-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VhryLRKQoH29ILRazz7UT4qDhX5MA0hZpQlsItMP7qqSqmnHy0BMW8maPzAUgJgj 86vh2315uaQXPA91phVhxw== 0000914317-99-000216.txt : 19990412 0000914317-99-000216.hdr.sgml : 19990412 ACCESSION NUMBER: 0000914317-99-000216 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990331 DATE AS OF CHANGE: 19990409 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SUSSEX BANCORP CENTRAL INDEX KEY: 0001028954 STANDARD INDUSTRIAL CLASSIFICATION: 6022 IRS NUMBER: 223475473 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10KSB SEC ACT: SEC FILE NUMBER: 001-12569 FILM NUMBER: 99584212 BUSINESS ADDRESS: STREET 1: 399 RTE 23 STREET 2: 9 CITY: FRANKLIN STATE: NJ ZIP: 07416 BUSINESS PHONE: 9738272914 MAIL ADDRESS: STREET 1: 399 RTE 23 CITY: FRANKLIN STATE: NJ ZIP: 07416 10KSB 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 ------------------- FORM 10-KSB (Mark One) [ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended: December 31, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to ________ Commission file number 0-29030 SUSSEX BANCORP -------------- (Name of small business issuer as specified in its charter) New Jersey 22-3475473 - - -------------------------------------------------------------------------------- (State of other jurisdiction (I.R.S. employer of incorporation or organization) identification no.) 399 Route 23, Franklin, New Jersey 07416 - - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (973) 827-2914 - - -------------------------------------------------------------------------------- (Issuer's Telephone Number Including Area Code) Securities Registered Pursuant to Section 12(b) of the Act: Title of Each Class Name of Exchange on Which Registered ------------------- ------------------------------------ Common Stock, no par value American Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None. Indicate by check mark whether the Issuer: (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934, as amended, 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 by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-B is not contained herein, and will not be contained, to the best of Issuer's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. (X) The aggregate market value of the voting stock held by non-affiliates of the Issuer as of March 3, 1999, was $12,637,420. The number of shares of the Issuer's Common Stock, no par value, outstanding as of March 3, 1999, was 1,423,634. For the fiscal year ended December 31, 1998, the Issuer had total revenues of $9,164,000. DOCUMENTS INCORPORATED BY REFERENCE ----------------------------------- 10-KSB Item Document Incorporated ----------- --------------------- Item 6. Management's Discussion Registrant's Annual Report and Analysis or Plan of to Shareholders, under the Operation caption "Management's Discussion and Analysis of Financial Conditions and Results of Operation. Item 7. Financial Statements Registrant's Annual Report to shareholders under the caption "Consolidated Financial statements. Item 9. Directors and Executive Proxy Statement for 1999 Officers of the Annual Meeting of Company; Compliance Shareholders to be filed with Section 16(a) of no later than April 29, the Exchange Act. 1999. Item 10. Executive Compensation Proxy Statement for 1999 Annual Meeting of Shareholders to be filed not later than April 29, 1999. Item 11. Security Ownership of Proxy Statement for 1999 Certain Beneficial Annual Meeting of Owners and Management Shareholders to be filed no later than April 29, 1999. Item 12. Certain Relationships Proxy Statement for 1999 and Related Annual Meeting of Transactions Shareholders to be filed no later than April 29, 1999. PART I ITEM 1: Description of Business General Sussex Bancorp (the "Company" or "Registrant") is a one-bank holding company incorporated under the laws of the State of New Jersey in January, 1996 to serve as a holding company for the Sussex County State Bank (the "Bank"). The company was organized at the direction of the Board of Directors of the Bank for the purpose of acquiring all of the capital stock of the Bank (the "Acquisition"). Pursuant to the New Jersey Banking Act of 1948, as amended, (the "Banking Act"), and pursuant to approval of the shareholders of the Bank, the Company acquired the Bank and became its holding company on November 20, 1996. As part of the Acquisition, shareholders of the Bank received one share of common stock, no par value ("Common Stock") of the Company for each outstanding share of the common stock of the Bank, $2.50 per share par value ("Bank Common Stock"). The only significant asset of the Company is its investment in the Bank. The company's main office is located at 399 Route 23, Franklin, Sussex County, New Jersey 07416. The Bank is a commercial bank formed under the laws of the State of New Jersey in 1975. The bank operates from its main office at 399 Route 23, Franklin, New Jersey 07416, and its six branch offices located at 7 Church Street, Vernon, New Jersey; 266 Clove Road, Montague,. New Jersey; 172 Woodport Road, Sparta, New Jersey; 455 Route 23, Wantage, New Jersey; 15 Trinity Street, Newton, New Jersey; and 165 Route 206, Andover, New Jersey. The Company is subject to the supervision and regulation of the Board of Governors of the Federal Reserve System (the "FRB"). The Bank's deposits are insured by the Bank Insurance Fund ("BIF") of the Federal Deposit Insurance Corporation ("FDIC") up to applicable limits. The operations of the Company and the Bank are subject to the supervision and regulation of the FRB, FDIC and the New Jersey Department of Banking and Insurance (the "Department"). The principal executive offices of the Company are located at 399 Route 23, Franklin, New Jersey 07416, and the telephone number is (973) 827-2914. Business of the Company The Company's primary business is ownership and supervision of the Bank. The Company, through the Bank, conducts a traditional commercial banking business, and offers services including personal and business checking accounts and time deposits, money market accounts and regular savings accounts. The Company structures its specific services and charges in a manner designed to attract the business of the small and medium sized business and professional community as well as that of individuals residing, working and shopping in the Sussex County, New Jersey trade area serviced by the Company. The Company engages in a wide range of lending activities and offers commercial, consumer, mortgage, home equity and personal loans. In addition, during 1998, the Bank formed the Sussex Bancorp Mortgage Company (the "Mortgage Company"). The Mortgage Company originates one to four family mortgage loans for resale into the secondary market. Currently, all loan are sold servicing released, although the Company, through the Bank, may seek to service the loans it originates in the future. Service Area The Company's service area primarily consists of the Sussex County, New Jersey market, although the Company makes loans throughout New Jersey. The Company operates its main office in Franklin, New Jersey and six branch offices in Vernon, Montague, Sparta, Wantage, Newton and Andover, New Jersey Competition The Company operates in a highly competitive environment competing for deposits and loans with commercial banks, thrifts and other financial institutions, many of which have greater financial resources than the Company. Many large financial institutions in New York City and other parts of New Jersey compete for the business of New Jersey residents located in he Company's service area. Certain of these institutions have significantly higher lending limits than the Company and provide services to their customers which the Company does not offer. Management believes the Company is able to compete on a substantially equal basis with its competitors because it provides responsive personalized services through management's knowledge and awareness of the Company's service area, customers and business. Employees At December 31, 1998, the Company employed 67 full-time employees and 15 part-time employees. None of these employees is covered by a collective bargaining agreement and the Company believes that its employee relations are good. SUPERVISION AND REGULATION Bank holding companies and banks are extensively regulated under both federal and state law. These laws and regulations are intended to protect depositors, not stockholders. To the extent that the following information describes statutory and regulatory provisions, it is qualified in its entirety by reference to the particular statutory and regulatory provisions. Any change in the applicable law or regulation may have a material effect on the business and prospects of the Company and the Bank. BANK HOLDING COMPANY REGULATION General As a bank holding company registered under the Bank Holding Company Act of 1956, as amended, (the "BHCA"), the Company is subject to the regulation and supervision of the FRB. The Company is required to file with the FRB annual reports and other information regarding its business operations and those of its subsidiaries. Under the BHCA, the Company's activities and those of its subsidiaries are limited to banking, managing or controlling banks, furnishing services to or performing services for its subsidiaries or engaging in any other activity which the FRB determines to be so closely related to banking or managing or controlling banks as to be properly incident thereto. The BHCA requires, among other things, the prior approval of the FRB in any case where a bank holding company proposes to (i) acquire all or substantially all of the assets of any other bank, (ii) acquire direct or indirect ownership or control of more than 5% of the outstanding voting stock of any bank (unless it owns a majority of such bank's voting shares) or (iii) merge or consolidate with any other bank holding company. The FRB will not approve any acquisition, merger, or consolidation that would have a substantially anti-competitive effect, unless the anti-competitive impact of the proposed transaction is clearly outweighed by a greater public interest in meeting the convenience and needs of the community to be served. The FRB also considers capital adequacy and other financial and managerial resources and future prospects of the companies and the banks concerned, together with the convenience and needs of the community to be served, when reviewing acquisitions or mergers. Additionally, the BHCA prohibits a bank holding company, with certain limited exceptions, from (i) acquiring or retaining direct or indirect ownership or control of more than 5% of the outstanding voting stock of any company which is not a bank or bank holding company, or (ii) engaging directly or indirectly in activities other than those of banking, managing or controlling banks, or performing services for its subsidiaries, unless such non-banking business is determined by the FRB to be so closely related to banking or managing or controlling banks as to be properly incident thereto. In making such determinations, the FRB is required to weigh the expected benefits to the public, such as greater convenience, increased competition or gains in efficiency, against the possible adverse effects, such as undue concentration of resources, decreased or unfair competition, conflicts of interest, or unsound banking practices. There are a number of obligations and restrictions imposed on bank holding companies and their depository institution subsidiaries by law and regulatory policy that are designed to minimize potential loss to the depositors of such depository institutions and the FDIC insurance funds in the event the depository institution becomes in danger of default. Under a policy of the FRB with respect to bank holding company operations, a bank holding company is required to serve as a source of financial strength to its subsidiary depository institutions and to commit resources to support such institutions in circumstances where it might not do so absent such policy. The FRB also has the authority under the BHCA to require a bank holding company to terminate any activity or to relinquish control of a non-bank subsidiary upon the FRB's determination that such activity or control constitutes a serious risk to the financial soundness and stability of any bank subsidiary of the bank holding company. Capital Adequacy Guidelines for Bank Holding Companies The FRB has adopted risk-based capital guidelines for bank holding companies. The risk-based capital guidelines are designed to make regulatory capital requirements more sensitive to differences in risk profile among banks and bank holding companies, to account for off-balance sheet exposure, and to minimize disincentives for holding liquid assets. Under these guidelines, assets and off-balance sheet items are assigned to broad risk categories each with appropriate weights. The resulting capital ratios represent capital as a percentage of total risk-weighted assets and off-balance sheet items. The risk-based guidelines apply on a consolidated basis to bank holding companies with consolidated assets of $150 million or more. For bank holding companies with less that $150 million in consolidated assets, the guidelines will be applied on a bank-only basis unless: (a) the parent bank holding company is engaged in non-bank activity involving significant leverage; or (b) the parent company has a significant amount of outstanding debt that is held by the general public. The minimum ratio of total capital to risk-weighted assets (including certain off-balance sheet activities, such as standby letters of credit) is 8%. At least 4% of the total capital is required to be "Tier 1", consisting of common stockholders' equity and certain preferred stock, less certain goodwill items and other intangible assets. The remainder, "Tier II Capital", may consist of (a) the allowance for loan losses of up to 1.25% of risk-weighted assets, (b) excess of qualifying preferred stock, (c) hybrid capital instruments, (d) debt, (e) mandatory convertible securities, and (f) qualifying subordinated debt. Total capital is the sum of Tier I and Tier II capital less reciprocal holdings of other banking organizations' capital instruments, investments in unconsolidated subsidiaries and any other deductions as determined by the FRB (determined on a case-by-case basis or as a matter of policy after formal rule-making). Bank holding company assets are given risk-weights of 0%, 20%, 50% and 100%. In addition, certain off-balance sheet items are given similar credit conversion factors to convert them to asset equivalent amounts to which an appropriate risk-weight will apply. These computations result in the total risk-weighted assets. Most loans are assigned to the 100% risk category, except for performing first mortgage loans fully secured by residential property which carry a 50% risk-weighting. Most investment securities (including, primarily, general obligation claims of states or other political subdivisions of the United States) are assigned to the 20% category, except for municipal or state revenue bonds, which have a 50% risk-weight, and direct obligations of the U.S. Treasury or obligations backed by the full faith and credit of the U.S. Government, which have a 0% risk-weight. In converting off-balance sheet items, direct credit substitutes including general guarantees and standby letters of credit backing financial obligations are given 100% risk-weighing. Transaction related contingencies such as bid bonds, standby letters of credit backing non-financial obligations, and undrawn commitments (including commercial credit lines with an initial maturity of more than one year) have a 50% risk-weighing. Short term commercial letters of credit have a 20% risk-weighing and certain short-term unconditionally cancelable commitments have a 0% risk-weighing. In addition to the risk-based capital guidelines, the FRB has adopted a minimum Tier I capital (leverage) ratio, under which a bank holding company must maintain a minimum level of Tier I capital to average total consolidated assets of at least 3% in the case of a bank holding company that has the highest regulatory examination rating and is not contemplating significant growth or expansion. All other bank holding companies are expected to maintain a leverage ratio of at least 100 to 200 basis points above the stated minimum. Bank Regulation As a New Jersey-chartered commercial bank, the Bank is subject to the regulation, supervision, and control of the Department. As an FDIC-insured institution, the Bank is subject to regulation, supervision and control of the FDIC, an agency of the federal government. The regulations of the FDIC and the Department impact virtually all activities of the Bank, including the minimum level of capital the Bank must maintain, the ability of the Bank to pay dividends, the ability of the Bank to expand through new branches or acquisitions and various other matters. Insurance of Deposits The Bank's deposits are insured up to a maximum of $100,000 per depositor under the BIF. The FDIC has established a risk-based insurance premium assessment system under which the FDIC has developed a matrix that sets the assessment premium for a particular institution in accordance with its capital level and overall regulatory rating by the institutions' primary federal regulatory. Under the matrix that is currently in effect, the assessment rate ranges from 0 to 27 basis points of assessed deposits. In addition to the deposit insurance premium assessment, under the deposit insurance funds act of 1996 (the "Deposit Act"), BIF insured institutions like the Bank are required to contribute to the debt service and principal repayment on bonds issued by the Federal Finance Corporation ("FICO") in the mid-1980s to fund a portion of the thrift bailout. This assessment is currently set at 1.3 basis points of assessed deposits. Dividend Rights Under the Banking Act, a bank may declare and pay dividends only if, after payment of the dividend, the capital stock of the bank will be unimpaired and either the bank will have a surplus of not less than 50% of its capital stock or the payment of the dividend will not reduce the bank's surplus. ITEM 2. Description of Property The Company conducts its business through its main office located at 399 Route 23, Franklin, New Jersey, and its six branch offices. The following table set forth certain information regarding the Company's properties as of December 31, 1998. DATE OF LOCATION LEASED OR OWNED LEASE EXPIRATION - - -------- --------------- ---------------- 399 Route 23 Owned N/A Franklin, New Jersey 7 Church Street Owned N/A Vernon, New Jersey 266 Clove Road Leased April, 2002 Montague, New Jersey 172 Woodport Road Leased September, 1998 Sparta, New Jersey 455 Route 23 Owned(1) N/A Wantage, New Jersey 15 Trinity Street Owned N/A Newton, New Jersey 165 Route 206 Owned N/A Andover, New Jersey Route 206 Owned N/A Frankford, New jersey - - -------------- (1) The Company owns the building housing its Wantage branch. The land on which the building is located is leased pursuant to a ground lease which runs until December 31, 2020, and contains an option for the Company to extend the lease for an additional 25 year term. ITEM 3. Legal Proceedings The Company and the Bank are periodically parties to or otherwise involved in legal proceedings arising in the normal course of business, such as claims to enforce liens, claims involving the making and servicing of real property loans, and other issues incident to the Bank's business. Management does not believe that there is any pending or threatened proceeding against the Company of the Bank which, if determined adversely, would have a material effect on the business, financial position or results of operation of the Company or the Bank. ITEM 4. Submission of Matters to a Vote of Security Holders No matters were submitted for a vote of the registrant's shareholders during the Fourth Quarter of fiscal 1998. PART II ITEM 5. Market for Common Equity and Related Stockholder Matters Historically, there has been no established public market for the common stock of the Company, which was periodically traded in the over-the-counter market through the "pink sheets" published by the National Quotation Bureau, Inc. However, commencing February 20, 1998, the Common Stock began trading on the American Stock Exchange, under the symbol "SBB". As of December 31, 1998, the Company had approximately 711 holders of record of the Common Stock. The following table shows the high and low closing price, by quarter, for the common stock, as well as dividends declared, since the common stock began trading on the American Stock Exchange: DIVIDENDS 1998 HIGH LOW DECLARED ---- ---- ----- -------- 4th Quarter 11 3/8 8 1/2 $ 0.03 3rd Quarter 11 5/8 9 3/8 $ 0.07 2nd Quarter 11 5/16 9 3/4 $ 0.13 1st Quarter 13 10 15/16 $ 0.13 During 1998 the Company also declared a two for one stock split. During 1997, the Company paid quarterly cash dividends of $0.06, $0.10, $0.12 and $0.13 and declared a 2% stock dividend. ITEM 6. Management's Discussion and Analysis or Plan of Operation The information required by this item is incorporated by reference from the Registrant's 1997 Annual Report to Shareholders under the caption "Management Discussion and Analysis". ITEM 7. Financial Statements The information required by this item is incorporated by reference from the Registrant's 1997 Annual Report to Shareholders under the caption "consolidated Financial Statements". ITEM 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Upon completion of the 1997 audit, the Registrant replaced Arthur Andersen LLP ("Andersen") as its independent auditor with Radics & Co., LLP, who conducted the audit of the Company's financial statements for the 1998 fiscal year. The decision to change auditors was recommended by the Audit Committee and was approved by the Company's Board of Directors. For the fiscal years ended December 31, 1997 and 1996, there have been no disagreements with Andersen on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure which, if not resolved to the satisfaction of Andersen would have caused it to make reference to the subject matter of the disagreement in connection with their reports. The independent auditor's report on the consolidated financial statements for the fiscal years ended December 31, 1997 and 1996 expressed an unqualified opinion. ITEM 9. Directors and Executive Officers of the Registrant; Compliance with Section 16(a) Information concerning directors and executive officers is included in the definitive Proxy Statement for the Company's 1999 Annual Meeting under the caption "ELECTION OF DIRECTORS" and information concerning compliance with Section 16(a) of the Exchange Act is included under the caption "COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934," each of which is incorporated herein by reference. It is expected that such Proxy Statement will be filed with the Securities and Exchange Commission no later than April 29, 1999. The following table sets forth certain information about each executive officer of the Company who is not also a director.
Principal Occupation Name, Age and Position Officer Since (1) During Past Five Years ---------------------- ---------------- ---------------------- Candace A. Leatham, 44 1984 Senior Vice President and Senior Vice President Treasurer of the Bank and Treasurer
- - -------------- (1) Includes prior service as an officer of the Bank. ITEM 10. Executive Compensation Information concerning executive compensation is incorporated by reference from the Registrant definitive Proxy Statement for the Company's 1999 Annual Meeting under the captions "ANNUAL EXECUTIVE COMPENSATION AND ALL OTHER COMPENSATION" and "COMPENSATION OF DIRECTORS". It is expected that such Proxy Statement will be filed with the Securities and Exchange Commission no later than April 29, 1999. ITEM 11. Security Ownership of Certain Beneficial Owners and Management Information concerning security ownership of certain beneficial owners and management is included in the definitive Proxy statement for the Company's 1998 Annual Meeting under the caption "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT", which is incorporated herein by reference. It is expected that such Proxy statement will be filed with the Securities and Exchange commission no later than April 29, 1999. ITEM 12. Certain Relationships and Related Transactions Information concerning certain relationships and related transactions is included in the definitive Proxy Statement for the Company's 1999 Annual Meeting under the caption "INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS", which is incorporated herein by reference. It is expected that such Proxy Statement will be filed with the Securities and Exchange Commission no later than April 29, 1999. ITEM 13. Exhibits, List and Reports on Form 8-K (a) Exhibits Exhibit Number Description of Exhibits ------ ----------------------- 3(i) Certificate of Incorporation of the Company (1) 3(ii) Bylaws of the Company(1) 10(i) 1995 Incentive Stock Option Plan(1) 10(ii) 1995 Stock Option Plan for Non-Employee Directors(1) 10(iii) 1988 Non-Qualified Stock Option(1) 10(iv) Employment Agreement with Donald Kovach 13 Annual Report to Shareholders for the year ended December 31, 1998. 21 Subsidiaries of the Registrant 23(a) Consent of ARTHUR ANDERSEN LLP 23(b) Consent of RADICS & CO., L.L.C. 27 Financial Data Schedule (1) Incorporated by reference from Exhibits 5(B)(1) to 5(B)(27) from the Company's Registration Statement on form 8-B, Registration No. 1-12569. (b) Reports on form 8-K None. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. SUSSEX BANCORP By: /s/Donald L. Kovach ------------------- Donald L. Kovach Chairman of the Board and Dated: Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. NAME TITLE DATE ---- ----- ---- /s/Donald L. Kovach Chairman of the Board and - - ------------------- Chief Executive Officer Donald L. Kovach /s/Candace A. Leatham Treasurer (Principal Financial - - --------------------- Officer and Principal Candace A. Leatham Accounting Officer) /s/Irvin Ackerson Director - - ----------------- Irvin Ackerson /s/William E. Kulsar Secretary and Director - - -------------------- William E. Kulsar /s/Joel D. Marvil Director - - ----------------- Joel D. Marvil /s/Richard Scott Director - - ---------------- Richard Scott /s/Joseph Zitone Director - - ---------------- Joseph Zitone EX-13 2 Table of Contents Message To Our Stockholders 1 Management Discussion and Analysis 2 Independent Auditors' Report 14 Consolidated Statements of Condition 15 Consolidated Statements of Income 16 Consolidated Statements of Changes in Stockholders' Equity 17 Consolidated Statements of Cash Flows 18 Notes to Consolidated Financial Statements 19 Office Locations 36 Board of Directors and Officers 36 Five Year Summary 38 Message To Our Stockholders Managing remarkable growth while effecting market penetration through new products and services as well as satisfying regulatory requirements for the Year 2000 were the major achievements of Sussex Bancorp in 1998. Throughout 1998 interest margins were compressed due to economic conditions which favored lower interest rates on the asset side while interest on deposits increased, resulting in a higher cost of funds. This presented an interesting paradox: How to stabilize net interest spread and continue to maintain the Bank's growth history. The key is and remains innovation. Strategies designed to generate more profits in the loan and investment portfolio and increasing fee income can produce both growth and increase Return On Assets. For example, in 1998 the composition of our loan portfolio changed showing an increase in small to medium size business loans of over $2M, both secured and lines of credit, producing higher yields. Fee income through non-deposit products and trust services increased $100,000 over last year. The investment portfolio reflects a changing composition, balancing liquidity with investments in less volatile municipal tax free bonds. By establishing the Sussex Bancorp Mortgage Company, a subsidiary of the Bank, another profit center was added that will generate fees from mortgage brokerage services and sales of first mortgages in the secondary market. Sussex Bancorp Mortgage Company, organized in the last quarter of 1998, has received Freddie Mac approval as a seller/servicer for one-to-four family mortgage loans and is on-line for internet sales. On the deposit side, the creation of the "Senior Select" account illustrates a novel approach to overall asset growth combined with cross-selling. Total assets grew by over $20M, or 20%, over 1997. A substantial portion of deposit growth was attributable to the Senior Select program, specifically designed for our senior clientele. The cornerstone of the "Senior Select" account is a savings account paying money market account rates with unlimited withdrawal authority without penalty. Through a menu of services our senior customers can find answers to financial questions through free investment and tax seminars. This provides the ability to cross-sell non-deposit investment products and loans tailored to the needs of the customer and their families. Bringing our in-house computer systems into Y2K compliance and establishing contingency plans were a priority of management last year. Through prudent planning, the central computer system and corresponding software was scheduled for upgrade. Fortuitously, the timing was commensurate with the banking regulators examination of our Y2K compliance. Hence, testing the new system corresponded with our Y2K preparedness requirements. By tackling the problem head-on with a confident and dedicated staff we can now look forward with optimism and excitement to the new millennium. Indeed, deposits may increase as the new year approaches and the public and our customers become more aware of the safety in keeping their money in the Sussex County State Bank, where it remains insured by the FDIC. Improving our existing branch sites and expanding through new locations occurred in 1998 and will continue in the future. The improvement of the Andover site was completed. The purchase of the Tanis homestead on Route 206 inAugusta will provide the headquarters for our trust and investments division, as well as a full-service branch in a campus-like atmosphere. Improvement of the Vernon branch is scheduled in 1999, while efforts to upgrade the Sussex/Wantage site continue to be investigated. Architectural and site plans will be developed for an alternative site in Sparta. Potential de novo and branch acquisitions in Morris County will be considered as well. We continue to review joint venture possibilities to expand our product offerings and potential for non-interest income. Sussex Bancorp is in a unique position, we are located in northwest New Jersey, which enjoys a vibrant and growing economy. Consolidations and mergers continue to underpin and enhance the concept of a community bank. The mega banks shoulder the marketing cost of expanded banking services for all banks, including the movement into fee income, such as non-deposit investment products and mortgage brokerage, making it easier for community banks to do the same. With a complete product menu and the ability to provide personal services, community banks are here to stay. Eleven new banks opened their doors in New Jersey during 1997 and 1998. Eight others are in the organization stage. Nationwide, 144 new community banks were launched in 1996 and 188 new banks started in 1997. This year's business plan contemplates a secondary stock issue to address the capital needs necessary to continue our product and geographic growth. The last year of the 20th century will be another exciting year for Sussex Bancorp. Sincerely, /s/Donald L. Kovach - - ------------------- Donald L. Kovach President/CEO 1 Management Discussion and Analysis This section presents management's discussion and analysis of and changes to the Company's consolidated financial results of operations and conditions and should be read in conjunction with the Company's financial statements and notes thereto included herein. Management Strategy The Company's goal is to serve as a community-oriented financial institution serving the Sussex County, New Jersey marketplace. All seven of the Company's offices are located within Sussex County, New Jersey, and over 90% of the Company's loans are made to borrowers located in Sussex County. Through the year ended December 31, 1998, management sought to change the mix of the Company's loan portfolio and enhance non-interest income. During 1998, the Company established relationships with commercial borrowers to attain a greater market share of commercial loans. In addition, the Company established the Sussex Bancorp Mortgage Company, Inc. to offer 30-year fixed mortgages to our customers. These loans will be sold in the secondary market, producing non-interest income. For 1999, management's goals for the Company include (1) further enhancing non-interest income by focusing on fee income, (2) promoting the Sussex Bancorp Mortgage Company, and (3) continuing to emphasize the expansion of product base to achieve a one-stop financial service concept to retain and gain market share. The Company will seek to increase non-interest income through the Company's relationship with Independent Bankers Financial Services, a registered broker-dealer which will sell non-deposit products, by offering 30-year fixed mortgages to be sold in the secondary market by Sussex Bancorp Mortgage Company, and through growing the Bank's trust department. Results of Operations For the year ended December 31, 1998, the Company's net income was $710,000 , representing an increase of $2,000, or 0.3 %, over the $708,000 earned in 1997. The basic net income per share for 1998 was $.50, compared to basic net income per share of $.51 in 1997. The diluted net income per share for 1998 was $.50, compared to diluted net income per share of $.51 in 1997. The change in per share earnings reflects an increase in net income offset by an increased number of average shares outstanding during 1998, as the Company's average basic shares outstanding increased to 1,410,535 from 1,377,934. The increase was attributable to issuance of new shares through the Company's dividend reinvestment plan and exercises of stock options. The Company's results for 1998 were affected by increases of $157,000 in net interest income and $125,000 in non-interest income and decreases of $191,000 in provision for loan losses and $63,000 in income taxes, partially offset by an increase of $534,000 in total other expenses. Net Interest Income Net interest income is the difference between interest and fees earned on loans and other interest-earning assets and interest paid on interest-bearing liabilities. Net interest income is directly affected by changes in volume and mix of interest-earning assets and interest-bearing liabilities which support those assets, as well as changing interest rates when differences exist in repricing dates of assets and liabilities. Net interest income, on a fully taxable basis (a 34% tax rate), increased by $198,000 in 1998 to $4.5 million compared to $4.3 million in 1997. The increase in net interest income occurred as total interest income increased by $953,000, or 12.9%, to $8.4 million, while interest expense increased $755,000, or 24.6%, to $3.8 million. Interest income increased primarily as a result of an increase in average earning assets of $17.5 million. The increase in volume was partially offset by a decrease in rate as the Company's average yield on interest earning assets declined to 7.16% for the year ended December 31, 1998, compared to 7.46% for the year ended December 31, 1997. The decrease in rate reflects the Company's offering of lower priced loan products to gain new originations, particularly in commercial 2 Management Discussion and Analysis (continued) and non-residential real estate loans, and the repricing of the Company's investment portfolio as securities mature, reprice and are called and the proceeds are reinvested at lower current market rates. Interest income on total loans increased from $5.5 million in 1997 to $5.6 million 1998, an increase of $84,000. As discussed above, this increase was primarily the result of an increase in the volume of the loan portfolio, partially offset by a decline in average rate. The average yield on loans declined one basis point from 8.15% in 1997 to 8.14% in 1998. Total interest income on securities increased to $1.9 million in 1998 from $1.5 million in 1997, an increase of $349,000, or 22.9%. Average securities increased to $31.7 million in 1998 from $24.6 million in 1997, an increase of $7.1 million, reflecting investment of new deposits in excess of loan demand, primarily in state and local government securities. The average rate earned on securities declined to 5.90% in 1998 from 6.20% in 1997 due to lower current market rates. Interest income on other interest-earning assets increased by $520,000 in 1998 to $886,000 from $366,000 for 1997. The average balance of other interest-earning assets increased to $16.2 million in 1998 from $7.1 million in 1997. In 1998, the Company was required to keep certain municipal deposits in short term liquid investments such as term Federal funds. The average rate on other interest-earning assets increased to 5.46% in 1998 from 5.18% in 1997. Total interest expense increased from $3.1 million in 1997 to $3.8 million for the year ended December 31, 1998, an increase of $755,000, or 24.6%. The increase in interest expense was attributable to increases in both the Company's average interest-bearing deposits and the average rate paid thereon. During 1998, the Company's average interest-bearing liabilities outstanding increased by $14 million , to $96.1 million for the year ended December 31, 1998 compared to the $82.2 million for the year ended December 31, 1997. The increase in deposits occurred primarily in the Company's time deposits. Average time deposits increased to $47.4 million, an increase of $9.5 million, or 25.1%, from 1997 to 1998, and the average rate paid on time deposits increased marginally to 5.42% in 1998 from 5.39% in 1997. The average rate paid on all the Company's liabilities increased to 3.97% in 1998 from 3.73% in 1997, due primarily to increased rates paid on savings deposits and the increase of average time deposits to 49.3% of average interest-bearing liabilities in 1998 from 46.1% in 1997. The net interest margin was 3.19% in 1998, a decline from the net interest margin of 3.73% in 1997 reflecting the Company's decreased yield on interest earning assets as management continues its strategy of attempting to retain and increase its market share. Despite the declining net interest margin, the Company managed to increase net interest income by increasing average interest-earning assets by $17.5 million, or 17.6%, in 1998, which more than offset the effects of the $14.0 million increase in average interest-bearing liabilities and the decreased net interest margin. Comparative Average Balance Sheets The following table reflects the components of the Company's net interest income, setting forth for the period presented (1) average assets, liabilities, and stockholders' equity, (2) interest income earned on interest-earning assets, and the interest expense paid on interest-bearing liabilities, (3) average yields earned on interest-earning assets and average rates paid on interest-bearing liabilities, (4) the Company's net interest spread, and (5) the Company's net yield on interest earning assets. Rates are computed on a tax equivalent-basis. 3 Management Discussion and Analysis (continued)
Comparative Average Balance Sheets Year ended December 31, --------------------------------------------------------------------------------- 1998 1997 Average Average Interest Rates Rates Average Income/ Earned/ Average Income Earned/ Balance Expense Paid Balance Expense Paid ------- ------- ---- ------- ------- ---- (Dollars in Thousands) Assets Interest Earning assets: Taxable loans (net of unearned income) .............................. $ 68,842 $ 5,601 8.14% $ 67,694 $ 5,517 8.15% Tax exempt securities ................... 3,046 182 5.97% 952 61 6.41% Taxable investment securities ........... 28,658 1,688 5.89% 23,599 1,460 6.19% Other (1) ............................... 16,235 886 5.46% 7,059 366 5.18% --------- --------- --------- --------- Total earning assets .................... 116,781 8,357 7.16% 99,304 7,404 7.46% Non-interest earning assets ................ 8,319 8,245 Allowance for possible loan losses ......... (706) (670) --------- --------- Total Assets ...................... $ 124,394 $ 106,879 ========= ========= Liabilities and Shareholders' Equity Interest bearing liabilities: NOW deposits ............................ $ 13,496 $ 260 1.93% $ 12,593 $ 239 1.90% Savings deposits ........................ 30,646 867 2.83% 28,109 705 2.51% Money market deposits ................... 4,590 120 2.61% 3,580 78 2.18% Time Deposits ........................... 47,398 2,571 5.42% 37,874 2,041 5.39% --------- --------- --------- --------- Total interest bearing Liabilities ..................... 96,130 3,818 3.97% 82,156 3,063 3.73% --------- --------- --------- --------- Non-interest bearing liabilities: Demand Deposits ......................... 18,912 15,886 Other liabilities ....................... 826 824 --------- --------- Total non-interest bearing liabilities ..... 19,738 16,710 --------- --------- Shareholders' equity ....................... 8,526 8,013 --------- --------- Total liabilities and shareholders' equity ................................ $ 124,394 $ 106,879 ========= ========= Net interest differential/ net interest margin ................... $ 4,539 3.19% $ 4,341 3.73% ========= ========= Net yield on interest-earning assets ................................ 3.89% 4.37%
(1) Includes federal funds sold and interest-bearing deposits. 4 Management Discussion and Analysis (continued) The following table presents by category the major factors that contributed to the changes in net interest income between the years ended December 31, 1998 and 1997. Amounts have been computed on a fully tax equivalent basis, assuming a federal tax rate of 34%.
Year Ended December 31, - - ---------------------------------------------------------------------------------------- 1998 versus 1997 Increase (Decrease) Due to Change In - - ---------------------------------------------------------------------------------------- Average Average Volume Rate Net - - ---------------------------------------------------------------------------------------- (Dollars in Thousands) Interest Income: Loans (net of unearned income) $ 91 $ (7) $ 84 Tax exempt securities 125 (4) 121 Taxable investment securities 301 (73) 228 Other 499 21 520 - - ---------------------------------------------------------------------------------------- Total interest Income 1016 (63) 953 - - ---------------------------------------------------------------------------------------- Interest expense: NOW deposits 17 4 21 Savings deposits 67 95 162 Money market deposits 25 17 42 Time deposits 519 11 530 - - ---------------------------------------------------------------------------------------- Total interest expense 628 127 755 - - ---------------------------------------------------------------------------------------- Net interest income $ 388 $ (190) $ 198 ========================================================================================
Provision for Possible Loan Losses The provision for possible loan losses in 1998 was $19,000 compared to a provision of $210,000 in 1997. The decrease for 1998 reflects both relatively mild growth in the loan portfolio and a reduction in non-accrual and restructured loans of $666,000, or 62.6% from 1997 to 1998. In addition, the decrease reflects management's view of the continued strong economic conditions in the Company's Sussex County market area and New Jersey generally. During 1998, the Company had $40,000 in loans charged off. Other Income The Company's other income is primarily generated through service charges on deposit accounts. Other income increased $125,000 in 1998 to $869,000 compared to $744,000 in 1997. The Company recognized a gain of $65,000 on the sale of securities available for sale in 1998. The Company also experienced a gain of $122,000 in other income, representing primarily an increase in fees from the sale of non-deposit products. The Company plans to focus on developing additional non-interest income in 1999. Although no assurances can be given regarding the success of the Company's efforts, the Company believes that opportunities to enhance non-interest income are available through the Banks' mortgage subsidiary selling loans, the expansion of the Bank's trust powers and enhanced marketing of the Company's annuities, mutual funds and discount brokerage services. 5 Management Discussion and Analysis (continued) Other Expense Total other expense increased from $3,753,000 in 1997 to $4,287,000 for 1998, an increase of $534,000 or 14.2%. Salaries and employee benefits expense, the largest element of other expenses, increased $363,000 or 19.6%, and furniture and equipment expense increased $154,000 or 41.5%. During 1998, the Bank upgraded it's in-house computer system, formed and staffed its mortgage banking subsidiary, and paid customary compensation increases. The increase of $363,000 in salaries and employee benefits reflects the addition of staff for the mortgage banking subsidiary as well as customary salary increases. Income Tax Expense The Company's income tax provisions, which includes both federal and state taxes, were $330,000, and $393,000 for the years ended December 31, 1998 and 1997, respectively. The decreased provision for income tax reflects a decrease in income before income taxes and the increased income from tax-exempt securities. FINANCIAL CONDITION At December 31, 1998, the Company had total assets of $137.5 million compared to total assets of $114.3 million at December 31, 1997. Net loans increased to $69.3 million at December 31, 1998 from $67.4 million at December 31, 1997. Total deposits increased to $127.7 million at December 31, 1998 from $104.9 million at December 31, 1997. Loans Net loans increased from $67.4 million at December 31, 1997 to $69.3 million at December 31, 1998, an increase of $2 million, or 3%. The increase in the Company's loan portfolio during 1998 occurred in commercial and construction loans. Commercial loans increased by $1.2 million, or 49.7%, to $3.7 million at December 31, 1998 from $2.5 million at December 31, 1997. Construction and development loans increased by $1.5 million, or 168.2%, to $2.4 million at December 31, 1998 from $877,000 at December 31, 1997. The Company's loans secured by non-residential properties increased by $947,000 to $11.6 million from $10.7 million. These increases were partially offset by decreases in loans to individuals of $108,000, and of $2.1 million on the Company's 1-4 family mortgage loans. The Company's strategy during 1998 was to continue to diversify its loan portfolio away from residential loans, with emphasis on commercial lending. Management anticipates continuing its efforts to diversify the loan portfolio, and in particular to continue focusing on commercial customers. The increase in loans was funded during 1998 by an increase in the Company's demand, savings and time deposits. The Company has defined its primary market area to be Sussex County, New Jersey. Over ninety percent of all loans in the Company's portfolio are made to borrowers in Sussex County. The majority of approved loans are secured by real estate and the borrower's primary residence. The end of year loan to deposit ratios for 1998 and 1997 were 54.3% and 64.2%, respectively. The following tables set forth certain information concerning the distribution of the Company's loan portfolio. 6 Management Discussion and Analysis (continued)
December 31, - - ---------------------------------------------------------------------------------------- 1998 1997 - - ---------------------------------------------------------------------------------------- Amount Percent Amount Percent - - ---------------------------------------------------------------------------------------- (Dollars in Thousands) Commercial and industrial $ 3,742 5.35% $ 2,499 3.67% Real Estate: Non-residential 11,612 16.60% 10,665 15.67% Residential 49,128 70.22% 51,257 75.30% Construction 2,352 3.36% 877 1.30% Other loans 712 1.02% 241 0.35% Consumer 2,416 3.45% 2,524 3.71% - - ---------------------------------------------------------------------------------------- Total Loans $69,962 100.00% $68,063 100.00% ========================================================================================
Asset Quality Non-performing assets consist of non-accrual loans and all loans over ninety days delinquent and other real estate owned ("OREO"). Management ceases to accrue interest on all loans when they are over ninety days delinquent. All previously accrued interest is reversed unless management determines that the loan is adequately collateralized and that the principal and interest will be recovered within the original term of the loan. The Company experienced a significant decline in non-performing assets during 1998. Non-accrual loans declined by $332,000 to $398,000 at December 31, 1998 from $730,000 at December 31, 1997. In addition, as of December 31, 1998, the Company had no restructured loans compared to restructured loans of $334,000 at December 31, 1997. Restructured loans are put on accrual basis if the customer demonstrates the ability to repay the debt under the terms of the renegotiation by a period of performance, by financial statements or other evidence of ability to service debt. The Company seeks to actively manage its non-performing and questionable assets. OREO increased to $36,000 at December 31, 1998, consisting of one property. The Company had no OREO properties at year end 1997. In addition to active monitoring and collecting on delinquent loans Management has an active loan review process for commercial customers with aggregate unsecured loan amounts of $100,000 or more and real estate of $250,000 or more. The following table provides information concerning risk elements in the loan portfolio.
December 31, - - ------------------------------------------------------------------------- 1998 1997 - - ------------------------------------------------------------------------- Non-accrual loans $ 398 $ 730 Renegotiated loans 0 334 - - ------------------------------------------------------------------------- Non-performing loans $ 398 $ 1064 ========================================================================= Non-accrual loans to total loans 0.57% 1.07% Non-performing loans to total loans 0.57% 1.56% Non-performing assets to total assets 0.32% 0.93% Allowance for possible loan losses as a % of non-performing loans 167.09% 64.38%
7 Management Discussion and Analysis (continued) Allowance for Loan Losses Management has established a model for calculating the adequacy of the Company's Allowance for Loan Losses ("ALL"). Restructured loans, as well as certain loans designated by the Company's internal watch list, are assigned a percentage of their balance as a specific reserve. Additionally, all other delinquent, loans are grouped by the number of days delinquent with this amount assigned a general reserve amount. The ALL at year-end of 1998 was $665,000 versus $685,000 in 1997. Management recognizes the importance of adequate reserves and their proper allocation. Due to the reduction in non-accrual loans, the relatively small growth in the loan portfolio during 1998 and management's view of economic conditions in the Company's primary trade area, the ALL was increased by a provision for loan loss of $19,000 and recoveries of $1,000, offset by charge-off's of $40,000. The following table provides a three year analysis of the changes in the allowance for possible loan losses.
Year Ended December 31, - - ----------------------------------------------------------------------------------------- 1998 1997 1996 - - ----------------------------------------------------------------------------------------- Beginning Balance $685,000 $542,000 $476,000 Provision for Loan Losses 19,000 210,000 130,000 Loans charged-off (40,000) (68,000) (66,000) Recoveries 1,000 1,000 2,000 - - ----------------------------------------------------------------------------------------- Ending Balance $665,000 $685,000 $542,000 =========================================================================================
The following table sets forth information concerning the allocation of the Company's ALL.
December 31, - - ----------------------------------------------------------------------------------------- 1998 1997 - - ----------------------------------------------------------------------------------------- % of % of Amount All Loans Amount All Loans ========================================================================================= Balance Applicable to: Commercial and industrial $ 37,000 5.4% $ 25,000 3.7% Real Estate: Nonresidential properties 107,000 16.6% 107,000 15.7% Residential properties 467,000 70.2% 516,000 75.3% Construction 23,000 3.4% 9,000 1.3% Consumer 23,000 3.4% 26,000 3.7% Other Loans 8,000 1.0% 2,000 0.3% - - ----------------------------------------------------------------------------------------- Total $665,000 100.00% $685,000 100.00% =========================================================================================
Net charge-offs were $39,000 for 1998 compared to $67,000 in 1997. Net charge-offs as a percent of average loans were .06% in 1998, and .10% in 1997. Securities Portfolio The Company maintains an investment portfolio to fund increased loan demand or decreased deposits and other liquidity needs and to provide an additional source of interest income. The portfolio is composed primarily of U.S. Treasury Securities and obligations of U.S. Government agencies and 8 Management Discussion and Analysis (continued) government sponsored entities, including collateralized mortgage obligations issued by such agencies and entities, and municipal obligations. Securities are classified as securities held to maturity based on management's intent and the Company's ability to hold them to maturity. Such securities are stated at cost, adjusted for unamortized purchase premiums and discounts. Securities that are bought and held principally for the purpose of selling them in the near term are classified as trading securities, which are carried at market value. Realized gains and losses and gains and losses from marking the portfolio to market value are included in trading revenue. Securities not classified as securities held to maturity or trading securities are classified as securities available for sale, and are stated at fair value. Unrealized gains and losses on securities available for sale are excluded from results of operations, and are reported as a separate component of stockholders' equity, net of taxes. Securities classified as available for sale include securities that may be sold in response to changes in interest rates, changes in prepayment risks, the need to increase regulatory capital or other similar requirement. Management determines the appropriate classification of securities at the time of purchase. The following table shows the carrying value of the Company's security portfolio as of the dates indicated. Securities held to maturity are stated at cost, adjusted for amortization of premium and accretion of discounts. Securities available for sale are stated at their fair value. At December 31, 1998 and 1997 the Company had no securities classified as trading securities.
December 31, - - -------------------------------------------------------------------------------------------------- 1998 1997 1996 - - -------------------------------------------------------------------------------------------------- U.S. Treasury securities and obligations of U.S. government corporations and agencies available for sale $25,121 $26,600 $22,624 Mutual fund available for sale 831 --- --- Obligations of state and political subdivisions held to Maturity 5,939 2,082 652 - - -------------------------------------------------------------------------------------------------- Total Securities $31,891 $28,682 $23,276 ==================================================================================================
The Company's securities increased from $28.7 million at December 31, 1997 to $31.9 million at December 31, 1998. The $3.2 million increase in securities at December 31, 1998 was due to the Company's investing excess funds as management determined that the Company's liquidity was sufficient to meet anticipated funding needs through the end of the year. The Company also holds $693,000 in Federal Home Loan Bank of New York stock which it does not consider an investment security. Ownership of this stock is required for membership in the Federal Home Loan Bank. Cash and Cash Equivalents The Company's cash and cash equivalents increased by $17.0 million for the year ended December 31, 1998, to $30.7 million from $13.7 million at December 31, 1997. The increase was caused primarily by the Bank's increasing more rapidly than loan demand. As discussed above, the Company focused on retaining municipal deposits, which were primarily placed in short-term certificates of deposit. To keep these funds liquid, the Company invested $9.1 million in term federal Funds sold, classified as interest bearing deposits on the balance sheet. In addition, the Company's overnight federal funds sold increased by $9.6 million as the Company invested excess cash in short-term, liquid assets to fund future loan demand and to have available for investment in securities. 9 Management Discussion and Analysis (continued) Deposits Total deposits increased $22.8 million from $104.9 million at year end 1997 to $127.7 million at year-end 1998, a 21.8% increase. All categories of deposits contributed to the overall increase. Demand deposits increased to $19.8 million, an increase of $1.8 million, or 9.8%, from demand deposits of $18 million at year-end 1997. Savings deposits increased to $54.4 million, an increase of $6.5 million, or 13.5%, from savings deposits of $47.9 million at year-end 1997. Time deposits increased to $53.6 million, an increase of $14.6 million, or 37.4%, from time deposits of $39 million at year-end 1997. Time deposits at December 31, 1998 include $9 million owned by a local municipality which mature within 30 days. The increase in the overall portfolio reflects management's continued strategy of gaining market share in the Company's trade area, and growing the Company's balance sheet through the growth of the Company's securities portfolio and the origination of additional loans. Time deposits make up the largest portion of the Company's loan portfolio. Reliance on time deposits could cause liquidity concerns as time deposits may prove more volatile than other deposits. Management believes the Company's time deposits have historically renewed, although the need to maintain these time deposits could cause the Company's cost of funds to increase. Even if a large portion of the Company's time deposits do not renew, management believes the Company will have sufficient liquidity to fund its operating needs, through the Company's available for sale securities portfolio and secondary liquidity sources, such as lines of credit with the Federal Home Loan Bank of New York. The increase in time deposits primary reflects the Company's efforts to attract municipal deposits. The following tables provide information concerning the Company's deposits.
December 31, - - ----------------------------------------------------------------------------------------- 1998 1997 - - ----------------------------------------------------------------------------------------- Average Percent Average Percent Balance of Total Balance of Total - - ----------------------------------------------------------------------------------------- (Dollars in Thousands) NOW Deposits $ 13,496 11.73% $12,593 12.85% Savings Deposits 30,646 26.64% 28,109 28.67% Money Market Deposits 4,590 3.99% 3,580 3.65% Time Deposits 47,398 41.20% 37,874 38.63% Demand Deposits 18,912 16.44% 15,886 16.20% - - ----------------------------------------------------------------------------------------- Total Deposits $115,042 100.00% $98,042 100.00% =========================================================================================
As of December 31, 1998: Time Deposits ($100,000 and over) maturity: Three months or less $ 9,604 Over three months through six months 643 Over six months through twelve months 961 Over twelve months 2,532 - - -------------------------------------------------------------------------------- Total $ 13,740 ================================================================================ Liquidity Liquidity is a measure of the Company's ability to provide sufficient cash flow for current and future financial obligations and commitments on a timely basis. Sources of liquidity include deposits, liquidation or maturity of loans and investments and short-term borrowings. 10 Management Discussion and Analysis (continued) It is management's intent to fund future loan demand with deposit growth and sales of securities. In addition, the Bank is a member of Federal Home Loan Bank of New York and has available an overnight line of credit in the amount of $6.3 million. The Bank did not borrow against this line of credit during 1998. The Company believes that its current level of liquidity is sufficient to meet its current and anticipated operational needs. Interest Rate Sensitivity An interest rate sensitive asset or liability is one that, within a defined time period, either matures or experiences an interest rate change in line with general market interest rates. Interest rate sensitivity is the volatility of a Company's earnings from a movement in market interest rates. The Company has developed an Interest Rate Risk Policy. The policy provides for the Company to generally maintain a relatively balanced position between interest rate sensitive assets and interest rate sensitive liabilities. At December 31, 1998, the interest rate sensitivity position evident for the periodic intervals reflects an asset sensitive position.
Assets: 0-3 Mos. 3-12 Mos. 1-5 Years 5+ Years - - ----------------------------------------------------------------------------------------- (Dollars in Thousands) Securities(1) $ 3,200 $ 13,377 $ 10,111 $ 5,896 Interest bearing deposits in other banks 9,000 150 0 0 Federal funds 17,450 0 0 0 Commercial loans 3,310 236 705 101 Home equity (variable) 3,748 0 0 0 Consumer loans 1,241 3,302 11,695 3,907 Lease receivables 42 100 0 0 Mortgages 6,532 2,881 16,023 16,542 - - ----------------------------------------------------------------------------------------- Total Interest Earning Assets $ 44,523 $ 20,046 $ 38,534 $ 26,446 ========================================================================================= Liabilities: 0-3 Mos. 3-12 Mos. 1-5 Years 5+ Years - - ---------------------------------------------------------------------------------------------- (Dollars in Thousands) Certificate of deposits $ 16,960 $ 19,352 $ 17,165 $ 87 Money market deposit accounts 3,654 0 0 0 Savings accounts 3,621 32,913 0 0 Now accounts 1,417 12,752 0 0 - - ---------------------------------------------------------------------------------------------- Total Interest Bearing Liabilities $ 25,652 $ 65,017 $ 17,165 $ 87 ============================================================================================== Sensitivity Gap $ 18,851 ($44,971) ($21,369) $26,359 Cumulative Sensitive Gap $ 18,851 ($26,120) ($47,489 ($21,130)
(1) Includes $693,000 in Federal Home Loan Bank of New York stock, included in the 5+ years category. Capital Resources Stockholders' equity inclusive of accumulated other comprehensive income, net of income taxes, was $9.2 million at December 31, 1998. The growth in stockholders' equity is generated primarily through earnings retention. 11 Management Discussion and Analysis (continued) The Company and the Bank's regulators have classified and defined bank holding company capital into the following components (1)Tier 1 capital which includes tangible stockholders' equity for common stock and certain preferred stock, and (2) Tier II capital, which includes a portion of the allowance for possible loan losses, certain qualifying long-term debt and preferred stock which does not qualify for Tier I capital. The Company's and the Bank's regulators have implemented risk-based guidelines which require banks and bank holding companies to maintain certain minimum capital as a percent of such assets and certain off-balance sheet items adjusted for predefined credit risk factors (risk-adjusted assets). Banks and bank holding companies are required to maintain, Tier I capital as a percent of risk-adjusted assets of 4.0% and combined Tier I and Tier II capital as a percent of risk-adjusted assets of 8.0%, at a minimum. At December 31, 1998, the Company's Tier I and combined Tier I and Tier II capital ratios were 12.53% and 13.51%, respectively. The Bank's Tier I and combined Tier I and Tier II were 11.89% and 12.87%, respectively. In addition to the risk-based guidelines discussed above, the Company's and the Bank's regulators require that banks and bank holding companies which meet the regulators' highest performance and operational standards maintain a minimum leverage ratio (Tier I capital as a percent of tangible assets) of 3.0%. For those banks and bank holding companies with higher levels of risk or that are experiencing or anticipating growth, the minimum will be proportionately increased. Minimum leverage ratios for each bank and bank holding company are established and updated through the ongoing regulatory examination process. As of December 31, 1998, the Company has a leverage ratio of 6.24% and the Bank has a leverage ratio of 5.92%. Effect of Inflation Unlike most industrial companies, virtually all of the assets and liabilities of a financial institution are monetary in nature. As a result, the level of interest rates has a more significant impact on a financial institution's performance than the effects of general levels of inflation. Interest rates do not necessarily move in the same direction or change with the same magnitude as the price of goods and services such prices are affected by inflation. Accordingly, the liquidity, interest rate sensitivity and maturity characteristics of the Company's assets and liabilities are more indicative of its ability to maintain acceptable performance levels. Management of the Company monitors and seeks to mitigate the impact of interest rate changes by attempting to match the maturities of assets and liabilities to gap, thus seeking to minimize the potential effects of inflation. Year 2000 Compliance The Company's data processing capabilities are critical to its business and its ability to service customers. The Year 2000 problem is caused by many computer programs that were written to identify only the last two digits of a year (a common programming practice on the past to save computer memory). The expectation is that programs may read the year 2000 as 00 or 1900, and to compute interest, payments and other data incorrectly. The Company has put together a team of senior management to evaluate both its data processing systems (software and computers) and other systems (i.e., vault timers, alarms, heating and cooling systems) that are essential to its operations. The Company has examined all of its non-data processing systems and has either received Year 2000 compliant certification from third-party vendors or determined that the systems should not be affected by the Year 2000 problem. The Company does not expect any material costs to address non-data processing systems and has not expended any material costs to date. The Company's present data processing systems have more potential for Year 2000 risk in three areas: (1) its own computers, (2) computers and systems used by borrowers, and (3) vendors who provide the Company with software systems. 12 Management Discussion and Analysis (continued) Our Computers: The Company has made capital expenditures of approximately $200,000 during 1998 to upgrade its computer hardware and software systems, primarily the application software. These upgrades were anticipated in 1994 and planned and budgeted for in 1998, and they were planned to permit the Company continued growth and expansion of products and services. The Company contracted to have its primary application software tested. The test was completed November 1998 and the Company has evaluated the results by year-end 1998. Computers of Others Used by Borrowers: The Company evaluated most of its borrowers and does not believe that the Year 2000 problem should, on an aggregate basis, impact their ability to repay their loans to the Bank. The Company believes that the majority of its individual borrower are not dependent on home computers for income and none of its commercial borrowers are so large that a Year 2000 problem would render them unable to continue their businesses and subsequently be unable to repay their obligations. The Company does not anticipate any material costs to address this risk area. Vendors Who Provide The Company With Software Systems: As stated previously, the Company's primary application software system has been upgraded and modified to be Year 2000 compliant. The Company is in the process of having the critical systems tested to confirm Year 2000 compliance. Other peripheral software systems, which are not considered critical systems, have been reviewed and tested for Year 2000 compliance. Contingency Plan: The Company has developed a remediation contingency plan and is developing business resumption contingency plans specific to the Year 2000 project. Remediation contingency plans were developed and budgeted to address the actions to be taken if the testing of our mission critical systems fell behind schedule. The testing of our mission critical systems has been on schedule and satisfactory to date. Business resumption contingency plans are to address the actions that will be taken if critical business functions can't be handled in the normal manner due to system or third-party failures. These plans are additional to our normal disaster recovery plans. 13 [GRAPHIC-LOGO FOR RADICS & CO., LLC] RADICS & CO., LLC Certified Public Accountants &Consultants Established 1933 Independent Auditors' Report To the Board of Directors and Stockholders Sussex Bancorp We have audited the accompanying consolidated statement of condition of Sussex Bancorp (the "Corporation") and Subsidiaries as of December 31, 1998 and the related consolidated statements of income, changes in stockholders' equity and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Corporation's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. The consolidated financial statements of Sussex Bancorp and subsidiaries as of December 31, 1997 and for each of the years in the two-year period then ended were audited by other auditors whose report dated January 15, 1998, expressed an unqualified opinion on those statements. The other auditors' report does not cover, for the years ended December 31, 1997 and 1996, the restatement of (a) net income per common share and the weighted average number of common shares outstanding as a result of the two for one split, in 1998, of the Corporation's common stock and (b) the consolidated statements of changes in stockholders' equity for the years ended December 31, 1997 and 1996 for the purpose of presenting comprehensive income upon the implementation in 1998 of Statement of Financial Accounting Standards No. 130. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audit provide a reasonable basis for our opinion. In our opinion, the 1998 consolidated financial statements referred to in the second preceding paragraph present fairly, in all material respects, the financial position of Sussex Bancorp and Subsidiaries at December 31, 1998, and the results of their operations and their cash flows for the year then ended in conformity with generally accepted accounting principles. We also audited the adjustments applied to, for the years ended December 31, 1997 and 1996, restate net income per common share and the weighted average number of common shares outstanding and to present comprehensive income for the years ended December 31, 1997 and 1996. In our opinion, such adjustments are appropriate and have been properly applied. /s/Radics & Co., LLC - - -------------------- Radics & Co., LLC January 15, 1999 55 US Highway 46 East, Post Office Box 676, Pine Brook, NJ 07058-0676 973-575-9696 Fax:973-575-9695 Internet:www.radics.com 14 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Stockholders and Board of Directors of Sussex Bancorp: We have audited the accompanying consolidated balance sheets of Sussex Bancorp (a New Jersey corporation) and subsidiary as of December 31, 1997 and 1996, and the related consolidated statements of income, changes in stockholders' equity and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Sussex Bancorp and subsidiary as of December 31, 1997 and 1996, and the results of their operations and their cash flows for the years then ended in conformity with generally accepted accounting principles. /s/ARTHUR ANDERSEN LLP ---------------------- ARTHUR ANDERSEN LLP Roseland, New Jersey January 15, 1998
Consolidated Statements of Condition December 31, ==================================================================================================================== ASSETS 1998 1997 ==================================================================================================================== Cash and due from banks $ 4,060,000 $ 5,793,000 Interest bearing deposits in other banks 9,150,000 -- Federal funds sold 17,450,000 7,875,000 - - -------------------------------------------------------------------------------------------------------------------- Cash and cash equivalents 30,660,000 13,668,000 Securities available for sale, at estimated fair value 25,952,000 26,600,000 Securities held to maturity; estimated fair value of $5,949,000 in 1998 and $2,089,000 in 1997 5,939,000 2,082,000 Loans held for sale 354,000 -- Loans 69,346,000 67,350,000 Premises and equipment, net 2,956,000 2,287,000 Federal Home Loan Bank of New York stock, at cost 693,000 624,000 Accrued interest receivable 549,000 618,000 Other real estate owed 36,000 -- Intangible assets 703,000 787,000 Other assets 279,000 241,000 - - -------------------------------------------------------------------------------------------------------------------- Total assets $137,467,000 $114,257,000 ==================================================================================================================== LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities Deposits: Non-interest-bearing demand $19,793,000 $18,027,000 Savings club and interest-bearing demand 54,357,000 47,884,000 Time 39,824,000 35,050,000 Time of $100,000 and over 13,740,000 3,921,000 - - -------------------------------------------------------------------------------------------------------------------- Total deposits 127,714,000 104,882,000 Other liabilities 509,000 789,000 - - -------------------------------------------------------------------------------------------------------------------- Total liabilities 128,223,000 105,671,000 ==================================================================================================================== Commitments -- --
Stockholders' Equity Common stock (no par value); authorized shares 5,000,000; issued 1,422,260 in 1998 and 698,959 in 1997 5,635,000 5,412,000 Retained earnings 3,547,000 3,162,000 Accumulated other comprehensive income, net of income tax 64,000 14,000 Treasury stock, at cost; 242 shares in 1998 and 145 shares in 1997 (2,000) (2,000) - - -------------------------------------------------------------------------------------------------------------------- Total stockholders' equity 9,244,000 8,586,000 - - -------------------------------------------------------------------------------------------------------------------- Total liabilities and stockholders' equity $137,467,000 $114,257,000 ====================================================================================================================
See accompanying notes to consolidated financial statements. 15
Consolidated Statements of Income Year Ended December 31, =========================================================================================================================== 1998 1997 1996 =========================================================================================================================== INTEREST INCOME: Loans and fees $5,601,000 $5,517,000 $4,958,000 Investments securities: Taxable 1,688,000 1,460,000 1,512,000 Exempt from federal income tax 120,000 40,000 45,000 Federal funds sold 548,000 366,000 195,000 Interest bearing deposits 338,000 -- -- - - --------------------------------------------------------------------------------------------------------------------------- Total interest income 8,295,000 7,383,000 6,710,000 INTEREST EXPENSE: Deposits 3,818,000 3,063,000 2,728,000 - - --------------------------------------------------------------------------------------------------------------------------- Net interest income 4,477,000 4,320,000 3,982,000 PROVISION FOR POSSIBLE LOAN LOSSES 19,000 210,000 130,000 - - --------------------------------------------------------------------------------------------------------------------------- Net interest income after provision for possible loan losses 4,458,000 4,110,000 3,852,000 - - --------------------------------------------------------------------------------------------------------------------------- OTHER INCOME: Service charges on deposit accounts 490,000 500,000 512,000 Gains on sales of securities available for sale 65,000 -- -- Gain (loss) on sale of other real estate -- 44,000 (33,000) Trust department income 2,000 10,000 9,000 Other 312,000 190,000 178,000 - - --------------------------------------------------------------------------------------------------------------------------- Total other income 869,000 744,000 666,000 - - --------------------------------------------------------------------------------------------------------------------------- OTHER EXPENSES: Salaries and employee benefits 2,218,000 1,855,000 1,692,000 Occupancy, net 362,000 357,000 357,000 Furniture and equipment 525,000 371,000 319,000 Stationary and supplies 100,000 88,000 83,000 Audit and exams 93,000 86,000 85,000 Other 989,000 996,000 1,138,000 - - --------------------------------------------------------------------------------------------------------------------------- Total other expenses 4,287,000 3,753,000 3,674,000 - - ---------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 1,040,000 1,101,000 844,000 INCOME TAXES 330,000 393,000 322,000 - - --------------------------------------------------------------------------------------------------------------------------- NET INCOME $ 710,000 $ 708,000 $ 522,000 =========================================================================================================================== Net income per common share: Basic $ .50 $ .51 $ .38 =========================================================================================================================== Diluted $ .50 $ .51 $ .38 =========================================================================================================================== Weighted average number of common shares outstanding: Basic 1,410,535 1,377,934 1,368,618 =========================================================================================================================== Diluted 1,425,900 1,391,416 1,382,950 ===========================================================================================================================
See accompanying notes to consolidated financial statements. 16
Consolidated Statements of Changes in Stockholders' Equity Accumulated Number of Other Total Shares Common Comprehensive Retained Treasury Comprehensive Stockholders' Outstanding Stock Income Earnings Stock Income Equity - - ----------------------------------------------------------------------------------------------------------------------------------- Balance, December 31, 1995 647,236 $4,532,000 $3,023,000 $ -- $ 54,000 $7,609,000 Net income -- -- $ 522,000 522,000 -- -- 522,000 Other comprehensive income: Unrealized loss on securities available for sale, net of income taxes of $98,000 -- -- (147,000) -- -- (147,000) (147,000) - - ---------------------------------------------------------------------------------------------------------------------------------- Comprehensive income $ 375,000 ================================================================================================================================== Stock dividend 32,660 569,000 (569,000) -- -- -- Stock options exercised 500 5,000 (5,000) -- -- -- Shares issued through dividend reinvestment plan 8,100 140,000 -- -- -- 140,000 Cash dividend -- -- (242,000) -- -- (242,000) - - ---------------------------------------------------------------------------------------------------------------------------------- Balance, December 31, 1996 688,496 5,246,000 2,729,000 -- (93,000) 7,882,000 Net income -- -- $708,000 708,000 -- -- 708,000 Other comprehensive income: Unrealized gain on securities available for sale, net of income taxes of $68,000 -- -- 107,000 -- -- 107,000 107,000 - - ---------------------------------------------------------------------------------------------------------------------------------- Comprehensive income $ 815,000 ================================================================================================================================== Treasury stock purchased (145) -- -- (2,000) -- (2,000) Stock options exercised 2,000 23,000 -- -- -- 23,000 Shares issued through dividend reinvestment plan 8,608 143,000 -- -- -- 143,000 Cash dividend -- -- (275,000) -- -- (275,000) - - ---------------------------------------------------------------------------------------------------------------------------------- Balance, December 31, 1997 698,959 5,412,000 3,162,000 (2,000) 14,000 8,586,000 - - ---------------------------------------------------------------------------------------------------------------------------------- Net income -- -- $ 710,000 710,000 -- -- 710,000 - - ----------------------------------------------------------------------------------------------------------------------------------
Other comprehensive income: Unrealized gain on securities available for sale, net of income taxes of $60,000 89,000 Reclassification adjustment for gains included in income, net of income taxes of $26,000 (39,000) - - --------------------------------------------------------------------------------------------------------------------------------- Other comprehensive income -- -- 50,000 -- -- 50,000 50,000 - - --------------------------------------------------------------------------------------------------------------------------------- Comprehensive income $ 760,000 ================================================================================================================================= Stock options exercised 4,814 55,000 -- -- -- 55,000 Shares issued through dividend reinvestment plan 12,112 168,000 -- -- -- 168,000 Stock split 706,133 -- -- -- -- -- Cash dividends -- -- (325,000) -- -- (325,000) - - --------------------------------------------------------------------------------------------------------------------------------- Balance - December 31, 1998 1,422,018 $5,635,000 $3,547,000 $(2,000) $ 64,000 $9,244,000 =================================================================================================================================
See accompanying notes to consolidated financial statements. 17
Consolidated Statements of Cash Flows Year Ended December 31, =========================================================================================================================== 1998 1997 1996 =========================================================================================================================== Cash flows from operating activities: Net income $ 710,000 $ 708,000 $ 522,000 Adjustments to reconcile net income to net cash provided by operating activities: Net amortization (accretion) of premiums, discounts and loan origination fees and expenses, net 93,000 (54,000) (35,000) Depreciation and amortization 439,000 370,000 343,000 Provision for loan losses 19,000 210,000 130,000 (Gain) on sales of securities available for sale (65,000) -- -- (Gain) loss on sale of real estate -- (44,000) 33,000 Origination of loans held for sale (354,000) -- -- Deferred federal income tax (benefit) (25,000) (25,000) 54,000 Decrease (increase) in accrued interest receivable 69,000 (74,000) 38,000 (Increase) decrease in other assets (47,000) 430,000 (39,000) Decrease in other liabilities (280,000) (216,000) (331,000) - - --------------------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 559,000 1,305,000 715,000 - - --------------------------------------------------------------------------------------------------------------------------- Cash flows from investing activities: Proceeds from repayments on and maturities of securities available for sale 16,296,000 4,606,000 10,232,000 Proceeds from sales of securities available for sale 8,490,000 -- -- Purchases of securities available for sale (24,084,000) (8,931,000) (11,105,000) Proceeds from maturities of securities held to maturity 1,602,000 952,000 2,239,000 Purchases of securities held to maturity (5,464,000) (1,913,000) (1,220,000) Net increase in loans (1,907,000) (2,577,000) (13,235,000) Additions to premises and equipment (1,024,000) (332,000) (201,000) Purchase of Federal Home Loan Bank of New York stock (69,000) (624,000) -- Capitalized costs on other real estate owned (3,000) -- -- Proceeds from sale of other real estate -- 439,000 366,000 - - --------------------------------------------------------------------------------------------------------------------------- Net cash used in investing activities (6,163,000) (8,380,000) (12,924,000) - - --------------------------------------------------------------------------------------------------------------------------- Cash flows from financing activities: Net increase in deposits $22,832,000 $11,993,000 $ 6,964,000 Exercise of stock options 55,000 23,000 5,000 Stock dividends, net of fractional shares paid -- -- (5,000) Payment of dividends net of reinvestment (157,000) (126,000) (102,000) Purchase of treasury stock -- (2,000) -- - - --------------------------------------------------------------------------------------------------------------------------- Net cash provided by financing activities 22,730,000 11,888,000 6,862,000 - - ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 16,992,000 4,813,000 (5,347,000) Cash and cash equivalents - beginning 13,668,000 8,855,000 14,202,000 - - --------------------------------------------------------------------------------------------------------------------------- Cash and cash equivalents - ending $30,660,000 $13,668,000 $ 8,855,000 =========================================================================================================================== Supplemental disclosures of cash flow information: Cash paid during the year for: Income taxes (federal and state) $ 630,000 $ 192,000 $ 182,000 Interest 3,816,000 3,134,000 2,968,000 Supplemental schedule of noncash investing and financing activities: Transfer of loans to other real estate $ 33,000 $-- $ 473,000
See accompanying notes to consolidated financial statements. 18 Notes to Consolidated Financial Statements 1. NATURE OF OPERATIONS Sussex Bancorp (the "Corporation") is a bank holding company whose principal activity is the ownership and management of its wholly-owned subsidiary, Sussex County State Bank (the "Bank"), and the Bank's wholly-owned subsidiaries, Sussex Bancorp Mortgage Company and SCB Investment Company. The Corporation's business is conducted principally through the Bank. The Bank generates commercial, mortgage and consumer loans and receives deposits from customers at its seven branches located in Sussex County, New Jersey. The Bank operates under a state bank charter and provides full banking services and, accordingly, is subject to regulation by the New Jersey Department of Banking and Insurance and the Federal Deposit Insurance Corporation. 2. ACCOUNTING PRINCIPLES Principles of consolidation The consolidated financial statements include the accounts of the Corporation, the Bank and the Bank's wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Basis of consolidated financial statement presentation The consolidated financial statements of the Corporation have been prepared in conformity with generally accepted accounting principles. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the statement of condition and revenues and expenses for the period then ended. Actual results could differ significantly from those estimates. A material estimate that is particularly susceptible to significant changes relates to the determination of the allowance for loan losses. Management believes that the allowance for loan losses is adequate. While management uses available information to recognize losses on loans, future additions to the allowance for loan losses may be necessary based on changes in economic conditions in the market area. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Bank's allowance for loan losses. Such agencies may require additions to the allowance based on their judgments about information available to them at the time of their examination. Cash and cash equivalents Cash and cash equivalents include cash and due from banks, federal funds sold and interest-bearing deposits in other banks having original maturities of three months or less. Generally, federal funds sold are sold for one-day periods. Securities Investments in debt securities that the Corporation has the positive intent and ability to hold to maturity are classified as held to maturity securities and reported at amortized cost. Debt and equity securities that are bought and held principally for the purpose of selling them in the near term are classified as trading securities and reported at fair value, with unrealized holding gains and losses included in earnings. Debt and equity securities not classified as trading securities nor as held to maturity securities, are classified as available for sale securities and reported at fair value, with unrealized holding gains or losses, net of deferred income taxes, reported in a separate component of stockholders' equity. 19 Notes to Consolidated Financial Statements 2. ACCOUNTING PRINCIPLES (continued) Premiums and discounts on all securities are amortized/accreted using the interest method. Interest and dividend income on securities, which includes amortization of premiums and accretion of discounts, is recognized in the consolidated financial statements when earned. The adjusted cost basis of an identified security sold or called is used for determining security gains or losses recognized in the consolidated statements of income. Loans held for sale Loans held for sale are carried at the lower of cost or market value. Valuation computations are made in the aggregate by type of loan and rate of interest. The market values used for comparison are those associated with the Bank's normal investor outlets. Gain or loss on sales of loans is recognized based on the specific identification method. Loans Loans are stated at the amount of unpaid principal less unearned interest, net deferred loan origination costs/fees, and the allowance for loan losses. Interest on commercial, mortgage and simple interest installment loans is recognized as income based on the loan principal outstanding. Recognition of interest on the accrual method is generally discontinued when factors indicate that the collection of such amounts is doubtful. At the time a loan is placed on non-accrual status, previously accrued and uncollected interest is reversed against interest income in the current period. Interest on such loans, if appropriate, is recognized as income when payments are received. A loan is returned to an accrual status when factors indicating doubtful collectibility no longer exist. Loan origination costs/fees Loan origination fees and certain direct loan origination costs are deferred and subsequently amortized as an adjustment of yield over the contractual lives of the related loans. Allowance for possible loan losses The allowance for possible loan losses is maintained at a level considered adequate to absorb future losses. Management determines the adequacy of the allowance based upon reviews of individual credits, recent loss experience, current economic conditions, the risk characteristics of the various categories of loans and other pertinent factors. Loans deemed uncollectible are charged to the allowance. Provisions for loan losses and recoveries on loans previously charged off are added to the allowance. Loans are deemed to be impaired when, based on current information and events, it is probable that the Bank will be unable to collect all amounts due according to the contractual terms of the loan agreement. Impaired loans are measured based on the present value of expected future cash flows discounted at the loan's effective interest rate or, as a practical expedient, at the loan's observable market price or the fair value of the collateral if the loan is collateral dependent. When the measured value of an impaired loan is less than the recorded investment in that loan, the impairment is recorded in the allowance for possible loan losses. All loans identified as impaired are evaluated independently. The Bank does not aggregate such loans for evaluation purposes. Payments received on impaired loans are applied to principal, accrued interest receivable and interest income, in that order. 20 Notes to Consolidated Financial Statements 2. ACCOUNTING PRINCIPLES (continued) Concentration of risk Lending activity is concentrated in loans secured by real estate located primarily in Sussex and adjacent counties in the State of New Jersey. Premises and equipment Land is carried at cost. Buildings, building improvements, furniture, fixtures and equipment and leasehold improvements are carried at cost less accumulated depreciation and amortization. Depreciation and amortization charges are computed on the straight-line method over the shorter of the estimated lives of the related assets or the lease term. Significant renewals and betterments are charged to the premises and equipment account. Maintenance and repairs are charged to expense in the years incurred. Rental income is netted against occupancy expense in the consolidated statements of income. Other real estate owned ("OREO") OREO consists of loan collateral repossessed and is carried at the lower of cost or fair value less estimated cost to sell. When a property is acquired, the excess of the carrying amount over fair value, if any, is charged to the allowance for loan losses. An allowance for OREO has been established, through charges to OREO expense, to maintain properties at the lower of cost or fair value less estimated costs to sell. Operating results of OREO, including rental income, operating expenses, and gains and losses realized from the sale of properties owned, are included in other expenses. Intangible assets Core deposit intangibles relating to premiums paid on the acquisition of deposits are amortized on a straight line basis over 15 years. Such amortization totalled $84,000 in each of the years ended December 31, 1998, 1997 and 1996. Trust operations Trust income is recorded on a cash basis, which approximates the accrual basis. Securities and other property held by the Corporation in fiduciary or agency capacities for customers of the trust department are not assets of the Corporation and, accordingly, are not included in the accompanying consolidated financial statements. Income taxes The Corporation and its subsidiaries use the accrual basis of accounting for financial and income tax reporting. Provisions for income taxes in the consolidated financial statements differ from the amounts reflected in income tax returns due to temporary differences in the reporting of certain items for financial reporting and income tax reporting purposes. The income tax provisions shown in the consolidated financial statements relate to items of income and expense in those statements irrespective of temporary differences for income tax return purposes. The tax effect of these temporary differences is accounted for as deferred income taxes applicable to future years. The Corporation and its subsidiaries file separate state income tax returns and a consolidated federal income tax return with the amount of income tax expense or benefit computed and allocated on a separate return basis. 21 Notes to Consolidated Financial Statements 2. ACCOUNTING PRINCIPLES (continued) Net income per common share Basic net income per share of common stock is calculated by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted net income per share is calculated by dividing net income by the weighted average number of shares of common stock outstanding during the period plus the potential dilutive effect of outstanding stock options. On June 18, 1998, the Corporation's Board of Directors authorized a two for one stock split, which was distributed on August 3, 1998. Basic and diluted net income per common share have been retroactively restated to give effect to the stock split. Comprehensive income Effective January 1, 1998, the Corporation adopted Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income". SFAS No. 130 requires the reporting of comprehensive income in addition to net income from operations. Comprehensive income is a more inclusive financial reporting methodology that includes disclosure of certain financial information that historically has not been recognized in the calculation of net income. As required, the provisions of SFAS No. 130 have been retroactively applied to previously reported periods. The application of SFAS No. 130 had no material effect on the Corporation's consolidated financial condition or operations. Impact of new financial Accounting Standards In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS No. 133, "Accounting for Derivative Instruments Hedging Activities." SFAS No. 133 establishes accounting and reporting standards for derivative instruments 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. In addition, certain provisions of SFAS No. 133 will permit, at the date of initial adoption of SFAS No. 133, the transfer of any held-to-maturity security into either the available for sale or trading category and the transfer of any available for sale security into the trading category. Transfers from the held-to-maturity portfolio at the date of initial adoption will not call into question the entity's intent to hold other debt securities to maturity in the future. SFAS No. 133 is effective for all fiscal quarters of fiscal years beginning after June 15, 1999 and is not expected to have a material impact on the Corporation. The Corporation does not intend to adopt SFAS No. 133 earlier than required. Interest-rate risk The Corporation, primarily through the Bank, is principally engaged in the business of attracting deposits from the general public and using these deposits, together with other funds, to make loans secured by real estate and, to a lesser extent, commercial and consumer loans. Additionally, such funds are utilized to purchase investment securities. The potential for interest-rate risk exists as a result of the differences in the duration of the Corporation's interest-sensitive liabilities compared to its interest-sensitive assets. In a changing interest rate environment, liabilities will reprice at different speeds and to different degrees than assets, thereby impacting net interest income. For this reason, management regularly monitors the maturity structure of the Corporation's assets and liabilities in order to measure its level of interest-rate risk and plan for future volatility. Reclassification Certain amounts for the years ended December 31, 1997 and 1996 have been reclassified to conform to the current year's presentation. 22 Notes to Consolidated Financial Statements 3. SECURITIES AVAILABLE FOR SALE
December 31, 1998 - - --------------------------------------------------------------------------------------------------------------------------- Amortized Gross Unrealized Carrying - - --------------------------------------------------------------------------------------------------------------------------- Cost Gains Losses Value - - --------------------------------------------------------------------------------------------------------------------------- U.S. Treasury $ 5,589,000 $ 124,000 $ 3,000 $ 5,710,000 U.S. Government agencies including mortgage-backed securities 19,407,000 75,000 71,000 19,411,000 Equity securities 850,000 -- 19,000 831,000 - - --------------------------------------------------------------------------------------------------------------------------- $25,846,000 $ 199,000 $93,000 $25,952,000 =========================================================================================================================== December 31, 1997 - - --------------------------------------------------------------------------------------------------------------------------- Amortized Gross Unrealized Carrying - - --------------------------------------------------------------------------------------------------------------------------- Cost Gains Losses Value - - --------------------------------------------------------------------------------------------------------------------------- U.S. Treasury $ 8,049,000 $ 30,000 $ 30,000 $ 8,049,000 U.S. Government agencies including mortgage-backed securities 18,529,000 60,000 38,000 18,551,000 - - --------------------------------------------------------------------------------------------------------------------------- $26,578,000 $ 90,000 $ 68,000 $26,600,000 =========================================================================================================================== December 31, - - --------------------------------------------------------------------------------------------------------------------------- 1998 1997 - - --------------------------------------------------------------------------------------------------------------------------- Amortized Carrying Amortized Carrying Cost Value Cost Value - - --------------------------------------------------------------------------------------------------------------------------- Due in one year or less $ -- $ -- $ 2,503,000 $ 2,510,000 Due after one year through five years 8,589,000 8,714,000 14,702,000 14,707,000 Due after five years through ten years 1,500,000 1,493,000 2,000,000 2,005,000 Due after ten years 14,907,000 14,914,000 7,373,000 7,378,000 Equity securities 850,000 831,000 -- -- - - --------------------------------------------------------------------------------------------------------------------------- $25,846,000 $ 25,952,000 $26,578,000 $26,600,000 ===========================================================================================================================
The amortized cost and carrying value of securities at December 31, 1998 and 1997 are shown above by contractual maturity. Actual maturities may differ from contractual maturities as borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. The following presents details of sales of securities available for sale:
Year Ended December 31, - - ----------------------------------------------------------------------------------------- 1998 1997 1996 - - ----------------------------------------------------------------------------------------- Sales proceeds $ 8,490,000 $-- $-- Gross gains 65,000 -- -- Gross losses -- -- --
Securities with a carrying value of approximately $4,333,000 and $200,000 at December 31, 1998 and 1997, respectively, were pledged to secure public deposits and for other purposes required by applicable laws and regulations. 23 Notes to Consolidated Financial Statements 4. SECURITIES HELD TO MATURITY
December 31, 1998 - - --------------------------------------------------------------------------------------------------------------------------- Amortized Gross Unrealized Estimated - - --------------------------------------------------------------------------------------------------------------------------- Cost Gains Losses Fair Value - - --------------------------------------------------------------------------------------------------------------------------- Obligations of state and political subdivisions $ 5,939,000 $ 18,000 $ 8,000 $ 5,949,000 =========================================================================================================================== December 31, 1997 - - --------------------------------------------------------------------------------------------------------------------------- Amortized Gross Unrealized Estimated - - --------------------------------------------------------------------------------------------------------------------------- Cost Gains Losses Fair Value - - --------------------------------------------------------------------------------------------------------------------------- Obligations of state and political subdivisions $2,082,000 $ 7,000 $ -- $2,089,000 =========================================================================================================================== December 31, - - --------------------------------------------------------------------------------------------------------------------------- 1998 1997 - - --------------------------------------------------------------------------------------------------------------------------- Amortized Estimated Amortized Estimated Cost Fair Value Cost Fair Value - - --------------------------------------------------------------------------------------------------------------------------- Due in one year or less $ 3,957,000 $ 3,963,000 $ 1,603,000 $ 1,603,000 Due after one year through five years 1,015,000 1,024,000 479,000 486,000 Due after five years through ten years 967,000 962,000 -- - - --------------------------------------------------------------------------------------------------------------------------- $ 5,939,000 $ 5,949,000 $ 2,082,000 $ 2,089,000 ===========================================================================================================================
The amortized cost and carrying value of securities at December 31, 1998 and 1997 are shown above by contractual maturity. Actual maturities may differ from contractual maturities as borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. There were no sales of securities held to maturity during the years ended December 31, 1998, 1997 and 1996. Notes to Consolidated Financial Statements 5. LOANS
December 31, - - ----------------------------------------------------------------------------------------------- 1998 1997 - - ----------------------------------------------------------------------------------------------- Loans secured by one to four family residential properties $ 49,128,000 $ 51,257,000 Loans secured by nonresidential properties 11,612,000 10,665,000 Loans to individuals 2,416,000 2,524,000 Commercial loans 3,742,000 2,499,000 Loans secured by construction and land development 2,352,000 877,000 Other loans 712,000 241,000 - - ----------------------------------------------------------------------------------------------- 69,962,000 68,063,000 - - ----------------------------------------------------------------------------------------------- Less: Unearned income and net deferred loan costs, net (49,000) 28,000 Allowance for loan losses 665,000 685,000 - - ----------------------------------------------------------------------------------------------- 616,000 713,000 - - ----------------------------------------------------------------------------------------------- $ 69,346,000 $ 67,350,000
24 Notes to Consolidated Financial Statements 5. LOANS (continued) Non-performing loans consist of nonaccrual and renegotiated loans. Nonaccrual loans are those on which income under the accrual method has been discontinued with subsequent interest payments credited to interest income when received, or if ultimate collectibility of principal is in doubt, applied as principal reductions. Renegotiated loans are loans whose contractual interest rates have been reduced or where other significant modifications have been made due to borrowers' financial difficulties. Interest on these loans is either accrued or credited directly to interest income. If interest had been accrued on these loans, the effect on net interest income would have been approximately $9,000, $32,000 and $68,000 higher in 1998, 1997 and 1996, respectively. Non-performing loans were as follows:
================================================================================ December 31, ================================================================================ 1998 1997 1996 ================================================================================ Nonaccrual $ 398,000 $ 730,000 $ 935,000 Renegotiated -- 334,000 277,000 - - -------------------------------------------------------------------------------- $ 398,000 $1,064,000 $1,212,000 ================================================================================
The Bank has entered into lending transactions in the ordinary course of business with directors, executive officers, principal stockholders and affiliates of such persons on the same terms as those prevailing for comparable transactions with other borrowers. These loans, at December 31, 1998, were current as to principal and interest payments, and do not involve more than normal risk of collectibility. A summary of lending activity with respect to such persons who had borrowings of $60,000 or more, is as follows:
Year Ended December 31, 1998 ================================================================================ Balance - beginning $ 1,909,000 Loans originated 581,000 Repayments (415,000) - - -------------------------------------------------------------------------------- Balance - ending $ 2,075,000 ================================================================================
6. ALLOWANCE FOR LOAN LOSSES
Year Ended December 31, ================================================================================ 1998 1997 1996 ================================================================================ Balance - beginning $ 685,000 $ 542,000 $ 476,000 Provision for loan losses 19,000 210,000 130,000 Loans charged off (40,000) (68,000) (66,000) Recoveries 1,000 1,000 2,000 - - -------------------------------------------------------------------------------- $ 665,000 $ 685,000 $ 542,000 ================================================================================
Impaired loans and related amounts recorded in the allowance for loan losses are summarized as follows: 25 Notes to Consolidated Financial Statements
December 31, - - ---------------------------------------------------------------------------------- 1998 1997 - - ---------------------------------------------------------------------------------- Record investment in impaired loans: With recorded allowances $ 407,000 $1,272,000 Without recorded allowances -- -- - - ---------------------------------------------------------------------------------- Total impaired loans 407,000 1,272,000 Related allowance for loan losses (121,000) (202,000) - - ---------------------------------------------------------------------------------- Net impaired loans $ 286,000 $1,070,000 ==================================================================================
For the years ended December 31, 1998, 1997 and 1996, the average recorded investment in impaired loans totalled $898,000, $1,345,000 and $1,864,000, respectively. Interest income recognized on such loans during the time each was impaired totalled $79,000, $135,000 and $132,000, respectively. 7. PREMISES AND EQUIPMENT
December 31, - - -------------------------------------------------------------------------------- 1998 1997 - - -------------------------------------------------------------------------------- Land $ 417,000 $ 417,000 Buildings and building improvements 1,592,000 1,555,000 Leasehold improvements 136,000 145,000 Furniture, fixtures and equipment 2,912,000 2,648,000 Assets in progress 629,000 -- - - -------------------------------------------------------------------------------- 5,686,000 4,765,000 Less accumulated depreciation and amortization 2,730,000 2,478,000 - - -------------------------------------------------------------------------------- $2,956,000 $2,287,000 ================================================================================
During the years ended December 31, 1998, 1997 and 1996, depreciation and amortization expense totalled $355,000, $286,000 and $259,000, respectively. Assets in progress consist primarily of property in Frankford Township, New Jersey, which was purchased in 1998 and is being prepared for use in the Bank's branch network. 8. DEPOSITS Scheduled maturities of certificates of deposit are as follows:
December 31, - - -------------------------------------------------------------------------------- 1998 1997 - - -------------------------------------------------------------------------------- One year or less $ 36,312,000 $ 33,793,000 After one through three years 17,097,000 4,874,000 After three years 155,000 304,000 - - -------------------------------------------------------------------------------- $ 53,564,000 $ 38,971,000 ================================================================================
At December 31, 1998, certificates of deposit include $9,000,000 owned by a local municipality which mature within 30 days. 26 Notes to Consolidated Financial Statements 9. INCOME TAXES The components of the provision for income taxes are as follows:
Year Ended December 31, - - -------------------------------------------------------------------------------- 1998 1997 1996 - - -------------------------------------------------------------------------------- Current $ 355,000 $ 418,000 $ 268,000 Deferred (25,000) (25,000) 54,000 - - -------------------------------------------------------------------------------- Total $ 330,000 $ 393,000 $ 322,000 ================================================================================
The tax effects of existing temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are as follows:
December 31, - - ---------------------------------------------------------------------------------- 1998 1997 - - --------------------------------------------------------------------------------- Deferred tax assets: Allowance for loan losses $266,000 $262,000 Deferred loan fees 27,000 40,000 Other 19,000 3,000 - - --------------------------------------------------------------------------------- 312,000 305,000 - - --------------------------------------------------------------------------------- Deferred tax liabilities: Depreciation and amortization (168,000) (186,000) Unrealized gain on securities available for sale (42,000) (9,000) - - --------------------------------------------------------------------------------- (210,000) (195,000) - - ---------------------------------------------------------------------------------- Net deferred tax assets included in other assets $102,000 $110,000 =================================================================================
The following table presents a reconciliation between the reported income taxes and the income taxes that would have been computed by applying the normal federal income tax rate of 34% to income before income taxes:
Year Ended December 31, - - --------------------------------------------------------------------------------------- 1998 1997 1996 - - --------------------------------------------------------------------------------------- Amount Percent Amount Percent Amount Percent - - --------------------------------------------------------------------------------------- Federal income tax 354,000 34.0% 374,000 34.0% 287,000 34.0% Add (deduct) effect of: Non-taxable interest income (38,000) (3.7) (11,000) (1.0) (12,000) (1.4) State income tax, net of federal income tax effect 1,000 0.1 27,000 2.4 46,000 5.5 Other items, net 13,000 1.3 3,000 0.3 1,000 0.1 - - --------------------------------------------------------------------------------------- $330,000 31.7 $393,000 35.7 $322,000 38.2 =======================================================================================
10. BENEFIT PLANS Stock Option Plans During 1988, the stockholders approved a nonqualified stock option plan (the "1988 Plan"). As of December 31, 1998, there were 63,714 authorized shares of the Corporation's common stock to be 27 Notes to Consolidated Financial Statements 10. BENEFIT PLANS (continued) granted. Options may be granted to any officer of the Corporation or the Bank, at a grant price not to be less than the higher of the par value of the stock or 85% of its fair market value at the grant date. Options are exercisable when granted with the option period determined by the Corporation's Board of Directors, but not to exceed five years. As of December 31, 1998, no options have been granted. During 1995, the stockholders approved a stock option plan for nonemployee directors (the "Director Plan"). As of December 31, 1998, there were 67,238 authorized shares of the Corporation's common stock to be granted. Upon approval of the Director Plan, each director was granted an option to purchase 5,253 shares. In addition to the foregoing, each person serving as a nonemployee director on the date of each annual meeting of the shareholders who is elected or reelected as a nonemployee director of the Corporation at such annual meeting of stockholders, shall be granted an option to purchase 1,050 shares of the Corporation's common stock with a maximum of 15,759 shares total. The option price under each grant shall not be less than the fair market value on the date of the grant. Options are exercisable in their entirety six months after the date of the grant and expire after 10 year. As of December 31, 1998, 28,034 options at $5.35, 3,060 options at $8.70, 3,000 options at $9.00 and 5,000 options at $10.69 were outstanding, of which all were exercisable and none which have been forfeited. During 1995, the stockholders approved an incentive stock option plan for executives of the Corporation (the "Executive Plan"). As of December 31, 1998 there were 134,477 authorized shares of the Corporation's common stock to be granted. Executive Plan options are granted at the sole discretion of the Board of Directors. The option price under each grant shall not be less than the fair market value on the date of grant. The Corporation may establish a vesting schedule that must be satisfied before the options may be exercised; but not within six months after the date of grant and have a term not longer than 10 years from the date of grant. As of December 31, 1998, 4,692 options at $8.82 were outstanding, of which all were exercisable and none have been forfeited. Transactions under all stock option plans are summarized as follows:
Weighted Average Range of Exercise Number of Exercise Price Price Shares Per Share Per Share - - --------------------------------------------------------------------------------------- Outstanding, December 31, 1995 37,822 $ 5.35 $ 5.35 Options granted 5,100 8.70 8.70 Options exercised (1,020) 5.35 5.35 - - --------------------------------------------------------------------------------------- Outstanding, December 31, 1996 41,902 5.35 - 8.70 5.76 Options granted 9,692 8.82 - 9.00 8.91 Options exercised (5,200) 5.35 5.35 - - --------------------------------------------------------------------------------------- Outstanding, December 31, 1997 46,394 5.35 - 9.00 6.47 Options granted 5,000 10.69 10.69 Options exercised (7,608) 5.35 - 9.00 7.27 - - --------------------------------------------------------------------------------------- Outstanding, December 31, 1998 43,786 $5.35 - $10.69 $ 6.82 =======================================================================================
28 Notes to Consolidated Financial Statements The Corporation applies Accounting Principles Board Opinion 25 and related interpretations in accounting for its plans. Accordingly, no compensation cost has been recognized for its fixed stock option plans and its stock purchase plan. Had compensation cost for the Corporation's three stock based compensation plans been determined based on the fair value at the grant dates for awards under those plans consistent with the method of FASB SFAS No. 123, the Corporation's net income and income per share would have been reduced to the pro forma amounts indicated below:
Year Ended December 31, - - --------------------------------------------------------------------------------------- 1998 1997 1996 - - --------------------------------------------------------------------------------------- Net income As reported $ 710,000 $ 708,000 $ 522,000 Pro forma 700,000 696,000 516,000 Diluted income per share As reported $ 0.50 $ 0.51$ 0.38 Pro forma 0.49 0.500.37
The following table summarizes information about fixed stock options outstanding at December 31, 1998:
Exercise Number Remaining Number Price Outstanding Contractual Life Exerciseable - - --------------------------------------------------------------------------------- $ 5.35 28,034 6.5 years 28,034 8.70 3,060 7.5 years 3,060 8.82 4,692 8.0 years 4,692 9.00 3,000 8.5 years 3,000 10.69 5,000 9.5 years 5,000 - - --------------------------------------------------------------------------------- 43,786 43,786 =================================================================================
11. RELATED PARTY TRANSACTIONS Certain directors of the Corporation are associated with legal, accounting and construction businesses that rendered various services to the Corporation. The Corporation paid these companies $168,000, $67,000 and $82,000 during 1988, 1997 and 1996, respectively. 12. COMMITMENTS The Bank is party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of their customers. These financial instruments include commitments to extend credit and standby letters of credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated financial statements. The contract or notional amounts of those instruments reflect the extent of involvement in particular classes of financial instruments. The exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual notional amount of those instruments. The Bank uses the same credit policies in making commitments and conditional obligations as they do for on-balance-sheet instruments. The commitments to extend credit are as follows: 29 12. COMMITMENTS (continued)
December 31, - - -------------------------------------------------------------------------------- 1998 1997 - - -------------------------------------------------------------------------------- (In Thousands) Commitments to extend credit $ 11,543 $ 8,259 Standby letters of credit and financial guarantees 8 49
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Bank evaluates each customer's creditworthiness on a case-by-case basis. The amount of collateral obtained if deemed necessary upon extension of credit is based on management's credit evaluation of the counterparty. Collateral held varies but may include accounts receivable, inventory, property, plant, and equipment, residential real estate and income-producing commercial properties. Standby letters of credit and financial guarantees written are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing, and similar transactions. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The Bank holds collateral supporting those commitments for which collateral is deemed necessary. Rentals under long-term operating leases amounted to approximately $52,000, $55,000 and $53,000 for the years ended December 31, 1998, 1997 and 1996, respectively. At December 31, 1998, the minimum commitments, which include rental, real estate tax and other related amounts, under all noncancellable leases with remaining terms of more than one year and expiring through 2020 are as follows: December 31, Amount - - -------------------------------------------------------------------------------- (In Thousands) 1999 $ 52,000 2000 47,000 2001 30,000 2002 15,000 2003 10,000 Thereafter 165,000 - - -------------------------------------------------------------------------------- $319,000 ================================================================================ The Corporation and its subsidiaries are also subject to litigation which arises primarily in the ordinary course of business. In the opinion of management, the ultimate disposition of such litigation should not have a material adverse effect on the consolidated financial position or results of operations of the Corporation. 30 Notes to Consolidated Financial Statements 13. DIVIDEND LIMITATION A limitation exists on the ability of the Bank to pay dividends to the Corporation. State of New Jersey Banking laws specify that no dividend shall be paid by the Bank on its capital stock unless, following the payment of each such dividend, the capital stock of the Bank will be unimpaired and the Bank will have a surplus of not less than 50% of its capital stock, or, if not, the payment of such dividend will not reduce the surplus of the Bank. 14. REGULATORY CAPITAL REQUIREMENTS The Corporation and the Bank are subject to various regulatory capital requirements administered by the Federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Corporation's consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Corporation and the Bank must meet specific capital guidelines that involve quantitative measures of the Corporation's and the Bank's assets, liabilities, and certain off-balance sheet items as calculated under regulatory account practices. The Corporation's and the Bank's capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Quantitative measures established by regulation to ensure capital adequacy require the Corporation and the Bank to maintain minimum amounts and ratios (set forth in the table below) of total Tier 1 capital (as defined in the regulations) to risk weighted assets (as defined), and of Tier 1 capital (as defined) to average assets (as defined). Management believes, as of December 31, 1998, that the Corporation and the Bank meet all capital adequacy requirements to which they are subject. As of March 31, 1997, the most recent notification from the Federal Deposit Insurance Corporation, the Bank was categorized as well-capitalized under the regulatory framework for prompt corrective action. The Corporation has not been notified by the Federal Reserve Bank of its capital category. To be categorized as well-capitalized, the Bank must maintain minimum total risk based, Tier 1 risk based, and Tier 1 leverage ratios as set forth in the table. There are no conditions or events since the aforementioned notification that management believes have changed the institution's category. The Corporation's and the Bank's actual capital amounts and ratios are presented in the following table:
To Be Well Capitalized Under Minimum Capital Prompt Corrective Actual Requirements Actions Provisions - - -------------------------------------------------------------------------------------------------------- Amount Ratio Amount Ratio Amount Ratio - - -------------------------------------------------------------------------------------------------------- (Dollars in Thousands) December 31, 1998 Total Capital (to risk-weighted assets): Corporation $ 9,123 13.51% $ 5,401 8.00% $ 6,751 10.00% Bank 8,687 12.87% 5,399 8.00% 6,749 10.00% Tier 1 Capital (to risk-weighted assets): Corporation 8,458 12.53% 2,701 4.00% 4,051 6.00% Bank 8,022 11.89% 2,700 4.00% 4,050 6.00% Tier 1 Capital (to average total assets): Corporation 8,458 6.24% 5,422 4.00% 6,778 5.00% Bank 8,022 5.92% 5,422 4.00% 6,777 5.00%
31 14. REGULATORY CAPITAL REQUIREMENTS (continued)
To Be Well Capitalized Under Minimum Capital Prompt Corrective Actual Requirements Actions Provisions ---------------- ------------------ ------------------- Amount Ratio Amount Ratio Amount Ratio - - ---------------------------------------------------------------------------------------------------------- (Dollars in Thousands) December 31, 1997 Total Capital (to risk-weighted assets): Corporation $ 8,470 14.10% $ 4,806 8.00% $ 6,008 10.00% Bank 8,215 13.67% 4,806 8.00% 6,008 10.00% Tier 1 Capital (to risk-weighted assets): Corporation 7,785 12.96% 2,403 4.00% 3,605 6.00% Bank 7,530 12.53% 2,403 4.00% 3,605 6.00% Tier 1 Capital (to average total assets): Corporation 7,785 7.00% 4,477 4.00% 5,597 5.00% Bank 7,530 6.70% 4,477 4.00% 5,597 5.00%
15. SUSSEX BANCORP, INC. (PARENT COMPANY ONLY) Condensed financial statements of the Corporation (Parent Company only) follow:
STATEMENTS OF CONDITION December 31, - - --------------------------------------------------------------------------------------- 1998 1997 - - --------------------------------------------------------------------------------------- Assets: Cash and due from banks $ 457,000 $ 266,000 Investment in subsidiaries 8,808,000 8,367,000 Other assets 22,000 44,000 - - --------------------------------------------------------------------------------------- Total assets $ 9,287,000 $ 8,677,000 ======================================================================================= Liabilities: Dividends payable 43,000 91,000 - - --------------------------------------------------------------------------------------- Stockholders' equity 9,244,000 8,586,000 - - --------------------------------------------------------------------------------------- Total liabilities and stockholders' equity $ 9,287,000 $ 8,677,000 =======================================================================================
STATEMENTS OF INCOME Year Ended December 31, - - --------------------------------------------------------------------------------------- 1998 1997 1996 - - --------------------------------------------------------------------------------------- Dividends from subsidiary bank $ 361,000 387,000 102,000 Other expenses 42,000 37,000 -- - - --------------------------------------------------------------------------------------- Income before income tax expense 319,000 350,000 102,000 Income tax expense -- -- - - --------------------------------------------------------------------------------------- Income before undistributed earnings of subsidiaries 319,000 350,000 102,000 Equity in undistributed earnings of subsidiaries 391,000 358,000 420,000 - - --------------------------------------------------------------------------------------- Net income $ 710,000 $ 708,000 $ 522,000 =======================================================================================
32 Notes to Consolidated Financial Statements 15. SUSSEX BANCORP, INC. (PARENT COMPANY ONLY) (continued)
STATEMENTS OF CASH FLOWS Year Ended December 31, - - ------------------------------------------------------------------------------------------------------- 1998 1997 1996 - - ------------------------------------------------------------------------------------------------------- Cash flows from operating activities: Net income $ 710,000 $ 708,000 $ 522,000 Adjustments to reconcile net income to net cash provided by operating activities: Decrease in other assets 22,000 21,000 -- Equity in undistributed earnings of subsidiaries (391,000) (358,000) (420,000) - - ------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 341,000 371,000 102,000 - - ------------------------------------------------------------------------------------------------------- Cash dividends paid net of reinvestments (205,000) (126,000) (102,000) Stock dividend, net of fractional shares -- -- (5,000) Purchase of treasury stock -- (2,000) -- Exercise of stock options 55,000 23,000 5,000 - - ------------------------------------------------------------------------------------------------------- Net cash (used in) financing activities (150,000) (105,000) (102,000) - - ------------------------------------------------------------------------------------------------------- Net increase in cash and cash equivalents 191,000 266,000 -- Cash and cash equivalents - beginning 266,000 -- -- - - ------------------------------------------------------------------------------------------------------- Cash and cash equivalents - ending $ 457,000 $ 266,000 $ -- =======================================================================================================
16. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS The fair value of a financial instrument is defined as the amount at which the instrument could be exchanged in a current transaction between willing parties, other than a forced or liquidation sale. Significant estimations were used for the purposes of this disclosure. Estimated fair values have been determined using the best available data and estimation methodology suitable for each category of financial instruments. For those loans and deposits with floating interest rates, it is presumed that estimated fair values generally approximate their recorded book balances. The estimation methodologies used and the estimated fair values and carrying values of the financial instruments are set forth below: Cash and cash equivalents and accrued interest receivable The carrying amounts for cash and cash equivalents and accrued interest receivable approximate fair value. Securities The fair values for securities are based on quoted market prices or dealer prices, if available. If quoted market prices or dealer prices are not available, fair value is estimated using quoted market prices or dealer prices for similar securities. Loans held for sale The fair value of loans held for sale is based on prices associated with the Bank's normal investor outlets. Loans The fair value of loans is estimated by discounting the future cash flows, using the current rates at which similar loans with similar remaining maturities would be made to borrowers with similar credit ratings. 33 Notes to Consolidated Financial Statements 16. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS (continued) Deposits For demand, savings and club accounts, fair value is the carrying amount reported in the consolidated financial statements. For fixed-maturity certificates of deposit, fair value is estimated using the rates currently offered for deposits of similar remaining maturities. Commitments The fair values of commitments to extend credit and standby letters of credit are estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. For fixed-rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates. The fair value of guarantees and letters of credit is based on fees currently charged for similar agreements or on the estimated cost to terminate them or otherwise settle the obligations with the counterparties at the reporting date. The carrying values and estimated fair values of the Corporation's financial instruments are as follows:
December 31, - - ---------------------------------------------------------------------------------------- 1998 1997 - - ---------------------------------------------------------------------------------------- Carrying Estimated Carrying Estimated Financial assets Value Fair Value Value Fair Value - - ---------------------------------------------------------------------------------------- (In Thousands) Cash and cash equivalents $30,660 $30,660 $13,668 $13,668 Securities available for sale 25,952 25,952 26,600 26,600 Securities held to maturity 5,939 5,949 2,082 2,089 Loans held for sale 354 354 -- -- Loans 69,346 68,545 67,350 67,326 Accrued interest receivable 549 549 618 618 Financial liabilities Deposits 127,714 128,005 104,882 112,783 Commitments To extend credit 11,543 11,543 8,259 8,259 Standby letters of credit 8 8 49 49
Fair value estimates are made at a specific point in time based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the entire holdings of a particular financial instrument. Because no established secondary market exists for a significant portion of the financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of the financial instruments, and other factors. These estimates are subjective in nature, involve uncertainties and matters of judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates. In addition, fair value estimates are based on existing on-and-off balance sheet financial instruments without attempting to estimate the value of anticipated future business, and exclude the value of assets and liabilities that are not considered financial instruments. Other significant assets and 34 Notes to Consolidated Financial Statements 16. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS (continued) liabilities that are not considered financial assets and liabilities include premises and equipment, other assets and other liabilities. In addition, the income tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in any of the estimates. Finally, reasonable comparability between financial institutions may not be likely due to the wide range of permitted valuation techniques and numerous estimates which must be made given the absence of active secondary markets for many of the financial instruments. This lack of uniform evaluation methodologies introduces a greater degree of subjectivity to these estimated fair values. 17. QUARTERLY FINANCIAL DATA (UNAUDITED)
Quarter Ended - - -------------------------------------------------------------------------------------- March 31, June 30, September 30, December 31, 1998 1998 1998 1998 - - -------------------------------------------------------------------------------------- (In Thousands, Except Per Share Amounts) Total interest income $ 1,951 $ 2,049 $ 2,098 $ 2,197 Total interest expense 831 932 989 1,066 - - -------------------------------------------------------------------------------------- Net interest income 1,120 1,117 1,109 1,131 - - -------------------------------------------------------------------------------------- Provision for loan losses 21 21 21 (44) Other income 183 205 231 250 Other expenses 999 1,065 1,062 1,161 Income taxes 101 77 79 73 - - -------------------------------------------------------------------------------------- Net income $ 182 $ 159 $ 178 $ 191 ====================================================================================== Net income per common share - basic and diluted $ 0.13 $ 0.11 $ 0.13 $ 0.13 ======================================================================================
Quarter Ended - - -------------------------------------------------------------------------------------- March 31, June 30, September 30, December 31, 1997 1997 1997 1997 - - -------------------------------------------------------------------------------------- (In Thousands, Except Per Share Amounts) Total interest income $ 1,755 $ 1,810 $ 1,892 $ 1,926 Total interest expense 731 754 777 801 - - -------------------------------------------------------------------------------------- Net interest income 1,024 1,056 1,115 1,125 - - -------------------------------------------------------------------------------------- Provision for loan losses 75 75 45 15 Other income 165 205 167 207 Other expenses 927 938 971 917 Income taxes 63 88 93 149 - - -------------------------------------------------------------------------------------- Net income $ 124 $ 160 $ 173 $ 251 ====================================================================================== Net income common per share - basic and diluted $ 0.09 $0.12 $0.12 $0.18 ======================================================================================
Net income per common share for the quarters ended June 30, 1998 and prior have been restated to give retroactive effect to the subsequent 2 for 1 stock split. 35 Sussex Bancorp, Inc. OFFICE LOCATIONS Main Office: FRANKLIN 399 Route 23, Franklin Bank - 827-2404 Administrative Offices - 827-2914 Loan Department - 827-3726 Branch Offices: ANDOVER 165 Route 206, Andover 786-5150 NEWTON 15 Trinity Street, Newton 383-2211 MONTAGUE 266 Clove Road, Montague 293-3488 SPARTA 172 Woodport Road, Sparta 729-7223 VERNON 7 Church Street, Vernon 754-6175 WANTAGE 455 Route 23, Wantage 875-9957 Transfer and Dividend Paying Agent/Registrar American Stock Transfer & Trust Company 40 WallStreet New York, NY 10005 800-937-5449 Common Stock Data Common stock is traded on the American Stock Exchange under the Symbol SBB. SUSSEX BANCORP, INC. Board of Directors and Executive Officers Donald L. Kovach Chairman of the Board, President and Chief Executive Officer Irvin Ackerson Excavator, Ackerson Excavating William Kulsar CPA, Caristia, Kulsar and Wade, P.A. Joel D. Marvil President and Chief Executive Officer, Ames Rubber Corporation Richard W. Scott Dentist, Richard W. Scott, D.D.S. Joseph Zitone General Contractor, Zitone Construction Co. SUSSEX COUNTY STATE BANK Board of Directors Donald L. Kovach Chairman of the Board, President and Chief Executive Officer Terry H. Thompson Secretary, Senior Vice President/COO Irvin Ackerson Excavator, Ackerson Excavating Mark J. Hontz Attorney, Dolan & Dolan, P.A. William E. Kulsar CPA, Caristia, Kulsar and Wade, P.A. Candace Leatham Senior Vice President/Treasurer Joel D. Marvil President and Chief Executive Officer of Ames Rubber Corp. Richard W. Scott Dentist, Richard W. Scott, D.D.S. Joseph Zitone General Contractor, Zitone Construction Co. Officers Donald L. Kovach President/Chief Executive Officer Candace Leatham Senior Vice President/Treasurer Terry H. Thompson Senior Vice President/COO Mary Cannistra Vice President/Personnel Officer Gary Chuisano Vice President/Trust Officer/Non-deposit Products James Ciaravolo Vice President/Branch Administration/Security Elizabeth Martin Vice President/Operations Valerie Seufert Vice President/Senior Loan Officer Samuel Tolley Vice President/Loans &Compliance Officer Janice Mandeville Asst. Vice President/Loan Administration Maryann Parker Asst. Vice President/Branch Manager-Franklin Mardella Venable Asst. Vice President/Branch Manager-Newton Diana Whitehead Asst. Vice President/Asst. Operations Officer Laurie Grafeld Asst. Secretary/Branch Manager-Montague Colleen Herman Asst. Secretary/Branch Manager-Wantage Lori Hotchkiss Asst. Secretary/Data Processing Margaret Sisco Asst. Secretary/Deposit Operations Patricia Backman Asst. Treasurer/Controllers Office SUSSEX BANCORP MORTGAGE CO., INC. Officers Gerald R. Lake President David K. VerHage Vice President 36 Sussex Bancorp, Inc. [GRAPHIC-PHOTO OF INDIVIDUALS LISTED BELOW] Trust/Estate Advisory Committee: - - -------------------------------- LEFT to RIGHT (sitting): Candace Leatham, DonaldL. Kovach and Pat Bauernfeind LEFT to RIGHT (standing): Gary Chiusano and William E. Kulsar [GRAPHIC-PHOTO OF INDIVIDUALS LISTED BELOW AT AMEX] OPENING DAY ON THE AMEX: - - ------------------------ LEFT: FRONT - William E. Kulsar, Donald L. Kovach, Candace Leatham: BACK - Joel D. Marvil, Richard W. Scott and Terry H. Thompson - - ------------------------ Below: Donald L. Kovach with a Senior Amex Representative 37 Five Year Summary (Not covered by Report of Independent Public Accountants)
Year Ended December 31 =========================================================================================================================== 1998 1997 1996 1995 1994 =========================================================================================================================== SUMMARY OF INCOME: Interest income $ 8,295,000 $ 7,383,000 $ 6,710,000 $ 6,050,000 $ 5,516,000 Interest expense 3,818,000 3,063,000 2,728,000 2,267,000 1,656,000 - - --------------------------------------------------------------------------------------------------------------------------- Net interest income 4,477,000 4,320,000 3,982,000 3,783,000 3,860,000 Provision for possible loan losses 19,000 210,000 130,000 64,000 187,000 - - --------------------------------------------------------------------------------------------------------------------------- Net interest income after provision for possible loan losses 4,458,000 4,110,000 3,852,000 3,719,000 3,673,000 Other income 869,000 744,000 666,000 677,000 592,000 Other expense 4,287,000 3,753,000 3,764,000 3,641,000 3,431,000 - - --------------------------------------------------------------------------------------------------------------------------- Income before provision for income taxes 1,040,000 1,101,000 844,000 755,000 834,000 Provision for income taxes 330,000 393,000 322,000 254,000 234,000 - - --------------------------------------------------------------------------------------------------------------------------- Net income $ 710,000 $ 708,000 $ 522,000 $ 501,000 $ 600,000 =========================================================================================================================== BASIC AVERAGE NUMBER OF SHARES OUTSTANDING (a) 1,410,535 1,377,934 1,368,618 1,345,616 1,334,418 DILUTED AVERAGE NUMBER OF SHARES OUTSTANDING (a) 1,425,900 1,391,416 1,382,950 1,349,658 1,334,418 PER SHARE INFORMATION: Basic net income $.50 $.51 $.38 $.37 $.45 Diluted net income $.50 $.51 $.38 $.37 $.45 Cash dividends (b) $.23 $.20 $.18 $.22 $.16 Stock dividends (b) 100% 0% 5% 0% 0% Dividend payout ratio 46% 39% 46% 59% 36% PERFORMANCE YIELDS: Return on average assets .57% .66% .54% .57% .73% Return on average stockholders' equity 8.33% 8.84% 6.84% 6.98% 8.84% Average equity/average costs 6.85% 7.50% 7.87% 8.11% 8.24% END OF PERIOD DATA: Total assets $137,467,000 $114,257,000 $101,776,000 $94,870,000 $82,243,000 Total deposits 127,714,000 104,882,000 92,889,000 85,925,000 75,087,000 Total stockholders' equity 9,244,000 8,586,000 7,882,000 7,609,000 6,646,000 Average assets 124,394,000 106,879,000 96,996,000 88,535,000 82,344,000 Average stockholders' equity 8,526,000 8,013,000 7,630,000 7,178,000 6,785,000 - - ---------------------------------------------------------------------------------------------------------------------------
(a) The average number of shares outstanding was computed based on the average number of shares outstanding during each period as adjusted for subsequent stock dividends. (b) Cash and stock dividends per common share are based on the actual number of common shares outstanding on the dates of record as adjusted for subsequent stock dividends. 38 EX-21 3 EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT Sussex Bancorp has a single subsidiary, Sussex County State Bank. Sussex County State Bank has a single subsidiary, Sussex Bancorp Mortgage Corp. EX-23 4 EXHIBIT 23(a) CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS ----------------------------------------- To Sussex Bancorp: We hereby consent to the incorporation by reference, into the previously filed Registration Statements No. 333-20643 on Form S-3 and No. 333-20603 on Form S-8 of Sussex Bancorp (the "Company"), of our report dated January 15, 1999, included in the Company's annual report on Form 10-KSB for the year ended December 31, 1998. /s/RADICS & CO., L.L.C. ------------------------ RADICS & CO., L.L.C. Pine Brook, New Jersey March 30, 1999 EXHIBIT 23(b) CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS ----------------------------------------- To Sussex Bancorp: As independent public accountants, we hereby consent to the incorporation by reference of our report dated January 15, 1998 and to all references to our Firm included in this Form 10-KSB into Sussex Bancorp's previously filed Registration Statement No. 333-20643 on Form S-3 and Registration Statement No. 333-20603 on Form S-8. It should be noted that we have not audited any financial statements of Sussex Bancorp subsequent to December 31, 1997 or performed any audit procedures subsequent to the date of our report. /s/ARTHUR ANDERSEN L.L.P. -------------------------- ARTHUR ANDERSEN L.L.P. Roseland, New Jersey March 30, 1999 EX-27 5
9 12-MOS 12-MOS DEC-31-1998 DEC-31-1997 DEC-31-1998 DEC-31-1997 4,060 5,693 150 100 26,450 7,875 0 0 26,645 26,600 5,939 2,706 0 0 69,346 67,351 665 685 137,467 114,257 127,714 104,882 0 0 509 789 0 0 0 0 0 0 5,635 5,412 3,609 3,174 137,467 114,257 5,601 5,517 2,694 1,866 0 0 8,295 7,383 3,818 3,063 3,818 3,063 4,477 4,320 19 210 65 0 4,287 3,753 1,040 1,040 1,040 1,040 0 0 0 0 710 708 0.50 1.03 0.50 1.02 0 0 389 730 0 0 0 344 0 0 685 542 40 68 1 1 665 685 665 685 0 0 0 0
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