SBT Bancorp, Inc. Reports Second Quarter 2018 Results

SBT Bancorp, Inc. (the "Company"), SBTB, holding company for The Simsbury Bank & Trust Company, Inc. (the "Bank"), today announced net income of $1.01 million or $0.74 basic and diluted earnings per share for the quarter ended June 30, 2018, compared to net income of $568 thousand or $0.42 basic and diluted earnings per share for the prior year's second quarter.

Net interest and dividend income increased $304 thousand or 8.3% as compared to the prior year's second quarter primarily driven by increased interest and fees on loans. The net interest margin for the quarter ended June 30, 2018 increased 32 basis points to 3.38% when compared to the three months ended June 30, 2017. Noninterest income increased $16 thousand due principally to an increase in service charges on deposit accounts of $42 thousand. Noninterest expenses for the three months ended June 30, 2018 were $3.4 million, a decrease of $150 thousand compared to the three months ended June 30, 2017. The decrease was due primarily to a decrease in salaries and benefits of $80 thousand, occupancy expenses of $39 thousand and other noninterest expenses of $136 thousand. These were offset by an increase in data processing of $56 thousand, internet banking costs of $26 thousand, and professional fees of $22 thousand.

"We are very pleased to report the third consecutive quarter of record earnings," said Simsbury Bank President & CEO Martin J. Geitz. "The initiatives we have taken in the past year to increase revenues and manage expenses continue to result in improved earnings. Our strategic focus on increasing the Bank's commercial banking activities, with particular focus on family owned businesses, continues to yield excellent results."

Key highlights for quarter ended June 30, 2018 compared to quarter ended June 30, 2017 included:

• Net income increased $445 thousand, or 78.4%.
• Total revenue, consisting of net interest and dividend income plus noninterest income, increased $320 thousand, or 7.3%.
• Net interest and dividend income increased 8.3% to $3.9 million.
• Net interest margin increased 32 basis points to 3.38%. The yield on interest earning assets increased 26 basis points to 3.78%.
• Provision for loan losses totaled $30 thousand, a decrease of $55 thousand compared to the quarter ended June 30, 2017. The allowance for loan losses at June 30, 2018 was 1.05% of total gross loans compared to 1.03% at June 30, 2017.
• Service charges on deposit accounts for the three months ended June 30, 2018 increased $42 thousand, or 46.2%, compared to the three months ended June 30, 2017, primarily driven by increases in overdraft fees related to the implementation of an overdraft privilege program in the fourth quarter of 2017.
• Commercial loan balances increased $5.2 million, or 2.7%, to $193.8 million compared to June 30, 2017.
• Total deposits increased $21.3 million, or 5.1%, to $439 million, driven by increases in savings and NOW deposits of $19.9 million, and demand deposits of $9.5 million, partially offset by a decrease in time deposits of $8.3 million.
• Income tax expenses increased $80 thousand related to higher pre-tax earnings.

The Company's allowance for loan losses at June 30, 2018 was 1.05% of total gross loans compared to 1.03% at June 30, 2017. The Company had non-accrual loans totaling $0.9 million, or 0.24%, of total loans on June 30, 2018, compared to non-accrual loans totaling $3.5 million, or 0.81%, of total loans a year ago. Total non-accrual and delinquent loans on June 30, 2018 was 0.92% of loans outstanding compared to 0.91% on June 30, 2017.

Total deposits on June 30, 2018 were $439 million, an increase of $21.2 million, or 5.1%, over a year ago. At the period end, 32% of total deposits were in non-interest bearing demand accounts, 54% were in low-cost savings, money market and NOW accounts and 14% were in time deposits.

For the three months ended June 30, 2018, total net revenues, consisting of net interest and dividend income plus noninterest income, were $4.7 million compared to $4.4 million for the same period in 2017, an increase of $320 thousand, or 7.3%, above the prior year's second quarter. Net interest and dividend income increased $304 thousand, or 8.4%, primarily driven by a $197 thousand, or 5.2%, increase in interest and fees on loans and a $94 thousand increase in interest on federal funds sold and overnight deposits. The increase was also enhanced by decreased interest expense on borrowing interest of $138 thousand. Noninterest income increased by $16 thousand, or 2.1%, primarily due to an increase in service charges on deposit accounts of $42 thousand offset by a decrease in other income of $41 thousand.

The Company's taxable-equivalent net interest margin for the three months ended June 30, 2018 (taxable-equivalent net interest and dividend income divided by average earning assets) was 3.38% compared to 3.06% for the comparable 2017 period. The Company's yield on earning assets increased 26 basis points to 3.78% and the cost of funds decreased 5 basis points to 0.58%, primarily driven by decreased borrowings funds expense.

For the year-to-date ended June 30, 2018, total net revenues, consisting of net interest and dividend income plus noninterest income, were $9.2 million compared to $8.6 million for the same period in 2017, an increase of $605 thousand or 7.1% above the prior year-to-date period. Net interest and dividend income increased $545 thousand or 7.6%, primarily driven by a $410 thousand, or 5.5%, increase in interest and fees on loans. The increase was partially offset by decreased interest income on securities of $121 thousand and increased interest expense on deposits of $176 thousand. Noninterest income increased by $60 thousand or 4.3%, primarily due to an increase in service charges on deposits of $87 thousand, partially offset by a decrease in mortgage banking activities, net of $22 thousand.

The Company's year-to-date 2018 taxable-equivalent net interest margin (taxable-equivalent net interest and dividend income divided by average earning assets) was 3.26% compared to 3.03% for the comparable 2017 period. The Company's yield on earning assets increased 22 basis points to 3.67% and the cost of funds was 0.59% for both the six months ended June 30, 2018 and June 30, 2017.

Total noninterest expense for the year-to-date 2018 was $6.7 million, a decrease of $174 thousand, or 2.5% compared to the six months ended June 30, 2017.

Capital levels for The Simsbury Bank & Trust Company on March 31, 2018 remain above the regulatory "well-capitalized" designation. Capital ratios are calculated under Basel III rules.

Simsbury Bank is a Central Connecticut based independent, community bank for businesses and consumers. Simsbury Bank Home Loans is a division of Simsbury Bank serving the home financing needs of consumers. The Bank's wholly-owned subsidiary, SBT Investment Services, Inc., offers securities and insurance products through LPL Financial and its affiliates, Member FINRA/SIPC. Simsbury Bank is wholly-owned by publicly traded SBT Bancorp, Inc., whose stock is traded on the OTC Pink marketplace under the ticker symbol of SBTB. For more information, visit www.simsburybank.com.

Certain statements in this press release, including statements regarding the intent, belief or current expectations of SBT Bancorp, Inc., The Simsbury Bank & Trust Company, or their directors or officers, are "forward-looking" statements (as such term is defined in the Private Securities Litigation Reform Act of 1995). Because such statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements.

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