Salisbury Bancorp, Inc. Reports Results for Second Quarter 2018; Declares 28 Cent Dividend

Lakeville, Connecticut, UNITED STATES


  • Second Quarter Net Income of $0.68 per Share
  • Total Assets of $1.1 Billion on Strong Loan Growth
  • Non-performing Assets were 0.58% of Total Assets
  • Wealth Assets Under Administration Increased $68 million to $668 Million

LAKEVILLE, Conn., July 27, 2018 (GLOBE NEWSWIRE) -- Salisbury Bancorp, Inc. (“Salisbury”), (NASDAQ Capital Market: “SAL”), the holding company for Salisbury Bank and Trust Company (the “Bank”), announced results for its second quarter ended June 30, 2018.

Net income allocated to common shareholders was $1.9 million, or $0.68 per common share, for the quarter ended June 30, 2018 (second quarter 2018), compared with $2.0 million, or $0.72 per common share, for the first quarter ended March 31, 2018 (first quarter 2018), and $1.9 million, or $0.68 per common share, for the second quarter ended June 30, 2017 (second quarter 2017).

Salisbury’s President and Chief Executive Officer, Richard J. Cantele, Jr., stated, “We continued to generate solid earnings on robust loan growth despite extremely competitive markets and a challenging interest rate environment. The credit quality of our loan portfolio remains strong as we continue to prudently capitalize on the strength of our commercial and residential lending franchise. During the quarter we also completed the acquisition of the Fishkill, N. Y. branch of Orange Bank & Trust Company and consolidated our existing Fishkill branch into this new location. We remain focused on enhancing long-term value for our shareholders and providing outstanding service to our customers.”

Net-Interest Income

Tax equivalent net interest income for the second quarter 2018 increased $43 thousand, or 0.5%, versus first quarter 2018, and increased $262 thousand, or 3.3%, versus second quarter 2017. Average earning assets increased $46.6 million versus second quarter 2018, and increased $102.8 million versus second quarter 2017. Average total interest bearing deposits increased $25.6 million versus first quarter 2018 and increased $55.4 million versus second quarter 2017. The increase in average interest bearing deposits from the first quarter 2018 partly reflected the acquisition of the Fishkill, N.Y. branch in April 2018, which increased deposits by approximately $8 million. The increase in average interest bearing deposits from the second quarter 2017 partly reflected the acquisition of the New Paltz, N.Y. branch in June 2017, which increased deposits by approximately $31 million. The tax equivalent net interest margin for the second quarter 2018 was 3.31% compared with 3.46% for the first quarter 2018 and 3.58% for the second quarter 2017.

Non-Interest Income

Non-interest income for second quarter 2018 increased $84 thousand versus first quarter 2018 and increased $107 thousand versus second quarter 2017.

Trust and Wealth Advisory fees increased $55 thousand versus first quarter 2018 and increased $57 thousand versus second quarter 2017. The quarter-over-quarter increase reflected higher tax preparation and estate settlement fees partly offset by lower asset-based fees. The year-over-year increase primarily reflected higher asset-based fees and higher estate settlement fees. Assets under administration were $668 million as of June 30, 2018 compared with $600 million at March 31, 2018 and $586 million as of June 30, 2017. The increase from the first quarter 2018 was primarily attributed to growth in non-discretionary assets and, to a lesser extent, growth in discretionary assets. 

Service charges and fees increased $24 thousand versus first quarter 2018 and decreased $10 thousand versus second quarter 2017. The increase from the first quarter 2018 primarily reflected higher interchange fees whereas the decrease versus second quarter 2017 reflected higher interchange fees, which were offset by lower deposit and other fees.

Income from sales and servicing of mortgage loans decreased $18 thousand versus first quarter 2018 and increased $22 thousand versus second quarter 2017. No mortgage loans were sold during the second quarter 2018 compared with sales of $0.7 million for first quarter 2018, and $1.6 million for second quarter 2017. The increase versus second quarter 2017 primarily reflected lower amortization for mortgage servicing rights in the second quarter 2018. Second quarter 2018, first quarter 2018, and second quarter 2017 included mortgage servicing amortization and periodic impairment charges (net) of $11 thousand, $11 thousand, and $68 thousand, respectively.

Realized gains / (losses) on the sale of securities were $30 thousand for the second quarter 2018 compared with $(15) thousand for the first quarter 2018 and $(14) thousand for the second quarter 2017. Losses on an investment in a CRA mutual fund were $(20) thousand in the second quarter 2018. Prior to first quarter 2018, unrealized gains and losses on equity investments were included in shareholders’ equity.

Non-Interest Expense

Non-interest expense for second quarter 2018 increased $238 thousand versus first quarter 2018 and increased $666 thousand versus second quarter 2017. 

Total compensation expense decreased $97 thousand versus first quarter 2018 as higher salary expense, reflecting higher production accruals, was offset by lower payroll taxes and lower benefits expense and higher deferred expenses related to loan originations. Total compensation expenses year-over-year increased by $409 thousand primarily reflecting higher base salaries and higher production accruals, reflecting higher loan origination volume, and higher ESOP, 401K and deferred compensation expense.

Premises and equipment expense increased $77 thousand versus first quarter 2018 and increased $194 thousand versus second quarter 2017. The increase from the first quarter 2018 primarily reflected operating costs related to the new Newburgh and Fishkill, N.Y. branches and the relocation and consolidation of existing branches into those new locations. The year-over-year increase primarily reflected lease and depreciation expense as well as other operating costs associated with the new Newburgh and Fishkill, N.Y. branches as well the New Paltz, N.Y. branch, which was acquired in June 2017.

Data processing expenses, which also include data communications, increased $70 thousand versus first quarter 2018 and increased $52 thousand versus second quarter 2017. The increase from the first quarter 2018 reflected higher core system and Trust & Wealth related data processing charges. The year over year increase primarily reflected higher core system charges and higher data communications expenses, partly offset by lower Trust & Wealth related data processing charges.

Professional fees decreased $8 thousand versus first quarter 2018, and decreased $153 thousand versus second quarter 2017. The decline from the first quarter 2018 primarily reflected lower investment management and audit accruals. The decline from the second quarter 2017 primarily reflected lower audit accruals and lower consultation fees. The second quarter 2018 also included one-time legal and consultation costs of approximately $75 thousand related to the acquisition of the Fishkill, N.Y. branch from Orange Bank & Trust Company.

Loan related expenses increased $101 thousand compared to first quarter 2018 and increased $81 thousand versus second quarter 2017. The increase over both comparable periods was primarily driven by higher OREO carrying costs, delinquent taxes paid on properties in the foreclosure process and appraisal costs.

The effective income tax rates for second quarter 2018, first quarter 2018 and second quarter 2017 were 14.4%, 18.1% and 24.62%, respectively. The decline in the effective income tax rate from the first quarter 2018 primarily reflected the impact of permanent items on lower taxable income. The decline in the effective income tax rate from the second quarter 2017 primarily reflected the enactment of the new U.S. tax law during the fourth quarter of 2017.

Loans

Gross loans receivable increased $42.7 million during second quarter 2018 to $880.2 million at June 30, 2018, compared with $837.4 million at March 31, 2018, and increased $101.8 million from $771.9 million at June 30, 2017. Residential real estate loans increased $15.5 million during second quarter 2018 to $407.1 million, and increased $37.6 million from second quarter 2017. Commercial real estate loans increased $11.6 million during second quarter 2018 to $283.9 million, and increased $31.0 million from second quarter 2017. Commercial and Industrial loans increased $13.6 million from first quarter 2018 to $150.9 million, and increased $25.3 million from second quarter 2017.

The allowance for loan losses for second quarter 2018 was $7.4 million compared with $7.1 million for first quarter 2018 and $6.5 million for second quarter 2017.

Asset Quality

Non-performing assets increased $0.6 million during second quarter 2018 to $6.4 million, or 0.58% of assets at June 30, 2018, from $5.8 million, or 0.57% of assets at March 31, 2018, and decreased $5.3 million from $11.7 million, or 1.20% of assets, at June 30, 2017.

The amount of total impaired and potential problem loans increased $0.3 million during the second quarter to $23.3 million (2.7% of gross loans receivable), compared to $23.0 million, or 2.8% of gross loans receivable at March 31, 2018, and increased $1.0 million from $22.3 million, or 2.9% of gross loans receivable at June 30, 2017.  

Accruing loans receivable 30-to-89 days past due decreased $1.9 million during second quarter 2018 to $1.5 million, or 0.17% of gross loans receivable, from $3.4 million, or 0.40% of gross loans receivable at March 31, 2018, and decreased $1.5 million from $3.0 million, or 0.38% of gross loans receivable at June 30, 2017.

Provision for loan loss expense was $467 thousand for second quarter 2018 versus $326 thousand for first quarter 2018, and $364 thousand for second quarter 2017. The increase in the provision from both comparable periods primarily reflected the growth in the portfolio. Net loan charge-offs were $144 thousand for the second quarter 2018, $43 thousand for first quarter 2018 and $155 thousand for the second quarter 2017. Reserve coverage, as measured by the ratio of the allowance for loan losses to gross loans, was 0.84% for the second quarter 2018, versus 0.84% for first quarter 2018 and 0.83% for second quarter 2017.

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 $0.18 during the second quarter to $35.38 per share and increased $0.72 from the second quarter 2017. Tangible book value per common share increased $0.25 during second quarter 2018 to $29.88 and increased $0.94 from the second quarter 2017.

Shareholders’ equity increased $1.1 million in second quarter 2018 to $99.2 million at June 30, 2018 as net income of $1.9 million and the issuance of restricted stock awards of $0.2 million was partly offset by common stock dividends paid of $0.8 million and unrealized losses in the AFS portfolio of $0.2 million.  

The Bank’s regulatory capital ratios remain in compliance with regulatory “well capitalized” requirements. At June 30, 2018, Salisbury’s Tier 1 leverage, total risk-based capital, and common equity tier 1 capital ratios were 8.30%, 12.27%, and 10.18%, respectively. The Bank’s Tier 1 leverage, total risk-based capital, and common equity tier 1 capital ratios were 8.98%, 11.92%, and 11.02%, respectively, compared with regulatory “well capitalized” minimums of 5.00%, 10.00%, and 6.5%, respectively.

Second Quarter 2018 Dividends on Common Shares

The Board of Directors of Salisbury declared a $0.28 per common share quarterly cash dividend at its July 27, 2018 meeting. The dividend will be paid on August 31, 2018 to shareholders of record as of August 17, 2018.

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, 2018
(unaudited)
December 31, 2017
ASSETS  
Cash and due from banks$  5,953 $  9,357 
Interest bearing demand deposits with other banks  71,520  39,129 
Total cash and cash equivalents 77,473  48,486 
Securities  
  Available-for-sale at fair value 85,057  78,212 
  CRA mutual fund 825  835 
  Federal Home Loan Bank of Boston stock at cost 4,988  3,813 
Loans held-for-sale 206  669 
Loans receivable, net (allowance for loan losses: $7,381 and $6,776) 872,796  801,703 
Other real estate owned 478  719 
Bank premises and equipment, net 18,811  16,401 
Goodwill 13,815  13,815 
Intangible assets (net of accumulated amortization: $4,279 and $4,043) 1,601  1,837 
Accrued interest receivable 3,025  2,665 
Cash surrender value of life insurance policies 14,544  14,381 
Deferred taxes 1,101  677 
Other assets 2,060  2,771 
Total Assets$1,096,780 $986,984 
LIABILITIES and SHAREHOLDERS' EQUITY  
Deposits  
  Demand (non-interest bearing)$  215,149 $  220,536 
  Demand (interest bearing) 147,120  142,575 
  Money market 228,918  190,953 
  Savings and other 172,701  144,600 
  Certificates of deposit 133,593  116,831 
  Total deposits 897,481  815,495 
Repurchase agreements 1,691  1,668 
Federal Home Loan Bank of Boston advances 79,538  54,422 
Subordinated debt 9,823  9,811 
Note payable 297  313 
Capital lease liability 3,147  1,835 
Accrued interest and other liabilities 5,623  5,926 
Total Liabilities 997,600  889,470 
Shareholders' Equity  
Common stock - $.10 per share par value  
Authorized: 5,000,000;  
Issued: 2,885,788 and 2,872,578  
Outstanding: 2,803,126 and 2,785,216 280  279 
Unearned compensation - restricted stock awards (983) (606)
Paid-in capital 43,727  42,998 
Retained earnings 57,002  54,664 
 Accumulated other comprehensive (loss) income, net (846) 179 
Total Shareholders' Equity 99,180   97,514 
Total Liabilities and Shareholders' Equity$  1,096,780 $  986,984 


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) 2018   2017   2018   2017  
Interest and dividend income    
Interest and fees on loans$  9,007 $8,126 $  17,656 $16,347 
Interest on debt securities    
  Taxable 532    354    992    672 
  Tax exempt 29    113    61    277 
Other interest and dividends 181    94    340    176 
  Total interest and dividend income 9,749    8,687    19,049  17,472 
Interest expense    
Deposits 997    578    1,774    1,094 
Repurchase agreements 1    1    3    1 
Capital lease 48    20    83    37 
Note payable 4    5    9    7 
Subordinated debt 156    156    312    312 
Federal Home Loan Bank of Boston advances 500    266    833    528 
  Total interest expense 1,706    1,026    3,014    1,979 
Net interest and dividend income 8,043    7,661    16,035  15,493 
Provision for loan losses 467    364    793    716 
  Net interest and dividend income after provision for loan losses 7,576    7,297    15,242    14,777 
Non-interest income    
Trust and wealth advisory 949    892    1,843    1,746 
Service charges and fees 892    902    1,760    1,863 
Gains on sales of mortgage loans, net (1)   30    17    79 
Mortgage servicing, net 84    31    167    76 
Losses on CRA mutual fund (20) -  (20) - 
Gain (losses) on available-for-sale securities, net 30  (14) 16  (14)
Other  124    110    249    223 
  Total non-interest income 2,058    1,951    4,032    3,973 
Non-interest expense    
Salaries 2,939    2,668    5,785    5,437 
Employee benefits 969    831    2,128    1,919 
Premises and equipment 1,101    907    2,125    1,802 
Data processing 556    504    1,042    977 
Professional fees 611    764    1,230    1,481 
OREO gains, losses and writedowns 1    -     53    144 
Collections, OREO, and loan related 235    155    316    312 
FDIC insurance 123    98    253    247 
Marketing and community support 222    152    463    403 
Amortization of intangibles 116    126    236    252 
Other 544    546    965    1,081 
  Total non-interest expense 7,417    6,751    14,596    14,055 
Income before income taxes 2,217    2,497    4,678    4,695 
Income tax provision 318    615    763    1,208 
Net income$  1,899 $1,882 $  3,915 $3,487 
Net income allocated to common shareholders$  1,877 $  1,867 $  3,873 $  3,461 
     
Basic earnings per common share$  0.68 $  0.68 $  1.40 $  1.26 
Diluted earnings per common share 0.68  0.67  1.39  1.25 
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 2018   Q1 2018   Q4 2017 Q3 2017   Q2 2017   
Total assets$1,096,780 $1,014,934 $986,984 $979,469 $974,806 
Loans receivable, net 872,796  830,370  801,703  784,136  771,850 
Total securities 90,870  84,878  82,860  88,546  84,468 
Deposits 897,481  831,837  815,495  831,989  811,341 
FHLBB advances 79,538  62,480  54,422  27,364  47,302 
Shareholders’ equity 99,180  98,097  97,514  97,526  96,545 
Wealth assets under administration 667,933  600,256  610,218  594,510  585,759 
Discretionary wealth assets under administration 397,637  390,248  394,673  374,357  374,271 
Non-Discretionary wealth assets under administration 270,296  210,008  215,545  220,153  211,488 
Non-performing loans 5,881  5,094  6,635  8,313  7,835 
Non-performing assets 6,359  5,761  7,354  12,257  11,690 
Accruing loans past due 30-89 days 1,507  3,362  3,536  3,449  2,961 
Net interest and dividend income 8,043  7,994  8,025  7,766  7,661 
Net interest and dividend income, tax equivalent 8,155  8,112  8,231  7,983  7,894 
Provision for loan losses 467  326  67  237  364 
Non-interest income 2,058  1,974  2,182  2,080  1,951 
Non-interest expense 7,417  7,182  8,052  7,220  6,751 
Income before income taxes 2,217  2,460  2,088  2,389  2,497 
Income tax provision 318  445  1,011  695  615 
Net income 1,899  2,015  1,077  1,694  1,882 
Net income applicable to common shareholders 1,877  1,995  1,065  1,678  1,867 
Per share data     
Basic earnings per common share$0.68 $0.72 $0.39 $0.61 $0. 68 
Diluted earnings per common share 0.68  0.72  0.38  0.60  0.67 
Dividends per common share 0.28  0.28  0.28  0.28  0.28 
Book value per common share 35.38  35.20  35.01  35.01  34.66 
Tangible book value per common share - Non-GAAP(1) 29.88  29.63  29.39  29.34  28.94 
      
Common shares outstanding at end of period (in thousands) 2,803  2,787  2,785  2,786  2,785 
Weighted average common shares outstanding, to calculate basic earnings per share (in thousands) 2,761  2,759  2,757  2,757  2,757 
Weighted average common shares outstanding, to calculate diluted earnings per share (in thousands) 2,779  2,780  2,778  2,777  2,775 
      
Profitability ratios     
Net interest margin (tax equivalent) 3.31% 3.46% 3.58% 3.50%  3.58%
Efficiency ratio(2) 70.87  69.35  64.90  67.18  66.56 
Effective income tax rate(3) 14.35  18.09  48.42  29.09  24.62 
Return on average assets 0.69  0.81  0.43  0.69  0.77 
Return on average common shareholders’ equity 7.68  8.33  4.38  6.89   7.82 
      
Credit quality ratios     
Non-performing loans to loans receivable, gross 0.67  0.61  0.82  1.05  1.01 
Accruing loans past due 30-89 days to loans receivable, gross 0.17  0.40  0.44  0.44  0.38 
Allowance for loan losses to loans receivable, gross 0.84  0.84  0.84  0.82  0.83 
Allowance for loan losses to non-performing loans 125.51  138.56  102.12  79.30  82.87 
Non-performing assets to total assets 0.58  0.57  0.74  1.25  1.20 
      
Capital ratios     
Common shareholders' equity to assets 9.04% 9.67% 9.88% 9.96% 9.90%
Tangible common shareholders' equity to tangible assets - Non-GAAP(1) 7.75  8.26  8.43  8.48  8.41 
Tier 1 leverage capital 8.30  8.56  8.53  8.49  8.77 
Total risk-based capital 12.27  12.70  12.94  13.20  13.12 
Common equity tier 1 capital    10.18  10.54  10.73  10.96  10.88 

(1) Refer to schedule labeled “Supplemental Information – Non-GAAP Financial Measures”.
(2) Calculated using S&P Global’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 included 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)Q2 2018Q1 2018Q4 2017Q3 2017Q2 2017
      
      
Common Shareholders' Equity$99,180 $98,097 $97,514 $97,526 $96,545 
Less: Goodwill (13,815) (13,815) (13,815) (13,815) (13,827)
Less: Intangible assets (1,601) (1,716) (1,837) (1,974) (2,116)
Tangible Common Shareholders' Equity$83,764 $82,566 $81,862 $81,737 $  80,602 
Total Assets$1,096,780 $1,014,934 $986,984 $979,469 $  974,806 
Less: Goodwill (13,815) (13,815) (13,815) (13,815) (13,827)
Less: Intangible assets (1,601) (1,716) (1,837) (1,974) (2,116)
Tangible Total Assets$1,081,364 $999,403 $971,332 $963,680 $  958,863 
Common Shares outstanding 2,803  2,787  2,785  2,786  2,785 
      
Book value per Common Share – GAAP$35.38 $35.20 $35.01 $35.01 $34.66 
Tangible book value per Common Share - Non-GAAP 29.88  29.63  29.39  29.34  28.94 
      
      
Non-interest expense$7,417 $7,182 $8,052 $7,220 $  6,751 
Less: Amortization of core deposit intangibles (116) (120) (138) (142) (126)
Less: Foreclosed property expense including OREO gains, losses and write downs (71) (56) (1,281) (318) (63)
Operating Expenses$7,230 $7,006 $6,633 $6,760 $  6,562 
Net interest and dividend income, tax equivalent$8,155 $8,112 $8,231 $7,983 $  7,894 
Non-interest income 2,058  1,974  2,182  2,080  1,951 
Gains (losses) on securities (11) 15  (193) -  14 
Operating Revenue$10,202 $10,101 $10,220 $10,063 $  9,859 
Efficiency Ratio - Non-GAAP 70.87% 69.35% 64.90% 67.18% 66.56%
      

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

Source: Salisbury Bancorp, Inc.