Market Overview

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

Share:
  • 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 ended Twelve 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 2017 Q3 2017 Q2 2017 Q1 2017 Q4 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 2017 Q3 2017 Q2 2017 Q1 2017 Q4 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

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