BERNARDSVILLE, N.J., April 18, 2013 (GLOBE NEWSWIRE) -- Somerset Hills Bancorp (Nasdaq:SOMH) (the "Company"), parent company of Somerset Hills Bank (the "Bank"), today reported first quarter net income of $402,000 for 2013, a 51.0% decline from the $820,000 earned in the first quarter of 2012. First quarter diluted earnings were $0.07 per share for 2013 and $0.15 per share for 2012. First quarter 2013 results include $419,000 of pretax expenses related to the pending merger with Lakeland Bancorp, Inc. ("Lakeland") and amount to $352,000 on an after-tax basis. Net income of the first quarter of 2013 excluding these merger-related expenses was $754,000, a decline of 8.0% from the same quarter of 2012. Excluding merger-related expenses, fully diluted net income per share for the first quarter of 2013 was $0.14, a 6.7% decrease from the first quarter of 2012.
Stewart E. McClure, Jr., President and CEO, noted, "The Company continues to be challenged by the difficult economic operating environment for banks. Our net interest margin along with that of our industry peers has been under duress as longer term assets reprice at increasingly lower levels and banks are hesitant to extend the maturities of their securities portfolios in anticipation of a rise in interest rates in the future. As expected, our first quarter results for 2013 were adversely affected by a significant rise in expenses related to our pending merger with Lakeland. While we look forward to the consummation of our merger with Lakeland, the Company remains focused on maintaining our excellent credit quality and disciplined approach to cost management."
Net Interest Income (Tax Equivalent Basis)
Fully taxable equivalent ("FTE") net interest income for the first three months of 2013 was $2.8 million, down $319,000 or 10.1%, from the $3.1 million earned in 2012. The decline in net interest income during 2013 was attributable to a 47 basis-point narrowing in first quarter net interest margin to 3.37% from 3.84% in the first quarter of 2012, partly offset by a 3.2% increase in average interest-earning assets to $340.2 million in 2013 from $329.6 million in 2012. The decline in the first quarter 2013 net interest margin was largely due to a $30.6 million decline in average securities to $23.1 million from $53.7 million in the first quarter of 2012 that led to a $29.9 million growth in average interest bearing deposits with banks to $70.2 million in the 2013 quarter from $40.3 million in the first quarter of 2012. The growth in average interest earning assets resulted from an $11.0 million increase in average loans to $243.5 million during the first quarter of 2013 versus $232.5 million in the same quarter of 2012.
Non-Interest Income
Non-interest income decreased $32,000 or 5.8% to $519,000 in the first quarter of 2013 from $551,000 in the first quarter of 2012, primarily due to a $41,000 decline in gains on sales of residential loans at Sullivan Financial Services, Inc., a wholly-owned mortgage banking subsidiary of the Bank, partially offset by a $9,000 increase in deposit service fees to $80,000 in the first quarter of 2013 from $71,000 in the first three months of 2012. A decline in Sullivan's origination volume was primarily responsible for the decline in mortgage banking income.
Non-Interest Expense
Non-interest expense increased 10.4% to $2.6 million for the first quarter of 2013 from $2.3 million for the same period of 2012. Included in non-interest expense in the first quarter of 2013 were merger‑related expenses of $419,000. Excluding these merger-related expenses, adjusted non-interest expense decreased by $177,000 or 7.6% to $2.1 million for the three months of 2013 from $2.3 million in the first quarter of 2012. The decline in operating expenses was primarily due to decreases in personnel, office-related and other non-interest expenses. Management continues to proactively manage its expense containment efforts.
Provision for Income Taxes
The Company recorded first quarter income tax provisions of $317,000 for 2013 and $438,000 for 2012. The effective tax rates were 44.1% and 34.8% for the first quarter of 2013 and 2012, respectively. The increase in the effective tax rates for the first three months of 2013 over the same period of 2012 was primarily due to the impact of the merger-related expenses. If both taxable income and the income tax provision for the first quarter 2013 were adjusted to exclude the impact of merger-related costs, the adjusted effective tax rate would be 33.7%.
Asset Quality
The first quarter provision for loan losses was $25,000 in 2013 versus $75,000 for 2012. A net recovery of $9,000 was recorded in the first quarter of 2013, while net charge-offs of $56,000 were recorded in the first quarter of last year. The allowance for loan losses amounted to $3.2 million, or 1.30% of total loans, at March 31, 2013; $3.2 million, or 1.31% of total loans, at December 31, 2012; and $3.0 million, or 1.30% of total loans at March 31, 2012.
Non-accrual loans at March 31, 2013 were $746,000, representing 0.30% of total loans, and $136,000, or 0.06% of total loans at March 31, 2012. The non-performing asset ratio, which is defined as nonaccrual loans and OREO as a percentage of total assets, was 0.21% at March 31, 2013 and 0.04% at March 31, 2012. The Company had no OREO at both March 31, 2013 and 2012 and troubled debt restructured loans ("TDRs") were $2.3 million and $343,000 at March 31, 2013 and 2012, respectively. Loans past due 90 days or more and still accruing amounted to $416,000 at March 31, 2013 compared with none at March 31, 2012. As of March 31, 2013, the Company had $205,000 in loans delinquent 30 to 89 days, representing 0.08% of total loans, versus $854,000, or 0.37%, of total loans at March 31, 2012.
Financial Ratios
As of March 31, 2013, the Company's tangible common equity ratio and tangible book value per share were 11.74% and $7.78, respectively. As of March 31, 2012, the Company's tangible common equity ratio and tangible book value per share were 11.84% and $7.63, respectively.
Forward-Looking Statements
This news release contains certain forward-looking statements which are based on certain assumptions and describe future plans, strategies and expectations of the Company. These forward-looking statements are generally identified by use of the words "believe," "expect," "intend," "anticipate," "estimate," "project," or similar expressions. The Company's ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on the operations of the Company and its subsidiaries include, but are not limited to, changes in interest rates, general economic conditions, legislative/regulatory changes, monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve Board, the quality or composition of the loan or investment portfolios, demand for loan products, deposit flows, competition, demand for financial services in the Company's market area and accounting principles and guidelines. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. The Company does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.
| SOMERSET HILLS BANCORP | ||
| Selected Consolidated Financial Data | ||
| (Unaudited) | ||
| Quarter Ended March 31, | ||
| ($ in thousands, except per share data) | 2013 | 2012 |
| Income Statement Data: | ||
| Net interest income | $ 2,784 | $ 3,099 |
| Provision for loan losses | 25 | 75 |
| Net interest income after loan loss provision | 2,759 | 3,024 |
| Non-interest income | 519 | 551 |
| Non-interest expense | 2,559 | 2,317 |
| Income before income taxes | 719 | 1,258 |
| Income tax expense | 317 | 438 |
| Net income | $ 402 | $ 820 |
| Diluted earnings per share | $ 0.07 | $ 0.15 |
| Balance Sheet Data: | ||
| At period end | ||
| Total assets | $ 355,927 | $ 343,690 |
| Loans, net | 242,230 | 228,776 |
| Loans held for sale | 2,557 | 1,495 |
| Allowance for loan losses | 3,192 | 3,001 |
| Investment securities held to maturity | 9,354 | 9,936 |
| Investment securities held for sale | 12,982 | 42,177 |
| Deposits | 307,541 | 294,273 |
| Borrowings | 5,500 | 7,500 |
| Shareholders' equity | 41,781 | 40,690 |
| Book value per share | 7.78 | 7.63 |
| Tangible common equity ratio | 11.74% | 11.84% |
| Average for the period | ||
| Loans | $ 243,463 | $ 232,507 |
| Interest-earning assets | 340,167 | 329,618 |
| Total assets | 360,606 | 350,749 |
| Shareholders' equity | 41,984 | 40,957 |
| Diluted shares outstanding (in thousands) | 5,454 | 5,381 |
| Performance Ratios/Amounts: | ||
| Return on average assets | 0.45% | 0.94% |
| Return on average equity | 3.88% | 8.05% |
| Fully taxable equivalent net interest margin | 3.37% | 3.84% |
| Efficiency ratio* | 64.0% | 62.7% |
| Fully taxable equivalent net interest income | $ 2,827 | $ 3,146 |
| Asset Quality: | ||
| Net charge-offs (recoveries) | $ (9) | $ 56 |
| At period end | ||
| Nonaccrual loans | 746 | 136 |
| OREO property | -- | -- |
| Total nonperforming assets | 746 | 136 |
| Loans past due 90 days or more and still accruing | 416 | -- |
| Troubled debt restructured loans | 2,255 | 343 |
| Loans past due 30 to 89 days and still accruing | 205 | 854 |
| Nonaccrual loans to total loans | 0.30% | 0.06% |
| Nonperforming assets to total assets | 0.21% | 0.04% |
| Allowance for loan losses to total loans | 1.30% | 1.30% |
| Allowance as a % of nonperforming loans | 428% | 2207% |
| * Represents non-interest expense excluding merger-related costs divided by the sum of fully taxable equivalent net interest income and non-interest income excluding any investment securities gains or losses for the period. | ||
| SOMERSET HILLS BANCORP | ||
| Statement of Operations | ||
| (Dollars in thousands, except per share data) | ||
| (Unaudited) | ||
| Quarter Ended March 31, | ||
| 2013 | 2012 | |
| INTEREST INCOME | ||
| Loans, including fees | $ 2,793 | $ 3,026 |
| Investment securities | 181 | 403 |
| Interest bearing deposits with other banks | 45 | 26 |
| Total interest income | 3,019 | 3,455 |
| INTEREST EXPENSE | ||
| Deposits | 188 | 290 |
| Federal Home Loan Bank advances | 47 | 66 |
| Total interest expense | 235 | 356 |
| Net Interest Income | 2,784 | 3,099 |
| PROVISION FOR LOAN LOSSES | 25 | 75 |
| Net Interest Income after Provision for Loan Losses | 2,759 | 3,024 |
| NON-INTEREST INCOME | ||
| Service fees on deposit accounts | 80 | 71 |
| Gains on sales of mortgage loans, net | 266 | 307 |
| Bank owned life insurance | 66 | 67 |
| Other income | 107 | 106 |
| Total Non-Interest Income | 519 | 551 |
| NON-INTEREST EXPENSE | ||
| Salaries and employee benefits | 1,253 | 1,367 |
| Occupancy expense | 347 | 349 |
| Advertising and business promotions | 30 | 29 |
| Printing, stationery and supplies | 18 | 45 |
| Data processing | 133 | 131 |
| Merger-related costs | 419 | -- |
| Other operating expense | 359 | 396 |
| Total Non-Interest Expense | 2,559 | 2,317 |
| Income before Provision for Taxes | 719 | 1,258 |
| PROVISION FOR INCOME TAXES | 317 | 438 |
| Net income | $ 402 | $ 820 |
| Diluted earnings per common share | $ 0.07 | $ 0.15 |
| SOMERSET HILLS BANCORP | ||
| Balance Sheets | ||
| (Dollars in thousands) | ||
| (Unaudited) | ||
| March 31, | December 31, | |
| 2013 | 2012 | |
| ASSETS | ||
| Cash and due from banks | $ 4,977 | $ 7,544 |
| Interest bearing deposits at other banks | 65,475 | 75,127 |
| Total cash and cash equivalents | 70,452 | 82,671 |
| Interest bearing deposits in other financial institutions | 775 | 775 |
| Loans held for sale | 2,557 | 6,977 |
| Investment securities held to maturity (Approximate market value | ||
| of $9,587 in 2013 and $9,186 in 2012) | 9,354 | 8,900 |
| Investments available for sale | 12,982 | 13,370 |
| Restricted stock, at cost | 743 | 743 |
| Loans receivable | 245,422 | 241,911 |
| Less allowance for loan losses | (3,192) | (3,158) |
| Net loans receivable | 242,230 | 238,753 |
| Premises and equipment, net | 4,834 | 4,868 |
| Bank owned life insurance | 8,311 | 8,245 |
| Accrued interest receivable | 978 | 1,036 |
| Prepaid expenses | 775 | 790 |
| Other assets | 1,936 | 1,802 |
| Total assets | $ 355,927 | $ 368,930 |
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||
| LIABILITIES | ||
| Deposits: | ||
| Non-interest bearing deposits - demand | $ 82,817 | $ 87,279 |
| Interest bearing deposits | ||
| NOW, money market and savings | 192,154 | 198,595 |
| Certificates of deposit, under $100,000 | 16,852 | 17,799 |
| Certificates of deposit, $100,000 and over | 15,718 | 16,514 |
| Total deposits | 307,541 | 320,187 |
| Federal Home Loan Bank advances | 5,500 | 5,500 |
| Other liabilities | 1,105 | 1,395 |
| Total liabilities | 314,146 | 327,082 |
| STOCKHOLDERS' EQUITY | ||
| Preferred stock - 1,000,000 shares authorized, none issued | -- | -- |
| Common stock - authorized 9,000,000 shares | ||
| of no par value;issued and outstanding, 5,370,000 | ||
| shares in 2013 and 5,369,673 shares in 2012 | 37,156 | 37,143 |
| Retained earnings | 4,306 | 4,333 |
| Accumulated other comprehensive income | 319 | 372 |
| Total stockholders' equity | 41,781 | 41,848 |
| Total liabilities and stockholders' equity | $ 355,927 | $ 368,930 |