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Salisbury Bancorp, Inc. Reports Results for First Quarter 2019; Declares 28 Cent Dividend

  • First Quarter Net Income of $0.87 per share
  • Return on Average Assets of 0.89%; Efficiency Ratio of 66.15%
  • Non-performing Assets Improved to 0.64% of Total Assets from 0.74% at December 31, 2018
  • Wealth Assets Under Administration of $692 Million

LAKEVILLE, Conn., April 26, 2019 (GLOBE NEWSWIRE) -- Salisbury Bancorp, Inc. (“Salisbury”), (NASDAQ: “SAL”), the holding company for Salisbury Bank and Trust Company (the “Bank”), announced results for its first quarter ended March 31, 2019.

Net income available to common shareholders was $2.4 million, or $0.87 per common share, for Salisbury’s first quarter ended March 31, 2019 (first quarter 2019), compared with $2.5 million, or $0.91 per common share, for the fourth quarter ended December 31, 2018 (fourth quarter 2018), and $2.0 million, or $0.72 per common share, for the first quarter ended March 31, 2018 (first quarter 2018).

Salisbury’s President and Chief Executive Officer, Richard J. Cantele, Jr., stated, “We reported strong earnings for the first quarter despite a sustained competitive landscape and an uncertain interest rate environment. Strength in commercial lending for the quarter was mostly offset by seasonally lower residential lending and the payoff of a $7.5 million residential loan. The ratio of our non-performing assets improved significantly this quarter due to the sale of a $1.0 million OREO property. We remain intently focused on enhancing operating efficiency and profitability while continuing to provide outstanding service to our customers.”

Net Interest Income

Tax equivalent net interest income for the first quarter 2019 decreased $174 thousand, or 2.0%, versus fourth quarter 2018, and increased $450 thousand, or 5.6%, versus first quarter 2018. Average earning assets increased $2.5 million versus fourth quarter 2018, and increased $109.9 million versus first quarter 2018. Average total interest bearing deposits increased $17.8 million versus fourth quarter 2018 and increased $93.3 million versus first quarter 2018. The tax equivalent net interest margin for the first quarter 2019 was 3.28% compared with 3.34% for the fourth quarter 2018 and 3.46% for the first quarter 2018.

Non-Interest Income

Non-interest income for first quarter 2019 decreased $797 thousand versus fourth quarter 2018 and increased $52 thousand versus first quarter 2018. The first quarter 2019 included losses of $9 thousand on the sale of available-for-sale securities compared with gains of $302 thousand in the fourth quarter 2018 and losses of $2 thousand in first quarter 2018. The fourth quarter 2018 also included a non-taxable gain of $341 thousand related to proceeds receivable from a bank-owned life-insurance (“BOLI”) policy due to the death of a covered former employee.

Trust and Wealth Advisory revenues decreased $15 thousand versus fourth quarter 2018 and increased $12 thousand versus first quarter 2018. The decrease from fourth quarter 2018 primarily reflected lower asset management and estate fees whereas the increase from first quarter 2018 primarily reflected higher asset management fees.

Service charges and fees decreased $105 thousand versus fourth quarter 2018, and increased $52 thousand versus first quarter 2018. The decline from fourth quarter 2018 primarily reflected lower interchange fees and lower loan prepayment fees. The increase from first quarter 2018 primarily reflected higher deposit, interchange and prepayment fees.

Income from mortgage sales and servicing decreased $25 thousand versus fourth quarter 2018 and decreased $18 thousand versus first quarter 2018. The decrease from comparative quarters primarily reflected lower gains on the sale of mortgage loans, due to a reduction in volume. The lower gains in first quarter 2019 were partly offset by higher mortgage servicing income.

Non-Interest Expense

Non-interest expense for the first quarter 2019 decreased $698 thousand from fourth quarter 2018 and increased $31 thousand from first quarter 2018.

Compensation expense decreased $49 thousand versus fourth quarter 2018, and increased $173 thousand versus first quarter 2018. The decrease from the fourth quarter 2018 primarily reflected lower salary expense, including lower production and incentive accruals, partly offset by higher benefits expense and a seasonal increase in payroll taxes. The increase from the first quarter 2018 primarily reflected higher salary and benefits expenses.

Premises and equipment costs decreased $402 thousand versus fourth quarter 2018 and decreased $52 thousand versus first quarter 2018. The fourth quarter 2018 included a charge of $171 thousand to write off the lease and fixed assets related to the Bank’s previously occupied Fishkill, New York branch location and a charge of $95 thousand to write-off the remaining term of a third-party software contract. Additionally, the fourth quarter 2018 included higher building maintenance and repair costs. The decline from first quarter 2018 reflected lower software related costs.

Data processing expenses, which also include data communications related expenses, decreased $49 thousand versus fourth quarter 2018 and increased $23 thousand versus first quarter 2018. The decrease from the fourth quarter 2018 primarily reflected lower trust & wealth and core system data processing charges whereas the increase from first quarter 2018 reflected higher core system data processing costs.

Professional fees increased $25 thousand versus fourth quarter 2018 and decreased $84 thousand versus first quarter 2018. The increase from the fourth quarter 2018 was attributed to higher audit and exam fees, partly offset by lower investment management and internal audit fees. The decrease from the prior year first quarter primarily reflected lower consultation and investment management fees, partly offset by higher audit and exam fees and internal audit expenses.

Loan related expenses decreased $147 thousand versus the fourth quarter 2018 and increased $48 thousand compared with the first quarter 2018. The decrease from fourth quarter 2018 primarily reflected lower OREO losses and lower OREO carrying costs, partly offset by higher loan-related legal expenses. The increase from first quarter 2018 primarily reflected higher OREO carrying costs. OREO losses were $52 thousand in first quarter 2019 compared with $184 thousand in fourth quarter 2018 and $52 thousand in first quarter 2018.

The effective income tax rates for first quarter 2019, fourth quarter 2018 and first quarter 2018 were 17.8%, 13.7% and 18.1%, respectively. The lower tax rate for fourth quarter 2018 was primarily attributed to a higher amount of net interest income, on qualifying loans, that was deductible from New York state taxable income as well as tax credits for New York state mortgage recording taxes paid. The tax rate for the fourth quarter 2018 also reflected the non-taxable BOLI proceeds receivable recorded in that quarter.

Loans

Gross loans receivable increased $2.8 million during the quarter to $919.9 million at March 31, 2019, compared with $917.1 million at December 31, 2018, and increased $82.5 million from $837.4 million at March 31, 2018. Residential real estate loans decreased $10.8 million during first quarter 2019 to $418.1 million, and increased $26.5 million from first quarter 2018. The decline in residential loans from fourth quarter 2018 reflected the pay-off of a $7.5 million loan. Commercial real estate loans increased $8.1 million during first quarter 2019 to $300.6 million, and increased $28.3 million from first quarter 2018. Commercial and Industrial loans increased $4.6 million during the first quarter 2019 to $167.5 million, and increased $30.3 million from first quarter 2018.

The ratio of gross loans to deposits for first quarter 2019 was 97.7% compared with 99.0% for fourth quarter 2018 and 100.7% for first quarter 2018.

Asset Quality

Non-performing assets decreased $1.2 million during the first quarter 2019 to $7.1 million, or 0.64% of assets at March 31, 2019, from $8.3 million, or 0.74% of assets at December 31, 2018, and increased $1.4 million from $5.8 million, or 0.57% of assets, at March 31, 2018. The decrease in non-performing assets from the fourth quarter of 2018 primarily reflected the sale of an OREO property.    

The amount of total impaired and potential problem loans was $22.9 million or 2.49% of gross loans receivable at March 31, 2019 compared to $20.2 million, or 2.20% of gross loans receivable at December 31, 2018 and $23.0 million, or 2.75% of gross loans receivable at March 31, 2018.

Accruing loans receivable 30-to-89 days past due were $2.2 million or 0.24% of gross loans receivable at March 31, 2019 compared to $2.2 million, or 0.24% of gross loans receivable at December 31, 2018, and $3.4 million, or 0.40% of gross loans receivable at March 31, 2018.

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.

During the first quarter 2019, the allowance for loan losses activity included reduced charge-offs, quarterly provisions, and the transfer of the remaining unearned credit-related discount on the loans acquired in the 2014 Riverside Bank acquisition. The transfer of the unearned credit-related discount increased gross loans receivable and the allowance for loan losses by $664 thousand without changing net loans receivable. The allowance for loan losses was further increased by the provision for loan loss expense of $294 thousand for first quarter 2019 compared with $558 thousand for fourth quarter 2018 and $325 thousand for the first quarter 2018. Net loan charge-offs were $38 thousand for the first quarter 2019, $471 thousand for fourth quarter 2018 and $43 thousand for the first quarter 2018.

As a result of these factors, reserve coverage, as measured by the ratio of the allowance for loan losses to gross loans, was 0.95% for the first quarter 2019, versus 0.85% for the fourth quarter 2018 and 0.84% for the first quarter 2018. Similarly, reserve coverage, as measured by the ratio of the allowance for loan losses to non-performing loans was 137% for the first quarter of 2019, versus 120% for the fourth quarter of 2018 and 139% for the first quarter of 2018.

Deposits and Borrowings

Deposits were $942.0 million at March 31, 2019 compared with $926.7 million at December 31, 2018 and $831.8 million at March 31, 2018. Deposits at March 31, 2019 included brokered deposits, including CDARS one-way buys, of $49.7 million compared with $39.4 million at December 31, 2018 and $7.8 million at March 31, 2018. Average total deposits for the first quarter 2019 were $918.8 million compared with $905.7 million at December 31, 2018 and $823.6 million at March 31, 2018. Average total deposits for the first quarter 2019 included average brokered deposits of $42.2 million compared with $29.0 million for fourth quarter 2018 and $6.5 million for first quarter 2018.

FHLB advances decreased $19.4 million during the quarter to $47.7 million at March 31, 2019 and decreased $14.8 million from March 31, 2018.

Capital

Shareholders’ equity, which included after-tax net unrealized gains on available-for-sale securities of $680 thousand, was $106.1 million at March 31, 2019. Book value and tangible book value, which excludes goodwill and core deposit intangibles, were $37.81 and $32.43, respectively at March 31, 2019.

The regulatory capital ratios of the Company and the Bank remain in compliance with regulatory “well capitalized” requirements. At March 31, 2019, Salisbury’s tier 1 leverage, total risk-based capital, and common equity tier 1 capital ratios were 8.32%,12.68%, and 10.50%, respectively. The Bank’s tier 1 leverage, total risk-based capital, and common equity tier 1 capital ratios were 8.97%, 12.35%, and 11.33%, respectively, compared with regulatory “well capitalized” minimums of 5.00%, 10.00%, and 6.5%, respectively.

Dividends on Common Shares

The Board of Directors of Salisbury declared a $0.28 per common share quarterly cash dividend at their April 26, 2019 meeting. Such dividend will be paid on May 31, 2019 to shareholders of record as of May 17, 2019.

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 share data) March 31, 2019 December 31, 2018
ASSETS (unaudited)  
Cash and due from banks $ 6,944   $ 7,238  
Interest bearing demand deposits with other banks   41,685     51,207  
Total cash and cash equivalents   48,629     58,445  
Securities    
Available-for-sale at fair value   98,255     91,818  
CRA mutual fund, at fair value   852     836  
Federal Home Loan Bank of Boston stock at cost   3,372     4,496  
Loans receivable, net (allowance for loan losses: $8,750 and $7,831)   911,188     909,279  
Other real estate owned   741     1,810  
Bank premises and equipment, net   17,812     18,175  
Goodwill   13,815     13,815  
Intangible assets (net of accumulated amortization: $4,601 and $4,497)   1,279     1,383  
Accrued interest receivable   3,411     3,148  
Cash surrender value of life insurance policies   15,267     14,438  
Deferred taxes   766     1,276  
Other assets   3,538     2,635  
Total Assets $ 1,118,925   $ 1,121,554  
LIABILITIES and SHAREHOLDERS' EQUITY    
Deposits    
Demand (non-interest bearing) $ 219,168   $ 228,448  
Demand (interest bearing)   157,123     153,586  
Money market   203,309     204,219  
Savings and other   190,011     178,807  
Certificates of deposit   172,358     161,679  
Total deposits   941,969     926,739  
Repurchase agreements   2,951     4,104  
Federal Home Loan Bank of Boston advances   47,712     67,154  
Subordinated debt   9,841     9,835  
Note payable   272     280  
Finance lease   3,046     3,081  
Accrued interest and other liabilities   7,025     6,902  
Total Liabilities   1,012,816     1,018,095  
Shareholders' Equity    
Common stock - $0.10 per share par value    
Authorized: 5,000,000;    
Issued: 2,884,888 and 2,884,988    
Outstanding: 2,806,681 and 2,806,781   281     281  
Unearned compensation - restricted stock awards   (606)     (711)  
Paid-in capital   43,765     43,770  
Retained earnings   61,989     60,339  
Accumulated other comprehensive income (loss), net   680     (220)  
Total Shareholders' Equity   106,109     103,459  
Total Liabilities and Shareholders' Equity $ 1,118,925   $ 1,121,554  
             

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

Three months ended March 31, (in thousands except per share amounts)   2019     2018  
Interest and dividend income    
Interest and fees on loans $   9,934   $   8,649  
Interest on debt securities    
Taxable     621       460  
Tax exempt     72       32  
Other interest and dividends     227       159  
Total interest and dividend income     10,854       9,300  
Interest expense    
Deposits     1,796       777  
Repurchase agreements     3       1  
Finance lease     46       35  
Note payable     4       5  
Subordinated debt     156       156  
Federal Home Loan Bank of Boston advances     412       332  
Total interest expense     2,417       1,306  
Net interest and dividend income     8,437       7,994  
Provision for loan losses     294       326  
Net interest and dividend income after provision for loan losses     8,143       7,668  
Non-interest income    
Trust and wealth advisory     906       894  
Service charges and fees     920       868  
Gains on sales of mortgage loans, net     7       18  
Mortgage servicing, net     76       83  
Gains (losses) on CRA mutual fund     11     (13)  
Losses on available-for-sale securities, net     (9)       (2)  
Other      116       126  
Total non-interest income     2,027       1,974  
Non-interest expense    
Salaries     2,993       2,846  
Employee benefits     1,185       1,159  
Premises and equipment     972       1,024  
Data processing     509       486  
Professional fees     535       619  
OREO gains, losses and write-downs     52       52  
Collections and other real estate owned     130     82  
FDIC insurance     163       130  
Marketing and community support     156       242  
Amortization of core deposit intangibles     104       120  
Other     412       422  
Total non-interest expense     7,211       7,182  
Income before income taxes     2,959       2,460  
Income tax provision     525       445  
Net income $   2,434   $   2,015  
Net income allocated to common stock $   2,408   $   1,995  
     
Basic earnings per common share $   0.87   $   0.72  
Weighted average common shares outstanding,  to calculate basic earnings per share     2,777       2,759  
Diluted earnings per common share $   0.86   $   0.72  
Weighted average common shares outstanding, to calculate diluted earnings per share     2,789       2,780  
Common dividends per share $   0.28   $   0.28  
             

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) Q1 2019 Q4 2018 Q3 2018 Q2 2018 Q1 2018
Total assets $1,118,925   $1,121,554   $1,098,715   $1,096,780   $1,014,934  
Loans receivable, net   911,188     909,279     898,625     872,796     830,370  
Total securities   102,479     97,150     101,591     90,870     84,878  
Deposits   941,969     926,739     902,161     897,481     831,837  
FHLBB advances   47,712     67,154     67,596     79,538     62,480  
Shareholders’ equity   106,109     103,459     100,767     99,180     98,097  
Wealth assets under administration   691,731     648,027     690,448     667,933     600,256  
Discretionary wealth assets under administration   444,110     398,287     435,357     397,637     390,248  
Non-Discretionary wealth assets under administration   247,621     249,740     255,091     270,296     210,008  
Non-performing loans   6,389     6,514     8,173     5,881     5,094  
Non-performing assets   7,130     8,324     8,513     6,359     5,761  
Accruing loans past due 30-89 days   2,228     2,165     1,784     1,507     3,362  
Net interest and dividend income   8,437     8,615     8,500     8,043     7,994  
Net interest and dividend income, tax equivalent   8,562     8,736     8,615     8,155     8,112  
Provision for loan losses   294     558     378     467     326  
Non-interest income   2,027     2,824     2,088     2,058     1,974  
Non-interest expense   7,211     7,909     7,329     7,417     7,182  
Income before income taxes   2,959     2,972     2,881     2,217     2,460  
Income tax provision   525     408     537     318     445  
Net income   2,434     2,564     2,344     1,899     2,015  
Net income applicable to common shareholders   2,408     2,528     2,311     1,877     1,995  
Per share data          
Basic earnings per common share $0.87   $0.91   $0.84   $0.68   $0.72  
Diluted earnings per common share   0.86     0.91     0.83     0.68     0.72  
Dividends per common share   0.28     0.28     0.28     0.28     0.28  
Book value per common share   37.81     36.86     35.93     35.38     35.20  
Tangible book value per common share - Non-GAAP⁽¹⁾   32.43     31.45     30.47     29.88     29.63  
Common shares outstanding at end of period (in thousands)   2,807     2,807     2,805     2,803     2,787  
Weighted average common shares outstanding, to calculate basic earnings per share (in thousands)   2,777     2,766     2,764     2,761     2,759  
Weighted average common shares outstanding, to calculate diluted earnings per share (in thousands)   2,789     2,779     2,779     2,779     2,780  
           
Profitability ratios          
Net interest margin (tax equivalent)   3.28%     3.34%     3.29%     3.31%     3.46%  
Efficiency ratio 1   66.15     69.13     66.91     70.87     69.35  
Effective income tax rate   17.75     13.74     18.65     14.35     18.09  
Return on average assets   0.89     0.92     0.85     0.69     0.81  
Return on average common shareholders’ equity   9.45     9.99     9.26     7.68     8.33  
Credit quality ratios          
Non-performing loans to loans receivable, gross   0.69     0.71     0.90     0.67     0.61  
Accruing loans past due 30-89 days to loans receivable, gross   0.24     0.24     0.20     0.17     0.40  
Allowance for loan losses to loans receivable, gross   0.95     0.85     0.85     0.84     0.84  
Allowance for loan losses to non-performing loans   136.96     120.21     94.77     125.51     138.56  
Non-performing assets to total assets   0.64     0.74     0.77     0.58     0.57  
           
Capital ratios          
Common shareholders' equity to assets   9.48%     9.22%     9.17%     9.04%     9.67%  
Tangible common shareholders' equity to tangible assets - Non-GAAP 2   8.25     7.98     7.89     7.75     8.26  
Tier 1 leverage capital   8.32     8.25     8.02     8.30     8.56  
Total risk-based capital   12.68     12.51     12.26     12.27     12.70  
Common equity tier 1 capital   10.50     10.43     10.17     10.18     10.54  

1 Calculated 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.
Refer to schedule labeled “Supplemental Information – Non-GAAP Financial Measures”.


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) Q1 2019 Q4 2018 Q3 2018 Q2 2018 Q1 2018
           
Common Shareholders' Equity $106,108   $103,459   $100,767   $99,180   $98,097  
Less: Goodwill   (13,815)     (13,815)     (13,815)     (13,815)     (13,815)  
Less: Intangible assets   (1,279)     (1,383)     (1,490)     (1,601)     (1,716)  
Tangible Common Shareholders' Equity $91,014   $88,261   $85,462   $83,764   $82,566  
Total Assets $1,118,925   $1,121,554   $1,098,715   $1,096,780   $1,014,934  
Less: Goodwill   (13,815)     (13,815)     (13,815)     (13,815)     (13,815)  
Less: Intangible assets   (1,279)     (1,383)     (1,490)     (1,601)     (1,716)  
Tangible Total Assets $1,103,831   $1,106,356   $1,083,410   $ 1, 081,364   $999,403  
Common Shares outstanding   2,807     2,807     2,805     2,803     2,787  
           
Book value per Common Share – GAAP $37.81   $36.86   $35.93   $35.38   $35.20  
Tangible book value per Common Share - Non-GAAP   32.43     31.45     30.47     29.88     29.63  
           
Consolidated:          
Non-interest expense $7,211   $7,909   $7,329   $7,417   $7,182  
Less: Amortization of core deposit intangibles   (104)     (107)     (111)     (116)     (120)  
Less: Foreclosed property expense including OREO gains, losses and
Write downs
  (103)     (260)     (52)     (71)     (56)  
Adjusted non-interest expense $7,004   $7,542   $7,166   $7,230   $7,006  
Net interest and dividend income, tax equivalent $8,562   $8,736   $8,615   $8,155   $8,112  
Non-interest income   2,027     2,824     2,088     2,058     1,974  
(Gains) losses on securities   (2)     (300)     6     (11)     15  
BOLI proceeds receivable   -     (341)     -     -     -  
Adjusted revenue $10,588   $10,909   $10,709   $10,202   $10,101  
Efficiency Ratio – Non-GAAP 1   66.15%     69.13%     66.91%     70.87%     69.35%  

1 Excluding revenue and expenses associated with trust & wealth advisory, the efficiency ratios would be: Q1 2019: 64.51%; Q4 2018: 67.17%; Q3 2018: 65.65%; Q2 2018: 69.47%; Q1 2018: 67.67%.

Source: Salisbury Bancorp, Inc.

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