- Fourth Quarter and Full Year 2018 Net Income of $0.91 and $3.15 per Share, Respectively
- Total Assets of $1.1 Billion Increased 14% from December 31, 2017 on Strong Loan Growth
- Non-performing Assets were 0.74% of Total Assets, Consistent with December 31, 2017
- Wealth Assets Under Administration of $648 Million Increased 6% in 2018
- Book Value and Tangible Book Value Per Common Share Increased 5% and 7%, Respectively in 2018
LAKEVILLE, Conn., Jan. 25, 2019 (GLOBE NEWSWIRE) -- Salisbury Bancorp, Inc. (“Salisbury”), (NASDAQ Capital Market: “SAL”), the holding company for Salisbury Bank and Trust Company (the “Bank”), announced results for its fourth quarter and full year ended December 31, 2018.
Net income available to common shareholders was $2.5 million, or $0.91 per common share, for Salisbury’s fourth quarter ended December 31, 2018 (fourth quarter 2018), compared with $2.3 million, or $0.84 per common share, for the third quarter ended September 30, 2018 (third quarter 2018), and $1.1 million, or $0.39 per common share, for the fourth quarter ended December 31, 2017 (fourth quarter 2017).
Results for the fourth quarter and full year 2018 included a non-recurring non-taxable gain of $341 thousand or $0.12 per common share related to proceeds receivable from a bank-owned life insurance (“BOLI”) policy due to the death of a covered former employee. Results for the fourth quarter and full year 2017 included a non-recurring charge of $445 thousand or $0.16 per share related to the remeasurement of net deferred tax assets due to the enactment of the Tax Cuts and Jobs Act (“TCJA”) during the quarter.
Salisbury’s President and Chief Executive Officer, Richard J. Cantele, Jr., stated, “Despite challenging market conditions and an extremely competitive environment in 2018, we executed on several strategic priorities to better serve our customers and to prudently grow the Bank. In March, we relocated our Newburgh, New York branch to an improved location. In April, we completed the acquisition of the Fishkill, New York branch of Orange Bank & Trust Company and consolidated our existing Fishkill branch into that new location. Additionally, during 2018 we essentially grew our loan portfolio 13% organically while maintaining strong credit quality. As we enter 2019, we remain focused on enhancing both operating efficiency and profitability, while continuing to provide outstanding customer service.”
Net Interest Income
Tax equivalent net interest income for the fourth quarter 2018 increased $121 thousand, or 1.4%, versus third quarter 2018, and increased $505 thousand, or 6.1%, versus fourth quarter 2017. Average earning assets increased $1.6 million versus third quarter 2018, and increased $127.9 million versus fourth quarter 2017. Average total interest bearing deposits increased $8.4 million versus third quarter 2018 and increased $77.2 million versus fourth quarter 2017. The increase in average interest bearing deposits from the prior year fourth quarter included the acquisition of the Fishkill branch, which increased deposits by $8 million. The tax equivalent net interest margin for the fourth quarter was 3.34% compared with 3.29% for the third quarter 2018 and 3.58% for the fourth quarter 2017.
Non-interest income for fourth quarter 2018 increased $736 thousand versus third quarter 2018 and increased $642 thousand versus fourth quarter 2017.
Trust and Wealth Advisory revenues decreased $15 thousand versus third quarter 2018 and increased $64 thousand versus fourth quarter 2017. The quarter-over-quarter decrease primarily reflected lower estate, 401K advisory and life insurance trust fees whereas the increase from the prior year fourth quarter primarily reflected higher asset based fees.
Service charges and fees increased $93 thousand versus third quarter 2018, and increased $106 thousand versus fourth quarter 2017. The increase from prior quarters primarily reflected the receipt of loan pre-payment penalties of $60 thousand as well as higher interchange fees.
Income from mortgage sales and servicing increased $3 thousand versus third quarter 2018 and increased $12 thousand versus fourth quarter 2017. The increase from prior quarters reflected higher gains on mortgage sales, due to an increase in volume, mostly offset by lower servicing income.
Gains on the sale of available-for-sale securities for the fourth quarter were $302 thousand compared with $193 thousand in the fourth quarter of 2017. Gains on an equity investment in a CRA mutual fund were $8 thousand in the fourth quarter 2018 compared with losses of $6 thousand for the third quarter 2018. Prior to first quarter 2018, unrealized gains and losses on equity investments were included in shareholders’ equity.
Non-interest income for the fourth quarter and full year 2018 also included the non-taxable BOLI gain of $341 thousand noted above.
Non-interest expense included OREO losses of $184 thousand for the fourth quarter 2018 compared with losses of $38 thousand in the prior quarter and $1.4 million in the fourth quarter 2017. The loss in the fourth quarter 2018 reflected an accepted offer on a residential property acquired by the Bank in that quarter. The sale, which is subject to the satisfactory completion of an inspection, is expected to close during the first quarter of 2019.
Compensation expense increased $84 thousand versus third quarter 2018, and increased $514 thousand versus fourth quarter 2017. The increase from third quarter 2018 primarily reflected higher salary and payroll tax expense whereas the increase from fourth quarter 2017 reflected higher base salaries and incentive accruals as well as higher ESOP and 401k accruals.
Premises and equipment costs increased $338 thousand versus third quarter 2018 and increased $340 thousand versus fourth quarter 2017. The fourth quarter 2018 included a charge of $171 thousand to write-off the remainder of the lease and the 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.
Data processing expenses, which also include data communications related expenses, increased $39 thousand versus third quarter 2018 and increased $22 thousand versus fourth quarter 2017.
Professional fees increased $14 thousand versus third quarter 2018 and decreased $27 thousand versus fourth quarter 2017. The quarter over quarter increase was mainly attributed to higher investment management and consulting fees, partly offset by lower audit and legal fees. The decrease from the prior year fourth quarter primarily reflected lower audit fees partly offset by higher legal fees.
Excluding the OREO charges noted above, loan related expenses increased $29 thousand versus third quarter 2018 and increased $195 thousand versus fourth quarter 2017. The increase from third quarter 2018 reflecting higher OREO carrying costs and litigation expense, partly offset by lower expenses for appraisals and inspections. The increase from fourth quarter 2017 primarily reflected a reversal of accruals in the fourth quarter 2017 for OREO carrying costs and delinquent real estate taxes on OREO properties.
The effective income tax rates for fourth quarter 2018, third quarter 2018 and fourth quarter 2017 were 13.7%, 18.7% and 48.4%, respectively. The effective tax rate for 2018 was 16.2% compared with 31.8% for 2017. The decline in the effective tax rate from third quarter 2018 reflected an increase in the amount of net interest income, on qualifying loans, that is 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 the quarter. The decline in the effective income tax rate from the fourth quarter and full year 2017 primarily reflected the enactment of the TCJA during the fourth quarter of 2017. The enactment of the TCJA, which reduced the federal statutory tax rate from 34% to 21%, resulted in a one-time charge of $445 thousand in the fourth quarter 2017 for the remeasurement of net deferred tax assets. Excluding the impact of the new U.S. tax law, the effective tax rate for fourth quarter 2017 was 29.1%.
Gross loans receivable increased $10.7 million during the quarter to $917.1 million at December 31, 2018, compared with $906.4 million at September 30, 2018, and increased $108.6 million from $808.5 million at December 31, 2017. Residential real estate loans increased $1.9 million during fourth quarter 2018 to $428.8 million, and increased $48.1 million from fourth quarter 2017. Commercial real estate loans increased $1.3 million during fourth quarter 2018 to $292.6 million, and increased $33.3 million from fourth quarter 2017. Commercial and Industrial loans increased $12.2 million during the fourth quarter 2018 to $162.9 million, and increased $30.2 million from fourth quarter 2017.
The ratio of gross loans to deposits for fourth quarter 2018 was 99.0% compared with 100.5% for third quarter 2018 and 99.1% for fourth quarter 2017.
Non-performing assets decreased $0.2 million during the current quarter to $8.3 million, or 0.74% of assets at December 31, 2018, from $8.5 million, or 0.77% of assets at September 30, 2018, and increased $1.0 million from $7.4 million, or 0.74% of assets, at December 31, 2017.
The amount of total impaired and potential problem loans were $20.2 million or 2.20% of gross loans receivable at December 31, 2018 compared to $24.4 million, or 2.7% of gross loans receivable at September 30, 2018 and $23.9 million, or 2.97% of gross loans receivable at December 31, 2017.
Accruing loans receivable 30-to-89 days past due increased $0.4 million during fourth quarter 2018 to $2.2 million, or 0.24% of gross loans receivable, from $1.8 million, or 0.20% of gross loans receivable at September 30, 2018, and decreased $1.4 million from $3.5 million, or 0.44% of gross loans receivable at December 31, 2017.
The allowance for loan losses for fourth quarter 2018 was $7.8 million compared with $7.7 million for third quarter 2018 and $6.8 million for fourth quarter 2017.
The provision for loan loss expense was $558 thousand for fourth quarter 2018 versus $378 thousand for third quarter 2018, and $67 thousand for the fourth quarter 2017. The increase in the provision was primarily attributable to loan growth and higher charge-offs in the fourth quarter 2018. Net loan charge-offs (recoveries) were $471 thousand for the fourth quarter 2018, ($15) thousand for third quarter 2018 and ($300) thousand for the fourth quarter 2017. Reserve coverage, as measured by the ratio of the allowance for loan losses to gross loans, was 0.85% for the fourth quarter 2018, versus 0.85% for the third quarter 2018 and 0.84% for the fourth quarter 2017. Similarly, reserve coverage, as measured by the ratio of the allowance for loan losses to non-performing loans was 120% for the fourth quarter of 2018, versus 95% for the third quarter of 2018 and 102% for the fourth quarter of 2017.
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.
Deposits and Borrowings
Deposits were $926.7 million at December 31, 2018 compared with $902.2 million at September 30, 2018 and $815.5 million at December 31, 2017. Deposits at December 31, 2018 reflected brokered deposits, including CDARS one-way buys, of $39.4 million compared with $15.2 million at September 30, 2018. There were no brokered deposit balances at December 31, 2017. Average total deposits for the fourth quarter 2018 were $905.7 million compared with $894.6 million at September 30, 2018. Average total deposits for the fourth quarter 2018 included average brokered deposits of $29.0 million compared with $13.7 million for third quarter 2018.
FHLB advances decreased $0.4 million during the quarter to $67.2 million at December 31, 2018 and increased $12.7 million from December 31, 2017.
Book value per common share increased $0.93 during the fourth quarter to $36.86 per share and increased $1.85 from the fourth quarter 2017. Tangible book value per common share increased $0.98 during fourth quarter 2018 to $31.45 and increased $2.06 as compared to the fourth quarter 2017.
Shareholders’ equity increased $2.7 million in fourth quarter 2018 to $103.5 million at December 31, 2018 as net income of $2.6 million and unrealized gains in the AFS portfolio of $0.8 million were 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 December 31, 2018, Salisbury’s Tier 1 leverage, total risk-based capital, and common equity tier 1 capital ratios were 8.25%, 12.51%, and 10.43%, respectively. The Bank’s Tier 1 leverage, total risk-based capital, and common equity tier 1 capital ratios were 8.83%, 12.09%, and 11.17%, respectively, compared with regulatory “well capitalized” minimums of 5.00%, 10.00%, and 6.5%, respectively.
Fourth Quarter 2018 Dividends on Common Shares
The Board of Directors of Salisbury declared a $0.28 per common share quarterly cash dividend at its January 25, 2019 meeting. The dividend will be paid on February 28, 2019 to shareholders of record as of February 14, 2019.
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.
This news release may contain statements relating to 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)
|(in thousands, except share data)||December 31, 2018||December 31, 2017|
|Cash and due from banks||$||7,238||$||9,357|
|Interest bearing demand deposits with other banks||51,207||39,129|
|Total cash and cash equivalents||58,445||48,486|
|Available-for-sale at fair value||91,818||78,212|
|CRA mutual fund at fair value||836||835|
|Federal Home Loan Bank of Boston stock at cost||4,496||3,813|
|Loans receivable, net (allowance for loan losses: $7,831 and $6,776)||909,279||801,703|
|Other real estate owned||1,810||719|
|Bank premises and equipment, net||18,175||16,401|
|Intangible assets (net of accumulated amortization: $4,497 and $4,043)||1,383||1,837|
|Accrued interest receivable||3,148||2,665|
|Cash surrender value of life insurance policies||14,438||14,381|
|LIABILITIES and SHAREHOLDERS' EQUITY|
|Demand (non-interest bearing)||$||228,448||$||220,536|
|Demand (interest bearing)||153,586||142,575|
|Savings and other||178,807||144,600|
|Certificates of deposit||161,679||116,831|
|Federal Home Loan Bank of Boston advances||67,154||54,422|
|Capital lease liability||3,081||1,835|
|Accrued interest and other liabilities||6,902||5,926|
|Common stock - $.10 per share par value|
|Issued: 2,884,988 and 2,872,578|
|Outstanding: 2,806,781 and 2,785,216||281||279|
|Unearned compensation – restricted stock awards||(711||)||(606||)|
|Accumulated other comprehensive (loss) income, net||(220||)||179|
|Total Shareholders' Equity||103,459||97,514|
|Total Liabilities and Shareholders' Equity||$||1,121,554||$||986,984|
Salisbury Bancorp, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
|Periods ended December 31,||Three months ended||Twelve months ended|
|(in thousands, except per share amounts)||2018||2017||2018||2017|
|Interest and dividend income|
|Interest and fees on loans||$||9,846||$||8,547||$||37,072||$||33,090|
|Interest on debt securities|
|Other interest and dividends||271||134||933||485|
|Total interest and dividend income||10,807||9,167||40,372||35,521|
|Federal Home Loan Bank of Boston advances||421||243||1,733||1,012|
|Total interest expense||2,192||1,142||7,221||4,238|
|Net interest and dividend income||8,615||8,025||33,151||31,283|
|Provision for loan losses||558||67||1,728||1,020|
|Net interest and dividend income after provision for loan losses||8,057||7,958||31,423||30,263|
|Trust and wealth advisory||921||857||3,700||3,477|
|Service charges and fees||1,025||919||3,718||3,718|
|Gains on sales of mortgage loans, net||51||21||89||125|
|Mortgage servicing, net||57||75||308||255|
|Gains (Losses) on CRA mutual fund||8||-||(18||)||-|
|Gains on sales of available -for-sale- securities, net||302||193||318||178|
|BOLI income and gains||432||83||678||343|
|Total non-interest income||2,824||2,182||8,945||8,236|
|Premises and equipment||1,374||1,034||4,535||3,831|
|OREO gains, losses and writedowns, net||184||1,354||275||1,716|
|Collections, OREO, and loan related||145||(50||)||578||463|
|Marketing and community support||185||170||815||793|
|Amortization of intangibles||107||138||454||533|
|Total non-interest expense||7,909||8,052||29,835||29,329|
|Income before income taxes||2,972||2,088||10,533||9,170|
|Income tax provision||408||1,011||1,709||2,914|
|Net income applicable to common shareholders||$||2,528||$||1,065||$||8,713||$||6,201|
|Basic earnings per common share||$||0.91||$||0.39||$||3.15||$||2.25|
|Diluted earnings per common share||0.91||0.38||3.13||2.24|
|Common dividends per share||0.28||0.28||1.12||1.12|
Salisbury Bancorp, Inc. and Subsidiary
SELECTED CONSOLIDATED FINANCIAL DATA (unaudited)
|At or for the quarters ended|
|(in thousands, except per share amounts and ratios)||Q4 2018||Q3 2018||Q2 2018||Q1 2018||Q4 2017|
|Loans receivable, net||909,279||898,625||872,796||830,370||801,703|
|Wealth assets under administration||648,027||690,448||667,933||600,256||610,218|
|Discretionary wealth assets under administration||398,287||435,357||397,637||390,248||394,673|
|Non-discretionary wealth assets under administration||249,740||255,091||270,296||210,008||215,545|
|Accruing loans past due 30-89 days||2,165||1,784||1,507||3,362||3,536|
|Net interest and dividend income||8,615||8,500||8,043||7,993||8,025|
|Net interest and dividend income, tax equivalent||8,736||8,615||8,155||8,112||8,231|
|Provision for loan losses||558||378||467||325||67|
|Income before income taxes||2,972||2,881||2,217||2,463||2,088|
|Income tax provision||408||537||318||446||1,011|
|Net income allocated to common shareholders||2,528||2,311||1,877||1,997||1,065|
|Per share data|
|Basic earnings per common share||$||0.91||$||0.84||$||0.68||$||0.72||$||0.39|
|Diluted earnings per common share||0.91||0.83||0.68||0.71||0.38|
|Dividends per common share||0.28||0.28||0.28||0.28||0.28|
|Book value per common share||36.86||35.93||35.38||35.20||35.01|
|Tangible book value per common share - Non-GAAP ⁽1⁾||31.45||30.47||29.88||29.63||29.39|
|Common shares outstanding at end of period (in thousands)||2,807||2,805||2,803||2,787||2,785|
|Weighted average common shares outstanding, to calculate basic earnings per share (in thousands)||2,766||2,764||2,761||2,759||2,757|
|Weighted average common shares outstanding, to calculate diluted earnings per share (in thousands)||2,779||2,779||2,779||2,780||2,778|
|Net interest margin (tax equivalent)||3.34||%||3.29||%||3.31||%||3.46||%||3.58||%|
|Efficiency ratio (2)||69.13||66.91||70.87||69.35||64.90|
|Effective income tax rate (3)||13.74||18.65||14.35||18.09||48.42|
|Return on average assets||0.92||0.85||0.69||0.81||0.43|
|Return on average common shareholders’ equity||9.99||9.26||7.68||8.33||4.38|
|Credit quality ratios|
|Non-performing loans to loans receivable, gross||0.71||0.90||0.67||0.61||0.82|
|Accruing loans past due 30-89 days to loans receivable, gross||0.24||0.20||0.17||0.40||0.44|
|Allowance for loan losses to loans receivable, gross||0.85||0.85||0.84||0.84||0.84|
|Allowance for loan losses to non-performing loans||120.21||94.77||125.51||138.56||102.12|
|Non-performing assets to total assets||0.74||0.77||0.58||0.57||0.74|
|Common shareholders' equity to assets||9.22||%||9.17||%||9.04||%||9.67||%||9.88||%|
|Tangible common shareholders' equity to tangible assets - Non-GAAP⁽1⁾||7.98||7.89||7.75||8.26||8.43|
|Tier 1 leverage capital||8.25||8.02||8.30||8.56||8.53|
|Total risk-based capital||12.51||12.26||12.27||12.70||12.94|
|Common equity tier 1 capital||10.43||10.17||10.18||10.54||10.73|
(1) Refer to schedule labeled “Supplemental Information – Non-GAAP Financial Measures”.
(2) 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.
(3) The effective tax rate for 4Q 2017 includes the discrete charge related to the remeasurement of net deferred tax assets. Excluding this charge, the effective tax rate for the quarter was 27.12%.
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)||Q4 2018||Q3 2018||Q2 2018||Q1 2018 ||Q4 2017|
|Common Shareholders' Equity||$||103,459||$||100,767||$||99,180||$||98,097||$||97,514|
|Less: Intangible assets||(1,383||)||(1,490||)||(1,601||)||(1,716||)||(1,837||)|
|Tangible Common Shareholders' Equity||$||88,261||$||85,462||$||83,764||$||82,566||$||81,862|
|Less: Intangible assets||(1,383||)||(1,490||)||(1,601||)||(1,716||)||(1,837||)|
|Tangible Total Assets||$||1,106,356||$||1,083,410||$||1, 081,364||$||999,403||$||971,332|
|Common Shares outstanding||2,807||2,805||2,803||2,787||2,758|
|Book value per Common Share – GAAP||$||36.86||$||35.93||$||35.38||$||35.20||$||35.01|
|Tangible book value per Common Share - Non-GAAP||31.45||30.47||29.88||29.63||29.39|
|Less: Amortization of core deposit intangibles||(107||)||(111||)||(116||)||(120||)||(138||)|
|Less: Foreclosed property expense including OREO gains, losses and |
|Adjusted non-interest expense||$||7,542||$||7,166||$||7,230||$||7,006||$||6,633|
|Net interest and dividend income, tax equivalent||$||8,736||$||8,615||$||8,155||$||8,112||$||8,231|
|(Gains) losses on securities||(310||)||6||(11||)||15||(193||)|
|BOLI proceeds receivable||(341||)||-||-||-||-|
|Efficiency Ratio – Non-GAAP 1||69.13||%||66.91||%||70.87||%||69.35||%||64.90||%|
1 Excluding revenue and expenses associated with trust & wealth advisory, the efficiency ratios would be: Q4 2018: 67.27%; Q3 2018: 65.65%; Q2 2018: 69.47%; Q1 2018: 67.67%; Q4 2017: 62.45%.
Source: Salisbury Bancorp, Inc.
Salisbury Contact: Richard J. Cantele, Jr., President and Chief Executive Officer
860-435-9801 or firstname.lastname@example.org