<PAGE> 1
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 September 30, 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 (I.R.S. Employer
incorporation or organization) Identification No.)
6 West Second Street, Riverhead, New York 11901
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(516) 727-2700
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(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 of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
3,688,873 SHARES OF COMMON STOCK OUTSTANDING AS OF SEPTEMBER 30, 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 September 30, 1995 and 1994 2
Consolidated Statements of Income,
For the Nine Months Ended September 30, 1995 and 1994 3
Statements of Cash Flows, For the Nine Months Ended September 30, 1995 and 1994 4
Notes to the Unaudited Consolidated Financial Statements 5
Management's Discussion and Analysis of Financial Condition and
Results of Operation 5
Part II Other Information 6
Signatures 7
</TABLE>
<PAGE> 3
SUFFOLK BANCORP AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CONDITION (in thousands except number of
shares)
<TABLE>
<CAPTION>
September 30, 1995 December 31, 1994
ASSETS
<S> <C> <C>
Cash and Due From Banks ................................................ $ 37,487 $ 56,488
Federal Funds Sold ..................................................... 61,700 --
Investment Securities:
United States Treasury Obligations; Available for Sale .............. 91,099 68,261
Held to Maturity:
United States Treasury Obligations .................................. 24,063 57,091
Obligations of States and Political Subdivisions .................... 18,099 36,780
U.S. Govt. Agency Obligations ....................................... 30,132 31,871
Corporate Bonds and Other Securities ................................ 638 638
--------- ---------
Total Investment Securities ....................................... 164,031 194,641
Total Loans, Net of Unearned Income .................................... 516,308 535,646
Less: Allowance for Possible Loan Losses ............................. 6,111 6,213
--------- ---------
Net Loans ........................................................ 510,197 529,433
Premises and Equipment, Net ............................................ 12,170 12,428
Other Real Estate Owned, Net ........................................... 1,489 2,265
Accrued Interest Receivable, Net ....................................... 3,641 4,007
Excess Cost Over Fair Value of Net Assets Acquired ..................... 3,077 3,348
Other Assets ........................................................... 9,712 9,044
--------- ---------
TOTAL ASSETS ..................................................... $ 803,504 $ 811,654
========= =========
LIABILITIES
Demand Deposits ........................................................ $ 156,775 $ 147,133
Savings, N.O.W. and Money Market Deposits .............................. 343,175 408,838
Time Certificates of $100,000 or More .................................. 26,214 23,767
Other Time Deposits .................................................... 187,456 144,255
--------- ---------
Total Deposits ...................................................... 713,620 723,993
Federal Funds Purchased ................................................ -- 4,300
Other Borrowings ....................................................... 5,540 --
Dividends Payable on Common Stock ...................................... 739 722
Accrued Interest Payable ............................................... 1,794 1,100
Other Liabilities ...................................................... 2,939 4,446
--------- ---------
TOTAL LIABILITIES ................................................ $ 724,632 $ 734,561
STOCKHOLDERS' EQUITY
Common Stock (Par Value $5.00; 7,500,000 authorized;
3,799,674 Issued at September 30, 1995 and
December 31, 1994, respectively) .................................... $ 18,998 $ 18,998
Surplus ................................................................ 18,373 18,373
Unrealized Gain (Loss) on Investments
Available for Sale, Net of Tax ..................................... 229 (443)
Treasury Stock (110,801 Shares) ........................................ (554) --
Undivided Profits ...................................................... 41,826 40,165
--------- ---------
TOTAL STOCKHOLDERS' EQUITY .......................................... $ 78,872 $ 77,093
--------- ---------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY ................................................ $ 803,504 $ 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 September 30,)
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
INTEREST INCOME
Loans (including fee income) ............ $ 11,970 $ 11,372
Federal Funds Sold ...................... 775 308
United States Treasury Securities ....... 1,481 1,412
Obligations of States and
Political Subdivisions ............... 203 376
U.S. Govt. Agency Obligations ........... 508 523
Corporate Bonds and Other Securities .... 10 8
---------- ----------
Total Interest Income ............... 14,947 13,999
INTEREST EXPENSE
Savings, N.O.W. and Money Market Deposits 2,088 2,444
Time Certificates of $100,000 or more ... 223 106
Other Time Deposits ..................... 2,780 1,496
Federal Funds Purchased ................. -- 2
Interest on Other Borrowings ............ 27 --
Interest on Mortgages ................... -- 39
---------- ----------
Total Interest Expense .............. 5,118 4,087
---------- ----------
Net Interest Income ................. 9,829 9,912
Provision For Possible Loan Losses ...... 75 130
---------- ----------
Net Interest Income After Provision
For Possible Loan Losses .......... 9,754 9,782
OTHER INCOME
Service Charges on Deposit Accounts ..... 1,091 780
Other Service Charges, Commissions & Fees 445 451
Fiduciary Activities .................... 131 105
Other Operating Income .................. 197 182
---------- ----------
Total Other Income .................. 1,864 1,518
OTHER EXPENSE
Salaries and Employee Benefits .......... 4,002 3,810
Net Occupancy Expense ................... 715 657
Equipment Expense ....................... 767 758
Other Operating Expense ................. 1,745 2,296
---------- ----------
Total Other Expense ................. 7,229 7,521
---------- ----------
Income Before Income Taxes .............. 4,389 3,779
Provision For Income Taxes .............. 1,713 1,155
---------- ----------
NET INCOME .............................. $ 2,676 $ 2,624
========== ==========
Earnings Per Share ...................... $ 0.71 $ 0.69
========== ==========
Average Shares .......................... 3,716,770 3,799,088
</TABLE>
See accompanying notes to consolidated financial statements.
(2)
<PAGE> 5
SUFFOLK BANCORP AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME (in thousands except per share
amounts) (For the Nine Months Ended September 30,)
<TABLE>
<CAPTION>
1995 1994
INTEREST INCOME
<S> <C> <C>
Loans (including fee income) ............ $ 35,926 $ 30,801
Federal Funds Sold & Securities Purchased
Under Agreements to Resell ........... 1,172 567
United States Treasury Securities ....... 4,762 3,901
Obligations of States and
Political Subdivisions ............... 1,031 1,241
U.S. Govt. Agency Obligations ........... 1,552 1,048
Corporate Bonds and Other Securities .... 29 32
---------- ----------
Total Interest Income ............... 44,472 37,590
INTEREST EXPENSE
Savings, N.O.W. and Money Market Deposits 6,390 6,663
Time Certificates of $100,000 or more ... 778 272
Other Time Deposits ..................... 7,279 4,330
Federal Funds Purchased ................. 86 77
Interest on Other Borrowings ............ 539 54
Interest on Mortgages ................... 95 76
---------- ----------
Total Interest Expense .............. 15,167 11,472
---------- ----------
Net Interest Income ................. 29,305 26,118
Provision For Possible Loan Losses ...... 380 610
---------- ----------
Net Interest Income After Provision
For Possible Loan Losses .......... 28,925 25,508
OTHER INCOME
Service Charges on Deposit Accounts ..... 2,891 2,150
Other Service Charges, Commissions & Fees 1,197 1,016
Fiduciary Activities .................... 367 330
Other Operating Income .................. 605 461
---------- ----------
Total Other Income .................. 5,060 3,957
OTHER EXPENSE
Salaries and Employee Benefits .......... 12,400 10,547
Net Occupancy Expense ................... 1,966 1,661
Equipment Expense ....................... 2,384 1,956
Other Operating Expense ................. 6,293 6,005
---------- ----------
Total Other Expense ................. 23,043 20,169
---------- ----------
Income Before Income Taxes .............. 10,942 9,296
Provision For Income Taxes .............. 4,034 3,155
---------- ----------
NET INCOME .............................. $ 6,908 $ 6,141
========== ==========
Earnings Per Share ...................... $ 1.83 $ 1.68
========== ==========
Average Shares .......................... 3,765,620 3,656,095
</TABLE>
See accompanying notes to consolidated financial statements.
(3)
<PAGE> 6
SUFFOLK BANCORP AND SUBSIDIARIES
UNAUDITED STATEMENTS OF CASH FLOWS (in thousands)
(For the Nine Months Ended September 30,)
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
NET INCOME ........................................... $ 6,908 $ 6,141
ADJUSTMENT TO RECONCILE NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Provision for Loan Losses ........................ 380 610
Depreciation ..................................... 1,545 1,167
Amortization of Excess of Cost
Over Fair Value of Net Assets Acquired ......... 272 277
Accretion of Discounts ........................... (1,455) (1,431)
Amortization of Premiums ......................... 161 79
Increase (Decrease) in Accrued Interest Receivable 366 (1,079)
Increase in Other Assets ......................... (668) (551)
Increase in Dividends Payable on Common Stock .... 17 106
Increase in Accrued Interest Payable ............. 695 104
(Decrease) Increase in Other Liabilities ......... (1,507) 116
Other, Net ....................................... -- 165
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES ...... $ 6,714 $ 5,704
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Principal Payments on Investment Securities ...... $ 1,864 $ 1,295
Maturities of Investments - Available for Sale ... 92,515 114,000
Purchases of Investments - Available for Sale .... (114,091) (88,902)
Maturities of Investments - Held to Maturity ..... 60,878 31,729
Purchases of Investments - Held to Maturity ...... (9,262) (25,398)
Loan Disbursements and Repayments, Net ........... 16,222 (21,596)
Purchases of Premises and Equipment, Net ......... (1,288) (1,002)
Acquisition of Hampton Bancshares, Net ........... -- 14,938
Disposition of OREO Property ..................... 1,070 --
--------- ---------
NET CASH PROVIDED BY INVESTING ACTIVITIES ...... $ 47,908 $ 25,064
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Net Increase in Deposit Accounts ................. $ (10,374) $ (1,379)
Net Proceeds from (Repayment of) Other Borrowings 1,240 (6,500)
Treasury Stock Acquired .......................... (554) --
Common Stock Sold for Cash ....................... -- 26
Dividends Paid to Stockholders ................... (2,235) (1,801)
--------- ---------
NET CASH USED BY FINANCING ACTIVITIES .......... $ (11,923) $ (9,654)
--------- ---------
NET INCREASE IN CASH
AND CASH EQUIVALENTS ......................... 42,699 21,114
CASH AND CASH EQUIVALENTS BEGINNING OF PERIOD 56,488 27,557
--------- ---------
CASH AND CASH EQUIVALENTS END OF PERIOD ...... $ 99,187 $ 48,671
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
(4)
<PAGE> 7
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 normally
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 and nine months ended
September 30, 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 foreclosed 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.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION for the Three and Nine Month Period ended September 30, 1995 and 1994
NET INCOME
Net income was $2,676,000 for the quarter, ahead 2.0 percent from
$2,624,000 posted during the same period last year when the company completed
the acquisition of Hamptons Bancshares, Inc. Earnings-per-share for the quarter
were $0.71 versus $0.69. Net Income for the nine months ended September 30, 1995
was $6,908,000 compared to $6,141,000 for the first nine months of 1994, up 12.5
percent for the period. Earnings-per-share for the nine months was $1.83 versus
$1.68. Operating results for the nine months ended September 30, 1995 include
approximately $245,000 ($427,000 before tax) or $0.07 per share in reduction of
other operating expenses associated with the refund of FDIC premiums paid in
1995.
INTEREST INCOME
Interest income was $14,947,000 for the third quarter 1995, ahead 6.8
percent from the $13,999,000 posted for the same quarter in 1994. Average net
loans for the third quarter of 1995 totaled $511,755,000, compared to
$514,443,000 for the same period of 1994. During the third quarter of 1995, the
yield on average earning assets of $723,789,000 increased to 8.34 percent, up
from 7.79 percent on average earning assets of $730,632,000 during third quarter
1994. Interest income was $44,472,000 for the nine months of 1995, up 18.3
percent from $37,590,000 posted for the same period in 1994. Interest income has
been impacted by higher rates of interest earned on loans and investment
balances.
(5)
<PAGE> 8
INTEREST EXPENSE
Interest expense for the third quarter of 1995 was $5,118,000, ahead
25.2 percent from the $4,087,000 for the same period of 1994. Average deposits
for the third quarter 1995 were $700,915,000, down from $714,268,000 for the
comparable period in 1994. Other borrowings, in the form of repurchase
agreements and federal funds purchased, averaged $1,866,739 during the third
quarter 1995, compared to $120,000 during third quarter 1994. The composition of
deposit balances from quarter to quarter has changed. Savings deposits have
decreased and other time deposits have increased. Interest expense for the nine
months ended September 30, 1995 was $15,167,000, up from $11,472,000 for the
same period of 1994, an increase of 32.2 percent. Interest paid on deposit
reflects the higher balance of certificates of deposit, as well as the rise in
interest rates as maturing certificates of deposit reprice at higher rates.
NET INTEREST INCOME
Net interest income remains the largest component of the Bank's
earnings. The net interest income for year to date 1995 was $29,305,000, up from
$26,118,000 during the same period of 1994, an increase of 12.2 percent. Net
interest margin, on a fully tax-equivalent basis, for nine months was 5.44
percent compared to 5.25 percent for the same period of 1994. Net interest
income for the third quarter of 1995 was $9,829,000, down slightly from
$9,912,000 during the same period of 1994. Net interest margin, on a fully tax
equivalent basis, for the third quarter of 1995 was 5.51 percent compared to
5.27 percent for the third quarter of 1994. Time deposit balances continue to
and consumer loan balances are decreasing due to the rate sensitive nature of
these products. Rates have increased more rapidly on assets than liabilities.
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 SEPT. 30 JUNE 30 MAR. 31 DEC. 31
COVERAGE RATIO'S MONTHS 1995 1995 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Charge-offs/Average Net Loans (annualized) 0.13% 0.02% 0.12% 0.24% 0.15%
Allowance for loan losses/non-accrual,
restructured, & OREO 82.26% 84.19% 89.78% 77.69% 77.39%
Allowance for loan losses/loans, Net of Discount 1.16% 1.20% 1.16% 1.14% 1.18%
===========================================================================================================================
</TABLE>
OTHER INCOME
Other income increased to $1,864,000 for the three months ended
September 30, 1995 compared to $1,518,000 for the same period during 1994.
Service charges on deposit accounts for the year to date 1995 totaled
$2,891,000, up from $2,150,000 for the nine months of 1994. Included in other
income are revenues of the Island Computer Corporation, of which The Suffolk
County National Bank represents 92 percent of its business. Other income for the
nine months ended September 30, 1995 was $5,060,000, an increase of 28 percent
over other income of $3,957,000 for the nine months ended September 30, 1994.
The increase is attributable to larger deposits and related service charges.
OTHER EXPENSE
Other expenses for the third quarter 1995 were $7,229,000, down 4
percent from $7,521,000 for the comparable period in 1994. Other expenses for
the nine months ended September 30, 1995 were $23,043,000, up 14 percent from
$20,169,000 for the comparable period in 1994.
CAPITAL RESOURCES
Stockholders' equity totaled $78,872,000 on September 30, 1995, an
increase of $1,779,000 from $77,093,000 on December 31, 1994. The ratio of
equity to assets was 9.8 percent at September 30, 1995 and 9.2 percent at
December 31, 1994.
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
See item 4 of attached Form 8-K.
(6)
<PAGE> 9
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: November 14, 1995 /s/ Edward J. Merz
------------------------------
Edward J. Merz
President & Chief Executive
Officer
Date: November 14, 1995 /s/ Victor F. Bozuhoski, Jr.
------------------------------
Victor F. Bozuhoski, Jr.
Executive Vice President,
Treasurer & Chief Financial Officer
(7)
<PAGE> 10
EXHIBIT INDEX
-------------
Exhibit 27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 9
<CURRENCY> U.S. DOLLAR
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<EXCHANGE-RATE> 1
<CASH> 37,487
<INT-BEARING-DEPOSITS> 556,845
<FED-FUNDS-SOLD> 61,700
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 91,099
<INVESTMENTS-CARRYING> 72,932
<INVESTMENTS-MARKET> 73,259
<LOANS> 516,308
<ALLOWANCE> 6,111
<TOTAL-ASSETS> 803,504
<DEPOSITS> 713,620
<SHORT-TERM> 0
<LIABILITIES-OTHER> 11,012
<LONG-TERM> 0
<COMMON> 18,998
0
0
<OTHER-SE> 59,874
<TOTAL-LIABILITIES-AND-EQUITY> 803,504
<INTEREST-LOAN> 35,926
<INTEREST-INVEST> 8,546
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 44,472
<INTEREST-DEPOSIT> 14,447
<INTEREST-EXPENSE> 15,167
<INTEREST-INCOME-NET> 29,305
<LOAN-LOSSES> 380
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 23,043
<INCOME-PRETAX> 10,942
<INCOME-PRE-EXTRAORDINARY> 10,942
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,908
<EPS-PRIMARY> 1.83
<EPS-DILUTED> 1.83
<YIELD-ACTUAL> 8.20
<LOANS-NON> 5,243
<LOANS-PAST> 606
<LOANS-TROUBLED> 527
<LOANS-PROBLEM> 9,167
<ALLOWANCE-OPEN> 6,213
<CHARGE-OFFS> 696
<RECOVERIES> 283
<ALLOWANCE-CLOSE> 6,111
<ALLOWANCE-DOMESTIC> 6,111
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
