EX-99.1 2 ex99-1.htm EXHIBIT 99.1 ex99-1.htm
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

 
-5-
 

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.

 
-6-
 


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
  


 
-7-
 


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
  



 
-8-
 


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