Sussex Bancorp Declares Quarterly Cash Dividend and Announces Second Quarter Results for 2014

FRANKLIN, N.J., July 31, 2014 (GLOBE NEWSWIRE) -- Sussex Bancorp (the "Company") (Nasdaq:SBBX), the holding company for Sussex Bank (the "Bank") today announced reported net income of $607 thousand, or $0.13 per basic and diluted share, for the quarter ended June 30, 2014, as compared to a net income of $134 thousand, or $0.04 per basic and diluted share, for the same period last year. For the six months ended June 30, 2014, the Company reported net income of $1.3 million, or $0.28 per basic and diluted share, as compared to net income of $232 thousand, or $0.07 per basic and diluted share, for the same period last year.

"We continue to see strong organic growth in our commercial loan portfolio, which grew 13.3% for the first six months of 2014 or approximately 26.6% on an annualized basis. The growth helped expand our net interest margin 7 basis points on a linked quarter basis and 16 basis points from the same three month period last year. This produced a 10.1% growth in our net interest income on a fully tax equivalent basis for the six month period, as compared to the same period last year, which helped drive the improvement in our reported earnings," said Anthony Labozzetta, President and Chief Executive Officer of Sussex Bank.

Mr. Labozzetta also stated, "We continue to reduce our legacy problem assets and as a result we saw costs related to credit issues decline $1.7 million or 55.6% for the first six months of 2014 as compared to the same period last year."

Opening of New Branches

Sussex Bank received regulatory approvals for a new mini-branch at Heath Village in Hackettstown, New Jersey and a new branch location in Astoria, New York, which are expected to open in the third and fourth quarters of 2014, respectively. "We are now in a position to more thoroughly implement our strategic plan to improve our funding base by continuing to penetrate into the metro New York market. We are excited about having a physical location in a familiar market to better support and serve our customers," said Mr. Labozzetta.

Declaration of Quarterly Dividend

The Company's Board of Directors declared a quarterly cash dividend of $0.03 per share, which is payable on August 29, 2014 to common shareholders of record as of the close of business on August 15, 2014.

Financial Performance

Net Income. For the quarter ended June 30, 2014, the Company reported net income of $607 thousand, or $0.13 per basic and diluted share, as compared to net income of $134 thousand, or $0.04 per basic and diluted share, for the same period last year. The increase in net income for the quarter ended June 30, 2014 was largely due to a decrease in credit quality costs of $683 thousand or 48.3%, and increases in net interest income of $367 thousand and gain on securities transactions of $65 thousand.

For the six months ended June 30, 2014, the Company reported net income of $1.3 million, or $0.28 per basic and diluted share, as compared to net income of $232 thousand, or $0.07 per basic and diluted share, for the same period last year. The increase in net income for the six months ended June 30, 2014 was largely due to a decrease in credit quality costs of $1.7 million or 55.6%, and an increase in net interest income of $830 thousand, which were partially offset by a decrease in gain on securities transactions of $305 thousand.

Net Interest Income. Net interest income on a fully tax equivalent basis increased $369 thousand, or 8.8%, to $4.6 million for the second quarter of 2014 as compared to $4.2 million for same period in 2013. The increase in net interest income was largely due to a $19.4 million, or 4.0%, increase in average interest earning assets, principally loans receivable, which increased $38.8 million, or 10.6%, and was partially offset by a decrease in the average balance on the securities portfolio of $22.6 million, or 18.3%. The aforementioned increase also benefited from a 16 basis point increase in the net interest margin to 3.60% for the second 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 17 basis points to 4.25% for the second quarter of 2014 from 4.08% for the same period in 2013.

Net interest income on a fully tax equivalent basis increased $830 thousand, or 10.1%, to $9.0 million for the first six months of 2014 as compared to $8.2 million for same period in 2013. The increase in net interest income was largely due to a $19.9 million, or 4.1%, increase in average interest earning assets, principally loans receivable, which increased $46.0 million, or 12.9%, and was partially offset by a decrease in the average balance on the securities portfolio of $26.5 million, or 20.7%. The aforementioned increase also benefited from a 20 basis point increase in the net interest margin to 3.57% for the first six months 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 17 basis points to 4.21% for the first six months of 2014 from 4.04% for the same period in 2013.

Provision for Loan Losses. Provision for loan losses decreased $300 thousand, or 42.9%, to $400 thousand for the second quarter of 2014, as compared to $700 thousand for the same period in 2013.

Provision for loan losses decreased $989 thousand, or 53.7%, to $853 thousand for the first six months of 2014, as compared to $1.8 million for the same period in 2013.

Non-interest Income. The Company reported an increase in non-interest income of $95 thousand, or 7.0%, to $1.5 million for the second quarter of 2014 as compared to the same period last year. The increase in non-interest income was largely due to an increase in gains on securities transactions of $65 thousand and increases in insurance commissions and fees of $49 thousand, or 7.6%, which were partially offset by a decrease in investment brokerage fees of $17 thousand, or 31.5%.

The Company reported a decrease in non-interest income of $199 thousand, or 6.1%, to $3.0 million for the first six months 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 $305 thousand, which was partially offset by increases in insurance commissions and fees of $180 thousand, or 12.1%.

Non-interest Expense. The Company's non-interest expenses increased $48 thousand, or 1.0%, to $4.7 million for the second quarter of 2014 as compared to the same period last year. The increase for the second quarter of 2014 as compared to the same period in 2013 was largely due to increases in salaries and employee benefits expense of $120 thousand, director fees of $118 thousand and data processing fees of $94 thousand, which were partially offset by a decrease in expenses and write-downs related to foreclosed real estate of $436 thousand. The increase in director fees was principally related to a deferred compensation plan that is tied to the performance of the Company's stock. The increase in data processing fees was principally due to de-conversion charges related to a planned technology upgrade scheduled for the third quarter of 2014.

The Company's non-interest expenses decreased $62 thousand, or 0.7%, to $9.2 million for the first six months of 2014 as compared to the same period last year. The decrease for the first six months of 2014 as compared to the same period in 2013 was largely due to a decrease in expenses and write-downs related to foreclosed real estate of $747 thousand, which was partly offset by increases in salaries and employee benefits expense of $303 thousand, data processing fees of $145 thousand and occupancy of $109 thousand. The increase in data processing fees was principally due to de-conversion charges related to a planned technology upgrade scheduled for the third quarter of 2014.

Financial Condition

At June 30, 2014, the Company's total assets were $557.2 million, an increase of $23.3 million, or 4.4%, 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 $35.9 million, or 9.2%, which was partially offset by declines in the securities portfolio of $9.4 million, or 9.7% and cash and cash equivalents of $2.1 million, or 16.1%. 

The Company saw strong loan growth as total loans receivable, net of unearned income, increased $35.9 million, or 9.2%, to $428.3 million at June 30, 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 $32.0 million, or 12.3%, to $292.6 million at June 30, 2014, as compared to $260.7 million at December 31, 2013 and in the commercial and industrial portfolio, which increased $3.9 million, or 25.4%, to $19.1 million at June 30, 2014, as compared to $15.2 million at December 31, 2013.

The Company's total deposits increased $14.0 million, or 3.3%, to $444.3 million at June 30, 2014, from $430.3 million at December 31, 2013. The increase in deposits was due to an increase in non-interest bearing deposits of $9.5 million, or 16.4%, and interest bearing deposits of $4.5 million, or 1.2%, for June 30, 2014, as compared to December 31, 2013. 

At June 30, 2014, the Company's total stockholders' equity was $49.7 million, an increase of $3.3 million when compared to December 31, 2013. The increase was largely due to net income for the six months ended June 30, 2014 and an improvement in accumulated other comprehensive income relating to a reduction in the net unrealized losses on available for sale securities. At June 30, 2014, the leverage, Tier I risk-based capital and total risk-based capital ratios for the Bank were 10.31%, 13.60% and 14.85%, 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 non-performing assets ("NPAs") continued to decline. Overall problem assets (foreclosed real estate, criticized assets and classified assets) are down 13.4% from December 31, 2013, and the ratio of NPAs to total assets improved to 2.63% at June 30, 2014 from 3.10% at December 31, 2013. Non-accrual loans to total loans fell to 2.38% at June 30, 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 $1.9 million, or 11.5%, to $14.7 million at June 30, 2014, as compared to $16.6 million at December 31, 2013. Non-accrual loans decreased $1.7 million, or 14.2%, to $10.2 million at June 30, 2014, as compared to $11.9 million at December 31, 2013. The top five non-accrual loan relationships total $6.4 million, or 61.1%, of total non-accrual loans and 43.9% of total NPAs at June 30, 2014. The remaining non-accrual loans have an average loan balance of $111 thousand. Loans past due 30 to 89 days decreased $698 thousand, or 19.0%, to $3.0 million at June 30, 2014, as compared to $3.7 million at December 31, 2013.

The Company continues to actively market its foreclosed real estate properties, which decreased $72 thousand to $2.9 million at June 30, 2014, as compared to $2.9 million at December 31, 2013. The decrease was primarily due to the sale of foreclosed real estate properties for $683 thousand and write downs of $110 thousand, which were partially offset by additions of $715 thousand in new foreclosed real estate properties during 2014. At June 30, 2014, the Company's foreclosed real estate properties had an average value of approximately $317 thousand per property.

The allowance for loan losses increased $433 thousand, or 8.0%, to $5.9 million, or 1.37% of total loans, at June 30, 2014, compared to $5.4 million, or 1.38% of total loans, at December 31, 2013. The Company recorded $853 thousand in provision for loan losses, which was partly offset by $420 thousand in net charge-offs for 2014. The allowance for loan losses as a percentage of non-accrual loans increased to 57.4% at June 30, 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 Wantage and Rockaway, New Jersey and through its nine branch offices located in Andover, Augusta, Franklin, 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.