Salisbury Bancorp, Inc. Reports Solid Results for Third Quarter 2016; Declares 28 Cent Dividend

LAKEVILLE, Conn., Oct. 28, 2016 (GLOBE NEWSWIRE) -- Salisbury Bancorp, Inc. (“Salisbury”), (NASDAQ:SAL), the holding company for Salisbury Bank and Trust Company (the “Bank”), announced results for its third quarter ended September 30, 2016.

Net income available to common shareholders was $1.9 million, or $0.70 per common share, for the third quarter ended September 30, 2016 (third quarter 2016), compared with $1.7 million, or $0.63 per common share, for the second quarter ended June 30, 2016 (second quarter 2016), and $1.9 million, or $0.71 per common share, for the third quarter ended September 30, 2015 (third quarter 2015).

Selected Third Quarter 2016 Financial Highlights

  • Earnings Per Share increased 11.1% to $0.70 for the third quarter 2016 as compared with the $0.63 for the second quarter 2016.
  • Assets under administration increased $84.9 million, or 20%, from the second quarter 2016 and have increased $159.5 million, or 46%, from third quarter 2015.
  • Total deposits increased $32 million, or 4%, from June 30, 2016.
  • Salisbury’s efficiency ratio improved to 64.13% for the quarter ended September 30, 2016 as compared to 66.51% in prior quarter.
  • Tangible book value per common share of $28.63 at September 30, 2016 increased $0.35 from $28.28 at June 30, 2016, and $1.42 as compared to $27.21 at September 30, 2015.

Richard J. Cantele, Jr., President and Chief Executive Officer, stated, “Our third quarter results reflect the continued positive momentum achieved during the first half of the year. Our teams achieved strong growth in our core businesses as deposits and assets under administration in our Trust and Wealth Advisory business posted solid gains. That growth, combined with more efficient operations, assisted in increasing tangible book value by $0.35 for the quarter reflecting our continued focus on enhancing the value of our franchise.

Net Interest Income

Tax equivalent net interest income for third quarter 2016 increased $102,000, or 1.3%, versus second quarter 2016, and decreased $220,000 or 2.7%, versus third quarter 2015. Average earning assets increased $40.3 million versus second quarter 2016, and increased $55.7 million versus third quarter 2015. Average total interest bearing deposits increased $34.9 million versus second quarter 2016 and increased $37.9 million versus third quarter 2015. The net interest margin of 3.57% decreased 14 basis points versus 3.71% for the second quarter 2016 and decreased 34 basis points versus 3.91% for the third quarter 2015.

Interest income for the third quarter reflects net accretion related to the fair value adjustments of loans acquired in the Riverside Bank acquisition in the amount of $440,000. The second quarter 2016 and third quarter 2015 included similar adjustments of $403,000 and $726,000, respectively.

Non-Interest Income

Non-interest income for third quarter 2016 decreased $114,000 versus second quarter 2016 and increased $126,000 versus third quarter 2015. Trust and wealth advisory revenues decreased $35,000 versus second quarter 2016. This decrease primarily reflects a decrease of $16,000 in estate fees and $65,000 in tax letter preparation fees which were collected in the second quarter 2016. These decreases were partially offset by a $45,000 increase in asset management fees. The $51,000 increase in Trust and wealth advisory services versus the third quarter 2015 was primarily attributable to the increase in assets under management. Service charges and fees increased $55,000 versus second quarter 2016 and increased $42,000 versus third quarter 2015. The increase was primarily due to increased transactional volume and Master Card Enrollment fees. The Master Card Enrollment fees, which began in June 2016, were $25,000 and $8,000 in the third and second quarters of 2016, respectively, with no such fees in the third quarter 2015. Income from sales and servicing of mortgage loans increased $5,000 versus second quarter 2016 and $31,000 versus third quarter 2015 due primarily to mortgage servicing which increased $7,000 and $23,000 for these respective periods. Third quarter 2016, second quarter 2016, and third quarter 2015 included mortgage servicing amortization and periodic impairment charges (net) of $60,000, $65,000, and $85,000, respectively. Gain on sale of securities for the third quarter 2016, second quarter 2016, and third quarter 2015 totaled $10,000, $146,000, and $6,000, respectively. Other income includes bank owned life insurance income and rental income.

Non-Interest Expense

Non-interest expense for third quarter 2016 decreased $140,000 versus second quarter 2016 and increased $297,000 versus third quarter 2015. Total compensation expense increased $84,000 versus second quarter 2016 mainly due to increases in base salaries and production based salaries which increased $23,000 and $62,000, respectively. The total compensation expense year-over-year increase of $297,000 is mainly attributable to increased salaries and benefits expense of $234,000 due to increased staffing levels, market and merit adjustments.

Premises and equipment expense decreased $36,000 versus second quarter 2016 and decreased $54,000 versus third quarter 2015. The third quarter 2016 and the year-over-year decreases were mainly related to lower fuel, utility, and building repair costs.

Data processing increased $23,000 versus second quarter 2016 and increased $68,000 versus third quarter 2015. The increase versus the second quarter 2016 and third quarter 2015 reflected increases in data communications and processing. These increases were partially offset versus the second quarter 2016 due to lower Trust data processing which included the expense related to a terminated contract, year-end processing and tax reporting.

Loan related expenses decreased $16,000 versus both the second quarter 2016 and third quarter 2015. The third quarter versus the second quarter 2016 decrease was mainly due to lower appraisal fees, disclosure adjustments and legal collections expenses, which were partially offset by an increase in OREO carrying costs. The increase in OREO carrying costs reflects the successful completion in August 2016 of foreclosure litigation involving the Bank’s single largest non-performing asset and the transfer of that $2.8 million asset from non-performing loans to OREO to be held for sale. The year-over-year decrease in loan related expenses was mainly due to lower appraisal fees and disclosure adjustments, which were partially offset by increased expense related to customer delinquent taxes.

Professional fees decreased $105,000 versus second quarter 2016, and increased $61,000 versus third quarter 2015. The decrease from the second quarter 2016 was mainly caused by Trust and wealth advisory tax preparation expense incurred in the second quarter 2016. The increase versus third quarter 2015 was due to increased investment management fees.

Other expense decreased $39,000 versus second quarter 2016 primarily as a result of a $64,000 decline in expenses related to sold loans serviced for others, which was partially offset by a $19,000 increase in loss provision for off balance sheet unused commitments. Other expense increased $46,000 versus third quarter 2015 due primarily to the $32,000 change in the provision expense for off balance sheet unused commitments.

The effective income tax rates for third quarter 2016, second quarter 2016 and third quarter 2015 were 29.71%, 27.79% and 29.31%, respectively.

Loans

Net loans receivable increased $4.1 million during third quarter 2016 to $753.6 million at September 30, 2016, increased $54.6 million compared with $699.0 million at December 31, 2015, and increased $65.9 million compared with $687.7 million at September 30, 2015.

Asset Quality

Non-performing assets decreased $0.1 million during third quarter 2016 to $14.5 million, or 1.56% of assets at September 30, 2016, from $14.6 million, or 1.60% of assets at June 30, 2016, and decreased $2.1 million from $16.6 million, or 1.84% of assets, at September 30, 2015. The decrease in non-performing assets reflects a decrease of non-performing loans in the third quarter of 2016 of $2.9 million. However, much of the decrease in non-performing loans was offset by an increase of $2.8 million in OREO as the Bank successfully completed the foreclosure litigation involving its largest non-performing asset which is now in OREO and held for sale.

The amount of total impaired and potential problem loans decreased to $26.1 million (3.43% of gross loans receivable) during third quarter 2016, compared to $28.8 million, or 3.83% of gross loans receivable at June 30, 2016 and decreased $4.9 million from $31.0 million, or 4.48% of gross loans receivable at September 30, 2015.

Accruing loans receivable 30-to-89 days past due increased $2.3 million during third quarter 2016 to $5.9 million, or 0.8% of gross loans receivable, from $3.6 million, or 0.5% of gross loans receivable at June 30, 2016, and increased $3.4 million versus September 30, 2015.

Provision for loan loss expense was $344,000 for third quarter 2016 versus $525,000 for second quarter 2016, and $655,000 for third quarter 2015. Net loan charge-offs were $171,000 for the third quarter 2016, $684,000 for second quarter 2016 and $55,000 for the third quarter 2015. Reserve coverage, as measured by the ratio of the allowance for loan losses to gross loans, was 0.78% for the third quarter 2016, versus 0.76% for second quarter 2016 and 0.82% for third quarter 2015.

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 and tangible book value per common share increased $0.35 and $0.41, respectively, during third quarter 2016 to $33.92 and $28.69, respectively. Tangible book value excludes goodwill and core deposit intangibles.

Shareholders’ equity increased $1.0 million in third quarter 2016 to $93.6 million at September 30, 2016. Contributing to the increase in shareholders’ equity for third quarter 2016 was net income of $1.9 million, offset by a $0.2 million decrease in other comprehensive income and common stock dividends paid of $0.8 million.

The Bank’s regulatory capital ratios remain in compliance with regulatory “well capitalized” requirements. At September 30, 2016, the Bank’s tier 1 leverage, total risk-based capital, and common equity tier 1 capital ratios were 9.30%, 12.94%, and 12.09%, respectively, compared with regulatory “well capitalized” minimums of 5.00%, 10.00%, and 6.5%, respectively. Risk based capital information for 2016 incorporates the implementation of Basel III.

At September 30, 2016, Salisbury’s tier 1 leverage, total risk-based capital, and common equity tier 1 capital ratios were 8.47%, 13.25%, and 11.01%, respectively.

Third Quarter 2016 Dividends on Common Shares

The Board of Directors of Salisbury declared a $0.28 per common share quarterly cash dividend at their October 28, 2016 meeting. The dividend will be paid on November 25, 2016 to shareholders of record as of November 11, 2016.

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, 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) September 30, 2016
(unaudited)
December 31, 2015
ASSETS
Cash and due from banks $13,004 $14,891
Interest bearing demand deposits with other banks 29,634 47,227
Total cash and cash equivalents 42,638 62,118
Securities
Available-for-sale at fair value 76,801 76,694
Federal Home Loan Bank of Boston stock at cost 2,937 3,176
Loans held-for-sale 837 763
Loans receivable, net (allowance for loan losses: $5,892 and $5,716) 753,623 699,018
Other real estate owned 2,823 -
Bank premises and equipment, net 14,573 14,307
Goodwill 12,552 12,552
Intangible assets (net of accumulated amortization: $3,364 and $2,909) 1,883 2,338
Accrued interest receivable 2,260 2,307
Cash surrender value of life insurance policies 13,952 13,685
Deferred taxes 2,114 1,989
Other assets 1,452 2,245
Total Assets $928,445 $891,192
LIABILITIES and SHAREHOLDERS' EQUITY
Deposits
Demand (non-interest bearing) $210,396 $201,340
Demand (interest bearing) 126,064 125,465
Money market 201,504 183,783
Savings and other 127,595 119,651
Certificates of deposit 121,171 124,294
Total deposits 786,730 754,533
Repurchase agreements 3,581 3,914
Federal Home Loan Bank of Boston advances 27,134 26,979
Subordinated debt(1) 9,782 9,764
Note payable 351 376
Capital lease liability 419 422
Accrued interest and other liabilities 6,894 4,630
Total Liabilities 834,891 800,618
Shareholders' Equity
Common stock - $.10 per share par value
Authorized: 5,000,000;
Issued: 2,758,086 and 2,733,576 276 273
Unearned compensation - restricted stock awards (431) (110)
Paid-in capital 42,053 41,364
Retained earnings 50,773 47,922
Accumulated other comprehensive income, net 883 1,125
Total Shareholders' Equity $93,554 90,574
Total Liabilities and Shareholders' Equity $928,445 $891,192

(1) Net of issuance costs, which are capitalized and amortized as a component of interest expense over a period of 10 years.


Salisbury Bancorp, Inc. and Subsidiary

CONSOLIDATED STATEMENTS OF INCOME (unaudited)

Periods ended September, Three months ended Nine months ended
(in thousands, except per share amounts) 2016 2015 2016 2015
Interest and dividend income
Interest and fees on loans $8,061 $ 7,955 $23,915 $ 23,727
Interest on debt securities
Taxable 341 286 976 910
Tax exempt 202 351 725 1,098
Other interest and dividends 60 58 138 132
Total interest and dividend income 8,664 8,650 25,754 25,867
Interest expense
Deposits 565 463 1,603 1,359
Repurchase agreements 2 2 4 5
Capital lease 17 18 52 53
Note payable 5 1 16 1
Subordinated debt 156 468
Federal Home Loan Bank of Boston advances 237 269 714 832
Total interest expense 982 753 2,857 2,250
Net interest and dividend income 7,682 7,897 22,897 23,617
Provision for loan losses 344 655 1,332 651
Net interest and dividend income after provision for loan losses 7,338 7,242 21,565 22,966
Non-interest income
Trust and wealth advisory 849 798 2,517 2,510
Service charges and fees 840 798 2,355 2,307
Gains on sales of mortgage loans, net 55 47 152 227
Mortgage servicing, net 28 5 61 (15)
Gains on sales of available-for-sale securities, net 10 6 157 192
Other 113 115 342 343
Total non-interest income 1,895 1,769 5,584 5,564
Non-interest expense
Salaries 2,757 2,531 8,017 7,520
Employee benefits 924 916 2,923 2,881
Premises and equipment 809 863 2,546 2,683
Data processing 472 404 1,369 1,276
Professional fees 459 398 1,403 1,642
Collections, OREO and loan related 109 125 420 594
FDIC insurance 164 163 474 494
Marketing and community support 144 174 524 465
Amortization of core deposit intangibles 148 161 455 494
Other 513 467 1,844 1,528
Total non-interest expense 6,499 6,202 19,975 19,577
Income before income taxes 2,734 2,809 7,174 8,953
Income tax provision 812 824 2,009 2,663
Net income $1,922 $ 1,985 $5,165 $ 6,290
Net income available to common shareholders $1,922 $ 1,945 $5,165 $ 6,170
Net income applicable to common shareholders $ 1,907 $ 1,928 $ 5,124 $ 6,116
Basic earnings per common share $0.70 $ 0.71 $1.88 $ 2.26
Diluted earnings per common share 0.69 0.71 1.87 2.25
Common dividends per share 0.28 0.28 0.84 0.84


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) Q3 2016 Q2 2016 Q1 2016 Q4 2015 Q3 2015
Total assets $928,445 $913,494 $891,804 $891,192 $904,233
Loans receivable, net 753,623 749,523 728,845 699,018 687,719
Total securities 79,738 83,874 82,151 79,870 83,886
Deposits 786,730 754,471 755,658 754,533 761,479
FHLBB advances 27,134 47,083 27,031 26,979 26,928
Shareholders’ equity 93,554 92,584 91,402 90,574 105,450
Assets under administration 509,557 424,702 422,918 371,012 350,102
Non-performing loans 11,673 14,579 16,829 16,264 16,435
Non-performing assets 14,496 14,579 16,829 16,264 16,602
Accruing loans past due 30-89 days 5,889 3,569 7,995 4,499 2,486
Net interest and dividend income 7,682 7,559 7,659 7,930 7,897
Net interest and dividend income, tax equivalent 7,975 7,873 7,985 8,235 8,195
Provision for loan losses 344 525 463 266 655
Non-interest income 1,895 2,009 1,684 1,747 1,769
Non-interest expense 6,499 6,639 6,840 6,344 6,202
Income before income taxes 2,734 2,404 2,040 3,067 2,809
Income tax provision 812 669 528 901 824
Net income 1,922 1,735 1,512 2,166 1,985
Net income available to common shareholders 1,922 1,735 1,512 2,129 1,945
Per share data
Basic earnings per common share $0.70 $0.63 $0.55 $0.78 $0.71
Diluted earnings per common share 0.69 0.63 0.55 0.77 0.71
Dividends per common share 0.28 0.28 0.28 0.28 0.28
Book value per common share 33.92 33.57 33.20 33.13 32.72
Tangible book value per common share - Non-GAAP(1) 28.63 28.28 27.84 27.69 27.21
Common shares outstanding at end of period 2,758 2,758 2,753 2,734 2,734
Weighted average common shares outstanding, to calculate basic earnings per share 2,737 2,735 2,723 2,710 2,708
Weighted average common shares outstanding, to calculate diluted earnings per share 2,751 2,749 2,741 2,727 2,724
Profitability ratios
Net interest margin (tax equivalent) 3.57% 3.71% 3.79% 3.88% 3.91%
Efficiency ratio(2) 64.13 66.51 69.28 63.64 60.40
Non-interest income to operating revenue 19.22 20.63 18.01 18.06 18.25
Effective income tax rate 29.71 27.79 25.86 29.35 29.31
Return on average assets 0.81 0.77 0.68 0.94 0.87
Return on average common shareholders’ equity 8.20 7.58 6.68 9.34 8.64
Credit quality ratios
Net charge-offs to average loans receivable, gross 0.02% 0.37% 0.17% 0.12% 0.03%
Non-performing loans to loans receivable, gross 1.54 1.93 2.29 2.31 2.37
Accruing loans past due 30-89 days to loans receivable, gross 0.78 0.47 1.09 0.64 0.36
Allowance for loan losses to loans receivable, gross 0.78 0.76 0.80 0.81 0.82
Allowance for loan losses to non-performing loans 50.47 39.22 34.92 35.15 34.43
Non-performing assets to total assets 1.56 1.60 1.89 1.82 1.84
Capital ratios
Common shareholders' equity to assets 10.08% 10.14% 10.25% 10.16% 9.89%
Tangible common shareholders' equity to tangible assets - Non-GAAP(1) 8.66 8.68 8.74 8.64 8.37
Tier 1 leverage capital 8.47 8.64 8.57 8.56 10.31
Total risk-based capital 13.25 13.08 12.92 13.51 13.90
Common equity tier 1 capital 11.01 10.86 10.69 11.17 10.74

(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.


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) Q3 2016 Q2 2016 Q1 2016 Q4 2015 Q3 2015
Shareholders' Equity $93,554 $92,584 $ 91,402 $90,574 $105,450
Less: Preferred Stock (16,000)
Common Shareholders' Equity 93,554 92,584 91,402 90,574 89,450
Less: Goodwill (12,552) (12,552) (12,552) (12,552) (12,552)
Less: Intangible assets (1,883) (2,031) (2,183) (2,338) (2,496)
Tangible Common Shareholders' Equity $79,119 $78,001 76,667 $75,684 $74,402
Total Assets $928,445 $913,494 891,804 $891,192 $904,234
Less: Goodwill (12,552) (12,552) (12,552) (12,552) (12,552)
Less: Intangible assets (1,883) (2,031) (2,183) (2,338) (2,496)
Tangible Total Assets $914,010 $898,911 $ 877,069 $876,302 $889,186
Common Shares outstanding 2,758 2,758 2,753 2,734 2,734
Book value per Common Share – GAAP $33.92 $33.57 $ 33.20 $33.13 $32.72
Tangible book value per Common Share - Non-GAAP 28.69 28.28 27.84 27.69 27.21
Common Shareholders’ Equity to Assets – GAAP 10.08% 10.14% 10.25% 10.16% 9.89%
Tangible Common Shareholders’ Equity to Tangible Assets – Non-GAAP 8.66 8.68 8.74 8.64 8.37
Non-interest expense $6,499 $6,639 $ 6,840 $6,343 $6,202
Less: Amortization of core deposit intangibles (148) (152) (155) (158) (161)
Less: Foreclosed property expense (27) (12) 12 168 (27)
Less: Strategic initiatives
Operating expenses $6,324 $6,475 $ 6,697 $6,353 $6,014
Net interest and dividend income, tax equivalent $7,975 $7,873 7,985 $8,235 $8,194
Non-interest income 1,895 2,009 1,684 1,748 1,769
Gains on securities, net (10) (146) (2) (6)
Operating revenue $9,860 $9,736 $ 9,667 $9,983 $9,957
Efficiency Ratio 64.13% 66.51% 69.28% 63.64% 60.40%

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

Source:Salisbury Bancorp, Inc.