<PAGE> 1
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, 1996
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) 727-5667
- --------------------------------------------------------------------------------
(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.
3,330,909 SHARES OF COMMON STOCK OUTSTANDING AS OF JUNE 30, 1996
(1)
<PAGE> 2
SUFFOLK BANCORP AND SUBSIDIARIES
<TABLE>
<CAPTION>
Part I FINANCIAL INFORMATION PAGE
<S> <C>
Consolidated Statements of Condition 3
Consolidated Statements of Income, For the Three Months Ended June 30, 1996 and 1995 4
Consolidated Statements of Income, For the Six Months Ended June 30, 1996 and 1995 5
Consolidated Statements of Cash Flows, For the Six Months Ended June 30, 1996 and 1995 6
Notes to the Unaudited Consolidated Financial Statements 7
Management's Discussion and Analysis of Financial Condition and Results of Operations 7
Part II OTHER INFORMATION 8
Signatures 8
</TABLE>
(2)
<PAGE> 3
PART I
SUFFOLK BANCORP AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CONDITION
(in thousands of dollars except number of shares)
<TABLE>
<CAPTION>
ASSETS June 30, 1996 December 31, 1995
--------------------- ---------------------
<S> <C> <C>
Cash and Due From Banks 43,586 48,955
Federal Funds Sold 16,900 32,500
Investment Securities:
Investment Securities Available for Sale 114,401 137,043
Investment Securities Held to Maturity:
United States Treasury Obligations 12,037 12,053
Obligations of States and Political Subdivisions 10,716 18,140
U.S. Govt. Agency Obligations 12,918 14,092
Other Securities 638 638
--------------------- ---------------------
Total Investment Securities 150,710 181,966
Loans, Net of Discounts 560,644 515,938
Less: Allowance for Loan Loss 5,823 5,923
--------------------- ---------------------
Net Loans 554,821 510,015
Premises and Equipment, Net 12,221 11,803
Other Real Estate Owned, Net 1,894 1,241
Accrued Interest Receivable, Net 5,449 5,133
Excess of Cost Over Fair Value of Net Assets Acquired 2,805 2,986
Other Assets 13,503 11,195
--------------------- ---------------------
TOTAL ASSETS 801,889 805,794
===================== =====================
LIABILITIES
Demand Deposits 158,347 152,007
Savings, N.O.W.'s, and Money Market Deposits 350,205 359,331
Time Certificates of $100,000 or More 29,008 27,777
Other Time Deposit 184,419 187,945
--------------------- ---------------------
Total Deposits 721,979 727,060
Dividends Payable on Common Stock 1,291 1,096
Accrued Interest Payable 1,740 1,830
Other Liabilities 6,919 5,763
--------------------- ---------------------
TOTAL LIABILITIES 731,929 735,749
STOCKHOLDERS' EQUITY
Common Stock (Par Value $5.00; 7,500,000 authorized
3,799,674 shares issued at June 30, 1996 and 1995, respectively) 18,998 18,998
Surplus 18,373 18,373
Undivided Profits 34,848 33,928
Treasury Stock (468,765 shares in 1996 and 390,365 in 1995) (2,344) (1,952)
Investment Securities Valuation Allowance 85 698
--------------------- ---------------------
TOTAL STOCKHOLDERS' EQUITY 69,960 70,045
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 801,889 805,794
===================== =====================
</TABLE>
(3)
<PAGE> 4
SUFFOLK BANCORP AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(in thousands of dollars except shares and per share data)
<TABLE>
<CAPTION>
Three Months Three Months
INTEREST INCOME Ended 6/30/96 Ended 6/30/95
--------------------- ---------------------
<S> <C> <C>
Loans (including fee income) 12,521 12,167
Federal Funds Sold 198 324
United States Treasury Obligations 1,621 1,346
Obligations of States and Political Subdivisions 197 408
U.S. Govt. Agency Obligations 447 517
Other Securities 9 9
--------------------- ---------------------
Total Interest Income 14,993 14,771
INTEREST EXPENSE
Savings, N.O.W.'s, and Money Market Deposits 1,953 2,125
Time Certificates of $100,000 or More 211 265
Other Time Deposits 2,670 2,588
Federal Funds Purchased 7 -
Interest on Other Borrowings - 73
--------------------- ---------------------
Total Interest Expense 4,841 5,051
Net Interest Income 10,152 9,720
Provision for Possible Loan Losses 295 115
--------------------- ---------------------
Net Interest Income After Provision for Possible Loan Losses 9,857 9,605
OTHER INCOME
Service Charges on Deposit Accounts 1,055 897
Other Service Charges, Commissions, and Fees 434 392
Fiduciary Activities 140 121
Other Operating Income 123 265
--------------------- ---------------------
Total Other Income 1,752 1,675
OTHER EXPENSE
Salaries and Employee Benefits 3,931 4,201
Net Occupancy Expense 580 638
Equipment Expense 643 816
Other Operating Expense 2,098 2,444
--------------------- ---------------------
Total Other Expense 7,252 8,099
Income Before Taxes 4,357 3,181
Provision for Income Taxes 1,823 1,150
--------------------- ---------------------
NET INCOME 2,534 2,031
===================== =====================
Earnings Per Share 0.75 0.54
Average Shares 3,367,124 3,780,195
</TABLE>
(4)
<PAGE> 5
SUFFOLK BANCORP AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(in thousands of dollars except shares and per share data)
<TABLE>
<CAPTION>
Six Months Six Months
INTEREST INCOME Ended 6/30/96 Ended 6/30/95
--------------------- ---------------------
<S> <C> <C>
Loans (including fee income) 24,321 23,956
Federal Funds Sold 459 397
United States Treasury Obligations 3,520 3,281
Obligations of States and Political Subdivisions 404 828
U.S. Govt. Agency Obligations 941 1,044
Other Securities 19 19
--------------------- ---------------------
Total Interest Income 29,664 29,525
INTEREST EXPENSE
Savings, N.O.W.'s, and Money Market Deposits 3,974 4,302
Time Certificates of $100,000 or More 429 555
Other Time Deposits 5,420 4,499
Federal Funds Purchased 15 86
Interest on Other Borrowings - 607
--------------------- ---------------------
Total Interest Expense 9,838 10,049
Net Interest Income 19,826 19,476
Provision for Possible Loan Losses 520 305
--------------------- ---------------------
Net Interest Income After Provision for Possible Loan Losses 19,306 19,171
OTHER INCOME
Service Charges on Deposit Accounts 2,018 1,800
Other Service Charges, Commissions, and Fees 787 752
Fiduciary Activities 275 236
Other Operating Income 308 408
--------------------- ---------------------
Total Other Income 3,388 3,196
OTHER EXPENSE
Salaries and Employee Benefits 7,919 8,398
Net Occupancy Expense 1,204 1,251
Equipment Expense 1,291 1,617
Other Operating Expense 3,808 4,548
--------------------- ---------------------
Total Other Expense 14,222 15,814
Income Before Taxes 8,472 6,553
Provision for Income Taxes 3,485 2,321
--------------------- ---------------------
NET INCOME 4,987 4,232
===================== =====================
Earnings Per Share 1.47 1.12
Average Shares 3,377,720 3,789,881
</TABLE>
(5)
<PAGE> 6
SUFFOLK BANCORP AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of dollars)
<TABLE>
<CAPTION>
Six Months Six Months
Ended 6/30/96 Ended 6/30/95
--------------------- ---------------------
<S> <C> <C>
NET INCOME 4,987 4,232
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH:
Provision for Loan Losses 520 305
Depreciation 828 1,047
Amortization of Excess of
Cost Over Fair Market Value of Net Assets Acquired 181 181
Accretion of Discounts (1,313) (549)
Amortization of Premiums 293 50
Increase in Interest Receivable (316) (21)
Increase in Other Assets (2,308) (378)
(Decrease) Increase in Interest Payable (90) 531
Increase (Decrease) in Other Liabilities 1,156 (2,039)
--------------------- ---------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 3,938 3,359
CASH FLOWS FROM INVESTING ACTIVITIES
Principal Payments on Investment Securities 1,210 1,189
Maturities of Investments Available for Sale 84,167 33,286
Purchases of Investments Available for Sale (60,512) (35,564)
Maturities of Investments Held to Maturity 7,941 78,085
Purchases of Investments Held to Maturity (530) (31,586)
Net Loan Disbursements and Repayments (47,383) 4,944
Purchases of Premises and Equipment, Net (1,246) (1,054)
Disposition of OREO Property 1,034 844
--------------------- ---------------------
NET CASH (USED) PROVIDED BY INVESTING ACTIVITIES (15,319) 50,144
CASH FLOWS FROM FINANCING ACTIVITIES
Net Decrease in Deposit Accounts (5,081) (16,389)
Proceeds from Other Borrowings - (4,300)
Treasury Shares Acquired (2,438) (332)
Dividends Paid to Shareholders (2,264) (1,482)
Increase in Dividends Payable on Common Stock 195 31
--------------------- ---------------------
NET CASH USED FROM FINANCING ACTIVITIES (9,588) (22,472)
NET (DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS (20,969) 31,031
CASH AND CASH EQUIVALENTS: BEGINNING OF PERIOD 81,455 56,488
CASH AND CASH EQUIVALENTS: END OF PERIOD 60,486 87,519
</TABLE>
(6)
<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,
1995.
The results of operations for the three and six months ended June 30,
1996, 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, 1996, the Company adopted Statement of Financial
Accountings Standards ("SFAS") No. 122, "Accounting for Mortgage Servicing
Rights" ("Statement 122") which is an amendment of SFAS No. 65, "Accounting for
Certain Mortgage Banking Activities." This statement requires the recognition as
separate assets rights to service mortgage loans for others, however those
servicing rights are acquired. Statement 122 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 OPERATIONS
for the Three Month Periods ended June 30, 1996 and 1995
NET INCOME
Net income was $2,534,000 for the quarter, ahead 24.8 percent from
$2,031,000 posted during the same period last year. Earnings per share for the
quarter were $0.75 versus $0.54, a gain of 38.9 percent.
INTEREST INCOME
Interest income was $14,993,000 for the second quarter 1996, up 1.5
percent from $14,771,000 posted for the same quarter in 1995. Average net loans
for the second quarter of 1996 totaled $537,187,000, compared to $529,509,000
for the same period of 1995. During the second quarter of 1996, the yield on a
fully taxable-equivalent basis, was 8.53 percent on average earning assets of
$709,439,000, up from 8.31 percent on average earning assets of $722,924,000
during the second quarter of 1995.
INTEREST EXPENSE
Interest expense for the second quarter of 1996 was $4,841,000, down
4.2 percent from $5,051,000 for the same period of 1995. Average deposits for
the second quarter 1996 were $705,307,000, up slightly from $701,262,000 for the
comparable period in 1995. Savings deposits have decreased slightly as well as
other time deposits.
NET INTEREST INCOME
Net interest income remains the largest component of the Bank's
earnings. Net interest income for the second quarter of 1996 was $10,152,000, up
from $9,720,000 during the same period of 1995, an increase of 4.4 percent. The
net interest margin for the quarter, on a fully taxable-equivalent basis, was
5.80 percent compared to 5.51 percent for the same period of 1995.
(7)
<PAGE> 8
COVERAGE RATIOS
The following table presents the coverage of troubled assets:
<TABLE>
<CAPTION>
LAST 12 JUNE 30 MAR. 31 DEC. 31 SEPT. 30
MONTHS 1996 1996 1995 1995
<S> <C> <C> <C> <C> <C>
Net Charge-offs/Average Net Loans (annualized) 0.24% 0.35% 0.35% 0.27% 0.01%
Allowance for Loan Losses/Non-Accrual,
Restructured, and OREO 88.26% 102.43% 79.89% 86.54% 84.19%
Allowance for Loan Losses/Net Loans 1.12% 1.04% 1.10% 1.15% 1.20%
</TABLE>
OTHER INCOME
Other income increased to $1,752,000 for the three months ended June
30, 1996 compared to $1,675,000 for the same period during 1995. Trust revenue
is up 15.7 percent .
OTHER EXPENSE
Other expense for the second quarter 1996 was $7,252,000, down 10.5
percent from $8,099,000 for the comparable period in 1995. Compensation is down
because the number of employees has been reduced primarily through attrition.
Equipment expense is down because more equipment is fully depreciated, and
because of the ongoing control of the purchase of equipment. Other expense
reflects a decrease in FDIC insurance premiums.
CAPITAL RESOURCES
Stockholders' equity totaled $69,960,000 on June 30, 1996, a slight
decrease from $70,045,000 on December 31, 1995. The ratio of equity to assets
was 8.7 percent at June 30, 1996 and December 31, 1995.
In January of 1996, the Company announced its intention to repurchase
five percent of the common shares then outstanding, or approximately 171,000
shares. During the quarter, the Company repurchased 48,400 shares. Since
December 31, 1995, the company has repurchased 78,400 shares or approximately
2.4 percent of shares outstanding at December 31, 1995.
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
None.
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 14, 1996 /s/ Edward J. Merz
------------------------------
Edward J. Merz
President and Chief Executive Officer
Date: August 14, 1996 /s/ Victor F. Bozuhoski, Jr.
------------------------------
Victor F. Bozuhoski, Jr.
Executive Vice President,
Chief Financial Officer and Treasurer
(8)
<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 14, 1996 /s/ Edward J. Merz
-------------------------------
Edward J. Merz
President and Chief Executive Officer
Date: August 13, 1996 /s/ Victor F. Bozuhoski, Jr
-------------------------------
Victor F. Bozuhoski, Jr.
Executive Vice President,
Chief Financial Officer and Treasurer
(9)
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 43,586
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 16,900
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 114,401
<INVESTMENTS-CARRYING> 36,309
<INVESTMENTS-MARKET> 36,253
<LOANS> 560,644
<ALLOWANCE> 5,823
<TOTAL-ASSETS> 801,889
<DEPOSITS> 721,979
<SHORT-TERM> 0
<LIABILITIES-OTHER> 9,950
<LONG-TERM> 0
0
0
<COMMON> 18,998
<OTHER-SE> 50,962
<TOTAL-LIABILITIES-AND-EQUITY> 801,889
<INTEREST-LOAN> 24,321
<INTEREST-INVEST> 5,343
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 29,664
<INTEREST-DEPOSIT> 9,823
<INTEREST-EXPENSE> 9,838
<INTEREST-INCOME-NET> 19,826
<LOAN-LOSSES> 520
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 14,222
<INCOME-PRETAX> 8,472
<INCOME-PRE-EXTRAORDINARY> 4,987
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,987
<EPS-PRIMARY> 1.47
<EPS-DILUTED> 1.47
<YIELD-ACTUAL> 5.76
<LOANS-NON> 3,634
<LOANS-PAST> 1,235
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 3,243
<ALLOWANCE-OPEN> 5,923
<CHARGE-OFFS> 734
<RECOVERIES> 114
<ALLOWANCE-CLOSE> 5,823
<ALLOWANCE-DOMESTIC> 5,823
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
