Somerset Hills Bancorp Reports 2009 Second Quarter and Six-Month Earnings

Declares Cash Dividend of $0.05 Per Share

• Press Release
• Source: Somerset Hills Bancorp
• On 8:51 am EDT, Friday July 24, 2009

BERNARDSVILLE, N.J., July 24, 2009 (GLOBE NEWSWIRE) -- Somerset Hills Bancorp (Nasdaq:SOMH - News; the "Company"), parent company of Somerset Hills Bank (the "Bank"), reported net income of $331,000 for the quarter ended June 30, 2009 versus $367,000 earned during the second quarter of 2008. For the first six months of 2009, net income was $950,000 versus $811,000 for the first six months of 2008.

Related Quotes

Symbol	Price	Change
SOMH	7.72	0.00

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

Net income available to common stockholders was $68,000 for the second quarter 2009 and $595,000 for the six months ended June 30, 2009 reflecting accretion, dividends, and repurchase premium related to $7.4 million of preferred stock issued on January 16, 2009 to the U.S. Treasury under the Capital Purchase Program. Diluted earnings per share were $0.01 for the second quarter of 2009 versus $0.07 for the second quarter of 2008 and $0.11 for the first six months of 2009 versus $0.15 for the first six months of 2008. On May 20, 2009 the Company repurchased all shares of the preferred stock and on June 24, 2009 repurchased all common stock purchase warrants issued to Treasury in the January transaction.

Stewart E. McClure, Jr., President and CEO, stated, "As a bank with strong capital, we were among just a handful of financial institutions nationwide that redeemed all of the preferred stock and warrants issued to the U.S Treasury without any requirement to raise additional equity. Having paid off these highly dilutive securities, we are now released from several restrictions including prohibitions against cash dividend increases and stock repurchases. Turning to asset quality, the quarter was marked by no charge-offs and a slight decline in nonperforming loans, in the face of rising credit problems across the banking industry. Despite our recent asset quality performance, we continue to manage our asset portfolios with the knowledge that almost all financial institutions, including ourselves, are susceptible to the ill-effects of economic downturns." Mr. McClure further commented, "Our core deposits grew at a strong pace, as evidenced by a 9.2% (36.6% on an annualized basis) increase in average noninterest-bearing demand deposits versus the first quarter of 2009. Although our net interest margin remained lower than historical levels, we are poised for margin expansion during the latter half of 2009 as high-rate promotional time deposits mature and re-price and we begin to capitalize on select opportunities to increase our loan portfolio. We continue to manage our balance sheet conservatively, largely steering clear of investments in low-yielding securities that may increase earnings slightly today, but are likely to have a negative impact on shareholder value in the longer-term."

Net interest income for the 2009 second quarter totaled $2,524,000, a decline of $152,000, or 5.7%, from $2,676,000 earned in the year ago quarter. The net interest margin declined by 71 basis points to 3.43% in the current quarter from 4.14% in the prior year quarter. Average interest-earning assets were $295.3 million, up 13.6% from $260.0 million in the second quarter of 2008. For the first half of 2009, net interest income was $5,107,000 and the net interest margin was 3.56%, down from $5,338,000 and 4.18% for the first half of 2008. Average interest-earning assets increased by 12.7% to $289.6 million for the first six months of 2009 versus $257.0 million for same period one year ago. The reductions in net interest margin and the increases in interest-earning assets were substantial, although anticipated, due to our desire to remain more liquid than normal and to grow market share by offering time deposits at competitive rates of interest. The first tranche of these deposits matured at the end of June and in early July, and a significant amount have been retained at interest rates that are at least 200 basis points lower. This deposit re-pricing, combined with additional deposit maturities and projected increases in our loan portfolio, point to a widening net interest margin for the second half of 2009.

Non-interest income increased by $194,000 to $716,000 in the second quarter of 2009, from $522,000 in the second quarter of 2008, primarily due to higher gains on sales of residential loans at Sullivan Financial Services, Inc., a wholly-owned mortgage banking subsidiary of the Bank. Sullivan originates loans for sale strictly on a pre-sold flow-basis, and had a strong quarter due to increased residential loan refinancing business. For the six months ended June 30, 2009, non-interest income was $1,787,000, up $800,000 from the first six months of 2008. In addition to stronger mortgage banking activity in the six-month period, the Company received, in January 2009, $568,000 in tax free proceeds from a bank-owned life insurance policy as a result of the death of our founding Chief Financial Officer, Gerard Riker.

Non-interest expenses increased by $106,000 to $2,645,000 in the second quarter of 2009, from $2,539,000 in the second quarter of 2008. FDIC insurance assessment expense increased by $222,000, including a special assessment of approximately $140,000. Excluding the significant increase in FDIC insurance costs, the Bank's total other non-interest expenses decreased, reflecting lower legal and consulting costs, as well as a focus on cost containment. For the six months ended June 30, 2009, non-interest expense was $5,311,000, up $335,000 versus the first six months of 2008. The increase for the six-month period comparison was due to increased FDIC costs and a non-recurring $183,000 expense for retirement plan liability due to Mr. Riker's death, partially offset by overall expense control.

Total non-performing loans at quarter-end decreased to $119,000, representing 0.06% of total loans versus $127,000, or 0.06% of total loans, at March 31, 2009 and $2,100,000, or 1.00% of total loans, at June 30, 2008. The Company had no other real estate owned at June 30, 2009 down from $260,000 one year ago. There were no net charge-offs in the current quarter versus $230,000 for the second quarter of 2008, while net charge-offs for the first half of 2009 were $646,000 versus $375,000 for the first half of 2008. The ratio of allowance for loan losses to total loans was 1.33% at June 30, 2009, 1.27% at March 31, 2009 and 1.45% at June 30, 2008. The allowance for loan losses currently covers nonperforming loans by more than 23x.

The Company's tangible common equity ratio was 12.03% at June 30, 2009 and 12.88% at June 30, 2008. Tangible book value per share was $7.27 at June 30, 2009 and $7.08 at June 30, 2008.

The Board of Directors has declared a quarterly cash dividend of $0.05 per share, payable August 31, 2009 to shareholders of record as of August 17, 2009.

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)

                                                Quarter Ended 
                                                   June 30
                                             --------------------
 ($ in thousands except per share data)        2009        2008
                                             --------    --------
 Income Statement Data:
      Net interest income                    $  2,524    $  2,676
      Provision for loan losses                   150         145
                                             --------    --------
      Net interest income after prov. for
       loan losses                              2,374       2,531
      Non-interest income                         716         522
      Non-interest expense                      2,645       2,539
                                             --------    --------
      Income before income taxes                  445         514
      Income tax expense                          114         147
                                             --------    --------
      Net income                             $    331    $    367
                                             ========    ========
      Net income available to common         $     68    $    367
                                             ========    ========
      Diluted earnings per share             $   0.01    $   0.07
                                             ========    ========

 Balance Sheet Data:
 At period end --
      Total assets                           $312,918    $283,517
      Loans, net                              205,343     206,163
      Loans held for sale                      10,706       4,419
      Allowance for loan losses                 2,774       3,041
      Investment securities held to
       maturity                                12,262      12,056
      Investment securities held for sale      28,128      25,949
      Deposits                                262,196     234,735
      Borrowings                               11,000      11,000
      Shareholders' equity                     37,641      36,510
      Tangible book value per share          $   7.27    $   7.08
      Tangible common equity ratio              12.03%      12.88%
 Average for the period --
      Interest-earning assets                 295,315     259,993
      Total assets                            314,973     280,897
      Shareholders' equity                     42,272      37,235

 Performance Ratios:
      Return on average assets                   0.42%       0.52%
      Return on average equity                   3.14%       3.95%
      Net interest margin                        3.43%       4.14%
      Efficiency ratio                           81.6%       79.4%

 Asset Quality:
      Net charge-offs (recoveries)                 --         230
 At period end --
      Nonaccrual loans                            119       2,100
      OREO property                                --         260
      Nonperforming loans to total loans         0.06%       1.00%
      Nonperforming assets to total assets       0.04%       0.83%
      Allowance for loan losses to
       total loans                               1.33%       1.45%
      Allowance as a % of nonperforming
       loans                                    2,331%        145%

 Note: Financial statements for the second quarter and for the six
 months ended June 30, 2009 will be filed as an exhibit to the
 Company's Current Report on Form 8-k and will be available on the
 SEC's website (www.sec.gov) or the Company's website
 (www.somersethillsbank.com).

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