<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 March 31, 1997
Commission file number 0-13580
SUFFOLK BANCORP
- --------------------------------------------------------------------------------
(exact name of registrant as specified in its charter)
New York State 11-2708279
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6 West Second Street, Riverhead, New York 11901
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(Address of Principal Executive Offices) (Zip Code)
(516) 727-3800
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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 of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
3,242,899 SHARES OF COMMON STOCK OUTSTANDING AS OF MARCH 31, 1997
(1)
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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 March 31, 1997 and 1996 4
Statements of Cash Flows, For the Three Months Ended March 31, 1997 and 1996 5
Notes to the Unaudited Consolidated Financial Statements 6
Management's Discussion and Analysis of Financial Condition and Results of Operations 6
Part II Other Information 7
Signatures 8
</TABLE>
(2)
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SUFFOLK BANCORP AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CONDITION
(in thousands of dollars except number of shares)
<TABLE>
<CAPTION>
ASSETS March 31, 1997 December 31, 1996
-------- --------
<S> <C> <C>
Cash and Due From Banks 51,086 49,824
Federal Funds Sold -- 1,500
Investment Securities:
Investment Securities Available for Sale 98,991 104,649
Investment Securities Held to Maturity:
United States Treasury Obligations 8,010 8,019
Obligations of States and Political Subdivisions 9,765 10,170
U.S. Govt. Agency Obligations 11,513 11,877
Other Securities 638 638
-------- --------
Total Investment Securities 128,917 135,353
Loans, Net of Discounts 592,703 584,996
Less: Allowance for loan loss 6,224 6,113
-------- --------
Net Loans 586,479 578,883
Premises and Equipment, net 14,755 13,201
Other Real Estate Owned, net 383 1,899
Accrued Interest Receivable, net 4,623 5,222
Intangible Assets 2,534 2,624
Other Assets 14,879 15,873
-------- --------
TOTAL ASSETS 803,656 804,379
======== ========
LIABILITIES
Demand Deposits 163,680 168,315
Savings, N.O.W.'s and Money Market Deposits 324,982 329,930
Time Certificates of $100,000 or More 20,436 31,074
Other Time Deposit 188,824 181,698
-------- --------
Total Deposits 697,922 711,017
Federal Funds Purchased & Securities Sold
Under Agreements to repurchase 18,948 7,200
Dividends Payable on Common Stock 1,070 1,088
Accrued Interest Payable 1,579 1,579
Other Liabilities 12,400 10,745
-------- --------
TOTAL LIABILITIES 731,919 731,629
STOCKHOLDER'S EQUITY
Common Stock (Par Value $5.00; 7,500,000 authorized
3,242,899 and 3,296,445 shares outstanding at
March 31,1997 and December 31, 1996, respectively) 19,026 19,026
Surplus 18,456 18,456
Undivided Profits 37,067 37,353
Treasury Stock (562,311 shares in 1997 and 508,765 in 1996) (2,811) (2,543)
Net Unrealized (Loss) Gain on Securities Available for Sale (1) 458
-------- --------
TOTAL STOCKHOLDERS EQUITY 71,737 72,750
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY 803,656 804,379
======== ========
</TABLE>
(3)
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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
Ended 03/31/97 Ended 03/31/96
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<S> <C> <C>
INTEREST INCOME
Loans (including fee income) 13,188 11,800
Federal Funds Sold 59 261
United States Treasury Obligations 1,750 1,899
Obligations of States and Political Subdivisions 116 207
U.S. Govt. Agency Obligations 423 494
Other Securities 10 10
--------- ---------
Total Interest Income 15,546 14,671
INTEREST EXPENSE
Savings, N.O.W.'s and Money Market Deposits 1,896 2,021
Time Certificates of $100,000 or more 245 218
Other Time Deposits 2,493 2,750
Federal Funds Purchased 85 8
Interest on Other Borrowings 253 --
--------- ---------
Total Interest Expense 4,972 4,997
Net Interest Income 10,574 9,674
Provision for Possible Loan Losses 251 225
--------- ---------
Net Income After Provision for Possible Loan Losses 10,323 9,449
OTHER INCOME
Service Charges on Deposit Accounts 1,076 963
Other Service Charges, Commissions & Fees 344 353
Fiduciary Activities 131 135
Other Operating Income 128 185
--------- ---------
Total Other Income 1,679 1,636
OTHER EXPENSE
Salaries and Employee Benefits 4,007 3,988
Net Occupancy Expense 596 624
Equipment Expense 527 648
Other Real Estate Owned 194 --
Other Operating Expense 1,991 1,710
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Total Other Expense 7,315 6,970
Income Before Taxes 4,687 4,115
Provision for Income Taxes 1,976 1,662
--------- ---------
NET INCOME 2,711 2,453
========= =========
Earnings Per Share 0.83 0.72
Average Shares 3,267,843 3,394,595
</TABLE>
(4)
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SUFFOLK BANCORP AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of dollars)
<TABLE>
<CAPTION>
Three Months Three Months
Ended 03/31/97 Ended 03/31/96
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<S> <C> <C>
NET INCOME 2,711 2,453
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH :
Provision for Loan Losses 251 225
Depreciation 314 421
Amortization of Excess of
Cost Over Fair Market Value of Net Assets Acquired 90 91
Accretion of Discounts (205) (813)
Amortization of Premiums 180 153
Decrease in Interest Receivable 600 947
Decrease (Increase) in Other Assets 994 (221)
Decrease in Interest Payable (1) (81)
Increase in Other Liabilities 1,655 2,812
------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 6,589 5,987
CASH FLOWS FROM INVESTING ACTIVITIES
Principal Payments on Investment Securities 383 584
Maturities of Investments Held to Maturity 404 1,419
Purchases of Investments Held to Maturity -- (442)
Maturities of Investments Available for Sale 25,777 32,755
Purchases of Investments Available for Sale (20,102) (14,820)
Net Loan Disbursements & Repayments (8,478) (10,172)
Purchases of Premises and Equipment, Net (1,868) (965)
Disposition of OREO Property 1,690 --
------- -------
NET CASH (USED IN) PROVIDED BY INVESTING
ACTIVITIES (2,194) 8,359
CASH FLOWS FROM FINANCING ACTIVITIES
Net Decrease in Deposit Accounts (13,095) (60,631)
Increase in Federal Funds Purchased -- 1,300
Proceeds from Other Borrowings 11,748 --
Treasury Shares Acquired (2,197) (1,074)
Dividends Paid to Shareholders (1,088) (1,096)
------- -------
NET CASH USED FROM FINANCING ACTIVITIES (4,632) (61,501)
NET DECREASE IN CASH AND CASH EQUIVALENTS (237) (47,155)
CASH AND CASH EQUIVALENTS: BEGINNING OF PERIOD 51,324 81,455
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CASH AND CASH EQUIVALENTS: END OF PERIOD 51,087 34,300
======= =======
</TABLE>
(5)
<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
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 March 31,
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 March 31, 1997 and 1996
NET INCOME
Net income was $2,711,000 for the quarter, ahead 10.5 percent
from $2,453,000 posted during the same period last year. Earnings per share for
the quarter were $0.83 versus $0.72, a gain of 15.3 percent.
INTEREST INCOME
Interest income was $15,546,000 for the first quarter 1997, up
6.0 percent from $14,671,000 posted for the same quarter in 1996. Average net
loans for the first quarter of 1997 totaled $578,529,000, compared to
$509,375,000 for the same period of 1996. During the first quarter of 1997, the
yield was 8.49 percent on average earning assets of $736,525,000, up from 8.32
percent on average earning assets of $711,726,000 during the first 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 first quarter of 1997 was $4,972,000,
down 0.5 percent from $4,997,000 for the same period of 1996. Average deposits
for the first quarter 1997 were $711,927,000, up from $703,570,000 for the
comparable period in 1996. Other borrowings, in the form of federal funds
purchased and securities sold under agreements to repurchase, averaged
$17,965,000 during the first quarter 1997, compared to $570,000 during first
quarter 1996. Time deposits have decreased while other time deposits and savings
have increased.
NET INTEREST INCOME
Net interest income remains the largest component of the Bank's
earnings. Net interest income for the first quarter of 1997 was $10,574,000, up
from $9,674,000 during the same period of 1996. The net interest margin for the
quarter, on a fully taxable-equivalent basis, was 5.79 percent compared to 5.52
percent for the same period of 1996.
(6)
<PAGE> 7
The following table presents the coverage of troubled assets:
<TABLE>
<CAPTION>
LAST 12 MAR. 31 DEC. 31 SEPT. 30 JUNE 30
COVERAGE RATIOS MONTHS 1997 1996 1996 1996
<S> <C> <C> <C> <C> <C>
Net Charge-offs/Average Net Loans (annualized) 0.11% 0.10% 0.09% 0.13% 0.13%
Allowance for Loan Losses/Non-Accrual,
Restructured, & OREO 117.19% 158.13% 102.93% 105.26% 102.43%
Allowance for Loan Losses/Net Loans 1.05% 1.05% 1.05% 1.06% 1.04%
</TABLE>
OTHER INCOME
Other income increased to $1,679,000 for the three months ended
March 31, 1997 compared to $1,636,000 for the same period during 1996. Service
charges on deposit accounts is up $113,000 or 11.7 percent as a result of higher
volume within transactional accounts. Trust revenue is down 3.0 percent. Other
operating income is down $57,000 or 30.8 percent.
OTHER EXPENSE
Other expense for the first quarter 1997 was $7,315,000, up 4.9
percent from $6,970,000 for the comparable period in 1996. The largest component
of the increase is the one-time expenses related to the disposition of real
estate owned, $194,000 during the period. Other operating expenses are up 16.4
percent.
CAPITAL RESOURCES
Stockholders' equity totaled $71,737,000 on March 31, 1997, a
decrease of $1,013,000 from $72,750,000 on December 31, 1996. The ratio of
equity to assets was 8.93 percent at March 31, 1997 and 9.04 percent at December
31, 1996.
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 164,822 shares. In 1996,
the Company authorized the repurchase of 170,065 shares, of which it was able to
repurchase only 118,400 shares. The remaining 51,665 shares not repurchased
during 1996 were added to the 1997 plan, calling in total to repurchase 216,487
shares more. During the quarter most recently ended, the Company repurchased
53,546 shares, or approximately 1.6 percent of the shares outstanding at
December 31, 1996.
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
None.
(7)
<PAGE> 8
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 14, 1997 /s/ Edward J. Merz
------------------------------
Edward J. Merz
Chairman, President & Chief Executive Officer
Date: May 14, 1997 /s/ Victor F. Bozuhoski, Jr.
------------------------------
Victor F. Bozuhoski, Jr.
Executive Vice President,
Treasurer & Chief Financial Officer
(8)
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 51,087
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 98,991
<INVESTMENTS-CARRYING> 29,926
<INVESTMENTS-MARKET> 30,008
<LOANS> 592,703
<ALLOWANCE> 6,224
<TOTAL-ASSETS> 803,656
<DEPOSITS> 697,922
<SHORT-TERM> 0
<LIABILITIES-OTHER> 33,997
<LONG-TERM> 0
0
0
<COMMON> 19,026
<OTHER-SE> 52,711
<TOTAL-LIABILITIES-AND-EQUITY> 803,656
<INTEREST-LOAN> 13,188
<INTEREST-INVEST> 2,299
<INTEREST-OTHER> 59
<INTEREST-TOTAL> 15,546
<INTEREST-DEPOSIT> 4,634
<INTEREST-EXPENSE> 4,972
<INTEREST-INCOME-NET> 10,574
<LOAN-LOSSES> 251
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 7,315
<INCOME-PRETAX> 4,687
<INCOME-PRE-EXTRAORDINARY> 2,711
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,711
<EPS-PRIMARY> 0.83
<EPS-DILUTED> 0.83
<YIELD-ACTUAL> 5.79
<LOANS-NON> 3,181
<LOANS-PAST> 909
<LOANS-TROUBLED> 372
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 6,113
<CHARGE-OFFS> 173
<RECOVERIES> 33
<ALLOWANCE-CLOSE> 6,224
<ALLOWANCE-DOMESTIC> 6,224
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
