Salisbury Bancorp, Inc. Reports Results for Fourth Quarter and Full Year 2017

Lakeville, Connecticut, UNITED STATES


  • Fourth Quarter and Full Year 2017 Net Income of $0.39 and $2.25 per Share, Respectively
  • Fourth Quarter and Full Year 2017 Net Income of $0.87 and $2.82 per Share, Respectively Excluding Significant Items1
  • Total Assets of $987 Million Increased 6% from December 31, 2016
  • Non-performing Assets Improved to 0.74% of Total Assets from 1.34% at December 31, 2016
  • Wealth Assets Under Administration of $610 Million

LAKEVILLE, Conn., Jan. 26, 2018 (GLOBE NEWSWIRE) -- Salisbury Bancorp, Inc. (“Salisbury”), (NASDAQ:SAL), the holding company for Salisbury Bank and Trust Company (the “Bank”), announced results for its fourth quarter and full year ended December 31, 2017.

Net income available to common shareholders was $1.1 million, or $0.39 per common share, for Salisbury’s fourth quarter ended December 31, 2017 (fourth quarter 2017), compared with $1.7 million, or $0.61 per common share, for the third quarter ended September 30, 2017 (third quarter 2017), and $1.5 million, or $0.55 per common share, for the fourth quarter ended December 31, 2016 (fourth quarter 2016).

Results for the fourth quarter and full year 2017 included after-tax losses of $884 thousand or $0.32 per share and $1.1 million or $0.41 per share, respectively related to OREO. Results for the fourth quarter and full year also included a charge of $445 thousand or $0.16 per share related to the remeasurement of net deferred tax assets due to the enactment of the new U.S. tax law during the quarter.

Salisbury’s President and Chief Executive Officer, Richard J. Cantele, Jr., stated, “In 2017 we made measurable progress on our strategy to improve asset quality and to achieve growth through prudent acquisitions. Although we incurred losses this year on the sale of OREO properties, our non-performing assets declined significantly during the fourth quarter. In June 2017 we completed the acquisition of the New Paltz, New York branch from Empire State Bank and in December 2017, we executed and announced a definitive agreement to acquire the Fishkill, New York branch of Orange Bank & Trust Company. The acquisition, which is subject to regulatory approval, is expected to be completed in the second quarter of this year. We enter 2018 well-positioned for continued growth and we remain focused on managing asset quality and enhancing profitability while maintaining our commitment to provide outstanding customer service.”

Net Interest Income

Tax equivalent net interest income for the fourth quarter 2017 increased $248 thousand, or 3.1%, versus third quarter 2017, and increased $265 thousand, or 3.3%, versus fourth quarter 2016. Net interest income for the current quarter included $183 thousand for interest received upon settlement of a past due loan. Average earning assets increased $1.9 million versus third quarter 2017, and increased $49.3 million versus fourth quarter 2016. Average total interest bearing deposits decreased $0.2 million versus third quarter 2017 and increased $27.5 million versus fourth quarter 2016. The increase in average interest bearing deposits from the prior year fourth quarter reflected the acquisition of the New Paltz branch, which increased deposits by approximately $31 million. The tax equivalent net interest margin for the fourth quarter was 3.58% compared with 3.50% for the third quarter 2017 and 3.45% for the fourth quarter 2016.

Non-Interest Income

Non-interest income for fourth quarter 2017 increased $102 thousand versus third quarter 2017 and decreased $144 thousand versus fourth quarter 2016. Trust and Wealth Advisory revenues decreased $17 thousand versus third quarter 2017 and increased $36 thousand versus fourth quarter 2016. The quarter-over-quarter net revenue decrease primarily resulted from lower fees for life insurance trust administration, whereas the increase from the prior year fourth quarter primarily reflected net growth in asset based fees.

Service charges and fees decreased $17 thousand versus third quarter 2017, and increased $63 thousand versus fourth quarter 2016. The decline from the third quarter primarily reflected lower ATM, safe deposit rental, and other fees whereas the increase from the prior year fourth quarter primarily reflected higher ATM and interchange fees.

____________________________________________
1
Significant items include losses on the sale of OREO properties and a charge related to the remeasurement of net deferred tax assets following the enactment of the new U.S. tax law during the current quarter. The impact of these items on net income available to common shareholders and earnings per share is presented in the text of this release.

 

Income from mortgage sales and servicing decreased $33 thousand versus third quarter 2017 and decreased $18 thousand versus fourth quarter 2016. The decline from the third quarter was primarily attributed to a reversal of impairment charges for mortgage servicing rights in the prior quarter. The decrease from the fourth quarter of 2016 primarily reflected lower gains on mortgage sales, due to a reduction in volume, partly offset by lower amortization charges for mortgage servicing rights.

Gains on the sale of available-for-sale securities for the fourth quarter were $193 thousand compared with $427 thousand in the fourth quarter of 2016.

Non-Interest Expense

Non-interest expense included OREO charges of $1.4 million for the fourth quarter compared with charges of $218 thousand in the prior quarter and $435 thousand in the prior year fourth quarter. Excluding these charges, non-interest expense for fourth quarter 2017 declined $305 thousand versus third quarter 2017 and declined $278 thousand versus fourth quarter 2016. Salaries and benefits decreased $120 thousand versus third quarter 2017, and decreased $163 thousand versus fourth quarter 2016. The decrease for both periods primarily reflected lower benefits and lower deferred compensation expense.

Premises and equipment costs increased $39 thousand versus third quarter 2017 and increased $205 thousand versus fourth quarter 2016.  The increase from the prior year fourth quarter reflected higher lease expense, which included costs related to the acquisition of the New Paltz branch, and higher depreciation and maintenance expense for computer equipment and software. Data processing expenses, which also include data communications related expenses, decreased $9 thousand versus third quarter 2017 and decreased $201 thousand versus fourth quarter 2016. The prior year fourth quarter included expenses related to the Bank’s core system conversion and the upgrade of data communication capabilities to support new technologies.

Professional fees increased $56 thousand versus third quarter 2017 and increased $7 thousand versus fourth quarter 2016. The quarter over quarter increase was mainly attributed to higher audit and investment management fees offset by a reduction in legal and consulting expense. The increase from the prior year fourth quarter reflected higher legal, consulting and audit fees which were mostly offset by lower internal audit and investment management fees.

OREO and loan related expenses of $1.4 million, included the OREO charge noted above. Excluding OREO expenses in the fourth quarter and comparative quarters, OREO and loan related expenses decreased $253 thousand versus the third quarter 2017 and decreased $196 thousand compared with the fourth quarter 2016. The declines primarily reflected a reversal of accruals for OREO carrying costs and the delinquent real estate taxes on OREO properties.

The effective income tax rates for fourth quarter 2017, third quarter 2017 and fourth quarter 2016 were 48.42%, 29.09% and 27.62%, respectively. Excluding the discrete charge in the fourth quarter 2017 related to the change in U.S. tax law, the effective tax rate for the quarter was 27.12%.

Loans

Net loans receivable increased $18 million, or 2% from $784 million as of the third quarter 2017 to $802 million at December 31, 2017, and increased $39 million, or 5% from $763 million at December 31, 2016.

Asset Quality

Non-performing assets decreased $4.9 million during the current quarter to $7.4 million, or 0.74% of assets at December 31, 2017, from $12.3 million, or 1.3% of assets at September 30, 2017, and decreased $5.2 million from $12.6 million, or 1.3% of assets, at December 31, 2016. The decrease in non-performing assets from the third quarter of 2017 and the prior year fourth quarter reflected the sale of OREO and a decline in non-performing loans.    

The amount of total impaired and potential problem loans were $23.9 million or 2.97% of gross loans receivable at December 31, 2017 compared to $23.3 million, or 2.95% of gross loans receivable at September 30, 2017 and $23.6 million, or 3.07% of gross loans receivable at December 31, 2016.

Accruing loans receivable 30-to-89 days past due increased $0.1 million during fourth quarter 2017 to $3.5 million, or 0.44% of gross loans receivable, from $3.4 million, or 0.44% of gross loans receivable at September 30, 2017, and decreased $1.0 million from $4.5 million, or 0.59% of gross loans receivable at December 31, 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.

The provision for loan loss expense was $67 thousand for fourth quarter 2017 versus a charge of $237 thousand for third quarter 2017, and a charge of $503 thousand for the fourth quarter 2016. The decline in the provision was primarily attributable to recoveries of $334 thousand received in the fourth quarter. Net loan charge-offs (recoveries) were ($300) thousand for the fourth quarter 2017, $236 thousand for third quarter 2017 and $263 thousand for the fourth quarter 2016. Reserve coverage, as measured by the ratio of the allowance for loan losses to gross loans, was 0.84% for the fourth quarter 2017, versus 0.82% for the third quarter 2017 and 0.79% for the fourth quarter 2016. Similarly, reserve coverage, as measured by the ratio of the allowance for loan losses to non-performing loans was 102% for the fourth quarter of 2017, versus 79% for the third quarter of 2017 and 69% for the fourth quarter of 2016.

Capital

Shareholders’ equity was $97.5 million at December 31, 2017 and book value and tangible book value were $35.01 and $29.39, respectively. Tangible book value excludes goodwill and core deposit intangibles.

The regulatory capital ratios of the Company and the Bank remain in compliance with regulatory “well capitalized” requirements. At December 31, 2017, Salisbury’s tier 1 leverage, total risk-based capital, and common equity tier 1 capital ratios were 8.53%, 12.94%, and 10.73%, respectively. The Bank’s tier 1 leverage, total risk-based capital, and common equity tier 1 capital ratios were 9.25%, 12.54%, and 11.64%, respectively, compared with regulatory “well capitalized” minimums of 5.00%, 10.00%, and 6.5%, respectively.

Dividends on Common Shares

Consistent with the dividends declared in each calendar quarter of 2017, the Board of Directors of Salisbury declared a $0.28 per common share quarterly cash dividend at their January 26, 2018 meeting. Such dividend will be paid on February 23, 2018 to shareholders of record as of February 9, 2018.

Background

Salisbury Bancorp, Inc. is the parent company of Salisbury Bank and Trust Company (the “Bank”), 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)

(in thousands, except share data) December 31,
2017
December 31,
2016
ASSETS  
Cash and due from banks$  9,357 $  5,434 
Interest bearing demand deposits with other banks 39,129  30,051 
Total cash and cash equivalents 48,486  35,485 
Securities  
Available-for-sale at fair value 79,047  79,623 
Federal Home Loan Bank of Boston stock at cost 3,813  3,211 
Loans held-for-sale 669  - 
Loans receivable, net (allowance for loan losses: $6,776 and $6,127) 801,703  763,184 
Other real estate owned 719  3,773 
Bank premises and equipment, net 16,401  14,398 
Goodwill 13,815  12,552 
Intangible assets (net of accumulated amortization: $4,043 and $3,510) 1,837  1,737 
Accrued interest receivable 2,665  2,424 
Cash surrender value of life insurance policies 14,381  14,038 
Deferred taxes 1,120  1,367 
Other assets 2,328  3,574 
Total Assets$986,984 $  935,366 
LIABILITIES and SHAREHOLDERS' EQUITY  
Deposits  
Demand (non-interest bearing)$  220,536 $  218,420 
Demand (interest bearing) 142,575  127,854 
Money market 190,953  182,476 
Savings and other 144,600  135,435 
Certificates of deposit 116,831  117,585 
Total deposits 815,495  781,770 
Repurchase agreements 1,668  5,535 
Federal Home Loan Bank of Boston advances 54,422  37,188 
Subordinated Debt 9,811  9,788 
Note payable 313  344 
Capital lease liability 1,835  418 
Accrued interest and other liabilities 5,926  6,316 
Total Liabilities 889,470  841,359 
Shareholders' Equity  
Common stock - $.10 per share par value  
Authorized: 5,000,000;   
Issued: 2,785,216 and 2,758,086 279  276 
Unearned compensation - restricted stock awards (606) (352)
Paid-in capital 42,998  42,085 
Retained earnings 54,664  51,521 
Accumulated other comprehensive income, net 179  477 
Total Shareholders' Equity 97,514  94,007 
Total Liabilities and Shareholders' Equity$  986,984 $  935,366 



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

Periods ended December 31,Three months endedTwelve months ended
(in thousands, except per share amounts) 2017 2016 2017 2016
Interest and dividend income    
Interest and fees on loans$  8,547$  8,115$  33,090$  32,050
Interest on debt securities     
Taxable 451 293 1,566 1,183
Tax exempt 35 202 380 927
Other interest and dividends 134 69 485 294
Total interest and dividend income 9,167 8,679 35,521 34,454
Interest expense    
Deposits   707 578 2,483 2,181
Repurchase agreements 2 2 5 6
Capital lease 29 17 96 70
Note payable 5 5 18 21
Subordinated Debt 156 156 624 624
Federal Home Loan Bank of Boston advances 243 233 1,012 947
Total interest expense 1,142 991 4,238 3,849
Net interest and dividend income 8,025 7,688 31,283 30,605
Provision for loan losses 67 503 1,020 1,835
Net interest and dividend income after provision for loan losses 7,958 7,185 30,263 28,770
Non-interest income    
Trust and wealth advisory 857 821 3,477 3,338
Service charges and fees 919 856 3,718 3,133
Gains on sales of mortgage loans, net 21 77 125 229
Mortgage servicing, net 75 37 255 156
Gains on sales of available -for-sale- securities, net  193 427 178 584
Other   117 108 483 451
Total non-interest income 2,182 2,326 8,236 7,891
Non-interest expense    
Salaries 2,869 2,908 11,135 10,926
Employee benefits 844 969 3,767 3,891
Premises and equipment  1,034 829 3,831 3,375
Data processing 536 737 2,057 2,106
Professional fees 537 530 2,499 1,933
Collections, OREO, and loan related, including OREO gains, losses and writedowns 1,304 579 2,179 999
FDIC insurance 143 132 497 606
Marketing and community support 170 162 793 686
Amortization of intangibles 138 146 533 601
Other 477 419 2,038 2,264
Total non-interest expense 8,052 7,411 29,329 27,387
Income before income taxes 2,088 2,100 9,170 9,274
Income tax provision 1,011 580 2,914 2,589
Net income$  1,077$  1,520$  6,256$  6,685
Net income applicable to common shareholders$  1,065$  1,509$  6,201$  6,633
     
Basic earnings per common share$  0.39$  0.55$  2.25 $  2.43
Diluted earnings per common share   0.38  0.55   2.24 2.41
Common dividends per share   0.28 0.28   1.12 1.12
     


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)Q4 2017Q3 2017Q2 2017Q1 2017Q4 2016
Total assets$986,984 $979,469  $974,806  $939,549  $935,366 
Loans receivable, net 801,703  784,136  771,850  764,665  763,184 
Total securities 82,860  88,546  84,468  80,359  82,834 
Deposits 815,495  831,989  811,341  772,416  781,770 
FHLBB advances 54,422  27,364  47,302  52,745  37,188 
Shareholders’ equity 97,514  97,526  96,545  95,221  94,007 
Wealth assets under administration 610,218  594,510  585,759  524,459  516,350 
Discretionary wealth assets under administration 394,673  374,357  374,271  365,086  366,167 
Non-Discretionary wealth assets under administration 215,545  220,153  211,488  159,373  150,183 
Non-performing loans 6,635  8,313  7,835  7,057  8,792 
Non-performing assets 7,354  12,257  11,690  10,890  12,565 
Accruing loans past due 30-89 days 3,536  3,449  2,961  11,689  4,537 
Net interest and dividend income 8,025  7,766  7,661  7,832  7,688 
Net interest and dividend income, tax equivalent 8,231  7,983  7,894  8,093  7,966 
Provision (benefit) for loan losses 67  237  364  352  503 
Non-interest income 2,182  2,080  1,951  2,023  2,326 
Non-interest expense 8,052  7,220  6,751  7,306  7,411 
Income before income taxes 2,088  2,389  2,497  2,197  2,100 
Income tax provision 1,011  695  615  593  580 
Net income 1,077  1,694  1,882  1,604  1,520 
Net income applicable to common shareholders 1,065  1,678  1,867  1,594  1,509 
Per share data     
Basic earnings per common share$0.39 $0.61  $ 0. 68 $0.58  $  0.55 
Diluted earnings per common share 0.38  0.60  0.67  0.58  0.55 
Dividends per common share 0.28  0.28  0.28  0.28  0.28 
Book value per common share 35.01  35.01  34.66  34.38  34.08 
Tangible book value per common share - Non-GAAP⁽¹⁾ 29.39  29.34  28.94  29.26  28.90 
      
Common shares outstanding at end of period 2,785  2,786  2,785  2,770  2,758 
Weighted average common shares outstanding, to calculate basic earnings per share  2,757  2,757  2,757  2,749  2,737 
Weighted average common shares outstanding, to calculate diluted earnings per share  2,778  2,777  2,775  2,768  2,755 
      
Profitability ratios     
Net interest margin (tax equivalent) 3.58% 3.50%  3.58% 3.69% 3.45%
Efficiency ratio⁽²⁾ 64.90  67.18  66.56  68.68  67.08 
Effective income tax rate (3) 48.42  29.09  24.62  27.00  27.62 
Return on average assets 0.43  0.69  0.77  0.70  0.65 
Return on average common shareholders’ equity 4.38  6.89   7.82  6.83  6.43 
      
Credit quality ratios     
Net charge-offs to average loans receivable, gross 0.02% 0.03% 0.02% 0.03% 0.04%
Non-performing loans to loans receivable, gross 0.82  1.05  1.01  0.92  1.16 
Accruing loans past due 30-89 days to loans receivable, gross 0.44  0.44  0.38  1.53  0.60 
Allowance for loan losses to loans receivable, gross 0.84  0.82  0.83  0.82  0.79 
Allowance for loan losses to non-performing loans 102.12  79.30  82.87  89.05  69.43 
Non-performing assets to total assets 0.74  1.25  1.20  1.16  1.34 
      
Capital ratios     
Common shareholders' equity to assets 9.88% 9.96% 9.90% 10.13% 10.05%
Tangible common shareholders' equity to tangible assets - Non-GAAP⁽¹⁾ 8.43  8.48  8.41  8.76  8.64 
Tier 1 leverage capital 8.53  8.49  8.77  8.83  8.69 
Total risk-based capital 12.94  13.20  13.12  13.34  13.26 
Common equity tier 1 capital     10.73  10.96  10.88  11.10  11.02 
 
(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.
(3) The effective tax rate for 4Q 2017 includes the discrete charge related to the remeasurement of net deferred tax assets. Excluding this charge, the effective tax rate for the quarter was 27.12%.
 


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)Q4 2017Q3 2017Q2 2017Q1 2017Q4 2016
      
      
Common Shareholders' Equity$97,514 $97,526 $96,545 $95,221 $  94,007 
Less: Goodwill (13,815) (13,815) (13,827) (12,552) (12,552)
Less: Intangible assets (1,837) (1,974) (2,116) (1,611) (1,737)
Tangible Common Shareholders' Equity$81,862 $81,737 $  80,602 $  81,058 $  79,718 
Total Assets$986,984 $979,469 $  974,806 $  939,549 $ 935,366 
Less: Goodwill (13,815) (13,815) (13,827) (12,552) (12,552)
Less: Intangible assets (1,837) (1,974) (2,116) (1,611) (1,737)
Tangible Total Assets$971,332 $963,680 $  958,863 $  925,386 $ 921,077 
Common Shares outstanding 2,785  2,786  2,785  2,770  2,758 
      
Book value per Common Share – GAAP$35.01 $35.01 $34.66 $34.38 $34.08 
Tangible book value per Common Share - Non-GAAP 29.39  29.34  28.94  29.26  28.90 
      
      
Non-interest expense$8,052 $7,220 $  6,751 $  7,306 $  7,411 
Less: Amortization of core deposit intangibles (138) (142) (126) (126) (146)
Less: Foreclosed property expense including OREO gains, losses and write downs (1,281) (318) (63) (232) (493)
Less: Technology enhancement related expenses -  -  -  -  (155)
Operating Expenses$6,633 $6,760 $  6,562 $  6,948 $  6,617 
Net interest and dividend income, tax equivalent$8,231 $ 7,983 $  7,894 $  8,093 $  7,966 
Non-interest income 2,182  2,080  1,951  2,023  2,326 
Gains on securities (193) -  14  -  (427)
Operating Revenue$10,220 $10,063 $  9,859 $  10,116 $  9,865 
Efficiency Ratio - Non-GAAP 64.90% 67.18% 66.56% 68.68% 67.08%
      


Salisbury Contact: Richard J. Cantele, Jr., President and Chief Executive Officer
860-435-9801 or rcantele@salisburybank.com