SBT Bancorp (SBTB) 8-K SBT Bancorp, Inc. Reports Third Quarter 2016 Results

Exhibit 99.1

SBT Bancorp, Inc. Reports Third Quarter 2016 Results

SIMSBURY, Conn.--(BUSINESS WIRE)--October 27, 2016--SBT Bancorp, Inc., (OTCQX: SBTB), holding company for The Simsbury Bank & Trust Company, Inc., today announced net income of $431 thousand or $0.32 basic and $0.32 diluted earnings per share for the quarter ended September 30, 2016, compared to a net income of $327 thousand or $0.37 basic and $0.37 diluted earnings per share for the quarter ended September 30, 2015.

Net interest and dividend income for the third quarter increased $418 thousand or 14.2% as compared to the third quarter of 2015 due to growth in the Bank’s commercial and consumer loan portfolios. Gain on sale of loans increased 43.8% to $607 thousand compared to the quarter ended September 30, 2015. Noninterest income increased $269 thousand compared to the quarter ended September 30, 2015, and noninterest expenses increased $344 thousand as the Bank continues to invest in its three primary business lines of Commercial, Retail and Mortgage Banking.

“We are very pleased to report improved earnings for the third quarter of 2016 resulting from commercial loan growth and growth in mortgage gain on sale fueled by our capital raise last fall,” said Simsbury Bank President & CEO Martin J. Geitz. “Most of our balance sheet growth came from a 42.9% increase in commercial loans since the end of the prior year. Our mortgage business reported solid gain on sale revenue growth of 43.8% when compared to the third quarter of 2015. We also continue to be pleased with the performance of our West Hartford branch since its grand opening in May of this year.”

Key highlights for quarter ended September 30, 2016 compared to quarter ended September 30, 2015 included:

• Net Income increased 22% from the prior year’s third quarter.
• Total revenue, consisting of net interest and dividend income plus noninterest income, increased $687 thousand or 17.7% above the prior year’s third quarter.
• Net interest and dividend income for the quarter increased 14.2% to $3.4 million.
• Provision for loan losses totaled $305 thousand for the quarter due to loan growth, and the allowance for loan losses at September 30, 2016 was 0.92% of total loans.
• Gain on sale of mortgages increased $185 thousand, or 43.8%, for the quarter ended September 30, 2016.
• Net loans grew $88.2 million or 29.0%.
• Commercial loan balances increased $68.9 million or 79.4% compared to the quarter ended September 30, 2015.
• Consumer loans grew $21.4 million driven by the purchase of a $9.5 million portfolio of refinanced student loans in the second quarter of 2016 and the purchase of a $9.3 million portfolio of refinanced student loans in the third quarter of 2016.
• Total deposits increased $57.9 million or 15.4%, driven by increases in Demand Deposits of $12.9 million, Savings and Now deposits of $38.4 million, and Time Deposits of $6.6 million.

On September 30, 2016, gross loans outstanding were $396 million, an increase of $88.9 million, or 29.0% over a year ago. Commercial loans grew by $68.9 million or 79.4% and consumer loans grew by $21.4 million or 127.9%. Residential mortgage loans decreased by $149 thousand or 0.1% as the Company’s focus is to sell qualifying residential loans in the secondary market.

The Company’s allowance for loan losses at September 30, 2016 was 0.92% of total gross loans. The Company had non-accrual loans totaling $3.1 million or 0.77% of total loans on September 30, 2016, compared to non-accrual loans totaling $4.0 million or 1.30% of total loans a year ago. Total non-accrual and delinquent loans on September 30, 2016 was 0.90% of loans outstanding compared to 1.46% on September 30, 2015.

Total deposits on September 30, 2016 were $433 million, an increase of $57.9 million or 15.4% over a year ago primarily due to an increase in savings and NOW deposits of $38.4 million and a $12.9 million increase in demand deposit accounts. At quarter-end, 30% of total deposits were in non-interest bearing demand accounts, 55% were in low-cost savings, money market and NOW accounts and 15% were in time deposits.

For the quarter ended September 30, 2016, total revenues, consisting of net interest and dividend income plus noninterest income, were $4.6 million compared to $3.9 million a year ago, an increase of $687 thousand or 17.7% above the prior year’s third quarter. Net interest and dividend income increased $418 thousand or 14.2% primarily driven by a $685 thousand, or 25%, increase in interest and fees on loans. The increase was partially offset by the interest expense on subordinated debt of $137 thousand. Noninterest income increased by $269 thousand or 29.2%, primarily due to an increase in gain on sale of mortgages of $185 thousand, and an increase in other service charges and fees of $85 thousand. Gain on sale of loans sold in the third quarter was $607 thousand compared to $422 thousand for the third quarter ended September 30, 2015.

For the year-to-date ended September 30, 2016, total revenues, consisting of net interest and dividend income plus noninterest income, were $12.2 million compared to $11.0 million a year ago, an increase of $1.2 million or 11.2% above the year-to-date period ended September 30, 2015. Net interest and dividend income increased $1.2 million or 13.2% primarily driven by a $1.8 million, or 21.8%, increase in interest and fees on loans. The increase was partially offset by the interest expense on subordinated debt of $379 thousand. Noninterest income increased by $76 thousand or 3.3%, primarily due to an increase in gain on sale of mortgage loans of $243 thousand and an increase in other service charges and fees of $172 thousand. These were partially offset by a decrease in net revenue from mortgage loan servicing activities of $308 thousand. Mortgage loan servicing activities decreased $308 thousand due to a non-cash expense related to the decline in the mortgage servicing rights valuation. The decline in valuation is a result of the decline in long-term interest rates and related increase in implied prepayment rates. Gain on sale of loans sold for the year-to-date ended September 30, 2016 was $1.2 million compared to $971 thousand for the year-to-date ended September 30, 2015.

The Company’s quarter-to-date 2016 taxable-equivalent net interest margin (taxable-equivalent net interest and dividend income divided by average earning assets) was 2.90% compared to 2.97% for the comparable 2015 period. The Company’s yield on earning assets increased 11 basis points to 3.27%, while the cost of funds increased 25 basis points to 0.53% for the three months ended September 30, 2016 compared to the same period of 2015. The increase in cost of funds was primarily due to the interest on the subordinated debt issued in the fourth quarter of 2015.

Total noninterest expense for the third quarter 2016 was $3.7 million, an increase of $344 thousand or 10.2% above the third quarter of 2015. The increase was primarily driven by an increase in salary and benefits expense of $170 thousand and advertising and promotion costs of $104 thousand. The increases in these expenses are largely attributed to the new West Hartford branch. These were partially offset by decreases in professional fees of $54 thousand.

Total noninterest expense for the first nine months of 2016 was $10.6 million, an increase of $1.0 million or 10.6% above the comparable year-to-date 2015 period. The increase was primarily driven by increases in salary and benefits expense of $638 thousand, advertising and promotion costs of $143 thousand, occupancy costs of $101 thousand, and data processing fees of $97 thousand. These were partially offset by decreases in professional fees of $103 thousand.

Capital levels for The Simsbury Bank & Trust Company on September 30, 2016 remains comfortably above the regulatory “well-capitalized” designation. Capital ratios are calculated under Basel III rules, which became effective January 1, 2015.

Capital Ratios September 30, 2016
	Simsbury Bank & Trust Company	Regulatory Standard For Well-Capitalized
Tier 1 Leverage Capital Ratio	7.63%	5.00%
Tier 1 Risk-Based Capital Ratio	10.70%	8.00%
Total Risk-Based Capital Ratio	11.76%	10.00%
Common Equity Tier 1 Risk-Based Capital Ratio	10.70%	6.50%

Simsbury Bank is an independent, community bank for consumers and businesses based in Connecticut. Simsbury Bank Home Loans is a division of Simsbury Bank serving the home financing needs of consumers throughout Southern New England. Simsbury Bank is wholly-owned by publicly traded SBT Bancorp, Inc. Its stock is traded on the OTCQX marketplace under the ticker symbol of SBTB. For more information, visit www.simsburybank.com.

Certain statements in this press release, including statements regarding the intent, belief or current expectations of SBT Bancorp, Inc., The Simsbury Bank & Trust Company, or their directors or officers, are “forward-looking” statements (as such term is defined in the Private Securities Litigation Reform Act of 1995). Because such statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements.

SBT Bancorp, Inc. and Subsidiary
Condensed Consolidated Balance Sheets
	September 30, 2016, December 31, 2015 and September 30, 2015
(Dollars in thousands)
			9/30/2016			12/31/2015			9/30/2015
		(unaudited)						(unaudited)
ASSETS
	Cash and due from banks	$	12,994		$	8,933		$	7,313
	Interest-bearing deposits with Federal Reserve Bank of Boston and Federal Home Loan Bank
			6,418			19,795			5,919
	Money market mutual funds		45			13			580
	Federal funds sold		100			149			346
	Cash and cash equivalents		19,557			28,890			14,158
	Certificates of deposit		1,500			1,250			-
	Investments in available-for-sale securities (at fair value)		63,611			71,517			71,816
	Federal Home Loan Bank stock, at cost		1,977			2,047			3,074
	Loans held-for-sale		8,238			2,167			6,892
	Loans outstanding		396,280			326,723			307,323
	Less allowance for loan losses		3,631			3,028			2,897
	Loans, net		392,649			323,695			304,426
	Premises and equipment, net		1,988			1,420			1,390
	Accrued interest receivable		1,232			1,143			1,045
	Bank owned life insurance		9,066			7,389			7,338
	Other assets		5,120			5,262			5,021
	Total other assets		17,406			15,214			14,794
	TOTAL ASSETS	$	504,938		$	444,780		$	415,160
LIABILITIES AND STOCKHOLDERS' EQUITY
	Deposits:
	Demand deposits	$	128,000		$	135,580		$	115,105
	Savings and NOW deposits		239,557			179,775			201,170
	Time deposits		65,108			57,287			58,531
	Total deposits		432,665			372,642			374,806
	Securities sold under agreements to repurchase		3,193			1,915			2,722
	Federal Home Loan Bank advances		29,000			31,500			5,500
	Long-term subordinated debt		7,245			7,230			-
	Other liabilities		1,854			1,751			1,717
	Total liabilities		473,957			415,038			384,745
	Stockholders' equity:
	Preferred stock, senior non-cumulative perpetual, Series C, no par; 9,000 shares issued and outstanding at September 30, 2015;
			-			-			8,997
	Common stock, no par value; authorized 2,000,000 shares; issued and outstanding 1,361,135 shares and 1,360,721 shares, respectively, at September 30, 2016; 1,360,591 shares and 1,360,177 shares, respectively, at December 31, 2015, and 908,660 shares and 908,246 shares, respectively, at September 30, 2015
			18,887			18,856			10,333
	Retained earnings		11,609			11,288			11,134
	Treasury stock, 414 shares		(7	)		(7	)		(7	)
	Unearned compensation- restricted stock awards		(95	)		(206	)		(254	)
	Accumulated other comprehensive income (loss)		587			(189	)		212
	Total stockholders' equity		30,981			29,742			30,415
	TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	504,938		$	444,780		$	415,160

SBT Bancorp, Inc. and Subsidiary
Condensed Consolidated Statements of Income
(Unaudited)
(Dollars in thousands, except for per share amounts)
		For the quarter ended				For the nine months ended
		9/30/2016		9/30/2015		9/30/2016			9/30/2015
Interest and dividend income:
	Interest and fees on loans	$	3,433	$	2,748	$	9,814		$	8,057
	Investment securities		359		393		1,130			1,235
	Federal funds sold and overnight deposits		26		14		65			26
	Total interest and dividend income		3,818		3,155		11,009			9,318
Interest expense:
	Deposits		271		192		619			566
	Repurchase agreements		2		1		5			3
	Interest on long-term subordinated debt		137		-		379			-
	Federal Home Loan Bank advances		36		8		134			35
	Total interest expense		446		201		1,137			604
	Net interest and dividend income		3,372		2,954		9,872			8,714
Provision for loan losses			305		65		606			145
	Net interest and dividend income after provision for loan losses
			3,067		2,889		9,266			8,569
Noninterest income:
	Service charges on deposit accounts		98		98		278			303
	Gain on available-for-sale securities, net of writedowns		23		26		93			93
	Other service charges and fees		293		208		733			561
	Increase in cash surrender value of life insurance policies
			64		51		177			154
	Mortgage loan servicing activities		41		48		(316	)		(8	)
	Gain on sale of mortgages		607		422		1,214			971
	Investment services fees and commissions		53		48		133			159
	Other income		11		20		41			44
	Total noninterest income		1,190		921		2,353			2,277
Noninterest expense:
	Salaries and employee benefits		1,949		1,779		5,700			5,062
	Occupancy expense		387		340		1,147			1,046
	Equipment expense		111		104		317			306
	Advertising and promotions		213		109		508			365
	Forms and supplies		86		48		160			125
	Professional fees		142		196		345			448
	Directors' fees		53		66		160			180
	Correspondent charges		83		67		228			187
	FDIC Assessment		70		78		223			234
	Data Processing Fees		219		198		628			531
	Internet banking costs		75		52		221			157
	Other expenses		338		345		1,001			975
	Total noninterest expense		3,726		3,382		10,638			9,616
Income before income taxes			531		428		981			1,230
Income tax provision			100		75		93			185
Net income		$	431	$	353	$	888		$	1,045
Less: Preferred stock dividend and accretion		$	-	$	26	$	-		$	86
Net income available to common stockholders		$	431	$	327	$	888		$	959
Average shares outstanding, basic			1,352,263		890,190		1,350,725			889,473
Earnings per common share, basic		$	0.32	$	0.37	$	0.66		$	1.08
Average shares outstanding, assuming dilution			1,354,362		894,380		1,352,887			892,004
Earnings per common share, assuming dilution		$	0.32	$	0.37	$	0.66		$	1.08

CONTACT:
Simsbury Bank
Richard J. Sudol, 860-651-2057
860-408-4679 (fax)
SVP & CFO
rsudol@simsburybank.com