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 March 31, 1999
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.)
Issuer's telephone number, including area code: (973) 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 April 30, 1999 there were 1,424,634 shares of common stock, no par value,
outstanding.
<PAGE>
SUSSEX BANCORP
FORM 10-QSB
INDEX
Page(s)
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements and Notes to Consolidated
Financial Statements 1
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 3. Defaults Upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 16
ii
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
SUSSEX BANCORP
CONSOLIDATED BALANCE SHEETS
(in Thousands, Except Share Data)
(Unaudited)
<TABLE>
<CAPTION>
Assets March 31, 1999 December 31, 1998
- ------- --------------- -----------------
<S> <C> <C>
Cash and Due from Banks $ 4,976 $ 4,060
Interest bearing deposits in other banks 150 150
Federal Funds Sold 14,875 26,450
Securities:
Available for Sale, at Market Value 34,781 26,645
Held to maturity 9,411 5,939
--------- ---------
Total Securities 44,192 32,584
Loans held for sale 115 354
Loans (Net of Unearned Income) 71,098 70,011
Less: Allowance for Possible
Loan Losses 691 665
--------- ---------
Net Loans 70,522 69,700
Premises and Equipment, Net 2,929 2,956
Other Real Estate 43 36
Intangible Assets, Primarily
Core Deposit Premiums 682 703
Other Assets 1,348 828
--------- ---------
Total Assets $ 139,717 $ 137,467
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Demand 19,246 19,793
Savings 58,200 54,357
Time 52,397 53,564
--------- ---------
Total Deposits 129,843 127,714
Other Liabilities 586 509
--------- ---------
Total Liabilities 133,429 128,223
</TABLE>
(continued)
<PAGE>
<TABLE>
<CAPTION>
Assets March 31, 1999 December 31, 1998
- ------- --------------- -----------------
<S> <C> <C>
Stockholders' Equity:
Common Stock, No Par Value
Authorized 5,000,000 Shares,
Issued and outstanding
1,424,634 in 1999 and
1,422,260 in 1998, respectively 5,659 5,635
Retained Earnings 3,697 3,547
Treasury Stock (6) (2)
Net Unrealized Gain (Loss) on Securities
Available for Sale,
net of income taxes (62) 64
--------- ---------
Total Stockholders' Equity 9,288 9,244
Total Liabilities and
Stockholders' Equity $ 139,717 $ 137,467
========= =========
</TABLE>
See Notes to Consolidated Financial Statements
2
<PAGE>
SUSSEX BANCORP
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Share Data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------
1999 1998
---------- ----------
<S> <C> <C>
INTEREST INCOME
Interest and Fees on Loans $ 1,406 $ 1,384
Interest on Time Deposits 2 1
Interest on Securities:
Taxable 439 403
Exempt from Federal Income Tax 85 19
Interest on Federal Funds Sold 199 144
---------- ----------
Total Interest Income 2,131 1,951
INTEREST EXPENSE Interest on Deposits:
Interest on Savings Deposits 378 266
Interest on Time Deposits 669 565
---------- ----------
Total Interest Expense 1,047 831
Net Interest Income 1,084 1,120
Provision for Possible Loan Losses 33 21
---------- ----------
Net Interest Income After Provision for
Possible Loan Losses 1,051 1,099
NON-INTEREST INCOME
Trust Income 1 -0-
Service charges on Deposit Accounts 137 124
Other Income 158 59
---------- ----------
Total Non-interest Income 296 183
</TABLE>
(continued)
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------
1999 1998
---------- ----------
<S> <C> <C>
NON-INTEREST EXPENSE
Salaries and Employee Benefits 573 511
Occupancy Expense, Net 94 92
Furniture and Equipment Expense 120 95
Data Processing Expense 20 18
Amortization of Intangibles 21 21
Other Expenses 279 262
---------- ----------
Total Non-Interest Expense 1,107 999
Income Before Provision for Income Taxes 240 283
Provision for Income Taxes 48 101
---------- ----------
Net Income $ 192 $ 182
========== ==========
Net Income Per Common Share $ 0.13 $ 0.13
========== ==========
Weighted Average Shares Outstanding 1,423,228 1,398,866
</TABLE>
See Notes to Consolidated Financial Statements
3
<PAGE>
SUSSEX BANCORP
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1999 1998
<S> <C> <C>
Net Income ......................................... $ 192 $ 182
Other Comprehensive Income, Net of tax
Unrealized loss on available-for-
sale Securities .............................. (62) 64
---- --
Comprehensive income $ 130 $ 246
</TABLE>
See Notes to Consolidated Financial Statements
4
<PAGE>
SUSSEX BANCORP
CONSOLIDATED STATEMENT OF CHANGES IN
STOCKHOLDERS' EQUITY
(In Thousands, Except Share Data)
(Unaudited)
<TABLE>
<CAPTION>
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, 1998 $5,635 $3,547 $ (2) $ 64 $9,244
Net Income for the Period 192 192
Shares issued through
dividend reinvestment plan 14 14
Stock Option Exercised 10 10
Treasury Stock purchased (4) (4)
Cash Dividends (42) (42)
Change in unrealized loss on
securities available for sale (126) (126)
Balance March 31, 1999 $5,659 $3,697 $ (6) $ (62) $9,288
</TABLE>
See Notes to Consolidated Financial Statements
5
<PAGE>
CONSOLIDATED STATEMENTS
OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March
1999 1998
---- ----
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 192 $ 182
Adjustments to reconcile net income
to net cash provided by Operating
Activities:
Depreciation and Amortization of Premises
and Equipment 98 80
Amortization of Intangible Assets 21 21
Premium amortization (discount accretion)
of securities, net 39 14
Provision for Possible Loan Loses 26 21
(Gain) on Sale of Securities, Available for Sale (3) --
Accretion of Loan origination and
commitment fees, net 8 12
Decrease (Increase) Loans Held for Sale 239 --
Deferred Federal income tax benefit
(increase) (25) 49
Decrease (Increase) in Accrued Interest
Receivable (299) (100)
Decrease (Increase) in Other Assets (112) (70)
(Decrease) Increase in Accrued Interest
and Other Liabilities 77 (149)
-------- --------
Net Cash Provided by Operating Activities $ 177 $ 60
Cash Flow from Investing Activities:
Securities Available for Sale:
Proceeds from Maturities and Pay-downs 1,522 857
Proceeds from Sales/Calls Prior to Maturity 507 5,000
Purchases (10,406) (2,390)
Securities Held to maturity:
Proceeds from Maturities -- 295
Purchases (3,478) (70)
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended
March
1999 1998
---- ----
<S> <C> <C>
Net Increase in Loans Outstanding (1,095) (597)
Capital Expenditures (71) (130)
Net Increase in Other Real Estate (7) --
-------- --------
Net Cash Provided by (used in)
Investing Activities $(13,027) $ 2,965
Cash Flows from Financing Activities:
Net (Decrease) Increase Total Deposits 2,129 7,881
Exercise of stock options 10 --
Payment of dividends net of reinvestment (28) --
Purchase of Treasury Stock (4) --
-------- --------
Net Cash (used in) Provided by
Financing Activities $ 2,107 $ 7,881
Net Increase (Decrease) in Cash and
Cash Equivalents (10,659) 10,906
Cash and Cash Equivalents,
Beginning of Period 30,660 13,568
Cash and Cash Equivalents,
End of Period $ 20,001 $ 24,474
======== ========
</TABLE>
See Notes to Consolidated Financial Statements
7
<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 Bank is the only active subsidiary of the
Company at March 31, 1999. 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,
1998.
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):
<PAGE>
<TABLE>
<CAPTION>
March 31, 1999 December 31, 1998
-------------- ----------------
Amortized Market Amortized Market
Cost Value Cost Value
------- ------- ------- -------
<S> <C> <C> <C> <C>
Securities Available
For Sale -
U. S. Treasury Securities $ 5,584 $ 5,591 $ 5,589 $ 5,710
U. S. Government
Backed Securities 27,758 27,672 19,407 19,411
Equity Securities 1,543 1,518 1,543 1,524
------- ------- ------- -------
Total $34,885 $34,781 $26,539 $26,645
Securities Held to Maturity -
Obligations of State and
Political Subdivisions 9,411 9,373 5,939 5,949
------- ------- ------- -------
Total 9,411 9,373 5,939 5,949
Total Securities $44,296 $44,154 $32,478 $32,594
======= ======= ======= =======
</TABLE>
8
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Three Months Ended March 31, 1999 and March 31, 1998
OVERVIEW
The Company realized net income of $192 thousand for the first quarter of 1999,
a increase of $10 thousand, or 5.5%, from the $182 thousand reported for the
same period in 1998. Earnings per share were $.13 for each of the respective
periods.
The increase in net income for the three months ended March 31, 1999 over the
comparable period primarily reflects an increase in non-interest income and a
decrease in provision for income taxes, partially offset by a $48 thousand
decline in net interest income after provision for possible loan losses and an
increase in non-interest expense.
Interest Income. Total interest income increased $180 thousand, or 9.2%, to $2.1
million for the three months ended March 31, 1999 from $2.0 million for the
three months ended March 31, 1998. This growth in interest income is the result
of a $20.8 million increase in earning assets over the comparable period of last
year, partially offset by a decrease in the average yield on total earning
assets to 6.66% during the quarter from 7.28% during the quarter ended March 31,
1998. The decline in average yield reflects reinvestment of mortgage principal
repayments and amortization and proceeds of securities calls and maturities into
a lower interest rate environment. Funds are currently being reinvested at a
lower rate than were previously earned, reflecting both lower market rates of
interest as well as the Company's decision to offer lower rate products in its
efforts to retain its market share in a competitive environment.
Interest Expense. Interest expense on deposits increased $216 thousand, or
26.0%, during the current quarter compared to the same quarter a year ago. The
average balance of interest bearing deposits increased $19.9 million, or 22.6%,
for the current quarter over the prior year. This growth is primarily the result
of marketing a higher yielding savings account to senior citizens. The average
cost of the interest-bearing deposits increased to 3.89% during the current
quarter, from 3.78% during the same quarter in the prior year, reflecting both
the success of the Company's senior savings account and a $10.1 million increase
in higher costing time deposits.
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 three months ended March 31, 1999 and
1998. The average balance of loans includes non-accrual loans, and associated
yields include loan fees which are considered adjustment to yields.
9
<PAGE>
Comparative Average
Balance Sheets
Three Months Ended March 31,
<TABLE>
<CAPTION>
1999 1998
Interest Average Average
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)................................. $ 70,811 $ 1,406 7.94% $ 68,549 $ 1,384 8.08%
Tax exempt securities .................. 8,766 85 3.88% 1,906 19 4.21%
Taxable investment securities .......... 31,628 439 5.55% 26,462 404 6.11%
Interest bearing deposits .............. 150 2 5.33% 86 1 4.65%
Federal Funds sold ..................... 16,722 199 4.76% 10,305 144 5.59%
Total earning assets ................... 128,077 2,131 6.66% 107,308 1,952 7.28%
Non-interest earning assets ............ 9,181 8,133
Allowance for possible
loan losses .......................... (694) (697)
Total Assets .....................$ 136,564 $ 114,744
</TABLE>
10
<PAGE>
COMPARATIVE AVERAGE
BALANCE SHEETS
Three Months Ended March 31,
<TABLE>
<CAPTION>
1999 1998
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 $ 14,418 $ 57 1.58% $ 12,951 $ 61 1.88%
Savings deposits 37,351 294 3.15% 26,680 179 2.50%
Money market deposits 3,938 26 2.64% 4,347 26 2.39%
Time deposits 52,089 670 5.15% 41,953 566 5.40%
Total interest bearing 107,796 1,047 3.89% 87,931 832 3.78%
liabilities
Non-interest bearing liabilities:
Demand Deposits $ 18,566 $ 17,517
Other Liabilities 948 915
Total Non-Interest Bearing Liabilities 19,514 18,432
Shareholders' equity 9,254 8,381
Total Liabilities and
Shareholders' Equity $136,564 $114,744
New Interest Differential $ 1,084 $ 1,120
Net Yield on Interest-Earning
Assets 3.80% 4.22%
</TABLE>
Other Income. Other income increased by $113 thousand, or 61.7%, to $296
thousand for the first quarter of 1999 from $183 thousand for the first quarter
of 1998. The increase primarily reflects increased revenues from the sale of
non-deposit products and earnings from the Bank's newly formed mortgage company
subsidiary.
Provision for Loan Losses. The provision for loan losses for the three months
ended March 31, 1999 was $33 thousand, compared to $21 thousand for the same
period last year.
Income Taxes. The provision for income taxes, both state and federal, decreased
$53 thousand to $48 thousand for the first quarter of 1999 compared to $101
thousand for the same period in 1998. The decrease in income taxes resulted from
an increase in tax exempt securities in 1999.
11
<PAGE>
FINANCIAL CONDITION
March 31, 1999 as compared to December 31, 1998
Total assets increased $2.3 million, or 1.6%, to $139.7 million at March 31,
1999 from $137.5 million at December 31, 1998. This total increase reflects
increases of $916 thousand in cash and due from banks, $11.6 million in total
securities, $1.1 million in total loans, and $479 thousand in all other assets,
which consists of premises and equipment, other real estate, intangible assets,
and other assets. These increases were offset by a decrease of $11.6 million in
federal funds sold, including a decline of $3.0 million in term federal funds
sold and $8.6 million in federal funds sold.
Total loans at March 31, 1999 increased $1.1 million, or 1.6%, over year end to
$71.1 million. Although the components of the Company's portfolio remained
relatively stable from year end, residential loans represented 66.7% of the
portfolio, a decline from the 70.3% of the portfolio at year end, loans secured
by non-residential properties increased to 18.1% of the portfolio, up from 16.6%
at year end, and construction loans increased to 5.1% of the portfolio compared
to 3.4% at year end.
<PAGE>
The following schedule presents the components of loans, net of unearned income,
by type, for each period presented.
<TABLE>
<CAPTION>
March 31 December 31
1999 1998
Amount Percent Amount Percent
------ ------- ------ -------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Commercial and industrial .. $ 4,148 5.83% $ 3,742 5.34%
Real Estate: Non-residential
properties ............ 12,852 18.08% 11,612 16.59%
Residential properties 47,465 66.76% 49,198 70.27%
Construction .............. 3,613 5.08% 2,352 3.36%
Lease financing ............ 134 0.19% 142 .20%
Consumer/ Other Loans ...... 2,886 4.06% 2,965 4.23%
------- ------ ------- ------
Total Loans ................ $71,098 100.00% $70,011 100.00%
======= ====== ======= ======
</TABLE>
Total average deposits increased $11.3 million, or 9.8%. Time deposits increased
by $4.7 million, savings deposits increased by $6.7 million and NOW deposits
increased by $922 thousand. Management continues to monitor the shift in
deposits through its Asset/Liability committee.
The following schedule presents the components of deposits, for each period
presented.
<TABLE>
<CAPTION>
March 31, 1999 December 31, 1998
Average Average
Amount % Amount %
-------- ------ -------- ------
<S> <C> <C> <C> <C>
NOW deposits.................................... $14,418 11.41% $13,496 11.73%
Savings deposits.............................. 37,351 29.56% 30,646 26.64%
Money market deposits......................... 3,938 3.12% 4,590 3.99%
Time deposits................................. 52,089 41.22% 47,398 41.20%
Demand deposits............................... 18,566 14.69% 18,912 16.44%
-------- ------ -------- ------
Total interest-bearing liabilities $126,362 100.00% $115,042 100.00%
======== ====== ======== ======
</TABLE>
12
<PAGE>
ASSET QUALITY
At March 31, 1999, non-performing loans decreased $78 thousand, as compared to
December 31, 1998. The decrease was attributable to several real estate loans
being restored to performing status. Management continues to monitor the
Company's asset quality.
The following table provides an analysis of non-performing loans and assets:
<TABLE>
<CAPTION>
March 31 December 31
1999 1998
<S> <C> <C>
Non-accrual loans............................ $ 320 $ 398
Non-accrual loans to
total loans............................... .45% .57%
Non-performing assets
to total assets........................... .26% .32%
Allowance for possible
loan losses as a percentage of
non-performing loans....................... 215.94% 167.09%
</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 March 31, 1999, the allowance for possible loan losses was $691 thousand, up
3.9% from the $665 thousand at year-end 1998. Net charge-offs for the first
quarter of 1998 were $7 thousand, partially offsetting the first quarter
provision of $33 thousand.
LIQUIDITY MANAGEMENT
At March 31, 1999, 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 March 31, 1999, liquid investments totaled $20 million, and all mature within
30 days.
CAPITAL RESOURCES
Total stockholders' equity increased $44 thousand to $9.29 million at March 31,
1999 from $9.24 million at the end of 1998. The increase was due to net income
of $192 thousand and offset by a net unrealized loss on securities, available
for sale, of $126 thousand for the first three months of 1999.
At March 31, 1999, both the Company and the Bank exceeded each of the regulatory
capital requirements applicable to it. The table below presents the capital
ratios at March 31, 1999 for both the Company and the Bank as well as the
minimum regulatory requirements.
13
<PAGE>
<TABLE>
<CAPTION>
Regulatory Minimum
Amount Ratio Amount Ration
------ ----- ------ ------
<S> <C> <C> <C> <C>
The Company
Leverage Capital 8,653 6.37% 4,076 3-5%
Tier I-Risk Based 8,653 12.64% 2,739 4%
Total Risk-Based 9,344 13.64% 5,479 8%
The Bank
Leverage Capital 8,204 6.04% 4,073 3-5%
Tier I-Risk Based 8,204 11.98% 2,739 4%
Total Risk-Based 8,895 12.99% 5,477 8%
</TABLE>
<PAGE>
YEAR 2000 COMPLIANCE
The Company's data processing capabilities are critical to its business and its
ability to service customers. The Year 2000 problem is caused by many computer
programs that were written to identify only the last two digits of a year (a
common programming practice on the past to save computer memory). The
expectation is that programs may read the year 2000 as 00 or 1900, and to
compute interest, payments and other data incorrectly. The Company has put
together a team of senior management to evaluate both its data processing
systems (software and computers) and other systems (i.e., vault timers, alarms,
heating and cooling systems) that are essential to its operations. The Company
has examined all of its non-data processing systems and has either received Year
2000 compliant certification from third-party vendors or determined that the
systems should not be affected by the Year 2000 problem. The Company does not
expect any material costs to address non-data processing systems and has not
expended any material costs to date. The Company's present data processing
systems have more potential for Year 2000 risk in three areas: (1) its own
computers, (2) computers and systems used by borrowers, and (3) vendors who
provide the Company with software systems.
Our Computers: The Company expended approximately $200,000 in 1998 to upgrade
its computer hardware and software systems, primarily our application software.
We have budgeted $10,000 for Year 2000 expenditures for 1999, which include a
software upgrade for one of our ATM's and various equipment and supplies
necessary for our Year 2000 Business Resumption Plan. The Company contracted to
have its primary mission-critical application software tested in the fall of
1998. The tests were completed and then evaluated in December 1998 and January
1999. The Company is satisfied with this results.
Computers of Others Used by Borrowers: The Company evaluated most of its
borrowers and does not believe that the Year 2000 problem should, on an
aggregate basis, impact their ability to repay their loans to the Bank. The
Company believes that he majority of its individual borrower are not dependent
on home computers for income and none of its commercial borrowers are so large
that a Year 2000 problem would render them unable to continue their businesses
and subsequently be unable to repay their obligations. The Company does not
anticipate any material costs to address this risk area.
14
<PAGE>
Vendors Who Provide The Company With Software Systems: As stated previously, the
Company's primary mission-critical application software system has been upgraded
and modified to be Year 2000 compliant. The majority of our critical systems
have been deemed Year 2000 compliant, and tests have been completed to confirm
these systems are compliant as well as the vendors we communicate with. Other
peripheral software systems, which are not considered critical systems, have
been reviewed and tested for Year 2000 compliance.
Contingency Plan: The Company's remediation Contingency Plan was put in place in
1998 to provide alternatives in the event our primary hardware and software
systems were not deemed to be Year 2000 compliant by early 1999. Since our
primary systems have been upgraded and tested the remediation plan is no longer
necessary. The Company is in the process of finalizing its Year 2000 Business
Resumption Contingency Plan and expects to test this plan prior to July of 1999.
Business Resumption Contingency Plans are to address the actions that will be
taken if critical business functions can't be handled in the normal manner due
to system or third-party failures, i.e., power outages, phone communication
problems, ATM network failures. These plans are additional to our normal
disaster recovery plans.
<PAGE>
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
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
Date Filed Item
- ---------- ----
February 12, 1999 Item 5-- Announcing Year-End Results
15
<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 there unto duly authorized.
SUSSEX BANCORP
Date: May 5, 1999 By:/s/ Candace A. Leatham
-------------------------
CANDACE A. LEATHAM
Senior Vice President and
Chief Financial Officer
16
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-END> MAR-31-1999 DEC-31-1998
<CASH> 4,976 4,060
<INT-BEARING-DEPOSITS> 150 150
<FED-FUNDS-SOLD> 14,875 26,450
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 34,781 26,645
<INVESTMENTS-CARRYING> 9,411 5,939
<INVESTMENTS-MARKET> 0 0
<LOANS> 70,407 69,346
<ALLOWANCE> 691 665
<TOTAL-ASSETS> 139,717 137,467
<DEPOSITS> 129,843 127,714
<SHORT-TERM> 0 0
<LIABILITIES-OTHER> 586 509
<LONG-TERM> 0 0
0 0
0 0
<COMMON> 5,659 5,635
<OTHER-SE> 3,629 3,609
<TOTAL-LIABILITIES-AND-EQUITY> 139,717 137,467
<INTEREST-LOAN> 1,406 5,601
<INTEREST-INVEST> 725 2,694
<INTEREST-OTHER> 0 0
<INTEREST-TOTAL> 2,131 8,295
<INTEREST-DEPOSIT> 1,047 3,818
<INTEREST-EXPENSE> 1,047 3,818
<INTEREST-INCOME-NET> 1,084 4,477
<LOAN-LOSSES> 33 19
<SECURITIES-GAINS> 3 65
<EXPENSE-OTHER> 1,107 4,287
<INCOME-PRETAX> 240 1,040
<INCOME-PRE-EXTRAORDINARY> 240 1,040
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 192 710
<EPS-PRIMARY> 0.13 0.50
<EPS-DILUTED> 0.13 0.50
<YIELD-ACTUAL> 0 0
<LOANS-NON> 320 389
<LOANS-PAST> 0 0
<LOANS-TROUBLED> 0 0
<LOANS-PROBLEM> 0 0
<ALLOWANCE-OPEN> 665 685
<CHARGE-OFFS> 8 40
<RECOVERIES> 1 1
<ALLOWANCE-CLOSE> 691 665
<ALLOWANCE-DOMESTIC> 691 665
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 0 0
</TABLE>
