Salisbury Bancorp, Inc. Reports Results for First Quarter 2017; Declares 28 Cent Dividend

Lakeville, Connecticut, UNITED STATES


LAKEVILLE, Conn., April 28, 2017 (GLOBE NEWSWIRE) -- Salisbury Bancorp, Inc. (“Salisbury”) (NASDAQ:SAL), the holding company for Salisbury Bank and Trust Company (the “Bank”), announced results for its first quarter ended March 31, 2017.

Net income allocated to common shareholders was $1.6 million, or $0.58 per common share, for the first quarter ended March 31, 2017 (first quarter 2017), compared with $1.5 million, or $0.55 per common share, for the fourth quarter ended December 31, 2016 (fourth quarter 2016), and $1.5 million, or $0.55 per common share, for the first quarter ended March 31, 2016 (first quarter 2016).

Selected First Quarter 2017 Financial Highlights

  • Net Income per share increased to $0.58 per share from $0.55 last quarter and $0.55 for the first quarter 2016.
  • Non Performing loans decreased to 0.92% of gross loans receivable from 2.29% at March 31, 2016.
  • Wealth assets under administration increased to $524.5 million at March 31, 2017 an increase of $101.5 million, or 24%, from first quarter 2016.
  • Book value per common share increased to $34.38 at March 31, 2017 from $34.07 at December 31, 2016, and $33.20 at March 31, 2016.
  • Tangible book value per common share increased to $29.26 at March 31, 2017 from $28.90 at December 31, 2016 and $27.84 at March 31, 2016.

Richard J. Cantele, Jr., President and Chief Executive Officer, stated, “Salisbury Bank posted improved metrics during the first quarter as earnings per share, asset quality and assets under administration in our Wealth Management area each saw positive movement. Both book value and tangible book value grew, further enhancing shareholder value.”

Net-Interest Income

Tax equivalent net interest income for first quarter 2017 increased $248 thousand, or 3.1%, versus fourth quarter 2016, and increased $240 thousand or 3.0%, versus first quarter 2016. Average earning assets increased $9.6 million versus fourth quarter 2016, and increased $42.1 million versus first quarter 2016. Average total interest bearing deposits decreased $9.6 million versus fourth quarter 2016 and increased $8.5 million versus first quarter 2016. The net interest margin of 3.74% increased 11 basis points versus 3.63% for the fourth quarter 2016 and decreased 5 basis points versus 3.79% for the first quarter 2016.

Interest income for the first quarter 2017 reflects net accretion related to the fair value adjustments of loans acquired in the Riverside Bank acquisition in the amount of $495,000. The fourth quarter and first quarter of 2016 included similar adjustments of $435,000 and $586,000, respectively.

Non-Interest Income

Non-interest income for first quarter 2017 decreased $304 thousand versus fourth quarter 2016 and increased $348 thousand versus first quarter 2016. Trust and Wealth Advisory revenues increased $33 thousand versus fourth quarter 2016 and increased $70 thousand versus first quarter 2016. The quarter-over-quarter net revenue increase resulted from higher asset based fees collected as compared to the prior quarter due to improving market conditions and fees collected on net new business.  The same revenue came in higher year over year representing a net growth in asset based fees for the year.  Service charges and fees increased $106 thousand versus fourth quarter 2016 and increased $260 thousand versus first quarter 2016. The increases were a result of higher fees related to ATM and interchange activity, which contributed $65 thousand and $72 thousand to the increase from fourth quarter and first quarter 2016, respectively. The first quarter 2017 results also include fees related to loan prepayments of $48 thousand.  Income from sales and servicing of mortgage loans decreased $20 thousand versus fourth quarter 2016 and increased $21 thousand versus first quarter 2016. The decrease from the fourth quarter 2016 is mainly attributable to lower gains on sale during the first quarter 2017.  The first quarter 2017 increase as compared to first quarter 2016 is mainly attributable to lower impairments on servicing values in the current period. First quarter 2017 mortgage loans sales totaled $1.8 million versus $3.0 million for fourth quarter 2016 and $1.8 million for first quarter 2016. First quarter 2017, fourth quarter 2016, and first quarter 2016 included mortgage servicing amortization and periodic impairment charges (net) of $70 thousand, $65 thousand, and $71 thousand, respectively. There were no gains on sales of securities during the first quarter 2017 while fourth quarter and first quarter 2016 totaled $427 thousand and $2 thousand, respectively.  Other income includes bank owned life insurance income and rental income.

Non-Interest Expense

Non-interest expense for first quarter 2017 increased $16 thousand versus fourth quarter 2016 and increased $590 thousand versus first quarter 2016.  This first quarter 2017 results include OREO related expenses, which are discussed below, of $232 thousand. Total compensation expense increased $101 thousand versus fourth quarter 2016 as reductions from fourth quarter’s overtime and production related expenses were substantially offset by first quarter increases in payroll taxes related to the annual performance related compensation paid in March as well as changes in deferred expense related to loan origination for the current period. The total compensation expenses year-over-year increase of $316 thousand is mainly attributable to the mix and levels of staff as well as lower current period deferred expense related to loan origination.

Premises and equipment expense increased $66 thousand versus fourth quarter 2016 and increased $3 thousand versus first quarter 2016. Premises related expenses in the first quarter 2017 include those related to the proposed future branch facility in Newburgh, New York, as well as additional depreciation expense related to new technology infrastructure which was placed into service in the fourth quarter of 2016.  The year-over-year increase was substantially offset with comparable current period reductions in software maintenance expenses. 

Data processing decreased $265 thousand versus fourth quarter 2016 and increased $25 thousand versus first quarter 2016. The fourth quarter data processing expense included core conversion related expenses.

Professional fees increased $187 thousand versus fourth quarter 2016, and $337 thousand versus first quarter 2016. Increases over both the fourth quarter 2016 and first quarter 2016 were primarily attributable to legal and consulting fees. Increases, as compared to first quarter 2016, also included higher Investment Management fees.

Loan related expenses decreased $278 thousand versus fourth quarter 2016 and increased $144 thousand versus first quarter 2016. The decrease, as compared to the fourth quarter 2016, was mainly due to a difference of $291 thousand between quarters in net write-downs associated with OREO properties. Write-downs in the first quarter of 2017 totaled $144 thousand while net write-downs for the fourth quarter 2016 totaled $435 thousand. The first quarter of 2016 had no such write-downs.

Other expense increased $205 thousand versus fourth quarter 2016 and decreased $235 thousand versus first quarter 2016. First quarter increases, as compared to the fourth quarter are primarily related to increases in marketing and employee related expenses.  Decreases in the first quarter 2017 as compared to the first quarter of 2016 are mainly attributable to expenses which occurred in 2016 related to sold loans.

The effective income tax rates for first quarter 2017, fourth quarter 2016 and first quarter 2016 were 27.00%, 27.62% and 25.86%, respectively.

Loans

Net loans receivable increased $1.5 million during first quarter 2017 to $764.7 million at March 31, 2017, compared with $763.2 million at December 31, 2016, and increased $35.9 million compared with $728.8 million at March 31, 2016.

Asset Quality

Non-performing assets decreased $1.7 million during first quarter 2017 to $10.9 million, or 1.2% of assets at March 31, 2017, from $12.6 million, or 1.3% of assets at December 31, 2016, and decreased $5.9 million from $16.8 million, or 1.9% of assets, at March 31, 2016.

The amount of total impaired and potential problem loans decreased to $21.5 million (2.8% of gross loans receivable) during first quarter 2017, compared to $23.6 million, or 3.1% of gross loans receivable at December 31, 2016, and decreased $9.1 million from $30.6 million, or 4.2% of gross loans receivable at March 31, 2016.  

Accruing loans receivable 30-to-89 days past due increased $7.2 million during first quarter 2017 to $11.7 million, or 1.5% of gross loans receivable, from $4.5 million, or 0.6% of gross loans receivable at December 31, 2016, and increased $3.7 million as compared to $8.0 million versus March 31, 2016.

Provision for loan loss expense was $352 thousand for first quarter 2017 versus $503 thousand for fourth quarter 2016, and $463 thousand for first quarter 2016. Net loan charge-offs were $194 thousand for the first quarter 2017, $263 thousand for fourth quarter 2016 and $302 thousand for the first quarter 2016. Reserve coverage, as measured by the ratio of the allowance for loan losses to gross loans, was 0.82% for the first quarter 2017, versus 0.79% for fourth quarter 2016 and 0.80% for first quarter 2016.

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 $0.31 and $0.36, respectively, during first quarter 2017, to $34.38 and $29.26, respectively. Tangible book value excludes goodwill and core deposit intangibles.

Shareholders’ equity increased $1.2 million in first quarter 2017 to $95.2 million at March 31, 2017. Contributing to the increase in shareholders’ equity for first quarter 2017 was net income of $1.6 million, and a $0.4 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 March 31, 2017, Salisbury’s Tier 1 leverage, total risk-based capital, and common equity tier 1 capital ratios were 8.81%, 13.23%, and 11.01%, respectively. The Bank’s Tier 1 leverage, total risk-based capital, and common equity tier 1 capital ratios were 9.57%, 12.80%, and 11.93%, respectively, compared with regulatory “well capitalized” minimums of 5.00%, 10.00%, and 6.5%, respectively.

First Quarter 2017 Dividends on Common Shares

The Board of Directors of Salisbury declared a $0.28 per common share quarterly cash dividend at their April 28, 2017 meeting. The dividend will be paid on May 26, 2017 to shareholders of record as of May 12, 2017.

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)March 31, 2017
(unaudited)
 December 31, 2016
ASSETS  
Cash and due from banks$6,376  $5,434 
Interest bearing demand deposits with other banks 34,916   30,051 
Total cash and cash equivalents 41,292   35,485 
Securities  
Available-for-sale at fair value 76,849   79,623 
Federal Home Loan Bank of Boston stock at cost 3,510   3,211 
Loans held-for-sale 53   - 
Loans receivable, net (allowance for loan losses: $6,285 and $6,127) 764,665   763,184 
Other real estate owned 3,833   3,773 
Bank premises and equipment, net 14,574   14,398 
Goodwill 12,552   12,552 
Intangible assets (net of accumulated amortization: $3,637 and $3,511) 1,611   1,737 
Accrued interest receivable 2,431   2,424 
Cash surrender value of life insurance policies 14,126   14,038 
Deferred taxes 1,361   1,367 
Other assets 2,692   3,574 
  Total Assets$939,549  $935,366 
LIABILITIES and SHAREHOLDERS' EQUITY  
Deposits  
Demand (non-interest bearing)$201,215  $218,420 
Demand (interest bearing) 132,527   127,854 
Money market 182,438   182,476 
Savings and other 141,085   135,435 
Certificates of deposit 115,151   117,585 
Total deposits 772,416   781,770 
Repurchase agreements 2,350   5,535 
Federal Home Loan Bank of Boston advances 52,745   37,188 
Subordinated debt⁽¹⁾ 9,794   9,788 
Note payable 335   344 
Capital lease liability 417   418 
Accrued interest and other liabilities 6,272   6,316 
  Total Liabilities 844,329   841,359 
Shareholders' Equity  
Common stock - $.10 per share par value  
Authorized: 5,000,000;  
Issued: 2,770,036 and 2,758,086 277   276 
Unearned compensation - restricted stock awards (288)  (352)
Paid-in capital 42,394   42,085 
Retained earnings 52,351   51,521 
Accumulated other comprehensive income, net 487   477 
Total Shareholders' Equity$95,221  $94,007 
Total Liabilities and Shareholders' Equity$939,549  $935,366 
        

⁽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 March 31, Three months ended
(in thousands, except per share amounts)  2017 2016
Interest and dividend income       
Interest and fees on loans  $8,342 $7,932
Interest on debt securities       
Taxable   317  293
Tax exempt   164  286
Other interest and dividends   83  72
Total interest and dividend income   8,906  8,583
Interest expense    
Deposits   515  509
Repurchase agreements   1  1
Capital lease   17  17
Note payable   2  4
Subordinated debt   156  156
Federal Home Loan Bank of Boston advances   262  232
Total interest expense   953  919
Net interest and dividend income   7,953  7,664
Provision for loan losses   352  463
Net interest and dividend income after provision for loan losses   7,601  7,201
Non-interest income    
Trust and wealth advisory   854  784
Service charges and fees   962  702
Gains on sales of mortgage loans, net   49  39
Mortgage servicing, net   45  34
Gains on sales of available-for-sale securities, net   -  2
Other   113  114
Total non-interest income   2,023  1,675
Non-interest expense    
Salaries   2,890  2,574
Employee benefits   1,088  1,088
Premises and equipment   895  892
Data processing   472  447
Professional fees   717  380
Collections, OREO and loan related   301  157
FDIC insurance   149  134
Marketing and community support   251  200
Amortization of core deposit intangibles   126  155
Other   538  810
Total non-interest expense   7,427  6,837
Income before income taxes   2,197  2,039
Income tax provision   593  527
Net income  $1,604 $1,512
Net income allocated to common shareholders  $1,594 $1,499
     
Basic earnings per common share  $0.58 $0.55
Diluted earnings per common share   0.58  0.55
Common dividends per share   0.28  0.28
        

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) Q1 2017 Q4 2016 Q3 2016 Q2 2016 Q1 2016
Total assets $939,549  $935,366  $928,445  $913,494  $891,804 
Loans receivable, net  764,665   763,184   753,623   749,523   728,845 
Total securities  80,359   82,834   79,738   83,874   82,151 
Deposits  772,416   781,770   786,730   754,471   755,658 
FHLBB advances  52,745   37,188   27,134   47,083   27,031 
Shareholders’ equity  95,221   94,007   93,554   92,584   91,402 
Wealth assets under administration  524,459   516,350   509,557   424,702   422,918 
Discretionary wealth assets under administration  365,086   366,167   361,326   355,560   354,202 
Non-discretionary wealth assets under administration  159,373   150,183   148,230   69,142   68,715 
Non-performing loans  7,057   8,792   11,673   14,579   16,829 
Non-performing assets  10,890   12,565   14,496   14,579   16,829 
Accruing loans past due 30-89 days  11,689   4,537   5,889   3,569   7,995 
Net interest and dividend income  7,953   7,687   7,687   7,567   7,664 
Net interest and dividend income, tax equivalent  8,214   7,966   7,981   7,882   7,991 
Provision for loan losses  352   503   344   525   463 
Non-interest income  2,023   2,327   1,888   2,001   1,675 
Non-interest expense  7,427   7,411   6,500   6,640   6,837 
Income before income taxes  2,197   2,100   2,731   2,403   2,039 
Income tax provision  593   580   812   669   528 
Net income  1,604   1,520   1,919   1,734   1,512 
Net income allocated to common shareholders  1,594   1,509   1,904   1,721   1,499 
                     
Per share data                    
Basic earnings per common share $0.58  $0.55  $0.70  $0.63  $0.55 
Diluted earnings per common share  0.58   0.55   0.69   0.63   0.55 
Dividends per common share  0.28   0.28   0.28   0.28   0.28 
Book value per common share  34.38   34.07   33.92   33.57   33.20 
Tangible book value per common share - Non-GAAP⁽¹⁾  29.26   28.90   28.63   28.28   27.84 
       
Common shares outstanding at end of period  2,770   2,758   2,758   2,758   2,753 
Weighted average common shares outstanding,  to calculate basic earnings per share   2,749   2,737   2,737   2,735   2,723 
Weighted average common shares outstanding, to calculate diluted earnings per share   2,768   2,755   2,751   2,749   2,741 
                     
Profitability ratios                    
Net interest margin (tax equivalent)  3.74%  3.63%  3.57%  3.71%  3.79%
Efficiency ratio(2)  69.06   67.08   64.13   66.51   69.28 
Non-interest income to operating revenue  20.28   19.81   19.22   20.63   18.01 
Effective income tax rate  27.00   27.62   29.71   27.79   25.86 
Return on average assets  0.70   0.65   0.81   0.77   0.68 
Return on average common shareholders’ equity  6.83   6.43   8.20   7.58   6.68 
                     
Credit quality ratios                    
Net charge-offs to average loans receivable, gross  0.03%  0.04%  0.02%  0.37%  0.17%
Non-performing loans to loans receivable, gross  0.92   1.16   1.54   1.93   2.29 
Accruing loans past due 30-89 days to loans receivable, gross  1.53   0.60   0.78   0.47   1.09 
Allowance for loan losses to loans receivable, gross  0.82   0.79   0.78   0.76   0.80 
Allowance for loan losses to non-performing loans  89.05   69.43   50.47   39.22   34.92 
Non-performing assets to total assets  1.16   1.34   1.56   1.60   1.89 
                     
Capital ratios                    
Common shareholders' equity to assets  10.13%  10.05%  10.08%  10.14%  10.25%
Tangible common shareholders' equity to tangible assets - Non-GAAP⁽¹⁾  8.76   8.64   8.66   8.68   8.74 
Tier 1 leverage capital  8.81   8.73   8.47   8.64   8.57 
Total risk-based capital  13.23   13.10   13.25   13.08   12.92 
Common equity tier 1 capital  11.01   10.89   11.01   10.86   10.69 
                     

(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) Q1 2017 Q4 2016 Q3 2016 Q2 2016 Q1 2016
Shareholders' Equity $95,221  $94,007  $93,554  $92,584  $91,402 
Less: Goodwill  (12,552)  (12,552)  (12,552)  (12,552)  (12,552)
Less: Intangible assets  (1,611)  (1,737)  (1,883)  (2,031)  (2,183)
Tangible Common Shareholders' Equity $81,058  $79,718  $79,119  $78,001  $76,667 
Total Assets $939,549  $935,366  $928,445  $913,494  $891,804 
Less: Goodwill  (12,552)  (12,552)  (12,552)  (12,552)  (12,552)
Less: Intangible assets  (1,611)  (1,737)  (1,883)  (2,031)  (2,183)
Tangible Total Assets $925,386  $921,077  $914,010  $898,911  $877,069 
Common Shares outstanding  2,770   2,758   2,758   2,758   2,753 
       
Book value per Common Share – GAAP $34.38  $34.09  $33.92  $33.57  $33.20 
Tangible book value per Common Share – Non-GAAP  29.26   28.90   28.69   28.28   27.84 
       
Common Shareholders’ Equity to Assets – GAAP  10.13%  10.05%  10.08%  10.14%  10.25%
Tangible Common Shareholders’ Equity to Tangible Assets – Non-GAAP  8.76   8.65   8.66   8.68   8.74 
       
Non-interest expense $7,427  $7,411  $6,499  $6,639  $6,840 
Less: Amortization of core deposit intangibles  (126)  (146)  (148)  (152)  (155)
Less: Foreclosed property expense  (232)  (493)  (27)  (12)  12 
Less: Strategic initiatives  -   (155)  -   -   - 
Operating expenses $7,069  $6,617  $6,324  $6,475  $6,697 
Net interest and dividend income, tax equivalent $8,214  $7,966  $7,981  $7,882  $7,991 
Non-interest income  2,023   2,326   1,889   2,000   1,674 
Gains on securities, net  -   (427)  (10)  (146)  (2)
Operating revenue $10,237  $9,865  $9,860  $9,736  $9,663 
Efficiency Ratio   69.06%  67.08%  64.13%  66.50%  69.30%
       

        

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