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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 June 30, 2000
Commission file number 0-13580
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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 Identification No.)
incorporation or organization)
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.
5,995,064 SHARES OF COMMON STOCK OUTSTANDING AS OF JUNE 30, 2000
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SUFFOLK BANCORP AND SUBSIDIARIES
Part I - Financial Information (unaudited) page
Consolidated Statements of Condition............................4
Consolidated Statements of Income, For the Three
Months Ended June 30, 2000 and 1999...........................5
Consolidated Statements of Income, For the Six
Months Ended June 30, 2000 and 1999...........................6
Statements of Cash Flows, For the Six Months
Ended June 30, 2000 and 1999..................................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.........................................11
Signatures.....................................................11
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SUFFOLK BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
(UNAUDITED, IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
JUNE 30, 2000 DECEMBER 31, 1999
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ASSETS
Cash & Due From Banks $ 84,361 $ 53,452
Federal Funds Sold 2,000 -
Investment Securities:
Available for Sale, at Fair Value 138,520 132,484
Held to Maturity:
U.S. Government Agency Obligations 1,291 1,583
Obligations of States & Political
Subdivisions 13,759 27,835
Corporate Bonds & Other Securities 3,468 3,468
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Total Investment Securities 157,038 165,370
Total Loans 750,732 727,525
Less: Allowance for Possible
Loan Losses 7,527 7,270
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Net Loans 743,205 720,255
Premises & Equipment, Net 13,949 14,345
Other Real Estate Owned, Net 175 203
Accrued Interest Receivable, Net 6,058 5,871
Excess of Cost Over Fair Value
of Net Assets Acquired 1,357 1,538
Other Assets 21,216 19,765
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TOTAL ASSETS 1,029,359 980,799
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LIABILITIES & STOCKHOLDERS' EQUITY
Demand Deposits 265,442 242,397
Savings, N.O.W.'s & Money Market Deposits 383,842 369,921
Time Certificates of $100,000 or more 31,406 23,458
Other Time Deposits 240,131 241,527
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Total Deposits 920,821 877,303
Federal Home Loan Bank Borrowings 15,200 13,500
Dividend Payable on Common Stock 1,381 1,273
Accrued Interest Payable 2,327 2,463
Other Liabilities 8,918 8,926
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TOTAL LIABILITIES 948,647 903,465
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STOCKHOLDERS' EQUITY
Common Stock (par value $2.50;
15,000,000 shares authorized;
5,995,064 & 6,055,580 shares
issued at June 30, 2000
& December 31, 1999, respectively) 19,026 19,026
Surplus 18,456 18,456
Treasury Stock at Par
(1,615,356 shares & 1,554,840
shares, respectively) (4,038) (3,887)
Undivided Profits 49,031 45,576
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82,475 79,171
Accumulated Other Comprehensive
Income, Net of Tax (1,763) (1,837)
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TOTAL STOCKHOLDERS' EQUITY 80,712 77,334
TOTAL LIABILITIES & STOCKHOLDERS'
EQUITY $ 1,029,359 $ 980,799
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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)
For the Three Months Ended
JUNE 30, 2000 JUNE 30, 1999
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INTEREST INCOME
Federal Funds Sold $ 24 $ 217
United States Treasury Securities 431 543
Obligations of States & Political
Subdivisions (tax exempt) 324 152
U.S. Government Agency Obligations 1,788 849
Corporate Bonds & Other Securities 71 38
Loans 16,379 14,774
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Total Interest Income 19,017 16,573
INTEREST EXPENSE
Savings, N.O.W.'s & Money Market
Deposits 2,209 1,927
Time Certificates of $100,000 or more 315 273
Other Time Deposits 3,134 2,903
Federal Funds Purchased 116 2
Interest on Other Borrowings 395 5
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Total Interest Expense 6,169 5,110
Net-interest Income 12,848 11,463
Provision for Possible Loan Losses 300 225
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Net-interest Income After
Provision for Possible Loan Losses 12,548 11,238
OTHER INCOME
Service Charges on Deposit Accounts 1,170 1,086
Other Service Charges, Commissions & Fees 370 320
Fiduciary Fees 190 169
Other Operating Income 111 104
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Total Other Income 1,841 1,679
OTHER EXPENSE
Salaries & Employee Benefits 4,326 4,159
Net Occupancy Expense 620 559
Equipment Expense 614 587
Other Real Estate Expense 3 12
Other Operating Expense 2,058 2,278
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Total Other Expense 7,621 7,595
Income Before Provision for
Income Taxes 6,768 5,322
Provision for Income Taxes 2,693 2,115
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NET INCOME $ 4,075 $ 3,207
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AVERAGE: Common Shares Outstanding 6,010,506 6,070,080
Dilutive Stock Options 6,924 6,735
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AVERAGE TOTAL COMMON SHARES AND
DILUTIVE OPTIONS 6,017,430 6,076,815
EARNINGS PER COMMON SHARE Basic $ 0.68 $ 0.53
Diluted $ 0.68 $ 0.53
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)
For the Six Months Ended
JUNE 30, 2000 JUNE 30, 1999
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INTEREST INCOME
Federal Funds Sold $ 148 $ 315
United States Treasury Securities 850 1,557
Obligations of States & Political
Subdivisions 637 305
U.S. Government Agency Obligations 3,459 1,801
Corporate Bonds & Other Securities 127 112
Loans 32,143 28,845
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Total Interest Income 37,364 32,935
INTEREST EXPENSE
Savings, N.O.W.'s & Money Market Deposits 4,409 3,683
Time Certificates of $100,000 or more 667 579
Other Time Deposits 6,152 5,865
Federal Funds Purchased 191 169
Interest on Other Borrowings 640 15
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Total Interest Expense 12,059 10,311
Net-interest Income 25,305 22,624
Provision for Possible Loan Losses 600 495
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Net-interest Income After Provision 24,705 22,129
OTHER INCOME
Service Charges on Deposit Accounts 2,352 2,045
Other Service Charges, Commissions & Fees 652 521
Fiduciary Fees 423 336
Other Operating Income 343 242
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Total Other Income 3,770 3,144
OTHER EXPENSE
Salaries & Employee Benefits 8,817 8,434
Net Occupancy Expense 1,246 1,173
Equipment Expense 1,251 1,151
Other Real Estate Expense 6 13
Other Operating Expense 4,266 4,276
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Total Other Expense 15,586 15,047
Income Before Provision for Income Taxes 12,889 10,226
Provision for Income Taxes 5,185 3,996
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NET INCOME $ 7,704 $ 6,230
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AVERAGE: Common Shares Outstanding 6,029,856 6,073,662
Dilutive Stock Options 7,042 6,693
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AVERAGE TOTAL 6,036,898 6,080,355
EARNINGS PER COMMON SHARE Basic $ 1.28 $ 1.03
Diluted $ 1.28 $ 1.02
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)
For the Six Months Ended
JUNE 30, 2000 JUNE 30, 1999
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CASH FLOWS FROM OPERATING ACTIVITIES
NET INCOME $ 7,704 $ 6,230
ADJUSTMENTS TO RECONCILE NET INCOME
TO NET CASH
Provision for Possible Loan Losses 600 495
Depreciation & Amortization 1,018 1,007
Amortization of Excess Cost Over Fair
Value of Net Assets Acquired 181 181
Accretion of Discounts (122) (634)
Amortization of Premiums 363 315
(Increase) Decrease in Accrued
Interest Receivable (187) 74
Increase in Other Assets (1,424) (84)
Decrease in Accrued Interest Payable (136) (701)
Increase in Other Liabilities 99 2,865
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NET CASH PROVIDED BY OPERATING 8,096 9,748
ACTIVITIES
CASH FLOWS FROM INVESTING ACTIVITIES
Principal Payments on Investment
Securities 482 500
Maturities of Investment Securities;
Available for Sale 21,566 11,648
Purchases of Investment Securities;
Available for Sale (7,485) (5,299)
Maturities of Investment Securities;
Held to Maturity 6,000 78,000
Purchases of Investment Securities;
Held to Maturity (12,342) (59,617)
Loan Disbursements & Repayments, Net (23,712) (51,545)
Purchases of Premises & Equipment, Net (622) (764)
Disposition of Other Real Estate Owned -- 95
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NET CASH USED IN INVESTING ACTIVITIES (16,113) (26,982)
CASH FLOWS FROM FINANCING ACTIVITIES
Net Increase in Deposit Accounts 43,519 39,938
Net Proceeds from Other Borrowings 1,700 --
Dividends Paid to Shareholders (2,662) (2,373)
Treasury Shares Acquired (1,631) (288)
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NET CASH PROVIDED BY FINANCING
ACTIVITIES 40,926 37,277
NET INCREASE IN CASH & CASH
EQUIVALENTS 32,909 20,043
CASH & CASH EQUIVALENTS
BEGINNING OF PERIOD 53,452 76,098
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CASH & CASH EQUIVALENTS
END OF PERIOD $ 86,361 $ 96,141
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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 (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 June 30, 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 June 30, 2000 and 1999
NET INCOME
Net income was $4,075,000 for the quarter, ahead 27.1 percent from
$3,207,000 posted during the same period last year. Earnings per share
for the quarter were $0.68 versus $0.53, a gain of 28.3 percent.
INTEREST INCOME
Interest income was $19,017,000 for the second quarter of 2000, up
14.7 percent from $16,573,000 posted for the same quarter in 1999.
Average loans during the second quarter of 2000 totaled $734,945,000,
compared to $676,969,000 for the same period of 1999. During the second
quarter of 2000, the yield was 8.44 percent (taxable-equivalent) on
average earning assets of $909,215,000 up from 8.19 percent on average
earning assets of $813,753,000 during the second quarter of 1999.
Increases in interest income were attributable primarily to increases in
the volume of both loans and investments, but also to a change in the
composition of the investment portfolio emphasizing high-quality
higher-yielding collateralized mortgage obligations.
INTEREST EXPENSE
Interest expense for the second quarter of 2000 was $6,169,000, up
20.7 percent from $5,110,000 for the same period of 1999. Average
deposits for the second quarter 2000 were $876,703,000 up from
$828,972,000 for the comparable period in 1999. Interest expense
remained moderate as demand deposits comprised 28.8 percent of total
deposits.
NET INTEREST INCOME
Net interest income, net of the provision for possible loan losses,
is the largest component of Suffolk's earnings. Net interest income for
the second quarter of 2000 was $12,548,000, up 11.7 percent from
$11,238,000 during the same period of 1999. The net interest margin for
the quarter, on a fully taxable-equivalent basis, was 5.73 percent
compared to 5.68 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>
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Quarter ended June 30, 2000 June 30, 1999
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Average Average Average Average
Balance Interest Rate Balance Interest Rate
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INTEREST-EARNING ASSETS
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<S> <C> <C> <C> <C> <C> <C>
U.S. treasury securities $ 31,320 $ 440 5.62 % $ 39,633 $ 555 5.59 %
Obligations of states and political subdivisions 30,829 493 6.40 14,886 231 6.20
U.S. govt. agency obligations 107,150 1,788 6.67 60,828 849 5.59
Corporate bonds and other securities 3,468 71 8.17 3,368 37 4.44
Federal funds sold and securities purchased
under agreements to resell 1,503 24 6.44 18,069 217 4.80
Loans, including non-accrual loans
Commercial, financial agricultural loans 138,547 3,669 10.59 125,902 2,707 8.60
Commercial real estate mortgages 151,355 3,356 8.87 144,155 3,188 8.85
Real estate construction loans 30,042 753 10.03 13,624 367 10.78
Residential mortgages (1st and 2nd liens) 84,565 1,897 8.97 75,400 1,845 9.79
Home equity loans 20,033 504 10.06 21,000 480 9.14
Consumer loans 309,723 6,200 8.01 293,224 6,187 8.44
Other loans (overdrafts) 680 -- 3,664
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Total interest-earning assets $ 909,215 $ 19,195 8.44 % $ 813,753 $ 16,663 8.19 %
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Cash and due from banks $ 62,371 $ 62,440
Other non-interest-earning assets 39,482 39,174
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Total assets $1,011,068 $ 915,367
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INTEREST-BEARING LIABILITIES
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Savings, N.O.W.'s and money market deposits $ 369,950 $ 2,208 2.39 % $ 344,637 $ 1,927 2.24 %
Time deposits 259,095 3,450 5.33 254,077 3,176 5.00
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Total savings and time deposits 629,045 5,658 3.60 598,714 5,103 3.41
Federal funds purchased and securities
sold under agreement to repurchase 7,335 116 6.35 194 2 5.14
Other borrowings 24,397 395 6.47 419 5 4.73
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Total interest-bearing liabilities $ 660,777 $ 6,169 3.73 % $ 599,327 $ 5,110 3.41 %
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Rate spread 4.71 % 4.78 %
Non-interest-bearing deposits $ 247,658 $ 219,711
Other non-interest-bearing liabilities 25,319 23,924
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Total liabilities $ 933,754 $ 842,962
Stockholders' equity 77,314 72,405
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Total liabilities and stockholders' equity $1,011,068 $ 915,367
Net-interest income (taxable-equivalent basis)
and effective interest rate differential $13,026 5.73 % $ 11,553 5.68 %
Less: taxable-equivalent basis adjustment (178) (90)
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Net-interest income $12,848 $ 11,463
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</TABLE>
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OTHER INCOME
Other income increased to $1,841,000 for the three months compared to
$1,679,000 the previous year. Service charges on deposits were up 7.7 percent.
Service charges, including commissions and fees other than for deposits,
increased by 15.6 percent. Trust revenue was up 12.4 percent. Other operating
income was up 6.7 percent.
OTHER EXPENSE
Other expense for the second quarter of 2000 was $7,621,000, up 0.3 percent
from $7,595,000 for the comparable period in 1999. Employee compensation
increased by 4.0 percent, net occupancy by 10.9 percent, equipment expense by
4.6 percent while other operating expense decreased by 9.7.
CAPITAL RESOURCES
Stockholders' equity totaled $80,712,000 on June 30, 2000, an increase of
4.4 percent from $77,334,000 on December 31, 1999. The ratio of equity to assets
was 7.8 percent at June 30, 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>
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To be well capitalized
For capital under prompt corrective
Actual adequacy action provisions
Amount Ratio Amount Ratio Amount Ratio
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As of June 30, 2000
<S> <C> <C> <C> <C> <C> <C>
Total capital (to risk-weighted assets) $ 88,498 10.75% $ 65,873 8.00% $ 82,342 10.00%
Tier 1 capital (to risk-weighted assets) 80,971 9.83% 32,937 4.00% 49,405 6.00%
Tier 1 capital (to average assets) 80,971 8.05% 32,937 4.00% 41,171 5.00%
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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%
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</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 institution 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.
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The following table presents information about the allowance for possible loan
losses: (in thousands of dollars except ratios)
<TABLE>
<CAPTION>
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For the For the three months ended
last 12 June 30 Mar. 31 Dec. 31 Sept. 30
months 2000 2000 1999 1999
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Allowance for possible loan losses
<S> <C> <C> <C> <C> <C>
Beginning balance 7,173 7,382 7,270 7,106 7,173
Total charge-offs 979 198 214 172 395
Total recoveries 158 43 26 36 53
Provision for possible loan losses 1,175 300 300 300 275
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Ending balance 7,527 7,527 7,382 7,270 7,106
==========================================================================================================
Coverage ratios
Loans, net of discounts: average 711,526 734,945 718,721 702,838 689,600
at end of period 729,852 750,732 739,389 727,525 701,763
Non-performing assets 1,703 2,273 1,646 1,407 1,485
Non-performing assets/total loans
(net of discount) 0.23% 0.30% 0.22% 0.19% 0.21%
Net charge-offs/average net loans
(annualized) 0.12% 0.08% 0.10% 0.08% 0.20%
Allowance/non-accrual,
restructured, & OREO 427.43% 331.15% 448.48% 451.55% 478.52%
Allowance for loan losses/net loans 1.00% 1.00% 1.00% 1.00% 1.01%
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</TABLE>
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: August 14, 2000 /s/ Thomas S. Kohlmann
-----------------------
Thomas S. Kohlmann
President & Chief Executive Officer
Date: August 14, 2000 /s/ J. Gordon Huszagh
-----------------------
J. Gordon Huszagh
Executive Vice President &
Chief Financial Officer
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