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SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549



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FORM 10-Q



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QUARTERLY REPORT UNDER SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF
1934



For the quarter ended March 31, 2004



Commission file number 2-91511



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SMITHTOWN BANCORP

Incorporated pursuant to the laws of New York State



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Internal Revenue Service  Employer Identification No. 11-2695037



One East Main Street, Smithtown, New York 11787-2801



631-360-9300



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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: 2,970,949 Shares of Common Stock ($.01 Par Value) Outstanding as of April 30, 2004.



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SMITHTOWN BANCORP



INDEX



|                               |  |                                                                                                                        
|------------------------------ |  | -----------------------------------------------------------------------------------------------------------------------
|Part I - FINANCIAL INFORMATION
|                               | 
|Item 1.                        |  | Financial Statements                                                                                                   
|                               | 
|                               |  | Unaudited Consolidated Balance Sheets as of March 31, 2004 and December 31, 2003.                                      
|                               | 
|                               |  | Unaudited Consolidated Statements of Income for the Three Months Ended March 31, 2004 and 2003                         
|                               | 
|                               |  | Unaudited Consolidated Statements of Changes in Stockholders Equity for the Three Months Ended March 31, 2004 and 2003
|                               | 
|                               |  | Unaudited Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2004 and 2003                     
|                               | 
|Item 2.                        |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                  
|                               | 
|Item 3.                        |  | Quantitative and Qualitative Disclosures About Market Risk                                                             
|                               | 
|Item 4.                        |  | Controls and Procedures                                                                                                
|                              
|Part II - OTHER INFORMATION   
|                               | 
|Item 1.                        |  | Legal Proceedings - None                                                                                               
|                               | 
|Item 2.                        |  | Change in Securities and Use of Proceeds                                                                               



Issuer Purchases of
Equity Securities



|                                     |  |                                           |  |                                      |  |                                                                                        |  |                                                                                                                  
|------------------------------------ |  | ----------------------------------------- |  | ------------------------------------ |  | -------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------
|                                     |  | (a)                                       |  | (b)                                  |  | (c)                                                                                    |  | (d)                                                                                                              
|Period                               |  | Total Numberof Shares (or Units)Purchased |  | Average PricePaid perShare (or Unit) |  | Total Number ofShares (or Units)Purchased asPart of PubliclyAnnounced Plansor Programs |  | Maximum Number(or ApproximateDollar Value) ofShares (or Units)that May Yet BePurchased
Underthe Plans or Programs
|January 1, 2004  January 31, 2004   |  | 955                                       |  | 42.45                                |  | (1)                                                                                    |  | (1)                                                                                                              
|February 1, 2004  February 28, 2004 |  | 778                                       |  | 50.12                                |  |                                                                                        |  |                                                                                                                  
|March 1, 2004  March 31, 2004       |  | 1,555                                     |  | 58.50                                |  |                                                                                        |  |                                                                                                                  
|                                     |  |                                           |  |                                      |  |                                                                                        |  |                                                                                                                  
|Total                                |  | 3,288                                     |  | 51.85                                |  |                                                                                        |  |                                                                                                                  

| | 
| | 

| | (1) | During 1998, the Board of Directors approved 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. |  | Other Information - None                                  

|        |  |                                 
|------- |  | --------------------------------
|        | 
|Item 6. |  | Exhibits and Reports on Form 8-K



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



|                                                        |  |                                                                                               
|------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------
|Exhibit Number Referred to inItem 601 of Regulation S-K |  | Description of Exhibit                                                                        
|31.1                                                    |  | Certification of Chief Executive Officer pursuant toRule 13a-14(a)                            
|31.2                                                    |  | Certification of Chief Financial Officer pursuant toRule 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



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| | (2) | Report Form 8-K
| | --- | ---------------



|                                                                                                  
|--------------------------------------------------------------------------------------------------
|Results of Operations and Financial Condition  Filed January 22, 2004  Incorporated by Reference
|Results of Operations and Financial Condition  Filed March 4, 2004  Incorporated by Reference   
|Other Events and Regulation FD Disclosures  Filed April 1, 2004  Incorporated by Reference      
|Other Events and Regulation FD Disclosure Filed April 7, 2004  Incorporated by Reference        
|Other Events and Regulation FD Disclosure  Filed April 15, 2004  Incorporated by Reference      
|Results of Operations and Financial Condition Filed April 23, 2004  Incorporated by Reference   



Signatures



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##### Table of Contents

SMITHTOWN BANCORP

CONSOLIDATED BALANCE SHEETS

(unaudited)

(in thousands, except share and per share data)

|                                                                                                      |  |                |         |                   |   |        
|----------------------------------------------------------------------------------------------------- |  | -------------- | ------- | ----------------- | - | -------
|                                                                                                      |  | As of         
|                                                                                                      |  | March 31, 2004 |         | December 31, 2003
|Assets                                                                                                |  |                |         |                   |   |        
|Cash and due from banks                                                                               |  | $              | 11,793  |                   | $ | 9,383  
|Federal funds sold                                                                                    |  |                | 35,583  |                   |   | 5,382  
|                                                                                                      |  |                |         |                   |   |        
|Total cash and cash equivalents                                                                       |  |                | 47,376  |                   |   | 14,765 
|Investment securities:                                                                                |  |                |         |                   |   |        
|Investment securities held to maturity                                                                |  |                |         |                   |   |        
|Mortgage - backed securities                                                                          |  |                | 255     |                   |   | 293    
|Obligations of state and political subdivisions                                                       |  |                | 1,625   |                   |   | 1,700  
|                                                                                                      |  |                |         |                   |   |        
|Total investment securities held to maturity (Estimated fair value $1,964 in 2004 and $2,091 in 2003) |  |                | 1,880   |                   |   | 1,993  
|                                                                                                      |  |                |         |                   |   |        
|Investment securities available for sale                                                              |  |                |         |                   |   |        
|Obligations of U.S. government agencies                                                               |  |                | 16,243  |                   |   | 25,094 
|Mortgage - backed securities                                                                          |  |                | 7,206   |                   |   | 8,120  
|Obligations of state and political subdivisions                                                       |  |                | 17,418  |                   |   | 17,746 
|Other securities                                                                                      |  |                | 4,341   |                   |   | 6,324  
|                                                                                                      |  |                |         |                   |   |        
|Total investment securities available for sale (at estimated fair value)                              |  |                | 45,208  |                   |   | 57,284 
|                                                                                                      |  |                |         |                   |   |        
|Total investment securities                                                                           |  |                | 47,088  |                   |   | 59,277 
|                                                                                                      |  |               
|Restricted securities                                                                                 |  |                | 2,712   |                   |   | 2,162  
|                                                                                                      |  |               
|Loans                                                                                                 |  |                | 493,901 |                   |   | 459,678
|Less: unearned discount                                                                               |  |                | 37      |                   |   | 47     
|allowance for loan losses                                                                             |  |                | 4,763   |                   |   | 4,761  
|                                                                                                      |  |                |         |                   |   |        
|Loans, net                                                                                            |  |                | 489,101 |                   |   | 454,870
|Bank premises and equipment                                                                           |  |                | 10,340  |                   |   | 10,288 
|                                                                                                      |  |                |         |                   |   |        
|Other assets                                                                                          |  |                |         |                   |   |        
|Cash surrender value - bank owned life insurance                                                      |  |                | 16,439  |                   |   | 16,288 
|Other                                                                                                 |  |                | 7,569   |                   |   | 7,435  
|                                                                                                      |  |                |         |                   |   |        
|Total assets                                                                                          |  | $              | 620,625 |                   | $ | 565,085
|                                                                                                      |  |                |         |                   |   |        
|Liabilities                                                                                           |  |                |         |                   |   |        
|Deposits:                                                                                             |  |                |         |                   |   |        
|Demand (non-interest bearing)                                                                         |  |                | 85,547  |                   | $ | 85,604 
|Money market                                                                                          |  |                | 172,432 |                   |   | 150,584
|NOW                                                                                                   |  |                | 42,803  |                   |   | 41,817 
|Savings                                                                                               |  |                | 50,318  |                   |   | 50,892 
|Time                                                                                                  |  |                | 172,233 |                   |   | 152,434
|                                                                                                      |  |                |         |                   |   |        
|Total deposits                                                                                        |  |                | 523,333 |                   |   | 481,331
|Dividend payable                                                                                      |  |                | 297     |                   |   | 268    
|Federal Home Loan Bank advances                                                                       |  |                | 42,000  |                   |   | 31,000 
|Subordinated debt                                                                                     |  |                | 11,000  |                   |   | 11,000 
|Other liabilities                                                                                     |  |                | 2,984   |                   |   | 2,308  
|                                                                                                      |  |                |         |                   |   |        
|Total liabilities                                                                                     |  |                | 579,614 |                   |   | 525,907
|                                                                                                      |  |               
|Stockholders Equity                                                                                  |  |                |         |                   |   |        
|Common Stock - $1.25 par value (7,000,000 shares authorized; 3,583,640 shares issued)                 |  |                | 4,480   |                   |   | 4,480  
|Retained earnings                                                                                     |  |                | 45,488  |                   |   | 43,656 
|Accumulated other comprehensive income                                                                |  |                | 591     |                   |   | 420    
|                                                                                                      |  |                |         |                   |   |        
|Total                                                                                                 |  |                | 50,559  |                   |   | 48,556 
|Less: treasury stock (612,691 and 609,403 shares at cost)                                             |  |                | 9,548   |                   |   | 9,378  
|                                                                                                      |  |                |         |                   |   |        
|Total stockholders equity                                                                            |  |                | 41,011  |                   |   | 39,178 
|Total liabilities and stockholders equity                                                            |  | $              | 620,625 |                   | $ | 565,085
|                                                                                                      |  |                |         |                   |   |        



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##### Table of Contents

SMITHTOWN BANCORP

CONSOLIDATED STATEMENTS OF INCOME

(unaudited)

(in thousands, except share and per share data)



|                                                    |  |                                     |           |      |   |          
|--------------------------------------------------- |  | ----------------------------------- | --------- | ---- | - | ---------
|                                                    |  | For the Three Months EndedMarch 31,
|                                                    |  | 2004                                |           | 2003
|Interest Income                                     |  |                                     |           |      |   |          
|Interest on loans                                   |  | $                                   | 7,754     |      | $ | 6,209    
|Interest on federal funds sold                      |  |                                     | 49        |      |   | 24       
|Interest and dividends on investment securities:    |  |                                     |           |      |   |          
|Taxable:                                            |  |                                     |           |      |   |          
|Obligations of U.S. government agencies             |  |                                     | 154       |      |   | 93       
|Mortgage - backed securities                        |  |                                     | 86        |      |   | 187      
|Other securities                                    |  |                                     | 79        |      |   | 126      
|                                                    |  |                                     |           |      |   |          
|Subtotal                                            |  |                                     | 319       |      |   | 406      
|Exempt from federal income taxes                    |  |                                     |           |      |   |          
|Obligations of state & political subdivisions       |  |                                     | 191       |      |   | 248      
|Other interest income                               |  |                                     | 21        |      |   | 29       
|                                                    |  |                                     |           |      |   |          
|Total interest income                               |  |                                     | 8,334     |      |   | 6,916    
|                                                    |  |                                     |           |      |   |          
|Interest Expense                                    |  |                                     |           |      |   |          
|Money market accounts (including savings)           |  |                                     | 610       |      |   | 477      
|Time deposits $100,000 and over                     |  |                                     | 496       |      |   | 376      
|Other time deposits                                 |  |                                     | 884       |      |   | 637      
|Other borrowings                                    |  |                                     | 489       |      |   | 356      
|                                                    |  |                                     |           |      |   |          
|Total interest expense                              |  |                                     | 2,479     |      |   | 1,846    
|                                                    |  |                                     |           |      |   |          
|Net interest income                                 |  |                                     | 5,855     |      |   | 5,070    
|Provision for loan losses                           |  |                                     |          |      |   | 80       
|                                                    |  |                                     |           |      |   |          
|Net interest income after provision for loan losses |  |                                     | 5,855     |      |   | 4,990    
|                                                    |  |                                     |           |      |   |          
|Other Non - Interest Income                         |  |                                     |           |      |   |          
|Trust department income                             |  |                                     | 110       |      |   | 101      
|Service charges on deposit accounts                 |  |                                     | 426       |      |   | 455      
|Other income                                        |  |                                     | 388       |      |   | 382      
|Net gain on sales of investment securities          |  |                                     | 94        |      |   | 10       
|                                                    |  |                                     |           |      |   |          
|Total other non - interest income                   |  |                                     | 1,018     |      |   | 948      
|                                                    |  |                                     |           |      |   |          
|Other Operating Expenses                            |  |                                     |           |      |   |          
|Salaries                                            |  |                                     | 1,776     |      |   | 1,183    
|Pension and other employee benefits                 |  |                                     | 335       |      |   | 333      
|Net occupancy expense of bank premises              |  |                                     | 414       |      |   | 377      
|Furniture and equipment expense                     |  |                                     | 284       |      |   | 249      
|Other operating expense                             |  |                                     | 721       |      |   | 685      
|                                                    |  |                                     |           |      |   |          
|Total other operating expense                       |  |                                     | 3,530     |      |   | 2,827    
|                                                    |  |                                     |           |      |   |          
|Income before income taxes                          |  |                                     | 3,343     |      |   | 3,111    
|Provision for income taxes                          |  |                                     | 1,213     |      |   | 1,122    
|                                                    |  |                                     |           |      |   |          
|Net Income                                          |  | $                                   | 2,130     |      | $ | 1,989    
|                                                    |  |                                     |           |      |   |          
|Earnings per share                                  |  |                                     |           |      |   |          
|Net income                                          |  | $                                   | 0.72      |      | $ | 0.66     
|Cash dividends declared                             |  | $                                   | 0.10      |      | $ | 0.09     
|Weighted average shares outstanding                 |  |                                     | 2,970,949 |      |   | 3,034,488
|Comprehensive income                                |  | $                                   | 1,706     |      | $ | 2,030    



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##### Table of Contents

SMITHTOWN BANCORP

UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY

(in thousands)



|                                       |  |                   |   |                |        |                  |  |   |                               |  |   |                                     |   |                          |   |        |   |  |   |     |  |   |        |  
|-------------------------------------- |  | ----------------- | - | -------------- | ------ | ---------------- |  | - | ----------------------------- |  | - | ----------------------------------- | - | ------------------------ | - | ------ | - |  | - | --- |  | - | ------ | -
|                                       |  | Common Stock      |   | CapitalSurplus |        | RetainedEarnings |  |   | Cost ofCommonStock inTreasury |  |   | AccumulatedOtherComprehensiveIncome |   | TotalStockholdersEquity |  
|                                       |  | SharesOutstanding |   |                | Amount |                  |  |   |                               | 
|Balance at 12/31/2002                  |  | 3,047             |   |                | $      | 4,480            |  | $ | 0                             |  | $ | 35,641                              |   |                          | $ | (6,910 | ) |  | $ | 734 |  | $ | 33,945 |  
|Comprehensive income:                  |  |                   |   |                |        |                  |  |   |                               |  |   |                                     |   |                          |   |        |   |  |   |     |  |   |        |  
|Net income                             |  |                   |   |                |        |                  |  |   |                               |  |   | 1,989                               |   |                          |   |        |   |  |   |     |  |   | 1,989  |  
|Other comprehensive income, net of tax |  |                   |   |                |        |                  |  |   |                               |  |   |                                     |   |                          |   |        |   |  |   | 24  |  |   | 24     |  
|                                       |  |                   |   |                |        |                  |  |   |                               |  |   |                                     |   |                          |   |        |   |  |   |     |  |   |        |  
|Total comprehensive income             |  |                   |   |                |        |                  |  |   |                               |  |   |                                     |   |                          |   |        |   |  |   |     |  |   | 2,013  |  
|Cash dividends declared                |  |                   |   |                |        |                  |  |   |                               |  |   | (272                                | ) |                          |   |        |   |  |   |     |  |   | (272   | )
|Treasury stock purchases               |  | (24               | ) |                |        |                  |  |   |                               |  |   |                                     |   |                          |   | (663   | ) |  |   |     |  |   | (663   | )
|                                       |  |                   |   |                |        |                  |  |   |                               |  |   |                                     |   |                          |   |        |   |  |   |     |  |   |        |  
|Balance at 3/31/2003                   |  | 3,023             |   |                |        | 4,480            |  |   | 0                             |  |   | 37,358                              |   |                          |   | (7,573 | ) |  |   | 758 |  |   | 35,023 |  
|                                       |  |                   |   |                |        |                  |  |   |                               |  |   |                                     |   |                          |   |        |   |  |   |     |  |   |        |  
|Balance at 12/31/2003                  |  | 2,974             |   |                | $      | 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  |  
|Cash dividends declared                |  |                   |   |                |        |                  |  |   |                               |  |   | (298                                | ) |                          |   |        |   |  |   |     |  |   | (298   | )
|Treasury stock purchases               |  | (3                | ) |                |        |                  |  |   |                               |  |   |                                     |   |                          |   | (170   | ) |  |   |     |  |   | (170   | )
|                                       |  |                   |   |                |        |                  |  |   |                               |  |   |                                     |   |                          |   |        |   |  |   |     |  |   |        |  
|Balance at 3/31/2004                   |  | 2,971             |   |                | $      | 4,480            |  | $ |                              |  | $ | 45,488                              |   |                          | $ | (9,548 | ) |  | $ | 591 |  | $ | 41,011 |  
|                                       |  |                   |   |                |        |                  |  |   |                               |  |   |                                     |   |                          |   |        |   |  |   |     |  |   |        |  



See accompanying notes to the
Unaudited Consolidated Financial Statements.



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##### Table of Contents

SMITHTOWN BANCORP

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)



|                                                                                  |  |                                    |         |   |      |   |        |  
|--------------------------------------------------------------------------------- |  | ---------------------------------- | ------- | - | ---- | - | ------ | -
|                                                                                  |  | For the Three MonthsEnded March 31 |        
|                                                                                  |  | 2004                               |         |   | 2003 |  
|Cash flows from operating activities                                              |  |                                    |         |   |      |   |        |  
|Net income                                                                        |  | $                                  | 2,130   |   |      | $ | 1,989  |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                                    |         |   |      |   |        |  
|Depreciation on premises and equipment                                            |  |                                    | 163     |   |      |   | 154    |  
|Provision for possible loan losses                                                |  |                                    | 0       |   |      |   | 80     |  
|Net gain on sale of investment securities                                         |  |                                    | (94     | ) |      |   | (10    | )
|Amortization of transition obligation                                             |  |                                    | (1      | ) |      |   | (1     | )
|Increase in interest payable                                                      |  |                                    | 133     |   |      |   | 107    |  
|Increase (decrease) in miscellaneous payables and accrued expenses                |  |                                    | (48     | ) |      |   | 91     |  
|Increase in fees and commissions receivable                                       |  |                                    | 0       |   |      |   | (10    | )
|Increase in interest receivable                                                   |  |                                    | (1      | ) |      |   | (209   | )
|Increase in prepaid expenses                                                      |  |                                    | (559    | ) |      |   | (634   | )
|(Increase) decrease in miscellaneous receivables                                  |  |                                    | (409    | ) |      |   | 414    |  
|Decrease in income taxes receivable                                               |  |                                    | 832     |   |      |   | 935    |  
|Increase (decrease) in deferred taxes                                             |  |                                    | 62      |   |      |   | (49    | )
|Decrease in accumulated post retirement benefit obligation                        |  |                                    | 2       |   |      |   | 3      |  
|Amortization of investment security premiums and accretion of discounts           |  |                                    | (83     | ) |      |   | 41     |  
|Net gain on investment in SMTB Financial Group, LLC                               |  |                                    | (20     | ) |      |   | (17    | )
|                                                                                  |  |                                    |         |   |      |   |        |  
|Cash provided by operating activities                                             |  |                                    | 2,107   |   |      |   | 2,884  |  
|                                                                                  |  |                                    |         |   |      |   |        |  
|Cash flows from investing activities                                              |  |                                    |         |   |      |   |        |  
|Mortgage-backed securities:                                                       |  |                                    |         |   |      |   |        |  
|Proceeds from calls, repayments, maturities and sales of available for sale       |  |                                    | 907     |   |      |   | 2,153  |  
|Proceeds from calls, repayments and maturities of held to maturity                |  |                                    | 38      |   |      |   | 84     |  
|Investment securities:                                                            |  |                                    |         |   |      |   |        |  
|Proceeds from calls, repayments, maturities and sales of available for sale       |  |                                    | 14,358  |   |      |   | 2,694  |  
|Proceeds from calls, repayments and maturities of held to maturity                |  |                                    | 75      |   |      |   | 0      |  
|Purchase of other investment securities:                                          |  |                                    |         |   |      |   |        |  
|Held to maturity                                                                  |  |                                    | 0       |   |      |   | (40    | )
|Available for sale                                                                |  |                                    | (2,841  | ) |      |   | (419   | )
|Loans made to customers, net                                                      |  |                                    | (34,231 | ) |      |   | (5,509 | )
|Purchase of premises and equipment                                                |  |                                    | (215    | ) |      |   | (737   | )
|Increase in cash surrender value of officers life insurance policies             |  |                                    | (151    | ) |      |   | (122   | )
|                                                                                  |  |                                    |         |   |      |   |        |  
|Cash used in investing activities                                                 |  |                                    | (22,060 | ) |      |   | (1,896 | )
|                                                                                  |  |                                    |         |   |      |   |        |  
|Cash flows from financing activities                                              |  |                                    |         |   |      |   |        |  
|Net increase in demand deposits, NOW and savings accounts                         |  |                                    | 22,203  |   |      |   | 17,296 |  
|Net increase in time accounts                                                     |  |                                    | 19,799  |   |      |   | 1,163  |  
|Cash dividends paid                                                               |  |                                    | (268    | ) |      |   | (229   | )
|Net increase in advances from Federal Home Loan Bank                              |  |                                    | 11,000  |   |      |   | 0      |  
|Purchase of treasury stock                                                        |  |                                    | (170    | ) |      |   | (663   | )
|                                                                                  |  |                                    |         |   |      |   |        |  
|Cash provided by financing activities                                             |  |                                    | 52,564  |   |      |   | 17,567 |  
|                                                                                  |  |                                    |         |   |      |   |        |  
|Net increase in cash and due from banks                                           |  |                                    | 32,611  |   |      |   | 18,555 |  
|Cash and cash equivalents, beginning of period                                    |  |                                    | 14,765  |   |      |   | 10,692 |  
|                                                                                  |  |                                    |         |   |      |   |        |  
|Cash and cash equivalents, end of period                                          |  | $                                  | 47,376  |   |      | $ | 29,247 |  
|                                                                                  |  |                                    |         |   |      |   |        |  
|Supplemental disclosures of cash flow information                                 |  |                                    |         |   |      |   |        |  
|Cash paid during period for:                                                      |  |                                    |         |   |      |   |        |  
|Interest                                                                          |  | $                                  | 2,347   |   |      | $ | 1,739  |  
|Income taxes                                                                      |  |                                    | 491     |   |      |   | 224    |  
|Schedule of noncash investing activities                                          |  |                                    |         |   |      |   |        |  
|Unrealized gain on securities available for sale                                  |  |                                    | 294     |   |      |   | 41     |  



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Notes to Consolidated Financial Statements - Unaudited



(in thousands, except share and per share data)



Note 1 - Financial Statement Presentation



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, 2003.



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 accounting principles generally accepted in the United States of America 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, 2003 consolidated balance sheet was derived
from the Companys December 31, 2003 audited consolidated financial statements included in the Annual Report on Form 10-K.



Interim statements are subject to possible adjustment in connection with the annual audit of the Company for the year ending December 31, 2004. 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.



Certain reclassifications related to direct loan origination fees and costs
have been made to the prior years financial statements to conform to the current period presentation. These reclassifications had no effect on previously reported results of operations or retained earnings.



Note 2  Subordinated Debt



In September 2003, the Company formed a statutory trust organized under the laws of the
State of Delaware, known as Smithtown Bancorp Capital Trust I (the Trust). The Trust issued $11,000 of Floating Rate Capital Securities due October 8, 2033 (capital securities). The capital securities bear interest at 3-month
LIBOR plus 2.99%. The interest rate adjusts quarterly. Interest is payable quarterly. The capital securities provide for an interest deferral on a cumulative basis at the option of the Company for up to 20 consecutive quarters. The Company may not
declare or pay dividends or distributions on capital stock or redeem or purchase any of its capital stock during an interest deferral period. The Company has the right to redeem the capital securities, in whole or in part, at a premium declining
ratably to par on October 8, 2008.



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Note 3 - Earnings Per Common Share



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



Note 4  Employee Benefits



During
2004, 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 2004 and 2003 for these two plans were $29 and $45 and $24 and $40. It is
expected that the Companys costs for the two plans for the twelve months ending December 31, 2004 will be approximately $120 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, 2004 and 2003 were $7, $8, and $1 for both periods. Since
the plan holds no assets, the Bank did not contribute and expects to contribute $0 to its plan in 2003 and 2004.



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



(in thousands, except share and per share data)



This report may contain certain 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 use of the words believe, expect, anticipate,
project, estimate, will be, will continue, will likely result, or similar expressions. The Bancorp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 operations of the Bancorp 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 Bancorp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 Bancorp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 Bancorp 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 Bancorp makes on
related subjects in our reports to the Securities Exchange Commission.



Smithtown Bancorp is a one-bank holding company formed in 1984. Its income is derived primarily from the operations of its subsidiary, Bank of Smithtown.



Comparison of Financial Condition at March 31, 2004 and December 31, 2003



The balance sheet for the first quarter of 2004 underwent significant changes in asset and
liability allocations. Total assets increased from $565,085 at December 31, 2003 to $620,625 at March 31, 2004, an increase of 9.8%. As in prior quarters, one of the largest areas of growth was in the loan portfolio which grew from $459,678 at year
end 2003 to $493,901 at the end of the first quarter, an increase of 7.4%. The composition of the loan portfolio remained stable from December 31, 2003 to March 31, 2004, with real estate loans and commercial loans comprising 91.4% and 8.0% of the
portfolio, as compared to 91.1% and 8.5%, respectively. Within the real estate portfolio, loans for commercial properties and construction and land loans comprise 59.3% and 19.0%, respectively. The allowance for loan losses account remained
consistent at March 31 and December 31 due to a minimal amount of charge-offs and recoveries. There was no provision for loan losses



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taken during the first quarter of 2004 due to managements evaluation of the allowance account. Although there was
$706 in non-accrual loans at March 31, 2004, the allowance account remains at a level that management believes to be adequate to provide coverage against potential losses in the portfolio. Investment securities decreased from December 31, 2003 to
March 31, 2004 from $59,277 to $47,088, a decrease of $12,189 or 20.6%. This decrease was primarily the result of called agency securities. The Company also sold an agency security and recognized $94 in gains on this sale. Managements intent
still remains to hold most investment securities to maturity. The funds received from the call of agency securities was re-channeled into the loan portfolio rather than reinvested into securities in order to achieve a higher yield. The volume of
restricted securities increased by $550 from December 31, 2003 to March 31, 2004. This was a result of increased Federal Home Loan Bank borrowings which require increased holdings of Federal Home Loan Bank stock. The volume of federal funds sold at
March 31, 2004 was $35,583 as compared to $5,382 at December 31, 2003, representing a 561.1% increase. This was the result of deposit growth outpacing loan closings during the first quarter. As loan demand remains very strong, these federal funds
sold will be channeled into higher yielding loans during the second quarter. The liability side of the balance sheet also saw significant changes during the first quarter of 2004. Deposits increased from $481,331 at December 31, 2003 to $523,333 at
March 31, 2004, an increase of $42,002 or 8.7% growth. The largest area of this growth was in money market accounts which increased by 14.5%. Time deposits also experienced large growth of $19,799 or 13.0%. The amount of Federal Home Loan Bank
borrowings increased from $31,000 at year end 2003 to $42,000 at March 31, 2004. These low cost borrowings helped provide temporary funding for loans during the early part of the first quarter, and also help the bank maintain its net interest
margin. Stockholders equity increased from December 31, 2003 to March 31, 2004 by $1,833 or 4.7% as a result of net income of $2,130, dividend payment of $297, an increase in comprehensive income of $171, and an increase in treasury stock of
$170.



During the first quarter of 2004, the Bancorp repurchased 3,288 shares
at a cost of $170. Net income for the first three months of 2004 was $2,130 as compared to $1,989 for the same period in 2003. This represents an increase of 7.1%. The primary contributor to this increased income is interest on loans, which rose by
24.9%. The average yield on loans during first quarter 2004 was 6.5% as compared to 7.0% during the same period in 2003. Interest on federal funds sold increased by 104.2% due to the large average volume during first quarter 2004. The yield on these
funds was .9% as compared to 1.2% in 2003. Interest income on investment securities decreased over the same time period in 2003 by $144 or 22.0%. The yield on these securities at March 31, 2004 and 2003 was 5.2% and 5.8%, respectively. As the growth
rate of deposits was so strong during the first quarter of 2004 as compared to the same period in 2003, the expense for these deposits also increased by $633 or 34.3%, primarily in the time deposit category. The banks cost of funds for the
first quarter of 2004 was 2.07% as compared to 2.1% for the same period in 2003. Net interest income, the primary driver of net income, increased by 15.5% this quarter over the first quarter of 2003. This increase was the result of significantly
increased loan income in combination with reduced investment income and increased interest expense. Other non-interest income grew by 7.4% and non-interest expense increased by 24.9%. Due to the increased level of income during this first quarter of
2004, earnings per share were $.72 as compared to $.66 during first quarter 2003, an increase of 9.1%.



Investment securities at March 31, 2004 totaled $47,088 as compared to $59,277 at December 31, 2003, a decrease of 20.6%. As interest rates remained low during 2004, principal payment reductions on mortgage backed
securities continued to flow into the



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bank. Proceeds from matured investment securities were rechanneled into higher yielding loan originations. The majority
of investment securities remain in the available for sale portfolio, which represents 96.0% of total investments. This provides maximum liquidity for the bank, as these securities may be sold, if necessary. Agency securities, mortgage backed
securities and obligations of state and political subdivisions now represent 34.5%, 15.8% and 40.4%, respectively of the total portfolio at March 31, 2004. The overall yield on these securities is 5.2% at March 31, 2004 as compared to 5.8% at
December 31, 2003.



Loan balances at March 31, 2004 were $493,901 as compared
to $459,678 at December 31, 2003, an increase of 7.4%. Growth was primarily in the commercial real estate portfolio, which grew by 3.3%. Loans represent 94.4% of deposits at first quarter end 2004 as compared to 95.5% at year end 2003. Average yield
on this loan portfolio was 6.5% as compared to 7.0% at year end 2003. The allowance for loan loss account at March 31, 2004 was $4,763 as compared to $4,761 at December 31, 2003. The change in the allowance account was the result of $7 in recoveries
and $5 in charge-offs. Based on the continued high quality of the loan portfolio and the low level of nonperforming assets, management feels the allowance account provides adequate coverage for potential losses. 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 future losses which may
occur within the loan category since the loan loss allowance is a valuation applicable to the entire loan portfolio.



Quarter end deposits at March 31, 2004 were $523,333 as compared to $481,331 at December 31, 2003. This represents an 8.7% increase, primarily in the money market and
time deposit categories. Money market accounts saw an increase of 14.5% over year end balances, and time deposits rose by 13.0%. Deposits remain the banks primary source of funding, but borrowings also serve to increase this funding. During
the first quarter of 2004 the cost of borrowings through the Federal Home Loan Bank was low and therefore the bank took advantage of the opportunity to borrow additional funds at costs lower than the expense of normal deposit accounts. The average
cost for these borrowings during first quarter was 3.7%.



The Company and 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 (Total
Risk Adjusted Capital) of 8%, including Tier I capital to total risk weighted assets (Tier I Capital) of 4% and a Tier I capital to average total assets (Leverage 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 direct material effect on our consolidated financial statements.



As of March 31, 2004, the Bank is considered to be 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. As of March 31, 2004, the banks ratios were 11.6%,



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10.5% and 8.7%, respectively. There are no conditions or events since such notifications that management believes have
changed this classification. However, due to the recent issuance of FIN 46, there can be no assurance that the Federal Reserve will continue to allow institutions to include Trust Preferred Securities in Tier I Capital. The banks return on
average equity and return on average assets for the first three months of 2004 was 24.2% and 1.7%, respectively.



Comparison of Operating Results for the Three Months Ended March 31, 2004 and 2003



Interest income for the three months ended March 31, 2004 and 2003 was $8,334 and $6,916, respectively. The largest contributor to interest
income is interest on loans and it represents 93.0% of total interest income at March 31, 2004 as compared to 89.8% at March 31, 2003. The yield on the loan portfolio was 6.5% and 7.0% for the periods ended March 2004 and March 2003, respectively.
The next largest contributor to interest income is the investment portfolio, which now represents 6.1% of total interest income as compared to 9.5% at March 31, 2003. This reduced income has been the result of the continued low interest rate
environment in combination with the reduced volume of investment securities. Average yield on the securities portfolio was 5.2% for the period ending March 31, 2004 as compared to 5.8% for the same period at March 31, 2003. The final contributor to
interest income is the interest on federal funds sold, and it increased by 104.2% during first quarter 2004, due in majority to the higher volume of funds sold. Yield on these funds was .9% in 2004 as compared to 1.2% in the same period in 2003.



Interest expense for the first quarter of 2004 was $2,479 as compared to
$1,846 in the same period of 2003. Interest expense incurred by the bank is the combination of expense for deposit accounts and borrowings. As both of these volumes increased during the first quarter of 2004, the total expense also increased. The
banks overall cost of funds for the first quarter of 2004 was 2.07% as compared to 2.11% for the first quarter of 2003.



Net interest income remains the largest contributor to net income and currently comprises 85.2% of total income. Net interest income increased from $5,070 in the first
quarter of 2003 to $5,855 in the first quarter of 2004, resulting from a larger volume of interest earning assets than interest bearing liabilities. The result of these changes in balance sheet composition and interest rates was an interest margin
of 4.4% in 2004 as compared to 5.0% in 2003. Although the bank has felt the pressures of this low interest rate environment, margin still remains strong as compared to peer groups.



Other operating income increased from $948 to $1,018 or 7.4% over the comparable period in 2003 and 2004. This increase in non-interest
income was primarily the result of an increase in the gains on the sales of investment securities. Service charge income on deposit accounts decreased by 6.4% for the period ending March 31, 2004 as compared to the same period in 2003 due to the
increased number of free checking accounts opened this year. Trust department income increased by 8.9% for the first quarter of 2004 over the comparable period in 2003 due to the increased market value of assets under management as well as an
increased volume of these assets. Other income represents miscellaneous categories of non-interest income and it increased by 1.6%. Other operating expenses increased by 24.9%, primarily the result of increased salary and benefit expense. These
expenses increased by 50.1% during the period ended March 31, 2004 as compared to the same period ended March 31, 2003. Salary expense has increased due to the increased needs for staff resulting from the



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high growth rate of the bank over the past years. The demand for increased retail staff in a larger branch network has
correspondingly increased the demand for back office support. There has also been an increase in the human resource department as well as in the business development area, all placing higher demands on salary and benefit expense. Net occupancy
expense has increased by 9.8% due to increased lease payments on new branch properties and depreciation expenses attributed to the construction costs of the new branches as well as leasehold and building improvements. Other expenses increased by
5.3%, reflective of the increased changes in overhead and operating expenses for this increased asset and deposit base.



Liquidity and Commitments



Liquidity provides the source of funds for anticipated and unanticipated deposit outflow and loan growth. The Banks primary sources of liquidity includes 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.



At March 31, 2004, the total approved loan origination commitments outstanding
amounted to $69,750 of which unused lines of credit were $2,113. Outstanding letters of credit totaled $8,873. Certificates of deposit scheduled to mature in one year or less at March 31, 2004 totaled $54,554.



The Companys membership in the Federal Home Loan Bank System gives it the ability to
borrow funds from the Federal Home Loan Bank of New York for short or long term purposes under a variety of programs. The Bank also has various funding arrangements with commercial and investment banks providing up to $6,000,000 of unsecured funding
sources in the form of Federal funds lines and repurchase agreements based on available collateral. Unused capacity under these unsecured lines was $6,000,000 at March 31, 2004. The Bank maintains these funding arrangements to achieve favorable
costs of funds, manage interest rate risk, and enhance liquidity in the event of deposit outflows.



Impact of Inflation and Changing Prices



The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, 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 States government and federal agencies, particularly the Federal Reserve Bank.



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Subsequent Events



As of April 5, 2004 the bank changed its listing from the over the counter electronic bulletin board to Nasdaq. This will provide additional exposure for the bank and
availability of shares to a wider group of investors. The bank also declared its fourth stock split since 1998 on April 7, 2004. The split will become effective on May 7, 2004 to shareholders of record as of April 23, 2004. On April 14, 2004 the
bank announced that it had entered into an agreement to purchase the Siegerman Mulvey insurance agency. This acquisition will provide a synergy between two financial service organizations and it is managements expectation that the purchase
will result in additional earnings to the corporation after the transaction closes.



Item 3. Quantitative and Qualitative Disclosures About Market Risk



The method by which the Bank controls its liquidity and interest rate sensitivity is through asset liability management. The goal of asset liability management is the combination of maintaining adequate liquidity
levels without sacrificing earnings. The Bank matches the maturity of its assets and liabilities in a way that takes advantage of the current and anticipated rate environment. Asset liability management is of great concern to management and is
reviewed on an ongoing basis. The Chief Executive Officer, Chief Financial Officer, Chief Lending Officer, Chief Commercial Lending Officer, and the Chief Retail Officer of the Bank serve on the Asset Liability Management Committee. Reports
detailing current liquidity position and projected liquidity as well as projected funding requirements are reviewed monthly, or as often as deemed necessary. Semi-annually, the Bank collects the necessary information to run an income simulation
model, which tests the Banks sensitivity to fluctuations in interest rates. These rate fluctuations are large and immediate and actually reflect the Banks earnings under these simulations. These income simulations are reviewed by the
Board of Directors. The simulation performed during 2003 reflected minimal sensitivity to upward or downward rate fluctuations. Interest income, margins, and net income remain stable regardless of changes in market interest rates. These models then
lead to investment, loan, and deposit strategies and decisions for earnings maximization within acceptable risk levels.



The Banks market risk is primarily its exposure to interest rate risk. Interest rate risk is the effect that changes in interest rates have on future earnings. The
principal objective in managing interest rate risk is to maximize net interest income within acceptable levels of risk that have been previously established by policy.



At March 31, 2004, management believes that there has been no material change in market risk from December 31, 2003.





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



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procedures (as defined in Rule 13a-15(e) promulgated under the Securities and Exchange Act of 1934, as amended) as of
March 31, 2004. 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 control over financial reporting
during the quarter that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting.



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 6, 2004                                  
|            | 
|            |  | /s/ Bradley E. Rock                          
|            |  | Bradley E. Rock, Chairman, President and     
|            |  | Chief Executive Officer                      
|            | 
|May 6, 2004 |  |                                              
|            |  | /s/ Anita M. Florek                          
|            |  | Anita M. Florek, Executive Vice President and
|            |  | Treasurer                                    



15