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Salisbury Bancorp, Inc. Reports Results for Second Quarter 2017; Declares 28 Cent Dividend

LAKEVILLE, Conn., July 28, 2017 (GLOBE NEWSWIRE) -- Salisbury Bancorp, Inc. (“Salisbury”) (NASDAQ:SAL), the holding company for Salisbury Bank and Trust Company (the “Bank”), announced results for its second quarter ended June 30, 2017.

Net income allocated to common shareholders was $1.9 million, or $0.68 per common share, for the second quarter ended June 30, 2017 (second quarter 2017), compared with $1.6 million, or $0.58 per common share, for the first quarter ended March 31, 2017 (first quarter 2017), and $1.7 million, or $0.63 per common share, for the second quarter ended June 30, 2016 (second quarter 2016).

Selected Second Quarter 2017 Financial Highlights

  • The previously announced acquisition of the New Paltz, New York branch closed during the second quarter adding $31 million in deposits and $7 million in loans. The New Paltz branch is Salisbury’s 14th full service branch facility and expands Salisbury’s presence in New York State, which is comprised of seven (7) branches in Dutchess, Orange and Ulster Counties in New York.
  • Net Income per share increased to $0.68 per share from $0.58 last quarter and $0.63 for the second quarter 2016.
  • Wealth assets under administration increased to $586 million at June 30, 2017, an increase of $62 million, or 12%, from first quarter 2017.
  • Book value per common share increased to $34.66 at June 30, 2017 from $34.38 at March 31, 2017, and $33.57 at June 30, 2016.

Richard J. Cantele, Jr., President and Chief Executive Officer, stated,

“We are pleased to report that second quarter results reflect continued progress in enhancing the long term value of our franchise. We grew the footprint of our company with the consummation of a branch acquisition in New Paltz, New York, which expands our delivery system and customer base in the Hudson River communities. Our wealth assets under management also grew, which helps to diversify our sources of income. During the second quarter, we continued to grow net interest income and build value for our shareholders. Our focus on asset quality remains in the forefront and the control of non-interest expense, while always maintaining our commitment to outstanding customer service, improves our efficiency. We continue to believe that despite the highly competitive banking market in the three states in which we operate, we are well-positioned for continued growth and success.”

Net-Interest Income

Tax equivalent net interest income for second quarter 2017 decreased $211 thousand, or 2.5%, versus first quarter 2017, and increased $121 thousand or 1.5%, versus second quarter 2016. Average earning assets increased $3.8 million versus first quarter 2017, and increased $37.3 million versus second quarter 2016. Average total interest bearing deposits increased $6.9 million versus first quarter 2017 and increased $11.3 million versus second quarter 2016. The net interest margin of 3.63% decreased 11 basis points versus 3.74% for the first quarter 2017 and decreased 8 basis points versus 3.71% for the second quarter 2016.

Interest income for the second quarter 2017 reflects net accretion related to the fair value adjustments of loans acquired in the Riverside Bank acquisition in the amount of $250 thousand. The first quarter 2017 and second quarter of 2016 included similar adjustments of $495 thousand and $403 thousand, respectively.

Non-Interest Income

Non-interest income for second quarter 2017 decreased $72 thousand versus first quarter 2017 and decreased $49 thousand versus second quarter 2016. Trust and Wealth Advisory revenues increased $38 thousand versus first quarter 2017 and increased $8 thousand versus second quarter 2016. The quarter-over-quarter net revenue increase for the Trust and Wealth Advisory division reflects tax preparation fees net of slightly lower asset based fees collected as compared to the prior quarter resulting mostly from estate and planning related distributions. Revenue for Trust and Wealth Advisory Services came in higher year over year representing a net growth in asset based fees. Service charges and fees decreased $60 thousand versus first quarter 2017 and increased $149 thousand versus second quarter 2016. The decrease was substantially a result of $45 thousand in lower fees related to commercial mortgages. Income from sales and servicing of mortgage loans decreased $33 thousand versus first quarter 2017 and decreased $41 thousand versus second quarter 2016. The decrease from the first quarter 2017 is mainly attributable to lower gains on sale during the second quarter 2017 as well as lower income from servicing of loans for others. Second quarter 2017 mortgage loans sales totaled $1.8 million versus $1.8 million for first quarter 2017, and $2.5 million for second quarter 2016. Second quarter 2017, first quarter 2017, and second quarter 2016 included mortgage servicing amortization and periodic impairment charges (net) of $69 thousand, $70 thousand, and $65 thousand, respectively. (Losses)/Gains on sales of securities during the second quarter 2017 was ($14) thousand while first quarter 2017 and second quarter 2016 totaled $0 thousand and $146 thousand, respectively. Other income includes bank owned life insurance income and rental income.

Non-Interest Expense

Non-interest expense for second quarter 2017 decreased $567 thousand versus first quarter 2017 and increased $222 thousand versus second quarter 2016.

Total compensation expense decreased $370 thousand versus first quarter 2017. A reduction in salary expense for the second quarter of $78 thousand was mainly attributable to open positions. Benefit expense declined $184 thousand in the second quarter as adjustments were made to performance related benefits and lower medical insurance costs. Payroll taxes declined in the second quarter, as compared to the first quarter, by $73 thousand. Total compensation expenses year-over-year increased by $11 thousand and is mainly attributable to the lower current period benefit expenses offset by higher deferred expenses related to loan origination in the second quarter of 2016.

Premises and equipment expense increased $12 thousand versus first quarter 2017 and increased $63 thousand versus second quarter 2016. The year-over-year increase was substantially attributable to lease expense.

Data processing expense increased $32 thousand versus first quarter 2017 and increased $55 thousand versus second quarter 2016. Second quarter 2017 increases in core data processing expense, which include a timing difference of $16 thousand, and ATM and debit card processing were largely offset by reductions in data communication related expenses. The year over year increase includes the 2017 timing difference as well as increased core data processing expense in the current quarter.

Professional fees increased $47 thousand versus first quarter 2017, and $200 thousand versus second quarter 2016. Increases over both the first quarter 2017 and second quarter 2016 were primarily attributable to consulting and audit related fees. In the second quarter of 2017 declines in legal and investment management expense contributed to the lower net quarter over quarter increase.

Loan related expenses declined $146 thousand as compared to first quarter 2017 and increased $30 thousand versus second quarter 2016. The decrease in current quarter expense is substantially attributable to a first quarter loss on sale of OREO. The year over year increase is substantially attributable to increased OREO carrying costs.

The effective income tax rates for second quarter 2017, first quarter 2017 and second quarter 2016 were 24.62%, 27.00% and 27.79%, respectively.

Loans

Net loans receivable increased $7 million during second quarter 2017 to $772 million at June 30, 2017, compared with $765 million at March 31, 2017, and increased $22 million compared with $750 million at June 30, 2016.

Asset Quality

Non-performing assets increased $0.8 million during second quarter 2017 to $11.7 million, or 1.2% of assets at June 30, 2017, from $10.9 million, or 1.2% of assets at March 31, 2017, and decreased $2.9 million from $14.6 million, or 1.6% of assets, at June 30, 2016.

The amount of total impaired and potential problem loans decreased to $21.5 million (2.8% of gross loans receivable) during second quarter 2017, compared to $23.6 million, or 3.1% of gross loans receivable at March 31, 2017, and decreased $9.1 million from $30.6 million, or 4.2% of gross loans receivable at June 30, 2016.

Accruing loans receivable 30-to-89 days past due decreased $8.7 million during second quarter 2017 to $3 million, or 0.38% of gross loans receivable, from $11.7 million, or 1.52% of gross loans receivable at March 31, 2017, and decreased $0.6 million from $3.6 million, or 0.47% of gross loans receivable at June 30, 2016.

Provision for loan loss expense was $364 thousand for second quarter 2017 versus $352 thousand for first quarter 2017, and $525 thousand for second quarter 2016. Net loan charge-offs were $155 thousand for the second quarter 2017, $194 thousand for first quarter 2017 and $684 thousand for the second quarter 2016. Reserve coverage, as measured by the ratio of the allowance for loan losses to gross loans, was 0.83% for the second quarter 2017, versus 0.82% for first quarter 2017 and 0.76% for second quarter 2016.

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 $0.28 as compared to first quarter 2017 and increased $1.09 as compared to the second quarter 2016. Tangible book value per common share decreased $0.32 during second quarter 2017, to $28.94 and increased $0.66 as compared to the second quarter 2016. The second quarter 2017 net decline in tangible book value, which excludes goodwill and core deposit intangibles, reflects the addition of $1.3 million to goodwill and $632 thousand to core deposit intangibles related to the acquisition of the New Paltz, New York branch.

Shareholders’ equity increased $1.3 million in second quarter 2017 to $96.5 million at June 30, 2017. Contributing to the increase in shareholders’ equity for second quarter 2017 was net income of $1.9 million, and a $0.1 million increase in common stock offset by common stock dividends paid of $0.8 million.

The Bank’s regulatory capital ratios remain in compliance with regulatory “well capitalized” requirements. At June 30, 2017, Salisbury’s Tier 1 leverage, total risk-based capital, and common equity tier 1 capital ratios were 8.77%, 13.12%, and 10.88%, respectively. The Bank’s Tier 1 leverage, total risk-based capital, and common equity tier 1 capital ratios were 9.53%, 12.70%, and 11.81%, respectively, compared with regulatory “well capitalized” minimums of 5.00%, 10.00%, and 6.5%, respectively.

Second Quarter 2017 Dividends on Common Shares

The Board of Directors of Salisbury declared a $0.28 per common share quarterly cash dividend at its July 28, 2017 meeting. The dividend will be paid on August 25, 2017 to shareholders of record as of August 11, 2017.

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, 2017
(unaudited)
December 31, 2016
ASSETS
Cash and due from banks$5,920 $5,434
Interest bearing demand deposits with other banks 55,472 30,051
Total cash and cash equivalents 61,392 35,485
Securities
Available-for-sale at fair value 81,016 79,623
Federal Home Loan Bank of Boston stock at cost 3,452 3,211
Loans held-for-sale 594 -
Loans receivable, net (allowance for loan losses: $6,493 and $6,127) 771,850 763,184
Other real estate owned 3,854 3,773
Bank premises and equipment, net 16,149 14,398
Goodwill 13,827 12,552
Intangible assets (net of accumulated amortization: $3,763 and $3,511) 2,116 1,737
Accrued interest receivable 2,303 2,424
Cash surrender value of life insurance policies 14,211 14,038
Deferred taxes 1,320 1,367
Other assets 2,722 3,574
Total Assets$974,806 $935,366
LIABILITIES and SHAREHOLDERS' EQUITY
Deposits
Demand (non-interest bearing)$219,660 $218,420
Demand (interest bearing) 132,899 127,854
Money market 194,704 182,476
Savings and other 145,937 135,435
Certificates of deposit 118,141 117,585
Total deposits 811,341 781,770
Repurchase agreements 2,126 5,535
Federal Home Loan Bank of Boston advances 47,302 37,188
Subordinated debt 9,799 9,788
Note payable 327 344
Capital lease liability 1,987 418
Accrued interest and other liabilities 5,379 6,316
Total Liabilities 878,261 841,359
Shareholders' Equity
Common stock - $.10 per share par value
Authorized: 5,000,000;
Issued: 2,785,066 and 2,758,086 279 276
Unearned compensation - restricted stock awards (738) (352)
Paid-in capital 42,984 42,085
Retained earnings 53,453 51,521
Accumulated other comprehensive income, net 567 477
Total Shareholders' Equity$96,545 $94,007
Total Liabilities and Shareholders' Equity$974,806 $935,366


Salisbury Bancorp, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
Periods ended June 30,Three months endedSix months ended
(in thousands, except per share amounts) 2017 2016 2017 2016
Interest and dividend income
Interest and fees on loans $8,235 $7,938$16,577
$15,869
Interest on debt securities
Taxable 354 286 672 579
Tax exempt 113 237 277 523
Other interest and dividends 94 60 176 134
Total interest and dividend income 8,796 8,521 17,702 17,105
Interest expense
Deposits 578 529 1,094 1,037
Repurchase agreements 1 1 1 2
Capital lease 20 17 37 35
Note payable 5 6 7 11
Subordinated debt 156 156 312 312
Federal Home Loan Bank of Boston advances 266 245 528 476
Total interest expense 1,026 954 1,979 1,873
Net interest and dividend income 7,770 7,567 15,723 15,232
Provision for loan losses 364 525 716 988
Net interest and dividend income after provision for loan losses 7,406 7,042 15,007 14,244
Non-interest income
Trust and wealth advisory 892 884 1,746 1,668
Service charges and fees 902 753 1,863 1,455
Gains on sales of mortgage loans, net 30 57 79 96
Mortgage servicing, net 31 45 76 79
(Loss) /gains on sales of available-for-sale securities, net (14) 146 (14) 148
Other 110 115 223 229
Total non-interest income 1,951 2,000 3,973 3,675
Non-interest expense
Salaries 2,777 2,687 5,667 5,261
Employee benefits 831 910 1,919 1,998
Premises and equipment 907 844 1,802 1,739
Data processing 504 449 977 896
Professional fees 764 564 1,481 944
Collections, OREO and loan related 155 125 456 311
FDIC insurance 98 176 247 310
Marketing and community support 152 180 403 380
Amortization of core deposit intangibles 126 152 252 307
Other 546 551 1,081 1,330
Total non-interest expense 6,860 6,638 14,285 13,476
Income before income taxes 2,497 2,404 4,695 4,443
Income tax provision 615 669 1,208 1,196
Net income $1,882 $1,735$3,487 $3,247
Net income allocated to common shareholders $1,867 $1,721$3,461 $3,220
Basic earnings per common share $0.68 $0.63$1.26 $1.18
Diluted earnings per common share 0.67 0.63 1.25 1.17
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 2017Q1 2017Q4 2016Q3 2016Q2 2016
Total assets$974,806 $939,549 $935,366 $928,445 $913,494
Loans receivable, net 771,850 764,665 763,184 753,623 749,523
Total securities 84,468 80,359 82,834 79,738 83,874
Deposits 811,341 772,416 781,770 786,730 754,471
FHLBB advances 47,302 52,745 37,188 27,134 47,083
Shareholders’ equity 96,545 95,221 94,007 93,554 92,584
Wealth assets under administration 585,759 524,459 516,350 509,557 424,702
Discretionary wealth assets under administration 374,271 365,086 366,167 361,326 355,560
Non-discretionary wealth assets under administration 211,488 159,373 150,183 148,230 69,142
Non-performing loans 7,835 7,057 8,792 11,673 14,579
Non-performing assets 11,690 10,890 12,565 14,496 14,579
Accruing loans past due 30-89 days 2,961 11,689 4,537 5,889 3,569
Net interest and dividend income 7,770 7,953 7,687 7,687 7,567
Net interest and dividend income, tax equivalent 8,003 8,214 7,966 7,981 7,882
Provision for loan losses 364 352 503 344 525
Non-interest income 1,951 2,023 2,327 1,888 2,000
Non-interest expense 6,860 7,427 7,411 6,500 6,638
Income before income taxes 2,497 2,197 2,100 2,731 2,403
Income tax provision 615 593 580 812 669
Net income 1,882 1,604 1,520 1,919 1,734
Net income allocated to common shareholders 1,867 1,594 1,509 1,904 1,721
Per share data
Basic earnings per common share$0. 68 $0.58 $0.55 $0.70 $0.63
Diluted earnings per common share 0.67 0.58 0.55 0.69 0.63
Dividends per common share 0.28 0.28 0.28 0.28 0.28
Book value per common share 34.66 34.38 34.07 33.92 33.57
Tangible book value per common share - Non-GAAP⁽¹⁾ 28.94 29.26 28.90 28.63 28.28
Common shares outstanding at end of period 2,785 2,770 2,758 2,758 2,758
Weighted average common shares outstanding, to calculate basic earnings per share 2,757

2,749


2,737
2,737 2,735
Weighted average common shares outstanding, to calculate diluted earnings per share 2,775

2,768


2,755
2,751 2,749
Profitability ratios
Net interest margin (tax equivalent) 3.63% 3.74% 3.63% 3.57% 3.71%
Efficiency ratio(2) 67.11 69.06 67.08 64.13 66.51
Non-interest income to operating revenue 20.18 20.28 19.81 19.22 20.63
Effective income tax rate 24.62 27.00 27.62 29.71 27.79
Return on average assets 0.77 0.70 0.65 0.81 0.77
Return on average common shareholders’ equity 7.82 6.83 6.43 8.20 7.58
Credit quality ratios
Net charge-offs to average loans receivable, gross 0.02% 0.03% 0.04% 0.02% 0.37%
Non-performing loans to loans receivable, gross 1.01 0.92 1.16 1.54 1.93
Accruing loans past due 30-89 days to loans receivable, gross 0.38 1.53 0.60 0.78 0.47
Allowance for loan losses to loans receivable, gross 0.83 0.82 0.79 0.78 0.76
Allowance for loan losses to non-performing loans 82.87 89.05 69.43 50.47 39.22
Non-performing assets to total assets 1.20 1.16 1.34 1.56 1.60
Capital ratios
Common shareholders' equity to assets 9.90% 10.13% 10.05% 10.08% 10.14%
Tangible common shareholders' equity to tangible assets - Non-GAAP⁽¹⁾ 8.41 8.76 8.64 8.66 8.68
Tier 1 leverage capital 8.77 8.83 8.69 8.47 8.77
Total risk-based capital 13.12 13.34 13.26 13.25 13.08
Common equity tier 1 capital 10.88 11.10 11.02 11.01 10.86
(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)Q2 2017Q1 2017Q4 2016Q3 2016Q2 2016
Shareholders' Equity$ 96,545 $ 95,221 $ 94,007 $ 93,554 $ 92,584
Less: Goodwill (13,827) (12,552) (12,552) (12,552) (12,552)
Less: Intangible assets (2,116) (1,611) (1,737) (1,883) (2,031)
Tangible Common Shareholders' Equity$ 80,602 $ 81,058 $ 79,718 $ 79,119 $ 78,001
Total Assets$974,806 $939,549 $935,366 $928,445 $ 913,494
Less: Goodwill (13,827) (12,552) (12,552) (12,552) (12,552)
Less: Intangible assets (2,116) (1,611) (1,737) (1,883) (2,031)
Tangible Total Assets$958,863 $925,386 $921,077 $914,010 $ 898,911
Common Shares outstanding 2,785 2,770 2,758 2,758 2,758
Book value per Common Share – GAAP$ 34.66 $ 34.38 $ 34.09 $ 33.92 $ 33.57
Tangible book value per Common Share - Non-GAAP 28.94 29.26 28.90 28.69 28.28
Common Shareholders’ Equity to Assets – GAAP 9.90% 10.13% 10.05% 10.08% 10.14%
Tangible Common Shareholders’ Equity to Tangible Assets – Non-GAAP 8.41 8.76 8.65 8.66 8.68
Non-interest expense$ 6,860 $ 7,427 $ 7,411 $ 6,499 $ 6,639
Less: Amortization of core deposit intangibles (126) (126) (146) (148) (152)
Less: Foreclosed property expense (63) (232) (493) (27) (12)
Less: Strategic initiatives - - (155) - -
Operating expenses$ 6,671 $ 7,069 $ 6,617 $ 6,324 $ 6,475
Net interest and dividend income, tax equivalent$ 8,003 $ 8,214 $ 7,966 $ 7,981 $ 7,882
Non-interest income 1,951 2,023 2,326 1,889 2,000
Losses/ (gains) on securities, net 14 - (427) (10) (146)
Operating revenue$ 9,940 $ 10,237 $ 9,865 $ 9,860 $ 9,736
Efficiency Ratio 67.11% 69.06% 67.08% 64.13% 66.50%

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

Source:Salisbury Bancorp, Inc.