SB One Bancorp (SBBX) 8-K Sussex Bancorp Announces 2008 Results of Operations; Operations Reflect Impact of

Sussex Bancorp	Contact:	Donald L. Kovach
200 Munsonhurst  Road		President/CEO
Franklin, NJ 07416		(973) 827-2914

SUSSEX BANCORP ANNOUNCES 2008 RESULTS OF OPERATIONS; OPERATIONS REFLECT IMPACT OF

CHARGE FOR FANNIE MAE AND FREDDIE MAC SECURITIES

FRANKLIN, NEW JERSEY – February 2, 2009– Sussex Bancorp (NASDAQ “SBBX”) today announced its results of operations for the year ended December 31, 2008. For the year, the Company had a net loss of $1.0 million, or ($0.32) loss per basic and diluted share, compared to net income of $1.5 million for the prior year, or $0.45 per basic and diluted share.   The Company’s performance in 2008 primarily reflects the effect of a $3.5 million other than temporary impairment charge recognized by the Company in the third quarter in connection with certain Fannie Mae and Freddie Mac perpetual preferred stock held by the Company. The charge reduced net income by $2.3 million or $0.70 per share.

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.  Despite the difficult economic environment, I am gratified that our year over year operating performance, exclusive of the impairment charge for the Fannie Mae and Freddie Mac preferred stock, remained relatively stable. The Company has received preliminary approval to participate in the US Department of Treasury Capital Purchase Program, which will significantly bolster our capital during these challenging times and enhance our lending operations.”

The Company’s total interest income decreased to $22.7 million for the year ended December 31, 2008 from $22.8 million for the same period last year, as total interest expense decreased to $10.8 million for the year ended December 31, 2008 compared to $11.4 million for the year ended December 31, 2007.  As a result, for the year ended December 31, 2008 the Company’s net interest income increased to $11.8 million from the $11.4 million earned last year.  The decline in interest income reflects a $310 thousand decline in interest on federal funds sold and a $374 thousand decline in interest on loans, both reflecting declining market rates of interest.

The Company’s average earning assets increased by $39.4 millionin 2008 compared to 2007, while the average yield declined by 64 basis points, to 5.88% in 2008 from 6.52% in 2007.The Company’s average interest bearing liabilities increased by $40.6 million for the year ended December 31, 2008 compared to the prior year.  The Company’s cost of interest bearing liabilities decreased by 59 basis points, to 3.15% in 2008 from 3.74% in 2007, while the net interest margin fell 19 basis points to 3.12% in 2008 from 3.31% in 2007.

For the year ended December 31, 2008, the Company’s non-interest income decreased by $3.6 million from $5.6 million for year ended December 31, 2007 to $2.0 million for year ended December 31, 2008. The decrease primarily reflects the other than temporary impairment charge discussed above.  Non-interest expenses increased $1.5 million to $14.6 million for the year ended December 31, 2008 compared to $13.1 million one year earlier.  This increase is largely due to $692 thousand in combined expenses related to a write-down on foreclosed real estate and other foreclosed real estate expenses, in addition to a $349 thousand increase in FDIC assessment charges and a $392 thousand increase in salary and benefit expenses.

The Company’s loan loss provision for the year ended December 31, 2008 was $1.4 million compared to $1.9 million for the same period last year.  The Company’s non-accrual loan balance decreased to $9.7 million at December 31, 2008 from $12.3 million at December 31, 2007. The decrease in non-accrual loans primarily reflects the migration of one loan with a principal balance of $3.0 million to foreclosed real estate. The balance of the non-accrual loans reflect a number of individual loans all of which the Company believes are adequately provided for in its loan loss provision or are sufficiently secured.  Non-performing loans as a percentage of total gross loans at December 31, 2008 was 3.44%, compared to 4.28% one year earlier.

At December 31, 2008 the Company had total assets of $440.6 million, compared to total assets of $393.5 million at December 31, 2007.  In addition, the Company had total deposits of $360.1 million at December 31, 2008, compared to total deposits of $308.5 million at December 31, 2007.

Sussex Bancorp is the holding company for Sussex Bank, which services its customers through ten branch offices, eight located in Sussex County, New Jersey and two in Orange County, New York and for Tri-State Insurance Agency, Inc, a full service insurance agency located in Sussex County, New Jersey.

SUSSEX BANCORP
CONSOLIDATED BALANCE SHEETS
(Dollars In Thousands)
ASSETS	December 31, 2008		December 31, 2007
Cash and due from banks	$	7,602	$	7,985
Federal funds sold		13,310		3,790
Cash and cash equivalents		20,912		11,775
Interest bearing time deposits with other banks		100		100
Trading securities		13,290		14,259
Securities available for sale		62,272		48,397
Federal Home Loan Bank Stock, at cost		1,975		2,032
Loans receivable, net of unearned income		320,880		300,646
Less:  allowance for loan losses		5,813		5,140
Net loans receivable		315,067		295,506
Foreclosed real estate		3,864		-
Premises and equipment, net		8,526		9,112
Accrued interest receivable		2,115		2,035
Goodwill		2,820		2,820
Other assets		9,654		7,496
Total Assets	$	440,595	$	393,532
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Non-interest bearing	$	34,784	$	36,625
Interest bearing		325,297		271,913
Total Deposits		360,081		308,538
Borrowings		33,146		35,200
Accrued interest payable and other liabilities		2,571		2,467
Junior subordinated debentures		12,887		12,887
Total Liabilities		408,685		359,092
Total Stockholders' Equity		31,910		34,440
Total Liabilities and Stockholders' Equity	$	440,595	$	393,532

SUSSEX BANCORP
CONSOLIDATED STATEMENTS OF INCOME
(Dollars In Thousands Except Per Share Data)
	Years Ended December 31,
	2008			2007
INTEREST INCOME
Loans receivable, including fees	$	19,150		$	19,524
Securities:
Taxable		2,266			1,696
Tax-exempt		976			1,014
Federal funds sold		259			569
Interest bearing deposits		2			5
Total Interest Income		22,653			22,808
INTEREST EXPENSE
Deposits		8,746			9,734
Borrowings		1,507			966
Junior subordinated debentures		590			687
Total Interest Expense		10,843			11,387
Net Interest Income		11,810			11,421
PROVISION FOR LOAN LOSSES		1,350			1,930
Net Interest Income after Provision for Loan Losses		10,460			9,491
OTHER INCOME
Service fees on deposit accounts		1,534			1,396
ATM fees		464			412
Insurance commissions and fees		2,507			2,688
Investment brokerage fees		151			282
Holding gains on trading securities		199			258
Gain on sale of securities, available for sale		150			10
Loss on sale of foreclosed real estate		(58	)		-
Impairment write-downs on equity securities		(3,526	)		-
Other		570			570
Total Other Income		1,991			5,616
OTHER EXPENSES
Salaries and employee benefits		7,545			7,153
Occupancy, net		1,299			1,246
Furniture, equipment and data processing		1,481			1,462
Stationary and supplies		192			187
Professional fees		621			599
Advertising and promotion		469			556
Insurance		171			176
FDIC Assessment		385			36
Postage and freight		155			167
Amortization of intangible assets		49			93
Write-down on foreclosed real estate		437			-
Foreclosed real estate		255			-
Other		1,530			1,473
Total Other Expenses		14,589			13,148
Income (Loss) before Income Taxes		(2,138	)		1,959
PROVISION (BENEFIT) FOR INCOME TAXES		(1,096	)		450
Net Income (Loss)	$	(1,042	)	$	1,509

SUSSEX BANCORP
COMPARATIVE AVERAGE BALANCES AND AVERAGE INTEREST RATES
(Dollars In Thousands)
(Unaudited)
	Twelve Months Ended December 31,
(dollars in thousands)	2008								2007
	Average					Average			Average					Average
Earning Assets:	Balance			Interest (1)		Rate (2)			Balance			Interest (1)		Rate (2)
Securities:
Tax exempt  (3)	$	23,720		$	1,458		6.15	%	$	24,033		$	1,317		5.48	%
Taxable		47,234			2,266		4.80	%		35,214			1,696		4.82	%
Total securities		70,954			3,724		5.25	%		59,247			3,013		5.09	%
Total loans receivable (4)		307,845			19,150		6.22	%		283,346			19,524		6.89	%
Other interest-earning assets		14,749			261		1.77	%		11,603			574		4.95	%
Total earning assets		393,548		$	23,135		5.88	%		354,196		$	23,111		6.52	%
Non-interest earning assets		31,359								28,738
Allowance for loan losses		(5,182	)							(3,778	)
Total Assets	$	419,725							$	379,156
Sources of Funds:
Interest bearing deposits:
NOW	$	58,878		$	798		1.36	%	$	60,377		$	1,282		2.12	%
Money market		23,769			527		2.22	%		37,317			1,378		3.69	%
Savings		85,707			2,350		2.74	%		38,142			348		0.91	%
Time		127,475			5,071		3.98	%		138,633			6,726		4.85	%
Total interest bearing deposits		295,829			8,746		2.96	%		274,469			9,734		3.55	%
Borrowed funds		35,971			1,507		4.19	%		20,397			966		4.74	%
Junior subordinated debentures		12,887			590		4.57	%		9,271			687		7.41	%
Total interest bearing liabilities		344,687		$	10,843		3.15	%		304,137		$	11,387		3.74	%
Non-interest bearing liabilities:
Demand deposits		39,303								37,663
Other liabilities		2,036								2,309
Total non-interest bearing liabilities		41,339								39,972
Stockholders' equity		33,699								35,047
Total Liabilities and Stockholders' Equity	$	419,725							$	379,156
Net Interest Income and Margin (5)				$	12,292		3.12	%				$	11,724		3.31	%
(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