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

Lakeville, Connecticut, UNITED STATES


LAKEVILLE, Conn., Oct. 28, 2016 (GLOBE NEWSWIRE) -- Salisbury Bancorp, Inc. (“Salisbury”), (NASDAQ:SAL), the holding company for Salisbury Bank and Trust Company (the “Bank”), announced results for its third quarter ended September 30, 2016.

Net income available to common shareholders was $1.9 million, or $0.70 per common share, for the third quarter ended September 30, 2016 (third quarter 2016), compared with $1.7 million, or $0.63 per common share, for the second quarter ended June 30, 2016 (second quarter 2016), and $1.9 million, or $0.71 per common share, for the third quarter ended September 30, 2015 (third quarter 2015).

Selected Third Quarter 2016 Financial Highlights

  • Earnings Per Share increased 11.1% to $0.70 for the third quarter 2016 as compared with the $0.63 for the second quarter 2016.
  • Assets under administration increased $84.9 million, or 20%, from the second quarter 2016 and have increased $159.5 million, or 46%, from third quarter 2015.
  • Total deposits increased $32 million, or 4%, from June 30, 2016.
  • Salisbury’s efficiency ratio improved to 64.13% for the quarter ended September 30, 2016 as compared to 66.51% in prior quarter.
  • Tangible book value per common share of $28.63 at September 30, 2016 increased $0.35 from $28.28 at June 30, 2016, and $1.42 as compared to $27.21 at September 30, 2015.

Richard J. Cantele, Jr., President and Chief Executive Officer, stated, “Our third quarter results reflect the continued positive momentum achieved during the first half of the year.  Our teams achieved strong growth in our core businesses as deposits and assets under administration in our Trust and Wealth Advisory business posted solid gains. That growth, combined with more efficient operations, assisted in increasing tangible book value by $0.35 for the quarter reflecting our continued focus on enhancing the value of our franchise.

Net Interest Income

Tax equivalent net interest income for third quarter 2016 increased $102,000, or 1.3%, versus second quarter 2016, and decreased $220,000 or 2.7%, versus third quarter 2015. Average earning assets increased $40.3 million versus second quarter 2016, and increased $55.7 million versus third quarter 2015. Average total interest bearing deposits increased $34.9 million versus second quarter 2016 and increased $37.9 million versus third quarter 2015. The net interest margin of 3.57% decreased 14 basis points versus 3.71% for the second quarter 2016 and decreased 34 basis points versus 3.91% for the third quarter 2015.

Interest income for the third quarter reflects net accretion related to the fair value adjustments of loans acquired in the Riverside Bank acquisition in the amount of $440,000. The second quarter 2016 and third quarter 2015 included similar adjustments of $403,000 and $726,000, respectively.

Non-Interest Income

Non-interest income for third quarter 2016 decreased $114,000 versus second quarter 2016 and increased $126,000 versus third quarter 2015. Trust and wealth advisory revenues decreased $35,000 versus second quarter 2016. This decrease primarily reflects a decrease of $16,000 in estate fees and $65,000 in tax letter preparation fees which were collected in the second quarter 2016. These decreases were partially offset by a $45,000 increase in asset management fees. The $51,000 increase in Trust and wealth advisory services versus the third quarter 2015 was primarily attributable to the increase in assets under management. Service charges and fees increased $55,000 versus second quarter 2016 and increased $42,000 versus third quarter 2015. The increase was primarily due to increased transactional volume and Master Card Enrollment fees.  The Master Card Enrollment fees, which began in June 2016, were $25,000 and $8,000 in the third and second quarters of 2016, respectively, with no such fees in the third quarter 2015. Income from sales and servicing of mortgage loans increased $5,000 versus second quarter 2016 and $31,000 versus third quarter 2015 due primarily to mortgage servicing which increased $7,000 and $23,000 for these respective periods. Third quarter 2016, second quarter 2016, and third quarter 2015 included mortgage servicing amortization and periodic impairment charges (net) of $60,000, $65,000, and $85,000, respectively. Gain on sale of securities for the third quarter 2016, second quarter 2016, and third quarter 2015 totaled $10,000, $146,000, and $6,000, respectively.  Other income includes bank owned life insurance income and rental income.

Non-Interest Expense

Non-interest expense for third quarter 2016 decreased $140,000 versus second quarter 2016 and increased $297,000 versus third quarter 2015. Total compensation expense increased $84,000 versus second quarter 2016 mainly due to increases in base salaries and production based salaries which increased $23,000 and $62,000, respectively. The total compensation expense year-over-year increase of $297,000 is mainly attributable to increased salaries and benefits expense of $234,000 due to increased staffing levels, market and merit adjustments.

Premises and equipment expense decreased $36,000 versus second quarter 2016 and decreased $54,000 versus third quarter 2015. The third quarter 2016 and the year-over-year decreases were mainly related to lower fuel, utility, and building repair costs.

Data processing increased $23,000 versus second quarter 2016 and increased $68,000 versus third quarter 2015. The increase versus the second quarter 2016 and third quarter 2015 reflected increases in data communications and processing. These increases were partially offset versus the second quarter 2016 due to lower Trust data processing which included the expense related to a terminated contract, year-end processing and tax reporting.

Loan related expenses decreased $16,000 versus both the second quarter 2016 and third quarter 2015. The third quarter versus the second quarter 2016 decrease was mainly due to lower appraisal fees, disclosure adjustments and legal collections expenses, which were partially offset by an increase in OREO carrying costs. The increase in OREO carrying costs reflects the successful completion in August 2016 of foreclosure litigation involving the Bank’s single largest non-performing asset and the transfer of that $2.8 million asset from non-performing loans to OREO to be held for sale. The year-over-year decrease in loan related expenses was mainly due to lower appraisal fees and disclosure adjustments, which were partially offset by increased expense related to customer delinquent taxes.  

Professional fees decreased $105,000 versus second quarter 2016, and increased $61,000 versus third quarter 2015. The decrease from the second quarter 2016 was mainly caused by Trust and wealth advisory tax preparation expense incurred in the second quarter 2016. The increase versus third quarter 2015 was due to increased investment management fees.

Other expense decreased $39,000 versus second quarter 2016 primarily as a result of a $64,000 decline in expenses related to sold loans serviced for others, which was partially offset by a $19,000 increase in loss provision for off balance sheet unused commitments. Other expense increased $46,000 versus third quarter 2015 due primarily to the $32,000 change in the provision expense for off balance sheet unused commitments.

The effective income tax rates for third quarter 2016, second quarter 2016 and third quarter 2015 were 29.71%, 27.79% and 29.31%, respectively.

Loans

Net loans receivable increased $4.1 million during third quarter 2016 to $753.6 million at September 30, 2016, increased $54.6 million compared with $699.0 million at December 31, 2015, and increased $65.9 million compared with $687.7 million at September 30, 2015.

Asset Quality

Non-performing assets decreased $0.1 million during third quarter 2016 to $14.5 million, or 1.56% of assets at September 30, 2016, from $14.6 million, or 1.60% of assets at June 30, 2016, and decreased $2.1 million from $16.6 million, or 1.84% of assets, at September 30, 2015. The decrease in non-performing assets reflects a decrease of non-performing loans in the third quarter of 2016 of $2.9 million. However, much of the decrease in non-performing loans was offset by an increase of $2.8 million in OREO as the Bank successfully completed the foreclosure litigation involving its largest non-performing asset which is now in OREO and held for sale.

The amount of total impaired and potential problem loans decreased to $26.1 million (3.43% of gross loans receivable) during third quarter 2016, compared to $28.8 million, or 3.83% of gross loans receivable at June 30, 2016 and decreased $4.9 million from $31.0 million, or 4.48% of gross loans receivable at September 30, 2015.

Accruing loans receivable 30-to-89 days past due increased $2.3 million during third quarter 2016 to $5.9 million, or 0.8% of gross loans receivable, from $3.6 million, or 0.5% of gross loans receivable at June 30, 2016, and increased $3.4 million versus September 30, 2015.

Provision for loan loss expense was $344,000 for third quarter 2016 versus $525,000 for second quarter 2016, and $655,000 for third quarter 2015. Net loan charge-offs were $171,000 for the third quarter 2016, $684,000 for second quarter 2016 and $55,000 for the third quarter 2015. Reserve coverage, as measured by the ratio of the allowance for loan losses to gross loans, was 0.78% for the third quarter 2016, versus 0.76% for second quarter 2016 and 0.82% for third 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 $0.35 and $0.41, respectively, during third quarter 2016 to $33.92 and $28.69, respectively. Tangible book value excludes goodwill and core deposit intangibles.

Shareholders’ equity increased $1.0 million in third quarter 2016 to $93.6 million at September 30, 2016. Contributing to the increase in shareholders’ equity for third quarter 2016 was net income of $1.9 million, offset by a $0.2 million decrease in other comprehensive income and common stock dividends paid of $0.8 million.

The Bank’s regulatory capital ratios remain in compliance with regulatory “well capitalized” requirements. At September 30, 2016, the Bank’s tier 1 leverage, total risk-based capital, and common equity tier 1 capital ratios were 9.30%, 12.94%, and 12.09%, 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 September 30, 2016, Salisbury’s tier 1 leverage, total risk-based capital, and common equity tier 1 capital ratios were 8.47%, 13.25%, and 11.01%, respectively.

Third Quarter 2016 Dividends on Common Shares

The Board of Directors of Salisbury declared a $0.28 per common share quarterly cash dividend at their October 28, 2016 meeting. The dividend will be paid on November 25, 2016 to shareholders of record as of November 11, 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)  September 30, 2016
(unaudited)
   December 31, 2015 
ASSETS        
Cash and due from banks $13,004  $14,891 
Interest bearing demand deposits with other banks  29,634   47,227 
Total cash and cash equivalents  42,638   62,118 
Securities        
Available-for-sale at fair value  76,801   76,694 
Federal Home Loan Bank of Boston stock at cost  2,937   3,176 
Loans held-for-sale  837   763 
Loans receivable, net (allowance for loan losses: $5,892 and $5,716)  753,623   699,018 
Other real estate owned  2,823   - 
Bank premises and equipment, net  14,573   14,307 
Goodwill  12,552   12,552 
Intangible assets (net of accumulated amortization: $3,364 and $2,909)  1,883   2,338 
Accrued interest receivable  2,260   2,307 
Cash surrender value of life insurance policies  13,952   13,685 
Deferred taxes  2,114   1,989 
Other assets  1,452   2,245 
    Total Assets $928,445  $891,192 
LIABILITIES and SHAREHOLDERS' EQUITY        
Deposits        
Demand (non-interest bearing) $210,396  $201,340 
Demand (interest bearing)  126,064   125,465 
Money market  201,504   183,783 
Savings and other  127,595   119,651 
Certificates of deposit  121,171   124,294 
Total deposits  786,730   754,533 
Repurchase agreements  3,581   3,914 
Federal Home Loan Bank of Boston advances  27,134   26,979 
Subordinated debt(1)  9,782   9,764 
Note payable  351   376 
Capital lease liability  419   422 
Accrued interest and other liabilities  6,894   4,630 
    Total Liabilities  834,891   800,618 
Shareholders' Equity        
Common stock - $.10 per share par value        
Authorized: 5,000,000;        
Issued: 2,758,086 and 2,733,576  276   273 
Unearned compensation - restricted stock awards  (431)  (110)
Paid-in capital  42,053   41,364 
Retained earnings  50,773   47,922 
Accumulated other comprehensive income, net  883   1,125 
    Total Shareholders' Equity $93,554   90,574 
    Total Liabilities and Shareholders' Equity $928,445  $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 September,  Three months ended   Nine months ended 
(in thousands, except per share amounts)  2016    2015    2016  2015  
Interest and dividend income             
Interest and fees on loans $8,061   $  7,955   $23,915 $  23,727  
Interest on debt securities             
Taxable  341    286    976  910  
Tax exempt  202    351    725  1,098  
Other interest and dividends  60    58    138  132  
Total interest and dividend income  8,664    8,650    25,754  25,867  
Interest expense             
Deposits  565    463    1,603  1,359  
Repurchase agreements  2    2    4  5  
Capital lease  17    18    52  53  
Note payable  5    1    16  1  
Subordinated debt  156        468    
Federal Home Loan Bank of Boston advances  237    269    714  832  
Total interest expense  982    753    2,857  2,250  
Net interest and dividend income  7,682    7,897    22,897  23,617  
Provision for loan losses  344    655    1,332  651  
Net interest and dividend income after provision for loan losses  7,338    7,242    21,565  22,966  
Non-interest income             
Trust and wealth advisory  849    798    2,517  2,510  
Service charges and fees  840    798    2,355  2,307  
Gains on sales of mortgage loans, net  55    47    152  227  
Mortgage servicing, net  28    5    61  (15) 
Gains on sales of available-for-sale securities, net  10    6    157  192  
Other  113    115    342  343  
Total non-interest income  1,895    1,769    5,584  5,564  
Non-interest expense             
Salaries  2,757    2,531    8,017  7,520  
Employee benefits  924    916    2,923  2,881  
Premises and equipment  809    863    2,546  2,683  
Data processing  472    404    1,369  1,276  
Professional fees  459    398    1,403  1,642  
Collections, OREO and loan related  109    125    420  594  
FDIC insurance  164    163    474  494  
Marketing and community support  144    174    524  465  
Amortization of core deposit intangibles  148    161    455  494  
Other  513    467    1,844  1,528  
Total non-interest expense  6,499    6,202    19,975  19,577  
Income before income taxes  2,734    2,809    7,174  8,953  
Income tax provision  812    824    2,009  2,663  
Net income $1,922  $ 1,985   $5,165 $    6,290  
Net income available to common shareholders $1,922  $ 1,945   $5,165 $    6,170  
Net income applicable to common shareholders    1,907  $ 1,928   $  5,124 $  6,116  
Basic earnings per common share $0.70  $ 0.71   $1.88 $    2.26  
Diluted earnings per common share  0.69    0.71    1.87  2.25  
Common dividends per share  0.28    0.28    0.84  0.84  


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)  Q3 2016   Q2 2016   Q1 2016   Q4 2015   Q3 2015 
Total assets $928,445  $913,494  $891,804  $891,192  $904,233 
Loans receivable, net  753,623   749,523   728,845   699,018   687,719 
Total securities  79,738   83,874   82,151   79,870   83,886 
Deposits  786,730   754,471   755,658   754,533   761,479 
FHLBB advances  27,134   47,083   27,031   26,979   26,928 
Shareholders’ equity  93,554   92,584   91,402   90,574   105,450 
Assets under administration  509,557   424,702   422,918   371,012   350,102 
Non-performing loans  11,673   14,579   16,829   16,264   16,435 
Non-performing assets  14,496   14,579   16,829   16,264   16,602 
Accruing loans past due 30-89 days  5,889   3,569   7,995   4,499   2,486 
Net interest and dividend income  7,682   7,559   7,659   7,930   7,897 
Net interest and dividend income, tax equivalent  7,975   7,873   7,985   8,235   8,195 
Provision for loan losses  344   525   463   266   655 
Non-interest income  1,895   2,009   1,684   1,747   1,769 
Non-interest expense  6,499   6,639   6,840   6,344   6,202 
Income before income taxes  2,734   2,404   2,040   3,067   2,809 
Income tax provision  812   669   528   901   824 
Net income  1,922   1,735   1,512   2,166   1,985 
Net income available to common shareholders  1,922   1,735   1,512   2,129   1,945 
                     
Per share data                    
Basic earnings per common share $0.70  $0.63  $0.55  $0.78  $0.71 
Diluted earnings per common share  0.69   0.63   0.55   0.77   0.71 
Dividends per common share  0.28   0.28   0.28   0.28   0.28 
Book value per common share  33.92   33.57   33.20   33.13   32.72 
Tangible book value per common share - Non-GAAP(1)  28.63   28.28   27.84   27.69   27.21 
                     
Common shares outstanding at end of period  2,758   2,758   2,753   2,734   2,734 
Weighted average common shares outstanding, to calculate basic earnings per share   2,737   2,735   2,723   2,710   2,708 
Weighted average common shares outstanding, to calculate diluted earnings per share   2,751   2,749   2,741   2,727   2,724 
                     
Profitability ratios                    
Net interest margin (tax equivalent)  3.57%  3.71%  3.79%  3.88%  3.91%
Efficiency ratio(2)  64.13   66.51   69.28   63.64   60.40 
Non-interest income to operating revenue  19.22   20.63   18.01   18.06   18.25 
Effective income tax rate  29.71   27.79   25.86   29.35   29.31 
Return on average assets  0.81   0.77   0.68   0.94   0.87 
Return on average common shareholders’ equity  8.20   7.58   6.68   9.34   8.64 
                     
Credit quality ratios                    
Net charge-offs to average loans receivable, gross  0.02%  0.37%  0.17%  0.12%  0.03%
Non-performing loans to loans receivable, gross  1.54   1.93   2.29   2.31   2.37 
Accruing loans past due 30-89 days to loans receivable, gross  0.78   0.47   1.09   0.64   0.36 
Allowance for loan losses to loans receivable, gross  0.78   0.76   0.80   0.81   0.82 
Allowance for loan losses to non-performing loans  50.47   39.22   34.92   35.15   34.43 
Non-performing assets to total assets  1.56   1.60   1.89   1.82   1.84 
                     
Capital ratios                    
Common shareholders' equity to assets  10.08%  10.14%  10.25%  10.16%  9.89%
Tangible common shareholders' equity to tangible assets - Non-GAAP(1)  8.66   8.68   8.74   8.64   8.37 
Tier 1 leverage capital  8.47   8.64   8.57   8.56   10.31 
Total risk-based capital  13.25   13.08   12.92   13.51   13.90 
Common equity tier 1 capital   11.01   10.86   10.69   11.17   10.74 

(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)  Q3 2016   Q2 2016   Q1 2016   Q4 2015   Q3 2015 
Shareholders' Equity $93,554  $92,584 $   91,402  $90,574  $105,450 
Less: Preferred Stock              (16,000)
Common Shareholders' Equity  93,554   92,584   91,402   90,574   89,450 
Less: Goodwill  (12,552)  (12,552)  (12,552)  (12,552)  (12,552)
Less: Intangible assets  (1,883)  (2,031)  (2,183)  (2,338)  (2,496)
Tangible Common Shareholders' Equity $79,119  $78,001   76,667  $75,684  $74,402 
Total Assets $928,445  $913,494   891,804  $891,192  $904,234 
Less: Goodwill  (12,552)  (12,552)  (12,552)  (12,552)  (12,552)
Less: Intangible assets  (1,883)  (2,031)  (2,183)  (2,338)  (2,496)
Tangible Total Assets $914,010  $898,911 $  877,069  $876,302  $889,186 
Common Shares outstanding  2,758   2,758   2,753   2,734   2,734 
                     
Book value per Common Share – GAAP $33.92  $33.57 $  33.20  $33.13  $32.72 
Tangible book value per Common Share - Non-GAAP  28.69   28.28   27.84   27.69   27.21 
                     
Common Shareholders’ Equity to Assets – GAAP  10.08%  10.14%  10.25%  10.16%  9.89%
Tangible Common Shareholders’ Equity to Tangible Assets – Non-GAAP  8.66   8.68   8.74   8.64   8.37 
                     
Non-interest expense $6,499  $6,639 $  6,840  $6,343  $6,202 
Less: Amortization of core deposit intangibles  (148)  (152)  (155)  (158)  (161)
Less: Foreclosed property expense  (27)  (12)  12   168   (27)
Less: Strategic initiatives               
Operating expenses $6,324  $6,475 $  6,697  $6,353  $6,014 
Net interest and dividend income, tax equivalent $7,975  $7,873   7,985  $8,235  $8,194 
Non-interest income  1,895   2,009   1,684   1,748   1,769 
Gains on securities, net  (10)  (146)  (2)     (6)
Operating revenue $9,860  $9,736 $  9,667  $9,983  $9,957 
Efficiency Ratio   64.13%  66.51%  69.28%  63.64%  60.40%

        

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