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 September 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) (973) 827-2914
-------------------------------------------------------------------
N/A
- --------------------------------------------------------------------------------
(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 October 31, 1997 there were 695,988 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 Sept. 30, 1997 December 31, 1996
<S> <C> <C>
Cash and Due from Banks ................... $ 4,321 $ 4,605
Federal Funds Sold ........................ 7,650 4,250
Securities:
Available for Sale, at Market Value ..... 24,142 22,154
Held to maturity ........................ 1,594 1,122
--------- ---------
Total Securities .................... 25,736 23,276
Loans (Net of Unearned Income) ............ 68,804 65,464
Less: Allowance for Possible
Loan Losses ...................... 725 542
Net Loans ................ 68,079 64,922
Premises and Equipment, Net ............... 2,298 2,242
Other Real Estate ......................... -0- 396
Intangible Assets, Primarily
Core Deposit Premiums ................... 808 870
Other Assets ..................... 1,129 1,215
--------- ---------
Total Assets ..................... $ 110,021 $ 101,776
========= =========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SUSSEX BANCORP
CONSOLIDATED BALANCE SHEETS
(in Thousands, Except Share Data)
(Unaudited)
(continued)
ASSETS Sept. 30, 1997 December 31, 1996
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Demand ................................. $ 16,828 $ 13,807
Savings .......................... 30,104 26,502
Time ............................. 53,933 52,580
--------- ---------
Total Deposits ................... 100,865 92,889
Other Liabilities ......................... 790 1,005
--------- ---------
Total Liabilities ..... $ 101,655 $ 93,894
Stockholders' Equity:
Common Stock, No Par Value
Authorized 5,000,000 Shares,
Issued and outstanding
695,988 in 1997 and
672,460 in 1996, respectively .... 5,358 5,246
Retained Earnings ......................... 3,001 2,729
Net Unrealized Gain on Securities
Available for Sale,
net of income taxes .............. 7 (93)
--------- ---------
Total Stockholders' Equity ................ 8,366 7,882
Total Liabilities and
Stockholders' Equity ............. $ 110,021 $ 101,776
========= =========
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
<TABLE>
<CAPTION>
SUSSEX BANCORP
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Share Data)
(Unaudited)
Three Months Ended Nine Months Ended
Sept. 30 Sept. 30
------------------------ ------------------------
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and Fees on Loans .......... $ 1,409 $ 1,262 $ 4,114 $ 3,652
Interest on Securities:
Taxable ............................. 376 361 1,070 1,140
Exempt from Federal Income Tax ...... 10 6 27 31
Interest on Federal Funds Sold .......... 97 26 246 159
-------- -------- -------- --------
Total Interest Income . $ 1,892 $ 1,655 $ 5,457 $ 4,982
INTEREST EXPENSE
Interest on Deposits:
Interest on Savings Deposits ........ 180 161 518 501
Interest on Time Deposits ........... 597 493 1,744 1,489
-------- -------- -------- --------
Total Interest Expense ......... $ 777 $ 654 $ 2,262 $ 1,990
Net Interest Income ................. $ 1,115 $ 1,001 $ 3,195 $ 2,992
Provision for Possible
Loan Losses ....................... 45 45 195 85
-------- -------- -------- --------
Net Interest Income After
Provision for Possible Loan Losses $ 1,070 $ 951 $ 3,000 $ 2,907
NON-INTEREST INCOME
Trust Income ........................ 0 0 5 8
Service charges
on Deposit Accounts .............. 121 130 376 385
Other Income ........................ 46 27 156 112
-------- -------- -------- --------
Total Non-interest Income ...... 167 157 537 505
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SUSSEX BANCORP
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Share Data)
(Unaudited)
(continued)
Three Months Ended Nine Months Ended
Sept. 30 Sept. 30
------------------------ ------------------------
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
NON-INTEREST EXPENSE
Salaries and Employee Benefits ...... 487 440 1,409 1,284
Occupancy Expense, Net .............. 81 84 262 269
Furniture and Equipment Expense ..... 92 75 288 246
Data Processing Expense ............. 21 16 53 42
Amortization of Intangibles ......... 21 21 63 63
Other Expenses ...................... 269 251 761 799
-------- -------- -------- --------
Total Non-Interest Expense ..... 971 887 2,836 2,703
Income Before Provision for Income Taxes 266 226 701 709
Provision for Income Taxes .............. 93 87 244 269
-------- -------- -------- --------
Net Income ..................... $ 173 $ 139 $ 457 $ 440
======== ======== ======== ========
Net Income Per Common Share ......... $ 0.25 $ 0.21 $ .66 $ .67
======== ======== ======== ========
Weighted Average Shares Outstanding ..... 695,067 659,821 695,067 659,821
</TABLE>
See Notes to Consolidated Financial Statements
<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 ..... 457,000 475,000
Cash Dividend ($.27 per share) (187,000) (187,000)
Stock Dividend 2% ............. 237,000 (240,000)
Treasury Stock ................ (2,000) (2,000)
Shares issued through
dividend reinvestment plan .. 97,000 97,000
Stock Option Exercised ........ 23,000 23,000
Change in unrealized gain on
securities available for sale 100,000 100,000
----------- ----------- ----------- -----------
Balance Sept. 30, 1997 ........ $ 5,358,000 $ 3,001,000 $ 7,000 $ 8,369,000
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS
OF CASH FLOWS
(Unaudited)
Nine Months Ended
Sept.
1997 1996
-------- --------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income ................................ 457 440
Adjustments to reconcile net income
to net cash provided by Operating
Activities:
Depreciation and Amortization of Premises
and Equipment ............................. 213 5
Amortization of Intangible Assets .................. 62
Premium amortization (discount accretion)
of securities, net ........................ 43 25
Loss on Sale of Investment Securities .............. 0 (9)
Provision for Possible Loan Loses .................. 195 85
Gain/Loss on Sale of Other Real Estate ............. 24 (14)
Accretion of Loan origination and
commitment fees, net ...................... 16 (26)
Deferred Federal income tax benefit
(increase) ................................ 71 59
Decrease (Increase) in Accrued Interest
Receivable ................................ (195) (106)
Decrease (Increase) in Other Assets ................ 305 (132)
Decrease (Increase) in Accrued Interest
and Other Liabilities ..................... (193) (261)
-------- --------
Net Cash Provided by Operating Activities .......... $ 998 $ 256
Cash Flow from Investing Activities:
Securities Available for Sale:
Proceeds from Maturities and Pay downs .... 674 4,437
Proceeds from Sales/Calls Prior to Maturity -- 5,061
Purchases ................................. (2,658) (10,526)
Securities Held to maturity:
Proceeds from Maturities .................. 682 1,671
Purchases ................................. (1,125) (1,220)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS
OF CASH FLOWS
(Unaudited)
Nine Months Ended
Sept.
1997 1996
-------- --------
<S> <C> <C>
Net Increase in Loans Outstanding ......... (3,493) (10,878)
Capital Expenditures ...................... (270) (100)
Net Increase in Other Real Estate ......... 410 -0-
-------- --------
Net Cash Provided by (used in)
Investing Activities .................... $ (5,780) $(11,555)
Cash Flows from Financing Activities:
Net (Decrease) Increase Total Deposits .... 7,874 4,118
Payment of dividends ........................... (186) (154)
-------- --------
Net Cash (used in) Provided by
Financing Activities ................... $ 7,688 $ 3,964
Net increase (Decrease) in Cash and
Cash Equivalents ........................ 2,906 (7,335)
Cash and Cash Equivalents,
Beginning of Period ..................... 8,964 14,202
Cash and Cash Equivalents,
End of Period .......................... $ 11,870 $ 6,867
======== ========
</TABLE>
See Notes to Consolidated Financial Statements
<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
September 30, 1997. The Bank operates seven banking offices all located in
Sussex County. 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>
September 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 .... $ 8,042 $ 8,035 $ 8,068 $ 8,022
U. S. Government
Mortgage Backed Securities ... 16,088 16,106 14,239 14,132
------- ------- ------- -------
Total Securities
Available for Sale $24,130 $24,141 $22,307 $22,154
Securities Held to Maturity -
Obligations of State and
Political Subdivisions . 971 975 652 646
Other Debt Securities ... 623 623 470 470
------- ------- ------- -------
Total Securities
Held to Maturity ... $ 1,594 $ 1,598 $ 1,122 $ 1,116
------- ------- ------- -------
Total Securities ................. $25,724 $25,739 $23,429 $23,270
======= ======= ======= =======
</TABLE>
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Nine Months Ended September 30, 1997 and September 30, 1996.
OVERVIEW
The Company realized net income of $173,000 for the third quarter of 1997, a
increase of $34,000, or 24.5%, over net income reported for the same period of
1996. Earnings per share were $.25 for the third quarter, an increase of $.04 or
a 19% increase over earnings reported for the same period in 1996.
The increase in net income for the third quarter of 1997 resulted from a number
of factors including an increase in net-interest income coupled with an increase
in non-interest income, which relates to a gain on sale of REO property,
partially offset by increases in interest expense and non-interest expense.
For the nine months ended September 30, 1997, net-income was $457,000, an
increase of 3.9% from the $440,000 reported for the same period last year,
reflecting increases in interest income and non-interest income partially offset
by increases in interest expense and the provision for loan losses. Per share
earnings were $.66 and $.67, respectively, reflecting an increase in the average
number of shares outstanding during the 1997 period through the Company's
dividend reinvestment plan.
RESULTS OF OPERATIONS
Interest Income. Total interest income increased $237 thousand, or 14.3%, to
$1.9 million for the quarter ended September 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 $147 thousand, an increase in interest on Federal Funds sold of $71
thousand, and an increase in interest on securities of $19 thousand. The
increase in interest income is primarily attributable to the $11,810,000
increase in average interest-earning assets. The yield on average
interest-earning assets on a fully taxable equivalent basis increased 5 basis
points from 7.43% for the third quarter of 1996 to 7.48% for the third quarter
of 1997, reflecting both the Company's purchase of higher yielding investment
securities and reduced market rates of interest on deposits partially offset by
management's decision to offer lower priced consumer loan products in an effort
to generate additional consumer loans and reestablish the Company's presence in
its market areas.
<PAGE>
For the nine months ended September 30, 1997, interest income increased $475
thousand, or 9.5%, to $5.5 million from the $5.0 million reported for the same
period in 1996. This growth in interest income is the result of a $8.7 million,
or 10%, increase in the average balance of interest-earning assets over the
comparable period last year, partially offset by a decrease in the average yield
on total interest-earning assets to 7.48% during the nine months ended September
30, 1997, compared to 7.53% during the same period in 1996. The decline in
average yield reflects reinvestment of mortgage principal repayments and
amortization and consumer loan repayments, primarily on home equity loans, at
lower rates of interest. The increased interest yields for the three month
period as compared to the nine-month period is attributable to the purchase of
higher yielding investment securities during the third quarter and the repricing
of existing adjustable rate investment securities to higher market rates of
interest.
Interest Expense. The Company's interest expense for the third quarter of 1997
increased $123 thousand, or 18.8%, to $777 thousand from $654 thousand for the
same period last year. For the nine months ended September 30, 1997 interest
expense increased $272 thousand, or 13.7%, to $2,262,000 from $1,990,000 for the
same period last year. The average balance of interest bearing deposits
increased $10.6 million, or 12%, over the same period last year. The largest
component of the increase, interest on time deposits, increased $104 thousand.
The Company's average cost of funds increased to 3.72% for the third quarter
from 3.50% for the third quarter in 1996, reflecting a change in the composition
of the Company's deposit portfolio as time deposits increased by $6.8 million
for the nine months ended September 30, 1997, compared to the nine months ended
September 30, 1996. This growth in time deposits is primarily the result of the
Company's marketing during the 1997 period a certificate of deposit product and
an IRA certificate of deposit product which were not being offered by the
Company's competitors. Despite the higher rate paid on time deposits, management
believes these new products will provide a stable, cost efficient source of
funds to fund expansion of the Company's loan and securities portfolios. The
average cost of the interest-bearing deposits increased to 3.72% for the first
nine months of 1997, from the 3.60% 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 nine months ended September 30, 1997 and
1996. The average balance of loans includes non-accrual loans, and associated
yields include loan fees which are considered adjustments to yields.
<PAGE>
<TABLE>
<CAPTION>
Comparative Average
Balance Sheets
Nine Months Ended September 30,
1997 1996
--------------------------------------- --------------------------------------
Average Average
Interest Rates 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) .................. $ 66,847 $ 4,114 8.11% $ 57,306 $ 3,652 8.39%
Tax exempt securities ....... 841 27 6.01% 1,028 31 5.53%
Taxable investment securities 22,748 1,070 6.80% 26,008 1,140 6.14%
Federal Funds sold .......... 6,020 246 5.45% 3,364 159 5.41%
Total earning assets ........ 96,456 5,457 7.48% 87,706 4,982 7.53%
Non-interest earning assets . 8,144 8,486
Allowance for possible
loan losses ............... (646) (481)
Total Assets ................ $ 103,954 $ 95,711
<CAPTION>
Comparative Average
Balance Sheets
Nine Months Ended September 30,
1997 1996
--------------------------------------- --------------------------------------
Average Average
Interest Rates Rates
Average Income/ Earned/ Average Income Earned/
Balance Expense Paid Balance Expense Paid
------- ------- ---- ------- ------- ----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Liabilities and Shareholders' Equity
Interest bearing liabilities:
NOW deposits ......................... $ 12,346 $ 176 1.89% $ 11,786 164 1.85%
Savings deposits ..................... 27,574 518 2.49% 26,986 502 2.49%
Money market deposits ................ 3,541 59 2.21% 3,929 65 2.21%
Time deposits ........................... 37,315 1,509 5.40% 31,268 1,259 5.22%
Subordinated debt .................... 0 0
Total interest bearing
liabilities ............... 80,776 2,262 3.72% 73,969 1,990 3.60%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Comparative Average
Balance Sheets
Nine Months Ended September 30,
(continued)
1997 1996
--------------------------------------- --------------------------------------
Average Average
Interest Rates Rates
Average Income/ Earned/ Average Income Earned/
Balance Expense Paid Balance Expense Paid
------- ------- ---- ------- ------- ----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Non-interest bearing liabilities:
Demand Deposits ..................... $ 14,515 $ 12,935
Other liabilities ................... 781 1,142
Total non-interest bearing
liabilities ......................... 15,296 14,127
Shareholders' equity ................ 7,882 7,615
Total liabilities and
shareholders' equity ................ $103,954 $ 95,711
Net interest differential ........... $ 3,195 $ 2,992
Net yield on interest-earning
assets ............................ 4.37% 4.49%
</TABLE>
Net-Interest Income. The net effect of the changes in interest income and
interest expense for the third quarter of 1997 was an increase of $114 thousand,
or 11.4%, in net interest income as compared to the third quarter of 1996. The
net interest spread, on a fully taxable equivalent basis, declined 6 basis
points from the same period last year.
Net interest income for the nine months ended September 30, 1997, increased by
$203 thousand, or 6.8%, over the same period last year. The net interest spread
over the nine month period decreased 12 basis points.
Provision for Loan Losses. For the three months ended September 30, 1997, the
provision for possible loan losses was equal to the provision for the same
period last year, $45 thousand. The provision for possible loan losses was $195
thousand for the nine months ended September 30, 1997, as compared to $85
thousand for the same period last year. The amount of the loan loss 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 during
the first half of 1997 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.
<PAGE>
Non-Interest Income. For the third quarter of 1997, total non-interest income
increased $10 thousand, or 6.4%, over the comparable period of 1996 due
primarily to a gain of $6 thousand on the sale of an OREO property.
For the nine months ended September 30, 1997, non-interest income increased $32
thousand from the same period in 1996, due primarily to an increase from a gain
on the sale of other real estate.
Non-Interest Expense. For the quarter ended September 30, 1997, non-interest
expense increased $84 thousand from the same period last year. Salaries and
employee benefits increased $47 thousand, or 10.7%, as salaries increased $28
thousand and employee benefits increased $19 thousand, reflecting normal salary
and benefit increases. Furniture and equipment expense increased $17 thousand,
or 22.7%, as a result of an increase in depreciation expense of $9 thousand and
an increase in maintenance and repair costs of $7 thousand. This is primarily
attributable to the addition of an ATM at Sussex County Community College, an
upgrade to the ATM at the Company`s Andover branch, the addition of a voice
response unit and upgrade's to the Company's data processing systems. Other
expenses increased by $18 thousand, or 7.2%, as a result of an increase of $9
thousand in Audit & Examination costs, and an increase in legal expense of $20
thousand related to the formation of the holding company offset by decreases in
FDIC insurance premiums in 1997 and a reduction in New Jersey Corporate Business
Taxes resulting from lower levels of taxable income.
For the nine months ended September 30, 1997, non-interest expense increased
$133 thousand, or 4.9%, from the same period last year. Salaries and employee
benefits increased $125 thousand, or 9.7%; salaries and wages increased $88
thousand and employee benefits increased $37 thousand. Furniture and equipment
expense increased $42 thousand, or 17.1%, as a result of additions to the
Company's ATM network and upgrades in the Company's data processing systems.
Other expenses decreased $38 thousand. This includes a reduction in FDIC
assessments and in Corporate Business Taxes.
Income Taxes. Income tax expense decreased $25 thousand to $244 thousand for the
nine months ended September 30, 1997 as compared to $269 thousand for the same
period in 1996. The decrease in income taxes resulted from lower levels of
taxable income during the first nine months of 1997.
<PAGE>
FINANCIAL CONDITION
September 30, 1997 as compared to December 31, 1996
Total assets at September 30, 1997 increased $8.2 million, or 8.1%, to $110
million from $101.8 million at December 31, 1996. Increases in total assets
included increases of $3.4 million in Federal Funds sold, $2.5 million in total
securities and $3.3 million in total loans. This was offset by a decrease of
$772 thousand in cash and due from banks, premises and equipment, other real
estate, intangible assets and all other assets.
Total loans at September 30, 1997 increased $3.3 million, or 5.1% from year-end
1996 to $68.8 million. Commercial and industrial loans increased $710 thousand
from December 31, 1996 and residential and commercial real estate increased by
$1.8 million from December 31, 1996 to $63 million at September 30, 1997.
The following schedule presents the components of loans, by type, for each of
the periods presented.
<TABLE>
<CAPTION>
September 30, December 31,
1996 1997
-------------------- --------------------
Amount Percent Amount Percent
------ ------- ------ -------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Commercial and industrial ...... $ 2,527 3.67% $ 1,817 2.75%
Real Estate:
Non-residential properties 10,691 15.55% 9,603 14.75%
Residential properties .... 52,209 75.88% 51,572 78.75%
Construction ................... 652 .95% 381
0.60%
Lease financing ................ 182 .26% 0
0
Consumer ....................... 2,543 3.69% 2,091
------- ------ ------- ------
3.15%
Total Loans .................... $68,804 100.00% $65,464 100.00%
======= ====== ======= ======
</TABLE>
As September 30, 1997, Federal Funds sold increased by $3.4 million to $7.7
million from $4.3 million at December 31, 1996. 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 September 30, 1997,
these excess funds have been invested in investment securities available for
sale to increase the Company's yields.
<PAGE>
At September 30, 1997, total deposits increased to $100.9 million, an increase
of $8 million, or 8.6%, 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, $3.6 million in savings deposits and $3 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.
The following schedule presents the components of deposits, for each period
presented.
<TABLE>
<CAPTION>
September 30, 1997 December 31, 1996
-------------------- ---------------------
Amount % Amount %
<S> <C> <C> <C> <C>
Balance Deposits:
NOW deposits ............... $ 12,475 12.35% $ 12,058 13.00%
Savings deposits ........... 30,104 29.85% 26,502 28.50%
Money market deposits ...... 3,324 3.30% 3,693 4.00%
Time deposits .............. 38,134 37.82% 36,829 39.65%
Demand deposits ............ 16,828 16.68% 13,807 14.85%
------ -------- ------
Total interest-bearing
liabilities ................. $100,865 100.00% $ 92,889 100.00%
======== ====== ======== ======
</TABLE>
ASSET QUALITY
At September 30, 1997, non-performing loans of $232 thousand decreased by $703
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>
September 30 December 31
1997 1996
---- ----
<S> <C> <C>
Non-accrual loans ............................ $ 232 $ 935
Non-accrual loans to
total loans ............................... 0.34% 1.40%
Non-performing assets
to total assets ........................... 0.21% 0.91%
Allowance for possible
loan losses as a percentage of
non-performing loans ....................... 312.5% 56.00%
</TABLE>
<PAGE>
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.
At September 30, 1997, the allowance for possible loan losses was $725 thousand,
up 33.8% from the $542 thousand at year-end 1996. Net charge-offs for the first
half of 1997 were $13 thousand.
LIQUIDITY MANAGEMENT
At September 30, 1997, the amount of liquid assets remain at a level management
deems adequate to ensure that contractual liabilities, depositors' withdrawal
requirements, and other operational and customer credit needs can be satisfied.
At September 30, 1997, liquid investments totaled $12 million, and all mature
within 30 days.
CAPITAL RESOURCES
Total stockholders' equity increased $487 thousand to $8,369,000 at September
30, 1997 from the $7,882,000 at December 31, 1996. The increase was due
primarily to net income of $457 thousand for the first nine months of 1997 and
an increase in the net unrealized gains on securities available for sale, net of
tax. The increase was offset by a cash dividend of $187 thousand.
<PAGE>
At September 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 September 30, 1997 for both the Company and the Bank as well as the
minimum regulatory requirements.
<TABLE>
<CAPTION>
Amount Ratio Amount Minimum Ratio
------ ----- ------ -------------
<S> <C> <C> <C> <C>
The Company
Leverage $7,544,000 7.26% $3,358,000 - 5,146,000 3-5%
Capital
Tier 1 - $7,544,000 12.36% 2,040,000 4%
Risk Based
Total $8,269,000 13.55% 4,081,000 8%
Risk-Based
The Bank
Leverage $7,544,000 7.26% 3,358,000 - 5,146,000 3-5%
Capital
Tier 1 $7,544,000 12.36% 2,040,000 4%
Risk-Based
Total $8,269,000 13.55% 4,081,000 8%
Risk-Based
</TABLE>
<PAGE>
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 Senior Securities
Not applicable
Item 4 Submission of Matters to a Vote of Security Holders
Not applicable
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 hereunto duly authorized.
SUSSEX BANCORP
Date: November 10, 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> 9-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996
<PERIOD-END> SEP-30-1997 DEC-31-1996
<CASH> 4,321 4,605
<INT-BEARING-DEPOSITS> 0 0
<FED-FUNDS-SOLD> 7,650 4,250
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 24,142 22,154
<INVESTMENTS-CARRYING> 1,594 1,122
<INVESTMENTS-MARKET> 0 0
<LOANS> 68,804 64,922
<ALLOWANCE> 725 542
<TOTAL-ASSETS> 110,021 101,776
<DEPOSITS> 100,865 92,889
<SHORT-TERM> 0 0
<LIABILITIES-OTHER> 0 0
<LONG-TERM> 0 0
0 0
0 0
<COMMON> 5,358 5,003
<OTHER-SE> 3,008 2,972
<TOTAL-LIABILITIES-AND-EQUITY> 110,021 101,776
<INTEREST-LOAN> 4,114 4,958
<INTEREST-INVEST> 1,343 1,752
<INTEREST-OTHER> 0 0
<INTEREST-TOTAL> 5,457 6,710
<INTEREST-DEPOSIT> 2,262 2,728
<INTEREST-EXPENSE> 2,262 2,728
<INTEREST-INCOME-NET> 3,195 3,982
<LOAN-LOSSES> 195 130
<SECURITIES-GAINS> 0 (9)
<EXPENSE-OTHER> 2,836 3,707
<INCOME-PRETAX> 709 844
<INCOME-PRE-EXTRAORDINARY> 709 844
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 457 522
<EPS-PRIMARY> 0.66 0.78
<EPS-DILUTED> 0.66 0.78
<YIELD-ACTUAL> 0 0
<LOANS-NON> 232 935
<LOANS-PAST> 0 0
<LOANS-TROUBLED> 172 172
<LOANS-PROBLEM> 0 0
<ALLOWANCE-OPEN> 542 476
<CHARGE-OFFS> 13 66
<RECOVERIES> 0 2
<ALLOWANCE-CLOSE> 725 542
<ALLOWANCE-DOMESTIC> 725 542
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 0 0
</TABLE>
