Salisbury Bancorp, Inc. Reports Results for Third Quarter 2015; Declares 28 Cent Dividend

LAKEVILLE, Conn., Oct. 30, 2015 (GLOBE NEWSWIRE) — Salisbury Bancorp, Inc. (Nasdaq:SAL) (“Salisbury”), NASDAQ Capital Market: “SAL”, the holding company for Salisbury Bank and Trust Company (the “Bank”), announced results for its third quarter ended September 30, 2015.

Net income available to common shareholders was $1,945,000, or $0.71 per common share, for the third quarter ended September 30, 2015 (third quarter 2015), compared with $2,032,000, or $0.74 per common share, for the second quarter ended June 30, 2015 (second quarter 2015), and $728,000, or $0.43 per common share, for the third quarter ended September 30, 2014 (third quarter 2014).

Selected Third Quarter 2015 Financial Highlights

As a result of Salisbury’s acquisition of Riverside Bank being completed in December 2014, the results of Riverside Bank’s stand-alone operations are not included in the presentation below of any Salisbury information prior to December 2014.

  • Salisbury’s earnings per common share for the three (3) and nine (9) month periods ended September 30, 2015 increased to $0.71 and $2.26, respectively, per common share as compared with $0.43 and $1.26 per common share for the same periods in 2014.
  • During the nine (9) month period ended September 30, 2015, total shareholders’ equity increased to $105.5 million from $101.8 million at December 31, 2014.
  • Salisbury’s efficiency ratio improved to 60.40% for the quarter ended September 30, 2015 as compared with 62.61% from the prior quarter and 75.92% for the third quarter 2014.
  • Annualized return on average assets for the quarter ended September 30, 2015 amounted to 0.87% as compared with 0.94% for the prior quarter and 0.45% for the third quarter 2014.
  • Annualized return on average common shareholders’ equity amounted to 8.64% for the quarter ended September 30, 2015 as compared with 9.26% for the prior quarter and 4.85% for the third quarter 2014.

Richard J. Cantele, President and Chief Executive Officer stated, “We are pleased with our progress toward achieving the goals that motivated our acquisition of Riverside Bank last December.  With the integration of the Riverside Bank acquisition, along with our 2014 branch acquisition in Sharon, Connecticut, and our de novo branch in Great Barrington, Massachusetts, we are achieving long and short term benefits for our shareholders. 

“Salisbury’s Tangible Common Shareholders’ Equity increased from $48.8 million at September 30, 2014 to more than $74.4 million at September 30, 2015. We are also pleased that our efficiency ratio has improved each quarter following the completion of the merger last December.  This reflects that it costs us less to make each dollar for our shareholders and represents a significant accomplishment.  Continued success will require us to find ways to deliver quality products and services with greater efficiency while maintaining our commitment to thoughtful and responsive customer service. 

“We are grateful for the efforts of our Board of Directors, management team and all of the Salisbury employees for their efforts and commitment to our success.  We are confident that we have the team and resources to continue to build value for our shareholders while serving our growing base of customers.”

Net-Interest Income

Tax equivalent net interest income increased $110,000, or 1.4%, versus second quarter 2015, and increased $3.1 million, or 61.5%, versus third quarter 2014. Interest income for the third quarter reflects net accretion related to the fair value adjustments of loans acquired in the Riverside Bank acquisition in the amount of $726,000. The second quarter of 2015 included similar adjustments totaling $654,000. Average earning assets increased $26.7 million versus second quarter 2015, and increased $244.8 million versus third quarter 2014. Average total interest bearing deposits increased $5.4 million versus second quarter 2015 and increased $154.0 million versus third quarter 2014 primarily as a result of the Riverside Bank acquisition. The net interest margin (tax equivalent) of 3.91% decreased 10 basis points versus 4.01% for the second quarter 2015 and increased 52 basis points versus 3.39% for the third quarter 2014.

Non-Interest Income

Non-interest income for third quarter 2015 decreased $131,000 versus second quarter 2015 and increased $216,000 versus third quarter 2014. Trust and wealth advisory revenues decreased $92,000 versus second quarter 2015 and increased $7,000 versus third quarter 2014. The quarter over quarter decrease is due to tax letter fees collected in the second quarter, and decreased estate fees collected in the third quarter.  Service charges and fees increased $20,000 versus second quarter 2015 and increased $159,000 versus third quarter 2014. The increases were a result of higher fees as a result of increased transactional volume, mainly attributable to the contribution from deposit accounts and balances assumed in the Riverside Bank acquisition. Income from sales and servicing of mortgage loans decreased $54,000 versus second quarter 2015 and increased $11,000 versus third quarter 2014. Second quarter 2015 mortgage loans sales totaled $1.4 million versus $3.0 million for second quarter 2015 and $1.4 million for third quarter 2014. Third quarter 2015, second quarter 2015, and third quarter 2014 included amortization of $85,000, $78,000, and $55,000, respectively. Gain on sale of securities for third quarter 2015 totaled $6,000, compared to $11,000 in the second quarter 2015 and no gains were recognized in the third quarter 2014.

Non-Interest Expense

Non-interest expense for third quarter 2015 decreased $338,000 versus second quarter 2015 and increased $1.1 million versus third quarter 2014. Total compensation expense increased $39,000 versus second quarter 2015 as a result of seasonal employees. Total compensation expense year-over-year increased by $770,000 (third quarter 2015 versus third quarter 2014) and reflects increased staffing levels primarily as a result of the Riverside Bank acquisition.  

Premises and equipment decreased $50,000 versus second quarter 2015 and increased $196,000 versus third quarter 2014. The quarterly decrease was related to lower utilities (seasonal), building maintenance and software maintenance (reclassification of IT help desk support to consulting). The year-over-year increase is mainly due to the addition of branch facilities acquired as a result of the Riverside Bank acquisition in December 2014, and the Sharon, Connecticut branch acquisition, as well as the opening of a new branch in Great Barrington, Massachusetts in June 2014.

Data processing increased $6,000 versus second quarter 2015 and decreased $16,000 versus third quarter 2014 mainly attributable to the Sharon branch data conversion expense in 2014.

Professional fees decreased $195,000 versus second quarter 2015, and increased $83,000 versus third quarter 2014. Second quarter 2015 included core vendor consulting, purchase accounting review and trust tax filing fees being reclassified from data processing to consulting fees.

Collections, OREO and loan related expenses decreased $94,000 versus second quarter 2015 and increased $40,000 versus third quarter 2014. The quarter-over-quarter decrease is mainly due to second quarter 2015 OREO write-downs.

The effective income tax rates for third quarter 2015, second quarter 2015 and third quarter 2014 were 29.31%, 29.93% and 12.83%, respectively.

Loans

Net loans receivable increased $10.0 million during third quarter 2015 to $687.7 million at September 30, 2015, compared with $677.7 million at June 30, 2015, and increased $225.8 million compared with $461.9 million at September 30, 2014. The year-over-year increase includes loans acquired with a fair value of $196.3 million from the Riverside Bank transaction completed in the fourth quarter 2014.

Asset Quality

Non-performing assets increased $1.6 million during third quarter 2015 to $16.6 million, or 1.8% of assets at September 30, 2015, from $15.0 million, or 1.7% of assets at June 30, 2015, and increased $7.7 million from $8.9 million, or 1.4% of assets, at September 30, 2014.

On a combined basis, the five largest non-performing loan relationships account for 55% of the non-performing balances while the combined ten largest loan relationships account for 73% of total non-performing assets. Accordingly asset quality issues are confined to a small number of relationships and management does not consider them to be systemic.  All of the ten largest non-performing relationships are secured by real estate and eight of these are actively moving through the legal process.  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. 

The amount of total impaired and potential problem loans increased to $31.0 million (4.48% of gross loans receivable) during third quarter 2015, compared to $30.2 million, or 4.44% of gross loans receivable at June 30, 2015. While the aggregate of such loans increased from $27.4 million at September 30, 2014, the percentage of such loans improved from 5.70% of gross loans receivable at September 30, 2014.  On a combined basis, the five largest impaired loan relationships account for 35% of the balance while the five largest potential problem loan relationships account for 64% of the balance

Accruing loans receivable 30-to-89 days past due decreased $0.3 million during third quarter 2015 to $2.5 million, or 0.36% of gross loans receivable, from $2.8 million, or 0.41% of gross loans receivable at June 30, 2015, and increased $1.2 million versus September 30, 2014.

Provision for loan loss expense was $655,000 for third quarter 2015 versus $196,000 in second quarter 2015 and $318,000 for the third quarter 2014.  The quarterly increase reflects routine updates to qualitative factors included in the methodology for the Allowance for Loan and Lease Losses calculation.  Net loan charge-offs (recoveries) were $55,000 for the third quarter 2015, $321,000 for second quarter 2015 and ($24,000) for third quarter 2014, respectively. Reserve coverage, as measured by the ratio of the allowance for loan losses to gross loans, was 0.82% for the third quarter 2015, versus 0.74% for second quarter 2015 and 1.15% for third quarter 2014. When expressed as a percentage of gross loans, the allowance for loan losses declined significantly from September 30, 2014 to September 30, 2015 due to the increase in the balance of gross loans that resulted from the acquisition at fair value of the loans acquired in the Riverside Bank merger. 

Capital

The Bank’s regulatory capital ratios remain in compliance with regulatory “well capitalized” requirements. At September 30, 2015, Salisbury’s tier 1 leverage, total risk-based capital, and common equity tier 1 capital ratios were 10.31%, 13.90%, and 10.74%, respectively. The Bank’s tier 1 leverage, total risk-based capital, and common equity tier 1 capital ratios were 9.30%, 12.62%, and 11.77%, respectively, compared with regulatory “well capitalized” minimums of 5.00%, 10.00%, and 6.5%, respectively. Risk based capital information for 2015 incorporates the implementation of Basel III.

At September 30, 2015, Salisbury’s assets totaled $904 million. Book value and tangible book value per common share were $32.72 and $27.21, respectively. Tangible book value excludes goodwill and core deposit intangibles.

In August 2011, Salisbury received $16 million of capital from the U.S. Treasury’s Small Business Lending Fund (the “SBLF”) program. The SBLF program was established to encourage lending to small businesses by providing Tier 1 capital to qualified community banks with assets of less than $10 billion. To date, Salisbury has used this capital to increase its portfolio of qualified small business loans by $59.3 million and to augment its regulatory capital ratios.

Third Quarter 2015 Dividends on Common Shares

The Board of Directors of Salisbury declared a $0.28 per common share quarterly cash dividend at their October 30, 2015 meeting. The dividend will be paid on November 27, 2015 to shareholders of record as of November 13, 2015.

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, Poughkeepsie, and Red Oaks Mill, New York. The Bank offers a full complement of consumer and business banking products and services as well as trust and wealth advisory services.

Forward-Looking Statements

Statements contained in this news release contain 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 government regulations; changes in accounting principles; and the quality or composition of the loan and investment portfolios and other factors that may be described in Salisbury’s quarterly reports on Form 10-Q and its annual report on Form 10-K, each filed with the Securities and Exchange Commission, which are available at the Securities and Exchange Commission’s internet website (www.sec.gov) and to which reference is hereby made.  Therefore, actual future results may differ materially from results discussed in the forward-looking statements.

Salisbury Bancorp, Inc. and Subsidiary
CONSOLIDATED BALANCE SHEETS

(in thousands, except share data) September 30,
2015
(unaudited)
December 31, 2014
ASSETS    
Cash and due from banks $ 11,436   $ 13,280  
Interest bearing demand deposits with other banks   70,259     22,825  
Total cash and cash equivalents   81,695     36,105  
Securities    
Available-for-sale at fair value   80,371     91,312  
Federal Home Loan Bank of Boston stock at cost   3,515     3,515  
Loans held-for-sale   573     568  
Loans receivable, net (allowance for loan losses: $5,659 and $5,358)   687,719     673,330  
Other real estate owned   167     1,002  
Bank premises and equipment, net   14,588     14,431  
Goodwill   12,552     12,552  
Intangible assets (net of accumulated amortization: $2,752 and $2,258)   2,496     2,990  
Accrued interest receivable   2,296     2,334  
Cash surrender value of life insurance policies   13,591     13,314  
Deferred taxes   2,788     2,428  
Other assets   1,882     1,546  
Total Assets $ 904,233   $ 855,427  
LIABILITIES and SHAREHOLDERS’ EQUITY    
Deposits    
Demand (non-interest bearing) $ 194,618   $ 161,386  
Demand (interest bearing)   129,779     117,169  
Money market   184,409     174,274  
Savings and other   123,017     121,387  
Certificates of deposit   129,656     141,210  
Total deposits   761,479     715,426  
Repurchase agreements   4,210     4,163  
Federal Home Loan Bank of Boston advances   26,928     28,813  
Note payable   380      
Capital lease liability   422     424  
Accrued interest and other liabilities   5,364     4,780  
Total Liabilities   798,783     753,606  
Shareholders’ Equity    
Preferred stock – $.01 per share par value    
Authorized: 25,000; Issued: 16,000 (Series B);    
Liquidation preference: $1,000 per share   16,000     16,000  
Common stock – $.10 per share par value    
Authorized: 5,000,000;    
Issued: 2,733,876 and 2,720,766   273     272  
Paid-in capital   41,362     41,077  
Retained earnings   46,558     42,677  
Unearned compensation – restricted stock awards   (186 )   (313 )
Accumulated other comprehensive income   1,443     2,108  
Total Shareholders’ Equity   105,450     101,821  
Total Liabilities and Shareholders’ Equity $ 904,233   $ 855,427  


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

Periods ended September 30, Three months ended Nine months ended
(in thousands, except per share amounts)   2015     2014     2015     2014  
Interest and dividend income        
Interest and fees on loans $ 7,955   $ 4,656   $ 23,727   $ 13,983  
Interest on debt securities        
Taxable   286     330     910     1,075  
Tax exempt   351     416     1,098     1,294  
Other interest and dividends   58     42     132     87  
Total interest and dividend income   8,650     5,444     25,867     16,439  
Interest expense        
Deposits   463     379     1,359     1,079  
Repurchase agreements   2     3     5     5  
Capital lease   18     12     53     29  
Note payable   1         1      
Federal Home Loan Bank of Boston advances   269     296     832     892  
Total interest expense   753     690     2,250     2,005  
Net interest and dividend income   7,897     4,754     23,617     14,434  
Provision for loan losses   655     318     651     969  
Net interest and dividend income after provision for loan losses   7,242     4,436     22,966     13,465  
Non-interest income        
Gains on sales of available-for-sale securities, net   6         192      
Trust and wealth advisory   798     791     2,510     2,509  
Service charges and fees   798     639     2,307     1,807  
Gains on sales of mortgage loans, net   47         227     43  
Mortgage servicing, net   5     41     (15 )   80  
Other   115     82     343     234  
Total non-interest income   1,769     1,553     5,564     4,673  
Non-interest expense        
Salaries   2,531     1,980     7,520     5,776  
Employee benefits   916     697     2,881     2,176  
Premises and equipment   863     667     2,683     2,080  
Data processing   404     420     1,276     1,166  
Professional fees   398     315     1,642     1,025  
Collections, OREO and loan related   125     85     594     319  
FDIC insurance   163     119     494     340  
Marketing and community support   174     115     465     355  
Amortization of core deposit intangibles   161     75     494     194  
Merger and acquisition related expenses       196         586  
Other   467     439     1,528     1,269  
Total non-interest expense   6,202     5,108     19,577     15,286  
Income before income taxes   2,809     881     8,953     2,852  
Income tax provision   824     113     2,663     567  
Net income $ 1,985   $ 768   $ 6,290   $ 2,285  
Net income available to common shareholders $ 1,945   $ 728   $ 6,170   $ 2,159  
         
Basic earnings per common share $ 0.71   $ 0.43   $ 2.26   $ 1.26  
Diluted earnings per common share   0.71     0.43     2.25     1.26  
Common dividends per share   0.28     0.28     0.84     0.84  


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) Q3 2015 Q2 2015 Q1 2015 Q4 2014 Q3 2014
Total assets $ 904,233   $ 860,794   $ 865,037   $ 855,427   $ 638,089  
Loans receivable, net   687,719     677,726     676,734     673,330     461,913  
Total securities   83,886     82,932     84,694     94,827     88,960  
Deposits   761,479     720,734     724,910     715,426     522,294  
FHLBB advances   26,928     28,033     28,403     28,813     29,218  
Shareholders’ equity   105,450     104,104     103,211     101,821     75,516  
Wealth assets under management   350,102     374,141     384,574     385,316     416,510  
Non-performing loans   16,435     14,728     14,000     9,890     8,611  
Non-performing assets   16,602     14,995     14,875     10,892     8,945  
Accruing loans past due 30-89 days   2,486     2,799     5,564     4,128     1,294  
Net interest and dividend income   7,897     7,793     7,926     5,717     4,754  
Net interest and dividend income, tax equivalent   8,194     8,084     8,238     6,038     5,075  
Provision (benefit)  for loan losses   655     196     (200 )   165     318  
Non-interest income   1,769     1,900     1,896     1,579     1,553  
Non-interest expense   6,202     6,540     6,835     6,852     5,108  
Income before income taxes   2,809     2,957     3,187     279     881  
Income tax provision   824     885     953     43     113  
Net income   1,985     2,072     2,234     236     768  
Net income available to common shareholders   1,945     2,032     2,194     196     728  
           
Per share data          
Basic earnings per common share $ 0.71   $ 0.74   $ 0.81   $ 0.10   $ 0.43  
Diluted earnings per common share   0.71     0.74     0.80     0.10     0.43  
Dividends per common share   0.28     0.28     0.28     0.28     0.28  
Book value per common share   32.72     32.26     31.96     31.54     34.74  
Tangible book value per common share – Non-GAAP⁽¹⁾   27.21     26.69     26.33     25.84     28.50  
           
Common shares outstanding at end of period   2,734     2,731     2,729     2,721     1,713  
Weighted average common shares outstanding, to calculate basic earnings per share   2,708     2,706     2,699     1,977     1,693  
Weighted average common shares outstanding, to calculate diluted earnings per share   2,724     2,724     2,716     1,981     1,693  
           
Profitability ratios          
Net interest margin (tax equivalent)   3.91 %   4.01 %   4.11 %   3.68 %   3.39 %
Efficiency ratio(2)   60.40     62.61     65.45     77.84     75.92  
Non-interest income to operating revenue   18.25     19.51     17.84     21.65     24.62  
Effective income tax rate   29.31     29.93     29.90     15.41     12.83  
Return on average assets   0.87     0.94     1.03     0.11     0.45  
Return on average common shareholders’ equity   8.64     9.26     10.22     1.18     4.85  
           
Credit quality ratios          
Net charge-offs to average loans receivable, gross   0.03 %   0.19 %   -0.01 %   0.14 %   0.03 %
Non-performing loans to loans receivable, gross   2.37     2.16     2.05     1.46     1.84  
Accruing loans past due 30-89 days to loans receivable, gross   0.36     0.41     0.82     0.61     0.28  
Allowance for loan losses to loans receivable, gross   0.82     0.74     0.76     0.79     1.15  
Allowance for loan losses to non-performing loans   34.43     34.35     37.02     54.18     62.52  
Non-performing assets to total assets   1.84     1.74     1.72     1.27     1.40  
           
Capital ratios          
Common shareholders’ equity to assets   9.89 %   10.24 %   10.08 %   10.03 %   9.33 %
Tangible common shareholders’ equity to tangible assets – Non-GAAP⁽¹⁾   8.37     8.62     8.45     8.37     7.78  
Tier 1 leverage capital   10.31     10.42     10.29     12.31     9.85  
Total risk-based capital   13.90     14.22     13.65     14.29     16.27  
Common equity tier 1 capital   10.74     11.01     10.50     N/A     N/A  


(1)
 Refer to schedule labeled “Supplemental Information – Non-GAAP Financial Measures.”
(2)  Calculated using SNL’s methodology: Noninterest expense before OREO expense, and amortization of intangibles
 as a percent of net interest income (fully taxable equivalent) and noninterest revenues, excluding gains from
 securities transactions.


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) Q3 2015 Q2 2015 Q1 2015 Q4 2014 Q3 2014
Shareholders’ Equity $ 105,450   $ 104,104   $ 103,211   $ 101,821   $ 75,516  
Less: Preferred Stock   (16,000 )   (16,000 )   (16,000 )   (16,000 )   (16,000 )
Common Shareholders’ Equity   89,450     88,104     87,211     85,821     59,516  
Less: Goodwill   (12,552 )   (12,552 )   (12,552 )   (12,552 )   (9,829 )
Less: Intangible assets   (2,496 )   (2,657 )   (2,821 )   (2,990 )   (872 )
Tangible Common Shareholders’ Equity $ 74,402   $ 72,895   $ 71,838   $ 70,279   $ 48,815  
Total Assets $ 904,234   $ 860,794   $ 865,037   $ 855,427   $ 638,089  
Less: Goodwill   (12,552 )   (12,552 )   (12,552 )   (12,552 )   (9,829 )
Less: Intangible assets   (2,496 )   (2,657 )   (2,821 )   (2,990 )   (872 )
Tangible Total Assets $ 889,186   $ 845,585   $ 849,664   $ 839,885   $ 627,388  
Common Shares outstanding   2,734     2,731     2,729     2,721     1,713  
           
Book value per Common Share – GAAP $ 32.72   $ 32.26   $ 31.96   $ 31.54   $ 34.74  
Tangible book value per Common Share – Non-GAAP   27.21     26.69     26.33     25.84     28.50  
           
Common Shareholders’ Equity to Assets – GAAP   9.89 %   10.24 %   10.08 %   10.03 %   9.33 %
Tangible Common Shareholders’ Equity to Tangible Assets – Non-GAAP   8.37     8.62     8.45     8.37     7.78  
           
Non-interest expense $ 6,202   $ 6,540   $ 6,835   $ 6,852   $ 5,108  
Less: Amortization of core deposit intangibles   (161 )   (164 )   (169 )   (97 )   (75 )
Less: Foreclosed property expense   (27 )   (131 )   (148 )   (114 )   (1 )
Less: Strategic initiatives               (1,596 )   (197 )
Operating expenses $ 6,014   $ 6,245   $ 6,518   $ 5,045   $ 4,835  
Net interest and dividend income, tax equivalent $ 8,194   $ 8,084   $ 8,238   $ 6,038   $ 5,075  
Non-interest income   1,769     1,900     1,896     1,579     1,553  
Gains on securities, net   (6 )   (11 )   (175 )        
Operating revenue $ 9,957   $ 9,973   $ 9,959   $ 7,617   $ 6,628  
Efficiency Ratio less strategic initiatives   60.40 %   62.61 %   65.45 %   66.19 %   72.94 %
           

 

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

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