<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, 1997
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.
6,468,776 SHARES OF COMMON STOCK OUTSTANDING AS OF JUNE 30, 1997
(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, 1997 and 1996 4
Consolidated Statements of Income, For the Six Months Ended June 30, 1997 and 1996 5
Statements of Cash Flows, For the Three Months Ended June 30, 1997 and 1996 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 9
</TABLE>
(2)
<PAGE> 3
SUFFOLK BANCORP AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CONDITION
(in thousands of dollars except number of shares)
<TABLE>
<CAPTION>
ASSETS June 30, 1997 December 31, 1996
----------------- -----------------
<S> <C> <C>
Cash and Due From Banks 49,778 49,824
Federal Funds Sold 26,000 1,500
Investment Securities:
Investment Securities Available for Sale 109,727 104,649
Investment Securities Held to Maturity:
United States Treasury Obligations 0 8,019
Obligations of States and Political Subdivisions 7,197 10,170
U.S. Govt. Agency Obligations 10,515 11,877
Other Securities 638 638
----------------- -----------------
Total Investment Securities 128,077 135,353
Loans, Net of Discounts 606,996 584,996
Less: Allowance for loan losses 6,423 6,113
----------------- -----------------
Net Loans 600,573 578,883
Premises and Equipment, net 15,926 13,201
Other Real Estate Owned, net 349 1,899
Accrued Interest Receivable, net 5,680 5,222
Intangible Assets 2,443 2,624
Other Assets 15,431 15,873
----------------- -----------------
TOTAL ASSETS 844,257 804,379
================= =================
LIABILITIES
Demand Deposits 176,000 168,315
Savings, N.O.W.'s and Money Market Deposits 333,783 329,930
Time Certificates of $100,000 or More 19,428 31,074
Other Time Deposits 226,145 181,698
----------------- -----------------
Total Deposits 755,356 711,017
Federal Funds Purchased & Securities Sold
Under Agreements to Repurchase 0 7,200
Dividends Payable on Common Stock 1,069 1,088
Accrued Interest Payable 2,028 1,579
Other Liabilities 12,526 10,745
----------------- -----------------
TOTAL LIABILITIES 770,979 731,629
STOCKHOLDER'S EQUITY
Common Stock (Par Value $2.50; 15,000,000 authorized; 6,468776 and 6,661,818
shares outstanding at June 30, 1997
and December 31,1996, respectively) 19,026 19,026
Surplus 18,456 18,456
Undivided Profits 38,333 37,353
Treasury Stock (1,141,642 shares in 1997 and 420,365 in 1996) (2,854) (2,543)
Investment Securities Valuation Allowance 317 458
----------------- -----------------
TOTAL STOCKHOLDERS EQUITY 73,278 72,750
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY 844,257 804,379
================= =================
</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 06/30/97 Ended 06/30/96
----------------- -----------------
<S> <C> <C>
Loans (including fee income) 13,716 12,521
Federal Funds Sold 156 198
United States Treasury Obligations 1,498 1,621
Obligations of States and Political Subdivisions 106 197
U.S. Govt. Agency Obligations 410 447
Other Securities 9 9
----------------- -----------------
Total Interest Income 15,895 14,993
INTEREST EXPENSE
Savings, N.O.W.'s and Money Market Deposits 1,867 1,953
Time Certificates of $100,000 or more 257 211
Other Time Deposits 2,856 2,670
Federal Funds Purchased 15 7
Interest on Other Borrowings 84 0
----------------- -----------------
Total Interest Expense 5,079 4,841
Net Interest Income 10,816 10,152
Provision for Possible Loan Losses 283 295
----------------- -----------------
Net Income After Provision for Possible Loan Losses 10,533 9,857
OTHER INCOME
Service Charges on Deposit Accounts 1,156 1,055
Other Service Charges, Commissions & Fees 434 434
Fiduciary Activities 128 140
Other Operating Income 103 123
----------------- -----------------
Total Other Income 1,821 1,752
OTHER EXPENSE
Salaries and Employee Benefits 4,114 3,931
Net Occupancy Expense 622 580
Equipment Expense 521 643
Other Real Estate Owned 22 118
Other Operating Expense 2,405 1,980
----------------- -----------------
Total Other Expense 7,684 7,252
Income Before Taxes 4,670 4,357
Provision for Income Taxes 1,947 1,823
----------------- -----------------
NET INCOME 2,723 2,534
================= =================
Earnings Per Share 0.42 0.38
Average Shares Outstanding 6,480,721 6,734,248
</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 06/30/97 Ended 06/30/96
---------------------- ----------------------
<S> <C> <C>
Loans (including fee income) 26,904 24,321
Federal Funds Sold 215 459
United States Treasury Obligations 3,248 3,520
Obligations of States and Political Subdivisions 222 404
U.S. Govt. Agency Obligations 833 941
Other Securities 19 19
---------------------- ----------------------
Total Interest Income 31,441 29,664
INTEREST EXPENSE
Savings, N.O.W.'s and Money Market Deposits 3,763 3,974
Time Certificates of $100,000 or more 502 429
Other Time Deposits 5,349 5,420
Federal Funds Purchased 100 15
Interest on Other Borrowings 337 0
---------------------- ----------------------
Total Interest Expense 10,051 9,838
Net Interest Income 21,390 19,826
Provision for Possible Loan Losses 534 520
---------------------- ----------------------
Net Income After Provision for Possible Loan Losses 20,856 19,306
OTHER INCOME
Service Charges on Deposit Accounts 2,232 2,018
Other Service Charges, Commissions & Fees 778 787
Fiduciary Activities 259 275
Other Operating Income 231 308
---------------------- ----------------------
Total Other Income 3,500 3,388
OTHER EXPENSE
Salaries and Employee Benefits 8,121 7,919
Net Occupancy Expense 1,218 1,204
Equipment Expense 1,048 1,291
Other Real Estate Owned 216 118
Other Operating Expense 4,396 3,690
---------------------- ----------------------
Total Other Expense 14,999 14,222
Income Before Taxes 9,357 8,472
Provision for Income Taxes 3,923 3,485
---------------------- ----------------------
NET INCOME 5,434 4,987
====================== ======================
Earnings Per Share 0.84 0.74
Average Shares Outstanding 6,506,573 6,755,440
</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 06/30/97 Ended 06/30/96
---------------------- ----------------------
<S> <C> <C>
NET INCOME 5,434 4,987
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH :
Provision for Loan Losses 534 520
Depreciation 646 828
Amortization of Excess of
Cost Over Fair Market Value of Net Assets Acquired 181 181
Accretion of Discounts (412) (1,313)
Amortization of Premiums 226 293
Incease in Interest Receivable (458) (316)
Decrease (Increase) in Other Assets 442 (2,308)
Increase (Decrease) in Interest Payable 448 (90)
Increase in Other Liabilities 1,782 1,156
---------------------- ----------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 8,823 3,938
CASH FLOWS FROM INVESTING ACTIVITIES
Principal Payments on Investment Securities 1,398 1,210
Maturities of Investments Held to Maturity 11,253 7,941
Purchases of Investments Held to Maturity (281) (530)
Maturities of Investments Available for Sale 35,239 84,167
Purchases of Investments Available for Sale (40,148) (60,512)
Net Loan Disbursements & Repayments (24,833) (47,383)
Purchases of Premises and Equipment, Net (3,371) (1,246)
Disposition of OREO Property 1,862 1,034
---------------------- ----------------------
Net Cash Provided (Used) from Investing Activities (18,881) (15,319)
CASH FLOWS FROM FINANCING ACTIVITIES
Net Decrease in Deposit Accounts 44,339 (5,081)
Increase in Federal Funds Purchased 0 0
Proceeds from Other Borrowings (7,200) 0
Treasury Shares Acquired (2,627) (2,438)
Dividends Paid to Shareholders 0 (2,264)
Increase in Dividends Payable on Common Stock 195
---------------------- ----------------------
NET CASH USED FROM FINANCING ACTIVITIES 34,512 (9,588)
NET DECREASE IN CASH AND CASH EQUIVALENTS 24,454 (20,969)
CASH AND CASH EQUIVALENTS: BEGINNING OF PERIOD 51,324 81,455
CASH AND CASH EQUIVALENTS: END OF PERIOD 75,778 60,486
</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,
1996.
The results of operations for the three months ended June 30, 1997, are
not necessarily indicative of the results of operations to be expected for the
remainder of the year.
(2) IMPACT OF NEW ACCOUNTING STANDARDS
In December 1996, the Financial Accounting Standards Board, ("FASB")
issued SFAS No. 127, "Deferral of the Effective Date of Certain Provisions of
FASB Statement No. 125," which is an amendment to SFAS No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishment of Liabilities."
which supersedes SFAS No. 122. SFAS No. 125 is effective for transfers and
servicing of financial assets and extinguishment of liabilities occurring after
December 31, 1996. SFAS No. 127 delayed the effective date of certain provisions
of SFAS No. 125 until January 1, 1998.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION for the Three Month Periods ended June 30, 1997 and 1996
NET INCOME
Net income was $2,723,000 for the quarter, ahead 7.5 percent from
$2,534,000 posted during the same period last year. Earnings per share for the
quarter were $0.42 versus $0.38, a gain of 10.5 percent.
INTEREST INCOME
Interest income was $15,895,000 for the second quarter 1997, up 6.0
percent from $14,993,000 posted for the same quarter in 1996. Average net loans
for the second quarter of 1997 totaled $594,097,000, compared to $537,187,000
for the same period of 1996. During the second quarter of 1997, the yield was
8.69 percent on average earning assets of $735,278,000 up from 8.53 percent on
average earning assets of $709,439,000 during the second quarter of 1996. The
increase in interest income, is attributable to the increase in average balances
of earning assets.
INTEREST EXPENSE
Interest expense for the second quarter of 1997 was $5,079,000, up 4.9
percent from $4,841,000 for the same period of 1996. Average deposits for the
second quarter 1997 were $731,415,000 up from $705,307 for the comparable period
in 1996. Other borrowings, in the form of federal funds purchased and securities
sold under agreements to repurchase, averaged $7,027,000 during the second
quarter 1997, compared to $491,000 during second quarter 1996. Savings, NOWa and
Money Market deposits have decreased while other time deposits and demand
deposits have increased.
NET INTEREST INCOME
Net interest income remains the largest component of the Bank's
earnings. Net interest income for the second quarter of 1997 was $10,816,000, up
from $10,152,000 during the same period of 1996. The net interest margin for the
quarter, on a fully taxable-equivalent basis, was 5.93 percent compared to 5.80
percent for the same period of 1996.
(7)
<PAGE> 8
The following table presents the coverage of troubled assets:
<TABLE>
<CAPTION>
LAST 12 JUN. 30 MAR. 31 DEC. 31 SEP. 30
COVERAGE RATIOS MONTHS 1997 1997 1996 1996
<S> <C> <C> <C> <C> <C>
Net Charge-offs/Average Net Loans (annualized) 0.09% 0.06% 0.10% 0.09% 0.13%
Allowance for Loan Losses/Non-Accrual,
Restructured, & OREO 132.05% 161.87% 158.13% 102.93% 105.26%
Allowance for Loan Losses/Net Loans 1.06% 1.08% 1.05% 1.05% 1.06%
</TABLE>
OTHER INCOME
Other income increased to $1,821,000 for the three months ended June
30, 1997 compared to $1,752,000 for the same period during 1996. Service charges
on deposit accounts is up $101,000 or 9.6 percent as a result of higher volume
within transactional accounts. Trust revenue is down 8.6 percent. Other
operating income is down $20,000 or 16.3 percent.
OTHER EXPENSE
Other expense for the second quarter 1997 was $7,684,000, up 6.0
percent from $7,252,000 for the comparable period in 1996. Other operating
expenses are up 21.5 percent, owing to increased loans and deposits.
CAPITAL RESOURCES
Stockholders' equity totaled $73,278,000 on June 30, 1997, a decrease
of $528,000 from $72,750,000 on December 31, 1996. The ratio of equity to assets
was 8.68 percent at June 30, 1997 and 9.04 percent at December 31, 1996.
At their annual meeting on April 8, 1997, the Company's shareholders
voted to increase the number of shares authorized from 7,500,000 to 15,000,000
and to split the stock 2 for 1, changing the par value from $5.00 to $2.50. The
split was payable on May 15, 1997. All numbers in the following discussion are
adjusted to reflect the split.
The Company believes that the repurchase of stock is an important tool
to manage capital in times when its business generates capital faster than
assets. In January of 1997, the Company announced its intention to repurchase
five percent of the common shares then outstanding, or 329,644 shares. In 1996,
the Company authorized the repurchase of 340,130 shares, of which it was able to
repurchase only 236,800 shares. The remaining 103,330 shares not repurchased
during 1996 were added to the 1997 plan, calling in total to repurchase 432,974
shares more. During the quarter most recently ended, the Company repurchased
17,000 shares.
In the week following the end of the quarter, the Company reached an
agreement with its largest shareholder to repurchase 373,422 shares, or 5.77
percent of the shares outstanding on June 30, 1997. This purchase raised the
total of shares repurchased since December 31, 1996 to 497,536, or 64,562 shares
more than had previously been announced for repurchase. The additional shares
were authorized by the board for repurchase in order to complete the
transaction. This transaction reduced the Company's leverage ratio from 8.68
percent to 7.26 percent, pro-forma, based on June 30, 1997 balances and should
be accretive to earnings per share. This transaction concludes the Company's
formal repurchase program, although the Company may repurchase shares in the
future for various corporate purposes.
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
None.
(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 12, 1997 /s/ Edward J. Merz
------------------------------
Edward J. Merz
Chairman, President & Chief Executive Officer
Date: August 15, 1997 /s/ Victor F. Bozuhoski, Jr.
------------------------------
Victor F. Bozuhoski, Jr.
Executive Vice President,
Treasurer & Chief Financial Officer
(9)
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 49,778
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 26,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 109,727
<INVESTMENTS-CARRYING> 18,350
<INVESTMENTS-MARKET> 15,522
<LOANS> 606,996
<ALLOWANCE> 6,423
<TOTAL-ASSETS> 844,257
<DEPOSITS> 755,356
<SHORT-TERM> 0
<LIABILITIES-OTHER> 15,623
<LONG-TERM> 0
0
19,026
<COMMON> 0
<OTHER-SE> 54,252
<TOTAL-LIABILITIES-AND-EQUITY> 844,257
<INTEREST-LOAN> 13,716
<INTEREST-INVEST> 2,023
<INTEREST-OTHER> 156
<INTEREST-TOTAL> 15,895
<INTEREST-DEPOSIT> 4,980
<INTEREST-EXPENSE> 5,079
<INTEREST-INCOME-NET> 10,816
<LOAN-LOSSES> 283
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 7,684
<INCOME-PRETAX> 4,670
<INCOME-PRE-EXTRAORDINARY> 2,723
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,723
<EPS-PRIMARY> .042
<EPS-DILUTED> .042
<YIELD-ACTUAL> 5.93
<LOANS-NON> 3,034
<LOANS-PAST> 2,616
<LOANS-TROUBLED> 585
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 6,113
<CHARGE-OFFS> 307
<RECOVERIES> 83
<ALLOWANCE-CLOSE> 6,423
<ALLOWANCE-DOMESTIC> 6,423
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
