SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
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FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2001
or
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________________ to __________________
Commission file number 0-29030
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SUSSEX BANCORP
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(Exact name of registrant as specified in its charter)
New Jersey 22-3475473
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(State of other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
399 Route 23, Franklin, New Jersey 07416
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code) (973) 827-2914
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(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities and Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No___
As of April 24, 2001 there were 1,623,454 shares of common stock, no par value,
outstanding.
SUSSEX BANCORP
FORM 10-QSB
INDEX
Part I - Financial Information Page(s)
Item I. Financial Statements and Notes to Consolidated
Financial Statements
Item 2. Management's Discussion and Analysis of
Financial condition and Results of Operations
Part II - Other Information
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
SUSSEX BANCORP
CONSOLIDATED BALANCE SHEETS
(in Thousands, Except Share Data)
(Unaudited)
ASSETS March 31, 2001 December 31, 2000
------ -------------- -----------------
Cash and Due from Banks $4,840 $4,835
Federal Funds Sold 19,025 8,030
Interest Bearing Deposits 1,096 55
-------- --------
Total Cash and Cash Equivalents 24,961 12,920
Time Deposits in Other Banks 1,100 100
Securities available for sale, at estimated fair value 41,182 33,186
Securities held to maturity, estimated fair value of $5,800,000
in 2001 and $6,393,000 in 2000 5,740 6,431
-------- --------
Total Securities 46,922 39,617
Loans Held for Sale 297 297
Loans (Net of Unearned Income) 102,786 101,166
Less: Allowance for Possible Loan Losses 1,036 973
-------- --------
Net Loans 101,750 100,193
Premises and Equipment, Net 4,721 4,516
Federal Home Loan Bank Stock 693 693
Intangible Assets, Primarily Core Deposit Premiums 514 535
Accrued Interest Receivable 997 981
Other Assets 1,592 1,777
-------- --------
Total Assets $183,547 $161,629
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Demand $25,101 $24,458
Savings 69,173 63,705
Time 49,368 42,714
Time of $100,000 and over 17,340 9,984
-------- --------
Total Deposits 160,982 140,861
Federal Home Loan Bank Advances 10,000 10,000
Other Liabilities 779 658
-------- --------
Total Liabilities 171,761 151,519
Stockholders' Equity:
Common Stock, No Par Value Authorized 5,000,000 Shares,
Issued 1,643,925 in 2001 and 1,511,567 in 2000. 7,585 6,385
Retained Earnings 4,237 4,027
Treasury Stock, 13,116 Shares in 2000 and 1999 (122) (122)
Accumulated other comprehensive income, net of income tax 86 (180)
-------- --------
Total Stockholders' Equity 11,786 10,110
Total Liabilities and Stockholders' Equity $183,547 $161,629
======== ========
See Notes to Consolidated Financial Statements
SUSSEX BANCORP
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands Except Share Data)
(Unaudited)
Three Months Ended
March 31,
2001 2000
---- ----
INTEREST INCOME
Interest and Fees on Loans $2,074 $1,731
Interest on Time Deposits 13 33
Interest on Securities:
Taxable 575 571
Exempt from Federal Income Tax 67 87
Interest on Federal Funds Sold 216 57
------ ------
Total Interest Income 2,945 2,479
INTEREST EXPENSE
Interest on Deposits: 1360 1056
Interest Expense on Federal Funds Purchased 0 67
Interest Expense on FHLB Advances 124 0
------ ------
Total Interest Expense 1,484 1,123
Net Interest Income 1,461 1,356
Provision for Possible Loan Losses 63 48
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Net Interest Income After Provision for Loan Losses 1,398 1,308
NON-INTEREST INCOME
Service charges on Deposit Accounts 122 110
Other Income 127 80
------ ------
Total Non-Interest Income 249 190
NON-INTEREST EXPENSE
Salaries and Employee Benefits 739 672
Occupancy Expense, Net 135 108
Furniture and Equipment Expense 125 132
Data Processing Expense 27 22
Stationary and Supplies 26 27
Advertising and Promotion 43 44
Audit and Exams 31 25
Amortization of Intangibles 21 21
Other Expenses 208 189
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Total Non-Interest Expense 1,355 1,240
Income Before Provision for Income Taxes 292 258
Provision for Income Taxes 82 58
------ ------
Net Income $210 $200
====== ======
Net Income Per Common Share-Basic $0.13 $0.13
====== ======
Net Income Per Common Share-Diluted $0.13 $0.13
====== ======
Weighted Average Shares Outstanding-Basic 1,617,571 1,493,776
Weighted Average Shares Outstanding-Diluted 1,635,683 1,504,330
See Notes to Consolidated Financial Statements
SUSSEX BANCORP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In Thousands)
(Unaudited)
Three Months Ended
March 31,
2001 2000
---- ----
Net Income $210 $200
Other Comprehensive Income, Net of Tax
Unrealized Gain (Loss) on Available for Sale Securities 266 (68)
-----------------
Comprehensive Income $476 $132
=================
See Notes to Consolidated Financial Statements
SUSSEX BANCORP
CONSOLIDATED STATEMENT OF CHANGES IN
STOCKHOLDERS' EQUITY
(In Thousands)
(Unaudited)
Unrealized
Gain (Loss) on Total
Common Retained Treasury Securities Stockholders
Stock Earnings Stock Available for Sale Equity
----- -------- ----- ------------------ ------
Balance December 31, 2000 $ 6,385 $ 4,027 ($ 122) ($ 180) $10,110
Net Income for the Period 210 210
Sale of Common Stock 1,160 1,160
Shares Issued Through Dividend Reinvestment Plan 40 40
Change in Unrealized Gain on Securities,
Available for Sale 266 266
------- ------- ------ ------- -------
Balance March 31, 2001 $ 7,585 $ 4,237 ($ 122) $ 86 $11,786
======= ======= ====== ======= =======
See Notes to Consolidated Financial Statements
CONSOLIDATED STATEMENTS
OF CASH FLOWS
(Unaudited)
Three Months Ended
March
2001 2000
---- ----
Cash Flows from Operating Activities:
Net Income $210 $200
Adjustments to Reconcile Net Income to Net Cash Provided by Operating
Activities:
Depreciation and Amortization of Premises and Equipment 112 108
Amortization of Intangible Assets 21 21
Premium Amortization of Securities, net 16 33
Provision for Possible Loan Losses 63 48
(Amortization) of Loan Origination and Commitment Fees, net (17) (9)
(Increase) in Loans Held for Sale 0 (377)
Deferred Federal Income Tax (Increase) (1) (1)
Decrease (Increase) in Accrued Interest Receivable (16) 10
(Increase) in Cash Value of Life Insurance Policy (13) 0
Decrease (Increase) in Other Assets 21 (20)
Increase in Accrued Interest and Other Liabilities 121 118
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Net Cash Provided by Operating Activities $517 $131
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Cash Flow from Investing Activities:
Securities Available for Sale:
Proceeds from Maturities and Paydowns 1,188 1,984
Proceeds from Sales/Calls Prior to Maturity 5,745 0
Purchases (14,494) 0
Securities Held to Maturity:
Proceeds from Maturities 1,215 2,113
Purchases (532) (650)
Purchases of Time Deposits on Other Banks (1,000) 0
Net Increase in Loans Outstanding (1,602) (2,294)
Capital Expenditures (317) (540)
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Net Cash (Used In) Provided by Investing Activities ($9,797) $613
-------------- -------------
Cash Flows from Financing Activities:
Net Increase (Decrease) in Total Deposits 20,121 (3,382)
Net Increase in Federal Funds Purchased 0 4,180
Exercise of Stock Options 16 0
Purchase of Stock 1,144 0
Payment of Dividends Net of Reinvestment 40 (65)
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Net Cash Provided by Financing Activities $21,321 $733
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Net Increase in Cash and Cash Equivalents $12,041 $1,477
Cash and Cash Equivalents, Beginning of Period 12,920 9,753
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Cash and Cash Equivalents, End of Period $24,961 $11,230
============== =============
See Notes to Consolidated Financial Statements
SUSSEX BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. Basis of Presentation
Sussex Bancorp ("the Company"), a one-bank holding company, was incorporated
in January, 1996 to serve as the holding company for the Sussex County State
Bank ("the Bank"). The Bank is the only active subsidiary of the Company at
March 31, 2001. The Bank operates eight banking offices all located in Sussex
County. The Company is subject to the supervision and regulation of the Board of
Governors of the Federal Reserve System (the "FRB"). The Bank's deposits are
insured by the Bank Insurance Fund ("BIF") of the Federal Deposit Insurance
Corporation ("FDIC") up to applicable limits. The operations of the Company and
the Bank are subject to the supervision and regulation of the FRB, FDIC and the
New Jersey Department of Banking and Insurance (the "Department").
The consolidated financial statements included herein have been prepared
without audit in accordance with the rules and regulations of the Securities and
Exchange Commission and reflect all adjustments which, in the opinion of
management, are necessary for a fair statement of the results for interim
periods. All adjustments made were of a normal recurring nature. These
consolidated financial statements should be read in conjunction with the
consolidated financial statements and the notes thereto that are included in the
Company's Annual Report on Form 10-KSB for the fiscal period ended December 31,
2000.
2. Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents include cash
and due from banks and federal funds sold. Generally, federal funds are sold for
a one day period.
3. Securities
The amortized cost and approximate market value of securities are summarized
as follows (in thousands):
March 31, 2001 December 31, 2000
Amortized Market Amortized Market
Cost Value Cost Value
------- ------- ------- -------
Available For Sale
US Treasury securities $ 2,267 $ 2,299 $ 4,043 $ 4,033
US Government Mortgage Backed 34,286 34,393 25,116 24,880
Corporate Bonds 3,636 3,679 3,477 3,469
Equity Securities 850 811 850 804
------- ------- ------- -------
Total $41,039 $41,182 $33,486 $33,186
======= ======= ======= =======
Held to maturity
Obligations of State and
Political subdivisions $ 5,740 $ 5,800 $ 6,431 $ 6,393
------- ------- ------- -------
Total $ 5,740 $ 5,800 $ 6,431 $ 6,393
======= ======= ======= =======
------- ------- ------- -------
Total Securities $46,779 $46,982 $39,917 $39,579
======= ======= ======= =======
4. Net Income Per Common Share
Basic net income per share of common stock is calculated by dividing net
income by the weighted average number of shares of common stock outstanding
during the period. Diluted net income per share is calculated by dividing
net income by the weighted average number of shares of common stock
outstanding during the period plus the potential dilutive effect of
outstanding stock options. On June 21, 2000 the Company declared a 5% stock
dividend, therefore share information for 2000 has been restated.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Three Months ended March 31, 2001 and March 31, 2000.
OVERVIEW
The Company realized net income of $210 thousand for the first quarter of 2001,
an increase of $10 thousand over the $200 thousand reported for the same period
in 2000. Basic and diluted earnings per share remained constant at $0.13 from
March 31, 2000 to March 31, 2001.
RESULTS OF OPERATIONS
Interest Income. Total interest income increased $466 thousand, or 18.8%, to
$2.9 million for the quarter ended March 31, 2001 from $2.5 million for the same
period in 2000. This increase was primarily attributable to an increase in
interest and fees on loans of $343 thousand and an increase of $159 thousand in
interest earned on federal funds sold. Offsetting these increases was a decrease
in interest earned on securities of $35 thousand from the first quarter of 2000
to the first quarter of 2001. This net increase in interest income is
attributable to a $22.2 million increase in average interest earning assets,
primarily in the loan portfolio. The yield on average interest-earning assets on
a fully taxable equivalent basis increased 22 basis points from 7.16% for the
first quarter of 2000 to 7.38% for the first quarter of 2001, reflecting both
market changes in interest rates and the first results of the Company's emphasis
on originating commercial and industrial loans, which generally have higher
yields than other assets.
Interest Expense. The Company's interest expense for the first quarter of 2001
increased $361 thousand, or 32.1% to $1.5 million from $1.1 million as the
average balance of interest bearing liabilities increased $21.3 million, or
18.1%, from the same period last year. The largest component of the increase was
in time deposits, which increased $15.9 million, or 35.3% in the first quarter
of 2001 compared to the same period in 2000. This increase was primarily due to
the promotion of higher yielding time deposits during the first quarter of 2001.
The Company's average borrowed funds increased $5.5 million from first quarter
2000 compared to the first quarter of 2001, as the Company entered into three
ten year Federal Home Loan Bank advances totaling $10 million in December 2000
compared to overnight borrowed funds of $4.5 million in the first quarter of
2000. Money market and savings deposits combined showed a decrease of $919
thousand, or 1.7%, in their average balance during the first quarter of 2001
from first quarter of 2000, while NOW deposits increased $856 thousand over the
same period. The Company's average cost of funds increased 46 basis points to
4.34% for the first quarter of 2001 from 3.88% for the first quarter in 2000.
This increase in the average cost of funds was mainly the result of competing
for higher interest rates paid on time deposits.
The following table presents, on a tax equivalent basis, a summary of the
Company's interest-earning assets and their average yields, and interest-bearing
liabilities and their average costs and shareholders' equity for the three
months ended March 31, 2001 and 2000. The average balance of loans includes
non-accrual loans, and associated yields include loan fees, which are considered
adjustment to yields.
Comparative Average
Balance Sheets
Three Months Ended March 31,
2001 2000
Average Average
Interest Rates Interest Rates
Average Income/ Earned/ Average Income/ Earned/
Balance Expense Paid Balance Expense Paid
------- ------- ---- ------- ------- ----
(Dollars in Thousands)
Assets
Interest Earning Assets:
Taxable Loans (net of unearned income) $102,668 $2,074 8.19% $86,948 $1,731 8.01%
Tax Exempt Securities 6,605 85 5.22% 8,915 112 5.05%
Taxable Investment Securities 36,246 551 6.17% 37,588 559 5.98%
Other (1) 17,299 253 5.93% 7,129 102 5.75%
--------------------------------- ----------------------------------
Total Earning Assets $162,818 $2,963 7.38% $140,580 $2,504 7.16%
Non-Interest Earning Assets $13,064 $9,734
Allowance for Possible Loan Losses ($1,005) ($862)
----------- -----------
Total Assets $174,877 $149,452
=========== ===========
Liabilities and Shareholders' Equity
Interest Bearing Liabilities:
NOW Deposits $15,203 $55 1.47% $14,347 $43 1.22%
Savings Deposits 45,763 391 3.47% 46,062 392 3.45%
Money Market Deposits 6,825 60 3.57% 7,445 71 3.87%
Time Deposits 60,997 854 5.68% 45,085 550 4.95%
Borrowed Funds 10,000 124 4.96% 4,515 67 5.94%
--------------------------------- ----------------------------------
Total Interest Bearing Liabilities $138,788 $1,484 4.28% $117,454 $1,123 3.88%
Non-Interest Bearing Liabilities:
Demand Deposits $24,111 $22,376
Other Liabilities 767 581
----------- -----------
Total Non-Interest Bearing Liabilities $24,878 $22,957
Shareholders' Equity $11,211 $9,041
----------- -----------
Total Liabilities and Shareholders' Equity $174,877 $149,452
=========== ===========
Net Interest Differential $1,479 $1,381
Net Interest Margin 3.04% 3.28%
Net Yield on Interest-Earning Assets 3.68% 3.98%
(1) Includes FHLB stock, federal funds sold, interest-bearing deposits, and time
deposits
Net-Interest Income. The net effect of the changes in interest income and
interest expense for the first quarter of 2001 was an increase in net interest
income of $105 thousand, or 7.8%, compared to the first quarter of 2000. The net
interest margin, on a fully taxable equivalent basis, decreased 24 basis points
and the net yield on interest earning assets decreased 30 basis points from the
same period last year. This decrease was largely attributable to the increase in
the average balance of higher yielding time deposits. The average rate paid on
time deposits increased 73 basis points from 4.95% during the first three months
of 2000 to 5.68% for the same period in 2001.
Provision for Loan Losses. For the three months ended March 31, 2001, the
provision for possible loan losses was $63 thousand compared to the $48 thousand
provision for the same period last year. The increase in the provision for loan
losses over the three-month period reflects management's judgement concerning
the risks inherent in the Company's existing loan portfolio and the size of the
allowance necessary to absorb the risks, as well as in the average balance of
the portfolio over both periods. Management reviews the adequacy of its
allowance on an ongoing basis and will provide for additional provision in
future periods, as management may deem necessary.
Non-Interest Income. For the first quarter of 2001, total non-interest income
increased $59 thousand, or 31.1%, from the same period in 2000. Service charges
on deposit accounts increased $12 thousand in the first quarter of 2001 compared
to the three months ended March 31, 2000. Other income increased $47 thousand,
or 58.8%, in the first quarter of 2001 from the same period last year. This
increase was the result of an increase of $34 thousand in fees generated by the
non-deposit investment products offered by our third party provider, IBFS, and
commission income from Sussex Bancorp Mortgage Company, our mortgage banking
subsidiary in the first quarter of 2001 over the first quarter of 2000.
Non-Interest Expense. For the quarter ended March 31, 2001, non-interest expense
increased $115 thousand from the same period last year. Branch expansion,
combined with continued growth in our existing locations, contributed to the
increase in non-interest expense. Salaries and employee benefits increased $67
thousand, or 10.0%, as salaries increased $45 thousand and employee benefits
increased $22 thousand, with an $18 thousand increase in medical claim expenses.
Occupancy expenses increased $27 thousand, or 25.0%, largely due to the addition
of our eighth location in February of 2000. Furniture and equipment expense
decreased $7 thousand as a result of a decrease in depreciation expense, while
other expenses increased by $19 thousand from first quarter 2000 to first
quarter 2001.
Income Taxes. Income taxes expense increased $24 thousand to $82 thousand for
the three months ended March 31, 2001 as compared to $58 thousand for the same
period in 2000. The increase in income taxes resulted from a lower percentage of
tax-exempt income in 2001.
FINANCIAL CONDITION
March 31, 2001 as compared to December 31, 2000
Total assets increased to $183.5 million at March 31, 2001, a $21.9 million
increase from total assets of $161.6 million at December 31, 2000. Increases in
total assets included increases of $12.0 million in cash and cash equivalents,
$7.3 million in total securities, $1.6 million in total loans and $1.0 million
in time deposits in other banks. These increases in assets were funded by an
increase in total deposits of $20.1 million from $140.9 million at year-end 2000
to $161.0 million on March 31, 2001.
Total loans at March 31, 2001 increased $1.6 million to $102.7 million from
year-end 2000. The components of the increase in total loans were an increase of
$1.8 million in commercial and industrial loans, a $1.1 million increase in
construction loans, a $136 thousand increase in non-residential real estate
loans and a $17 thousand increase in consumer loans. These increases were offset
by a decrease of $1.1 million in residential real estate loans and a $284
thousand decrease in other loans. During 2001, the Company intends to continue
to emphasize the origination of commercial, industrial, and construction loans
to increase the yield in its loan portfolio and reduce its dependence on loans
secured by 1-4 family properties.
The following schedule presents the components of loans for each period
presented:
March 31 December 31
2001 2000
-------------------------------------------------------
Amount Percent Amount Percent
(Dollars in Thousands)
Commercial and industrial $ 6,746 6.57% $ 4,968 4.92%
Real Estate-Non Residential 27,665 26.94% 27,529 27.23%
Residential Properties (1-4 Family) 54,009 52.59% 55,138 54.54%
Construction 10,046 9.78% 8,960 8.86%
Consumer 2,797 2.72% 2,780 2.75%
Other Loans 1,434 1.40% 1,718 1.70%
Total Loans $102,697 100.00% $101,093 100.00%
Federal funds sold increased by $11 million to $19 million at March 31, 2001
from $8 million on December 31, 2000. Due to the promotion of time deposits
during the first quarter of 2001, time deposits increased $14 million. As
deposits increased faster than investment opportunities, the excess funds were
invested in short-term federal funds. These funds will be used to fund future
loan demand, with excess liquidity used to purchase investment securities.
Time deposits in other banks increased $1 million from $100 thousand at year-end
2000 to $1.1 million on March 31, 2001.
Total securities increased $7.3 million, or 18.4%, from $39.6 million at
year-end 2000 to $46.9 million on March 31, 2001. Securities, available for
sale, at market value, increased $8 million, or 24.1%, from $33.2 million on
December 31, 2000 to $41.2 million on March 31, 2001. The Company purchased
$14.5 million in new securities in the first three months of 2001 and $6.9
million in available for sale securities matured, were called and were repaid.
There were $444 thousand in recorded unrealized gains in the available for sale
portfolio during the first three months of 2001. Held to maturity securities
decreased to $5.7 million on March 31, 2001 from $6.4 million at year-end 2000.
There were $532 thousand in held to maturity purchases and $1.2 million in
maturing securities in the held to maturity portfolio during the first three
months of 2001.
Total year to date average deposits increased $14.5 million, or 10.5% during the
first quarter of 2001 from the twelve-month average of $138.4 million at
December 31, 2000 to $152.9 million for the three months ended March 31, 2001.
Average time deposits increased by $13.3 million, NOW deposits increased by $942
thousand and demand deposits increased by $96 thousand. These increases were
offset by decreases in money market deposits of $196 thousand and savings
deposits of $90 thousand. As discussed earlier, the increase in time deposits
was due to an aggressive promotion of higher yielding time deposits and the
Company's decision to compete for the deposits on the basis of rate. Management
continues to monitor the shift in deposits through its Asset/Liability
Committee.
The following schedule presents the components of deposits, for each period
presented.
Three Months Ended Twelve Months Ended
March 31, 2001 December 31, 2000
----------------------------------------------------------------
Average Percent Average Percent
Balance of Total Balance of Total
----------------------------------------------------------------
Deposits:
NOW Deposits $ 15,203 9.94% $ 14,261 10.30%
Savings Deposits 45,763 29.93% 45,853 33.13%
Money Market Deposits 6,825 4.46% 6,629 4.79%
Time Deposits 60,997 39.90% 47,656 34.43%
Demand Deposits 24,111 15.77% 24,015 17.35%
-------- ------ -------- ------
Total Deposits $152,899 100.00% $138,414 100.00%
======== ====== ======== ======
ASSET QUALITY
At March 31, 2001, non-performing loans decreased $50 thousand to $502 thousand,
as compared to $552 thousand at December 31, 2000. Management continues to
monitor the Company's asset quality.
The following table provides information regarding risk elements in the loan
portfolio:
March 31 December 31
2001 2000
---- ----
Non-accrual loans .................................... $502 $552
Non-accrual loans to total loans ..................... 0.49% 0.55%
Non-performing loans to total assets ................. 0.27% 0.34%
Allowance for possible loan losses as a
percentage of non-performing loans ................. 206.37% 176.27%
Allowance for possible loan losses to total loans .... 1.01% 0.96%
ALLOWANCE FOR POSSIBLE LOAN LOSSES
The allowance for possible loan losses is maintained at a level considered
adequate to provide for potential loan losses. The level of the allowance is
based on management's evaluation of potential losses in the portfolio, after
consideration of risk characteristics of the loans and prevailing and
anticipated economic conditions. The allowance is increased by provisions
charged to expense and reduced by charge-offs, net of recoveries. Although
management strives to maintain an allowance it deems adequate, future economic
changes, deterioration of borrowers' credit worthiness, and the impact of
examinations by regulatory agencies all could cause changes to the Company's
allowance for possible loan losses.
At March 31, 2001, the allowance for possible loan losses was $1.0 million, up
6.5% from the $973 thousand at year-end 2000. There were no charge offs or
recoveries reported in the first quarter of 2001. The allowance for possible
loan losses as a percentage of total loans was 1.01% at March 31, 2001 compared
to .96% on December 31, 2000.
LIQUIDITY MANAGEMENT
At March 31, 2001, the amount of liquid assets remained at a level management
deemed adequate to ensure that contractual liabilities, depositors' withdrawal
requirements, and other operational and customer credit needs could be
satisfied.
At March 31, 2001, liquid investments totaled $25 million, and all mature within
30 days.
It is management's intent to fund future loan demand primarily with deposit
growth. In addition, the Bank is a member of the Federal Home Loan Bank of New
York and as of March 31, 2001, had the ability to borrow $24.2 million against
its one to four family mortgages as collateral for long term advances. The Bank
also has available an overnight line of credit in the amount of $7.8 million. In
December of 2000 the Company entered into three long term FHLB advances totaling
$10 million. The three borrowings, which have an average interest rate of 4.96%,
mature on December 21, 2010, but are callable beginning in December 2001, 2002
and 2003, respectively. These borrowings were used to restructure maturing
short-term debt of $4 million and make available funds to purchase higher
yielding investments.
CAPITAL RESOURCES
Total stockholders' equity increased $1.7 million to $11.8 million at March 31,
2001 from the $10.1 million at year-end 2000. The increase was due to the sale
of common stock of $1.2 million, net income of $210 thousand and shares issued
through the dividend reinvestment plan of $40 thousand and an increase in the
net unrealized gain on securities available for sale of $266 thousand. On
January 17, 2001 the Company sold 9.9% of its outstanding stock to Lakeland
Bancorp, a New Jersey based bank holding company, at a price of $8.50 per share.
Lakeland purchased 139,906 shares for approximately $1.1 million.
At March 31, 2000, each of the Company and the Bank exceeded each of the
regulatory capital requirements applicable to it. The table below presents the
capital ratios at March 31, 2001 for both the Company and the Bank as well as
the minimum regulatory requirements.
Amount Ratio Amount Minimum Ratio
The Company
Leverage Capital $11,163 6.40% $6,977 4%
Tier 1 - Risk Based 11,163 10.63% 4,202 4%
Total Risk-Based 12,199 11.61% 8,404 8%
The Bank
Leverage Capital 10,233 5.87% 6,975 4%
Tier 1 Risk-Based 10,233 9.75% 4,200 4%
Total Risk-Based 11,269 10.73% 8,400 8%
NEW ACCOUNTING PRONOUNCEMENTS
The adoption of SFAS No. 138 on January 1, 2001, "Accounting for Certain
Derivative Instruments and Certain Hedging Activities, an amendment of FASB
Statement No. 133" did not have a material impact on the financial condition or
results of operations of the Company.
Part II Other Information
-------------------------
Item 1. Legal Proceedings
-----------------
The Company and the Bank are periodically involved in various legal
proceedings as a normal incident to their businesses. In the opinion of
management, no material loss is expected from any such pending lawsuit.
Item 2. Changes in Securities
---------------------
Not applicable
Item 3. Defaults Upon Served Securities
-------------------------------
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
Not applicable
Item 5. Other Information
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Not applicable.
Item 6. Exhibits and Report on form 8-K
-------------------------------
(a). Exhibits
Number Description
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27 Financial Data Schedule
(b). Reports on Form 8-K
On January 26, 2001 the Company filed a Form 8K
to report results for the year ending December 31, 2000.
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SUSSEX BANCORP
Date: By: /s/ Candace A. Leatham
--------------------------
CANDACE A. LEATHAM
Senior Vice President and
Chief Financial Officer