 1,637 0.50 ------ ------ ------ ------ Total Liabilities $0 $113,416 $302,780 92.10 Total Equity (Excluding Limited Life Pref.Stock) 0 $25,989 $25,989 7.90
------- -------- -------- ---- Total Liabilities & Capital $0 $139,405 328,769 100.00
Net Positions-Total Assets $64,156 -133,948 Less: Liabilities and Capital Cumulative Position Ratios 1.71 Total Assets 323,312 328,769 Total Liabilities & Capital 189,364 328,769 ------ ------ ------ ------ Total Assets Less Liabilities & Capital $133,948 0
G A A P TABLE FOOTNOTES**
1.) These items are generally considered to be non-interest sensitive due to their infrequent repricing characteristics.
2.) In addition to the rate sensitivity characteristics of assets and supporting funds, sensitivity balances include assumptions for the potential balance volatility of certain deposit categories.
Regular savings balances are generally considered to be non-interest sensitive due to their infrequent repricing characteristics. However, in order to account for possible internal transfers to other deposit categories or the possibility of deposit disintermediation, a measure of variation has been determined for certain non-interest sensitive deposits. Consequently, an amount representing this measure of variation for savings accounts has been treated as interest rate sensitive within three months, six months and one year and the remainder has been considered non-interest sensitive.
GUIDE 3 Schedule VIII(a) Item III (C)(1)
THE FARMERS AND MERCHANTS NATIONAL BANK OF BRIDGETON, NJ
CHARTER 9498 ANALYSIS OF REPRICING OPPORTUNITIES DECEMBER 31, 1991
REPRICING OPPORTUNITIES FOR: 1 Day 3 Mo. 3-6 Mo. 6 Mo-One Yr. 1-5YRS Total Loans and Leases $15,634 $14,439 $9,490 $17,477 $77,884 Debt Securities 15,041 1,060 5,425 3,488 46,200 Trading Account Assets 0 0 0 0 0 Other Interest-Bearing Assets 17,700 0 0 0 0 Total Interest- ------ ------ ------ ------ ------- Bearing Assets 48,375 15,499 14,915 20,965 124,084 Loan and Lease Loss Reserve 0 0 0 0 0 Non-Accrual Loans All Other Assets 17,764 0 0 0 0 ------- ------- ------ ------- -------- Total Assets $66,139 $15,499 $14,915 $20,965 $124,084
Deposits in Foreign Offices $0 0 0 0 0 CDs over $100,000 0 14,412 10,047 9,535 6,411 Other Time Deposits 0 35,956 17,850 12,269 12,663 MMDA Savings & Unregulated NOW 0 65,204 0 0 0 Other Savings, ATS & Reg. NOW** 0 0 0 0 0 Treasury Notes 0 0 0 0 0 Mortgages & Capitalized Leases 0 0 0 0 0 Other Nondeposit Interest -Bearing Liabilities ------ ------ ------ ------ ------- Total Interest- Bearing Liabilities $0 115,572 $27,897 $21,804 $19,074
Demand Deposits 0 0 0 0 0 All Other Liabilities 0 0 0 0 0 ------ ------ ------ ------ ------- Total Liabilities $0 115,572 $27,897 $21,804 $19,074 Total Equity (Excluding Limited Life Pref.Stock) 0 0 0 0 0 ------ ------ ------ ------ ------- Total Liabilities & Capital $0 115,572 $27,895 $21,804 $19,074
Net Positions-Total Assets 66,139 -100,073 $-12,982 $-839 $105,010 Less: Liabilities and Capital 0 0 0 0 0 Cumulative Position Ratios 0 0 0 0 0 Total Assets 66,139 81,638 96,553 117,518 241,602 Total Liabilities & Capital 0 115,572 143,469 165,273 184,347 ------ ------ ------ ------ ------- Total Assets Less Liabilities & Capital $66,139 $-33,934 $-46,916 $-47,755 $57,255
REPRICING OPPORTUNITIES All Total FOR: 5 Yrs+ Other Assets %
Total Loans and Leases $12,666 0 $147,590 51.31 Debt Securities 30,132 128 101,474 35.28 Trading Account Assets 0 0 0 0 Other Interest-Bearing Assets 0 0 17,700 6.15 Total Interest- ------ ------ ------ ------ Bearing Assets 42,798 128 266,764 92.75 Loan and Lease Loss Reserve 0 -1,288 -1,288 -0.45 Non-Accrual Loans 0 2,805 2,805 0.98 All Other Assets Including Cash 0 1,585 19,349 6.73 ------ ------ ------- ------ Total Assets $42,798 $3,230 $287,630 100.00
Deposits in Foreign Offices 0 0 0 0 CDs over $100,000 0 0 40,405 14.05 Other Time Deposits 0 0 78,738 27.37 MMDA Savings & Unregulated NOW 0 0 65,204 22.67 Other Savings, ATS & Reg. NOW** 0 23,543 23,543 8.19 Treasury Notes 0 0 0 0 Mortgages & Capitalized Leases 0 0 0 0 Other Nondeposit Interest -Bearing Liabilities 0 0 0 0 ------ ------ ------ ------ Total Interest- Bearing Liabilities $0 $23,543 $207,890 72.28
Demand Deposits $0 $54,463 $54,463 18.94 All Other Liabilities 0 1,724 1,724 0.60 ------ ------ ------ ------ Total Liabilities $0 $79,730 $264,077 91.81 Total Equity (Excluding Limited Life Pref.Stock) 0 $23,553 $23,553 8.19
------- -------- -------- ---- Total Liabilities & Capital $0 $103,283 $287,630 100.00
Net Positions-Total Assets $42,798 -100,053 Less: Liabilities and Capital Cumulative Position Ratios 0 Total Assets 284,400 287,630 Total Liabilities & Capital 184,347 287,630 ------ ------ ------ ------ Total Assets Less Liabilities & Capital $100,053 0
G A A P TABLE FOOTNOTES**
1.) These items are generally considered to be non-interest sensitive due to their infrequent repricing characteristics.
2.) In addition to the rate sensitivity characteristics of assets and supporting funds, sensitivity balances include assumptions for the potential balance volatility of certain deposit categories.
Regular savings balances are generally considered to be non-interest sensitive due to their infrequent repricing characteristics. However, in order to account for possible internal transfers to other deposit categories or the possibility of deposit disintermediation, a measure of variation has been determined for certain non-interest sensitive deposits. Consequently, an amount representing this measure of variation for savings accounts has been treated as interest rate sensitive within three months, six months and one year and the remainder has been considered non-interest sensitive.
GUIDE 3 Schedule IX Item IV (A)(1)
SUMMARY OF LOAN LOSS EXPERIENCE
(In Thousands) For The Years Ended December 31, 1995 1994 1993 1992 1991 Balances at beginning of year $2,146 $2,135 $1,888 $1,288 $1,120 Loan charge-offs: Mortgage loans 17 151 288 14 50 Installment loans 414 265 116 231 3 Commercial loans 638 383 296 413 525 Total charge-offs 1,069 799 700 658 728 Recoveries of loans previously charged off: Mortgage loans 2 2 33 0 0 Installment loans 51 49 62 52 54 Commercial loans 17 34 52 215 17 Total recoveries 70 85 147 267 71 NET CHARGE-OFFS 999 714 553 391 657 Allowance charged to operations ,266 725 800 991 825 Balances at end of year $2,413 $2,146 $2,135 $1,888 $1,288 Average loans outstanding during year $211,398 $171,887 $149,842 $164,172 $172,110 Ratio of net charge-offs to average loans outstanding during the year 0.473% 0.415% 0.369% 0.238% 0.382%
Item IV(B) Allocation of Allowance for Loan Losses
The allowance for loan losses is maintained at a level considered by Management to be adequate to provide for losses which may be incurred on loans currently held based on a detailed evaluation of the loan portfolio, historical experience, current economic trends and other factors relevant to the collectibility of the loans in the portfolio. Credit risk, the risk that a borrower will fail to perform to the loan agreement, is managed by limiting the total amount of loans outstanding and by applying normal credit policies to all lending activities. Collateral is obtained based on Management's credit assessment of the customer. Loans are further subject to interest rate risk and risk from geographic concentration of lending activities. Interest rate risk is managed through various asset/liability management techniques. Loan policies and administration are designed to provide assurance that loans will only be granted to creditworthy borrowers, although credit losses are expected to occur because of subjective factors and factors beyond the control of the Bank. The Bank is mandated by the Community Reinvestment Act and other regulations to conduct most of its lending activities within the geographic area where it is located. As a result, the Bank and its borrowers may be vulnerable to the consequences of changes in the local economy. Anticipated amounts of loan charge-offs for the fiscal year are estimated to be an amount equal to the current fiscal year.
GUIDE 3
Schedule X
Item V(A) - Average Deposits
December 31 (In Thousands) 1995 1994 1993 AVG. AMT. % AVG. AMT. % AVG. AMT. % Non-interest bearing demand deposits $92,076 0.0 $95,719 0.0 $74,168 0.0 Interest bearing demand deposits 67,548 4.2 58,201 4.1 69,612 4.6 Savings accounts 146,401 5.7 152,539 4.6 140,599 4.1 CD's - Over $100,000 37,258 5.3 24,498 5.5 26,853 5.5 Total Average Deposits $343,283 5.2 $330,957 4.6 $311,232 4.4
Item V(D) - Deposits Summary (In Thousands) 1995 ---- Demand deposits Non-interest bearing $77,316 Interest bearing 89,873 (Money Market and N.O.W. Accounts) Savings deposits 55,199 Time deposits 141,045 Total Deposits $363,433
The remaining maturity on certificates of deposit of $100,000 or more is presented below:
(In Thousands) 1995 Maturity ----
3 months or less $12,376 3 months to 6 months 8,729 6 to 12 months 9,829 Over 12 months to 5 years 10,008 Over 5 years 0 ------- Total $40,942
GUIDE 3
Schedule XI
Item VI - Return on Equity and Assets
December 31 1995 1994 1993 (1) Return on assets 1.27% 1.23% 1.19% (2) Return on equity 13.11% 14.47% 14.38% (3) Dividend payout ratio 22.57% 23.47% 24.46% (4) Equity to assets ratio 9.66% 8.49% 8.27%
Item 2.

Item 2. Properties
The following table sets forth the location and principal offices of Registrant and its subsidiary.
Location Use
Bridgeton, New Jersey Executive Offices and Main Bank Office Bridgeton, New Jersey Branch Office (West Broad Street) Bridgeton, New Jersey Operations Center and Computer Facilities *Upper Deerfield, New Jersey Branch Office (Carll's Corner) Upper Deerfield, New Jersey Branch Office (Seabrook) Fairton, New Jersey Branch Office Penns Grove, New Jersey Branch Office Pennsville, New Jersey Branch Office Rosenhayn, New Jersey Branch Office *Vineland, New Jersey Branch Office (Cumberland Mall) *Millville, New Jersey Branch Office Millville (Airport), New Jersey Branch Office Wilmington, Delaware Administrative Office for F&M Investment Company *Salem City, New Jersey Branch Office Washington Township, New Jersey Branch Office Cedarville, New Jersey Branch Office
*Leased Property
Registrant owns substantially all properties used in its business Branch office leases are less than $100,000 annually, and Management does not foresee any material changes in terms or amounts of leased property or the ability to renew applicable leases.
None of the owned principal properties are subject to any major encumbrance material to the operations of Registrant.
All facilities are in good condition and are adequate and suitable for Registrant's business. Management believes that the capacity of the offices is such that no additional office space will be needed in the foreseeable future for administration purposes. In 1996, the Company will open a recently renovated building at the Upper Deerfield (Carll's Corner) location replacing the existing branch. Additional branch offices may be opened in the future when Management deems it necessary for meeting customer needs, expansion and growth.
Item 3.

Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of security holders of Registrant during the fourth quarter of fiscal year 1995.
PART II
Item 5.

Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters
Market Information for Common Stock.
Registrant's common stock is inactively traded on a local basis, and the range of sales prices known to Management based on quotes from the National Quotation Bureau and transactions noted in the transfer and issuance of Registrant's common stock certificates, for each quarter during the two most recent years are as follows:
1995 1994 High Low High Low First Quarter $31.50 $31.25 $27.50 $25.50 Second Quarter $31.50 $31.25 30.00 27.00 Third Quarter $33.50 $31.50 31.75 30.00 Fourth Quarter $37.00 $33.00 31.75 31.00
Holders
At March 14, 1996, there were 526 holders of record of Registrant's common stock.
Dividends
Registrant declared cash dividends of $0.50 per share payable to its common shareholders on June 30, 1995 and December 31, 1995, for a total of $1.00 per share or approximately $1,093,000.
Registrant declared cash dividends of $.48 per share payable to its common shareholders on June 30, 1994 and December 31, 1994, respectively, for a total of $.96 per share or approximately $1,054,000.
For restriction on dividends, see Note 7 to the consolidated financial statements.
Item 6.

Item 6. Selected Financial Data
The following table presents selected financial data of the Registrant. The historical data should be read in conjunction with the consolidated financial statements and the related notes thereon in Item 8 and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Item 7.

Item 8. Financial Statements and Supplementary Data. SOUTHERN JERSEY BANCORP OF DELAWARE, INC.
Index to Consolidated Financial Statements
Page
Independent Auditor's Report 34
Consolidated Balance Sheets 35
Consolidated Statements of Operations 36
Consolidated Statements of Shareholders' Equity 37
Consolidated Statements of Cash Flow 38
Notes to Consolidated Financial Statements 39-52
Independent Auditor's Report - F&M Investment Company 53
INDEPENDENT AUDITOR'S REPORT
To The Stockholders and Board of Directors Southern Jersey Bancorp of Delaware, Inc. Bridgeton, New Jersey 08302
We have audited the consolidated balance sheets of Southern Jersey Bancorp of Delaware, Inc., and its subsidiaries as of December 31, 1995 and 1994, and the related consolidated statements of operations, shareholders' equity, and cash flows for each of the years in the three year period ended December 31, 1995. These financial statements are the responsibility of the Company's manage- ment. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the financial statements of F&M Investment Company, a consolidated subsidiary whose statements reflect total assets of 28% and 35% as of December 31, 1995 and 1994, respectively, and total interest income revenues of 25%, 31% and 37% for each of the years in the three year period ended December 31, 1995, of the related consoli- dated totals. Those statements were audited by other auditors whose reports have been furnished to us, and our opinion, insofar as it relates to the amounts included for the F&M Investment Company, is based solely upon the reports of the other auditors.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and per- form 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 and the reports of other auditors provide a reasonable basis for our opinion.
In our opinion, based upon our audits and the reports of other auditors, the consolidated financial statements referred to above present fairly in all material respects the consolidated financial position of Southern Jersey Bancorp of Delaware, Inc., and subsi- diaries at December 31, 1995 and 1994, and the consolidated results of their operations and cash flows for each of the years in the three year period ended December 31, 1995, in conformity with generally accepted accounting principles.
s/ WILLIAM THOS. ATHEY & COMPANY ----------------------------- January 19, 1996 Bridgeton, New Jersey
Southern Jersey Bancorp of Delaware, Inc. And Subsidiaries CONSOLIDATED BALANCE SHEETS (In Thousands, Except Share and Per Share Data)
December 31 1995 1994 ASSETS Cash and due from banks (Note 2) $18,981 $17,982 Federal funds sold 27,800 11,250 Cash and Cash Equivalents 46,781 29,232 Interest-bearing deposits in other banks 0 3,000 Investment securities Available for sale (Note 3) 33,754 20,416 Held to maturity (Market value: 1995-$81,486 1994-$113,754) (Note 3) 80,566 117,728 Loans (Notes 1, 4 and 5) 233,366 194,628 Less: Allowance for loan losses 2,413 2,146 Unearned income 1,253 2,110 Net Loans 229,700 190,372 Bank premises and equipment - net (Notes 1 and 6) 5,916 5,308 Other assets 7,523 6,840 TOTAL ASSETS $404,240 $372,896 LIABILITIES AND SHAREHOLDERS' EQUITY Deposits Interest bearing deposits $286,117 $249,040 Non-interest bearing deposits 77,316 88,183 Total Deposits 363,433 337,223 Other liabilities 4,164 3,118 Total Liabilities 367,597 340,341 Shareholders' Equity (Note 7) Preferred stock, no par value; shares authorized - 500,000; no shares issued Common stock, par value $1.67 per share; shares authorized - 5,000,000; shares issued - 1,275,000 2,129 2,129 Additional paid-in-capital 2,223 2,258 Retained earnings 35,103 31,344 Unrealized gains on securities (Note 1) 929 56 40,384 35,787 Less: Treasury stock at cost - 190,193 shares in 1995 and 175,767 shares in 1994 3,741 3,232 Total Shareholders' Equity 36,643 32,555 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $404,240 $372,896
Southern Jersey Bancorp of Delaware, Inc. And Subsidiaries CONSOLIDATED STATEMENTS OF OPERATIONS (In Thousands, Except Per Share Data)
Year Ended December 31 1995 1994 1993 INTEREST INCOME: Investment securities: Taxable $5,720 $6,435 $6,477 Tax-Exempt 1,989 2,218 1,965 Loans and leases (Note 1) 19,396 15,010 13,754 Interest-bearing deposits With depository institutions 164 77 72 Federal funds sold 943 876 968 TOTAL INTEREST INCOME 28,212 24,616 23,236 INTEREST EXPENSE: Deposits 13,114 10,731 10,356 NET INTEREST INCOME 15,098 13,885 12,880 PROVISION FOR LOAN LOSSES (NOTES 1 AND 5) 1,266 725 800 NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 13,832 13,160 12,080 OTHER INCOME: Service fees 1,428 1,258 1,240 Trust department income 652 620 591 Other 303 430 355 Net investment security gains(Notes 1 and 3) 360 0 70 TOTAL OTHER INCOME 2,743 2,308 2,256 OTHER EXPENSES: Salaries and wages 4,388 4,164 3,781 Employee benefits (Notes 1, 8 and 9) 1,321 1,070 934 Occupancy and equipment expenses 1,704 1,593 1,465 OCC Exam and FDIC assessments 473 806 745 Postage, stationary and supplies 422 332 389 Professional fees 478 337 350 Other operating expenses 1,237 1,278 1,194 TOTAL OTHER EXPENSES 10,023 9,580 8,858 INCOME BEFORE INCOME TAXES 6,552 5,888 5,478 PROVISION FOR INCOME TAXES (NOTE 10) 1,700 1,411 1,411 NET INCOME $4,852 $4,477 $4,067 EARNINGS PER COMMON SHARE (NOTE 1) $4.43 $4.09 $3.68
Southern Jersey Bancorp of Delaware, Inc. And Subsidiaries CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY For The Three Years Ended December 31, 1995 (In Thousands, Except Share and Per Share Data)
Additional Common Paid-in Retained Treasury Urelized Stock Capital Earning Stock Gain/Loss Total
Balances at January 1, 1993 $2,129 $2,214 $24,851 $(2,640) $0 $26,554 Year Ended December 31, 1993 Net Income 4,067 4,067 Cash Dividends ($.90 per share) (997) (997) Addition of 29,720 shares to The Treasury (713) (713) Issuance of 6,009 sharesfrom The Treasury 46 69 115 Balances at ----- ----- ------ ------- - ------ December 31, 1993 2,129 2,260 27,921 (3,284) 0 29,026 Year Ended December 31, 1994 Net Income 4,477 4,477 Increase in Unrealized Gains on Securities 56 56 Cash Dividends ($.96 per share) (1,054) (1,054) Addition of 5,970 shares to The Treasury (2) (154) (156) Issuance of 9,304 shares from The Treasury 206 206 Balances at ----- ----- ------ ------- -- ------ December 31, 1994 2,129 2,258 31,344 (3,232) 56 32,555 Year Ended December 31, 1995 Net Income 4,852 4,852 Increase in Unrealized Gains on Securities 873 873 Cash Dividends ($1.00 per share) (1,093) (1,093) Addition of 23,806 shares to The Treasury (35) (765) (800) Issuance of 9,380 shares from The Treasury 256 256 BALANCES AT ------ ------ ------- -------- --- ------- DECEMBER 31, 1995 $2,129 $2,223 $35,103 $(3,741) 929 $36,643
Southern Jersey Bancorp of Delaware, Inc. And Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands) Year Ended December 31 1995 1994 1993 Cash flows from operating activities Net income $4,852 $4,477 $4,067 Adjustments to reconcile net income to net cash provided by operating activities: Amortization of organization expenses 0 16 32 Depreciation of premises and equipment 401 380 374 Provision for loan losses 1,266 725 800 Premium amortization net of discount accretion 264 68 37 Gains on sales of securities (360) 0 (70) Gain on sale of bank premises and equipment 0 0 (68) Increase in other assets (683) (214) (452) Increase in other liabilities 1,046 753 138 Net cash provided by operating activities 6,786 6,205 4,858 Cash flows from investing activities (Increase)/Decrease in interest bearing deposits in other banks 3,000 (1,000) 2,000 Purchase of investment securities (29,561) (25,149) (82,620) Proceeds from sales of investment securities 19,426 502 5,243 Proceeds from maturities of investment securities 34,642 36,281 48,171 Net increase in loans (40,594) 41,890) (10,301) Purchase bank premises and equipment (1,035) (689) (483) Proceeds from sale of bank premises and equipment 0 0 173 Proceeds from sale of other real estate 312 861 698 Net cash used for investing activities (13,810) (31,084) (37,119) Cash flows from financing activities Net increase in deposits 26,210 9,962 26,118 Cash dividends (1,093) (1,054) (997) Purchase of Treasury stock (800) (156) (713) Sale of Treasury stock 256 206 115 Net cash provided by financing activities 24,573 8,958 24,523 Net increase/(decrease) in cash and cash equivalents 17,549 (15,921) (7,738) Cash and cash equivalents at beginning of year 29,232 45,153 52,891 Cash and cash equivalents at end of year $46,781 $29,232 $45,153
Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $12,493 $10,612 $10,453 Income Taxes 1,172 1,478 1,326 Other non-cash activities: Transfer of loans, net of charge-offs to other real estate owned 164 233 1,208 Unrealized gain on investment securities available for sale 873 56 0
Southern Jersey Bancorp of Delaware, Inc. And Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies followed by Southern Jersey Bancorp of Delaware, Inc. and subsidiaries, and the methods of applying those policies conform to generally accepted accounting principles and to general practice within the banking industry. A summary of these policies is as follows:
Principles of Consolidation:
The consolidated financial statements include the accounts of Southern Jersey Bancorp of Delaware, Inc. (Company), and its wholly- owned subsidiary bank, The Farmers and Merchants National Bank of Bridgeton (Bank), and the Bank's wholly-owned subsidiary, F&M Investment Company. All significant intercompany balances and transactions have been eliminated.
Cash and Cash Equivalents:
Cash and cash equivalents include cash on hand, amounts due from banks, and Federal Funds sold. Generally, Federal Funds are purchased or sold for one-day periods.
Investment Securities:
Effective January 1, 1994, the Company adopted Financial Accounting Standards Board Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities" (FAS 115) for investments held as of or acquired after that date. The effect of this accounting change is not material.
Investment securities are classified as held to maturity when the Company has the intent and ability to hold those debt securities to maturity. Debt securities held to maturity are stated at cost and adjusted for accretion of discounts and amortization of premiums.
Those securities that might be sold in response to changes in market interest rates, prepayment risk, the Company's income tax position, the need to increase regulatory capital, or similar other factors are classified as available for sale. Available for sale securities are carried at fair value, with unrealized gains and losses, net of tax, reported as a component of stockholders' equity. Realized gains and losses are determined on the specific certificate method and are included in non-interest income.
Management has not classified any investment securities as trading securities, as the Company has not historically nor anticipates buying investment securities and holding them principally for the purpose of selling them in the near term with the objective of generating profits on short-term differences in price.
Loans:
Loans are reported at the principal amount outstanding, net of unearned income and the allowance for loan losses. The interest method is used to amortize unearned income on installment loans. Interest on all other loans is recognized based on the principal amount outstanding. Recognition of interest on
the accrual method is generally discontinued when interest or principal payments are ninety days or more in arrears or when other factors indicate the collection of such payments is doubtful. Once placed on non-accrual status, the loan is not returned to accrual status until interest is received on a current basis and the other factors indicating doubtful collection cease to exist.
Allowance for Loan Losses:
The allowance for loan losses is maintained at a level considered by Management to be adequate to provide for losses which may be incurred on loans currently held based on a detailed evaluation of the loan portfolio, historical experience, industry experience, current economic trends and other factors relevant to the collectibility of the loans currently in the portfolio. The allowance is increased by provisions charged to operating expense and reduced by charge-offs.
Other Real Estate:
Other real estate comprises properties acquired through a foreclosure proceeding or acceptance of a deed in lieu of foreclosure. These properties are carried at the lower of the loan balance or fair market value based on appraisals. Write-downs arising from foreclosure transactions, if any, are charged against the allowance for loan losses. The balances of $946,000 and $1,094,000 at December 31, 1995 and 1994, respectively, are included in other assets in the consolidated balance sheets.
Expenses related to holding the property are charged against earnings in the current period.
Bank Premises and Equipment:
Land, bank premises, equipment and leasehold improvements are recorded at cost. Depreciation is based on the estimated useful lives of the assets or the term of the lease whichever is less, using the straight-line and declining-balance methods.
Major improvements are charged to asset accounts. Maintenance and repairs which do not extend the life of assets are charged to current operating expenses.
Leased property under capital lease is recorded at the present value of the minimum lease payments and is being amortized using the straight-line method over the term of the lease.
Employee Benefit Plans:
The Bank has two retirement plans. One is a non-contributory defined benefit pension plan which covers substantially all salaried employees. Benefits under this plan are based on the employees' highest consecutive five years' compensation in the last ten years prior to retirement. The Bank's general funding policy is to contribute amounts when deductible for federal income tax purposes. The other retirement plan, effective January 1, 1995, is a profit sharing retirement plan under which eligible employees may defer a portion of their annual compensation, pursuant to Section 401(K) of the Internal Revenue Code. (See Note 8)
Under Farmers and Merchants National Bank of Bridgeton, New Jersey Flexible Benefits/Health Plan, employees are provided comprehensive health care coverage. Contributions to the Plan are made by participant salary reduction agreements.
The Plan includes coverage by both the Bank and the Plan's underwriter. Premiums due the underwriter are accrued and paid monthly. Bank's self-funded liability is also accrued monthly based on amounts provided by the Plan's administrator. (See Note 12)
Income Taxes:
The Company and its subsidiaries file a consolidated federal income tax return. State income taxes are filed on a separate basis. Certain income and expense items are accounted for in different years for financial reporting purposes than for income tax purposes. Deferred taxes are provided to recognize these temporary differences. (See Note 10)
Earnings Per Common Share:
Earnings per common share is computed based upon the weighted average number of common and dilutive common equivalent shares outstanding during the period. Fully diluted and primary earnings per common share are the same amounts for each of the periods presented. Common equivalent shares consist of stock options (calculated using the treasury stock method). Common equivalent shares are excluded as the effect would not be dilutive. Shares used in computing net income per share are 1,094,802 in 1995, 1,095,796 in 1994, and 1,105,608 in 1993.
NOTE 2 - CASH AND DUE FROM BANKS
The Company maintains various deposits in other banks. The withdrawal or usage restrictions on these balances do not have a significant impact on the consolidated operations of the Company. Aggregate reserves of $9,418,000 and $10,374,000 were maintained at the Federal Reserve Bank of Philadelphia as of December 31, 1995 and 1994, respectively, to satisfy federal regulatory requirements.
NOTE 3 - INVESTMENT SECURITIES
A summary of the amortized cost and market value of investment securities available for sale and securities held to maturity (in thousands) at December 31, 1995 and 1994 follows:
AC=AMORTIZED COST GUG=GROSS UNREALIZED GAIN GUL=GROSS UREALIZED LOST MV=MARKET VALUE December 31, 1995 1994 AC GUG GUL MV AC GUG GUL MV U.S. Treasury securities $10,916 $1,060 $0 $11,976 $14,875 $206 $(82) $14,999 U.S. governmental agencies 21,431 347 0 21,778 5,455 0 (38) 5,417 Securities Avail. for Sale $32,347 $1,407 $0 $33,754 $20,330 $206 $(120) $20,416 U.S. Treasury securities $13,610 $26 (10) $13,626 $32,792 $21 $(1,197) $ 31,616 U.S. governmental agencies 10,523 22 (94) 10,451 15,558 33 (801) 14,790 Obligations of states and poli- tical sub- divisions 33,299 760 (46) 34,013 41,413 370 (1,046) 40,737 Other securities 23,134 300 (38) 23,396 27,965 57 (1,411) 26,611 Securities held to maturity $ 80,566 $1,108 (188) $81,486 $117,728 $481 $(4,455) $113,754
The amortized cost and estimated market value of investment securities (in thousands) at December 31, 1995, by contractual maturity are shown below. Expected maturities will differ from contractual maturities because obligors have the right to repay obligations without prepayment penalties.
Available for Sale Held to Maturity Amortized Market Amortized Market Cost Value Cost Value
Due in one year or less $1,000 $1,030 $13,811 $13,936 Due after one year through five years 14,411 15,503 49,681 50,331 Due after five years through ten years 16,936 17,221 16,873 17,006 Due after ten years 0 0 201 213 ------- ------- ------- ------- $32,347 $33,754 $80,566 $81,486
Proceeds from sales and maturities of debt securities classified as available for sale during 1995 were $37,084,000. Gross gains of $271,000 and gross losses of $28,000 were realized on the sales in 1995. There were no sales of securities classified as available for sale during 1994 and 1993. Proceeds from sales and maturities of securities classified as held to maturity during 1995 were $16,984,000. Gross gains of $117,000 and no gross losses were realized on the sales in 1995. No gross gains or losses were realized on the sales in 1994. Gross gains of $70,000 and no gross losses were realized on the sales in 1993.
Investment securities with a market value of $18,899,000 and $19,432,000 and a carrying value of $18,250,000 and $19,550,000 were pledged at December 31, 1995 and 1994, respectively, to secure public funds, customer deposits, and for other purposes required by law.
NOTE 4 - LOANS
The loan portfolio is as follows: (In Thousands) December 31 1995 1994
Commercial and agriculture $84,820 $91,414 Real estate mortgages 83,705 61,241 Installment and consumer credit 54,782 41,622 Lease financing 10,059 351 Total $233,366 $194,628
Loans have been made to directors, principal officers, principal shareholders, and their related interests in the ordinary course of business. All loans and commitments to loans in such transactions were made on substantially the same terms, including collateral and interest rates as those prevailing at the time for comparable transactions with unrelated persons. In the opinion of Management, these transactions do not involve more than normal risk of collectibility nor present other unfavorable features. It is anticipated that such further extension of credit will be made in the future.
As of December 31, 1995 and 1994, such loans aggregated $4,663,000 and $4,062,000, respectively. Activity with said parties during 1995 included principal repayments of $1,184,000 and new loans of $1,785,000.
Loans that are guaranteed by said parties for which they are contingently liable as of December 31, 1995 and 1994 was $119,000 and $1,233,000, respectively.
NOTE 5 - ALLOWANCE FOR LOAN LOSSES
The changes in the allowance for loan losses are as follows:
(In Thousands) December 31 1995 1994 1993
Balances at beginning of year $2,146 $2,135 $1,888 Provision charged to operations 1,266 725 800 Recoveries of loans previously charged off: Mortgage loans 2 2 33 Installment loans 51 49 62 Commercial loans 17 34 52 Total recoveries 70 85 147 Loan charge offs: Mortgage loans (17) (151) (288) Installment loans (414) (265) (116) Commercial loans (638) (383) (296) Total charge offs (1,069) (799) (700) BALANCES AT END OF YEAR $2,413 $2,146 $2,135
NOTE 6 - BANK PREMISES AND EQUIPMENT
A summary of bank premises and equipment as of December 31, 1995 and 1994, is as follows:
(In Thousands) Estimated December 31 Years 995 1994 Land $565 $472 Buildings and improvements 10-80 years 4,378 3,893 Leasehold improvements 5-31 years 1,025 1,016 Furniture, fixtures and equipment 5-10 years 4,674 4,237 Leased equipment under capital lease 7 years 324 324 ------ ----- 10,966 9,942 Less: Accumulated depreciation and amortization 5,050 4,634 Net Bank Premises and Equipment $5,916 $5,308
Depreciation charged to operating expenses amounted to $401,000 in 1995, $380,000 in 1994 and $374,000 in 1993.
NOTE 7 - SHAREHOLDERS' EQUITY
Common Stock:
The Company has 5,000,000 shares of $1.67 par value common stock authorized with 1,275,000 shares issued and 1,084,807 shares outstanding at December 31, 1995, and 1,275,000 shares issued and 1,099,233 shares outstanding at December 31, 1994. Treasury stock totaled 190,193 shares and 175,767 shares at December 31, 1995 and 1994, respectively, and is accounted for under the cost method.
Preferred Stock:
The Company has 500,000 shares of no par value preferred stock authorized, of which none are issued or outstanding.
Stock Rights:
Pursuant to a shareholder rights plan adopted by the Company on November 30, 1989, the Company distributed common stock purchase rights to the shareholders of record on November 30, 1989. Each Right entitles the registered holder thereof to purchase from the Company following the Distribution Date, one one-hundredth of a share of Series A Preferred Stock, no par value, at a Purchase Price of $70.00 per one one-hundredth share, subject to adjustment, or, upon the occurrence of certain events, Common Stock of the Company or common stock of an entity that acquires the Company.
A Distribution Date will occur upon the earlier of 10 days following a public announcement that a Person or group of affiliated or associated Persons has acquired, or obtained the right to acquire, beneficial ownership of 20% or more of the outstanding shares of Common Stock; or 10 days following the commencement of a tender offer or exchange offer that would result in a Person or group beneficially owning 30% or more of such outstanding shares of Common Stock.
The Rights are not exercisable until the Distribution Date and will expire at the close of business on November 30, 1999, unless redeemed earlier by the Company.
In the event that, at any time following the Distribution Date, the Company is the surviving corporation in a merger with an Acquiring Person and the Company's Common Stock is not changed or exchanged; a Person becomes the beneficial owner of more than 30% of the then outstanding shares of Common Stock (except pursuant to an offer for all outstanding shares of Common Stock that the Continuing Directors determine to be fair to and otherwise in the best interests of the Company and its stockholders); an Acquiring Person engages in one or more "self-dealing" transactions; or during such time as there is an Acquiring Person, an event occurs that results in such Acquiring Person's ownership interest being increased by more than one percentage point, each holder of a Right will thereafter have the right to receive, upon exercise thereof and in lieu of Preferred Stock, Common Stock (or, in certain circumstances, cash, property, or other securities of the Company) having a value equal to twice the Purchase Price of the Right.
In the event that, at any time following the Stock Acquisition Date, the Company is acquired in a merger or other business combination transaction in which the Company is not the surviving corporation; or 50% or more of the Company's assets or earning power is sold or transferred to any Person other than a subsidiary of the Company, each holder of a Right shall thereafter have the right to receive, upon exercise thereof and in lieu of Preferred Stock, common stock of the acquiring Person having a value equal to twice the Purchase Price of the Right.
At any time prior to the earlier of November 30, 1999, or 10 days following the Stock Acquisition Date, the Company may redeem the Rights in whole, but not in part, at a price of $0.01 per Right (payable in cash, Common Stock, or other consideration deemed appropriate by the Board of Directors).
Until a Right is exercised, the holder will have no rights as a shareholder of the Company, including, without limitation, the right to vote or to receive dividends.
Stock Option and Stock Appreciation Rights Plan:
On August 7, 1988, the Company initiated a stock option and stock appreciation rights plan (Plan #1) for sale or award to key employees as incentive stock options, non-qualified stock options or stock appreciation rights, and may not be exercised later than ten years from the date of the grant. The options exercise price is $18.00 per share.
On March 25, 1993, the Company initiated a second stock option and stock appreciation rights plan (Plan #2) with the same terms and conditions as the first plan with the options exercise price at $20.00 per share.
On December 8, 1994, the Company initiated a third stock option and stock appreciation rights plan (Plan #3) with the same terms and conditions as the previous two plans with the options exercise price at $31.00 per share.
The following table summarizes the options activity. Shares Range ofOption Prices Options outstanding at January 1, 1993 28,410 Options granted (Plan #2) 14,000 $20.00 Options exercised (Plan #1) (4,567) $18.00 Options exercised (Plan #2) (275) $20.00 Options outstanding at December 31, 1993 37,568
Options granted (Plan #3) 69,500 $31.00 Options exercised (Plan #1) (4,179) $18.00 Options exercised (Plan #2) (1,825) $20.00 Options outstanding at December 31, 1994 101,064
Options granted (Plan #3) 0 $31.00 Options exercised (Plan #1) (3,061) $18.00 Options exercised (Plan #2) (770) $20.00 Options cancelled (Plan #1) (1,000) $18.00 Options outstanding at December 31, 1995 96,233
Options exercisable at December 31, 1995 96,233
At December 31, 1995, the Company had reserved 96,233 shares of common stock to cover grants under the plans.
Dividend Restriction and Regulatory Matters:
Permission from the Comptroller of the Currency is required if the total of dividends declared, by the Bank, in a calendar year exceeds the total of its net profits, as defined by the Comptroller, for that year, combined with its retained net profits of the two preceding years. The retained net profits of the Company available for dividends are approximately $11,522,000 at December 31, 1995.
The Bank is required to maintain minimum amounts of capital to total "risk weighted" assets, as defined by the bank regulatory authorities. At December 31, 1995, the Bank is required to have Tier 1 and Total Capital Ratios of no less than 4.0% and 8.0%, respectively. At December 31, 1995, the Bank's Tier 1 and Total Capital Ratios were 13.9% and 14.8%, respectively, as compared to 14.3% and 15.2% at December 31, 1994. The Bank's leverage ratios at December 31, 1995 and 1994 were 9.1% and 8.8%, respectively.
NOTE 8 - RETIREMENT PLANS
401(K) Profit Sharing Plan:
Effective January 1, 1995, the Company started a profit sharing retirement plan under which eligible employees may defer a portion of their annual compensation, pursuant to Section 401(K) of the Internal Revenue Code. The Company matches employee contributions at a designated rate times elective contribution. All employees with at least one year of service and who have attained the age of 21 are eligible to participate. The Company's contributions to the 401(K) plan were $75,000 for the year ended December 31, 1995.
Defined Benefit Pension Plan:
Pension expense of $138,000, $106,000, and $71,000 was recognized in 1995, 1994 and 1993, respectively. The following table sets forth the plan's funded status and amounts recognized in the consolidated financial statements:
December 31 (In Thousands) 1995 1994 Actuarial present values of benefit obligations: Vested benefit obligation $2,428 $2,833 Accumulated benefit obligation $2,485 $2,878 Projected benefit obligation $(3,526) $(3,732) Plan assets at fair value 3,892 3,853 Plan assets in excess of projected benefit obligation 366 121 Unrecognized net assets at January 1, 1990, being recognized over 11 years (210) ( 253) Unrecognized net loss 69 146 Prepaid pension cost recognized in the accompanying balance sheets $225 $14
December 31 (In Thousands) 1995 1994 1993 Net pension expense includesthe following: Normal service cost $219 $171 $146 Interest cost on projected benefit obligation 205 275 256 Actual return on plan assets (803) (188) (193) Net amortization and deferral 517 (152) (138) Net pension expense $138 $106 $71
The significant majority of plan assets is invested in common stocks, treasury securities and corporate obligations, with the balance in cash and short-term investments. Investment in the Company's stock as of December 31, 1995 and 1994, was 20,544 shares valued at $669,000 and $588,000, respectively.
The weighted average discount rate and expected long-term rate of return on assets used were 7.50% and 8.25% as of December 31, 1995 and December 31, 1994. The increase in salary levels was 5%.
NOTE 9 - DEFERRED COMPENSATION
The Bank has a deferred compensation plan for the benefit of key employees. Under the plan, upon retirement after age 65, the employee shall receive a minimum of fifty percent of his then monthly salary for one hundred twenty months. This amount will be reduced by one-half of one percent for each month that retirement is prior to age 65 with the minimum age for retirement at age 60. If a covered employee dies while employed by the Bank, a death benefit of fifty percent of the employee's then annual salary is payable to the employee's beneficiary over ten years. The expense charged to operations for future obligations was $137,000, $101,000, and $95,000 in 1995, 1994 and 1993, respectively.
NOTE 10 - INCOME TAXES
The provision for income taxes is comprised of the following components:
Year Ended December 31 (In Thousands) 1995 1994 1993 Current income tax expense: Federal $1,026 $1,491 $1,515 State 0 0 0 1,026 1,491 1,515 Deferred income tax (benefit)/expense 674 (80) (104) Provision for income tax $1,700 $1,411 $1,411
A reconciliation of the statutory federal income tax rate and the effective rate is as follows: Year Ended December 31 (In Thousands) 1995 1994 1993 Amount % Amount % Amount % Income taxes at the statutory rate $2,228 34 $2,002 34 $1,863 34 Increase/(decrease) in federal tax expense resulting from: Tax exempt income (636) (10) (637) (11) (545) (10) Prior year underaccrual/ (overaccrual) (33) 0 18 0 45 1 Other 141 2 28 1 48 1 Provision for income tax $1,700 26 $1,411 24 $1,411 26
The significant components of the Company's deferred tax liabilities and assets as of December 31, 1995 and 1994 are as follows (in thousands):
December 31 1995 1994 Deferred Tax Assets: Loan loss reserve $ 513 $ 553 Deferred compensation 308 274 Interest income 8 4 Total deferred tax assets 829 831 Deferred Tax Liabilities: Depreciation 248 245 Pension costs 77 5 Lease receivables 597 0 Fair value adjustment, available for sale securities 478 17 ---- --- 1,400 267
Net Deferred Assets/ (Liabilities) $(571) $564
NOTE 11 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The following fair value estimates, methods and assumptions were used to measure the fair value of each class of financial instruments for which it is practical to estimate that value:
Investment securities:
The fair value of investment securities, except certain state and municipal securities, is estimated based on published bid prices or bid quotations received from securities dealers. The fair value of certain state and municipal securities is not readily available through market sources other than dealer quotations, so fair value estimates are based on quoted market prices of similar instruments, adjusted for differences between the quoted instruments and the instruments being valued.
Loans:
Fair values are estimated for portfolios of loans with similar financial characteristics. Loans are segregated by type such as commercial, residential mortgage, and other consumer loans.
The fair value of loans is calculated by discounting scheduled cash flows through the estimated maturity using estimated market discount rates that reflect the credit and interest rate risk inherent in the loan. The estimate of maturity is based on the Company's historical experience with repayments for each loan classification, modified, as required, by an estimate of the effect of current economic and lending conditions.
Deposit Liabilities:
The fair value of deposits with no stated maturity, such as non- interest bearing demand deposits, savings, and money market and checking accounts, is equal to the amount payable on demand as of December 31, 1995. The fair value of certificates of deposit is based on the discounted value of contractual cash flows. The discount rate is estimated using the rates currently offered for deposits of similar remaining maturities.
The estimated fair values of the Company's financial instruments are as follows:
(In Thousands) 1995 1994 Carrying Fair Carrying Fair Amount Value Amount Value Financial Assets: Cash and Short-Term Investments $46,781 $46,781 $32,232 $32,232 Investment Securities 114,320 115,240 138,144 134,170 Loans 232,113 231,657 192,518 188,494 Less: Allowance for Loan Losses 2,413) 2,146) $390,801 $393,678 $360,748 $354,896 Financial Liabilities: Deposits $363,433 $352,178 $337,223 $335,678
The fair value of commitments to extend credit is estimated using the fees currently charged to enter into similar agreements, and as the fair value for these financial instruments were not material, these disclosures are not included above.
Limitations:
Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company's entire holdings of a particular financial instrument. Because no market exists for a significant portion of the Company's financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
Fair value estimates are based on existing on-and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Significant assets and liabilities that are not considered financial assets or liabilities include the deferred tax assets and bank premises and equipment. In addition, the tax ramifications related to the realization of unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in many of the estimates.
NOTE 12 - COMMITMENTS AND CONTINGENCIES
Financial Instruments with Off-Balance Sheet Risk:
In the normal course of business, the Company enters into a variety of financial instruments with off-balance sheet risk. These financial instruments include commitments to extend credit and standby letters of credit both of which involve to varying degrees, elements of risk in excess of the amounts recognized in the financial statements. Credit risk, the risk that a counterparty of a particular financial instrument will fail to perform, is the contract amount of commitments to extend credit and standby letters of credit. The credit risk associated with these financial instruments is essentially the same as that involved in extending loans to customers. Credit risk is managed by limiting the total amount of arrangements outstanding and by applying normal credit policies to all activities with credit risk. Collateral is obtained based on Management's credit assessment of the customer. At December 31, 1995 and 1994, the Company had commitments to make loans and outstanding letters of credit totaling $13,930,000
and $12,526,000, respectively (of this amount, outstanding letters of credit totaled $3,061,000 and $2,841,000, respectively). Many of such commitments to extend credit may expire without being drawn upon, and therefore, the total commitment amounts do not necessarily represent future cash flow requirements.
Concentration of Credit Risk:
The Bank's operations are affected by various risk factors including interest rate risk, credit risk and risk from geographic concentration of lending activities. Management attempts to manage interest rate risk through various asset/liability management techniques designed to match maturities of assets and liabilities. Loan policies and administration are designed to provide assurance that loans will only be granted to creditworthy borrowers, although credit losses are expected to occur because of subjective factors and factors beyond the control of the Bank. The Bank is mandated by the Community Reinvestment Act and other regulations to conduct most of its lending activities within the geographic area where it is located. As a result, the Bank and its borrowers may be vulnerable to the consequences of changes in the local economy.
Self-Funded Health Plan:
The Bank provides self-funded comprehensive health care coverage to substantially all of its employees. The plan is covered by an umbrella insurance policy for catastrophic illnesses. The Bank's maximum liability is $25,000 per participant with an overall maximum liability of $325,000 annually.
Other:
In addition, the Bank, from time to time, may be subject to claims and lawsuits relating to the conduct of its normal banking business. The Company, based on advice of legal counsel, has informed us that there are no pending or threatening litigations or unasserted claims against them at the present time.
NOTE 13 - CONDENSED FINANCIAL INFORMATION - PARENT COMPANY ONLY
SOUTHERN JERSEY BANCORP OF DELAWARE, INC. (Parent Company Only) CONDENSED BALANCE SHEET
(In Thousands Except Share and Per Share Data) December 31 1995 1994 ASSETS Cash and due from banks $667 $628 Investment in bank subsidiary 36,277 32,010 Other assets 250 450 TOTAL ASSETS $37,194 $33,088
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES Dividends Payable $542 $528 Other Liabilities 9 5 Total Liabilities 551 533 SHAREHOLDERS' EQUITY Preferred stock, no par value; shares authorized - 500,000; no shares issued Common stock, par value $1.67 per share; shares authorized - 5,000,000; shares issued - 1,275,000 2,129 2,129 Additional paid-in-capital 2,223 2,258 Retained earnings 35,103 31,344 Unrealized gains on securities 929 56 ------ ------ 40,384 35,787 Less: Treasury stock at cost - 190,193 shares in 1995 and 175,767 shares in 1994 3,741 3,232 Total Shareholders' Equity 36,643 32,555 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $37,194 $33,088
SOUTHERN JERSEY BANCORP OF DELAWARE, INC. (Parent Company Only) CONDENSED STATEMENT OF INCOME
(In Thousands) Year Ended December 31 1995 1994 1993 Income: Cash dividends from subsidiary $1,593 $1,554 $1,656 Expenses: Operating Expenses 135 116 101 Income before income taxes 1,458 1,438 1,555 Equity in undistributed earnings of subsidiaries 3,394 3,039 2,512 NET INCOME $4,852 $4,477 $4,067
CONDENSED STATEMENT OF CASH FLOWS
(In Thousands) Year Ended December 31 1995 1994 1993 Cash flows from operating activities: Net income $4,852 $4,477 $4,067 Adjustments to reconcile income from continuing operations to net cash provided by operating activities: Equity in net earnings of subsidiary (3,394) (3,039) (2,511) Amortization of organization costs 0 16 32 (Increase)/decrease in other assets 200 (450) 0 Increase in liabilities 18 12 67 Net cash provided by operating activities 1,676 1,016 1,655 Cash flows from investing activities: Net cash used for investing activities 0 0 0 Cash flows from financing activities: Cash dividends (1,093) 1,054) (997) Purchase of Treasury stock (800) (156) (713) Sale of Treasury stock 256 206 115 Net cash used for financing activities (1,637) (1,004) (1,595)
Net increase in cash and cash equivalents 39 12 60
Cash and cash equivalents at beginning of year 628 616 556 Cash and cash equivalents at end of year $667 $628 $616
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors of F & M Investment Company
We have audited the balance sheets of F & M Investment Company, (a wholly-owned subsidiary of Farmers & Merchants National Bank) as of December 31, 1995 and 1994 and the related statements of stockholders' equity, income and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these 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 from 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of F & M Investment Company, as of December 31, 1995 and 1994 and the results of its operations and cash flows for the years then ended, in conformity with generally accepted accounting principles.
s/ Belfint, Lyons & Shuman, P.A. _______________________________________
January 23, 1996 Wilmington, Delaware
Item 9.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None
PART III
Item 10.

Item 10. Directors and Executive Officers of Registrant
Information regarding Directors of Registrant will be set forth in the Southern Jersey Bancorp of Delaware, Inc. Proxy Statement for the annual meeting of shareholders to be held April 11, 1996, and is incorporated herein by reference. Information regarding executive officers of Registrant is set forth under the caption "Executive Officers" in Item 1(a) hereof.
Item 11.

Item 11. Executive Compensation
Information regarding executive compensation will be set forth in the Southern Jersey Bancorp of Delaware, Inc. Proxy Statement for the annual meeting of shareholders to be held April 11, 1996, and is incorporated herein by reference.
Item 12.

Item 12. Security Ownership of Certain Beneficial Owners and Management
Information regarding security ownership of certain beneficial owners and Management will be set forth in the Southern Jersey Bancorp of Delaware, Inc. Proxy Statement for the annual meeting of shareholders to be held April 11, 1996, and is incorporated herein by reference.
Item 13.

Item 13. Certain Relationships and Related Transactions
Information regarding certain relationships and related transactions will be set forth in the Southern Jersey Bancorp of Delaware, Inc. Proxy Statement for the annual meeting of shareholders to be held April 11, 1996, and is incorporated herein by reference.
PART IV
Item 14.

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(1) Financial Statements
The financial statements filed as a part of this report are listed on the Index to Consolidated Financial Statements on Page 33.
(2) Financial Statement Schedules
All other schedules have been omitted because the required information is shown in the Consolidated Financial Statements or notes thereto, the statistical information in Item 1, pursuant to Industry Guide 3, or they are not applicable.
(3) (a) Exhibits (numbered in accordance with Item 601 of Regulation S-K)
Exhibit Number Description
3A Form of Certificate of Incorporation of the Registrant - Incorporation by reference to Definitive Proxy Statement filed and dated June 16, 1989
3B Form of Bylaws of the Registrant - Incorporation by reference to Definitive Proxy Statement filed and dated June 16, 1989
4A Form of Common Stock Certificate - Incorporation by reference to Definitive Proxy Statement filed and dated June 16, 1989
4B Instruments Defining the Rights of Security Holders - Incorporation by reference to Form 8-A filed November 30, 1989
10A Stock Option and Stock Appreciation Rights Plan - Incorporated by reference to the Registrant's Definitive Proxy Statement filed February 27, 1987, and the Registrant's Annual Report on Form 10-K for the fiscal year ENded December 31, 1987, filed March 31, 1988.
21 Subsidiaries of the Registrant - Included under Item 1, Page 2 of this filing.
23 Consent of William Thos. Athey & Company, Certified Public Accountants, Professional Association Independent Public Accountants - Included under Item 8, Page 34 of this filing.
(3) (b) Reports on Form 8-K
No reports on Form 8-K have been filed by the Registrant during the quarter ended December 31, 1995.
(3) (c) Form of Deferred Compensation Agreement for named executive officers, Clarence D. McCormick, Sr., Harry W. Bullock, and Ralph Cocove is incorporated by reference to Form 10-K filed March 31, 1989.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SOUTHERN JERSEY BANCORP OF DELAWARE, INC.
Dated:March 28, 1996 By:s/ Clarence D. McCormick ---------------------- Clarence D. McCormick Chairman of the Board
Pursuant to 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.
Signatures Title Date s/ Henry L. Backenson Vice Chairman March 28, 1996 - ----------------------------- Henry L. Backenson s/ Alfred F. Caggiano Vice Chairman March 28, 1996 - ----------------------------- Alfred F. Caggiano s/ Ephraim M. Carll Director March 28, 1996 - ----------------------------- Ephraim M. Carll s/ Keron D. Chance Director March 28, 1996 - ----------------------------- Keron D. Chance, Esq. s/ Harry W. Bullock Director March 28, 1996 - ----------------------------- Harry W. Bullock s/ Frank LoBiondo Director March 28, 1996 - ----------------------------- Frank LoBiondo s/ Clarence D. McCormick, Jr. Director March 28, 1996 - ----------------------------- Clarence D. McCormick, Jr. s/ Louis Pizzo Director March 28, 1996 - ----------------------------- Louis Pizzo s/ Donald Strang Director March 28, 1996 - ---------------------- Donald Strang
PART II - OTHER INFORMATION
EXHIBITS AND REPORTS ON FORM 8-K A. Exhibits Exhibit 27. Financial Data Schedule B. Reports on Form 8-K No reports have been filed on form 8-K during this quarter.