<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 March 31, 1995
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 of incorporation (I.R.S. Employer
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.
3,799,674 SHARES OF COMMON STOCK OUTSTANDING AS OF MARCH 31, 1995
<PAGE> 2
SUFFOLK BANCORP AND SUBSIDIARIES
<TABLE>
<CAPTION>
Part I Financial Information page
<S> <C>
Consolidated Statements of Condition 1
Consolidated Statements of Income,
For the Three Months Ended March 31, 1995 and 1994 2
Statements of Cash Flows, For the Three Months Ended March 31, 1995 and 1994 3
Notes to the Unaudited Consolidated Financial Statements 4
Management's Discussion and Analysis of Financial Condition and
Results of Operation 4-5
Part II Other Information (Not Applicable)
Signatures 6
</TABLE>
<PAGE> 3
SUFFOLK BANCORP AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CONDITION
(in thousands except number of shares)
<TABLE>
<CAPTION>
March 31, 1995 December 31, 1994
<S> <C> <C>
ASSETS
Cash and Due From Banks............................................ $ 36,475 $ 56,488
Federal Funds Sold................................................. 15,000 -
Investment Securities:
United States Treasury Obligations; Available for Sale.......... 48,306 68,261
Held to Maturity:
United States Treasury Obligations.............................. 53,085 57,091
Obligations of States and Political Subdivisions................ 37,090 36,780
U.S. Govt. Agency Obligations................................... 31,220 31,871
Corporate Bonds and Other Securities ........................... 638 638
--------- ---------
Total Investment Securities................................... 170,339 194,641
Total Loans, Net of Unearned Income................................ 534,711 535,289
Less: Allowance for Possible Loan Losses......................... 6,091 6,213
--------- ---------
Net Loans.................................................... 528,620 529,076
Premises and Equipment............................................. 12,653 12,428
Other Real Estate Owned............................................ 1,749 2,622
Accrued Interest Receivable, Net................................... 4,007 4,007
Excess Cost Over Fair Value of Net Assets Acquired................. 3,257 3,348
Other Assets....................................................... 9,141 9,044
--------- ---------
TOTAL ASSETS $781,241 $811,654
======== ========
LIABILITIES
Demand Deposits.................................................... $137,635 $147,133
Savings, N.O.W. and Money Market Deposits.......................... 348,152 408,838
Time Certificates of $100,000 or More.............................. 30,215 23,767
Other Time Deposits................................................ 167,999 144,255
--------- ---------
Total Deposits 684,001 723,993
Federal Funds Purchased............................................ - 4,300
Securities Sold Under Agreements to Repurchase..................... 11,118 -
Dividends Payable on Common Stock.................................. 760 722
Accrued Interest Payable........................................... 1,422 1,100
Other Liabilities.................................................. 5,067 4,446
--------- ---------
TOTAL LIABILITIES $702,368 $734,561
STOCKHOLDERS' EQUITY
Common Stock (Par Value $5.00; 7,500,000 authorized;
3,799,674 issued at March 31, 1995 and
December 31, 1994, respectively)................................ $ 18,998 $ 18,998
Surplus............................................................ 18,373 18,373
Unrealized Loss on Investments Available for Sale, Net of Tax...... (103) (443)
Undivided Profits.................................................. 41,605 40,165
--------- ---------
TOTAL STOCKHOLDERS' EQUITY $ 78,873 $ 77,093
--------- ---------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $781,241 $811,654
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
(1)
<PAGE> 4
SUFFOLK BANCORP AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(in thousands except per share amounts)
(For the Three Months ended March 31,)
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
INTEREST INCOME
Loans (including fee income)...................................... $ 11,789 $ 8,865
Federal Funds Sold................................................ 73 42
United States Treasury Securities................................. 1,935 1,330
Obligations of States and
Political Subdivisions......................................... 420 447
U.S. Govt. Agency Obligations..................................... 527 13
Corporate Bonds and Other Securities.............................. 10 14
-------- --------
Total Interest Income 14,754 10,711
INTEREST EXPENSE
Savings, N.O.W. and Money Market Deposits......................... 2,177 1,899
Time Certificates of $100,000 or more............................. 290 71
Other Time Deposits............................................... 1,911 1,380
Federal Funds Purchased........................................... 86 99
Interest on Securities Sold Under
Agreements to Repurchase....................................... 482 16
Interest on Mortgages............................................. 52 -
-------- --------
Total Interest Expense 4,998 3,465
-------- --------
Net Interest Income 9,756 7,246
Provision For Possible Loan Losses................................ 190 150
-------- --------
Net Interest Income After Provision
For Possible Loan Losses.................................... 9,566 7,096
OTHER INCOME
Service Charges on Deposit Accounts............................... 903 543
Other Service Charges, Commissions & Fees......................... 360 237
Fiduciary Activities.............................................. 115 110
Other Operating Income............................................ 143 121
-------- --------
Total Other Income 1,521 1,011
OTHER EXPENSE
Salaries and Employee Benefits.................................... 4,197 2,994
Net Occupancy Expense............................................. 613 415
Equipment Expense................................................. 801 494
Other Operating Expense........................................... 2,104 1,407
-------- --------
Total Other Expense 7,715 5,310
-------- --------
Income Before Income Taxes........................................ 3,372 2,797
Provision For Income Taxes........................................ 1,171 890
-------- --------
NET INCOME $ 2,201 $ 1,907
======== ========
Earnings Per Share $ 0.58 $ 0.56
======== ========
Average Shares.................................................... 3,799,674 3,396,689
</TABLE>
See accompanying notes to consolidated financial statements.
(2)
<PAGE> 5
SUFFOLK BANCORP AND SUBSIDIARIES UNAUDITED STATEMENTS OF CASH FLOWS
(in thousands)
(For the Three months Ended March 31,)
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
NET INCOME........................................................ $ 2,201 $ 1,907
ADJUSTMENT TO RECONCILE NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Provision for Loan Losses..................................... 190 150
Depreciation.................................................. 513 291
Amortization of Excess of Cost
Over Fair Value of Net Assets Acquired...................... 91 -
Accretion of Discounts........................................ (852) (552)
Amortization of Premiums...................................... 23 25
Increase in Accrued Interest Receivable....................... - (596)
(Increase) Decrease in Other Assets........................... (97) 207
Increase (Decrease) in Accrued Interest Payable............... 322 (54)
Increase in Other Liabilities................................. 621 331
------------- --------------
NET CASH PROVIDED BY OPERATING ACTIVITIES................... $ 3,012 $ 1,709
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES
Principal Payments on Investment Securities................... $ 693 $ 232
Maturities of Investments; Held to Maturity................... 6,240 40,319
Purchases of Investments; Held to Maturity.................... (2,219) (578)
Maturities of Investments; Available for Sale................. 49,020 -
Purchases of Investments; Available for Sale.................. (28,603) -
Loan Disbursements and Repayments, Net........................ 789 (14,965)
Purchases of Premises and Equipment, Net...................... (738) (370)
Disposition of OREO Property.................................. 651 -
-------------- --------------
NET CASH PROVIDED BY INVESTING ACTIVITIES $ 25,833 $ 24,638
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net Decrease in Deposit Accounts.............................. $(39,992) $(13,779)
Net Proceeds from (Repayments of)
Other Borrowings............................................ 6,818 (6,500)
Common Stock Sold for Cash.................................... - 10
Dividends Paid to Stockholders................................ (722) (577)
Increase in Accrued Dividends Payable......................... 38 -
-------------- --------------
NET CASH USED BY FINANCING ACTIVITIES....................... $(33,858) $(20,846)
-------------- --------------
NET (DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS...................................... (5,013) 5,501
CASH AND CASH EQUIVALENTS BEGINNING OF PERIOD............. 56,488 27,557
============== ==============
CASH AND CASH EQUIVALENTS END OF PERIOD................... $ 51,475 $ 33,058
============== ==============
</TABLE>
(3)
<PAGE> 6
SUFFOLK BANCORP AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(1) GENERAL
In the opinion of management, the accompanying unaudited consolidated
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 financial condition and
results of operations for the periods presented. Certain information and
footnotes normally included in consolidated financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted. Notwithstanding, management believes that the disclosures are adequate
to prevent the information from misleading the reader, particularly when the
accompanying consolidated financial statements are read in conjunction with the
audited consolidated financial statements and notes thereto included in the
Registrant's annual report and on Form 10-K, for the year ended December 31,
1994.
The results of operations for the three months ended March 31, 1995 are not
necessarily indicative of the results of operations to be expected for the
remainder of the year.
(2) IMPACT OF NEW ACCOUNTING STANDARDS
Effective January 1, 1995, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 114, "Accounting by Creditors for Impairment
of a Loan" ("Statement 114") as amended by SFAS No. 118, "Accounting by
Creditors for Impairment of a Loan-Income Recognition and Disclosures",
("Statement 118").
Statement 114 generally requires all creditors to account for impaired
loans, except those loans that are accounted for at fair value or at the lower
of cost or fair value, at the present value of the expected future cash flows
discounted at the loan's effective interest rate. Statement 114 did not have a
material effect on the Company's financial condition or results of operations.
Statement 114 also provides that in-substance foreclosured loans should not be
included in OREO for financial reporting purposes, but rather should be included
in the loan portfolio.
Statement 118 amends Statement 114 to allow a creditor to use existing
methods for recognizing interest income on an impaired loan. This statement also
amends the disclosure requirements of Statement 114 to require information about
the recorded investment in certain impaired loans and about how a creditor
recognizes interest income related to those impaired loans. Statement 118 did
not have a material effect on the Company's financial condition or results of
operations.
(3) SUBSEQUENT EVENTS
On May 2, 1995, the Board of Directors of Suffolk Bancorp approved the
repurchase of up to 380,000 shares or approximately ten percent of the company's
common stock now outstanding. Purchases will be made from time to time whenever
prices are appropriate. The shares will be used for various corporate purposes,
or held for re-issue at some point in the future.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION for the Three Month Period ended March 31, 1995 and 1994
NET INCOME
Net income was $2,201,000 for the quarter, ahead 15.4 percent from
$1,907,000 posted during the same period last year. Earnings-per-share for the
quarter were $0.58 versus $0.56.
INTEREST INCOME
Interest income was $14,754,000 for the first quarter 1995, ahead 37.7
percent from the $10,711,000 posted for the same quarter in 1994. Average net
loans for the first quarter of 1995 totaled $528,336,000, compared to
$411,577,000 for the same period of 1994. A major factor contributing to the
increase was the acquisition of Hamptons Bancshares. During the first quarter of
1995, the yield on average earning assets of $753,074,000 have increased to 7.97
percent, up from 7.30 percent on average earnings assets of $601,007,000 during
first quarter 1994.
INTEREST EXPENSE
Interest expense for the first quarter 1995 was $4,998,000, ahead 44
percent from the $3,465,000 for the same period of 1994. Average deposits for
the first quarter 1995 were $690,818,000, up from $558,861,000 for the
comparable period in 1994. The increase resulting from the acquisition of
Hampton Bancshares. Other borrowings, in the form of repurchase agreements and
federal fund purchases, averaged $37,523,000 during the first quarter 1995,
compared to $12,989,000 during first quarter 1994. Other time deposits, which
have matured, as well as time certificates of $100,000 or more have been
repriced at higher rates of interest during the first quarter of 1995. The
variation in deposit balances from quarter to quarter is primarily attributable
to seasonal run-off in municipal deposits.
(4)
<PAGE> 7
NET INTEREST INCOME
Net interest income remains the largest component of the Company's
earnings. The net interest income for year to date 1995 was $9,756,000, up from
$7,246,000 during the same period of 1994, an increase of 34.6 percent. Net
interest margin, on a fully tax equivalent basis, for first quarter 1995 was
5.32 percent compared to 4.99 percent for the first quarter 1994. Rates have
increased more rapidly on assets than liabilities. However, the bulk of the
increase is attributable to the acquisition of Hamptons Bancshares.
As asset-quality has improved and stabilized since the most recent
recession, and as the troubled assets acquired from Hamptons have been disposed
of, the provision for possible loan losses has become a less significant
adjustment to net interest income. The following table presents the resulting
coverage of troubled assets:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
LAST 12 MAR. 31 DEC. 31 SEP. 30 JUN. 30
COVERAGE RATIO'S MONTHS 1995 1994 1994 1994
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Charge-offs/Average Net Loans (annualized) 0.34% 0.24% 0.07% 0.71% 0.33%
Allowance for loan losses/non-accrual,
restructured, & OREO 71.21% 77.69% 77.39% 72.02% 57.73%
Allowance for loan losses/loans, Net of Discount 1.20% 1.14% 1.16% 1.19% 1.29%
=============================================================================================================================
</TABLE>
OTHER INCOME
Other income increased to $1,521,000 for the three months ended March,
31, 1995 compared to $1,011,000 for the same period during 1994. Service charges
on deposit accounts for the year to date 1995 totaled $903,000, up from $543,000
for the first three months of 1994. The increase is the result of the merger
with Hamptons Bancshares. Included in other income are revenues of the Island
Computer Corporation, which have remained constant for each period.
OTHER EXPENSE
Other expenses for the first quarter 1995 were $7,715,000, up 45.3
percent from $5,310,000 for the comparable period 1994. This increase is the
result of increased payroll, occupancy and regulatory expenses primarily as the
result of the merger with Hamptons Bancshares.
CAPITAL RESOURCES
Stockholders' equity totaled $78,873,000 on March 31, 1995, an increase
of $1,780,000 from $77,093,000 on December 31, 1994. The ratio of equity to
assets was 10.1 percent at March 31, 1995 and 9.5 percent at December 31, 1994.
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 $0.14 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 $3.6
million 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 three months ended March 31, 1995 and 1994,
assuming the aforementioned acquisition had occurred on January 1, 1994. This
summary includes amortization of the excess cost of assets over fair value, and
all purchase accounting adjustments, beginning January 1, 1994. 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.
(5)
<PAGE> 8
Pro Forma Results of Operations: (in thousands of dollars except per share)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED MARCH 31, 1995 1994
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Interest Income $14,754 $13,674
Interest Expense 4,998 4,212
- ----------------------------------------------------------------------------------------------------------
Net Interest Income $ 9,756 $ 9,462
Provision for Possible Loan Losses 190 225
Other Income 1,521 1,242
Other Expenses 7,715 7,879
- ----------------------------------------------------------------------------------------------------------
Net Operating Expense $ 6,194 $ 6,637
Income Before Taxes and Cumulative Effect
of Change in Accounting Principle 3,372 2,600
Provision for Income Taxes 1,171 898
- ----------------------------------------------------------------------------------------------------------
Net Income $ 2,201 $ 1,702
Earnings-Per-Share $ 0.58 $ 0.45
- ----------------------------------------------------------------------------------------------------------
Average Shares 3,799,674 3,798,798
==========================================================================================================
</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: May 15, 1995 /s/ Edward J. Merz
------------------------------
Edward J. Merz
President & Chief Executive
Officer
Date: May 15, 1995 /s/ Victor F. Bozuhoski, Jr.
------------------------------
Victor F. Bozuhoski, Jr.
Executive Vice President,
Treasurer & Chief Financial Officer
(6)
<PAGE> 9
EXHIBIT INDEX
-------------
Exhibit 27 - Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<EXCHANGE-RATE> 1
<CASH> 36,475
<INT-BEARING-DEPOSITS> 546,366
<FED-FUNDS-SOLD> 15,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 48,306
<INVESTMENTS-CARRYING> 122,033
<INVESTMENTS-MARKET> 120,764
<LOANS> 528,620
<ALLOWANCE> 6,091
<TOTAL-ASSETS> 781,241
<DEPOSITS> 684,001
<SHORT-TERM> 11,118
<LIABILITIES-OTHER> 7,249
<LONG-TERM> 0
<COMMON> 18,998
0
0
<OTHER-SE> 59,875
<TOTAL-LIABILITIES-AND-EQUITY> 78,873
<INTEREST-LOAN> 11,789
<INTEREST-INVEST> 2,892
<INTEREST-OTHER> 73
<INTEREST-TOTAL> 14,754
<INTEREST-DEPOSIT> 4,378
<INTEREST-EXPENSE> 620
<INTEREST-INCOME-NET> 9,756
<LOAN-LOSSES> 190
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 7,715
<INCOME-PRETAX> 3,372
<INCOME-PRE-EXTRAORDINARY> 2,201
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,201
<EPS-PRIMARY> 0.58
<EPS-DILUTED> 0.58
<YIELD-ACTUAL> 7.97
<LOANS-NON> 5,542
<LOANS-PAST> 900
<LOANS-TROUBLED> 159
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 6,213
<CHARGE-OFFS> 361
<RECOVERIES> 49
<ALLOWANCE-CLOSE> 2,091
<ALLOWANCE-DOMESTIC> 6,091
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
