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Sussex Bancorp Announces First Quarter Results for 2013

FRANKLIN, N.J., May 1, 2013 (GLOBE NEWSWIRE) -- Sussex Bancorp (the "Company") (Nasdaq:SBBX), the holding company for Sussex Bank (the "Bank") today announced reported net income of $98 thousand, or $0.03 per basic and diluted share, for the quarter ended March 31, 2013, as compared to a net loss of $195 thousand, or $(0.06) per basic and diluted share, for the same period last year. The Company continued to improve its asset credit quality as total problem assets and non-performing assets ("NPAs") continued to decline. Overall problem assets are down 50.6% from their historical high at March 31, 2010, and the ratio of NPAs to total assets improved to 4.4% at March 31, 2013, from 4.6% at December 31, 2012. Non-accrual loans to total assets fell to 2.99% at March 31, 2013, which is the lowest level since 2007.

"We continue to make progress towards reducing our legacy problem assets. As of the end of this quarter, non-performing loans decreased $11.6 million, or 42.9%, and foreclosed real estate increased $1.6 million, or 32.4%, as compared to the same quarter end last year. Of note is that a considerable number of the legacy problem loans are nearing the end of the resolution cycle, which will culminate with the ultimate disposal of the foreclosed property," said Anthony Labozzetta, President and Chief Executive Officer of Sussex Bank. "Despite the challenging economic environment, we continue to build our business, this quarter we closed and funded $18 million in new commercial loans, up 320% over the same period last year," added Mr. Labozzetta.

Financial Performance

For the quarter ended March 31, 2013, the Company reported net income of $98 thousand, or $0.03 per basic and diluted share, as compared to a net loss of $195 thousand, or ($0.06) per basic and diluted share, for the same period last year. The improvement for the quarter ended March 31, 2013 in net income was largely due to an increase in gains on securities transactions and higher pre-tax earnings produced by our insurance subsidiary, Tri-State Insurance Agency, Inc., which increased $161 thousand to $200 thousand for the first quarter of 2013 as compared to the same period last year. Total credit quality costs (provision for loan losses, loan collection costs and expenses and write-downs related to foreclosed real estate) was approximately the same at $1.7 million for the first quarter of 2013 as compared to the same period in 2012.

Net Interest Income. Net interest income on a fully tax equivalent basis declined $138 thousand, or 3.4%, to $4.0 million for the first quarter of 2013 as compared to $4.1 million for same period in 2012. The decrease in net interest income was largely due to the Company's net interest margin declining 21 basis points to 3.30% for the first quarter of 2013 compared to the same period last year. The decline in the net interest margin was mostly due to a 39 basis point decline in the average rate earned on interest earning assets. This decline in net interest income was partially offset by a decrease in the average rate paid on total interest bearing liabilities, which decreased 19 basis points to 0.81% for the first quarter of 2013 from 1.00% for the same period in 2012, and a $17.5 million, or 3.7%, increase in average interest earning assets, principally securities.

Provision for Loan Losses. Provision for loan losses increased $282 thousand to $1.1 million for the first quarter of 2013, as compared to $860 thousand for the same period in 2012.

Non-interest Income. The Company reported an increase in non-interest income of $590 thousand, or 44.6%, to $1.9 million for the first quarter of 2013 as compared to the same period last year. The increase in non-interest income was largely due to increases in gains on securities transactions and an increase in insurance commissions and fees of $311 thousand and $243 thousand, respectively. Proceeds from the sale of securities were primarily used to fund loan growth.

Non-interest Expense. The Company's non-interest expenses decreased $303 thousand, or 6.2%, to $4.6 million for the first quarter of 2013 as compared to the same period last year. The decrease for the first quarter of 2013 versus the same period in 2012 was largely due to declines in expenses related to foreclosed real estate and salaries and employee benefits expense, which decreased $268 thousand and $189 thousand, respectively. The aforementioned declines were partly offset by increases in directors' fees and other expenses of $100 thousand and $62 thousand, respectively. The increase in directors' fees is principally due to the impact on the directors' deferred stock plan resulting from fluctuations in the Company's stock price, which increased $2.11 per share, or 39.2%, at March 31, 2013, as compared to December 31, 2012.

Financial Condition

At March 31, 2013, the Company's total assets were $518.8 million, an increase of $4.1 million, or 0.8%, as compared to total assets of $514.7 million at December 31, 2012. The increase in total assets was largely driven by securities growth of $4.6 million, or 3.7%, and net loans receivable growth of $1.6 million or 0.5%, which was partially offset by a decline in cash and cash equivalents of $4.6 million, or 39.3%.

Total loans receivable, net of unearned income, increased $1.9 million, or 0.6%, to $349.7 million at March 31, 2013, from $347.7 million at year-end 2012. The loan volume for the first quarter of 2013 was partly offset by pay-offs of loans repurchased from a participating bank ($3.0 million), loans transferred to foreclosed real estate ($2.7 million) and loan charge-offs, net ($813 thousand).

The Company's securities portfolio, which includes securities available for sale and securities held to maturity, increased $4.6 million to $128.7 million at March 31, 2013, as compared to $124.1 million at December 31, 2012.

The Company's total deposits increased $1.4 million, or 0.3%, to $433.8 million at March 31, 2013, from $432.4 million at December 31, 2012. The increase in deposits was due to an increase in non-interest bearing deposits of $5.4 million, or 11.3%, which was partially offset by a decrease in interest bearing checking and time deposits of $2.5 million and $2.4 million, respectively, for March 31, 2013 as compared to December 31, 2012. The Company's funding mix continues to improve as low cost deposits grow.

At March 31, 2013, the Company's total stockholders' equity was $39.9 million, a decrease of $457 thousand when compared to December 31, 2012. At March 31, 2013, the leverage, Tier I risk-based capital and total risk-based capital ratios for the Bank were 9.09%, 12.75% and 14.01%, respectively, all in excess of the ratios required to be deemed "well-capitalized."

Asset and Credit Quality

The overall credit quality of the Company continued to show positive trends through March 31, 2013, as our total problem assets, which is comprised of foreclosed real estate, criticized assets and classified assets, declined $3.9 million, or 11.2%, to $31.0 million at March 31, 2013 from $35.0 million at December 31, 2012. Our total problem assets declined 50.6% from a historical high of $62.8 million at March 31, 2010, as compared to March 31, 2013.

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, decreased $904 thousand, or 3.8%, to $22.9 million at March 31, 2013, as compared to $23.8 million at December 31, 2012. The ratios of NPAs to total assets for March 31, 2013 and December 31, 2012 were 4.4% and 4.6%, respectively. Non-accrual loans decreased $2.3 million, or 13.1%, to $15.5 million at March 31, 2013, as compared to $17.9 million at December 31, 2012 and declined 42.9% since March 31, 2012. Non-accrual loans to total assets fell to 2.99% at March 31, 2013, which is the lowest level since 2007.

The Company continues to actively market its foreclosed real estate properties, which increased $1.6 million to $6.6 million at March 31, 2013, as compared to $5.1 million at December 31, 2012. At March 31, 2013, the Company's foreclosed real estate properties had an average book value of approximately $331 thousand per property. During the first quarter of 2013, the Company sold $965 thousand and took title of $2.7 million of new foreclosed real estate. In addition, approximately $830 thousand is under contract and is scheduled to close in the second quarter of 2013.

The allowance for loan losses was $5.3 million, or 1.5% of total loans, at March 31, 2013, compared to $5.0 million, or 1.4% of total loans, at December 31, 2012. The increase in the allowance for loan losses was largely attributed to $1.1 million in provision for loan losses, which was in part offset by $813 thousand in net charge-offs for the first quarter of 2013. Total credit quality costs (provision for loan losses, loan collection costs and expenses and write-downs related to foreclosed real estate) was approximately the same at $1.7 million for the first quarter of 2013 as compared to the same period in 2012.

About Sussex Bancorp

Sussex Bancorp is the holding company for Sussex Bank, which operates through its main office in Franklin, New Jersey and through its nine branch offices located in Andover, Augusta, Newton, Montague, Sparta, Vernon and Wantage, New Jersey, Port Jervis and Warwick, New York; a loan production office in Rochelle Park, New Jersey and for the Tri-State Insurance Agency, Inc., a full service insurance agency with locations in Augusta and Rochelle Park, New Jersey. For additional information, please visit the Company's website at 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 (the "Reform Act"). 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 and the ability of its borrowers to comply with repayment terms. 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, 2012, 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.

SUSSEX BANCORP
SUMMARY FINANCIAL HIGHLIGHTS
(In Thousands, Except Percentages and Per Share Data)
(Unaudited)
3/31/2013 VS.
3/31/2013 12/31/2012 3/31/2012 3/31/2012 12/31/2012
BALANCE SHEET HIGHLIGHTS - Period End Balances
Total securities $ 128,724 $ 124,102 $ 107,482 19.8% 3.7%
Total loans 349,684 347,736 335,434 4.2% 0.6%
Allowance for loan losses (5,306) (4,976) (7,617) (30.3)% 6.6%
Total assets 518,812 514,734 513,184 1.1% 0.8%
Total deposits 433,843 432,436 432,074 0.4% 0.3%
Total borrowings and junior subordinated debt 41,887 38,887 38,887 7.7% 7.7%
Total shareholders' equity 39,915 40,372 39,903 0.0% (1.1)%
FINANCIAL DATA - QUARTER ENDED:
Net interest income (tax equivalent) (a) $ 3,978 $ 4,102 $ 4,112 (3.3)% (3.0)%
Provision for loan losses 1,142 1,408 860 32.8% (18.9)%
Total other income 1,914 2,335 1,324 44.6% (18.0)%
Total other expenses 4,607 5,201 4,910 (6.2)% (11.4)%
Income before provision for income taxes (tax equivalent) 143 (172) (334) (142.9)% (183.1)%
Provision for income taxes (90) (235) (265) (66.0)% (61.7)%
Taxable equivalent adjustment (a) 135 160 126 6.8% (15.6)%
Net income (loss) $ 98 $ (97) $ (195) (150.2)% (201.0)%
Net income (loss) per common share - Basic $ 0.03 $ (0.03) $ (0.06) (150.0)% (200.0)%
Net income (loss) per common share - Diluted $ 0.03 $ (0.03) $ (0.06) (150.0)% (200.0)%
Return on average assets 0.07% (0.08)% (0.15)% (148.4)% (198.8)%
Return on average equity 0.97% (0.94)% (1.95)% (149.8)% (203.2)%
Net interest margin (tax equivalent) 3.30% 3.41% 3.51% (5.9)% (3.3)%
SHARE INFORMATION:
Book value per common share $ 11.66 $ 11.88 $ 11.76 (0.9)% (1.9)%
Outstanding shares- period ending 3,424,213 3,397,873 3,393,106 0.9% 0.8%
Average diluted shares outstanding (year to date) 3,316,082 3,287,017 3,255,857 1.8% 0.9%
CAPITAL RATIOS:
Total equity to total assets 7.69% 7.84% 7.78% (1.1)% (1.9)%
Leverage ratio (b) 9.09% 9.27% 9.19% (1.1)% (1.9)%
Tier 1 risk-based capital ratio (b) 12.75% 12.93% 13.18% (3.3)% (1.4)%
Total risk-based capital ratio (b) 14.01% 14.18% 14.45% (3.0)% (1.2)%
ASSET QUALITY AND RATIOS:
Non-accrual loans $ 15,535 $ 17,871 $ 27,184 (42.9)% (13.1)%
Loans 90 days past due and still accruing 76 209 983 (92.3)% (63.6)%
Troubled debt restructured loans ("TDRs") (c) 617 608 2,084 (70.4)% 1.5%
Foreclosed real estate 6,622 5,066 5,001 32.4% 30.7%
Non-performing assets ("NPAs") $ 22,850 $ 23,754 $ 34,269 (33.3)% (3.8)%
Foreclosed real estate, Criticized and Classified Assets $ 31,029 $ 34,946 $ 50,299 (38.3)% (11.2)%
Loans past due 30 to 89 days 2,449 2,754 8,771 (72.1)% (11.1)%
Charge-offs, net (quarterly) 813 3,146 453 79.5% (74.2)%
Charge-offs, net as a % of average loans (annualized) 0.93% 3.70% 0.54% 72.3% (74.8)%
Non-accrual loans to total loans 4.44% 5.14% 8.10% (45.2)% (13.6)%
NPAs to total assets 4.40% 4.61% 6.68% (34.0)% (4.6)%
NPAs excluding TDR loans (c) to total assets 4.29% 4.50% 6.27% (31.7)% (4.7)%
Non-accrual loans to total assets 2.99% 3.47% 5.30% (43.5)% (13.8)%
Allowance for loan losses as a % of non-performing loans 32.85% 26.93% 26.03% 26.2% 22.0%
Allowance for loan losses to total loans 1.52% 1.43% 2.27% (33.2)% 6.0%
(a) Full taxable equivalent basis, using a 39% effective tax rate and adjusted for TEFRA (Tax and Equity Fiscal Responsibility Act) interest expense disallowance
(b) Sussex Bank capital ratios
(c) Troubled debt restructured loans currently performing in accordance with renegotiated terms
SUSSEX BANCORP
CONSOLIDATED BALANCE SHEETS
(Dollars In Thousands)
ASSETS March 31, 2013 December 31, 2012
(Unaudited)
Cash and due from banks $ 4,878 $ 6,268
Interest-bearing deposits with other banks 2,202 5,400
Cash and cash equivalents 7,080 11,668
Interest bearing time deposits with other banks 100 100
Securities available for sale, at fair value 123,251 118,881
Securities held to maturity 5,473 5,221
Federal Home Loan Bank Stock, at cost 2,115 1,980
Loans receivable, net of unearned income 349,684 347,736
Less: allowance for loan losses 5,306 4,976
Net loans receivable 344,378 342,760
Foreclosed real estate 6,622 5,066
Premises and equipment, net 6,336 6,476
Accrued interest receivable 1,781 1,741
Goodwill 2,820 2,820
Bank owned life insurance 11,628 11,536
Other assets 7,228 6,485
Total Assets $ 518,812 $ 514,734
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Non-interest bearing $ 53,825 $ 48,375
Interest bearing 380,018 384,061
Total Deposits 433,843 432,436
Borrowings 29,000 26,000
Accrued interest payable and other liabilities 3,167 3,039
Junior subordinated debentures 12,887 12,887
Total Liabilities 478,897 474,362
Total Stockholders' Equity 39,915 40,372
Total Liabilities and Stockholders' Equity $ 518,812 $ 514,734
SUSSEX BANCORP
CONSOLIDATED STATEMENTS OF INCOME
(Dollars In Thousands Except Per Share Data)
(Unaudited)
Three Months Ended March 31,
2013 2012
INTEREST INCOME
Loans receivable, including fees $ 4,276 $ 4,450
Securities:
Taxable 154 320
Tax-exempt 262 245
Interest bearing deposits 5 17
Total Interest Income 4,697 5,032
INTEREST EXPENSE
Deposits 538 719
Borrowings 262 265
Junior subordinated debentures 54 62
Total Interest Expense 854 1,046
Net Interest Income 3,843 3,986
PROVISION FOR LOAN LOSSES 1,142 860
Net Interest Income after Provision for Loan Losses 2,701 3,126
OTHER INCOME
Service fees on deposit accounts 286 275
ATM and debit card fees 160 137
Bank owned life insurance 92 103
Insurance commissions and fees 842 599
Investment brokerage fees 45 36
Gain on sale of loans, held for sale -- 47
Gain on securities transactions 370 59
Gain on sale of fixed assets -- 1
Gain on sale of foreclosed real estate 29 2
Other 90 65
Total Other Income 1,914 1,324
OTHER EXPENSES
Salaries and employee benefits 2,235 2,424
Occupancy, net 394 362
Furniture, equipment and data processing 326 354
Advertising and promotion 40 71
Professional fees 185 158
Director fees 206 106
FDIC assessment 169 167
Insurance 76 53
Stationary and supplies 49 45
Loan collection costs 98 134
Expenses and write-downs related to foreclosed real estate 440 708
Amortization of intangible assets 1 2
Other 388 326
Total Other Expenses 4,607 4,910
Income before Income Taxes 8 (460)
INCOME TAX BENEFIT (90) (265)
Net Income $ 98 $ (195)
OTHER COMPREHENSIVE INCOME:
Unrealized gains on available for sale securities arising during the period $ (644) $ 417
Reclassification adjustment for gain on sales included in net income (370) (59)
Income tax expense related to other comprehensive income 405 (143)
Other comprehensive (loss) income, net of income taxes (609) 215
Comprehensive (loss) income $ (511) $ 20
EARNINGS PER SHARE
Basic $ 0.03 $ (0.06)
Diluted $ 0.03 $ (0.06)
SUSSEX BANCORP
COMPARATIVE AVERAGE BALANCES AND AVERAGE INTEREST RATES
(Dollars In Thousands)
(Unaudited)
Three Months Ended March 31,
2013 2012
Average Average Average Average
Balance Interest (1) Rate (2) Balance Interest (1) Rate (2)
Earning Assets:
Securities:
Tax exempt (3) $ 32,197 $ 397 5.00% $ 24,686 $ 371 6.04%
Taxable 99,391 154 0.63% 77,506 320 1.66%
Total securities 131,588 551 1.70% 102,192 691 2.72%
Total loans receivable (4) 349,479 4,276 4.96% 335,558 4,450 5.33%
Other interest-earning assets 7,976 5 0.25% 33,837 17 0.20%
Total earning assets 489,043 $ 4,832 4.01% 471,587 $ 5,158 4.40%
Non-interest earning assets 40,461 41,203
Allowance for loan losses (5,302) (7,543)
Total Assets $ 524,202 $ 505,247
Sources of Funds:
Interest bearing deposits:
NOW $ 112,318 $ 36 0.13% $ 92,293 $ 51 0.22%
Money market 14,904 9 0.24% 17,560 20 0.46%
Savings 157,907 110 0.28% 163,130 206 0.51%
Time 103,479 383 1.50% 109,950 442 1.62%
Total interest bearing deposits 388,608 538 0.56% 382,933 719 0.76%
Borrowed funds 26,600 262 3.99% 26,000 265 4.10%
Junior subordinated debentures 12,887 54 1.70% 12,887 62 1.93%
Total interest bearing liabilities 428,095 $ 854 0.81% 421,820 $ 1,046 1.00%
Non-interest bearing liabilities:
Demand deposits 49,859 41,314
Other liabilities 5,808 2,013
Total non-interest bearing liabilities 55,667 43,327
Stockholders' equity 40,440 40,100
Total Liabilities and Stockholders' Equity $ 524,202 $ 505,247
Net Interest Income and Margin (5) 3,978 3.30% 4,112 3.51%
Tax-equivalent basis adjustment (135) (126)
Net Interest Income $ 3,843 $ 3,986
(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

CONTACT: Anthony Labozzetta, President/CEO Steven Fusco, SVP/CFO 973-827-2914

Source:Sussex Bancorp