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8-K - FORM 8-K - SB ONE BANCORPv437959_8-k.htm
EX-99.2 - EXHIBIT 99.2 - SB ONE BANCORPv437959_ex99-2.htm

 

Exhibit 99.1

 

 

100 Enterprise Dr.

Rockaway, NJ 07866

 

 

SUSSEX BANCORP REPORTS 62% EPS GROWTH FOR FIRST QUARTER 2016

 

ROCKAWAY, NEW JERSEY – April 26, 2016 – Sussex Bancorp (the “Company”) (Nasdaq: SBBX), the holding company for Sussex Bank (the “Bank”), today announced a 61.9% increase in net income per diluted common share to $0.34 for the quarter ended March 31, 2016 as compared to $0.21 for the same period last year. For the quarter ended March 31, 2016, the Company reported net income of $1.6 million as compared to net income of $952 thousand for the same period last year. The improvement for the first quarter of 2016 as compared to the same period last year was driven by a 17.6% increase in net interest income as a result of strong growth in average loans and deposits, which increased $89.0 million, or 18.9%, and $86.2 million, or 18.5%, respectively, and a $435 thousand, or 108.9%, increase in income before taxes from our insurance agency, Tri-State Insurance Agency. For the first quarter of the 2016, return on average assets and equity were 0.90% and 11.4%, respectively, as compared to the same period last year of 0.64% and 7.3%, respectively.

 

“I am excited to report yet another quarter of exceptional financial performance for Sussex Bancorp.  Each of our principal business lines produced outstanding results, due in large part to the meaningful synergies that exist between them.   In the first quarter our commercial loans and total deposits grew at an annualized rate of 33% and 44%, respectively, while our insurance subsidiary increased its pretax earnings 109%.   This growth along with a stable net interest margin is having a positive effect on our operating leverage, which boosted our return on average assets to a strong 0.90%.  Of note is that our growth continues to be organically generated and our production pipelines remain very robust,” said Anthony Labozzetta, President and Chief Executive Officer of Sussex Bank. 

 

“In March 2016, we opened another banking center, utilizing our new banking model that includes more technology, a smaller footprint and a new approach to staffing.  Roughly two months after its grand opening, the Oradell, NJ banking center has approximately $36 million in deposits with a cost of deposits of 0.56%, exceeding our expectations.  The efficiency and productivity of our new banking center model is very promising and it continues to demonstrate that we can reach break-even and produce positive operating leverage sooner than anticipated,” stated Mr. Labozzetta.

 

Financial Performance

Net Income. For the quarter ended March 31, 2016, the Company reported net income of $1.6 million, or $0.34 per basic and diluted share, as compared to net income of $952 thousand, or $0.21 per basic and diluted share, for the same period last year. The increase in net income for the quarter ended March 31, 2016 was driven by a $839 thousand, or 17.1%, increase in net interest income on a fully tax equivalent basis resulting from strong loan and deposit growth and a 108.9% increase in income before income taxes from Tri-State Insurance Agency as compared to the same quarter last year. The aforementioned were partially offset by an increase in non-interest expenses largely due to our growth and expansion into new markets.

 

Income before income taxes increased $1.0 million or 76.9% to $2.3 million for the quarter ended March 31, 2016 as compared to $1.3 million for the same period last year. Tri-State Insurance Agency’s contribution to the Company’s income before income taxes for the quarter ended March 31, 2016 increased $435 thousand or 108.9% to $834 thousand as compared to $399 thousand for the same period last year. The increase in Tri-State Insurance Agency’s contribution to the Company’s income before income taxes was mostly due to an increase in contingency fee income for the quarter ended March 31, 2016 of $405 thousand or 127.7% as compared to the same period last year. The Company’s income before income taxes, excluding Tri-State Insurance Agency, increased $586 thousand or 63.1% to $1.5 million for the quarter ended March 31, 2016 as compared to the same period last year.

 

Net Interest Income. Net interest income on a fully tax equivalent basis increased $839 thousand, or 17.1%, to $5.7 million for the first quarter of 2016, as compared to $4.9 million for the same period in 2015. The increase in net interest income was largely due to a $105.0 million, or 18.6%, increase in average interest earning assets, principally loans receivable, which increased $89.0 million, or 18.9%. The improvement in net interest income was partly offset by a decline in the net interest margin of 7 basis points to 3.46% for the first quarter of 2016 as compared to the same period in 2015. The decline in the net interest margin was mostly attributed to an 8 basis point increase in the average rate on interest bearing deposits, which was primarily driven by market competition and the Company’s strategy to use longer term wholesale deposit funding to manage interest rate risk. Included in the net interest margin decrease is a 4 basis point decline in the average rate earned on loans, which is mostly due to loan growth and loan repricing in a low rate environment.

 

 

 

 

Provision for Loan Losses. Provision for loan losses decreased $94 thousand, or 30.8%, to $211 thousand for the first quarter of 2016, as compared to $305 thousand for the same period in 2015.

 

Non-interest Income. Non-interest income increased $623 thousand, or 32.8%, to $2.5 million for the first quarter of 2016, as compared to the same period last year. The increase was primarily due to higher insurance commissions and fees, which increased $566 thousand, or 49.0%, for the first quarter of 2016 as compared to the same period in 2015. The growth in Tri-State Insurance Agency’s commissions and fees was principally due to an increase in contingency fee income of $405 thousand or 127.7% for the quarter ended March 31, 2016 as compared to the same period last year.

 

Non-interest Expense. The Company’s non-interest expenses increased $540 thousand, or 10.7%, to $5.6 million for the first quarter of 2016, as compared to the same period last year. The increase for the first quarter of 2016, as compared to the same period in 2015, was largely due to increases in salaries and employee benefits of $573 thousand and in data processing expenses of $195 thousand, which were partially offset by decreases in director fees and expenses and write-downs related to foreclosed real estate of $107 thousand and $89 thousand, respectively. The increase in salaries and employee benefits expense was partially due to an increase in personnel to support our growth initiative in new markets, including the opening of our Oradell branch in the first quarter of 2016.

 

Financial Condition

At March 31, 2016, the Company’s total assets were $716.8 million, an increase of $32.3 million, or 4.7%, as compared to total assets of $684.5 million at December 31, 2015. The increase in total assets was largely driven by growth in loans receivable of $36.6 million, or 6.7%, which was partially offset by a decline in the securities portfolio of $7.3 million, or 7.2%.

 

Total loans receivable, net of unearned income, increased $36.6 million, or 6.7%, to $580.1 million at March 31, 2016, as compared to $543.4 million at December 31, 2015. During the three months ended March 31, 2016, the Company had $50.6 million in commercial loan production, which was partly offset by $2.4 million in commercial loan payoffs.

 

The Company’s total deposits increased $57.4 million, or 11.1%, to $575.3 million at March 31, 2016, from $517.9 million at December 31, 2015. The growth in deposits was due to increases in both interest bearing deposits of $35.5 million, or 8.2%, and non-interest bearing deposits of $21.9 million, or 25.2%, at March 31, 2016, as compared to December 31, 2015. The increase was partially offset by a $28.2 million, or 29.5%, decrease in borrowings to $67.4 million at March 31, 2016 from $95.7 million at December 31, 2015. Included in the aforementioned deposit total is $35.9 million in deposit balances with a cost of 0.56% attributed to our newest branch in Oradell, New Jersey, which opened in the beginning of March 2016. Also, included is $51.8 million in deposit balances with a cost of 0.47% attributed to our branch in Astoria, New York, which opened in Mid-March of 2015.

 

At March 31, 2016, the Company’s total stockholders’ equity was $55.7 million, an increase of $1.7 million when compared to December 31, 2015. The increase was largely due to net income for the quarter ended March 31, 2016. At March 31, 2016, the leverage, Tier I risk-based capital, total risk-based capital and common equity Tier I capital ratios for the Bank were 9.18%, 11.29%, 12.31% and 11.29%, 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 improved to 1.39% at March 31, 2016 from 1.49% at December 31, 2015. NPAs decreased $270 thousand, or 2.6%, to $9.9 million at March 31, 2016, as compared to $10.2 million at December 31, 2015. Non-accrual loans increased $41 thousand, or 0.80%, to $5.4 million at March 31, 2016, as compared to $5.3 million at December 31, 2015. The top five non-accrual loan relationships total $3.4 million, which equates to 63.1% of total non-accrual loans and 33.9% of total NPAs at March 31, 2016. The remaining non-accrual loans at March 31, 2016 have an average loan balance of $94 thousand. Loans past due 30 to 89 days increased $2.0 million, or 71.5%, to approximately $4.8 million at March 31, 2016, as compared to $2.8 million at December 31, 2015. The increase was largely due to four loans. Loans that make up approximately half of the balance increase have made payments to bring their status current in April.

 

 

 

 

The Company continues to actively market its foreclosed real estate properties, which decreased $26 thousand to $3.3 million at March 31, 2016, as compared to $3.4 million at December 31, 2015. At March 31, 2016, the Company’s foreclosed real estate properties had an average carrying value of approximately $303 thousand per property.

 

The allowance for loan losses increased by $222 thousand, or 4.0%, to $5.8 million, or 1.00% of total loans, at March 31, 2016, compared to $5.6 million, or 1.03% of total loans, at December 31, 2015. The Company recorded $211 thousand in provision for loan losses for the quarter ended March 31, 2016. Additionally, the Company recorded net recoveries of $11 thousand for the quarter ended March 31, 2016, as compared to $183 thousand in net charge-offs for the quarter ended March 31, 2015. The allowance for loan losses as a percentage of non-accrual loans increased to 108.6% at March 31, 2016 from 105.2% at December 31, 2015.

 

About Sussex Bancorp

Sussex Bancorp is the holding company for Sussex Bank, which operates through its regional offices and corporate centers in Wantage and Rockaway, New Jersey, its twelve branch offices located in Andover, Augusta, Franklin, Hackettstown, Newton, Montague, Sparta, Vernon, Oradell and Wantage, New Jersey, and Port Jervis and Astoria, New York, and a loan production office in Oradell, New Jersey, and for the Tri-State Insurance Agency, Inc., a full service insurance agency with locations in Augusta and Oradell, 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. 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, 2015 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)

 

               3/31/2016 VS. 
   3/31/2016   12/31/2015   3/31/2015   3/31/2015   12/31/2015 
BALANCE SHEET HIGHLIGHTS - Period End Balances                    
Total securities  $93,339   $100,610   $91,064    2.5%   (7.2)%
Total loans   580,051    543,423    473,303    22.6%   6.7%
Allowance for loan losses   (5,812)   (5,590)   (5,763)   0.9%   4.0%
Total assets   716,772    684,503    604,251    18.6%   4.7%
Total deposits   575,300    517,856    473,512    21.5%   11.1%
Total borrowings and junior subordinated debt   80,317    108,537    74,087    8.4%   (26.0)%
Total shareholders' equity   55,682    53,941    51,969    7.1%   3.2%
                          
FINANCIAL DATA - QUARTER ENDED:                         
Net interest income (tax equivalent) (a)  $5,745   $5,414   $4,906    17.1%   6.1%
Provision for loan losses   211    130    305    (30.8)%   62.3%
Total other income   2,524    1,396    1,901    32.8%   80.8%
Total other expenses   5,610    5,198    5,070    10.7%   7.9%
Income before provision for income taxes (tax equivalent)   2,448    1,482    1,432    70.9%   65.2%
Provision for income taxes   775    450    376    106.1%   72.2%
Taxable equivalent adjustment (a)   99    119    104    (4.8)%   (16.8)%
Net income  $1,574   $913   $952    65.3%   72.4%
                          
Net income per common share - Basic  $0.34   $0.20   $0.21    61.9%   70.0%
Net income per common share - Diluted  $0.34   $0.20   $0.21    61.9%   70.0%
                          
Return on average assets   0.90%   0.55%   0.64%   41.2%   63.4%
Return on average equity   11.38%   6.79%   7.31%   55.7%   67.7%
Efficiency ratio (b)   68.67%   77.69%   75.64%   (9.2)%   (11.6)%
Net interest margin (tax equivalent)   3.46%   3.39%   3.53%   (2.0)%   2.1%
Avg. interest earning assets/Avg. interest bearing liabilities   1.23    1.24    1.19    3.0%   (0.8)%
                          
                          
SHARE INFORMATION:                         
Book value per common share  $11.91   $11.61   $11.13    7.0%   2.6%
Outstanding shares- period ending   4,675,976    4,646,238    4,669,597    0.1%   0.6%
Average diluted shares outstanding (year to date)   4,606,426    4,591,822    4,602,910    0.1%   0.3%
                          
CAPITAL RATIOS:                         
Total equity to total assets   7.77%   7.88%   8.60%   (9.7)%   (1.4)%
Leverage ratio (c)   9.18%   9.45%   9.97%   (7.9)%   (2.9)%
Tier 1 risk-based capital ratio (c)   11.29%   11.74%   12.67%   (10.9)%   (3.8)%
Total risk-based capital ratio (c)   12.31%   12.79%   13.90%   (11.4)%   (3.8)%
Common equity Tier 1 capital ratio (c)   11.29%   11.74%   12.67%   (10.9)%   (3.8)%
                          
ASSET QUALITY:                         
Non-accrual loans  $5,353   $5,312   $6,632    (19.3)%   0.8%
Loans 90 days past due and still accruing   -    -    1    -%   -%
Troubled debt restructured loans ("TDRs") (d)   1,268    1,553    1,580    (19.7)%   (18.4)%
Foreclosed real estate   3,328    3,354    2,852    16.7%   (0.8)%
Non-performing assets ("NPAs")  $9,949   $10,219   $11,065    (10.1)%   (2.6)%
                          
Foreclosed real estate, criticized and classified assets  $20,433   $20,778   $19,762    3.4%   (1.7)%
Loans past due 30 to 89 days  $4,841   $2,823   $4,178    15.9%   71.5%
Charge-offs, net (quarterly)  $(11)  $181   $183    (106.0)%   (106.1)%
Charge-offs, net as a % of average loans (annualized)   (0.01)%   0.14%   0.16%   (105.1)%   (105.7)%
Non-accrual loans to total loans   0.92%   0.98%   1.40%   (34.1)%   (5.6)%
NPAs to total assets   1.39%   1.49%   1.83%   (24.2)%   (7.0)%
NPAs excluding TDR loans (d) to total assets   1.21%   1.27%   1.57%   (22.8)%   (4.3)%
Non-accrual loans to total assets   0.75%   0.78%   1.10%   (32.0)%   (3.8)%
Allowance for loan losses as a % of non-accrual loans   108.57%   105.23%   86.90%   24.9%   3.2%
Allowance for loan losses to total loans   1.00%   1.03%   1.22%   (17.7)%   (2.6)%

   

(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)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)

 

ASSETS  March 31, 2016   December 31, 2015 
         
Cash and due from banks  $3,060   $2,914 
Interest-bearing deposits with other banks   5,979    3,206 
   Cash and cash equivalents   9,039    6,120 
           
Interest bearing time deposits with other banks   100    100 
Securities available for sale, at fair value   86,523    93,776 
Securities held to maturity   6,816    6,834 
Federal Home Loan Bank Stock, at cost   3,839    5,165 
           
Loans receivable, net of unearned income   580,051    543,423 
   Less:  allowance for loan losses   5,812    5,590 
        Net loans receivable   574,239    537,833 
           
Foreclosed real estate   3,328    3,354 
Premises and equipment, net   9,126    8,879 
Accrued interest receivable   2,257    1,764 
Goodwill   2,820    2,820 
Bank-owned life insurance   12,600    12,524 
Other assets   6,085    5,334 
           
Total Assets  $716,772   $684,503 
           
LIABILITIES AND STOCKHOLDERS' EQUITY          
           
Liabilities:          
   Deposits:          
      Non-interest bearing  $109,152   $87,209 
      Interest bearing   466,148    430,647 
   Total Deposits   575,300    517,856 
           
Borrowings   67,430    95,650 
Accrued interest payable and other liabilities   5,473    4,169 
Junior subordinated debentures   12,887    12,887 
           
Total Liabilities   661,090    630,562 
           
Total Stockholders' Equity   55,682    53,941 
           
Total Liabilities and Stockholders' Equity  $716,772   $684,503 

 

 

 

 

SUSSEX BANCORP

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(Dollars In Thousands Except Per Share Data)

(Unaudited)

 

   Three Months Ended March 31, 
   2016   2015 
INTEREST INCOME          
   Loans receivable, including fees  $6,145   $5,172 
   Securities:          
      Taxable   376    267 
      Tax-exempt   201    208 
   Interest bearing deposits   4    4 
         Total Interest Income   6,726    5,651 
           
INTEREST EXPENSE          
   Deposits   575    416 
   Borrowings   437    380 
   Junior subordinated debentures   68    53 
        Total Interest Expense   1,080    849 
           
        Net Interest Income   5,646    4,802 
PROVISION FOR LOAN LOSSES   211    305 
        Net Interest Income after Provision for Loan Losses   5,435    4,497 
           
OTHER INCOME          
   Service fees on deposit accounts   225    213 
   ATM and debit card fees   187    174 
   Bank owned life insurance   77    78 
   Insurance commissions and fees   1,721    1,155 
   Investment brokerage fees   27    22 
   Gain on securities transactions   167    168 
   (Loss) on disposal of fixed assets   (13)   - 
   Other   133    91 
      Total Other Income   2,524    1,901 
           
OTHER EXPENSES          
   Salaries and employee benefits   3,353    2,780 
   Occupancy, net   424    477 
   Data processing   549    354 
   Furniture and equipment   233    210 
   Advertising and promotion   105    70 
   Professional fees   174    146 
   Director fees   59    166 
   FDIC assessment   120    124 
   Insurance   73    52 
   Stationary and supplies   52    56 
   Loan collection costs   32    97 
   Expenses and write-downs related to foreclosed real estate   75    164 
   Other   361    374 
      Total Other Expenses   5,610    5,070 
           
       Income before Income Taxes   2,349    1,328 
 INCOME TAX EXPENSE   775    376 
      Net Income  $1,574   $952 
           
OTHER COMPREHENSIVE INCOME (LOSS):          
Unrealized gains on available for sale securities arising during the period  $985   $316 
Fair value adjustments on derivatives   (400)   - 
Reclassification adjustment for net gain on securities transactions included in net income   (167)   (168)
Income tax related to items of other comprehensive income (loss)   (167)   (60)
Other comprehensive income, net of income taxes   251    88 
Comprehensive income  $1,825   $1,040 
           
EARNINGS PER SHARE          
   Basic  $0.34   $0.21 
   Diluted  $0.34   $0.21 

 

 

 

 

SUSSEX BANCORP

COMPARATIVE AVERAGE BALANCES AND AVERAGE INTEREST RATES

(Dollars In Thousands)

(Unaudited)

 

   Three Months Ended March 31, 
   2016   2015 
   Average       Average   Average       Average 
   Balance   Interest   Rate (2)   Balance   Interest   Rate (2) 
Earning Assets:                              
Securities:                              
      Tax exempt (3)  $30,236   $300    3.99%  $31,339   $312    4.04%
      Taxable   69,870    376    2.16%   54,267    267    2.00%
Total securities   100,106    676    2.72%   85,606    579    2.74%
Total loans receivable (1) (4)   559,879    6,145    4.41%   470,870    5,172    4.45%
Other interest-earning assets   8,638    4    0.19%   7,118    4    0.23%
Total earning assets   668,623    6,825    4.11%   563,594    5,755    4.14%
                               
Non-interest earning assets   38,701              41,353           
Allowance for loan losses   (5,659)             (5,742)          
Total Assets  $701,665             $599,205           
                               
Sources of Funds:                              
Interest bearing deposits:                              
      NOW  $140,031   $71    0.20%  $128,160   $50    0.16%
      Money market   29,951    28    0.38%   14,511    5    0.14%
      Savings   138,528    70    0.20%   140,497    71    0.20%
      Time   146,344    406    1.12%   112,067    290    1.05%
Total interest bearing deposits   454,854    575    0.51%   395,235    416    0.43%
      Borrowed funds   75,965    437    2.31%   63,715    380    2.42%
      Junior subordinated debentures   12,887    68    2.12%   12,887    53    1.67%
Total interest bearing liabilities   543,706    1,080    0.80%   471,837    849    0.73%
                               
Non-interest bearing liabilities:                              
      Demand deposits   98,264              71,695           
      Other liabilities   4,381              3,595           
Total non-interest bearing liabilities   102,645              75,290           
Stockholders' equity   55,314              52,078           
Total Liabilities and Stockholders' Equity  $701,665             $599,205           
                               
Net Interest Income and Margin (5)        5,745    3.46%        4,906    3.53%
Tax-equivalent basis adjustment        (99)             (104)     
Net Interest Income       $5,646             $4,802      

 

(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