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 September 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
631-360-9300
------------------
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: 806,903 Shares of Common stock
($2.50 Par Value) Outstanding as of September 30, 1999.
<PAGE>
SMITHTOWN BANCORP
INDEX
Part I - FINANCIAL INFORMATION PAGES
------
Item 1. Financial Statements
Consolidated Balance Sheets
September 30, 1999 and December 31, 1998 4
Consolidated Statements of Income
Three months ended September 30, 1999 and 1998 5
Consolidated Statements of Income
Nine months ended September 30, 1999 and 1998 6
Consolidated Statements of Changes in Stockholders' Equity
Three months ended September 30, 1999 and 1998 7
Consolidated Statements of Changes in Stockholders' Equity
Nine months ended September 30, 1999 and 1998 8
Consolidated Statements of Comprehensive Income
Three months ended September 30, 1999 and 1998 9
Consolidated Statements of Comprehensive Income
Nine months ended September 30, 1999 and 1998 9
Consolidated Statements of Cash Flows
Three months ended September 30, 1999 and 1998 10
Consolidated Statements of Cash Flows
Nine months ended September 30, 1999 and 1998 11
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 12 - 16
Item 3. Notes to Consolidated Financial Statements 17
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 As of
September 30, 1999 December 31, 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Cash and Due from Banks .............................................................. $ 11,671,338 $ 7,124,365
Investment Securities:
Investment Securities Held to Maturity
Mortgage - Backed Securities .................................................... 2,977,918 4,582,024
Obligations of State and Political Subdivisions ................................. 5,374,321 6,292,248
------------- -------------
Total (Estimated Fair Value $8,400,992 at 9/30/99 and $11,125,675 ............. 8,352,239 10,874,272
at 12/31/98) ------------- -------------
Investment Securities Available for Sale
Obligations of U.S. Government .................................................. 6,042,465 6,151,890
Obligations of U.S. Government Agencies ......................................... 19,199,683 14,213,318
Mortgage - Backed Securities .................................................... 24,654,599 19,129,406
Oligations of State and Political Subdivisions .................................. 11,233,074 11,818,684
Other Securities ................................................................ 1,642,200 856,800
------------- -------------
Total (At Estimated Fair Value) ............................................... 62,772,021 52,170,098
------------- -------------
Total Investment Securities ..................................................... 71,124,260 63,044,370
(Estimated Fair Value $71,173,011 at 9/30/99 and ------------- -------------
$63,295,773 at 12/31/98)
Federal Funds Sold ................................................................... 4,400,000 12,500,000
Loans ................................................................................ 161,975,389 118,101,158
Less: Unearned Discount ......................................................... (569,264) (525,877)
Reserve for Possible Loan Losses .......................................... (2,237,827) (2,120,371)
------------- -------------
Loans, Net ........................................................................... 159,168,298 115,454,910
------------- -------------
Bank Premises and Equipment .......................................................... 3,132,603 3,259,290
Other Assets
Other Real Estate Owned ......................................................... 855,354 1,072,495
Other ........................................................................... 4,632,687 3,370,227
------------- -------------
Total Assets ......................................................................... $ 254,984,540 $ 205,825,657
============= =============
Liabilities
Deposits:
Demand .......................................................................... $ 54,940,843 $ 49,752,008
Money Market .................................................................... 52,929,927 42,807,109
NOW ............................................................................. 15,092,251 15,790,178
Savings ......................................................................... 38,273,864 39,267,087
Certificates of Deposit $100,000 and Over ....................................... 16,178,094 10,666,898
Other Time Deposits ............................................................. 28,515,518 25,592,182
----------- -------------
Total ......................................................................... 205,930,497 183,875,462
Dividend Payable ..................................................................... 177,519 165,893
Demand Notes Issued to the U.S. Treasury ............................................. 1,318,309 174,645
Other Borrowed Funds ................................................................. 28,000,000 3,000,000
Other Liabilities .................................................................... 1,367,186 1,197,468
------------ -------------
Total ........................................................................... 236,793,511 188,413,468
------------ -------------
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 ............................................... (703,507) 249,455
Surplus .............................................................................. 1,993,574 1,993,574
Retained Earnings .................................................................... 18,406,217 15,770,822
------------- -------------
Total ........................................................................... 21,936,059 20,253,626
Less: Treasury Stock (89,007 and 73,145 shares at cost) ......................... (3,745,030) (2,841,437)
------------- -------------
Total ........................................................................... 18,191,029 17,412,189
------------- -------------
Total Liabilities and Capital ........................................................ $ 254,984,540 $ 205,825,657
============= =============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SMITHTOWN BANCORP
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
For Three Months Ended
September 30, 1999 September 30, 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Interest Income
Interest and Fees on Loans ......................................................... $3,289,269 $2,604,258
Interest and Dividends on:
Obligations of U.S. Government ................................................ 90,648 96,303
Obligations of U.S. Government Agencies ....................................... 303,743 178,181
Mortgage - Backed Securities .................................................. 412,961 459,762
Obligations of State & Political Subdivisions ................................. 200,419 179,277
Other Securities .............................................................. 24,681 13,903
Interest on Federal Funds Sold ..................................................... 159,223 200,938
Interest on Balances Due From Depository Institutions .............................. 39,680 1,305
---------- ----------
Total Interest Income ......................................................... 4,520,624 3,733,927
---------- ----------
Interest Expense
Money Market Accounts .............................................................. 404,473 362,725
Savings ............................................................................ 139,127 199,225
Time Deposits $100,000 and Over ................................................... 192,286 158,713
Other Time Deposits ................................................................ 329,265 320,759
Interest on Federal Funds Purchased and Securities
Sold Under Agreements to Repurchase ........................................... - -
Interest on Demand Notes Issued by U. S. Treasury .................................. 24,343 61,705
Interest on Other Borrowed Money ................................................... 309,204 42,627
---------- ----------
Total Interest Expense ........................................................ 1,398,698 1,145,754
---------- ----------
Net Interest Income ................................................................ 3,121,926 2,588,173
Provision for Possible Loan Losses ................................................. 90,000 83,400
---------- ----------
Net Interest Income After Provision for Possible
Loan Losses ...................................................................... 3,031,926 2,504,773
---------- ----------
Other Non - Interest Income
Trust Department Income ............................................................ 157,669 78,037
Service Charges on Deposit Accounts ................................................ 390,146 367,665
Other Income ....................................................................... 319,682 253,513
Net Securities Transactions ........................................................ 472 40,676
---------- ----------
Total Other Non - Interest Income ............................................. 867,969 739,891
---------- ----------
Other Operating Expenses
Salaries ........................................................................... 930,401 863,266
Pension and Other Employee Benefits ................................................ 185,828 137,885
Net Occupancy Expense of Bank Premises ............................................. 219,080 212,090
Furniture and Equipment Expense .................................................... 210,519 174,611
Miscellaneous Operating Expense .................................................... 472,128 359,889
---------- ----------
Total Other Operating Expense ................................................. 2,017,956 1,747,741
---------- ----------
Income Before Income Taxes ......................................................... 1,881,939 1,496,923
Provision for Income Taxes ......................................................... 700,357 550,107
---------- ----------
Net Income .................................................................... $1,181,582 $ 946,816
========== ==========
Earnings Per Share
Net Income ......................................................................... $ 1.46 $ 1.13
Cash Dividends Paid ................................................................ $ 0.22 $ 0.20
Weighted Average Shares Outstanding ................................................ 806,951 837,207
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SMITHTOWN BANCORP
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
For Nine Months Ended
September 30, 1999 September 30, 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Interest Income
Interest and Fees on Loans ....................................................... $ 8,991,975 $ 7,419,107
Interest and Dividends on:
Obligations of U.S. Government .............................................. 271,754 323,143
Obligations of U.S. Government Agencies ..................................... 844,480 702,276
Mortgage - Backed Securities ................................................ 1,262,940 1,592,065
Obligations of State & Political Subdivisions ............................... 626,078 442,238
Other Securities ............................................................ 55,488 43,416
Interest on Federal Funds Sold ................................................... 293,336 491,829
Interest on Balances Due From Depository Institutions ............................ 41,649 7,006
----------- -----------
Total Interest Income ....................................................... 12,387,700 11,021,080
----------- -----------
Interest Expense
Money Market Accounts ............................................................ 1,108,728 1,041,831
Savings .......................................................................... 413,797 605,735
Time Deposits $100,000 and Over ................................................. 483,256 397,347
Other Time Deposits .............................................................. 903,099 952,416
Interest on Federal Funds Purchased and Securities
Sold Under Agreements to Repurchase ......................................... - 72,826
Interest on Demand Notes Issued by U. S. Treasury ................................ 93,138 163,821
Interest on Other Borrowed Money ................................................. 540,901 126,490
----------- ----------
Total Interest Expense ...................................................... 3,542,919 3,360,466
----------- ----------
Net Interest Income .............................................................. 8,844,781 7,660,614
Provision for Possible Loan Losses ............................................... 270,000 336,600
----------- ----------
Net Interest Income After Provision for Possible
Loan Losses .................................................................... 8,574,781 7,324,014
----------- -----------
Other Non - Interest Income
Trust Department Income .......................................................... 334,557 282,725
Service Charges on Deposit Accounts .............................................. 1,127,554 1,095,759
Other Income ..................................................................... 900,446 701,502
Net Securities Transactions ...................................................... 472 40,676
----------- -----------
Total Other Non - Interest Income ........................................... 2,363,029 2,120,662
----------- -----------
Other Operating Expenses
Salaries ......................................................................... 2,681,843 2,431,959
Pension and Other Employee Benefits .............................................. 580,809 508,299
Net Occupancy Expense of Bank Premises ........................................... 644,582 621,607
Furniture and Equipment Expense .................................................. 599,594 454,141
Miscellaneous Operating Expense .................................................. 1,441,633 1,292,527
----------- -----------
Total Other Operating Expense ............................................... 5,948,461 5,308,533
----------- -----------
Income Before Income Taxes ....................................................... 4,989,349 4,136,143
Provision for Income Taxes ....................................................... 1,821,722 1,532,399
----------- -----------
Net Income .................................................................. $ 3,167,627 $ 2,603,744
=========== ===========
Earnings Per Share
Net Income ....................................................................... $ 3.90 $ 3.06
Cash Dividends Paid .............................................................. $ 0.640 $ 0.575
Weighted Average Shares Outstanding .............................................. 811,366 849,995
</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 6/30/98 ............ 843,493 $ 2,239,775 $ 1,993,574 $14,260,308 $(1,678,700) $ 256,573 $17,071,530
Comprehensive Income:
Net Income ................. 946,816 946,816
Other Comprehensive Income,
Net of Tax ............... 90,699 90,699
Total Comprehensive Income 1,037,515
Cash Dividends Declared ... (167,774) (167,774)
Treasury Stock Purchases ...... (11,686) (658,943) (658,943)
----------------------------------------------------------------------------------------------
Balance at 9/30/98 ............ 831,807 $ 2,239,775 $ 1,993,574 $15,039,350 $(2,337,643) $ 347,272 $17,282,328
==============================================================================================
Balance at 6/30/99 ............ 807,531 $ 2,239,775 $ 1,993,574 $17,402,154 $(3,707,664) $ (595,090) $17,332,749
Comprehensive Income:
Net Income ................. 1,181,582 1,181,582
Other Comprehensive Income,
Net of Tax ............... (108,417) (108,417)
Total Comprehensive Income 1,073,165
Cash Dividends Declared ... (177,519) (177,519)
Treasury Stock Purchases ...... (628) (37,366) (37,366)
-----------------------------------------------------------------------------------------------
Balance at 9/30/99 ............ 806,903 $ 2,239,775 $ 1,993,574 $18,406,217 $(3,745,030) $ (703,507) $18,191,029
===============================================================================================
</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 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 .................. 2,603,744 2,603,744
Other Comprehensive Income,
Net of Tax ................ 98,204 98,204
Total Comprehensive Income 2,701,948
Cash Dividends Declared .... (508,074) (508,074)
Treasury Stock Purchases ....... (34,729) (1,891,004) (1,891,004)
-----------------------------------------------------------------------------------------------
Balance at 9/30/98 ............. 831,807 $ 2,239,775 $ 1,993,574 $15,039,350 $(2,337,643) $ 347,272 $17,282,328
===============================================================================================
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 .................. 3,167,627 3,167,627
Other Comprehensive Income,
Net of Tax ................ (952,962) (952,962)
Total Comprehensive Income 2,214,665
Cash Dividends Declared .... (532,232) (532,232)
Treasury Stock Purchases ....... (15,862) (903,593) (903,593)
-----------------------------------------------------------------------------------------------
Balance at 9/30/99 ............. 806,903 $ 2,239,775 $ 1,993,574 $18,406,217 $(3,745,030) $(703,507) $18,191,029
===============================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SMITHTOWN BANCORP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
For Three Months Ended September 30,
1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Income ................................................................................. $ 1,181,582 $ 946,816
----------- ----------
Other Comprehensive Income, (Loss) Before Tax:
Unrealized Holding Gain Arising During the Period ..................................... (186,926) 156,378
Less: Reclassification Adjustment for Gains Included in Net Income ................... -- --
----------- ----------
(186,926) 156,378
Income Tax Related to Other Comprehensive Income ...................................... (78,509) 65,679
----------- ----------
Other Comprehensive Income, Net of Tax ................................................ (108,417) 90,699
----------- ----------
Total Comprehensive Income ....................................................... $ 1,073,165 $1,037,515
=========== ==========
</TABLE>
<TABLE>
<CAPTION>
SMITHTOWN BANCORP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
For Nine Months Ended September 30,
1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Income ................................................................................. $ 3,167,627 $2,603,744
----------- ----------
Other Comprehensive Income, (Loss) Before Tax:
Unrealized Holding Gain Arising During the Period ..................................... (1,643,038) 169,317
Less: Reclassification Adjustment for Gains Included in Net Income ................... -- --
----------- ----------
(1,643,038) 169,317
Income Tax Related to Other Comprehensive Income ...................................... (690,076) 71,113
----------- ----------
Other Comprehensive Income, Net of Tax ................................................ (952,962) 98,204
----------- ----------
Total Comprehensive Income ....................................................... $ 2,214,665 $2,701,948
=========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
For Three Months Ended September 30 ,
1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash Flows from Operating Activities
Net Income ......................................................................... $ 1,181,582 $ 946,816
Adjustments to reconcile net income to net cash
provided by operating activities:
Valuation Reserve for Other Real Estate Owned ................................. -- --
Depreciation on Premises and Equipment ........................................ 128,410 89,924
Provision for Possible Loan Losses ............................................ 90,000 83,400
Amortization of Transition Obligation ......................................... 38,169 13,878
Gain on the Sale of Other Real Estate Owned ................................... -- (65,437)
Increase in Interest Payable .................................................. 142,179 46,316
Increase in Miscellaneous Payables and
Accrued Expenses ........................................................... 228,940 197,969
(Increase)Decrease in Fees and Commissions
Receivable ................................................................. 61,500 (7,200)
(Increase)Decrease in Interest Receivable ..................................... (211,175) 15,018
(Increase)Decrease in Prepaid Expenses ........................................ (4,555) 10,603
Increase in Miscellaneous Reveivables ......................................... (72,032) (54,635)
(Increase)Decrease in Income Taxes Receivable ................................. 106,193 (378)
Decrease in Deferred Taxes .................................................... (6,836) (9,515)
Decrease in Accumulated Post Retirement Benefit
Obligation ................................................................. (11,418) (13,079)
Amortization of Investment Security Premiums and
Accretion of Discounts ..................................................... (20,142) 9,514
Gain on the Sale of Investment Securities ..................................... (472) (40,676)
------------ ------------
Cash Provided by Operating Activities ......................................... 1,650,343 1,222,518
------------ ------------
Cash Flows from Investing Activities
Proceeds from Disposition of Mortgage-Backed Securities:
Held to Maturity ............................................................ 485,037 600,835
Available for Sale .......................................................... 4,577,596 4,386,931
Proceeds from Disposition of Other Investment Securities:
Held to Maturity ............................................................ -- 1,051,094
Available for Sale .......................................................... 1,468,339 1,000,000
Purchases of Mortgage-Backed Securities:
Available for Sale .......................................................... (5,276,828) --
Purchases of Other Investment Securities:
Held to Maturity ............................................................ -- (102,289)
Available for Sale .......................................................... (4,085,000) (3,077,034)
Net (Increase)Decrease in Federal Funds Sold .................................. 12,900,000 6,100,000
Net (Increase)Decrease in Loans ............................................... (18,335,752) (3,483,661)
Purchases of Premises and Equipment ........................................... (70,909) (114,830)
Proceeds from Sale of Other Real Estate Owned ................................. -- 3,197,693
Purchase of Treasury Stock .................................................... (37,366) (658,942)
------------ ------------
Cash Provided(Used) by Investing Activities ................................... (8,374,883) 8,899,797
------------ ------------
Cash Flows from Financing Activities
Net (Decrease)Increase in Demand Deposits, NOW
Accounts and Savings Accounts ................................................. 4,446,562 (982,604)
Net Increase in Time Accounts ................................................. 976,852 556,909
Cash Dividends Paid ........................................................... (177,766) (168,776)
Net Increase(Decrease)in Borrowed Funds ...................................... 4,318,309 (9,814,823)
------------ ------------
Cash Provided(Used)by Financing Activities .................................... 9,563,957 (10,409,294)
------------ ------------
Net Increase(Decrease)in Cash and Due from Banks .............................. 2,839,417 (286,979)
Cash and Due from Banks, Beginning of Period .................................. 8,831,921 8,729,362
------------ ------------
Cash and Due from Banks, End of Period ........................................ $ 11,671,338 $ 8,442,383
============ ============
Supplemental Disclosures of Cash Flow Information
Cash Paid During the Year for:
Interest ..................................................................... $ 333,546 $ 104,332
Income Taxes ................................................................. $ 601,000 $ 560,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SMITHTOWN BANCORP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
For Nine Months Ended September 30
1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash Flows from Operating Activities
Net Income ......................................................................... $ 3,167,627 $ 2,603,744
Adjustments to reconcile net income to net cash
provided by operating activities:
Valuation Reserve for Other Real Estate Owned ................................. -- 82,998
Depreciation on Premises and Equipment ........................................ 382,532 267,465
Provision for Possible Loan Losses ............................................ 270,000 336,600
Amortization of Transition Obligation ......................................... 90,219 65,930
Gain on the Sale of Other Real Estate Owned ................................... (29,281) (65,437)
Increase in Interest Payable .................................................. 182,645 39,090
Increase(Decrease)in Miscellaneous Payables and
Accrued Expenses ........................................................... (30,806) 111,081
(Increase)Decrease in Fees and Commissions
Receivable ................................................................. 56,700 (19,200)
(Increase)Decrease in Interest Receivable ..................................... (480,671) 27,893
Increase in Prepaid Expenses .................................................. (134,053) (24,436)
Increase in Miscellaneous Reveivables ......................................... (24,047) (111,980)
Decrease in Income Taxes Receivable ........................................... 77,357 151,030
Decrease in Deferred Taxes .................................................... (105,925) (205,631)
Decrease in Accumulated Post Retirement Benefit
Obligation ................................................................. (34,254) (40,320)
Amortization of Investment Security Premiums and
Accretion of Discounts ..................................................... 104,654 136,829
Gain on the Sale of Investment Securities ..................................... (472) (40,676)
------------ ------------
Cash Provided by Operating Activities ......................................... 3,492,225 3,314,980
------------ ------------
Cash Flows from Investing Activities
Proceeds from Disposition of Mortgage-Backed Securities:
Held to Maturity ............................................................ 1,526,825 1,798,665
Available for Sale .......................................................... 9,421,629 12,943,750
Proceeds from Disposition of Other Investment Securities:
Held to Maturity ............................................................ 1,248,604 2,426,432
Available for Sale .......................................................... 2,477,714 9,015,875
Purchases of Mortgage-Backed Securities:
Available for Sale .......................................................... (15,492,452) --
Purchases of Other Investment Securities:
Held to Maturity ............................................................ (723,862) (415,730)
Available for Sale .......................................................... (8,285,400) (14,557,822)
Net (Increase)Decrease in Federal Funds Sold .................................. 8,100,000 (6,700,000)
Net Increase in Loans ......................................................... (43,983,388) (9,691,110)
Purchases of Premises and Equipment ........................................... (255,844) (850,849)
Proceeds from Sale of Other Real Estate Owned ................................. 246,423 3,197,693
Purchase of Treasury Stock .................................................... (903,594) (1,891,004)
------------ ------------
Cash Used by Investing Activities ............................................. (46,623,345) (4,724,100)
------------ ------------
Cash Flows from Financing Activities
Net Increase in Demand Deposits, NOW
Accounts and Savings Accounts ................................................. 13,620,502 3,536,242
Net Increase in Time Accounts ................................................. 8,434,533 4,206,873
Cash Dividends Paid ........................................................... (520,606) (491,621)
Net Increase(Decrease)in Borrowed Funds ...................................... 26,143,664 (5,067,362)
------------ ------------
Cash Provided by Financing Activities ......................................... 47,678,093 2,184,132
------------ ------------
Net Increase in Cash and Due from Banks ....................................... 4,546,973 775,012
Cash and Due from Banks, Beginning of Period .................................. 7,124,365 7,667,371
------------ ------------
Cash and Due from Banks, End of Period ........................................ $ 11,671,338 $ 8,442,383
============ ============
Supplemental Disclosures of Cash Flow Information
Cash Paid During the Year for:
Interest ..................................................................... $ 634,038 $ 363,137
Income Taxes ................................................................. $ 1,850,290 $ 1,587,000
</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 Bank's Balance Sheet remains very strong, with significant growth since
December 31, 1998. Total assets at September 30, 1999 and December 31, 1998 were
$254,984,540 and $205,825,657 respectively, a 23.88% increase. Loan growth
during this same period was $43,713,388 or 37.86%, predominantly in the real
estate sector. Residential mortgages accounted for $11,887,683 or 27.19% of this
growth. Commercial real estate loans accounted for a majority of the remaining
growth. The Allowance for Possible Loan Loss Account remains adequate and
represents 1.39% of total loans and 130.02% of non-performing loans. The
investment portfolio also increased in volume, but asset allocation remained
relatively constant during the nine month period ended September 30, 1999. New
purchases included $6,500,000 of Agency securities and $15,500,000 of adjustable
rate GNMA securities. Sales also were transacted during the year resulting in a
net increase in the portfolio. Federal Funds sold decreased from $12,500,000 at
December 31, 1998 to $4,400,000 at September 30, 1999. These funds were used to
support the higher yielding loan growth. One OREO property was sold during 1999,
resulting in a $217,141 decrease in this asset category. Currently, only two
properties remain in OREO. Significant changes can be seen on the Liability side
of the Balance Sheet. Deposit growth has been at a very high level this year.
The Bank has seen an increase of $22,055,035 or 11.99% growth. This has been due
to a very competitive rate structure, various deposit promotion programs and
intense sales training for staff. The Bank's deposit mix has also changed this
year, with a higher volume of jumbo CD's and money market accounts. This is due
to the introduction of two new deposit products. The Bank now offers a Premier
Money Market Account, a variable rate product, tied to the 90 day treasury bill
for account balances over $50,000. Also part of its standard list of products
are Jumbo CD's, which are offered for CD balances over $100,000 for terms under
one year. Both products were launched during the third quarter and have been
very successful in attracting new balances. Borrowings have also increased
significantly during 1999 as an alternative source of funds. The borrowings have
all been secured through the Federal Home Loan Bank and range in term from one
year to ten years with rates ranging from 4.935% to 5.56%. These funds along
with the increased level of deposit balances have enabled the Bank to continue
to fund its loan demand and increase earnings. Capital levels remain very strong
by all regulatory guidelines and are detailed below.
September 30, 1999 December 31, 1998 Required Ratios
Tier I 11.09% 12.09% 4.00%
Tier II 1.25% 1.25% *
Total Risk Based 12.34% 14.14% 8.00%
Capital Ratio
Leverage Ratio 7.61% 8.47% 4.00%
(for the quarter)
*Tier II Capital is limited to 100% of Tier I Capital.
Net income for the nine month period ended September 30, 1999 was $3,167,627
compared to $2,603,744 for the same period in 1998. This represents a 21.66%
increase. Reasons for the increase are derived from the previously discussed
adjustments to the Bank's Balance Sheet. Loan income grew by 21.20% as a result
of the growth in the portfolio. Yield on the portfolio is now at 8.80%.
Investment income also increased as a result of changes in the portfolio, with
earnings growing by 5.43%. Yield on a tax equivalent basis on the Investment
Portfolio is 6.56%. Interest income on Balances Due from Depository Institutions
increased by $34,643 or 494.48% due to an $8,000,000 CD held at the Federal Home
Loan Bank for 30 days. Overall interest income grew by $1,366,620 or 12.4% over
the comparable period in 1998. Interest expense only increased by $182,453 or
5.4% over the 1998 comparable period, in spite of the large deposit account and
borrowing growth. This has been the result of careful interest rate management
as well as the reduced rate environment characteristic of 1999. The resultant
net interest income for the nine month period ended September 30, 1999 increased
by 17.08%. Cost of funds for the Bank remains very low at 2.97%. Net interest
margin at September 30, 1999 was 6.10%, very high compared to NYS and national
peer group averages. Other non-interest income increased by $242,367 or 11.43%
due primarily to increased loan origination fees. Operating expenses also
increased by $639,928 or 12.05% resulting from significant technology expenses
related to enhanced software and hardware products. As the end of the year
approaches, the Bank is preparing to offer three new products with associated
technology costs, but which will place Bank of Smithtown further in front of its
peers in terms of services and delivery channel alternatives.
Two important measures of a Bank's profitability are its Return on Average
Assets (ROAA) and Return on Average Equity. Both of these ratios remain very
high by all industry standards. As of September 30, 1999 the Bank's ROAA and
ROAE were 1.85 and 23.96. EPS for the nine month period ended September 30, 1999
was $3.90 compared to $3.06 during the same period in 1998, a 27.45% increase.
EPS for the three month period ended September 30, 1999 was 29.20% higher than
the same period in 1998. Management remains very confidant that 1999 will once
again witness record earnings secured by high asset quality, a winning
combination by any standard.
<PAGE>
<TABLE>
<CAPTION>
SMITHTOWN BANCORP
INTEREST RATE SENSITIVITY REPORT
SEPTEMBER 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 ................................ $ 2,650,429 $15,016,462 $ 6,627,213 $15,917,639 $40,211,743
FEDERAL FUNDS SOLD ......................... 4,400,000 0 0 0 4,400,000
LOANS:
INSTALLMENT ............................ 221,901 1,390,015 2,687,608 2,860,411 7,159,935
REAL ESTATE AND COMMERCIAL ............. 32,708,457 2,843,328 1,667,010 6,864,088 44,082,883
CASH AND DUE FROM BANKS .................... 372,768 0 0 0 372,768
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 ......................................... $40,353,555 $19,249,805 $10,981,831 $25,642,138 $96,227,329
----------- ----------- ----------- ----------- -----------
SMITHTOWN BANCORP
INTEREST RATE SENSITIVITY REPORT(continue)
SEPTEMBER 30, 1999
1-3 3-5 5+
YEARS YEARS YEARS OTHER TOTAL
____________________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
ASSETS:
INVESTMENTS .............................. $ 2,953,496 $ 7,124,860 $ 19,191,961 $ 1,642,200 $ 71,124,260
FEDERAL FUNDS SOLD ....................... 0 0 0 0 4,400,000
LOANS:
INSTALLMENT .......................... 2,826,870 4,027,844 3,628,892 0 17,643,541
REAL ESTATE AND COMMERCIAL ........... 16,929,337 57,318,209 24,263,314 87,595 142,681,338
CASH AND DUE FROM BANKS .................. 0 0 0 11,298,570 11,671,338
FIXED ASSETS ............................. 0 0 0 3,132,603 3,132,603
OTHER ASSETS ............................. 0 0 0 5,488,041 5,488,041
RESERVE FOR POSSIBLE LOAN LOSSES ......... 0 0 0 (2,237,827) (2,237,827)
NON-ACCRUALS ............................. 0 0 0 1,650,510 1,650,510
UNEARNED DISCOUNT ........................ 0 0 0 (569,264) (569,264)
------------- ------------- ------------- ------------- -------------
TOTAL ....................................... $ 22,709,703 $ 68,470,913 $ 47,084,167 $ 20,492,428 $ 254,984,540
------------- ------------- ------------- ------------- -------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SMITHTOWN BANCORP
INTEREST RATE SENSITIVITY REPORT
SEPTEMBER 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 $ 1,913,693 $ 1,913,693 $ 3,827,386 $ 7,654,772
MONEY MARKETS ......................... 0 6,616,240 6,616,240 13,232,482 26,464,962
NOW ................................... 0 754,613 754,613 1,509,225 3,018,451
TIME DEPOSITS OF $100,000 + ........... 0 8,034,523 2,306,288 1,614,029 11,954,840
OTHER TIME DEPOSITS ................... 31,002 4,530,826 7,018,055 8,392,197 19,972,080
DEMAND ................................ 0 1,373,521 1,373,521 2,747,042 5,494,084
OTHER BORROWED MONEY .................. 0 4,318,309 0 20,000,000 24,318,309
OTHER LIABILITIES ..................... 0 0 0 0 0
STOCKHOLDERS' EQUITY .................. 0 0 0 0 0
----------- ----------- ----------- ----------- -----------
TOTAL .................................... $ 31,002 $27,541,725 $19,982,410 $51,322,361 $98,877,498
----------- ----------- ----------- ----------- -----------
SMITHTOWN BANCORP
INTEREST RATE SENSITIVITY REPORT(continue)
SEPTEMBER 30, 1999
1-3 3-5 5+
YEARS YEARS YEARS OTHER TOTAL
____________________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
LIABILITIES:
SAVINGS ............................... $ 15,309,546 $ 15,309,546 $ 0 $ 0 $ 38,273,864
MONEY MARKETS ......................... 26,464,965 0 0 0 52,929,927
NOW ................................... 6,036,900 6,036,900 0 0 15,092,251
TIME DEPOSITS OF $100,000 + ........... 4,112,875 110,379 0 0 16,178,094
OTHER TIME DEPOSITS ................... 7,184,450 1,358,988 0 0 28,515,518
DEMAND ................................ 10,988,169 10,988,169 0 27,470,421 54,940,843
OTHER BORROWED MONEY .................. 0 5,000,000 0 0 29,318,309
OTHER LIABILITIES ..................... 0 0 0 1,544,705 1,544,705
STOCKHOLDERS' EQUITY .................. 0 0 0 18,191,029 18,191,029
------------ ------------ ------------ ------------ ------------
TOTAL .................................... $ 70,096,905 $ 38,803,982 $ 0 $ 47,206,155 $254,984,540
------------ ------------ ------------ ------------ ------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SMITHTOWN BANCORP
INTEREST RATE SENSITIVITY REPORT
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 ........................... 40,322,553 (8,291,920) (9,000,579) (25,680,223) (2,650,169)
GAP/TOTAL ASSETS ..................... 15.81% -3.25% -3.53% -10.07% -1.04%
CUMULATIVE INTEREST
SENSITIVITY GAP ...................... 40,322,553 32,030,633 23,030,054 (2,650,169) (2,650,169)
% OF CUMULATIVE GAP
TO TOTAL ASSETS ...................... 15.81% 12.56% 9.03% -1.04% -1.04%
SMITHTOWN BANCORP
INTEREST RATE SENSITIVITY REPORT(continue)
SEPTEMBER 30, 1999
1-3 3-5 5+
YEARS YEARS YEARS OTHER TOTAL
____________________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
INTEREST SENSITIVITY GAP (26,713,727)
PER PERIOD (47,387,202) 29,666,931 47,084,167
GAP/TOTAL ASSETS -18.58% 11.63% 18.47%
CUMULATIVE INTEREST
SENSITIVITY GAP (50,037,371) (20,370,440) 26,713,727
% OF CUMULATIVE GAP
TO TOTAL ASSETS -19.62% -7.99% 10.48%
ASSUMPTIONS:
1) BALANCE SHEET FIGURES AS OF SEPTEMBER 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 September 30,
1999, and its results of operations for the nine months and three months ended
September 30, 1999 and 1998 and its cash flows for the nine months and three
months ended September 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:
September 30, 1999 $71,173,011
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
November 12, 1999
/s/ Bradley E. Rock
---------------------------
Bradley E. Rock, President
November 12, 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> SEP-30-1999
<CASH> 3,692,899
<INT-BEARING-DEPOSITS> 372,114
<FED-FUNDS-SOLD> 4,400,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 62,772,021
<INVESTMENTS-CARRYING> 8,352,239
<INVESTMENTS-MARKET> 71,173,011
<LOANS> 161,406,126
<ALLOWANCE> 2,237,827
<TOTAL-ASSETS> 254,984,540
<DEPOSITS> 206,853,479
<SHORT-TERM> 9,319,309
<LIABILITIES-OTHER> 1,367,186
<LONG-TERM> 8,000,000
0
0
<COMMON> 2,239,775
<OTHER-SE> 15,951,254
<TOTAL-LIABILITIES-AND-EQUITY> 254,984,540
<INTEREST-LOAN> 8,991,975
<INTEREST-INVEST> 3,354,076
<INTEREST-OTHER> 41,649
<INTEREST-TOTAL> 12,387,700
<INTEREST-DEPOSIT> 2,908,880
<INTEREST-EXPENSE> 3,542,919
<INTEREST-INCOME-NET> 8,844,781
<LOAN-LOSSES> 270,000
<SECURITIES-GAINS> 472
<EXPENSE-OTHER> 5,948,461
<INCOME-PRETAX> 4,989,349
<INCOME-PRE-EXTRAORDINARY> 3,167,627
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,167,627
<EPS-BASIC> 3.90
<EPS-DILUTED> 3.90
<YIELD-ACTUAL> 7.92
<LOANS-NON> 1,650,510
<LOANS-PAST> 70,682
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 0
<CHARGE-OFFS> 191,511
<RECOVERIES> 38,967
<ALLOWANCE-CLOSE> 2,120,371
<ALLOWANCE-DOMESTIC> 2,237,827
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 550,571
</TABLE>
