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Somerset Hills Bancorp Reports 2012 Fourth Quarter and Higher Full-Year Earnings

BERNARDSVILLE, N.J., Jan. 24, 2013 (GLOBE NEWSWIRE) -- Somerset Hills Bancorp (Nasdaq:SOMH) (the "Company"), parent company of Somerset Hills Bank (the "Bank"), today reported full-year net income of $3.4 million for 2012, a 20.1% increase over the $2.8 million earned in 2011. On a fully diluted per share basis, net income was $0.63 per share for 2012 and $0.52 per share for 2011. For the fourth quarter of 2012, the Company earned $844,000, representing a 2.7% increase from 2011 fourth quarter net income of $822,000. Diluted earnings per share amounted to $0.16 in the fourth quarter of both 2012 and 2011.

Stewart E. McClure, Jr., President and CEO, noted, "The Company reported another quarter of good financial results despite a continuing difficult operating environment for banks that has been marked by high levels of unemployment and weak real estate valuations. Both the Company's and the banking industry's net interest margins continue to be under duress as longer term assets reprice at increasingly lower levels as a result of the lingering low interest rate environment. Our credit quality remains strong as nonaccrual loans were 0.31% of total loans at the end of 2012. In addition, our cost containment efforts have been instrumental in the improvement in our efficiency ratio to 61.9% for the year 2012, down from 66.8% for all of 2011."

Net Interest Income (Tax Equivalent Basis)

Fully taxable equivalent ("FTE") net interest income for 2012 was $12.1 million, up modestly, from the $12.0 million earned in 2011. The slight increase in net interest income during 2012 was primarily attributable to a 4.7% increase in average interest-earning assets to $334.0 million in 2012 from $318.9 million in 2011, which was partially offset by a 16 basis-point decline in the net interest margin to 3.62% in 2012 from 3.78% in 2011. FTE net interest income for the fourth quarter of 2012 totaled $2.9 million, a decline of $151,000, or 4.9%, from the $3.1 million earned in the fourth quarter of 2011. The decrease in FTE net interest income for the fourth quarter of 2012 from the same quarter of 2011 was primarily due to a 20 basis-point narrowing of the net interest margin to 3.35% from 3.55% for the fourth quarter of 2011. Growth in average interest earning assets of 1.1% in the fourth quarter of 2012 to $346.7 million over $342.8 million for the fourth quarter of 2011 served to partially offset the decline in net interest income. Average total loans increased by 5.1% in the full-year comparison and by 2.7% in the fourth-quarter comparison.

Non-Interest Income

Non-interest income increased to $2.8 million for the year 2012 from $2.0 million for 2011. After excluding net securities gains realized in both years and a nonrecurring, tax-free mortality gain recorded in 2011 of $267,000 on a bank-owned life insurance policy, adjusted non-interest income grew 36.0% during 2012 to $2.3 million over the $1.7 million earned in 2011. An increase in gains on sales of residential loans at Sullivan Financial Services, Inc. ("Sullivan") in 2012 to $1.4 million from $786,000 in 2011 was the primary factor contributing to the year-to-year growth in adjusted non-interest income. For the fourth quarter of 2012, non-interest income amounted to $1.0 million, up from $503,000 earned in the fourth quarter of 2011. Excluding net securities gains, adjusted non-interest income increased to $666,000, or 32.4% in the fourth quarter of 2012 from $503,000 earned in the fourth quarter of 2011. This increase in adjusted non-interest income was primarily attributable to increased origination volume and sales of residential loans at Sullivan. The gains realized on the sales of investment securities in 2012 amounted to $500,000 and were undertaken by the Company as part of its ongoing asset liability management strategy.

Non-Interest Expense

Non-interest expense declined to $9.3 million for the year 2012 from $9.6 million for all of 2011, and increased to $2.5 million in the fourth quarter of 2012 from $2.3 million in the same quarter of 2011. Included in non-interest expense in the fourth quarter of 2012, in the third quarter of 2011 and the respective full-year periods were nonrecurring losses on the early extinguishment of Federal Home Loan Bank borrowings of $334,000 in 2012 and $426,000 in 2011. Excluding these items, adjusted non-interest expense decreased by $270,000 or 2.9% to $8.9 million for the year 2012 from $9.2 million in the year 2011 and declined by $48,000 or 2.1% to $2.2 million for the fourth quarter of 2012 from $2.3 million for the fourth quarter of 2011. The declines in operating expenses were primarily due to decreases in personnel, occupancy and data processing expenses. Management continues to aggressively manage its expense containment efforts, which have yielded cost savings in many areas of the Company's operations.

Provision for Income Taxes

The Company recorded income tax provisions of $1.8 million for the full-year and $449,000 for the fourth quarter 2012, respectively, versus $1.2 million and $430,000 for the full-year and fourth quarter of 2011, respectively. The effective tax rates were 35.1% and 34.7% for the year and fourth quarter of 2012, respectively and 29.7% and 34.3% for the year and fourth quarter of 2011, respectively. The increase in the effective tax rates for the year 2012 was due to an increase in revenue from taxable sources.

Asset Quality

The full-year provision for loan losses was $290,000 in 2012 versus $220,000 for the year 2011, and the fourth-quarter provision for loan losses was $50,000 in 2012 versus $20,000 for the fourth quarter of 2011. Net charge-offs of $114,000 and $113,000 were recorded in the year 2012 and 2011, respectively. For the fourth quarter of 2012, net charge-offs totaled $59,000 compared to $5,000 for the same quarter of 2011. The allowance for loan losses was $3.2 million, or 1.31% of total loans, at December 31, 2012 and $3.0 million, or 1.28% of total loans, at December 31, 2011.

Non-accrual loans at the end of 2012 amounted to $746,000, representing 0.31% of total loans, and $146,000, or 0.06% of total loans at December 31, 2011. The non-performing asset ratio, which is defined as nonaccrual loans and OREO as a percentage of total assets, was 0.20% at December 31, 2012 and 0.04% at December 31, 2011. The Company had no OREO at the end of both 2012 and 2011 and troubled debt restructured loans ("TDRs") were $340,000 and $344,000 at December 31, 2012 and 2011, respectively. Loans past due 90 days or more and still accruing amounted to $420,000 at the end of 2012 compared with none at year-end 2011. As of December 31, 2012, the Company had $216,000 in loans delinquent 30 to 89 days, representing 0.09% of total loans, versus $875,000, or 0.38%, of total loans at the end of 2011.

Financial Ratios

As of December 31, 2012, the Company's tangible common equity ratio and tangible book value per share were 11.34% and $7.79, respectively. As of the end of 2011, the Company's tangible common equity ratio and tangible book value per share were 11.09% and $7.55, respectively.

Dividend Declaration

Based upon the Company's fourth quarter performance, the Board of Directors declared a quarterly cash dividend of $0.08 per share payable February 28, 2013 to shareholders of record as of February 14, 2013.

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 December 31, Year Ended December 31,
($ in thousands, except per share data) 2012 2011 2012 2011
Income Statement Data:
Net interest income $ 2,875 $ 3,020 $ 11,915 $ 11,847
Provision for loan losses 50 20 290 220
Net interest income after loan loss provision 2,825 3,000 11,625 11,627
Non-interest income 1,005 503 2,848 2,002
Non-interest expense 2,537 2,251 9,265 9,627
Income before income taxes 1,293 1,252 5,208 4,002
Income tax expense 449 430 1,830 1,189
Net income $ 844 $ 822 $ 3,378 $ 2,813
Diluted earnings per share $ 0.16 $ 0.16 $ 0.63 $ 0.52
Balance Sheet Data:
At period end
Total assets $ 368,930 $ 364,025
Loans, net 238,753 229,503
Loans held for sale 6,977 2,969
Allowance for loan losses 3,158 2,982
Investment securities held to maturity 8,900 10,738
Investment securities held for sale 13,370 43,579
Deposits 320,187 314,714
Borrowings 5,500 7,500
Shareholders' equity 41,848 40,369
Book value per share 7.79 7.55
Tangible common equity ratio 11.34% 11.09%
Average for the period
Loans $ 237,098 $ 230,915 $ 235,457 $ 223,937
Interest-earning assets 346,655 342,831 333,994 318,851
Total assets 366,695 364,120 354,435 339,582
Shareholders' equity 41,965 40,557 41,442 40,308
Diluted shares outstanding (in thousands) 5,380 5,395 5,371 5,459
Performance Ratios/Amounts:
Return on average assets 0.92% 0.90% 0.95% 0.83%
Return on average equity 8.00% 8.04% 8.15% 6.98%
Fully taxable equivalent net interest margin 3.35% 3.55% 3.62% 3.78%
Efficiency ratio 61.5% 63.0% 61.9% 66.8%
Fully taxable equivalent net interest income $ 2,918 $ 3,069 $ 12,091 $ 12,044
Asset Quality:
Net charge-offs (recoveries) $ 59 $ 5 $ 114 $ 113
At period end
Nonaccrual loans 746 146
OREO property -- --
Total nonperforming assets 746 146
Loans past due 90 days or more and still accruing 420 --
Troubled debt restructured loans 340 344
Loans past due 30 to 89 days and still accruing 216 875
Nonaccrual loans to total loans 0.31% 0.06%
Nonperforming assets to total assets 0.20% 0.04%
Allowance for loan losses to total loans 1.31% 1.28%
Allowance as a % of nonperforming loans 423% 2042%
SOMERSET HILLS BANCORP
Statement of Operations
(Dollars in thousands, except per share data)
(Unaudited)
Quarter Ended December 31, Year Ended December 31,
2012 2011 2012 2011
INTEREST INCOME
Loans, including fees $ 2,841 $ 3,015 $ 11,775 $ 11,879
Investment securities 253 398 1,294 1,626
Interest bearing deposits with other banks 48 41 135 135
Total interest income 3,142 3,454 13,204 13,640
INTEREST EXPENSE
Deposits 205 367 1,029 1,450
Federal Home Loan Bank advances 62 67 260 343
Total interest expense 267 434 1,289 1,793
Net Interest Income 2,875 3,020 11,915 11,847
PROVISION FOR LOAN LOSSES 50 20 290 220
Net Interest Income after Provision for Loan Losses 2,825 3,000 11,625 11,627
NON-INTEREST INCOME
Service fees on deposit accounts 89 73 322 286
Gains on sales of mortgage loans, net 406 262 1,362 786
Bank owned life insurance 67 73 270 555
Gain on sales of investment securities, net 339 -- 500 9
Other income 104 95 394 366
Total Non-Interest Income 1,005 503 2,848 2,002
NON-INTEREST EXPENSE
Salaries and employee benefits 1,272 1,338 5,238 5,324
Occupancy expense 319 358 1,328 1,499
Advertising and business promotions 30 29 119 129
Printing stationery and supplies 25 24 134 128
Data processing 127 136 505 539
Loss on debt extinguishment 334 -- 334 426
Other operating expense 430 366 1,607 1,582
Total Non-Interest Expense 2,537 2,251 9,265 9,627
Income before Provision for Taxes 1,293 1,252 5,208 4,002
PROVISION FOR INCOME TAXES 449 430 1,830 1,189
Net income $ 844 $ 822 $ 3,378 $ 2,813
Diluted earnings per common share $ 0.16 $ 0.16 $ 0.63 $ 0.52
SOMERSET HILLS BANCORP
Balance Sheets
(Dollars in thousands)
(Unaudited)
December 31, December 31,
2012 2011
ASSETS
Cash and due from banks $ 7,544 $ 4,588
Interest bearing deposits at other banks 75,902 55,411
Total cash and cash equivalents 83,446 59,999
Loans held for sale 6,977 2,969
Investment securities held to maturity (Approximate market value of $9,186 in 2012 and $10,849 in 2011) 8,900 10,738
Investments available for sale 13,370 43,579
Loans receivable 241,911 232,485
Less allowance for loan losses (3,158) (2,982)
Net loans receivable 238,753 229,503
Premises and equipment, net 4,868 4,996
Bank owned life insurance 8,245 8,000
Accrued interest receivable 1,036 1,168
Prepaid expenses 790 985
Other assets 2,545 2,088
Total assets $ 368,930 $ 364,025
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Non-interest bearing deposits - demand $ 87,279 $ 80,532
Interest bearing deposits
NOW, money market and savings 198,595 193,276
Certificates of deposit, under $100,000 17,716 20,875
Certificates of deposit, $100,000 and over 16,597 20,031
Total deposits 320,187 314,714
Federal Home Loan Bank advances 5,500 7,500
Other liabilities 1,395 1,442
Total liabilities 327,082 323,656
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, 5,369,673 shares in 2012 and 5,344,648 shares in 2011 37,143 36,972
Retained earnings 4,333 2,608
Accumulated other comprehensive income 372 789
Total stockholders' equity 41,848 40,369
Total liabilities and stockholders' equity $ 368,930 $ 364,025

CONTACT: Stewart E. McClure, Jr. President & CEO 908.630.5000 Alfred J. Soles Executive VP & CFO 908.630.5018Source:Somerset Hills Bancorp