<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, 1995
Commission file number 0-13580
SUFFOLK BANCORP
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(exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
New York State 11-2708279
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(State or other jurisdiction of incorporation or organization) (I.R.S. Employer
Identification No.)
</TABLE>
6 West Second Street, Riverhead, New York 11901
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(Address of Principal Executive Offices) (Zip Code)
(516) 727-2700
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(Registrant's telephone number, including area code)
NOT APPLICABLE
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(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.
3,741,673 SHARES OF COMMON STOCK OUTSTANDING AS OF JUNE 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 June 30, 1995 and 1994 2
Consolidated Statements of Income,
For the Six Months Ended June 30, 1995 and 1994 3
Statements of Cash Flows, For the Six Months Ended June 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>
JUNE 30, 1995 DECEMBER 31, 1994
<S> <C> <C>
ASSETS
Cash and Due From Banks ............................................................... $ 38,819 $ 56,488
Federal Funds Sold .................................................................... 48,700 --
Investment Securities:
United States Treasury Obligations; Available for Sale ............................. 70,762 68,261
Held to Maturity:
United States Treasury Obligations ................................................. 34,072 57,091
Obligations of States and Political Subdivisions ................................... 13,493 36,780
U.S. Govt. Agency Obligations ...................................................... 30,765 31,871
Corporate Bonds and Other Securities ............................................... 638 638
--------- ---------
Total Investment Securities ...................................................... 149,730 194,641
Total Loans, Net of Unearned Income ................................................... 528,990 535,646
Less: Allowance for Possible Loan Losses ............................................ 6,050 6,213
--------- ---------
Net Loans ....................................................................... 522,940 529,433
Premises and Equipment ................................................................ 12,435 12,428
Other Real Estate Owned ............................................................... 1,634 2,265
Accrued Interest Receivable, Net ...................................................... 4,028 4,007
Excess Cost Over Fair Value of Net Assets Acquired .................................... 3,167 3,348
Other Assets .......................................................................... 9,422 9,044
--------- ---------
TOTAL ASSETS .................................................................... $ 790,875 $ 811,654
========= =========
LIABILITIES
Demand Deposits ....................................................................... $ 150,125 $ 147,133
Savings, N.O.W. and Money Market Deposits ............................................. 350,894 408,838
Time Certificates of $100,000 or More ................................................. 25,035 23,767
Other Time Deposits ................................................................... 181,550 144,255
--------- ---------
Total Deposits ..................................................................... 707,604 723,993
Federal Funds Purchased ............................................................... -- 4,300
Dividends Payable on Common Stock ..................................................... 753 722
Accrued Interest Payable .............................................................. 1,631 1,100
Other Liabilities ..................................................................... 2,407 4,446
--------- ---------
TOTAL LIABILITIES ............................................................... $ 712,395 $ 734,561
STOCKHOLDERS' EQUITY
Common Stock (Par Value $5.00; 7,500,000 authorized;
3,799,674 issued at June 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 .................................................... 271 (443)
Treasury Stock (66,301 Shares) ........................................................ (332) --
Undivided Profits ..................................................................... 41,170 40,165
--------- ---------
TOTAL STOCKHOLDERS' EQUITY ......................................................... $ 78,480 $ 77,093
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ......................................... $ 790,875 $ 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 JUNE 30,)
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
INTEREST INCOME
Loans (including fee income) ............ $ 12,167 $ 10,564
Federal Funds Sold ...................... 324 217
United States Treasury Securities ....... 1,346 1,159
Obligations of States and
Political Subdivisions ............... 408 418
U.S. Govt. Agency Obligations ........... 517 512
Corporate Bonds and Other Securities .... 9 10
---------- ----------
Total Interest Income ............... 14,771 12,880
INTEREST EXPENSE
Savings, N.O.W. and Money Market
Deposits ............................. 2,125 2,320
Time Certificates of $100,000 or more ... 265 95
Other Time Deposits ..................... 2,588 1,454
Federal Funds Purchased ................. -- 14
Interest on Other Borrowings ............ 30 --
Interest on Mortgages ................... 43 37
---------- ----------
Total Interest Expense .............. 5,051 3,920
---------- ----------
Net Interest Income ................. 9,720 8,960
Provision For Possible Loan Losses ...... 115 330
---------- ----------
Net Interest Income After Provision
For Possible Loan Losses .......... 9,605 8,630
OTHER INCOME
Service Charges on Deposit Accounts ..... 897 827
Other Service Charges, Commissions
& Fees ............................... 392 328
Fiduciary Activities .................... 121 115
Other Operating Income .................. 265 158
---------- ----------
Total Other Income .................. 1,675 1,428
OTHER EXPENSE
Salaries and Employee Benefits .......... 4,201 3,743
Net Occupancy Expense ................... 638 589
Equipment Expense ....................... 816 704
Other Operating Expense ................. 2,444 2,302
---------- ----------
Total Other Expense ................. 8,099 7,338
---------- ----------
Income Before Income Taxes .............. 3,181 2,720
Provision For Income Taxes .............. 1,150 1,110
---------- ----------
NET INCOME .............................. $ 2,031 $ 1,610
========== ==========
Earnings Per Share ...................... $ 0.54 $ 0.42
========== ==========
Average Shares .......................... 3,780,195 3,741,574
</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 SIX MONTHS ENDED JUNE 30,)
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
INTEREST INCOME
Loans (including fee income) ............ $ 23,956 $ 19,429
Federal Funds Sold ...................... 397 259
United States Treasury Securities ....... 3,281 2,489
Obligations of States and
Political Subdivisions ............... 828 865
U.S. Govt. Agency Obligations ........... 1,044 525
Corporate Bonds and Other Securities .... 19 24
---------- ----------
Total Interest Income ............... 29,525 23,591
INTEREST EXPENSE
Savings, N.O.W. and Money Market
Deposits ............................. 4,302 4,219
Time Certificates of $100,000 or more ... 555 166
Other Time Deposits ..................... 4,499 2,834
Federal Funds Purchased ................. 86 122
Interest on Other Borrowings ............ 512 7
Interest on Mortgages ................... 95 37
---------- ----------
Total Interest Expense .............. 10,049 7,385
---------- ----------
Net Interest Income ................. 19,476 16,206
Provision For Possible Loan Losses ...... 305 480
---------- ----------
Net Interest Income After Provision
For Possible Loan Losses .......... 19,171 15,726
OTHER INCOME
Service Charges on Deposit Accounts ..... 1,800 1,370
Other Service Charges, Commissions
& Fees ............................... 752 565
Fiduciary Activities .................... 236 225
Other Operating Income .................. 408 279
---------- ----------
Total Other Income .................. 3,196 2,439
OTHER EXPENSE
Salaries and Employee Benefits .......... 8,398 6,737
Net Occupancy Expense ................... 1,251 1,004
Equipment Expense ....................... 1,617 1,198
Other Operating Expense ................. 4,548 3,709
---------- ----------
Total Other Expense ................. 15,814 12,648
---------- ----------
Income Before Income Taxes .............. 6,553 5,517
Provision For Income Taxes .............. 2,321 2,000
---------- ----------
NET INCOME .............................. $ 4,232 $ 3,517
========== ==========
Earnings Per Share ...................... $ 1.12 $ 0.98
========== ==========
Average Shares .......................... 3,789,881 3,583,414
</TABLE>
See accompanying notes to consolidated financial statements.
(3)
<PAGE> 6
SUFFOLK BANCORP AND SUBSIDIARIES
UNAUDITED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
(FOR THE SIX MONTHS ENDED JUNE 30,)
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
NET INCOME .............................................. $ 4,232 $ 3,517
ADJUSTMENT TO RECONCILE NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Provision for Loan Losses ........................... 305 480
Depreciation ........................................ 1,047 679
Amortization of Excess of Cost
Over Fair Value of Net Assets Acquired ............ 181 156
Accretion of Discounts .............................. (549) (972)
Amortization of Premiums ............................ 50 54
Increase in Accrued Interest Receivable ............. (21) (949)
Increase in Other Assets ............................ (378) (2,862)
Increase in Dividends Payable on Common Stock ....... 31 68
Increase (Decrease) in Accrued Interest Payable ..... 531 (585)
(Decrease) Increase in Other Liabilities ............ (2,039) 830
Other, Net .......................................... -- 340
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES ......... $ 3,390 $ 756
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Principal Payments on Investment Securities ......... $ 1,189 $ 545
Maturities of Investments - Available for Sale ...... 33,286 64,000
Purchases of Investments - Available for Sale ....... (35,564) (39,169)
Maturities of Investments - Held to Maturity ........ 78,085 25,761
Purchases of Investments - Held to Maturity ......... (31,586) (2,237)
Investments Acquired from Hampton Bancshares ........ -- (34,929)
Loan Disbursements and Repayments, Net .............. 4,944 (24,128)
Net Loans Acquired from Hampton Bancshares .......... -- (86,422)
Purchases of Premises and Equipment, Net ............ (1,054) (242)
Premises & Equipment Acquired from Hampton Bancshares -- (8,244)
Acquisition of Hampton Bancshares, Net .............. -- 4,980
Disposition of OREO Property ........................ 844 --
--------- ---------
NET CASH PROVIDED BY INVESTING ACTIVITIES ......... $ 50,144 $(100,085)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Net (Decrease) Increase in Deposit Accounts ......... $ (16,389) $ 9,862
Net Deposits Acquired from Hampton Bancshares ....... -- 142,227
Net Proceeds from Other Borrowings .................. (4,300) (4,483)
Treasury Stock Acquired ............................. (332) --
Common Stock Sold for Cash .......................... -- 10
Dividends Paid to Stockholders ...................... (1,482) (1,155)
--------- ---------
NET CASH USED BY FINANCING ACTIVITIES ............. $ (22,503) $ 146,461
--------- ---------
NET (DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS ............................ 31,031 47,132
CASH AND CASH EQUIVALENTS BEGINNING OF PERIOD ... 56,488 27,557
========= =========
CASH AND CASH EQUIVALENTS END OF PERIOD ......... $ 87,519 $ 74,689
========= =========
</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 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 and six months ended
June 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 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.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION for the Three and Six Month Period ended June 30, 1995 and 1994
NET INCOME
Net income was $2,031,000 for the quarter, ahead 26.2 percent from
$1,610,000 posted during the same period last year when the company completed
the acquisition of Hamptons Bancshares, Inc. Earnings-per-share for the quarter
were $0.54 versus $0.42. Net income for the six months ended June 30, 1995 was
$4,232,000 compared to $3,517,000 for the first six months of 1994, up 20.3
percent for the period. Earnings-per-share for the six months was $1.12 versus
$0.98.
INTEREST INCOME
Interest income was $14,771,000 for the second quarter 1995, ahead 14.7
percent from the $12,880,000 posted for the same quarter in 1994. Average net
loans for the second quarter of 1995 totaled $528,808,000, compared to
$503,169,000 for the same period of 1994. During the second quarter of 1995, the
yield on average earning assets of $722,924,000 increased to 8.31 percent, up
from 7.39 percent on average earning assets of $709,890,000 during second
quarter 1994. Interest income was $29,525,000 for the first six months of 1995,
up 25.2 percent from $23,591,000 posted for the same period in 1994. Interest
income has been impacted by higher rates of interest as well as greater loan
balances outstanding.
(5)
<PAGE> 8
INTEREST EXPENSE
Interest expense for the second quarter 1995 was $5,051,000, ahead 28.9
percent from the $3,920,000 for the same period of 1994. Average deposits for
the second quarter 1995 were $701,262,000, up from $692,729,000 for the
comparable period in 1994. Other borrowings, in the form of repurchase
agreements and federal funds purchased, averaged $1,998,000 during the second
quarter 1995, compared to $1,336,000 during second 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 second quarter of
1995. The variation in deposit balances from quarter to quarter is primarily
attributable to increases in other time deposits. Interest expense for the six
months ended June 30, 1995 was $10,049,000, up from $7,385,000 for the same
period of 1994, an increase of 36.1 percent. Interest paid on deposits reflects
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 Company's
earnings. The net interest income for year to date 1995 was $19,476,000, up from
$16,206,000 during the same period of 1994, an increase of 20.2 percent. Net
interest margin, on a fully tax equivalent basis, for second quarter 1995 was
5.51 percent compared to 5.18 percent for the second quarter 1994. Net interest
income for the first six months of 1995 was $19,476,000, up from $16,206,000
during the same period of 1994, an increase of 20.2 percent. Net interest
margin, on a fully tax equivalent basis, for the first six months of 1995 was
5.41 percent compared to 5.10 percent for the first half of 1994. 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>
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LAST 12 JUNE 30 MAR. 31 DEC. 31 SEP. 30
COVERAGE RATIO'S MONTHS 1995 1995 1994 1994
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<S> <C> <C> <C>
Net Charge-offs/Average Net Loans (annualized) 0.31% 0.12% 0.24% 0.15% 0.71%
Allowance for loan losses/non-accrual,
restructured, & OREO 79.22% 89.78% 77.69% 77.39% 72.02%
Allowance for loan losses/loans, Net of Discount 1.17% 1.16% 1.14% 1.18% 1.19%
===================================================================================================================================
</TABLE>
OTHER INCOME
Other income increased to $1,675,000 for the three months ended June,
30, 1995 compared to $1,428,000 for the same period during 1994. Service charges
on deposit accounts for the year to date 1995 totaled $1,800,000, up from
$1,370,000 for the first six 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 six
months ended June 30, 1995 was $3,196,000, an increase of 31 percent over other
income of $2,439,000 for the six months ended June 30, 1994. The increase is
attributable to a larger deposit base and related account activity.
OTHER EXPENSE
Other expenses for the second quarter 1995 were $8,099,000, up 10.4
percent from $7,338,000 for the comparable period 1994. Other expenses for the
first half of 1995 was $15,814,000, up 25 percent from $12,648,000 for the
comparable period 1994.
CAPITAL RESOURCES
Stockholders' equity totaled $78,480,000 on June 30, 1995, an increase
of $1,387,000 from $77,093,000 on December 31, 1994. The ratio of equity to
assets was 9.9 percent at June 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: August 10, 1995 /s/ Edward J. Merz
------------------------------
Edward J. Merz
President & Chief Executive
Officer
Date: August 10, 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
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> DEC-31-1994
<PERIOD-END> JUN-30-1995
<CASH> 38,819
<INT-BEARING-DEPOSITS> 557,479
<FED-FUNDS-SOLD> 48,700
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 70,762
<INVESTMENTS-CARRYING> 78,968
<INVESTMENTS-MARKET> 79,389
<LOANS> 528,990
<ALLOWANCE> 6,050
<TOTAL-ASSETS> 790,875
<DEPOSITS> 707,604
<SHORT-TERM> 0
<LIABILITIES-OTHER> 4,791
<LONG-TERM> 0
<COMMON> 18,998
0
0
<OTHER-SE> 59,482
<TOTAL-LIABILITIES-AND-EQUITY> 790,875
<INTEREST-LOAN> 23,956
<INTEREST-INVEST> 5,569
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 29,525
<INTEREST-DEPOSIT> 9,356
<INTEREST-EXPENSE> 10,049
<INTEREST-INCOME-NET> 19,476
<LOAN-LOSSES> 305
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 15,814
<INCOME-PRETAX> 6,553
<INCOME-PRE-EXTRAORDINARY> 4,232
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,232
<EPS-PRIMARY> 1.12
<EPS-DILUTED> 1.12
<YIELD-ACTUAL> 8.00
<LOANS-NON> 4,588
<LOANS-PAST> 1,638
<LOANS-TROUBLED> 517
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 6,213
<CHARGE-OFFS> 557
<RECOVERIES> 89
<ALLOWANCE-CLOSE> 6,050
<ALLOWANCE-DOMESTIC> 6,050
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
<FN>
Provision for loan loss for 6 month period ended 6/30/94 $305.
</FN>
</TABLE>
