Somerset Hills Bancorp (SOMH) 8-K Results of Operations and Financial Condition

Exhibit 99.1

Contact: Stewart E. McClure, Jr.
President & CEO
(908) 630-5000

SOMERSET HILLS BANCORP REPORTS
2009 THIRD QUARTER AND NINE-MONTH EARNINGS
DECLARES CASH DIVIDEND OF $0.05 PER SHARE

BERNARDSVILLE, N.J., October 22, 2009 (GLOBE NEWSWIRE) -- Somerset Hills Bancorp (Nasdaq:SOMH) (the “Company”) parent company of Somerset Hills Bank (the “Bank”) reported net income of $462,000 for the quarter ended September 30, 2009, up 8.7% from $425,000 earned during the third quarter of 2008. Diluted earnings per share for the third quarter were $0.08 in 2009 and 2008.

Net income for the first nine months of 2009 was $1.413 million, up 14.3% from $1.236 million earned during the first nine months of 2008. Diluted earnings per share for the nine months were $0.20 in 2009 versus $0.23 in 2008. Net income available to common stockholders was $1.063 million for the first nine months of 2009. Net income available to common and diluted earnings per share for 2009 reflect accretion, dividends, and repurchase premium related to $7.4 million of preferred stock and warrants issued on January 16, 2009 to the U.S. Treasury under the Capital Purchase Program. During the second quarter of 2009 the Company repurchased all of the preferred stock and warrants issued to Treasury, and therefore these securities had no impact on the current quarter.

Stewart E. McClure, Jr., President and CEO stated, “With the repurchase of the TARP capital behind us, we redoubled our efforts toward building shareholder value. In short, we maintained our solid asset quality and improved our profitability.” Mr. McClure further commented, “For the seventh consecutive quarterly period, we had no increases in nonperforming assets, which remained at only 0.04% of total assets. On a sequential quarter basis, our net interest margin widened significantly and our non-interest expenses declined, even after taking into account the FDIC special assessment recorded in the second quarter. Going forward, we aim to build upon the Company’s positive trends including core deposit growth, net interest margin expansion and expense control. Our capital (tangible common equity ratio of 12.30%), and loan loss reserves (1.39% of total loans) are solid, yet we are mindful that there remains a credit crisis in the U.S., and that we may see additional stress to credit portfolios before we reach full economic recovery.”

Net interest income for the 2009 third quarter totaled $2.662 million, a decline of $78,000, or 2.8%, from $2.740 million earned in the year ago quarter. The net interest margin declined by 60 basis points to 3.68% in the current quarter from 4.28% in the prior year quarter. Average interest-earning assets were $287.1 million, up 12.7% from

$254.8 million in the third quarter of 2008. For the first nine months of 2009, net interest income was $7.769 million and the net interest margin was 3.60%, down from $8.078 million and 4.21% for the first nine months of 2008. Average interest-earning assets increased by 12.7% to $288.8 million for the first nine months of 2009 versus $256.2 million for same period one year ago. The reductions in net interest margin and the increases in interest-earning assets versus last year were substantial due to a strategy employed primarily during the third quarter of last year to increase liquidity and grow market share by offering time deposits at competitive rates of interest. The maturity and re-pricing of these deposits during the third quarter of 2009 at lower rates of interest contributed to a 25 basis point increase in the net interest margin versus the second quarter of 2009.

Non-interest income increased by $114,000 to $594,000 in the third quarter of 2009, from $480,000 in the third quarter of 2008, primarily due to higher gains on sales of residential mortgages at Sullivan Financial Services, Inc., a wholly-owned mortgage banking subsidiary of the Bank. Sullivan originates loans strictly on a pre-sold flow-basis, and had an improved year-over-year quarter due to improved execution in the current low interest rate environment. For the nine months ended September 30, 2009, non-interest income was $2.381 million, up $914,000 from $1.467 million reported for the first nine months of 2008. Gains on sales of residential mortgages increased by $375,000 for the year-over-year nine-month period due to increased volume and improved sales execution. In addition, the Company received in January 2009, $568,000 in tax free proceeds from a bank-owned life insurance policy.

Non-interest expenses declined by $19,000 to $2.450 million in the third quarter of 2009, from $2.469 million in the third quarter of 2008. Decreases in fees paid for professional services, such as consultants and legal counsel, were partially offset by higher FDIC regular insurance premiums and moderately higher employee expenses, including increased costs for health benefits. For the first nine months of 2009, non-interest expense was $7.760 million, up $315,000 from $7.445 million reported for the prior year period. Contributing to increased operating expenses for the nine-month comparison were higher FDIC insurance premiums, including a $140,000 special assessment, and a non-recurring $183,000 charge for retirement plan liability. These increases were partially offset by lower marketing expenses and overall cost containment.

Total non-accrual loans at quarter-end were $115,000, representing 0.05% of total loans versus $1.963 million, or 0.94% of total loans, at September 30, 2008. The Company had no other real estate owned at September 30, 2009 down from $297,000 one year ago. Net charge-offs in the current quarter were $10,000 versus $132,000 for the third quarter of 2008, while net charge-offs for the first nine months of 2009 were $656,000 versus $507,000 for the first nine months of 2008. The ratio of allowance for loan losses to total loans was 1.39% at September 30, 2009 and 1.46% at September 30, 2008. The allowance for loan losses as of the current quarter-end covers nonperforming loans by 25.3x up from 1.6x one year ago.

The Company’s tangible common equity ratio was 12.30% at September 30, 2009 versus 12.85% one year ago. Tangible book value per share was $7.34 at September 30, 2009 and $7.13 at September 30, 2008.

The Board of Directors has declared a quarterly cash dividend of $0.05 per share payable November 30, 2009 to shareholders of record as of November 16, 2009.

Forward-Looking Statements

This news release contains certain forward-looking statements which are based on certain assumptions and describe future plans, strategies and expectations of the Company. These forward-looking statements are generally identified by use of the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project,” or similar expressions. The Company’s ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on the operations of the Company and its subsidiaries include, but are not limited to, changes in interest rates, general economic conditions, legislative/regulatory changes, monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve Board, the quality or composition of the loan or investment portfolios, demand for loan products, deposit flows, competition, demand for financial services in the Company’s market area and accounting principles and guidelines. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. The Company does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

SOMERSET HILLS BANCORP
Selected Consolidated Financial Data
(Unaudited)

	Quarter Ended September 30
($ in thousands except per share data)	2009			2008
Income Statement Data:
Net interest income	$	2,662		$	2,740
Provision for loan losses		150			150
Net interest income after prov. for loan losses		2,512			2,590
Non-interest income		594			480
Non-interest expense		2,450			2,469
Income before income taxes		656			601
Income tax expense		194			176
Net income	$	462		$	425
Diluted earnings per share	$	0.08		$	0.08
Balance Sheet Data:
At period end-
Total assets	$	309,165		$	286,522
Loans, net		206,269			206,930
Loans held for sale		2,059			4,624
Allowance for loan losses		2,914			3,059
Investment securities held to maturity		12,262			12,056
Investment securities held for sale		34,160			22,044
Deposits		258,055			237,124
Borrowings		11,000			11,000
Shareholders’ equity		38,036			36,814
Book value per share	$	7.34		$	7.13
Tangible common equity ratio		12.30	%		12.85	%
Average for the period-
Interest-earning assets		287,099			254,856
Total assets		306,055			276,228
Shareholders’ equity		38,131			36,518
Performance Ratios:
Return on average assets		0.60	%		0.61	%
Return on average equity		4.81	%		4.62	%
Net interest margin		3.68	%		4.28	%
Efficiency ratio		75.2	%		76.7	%
Asset Quality:
Net charge-offs (recoveries)		10			132
At period end-
Nonaccrual loans		115			1,963
OREO property		-			297
Nonaccrual loans to total loans		0.05	%		0.94	%
Nonperforming assets to total assets		0.04	%		0.69	%
Allowance for loan losses to total loans		1.39	%		1.46	%
Allowance as a % of nonperforming loans		2,534	%		156	%

SOMERSET HILLS BANCORP
Statement of Operations
(in thousands, except per share data)

	Three months ended September 30, 2009			Three months ended September 30, 2008			Nine months ended September 30, 2009			Nine months ended September 30, 2008
		(unaudited)			(unaudited)			(unaudited)			(unaudited)
INTEREST INCOME
Loans, including fees		$	2,989		$	3,256		$	8,791		$	9,861
Federal funds sold			-			11			2			98
Investment securities			481			434			1,543			1,363
Cash and due from banks			22			4			58			15
Total interest income			3,492			3,705			10,394			11,337
INTEREST EXPENSE
Deposits			737			855			2,348			2,967
Federal funds Purchased			-			12			-			12
Federal Home Loan Bank advances			93			98			277			280
Total interest expense			830			965			2,625			3,259
Net Interest Income			2,662			2,740			7,769			8,078
PROVISION FOR LOAN LOSSES			150			150			750			365
Net interest income after provision for loan losses			2,512			2,590			7,019			7,713
NON-INTEREST INCOME
Service fees on deposit accounts			72			83			207			225
Gains on sales of mortgage loans, net			371			249			1,169			794
Bank owned life insurance			79			87			801			261
Other income			72			61			204			187
Total Non-Interest Income			594			480			2,381			1,467
NON-INTEREST EXPENSE
Salaries and employee benefits			1,382			1,303			4,150			3,918
Occupancy expense			468			493			1,446			1,451
Advertising & business promotions			50			78			151			222
Printing stationery and supplies			37			41			152			138
Data processing			125			137			376			418
Other operating expense			388			417			1,485			1,298
Total Non-Interest Expense			2,450			2,469			7,760			7,445
Income before provision for taxes			656			601			1,640			1,735
PROVISION FOR INCOME TAX			194			176			227			499
Net income		$	462		$	425		$	1,413		$	1,236
Dividends on preferred stock and accretion			-			-			350			-
Net income available to common stockholders		$	462		$	425		$	1,063		$	1,236
Per share data
Net income - basic		$	0.09		$	0.08		$	0.21		$	0.24
Net income - diluted		$	0.08		$	0.08		$	0.20		$	0.23

SOMERSET HILLS BANCORP
Balance Sheets
(Dollars in thousands)

	September 30, 2009			December 31, 2008
	(unaudited)			(unaudited)
ASSETS
Cash and due from banks	$	37,303		$	19,997
Federal funds sold		-			1,500
Total cash and cash equivalents		37,303			21,497
Loans held for sale, net		2,059			2,366
Investment securities held to maturity (Approximate maket value of $12,157 in 2009 and $11,608 in 2008)		12,262			12,293
Investments available for sale		34,160			36,816
Loans receivable		209,183			211,246
Less allowance for loan losses		(2,914	)		(2,819	)
Net loans receivable		206,269			208,427
Premises and equipment, net		5,655			5,973
Bank owned life insurance		7,678			8,459
Accrued interest receivable		1,116			1,227
Other assets		2,663			2,605
Total assets	$	309,165		$	299,663
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES
Deposits:
Non-interest bearing deposits-demand	$	56,793		$	50,957
Interest bearing deposits
Now, M/M and savings		144,693			140,945
Certificates of deposit, under $100,000		28,988			32,774
Certificates of deposit, $100,000 and over		27,581			25,084
Total deposits		258,055			249,760
Federal Home Loan Bank advances		11,000			11,000
Other liabilities		2,074			1,374
Total liabilities		271,129			262,134
STOCKHOLDERS’ EQUITY
Preferred stock- 1,000,000 Shares authorized, none issued		-			-
Common stock- authorized 9,000,000 shares of no par value; issued and outstanding, 5,179,773 shares in 2009 and 5,180,012 shares in 2008		37,311			37,361
Accumulated deficit		(41	)		(326	)
Accumulated other comprehensive income		766			494
Total stockholders’ equity		38,036			37,529
Total liabilities and stockholders’ equity	$	309,165		$	299,663