Somerset Hills Bancorp Reports Year End Earnings; Announces $0.05 Per Share Quarterly Cash Dividend; Receives $7.4 Million Capital Purchase Program Funds

• Press Release
• Source: Somerset Hills Bancorp
• On 5:06 pm EST, Monday February 2, 2009

BERNARDSVILLE, N.J., Feb. 2, 2009 (GLOBE NEWSWIRE) -- Somerset Hills Bancorp (NasdaqGM:SOMH - News) reported its results of operations for the year ended December 31, 2008. For the year, the Company reported net income of $1,566,000 or $0.30 per diluted share, compared to earnings of $382,000, or $0.07 per diluted share for the prior year.

Related Quotes

Symbol	Price	Change
SOMH	7.80	-0.38

{"s" : "somh","k" : "c10,l10,p20,t10","o" : "","j" : ""}

In the fourth quarter of 2008 net income was $330,000 or $0.06 per diluted share compared to a loss of ($1,178,000) or ($0.22) per diluted share for the quarter ending December 31, 2007. The current year fourth quarter included a pre tax charge of $109,000 in conjunction with the disposition of the Company's only OREO property, while the fourth quarter of 2007 included a one time charge of $1.2 million to write off the goodwill associated with the 2000 acquisition of Sullivan Financial Services, the Company's mortgage banking subsidiary.

For the year ended December 31, 2008, the provision added to the allowance for loan losses was $515,000 compared to $1.0 million in the prior year. The $516,000 decline reflects, among other factors, a $1.7 million decline in nonaccrual loans.

For the year ended December 31, 2008, the net interest margin increased 10 basis points to 4.12% from 4.02% for the prior year. During the fourth quarter of 2008, the Company's net interest margin decreased 43 basis points to 3.88% from 4.31% in the fourth quarter of 2007. The decrease reflects the Company's decision in the third quarter of 2008 to both increase liquidity and acquire new customers from larger competitors by offering higher rates for certain time deposit accounts. It also reflects the loss of some lower cost core deposits as customers reduced deposit levels to the maximum FDIC insurance limit. Finally, Federal Reserve interest rate cuts reduced interest income on federal funds sold.

At December 31, 2008, net loans increased $3.1 million, or 1.5% to $208.4 million from $205.3 million at December 31, 2007. At December 31, 2008, deposits increased $5.1 million, or 2.1% to $249.8 million from $244.7 million at December 31, 2007.

At December 31, 2008, the Company's shareholders' equity totaled $37.5 million compared to $36.6 million at December 31, 2007. The increase includes the exercise of 151,523 options. During the year 123,460 additional options expired unexercised and 944 options were forfeited, leaving 283,494 options issued and unexercised. During the year the Company also repurchased 148,436 shares of its common stock at an average price of $9.15 per share. However, pursuant to the requirements of the Treasury's Capital Purchase Program, the Company has suspended its stock repurchase program. Both the Company and the Bank are ``well capitalized'' under all regulatory capital requirements applicable to them.

On January 20, 2009, the Company received a $7.4 million investment from the U.S. Treasury under its Capital Purchase Program. The Company issued 7,414 shares of preferred stock and warrants to purchase 163,065 shares of common stock of the Company with an exercise price of $6.82 to the Treasury. As a result of the investment, the Company's year end capital ratios have subsequently increased by approximately 300 basis points.

At December 31, 2008, the Company's consolidated capital ratios were 12.57% , 14.70% and 15.83% for its leverage, Tier I risk based and total risk based ratios, respectively.

At December 31, 2008, the Company's non-accrual loans decreased to $1.4 million from $3.0 million at December 31, 2007, and the Company's ratio of non-performing loans to total loans decreased to .65% from 1.46%.

Stewart E. McClure, Jr., President and Chief Executive Officer said, ``The economic and operating environment that we all face today is as challenging as anything we have ever seen. As unemployment continues to rise we are likely to see 2009 continue to be at least as challenging as 2008. We substantially reduced non-performing loans during the year and added no new non-accrual loans during the period. We also had no past due loans of 30 days or longer at December 31, 2008. While our capital levels are well above those necessary to be considered well capitalized, we decided to participate in Treasury's Capital Purchase Program. Our belief is that being among the most highly capitalized banks in our market will create more opportunities.''

On January 25, 2009, Somerset Hills Bank experienced the loss of its Chief Financial Officer Gerard Riker. Mr. Riker was one of the original employees of Somerset Hills Bank and served as the Executive Vice President and Chief Financial Officer since the Bank's inception in 1998. Mr. McClure said, ``Jerry was a wonderful friend to all who knew him and was well respected in the banking community. We will all miss him in our personal and professional lives.''

In connection with Mr. Riker's death the Bank previously reported that his rights under his Supplemental Executive Retirement Plan fully vested and his beneficiary is entitled to payments under the plan. During the first quarter 2009 the Bank will record an after tax charge to earnings of approximately $110,000 related to this vesting. In addition, the Bank is a beneficiary of bank owned life insurance policies on Mr. Riker. The Company expects to recognize income of approximately $560,000 in the first quarter of 2009, from payouts under these policies. The insurance proceeds received by the bank will not be subject to income tax.

The Board of Directors has also declared a quarterly cash dividend of $0.05 per share, payable February 27, 2009 to shareholders of record as of February 13, 2009.

Somerset Hills Bancorp is a bank holding company for Somerset Hills Bank, a full service commercial bank with offices in Bernardsville, Long Valley, Madison, Mendham, Morristown, and Summit, New Jersey. Somerset Hills Bank focuses its lending activities on small to medium sized businesses, high net worth individuals, professional practices, and consumer and retail customers. The Bank operates a licensed mortgage company subsidiary, Sullivan Financial Services, Inc. and also operates Somerset Hills Wealth Management Services, LLC, a wholly owned subsidiary licensed to provide financial services, including financial planning, insurance (life and health), mutual funds and annuities for individuals and commercial accounts, and Somerset Hills Title Group, LLC, which, with its partner, Property Title Group, provides title services in connection with the closing of real estate transactions. The common stock of the company is traded on NASDAQ Global Market under the symbol SOMH. You can visit our website at http://www.somersethillsbank.com.

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 the 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)

 ($ in thousands except per share data)            Twelve Months Ended
                                                       December 31
                                                      2008      2007
                                                    --------  --------

 Income Statement Data:

  Interest income                                    $14,988   $17,867
  Interest expense                                     4,275     7,142
                                                    --------  --------
  Net interest income                                 10,713    10,725
  Provision for loan losses                              515     1,031
                                                    --------  --------
  Net interest income after prov. for loan losses     10,198     9,694
  Non-interest income                                  1,747     2,386
  Non-interest expense                                 9,780    11,159
                                                    --------  --------
  Income before income taxes                           2,165       921
  Income tax expense                                     599       539
                                                    --------  --------
  Net income                                          $1,566      $382
                                                    ========  ========

 Balance Sheet Data:

  Total assets                                      $299,663  $285,470
  Loans, net                                         208,427   205,257
  Loans held for sale                                  2,366     3,063
  Allowance for loan losses                            2,819     3,201
  Investment securities held to maturity              12,293    13,646
  Investment securities held for sale                 37,687    27,954
  Deposits                                           249,760   244,673
  Borrowings                                          11,000     3,000
  Shareholders' equity                                37,529    36,621

 Capital Ratios:

  Somerset Hills Bank:
   Leverage ratio                                      10.20%     9.84%
   Tier 1 risk-based                                   11.93%    11.47%
   Total risk-based                                    13.06%    12.72%

  Somerset Hills Bancorp:
   Leverage ratio                                      12.57%    12.68%
   Tier 1 risk-based                                   14.70%    14.76%
   Total risk-based                                    15.83%    16.01%

 Performance Ratios:

  Return on average assets                              0.56%     0.13%
  Return on average equity                              4.24%     1.01%
  Net interest margin                                   4.12%     4.02%
  Efficiency ratio                                      78.5%     85.1%

 Asset Quality:

  Nonaccrual loans                                     1,365     3,036
  OREO property                                            0         0
  Net charge-offs (recoveries)                           897         0
  Allowance for loan losses to total loans              1.33%     1.54%
  Nonperforming loans to total loans                    0.65%     1.46%

 Per Share Data:

  Earnings per share- Basic                            $0.30     $0.07
  Earnings per share- Diluted                          $0.30     $0.07
  Book value per share                                 $7.24     $7.07


                       SOMERSET HILLS BANCORP
                           Balance Sheets
                (in thousands, except for share data)

                                            December 31,  December 31,
                                                2008          2007
                                            ------------  ------------
                                             (unaudited)   (unaudited)
                                            ------------  ------------
 ASSETS

 Cash and due from banks                    $     19,997  $     12,069
 Federal funds sold                                1,500         5,800
                                            ------------  ------------
   Total cash and cash equivalents                21,497        17,869

 Loans held for sale,net                           2,366         3,063
 Investment securities held to maturity
  (Approximate maket value of $11,608 in
  2008 and $13,531 in 2007)                       12,293        13,646
 Investments available for sale                   37,687        27,954

 Loans receivable                                211,115       208,376
    Less allowance for loan losses                (2,819)       (3,201)
    Net deferred costs                               131            82
                                            ------------  ------------

 Net loans receivable                            208,427       205,257

 Premises and equipment, net                       5,973         6,343
 Goodwill, net                                        --            --
 Bank owned life insurance                         8,459         8,111
 Accrued interest receivable                       1,227         1,435
 Deferred tax asset                                  750           723
 Other assets                                        984         1,069
                                            ------------  ------------

    Total assets                            $    299,663  $    285,470
                                            ============  ============

 LIABILITIES AND STOCKHOLDERS' EQUITY

 LIABILITIES
  Deposits:
  Non-interest bearing deposits-demand      $     50,957  $     53,783
  Interest bearing deposits
    Now, M/M and savings                         140,945       159,462
  Certificates of deposit, under $100,000         32,774        19,170
  Certificates of deposit, $100,000 and over      25,084        12,258
                                            ------------  ------------

    Total deposits                               249,760       244,673
                                            ------------  ------------

 Federal Home Loan Bank advances                  11,000         3,000
 Accrued interest payable                            236           523
 Taxes payable                                       135            --
 Other liabilities                                 1,003           653
                                            ------------  ------------
    Total liabilities                            262,134       248,849
                                            ------------  ------------

 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,
    5,180,012 shares in 2008 and 5,176,586
    in 2007                                       37,361        37,513
  Accumulated deficit                               (326)         (896)
  Accumulated other comprehensive income             494             4
                                            ------------  ------------

 Total stockholders` equity                       37,529        36,621
                                            ------------  ------------

 Total liabilities and stockholders'
  equity                                    $    299,663  $    285,470
                                            ============  ============

 *Restated to reflect 5% Stock Dividend


                       SOMERSET HILLS BANCORP
                        Statements of Income
            (Dollars In Thousands, Except Per Share Data)

                       Three        Three        Twelve       Twelve
                       months       months       months       months
                       ended        ended        ended         ended
                      Dec. 31,     Dec. 31,     Dec. 31,     Dec. 31,
                        2008         2007         2008         2007
                    -----------  -----------  -----------  -----------
                    (unaudited)  (unaudited)  (unaudited)  (unaudited)
 Interest Income:

  Loans, including
   fees             $     3,117  $     3,702  $    12,978  $    14,680
  Investment
   securities               516          560        1,879        2,515
  Federal funds sold          9           82          106          625
  Interest bearing
   deposits with
   other banks                9            8           25           47
                    -----------  -----------  -----------  -----------
   Total interest
    income                3,651        4,352       14,988       17,867

 Interest Expense:

  Deposits                  922        1,493        3,890        7,125
  Federal funds
   purchased                 --           --           12           --
  Federal Home Loan
   Bank advances             93           15          373           17
                    -----------  -----------  -----------  -----------
   Total interest
    expense               1,015        1,508        4,275        7,142

   Net interest
    income                2,636        2,844       10,713       10,725

 Provision for loan
  losses                    150          986          515        1,031
                    -----------  -----------  -----------  -----------

  Net interest
   income after
   provision for
   loan losses            2,486        1,858       10,198        9,694
                    -----------  -----------  -----------  -----------

 Non-Interest
  Income:

  Service fees on
   deposit accounts          88           74          313          329
  Gains on sales of
   mortgage loans,
   net                      150          305          943        1,473
  Gain on sales of
   investments                7            3            7            3
  Loss on sale of
   other real estate
   owned                   (109)          --         (109)          --
  Other income              145          166          593          581
                    -----------  -----------  -----------  -----------
  Total Non-Interest
   Income                   281          548        1,747        2,386
                    -----------  -----------  -----------  -----------

 Non-Interest
  Expense

  Salaries and
   employee benefits      1,224        1,215        5,141        5,163
  Occupancy expense         466          446        1,917        1,864
  Advertising &
   business
   promotion                 51           57          274          365
  Stationery and
   supplies                  45           72          183          276
  Data processing           122          133          540          521
  Goodwill
   impairment                --        1,191           --        1,191
  Other operating
   expense                  428          597        1,725        1,779
                    -----------  -----------  -----------  -----------
   Total
    Non-Interest
    Expense               2,336        3,711        9,780       11,159
                    -----------  -----------  -----------  -----------

   Income before
    provision for
    taxes                   431       (1,305)       2,165          921

 Provision for
  Income Taxes              101         (127)         599          539
                    -----------  -----------  -----------  -----------

    Net income      $       330  $    (1,178) $     1,566  $       382
                    ===========  ===========  ===========  ===========

 *Per share data
   Net income basic $      0.06  $     (0.23) $      0.30  $      0.07
                    ===========  ===========  ===========  ===========
   Net income
    diluted         $      0.06  $     (0.22) $      0.30  $      0.07
                    ===========  ===========  ===========  ===========

  *Restated to reflect 5% Stock Dividend

          Somerset Hills Bancorp
          Stewart E. McClure, Jr., President & CEO
          908-630-5000