SBT Bancorp, Inc. Reports Fourth 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 $1.13 million or $0.82 basic and diluted earnings per share for the quarter ended December 31, 2018, compared to net income of $682 thousand or $0.50 basic and diluted earnings per share for the prior year's fourth quarter. The Company's net income for the year ended December 31, 2018 was $4.11 million, or $3.01 basic and diluted earnings per share, compared to net income of $2.35 million, or $1.72 basic and $1.71 diluted earnings per share for the year ended December 31, 2017.

"We are very pleased to report record earnings for 2018 and our fifth consecutive quarter of record earnings," said Simsbury Bank President & CEO Martin J. Geitz. "The initiatives we have taken to increase revenues and manage expenses continue to result in strong earnings growth. Our strategic focus on increasing the Bank's commercial banking activities, with particular focus on family owned businesses and manufacturing companies continues to yield excellent results."

Net interest and dividend income increased $212 thousand or 5.6% as compared to the prior year's fourth quarter primarily driven by increased interest and fees on loans. The net interest margin for the quarter ended December 31, 2018 increased 22 basis points to 3.43% when compared to the three months ended December 31, 2017. Noninterest income increased $116 thousand due principally to an increase in other income of $91 thousand and service charges on deposit accounts of $45 thousand. Noninterest expenses for the three months ended December 31, 2018 were $3.5 million, an increase of $105 thousand compared to the three months ended December 31, 2017. The increase was due primarily to an increase in professional fees expense of $190 thousand and occupancy of $43 thousand. This increase was offset by a decrease in salaries and benefits of $123 thousand, advertising and promotions of $25 thousand and equipment expense of $11 thousand.

Key highlights for quarter ended December 31, 2018 compared to quarter ended December 31, 2017 included:

• Net income increased $443 thousand, or 64.9%.
• Total revenue, consisting of net interest and dividend income plus noninterest income, increased $328 thousand, or 7.1%.
• Net interest and dividend income increased 5.6% to $4.0 million.
• Net interest margin increased 22 basis points to 3.43%. The yield on interest earning assets increased 25 basis points to 3.89%.
• Provision for loan losses totaled $75 thousand which was equivalent to the quarter ending December 31, 2017. The allowance for loan losses at December 31, 2018 was 1.13% of total gross loans compared to 1.03% at December 30, 2017.
• Service charges on deposit accounts for the three months ended December 31, 2018 increased $45 thousand, or 44.1%, compared to the three months ended December 31, 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 $2.1 million, or 1.1%, to $192.5 million compared to December 31, 2017.
• Total deposits decreased $29.4 million, or 6.4%, to $428 million, driven by decreases in Savings, Now and Time deposits offset by increases in demand deposits of $7.7 million.
• Income tax expenses decreased $220 thousand related to lower tax rates offset by higher pre-tax earnings.

The Company's allowance for loan losses at December 31, 2018 was 1.13% of total gross loans compared to 1.03% at December 31, 2017. The Company had non-accrual loans totaling $4.8 million, or 1.23%, of total loans on December 31, 2018, compared to non-accrual loans totaling $1.5 million, or 0.36%, of total loans a year ago. Total non-accrual and delinquent loans on December 31, 2018 was 1.45% of loans outstanding compared to 0.51% on December 31, 2017.

Total deposits on December 31, 2018 were $428 million, a decrease of $29.4 million, or 6.4%, over a year ago. At the period end, 35% of total deposits were in non-interest bearing demand accounts, 51% were in low-cost savings, money market and NOW accounts and 14% were in time deposits.

For the three months ended December 31, 2018, total net revenues, consisting of net interest and dividend income plus noninterest income, were $4.9 million compared to $4.6 million for the same period in 2017, an increase of $328 thousand, or 7.1%, above the prior year's fourth quarter. Net interest and dividend income increased $240 thousand, or 5.6%, primarily driven by a $155 thousand, or 3.9%, increase in interest and fees on loans and a $138 thousand increase in interest on federal funds sold and overnight deposits. The increase was also partially offset by an interest expense on deposits of $32 thousand. Noninterest income increased by $116 thousand, or 14.1%, primarily due to an increase in service charges on deposit accounts of $45 thousand and an increase in other income of $91 thousand.

The Company's taxable-equivalent net interest margin for the three months ended December 31, 2018 (taxable-equivalent net interest and dividend income divided by average earning assets) was 3.43% compared to 3.21% for the comparable 2017 period. The Company's yield on earning assets increased 25 basis points to 3.89% and the cost of funds increased 9 basis points to 0.70%, primarily driven by increased interest expense on deposits.

Key highlights for full year ended December 31, 2018 compared to full year ended December 31, 2017 included:

• Net income increased $1.76million, or 74.8%.
• Total revenue, consisting of net interest and dividend income plus noninterest income, increased $1.3 million or 7.3%.
• Net interest and dividend income increased 6.5% to $15.7 million.
• Net interest margin increased 19 basis points to 3.27%. The yield on interest earning assets increased 21 basis points to 3.72%.
• Provision for loan losses totaled for the full year totaled $280 thousand which was $365 thousand lower than the full year 2017. The allowance for loan losses at December 31, 2018 was 1.13% of total gross loans compared to 1.03% at December 31, 2017.
• Service charges on deposit accounts for the full year 2018 increased $188 thousand, or 50.7%, compared to 2017, primarily driven by increases in overdraft fees related to the implementation of an overdraft privilege program in the fourth quarter of 2017.
• Total average year deposits increased $18.1 million, or 4.1%, to $457 million, driven by increases in Savings, Now, Time deposits and demand deposits of $7.2 million.
• Income tax expenses decreased $9 thousand related to lower tax rates offset by higher pre-tax earnings.

For the full year ended December 31, 2018, total net revenues, consisting of net interest and dividend income plus noninterest income, were $19.2 million compared to $17.9 million for the same period in 2017, an increase of $1.3 million or 7.3% above the prior year. Net interest and dividend income increased $1.0 million or 6.0%, primarily driven by a $698 thousand, or 4.6%, increase in interest and fees on loans and $556 thousand in federal funds sold and overnight interest on deposits. The increase was partially offset by decreased interest income on securities of $244 thousand and increased interest expense on deposits of $309 thousand. Noninterest income increased by $344 thousand or 11.0%, primarily due to an increase in service charges on deposits of $188 thousand.

The Company's 2018 taxable-equivalent net interest margin (taxable-equivalent net interest and dividend income divided by average earning assets) was 3.27% compared to 3.08% for the 2017. The Company's yield on earning assets increased 21 basis points to 3.72% and the cost of funds was 0.65% for the year ended December 31, 2018 and 0.61% for the year ended December 31, 2017.

Total noninterest expense for 2018 was $13.8 million, a decrease of $80 thousand, or 0.6% compared to the year ended December 31, 2017.

Capital levels for The Simsbury Bank & Trust Company on December 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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