Sussex Bancorp (Nasdaq: SBBX), the holding company for Sussex Bank, today reported net income of $513.00 thousand, or $0.090 for each basic and diluted share, for the quarter finished December 31, 2017, as compared to $1.50M, or $0.330 for each basic share and $0.320 for each diluted share, for the same period last year.
For the year finished December 31, 2017, the Company reported net income of $5.70M, or $1.050 for each diluted share as compared to net income of $5.50M, or $1.190 for each diluted share, for the same period last year.
The decline in net income for both reported periods was mainly attributable to the Company’s adjustment to deferred tax assets resulting from the recognition of the newly enacted Tax Cuts and Jobs Act (“Tax Act”) and merger-related costs associated with the merger of Community Bank of Bergen County (“Community Bank”), NJ with and into the Bank.
Earnings for each share for both periods were also impacted by 1,249,999.00 extra common shares issued in the 2nd-quarter of 2017 in connection with an approximately $28.20M capital raise.
The Company’s net income, adjusted for merger-related costs and the impact from the Tax Act on income tax costs, inclined $608.00 thousand, or 39.90%, to $2.10M, or $0.350 for each basic and diluted share, for the quarter finished December 31, 2017, as compared to the same period last year.
For the year finished December 31, 2017, the Company’s net income, adjusted for merger-related costs and the impact from the Tax Act on income tax costs, inclined $2.20M, or 39.40%, to $7.70M, or $1.420 for each basic and diluted common share, for the year finished December 31, 2017, as compared to last year.
In December 2017, the Company recognized a decline in deferred tax assets as a result of the Tax Act and the change in federal income tax rate from 34.00% to the newly enacted 21.00%, which resulted in additional income tax expense of $942.00 thousand.
Also, the Company realized $705.00 thousand and $1.20M in merger-related costs for the three months finished December 31, 2017, and for the year finished December 31, 2017, respectively.
“I am very excited to report another strong year of financial performance for Sussex Bancorp as our business lines continue to drive outstanding results. For 2017, each of our major business units grew in excess of 15.00% with commercial loans leading the way, growing at 23.00%.
The business line growth in conjunction with continued improvement in efficiency has driven strong growth in operating results of approximately 40.00% for the 4th-quarter and fiscal year of 2017,” said Anthony Labozzetta, President, and CEO of Sussex Bank.
Financial Performance:
Net Income. For the quarter finished December 31, 2017, the Company reported net income of $513.00 thousand, or $0.090 for each basic and diluted share, as compared to net income of $1.50M, or $0.330 for each basic share and $0.320 for each diluted share, for the same period last year.
The decline in net income for the quarter finished December 31, 2017, was driven by a $1.20M, or 153.00%, incline in income tax provision mostly due to the newly enacted Tax Act and an incline in non-interest costs of $1.10M largely due to merger-related costs of $705.00 thousand.
The aforementioned decline in net income was partially offset by a $1.30M, or 19.50%, incline in net interest income resulting from strong average loan and average interest-bearing deposit growth of 18.40% and 19.50%, respectively, which is partially offset by a $491.00 thousand incline in overall interest expense partly related to the $15.00M private placement of subordinated notes completed in the 4th-quarter of 2016 and an incline in interest expense related to growth and higher costs for interest-bearing deposits.
The Company’s net income, adjusted for merger and impact on income tax costs from the Tax Act, inclined $608.00 thousand, or 39.90%, to $2.10M, or $0.350 for each basic and diluted share, for the quarter finished December 31, 2017, as compared to the same period last year.
For the year finished December 31, 2017, the Company reported net income of $5.70M, or $1.050 for each diluted share, or a 3.00% incline, as compared to net income of $5.50M, or $1.190 for each diluted share, for the same period last year.
The incline in net income for the twelve months finished December 31, 2017, was largely due to an incline in net interest income of $4.70M, which was partially offset by an incline in non-interest costs of $3.00M and income tax costs from the Tax Act of $942.00 thousand.
The incline in non-interest costs was largely due to a $1.70M incline in salaries and employee benefits and merger-related costs of $1.20M. Excluding merger-related costs, net income inclined $1.20M, or 21.50%, for the twelve months finished December 31, 2017.
The Company’s net income, adjusted for merger-related costs and income tax costs from the Tax Act, inclined $2.20M, or 39.40%, to $7.70M, or $1.420 for each basic and diluted share, for the year finished December 31, 2017, as compared to last year.
Net Interest Income. Net interest income on a fully tax equivalent basis inclined $1.30M, or 19.90%, to $8.00M for the 4th-quarter of 2017, as compared to $6.70M for the same period in 2016.
The incline in net interest income was largely due to a $128.10M, or 16.10%, incline in average interest-earning assets, principally loans receivable, which inclined $125.10M, or 18.40%. The net interest margin inclined by 11.0 basis points to 3.460% for the 4th-quarter of 2017, as compared to the same period in 2016.
The net interest margin incline was partially attributed to $178.00 thousand in prepayment penalties, an incline of $135.00 thousand, or 319.50%, as compared to the same period in 2016.
Net interest income on a fully tax equivalent basis inclined $4.90M, or 19.80%, to $29.70M for the year finished December 31, 2017, as compared to $24.80M for the same period in 2016. Included in the incline in net interest income was $635.00 thousand in prepayment penalties on $54.90M of commercial loans, an incline of $544.00 thousand, or 601.20%, as compared to the same period in 2016. The net interest margin inclined by 2 basis points to 3.390% for the year finished December 31, 2017, as compared to the same period in 2016.
Provision for Loan Losses. Provision for loan losses inclined $222.00 thousand to $459.00 thousand for the 4th-quarter of 2017, as compared to $237.00 thousand for the same period in 2016.
Provision for loan losses inclined $295.00 thousand, or 22.90%, to $1.60M for the year finished December 31, 2017, as compared to the same period in 2016.
Non-interest Income. Non-interest income inclined $256.00 thousand, or 15.00%, to $2.00M for the 4th-quarter of 2017, as compared to the same period last year. The incline was principally due to a growth of $227.00 thousand in insurance commissions and fees relating to Tri-State Insurance Agency, $62.00 thousand in service fees on deposit accounts and $61.00 thousand in bank owned life insurance. The aforementioned was partly offset by a reduction in gain on sales of securities of approximately $143.00 thousand.
The Company’s non-interest income inclined $456.00 thousand, or 5.80%, to $8.30M for the year finished December 31, 2017, as compared to the same period last year.
The incline was principally due to a growth of $530.00 thousand in insurance commissions and fees relating to Tri-State Insurance Agency and an incline of $214.00 thousand in bank-owned life insurance, due to an incline in investments in bank owned life insurance. The aforementioned were partly offset by a reduction in gain on sales of securities of approximately $453.00 thousand.
Non-interest Expense. The Company’s non-interest costs inclined $1.10M, or 19.10%, to $6.80M for the 4th-quarter of 2017, as compared to the same period last year.
The incline for the 4th-quarter of 2017, as compared to the same period in 2016, was largely due to costs of $705.00 thousand related to the acquisition of Community Bank and inclines in salaries and employee benefits of $377.00 thousand and in professional fees of $177.00 thousand.
The aforementioned were partly offset by reductions in costs and write-downs related to the foreclosed real estate of $156.00 thousand.
The Company’s non-interest costs inclined $3.00M, or 13.40%, to $25.60M for the year finished December 31, 2017, as compared to the same period last year.
The incline for the year finished December 31, 2017, as compared to the same period in 2016, was largely due to inclines in salaries and worker benefits of $1.70M, merger-related costs of $1.20M, professional fees of $385.00 thousand, and other costs of $270.00 thousand and was partly offset by declines of $245.00 thousand in FDIC assessment fees and $175.00 in costs and write-downs related to foreclosed real estate.
The incline in salaries and employee benefits for the 4th-quarter and twelve months finished December 31, 2017 as compared to the same periods in 2016 was largely due to an incline in personnel to support the Company’s growth.
Income Tax Expense. The Company’s income tax costs inclined $1.20M, or 153.00% to $2.00M for the 4th-quarter of 2017, as compared to the same period last year. The Company’s income tax costs inclined $1.70M, or 58.40%, to $4.50M for the year finished December 31, 2017, as compared to the same period last year.
The incline in income tax expense for the quarter and year finished December 31, 2017, was directly impacted by the recognition of the newly enacted Tax Act.
Financial Condition
On December 31, 2017, the Company’s total assets were $979.40M, an incline of $130.70M, or 15.40%, as compared to total assets of $848.70M at December 31, 2016. The incline in total assets was largely driven by growth in loans receivable of $125.40M, or 18.00%.
Total loans receivable, net of unearned income, inclined $125.40M, or 18.00%, to $820.70M at December 31, 2017, as compared to $695.30M at December 31, 2016. Throughout the twelve months finished December 31, 2017, the Company had $165.30M in commercial loan production, which was partially offset by $54.90M in commercial loan payoffs.
The Company’s total deposits inclined $101.60M, or 15.40%, to $762.50M at December 31, 2017, from $660.90M on December 31, 2016. The growth in deposits was primarily due to an incline in interest-bearing deposits of $87.80M, or 16.60%, at December 31, 2017, as compared to December 31, 2016. Included in the aforementioned deposit total is $89.90M with a cost of 0.690% attributed to our branch in Oradell, New Jersey, which opened in the beginning of March 2016, an incline of $29.90M or 49.90% from December 31, 2016. Additionally, the Company’s wholesale deposits inclined $46.00M, or 54.40%, to $130.60M at December 31, 2017, from $84.60 on December 31, 2016.
On December 31, 2017, the Company’s total stockholders’ equity was $94.20M, an incline of $34.10M when compared to December 31, 2016. The incline was largely due to the capital raise of approximately $28.20M and net income for the twelve months finished December 31, 2017. The Company completed the capital raise on June 21, 2017, which was the primary driver in the book value incline of 23.10% from $12.670 to $15.590. At December 31, 2017, the leverage, Tier I risk-based capital, total risk-based capital and common equity Tier I capital ratios for the Bank were 11.870%, 14.280%, 15.190% and 14.280%, respectively, all in excess of the ratios required to be deemed “well-capitalized.”
Asset and Credit Quality
The ratio of NPAs, which include non-accrual loans, loans 90.00 days past due and still accruing, troubled debt restructured loans currently performing in accordance with renegotiated terms and foreclosed real estate, to total assets declined to 0.940% at December 31, 2017, from 1.10% at December 31, 2016.
NPAs declined $120.00 thousand, or 1.30%, to $9.20M at December 31, 2017, as compared to $9.30M at December 31, 2016.
There were no loans 90 days past due and still accruing on December 31, 2017, as compared to $468.00 thousand at December 31, 2016.
Non-accrual loans inclined $187.00 thousand, or 3.20%, to $6.00M at December 31, 2017, as compared to $5.80M at December 31, 2016. Loans past due 30.0 to 89.0 days totaled $6.50M at December 31, 2017, representing an incline of $4.70M, or 253.00%, as compared to $1.80M at December 31, 2016.
The Company continues to actively market its foreclosed real estate properties, which declined $92.00 thousand to $2.30M at December 31, 2017, as compared to $2.40M at December 31, 2016. On December 31, 2017, the Company’s foreclosed real estate properties had an average carrying value of approximately $253.00 thousand for each property.
The allowance for loan losses inclined by $639.00 thousand, or 9.50%, to $7.30M, or 0.890% of total loans, at December 31, 2017, compared to $6.70M, or 0.960% of total loans, at December 31, 2016.
The Company recorded $1.60M in the provision for loan losses for the twelve months finished December 31, 2017, as compared to $1.30M for the twelve months finished December 31, 2016.
Additionally, the Company recorded net charge-offs of $947.00 thousand for the twelve months finished December 31, 2017, as compared to $185.00 thousand in net charge-offs for the twelve months finished December 31, 2016.
The allowance for loan losses as a percentage of non-accrual loans inclined to 121.80% at December 31, 2017, from 114.80% at December 31, 2016.
