Washington, D.C. 20549
------------------
FORM 10-Q
------------------
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended June 30, 1999
------------------
Commission file number 2-91511
SMITHTOWN BANCORP
Incorporated pursuant to the Laws of New York State
Internal Revenue Service - Employer Identification No. 11-2695037
One East Main Street, Smithtown, New York 11787-2801
516-360-9300
------------------
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: 807,531 Shares of Common stock
($2.50 Par Value) Outstanding as of June 30, 1999.
<PAGE>
SMITHTOWN BANCORP
INDEX
Part I - FINANCIAL INFORMATION PAGES
------
Item 1. Financial Statements
Consolidated Balance Sheets
June 30, 1999 and December 31, 1998 4
Consolidated Statements of Income
Three months ended June 30, 1999 and 1998 5
Consolidated Statements of Income
Six months ended June 30, 1999 and 1998 6
Consolidated Statements of Changes in Stockholders' Equity
Three months ended June 30, 1999 and 1998 7
Consolidated Statements of Changes in Stockholders' Equity
Six months ended June 30, 1999 and 1998 8
Consolidated Statements of Comprehensive Income
Three months ended June 30, 1999 and 1998 9
Consolidated Statements of Comprehensive Income
Six months ended June 30, 1999 and 1998 10
Consolidated Statements of Cash Flows
Three months ended June 30, 1999 and 1998 11
Consolidated Statements of Cash Flows
Six months ended June 30, 1999 and 1998 12
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 13 - 17
Item 3. Notes to Consolidated Financial Statements 18
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
<PAGE>
<TABLE>
<CAPTION>
SMITHTOWN BANCORP
CONSOLIDATED BALANCE SHEETS
(unaudited)
As of
June 30, 1999 December 31, 1998
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash and Due from Banks .............................................................. $ 8,831,921 $ 7,124,365
Investment Securities:
Investment Securities Held to Maturity
Mortgage - Backed Securities .................................................... 3,464,768 4,582,024
Obligations of State and Political Subdivisions ................................. 5,797,498 6,292,248
------------- -------------
(Estimated Fair Value $9,324,483 at 6/30/99 and $11,125,675 ................... 9,262,266 10,874,272
------------- -------------
at 12/31/98)
Investment Securities Available for Sale
Obligations of U.S. Government .................................................. 6,069,600 6,151,890
Obligations of U.S. Government Agencies ......................................... 16,714,049 14,213,318
Mortgage - Backed Securities .................................................... 24,022,271 19,129,406
Oligations of State and Political Subdivisions .................................. 11,334,161 11,818,684
Other Securities ................................................................ 1,057,200 856,800
------------- -------------
Total (At Estimated Fair Value) ............................................... 59,197,281 52,170,098
------------- -------------
Total Investment Securities ..................................................... 68,459,547 63,044,370
------------- -------------
(Estimated Fair Value $68,521,764 at 6/30/99 and
$63,295,773 at 12/31/98)
Federal Funds Sold ................................................................... 17,300,000 12,500,000
Loans ................................................................................ 143,758,376 118,101,158
Less: Unearned Discount ......................................................... (588,940) (525,877)
Reserve for Possible Loan Losses ....................................... (2,246,890) (2,120,371)
------------- -------------
Loans, Net ........................................................................... 140,922,546 115,454,910
------------- -------------
Bank Premises and Equipment .......................................................... 3,190,102 3,259,290
Other Assets
Other Real Estate Owned ......................................................... 855,354 1,072,495
Other ........................................................................... 4,600,325 3,370,227
------------- -------------
Total Assets ......................................................................... $ 244,159,795 $ 205,825,657
============= =============
Liabilities
Deposits:
Demand .......................................................................... $ 51,605,096 $ 49,752,008
Money Market .................................................................... 53,055,455 42,807,109
NOW ............................................................................. 14,699,088 15,790,178
Savings ......................................................................... 37,430,684 39,267,087
Certificates of Deposit $100,000 and Over ....................................... 17,934,296 10,666,898
Other Time Deposits ............................................................. 25,782,464 25,592,182
------------- -------------
Total ......................................................................... 200,507,083 183,875,462
Dividend Payable ..................................................................... 177,657 165,893
Demand Notes Issued to the U.S. Treasury ............................................. 7,000,000 174,645
Other Borrowed Funds ................................................................. 18,000,000 3,000,000
Other Liabilities .................................................................... 1,142,196 1,197,468
------------- -------------
Total ........................................................................... 226,826,936 188,413,468
------------- -------------
Stockholders' Equity
Common Stock - $2.50 Par Value, 3,000,000 Shares .................................... 2,239,775 2,239,775
Authorized; 895,910 Shares Issued
Accumulated Other Comprehensive Income ............................................... (595,090) 249,455
Surplus .............................................................................. 1,993,574 1,993,574
Retained Earnings .................................................................... 17,402,264 15,770,822
------------- -------------
Total ........................................................................... 21,040,523 20,253,626
Less: Treasury Stock (88,379 and 73,145 shares at cost) ......................... (3,707,664) (2,841,437)
------------- -------------
Total ........................................................................... 17,332,859 17,412,189
------------- -------------
Total Liabilities and Capital ........................................................ $ 244,159,795 $ 205,825,657
============= =============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SMITHTOWN BANCORP
CONSOLIDATED INCOME STATEMENTS
(unaudited)
For Three Months Ended
June 30, 1999 June 30, 1998
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Interest Income
Interest and Fees on Loans ......................................................... $2,985,292 $2,386,239
Interest and Dividends on:
Obligations of U.S. Government ................................................ 90,960 111,083
Obligations of U.S. Government Agencies ....................................... 282,038 234,215
Mortgage - Backed Securities .................................................. 460,197 515,826
Obligations of State & Political Subdivisions ................................. 209,627 170,663
Other Securities .............................................................. 16,056 15,173
Interest on Federal Funds Sold ..................................................... 28,102 176,151
Interest on Balances Due From Depository Institutions .............................. 1,407 2,794
------------- ----------
Total Interest Income ......................................................... 4,073,679 3,612,144
------------- ----------
Interest Expense
Money Market Accounts .............................................................. 358,844 343,404
Savings ............................................................................ 137,595 202,538
Time Deposits $100,000 and Over ................................................... 156,883 117,506
Other Time Deposits ................................................................ 306,458 334,530
Interest on Federal Funds Purchased and Securities
Sold Under Agreements to Repurchase ........................................... 0 28,745
Interest on Demand Notes Issued by U. S. Treasury .................................. 30,440 51,924
Interest on Other Borrowed Money ................................................... 137,564 42,163
------------- ----------
Total Interest Expense ........................................................ 1,127,784 1,120,810
------------- ----------
Net Interest Income ................................................................ 2,945,895 2,491,334
Provision for Possible Loan Losses ................................................. 90,000 143,200
------------- ----------
Net Interest Income After Provision for Possible
Loan Losses ...................................................................... 2,855,895 2,348,134
------------- ----------
Other Non - Interest Income
Trust Department Income ............................................................ 85,028 118,186
Service Charges on Deposit Accounts ................................................ 366,927 374,178
Other Income ....................................................................... 226,606 286,368
------------- ----------
Total Other Non - Interest Income ............................................. 678,561 778,732
------------- ----------
Other Operating Expenses
Salaries ........................................................................... 899,328 807,058
Pension and Other Employee Benefits ................................................ 210,309 176,824
Net Occupancy Expense of Bank Premises ............................................. 209,483 196,753
Furniture and Equipment Expense .................................................... 204,454 158,019
Miscellaneous Operating Expense .................................................... 523,337 506,715
------------- ----------
Total Other Operating Expense ................................................. 2,046,911 1,845,369
------------- ----------
Income Before Income Taxes ......................................................... 1,487,545 1,281,497
Provision for Income Taxes ......................................................... 534,608 463,022
------------- ----------
Net Income .................................................................... $ 952,937 $ 818,475
============= ==========
Earnings Per Share
Net Income ......................................................................... $ 1.18 $ 0.96
Cash Dividends Paid ................................................................ $ 0.220 $ 0.200
Weighted Average Shares Outstanding ................................................ 809,385 850,263
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SMITHTOWN BANCORP
CONSOLIDATED INCOME STATEMENTS
(unaudited)
For Six Months Ended
June 30, 1999 June 30, 1998
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Interest Income
Interest and Fees on Loans ......................................................... $5,702,706 $4,814,849
Interest and Dividends on:
Obligations of U.S. Government ................................................ 181,106 226,840
Obligations of U.S. Government Agencies ....................................... 540,737 524,095
Mortgage - Backed Securities .................................................. 849,979 1,132,303
Obligations of State & Political Subdivisions ................................. 425,659 262,961
Other Securities .............................................................. 30,808 29,513
Interest on Federal Funds Sold ..................................................... 134,113 290,891
Interest on Balances Due From Depository Institutions .............................. 1,968 5,701
------------- ----------
Total Interest Income ......................................................... 7,867,076 7,287,153
------------- ----------
Interest Expense
Money Market Accounts .............................................................. 704,256 679,106
Savings ............................................................................ 274,670 406,510
Time Deposits $100,000 and Over ................................................... 290,970 238,634
Other Time Deposits ................................................................ 573,833 631,657
Interest on Federal Funds Purchased and Securities
Sold Under Agreements to Repurchase ........................................... 0 72,826
Interest on Demand Notes Issued by U. S. Treasury .................................. 68,795 102,116
Interest on Other Borrowed Money ................................................... 231,697 83,863
------------- ----------
Total Interest Expense ........................................................ 2,144,221 2,214,712
------------- ----------
Net Interest Income ................................................................ 5,722,855 5,072,441
Provision for Possible Loan Losses ................................................. 180,000 253,200
------------- ----------
Net Interest Income After Provision for Possible
Loan Losses ...................................................................... 5,542,855 4,819,241
------------- ----------
Other Non - Interest Income
Trust Department Income ............................................................ 176,889 204,688
Service Charges on Deposit Accounts ................................................ 737,408 728,094
Other Income ....................................................................... 580,765 447,989
------------- ----------
Total Other Non - Interest Income ............................................. 1,495,062 1,380,771
------------ ----------
Other Operating Expenses
Salaries ........................................................................... 1,751,442 1,568,693
Pension and Other Employee Benefits ................................................ 394,981 370,414
Net Occupancy Expense of Bank Premises ............................................. 425,502 409,517
Furniture and Equipment Expense .................................................... 389,075 279,530
Miscellaneous Operating Expense .................................................... 969,506 932,638
------------- ----------
Total Other Operating Expense ................................................. 3,930,506 3,560,792
------------- ----------
Income Before Income Taxes ......................................................... 3,107,411 2,639,220
Provision for Income Taxes ......................................................... 1,121,365 982,292
------------- ----------
Net Income .................................................................... $1,986,046 $1,656,928
============= ==========
Earnings Per Share
Net Income ......................................................................... $ 2.44 $ 1.93
Cash Dividends Paid ................................................................ $ 0.420 $ 0.375
Weighted Average Shares Outstanding ................................................ 813,611 856,605
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SMITHTOWN BANCORP
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(unaudited)
Cost of Accumulated
Common Stock Common Other Total
Shares Capital Retained Stock in Comprehensive Stockholders'
Outstanding Amount Surplus Earnings Treasury Income (Loss) Equity
================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at 3/31/98 ............ 855,324 $ 2,239,775 $ 1,993,574 $13,610,931 $(1,012,198) $ 264,886 $17,096,968
Comprehensive Income:
Net Income ................. 818,475 818,475
Other Comprehensive Income,
Net of Tax ............... (8,313) (8,313)
Total Comprehensive Income 810,162
Cash Dividends Declared ... (169,098) (169,098)
Treasury Stock Purchases ...... (11,831) (666,502) (666,502)
Balance at 6/30/98 ............ 843,493 $ 2,239,775 $ 1,993,574 $14,260,308 $(1,678,700) $ 256,573 $17,071,530
================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at 3/31/99 ............ 813,627 $ 2,239,775 $ 1,993,574 $16,626,984 $(3,348,185) $ 69,837 $17,581,985
Comprehensive Income:
Net Income ................. 952,937 952,937
Other Comprehensive Income,
Net of Tax ............... (664,927) (664,927)
Total Comprehensive Income 288,010
Cash Dividends Declared ... (177,657) (177,657)
Treasury Stock Purchases ...... (6,096) (359,479) (359,479)
Balance at 6/30/99 ............ 807,531 $ 2,239,775 $ 1,993,574 $17,402,264 $(3,707,664) $(595,090) $17,332,859
================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SMITHTOWN BANCORP
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(unaudited)
Cost of Accumulated
Common Stock Common Other Total
Shares Capital Retained stock in Comprehensive Stockholders'
Outstanding Amount Surplus Earnings Treasury Income (Loss) Equity
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at 1/1/98 ............. 866,536 $ 2,239,775 $ 1,993,574 $12,943,680 $ (446,639) $ 249,068 $16,979,458
Comprehensive Income:
Net Income ................. 1,656,928 1,656,928
Other Comprehensive Income,
Net of Tax ............... 7,505 7,505
Total Comprehensive Income 1,664,433
Cash Dividends Declared ... (340,300) (340,300)
Treasury Stock Purchases ...... (21,043) (1,232,061) (1,232,061)
Balance at 6/30/98 ............ 845,493 $ 2,239,775 $ 1,993,574 $14,260,308 $(1,678,700) $ 256,573 $17,071,530
================================================================================================
Balance at 1/1/99 ............. 822,765 $ 2,239,775 $ 1,993,574 $15,770,822 $(2,841,437) $ 249,455 $17,412,189
Comprehensive Income:
Net Income ................. 1,986,046 1,986,046
Other Comprehensive Income,
Net of Tax ............... (844,545) (844,545)
Total Comprehensive Income 1,141,501
Cash Dividends Declared ... (354,604) (354,604)
Treasury Stock Purchases ...... (15,234) (866,227) (866,227)
Balance at 6/30/99 ............ 807,531 $ 2,239,775 $ 1,993,574 $17,402,264 $(3,707,664) $ (595,090) $17,332,859
================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SMITHTOWN BANCORP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
For Three Months Ended June 30,
1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Income ............................................................................... $ 952,937 $ 818,475
----------- -----------
Other Comprehensive Income, Before Tax:
Unrealized Holding Gain Arising During the Period ................................... (1,146,426) (14,333)
Less: Reclassification Adjustment for Gains Included in Net Income ................. 0 0
----------- -----------
(1,146,426) (14,333)
Income Tax Related to Other Comprehensive Income .................................... (481,499) (6,020)
Other Comprehensive Income, Net of Tax .............................................. (664,927) (8,313)
---------- -----------
Total Comprehensive Income ....................................................... $ 288,010 $ 810,162
=========== ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SMITHTOWN BANCORP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
For Six Months Ended June 30,
1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Income ................................................................................ $ 1,986,046 $ 1,656,928
----------- -----------
Other Comprehensive Income, Before Tax:
Unrealized Holding Gain Arising During the Period .................................... (1,456,112) 12,940
Less: Reclassification Adjustment for Gains Included in Net Income .................. 0 0
----------- -----------
(1,456,112) 12,940
Income Tax Related to Other Comprehensive Income ..................................... (611,567) 5,435
Other Comprehensive Income, Net of Tax ............................................... (844,545) 7,505
----------- -----------
Total Comprehensive Income ........................................................ $ 1,141,501 $ 1,664,433
=========== ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SMITHTOWN BANCORP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
For Three Months Ended
June 30, 1999 June 30, 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash Flows from Operating Activities
Net Income ......................................................................... $ 952,937 $ 818,475
Adjustments to reconcile net income to net cash
provided by operating activities:
Valuation Reserve for Other Real Estate Owned ................................. 0 40,998
Depreciation on Premises and Equipment ........................................ 129,866 92,028
Provision for Possible Loan Losses ............................................ 90,000 143,200
Amortization of Transition Obligation ......................................... 38,169 26,025
Gain on the Sale of Other Real Estate Owned ................................... 0 0
Increase(Decrease)in Interest Payable ......................................... 42,455 (4,522)
Increase(Decrease)in Miscellaneous Payables and
Accrued Expenses ........................................................... (69,626) 143,717
(Increase)Decrease in Fees and Commissions
Receivable ................................................................. 0 (7,200)
(Increase)Decrease in Interest Receivable ..................................... (1,890) 101,926
(Increase)Decrease in Prepaid Expenses ........................................ (149,245) (56,822)
(Increase)Decrease in Miscellaneous Receivables ............................... (69,858) (44,208)
(Increase)Decrease in Income Taxes Receivable ................................. (511,201) (448,242)
Increase(Decrease) in Deferred Taxes .......................................... (54,891) (115,736)
Decrease in Accumulated Post Retirement Benefit
Obligation ................................................................. (11,418) (13,418)
Amortization of Investment Security Premiums and
Accretion of Discounts ..................................................... 78,054 29,807
------------ ------------
Cash Provided by Operating Activities ......................................... 463,352 706,028
------------ ------------
Cash Flows from Investing Activities
Proceeds from Disposition of Mortgage-Backed Securities:
Held to Maturity ............................................................ 364,454 706,176
Available for Sale .......................................................... 2,409,088 4,970,385
Proceeds from Disposition of Other Investment Securities:
Held to Maturity ............................................................ 1,138,758 1,266,624
Available for Sale .......................................................... 870,908 5,015,875
Purchases of Mortgage-Backed Securities:
Available for Sale .......................................................... 0 0
Purchases of Other Investment Securities:
Held to Maturity ............................................................ (723,862) (198,131)
Available for Sale .......................................................... (2,200,400) (5,478,457)
Net (Increase)Decrease in Federal Funds Sold .................................. (17,000,000) (7,900,000)
Net (Increase)Decrease in Loans ............................................... (13,427,900) (6,188,540)
Purchases of Premises and Equipment ........................................... (139,534) (433,149)
Proceeds from Sale of Other Real Estate Owned ................................. 0 0
Purchase of Treasury Stock .................................................... (359,479) (666,503)
------------- ------------
Cash Provided(Used) by Investing Activities ................................... (29,067,967) (8,905,720)
Cash Flows from Financing Activities
Net (Decrease)Increase in Demand Deposits, Now
Accounts and Savings Accounts ................................................. 6,231,455 2,158,035
Net Increase(Decrease) in Time Accounts ....................................... 8,963,291 2,076,654
Cash Dividends Paid ........................................................... (178,990) (171,201)
Net Increase(Decrease)in Borrowed Funds ...................................... 14,597,835 4,905,816
------------- ------------
Cash Provided(Used)by Financing Activities .................................... 29,613,591 8,969,304
Net Increase(Decrease)in Cash and Due from Banks .............................. 1,008,976 769,612
Cash and Due from Banks, Beginning of Period .................................. 7,822,945 7,959,750
------------- ------------
Cash and Due from Banks, End of Period ........................................ $ 8,831,921 $ 8,729,362
============ ============
Supplemental Disclosures of Cash Flow Information
Cash Paid During the Year for:
Interest ..................................................................... 168,005 $ 122,832
Income Taxes ................................................................. 1,100,700 $ 1,027,000
Non-Cash Investing Activities
Loans Transferred to Other Real Estate Owned .................................. $ 0 $ 0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SMITHTOWN BANCORP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
For Six Months Ended
June 30, 1999 June 30, 1998
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash Flows from Operating Activities
Net Income ......................................................................... $ 1,986,046 $ 1,656,928
Adjustments to reconcile net income to net cash
provided by operating activities:
Valuation Reserve for Other Real Estate Owned ................................. 0 82,998
Depreciation on Premises and Equipment ........................................ 254,122 177,541
Provision for Possible Loan Losses ............................................ 180,000 253,200
Amortization of Transition Obligation ......................................... 52,050 52,052
Gain on the Sale of Other Real Estate Owned ................................... (29,281) 0
Increase(Decrease)in Interest Payable ......................................... 40,464 (7,226)
Increase(Decrease)in Miscellaneous Payables and
Accrued Expenses ........................................................... (259,746) (86,886)
(Increase)Decrease in Fees and Commissions
Receivable ................................................................. (4,800) (12,000)
(Increase)Decrease in Interest Receivable ..................................... (269,496) 12,874
(Increase)Decrease in Prepaid Expenses ........................................ (129,498) (35,039)
(Increase)Decrease in Miscellaneous Receivables ............................... 47,985 (57,345)
(Increase)Decrease in Income Taxes Receivable ................................. (28,836) 151,408
Increase(Decrease) in Deferred Taxes .......................................... (99,089) (196,116)
Decrease in Accumulated Post Retirement Benefit
Obligation ................................................................. (22,836) (27,241)
Amortization of Investment Security Premiums and
Accretion of Discounts ..................................................... 124,796 127,314
------------ ------------
Cash Provided by Operating Activities ......................................... 1,841,881 2,092,462
Cash Flows from Investing Activities
Proceeds from Disposition of Mortgage-Backed Securities:
Held to Maturity ............................................................ 1,041,788 1,197,830
Available for Sale .......................................................... 4,844,033 8,556,819
Proceeds from Disposition of Other Investment Securities:
Held to Maturity ............................................................ 1,248,604 1,375,338
Available for Sale .......................................................... 1,009,375 8,015,875
Purchases of Mortgage-Backed Securities:
Available for Sale .......................................................... (10,215,625) 0
Purchases of Other Investment Securities:
Held to Maturity ............................................................ (723,810) (313,441)
Available for Sale .......................................................... (4,200,400) (11,480,787)
Net (Increase)Decrease in Federal Funds Sold .................................. (4,800,000) (12,800,000)
Net (Increase)Decrease in Loans ............................................... (25,647,636) (6,207,449)
Purchases of Premises and Equipment ........................................... (184,935) (736,019)
Proceeds from Sale of Other Real Estate Owned ................................. 246,423 0
Purchase of Treasury Stock .................................................... (866,228) (1,232,061)
----------- ------------
Cash Provided(Used) by Investing Activities ................................... (38,248,461) (13,623,895)
Cash Flows from Financing Activities
Net (Decrease)Increase in Demand Deposits, Now
Accounts and Savings Accounts ................................................. 9,173,940 4,518,846
Net Increase(Decrease) in Time Accounts ....................................... 7,457,681 3,649,964
Cash Dividends Paid ........................................................... (342,840) (322,845)
Net Increase(Decrease)in Borrowed Funds ...................................... 21,825,355 4,747,460
------------ ------------
Cash Provided(Used)by Financing Activities .................................... 38,114,136 12,593,425
Net Increase(Decrease)in Cash and Due from Banks .............................. 1,707,556 1,061,992
Cash and Due from Banks, Beginning of Period .................................. 7,124,365 7,667,371
------------ ------------
Cash and Due from Banks, End of Period ........................................ $ 8,831,921 $ 8,729,363
============ ============
Supplemental Disclosures of Cash Flow Information
Cash Paid During the Year for:
Interest ..................................................................... $ 300,492 $ 258,805
Income Taxes ................................................................. $ 1,249,290 $ 1,027,000
Non-Cash Investing Activities
Loans Transferred to Other Real Estate Owned .................................. $ 0 $ 0
</TABLE>
<PAGE>
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, 1998.
The Balance Sheet remained very strong for the first half of 1999, ending with
total assets at $244,159,795, a substantial increase of 18.62% from $205,825,657
on December 31, 1998. The loan portfolio was primarily responsible for this
major source of growth as demand for residential mortgages continued and the
bank's home equity product was launched. Total loans increased by 21.77%, or
approximately $25,500,000, since year end. The Investment Portfolio rose 8.59%
with ending balances at $68,459,547 on June 30, 1999, compared to $63,044,370,
on December 31, 1998. This increase was due primarily to the first quarter
purchase of a GNMA ARM for $10,000,000, along with second quarter purchases of
Federal Home Loan Bank stock and municipal bonds. Federal Funds Sold reached
$17,300,000 on June 30, 1999, as compared to $12,500,000 on December 31, 1998.
This increase was the result of additional borrowings transacted in May 1999.
These funds are earmarked for future loan originations and possible Y2K cash out
flow in the fourth quarter. Other Real Estate Owned declined from $1,072,495 to
$855,354, as a result of the sale of one residential property. The liability
side of the Balance Sheet also changed considerably from December 31, 1998.
Total deposits rose 9.05%, over $16,000,000, for the first six months of this
year. Total deposits reached $200,507,083 on June 30, 1999, as compared to
$183,875,462 on December 31, 1999. This growth was attributable to substantial
increases to both Money Market ($10,000,000) and jumbo Certificates of Deposit
Accounts ($7,000,000). These two products were particularly attractive to our
customers because of their competitive rate structures. Other Borrowed Funds
reached $25,000,000 on June 30, 1999, as compared to $3,174,645 on December 31,
1998, an increase of 687.49%. The majority of these borrowings were Advances
(short and long term) from the Federal Home Loan Bank, totaling $18,000,000. The
remaining $7,000,000 in borrowings were Demand Notes Issued to the U.S. Treasury
accounts. These funds are considered relatively short term as withdrawal dates
usually occur within a two week period. This increase to Other Borrowed Funds
will be used to fund future loan demand and to a lesser extent, to fund the
potential out flow of cash resulting from customer cash demands.
Capital remains strong at the Bank with ratios well in excess of regulatory
guidelines as detailed below.
June 30, 1999 December 31, 1998 Required
Tier I 11.35% 12.09% 4.00%
Tier II 1.25% 1.25% *
Total Risk Based
Capital Ratio 12.60% 14.14% 8.00%
Leverage Ratio 7.99% 8.47% 4.00%
* Tier II Capital is limited to 100% of Tier I Capital
<PAGE>
Net income for the six month period ended June 30, 1999, was $1,986,046,
compared to $1,656,928, for the same period one year ago, representing a 19.86%
increase. This substantial increase was the result of additional interest
income, and loan fees generated from new loan originations, service charge fees
collected on an increased deposit base, and a reduction in the cost of funds.
Total interest income rose 7.96% over last year, due predominately to the growth
in the residential and commercial loan portfolio. Real Estate loan interest
income was $3,387,890 on June 30, 1999, compared to $2,603,429, for the same
period in 1998, a 30.13% increase. The launching of our Home Equity product also
provided an additional boost to earnings, with interest totaling approximately
$64,000 for the first two quarters of 1999. The yield on the investment
portfolio dropped slightly from 5.93% on June 30, 1998 to 5.86% on June 30,
1999. Average balances in the investment portfolio decreased by approximately
$4,000,000 from last year due primarily to scheduled maturities and prepayments
of Mortgage-backed security principal payments. Interest on Federal Funds Sold
decreased as a result of reduced average balances. Interest expense on deposit
accounts was 3.18% lower at $2,144,221 on June 30, 1999, compared to $2,214,712
on June 30, 1998. While deposits grew significantly, the current competitive
rate environment continued to drive interest costs on regular interest-bearing
deposits to a lower level than that paid for this same period last year.
Non-interest income increased by 8.28%, approximately $114,000 over last years
total, due largely to the significant growth in the loan portfolio. The sale of
one OREO property during the first half of 1999, resulted in a net gain of
$29,281. Other revenue generating services, such as ATM services and official
check sales continued to increase significantly over last year by approximately
$15,000. Trust income decreased by approximately $28,000 during the first half
of 1999, and safe deposit income decreased by $4,000 due to a larger number of
vacant boxes.
Other Operating Expenses rose by 10.38% over last year. This is due to the
combination of salaries and benefit increases of 10.69%, resulting from annual
increases, incentive compensation, and additional staffing in the loan
department, as well as an increase in the bank's contribution to the 401K Plan.
Furniture and fixture expense increased by 39.19%, over the two comparable
periods, resulting from the purchase of a new main frame computer and on-line
teller system.
Evidence of the Bank's continued strength of operations is evident from its
ROAA, ROAE, and earnings per share ratios as detailed below.
June 1999 December 1998
ROAA 1.82 1.73
ROAE 22.77 20.45
Earnings/Share 2.44 4.15
The Bank continues its Y2K efforts with all FFIEC time frames successfully
completed. Business resumption and cash contingency plans have been written and
are currently being tested in the unlikely event of any disruption. All
compliant mission critical systems have been implemented.
Results of operations for the six months ended June 30, 1999, continues to be
very positive and increasingly profitable for the Bank. As we continue through
1999, management fully anticipates these results to continue for another record
high income year.
<PAGE>
<TABLE>
<CAPTION>
SMITHTOWN BANCORP
INTEREST RATE SENSITIVITY REPORT
JUNE 30, 1999
TOTAL
3 MONTHS 3 -6 6 - 12 SENSITIVE
REVOLVING OR LESS MONTHS MONTHS WITHIN I YR
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS:
INVESTMENTS .................... $ 4,450,503 $ 8,775,382 $ 9,581,035 $ 13,837,057 $ 36,643,977
FEDERAL FUNDS SOLD ............. 17,300,000 0 0 0 17,300,000
LOANS:
INSTALLMENT ................ 297,570 619,280 1,575,464 5,011,863 7,504,177
REAL ESTATE AND COMMERCIAL . 30,849,776 1,837,423 470,250 2,426,066 35,583,515
CASH AND DUE FROM BANKS ........ 188,602 0 0 0 188,602
FIXED ASSETS ................... 0 0 0 0 0
OTHER ASSETS ................... 0 0 0 0 0
RESERVE FOR POSSIBLE LOAN LOSSES 0 0 0 0 0
NON-ACCRUALS ................... 0 0 0 0 0
UNEARNED DISCOUNT .............. 0 0 0 0 0
------------ ------------ ------------ ------------ ------------
TOTAL ............................. $ 53,086,451 $ 11,232,085 $ 11,626,749 $ 21,274,986 $ 97,220,271
------------ ------------ ------------ ------------ ------------
SMITHTOWN BANCORP
INTEREST RATE SENSITIVITY REPORT(continue)
JUNE 30, 1999
1-3 3-5 5+
YEARS YEARS YEARS OTHER TOTAL
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS:
INVESTMENTS .................... $ 3,303,026 $ 7,487,022 $ 19,968,322 $ 1,057,200 $ 68,459,547
FEDERAL FUNDS SOLD ............. 0 0 0 0 17,300,000
LOANS:
INSTALLMENT ................ 2,983,839 4,201,069 3,393,151 0 18,082,236
REAL ESTATE AND COMMERCIAL . 1,032,223 15,965,104 70,691,880 497,679 123,770,401
CASH AND DUE FROM BANKS ........ 0 0 0 8,643,319 8,831,921
FIXED ASSETS ................... 0 0 0 3,190,102 3,190,102
OTHER ASSETS ................... 0 0 0 5,455,679 5,455,679
RESERVE FOR POSSIBLE LOAN LOSSES 0 0 0 (2,246,890) (2,246,890)
NON-ACCRUALS ................... 0 0 0 1,905,739 1,905,739
UNEARNED DISCOUNT .............. 0 0 0 (588,940) (588,940)
------------ ------------ ------------ ------------ ------------
TOTAL ............................. $ 7,319,088 $ 27,653,195 $ 94,053,353 $ 17,913,888 $ 244,159,795
------------ ------------ ------------ ------------ ------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SMITHTOWN BANCORP
INTEREST RATE SENSITIVITY REPORT
JUNE 30, 1999
TOTAL
3 MONTHS 3 -6 6 - 12 SENSITIVE
REVOLVING OR LESS MONTHS MONTHS WITHIN I YR
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
LIABILITIES:
SAVINGS .......................... $ 0 $ 1,871,534 $ 1,871,534 $ 3,743,068 $ 7,486,136
MONEY MARKETS .................... 0 6,631,932 6,631,932 13,263,864 26,527,728
NOW .............................. 0 734,954 734,954 1,469,909 2,939,817
TIME=/>100,000.................... 0 8,301,901 3,672,557 2,951,274 14,925,732
TIME<100,000...................... 90,492 6,135,950 3,674,312 10,241,790 20,142,544
DEMAND ........................... 0 1,290,127 1,290,127 2,580,255 5,160,509
REPURCHASE AGREEMENTS ............ 0 0 0 0 0
OTHER BORROWED MONEY ............. 0 7,000,000 3,000,000 10,000,000 20,000,000
OTHER LIABILITIES ................ 0 0 0 0 0
STOCKHOLDERS' EQUITY ............. 0 0 0 0 0
---------- ---------- ---------- ---------- ----------
TOTAL ............................... $ 90,492 $31,966,398 $ 20,875,416 $ 44,250,160 $ 97,182,466
---------- ---------- ---------- ---------- ----------
SMITHTOWN BANCORP
INTEREST RATE SENSITIVITY REPORT(continue)
JUNE 30, 1999
1-3 3-5 5+
YEARS YEARS YEARS OTHER TOTAL
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
LIABILITIES:
SAVINGS .......................... $ 14,972,274 $14,972,274 $ 0 $ 0 $ 37,430,684
MONEY MARKETS .................... 26,527,727 0 0 0 53,055,455
NOW .............................. 5,879,635 5,879,636 0 0 14,699,088
TIME=/>100,000.................... 1,901,002 1,107,562 0 0 17,934,296
TIME<100,000...................... 3,913,978 1,725,942 0 0 25,782,464
DEMAND ........................... 10,321,019 10,321,019 0 25,802,549 51,605,096
REPURCHASE AGREEMENTS ............ 0 0 0 0 0
OTHER BORROWED MONEY ............. 0 5,000,000 0 0 25,000,000
OTHER LIABILITIES ................ 0 0 0 1,319,853 1,319,853
STOCKHOLDERS' EQUITY ............. 0 0 0 17,332,859 17,332,859
----------- ----------- ---------- ----------- -----------
TOTAL ............................ $ 63,515,635 $39,006,433 $ 0 $ 44,455,261 $244,159,795
----------- ----------- ----------- ----------- -----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SMITHTOWN BANCORP
INTEREST RATE SENSITIVITY REPORT
JUNE 30, 1999
TOTAL
3 MONTHS 3 -6 6 - 12 SENSITIVE
REVOLVING OR LESS MONTHS MONTHS WITHIN I YR
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INTEREST SENSITIVITY GAP
PER PERIOD 52,995,959 (20,734,313) (9,248,667) (22,975,174) 37,805
GAP/TOTAL ASSETS 21.71% -8.49% -3.79% -9.41% 0.02%
CUMULATIVE INTEREST
SENSITIVITY GAP 52,995,959 32,261,646 23,012,979 37,805 37,805
% OF CUMULATIVE GAP
TO TOTAL ASSETS 21.71% 13.21% 9.43% 0.02% 0.02%
SMITHTOWN BANCORP
INTEREST RATE SENSITIVITY REPORT(continue)
JUNE 30, 1999
1-3 3-5 5+
YEARS YEARS YEARS OTHER TOTAL
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INTEREST SENSITIVITY GAP
PER PERIOD (56,196,547) (11,353,238) 94,053,353 (26,541,373)
GAP/TOTAL ASSETS -23.02% -4.65% 38.52%
CUMULATIVE INTEREST
SENSITIVITY GAP (56,158,742) (67,511,980) 26,541,373
% OF CUMULATIVE GAP
TO TOTAL ASSETS -23.00% -27.65% 10.87%
ASSUMPTIONS:
1) BALANCE SHEET FIGURES AS OF JUNE 30, 1999
2) SAVINGS AND NOW ACCOUNTS ASSUMED TO DECLINE OVER 5 YEAR PERIOD
3) MONEY MARKET ACCOUNTS ASSUMED TO DECLINE OVER 2 YEAR PERIOD
</TABLE>
<PAGE>
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 June 30,
1999, and its results of operations for the six months and three months ended
June 30, 1999 and 1998 and its cash flows for the six months and three months
ended June 30, 1999 and 1998. For further information, refer to the consolidated
financial statements and notes thereto included in the Company's annual report
on Form 10-K for the year ended December 31, 1998. Earnings Per Common Shares
Earnings per share are calculated by dividing Net Income by the weighted average
number of common shares outstanding.
Investment Securities
Fair Value:
June 30, 1999 $68,521,764
December 31, 1998 $63,295,773
<PAGE>
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
August 13, 1999
/s/ Bradley E. Rock
---------------------------
Bradley E. Rock, President
August 13, 1999
/s/ Anita M. Florek
---------------------------
Anita Florek, Treasurer
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-END> Jun-30-1999
<CASH> 4,382,705
<INT-BEARING-DEPOSITS> 188,602
<FED-FUNDS-SOLD> 17,300,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 59,197,281
<INVESTMENTS-CARRYING> 9,262,266
<INVESTMENTS-MARKET> 68,521,764
<LOANS> 143,169,436
<ALLOWANCE> 2,246,890
<TOTAL-ASSETS> 244,159,795
<DEPOSITS> 200,507,083
<SHORT-TERM> 20,000,000
<LIABILITIES-OTHER> 1,142,196
<LONG-TERM> 5,000,000
0
0
<COMMON> 2,239,775
<OTHER-SE> 15,093,084
<TOTAL-LIABILITIES-AND-EQUITY> 244,159,795
<INTEREST-LOAN> 5,702,706
<INTEREST-INVEST> 2,162,402
<INTEREST-OTHER> 1,968
<INTEREST-TOTAL> 7,867,076
<INTEREST-DEPOSIT> 1,843,729
<INTEREST-EXPENSE> 2,144,221
<INTEREST-INCOME-NET> 5,722,855
<LOAN-LOSSES> 180,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 3,930,506
<INCOME-PRETAX> 3,107,411
<INCOME-PRE-EXTRAORDINARY> 1,986,046
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,986,046
<EPS-BASIC> 2.44
<EPS-DILUTED> 2.44
<YIELD-ACTUAL> 8.29
<LOANS-NON> 1,905,739
<LOANS-PAST> 20,325
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 0
<CHARGE-OFFS> 88,989
<RECOVERIES> 35,508
<ALLOWANCE-CLOSE> 2,120,371
<ALLOWANCE-DOMESTIC> 2,246,890
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 584,697
</TABLE>
