Market Overview

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

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  • 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 ended Six 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 2018 Q1 2018 Q4 2017 Q3 2017 Q2 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. 

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