BERNARDSVILLE, N.J., Oct. 21, 2010 (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 $689,000, or $0.13 per diluted share, for the quarter ended September 30, 2010 versus $462,000, or $0.08 per diluted share, for the third quarter of 2009 and $601,000, or $0.11 per diluted share, for the second quarter of 2010. For the first nine months of 2010, net income available to common stockholders was $1.7 million, or $0.31 per diluted share, versus $1.1 million, or $0.19 per diluted share, for the first nine months of 2009.
Net income available to common stockholders for the nine months ended September 30, 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.
Stewart E. McClure, Jr., President and CEO, stated, "Despite a difficult general economy, which continues to stress much of our industry, the Bank's net income increased for the fifth consecutive quarter and return on assets reached 0.86%, reflecting strong performance in all areas of the Bank. Our asset quality metrics remain among the best in the Nation. At quarter-end, the Bank's nonperforming asset ratio was only 0.17% and loans past due 30 to 89 days were only 0.08% of total loans." Mr. McClure continued, "Our Board of Directors made a decision to increase the quarterly cash dividend by one cent to $0.06 per share, taking into consideration the Company's core earnings growth, strong capital, and sound credit quality. The dividend yield on our stock, based on the price as of the close of business yesterday, is 3.0%. Looking ahead, we have started to see modest growth potential for our loan portfolio and we expect this to continue into the fourth quarter. Meanwhile, our deposit growth remains very strong. Average core deposits increased by an annualized 20.8% from the second quarter of 2010 and now represent 84.4% of total deposits."
Net interest income on a fully taxable equivalent basis for the 2010 third quarter totaled $2.9 million, an increase of $219,000, or 8.0%, 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 3.93% in the current quarter from 3.76% in the prior year quarter, coupled with a 3.3% increase in interest-earning assets to $296.5 million in the current quarter from $287.1 million in the prior year quarter. For the first nine months of 2010, net interest income on a fully taxable equivalent basis was $8.6 million and the net interest margin was 3.94%, up from $7.9 million and 3.68% for the first nine months of 2009. Average interest-earning assets increased slightly to $290.4 million for the first nine months of 2010 from $288.8 million for the same period one year ago. The increases in the net interest margin for the three- and nine-month periods versus last year 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 third quarter 2010 (3.93%) contracted slightly from the second quarter 2010 (4.06%) due primarily to an increase in liquid funds invested at overnight rates that were funded by an increase in core deposits. Excluding the increase in liquidity, which negatively impacts interest rate spreads, the Bank's net interest margin was essentially flat on a sequential quarter basis.
Non-interest income declined slightly, to $579,000 in the third quarter of 2010 from $594,000 in the third quarter of 2009, due primarily to a $31,000 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, although down moderately from one year ago, remained strong during the current quarter due to robust residential mortgage refinancing activity. Partially offsetting the reduction in mortgage banking revenue were higher banking and wealth management fees. For the nine months ended September 30, 2010, non-interest income was $1.5 million, down $895,000 from $2.4 million earned during the first nine months of 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. In addition, gains on sales of residential mortgage loans declined by $380,000 versus the same period one year ago, due to the reduction in industry-wide refinancing activity for the nine-month comparison. Partially offsetting these declines were higher banking and wealth management fees.
Non-interest expenses decreased by $51,000, or 2.1%, to $2.4 million in the third quarter of 2010 from $2.5 million in the third quarter of 2009, due primarily to a decrease in occupancy expenses. For the nine months ended September 30, 2010, non-interest expenses were $7.3 million, down $486,000, or 6.3%, from the first nine months of 2009. The decrease for the nine-month comparison was due to a $125,000 decline in FDIC insurance, a 2009 non-recurring $183,000 charge for retirement plan liability, and management's ongoing cost containment efforts, which commenced during 2009 and have yielded cost savings in all areas of the Company's operations.
The Company recorded provisions for income taxes of $350,000 and $796,000 for the third quarter and first nine months of 2010, respectively, versus $194,000 and $227,000 for the third quarter and first nine months of 2009, respectively. The effective tax rates were 33.7% and 31.9% for the third quarter and first nine months of 2010, respectively, versus 29.6% and 13.8% for the third quarter and first nine months 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 remained relatively constant. In addition, pretax income for the first nine months of 2009 included a tax-free $568 thousand death benefit payment on bank owned life insurance, which resulted in a very low effective rate for the applicable period.
For the third quarter of 2010, the provision for loan losses was $25,000 and net charge-offs were $97,000, while for the third quarter of 2009, the provision for loan losses was $150,000 and net charge-offs were $10,000. For the first nine months of 2010, the provision for loan losses was $100,000 and there were $94,000 in net charge-offs, while for the first nine months of 2009, the provision for loan losses was $750,000 and net charge-offs were $655,000. The allowance for loan losses at September 30, 2010 was $3.1 million, representing 1.49% of total loans. At September 30, 2009, the allowance was $2.9 million, representing 1.39% of total loans. Non-accrual loans at September 30, 2010 totaled $565,000, representing 0.27% of total loans, up from $115,000, or 0.05% 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 0.17% at September 30, 2010 and 0.04% at September 30, 2009. The Company had no OREO at September 30 for both 2010 and 2009 and one troubled debt restructured loan ("TDR") totaling $391,000 at September 30, 2010. As of September 30, 2010, the Company had $168,000 in loans delinquent 30 to 89 days, representing 0.08% of total loans, versus $198,000, or 0.10%, of total loans, at September 30, 2009.
As of September 30, 2010, the Company's tangible common equity ratio and tangible book value per share were 12.07% and $7.21, respectively. As of September 30, 2009, the Company's tangible common equity ratio and tangible book value per share were 12.30% and $6.99, respectively.
The Board of Directors declared a quarterly cash dividend of $0.06 per share payable November 30, 2010 to shareholders of record as of November 16, 2010.
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.
CONTACT: Somerset Hills Bancorp Stewart E. McClure, Jr., President & CEO 908.630.5000 William S. Burns, Chief Financial Officer 908.630.5018