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

LAKEVILLE, Conn., Oct. 27, 2017 (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, 2017.

Net income allocated to common shareholders was $1.7 million, or $0.61 per common share, for the third quarter ended September 30, 2017 (third quarter 2017), compared with $1.9 million, or $0.68 per common share, for the second quarter ended June 30, 2017 (second quarter 2017), and $1.9 million, or $0.70 per common share, for the third quarter ended September 30, 2016 (third quarter 2016).

Selected Third Quarter 2017 Financial Highlights

  • Net Income per share for the quarter was $0.61 per share compared with $0.68 last quarter and $0.70 for the third quarter 2016.
  • Results for the current quarter included a pre-tax charge of $217 thousand, or $0.05 per share, related to the pending sale of an OREO property.
  • Wealth assets under administration increased to $595 million at September 30, 2017, an increase of $9 million, or 1.5%, from second quarter 2017.
  • Book value per common share increased to $35.01 at September 30, 2017 from $34.66 at June 30, 2017, and $33.92 at September 30, 2016.

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

“We are pleased to report solid results for the third quarter despite the write-down on the OREO property. This quarter we focused on deploying the deposits from our recent acquisition of the New Paltz branch into new loans. Our wealth assets under management also increased, which helps to diversify our sources of income. We continue to focus on improving asset quality and managing non-interest expense while maintaining our commitment to outstanding customer service and enhancing long-term value for our shareholders.”

Net-Interest Income

Tax equivalent net interest income for third quarter 2017 increased $89 thousand, or 1.1%, versus second quarter 2017, and increased $4 thousand or 0.05%, versus third quarter 2016. Average earning assets increased $33.6 million versus second quarter 2017, and increased $30.6 million versus third quarter 2016. Average total interest bearing deposits increased $28.4 million versus second quarter 2017 and increased $5.0 million versus third quarter 2016. The net interest margin of 3.50% decreased 8 basis points from 3.58% in the second quarter 2017 and decreased 7 basis points from 3.57% for the third quarter 2016.

Interest income for the third quarter 2017 reflects net accretion related to the fair value adjustments of loans acquired in the Riverside Bank acquisition in the amount of $193 thousand. The second quarter of 2017 and third quarter of 2016 included similar adjustments of $250 thousand and $441 thousand, respectively.

Non-Interest Income

Non-interest income for third quarter 2017 increased $129 thousand versus second quarter 2017 and increased $192 thousand versus third quarter 2016.

Trust and Wealth Advisory revenues decreased $18 thousand versus second quarter 2017 and increased $25 thousand versus third quarter 2016. The quarter-over-quarter net revenue decrease for the Trust and Wealth Advisory division reflects lower revenue from tax preparation fees, partly offset by higher asset based and other fees. The increase from the prior year third quarter primarily reflects an increase in estate and retirement planning fees and asset based fees.

Service charges and fees increased $33 thousand versus second quarter 2017 and increased $113 thousand versus third quarter 2016. The increases primarily reflected higher deposit related fees.

Income from sales and servicing of mortgage loans increased $68 thousand versus second quarter 2017 and increased $34 thousand versus third quarter 2016. Third quarter 2017 mortgage loans sales totaled $0.4 million versus $1.6 million for second quarter 2017, and $3.3 million for third quarter 2016. Third quarter 2017, second quarter 2017, and third quarter 2016 included net mortgage servicing amortization and periodic impairment (benefit) charges of $(12) thousand, $68 thousand, and $60 thousand, respectively. The benefit in the current quarter primarily reflected management’s review of the portfolio and the update of key assumptions to more closely reflect the portfolio’s historical performance. As a result of this review, the current quarter includes the reversal of a previously recorded impairment charge of $25 thousand.

Non-Interest Expense

Non-interest expense for third quarter 2017 increased $469 thousand versus second quarter 2017 and increased $720 thousand versus third quarter 2016.

Total compensation expense increased $334 thousand versus second quarter 2017 and increased $152 thousand versus the third quarter of 2016. The increase versus both periods primarily reflected higher salary and benefits expense, partly offset by higher deferred expenses related to loan origination.

Premises and equipment expense increased $88 thousand versus second quarter 2017 and increased $186 thousand versus third quarter 2016. The increase in both periods was substantially attributable to higher lease related expenses and building maintenance and repair costs.

Data processing expense increased $41 thousand versus second quarter 2017 and increased $72 thousand versus third quarter 2016. The increases primarily reflected higher data communications and data processing charges.

Professional fees decreased $283 thousand versus second quarter 2017, and increased $22 thousand versus third quarter 2016. The decrease from the second quarter 2017 was primarily attributable to lower consulting and audit fees and a reversal of accruals to reflect current service levels.

Loan related expenses increased $263 thousand compared to second quarter 2017 and increased $310 thousand versus third quarter 2016. The increase in both periods reflected the write-down on the OREO property noted above as well as higher OREO carrying costs and higher payments for delinquent real estate taxes.

The effective income tax rates for third quarter 2017, second quarter 2017 and third quarter 2016 were 29.09%, 24.62% and 29.71%, respectively.

Loans

Net loans receivable increased $12 million during third quarter 2017 to $784 million at September 30, 2017, compared with $772 million at June 30, 2017, and increased $30 million compared with $754 million at September 30, 2016.

Asset Quality

Non-performing assets increased $0.6 million during third quarter 2017 to $12.3 million, or 1.3% of assets at September 30, 2017, from $11.7 million, 1.2% of assets at June 30, 2017, and decreased $2.3 million from $14.5 million, or 1.6% of assets, at September 30, 2016.

The amount of total impaired and potential problem loans increased $1.0 million during the quarter to $23.3 million (3.0% of gross loans receivable) during third quarter 2017, compared to $22.3 million, or 2.9% of gross loans receivable at June 30, 2017, and decreased $2.8 million from $26.1 million, or 3.4% of gross loans receivable at September 30, 2016.

Accruing loans receivable 30-to-89 days past due increased $0.5 million during third quarter 2017 to $3.4 million, or 0.44% of gross loans receivable, from $3.0 million, or 0.38% of gross loans receivable at June 30, 2017, and decreased $2.5 million from $5.9 million, or 0.78% of gross loans receivable at September 30, 2016.

Provision for loan loss expense was $237 thousand for third quarter 2017 versus $364 thousand for second quarter 2017, and $344 thousand for third quarter 2016. Net loan charge-offs were $236 thousand for the third quarter 2017, $157 thousand for second quarter 2017 and $171 thousand for the third quarter 2016. Reserve coverage, as measured by the ratio of the allowance for loan losses to gross loans, was 0.82% for the third quarter 2017, versus 0.83% for second quarter 2017 and 0.78% for third 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 $0.35 to $35.01 from the second quarter 2017 and increased $1.09 as compared to the third quarter 2016. Tangible book value per common share increased $0.40 during third quarter 2017 to $29.34 and increased $0.71 as compared to the third quarter 2016.

The increase in shareholders’ equity of $981 thousand in the current quarter to $97.5 primarily reflected net income of $1.7 million, partly 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 September 30, 2017, Salisbury’s Tier 1 leverage, total risk-based capital, and common equity tier 1 capital ratios were 8.49%, 13.20%, and 10.96%, respectively. The Bank’s Tier 1 leverage, total risk-based capital, and common equity tier 1 capital ratios were 9.20%, 12.77%, and 11.87%, respectively, compared with regulatory “well capitalized” minimums of 5.00%, 10.00%, and 6.5%, respectively.

Third Quarter 2017 Dividends on Common Shares

The Board of Directors of Salisbury declared a $0.28 per common share quarterly cash dividend at its October 27, 2017 meeting. The dividend will be paid on November 24, 2017 to shareholders of record as of November 10, 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 (unaudited)

(dollars in thousands, except par value)September 30, 2017December 31, 2016
ASSETS
Cash and due from banks$6,833 $5,434
Interest bearing demand deposits with other banks 42,570 30,051
Total cash and cash equivalents 49,403 35,485
Securities
Available-for-sale at fair value 85,508 79,623
Federal Home Loan Bank of Boston stock at cost 3,038 3,211
Loans held-for-sale 561 -
Loans receivable, net (allowance for loan losses: $6,494 and $6,127) 784,136 763,184
Other real estate owned 3,944 3,773
Bank premises and equipment, net 16,329 14,398
Goodwill 13,815 12,552
Intangible assets (net of accumulated amortization: $3,906 and $3,511) 1,974 1,737
Accrued interest receivable 2,520 2,424
Cash surrender value of life insurance policies 14,297 14,038
Deferred taxes 1,326 1,367
Other assets 2,618 3,574
Total Assets$979,469 $935,366
LIABILITIES and SHAREHOLDERS' EQUITY
Deposits
Demand (non-interest bearing)$225,496 $218,420
Demand (interest bearing) 139,521 127,854
Money market 196,745 182,476
Savings and other 152,570 135,435
Certificates of deposit 117,657 117,585
Total deposits 831,989 781,770
Repurchase agreements 4,529 5,535
Federal Home Loan Bank of Boston advances 27,364 37,188
Subordinated debt 9,805 9,788
Note payable 321 344
Capital lease liability 1,859 418
Accrued interest and other liabilities 6,076 6,316
Total Liabilities 881,943 841,359
Shareholders' Equity
Common stock - $.10 per share par value
Authorized: 5,000,000;
Issued: 2,785,916 and 2,758,086 279 276
Paid-in capital 42,983 42,085
Retained earnings 54,368 51,521
Unearned compensation - restricted stock awards (660) (352)
Accumulated other comprehensive income, net 556 477
Total Shareholders' Equity 97,526 94,007
Total Liabilities and Shareholders' Equity$979,469 $935,366

Salisbury Bancorp, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF INCOME (unaudited)

Periods ended September 30, (in thousands except per share amounts)Three months endedNine months ended
2017 2016 2017 2016
Interest and dividend income
Interest and fees on loans$8,196$8,067$24,544 $23,935
Interest on debt securities
Taxable 443 310 1,115 889
Tax exempt 68 202 345 725
Other interest and dividends 175 91 351 226
Total interest and dividend income 8,882 8,670 26,355 25,775
Interest expense
Deposits 682 565 1,776 1,603
Repurchase agreements 2 2 4 4
Capital lease 29 17 66 53
Note payable 6 6 13 15
Subordinated debt 156 156 468 468
Federal Home Loan Bank of Boston advances 241 237 769 714
Total interest expense 1,116 983 3,096 2,857
Net interest and dividend income 7,766 7,687 23,259 22,918
Provision for loan losses 237 344 953 1,332
Net interest and dividend income after provision for loan losses 7,529 7,343 22,306 21,586
Non-interest income
Trust and wealth advisory 874 849 2,620 2,517
Service charges and fees 935 822 2,799 2,277
Gains on sales of mortgage loans, net 25 55 104 151
Mortgage servicing, net 104 40 180 119
Gains (losses) on sales and calls of available-for-sale securities, net - 9 (14) 157
Other 142 113 365 343
Total non-interest income 2,080 1,888 6,054 5,564
Non-interest expense
Salaries 2,829 2,757 8,266 8,018
Employee benefits 1,004 924 2,923 2,922
Premises and equipment 995 809 2,797 2,546
Data processing 545 473 1,521 1,369
Professional fees 481 459 1,962 1,403
Collections, OREO, and loan related 419 109 875 420
FDIC insurance 106 164 354 474
Marketing and community support 220 144 623 524
Amortization of intangibles 142 148 395 455
Other 479 513 1,561 1,846
Total non-interest expense 7,220 6,500 21,277 19,977
Income before income taxes 2,389 2,731 7,083 7,173
Income tax provision 695 812 1,903 2,008
Net income$1,694$1,919$5,180 $5,165
Net income available to common stock$1,678$1,904$5,139 $5,124
Basic earnings per common share$0.61$0.70$1.87 $1.88
Weighted average common shares outstanding, to calculate basic earnings per share 2,759 2,737 2,755 2,732
Diluted earnings per common share 0.60 0.69 1.85 1.87
Weighted average common shares outstanding, to calculate diluted earnings per share 2,779 2,751 2,774 2,747
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 2017 Q2 2017 Q1 2017 Q4 2016 Q3 2016
Total assets$979,469 $974,806 $939,549 $935,366 $928,445
Loans receivable, net 784,136 771,850 764,665 763,184 753,623
Total securities 88,546 84,468 80,359 82,834 79,738
Deposits 831,989 811,341 772,416 781,770 786,730
FHLBB advances 27,364 47,302 52,745 37,188 27,134
Shareholders’ equity 97,526 96,545 95,221 94,007 93,554
Wealth assets under administration 594,510 585,759 524,459 516,350 509,556
Discretionary wealth assets under administration 374,357 374,271 365,086 366,167 361,326
Non-discretionary wealth assets under administration 220,153 211,488 159,373 150,183 148,230
Non-performing loans 8,311 7,835 7,057 8,792 11,673
Non-performing assets 12,256 11,690 10,890 12,565 14,496
Accruing loans past due 30-89 days 3,449 2,961 11,689 4,537 5,889
Net interest and dividend income (1) 7,766 7,661 7,832 7,687 7,687
Net interest and dividend income, tax equivalent (1) 7,983 7,894 8,093 7,966 7,979
Provision for loan losses 237 364 352 503 344
Non-interest income 2,080 1,951 2,023 2,327 1,888
Non-interest expense (1) 7,220 6,751 7,306 7,411 6,500
Income before income taxes 2,389 2,497 2,197 2,100 2,731
Income tax provision 695 615 593 580 812
Net income 1,694 1,882 1,604 1,520 1,919
Net income allocated to common shareholders 1,678 1,867 1,594 1,509 1,904
Per share data
Basic earnings per common share$0.61 $0. 68 $0.58 $0.55 $0.70
Diluted earnings per common share 0.60 0.67 0.58 0.55 0.69
Dividends per common share 0.28 0.28 0.28 0.28 0.28
Book value per common share 35.01 34.66 34.38 34.07 33.92
Tangible book value per common share - Non-GAAP ⁽2 29.34 28.94 29.26 28.9 28.63
Common shares outstanding at end of period 2,786 2,785 2,770 2,758 2,758
Weighted average common shares outstanding, to calculate basic earnings per share 2,759 2,757 2,749 2,737 2,737
Weighted average common shares outstanding, to calculate diluted earnings per share 2,779 2,775 2,768 2,755 2,751
Profitability ratios
Net interest margin (tax equivalent) (1) 3.50% 3.58% 3.69% 3.45% 3.57%
Efficiency ratio (3) 67.18 66.56 68.68 67.08 64.13
Effective income tax rate 29.09 24.62 27.00 27.62 29.71
Return on average assets 0.69 0.77 0.70 0.65 0.81
Return on average common shareholders’ equity 6.89 7.82 6.83 6.43 8.20
Credit quality ratios
Net charge-offs to average loans receivable, gross 0.03% 0.02% 0.03% 0.04% 0.02%
Non-performing loans to loans receivable, gross 1.05 1.01 0.92 1.16 1.54
Accruing loans past due 30-89 days to loans receivable, gross 0.44 0.38 1.53 0.60 0.78
Allowance for loan losses to loans receivable, gross 0.82 0.83 0.82 0.79 0.78
Allowance for loan losses to non-performing loans 79.30 82.87 89.05 69.43 50.47
Non-performing assets to total assets 1.25 1.20 1.16 1.34 1.56
Capital ratios
Common shareholders' equity to assets 9.96% 9.90% 10.13% 10.05% 10.08%
Tangible common shareholders' equity to tangible assets - Non-GAAP2 8.48 8.41 8.76 8.64 8.66
Tier 1 leverage capital 8.49 8.77 8.83 8.69 8.47
Total risk-based capital 13.20 13.12 13.34 13.26 13.25
Common equity tier 1 capital 10.96 10.88 11.10 11.02 11.01

(1) The net interest margin for 2Q 2017 and 1Q 2017 has been adjusted by $109,000 or (0.05%) and $121,000 or (0.06%), respectively to reflect an adjustment for deferred loan origination costs which were previously reported in compensation expense and have been reclassified as a reduction to loan income.
(2) Refer to schedule labeled “Supplemental Information – Non-GAAP Financial Measures”.
(3) 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 2017 Q2 2017 Q1 2017 Q4 2016 Q3 2016
Shareholders' Equity$97,526 $ 96,545 $95,221 $ 94,007 $ 93,554
Less: Goodwill (13,815) (13,827) (12,552) (12,552) (12,552)
Less: Intangible assets (1,974) (2,116) (1,611) (1,737) (1,883)
Tangible Common Shareholders' Equity$81,737 $ 80,602 $ 81,058 $ 79,718 $ 79,119
Total Assets$979,469 $974,806 $939,549 $935,366 $928,445
Less: Goodwill (13,815) (13,827) (12,552) (12,552) (12,552)
Less: Intangible assets (1,974) (2,116) (1,611) (1,737) (1,883)
Tangible Total Assets$963,680 $958,863 $925,386 $921,077 $914,010
Common Shares outstanding 2,786 2,785 2,770 2,758 2,758
Book value per Common Share – GAAP$35.01 $34.66 $34.38 $34.07 $33.92
Tangible book value per Common Share - Non-GAAP 29.34 28.94 29.26 28.90 28.63
Common Shareholders’ Equity to Assets – GAAP 9.96% 9.90% 10.13% 10.05% 10.08%
Tangible Common Shareholders’ Equity to Tangible Assets – Non-GAAP 8.48 8.41 8.76 8.64 8.66
Non-interest expense$7,220 $ 6,751 $ 7,306 $ 7,411 $ 6,500
Less: Amortization of core deposit intangibles (142) (126) (126) (146) (148)
Less: Foreclosed property expense (318) (63) (232) (493) (27)
Less: Strategic initiatives - - - (155) -
Operating expenses$6,760 $ 6,562 $ 6,948 $ 6,617 $ 6,325
Net interest and dividend income, tax equivalent$7,983 $ 7,894 $ 8,093 $ 7,966 $ 7,981
Non-interest income 2,080 1,951 2,023 2,327 1,888
Losses/ (gains) on securities, net - 14 - (427) (9)
Operating revenue$10,063 $ 9,859 $ 10,116 $ 9,866 $ 9,860
Efficiency Ratio 67.18% 66.56% 68.68% 67.08% 64.13%


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

Source:Salisbury Bancorp, Inc.