RIVERHEAD, N.Y.--(BUSINESS WIRE)--
Suffolk Bancorp (the “Company”) (NYSE:SCNB), parent company of Suffolk County National Bank (the “Bank”), today reported net income of $3.7 million, or $0.31 per diluted common share, for the fourth quarter of 2016 compared to $3.6 million, or $0.31 per diluted common share, a year ago. For the year ended December 31, 2016, the Company recorded net income of $19.8 million, or $1.66 per diluted common share, versus $17.7 million, or $1.49 per diluted common share for the comparable 2015 full year period. Excluding merger-related charges, net non-accrual interest received and other real estate owned (“OREO”) expenses incurred in 2016, core net income was $5.0 million and $21.5 million in the fourth quarter and full year 2016 periods, respectively.
The 2.6% increase in fourth quarter 2016 earnings versus the comparable 2015 period resulted from a $239 thousand increase in net interest income and a $400 thousand reduction in the provision for loan losses. Based upon consideration of many factors, including credit risk grades and economic conditions, in its evaluation of the various classes of the loan portfolio, the Company recorded in total a $400 thousand credit to the provision for loan losses in the fourth quarter of 2016. No provision expense was recorded in the comparable 2015 period. Partially offsetting these improvements was a $378 thousand increase in total operating expenses in 2016 when compared to the fourth quarter of 2015.
The Company is also pleased that the Office of the Comptroller of the Currency has approved the merger of the Bank with People's United Bank, N.A., the bank subsidiary of People's United Financial, Inc., in connection with the previously announced merger of the Company and People's United Financial, Inc. The merger transaction, which was previously approved by the Company's shareholders, remains subject to the approval of the Board of Governors of the Federal Reserve System and other customary conditions to closing, and is currently expected to be completed during the first quarter.
President & CEO Howard C. Bluver stated: “I am pleased to report a strong fourth quarter. Most importantly, we made significant progress during the quarter toward ensuring a smooth and successful integration in connection with our pending merger with People’s United Financial. When the merger was announced on June 27, 2016, I stated my belief that we could leverage the strengths of our combined institutions for the benefit of all our current and future stakeholders. After seeing how closely and cooperatively our respective teams have worked together over the past seven months, I am even more confident today that we will hit the ground running on day one. It is also gratifying to see that our continued Company-wide focus on high quality execution has not been compromised as a result of the pending merger.
“First, our deposit businesses performed well during the quarter. While linked-quarter commercial and municipal deposit levels reflect the winter seasonality that is inherent in many of our markets, particularly in the Hamptons on the east end of Long Island, we continue to grow deposit levels year over year, particularly with respect to non-interest bearing demand deposits. Total non-interest bearing demand deposits at December 31, 2016 were $867 million, compared to $788 million at December 31, 2015, an increase of $79 million, or 10.1%. At the end of 2016, 47% of our total deposits were demand deposits, resulting in an extraordinarily low cost of funds of 18 basis points during the fourth quarter and an attractive net interest margin of 3.68% for the quarter.
“Second, we experienced modest loan growth in 2016 compared to 2015, which is not surprising given our previously announced decision to temporarily pull back from certain commercial lending markets during the middle of the year. In addition, we sold $77 million in multi-family loans during the year, including approximately $28 million during the fourth quarter, in order to generate non-interest income, protect our net interest margin and avoid becoming too concentrated in a single product line. Notwithstanding these factors, I am pleased to report that we are building a very strong and diversified loan pipeline for the future and, once the merger with People’s United closes, we will no longer be subject to the growth constraints that come from operating with a relatively small balance sheet.
“Finally, credit quality continues to be strong in all categories. Total non-accrual loans at December 31, 2016 were $5.6 million, or 0.33% of total loans, compared to $6.3 million, or 0.37% of total loans, at September 30, 2016. All other key credit metrics remain solid and reflect our steadfast commitment to a strong and highly disciplined credit culture. Early delinquencies (30-89 days past due), which we manage aggressively as a harbinger of future credit issues, remain extremely low at $1.2 million, or 0.07% of total loans, at December 31, 2016, compared to $2.0 million, or 0.12% of total loans, at September 30, 2016. Given the continuous improvement we have seen in our credit profile, we also believe we are well reserved. Our allowance for loan losses at December 31, 2016 was $20.1 million, or 1.20% of total loans and 362% of total non-accrual loans.”
Performance and Other Highlights
- Asset Quality – Total non-accrual loans were $5.6 million or 0.33% of loans outstanding at December 31, 2016 versus $5.5 million or 0.33% of loans outstanding at December 31, 2015. Total accruing loans delinquent 30 days or more were $1.2 million or 0.07% of loans outstanding at December 31, 2016 compared to $1.0 million or 0.06% of loans outstanding at December 31, 2015. The Company recorded net loan recoveries of $52 thousand in the fourth quarter of 2016 versus net loan charge-offs of $150 thousand in the third quarter of 2016 and net loan recoveries of $370 thousand in the fourth quarter of 2015. The allowance for loan losses totaled $20.1 million at December 31, 2016 versus $20.7 million at December 31, 2015, representing 1.20% and 1.24% of total loans, respectively, at such dates. The allowance for loan losses as a percentage of non-accrual loans was 362% and 374% at December 31, 2016 and 2015, respectively. The Company held OREO amounting to $650 thousand at December 31, 2016. The Company held no OREO at December 31, 2015.
- Capital Strength – The Company’s capital ratios continue to exceed all regulatory requirements, including the individual minimum capital requirements that the OCC established for the Bank. The Company’s tier 1 leverage ratio was 10.31% at December 31, 2016 versus 9.77% at December 31, 2015. The Company’s tier 1 risk-based capital ratio was 13.50% at December 31, 2016 versus 11.68% at December 31, 2015. The Company’s total risk-based capital ratio was 14.73% at December 31, 2016 as compared to 12.89% at December 31, 2015. The Company’s total stockholders’ equity to total assets ratio and the Company’s tangible common equity to tangible assets ratio (“TCE ratio”) were 10.34% and 10.22%, respectively, at December 31, 2016 versus 9.10% and 8.98%, respectively, at December 31, 2015. The ratio of total stockholders’ equity to total assets is the most comparable U.S. GAAP measure to the non-GAAP TCE ratio presented herein.
- Core Deposits – Core deposits, consisting of demand, N.O.W., savings and money market accounts, totaled $1.64 billion at December 31, 2016 versus $1.56 billion at December 31, 2015. Core deposits represented 89% and 87% of total deposits at December 31, 2016 and 2015, respectively. Demand deposits were $867 million at December 31, 2016, reflecting an increase of 10.1% from $788 million at December 31, 2015. Demand deposits represented 47% and 44% of total deposits at December 31, 2016 and 2015, respectively.
- Loans – Loans outstanding at December 31, 2016 increased by $10 million, or 0.6%, to $1.68 billion when compared to December 31, 2015.
- Net Interest Margin – Net interest margin was 3.68% in the fourth quarter of 2016 versus 3.72% in the third quarter of 2016 and 3.84% in the fourth quarter of 2015. Adjusting for the impact of net non-accrual interest received in each period, the Company’s core net interest margin was 3.66% in the fourth quarter of 2016 as compared to 3.71% in the third quarter of 2016 and 3.82% in the fourth quarter of 2015. The average cost of funds was 0.18% in the fourth quarter of 2016 versus 0.19% in the third quarter of 2016 and 0.21% in the fourth quarter of 2015.
- Performance Ratios – Return on average assets and return on average common stockholders’ equity were 0.68% and 6.90%, respectively, in the fourth quarter of 2016 versus 0.99% and 10.21%, respectively, in the third quarter of 2016, and 0.69% and 7.33%, respectively, in the fourth quarter of 2015. Excluding merger-related charges, net non-accrual interest received and OREO expenses incurred, fourth quarter 2016 core return on average assets was 0.91% and core return on average stockholders’ equity was 9.18%.
Earnings Summary for the Quarter Ended December 31, 2016
The Company recorded net income of $3.7 million during the fourth quarter of 2016 versus $3.6 million in the comparable quarter a year ago. Excluding merger-related charges, net non-accrual interest received and OREO expenses incurred, core net income was $5.0 million in the fourth quarter of 2016. The 2.6% improvement in reported fourth quarter 2016 net income versus the comparable 2015 period resulted from a $239 thousand increase in net interest income and a $400 thousand reduction in the provision for loan losses. The Company recorded a $400 thousand credit to the provision for loan losses in the fourth quarter of 2016. Partially offsetting these positive factors was a $378 thousand increase in total operating expenses in the fourth quarter of 2016 versus 2015. The Company’s effective tax rate was 26.8% in the fourth quarter of 2016 versus 24.8% a year ago.
The $239 thousand or 1.3% improvement in fourth quarter 2016 net interest income resulted from a $101 million (5.3%) increase in average total interest-earning assets. Partially offsetting the earning asset growth was a 16 basis point decline in the Company’s net interest margin to 3.68% in 2016 from 3.84% in 2015. The Company’s fourth quarter 2016 average total interest-earning asset yield was 3.85% versus 4.05% in the comparable 2015 quarterly period. The decrease in the interest-earning asset yield in 2016 resulted from a two basis point decline in the average loan yield to 4.15% in 2016 along with a shift in the average asset mix to a greater percentage of Fed funds sold, securities purchased under agreements to resell and interest-bearing deposits due from banks (short-term investments) in 2016. Average loans increased by $95 million (6.0%) versus fourth quarter 2015. The average securities portfolio decreased by $107 million to $204 million in the fourth quarter of 2016 versus the comparable 2015 period. The average yield on the investment portfolio was 3.54% in 2016 versus 3.62% a year ago. At December 31, 2016, mortgage-backed securities, at 44%, made up the largest component of the Company’s investment portfolio. The available for sale securities portfolio had an unrealized pre-tax gain of $172 thousand and the entire securities portfolio had an estimated weighted average life of 3.4 years at December 31, 2016. Average short-term investments grew by $115 million in 2016 at an average yield of 0.49%.
The Company’s average cost of total interest-bearing liabilities decreased by four basis points to 0.33% in the fourth quarter of 2016 versus 0.37% in the comparable 2015 quarter. The Company’s total cost of funds, among the lowest in the industry, was 0.18% in the fourth quarter of 2016 versus 0.21% a year ago. Average core deposits increased $146 million (9.3%) to $1.7 billion during the fourth quarter of 2016 versus the fourth quarter of 2015, with average demand deposits representing 46% of fourth quarter 2016 average total deposits. Total deposits increased by $58 million or 3.2% to $1.8 billion at December 31, 2016 versus the comparable 2015 date. Core deposit balances, which represented 89% of total deposits at December 31, 2016, grew by $85 million or 5.5% during the same period. Average borrowings decreased by $49 million (76.4%) during the fourth quarter of 2016 compared to 2015. Total borrowings at December 31, 2016 were $15 million versus $165 million at the comparable 2015 date.
Non-interest income was unchanged in the fourth quarter of 2016 versus the comparable 2015 period. A reduction in service charges on deposit accounts (down $187 thousand) was offset by increases in other service charges, commissions and fees (up $117 thousand) and net gain on sale of securities available for sale (up $70 thousand).
Total operating expenses increased by $378 thousand or 2.5% in the fourth quarter of 2016 versus 2015 principally the result of $1.8 million of merger-related expenses incurred in 2016. Excluding these merger-related costs and $1.4 million in systems conversion expenses recorded in the fourth quarter of 2015, core operating expenses increased by $31 thousand or 0.2% in 2016 when compared to the fourth quarter of 2015. Growth in employee compensation and benefits of $1.0 million was the primary reason for the nominal increase in core operating expenses in 2016. Partially offsetting this increase were reductions in 2016 in other operating expenses, data processing costs and FDIC assessment expenses of $328 thousand, $291 thousand and $214 thousand, respectively, versus the comparable 2015 period. Consulting and professional fees were also lower by $118 thousand in the fourth quarter of 2016 from the year ago period. The increase in employee compensation and benefits expense in 2016 resulted principally from an increase in incentive compensation expense coupled with a higher deferred expense credit in 2015 due to last year’s increased fourth quarter loan production. The improvement in data processing costs resulted from lower core systems expenses in 2016 resulting from the conversion to Fiserv in the second quarter of 2016. The Company’s operating efficiency ratio was 73.6% in the fourth quarter of 2016 versus 71.9% a year ago. Excluding merger-related expenses, systems conversion expenses, net non-accrual interest received and OREO related expenses, the Company’s core operating efficiency ratio was 65.3% in 2016 versus 65.2% in 2015.
The Company recorded a $400 thousand credit to the provision for loan losses in the fourth quarter of 2016. The Company did not record a provision for loan losses in the fourth quarter of 2015.
The Company recorded income tax expense of $1.4 million in the fourth quarter of 2016 resulting in an effective tax rate of 26.8% versus an income tax expense of $1.2 million and an effective tax rate of 24.8% in the comparable period a year ago.
Earnings Summary for the Year Ended December 31, 2016
The Company recorded net income of $19.8 million during the full year ended December 31, 2016 versus $17.7 million in the comparable 2015 period. Excluding merger-related charges, net non-accrual interest received and OREO expenses incurred, core net income was $21.5 million for the full year of 2016. The improvement in reported 2016 net income resulted principally from a $4.3 million increase in net interest income coupled with a $1.1 million reduction in the provision for loan losses. Partially offsetting these positive factors was a $1.4 million increase in total operating expenses, a $111 thousand reduction in non-interest income, and an increase in the Company’s effective tax rate in 2016. Excluding merger-related expenses incurred in 2016 and systems conversion expenses incurred in 2015, total operating expenses increased by $375 thousand or 0.7% versus 2015.
The $4.3 million or 6.1% improvement in full year 2016 net interest income resulted from a $201 million increase in average total interest-earning assets, offset in part by a 21 basis point contraction of the Company’s net interest margin to 3.77% in 2016 from 3.98% in 2015. The Company’s full year 2016 average total interest-earning asset yield was 3.96% versus 4.15% in the comparable 2015 period. A lower average yield on the Company’s loan portfolio in 2016 versus the comparable 2015 period, down 13 basis points to 4.17%, was the primary driver of the reduction in the interest-earning asset yield. Excluding the impact of net non-accrual interest received in each full year period, the Company’s core net interest margin was 3.71% in 2016 versus 3.91% in 2015. The Company’s average loan portfolio increased by $230 million (15.6%) versus 2015 while the average securities portfolio decreased by $86 million (25.4%) to $251 million in the same period. The average yield on the investment portfolio was 3.58% in 2016 versus 3.71% a year ago.
The Company’s average cost of total interest-bearing liabilities increased by three basis points to 0.35% in 2016 versus 0.32% in the comparable 2015 full year period. The Company’s total cost of funds increased by two basis points to 0.20% in 2016 versus 2015. Average core deposits increased by $214 million (14.6%) to $1.7 billion during the 2016 full year period compared to 2015, with average demand deposits representing 44% of full year 2016 average total deposits. Average total deposits increased by $205 million or 12.1% to $1.9 billion during in 2016 versus 2015. Average core deposit balances represented 88% of average total deposits in 2016 compared to 86% in the year ago period.
The Company recorded a $500 thousand credit to the provision for loan losses during 2016 versus a provision expense of $600 thousand a year ago.
Total operating expenses increased by $1.4 million (2.5%) in the full year 2016 versus 2015 principally due to $2.4 million in merger-related expenses coupled with growth in employee compensation and benefits expense (up $1.6 million), offset in part by reductions in non-recurring project costs (systems conversion expenses) and data processing costs of $1.4 million and $1.3 million, respectively. The Company’s operating efficiency ratio improved to 64.5% in 2016 from 65.6% a year ago. Excluding merger-related costs, systems conversion costs, net non-accrual interest received and OREO related expenses, the Company’s core operating efficiency ratio improved to 61.9% in 2016 versus 64.9% a year ago.
The Company recorded income tax expense of $7.6 million in the 2016 full year period resulting in an effective tax rate of 27.8% versus income tax expense of $5.9 million and an effective tax rate of 25.0% in the comparable 2015 period.
Asset Quality
Non-accrual loans totaled $5.6 million or 0.33% of loans outstanding at December 31, 2016 versus $5.5 million or 0.33% of loans outstanding at December 31, 2015. The allowance for loan losses as a percentage of total non-accrual loans amounted to 362% and 374% at December 31, 2016 and December 31, 2015, respectively. Total accruing loans delinquent 30 days or more amounted to $1.2 million or 0.07% of loans outstanding at December 31, 2016 compared to $1.0 million or 0.06% of loans outstanding at December 31, 2015.
Total criticized and classified loans were $30 million at December 31, 2016 versus $21 million at December 31, 2015. Criticized loans are those loans that are not classified but require some degree of heightened monitoring. Classified loans were $25 million at December 31, 2016 as compared to $12 million at December 31, 2015. The allowance for loan losses as a percentage of total classified loans was 82% and 170%, respectively, at the same dates.
At December 31, 2016, the Company had $12 million in troubled debt restructurings (“TDRs”), primarily consisting of commercial and industrial loans, commercial real estate loans, residential mortgages and home equity loans totaling $4 million, $2 million, $5 million and $1 million, respectively. The Company had TDRs amounting to $12 million at December 31, 2015.
At December 31, 2016, the Company’s allowance for loan losses amounted to $20.1 million or 1.20% of period-end total loans outstanding. The allowance as a percentage of loans outstanding was 1.24% at December 31, 2015. The Company recorded net loan recoveries of $52 thousand in the fourth quarter of 2016 versus net loan charge-offs of $150 thousand in the third quarter of 2016 and net loan recoveries of $370 thousand in the fourth quarter of 2015. As a percentage of average total loans outstanding, these net amounts represented, on an annualized basis, (0.01%) for the fourth quarter of 2016, 0.03% for the third quarter of 2016 and (0.09%) for the fourth quarter of 2015.
The Company held OREO amounting to $650 thousand at December 31, 2016. The Company held no OREO at December 31, 2015.
Capital
Total stockholders’ equity was $216 million at December 31, 2016 compared to $197 million at December 31, 2015. The increase in stockholders’ equity versus December 31, 2015 was due principally to net income recorded during 2016, net of dividends paid. The Company’s return on average common stockholders’ equity was 6.90% and 9.54% for the three and twelve months ended December 31, 2016 versus 7.33% and 9.27%, respectively, for the comparable 2015 periods. Excluding merger-related expenses, net non-accrual interest received and OREO related expenses, the Company’s 2016 core return on average common stockholders’ equity was 9.18% and 10.32%, respectively, for the three and twelve-month periods ended December 31, 2016.
The Bank’s tier 1 leverage, common equity tier 1 risk-based, tier 1 risk-based and total risk-based capital ratios were 10.25%, 13.42%, 13.42% and 14.65%, respectively, at December 31, 2016. Each of these ratios exceeds the regulatory guidelines for a “well capitalized” institution, the highest regulatory capital category.
The Company’s capital ratios also exceeded all regulatory requirements, including the individual minimum capital requirements that the OCC established for the Bank, at December 31, 2016. The Company’s total stockholders’ equity to total assets ratio and the Company’s TCE ratio were 10.34% and 10.22%, respectively, at December 31, 2016 versus 9.10% and 8.98%, respectively, at December 31, 2015. The ratio of total stockholders’ equity to total assets is the most comparable U.S. GAAP measure to the non-GAAP TCE ratio presented herein.
Corporate Information
Suffolk Bancorp is a one-bank holding company engaged in the commercial banking business through Suffolk County National Bank, a full service commercial bank headquartered in Riverhead, New York and Suffolk Bancorp’s wholly owned subsidiary. Organized in 1890, the Bank has 27 branch offices in Nassau, Suffolk and Queens Counties, New York. For more information about the Bank and its products and services, please visit www.scnb.com.
Non-GAAP Disclosure
This discussion includes non-GAAP financial measures of the Company’s TCE ratio, tangible common equity, tangible assets, core net income, core fully taxable equivalent (“FTE”) net interest income, core FTE net interest margin, core operating expenses, core non-interest income, core FTE non-interest income, core returns on average assets and stockholders’ equity and core operating efficiency ratio. A non-GAAP financial measure is a numerical measure of historical or future financial performance, financial position or cash flows that excludes or includes amounts that are required to be disclosed in the most directly comparable measure calculated and presented in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”). The Company believes that these non-GAAP financial measures provide both management and investors a more complete understanding of the underlying operational results and trends and the Company’s marketplace performance. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the numbers prepared in accordance with U.S. GAAP and may not be comparable to similarly titled measures used by other financial institutions.
With respect to the calculations of core net income, core FTE net interest income and core FTE net interest margin for the periods presented in this discussion, reconciliations to the most comparable U.S. GAAP measures are provided in the following tables. Such reconciliations for the TCE ratio, tangible common equity, tangible assets, core operating expenses, core non-interest income, core FTE non-interest income, core returns on average assets and stockholders’ equity and core operating efficiency ratio are provided elsewhere herein.
| Three Months Ended December 31, | Years Ended December 31, | ||||||||||||||||||
| (in thousands) | 2016 | 2015 | 2016 | 2015 | |||||||||||||||
|
CORE NET INCOME: |
|||||||||||||||||||
| Net income, as reported | $ | 3,733 | $ | 3,637 | $ | 19,831 | $ | 17,687 | |||||||||||
| Adjustments: | |||||||||||||||||||
| Net non-accrual interest adjustment | (114 | ) | (75 | ) | (298 | ) | (1,248 | ) | |||||||||||
| Merger costs | 1,790 | - | 2,434 | - | |||||||||||||||
| Nonrecurring project costs | - | 1,443 | - | 1,443 | |||||||||||||||
| OREO-related expenses | 8 | - | 113 | - | |||||||||||||||
| Total adjustments, before income taxes | 1,684 | 1,368 | 2,249 | 195 | |||||||||||||||
| Adjustment for reported effective income tax rate | 452 | 340 | 624 | 49 | |||||||||||||||
| Total adjustments, after income taxes | 1,232 | 1,028 | 1,625 | 146 | |||||||||||||||
| Core net income | $ | 4,965 | $ | 4,665 | $ | 21,456 | $ | 17,833 | |||||||||||
| Three Months Ended December 31, | Years Ended December 31, | |||||||||||||||||||||||||||||||
| ($ in thousands) | 2016 | 2015 | 2016 | 2015 | ||||||||||||||||||||||||||||
|
CORE NET INTEREST INCOME/MARGIN: |
||||||||||||||||||||||||||||||||
| Net interest income/margin (FTE) | $ | 18,724 | 3.68 | % | $ | 18,618 | 3.84 | % | $ | 76,841 | 3.77 | % | $ | 73,093 | 3.98 | % | ||||||||||||||||
| Net non-accrual interest adjustment | (114 | ) | (0.02 | %) | (75 | ) | (0.02 | %) | (298 | ) | (0.06 | %) | (1,248 | ) | (0.07 | %) | ||||||||||||||||
| Core net interest income/margin (FTE) | $ | 18,610 | 3.66 | % | $ | 18,543 | 3.82 | % | $ | 76,543 | 3.71 | % | $ | 71,845 | 3.91 | % | ||||||||||||||||
Safe Harbor Statement Pursuant to the Private Securities Litigation Reform Act of 1995
Certain statements contained in this document are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These can include remarks about the Company, the proposed merger with People’s United Financial, Inc. (“People’s United”), the banking industry, the economy in general, expectations of the business environment in which the Company operates, projections of future performance, and potential future credit experience. These remarks are based upon current management expectations, and may, therefore, involve risks and uncertainties that cannot be predicted or quantified, that are beyond the Company’s control and that could cause future results to vary materially from the Company’s historical performance or from current expectations. These remarks may be identified by such forward-looking statements as “should,” “expect,” “believe,” “view,” “opportunity,” “allow,” “continues,” “reflects,” “typically,” “usually,” “anticipate,” or similar statements or variations of such terms. Factors that could affect the Company include particularly, but are not limited to: the ability to obtain regulatory approvals and meet other closing conditions to the merger with People’s United, including the risk that regulatory approvals required for the merger are not obtained or are obtained subject to conditions that are not anticipated; delay in closing the merger; difficulties and delays in integrating the Company’s business or fully realizing cost savings and other benefits of the merger; business disruption following the merger; increased capital requirements mandated by the Company’s regulators, including the individual minimum capital requirements that the OCC established for the Bank; the Bank’s temporary limitation on the growth of its commercial real estate (“CRE”) portfolio and the potentially adverse impact thereof on the Company’s overall business, financial condition and results of operation due to the importance of the Bank’s CRE business to the Company’s overall business, financial condition and results of operation; any failure by the Bank to comply with the individual minimum capital ratios (including as a result of increases to the Bank’s allowance for loan losses), which may result in regulatory enforcement actions; the duration of the Bank’s limitation on the growth of its CRE portfolio, and the potentially adverse impact thereof on the Company’s overall business, financial condition and results of operation; the cost of compliance and significant amount of time required of management to comply with regulatory requirements; results of changes in law, regulations or regulatory practices; the Company’s ability to raise capital; competitive factors, including price competition; changes in interest rates; increases or decreases in retail and commercial economic activity in the Company’s market area; variations in the ability and propensity of consumers and businesses to borrow, repay, or deposit money, or to use other banking and financial services; the Company’s ability to attract and retain key management and staff; any failure by the Company to maintain effective internal control over financial reporting; larger-than-expected losses from the sale of assets; and the potential that net charge-offs are higher than expected or for increases in our provision for loan losses. Further, it could take the Company longer than anticipated to implement its strategic plans to increase revenue and manage non-interest expense, or it may not be possible to implement those plans at all. Finally, new and unanticipated legislation, regulation, or accounting standards may require the Company to change its practices in ways that materially change the results of operations. We have no obligation to update any forward-looking statements to reflect events or circumstances after the date of this document. For more information, see the risk factors described in the Company’s Annual Report on Form 10-K and other filings with the Securities and Exchange Commission.
Financial Highlights Follow
| CONSOLIDATED STATEMENTS OF CONDITION | |||||||||
| (unaudited, dollars in thousands, except per share data) | |||||||||
| December 31, 2016 | December 31, 2015 | ||||||||
| ASSETS | |||||||||
| Cash and cash equivalents | |||||||||
| Cash and non-interest-bearing deposits due from banks | $ | 37,572 | $ | 75,272 | |||||
| Interest-bearing deposits due from banks | 87,282 | 22,814 | |||||||
| Total cash and cash equivalents | 124,854 | 98,086 | |||||||
| Federal Reserve and Federal Home Loan Bank stock and other investments | 4,524 | 10,756 | |||||||
| Investment securities: | |||||||||
| Available for sale, at fair value | 179,242 | 247,099 | |||||||
| Held to maturity (fair value $19,259 and $63,272, respectively) | 18,780 | 61,309 | |||||||
| Total investment securities | 198,022 | 308,408 | |||||||
| Loans | 1,676,564 | 1,666,447 | |||||||
| Allowance for loan losses | 20,117 | 20,685 | |||||||
| Net loans | 1,656,447 | 1,645,762 | |||||||
| Loans held for sale | - | 1,666 | |||||||
| Premises and equipment, net | 24,725 | 23,240 | |||||||
| Bank-owned life insurance | 53,756 | 52,383 | |||||||
| Deferred tax assets, net | 13,595 | 15,845 | |||||||
| Accrued interest and loan fees receivable | 5,742 | 5,859 | |||||||
| Goodwill and other intangibles | 2,722 | 2,864 | |||||||
| Other real estate owned ("OREO") | 650 | - | |||||||
| Other assets | 6,465 | 3,723 | |||||||
| TOTAL ASSETS | $ | 2,091,502 | $ | 2,168,592 | |||||
| LIABILITIES & STOCKHOLDERS' EQUITY | |||||||||
| Demand deposits | $ | 867,404 | $ | 787,944 | |||||
| Savings, N.O.W. and money market deposits | 774,075 | 768,036 | |||||||
| Subtotal core deposits | 1,641,479 | 1,555,980 | |||||||
| Time deposits | 196,703 | 224,643 | |||||||
| Total deposits | 1,838,182 | 1,780,623 | |||||||
| Borrowings | 15,000 | 165,000 | |||||||
| Unfunded pension liability | 6,072 | 6,428 | |||||||
| Capital leases | 4,261 | 4,395 | |||||||
| Other liabilities | 11,823 | 14,888 | |||||||
| TOTAL LIABILITIES | 1,875,338 | 1,971,334 | |||||||
| COMMITMENTS AND CONTINGENT LIABILITIES | |||||||||
| STOCKHOLDERS' EQUITY | |||||||||
| Common stock (par value $2.50; 15,000,000 shares authorized; | |||||||||
| issued 14,102,617 and 13,966,292, respectively; | |||||||||
| outstanding 11,936,879 and 11,800,554, respectively) | 35,256 | 34,916 | |||||||
| Surplus | 49,532 | 46,239 | |||||||
| Retained earnings | 145,173 | 130,093 | |||||||
| Treasury stock at par (2,165,738 shares) | (5,414 | ) | (5,414 | ) | |||||
| Accumulated other comprehensive loss, net of tax | (8,383 | ) | (8,576 | ) | |||||
| TOTAL STOCKHOLDERS' EQUITY | 216,164 | 197,258 | |||||||
| TOTAL LIABILITIES & STOCKHOLDERS' EQUITY | $ | 2,091,502 | $ | 2,168,592 | |||||
| CONSOLIDATED STATEMENTS OF INCOME | |||||||||||||||
| (unaudited, dollars in thousands, except per share data) | |||||||||||||||
| Three Months Ended December 31, | Years Ended December 31, | ||||||||||||||
| 2016 | 2015 | 2016 | 2015 | ||||||||||||
| INTEREST INCOME | |||||||||||||||
| Loans and loan fees | $ | 17,320 | $ | 16,552 | $ | 70,128 | $ | 62,914 | |||||||
| U.S. Government agency obligations | 14 | 477 | 676 | 2,079 | |||||||||||
| Obligations of states and political subdivisions | 691 | 1,049 | 3,400 | 4,774 | |||||||||||
| Collateralized mortgage obligations | 83 | 86 | 353 | 593 | |||||||||||
| Mortgage-backed securities | 445 | 438 | 1,846 | 1,767 | |||||||||||
| Corporate bonds | 161 | 132 | 630 | 311 | |||||||||||
| Federal funds sold, securities purchased under agreements to | |||||||||||||||
| resell and interest-bearing deposits due from banks | 163 | 12 | 354 | 62 | |||||||||||
| Dividends | 57 | 59 | 332 | 280 | |||||||||||
| Total interest income | 18,934 | 18,805 | 77,719 | 72,780 | |||||||||||
| INTEREST EXPENSE | |||||||||||||||
| Savings, N.O.W. and money market deposits | 522 | 477 | 2,084 | 1,383 | |||||||||||
| Time deposits | 290 | 379 | 1,305 | 1,422 | |||||||||||
| Borrowings | 66 | 132 | 540 | 442 | |||||||||||
| Total interest expense | 878 | 988 | 3,929 | 3,247 | |||||||||||
| Net interest income | 18,056 | 17,817 | 73,790 | 69,533 | |||||||||||
| (Credit) provision for loan losses | (400 | ) | - | (500 | ) | 600 | |||||||||
| Net interest income after (credit) provision for loan losses | 18,456 | 17,817 | 74,290 | 68,933 | |||||||||||
| NON-INTEREST INCOME | |||||||||||||||
| Service charges on deposit accounts | 536 | 723 | 2,449 | 3,042 | |||||||||||
| Other service charges, commissions and fees | 803 | 686 | 2,891 | 2,718 | |||||||||||
| Net gain on sale of securities available for sale | 70 | - | 617 | 319 | |||||||||||
| Net gain on sale of portfolio loans | - | - | 457 | 568 | |||||||||||
| Net gain on sale of mortgage loans originated for sale | 45 | 66 | 292 | 356 | |||||||||||
| Income from bank-owned life insurance | 338 | 356 | 1,373 | 1,274 | |||||||||||
| Other operating income | 236 | 195 | 404 | 317 | |||||||||||
| Total non-interest income | 2,028 | 2,026 | 8,483 | 8,594 | |||||||||||
| OPERATING EXPENSES | |||||||||||||||
| Employee compensation and benefits | 9,363 | 8,344 | 35,029 | 33,446 | |||||||||||
| Occupancy expense | 1,351 | 1,439 | 5,476 | 5,675 | |||||||||||
| Equipment expense | 488 | 437 | 1,829 | 1,636 | |||||||||||
| Consulting and professional services | 550 | 668 | 2,128 | 2,159 | |||||||||||
| FDIC assessment | 66 | 280 | 953 | 1,082 | |||||||||||
| Data processing | 242 | 533 | 811 | 2,123 | |||||||||||
| Merger costs | 1,790 | - | 2,434 | - | |||||||||||
| Nonrecurring project costs | - | 1,443 | - | 1,443 | |||||||||||
| Other operating expenses | 1,532 | 1,860 | 6,660 | 6,390 | |||||||||||
| Total operating expenses | 15,382 | 15,004 | 55,320 | 53,954 | |||||||||||
| Income before income tax expense | 5,102 | 4,839 | 27,453 | 23,573 | |||||||||||
| Income tax expense | 1,369 | 1,202 | 7,622 | 5,886 | |||||||||||
| NET INCOME | $ | 3,733 | $ | 3,637 | $ | 19,831 | $ | 17,687 | |||||||
| EARNINGS PER COMMON SHARE - BASIC | $ | 0.31 | $ | 0.31 | $ | 1.67 | $ | 1.50 | |||||||
| EARNINGS PER COMMON SHARE - DILUTED | $ | 0.31 | $ | 0.31 | $ | 1.66 | $ | 1.49 | |||||||
| CASH DIVIDENDS DECLARED PER COMMON SHARE | $ | 0.10 | $ | 0.10 | $ | 0.40 | $ | 0.32 | |||||||
| CONSOLIDATED STATEMENTS OF INCOME | |||||||||||||||||||
| QUARTERLY TREND | |||||||||||||||||||
| (unaudited, dollars in thousands, except per share data) | |||||||||||||||||||
| Three Months Ended | |||||||||||||||||||
| December 31, | September 30, | June 30, | March 31, | December 31, | |||||||||||||||
| 2016 | 2016 | 2016 | 2016 | 2015 | |||||||||||||||
| INTEREST INCOME | |||||||||||||||||||
| Loans and loan fees | $ | 17,320 | $ | 17,545 | $ | 18,041 | $ | 17,222 | $ | 16,552 | |||||||||
| U.S. Government agency obligations | 14 | 47 | 197 | 418 | 477 | ||||||||||||||
| Obligations of states and political subdivisions | 691 | 791 | 924 | 994 | 1,049 | ||||||||||||||
| Collateralized mortgage obligations | 83 | 91 | 100 | 79 | 86 | ||||||||||||||
| Mortgage-backed securities | 445 | 464 | 473 | 464 | 438 | ||||||||||||||
| Corporate bonds | 161 | 161 | 162 | 146 | 132 | ||||||||||||||
| Federal funds sold, securities purchased under agreements to | |||||||||||||||||||
| resell and interest-bearing deposits due from banks | 163 | 133 | 29 | 29 | 12 | ||||||||||||||
| Dividends | 57 | 92 | 108 | 75 | 59 | ||||||||||||||
| Total interest income | 18,934 | 19,324 | 20,034 | 19,427 | 18,805 | ||||||||||||||
| INTEREST EXPENSE | |||||||||||||||||||
| Savings, N.O.W. and money market deposits | 522 | 539 | 510 | 513 | 477 | ||||||||||||||
| Time deposits | 290 | 331 | 336 | 348 | 379 | ||||||||||||||
| Borrowings | 66 | 66 | 166 | 242 | 132 | ||||||||||||||
| Total interest expense | 878 | 936 | 1,012 | 1,103 | 988 | ||||||||||||||
| Net interest income | 18,056 | 18,388 | 19,022 | 18,324 | 17,817 | ||||||||||||||
| (Credit) provision for loan losses | (400 | ) | (350 | ) | - | 250 | - | ||||||||||||
| Net interest income after (credit) provision for loan losses | 18,456 | 18,738 | 19,022 | 18,074 | 17,817 | ||||||||||||||
| NON-INTEREST INCOME | |||||||||||||||||||
| Service charges on deposit accounts | 536 | 523 | 614 | 776 | 723 | ||||||||||||||
| Other service charges, commissions and fees | 803 | 793 | 684 | 611 | 686 | ||||||||||||||
| Net gain on sale of securities available for sale | 70 | 523 | 18 | 6 | - | ||||||||||||||
| Net gain on sale of portfolio loans | - | - | 457 | - | - | ||||||||||||||
| Net gain on sale of mortgage loans originated for sale | 45 | 100 | 73 | 74 | 66 | ||||||||||||||
| Income from bank-owned life insurance | 338 | 344 | 345 | 346 | 356 | ||||||||||||||
| Other operating income | 236 | 39 | 50 | 79 | 195 | ||||||||||||||
| Total non-interest income | 2,028 | 2,322 | 2,241 | 1,892 | 2,026 | ||||||||||||||
| OPERATING EXPENSES | |||||||||||||||||||
| Employee compensation and benefits | 9,363 | 8,518 | 8,482 | 8,666 | 8,344 | ||||||||||||||
| Occupancy expense | 1,351 | 1,337 | 1,346 | 1,442 | 1,439 | ||||||||||||||
| Equipment expense | 488 | 494 | 461 | 386 | 437 | ||||||||||||||
| Consulting and professional services | 550 | 476 | 619 | 483 | 668 | ||||||||||||||
| FDIC assessment | 66 | 303 | 291 | 293 | 280 | ||||||||||||||
| Data processing | 242 | 156 | 234 | 179 | 533 | ||||||||||||||
| Merger costs | 1,790 | 644 | - | - | - | ||||||||||||||
| Nonrecurring project costs | - | - | - | - | 1,443 | ||||||||||||||
| Other operating expenses | 1,532 | 1,539 | 1,886 | 1,703 | 1,860 | ||||||||||||||
| Total operating expenses | 15,382 | 13,467 | 13,319 | 13,152 | 15,004 | ||||||||||||||
| Income before income tax expense | 5,102 | 7,593 | 7,944 | 6,814 | 4,839 | ||||||||||||||
| Income tax expense | 1,369 | 2,118 | 2,159 | 1,976 | 1,202 | ||||||||||||||
| NET INCOME | $ | 3,733 | $ | 5,475 | $ | 5,785 | $ | 4,838 | $ | 3,637 | |||||||||
| EARNINGS PER COMMON SHARE - BASIC | $ | 0.31 | $ | 0.46 | $ | 0.49 | $ | 0.41 | $ | 0.31 | |||||||||
| EARNINGS PER COMMON SHARE - DILUTED | $ | 0.31 | $ | 0.46 | $ | 0.48 | $ | 0.41 | $ | 0.31 | |||||||||
| CASH DIVIDENDS DECLARED PER COMMON SHARE | $ | 0.10 | $ | 0.10 | $ | 0.10 | $ | 0.10 | $ | 0.10 | |||||||||
| STATISTICAL SUMMARY | |||||||||||||||||||||
| (unaudited, dollars in thousands, except per share data) | |||||||||||||||||||||
| Three Months Ended December 31, | Years Ended December 31, | ||||||||||||||||||||
| 2016 | 2015 | 2016 | 2015 | ||||||||||||||||||
|
AVERAGE BALANCES: |
|||||||||||||||||||||
| Total assets | $ | 2,173,076 | $ | 2,080,471 | $ | 2,194,399 | $ | 1,984,580 | |||||||||||||
| Loans and performing loans held for sale | 1,683,655 | 1,589,016 | 1,706,263 | 1,475,773 | |||||||||||||||||
| Investment securities | 204,001 | 310,619 | 251,319 | 337,050 | |||||||||||||||||
| Interest-earning assets | 2,023,344 | 1,922,330 | 2,038,513 | 1,837,977 | |||||||||||||||||
| Demand deposits | 880,804 | 799,925 | 832,266 | 742,876 | |||||||||||||||||
| Core deposits (1) | 1,709,917 | 1,564,058 | 1,678,809 | 1,464,865 | |||||||||||||||||
| Total deposits | 1,918,448 | 1,795,597 | 1,900,504 | 1,695,411 | |||||||||||||||||
| Borrowings | 15,008 | 63,713 | 62,318 | 74,746 | |||||||||||||||||
| Stockholders' equity | 215,239 | 196,947 | 207,893 | 190,785 | |||||||||||||||||
|
FINANCIAL PERFORMANCE RATIOS: |
|||||||||||||||||||||
| Return on average assets | 0.68 | % | 0.69 | % | 0.90 | % | 0.89 | % | |||||||||||||
| Core return on average assets (2) | 0.91 | % | 0.89 | % | 0.98 | % | 0.90 | % | |||||||||||||
| Return on average stockholders' equity | 6.90 | % | 7.33 | % | 9.54 | % | 9.27 | % | |||||||||||||
| Core return on average stockholders' equity (3) | 9.18 | % | 9.40 | % | 10.32 | % | 9.35 | % | |||||||||||||
| Average loans/average deposits | 87.76 | % | 88.50 | % | 89.78 | % | 87.05 | % | |||||||||||||
| Average core deposits/average deposits | 89.13 | % | 87.11 | % | 88.33 | % | 86.40 | % | |||||||||||||
| Average demand deposits/average deposits | 45.91 | % | 44.55 | % | 43.79 | % | 43.82 | % | |||||||||||||
| Net interest margin (FTE) | 3.68 | % | 3.84 | % | 3.77 | % | 3.98 | % | |||||||||||||
| Operating efficiency ratio (4) | 73.55 | % | 71.87 | % | 64.49 | % | 65.64 | % | |||||||||||||
| Core operating efficiency ratio (5) | 65.34 | % | 65.19 | % | 61.86 | % | 64.87 | % | |||||||||||||
| (1) Demand, savings, N.O.W. and money market deposits. |
| (2) Core return on average assets, the ratio of core net income to average total assets, is a non-GAAP measure and should not be considered as a substitute for or superior to financial measures determined in accordance with U.S. GAAP. |
| (3) Core return on average stockholders' equity, the ratio of core net income to average total stockholders' equity, is a non-GAAP measure and should not be considered as a substitute for or superior to financial measures determined in accordance with U.S. GAAP. |
| (4) The operating efficiency ratio is calculated by dividing operating expenses less OREO-related expenses by the sum of fully taxable equivalent ("FTE") net interest income and non-interest income, excluding net gains and losses on sales of available for sale securities. |
| (5) The core operating efficiency ratio is not required by U.S. GAAP or by applicable bank regulatory requirements, but is a metric used by management to evaluate core operating efficiency. Since there is no authoritative requirement to calculate this ratio, our ratio is not necessarily comparable to similar efficiency measures disclosed or used by other companies in the financial services industry. The core operating efficiency ratio is a non-GAAP financial measure and should be considered in addition to, not as a substitute for or superior to, financial measures determined in accordance with U.S. GAAP. The reconciliation of core operating expenses to U.S. GAAP total operating expenses and core non-interest income to U.S. GAAP total non-interest income and the calculation of the core operating efficiency ratio are set forth below: |
|
Core operating expenses: |
|||||||||||||||||||||||||||||||
| Total operating expenses | $ | 15,382 | $ | 15,004 | $ | 55,320 | $ | 53,954 | |||||||||||||||||||||||
| Adjust for merger costs | (1,790 | ) | - | (2,434 | ) | - | |||||||||||||||||||||||||
| Adjust for nonrecurring project costs | - | (1,443 | ) | - | (1,443 | ) | |||||||||||||||||||||||||
| Adjust for OREO-related expenses | (8 | ) | - | (113 | ) | - | |||||||||||||||||||||||||
| Core operating expenses | 13,584 | 13,561 | 52,773 | 52,511 | |||||||||||||||||||||||||||
|
Core non-interest income: |
|||||||||||||||||||||||||||||||
| Total non-interest income | 2,028 | 2,026 | 8,483 | 8,594 | |||||||||||||||||||||||||||
| Adjustments | - | - | - | - | |||||||||||||||||||||||||||
| Core non-interest income | 2,028 | 2,026 | 8,483 | 8,594 | |||||||||||||||||||||||||||
| Adjust for tax-equivalent basis | 222 | 233 | 898 | 833 | |||||||||||||||||||||||||||
| Core FTE non-interest income | 2,250 | 2,259 | 9,381 | 9,427 | |||||||||||||||||||||||||||
|
Core operating efficiency ratio: |
|||||||||||||||||||||||||||||||
| Core operating expenses | 13,584 | 13,561 | 52,773 | 52,511 | |||||||||||||||||||||||||||
| Core FTE net interest income | 18,610 | 18,543 | 76,543 | 71,845 | |||||||||||||||||||||||||||
| Core FTE non-interest income | 2,250 | 2,259 | 9,381 | 9,427 | |||||||||||||||||||||||||||
| Adjust for net gain on sale of securities available for sale | (70 | ) | - | (617 | ) | (319 | ) | ||||||||||||||||||||||||
| Core total FTE revenue | 20,790 | 20,802 | 85,307 | 80,953 | |||||||||||||||||||||||||||
| Core operating expenses/core total FTE revenue | 65.34 | % | 65.19 | % | 61.86 | % | 64.87 | % | |||||||||||||||||||||||
| STATISTICAL SUMMARY (continued) | |||||||||
| (unaudited, dollars in thousands) | |||||||||
|
RECONCILIATION OF BASIC AND DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: |
|||||||||
| Three Months Ended December 31, | Years Ended December 31, | ||||||||
| 2016 | 2015 | 2016 | 2015 | ||||||
| Weighted average common shares outstanding | 11,810,620 | 11,688,069 | 11,766,912 | 11,649,240 | |||||
| Weighted average unvested restricted shares | 112,702 | 108,073 | 115,735 | 107,211 | |||||
| Weighted average shares for basic earnings per share | 11,923,322 | 11,796,142 | 11,882,647 | 11,756,451 | |||||
| Additional diluted shares: | |||||||||
| Stock options | 107,928 | 83,677 | 89,725 | 77,053 | |||||
| Weighted average shares for diluted earnings per share | 12,031,250 | 11,879,819 | 11,972,372 | 11,833,504 | |||||
|
CAPITAL RATIOS: |
||||||||||||
| December 31, | September 30, | June 30, | March 31, | December 31, | ||||||||
| 2016 | 2016 | 2016 | 2016 | 2015 | ||||||||
|
Suffolk Bancorp: |
||||||||||||
| Tier 1 leverage ratio | 10.31% | 10.04% | 9.66% | 9.52% | 9.77% | |||||||
| Common equity tier 1 risk-based capital ratio | 13.50% | 12.73% | 12.04% | 11.48% | 11.68% | |||||||
| Tier 1 risk-based capital ratio | 13.50% | 12.73% | 12.04% | 11.48% | 11.68% | |||||||
| Total risk-based capital ratio | 14.73% | 13.93% | 13.24% | 12.65% | 12.89% | |||||||
| Tangible common equity ratio (1) | 10.22% | 9.66% | 9.46% | 8.91% | 8.98% | |||||||
| Total stockholders' equity/total assets (2) | 10.34% | 9.77% | 9.58% | 9.03% | 9.10% | |||||||
|
Suffolk County National Bank: |
||||||||||||
| Tier 1 leverage ratio | 10.25% | 9.94% | 9.55% | 9.30% | 9.58% | |||||||
| Common equity tier 1 risk-based capital ratio | 13.42% | 12.61% | 11.90% | 11.21% | 11.45% | |||||||
| Tier 1 risk-based capital ratio | 13.42% | 12.61% | 11.90% | 11.21% | 11.45% | |||||||
| Total risk-based capital ratio | 14.65% | 13.81% | 13.10% | 12.38% | 12.66% | |||||||
| Tangible common equity ratio (1) | 10.15% | 9.57% | 9.35% | 8.70% | 8.79% | |||||||
| Total stockholders' equity/total assets (2) | 10.27% | 9.68% | 9.46% | 8.81% | 8.91% | |||||||
| (1) The ratio of tangible common equity to tangible assets, or TCE ratio, is calculated by dividing total common stockholders’ equity by total assets, after reducing both amounts by intangible assets. The TCE ratio is not required by U.S. GAAP or by applicable bank regulatory requirements, but is a metric used by management to evaluate the adequacy of our capital levels. Since there is no authoritative requirement to calculate the TCE ratio, our TCE ratio is not necessarily comparable to similar capital measures disclosed or used by other companies in the financial services industry. Tangible common equity and tangible assets are non-GAAP financial measures and should be considered in addition to, not as a substitute for or superior to, financial measures determined in accordance with U.S. GAAP. With respect to the calculation of the actual unaudited TCE ratios at December 31, 2016, reconciliations of tangible common equity to U.S. GAAP total common stockholders’ equity and tangible assets to U.S. GAAP total assets are set forth below: |
|
Suffolk Bancorp: |
|||||||||||||||||||||
| Total stockholders' equity | $ | 216,164 | Total assets | $ | 2,091,502 | 10.34 | % | ||||||||||||||
| Less: intangible assets | (2,722 | ) | Less: intangible assets | (2,722 | ) | ||||||||||||||||
| Tangible common equity | $ | 213,442 | Tangible assets | $ | 2,088,780 | 10.22 | % | ||||||||||||||
|
Suffolk County National Bank: |
|||||||||||||||||||||
| Total stockholders' equity | $ | 214,735 | Total assets | $ | 2,091,105 | 10.27 | % | ||||||||||||||
| Less: intangible assets | (2,722 | ) | Less: intangible assets | (2,722 | ) | ||||||||||||||||
| Tangible common equity | $ | 212,013 | Tangible assets | $ | 2,088,383 | 10.15 | % | ||||||||||||||
| (2) The ratio of total stockholders' equity to total assets is the most comparable U.S. GAAP measure to the non-GAAP tangible common equity ratio presented herein. |
| STATISTICAL SUMMARY (continued) | ||||||||||||||||||||||
| (unaudited, dollars in thousands, except per share data) | ||||||||||||||||||||||
| Periods Ended | ||||||||||||||||||||||
| December 31, | September 30, | June 30, | March 31, | December 31, | ||||||||||||||||||
| 2016 | 2016 | 2016 | 2016 | 2015 | ||||||||||||||||||
|
LOAN DISTRIBUTION (1): |
||||||||||||||||||||||
| Commercial and industrial | $ | 189,410 | $ | 210,510 | $ | 215,960 | $ | 195,321 | $ | 189,769 | ||||||||||||
| Commercial real estate | 731,986 | 728,562 | 734,586 | 718,934 | 696,787 | |||||||||||||||||
| Multifamily | 402,935 | 418,108 | 426,367 | 480,678 | 426,549 | |||||||||||||||||
| Mixed use commercial | 78,807 | 82,527 | 84,070 | 83,421 | 78,787 | |||||||||||||||||
| Real estate construction | 41,028 | 43,190 | 40,452 | 37,373 | 37,233 | |||||||||||||||||
| Residential mortgages | 185,112 | 180,831 | 178,504 | 181,649 | 186,313 | |||||||||||||||||
| Home equity | 42,419 | 42,407 | 44,655 | 45,447 | 44,951 | |||||||||||||||||
| Consumer | 4,867 | 4,651 | 5,280 | 5,249 | 6,058 | |||||||||||||||||
| Total loans | $ | 1,676,564 | $ | 1,710,786 | $ | 1,729,874 | $ | 1,748,072 | $ | 1,666,447 | ||||||||||||
| Sequential quarter growth rate | (2.00 | %) | (1.10 | %) | (1.04 | %) | 4.90 | % | 6.86 | % | ||||||||||||
| Period-end loans/deposits ratio | 91.21 | % | 87.99 | % | 88.76 | % | 93.46 | % | 93.59 | % | ||||||||||||
|
FUNDING DISTRIBUTION: |
||||||||||||||||||||||
| Demand | $ | 867,404 | $ | 867,178 | $ | 863,048 | $ | 790,678 | $ | 787,944 | ||||||||||||
| N.O.W. | 118,683 | 127,128 | 134,562 | 143,862 | 130,968 | |||||||||||||||||
| Savings | 355,931 | 362,269 | 350,565 | 337,657 | 326,469 | |||||||||||||||||
| Money market | 299,461 | 368,393 | 374,926 | 368,331 | 310,599 | |||||||||||||||||
| Total core deposits | 1,641,479 | 1,724,968 | 1,723,101 | 1,640,528 | 1,555,980 | |||||||||||||||||
| Time | 196,703 | 219,232 | 225,918 | 229,841 | 224,643 | |||||||||||||||||
| Total deposits | 1,838,182 | 1,944,200 | 1,949,019 | 1,870,369 | 1,780,623 | |||||||||||||||||
| Borrowings | 15,000 | 15,000 | 15,000 | 160,000 | 165,000 | |||||||||||||||||
| Total funding sources | $ | 1,853,182 | $ | 1,959,200 | $ | 1,964,019 | $ | 2,030,369 | $ | 1,945,623 | ||||||||||||
| Sequential quarter growth rate - total deposits | (5.45 | %) | (0.25 | %) | 4.21 | % | 5.04 | % | (0.85 | %) | ||||||||||||
| Period-end core deposits/total deposits ratio | 89.30 | % | 88.72 | % | 88.41 | % | 87.71 | % | 87.38 | % | ||||||||||||
| Period-end demand deposits/total deposits ratio | 47.19 | % | 44.60 | % | 44.28 | % | 42.27 | % | 44.25 | % | ||||||||||||
| Cost of funds for the quarter | 0.18 | % | 0.19 | % | 0.20 | % | 0.23 | % | 0.21 | % | ||||||||||||
|
EQUITY: |
||||||||||||||||||||||
| Common shares outstanding | 11,936,879 | 11,907,421 | 11,892,254 | 11,853,564 | 11,800,554 | |||||||||||||||||
| Stockholders' equity | $ | 216,164 | $ | 214,698 | $ | 210,307 | $ | 203,717 | $ | 197,258 | ||||||||||||
| Book value per common share | 18.11 | 18.03 | 17.68 | 17.19 | 16.72 | |||||||||||||||||
| Tangible common equity | 213,442 | 211,937 | 207,551 | 200,883 | 194,394 | |||||||||||||||||
| Tangible book value per common share | 17.88 | 17.80 | 17.45 | 16.95 | 16.47 | |||||||||||||||||
| (1) Excluding loans held for sale. | ||||||||||||||||||||||
| ASSET QUALITY ANALYSIS | ||||||||||||||||||||||
| (unaudited, dollars in thousands) | ||||||||||||||||||||||
| Three Months Ended | ||||||||||||||||||||||
| December 31, | September 30, | June 30, | March 31, | December 31, | ||||||||||||||||||
| 2016 | 2016 | 2016 | 2016 | 2015 | ||||||||||||||||||
|
Non-performing assets (1): |
||||||||||||||||||||||
| Non-accrual loans: | ||||||||||||||||||||||
| Commercial and industrial | $ | 3,288 | $ | 3,602 | $ | 4,118 | $ | 4,128 | $ | 1,954 | ||||||||||||
| Commercial real estate | 1,964 | 2,167 | 2,174 | 1,959 | 1,733 | |||||||||||||||||
| Residential mortgages | 143 | 361 | 421 | 724 | 1,358 | |||||||||||||||||
| Home equity | 164 | 185 | 185 | 186 | 406 | |||||||||||||||||
| Consumer | 1 | - | - | 1 | 77 | |||||||||||||||||
| Total non-accrual loans | 5,560 | 6,315 | 6,898 | 6,998 | 5,528 | |||||||||||||||||
| Loans 90 days or more past due and still accruing | - | - | - | - | - | |||||||||||||||||
| Total non-performing loans | 5,560 | 6,315 | 6,898 | 6,998 | 5,528 | |||||||||||||||||
| Non-accrual loans held for sale | - | - | - | - | - | |||||||||||||||||
| OREO | 650 | 650 | 650 | 650 | - | |||||||||||||||||
| Total non-performing assets | $ | 6,210 | $ | 6,965 | $ | 7,548 | $ | 7,648 | $ | 5,528 | ||||||||||||
| Additions to non-accrual loans during the quarter | $ | 545 | $ | - | $ | 259 | $ | 2,519 | $ | 50 | ||||||||||||
| Total non-accrual loans/total loans (2) | 0.33 | % | 0.37 | % | 0.40 | % | 0.40 | % | 0.33 | % | ||||||||||||
| Total non-performing loans/total loans (2) | 0.33 | % | 0.37 | % | 0.40 | % | 0.40 | % | 0.33 | % | ||||||||||||
| Total non-performing assets/total assets | 0.30 | % | 0.32 | % | 0.34 | % | 0.34 | % | 0.25 | % | ||||||||||||
|
Troubled debt restructurings ("TDRs") (2): |
||||||||||||||||||||||
| Total TDRs | $ | 12,339 | $ | 12,176 | $ | 10,156 | $ | 11,343 | $ | 11,563 | ||||||||||||
| Performing TDRs | 7,991 | 7,971 | 8,125 | 9,267 | 9,239 | |||||||||||||||||
|
Criticized and classified loans (2): |
||||||||||||||||||||||
| Special mention | $ | 5,833 | $ | 17,754 | $ | 14,862 | $ | 6,637 | $ | 9,197 | ||||||||||||
| Substandard/doubtful | 24,584 | 15,126 | 10,296 | 11,218 | 12,190 | |||||||||||||||||
| Total criticized and classified loans | $ | 30,417 | $ | 32,880 | $ | 25,158 | $ | 17,855 | $ | 21,387 | ||||||||||||
|
Activity in the allowance for loan losses: |
||||||||||||||||||||||
| Balance at beginning of period | $ | 20,465 | $ | 20,965 | $ | 20,930 | $ | 20,685 | $ | 20,315 | ||||||||||||
| Less: charge-offs | 318 | 217 | 9 | 66 | 3 | |||||||||||||||||
| Recoveries | 370 | 67 | 44 | 61 | 373 | |||||||||||||||||
| (Credit) provision for loan losses | (400 | ) | (350 | ) | - | 250 | - | |||||||||||||||
| Balance at end of period | $ | 20,117 | $ | 20,465 | $ | 20,965 | $ | 20,930 | $ | 20,685 | ||||||||||||
| Allowance for loan losses/non-accrual loans (1) (2) | 362 | % | 324 | % | 304 | % | 299 | % | 374 | % | ||||||||||||
| Allowance for loan losses/non-performing loans (1) (2) | 362 | % | 324 | % | 304 | % | 299 | % | 374 | % | ||||||||||||
| Allowance for loan losses/total loans (1) (2) | 1.20 | % | 1.20 | % | 1.21 | % | 1.20 | % | 1.24 | % | ||||||||||||
|
Net (recoveries) charge-offs: |
||||||||||||||||||||||
| Commercial and industrial | $ | 57 | $ | 168 | $ | (28 | ) | $ | (45 | ) | $ | (350 | ) | |||||||||
| Commercial real estate | (75 | ) | (14 | ) | (8 | ) | (10 | ) | (11 | ) | ||||||||||||
| Residential mortgages | (37 | ) | - | (3 | ) | (2 | ) | (1 | ) | |||||||||||||
| Home equity | 7 | (4 | ) | (3 | ) | 6 | (5 | ) | ||||||||||||||
| Consumer | (4 | ) | - | 7 | 56 | (3 | ) | |||||||||||||||
| Total net (recoveries) charge-offs | $ | (52 | ) | $ | 150 | $ | (35 | ) | $ | 5 | $ | (370 | ) | |||||||||
| Net (recoveries) charge-offs (annualized)/average loans | (0.01 | %) | 0.03 | % | (0.01 | %) | 0.00 | % | (0.09 | %) | ||||||||||||
| Delinquencies and non-accrual loans | ||||||||||||||||||||||
|
as a % of total loans (1): |
||||||||||||||||||||||
| Loans 30 - 59 days past due | 0.07 | % | 0.12 | % | 0.04 | % | 0.05 | % | 0.05 | % | ||||||||||||
| Loans 60 - 89 days past due | 0.00 | % | 0.00 | % | 0.04 | % | 0.02 | % | 0.01 | % | ||||||||||||
| Loans 90 days or more past due and still accruing | - | - | - | - | - | |||||||||||||||||
| Total accruing past due loans | 0.07 | % | 0.12 | % | 0.08 | % | 0.07 | % | 0.06 | % | ||||||||||||
| Non-accrual loans | 0.33 | % | 0.37 | % | 0.40 | % | 0.40 | % | 0.33 | % | ||||||||||||
| Total delinquent and non-accrual loans | 0.40 | % | 0.49 | % | 0.48 | % | 0.47 | % | 0.39 | % | ||||||||||||
| (1) At period end. | ||||||||||||||||||||||
| (2) Excluding loans held for sale. | ||||||||||||||||||||||
| NET INTEREST INCOME ANALYSIS | |||||||||||||||||||||||
| For the Three Months Ended December 31, 2016 and 2015 | |||||||||||||||||||||||
| (unaudited, dollars in thousands) | |||||||||||||||||||||||
| 2016 | 2015 | ||||||||||||||||||||||
| Average | Average | Average | Average | ||||||||||||||||||||
| Balance | Interest | Yield/Cost | Balance | Interest | Yield/Cost | ||||||||||||||||||
|
Assets: |
|||||||||||||||||||||||
| Interest-earning assets: | |||||||||||||||||||||||
| Investment securities (1) | $ | 204,001 | $ | 1,815 | 3.54 | % | $ | 310,619 | $ | 2,832 | 3.62 | % | |||||||||||
| Federal Reserve and Federal Home Loan Bank stock | |||||||||||||||||||||||
| and other investments | 4,528 | 57 | 5.01 | 6,197 | 59 | 3.78 | |||||||||||||||||
| Federal funds sold, securities purchased under agreements | |||||||||||||||||||||||
| to resell and interest-bearing deposits due from banks | 131,160 | 163 | 0.49 | 16,498 | 12 | 0.29 | |||||||||||||||||
| Loans and performing loans held for sale (2) | 1,683,655 | 17,567 | 4.15 | 1,589,016 | 16,703 | 4.17 | |||||||||||||||||
| Total interest-earning assets | 2,023,344 | $ | 19,602 | 3.85 | % | 1,922,330 | $ | 19,606 | 4.05 | % | |||||||||||||
| Non-interest-earning assets | 149,732 | 158,141 | |||||||||||||||||||||
| Total assets | $ | 2,173,076 | $ | 2,080,471 | |||||||||||||||||||
|
Liabilities and stockholders' equity: |
|||||||||||||||||||||||
| Interest-bearing liabilities: | |||||||||||||||||||||||
| Savings, N.O.W. and money market deposits | $ | 829,113 | $ | 522 | 0.25 | % | $ | 764,133 | $ | 477 | 0.25 | % | |||||||||||
| Time deposits | 208,531 | 290 | 0.55 | 231,539 | 379 | 0.65 | |||||||||||||||||
| Total savings and time deposits | 1,037,644 | 812 | 0.31 | 995,672 | 856 | 0.34 | |||||||||||||||||
| Borrowings | 15,008 | 66 | 1.76 | 63,713 | 132 | 0.82 | |||||||||||||||||
| Total interest-bearing liabilities | 1,052,652 | 878 | 0.33 | 1,059,385 | 988 | 0.37 | |||||||||||||||||
| Demand deposits | 880,804 | 799,925 | |||||||||||||||||||||
| Other liabilities | 24,381 | 24,214 | |||||||||||||||||||||
| Total liabilities | 1,957,837 | 1,883,524 | |||||||||||||||||||||
| Stockholders' equity | 215,239 | 196,947 | |||||||||||||||||||||
| Total liabilities and stockholders' equity | $ | 2,173,076 | $ | 2,080,471 | |||||||||||||||||||
| Total cost of funds | 0.18 | % | 0.21 | % | |||||||||||||||||||
| Net interest rate spread | 3.52 | % | 3.68 | % | |||||||||||||||||||
| Net interest income/margin | 18,724 | 3.68 | % | 18,618 | 3.84 | % | |||||||||||||||||
| Less tax-equivalent basis adjustment | (668 | ) | (801 | ) | |||||||||||||||||||
| Net interest income | $ | 18,056 | $ | 17,817 | |||||||||||||||||||
| (1) Interest on securities includes the effects of tax-equivalent basis adjustments of $421 and $650 in 2016 and 2015, respectively. |
| (2) Interest on loans includes the effects of tax-equivalent basis adjustments of $247 and $151 in 2016 and 2015, respectively. |
| NET INTEREST INCOME ANALYSIS | |||||||||||||||||||||
| For the Years Ended December 31, 2016 and 2015 | |||||||||||||||||||||
| (unaudited, dollars in thousands) | |||||||||||||||||||||
| 2016 | 2015 | ||||||||||||||||||||
| Average | Average | Average | Average | ||||||||||||||||||
| Balance | Interest | Yield/Cost | Balance | Interest | Yield/Cost | ||||||||||||||||
|
Assets: |
|||||||||||||||||||||
| Interest-earning assets: | |||||||||||||||||||||
| Investment securities (1) | $ | 251,319 | $ | 8,995 | 3.58 | % | $ | 337,050 | $ | 12,502 | 3.71 | % | |||||||||
| Federal Reserve and Federal Home Loan Bank stock | |||||||||||||||||||||
| and other investments | 6,488 | 332 | 5.12 | 6,505 | 280 | 4.30 | |||||||||||||||
| Federal funds sold, securities purchased under agreements to | |||||||||||||||||||||
| resell and interest-bearing deposits due from banks | 74,443 | 354 | 0.48 | 18,649 | 62 | 0.33 | |||||||||||||||
| Loans and performing loans held for sale (2) | 1,706,263 | 71,089 | 4.17 | 1,475,773 | 63,496 | 4.30 | |||||||||||||||
| Total interest-earning assets | 2,038,513 | $ | 80,770 | 3.96 | % | 1,837,977 | $ | 76,340 | 4.15 | % | |||||||||||
| Non-interest-earning assets | 155,886 | 146,603 | |||||||||||||||||||
| Total assets | $ | 2,194,399 | $ | 1,984,580 | |||||||||||||||||
|
Liabilities and stockholders' equity: |
|||||||||||||||||||||
| Interest-bearing liabilities: | |||||||||||||||||||||
| Savings, N.O.W. and money market deposits | $ | 846,543 | $ | 2,084 | 0.25 | % | $ | 721,989 | $ | 1,383 | 0.19 | % | |||||||||
| Time deposits | 221,695 | 1,305 | 0.59 | 230,546 | 1,422 | 0.62 | |||||||||||||||
| Total savings and time deposits | 1,068,238 | 3,389 | 0.32 | 952,535 | 2,805 | 0.29 | |||||||||||||||
| Borrowings | 62,318 | 540 | 0.87 | 74,746 | 442 | 0.59 | |||||||||||||||
| Total interest-bearing liabilities | 1,130,556 | 3,929 | 0.35 | 1,027,281 | 3,247 | 0.32 | |||||||||||||||
| Demand deposits | 832,266 | 742,876 | |||||||||||||||||||
| Other liabilities | 23,684 | 23,638 | |||||||||||||||||||
| Total liabilities | 1,986,506 | 1,793,795 | |||||||||||||||||||
| Stockholders' equity | 207,893 | 190,785 | |||||||||||||||||||
| Total liabilities and stockholders' equity | $ | 2,194,399 | $ | 1,984,580 | |||||||||||||||||
| Total cost of funds | 0.20 | % | 0.18 | % | |||||||||||||||||
| Net interest rate spread | 3.61 | % | 3.83 | % | |||||||||||||||||
| Net interest income/margin | 76,841 | 3.77 | % | 73,093 | 3.98 | % | |||||||||||||||
| Less tax-equivalent basis adjustment | (3,051 | ) | (3,560 | ) | |||||||||||||||||
| Net interest income | $ | 73,790 | $ | 69,533 | |||||||||||||||||
| (1) Interest on securities includes the effects of tax-equivalent basis adjustments of $2,090 and $2,978 in 2016 and 2015, respectively. |
| (2) Interest on loans includes the effects of tax-equivalent basis adjustments of $961 and $582 in 2016 and 2015, respectively. |
View source version on businesswire.com: http://www.businesswire.com/news/home/20170207005399/en/
