-----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, Tf6ahkqmZ41kpxnDJjHvXZdMr2wGHrVm4ZotAe32HN2TSQ0SUWQdRKCj+OVRbv95 6+YtnQT6L1eiaMTbWDT3iQ== 0000950123-99-004695.txt : 19990517 0000950123-99-004695.hdr.sgml : 19990517 ACCESSION NUMBER: 0000950123-99-004695 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990514 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SUFFOLK BANCORP CENTRAL INDEX KEY: 0000754673 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 112708279 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-13580 FILM NUMBER: 99622888 BUSINESS ADDRESS: STREET 1: 6 W SECOND ST CITY: RIVERHEAD STATE: NY ZIP: 11901 BUSINESS PHONE: 5167275667 MAIL ADDRESS: STREET 1: 6 WEST SECOND STREET CITY: RIVERHEAD STATE: NY ZIP: 11901 10-Q 1 FORM 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended March 31, 1999 Commission file number 0-13580 SUFFOLK BANCORP (exact name of registrant as specified in its charter) New York State 11-2708279 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 6 West Second Street, Riverhead, New York 11901 (Address of Principal Executive Offices) (Zip Code) (Registrant's telephone number, including area code) (516) 727-5667 NOT APPLICABLE (former name, former address and former fiscal year if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /X/ No / /. Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. 6,070,080 SHARES OF COMMON STOCK OUTSTANDING AS OF MARCH 31, 1999 1 2 This page left blank intentionally. 2 3 SUFFOLK BANCORP AND SUBSIDIARIES Part I Financial Information page Consolidated Statements of Condition 4 Consolidated Statements of Income, For the Three Months Ended March 31, 1999 and 1998 5 Statements of Cash Flows, For the Three Months Ended March 31, 1999 and 1998 6 Notes to the Unaudited Consolidated Financial Statements 7 Management's Discussion and Analysis of Financial Condition and Results of Operations 7 Part II Other Information 10 Signatures 11 3 4 SUFFOLK BANCORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CONDITION (unaudited, in thousands of dollars, except share and per share data)
March 31, December 31, 1999 1998 --------- ------------ ASSETS Cash & Due From Banks $ 62,491 $ 58,298 Federal Funds Sold 8,500 17,800 Investment Securities Available for Sale, at Fair Value 105,968 129,348 U.S. Government Agency Obligations 2,194 2,382 Obligations of States & Political Subdivisions 15,631 16,231 Corporate Bonds & Other Securities 3,368 3,240 --------- ------------ Total Investment Securities 127,161 151,201 Total Loans 677,351 647,520 Less: Allowance for Possible Loan Losses 7,086 6,955 --------- ------------ Net Loans 670,265 640,565 Premises & Equipment, Net 15,137 15,249 Other Real Estate Owned, Net 296 341 Accrued Interest Receivable, Net 5,334 5,365 Excess of Cost Over Fair Value of Net Assets Acquired 1,810 1,900 Other Assets 20,227 18,713 --------- ------------ TOTAL ASSETS 911,221 909,432 ========= ============ LIABILITIES & STOCKHOLDERS' EQUITY Demand Deposits 226,419 234,049 Savings, N.O.W.'s & Money Market Deposits 345,739 333,098 Time Certificates of $100,000 or more 25,528 25,861 Other Time Deposits 229,330 233,556 --------- ------------ Total Deposits 827,016 826,564 Dividend Payable on Common Stock 1,276 1,097 Accrued Interest Payable 1,966 2,867 Other Liabilities 7,955 7,059 --------- ------------ TOTAL LIABILITIES 838,213 837,587 --------- ------------ STOCKHOLDERS' EQUITY Common Stock (par value $2.50; 15,000,000 shares authorized; 6,070,080 and 6,080,856 shares issued at March 31, 1999 & December 31, 1998, respectively) 19,026 19,026 Surplus 18,456 18,456 Treasury Stock at Par (1,540,340 shares and 1,529,564 shares, respectively) (3,851) (3,824) Undivided Profits 39,641 38,155 --------- ------------ 73,272 71,813 Accumulated Other Comprehensive Income, Net of Tax (264) 32 --------- ------------ TOTAL STOCKHOLDERS' EQUITY 73,008 71,845 TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $911,221 909,432 ========= ============
See accompanying notes to consolidated financial statements. 4 5 SUFFOLK BANCORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (unaudited, in thousands of dollars, except share and per share data)
FOR THE THREE MONTHS ENDED MARCH 31, MARCH 31, 1999 1998 ---------- ---------- INTEREST INCOME Federal Funds Sold $ 98 $ 81 United States Treasury Securities 1,014 1,738 Obligations of States & Political Subdivisions (tax exempt) 153 192 U.S. Government Agency Obligations 952 407 Corporate Bonds & Other Securities 74 10 Loans 14,071 13,964 ---------- ---------- Total Interest Income 16,362 16,392 INTEREST EXPENSE Savings, N.O.W.'s & Money Market Deposits 1,756 1,890 Time Certificates of $100,000 or more 306 350 Other Time Deposits 2,962 3,277 Federal Funds Purchased 167 72 Interest on Other Borrowings 10 70 ---------- ---------- Total Interest Expense 5,201 5,659 Net-interest Income 11,161 10,733 Provision for Possible Loan Losses 270 300 ---------- ---------- Net-interest Income After Provision for Possible Loan Losses 10,891 10,433 OTHER INCOME Service Charges on Deposit Accounts 959 998 Other Service Charges, Commissions & Fees 201 465 Fiduciary Fees 167 115 Other Operating Income 138 340 ---------- ---------- Total Other Income 1,465 1,918 OTHER EXPENSE Salaries & Employee Benefits 4,275 4,018 Net Occupancy Expense 614 613 Equipment Expense 564 501 Other Real Estate Expense 1 23 Other Operating Expense 1,998 2,095 ---------- ---------- Total Other Expense 7,452 7,250 Income Before Provision for Income Taxes 4,904 5,101 Provision for Income Taxes 1,881 2,195 ---------- ---------- NET INCOME $ 3,023 $ 2,906 ========== ========== AVERAGE: Common Shares Outstanding 6,076,842 6,095,356 Dilutive Stock Options 34,700 27,800 ---------- ---------- AVERAGE TOTAL COMMON SHARES AND DILUTIVE OPTIONS 6,111,542 6,123,156 EARNINGS PER COMMON SHARE Basic $ 0.50 $ 0.48 Diluted $ 0.49 $ 0.47
See accompanying notes to consolidated financial statements. 5 6 SUFFOLK BANCORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited, in thousands of dollars, except share and per share data)
For the Three Months Ended March 31, 1999 1998 CASH FLOWS FROM OPERATING ACTIVITIES NET INCOME $ 3,023 $ 2,906 ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH Provision for Possible Loan Losses 270 300 Depreciation & Amortization 500 388 Amortization of Excess Cost Over Fair Value of Net Assets Acquired 90 90 Accretion of Discounts (518) (352) Amortization of Premiums 159 31 Decrease in Accrued Interest Receivable 30 465 Increase in Other Assets (1,469) (1,297) Decrease in Accrued Interest Payable (900) (1,342) Increase (Decrease) in Other Liabilities 1,075 (9,104) -------- -------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 2,260 (7,915) CASH FLOWS FROM INVESTING ACTIVITIES Principal Payments on Investment Securities 258 1,012 Maturities of Investment Securities; Available for Sale 1,342 23,928 Purchases of Investment Securities; Available for Sale (128) (9,889) Maturities of Investment Securities; Held to Maturity 52,000 681 Purchases of Investment Securities; Held to Maturity (29,819) (1,407) Loan Disbursements & Repayments, Net (29,700) (11,030) Purchases of Premises & Equipment, Net (388) (78) Disposition of Other Real Estate Owned -- 248 -------- -------- NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES (6,435) 3,465 CASH FLOWS FROM FINANCING ACTIVITIES Net Increase (Decrease) in Deposit Accounts 452 (12,184) Dividends Paid to Shareholders (1,097) (1,097) Treasury Shares Acquired (287) -- -------- -------- NET CASH USED IN FINANCING ACTIVITIES (932) (13,281) NET DECREASE IN CASH & CASH EQUIVALENTS (5,107) (17,731) CASH & CASH EQUIVALENTS BEGINNING OF PERIOD 76,098 71,939 -------- -------- CASH & CASH EQUIVALENTS END OF PERIOD $ 70,991 $ 54,208 ======== ========
See accompanying notes to consolidated financial statements. 6 7 SUFFOLK BANCORP AND SUBSIDIARIES NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (1) GENERAL In the opinion of management, the accompanying unaudited consolidated financial statements of Suffolk Bancorp (Suffolk) and its consolidated subsidiaries have been prepared to reflect all adjustments (consisting solely of normally recurring accruals) necessary for a fair presentation of the financial condition and results of operations for the periods presented. Certain information and footnotes normally included in consolidated financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. Notwithstanding, management believes that the disclosures are adequate to prevent the information from misleading the reader, particularly when the accompanying consolidated financial statements are read in conjunction with the audited consolidated financial statements and notes thereto included in the Registrant's annual report and on Form 10-K, for the year ended December 31, 1998. The results of operations for the three months ended March 31, 1999 are not necessarily indicative of the results of operations to be expected for the remainder of the year. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS for the Three-Month Periods ended March 31, 1999 and 1998 NET INCOME Net income was $3,023,000 for the quarter, ahead 4.0 percent from $2,906,000 posted during the same period last year. Earnings per share for the quarter were $0.50 versus $0.48, a gain of 4.2 percent. INTEREST INCOME Interest income was $16,362,000 for the first quarter of 1999, down 0.2 percent from $16,392,000 posted for the same quarter in 1998. Average net loans during the first quarter of 1999 totaled $635,636,000, compared to $606,389,000 for the same period of 1998. During the first quarter of 1999, the yield was 8.13 percent (taxable-equivalent) on average earning assets of $810,317,000 down from 8.62 percent on average earning assets of $767,137,000 during the first quarter of 1998. INTEREST EXPENSE Interest expense for the first quarter of 1999 was $5,201,000, down 8.1 percent from $5,659,000 for the same period of 1998. Average deposits for the first quarter 1999 were $809,396,000 up from $769,871,000 for the comparable period in 1998. NET INTEREST INCOME Net interest income is the largest component of the Suffolk's earnings. Net interest income for the first quarter of 1998 was $11,161,000, up from $10,733,000 during the same period of 1998. The net interest margin for the quarter, on a fully taxable-equivalent basis, was 5.56 percent compared to 5.67 percent for the same period of 1998. 7 8 The following table details the components of Suffolk's net interest income:
- -------------------------------------------------------------------------------- Quarter ended March 31, 1999 - -------------------------------------------------------------------------------- Average Average Balance Interest Rate - -------------------------------------------------------------------------------- INTEREST-EARNING ASSETS - -------------------------------------------------------------------------------- U.S. treasury securities......... $ 78,877 $ 1,034 5.24% Obligations of states & political subdivisions.......... 15,266 233 6.11 U.S. govt. agency obligations.... 61,982 952 6.14 Corporate bonds & other securities...................... 3,254 74 9.13 Federal funds sold & securities purchased under agreements to resell.......................... 8,094 98 4.84 Loans, including non-accrual loans Commercial, financial agricultural loans............ 122,068 2,562 8.39 Commercial real estate mortgages..................... 128,009 2,972 9.29 Real estate - construction loans......................... 13,379 284 8.50 Residential mortgages (1st and 2nd liens).................... 72,386 1,751 9.68 Home equity loans.............. 21,485 485 9.02 Consumer loans................. 283,933 6,017 8.48 Other loans (overdrafts)....... 1,585 -- -- - -------------------------------------------------------------------------------- Total interest-earning assets.... $810,318 $16,462 8.13% ================================================================================ Cash & due from banks............ $ 58,593 Other non-interest-earning assets.......................... 45,992 - -------------------------------------------------------------------------------- Total assets..................... $914,903 - -------------------------------------------------------------------------------- INTEREST-BEARING LIABILITIES - -------------------------------------------------------------------------------- Savings, N.O.W.'s & money market deposits................. $332,218 $ 1,756 2.11% Time deposits.................... 257,467 3,268 5.08 - -------------------------------------------------------------------------------- Total savings & time deposits.... 589,685 5,024 3.41 Federal funds purchased & securities sold under agreement to repurchase................... 14,189 167 4.76 Other borrowings................. 1,645 10 2.50 - -------------------------------------------------------------------------------- Total interest-bearing liabilities.................... $605,519 $ 5,201 3.44% ================================================================================ Rate spread...................... 4.69% Non-interest-bearing deposits.... $219,711 Other non-interest-bearing liabilities..................... 18,691 - -------------------------------------------------------------------------------- Total liabilities................ $843,921 Stockholders' equity............. 70,982 - -------------------------------------------------------------------------------- Total liabilities & stockholders' equity............ $914,903 Net-interest income (taxable- equivalent basis) & effective interest rate differential...... $11,261 5.56% Less taxable-equivalent basis adjustment...................... (100) - -------------------------------------------------------------------------------- Net-interest income.............. $11,161 ================================================================================
8 9 OTHER INCOME Other income decreased to $1,465,000 for the three months compared to $1,913,000 the previous year. Service charges on deposits were down 3.9 percent. Service charges other than for deposits, commissions, and fees decreased by 56.8 percent. Trust revenue was up 45.2 percent. Other operating income was down 59.4 percent. More than half of the decline is attributable to the sale of the merchant services portfolio during the first quarter of 1998. The portfolio provided revenues which were largely offset by non-interest expense. OTHER EXPENSE Other expense for the first quarter of 1999 was $7,452,000, up 2.8 percent from $7,250,000 for the comparable period in 1998. CAPITAL RESOURCES Stockholders' equity totaled $73,008,000 on March 31, 1999, an increase of 1.6 percent from $71,845,000 on December 31, 1998. The ratio of equity to assets was 8.0 percent at March 31, 1999 and 7.9 percent at December 31, 1998. The following table details amounts and ratios of Suffolk's regulatory capital: (in thousands of dollars except ratios)
- ----------------------------------------------------------------------------------------------------------------------------------- To be Well Capitalized Per Capital Under Prompt Corrective Actual Adequacy Action Provisions Amount Ratio Amount Ratio Amount Ratio - ----------------------------------------------------------------------------------------------------------------------------------- As of March 31, 1999 Total Capital (to risk-weighted assets) $78,550 10.01% $62,761 8.00% $78,451 10.00% Tier 1 Capital (to risk-weighted assets) 71,464 9.11% 31,380 4.00% 47,070 6.00% Tier 1 Capital (to average assets) 71,464 7.81% 31,380 4.00% 39,225 5.00% - ----------------------------------------------------------------------------------------------------------------------------------- As of December 31, 1998 Total Capital (to risk-weighted assets) $76,423 10.55% $57,941 8.00% $72,426 10.00% Tier 1 Capital (to risk-weighted assets) 69,468 9.59% 28,970 4.00% 43,455 6.00% Tier 1 Capital (to average assets) 69,468 7.83% 28,970 4.00% 36,213 5.00% - -----------------------------------------------------------------------------------------------------------------------------------
CREDIT RISK Suffolk makes loans based on the best evaluation possible of the creditworthiness of the borrower. Even with the careful underwriting, some loans may not be repaid as originally agreed. To provide for this possibility, Suffolk maintains an allowance for possible loan losses, based on an analysis of the performance of the loans in its portfolio. The following table presents information about the allowance for possible loan losses: (in thousands of dollars except ratios)
For the For the three months ended Last 12 Mar. 31 Dec. 31 Sept. 30 June 30 Months 1999 1998 1998 1998 - ------------------------------------------------------------------------------------------------------------------------- ALLOWANCE FOR POSSIBLE LOAN LOSSES Beginning Balance 6,627 6,955 7,041 6,771 6,627 Total Charge-offs 593 172 119 109 193 Total Recoveries 182 33 33 79 37 Provision for possible loan losses 870 270 -- 300 300 - ------------------------------------------------------------------------------------------------------------------------- Ending Balance 7,086 7,086 6,955 7,041 6,771 ========================================================================================================================= COVERAGE RATIOS Loans, net of discounts average 627,599 635,636 622,035 628,510 624,213 at end of period 646,564 677,351 647,520 624,268 637,115 Non-performing Assets 2,245 2,453 2,178 2,253 2,097 Non-performing Assets/Total Loans (net of discount) 0.35% 0.36% 0.34% 0.36% 0.33% Net Charge-offs/Average Net Loans (annualized) 0.07% 0.09% 0.06% 0.02% 0.10% Allowance/Non-Accrual, Restructured, & OREO 314.50% 288.87% 319.33% 312.52% 337.29% Allowance for Loan Losses/Net Loans 1.08% 1.05% 1.07% 1.14% 1.06% - -------------------------------------------------------------------------------------------------------------------------
9 10 MARKET RISK Suffolk originates and invests in interest-earning assets and solicits interest-bearing deposit accounts. Suffolk's operations are subject to market risk resulting from fluctuations in interest rates to the extent that there is a difference between the amounts of interest-earning assets and interest-bearing liabilities that are prepaid, withdrawn, mature, or reprice in any given period of time. Suffolk's earnings or the net value of its portfolio (the present value of expected cash flows from liabilities) will change when interest rates change. The principal objective of Suffolk's asset/liability management program is to maximize net interest income while keeping risks acceptable. These risks include both the effect of changes in interest rates, and risks to liquidity. The program also provides guidance to management in funding Suffolk's investment in loans and securities. Suffolk's exposure to interest-rate risk has not changed substantially since December 31, 1998. READINESS FOR THE YEAR 2000 Suffolk has identified ways in which the year 2000 ("Y2K") may affect its operations. Following is a summary of its readiness. 1. Suffolk's Readiness. Suffolk is in the final phase of its evaluation and improvement of its internal information systems. During the first quarter of 1998, Suffolk converted its core-processing systems (including loans, deposits, and general ledger) to a state-of-the-art distributed client-server system which is fully ready for Y2K. Various accounting subsystems (non-core) have been evaluated, and all modifications were made by December 15, 1998. As a banking corporation, Suffolk relies mainly on its information systems to conduct business. Management does not expect that technology embedded in microprocessors which may not work properly after the year 2000 to have a material effect on Suffolk's operations or profitability. 2. Cost to Address Y2K. Management expects the cost of evaluating and modifying systems in preparation for the year 2000 to be approximately $40,000 for 1999. 3. Risk of Y2K. Management at Suffolk believes that it has made provision for its systems to continue processing information correctly through and beyond the year 2000. Management has also confirmed, in writing, that key providers of information have also made proper provision. However, Suffolk has no control over the readiness of major utilities and communications networks. In the opinion of management, the failure of such outside services presents the greatest risk to Suffolk of Y2K problems. 4. Contingency Plan. As a matter of standard practice, Suffolk maintains a disaster recovery plan which is reviewed and updated annually. While Suffolk has no means of accurately measuring risk to the systems of major utilities and communications networks, its disaster recovery plan assumes that these systems may fail, both for reasons related to Y2K, as well as for other reasons, and makes provision for operations to continue without them, albeit with reduced efficiency. 5. Assessment of Suffolk's Readiness. Suffolk's readiness for Y2K has been and continues to be evaluated by management. It has been and will continue to be evaluated by its primary banking regulator, the Office of the Comptroller of the Currency. PART II ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. None. 10 11 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SUFFOLK BANCORP Date: May 14, 1999 /s/ Victor F. Bozuhoski, Jr. ------------------------------ Victor F. Bozuhoski, Jr. Executive Vice President & Acting Chief Operating Officer Date: May 14, 1999 /s/ J. Gordon Huszagh ------------------------------ J. Gordon Huszagh Executive Vice President & Chief Financial Officer 11 EX-27 2 FINANCIAL DATA SCHEDULE
9 1,000 3-MOS DEC-31-1999 JAN-01-1999 MAR-31-1999 62,491 0 8,500 0 105,968 21,193 21,275 677,351 7,086 911,221 827,016 0 11,197 0 0 0 73,008 0 911,221 14,071 2,193 98 16,362 5,024 5,201 11,161 270 0 7,452 4,904 4,904 0 0 3,023 .50 0.49 5.56 1,885 2,323 272 0 6,955 172 33 7,086 7,086 0 0
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