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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 the Quarter Ended June 30, 1998
Commission file number 0-13580
SUFFOLK BANCORP
(exact name of registrant as specified in its charter)
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<S> <C>
New York State 11-2708279
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
6 West Second Street, Riverhead, New York 11901
(Address of Principal Executive Offices) (Zip Code)
</TABLE>
(Registrant's telephone number, including area code) (516) 727-5667
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.
6,095,356 SHARES OF COMMON STOCK OUTSTANDING AS OF JUNE 30, 1998
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SUFFOLK BANCORP AND SUBSIDIARIES
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Part I Financial Information page
<S> <C>
Consolidated Statements of Condition 4
Consolidated Statements of Income, For the Three Months Ended June 30, 1998 and 1997 5
Consolidated Statements of Income, For the Six Months Ended June 30, 1998 and 1997 6
Statements of Cash Flows, For the Six Months Ended June 30, 1998 and 1997 7
Notes to the Unaudited Consolidated Financial Statements 8
Management's Discussion and Analysis of Financial Condition and Results of Operations 8
Part II Other Information 9
Signatures 10
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SUFFOLK BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
(unaudited, in thousands of dollars, except share and per share data)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
-------- ------------
<S> <C> <C>
ASSETS
Cash & Due From Banks ............................... $ 63,263 $ 53,439
Federal Funds Sold .................................. 7,700 18,500
Investment Securities:
Available for Sale, at Fair Value .................. 111,128 120,878
U.S. Government Agency Obligations ................ 2,884 7,039
Obligations of States & Political Subdivisions .... 9,494 18,371
Corporate Bonds & Other Securities ................ 638 638
-------- --------
Total Investment Securities ......................... 124,144 146,926
Total Loans ......................................... 637,115 611,388
Allowance for Possible Loan Losses ................ 6,771 6,524
-------- ---------
Net Loans ........................................... 630,344 604,864
Premises & Equipment, Net ........................... 15,874 16,182
Other Real Estate Owned, Net ........................ 341 597
Accrued Interest Receivable, Net .................... 5,851 5,548
Excess of Cost Over Fair Value of Net Assets
Acquired .......................................... 2,081 2,262
Other Assets ........................................ 18,520 16,595
-------- --------
TOTAL ASSETS 868,118 864,913
======== ========
LIABILITIES & STOCKHOLDERS' EQUITY
Demand Deposits ..................................... 222,162 184,085
Savings, N.O.W.'s & Money Market Deposits ........... 319,216 335,047
Time Certificates of $100,000 or more ............... 22,263 23,406
Other Time Deposits ................................. 225,496 235,057
-------- --------
Total Deposits .................................... 789,137 777,595
Dividend Payable on Common Stock .................... 1,097 1,097
Accrued Interest Payable ............................ 2,169 3,075
Other Liabilities ................................... 7,097 18,006
-------- --------
TOTAL LIABILITIES 799,500 799,773
-------- --------
STOCKHOLDERS' EQUITY
Common Stock (par value $2.50; 15,000,000 shares
authorized; 6,095,356 and 6,485,798 shares issued
at June 30, 1998 & 1997, respectively) ............. 19,026 19,026
Surplus ............................................. 18,456 18,456
Treasury Stock at Par (1,515,064 shares and
1,124,622 shares, respectively) .................... (3,788) (3,788)
Undivided Profits ................................... 34,609 30,992
-------- --------
68,303 64,686
Accumulated Other Comprehensive Income, Net Of Tax .. 315 454
-------- --------
TOTAL STOCKHOLDERS' EQUITY......................... 68,618 65,140
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY........... $868,118 $864,913
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
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SUFFOLK BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(unaudited, in thousands of dollars, except share and per share data)
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<CAPTION>
For the 3 Months Ended
6/30/98 6/30/97
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<S> <C> <C>
INTEREST INCOME
Federal Funds Sold $ 120 $ 156
United States Treasury Securities 1,497 1,498
Obligations of States & Political Subdivisions 209 106
U.S. Government Agency Obligations 186 410
Corporate Bonds & Other Securities 9 9
Loans 14,226 13,716
---------- ----------
Total Interest Income 16,247 15,895
INTEREST EXPENSE
Savings, N.O.W.'s & Money Market Deposits 1,847 1,867
Time Certificates of $100,000 or more 301 257
Other Time Deposits 3,133 2,856
Federal Funds Purchased 10 15
Interest on Other Borrowings - 84
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Total Interest Expense 5,291 5,079
Net-interest Income 10,956 10,816
Provision for Possible Loan Losses 300 283
---------- ----------
Net-interest Income After Provision 10,656 10,533
OTHER INCOME
Service Charges on Deposit Accounts 1,083 1,156
Other Service Charges, Commissions & Fees 672 434
Fiduciary Fees 143 128
Other Operating Income 123 103
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Total Other Income 2,021 1,821
OTHER EXPENSE
Salaries & Employee Benefits 4,177 4,114
Net Occupancy Expense 640 622
Equipment Expense 583 521
Other Real Estate Expense 5 22
Other Operating Expense 2,087 2,405
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Total Other Expense 7,492 7,684
Income Before Provision for Income Taxes 5,185 4,670
Provision for Income Taxes 2,280 1,947
---------- ----------
NET INCOME $ 2,905 $ 2,723
========== ==========
AVERAGE: Common Shares Outstanding 6,095,356 6,480,221
Dilutive Stock Options 27,800 -
---------- ----------
AVERAGE TOTAL 6,123,156 6,480,221
EARNINGS PER COMMON SHARE Basic $ 0.47 $ 0.42
Diluted $ 0.47 $ 0.42
</TABLE>
See accompanying notes to consolidated financial statements.
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SUFFOLK BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(unaudited, in thousands of dollars, except share and per share data)
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<CAPTION>
For the Six Months Ended
6/30/98 6/30/97
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<S> <C> <C>
INTEREST INCOME
Federal Funds Sold $ 201 $ 215
United States Treasury Securities 3,235 3,248
Obligations of States & Political Subdivisions 401 222
U.S. Government Agency Obligations 593 833
Corporate Bonds & Other Securities 19 19
Loans 28,190 26,904
---------- -----------
Total Interest Income 32,639 31,441
INTEREST EXPENSE
Savings, N.O.W.'s & Money Market Deposits 3,737 3,763
Time Certificates of $100,000 or more 651 502
Other Time Deposits 6,410 5,349
Federal Funds Purchased 82 100
Interest on Other Borrowings 70 337
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Total Interest Expense 10,950 10,051
Net-interest Income 21,689 21,390
Provision for Possible Loan Losses 600 534
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Net-interest Income After Provision 21,089 20,856
OTHER INCOME
Service Charges on Deposit Accounts 2,081 2,232
Other Service Charges, Commissions & Fees 1,137 778
Fiduciary Fees 258 259
Other Operating Income 463 231
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Total Other Income 3,939 3,500
OTHER EXPENSE
Salaries & Employee Benefits 8,195 8,121
Net Occupancy Expense 1,253 1,218
Equipment Expense 1,084 1,048
Other Real Estate Expense 28 216
Other Operating Expense 4,182 4,396
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Total Other Expense 14,742 14,999
Income Before Provision for Income Taxes 10,286 9,357
Provision for Income Taxes 4,475 3,923
---------- -----------
NET INCOME $ 5,811 $ 5,434
========== ===========
AVERAGE: Common Shares Outstanding 6,095,356 6,506,573
Dilutive Stock Options 27,800 --
---------- -----------
AVERAGE TOTAL 6,123,156 6,506,573
EARNINGS PER COMMON SHARE Basic $ 0.95 $ 0.84
Diluted $ 0.94 $ 0.84
</TABLE>
See accompanying notes to consolidated financial statements.
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SUFFOLK BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands of dollars, except share and per share data)
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<CAPTION>
For the Six Months Ended June 30,
1988 1997
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
NET INCOME $ 5,811 $ 5,434
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
Provision for Possible Loan Losses 600 534
Depreciation & Amortization 872 646
Amortization of Excess Cost Over Fair Value of Net Assets Acquired 181 181
Accretion of Discounts (563) (412)
Amortization of Premiums 62 226
Increase in Accrued Interest Receivable (303) (458)
Increase (Decrease) in Other Assets (1,925) 442
(Decrease) Increase in Accrued Interest Payable (905) 448
(Decrease) Increase in Other Liabilities (10,910) 1,782
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NET CASH PROVIDED BY OPERATING ACTIVITIES (7,080) 8,823
CASH FLOWS FROM INVESTING ACTIVITIES
Principal Payments on Investment Securities 4,184 1,398
Maturities of Investment Securities; Available for Sale 30,815 35,239
Purchases of Investment Securities; Available for Sale (20,827) (40,288)
Maturities of Investment Securities; Held to Maturity 10,591 11,253
Purchases of Investment Securities; Held to Maturity (1,718) (281)
Loan Disbursements & Repayments, Net (26,075) (24,833)
Purchases of Premises & Equipment, Net (565) (3,371)
Disposition of Other Real Estate Owned 351 1,862
---------- --------
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES (3,244) (19,021)
CASH FLOWS FROM FINANCING ACTIVITIES
Net Increase in Deposit Accounts 11,542 44,439
Decrease in Other Borrowings -- (7,200)
Common Stock Sold for Cash -- --
Dividends Paid to Shareholders (2,194) (2,158)
Treasury Shares Acquired -- (310)
Increase in Dividends Payable on Common Stock -- (19)
---------- --------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES 9,348 34,652
NET (DECREASE) INCREASE IN CASH & CASH EQUIVALENTS (976,399) 24,454
CASH & CASH EQUIVALENTS BEGINNING OF PERIOD 71,939 51,324
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CASH & CASH EQUIVALENTS END OF PERIOD $ 70,963 $ 75,778
========= ========
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See accompanying notes to consolidated financial statements.
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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,
1997.
The results of operations for the three months ended June 30, 1998 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 February 1998, the Financial Accountings Standards Board issued Statement of
Financial Accounting Standards No. 132 "Employers' Disclosures about Pensions
and Other Post-retirement Benefits" ("SFAS No. 132"). SFAS No. 132 supercedes
the disclosure requirements for pension and other post-retirement plans as set
forth in SFAS No. 87, "Employers' Accounting For Pensions," SFAS No. 88,
"Employers' Accounting for Settlements and Curtailments of Defined Benefit
Pension Plans and for Termination Benefits," and SFAS No. 106, "Employers'
Accounting for Post-retirement Benefits Other Than Pensions." SFAS No. 132 does
not address measurement or recognition for pension and other post-retirement
benefit plans.
SFAS No. 132 is effective for fiscal years beginning after December 15, 1997.
Restatement of disclosures for earlier periods provided for comparative purposes
is required unless the information is not readily available.
In June 1998, The Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting For Derivative Instruments
and Hedging Activities" ("SFAS No. 133"). This statement established accounting
and reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. It requires
that an entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value. The
accounting for changes in the fair value of a derivative depends on the
intended use of the derivative and the resulting designation. SFAS No. 133 will
not affect Suffolk's accounting or disclosures.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
for the Three Month Periods ended June 30, 1998 and 1997
NET INCOME
Net income was $2,905,000 for the quarter, ahead 6.7 percent from
$2,723,000 posted during the same period last year. Earnings per share for the
quarter were $0.47 versus $0.42, a gain of 11.9 percent.
INTEREST INCOME
Interest income was $16,247,000 for the second quarter of 1998, up 2.2
percent from $15,895,000 posted for the same quarter in 1997. Average net loans
during the second quarter of 1998 totaled $615,351,000, compared to $594,097,000
for the same period of 1997. During the second quarter of 1998, the yield was
8.63 percent (taxable-equivalent) on average
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earning assets of $763,988,000 up from $735,278,000 during the second quarter of
1997, which yielded 8.53 percent. The increase in interest income is primarily
attributable to the increase in average balances of earning assets.
INTEREST EXPENSE
Interest expense for the second quarter of 1998 was $5,291,000, up 4.2
percent from $5,079,000 for the same period of 1997. Average deposits for the
second quarter 1998 were $775,466,000, up from $731,415,000 for the comparable
period in 1997.
NET INTEREST INCOME
Net interest income is the largest component of the Company's earnings.
Net interest income for the second quarter of 1998 was $10,956,000, up from
$10,816,000 during the same period of 1997. The net interest margin for the
quarter, on a fully taxable-equivalent basis, was 5.84 percent compared to 5.80
percent for the same period of 1997.
The following table presents the coverage of troubled assets:
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FOR THE FOR THE THREE MONTHS ENDED
LAST 12 JUNE 30 MAR. 31 DEC. 31 SEPT. 30
COVERAGE RATIOS MONTHS 1998 1998 1997 1997
<S> <C> <C> <C> <C> <C>
Net Charge-offs/Average Net Loans (annualized) 0.13% 0.09% 0.13% 0.10% 0.19%
Allowance for Loan Losses/Non-Accrual,
Restructured, & OREO 224.02% 322.89% 218.79% 182.29% 172.10%
Allowance for Loan Losses/Net Loans 1.08% 1.07% 1.08% 1.07% 1.09%
</TABLE>
OTHER INCOME
Other income increased to $2,021,000 for the three months compared to
$1,821,000 the previous year. Service charges on deposits were down 6.3 percent.
Service charges other than for deposits, commissions, and fees increased by 54.8
percent. Trust revenue was down 11.7 percent. Other operating income was up 19.4
percent.
OTHER EXPENSE
Other expense for the second quarter of 1998 was $7,492,000, down 2.5
percent from $7,684,000 for the comparable period in 1997.
CAPITAL RESOURCES
Stockholders' equity totaled $68,618,000 on June 30, 1998, an increase
of 5.3 percent from $65,140,000 on December 31, 1997. The ratio of equity to
assets was 7.9 percent at June 30, 1998 and 7.5 percent at December 31, 1997.
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
None.
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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, 1998 /s/ John F. Hanley
------------------------------
John F. Hanley
President & Chief Executive Officer
Date: August 14, 1998 /s/ Victor F. Bozuhoski, Jr.
------------------------------
Victor F. Bozuhoski, Jr.
Executive Vice President,
Treasurer & Chief Financial Officer
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<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 63,263
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 7,700
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 111,128
<INVESTMENTS-CARRYING> 13,016
<INVESTMENTS-MARKET> 13,137
<LOANS> 637,114
<ALLOWANCE> 6,771
<TOTAL-ASSETS> 868,118
<DEPOSITS> 789,137
<SHORT-TERM> 0
<LIABILITIES-OTHER> 10,363
<LONG-TERM> 0
0
0
<COMMON> 68,618
<OTHER-SE> 0
<TOTAL-LIABILITIES-AND-EQUITY> 868,118
<INTEREST-LOAN> 28,189
<INTEREST-INVEST> 4,248
<INTEREST-OTHER> 201
<INTEREST-TOTAL> 32,638
<INTEREST-DEPOSIT> 10,798
<INTEREST-EXPENSE> 10,950
<INTEREST-INCOME-NET> 21,688
<LOAN-LOSSES> 600
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 14,743
<INCOME-PRETAX> 10,285
<INCOME-PRE-EXTRAORDINARY> 10,285
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,811
<EPS-PRIMARY> 0.95
<EPS-DILUTED> 0.94
<YIELD-ACTUAL> 5.84
<LOANS-NON> 1,715
<LOANS-PAST> 1,680
<LOANS-TROUBLED> 41
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 6,524
<CHARGE-OFFS> 445
<RECOVERIES> 92
<ALLOWANCE-CLOSE> 6,771
<ALLOWANCE-DOMESTIC> 6,771
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
