Sussex Bancorp Announces Third Quarter Results for 2010

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| Source: Sussex Bancorp

FRANKLIN, N. J., Oct. 28, 2010 (GLOBE NEWSWIRE) -- Sussex Bancorp ("Company") (Nasdaq:SBBX) today announced its financial results for the three and nine months ended September 30, 2010.

For the quarter ended September 30, 2010, the Company reported net income of $631 thousand, a decrease of $266 thousand as compared to the third quarter of 2009. Basic and diluted earnings per share were $0.19 in the third quarter of 2010 compared to $0.28 for the third quarter of 2009. For the nine months ended September 30, 2010, the Company's net income decreased $166 thousand, or 9.5%, to $1.6 million from the $1.7 million earned for the same period last year. Diluted earnings per share were $0.48 for the nine months ended September 30, 2010 compared to $0.54 for the same period in 2009.

Highlights for the quarter and nine months ended September 30, 2010 include:

  • For the nine months ended September 30, 2010, net interest income (tax equivalent) increased 8.7% over the same period last year driven by a higher net interest margin.
  • Net interest margin was 3.76% for the nine months ended September 30, 2010, a 25 basis point increase from 3.51% for the same period last year. This increase was attributed to lower cost of funds.
  • Provision for loan losses increased $781 thousand, or 49.3%, for the nine months ended September 30, 2010 as compared to the same period last year, which resulted in a 20.4% growth in the allowance for loan losses. The allowance for loan losses totaled $6.1 million at September 30, 2010, or 1.83% of total loans as compared to $5.5 million, or 1.65% of total loans at December 31, 2009.
  • Non-accrual loans remain unchanged at approximately $22 million for the last three quarters.
  • Nonperforming assets have declined by $3.6 million, or 11.8%, since June 30, 2010 to $27.0 million at September 30, 2010.
  • Return on Average Assets of 0.52% for the third quarter and 0.44% for the nine months.
  • At September 30, 2010, the leverage, Tier I and Total Risk Based Capital ratios for Sussex Bank were 8.94%, 12.29% and 13.55%, respectively, all in excess of the ratios required to be deemed "well-capitalized."

Mr. Anthony Labozzetta, Sussex's President and Chief Executive Officer, commented, "During the quarter, we made progress from our efforts in addressing problem assets as we sold off our largest foreclosed asset with a carrying value of $2.0 million and have seen stabilization in our non-accrual loans during the past six months." 

For the three months ended September 30, 2010, the Company's net interest income (tax equivalent) decreased $82 thousand, or 1.9%, to $4.3 million from $4.4 million for the third quarter of 2009. The quarterly decline in net interest income was driven by a 26 basis point decrease in the Company's net interest margin to 3.78% for the quarter ended September 30, 2010, which was largely due to a 61 basis point decrease in the average rate received on earning assets.  For the nine months ended September 30, 2010, the Company's net interest income (tax equivalent) increased $1.0 million, or 8.7%, to $12.5 million from the $11.5 million earned for the same period last year. The improvement in net interest income was driven by a 25 basis point increase in the Company's net interest margin to 3.76% for the nine months ended September 30, 2010, which was largely due to a 74 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 $1.2 million and $3.5 million for the three and nine month periods ended September 30, 2010, respectively, compared to non-interest income of $1.3 million and $4.1 million for the three and nine month periods ended September 30, 2009, respectively. The decline for the nine month period was largely due to a non-cash other than temporary impairment charge of $171 thousand related to an equity portfolio fund during the second quarter of 2010, lower insurance commissions of $135 thousand for 2010 and non-recurring gains on the sale of fixed assets of $203 thousand during the second quarter of 2009.

The Company's non-interest expenses increased $131 thousand, or 3.5%, to $3.8 million for the three months ended September 30, 2010 and decreased $45 thousand, or 0.4%, to $11.2 million for the nine months ended September 30, 2010 as compared to the same periods in 2009. The increase for the quarter was largely due to an increase of $182 thousand in write-downs on foreclosed real estate and higher loan collection costs of $52 thousand. The aforementioned increases were partly offset by $205 thousand of severance paid in the third quarter of 2009 that was included in salaries and benefits.  There were no comparable payments in 2010. The decrease for the nine month period was largely due to a decrease of $247 thousand in write-downs on foreclosed real estate, which was partly offset by an increase in salary and employee benefits expense of $241 thousand, or 4.3% over the same period last year. 

At September 30, 2010, non-performing assets, which include non-accrual loans, renegotiated loans and foreclosed real estate, decreased on a linked quarter basis by $3.6 million, or 11.8%, to $27.0 million.  The decrease was largely due to a 52.2% decline in foreclosed real estate resulting principally from the sale of the Company's largest foreclosed asset during the third quarter of 2010 and declines in renegotiated loans. The ratio of non-performing assets to total assets for September 30, 2010, June 30, 2010 and September 30, 2009 were 5.58%, 6.32% and 4.31%, respectively. The allowance for loan losses was $6.1 million, or 1.83% of total loans, at September 30, 2010 as compared to $5.5 million, or 1.65% of total loans, at December 31, 2009.   

At September 30, 2010, the Company's total assets were $484.2 million, an increase of $29.4 million, or 6.5%, compared to total assets of $454.8 million at December 31, 2009. The Company's total deposits increased $26.6 million, or 7.2%, to $398.7 million at September 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 $29.6 million, or 10.9%, at September 30, 2010 as compared to December 31, 2009.  The Company's gross loans, net of unearned income, increased $648 thousand to $333.6 million at September 30, 2010 from $333.0 million at December 31, 2009, as cash and cash equivalents increased $12.6 million, or 54.4%, to $35.6 million at September 30, 2010. Bank-owned life insurance increased to $10.1 million at September 30, 2010, as the Company purchased an additional $6.5 million during the second quarter of 2010. At September 30, 2010, the Company's total stockholders' equity was $37.0 million, an increase of $2.4 million, or 7.0%, as compared to December 31, 2009. 

"A key focus for our Company is to work through and reduce our problem assets, which continue to put downward pressure on our results. In addition, we are focused on building for the future and strengthening our core operating results within a risk management framework. To this end, during the quarter, we have enhanced our senior management team with the addition of a new chief financial officer, a new chief retail officer and the promotion of a new chief credit officer. Our team is committed to executing our community bank strategy of delivering an extraordinary experience for our customers while assisting with their financial needs," stated Mr. Labozzetta.

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
SUMMARY FINANCIAL HIGHLIGHTS
(Dollars in Thousands, Except Percentages and Per Share Data)
(Unaudited)
           
        Q/E 9/30/10 VS.
  9/30/2010 6/30/2010 9/30/2009 Q/E 6/30/10 Q/E 9/30/09
BALANCE SHEET DATA:          
Total securities $87,779 $79,421 $86,060  10.5%  2.0%
Total loans 333,607 330,179 330,404  1.0%  1.0%
Allowance for loan losses  (6,097)  (5,449)  (5,064)  11.9%  20.4%
Total assets 484,195 484,626 452,534  (0.1)%  7.0%
Total deposits 398,737 400,051 369,137  (0.3)%  8.0%
Total borrowings and junior subordinated debt  45,933  45,947  45,991  (0.0)%  (0.1)%
Total shareholders' equity  36,959  35,895  34,689  3.0%  6.5%
           
FINANCIAL DATA - QUARTER ENDED:          
Net interest income (tax equivalent) $4,274 $4,096 $4,356  4.3%  (1.9)%
Provision for loan losses 662 965 520  (31.4)%  27.3%
Total other income  1,176  1,143  1,280  2.9%  (8.1)%
Total other expenses 3,844 3,838 3,713  0.2%  3.5%
Income before provision (benefit) for income taxes 799 303  1,248  163.7%  (36.0)%
Provision (benefit) for income taxes 168  (2)  351  (8,500.0)%  (52.1)%
Net income  $631 $305 $897  106.9%  (29.7)%
            
Net income per common share - Basic $0.19 $0.09 $0.28  111.1%  (32.1)%
Net income per common share - Diluted $0.19 $0.09 $0.28  111.1%  (32.1)%
            
Return on average assets  0.52% 0.25%  0.78%  105.7%  (33.1)%
Return on average equity  6.96% 3.42%  10.69%  103.7%  (34.9)%
Efficiency ratio (a)  70.53%  73.26%  65.88%  (3.7)%  7.1%
            
FINANCIAL DATA - YEAR TO DATE:          
Net interest income (tax equivalent) $12,457   $11,455    8.7%
Provision for loan losses 2,364   1,583    49.3%
Total other income  3,500    4,070    (14.0)%
Total other expenses 11,218   11,263    (0.4)%
Income before provision for income taxes  1,967    2,230    (11.8)%
Provision for income taxes  388    485    (20.0)%
Net income  $1,579   $1,745    (9.5)%
            
Net income per common share - Basic $0.49   $0.54    (9.3)%
Net income per common share - Diluted $0.48   $0.54    (11.1)%
            
Return on average assets  0.44%    0.50%    (11.2)%
Return on average equity  5.91%    7.08%    (16.5)%
Efficiency ratio (a)  70.30%    72.55%    (3.1)%
            
SHARE INFORMATION:          
Book value per common share $11.37 $11.04 $10.69  3.0%  6.4%
Average diluted shares outstanding (QE) 3,309  3,283 3,256  0.8%  1.6%
            
CAPITAL RATIOS:          
Total equity to total assets  7.63%  7.41%  7.67%  3.1%  (0.4)%
Leverage ratio (b) 8.94% 8.84% 8.91%  1.1%  0.3%
Tier 1 risk-based capital ratio (b) 12.29% 11.94% 11.85%  2.9%  3.7%
Total risk-based capital ratio (b) 13.55% 13.19% 13.11%  2.7%  3.4%
            
ASSET QUALITY AND RATIOS:          
Non-accrual loans $22,403 $22,529 $13,263  (0.6)%  68.9%
Renegotiated loans 2,537 3,551 1,883  (28.6)%  34.7%
Foreclosed real estate  2,095  4,564  4,380  (54.1)%  (52.2)%
Non-performing assets $27,035 $30,644 $19,526  (11.8)%  38.5%
           
Loans 90 days past due and still accruing $330 $1,262 $4,263  (73.9)%  (92.3)%
 Non-accrual loans to total loans   6.72%  6.82%  4.01%  (1.58)%  67.29%
 Non-performing assets to total assets   5.58%  6.32%  4.31%  (11.7)%  29.4%
 Allowance for loan losses as a % of non-performing loans   24.45%  20.89%  33.43%  17.01%  (26.88)%
 Allowance for loan losses to total loans   1.83%  1.65%  1.53%  10.7%  19.2%
           
(a) Efficiency ratio calculated non-interest expense divided by net interest income (tax equivalent) plus non-interest income. 
(b) Sussex Bank capital ratios.
SUSSEX BANCORP
CONSOLIDATED BALANCE SHEETS
(Dollars In Thousands)
(Unaudited)      
       
ASSETS September 30, 2010 September 30, 2009 December 31, 2009
       
Cash and due from banks $32,644 $13,240 $8,779
Federal funds sold 3,000 2,038 14,300
 Cash and cash equivalents 35,644 15,278 23,079
       
Interest bearing time deposits with other banks 600 100 100
Trading securities -- 3,974 2,955
Securities available for sale 85,677 80,040 71,315
Federal Home Loan Bank Stock, at cost 2,102 2,046 2,045
       
Loans receivable, net of unearned income 333,607 330,404 332,959
 Less: allowance for loan losses 6,097 5,064 5,496
 Net loans receivable 327,510 325,340 327,463
       
Foreclosed real estate 2,095 4,380 3,843
Premises and equipment, net 6,868 7,165 7,065
Accrued interest receivable 1,925 2,120 1,943
Goodwill 2,820 2,820 2,820
Bank-owned life insurance 10,069 3,326 3,360
Other assets 8,885 5,945 8,853
       
Total Assets $484,195 $452,534 $454,841
       
LIABILITIES AND STOCKHOLDERS' EQUITY      
       
Liabilities:      
 Deposits:      
 Non-interest bearing  $37,765 $39,037 $34,155
 Interest bearing  360,972 330,100 337,920
 Total Deposits 398,737 369,137 372,075
       
Borrowings 33,046 33,104 33,090
Accrued interest payable and other liabilities 2,566 2,717 2,262
Junior subordinated debentures 12,887 12,887 12,887
       
Total Liabilities 447,236 417,845 420,314
       
Total Stockholders' Equity 36,959 34,689 34,527
       
Total Liabilities and Stockholders' Equity $484,195 $452,534 $454,841
 
SUSSEX BANCORP
CONSOLIDATED STATEMENTS OF INCOME
(Dollars In Thousands, Except Per Share Data)
(Unaudited)
         
  Three Months Ended September 30, Nine Months Ended September 30,
  2010 2009 2010 2009
INTEREST INCOME         
 Loans receivable, including fees $4,765 $4,923 $14,194 $14,520
 Securities:        
 Taxable  412 651 1,378 2,032
 Tax-exempt  292 308 820 897
 Federal funds sold  3 5 20 26
 Interest bearing deposits  20  1 30 15
 Total Interest Income  5,492 5,888 16,442 17,490
         
INTEREST EXPENSE        
 Deposits  943 1,264 3,158 5,166
 Borrowings  358 359 1,065 1,067
 Junior subordinated debentures  62 64 170 251
 Total Interest Expense  1,363 1,687 4,393 6,484
         
 Net Interest Income  4,129 4,201 12,049 11,006
PROVISION FOR LOAN LOSSES  662 520 2,364 1,583
 Net Interest Income after Provision for Loan Losses  3,467 3,681 9,685 9,423
         
OTHER INCOME        
 Service fees on deposit accounts  375 380 1,049 1,095
 ATM and debit card fees  128 126 370 354
 Bank-owned life insurance  100 41 219  144
 Insurance commissions and fees  485 548 1,622 1,757
 Investment brokerage fees  24 30 133 111
 Realized holding gains (losses) on trading securities  -- 2 7 21
 Gain on sale of securities, available for sale  (2)  55  52 55
 Gain on sale of fixed assets  2  --  2  203
 Gain (loss) on sale of foreclosed real estate  12  (34) 17  (35)
 Impairment write-downs on equity securities  --  --  (171)  -- 
 Other  52 132 200 365
 Total Other Income  1,176 1,280 3,500 4,070
         
OTHER EXPENSES        
 Salaries and employee benefits  1,885 2,070 5,865 5,624
 Occupancy, net  336 320 1,011 979
 Furniture, equipment and data processing  325 314 919 991
 Advertising and promotion  36 49 138 145
 Professional fees  130 168 398 416
 Director Fees  65 56 183 182
 FDIC assessment  232 172 681 687
 Insurance  56 54 167 140
 Stationary and supplies  53 37 147 128
 Loan collection costs  144 92 307 338
 Write-down on foreclosed real estate  182  -- 209  456
 Expenses related to foreclosed real estate   82  36 222  195
 Amortization of intangible assets  3 4 11 14
 Other   315 341 960 968
 Total Other Expenses  3,844 3,713 11,218 11,263
         
 Income before Income Taxes  799 1,248 1,967 2,230
PROVISION (BENEFIT) FOR INCOME TAXES  168 351 388 485
 Net Income $631 $897 $1,579 $1,745
         
EARNINGS PER SHARE        
 Basic $0.19 $0.28 $0.49 $0.54
 Diluted $0.19 $0.28 $0.48 $0.54
 
SUSSEX BANCORP
COMPARATIVE AVERAGE BALANCES AND AVERAGE INTEREST RATES
(Dollars In Thousands)
(Unaudited)
             
  Three Months Ended September 30,
  2010 2009
   Average 
Balance
 
Interest (1)
Average
Rate (2)
 Average 
Balance
 
Interest (1)
Average
Rate (2)
Earning Assets:            
Securities:            
 Tax exempt (3) $30,669 $436 5.64% $29,243 $464 6.30%
 Taxable  49,501 412 3.30% 61,132 651 4.22%
Total securities 80,170 848 4.20% 90,375 1,115 4.89%
Total loans receivable (4) 329,294 4,765 5.74% 326,645 4,923 5.98%
Other interest-earning assets 39,071 24 0.24% 10,805 5 0.20%
Total earning assets 448,535 $5,637 4.99% 427,826 $6,043 5.60%
             
Non-interest earning assets 39,847     36,999    
Allowance for loan losses (5,809)     (5,604)    
Total Assets $482,573     $459,220    
             
Sources of Funds:            
Interest bearing deposits:            
 NOW  $67,306 $109 0.64% $55,906 $132 0.94%
 Money market  13,735 25 0.72% 15,766 48 1.22%
 Savings  178,833 398 0.88% 173,872 522 1.19%
 Time  100,517 411 1.62% 91,252 562 2.44%
Total interest bearing deposits 360,391 943 1.04% 336,796 1,264 1.49%
 Borrowed funds 33,051 358 4.24% 33,109 359 4.24%
 Junior subordinated debentures 12,887 62 1.88% 12,887 64 1.95%
Total interest bearing liabilities 406,329 $1,363 1.33% 382,792 $1,687 1.75%
             
Non-interest bearing liabilities:            
 Demand deposits 38,721     40,130    
 Other liabilities 1,266     2,723    
Total non-interest bearing liabilities 39,987     42,853    
Stockholders' equity 36,257     33,575    
Total Liabilities and Stockholders' Equity $482,573     $459,220    
             
Net Interest Income and Margin (5)   $4,274 3.78%   $4,356 4.04%
             
(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
COMPARATIVE AVERAGE BALANCES AND AVERAGE INTEREST RATES
(Dollars In Thousands)
(Unaudited)
             
  Nine Months Ended September 30,
  2010 2009
   Average 
Balance
 
Interest (1)
Average
Rate (2)
 Average 
Balance
 
Interest (1)
Average
Rate (2)
Earning Assets:            
Securities:            
 Tax exempt (3) $28,432 $1,227 5.77% $28,812 $1,347 6.25%
 Taxable  49,820 1,379 3.70% 61,628 2,032 4.41%
Total securities 78,252 2,606 4.45% 90,440 3,379 4.99%
Total loans receivable (4) 330,340 14,194 5.74% 324,796 14,519 5.98%
Other interest-earning assets 34,914 50 0.19% 21,226 40 0.25%
Total earning assets 443,506 $16,850 5.08% 436,463 $17,939 5.50%
             
Non-interest earning assets 38,058     36,269    
Allowance for loan losses (5,991)     (6,059)    
Total Assets $475,573     $466,673    
             
Sources of Funds:            
Interest bearing deposits:            
 NOW  $64,342 $386 0.80% $57,108 $432 1.01%
 Money market  12,857 74 0.77% 15,129 144 1.27%
 Savings  174,285 1,398 1.07% 171,164 2,264 1.77%
 Time  102,586 1,300 1.69% 103,722 2,325 3.00%
Total interest bearing deposits 354,070 3,158 1.19% 347,122 5,166 1.99%
 Borrowed funds 33,065 1,065 4.25% 33,123 1,067 4.25%
 Junior subordinated debentures 12,887 170 1.74% 12,887 251 2.57%
Total interest bearing liabilities 400,022 $4,393 1.47% 393,133 $6,484 2.21%
             
Non-interest bearing liabilities:            
 Demand deposits 38,474     38,512    
 Other liabilities 1,436     2,159    
Total non-interest bearing liabilities 39,910     40,671    
Stockholders' equity 35,641     32,870    
Total Liabilities and Stockholders' Equity $475,573     $466,673    
             
Net Interest Income and Margin (5)   $12,457 3.76%   $11,455 3.51%
             
(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