<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 1994
Commission file number 0-13580
-------
SUFFOLK BANCORP
- - -------------------------------------------------------------------------------
(exact name of registrant as specified in its charter)
New York State 11-2708279
- - -------------------------------------------------------------------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
6 West Second Street, Riverhead, New York 11901
- - -------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(516) 727-2700
- - -------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
NOT APPLICABLE
- - -------------------------------------------------------------------------------
(former name, former address and former fiscal year
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X . No .
----- --------
Indicate the number shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
3,799,018 SHARES OF COMMON STOCK OUTSTANDING AS OF JUNE 30, 1994
<PAGE> 2
SUFFOLK BANCORP AND SUBSIDIARIES
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
Part I Financial Information
Consolidated Balance Sheets 1
Consolidated Statements Of Income,
For the Three Months Ended June 30, 1994 and 1993 2
Consolidated Statements Of Income,
For the Six Months Ended June 30, 1994 and 1993 3
Statements Of Cash Flows, For the Six Months Ended June 30, 1994 and 1993 4
Note To The Consolidated Financial Statements 5
Management's Discussion And Analysis Of Financial Condition And
Results Of Operation 5
Part II Other Information (Not Applicable)
Signatures 6
</TABLE>
<PAGE> 3
SUFFOLK BANCORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (in thousands except number of shares)
<TABLE>
<CAPTION>
June 30, 1994 December 31, 1993
(unaudited) (unaudited)
<S> <C> <C>
ASSETS
Cash and Due From Banks . . . . . . . . . . . . . . . . . . . . $ 36,689 $ 27,557
Federal Funds Sold & Securities Purchased
Under Agreements To Resell . . . . . . . . . . . . . . . . 38,000 -
Investment Securities:(Fair Value: $178,617,000 at
June 30, 1994 and $195,287,000 at December 31, 1993)
United States Treasury Obligations; Available for Sale . . 72,792 -
Held for Investment:
United States Treasury Obligations . . . . . . . . . . . . 53,111 149,999
Obligations of States and Political Subdivisions . . . . . 20,057 42,025
U.S. Govt. Agency Mortgage Backed Obligations . . . . . . 18,543 1,176
U.S. Govt. Agency Debt Obligations . . . . . . . . . . . . 15,280 -
Corporate Bonds and Other Securities . . . . . . . . . . . 638 939
--------- ---------
Total Investment Securities . . . . . . . . . . . . . . . 180,421 194,139
Total Loans . . . . . . . . . . . . . . . . . . . . . . . . . 553,246 442,224
Less: Unearned Income . . . . . . . . . . . . . . . . . . . . 29,658 30,562
Allowance for Possible Loan Losses . . . . . . . . 6,743 4,922
--------- ---------
Net Loans . . . . . . . . . . . . . . . . . . . . . . . . 516,845 406,740
Premises and Equipment . . . . . . . . . . . . . . . . . . . . 12,535 4,727
Other Real Estate Owned . . . . . . . . . . . . . . . . . . . . 2,282 649
Insubstance Foreclosures . . . . . . . . . . . . . . . . . . . 1,396 -
Accrued Interest Receivable . . . . . . . . . . . . . . . . . . 3,149 2,199
Excess Cost Over Fair Value of Assets Acquired . . . . . . . . 3,969 510
Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . 5,670 5,838
--------- ---------
TOTAL ASSETS $ 800,956 $ 642,359
============= =============
LIABILITIES
Demand Deposits . . . . . . . . . . . . . . . . . . . . . . . . $ 147,201 $ 98,532
Savings, N.O.W. and Money Market Deposits . . . . . . . . . . . 372,401 319,557
Time Certificates of $100,000 or More . . . . . . . . . . . . . 15,185 12,868
Other Time Deposits . . . . . . . . . . . . . . . . . . . . . . 186,071 137,811
--------- ---------
Total Deposits 720,858 568,768
Federal Funds Purchased & Securities Sold
Under Agreements to Repurchase . . . . . . . . . . . . . . - -
Federal Reserve Bank Borrowings . . . . . . . . . . . . . . . . - 6,500
Mortgages Payable . . . . . . . . . . . . . . . . . . . . . . . 2,017 -
Dividends Payable on Common Stock . . . . . . . . . . . . . . . 646 577
Accrued Interest Payable . . . . . . . . . . . . . . . . . . . 383 968
Other Liabilities . . . . . . . . . . . . . . . . . . . . . . . 3,091 2,262
--------- ---------
TOTAL LIABILITIES $ 726,995 $ 579,075
STOCKHOLDERS' EQUITY
Common Stock (Par Value $5.00; 7,500,000 authorized;
3,799,018 and 3,396,460 shares issued at June 30, 1994
and December 31, 1993, respectively) . . . . . . . . . . . . $ 18,995 $ 16,982
Surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,360 11,832
Unrealized Gain on Investments Available for Sale . . . . . . . -158 -
Undivided Profits . . . . . . . . . . . . . . . . . . . . . . . 36,764 34,470
--------- ---------
TOTAL STOCKHOLDERS' EQUITY $ 73,961 $ 63,284
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 800,956 $ 642,359
============= =============
</TABLE>
See accompanying note to consolidated financial statements.
(1)
<PAGE> 4
SUFFOLK BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (in thousands except per share amounts)
(For the Three Months ended June 30,)
<TABLE>
<CAPTION>
1994 1993
(unaudited) (unaudited)
<S> <C> <C>
INTEREST INCOME
Loans (including fee income) . . . . . . . . . . . . . . . . $ 10,564 $ 8,894
Federal Funds Sold & Securities Purchased
Under Agreements to Resell . . . . . . . . . . . . . . . 217 193
United States Treasury Securities . . . . . . . . . . . . . . 1,159 1,319
Obligations of States and
Political Subdivisions . . . . . . . . . . . . . . . . . . 418 571
U.S. Govt. Agency Obligations . . . . . . . . . . . . . . . . 512 26
Corporate Bonds and Other Securities . . . . . . . . . . . . 10 18
-------- --------
Total Interest Income $ 12,880 $ 11,021
INTEREST EXPENSE
Savings, N.O.W. and Money Market Deposits . . . . . . . . . . $ 2,320 $ 1,933
Time Certificates of $100,000 or more . . . . . . . . . . . . 95 84
Other Time Deposits . . . . . . . . . . . . . . . . . . . . . 1,454 1,601
Interest on Other Borrowings . . . . . . . . . . . . . . . . 14 -
Interest on Other Mortgages . . . . . . . . . . . . . . . . . 37 -
-------- --------
Total Interest Expense $ 3,920 $ 3,618
-------- --------
Net Interest Income $ 8,960 $ 7,403
Provision For Possible Loan Losses . . . . . . . . . . . . . 330 253
-------- --------
Net Interest Income After Provision
For Possible Loan Losses . . . . . . . . . . . . . . . $ 8,630 $ 7,150
OTHER INCOME
Service Charges on Deposit Accounts . . . . . . . . . . . . . $ 827 $ 591
Other Service Charges, Commissions & Fees . . . . . . . . . . 328 219
Fiduciary Activities . . . . . . . . . . . . . . . . . . . . 115 95
Other Operating Income . . . . . . . . . . . . . . . . . . . 158 117
-------- --------
Total Other Income $ 1,428 $ 1,022
OTHER EXPENSE
Salaries and Employee Benefits . . . . . . . . . . . . . . . $ 3,743 $ 2,830
Net Occupancy Expense . . . . . . . . . . . . . . . . . . . . 589 404
Equipment Expense . . . . . . . . . . . . . . . . . . . . . . 704 500
Other Operating Expense . . . . . . . . . . . . . . . . . . . 2,302 1,541
-------- --------
Total Other Expense $ 7,338 $ 5,275
-------- --------
Income Before Income Taxes . . . . . . . . . . . . . . . . . $ 2,720 $ 2,897
Provision For Income Taxes . . . . . . . . . . . . . . . . . 1,110 990
-------- --------
Net Income Before Cumulative Effect of Accounting Change $ 1,610 $ 1,907
Cumulative Effect of Accounting Change . . . . . . . . . . . - -
-------- --------
NET INCOME $1,610 $ 1,907
======== ========
Earnings Per Share Before Effect of Accounting Change $ 0.42 $ 0.56
-------- --------
Earnings Per Share $ 0.42 $ 0.56
======== ========
Average Shares . . . . . . . . . . . . . . . . . . . . . . . 3,741,574 3,390,139
</TABLE>
See accompanying note to consolidated financial statements.
(2)
<PAGE> 5
SUFFOLK BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (in thousands except per share amounts)
For the Six Months ended June 30,
<TABLE>
<CAPTION>
1994 1993
(unaudited) (unaudited)
<S> <C> <C>
INTEREST INCOME
Loans (including fee income) . . . . . . . . . . . . . . . . $ 19,429 $ 17,875
Federal Funds Sold & Securities Purchased
Under Agreements to Resell . . . . . . . . . . . . . . . 259 473
United States Treasury Obligations . . . . . . . . . . . . . 2,489 2,661
Obligations of States and
Political Subdivisions . . . . . . . . . . . . . . . . . . 865 1,186
U.S. Govt. Agency Obligations . . . . . . . . . . . . . . . . 525 63
Corporate Bonds and Other Securities . . . . . . . . . . . . 24 36
-------- --------
Total Interest Income $ 23,591 $ 22,294
INTEREST EXPENSE
Savings, N.O.W. and Money Market Deposits . . . . . . . . . . $ 4,219 $ 3,930
Time Certificates of $100,000 or more . . . . . . . . . . . . 166 183
Other Time Deposits . . . . . . . . . . . . . . . . . . . . . 2,834 3,286
Federal Funds Purchased & Securities Sold
Under Agreements to Repurchase . . . . . . . . . . . . . 122 -
Interest on Other Borrowings . . . . . . . . . . . . . . . . 7 -
Interest on Mortgages . . . . . . . . . . . . . . . . . . . . 37 -
-------- --------
Total Interest Expense $ 7,385 $ 7,399
-------- --------
Net Interest Income $ 16,206 $ 14,895
Provision For Possible Loan Losses . . . . . . . . . . . . . 480 598
-------- --------
Net Interest Income After Provision
For Possible Loan Losses . . . . . . . . . . . . . . . $ 15,726 $ 14,297
OTHER INCOME
Service Charges on Deposit Accounts . . . . . . . . . . . . . $ 1,370 $ 1,131
Other Service Charges, Commissions & Fees . . . . . . . . . . 565 420
Fiduciary Activities . . . . . . . . . . . . . . . . . . . . 225 185
Other Operating Income . . . . . . . . . . . . . . . . . . . 279 236
-------- --------
Total Other Income $ 2,439 $ 1,972
OTHER EXPENSE
Salaries and Employee Benefits . . . . . . . . . . . . . . . $ 6,737 $ 5,724
Net Occupancy Expense . . . . . . . . . . . . . . . . . . . . 1,004 821
Equipment Expense . . . . . . . . . . . . . . . . . . . . . . 1,198 972
Other Operating Expense . . . . . . . . . . . . . . . . . . . 3,709 2,943
-------- --------
Total Other Expense $ 12,648 $ 10,460
-------- --------
Income Before Income Taxes . . . . . . . . . . . . . . . . . $ 5,517 $ 5,809
Provision For Income Taxes . . . . . . . . . . . . . . . . . 2,000 2,070
-------- --------
Net Income Before Cumulative Effect of Accounting Change $ 3,517 $ 3,739
Cumulative Effect of Accounting Change - 624
-------- --------
NET INCOME 3,517 4,363
======== ========
Earnings per Share Before Effect of Accounting Change $ 0.98 $ 1.10
Cumulative Effect of Accounting Change - 0.18
-------- --------
Earnings per Share $ 0.98 $ 1.29
======== ========
Average Shares 3,583,414 3,389,864
</TABLE>
See accompanying note to consolidated financial statements.
(3)
<PAGE> 6
SUFFOLK BANCORP AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS (in Thousands)
(For the Six months Ended June 30,)
<TABLE>
<CAPTION>
1994 1993
(unaudited) (unaudited)
<S> <C> <C>
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,516 $ 4,363
ADJUSTMENT TO RECONCILE NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Provision for Loan Losses . . . . . . . . . . . . . . . . 480 598
Depreciation . . . . . . . . . . . . . . . . . . . . . . 679 524
Amortization of Excess of Cost
Over Fair Value of Net Assets Acquired . . . . . . . . 156 66
Accretion of Discounts . . . . . . . . . . . . . . . . . (972) (729)
Amortization of Premiums . . . . . . . . . . . . . . . . 54 113
Increase in Accrued Interest Receivable . . . . . . . . . (949) 336
Increase in Other Assets . . . . . . . . . . . . . . . . (2,862) (3,560)
Increase in Dividends Payable on Common Stock . . . . . . 68 34
Decrease in Accrued Interest Payable . . . . . . . . . . (585) (214)
Increase In Income Taxes Payable . . . . . . . . . . . . (342) (535)
Decrease in Other Liabilities . . . . . . . . . . . . . . 1,172 492
Other, net . . . . . . . . . . . . . . . . . . . . . . . 340 -
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES . . . . . . . $ 755 $ 1,488
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Principal Payments on Investments . . . . . . . . . . . . $ 545 $ 943
Maturities of Investments . . . . . . . . . . . . . . . . 89,761 100,607
Purchases of Investments . . . . . . . . . . . . . . . . (41,406) (86,978)
Investments Acquired from Hampton Bancshares . . . . . . (34,929) -
Loan Disbursements and Repayments, Net . . . . . . . . . (24,127) (10,464)
Net Loans Acquired from Hampton Bancshares . . . . . . . (86,422) -
Purchases of Premises and Equipment, Net . . . . . . . . (242) (570)
Premises & Equipment Acquired from Hampton Bancshares . . (8,244) -
Acquisition of Hampton Bancshares, Net . . . . . . . . . 4,980 -
------------ ------------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES $ (100,084) $ 3,538
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net Increase in Deposit Accounts . . . . . . . . . . . . $ 9,862 $ 9,837
Net Deposits Acquired from Hampton Bancshares . . . . . . 142,227 -
Net Proceeds from Other Borrowings . . . . . . . . . . . (4,483) -
Common Stock Sold for Cash . . . . . . . . . . . . . . . 10 24
Dividends Paid to Shareholders . . . . . . . . . . . . . (1,155) (1,119)
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES . . . . . . . $ 146,461 $ 8,742
------------ ------------
NET INCREASE IN CASH
AND CASH EQUIVALENTS . . . . . . . . . . . . . . . . 47,132 13,768
CASH AND CASH EQUIVALENTS DECEMBER 31, . . . . . . . 27,557 50,896
============ ============
CASH AND CASH EQUIVALENTS JUNE 30, . . . . . . . . . $ 74,689 $ 64,664
============ ============
</TABLE>
See accompanying note to consolidated financial statements.
(4)
<PAGE> 7
SUFFOLK BANCORP AND SUBSIDIARIES
NOTE TO THE CONSOLIDATED FINANCIAL STATEMENTS
GENERAL
In the opinion of management, the accompanying unaudited consolidated
interim financial statements of Suffolk Bancorp and its consolidated
subsidiaries have been prepared to reflect all adjustments (consisting solely
of normal recurring accruals) necessary for a fair presentation of the results
of operations for the periods shown. Certain information and footnote
disclosures normally included in consolidated financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted. The results of operations for the periods shown are not necessarily
indicative of results that may be expected for the entire year.
The unaudited consolidated interim financial statements presented
herein should be read in conjunction with the consolidated financial statements
and notes thereto included in Suffolk Bancorp's 1993 Annual Report to
Shareholders.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION for the Three and Six Month Periods ended June 30, 1994 and 1993
NET INCOME
Net income was $1,610,000 for the quarter, behind 15.6 percent from
$1,907,000 posted during the same period last year. Earnings-per- share for the
quarter were $0.42 versus $0.56. Operating results for the six months ended
June 30, 1994 include approximately $415,000 ($245,000 after-tax) in additional
expenses associated with the acquisition of Hamptons Bancshares, Inc.
Net interest income remains the major part of the company's earnings.
Increased competition for indirect automobile loans has moderated volume and
lowered rates. Charge-offs have decreased substantially, and while the
provision for possible loan losses has been reduced, the allowance for possible
loan losses now remains high by historic standards in reflection of
management's cautious view of the regional economy, and a long-term downward
trend in charge-offs.
<TABLE>
<CAPTION>
LAST 12 JUNE 30 MAR. 31 DEC. 31 SEPT. 30
ASSET QUALITY MONTHS 1994 1994 1993 1993
- - --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Charge-offs/Average Loans (annualized) 0.25% 0.33% 0.04% 0.50% 0.06%
Allowance for loan losses/non-accrual & 90+ 83.97% 57.73% 89.91% 93.26% 94.98%
Allowance for loan losses/total loans 1.24% 1.29% 1.18% 1.21% 1.29%
</TABLE>
The provision for possible loan losses decreased by $213,000 for the
quarter, and $408,000 for the six months ended June 30, 1994, exclusive of the
additional provision of $290,000 as result of the acquisition of Hamptons
Bancshares. During the years of the recent recession, management determined
that the allowance should be increased in reflection of its concerns about the
economy. As the economy has improved, and net charge-offs have dropped, the
provision has been reduced.
INTEREST INCOME
Net interest income was $8,960,000 for the second quarter 1994, ahead
21.0 percent from the $7,403,000 posted for the same quarter in 1993. Net
interest income for year to date 1994 was $16,206,000, up from $14,895,000
during the same period of 1993, an increase of 8.8 percent. Net interest margin
decreased slightly as loan volume increased, as average net loans for the
second quarter of 1994 totaled $503,169,000, compared to $376,226,000 for the
same period of 1993. A major factor contributing to the increase was the
acquisition of Hampton Bancshares.
INTEREST EXPENSE
Interest expense for the year to date 1994 was $7,385,000, up from
$7,399,000 for the same period of 1993. Average interest bearing deposits for
the second quarter 1994 were $692,729,000, up from $549,405,000 for the
comparable period in 1993. The increase in interest expense is the result of
higher deposit balances, a result of the merger with Hamptons Bancshares.
OTHER INCOME
Non-interest operating income increased to $2,439,000 for the six
months ended June, 30, 1994 compared to $1,972,000 for the same period during
1993. Service charges on deposit accounts for the year to date 1994 totaled
$1,370,000, up from $1,131,000 for the first six months of 1993. Included in
other income are revenues of the Island Computer Corporation, which have
remained constant for each period.
(5)
<PAGE> 8
OTHER EXPENSE
Other expenses for the year-to-date 1994 were $12,648,000, up 21
percent from $10,460,000 for the comparable period 1993. This increase is the
result of increased payroll and occupancy and regulatory expenses primarily as
the result of the merger with Hamptons Bancshares, Inc.
CAPITAL RESOURCES
Shareholders' equity totaled $73,961,000 on June 30, 1994, an increase
of $13,620,000 from $60,341,000 on June 30, 1993. The ratio of equity to assets
was 9.2 percent at June 30, 1994 and 9.8 percent at June 30, 1993.
On April 11, 1994, Suffolk Bancorp (SUBK or "Suffolk") completed the
acquisition of Hamptons Bancshares (HBSI or "Hamptons"). The acquisition of
Hamptons was accounted for as a purchase, with shareholders receiving cash or
stock in Suffolk in an amount of $14.50 per share for each share of Hamptons
stock as well as a payment of $.14 per share as additional consideration for
sales of foreclosed real estate which exceeded Suffolk's estimated value of
such properties. The aggregate purchase price was $12.2 million resulting in
$3,619,000 in excess cost over fair value of net assets acquired which is being
amortized over ten years. After the acquisition, all properties of Hamptons
were merged into and operated under the name of The Suffolk County National
Bank, the banking subsidiary of Suffolk.
The following is an unaudited pro forma summary of the consolidated
results of operations for the six months ended June 30, 1993 and 1994, assuming
the aforementioned acquisition had occurred on January 1, 1993. This summary
includes amortization of the excess cost of assets over fair value, and all
purchase accounting adjustmsnets, beginning January 1, 1993. The pro forma
results are not necessarily indicative of the results which would have actually
been attained if the acquisition had been consummated in the past or what may
be attained in the future.
<TABLE>
<CAPTION>
(in thousands of dollars except per share) SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30 1994 JUNE 30, 1993
- - -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Interest Income $18,442 $19,318
Net Income 3,323 4,465
Net Income Per Share 0.87 1.18
</TABLE>
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.
SUFFOLK BANCORP
Date: August 15, 1994 /s/ Edward J. Merz
----------------------------
Edward J. Merz
President & Chief Executive
Officer
Date: August 15, 1994 /s/ Victor F. Bozuhoski, Jr.
----------------------------
Victor F. Bozuhoski, Jr.
Executive Vice President,
Treasurer & Chief Financial Officer
(6)
