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Sussex Bancorp Reports Strong Growth of Approximately 40% in Operating Results for the Fourth Quarter and Full Year 2017

ROCKAWAY, N.J., Jan. 30, 2018 (GLOBE NEWSWIRE) -- Sussex Bancorp (the “Company”) (Nasdaq:SBBX), the holding company for Sussex Bank (the “Bank”), today reported net income of $513 thousand, or $0.09 per basic and diluted share, for the quarter ended December 31, 2017, as compared to $1.5 million, or $0.33 per basic share and $0.32 per diluted share, for the same period last year. For the year ended December 31, 2017, the Company reported net income of $5.7 million, or $1.05 per diluted share as compared to net income of $5.5 million, or $1.19 per diluted share, for the same period last year. The decrease in net income for both reported periods was mainly attributable to the Company’s adjustment to deferred tax assets resulting from the recognition of the newly enacted Tax Cuts and Jobs Act (“Tax Act”) and merger-related costs associated with the merger of Community Bank of Bergen County (“Community Bank”), NJ with and into the Bank. Earnings per share for both periods were also impacted by 1,249,999 additional common shares issued in the second quarter of 2017 in connection with an approximately $28.2 million capital raise.

The Company’s net income, adjusted for merger-related expenses and the impact from the Tax Act on income tax expenses, increased $608 thousand, or 39.9%, to $2.1 million, or $0.35 per basic and diluted share, for the quarter ended December 31, 2017, as compared to the same period last year.

For the year ended December 31, 2017, the Company’s net income, adjusted for merger-related expenses and the impact from the Tax Act on income tax expenses, increased $2.2 million, or 39.4%, to $7.7 million, or $1.42 per basic and diluted common share, for the year ended December 31, 2017, as compared to last year.

In December 2017, the Company recognized a decrease in deferred tax assets as a result of the Tax Act and the change in federal income tax rate from 34% to the newly enacted 21%, which resulted in additional income tax expense of $942 thousand. Also, the Company realized $705 thousand and $1.2 million in merger-related expenses for the three months ended December 31, 2017 and for the year ended December 31, 2017, respectively.

“I am very excited to report another strong year of financial performance for Sussex Bancorp as our business lines continue to drive outstanding results. For 2017, each of our major business units grew in excess of 15% with commercial loans leading the way, growing at 23%. The business line growth in conjunction with continued improvement in efficiency has driven strong growth in operating results of approximately 40% for the fourth quarter and fiscal year of 2017,” said Anthony Labozzetta, President and Chief Executive Officer of Sussex Bank.

Mr. Labozzetta also stated, “We are very excited at the tremendous opportunities ahead of us. In January, we completed our merger and began our partnership with Community Bank. Also, the new Tax Act will provide us a financial lift for both the short and long run. The Tax Act provides an opportunity to prudently accelerate our strategic plan initiatives through the hiring of additional staff to grow our businesses, invest in technology, and expand risk management and infrastructure to support our growth. We were optimistic and excited about the future of our Company prior to the signing of the Tax Act and now even more so.”

Financial Performance
Net Income. For the quarter ended December 31, 2017, the Company reported net income of $513 thousand, or $0.09 per basic and diluted share, as compared to net income of $1.5 million, or $0.33 per basic share and $0.32 per diluted share, for the same period last year. The decrease in net income for the quarter ended December 31, 2017 was driven by a $1.2 million, or 153.0%, increase in income tax provision mostly due to the newly enacted Tax Act and an increase in non-interest expenses of $1.1 million largely due to merger-related expenses of $705 thousand. The aforementioned decrease in net income was partially offset by a $1.3 million, or 19.5%, increase in net interest income resulting from strong average loan and average interest bearing deposit growth of 18.4% and 19.5%, respectively, which is partially offset by a $491 thousand increase in overall interest expense partly related to the $15.0 million private placement of subordinated notes completed in the fourth quarter of 2016 and an increase in interest expense related to growth and higher costs for interest bearing deposits.

The Company’s net income, adjusted for merger and impact on income tax expenses from the Tax Act, increased $608 thousand, or 39.9%, to $2.1 million, or $0.35 per basic and diluted share, for the quarter ended December 31, 2017, as compared to the same period last year.

For the year ended December 31, 2017, the Company reported net income of $5.7 million, or $1.05 per diluted share, or a 3.0% increase, as compared to net income of $5.5 million, or $1.19 per diluted share, for the same period last year. The increase in net income for the twelve months ended December 31, 2017 was largely due to an increase in net interest income of $4.7 million, which was partially offset by an increase in non-interest expenses of $3.0 million and income tax expenses from the Tax Act of $942 thousand. The increase in non-interest expenses was largely due to an $1.7 million increase in salaries and employee benefits and merger-related expenses of $1.2 million. Excluding merger-related expenses, net income increased $1.2 million, or 21.5%, for the twelve months ended December 31, 2017.

The Company’s net income, adjusted for merger-related expenses and income tax expenses from the Tax Act, increased $2.2 million, or 39.4%, to $7.7 million, or $1.42 per basic and diluted share, for the year ended December 31, 2017, as compared to last year.

Net Interest Income. Net interest income on a fully tax equivalent basis increased $1.3 million, or 19.9%, to $8.0 million for the fourth quarter of 2017, as compared to $6.7 million for the same period in 2016. The increase in net interest income was largely due to a $128.1 million, or 16.1%, increase in average interest earning assets, principally loans receivable, which increased $125.1 million, or 18.4%. The net interest margin increased by 11 basis points to 3.46% for the fourth quarter of 2017, as compared to the same period in 2016. The net interest margin increase was partially attributed to $178 thousand in prepayment penalties, an increase of $135 thousand, or 319.5%, as compared to the same period in 2016.

Net interest income on a fully tax equivalent basis increased $4.9 million, or 19.8%, to $29.7 million for the year ended December 31, 2017 as compared to $24.8 million for the same period in 2016. Included in the increase in net interest income was $635 thousand in prepayment penalties on $54.9 million of commercial loans, an increase of $544 thousand, or 601.2%, as compared to the same period in 2016. The net interest margin increased by 2 basis points to 3.39% for the year ended December 31, 2017, as compared to the same period in 2016.

Provision for Loan Losses. Provision for loan losses increased $222 thousand to $459 thousand for the fourth quarter of 2017, as compared to $237 thousand for the same period in 2016.

Provision for loan losses increased $295 thousand, or 22.9%, to $1.6 million for the year ended December 31, 2017, as compared to the same period in 2016.

Non-interest Income. Non-interest income increased $256 thousand, or 15.0%, to $2.0 million for the fourth quarter of 2017, as compared to the same period last year. The increase was principally due to growth of $227 thousand in insurance commissions and fees relating to Tri-State Insurance Agency, $62 thousand in service fees on deposit accounts and $61 thousand in bank owned life insurance. The aforementioned was partly offset by a reduction in gain on sales of securities of approximately $143 thousand.

The Company’s non-interest income increased $456 thousand, or 5.8%, to $8.3 million for the year ended December 31, 2017 as compared to the same period last year. The increase was principally due to growth of $530 thousand in insurance commissions and fees relating to Tri-State Insurance Agency and an increase of $214 thousand in bank owned life insurance, due to an increase in investments in bank owned life insurance. The aforementioned were partly offset by a reduction in gain on sales of securities of approximately $453 thousand.

Non-interest Expense. The Company’s non-interest expenses increased $1.1 million, or 19.1%, to $6.8 million for the fourth quarter of 2017, as compared to the same period last year. The increase for the fourth quarter of 2017, as compared to the same period in 2016, was largely due to expenses of $705 thousand related to the acquisition of Community Bank and increases in salaries and employee benefits of $377 thousand and in professional fees of $177 thousand. The aforementioned were partly offset by reductions in expenses and write-downs related to foreclosed real estate of $156 thousand.

The Company’s non-interest expenses increased $3.0 million, or 13.4%, to $25.6 million for the year ended December 31, 2017 as compared to the same period last year. The increase for the year ended December 31, 2017, as compared to the same period in 2016, was largely due to increases in salaries and employee benefits of $1.7 million, merger-related expenses of $1.2 million, professional fees of $385 thousand, and other expenses of $270 thousand and was partly offset by decreases of $245 thousand in FDIC assessment fees and $175 in expenses and write-downs related to foreclosed real estate.

The increase in salaries and employee benefits for the fourth quarter and twelve months ended December 31, 2017 as compared to the same periods in 2016 was largely due to an increase in personnel to support the Company’s growth.

Income Tax Expense. The Company’s income tax expenses increased $1.2 million, or 153.0% to $2.0 million for the fourth quarter of 2017, as compared to the same period last year. The Company’s income tax expenses increased $1.7 million, or 58.4%, to $4.5 million for the year ended December 31, 2017 as compared to the same period last year.

The increase in income tax expense for the quarter and year ended December 31, 2017, was directly impacted by the recognition of the newly enacted Tax Act.

Financial Condition
At December 31, 2017, the Company’s total assets were $979.4 million, an increase of $130.7 million, or 15.4%, as compared to total assets of $848.7 million at December 31, 2016. The increase in total assets was largely driven by growth in loans receivable of $125.4 million, or 18.0%.

Total loans receivable, net of unearned income, increased $125.4 million, or 18.0%, to $820.7 million at December 31, 2017, as compared to $695.3 million at December 31, 2016. During the twelve months ended December 31, 2017, the Company had $165.3 million in commercial loan production, which was partly offset by $54.9 million in commercial loan payoffs.

The Company’s total deposits increased $101.6 million, or 15.4%, to $762.5 million at December 31, 2017, from $660.9 million at December 31, 2016. The growth in deposits was primarily due to an increase in interest bearing deposits of $87.8 million, or 16.6%, at December 31, 2017, as compared to December 31, 2016. Included in the aforementioned deposit total is $89.9 million with a cost of 0.69% attributed to our branch in Oradell, New Jersey, which opened in the beginning of March 2016, an increase of $29.9 million or 49.9% from December 31, 2016. Additionally, the Company’s wholesale deposits increased $46.0 million, or 54.4%, to $130.6 million at December 31, 2017 from $84.6 at December 31, 2016.

At December 31, 2017, the Company’s total stockholders’ equity was $94.2 million, an increase of $34.1 million when compared to December 31, 2016. The increase was largely due to the capital raise of approximately $28.2 million and net income for the twelve months ended December 31, 2017. The Company completed the capital raise on June 21, 2017 which was the primary driver in the book value increase of 23.1% from $12.67 to $15.59. At December 31, 2017, the leverage, Tier I risk-based capital, total risk-based capital and common equity Tier I capital ratios for the Bank were 11.87%, 14.28%, 15.19% and 14.28%, respectively, all in excess of the ratios required to be deemed “well-capitalized.”

Asset and Credit Quality
The ratio of NPAs, which include non-accrual loans, loans 90 days past due and still accruing, troubled debt restructured loans currently performing in accordance with renegotiated terms and foreclosed real estate, to total assets decreased to 0.94% at December 31, 2017 from 1.10% at December 31, 2016. NPAs decreased $120 thousand, or 1.3%, to $9.2 million at December 31, 2017, as compared to $9.3 million at December 31, 2016. There were no loans 90 days past due and still accruing at December 31, 2017 as compared to $468 thousand at December 31, 2016. Non-accrual loans increased $187 thousand, or 3.2%, to $6.0 million at December 31, 2017, as compared to $5.8 million at December 31, 2016. Loans past due 30 to 89 days totaled $6.5 million at December 31, 2017, representing an increase of $4.7 million, or 253.0%, as compared to $1.8 million at December 31, 2016.

The Company continues to actively market its foreclosed real estate properties, which decreased $92 thousand to $2.3 million at December 31, 2017 as compared to $2.4 million at December 31, 2016. At December 31, 2017, the Company’s foreclosed real estate properties had an average carrying value of approximately $253 thousand per property.

The allowance for loan losses increased by $639 thousand, or 9.5%, to $7.3 million, or 0.89% of total loans, at December 31, 2017, compared to $6.7 million, or 0.96% of total loans, at December 31, 2016. The Company recorded $1.6 million in provision for loan losses for the twelve months ended December 31, 2017 as compared to $1.3 million for the twelve months ended December 31, 2016. Additionally, the Company recorded net charge-offs of $947 thousand for the twelve months ended December 31, 2017, as compared to $185 thousand in net charge-offs for the twelve months ended December 31, 2016. The allowance for loan losses as a percentage of non-accrual loans increased to 121.8% at December 31, 2017 from 114.8% at December 31, 2016.

About Sussex Bancorp
Sussex Bancorp (Nasdaq:SBBX) is the holding company for Sussex Bank which is headquartered in Sussex County, New Jersey and operates regionally with fourteen branch locations throughout Bergen, Sussex and Warren counties in New Jersey and in Astoria, New York. In addition to its branch locations, Sussex Bancorp offers a loan production office in Oradell, New Jersey and a full-service insurance agency, the Tri-State Insurance Agency, Inc., with locations in Augusta and Oradell, New Jersey.

In 2017, Sussex Bancorp was recognized as one of the top 29 banks and thrifts nationwide and one of three from New Jersey that comprise the Sandler O’Neill Sm-All Stars Class of 2017. Sussex Bancorp is one of the 50 Fastest Growing Companies in New Jersey as ranked by NJBIZ Magazine. Sussex Bancorp President and Chief Executive Officer, Anthony Labozzetta, was named one of America’s Business Leaders in Banking by Forbes magazine and American Banker’s Community Banker of the Year in 2016.

For more details on Sussex Bank, please visit: www.sussexbank.com

Forward-Looking Statements
This press release contains statements that are forward looking and are made pursuant to the “safe-harbor” provisions of the Private Securities Litigation Reform Act of 1995. Such statements may be identified by the use of words such as "expect," "estimate," “assume,” "believe," "anticipate," "will," "forecast," "plan," "project" or similar words. Such statements are based on the Company’s current expectations and are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, among others, changes to interest rates, the ability to control costs and expenses, general economic conditions, the success of the Company’s efforts to diversify its revenue base by developing additional sources of non-interest income while continuing to manage its existing fee-based business, risks associated with the quality of the Company’s assets, the ability of its borrowers to comply with repayment terms, the inability to realize expected cost savings or to implement integration plans and other adverse consequences associated with the acquisition of Community Bank of Bergen County, NJ (“Community Bank”), the inability to retain Community’s customers, the risk that the businesses of Community and the Bank may not be combined successfully or may take longer than expected, and the diversion of management’s time on issues relating to integration of Community. Further information about these and other relevant risks and uncertainties may be found in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016 and in subsequent filings with the Securities and Exchange Commission. The Company undertakes no obligation to publicly release the results of any revisions to those forward looking statements that may be made to reflect events or circumstances after this date or to reflect the occurrence of unanticipated events.

Contacts: Anthony Labozzetta, President/CEO
Steven Fusco, SEVP/CFO
844-256-7328

SUSSEX BANCORP
SUMMARY FINANCIAL HIGHLIGHTS
(In Thousands, Except Percentages and Per Share Data)
(Unaudited)
12/31/2017 VS.
12/31/2017 9/30/2017 12/31/2016 12/31/2016 9/30/2017
BALANCE SHEET HIGHLIGHTS - Period End Balances
Total securities $104,034 $109,053 $100,229 3.8 % (4.6)%
Total loans 820,700 795,124 695,257 18.0 % 3.2 %
Allowance for loan losses (7,335) (7,502) (6,696) 9.5 % (2.2)%
Total assets 979,383 956,802 848,728 15.4 % 2.4 %
Total deposits 762,491 741,928 660,921 15.4 % 2.8 %
Total borrowings and junior subordinated debt 118,198 116,556 123,645 (4.4)% 1.4 %
Total shareholders' equity 94,193 93,944 60,072 56.8 % 0.3 %
FINANCIAL DATA - QUARTER ENDED:
Net interest income (tax equivalent) (a) $8,038 $7,732 $6,704 19.9 % 4.0 %
Provision for loan losses 459 340 237 93.7 % 35.0 %
Total other income 1,961 2,029 1,705 15.0 % (3.4)%
Total other expenses 6,820 6,294 5,726 19.1 % 8.4 %
Income before provision for income taxes (tax equivalent) 2,720 3,127 2,446 11.2 % (13.0)%
Provision for income taxes 2,039 1,006 806 153.0 % 102.7 %
Taxable equivalent adjustment (a) 168 158 117 43.6 % 6.3 %
Net income $513 $1,963 $1,523 (66.3)% (73.9)%
Net income per common share - Basic $0.09 $0.33 $0.33 (72.7)% (72.7)%
Net income per common share - Diluted $0.09 $0.33 $0.32 (71.9)% (72.7)%
Return on average assets 0.21 % 0.84 % 0.74 % (71.0)% (74.6)%
Return on average equity 2.16 % 8.40 % 10.14 % (78.7)% (74.3)%
Efficiency ratio (b) 69.37 % 65.54 % 69.05 % 0.5 % 5.8 %
Net interest margin (tax equivalent) 3.46 % 3.42 % 3.35 % 3.3 % 1.2 %
Avg. interest earning assets/Avg. interest bearing liabilities 1.29 1.29 1.25 2.9 % (0.1)%
FINANCIAL DATA - YEAR TO DATE:
Net interest income (tax equivalent) (a) $29,732 $24,813 19.8 %
Provision for loan losses 1,586 1,291 22.9 %
Total other income 8,285 7,829 5.8 %
Total other expenses 25,617 22,585 13.4 %
Income before provision for income taxes (tax equivalent) 10,814 8,766 23.4 %
Provision for income taxes 4,479 2,828 58.4 %
Taxable equivalent adjustment (a) 644 415 55.2 %
Net income $ 5,691 $ 5,523 3.0 %
Net income per common share - Basic $1.06 $1.20 (11.7)%
Net income per common share - Diluted $1.05 $1.19 (11.8)%
Return on average assets 0.62 % 0.72 % (13.2)%
Return on average equity 7.17 % 9.60 % (25.3)%
Efficiency ratio (b) 68.54 % 70.08 % (2.2)%
Net interest margin (tax equivalent) 3.39 % 3.37 % 0.6 %
Avg. interest earning assets/Avg. interest bearing liabilities 1.27 % 1.25 % 1.6 %
SHARE INFORMATION:
Book value per common share $ 15.59 $ 15.55 $ 12.67 23.1 % 0.3 %
Tangible book value per common share 15.13 15.09 12.08 25.3 % 0.3 %
Outstanding shares- period ending 6,040,564 6,040,180 4,741,068 27.4 % 0.0 %
Average diluted shares outstanding (year to date) 5,404,381 5,200,467 4,651,108 16.2 % 3.9 %
CAPITAL RATIOS:
Total equity to total assets 9.62 % 9.82 % 7.08 % 35.9 % (2.0)%
Leverage ratio (c) 11.87 %12.14 %10.41 % 14.0 % (2.2)%
Tier 1 risk-based capital ratio (c) 14.28 % 14.82 % 12.87 % 11.0 % (3.6)%
Total risk-based capital ratio (c) 15.19 %15.80 %13.86 % 9.6 % (3.9)%
Common equity Tier 1 capital ratio (c) 14.28 %14.82 % 12.87 % 11.0 % (3.6)%
ASSET QUALITY:
Non-accrual loans $6,020 $6,604 $5,833 3.2 % (8.8)%
Loans 90 days past due and still accruing - - 468 - % #DIV/0!%
Troubled debt restructured loans ("TDRs") (d) 932 939 679 37.3 % (0.7)%
Foreclosed real estate 2,275 2,275 2,367 (3.9)% - %
Non-performing assets ("NPAs") $9,227 $9,818 $9,347 (1.3)% (6.0)%
Foreclosed real estate, criticized and classified assets $18,992 $20,285 $20,450 (7.1)% (6.4)%
Loans past due 30 to 89 days $6,495 $1,628 $1,840 253.0 % 299.0 %
Charge-offs (Recoveries) , net (quarterly) $ 626 $ 3 $ (128) (589.1)% 20,766.7 %
Charge-offs (Recoveries) , net as a % of average loans (annualized) 0.31 % 0.00 % (0.08)% (513.1)% 20,083.3 %
Non-accrual loans to total loans 0.73 % 0.83 % 0.84 % (12.6)% (11.7)%
NPAs to total assets 0.94 % 1.03 % 1.10 % (14.5)% (8.2)%
NPAs excluding TDR loans (d) to total assets 0.85 % 0.93 % 1.02 % (17.1)% (8.7)%
Non-accrual loans to total assets 0.61 % 0.69 % 0.69 % (10.6)% (10.9)%
Allowance for loan losses as a % of non-accrual loans 121.84 % 113.60 % 114.80 % 6.1 % 7.3 %
Allowance for loan losses to total loans 0.89 % 0.94 % 0.96 % (7.2)% (5.3)%
(a) Full taxable equivalent basis, using a 34% effective tax rate and adjusted for TEFRA (Tax and Equity Fiscal Responsibility Act) interest expense disallowance
(b) Efficiency ratio calculated non-interest expense divided by net interest income plus non-interest income
(c) Sussex Bank capital ratios
(d) Troubled debt restructured loans currently performing in accordance with renegotiated terms

SUSSEX BANCORP
CONSOLIDATED BALANCE SHEETS
(Dollars In Thousands)
ASSETSDecember 31, 2017 December 31, 2016
Cash and due from banks$ 3,270 $ 2,847
Interest-bearing deposits with other banks 8,376 11,791
Cash and cash equivalents 11,646 14,638
Interest bearing time deposits with other banks 100 100
Securities available for sale, at fair value 98,730 88,611
Securities held to maturity 5,304 11,618
Federal Home Loan Bank Stock, at cost 4,925 5,106
Loans receivable, net of unearned income 820,700 695,257
Less: allowance for loan losses 7,335 6,696
Net loans receivable 813,365 688,561
Foreclosed real estate 2,275 2,367
Premises and equipment, net 8,389 8,728
Accrued interest receivable 2,472 2,058
Goodwill 2,820 2,820
Bank-owned life insurance 22,054 16,532
Other assets 7,303 7,589
Total Assets$ 979,383 $ 848,728
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Non-interest bearing$ 146,167 $ 132,434
Interest bearing 616,324 528,487
Total Deposits 762,491 660,921
Borrowings 90,350 95,805
Accrued interest payable and other liabilities 4,501 4,090
Subordinated debentures 27,848 27,840
Total Liabilities 885,190 788,656
Total Stockholders' Equity 94,193 60,072
Total Liabilities and Stockholders' Equity$ 979,383 $ 848,728

SUSSEX BANCORP
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Dollars In Thousands Except Per Share Data)
(Unaudited)
Three Months Ended December 31, Year Ended December 31,
2017 2016 2017 2016
INTEREST INCOME
Loans receivable, including fees$ 8,923 $ 7,287 $ 32,953 $ 26,862
Securities:
Taxable 373 327 1,437 1,443
Tax-exempt 331 240 1,274 832
Interest bearing deposits 7 6 35 23
Total Interest Income 9,634 7,860 35,699 29,160
INTEREST EXPENSE
Deposits 1,052 619 3,584 2,449
Borrowings 391 529 1,749 1,922
Junior subordinated debentures 321 125 1,278 391
Total Interest Expense 1,764 1,273 6,611 4,762
Net Interest Income 7,870 6,587 29,088 24,398
PROVISION FOR LOAN LOSSES 459 237 1,586 1,291
Net Interest Income after Provision for Loan Losses 7,411 6,350 27,502 23,107
OTHER INCOME
Service fees on deposit accounts 311 249 1,123 975
ATM and debit card fees 199 190 777 767
Bank owned life insurance 144 83 522 308
Insurance commissions and fees 1,173 946 5,326 4,796
Investment brokerage fees 12 8 24 75
(Loss) gain on securities transactions (60) 83 (9) 444
Gain (loss) on disposal of fixed assets 7 - 7 (19)
Other 175 146 515 483
Total Other Income 1,961 1,705 8,285 7,829
OTHER EXPENSES
Salaries and employee benefits 3,783 3,406 14,773 13,078
Occupancy, net 462 460 1,880 1,859
Data processing 530 482 2,173 2,108
Furniture and equipment 233 229 938 993
Advertising and promotion 49 57 308 311
Professional fees 395 218 1,173 788
Director fees 109 72 399 450
FDIC assessment 70 129 263 508
Insurance 77 67 279 280
Stationary and supplies 30 42 148 191
Merger-related expenses 705 - 1,187 -
Loan collection costs 47 31 122 140
Expenses and write-downs related to foreclosed real estate (15) 141 283 458
Other 345 392 1,691 1,421
Total Other Expenses 6,820 5,726 25,617 22,585
Income before Income Taxes 2,552 2,329 10,170 8,351
INCOME TAX EXPENSE 2,039 806 4,479 2,828
Net Income $ 513 $ 1,523 $ 5,691 $ 5,523
OTHER COMPREHENSIVE INCOME (LOSS):
Unrealized (loss) gains on available for sale securities arising during the period$ (128) $ (2,936) $ 1,682 $ (950)
Fair value adjustments on derivatives 282 3,006 (196) 1,647
Reclassification adjustment for net loss (gain) on securities transactions included in net income 60 (75) 9 (436)
Income tax related to items of other comprehensive income (loss) (86) 2 (599) (104)
Other comprehensive income, net of income taxes 128 (3) 896 157
Comprehensive income$ 641 $ 1,520 $ 6,587 $ 5,680
EARNINGS PER SHARE
Basic$ 0.09 $ 0.33 $ 1.06 $ 1.20
Diluted$ 0.09 $ 0.32 $ 1.05 $ 1.19

SUSSEX BANCORP
COMPARATIVE AVERAGE BALANCES AND AVERAGE INTEREST RATES
(Dollars In Thousands)
(Unaudited)
Three Months Ended December 31,
2017 2016
Average Average Average Average
Balance Interest Rate (2) Balance Interest Rate (2)
Earning Assets:
Securities:
Tax exempt (3) $ 47,223 $ 499 4.19% $ 38,186 $ 357 3.71%
Taxable 63,055 373 2.35% 66,336 327 1.96%
Total securities 110,278 872 3.14% 104,522 684 2.60%
Total loans receivable (1) (4) 805,179 8,923 4.40% 680,064 7,287 4.25%
Other interest-earning assets 7,527 7 0.37% 10,292 6 0.23%
Total earning assets 922,984 9,802 4.21% 794,878 7,977 3.98%
Non-interest earning assets 48,143 40,240
Allowance for loan losses (7,528) (6,551)
Total Assets $ 963,599 $ 828,567
Sources of Funds:
Interest bearing deposits:
NOW $ 192,595 $ 185 0.38% $ 153,845 $ 84 0.22%
Money market 99,115 250 1.00% 43,430 43 0.39%
Savings 134,803 70 0.21% 136,274 72 0.21%
Time 186,896 547 1.16% 179,629 420 0.93%
Total interest bearing deposits 613,409 1,052 0.68% 513,178 619 0.48%
Borrowed funds 74,255 391 2.09% 106,395 529 1.97%
Subordinated debentures 27,847 321 4.57% 14,354 125 3.45%
Total interest bearing liabilities 715,511 1,764 0.98% 633,927 1,273 0.80%
Non-interest bearing liabilities:
Demand deposits 148,420 131,098
Other liabilities 4,515 3,460
Total non-interest bearing liabilities 152,935 134,558
Stockholders' equity 95,153 60,082
Total Liabilities and Stockholders' Equity $ 963,599 $ 828,567
Net Interest Income and Margin (5) 8,038 3.46% 6,704 3.35%
Tax-equivalent basis adjustment (168) (117)
Net Interest Income $ 7,870 $ 6,587
(1) Includes loan fee income
(2) Average rates on securities are calculated on amortized costs
(3) Full taxable equivalent basis, using a 34% 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
SUSSEX BANCORP
COMPARATIVE AVERAGE BALANCES AND AVERAGE INTEREST RATES
(Dollars In Thousands)
(Unaudited)
Year Ended December 31,
2017 2016
Average Average Average Average
Balance Interest Rate (2) Balance Interest Rate (2)
Earning Assets:
Securities:
Tax exempt (3) $ 46,449 $ 1,918 4.13% $ 32,359 $ 1,247 3.85%
Taxable 64,636 1,437 2.22% 69,225 1,443 2.08%
Total securities 111,085 3,355 3.02% 101,584 2,690 2.65%
Total loans receivable (1) (4) 756,766 32,953 4.35% 625,399 26,862 4.30%
Other interest-earning assets 8,611 35 0.41% 9,440 23 0.24%
Total earning assets 876,462 36,343 4.15% 736,423 29,575 4.02%
Non-interest earning assets 45,398 40,106
Allowance for loan losses (7,113) (6,059)
Total Assets $ 914,747 $ 770,470
Sources of Funds:
Interest bearing deposits:
NOW $ 183,457 $ 584 0.32% $ 145,659 $ 313 0.21%
Money market 93,505 843 0.90% 37,046 148 0.40%
Savings 137,120 285 0.21% 137,696 286 0.21%
Time 171,163 1,872 1.09% 162,864 1,702 1.05%
Total interest bearing deposits 585,245 3,584 0.61% 483,265 2,449 0.51%
Borrowed funds 78,551 1,749 2.23% 93,974 1,922 2.05%
Subordinated debentures 27,844 1,278 4.59% 13,256 391 2.95%
Total interest bearing liabilities 691,640 6,611 0.96% 590,495 4,762 0.81%
Non-interest bearing liabilities:
Demand deposits 139,611 117,927
Other liabilities 4,167 4,530
Total non-interest bearing liabilities 143,778 122,457
Stockholders' equity 79,329 57,518
Total Liabilities and Stockholders' Equity $ 914,747 $ 770,470
Net Interest Income and Margin (5) 29,732 3.39% 24,813 3.37%
Tax-equivalent basis adjustment (644) (415)
Net Interest Income $ 29,088 $ 24,398
(1) Includes loan fee income
(2) Average rates on securities are calculated on amortized costs
(3) Full taxable equivalent basis, using a 34% 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

SUSSEX BANCORP
Segment Reporting
(Dollars In Thousands)
(Unaudited)
Three Months Ended December 31, 2017 Three Months Ended December 31, 2016
Banking and Banking and
Financial Insurance Financial Insurance
Services Services Total Services Services Total
Net interest income from external sources$ 7,870 $ - $ 7,870 $ 6,587 $ - $ 6,587
Other income from external sources 723 1,238 1,961 759 946 1,705
Depreciation and amortization 257 5 262 274 5 279
Income before income taxes 2,333 219 2,552 2,234 95 2,329
Income tax expense (1) 1,952 87 2,039 768 38 806
Total assets 973,729 5,654 979,383 843,703 5,025 848,728
Year Ended December 31, 2017 Year Ended December 31, 2016
Banking and Banking and
Financial Insurance Financial Insurance
Services Services Total Services Services Total
Net interest income from external sources$ 29,088 $ - $ 29,088 $ 24,398 $ - $ 24,398
Other income from external sources 2,864 5,421 8,285 3,033 4,796 7,829
Depreciation and amortization 1,037 24 1,061 1,089 26 1,115
Income before income taxes 8,757 1,413 10,170 7,152 1,199 8,351
Income tax expense (1) 3,914 565 4,479 2,348 480 2,828
Total assets 973,729 5,654 979,383 843,703 5,025 848,728
(1) Calculated at statutory tax rate of 40% for the insurance services segment

SUSSEX BANCORP
Non-GAAP Reporting
(Dollars In Thousands)
(Unaudited)
Three Months Ended December 31,
2017 2016
Net income (GAAP)$ 513 $ 1,523
Merger related expenses net of tax (1) 676 -
Tax Cut and Jobs Act adjusted (2) 942 -
Net income, as adjusted$ 2,131 $ 1,523
Average diluted shares outstanding (GAAP) 6,011,574 4,684,308
Diluted EPS, as adjusted$ 0.35 $ 0.33
Return on average assets, as adjusted 0.88% 0.74%
Return on average equity, as adjusted 8.96% 10.14%
(1) Merger related expense net of tax expense of $29 thousand.
(2) Represents acceleration of $942 thousand of deferred tax assets into expense due to recent enactment of the Tax Cut and Jobs Act
Year Ended December 31,
2017 2016
Net income (GAAP)$ 5,691 $ 5,523
Merger related expenses net of tax (1) 1,021 -
S-3 Registration filing expenses net of tax (1) 45 -
Tax Cut and Jobs Act adjusted (2) 942 -
Net income, as adjusted$ 7,699 $ 5,523
Average diluted shares outstanding (GAAP) 5,404,381 4,633,473
Diluted EPS, as adjusted$ 1.42 $ 1.19
Return on average assets, as adjusted 0.84% 0.72%
Return on average equity, as adjusted 9.71% 9.60%
(1) Merger related expenses net of tax expenses of $166 thousand; S-3 registration filing net of tax expenses of $30 thousand.
(2) Represents acceleration of $942 thousand of deferred tax assets into expense due to recent enactment of the Tax Cut and Jobs Act

Source:Sussex Bancorp