SMTB » Topics » Item 1: Description of Business

These excerpts taken from the SMTB 10-K filed Mar 12, 2009.

Item 1: Description of Business

Smithtown Bancorp, Inc. (“Registrant” or “Company”) is a New York State registered bank holding company with one wholly owned bank subsidiary, Bank of Smithtown (“Bank”) and three other wholly owned subsidiaries, Bank of Smithtown Capital Trust I, Bank of Smithtown Capital Trust II and Bank of Smithtown Capital Trust III, all of which were formed for the purpose of issuing trust preferred securities. The Company was organized as a New York business corporation and was incorporated under the laws of New York State in 1984. At the direction of the Board of Directors, pursuant to a plan of reorganization, the former stockholders of the Bank became the stockholders of the Company. Since commencing business in 1984, the Company has functioned primarily as holder of all of the Bank’s common stock. In October 1999, the Bank and Seigerman-Mulvey Co., Inc. entered into a joint venture, SMTB Financial Group, LLC, for the purpose of selling insurance products and services and offering financial investment services to employees and customers of the Bank. In April 2001, the Bank established a new corporation, Bank of Smithtown Insurance Agency, for the purpose of accepting commission payments from Essex National Securities and Essex National Insurance Agency. These commissions were generated through a program called “Investors Marketplace.” The program, which was designed by a large group of community bankers, offers tax deferred annuities and mutual funds. During 2005, the Bank filed for a change of name for this subsidiary to Bank of Smithtown Financial Services, Inc. Effective February 2006, the source of the agency’s commissions is Great American Advisors. In August 2004, the Bank purchased all of the stock of Seigerman-Mulvey Co., Inc. As a wholly-owned subsidiary of the Bank, the insurance company provides business and personal insurance products as well as financial products and services. Following the Bank’s acquisition of Seigerman-Mulvey Co., Inc., SMTB Financial Group, LLC ceased operations. During 2005, the Bank also filed for a change of name for Seigerman-Mulvey Co., Inc., which is now known as Bank of Smithtown Insurance Agents and Brokers, Inc. (“Agency”). In September 2007, the Agency purchased the assets of Payne & Palmieri, a small insurance agency located in East Setauket, NY. This acquisition has served to both enhance revenues and provide access to additional insurance carriers. In February 2006, the Bank formed an additional subsidiary, BOS Preferred Funding Corporation. This subsidiary is a real estate investment trust, formed as a vehicle for capital enhancement for the Bank, and became a holder of a substantial volume of the residential and commercial real estate loans of the Bank.

At present, the Company does not own or lease any property and has no paid employees. The Company uses the Bank’s office space and employees without separate payment. Corporate headquarters are located at 100 Motor Parkway, Hauppauge, NY 11788.

The Bank engages in a complete range of commercial and consumer banking services as well as trust services, including demand, savings and time deposits accepted from consumers, businesses and municipalities located primarily within Suffolk and Nassau Counties, Long Island, NY. These deposits, along with funds generated from operations and other borrowings are invested primarily in (1) commercial and residential mortgages, (2) construction and land loans, (3) secured and unsecured commercial loans, (4) secured and unsecured consumer loans, (5) U.S. treasury and government agency securities, (6) obligations of state and political subdivisions (7) FNMA, FHLMC, FHLB, and GNMA mortgage-backed securities and (8) trust preferred securities. The Bank also offers merchant credit and debit card processing, safe deposit boxes, online banking including account opening and bill pay, telephone banking, automated teller machines and individual retirement accounts. Through its financial services subsidiary, Bank of Smithtown Financial Services Inc., the Bank offers tax deferred annuities and mutual funds. Through its insurance subsidiary, Bank of Smithtown Insurance Agents and Brokers, Inc., the Bank offers a full line of commercial and personal insurance products. For the years ended December 31, 2008, 2007 and 2006, the Bank’s primary source of income has been interest income received on loans, which represented 87.59%, 84.17%, and 80.42% of total revenue, respectively. As the Bank services a wide range of customers, there is no dependence upon any single customer, the loss of which would have a material adverse effect on its business.

The Bank employs a total of 243 full-time equivalent individuals on a full and part time basis, including the employees of its subsidiaries.

The Bank’s primary market area extends along the north shore of Long Island, including both Nassau and Suffolk Counties, principally from Port Washington to Wading River. All but one of the Bank’s current twenty-one branch offices are located within this region, as are the majority of the consumers and businesses which it serves. The one exception is the Bank’s newest location on Seventh Avenue in New York City. As part of the Bank’s continued growth plans to serve a wider geographical customer base, five additional leases have been signed for branch locations on Houston Street in New York City, Deer Park, East Setauket, St. James and Hicksville. An additional site has been purchased in East Northport for a branch office. It is presently expected that most of the above locations will open during 2009. Within the Bank’s primary market area, the majority of businesses are considered small businesses, and lending tends to be concentrated within commercial and residential real estate, health services, technology, insurance and construction industries, as well as small professional businesses.

The Bank makes loans, mostly on Long Island and throughout the greater metropolitan area, for office and retail properties, industrial properties, storage facilities, professional offices, golf courses and other recreational facilities, parking garages and

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other commercial uses. Loans are also made for land acquisition and/or for the construction of residential properties and commercial properties. The Bank also makes permanent mortgage loans for single-family and multi-family housing. Bank of Smithtown Insurance Agents and Brokers, Inc. provides insurance and financial services to a wide range of consumer and business customers, who reside primarily on Long Island and the metropolitan area, thus adding a synergy between the two businesses. Insurance products are also provided nationally by the Agency, but to a much lesser degree. Bank of Smithtown Financial Services, Inc. serves consumers located primarily within the Bank’s market area.

All of the business lines engaged in by the Bank and its subsidiaries are of a highly competitive nature. The Bank faces competitive pressures from multi-national banks located within its market area, as well as other community banks and regional banks in the area. These competitive pressures can affect the pricing of bank deposit and loan products, as well as the costs of providing bank services. Competition results from other commercial banks, savings banks, credit unions and financial service providers such as investment and insurance companies.

The Company, the Bank and its subsidiaries report their income on a consolidated basis using the accrual method of accounting and are subject to federal and state income taxes. In general, banks are subject to federal income tax in the same manner as other corporations. However, gains and losses from the sale of available for sale securities are treated as ordinary income rather than capital gains or losses. Additionally, the Company can exclude 100% of the dividend income it receives from the Bank as they are members of the same affiliated group. The Bank is subject to New York State Franchise Tax on Banking Corporations based on certain criteria. The Bank can exclude 60% of the dividend income received from BOS Preferred Funding, Inc. from New York State taxable income as long as this subsidiary meets certain requirements. The taxation of other income is similar to federal taxable income subject to certain modifications.

Regulation and Supervision

The Bank maintains a New York State charter and as such is subject to supervision, examination and regulation by the New York State Banking Department. During 2007, as a result of its withdrawal from the Federal Reserve System, the Bank came under regulation, supervision and examination by the Federal Deposit Insurance Corporation (“FDIC”). Smithtown Bancorp, Inc. remains subject to the Bank Holding Company Act of 1956, as amended (“BHCA”), and as such is subject to the rules and regulations under the BHCA. The statutory rules and regulations enforced by the Bank’s regulatory agencies relate to deposit insurance, minimum capital requirements, allowable investments, lending limits, payments of dividends and various consumer protection laws. Any change in such laws and regulations, whether by the New York State Banking Department, the Federal Reserve, the FDIC or through legislation, could have a material adverse impact on the Bank, the Company and its stockholders, and on the operations of the Bank and the Company. The Company is additionally under the supervision and regulation of the Securities and Exchange Commission (“SEC”). Access to any materials filed with the SEC is available at the SEC Public Reference Room, 450 Fifth Street, NW, Washington, DC 20549. Information on the operation of the Public Reference Room is available by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site, http://www.sec.gov, that contains reports, proxy and information statements filed by the Registrant.

Other Information

The Bank’s internet address is www.bankofsmithtown.com. The Annual Report on Form 10-K, quarterly reports on Form 10-Q and amendments to those reports filed or furnished pursuant to Section 13 or 15(d) of the Exchange Act are made available free of charge at the Bank’s website as soon as reasonably practicable after electronic filing has been completed. Requests for these documents may also be directed to Smithtown Bancorp, Inc., 100 Motor Parkway, Suite 160, Hauppauge, NY 11788, (631) 360-9300.

The Bank has adopted a Code of Ethics, which applies to all directors, officers and employees. This Code is distributed to and signed by each of the above, and is maintained in the Bank’s Human Resources Department. The Code contains Whistleblower provisions adopted by the Company and its subsidiaries. Stockholders may request a copy of the Code of Ethics by contacting Smithtown Bancorp, Inc., 100 Motor Parkway, Suite 160, Hauppauge NY 11788 (631) 360-9398, Deborah McElroy, Director of Human Resources.

Item 1: Description of Business



Smithtown Bancorp, Inc. (“Registrant” or “Company”) is a New York State registered bank holding company with one wholly owned bank subsidiary, Bank of Smithtown (“Bank”) and three other wholly owned subsidiaries, Bank of Smithtown Capital Trust I, Bank of Smithtown Capital Trust II and Bank of Smithtown Capital Trust III, all of which were formed for the purpose of issuing trust preferred securities. The Company was
organized as a New York business corporation and was incorporated under the laws of New York State in 1984. At the direction of the Board of Directors, pursuant to a plan of reorganization, the former stockholders of the Bank became the stockholders of the Company. Since commencing business in 1984, the Company has functioned primarily as holder of all of the Bank’s common stock. In October 1999, the Bank and Seigerman-Mulvey Co., Inc. entered into a joint venture, SMTB Financial
Group, LLC, for the purpose of selling insurance products and services and offering financial investment services to employees and customers of the Bank. In April 2001, the Bank established a new corporation, Bank of Smithtown Insurance Agency, for the purpose of accepting commission payments from Essex National Securities and Essex National Insurance Agency. These commissions were generated through a program called “Investors Marketplace.” The program, which was designed by
a large group of community bankers, offers tax deferred annuities and mutual funds. During 2005, the Bank filed for a change of name for this subsidiary to Bank of Smithtown Financial Services, Inc. Effective February 2006, the source of the agency’s commissions is Great American Advisors. In August 2004, the Bank purchased all of the stock of Seigerman-Mulvey Co., Inc. As a wholly-owned subsidiary of the Bank, the insurance company provides business and personal insurance
products as well as financial products and services. Following the Bank’s acquisition of Seigerman-Mulvey Co., Inc., SMTB Financial Group, LLC ceased operations. During 2005, the Bank also filed for a change of name for Seigerman-Mulvey Co., Inc., which is now known as Bank of Smithtown Insurance Agents and Brokers, Inc. (“Agency”). In September 2007, the Agency purchased the assets of Payne & Palmieri, a small insurance agency located in East Setauket, NY. This
acquisition has served to both enhance revenues and provide access to additional insurance carriers. In February 2006, the Bank formed an additional subsidiary, BOS Preferred Funding Corporation. This subsidiary is a real estate investment trust, formed as a vehicle for capital enhancement for the Bank, and became a holder of a substantial volume of the residential and commercial real estate loans of the Bank.



At present, the Company does not own or lease any property and has no paid employees. The Company uses the Bank’s office space and employees without separate payment. Corporate headquarters are located at 100 Motor Parkway, Hauppauge, NY 11788.



The Bank engages in a complete range of commercial and consumer banking services as well as trust services, including demand, savings and time deposits accepted from consumers, businesses and municipalities located primarily within Suffolk and Nassau Counties, Long Island, NY. These deposits, along with funds generated from operations and other borrowings are invested primarily in (1) commercial and residential mortgages, (2) construction and land
loans, (3) secured and unsecured commercial loans, (4) secured and unsecured consumer loans, (5) U.S. treasury and government agency securities, (6) obligations of state and political subdivisions (7) FNMA, FHLMC, FHLB, and GNMA mortgage-backed securities and (8) trust preferred securities. The Bank also offers merchant credit and debit card processing, safe deposit boxes, online banking including account opening and bill pay, telephone banking, automated teller machines and individual
retirement accounts. Through its financial services subsidiary, Bank of Smithtown Financial Services Inc., the Bank offers tax deferred annuities and mutual funds. Through its insurance subsidiary, Bank of Smithtown Insurance Agents and Brokers, Inc., the Bank offers a full line of commercial and personal insurance products. For the years ended December 31, 2008, 2007 and 2006, the Bank’s primary source of income has been interest income received on loans, which represented
87.59%, 84.17%, and 80.42% of total revenue, respectively. As the Bank services a wide range of customers, there is no dependence upon any single customer, the loss of which would have a material adverse effect on its business.



The Bank employs a total of 243 full-time equivalent individuals on a full and part time basis, including the employees of its subsidiaries.



The Bank’s primary market area extends along the north shore of Long Island, including both Nassau and Suffolk Counties, principally from Port Washington to Wading River. All but one of the Bank’s current twenty-one branch offices are located within this region, as are the majority of the consumers and businesses which it serves. The one exception is the Bank’s newest location on Seventh Avenue in New York City. As part of the
Bank’s continued growth plans to serve a wider geographical customer base, five additional leases have been signed for branch locations on Houston Street in New York City, Deer Park, East Setauket, St. James and Hicksville. An additional site has been purchased in East Northport for a branch office. It is presently expected that most of the above locations will open during 2009. Within the Bank’s primary market area, the majority of businesses are considered small
businesses, and lending tends to be concentrated within commercial and residential real estate, health services, technology, insurance and construction industries, as well as small professional businesses.



The Bank makes loans, mostly on Long Island and throughout the greater metropolitan area, for office and retail properties, industrial properties, storage facilities, professional offices, golf courses and other recreational facilities, parking garages and



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other commercial uses. Loans are also made for land acquisition and/or for the construction of residential properties and commercial properties. The Bank also makes permanent mortgage loans for single-family and multi-family housing. Bank of Smithtown Insurance Agents and Brokers, Inc. provides insurance and financial services to a wide range of consumer and business customers, who reside primarily on Long Island and the metropolitan area, thus adding a
synergy between the two businesses. Insurance products are also provided nationally by the Agency, but to a much lesser degree. Bank of Smithtown Financial Services, Inc. serves consumers located primarily within the Bank’s market area.



All of the business lines engaged in by the Bank and its subsidiaries are of a highly competitive nature. The Bank faces competitive pressures from multi-national banks located within its market area, as well as other community banks and regional banks in the area. These competitive pressures can affect the pricing of bank deposit and loan products, as well as the costs of providing bank services. Competition results from other commercial banks, savings
banks, credit unions and financial service providers such as investment and insurance companies.



The Company, the Bank and its subsidiaries report their income on a consolidated basis using the accrual method of accounting and are subject to federal and state income taxes. In general, banks are subject to federal income tax in the same manner as other corporations. However, gains and losses from the sale of available for sale securities are treated as ordinary income rather than capital gains or losses. Additionally, the Company can exclude 100% of
the dividend income it receives from the Bank as they are members of the same affiliated group. The Bank is subject to New York State Franchise Tax on Banking Corporations based on certain criteria. The Bank can exclude 60% of the dividend income received from BOS Preferred Funding, Inc. from New York State taxable income as long as this subsidiary meets certain requirements. The taxation of other income is similar to federal taxable income subject to certain modifications.



Regulation and Supervision



The Bank maintains a New York State charter and as such is subject to supervision, examination and regulation by the New York State Banking Department. During 2007, as a result of its withdrawal from the Federal Reserve System, the Bank came under regulation, supervision and examination by the Federal Deposit Insurance Corporation (“FDIC”). Smithtown Bancorp, Inc. remains subject to the Bank Holding Company Act of 1956, as amended
(“BHCA”), and as such is subject to the rules and regulations under the BHCA. The statutory rules and regulations enforced by the Bank’s regulatory agencies relate to deposit insurance, minimum capital requirements, allowable investments, lending limits, payments of dividends and various consumer protection laws. Any change in such laws and regulations, whether by the New York State Banking Department, the Federal Reserve, the FDIC or through legislation, could have a
material adverse impact on the Bank, the Company and its stockholders, and on the operations of the Bank and the Company. The Company is additionally under the supervision and regulation of the Securities and Exchange Commission (“SEC”). Access to any materials filed with the SEC is available at the SEC Public Reference Room, 450 Fifth Street, NW, Washington, DC 20549. Information on the operation of the Public Reference Room is available by calling the SEC at
1-800-SEC-0330. The SEC also maintains an Internet site, http://www.sec.gov, that contains reports, proxy and information statements filed by the Registrant.



Other Information



The Bank’s internet address is www.bankofsmithtown.com. The Annual Report on Form 10-K, quarterly reports on Form 10-Q and amendments to those reports filed or furnished pursuant to Section 13 or 15(d) of the Exchange Act are made available free of charge at the Bank’s website as soon as reasonably practicable after electronic filing has been completed. Requests for these documents may also be directed to Smithtown Bancorp, Inc., 100
Motor Parkway, Suite 160, Hauppauge, NY 11788, (631) 360-9300.



The Bank has adopted a Code of Ethics, which applies to all directors, officers and employees. This Code is distributed to and signed by each of the above, and is maintained in the Bank’s Human Resources Department. The Code contains Whistleblower provisions adopted by the Company and its subsidiaries. Stockholders may request a copy of the Code of Ethics by contacting Smithtown Bancorp, Inc., 100 Motor Parkway, Suite 160, Hauppauge NY 11788 (631)
360-9398, Deborah McElroy, Director of Human Resources.



EXCERPTS ON THIS PAGE:

10-K (2 sections)
Mar 12, 2009

RELATED TOPICS for SMTB:

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