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, 1998
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 August 3, 1998 there were 706,375 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, 1998 December 31, 1997
- ------ ------------- -----------------
<S> <C> <C>
Cash and Due from Banks ...................... $ 4,029 $ 5,793
Federal Funds Sold ........................... 16,525 7,875
Securities:
Available for Sale, at Market Value ........ 28,433 26,600
Held to maturity ........................... 2,750 2,706
--------- ---------
Total Securities ....................... 31,183 29,306
Loans (Net of Unearned Income) ............... 68,409 68,035
Less: Allowance for Possible
Loan Losses ........................ 727 685
--------- ---------
Net Loans .................. 67,682 67,350
Premises and Equipment, Net .................. 2,369 2,287
Other Real Estate ............................ -0- -0-
Intangible Assets, Primarily ................. 745 787
Core Deposit Premiums
Other Assets ...................... 1,318 859
--------- ---------
Total Assets ........................ $ 123,851 $ 114,257
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Demand .................................... 19,232 13,807
Savings ................................... 47,894 47,884
Time ...................................... 47,133 38,971
--------- ---------
Total Deposits ...................... 114,259 104,882
Other Liabilities ............................ 757 789
--------- ---------
Total Liabilities ................... 115,016 105,671
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
SUSSEX BANCORP
CONSOLIDATED BALANCE SHEETS
(in Thousands, Except Share Data)
(Unaudited)
(continued)
June 30, 1998 December 31, 1997
------------- -----------------
<S> <C> <C>
Stockholders' Equity:
Common Stock, No Par Value
Authorized 5,000,000 Shares,
Issued and outstanding
706,375 in 1998 and
693,563 in 1997, respectively ............. 5,543 5,412
Retained Earnings ............................ 3,320 3,162
Treasury Stock ............................... (2) (2)
Net Unrealized Gain on Securities
Available for Sale,
net of income taxes ....................... (26) (14)
--------- ---------
Total Stockholders' Equity ................... 8,835 8,586
Total Liabilities and
Stockholders' Equity ...................... $ 123,851 $ 114,257
========= =========
</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 Six Months Ended
June 30 June 30
--------------------- ---------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and Fees on Loans ................... $ 1,382 $ 1,361 $ 2,766 $ 2,705
Interest on Securities:
Taxable ..................................... 402 349 806 694
Exempt from Federal Income Tax .............. 21 8 40 17
Interest on Federal Funds Sold .............. 244 92 388 149
-------- -------- -------- --------
Total Interest Income .................. 2,049 1,810 $ 4,000 $ 3,565
INTEREST EXPENSE Interest on Deposits:
Interest on Savings Deposits ............. 278 174 544 338
Interest on Time Deposits ................ 654 580 1,219 1,147
-------- -------- -------- --------
Total Interest Expense ................. 932 754 1,763 1,485
Net Interest Income ....................... 1,117 1,056 2,237 2,080
-------- -------- -------- --------
Provision for Possible
Loan Losses ........................... 21 75 42 150
-------- -------- -------- --------
Net Interest Income After
Provision for Possible Loan Losses ..... 1,096 981 2,195 1,930
NON-INTEREST INCOME
Trust Income .............................. 4 5 4 5
Service charges on Deposit Accounts ...... 122 129 246 255
Other Income ............................. 79 71 138 110
-------- -------- -------- --------
Total Non-interest Income .............. 205 205 388 370
</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
--------------------- ---------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
NON-INTEREST EXPENSE
Salaries and Employee Benefits ............ 539 458 1,050 922
Occupancy Expense, Net .................... 88 87 180 181
Furniture and Equipment Expens ............ 110 106 205 196
Data Processing Expense ................... 19 16 37 32
Amortization of Intangibles ............... 20 21 41 42
Other Expenses ............................ 289 250 551 504
-------- -------- -------- --------
Total Non-Interest Expense ............. 1,065 938 2,064 1,877
Income Before Provision for Income Taxes ........ 236 248 519 423
Provision for Income Taxes ...................... 77 88 178 152
-------- -------- -------- --------
Net Income ............................. $ 159 $ 160 $ 341 $ 271
======== ======== ======== ========
Net Income Per Common Share .................. $ 0.23 $ 0.23 $ .49 $ .40
======== ======== ======== ========
Weighted Average Shares Outstanding ............. 697,163 686,867 701,819 680,959
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
<TABLE>
<CAPTION>
SUSSEX BANCORP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In Thousands)
(Unaudited)
Six Months Ended:
June 30,
1998 1997
----- ----
<S> <C> <C>
Net Income ............................................. $ 341 $ 271
Other comprehensive income,
Net of tax
Unrealized loss on available-for-sale Securities ... (26) (14)
----- -----
Comprehensive income ................................... $ 315 $ 257
===== =====
</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 Treasury Securities Stockholders
Stock Earnings Stock Available for Sale Equity
----- -------- ----- ------------------ ------
<S> <C> <C> <C> <C> <C>
Balance December 31, 1997 $5,412 $3,162 $(2) $ 14 $8,586
------ ------ --- ----- ------
Net Income for the Period 341 341
Cash Dividend ($.26 per share) (183) (183)
Shares issued through
dividend reinvestment plan 94 94
Stock Option Exercised 37 37
Change in unrealized gain on
securities available for sale (40)
------ ------ --- ----- ------
Balance June 30, 1998 $5,543 $3,320 $(2) $ (26) $8,835
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS
OF CASH FLOWS
(Unaudited)
Six Months Ended
June
1998 1997
-------- --------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income ..................................... $ 341 $ 271
Adjustments to reconcile net income to net cash
provided by Operating Activities:
Depreciation and Amortization of Premises
and Equipment .................................. 167 142
Amortization of Intangible Assets .................. 42 41
Premium amortization (discount accretion)
of securities, net ............................. (40) 25
Provision for Possible Loan Loses .................. 42 150
Accretion of Loan origination and
commitment fees, net ........................... (69) 11
Deferred Federal income tax benefit
(increase) ..................................... 200 90
Decrease (Increase) in Accrued Interest
Receivable ..................................... (149) (149)
Decrease (Increase) in Other Assets ................ (310) 157
Decrease (Increase) in Accrued Interest
and Other Liabilities .......................... (32) (239)
-------- --------
Net Cash Provided by Operating Activities ... $ 192 $ 499
Cash Flow from Investing Activities:
Securities Available for Sale:
Proceeds from Maturities and Paydowns ....... 2,667 349
Proceeds from Sales/Calls Prior to Maturity . 5,650 --
Purchases ................................... (10,216) (506)
Securities Held to maturity:
Proceeds from Maturities .................... 489 618
Purchases ................................... (536) (1,039)
Net Increase in Loans Outstanding .............. (306) (2,539)
Capital Expenditures ........................... (249) (172)
Net Increase in Other Real Estate .............. 0 154
-------- --------
Net Cash Provided by (used in)
Investing Activities ...................... $ (2,501) $ (3,135)
Cash Flows from Financing Activities:
Net (Decrease) Increase Total Deposits ...... 9,377 5,764
Payment of dividends ........................... (183) (110)
-------- --------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS
OF CASH FLOWS
(Unaudited)
(continued)
Six Months Ended
June
1998 1997
-------- --------
<S> <C> <C>
Net Cash (used in) Provided by
Financing Activities ................... $ 9,194 $ 5,654
Net increase (Decrease) in Cash and
Cash Equivalents ........................ 6,885 3,018
Cash and Cash Equivalents,
Beginning of Period ..................... 13,668 8,964
Cash and Cash Equivalents,
End of Period .......................... $ 20,553 $ 11,982
======== ========
</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 June 30, 1998. 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,
1997.
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.
3. Securities
The amortized cost and approximate market value of securities are
summarized as follows (in thousands):
June 30, 1998 December 31, 1997
------------------- -------------------
Amortized Market Amortized Market
Cost Value Cost Value
---- ----- ---- -----
Securities Available
For Sale -
U. S. Treasury Securities .. $ 6,539 $ 6,549 $ 8,049 $ 8,049
U. S. Government
Mortgage Backed Securities . 21,939 21,883 18,529 18,551
------- ------- ------- -------
Total Securities
Available for Sale ...... $28,478 $28,432 $26,578 $26,600
Securities Held to Maturity -
Obligations of State and
Political Subdivisions ..... $ 2,058 $ 2,061 $ 2,082 $ 2,089
Other Debt Securities ... 693 693 624 624
------- ------- ------- -------
Total .................... $ 2,751 $ 2,754 $ 2,706 $ 2,713
Total Securities ............... $31,229 $31,186 $29,284 $29,313
======= ======= ======= =======
<PAGE>
4. Recently Issued Accounting Pronouncements
The Company adopted Statement of Financial Accounting Standards No. 130
"Reporting Comprehensive Income" ("Statement 130") effective March 31, 1998.
Statement 130 establishes standards for reporting and display of comprehensive
income and its components in a full set of general purpose financial statements.
Under Statement 130, comprehensive income is divided into net income and other
comprehensive income. Other comprehensive income includes items previously
recorded directly in equity, such as unrealized gains or losses on securities
available-for-sale. Statement 130 became effective for interim and annual
periods beginning after December 15, 1997. Comparative financial statements
provided for earlier periods are reclassified to reflect application of the
provisions of the statement.
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three and Six Months Ended June 30, 1998 and June 30, 1997.
OVERVIEW
The Company realized net income of $159 thousand for the second quarter of 1998,
a decrease of $1 thousand from the $160 thousand reported for the same period in
1997. Basic earnings per share were $.23, the same as per share income for the
prior year period, and diluted earnings per share were $ .22 for both the three
month periods ended June 30, 1998 and 1997 respectively.
For the six months ended June 30, 1998, net-income was $341 thousand, an
increase of $70 thousand, or 25.8% from the $271 thousand reported for the same
period in 1997. Basic earnings per share were $ .49 and $ .40 for the six months
ended June 30, 1998 and 1997, respectively, and diluted earnings per share were
$ .48 and $ .39, respectively. Six month earnings for 1998 represent an increase
over prior year earnings of 22.5%.
RESULTS OF OPERATIONS
Interest Income. Total interest income increased $239 thousand, or 13.2%, to
$2.0 million for the quarter ended June 30, 1998 from $1.8 million for the same
period in 1997. This was attributable to an increase in interest and fees on
loans of $21 thousand, an increase in interest on Federal Funds sold of $152
thousand, and an increase in interest and dividends on securities of $66
thousand. The increase in interest income is primarily attributable to the $24.4
million increase in average interest earnings assets. The yield on average
interest-earnings on a fully taxable equivalent basis decreased 17 basis points
from 7.41% for the second quarter of 1997 to 7.24% for the second quarter of
1998. The decline in average yield reflects reinvestment of mortgage principal
repayments and prepayments and amortization and cash flows from called and
maturing investment securities being reinvested at lower current market rates of
interest. The increase in interest earning assets reflects the Company's
continued efforts to increase market share in its Sussex County, New Jersey
trade area.
For the six months ended June 30, 1998, interest income increased $435 thousand,
or 12.2%, from the $3.6 million reported for the same period in 1997. This
growth in interest income is the result of a $22.1 million, or 23.1%, 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 7.30% during the six months ended June 30, 1998,
compared to 7.45% during the same period in 1997. The decline in average yield
reflects investment on securities 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 1998
increased $178 thousand, or 23.6%, to $932 thousand from $754 thousand for the
same period last year. For the six months ended June 30, 1998 interest expense
increased $277 thousand, or 18.7%, to 1.8 million from $1.5 million for the same
<PAGE>
period last year. The average balance of interest bearing deposits increased
$11.8 million, or 14.5%, from the same period of 1997, with growth in time
deposits the largest component of this increase. Interest on time deposits
increased $278 thousand for the six months ended June 30, 1998 over the
comparable period of 1997. The Company's average cost of funds increased to
3.28% for the second quarter from 3.15% for the second quarter in 1997,
reflecting a change in the composition of the Company's deposit portfolio as
average time deposits for the six months ended June 30, 1998 increased by $15.9
million compared to the six months ended June 30, 1997. This growth is primarily
the result of an increase in the Company's public funds on deposit, representing
time deposits over $100,000. The average cost of the interest-bearing deposits
increased to 3.75% during the current period, from the 3.71% 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, 1998 and 1997.
The average balance of loans includes non-accrual loans, and associated yields
include loan fees which are considered adjustment to yields.
<PAGE>
<TABLE>
<CAPTION>
Comparative Average
Balance Sheets
Six Months Ended June 30,
----------------------------------------------------------------------------------------
1998 1997
----------------------------------------- --------------------------------------
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) .......................... $ 68,491 2,766 8.16% $ 66,853 $ 2,705 8.07%
Tax exempt securities ............ 2,058 40 5.85% 793 17 6.11%
Taxable investment securities ... 28,467 838 6.14% 22,499 694 6.16%
Interest bearing deposits ........ 100 3 4.65% 0 0 0.00%
Federal Funds sold ............... 18,681 388 5.86% 5,595 149 5.41%
Total earning assets ............. 117,797 4,025 7.30% 95,740 3,565 7.45%
Non-interest earning assets ...... 8,390 8,383
Allowance for possible
loan losses .................... (721) (619)
Total Assets ............... $ 125,634 $ 103,511
Liabilities and Shareholders' Equity
Interest bearing liabilities:
NOW deposits ....................... $ 13,283 $ 126 1.94% $ 12,516 $ 117 1.90%
Savings deposits ................... 30,097 366 2.64% 27,292 338 2.50%
Money market deposits .............. 3,986 52 2.25% 3,598 40 2.24%
Time deposits ......................... 49,236 1,218 5.39% 37,304 990 5.38%
Total interest bearing
liabilities ............. 96,602 1,762 3.75% 80,710 1,485 3.71%
Non-interest bearing liabilities:
Demand Deposits ................... $ 19,836 $ 14,096
Other liabilities ................. 771 799
Total non-interest bearing
liabilities ....................... 20,607 14,895
Shareholders' equity .............. 8,425 7,906
Total liabilities and shareholders'
equity........................... 125,634 103,511
========== =========
New interest differential ......... $ 2,263 $ 2,080
Net yield on interest-earning
assets ......................... 4.11% 4.32%
</TABLE>
<PAGE>
Net-Interest Income. The net effect of the changes in interest income and
interest expense for the second quarter of 1998 was an increase of $61 thousand,
or 5.8%, in net interest income as compared to the second quarter of 1997. The
net interest spread, on a fully taxable equivalent basis, declined 32 basis
points from the same period last year.
Net interest income for the six months ended June 30, 1998, increased by $157
thousand, or 7.5%, over the same period last year. The net interest spread
decreased 22 basis points.
Provision for Loan Losses. For the three months ended June 30, 1998, the
provision for possible loan losses was $21 thousand compared to the $75 thousand
for the same period last year. The provision for possible loan losses was $42
thousand for the six months ended June 30,. 1998, as compared to $150 thousand
for the same period last year. The decrease in the provision for loan losses
reflects management's judgement concerning the risks inherent in the Company's
existing loan portfolio and the size of the allowance necessary to absorb the
risks. In setting the provision, management considers the amount and type of
lending being undertaken by the Company and economic conditions in the Company's
trade area, among other factors. Management reviews the adequacy of its
allowance on an ongoing basis and will provide for additional provision in
future periods as may be necessary.
Non-Interest Income. For the second quarter of 1998, total non-interest income
equaled the comparable period of 1997.
For the six months ended June 30, 1998, non-interest income increased $18
thousand from the same period in 1997, due primarily to fees generated by the
sale of non-deposit products such as annuities and mutual funds.
Non-Interest Expense. For the quarter ended June 30, 1998, non-interest expense
increased $127 thousand from the same period of 1997. Salaries and employee
benefits increased $81 thousand, or 17.7%, as salaries increased $61 thousand
and employee benefits increased $20 thousand, reflecting the addition of staff,
normal salary increases and benefit increases from the increased cost to provide
standard benefits. Furniture and equipment expense increased $4 thousand, or
3.8%, as a result of an increase in depreciation expense. Other expenses
increased by $39 thousand, or 15.6%, as a result of increases in the costs to
operate the Company's ATM network, increases in legal and professional fees and
increase in filing fees attributable to listing on the American Stock Exchange.
For the six months ended June 30, 1998, non-interest expense increased $187
thousand, or 10.0%, from the same period last year. Salaries and employee
benefits increased $128 thousand, or 13.9%; salaries increased $101 thousand and
employee benefits increased $27 thousand. Furniture and equipment expense
increased $9 thousand, or 4.4%, which reflects an increase in depreciation
expense of $26 thousand as a result of upgrades to the Company's in-house
computer system, offset by a decrease in maintenance and repairs of $17
thousand. Other expenses increased $47 thousand. This includes an increase in
legal and professional fees of $24 thousand, or 6.8%, and an increase in ATM
fees of $10 thousand, or 4.9%.
Income Taxes. Income taxes expense increased $26 thousand to $178 thousand for
the six months ended June 30, 1998 as compared to $152 thousand for the same
period in 1997. The increase in income taxes resulted from higher levels of
taxable income in 1998.
<PAGE>
FINANCIAL CONDITION
June 30, 1998 compared to December 31, 1997
Total assets increased to $123.9 million, an increase of $9.6 million, or 8.4%,
from total assets of $114.3 million at December 31, 1997. Increases in total
assets included increases of $8.7 million in Federal Funds sold, $1.9 million in
total securities, $374 thousand in total loans and $541 thousand in premises and
equipment and other assets. This was offset by a decrease of $1.8 million in
cash and due from banks and intangible assets
Total loans at June 30, 1998 increased $541 thousand to $68.4 million from
year-end 1997. Within the portfolio, commercial and industrial loans increased
$516 thousand to $3 million, and residential and commercial real estate loans
declined $856 thousand from year-end 1997, reflecting increased prepayments.
The following schedule presents the components of loans, net of unearned income,
by type, for each periods presented.
<TABLE>
<CAPTION>
June 30 December 31
1998 1997
---------------------- ----------------------
Amount Percent Amount Percent
------- ------ ------- ------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Commercial and industrial ............... $ 3,060 4.43% $ 2,499 3.67%
Real Estate non residential properties 10,915 15.65% 10,665 15.67%
Residential properties ............. 50,123 73.70% 51,229 75.30%
Construction ........................... 1,393 2.00% 877 1.30%
Lease financing ......................... 158 0.22% 0 0
Consumer ............................... 2,760 4.00% 2,765 4.06%
------- ------ ------- ------
Total Loans ............................ $68,409 100.00% $68,035 100.00%
======= ====== ======= ======
</TABLE>
At June 10, 1998, federal funds sold increased by $8.7 million over December 31,
1997. The increase is attributable both to the short term investment of public
deposits received by the Bank and cash from prepayments and repayments in the
investment portfolio exceeding new loan demand. Subsequent to June 30, 1998, the
Company reinvested this excess cash in new investment securities.
Total average deposits increased $16.2 million, or 16.5%. Time deposits over
$100,000 increased by $5.4 million, savings deposits increased by $2.4 million,
NOW deposits increased by $817 thousand and demand deposits by $3.3 million. The
increase in Time Deposits over $100,000 reflects the Bank's increase in public
deposits as the Bank has sought to develop additional loan and deposit
relationships through public entities. Management continues to monitor the shift
in deposits through its Asset/Liability Committee.
<PAGE>
The following schedule presents the components of deposits, for each period
presented.
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997
-------------------------- ------------------------
Average Balance % Average Balance %
Deposits:
<S> <C> <C> <C> <C>
NOW deposits ......................... $ 13,410 11.74% $12,593 12.85%
Savings deposits ..................... 30,58 26.77% 28,109 28.67%
Money market deposits ................ 3,901 3.40% 3,580 3.65%
Time deposits ........................ 47,133 41.25% 37,874 38.63%
Demand deposits ...................... 19,232 16.84% 15,886 16.20%
--------- ------ ------- ------
Total interest-bearing liabilities . $ 114,259 100.00% $98,042 100.00%
========= ====== ======= ======
</TABLE>
ASSET QUALITY
At June 30, 1998, non-performing loans decreased $107 thousand as compared to
December 31, 1997. The following table provides information on risk elements in
the loan portfolio:
<TABLE>
<CAPTION>
June 30 December 31
1998 1997
---- ----
<S> <C> <C>
Non-accrual loans ................................ $ 623 $ 730
Non-accrual loans to total loans ................. 0.91% 1.07%
Non-performing assets to total assets ............ 0.50% 0.64%
Allowance for possible loan losses
as a percentage of non-performing loans ...... 85.69% 93.80%
</TABLE>
ALLOWANCE FOR POSSIBLE LOAN LOSSES
The allowance for possible loan losses is maintained at a level considered
adequate by management 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, among other factors. The
allowance is increased by provisions charged to expense and reduced by
charge-offs, net of recoveries. Although management strives to maintain an
allowance it deems adequate, future economic changes, deterioration of
borrowers' credit worthiness, and the impact of of examinations by regulatory
agencies all could cause changes to the Company's allowance for possible loan
losses.
At June 30, 1998, the allowance for possible loan losses was $737 thousand, an
increase of 6.13% from the $685 thousand at year-end 1997. There were no net-
charge-offs for the first half of 1998.
<PAGE>
LIQUIDITY MANAGEMENT
At June 30, 1998, 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, 1998, liquid investments totaled $20 million, and all mature within
30 days.
CAPITAL RESOURCES
Total Stockholders' equity increased $249 thousand to $8.8 at June 30, 1998 from
$8.6 at year end 1997. The increase was due primarily to net income of $341
thousand for the first six months of 1998. This increase was offset by a cash
dividend of $183 thousand.
At June 30, 1998, both the Company and the Bank exceeded each of the regulatory
capital requirements applicable to it. The table below presents the capital
ratios at June 30, 1998 for both the Company and the Bank as well as the minimum
regulatory requirements.
<TABLE>
<CAPTION>
Company Required Maximum
Minimum
Amount Ratio Amount Ratio
------ ----- ------ -----
THE COMPANY:
<S> <C> <C> <C> <C>
Leverage Capital .......... $8,089 6.57% $3,419 3-5%
Tier 1 - Risk Based ....... 8,089 12.74% 2,240 4%
Total Risk-Based .......... 8,816 13.88% 4,482 8%
THE BANK:
Leverage Capital .......... 7,747 6.33% 3,411 3-5%
Tier 1 Risk-Based ......... 7,747 12.35% 2,226 4%
Total Risk-Based .......... 8,474 13.51% 4,431 8%
</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, nor from
all such lawsuits in the aggregate.
Item 2 Changes in Securities
Not applicable
Item 3 Defaults Upon Served Securities
Not applicable
Item 4 Submission of Matters to a Vote of Security Holders
On April 22, 1998, the Registrant held its annual meeting of shareholders to
elect certain members of the Company's Board of Directors. Nominees for election
to the Board of Directors received the following votes:
Nominees:
For Withhold Authority Broker Non-Vote
--- ------------------ ---------------
Irvin Ackerson 559,133 518 0
William E. Kulsar 559,160 491 0
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: 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-31-1998 DEC-31-1997
<PERIOD-END> JUN-30-1998 JUN-30-1997
<CASH> 4,029 5,893
<INT-BEARING-DEPOSITS> 100 100
<FED-FUNDS-SOLD> 16,525 7,875
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 28,433 26,600
<INVESTMENTS-CARRYING> 2,760 2,706
<INVESTMENTS-MARKET> 0 0
<LOANS> 67,682 67,351
<ALLOWANCE> 727 685
<TOTAL-ASSETS> 123,851 114,257
<DEPOSITS> 114,259 104,882
<SHORT-TERM> 0 0
<LIABILITIES-OTHER> 0 0
<LONG-TERM> 0 0
0 0
0 0
<COMMON> 5,543 5,412
<OTHER-SE> 3,318 3,174
<TOTAL-LIABILITIES-AND-EQUITY> 123,851 114,257
<INTEREST-LOAN> 2,766 5,517
<INTEREST-INVEST> 1,234 1,866
<INTEREST-OTHER> 0 0
<INTEREST-TOTAL> 4,000 7,383
<INTEREST-DEPOSIT> 1,763 3,063
<INTEREST-EXPENSE> 1,763 3,063
<INTEREST-INCOME-NET> 2,237 4,320
<LOAN-LOSSES> 42 210
<SECURITIES-GAINS> 0 0
<EXPENSE-OTHER> 2,064 3,753
<INCOME-PRETAX> 519 1,101
<INCOME-PRE-EXTRAORDINARY> 519 1,101
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 341 708
<EPS-PRIMARY> 0.49 1.03
<EPS-DILUTED> 0.48 1.02
<YIELD-ACTUAL> 0 0
<LOANS-NON> 623 730
<LOANS-PAST> 0 0
<LOANS-TROUBLED> 164 344
<LOANS-PROBLEM> 0 0
<ALLOWANCE-OPEN> 0 0
<CHARGE-OFFS> 0 68
<RECOVERIES> 0 1
<ALLOWANCE-CLOSE> 727 685
<ALLOWANCE-DOMESTIC> 727 685
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 0 0
</TABLE>
