FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 1996
Commission file number 2-91511
SMITHTOWN BANCORP
(Exact name of registrant as specified in its charter)
NEW YORK 11-2695037
(State or other jurisdiction (I.R.S. Employer Identification Number)
of incorporation or
organization)
ONE EAST MAIN STREET, SMITHTOWN, NEW YORK 11787-2801
(Address of principal executive offices)
516-360-9300
(Registrant's telephone number, including area code)
NOT APPLICABLE
(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 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 __
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date:
433,268 Shares of Common stock ($5.00 Par Value) Outstanding as of March
31, 1996
SMITHTOWN BANCORP
INDEX
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - March 31, 1996 and December 31, 1995
Consolidated Statements of Income - Three months ended March 31, 1996
and 1995
Consolidated Statements of Changes in Stockholders' Equity - Three
months ended March 31, 1996 and 1995
Consolidated Statements of Cash Flows - Three months ended March 31,
1996 and 1995
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Item 3. Notes to Consolidated Financial Statements
PART II - OTHER INFORMATION
Item 1. Legal Proceedings - None
Item 2. Change in Securities - None
Item 3. Defaults under Senior Securities - None
Item 4. Submission of Matters to Vote of Security Holders - None
Item 5. Other Information - None
Item 6. (A) Exhibits - None
SMITHTOWN BANCORP
CONSOLIDATED BALANCE SHEETS
(unaudited)
As of
Mar 31 96 Dec 31 95
Assets
Cash and Due from Banks $6,131,926 $7,003,234
Investment Securities:
Investment Securities Held to Maturity
Obligations of U.S. Government 2,012,426 2,013,739
Mortgage - Backed Securities 9,928,636 10,226,753
Obligations of State and Political
Subdivisions 4,483,631 4,647,865
----------- -----------
Total 16,424,693 16,888,357
Investment Securities Available for Sale
Obligations of U.S. Government 1,002,805 3,008,900
Obligations of U.S. Government Agencies 3,980,700 3,015,900
Mortgage - Backed Securities 15,655,700 13,155,534
Other Securities 599,800 599,000
----------- -----------
Total 21,239,005 19,779,334
Total Investment Securities 37,663,698 36,667,691
(Market value $37,538,566 at 3/31/96 and
$36,755,073 at 12/31/95)
Federal Funds Sold 11,600,000 6,750,000
Loans
Real Estate 65,253,043 62,926,321
Commercial and Industrial 19,541,352 19,074,380
Loans to Individuals for Household,
Family and Other Personal Expenditures 14,668,111 15,993,856
Other 100,470 74,704
----------- -----------
Total 99,562,976 98,069,261
Less: Unearned Discount (611,354) (655,323)
Reserve for Possible Loan Losses (1,525,294) (1,429,894)
----------- -----------
Loans, Net 97,426,328 95,984,044
Bank Premises and Equipment 2,810,529 3,173,036
Other Assets
Other Real Estate Owned 4,566,544 5,046,544
Other 2,792,534 2,903,725
----------- -----------
Total Assets $162,991,559 $157,528,274
=========== ===========
Liabilities
Deposits:
Demand $33,855,766 $35,944,658
Money Market 26,294,129 23,376,214
NOW 13,600,392 13,341,511
Savings 46,542,553 46,314,234
Certificates of Deposit
$100,000 and Over 7,352,895 4,986,024
Other Time Deposits 21,324,432 19,618,856
----------- -----------
Total 148,970,167 143,581,497
Dividend Payable 138,646 121,315
Other Liabilities 1,044,548 988,389
----------- -----------
Total 150,153,361 144,691,201
Capital Accounts
Common Stock - $5.00 Par Value, 500,000 Shares 2,239,775 2,239,775
Authorized; 447,955 Shares Issued
Unrealized Loss on Investment Securities
Available for Sale (87,184) (28,157)
Surplus 1,993,574 1,993,574
Retained Earnings 9,138,672 9,078,520
----------- -----------
Total 13,284,837 13,283,712
Less: Treasury Stock (446,639) (446,639)
----------- -----------
Total 12,838,198 12,837,073
----------- -----------
Total Liabilities and Capital $162,991,559 $157,528,274
=========== ===========
SMITHTOWN BANCORP
CONSOLIDATED INCOME STATEMENTS
(unaudited)
For Three Months Ended
Mar 31 96 Mar 31 95
Interest Income
Interest and Fees on Loans $2,314,017 $1,942,536
Interest and Dividends on:
Obligations of U.S. Government 46,658 152,767
Obligations of U.S. Government Agencies 45,453 44,793
Mortgage - Backed Securities 325,189 507,508
Obligations of State & Political
Subdivisions 70,846 87,209
Other Securities 9,063 1,908
Interest on Federal Funds Sold 151,867 27,480
Interest on Balances Due From Depository
Institutions 125 0
----------- -----------
Total Interest Income 2,963,218 2,764,201
----------- -----------
Interest Expense
Money Market Accounts 215,571 181,945
Savings 335,178 342,664
Certificates of Deposit $100,000 and Over 49,747 35,501
Other Time Deposits 282,074 151,321
Interest on Federal Funds Purchased and Securities
Sold Under Agreements to Repurchase 0 86,507
----------- -----------
Total Interest Expense 882,570 797,938
----------- -----------
Net Interest Income 2,080,648 1,966,263
Provision for Possible Loan Losses 90,000 30,000
----------- -----------
Net Interest Income After Provision for
Possible Loan Losses 1,990,648 1,936,263
----------- -----------
Other Non - Interest Income
Trust Department Income 102,935 72,018
Service Charges on Deposit Accounts 320,659 326,394
Other Income 151,536 116,438
Net Securities Transactions 0 1,826
----------- -----------
Total Other Non - Interest Income 575,130 516,676
----------- -----------
Other Operating Expenses
Salaries 919,920 849,957
Pension and Other Employee Benefits 230,823 227,750
Net Occupancy Expense of Bank Premises 331,057 227,185
Furniture and Equipment Expense 168,648 152,012
Miscellaneous Operating Expense 618,983 485,056
----------- -----------
Total Other Operating Expense 2,269,431 1,941,960
----------- -----------
Income Before Income Taxes 296,347 510,979
Provision for Income Taxes 97,550 180,000
----------- -----------
Net Income $198,797 $330,979
=========== ===========
Earnings Per Share
Net Income $0.46 $0.77
Cash Dividends Paid $0.28 $0.28
Weighted Average Shares Outstanding 433,268 432,268
<TABLE>
SMITHTOWN BANCORP
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(unaudited)
COMMON STOCK UNREALIZED COST OF
---------------------- GAIN(LOSS) COMMON TOTAL
SHARES CAPITAL ON SECURITIES RETAINED STOCK IN STOCKHOLDERS'
OUTSTANDING AMOUNT SURPLUS AVAILABLE FOR SALE EARNINGS TREASURY EQUITY
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at 1/1/95 427,666 $2,239,775 $1,993,118 ($134,616) $8,092,029 ($584,588) $11,605,718
Net Income 330,979 330,979
Cash Dividend Declared (121,111) (121,111)
Allowance for Unrealized Gain 73,943 73,943
Sale of Treasury Stock 119,998 119,998
--------- ----------- ---------- ----------- ----------- --------- ------------
Balance at 3/31/95 427,666 $2,239,775 $1,993,118 ($60,673) $8,301,897 ($464,590) $12,009,527
========= =========== ========== =========== =========== ========= =============
Balance at 1/1/96 433,268 $2,239,775 $1,993,574 ($28,157) $9,078,520 ($446,639) $12,837,073
Net Income 198,797 198,797
Cash Dividend Declared (138,645) (138,645)
Allowance for Unrealized Loss (59,027) (59,027)
--------- ----------- ---------- ----------- ----------- --------- ------------
Balance at 3/31/96 433,268 $2,239,775 $1,993,574 ($87,184) $9,138,672 ($446,639) $12,838,198
========= =========== ========== =========== =========== ========= =============
</TABLE>
SMITHTOWN BANCORP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
For Three Months Ended
Mar 31 96 Mar 31 95
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $198,797 $330,979
--------- ---------
Adjustments to reconcile net income to net cash
provided by operating activities:
Valuation Reserve for Other Real
Estate Owned 60,000 0
Depreciation on Premises and Equipment 119,278 107,528
Provision for Possible Loan Losses 90,000 30,000
Net Gain on Sales of
Investment Securities 0 (1,826)
Amortization of Transition Obligation 11,925 31,800
Loss on Sale of Bank Property 57,568 0
Increase in Interest Payable 12,778 18,390
Increase(Decrease)in Miscellaneous Payables
and Accrued Expenses 38,108 (36,885)
(Increase)Decrease in Fees and Commissions
Receivable (22,800) 22,863
Decrease in Interest Receivable 47,655 177,866
(Increase)Decrease in Prepaid Expenses 54,836 (65,436)
Increase in Miscellaneous Receivables (5,164) (5,040)
Decrease in Income Taxes Receivable 40,587 245,148
Increase in Deferred Taxes 0 (35,175)
Decrease in Accumulated Post Retirement
Benefit Obligation (10,575) (11,772)
Amortization of Investment Security
Premiums and Accretion of Discounts (118,893) (2,929)
--------- --------
CASH PROVIDED BY OPERATING ACTIVITIES 375,303 474,532
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from Maturities of Investment
Securities Held to Maturity 453,232 3,355,852
Proceeds from Maturities of Investment
Securities Available for Sale 2,783,613 4,509,824
Purchases of Investment Securities
Available for Sale (4,172,986) 0
Net Increase in Federal Funds (4,850,000) (400,000)
Net Increase in Loans (1,532,284) (3,572,621)
Purchases of Premises and Equipment (19,578) (49,746)
Proceeds from Sale of Bank Property 205,239 0
Proceeds from Sale of Other
Real Estate Owned 420,000 0
--------- ---------
CASH PROVIDED(USED) BY INVESTING
ACTIVITIES (6,712,764) 3,843,309
--------- ---------
Cash Flows from Financing Activities
Net Increase (Decrease) in Demand Deposits,
NOW Accounts and Savings Accounts 1,316,224 (3,398,086)
Net Increase in Time Accounts 4,072,447 7,558,953
Cash Dividends Paid (121,315) (106,917)
Net Decrease in Securities Sold Under
Agreements to Repurchase 0 (9,003,500)
Proceeds from Sale of Treasury Stock 0 119,998
--------- ---------
CASH PROVIDED(USED)BY FINANCING
ACTIVITIES 5,267,356 (4,829,552)
--------- ---------
Net Decrease in Cash and Due from Banks (871,308) (180,732)
Cash and Due from Banks, Beginning
of Year 7,003,234 5,955,650
--------- ---------
Cash and Due from Banks, End of Year $6,131,926 $5,774,918
========= =========
Supplemental Disclosures of Cash Flow Information
Cash Paid During the Year for:
Interest $0 $86,507
Non-cash Investing Activities
Loans Transferred to Other Real
Estate Owned $0 $87,099
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Smithtown Bancorp, a one-bank holding company, acquired 100% of the
outstanding common stock of Bank of Smithtown on November 1, 1984. Smithtown
Bancorp and its subsidiary Bank of Smithtown, filed an Annual Report 10KSB for
the period ended December 31, 1995.
The segregation of the Bank's Balance Sheet remained stable from December
31, 1995 to March 31, 1996, although total assets increased from $157,528,274
to $162,991,559 or 3.47%. Investment securities represent 23.10% of total
assets and yield approximately 5.67%. Federal Funds Sold comprise 7.12% of
assets and yield approximately 5.24%. Loans now represent 60.71% of assets
and currently yield 9.35%. One piece of commercial property carried in Other
Real Estate Owned at December 31, 1995, was sold during first quarter 1996 at
its carrying value, and thereby reduced non - performing assets by $420,000.
Total deposits increased from December 31, 1995 from $143,581,497 to
$148,970,167 or by 3.75%. The largest increase has been in Certificates of
Deposit and Money Market Accounts. The Bank's cost of funds remains very low
at 3.07%. This increase in deposits has been funneled into new loan
originations, investment securities and Federal Funds Sold. Interest margin ,
although slightly lower than at December 31, remains high compared to peers at
5.27%. Capital remained constant due to the combination of a slightly
increased dividend and reduced earnings for the quarter. Book value of the
Bank's stock remains at $29.63. Leverage capital and risk based capital
remain very strong at 7.94% and 12.78%. The following table details Smithtown
Bancorp's capital ratios at March 31, 1996 and December 31, 1995 as compared
to regulatory guidelines.
March 31, 1996 December 31,1995 Required
Tier I 11.51 11.63 4.00
Tier II 1.25 1.25 **
Total Risk Based 12.78 12.89 8.00
Capital Ratio
Leverage Ratio 7.94 8.15 4.00
** Tier II Capital is limited to maximum of 100% of Tier I Capital.
Results of operations for the first quarter were positive, although low
compared to prior quarters. Due to the aggressive re-engineering efforts
during the first three months of the year, income only reached $198,797. The
planning stages of this re-engineering began during third and fourth quarters
of 1995, and its effects on bottom line have been calculated. Benefits from
the program will begin during fourth quarter of 1996 and will continue
forward. This re-engineering has streamlined processes, improved
efficiencies, increased non-interest income and ultimately will result in
reduced fulltime equivalent employees. As can be seen from the Bank's Income
Statement, interest income and fees on loans has increased by 19.12% from
first quarter 1995 due to increased volume. Investment security income on a
tax equivalent basis for first quarter 1996 as compared to first quarter 1995
has declined by $305,406 or 36.39% due to reduced volume. Interest expense
has increased by $84,632 or 10.61% due to the higher overall deposit level,
the increase in interest bearing accounts and higher interest rates. Non-
interest income increased over first quarter 1995 by 11.31% primarily due to
higher trust department income and loan origination fee income. Non-interest
expense has increased by 16.86%, a result of increased salary and benefit
expense, increased occupancy expenses due to our new Northport branch, and
consulting expenses related to the re-engineering project.
Although net income was low for first quarter 1996, as the benefits from
the re-engineering effort begin to migrate to the bottom line, earnings for
1996 are expected to exceed that of 1995. Loan demand remains strong, and
active Asset/Liability management continues to provide for high interest
margins. These strategies in combination with the continued acquisition of
high quality credits, continue to provide for increased profitability and
shareholder value for 1996 and in the future.
<TABLE>
SMITHTOWN BANCORP
INTEREST RATE SENSITIVITY GAP REPORT BANK OF SMITHTOWN
GAP REPORT 3/31/96
3 MONTHS 3 -6 6 - 12 1-5 5+
REVOLVING OR LESS MONTHS MONTHS YEARS YEARS OTHER TOTAL
---------- --------- ----------- ---------- ----------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
- -----------------------
INVESTMENTS 65,750 3,104,215 2,103,535 17,275,679 14,514,719 599,800 37,663,698
FED FUNDS SOLD 11,600,000 11,600,000
LOANS:
INSTALLMENT 887,143 894,822 1,768,795 15,835,516 1,136,540 20,522,816
REAL ESTATE AND
COMMERCIAL 23,612,444 4,090,806 922,238 5,792,045 29,787,349 11,989,030 100,470 76,294,382
CASH & DUE 21,212 6,110,714 6,131,926
FIXED ASSETS 2,810,529 2,810,529
OTHER ASSETS 7,359,078 7,359,078
A/L/L (1,525,294) (1,525,294)
NON-ACCRUALS &
UNEARNED DISCOUNT 2,134,424 2,134,424
---------- --------- ----------- ---------- ----------- ---------- --------- -----------
TOTAL 35,212,444 5,064,911 4,921,275 9,664,375 62,898,544 27,640,289 17,589,721 162,991,559
========== ========= =========== ========== =========== ========== ========== ===========
LIABILITIES:
- -----------------------
SAVINGS 2,327,128 2,327,128 4,654,255 37,234,042 46,542,553
MONEY MARKETS 3,286,766 3,286,766 6,573,532 13,147,065 26,294,129
NOW 680,019 680,020 1,360,039 10,880,314 13,600,392
CD<100 250,232 4,712,215 5,140,693 4,776,090 5,715,727 20,594,957
CD>100 1,054,375 2,700,832 567,387 606,558 2,423,743 7,352,895
HOLIDAY CLUBS 729,475 729,475
DEMAND 851,117 851,117 1,702,234 13,617,868 17,022,335 34,044,671
OTHER LIABILITIES 1,044,548 1,044,548
STOCKHOLDERS' EQUITY 12,787,939 12,787,939
---------- --------- ----------- ---------- ----------- ---------- ---------- -----------
TOTAL 1,304,607 14,558,077 12,853,111 19,672,708 83,018,759 31,584,297 162,991,559
========== ========= =========== ========== =========== ========== ========== ===========
INTEREST SENSITIVITY GAP
PER PERIOD 33,907,837 (9,493,166) (7,931,836) (10,008,333) (20,120,215) 27,640,289 (13,994,576)
GAP/TOTAL ASSETS 20.80% (5.82%) (4.87%) (6.14%) (12.34%) 16.96%
CUMULATIVE INTEREST
SENSITIVITY GAP 33,907,837 24,414,671 16,482,835 6,474,502 (13,645,713) 13,994,576
% OF CUMULATIVE GAP
TO TOTAL ASSETS 20.80% 14.98% 10.11% 3.97% (8.37%) 8.59%
ASSUMPTIONS:
1) BALANCE SHEET FIGURES AS OF MARCH 31, 1996
2) FINAL MATURITIES USED FOR MORTGAGE BACKED SECURITIES
3) SAVINGS AND NOW ACCOUNTS ASSUMED TO DECLINE OVER 5 YEAR PERIOD
4) MONEY MARKET ACCOUNTS ASSUMED TO DECLINE OVER 2 YEAR PERIOD
</TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Financial Statement Presentation
In the opinion of management, the accompanying unaudited interim
consolidated financial statements contain all adjustments (consisting of
normal recurring accruals) necessary to present fairly its financial position
as of March 31, 1996, and its results of operations for the three months ended
March 31, 1996 and 1995 and its cash flows for the three months ended March
31, 1996 and 1995. For further information, refer to the consolidated
financial statements and notes thereto included in the Company's annual report
on Form 10-KSB for the year ended December 31, 1995.
Earnings Per Common Share
Earnings per share are calculated by dividing Net Income by the weighted
average number of common shares outstanding.
Investment Securities
Market Value:
March 31, 1996 $37,538,566
December 31, 1995 $36,755,073
SIGNATURES
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.
SMITHTOWN BANCORP
May 10, 1996 _________________________________
by /s/ Bradley E. Rock, President
May 10, 1996 _________________________________
by /s/ Anita Florek, Treasurer
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1996
<CASH> 2,612,046
<INT-BEARING-DEPOSITS> 21,212
<FED-FUNDS-SOLD> 11,600,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 16,424,693
<INVESTMENTS-CARRYING> 21,239,005
<INVESTMENTS-MARKET> 37,538,566
<LOANS> 98,951,622
<ALLOWANCE> 1,525,294
<TOTAL-ASSETS> 162,991,559
<DEPOSITS> 148,970,167
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,183,194
<LONG-TERM> 0
<COMMON> 2,239,775
0
0
<OTHER-SE> 10,598,423
<TOTAL-LIABILITIES-AND-EQUITY> 162,991,559
<INTEREST-LOAN> 2,314,017
<INTEREST-INVEST> 649,076
<INTEREST-OTHER> 125
<INTEREST-TOTAL> 2,963,218
<INTEREST-DEPOSIT> 882,570
<INTEREST-EXPENSE> 882,570
<INTEREST-INCOME-NET> 2,080,648
<LOAN-LOSSES> 90,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,269,431
<INCOME-PRETAX> 296,347
<INCOME-PRE-EXTRAORDINARY> 198,797
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 198,797
<EPS-PRIMARY> 0.46
<EPS-DILUTED> 0.46
<YIELD-ACTUAL> 8.1
<LOANS-NON> 2,745,778
<LOANS-PAST> 375,434
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,429,894
<CHARGE-OFFS> 0
<RECOVERIES> 5,401
<ALLOWANCE-CLOSE> 1,525,294
<ALLOWANCE-DOMESTIC> 1,525,294
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 351,000
</TABLE>
