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.
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: Stewart E. McClure, Jr. President & CEO 908.630.5000 William S. Burns Executive VP & CFO 908.630.5018