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

Lakeville, Connecticut, UNITED STATES


LAKEVILLE, Conn., July 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 second quarter ended June 30, 2017.

Net income allocated to common shareholders was $1.9 million, or $0.68 per common share, for the second quarter ended June 30, 2017 (second quarter 2017), compared with $1.6 million, or $0.58 per common share, for the first quarter ended March 31, 2017 (first quarter 2017), and $1.7 million, or $0.63 per common share, for the second quarter ended June 30, 2016 (second quarter 2016).

Selected Second Quarter 2017 Financial Highlights

  • The previously announced acquisition of the New Paltz, New York branch closed during the second quarter adding $31 million in deposits and $7 million in loans. The New Paltz branch is Salisbury’s 14th full service branch facility and expands Salisbury’s presence in New York State, which is comprised of seven (7) branches in Dutchess, Orange and Ulster Counties in New York.
  • Net Income per share increased to $0.68 per share from $0.58 last quarter and $0.63 for the second quarter 2016.
  • Wealth assets under administration increased to $586 million at June 30, 2017, an increase of $62 million, or 12%, from first quarter 2017.
  • Book value per common share increased to $34.66 at June 30, 2017 from $34.38 at March 31, 2017, and $33.57 at June 30, 2016.

Richard J. Cantele, Jr., President and Chief Executive Officer, stated,

“We are pleased to report that second quarter results reflect continued progress in enhancing the long term value of our franchise. We grew the footprint of our company with the consummation of a branch acquisition in New Paltz, New York, which expands our delivery system and customer base in the Hudson River communities. Our wealth assets under management also grew, which helps to diversify our sources of income. During the second quarter, we continued to grow net interest income and build value for our shareholders. Our focus on asset quality remains in the forefront and the control of non-interest expense, while always maintaining our commitment to outstanding customer service, improves our efficiency. We continue to believe that despite the highly competitive banking market in the three states in which we operate, we are well-positioned for continued growth and success.”

Net-Interest Income

Tax equivalent net interest income for second quarter 2017 decreased $211 thousand, or 2.5%, versus first quarter 2017, and increased $121 thousand or 1.5%, versus second quarter 2016. Average earning assets increased $3.8 million versus first quarter 2017, and increased $37.3 million versus second quarter 2016. Average total interest bearing deposits increased $6.9 million versus first quarter 2017 and increased $11.3 million versus second quarter 2016. The net interest margin of 3.63% decreased 11 basis points versus 3.74% for the first quarter 2017 and decreased 8 basis points versus 3.71% for the second quarter 2016.

Interest income for the second quarter 2017 reflects net accretion related to the fair value adjustments of loans acquired in the Riverside Bank acquisition in the amount of $250 thousand. The first quarter 2017 and second quarter of 2016 included similar adjustments of $495 thousand and $403 thousand, respectively.

Non-Interest Income

Non-interest income for second quarter 2017 decreased $72 thousand versus first quarter 2017 and decreased $49 thousand versus second quarter 2016. Trust and Wealth Advisory revenues increased $38 thousand versus first quarter 2017 and increased $8 thousand versus second quarter 2016. The quarter-over-quarter net revenue increase for the Trust and Wealth Advisory division reflects tax preparation fees net of slightly lower asset based fees collected as compared to the prior quarter resulting mostly from estate and planning related distributions.  Revenue for Trust and Wealth Advisory Services came in higher year over year representing a net growth in asset based fees. Service charges and fees decreased $60 thousand versus first quarter 2017 and increased $149 thousand versus second quarter 2016. The decrease was substantially a result of $45 thousand in lower fees related to commercial mortgages. Income from sales and servicing of mortgage loans decreased $33 thousand versus first quarter 2017 and decreased $41 thousand versus second quarter 2016. The decrease from the first quarter 2017 is mainly attributable to lower gains on sale during the second quarter 2017 as well as lower income from servicing of loans for others. Second quarter 2017 mortgage loans sales totaled $1.8 million versus $1.8 million for first quarter 2017, and $2.5 million for second quarter 2016. Second quarter 2017, first quarter 2017, and second quarter 2016 included mortgage servicing amortization and periodic impairment charges (net) of $69 thousand, $70 thousand, and $65 thousand, respectively. (Losses)/Gains on sales of securities during the second quarter 2017 was ($14) thousand while first quarter 2017 and second quarter 2016 totaled $0 thousand and $146 thousand, respectively.  Other income includes bank owned life insurance income and rental income.

Non-Interest Expense

Non-interest expense for second quarter 2017 decreased $567 thousand versus first quarter 2017 and increased $222 thousand versus second quarter 2016. 

Total compensation expense decreased $370 thousand versus first quarter 2017.  A reduction in salary expense for the second quarter of $78 thousand was mainly attributable to open positions.  Benefit expense declined $184 thousand in the second quarter as adjustments were made to performance related benefits and lower medical insurance costs.  Payroll taxes declined in the second quarter, as compared to the first quarter, by $73 thousand. Total compensation expenses year-over-year increased by $11 thousand and is mainly attributable to the lower current period benefit expenses offset by higher deferred expenses related to loan origination in the second quarter of 2016.

Premises and equipment expense increased $12 thousand versus first quarter 2017 and increased $63 thousand versus second quarter 2016. The year-over-year increase was substantially attributable to lease expense.

Data processing expense increased $32 thousand versus first quarter 2017 and increased $55 thousand versus second quarter 2016. Second quarter 2017 increases in core data processing expense, which include a timing difference of $16 thousand, and ATM and debit card processing were largely offset by reductions in data communication related expenses. The year over year increase includes the 2017 timing difference as well as increased core data processing expense in the current quarter.

Professional fees increased $47 thousand versus first quarter 2017, and $200 thousand versus second quarter 2016. Increases over both the first quarter 2017 and second quarter 2016 were primarily attributable to consulting and audit related fees. In the second quarter of 2017 declines in legal and investment management expense contributed to the lower net quarter over quarter increase.

Loan related expenses declined $146 thousand as compared to first quarter 2017 and increased $30 thousand versus second quarter 2016. The decrease in current quarter expense is substantially attributable to a first quarter loss on sale of OREO.  The year over year increase is substantially attributable to increased OREO carrying costs.

The effective income tax rates for second quarter 2017, first quarter 2017 and second quarter 2016 were 24.62%, 27.00% and 27.79%, respectively.

Loans

Net loans receivable increased $7 million during second quarter 2017 to $772 million at June 30, 2017, compared with $765 million at March 31, 2017, and increased $22 million compared with $750 million at June 30, 2016.

Asset Quality

Non-performing assets increased $0.8 million during second quarter 2017 to $11.7 million, or 1.2% of assets at June 30, 2017, from $10.9 million, or 1.2% of assets at March 31, 2017, and decreased $2.9 million from $14.6 million, or 1.6% of assets, at June 30, 2016.

The amount of total impaired and potential problem loans decreased to $21.5 million (2.8% of gross loans receivable) during second quarter 2017, compared to $23.6 million, or 3.1% of gross loans receivable at March 31, 2017, and decreased $9.1 million from $30.6 million, or 4.2% of gross loans receivable at June 30, 2016.  

Accruing loans receivable 30-to-89 days past due decreased $8.7 million during second quarter 2017 to $3 million, or 0.38% of gross loans receivable, from $11.7 million, or 1.52% of gross loans receivable at March 31, 2017, and decreased $0.6 million from $3.6 million, or 0.47% of gross loans receivable at June 30, 2016.

Provision for loan loss expense was $364 thousand for second quarter 2017 versus $352 thousand for first quarter 2017, and $525 thousand for second quarter 2016. Net loan charge-offs were $155 thousand for the second quarter 2017, $194 thousand for first quarter 2017 and $684 thousand for the second quarter 2016. Reserve coverage, as measured by the ratio of the allowance for loan losses to gross loans, was 0.83% for the second quarter 2017, versus 0.82% for first quarter 2017 and 0.76% for second 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 per common share increased $0.28 as compared to first quarter 2017 and increased $1.09 as compared to the second quarter 2016. Tangible book value per common share decreased $0.32 during second quarter 2017, to $28.94 and increased $0.66 as compared to the second quarter 2016. The second quarter 2017 net decline in tangible book value, which excludes goodwill and core deposit intangibles, reflects the addition of $1.3 million to goodwill and $632 thousand to core deposit intangibles related to the acquisition of the New Paltz, New York branch.

Shareholders’ equity increased $1.3 million in second quarter 2017 to $96.5 million at June 30, 2017. Contributing to the increase in shareholders’ equity for second quarter 2017 was net income of $1.9 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, 2017, Salisbury’s Tier 1 leverage, total risk-based capital, and common equity tier 1 capital ratios were 8.77%, 13.12%, and 10.88%, respectively. The Bank’s Tier 1 leverage, total risk-based capital, and common equity tier 1 capital ratios were 9.53%, 12.70%, and 11.81%, respectively, compared with regulatory “well capitalized” minimums of 5.00%, 10.00%, and 6.5%, respectively.

Second Quarter 2017 Dividends on Common Shares

The Board of Directors of Salisbury declared a $0.28 per common share quarterly cash dividend at its July 28, 2017 meeting. The dividend will be paid on August 25, 2017 to shareholders of record as of August 11, 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, New Paltz, 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, 2017
(unaudited)
December 31, 2016
ASSETS  
Cash and due from banks$5,920 $5,434 
Interest bearing demand deposits with other banks 55,472  30,051 
Total cash and cash equivalents 61,392  35,485 
Securities  
Available-for-sale at fair value 81,016  79,623 
Federal Home Loan Bank of Boston stock at cost 3,452  3,211 
Loans held-for-sale 594  - 
Loans receivable, net (allowance for loan losses: $6,493 and $6,127) 771,850  763,184 
Other real estate owned 3,854  3,773 
Bank premises and equipment, net 16,149  14,398 
Goodwill 13,827  12,552 
Intangible assets (net of accumulated amortization: $3,763 and $3,511) 2,116  1,737 
Accrued interest receivable 2,303  2,424 
Cash surrender value of life insurance policies 14,211  14,038 
Deferred taxes 1,320  1,367 
Other assets 2,722  3,574 
Total Assets$974,806 $935,366 
LIABILITIES and SHAREHOLDERS' EQUITY  
Deposits  
Demand (non-interest bearing)$219,660 $218,420 
Demand (interest bearing) 132,899  127,854 
Money market 194,704  182,476 
Savings and other 145,937  135,435 
Certificates of deposit 118,141  117,585 
Total deposits 811,341  781,770 
Repurchase agreements 2,126  5,535 
Federal Home Loan Bank of Boston advances 47,302  37,188 
Subordinated debt 9,799  9,788 
Note payable 327  344 
Capital lease liability 1,987  418 
Accrued interest and other liabilities 5,379  6,316 
Total Liabilities 878,261  841,359 
Shareholders' Equity  
Common stock - $.10 per share par value  
Authorized: 5,000,000;  
Issued: 2,785,066 and 2,758,086 279  276 
Unearned compensation - restricted stock awards (738) (352)
Paid-in capital 42,984  42,085 
Retained earnings 53,453  51,521 
Accumulated other comprehensive income, net 567  477 
Total Shareholders' Equity$96,545 $94,007 
Total Liabilities and Shareholders' Equity$974,806 $935,366 


Salisbury Bancorp, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
 
Periods ended June 30,Three months endedSix months ended
(in thousands, except per share amounts)  2017  2016 2017  2016 
Interest and dividend income      
Interest and fees on loans $8,235 $7,938$16,577
 $15,869 
Interest on debt securities      
Taxable  354  286 672  579 
Tax exempt  113  237 277  523 
Other interest and dividends  94  60 176  134 
Total interest and dividend income  8,796  8,521 17,702  17,105 
Interest expense      
Deposits  578  529 1,094  1,037 
Repurchase agreements  1  1 1  2 
Capital lease  20  17 37  35 
Note payable  5  6 7  11 
Subordinated debt  156  156 312  312 
Federal Home Loan Bank of Boston advances  266  245 528  476 
Total interest expense  1,026  954 1,979  1,873 
Net interest and dividend income  7,770  7,567 15,723  15,232 
Provision for loan losses  364  525 716  988 
Net interest and dividend income after provision for loan losses  7,406  7,042 15,007  14,244 
Non-interest income      
Trust and wealth advisory  892  884 1,746  1,668 
Service charges and fees  902  753 1,863  1,455 
Gains on sales of mortgage loans, net  30  57 79  96 
Mortgage servicing, net  31  45 76  79 
(Loss) /gains on sales of available-for-sale securities, net  (14) 146 (14) 148 
Other  110  115 223  229 
Total non-interest income  1,951  2,000 3,973  3,675 
Non-interest expense      
Salaries  2,777  2,687 5,667  5,261 
Employee benefits  831  910 1,919  1,998 
Premises and equipment  907  844 1,802  1,739 
Data processing  504  449 977  896 
Professional fees  764  564 1,481  944 
Collections, OREO and loan related  155  125 456  311 
FDIC insurance  98  176 247  310 
Marketing and community support  152  180 403  380 
Amortization of core deposit intangibles  126  152 252  307 
Other  546  551 1,081  1,330 
Total non-interest expense  6,860  6,638 14,285  13,476 
Income before income taxes  2,497  2,404 4,695  4,443 
Income tax provision  615  669 1,208  1,196 
Net income $1,882 $1,735$3,487 $3,247 
Net income allocated to common shareholders $1,867 $1,721$3,461 $3,220 
       
Basic earnings per common share $0.68 $0.63$1.26 $1.18 
Diluted earnings per common share  0.67  0.63 1.25  1.17 
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 2017Q1 2017Q4 2016Q3 2016Q2 2016
Total assets$974,806 $939,549 $935,366 $928,445 $913,494 
Loans receivable, net 771,850  764,665  763,184  753,623  749,523 
Total securities 84,468  80,359  82,834  79,738  83,874 
Deposits 811,341  772,416  781,770  786,730  754,471 
FHLBB advances 47,302  52,745  37,188  27,134  47,083 
Shareholders’ equity 96,545  95,221  94,007  93,554  92,584 
Wealth assets under administration 585,759  524,459  516,350  509,557  424,702 
Discretionary wealth assets under administration 374,271  365,086  366,167  361,326  355,560 
Non-discretionary wealth assets under administration 211,488  159,373  150,183  148,230  69,142 
Non-performing loans 7,835  7,057  8,792  11,673  14,579 
Non-performing assets 11,690  10,890  12,565  14,496  14,579 
Accruing loans past due 30-89 days 2,961  11,689  4,537  5,889  3,569 
Net interest and dividend income 7,770  7,953  7,687  7,687  7,567 
Net interest and dividend income, tax equivalent 8,003  8,214  7,966  7,981  7,882 
Provision for loan losses 364  352  503  344  525 
Non-interest income 1,951  2,023  2,327  1,888  2,000 
Non-interest expense 6,860  7,427  7,411  6,500  6,638 
Income before income taxes 2,497  2,197  2,100  2,731  2,403 
Income tax provision 615  593  580  812  669 
Net income 1,882  1,604  1,520  1,919  1,734 
Net income allocated to common shareholders 1,867  1,594  1,509  1,904  1,721 
      
Per share data     
Basic earnings per common share$0. 68 $0.58 $0.55 $0.70 $0.63 
Diluted earnings per common share 0.67  0.58  0.55  0.69  0.63 
Dividends per common share 0.28  0.28  0.28  0.28  0.28 
Book value per common share 34.66  34.38  34.07  33.92  33.57 
Tangible book value per common share - Non-GAAP⁽¹⁾ 28.94  29.26  28.90  28.63  28.28 
      
Common shares outstanding at end of period 2,785  2,770  2,758  2,758  2,758 
Weighted average common shares outstanding,  to calculate basic earnings per share  2,757  

2,749
  

2,737
  2,737  2,735 
Weighted average common shares outstanding, to calculate diluted earnings per share  2,775  

2,768
  

2,755
  2,751  2,749 
      
Profitability ratios     
Net interest margin (tax equivalent) 3.63% 3.74% 3.63% 3.57% 3.71%
Efficiency ratio(2) 67.11  69.06  67.08  64.13  66.51 
Non-interest income to operating revenue 20.18  20.28  19.81  19.22  20.63 
Effective income tax rate 24.62  27.00  27.62  29.71  27.79 
Return on average assets 0.77  0.70  0.65  0.81  0.77 
Return on average common shareholders’ equity 7.82  6.83  6.43  8.20  7.58 
      
Credit quality ratios     
Net charge-offs to average loans receivable, gross 0.02% 0.03% 0.04% 0.02% 0.37%
Non-performing loans to loans receivable, gross 1.01  0.92  1.16  1.54  1.93 
Accruing loans past due 30-89 days to loans receivable, gross 0.38  1.53  0.60  0.78  0.47 
Allowance for loan losses to loans receivable, gross 0.83  0.82  0.79  0.78  0.76 
Allowance for loan losses to non-performing loans 82.87  89.05  69.43  50.47  39.22 
Non-performing assets to total assets 1.20  1.16  1.34  1.56  1.60 
      
Capital ratios     
Common shareholders' equity to assets 9.90% 10.13% 10.05% 10.08% 10.14%
Tangible common shareholders' equity to tangible assets - Non-GAAP⁽¹⁾ 8.41  8.76  8.64  8.66  8.68 
Tier 1 leverage capital 8.77  8.83  8.69  8.47  8.77 
Total risk-based capital 13.12  13.34  13.26  13.25  13.08 
Common equity tier 1 capital 10.88  11.10  11.02  11.01  10.86 
                
(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 2017Q1 2017Q4 2016Q3 2016Q2 2016
Shareholders' Equity$  96,545 $  95,221 $  94,007 $  93,554 $  92,584 
Less: Goodwill (13,827) (12,552) (12,552) (12,552) (12,552)
Less: Intangible assets (2,116) (1,611) (1,737) (1,883) (2,031)
Tangible Common Shareholders' Equity$  80,602 $  81,058 $  79,718 $  79,119 $  78,001 
Total Assets$974,806 $939,549 $935,366 $928,445 $  913,494 
Less: Goodwill (13,827) (12,552) (12,552) (12,552) (12,552)
Less: Intangible assets (2,116) (1,611) (1,737) (1,883) (2,031)
Tangible Total Assets$958,863 $925,386 $921,077 $914,010 $  898,911 
Common Shares outstanding 2,785  2,770  2,758    2,758    2,758 
      
Book value per Common Share – GAAP$  34.66 $  34.38 $  34.09 $  33.92 $  33.57 
Tangible book value per Common Share - Non-GAAP 28.94  29.26  28.90  28.69  28.28 
      
Common Shareholders’ Equity to Assets – GAAP 9.90% 10.13% 10.05%   10.08% 10.14%
Tangible Common Shareholders’ Equity to Tangible Assets – Non-GAAP 8.41  8.76  8.65  8.66  8.68 
      
Non-interest expense$  6,860 $  7,427 $  7,411 $  6,499 $  6,639 
Less: Amortization of core deposit intangibles (126) (126) (146) (148) (152)
Less: Foreclosed property expense (63) (232) (493) (27) (12)
Less: Strategic initiatives -  -  (155) -  - 
Operating expenses$  6,671 $  7,069 $  6,617 $  6,324 $  6,475 
Net interest and dividend income, tax equivalent$  8,003 $  8,214 $  7,966 $  7,981 $  7,882 
Non-interest income 1,951  2,023  2,326  1,889  2,000 
Losses/ (gains) on securities, net 14  -    (427) (10) (146)
Operating revenue$  9,940 $  10,237 $  9,865 $  9,860 $  9,736 
Efficiency Ratio  67.11% 69.06% 67.08%   64.13%   66.50%
      


        

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