NEWPORT, NH--(Marketwired - Jul 19, 2016) - Lake Sunapee Bank Group ("we," "us," "our" or the "Company") (
"We are very pleased with second quarter performance," President and Chief Executive Officer, Steve Theroux, commented. "In addition to deposits increasing, we originated strong loan volume which provided both portfolio loan and servicing portfolio loan growth. During the second quarter, we began to realize expenses related to the definitive merger agreement, announced on May 5, 2016, with Bar Harbor Bankshares whereby the Company will merge with and into Bar Harbor Bankshares. We expect additional expenses related to the transaction to impact earnings between now and closing."
Year-to-Date Highlights
Highlights of the six months ended June 30, 2016 include:
- Net income available to common stockholders increased 2.22% compared to the same period in 2015.
- Return on average common stockholders' equity of 7.11% and return on average assets of 0.63%.
- Book value per common share increased 3.37% to $16.86 as of June 30, 2016.
- Loans increased $16.4 million, or 1.35%, to $1.2 billion as of June 30, 2016.
- Loans totaling $178.1 million were originated.
- Our loan servicing portfolio increased $5.7 million to $451.8 million.
- Net loan charge-offs were $341 thousand, or 0.06% (annualized) of average loans, for the six months ended June 30, 2016.
- As a percentage of total loans, nonperforming loans were 0.47%.
- Net interest margin was 3.07%.
- Noninterest income increased 5.28% to $10.3 million compared to the same period in 2015.
Second Quarter Highlights
Highlights of the three months ended June 30, 2016 (as compared to the prior quarter end and quarter to date) include:
- Total assets increased $27.4 million, or 1.75%, to $1.6 billion.
- Loans increased $21.7 million, or 1.79%, to $1.2 billion.
- Loans originated increased 95.13% to $117.7 million.
- Our loan servicing portfolio increased $5.7 million to $451.8 million.
- Net loan charge-offs were $36 thousand, or 0.01% (annualized) of average loans, for the quarter ended June 30, 2016.
- Deposits increased $6.8 million, or 0.6%, to $1.1 billion.
- Return on average common stockholders' equity of 6.98% and return on average assets of 0.61%.
- Noninterest income increased 25.26% to $5.7 million.
Earnings Summary for the Three and Six Months Ended June 30, 2016
Net income decreased $101 thousand, or 4.09%, compared to the first quarter of 2016. The decrease in net income for the quarter ended June 30, 2016 compared to the quarter ended March 31, 2016 resulted from $1.5 million, or 12.98%, in noninterest expenses including $754 thousand of non-deductible expenses related to the pending acquisition by Bar Harbor Bankshares (BHB), announced on May 5, 2016, offset by increases of $367 thousand, or 3.47%, in net interest and dividend income, and $1.1 million, or 25.26%, in noninterest income.
Net income for the six months ended June 30, 2016 increased $116 thousand, or 2.46%, to $4.8 million compared to $4.7 million for the same period in 2015. The increase in net income resulted from increases of $1.3 million, or 6.42%, in net interest and dividend income after provision for loan losses, and $517 thousand, or 5.28%, in noninterest income, offset by an increase of $1.7 million, or 7.29%, in noninterest expenses including the aforementioned $754 thousand of non-deductible expenses related to the pending acquisition by BHB.
Net interest and dividend income and Margin
Net interest and dividend income for the quarter ended June 30, 2016 increased $367 thousand, or 3.47%, compared to the first quarter of 2016, primarily driven by higher yields on the loans and investments during the period. Interest and dividend income increased $466 thousand, or 3.75%, to $12.9 million for the quarter ended June 30, 2016 compared to the quarter ended March 31, 2016, which included an increase of $346 thousand, or 3.00%, in interest and fees on loans. The increase in interest and fees on loans includes the recognition of approximately $200 thousand of interest on a non-accruing loan which was paid off during the quarter. Interest expense increased $99 thousand, or 5.33%, including an increase of $105 thousand in interest on advances and other borrowed money representing the impact of average borrowings increasing 17.16% during the second quarter of 2016 compared to the first quarter of 2016.
For the quarter ended June 30, 2016, our net interest margin increased to 3.08% compared to 2.99% for the quarter ended March 31, 2016 due primarily to the increase in the average yields on loans and investments to 3.83% and 2.26%, respectively. The average cost of deposits for the second quarter of 2016 was 0.34% compared to 0.34% for the first quarter of 2016 while the average cost of other borrowed funds was 1.51% and 1.58%, respectively.
The average cost of funds for the quarter ended June 30, 2016 was 0.57% compared to 0.55% for the quarter ended March 31, 2016, due to the increased average volume in other borrowed funds which typically carry a higher cost.
Net interest and dividend income for the six months ended June 30, 2016 increased $1.1 million, or 5.37%, compared to the same period in 2015, primarily driven by the increase of interest income on debt securities. Interest and dividend income increased $1.4 million, or 5.73%, to $25.3 million for the six months ended June 30, 2016 compared to the same period in 2015, which included increases of $327 thousand, or 1.42%, in interest and fees on loans including the aforementioned recognition of approximately $200 thousand of interest on a non-accruing loan which was paid off during the quarter and $1.0 million, or 122.79%, in interest on debt securities and dividends. Interest expense increased $276 thousand, or 7.79%, which included a decrease of $208 thousand, or 10.11%, in interest on deposits and an increase of $430 thousand, or 81.75%, in interest on advances and other borrowed money which includes the impact of an increase of $70.0 million in average borrowings as compared to the same period in 2015.
For the six months ended June 30, 2016, our net interest margin increased to 3.07% compared to 2.96% for the same period in 2015. The average yield on interest-earning assets for the six months ended June 30, 2016 was 3.62% compared to 3.48% for the same period in 2015. The average cost of deposits for the six months ended June 30, 2016 was 0.34% compared to 0.38% for the same period in 2015. The average cost of funds for the six months ended June 30, 2016 was 0.56% compared to 0.55% for the same period in 2015.
Provision for Loan Losses
During the second quarter of 2016, we recognized an increase of $10 thousand in the provision for loan losses compared to the first quarter of 2016. Net loan charge-offs were $36 thousand, or 0.01% (annualized) of average loans, for the second quarter of 2016, compared to net loan charge-offs of $304 thousand, or 0.10% (annualized) of average loans, for the first quarter of 2016.
During the six months ended June 30, 2016, we recognized a provision for loan losses of $232 thousand compared to $419 thousand for the same period in 2015. Net loan charge-offs were $341 thousand, or 0.06% (annualized) of average loans, for the six months ended June 30, 2016 compared to $723 thousand, or 0.12% (annualized) of average loans, for the same period in 2015.
Noninterest Income
Noninterest income for the second quarter of 2016 was $5.7 million, an increase of $1.2 million, or 25.26%, compared to the first quarter of 2016. The increase was primarily due to an increase of $1.2 million in gains on sales of securities as we sold $30.0 million in bonds during the second quarter compared to no sales of securities or related gains in the first quarter.
Noninterest income for the six month period ended June 30, 2016 was $10.3 million, an increase of $517 thousand, or 5.28%, compared to the same period in 2015. The increase was primarily due to an increase of $828 thousand in gains on sales of securities offset, in part, by a decrease of $462 thousand in mortgage banking activity income as we recognized a change of $160 thousand in mortgage banking-related derivative values.
Noninterest Expense
Noninterest expense for the second quarter of 2016 increased $1.5 million, or 12.98%, compared to the first quarter of 2016. The increase included $754 thousand of non-deductible expenses related to the pending BHB merger and increases of $156 thousand in advertising and promotion expense, $62 thousand in outside services, and $618 thousand in other expenses which includes increases of $327 thousand in tax credit purchases and $107 thousand in debit card fraud charge-offs, partially offset by a decrease of $106 thousand in salaries and employee benefits and $36 thousand in occupancy and equipment expense.
Noninterest expense for the six month period ended June 30, 2016 increased $1.7 million, or 7.29%, compared to the same period in 2015. The increase included $754 thousand of non-deductible expenses related to the pending BHB merger and increases of $326 thousand in salaries and employee benefits, $145 thousand in outside services, $25 thousand in supplies, and $812 thousand in other expenses which includes increases of $264 thousand in contributions including tax credit purchases, $152 thousand in periodic impairment expense related to mortgage servicing rights, and $176 thousand in debit card charge-offs related to fraudulent transactions, partially offset by decreases of $246 thousand in occupancy and equipment expense and $89 thousand in amortization of intangible assets.
Income Tax Provision
Income tax expense for the second quarter of 2016 increased $117 thousand, or 11.45%, to $1.1 million compared to the first quarter of 2016 primarily due to the increase in taxable income during the second quarter. Our effective tax rate was 32.48% for the quarter ended June 30, 2016, an increase from 29.28% for the first quarter of 2016. The increase in effective tax rate comparing quarters is primarily driven by $754 thousand of non-deductible expenses related to the merger.
Income tax expense for the six months ended June 30, 2016 increased $13 thousand to $2.2 million compared to the same period in 2015. Our effective tax rate was 30.87% for the six month period ended June 30, 2016, which reflects an improvement compared to the same period in 2015 as we increased our participation in tax credit programs; the benefits of this participation provide some offset to the impact of the non-deductible merger expenses recognized during the period.
Loans and Credit Quality
During the second quarter of 2016, loans increased $21.7 million, or 1.79%, to $1.2 billion at June 30, 2016 compared to March 31, 2016. The second quarter increase reflects increases of $11.8 million in commercial and industrial loans, $7.9 million in conventional real estate loans, $1.6 million in commercial real estate, and $1.2 million in home equity loans, partially offset by decreases of $471 thousand in construction and land loans and $331 thousand in consumer loans.
During the six months ended June 30, 2016, loans increased $16.4 million, or 1.35%, compared to December 31, 2015. The year-to-date increase reflects increases of $12.6 million in commercial real estate loans, $10.2 million in conventional real estate loans, $7.1 million in commercial and industrial loans, and $988 thousand in home equity loans, partially offset by a decrease of $13.9 million in construction and land loans and $789 thousand in consumer loans.
At June 30, 2016, nonperforming loans totaled $5.9 million, or 0.47% of total loans, compared to $5.5 million, or 0.45% of total loans, at March 31, 2016. The allowance for loan losses to nonperforming loans at June 30, 2016 was 149.11% compared to 158.42% at March 31, 2016 and 147.51% at December 31, 2015.
Deposits and Funding
Deposits increased $6.8 million, or 0.60%, to $1.1 billion at June 30, 2016 compared to March 31, 2016. Our noninterest-bearing deposits increased $19.3 million, or 15.84 %, and interest-bearing deposits decreased $12.5 million, or 1.22%, comparing balances at June 30, 2016 to balances at March 31, 2016.
Deposits decreased $9.0 million, or 0.78%, compared to December 31, 2015. Our noninterest-bearing deposits increased $13.7 million, or 10.79%, and interest-bearing deposits decreased $22.8 million, or 2.21%, including a decrease of $9.2 million in time deposits, comparing balances at June 30, 2016 to balances at December 31, 2015.
Quarterly Dividend
On July 11, 2016, the Company declared a regular quarterly cash dividend of $0.14 per share payable July 29, 2016 to stockholders of record as of July 22, 2016.
About Lake Sunapee Bank Group
Lake Sunapee Bank Group is the holding company of Lake Sunapee Bank, a federally chartered savings bank that provides a wide range of life-cycle banking and financial services. Lake Sunapee Bank has four wholly owned subsidiaries: Lake Sunapee Financial Services Corp.; Lake Sunapee Group, Inc., which owns and maintains all buildings and investment properties; McCrillis & Eldredge Insurance, Inc., a full-line independent insurance agency; and Charter Holding Corp., which wholly owns Charter Trust Company, a trust services and wealth management company. Lake Sunapee Bank Group, through its direct and indirect subsidiaries, operates 30 offices in New Hampshire in Grafton, Hillsborough, Merrimack and Sullivan counties and 15 offices in Vermont in Orange, Rutland and Windsor counties.
Forward-Looking Statements
The Company wishes to caution readers not to place undue reliance on any such forward-looking statements contained in this press release, which speak only as of the date made. Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors discussed under the caption "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2015, and in subsequent filings with the Securities and Exchange Commission. In addition, the forward-looking statements included in this press release represent our views as of the date of this release. The Company and the Bank do not undertake and specifically decline any obligation to publicly release the result of any revisions that may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.
| Lake Sunapee Bank Group | ||||||||||||||||
| Selected Financial Highlights | ||||||||||||||||
| (Dollars in thousands | Three Months Ended June 30, |
Six Months Ended June 30, |
||||||||||||||
| except for per share data) | 2016 | 2015 | 2016 | 2015 | ||||||||||||
| Net Income | $ | 2,368 | $ | 2,418 | $ | 4,837 | $ | 4,721 | ||||||||
| Per Common Share Data: | ||||||||||||||||
| Basic Earnings | 0.28 | 0.29 | 0.58 | 0.57 | ||||||||||||
| Diluted Earnings (1) | 0.28 | 0.29 | 0.58 | 0.56 | ||||||||||||
| Dividends Paid | 0.14 | 0.13 | 0.28 | 0.26 | ||||||||||||
| Dividend Payout Ratio | 50.00 | % | 44.83 | % | 48.28 | % | 46.43 | % | ||||||||
| As of | ||||||||||||||||
| (Dollars in thousands except for per share data) | June 30, 2016 | December 31, 2015 | ||||||||||||||
| Total Assets | $ | 1,590,664 | $ | 1,518,521 | ||||||||||||
| Total Securities (2) | 171,137 | 130,161 | ||||||||||||||
| Loans, Net | 1,233,871 | 1,217,461 | ||||||||||||||
| Total Deposits | 1,148,334 | 1,157,352 | ||||||||||||||
| Federal Home Loan Bank Advances | 226,178 | 150,000 | ||||||||||||||
| Stockholders' Equity | 141,375 | 136,708 | ||||||||||||||
| Book Value per Common Share | $ | 16.86 | $ | 16.31 | ||||||||||||
| Common Shares Outstanding | 8,385,278 | 8,376,841 | ||||||||||||||
| Bank Leverage (Tier I) Capital | 8.71 | % | 9.02 | % | ||||||||||||
| Common Equity (Tier I) Capital, consolidated | 9.40 | % | 9.41 | % | ||||||||||||
| Number of Offices: | ||||||||||||||||
| Banking Offices | 35 | 34 | ||||||||||||||
| Insurance Offices | 3 | 3 | ||||||||||||||
| Trust Offices | 7 | 7 | ||||||||||||||
| (1) | Diluted earnings per share are calculated using the weighted-average number of shares outstanding for the period, including common stock equivalents, as appropriate. |
| (2) | Includes available-for-sale securities shown at fair value and Federal Home Loan Bank stock at cost. |
| Lake Sunapee Bank Group | |||||||||||
| Consolidated Balance Sheets | |||||||||||
| June 30, | December 31, | ||||||||||
| (Dollars in thousands, except per share data) | 2016 | 2015 | |||||||||
| (Unaudited) | |||||||||||
| ASSETS | |||||||||||
| Cash and due from banks | $ | 19,630 | $ | 16,426 | |||||||
| Overnight deposits | 34,999 | 26,140 | |||||||||
| Cash and cash equivalents | 54,629 | 42,566 | |||||||||
| Securities available-for-sale | 157,424 | 120,198 | |||||||||
| Federal Home Loan Bank stock | 13,713 | 9,963 | |||||||||
| Loans held-for-sale | 3,573 | 2,188 | |||||||||
| Loans receivable, net of allowance for loan losses of $8.7 million as of June 30, 2016 and $8.9 million as of December 31, 2015 | 1,233,871 | 1,217,461 | |||||||||
| Accrued interest receivable | 3,799 | 2,431 | |||||||||
| Bank premises and equipment, net | 24,674 | 24,421 | |||||||||
| Investments in real estate | 3,331 | 3,392 | |||||||||
| Other real estate owned | 335 | 904 | |||||||||
| Goodwill | 44,576 | 44,576 | |||||||||
| Other intangible assets | 7,135 | 7,822 | |||||||||
| Bank-owned life insurance | 31,288 | 30,833 | |||||||||
| Other assets | 12,316 | 11,019 | |||||||||
| Total assets | $ | 1,590,664 | $ | 1,517,774 | |||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||
| LIABILITIES | |||||||||||
| Deposits: | |||||||||||
| Noninterest-bearing | $ | 141,176 | $ | 127,428 | |||||||
| Interest-bearing | 1,007,158 | 1,029,924 | |||||||||
| Total deposits | 1,148,334 | 1,157,352 | |||||||||
| Federal Home Loan Bank advances | 226,178 | 150,000 | |||||||||
| Securities sold under agreements to repurchase | 20,540 | 17,957 | |||||||||
| Subordinated debentures | 36,910 | 36,873 | |||||||||
| Accrued expenses and other liabilities | 17,327 | 18,884 | |||||||||
| Total liabilities | 1,449,289 | 1,381,066 | |||||||||
| STOCKHOLDERS' EQUITY | |||||||||||
| Common stock, $.01 par value per share: 30,000,000 shares authorized, 8,821,025 shares issued, and 8,385,278 shares outstanding at June 30, 2016 and 30,000,000 shares authorized, 8,811,170 shares issued, and 8,376,841 shares outstanding at December 31, 2015 | 88 | 88 | |||||||||
| Paid-in capital | 80,387 | 80,252 | |||||||||
| Retained earnings | 70,835 | 68,344 | |||||||||
| Unearned restricted stock awards | (1,031 | ) | (1,375 | ) | |||||||
| Accumulated other comprehensive loss | (2,129 | ) | (3,850 | ) | |||||||
| Treasury stock, 435,747 shares as of June 30, 2016 and 434,329 shares as of December 31, 2015, at cost | (6,775 | ) | (6,751 | ) | |||||||
| Total stockholders' equity | 141,375 | 136,708 | |||||||||
| Total liabilities and stockholders' equity | $ | 1,590,664 | $ | 1,517,774 | |||||||
| Lake Sunapee Bank Group | |||||||||||||||||
| Consolidated Statements of Income (unaudited) | |||||||||||||||||
| Three Months Ended | Six Months Ended | ||||||||||||||||
| (In thousands, except share | June 30, | June 30, | June 30, | June 30, | |||||||||||||
| and per share data) | 2016 | 2015 | 2016 | 2015 | |||||||||||||
| Interest and dividend income | |||||||||||||||||
| Interest and fees on loans | $ | 11,872 | $ | 11,481 | $ | 23,398 | $ | 23,071 | |||||||||
| Interest on debt securities: | |||||||||||||||||
| Taxable | 753 | 258 | 1,459 | 571 | |||||||||||||
| Tax exempt | 137 | 85 | 219 | 172 | |||||||||||||
| Dividends | 104 | 47 | 189 | 95 | |||||||||||||
| Other | 22 | 12 | 45 | 30 | |||||||||||||
| Total interest and dividend income | 12,888 | 11,883 | 25,310 | 23,939 | |||||||||||||
| Interest expense | |||||||||||||||||
| Interest on deposits | 918 | 991 | 1,849 | 2,057 | |||||||||||||
| Interest on advances and other borrowed money | 1,040 | 726 | 1,968 | 1,484 | |||||||||||||
| Total interest expense | 1,958 | 1,717 | 3,817 | 3,541 | |||||||||||||
| Net interest and dividend income | 10,930 | 10,166 | 21,493 | 20,398 | |||||||||||||
| Provision for loan losses | 121 | 215 | 232 | 419 | |||||||||||||
| Net interest and dividend income after provision for loan losses | 10,809 | 9,951 | 21,261 | 19,979 | |||||||||||||
| Noninterest income | |||||||||||||||||
| Customer service fees | 1,453 | 1,454 | 2,869 | 2,828 | |||||||||||||
| Gain on sales and calls of securities, net | 1,201 | 1 | 1,201 | 373 | |||||||||||||
| Mortgage banking activities | 236 | 683 | 348 | 810 | |||||||||||||
| Net loss on sales of other real estate and property owned | (27 | ) | - | (42 | ) | (3 | ) | ||||||||||
| Net gain on sales of premises and equipment | - | 3 | - | 3 | |||||||||||||
| Rental income | 170 | 168 | 337 | 337 | |||||||||||||
| Trust and investment management fee income | 2,115 | 2,202 | 4,166 | 4,246 | |||||||||||||
| Insurance and brokerage service income | 370 | 296 | 907 | 819 | |||||||||||||
| Bank-owned life insurance income | 218 | 152 | 437 | 298 | |||||||||||||
| Other income | 2 | 85 | 94 | 89 | |||||||||||||
| Total noninterest income | 5,738 | 5,044 | 10,317 | 9,800 | |||||||||||||
| Noninterest expense | |||||||||||||||||
| Salaries and employee benefits | 6,115 | 5,975 | 12,336 | 12,010 | |||||||||||||
| Occupancy and equipment | 1,466 | 1,533 | 2,968 | 3,214 | |||||||||||||
| Advertising and promotion | 298 | 271 | 440 | 440 | |||||||||||||
| Depositors' insurance | 234 | 236 | 470 | 474 | |||||||||||||
| Outside services | 695 | 591 | 1,328 | 1,183 | |||||||||||||
| Professional services | 307 | 377 | 602 | 659 | |||||||||||||
| ATM processing fees | 231 | 231 | 419 | 419 | |||||||||||||
| Supplies | 150 | 163 | 298 | 273 | |||||||||||||
| Telephone | 273 | 271 | 544 | 540 | |||||||||||||
| Merger-related expenses | 754 | - | 754 | - | |||||||||||||
| Amortization of intangible assets | 341 | 386 | 687 | 776 | |||||||||||||
| Other expenses | 2,176 | 1,464 | 3,735 | 2,923 | |||||||||||||
| Total noninterest expense | 13,040 | 11,498 | 24,581 | 22,911 | |||||||||||||
| Income before provision for income taxes | 3,507 | 3,497 | 6,997 | 6,868 | |||||||||||||
| Provision for income taxes | 1,139 | 1,079 | 2,160 | 2,147 | |||||||||||||
| Net income | $ | 2,368 | $ | 2,418 | $ | 4,837 | $ | 4,721 | |||||||||
| Net income applicable to common stock | $ | 2,343 | $ | 2,398 | $ | 4,785 | $ | 4,681 | |||||||||
| Earnings per common share, basic | $ | 0.28 | $ | 0.29 | $ | 0.58 | $ | 0.57 | |||||||||
| Weighted average number of shares, basic | 8,298,504 | 8,285,521 | 8,292,397 | 8,273,519 | |||||||||||||
| Earnings per common share, assuming dilution | $ | 0.28 | $ | 0.29 | $ | 0.58 | $ | 0.56 | |||||||||
| Weighted average number of shares, assuming dilution | 8,298,504 | 8,298,584 | 8,293,050 | 8,287,204 | |||||||||||||
| Dividends declared per common share | $ | 0.14 | $ | 0.13 | $ | 0.28 | $ | 0.26 | |||||||||
Contact Information:
For additional information contact:
Laura Jacobi
Executive Vice President
Chief Financial Officer
603-863-0886