Sussex Bancorp
July 2005
KBW Community Bank Conference
AMEX / SBB
FORWARD-LOOKING DISCLAIMER
Statements contained in this presentation which are not historical facts are
forward-looking statements. In addition, Sussex Bancorp, through its senior
management, may from time to time make forward-looking public
statements concerning the matters described herein. Such forward-looking
statements are estimates reflecting the best judgment of Sussex Bancorp’s
senior management based upon current information and involve a number
of risks and uncertainties. Certain factors which could affect the accuracy of
such forward-looking statements are identified in the public filings made by
Sussex Bancorp with the Securities and Exchange Commission, including
the company’s annual report on form 10-K for the year ended December 31,
2004 and forward-looking statements contained in this or other public
statements of Sussex Bancorp or its senior management should be
considered in light of those factors. There can be no assurance that such
factors or other factors will not affect the accuracy of such forward-looking
statements. Sussex Bancorp undertakes no obligation to revise these
statements after the date of this presentation.
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SUSSEX BANCORP
Headquartered in Sussex County, NJ
Chartered in 1975 with $1.5 million in
capital:
2000: Obtained capital contribution from
competitor Lakeland Bancorp
2004: Raised $15.2 million through
follow-on equity offering doubling our
capital
Lines of business:
Personal & business banking
Insurance agency
Mortgage banking
Title insurance & settlement services
Trust & investment services
OUR COMMUNITY BANK PHILOSOPHY EMPHASIZES A HIGH SERVICE LEVEL,
PERSONALIZED APPROACH WHICH IS GENERALLY NOT OFFERED BY OUR LARGER
COMPETITORS.
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INVESTMENT THESIS
Demonstrated record of success managing and growing a community bank:
15% compounded annual growth of assets(1)
12% compounded annual growth of loans(1)
13% compounded annual growth of deposits(1)
20% compounded annual growth of net income(1)
14% compounded annual growth of EPS(1)
Contiguous markets are much larger than Sussex and have been disrupted by
consolidation. These markets include some of the wealthiest in the United States.
We intend to grow in these markets by capturing market share from our larger
competitors.
We have built an infrastructure and have obtained the capital to support a much
larger institution.
Experienced management team with deep knowledge of market area and large
ownership stake of 17%.
(1) For the ‘00 – ‘04 period
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BUSINESS PLAN
ELEMENTS OF OUR 3-5 YEAR BUSINESS PLAN:
Continue to grow the balance sheet organically at rates consistent with our recent
track record (10 -13%) by expanding in Sussex and into contiguous markets:
Capitalize on dislocation caused by merger & acquisition activity
Take advantage of greater deposit base in surrounding counties by stealing market
share
De novo branching
M&A opportunities (whole bank, branch and insurance agency acquisitions)
Loan production offices
Improve the profitability of franchise over 3-5 year time horizon:
Focus on commercial loan growth to improve our yield on loans
Focus on growing core deposits to lower our cost of funds
Obtain economies of scale as our balance sheet grows into our infrastructure
Our goal is to create a $500 million + community banking company with an ROA
of at least 1%
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DISTRIBUTION NETWORK
Our distribution network currently consists of 8 full-service branch locations, 2
loan production offices and 1 insurance agency office.
(Parentheses indicate county deposits as of June 30, 2004)
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BUSINESS STRATEGY
EXPAND THE FRANCHISE IN CONTIGUOUS COUNTIES: THE OPPORTUNITY
Leveraging our high touch / service business model
Significantly larger markets
Markets disrupted by consolidation
Market contains $29.9 billion in deposits
Market has experienced 10 mergers(1)
over the last 2 years where 22.1% of
deposits ($6.6 billion) have or will be
“turned over”
(1) Source: SNL Financial
Mergers include: Bank of America / Fleet, Citizens / Charter One, PNC / United National, North Fork / Trust Co. of NJ,
Lakeland / Newton Financial, Valley / NorCrown, Kearny / West Essex, Provident / Warwick Community,
Center Bancorp / Red Oak Bank, TD Banknorth / Hudson United
(Parentheses indicate county deposits as of June 30, 2004)
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ATTRACTIVE DEMOGRAPHICS OF OUR TARGET MARKETS
Data obtained from: SNL Financial's Datasource database
SNL's source of deposit data: Federal Deposit Insurance Corporation; Data as of June 30, 2004
SNL's source of demographic data: Claritas
(1) Mergers include: Bank of America / Fleet, Citizens / Charter One, PNC / United National, North Fork / Trust Co. of NJ,
Lakeland / Newton Financial, Valley / NorCrown, Kearny / West Essex, Provident / Warwick Community,
Center Bancorp / Red Oak Bank, TD Banknorth / Hudson United
(2) Data as of 2002; Source: US Census; Small businesses defined as those with less than 100 employees
OUR TARGETED MARKETS ARE DENSELY POPULATED MARKETS WITH
ROBUST BUSINESS CLIMATES:
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OUR EXISTING AND TARGET MARKETS
HIGHLY CONSOLIDATED MARKETS, POPULATED BY LARGE, OUT OF STATE
COMPETITORS:
Source: SNL Financial (FDIC data); Deposit data as of 6/30/2004 and pro forma for pending and completed acquisitions
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FINANCIAL PERFORMANCE
(1) Non-interest income as a percentage of net interest income + non-interest income; Excludes securities gains/losses
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IMPROVE CORE PROFITABILITY
BALANCE SHEET INITIATIVES
Continue to transform the bank’s balance sheet:
Continue our growth in core deposits to reduce our cost of funds
Continue our commercial real estate and commercial loan growth to raise our yield on
earning assets
Will result in net interest margin expansion
NIM goal of 4.50% over 3-5 years
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Efficiency ratio goal of 65% over 3-5 years
IMPROVE CORE PROFITABILITY
Improve Efficiency
Through growth &
scalability:
Investments in our
future have been
made:
Investments recently made in our infrastructure and
product platform, coupled with recent hires has created
the foundation to support a $500 million institution
Our expenses should not grow proportionally to our
earning asset growth
We have invested significantly in our future:
Relocated our corporate office to a sufficiently large space
Jack Henry bank-wide processing program
IBM computer mainframe
Retained Tammy Case, a veteran of our market, as our
new Executive Vice President – Loan Administration
Formed Sussex Settlement Services to provide title
insurance & settlement services
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DEPOSIT GROWTH
Strong organic growth in total deposits
Shift towards lower costing core deposits
Total Deposits ($M)
Core Deposits ($M)*
* Excludes all CDs
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SHIFTING DEPOSIT MIX
Our solid growth in core deposits has lowered our overall cost of funds
“High Performance Checking” (free checking)
Aggressive marketing
Targeted mailings
12/31/2000
6/30/2005
Total Deposits: $140.9 million
Cost of Deposits: 3.29%
Total Deposits: $236.3 million
Cost of Deposits: 1.33%
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LOAN GROWTH
Demonstrating strong organic growth
Loan production offices in Port Jervis, NY and Milford, PA
Approximately 90% of loans in Sussex, Orange & Pike Counties
Gross Loans ($M)
Commercial Portfolio* ($M)
* Commercial portfolio includes commercial and commercial real estate loans.
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LOAN PORTFOLIO DYNAMICS SINCE 1999
TRANSFORMATION FROM THRIFT-LIKE BALANCE SHEET TO A MORE
COMMERCIAL FOCUS:
12/31/2000
06/30/2005
Gross Loans: $101.1 million
Gross Loans: $186.3 million
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ASSET QUALITY
83% of our portfolio is secured by real estate
Asset quality is closely monitored by Officers Loan Committee, Directors Loan
Committee and Board of Directors
We use an independent consultant to review a sample of our portfolio quarterly
and verify our gradings
Charge-offs have remained low throughout our history
(1)
YTD for Sussex is the six months ended June 30, 2005;
YTD for the nationwide peers is the three months ended March 31, 2005
(2)
Includes all publicly traded banks nationwide with $200 million - $400 million in assets
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FEE BASED BUSINESSES
31.1% of our revenues come from fee income businesses as compared to 14.8%
for our nationwide peer group**.
YTD Nationwide Bank Median** = 14.8%
**Includes all publicly traded banks nationwide with $200 million - $400 million in assets
YTD is the three months ended March 31, 2005
*2005 data is annualized
Fee Income ($000)
Fee Income / Revenue (%)
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FEE BASED BUSINESSES
We have a diversified source of revenues uncommon of an institution of our size.
Fee income
31.1%
Net interest income
68.9%
Investment
Brokerage
Fees
5.4%
Deposit
Services & ATM
fees
29.7%
Insurance
Brokerage
50.2%
Mortgage
Broker Fees
6.6%
Revenue Composition (YTD)
Fee Revenue Composition (YTD)
Other
8.1%
Analysis excludes securities gains / losses
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FINANCIAL PERFORMANCE
In December of 2004, we raised $15.2 million in net proceeds in a follow-on
common stock offering which doubled our capital.
We now have the necessary capital to grow and execute our strategic plan:
Organic growth
Expand our footprint in contiguous markets
Opportunistic acquisitions
Strategic hires
*Includes all publicly traded banks nationwide with $200 million - $400 million in assets
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FINANCIAL PERFORMANCE
(1) Excluding amortization of intangibles, net of tax
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EXPANDING THE FRANCHISE AND BUILDING SHAREHOLDER VALUE
Business plan with realistic and achievable goals:
$500 million assets
1% ROA
Demonstrated track record of success as a community bank:
Historic growth of 12% – 13% of loans and deposits
Investments in our infrastructure have been made and we have obtained the
necessary capital to support our strategic plan.
Existing and contiguous markets are ideal for expansion:
Densely populated and affluent with strong business climates
Customer dislocation as a result of bank consolidation
Management and Board interest aligned with shareholders:
Management and Board ownership – 17%
CEO ownership – 4%
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