<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, 2000
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) (631) 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.
6,035,580 SHARES OF COMMON STOCK OUTSTANDING AS OF MARCH 31, 2000
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SUFFOLK BANCORP AND SUBSIDIARIES
<TABLE>
<CAPTION>
Part I Financial Information (unaudited) page
<S> <C>
Consolidated Statements of Condition 4
Consolidated Statements of Income, For the Three Months Ended March 31, 2000 and 1999 5
Statements of Cash Flows, For the Three Months Ended March 31, 2000 and 1999 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 11
Signatures 11
</TABLE>
3
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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, 2000 December 31, 1999
-------------- -----------------
<S> <C> <C>
ASSETS
Cash & Due From Banks $ 65,563 $ 53,452
Federal Funds Sold -- --
Investment Securities:
Available for Sale, at Fair Value 138,114 132,484
Held to Maturity:
U.S. Government Agency Obligations 1,503 1,583
Obligations of States & Political Subdivisions 31,782 27,835
Corporate Bonds & Other Securities 3,468 3,468
----------- -----------
Total Investment Securities 174,867 165,370
Total Loans 739,389 727,525
Less: Allowance for Possible Loan Losses 7,382 7,270
----------- -----------
Net Loans 732,007 720,255
Premises & Equipment, Net 13,955 14,345
Other Real Estate Owned, Net 175 203
Accrued Interest Receivable, Net 6,192 5,871
Excess of Cost Over Fair Value of Net Assets Acquired 1,448 1,538
Other Assets 19,555 19,765
----------- -----------
TOTAL ASSETS 1,013,762 980,799
=========== ===========
LIABILITIES & STOCKHOLDERS' EQUITY
Demand Deposits 242,943 242,397
Savings, N.O.W.'s & Money Market Deposits 385,821 369,921
Time Certificates of $100,000 or more 29,622 23,458
Other Time Deposits 234,196 241,527
----------- -----------
Total Deposits 892,582 877,303
Federal Home Loan Bank Borrowings 29,300 13,500
Dividend Payable on Common Stock 1,676 1,273
Accrued Interest Payable 2,061 2,463
Other Liabilities 9,337 8,926
----------- -----------
TOTAL LIABILITIES 934,956 903,465
----------- -----------
STOCKHOLDERS' EQUITY
Common Stock (par value $2.50; 15,000,000 shares authorized;
6,035,580 and 6,055,580 shares issued at March 31, 2000
& December 31, 1999, respectively) 19,026 19,026
Surplus 18,456 18,456
Treasury Stock at Par (1,574,840 shares and 1,554,840 shares, respectively) (3,937) (3,887)
Undivided Profits 47,327 45,576
----------- -----------
80,872 79,171
Accumulated Other Comprehensive Income, Net of Tax (2,066) (1,837)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 78,806 77,334
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 1,013,762 $ 980,799
=========== ===========
</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)
<TABLE>
<CAPTION>
For the Three Months Ended
March 31, 2000 March 31, 1999
-------------- --------------
<S> <C> <C>
INTEREST INCOME
Federal Funds Sold $ 124 $ 98
United States Treasury Securities 419 1,014
Obligations of States & Political Subdivisions (tax exempt) 313 153
U.S. Government Agency Obligations 1,671 952
Corporate Bonds & Other Securities 56 74
Loans 15,764 14,071
---------- ----------
Total Interest Income 18,347 16,362
INTEREST EXPENSE
Savings, N.O.W.'s & Money Market Deposits 2,200 1,756
Time Certificates of $100,000 or more 352 306
Other Time Deposits 3,018 2,962
Federal Funds Purchased 245 167
Interest on Other Borrowings 75 10
---------- ----------
Total Interest Expense 5,890 5,201
Net-interest Income 12,457 11,161
Provision for Possible Loan Losses 300 270
---------- ----------
Net-interest Income After Provision for Possible Loan Losses 12,157 10,891
OTHER INCOME
Service Charges on Deposit Accounts 1,182 959
Other Service Charges, Commissions & Fees 282 201
Fiduciary Fees 233 167
Other Operating Income 232 138
---------- ----------
Total Other Income 1,929 1,465
OTHER EXPENSE
Salaries & Employee Benefits 4,491 4,275
Net Occupancy Expense 626 614
Equipment Expense 637 564
Other Real Estate Expense 3 1
Other Operating Expense 2,208 1,998
---------- ----------
Total Other Expense 7,965 7,452
Income Before Provision for Income Taxes 6,121 4,904
Provision for Income Taxes 2,492 1,881
---------- ----------
NET INCOME $ 3,629 $ 3,023
========== ==========
Average: Common Shares Outstanding 6,049,206 6,076,842
Dilutive Stock Options 7,154 9,143
---------- ----------
Average Total Common Shares and Dilutive Options 6,056,360 6,085,985
EARNINGS PER COMMON SHARE Basic $ 0.60 $ 0.50
Diluted $ 0.60 $ 0.50
</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, 2000 March 31, 1999
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
NET INCOME $ 3,629 $ 3,023
ADJUSTMENTS TO RECONCILENET INCOME TO NET CASH
Provision for Possible Loan Losses 300 270
Depreciation & Amortization 494 500
Amortization of Excess Cost Over Fair Value of Net Assets Acquired 90 90
Accretion of Discounts (53) (518)
Amortization of Premiums 205 159
(Increase) Decrease in Accrued Interest Receivable (321) 30
Decrease (Increase) in Other Assets 237 (1,469)
Decrease in Accrued Interest Payable (402) (900)
Increase in Other Liabilities 814 1,075
-------- --------
Net Cash Provided by Operating Activities 4,993 2,260
CASH FLOWS FROM INVESTING ACTIVITIES
Principal Payments on Investment Securities 131 258
Maturities of Investment Securities; Available for Sale 742 1,342
Purchases of Investment Securities; Available for Sale (4,685) (128)
Maturities of Investment Securities; Held to Maturity -- 52,000
Purchases of Investment Securities; Held to Maturity (6,215) (29,819)
Loan Disbursements & Repayments, Net (12,018) (29,700)
Purchases of Premises & Equipment, Net (104) (388)
-------- --------
Net Cash Used in Investing Activities (22,149) (6,435)
CASH FLOWS FROM FINANCING ACTIVITIES
Net Increase in Deposit Accounts 15,279 452
Net Proceeds from Other Borrowings 15,800 --
Dividends Paid to Shareholders (1,273) (1,097)
Treasury Shares Acquired (539) (287)
-------- --------
Net Cash Provided by (Used in) Financing Activities 29,267 (932)
Net Increase (Decrease) in Cash & Cash Equivalents 12,111 (5,107)
Cash & Cash Equivalents Beginning of Period 53,452 76,098
-------- --------
Cash & Cash Equivalents End of Period $ 65,563 $ 70,991
======== ========
</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 (Suffolk) 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,
1999.
The results of operations for the three months ended March 31, 2000 are
not necessarily indicative of the results of operations to be expected for the
remainder of the year.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
for the Three-Month Periods ended March 31, 2000 and 1999
Net Income
Net income was $3,629,000 for the quarter, ahead 20.0 percent from
$3,023,000 posted during the same period last year. Earnings per share for the
quarter were $0.60 versus $0.50, a gain of 20.0 percent.
Interest Income
Interest income was $18,347,000 for the first quarter of 2000, up 12.1
percent from $16,362,000 posted for the same quarter in 1999. Average loans
during the first quarter of 2000 totaled $718,721,000, compared to $635,845,000
for the same period of 1999. During the first quarter of 2000, the yield was
8.28 percent (taxable-equivalent) on average earning assets of $894,044,000 up
from 8.13 percent on average earning assets of $810,318,000 during the first
quarter of 1999.
Interest Expense
Interest expense for the first quarter of 2000 was $5,890,000, up 13.2
percent from $5,201,000 for the same period of 1999. Average deposits for the
first quarter 2000 were $872,557,000 up from $809,396,000 for the comparable
period in 1999.
Net Interest Income
Net interest income is the largest component of Suffolk's earnings. Net
interest income for the first quarter of 2000 was $12,457,000, up from
$11,161,000 during the same period of 1999. The net interest margin for the
quarter, on a fully taxable-equivalent basis, was 5.65 percent compared to 5.56
percent for the same period of 1999.
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The following table details the components of Suffolk's net interest
income:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Quarter ended March 31, 2000 1999
- -----------------------------------------------------------------------------------------------------------------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. treasury securities $ 30,995 $ 427 5.52% $ 78,877 $ 1,034 5.24%
Obligations of states and political subdivisions 30,133 476 6.31 15,266 233 6.11
U.S. govt. agency obligations 101,740 1,671 6.57 61,982 952 6.14
Corporate bonds and other securities 3,468 56 6.46 3,254 74 9.13
Federal funds sold and securities purchased
under agreements to resell 8,987 124 5.51 8,094 98 4.84
Loans, including non-accrual loans
Commercial, financial agricultural loans 128,829 3,016 9.37 122,068 2,562 8.39
Commercial real estate mortgages 156,398 3,439 8.80 128,009 2,972 9.29
Real estate construction loans 22,575 521 9.23 13,379 284 8.50
Residential mortgages (1st and 2nd liens) 81,972 1,895 9.25 72,386 1,751 9.68
Home equity loans 20,144 518 10.28 21,485 485 9.02
Consumer loans 306,129 6,375 8.32 283,933 6,017 8.48
Other loans (overdrafts) 2,674 -- -- 1,585 -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Total interest-earning assets $ 894,044 $ 18,518 8.28% $ 810,318 $ 16,462 8.13%
===================================================================================================================================
Cash and due from banks $ 60,527 $ 58,593
Other non-interest-earning assets 45,733 45,992
- -----------------------------------------------------------------------------------------------------------------------------------
Total assets $1,000,304 $ 914,903
- -----------------------------------------------------------------------------------------------------------------------------------
INTEREST-BEARING LIABILITIES
- -----------------------------------------------------------------------------------------------------------------------------------
Savings, N.O.W.'s and money market deposits $ 372,750 $ 2,200 2.36% $ 332,218 $ 1,756 2.11%
Time deposits 261,457 3,370 5.16 257,467 3,268 5.08
- -----------------------------------------------------------------------------------------------------------------------------------
Total savings and time deposits 634,207 5,570 3.51 589,685 5,024 3.41
Federal funds purchased and securities
sold under agreement to repurchase 5,043 75 5.94 14,189 167 4.76
Other borrowings 16,497 245 5.94 1,645 10 2.50
- -----------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities $ 655,747 $ 5,890 3.59% $ 605,519 $ 5,201 3.44%
===================================================================================================================================
Rate spread 4.69% 4.69%
Non-interest-bearing deposits $ 238,350 $ 219,711
Other non-interest-bearing liabilities 29,899 18,691
- -----------------------------------------------------------------------------------------------------------------------------------
Total liabilities $ 923,996 $ 843,921
Stockholders' equity 76,308 70,982
- -----------------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $1,000,304 $ 914,903
Net-interest income (taxable-equivalent basis)
and effective interest rate differential $ 12,628 5.65% $ 11,261 5.56%
Less: taxable-equivalent basis adjustment (171) (100)
- -----------------------------------------------------------------------------------------------------------------------------------
Net-interest income $ 12,457 $ 11,161
===================================================================================================================================
</TABLE>
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The following table allocates changes from year to year in net interest
income to rate and volume on a taxable equivalent basis (dollars in thousands)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
In 2000 over 1999
Changes Due to
Volume Rate Net Change
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
INTEREST-EARNING ASSETS
- -----------------------------------------------------------------------------------------
U.S. Treasury securities $ (657) $ 50 (607)
Obligations of states and political subdivisions 235 8 243
U.S. govt. agency obligations 649 70 719
Corporate bonds and other securities 5 (23) (18)
Federal fund sold and securities purchased
under agreement to resell 11 15 26
Loans, including non-accrual loans
Commercial, financial agricultural loans 147 307 454
Commercial real estate mortgages 631 (164) 467
Real estate construction loans 210 27 237
Residential mortgages (1st and 2nd liens) 224 (80) 144
Home equity loans (32) 65 33
Consumer loans 465 (107) 358
Other loans (overdrafts) 0 0 --
- -----------------------------------------------------------------------------------------
Total interest-earning assets $ 1,888 $ 168 $ 2,056
- -----------------------------------------------------------------------------------------
INTEREST-BEARING LIABILITIES
- -----------------------------------------------------------------------------------------
Savings, N.O.W.'s and money market deposits $ 228 $ 216 $ 444
Time deposits 51 51 102
Federal funds purchased and securities
sold under agreement to repurchase (128) 36 (92)
Other borrowings 155 80 235
- -----------------------------------------------------------------------------------------
Total interest-bearing liabilities $ 306 $ 383 $ 689
- -----------------------------------------------------------------------------------------
Net change in net-interest income
(taxable-equivalent basis) $ 1,582 $ (215) $ 1,367
=========================================================================================
</TABLE>
Other Income
Other income increased to $1,929,000 for the three months compared to
$1,465,000 the previous year. Service charges on deposits were up 23.3 percent.
Service charges other than for deposits, commissions, and fees increased by 40.3
percent. Trust revenue was up 39.5 percent. Other operating income was up 68.1
percent.
Other Expense
Other expense for the first quarter of 2000 was $7,965,000, up 6.9 percent
from $7,452,000 for the comparable period in 1999.
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Capital Resources
Stockholders' equity totaled $78,806,000 on March 31, 2000, an increase of
1.9 percent from $77,334,000 on December 31, 1999. The ratio of equity to assets
was 7.8 percent at March 31, 2000 and 7.9 percent at December 31, 1999. The
following table details amounts and ratios of Suffolk's regulatory capital: (in
thousands of dollars except ratios)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
To be well capitalized
For capital under prompt corrective
Actual adequacy action provisions
Amount Ratio Amount Ratio Amount Ratio
- ---------------------------------------------------------------------------------------------------------------------
As of March 31, 2000
<S> <C> <C> <C> <C> <C> <C>
Total capital (to risk-weighted assets) $86,636 10.66% $65,022 8.00% $81,277 10.00%
Tier 1 capital (to risk-weighted assets) 79,254 9.75% 32,511 4.00% 48,766 6.00%
Tier 1 capital (to average assets) 79,254 7.92% 32,511 4.00% 40,639 5.00%
- ---------------------------------------------------------------------------------------------------------------------
As of December 31, 1999
Total capital (to risk-weighted assets) $88,615 11.05% $61,905 8.00% $77,381 10.00%
Tier 1 capital (to risk-weighted assets) 81,345 10.15% 30,952 4.00% 46,429 6.00%
Tier 1 capital (to average assets) 81,345 8.74% 30,952 4.00% 47,010 5.00%
=====================================================================================================================
</TABLE>
Credit Risk
Suffolk makes loans based on the best evaluation possible of the
creditworthiness of the borrower. Even with careful underwriting, some loans may
not be repaid as originally agreed. To provide for this possibility, Suffolk
maintains an allowance for possible loan losses, based on an analysis of the
performance of the loans in its portfolio. The analysis includes subjective
factors based on management's judgment as well as quantitative evaluation.
Prudent, conservative estimates should produce an allowance that will provide
for a range of losses. According to generally accepted accounting principles
("GAAP") a financial instiution should record its best estimate. Appropriate
factors contributing to the estimate may include changes in the composition of
the institution's assets, or potential economic slowdowns or downturns. Also
important is the geographical or political environment in which the institution
operates. Suffolk's management considers all of these factors when determining
the provision for possible loan losses.
The following table presents information about the allowance for possible loan
losses: (in thousand of dollars except ratios)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
For the For the three months ended
last 12 Mar. 31 Dec. 31 Sept. 30 June 30
months 2000 1999 1999 1999
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Allowance for possible loan losses
Beginning balance 7,086 7,270 7,106 7,173 7,086
Total charge-offs 976 214 172 395 195
Total recoveries 172 26 36 53 57
Provision for possible loan losses 1,100 300 300 275 225
- ----------------------------------------------------------------------------------------------------------------------
Ending balance 7,382 7,382 7,270 7,106 7,173
======================================================================================================================
Coverage ratios
Loans, net of discounts: average 697,032 718,721 702,838 689,600 676,969
at end of period 716,934 739,389 727,525 701,763 699,060
Non-performing assets 1,659 1,646 1,407 1,485 2,099
Non-performing assets/total loans (net of discount) 0.23% 0.22% 0.19% 0.21% 0.30%
Net charge-offs/average net loans (annualized) 0.12% 0.10% 0.08% 0.20% 0.08%
Allowance/non-accrual, restructured, & OREO 430.07% 448.48% 451.55% 478.52% 341.73%
Allowance for loan losses/net loans 1.01% 1.00% 1.00% 1.01% 1.03%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
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Market Risk
Suffolk originates and invests in interest-earning assets and solicits
interest-bearing deposit accounts. Suffolk's operations are subject to market
risk resulting from fluctuations in interest rates to the extent that there is a
difference between the amounts of interest-earning assets and interest-bearing
liabilities that are prepaid, withdrawn, mature, or reprice in any given period
of time. Suffolk's earnings or the net value of its portfolio (the present value
of expected cash flows from liabilities) will change when interest rates change.
The principal objective of Suffolk's asset/liability management program is to
maximize net interest income while keeping risks acceptable. These risks include
both the effect of changes in interest rates, and risks to liquidity. The
program also provides guidance to management in funding Suffolk's investment in
loans and securities. Suffolk's exposure to interest-rate risk has not changed
substantially since December 31, 1999.
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: May 15, 2000 /s/ Thomas S. Kohlmann
-----------------------------------
Thomas S. Kohlmann
President & Chief Executive Officer
Date: May 15, 2000 /s/ J. Gordon Huszagh
-----------------------------------
J. Gordon Huszagh
Executive Vice President &
Chief Financial Officer
11
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 65,563
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 138,114
<INVESTMENTS-CARRYING> 36,753
<INVESTMENTS-MARKET> 36,668
<LOANS> 739,389
<ALLOWANCE> 7,382
<TOTAL-ASSETS> 1,013,762
<DEPOSITS> 892,582
<SHORT-TERM> 29,300
<LIABILITIES-OTHER> 13,074
<LONG-TERM> 0
0
0
<COMMON> 78,806
<OTHER-SE> 0
<TOTAL-LIABILITIES-AND-EQUITY> 1,013,762
<INTEREST-LOAN> 15,764
<INTEREST-INVEST> 2,459
<INTEREST-OTHER> 124
<INTEREST-TOTAL> 18,347
<INTEREST-DEPOSIT> 5,815
<INTEREST-EXPENSE> 5,890
<INTEREST-INCOME-NET> 12,457
<LOAN-LOSSES> 300
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 7,965
<INCOME-PRETAX> 6,121
<INCOME-PRE-EXTRAORDINARY> 6,121
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,629
<EPS-BASIC> 0.60
<EPS-DILUTED> 0.60
<YIELD-ACTUAL> 5.65
<LOANS-NON> 1,085
<LOANS-PAST> 1,855
<LOANS-TROUBLED> 272
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 7,270
<CHARGE-OFFS> 214
<RECOVERIES> 26
<ALLOWANCE-CLOSE> 7,382
<ALLOWANCE-DOMESTIC> 7,382
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
