updated 4/26/2011 8:46:31 AM ET 2011-04-26T12:46:31

BERNARDSVILLE, N.J., April 26, 2011 (GLOBE NEWSWIRE) -- Somerset Hills Bancorp (Nasdaq:SOMH) (the "Company"), parent company of Somerset Hills Bank (the "Bank"), reported net income of $603,000 for the first quarter of 2011, a 47.1% increase over $410,000 for the first quarter of 2010. First quarter diluted earnings per share were $0.11 in 2011 and $0.07 in 2010.

Stewart E. McClure, Jr., President and CEO, stated, "We are again very pleased with the Company's financial performance. Earnings increased significantly versus last year's first quarter, reflecting core balance sheet growth, a wider net interest margin, and reduced operating expenses. Loan growth was very challenging in 2010, but 2011 has started off strong with our loan portfolio increasing by 5.9% since the beginning of the year. Partially offsetting these core banking improvements were reduced revenues in our residential mortgage origination business, consistent with the industry-wide downturn in refinancing activity. Our credit quality remains solid -- nonaccrual loans as a percent of total loans remained at 0.12%."

Net interest income on a fully taxable equivalent basis for the first quarter of 2011 totaled $2.9 million, an increase of $198,000, or 7.3%, from $2.7 million earned in the year ago quarter. The increase in net interest income was due to a widening of the net interest margin, which increased by 17 basis points to 3.99% in the current quarter from 3.82% in the prior year quarter, coupled with a 2.8% increase in interest-earning assets to $297.3 million in the current quarter from $289.1 million in the prior year quarter. The increase in the net interest margin was primarily due to a reduction in rates paid for deposits. Further contributing to the wider margin was an improved deposit mix, resulting from core deposit growth, and an improved asset mix, resulting from loan growth. The net interest margin for the first quarter 2011 widened by 17 basis points on a sequential quarter basis, as $11 million of liquid cash balances were redeployed into the loan portfolio.

Non-interest income declined to $396,000 in the first quarter of 2011 from $422,000 in the first quarter of 2010, due primarily to a $40,000 decline in gains on sales of residential loans at Sullivan Financial Services, Inc., a wholly-owned mortgage banking subsidiary of the Bank, which originates loans for sale strictly on a pre-sold flow-basis. Sullivan's origination volume is down due to declining residential mortgage refinancing activity and continued low home purchase activity. Partially offsetting the reduction in mortgage banking revenue were higher banking and wealth management fees, and $9,000 in net gains from the sale of investment securities.

Non-interest expenses decreased by $97,000, or 4.0%, to $2.4 million in the first quarter of 2010 from $2.5 million in the first quarter of 2010, due primarily to decreases in employee, occupancy and FDIC premium expenses. Management continues its cost containment efforts which have yielded cost savings in all areas of the Company's operations.

The Company recorded provisions for income taxes of $240,000 for the first quarter of 2011 and $155,000 for the first quarter of 2010. The effective tax rate was 28.5% for the first quarter of 2011 and 27.4% for same period one year ago.

The first quarter provision for loan losses was $75,000 for both 2011 and 2010. There was a recovery of $3,000 during the first quarter of 2011 compared to no charge-offs or recoveries in 2010. The allowance for loan losses was $3.0 million, or 1.35% of total loans, at March 31, 2011 versus $3.2 million, or 1.53% of total loans, at March 31, 2010. The reduction in the allowance over the course of the past year was primarily due to a lower level of impaired loans. Non-accrual loans at March 31, 2011 totaled $254,000, representing 0.12% of total loans, down from $374,000, or 0.18% of total loans one year ago. The non-performing asset ratio, which is defined as nonaccrual loans and OREO as a percentage of total assets, was 0.08% at March 31, 2011 and 0.12% at March 31, 2010. The Company had no OREO at March 31 for both 2011 and 2010 and troubled debt restructured loans totaling $736,000 at March 31, 2011 and $393,000 at March 31, 2010. As of March 31, 2011, the Company had $2.5 million in loans delinquent 30 to 89 days, representing 1.12% of total loans, versus $182,000, or 0.09%, of total loans, at the end of the prior year's first quarter. All loans delinquent 30 to 89 days were, and continue to be, adequately secured.

As of March 31, 2011, the Company's tangible common equity ratio and tangible book value per share were 12.28% and $7.30, respectively. As of March 31, 2010, the Company's tangible common equity ratio and tangible book value per share were 12.33% and $7.06, respectively.

Based upon the Company's first quarter performance, the Board of Directors declared a quarterly cash dividend of $0.06 per share payable May 31, 2011 to shareholders of record as of May 19, 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 March 31
($ in thousands except per share data) 2011 2010
     
Income Statement Data:    
 Net interest income  $ 2,875  $ 2,668
 Provision for loan losses  75  75
 Net interest income after prov. for loan losses  2,800  2,593
 Non-interest income  396  422
 Non-interest expense  2,353  2,450
 Income before income taxes  843  565
 Income tax expense  240  155
 Net income  $ 603  $ 410
 Net income available to common  $ 603  $ 410
 Diluted earnings per share  $ 0.11  $ 0.07
     
Balance Sheet Data:    
At period end--    
 Total assets  $ 324,162  $ 312,752
 Loans, net  216,394  205,670
 Loans held for sale  1,183  2,148
 Allowance for loan losses  2,953  3,186
 Investment securities held to maturity  10,740  12,262
 Investment securities held for sale  31,251  31,506
 Deposits  271,688  261,427
 Borrowings  11,000  11,000
 Shareholders' equity  39,805  38,547
 Book value per share  $ 7.30  $ 7.06
 Tangible common equity ratio 12.28% 12.33%
Average for the period--    
 Interest-earning assets  297,347  289,133
 Total assets  317,743  308,374
 Shareholders' equity  39,771  38,830
     
Performance Ratios:    
 Return on average assets 0.77% 0.54%
 Return on average equity 6.15% 4.28%
 Net interest margin (FTE) 3.99% 3.82%
 Efficiency ratio 71.9% 79.3%
     
Asset Quality:    
 Net charge-offs (recoveries)  (3)  -- 
At period end--    
 Nonaccrual loans  254  374
 OREO property  --   -- 
 Total nonperforming assets  254  374
 Troubled debt restructured loans  736  393
 Nonaccrual loans to total loans 0.12% 0.18%
 Nonperforming assets to total assets 0.08% 0.12%
 Allowance for loan losses to total loans 1.35% 1.53%
 Allowance as a % of nonperforming loans 1,163% 852%
 
SOMERSET HILLS BANCORP
Statement of Operations
(in thousands, except per share data)
(unaudited)
     
  Three months ended  Three months ended 
  March 31, 2011 March 31, 2010
     
INTEREST INCOME    
     
 Loans, including fees  $ 2,871  $ 2,805
 Investment securities  429  476
 Interest bearing deposits with other banks  25  28
Total interest income  3,325  3,309
     
INTEREST EXPENSE    
 Deposits  359  550
 Federal Home Loan Bank advances  91  91
Total interest expense  450  641
     
Net interest income  2,875  2,668
     
PROVISION FOR LOAN LOSSES  75  75
     
Net interest income after provision for     
 loan losses  2,800  2,593
     
NON-INTEREST INCOME    
 Service fees on deposit accounts  75  79
 Gains on sales of mortgage loans, net  147  187
 Bank owned life insurance  71  75
 Gain on sales of investment securities, net  9  -- 
 Other income  94  81
Total Non-Interest Income  396  422
     
NON-INTEREST EXPENSE    
 Salaries and employee benefits  1,317  1,366
 Occupancy expense  412  435
 Advertising and business promotions  29  43
 Printing stationery and supplies  43  40
 Data processing  135  127
 FDIC insurance  83  110
 Other operating expense  334  329
Total Non-Interest Expense  2,353  2,450
     
Income before provision for taxes  843  565
     
PROVISION FOR INCOME TAXES  240  155
     
Net income  $ 603  $ 410
     
 Dividends on preferred stock and accretion  --   -- 
     
Net income available to common stockholders  $ 603  $ 410
     
 Diluted earnings per common share  $ 0.11  $ 0.07
 
SOMERSET HILLS BANCORP
Balance Sheets
(Dollars in thousands)
(unaudited)
     
  March 31, 2011 December 31, 2010
     
ASSETS    
     
Cash and due from banks  $ 6,797  $ 5,480
Interest bearing deposits at other banks  39,368  52,086
 Total cash and cash equivalents  46,165  57,566
     
Loans held for sale  1,183  2,230
Investment securities held to maturity (Approximate market value     
 of $10,653 in 2011 and $10,548 in 2010)  10,740  10,740
Investments available for sale  31,251  35,993
     
Loans receivable  219,347  207,146
Less allowance for loan losses  (2,953)  (2,875)
     
Net loans receivable  216,394  204,271
     
Premises and equipment, net  5,184  5,285
Bank owned life insurance  8,124  8,053
Accrued interest receivable  1,114  1,111
Prepaid expenses  1,155  1,251
Other assets  2,852  2,396
     
Total assets  $ 324,162  $ 328,896
     
LIABILITIES AND STOCKHOLDERS' EQUITY    
     
LIABILITIES    
 Deposits:    
 Non-interest bearing deposits-demand  $ 64,419  $ 68,521
 Interest bearing deposits    
 Now,M/M and savings  166,084  166,304
 Certificates of deposit,under $100,000  20,880  21,101
 Certificates of deposit, $100,000 and over  20,305  20,615
     
Total deposits  271,688  276,541
     
Federal Home Loan Bank advances  11,000  11,000
Other liabilities  1,669  1,964
     
Total liabilities  284,357  289,505
     
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, 5,450,838    
 shares in 2011 and 5,421,924 shares in 2010 37,789 37,600
 Retained earnings 1,422 1,145
 Accumulated other comprehensive income 594 646
     
Total stockholders' equity  39,805  39,391
     
Total liabilities and stockholders' equity  $ 324,162  $ 328,896
CONTACT: Stewart E. McClure, Jr.
         President & CEO
         908.630.5000
         
         William S. Burns
         Executive VP & CFO
         908.630.5018

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