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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 Quarter Ended March 31, 1998
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)
(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 MARCH 31, 1998
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SUFFOLK BANCORP AND SUBSIDIARIES
Part I Financial Information page
Consolidated Statements of Condition 3
Consolidated Statements of Income, For the Three Months Ended
March 31, 1998 and 1997 4
Statements of Cash Flows, For the Three Months Ended
March 31, 1998 and 1997 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
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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>
MARCH 31, DECEMBER 31,
1998 1997
<S> <C> <C>
ASSETS
Cash & Due From Ranks .................................................. $ 52,708 $ 53,439
Federal Funds Sold ..................................................... 1,500 18,500
Investment Securities:
Available for Sale, at Fair Value .................................... 107,141 120,878
U.S. Government Agency Obligations .................................. 6,044 7,039
Obligations of States & Political Subdivisions ...................... 19,100 18,371
Corporate Bonds & Other Securities .................................. 638 638
----------- ----------
Total Investment Securities ............................................ 132,923 146,926
Total Loans ............................................................ 622,164 611,388
Allowance for Possible Loan Losses .................................. 6,627 6,524
----------- ----------
Net Loans .............................................................. 615,537 604,864
Premises & Equipment,, Net ............................................. 15,871 16,182
Other Real Estate Owned, Net ........................................... 341 597
Accrued Interest Receivable, Net ....................................... 5,083 5,548
Excess of Cost Over Fair Value of Net Assets Acquired .................. 2,172 2,262
Other Assets ........................................................... 17,893 16,595
----------- ----------
TOTAL ASSETS ......................................................... 844,028 864,913
=========== ==========
LIABILITIES & STOCKHOLDERS' EQUITY
Demand Deposits ........................................................ 188,083 184,085
Savings, N O W's & Money Market Deposits ............................... 319,549 335,047
Time Certificates of $100,000 or more .................................. 24,009 23,406
Other Time Deposits .................................................... 233,770 235,057
----------- ----------
Total Deposits ....................................................... 765,411 777,595
Dividend Payable on Common Stock ....................................... 1,097 1,097
Accrued Interest Payable ............................................... 1,733 3,075
Other Liabilities ...................................................... 8,902 18,006
----------- ----------
TOTAL LIABILITIES .................................................... 777,143 799,773
----------- ----------
STOCKHOLDERS' EQUITY
Common Stock (par value $2.50, 15,000,000 shares authorized, 6,095,356
and 6,485,798 shares issued at March 31, 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 ...................................................... 32,801 30,992
----------- -----------
66,495 64,686
Accumulated Other Comprehensive Income, Net of Tax ..................... 390 454
----------- -----------
TOTAL STOCKHOLDERS' EQUITY ......................................... 66,885 65,140
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY ............................. 884,028 864,913
============ ===========
See accompanying notes to consolidated financial statements.
</TABLE>
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SUFFOLK BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED, IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
For the Three Months Ended
----------------------------------
MARCH 31, 1998 MARCH 31, 1997
-------------- --------------
<S> <C> <C>
INTEREST INCOME
Federal Funds Sold...................................................... $ 81 $ 59
United States Treasury Securities....................................... 1,738 1,750
Obligations of States & Political Subdivisions (tax exempt)............. 192 116
U.S. Government Agency Obligations...................................... 407 423
Corporate Bonds & Other Securities...................................... 10 10
Loans................................................................... 13,964 13,188
Total Interest Income................................................. -------------- --------------
16,392 15,546
INTEREST EXPENSE
Savings, N.O.W.'s & Money Market Deposits.............................. 1,890 1,896
Time Certificates of $100,000 or more.................................. 350 245
Other Time Deposits.................................................... 3,277 2,493
Federal Funds Purchased................................................ 72 85
Interest on Other Borrowings........................................... 70 253
-------------- --------------
Total Interest Expense............................................... 5,659 4,972
Net-interest Income.................................................. 10,733 10,574
Provision for Possible Loan Losses..................................... 300 251
-------------- --------------
Net-interest Income After Provision for Possible Loan Losses......... 10,433 10,323
OTHER INCOME
Service Charges on Deposit Accounts.................................... 998 1,076
Other Service Charges, Commissions & Fees.............................. 465 344
Fiduciary Fees......................................................... 115 131
Other Operating Income................................................. 340 128
-------------- --------------
Total Other Income................................................... 1,918 1,679
OTHER EXPENSE
Salaries & Employee Benefits........................................... 4,018 4,007
Net Occupancy Expense.................................................. 613 596
Equipment Expense...................................................... 501 527
other Real Estate Expense.............................................. 23 194
Other Operating Expense................................................ 2,095 1,991
-------------- --------------
Total Other Expense.................................................. 7,250 7,315
Income Before Provision for Income Taxes............................... 5,101 4,687
Provision for Income Taxes............................................. 2,195 1,976
------------- --------------
NET INCOME............................................................. $ 2,906 $ 2,711
============== ==============
AVERAGE: Common Shares Outstanding 6,095,356 6,535,686
Dilutive Stock Options 27,800 --
-------------- --------------
AVERAGE TOTAL COMMON SHARES AND DILUTIVE OPTIONS 6,123,156 6,535,686
EARNINGS PER COMMON SHARE Basic $ 0.48 $ 0.41
Diluted $ 0.47 $ 0.41
</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)
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
----------------------------
1998 1997
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
NET INCOME................................................................ $ 2,906 $ 2,711
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
Provision for Possible Loan Losses...................................... 300 251
Depreciation & Amortization............................................. 388 314
Amortization of Excess Cost Over Fair Value of Net Assets Acquired...... 90 90
Accretion of Discounts.................................................. (352) (205)
Amortization of Premiums................................................ 31 180
Increase in Accrued Interest Receivable................................. 465 600
Increase (Decrease) in Other Assets..................................... (1,297) 994
(Decrease) in Accrued Interest Payable.................................. (1,342) (1)
(Decrease) Increase in Other Liabilities................................ (9,104) 1,655
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES.............................. (7,915) 6,589
CASH FLOWS FROM INVESTING ACTIVITIES
Principal Payments on Investment Securities............................. 1,012 383
Maturities of Investment Securities; Available for Sale................. 23,928 25,777
Purchases of Investment Securities; Available for Sale.................. (9,889) (20,102)
Maturities of Investment Securities; Held to Maturity.................. 681 404
Purchases of Investment Securities; Held to Maturity................... (1,407) --
Loan Disbursements & Repayments, Net.................................... (11,030) (8,478)
Purchases of Premises & Equipment, Net.................................. (78) (1,868)
Disposition of Other Real Estate Owned.................................. 248 1,690
--------- ---------
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES.................... 3,465 (2,194)
CASH FLOWS FROM FINANCING ACTIVITIES
Net Decrease in Deposit Accounts........................................ (12,184) (13,095)
Increase in Other Borrowings............................................ -- 11,748
Common Stock Sold for Cash.............................................. -- --
Dividends Paid to Shareholders.......................................... (1,097) (1,088)
Treasury Shares Acquired................................................ -- (2,197)
--------- ---------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES.................... (13,281) (4,632)
NET DECREASE IN CASH & CASH EQUIVALENTS................................ (17,731) (237)
CASH & CASH EQUIVALENTS BEGINNING OF PERIOD........................... 71,939 51,324
--------- ---------
Cash & Cash Equivalents End of Period................................. $ 54,208 $ 51,087
========= =========
</TABLE>
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 March 31, 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
The Company adopted S.F.A.S. 130, "Reporting Comprehensive Income," during the
first quarter of 1998. For the three months ended March 31st, comprehensive
income totaled ($64,000) and ($459,000) in 1998 and 1997, respectively.
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.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
for the Three-Month Periods ended March 31, 1998 and 1997
NET INCOME
Net income was $2,906,000 for the quarter, ahead 7.2 percent from
$2,711,000 posted during the same period last year. Earnings per share for the
quarter were $0.48 versus $0.41, a gain of 17.1 percent.
INTEREST INCOME
Interest income was $16,392,000 for the first quarter of 1998, up 5.4
percent from $15,546,000 posted for the same quarter in 1997. Average net loans
during the first quarter of 1998 totaled $606,389,000, compared to $578,529,000
for the same period of 1997. During the first quarter of 1998, the yield was
8.62 percent (taxable-equivalent) on average earning assets of $767,136,000 up
from $736,525,000 during the first quarter of 1997, which yielded 8.49 percent.
The increase in interest income is primarily attributable to the increase in
average balances of earning assets.
INTEREST EXPENSE
Interest expense for the first quarter of 1998 was $5,659,000, up 13.8
percent from $4,972,000 for the same period of 1997. Average deposits for the
first quarter 1998 were $769,871,000 up from $715,112,000 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 first quarter of 1998 was $10,733,000, up from
$10,574,000 during the same period of 1997. The net interest margin for
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the quarter, on a fully taxable-equivalent basis, was 5.67 percent compared to
5.79 percent for the same period of 1997.
The following table presents the coverage of troubled assets:
<TABLE>
<CAPTION>
FOR THE FOR THE THREE MONTHS ENDED
LAST 12 MAR. 31 DEC. 31 Sept. 30 June 30
COVERAGE RATIOS MONTHS 1997 1997 1997 1997
- --------------- ------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C>
Net Charge-offs/Average Net Loans (annualized)......... 0.12% 0.13% 0.10% 0.19% 0.06%
Allowance for Loan Losses/Non-Accrual,
Restructured, & OREO................................ 183.76% 218.79% 182.29% 172.10% 161.87%
Allowance for Loan Losses/Net Loans.................... 1.08% 1.08% 1.07% 1.09% 1.08%
</TABLE>
OTHER INCOME
Other income increased to $1,918,000 for the three months compared to
$1,679,000 the previous year. Service charges on deposits were down 7.2 percent.
Service charges other than for deposits, commissions, and fees increased by 35.2
percent. Trust revenue was down 12.2 percent. Other operating income was up
165.6 percent, primarily because of a gain of $250,000 on the sale of a merchant
services portfolio.
OTHER EXPENSE
Other expense for the first quarter of 1998 was $7,250,000, down 0.9
percent from $7,315,000 for the comparable period in 1997.
CAPITAL RESOURCES
Stockholders' equity totaled $66,885,000 on March 31, 1998, a decrease
of 6.8 percent from $71,737,000 a year ago. The ratio of equity to assets was
7.55 percent at March 31, 1998 and 7.44 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: May 15, 1998 /s/ John F. Hanley
------------------------------
John F. Hanley
President & Chief Executive Officer
Date: May 15, 1998 /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-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 52,708
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 1,500
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 107,141
<INVESTMENTS-CARRYING> 25,782
<INVESTMENTS-MARKET> 25,930
<LOANS> 622,164
<ALLOWANCE> 6,627
<TOTAL-ASSETS> 844,028
<DEPOSITS> 765,411
<SHORT-TERM> 0
<LIABILITIES-OTHER> 11,732
<LONG-TERM> 0
66,885
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITIES-AND-EQUITY> 844,028
<INTEREST-LOAN> 13,964
<INTEREST-INVEST> 6,340
<INTEREST-OTHER> 664
<INTEREST-TOTAL> 20,968
<INTEREST-DEPOSIT> 15,007
<INTEREST-EXPENSE> 15,444
<INTEREST-INCOME-NET> 5,524
<LOAN-LOSSES> 834
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 22,885
<INCOME-PRETAX> 14,271
<INCOME-PRE-EXTRAORDINARY> 14,271
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,314
<EPS-PRIMARY> 1.16
<EPS-DILUTED> 1.16
<YIELD-ACTUAL> 5.91
<LOANS-NON> 2,620
<LOANS-PAST> 1,989
<LOANS-TROUBLED> 773
<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>
