SOURCE: Smithtown Bancorp

April 27, 2007 09:31 ET

Smithtown Bancorp Announces First Quarter Earnings

Net Income Up 9.75%; Deposits Continue to Grow at 28% Pace; New Coram Branch Growing Core Deposits Rapidly

SMITHTOWN, NY -- (MARKET WIRE) -- April 27, 2007 -- Smithtown Bancorp (NASDAQ: SMTB), the parent company of Bank of Smithtown, today announced that the Company had earnings for the first quarter of 2007 of $3,378,713, or $.35 per share. These basic earnings per share reflect a 9.38% increase over the same period last year. Basic earnings per share for the last twelve months now stand at $1.46. These EPS figures have been restated to reflect the 10% stock dividend that was declared by the Company on February 27, 2007, for stockholders of record as of March 16, 2007, and which was paid on April 2, 2007.

Net income for the first quarter grew on a year-over-year basis from $3,078,472 to $3,378,713, an increase of 9.75%.

Deposits continued to grow at a rapid pace during the first quarter. Deposits increased by approximately $62 million, to $954.3 million at quarter-end. This figure represents deposit growth of 6.95% during the first quarter, or 27.79% on an annualized basis. Last year, deposits grew by 28.04%.

The Bank's new branch in Coram has already begun to contribute significantly to deposit growth. During the first 13 weeks it has been open, the Coram branch collected approximately $14 million in deposits. Furthermore, approximately $12.3 million, or 88%, of the deposits collected have been "core" deposits, that is, checking, savings, money market and NOW accounts.

The Bank has four similarly-styled branches in various stages of development in Nesconset, Huntington, Deer Park and Setauket. The Bank presently expects two of these branches to open during the second half of 2007.

Loan growth was also favorable during the first quarter, although many of the loans booked were not closed until late in the quarter. Loans grew by $41.2 million during the first quarter, to $890.5 million at the end of the period. This figure represents loan growth of 4.86% during the first quarter, or 19.43% on an annualized basis. Last year, loan growth was 21.60%.

The Company's Chairman & CEO, Brad Rock, commented: "It is not uncommon for us to have slower loan growth during the first quarter than during subsequent quarters. Because more than 25% of our loans are construction loans, we do have some seasonality to our lending, particularly during January and February." Nonetheless, at the end of the quarter, the Bank had more than $88 million of loans which have been approved, and for which the borrowers have accepted the commitment, but which have not yet closed. At December 31, 2006, the amount of approved but unfunded commitments was $65 million.

Asset quality remained strong. Nonperforming loans were less than .016% of total loans at the end of the quarter.

The net interest margin for the quarter narrowed by 20 basis points to 4.04%. Mr. Rock said: "The contraction of the margin was not the result of any changes in pricing for loans or deposits. The margin narrowed because, for most of the quarter, the growth of deposits significantly outpaced the growth of loans. Therefore, as interest expense increased, interest income was not increasing commensurately. As we progress through the year and close more of the loans that are currently in the 'pipeline,' we expect the net interest margin to improve and to grow closer to the levels to which we have been previously accustomed." Last year, the net interest margin was 4.24%. According to the latest figures available from the FDIC, the average net interest margin for the 200 banks doing business in New York State is 3.60%.

Noninterest expenses were higher than usual during the first quarter. The efficiency ratio for the first quarter was 54.94%. Some of the additional expenses were associated with the opening of the new Coram branch. As noted earlier, however, this branch's rapid growth in core deposits will cause it to become profitable quickly. Some expenses are related to increased regulatory requirements that the Bank must meet because it has crossed the threshold of $1 billion in assets. Finally, the Bank is in the process of converting its core operating software system to a Jack Henry system that has greater capabilities and which will allow the Bank to process larger volumes of work more efficiently in the future. While these regulatory expenses and I.T. expenses will increase noninterest expense during the first half of this year, the Bank's continued strong growth in deposits and loans should increase net interest income in a manner that will gradually absorb these expenses over the course of the year. Mr. Rock commented: "These expenditures are much like the expenditures we made in 2004 when we opened our new headquarters and operations center. They represent an investment in the future growth of our Company."

The Company's return on average equity remained strong. ROE for the last 12 months was 22.10%. The average ROE for the last 12 years is 22.09%.

The price for the Company's stock was up 5.4% during the first quarter. The Company recently distributed a 10% stock dividend, which was the Company's sixth stock split or dividend during the past nine years. Over the course of the past 12 years, the value of the Company's stock has grown at a compounded annual growth rate of 31% per year.

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
                                                   March 31,    March 31,
                                                      2007         2006
                                                  -----------  -----------
ASSETS
Cash and due from banks                           $    13,941  $    12,464
Federal funds sold                                     47,546          158
                                                  -----------  -----------
Total cash and cash equivalents                        61,487       12,622

Investment securities:
   Available for sale:
     Obligations of U.S. treasury                           -        6,924
     Obligations of U.S. government agencies           59,084       94,065
     Mortgage - backed securities                       2,639        4,243
     Obligations of state and political
      subdivisions                                      8,565       12,644
     Other securities                                   5,135        2,000
                                                  -----------  -----------
        Total securities available for
         sale                                          75,423      119,876
    Held to maturity:
      Mortgage - backed securities                         31           74
      Obligations of state and political
       subdivisions                                       293          932
                                                  -----------  -----------
         Total securities held to maturity
         (estimated fair value $327 in
          2007 and  $1,012 in 2006)                       324        1,006
                                                  -----------  -----------
           Total investment securities                 75,747      120,882

Restricted securities                                   2,547        4,084

Loans                                                 890,505      745,169
   Less: allowance for loan losses                      7,414        6,552
                                                  -----------  -----------
   Loans, net                                         883,091      738,617

Bank premises and equipment                            22,334       18,352

Other assets
 Cash value of bank-owned life insurance               18,385       17,732
 Goodwill                                               2,077          481
 Intangible assets                                      1,471        2,585
 Other real estate owned                                6,972            -
 Other                                                 15,068       12,240
                                                  -----------  -----------
     Total other assets                                43,973       33,038
                                                  -----------  -----------

              Total assets                        $ 1,089,179  $   927,595
                                                  ===========  ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
 Deposits:
     Demand (non-interest bearing)                $   103,100  $   107,505
     Money market                                     351,634      254,693
     NOW                                               37,509       34,369
     Savings                                           53,263       45,210
     Time                                             408,813      339,007
                                                  -----------  -----------
        Total deposits                                954,319      780,784

 Dividends payable                                        356          355
 Other borrowings                                      35,000       63,740
 Subordinated debt                                     18,217       18,217
 Other liabilities                                     11,033        6,176
                                                  -----------  -----------
       Total liabilities                            1,018,925      869,272

Stockholders' equity
  Common stock - $.01 par value (20,000,000
   shares authorized at March 31, 2007 and 2006;
   11,852,497 shares issued, 9,768,091 shares
   outstanding at March 31, 2007; 11,826,012
   shares issued, 9,753,173 shares outstanding at
   March 31, 2006)                                         98           72
  Additional paid in capital                            4,323        4,162
  Retained earnings                                    76,068       64,847
  Accumulated other comprehensive loss                   (173)        (696)
                                                  -----------  -----------
                                                       80,316       68,385
 Treasury stock (2,051,864 shares at cost)            (10,062)     (10,062)
                                                  -----------  -----------
        Total stockholders' equity                     70,254       58,323
                                                  -----------  -----------

Total liabilities and stockholders' equity        $ 1,089,179  $   927,595
                                                  ===========  ===========



Consolidated Statements of Income
                                                 For the Three Months Ended
                                                         March 31,
                                                     2007          2006
                                                 ------------  -----------
Interest income
  Loans                                          $     17,713  $    13,713
  Federal funds sold                                      311          153
  Investment securities:
     Taxable:
         Obligations of U.S. treasury                       -           61
         Obligations of U.S. government agencies          859          853
         Mortgage - backed securities                      37           58
         Other securities                                  48           22
                                                 ------------  -----------
             Subtotal                                     944          994
     Exempt from federal income taxes:
         Obligations of state & political
          subdivisions                                     79          125
  Other interest income                                    59           47
                                                 ------------  -----------
             Total interest income                     19,106       15,032

Interest expense
 Money market accounts (including savings)              3,535        1,880
 Time deposits of $100,000 or more                      1,959        1,261
 Other time deposits                                    2,935        2,058
 Other borrowings                                         384          716
 Subordinated debt                                        344          210
                                                 ------------  -----------
             Total interest expense                     9,157        6,125
                                                 ------------  -----------
Net interest income                                     9,949        8,907
Provision for loan losses                                 400          600
                                                 ------------  -----------
Net interest income after provision for loan
 losses                                                 9,549        8,307


Noninterest income
  Trust and investment services                           159          120
  Service charges on deposit accounts                     427          503
  Revenues from insurance agency                          903        1,021
  Net loss on sales of investment securities                -          (11)
  Increase in cash value of bank-owned life
   insurance                                              230          157
  Other income                                            507          594
                                                 ------------  -----------
              Total noninterest income                  2,226        2,384

Noninterest expense
 Salaries                                               2,992        2,650
 Pension and other employee benefits                      740          634
 Net occupancy expense of bank premises                 1,020          873
 Furniture and equipment expense                          645          538
 Amortization of intangible assets                        120          246
 Other expense                                          1,128        1,042
                                                 ------------  -----------
              Total noninterest expense                 6,645        5,983
                                                 ------------  -----------
Income before income taxes                              5,130        4,708
Provision for income taxes                              1,751        1,630
                                                 ------------  -----------
Net income                                       $      3,379  $     3,078
                                                 ============  ===========

Earnings per share
  Basic earnings per share                       $       0.35  $      0.32
  Diluted earnings per share                     $       0.35  $      0.32

Cash dividends declared                          $       0.04  $      0.04
Weighted average common shares outstanding          9,766,753    9,752,397
Weighted average common equivalent shares           9,769,936    9,753,255

Comprehensive income                             $      3,537  $     2,983


SELECTED FINANCIAL DATA
(in thousands, except per share data)
                                                     For the Three Months
                                                            Ended
                                                    March 31,   March 31,
                                                       2007        2006
                                                    ----------- -----------
Basic earnings per share                            $      0.35 $      0.32
                                                    ----------- -----------
Diluted earnings per share                                 0.35        0.32
                                                    ----------- -----------

                                                    ----------- -----------
Assets                                              $ 1,089,179 $   927,595
                                                    ----------- -----------
Loans                                                   890,505     745,169
                                                    ----------- -----------
Deposits                                                954,319     780,784
                                                    ----------- -----------

                                                    ----------- -----------
Return on Average Equity                                  19.71       21.54
                                                    ----------- -----------
Cash Return on Average Equity (1)                         20.18       22.67
                                                    ----------- -----------
Return on Average Tangible Equity (2)                     20.82       22.56
                                                    ----------- -----------
Cash Return on Average Tangible Equity (3)                21.30       23.75
                                                    ----------- -----------

                                                    ----------- -----------
Return on Average Assets                                   1.28        1.38
                                                    ----------- -----------
Cash Return on Average Assets (1)                          1.31        1.45
                                                    ----------- -----------
Return on Average Tangible Assets (2)                      1.28        1.38
                                                    ----------- -----------
Cash Return on Average Tangible Assets (3)                 1.31        1.45
                                                    ----------- -----------

                                                    ----------- -----------
Net Interest Margin                                        4.04        4.25
                                                    ----------- -----------

                                                    ----------- -----------
Efficiency                                                54.94       52.98
                                                    ----------- -----------
Efficiency - Cash Basis                                   54.15       50.84
                                                    ----------- -----------


(1) Excludes amortization of intangibles
(2) Excludes intangible assets
(3) 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
    Email Contact