BERNARDSVILLE, N.J., Oct. 22, 2009 (GLOBE NEWSWIRE) -- Somerset Hills Bancorp (Nasdaq:SOMH) (the "Company"), parent company of Somerset Hills Bank (the "Bank") reported net income of $462,000 for the quarter ended September 30, 2009, up 8.7% from $425,000 earned during the third quarter of 2008. Diluted earnings per share for the third quarter were $0.08 in 2009 and 2008.
Net income for the first nine months of 2009 was $1.413 million, up 14.3% from $1.236 million earned during the first nine months of 2008. Diluted earnings per share for the nine months were $0.20 in 2009 versus $0.23 in 2008. Net income available to common stockholders was $1.063 million for the first nine months of 2009. Net income available to common and diluted earnings per share for 2009 reflect accretion, dividends, and repurchase premium related to $7.4 million of preferred stock and warrants issued on January 16, 2009 to the U.S. Treasury under the Capital Purchase Program. During the second quarter of 2009 the Company repurchased all of the preferred stock and warrants issued to Treasury, and therefore these securities had no impact on the current quarter.
Stewart E. McClure, Jr., President and CEO, stated, "With the repurchase of the TARP capital behind us, we redoubled our efforts toward building shareholder value. In short, we maintained our solid asset quality and improved our profitability." Mr. McClure further commented, "For the seventh consecutive quarterly period, we had no increases in nonperforming assets, which remained at only 0.04% of total assets. On a sequential quarter basis, our net interest margin widened significantly and our non-interest expenses declined, even after taking into account the FDIC special assessment recorded in the second quarter. Going forward, we aim to build upon the Company's positive trends including core deposit growth, net interest margin expansion and expense control. Our capital (tangible common equity ratio of 12.30%), and loan loss reserves (1.39% of total loans) are solid, yet we are mindful that there remains a credit crisis in the U.S., and that we may see additional stress to credit portfolios before we reach full economic recovery."
Net interest income for the 2009 third quarter totaled $2.662 million, a decline of $78,000, or 2.8%, from $2.740 million earned in the year ago quarter. The net interest margin declined by 60 basis points to 3.68% in the current quarter from 4.28% in the prior year quarter. Average interest-earning assets were $287.1 million, up 12.7% from $254.8 million in the third quarter of 2008. For the first nine months of 2009, net interest income was $7.769 million and the net interest margin was 3.60%, down from $8.078 million and 4.21% for the first nine months of 2008. Average interest-earning assets increased by 12.7% to $288.8 million for the first nine months of 2009 versus $256.2 million for same period one year ago. The reductions in net interest margin and the increases in interest-earning assets versus last year were substantial due to a strategy employed primarily during the third quarter of last year to increase liquidity and grow market share by offering time deposits at competitive rates of interest. The maturity and re-pricing of these deposits during the third quarter of 2009 at lower rates of interest contributed to a 25 basis point increase in the net interest margin versus the second quarter of 2009.
Non-interest income increased by $114,000 to $594,000 in the third quarter of 2009, from $480,000 in the third quarter of 2008, primarily due to higher gains on sales of residential mortgages at Sullivan Financial Services, Inc., a wholly-owned mortgage banking subsidiary of the Bank. Sullivan originates loans strictly on a pre-sold flow-basis, and had an improved year-over-year quarter due to improved execution in the current low interest rate environment. For the nine months ended September 30, 2009, non-interest income was $2.381 million, up $914,000 from $1.467 million reported for the first nine months of 2008. Gains on sales of residential mortgages increased by $375,000 for the year-over-year nine-month period due to increased volume and improved sales execution. In addition, the Company received in January 2009, $568,000 in tax free proceeds from a bank-owned life insurance policy.
Non-interest expenses declined by $19,000 to $2.450 million in the third quarter of 2009, from $2.469 million in the third quarter of 2008. Decreases in fees paid for professional services, such as consultants and legal counsel, were partially offset by higher FDIC regular insurance premiums and moderately higher employee expenses, including increased costs for health benefits. For the first nine months of 2009, non-interest expense was $7.760 million, up $315,000 from $7.445 million reported for the prior year period. Contributing to increased operating expenses for the nine-month comparison were higher FDIC insurance premiums, including a $140,000 special assessment, and a non-recurring $183,000 charge for retirement plan liability. These increases were partially offset by lower marketing expenses and overall cost containment.
Total non-accrual loans at quarter-end were $115,000, representing 0.05% of total loans versus $1.963 million, or 0.94% of total loans, at September 30, 2008. The Company had no other real estate owned at September 30, 2009 down from $297,000 one year ago. Net charge-offs in the current quarter were $10,000 versus $132,000 for the third quarter of 2008, while net charge-offs for the first nine months of 2009 were $656,000 versus $507,000 for the first nine months of 2008. The ratio of allowance for loan losses to total loans was 1.39% at September 30, 2009 and 1.46% at September 30, 2008. The allowance for loan losses as of the current quarter-end covers nonperforming loans by 25.3x up from 1.6x one year ago.
The Company's tangible common equity ratio was 12.30% at September 30, 2009 versus 12.85% one year ago. Tangible book value per share was $7.34 at September 30, 2009 and $7.13 at September 30, 2008.
The Board of Directors has declared a quarterly cash dividend of $0.05 per share payable November 30, 2009 to shareholders of record as of November 16, 2009.
Forward-Looking Statements
This news release contains certain forward-looking statements which are based on certain assumptions and describe future plans, strategies and expectations of the Company. These forward-looking statements are generally identified by use of the words "believe," "expect," "intend," "anticipate," "estimate," "project," or similar expressions. The Company's ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on the operations of the Company and its subsidiaries include, but are not limited to, changes in interest rates, general economic conditions, legislative/regulatory changes, monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve Board, the quality or composition of the loan or investment portfolios, demand for loan products, deposit flows, competition, demand for financial services in the Company's market area and accounting principles and guidelines. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. The Company does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.
Quarter Ended September 30
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($ in thousands except per share data) 2009 2008
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Income Statement Data:
Net interest income $ 2,662 $ 2,740
Provision for loan losses 150 150
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Net interest income after prov. for
loan losses 2,512 2,590
Non-interest income 594 480
Non-interest expense 2,450 2,469
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Income before income taxes 656 601
Income tax expense 194 176
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Net income $ 462 $ 425
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Diluted earnings per share $ 0.08 $ 0.08
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Balance Sheet Data:
At period end-
Total assets $ 309,165 $ 286,522
Loans, net 206,269 206,930
Loans held for sale 2,059 4,624
Allowance for loan losses 2,914 3,059
Investment securities held to
maturity 12,262 12,056
Investment securities held for sale 34,160 22,044
Deposits 258,055 237,124
Borrowings 11,000 11,000
Shareholders' equity 38,036 36,814
Book value per share $ 7.34 $ 7.13
Tangible common equity ratio 12.30% 12.85%
Average for the period-
Interest-earning assets 287,099 254,856
Total assets 306,055 276,228
Shareholders' equity 38,131 36,518
Performance Ratios:
Return on average assets 0.60% 0.61%
Return on average equity 4.81% 4.62%
Net interest margin 3.68% 4.28%
Efficiency ratio 75.2% 76.7%
Asset Quality:
Net charge-offs (recoveries) 10 132
At period end-
Nonaccrual loans 115 1,963
OREO property -- 297
Nonaccrual loans to total loans 0.05% 0.94%
Nonperforming assets to total assets 0.04% 0.69%
Allowance for loan losses to total
loans 1.39% 1.46%
Allowance as a % of nonperforming
loans 2,534% 156%
Note: Financial statements for the third quarter and for the nine
months ended September 30, 2009 will be filed as an exhibit
to the Company's Current Report on Form 8-k and are
available on the SEC's website (www.sec.gov) or the
Company's website (www.somersethillsbank.com).