1
ON THE COVER
TIANA BAY AT PONQUOGUE
Shinnecock Bay appears in the
foreground, Tiana Bay past the
Ponquogue bridge, and the Atlantic
Ocean beyond the barrier beach.
Shinnecock and Tiana bays are part
of the intra-coastal waterway which
runs from New England to Florida.
With vertical clearance of 55 feet
at mid-span, the bridge permits
motorboats and most sailboats to
navigate behind the barrier beach,
[PHOTO] sparing yachtsmen and working
baymen outside passage in the open
ocean. The protected bays and
inlets of Long Island's south shore
are ideal for recreational boating
and shellfishing. Each makes an
important contribution to Suffolk
Bancorp's primary service area, and
serves to attract tourists who are
increasingly the mainstay of the
economy on the island's eastern
end.
TABLE OF CONTENTS
Corporate Profile & Financial Highlights................................. 1
Message to the Shareholders.............................................. 2
Commentary............................................................... 3
Summary of Selected Financial Data....................................... 4
Price Range of Common Stock & Dividends.................................. 4
Management's Discussion & Analysis of Financial Condition
and Results of Operations.............................................. 5
The Company's Business................................................... 5
General Economic Conditions.............................................. 5
Results of Operations.................................................... 5
Net Income............................................................... 5
Net-interest Income...................................................... 5
Average Assets, Liabilities, & Stockholders' Equity, Rate Spread,
& Effective Interest Rate Differential................................. 6
Analysis of Changes in Net-interest Income............................... 6
Interest Income.......................................................... 7
Investment Securities.................................................... 7
Loan Portfolio........................................................... 8
Summary of Loan Loss Experience
& Allowance for Possible Loan Losses................................... 9
Interest Expense......................................................... 10
Deposits................................................................. 10
Short Term Borrowings.................................................... 11
Other Income............................................................. 11
Other Expense............................................................ 11
Interest Rate Sensitivity................................................ 11
Asset/Liability Management & Liquidity................................... 12
Business Risks & Uncertainties........................................... 12
Capital Resources........................................................ 12
Risk-Based Capital/Leverage Guidelines................................... 13
Discussion of Current Accounting Principles.............................. 13
Consolidated Statements of Condition..................................... 14
Consolidated Statements of Income........................................ 15
Consolidated Statements of Changes in Stockholders' Equity............... 16
Consolidated Statements of Cash Flows.................................... 17
Notes to Consolidated Financial Statements............................... 18
Independent Auditors' Report............................................. 26
Report of Management..................................................... 26
Suffolk Bancorp: Directors and Officers.................................. 27
Island Computer Corporation: Directors and Officers...................... 27
The Suffolk County National Bank: Directors and Officers................. 28
Directory of Offices and Departments:
Addresses, Telephones, and Telecopiers.................. inside back cover
This statement has not been reviewed or confirmed for accuracy or relevance by
the Office of the Comptroller of the Currency.
2
CORPORATE PROFILE
SUFFOLK BANCORP is engaged in the commercial banking business through
its wholly owned subsidiary, The Suffolk County National Bank. "SCNB" is a
full-service commercial bank. Organized in 1890, the Bank is the second largest
independent bank headquartered on Long Island. The Bank has built a strong local
reputation by providing personal service which has developed a loyal and growing
clientele.
The Bank focuses on developing and maintaining ties to the communities
it serves. Its business is primarily retail, and emphasizes loans to individual
consumers, and to small and medium-sized commercial enterprises. It has special
expertise in indirect retail lending, evaluating and buying loans generated by
automobile dealers. The Bank's primary market is Suffolk County, New York, which
is increasingly suburban in character. The County has a population of more than
1.3 million people, and incomes above the national average.
Suffolk Bancorp also owns Island Computer Corporation of New York,
Inc., a bank data processing company located in Bohemia, New York. On April 11,
1994, Suffolk Bancorp acquired Hamptons Bancshares, Inc., a bank holding company
on the south fork of Long Island which had eight offices and $160,000,000 in
assets. The following information for 1994 reflects the earnings from Hamptons
Bancshares, on and after April 11, 1994.
FINANCIAL HIGHLIGHTS
(dollars in thousands, except ratios, share, and per-share information)
- -----------------------------------------------------------------------------------------------------------------------
SUFFOLK BANCORP December 31, 1995 1994
- -----------------------------------------------------------------------------------------------------------------------
EARNINGS FOR THE YEAR Net income $ 9,089 $ 8,318
Net-interest income 38,981 35,830
Net income-per-share 2.43 2.25
Cash dividends-per-share 0.90 0.71
- -----------------------------------------------------------------------------------------------------------------------
BALANCES AT YEAR-END Assets $ 805,794 $ 811,654
Net loans 510,015 529,076
Investment securities 181,966 194,641
Deposits 727,060 723,993
Equity 70,046 77,093
Shares outstanding 3,409,309 3,799,674
Book value per common share $ 20.55 $ 20.29
- -----------------------------------------------------------------------------------------------------------------------
RATIOS Return on average equity 11.56% 11.50%
Return on average assets 1.15 1.11
Average equity to average assets 9.91 9.68
Net-interest margin (taxable-equivalent) 5.49 5.34
Net charge-offs to average net loans 0.16 0.23
- -----------------------------------------------------------------------------------------------------------------------
SUFFOLK BANCORP ANNUAL MEETING
Tuesday, April 9, 1996, 1:00 P.M.
Fox Hill Golf & Country Club
Oakleigh Avenue
Baiting Hollow, New York
REGISTRAR AND TRANSFER AGENT
American Stock Transfer & Trust Co.
40 Wall Street, 46th Floor
New York, New York 10269-0436
(800) 937-5449
TRADING
Suffolk Bancorp's common stock is traded over-the-counter, and is listed on the
NASDAQ National Market System under the symbol "SUBK." Market makers at December
31, 1995 included the firms of: Herzog, Heine, Geduld, Inc.; McConnell, Budd &
Downes, Inc.; Sandler O'Neill & Partners, L.P.; Smith Barney Shearson, Inc.; and
Troster Singer Corporation.
S.E.C. FORM 10-K
The Annual Report to the Securities and Exchange Commission on Form 10-K and
documents incorporated by reference can be obtained, without charge, by writing
to the Secretary, Suffolk Bancorp, 6 West Second Street, Riverhead, New York
11901.
1
3
TO OUR SHAREHOLDERS:
Nineteen-ninety-five was another successful year for Suffolk Bancorp and for its
wholly owned subsidiaries, The Suffolk County National Bank and Island
Computer Corporation.
Net income was $9,089,000 compared to $8,318,000 last year. Earnings-per-share
were $2.43 compared to $2.25. Assets totaled $805,794,000 at year-end compared
to $811,654,000. Shareholders' equity totaled $70,046,000, down 9 percent from
year-end 1994. Book-value-per-share was $20.55, up 1 percent from last year.
Dividends-per-share increased to $0.90 from $0.71. Net interest income improved
by 8.8 percent. Average loans increased by 6.6 percent. Average deposits rose
4.8 percent. Non-interest income improved by 18.1 percent. Offsetting this was
an increase of 8.6 percent in non-interest expense. Your shares reached a new
high of $37.50, closing the year at $34.50.
As most of you know, 1995 was an extraordinary year for your company. From
January onward, we were at odds with North Fork Bancorporation over the future
of Suffolk Bancorp. It is important to recount these events and explain why and
how your Board of Directors resolved them.
During 1994, North Fork Bancorporation started to accumulate shares of Suffolk
Bancorp. Early in 1995, North Fork filed an application with the Federal Reserve
Bank of New York to acquire up to 19.9% of the common shares of Suffolk. In that
filing, North Fork confirmed that it was considering acquiring the entire equity
interest in Suffolk.
This alarmed our loyal shareholders, customers, and employees. North Fork has
recovered from its difficulties in the early 1990's, and runs an enterprise
which is highly profitable at the moment. Nonetheless, though we operate in many
of the same markets, we approach our businesses quite differently.
While Suffolk has grown to 22 offices, we are still a community bank. Our
relationship with the communities we serve has been built painstakingly, over
more than a century, and that has been the foundation of our success. It has
produced consistent, reliable earnings through good times and bad. We know our
customers and shareholders personally, and feel accountable to them, one-to-one.
[PHOTO]
Mr. Merz at the Ostrander Avenue Office with the "Riverhead Trolley."
It links the 90-store Tanger Outlet Mall with downtown and the
Okeanos Ocean Research Foundation. The Suffolk County National
Bank provided funding.
North Fork, by contrast, is sharply aggressive and has expanded throughout the
region in a series of rapid acquisitions. We believe that such a strategy gives
North Fork characteristics that are unfamiliar to most of our shareholders, with
different risks and prospects.
Fortunately, in December, we were able to reach an agreement with North Fork to
buy back the shares it had accumulated in Suffolk. Not only did this reassure
our customers and employees; it made it possible to complete our repurchase
program much more quickly than we had anticipated, and it added to your earnings
per share.
Now we can turn to the future. Your Board of Directors has approved an ambitious
strategic plan. Increasing volume, improving yields, and containing expenses are
the keys. If we reach our goals, chances are excellent that we will be able to
overcome any future attempt to end Suffolk Bancorp's 106 year tradition of
independence, service, and profit.
More than ever, it is my honor to serve as your Chief Executive Officer. On
behalf of my fellow directors and employees, and our loyal customers, I thank
you for your steadfast support during the past year.
Edward J. Merz
President & Chief Executive Officer
2
4
COMMENTARY
INITIATIVE FOR THE SHAREHOLDERS
Suffolk Bancorp undertook two major initiatives for its shareholders during
1995, a repurchase of common shares, and a substantial increase in the dividend.
First, we repurchased 390,365 shares, or 10.27 percent of the shares outstanding
at the time the program was announced on May 2, 1995. This had the effect of
increasing earnings per share by 13 cents pro forma on an ongoing basis, or 5.53
percent based on 1995 earnings.
There were several reasons for the buy-back. Over the past ten years, the ratio
of average common equity to average assets was 9.01 percent, well above industry
averages, and far above regulatory requirements. In the uncertain times of the
last recession, it provided a secure cushion against adversity, giving
confidence to our customers, employees, and shareholders alike. In combination
with conservative lending policies, our strength of capital assured all parties
that Suffolk would weather the storm.
Since 1991, the ratio of average equity to average assets climbed steadily, from
9.27 percent, to 9.91 percent in 1995, even including the effect of the
repurchase. The economy on Long Island has recovered much more slowly than that
of the nation as a whole, and local competition for loans of good quality has
been intense. For that reason, assets have not grown as fast as capital. While
adequate capital is essential to the long-term health of any business, a banking
company makes its profit on the margin between loans and investments, and
deposits. Surplus capital decreases returns to shareholders.
We felt that the repurchase of shares was the best way to meet our shareholders'
varying financial needs. Short-term holders could take their profits and move
on. Long-term holders could enjoy revenues spread among a fewer number of
outstanding shares. They could also defer taxation on the gain as the stock
market recognized the increased earnings per share in the market price.
The second initiative for our shareholders was to increase the regular quarterly
dividend to $0.30 per share, an increment of 50 percent. Many of our
shareholders rely on their holdings for current income. Even after the
repurchase program was complete, and after the dividend was increased in the
fourth quarter, book value per common share increased slightly from year to
year. Suffolk Bancorp's ability to generate capital was clearly sufficient to
support a higher dividend going forward.
We are still working to use your capital as effectively as we can. In January of
1996, the Board of Directors approved the repurchase of an additional 171,000
shares, or about 5 percent of the company's common stock now outstanding.
Capital is like any other part of the business, and must be managed for the
shareholders' benefit.
* * * * *
While return on capital is the most important of our shareholders' concerns, as
a banking company, the way we run the business determines how large that return
will be. While management spent much time during the past year securing Suffolk
Bancorp's corporate future, much else was done to ensure future profit.
The strategic plan was overhauled, simplified, and tied to the current
expectations of our investors. To accomplish the goals outlined in the plan, the
Board of Directors reorganized executive management. The executive officers now
include President and Chief Executive Officer, Edward J. Merz, and welcome John
F. Hanley, formerly head of consumer lending, as Chief Administrative Officer.
Victor F. Bozuhoski continues as Chief Financial Officer, as does Ronald M.
Krawczyk as head of retail banking. Augustus C. Weaver, now President of Island
Computer, becomes Chief Information Officer, and Thomas S. Kohlmann, previously
our loan administrator, assumes the post of Chief Lending Officer.
The group is charged with streamlining staff, containing general and
administrative expense, as well as maintaining and sharpening the Company's
focus on service to our customers and the community.
Most of our lines of business continued without major changes from the previous
year. Competition was fierce in retail lending, resulting in lower balances.
Commercial loan balances and rates increased. Demand deposits increased
substantially, as did time certificates, while savings, N.O.W., and money market
deposits decreased.
Of particular note is our trust business. At the end of the Trust Department's
first full year in Southampton, assets under administration totaled $95,112,000,
up 27.4 percent from $74,632,000 a year ago.
During 1995, Suffolk Bancorp persevered once again. That is our way for the past
106 years, and it always will be.
* * * * *
Management's discussion and analysis of financial condition and results begins
on page 5. The Board of Directors and Management encourage you to read it to
gain a better understanding of our operations during the past year.
3
5
SUMMARY OF SELECTED FINANCIAL DATA
FIVE YEAR SUMMARY: (dollars in thousands except per share amounts)
- ----------------------------------------------------------------------------------------------------------------------------------
For the Years 1995 1994 (1) 1993 1992 1991
- ----------------------------------------------------------------------------------------------------------------------------------
Interest income $ 59,312 $ 51,564 $ 43,997 $ 46,984 $ 50,787
Interest expense 20,331 15,734 14,525 18,153 25,619
- ----------------------------------------------------------------------------------------------------------------------------------
Net-interest income 38,981 35,830 29,472 28,831 25,168
Provision for possible loan losses 530 730 1,098 2,572 2,610
Other income 6,702 5,675 4,730 4,060 3,169
Other expense 30,135 27,752 21,345 19,788 18,090
- ----------------------------------------------------------------------------------------------------------------------------------
Net operating expense 23,433 22,077 16,615 15,728 14,921
Income before income taxes and cumulative effect
of change in accounting principle 15,018 13,023 11,759 10,531 7,637
Provision for income taxes 5,929 4,705 4,070 3,858 2,576
- ----------------------------------------------------------------------------------------------------------------------------------
Income before cumulative effect of change in
accounting for income taxes 9,089 8,318 7,689 6,673 5,061
Cumulative effect of change
in accounting for income taxes - - 624 - -
- ----------------------------------------------------------------------------------------------------------------------------------
Net income $ 9,089 $ 8,318 $ 8,313 $ 6,673 $ 5,061
==================================================================================================================================
BALANCE AT DECEMBER 31,
Federal funds sold $ 32,500 $ - $ - $ 27,600 $ 40,400
Investment securities-available for sale 137,043 68,261 - - -
Investment securities-held to maturity 44,923 126,380 194,391 166,946 136,113
- ----------------------------------------------------------------------------------------------------------------------------------
Total investment securities 181,966 194,641 194,391 166,946 136,113
Net loans 510,015 529,075 406,740 369,005 360,074
Total assets 805,794 811,654 642,359 599,418 574,042
Total deposits 727,060 723,993 568,768 538,604 517,551
Other borrowings - - 6,500 - -
Stockholders' equity $ 70,046 $ 77,093 $ 63,284 $ 57,105 $ 52,268
- ----------------------------------------------------------------------------------------------------------------------------------
SELECTED FINANCIAL RATIOS:
Performance:
Return on average equity 11.56% 11.50% 13.78% 12.19% 10.02%
Return on average assets 1.15 1.11 1.35 1.13 0.93
Net interest margin (taxable equivalent) 5.49 5.34 5.31 5.43 5.28
Average equity to average assets 9.91 9.68 9.79 9.24 9.27
Dividend pay-out ratio 36.83 31.61 27.32 29.40 37.16
Asset Quality:
Non-performing assets to total loans 1.33 1.70 (2) 1.26 1.84 1.40
Non-performing assets to total assets 0.85 1.11 (2) 0.80 1.13 0.88
Allowance to non-accrual loans and 90+ 77.38 77.39 92.73 71.62 52.50
Allowance to loans, net of discounts 1.15 1.16 1.20 1.27 1.06
Net charge-offs to average loans 0.16% 0.23% 0.24% 0.48% 0.46%
- ----------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA: (4)
Income before cumulative effect of change in
accounting principle $ 2.43 $ 2.25 $ 2.27 $ 1.97 $ 1.51
Cumulative effect of change in accounting principle - - 0.18 - -
Net income 2.43 2.25 (3) 2.45 1.97 1.51
Cash dividends 0.90 0.71 0.68 0.60 0.56
Book value at year-end 20.55 20.29 18.63 16.85 15.51
Highest market value 37.50 28.50 25.00 20.00 11.00
Lowest market value $ 26.00 $ 21.00 $ 19.00 $ 9.00 $ 7.75
- ----------------------------------------------------------------------------------------------------------------------------------
Number of full-time-equivalent employees at year-end 400 426 322 307 297
Number of branch offices at year-end 22 21 13 13 13
Number of automatic teller machines 15 14 8 5 4
==================================================================================================================================
(1) The information for 1994 reflects the acquisition of Hamptons on April 11,
1994.
(2) Includes $2,128,000 of non-performing loans and $1,222,000 of other real
estate acquired from Hamptons.
(3) Reflects issuance of 402,109 shares in acquisition of Hamptons.
(4) Per share data is based on average shares outstanding of 3,739,470 in 1995,
3,692,286 in 1994, 3,391,149 in 1993, 3,387,198 in 1992, and 3,358,228 in
1991.
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
The Company's common stock is traded in the over-the-counter market, and is
quoted on the NASDAQ National Market System under the symbol "SUBK." Following
are the quarterly high and low prices of the Company's common stock. Prices are
as reported by NASDAQ.
- ----------------------------------------------------------------------------------------------------------------------------------
1995 High Low Dividends 1994 High Low Dividends
- ----------------------------------------------------------------------------------------------------------------------------------
First quarter $ 29.00 $ 26.00 $ 0.20 First quarter $ 24.00 $ 21.50 $ 0.17
Second quarter 33.25 26.50 0.20 Second quarter 23.50 21.00 0.17
Third quarter 36.75 32.00 0.20 Third quarter 27.50 22.00 0.18
Fourth quarter 37.50 32.50 0.30 Fourth quarter 28.50 26.00 0.19
==================================================================================================================================
The Company declares regular quarterly cash dividends, payable on the first
business day of each fiscal quarter.
4
6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The discussion which follows provides an analysis of Suffolk Bancorp's (the
"Company" or "Suffolk") results of operations for each of the past three years,
and its financial condition as of December 31, 1995 and 1994, respectively.
Selected tabular data are presented for each of the past five years.
THE COMPANY'S BUSINESS
Nearly all of the Company's business is providing banking services to its
commercial and retail customers in Suffolk County, on Long Island, New York. The
Company is a one-bank holding company which banking subsidiary, The Suffolk
County National Bank (the "Bank"), operates 22 full-service offices in the
eastern half of Suffolk County. It offers a full line of domestic, retail, and
commercial banking services, including trust services. The Bank's primary
lending area includes all of Suffolk County, New York. The Bank also makes loans
for automobiles in Nassau County, New York.
The Bank serves as an indirect lender to the customers of many automobile
dealers in its service area. The Bank also lends to small manufacturers,
wholesalers, builders, farmers and retailers, and finances dealers' inventory.
The Bank also makes loans secured by real estate, including residential
mortgages, of which most are sold to mortgage investors; real estate
construction loans; and loans which are secured by commercial real estate and
which float with the prime rate, or which have relatively short terms and are
retained in the Bank's portfolio. The Bank offers both fixed and floating rate
second mortgage loans with a variety of repayment plans.
Other investments are made in short-term United States Treasury debt, high
quality obligations of municipalities in New York State, issues of agencies of
the United States Government, and high-quality corporate bonds.
The Bank finances most of its activities with deposits which include demand,
savings, N.O.W., and money market accounts, as well as term certificates. To a
much lesser degree, it relies on other short-term sources of funds, including
sale-repurchase agreements, and when needed, interbank overnight loans.
The Company is also the sole owner of Island Computer Corporation of New York,
Inc. ("Island Computer"), a financial data-processing service company located in
Bohemia, New York. Approximately 93 percent of the ongoing business of Island
Computer is providing services to The Suffolk County National Bank.
GENERAL ECONOMIC CONDITIONS
Growth in Long Island's economy was slow but sustained in 1995. Increased demand
for finance, information, transportation and tourism were offset by layoffs
resulting from corporate consolidations and down-sizing. Long Island has a
highly educated and skilled work force, and a diverse industrial base. It is
adjacent to New York City, one of the world's largest centers of distribution
and a magnet for finance and culture. The island's economic cycles vary from
those of the national economy. During 1995, interest rates were comparatively
stable declining slightly towards year-end.
RESULTS OF OPERATIONS
NET INCOME
Net income was $9,089,000 compared to $8,318,000 last year and $8,313,000 in
1993. This represents an increase of 9.27 percent in 1995 after a slight
increase in 1994. Earnings-per-share were $2.43 compared to $2.25 last year and
$2.45 in 1993. Earnings per share for 1993 included a $ .18 benefit from the
cumulative effect of a change in accounting principle.
NET-INTEREST INCOME
Net-interest income during 1995 was $38,981,000, up from $35,830,000 and
$29,472,000 in 1994 and 1993, respectively. These represent increases of 8.80
percent and 21.6 percent, respectively. Net-interest income is the most
important part of the net income of the Company.
The effective-interest-rate-differential, on a taxable-equivalent basis, was
5.49 percent during 1995, up from 5.34 percent in 1994, which was up from 5.31
percent in 1993. Average rates on average interest-earning assets increased to
8.30 percent in 1995 from 7.62 percent in 1994. Average rates on average
interest-bearing liabilities increased from 2.93 percent to 3.65 percent in
1995. These resulted in a 0.15 percent increase in the interest rate
differential from 1994 to 1995, compared to a 0.03 percent increase from 1993 to
1994. Core deposits did not reprice upward as quickly as did assets.
5
7
AVERAGE ASSETS, LIABILITIES, AND STOCKHOLDERS' EQUITY,
RATE SPREAD, AND EFFECTIVE INTEREST RATE DIFFERENTIAL
(ON A TAXABLE-EQUIVALENT BASIS)
The following table illustrates the average composition of the Company's
statements of condition. It presents an analysis of net-interest income on a
taxable-equivalent basis, listing each major category of interest-earning assets
and interest-bearing liabilities, as well as other assets and liabilities:
(dollars in thousands)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------------
Average Average Average Average Average Average
Balance Interest Rate Balance Interest Rate Balance Interest Rate
- -----------------------------------------------------------------------------------------------------------------------------------
INTEREST-EARNING ASSETS
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. treasury securities $115,606 $ 6,482 5.61% $123,864 $ 5,520 4.46% $122,175 $ 5,354 4.38%
Obligations of states &
political subdivisions 25,404 1,892 7.45 37,004 2,561 6.92 41,663 3,095 7.43
U.S. govt. agency obligations 30,734 2,052 6.68 24,854 1,610 6.48 1,912 99 5.18
Corporate bonds & other securities 638 38 5.96 665 49 7.37 934 70 7.49
Federal funds sold & securities purchased
under agreements to resell 31,805 1,839 5.78 15,771 663 4.20 27,870 852 3.06
Loans, including non-accrual loans 519,602 47,783 9.20 487,297 42,145 8.65 381,884 35,691 9.35
- -----------------------------------------------------------------------------------------------------------------------------------
Total interest-earning assets $723,789 $ 60,086 8.30% $689,455 $ 52,548 7.62% $576,438 $ 45,161 7.83%
===================================================================================================================================
Cash & due from banks $ 37,806 $ 25,319 $ 25,319
Other non-interest-earning assets 31,596 32,671 14,494
- -----------------------------------------------------------------------------------------------------------------------------------
Total assets $793,191 $747,445 $616,251
- -----------------------------------------------------------------------------------------------------------------------------------
INTEREST-BEARING LIABILITIES
- -----------------------------------------------------------------------------------------------------------------------------------
Savings, N.O.W.'s &
money market deposits $337,550 $ 8,462 2.51% $373,690 $ 8,949 2.39% $303,364 $ 7,815 2.58%
Time deposits 206,801 11,098 5.37 155,278 6,430 4.14 158,071 6,705 4.24
- -----------------------------------------------------------------------------------------------------------------------------------
Total savings & time deposits 544,351 19,560 3.59 528,968 15,379 2.91 461,435 14,520 3.15
Federal funds purchased & securities
sold under agreements to repurchase 11,140 674 6.05 3,861 171 4.43 125 4 3.20
Other borrowings 72 2 2.78 2,132 81 3.80 18 1 5.56
Mortgages 748 95 12.70 1,446 103 7.12 - - -
- -----------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities $556,311 $ 20,331 3.65% $536,407 $ 15,734 2.93% $461,578 $ 14,525 3.15%
===================================================================================================================================
Rate spread 4.65% 4.69% 4.68%
Non-interest-bearing deposits $152,278 $135,593 $ 90,564
Other non-interest-bearing liabilities 6,000 3,097 3,767
- -----------------------------------------------------------------------------------------------------------------------------------
Total liabilities $714,589 $675,097 $555,909
Stockholders' equity 78,602 72,348 60,342
- -----------------------------------------------------------------------------------------------------------------------------------
Total liabilities & stockholders' equity $793,191 $747,445 $616,251
Net-interest income (tax equivalent basis)
& effective interest rate differential $ 39,755 5.49% $ 36,814 5.34% $ 30,636 5.31%
Less: taxable-equivalent basis adjustment (774) (984) (1,164)
- -----------------------------------------------------------------------------------------------------------------------------------
Net-interest income $ 38,981 $ 35,830 $ 29,472
===================================================================================================================================
Interest income on a taxable-equivalent basis includes the additional amount of
interest income that would have been earned had the Bank's investment in
non-taxable U.S. Treasury Securities and state and municipal obligations had
been subject to New York State and Federal income taxes yielding the same
after-tax income. The rate used for this adjustment was approximately 34.0% for
federal income taxes and 9.0% for New York State income taxes for all periods.
For each of the years 1995, 1994 and 1993, $1.00 of non-taxable income from
obligations of states and political subdivisions equates to fully taxable income
of $1.52. In addition, in 1995, 1994 and 1993, $1.00 of non-taxable income on
U.S. Treasury securities equates to $1.02 of fully taxable income.
Amortization of loan fees are included in interest income.
ANALYSIS OF CHANGES IN NET-INTEREST INCOME
The table on the next page represents a summary analysis of changes in interest
income, interest expense and the resulting net-interest income on a
taxable-equivalent basis for the periods presented, each as compared with the
preceding period. Because of the numerous simultaneous changes in volume and
rate during the period, it is not possible to allocate precisely the changes
between volumes and rates. For purposes of this table, changes which are not due
solely to volume or to rate have been allocated to these categories based on the
respective percentage changes in average volume and average rate as they compare
to each other: (in thousands)
6
8
- ----------------------------------------------------------------------------------------------------------------------------
1995 OVER 1994 1994 OVER 1993
- ----------------------------------------------------------------------------------------------------------------------------
Changes due to Changes due to
Volume Rate Net Change Volume Rate Net Change
- ----------------------------------------------------------------------------------------------------------------------------
INTEREST-EARNING ASSETS
- ----------------------------------------------------------------------------------------------------------------------------
U.S. treasury securities $ (388) $1,350 $ 962 $ 75 $ 91 $ 166
Obligations of states & political subdivisions (853) 184 (669) (331) (203) (534)
U.S. govt. agency obligations 391 51 442 1,480 31 1,511
Corporate bonds & other securities (2) (9) (11) (20) (1) (21)
Federal funds sold & securities purchased
under agreements to resell 859 317 1,176 (444) 255 (189)
Loans, including non-accrual loans 2,884 2,754 5,638 9,273 (2,819) 6,454
- ----------------------------------------------------------------------------------------------------------------------------
Total interest-earning assets $2,891 $4,647 $7,538 $10,033 $(2,646) $ 7,387
- ----------------------------------------------------------------------------------------------------------------------------
INTEREST-BEARING LIABILITIES
- ----------------------------------------------------------------------------------------------------------------------------
Savings, N.O.W.'s & money market deposits $ (893) $ 406 $ (487) $ 1,690 $ (556) $ 1,134
Time deposits 2,467 2,201 4,668 (117) (158) (275)
Federal funds purchased & securities sold
under agreements to repurchase 421 82 503 165 2 167
Other borrowings (62) (17) (79) 81 (1) 80
Mortgages (65) 57 (8) 103 - 103
- ----------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities $1,868 $2,729 $4,597 $ 1,922 $ (713) $ 1,209
- ----------------------------------------------------------------------------------------------------------------------------
Net change in net-interest income
(taxable-equivalent basis) $1,023 $1,918 $2,941 $ 8,111 $(1,933) $ 6,178
============================================================================================================================
The table above includes the effect of the acquisition of Hamptons as of April
11, 1994.
INTEREST INCOME
Interest income increased to $59,312,000 in 1995 from $51,564,000 in 1994 an
increase of 15.0 percent, which was up 17.2 percent from $43,997,000 in 1993.
The increase in 1995 was attributable to higher average loan balances and rates,
and higher rates on investments.
INVESTMENT SECURITIES
Average investment in U.S. Treasury securities decreased to $115,606,000 in 1995
from $123,864,000 in 1994, a decrease of 6.7 percent. These securities are the
primary source of the Company's liquidity. Holdings of municipal securities have
decreased because yields, even on a taxable-equivalent basis, have become less
attractive during 1995 as changes in the income tax code for individuals made it
possible for them to underbid corporate investors. U.S. Treasury and municipal
securities provide collateral for various liabilities to municipal depositors.
The Company currently holds no investment in derivative products.
On November 15, 1995, the FASB issued a special report entitled, "A Guide to
Implementation of Statement No. 115 on Accounting for Certain Investments in
Debt and Equity Securities, Questions and Answers" ("the Guide"). The Guide
permitted a one-time reassessment and reclassification from the
"held-to-maturity" category (no later than December 31, 1995) that will not call
into question the intent of the enterprise to hold other debt securities to
maturity in the future. In December 1995, the Company reassessed its investment
and mortgage-backed securities portfolio and reclassified approximately $16
million of investment securities as available-for-sale. The effect upon the
Company's financial condition resulting from this transfer was not material.
This transfer had no effect on the Company's results from operations.
The following table summarizes the carrying amounts of the Company's Investment
Securities available for sale and held to maturity as of the dates indicated:
(in thousands)
- -----------------------------------------------------------------------------------------------------
Year Ended December 31, 1995 1994 1993
- -----------------------------------------------------------------------------------------------------
Investment securities available for sale, at fair value:
U.S. treasury securities $121,168 $ 68,261 -
U.S. government agency debt securities 15,875 - -
- -----------------------------------------------------------------------------------------------------
Total investment securities available for sale 137,043 68,261
- -----------------------------------------------------------------------------------------------------
Investment securities held to maturity:
U.S. treasury securities 12,053 57,091 $149,999
Obligations of states & political subdivisions 18,140 36,780 42,025
U.S. govt. agency obligations 14,092 31,871 1,176
Corporate bonds & other securities 638 638 1,191
- -----------------------------------------------------------------------------------------------------
Total investment securities held to maturity 44,923 126,380 194,391
- -----------------------------------------------------------------------------------------------------
Total investment securities $181,966 $194,641 $194,391
=====================================================================================================
Fair value of investment securities held to maturity $ 45,451 $123,096 $195,532
Unrealized gains 662 228 1,298
Unrealized losses 134 3,512 157
=====================================================================================================
7
9
The amortized cost, maturities and approximate weighted average yields, on a
taxable-equivalent basis, at December 31, 1995 are as follows: (in thousands)
- --------------------------------------------------------------
Available for Sale
- --------------------------------------------------------------
U.S.
U.S. Treasury Govt. Agency
Securities Debt.
- --------------------------------------------------------------
Amortized Amortized
Maturity (in years) Cost Yield Cost Yield
- --------------------------------------------------------------
Within 1 $105,307 5.70% $ - -
After 1 but within 5 15,109 6.85% 7,023 6.52%
After 5 but within 10 - - 8,421 7.89%
Other securities (FRB) - - - -
- --------------------------------------------------------------
Total $120,416 5.85% $15,444 6.83%
==============================================================
- -----------------------------------------------------------------------------------------------------------------
----------------------------------Held To Maturity------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Obligations of U.S. Corporate Total
U.S. Treasury States & Political Govt. Agency Bonds & Amortized
Securities Subdivisions Obligations Other Securities Cost
- -----------------------------------------------------------------------------------------------------------------
Amortized Amortized Amortized Amortized
Maturity (in years) Cost Yield Value Yield Cost Yield Cost Yield
- -----------------------------------------------------------------------------------------------------------------
Within 1 $ 3,994 4.64% $13,975 6.97% $ 136 5.75% $ - - $123,412
After 1 but within 5 8,059 5.46% 2,415 9.58% 13,956 6.68% - - 46,562
After 5 but within 10 - - 1,750 7.98% - - - - 10,171
Other securities (FRB) - - - - - - 638 6.00% 638
- -----------------------------------------------------------------------------------------------------------------
Total $12,053 5.46% $18,140 7.42% $14,092 6.67% $638 6.00% $180,783
=================================================================================================================
As a member of the Federal Reserve System, the Bank owns Federal Reserve Bank
stock with a book value of $638,000. An equity investment, the stock has no
maturity. There is no public market for this investment. The last declared
dividend was 6%.
LOAN PORTFOLIO
Consumer loans, net of unearned discounts, totaled $245,317,000 at year-end
1995, down 9.0 percent from $269,725,000 at the end of 1994. Consumer loans are
composed primarily of indirect, dealer-generated automobile loans. Competition
for these loans is intense on Long Island, both among commercial banks, and with
captive finance companies of automobile manufacturers. This has resulted in
lower rates.
Commercial loans totaling $78,730,000 at year-end 1995 were up 10.2 percent from
$71,414,000 at year-end 1994. These loans continue to be made to small local
businesses throughout the Company's primary lending area. Loan balances are
seasonal, particularly in the Hamptons where retail inventories rise in the
spring and are reduced by autumn.
Commercial and residential real estate mortgages, including home equity loans
have decreased to $189,802,000 in 1995 from $190,111,000 in 1994.
The following table categorizes the Company's total loans (net of unearned
discounts) at December 31,: (in thousands)
- -------------------------------------------------------------------------------------------------------------------------
CATEGORY 1995 1994 1993 1992 1991
- -------------------------------------------------------------------------------------------------------------------------
Commercial, financial & agricultural loans $ 78,730 $ 71,414 $ 52,103 $ 45,030 $ 41,435
Commercial real estate mortgages 99,940 104,548 65,738 59,250 49,365
Real estate - construction loans 7,946 8,018 5,327 6,294 4,883
Residential mortgages (1st and 2nd liens) 55,047 50,011 33,489 34,558 31,782
Home equity loans 26,869 27,534 18,440 19,900 21,843
Consumer loans 245,317 269,725 236,043 207,211 205,855
Lease finance 311 743 - - -
Other loans 1,778 3,296 522 1,492 8,782
- -------------------------------------------------------------------------------------------------------------------------
Total loans (net of unearned discounts) $515,938 $535,289 $411,662 $373,735 $363,945
=========================================================================================================================
The following table illustrates the sensitivity to changes in interest rates of
the Company's total loans, net of discounts, not including overdrafts and loans
not accruing interest, together totaling approximately $6,849,000 at December
31, 1995: (in thousands)
- ------------------------------------------------------------------------------------------
After 1 But After
Within 5 Years 5 Years Total
- ------------------------------------------------------------------------------------------
Predetermined rates $212,089 $26,021 $238,110
Floating or adjustable rates 15,328 2,342 17,670
- ------------------------------------------------------------------------------------------
Total $227,417 $28,363 $255,780
==========================================================================================
The following table illustrates the sensitivity to changes in interest rates on
the Company's commercial, financial and agricultrual; and real estate
construction loans not including non-accrual loans totaling approximately
$2,786,000 at December 31, 1995: (in thousands)
- -------------------------------------------------------------------------------------------------------------
Due Within After 1 But After
1 year Before 5 Years 5 Years Total
- -------------------------------------------------------------------------------------------------------------
Commercial, financial & agricultural $72,394 $1,917 $1,743 $76,054
Real estate construction 5,756 1,006 1,074 7,836
- -------------------------------------------------------------------------------------------------------------
Total $78,150 $2,923 $2,817 $83,890
=============================================================================================================
8
10
The following table shows the Company's non-accrual, past due and restructured
loans, at December 31,: (in thousands)
- --------------------------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------------------------------------------------------
Accruing loans which are
contractually past due 90 days or more $2,584 $2,015 $ 871 $1,372 $2,441
Loans not accruing interest 5,071 6,014 4,437 5,175 4,054
Restructured loans 532 372 51 744 878
- --------------------------------------------------------------------------------------------------------------------------------
Total $8,187 $8,401 $5,359 $7,291 $7,373
================================================================================================================================
Interest on loans which have been restructured or are no longer accruing
interest would have amounted to $415,000 for 1995 under the contractual terms of
those loans. The Company records the payment of interest on such loans as a
reduction of principal. Interest income recognized on restructured and
non-accrual loans was immaterial for the year 1995.
The percentage of net charge-offs to average net loans during 1995 was 0.16
percent, compared to 0.23 percent during 1994 and 0.24 percent during 1993. The
ratio of the allowance for possible loan losses to loans, net of discount was
1.15 percent during 1995, compared to 1.16 percent in 1994 and 1.20 percent in
1993. The Company has a formal policy for internal credit review to more
precisely identify risk and exposure in the loan portfolio.
Generally, recognition of interest income is discontinued where reasonable doubt
exists as to whether interest can be collected. Ordinarily, loans no longer
accrue interest when ninety days past due. When a loan is placed on non-accrual
status, all interest accrued previously in the current year, but not collected,
is reversed against interest income in the current year. Any interest accrued in
prior years is charged against the allowance for possible loan losses. Loans are
removed from non-accrual status when they become current as to principal and
interest, and when, in the opinion of management, the loans can be collected in
full. There were no loans of a material amount which have become problems that
are not reflected in the foregoing tables.
SUMMARY OF LOAN LOSS EXPERIENCE AND ALLOWANCE FOR POSSIBLE LOAN LOSSES
The allowance is evaluated continually by management. In making provisions for
loan losses, recent loan charge-offs, loans requiring special attention (whether
or not 90 days past due, not accruing interest, or restructured), and other
information available are considered. In evaluating the Bank's allowance for
loan losses, management principally considers the historical losses, the
borrowers' ability to repay, the value of any collateral, and the economy. In
evaluating real estate mortgage collateral, principally for classified loans,
the Bank considers current real estate values, the condition of the real estate,
and the possibility of environmental contamination near or on the mortgaged
property. Environmental audits were begun in 1990, and the scope of these audits
has been increased since. The Bank's current policy requires an environmental
audit on virtually all commercial properties being considered for a mortgage. In
addition, management considers the examination of loans by regulatory
authorities, internal reviews and other evaluations. The Company allocates the
allowance in proportion to the risk identified in each category of loans.
Transactions in the Allowance for Possible Loan Losses are made in seven major
loan categories. The summary of such transactions for periods indicated follows:
(in thousands)
- ---------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1995 1994 1993 1992 1991
- ---------------------------------------------------------------------------------------------------------------
Allowance for possible loan losses, January 1, $6,214 $4,922 $4,730 $3,871 $2,873
Allowance acquired from Hamptons - 1,678 -
Loans charged-off:
Commercial, financial & agricultural loans 346 869 440 623 479
Commercial real estate mortgages 271 8 - 244 -
Real estate - construction loans - - - - -
Residential mortgages (1st & 2nd liens) - - - - 52
Home equity loans 28 80 - 50 -
Consumer loans 539 511 678 1,022 1,329
Lease finance - - - - -
Other loans - - 49 - -
- ---------------------------------------------------------------------------------------------------------------
Total charge-offs 1,184 1,468 1,167 1,939 1,860
- ---------------------------------------------------------------------------------------------------------------
Recoveries of charged-off loans:
Commercial, financial & agricultural loans 89 72 14 11 54
Commercial real estate mortgages 16 - - - -
Real estate - construction loans - 11 - - -
Residential mortgages (1st & 2nd liens) - - - - -
Home equity loans - - - - -
Consumer loans 258 269 247 215 194
Lease finance - - - - -
Other loans - - - - -
- ---------------------------------------------------------------------------------------------------------------
Total recoveries 363 352 261 226 248
Net loans charged-off 821 1,116 906 1,713 1,612
Provisions for possible loan losses 530 730 1,098 2,572 2,610
- ---------------------------------------------------------------------------------------------------------------
Balance, December 31, $5,923 $6,214 $4,922 $4,730 $3,871
===============================================================================================================
9
11
The distribution of the Allowance for Possible Loan Losses, and the percentage
of the total allowance, by category at end of period, is listed in the following
table. The distribution is proportionate to the risk identified in each
category: (dollars in thousands)
- --------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1995 % 1994 % 1993 % 1992 % 1991 %
- --------------------------------------------------------------------------------------------------------------------------------
Commercial, financial & agricultural loans $1,816 30.7 $1,988 32.0 $1,581 32.1 $1,557 32.9 $1,552 40.1
Commercial real estate mortgages 2,230 37.6 2,212 35.6 1,707 34.7 1,383 29.3 992 25.6
Real estate - construction loans 18 0.3 80 1.3 1 0.0 - - - -
Residential mortgages (1st & 2nd liens) 369 6.2 449 7.2 155 3.1 147 3.1 108 2.8
Home equity loans 292 4.9 200 3.2 254 5.2 223 4.7 204 5.3
Consumer loans 1,164 19.7 1,243 20.0 1,191 24.2 1,396 29.5 1,003 25.9
Other loans 34 0.6 42 0.7 34 0.7 24 0.5 12 0.3
- --------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, $5,923 100.0 $6,214 100.0 $4,922 100.0 $4,730 100.0 $3,871 100.0
================================================================================================================================
The following table presents information concerning loan balances and asset
quality: (dollars in thousands)
- ----------------------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1995 1994 1993 1992 1991
- ----------------------------------------------------------------------------------------------------------------------------
Loans, net of discounts:
Average net loans $520,139 $487,297 $381,884 $358,093 $347,286
Net loans at end of period $515,938 $535,289 $411,662 $369,005 $360,074
- ----------------------------------------------------------------------------------------------------------------------------
Non-performing assets to total loans (net of discounts) 1.33% 1.70% 1.26% 1.84% 1.40%
Non-performing assets to total assets 0.85 1.11 0.80 1.13 0.88
Ratio of net charge-offs to average net loans 0.16 0.23 0.24 0.48 0.46
Net charge-offs to net loans at December 31, 0.16 0.21 0.22 0.46 0.45
Allowance for possible loan losses
to loans, net of discounts 1.15 1.16 1.20 1.27% 1.06
============================================================================================================================
The disparity between average net loans and net loans at December 31, 1994 is
largely attributable to the acquisition of the loan portfolio of Hamptons during
the second quarter.
INTEREST EXPENSE
Interest expense for 1995 was $20,331,000, up 29.2 percent from $15,734,000
during 1994, which was up 8.3 percent from $14,525,000 in 1993. The largest part
of the Company's interest expense was incurred for deposits of individuals,
commercial enterprises, and various levels of government and governmental
agencies. Short-term borrowings, including Federal Funds Purchased (inter-bank
short-term lending), Securities Sold Under Agreements to Repurchase, and Federal
Reserve Bank Borrowings are utilized at various times throughout the year. These
borrowings averaged $11,212,000 during 1995, $5,993,000 in 1994 and were minimal
during 1993.
DEPOSITS
Average interest-bearing deposits increased to $544,351,000 in 1995 from
$528,968,000 in 1994. Traditional savings deposits decreased during 1995,
averaging $196,587,000, down 12.7 percent from $225,142,000 in 1994. Average
balances of time certificates under $100,000, increased to $178,481,000 in 1995,
up from $139,675,000 in 1994, an increase of 27.8 percent. Average balances of
money market deposits of $81,615,000 were 11.7 percent of average total deposits
during 1995. Average balances of time certificates of $100,000 or more were
$28,320,000, up 81.5 percent from $15,603,000 during 1994.
The following table shows the classification of the average deposits of the
Company for each of the periods indicated: (dollars in thousands)
- ----------------------------------------------------------------------------------------------------------------------------
1995 1994 1993
- ----------------------------------------------------------------------------------------------------------------------------
Average Average Average
Rates Paid Rates Paid Rates Paid
- ----------------------------------------------------------------------------------------------------------------------------
Demand deposits $152,278 - $135,593 - $ 90,564 -
Savings deposits 196,587 2.80% 225,142 2.67% 184,185 2.84%
N.O.W. & money market deposits 140,963 2.10 148,548 1.98 119,179 2.16
Time certificates of $100,000 or more 28,320 3.48 15,603 2.55 13,731 2.49
Other time deposits 178,481 5.67 139,675 4.32 144,340 4.41
- ----------------------------------------------------------------------------------------------------------------------------
Total deposits $696,629 $664,561 $551,999
============================================================================================================================
10
12
At December 31, 1995, the remaining maturities of the Company's time
certificates of $100,000 or more were as follows: (in thousands)
- ---------------------------------------------------------------------------
3 months or less $12,855
Over 3 through 6 months 3,843
Over 6 through 12 months 5,215
Over 12 months 5,864
- ---------------------------------------------------------------------------
Total $27,777
===========================================================================
SHORT TERM BORROWINGS
The Company uses several types of short-term funding intermittently. These
include lines of credit for federal funds with correspondent banks, retail
sale-repurchase agreements and the Federal Reserve Bank discount window. Average
balances of federal funds purchased were $1,389,000 and $3,861,000 for 1995 and
1994 respectively. Average balances of Federal Reserve Bank borrowings during
1995 were $72,000 and $351,000 for 1994. Retail repurchase agreements averaged
$9,751,000 and $1,781,000 in 1995 and 1994, respectively.
OTHER INCOME
Other income increased to $6,947,000 during 1995, up 22.4 percent from
$5,675,000 in 1994, which was up 20.0 percent from $4,730,000 in 1993. Service
charges on deposit accounts were up 24.0 percent from 1994 to 1995, and 34.0
percent from 1993 to 1994. Other service charges were up 14.7 percent and 31.3
percent for the same periods.
OTHER EXPENSE
Other expense during 1995 was $30,380,000, up 9.47 percent from $27,752,000 in
1994, which was up 30.0 percent from $21,345,000 during 1993. FDIC assessments
decreased from $1,407,000 in 1994, to $811,000 in 1995. FDIC assessments were
$1,203,000 in 1993.
INTEREST RATE SENSITIVITY
Interest-rate sensitivity is determined by the date when each asset and
liability in the Company's portfolio of assets and liabilities can be repriced.
Sensitivity increases when the interest-earning assets and interest-bearing
liabilities cannot be repriced at the same time. While this analysis presents
the quantity of assets and liabilities repricing in each time period, it does
not consider how quickly various assets and liabilities might actually be
repriced in response to changes in interest rates. Management reviews its
asset/liability strategy regularly. Given differing sensitivities to the various
interest rates of its assets and liabilities, management may selectively
mismatch the repricing of assets and liabilities to take advantage of temporary
or projected differences in interest rates. The following table reflects the
sensitivity of the Company's consolidated statement of condition at December 31,
1995: (dollars in thousands)
- --------------------------------------------------------------------------------------------------------------------------------
0 - 90 91 - 180 181 - 360 Over One Not Rate
MATURITY Days Days Days Year Sensitive Total
================================================================================================================================
INTEREST-EARNING ASSETS
================================================================================================================================
Domestic Loans (1) (Net of unearned discount) $131,502 $ 49,012 $ 74,431 $ 250,698 $28,352 $533,995
Investment Securities (2) 31,261 41,781 50,370 56,733 638 180,783
Federal Funds Sold (3) 32,500 32,500
================================================================================================================================
Total Interest-Earning Assets $195,263 $ 90,793 $124,801 $ 307,431 $28,990 $747,278
================================================================================================================================
DEMAND DEPOSITS AND INTEREST-BEARING LIABILITIES
================================================================================================================================
Demand Deposits (4) $ 15,031 $ 15,031 $ 30,063 $ 91,707$ 175 $152,007
N.O.W. & Money Market Accounts (5) 6,121 6,121 12,242 138,260 0 162,744
Interest-Bearing Deposits (6) 55,184 42,132 73,859 241,134 0 412,309
================================================================================================================================
Total Demand Deposits and Interest-Bearing Liabilities $ 76,336 $ 63,284 $116,164 $471,101 $ 175 $727,060
================================================================================================================================
Gap $118,927 $ 27,509 $ 8,637 $(163,670) $28,815 $ 20,218
================================================================================================================================
Cumulative Difference Between Interest-Earning
Assets and Interest-Bearing Liabilities $118,927 $146,436 $155,073 $ (8,597) $20,218
================================================================================================================================
Cumulative Difference as a Percentage of Total Assets 14.76% 18.17% 19.24% (1.07%) 2.51%
================================================================================================================================
(1) Based upon contractual maturity, instrument repricing date, if applicable,
projected prepayments and prepayments of principal, based upon experience.
Non-accrual loans, loans in the process of renewal and potential
charge-offs were classified as not rate sensitive.
(2) Based upon contractual maturity, projected prepayments and prepayments of
principal, based upon experience. FRB stock is not considered rate
sensitive.
(3) Based upon contractual maturity.
(4) Based upon experience of historical stable core deposit relationships.
(5) N.O.W. and Money Market Accounts are assumed to decline over a period of
two years.
(6) Fixed rate deposits and deposits with fixed pricing intervals are reflected
as maturing in the period of contractual maturity. Savings accounts are
assumed to decline over a period of five years.
11
13
As of December 31, 1995, the volume of interest-earning assets with maturities
of less than one year exceeded interest-bearing liabilities of similar maturity.
This cumulative gap might result in increased net interest margin if interest
rates increase. If interest rates decline, a narrowing of the net interest
margin could result.
ASSET/LIABILITY MANAGEMENT & LIQUIDITY
The asset/liability management committee (the "committee") reviews the financial
performance of the Company under the asset/liability management policy. The
committee is composed of two outside directors, executive management, the
comptroller, and the heads of commercial lending, retail lending, and retail
banking. It uses computer simulations of financial performance under changing
interest rates to quantify interest-rate risk and project liquidity. The
simulations also help in developing alternative strategies to increase the
Company's net-interest margin. The committee always assesses the impact of any
change in strategy on the Company's ability to make loans and repay deposits.
While managing financial risk, only strategies and policies which meet
regulatory guidelines and are appropriate under the economic and competitive
conditions in the Company's market are considered by the committee. The Company
has not used forward contracts or interest rate swaps to manage interest-rate
risk.
Liquidity is the Company's ability to meet anticipated loan demand and
withdrawals of deposits. It is ensured by assets which can be converted quickly
into cash. These liquid assets must be of a short term to minimize the risk to
principal from changing interest rates. The committee anticipates cash flows for
the coming three months and suggests actions to ensure liquidity. Thus, the
Company has sufficient cash flow under normal operations, and is aware of
potential sources of liquidity to meet the demand for loans and withdrawals of
deposits.
BUSINESS RISKS AND UNCERTAINTIES
The Bank's principal investments are loans and a portfolio of short and medium
term debt of the United States Treasury, states and other political
subdivisions, U.S. Government agencies, and corporations.
Consumer loans, net of unearned discounts, comprised 47.5 percent of the Bank's
loan portfolio, more than 89 percent of which are indirect dealer-generated
loans secured by automobiles. Most of these loans are made to residents of the
Bank's primary lending area.. Each loan is small in amount, and borrowers
represent a cross-section of the population employed in a variety of industries.
The risk presented by any one loan is correspondingly small, and therefore, the
risk which this portion of the portfolio presents to the Company is dependent
upon the financial stability of the population as a whole, and is not dependent
on any one entity or industry.
Loans secured by real estate represented 36.8 percent of the portfolio, 53
percent of which are for commercial real estate. Loans of this variety present
somewhat greater risk than consumer loans, particularly in the current economy.
The Company has attempted to minimize the risks of these loans by considering
several factors, including the creditworthiness of the borrower, the location,
condition, and value, as well as the business prospects for the security
property.
Commercial, financial, and agricultural loans, unsecured or secured by
collateral other than real estate, comprise 15.3 percent of the loan portfolio.
These loans present significantly greater risk than other types of loans.
Average credits are greater in size than consumer loans, and unsecured loans may
be more difficult to collect. The Company obtains, whenever possible, the
personal guarantees of the principal(s), and cross-guarantees among the
principals' business enterprises.
U.S. Treasury securities represented 73.2 percent of the investment portfolio
and offer little or no financial risk. Municipal obligations constitute 10.0
percent of the investment portfolio. These obligations present slightly greater
risk than U.S. Treasury securities, but significantly less risk than loans
because they are backed by the full faith and taxing power of the municipal
entity, each of which is located in the state of New York. The Company's policy
is to hold these securities to maturity, which eliminates the risk to principal
caused by fluctuations in interest rates.
Aggregate balances of other types of loans and investments are not material in
amount, and present little overall risk to the Company.
Virtually all of the assets and liabilities of a financial institution are
monetary in nature. As a result, interest rates have a more significant impact
on a financial institution's performance than the effect of inflation. Interest
rates do not necessarily move in the same direction or in the same magnitude as
the prices of goods and services. Management believes that continuation of its
efforts to manage its net-interest spread and the maturity of its assets and
liabilities will position the Company to benefit from current interest rates.
CAPITAL RESOURCES
Primary capital, including stockholders' equity without consideration for the
net unrealized gain on securities available for sale, net of tax and the
allowance for possible loan losses, amounted to $75,271,000 at year-end 1995,
compared to $83,750,000 at year-end 1994 and $68,206,000 at year-end 1993.
During 1995, the Company repurchased 390,365 shares for an aggregate price of
$13,929,414. This accounts for the decrease in capital from 1994 to 1995.
Management determined that this would increase leverage while preserving capital
ratios well above regulatory requirements.
12
14
The following table presents the Company's primary capital and related ratios
for each of the last five years: (dollars in thousands)
- --------------------------------------------------------------------------------------------------------------------------------
1995(1) 1994 (1) 1993 1992 1991
- --------------------------------------------------------------------------------------------------------------------------------
Primary capital at year-end $75,271 $83,750 $68,206 $61,835 $ 56,139
Primary capital at year-end as a percentage of year-end:
Total assets plus allowance for possible loan losses 9.27% 10.24% 10.54% 10.24% 9.69%
Loans, net of unearned discounts 14.59% 15.65% 16.57% 16.55% 15.43%
Total deposits 10.35% 11.57% 11.99% 11.48% 10.82%
================================================================================================================================
(1) Capital ratios do not include the effect of SFAS No. 115 "Accounting for
Certain Investments in Debt and Investment Securities."
The Company measures how effectively it utilizes capital using two widely
accepted performance ratios, return on average assets and return on average
common stockholders' equity. The returns in 1995 on average assets of 1.15
percent and average common equity of 11.56 percent increased from 1994. In 1994,
returns were 1.11 percent and 11.50 percent, respectively.
All dividends must conform to applicable statutory requirements. The Company's
ability to pay dividends depends on the Bank's ability to pay dividends. Under
12 USC 56-9, a national bank may not pay a dividend on its common stock if the
dividend would exceed net undivided profits then on hand. Further, under 12 USC
60, a national bank must obtain prior approval from the Office of the
Comptroller of the Currency to pay dividends on either common or preferred stock
that would exceed its net profits for the current year combined with retained
net profits (net profits minus dividends paid during that period) of the prior
two years. The amount currently available is $ 3,354,000.
RISK-BASED CAPITAL/LEVERAGE GUIDELINES
The Federal Reserve Bank's requirements concerning risk-based capital
requirements for bank holding companies were implemented during a transition
period ending in 1992. The guidelines require minimum ratios of capital to
risk-weighted assets, which include certain off-balance sheet activities, such
as standby letters of credit. The guidelines define capital as being "core," or
"Tier 1," capital, which includes common stockholders' equity, a limited amount
of perpetual preferred stock, minority interest in unconsolidated subsidiaries,
less goodwill; or "supplementary" or "Tier 2" capital which includes
subordinated debt, redeemable preferred stock, and a limited amount of the
allowance for possible loan losses. By year-end 1993, all bank holding companies
should have met a minimum ratio of total qualifying capital to risk weighted
assets of 8.00 percent, of which at least 4.00 percent should be in the form of
Tier 1 capital. At December 31, 1995, the Company's ratios of core capital and
total qualifying capital (core capital plus Tier 2 capital) to risk-weighted
assets were 10.97 percent and 11.95 percent, respectively.
DISCUSSION OF CURRENT ACCOUNTING PRINCIPLES
In March 1995, the Financial Accounting Standards Board issued SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets to Be Disposed Of." This
Statement requires that long-lived assets and certain identifiable intangibles
to be held and used by an entity be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. The pronouncement is effective for fiscal years beginning after
December 15, 1995, although earlier implementation is encouraged. In
management's opinion, when adopted, SFAS No. 121 will not have a material effect
on the Bank's financial position or results of operations.
In May 1995, the Financial Accounting Standards Board issued SFAS No 122,
"Accounting for Mortgage Servicing Rights," which is an amendment to SFAS No.
65, "Accounting for Certain Mortgage Banking Activities." This Statement
requires the recognition as separate assets rights to service mortgage loans for
others, however those servicing rights are acquired. The pronouncement is
effective for fiscal years beginning after December 15, 1995, although earlier
implementation is permitted. In management's opinion, when adopted, Statement
No. 122 will not have a material effect on the Bank's financial position or
results of operations.
In October 1995, the Financial Accounting Standards Board issued SFAS No. 123,
"Accounting for Stock-Based Compensation." This Statement establishes financial
accounting and reporting standards for stock-based employee compensation plans.
The pronouncement is effective for transactions entered into fiscal years that
begin after December 15, 1995, though they may be adopted on issuance. In
management's opinion, when adopted, Statement No. 123 will not have a material
effect on the Bank's financial position or results of operations.
In accordance with SFAS No. 114 and SFAS No. 118, a loan is classified as
foreclosed property when the bank has taken possession of the collateral,
regardless of whether formal proceedings take place. This is a change from the
previous accounting for in-substance foreclosed property under provisions of
SFAS No. 15. SFAS No. 114 and SFAS No. 118 require classifications of foreclosed
property based on actual possession, whereas previous practice classified
certain loans as in-substance foreclosures prior to possession based on
characteristics of the borrower and underlying collateral. As a result of
adopting SFAS No. 114 and SFAS No. 118, loans of approximately $357,000 no
longer qualify as in-substance foreclosures based on the possession criterion,
and therefore have been reclassified from the other assets to loans as of
January 1, 1995. Prior periods were not restated since the amounts were not
material.
In December 1994, the AICPA issued Statement of Position No. 94-6, "Disclosure
of Certain Significant Risks and Uncertainties" ("SOP 94-6") which is effective
for fiscal years ending December 15, 1995. SOP 94-6 requires disclosure in the
financial statements about certain risks and uncertainties that could
significantly affect the amounts reported in the financial statements in the
near term related to: (i) the nature of operations; (ii) the necessary use of
estimates in the preparation of financial statements, and; (iii) significant
concentrations in certain aspects of operations. In management's opinion, the
effect on the Company's financial statements was not material.
13
15
CONSOLIDATED STATEMENTS OF CONDITION
DECEMBER 31,
1995 1994
ASSETS
Cash & Due From Banks........................................................... $ 48,954,797 $ 56,488,206
Federal Funds Sold.............................................................. 32,500,000 -
Investment Securities:
Investment Securities Available for Sale, At Fair Value 137,043,258 68,260,575
Investment Securities Held to Maturity (Fair Value of $45,451,000
and $123,096,000, respectively)
United States Treasury Securities........................................... 12,053,390 57,090,622
Obligations of States & Political Subdivisions.............................. 18,139,862 36,780,489
U.S. Government Agency Obligations.......................................... 14,091,886 31,871,215
Corporate Bonds & Other Securities.......................................... 637,849 637,849
------------ ------------
44,922,987 126,380,175
------------ ------------
Total Investment Securities................................................. 181,966,245 194,640,750
Total Loans..................................................................... 533,994,669 568,198,173
Less: Unearned Discounts........................................................ 18,056,029 32,909,042
Allowance for Possible Loan Losses..................................... 5,923,233 6,213,548
------------ ------------
Net Loans..................................................................... 510,015,407 529,075,583
Premises & Equipment, Net....................................................... 11,802,549 12,428,053
Other Real Estate Owned, Net.................................................... 1,240,756 2,621,598
Accrued Interest Receivable, Net................................................ 5,132,867 4,007,001
Excess of Cost Over Fair Value of Net Assets Acquired........................... 2,986,037 3,347,969
Other Assets.................................................................... 11,195,455 9,044,349
------------ ------------
TOTAL ASSETS $805,794,113 $811,653,509
============ ============
LIABILITIES & STOCKHOLDERS' EQUITY
Demand Deposits................................................................. $152,007,218 $147,133,340
Savings, N.O.W.'s & Money Market Deposits....................................... 359,331,269 408,838,090
Time Certificates of $100,000 or more........................................... 27,777,020 23,766,390
Other Time Deposits............................................................. 187,944,356 144,255,106
------------ ------------
Total Deposits 727,059,863 723,992,926
Federal Funds Purchased......................................................... - 4,300,000
Dividend Payable on Common Stock................................................ 1,095,562 721,938
Accrued Interest Payable........................................................ 1,830,052 1,099,826
Other Liabilities............................................................... 5,762,873 4,446,133
------------ ------------
TOTAL LIABILITIES 735,748,350 734,560,823
------------ ------------
Commitments and Contingent Liabilities (see note 11)
STOCKHOLDERS' EQUITY
Common Stock (par value $5.00; 7,500,000 shares authorized; 3,799,674 shares
issued at December 31, 1995 & 1994, and 3,409,309 and 3,799,674 outstanding
at December 31, 1995 and 1994, respectively)................................. 18,998,370 18,998,370
Surplus......................................................................... 18,373,392 18,373,392
Undivided Profits............................................................... 33,927,780 40,164,291
Treasury Stock at Par (390,365 shares).......................................... (1,951,825) -
Net Unrealized Gain (Loss) on Securities Available for Sale, Net of Tax 698,046 (443,367)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 70,045,763 77,092,686
------------ ------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $805,794,113 $811,653,509
============ ============
See accompanying notes to consolidated financial statements
14
16
CONSOLIDATED STATEMENTS OF INCOME
For the Years ended December 31,
1995 1994 1993
INTEREST INCOME
Federal Funds Sold................................................ $ 1,839,151 $ 663,262 $ 851,504
United States Treasury Securities ................................ 6,354,527 5,412,007 5,249,261
Obligations of States & Political Subdivisions (tax exempt)....... 1,244,807 1,685,087 2,035,667
U.S. Government Agency Obligations................................ 2,052,192 1,609,537 98,884
Corporate Bonds & Other Securities................................ 38,271 49,022 70,436
Loans............................................................. 47,782,904 42,145,375 35,690,994
----------- ----------- -----------
Total Interest Income 59,311,852 51,564,290 43,996,746
INTEREST EXPENSE
Savings, N.O.W.'s & Money Market Deposits......................... 8,460,997 8,949,438 7,815,716
Time Certificates of $100,000 or more............................. 986,204 398,591 341,536
Other Time Deposits............................................... 10,111,987 6,032,300 6,363,027
Federal Funds Purchased........................................... 87,123 170,093 3,999
Interest on Other Borrowings...................................... 589,507 81,387 542
Interest on Mortgages............................................. 94,712 102,612 -
----------- ----------- -----------
Total Interest Expense 20,330,530 15,734,421 14,524,820
Net-interest Income 38,981,322 35,829,869 29,471,926
Provision For Possible Loan Losses................................ 530,000 730,000 1,098,000
----------- ----------- -----------
Net-interest Income After Provision For Possible Loan
Losses...................................................... 38,451,322 35,099,869 28,373,926
OTHER INCOME
Service Charges on Deposit Accounts............................... 3,729,918 3,007,977 2,244,682
Other Service Charges, Commissions & Fees......................... 1,724,075 1,502,648 1,145,272
Fiduciary Activities.............................................. 503,257 450,000 410,549
Other Operating Income............................................ 744,533 714,606 929,976
----------- ----------- -----------
Total Other Income 6,701,783 5,675,231 4,730,479
OTHER EXPENSE
Salaries & Employee Benefits...................................... 16,373,556 14,540,444 11,609,771
Net Occupancy Expense............................................. 2,329,290 2,202,202 1,659,004
Equipment Expense................................................. 3,162,296 2,784,688 2,037,297
FDIC Assessments.................................................. 810,720 1,407,465 1,202,640
Amortization of Excess Cost
Over Fair Value of Net Assets Acquired........................ 361,932 270,969 -
Other Operating Expense........................................... 7,097,049 6,546,500 4,836,464
----------- ----------- -----------
Total Other Expense 30,134,843 27,752,268 21,345,176
Income Before Provision for Income Taxes and
Cumulative Effect of Change in Accounting for Income Taxes.... 15,018,262 13,022,832 11,759,229
Provision For Income Taxes........................................ 5,929,578 4,705,000 4,070,000
----------- ----------- -----------
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING FOR INCOME TAXES 9,088,684 8,317,832 7,689,229
CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING FOR INCOME TAXES - - 623,614
----------- ----------- -----------
NET INCOME $ 9,088,684 $ 8,317,832 $ 8,312,843
=========== =========== ===========
EARNINGS PER COMMON SHARE:
Before Cumulative Effect Of Change in Accounting Principle $ 2.43 $ 2.25 $ 2.27
Cumulative Effect Of Change In Accounting Principle - - 0.18
----------- ----------- -----------
Net Income $ 2.43 $ 2.25 $ 2.45
=========== =========== ===========
Average Common Shares Outstanding 3,739,470 3,692,286 3,391,149
See accompanying notes to consolidated financial statements
15
17
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Net Unrealized
Gain (Loss) On
Securities
Common Undivided Treasury Available
Stock Surplus Profits Stock For Sale Total
- ---------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1992 $16,946,405 $11,695,011 $ 28,463,798 $ - $ - $ 57,105,214
Net Income - - 8,312,843 - - 8,312,843
Dividend - - (2,306,454) - - (2,306,454)
Issuance of Stock Under Stock
Option Plan (7,179 Shares) 35,895 136,784 - - - 172,679
- ---------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1993 $16,982,300 $11,831,795 $ 34,470,187$ - $ - $ 63,284,282
Net Income - - 8,317,832 - - 8,317,832
Dividend - - (2,623,728) - - (2,623,728)
Issuance of Stock in Purchase of
Hamptons Bancshares (402,109) 2,010,545 6,520,653 - - - 8,531,198
Issuance of Stock Under Stock
Option Plan (1,105 Shares) 5,525 20,944 - - - 26,469
Cumulative Effect of Change in
Accounting Principle at
January 1, 1994 - - - - (328,472) (328,472)
Net Change in Unrealized Loss on
Securities Available For Sale - - - - (114,895) (114,895)
- ---------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1994 $18,998,370 $18,373,392 $ 40,164,291 $ - $ (443,367) $ 77,092,686
Net Income - - 9,088,684 - - 9,088,684
Dividend - - (3,347,606) - - (3,347,606)
Purchase of Treasury Stock - - (11,977,589) (1,951,825) - (13,929,414)
Net Change in Unrealized Gain on
Securities Available For Sale - - - - 1,141,413 1,141,413
- ---------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1995 $18,998,370 $18,373,392 $ 33,927,780 $(1,951,825) $ 698,046 $ 70,045,763
=================================================================================================================================
See accompanying notes to consolidated financial statements
16
18
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years ended December 31,
CASH FLOWS FROM OPERATING ACTIVITIES 1995 1994 1993
NET INCOME........................................................ $ 9,088,684 $ 8,317,832 $ 8,312,843
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
Provision for Possible Loan Losses.......................... 530,000 730,000 1,098,000
Depreciation & Amortization................................. 2,074,991 1,727,892 1,212,234
Amortization of Excess Cost Over Fair Value
of Net Assets Acquired.................................... 361,932 270,969 -
Accretion of Discounts...................................... (1,839,404) (2,107,671) (1,496,699)
Amortization of Premiums.................................... 200,867 284,555 387,413
(Increase) Decrease in Accrued Interest Receivable.......... (1,125,866) (892,059) 323,470
(Increase) in Other Assets.................................. (2,151,106) (527,083) (1,630,011)
Increase (Decrease) in Accrued Interest Payable............. 730,226 (36,898) (303,619)
Increase (Decrease) in Income Taxes Payable................. 59,851 6,053 (319,554)
Increase (Decrease) in Other Liabilities.................... 1,256,889 (1,219,703) 685,514
------------- ------------- -------------
NET CASH PROVIDED BY OPERATING ACTIVITIES................. 9,187,064 6,553,887 8,269,591
------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Principal Payments on Investment Securities................. 2,500,940 1,449,362 1,575,421
Maturities of Investment Securities; Available for Sale..... 121,070,133 55,000,000 -
Purchases of Investment Securities; Available for Sale ..... (188,275,593) (123,295,731) -
Maturities of Investment Securities; Held to Maturity....... 91,768,062 126,756,406 177,424,983
Purchases of Investment Securities; Held to Maturity........ (12,750,500) (25,673,742) (205,203,351)
Loan Disbursements & Repayments, Net........................ 19,157,077 (35,913,818) (38,868,615)
Purchases of Premises & Equipment, Net...................... (1,449,487) (1,184,547) (1,343,369)
Disposition of Other Real Estate Owned...................... 1,521,730 823,216 204,990
Cash & Cash Equivalents Acquired, Net of Cash Disbursement.. - 15,938,431 -
------------- ------------- -------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES....... 33,542,362 13,899,577 (66,209,941)
------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net Increase in Deposit Accounts............................ 3,066,937 12,997,051 30,164,131
(Decrease) Increase in Other Borrowings..................... - (6,500,000) 6,500,000
(Decrease) Increase in Federal Funds Purchased.............. (4,300,000) 4,300,000 -
Common Stock Sold for Cash.................................. - 26,469 172,679
Dividends Paid to Shareholders.............................. (2,973,982) (2,490,014) (2,271,341)
Treasury Shares Acquired.................................... (13,929,414) - -
Increase in Dividend Payable on Common Stock................ 373,624 144,540 35,113
------------- ------------- -------------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES...... (17,762,835) 8,478,046 34,600,582
------------- ------------- -----------
NET INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS........ 24,966,591 28,931,510 (23,339,768)
CASH & CASH EQUIVALENTS BEGINNING OF YEAR.............. 56,488,206 27,556,696 50,896,464
------------ ------------ ------------
CASH & CASH EQUIVALENTS END OF YEAR.................... $ 81,454,797 $ 56,488,206 $ 27,556,696
============= ============= =============
Supplemental Disclosure of Cash Flow Information
Cash Received During the Year for Interest.................. $ 58,185,987 $ 49,756,316 $ 44,320,216
============= ============= =============
Cash Paid During the Year for:
Interest.................................................. $ 19,600,304 $ 15,602,404 $ 14,828,440
Income Taxes.............................................. 5,869,727 4,698,947 4,389,554
------------- ------------- -------------
Total Cash Paid During Year for Interest & Income Taxes. $ 25,470,031 $ 20,301,350 $ 19,217,994
============= ============= =============
Non Cash Investing & Financing - (loans re-classified as "other real
estate owned", including foreclosures) $ 459,381 $ 1,510,346$ -
Issuance of Common Stock - 8,531,198 -
Increase (Decrease) in Market Value Related to FASB 115 2,002,357 (819,229) -
(Increase) Decrease in Deferred Tax (Liability) Benefit Related to
FASB 115 (860,944) 375,862 -
Dividends Declared Not Paid 1,095,562 721,938 -
Net Assets Acquired from Hamptons Bancshares, Inc. (see footnote 10) - 9,308,631 -
============= ============= =============
See accompanying notes to consolidated financial statements
17
19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of Suffolk Bancorp and its subsidiaries
conform to generally accepted accounting principles and general practices within
the banking industry. The following footnotes describe the most significant of
these policies.
In preparing the consolidated financial statements, management is required to
make estimates and assumptions that affect the reported assets and liabilities
as of the date of the consolidated statements of condition. The same is true of
revenues and expenses reported for the period. Actual results could differ
significantly from those estimates.
(A) CONSOLIDATION -- The consolidated financial statements include the accounts
of the Company and its wholly owned subsidiaries, The Suffolk County National
Bank (the "Bank") and Island Computer Corporation of New York, Inc. All
inter-company transactions have been eliminated in consolidation.
(B) INVESTMENT SECURITIES -- Effective January 1, 1994, the Company adopted SFAS
No. 115, "Accounting for Certain Investments in Debt and Equity Securities,"
which was issued in May 1993. Under SFAS No. 115, the Company is required to
report debt securities and mortgage-backed securities in one of the following
categories: (i) "held to maturity" (management has the intent and ability to
hold to maturity) which are to be reported at amortized cost; (ii) "trading"
(held for current resale) which are to be reported at fair value, with
unrealized gains and losses included in earnings; and (iii) "available for sale"
(all other debt securities and mortgage-backed securities) which are to be
reported at fair value, with unrealized gains and losses excluded from earnings
and reported as a separate component of stockholders' equity. Accordingly, in
adopting SFAS No. 115, the Company classified all of its holdings of debt
securities and mortgage-backed securities as either "held to maturity", or
"available for sale." Under SFAS No. 115, at the time a security is purchased, a
determination is made as to the appropriate classification.
On November 15, 1995, the FASB issued a special report entitled, "A Guide to
Implementation of Statement No. 115 on Accounting for Certain Investments in
Debt and Equity Securities, Questions and Answers" ("the Guide"). The Guide
permitted a one-time reassessment and related reclassifications from the held to
maturity category (no later than December 31, 1995) that will not call into
question the intent of the enterprise to hold other debt securities until
maturity in the future. In December 1995, the Bank performed a reassessment of
its investment and mortgage-backed securities portfolio which resulted in a
reclassification of approximately $16 million of investment securities from held
to maturity into available for sale. The impact upon the Bank's financial
condition resulting from this transfer was not material. There was no impact on
the Bank's results from operations resulting from this transfer.
Premiums and discounts on debt and mortgage-backed securities are amortized as
expense and accreted as income over the estimated life of the respected security
using a method which approximates the level-yield method. Gains and losses on
the sales of investment securities are recognized upon realization, using the
specific identification method and shown separately in the consolidated
statements of income.
(C) LOANS AND LOAN INTEREST INCOME RECOGNITION -- Loans are stated at the
principal amount outstanding. Interest on loans not made on a discounted basis
is credited to income, based upon the principal amount outstanding during the
period. Unearned discounts on installment loans are credited to income using
methods which approximate a level-yield. Recognition of interest income is
discontinued when reasonable doubt exists as to whether interest can be
collected. Loans generally no longer accrue interest when 90 days past due. When
a loan is placed on non-accrual status, all interest previously accrued in the
current year, but not collected, is reversed against current year interest
income. Any interest accrued in prior years is charged against the allowance for
possible loan losses. Loans and leases are removed from non-accrual status when
they become current as to principal and interest, and when, in the opinion of
management, the loans can be collected in full.
(D) ALLOWANCE FOR POSSIBLE LOAN LOSSES - - The balance of the Allowance for
Possible Loan Losses is determined by management's estimate of the amount of
financial risk in the loan portfolio and the likelihood of loss. The analysis
also considers the Bank's loan loss experience, and may be adjusted in the
future depending on economic conditions. Additions to the Allowance are made by
charges to expense, and actual losses, net of recoveries, are charged to the
Allowance. Regulatory examiners may require the Bank to add to the allowance
based upon their judgment of information available to them at the time of their
examination
Effective January 1, 1995, the Bank adopted the accounting and disclosure
guidance in Statement of Financial Accounting Standards No. 114, titled
"Accounting by Creditors for Impairment of a Loan." as amended by Statement No.
118, titled "Accounting by Creditors for Impairment of a Loan-Income Recognition
and Disclosures." Both pronouncements establish the accounting by creditors for
impairment of certain loans with the latter adding as to how a creditor
recognizes the interest income related to those impaired loans. Pursuant to this
accounting guidance, a valuation allowance is recorded on impaired loans to
reflect the difference, if any, between the loan face and the present value of
projected cash flows, observable fair value or collateral value. This valuation
allowance is reported within the overall allowance for loan losses. Such change
in accounting was not material to the consolidated financial statements.
(E) PREMISES AND EQUIPMENT -- Premises and equipment are stated at cost, less
accumulated depreciation and amortization. Depreciation is calculated by the
declining-balance or straight-line method over the estimated useful lives of the
assets. Leasehold improvements are amortized using the straight-line method over
the term of the lease or the estimated life of the asset, whichever is shorter.
(F) OTHER REAL ESTATE OWNED -- Property acquired through foreclosure (other real
estate owned or "OREO"), is stated at the lower of cost or fair value less
selling costs. Credit losses arising at the time of the acquisition of property
are charged against the allowance for possible loan losses. Any additional
write-downs to the carrying value of these assets that may be required, as well
as the cost of maintaining and operating these foreclosed properties, are
charged to expense. Additional write-downs are recorded in a valuation reserve
account that is maintained asset by asset. Also included is $100,000
representing investment in property purchased by the Bank for a possible branch
office.
(G) EXCESS OF COST OVER FAIR VALUE OF NET ASSETS ACQUIRED -- The excess of cost
over fair value of net assets acquired (goodwill) is amortized over ten years.
18
20
(H) INCOME TAXES -- Effective January 1, 1993, the Company adopted SFAS No. 109,
"Accounting for Income Taxes." The adoption of SFAS No. 109 changed the
Company's method of accounting for income taxes from the deferred method to an
asset and liability approach. The asset and liability approach requires the
recognition of deferred tax assets and liabilities for the expected future tax
consequences of temporary differences between the carrying amounts and the tax
bases of assets and liabilities. Under SFAS No. 109, deferred tax assets are
recognized if it is more likely than not that a future benefit will be realized.
It is management's position that no valuation allowance is necessary against any
of the Company's deferred tax assets.
(I) SUMMARY OF RETIREMENT BENEFITS ACCOUNTING -- The Company's retirement plan
is non-contributory and covers substantially all eligible employees. The plan
conforms to the provisions of the Employee Retirement Income Security Act of
1974, as amended. The Company's policy is to accrue for all pension costs and to
fund the maximum amount allowable for tax purposes. Actuarial gains and losses
that arise from changes in assumptions concerning future events, used in
estimating pension costs, are amortized over a period that reflects the
long-term nature of pension expense.
The Company adopted SFAS No. 106 "Employers' Accounting for Post-retirement
Benefits Other Than Pensions" ("SFAS No. 106") on January 1, 1992. This
Statement established accounting standards for post-retirement benefits other
than pensions (hereinafter referred to as post-retirement benefits). The
statement focuses principally on health care, although it applies to all forms
of post-retirement benefits other than pensions. SFAS No. 106 changed the
Company's practice of accounting for post-retirement benefits on a cash basis by
requiring accrual of the cost of providing those benefits to an employee, and
the employee's beneficiaries and covered dependents, during the years that the
employee renders the necessary service.
(J) CASH AND CASH EQUIVALENTS -- For purposes of the consolidated statement of
cash flows, cash and due from banks and federal funds sold are considered to be
cash equivalents. Generally, federal funds are sold for one-day periods.
(K) TREASURY STOCK -- The balance of treasury stock is computed at par value.
The excess cost over par is subtracted from undivided profits.
(L) RECLASSIFICATION OF PRIOR YEAR CONSOLIDATED FINANCIAL STATEMENTS -- Certain
reclassifications have been made to the prior year's consolidated financial
statements that conform with the current year's presentation.
NOTE 2 - INVESTMENT SECURITIES
The amortized cost, estimated fair values and gross unrealized gains and losses
of the Company's investment securities available for sale and held to maturity
at December 31, 1995 and 1994 were: (in thousands)
- ----------------------------------------------------------------------------------------
Investment Securities 1995
- ----------------------------------------------------------------------------------------
Estimated Gross Gross
Amortized Fair Unrealized Unrealized
Cost Value Gains Losses
- ----------------------------------------------------------------------------------------
Available for sale:
U.S. treasury securities $120,416 $121,168 $ 752 $ -
U.S. gov't agency debt sec 15,444 15,875 431 -
-------- -------- ------ ---
Balance at end of year 135,860 137,043 1,183 -
- ----------------------------------------------------------------------------------------
Held to maturity:
U.S. treasury securities $ 12,053 $ 12,106 $ 76 $ 23
Obligations of states and
political subdivisions 18,140 18,363 281 58
U.S. govt. agency
obligations 14,092 14,344 303 51
Corporate bonds and
other securities 638 638 - -
-------- -------- ------ ---
Balance at end of year $ 44,923 $ 45,451 $ 660 $ 132
- ----------------------------------------------------------------------------------------
Total investment securities $180,783 $182,494 $1,843 $ 132
========================================================================================
- ----------------------------------------------------------------------------------------
Investment Securities 1994
- ----------------------------------------------------------------------------------------
Estimated Gross Gross
Amortized Fair Unrealized Unrealized
Cost Value Gains Losses
- ----------------------------------------------------------------------------------------
Available for sale:
U.S. treasury securities $ 69,080 $ 68,261 $ 23 $ 842
U.S. gov't agency debt sec - - - -
-------- -------- ---- ------
Balance at end of year 69,080 68,261 23 842
- ----------------------------------------------------------------------------------------
Held to maturity:
U.S. treasury securities $ 57,091 $ 55,827 $- $1,264
Obligations of states and
political subdivisions 36,780 36,841 221 160
U.S. govt. agency
obligations 31,871 29,790 7 2,088
Corporate bonds and
other securities 638 638 - -
-------- -------- ---- ------
Balance at end of year $126,380 $123,096 $228 $3,512
- ----------------------------------------------------------------------------------------
Total investment securities $195,460 $191,357 $251 $4,354
========================================================================================
19
21
U.S. Government Agency Obligations are mortgage-backed securities which
represent participating interests in pools of first mortgage loans. The
amortized cost, maturities and approximate fair value at December 31, 1995 are
as follows: (in thousands)
- -----------------------------------------------------------------------
Available for Sale
- -----------------------------------------------------------------------
U.S.
U.S. Treasury Govt. Agency
Securities Debt
- -----------------------------------------------------------------------
Amortized Fair Amortized Fair
Maturity (in years) Cost Value Cost Value
- -----------------------------------------------------------------------
Within 1 $105,307 $105,531 $ $
After 1 but within 5 15,109 15,637 7,023 7,141
After 5 but within 10 8,421
Other Securities (FRB)
- -----------------------------------------------------------------------
Total $120,416 $121,168 $15,444 $15,875
=======================================================================
- ------------------------------------------------------------------------------------------------------------------
------------------------------- Held To Maturity --------------------------------------
- ------------------------------------------------------------------------------------------------------------------
Obligations of U.S. Corporate Total
U.S. Treasury State & Political Govt. Agency Bonds & Amortized
Securities Subdivisions Obligations Other Securities Cost
- ------------------------------------------------------------------------------------------------------------------
Amortized Fair Amortized Fair Amortized Fair Amortized Fair
Maturity (in years) Cost Value Cost Value Cost Value Cost Value
- ------------------------------------------------------------------------------------------------------------------
Within 1 $ 3,994 $ 3,971 $13,975 $13,979 $ 136 $ 135 $ $ $123,412
After 1 but within 5 8,059 8,135 2,415 2,513 13,956 14,209 46,562
After 5 but within 10 8,734 1,750 1,871 10,171
Other Securities (FRB) 638 638 638
- ------------------------------------------------------------------------------------------------------------------
Total $12,053 $12,106 $18,140 $18,363 $14,092 $14,344 $638 $638 $180,783
==================================================================================================================
As a member of the Federal Reserve system, the Bank owns Federal Reserve Bank
Stock with a book value of $638,000. The stock has no maturity and there is no
public market for the investment.
Actual maturities of U.S. Government Agency Obligations will differ from
contractual maturities because the mortgage-loan borrowers have the right to
prepay obligations with or without penalties and because the issuer can call the
security before it is due.
At December 31, 1995 and 1994, investment securities carried at $156,599,000 and
$170,522,000, respectively, were pledged to secure trust deposits and public
funds on deposit. No securities have been sold during the past three years.
Note 3- Loans
At December 31, 1995 and 1994, loans
included the following: (in thousands)
- --------------------------------------------------------------------------------
1995 1994
- --------------------------------------------------------------------------------
Commercial financial and agricultural $ 78,737 $ 71,414
Commercial real estate 99,940 104,548
Real estate construction loans 8,016 8,018
Residential mortgages (1st and 2nd liens) 55,047 50,011
Home equity loans 26,869 27,534
Consumer loans 263,297 302,634
Lease finance 311 743
Other loans 1,778 3,296
- --------------------------------------------------------------------------------
533,995 568,198
Unearned discounts (18,057) (32,909)
Allowance for possible loan losses (5,923) (6,214)
- --------------------------------------------------------------------------------
Balance at end of year $510,015 $529,075
================================================================================
Restructured loans, loans not accruing interest and loans contractually past due
90 days or more with regard to payment of principal and/or interest amounted to
$8,187,000 and $8,401,000 at December 31, 1995 and 1994, respectively. Interest
on loans which have been restructured or are no longer accruing interest would
have amounted to $415,000 during 1995, $394,000 during 1994 and $322,000 during
1993 under the contractual terms of those loans. Interest income recognized on
restructured and non-accrual loans was immaterial for the years 1995, 1994 and
1993.
The Company makes loans to its directors, as well as to other related parties in
the ordinary course of its business. Loans made to directors, either directly or
indirectly, which exceed $60,000 in aggregate for any one director totaled
$5,237,000 and $7,234,000 at December 31, 1995 and 1994 respectively. Unused
portions of lines of credit to directors, directly or indirectly, totaled
$5,075,000 and $4,250,000 as of December 31, 1995 and 1994, respectively. New
loans totaling $14,066,000 were granted and payments of $16,063,000 were
received during 1995.
The Company has pledged $17,278,000 of 1-4 family residential mortgages as
collateral against advances from the Federal Reserve Bank as of December 31,
1995.
NOTE 4 - ALLOWANCE FOR POSSIBLE LOAN LOSSES
An analysis of the changes in the Allowance for Possible Loan Losses follows:
(in thousands)
- --------------------------------------------------------------------------------
1995 1994 1993
- --------------------------------------------------------------------------------
Balance at beginning of year $ 6,214 $ 4,922 $ 4,730
Allowance acquired from Hamptons - 1,678 -
Provision for possible loan losses 530 730 1,098
Loans charged-off (1,184) (1,468) (1,167)
Recoveries on loans 363 352 261
- --------------------------------------------------------------------------------
Balance at end of year $ 5,923 $ 6,214 $ 4,922
================================================================================
The Bank adopted SFAS No. 114, "Accounting by Creditors for Impairment of a
Loan," and SFAS No. 118, "Accounting by Creditors for Impairment of a Loan -
Income Recognition and Disclosures," as of January 1, 1995. SFAS No. 114
requires that certain impaired loans be measured based on the present value of
expected future cash flows discounted at the loan's original effective interest
rate. As a practical expedient, impairment may be measured based on the loan's
observable market price or the fair value of the collateral if the loan is
collateral dependent. When the measure of the impaired loan is less than the
recorded investment in the loan, the impairment is recorded through a valuation
allowance.
The Bank had previously measured the allowance for loan losses using methods
similar to those prescribed in SFAS No. 114 and SFAS No. 118. As a result of
adopting these statements, no additional allowance for loan losses was required
as of January 1, 1995.
As of December 31, 1995, the Bank's recorded investment in impaired loans and
the related valuation allowance calculated under SFAS No. 114 and SFAS No. 118
are as follows: (in thousands)
RECORDED VALUATION
INVESTMENT ALLOWANCE
- --------------------------------------------------------------------------------
Valuation allowance required $3,200 $1,002
- --------------------------------------------------------------------------------
This allowance is included in the allowance for loan losses on the statements of
condition.
20
22
NOTE 5 - PREMISES AND EQUIPMENT
The following table presents detail concerning premises and equipment: (in
thousands)
- --------------------------------------------------------------------------------
1995 1994
- --------------------------------------------------------------------------------
Land $ 2,490 $ 2,412
Premises 7,535 7,477
Furniture, fixtures & equipment 11,941 12,010
Leasehold improvements 479 411
- --------------------------------------------------------------------------------
22,445 22,310
Accumulated depreciation
and amortization (10,642) (9,882)
- --------------------------------------------------------------------------------
Balance at end of year $ 11,803 $12,428
================================================================================
Depreciation and amortization charged to operations amounted to $2,075,000,
$1,728,000, and $1,212,000 during 1995, 1994 and 1993, respectively
NOTE 6 - SHORT-TERM BORROWINGS
Presented below is information concerning short-term interest-bearing
liabilities, principally Federal Reserve Bank Borrowings, and Securities Sold
Under Agreements to Repurchase, with maturities of less than one year, and their
related weighted average interest rates for the years 1995 and 1994: (dollars in
thousands)
- --------------------------------------------------------------------------------
1995 1994
- --------------------------------------------------------------------------------
Daily average outstanding $ 9,823 $ 2,132
Total interest cost 590 81
Average interest rate paid 6.00% 3.80%
Maximum amount outstanding at any month-
end (March 1995, February 1994) $11,118 $22,840
December 31, balance - -
Weighted average interest rate
on balances outstanding at December 31, -% -%
================================================================================
There were minimal borrowings for the year 1993.
NOTE 7 - STOCKHOLDERS' EQUITY
The Company has a Dividend Reinvestment Plan. Stockholders can reinvest
dividends in common stock of the Company at a 3% discount from market value on
newly issued shares. Shareholders may also make additional cash purchases. There
were no shares issued in 1995 , 1994 or 1993.
The Company has an Incentive Stock Option Plan ("the Plan") under which 330,000
shares of the Company's common stock are reserved for issuance to key employees.
Options are awarded by a committee appointed by the Board of Directors. The Plan
provides that the option price shall not be less than the fair value of the
common stock on the date the option is granted. All options are exerciseable for
a period of ten years or less. The Plan provides for the grant of stock
appreciation rights which the holder may exercise instead of the underlying
option. When the stock appreciation right is exercised, the underlying option is
canceled. The optionee receives shares of common stock with a fair market value
equal to the excess of the fair value of the shares subject to the option at the
time of exercise (or the portion thereof so exercised) over the aggregate option
price of the shares set forth in the option agreement. The exercise of stock
appreciation rights is treated as the exercise of the underlying option.
The following table presents the options exercised or expired during each of the
past three years:
- --------------------------------------------------------------------------------
NUMBER OF SHARES
- --------------------------------------------------------------------------------
Balance at December 31, 1992 16,096
Options granted -
Options exercised (11,481)
Options expired or terminated -
- --------------------------------------------------------------------------------
Balance at December 31, 1993 4,615
Options granted -
Options exercised (1,401)
Options expired or terminated (3,214)
- --------------------------------------------------------------------------------
Balance at December 31, 1994 -
================================================================================
No options were granted, exercised, expired, or terminated during 1995.
All dividends must conform to applicable statutory requirements. Under 12 USC
56-9, a national bank may not pay a dividend on its common stock if the dividend
would exceed net undivided profits then on hand. Further, under 12 USC 60, a
national bank must obtain prior approval from the Office of the Comptroller of
the Currency ("OCC") to pay dividends on either common or preferred stock that
would exceed its net profits for the current year combined with retained net
profits (net profits minus dividends paid during that period) of the prior two
years. At December 31, 1995, approximately $3,354,000 was available for
dividends from the Bank to Suffolk Bancorp without prior approval of the OCC.
On October 23, 1995, the Board of Directors adopted a Shareholder Rights Plan
and declared a dividend distribution of one right per common share. Each right,
if made exerciseable by certain events, entitles the holder to acquire one-half
of a share of common stock for $70, adjustable to prevent dilution. The Rights
expire in 2005 if they are not redeemed before that time. The Plan contains
provisions to protect stockholders from possible, unsolicited attempts to
acquire the Company. In the event of the acquisition by any potential acquirer
of 10% of the outstanding stock, they become rights to purchase the acquiring
company's stock at a 50% discount upon a subsequent merger with that acquirer.
In the event of the acquisition of 20% or more of the Company's common stock,
they become rights to purchase the Company's common stock at a 50% discount.
Following the acquisition of 20% but less than 50% of the common shares, the
Board can exchange one-half of a share of the Company for each valid right.
NOTE 8 - INCOME TAXES
As discussed in Note 1(H), the Company adopted Statement No. 109 as of January
1, 1993. The cumulative effect of this change in accounting for income taxes of
$624,000 is determined as of January 1, 1993 and is reported separately in the
consolidated statements of income in 1993.
The following table presents the provision for income taxes in the consolidated
statements of income which is comprised of the following: (in thousands)
Years Ended December 31, 1995 1994 1993
- --------------------------------------------------------------------------------
Current
Federal $4,032 $3,792 $3,115
State 1,510 1,270 1,367
- --------------------------------------------------------------------------------
5,542 5,062 4,482
Deferred
Federal 336 (413) (295)
State 52 56 (117)
- --------------------------------------------------------------------------------
388 (357) (412)
- --------------------------------------------------------------------------------
Total $5,930 $4,705 $4,070
================================================================================
21
23
The total tax expense was less than the amounts computed by applying the Federal
income tax rate because of the following:
- --------------------------------------------------------------------------------
Year Ended December 31, 1995 1994 1993
- --------------------------------------------------------------------------------
Federal income tax expense
at statutory rates 34% 34% 34%
Tax exempt interest (3%) (4%) (5%)
Amortization of excess cost over
fair value of net assets acquired 1% 1% -
State income taxes net of
federal benefit 7% 7% 7%
Other - (1%) (1%)
- --------------------------------------------------------------------------------
Total 39% 37% 35%
================================================================================
The tax effects of temporary differences that create significant deferred-tax
assets and deferred-tax liabilities at December 31, 1995 and 1994 and the
recognition of income and expense for purposes of tax and financial reporting,
resulting in net increases to the Company's net deferred tax asset for the year
ended December 31, 1995 are presented below: (in thousands)
- --------------------------------------------------------------------------------
DOLLAR
1995 1994 CHANGE
- --------------------------------------------------------------------------------
Deferred tax assets:
Provision for possible
loan losses $2,434 $2,230 $ 204
Depreciation 4 41 (37)
Post-retirement benefits 280 186 94
Deferred compensation 566 249 317
Purchase accounting 790 987 (197)
Bad debt recapture (281) - (281)
Tax net operating loss carry-
forward acquired from Hamptons - 192 (192)
Tax benefit from investment
securities available for sale - 376 (376)
Other 198 - 198
- --------------------------------------------------------------------------------
Total deferred tax assets
before valuation allowance 3,991 4,261 (270)
Valuation allowance - - -
- --------------------------------------------------------------------------------
Total deferred tax assets
net of valuation allowance 3,991 4,261 (270)
- --------------------------------------------------------------------------------
Deferred tax liability:
Pension 648 249 399
Tax liability from investment
Securities available for sale 309 - 309
- --------------------------------------------------------------------------------
Total deferred tax liability 957 249 708
Net deferred tax asset $3,034 $4,012 $(978)
================================================================================
The Internal Revenue Service has examined and closed their years through tax
year 1990.
NOTE 9 - EMPLOYEE BENEFITS
(A) RETIREMENT PLAN - The Company has a non-contributory pension plan available
to all full-time employees who are at least 21 years old and have completed at
least one year of employment. The following tables set forth the status of
Suffolk Bancorp's combined plan as of September 30, 1995 and September 30, 1994,
the time at which the annual valuation of the plan is made:
- --------------------------------------------------------------------------------
ACTUARIAL PRESENT VALUE OF BENEFIT OBLIGATIONS: 1995 1994
- ---------------------------------------------------------------------------------
Accumulated benefit obligation $ 6,459,208 $ 5,939,500
- ---------------------------------------------------------------------------------
Vested benefit obligation $ 6,394,357 $ 5,765,409
- ---------------------------------------------------------------------------------
Projected benefit obligation for
service rendered to date $(8,743,268) $(8,014,115)
Plan assets at fair value, primarily
listed stocks and bonds 9,738,873 8,304,960
- ---------------------------------------------------------------------------------
Plan assets in excess of
projected benefit obligation $ 995,605 $ 290,845
Unrecognized net transition assets
being amortized over 17 years (496,292) (551,916)
Unrecognized prior service cost (68,410) (24,739)
Unrecognized net loss 1,109,736 1,248,975
- ---------------------------------------------------------------------------------
Prepaid pension cost included in
other assets $ 1,540,639 $ 963,165
=================================================================================
Net pension cost for 1995, 1994 & 1993 included the following components:
- --------------------------------------------------------------------------------
1995 1994 1993
- --------------------------------------------------------------------------------
Service cost $ 609,669 $ 589,376 $ 446,139
Interest cost on projected
benefit obligations 626,586 587,690 391,655
Expected return on plan assets (721,316) (676,728) (449,584)
Net amortization & deferral (28,582) (37,457) (38,936)
- --------------------------------------------------------------------------------
Net periodic pension cost $ 486,357 $ 462,881 $ 349,274
================================================================================
The weighted average discount rate for purposes of determining net periodic
pension cost was 7.75% in 1995 and 8.0% 1994. The rate of increase in future
compensation levels used in determining these amounts was 5.0% in 1995 and 1994,
respectively. The expected long-term rate of return on assets is 8.5% for 1995
and 1994.
(B) DEFERRED COMPENSATION PLAN - During 1986, the Board approved a deferred
compensation plan. Under the plan, certain employees and Directors of the
Company elected to defer compensation aggregating approximately $177,000 in
exchange for stated future payments to be made at specified dates which would
include a guaranteed rate of return on the initial deferral. For purposes of
financial reporting, interest (approximately $183,000 in 1995, $100,000 in 1994
and $130,000 in 1993) at the plan's contractual rate is being accrued on the
deferral amounts over the expected plan term. During 1995, the Company made
payments of $99,000 to participants of the plan.
The Company has purchased life insurance policies on the plan's participants
based upon reasonable actuarial benefit and other financial assumptions where
the present value of the projected cash flows from the insurance proceeds
approximates the present value of the projected cost of the employee benefit.
The Company is the named beneficiary on the policies. Net insurance expense
(income) related to the policies aggregated approximately $68,000, ($11,000) and
$1,000 in 1995, 1994 and 1993, respectively.
22
24
(C) POST-RETIREMENT BENEFITS OTHER THAN PENSION
The following table sets forth the post-retirement benefit liability included in
other liabilities in the accompanying consolidated statements of condition as of
December 31, 1995 and 1994:
December 31, 1995 1994
- --------------------------------------------------------------------------------
Accumulated post-retirement benefit
obligation (the "APBO"):
Retirees $ (431,714) $ (360,068)
Fully eligible active plan participants (617,012) (514,616)
Other active participants (705,169) (588,143)
- --------------------------------------------------------------------------------
Total APBO $(1,753,895) $(1,462,827)
Unrecognized net loss 387,913 276,332
Unrecognized transition obligation 332,305 353,074
- --------------------------------------------------------------------------------
Post-retirement benefit liability $(1,033,677) $ (833,421)
Net periodic post-retirement benefit cost (the "net periodic cost") for the
years ended December 31, 1995, 1994, and 1993 includes the following components:
(in thousands)
Year Ended December 31, 1995 1994 1993
- --------------------------------------------------------------------------------
Service cost of benefits earned $ 97,007 $ 83,461 $ 61,992
Interest cost on liability 115,200 94,007 41,064
Unrecognized loss 9,417 16,570 -
Unrecognized service liability 20,769 20,769 20,769
- --------------------------------------------------------------------------------
Net periodic cost $242,393 $214,807 $123,825
- --------------------------------------------------------------------------------
The average health care cost trend rate assumption significantly affects the
amounts reported. For example, a 1% increase in this rate would increase the
accumulated benefit obligation by $146,283 at December 31, 1995, and increase
the net periodic cost by $23,343 for the year. The post-retirement benefit cost
components for 1995 were calculated assuming average health care cost trend
rates ranging up 9% and decreasing 5% after approximately 45 years.
NOTE 10 - ACQUISITION OF HAMPTONS BANCSHARES, INC.
On April 11, 1994, Suffolk Bancorp ("Suffolk") acquired Hamptons Bancshares,
Inc. ("Hamptons"). Hamptons' principal asset was The Bank of the Hamptons, which
operated 8 branch locations in eastern Suffolk County. Each share of Hamptons
common stock on that date was entitled to receive 0.6809 shares of Suffolk
common stock or $14.64 in cash. 402,109 shares were issued. This transaction has
been accounted for under the purchase method of accounting and, accordingly, the
Company's consolidated results of operations for 1994 reflect the results of
Hamptons from April 11, 1994. The excess cost over the fair value of net assets
acquired of $2,986,000 and $3,348,000 is shown as an intangible asset on the
statement of condition at December 31, 1995 and 1994, and is being amortized
over 10 years.
NOTE 11 - COMMITMENTS AND CONTINGENT LIABILITIES
In the normal course of business, there are various outstanding commitments and
contingent liabilities, such as standby letters-of-credit and commitments to
extend credit, which are not reflected in the accompanying consolidated
financial statements. No material losses are anticipated as a result of these
transactions. The Company is contingently liable under standby letters-of-credit
in the amount of $5,428,000 and $4,432,000 at December 31, 1995 and 1994,
respectively. The Company has commitments to make or to extend credit in the
form of revolving open end lines secured by 1-4 family residential properties,
commercial real estate, construction and land development loans, and lease
financing arrangements in the amount of $23,719,000 and $18,080,000, and
commercial loans of $9,450,000 and $5,549,000 as of December 31, 1995 and 1994,
respectively.
In the opinion of management, based upon legal counsel, liabilities arising from
legal proceedings against the Company, would not have a significant effect on
the financial position of the Company.
During 1995, the Company was required to maintain balances with the Federal
Reserve Bank of N.Y. for reserve and clearing requirements. These balances
averaged $5,419,000 in 1995.
Total rental expense for the years ended December 31, 1995, 1994 and 1993
amounted to $501,000, $527,000 and $496,000, respectively.
At December 31, 1995, the Company was obligated under a number of non-cancelable
operating leases for land and buildings used for bank purposes. Minimum annual
rentals, exclusive of taxes and other charges under non-cancelable operating
leases, are summarized as follows: (in thousands)
- --------------------------------------------------------------------------------
Year ending December 31, Minimum Annual Rentals
- --------------------------------------------------------------------------------
1996 $ 503
1997 313
1998 183
1999 166
2000 and thereafter 1,755
================================================================================
NOTE 12 - CREDIT CONCENTRATIONS
The Bank's principal investments are loans, and a portfolio of short and
medium-term debt of the United States Treasury, states and other political
subdivisions, U.S. Government agencies, and corporations.
As of December 31, 1995, consumer loans, net of unearned discounts, comprised
47.5 percent of the Bank's loan portfolio, more than 89 percent of which are
indirect dealer-generated loans secured by automobiles. Most of these loans are
made to residents of the Bank's primary lending area, which is Suffolk County,
New York. Borrowers represent a cross-section of the population employed in a
variety of industries. The risk presented by any one loan is correspondingly
small, and therefore, the risk which this portion of the portfolio presents to
the Company is dependent upon the financial stability of the population as a
whole, and is not dependent on any one entity or industry.
Loans secured by real estate represented 36.8 percent of the portfolio, 53
percent of which are for commercial real estate. Loans of this variety present
somewhat greater risk than consumer loans, particularly in the current economy.
The Company has attempted to minimize the risks of these loans by considering
several factors, including the creditworthiness of the borrower, the location,
condition, and value, as well as the business prospects for the security
property.
23
25
Commercial, financial, and agricultural loans, unsecured or secured by
collateral other than real estate, comprise 15.3 percent of the loan portfolio.
These loans present significantly greater risk than other types of loans.
Average credits are greater in size than consumer loans, and unsecured loans may
be more difficult to collect. The Company obtains, whenever possible, the
personal guarantees of the principal(s), and cross-guarantees among the
principals' business enterprises.
NOTE 13 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents the carrying amounts and fair values of the Bank's
financial instruments at December 31, 1995 and 1994. SFAS No. 107, "Disclosures
about Fair Value of Financial Instruments," defines the fair value of a
financial instrument as the amount at which the instrument could be exchanged in
a current transaction between willing parties, other than in a forced or
liquidation sale: (in thousands)
- --------------------------------------------------------------------------------
1995 1994
Amortized Fair Amortized Fair
Cost Value Cost Value
- --------------------------------------------------------------------------------
Cash & cash equivalents $ 81,455 $ 81,455 $ 56,488 $ 56,488
Investment securities
available for sale 137,043 137,043 68,261 68,261
Investment securities
held to maturity 44,923 45,451 126,380 123,096
Loans 533,995 526,826 568,198 555,195
Accrued interest receivable 5,133 5,133 4,007 4,007
Deposits 727,060 730,098 723,993 720,857
Accrued interest payable 1,830 1,830 1,100 1,100
Fed funds purchased - - 4,300 4,300
================================================================================
LIMITATIONS
The following estimates are made at a specific point in time and may be based on
judgments regarding losses expected in the future, risk, and other factors which
are subjective in nature. The methods and assumptions used to produce the fair
value estimates are listed below.
SHORT-TERM INSTRUMENTS
Short-term financial instruments are valued at the carrying amounts included in
the statements of condition, which are reasonable estimates of fair value due to
the relatively short period or no maturity of the instruments. This approach
applies to cash and cash equivalents, federal funds purchased, accrued interest
receivable, non-interest bearing demand deposits, N.O.W., money market, savings
accounts, accrued interest payable and other borrowings.
INVESTMENT SECURITIES
The fair value of the investment portfolio including mortgage-backed securities
was based on quoted market prices or market prices of similar instruments with
appropriate adjustments.
LOANS
Fair values are estimated for portfolios of loans with similar characteristics.
Loans are segregated by type.
The fair value of performing loans was calculated by discounting scheduled cash
flows through the estimated maturity using estimated market discount rates that
reflect the credit and interest-rate risk inherent in the loan. The estimate of
maturity is based on the Bank's historical experience with repayments for each
type of loan, modified, as required, by an estimate of the effects of the
current economy.
Fair value for significant non-performing loans is based on recent external
appraisals of collateral, if any. If appraisals are not available, estimated
cash flows are discounted using a rate commensurate with the associated risk.
Assumptions regarding credit risk, cash flows, and discount rates are made using
available market information and specific borrower information.
The carrying amount and fair value of loans were as follows at December 31, 1995
and 1994: (in thousands)
- ----------------------------------------------------------------------------------
1995 1994
Carrying Fair Carrying Fair
Amount Value Amount Value
- ----------------------------------------------------------------------------------
Commercial, financial
& agricultural $ 78,737 $ 77,952 $ 71,414 $ 68,617
Commercial real estate 99,940 99,234 104,548 103,895
Real estate
construction loans 8,016 7,960 8,018 7,540
Residential mortgages
(1st & 2nd liens) 55,047 53,538 50,011 50,215
Home equity loans 26,869 26,886 27,534 27,531
Consumer loans 263,297 259,200 302,634 293,382
Lease finance 311 306 743 720
Other loans 1,778 1,750 3,296 3,295
- ----------------------------------------------------------------------------------
Totals $533,995 $526,826 $568,198 $555,195
==================================================================================
DEPOSIT LIABILITIES
The fair value of certificates of deposit was calculated by discounting cash
flows with applicable origination rates. At December 31, 1995, the fair value of
certificates of deposit of $187,922,000 had a carrying value of $185,636,000. At
December 31, 1994, the fair value of certificates of deposit of $164,886,000 had
a carrying value of $168,021,000.
COMMITMENTS TO EXTEND CREDIT, STANDBY LETTERS OF CREDIT, AND WRITTEN FINANCIAL
GUARANTEES
The fair value of commitments to extend credit was estimated either by
discounting cash flows or using the fees currently charged to enter into similar
agreements, taking into account the remaining terms of the agreements and the
current creditworthiness of the counter-parties.
The estimated fair value of written financial guarantees and letters of credit
is based on fees currently charged for similar agreements. The contractual
amounts of these commitments were $23,629,000 and $31,105,000 at December 31,
1995 and 1994. The fees charged for the commitments were not material in amount.
24
26
NOTE 14 - SUFFOLK BANCORP (PARENT COMPANY ONLY) Condensed Financial Statements:
(in thousands)
- ----------------------------------------------------------------------------------------------------------------
Condensed Statements of Condition as of December 31, 1995 1994
- ----------------------------------------------------------------------------------------------------------------
Assets
Due From Banks $ 1,513 $ 1,368
Investment in Subsidiaries: SCNB 68,817 75,811
ICC 763 587
Other Assets 69 69
- ----------------------------------------------------------------------------------------------------------------
Total Assets $ 71,162 $77,835
================================================================================================================
Liabilities and Stockholders' Equity
Dividends Payable $ 1,096 $ 722
Other Liabilities 20 20
Stockholders' Equity 70,046 77,093
- ----------------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $ 71,162 $77,835
================================================================================================================
Condensed Statements of Income for the years ended December 31, 1995 1994 1993
- ----------------------------------------------------------------------------------------------------------------
Income
Dividends from Subsidiary Bank $ 17,277 $ 2,629 $ 2,306
Interest Income 2 8 23
- ----------------------------------------------------------------------------------------------------------------
17,279 2,637 2,329
Expense
Other Expense (Income) 229 (17) 185
- ----------------------------------------------------------------------------------------------------------------
Income before Equity in Undistributed Net Income of Subsidiaries 17,050 2,654 2,144
Equity in Undistributed Earnings of Subsidiaries (7,961) 5,664 6,169
- ----------------------------------------------------------------------------------------------------------------
Net Income $ 9,089 $ 8,318 $ 8,313
================================================================================================================
Condensed Statements of Cash Flows for the years ended December 31, 1995 1994 1993
- ----------------------------------------------------------------------------------------------------------------
Cash Flows from Operating Activities
Net Income $ 9,089 $ 8,318 $ 8,313
less: Equity in Undistributed Earnings of Subsidiaries (7,961) 5,664 6,169
Other, net (2) 3,099 (252)
- ----------------------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 17,048 5,753 1,892
- ----------------------------------------------------------------------------------------------------------------
Cash Flows from Investing Activities
Cash Paid for Acquisition - (3,556) -
- ----------------------------------------------------------------------------------------------------------------
Net Cash (Used In) Investing Activities - (3,556) -
Cash Flows from Financing Activities
Repurchase of Common Stock (13,929) - -
Issuance of Stock under Stock Option Plan - 26 173
Dividends Paid (2,974) (2,490) (2,271)
- ----------------------------------------------------------------------------------------------------------------
Net Cash (Used In) Financing Activities (16,903) (2,464) (2,098)
Net Increase (Decrease) in Cash and Cash Equivalents 145 (267) (206)
Cash and Cash Equivalents, Beginning of Year 1,368 1,635 1,841
- ----------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents, End of Year $ 1,513 $ 1,368 $ 1,635
================================================================================================================
Note: No income tax provision has been recorded on the books of Suffolk Bancorp
since it files a return consolidated with its subsidiaries.
NOTE 15- SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
The comparative results for the four quarters of 1995 and 1994 are as follows:
(in thousands of dollars except for share and per-share data)
- -----------------------------------------------------------------------------------------------------------------------------------
1995 1994
- -----------------------------------------------------------------------------------------------------------------------------------
1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
- -----------------------------------------------------------------------------------------------------------------------------------
Interest income $ 14,754 $ 14,771 $ 14,947 $ 14,840 $ 10,711 $ 12,880 $ 13,999 $ 13,974
Interest expense 4,998 5,051 5,118 5,164 3,465 3,920 4,087 4,262
- -----------------------------------------------------------------------------------------------------------------------------------
Net-interest income 9,756 9,720 9,829 9,676 7,246 8,960 9,912 9,712
Provision for possible
loan losses 190 115 75 150 150 330 130 120
- -----------------------------------------------------------------------------------------------------------------------------------
Net-interest income after provision
for possible loan losses 9,566 9,605 9,754 9,526 7,096 8,630 9,782 9,592
Other income 1,521 1,675 1,864 1,887 1,011 1,428 1,518 1,866
Other expense 7,715 8,099 7,229 7,337 5,310 7,338 7,521 7,731
Provision for income taxes 1,171 1,150 1,713 1,895 890 1,110 1,155 1,550
- -----------------------------------------------------------------------------------------------------------------------------------
Net income $ 2,201 $ 2,031 $ 2,676 $ 2,181 $ 1,907 $ 1,610 $ 2,624 $ 2,177
===================================================================================================================================
Per-share data:
- -----------------------------------------------------------------------------------------------------------------------------------
Net income $ 0.58 $ 0.54 $ 0.71 $ 0.60 $ 0.56 $ 0.43 $ 0.69 $ 0.57
===================================================================================================================================
Cash dividends $ 0.20 $ 0.20 $ 0.20 $ 0.30 $ 0.17 $ 0.17 $ 0.18 $ 0.19
Average shares 3,799,674 3,780,195 3,716,770 3,661,871 3,396,689 3,741,574 3,799,088 3,799,674
===================================================================================================================================
25
27
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of Suffolk Bancorp:
We have audited the accompanying consolidated statement of condition of
Suffolk Bancorp and subsidiaries as of December 31, 1995 and the related
consolidated statements of income, changes in stockholders' equity, and cash
flows for the year 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 audit. The consolidated financial
statements of Suffolk Bancorp and subsidiaries as of December 31, 1994, and for
each of the years in the two year period then ended were audited by other
auditors whose report, dated January 23, 1995, expressed an unqualified opinion
on those statements which included an explanatory paragraph that discussed
changes in accounting principles relating to Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities," effective January 1, 1994, and Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes," effective January 1, 1993,
which were promulgated by the Financial Accounting Standards Board.
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 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 audit provides 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 Suffolk Bancorp and
subsidiaries as of December 31, 1995 and the results of their operations and
their cash flows for the year then ended in conformity with generally accepted
accounting principles.
New York, New York
January 19, 1996
- -------------------------------------------------------------------------------
REPORT OF MANAGEMENT
The Stockholders and Board of Directors Suffolk Bancorp:
The management of Suffolk Bancorp is responsible for the preparation
and integrity of the consolidated financial statements and all other information
in this annual report, whether audited or unaudited. The financial statements
have been prepared in accordance with generally accepted accounting principles
and, where necessary, are based on management's best estimates and judgment. The
financial information contained elsewhere in this annual report is consistent
with that in the consolidated financial statements.
Suffolk Bancorp's independent auditors have been engaged to perform an
audit of the consolidated financial statements in accordance with generally
accepted auditing standards and the auditors' report expresses their opinion as
to the fair presentation of the consolidated financial statements and conformity
with generally accepted accounting principles.
Suffolk Bancorp maintains systems of internal controls that provide
reasonable assurance that assets are safeguarded and reliable financial records
are maintained for preparing financial statements. Internal audits are conducted
to continually evaluate the adequacy and effectiveness of such internal
controls, policies, and procedures.
The examination and audit committee of the Board of Directors, which is
composed entirely of directors who are not employees of Suffolk Bancorp, meets
periodically with the independent auditors, internal auditors, and with
management to discuss audit and internal accounting controls, regulatory audits,
and financial reporting matters.
Edward J. Merz, President & Victor F. Bozuhoski, Jr.,
Chief Executive Officer Executive Vice President,
Chief Financial Officer, and Treasurer
Riverhead, New York
January 19, 1996
26
28
DIRECTORS AND OFFICERS
SUFFOLK BANCORP
DIRECTORS
Raymond A. Mazgulski
Chairman of the Board, Suffolk Bancorp
Bruce Collins
Superintendent of Public Works, Village of East Hampton, N.Y.
Joseph A. Deerkoski
President, See Neefus, Inc. (general insurance)
Howard M. Finkelstein
Partner, Smith, Finkelstein, Lundberg, Isler & Yakaboski (attorneys)
Edgar F. Goodale
President, Riverhead Building Supply, Corp.
Hallock Luce 3rd
Director, Lupton & Luce, Inc. (general insurance)
President, Hallup Realty Corp. (real estate)
Edward J. Merz
President & Chief Executive Officer, Suffolk Bancorp
John J. Raynor
President, John J. Raynor, P.E. & L.S., P.C.
(Civil Engineering/Surveying)
J. Douglas Stark
President, Stark Mobile Homes, Inc.
OFFICERS
Edward J. Merz
Presdient & Chief Executive Officer
Victor F. Bozuhoski, Jr.,
Executive Vice President, Chief Financial Officer & Treasurer
Douglas Ian Shaw
Vice President & Corporate Secretary
- -------------------------------------------------------------------------------
ISLAND COMPUTER CORPORATION OF NEW YORK
DIRECTORS
Edward J. Merz, Chairman
President & Chief Executive Officer, Suffolk Bancorp
Augustus C. Weaver
President, Island Computer Corporation of New York, Inc.
Bruce Collins
Superintendent of Public Works, Village of East Hampton, N.Y.
Alexander B. Doroski
Senior Vice President, Research & Development
The Suffolk County National Bank
Hallock Luce 3rd
Director, Lupton & Luce, Inc. (general insurance)
President, Hallup Realty Corp. (real estate)
OFFICERS
Augustus C. Weaver
President
Mark J. Drozd
Vice President & Corporate Treasurer
Thomas J. Munkelwitz
Corporate Secretary
27
29
THE SUFFOLK COUNTY NATIONAL BANK
DIRECTORS
Raymond A. Mazgulski
Chairman of the Board
The Suffolk County
National Bank
Bruce Collins
Superintendent of
Public Works
Village of East Hampton
Joseph A. Deerkoski
President, See Neefus, Inc.
(general insurance)
Howard M. Finkelstein
Partner; Smith, Finkelstein,
Lundberg, Isler
& Yakaboski
(attorneys)
Edgar F. Goodale
President
Riverhead Building
Supply, Corp.
Hallock Luce 3rd
Director,
Lupton & Luce, Inc.
(general insurance)
President,
Hallup Realty Corp.
(real estate)
Edward J. Merz
President &
Chief Executive Officer,
Suffolk Bancorp
John J. Raynor
President, John J. Raynor,
P.E. & L.S., P.C. (civil
engineering/surveying firm)
J. Douglas Stark
President, Stark
Mobile Homes, Inc.
Peter Van de Wetering
President, Van de Wetering
Greenhouses, Inc.
(wholesale nursery)
EXECUTIVE OFFICERS
Edward J. Merz
President &
Chief Executive Officer
John F. Hanley
Executive Vice President &
Chief Administrative Officer
Victor F. Bozuhoski, Jr.
Executive Vice President &
Chief Financial Officer
Thomas S. Kohlmann
Executive Vice President &
Chief Lending Officer
Ronald M. Krawczyk
Executive Vice President
Retail Banking
Augustus C. Weaver
Executive Vice President &
Chief Information Officer
CONSUMER LOANS
Jeanne P. Hamilton
Vice President
Brian Both
Vice President
John Dunleavy
Vice President
Gordon F. Handshaw
Vice President
COMMERCIAL LOANS
Robert C. Dick
Senior Vice President
Frank Filipo
Senior Vice President
Lawrence Milius
Senior Vice President &
C.R.A. Officer
Peter M. Almasy
Vice President
David T. De Vito
Vice President
Robert T. Ellerkamp
Vice President
Frederick J. Weinfurt
Vice President
Thomas E. Clemmens
Vice President
AUDIT
Roy Garbarino, C.P.A.
Auditor
BRANCH
ADMINISTRATION
Robert H. Militscher
Senior Vice President &
Branch Administrator
Wayne Swiatocha
Vice President
BOHEMIA OFFICE
Dwight W. Miller
Vice President
CENTER MORICHES OFFICE
Thomas R. Columbus, Sr.
Vice President
CUTCHOGUE OFFICE
Richard J. Noncarrow
Vice President
EAST HAMPTON PANTIGO OFFICE
Katherine M. Francis
Vice President
EAST HAMPTON
VILLAGE OFFICE
Jill M. James
Assistant Vice President
HAMPTON BAYS
OFFICE
John J. Reilly
Vice President
MATTITUCK OFFICE
Janet V. Stewart
Assistant Vice
President
MEDFORD OFFICE
Paul E. Vaas
Vice President
MILLER PLACE
William K. Miller
Regional Vice
President
MONTAUK HARBOR OFFICE
MONTAUK VILLAGE OFFICE
Susan M. Williams
Assistant Vice President
PORT JEFFERSON OFFICE
Peter A. Poten
Vice President
RIVERHEAD, OSTRANDER
AVENUE OFFICE
Linda C. Zarro
Vice President
RIVERHEAD, SECOND STREET OFFICE
Barbara A. Scesny
Regional Vice President
Anita J. Nigrel
Vice President
SAG HARBOR OFFICE
Jane P. Markowski
Assistant Vice President
SHOREHAM OFFICE
William K. Miller
Regional Vice President
SOUTHAMPTON OFFICE
WATER MILL OFFICE
Jeffrey D. Morch
Vice President
WADING RIVER OFFICE
William K. Miller
Regional Vice President
WESTHAMPTON BEACH OFFICE
Charles E. Johnson
Vice President
TRUST
Dan A. Cicale
Senior Vice President
& Trust Officer
William C. Araneo
Vice President
COMPTROLLER
J. Gordon Huszagh
Senior Vice President
& Comptroller
David J. Bennett, C.P.A.
Vice President
COMPLIANCE
Louis A. Antoniello
Bank Officer
CORPORATE SERVICES
Douglas Ian Shaw
Vice President & Secretary
FACILITIES AND SECURITY
William E. Heck, Jr.
Vice President
HUMAN RESOURCES
Richard Montenegro
Vice President
MARKETING
Brenda B. Sujecki
Vice President
RESEARCH & DEVELOPMENT
Alexander B. Doroski
Senior Vice President
& Cashier
OPERATIONS
Dennis F. Orski
Vice President
Suffolk Bancorp and the Suffolk County National Bank are
Equal Opportunity Affirmative Action Employers
28
30
DIRECTORY OF OFFICES AND DEPARTMENTS
Area Code (516)
Telephone Telecopier
EXECUTIVE OFFICES.........................................322 Roanoke Avenue, Riverhead, N.Y. 11901 727-3800 727-3214
Audit ................................................228 East Main St., Port Jefferson, N.Y. 11777 473-3580 473-6221
Bohemia Office..................................3880 Veterans Memorial Highway, Bohemia, N.Y. 11716 585-4477 585-4809
Branch Administration...................................295 North Sea Road, Southampton, N.Y. 11968 287-3138 287-2690
Center Moriches Office.................................502 Main Street, Center Moriches, N.Y. 11934 878-8800 878-4431
Commercial Loans .......................................6 West Second Street, Riverhead, N.Y. 11901 727-2701 727-5798
Compliance ...............................................322 Roanoke Avenue, Riverhead, N.Y. 11901 727-5395 727-3214
Comptroller..............................................206 Griffing Avenue, Riverhead, N.Y. 11901 727-5270 369-2230
Consumer Loans .........................................244 Old Country Road, Riverhead, N.Y. 11901 727-7277 727-5521
Corporate Services (Investor Relations)...................322 Roanoke Avenue, Riverhead, N.Y. 11901 727-5667 727-3214
Cutchogue Office....................................................Route 25, Cutchogue, N.Y. 11935 734-5050 734-7759
East Hampton Pantigo Office..............................351 Pantigo Road, East Hampton, N.Y. 11937 324-2000 324-6367
East Hampton Village Office................................100 Park Place, East Hampton, N.Y. 11937 324-3800 324-3863
Facilities & Security...................................6 West Second Street, Riverhead, N.Y. 11901 727-2700 727-3210
Hampton Bays Office.......................................Montauk Highway, Hampton Bays, N.Y. 11946 728-2700 728-8311
Human Resources..........................................206 Griffing Avenue, Riverhead, N.Y. 11901 727-5377 727-3170
Item Processing (File Room).............................295 North Sea Road, Southampton, N.Y. 11968 287-3184 287-5422
Marketing ..............................................295 North Sea Road, Southampton, N.Y. 11968 287-2288 287-2690
Mattituck Office.............................................10900 Main Road, Mattituck, N.Y. 11952 298-9400 298-9188
Medford Office..........................................2690R Expressway Plaza, Medford, N.Y. 11763 758-1500 758-1509
Miller Place Office........................................74 Echo Avenue, Miller Place, N.Y. 11764 474-8400 474-8510
Montauk Harbor Office..........................................West Lake Drive, Montauk, N.Y. 11954 668-4333 668-3643
Montauk Village Office.....................................746 Montauk Highway, Montauk, N.Y. 11954 668-5300 668-1214
Mortgage Loans .........................................244 Old Country Road, Riverhead, N.Y. 11901 727-7277 369-2468
Operations ..............................................206 Griffing Avenue, Riverhead, N.Y. 11901 727-5151 369-5834
Port Jefferson Harbor Office..........................135 West Broadway, Port Jefferson, N.Y. 11777 474-7200 331-7806
Port Jefferson Village Office......................228 East Main Street, Port Jefferson, N.Y. 11777 473-7700 473-9406
Retail Banking..........................................295 North Sea Road, Southampton, N.Y. 11968 287-3100 287-2690
Riverhead, Ostrander Avenue Office.....................1201 Ostrander Avenue, Riverhead, N.Y. 11901 727-6800 727-5095
Riverhead, Second Street Office.........................6 West Second Street, Riverhead, N.Y. 11901 727-2700 727-3210
Sag Harbor Office............................................17 Main Street, Sag Harbor, N.Y. 11963 725-3000 725-4627
Shoreham Office................................................9926 Route 25A, Shoreham, N.Y. 11786 744-4400 744-6743
Southampton Office......................................295 North Sea Road, Southampton, N.Y. 11968 287-3800 287-3293
Trust and Investment Services...........................295 North Sea Road, Southampton, N.Y. 11968 287-3100 287-3296
Wading River Office...........................2065 Wading River-Manor Rd., Wading River, N.Y. 11792 929-6300 929-6799
Water Mill Office.......................................828 Montauk Highway, Water Mill, N.Y. 11976 726-4500 726-7573
Westhampton Beach Office.............................144 Sunset Ave., Westhampton Beach, N.Y. 11978 288-4000 288-9252
ISLAND COMPUTER CORPORATION...................................40 Orville Drive, Bohemia, N.Y. 11716 589-5131 589-6329