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United States

Securities and Exchange Commission

Washington, D.C. 20549



Form 10-Q



QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF

THE SECURITIES EXCHANGE
ACT OF 1934



For the quarter ended March 31, 2005



Commission File #0 - 13314



SMITHTOWN BANCORP, INC.

(Exact name of registrant as specified in its charter)



|                                                               |  |                                  
|-------------------------------------------------------------- |  | ---------------------------------
|New York                                                       |  | 11-2695037                       
|(State or other jurisdiction of incorporation or organization) |  | (IRS Employer Identification No.)
|                                                               | 
|100 Motor Parkway, Suite 160, Hauppauge, NY                    |  | 11788-5138                       
|(Address of Principal Executive Office)                        |  | (Zip Code)                       



(631) 360-9300

(Registrants telephone number, including area code)



Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 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 ̈



Check whether the registrant is an accelerated filer. Yes x    No ̈



Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date:



Shares of Common Stock ($.01 Par Value) Outstanding as of May 9, 2005.

5,923,726



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SMITHTOWN BANCORP



INDEX



|                               |  |                                                                                                                         |  |   
|------------------------------ |  | ----------------------------------------------------------------------------------------------------------------------- |  | --
|                               | 
|Part I - FINANCIAL INFORMATION |  |                                                                                                                        
|                               |  |                                                                                                                        
|Item 1.                        |  | Financial Statements                                                                                                    |  |   
|                               |  |                                                                                                                        
|                               |  | Unaudited Consolidated Balance Sheets as of March 31, 2005 and December 31, 2004.                                       |  | 4 
|                               |  |                                                                                                                        
|                               |  | Unaudited Consolidated Statements of Income for the Three Months Ended March 31, 2005 and 2004                          |  | 5 
|                               |  |                                                                                                                        
|                               |  | Unaudited Consolidated Statements of Changes in Stockholders Equity For the Three Months Ended March 31, 2005 and 2004 |  | 6 
|                               |  |                                                                                                                        
|                               |  | Unaudited Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2005 and 2004                      |  | 7 
|                               |  |                                                                                                                        
|Item 2.                        |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                   |  | 9 
|                               |  |                                                                                                                        
|Item 3.                        |  | Quantitative and Qualitative Disclosures About Market Risk                                                              |  | 13
|                               |  |                                                                                                                        
|Item 4.                        |  | Controls and Procedures                                                                                                 |  | 13
|                               | 
|Part II - OTHER INFORMATION    |  |                                                                                                                        
|                               |  |                                                                                                                        
|Item 1.                        |  | Legal Proceedings - None                                                                                                |  |   
|                               |  |                                                                                                                        
|Item 2.                        |  | Change in Securities and Use of Proceeds  Not Applicable                                                               |  |   



Issuer Purchases of Equity Securities



|                                   |  |                                         |  |                                      |  |                                                                                       |  |                                                                                                                  
|---------------------------------- |  | --------------------------------------- |  | ------------------------------------ |  | ------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------
|                                   |  | (a)                                     |  | (b)                                  |  | (c)                                                                                   |  | (d)                                                                                                              
|Period                             |  | TotalNumberof Shares(or Units)Purchased |  | Average Price Paid PerShare(or Unit) |  | Total Number ofShares (orUnits)Purchased asPart of
PubliclyAnnouncedPlans or Programs |  | MaximumNumber (or ApproximateDollar Value) ofShares (or Units)That May Yet BePurchased Underthe Plans or Programs
|January 1, 2005-January 31, 2005   |  | 0                                       |  | 0                                    |  | (1)                                                                                   |  | (1)                                                                                                              
|February 1, 2005-February 28, 2005 |  | 0                                       |  | 0                                    |  |                                                                                       |  |                                                                                                                  
|March 1, 2005-March 31, 2005       |  | 0                                       |  | 0                                    |  |                                                                                       |  |                                                                                                                  
|                                   |  |                                         |  |                                      |  |                                                                                       |  |                                                                                                                  
|Total                              |  | 0                                       |  | 0                                    |  |                                                                                       |  |                                                                                                                  



|(1) | During 2004, the Board of Directors reapproved a Stock Repurchase Plan authorizing the repurchase of Bancorp stock at market prices.
|--- | ------------------------------------------------------------------------------------------------------------------------------------



|        |  |                                                            |  |   
|------- |  | ---------------------------------------------------------- |  | --
|Item 3. |  | Defaults upon Senior Securities  None                     |  |   
|        |  |                                                           
|Item 4. |  | Submission of Matters to a Vote of Security Holders  None |  |   
|        |  |                                                           
|Item 5. |  | Subsequent Event  Equity Compensation Plan                |  | 14
|        |  |                                                           
|Item 6. |  | Other Information  None                                   |  |   
|        |  |                                                           
|Item 7. |  | Exhibits and Reports on Form 8-K                           |  |   



2



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|(1) | Exhibits
|--- | --------



|                                                         |  |                                                                                               
|-------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------
|Exhibit Number Referred to in Item 601 of Regulation S-K |  | Description of Exhibit                                                                        
|                                                         | 
|31.1                                                     |  | Certification of Chief Executive Officer pursuant to Rule 13a-14(a)                           
|                                                         | 
|31.2                                                     |  | Certification of Chief Financial Officer pursuant to Rule 13a-14(a)                           
|                                                         | 
|32.1                                                     |  | Certification of Chief Executive Officer pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350
|                                                         | 
|32.2                                                     |  | Certification of Chief Financial Officer pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350



|(2) | Reports on Form 8-K
|--- | -------------------



|                                                                                                    
|----------------------------------------------------------------------------------------------------
|Results of Operations and Financial Condition  Filed January 27, 2005  Incorporated by Reference  
|                                                                                                    
|Results of Operations and Financial Condition  Filed January 31, 2005  Incorporated by Reference  
|                                                                                                    
|Other Events and Regulation FD Disclosures  Filed March 1, 2005  Incorporated by Reference        
|                                                                                                    
|Amendment to Articles of Incorporation or By Laws  Filed March 17, 2005  Incorporated by Reference
|                                                                                                    
|Signatures                                                                                          



3



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SMITHTOWN BANCORP, INC.

CONSOLIDATED BALANCE SHEETS

(unaudited)

(in thousands, except share and per share data)



|                                                                                           |  |               |         |   |                  |   |         |  
|------------------------------------------------------------------------------------------ |  | ------------- | ------- | - | ---------------- | - | ------- | -
|                                                                                           |  | As of         |        
|                                                                                           |  | March 31,2005 |         |   | December 31,2004 |  
|ASSETS                                                                                     |  |               |         |   |                  |   |         |  
|Cash and due from banks                                                                    |  | $             | 9,463   |   |                  | $ | 8,581   |  
|Federal funds sold                                                                         |  |               | 30,974  |   |                  |   | 1,052   |  
|                                                                                           |  |               |         |   |                  |   |         |  
|Total cash and cash equivalents                                                            |  |               | 40,437  |   |                  |   | 9,633   |  
|Investment securities:                                                                     |  |               |         |   |                  |   |         |  
|Available for sale:                                                                        |  |               |         |   |                  |   |         |  
|Obligations of U.S. government                                                             |  |               | 6,880   |   |                  |   |        |  
|Obligations of U.S. government agencies                                                    |  |               | 64,547  |   |                  |   | 30,192  |  
|Mortgage-backed securities                                                                 |  |               | 2,899   |   |                  |   | 4,976   |  
|Obligations of state and political subdivisions                                            |  |               | 12,792  |   |                  |   | 13,585  |  
|Other securities                                                                           |  |               | 2,992   |   |                  |   | 3,005   |  
|                                                                                           |  |               |         |   |                  |   |         |  
|Total securities available for sale                                                        |  |               | 90,110  |   |                  |   | 51,758  |  
|Held to maturity:                                                                          |  |               |         |   |                  |   |         |  
|Mortgage-backed securities                                                                 |  |               | 144     |   |                  |   | 165     |  
|Obligations of state and political subdivisions                                            |  |               | 1,343   |   |                  |   | 1,419   |  
|                                                                                           |  |               |         |   |                  |   |         |  
|Total securities held to maturity (estimated fair value $1,520 in 2005 and $1,631 in 2004) |  |               | 1,487   |   |                  |   | 1,584   |  
|                                                                                           |  |               |         |   |                  |   |         |  
|Total investment securities                                                                |  |               | 91,597  |   |                  |   | 53,342  |  
|Restricted securities                                                                      |  |               | 4,005   |   |                  |   | 5,555   |  
|Loans                                                                                      |  |               | 576,663 |   |                  |   | 570,093 |  
|Less: allowance for loan losses                                                            |  |               | 5,060   |   |                  |   | 4,912   |  
|                                                                                           |  |               |         |   |                  |   |         |  
|Loans, net                                                                                 |  |               | 571,603 |   |                  |   | 565,181 |  
|Bank premises and equipment                                                                |  |               | 18,065  |   |                  |   | 15,366  |  
|Other assets                                                                               |  |               |         |   |                  |   |         |  
|Cash value of bank-owned life insurance                                                    |  |               | 17,099  |   |                  |   | 16,942  |  
|Goodwill                                                                                   |  |               | 388     |   |                  |   | 388     |  
|Intangible assets                                                                          |  |               | 559     |   |                  |   | 465     |  
|Other                                                                                      |  |               | 10,379  |   |                  |   | 10,131  |  
|                                                                                           |  |               |         |   |                  |   |         |  
|Total other assets                                                                         |  |               | 28,425  |   |                  |   | 27,926  |  
|Total assets                                                                               |  | $             | 754,132 |   |                  | $ | 677,003 |  
|                                                                                           |  |               |         |   |                  |   |         |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                       |  |               |         |   |                  |   |         |  
|Liabilities                                                                                |  |               |         |   |                  |   |         |  
|Deposits:                                                                                  |  |               |         |   |                  |   |         |  
|Demand (non-interest bearing)                                                              |  | $             | 95,740  |   |                  | $ | 90,466  |  
|Money market                                                                               |  |               | 210,087 |   |                  |   | 164,878 |  
|NOW                                                                                        |  |               | 29,877  |   |                  |   | 32,434  |  
|Savings                                                                                    |  |               | 53,945  |   |                  |   | 55,258  |  
|Time                                                                                       |  |               | 232,340 |   |                  |   | 171,278 |  
|                                                                                           |  |               |         |   |                  |   |         |  
|Total deposits                                                                             |  |               | 621,989 |   |                  |   | 514,314 |  
|Dividends payable                                                                          |  |               | 355     |   |                  |   | 296     |  
|Other borrowings                                                                           |  |               | 67,000  |   |                  |   | 99,500  |  
|Subordinated debt                                                                          |  |               | 11,000  |   |                  |   | 11,000  |  
|Other liabilities                                                                          |  |               | 5,275   |   |                  |   | 4,950   |  
|                                                                                           |  |               |         |   |                  |   |         |  
|Total liabilities                                                                          |  |               | 705,619 |   |                  |   | 630,060 |  
|Stockholders equity                                                                       |  |               |         |   |                  |   |         |  
|Common stock $.01 par value (15,000,000 shares authorized; 7,167,280 shares issued)        |  |               | 72      |   |                  |   | 72      |  
|Retained earnings                                                                          |  |               | 54,474  |   |                  |   | 52,480  |  
|Additional paid in capital                                                                 |  |               | 4,408   |   |                  |   | 4,408   |  
|Accumulated other comprehensive income (loss)                                              |  |               | (379    | ) |                  |   | 45      |  
|                                                                                           |  |               |         |   |                  |   |         |  
|                                                                                           |  |               | 58,575  |   |                  |   | 57,005  |  
|Treasury stock (1,243,554 shares at cost)                                                  |  |               | (10,062 | ) |                  |   | (10,062 | )
|                                                                                           |  |               |         |   |                  |   |         |  
|Total stockholders equity                                                                 |  |               | 48,513  |   |                  |   | 46,943  |  
|Total liabilities and stockholders equity                                                 |  | $             | 754,132 |   |                  | $ | 677,003 |  
|                                                                                           |  |               |         |   |                  |   |         |  



See
notes to consolidated financial statements.



4



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SMITHTOWN BANCORP, INC.

CONSOLIDATED STATEMENTS OF INCOME

(unaudited)

(in thousands, except share and per share data)



|                                                    |  |                                     |           |      |   |          
|--------------------------------------------------- |  | ----------------------------------- | --------- | ---- | - | ---------
|                                                    |  | For the Three Months EndedMarch 31,
|                                                    |  | 2005                                |           | 2004
|Interest income                                     |  |                                     |           |      |   |          
|Interest and fees on loans                          |  | $                                   | 9,756     |      | $ | 7,754    
|Interest on federal funds sold                      |  |                                     | 205       |      |   | 49       
|Interest on balances due from banks                 |  |                                     | 1         |      |   |         
|Interest and dividends on investment securities:    |  |                                     |           |      |   |          
|Taxable:                                            |  |                                     |           |      |   |          
|Obligations of U.S. government                      |  |                                     | 11        |      |   |         
|Obligations of U.S. government agencies             |  |                                     | 381       |      |   | 154      
|Mortgage-backed securities                          |  |                                     | 44        |      |   | 86       
|Other securities                                    |  |                                     | 29        |      |   | 79       
|                                                    |  |                                     |           |      |   |          
|Subtotal                                            |  |                                     | 465       |      |   | 319      
|Exempt from federal income taxes:                   |  |                                     |           |      |   |          
|Obligations of state and political subdivisions     |  |                                     | 117       |      |   | 191      
|Other interest income                               |  |                                     | 9         |      |   | 21       
|                                                    |  |                                     |           |      |   |          
|Total interest income                               |  |                                     | 10,553    |      |   | 8,334    
|                                                    |  |                                     |           |      |   |          
|Interest expense                                    |  |                                     |           |      |   |          
|Money market accounts (including savings)           |  |                                     | 739       |      |   | 610      
|Time deposits of $100,000 or more                   |  |                                     | 592       |      |   | 496      
|Other time deposits                                 |  |                                     | 1,306     |      |   | 884      
|Other borrowings                                    |  |                                     | 755       |      |   | 489      
|                                                    |  |                                     |           |      |   |          
|Total interest expense                              |  |                                     | 3,392     |      |   | 2,479    
|                                                    |  |                                     |           |      |   |          
|Net interest income                                 |  |                                     | 7,161     |      |   | 5,855    
|Provision for loan losses                           |  |                                     | 140       |      |   |         
|                                                    |  |                                     |           |      |   |          
|Net interest income after provision for loan losses |  |                                     | 7,021     |      |   | 5,855    
|Other noninterest income                            |  |                                     |           |      |   |          
|Trust department income                             |  |                                     | 103       |      |   | 110      
|Service charges on deposit accounts                 |  |                                     | 471       |      |   | 426      
|Other income                                        |  |                                     | 1,234     |      |   | 217      
|Net gain on sales of investment securities          |  |                                     | 4         |      |   | 94       
|Gain in cash value of bank owned life insurance     |  |                                     | 157       |      |   | 151      
|Net income from equity investment                   |  |                                     | 26        |      |   | 20       
|                                                    |  |                                     |           |      |   |          
|Total other noninterest income                      |  |                                     | 1,995     |      |   | 1,018    
|Other operating expenses                            |  |                                     |           |      |   |          
|Salaries                                            |  |                                     | 2,390     |      |   | 1,776    
|Pensions and other employee benefits                |  |                                     | 609       |      |   | 335      
|Net occupancy expense of bank premises              |  |                                     | 779       |      |   | 414      
|Furniture and equipment expense                     |  |                                     | 435       |      |   | 284      
|Other expense                                       |  |                                     | 1,088     |      |   | 721      
|                                                    |  |                                     |           |      |   |          
|Total other operating expenses                      |  |                                     | 5,301     |      |   | 3,530    
|                                                    |  |                                     |           |      |   |          
|Income before income taxes                          |  |                                     | 3,715     |      |   | 3,343    
|Provision for income taxes                          |  |                                     | 1,366     |      |   | 1,213    
|                                                    |  |                                     |           |      |   |          
|Net income                                          |  | $                                   | 2,349     |      | $ | 2,130    
|                                                    |  |                                     |           |      |   |          
|Earnings per share                                  |  |                                     |           |      |   |          
|Net income                                          |  | $                                   | 0.40      |      | $ | 0.36     
|Cash dividends declared                             |  | $                                   | 0.06      |      | $ | 0.05     
|Weighted average shares outstanding                 |  |                                     | 5,923,726 |      |   | 5,941,898
|Comprehensive income                                |  | $                                   | 1,925     |      | $ | 2,301    



See
notes to consolidated financial statements.



5



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SMITHTOWN BANCORP, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY

(unaudited)

(in thousands, except share and per share data)



|                                              |  |                   |   |  |                |        |   |                  |   |       |                                 |  |   |                                             |   |  |                           |         |   |  |   |      |   |  |   |        |  
|--------------------------------------------- |  | ----------------- | - |  | -------------- | ------ | - | ---------------- | - | ----- | ------------------------------- |  | - | ------------------------------------------- | - |  | ------------------------- | ------- | - |  | - | ---- | - |  | - | ------ | -
|                                              |  | Common Stock      |   |  | CapitalSurplus |        |   | RetainedEarnings |   |       | Cost of Common Stock inTreasury |  |   | Accumulated Other ComprehensiveIncome(Loss) |   |  | Total StockholdersEquity |        
|                                              |  | SharesOutstanding |   |  | Amount         |        |   |                  |   |       |                                
|Balance at 12/31/2003                         |  | 2,974,237         |   |  | $              | 4,480  |   |                  | $ |      |                                 |  | $ | 43,656                                      |   |  | $                         | (9,378  | ) |  | $ | 420  |   |  | $ | 39,178 |  
|Comprehensive income:                         |  |                   |   |  |                |        |   |                  |   |       |                                 |  |   |                                             |   |  |                           |         |   |  |   |      |   |  |   |        |  
|Net income                                    |  |                   |   |  |                |        |   |                  |   |       |                                 |  |   | 2,130                                       |   |  |                           |         |   |  |   |      |   |  |   | 2,130  |  
|Other comprehensive income, net of tax        |  |                   |   |  |                |        |   |                  |   |       |                                 |  |   |                                             |   |  |                           |         |   |  |   | 171  |   |  |   | 171    |  
|Total comprehensive income                    |  |                   |   |  |                |        |   |                  |   |       |                                 |  |   |                                             |   |  |                           |         |   |  |   |      |   |  |   | 2,301  |  
|2-for-1 stock split                           |  | 2,974,237         |   |  |                | 36     |   |                  |   | (36   | )                               |  |   |                                             |   |  |                           |         |   |  |   |      |   |  |   |        |  
|Change in par value                           |  |                   |   |  |                | (4,444 | ) |                  |   | 4,444 |                                 |  |   |                                             |   |  |                           |         |   |  |   |      |   |  |   |        |  
|Cash dividends declared                       |  |                   |   |  |                |        |   |                  |   |       |                                 |  |   | (298                                        | ) |  |                           |         |   |  |   |      |   |  |   | (298   | )
|Treasury stock purchases                      |  | (6,576            | ) |  |                |        |   |                  |   |       |                                 |  |   |                                             |   |  |                           | (170    | ) |  |   |      |   |  |   | (170   | )
|                                              |  |                   |   |  |                |        |   |                  |   |       |                                 |  |   |                                             |   |  |                           |         |   |  |   |      |   |  |   |        |  
|Balance at 3/31/2004                          |  | 5,941,898         |   |  | $              | 72     |   |                  | $ | 4,408 |                                 |  | $ | 45,488                                      |   |  | $                         | (9,548  | ) |  | $ | 591  |   |  | $ | 41,011 |  
|                                              |  |                   |   |  |                |        |   |                  |   |       |                                 |  |   |                                             |   |  |                           |         |   |  |   |      |   |  |   |        |  
|Balance at 12/31/2004                         |  | 5,923,726         |   |  | $              | 72     |   |                  | $ | 4,408 |                                 |  | $ | 52,480                                      |   |  | $                         | (10,062 | ) |  | $ | 45   |   |  | $ | 46,943 |  
|Comprehensive income:                         |  |                   |   |  |                |        |   |                  |   |       |                                 |  |   |                                             |   |  |                           |         |   |  |   |      |   |  |   |        |  
|Net income                                    |  |                   |   |  |                |        |   |                  |   |       |                                 |  |   | 2,349                                       |   |  |                           |         |   |  |   |      |   |  |   | 2,349  |  
|Other comprehensive income (loss), net of tax |  |                   |   |  |                |        |   |                  |   |       |                                 |  |   |                                             |   |  |                           |         |   |  |   | (424 | ) |  |   | (424   | )
|Total comprehensive income                    |  |                   |   |  |                |        |   |                  |   |       |                                 |  |   |                                             |   |  |                           |         |   |  |   |      |   |  |   | 1,925  |  
|Cash dividends declared                       |  |                   |   |  |                |        |   |                  |   |       |                                 |  |   | (355                                        | ) |  |                           |         |   |  |   |      |   |  |   | (355   | )
|Treasury stock purchases                      |  |                   |   |  |                |        |   |                  |   |       |                                 |  |   |                                             |   |  |                           |         |   |  |   |      |   |  |   |       |  
|                                              |  |                   |   |  |                |        |   |                  |   |       |                                 |  |   |                                             |   |  |                           |         |   |  |   |      |   |  |   |        |  
|Balance at 3/31/2005                          |  | 5,923,726         |   |  | $              | 72     |   |                  | $ | 4,408 |                                 |  | $ | 54,474                                      |   |  | $                         | (10,062 | ) |  | $ | (379 | ) |  | $ | 48,513 |  
|                                              |  |                   |   |  |                |        |   |                  |   |       |                                 |  |   |                                             |   |  |                           |         |   |  |   |      |   |  |   |        |  



See
notes to consolidated financial statements.



6



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##### Table of Contents



SMITHTOWN BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)



|                                                                                  |  |                                     |         |   |      |   |         |  
|--------------------------------------------------------------------------------- |  | ----------------------------------- | ------- | - | ---- | - | ------- | -
|                                                                                  |  | For the Three MonthsEnded March 31, |        
|                                                                                  |  | 2005                                |         |   | 2004 |  
|Cash flows from operating activities                                              |  |                                     |         |   |      |   |         |  
|Net income                                                                        |  | $                                   | 2,349   |   |      | $ | 2,130   |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                                     |         |   |      |   |         |  
|Depreciation on premises and equipment                                            |  |                                     | 407     |   |      |   | 163     |  
|Provision for loan losses                                                         |  |                                     | 140     |   |      |   |        |  
|Net gain on sale of investment securities                                         |  |                                     | (4      | ) |      |   | (94     | )
|Net increase in other liabilities                                                 |  |                                     | 645     |   |      |   | 86      |  
|Net (increase) decrease in other assets                                           |  |                                     | 364     |   |      |   | (137    | )
|Net (increase) decrease in deferred taxes                                         |  |                                     | (708    | ) |      |   | 62      |  
|Distribution from SMTB Financial Group, LLC.                                      |  |                                     |        |   |      |   | (20     | )
|Increase in cash surrender value of officers life insurance policies             |  |                                     | (157    | ) |      |   | (151    | )
|Amortization of investment security premiums and accretion of discounts, net      |  |                                     | (212    | ) |      |   | (83     | )
|                                                                                  |  |                                     |         |   |      |   |         |  
|Cash provided by operating activities                                             |  |                                     | 2,824   |   |      |   | 1,956   |  
|Cash flows from investing activities                                              |  |                                     |         |   |      |   |         |  
|Mortgage-backed securities:                                                       |  |                                     |         |   |      |   |         |  
|Proceeds from calls, repayments, maturities and sales of available for sale       |  |                                     | 2,269   |   |      |   | 907     |  
|Proceeds from calls, repayments and maturities of held to maturity                |  |                                     | 22      |   |      |   | 38      |  
|Other securities:                                                                 |  |                                     |         |   |      |   |         |  
|Proceeds from calls, repayments, maturities and sales of available for sale       |  |                                     | 7,958   |   |      |   | 14,358  |  
|Proceeds from calls, repayments and maturities of held to maturity                |  |                                     | 75      |   |      |   | 75      |  
|Purchase of other investment securities:                                          |  |                                     |         |   |      |   |         |  
|Available for sale                                                                |  |                                     | (49,105 | ) |      |   | (2,841  | )
|Redemptions of Federal Home Loan Bank stock                                       |  |                                     | 1,550   |   |      |   |        |  
|Loans made to customers, net                                                      |  |                                     | (6,562  | ) |      |   | (34,231 | )
|Purchase of premises and equipment                                                |  |                                     | (3,106  | ) |      |   | (215    | )
|                                                                                  |  |                                     |         |   |      |   |         |  
|Cash used in investing activities                                                 |  |                                     | (46,899 | ) |      |   | (21,909 | )
|Cash flows from financing activities                                              |  |                                     |         |   |      |   |         |  
|Net increase in demand deposits, money market, NOW and savings                    |  |                                     | 46,613  |   |      |   | 22,203  |  
|Net increase in time deposits                                                     |  |                                     | 61,062  |   |      |   | 19,799  |  
|Cash dividends paid                                                               |  |                                     | (296    | ) |      |   | (268    | )
|Net increase (decrease) in other borrowings                                       |  |                                     | (32,500 | ) |      |   | 11,000  |  
|Purchase of treasury stock                                                        |  |                                     |        |   |      |   | (170    | )
|                                                                                  |  |                                     |         |   |      |   |         |  
|Cash provided by financing activities                                             |  |                                     | 74,879  |   |      |   | 52,564  |  
|                                                                                  |  |                                     |         |   |      |   |         |  
|Net increase in cash and cash equivalents                                         |  |                                     | 30,804  |   |      |   | 32,611  |  
|Cash and cash equivalents, beginning of period                                    |  |                                     | 9,633   |   |      |   | 14,765  |  
|                                                                                  |  |                                     |         |   |      |   |         |  
|Cash and cash equivalents, end of period                                          |  | $                                   | 40,437  |   |      | $ | 47,376  |  
|                                                                                  |  |                                     |         |   |      |   |         |  
|Supplemental disclosures of cash flow information                                 |  |                                     |         |   |      |   |         |  
|Cash paid during the year for:                                                    |  |                                     |         |   |      |   |         |  
|Interest                                                                          |  | $                                   | 2,913   |   |      | $ | 2,347   |  
|Income taxes                                                                      |  |                                     | 690     |   |      |   | 491     |  



See
notes to consolidated financial statements.



7



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##### Table of Contents



Notes to
Consolidated Financial Statements  Unaudited



Note 1  Financial
Statement Presentation

(in thousands, except share and per share data)



The consolidated financial statements include the accounts of Smithtown Bancorp (the Company) and its wholly-owned subsidiary,
Bank of Smithtown (the Bank) (collectively referred to as the Company). The Companys financial condition and operating results principally reflect those of the Bank. All intercompany balances and amounts have been
eliminated. For further information refer to the consolidated financial statements and notes thereto included in the Companys Annual Report on Form 10-K for the year ended December 31, 2004.



The accompanying unaudited interim consolidated financial statements have been prepared
pursuant to the rules and regulations for reporting on Form 10-Q. Accordingly, certain disclosures required by U.S. generally accepted accounting principles are not included herein. These interim statements should be read in conjunction with the
consolidated financial statements and notes included in the Annual Report on Form 10-K filed by the Company with the Securities and Exchange Commission. The December 31, 2004 consolidated balance sheet was derived from the Companys December
31, 2004 audited financial statements included in the Annual Report on Form 10-K.



Interim statements are subject to possible adjustments in connection with the annual audit of the Company for the year ending December 31, 2005. In the opinion of management, the accompanying unaudited interim consolidated financial
statements contain all adjustments (consisting of normal recurring accruals) necessary to present fairly its financial position and its results of operations for the periods presented.



In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported asset
and liability balances and revenue and expense amounts and the disclosure of contingent assets and liabilities. Actual results could differ significantly from those estimates.



Note 2  Subordinated Debt



A trust formed by the Company issued $11,000 of floating rate trust preferred securities in 2003 as part of a pooled offering of such
securities due October 8, 2033. The securities bear interest at 3-month LIBOR plus 2.99%. The Bancorp issued subordinated debentures to the trust in exchange for the proceeds of the offering: the debentures and related issuance costs represent the
sole assets of the trust. The Bancorp may redeem the subordinated debentures, in whole or part, at a premium declining ratably to par on October 8, 2008.



Note 3  Earnings Per Common Share



Earnings per common share are calculated by dividing net income by the weighted average number of common shares outstanding for the respective period. The Company has no
potentially dilutive securities.



Note 4
 Employee Benefits



During 2005, the Bank continues to fund a 401(K)
Defined Contribution Plan and an Employee Stock Ownership Plan for substantially all of its employees. First quarter costs during 2005 and 2004 for these two plans were $36 and $29 and $45 and $45, respectively. It is expected that the
Companys costs for these two plans for the twelve months ending December 31, 2005 will be approximately $145 and $180, respectively. Bank of Smithtown also continues to sponsor post-retirement medical and life insurance plans for a closed
group of prior employees. The interest cost, amortization cost of the unrecognized transition obligation, and the amortization of the net gain for the quarters ended March 31, 2005 and 2004 were $5, $8 and $2 and $5, $8 and $1, respectively. Since
the plans hold no assets, the Bank did not contribute and does not expect to contribute to the plans during 2004 and 2005, other than to fund the payments for the benefits. The Bank has also adopted a nontax qualified Executive and Director
Incentive Retirement Plan. While this plan is to be funded from the general assets of the Bank, life insurance policies were acquired for the purpose of serving as the primary funding source. Benefits under the Incentive Retirement Plan are based
solely on the amount contibuted by the Bank. The contributions accrued under this plan for the three months ending March 31, 2005 and 2004 were $50 and $47. The Bank has a similar supplemental life insurance plan for all members of management,
funded with similar life insurance policies. The benefit provides post retirement life insurance up to a maximum of two and one half times annual salary. At March 31, 2005 and 2004, the combined value of these insurance policies was $13,429 and
$12,936. The Bank has also establised a nontax qualified Deferred Compensation Plan for certain directors and executive officers. This group of employees defers a portion of its compensation. A liability is accrued for the obligation under this
plan. During 2004 the Bank adopted a Supplemental Executive Retirement Plan for the Chief Executive Officer. This Plan is partially funded by a life insurance policy with a cash value at March 31, 2005 and 2004 of $3,670 and $3,500. The Banks
expense for this Plan for the three months ending March 31, 2005 and 2004 was $69 and $0.



8



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##### Table of Contents

Item 2.- Managements Discussion and Analysis of Financial Plan and Results of Operations



This report may contain certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements
are based on current expectations, but actual results may differ materially from anticipated future results. Forward-looking statements may be identified by the use of the words believe, expect, anticipate,
project, estimate, will be, will continue, will likely result, or similar expressions. The Companys ability to predict results or the actual effect of future strategic plans is
inherently uncertain. Factors that could have a material adverse effect on the operation of the Company and its subsidiaries include, but are not limited to, changes in: general economic conditions, interest rates, deposit flows, loan demand,
competition, accounting principles and guidelines, and governmental, regulatory and technological factors affecting the Companys operations, pricing, products, and services. The factors included here are not exhaustive. Other sections of this
report may include additional factors that could adversely impact the Companys performance.



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 hereof 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.



Summary



An 11.11% increase in earnings per
share and 11.39% growth in assets are the most significant results of first quarter 2005. These results also produced the following statistics:



| |  |  | Net interest income of $7,021 as compared to $5,855 during the three months ending March 31, 2005 and 2004
| | - |  | ----------------------------------------------------------------------------------------------------------



| |  |  | Strong net interest margin of 4.29%
| | - |  | -----------------------------------



| |  |  | 20.94% deposit growth
| | - |  | ---------------------



Asset growth during first quarter 2005 was primarily the result of the 20.94% increase in deposits. This deposit inflow resulted from the opening of the Banks twelfth branch office located at corporate
headquarters, additional deposit inflow from a new branch office opened during fourth quarter 2004, the introduction of a new Elite Money Market product and various CD campaigns. Total loan growth during the quarter was $6,570 or 1.15%. Actual loan
closings during the quarter were over $65,000, but due to an unusually high number of loan payoffs of interim fundings in conjunction with slow draw downs of construction loans, net loan growth was considerably slower than that of prior quarters.
Asset quality remained high at first quarter end 2005, with no nonperforming loans. The Banks efficiency ratio increased from 48.89% at year end December 2004 to 57.79% at March 31, 2005. This increase was fully expected and is the result of
the additional expenses associated with the Bancorps growth. The Banks eleventh branch office in Miller Place opened during fourth quarter of 2004. The opening of new corporate headquarters also took place during the fourth quarter. The
twelfth branch location at corporate headquarters opened on January 3, 2005 and our thirteenth location in Port Washington opened on April 4, 2005. The acquisition of the Seigerman Mulvey insurance agency with its associated expenses has also
contributed to the increased efficiency ratio. Efficiencies are expected to continue to develop from both the single location of all support staff at the new headquarters as well as further integration of the insurance agency into the Bank. Capital
remains strong at March 31, with regulatory ratios in the well capitalized level.



Comparision of Financial Position at March 31, 2005 and December 31, 2004



Total assets of the Company at March 31, 2005 were $754,132 as compared to $677,003, an increase of 11.39%. The largest areas of growth
during the quarter were in federal funds sold, investment securities and deposits. Federal funds sold increased significantly as a result of the large increase in deposits. Year end overnight borrowings from Federal Home Loan Bank and JP Morgan
Chase were paid off and the balance was channeled into loans, investment securities and federal funds sold. Investment securities and deposits increased by 71.72% and 20.94%, respectively. Loans increased by 1.15%. The segregation of the loan
portfolio at March 31, 2005 and December 31, 2004 remained stable and is as follows:



|                          |  |                |         |  |                   |   |  |   |         |  |        |  
|------------------------- |  | -------------- | ------- |  | ----------------- | - |  | - | ------- |  | ------ | -
|                          |  | March 31, 2005 |         |  | December 31, 2004 |  
|Real Estate Loans         |  | $              | 532,390 |  | 92.20             | % |  | $ | 527,786 |  | 92.46  | %
|Commercial and Industrial |  |                | 42,673  |  | 7.39              |   |  |   | 40,968  |  | 7.18   |  
|Consumer                  |  |                | 2,039   |  | .35               |   |  |   | 1,893   |  | .33    |  
|Other Loans               |  |                | 312     |  | .06               |   |  |   | 190     |  | .03    |  
|                          |  |                |         |  |                   |   |  |   |         |  |        |  
|                          |  | $              | 577,414 |  | 100.00            | % |  | $ | 570,837 |  | 100.00 | %
|                          |  |                |         |  |                   |   |  |   |         |  |        |  



Non performing loans at March 31, 2005
remain at $0, as they were at December 31, 2004. Loans past due 30-89 days amounted to $14,469 as compared to $61 at year end 2004. This large increase is due to the delinquent status of three loans to one borrower. The first loan is a $7,378 loan,
collateral for which consists of a leasehold mortgage on two six story office buildings located on Madison Avenue, New York City which are appraised at $11,800. While this loan is not at a 90 day delinquency status, the borrower remains in technical
default under the lease. Substantial progress has been made in satisfying the technical problems, but the problems have not been completely resolved. Prospects for resolution appear to be very good. The same borrower is a principal on a second
property located in the Greenwich Village section of New York City on which the bank holds a mortgage of $3,002 that is also in arrears. The Greenwich Village property is under contract of sale and is scheduled to be sold in June 2005. The same
borrower was a principal in a third property also in Manhattan on which the bank held a mortgage of approximately $4,000 which was sold and the banks mortgage satisfied on April 28, 2005. The allowance for loan loss account at March 31, 2005



9



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##### Table of Contents

and December 31, 2004 was $5,060 and $4,912. The increase was the result of net recoveries of $8 and a provision for loan losses of $140. Based on specific
reserves for internally classified loans and multiple factors including historical loss experience and current economic conditions, management feels the level of the allowance for loan losses provides adequate coverage. At March 31, 2005 and
December 31, 2004, the Banks coverage ratio (the allowance for loan losses as a percentage of end of period loans) was .88% and .86%, respectively, and remains well within the range of peer group bank ratios. In determining the allowance for
loan losses, there is not an exact amount but rather a range for what constitutes an appropriate amount. The determination of this amount as of any balance sheet date is subjective in nature and requires material estimates based on historical
experience, the economic environment, trends in the portfolio, concentrations of loan balances and various other factors. The portion of the loan loss allowance allocated to each loan category does not represent the total available for probable
incurred losses which may occur within the loan category since the loan loss allowance is a valuation applicable to the entire loan portfolio.



Investment securities increased by 71.72% from December 31, 2004 to March 31, 2005. The composition of the portfolio at these two dates was as follows:



|                                                |  |                |        |                   |   |       
|----------------------------------------------- |  | -------------- | ------ | ----------------- | - | ------
|                                                |  | March 31, 2005 |        | December 31, 2004
|Securities available for sale                   |  |                |        |                   |   |       
|Obligations of U.S. government                  |  | $              | 6,880  |                   | $ | 0     
|Obligations of U.S. government agencies         |  |                | 64,547 |                   |   | 30,192
|Mortgage-backed securities                      |  |                | 2,899  |                   |   | 4,976 
|Obligations of stae and political subdivisions  |  |                | 12,792 |                   |   | 13,585
|Other securities                                |  |                | 2,992  |                   |   | 3,005 
|                                                |  |                |        |                   |   |       
|Total securities available for sale             |  |                | 90,110 |                   |   | 51,758
|Securities held to maturity                     |  |                |        |                   |   |       
|Mortgage-backed securities                      |  |                | 144    |                   |   | 165   
|Obligations of state and political subdivisions |  |                | 1,343  |                   |   | 1,419 
|                                                |  |                |        |                   |   |       
|Total held to maturity                          |  |                | 1,487  |                   |   | 1,584 
|                                                |  |                |        |                   |   |       
|Total investment securities                     |  | $              | 91,597 |                   | $ | 53,342
|                                                |  |                |        |                   |   |       



As a result of the large growth in
deposits during the first quarter, the Bank channeled a substantial portion of these funds into higher yielding investment securities, rather than maintaining a very high federal funds position awaiting loan closings. A majority of the securities
purchased were short term treasury and agency securities with a book value of $49,154 and an average weighted yield of 4.41%. The yield on the total investment portfolio at March 31, 2005 and December 31, 2004 was 4.23% and 4.55%, respectively.
Restricted securities decreased from $5,555 to $4,005, a 27.90% reduction, resulting from a lower volume of Federal Home Loan Bank stock, due to the significantly reduced borrowing position of the Bank from December 31, 2004 to March 31, 2005.



Bank premises and equipment increased from December 31, 2004 to March 31, 2005
by 17.56%, a result of the opening of corporate headquarters and corporate headquarters branch office, as well as the construction costs of the Port Washington office. Other assets increased by 1.79%, primarily the result of the increase in cash
value of bank owned life insurance.



On the liability side of the balance
sheet, total deposits increased by 20.94% from year end 2004 to March 31, 2005. The composition of deposits is as follows:



|                              |  |                |         |                   |   |        
|----------------------------- |  | -------------- | ------- | ----------------- | - | -------
|                              |  | March 31, 2005 |         | December 31, 2004
|Demand (non interest bearing) |  | $              | 95,740  |                   | $ | 90,466 
|Money market                  |  |                | 210,087 |                   |   | 164,878
|NOW                           |  |                | 29,877  |                   |   | 32,434 
|Savings                       |  |                | 53,945  |                   |   | 55,258 
|Time                          |  |                | 232,340 |                   |   | 171,278
|                              |  |                |         |                   |   |        
|Total deposits                |  | $              | 621,989 |                   | $ | 514,314
|                              |  |                |         |                   |   |        



The large increase in deposits was the
result of various factors. The opening of the new corporate headquarters branch office contributed to the growth, as well as the continued growth of deposits at a newly opened branch during fourth quarter of 2004. The Bank also introduced a new
Elite money market account which pays a high, competitive interest rate for balances over $50,000. Various CD campaigns were also run during the early part of first quarter in anticipation of future rate increases by the Federal Reserve Bank. These
campaigns resulted in approximately $20,000 in each of one, two and five year CDs. Although these deposits increased the Banks cost of funds from 2.08% at December 31, 2004 to 2.38% at March 31, 2005, these funds have been invested in
higher yielding investment securities.



Other borrowings decreased from $99,500
at December 31, 2004 to $67,000 at March 31, 2005. As deposits flowed into the Bank during the first weeks of the quarter, all overnight borrowings were paid down. At March 31, 2005, the $67,000 in outstanding borrowings is comprised of thirteen
advances from the Federal Home Loan Bank with maturities ranging from September 2005 to March 2011. The weighted average maturity of these borrowings is 2 years 10 months. The weighted average rate of the borrowings is 3.50%. Stockholders
equity increased



10



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##### Table of Contents

from $46,943 to $48,513, an increase of 3.34% from year end December 2004 to quarter end March 2005. This growth was the result of dividends declared of
$355, net income of $2,349 and the increase of accumulated other comprehensive income of $424. The Company and the Bank are subject to the risk based capital guidelines administered by bank regulatory agencies. The guidelines require all banks and
bank holding companies to maintain a minimum ratio of total risk based capital to total risk weighted assets of 8%, including Tier I capital to total risk weighted assets of 4% and a Tier I capital to average assets ratio of at least 4%. Failure to
meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary actions by regulators, that, if undertaken, could have a material effect on the consolidated financial statements. As of March 31, 2005, the most
recent notification from the corresponding regulatory agency, categorized the Company as well capitalized under the regulatory framework for prompt corrective action. Under the capital adequacy guidelines, a well capitalized institution must
maintain a total risk adjusted capital ratio of at least 10%, a Tier I capital ratio of at least 6%, a leverage ratio of at least 5%, and not be subject to any written order, agreement or directive. There are no conditions or events since such
notifications that management believes have changed this classification. As of March 31, 2005, the Companys ratios were 11.29%, 10.31% and 8.16%, respectively, well above these minimum guidelines.



Comparision of Operating Results for the Three Months Ended
March 31, 2005 and 2004



Net income for the three months ended March 31, 2005
and 2004 was $2,349 and $2,130, an increase of 10.28%. Total interest income increased by $2,219 or 26.63%. The largest growth in interest income over the two periods was in interest on federal funds sold, which increased by 318.37%, due to the
significantly higher average balance of funds during 2005. Interest on loans increased by 25.82% during first quarter 2005 also a result of the increased portfolio balance. Interest income on the investment portfolio increased by 14.12% during first
quarter 2005 as compared to first quarter 2004. The purchase of securities during first quarter 2005 resulted in the increased interest income. The yield on interest earning assets for the periods ending March 31, 2005 and March 31, 2004 was 6.33%
and 6.08%.



Total interest expense increased by 36.83% for the three months
ending March 31, 2005 as compared to the same period in 2004. This was a result of both an increase in volume and an increase in rate during 2005. The largest increase in interest expense was in borrowed funds, resulting from an increased average
balance of Federal Home Loan Bank advances of $70,218 during first quarter 2005 as compared to $40,334 during first quarter 2004. This increased expense was also the result of the higher cost of interest payments on the subordinated debt during 2005
as compared to 2004. The next largest increase in interest expense was the cost of time deposits. Average balances for time deposits during first quarter 2005 was $220,080 as compared to $162,469 during the comparable period in 2004. The average
rate paid on these time deposits during first quarter 2005 was 3.50% as compared to 3.42% during the same period in 2004. The cost for money market accounts also increased during 2005 as compared to 2004. This increased interest expense was
primarily the result of the increased money market average balances during the first three months of 2005 as compared to the same period in 2004. These increased average balances totaled $25,925. The increased rate paid for these balances also
contributed to the higher cost. Average cost for money market accounts in the period in 2005 was 1.45% as compared to 1.19% during the same period in 2004. Net interest income increased by 22.01% for the first three months of 2005 as compared to the
same three months in 2004. The provision for loan losses was $140 for the period ending March 31, 2005 as compared to $0 during the period ending March 31, 2004.



The following table sets forth certain information relating to the Companys consolidated statements of financial condition and its
consolidated statements of income for the periods indicated and reflects the average yield on assets and average cost of liabilities. These yields and costs are derived by dividing income or expense by the average balance of assets or liabilities,
respectively, for the periods shown. The resulting spread is the rate equivalent of net interest income.



11



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##### Table of Contents



AVERAGE BALANCE SHEET AND YIELD ANALYSIS



|                                                                |  |                |         |          |                |             |  |      |                |  |          |         |             |   |       |  |      |  
|--------------------------------------------------------------- |  | -------------- | ------- | -------- | -------------- | ----------- |  | ---- | -------------- |  | -------- | ------- | ----------- | - | ----- |  | ---- | -
|                                                                |  | As of          |        
|                                                                |  | March 31, 2005 |         |          | March 31, 2004 |            
|                                                                |  | AverageBalance |         | Interest |                | AverageRate |  |      | AverageBalance |  | Interest |         | AverageRate |  
|ASSETS                                                          |  |                |         |          |                |             |  |      |                |  |          |         |             |   |       |  |      |  
|Interest-earning assets:                                        |  |                |         |          |                |             |  |      |                |  |          |         |             |   |       |  |      |  
|Investment securities:                                          |  |                |         |          |                |             |  |      |                |  |          |         |             |   |       |  |      |  
|Taxable                                                         |  | $              | 47,294  |          | $              | 475         |  | 4.02 | %              |  | $        | 34,567  |             | $ | 319   |  | 3.69 | %
|Nontaxable                                                      |  |                | 14,453  |          |                | 178         |  | 4.93 |                |  |          | 19,203  |             |   | 289   |  | 6.02 |  
|                                                                |  |                |         |          |                |             |  |      |                |  |          |         |             |   |       |  |      |  
|Total investment securities                                     |  |                | 61,747  |          |                | 653         |  | 4.23 |                |  |          | 53,770  |             |   | 608   |  | 4.52 |  
|Total loans                                                     |  |                | 572,950 |          |                | 9,756       |  | 6.81 |                |  |          | 477,305 |             |   | 7,754 |  | 6.50 |  
|Federal funds sold                                              |  |                | 34,049  |          |                | 204         |  | 2.40 |                |  |          | 21,292  |             |   | 49    |  | 0.91 |  
|Restricted securities                                           |  |                | 4,040   |          |                | 42          |  | 4.22 |                |  |          | 2,428   |             |   | 21    |  | 3.48 |  
|                                                                |  |                |         |          |                |             |  |      |                |  |          |         |             |   |       |  |      |  
|Total interest-earning assets                                   |  |                | 672,786 |          |                | 10,655      |  | 6.33 |                |  |          | 554,795 |             |   | 8,432 |  | 6.08 |  
|Non-interest-earning assets                                     |  |                | 49,327  |          |                |             |  |      |                |  |          | 39,364  |             |   |       |  |      |  
|                                                                |  |                |         |          |                |             |  |      |                |  |          |         |             |   |       |  |      |  
|Total assets                                                    |  | $              | 722,113 |          |                |             |  |      |                |  | $        | 594,159 |             |   |       |  |      |  
|                                                                |  |                |         |          |                |             |  |      |                |  |          |         |             |   |       |  |      |  
|LIABILITIES AND STOCKHOLDERS EQUITY                            |  |                |         |          |                |             |  |      |                |  |          |         |             |   |       |  |      |  
|Liabilities                                                     |  |                |         |          |                |             |  |      |                |  |          |         |             |   |       |  |      |  
|Interest-bearing liabilities:                                   |  |                |         |          |                |             |  |      |                |  |          |         |             |   |       |  |      |  
|Savings deposits (including NOW)                                |  | $              | 84,525  |          | $              | 53          |  | 0.25 | %              |  | $        | 88,325  |             | $ | 118   |  | 0.54 | %
|Money market accounts                                           |  |                | 191,683 |          |                | 685         |  | 1.45 |                |  |          | 165,758 |             |   | 492   |  | 1.19 |  
|Certificates of deposit                                         |  |                | 220,080 |          |                | 1,898       |  | 3.50 |                |  |          | 162,469 |             |   | 1,380 |  | 3.42 |  
|                                                                |  |                |         |          |                |             |  |      |                |  |          |         |             |   |       |  |      |  
|Total interest-bearing deposits                                 |  |                | 496,288 |          |                | 2,636       |  | 2.15 |                |  |          | 416,552 |             |   | 1,990 |  | 1.92 |  
|Securities sold under agreements to repurchase                  |  |                |         |          |                |             |  |      |                |  |          |         |             |   |       |  |      |  
|Other borrowings                                                |  |                | 70,218  |          |                | 602         |  | 3.48 |                |  |          | 40,334  |             |   | 373   |  | 3.72 |  
|Subordinated debt                                               |  |                | 11,000  |          |                | 154         |  | 5.60 |                |  |          | 11,000  |             |   | 116   |  | 4.17 |  
|                                                                |  |                |         |          |                |             |  |      |                |  |          |         |             |   |       |  |      |  
|Total interest-bearing liabilities                              |  |                | 577,506 |          |                | 3,392       |  | 2.38 |                |  |          | 467,886 |             |   | 2,479 |  | 2.13 |  
|Non-interest bearing liabilities:                               |  |                |         |          |                |             |  |      |                |  |          |         |             |   |       |  |      |  
|Demand deposits                                                 |  |                | 92,913  |          |                |             |  |      |                |  |          | 83,863  |             |   |       |  |      |  
|Other liabilities                                               |  |                | 4,040   |          |                |             |  |      |                |  |          | 3,085   |             |   |       |  |      |  
|                                                                |  |                |         |          |                |             |  |      |                |  |          |         |             |   |       |  |      |  
|Total liabilities                                               |  |                | 674,459 |          |                |             |  |      |                |  |          | 554,064 |             |   |       |  |      |  
|Stockholders equity                                            |  |                | 47,654  |          |                |             |  |      |                |  |          | 40,095  |             |   |       |  |      |  
|                                                                |  |                |         |          |                |             |  |      |                |  |          |         |             |   |       |  |      |  
|Total liabilites & stockholders equity                          |  | $              | 722,113 |          |                |             |  |      |                |  | $        | 594,159 |             |   |       |  |      |  
|                                                                |  |                |         |          |                |             |  |      |                |  |          |         |             |   |       |  |      |  
|Net interest income/interest rate spread                        |  |                |         |          | $              | 7,263       |  | 3.95 | %              |  |          |         |             | $ | 5,953 |  | 3.95 | %
|                                                                |  |                |         |          |                |             |  |      |                |  |          |         |             |   |       |  |      |  
|Net earning assets/net yield on average interest earning assets |  | $              | 95,280  |          |                |             |  | 4.29 | %              |  | $        | 86,909  |             |   |       |  | 4.28 | %
|                                                                |  |                |         |          |                |             |  |      |                |  |          |         |             |   |       |  |      |  



Other noninterest income increased by
95.97%, primarily the result of the income received from the Seigerman Mulvey insurance agency . This gross income totaled $867 during 2005 as compared to $47 during 2004. Service charges on deposit accounts also increased this year as a result of a
new Overdraft Honor program implemented in early February 2005. This program provides overdraft coverage for customers meeting certain requirements, and has been very successful in providing increased fee income. Other miscellaneous income also
increased due to increased debit card fee income, and loan fee income. Other operating expenses increased by 50.17%, a result of various factors. The largest increase in this category of expenses was in net occupancy expenses of Bank premises. This
increase was 88.16% over the comparable period in 2004, and is primarily the increased rental expenses of new branch offices and corporate headquarter facilities. The second largest increased category of non interest expense was pension and other
employee benefits. Higher costs for group medical insurance, even with a portion of this increase passed along to employees, has caused the Banks expense to increase significantly. Furniture and equipment expense also increased by 53.17% this
quarter as compared to the same period during 2004. As with the increased occupancy expense, this is the result of the growth in branch offices and corporate headquarters. Other miscellaneous expenses also grew by 50.90%. These miscellaneous
expenses are related to normal operating costs. The major categories of increases included audit and accounting fees, ATM and debit card fees, legal fees and the provision for contingent liabilities. Earnings per share increased by 11.11% for the
period ending March 31, 2005 as compared to the same period ending March 2004. Return on average assets for the 2005 and 2004 periods was 1.30% and 1.44% respectively, primarily reduced due to the significantly increased asset base.



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Liquidity and Commitments



Liquidity provides the source of funds for anticipated deposit outflow and loan growth. The Banks primary sources of liquidity include
deposits, repayments of loan principal, maturities of investment securities, principal reductions on mortgage-backed securities, unpledged securities available for sale, overnight federal funds sold, and borrowing potential from correspondent banks.
The primary factors affecting these sources of liquidity are their immediate availability if necessary and current market rates of interest, which can cause fluctuations in levels of deposits and prepayments on loans and securities. The Banks
total liquidity level at March 31, 2005 was strong due to the high levels of federal funds sold, marketable securities available for sale, and unused lines of credit from correspondent banks. In addition to these sources of liquidity, additional
borrowing potential from the Federal Home Loan Bank at March 31, 2005 was $104,532.



On March 31, 2005 total loan commitments outstanding were $152,930 of which $88,143 represented available lines on funded loans, and $8,962 represents letters of credit. At March 31, 2004 these commitments totaled $122,330 with available
lines of $52,580 and letters of credit of $8,873.



Impact of Inflation and Changing Prices



The consolidated financial
statements have been prepared in accordance with U.S. generally accepted accounting principles, which require the measurement of financial position and operating results in terms of historical dollars without considering the relative purchasing
power of money over time due to inflation. The primary effect of inflation on the operations of the Company is reflected in increased operating costs. Unlike most industrial companies, virtually all of the assets and liabilities of a financial
institution are monetary in nature. As a result, changes in interest rates have a more significant effect on the performance of a financial institution than do the effects of changes in the general rate of inflation and changes in prices. Interest
rates do not necessarily move in the same direction or in the same magnitude as the prices of goods and services. Interest rates are highly sensitive to many factors, which are beyond the control of the Company, including the influence of domestic
and foreign economic conditions and the monetary and fiscal policies of the United Sates government and federal agencies, particularly the Federal Reserve Bank.



Item 3.- Quantitative and Qualitative Disclosures About Market Risk



Significant changes in the level of market interest rates may adversely affect the value of the Companys interest earning assets. This change in rates could also affect the level of net interest income and
ultimately net income of the Company. The Company utilizes the results of a dynamic simulation model to quantify the estimated exposure to net interest income fluctuations resulting from sustained interest rate changes. Management monitors simulated
net interest income sensitivity over a rolling two year horizon. This simulation captures the impact of changing interest rates on the interest income received and interest expense paid on all interest sensitive assets and liabilities. This
sensitivity is then compared to policy limits internally set by the Asset Liability Committee that specify a maximum tolerance level for net interest income exposure over a one year horizon given both an upward and downward shift in interest rates.
This simulation modeling is done on a quarterly basis. The last simulation model was prepared as of February 28, 2005 and was modeled on a 100 basis point downward shift and a 300 basis point upward shift in rates. A parallel and pro rata shift in
rates over a twelve month period is assumed. The following reflects the Companys income sensitivity analysis as of February 28, 2005 and October 31, 2004.



|                                                      |  |                                                               |   |  |                                                              |   |  |          |   |  |          |  
|----------------------------------------------------- |  | ------------------------------------------------------------- | - |  | ------------------------------------------------------------ | - |  | -------- | - |  | -------- | -
|Change in Interest Rates In Basis
Points (Rate Shock) |  | As of February 28,2005 Potential Change in NetInterest Income |   |  | As of October 31, 2004Potential Change in NetInterest Income |  
|                                                      |  | $ Change                                                      |   |  | % Change                                                     |   |  | $ Change |   |  | % Change |  
|Up 300 Basis Points                                   |  | 738                                                           |   |  | 2.44                                                         |   |  | 2,056    |   |  | 6.43     |  
|Static                                                |  |                                                              |   |  |                                                             |   |  |         |   |  |         |  
|Down 100 Basis Points                                 |  | (1,068                                                        | ) |  | (3.53                                                        | ) |  | (1,209   | ) |  | (3.78    | )



Item 4.- Controls and Procedures



An evaluation
was performed under the supervision and with the participation of the Companys management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Companys disclosure
controls and procedures (as defined in Rule 131-15(e) promulgated under the Securities and Exchange Act of 1934, as amended) as of March 31, 2005. Based on that evaluation, the Companys management, including the Chief Executive Officer and
Chief Financial Officer, concluded that the Companys disclosure controls and procedures were effective. There has been no change in the Companys internal controls over financial reporting during the quarter that has materially affected,
or is reasonably likely to affect, the Companys internal control over financial reporting.



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Item 5.- Subsequent Event  Equity Compensation Plan



At the annual meeting held on April 21, 2005, stockholders of Smithtown Bancorp approved the Smithtown Bancorp Restricted Stock Plan, an equity compensation plan for the directors and certain officers of Bank of Smithtown. Under the plan
the Board will award a total of 4,600 plan shares to eligible employees and directors for 2005.



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SIGNATURES



Pursuant to the requirements 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.





|            |  |                                                                      
|----------- |  | ---------------------------------------------------------------------
|            |  | SMITHTOWN BANCORP                                                    
|            | 
|            |  | May 9, 2005                                                          
|            | 
|            |  | /s/ Bradley E. Rock                                                  
|            |  | Bradley E. Rock, Chairman, President and Chief Executive Officer     
|            | 
|May 9, 2005 |  | /s/ Anita M. Florek                                                  
|            |  | Anita M. Florek, Executive Vice President and Chief Financial Officer





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