FRANKLIN, N.J., April 29, 2014 (GLOBE NEWSWIRE) -- Sussex Bancorp (the "Company") (Nasdaq:SBBX), the holding company for Sussex Bank (the "Bank") today announced reported net income of $678 thousand, or $0.15 per basic and diluted share, for the quarter ended March 31, 2014, as compared to a net income of $98 thousand, or $0.03 per basic and diluted share, for the same period last year. Net income benefited from strong growth in loans, which increased $20.3 million or 5.2% at March 31, 2014 as compared to December 31, 2013, and declines of $1.0 million, or 61.8% in credit quality costs (provision for loan losses, loan collection costs and expenses and write-downs related to foreclosed real estate) for the quarter ended March 31, 2014, as compared to the same period in the prior year. The declines in credit quality costs were driven by a significant improvement in credit quality as non-performing assets ("NPAs") to total assets improved to 2.8%, which is the lowest level this ratio has been since 2007.
"Our capacity to grow our principal business lines, specifically in our commercial loan portfolio, which grew 5.2% or approximately 21.0% on an annualized basis, is having an enormous benefit to our performance metrics. We saw our net interest margin improve 7 basis points on a linked quarter basis and 23 basis points from the same period last year. More importantly, this resulted in an 11.5% growth in our net interest income from the prior year quarter that drove the improvement in our core earnings for the quarter," said Anthony Labozzetta, President and Chief Executive Officer of Sussex Bank.
Mr. Labozzetta also stated, "We have reduced our legacy problem assets considerably and as of the end of this quarter, our NPAs were $15.3 million or 2.80% of total assets, a decrease of 33.0% as compared to the same period last year." Additionally, Mr. Labozzetta noted that, "while we are nearing the end of our turn-around story, the more appropriate narrative on us is how we are building a better bank by growing our businesses, enhancing the quality of our balance sheet, improving profitability and building shareholder value."
Financial Performance
Net Income. For the quarter ended March 31, 2014, the Company reported net income of $678 thousand, or $0.15 per basic and diluted share, as compared to a net income of $98 thousand, or $0.03 per basic and diluted share, for the same period last year. The increase in net income for the quarter ended March 31, 2014 was largely due to a decrease in credit quality costs of $1.0 million or 61.8%, which was partially offset by a decrease in gain on securities transactions of $370 thousand.
Net Interest Income. Net interest income on a fully tax equivalent basis increased $457 thousand, or 11.5%, to $4.4 million for the first quarter of 2014 as compared to $4.0 million for same period in 2013. The increase in net interest income was largely due to a $20.4 million, or 4.2%, increase in average interest earning assets, principally loans receivable, which increased $53.3 million, or 15.2%, and was partially offset by a decrease in the average balance on the securities portfolio of $30.4 million, or 23.1%. The aforementioned increase also benefited from a 23 basis point increase in the net interest margin to 3.53% for the first quarter of 2014 as compared to the same period last year. The increase in the net interest margin was mostly due to an increase in the average rate paid on interest earning assets, which increased 15 basis points to 4.16% for the first quarter of 2014 from 4.01% for the same period in 2013 and a decrease in the average rate paid on total interest bearing liabilities, which decreased 7 basis points to 0.74% for the first quarter of 2014 from 0.81% for the same period in 2013.
Provision for Loan Losses. Provision for loan losses decreased $689 thousand to $453 thousand for the first quarter of 2014, as compared to $1.1 million for the same period in 2013.
Non-interest Income. The Company reported a decrease in non-interest income of $294 thousand, or 15.6%, to $1.6 million for the first quarter of 2014 as compared to the same period last year. The decrease in non-interest income was largely due to a decrease in gains on securities transactions of $370 thousand, which was partially offset by increases in insurance commissions and fees of $131 thousand, or 15.6%.
Non-interest Expense. The Company's non-interest expenses decreased $110 thousand, or 2.4%, to $4.5 million for the first quarter of 2014 as compared to the same period last year. The decrease for the first quarter of 2014 as compared to the same period in 2013 was largely due to decreases in expenses and write-downs related to foreclosed real estate of $311 thousand, which was partly offset by an increase in salaries and employee benefits expense of $183 thousand.
Financial Condition
At March 31, 2014, the Company's total assets were $547.0 million, an increase of $13.1 million, or 2.4%, as compared to total assets of $533.9 million at December 31, 2013. The increase in total assets was largely driven by net growth in total loans of $20.3 million, or 5.2%, which was partially offset by declines in cash and cash equivalents of $5.4 million, or 41.0% and the securities portfolio of $2.7 million, or 2.8%.
The Company saw strong loan growth as total loans receivable, net of unearned income, increased $20.3 million, or 5.2%, to $412.7 million at March 31, 2014, as compared to $392.4 million at December 31, 2013. The increase in loans was primarily in the commercial real estate portfolio, which increased $15.4 million, or 5.9%, to $276.1 million at March 31, 2014, as compared to $260.7 million at December 31, 2013 and in the commercial and industrial portfolio, which increased $4.4 million, or 29.1%, to $19.6 million at March 31, 2014, as compared to $15.2 million at December 31, 2013.
The Company's total deposits decreased $4.5 million, or 1.0%, to $425.8 million at March 31, 2014, from $430.3 million at December 31, 2013. The decrease in deposits was due to a decrease in interest bearing deposits of $5.4 million, or 1.4%, partially offset by an increase in non-interest bearing deposits of $896 thousand, or 1.5%, for March 31, 2014, as compared to December 31, 2013.
At March 31, 2014, the Company's total stockholders' equity was $48.2 million, an increase of $1.8 million when compared to December 31, 2013. The increase was largely due to net income for the quarter and an increase in accumulated other comprehensive income relating to a reduction in the net unrealized losses on available for sale securities. At March 31, 2014, the leverage, Tier I risk-based capital and total risk-based capital ratios for the Bank were 10.49%, 13.77% and 15.02%, respectively, all in excess of the ratios required to be deemed "well-capitalized."
Asset and Credit Quality
The Company continued to improve its asset credit quality as total problem assets and NPAs continued to decline. Overall problem assets (foreclosed real estate, criticized assets and classified assets) are down 9.0% from December 31, 2013, and the ratio of NPAs to total assets improved to 2.80% at March 31, 2014 from 3.10% at December 31, 2013. Non-accrual loans to total loans fell to 2.56% at March 31, 2014, which is the lowest level this ratio has been since 2007.
NPAs, which include non-accrual loans, loans 90 days past due and still accruing, troubled debt restructured loans currently performing in accordance with renegotiated terms and foreclosed real estate, decreased $1.3 million, or 7.6%, to $15.3 million at March 31, 2014, as compared to $16.6 million at December 31, 2013. Non-accrual loans decreased $1.3 million, or 11.3%, to $10.6 million at March 31, 2014, as compared to $11.9 million at December 31, 2013. The top five non-accrual loan relationships total $6.5 million, or 61.2%, of total non-accrual loans and 42.2% of total NPAs at March 31, 2014. The remaining non-accrual loans have an average loan balance of $117 thousand. Loans past due 30 to 89 days decreased $588 thousand, or 16.0%, to $3.1 million at March 31, 2014, as compared to $3.7 million at December 31, 2013.
The Company continues to actively market its foreclosed real estate properties, which increased $214 thousand to $3.1 million at March 31, 2014, as compared to $2.9 million at December 31, 2013. The increase was primarily due to the addition of $443 thousand in new foreclosed real estate properties during 2014, which was partially offset by the sale of foreclosed real estate properties for $242 thousand. At March 31, 2014, the Company's foreclosed real estate properties had an average value of approximately $285 thousand per property.
The allowance for loan losses remained unchanged at $5.4 million, or 1.3% of total loans, at March 31, 2014, compared to $5.4 million, or 1.4% of total loans, at December 31, 2013. The Company recorded $453 thousand in provision for loan losses, which was partly offset by $437 thousand in net charge-offs for 2014. The allowance for loan losses as a percentage of non-accrual loans improved to 51.5% at March 31, 2014 from 45.6% at December 31, 2013.
About Sussex Bancorp
Sussex Bancorp is the holding company for Sussex Bank, which operates through its regional offices and corporate centers in Franklin and Rockaway, New Jersey and through its eight branch offices located in Andover, Augusta, Newton, Montague, Sparta, Vernon and Wantage, New Jersey, Port Jervis, New York; a loan production office in Rochelle Park, New Jersey and for the Tri-State Insurance Agency, Inc., a full service insurance agency with locations in Augusta and Rochelle Park, New Jersey. For additional information, please visit the Company's website at www.sussexbank.com.
Forward-Looking Statements
This press release contains statements that are forward looking and are made pursuant to the "safe-harbor" provisions of the Private Securities Litigation Reform Act of 1995 (the "Reform Act"). Such statements may be identified by the use of words such as "expect," "estimate," "assume," "believe," "anticipate," "will," "forecast," "plan," "project," or similar words. Such statements are based on the Company's current expectations and are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, among others, 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. Further information about these and other relevant risks and uncertainties may be found in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2013, and in subsequent filings with the Securities and Exchange Commission. 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 | |||||
| (In Thousands, Except Percentages and Per Share Data) | |||||
| (Unaudited) | |||||
| 3/31/2014 VS. | |||||
| 3/31/2014 | 12/31/2013 | 3/31/2013 | 3/31/2013 | 12/31/2013 | |
| BALANCE SHEET HIGHLIGHTS - Period End Balances | |||||
| Total securities | $94,073 | $96,750 | $128,724 | (26.9)% | (2.8)% |
| Total loans | 412,724 | 392,402 | 349,684 | 18.0% | 5.2% |
| Allowance for loan losses | (5,437) | (5,421) | (5,306) | 2.5% | 0.3% |
| Total assets | 546,972 | 533,911 | 518,812 | 5.4% | 2.4% |
| Total deposits | 425,837 | 430,297 | 433,843 | (1.8)% | (1.0)% |
| Total borrowings and junior subordinated debt | 68,887 | 53,887 | 41,887 | 64.5% | 27.8% |
| Total shareholders' equity | 48,213 | 46,425 | 39,915 | 20.8% | 3.9% |
| FINANCIAL DATA - QUARTER ENDED: | |||||
| Net interest income (tax equivalent) (a) | $4,435 | $4,430 | $3,978 | 11.5% | 0.1% |
| Provision for loan losses | 453 | 403 | 1,142 | (60.3)% | 12.4% |
| Total other income | 1,591 | 1,411 | 1,885 | (15.6)% | 12.8% |
| Total other expenses | 4,468 | 4,526 | 4,578 | (2.4)% | (1.3)% |
| Income before provision for income taxes (tax equivalent) | 1,105 | 912 | 143 | 672.7% | 21.2% |
| Provision for income taxes | 298 | 162 | (90) | (431.1)% | 84.0% |
| Taxable equivalent adjustment (a) | 129 | 129 | 135 | (4.4)% | -- % |
| Net income | $678 | $621 | $98 | 591.8% | 9.2% |
| Net income per common share - Basic | $0.15 | $0.14 | $0.03 | 400.0% | 7.1% |
| Net income per common share - Diluted | $0.15 | $0.14 | $0.03 | 400.0% | 7.1% |
| Return on average assets | 0.50% | 0.46% | 0.07% | 572.4% | 8.9% |
| Return on average equity | 5.74% | 5.34% | 0.97% | 492.0% | 7.6% |
| Net interest margin (tax equivalent) | 3.53% | 3.46% | 3.30% | 7.0% | 2.0% |
| SHARE INFORMATION: | |||||
| Book value per common share | $10.35 | $10.03 | $11.66 | (11.2)% | 3.2% |
| Outstanding shares- period ending | 4,657,856 | 4,629,113 | 3,424,213 | 36.0% | 0.6% |
| Average diluted shares outstanding (year to date) | 4,564,600 | 3,816,904 | 3,316,082 | 37.7% | 19.6% |
| CAPITAL RATIOS: | |||||
| Total equity to total assets | 8.81% | 8.70% | 7.69% | 14.6% | 1.4% |
| Leverage ratio (b) | 10.49% | 10.38% | 9.09% | 15.4% | 1.1% |
| Tier 1 risk-based capital ratio (b) | 13.77% | 14.21% | 12.75% | 8.0% | (3.1)% |
| Total risk-based capital ratio (b) | 15.02% | 15.47% | 14.01% | 7.2% | (2.9)% |
| ASSET QUALITY: | |||||
| Non-accrual loans | $10,554 | $11,892 | $15,535 | (32.1)% | (11.3)% |
| Loans 90 days past due and still accruing | 2 | 123 | 76 | (97.4)% | (98.4)% |
| Troubled debt restructured loans ("TDRs") (c) | 1,620 | 1,628 | 617 | 162.6% | (0.5)% |
| Foreclosed real estate | 3,140 | 2,926 | 6,622 | (52.6)% | 7.3% |
| Non-performing assets ("NPAs") | $15,316 | $16,569 | $22,850 | (33.0)% | (7.6)% |
| Foreclosed real estate, criticized and classified assets | $24,692 | $27,148 | $31,029 | (20.4)% | (9.0)% |
| Loans past due 30 to 89 days | $3,089 | $3,677 | $2,228 | 38.6% | (16.0)% |
| Charge-offs, net (quarterly) | $437 | $637 | $812 | (46.2)% | (31.4)% |
| Charge-offs, net as a % of average loans (annualized) | 0.43% | 0.65% | 0.93% | (53.3)% | (32.9)% |
| Non-accrual loans to total loans | 2.56% | 3.03% | 4.44% | (42.4)% | (15.6)% |
| NPAs to total assets | 2.80% | 3.10% | 4.40% | (36.4)% | (9.8)% |
| NPAs excluding TDR loans (c) to total assets | 2.50% | 2.80% | 4.29% | (41.6)% | (10.5)% |
| Non-accrual loans to total assets | 1.93% | 2.23% | 2.99% | (35.6)% | (13.4)% |
| Allowance for loan losses as a % of non-accrual loans | 51.52% | 45.59% | 34.16% | 50.8% | 13.0% |
| Allowance for loan losses to total loans | 1.32% | 1.38% | 1.52% | (13.2)% | (4.6)% |
| (a) Full taxable equivalent basis, using a 39% effective tax rate and adjusted for TEFRA (Tax and Equity Fiscal Responsibility Act) interest expense disallowance | |||||
| (b) Sussex Bank capital ratios | |||||
| (c) Troubled debt restructured loans currently performing in accordance with renegotiated terms | |||||
| SUSSEX BANCORP | ||
| CONSOLIDATED BALANCE SHEETS | ||
| (Dollars In Thousands) | ||
| ASSETS | March 31, 2014 | December 31, 2013 |
| (Unaudited) | ||
| Cash and due from banks | $ 7,349 | $ 5,521 |
| Interest-bearing deposits with other banks | 463 | 7,725 |
| Cash and cash equivalents | 7,812 | 13,246 |
| Interest bearing time deposits with other banks | 100 | 100 |
| Securities available for sale, at fair value | 88,273 | 90,676 |
| Securities held to maturity | 5,800 | 6,074 |
| Federal Home Loan Bank Stock, at cost | 3,425 | 2,705 |
| Loans receivable, net of unearned income | 412,724 | 392,402 |
| Less: allowance for loan losses | 5,437 | 5,421 |
| Net loans receivable | 407,287 | 386,981 |
| Foreclosed real estate | 3,140 | 2,926 |
| Premises and equipment, net | 7,603 | 6,892 |
| Accrued interest receivable | 1,772 | 1,642 |
| Goodwill | 2,820 | 2,820 |
| Bank-owned life insurance | 11,972 | 11,889 |
| Other assets | 6,968 | 7,960 |
| Total Assets | $ 546,972 | $ 533,911 |
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||
| Liabilities: | ||
| Deposits: | ||
| Non-interest bearing | $ 59,106 | $ 58,210 |
| Interest bearing | 366,731 | 372,087 |
| Total Deposits | 425,837 | 430,297 |
| Borrowings | 56,000 | 41,000 |
| Accrued interest payable and other liabilities | 4,035 | 3,302 |
| Junior subordinated debentures | 12,887 | 12,887 |
| Total Liabilities | 498,759 | 487,486 |
| Total Stockholders' Equity | 48,213 | 46,425 |
| Total Liabilities and Stockholders' Equity | $ 546,972 | $ 533,911 |
| SUSSEX BANCORP | ||
| CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME | ||
| (Dollars In Thousands Except Per Share Data) | ||
| (Unaudited) | ||
| Three Months Ended March 31, | ||
| 2014 | 2013 | |
| INTEREST INCOME | ||
| Loans receivable, including fees | $ 4,623 | $ 4,276 |
| Securities: | ||
| Taxable | 217 | 154 |
| Tax-exempt | 254 | 262 |
| Interest bearing deposits | 3 | 5 |
| Total Interest Income | 5,097 | 4,697 |
| INTEREST EXPENSE | ||
| Deposits | 390 | 538 |
| Borrowings | 348 | 262 |
| Junior subordinated debentures | 53 | 54 |
| Total Interest Expense | 791 | 854 |
| Net Interest Income | 4,306 | 3,843 |
| PROVISION FOR LOAN LOSSES | 453 | 1,142 |
| Net Interest Income after Provision for Loan Losses | 3,853 | 2,701 |
| OTHER INCOME | ||
| Service fees on deposit accounts | 264 | 286 |
| ATM and debit card fees | 167 | 160 |
| Bank owned life insurance | 83 | 92 |
| Insurance commissions and fees | 973 | 842 |
| Investment brokerage fees | 31 | 45 |
| Gain on securities transactions | -- | 370 |
| Other | 73 | 90 |
| Total Other Income | 1,591 | 1,885 |
| OTHER EXPENSES | ||
| Salaries and employee benefits | 2,418 | 2,235 |
| Occupancy, net | 453 | 394 |
| Furniture and equipment | 164 | 152 |
| Advertising and promotion | 44 | 40 |
| Professional fees | 153 | 185 |
| Director fees | 137 | 206 |
| FDIC assessment | 176 | 169 |
| Insurance | 76 | 76 |
| Stationary and supplies | 55 | 49 |
| Loan collection costs | 77 | 98 |
| Data processing | 380 | 329 |
| Expenses and write-downs related to foreclosed real estate | 100 | 411 |
| Amortization of intangible assets | -- | 1 |
| Other | 235 | 233 |
| Total Other Expenses | 4,468 | 4,578 |
| Income before Income Taxes | 976 | 8 |
| INCOME TAX EXPENSE (BENEFIT) | 298 | (90) |
| Net Income | $ 678 | $ 98 |
| OTHER COMPREHENSIVE INCOME (LOSS): | ||
| Unrealized gains (losses) on available for sale securities arising during the period | $ 1,716 | $ (644) |
| Reclassification adjustment for net gain on securities transactions included in net income | -- | (370) |
| Income tax (expense) benefit related to items of other comprehensive income (loss) | (686) | 405 |
| Other comprehensive income (loss), net of income taxes | 1,030 | (609) |
| Comprehensive income (loss) | $ 1,708 | $ (511) |
| EARNINGS PER SHARE | ||
| Basic | $ 0.15 | $ 0.03 |
| Diluted | $ 0.15 | $ 0.03 |
| SUSSEX BANCORP | ||||||
| COMPARATIVE AVERAGE BALANCES AND AVERAGE INTEREST RATES | ||||||
| (Dollars In Thousands) | ||||||
| (Unaudited) | ||||||
| Three Months Ended March 31, | ||||||
| 2014 | 2013 | |||||
| Average | Average | Average | Average | |||
| Balance | Interest | Rate (2) | Balance | Interest | Rate (2) | |
| Earning Assets: | ||||||
| Securities: | ||||||
| Tax exempt (3) | $ 30,767 | $ 383 | 5.05% | $ 32,197 | $ 397 | 5.00% |
| Taxable | 70,451 | 217 | 1.25% | 99,391 | 154 | 0.63% |
| Total securities | 101,218 | 600 | 2.40% | 131,588 | 551 | 1.70% |
| Total loans receivable (1) (4) | 402,757 | 4,623 | 4.66% | 349,479 | 4,276 | 4.96% |
| Other interest-earning assets | 5,420 | 3 | 0.22% | 7,976 | 5 | 0.25% |
| Total earning assets | 509,395 | 5,226 | 4.16% | 489,043 | 4,832 | 4.01% |
| Non-interest earning assets | 35,608 | 40,461 | ||||
| Allowance for loan losses | (5,650) | (5,302) | ||||
| Total Assets | $ 539,353 | $ 524,202 | ||||
| Sources of Funds: | ||||||
| Interest bearing deposits: | ||||||
| NOW | $ 115,661 | $ 39 | 0.14% | $ 112,318 | $ 36 | 0.13% |
| Money market | 12,573 | 4 | 0.13% | 14,904 | 9 | 0.24% |
| Savings | 146,082 | 75 | 0.21% | 157,907 | 110 | 0.28% |
| Time | 98,931 | 272 | 1.12% | 103,479 | 383 | 1.50% |
| Total interest bearing deposits | 373,247 | 390 | 0.42% | 388,608 | 538 | 0.56% |
| Borrowed funds | 46,222 | 348 | 3.05% | 26,600 | 262 | 3.99% |
| Junior subordinated debentures | 12,887 | 53 | 1.67% | 12,887 | 54 | 1.70% |
| Total interest bearing liabilities | 432,356 | 791 | 0.74% | 428,095 | 854 | 0.81% |
| Non-interest bearing liabilities: | ||||||
| Demand deposits | 57,541 | 49,859 | ||||
| Other liabilities | 2,194 | 5,808 | ||||
| Total non-interest bearing liabilities | 59,735 | 55,667 | ||||
| Stockholders' equity | 47,262 | 40,440 | ||||
| Total Liabilities and Stockholders' Equity | $ 539,353 | $ 524,202 | ||||
| Net Interest Income and Margin (5) | 4,435 | 3.53% | 3,978 | 3.30% | ||
| Tax-equivalent basis adjustment | (129) | (135) | ||||
| Net Interest Income | $ 4,306 | $ 3,843 | ||||
| (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 | ||||||