1189396--3/20/2009--SOMERSET_HILLS

related topics

{loss, insurance, financial}

{loan, real, estate}

{competitive, industry, competition}

{condition, economic, financial}

{regulation, change, law}

{personnel, key, retain}

{system, service, information}

{acquisition, growth, future}

{product, market, service}

{cost, regulation, environmental}

The nationwide recession may adversely affect our business by reducing real estate values on our trade area and stressing the ability of our customers to repay their loans. Our FDIC deposit insurance premiums have increased and may continue to increase, substantially increasing our non-interest expense. A flattening of the yield curve may reduce our net-interest margin and net-interest spread, which could negatively impact our results of operations. Our earnings may not grow if we are unable to successfully attract core deposits and lending opportunities and exploit opportunities to generate fee-based income. Our business strategy could be adversely affected if we are not able to attract and retain skilled employees and manage our expenses. Risks Related to the Banking Industry: Changes in local economic conditions could adversely affect our loan portfolio. There is a risk that we may not be repaid in a timely manner, or at all, for loans we make. Our allowance for loan losses may not be adequate to cover actual losses. We are in competition with many other banks, including larger commercial banks which have greater resources than us. The laws that regulate our operations are designed for the protection of depositors and the public, but not our stockholders. We may be subject to higher operating costs as a result of government regulation. We cannot predict how changes in technology will impact our business. The Company s information systems may experience an interruption or breach in security.

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1189396--3/20/2009--SOMERSET_HILLS_BANCORP