SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
-------------------
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ____________
Commission file number 0-29030
SUSSEX BANCORP
(Exact name of registrant as specified in its charter)
New Jersey 22-3475473
- --------------------------------------------------------------------------------
(State of other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
399 Route 23, Franklin, New Jersey 07416
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code) (201) 827-2914
-------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities and Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [ X ] No [ ]
As of July 31, 1997 there were 693,473 shares of common stock, no par value,
outstanding.
<PAGE>
SUSSEX BANCORP
FORM 10-QSB
INDEX
Part I - Financial Information
Item I. Financial Statements and Notes to Consolidated
Financial Statements
Item 2. Management's Discussion and Analysis of
Financial condition and Results of Operations
Part II - Other Information
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
SUSSEX BANCORP
CONSOLIDATED BALANCE SHEETS
(in Thousands, Except Share Data)
(Unaudited)
ASSETS June 30, 1997 December 31, 1996
------------- -----------------
<S> <C> <C>
Cash and Due from Banks ...................... $ 4,410 $ 4,605
Federal Funds Sold ........................... 7,600 4,250
Securities:
Available for Sale, at Market Value ........ 22,205 22,154
Held to maturity ........................... 1,543 1,122
--------- ---------
Total Securities ....................... 23,748 23,276
Loans (Net of Unearned Income) ............... 67,822 65,464
Less: Allowance for Possible
Loan Losses ........................ 680 542
--------- ---------
Net Loans .................. 67,142 64,922
Premises and Equipment, Net .................. 2,271 2,242
Other Real Estate ............................ 256 396
Intangible Assets, Primarily
Core Deposit Premiums ...................... 829 870
Other Assets ...................... 1,231 1,215
--------- ---------
Total Assets ........................ $ 107,487 $ 101,776
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Demand .................................... 15,877 13,807
Savings ................................... 28,753 26,502
Time ...................................... 53,963 52,580
--------- ---------
Total Deposits ...................... 98,593 92,889
Other Liabilities ............................ 744 1,005
--------- ---------
Total Liabilities ................... 99,337 93,894
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SUSSEX BANCORP
CONSOLIDATED BALANCE SHEETS
(in Thousands, Except Share Data)
(Unaudited)
June 30, 1997 December 31, 1996
------------- -----------------
<S> <C> <C>
Stockholders' Equity:
Common Stock, No Par Value
Authorized 5,000,000 Shares,
Issued and outstanding
693,594 in 1997 and
674,996 in 1996, respectively ............. 5,323 5,246
Retained Earnings ............................ 2,892 2,729
Net Unrealized Gain on Securities
Available for Sale,
net of income taxes ....................... (65) (93)
--------- ---------
Total Stockholders' Equity ................... 8,150 7,882
Total Liabilities and
Stockholders' Equity ...................... $ 107,487 $ 101,776
========= =========
See Notes to Consolidated Financial Statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SUSSEX BANCORP
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Share Data)
(Unaudited)
Three Months Ended Six Months Ended
June 30 June 30
--------------------- ---------------------
1997 1996 1997 1996
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and Fees on Loans ............... $ 1,361 $ 1,233 $ 2,705 $ 2,390
Interest on Securities:
Taxable ................................. 349 423 694 794
Exempt from Federal Income Tax .......... 8 7 17 25
Interest on Federal Funds Sold .............. 92 37 149 119
-------- -------- -------- --------
Total Interest Income .............. 1,810 1,700 $ 3,565 $ 3,328
INTEREST EXPENSE
Interest on Deposits:
Interest on Savings Deposits ............ 174 170 338 332
Interest on Time Deposits ............... 580 503 1,147 1,004
-------- -------- -------- --------
Total Interest Expense ............. 754 663 1,485 1,336
Net Interest Income ..................... 1,056 1,027 2,080 1,992
Provision for Possible
Loan Losses ........................... 75 25 150 40
-------- -------- -------- --------
Net Interest Income After
Provision for Possible Loan Losses.... 981 1,002 1,930 1,952
NON-INTEREST INCOME
Trust Income ............................ 5 7 5 8
Service charges
on Deposit Accounts .................. 129 129 255 255
Other Income ............................ 71 45 110 86
-------- -------- -------- --------
Total Non-interest Income .......... 205 181 370 349
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SUSSEX BANCORP
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Share Data)
(Unaudited) (continued)
Three Months Ended Six Months Ended
June 30 June 30
--------------------- ---------------------
1997 1996 1997 1996
<S> <C> <C> <C> <C>
NON-INTEREST EXPENSE
Salaries and Employee Benefits .......... 458 435 922 845
Occupancy Expense, Net .................. 87 84 181 186
Furniture and Equipment Expense ......... 106 84 196 170
Data Processing Expense ................. 16 13 32 26
Amortization of Intangibles ............. 21 21 42 42
Other Expenses .......................... 250 297 504 549
-------- -------- -------- --------
Total Non-Interest Expense ......... 938 934 1,877 1,818
Income Before Provision for Income Taxes .... 248 249 423 483
Provision for Income Taxes .................. 88 96 152 182
Net Income ......................... $ 160 $ 153 $ 271 $ 301
======== ======== ======== ========
Net Income Per Common Share ............. $ 0.23 $ 0.23 $ .40 $ .46
======== ======== ======== ========
Weighted Average Shares Outstanding ......... 686,867 659,263 680,959 659,263
See Notes to Consolidated Financial Statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SUSSEX BANCORP
CONSOLIDATED STATEMENT OF CHANGES IN
STOCKHOLDERS' EQUITY
(In Thousands, Except Share Data)
(Unaudited)
Unrealized
Gain (Loss) on Total
Common Retained Securities Stockholders
Stock Earnings Available for Sale Equity
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Balance December 31, 1996 ..... $ 5,003,000 $ 2,971,000 $ (93,000) $ 7,881,000
Net Income for the Period ..... 271,000 271,000
Cash Dividend ($.16 per share) (110,000) (110,000)
Stock Dividend 2% ............. 240,000 (240,000)
Shares issued through
dividend reinvestment plan .. 57,000 57,000
Stock Option Exercised ........ 23,000 23,000
Change in unrealized gain on
securities available for sale 28,000 28,000
----------- ----------- ----------- -----------
Balance June 30, 1997 ......... $ 5,323,000 $ 2,892,000 $ (65,000) $ 8,150,000
See Notes to Consolidated Financial Statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS
OF CASH FLOWS
(Unaudited)
Six Months Ended
June
1997 1996
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income ..................................... $ 271 $ 301
Adjustments to reconcile net income
to net cash provided by Operating
Activities:
Depreciation and Amortization of Premises
and Equipment .................................. 142 132
Amortization of Intangible Assets .................. 41 42
Premium amortization (discount accretion)
of securities, net ............................. 25 14
Provision for Possible Loan Loses .................. 150 40
Accretion of Loan origination and
commitment fees, net ........................... 11 (17)
Deferred Federal income tax benefit
(increase) ..................................... 90 0
Decrease (Increase) in Accrued Interest
Receivable ..................................... (149) (173)
Decrease (Increase) in Other Assets ................ 157 (124)
Decrease (Increase) in Accrued Interest
and Other Liabilities .......................... (239) (365)
-------- --------
Net Cash Provided by Operating Activities ... $ 499 $ (150)
Cash Flow from Investing Activities:
Securities Available for Sale:
Proceeds from Maturities and Paydowns ....... 349 3,767
Proceeds from Sales/Calls Prior to Maturity . -- --
Purchases ................................... (506) (10,526)
Securities Held to maturity:
Proceeds from Maturities .................... 618 1,633
Purchases ................................... (1,039) (568)
Net Increase in Loans Outstanding .............. (2,539) (7,859)
Capital Expenditures ........................... (172) (79)
Net Increase in Other Real Estate .............. 154 (169)
-------- --------
Net Cash Provided by (used in)
Investing Activities ...................... $ (3,135) $(13,801)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS
OF CASH FLOWS
(Unaudited)
Six Months Ended
June
1997 1996
<S> <C> <C>
Cash Flows from Financing Activities:
Net (Decrease) Increase Total Deposits ...... 5,764 3,149
Payment of dividends ........................... (110) (405)
-------- --------
Net Cash (used in) Provided by
Financing Activities ................... $ 5,654 $ 2,744
Net increase (Decrease) in Cash and
Cash Equivalents ........................ 3,018 (11,207)
Cash and Cash Equivalents,
Beginning of Period ..................... 8,964 14,202
Cash and Cash Equivalents,
End of Period .......................... $ 11,982 $ 2,995
======== ========
See Notes to Consolidated Financial Statements
</TABLE>
<PAGE>
SUSSEX BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. Basis of Presentation
Sussex Bancorp ("the Company"), a one-bank holding company, was
incorporated in January, 1996 to serve as a holding company for the Sussex
County State Bank ("the Bank"). The Company acquired the Bank and became its
holding company on November 20, 1996. The Bank is the only active subsidiary at
June 30, 1997. The Bank operates seven banking offices all located in Sussex
County, New Jersey. The Company is subject to the supervision and regulation of
the Board of Governors of the Federal Reserve System (the "FRB"). The Bank's
deposits are insured by the Bank Insurance Fund ("BIF") of the Federal Deposit
Insurance corporation ("FDIC") up to applicable limits. The operations of the
Company and the Bank are subject to the supervision and regulation of the FRB,
FDIC and the New Jersey Department of Banking and Insurance (the "Department").
The consolidated financial statements included herein have been prepared
without audit in accordance with the rules and regulations of the Securities and
Exchange Commission and reflect all adjustments which, in the opinion of
management, are necessary for a fair statement of the results for interim
periods. All adjustments made were of a normal recurring nature. These
consolidated financial statements should be read in conjunction with the
consolidated financial statements and the notes thereto that are included in the
Company's Annual Report on Form 10-KSB for the fiscal period ended December 31,
1996.
2. Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents include
cash and due from banks and federal funds sold. Generally, federal funds are
sold for a one day period.
<PAGE>
3. Securities
The amortized cost and approximate market value of securities are
summarized as follows (in thousands):
<TABLE>
<CAPTION>
June 30, 1997 December 31, 1996
-------------------- --------------------
Amortized Market Amortized Market
Cash Value Cash Value
<S> <C> <C> <C> <C>
Securities Available
For Sale -
U. S. Treasury Securities ..... $ 8,059 $ 7,996 $ 8,068 $ 8,022
U. S. Government
Mortgage Backed Securities .... 14,254 14,209 14,239 14,132
------- ------- ------- -------
Total Securities
Available for Sale ..... $22,313 $22,205 $22,307 $22,154
Securities Held to Maturity -
Obligations of State and
Political Subdivisions ........ 919 919 652 646
Other Debt Securities .. 624 624 470 470
------- ------- ------- -------
Total Securities
Held to Maturity ......... $ 1,543 $ 1,543 $ 1,122 $ 1,116
------- ------- ------- -------
Total Securities .................. $23,856 $23,748 $23,429 $23,270
======= ======= ======= =======
</TABLE>
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Three Months Ended June 30, 1997 and June 30, 1996.
OVERVIEW
The Company realized net income of $160,000 for the second quarter of 1997,
a increase of $7,000, or 4.6%, from the $153,000 reported for the same period in
1996. Earnings per share were $.23, which was equal to per share income for the
prior year period, reflecting both increased earnings and an increase in the
average number of shares outstanding.
The increase in net income for the second quarter of 1997 resulted from a
number of factors including a increase in net interest income coupled with a
slight increase in non-interest income, partially offset by increases in
interest expense and the provision for loan losses.
For the six months ended June 30, 1997, net-income was $271,000, a decrease
of 10% from the $301,000 reported in the same period last year. Per share
earnings were $.40 and $.46, respectively, a 13.1% decrease, reflecting
increases in interest expense and the provision for loan losses exceeding
increases in interest income and non-interest income, and an increase in the
average number of shares outstanding during the 1997 period.
RESULTS OF OPERATION
Interest Income. Total interest income increased $110 thousand, or 6.5%, to
$1.8 million for the quarter ended June 30, 1997 from $1.7 million for the same
period in 1996. This was attributable to an increase in interest and fees on
loans of $128 thousand, an increase in interest on Federal Funds sold of $55
thousand, offset by a decrease in interest and dividends on securities of $73
thousand. The increase in interest income is primarily attributable to the
$8,573,000 increase in average interest earnings assets. The yield on average
interest-earnings assets on a fully taxable equivalent basis decreased 17 basis
points from 7.58% for the second quarter of 1996 to 7.41% for the second quarter
of 1997, reflecting both reduced market rates of interest and management's
decision to offer lower priced products in an effort to reestablish the
Company's presence in its market areas.
For the six months ended June 30, 1997, interest income increased $237
thousand, or 7.1%, from the $3.3 million reported for the same period in 1996.
This growth in interest income is the result of a $8.2 million, or 9.4%,
increase in the average balance of interest-earning assets over the comparable
period of last year, partially offset by a decrease in the average yield on
total interest-earning assets to 7.45% during the six months ended June 30,
1997, compared to 7.57% during the same period in 1996. The decline in average
yield reflects reinvestment of mortgage principal repayments and amortization,
as well as consumer loans, primarily home equity loans, at lower rates of
interest. The reduced interest rates for the six month periods reflect the same
factors as were present in the three month period.
Interest Expense. The Company's interest expense for the second quarter of
1997 increased $81 thousand, or 12.04%, to $754 thousand from $673 thousand for
the same period last year. For the six months ended June 30, 1997 interest
expense increased $151 thousand or 10.2% to $1,486,000 from $1,335,000 for the
same period last year. The average balance of interest bearings deposits
<PAGE>
increased $7 million or 9.4% for the same period last year. The largest
component of the increase, interest on time deposits, increased $75 thousand.
The Company's average cost of funds increased to 3.70% for the second quarter
from 3.60% for the second quarter in 1996, reflecting a change in the
composition of the Company's deposit portfolio as average time deposits for the
six months ended June 30, 1997 increased by $6.2 million compared to the six
months ended June 30, 1996. This growth is primarily the result of marketing a
Certificate of Deposit product and a IRA Certificate of Deposit product which
were not being offered by the Company's competitors. The average cost of the
interest-bearing deposits increased to 3.71%, during the current period, from
the 3.65% during the same period last year.
Table 1 following presents a summary of the Company's interest-earning
assets and their average yields, and interest-bearing liabilities and their
average costs and shareholders' equity for the six months ended June 30, 1997
and 1996. The average balance of loans includes non-accrual loans, and
associated yields include loan fees which are considered adjustment to yields.
<TABLE>
<CAPTION>
Comparative Average
Balance Sheets
Six Months Ended June 30,
------------------------------------------------------------------------------------------
1997 1996
--------------------------------------------- -------------------------------------------
Interest Average Rates Interest Average Rates
Average Income/ Earned/ Average Income/ Earned/
Balance Expense Paid Balance Expense Paid
------- ------- ---- ------- ------- ----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Assets
Interest Earning assets:
Taxable loans (net of unearned
income) ....................... $ 66,853 $ 2,705 8.07% $ 54,797 $ 2,390 8.06%
Tax exempt securities ......... 793 17 6.11% 1,124 25 6.08%
Taxable investment securities . 22,499 694 6.16% 27,161 794 6.06%
Federal Funds sold ............ 5,595 149 5.41% 4,395 119 5.46%
Total earning assets .......... 95,740 3,565 7.45% 87,477 3,328 7.57%
Non-interest earning assets ... 8,390 8,383
Allowance for possible
loan losses ................. (619) (481)
Total Assets ............ $ 103,511 $ 95,379
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Comparative Average
Balance Sheets
Six Months Ended June 30,
-------------------------------------------------------------------------
1997 1996
------------------------------------ -----------------------------------
Average Average
Interest Rates Rates
Average Income/ Earned/ Average Income Earned/
Balance Expense Paid Balance Expense Paid
------- ------- ---- ------- ------- ----
<S> <C> <C> <C> <C> <C> <C>
Liabilities and Shareholders'
Equity
Interest bearing liabilities:
NOW deposits ...................... $ 12,516 $ 117 1.90% $ 11,592 108 1.86%
Savings deposits .................. 27,292 338 2.50% 26,831 333 2.50%
Money market deposits ............. 3,598 40 2.24% 4,168 46 2.23%
Time deposits ......................... 37,304 990 5.38% 31,159 849 5.33%
Subordinated debt .................. 0 0
Total interest bearing
liabilities ...................... 80,710 1,485 3.71% 73,750 1,336 3.65%
Non-interest bearing liabilities:
Demand Deposits ................... $ 14,096 $ 12,830
Other liabilities ................. 799 1,138
Total non-interest bearing
Liabilities ....................... 14,895 13,968
Shareholders' equity .............. 7,906 7,661
Total liabilities and shareholders'
Equity .......................... $103,511 $ 95,379
New interest differential ......... $ 2,080 $ 1,992
Net yield on interest-earning
Assets .......................... 4.32% 4.49%
</TABLE>
Net-Interest Income. The net effect of the changes in interest income and
interest expense for the second quarter of 1997 was an increase of $29 thousand,
or 2.8%, in net interest income as compared to the second quarter of 1996. The
net interest spread, on a fully taxable equivalent basis, declined 22 basis
points from the same period last year.
Net interest income for the six months ended June 30, 1997, increased by
$88 thousand, or 4.4%, over the same period last year. The net interest spread
decreased 17 basis points.
Provision for Loan Losses. For the three months ended June 30, 1997, the
provision for possible loan losses was $75 thousand compared to a provision of
$25 thousand for the same period last year. The provision for possible loan
losses was $150 thousand for the six months ended June 30,. 1997, as compared to
$40 thousand for the same period last year. The amount of the loan loss
<PAGE>
provision was determined by management after review of, among other things, the
Company's loan portfolio, the risks inherent in the Company's lending activities
and the economy in the Company's market area. Upon this review, it was
determined that the provision should be increased in light of the growth
experienced in the Company's loan portfolio as well as management's strategy of
seeking additional commercial lending opportunities.
Non-Interest Income. For the second quarter of 1997, total non-interest
income increased $24 thousand, or 13.3%, over the comparable period of 1996 due
primarily to a gain of $22 thousand on the sale of an OREO property.
For the six months ended June 30, 1997, non-interest income increased $21
thousand from the same period in 1996, due primarily to an increase from gain on
the sale of other real estate.
Non-Interest Expense. For the quarter ended June 30, 1997, non-interest
expense increased $4 thousand from the same period last year. Salaries and
employee benefits increased $23 thousand, or 5.3%, as salaries increased $15
thousand and employee benefits increased $8 thousand, reflecting normal salary
and benefit increases. Furniture and equipment expense increased $28 thousand,
or 15.5%, as a result of an increase in depreciation expense of $12 thousand and
an increase in maintenance and repairs costs of $12 thousand. This is primarily
attributable to the addition of an ATM at Sussex County Community College and
upgrades to the Company's data processing systems. Other expenses decreased by
$47 thousand, or 15.8%, as a result of lower FDIC insurance premiums in 1997 and
a reduction in New Jersey Corporate Business Taxes resulting from lower levels
of taxable income.
For the six months ended June 30, 1997, non-interest expense increased $59
thousand, or 3.25%, from the same period last year. Salaries and employee
benefits increased $77 thousand, or 9.1%; salaries and wages increased $59
thousand and employee benefits increased $20 thousand. Furniture and equipment
expense increased $27 thousand, or 7.1%, as a result of additions to the
Company's ATM network and upgrades in the Company's data processing systems.
Other expenses decreased $45 thousand. This includes a reduction in FDIC
assessments and in Corporate Business Taxes.
Income Taxes. Income tax expense decreased $30 thousand to $152 thousand
for the six months ended June 30, 1997 as compared to $182 thousand for the same
period in 1996. The decrease in income taxes resulted from lower levels of
taxable income in 1997.
<PAGE>
FINANCIAL CONDITION
June 30, 1997 as compared to December 31, 1996
Total assets at June 30, 1997 increased $5.7 million, or 5.6%, from
December 31, 1996. Increases in total assets included increases of $3.3 million
in Federal Funds sold, $472 thousand in total securities, $2.4 million in total
loans, and $45 thousand in other assets, which consist of premises and equipment
and all other assets. This was offset by a decrease of $376 thousand in cash and
due from banks, other real estate and intangible assets.
Total loans at June 30, 1997 increased by $2.4 million, or 3.7%, from
year-end 1996 to $67.8 million. Commercial and industrial loans increased $614
thousand from December 31, 1996 and residential and commercial real estate loans
increased buy $1.8 million from December 31, 1996 to $63 million at June 30,
1997.
The following schedule presents the components of loans, net of unearned
income, by type, for each of the periods presented.
<TABLE>
<CAPTION>
June 30 December 31
1997 1996
------------------ -------------------
Amount Percent Amount Percent
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Commercial and industrial........... $ 2,431 3.60% $ 1,817 2.75%
Real Estate non residential
properties..................... 10,756 15.85% 9,603 14.75%
Residential properties......... 52,259 77.05% 51,572 78.75%
Construction....................... 89 .15% 381 0.60%
Lease financing..................... 0 0 0 0
Consumer........................... 2,286 3.35% 2,091 3.15%
------- ------ ------- ------
Total Loans........................ $67,821 100.00% $65,464 100.00%
======= ====== ======= ======
</TABLE>
At June 30, 1997, Federal funds sold increased by $3.3 million to $7.6
million from $4.3 million. The increases in federal funds sold reflected the
Company's deposit portfolio increasing faster than loan demand and management's
strategy to keep these excess funds liquid to insure sufficient funds to fund
future loan demand. Subsequent to June 30, 1997, these excess funds have been
invested in investment securities available for sale.
At June 30, 1997, total deposits increased to $98.6 million, an increase of
$5.7 million, or 6.1%, over total deposits at December 31, 1996. The increases
in the Company's total deposit portfolio include an increase of $1.4 million in
time deposits, $2.3 million in savings deposits and $2 million in demand
deposits. The increase in time deposits reflects the results of certain time
deposit promotion rates offered in the second half of 1996 and the first half of
1997 on new products offered by the Company, such as an IRA Certificate of
Deposit. Increases in savings deposits and demand deposits reflect the offering
of a new savings product, a statement savings account, and the Company's
emphasis of commercial relationships, which increased demand deposits.
<PAGE>
The following schedule presents the components of deposits, for each period
presented.
<TABLE>
<CAPTION>
June 30, 1997 December 31, 1996
---------------------- ----------------------
Amount % Amount %
------ - ------ -
<S> <C> <C> <C> <C>
Balance Deposits:
NOW deposits ......................... $12,407 12.60% $12,058 13.00%
Savings deposits ..................... 28,040 28.45% 26,502 28.50%
Money market deposits ................ 3,487 3.50% 3,693 4.00%
Time deposits ........................ 38,782 39.35% 36,829 39.65%
Demand deposits ...................... 15,877 16.10% 13,807 14.85%
------- ------ ------- ------
Total interest-bearing liabilities . $98,593 100.00% $92,889 100.00%
======= ====== ======= ======
</TABLE>
ASSET QUALITY
At June 30, 1997, non-performing loans of $447,000 decreased by $487
thousand, as compared to December 31, 1996. Of the decrease in non-performing
loans, $481 thousand was in real estate loans which were restored to performing
status. The balance of the decrease was in commercial loans. Management
continues to work diligently to reduce the Company's non-performing loans.
The following table provides information regarding risk elements in the
loan portfolio:
<TABLE>
<CAPTION>
June 30 December 31
1997 1996
---- ----
<S> <C> <C>
Non-accrual loans ............................ $ 447 $ 935
Non-accrual loans to
total loans ............................... .65% 1.40%
Non-performing assets
to total assets ........................... .42% 0.91%
Allowance for possible
loan losses as a percentage of
non-performing loans ....................... 152.13% 56.00%
</TABLE>
ALLOWANCE FOR POSSIBLE LOAN LOSSES
The allowance for possible loan losses is maintained at a level considered
adequate to provide for potential loan losses. The level of the allowance is
based on management's evaluation of potential losses in the portfolio, after
consideration of risk characteristics of the loans and prevailing and
anticipated economic conditions. The allowance is increased by provisions
charged to expense and reduced by charge-offs, net of recoveries.
<PAGE>
At June 30, 1997, the allowance for possible loan losses was $680 thousand,
up 25.5% from the $542 thousand at year-end 1996. Net charge-offs for the first
half of 1997 were $13 thousand.
LIQUIDITY MANAGEMENT
At June 30, 1997, the amount of liquid assets remain at a level management
deemed adequate to ensure that contractual liabilities, depositors' withdrawal
requirements, and other operational and customer credit needs could be
satisfied.
At June 30, 1997, liquid investments totaled $9 million, and all mature
within 30 days.
CAPITAL RESOURCES
Total Stockholders' equity increased $268 thousand to $8,150,000 at June
30, 1997 from $7,882,000 at year end 1996. The increase was due primarily to net
income of $271 thousand for the first half of 1997 and a decrease in the net
unrealized gains on securities available for sale, net of tax. This increase was
offset by a cash dividend of $112 thousand.
At June 30, 1997, each of the Company and the Bank exceeded the regulatory
capital requirements applicable to it. The table below presents the capital
ratios at June 30, 1997 for both the Company and the Bank as well as the minimum
regulatory requirements.
<TABLE>
<CAPTION>
Amount Ratio Amount Minimum Ration
------ ----- ------ --------------
<S> <C> <C> <C> <C>
The Company 0
Leverage Capital $7,387,000 6.87% $3,358,000 3-5%
(5,146,000)
Tier 1 - Risk Based 7,387,000 12.31% 2,040,000 4%
Total Risk-Based 8,066,000 13.44% 4,081,000 8%
The Bank
Leverage Capital 7,387,000 6.87% 3,358,000 3-5%
5,146,000
Tier 1 Risk-Based 7,387,000 12.31% 2,040,000 4%
Total Risk-Based 8,066,000 13.44% 4,081,000 8%
</TABLE>
Part II Other Information
Item 1 Legal Proceedings
The Company and the Bank are periodically involved in various legal
proceedings as a normal incident to their businesses. In the opinion of
management, no material loss is expected from any such pending lawsuit.
Item 2 Changes in Securities
Not applicable
Item 3 Defaults Upon Served Securities
Not applicable
<PAGE>
Item 4 Submission of Matters to a Vote of Security Holders
On April 23, 1997, the Registrant held its annual meeting of shareholders
to elect the Company's Board of Directors and to amend the Company's Certificate
of Incorporation to classify the Board of Directors into three classes. Nominees
for election to the Board Directors received the following votes:
<TABLE>
<CAPTION>
Nominees: For Withhold Authority Broker Non-Vote
- --------- --- ------------------ ---------------
<S> <C> <C> <C>
Irvin Ackerson 548,625 3,919 0
Donald L. Kovach 549,785 2,759 0
William E. Kulsar 534,092 18,452 0
Joel D. Marvil 549,785 2,759 0
Richard Scott 549,802 2,742 0
Joseph Zitone 549,802 2,742 0
</TABLE>
The proposal to approve an amendment the Registrants Certificate of
Incorporation to classify its Board of Directors into three classes receive the
following votes: For: 463,634 Against: 30,690 Abstain: 6,131 Broker Non-Votes:
52,089
Item 5 Other Information
Not applicable
Item 6 Exhibits and Report on form 8-K
(a) Exhibits
Number Description
27 Financial Data Schedule
(b) Reports on Form 8-K
None
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SUSSEX BANCORP
Date: August 13, 1997 By: /s/ Candace A. Leatham
-----------------------
CANDACE A. LEATHAM
Senior Vice President and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-END> JUN-30-1997 DEC-31-1996
<CASH> 4,410 4,605
<INT-BEARING-DEPOSITS> 0 0
<FED-FUNDS-SOLD> 7,600 4,250
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 22,205 22,154
<INVESTMENTS-CARRYING> 1,543 1,122
<INVESTMENTS-MARKET> 0 0
<LOANS> 67,142 64,922
<ALLOWANCE> 680 542
<TOTAL-ASSETS> 107,487 101,776
<DEPOSITS> 98,593 92,889
<SHORT-TERM> 0 0
<LIABILITIES-OTHER> 0 0
<LONG-TERM> 0 0
0 0
0 0
<COMMON> 5,323 5,003
<OTHER-SE> 2,827 2,972
<TOTAL-LIABILITIES-AND-EQUITY> 107,487 101,776
<INTEREST-LOAN> 2,705 4,958
<INTEREST-INVEST> 860 1,752
<INTEREST-OTHER> 0 0
<INTEREST-TOTAL> 3,565 6,710
<INTEREST-DEPOSIT> 1,485 2,728
<INTEREST-EXPENSE> 1,485 2,728
<INTEREST-INCOME-NET> 2,080 3,982
<LOAN-LOSSES> 150 130
<SECURITIES-GAINS> 0 (9)
<EXPENSE-OTHER> 1,877 3,707
<INCOME-PRETAX> 423 844
<INCOME-PRE-EXTRAORDINARY> 423 844
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 271 522
<EPS-PRIMARY> 0.40 0.78
<EPS-DILUTED> 0.40 0.78
<YIELD-ACTUAL> 0 0
<LOANS-NON> 447 935
<LOANS-PAST> 0 0
<LOANS-TROUBLED> 172 172
<LOANS-PROBLEM> 0 0
<ALLOWANCE-OPEN> 542 476
<CHARGE-OFFS> 12 66
<RECOVERIES> 0 2
<ALLOWANCE-CLOSE> 680 542
<ALLOWANCE-DOMESTIC> 680 542
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 0 0
</TABLE>
