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Somerset Hills Bancorp Reports 2013 First Quarter Earnings



Somerset Hills Bancorp Reports 2013 First Quarter Earnings

BERNARDSVILLE, N.J., April 18, 2013 (GLOBE NEWSWIRE) -- Somerset Hills Bancorp
(Nasdaq:SOMH) (the "Company"), parent company of Somerset Hills Bank (the
"Bank"), today reported first quarter net income of $402,000 for 2013, a 51.0%
decline from the $820,000 earned in the first quarter of 2012. First quarter
diluted earnings were $0.07 per share for 2013 and $0.15 per share for 2012.
First quarter 2013 results include $419,000 of pretax expenses related to the
pending merger with Lakeland Bancorp, Inc. ("Lakeland") and amount to $352,000
on an after-tax basis. Net income of the first quarter of 2013 excluding these
merger-related expenses was $754,000, a decline of 8.0% from the same quarter
of 2012. Excluding merger-related expenses, fully diluted net income per share
for the first quarter of 2013 was $0.14, a 6.7% decrease from the first
quarter of 2012.

Stewart E. McClure, Jr., President and CEO, noted, "The Company continues to
be challenged by the difficult economic operating environment for banks. Our
net interest margin along with that of our industry peers has been under
duress as longer term assets reprice at increasingly lower levels and banks
are hesitant to extend the maturities of their securities portfolios in
anticipation of a rise in interest rates in the future. As expected, our first
quarter results for 2013 were adversely affected by a significant rise in
expenses related to our pending merger with Lakeland. While we look forward to
the consummation of our merger with Lakeland, the Company remains focused on
maintaining our excellent credit quality and disciplined approach to cost
management."

Net Interest Income (Tax Equivalent Basis)

Fully taxable equivalent ("FTE") net interest income for the first three
months of 2013 was $2.8 million, down $319,000 or 10.1%, from the $3.1 million
earned in 2012. The decline in net interest income during 2013 was
attributable to a 47 basis-point narrowing in first quarter net interest
margin to 3.37% from 3.84% in the first quarter of 2012, partly offset by a
3.2% increase in average interest-earning assets to $340.2 million in 2013
from $329.6 million in 2012. The decline in the first quarter 2013 net
interest margin was largely due to a $30.6 million decline in average
securities to $23.1 million from $53.7 million in the first quarter of 2012
that led to a $29.9 million growth in average interest bearing deposits with
banks to $70.2 million in the 2013 quarter from $40.3 million in the first
quarter of 2012. The growth in average interest earning assets resulted from
an $11.0 million increase in average loans to $243.5 million during the first
quarter of 2013 versus $232.5 million in the same quarter of 2012.

Non-Interest Income

Non-interest income decreased $32,000 or 5.8% to $519,000 in the first quarter
of 2013 from $551,000 in the first quarter of 2012, primarily due to a $41,000
decline in gains on sales of residential loans at Sullivan Financial Services,
Inc., a wholly-owned mortgage banking subsidiary of the Bank, partially offset
by a $9,000 increase in deposit service fees to $80,000 in the first quarter
of 2013 from $71,000 in the first three months of 2012. A decline in
Sullivan's origination volume was primarily responsible for the decline in
mortgage banking income.

Non-Interest Expense

Non-interest expense increased 10.4% to $2.6 million for the first quarter of
2013 from $2.3 million for the same period of 2012. Included in non-interest
expense in the first quarter of 2013 were merger‑related expenses of $419,000.
Excluding these merger-related expenses, adjusted non-interest expense
decreased by $177,000 or 7.6% to $2.1 million for the three months of 2013
from $2.3 million in the first quarter of 2012. The decline in operating
expenses was primarily due to decreases in personnel, office-related and other
non-interest expenses.  Management continues to proactively manage its expense
containment efforts.

Provision for Income Taxes

The Company recorded first quarter income tax provisions of $317,000 for 2013
and $438,000 for 2012.  The effective tax rates were 44.1% and 34.8% for the
first quarter of 2013 and 2012, respectively.  The increase in the effective
tax rates for the first three months of 2013 over the same period of 2012 was
primarily due to the impact of the merger-related expenses. If both taxable
income and the income tax provision for the first quarter 2013 were adjusted
to exclude the impact of merger-related costs, the adjusted effective tax rate
would be 33.7%.

Asset Quality

The first quarter provision for loan losses was $25,000 in 2013 versus $75,000
for 2012.  A net recovery of $9,000 was recorded in the first quarter of 2013,
while net charge-offs of $56,000 were recorded in the first quarter of last
year.  The allowance for loan losses amounted to $3.2 million, or 1.30% of
total loans, at March 31, 2013; $3.2 million, or 1.31% of total loans, at
December 31, 2012; and $3.0 million, or 1.30% of total loans at March 31,
2012.

Non-accrual loans at March 31, 2013 were $746,000, representing 0.30% of total
loans, and $136,000, or 0.06% of total loans at March 31, 2012. The
non-performing asset ratio, which is defined as nonaccrual loans and OREO as a
percentage of total assets, was 0.21% at March 31, 2013 and 0.04% at March 31,
2012. The Company had no OREO at both March 31, 2013 and 2012 and troubled
debt restructured loans ("TDRs") were $2.3 million and $343,000 at March 31,
2013 and 2012, respectively. Loans past due 90 days or more and still accruing
amounted to $416,000 at March 31, 2013 compared with none at March 31, 2012.
As of March 31, 2013, the Company had $205,000 in loans delinquent 30 to 89
days, representing 0.08% of total loans, versus $854,000, or 0.37%, of total
loans at March 31, 2012.

Financial Ratios

As of March 31, 2013, the Company's tangible common equity ratio and tangible
book value per share were 11.74% and $7.78, respectively. As of March 31,
2012, the Company's tangible common equity ratio and tangible book value per
share were 11.84% and $7.63, respectively.

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 March 31,
($ in thousands, except per share data)    2013              2012
Income Statement Data:                                        
Net interest income                         $ 2,784           $ 3,099
Provision for loan losses                   25                75
Net interest income after loan loss         2,759             3,024
provision
Non-interest income                         519               551
Non-interest expense                        2,559             2,317
Income before income taxes                  719               1,258
Income tax expense                          317               438
Net income                                  $ 402             $ 820
Diluted earnings per share                  $ 0.07            $ 0.15
Balance Sheet Data:                                           
At period end                                                 
Total assets                                $ 355,927         $ 343,690
Loans, net                                  242,230           228,776
Loans held for sale                         2,557             1,495
Allowance for loan losses                   3,192             3,001
Investment securities held to maturity      9,354             9,936
Investment securities held for sale         12,982            42,177
Deposits                                    307,541           294,273
Borrowings                                  5,500             7,500
Shareholders' equity                        41,781            40,690
Book value per share                        7.78              7.63
Tangible common equity ratio               11.74%            11.84%
Average for the period                                        
Loans                                       $ 243,463         $ 232,507
Interest-earning assets                     340,167           329,618
Total assets                                360,606           350,749
Shareholders' equity                        41,984            40,957
Diluted shares outstanding (in thousands)   5,454             5,381
                                                              
Performance Ratios/Amounts:                                   
Return on average assets                   0.45%             0.94%
Return on average equity                   3.88%             8.05%
Fully taxable equivalent net interest      3.37%             3.84%
margin
Efficiency ratio*                          64.0%             62.7%
Fully taxable equivalent net interest       $ 2,827           $ 3,146
income
                                                              
Asset Quality:                                                
Net charge-offs (recoveries)                $ (9)             $ 56
At period end                                                 
Nonaccrual loans                            746               136
OREO property                               --                --
Total nonperforming assets                  746               136
Loans past due 90 days or more and still    416               --
accruing
Troubled debt restructured loans            2,255             343
Loans past due 30 to 89 days and still      205               854
accruing
Nonaccrual loans to total loans            0.30%             0.06%
Nonperforming assets to total assets       0.21%             0.04%
Allowance for loan losses to total loans   1.30%             1.30%
Allowance as a % of nonperforming loans    428%              2207%
                                                              
* Represents non-interest expense excluding merger-related costs divided by
the sum of fully taxable equivalent net interest income and non-interest
income excluding any investment securities gains or losses for the period.

 
 
SOMERSET HILLS BANCORP
Statement of Operations
(Dollars in thousands, except per share data)
(Unaudited)
                                                                  
                                                                  
                                                    Quarter Ended March 31, 
                                                    2013         2012
INTEREST INCOME                                                   
                                                                  
Loans, including fees                                $ 2,793      $ 3,026
Investment securities                                181          403
Interest bearing deposits with other banks           45           26
Total interest income                                3,019        3,455
                                                                  
INTEREST EXPENSE                                                  
Deposits                                             188          290
Federal Home Loan Bank advances                      47           66
Total interest expense                               235          356
                                                                  
Net Interest Income                                  2,784        3,099
                                                                  
PROVISION FOR LOAN LOSSES                            25           75
                                                                  
Net Interest Income after Provision for Loan Losses  2,759        3,024
                                                                  
NON-INTEREST INCOME                                               
Service fees on deposit accounts                     80           71
Gains on sales of mortgage loans, net                266          307
Bank owned life insurance                            66           67
Other income                                         107          106
Total Non-Interest Income                            519          551
                                                                  
NON-INTEREST EXPENSE                                              
Salaries and employee benefits                       1,253        1,367
Occupancy expense                                    347          349
Advertising and business promotions                  30           29
Printing, stationery and supplies                    18           45
Data processing                                      133          131
Merger-related costs                                 419          --
Other operating expense                              359          396
Total Non-Interest Expense                           2,559        2,317
                                                                  
Income before Provision for Taxes                    719          1,258
                                                                  
PROVISION FOR INCOME TAXES                           317          438
                                                                  
Net income                                           $ 402        $ 820
                                                                  
Diluted earnings per common share                    $ 0.07       $ 0.15

 
 
SOMERSET HILLS BANCORP
Balance Sheets
(Dollars in thousands)
(Unaudited)
                                                                   
                                                                   
                                                       March 31,  December 31,
                                                       2013       2012
ASSETS                                                             
                                                                   
Cash and due from banks                                 $ 4,977    $ 7,544
Interest bearing deposits at other banks                65,475     75,127
Total cash and cash equivalents                         70,452     82,671
                                                                   
Interest bearing deposits in other financial            775        775
institutions
Loans held for sale                                     2,557      6,977
Investment securities held to maturity (Approximate                
market value 
of $9,587 in 2013 and $9,186 in 2012)                   9,354      8,900
Investments available for sale                          12,982     13,370
Restricted stock, at cost                               743        743
                                                                   
Loans receivable                                        245,422    241,911
Less allowance for loan losses                          (3,192)    (3,158)
                                                                   
Net loans receivable                                    242,230    238,753
                                                                   
Premises and equipment, net                             4,834      4,868
Bank owned life insurance                               8,311      8,245
Accrued interest receivable                             978        1,036
Prepaid expenses                                        775        790
Other assets                                            1,936      1,802
                                                                   
Total assets                                            $ 355,927  $ 368,930
                                                                   
LIABILITIES AND STOCKHOLDERS' EQUITY                               
                                                                   
LIABILITIES                                                        
Deposits:                                                          
Non-interest bearing deposits - demand                  $ 82,817   $ 87,279
Interest bearing deposits                                          
NOW, money market and savings                           192,154    198,595
Certificates of deposit, under $100,000                 16,852     17,799
Certificates of deposit, $100,000 and over              15,718     16,514
Total deposits                                          307,541    320,187
                                                                   
Federal Home Loan Bank advances                         5,500      5,500
Other liabilities                                       1,105      1,395
                                                                   
Total liabilities                                       314,146    327,082
                                                                   
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, 5,370,000                  
shares in 2013 and 5,369,673 shares in 2012             37,156     37,143
Retained earnings                                       4,306      4,333
Accumulated other comprehensive income                  319        372
                                                                   
Total stockholders' equity                              41,781     41,848
                                                                   
Total liabilities and stockholders' equity              $ 355,927  $ 368,930

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