SOURCE: Lake Sunapee Bank Group

Lake Sunapee Bank Group

July 19, 2016 16:05 ET

Lake Sunapee Bank Group Reports 2016 Second Quarter Results

NEWPORT, NH--(Marketwired - Jul 19, 2016) -  Lake Sunapee Bank Group ("we," "us," "our" or the "Company") (NASDAQ: LSBG), the holding company for Lake Sunapee Bank, fsb (the "Bank"), today announced results for the quarter ended June 30, 2016. Consolidated net income for the second quarter of 2016 was $2.4 million, or $0.28 per diluted common share, compared to $2.4 million, or $0.29 per diluted common share, for the same period in 2015, and $4.8 million, or $0.58 per diluted common share, for the six months ended June 30, 2016, compared to $4.7 million, or $0.56 per diluted common share, for the same period in 2015.

"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