Somerset Hills Bancorp — Shareholder Meeting (April 2012)
25 slides from Somerset Hills Bancorp's shareholder meeting presentation, Apr 19, 2012
Slide 1: Annual Meeting of Stockholders
OMERSET HILLS ZS BANCORP Annual Meeting of Stockholders April 19, 2012
Slide 2: Forward-Looking Statements
Forward-Looking Statements This investor presentation 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," "ex
Slide 3: Overview
Overview * Commercial banking franchise in Northern NJ; founded in 1998 + Arelationship-based lender located in one of the Nation’s wealthiest regions * Newcompany records posted in 2011: * Earnings: $2.8 million + Netinterest income: $12.0 million * Total assets (at period-end): $364 million * Tota
Slide 4: Branch Network
Branch Network * congvattey senpuam "9 Pasunx g 4 : 5 4 a : = FO un e : BERNARDSVILLE ‘SuMMrT S a" &
Slide 5: Valuable New Jersey Franchise
Valuable New Jersey Franchise We rank #1 or #2 in New Jersey for these key “franchise value” metrics (see note): + #1 in Asset Quality + SOMH NPA ratio of 0.13%; avg. for all publicly traded banks in NJ was 3.16% + #1 in Deposit Mix + SOMH core (non-CD) deposits percentage of 87%; NJ average was 64%
Slide 6: Balance Sheet Trends
Balance Sheet Trends ($ millions) 7 Total Assets eto kad oer Balance up 10.8% from leet Growth Prior year \ $500 $364.4 $200.0 | $292.5 er — up 17.9% from ———> ae $250.0 $200.0 $186.3 Loans ap i $150.0 123% from prior year $100.0 2008 (YE) 2009 (YE) 2010 (YE) 2011 (YE)
Slide 7: Net Income Trend
Net Income Trend ($ thousands) $4,000 Several Years of Strong Earnings Growth $300 | $8,000 ea Ear $2,510 Continuing sia + into 2012 s2000 + $1,894 — er 2008, 2009 2010 2011 201110 201210
Slide 8: Profitability Ratios
ita Profi y Ratios 1.00% 0.80% 0.60% 0.40% 0.20% 0.00% ‘mim Return on Equity (Right Axis) a-Return on Assets (Left Axis) 0.80% 6.37% sa 4.65% 4.24% 2008 2009 2010 2011
Slide 9: Net Interest Income Trend
Net Interest Income Trend Net interest income rising due to balance sheet growth __ $2,889 aia $2,925 751 Via Net interest: i $2,720 27 compressing due to low rate 3.50 3.55 200801 200902 200803 2008Q4 2010G1 201002 201003 201004 201101 201102 201103 201108 201201 += Net Interest Margin (Right Axis)
Slide 10: Dramatic improvement reflects both growth and expense reductions
Dramatic improvement reflects both 80.0% 7 growth and expense reductions 7a0% 13% 70.3% 2008 2009 2010 2011 Note: Efficiency ratios are calculated as recurring operating expenses divided by the sum of fte net interest income plus recurring noninterest revenue. Nonrecurring items (such as loss on the
Slide 11: Expense Control
Expense Control 5.00% 4.50% 4.00% 3.50% 3.00% 2.50% 2.00% 1.50% 2007 2008 2009 2010 2011 Hills p yy Traded Banks + Expense control focused on the following areas: More efficient use of staff More efficient use of office space and equipment Reduced branch lease expense upon renewal Reduced use of out
Slide 12: Capital Strength
Capital Strength 20.00% 18.00% 16.00% 14.00% 12.00% 10.00% 8.00% 6.00% 400% 2.00% 0.00% All regulatory capital ratios are more — than 500 bps in excess of well- An additional $2.2 capitalized levels. million of = - cash/capital is held at holding 15:03 13.91% eee 10.00% 6.00% Bancorp Tangible Common
Slide 13: Credit Quality
Credit Quality 5.00% We have significantly less problem assets NPA’s as a % of Total Assets ages NPA’ T 3.00% US. Banks ——” SS NJ Banks 2.00% Somerset Hills Bancorp 1.00% ~ | —+_, 0.00% 200SYE -«-2006YE_-—«-2007YE = 2008YE-=2009YE = 2010YE_«—2011E ~~ Publicly Traded Banks-U.S. -lPublicly Traded Bank
Slide 14: Asset Quality-How Do We Do It?
Asset Quality-How Do We Do It? * Credit Culture * Conservative Strict Underwriting standards (Low LTV, Recourse, etc.) + Philosophy of “careful growth” since inception in 1998 * Owner-occupied collateral - focusing on professionals (e.g., lawyers, accountants, doctors) * Economic Strength of Operati
Slide 15: Loan Mix
Loan Mix | Total Portfolio - $232 million at Year-end 2011 Consumer Commercial (Home Equity). 14% 18% Construction, land and land development 3% Residential Mortgages. 16% Commercial ‘Mortgages 49% 15
Slide 16: Loan Portfolio Trends and Pipeline
Loan Portfolio Trends and Pipeline ($ millions) nerf Incr.) 4/15/2012 12/31/2010 (Decr.) 12/31/2011 (Decr.) 3/31/2012 _Pipeline® ‘Commercial* $137.2 15.7 $152.9 $1.2 $154.1 $20.2 Residential 26.9 10.5 37.4 08 38.2 19 Consumer 42.9 (0.9) 42.0 (2.7) 39.3 2 Total Loans $207.0 $25.3 $232.3 © ${0.7) $231
Slide 17: Loan Origination - Potential & Strategy
Loan Origination - Potential & Strategy * Economic conditions are improving * Pick up in loan demand for property acquisition and improvement. + We continue to be a net beneficiary of commercial and residential refinancings + Larger banking institutions losing focus on our primary targets + Weaker b
Slide 18: Core Deposit Funding Strategy
Core Deposit Funding Strategy * Our business model relies almost exclusively on core and other local deposits * Core deposi ., non-time) balances are 87% of total deposits, best in NJ + Relationship-driven commercial non-interest bearing demand accounts + Paramount account, an attractive interest-be
Slide 19: Deposit Mix Trends
Deposit Mix Trends (S thousands, annual averages) | Core Deposits have increased by 10+% over each of the past two years. $400,000 10,560 $350,000 $300,000 $250,000 $200,000 $150,000 12,000 10,000 6,000 4,000 2,000 Demand ‘tint. Bearing Transaction mlmiTime —®=# of Core Accounts
Slide 20: Investment Portfolio
Investment Portfolio We have never taken an OTTI charge largely due to our conservative investment philosophy + We avoid reaching for yield and stick to high quality investments Municipals * More than 75% of the portfolio is guaranteed by U.S. Gov't/Agencies + The fair market value of our municipal
Slide 21: Well-Positioned Interest Rate Risk
Well-Positioned Interest Rate Risk + We maintain a relatively large volume of overnight holdings * We have largely avoided reaching for yield in our securities portfolio * The duration of our loan portfolio is approximately 2 years * Our residential exposure (both securities and loans) represents le
Slide 22: Technology
Technology Enhanced our debit card fraud detection systems * Reduces our risks and has kept losses at insignificant levels First community bank to implement Trusteer’s Rapport identity protection product + Relatively high adoption rate - we have been offering this product for three years * Many othe
Slide 23: Dividends & Share Repurchases
Dividends & Share Repurchases Our historical dividend policy and actions have reflected strong results, confidence in our operating model and a solid balance sheet. Today, we increased our quarterly cash dividend to 8 cents per share. Represents a dividend yield of 3.9% (assuming $8.25 share price)
Slide 24: Summary
Summary We have a unique and valuable community banking franchise + We operate in one of the wealthiest regions in the Nation + Our asset quality metrics are among the best in the Nation + We are strongly capitalized We are poised for growth + We increased our loan portfolio by 12% in 2011 over 2010
Slide 25: Somerset Hills Bancorp
S OMERSET HILLS BANCORP
Somerset Hills Bancorp — Shareholder Meeting (April 2012) on 6ix