Sussex Bancorp Announces Second Quarter 2007 Earnings

Declares Quarterly Cash Dividend of $0.07 Per Share


FRANKLIN, N.J., July 24, 2007 (PRIME NEWSWIRE) -- Sussex Bancorp (Nasdaq:SBBX) today announced its financial results for the second quarter ending June 30, 2007.

For the quarter ended June 30, 2007, the Company earned net income of $294,000 compared to net income of $652,000 reported for the second quarter of 2006. For the six months ended June 30, 2007, the Company earned net income of $1,018,000, a decline from the $1,248,000 earned for the same period last year. Basic earnings per share for the three and six months ended June 30, 2007 were $0.09 and $0.32, respectively, compared to $0.21 and $0.40 for the respective comparable periods of 2006. Diluted earnings per share were $0.09 and $0.32 respectively for the three and six months ended June 30, 2007, compared to $0.20 and $0.39 in the respective comparable periods of 2006. The decline in both net income and earnings per share reflects continued pressure on the Company's net interest margin, as well as an increase in the Company's provision for loan losses related to certain loans performing at quarter end that management deems necessary at this time based upon the present loan repayment terms and the ability of the borrowers to comply with the present repayment terms.

The Company's net interest income decreased to $2,894,000 for the quarter ended June 30, 2007 from $3,051,000 for the second quarter of 2006. The decrease reflects the Company's interest expense increasing at a faster rate than its interest income, due in large measure to the competitive environment for deposits in the Company's trade area. The Company's interest income increased to $5,613,000 for the quarter ended June 30, 2007 from $4,876,000 for the second quarter of 2006. The Company's interest expense increased to $2,719,000 for the three months ended June 30, 2007 from $1,825,000 for the second quarter of 2006. For the six months ended June 30, 2007, the Company's net interest income decreased to $5,743,000 from the $5,966,000 earned for the same period last year. For the six months ended June 30, 2007, the Company's interest income increased to $11,005,000 from $9,457,000 for the period ended June 30, 2006, while the Company's interest expense increased to $5,262,000 from $3,491,000 for the six months ended June 30, 2006. As a result of these changes, the Company's net interest margin declined to 3.46% and 3.53% for the three and six months ended June 30, 2007, respectively, from 4.22% and 4.19% for the three and six months ended June 30, 2006, respectively.

Management has sought to address the margin compression in several ways. The Company recently refinanced $5.0 million in its outstanding trust preferred securities. The securities called for redemption bore a rate of 9.01%, while the newly issued trust preferred securities have a current rate of 6.80%. Management is also closely monitoring rates offered on deposit products. In addition, the Company is seeking to enhance its yield on its interest earning assets, primarily its loan portfolio. The Company will no longer seek to compete on rate for all potential customers, but only on its more profitable relationships. This may lead to a slowing in the rate of growth of the Company's loan portfolio, as certain borrowers elect to obtain credit products from competing institutions. However, management believes this will benefit the Company's net interest margin and profitability.

The loan loss provision for the second quarter was $436,000 compared to $229,000 for the same period last year. The increase is related both to the continued growth in the Company's loan portfolio and two construction loans dependent upon residential unit sales that due to market conditions have not kept pace with the expected loan amortization schedules. Subsequent to quarter end, one of these loans, with an outstanding balance of $4.4 million, reached maturity, but has not been paid off. Considering the underlying collateral value of both loans and the continuing economic environment, management therefore determined that an additional provision was prudent at this time.

The Company reported non-interest income of $1,235,000 and $2,821,000 for the current three and six month periods ended June 30, 2007, respectively, compared to non-interest income of $1,369,000 and $2,660,000 for the three and six month periods ending June 30, 2006. Insurance commissions for the three and six month periods ended June 30, 2007 were $664,000 and $1,518,000, respectively.

The Company's other expenses increased in the three and six month periods of 2007 compared to the prior year periods. For the three month period ending June 30, 2007 other expenses increased by $107,000 thousand, or 3.3%, while other expenses increased by $218,000 thousand, or 3.4%, for the six months ended June 30, 2007 compared to the prior year periods.

At June 30, 2007 the Company had total assets of $387.3 million, compared to total assets of $331.3 million at June 30, 2006. The Company's total deposits increased to $311.3 million at June 30, 2007 from $277.3 million at June 30, 2006, and the Company's total loan portfolio, net of unearned income, increased to $284.6 million at June 30, 2007 from $244.1 million at June 30, 2006.

Sussex Bancorp also announced that its Board of Directors declared a cash dividend of $0.07 per share, payable on August 24, 2007 to shareholders of record as of August 6, 2007.

Sussex Bancorp is the holding company for Sussex Bank, which operates through its main office in Franklin, New Jersey and branch offices in Andover, Augusta, Newton, Montague, Sparta, Vernon and Wantage, New Jersey, Port Jervis and Warwick, New York and for the Tri-State Insurance Agency, Inc., a full service insurance agency located in Sussex County, New Jersey.


                              SUSSEX BANCORP
                         CONSOLIDATED BALANCE SHEETS
                            (Dollars In Thousands)
                                 (Unaudited)

 ASSETS                                June 30,   June 30,    Dec. 31,
 ------                                  2007       2006        2006
                                       ------------------------------

 Cash and due from banks               $  9,240   $ 10,442   $ 10,170
 Federal funds sold                      16,795      2,670     11,995
                                       --------   --------   --------
   Cash and cash equivalents             26,035     13,112     22,165

 Interest bearing time deposits with
  other banks                               100        100        100
 Trading securities                      12,282         --         --
 Securities available for sale           45,703     57,814     54,635
 Federal Home Loan Bank Stock, at
  cost                                    1,358        964      1,188

 Loans receivable, net of unearned
  income                                284,640    244,061    262,276
   Less: allowance for loan losses        3,860      3,040      3,340
                                       --------   --------   --------
    Net loans receivable                280,780    241,021    258,936

 Premises and equipment, net              8,606      6,909      7,794
 Accrued interest receivable              1,804      1,497      1,910
 Goodwill                                 2,820      2,780      2,820
 Other assets                             7,766      7,062      6,749
                                       --------   --------   --------

 Total Assets                          $387,254   $331,259   $356,297
                                       ========   ========   ========

 LIABILITIES AND STOCKHOLDERS' EQUITY
 ------------------------------------
 Liabilities:
   Deposits:
    Non-interest bearing               $ 37,818   $ 34,234   $ 40,083
    Interest bearing                    273,517    243,063    255,687
                                       --------   --------   --------
   Total Deposits                       311,335    277,297    295,770

 Borrowings                              20,226     13,276     18,251
 Accrued interest payable and other
  liabilities                             2,663      2,077      2,529
 Junior subordinated debentures          18,042      5,155      5,155
                                       --------   --------   --------

 Total Liabilities                      352,266    297,805    321,705

 Total Stockholders' Equity              34,988     33,454     34,592
                                       --------   --------   --------

 Total Liabilities and Stockholders'
  Equity                               $387,254   $331,259   $356,297
                                       ========   ========   ========

                               SUSSEX BANCORP
                     CONSOLIDATED STATEMENTS OF INCOME
                (Dollars In Thousands Except Per Share Data)
                                (Unaudited)

                                     Three Months       Six Months
                                    Ended June 30,    Ended June 30,
                                   ----------------  ----------------
                                     2007     2006     2007     2006
                                   -------  -------  -------  -------
 INTEREST INCOME
  Loans receivable, including fees $ 4,881  $ 4,217  $ 9,534  $ 8,030
  Securities:
   Taxable                             404      349      800      702
   Tax-exempt                          257      259      507      520
  Federal funds sold                    69       46      161      195
  Interest bearing deposits              2        5        3       10
                                   -------  -------  -------  -------
   Total Interest Income             5,613    4,876   11,005    9,457
                                   -------  -------  -------  -------
 INTEREST EXPENSE
  Deposits                           2,355    1,548    4,563    2,920
  Borrowings                           243      168      465      359
  Junior subordinated debentures       121      109      234      212
                                   -------  -------  -------  -------
   Total Interest Expense            2,719    1,825    5,262    3,491
                                   -------  -------  -------  -------

   Net Interest Income               2,894    3,051    5,743    5,966
 PROVISION FOR LOAN LOSSES             436      229      544      445
                                   -------  -------  -------  -------
   Net Interest Income after
    Provision for Loan Losses        2,458    2,822    5,199    5,521
                                   -------  -------  -------  -------

 OTHER INCOME
  Service fees on deposit accounts     335      348      654      668
  ATM and debit card fees              104       97      191      179
  Insurance commissions and fees       664      688    1,518    1,421
  Investment brokerage fees             56       88      213      140
  Trading revenue                      (48)      --       (2)      --
  Other                                124      148      247      252
                                   -------  -------  -------  -------
   Total Other Income                1,235    1,369    2,821    2,660
                                   -------  -------  -------  -------

 OTHER EXPENSES
  Salaries and employee benefits     1,829    1,756    3,611    3,395
  Occupancy, net                       300      259      613      530
  Furniture, equipment and data
   processing                          356      297      694      575
  Stationary and supplies               46       45       92       96
  Professional fees                    165      167      304      345
  Advertising and promotion            137      145      241      330
  Insurance                             48       46       94      104
  Postage and freight                   48       60       88      112
  Amortization of intangible assets     26       40       63       73
  Other                                381      414      776      798
                                   -------  -------  -------  -------
   Total Other Expenses              3,336    3,229    6,576    6,358
                                   -------  -------  -------  -------

   Income before Income Taxes          357      962    1,444    1,823
 PROVISION FOR INCOME TAXES             63      310      426      575
                                   -------  -------  -------  -------
   Net Income                      $   294  $   652  $ 1,018  $ 1,248
                                   =======  =======  =======  =======

                               SUSSEX BANCORP
             COMPARATIVE AVERAGE BALANCES AND AVERAGE INTEREST RATES
                                   (Unaudited)

                            Six Months Ended June 30,
                 -----------------------------------------------------
 (Dollars in thousands)     2007                        2006
 ---------------------------------------------------------------------

                 Average  Interest  Average  Average  Interest Average
 Earning Assets: Balance    (a)     Rate (b) Balance    (a)    Rate (b)
 ---------------------------------------------------------------------
 Securities:
  Tax exempt (c) $ 24,030  $    663  5.57%  $ 24,171  $    708  5.91%
  Taxable          34,135       800  4.73%    35,752       702  3.96%
 ---------------------------------------------------------------------
 Total securities  58,166     1,463  5.07%    59,923     1,410  4.74%
 Total loans
  receivable (d)  272,678     9,534  7.05%   227,472     8,030  7.12%
 Other interest-
  earning assets    6,397       164  5.16%     9,083       205  4.55%
 ---------------------------------------------------------------------
 Total earning
  assets          337,242  $ 11,161  6.67%   296,478  $  9,645  6.56%

 Non-interest
  earning
  assets           28,098                     25,213
 Allowance
  for loan
  losses           (3,496)                    (2,804)
 ----------------------------------         --------
 Total Assets    $361,844                   $318,887
 =================================          ========

 Sources of
  Funds:
 Interest
  bearing
  deposits:
  NOW            $ 58,221  $    642  2.22%  $ 52,470  $    500  1.92%
  Money market     36,731       704  3.87%    27,873       511  3.70%
  Savings          39,655       178  0.91%    49,171       206  0.84%
  Time            127,386     3,039  4.81%    91,556     1,703  3.75%
 ---------------------------------------------------------------------
 Total interest
  bearing
  deposits        261,993     4,563  3.51%   221,070     2,920  2.66%
  Borrowed funds   19,565       465  4.73%    14,786       359  4.83%
  Junior
   subordinated
   debentures       5,366       234  8.66%     5,155       212  8.20%
 ---------------------------------------------------------------------
 Total interest
  bearing
  liabilities     286,924  $  5,262  3.70%   241,011  $  3,491  2.92%

 Non-interest
  bearing
  liabilities:
  Demand deposits  37,647                     42,561
  Other
   liabilities      2,218                      1,965
 ----------------------------------         --------
 Total non-
  interest
  bearing
  liabilities      39,865                     44,526
 Stockholders'
  equity           35,055                     33,350
 ----------------------------------         --------
 Total Liabilities
  and
  Stockholders'
  Equity         $361,844                   $318,887
 =================================          ========

 ----------------          --------------             ---------------
 Net Interest
  Income and
  Margin (e)               $  5,899  3.53%            $  6,154   4.19%
 ================          ==============             ===============

 (a) Includes loan fee income
 (b) Average rates on securities are calculated on amortized costs
 (c) Full taxable equivalent basis, using a 39% effective tax rate
     and adjusted for TEFRA (Tax and Equity Fiscal Responsibility
     Act) interest expense disallowance
 (d) Loans outstanding include non-accrual loans
 (e) Represents the difference between interest earned and interest
     paid, divided by average total interest-earning assets


            

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