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, 2000
------------------
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: 805,813 Shares of Common stock
($2.50 Par Value) Outstanding as of June 30, 2000.
<PAGE>
SMITHTOWN BANCORP
INDEX
Part I - FINANCIAL INFORMATION PAGES
------
Item 1. Financial Statements
Consolidated Balance Sheets
June 30, 2000 and December 31, 1999 4
Consolidated Statements of Income
Three months ended June 30, 2000 and 1999 5
Consolidated Statements of Income
Six months ended June 30, 2000 and 1999 6
Consolidated Statements of Changes in Stockholders' Equity
Three months ended June 30, 2000 and 1999 7
Consolidated Statements of Changes in Stockholders' Equity
Six months ended June 30, 2000 and 1999 8
Consolidated Statements of Comprehensive Income
Three months ended June 30, 2000 and 1999 9
Consolidated Statements of Comprehensive Income
Six months ended June 30, 2000 and 1999 10
Consolidated Statements of Cash Flows
Three months ended June 30, 2000 and 1999 11
Consolidated Statements of Cash Flows
Six months ended June 30, 2000 and 1999 12
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 13 - 15
Item 3. Notes to Consolidated Financial Statements 16
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, 2000 December 31, 1999
____________________________________________________________________________________________________________________________________
<S> <C> <C>
Assets
Cash and Due from Banks .......................................................... $ 8,719,669 $ 10,195,378
Investment Securities:
Investment Securities Held to Maturity
Mortgage - Backed Securities ................................................ 2,103,693 2,829,437
Obligations of State and Political Subdivisions ............................. 4,384,015 5,141,551
------------- -------------
Total (Estimated Fair Value $6,451,074 and $7,969,754 .................... . 6,487,708 7,970,988
at 6/30/00 and 12/31/99, respectively) ------------- -------------
Investment Securities Available for Sale
Obligations of U.S. Government .............................................. -- 3,012,570
Obligations of U.S. Government Agencies ..................................... 22,768,030 17,331,246
Mortgage - Backed Securities ................................................ 21,533,062 19,612,906
Oligations of State and Political Subdivisions .............................. 13,363,783 11,152,866
Other Securities ............................................................ 4,600,700 3,580,700
------------- -------------
Total (At Estimated Fair Value) ............................................ 62,265,575 54,690,288
------------- -------------
Total Investment Securities ................................................. 68,753,283 62,661,276
------------- -------------
(Estimated Fair Value $68,716,649 and $62,660,042........................
at 6/30/00 and 12/31/99, respectively)
Federal Funds Sold ............................................................... 950,000 10,350,000
------------- -------------
Loans ............................................................................ 212,185,988 176,819,745
Less: Unearned Discount ..................................................... 787,783 619,728
Allowance for Possible Loan Losses .................................... 2,386,436 2,251,668
------------- -------------
Loans, Net ....................................................................... 209,011,769 173,948,349
------------- -------------
Bank Premises and Equipment ...................................................... 3,148,264 3,207,348
------------- -------------
Other Assets
Other Real Estate Owned ..................................................... 855,353 855,353
Other ....................................................................... 11,087,079 4,863,739
------------- -------------
Total ....................................................................... $ 302,525,417 $ 266,081,443
============= =============
Liabilities
Deposits:
Demand (Non-Interest Bearing) ............................................... $ 55,134,570 $ 50,008,452
Money Market ................................................................ 68,078,755 53,667,605
NOW ......................................................................... 18,212,453 15,968,937
Savings ..................................................................... 35,067,302 35,594,368
Time ........................................................................ 73,901,622 52,566,899
------------- -------------
Total Deposits ............................................................. 250,394,702 207,806,261
------------- -------------
Dividend Payable ................................................................. 193,395 177,357
Other Borrowings ................................................................. 30,000,000 38,000,000
Other Liabilities ................................................................ 1,295,037 1,407,810
------------- -------------
Total Liabilities .......................................................... 281,883,134 247,391,428
------------- -------------
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 Loss ............................................. (1,140,583) (1,069,376)
Capital Surplus .................................................................. 1,993,574 1,993,574
Retained Earnings ................................................................ 21,358,705 19,314,995
------------- -------------
Total ....................................................................... 24,451,471 22,478,968
Less: Treasury Stock (90,097 and 89,742 shares at cost at ........................ 3,809,188 3,788,953
6/30/00 and 12/31/99, respectively) ------------- --------------
Total Stockholders' Equity .................................................. 20,642,283 18,690,015
------------- -------------
Total ....................................................................... $ 302,525,417 $ 266,081,443
============= =============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SMITHTOWN BANCORP
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
For the Three Months Ended June 30,
2000 1999
____________________________________________________________________________________________________________________________________
<S> <C> <C>
Interest Income
Interest and Fees on Loans ......................................................... $4,375,836 $2,985,292
Interest and Dividends on:
Obligations of U.S. Government ................................................ -- 90,960
Obligations of U.S. Government Agencies ....................................... 417,143 282,038
Mortgage - Backed Securities .................................................. 360,739 460,197
Obligations of State & Political Subdivisions ................................. 216,710 209,627
Other Securities .............................................................. 81,196 16,056
Interest on Federal Funds Sold ..................................................... 224,731 28,102
Interest on Balances Due From Depository Institutions .............................. 6,076 1,407
---------- ----------
Total Interest Income ......................................................... 5,682,431 4,073,679
---------- ----------
Interest Expense
Money Market Accounts .............................................................. 723,643 358,844
Savings ............................................................................ 133,744 137,595
Time Deposits $100,000 and Over ................................................... 225,023 156,883
Other Time Deposits ................................................................ 761,143 306,458
Interest on Other Borrowed Money ................................................... 471,994 168,004
---------- ----------
Total Interest Expense ........................................................ 2,315,547 1,127,784
---------- ----------
Net Interest Income ................................................................ 3,366,884 2,945,895
Provision for Possible Loan Losses ................................................. 120,000 90,000
---------- ----------
Net Interest Income After Provision for Possible
Loan Losses ...................................................................... 3,246,884 2,855,895
---------- ----------
Other Non - Interest Income
Trust Department Income ............................................................ 110,499 85,028
Service Charges on Deposit Accounts ................................................ 401,958 366,927
Other Income ....................................................................... 411,974 226,606
---------- ----------
Total Other Non - Interest Income ............................................. 924,431 678,561
---------- ----------
Other Operating Expenses
Salaries ........................................................................... 1,008,188 899,328
Pension and Other Employee Benefits ................................................ 235,199 210,309
Net Occupancy Expense of Bank Premises ............................................. 221,285 209,483
Furniture and Equipment Expense .................................................... 208,113 204,454
Miscellaneous Operating Expense .................................................... 494,817 523,337
---------- ----------
Total Other Operating Expense ................................................. 2,167,602 2,046,911
---------- ----------
Income Before Income Taxes ......................................................... 2,003,713 1,487,545
Provision for Income Taxes ......................................................... 698,013 534,608
---------- ----------
Net Income .................................................................... $1,305,700 $ 952,937
========== ==========
Earnings Per Share
Net Income ........................................................................ $ 1.62 $ 1.18
Cash Dividends Declared ........................................................... $ 0.24 $ 0.22
Weighted Average Shares Outstanding ............................................... 806,125 809,385
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SMITHTOWN BANCORP
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
For the Six Months Ended June 30,
2000 1999
____________________________________________________________________________________________________________________________________
<S> <C> <C>
Interest Income
Interest and Fees on Loans ...................................................... $ 8,347,632 $ 5,702,706
Interest and Dividends on:
Obligations of U.S. Government ............................................. 23,602 181,106
Obligations of U.S. Government Agencies .................................... 738,779 540,737
Mortgage - Backed Securities ............................................... 705,712 849,978
Obligations of State & Political Subdivisions .............................. 419,468 425,659
Other Securities ........................................................... 140,560 30,808
Interest on Federal Funds Sold .................................................. 412,889 134,113
Interest on Balances Due From Depository Institutions ........................... 11,988 1,969
------------ ------------
Total Interest Income ...................................................... 10,800,630 7,867,076
------------ ------------
Interest Expense
Money Market Accounts ........................................................... 1,294,919 704,256
Savings ......................................................................... 264,963 274,670
Time Deposits $100,000 and Over ................................................ 474,610 290,970
Other Time Deposits ............................................................. 1,301,301 573,833
Interest on Other Borrowed Money ................................................ 1,035,015 300,492
------------ ------------
Total Interest Expense ...................................................... 4,370,808 2,144,221
------------ ------------
Net Interest Income ............................................................. 6,429,822 5,722,855
Provision for Possible Loan Losses .............................................. 240,000 180,000
Net Interest Income After Provision for Possible ------------ ------------
Loan Losses ................................................................... 6,189,822 5,542,855
------------ ------------
Other Non - Interest Income
Trust Department Income ......................................................... 286,148 176,889
Service Charges on Deposit Accounts ............................................. 799,251 737,408
Other Income .................................................................... 734,142 580,765
Net Loss on Sale of Investment Securities ....................................... (1,359) --
------------ ------------
Total Other Non - Interest Income .......................................... 1,818,182 1,495,062
------------ ------------
Other Operating Expenses
Salaries ........................................................................ 1,984,280 1,751,442
Pension and Other Employee Benefits ............................................. 431,210 394,981
Net Occupancy Expense of Bank Premises .......................................... 465,493 425,502
Furniture and Equipment Expense ................................................. 400,616 389,075
Miscellaneous Operating Expense ................................................. 937,646 969,507
------------ ------------
Total Other Operating Expense .............................................. 4,219,245 3,930,507
------------ ------------
Before Income Taxes ........................................................ 3,788,759 3,107,410
Provision for Income Taxes ...................................................... 1,358,174 1,121,365
------------ ------------
Net Income ................................................................. $ 2,430,585 $ 1,986,045
============ ============
Earnings Per Share
Net Income ...................................................................... $ 3.02 $ 2.44
Cash Dividends Declared ......................................................... $ 0.48 $ 0.42
Weighted Average Shares Outstanding ............................................. 806,147 813,611
</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 3/31/99 ............ 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
================================================================================================
Balance at 3/31/00 ............ 806,168 $ 2,239,775 $ 1,993,574 $20,246,400 $(3,788,953) $(1,170,053) $ 19,520,743
Comprehensive Income:
Net Income ................. 1,305,700 1,305,700
Other Comprehensive Income,
Net of Tax ............... 29,470 29,470
-------------
Total Comprehensive Income 1,335,170
Cash Dividends Declared .... (193,395) (193,395)
Treasury Stock Purchases ...... (355) (20,235) (20,235)
________________________________________________________________________________________________
Balance at 6/30/00 ............ 805,813 $ 2,239,775 $ 1,993,574 $ 21,358,705 $(3,809,188) $(1,140,583) $ 20,642,283
================================================================================================
</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 1/1/99 822,765 $ 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
================================================================================================
Balance at 1/1/00 806,168 $ 2,239,775 $ 1,993,574 $19,314,995 $(3,788,953) $(1,069,376) $ 18,690,015
Comprehensive Income:
Net Income 2,430,585 2,430,585
Other Comprehensive Income,
Net of Tax (71,207) (71,207)
-------------
Total Comprehensive Income 2,359,378
Cash Dividends Declared (386,875) (386,875)
Treasury Stock Purchases (355) (20,235) (20,235)
________________________________________________________________________________________________
Balance at 6/30/00 805,813 $2,239,775 $1,993,574 $21,358,705 $(3,809,188) $(1,140,583) $ 20,642,283
================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SMITHTOWN BANCORP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
For Three Months Ended June 30,
2000 1999
____________________________________________________________________________________________________________________________________
<S> <C> <C> >
Net Income ............................................................................... $ 1,305,700 $ 952,937
----------- ----------
Other Comprehensive Income, Before Tax:
Unrealized Holding Gain(Loss) Arising During the Period ............................. 50,811 (1,146,426)
Income Tax Related to Other Comprehensive Income .................................... 21,341 (481,499)
----------- ------------
Other Comprehensive Income, Net of Tax .............................................. 29,470 (664,927)
----------- ------------
Total Comprehensive Income ..................................................... $ 1,335,170 $ 288,010
=========== ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SMITHTOWN BANCORP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
For Six Months Ended June 30,
2000 1999
___________________________________________________________________________________________________________________________________
<S> <C> <C>
Net Income ............................................................................... $ 2,430,585 $ 1,986,046
Other Comprehensive Income, Before Tax: ----------- ------------
Unrealized Holding Gain(Loss) Arising During the Period ............................. (122,770) (1,456,112)
Income Tax Related to Other Comprehensive Income .................................... (51,563) (611,567)
----------- -----------
Other Comprehensive Income, Net of Tax .............................................. (71,207) (844,545)
----------- -----------
Total Comprehensive Income ..................................................... $ 2,359,378 $ 1,141,501
=========== ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SMITHTOWN BANCORP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
For Three Months Ended June 30,
2000 1999
____________________________________________________________________________________________________________________________________
<S> <C> <C>
Cash Flows from Operating Activities
Net Income ................................................................................. 1,305,700 952,937
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation on Premises and Equipment ............................................... 130,167 129,866
Provision for Possible Loan Losses ................................................... 120,000 90,000
Amortization of Transition Obligation ................................................ 9,000 38,169
Increase (Decrease) in Interest Payable .............................................. (145,057) 42,455
Decrease in Miscellaneous Payables and Accrued Expenses .............................. (64,103) (69,516)
Increase in Interest Receivable ...................................................... (74,878) (1,890)
Increase in Prepaid Expenses ......................................................... (122,544) (149,245)
Increase in Miscellaneous Receivable ................................................. (719,913) (69,858)
Increase in Income Taxes Receivable .................................................. (342,237) (511,201)
Increase in Deferred Taxes ........................................................... (88,449) (54,891)
Decrease in Accumulated Post Retirement Benefit Obligation ........................... (10,203) (11,418)
Amortization of Investment Security Premiums and Accretion of Discounts .............. (134,522) 78,054
Increase in Cash Surrender Value of Officer's Life Insurance Policies ................ (67,800) --
----------- ------------
Cash Provided (Used) by Operating Activities ......................................... (204,839) 463,462
----------- ------------
Cash Flows from Investing Activities
Proceeds from Disposition of Mortgage-Backed Securities:
Held to Maturity ................................................................... 521,656 364,454
Available for Sale ................................................................. 838,713 2,409,088
Proceeds from Disposition of Other Investment Securities:
Held to Maturity ................................................................... 692,501 1,138,758
Available for Sale ................................................................. -- 870,908
Purchase of Mortgage-Backed Securities
Available for Sale ................................................................. (4,059,953) --
Purchase of Other Investment Securities:
Held to Maturity ................................................................... (4,453,309) (723,862)
Available for Sale ................................................................. -- (2,200,400)
Net (Increase) Decrease in Federal Funds Sold ........................................ 18,050,000 (17,000,000)
Net Increase in Loans ................................................................ (23,804,579) (13,427,900)
Purchase of Equipment ................................................................ (161,214) (139,534)
Purchase of Treasury Stock ........................................................... (20,235) (359,479)
------------- ------------
Cash Used by Investing Activities .................................................... (12,396,420) (29,067,967)
------------- ------------
Cash Flows from Financing Activities
Net Increase in Demand Deposits, NOW Accounts
and Savings Accounts ............................................................... 9,018,944 6,231,345
Net Increase in Time Accounts ........................................................ 8,206,894 8,963,291
Cash Dividends Paid .................................................................. (193,480) (178,990)
Net Increase (Decrease) in Borrowed Funds ............................................ (5,000,000) 14,597,835
------------ ------------
Cash Provided by Financing Activities ................................................ 12,032,358 29,613,481
------------ ------------
Net Increase (Decrease) in Cash and Due from Banks ................................... (568,901) 1,008,976
Cash and Due from Banks, Beginning of Period ......................................... 9,288,570 7,822,945
------------ -----------
Cash and Due from Banks, End of Period ............................................... 8,719,669 8,831,921
============ ===========
Supplemental Disclosures of Cash Flow Information
Cash Paid During Period for:
Interest ................................................................................. 641,876 168,500
Income Taxes ............................................................................. 1,128,700 1,100,700
Non-Cash Investing Activities
Unrealized Gain (Loss) on securities Available for Sale, Net of Tax...................... 29,470 (664,927)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SMITHTOWN BANCORP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
For Six Months Ended June 30,
2000 1999
____________________________________________________________________________________________________________________________________
<S> <C> <C>
Cash Flows from Operating Activities
Net Income ................................................................................. 2,430,585 1,986,046
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation on Premises and Equipment ................................................ 259,483 254,122
Provision for Possible Loan Losses .................................................... 240,000 180,000
Loss on Sale of Investment Securities ................................................. 1,360 --
Amortization of Transition Obligation ................................................. 18,000 52,050
Gain on Other Real Estate Owned ....................................................... -- (29,281)
Increase in Interest Payable .......................................................... 19,810 40,464
Decrease in Miscellaneous Payables and Accrued Expenses ............................... (131,826) (259,636)
Increase in Fees and Commissions Receivable ........................................... -- (4,800)
Increase in Interest Receivable ....................................................... (52,778) (269,496)
Increase in Prepaid Expenses .......................................................... (615,028) (129,498)
(Increase) Decrease in Miscellaneous Receivable ....................................... (450,181) 47,983
(Increase) Decrease in Income Taxes Receivable ........................................ 132,215 (28,836)
Increase in Deferred Taxes ............................................................ (70,951) (99,089)
Decrease in Accumulated Post Retirement Benefit Obligation ............................ (20,811) (22,836)
Amortization of Investment Security Premiums and Accretion of Discounts ............... (136,079) 124,798
Increase in Cash Surrender Value of Officer's Life Insurance Policies ................. (113,000) --
------------- ------------
Cash Provided by Operating Activities ................................................. 1,510,799 1,841,991
------------- ------------
Cash Flows from Investing Activities
Proceeds from Disposition of Mortgage-Backed Securities:
Held to Maturity .................................................................... 773,829 1,041,788
Available for Sale .................................................................. 2,096,730 4,844,033
Proceeds from Disposition of Other Investment Securities:
Held to Maturity .................................................................... 752,501 1,248,604
Available for Sale .................................................................. 4,084,350 1,009,375
Purchase of Mortgage-Backed Securities
Available for Sale .................................................................. (4,059,953) (10,215,625)
Purchase of Other Investment Securities:
Held to Maturity .................................................................... -- (723,862)
Available for Sale .................................................................. (9,727,516) (4,200,400)
Purchase of Officer's Life Insurance Policies ......................................... (5,000,000) --
Net (Increase) Decrease in Federal Funds Sold ......................................... 9,400,000 (4,800,000)
Net Increase in Loans ................................................................. (35,303,418) (25,647,634)
Purchase of Equipment ................................................................. (200,400) (184,935)
Proceeds from Sale of Other Real Estate Owned ......................................... -- 246,423
Purchase of Treasury Stock ............................................................ (20,235) (866,228)
------------- ------------
Cash Used by Investing Activities ..................................................... (37,204,112) (38,248,461)
------------- ------------
Cash Flows from Financing Activities
Net Increase in Demand Deposits, NOW Accounts
and Savings Accounts ................................................................ 21,253,718 9,173,830
Net Increase in Time Accounts ......................................................... 21,334,723 7,457,681
Cash Dividends Paid ................................................................... (370,837) (342,840)
Net Increase (Decrease) in Borrowed Funds ............................................. (8,000,000) 21,825,355
------------- -----------
Cash Provided by Financing Activities ................................................. 34,217,604 38,114,026
------------- -----------
Net Increase (Decrease) in Cash and Due from Banks .................................... (1,475,709) 1,707,556
Cash and Due from Banks, Beginning of Period .......................................... 10,195,378 7,124,365
------------ -----------
Cash and Due from Banks, End of Period ................................................ 8,719,669 8,831,921
============ ===========
Supplemental Disclosures of Cash Flow Information
Cash Paid During Period for:
Interest ................................................................................. 1,123,051 300,492
Income Taxes ............................................................................. 1,296,910 1,249,290
Non-Cash Investing Activities
Unrealized Gain (Loss) on Securities Available for Sale, Net of Tax ..................... (71,207) (844,545)
</TABLE>
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Bank of Smithtown's Balance Sheet continues to remain strong at June 30, 2000.
Total assets increased by 13.70% over that at December 31, 1999, from
$266,081,443 to $302,525,417. This overall increase is attributable to a
combination of changes within the Balance Sheet. At the end of the second
quarter the net loan portfolio stood at $209,011,769, an increase of 20.16% over
the December 31, 1999 balance. The composition of the loan portfolio remained
stable, with real estate loans and commercial loans comprising 83.49% and 15.29%
of total loans, respectively. Net loans represented 69.09% and 65.37% of total
assets as of June 30, 2000 and December 31, 1999, respectively. Loan yield at
June 30, 2000 was 9.34% as compared to 9.36% at December 31, 1999. The
investment portfolio at June 30, 2000 remained nearly constant, comprising
22.72% of total assets. Yield on the investment portfolio at June 30, 2000 was
7.03%, compared to 6.58% at December 31, 1999. Federal Funds Sold decreased by
$9,400,000 or 90.82% from December 31, 1999. The reduction in Federal Funds Sold
was used to fund new loans, purchase of higher yielding securities, and
repayment of borrowings from NY Federal Home Loan Bank. Other Real Estate Owned
remained level at $855,353. At the end of the second quarter of 2000, Other
Assets had increased from $4,863,739 to $11,087,079 or 127.95%. This increase is
attributable to purchases of Bank owned life insurance and balances held on
deposit with the Bank's third party check processor.
Changes to the liability side of the Balance Sheet were as significant for the
first six months of 2000. Total deposits increased by 20.49% during the first
two quarters of 2000. Money market and time deposit accounts accounted for the
largest portion of the growth in deposits. The money market accounts grew by
26.85% since December 31, 1999. Time deposits accounts increased by 40.59% since
December 31, 1999. These increases were fueled by attractive interest rates and
marketing efforts. However, the Bank's success in raising new deposits resulted
in a 29.74% increase in cost of funds for the first six months of 2000, from
3.16% at December 31, 1999 to 4.10% at June 30, 2000. The net interest margin
decreased from 5.96% to 5.32% during the first six months of 2000. Management is
aware of this decrease and continues to monitor and control it carefully. As a
result of management's oversight, the net interest margin increased to 5.32% at
June 30, 2000, up from 5.24% at March 31, 2000. Management has retained
consultants for further assistance with loan and deposit pricing. Borrowings
from the Federal Home Loan Bank decreased by $13,000,000 during the first six
months of 2000. Due to continued strong loan demand during the second quarter,
the Bank entered into a $5,000,000 Repurchase Agreement with Morgan Stanley.
Stockholder's Equity increased by 10.45% as a result of $2,430,585 in net income
and dividends declared in the amount of $386,875. Capital remains strong as
evidenced by the following ratios:
June 30, 2000 December 31, 1999 Required
Tier I ............................ 10.01 10.96 6.00
Tier II ........................... 1.10 1.25 **
Total Risk Based
Capital ........................... 11.10 12.20 10.00
Total I Leverage .................. 7.26 8.33 5.00
Net income through June 30, 2000 was $2,430,585, compared to $1,986,045 for the
same period in 1999, representing an increase of 22.38%. The source of the
additional earnings is attributable to increased interest and fees on loans and
non-interest income. Interest and fees on loans was 46.38% higher during the
first six months of 2000 over the same period in 1999, due to the increased
volume. Non-interest income was 21.61% higher during the first six months of
2000 over the same period in 1999, due to increased trust department income and
service charge fees on deposit accounts. Other operating expenses was 7.35%
higher during the first six months of 2000 over the same period in 1999, due in
a large part to higher salary expenses. Earnings per share for the first six
months of 2000 was $3.02 as compared to $2.44 for the same period in 1999. This
represents a 23.77% increase due to increased net income and a reduced number of
shares outstanding.
Second quarter results continue to mirror the past nine quarters' upward trend,
and remain the highest in the Bank's 90 years of operation. Asset quality
remains high and capital ratios are strong. Management fully expects these
trends to continue throughout the balance of the year.
<PAGE>
<TABLE>
<CAPTION>
SMITHTOWN BANCORP
INTEREST RATE SENSITIVITY REPORT
JUNE 30, 2000
TOTAL
3 MONTHS 3 -6 6 - 12 SENSITIVE 1-3 3-5
REVOLVING OR LESS MONTHS MONTHS WITHIN I YR YEARS YEARS
____________________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
INVESTMENTS .................... $ 0 $ 3,456,387 $ 1,810,184 $ 5,416,590 $ 10,683,161 $ 3,102,857 $ 9,315,316
FEDERAL FUNDS SOLD ............. 950,000 0 0 0 950,000 0 0
LOANS:
INSTALLMENT ................ 96,500 400,819 960,470 3,874,124 5,331,913 2,305,149 5,332,467
REAL ESTATE AND COMMERCIAL . 37,397,703 4,459,365 2,559,982 12,553,549 56,970,599 24,176,187 49,293,999
CASH AND DUE FROM BANKS ........ 222,133 0 0 0 222,133 0 0
FIXED ASSETS ................... 0 0 0 0 0 0 0
OTHER ASSETS ................... 0 0 0 0 0 0 0
RESERVE FOR POSSIBLE LOAN LOSSES 0 0 0 0 0 0 0
NON-ACCRUALS ................... 0 0 0 0 0 0 0
UNEARNED DISCOUNT .............. 0 0 0 0 0 0 0
------------ ------------ ------------ ------------ ------------ --------- -----------
TOTAL ........ $ 38,666,336 $ 8,316,571 $ 5,330,636 $ 21,844,263 $ 74,157,806 $ 29,584,193 $63,941,782
------------ ------------ ------------ ------------ ------------ ----------- -----------
SMITHTOWN BANCORP
INTEREST RATE SENSITIVITY REPORT
JUNE 30, 2000
5+
YEARS OTHER TOTAL
____________________________________________________________________________________________________________________________________
<S> <C> <C> <C>
ASSETS:
INVESTMENTS ........................................... $ 41,051,249 $ 4,600,700 $ 68,753,283
FEDERAL FUNDS SOLD .................................... 0 0 950,000
LOANS:
INSTALLMENT ...................................... 7,975,148 0 20,944,677
REAL ESTATE AND COMMERCIAL ....................... 59,153,413 369,160 189,963,358
CASH AND DUE FROM BANKS ............................... 0 8,497,536 8,719,669
FIXED ASSETS .......................................... 0 3,148,264 3,148,264
OTHER ASSETS .......................................... 0 11,942,432 11,942,432
RESERVE FOR POSSIBLE LOAN LOSSES ...................... 0 (2,386,436) (2,386,436)
NON-ACCRUALS .......................................... 0 1,277,953 1,277,953
UNEARNED DISCOUNT ..................................... 0 (787,783) (787,783)
-------------- ------------- -------------
TOTAL ............................... $ 108,179,810 $ 26,661,826 $ 302,525,417
-------------- ------------- -------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SMITHTOWN BANCORP
INTEREST RATE SENSITIVITY REPORT
JUNE 30, 2000
TOTAL
3 MONTHS 3 -6 6 - 12 SENSITIVE 1-3 3-5
REVOLVING OR LESS MONTHS MONTHS WITHIN I YR YEARS YEARS
____________________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C>
LIABILITIES:
SAVINGS ....................... $ 0 $ 1,753,365 $ 1,753,365 $ 3,506,730 $ 7,013,460 $14,026,921 $14,026,921
MONEY MARKETS ................. 0 8,509,844 8,509,844 17,019,690 34,039,378 34,039,377 0
NOW ........................... 0 910,623 910,623 1,821,245 3,642,491 7,284,981 7,284,981
TIME DEPOSITS OF $100,000 + ... 0 7,483,018 4,699,001 4,932,486 17,114,505 1,807,181 5,942,032
OTHER TIME DEPOSITS ........... 0 6,261,644 9,518,649 16,668,210 32,448,503 5,399,956 11,189,445
DEMAND ........................ 0 1,378,364 1,378,364 2,756,728 5,513,456 11,026,914 11,026,914
OTHER BORROWED MONEY .......... 0 10,000,000 0 5,000,000 15,000,000 3,000,000 12,000,000
OTHER LIABILITIES ............. 0 0 0 0 0 0 0
STOCKHOLDERS' EQUITY .......... 0 0 0 0 0 0 0
-------- ----------- ----------- ----------- ----------- ----------- -----------
TOTAL ....... $ 0 $36,296,858 $26,769,846 $51,705,089 $ 114,771,793 $ 76,585,330 $ 61,470,293
-------- ----------- ----------- ----------- ----------- ----------- -----------
SMITHTOWN BANCORP
INTEREST RATE SENSITIVITY REPORT
JUNE 30, 2000
5+
YEARS OTHER TOTAL
____________________________________________________________________________________________________________________________________
<S> <C> <C> <C>
LIABILITIES:
SAVINGS .............................................. $ 0 $ 0 $ 35,067,302
MONEY MARKETS ........................................ 0 0 68,078,755
NOW .................................................. 0 0 18,212,453
TIME DEPOSITS OF $100,000 + .......................... 0 0 24,863,718
OTHER TIME DEPOSITS .................................. 0 0 49,037,904
DEMAND ............................................... 0 27,567,286 55,134,570
OTHER BORROWED MONEY ................................. 0 0 30,000,000
OTHER LIABILITIES .................................... 0 1,488,432 1,488,432
STOCKHOLDERS' EQUITY ................................. 0 20,642,283 20,642,283
------------------ --------------- -------------
TOTAL .............................. 0 $ 49,698,001 $302,525,417
------------------ --------------- -------------
SMITHTOWN BANCORP
INTEREST RATE SENSITIVITY REPORT
JUNE 30, 2000
TOTAL
3 MONTHS 3 -6 6 - 12 SENSITIVE 1-3 3-5 5+
REVOLVING OR LESS MONTHS MONTHS WITHIN I YR YEARS YEARS YEARS OTHER
____________________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C>
INTEREST SENSITIVITY GAP
PER PERIOD 38,666,336 (27,980,287)(21,439,210) (29,860,826)(40,613,987) (47,001,137) 2,471,489 108,179,810 (23,036,175)
GAP/TOTAL ASSETS 12.78% (9.25%) (7.09%) (9.87%) (13.42%) (15.54%) 0.82% 35.76%
CUMULATIVE INTEREST
SENSITIVITY GAP 38,666,336 10,686,049 (10,753,161) (40,613,987)(40,613,987) (87,615,124)(85,143,635) 23,036,175
% OF CUMULATIVE GAP
TO TOTAL ASSETS 12.78% 3.53% (3.55%) (13.42%) (13.42%) (28.96%) (28.14%) 7.61%
ASSUMPTIOMS:
1) BALANCE SHEET FIGURES AS OF JUNE 39, 2000
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,
2000, and its results of operations for the six months and three months ended
June 30, 2000 and 1999 and its cash flows for the six months and three months
ended June 30, 2000 and 1999. 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, 1999. 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, 2000 $68,716,649
December 31, 1999 $62,660,042
<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 11, 1999
/s/ Bradley E. Rock
---------------------------
Bradley E. Rock, President
August 11, 1999
/s/ Anita M. Florek
---------------------------
Anita Florek, Treasurer
