Market Overview

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

Share:
  • First Quarter Net Income of $0.72 per Share
  • Total Assets Top $1.0 Billion on Strong Loan Growth
  • Non-performing Assets Improved to 0.57% of Total Assets from 0.74% at December 31, 2017
  • Wealth Assets Under Administration of $600 Million

LAKEVILLE, Conn., April 27, 2018 (GLOBE NEWSWIRE) -- Salisbury Bancorp, Inc. ("Salisbury"), (NASDAQ:SAL), the holding company for Salisbury Bank and Trust Company (the "Bank"), announced results for its first quarter ended March 31, 2018.

Net income available to common shareholders was $2.0 million, or $0.72 per common share, for Salisbury's first quarter ended March 31, 2018 (first quarter 2018), compared with $1.1 million, or $0.39 per common share, for the fourth quarter ended December 31, 2017 (fourth quarter 2017), and $1.6 million, or $0.58 per common share, for the first quarter ended March 31, 2017 (first quarter 2017).

Salisbury's President and Chief Executive Officer, Richard J. Cantele, Jr., stated, "We posted strong results for the quarter, which included solid loan growth and continued improvements in credit quality. During the quarter we also relocated our Newburgh branch to an improved location that will allow us to better serve our existing and new clients. Additionally, in April 2018, we completed the acquisition of the Fishkill, New York branch of Orange Bank & Trust Company and we consolidated our existing Fishkill branch into this new location. We continue to remain focused on enhancing shareholder value and providing outstanding service to our customers."

Net Interest Income

Tax equivalent net interest income for the first quarter 2018 decreased $119 thousand, or 1.4%, versus fourth quarter 2017, and increased $19 thousand, or 0.2%, versus first quarter 2017. Average earning assets increased $20.6 million versus fourth quarter 2017, and increased $59.6 million versus first quarter 2017. Average total interest bearing deposits increased $1.7 million versus fourth quarter 2017 and increased $37.0 million versus first quarter 2017. The increase in average interest bearing deposits from the prior year first quarter reflected the acquisition of the New Paltz branch in June 2017, which increased deposits by approximately $31 million. The tax equivalent net interest margin for the first quarter 2018 was 3.51% compared with 3.58% for the fourth quarter 2017 and 3.69% for the first quarter 2017.

Non-Interest Income

Non-interest income for first quarter 2018 decreased $207 thousand versus fourth quarter 2017 and decreased $49 thousand versus first quarter 2017. The fourth quarter 2017 included gains of $193 thousand on the sale of available-for-sale securities compared with losses of $15 thousand in the first quarter 2018.

Trust and Wealth Advisory revenues increased $37 thousand versus fourth quarter 2017 and increased $40 thousand versus first quarter 2017. The increases primarily reflected higher asset management fees.

Service charges and fees decreased $51 thousand versus fourth quarter 2017, and decreased $94 thousand versus first quarter 2017. The declines from both comparative periods primarily reflected lower ATM, deposit and loan related fees.

Income from mortgage sales and servicing increased $5 thousand versus fourth quarter 2017 and increased $7 thousand versus first quarter 2017. The increase from the fourth quarter 2017 primarily reflected lower amortization expense on mortgage servicing rights. The increase from the first quarter 2017 reflected lower amortization expense on mortgage servicing rights which was mostly offset by lower gains on the sale of mortgages, due to a reduction in volume, and lower mortgage servicing income.

Non-Interest Expense

Non-interest expense for the first quarter 2018 included OREO charges of $52 thousand compared with $1.4 million in the fourth quarter 2017 and $144 thousand in the first quarter 2017. Excluding OREO charges, non-interest expense for first quarter 2018 increased $433 thousand versus fourth quarter 2017 and decreased $32 thousand versus first quarter 2017. Compensation expense increased $292 thousand versus fourth quarter 2017, and increased $148 thousand versus first quarter 2017. The increase from the fourth quarter 2017 primarily reflected higher benefits expense and payroll taxes partly offset by lower salary expense. The increase from the first quarter 2017 reflected higher salary, benefits and payroll tax expenses.

Premises and equipment costs decreased $10 thousand versus fourth quarter 2017 and increased $129 thousand versus first quarter 2017.  The decrease from the fourth quarter 2017 reflected lower software and depreciation expense, partly offset by higher real estate taxes. The increase from the first quarter 2017 reflected higher lease expense, resulting from the acquisition of the New Paltz branch, higher software maintenance expense, and higher real estate taxes. Data processing expenses, which also include data communications related expenses, decreased $50 thousand versus fourth quarter 2017 and increased $14 thousand versus first quarter 2017. The decrease from the fourth quarter 2017 reflected lower Trust department data processing expenses and lower ATM and debit card network expenses.

Professional fees increased $82 thousand versus fourth quarter 2017 and decreased $98 thousand versus first quarter 2017. The increase from the fourth quarter 2017 was attributed to higher consultation, investment management and legal fees, which were partly offset by a reduction in internal audit expense. The decrease from the prior year first quarter primarily reflected lower internal audit and legal expenses partly offset by higher external audit and exam expenses.

Loan related expenses increased $133 thousand versus the fourth quarter 2017 and decreased $75 thousand compared with the first quarter 2017. The fourth quarter 2017 included a reversal of accruals for OREO carrying costs and the delinquent real estate taxes on OREO properties. The decrease from the first quarter 2017 reflected lower OREO carrying costs.

The effective income tax rates for first quarter 2018, fourth quarter 2017 and first quarter 2017 were 18.1%, 48.4% and 27.0%, respectively. The lower tax rate for first quarter 2018 reflected the reduction in the federal statutory rate from 34% to 21% as a result of the Federal Tax Cuts and Jobs Act enacted in December 2017. Excluding the discrete charge in the fourth quarter 2017 related to the remeasurement of net deferred tax assets as a result of this tax law change, the effective tax rate for the fourth quarter was 27.12%.

Loans

Net loans receivable increased $66 million, or 9% from $765 million as of the first quarter 2017 to $830 million at March 31, 2018, and increased $29 million, or 4% from $802 million at December 31, 2017.

Asset Quality

Non-performing assets decreased $1.6 million during the first quarter 2018 to $5.8 million, or 0.57% of assets at March 31, 2018, from $7.4 million, or 0.74% of assets at December 31, 2017, and decreased $5.1 million from $10.9 million, or 1.16% of assets, at March 31, 2017. The decrease in non-performing assets from the fourth quarter of 2017 reflected the payoff of certain non-performing loans.    

The amount of total impaired and potential problem loans were $23.0 million or 2.75% of gross loans receivable at March 31, 2018 compared to $23.9 million, or 2.97% of gross loans receivable at December 31, 2017 and $21.5 million, or 2.79% of gross loans receivable at March 31, 2017.

Accruing loans receivable 30-to-89 days past due were $3.4 million or 0.40% of gross loans receivable at March 31, 2018 compared to $3.5 million, or 0.44% of gross loans receivable at December 31 2017, and $11.9 million, or 1.55% of gross loans receivable at March 31, 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.

The provision for loan loss expense was $326 thousand for first quarter 2018 compared with $67 thousand for fourth quarter 2017 and $352 thousand for the first quarter 2017. The increase from the prior year fourth quarter primarily reflected higher recoveries received in the fourth quarter of 2017, which reduced the need for additional provision expense in that quarter. Net loan charge-offs (recoveries) were $43 thousand for the first quarter 2018, $(214) thousand for fourth quarter 2017 and $194 thousand for the first quarter 2017. Reserve coverage, as measured by the ratio of the allowance for loan losses to gross loans, was 0.84% for the first quarter 2018, versus 0.84% for the fourth quarter 2017 and 0.82% for the first quarter 2017. Similarly, reserve coverage, as measured by the ratio of the allowance for loan losses to non-performing loans was 139% for the first quarter of 2018, versus 102% for the fourth quarter of 2017 and 89% for the first quarter of 2017.

Capital

Shareholders' equity was $98.1 million at March 31, 2018 and book value and tangible book value were $35.20 and $29.63, 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 March 31, 2018, Salisbury's tier 1 leverage, total risk-based capital, and common equity tier 1 capital ratios were 8.56%, 12.70%, and 10.54%, respectively. The Bank's tier 1 leverage, total risk-based capital, and common equity tier 1 capital ratios were 9.27%, 12.32%, and 11.42%, respectively, compared with regulatory "well capitalized" minimums of 5.00%, 10.00%, and 6.5%, respectively.

Dividends on Common Shares

The Board of Directors of Salisbury declared a $0.28 per common share quarterly cash dividend at their April 27, 2018 meeting. Such dividend will be paid on May 25, 2018 to shareholders of record as of May 11, 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) March 31, 2018 December 31, 2017
ASSETS    
Cash and due from banks $   5,781   $   9,357  
Interest bearing demand deposits with other banks   39,198     39,129  
Total cash and cash equivalents   44,979     48,486  
Securities    
  Available-for-sale at fair value   80,732     79,047  
  Federal Home Loan Bank of Boston stock at cost   4,146     3,813  
Loans held-for-sale   -     669  
Loans receivable, net (allowance for loan losses: $7,058 and $6,776)   830,370     801,703  
Other real estate owned   667     719  
Bank premises and equipment, net   18,197     16,401  
Goodwill   13,815     13,815  
Intangible assets (net of accumulated amortization: $4,164 and $4,043)   1,716     1,837  
Accrued interest receivable   2,704     2,665  
Cash surrender value of life insurance policies   14,462     14,381  
Deferred taxes   905     677  
Other assets   2,241     2,771  
  Total Assets $ 1,014,934   $ 986,984  
LIABILITIES and SHAREHOLDERS' EQUITY    
Deposits    
  Demand (non-interest bearing) $   220,796   $   220,536  
  Demand (interest bearing)   146,312     142,575  
  Money market   185,955     190,953  
  Savings and other   155,630     144,600  
  Certificates of deposit   123,144     116,831  
  Total deposits   831,837     815,495  
Repurchase agreements   3,962     1,668  
Federal Home Loan Bank of Boston advances   62,480     54,422  
Subordinated Debt   9,817     9,811  
Note payable   305     313  
Capital lease liability   3,179     1,835  
Accrued interest and other liabilities   5,257     5,926  
  Total Liabilities   916,837     889,470  
Shareholders' Equity    
  Common stock - $.10 per share par value    
  Authorized: 5,000,000;    
  Issued: 2,872,578 and 2,872,578    
  Outstanding: 2,786,566 and 2,785,216   279     279  
Unearned compensation - restricted stock awards   (493 )   (606 )
  Paid-in capital   43,040     42,998  
  Retained earnings   55,883     54,664  
  Accumulated other comprehensive (loss) income, net   (612 )   179  
  Total Shareholders' Equity   98,097     97,514  
  Total Liabilities and Shareholders' Equity $   1,014,934   $   986,984  


 
Salisbury Bancorp, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF INCOME (unaudited) 
   
Periods ended March 31, Three months ended
(in thousands, except per share amounts)   2018     2017
Interest and dividend income    
Interest and fees on loans $   8,649   $ 8,221
Interest on debt securities    
  Taxable     460       317
  Tax exempt     32       164
Other interest and dividends     159       83
  Total interest and dividend income     9,300       8,785
Interest expense    
Deposits      777       515
Repurchase agreements     1       1
Capital lease     35       17
Note payable     5       2
Subordinated Debt     156       156
Federal Home Loan Bank of Boston advances     332       262
  Total interest expense     1,306       953
Net interest and dividend income     7,994       7,832
Provision for loan losses     326       352
  Net interest and dividend income after provision for loan losses     7,668       7,480
Non-interest income    
Trust and wealth advisory     894       854
Service charges and fees     868       962
Gains on sales of mortgage loans, net     18       49
Mortgage servicing, net     83       45
Loss on sales of available -for-sale- securities, net     (15 )     - 
Other      126       113
  Total non-interest income     1,974       2,023
Non-interest expense    
Salaries     2,846       2,769
Employee benefits     1,159       1,088
Premises and equipment     1,024       895
Data processing     486       472
Professional fees     619       717
OREO gains, losses and write-downs     52     144
Collections, OREO carrying costs, and loan related   82       157
FDIC insurance     130       149
Marketing and community support     242       251
Amortization of intangibles     120       126
Other     422       538
  Total non-interest expense     7,182       7,306
Income before income taxes     2,460       2,197
Income tax provision     445       593
Net income $   2,015   $ 1,604
Net income applicable to common shareholders $   1,995   $ 1,594
     
Basic earnings per common share $   0.72   $   0.58
Diluted earnings per common share     0.72     0.58
Common dividends per share     0.28     0.28
     


 
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) Q1 2018 Q4 2017 Q3 2017 Q2 2017 Q1 2017
Total assets $ 1,014,934   $ 986,984   $ 979,469   $ 974,806   $ 939,549  
Loans receivable, net   830,370     801,703     784,136     771,850     764,665  
Total securities   84,878     82,860     88,546     84,468     80,359  
Deposits   831,837     815,495     831,989     811,341     772,416  
FHLBB advances   62,480     54,422     27,364     47,302     52,745  
Shareholders' equity   98,097     97,514     97,526     96,545     95,221  
Wealth assets under administration   600,256     610,218     594,510     585,759     524,459  
  Discretionary wealth assets under administration   390,248     394,673     374,357     374,271     365,086  
  Non-Discretionary wealth assets under administration   210,008     215,545     220,153     211,488     159,373  
Non-performing loans   5,094     6,635     8,313     7,835     7,057  
Non-performing assets   5,761     7,354     12,257     11,690     10,890  
Accruing loans past due 30-89 days   3,362     3,536     3,449     2,961     11,689  
Net interest and dividend income   7,994     8,025     7,766     7,661     7,832  
Net interest and dividend income, tax equivalent   8,112     8,231     7,983     7,894     8,093  
Provision (benefit) for loan losses   326     67     237     364     352  
Non-interest income   1,974     2,182     2,080     1,951     2,023  
Non-interest expense   7,182     8,052     7,220     6,751     7,306  
Income before income taxes   2,460     2,088     2,389     2,497     2,197  
Income tax provision   445     1,011     695     615     593  
Net income   2,015     1,077     1,694     1,882     1,604  
Net income applicable to common shareholders   1,995     1,065     1,678     1,867     1,594  
Per share data          
Basic earnings per common share $ 0.72   $ 0.39   $ 0.61   $ 0. 68   $ 0.58  
Diluted earnings per common share   0.72     0.38     0.60     0.67     0.58  
Dividends per common share   0.28     0.28     0.28     0.28     0.28  
Book value per common share   35.20     35.01     35.01     34.66     34.38  
Tangible book value per common share - Non-GAAP⁽¹⁾   29.63     29.39     29.34     28.94     29.26  
           
Common shares outstanding at end of period (in thousands)   2,787     2,785     2,786     2,785     2,770  
Weighted average common shares outstanding, to calculate basic earnings per share (in thousands)   2,759     2,757     2,757     2,757     2,749  
Weighted average common shares outstanding, to calculate diluted earnings per share (in thousands)   2,780     2,778     2,777     2,775     2,768  
           
Profitability ratios          
Net interest margin (tax equivalent)   3.51 %   3.58 %   3.50 %    3.58 %   3.69 %
Efficiency ratio⁽²⁾   69.35     64.90     67.18     66.56     68.68  
Effective income tax rate (3)   18.09     48.42     29.09     24.62     27.00  
Return on average assets   0.81     0.43     0.69     0.77     0.70  
Return on average common shareholders' equity   8.33     4.38     6.89      7.82     6.83  
           
Credit quality ratios          
Non-performing loans to loans receivable, gross   0.61     0.82     1.05     1.01     0.92  
Accruing loans past due 30-89 days to loans receivable, gross   0.40     0.44     0.44     0.38     1.53  
Allowance for loan losses to loans receivable, gross   0.84     0.84     0.82     0.83     0.82  
Allowance for loan losses to non-performing loans   138.56     102.12     79.30     82.87     89.05  
Non-performing assets to total assets   0.57     0.74     1.25     1.20     1.16  
           
Capital ratios          
Common shareholders' equity to assets   9.67 %   9.88 %   9.96 %   9.90 %   10.13 %
Tangible common shareholders' equity to tangible assets - Non-GAAP⁽¹⁾   8.26     8.43     8.48     8.41     8.76  
Tier 1 leverage capital   8.56     8.53     8.49     8.77     8.83  
Total risk-based capital   12.70     12.94     13.20     13.12     13.34  
Common equity tier 1 capital      10.54     10.73     10.96     10.88     11.10  


     
(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) Q1 2018 Q4 2017 Q3 2017 Q2 2017 Q1 2017
           
           
Common Shareholders' Equity $ 98,097   $ 97,514   $ 97,526   $ 96,545   $ 95,221  
Less: Goodwill   (13,815 )   (13,815 )   (13,815 )   (13,827 )   (12,552 )
Less: Intangible assets   (1,716 )   (1,837 )   (1,974 )   (2,116 )   (1,611 )
Tangible Common Shareholders' Equity $ 82,566   $ 81,862   $ 81,737   $   80,602   $   81,058  
Total Assets $ 1,014,934   $ 986,984   $ 979,469   $   974,806   $   939,549  
Less: Goodwill   (13,815 )   (13,815 )   (13,815 )   (13,827 )   (12,552 )
Less: Intangible assets   (1,716 )   (1,837 )   (1,974 )   (2,116 )   (1,611 )
Tangible Total Assets $ 999,403   $ 971,332   $ 963,680   $   958,863   $   925,386  
Common Shares outstanding   2,787     2,785     2,786     2,785     2,770  
           
Book value per Common Share – GAAP $ 35.20   $ 35.01   $ 35.01   $ 34.66   $ 34.38  
Tangible book value per Common Share - Non-GAAP   29.63     29.39     29.34     28.94     29.26  
           
           
Non-interest expense $ 7,182   $ 8,052   $ 7,220   $   6,751   $   7,306  
Less: Amortization of core deposit intangibles   (120 )   (138 )   (142 )   (126 )   (126 )
Less: Foreclosed property expense including OREO gains, losses and write downs   (56 )   (1,281 )   (318 )   (63 )   (232 )
Operating Expenses $ 7,006   $ 6,633   $ 6,760   $   6,562   $   6,948  
Net interest and dividend income, tax equivalent $ 8,112   $ 8,231   $ 7,983   $   7,894   $   8,093  
Non-interest income   1,974     2,182     2,080     1,951     2,023  
Losses (gains) on securities   15     (193 )   -     14     -  
Operating Revenue $ 10,101   $ 10,220   $ 10,063   $   9,859   $   10,116  
Efficiency Ratio - Non-GAAP   69.35 %   64.90 %   67.18 %   66.56 %   68.68 %
           

Source: Salisbury Bancorp, Inc.  

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

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