Sussex Bancorp Announces 11.8% Growth in Year to Date 2010 Earnings

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| Source: Sussex Bancorp

FRANKLIN, N.J., July 27, 2010 (GLOBE NEWSWIRE) -- Sussex Bancorp ("Company") (Nasdaq:SBBX) today announced its financial results for the three and six months ended June 30, 2010. For the six months ended June 30, 2010, the Company's net income increased $100 thousand, or 11.8%, to $948 thousand from the $848 thousand earned for the same period last year driven by a 16.4% increase in net interest income. Diluted earnings per share were $0.29 for the six months ended June 30, 2010 compared to $0.26 for the same period in 2009. For the quarter ended June 30, 2010, the Company earned net income of $305 thousand, a decrease of $290 thousand from net income of $595 thousand for the second quarter of 2009. Basic and diluted earnings per share were $0.09 in the second quarter of 2010 compared to $0.18 for the second quarter of 2009.  

The decline for the second quarter of 2010 was largely attributed to severance costs that resulted in higher salary and employee benefits expense and an other-than-temporary impairment ("OTTI") charge both during the second quarter of 2010. The severance and OTTI charges of $217 thousand and $171 thousand, respectively, or combined amounted to an equivalent earnings per share decrease of $0.07. For the three and six months ended June 30, 2010 the provision for loan losses increased by $541 thousand and $639 thousand, respectively, over the same periods last year, which was largely offset by a decline in write-downs on foreclosed real estate expense for the three and six months ended June 30, 2010 of $456 thousand and $429 thousand, respectively, over the same periods last year. At June 30, 2010, non-performing assets to total assets remained flat on a linked quarter basis.

"We continue to focus on proactively managing and resolving the Company's troubled assets as well as taking steps to strengthen the Company's operating results by executing our community bank strategy of delivering an extraordinary experience for our customers while assisting with their financial needs," stated Mr. Anthony Labozzetta, Sussex's President and Chief Executive Officer.

The Company's net interest income increased $260 thousand, or 7.0%, to $4.0 million for the quarter ended June 30, 2010 from $3.7 million for the second quarter of 2009. The improvement in net interest income was driven by a 24 basis point increase in the Company's net interest margin to 3.69% for the quarter ended June 30, 2010, which was largely due to a 64 basis point decrease in the average rate paid on interest bearing liabilities.  For the six months ended June 30, 2010, the Company's net interest income increased $1.1 million, or 16.4%, to $7.9 million from the $6.8 million earned for the same period last year. The improvement in net interest income was driven by a 51 basis point increase in the Company's net interest margin to 3.76% for the six months ended June 30, 2010, which was largely due to an 89 basis point decrease in the average rate paid on interest bearing liabilities. The improvement in the average rate paid on interest bearing liabilities is a product of management's effort to reduce funding costs.

The Company reported non-interest income of $1.1 million and $2.3 million for the three and six month periods ended June 30, 2010, respectively, compared to non-interest income of $1.5 million and $2.8 million for the three and six month periods ended June 30, 2009. Adjusting for non-recurring gains on the sale of fixed assets of $203 thousand in the second quarter of 2009, non-interest income decreased by $107 thousand and declined by $263 thousand for the three and six months ended June 30, 2010, respectively, as compared to the same periods in 2009. During the three months ended June 30, 2010, the Company recognized a $171 thousand pre-tax ($113 thousand after-tax, or $0.03 per share) non-cash OTTI charge related to an equity portfolio fund that had an amortized cost of $250 thousand. The fund is comprised of common stocks of bank holding companies. The impairment was recognized because the market value of this security was below the Company's amortized cost for an extended period of time along with credit deterioration in some of the underlying banks and we do not believe the market value of this security will recover to the Company's amortized cost within the foreseeable future. In addition, the decrease in non-interest income for the six months ended June 30, 2010 is attributable to lower insurance commissions and lower service charges on deposit accounts.

The Company's non-interest expenses decreased by $164 thousand, or 4.1%, to $3.8 million and decreased by $176 thousand, or 2.3%, to $7.4 million for the three and six months ended June 30, 2010, respectively, as compared to the same periods in 2009. The decline in non-interest expenses was largely due to a decrease in foreclosed real estate expenses and FDIC insurance premiums, reflecting the expense incurred in the second quarter of 2009 of $215 thousand related to a special assessment by the FDIC to recapitalize the Deposit Insurance Fund. These improvements were partly offset by severance costs of $217 thousand incurred during the second quarter of 2010, which resulted in higher salary and employee benefits expense.

At June 30, 2010, non-performing assets, which include non-accrual loans and foreclosed real estate, increased on a linked quarter basis by $702 thousand to $27.1 million, or 5.59% of total assets, at June 30, 2010. The ratio of non-performing assets to total assets for March 31, 2010 and December 31, 2009 were 5.59% and 4.61%, respectively. The allowance for loan losses was $5.4 million, or 1.65% of total loans, at June 30, 2010 as compared to $5.5 million, or 1.65% of total loans, at December 31, 2009.  "Although the occupancy levels in our market have improved in the commercial real estate sector leading to several credit upgrades in our portfolio, we had some deterioration in the residential construction portfolio resulting in non-performing assets to total assets remaining at the same level for the current quarter," commented Mr. Labozzetta.   

At June 30, 2010 the Company's total assets were $484.6 million, an increase of $29.8 million, or 6.6%, compared to total assets of $454.8 million at December 31, 2009. The Company's total deposits increased $28.0 million, or 7.5%, to $400.1 million at June 30, 2010 from $372.1 million at December 31, 2009.  The growth in deposits was primarily in core deposits, (non-interest demand, NOW, savings and money market accounts), which increased $27.6 million, or 10.2%, at June 30, 2010 as compared to December 31, 2009.  The Company's gross loans, net of unearned income decreased $2.8 million to $330.2 million at June 30, 2010 from $333.0 million at December 31, 2009, as cash and cash equivalents increased $21.9 million, or 95.1%, to $45.0 million at June 30, 2010. Bank-owned life insurance increased to $10.0 million at June 30, 2010, as the Company purchased an additional $6.5 million during the second quarter of 2010. At June 30, 2010 the Company's total stockholders' equity was $35.9 million, an increase of $1.4 million, or 4.0%, as compared December 31, 2009 and has increased $3.1 million, or 9.6% since June 30, 2009. At June 30, 2010, the leverage capital, tier 1 capital to risk weighted assets and total capital to risk weighted assets ratios of Sussex Bank, the Company's bank subsidiary, were 8.84%, 11.94% and 13.19%, respectively, all in excess of the 5%, 6% and 10% ratios required to be deemed "well capitalized" under regulatory requirements.

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. For additional information, please visit the company's Web site at www.sussexbank.com.

When used in this discussion the words: "believes", "anticipates", "contemplates", "expects" or similar expressions are intended to identify forward looking statements. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. Those risks and uncertainties include those listed under Item 1A - Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2009 and changes to interest rates, the ability to control costs and expenses, general economic conditions, the success of the Company's efforts to diversify its revenue base by developing additional sources of non-interest income while continuing to manage its existing fee based business, risks associated with the quality of the Company's assets and the ability of its borrowers to comply with repayment terms. The Company undertakes no obligation to publicly release the results of any revisions to those forward looking statements that may be made to reflect events or circumstances after this date or to reflect the occurrence of unanticipated events.

SUSSEX BANCORP
CONSOLIDATED BALANCE SHEETS
(Dollars In Thousands)
(Unaudited)
       
ASSETS June 30, 2010 June 30, 2009 December 31, 2009
       
       
Cash and due from banks $15,045 $11,932 $8,779
Federal funds sold 29,980 5,237 14,300
 Cash and cash equivalents 45,025 17,169 23,079
       
Interest bearing time deposits with other banks 600 1,096 100
Trading securities -- 7,910 2,955
Securities available for sale 77,318 86,758 71,315
Federal Home Loan Bank Stock, at cost 2,103 2,047 2,045
       
Loans receivable, net of unearned income 330,179 329,181 332,959
 Less: allowance for loan losses 5,449 6,709 5,496
 Net loans receivable 324,730 322,472 327,463
       
Foreclosed real estate 4,564 4,627 3,843
Premises and equipment, net 6,969 7,302 7,065
Accrued interest receivable 1,802 2,064 1,943
Goodwill 2,820 2,820 2,820
Bank-owned life insurance 9,968 3,289 3,360
Other assets 8,727 7,104 8,853
       
Total Assets 484,626 $464,658 $454,841
       
LIABILITIES AND STOCKHOLDERS' EQUITY    
       
Liabilities:      
 Deposits:      
 Non-interest bearing  $39,570 $40,868 $34,155
 Interest bearing  360,481 342,278 337,920
 Total Deposits 400,051 383,146 372,075
       
Borrowings 33,060 33,119 33,090
Accrued interest payable and other liabilities 2,733 2,756 2,262
Junior subordinated debentures 12,887 12,887 12,887
       
Total Liabilities 448,731 431,908 420,314
       
Total Stockholders' Equity 35,895 32,750 34,527
       
Total Liabilities and Stockholders' Equity $484,626 $464,658 $454,841
 
SUSSEX BANCORP
CONSOLIDATED STATEMENTS OF INCOME
(Dollars In Thousands)
(Unaudited)
         
  Three Months Ended June 30, Six Months Ended June 30,
  2010 2009 2010 2009
INTEREST INCOME         
 Loans receivable, including fees $4,749 $4,789 $9,429 $9,597
 Securities:        
 Taxable 452 754 966 1,381
 Tax-exempt 265 316 528 589
 Federal funds sold 10 9 17 21
 Interest bearing deposits 8 7 10 14
 Total Interest Income 5,484 5,875 10,950 11,602
         
INTEREST EXPENSE        
 Deposits 1,111 1,733 2,215 3,902
 Borrowings 355 356 707 708
 Junior subordinated debentures 55 83 108 187
 Total Interest Expense 1,521 2,172 3,030 4,797
         
 Net Interest Income 3,963 3,703 7,920 6,805
PROVISION FOR LOAN LOSSES 965 424 1,702 1,063
 Net Interest Income after Provision for Loan Losses 2,998 3,279 6,218 5,742
         
OTHER INCOME        
 Service fees on deposit accounts 340 348 674 715
 ATM and debit card fees 127 121 242 228
 Insurance commissions and fees 590 595 1,137 1,209
 Investment brokerage fees 49 34 109 81
 Realized holding gains (losses) on trading securities (4) (16) 7 19
 Gain on sale of securities, available for sale 54  --  54 --
 Gain on sale of fixed assets  --  203  --  203
 Gain (loss) on sale of foreclosed real estate 1  --  5 (1)
 Impairment write-down on equity securities  (171) -- (171) --
 Bank-owned life insurance 78 67 119 104
 Other 79 101 148 232
 Total Other Income 1,143 1,453 2,324 2,790
         
OTHER EXPENSES        
 Salaries and employee benefits 2,139 1,771 3,980 3,554
 Occupancy, net 333 309 680 661
 Furniture, equipment and data processing 295 337 594 677
 Stationary and supplies 50 45 94 90
 Professional fees 194 186 353 369
 Advertising and promotion 51 37 102 96
 Insurance 55 45 111 86
 FDIC assessment 225 365 449 515
 Postage and freight 37 35 68 77
 Amortization of intangible assets 4 5 8 10
 Write-down on foreclosed real estate  --  456 27 456
 Expenses related to foreclosed real estate  128 93 199 276
 Other  327 318 709 683
 Total Other Expenses 3,838 4,002 7,374 7,550
         
 Income before Income Taxes 303 730 1,168 982
PROVISION FOR INCOME TAXES (2) 135 220 134
 Net Income $305 $595 $948 $848
 
SUSSEX BANCORP
COMPARATIVE AVERAGE BALANCES AND AVERAGE INTEREST RATES
(Dollars In Thousands)
(Unaudited)
             
  Six Months Ended June 30,
  2010 2009
   Average   Average   Average   Average 
Earning Assets:  Balance  Interest (1) Rate (2)  Balance  Interest (1) Rate (2)
Securities:            
 Tax exempt (3) $27,295 $791 5.85% $28,593 $883 6.22%
 Taxable  49,982 966 3.90% 61,881 1,381 4.50%
Total securities 77,277 1,757 4.59% 90,473 2,264 5.05%
Total loans receivable (4) 330,872 9,429 5.75% 323,857 9,597 5.98%
Other interest-earning assets 30,847 27 0.18% 26,523 35 0.27%
Total earning assets 438,996 $11,213 5.15% 440,853 $11,895 5.44%
             
Non-interest earning assets 39,102     35,899    
Allowance for loan losses (6,083)     (6,290)    
Total Assets $472,015     $470,462    
             
Sources of Funds:            
Interest bearing deposits:            
 NOW  $62,835 $277 0.89% $57,718 $300 1.05%
 Money market  12,410 49 0.80% 14,805 96 1.30%
 Savings  171,973 1,000 1.17% 169,787 1,742 2.07%
 Time  103,638 889 1.73% 110,060 1,764 3.23%
Total interest bearing deposits 350,856 2,215 1.27% 352,371 3,902 2.23%
 Borrowed funds 33,073 707 4.25% 33,130 708 4.25%
 Junior subordinated debentures 12,887 108 1.67% 12,887 187 2.89%
Total interest bearing liabilities 396,816 $3,030 1.54% 398,388 $4,797 2.43%
             
Non-interest bearing liabilities:            
 Demand deposits 38,349     37,689    
 Other liabilities 1,522     1,872    
Total non-interest bearing liabilities 39,871     39,561    
Stockholders' equity 35,328     32,512    
Total Liabilities and Stockholders' Equity $472,015     $470,462    
             
Net Interest Income and Margin (5)   $8,183 3.76%   $7,099 3.25%
             
(1) Includes loan fee income            
(2) Average rates on securities are calculated on amortized costs          
(3) Full taxable equivalent basis, using a 39% effective tax rate and adjusted for TEFRA (Tax and Equity Fiscal Responsibility Act) interest expense disallowance
(4) Loans outstanding include non-accrual loans            
(5) Represents the difference between interest earned and interest paid, divided by average total interest-earning assets    
Sussex Bancorp
Anthony Labozzetta, President/CEO
Steven Fusco, SVP/CFO
973-827-2914