SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
--------------------
FORM 10-KSB
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 2002
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-29030
SUSSEX BANCORP
(Name of small business issuer as specified in its charter)
New Jersey 22-3475473
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(State of other jurisdiction (I.R.S. employer
of incorporation or organization) identification no.)
399 Route 23, Franklin, New Jersey 07416 (973) 827-2914
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(Address of principal (Zip Code) (Issuer's Telephone Number
executive offices) Including Area Code)
Securities Registered Pursuant to Section 12(b) of the Act:
Common Stock, no par value American Stock Exchange
-------------------------- -----------------------
Title of Each Class Name of Exchange on Which Registered
Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark whether the Issuer: (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934, as amended, during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes [X] No[ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-B is not contained herein, and will not be contained,
to the best of Issuer's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
The aggregate market value of the voting stock held by non-affiliates of
the Issuer as of March 3 , 2003 was $13,595,098. The number of shares
of the Issuer's Common Stock, no par value, outstanding as of March 3,
2003 was 1,695,462.
For the fiscal year ended December 31, 2002, the Issuer had total revenues
of $ 14,152,000.
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
10-KSB Item Document Incorporated
----------- ---------------------
Item 6. Management's Discussion and Management's Discussion and
Analysis or Plan of Operation Analysis or Plan of Opera-
tion from the 2002 Annual
Report to Shareholders.
Item 7. Financial Statements Consolidated and Audited
Financial Statments from
the 2002 Annual Report to
Shareholders.
Item 9. Directors and Executive
Officers of the Proxy Statement for 2003
Company; Compliance Annual Meeting of
with Section 16(a) of Shareholders to be filed
the Exchange Act. no later than April 29,
2003.
Item 10. Executive Compensation
Proxy Statement for 2003
Annual Meeting of
Shareholders to be filed
not later than April 29,
2003.
Item 11. Security Ownership of
Certain Beneficial Proxy Statement for 2003
Owners and Management Annual Meeting of
Shareholders to be filed
no later than April 29,
2003.
Item 12. Certain Relationships
and Related Proxy Statement for 2003
Transactions Annual Meeting of
Shareholders to be filed
no later than April 29,
2003.
2
PART I
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ITEM 1 -- DESCRIPTION OF BUSINESS
General
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Sussex Bancorp (the "Company" or "Registrant") is a one-bank holding
company incorporated under the laws of the State of New Jersey in January, 1996
to serve as a holding company for Sussex Bank (the "Bank"). The Company was
organized at the direction of the Board of Directors of the Bank for the purpose
of acquiring all of the capital stock of the Bank (the "Acquisition"). Pursuant
to the New Jersey Banking Act of 1948, as amended, (the "Banking Act"), and
pursuant to approval of the shareholders of the Bank, the Company acquired the
Bank and became its holding company on November 20, 1996. As part of the
Acquisition, shareholders of the Bank received one share of common stock, no par
value ("Common Stock") of the Company for each outstanding share of the common
stock of the Bank, $2.50 per share par value ("Bank Common Stock"). The only
significant asset of the Company is its investment in the Bank. The Company's
main office is located at 399 Route 23, Franklin, Sussex County, New Jersey
07416.
The Bank is a commercial bank formed under the laws of the State of New
Jersey in 1975. The Bank operates from its main office at 399 Route 23,
Franklin, New Jersey 07416, and its seven branch offices located at 7 Church
Street, Vernon, New Jersey; 266 Clove Road, Montague, New Jersey; 33 Main
Street, Sparta, New Jersey; 455 Route 23, Wantage, New Jersey; 15 Trinity
Street, Newton, New Jersey; 100 Route 206, Augusta, New Jersey; and 165 Route
206, Andover, New Jersey.
Effective October 1, 2001, the Company acquired all of the outstanding
stock of Tri-State Insurance Agency, Inc. ("Tri-State"). Tri-State is a full
service insurance agency located in Augusta, New Jersey. The purchase price paid
by the Company for Tri-State was comprised of an upfront payment of $350,000 at
closing, and deferred payments on the first, second and third anniversaries of
the closing of $700,000 each, to be satisfied through a mix of cash and common
stock of the Company, subject to adjustment based upon the net income of
Tri-State as a subsidiary of the Bank. As part of the acquisition, each of the
principals of Tri-State have entered into an employment agreement providing for
their employment by Tri-State for a period of at least five years. Subsequent to
year end, the Company expanded its insurance operations through the acquisition
of the Garrera Insurance Agency. The operations of the Garrera Insurance Agency
have been consolidated with Tri-State.
The Company is subject to the supervision and regulation of the Board of
Governors of the Federal Reserve System (the "FRB"). The Bank's deposits are
insured by the Bank Insurance Fund ("BIF") of the Federal Deposit Insurance
Corporation ("FDIC") up to applicable limits. The operations of the Company and
the Bank are subject to the supervision and regulation of the FRB, FDIC and the
New Jersey Department of Banking and Insurance (the "Department"). The
operations of Tri-State are also subject to supervision and regulation by
Department. The principal executive offices of the Company are located at 399
Route 23, Franklin, New Jersey 07416, and the telephone number is (973)
827-2914.
Business of the Company
-----------------------
The Company's primary business is ownership and supervision of the Bank and
Tri-State, a subsidiary of the Bank. The Company, through the Bank, conducts a
traditional commercial banking business, and offers services including personal
and business checking accounts and time deposits, money market accounts and
regular savings accounts. The Company structures its specific services and
charges in a manner designed to attract the business of the small and medium
sized business and professional community as well as that of individuals
residing, working and shopping in the Sussex County, New Jersey trade area
serviced by the Company. The Company engages in a wide range of lending
activities and offers commercial, consumer, mortgage, home equity and personal
loans. In addition, during 1998, the Bank formed the Sussex Bancorp Mortgage
Company (the "Mortgage Company"). The Mortgage Company originates one to four
family mortgage loans for resale into the secondary market. Currently, all loans
are sold servicing released, although the Company, through the Bank, may seek to
service the loans it originates in the future.
Through the Bank's subsidiary, Tri-State, the Company operates a full
service general insurance agency, offering both commercial and personal lines of
insurance. The Company considers this to be a separate business segment.
Service Area
------------
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The Company's service area primarily consists of the Sussex County, New
Jersey market, although the Company makes loans throughout New Jersey and, on a
more limited basis, in Pike County, Pennsylvania and Orange County, New York.
The Company operates its main office in Franklin, New Jersey and seven branch
offices in Vernon, Montague, Sparta, Wantage, Newton, Andover and Augusta New
Jersey.
Competition
-----------
The Company operates in a highly competitive environment competing for
deposits and loans with commercial banks, thrifts and other financial
institutions, many of which have greater financial resources than the Company.
Many large financial institutions in New York City and other parts of New Jersey
compete for the business of New Jersey residents located in the Company's
service area. Certain of these institutions have significantly higher lending
limits than the Company and provide services to their customers which the
Company does not offer.
Management believes the Company is able to compete on a substantially equal
basis with its competitors because it provides responsive personalized services
through management's knowledge and awareness of the Company's service area,
customers and business.
Employees
---------
At December 31, 2002, the Company employed 97 full-time employees and 19
part-time employees. None of these employees are covered by a collective
bargaining agreement and the Company believes that its employee relations are
good.
Supervision and Regulation
--------------------------
Bank holding companies and banks are extensively regulated under both
federal and state law. These laws and regulations are intended to protect
depositors, not stockholders. Insurance agencies licensed in New Jersey are
regulated under state law by the New Jersey Department of Banking and Insurance.
To the extent that the following information describes statutory and regulatory
provisions, it is qualified in its entirety by reference to the particular
statutory and regulatory provisions. Any change in the applicable law or
regulation may have a material effect on the business and prospects of the
Company and the Bank.
Bank Holding Company Regulation
-------------------------------
General
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As a bank holding company registered under the Bank Holding Company Act of
1956, as amended, (the BHCA), we are subject to the regulation and supervision
of the Federal Reserve Bank (FRB). We are required to file with the FRB annual
reports and other information regarding our business operations and those of our
subsidiaries.
The BHCA requires, among other things, the prior approval of the FRB in any
case where a bank holding company proposes to (i) acquire all or substantially
all of the assets of any other bank, (ii) acquire direct or indirect ownership
or control or more than 5% of the outstanding voting stock of any bank (unless
it owns a majority of such bank's voting shares) or (iii) merge or consolidate
with any other bank holding company. The FRB will not approve any acquisition,
merger, or consolidation that would have a substantially anti-competitive
effect, unless the anti-competitive impact of the proposed transaction is
clearly outweighed by a greater public interest in meeting the convenience and
needs of the community to be served. The FRB also considers capital adequacy and
other financial and managerial resources and future prospects of the companies
and the banks concerned, together with the convenience and needs of the
community to be served, when reviewing acquisitions or mergers.
In addition, the BHCA was amended through the Gramm-Leach-Bliley Financial
Modernization Act of 1999 (the "GLBA"). Under the terms of the GLBA, bank
holding companies whose subsidiary banks meet certain capital, management and
Community Reinvestment Act standards are permitted to engage in a substantially
broader range of non-banking activities than is permissible for bank holding
companies under the BHCA. These activities include certain insurance, securities
and merchant banking activities. In addition, the GLBA amendments to the BHCA
remove the requirement for advance regulatory approval for a variety of
activities and acquisitions by financial holding companies. As our business is
4
currently limited to activities permissible for a bank, we have not elected to
become a financial holding company.
There are a number of obligations and restrictions imposed on bank holding
companies and their depository institution subsidiaries by law and regulatory
policy that are designed to minimize potential loss to the depositors of such
depository institutions and the FDIC insurance funds in the event the depository
institution becomes in danger of default. Under a policy of the FRB with respect
to bank holding company operations, a bank holding company is required to serve
as a source of financial strength to its subsidiary depository institutions and
to commit resources to support such institutions in circumstances where it might
not do so absent such policy. The FRB also has the authority under the BHCA to
require a bank holding company to terminate any activity or to relinquish
control of a non-bank subsidiary upon the FRB's determination that such activity
or control constitutes a serious risk to the financial soundness and stability
of any bank subsidiary of the bank holding company.
Capital Adequacy Guidelines for Bank Holding Companies
------------------------------------------------------
The FRB has adopted risk-based capital guidelines for bank holding
companies. The risk-based capital guidelines are designed to make regulatory
capital requirements more sensitive to differences in risk profile among banks
and bank holding companies, to account for off-balance sheet exposure, and to
minimize disincentives for holding liquid assets. Under these guidelines, assets
and off-balance sheet items are assigned to broad risk categories each with
appropriate weights. The resulting capital ratios represent capital as a
percentage of total risk-weighted assets and off-balance sheet items.
The risk-based guidelines apply on a consolidated basis to bank holding
companies with consolidated assets of $150 million or more. The minimum ratio of
total capital to risk-weighted assets (including certain off-balance sheet
activities, such as standby letters of credit) is 8%. At least 4% of the total
capital is required to be "Tier I", consisting of common stockholders' equity,
certain preferred stock and certain hybrid capital instruments, less certain
goodwill items and other intangible assets. The remainder, "Tier II Capital",
may consist of (a) the allowance for loan losses of up to 1.25% of risk-weighted
assets, (b) excess of qualifying preferred stock, (c) excess of hybrid capital
instruments, (d) debt, (e) mandatory convertible securities, and (f) qualifying
subordinated debt. Certain hybrid capital instruments, including specifically
trust preferred securities, may be included in Tier I capital up to a maximum of
25% of Tier I capital. In 2002, the Company raised $4.8 million in net proceeds
through an offering of trust preferred securities, all of which is counted as
Tier I Capital. Total capital is the sum of Tier I and Tier II capital less
reciprocal holdings of other banking organizations' capital instruments,
investments in unconsolidated subsidiaries and any other deductions as
determined by the FRB (determined on a case-by-case basis or as a matter of
policy after formal rule-making).
Bank holding company assets are given risk-weights of 0%, 20%, 50% and
100%. In addition, certain off-balance sheet items are given similar credit
conversion factors to convert them to asset equivalent amounts to which an
appropriate risk-weight will apply. These computations result in the total
risk-weighted assets. Most loans are assigned to the 100% risk category, except
for performing first mortgage loans fully secured by residential property which
carry a 50% risk-weighting. Most investment securities (including, primarily,
general obligation claims of states or other political subdivisions of the
United States) are assigned to the 20% category, except for municipal or state
revenue bonds, which have a 50% risk-weight, and direct obligations of the U.S.
Treasury or obligations backed by the full faith and credit of the U.S.
Government, which have a 0% risk-weight. In converting off-balance sheet items,
direct credit substitutes including general guarantees and standby letters of
credit backing financial obligations are given 100% risk-weighing. Transaction
related contingencies such as bid bonds, standby letters of credit backing
non-financial obligations, and undrawn commitments (including commercial credit
lines with an initial maturity of more than one year) have a 50% risk-weighting.
Short term commercial letters of credit have a 20% risk-weighting and certain
short-term unconditionally cancelable commitments have a 0% risk-weighting.
In addition to the risk-based capital guidelines, the FRB has adopted a
minimum Tier I capital (leverage) ratio, under which a bank holding company must
maintain a minimum level of Tier I capital to average total consolidated assets
of at least 3% in the case of a bank holding company that has the highest
regulatory examination rating and is not contemplating significant growth or
expansion. All other bank holding companies are expected to maintain a leverage
ratio of at least 100 to 200 basis points above the stated minimum.
Bank Regulation
---------------
As a New Jersey-chartered commercial bank, the Bank is subject to the
regulation, supervision, and control of the Department. As an FDIC-insured
institution, the Bank is subject to regulation, supervision and control of the
FDIC, an agency of the federal government. The regulations of the FDIC and the
Department impact virtually all activities of the Bank, including the minimum
level of capital the Bank must maintain, the ability of the Bank to pay
dividends, the ability of the Bank to expand through new branches or
acquisitions and various other matters.
5
Insurance of Deposits
---------------------
The Bank's deposits are insured up to a maximum of $100,000 per depositor
under the BIF. The FDIC has established a risk-based insurance premium
assessment system under which the FDIC has developed a matrix that sets the
assessment premium for a particular institution in accordance with its capital
level and overall regulatory rating by the institutions' primary federal
regulatory. Under the matrix that is currently in effect, the assessment rate
ranges from 0 to 27 basis points of assessed deposits. In addition to the
deposit insurance premium assessment, under the deposit insurance funds act of
1996 (the "Deposit Act"), BIF insured institutions like the Bank are required to
contribute to the debt service and principal repayment on bonds issued by the
Federal Finance Corporation ("FICO") in the mid-1980s to fund a portion of the
thrift bailout. This assessment is currently set at 1.68 basis points of
assessed deposits. During the early 1990's, the Bank acquired certain Savings
Association Insurance Fund ("SAIF") insured deposits from the Resolution Trust
Corporation. The Bank pays FICO assessments on these deposits at the higher SAIF
rate. In 2002, the assessment on these SAIF deposits totaled $ 12,190.
Dividend Rights
---------------
Under the Banking Act, a bank may declare and pay dividends only if, after
payment of the dividend, the capital stock of the bank will be unimpaired and
either the bank will have a surplus of not less than 50% of its capital stock or
the payment of the dividend will not reduce the bank's surplus.
Legislative and Regulatory Changes
----------------------------------
On October 26,2001, a new anti-terrorism bill, the International Money
Laundering Abatement and Anti-Terrorism Funding Act of 2001, was signed into
law. This law restricts money laundering by terrorist in the United States and
abroad. This act specifies new "know your customer" requirements that will
obligate financial institutions to take actions to verify the identity of the
account holders in connection with opening an account at any financial
institution. Banking regulations will consider compliance with the act's money
laundering provisions in making decisions regarding approval of acquisitions and
mergers. In addition, sanctions for violations of the act can be imposed in an
amount equal to twice the sum involved in the violating transactions, up to $1
million.
ITEM 2 -- DESCRIPTION OF PROPERTY
The Company conducts its business through its main office located at 399
Route 23, Franklin, New Jersey, and its seven branch offices and its insurance
company. The following table set forth certain information regarding the
Company's properties as of December 31, 2002. All properties are adequatley
covered by insurance.
--------------------------------------------------------------------------------
DATE OF
LOCATION LEASED OR OWNED LEASE EXPIRATION
-----------------------------------------------------------------------------
399 Route 23 Owned N/A
Franklin, New Jersey
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7 Church Street Owned N/A
Vernon, New Jersey
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266 Clove Road Leased March, 2007
Montague, New Jersey
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96 Route 206 Leased August, 2006
Augusta, New Jersey
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455 Route 23 Owned(1) N/A
Wantage, New Jersey
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15 Trinity Street Owned N/A
Newton, New Jersey
------------------------------------------------------------------------
165 Route 206 Owned N/A
Andover, New Jersey
------------------------------------------------------------------------
100 Route 206 Owned N/A
Augusta, New Jersey
------------------------------------------------------------------------
33 Main Street Owned N/A
Sparta, New Jersey
------------------------------------------------------------------------
-----------------------
(1) The Company owns the building housing its Wantage branch. The land on
which the building is located is leased pursuant to a ground lease which runs
until December 31, 2020, and contains an option for the Company to extend the
lease for an additional 25 year term.
ITEM 3 - LEGAL PROCEEDINGS
The Company and the Bank are periodically parties to or otherwise involved
in legal proceedings arising in the normal course of business, such as claims to
enforce liens, claims involving the making and servicing of real property loans,
and other issues incident to the Bank's business. Management does not believe
that there is any pending or threatened proceeding against the Company or the
6
Bank which, if determined adversely, would have a material effect on the
business, financial position or results of operation of the Company or the Bank.
ITEM 4 - SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted for a vote of the registrant's shareholders
during the Fourth Quarter of fiscal 2002.
PART II
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ITEM 5 -- MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Common Stock trades on the American Stock Exchange, under the
symbol "SBB". As of December 31, 2002, the Company had approximately 700
holders of record of the Common Stock.
The following table shows the high and low closing price, by quarter,
for the common stock, as well as dividends declared, for the last two
fiscal years:
DIVIDENDS
---------
2002 HIGH LOW DECLARED
---- ---- --- --------
$11.70 $10.20 $0.07
4th Quarter
10.97 10.55 0.06
3rd Quarter
10.82 10.60 0.06
2nd Quarter
10.68 9.97 0.06
1st Quarter
DIVIDENDS
---------
2001 HIGH LOW DECLARED
---- ---- --- --------
4th Quarter $10.38 $ 9.72 $ 0.05
3rd Quarter 11.25 10.37 0.07
2nd Quarter 10.50 9.50 0.07
1st Quarter 10.42 10.00 --
ITEM 6 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF OPERATION
The information required by this item is incorporated by reference from the
Registrant's 2002 Annual Report to Shareholders under the caption "Management
Discussion and Analysis."
ITEM 7 - FINANCIAL STATEMENTS
The information required by this item is incorporated by reference from the
Registrant's 2002 Annual Report to Shareholders under the caption "Consolidated
Financial Statements."
ITEM 8 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
For the year ended December 31, 2001, Arthur Andersen LLP performed the
audit of the Company's financial statements. In light of events impacting Arthur
Andersen LLP, the Company changed its independent auditors in April of 2002,
dismissing Arthur Andersen LLP and retaining Beard Miller Company LLP as
independent auditors. The decision to change auditors was recommended by the
Company's Audit Committee. There were no disagreements with Arthur Andersen LLP
on any matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedure which, if not resolved to the
satisfaction of Arthur Andersen LLP, would have caused it to make reference to
the subject matter of the disagreement in connection with their reports. The
independent auditors report on the consolidated financial statements for the
fiscal years ended December 31, 2001 and 2000 did not contain any adverse
7
opinion or disclaimer of opinion, and was not qualified or modified as to
uncertainty, audit scope or auditing principles.
In 2001 the Company changed independent auditors. The Company replaced
Radics & Co., LLC with Arthur Andersen to serve as its independent auditors. The
decision to change auditors was recommended by the Company's Audit Committee.
For the fiscal years ended December 31, 2000 and 1999, the Company had retained
the services of Radics & Co., LLC as its independent auditors. There have been
no disagreements with Radics & Co., LLC on any matter of accounting principles
or practices, financial statement disclosure or auditing scope or procedure
which, if not resolved to the satisfaction of Radics & Co., LLC, would have
caused it to make reference to the subject matter of the disagreement in
connection with their reports. The independent auditor's report on the
consolidated financial statements for the fiscal years ended December 31, 2000
and 1999 did not contain an adverse opinion or disclaimer of opinion, and was
not qualified or modified as to uncertainty, audit scope or auditing principles.
ITEM 9 -- DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
COMPLIANCE WITH SECTION 16(a)
Information concerning directors and executive officers is included in the
definitive Proxy Statement for the Company's 2003 Annual Meeting under the
captions "ELECTION OF DIRECTORS" and information concerning compliance with
Section 16(a) of the Exchange Act is included under the caption "COMPLIANCE WITH
SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934," each of which is
incorporated herein by reference. It is expected that such Proxy Statement will
be filed with the Securities and Exchange commission no later than April 29,
2003.
The following table sets forth certain information about each executive
officer of the Company who is not also a director.
Principal Occupation
Name, Age and Position Officer Since During Past Five Years
---------------------- ----------------- ----------------------
Candace A. Leatham, 48 1984(1) Senior Vice President and
Executive Vice President Treasurer of the Bank
and Treasurer
George B. Harper, 48 2001 President, Tri-State Insurance Agency, Inc.
President, Tri-State Insurance
Agency, Inc.
George Lista, 43 2001 Executive Vice President and Chief
Chief Operating Officer, Operating Officer, Tri-State Insurance
Tri-State Insurance Agency, Inc. Agency, Inc.
---------------------------------------
(1) Includes prior service as an officer of the Bank.
ITEM 10 - EXECUTIVE COMPENSATION
Information concerning executive compensation is incorporated by reference
from the Registrant definitive Proxy Statement for the Company's 2003 Annual
Meeting under the captions "ANNUAL EXECUTIVE COMPENSATION AND ALL OTHER
COMPENSATION" and "COMPENSATION OF DIRECTORS". It is expected that such Proxy
Statement will be filed with the Securities and Exchange Commission no later
than April 29, 2003.
ITEM 11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information concerning security ownership of certain beneficial owners and
management is included in the definitive Proxy statement for the Company's 2003
Annual Meeting under the caption "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT", which is incorporated herein by reference. It is
expected that such Proxy statement will be filed with the Securities and
Exchange commission no later than April 29, 2003.
8
The following table sets forth information with respect to the Company's
equity compensation plans as of the end of the most recently completed fiscal
year.
Equity Compensation Plan Information
------------------------------------------------------------------------------------------------------
Number of
securities
remaining
available for
Number of future issuance
securities to under equity
be issued Weighted-average compensation
upon exercise price of plans
exercise of outstanding (excluding
outstanding options, warrants securities
options, and rights reflected in
warrants and column (a))
Plan category rights (b)
(a) (c)
------------------------------------------------------------------------------------------------------
Equity compensation plans approved 87,850 $8.58 261,711
by security holders
------------------------------------------------------------------------------------------------------
Equity compensation plans not approved (1) (1) (1)
by security holders
------------------------------------------------------------------------------------------------------
Total 87,850(1) $8.58(1) 261,711(1)
------------------------------------------------------------------------------------------------------
(1) In connection with the Company's acquisition of Tri-State effective
October 1, 2001, the Company entered into employment agreements with each of
Messrs George B. Harper and George Lista. Under these agreements, each of
Messrs. Harper and Lista is entitled to receive bonuses based upon the net
before tax income of Tri-State for each twelve-month period commencing on the
effective date of the acquisition. To the extent Tri-State's net before tax
income exceeds certain designated targets contained in each employment
agreement, each of Messrs. Harper and Lista will be entitled to receive a bonus
equal to 25% of the amount by which the net before tax income of Tri State
exceeds the target. The bonus is to be paid in shares of the Company's common
stock. The amount of stock to be issued will be determined by dividing the
amount of the bonus by the fair market value of the Company's common stock,
determined by taking the average closing price of the common stock for the
fifteen trading days prior to issuance. For the twelve-month period ended
September 30, 2002, Tri-State exceeded its targeted net before tax income, and
each of Messrs. Harper and Lista received a bonus of 535 shares of the Company's
common stock. The employment agreements with Messrs. Harper and Lista expire on
September 30, 2006.
ITEM 12 -- CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information concerning certain relationships and related transactions is
included in the definitive Proxy Statement for the Company's 2003 Annual Meeting
under the caption "INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS",
which is incorporated herein by reference. It is expected that such Proxy
Statement will be filed with the Securities and Exchange Commission no later
than April 29, 2003.
ITEM 13 -- EXHIBITS, LISTS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
Number Description of Exhibits
------ -----------------------
13 Portions on the Annual Report to Shareholders for the
year ended December 31, 2002
21 Subsidiaries of the Registrant
23.1 Consent of Beard Miller Company LLP
23.2 Information regarding consent of Arthur Anderson LLP
99.1 Certification pursuant to Section 906 of the Sarbanes
-Oxley Act of 2002
99.2 Report of Arthur Anderson LLP as independent auditors
dated January 17, 2002.
(b) Reports on form 8-K
Date Filed Item
------------------------------ - -----------------------------------
October 17, 2002 Item 5 - Announcing the third quarter
results.
ITEM 14. --CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures
Within the 90 days prior to the date of this report, the Company carried out an
evaluation, under the supervision and with the participation of the Company's
management, including the Company's Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of the Company's
disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based
upon that evaluation, the Chief Executive Officer and Chief Financial Officer
concluded that the Company's disclosure controls and procedures are effective in
timely alerting them to material information relating to the Company (including
its consolidated subsidiaries) required to be included in the Company's periodic
SEC filings.
(b) Changes in internal controls.
Not applicable
10
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
SUSSEX BANCORP
By: /s/ Donald L. Kovach
-----------------------------
Donald L. Kovach
Chairman of the Board and
Dated: March 20, 2003 Chief Executive Officer
---------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
NAME TITLE DATE
/s/ Donald L. Kovach Chairman of the Board and March 20, 2003
---------------------- Chief Executive Officer
Donald L. Kovach
/s/ Candace A. Leatham Treasurer (Principal Financial March 20, 2003
---------------------- Officer and Principal
Candace A. Leatham Accounting Officer)
/s/ Irvin Ackerson Director March 20, 2003
----------------------
Irvin Ackerson
/s/ William E. Kulsar Secretary and Director March 20, 2003
----------------------
William E. Kulsar
/s/ Edward J. Leppert Director March 20, 2003
----------------------
Edward J. Leppert
/s/ Joel D. Marvil Director March 20, 2003
----------------------
Joel D. Marvil
/s/ Richard Scott Director March 20, 2003
----------------------
Richard Scott
11
/s/ Terry H. Thompson Director March 20, 2003
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Terry H. Thompson
/s/ Joseph Zitone Director March 20, 2003
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Joseph Zitone
12