Salisbury Bancorp, Inc. Reports Results for Second Quarter 2016; Declares 28 Cent Dividend

Lakeville, Connecticut, UNITED STATES


LAKEVILLE, Conn., July 29, 2016 (GLOBE NEWSWIRE) -- Salisbury Bancorp, Inc. (“Salisbury”), (NASDAQ:SAL), the holding company for Salisbury Bank and Trust Company (the “Bank”), announced results for its second quarter ended June 30, 2016.

Net income available to common shareholders was $1.7 million, or $0.63 per common share, for the second quarter ended June 30, 2016 (second quarter 2016), compared with $1.5 million, or $0.55 per common share, for the first quarter ended March 31, 2016 (first quarter 2016), and $2.0 million, or $0.74 per common share, for the second quarter ended June 30, 2015 (second quarter 2015).

Selected Second Quarter 2016 Financial Highlights

  • Earnings Per Share increased 14.5% to $0.63 for the second quarter 2016 as compared with the $0.55 for the first quarter 2016.
  • Net Loans increased $20.7 million, or 2.8%, in the second quarter 2016 to $749.5 million versus the first quarter 2016 and increased $71.8 million, or 10.6% versus the second quarter 2015.
  • Book value per common share increased $0.37 to $33.57 at June 30, 2016 from $33.20 at March 31, 2016, and $1.31 as compared to $32.26 at June 30, 2015.
  • Tangible book value per common share of $28.28 at June 30, 2016 increased $0.44 from $27.84 at March 31, 2016, and $1.59 as compared to $26.69 at June 30, 2015.

Richard J. Cantele, Jr., President and Chief Executive Officer, stated, “Our second quarter results continue to validate our role as a community bank as well as our excellent reputation as an alternative to larger banks in our marketplace. With assets over $900 million and loan growth of more than $50 million so far this year, we have demonstrated capabilities and teams in place to effectively serve our markets. While the historically low interest rate environment continues to challenge our industry, the Bank’s growth, interest margin of 3.71% and improvements in our efficiency ratio have resulted in a strong quarter. An increase in Tangible Book Value of $0.44 for the quarter continues to reflect management’s focus on enhancing the value of our franchise.”

Net-Interest Income

Tax equivalent net interest income for second quarter 2016 decreased $112,000, or 1.4%, versus first quarter 2016, and decreased $211,000 or 2.6%, versus second quarter 2015. Average earning assets increased $7.8 million versus first quarter 2016, and increased $42.1 million versus second quarter 2015. Average total interest bearing deposits increased $4.2 million versus first quarter 2016 and increased $8.4 million versus second quarter 2015. The net interest margin of 3.71% decreased 8 basis points versus 3.79% for the first quarter 2016 and decreased 30 basis points versus 4.01% for the second quarter 2015.

Interest income for the second quarter reflects net accretion related to the fair value adjustments of loans acquired in the Riverside Bank acquisition in the amount of $46,000. The first quarter 2016 and second quarter of 2015 included similar adjustments of $443,000 and $582,000 respectively.

Non-Interest Income

Non-interest income for second quarter 2016 increased $325,000 versus first quarter 2016 and increased $109,000 versus second quarter 2015. Trust and wealth advisory revenues increased $100,000 versus first quarter 2016 and decreased $6,000 versus second quarter 2015. The second quarter increase is the result of an increase in assets under management and the annual tax preparation fees collected in second quarter 2016. Service charges and fees increased $55,000 versus first quarter 2016 and increased $7,000 versus second quarter 2015. The second quarter increase was a result of higher fees due to increased transactional volume, mainly attributable to interchange fees. Income from sales and servicing of mortgage loans increased $27,000 versus first quarter 2016 and decreased $29,000 versus second quarter 2015. The second quarter increase is mainly due to a higher volume of mortgages sold, while the year-over-year decrease is due to a lower volume of mortgages sold and a decrease in servicing values as a result of a decline in the discount rate. Second quarter 2016 mortgage loan sales totaled $2.5 million versus $1.8 million for first quarter 2016 and $3.0 million for second quarter 2015. Second quarter 2016, first quarter 2016, and second quarter 2015 included mortgage servicing amortization and periodic impairment charges (net) of $65,000, $71,000, and $72,000, respectively. Gain on sale of securities for the second quarter 2016, first quarter 2016, and second quarter 2015 totaled $146,000, $2,000, and $11,000, respectively.  Other income includes bank owned life insurance income and rental income.

Non-Interest Expense

Non-interest expense for second quarter 2016 decreased $201,000 versus first quarter 2016 and increased $99,000 versus second quarter 2015. Total compensation expense decreased $65,000 versus first quarter 2016 mainly due to 401K and payroll taxes on the annual performance related compensation paid in March, partially offset by higher base salaries due to staffing and mix. The total compensation expense year-over-year increase of $188,000 is mainly attributable to increased staffing levels, market and merit adjustments.

Premises and equipment expense decreased $51,000 versus first quarter 2016 and decreased $69,000 versus second quarter 2015. The second quarter 2016 and the year-over-year decreases were mainly related to lower fuel, utility, and building repair costs.

Data processing increased $2,000 versus first quarter 2016 and $51,000 versus second quarter 2015. The increases were mainly due to expenses related to a terminated contract and imaging set-up fees. The first quarter 2016 included year-end processing and tax reporting.

Loan related expenses decreased $61,000 versus first quarter 2016 and $103,000 versus second quarter 2015. The second quarter decrease was mainly due to delinquent real estate taxes paid in first quarter 2016 on non-performing loans. The year-over-year decrease was mainly due to the write-down of OREO properties in second quarter 2015.

Professional fees increased $184,000 versus first quarter 2016, and decreased $29,000 versus second quarter 2015. Second quarter 2016 included third party imaging, Trust and wealth advisory client related tax preparation fees and increased loan review fees.

Other expense decreased $258,000 versus first quarter 2016 primarily as a result of decreased expenses related to sold loans serviced for others and increased $30,000 versus second quarter 2015.

The effective income tax rates for second quarter 2016, first quarter 2016 and second quarter 2015 were 27.79%, 25.86% and 29.96%, respectively.

Loans

Net loans receivable increased $20.7 million during second quarter 2016 to $749.5 million at June 30, 2016, increased $50.5 million compared with $699.0 million at December 31, 2015, and increased $71.8 million compared with $677.7 million at June 30, 2015.

Asset Quality

Non-performing assets decreased $2.2 million during second quarter 2016 to $14.6 million, or 1.6% of assets at June 30, 2016, from $16.8 million, or 1.9% of assets at March 31, 2016, and decreased $0.4 million from $15.0 million, or 1.7% of assets, at June 30, 2015.

The amount of total impaired and potential problem loans decreased to $28.8 million (3.83% of gross loans receivable) during second quarter 2016, compared to $30.6 million, or 4.17% of gross loans receivable at March 31, 2016 and decreased $1.5 million from $30.3 million, or 4.44% of gross loans receivable at June 30, 2015.

Accruing loans receivable 30-to-89 days past due decreased $4.4 million during second quarter 2016 to $3.6 million, or 0.5% of gross loans receivable, from $8.0 million, or 1.1% of gross loans receivable at March 31, 2016, and increased $0.7 million versus June 30, 2015.

Provision for loan loss expense was $525,000 for second quarter 2016 versus $463,000 for first quarter 2016, and $196,000 for second quarter 2015. Net loan charge-offs were $684,000 for the second quarter 2016, $302,000 for first quarter 2016 and $320,000 for the second quarter 2015. Reserve coverage, as measured by the ratio of the allowance for loan losses to gross loans, was 0.76% for the second quarter 2016, versus 0.80% for first quarter 2016 and 0.74% for second quarter 2015.

Salisbury endeavors to work constructively to resolve its non-performing loan issues with customers. Substantially all non-performing loans are collateralized with real estate and the repayment of such loans is largely dependent on the return of such loans to performing status or the liquidation of the underlying real estate collateral.

Capital

Book value and tangible book value per common share increased $0.37 and $0.44, respectively, during second quarter 2016, to $33.57 and $28.28, respectively. Tangible book value excludes goodwill and core deposit intangibles.

Shareholders’ equity increased $1.2 million in second quarter 2016 to $92.6 million at June 30, 2016. Contributing to the increase in shareholders’ equity for second quarter 2016 was net income of $1.7 million, and a $0.1 million increase in common stock offset by common stock dividends paid of $0.8 million.

The Bank’s regulatory capital ratios remain in compliance with regulatory “well capitalized” requirements. At June 30, 2016, the Bank’s tier 1 leverage, total risk-based capital, and common equity tier 1 capital ratios were 9.58%, 12.70%, and 11.87%, respectively, compared with regulatory “well capitalized” minimums of 5.00%, 10.00%, and 6.5%, respectively. Risk based capital information for 2016 incorporates the implementation of Basel III.

At June 30, 2016, Salisbury’s tier 1 leverage, total risk-based capital, and common equity tier 1 capital ratios were 8.64%, 13.08%, and 10.86%, respectively.

Second Quarter 2016 Dividends on Common Shares

The Board of Directors of Salisbury declared a $0.28 per common share quarterly cash dividend at their July 29, 2016 meeting. The dividend will be paid on August 26, 2016 to shareholders of record as of August 12, 2016. 

Background

Salisbury Bancorp, Inc. is the parent company of Salisbury Bank and Trust Company, a Connecticut chartered commercial bank serving the communities of northwestern Connecticut and proximate communities in New York and Massachusetts, since 1848, through full service branches in Canaan, Lakeville, Salisbury and Sharon, Connecticut; Great Barrington, South Egremont and Sheffield, Massachusetts; and Dover Plains, Fishkill, Millerton, Newburgh, Poughkeepsie, and Red Oaks Mill, New York. The Bank offers a broad spectrum of consumer and business banking products and services as well as trust and wealth advisory services.

Forward-Looking Statements

This news release may contain statements relating to future results of Salisbury’s and the Bank’s future results that are considered “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on the beliefs and expectations of management as well as the assumptions and estimates made by management using information currently available to management. Since these statements reflect the views of management concerning future events, these statements involve risks, uncertainties and assumptions, including among others: changes in market interest rates and general and regional economic conditions; changes in laws and regulations; changes in accounting principles; and the quality or composition of the loan and investment portfolios, technological changes and cybersecurity matters, and other factors that may be described in Salisbury’s quarterly reports on Form 10-Q and its annual report on Form 10-K, which are available at the Securities and Exchange Commission’s website (www.sec.gov) and to which reference is hereby made. Forward-looking statements made by Salisbury in this news release speak only as of the date they are made. Events or other facts that could cause Salisbury’s actual results to differ may arise from time to time and Salisbury cannot predict all such events and factors. Salisbury undertakes no obligation to publicly update any forward-looking statement unless as may be required by law.

 
Salisbury Bancorp, Inc. and Subsidiary
CONSOLIDATED BALANCE SHEETS
 
(in thousands, except share data)  June 30, 2016
(unaudited)
   December 31, 2015 
ASSETS        
Cash and due from banks $10,961  $14,891 
Interest bearing demand deposits with other banks  20,537   47,227 
Total cash and cash equivalents  31,498   62,118 
Securities        
Available-for-sale at fair value  80,438   76,694 
Federal Home Loan Bank of Boston stock at cost  3,436   3,176 
Loans held-for-sale     763 
Loans receivable, net (allowance for loan losses: $5,718 and $5,716)  749,523   699,018 
Bank premises and equipment, net  14,507   14,307 
Goodwill  12,552   12,552 
Intangible assets (net of accumulated amortization: $3,216 and $2,909)  2,031   2,338 
Accrued interest receivable  2,217   2,307 
Cash surrender value of life insurance policies  13,862   13,685 
Deferred taxes  1,998   1,989 
Other assets  1,432   2,245 
Total Assets $913,494  $891,192 
LIABILITIES and SHAREHOLDERS' EQUITY        
Deposits        
Demand (non-interest bearing) $189,182  $201,340 
Demand (interest bearing)  120,142   125,465 
Money market  197,869   183,783 
Savings and other  124,019   119,651 
Certificates of deposit  123,259   124,294 
Total deposits  754,471   754,533 
Repurchase agreements  3,355   3,914 
Federal Home Loan Bank of Boston advances  47,083   26,979 
Subordinated debt(1)  9,776   9,764 
Note payable  358   376 
Capital lease liability  420   422 
Accrued interest and other liabilities  5,447   4,630 
Total Liabilities  820,910   800,618 
Shareholders' Equity        
Common stock - $.10 per share par value        
Authorized: 5,000,000;        
Issued: 2,758,186 and 2,733,576  276   273 
Unearned compensation - restricted stock awards  (483)  (110)
Paid-in capital  42,056   41,364 
Retained earnings  49,627   47,922 
Accumulated other comprehensive income, net  1,108   1,125 
Total Shareholders' Equity $92,584   90,574 
Total Liabilities and Shareholders' Equity $913,494  $891,192 
         

(1) Net of issuance costs, which are capitalized and amortized as a component of interest expense over a period of 10 years.

 
 
Salisbury Bancorp, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
       
Periods ended June, Three months ended  Six months ended 
(in thousands, except per share amounts)  2016   2015   2016   2015 
Interest and dividend income                
Interest and fees on loans $7,930  $7,850  $15,855  $15,772 
Interest on debt securities                
Taxable  286   298   579   624 
Tax exempt  237   357   523   747 
Other interest and dividends  60   40   134   73 
Total interest and dividend income  8,513   8,545   17,091   17,216 
Interest expense                
Deposits  529   453   1,037   897 
Repurchase agreements  1   2   2   3 
Capital lease  17   17   35   35 
Note payable  6      11    
Subordinated debt  156      312    
Federal Home Loan Bank of Boston advances  245   280   476   562 
Total interest expense  954   752   1,873   1,497 
Net interest and dividend income  7,559   7,793   15,218   15,719 
Provision (benefit) for loan losses  525   196   988   (4)
Net interest and dividend income after provision (benefit) for loan losses  7,034   7,597   14,230   15,723 
Non-interest income                
Trust and wealth advisory  884   890   1,668   1,712 
Service charges and fees  785   778   1,515   1,509 
Gains on sales of mortgage loans, net  57   87   96   181 
Mortgage servicing, net  21   20   33   (20)
Gains on sales of available-for-sale securities, net  146   11   148   186 
Other  116   114   233   228 
Total non-interest income  2,009   1,900   3,693   3,796 
Non-interest expense                
Salaries  2,687   2,449   5,261   4,989 
Employee benefits  910   960   1,998   1,965 
Premises and equipment  844   913   1,739   1,821 
Data processing  449   398   896   872 
Professional fees  564   593   944   1,243 
Collections, OREO and loan related  125   228   311   472 
FDIC insurance  176   133   310   331 
Marketing and community support  180   180   380   290 
Amortization of core deposit intangibles  152   164   307   333 
Other  552   522   1,334   1,059 
Total non-interest expense  6,639   6,540   13,480   13,375 
Income before income taxes  2,404   2,957   4,443   6,144 
Income tax provision  669   885   1,196   1,838 
Net income $1,735  $2,072  $3,247  $4,306 
Net income available to common shareholders $1,735  $2,032  $3,247  $4,226 
                 
Basic earnings per common share $0.63  $0.74  $1.18  $1.55 
Diluted earnings per common share  0.63   0.74   1.17   1.54 
Common dividends per share  0.28   0.28   0.56   0.56 


Salisbury Bancorp, Inc. and Subsidiary
SELECTED CONSOLIDATED FINANCIAL DATA (unaudited)
           
At or for the three month periods ended          
(in thousands, except per share amounts and ratios)  Q2 2016   Q1 2016   Q4 2015   Q3 2015   Q2 2015 
Total assets $913,494  $891,804  $891,192  $904,233  $860,794 
Loans receivable, net  749,523   728,845   699,018   687,719   677,726 
Total securities  83,874   82,151   79,870   83,886   82,932 
Deposits  754,471   755,658   754,533   761,479   720,734 
FHLBB advances  47,083   27,031   26,979   26,928   28,033 
Shareholders’ equity  92,584   91,402   90,574   105,450   104,104 
Wealth assets under management  424,702   422,918   371,012   350,102   374,141 
Non-performing loans  14,579   16,829   16,264   16,435   14,728 
Non-performing assets  14,579   16,829   16,264   16,602   14,995 
Accruing loans past due 30-89 days  3,569   7,995   4,499   2,486   2,796 
Net interest and dividend income  7,559   7,659   7,928   7,897   7,793 
Net interest and dividend income, tax equivalent  7,873   7,985   8,235   8,195   8,084 
Provision (benefit) for loan losses  525   463   266   655   196 
Non-interest income  2,009   1,684   1,748   1,769   1,900 
Non-interest expense  6,639   6,840   6,343   6,202   6,540 
Income before income taxes  2,404   2,040   3,068   2,809   2,957 
Income tax provision  669   528   900   824   885 
Net income  1,735   1,512   2,167   1,985   2,072 
Net income available to common shareholders  1,735   1,512   2,129   1,945   2,032 
                     
Per share data                    
Basic earnings per common share $0.63  $0.55  $0.78  $0.71  $0.74 
Diluted earnings per common share  0.63   0.55   0.77   0.71   0.74 
Dividends per common share  0.28   0.28   0.28   0.28   0.28 
Book value per common share  33.57   33.20   33.13   32.72   32.26 
Tangible book value per common share - Non-GAAP(1)  28.28   27.84   27.69   27.21   26.69 
                     
Common shares outstanding at end of period  2,758   2,753   2,734   2,734   2,731 
Weighted average common shares outstanding, to calculate basic earnings per share   2,735   2,723   2,710   2,708   2,706 
Weighted average common shares outstanding, to calculate diluted earnings per share   2,749   2,741   2,727   2,724   2,724 
                     
Profitability ratios                    
Net interest margin (tax equivalent)  3.71%  3.79%  3.88%  3.91%  4.01%
Efficiency ratio(2)  66.51   69.28   63.64   60.40   62.91 
Non-interest income to operating revenue  20.63   18.01   18.06   18.25   19.51 
Effective income tax rate  27.79   25.86   29.35   29.31   29.96 
Return on average assets  0.77   0.68   0.94   0.87   0.94 
Return on average common shareholders’ equity  7.58   6.68   9.34   8.64   9.26 
                     
Credit quality ratios                    
Net charge-offs to average loans receivable, gross  0.37%  0.17%  0.12%  0.03%  0.19%
Non-performing loans to loans receivable, gross  1.93   2.29   2.31   2.37   2.16 
Accruing loans past due 30-89 days to loans receivable, gross  0.47   1.09   0.64   0.36   0.41 
Allowance for loan losses to loans receivable, gross  0.76   0.80   0.81   0.82   0.74 
Allowance for loan losses to non-performing loans  39.22   34.92   35.15   34.43   34.35 
Non-performing assets to total assets  1.60   1.89   1.82   1.84   1.74 
                     
Capital ratios                    
Common shareholders' equity to assets  10.14%  10.25%  10.16%  9.89%  10.24%
Tangible common shareholders' equity to tangible assets - Non-GAAP(1)  8.68   8.74   8.64   8.37   8.62 
Tier 1 leverage capital  8.64   8.57   8.56   10.31   10.42 
Total risk-based capital  13.08   12.92   13.51   13.90   14.22 
Common equity tier 1 capital  10.86   10.69   11.17   10.74   11.01 
                     

(1) Refer to schedule labeled “Supplemental Information – Non-GAAP Financial Measures”.
(2) Calculated using SNL’s (publicly recognized resource of bank data) methodology, as follows: Noninterest expense before OREO expense, amortization of intangibles, and goodwill impairments as a percent of net interest income (fully taxable equivalent) and noninterest revenues, excluding gains from securities transactions and litigation expenses.

 
 
Salisbury Bancorp, Inc. and Subsidiary
SUPPLEMENTAL INFORMATION – Non-GAAP Financial Measures (unaudited)
 
At or for the quarters ended          
(in thousands, except per share amounts and ratios)  Q2 2016   Q1 2016   Q4 2015   Q3 2015   Q2 2015 
Shareholders' Equity $92,584  $91,402  $90,574  $105,450  $104,104 
Less: Preferred Stock           (16,000)  (16,000)
Common Shareholders' Equity  92,584   91,402   90,574   89,450   88,104 
Less: Goodwill  (12,552)  (12,552)  (12,552)  (12,552)  (12,552)
Less: Intangible assets  (2,031)  (2,183)  (2,338)  (2,496)  (2,657)
Tangible Common Shareholders' Equity $78,001  $76,667  $75,684  $74,402  $72,895 
Total Assets $913,494  $891,804  $891,192  $904,234  $860,794 
Less: Goodwill  (12,552)  (12,552)  (12,552)  (12,552)  (12,552)
Less: Intangible assets  (2,031)  (2,183)  (2,338)  (2,496)  (2,657)
Tangible Total Assets $898,911  $877,069  $876,302  $889,186  $845,585 
Common Shares outstanding  2,758   2,753   2,734   2,734   2,731 
                     
Book value per Common Share – GAAP $33.57  $33.20  $33.13  $32.72  $32.26 
Tangible book value per Common Share - Non-GAAP  28.28   27.84   27.69   27.21   26.69 
                     
Common Shareholders’ Equity to Assets – GAAP  10.14%  10.25%  10.16%  9.89%  10.24%
Tangible Common Shareholders’ Equity to Tangible Assets – Non-GAAP  8.68   8.74   8.64   8.37   8.62 
                     
Non-interest expense $6,639  $6,840  $6,343  $6,202  $6,571 
Less: Amortization of core deposit intangibles  (152)  (155)  (158)  (161)  (164)
Less: Foreclosed property expense  (12)  12   168   (27)  (131)
Less: Strategic initiatives               
Operating expenses $6,475  $6,697  $6,353  $6,014  $6,276 
Net interest and dividend income, tax equivalent $7,873  $7,985  $8,235  $8,194  $8,084 
Non-interest income  2,009   1,684   1,748   1,769   1,900 
Gains on securities, net  (146)  (2)     (6)  (11)
Operating revenue $9,736  $9,667  $9,983  $9,957  $9,973 
Efficiency Ratio less strategic initiatives  66.51%  69.28%  63.64%  60.40%  62.91%

 


        

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