8-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) July 24, 2007

SUSSEX BANCORP

(Exact name of registrant as specified in its charter)

New Jersey	0-29030	22-3475473
(State or other jurisdiction	(Commission	(IRS Employer
of incorporation)	File Number)	Identification No.)

200 Munsonhurst Road
Franklin, New Jersey	07416
(Address of principal executive offices)	(Zip Code)

Registrant's telephone number, including area code  (973) 827-2914

Item 2.02.  Results of Operations and Financial Condition.

The information in this section, including the information contained in the press release included as Exhibit 99.1 hereto, is being furnished pursuant to this Item 2.02 and shall not deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section.  In addition, this information shall not be deemed to be incorporated by reference into any of the Registrant’s filings with the Securities and Exchange Commission, except as shall be expressly set forth by specific reference in any such filing.

On July 24, 2007, the Registrant issued a press release announcing its financial results for the second quarter ended June 30, 2007.  A copy of the July 24, 2007 press release is included as Exhibit 99.1 hereto.

Item 8.01.  Other Events.

On July 24, 2007, the Registrant issued a press release announcing that its Board of Directors declared a cash dividend of $0.07 per share, payable on August 24, 2007 to shareholders of record as of August 6, 2007.  A copy of the July 24, 2007 press release is included as Exhibit 99.1 hereto.

The information in this section, including the information contained in the press release included as Exhibit 99.1 hereto, is being furnished pursuant to this Item 8.01 and shall not deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section.  In addition, this information shall not be deemed to be incorporated by reference into any of the Registrant’s filings with the Securities and Exchange Commission, except as shall be expressly set forth by specific reference in any such filing.

Item 9.01.  Financial Statements and Exhibits.

(d) Exhibits.

Exhibit Number	Description
99.1	Press Release dated July 24, 2007 regarding financial results for the second quarter ended June 30, 2007 and announcing the declaration of a $0.07 per share cash dividend to be paid to shareholders of record as of August 6, 2007.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, Sussex Bancorp, has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	SUSSEX BANCORP
	(Registrant)
Dated: July 26, 2007	By:	/s/  Candace A. Leatham
		CANDACE A. LEATHAM
		Executive Vice President and
		Chief Financial Officer

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EXHIBIT INDEX

CURRENT REPORT ON FORM 8-K

Exhibit No.	Description	Page No.
99.1	Press release announcing the Registrant's results for the second quarter ended June 30, 2007 and the Registrant’s declaration of a $0.07 per share cash dividend to shareholders of record as of August 6, 2007.	5 - 9

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EX-99.1

EXHIBIT 99.1

Sussex Bancorp	Contact:	Donald L. Kovach
399 Route 23		President/CEO
Franklin, NJ  07416		(973) 827-2914

SUSSEX BANCORP ANNOUNCES SECOND QUARTER 2007 EARNINGS

---

DECLARES QUARTERLY CASH DIVIDEND OF $0.07 PER SHARE

FRANKLIN, NEW JERSEY– July 24, 2007– Sussex Bancorp (NASDAQ: “SBBX”) today announced its financial results for the second quarter ending June 30, 2007.

For the quarter ended June 30, 2007, the Company earned net income of $294,000 compared to net income of $652,000 reported for the second quarter of 2006. For the six months ended June 30, 2007, the Company earned net income of $1,018,000, a decline from the $1,248,000 earned for the same period last year.   Basic earnings per share for the three and six months ended June 30, 2007 were $0.09 and $0.32, respectively, compared to $0.21 and $0.40 for the respective comparable periods of 2006.  Diluted earnings per share were $0.09 and $0.32 respectively for the three and six months ended June 30, 2007, compared to $0.20 and $0.39 in the respective comparable periods of 2006. The decline in both net income and earnings per share reflects continued pressure on the Company’s net interest margin, as well as an increase in the Company’s provision for loan losses related to certain loans performing at quarter end that management deems necessary at this time based upon the present loan repayment terms and the ability of the borrowers to comply with the present repayment terms.

 The Company’s net interest income decreased to $2,894,000 for the quarter ended June 30, 2007 from $3,051,000 for the second quarter of 2006.  The decrease reflects the Company’s interest expense increasing at a faster rate than its interest income, due in large measure to the competitive environment for deposits in the Company’s trade area. The Company’s interest income increased to $5,613,000 for the quarter ended June 30, 2007 from $4,876,000 for the second quarter of 2006.   The Company’s interest expense increased to $2,719,000 for the three months ended June 30, 2007 from $1,825,000 for the second quarter of 2006.  For the six months ended June 30, 2007, the Company’s net interest income decreased to $5,743,000 from the $5,966,000 earned for the same period last year.  For the six months ended June 30, 2007, the Company’s interest income increased to $11,005,000 from $9,457,000 for the period ended June 30, 2006, while the Company’s interest expense increased to $5,262,000 from $3,491,000 for the six months ended June 30, 2006. As a result of these changes, the Company’s net interest margin declined to 3.46% and 3.53% for the three and six months ended June 30, 2007, respectively, from 4.22% and 4.19% for the three and six months ended June 30, 2006, respectively.

Management has sought to address the margin compression in several ways. The Company recently refinanced $5.0 million in its outstanding trust preferred securities. The securities called for redemption bore a rate of 9.01%, while the newly issued trust preferred securities have a current rate of 6.80%.  Management is also closely monitoring rates offered on deposit products.  In addition, the Company is seeking to enhance its yield on its interest earning assets, primarily its loan portfolio. The Company will no longer seek to compete on rate for all potential customers, but only on its more profitable relationships. This may lead to a slowing in the rate of growth of the Company’s loan portfolio, as certain borrowers elect to obtain credit products from competing institutions. However, management believes this will benefit the Company’s net interest margin and profitability.

The loan loss provision for the second quarter was $436,000 compared to $229,000 for the same period last year.  The increase is related both to the continued growth in the Company’s loan portfolio and two  construction loans dependent upon residential unit sales that due to market conditions have not kept pace with the expected loan amortization schedules. Subsequent to quarter end, one of these loans, with an outstanding balance of $4.4 million, reached maturity, but has not been paid off.  Considering the underlying collateral value of both loans and the continuing economic environment, management therefore determined that an additional provision was prudent at this time.

The Company reported non-interest income of $1,235,000 and $2,821,000 for the current three and six month periods ended June 30, 2007, respectively, compared to non-interest income of $1,369,000 and $2,660,000 for

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the three and six month periods ending June 30, 2006.  Insurance commissions for the three and six month periods ended June 30, 2007 were $664,000 and $1,518,000, respectively.

The Company’s other expenses increased in the three and six month periods of 2007 compared to the prior year periods.  For the three month period ending June 30, 2007 other expenses increased by $107,000 thousand, or 3.3%, while other expenses increased by $218,000 thousand, or 3.4%, for the six months ended June 30, 2007 compared to the prior year periods.

At June 30, 2007 the Company had total assets of $387.3 million, compared to total assets of $331.3 million at June 30, 2006. The Company’s total deposits increased to $311.3 million at June 30, 2007 from $277.3 million at June 30, 2006, and the Company’s total loan portfolio, net of unearned income, increased to $284.6 million at June 30, 2007 from $244.1 million at June 30, 2006.

Sussex Bancorp also announced that its Board of Directors declared a cash dividend of $0.07 per share, payable on August 24, 2007 to shareholders of record as of August 6, 2007.

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.

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SUSSEX BANCORP

CONSOLIDATED BALANCE SHEETS

(Dollars In Thousands)

(Unaudited)

ASSETS	June 30, 2007		June 30, 2006		December 31, 2006
Cash and due from banks	$	9,240	$	10,442	$	10,170
Federal funds sold		16,795		2,670		11,995
Cash and cash equivalents		26,035		13,112		22,165
Interest bearing time deposits with other banks		100		100		100
Trading securities		12,282		-		-
Securities available for sale		45,703		57,814		54,635
Federal Home Loan Bank Stock, at cost		1,358		964		1,188
Loans receivable, net of unearned income		284,640		244,061		262,276
Less:  allowance for loan losses		3,860		3,040		3,340
Net loans receivable		280,780		241,021		258,936
Premises and equipment, net		8,606		6,909		7,794
Accrued interest receivable		1,804		1,497		1,910
Goodwill		2,820		2,780		2,820
Other assets		7,766		7,062		6,749
Total Assets	$	387,254	$	331,259	$	356,297
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Non-interest bearing	$	37,818	$	34,234	$	40,083
Interest bearing		273,517		243,063		255,687
Total Deposits		311,335		277,297		295,770
Borrowings		20,226		13,276		18,251
Accrued interest payable and other liabilities		2,663		2,077		2,529
Junior subordinated debentures		18,042		5,155		5,155
Total Liabilities		352,266		297,805		321,705
Total Stockholders' Equity		34,988		33,454		34,592
Total Liabilities and Stockholders' Equity	$	387,254	$	331,259	$	356,297

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SUSSEX BANCORP
CONSOLIDATED STATEMENTS OF INCOME
(Dollars In Thousands Except Per Share Data)
(Unaudited)
	Three Months Ended June 30,					Six Months Ended June 30,
	2007			2006		2007			2006
INTEREST INCOME
Loans receivable, including fees	$	4,881		$	4,217	$	9,534		$	8,030
Securities:
Taxable		404			349		800			702
Tax-exempt		257			259		507			520
Federal funds sold		69			46		161			195
Interest bearing deposits		2			5		3			10
Total Interest Income		5,613			4,876		11,005			9,457
INTEREST EXPENSE
Deposits		2,355			1,548		4,563			2,920
Borrowings		243			168		465			359
Junior subordinated debentures		121			109		234			212
Total Interest Expense		2,719			1,825		5,262			3,491
Net Interest Income		2,894			3,051		5,743			5,966
PROVISION FOR LOAN LOSSES		436			229		544			445
Net Interest Income after Provision for Loan Losses		2,458			2,822		5,199			5,521
OTHER INCOME
Service fees on deposit accounts		335			348		654			668
ATM and debit card fees		104			97		191			179
Insurance commissions and fees		664			688		1,518			1,421
Investment brokerage fees		56			88		213			140
Trading revenue		(48	)		-		(2	)		-
Other		124			148		247			252
Total Other Income		1,235			1,369		2,821			2,660
OTHER EXPENSES
Salaries and employee benefits		1,829			1,756		3,611			3,395
Occupancy, net		300			259		613			530
Furniture, equipment and data processing		356			297		694			575
Stationary and supplies		46			45		92			96
Professional fees		165			167		304			345
Advertising and promotion		137			145		241			330
Insurance		48			46		94			104
Postage and freight		48			60		88			112
Amortization of intangible assets		26			40		63			73
Other		381			414		776			798
Total Other Expenses		3,336			3,229		6,576			6,358
Income before Income Taxes		357			962		1,444			1,823
PROVISION FOR INCOME TAXES		63			310		426			575
Net Income	$	294		$	652	$	1,018		$	1,248

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SUSSEX BANCORP
COMPARATIVE AVERAGE BALANCES AND AVERAGE INTEREST RATES
(Unaudited)
	Six Months Ended June 30,
(Dollars in thousands)	2007								2006
	Average					Average			Average					Average
Earning Assets:	Balance			Interest (1)		Rate (2)			Balance			Interest (1)		Rate (2)
Securities:
Tax exempt  (3)	$	24,030		$	663		5.57	%	$	24,171		$	708		5.91	%
Taxable		34,135			800		4.73	%		35,752			702		3.96	%
Total securities		58,166			1,463		5.07	%		59,923			1,410		4.74	%
Total loans receivable (4)		272,678			9,534		7.05	%		227,472			8,030		7.12	%
Other interest-earning assets		6,397			164		5.16	%		9,083			205		4.55	%
Total earning assets		337,242		$	11,161		6.67	%		296,478		$	9,645		6.56	%
Non-interest earning assets		28,098								25,213
Allowance for loan losses		(3,496	)							(2,804	)
Total Assets	$	361,844							$	318,887
Sources of Funds:
Interest bearing deposits:
NOW	$	58,221		$	642		2.22	%	$	52,470		$	500		1.92	%
Money market		36,731			704		3.87	%		27,873			511		3.70	%
Savings		39,655			178		0.91	%		49,171			206		0.84	%
Time		127,386			3,039		4.81	%		91,556			1,703		3.75	%
Total interest bearing deposits		261,993			4,563		3.51	%		221,070			2,920		2.66	%
Borrowed funds		19,565			465		4.73	%		14,786			359		4.83	%
Junior subordinated debentures		5,366			234		8.66	%		5,155			212		8.20	%
Total interest bearing liabilities		286,924		$	5,262		3.70	%		241,011		$	3,491		2.92	%
Non-interest bearing liabilities:
Demand deposits		37,647								42,561
Other liabilities		2,218								1,965
Total non-interest bearing liabilities		39,865								44,526
Stockholders' equity		35,055								33,350
Total Liabilities and Stockholders' Equity	$	361,844							$	318,887
Net Interest Income and Margin (5)				$	5,899		3.53	%				$	6,154		4.19	%

(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