-----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, Mk8KeVq5vpgF14uUqN8Qm4Zc6bW28gFf0D6nHEkJmQBbC1GjDPy9C4msuQETtNy/ UiBhbKe1amVqQBFeOrguBQ== 0001169232-02-002451.txt : 20021104 0001169232-02-002451.hdr.sgml : 20021104 20021104165142 ACCESSION NUMBER: 0001169232-02-002451 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020930 FILED AS OF DATE: 20021104 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: 1934 Act SEC FILE NUMBER: 000-13580 FILM NUMBER: 02808647 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 d52369_10q.txt QUARTERLY REPORT 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 September 30, 2002 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 (I.R.S. Employer of incorporation or organization) Identification No.) 6 West Second Street, Riverhead, New York 11901 (Address of Principal Executive Offices) (Zip Code) (Registrant's telephone number, including area code) (631) 727-5667 NOT APPLICABLE (former name, former address and former fiscal year if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes |X| No |_|. Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. 11,531,981 SHARES OF COMMON STOCK OUTSTANDING AS OF NOVEMBER 1, 2002 1 This page left blank intentionally. 2 SUFFOLK BANCORP AND SUBSIDIARIES page Part I - Financial Information (unaudited) Item 1. Financial Statements 4 Consolidated Statements of Condition 4 Consolidated Statements of Income, For the Three Months Ended September 30, 2002 and 2001 5 Consolidated Statements of Income, For the Nine Months Ended September 30, 2002 and 2001 6 Statements of Cash Flows, For the Nine Months Ended September 30, 2002 and 2001 7 Notes to the Unaudited Consolidated Financial Statements 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 Item 3. Quantitative and Qualitative Disclosures About Market Risk 12 Item 4. Controls and Procedures Part II - Other Information 12 Item 6. Exhibits and Reports on Form 8-K. 12 Signatures 13 Certifications of Periodic Report 14 3 SUFFOLK BANCORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CONDITION (in thousand of dollars except for share and per share data, restated to give effect to 100% stock dividend on 1/2/02)
September 30, December 31, 2002 2001 ----------- ----------- unaudited ASSETS Cash & Due From Banks $ 56,952 $ 60,926 Federal Funds Sold 46,000 17,600 Investment Securities: Available for Sale, at Fair Value 331,619 241,061 Held to Maturity (Fair Value of $15,142 and $13,872, respectively) Obligations of States & Political Subdivisions 12,342 11,709 Federal Reserve Bank Stock 638 638 Federal Home Loan Bank Stock 1,361 1,112 Corporate Bonds & Other Securities 100 100 ----------- ----------- Total Investment Securities 346,060 254,620 Total Loans 785,582 796,110 Less: Allowance for Possible Loan Losses 9,076 8,825 ----------- ----------- Net Loans 776,506 787,285 Premises & Equipment, Net 19,496 13,801 Accrued Interest Receivable, Net 5,612 5,557 Excess of Cost Over Fair Value of Net Assets Acquired 814 814 Other Assets 22,240 24,344 ----------- ----------- TOTAL ASSETS 1,273,680 1,164,947 =========== =========== LIABILITIES & STOCKHOLDERS' EQUITY Demand Deposits 311,560 294,190 Savings, N.O.W.'s & Money Market Deposits 555,659 453,922 Time Certificates of $100,000 or more 26,652 30,038 Other Time Deposits 250,920 273,562 ----------- ----------- Total Deposits 1,144,791 1,051,712 Dividend Payable on Common Stock 1,973 1,648 Accrued Interest Payable 1,450 2,513 Other Liabilities 17,396 12,237 ----------- ----------- TOTAL LIABILITIES 1,165,610 1,068,110 ----------- ----------- STOCKHOLDERS' EQUITY Common Stock (par value $2.50; 15,000,000 shares authorized; 11,569,481 and 11,770,596 shares outstanding at September 30, 2002 and December 31, 2001, respectively) 33,838 33,826 Surplus 19,230 19,165 Treasury Stock at Par (1,960,737 and 1,759,622 shares, respectively) (4,914) (4,399) Undivided Profits 51,492 47,149 ----------- ----------- 99,646 95,741 Accumulated Other Comprehensive Income, Net of Tax 8,424 1,096 ----------- ----------- TOTAL STOCKHOLDERS' EQUITY 108,070 96,837 TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 1,273,680 $ 1,164,947 =========== ===========
See accompanying notes to consolidated financial statements. 4 SUFFOLK BANCORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (in thousands of dollars except for share and per share data, restated to give effect to 100% stock dividend on 1/2/02)
For the Three Months Ended September 30, September 30, 2002 2001 ----------- ----------- unaudited unaudited INTEREST INCOME Federal Funds Sold $ 240 $ 663 United States Treasury Securities 103 224 Obligations of States & Political Subdivisions (tax exempt) 138 95 Mortgage-Backed Securities 3,234 1,436 U.S. Government Agency Obligations 766 603 Corporate Bonds & Other Securities 22 36 Loans 15,327 16,938 ----------- ----------- Total Interest Income 19,830 19,995 INTEREST EXPENSE Savings, N.O.W.'s & Money Market Deposits 1,765 2,311 Time Certificates of $100,000 or more 191 364 Other Time Deposits 1,987 3,310 Federal Funds Purchased -- -- Interest on Other Borrowings -- -- ----------- ----------- Total Interest Expense 3,943 5,985 Net-interest Income 15,887 14,010 Provision for Possible Loan Losses 360 405 ----------- ----------- Net-interest Income After Provision for Possible Loan Losses 15,527 13,605 OTHER INCOME Service Charges on Deposit Accounts 1,494 1,292 Other Service Charges, Commissions & Fees 748 505 Fiduciary Fees 282 250 Other Operating Income 283 310 Net Gain on Sale of Securities -- -- ----------- ----------- Total Other Income 2,807 2,357 OTHER EXPENSE Salaries & Employee Benefits 5,266 4,384 Net Occupancy Expense 730 713 Equipment Expense 679 582 Other Real Estate Expense -- -- Other Operating Expense 2,416 2,389 ----------- ----------- Total Other Expense 9,091 8,068 Income Before Provision for Income Taxes 9,243 7,894 Provision for Income Taxes 3,666 3,134 ----------- ----------- NET INCOME $ 5,577 $ 4,760 =========== =========== Average: Common Shares Outstanding 11,631,041 11,799,620 Dilutive Stock Options 43,884 18,634 ----------- ----------- Average Total Common Shares and Dilutive Options 11,674,925 11,818,254 EARNINGS PER COMMON SHARE Basic $ 0.48 $ 0.40 Diluted $ 0.48 $ 0.40
See accompanying notes to consolidated financial statements. 5 SUFFOLK BANCORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (in thousand of dollars except for share and per share data, restated to give effect to 100% stock dividend on 1/2/02)
For the Nine Months Ended September 30, September 30, 2002 2001 ----------- ----------- unaudited unaudited INTEREST INCOME Federal Funds Sold $ 508 841 United States Treasury Securities 367 950 Obligations of States & Political Subdivisions (tax exempt) 425 416 Mortgage-Backed Securities 8,987 4,317 U.S. Government Agency Obligations 2,073 1,593 Corporate Bonds & Other Securities 68 164 Loans 46,584 51,580 ----------- ----------- Total Interest Income 59,012 59,861 INTEREST EXPENSE Savings, N.O.W.'s & Money Market Deposits 5,202 6,578 Time Certificates of $100,000 or more 648 1,089 Other Time Deposits 6,792 10,611 Federal Funds Purchased 1 98 Interest on Other Borrowings -- 548 ----------- ----------- Total Interest Expense 12,643 18,924 Net-interest Income 46,369 40,937 Provision for Possible Loan Losses 1,020 1,215 ----------- ----------- Net-interest Income After Provision 45,349 39,722 OTHER INCOME Service Charges on Deposit Accounts 4,245 3,915 Other Service Charges, Commissions & Fees 1,544 1,197 Fiduciary Fees 860 728 Other Operating Income 693 751 Net Gain on Sale of Securities -- 395 ----------- ----------- Total Other Income 7,342 6,986 OTHER EXPENSE Salaries & Employee Benefits 15,338 13,358 Net Occupancy Expense 2,079 2,143 Equipment Expense 1,900 1,730 Other Real Estate Expense -- 10 Other Operating Expense 6,935 6,434 ----------- ----------- Total Other Expense 26,252 23,675 Income Before Provision for Income Taxes 26,439 23,033 Provision for Income Taxes 10,507 9,042 ----------- ----------- NET INCOME $ 15,932 $ 13,991 =========== =========== Average: Common Shares Outstanding 11,703,306 11,839,914 Dilutive Stock Options 42,023 15,748 ----------- ----------- Average Total Common Shares and Dilutive Options 11,745,329 11,855,662 EARNINGS PER COMMON SHARE Basic $ 1.36 $ 1.18 Diluted $ 1.36 $ 1.18
See accompanying notes to consolidated financial statements. 6 SUFFOLK BANCORP AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (in thousands of dollars)
For the Nine Months Ended September 30, September 30, 2002 2001 --------- --------- unaudited unaudited CASH FLOWS FROM OPERATING ACTIVITIES NET INCOME $ 15,932 $ 13,991 ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH Provision for Possible Loan Losses 1,020 1,215 Depreciation & Amortization 1,673 1,493 Amortization of Excess Cost Over Fair Value of Net Assets Acquired -- 271 Accretion of Discounts (518) (501) Amortization of Premiums 1,574 321 (Increase) Decrease in Accrued Interest Receivable (56) 787 Decrease (Increase) in Other Assets 2,105 (665) Decrease in Accrued Interest Payable (1,064) (560) Increase in Other Liabilities 70 3,577 Net Security Gains -- (395) --------- --------- Net Cash Provided by Operating Activities 20,736 19,534 CASH FLOWS FROM INVESTING ACTIVITIES Principal Payments on Investment Securities 20,591 9,676 Proceeds from Sale of Investment Securities, Available for Sale -- 1,005 Maturities of Investment Securities; Available for Sale 6,000 83,250 Purchases of Investment Securities; Available for Sale (105,786) (106,908) Maturities of Investment Securities; Held to Maturity 3,510 11,708 Purchases of Investment Securities; Held to Maturity (4,391) (5,125) Loan Disbursements & Repayments, Net 9,759 (14,125) Purchases of Premises & Equipment, Net (7,368) (1,249) Disposition of Other Real Estate Owned -- 175 --------- --------- Net Cash Used in Investing Activities (77,685) (21,593) CASH FLOWS FROM FINANCING ACTIVITIES Net Increase in Deposit Accounts 93,080 70,720 Dividends Paid to Shareholders (5,407) (4,688) Treasury Shares Acquired (6,298) (4,313) Stock Options Exercised -- 795 --------- --------- Net Cash Provided by Financing Activities 81,375 62,514 Net Increase in Cash & Cash Equivalents 24,426 60,455 Cash & Cash Equivalents Beginning of Period 78,526 73,284 --------- --------- Cash & Cash Equivalents End of Period $ 102,952 $ 133,739 ========= =========
See accompanying notes to consolidated financial statements. 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 ("GAAP") 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, 2001. The results of operations for the three months ended September 30 , 2002 are not necessarily indicative of the results of operations to be expected for the remainder of the year. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS for the Three-Month Periods ended September 30, 2002 and 2001 Net Income Net income was $5,577,000 for the quarter, ahead 17.2 percent from $4,760,000 posted during the same period last year. Earnings per share for the quarter were $0.48 versus $0.40, a gain of 20.0 percent. Interest Income Interest income was $19,830,000 for the third quarter of 2002, down 0.8 percent from $19,995,000 posted for the same quarter in 2001. Average net loans during the third quarter of 2002 totaled $780,796,000 compared to $777,266,000 for the same period of 2001. During the third quarter of 2002, the yield was 6.82 percent (taxable-equivalent) on average earning assets of $1,167,019,000 down from 7.99 percent on average earning assets of $1,004,103,000 during the third quarter of 2001. Decreases in interest income were attributable primarily to decrease in interest income on loans, offset by increases in investment income as a result of a change in the composition of the investment portfolio emphasizing high-quality, higher-yielding collateralized mortgage obligations. Interest Expense Interest expense for the third quarter of 2002 was $3,943,000, down 34.1 percent from $5,985,000 for the same period of 2001. During the third quarter of 2002, the cost of funds was 1.94 percent (taxable-equivalent) on average interest-bearing liabilities of $813,798,000 down from 3.42 percent on average interest-bearing liabilities of $699,044,000 during the third quarter of 2001. Interest expense decreased primarily as a result of decreases in market rates of interest, and as average demand deposits comprised 29.1 percent of total deposits. Each of the Bank's demand deposit accounts has a related non-interest-bearing sweep account. The sole purpose of the sweep accounts is to reduce the non-interest-bearing reserve balances that the Bank is required to maintain with the Federal Reserve Bank, and thereby increase funds available for investment. Although the sweep accounts are classified as savings accounts for regulatory purposes, they are included in demand deposits in the accompanying 8 consolidated statements of condition. Net Interest Income Net interest income, net of the provision for possible loan losses, is the largest component of Suffolk's earnings. Net interest income for the third quarter of 2002 was $15,527,000, up 14.1 percent from $13,605,000 during the same period of 2001. The net interest margin for the quarter, on a fully taxable-equivalent basis, was 5.47 percent compared to 5.60 percent for the same period of 2001. The following table details the components of Suffolk's net interest income on a taxable-equivalent basis: (dollars in thousands)
- ------------------------------------------------------------------------------------------------------------------------------ September 30, 2002 2001 - ------------------------------------------------------------------------------------------------------------------------------ Average Average Average Average Balance Interest Rate Balance Interest Rate - ------------------------------------------------------------------------------------------------------------------------------ INTEREST-EARNING ASSETS - ------------------------------------------------------------------------------------------------------------------------------ U.S. treasury securities $ 9,783 $ 106 4.34% $ 13,097 $ 229 7.00% Collateralized mortgage obligations 231,157 3,141 5.43 83,609 1,436 6.87 Mortgage backed securities 8,251 93 4.53 -- -- -- Obligations of states and political subdivisions 14,113 210 5.95 7,114 143 8.07 U.S. govt. agency obligations 65,199 766 4.70 44,327 602 5.44 Corporate bonds and other securities 2,099 22 4.11 2,267 36 6.31 Federal funds sold and securities purchased under agreements to resell 55,621 240 1.73 76,423 664 3.47 Loans, including non-accrual loans Commercial, financial agricultural loans 127,406 2,048 6.43 133,492 2,672 8.01 Commercial real estate mortgages 184,153 3,847 8.36 164,940 3,805 9.23 Real estate construction loans 33,715 788 9.35 25,043 673 10.76 Residential mortgages (1st and 2nd liens) 91,086 1,638 7.19 92,412 1,963 8.49 Home equity loans 35,029 514 5.87 25,378 482 7.59 Consumer loans 305,891 6,492 8.49 335,449 7,344 8.76 Other loans (overdrafts) 3,516 -- -- 552 -- -- - ------------------------------------------------------------------------------------------------------------------------------ Total interest-earning assets $1,167,019 $19,905 6.82% $1,004,103 $20,049 7.99% ============================================================================================================================== Cash and due from banks $ 47,776 $ 45,309 Other non-interest-earning assets 43,369 39,207 - ------------------------------------------------------------------------------------------------------------------------------ Total assets $1,258,164 $1,088,619 - ------------------------------------------------------------------------------------------------------------------------------ INTEREST-BEARING LIABILITIES - ------------------------------------------------------------------------------------------------------------------------------ Savings, N.O.W.'s and money market deposits $ 533,751 $ 1,765 1.32% $ 394,009 $ 2,311 2.35% Time deposits 280,047 2,179 3.11 305,035 3,674 4.82 - ------------------------------------------------------------------------------------------------------------------------------ Total savings and time deposits 813,798 3,944 1.94 699,044 5,985 3.42 Federal funds purchased and securities sold under agreement to repurchase -- -- -- -- -- -- Other borrowings -- -- -- -- -- -- - ------------------------------------------------------------------------------------------------------------------------------ Total interest-bearing liabilities $ 813,798 $ 3,944 1.94% $ 699,044 $ 5,985 3.42% ============================================================================================================================== Rate spread 4.88% 4.56% Non-interest-bearing deposits $ 334,679 $ 274,848 Other non-interest-bearing liabilities 6,826 23,309 - ------------------------------------------------------------------------------------------------------------------------------ Total liabilities $1,155,303 $ 997,201 Stockholders' equity 102,861 91,418 - ------------------------------------------------------------------------------------------------------------------------------ Total liabilities and stockholders' equity $1,258,164 $1,088,619 Net-interest income (taxable-equivalent basis) and effective interest rate differential $15,961 5.47% $14,064 5.60% Less: taxable-equivalent basis adjustment (74) (54) - ------------------------------------------------------------------------------------------------------------------------------ Net-interest income $15,887 $14,010 ==============================================================================================================================
9 Other Income Other income increased to $2,807,000 for the three months compared to $2,357,000 the previous year. Service charges on deposits were up 15.6 percent. Service charges, including commissions and fees other than for deposits, increased by 48.1 percent. Trust revenue was up 12.8 percent. Other operating income decreased by 8.7 percent. Other Expense Other expense for the third quarter of 2002 was $9,091,000, up 12.7 percent from $8,068,000 for the comparable period in 2001. Employee compensation increased by 20.1 percent, net occupancy increased 2.4 percent, equipment expense increased by 16.7 percent, while other operating expense increased by 1.1 percent. Capital Resources Stockholders' equity totaled $108,070,000 on September 30, 2002, an increase of 11.6 percent from $96,837,000 on December 31, 2001. The ratio of equity to assets was 8.5 percent at September 30, 2002 and 8.3 percent at December 31, 2001. The following table details amounts and ratios of Suffolk's regulatory capital: (in thousands of dollars except ratios)
- ------------------------------------------------------------------------------------------------------------------------- To be well capitalized For capital under prompt corrective Actual adequacy action provisions Amount Ratio Amount Ratio Amount Ratio - ------------------------------------------------------------------------------------------------------------------------- As of September 30, 2002 Total capital (to risk-weighted assets) $107,785 12.16% $70,912 8.00% $88,641 10.00% Tier 1 capital (to risk-weighted assets) 98,709 11.14% 35,456 4.00% 53,184 6.00% Tier 1 capital (to average assets) 98,709 7.85% 50,289 4.00% 62,861 5.00% - ------------------------------------------------------------------------------------------------------------------------- As of December 31, 2001 Total capital (to risk-weighted assets) $105,136 11.91% $70,641 8.00% $88,301 10.00% Tier 1 capital (to risk-weighted assets) 96,311 10.91% 35,320 4.00% 52,980 6.00% Tier 1 capital (to average assets) 96,311 8.92% 43,194 4.00% 53,992 5.00% =========================================================================================================================
Credit Risk Suffolk makes loans based on the best evaluation possible of the creditworthiness of the borrower. Even with careful underwriting, some loans may not be repaid as originally agreed. To provide for this possibility, Suffolk maintains an allowance for possible loan losses, based on an analysis of the performance of the loans in its portfolio. The analysis includes subjective factors based on management's judgment as well as quantitative evaluation. Prudent, conservative estimates should produce an allowance that will provide for a range of losses. According to generally accepted accounting principles ("GAAP") a financial institution should record its best estimate. Appropriate factors contributing to the estimate may include changes in the composition of the institution's assets, or potential economic slowdowns or downturns. Also important is the geographical or political environment in which the institution operates. Suffolk's management considers all of these factors when determining the provision for possible loan losses. 10 The following table presents information about the allowance for possible loan losses: (in thousands of dollars except for ratios)
- -------------------------------------------------------------------------------------------------------------------------- For the For the three months ended last 12 Sept. 30 June 30 Mar. 31 Dec. 31 months 2002 2002 2002 2001 - -------------------------------------------------------------------------------------------------------------------------- Allowance for possible loan losses Beginning balance $ 8,750 $ 8,957 $ 8,834 $ 8,825 $ 8,750 Total charge-offs 1,319 335 307 386 291 Total recoveries 296 94 70 95 37 Provision for possible loan losses 1,349 360 360 300 329 - -------------------------------------------------------------------------------------------------------------------------- Ending balance $ 9,076 $ 9,076 $ 8,957 $ 8,834 $ 8,825 ========================================================================================================================== Coverage ratios Loans, net of discounts: average $791,871 $789,784 $802,794 $790,472 $784,435 at end of period 795,244 785,582 806,694 792,588 796,110 Non-performing assets 2,257 1,753 2,987 2,319 1,968 Non-performing assets/total loans (net of discount) 0.28% 0.22% 0.37% 0.29% 0.25% Net charge-offs/average net loans (annualized) 0.13% 0.12% 0.12% 0.15% 0.13% Allowance/non-accrual, restructured, & OREO 411.74% 517.74% 299.87% 380.94% 448.42% Allowance for loan losses/net loans 1.12% 1.16% 1.11% 1.11% 1.11% - --------------------------------------------------------------------------------------------------------------------------
Recent Accounting Pronouncements Suffolk implemented SFAS No. 142, "Goodwill and Other Intangible Assets" on January 1, 2002. As of September 30, 2002, the balance of excess cost over the fair value of net assets acquired recorded on Suffolk's statement of condition was $814,000. During the third quarter of 2002, Suffolk determined that there was no impairment of the goodwill recorded on its books and no expense was recorded. Suffolk recorded expense of $90,483 to amortize goodwill during the third quarter of 2001. 11 Item 3. Quantitative and Qualitative Disclosures About Market Risk 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 repriced 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, 2001. Business Risks and Uncertainties This report contains some statements that look to the future. These may include remarks about Suffolk Bancorp, the banking industry, and the economy in general. Factors affecting Suffolk Bancorp include particularly, but are not limited to: changes in interest rates; increases or decreases in retail and commercial economic activity in Suffolk's market area; variations in the ability and propensity of consumers and businesses to borrow, repay, or deposit money, or to use other banking and financial services. Further, it could take Suffolk longer than anticipated to implement its strategic plans to increase revenue and manage non-interest expense, or it may not be possible to implement those plans at all. Finally, new and unanticipated legislation, regulation, or accounting standards may require Suffolk to change its practices in ways that materially change the results of operation. Each of the factors may change in ways that management does not now foresee. These remarks are based on current plans and expectations. They are subject, however, to a variety of uncertainties that could cause future results to vary materially from Suffolk's historical performance, or from current expectations. Item 4. Controls and Procedures Suffolk's Chief Executive Officer and Chief Financial Officer (collectively, the "Certifying Officers") are responsible for establishing and maintaining disclosure controls and procedures for Suffolk. Based upon their evaluation of these controls and procedures as of a date within 90 days of the filing of this report, the Certifying Officers have concluded that Suffolk's disclosure controls and procedures are effective to ensure that information required to be disclosed by Suffolk in this report is accumulated and communicated to Suffolk's management, including its principal executive officers as appropriate, to allow timely decisions regarding required disclosure. The Certifying Officers also have indicated that there were no significant changes in Suffolk's internal controls or other factors that could significantly affect these controls subsequent to the date of their evaluation, and there were no corrective actions with regard to signficant deficiencies and material weaknesses. PART II Item 6. Exhibits and Reports on Form 8-K. None 12 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: November 4, 2002 /s/ Thomas S. Kohlmann ---------------------- Thomas S. Kohlmann President & Chief Executive Officer Date: November 4, 2002 /s/ J. Gordon Huszagh --------------------- J. Gordon Huszagh Executive Vice President & Chief Financial Officer 13 CERTIFICATION OF PERIODIC REPORT I, Thomas S. Kohlmann, Chief Executive Officer of the Company, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Suffolk Bancorp; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in the Report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the Evaluation Date); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Dated: November 4, 2002 /s/ Thomas S. Kohlmann ----------------------------------- Thomas S. Kohlmann President & Chief Executive Officer 14 CERTIFICATION OF PERIODIC REPORT I, J. Gordon Huszagh, Chief Financial Officer of the Company, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Suffolk Bancorp; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in the Report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the Evaluation Date); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Dated: November 4, 2002 /s/ J. Gordon Huszagh ------------------------------ J. Gordon Huszagh Executive Vice President & Chief Financial Officer 15
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