updated 1/27/2011 8:15:57 AM ET 2011-01-27T13:15:57

BERNARDSVILLE, N.J., Jan. 27, 2011 (GLOBE NEWSWIRE) -- Somerset Hills Bancorp (Nasdaq:SOMH) (the "Company"), parent company of Somerset Hills Bank (the "Bank"), reported net income available to common stockholders of $2,510,000, or $0.46 per diluted share, for 2010 versus $1,544,000, or $0.28 per diluted share, for 2009. For the fourth quarter 2010, net income available to common stockholders was $810,000, or $0.15 per diluted share, versus $482,000, or $0.09 per diluted share, for the fourth quarter of 2009 and $689,000, or $0.13 per diluted share, for the third quarter of 2010.

Net income available to common stockholders for the full-year 2009 was negatively impacted by $350,000 due to accretion, dividends, and repurchase premium related to $7.4 million of preferred stock issued in January 2009 to the U.S. Treasury under the Capital Purchase Program. During the second quarter of 2009, the Company repurchased all shares of preferred stock and warrants issued to Treasury, thus eliminating any dilutive effect in prospective periods. Net income for the full-year 2010 increased by 32.5% from 2009; however, net income available to common stockholders, which takes into account the negative impact of the preferred stock on 2009 results, increased by 62.6%.

Stewart E. McClure, Jr., President and CEO stated, "2010 marked a banner year for Somerset Hills Bancorp. Net income for the full year was a record, and our current quarter results reflected continued improvement in all areas of the Bank. The Bank's return on assets reached 0.98% for the quarter, supported by both improved core banking earnings as well as strong results from our mortgage banking subsidiary, Sullivan Financial, which originates residential mortgage loans for sale on a pre-sold flow basis. Meanwhile, our asset quality remains solid with nonaccrual loans decreasing from last quarter. Today, we have only one nonaccrual loan representing just 0.12% of total loans and 99.6% of all of our loans are current. We continue to improve back-office efficiencies, doing more with less and driving this quarter's efficiency ratio down to 65% from 72% one year ago. On the economy in general, we see a continued challenging operating environment with sluggish economic growth and only tepid gains in employment. Nevertheless, our capital is strong, we are liquid, our asset/liability mix is positioned for rising rates and our commercial loan pipeline is growing, all of which point to an optimistic outlook as we head into 2011."

Net interest income on a fully taxable equivalent basis for 2010 totaled $11.5 million, an increase of $804,000, or 7.5%, from $10.7 million earned in 2009. The increase in net interest income was primarily attributable to a widening of the net interest margin, which increased by 24 basis points to 3.98% in 2010 from 3.74% in 2009. Also contributing to higher net interest income for the current year was a 0.9% increase in interest-earning assets to $294.3 million in 2010 from $291.8 million in 2009. For the fourth quarter of 2010, net interest income on a fully taxable equivalent basis increased to $2.9 million and the net interest margin increased to 3.82%, up from $2.8 million and 3.63% for the prior year fourth quarter. Also contributing to the increase in net interest income for the current quarter was a 1.7% increase in interest-earning assets to $306.0 million in 2010 from $300.7 million for same period one year ago. The increases in the net interest margin for the full-year and quarterly comparisons were primarily due to a reduction in rates paid for deposits and an improved deposit mix weighted more towards transaction accounts. The net interest margin for the fourth quarter 2010 (3.82%) contracted slightly from the third quarter 2010 (3.93%), and from the second quarter 2010 (4.06%). The average balance of cash and due from banks, which has been invested predominantly at an overnight rate of 0.25%, was $50.0 million for the fourth quarter 2010, $39.7 million for the third quarter 2010 and $29.9 million for the second quarter 2010. The increase in liquid funds has resulted from strong growth in core deposits that has outpaced loan growth. Adjusted on a pro forma basis to exclude the increase in liquidity that has occurred over the past three sequential quarters, the Bank's net interest margin has essentially been flat.

For the full-year 2010, non-interest income was $2.2 million, down $717,000 from $2.9 million earned during 2009. Bank owned life insurance income was significantly lower in 2010, as the bank received $568,000 on a life insurance policy in 2009 in connection with the death of its former CFO. Further contributing to the decrease was a $210,000 decline in gains on sales of residential mortgage loans, due to reduced origination volume at Sullivan Financial Services, Inc., a wholly-owned mortgage banking subsidiary of the Bank. Partially offsetting these declines were higher banking and wealth management fees. For the fourth quarter 2010, non-interest income increased to $728,000 from $550,000 in the fourth quarter of 2009, due primarily to a $170,000 increase in gains on sales of residential loans, reflecting increased origination activity versus the comparable period.

Management continued its focus on operating efficiency throughout 2010. Non-interest expenses decreased by $469,000, or 4.6%, to $9.6 million in 2010 from $10.1 million in 2009, primarily due to lower occupancy, FDIC insurance, and outside legal, audit and consulting expenses. For the three months ended December 31, 2010, non-interest expenses were $2.4 million, essentially flat from $2.3 million in the comparable 2009 period. An increase in employee-related expense was offset by declines in occupancy, and outside legal, audit and consulting expenses.

The Company recorded provisions for income taxes of $1.2 million and $423,000 for the full-year and fourth quarter of 2010, respectively, versus $441,000 and $214,000 for the full-year and fourth quarter of 2009, respectively. The effective tax rates were 32.7% and 34.3% for the full-year and fourth quarter of 2010, respectively, versus 18.9% and 30.8% for the full-year and fourth quarter of 2009, respectively. The increase in the effective tax rates this year versus last was due to an increase in income from taxable sources, whereas recurring non-taxable income has declined slightly. In addition, pretax income for the full-year 2009 included a tax-free $568,000 death benefit payment on bank owned life insurance, which resulted in a very low effective rate for the applicable period.

For 2010, the provision for loan losses was $125,000 and net charge-offs were $361,000, while for 2009, the provision for loan losses was $950,000 and net charge-offs were $658,000. For the fourth quarter of 2010, the provision for loan losses was $25,000 and there were $266,000 in net charge-offs, while for the fourth quarter of 2009, the provision for loan losses was $200,000 and net charge-offs were $3,000. During the fourth quarter of 2010, the Company charged off completely one consumer credit of $298,000 that previously had a specific impairment reserve of approximately $200,000. The allowance for loan losses at December 31, 2010 was $2.9 million, representing 1.39% of total loans. At December 31, 2009 the allowance was $3.1 million, representing 1.50% of total loans. Nonaccrual loans at December 31, 2010 totaled $254,000 representing 0.12% of total loans and virtually unchanged from one year ago. The nonperforming asset ratio, which is defined as nonaccrual loans and OREO as a percentage of total assets, was 0.08% at both December 31, 2010 and 2009. The Company had no OREO at either of December 31, 2010 or 2009. Troubled debt restructured loans ("TDRs") totaled $738,000 at December 31, 2010 versus $394,000 at December 31, 2009. All TDRs are current and performing under their restructured terms. As of December 31, 2010, the Company had $512,000 in loans delinquent 30 to 89 days, representing 0.25% of total loans, versus $759,000, or 0.37%, of total loans, at December 31, 2009.

As of December 31, 2010, the Company's tangible common equity ratio and tangible book value per share were 11.98% and $7.27, respectively. As of December 31, 2009, the Company's tangible common equity ratio and tangible book value per share were 11.57% and $7.02, respectively.

The Board of Directors declared a quarterly cash dividend of $0.06 per share payable February 28, 2011 to shareholders of record as of February 14, 2011. 

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 December 31
($ in thousands except per share data) 2010 2009
     
Income Statement Data:    
Net interest income  $ 2,896  $ 2,694
Provision for loan losses  25  200
Net interest income after prov. for loan losses  2,871  2,494
Non-interest income  728  550
Non-interest expense  2,366  2,348
Income before income taxes  1,233  696
Income tax expense  423  214
Net income  $ 810  $ 482
Net income available to common stockholders  $ 810  $ 482
Diluted earnings per share  $ 0.15  $ 0.09
     
Balance Sheet Data:    
At period end-    
Total assets  $ 328,896  $ 330,110
Loans, net  204,271  203,657
Loans held for sale  2,230  5,360
Allowance for loan losses  2,875  3,111
Investment securities held to maturity  10,740  12,262
Investment securities held for sale  35,993  34,215
Deposits  276,541  279,125
Borrowings  11,000  11,000
Shareholders' equity  39,391  38,200
Book value per share  $ 7.27  $ 7.02
Tangible common equity ratio 11.98% 11.57%
Average for the period-    
Interest-earning assets  305,979  300,734
Total assets  327,179  318,001
Shareholders' equity  39,816  38,694
     
Performance Ratios:    
Return on average assets 0.98% 0.60%
Return on average equity 8.07% 4.94%
Net interest margin (FTE) 3.82% 3.63%
Efficiency ratio 65.3% 72.4%
     
Asset Quality:    
Net charge-offs (recoveries)  266  3
At period end-    
Nonaccrual loans  254  256
OREO property  --   -- 
Total nonperforming assets  254  256
Troubled debt restructured loans  738  394
Nonaccrual loans to total loans 0.12% 0.12%
Nonperforming assets to total assets 0.08% 0.08%
Allowance for loan losses to total loans 1.39% 1.50%
Allowance as a % of nonperforming loans 1,132% 1,215%
 
SOMERSET HILLS BANCORP
Statement of Operations
(in thousands, except per share data)
(unaudited)
         
  Three months ended

December 31, 2010
Three months ended

December 31, 2009
Twelve months ended

December 31, 2010
Twelve months ended

December 31, 2009
         
INTEREST INCOME        
         
Loans, including fees  $ 2,903  $ 2,929  $ 11,544  $ 11,720
Federal funds sold  --   --   --   2
Investment securities  434  501  1,810  2,043
Interest bearing deposits with other banks  37  30  119  89
Total interest income  3,374  3,460  13,473  13,854
         
INTEREST EXPENSE        
Deposits  384  672  1,822  3,020
Federal Home Loan Bank advances  94  94  371  371
Total interest expense  478  766  2,193  3,391
         
Net interest income  2,896  2,694  11,280  10,463
         
PROVISION FOR LOAN LOSSES  25  200  125  950
         
Net interest income after provision for loan losses  2,871  2,494  11,155  9,513
         
NON-INTEREST INCOME        
Service fees on deposit accounts  79  85  299  293
Gains on sales of mortgage loans, net  492  322  1,281  1,491
Bank owned life insurance  74  77  298  879
Other income  83  66  336  268
Total Non-Interest Income  728  550  2,214  2,931
         
NON-INTEREST EXPENSE        
Salaries and employee benefits  1,411  1,302  5,460  5,452
Occupancy expense  395  435  1,665  1,882
Advertising and business promotions  38  46  189  198
Printing stationery and supplies  28  35  133  186
Data processing  140  124  535  499
FDIC insurance  93  84  387  503
Other operating expense  261  322  1,271  1,389
Total Non-Interest Expense  2,366  2,348  9,640  10,109
         
Income before provision for taxes  1,233  696  3,729  2,335
         
PROVISION FOR INCOME TAXES  423  214  1,219  441
         
Net income  $ 810  $ 482  $ 2,510  $ 1,894
         
Dividends on preferred stock and accretion  --   --   --   350
         
Net income available to common stockholders  $ 810  $ 482  $ 2,510  $ 1,544
         
Diluted earnings per common share  $ 0.15  $ 0.09  $ 0.46  $ 0.28
 
SOMERSET HILLS BANCORP
Balance Sheets
(Dollars in thousands)
(unaudited)
     
  December 31, 2010 December 31, 2009
     
ASSETS    
     
Cash and due from banks  $ 5,480  $ 4,911
Interest bearing deposits at other banks  52,086  51,381
Total cash and cash equivalents  57,566  56,292
     
Loans held for sale  2,230  5,360
Investment securities held to maturity (Approximate market

value of $10,548 in 2010 and $11,983 in 2009)
 10,740  12,262
Investments available for sale  35,993  34,215
     
Loans receivable  207,146  206,768
Less allowance for loan losses  (2,875)  (3,111)
     
Net loans receivable  204,271  203,657
     
Premises and equipment, net  5,285  5,592
Bank owned life insurance  8,053  7,756
Accrued interest receivable  1,111  1,127
Prepaid expenses  1,251  1,440
Other assets  2,396  2,409
     
Total assets  $ 328,896  $ 330,110
     
LIABILITIES AND STOCKHOLDERS' EQUITY    
     
LIABILITIES    
Deposits:    
Non-interest bearing deposits-demand  $ 68,521  $ 59,288
Interest bearing deposits    
Now, M/M and savings  166,304  169,510
Certificates of deposit, under $100,000  21,101  26,041
Certificates of deposit, $100,000 and over  20,615  24,286
     
Total deposits  276,541  279,125
     
Federal Home Loan Bank advances  11,000  11,000
Other liabilities  1,964  1,785
     
Total liabilities  289,505  291,910
     
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, 5,421,924

shares in 2010 and 5,438,762 shares in 2009
37,600  37,334
Retained earnings 1,145 182
Accumulated other comprehensive income 646  684
     
Total stockholders' equity  39,391  38,200
     
Total liabilities and stockholders' equity  $ 328,896  $ 330,110
CONTACT: Stewart E. McClure, Jr.
         President & CEO
         908.630.5000
         
         William S. Burns
         Chief Financial Officer
         908.630.5018

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