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

Lakeville, Connecticut, UNITED STATES


LAKEVILLE, Conn., Oct. 27, 2017 (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, 2017.

Net income allocated to common shareholders was $1.7 million, or $0.61 per common share, for the third quarter ended September 30, 2017 (third quarter 2017), compared with $1.9 million, or $0.68 per common share, for the second quarter ended June 30, 2017 (second quarter 2017), and $1.9 million, or $0.70 per common share, for the third quarter ended September 30, 2016 (third quarter 2016).

Selected Third Quarter 2017 Financial Highlights

  • Net Income per share for the quarter was $0.61 per share compared with $0.68 last quarter and $0.70 for the third quarter 2016.
  • Results for the current quarter included a pre-tax charge of $217 thousand, or $0.05 per share, related to the pending sale of an OREO property. 
  • Wealth assets under administration increased to $595 million at September 30, 2017, an increase of $9 million, or 1.5%, from second quarter 2017.
  • Book value per common share increased to $35.01 at September 30, 2017 from $34.66 at June 30, 2017, and $33.92 at September 30, 2016.

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

“We are pleased to report solid results for the third quarter despite the write-down on the OREO property. This quarter we focused on deploying the deposits from our recent acquisition of the New Paltz branch into new loans.  Our wealth assets under management also increased, which helps to diversify our sources of income. We continue to focus on improving asset quality and managing non-interest expense while maintaining our commitment to outstanding customer service and enhancing long-term value for our shareholders.”

Net-Interest Income

Tax equivalent net interest income for third quarter 2017 increased $89 thousand, or 1.1%, versus second quarter 2017, and increased $4 thousand or 0.05%, versus third quarter 2016. Average earning assets increased $33.6 million versus second quarter 2017, and increased $30.6 million versus third quarter 2016. Average total interest bearing deposits increased $28.4 million versus second quarter 2017 and increased $5.0 million versus third quarter 2016. The net interest margin of 3.50% decreased 8 basis points from 3.58% in the second quarter 2017 and decreased 7 basis points from 3.57% for the third quarter 2016.

Interest income for the third quarter 2017 reflects net accretion related to the fair value adjustments of loans acquired in the Riverside Bank acquisition in the amount of $193 thousand. The second quarter of 2017 and third quarter of 2016 included similar adjustments of $250 thousand and $441 thousand, respectively.

Non-Interest Income

Non-interest income for third quarter 2017 increased $129 thousand versus second quarter 2017 and increased $192 thousand versus third quarter 2016.

Trust and Wealth Advisory revenues decreased $18 thousand versus second quarter 2017 and increased $25 thousand versus third quarter 2016. The quarter-over-quarter net revenue decrease for the Trust and Wealth Advisory division reflects lower revenue from tax preparation fees, partly offset by higher asset based and other fees.  The increase from the prior year third quarter primarily reflects an increase in estate and retirement planning fees and asset based fees.

Service charges and fees increased $33 thousand versus second quarter 2017 and increased $113 thousand versus third quarter 2016. The increases primarily reflected higher deposit related fees.

Income from sales and servicing of mortgage loans increased $68 thousand versus second quarter 2017 and increased $34 thousand versus third quarter 2016. Third quarter 2017 mortgage loans sales totaled $0.4 million versus $1.6 million for second quarter 2017, and $3.3 million for third quarter 2016. Third quarter 2017, second quarter 2017, and third quarter 2016 included net mortgage servicing amortization and periodic impairment (benefit) charges of $(12) thousand, $68 thousand, and $60 thousand, respectively. The benefit in the current quarter primarily reflected management’s review of the portfolio and the update of key assumptions to more closely reflect the portfolio’s historical performance. As a result of this review, the current quarter includes the reversal of a previously recorded impairment charge of $25 thousand. 

Non-Interest Expense

Non-interest expense for third quarter 2017 increased $469 thousand versus second quarter 2017 and increased $720 thousand versus third quarter 2016. 

Total compensation expense increased $334 thousand versus second quarter 2017 and increased $152 thousand versus the third quarter of 2016.  The increase versus both periods primarily reflected higher salary and benefits expense, partly offset by higher deferred expenses related to loan origination.

Premises and equipment expense increased $88 thousand versus second quarter 2017 and increased $186 thousand versus third quarter 2016. The increase in both periods was substantially attributable to higher lease related expenses and building maintenance and repair costs.

Data processing expense increased $41 thousand versus second quarter 2017 and increased $72 thousand versus third quarter 2016. The increases primarily reflected higher data communications and data processing charges.

Professional fees decreased $283 thousand versus second quarter 2017, and increased $22 thousand versus third quarter 2016. The decrease from the second quarter 2017 was primarily attributable to lower consulting and audit fees and a reversal of accruals to reflect current service levels.

Loan related expenses increased $263 thousand compared to second quarter 2017 and increased $310 thousand versus third quarter 2016. The increase in both periods reflected the write-down on the OREO property noted above as well as higher OREO carrying costs and higher payments for delinquent real estate taxes.

The effective income tax rates for third quarter 2017, second quarter 2017 and third quarter 2016 were 29.09%, 24.62% and 29.71%, respectively.

Loans

Net loans receivable increased $12 million during third quarter 2017 to $784 million at September 30, 2017, compared with $772 million at June 30, 2017, and increased $30 million compared with $754 million at September 30, 2016.

Asset Quality

Non-performing assets increased $0.6 million during third quarter 2017 to $12.3 million, or 1.3% of assets at September 30, 2017, from $11.7 million, 1.2% of assets at June 30, 2017, and decreased $2.3 million from $14.5 million, or 1.6% of assets, at September 30, 2016.

The amount of total impaired and potential problem loans increased $1.0 million during the quarter to $23.3 million (3.0% of gross loans receivable) during third quarter 2017, compared to $22.3 million, or 2.9% of gross loans receivable at June 30, 2017, and decreased $2.8 million from $26.1 million, or 3.4% of gross loans receivable at September 30, 2016.  

Accruing loans receivable 30-to-89 days past due increased $0.5 million during third quarter 2017 to $3.4 million, or 0.44% of gross loans receivable, from $3.0 million, or 0.38% of gross loans receivable at June 30, 2017, and decreased $2.5 million from $5.9 million, or 0.78% of gross loans receivable at September 30, 2016.

Provision for loan loss expense was $237 thousand for third quarter 2017 versus $364 thousand for second quarter 2017, and $344 thousand for third quarter 2016. Net loan charge-offs were $236 thousand for the third quarter 2017, $157 thousand for second quarter 2017 and $171 thousand for the third quarter 2016. Reserve coverage, as measured by the ratio of the allowance for loan losses to gross loans, was 0.82% for the third quarter 2017, versus 0.83% for second quarter 2017 and 0.78% for third 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 $0.35 to $35.01 from the second quarter 2017 and increased $1.09 as compared to the third quarter 2016. Tangible book value per common share increased $0.40 during third quarter 2017 to $29.34 and increased $0.71 as compared to the third quarter 2016.

The increase in shareholders’ equity of $981 thousand in the current quarter to $97.5 primarily reflected net income of $1.7 million, partly 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 September 30, 2017, Salisbury’s Tier 1 leverage, total risk-based capital, and common equity tier 1 capital ratios were 8.49%, 13.20%, and 10.96%, respectively. The Bank’s Tier 1 leverage, total risk-based capital, and common equity tier 1 capital ratios were 9.20%, 12.77%, and 11.87%, respectively, compared with regulatory “well capitalized” minimums of 5.00%, 10.00%, and 6.5%, respectively.

Third Quarter 2017 Dividends on Common Shares

The Board of Directors of Salisbury declared a $0.28 per common share quarterly cash dividend at its October 27, 2017 meeting. The dividend will be paid on November 24, 2017 to shareholders of record as of November 10, 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 (unaudited)

(dollars in thousands, except par value)September 30, 2017December 31, 2016
ASSETS  
Cash and due from banks$6,833 $5,434 
Interest bearing demand deposits with other banks 42,570  30,051 
Total cash and cash equivalents 49,403  35,485 
Securities  
Available-for-sale at fair value 85,508  79,623 
Federal Home Loan Bank of Boston stock at cost 3,038  3,211 
Loans held-for-sale 561  - 
Loans receivable, net (allowance for loan losses: $6,494 and $6,127) 784,136  763,184 
Other real estate owned 3,944  3,773 
Bank premises and equipment, net 16,329  14,398 
Goodwill 13,815  12,552 
Intangible assets (net of accumulated amortization: $3,906 and $3,511) 1,974  1,737 
Accrued interest receivable 2,520  2,424 
Cash surrender value of life insurance policies 14,297  14,038 
Deferred taxes 1,326  1,367 
Other assets 2,618  3,574 
Total Assets$979,469 $935,366 
LIABILITIES and SHAREHOLDERS' EQUITY  
Deposits  
Demand (non-interest bearing)$225,496 $218,420 
Demand (interest bearing) 139,521  127,854 
Money market 196,745  182,476 
Savings and other 152,570  135,435 
Certificates of deposit 117,657  117,585 
Total deposits 831,989  781,770 
Repurchase agreements 4,529  5,535 
Federal Home Loan Bank of Boston advances 27,364  37,188 
Subordinated debt 9,805  9,788 
Note payable 321  344 
Capital lease liability 1,859  418 
Accrued interest and other liabilities 6,076  6,316 
Total Liabilities 881,943  841,359 
Shareholders' Equity  
Common stock - $.10 per share par value  
Authorized: 5,000,000;  
Issued: 2,785,916 and 2,758,086 279  276 
Paid-in capital 42,983  42,085 
Retained earnings 54,368  51,521 
Unearned compensation - restricted stock awards (660) (352)
Accumulated other comprehensive income, net 556  477 
Total Shareholders' Equity 97,526  94,007 
Total Liabilities and Shareholders' Equity$979,469 $935,366 
       
       

Salisbury Bancorp, Inc. and Subsidiary 
CONSOLIDATED STATEMENTS OF INCOME (unaudited)

Periods ended September 30, (in thousands except per share amounts)Three months endedNine months ended
  2017 2016 2017  2016
Interest and dividend income    
Interest and fees on loans$8,196$8,067$24,544 $23,935
Interest on debt securities    
Taxable 443 310 1,115  889
Tax exempt 68 202 345  725
Other interest and dividends 175 91 351  226
Total interest and dividend income 8,882 8,670 26,355  25,775
Interest expense    
Deposits 682 565 1,776  1,603
Repurchase agreements 2 2 4  4
Capital lease 29 17 66  53
Note payable 6 6 13  15
Subordinated debt 156 156 468  468
Federal Home Loan Bank of Boston advances 241 237 769  714
Total interest expense 1,116 983 3,096  2,857
Net interest and dividend income 7,766 7,687 23,259  22,918
Provision for loan losses 237 344 953  1,332
Net interest and dividend income after provision for loan losses 7,529 7,343 22,306  21,586
Non-interest income    
Trust and wealth advisory 874 849 2,620  2,517
Service charges and fees 935 822 2,799  2,277
Gains on sales of mortgage loans, net 25 55 104  151
Mortgage servicing, net 104 40 180  119
Gains (losses) on sales and calls of available-for-sale securities, net - 9 (14) 157
Other 142 113 365  343
Total non-interest income 2,080 1,888 6,054  5,564
Non-interest expense    
Salaries 2,829 2,757 8,266  8,018
Employee benefits 1,004 924 2,923  2,922
Premises and equipment 995 809 2,797  2,546
Data processing 545 473 1,521  1,369
Professional fees 481 459 1,962  1,403
Collections, OREO, and loan related 419 109 875  420
FDIC insurance 106 164 354  474
Marketing and community support 220 144 623  524
Amortization of intangibles 142 148 395  455
Other 479 513 1,561  1,846
Total non-interest expense 7,220 6,500 21,277  19,977
Income before income taxes 2,389 2,731 7,083  7,173
Income tax provision 695 812 1,903  2,008
Net income$1,694$1,919$5,180 $5,165
Net income available to common stock$1,678$1,904$5,139 $5,124
     
Basic earnings per common share$0.61$0.70$1.87 $1.88
Weighted average common shares outstanding, to calculate basic earnings per share 2,759 2,737 2,755  2,732
Diluted earnings per common share 0.60 0.69 1.85  1.87
Weighted average common shares outstanding, to calculate diluted earnings per share 2,779 2,751 2,774  2,747
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 2017  Q2 2017 Q1 2017 Q4 2016 Q3 2016 
Total assets$979,469 $974,806 $939,549 $935,366 $928,445 
Loans receivable, net 784,136  771,850  764,665  763,184  753,623 
Total securities 88,546  84,468  80,359  82,834  79,738 
Deposits 831,989  811,341  772,416  781,770  786,730 
FHLBB advances 27,364  47,302  52,745  37,188  27,134 
Shareholders’ equity 97,526  96,545  95,221  94,007  93,554 
Wealth assets under administration 594,510  585,759  524,459  516,350  509,556 
Discretionary wealth assets under administration 374,357  374,271  365,086  366,167  361,326 
Non-discretionary wealth assets under administration 220,153  211,488  159,373  150,183  148,230 
Non-performing loans 8,311  7,835  7,057  8,792  11,673 
Non-performing assets 12,256  11,690  10,890  12,565  14,496 
Accruing loans past due 30-89 days 3,449  2,961  11,689  4,537  5,889 
Net interest and dividend income (1) 7,766  7,661  7,832  7,687  7,687 
Net interest and dividend income, tax equivalent (1) 7,983  7,894  8,093  7,966  7,979 
Provision for loan losses 237  364  352  503  344 
Non-interest income 2,080  1,951  2,023  2,327  1,888 
Non-interest expense (1) 7,220  6,751  7,306  7,411  6,500 
Income before income taxes 2,389  2,497  2,197  2,100  2,731 
Income tax provision 695  615  593  580  812 
Net income 1,694  1,882  1,604  1,520  1,919 
Net income allocated to common shareholders 1,678  1,867  1,594  1,509  1,904 
      
Per share data     
Basic earnings per common share$0.61 $0. 68 $0.58 $0.55 $0.70 
Diluted earnings per common share 0.60  0.67  0.58  0.55  0.69 
Dividends per common share 0.28  0.28  0.28  0.28  0.28 
Book value per common share 35.01  34.66  34.38  34.07  33.92 
Tangible book value per common share - Non-GAAP ⁽2 29.34  28.94  29.26  28.9  28.63 
      
Common shares outstanding at end of period 2,786  2,785  2,770  2,758  2,758 
Weighted average common shares outstanding,  to calculate basic earnings per share  2,759  2,757  2,749  2,737  2,737 
Weighted average common shares outstanding, to calculate diluted earnings per share  2,779  2,775  2,768  2,755  2,751 
      
Profitability ratios     
Net interest margin (tax equivalent) (1) 3.50%  3.58% 3.69% 3.45% 3.57%
Efficiency ratio (3) 67.18  66.56  68.68  67.08  64.13 
Effective income tax rate 29.09  24.62  27.00  27.62  29.71 
Return on average assets 0.69  0.77  0.70  0.65  0.81 
Return on average common shareholders’ equity 6.89  7.82  6.83  6.43  8.20 
      
Credit quality ratios     
Net charge-offs to average loans receivable, gross 0.03% 0.02% 0.03% 0.04%   0.02%
Non-performing loans to loans receivable, gross 1.05  1.01  0.92  1.16  1.54 
Accruing loans past due 30-89 days to loans receivable, gross 0.44  0.38  1.53  0.60  0.78 
Allowance for loan losses to loans receivable, gross 0.82  0.83  0.82  0.79  0.78 
Allowance for loan losses to non-performing loans 79.30  82.87  89.05  69.43  50.47 
Non-performing assets to total assets 1.25  1.20  1.16  1.34  1.56 
      
Capital ratios     
Common shareholders' equity to assets 9.96% 9.90% 10.13% 10.05% 10.08%
Tangible common shareholders' equity to tangible assets - Non-GAAP2 8.48  8.41  8.76  8.64  8.66 
Tier 1 leverage capital 8.49  8.77  8.83  8.69  8.47 
Total risk-based capital 13.20  13.12  13.34  13.26  13.25 
Common equity tier 1 capital    10.96  10.88  11.10  11.02  11.01 

(1) The net interest margin for 2Q 2017 and 1Q 2017 has been adjusted by $109,000 or (0.05%) and $121,000 or (0.06%), respectively to reflect an adjustment for deferred loan origination costs which were previously reported in compensation expense and have been reclassified as a reduction to loan income.
(2) Refer to schedule labeled “Supplemental Information – Non-GAAP Financial Measures”.
(3) 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 2017 Q2 2017 Q1 2017 Q4 2016 Q3 2016 
Shareholders' Equity$97,526 $  96,545 $95,221 $  94,007 $  93,554 
Less: Goodwill (13,815) (13,827) (12,552) (12,552) (12,552)
Less: Intangible assets (1,974) (2,116) (1,611) (1,737) (1,883)
Tangible Common Shareholders' Equity$81,737 $  80,602 $  81,058 $  79,718 $  79,119 
Total Assets$979,469 $974,806 $939,549 $935,366 $928,445 
Less: Goodwill (13,815) (13,827) (12,552) (12,552) (12,552)
Less: Intangible assets (1,974) (2,116) (1,611) (1,737) (1,883)
Tangible Total Assets$963,680 $958,863 $925,386 $921,077 $914,010 
Common Shares outstanding 2,786  2,785  2,770  2,758  2,758 
      
Book value per Common Share – GAAP$35.01 $34.66 $34.38 $34.07 $33.92 
Tangible book value per Common Share - Non-GAAP 29.34  28.94  29.26  28.90  28.63 
      
Common Shareholders’ Equity to Assets – GAAP 9.96%  9.90%  10.13%  10.05%  10.08% 
Tangible Common Shareholders’ Equity to Tangible Assets – Non-GAAP 8.48  8.41  8.76  8.64  8.66 
      
Non-interest expense$7,220 $  6,751 $  7,306 $  7,411 $  6,500 
Less: Amortization of core deposit intangibles (142) (126) (126) (146) (148)
Less: Foreclosed property expense (318) (63) (232) (493) (27)
Less: Strategic initiatives -  -  -  (155) - 
Operating expenses$6,760 $  6,562 $  6,948 $  6,617 $  6,325 
Net interest and dividend income, tax equivalent$7,983 $  7,894 $  8,093 $  7,966 $  7,981 
Non-interest income 2,080  1,951  2,023  2,327  1,888 
Losses/ (gains) on securities, net -  14  -  (427) (9)
Operating revenue$10,063 $  9,859 $  10,116 $  9,866 $  9,860 
Efficiency Ratio  67.18%  66.56%  68.68%  67.08%  64.13% 



        

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