SOURCE: Smithtown Bancorp

October 31, 2007 09:39 ET

Smithtown Bancorp Announces Third Quarter Earnings

EPS Up 5.41%; Core Deposits Increasing at 26.77% Pace so Far This Year; Net Interest Margin Up 8 Basis Points

SMITHTOWN, NY--(Marketwire - October 31, 2007) - Smithtown Bancorp (NASDAQ: SMTB), the parent company of Bank of Smithtown, today announced that the Company had earnings for the third quarter of 2007 of $3,818,975, or $.39 per share. These basic earnings per share reflect a 5.41% increase over the third quarter of last year. Net income for the quarter increased by 4.66% on a year-over-year basis. Basic earnings per share year-to-date are $1.12, which represents growth of 6.67% over last year. Basic earnings per share for the last twelve months now stand at $1.50.

Return on average equity for the last twelve months is 20.67%. The average ROE for a national peer group of 342 banks is 11.57%. The Company's return on average assets for the last twelve months is 1.37%, while the peer group's average ROA is 1.13%.

Deposits grew by $21.0 million during the third quarter, or 2.22%. The Bank continued to emphasize the collection of core deposits over higher-cost certificates of deposit. Checking accounts were up $5.5 million for the quarter, or 5.40%. Deposits at the Bank's two newest branches, Bohemia and Coram, have increased by approximately $34 million during the first nine months of this year. Overall, core deposits have increased year-to-date by $92.3 million, or 26.77% on an annualized basis.

Loans grew by $28.9 million, or 3.14%, during the third quarter to $948.8 million at the end of the period. So far this year, loans have increased by $99.6 million, or 15.63% on an annualized basis. The Bank closed and funded $81.3 million of loans during the third quarter of 2007, which was substantially below the record high dollar amount of closings during the second quarter ($105.7 million), but consistent with the dollar amount of loans closed and funded during other recent quarters (e.g., $83.2 million during the first quarter of this year). Loan payoffs for the third quarter were $51.4 million, significantly below the $77.3 million of payoffs during the second quarter. The loan "pipeline" of approved but unfunded commitments at September 30, 2007, was $148.9 million, the strongest it has ever been at a quarter's end.

Asset quality remained strong. Nonperforming loans were less than .04% of total loans at the end of the quarter. Loans 30-89 days past due rose to 1.82% of the portfolio at September 30th, but almost all of that slowness resided in three credits, two of which were brought current in early October and the other of which is a commercial building which became occupied by a very substantial tenant during mid-October. With respect to the single ORE property owned by the Bank, that property is now under contract to be sold, and it is likely that the sale will close by year-end. In the event that that sale does not close for some unanticipated reason, management has received other similar offers for the property.

The net interest margin for the quarter increased by 8 basis points to 4.19%. The increase was brought about partly by an increased yield on loans and partly by reduced interest expense late in the quarter after the Federal Reserve cut interest rates. The Company's net interest margin has increased steadily throughout the year, being at 4.04% during the first quarter, 4.11% in the second quarter, and 4.19% in the third quarter. The cumulative net interest margin for the first nine months now stands at 4.11%, which compares very favorably with the national peer group figure of 3.87%.

After improving the efficiency ratio during the second quarter by 160 basis points, the Company improved its efficiency ratio during the third quarter by an additional 118 basis points to 52.16%. The Company's efficiency ratios for the first, second and third quarters of this year have been 54.94%, 53.34% and 52.16%, respectively. The average efficiency ratio for peer group banks is 59.61%.

The Company's Chairman & Chief Executive Officer, Brad Rock, commented: "While I am slightly disappointed that we were not able to grow earnings at our usual rapid pace during the third quarter, in light of the recent turmoil in the credit markets and the resulting severe declines in earnings at many banks, we feel that our moderate growth of earnings during the quarter is an adequate result. More importantly, although some of the unfavorable economic conditions may persist for awhile, we see several signs that we are approaching the beginning of an upturn for our Company."

"Our first observation is that, because of recent turmoil in the credit markets, the conduit market for certain types of permanent commercial mortgages has diminished significantly. As a result, we have already begun to see a greatly increased number of opportunities to make loans that might previously have gone to the conduits. Our 'pipeline' of $149 million of approved loans is the strongest it has ever been, and the current pace of both closings and new applications has picked up significantly. We expect to have very strong loan growth during the fourth quarter, and we expect that strong growth to continue into next year."

"With regard to funding our anticipated loan growth, we continue to be successful growing core deposits through our branch expansion program. We have received all necessary permits for our new branches in Huntington and Nesconset, and those projects are currently under construction. We expect both of those branches to open early next year. Our new branch projects in Deer Park, Setauket and Port Jefferson are in the permitting stage, and we expect construction to begin on one or more of those branches during the first half of next year."

"We also feel that our decision to reduce rates on new certificate of deposit offerings during the second and third quarters proved to be a sound decision in light of the Fed's 50 basis point rate cut on September 18th. In the months to come, our interest expense will not be burdened with the higher-rate money we would have had, had we not made the cuts."

"Our efficiency ratios have been higher than usual primarily due to costs associated with our computer conversion and increased regulatory requirements which resulted from our crossing the $1 billion asset threshold at the end of last year. The good news, however, is that these expense ratios have been improving steadily and we can now see that some of these expenses should be gone entirely by year-end."

"Finally, our single ORE property is under contract to be sold. We expect that sale to close by the end of this year, and if and when it does, a $6.972 million nonperforming asset will be converted into an earning asset. Given our current loan yields, this conversion will add approximately $40,000 per month to our revenue stream. And even if, for some presently unanticipated reason this particular deal were not to close soon, we have had other similar offers for the property, which means that this asset conversion should happen in the not-too-distant future in any event."

"All matters considered, we look for gradual improvement during the fourth quarter, and increasingly positive results during 2008."

Forward-Looking Statements

This release and other written materials and statements management may make, may contain forward-looking statements regarding the Company's prospective performance and strategies within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and is including this statement for purposes of said safe harbor provisions.

Forward-looking statements, which are based on certain assumptions and describe future plans, strategies and expectations of the Company, are sometimes identified by use of the words "plan," "believe," "expect," "intend," "anticipate," "estimate," "project," or other similar expressions. The Company's ability to predict results or the actual effects of its plans and strategies is inherently uncertain. Accordingly actual results may differ materially from anticipated results.

Factors that could have a material adverse effect on the operations of the Company and its subsidiaries include, but are not limited to, a change in economic conditions; changes in interest rates, deposit flows, loan demand, real estate values, and competition; changes in accounting principles, policies, or guidelines; changes in legislation and regulation; other risk factors disclosed in the Company's reports filed with the Securities and Exchange Commission; and other economic, competitive, governmental, regulatory, geopolitical and technological factors affecting the Company's operations, pricing and services.

Investors are cautioned not to place undue reliance on forward-looking statements as a prediction of actual results. Except as required by applicable law or regulation, the Company undertakes no obligation to republish or revise forward-looking statements to reflect events or circumstances after the date the statements were made or to reflect the occurrences of unanticipated results. Investors are advised, however, to consult any further disclosures the Company makes on related subjects in our reports to the Securities and Exchange Commission.



Consolidated Balance Sheets

                                                            As of
                                                   September    September
                                                      30,          30,
                                                     2007         2006
                                                  -----------  -----------
ASSETS
Cash and due from banks                           $    15,529  $    10,480
Federal funds sold                                        502       11,371
                                                  -----------  -----------
  Total cash and cash equivalents                      16,031       21,851

Investment securities:
  Available for sale:
     Obligations of U.S. treasury                           -        1,990
     Obligations of U.S. government agencies           44,706       97,499
     Mortgage - backed securities                       1,781        3,366
     Obligations of state and political
      subdivisions                                      6,650        9,344
     Other securities                                  11,553        3,966
                                                  -----------  -----------
               Total securities available for
                sale                                   64,690      116,165
    Held to maturity:
      Mortgage - backed securities                         15           51
      Obligations of state and political
       subdivisions                                       202          308
                                                  -----------  -----------
               Total securities held to maturity
                (estimated fair value $204 in
                  2007 and  $373 in  2006)                217          359
                                                  -----------  -----------
                   Total investment securities         64,907      116,524

Restricted securities                                   2,298        4,043

Loans                                                 948,826      805,056
  Less: allowance for loan losses                       7,967        7,372
                                                  -----------  -----------
  Loans, net                                          940,859      797,684

Bank premises and equipment                            21,726       19,954

Other assets
  Cash value of bank-owned life insurance              18,768       18,057
  Goodwill                                              3,860        2,077
  Intangible assets                                     1,533        2,127
  Other real estate owned                               6,972            -
  Other                                                18,534       13,364
                                                  -----------  -----------
     Total other assets                                49,667       35,625
                                                  -----------  -----------

              Total assets                        $ 1,095,488  $   995,681
                                                  ===========  ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
  Deposits:
     Demand (non-interest bearing)                $   107,492  $   101,231
     Money market                                     358,405      243,195
     NOW                                               31,971       36,080
     Savings                                           54,113       48,253
     Time                                             412,615      420,881
                                                  -----------  -----------
           Total deposits                             964,596      849,640

 Dividends payable                                        392          355
 Other borrowings                                      25,000       55,000
 Subordinated debt                                     18,217       18,217
 Other liabilities                                     10,217        7,491
                                                  -----------  -----------
       Total liabilities                            1,018,422      930,703

Stockholders' equity
  Common stock - $.01 par value (20,000,000
   shares authorized at September 30, 2007
   and  2006; 11,852,497 shares issued, 9,800,633
   shares outstanding at September 30, 2007;
   11,826,012 shares issued, 9,774,148 shares
   outstanding at September 30, 2006)                     119          108
  Additional paid in capital                            4,387        4,020
  Retained earnings                                    82,779       71,330
  Accumulated other comprehensive loss                   (157)        (418)
                                                  -----------  -----------
                                                       87,128       75,040
 Treasury stock (2,051,864 shares at cost)            (10,062)     (10,062)
                                                  -----------  -----------
        Total stockholders' equity                     77,066       64,978
                                                  -----------  -----------

Total liabilities and stockholders' equity        $ 1,095,488  $   995,681
                                                  ===========  ===========



Consoidated Statements of Income

                                For the Three Months  For the Nine Months
                                        Ended                 Ended
                                    September 30,         September 30,
                                  2007       2006       2007       2006
                                ---------- ---------- ---------- ----------
Interest income
   Loans                        $   18,861 $   15,757 $   54,954 $   44,680
   Federal funds sold                  203        127        712        349
   Investment securities:
       Taxable:
         Obligations of U.S.
          treasury                       -         45          -        168
         Obligations of U.S.
          government agencies          711      1,119      2,314      3,054
         Mortgage - backed
          securities                    29         43         99        146
         Other securities              110         27        246         71
                                ---------- ---------- ---------- ----------
            Subtotal                   850      1,234      2,659      3,439
       Exempt from federal
        income taxes:
         Obligations of state &
          political
          subdivisions                  72        105        222        348
   Other interest income                55         75        167        180
                                ---------- ---------- ---------- ----------
      Total interest income         20,041     17,298     58,714     48,996

Interest expense
   Money market accounts
    (including savings)              4,005      2,278     11,463      6,323
   Time deposits of $100,000 or
    more                             2,017      1,659      5,840      4,075
   Other time deposits               2,883      2,861      8,599      7,652
   Other borrowings                    297        572      1,090      1,965
   Subordinated debt                   352        355      1,040        903
                                ---------- ---------- ---------- ----------
      Total interest expense         9,554      7,725     28,032     20,918
                                ---------- ---------- ---------- ----------
Net interest income                 10,487      9,573     30,682     28,078
Provision for loan losses              300        300      1,000      1,400
                                ---------- ---------- ---------- ----------
Net interest income after
 provision for loan losses          10,187      9,273     29,682     26,678


Noninterest income
    Trust and investment
     services                          178        121        574        364
    Service charges on deposit
     accounts                          542        448      1,437      1,423
    Revenues from insurance
     agency                          1,032        984      2,819      2,948
    Net gain on sales of
     investment securities              34        205         34        194
    Increase in cash value of
     bank owned life insurance         194        164        613        482
    Other income                       479        588      1,418      1,794
                                ---------- ---------- ---------- ----------
      Total noninterest income       2,459      2,510      6,895      7,205

Noninterest expense
   Salaries                          2,925      2,823      8,894      8,270
   Pension and other employee
    benefits                           715        587      2,191      1,826
   Net occupancy expense of
    bank premises                      966        907      2,999      2,638
   Furniture and equipment
    expense                            725        560      2,042      1,593
   Amortization of intangible
    assets                             119        229        359        612
   Other expense                     1,270      1,051      3,497      3,243
                                ---------- ---------- ---------- ----------
      Total noninterest expense      6,720      6,157     19,982     18,182
                                ---------- ---------- ---------- ----------
Income before income taxes           5,926      5,626     16,595     15,701
Provision for income taxes           2,107      1,977      5,721      5,429
                                ---------- ---------- ---------- ----------
Net income                      $    3,819 $    3,649 $   10,874 $   10,272
                                ========== ========== ========== ==========

Earnings per share
   Basic earnings per share     $     0.39 $     0.37 $     1.12 $     1.05
   Diluted earnings per share   $     0.39 $     0.37 $     1.12 $     1.05

Cash dividends declared         $     0.04 $     0.04 $     0.12 $     0.12
Weighted average common shares
 outstanding                     9,770,828  9,754,764  9,768,807  9,753,585
Weighted average common
 equivalent shares               9,773,193  9,758,014  9,771,579  9,755,931

Comprehensive income            $    3,944 $    4,231 $   11,047 $   10,455



SELECTED FINANCIAL DATA
(in thousands, except per share data)
                                               For the Three Months Ended
                                              September 30,  September 30,
                                                  2007           2006
                                              -------------- --------------
Basic earnings per share (1)                  $         0.39 $         0.37
                                              -------------- --------------
Diluted earnings per share (1)                          0.39           0.37
                                              -------------- --------------

                                              -------------- --------------
Assets                                        $    1,095,488 $      995,681
                                              -------------- --------------
Loans                                                948,826        805,056
                                              -------------- --------------
Deposits                                             964,596        849,640
                                              -------------- --------------

                                              -------------- --------------
Return on Average Equity                               20.27          22.05
                                              -------------- --------------
Cash Return on Average Equity (2)                      20.69          22.96
                                              -------------- --------------
Return on Average Tangible Equity (3)                  21.84          23.54
                                              -------------- --------------
Cash Return on Average Tangible Equity (4)             22.29          24.52
                                              -------------- --------------

                                              -------------- --------------
Return on Average Assets                                1.41           1.41
                                              -------------- --------------
Cash Return on Average Assets (2)                       1.44           1.47
                                              -------------- --------------
Return on Average Tangible Assets (3)                   1.41           1.42
                                              -------------- --------------
Cash Return on Average Tangible Assets (4)              1.44           1.48
                                              -------------- --------------

                                              -------------- --------------
Net Interest Margin                                     4.19           4.20
                                              -------------- --------------

                                              -------------- --------------
Efficiency                                             52.16          52.46
                                              -------------- --------------
Efficiency - Cash Basis                                51.24          50.54
                                              -------------- --------------


(1) Reflects the effect of a 10% stock dividend payable to all shareholders
    of record on March 16, 2007 and payable on April 2, 2007.
(2) Excludes amortization of intangibles
(3) Excludes intangible assets
(4) Excludes amortization of intangibles and intangible assets

Contact Information

  • Contact: Ms. Judith Barber
    Corporate Secretary

    News Contact:

    Peter Hamilton
    Rubenstein Associates
    (work) 212-843-8015
    (home) 631-928-8437
    (cell) 516-375-6434

    Corporate Headquarters
    100 Motor Parkway, Suite 160
    Hauppauge, NY 11788-5138
    Direct Dial: 631-360-9304
    Direct Fax: 631-360-9380
    brock@bankofsmithtown.net