Sussex Bancorp
200 Munsonhurst Road, Rt. 517
Franklin, NJ 07416
973-827-2914
FOR IMMEDIATE RELEASE
SUSSEX BANCORP ANNOUNCES THIRD QUARTER AND NINE MONTHS EARNINGS
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DECLARES QUARTERLY 6.5% STOCK DIVIDEND
FRANKLIN, NEW JERSEY – October 16, 2008– Sussex Bancorp (NASDAQ: “SBBX”) today announced its financial results for the third quarter and nine months ended September 30, 2008
As previously announced in an 8-K filing on September 8, 2008, Sussex Bancorp held Fannie Mae and Freddie Mac perpetual preferred stock at September 30, 2008 with a cost basis of approximately $3.8 million. These securities are subject to an other than temporary impairment (“OTTI”) charge. On September 7, 2008, the Federal Housing Finance Agency placed both Fannie Mae and Freddie Mac under conservatorship. Although this action did not eliminate the equity in Fannie Mae and Freddie Mac represented by the perpetual preferred stock, it has negatively impacted the value of the perpetual preferred stock. The estimated fair value of these securities at September 30, 2008 was $300 thousand. The OTTI charge that was taken amounted to $3.5 million.
As a result of the OTTI charge, for the quarter ended September 30, 2008, the Company had a net loss of $3.0 million compared to net income of $533 thousand reported for the third quarter of 2007. For the nine months ended September 30, 2008, the Company had a net loss of $2.0 million compared to net income of $1.6 million reported for the same period last year. Basic and diluted loss per share for the three and nine months ended September 30, 2008, were ($0.92) and ($0.62), respectively, compared to basic and diluted earnings per share of $0.16 and $0.46 for the respective comparable periods of 2007. All per share numbers have been adjusted to reflect the stock dividend discussed below.
While the reported results for the three and nine month periods reflect the effects of the OTTI charge, they do not reflect the change in tax treatment enacted as part of the Emergency Economic Stabilization Act of 2008 (the “Act”), which was adopted on October 3, 2008. Under the Act, the Company is permitted to deduct the loss as an ordinary loss for tax purposes, thereby offsetting a portion of the Company’s ordinary income. However, since the Act was not enacted until the fourth quarter, the Company can not recognize this tax benefit as part of its third quarter results. The tax benefit will be recognized in the fourth quarter, and it is expected to amount to approximately $1.3 million or $0.40 per share, based on the average shares outstanding for the quarter ended September 30, 2008 and adjusted for the stock dividend discussed below.
Mr. Donald Kovach, the Company’s Chairman and CEO, stated: “Although the Company can not be immune from the turbulence effecting our financial markets and financial institutions, our core business remains strong, and we remain a well capitalized institution, exceeding all regulatory capital requirements. We have money to lend, and remain committed to serving the banking needs of our local communities.”
The Company’s net interest income increased to $3.1 million for the quarter ended September 30, 2008 from $2.9 million for the third quarter of 2007. The Company’s interest income was unchanged at $5.9 million for the quarter ended September 30, 2008 compared to same for the third quarter of 2007. The Company’s interest expense decreased to $2.7 million for the three months ended September 30, 2008 from $3.0 million for the third quarter of 2007. For the nine months ended September 30, 2008, the Company’s net interest income increased to $9.0 million from the $8.7 million earned for the same period last year. For the nine months ended September 30, 2008, the Company’s interest income was $17.0 million as compared to $16.9 million for the nine months ended September 30, 2007. As the Company’s average earning assets increased by $41.5 million, its yield on earning assets decreased by 66 basis points. The Company’s interest expense decreased to $8.0 million for the nine months ended September 30, 2008 from $8.3 million for the nine month period ended September 30, 2007. The Company’s average interest bearing liabilities increased by $40.7 million in the first nine months of 2008 compared to the prior year, and the Company’s cost of interest bearing liabilities decreased by 56 basis points.
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The loan loss provision for the third quarter was $279 thousand compared to $324 thousand for the same period last year. For the nine month period the provision was $569 thousand, compared to $868 thousand for the same period last year.
At September 30, 2008, non-performing assets totaled $14.8 million compared to $7.3 million at September 30, 2007 and $12.9 million at December 31, 2007.
At September 30, 2008 the Company had total assets of $439.1 million, compared to total assets of $391.9 million at September 30, 2007. The Company’s total loans increased $18.4 million to $312.3 million at September 30, 2008 from $293.9 million at September 30, 2007.
The Company reported non-interest income for the three and nine month periods ending September 30, 2008 of ($2.3) million and $632 thousand compared to $1.5 million and $4.3 million for the three and nine month periods ending September 30, 2007. The reduction in non-interest income for the three and nine month periods reflects the OTTI charge discussed above, which is recognized in non-interest income.
Sussex Bancorp also announced that its Board of Director’s declared a 6.5% stock dividend on October 15, 2008 payable November 12, 2008 to shareholders of record as of October 29, 2008.
Sussex Bancorp is the holding company for Sussex Bank, which operates through its eight New Jersey offices and two Orange County offices 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 | September 30, 2008 | September 30, 2007 | December 31, 2007 | ||
| Cash and due from banks | $10,537 | $10,056 | $7,985 | ||
| Federal funds sold | 15,470 | 11,255 | 3,790 | ||
| Cash and cash equivalents | 26,007 | 21,311 | 11,775 | ||
| Interest bearing time deposits with other banks | 100 | 100 | 100 | ||
| Trading securities | 13,519 | 11,865 | 14,259 | ||
| Securities available for sale | 64,487 | 46,248 | 48,397 | ||
| Federal Home Loan Bank Stock, at cost | 2,111 | 1,358 | 2,032 | ||
| Loans receivable, net of unearned income | 312,330 | 293,906 | 300,646 | ||
| Less: allowance for loan losses | 5,080 | 4,098 | 5,140 | ||
| Net loans receivable | 307,250 | 289,808 | 295,506 | ||
| Foreclosed real estate | 3,931 | - | - | ||
| Premises and equipment, net | 8,697 | 8,897 | 9,112 | ||
| Accrued interest receivable | 2,058 | 2,046 | 2,035 | ||
| Goodwill | 2,820 | 2,820 | 2,820 | ||
| Other assets | 8,099 | 7,481 | 7,496 | ||
| Total Assets | $439,079 | $391,934 | $393,532 | ||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||
| Liabilities: | |||||
| Deposits: | |||||
| Non-interest bearing | $40,430 | $38,315 | $36,625 | ||
| Interest bearing | 316,231 | 282,116 | 271,913 | ||
| Total Deposits | 356,661 | 320,431 | 308,538 | ||
| Borrowings | 36,160 | 20,213 | 35,200 | ||
| Accrued interest payable and other liabilities | 2,572 | 3,158 | 2,467 | ||
| Junior subordinated debentures | 12,887 | 12,887 | 12,887 | ||
| Total Liabilities | 408,280 | 356,689 | 359,092 | ||
| Total Stockholders' Equity | 30,799 | 35,245 | 34,440 | ||
| Total Liabilities and Stockholders' Equity | $439,079 | $391,934 | $393,532 | ||
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| SUSSEX BANCORP | |||||||
| CONSOLIDATED STATEMENTS OF INCOME | |||||||
| (Dollars In Thousands) | |||||||
| (Unaudited) | |||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||
| 2008 | 2007 | 2008 | 2007 | ||||
| INTEREST INCOME | |||||||
| Loans receivable, including fees | $4,887 | $5,038 | $14,335 | $14,572 | |||
| Securities: | |||||||
| Taxable | 631 | 439 | 1,698 | 1,239 | |||
| Tax-exempt | 248 | 255 | 710 | 762 | |||
| Federal funds sold | 111 | 193 | 223 | 354 | |||
| Interest bearing deposits | 1 | 1 | 2 | 4 | |||
| Total Interest Income | 5,878 | 5,926 | 16,968 | 16,931 | |||
| INTEREST EXPENSE | |||||||
| Deposits | 2,219 | 2,548 | 6,417 | 7,111 | |||
| Borrowings | 377 | 241 | 1,132 | 706 | |||
| Junior subordinated debentures | 135 | 226 | 459 | 460 | |||
| Total Interest Expense | 2,731 | 3,015 | 8,008 | 8,277 | |||
| Net Interest Income | 3,147 | 2,911 | 8,960 | 8,654 | |||
| PROVISION FOR LOAN LOSSES | 279 | 324 | 569 | 868 | |||
| Net Interest Income after Provision for Loan Losses | 2,868 | 2,587 | 8,391 | 7,786 | |||
| OTHER INCOME | |||||||
| Service fees on deposit accounts | 409 | 362 | 1,111 | 1,016 | |||
| ATM and debit card fees | 123 | 109 | 348 | 300 | |||
| Insurance commissions and fees | 576 | 618 | 1,972 | 2,136 | |||
| Investment brokerage fees | 22 | 26 | 117 | 239 | |||
| Holding gains on trading securities | (8) | 194 | 13 | 192 | |||
| Gain (loss) on sale of securities, available for sale | - | 10 | 152 | 10 | |||
| Impairment writedowns on equity securities | (3,526) | - | (3,526) | - | |||
| Other | 129 | 149 | 445 | 396 | |||
| Total Other Income | (2,275) | 1,468 | 632 | 4,289 | |||
| OTHER EXPENSES | |||||||
| Salaries and employee benefits | 1,842 | 1,792 | 5,697 | 5,403 | |||
| Occupancy, net | 315 | 319 | 977 | 932 | |||
| Furniture, equipment and data processing | 372 | 372 | 1,119 | 1,066 | |||
| Stationary and supplies | 50 | 46 | 141 | 138 | |||
| Professional fees | 140 | 120 | 337 | 424 | |||
| Advertising and promotion | 92 | 174 | 379 | 415 | |||
| Insurance | 42 | 41 | 127 | 135 | |||
| FDIC assessment | 95 | 9 | 280 | 26 | |||
| Postage and freight | 34 | 36 | 118 | 124 | |||
| Amortization of intangible assets | 14 | 15 | 43 | 78 | |||
| Other | 443 | 360 | 1,261 | 1,119 | |||
| Total Other Expenses | 3,439 | 3,284 | 10,479 | 9,860 | |||
| Income (loss) before Income Taxes | (2,846) | 771 | (1,456) | 2,215 | |||
| PROVISION FOR INCOME TAXES | 181 | 238 | 575 | 664 | |||
| Net Income (Loss) | (3,027) | $533 | ($2,031) | $1,551 | |||
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| SUSSEX BANCORP | ||||||||
| COMPARATIVE AVERAGE BALANCES AND AVERAGE INTEREST RATES | ||||||||
| (Dollars In Thousands) | ||||||||
| (Unaudited) | ||||||||
| Nine Months Ended September 30, | ||||||||
| 2008 | 2007 | |||||||
| Average | Average | Average | Average | |||||
| Earning Assets: | Balance | Interest (1) | Rate (2) | Balance | Interest (1) | Rate (2) | ||
| Securities: | ||||||||
| Tax exempt (3) | $22,906 | $1,061 | 6.19% | $24,083 | $992 | 5.51% | ||
| Taxable | 45,576 | 1,698 | 4.98% | 34,773 | 1,239 | 4.76% | ||
| Total securities | 68,482 | 2,759 | 5.38% | 58,856 | 2,231 | 5.07% | ||
| Total loans receivable (4) | 304,859 | 14,335 | 6.28% | 278,102 | 14,572 | 7.01% | ||
| Other interest-earning assets | 14,350 | 225 | 2.10% | 9,283 | 358 | 5.16% | ||
| Total earning assets | 387,691 | $17,319 | 5.97% | 346,241 | $17,161 | 6.63% | ||
| Non-interest earning assets | 30,837 | 28,420 | ||||||
| Allowance for loan losses | (5,188) | (3,626) | ||||||
| Total Assets | $413,340 | $371,035 | ||||||
| Sources of Funds: | ||||||||
| Interest bearing deposits: | ||||||||
| NOW | $58,277 | $604 | 1.38% | $59,130 | $971 | 2.20% | ||
| Money market | 26,346 | 451 | 2.29% | 38,379 | 1,097 | 3.82% | ||
| Savings | 73,098 | 1,376 | 2.51% | 38,860 | 264 | 0.91% | ||
| Time | 130,380 | 3,986 | 4.08% | 132,081 | 4,779 | 4.84% | ||
| Total interest bearing deposits | 288,101 | 6,417 | 2.98% | 268,450 | 7,111 | 3.54% | ||
| Borrowed funds | 35,998 | 1,132 | 4.13% | 19,785 | 706 | 4.70% | ||
| Junior subordinated debentures | 12,887 | 459 | 4.68% | 8,052 | 460 | 7.54% | ||
| Total interest bearing liabilities | 336,986 | $8,008 | 3.17% | 296,287 | $8,277 | 3.74% | ||
| Non-interest bearing liabilities: | ||||||||
| Demand deposits | 39,721 | 37,454 | ||||||
| Other liabilities | 2,207 | 2,252 | ||||||
| Total non-interest bearing liabilities | 41,928 | 39,706 | ||||||
| Stockholders' equity | 34,426 | 35,042 | ||||||
| Total Liabilities and Stockholders' Equity | $413,340 | $371,035 | ||||||
| Net Interest Income and Margin (5) | $9,311 | 3.21% | $8,884 | 3.43% | ||||
| (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 |
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