Salisbury Bancorp, Inc. Reports Results for Fourth Quarter and Full Year 2013; Declares 28 Cent Dividend

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| Source: Salisbury Bancorp, Inc.

LAKEVILLE, Conn., Jan. 31, 2014 (GLOBE NEWSWIRE) -- Salisbury Bancorp, Inc. ("Salisbury") (Nasdaq:SAL), the holding company for Salisbury Bank and Trust Company (the "Bank"), announced results for its fourth quarter and full year ended December 31, 2013.

Selected fiscal year 2013 highlights

Net income available to common shareholders was $3,922,000, or $2.30 per common share, for 2013, compared with $3,861,000 or $2.28 per common share for 2012.

  • Earnings per common share increased $0.02, or 0.9%, to $2.30.
  • Earnings per common share excluding one-time fourth quarter expenses related to strategic initiatives of $202,000 (net of taxes), or $0.12 per share, would have been $2.42 per share or an increase of $0.14 (+6%) compared to 2012.
  • Tax equivalent net interest income increased $405,000, or 8.6%.
  • Non-interest expense decreased $619,000, or 3.2%. Preferred stock dividends were $161,000, versus $241,000 for 2012.

Fourth quarter 2013 dividend

The Board of Directors of Salisbury Bancorp, Inc. declared a $0.28 per common share quarterly cash dividend at their January 31, 2014 meeting. The dividend will be paid on February 28, 2014 to shareholders of record as of February 14, 2014.

Selected fourth quarter 2013 highlights

Net income available to common shareholders was $940,000, or $0.55 per common share, for its fourth quarter ended December 31, 2013 (fourth quarter 2013), compared with $976,000, or $0.57 per common share, for the third quarter ended September 30, 2013 (third quarter 2013), and $531,000, or $0.31 per common share, for the fourth quarter ended December 31, 2012 (fourth quarter 2012). Fourth quarter 2012 results included a $450,000 non-recurring expense to the FHLBB that was substantially recovered in 2013 through reduced interest expense.

  • Earnings per common share increased $0.24, or 77.4%, versus fourth quarter 2012, but decreased $0.02, or 3.5%, to $0.55 versus third quarter 2013.
  • Earnings per share excluding one-time expenses related to strategic initiatives of $202,000 (net of taxes), or $0.12 per share, would have been $0.67 per share for the quarter, an increase of $0.10 (+17%) as compared to third quarter 2013.
  • Tax equivalent net interest income increased $406,000, or 8.6%, versus fourth quarter 2012 and increased $148,000, or 3.0%, versus third quarter 2013.
  • Provision for loan losses was $190,000, versus $380,000 for fourth quarter 2012 and $240,000 for third quarter 2013.
  • Net loan charge-offs were $163,000, versus $199,000 for fourth quarter 2012 and $215,000 for third quarter 2013.
  • Non-interest expense decreased $357,000, or 6.7%, versus fourth quarter 2012 but increased $334,000, or 7.2%, versus third quarter 2013.
  • Non-performing assets decreased $2.6 million, or 25.3%, versus fourth quarter 2012 and decreased $2.2 million, or 22.5%, to $7.5 million, or 1.3% of total assets, versus third quarter 2013. Loans receivable 30 days or more past due decreased $2.6 million versus fourth quarter 2012 and decreased $410,000 to $11.0 million, or 2.5% of gross loans, versus third quarter 2013.

Richard J. Cantele, Jr., President and Chief Executive Officer, stated, "While our progress has been restrained by the slow pace of economic growth in the region, we are pleased to report continued progress with respect to key strategic objectives and growth in our year-over-year earnings. Our continuing efforts to control non-interest expenses, maintain and improve asset quality, and grow net interest and dividend income, are enhancing our current results of operation and should continue to contribute to our future progress. Similarly, we are pleased to see continued growth in the assets under management in our Wealth Advisory Department. This continued success of our Wealth Advisory Department both distinguishes Salisbury from its competitors and diversifies our income stream by reducing our dependence on net interest income. We have also made advancements in implementing our strategic objectives of expanding our footprint in the market areas we serve through both de novo expansion and opportunistic acquisitions. In this regard, we recently took steps to establish a new branch in Great Barrington, Massachusetts and we signed an agreement to acquire a branch office and related deposits from another institution in Sharon, Connecticut. We expect to consolidate our existing Sharon office with such new branch following receipt of regulatory approvals and consummation of the transaction later this year. These efforts reflect our continuing interest in seeking opportunities to reach out and serve new customers and communities, while striving to maximize efficiency and maintain our commitment to quality customer service."

Net Interest Income

Tax equivalent net interest income for fourth quarter 2013 decreased $148,000, or 3.0%, versus third quarter 2013, and $406,000, or 8.6%, versus fourth quarter 2012. Average total interest bearing deposits decreased $19.3 million versus third quarter 2013 and decreased $1.1 million, or 2.86%, versus fourth quarter 2012. Average earning assets decreased $15.8 million versus third quarter 2013 and decreased $16.7 million, or 3.0%, versus fourth quarter 2012. The net interest margin increased 20 basis points versus third quarter 2013 and increased 39 basis points versus fourth quarter 2012 to 3.71% for fourth quarter 2013.

Non-Interest Income

Non-interest income for fourth quarter 2013 increased $110,000 versus third quarter 2013 and decreased $307,000 versus fourth quarter 2012. Trust and Wealth Advisory revenues increased $25,000 versus third quarter 2013 and increased $3,000 versus fourth quarter 2012. The quarter-over-quarter revenue increase resulted from growth in managed assets which were partially offset by decreased estate fees. Service charges and fees increased $17,000 versus third quarter 2013, and increased $51,000 versus fourth quarter 2012 due to restructuring of deposit fees and increased volume of debit card interchange fees in 2013. Income from sales and servicing of mortgage loans increased $84,000 versus third quarter 2013 due to higher sales volume and a decrease in the MSR impairment reserve. Income from sales and servicing of mortgage loans decreased $354,000 versus fourth quarter 2012 due primarily to fewer loans sold in 2013 than in 2012. Mortgage loan sales totaled $2.4 million for fourth quarter 2013, $2.2 million for third quarter 2013 and $13.4 million for fourth quarter 2012. Fourth quarter 2013, third quarter 2013 and fourth quarter 2012 included mortgage servicing valuation impairment benefit (expense) of $27,000, ($38,000) and $73,000, respectively.

Non-Interest Expense

Non-interest expense for fourth quarter 2013 increased $334,000 versus third quarter 2013 and decreased $357,000 versus fourth quarter 2012. Net compensation increased $9,000 versus third quarter 2013 and increased $76,000 versus fourth quarter 2012 due to changes in staffing levels, merit increases and increased employee benefits costs. Premises and equipment costs increased $13,000 versus third quarter 2013 and remained level versus fourth quarter 2012.  The third quarter increase was due primarily to the Millerton drive-up renovations. Data processing increased $12,000 versus third quarter 2013 and decreased $10,000 versus fourth quarter 2012. Professional fees increased $223,000 versus third quarter 2013 and increased $232,000 versus fourth quarter 2012 due to consulting, legal and other professional services associated with efforts to implement strategic and capital planning by taking advantage of prudent opportunities to expand our franchise through de novo branching and acquisition opportunities, including our plans to establish a full-service branch in Great Barrington, Massachusetts and our agreement to acquire a branch office and related deposits from another institution in Sharon, Connecticut. Each of these is expected to commence operations in the second quarter of this year. Collections and OREO increased $141,000 versus third quarter 2013 due primarily to write-down of OREO properties, and decreased $127,000 versus fourth quarter 2012 due to a change in the accounting for delinquent property taxes and fewer OREO properties to maintain. FDIC insurance increased $9,000 versus third quarter 2013 and decreased $2,000 versus fourth quarter 2012. A fourth quarter 2012 FHLBB advance prepayment fee of $450,000 resulted from the early prepayment of a $10 million advance due 12/16/2013 with a 4.88% coupon.  

The effective income tax rates for fourth quarter 2013, third quarter 2013 and fourth quarter 2012 were 17.92%, 17.70% and 4.36%, respectively.

Loans

Net loans receivable increased $17.9 million during fourth quarter 2013 to $438.2 million at December 31, 2013, compared with $420.0 million at September 30, 2013, and increased $49.4 million for full year 2013, compared with $388.8 million at December 31, 2012.

Asset Quality

Non-performing assets decreased $2.2 million during fourth quarter 2013 to $7.5 million, or 1.29% of assets at December 31, 2013, from $9.7 million, or 1.65% of assets at September 30, 2013, and decreased $2.6 million in 2013 from $10.1 million, or 1.68% of assets at December 31, 2012.

Fourth quarter 2013 non-performing assets activity included: $263,000 of loans placed on non-accrual status; $276,000 of loan charge-offs; $65,000 of loan repayments; $695,000 of loans paid off; $1.4 million reinstated to accrual; and, $69,000 in proceeds from OREO sales.

At December 31, 2013, 17.8% of non-accrual loans were current with respect to loan payments, compared with 16.7% at September 30, 2013 and 18.2% at December 31, 2012.

Non-performing assets include OREO of $377,000 at December 31, 2013, compared with $571,000 at September 30, 2013, and $244,000 at December 31, 2012.

Total impaired and potential problem loans decreased $307,000, or 1.2%, during fourth quarter 2013 to $24.8 million, or 5.6% of gross loans receivable at December 31, 2013, from $25.1 million, or 5.9% of gross loans receivable at September 30, 2013, and decreased $2.6 million for year-to-date 2013 from $27.4 million, or 7.0% of gross loans receivable at December 31, 2012.

Loans past due 30 days or more decreased $410,000 during fourth quarter 2013 to $11.0 million, or 2.5% of gross loans receivable at December 31, 2013, from $11.4 million, or 2.7% of gross loans receivable at September 30, 2013, and decreased $2.6 million in 2013 from $13.6 million, or 3.47% of gross loans receivable at December 31, 2012.

The provision for loan losses for fourth quarter 2013 was $190,000 versus $240,000 for third quarter 2013 and $380,000 for fourth quarter 2012. Net loan charge-offs were $163,000, $215,000 and $199,000, for the respective periods. Loan charge-offs for fourth quarter 2013 related to the aforementioned residential property and other non-performing loans. Reserve coverage, as measured by the ratio of the allowance for loan losses to gross loans, remained relatively unchanged at 1.06%, versus 1.10% for third quarter 2013 and 1.11% for fourth quarter 2012.

Salisbury has cooperative relationships with the vast majority of its non-performing loan 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.

Capital

Book value and tangible book value per common share increased $0.92 and $0.95, respectively, during fourth quarter, to $33.21 and $27.12, respectively. Tangible book value excludes goodwill and core deposit intangibles.

Shareholders' equity increased $1.6 million in fourth quarter 2013 to $72.8 million at December 31, 2013. Contributing to the increase in shareholders' equity for fourth quarter 2013 was net income of $1.0 million and other comprehensive income of $1.1 million, less common and preferred stock dividends of $0.5 million.

Both Salisbury and the Bank's regulatory capital ratios remain in compliance with regulatory "well capitalized" requirements. At December 31, 2013 the Bank's Tier 1 leverage and total risk-based capital ratios were 8.96% and 13.93%, respectively, compared with regulatory "well capitalized" minimums of 5.00% and 10.00%, respectively. Salisbury's Tier 1 leverage and total risk-based capital ratios were 10.65% and 16.46%, respectively.

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 $36.9 million and to augment its regulatory capital ratios.

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, South Egremont and Sheffield, Massachusetts and Dover Plains and Millerton, 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 (unaudited)    
 
(in thousands, except share data)
 
December 31,
2013
December 31,
2012
ASSETS    
Cash and due from banks $ 5,926 $ 9,545
Interest bearing demand deposits with other banks 6,785 34,029
Total cash and cash equivalents 12,711 43,574
Interest bearing time deposits with other banks 738 --
Securities    
Available-for-sale at fair value 94,491 126,287
Federal Home Loan Bank of Boston stock at cost 5,340 5,747
Loans held-for-sale 173 1,879
Loans receivable, net (allowance for loan losses: $4,683 and $4,360) 438,178 388,758
Other real estate owned 377 244
Bank premises and equipment, net 11,611 11,520
Goodwill 9,829 9,829
Intangible assets (net of accumulated amortization: $1,968 and $1,745) 576 798
Accrued interest receivable 1,760 1,818
Cash surrender value of life insurance policies 7,529 7,295
Deferred taxes 260 --
Other assets  3,536  3,064
Total Assets $ 587,109 $ 600,813
LIABILITIES and SHAREHOLDERS' EQUITY    
Deposits    
Demand (non-interest bearing) $ 84,677 $ 98,850
Demand (interest bearing) 81,932 65,991
Money market 120,550 128,501
Savings and other 107,171 103,985
Certificates of deposit 83,039 93,888
Total deposits 477,369 491,215
Repurchase agreements 2,554 1,784
Federal Home Loan Bank of Boston advances 30,411 31,980
Capital lease liability 425 --
Accrued interest and other liabilities 3,560 3,837
Total Liabilities 514,319 528,816
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: 3,000,000;    
Issued: 1,710,121 and 1,689,691 171 169
Paid-in capital 13,668 13,158
Retained earnings 42,240 40,233
Unearned compensation - restricted stock awards (335) --
Accumulated other comprehensive income, net  1,046  2,437
Total Shareholders' Equity 72,790 71,997
Total Liabilities and Shareholders' Equity $ 587,109 $ 600,813
     
     
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) 2013 2012 2013 2012
Interest and dividend income        
Interest and fees on loans $ 4,563 $ 4,376 $ 17,978 $ 18,054
Interest on debt securities        
Taxable 398 515 1,757 2,454
Tax exempt 507 491 1,948 2,030
Other interest and dividends  9  44  67  120
Total interest and dividend income 5,477 5,426 21,750 22,658
Interest expense        
Deposits  376 543 1,813 2,414
Repurchase agreements 2 2 6 23
Federal Home Loan Bank of Boston advances 308 447 1,243 1,845
Total interest expense 686 992 3,062 4,282
Net interest income 4,791 4,434 18,688 18,376
Provision for loan losses 190 380 1,066 1,070
 Net interest and dividend income after provision for loan losses 4,601 4,054 17,622 17,306
Non-interest income        
Trust and wealth advisory 775 772 3,074 2,945
Service charges and fees 612 561 2,298 2,189
Gains on sales of mortgage loans, net 78 394 579 1,596
Mortgage servicing, net 38 76 35 (21)
Gains on securities, net -- -- -- 279
Other  67 74 319 326
Total non-interest income 1,570 1,877 6,305 7,314
Non-interest expense        
Salaries 1,960 1,880 7,467 7,149
Employee benefits(1) 664 668  2,804  2,912
Premises and equipment 609 609 2,398 2,408
Data processing 370 379 1,514 1,569
Professional fees 529 297 1,524 1,212
Collections and OREO 215 342 519 709
Litigation settlement -- -- -- 400
FDIC insurance 120 123 470 486
Marketing and community support 67 89 393 356
Amortization of intangibles 56 56 222 222
FHLBB advance prepayment fee -- 450 -- 450
Other 387 441 1,624 1,681
Total non-interest expense 4,977 5,334 18,935 19,554
Income before income taxes 1,194 597 4,992 5,066
Income tax provision 214 26 909 989
Net income $ 980 $ 571 $ 4,083 $ 4,077
Net income available to common shareholders $ 940 $ 531 $ 3,922 $ 3,861
         
Basic earnings per common share $ 0.55 $ 0.31 $ 2.30 $ 2.28
Diluted earnings per common share 0.55 0.31 2.30 2.28
Common dividends per share 0.28 0.28 1.12 1.12
         
(1) Included pension plan curtailment expense of $341,000 for the twelve month period ended December 31, 2012.
           
           
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) Q4 2013 Q3 2013 Q2 2013 Q1 2013 Q4 2012
Total assets $ 587,109 $ 589,481 $ 600,712 $ 597,343 $ 600,813
Loans receivable, net 438,178 420,306 416,729 406,258 388,758
Total securities 99,831 105,156 111,950 124,004 132,034
Deposits 477,369 479,869 492,040 487,773 491,215
FHLBB advances 30,411 30,801 31,187 31,574 31,980
Shareholders' equity 72,790 71,211 71,489 72,206 71,997
Wealth assets under management 431,793 408,448 402,897 404,211 388,113
Non-performing loans 7,172 9,166 9,204 8,585 9,860
Non-performing assets 7,549 9,737 9,639 9,297 10,104
Accruing loans past due 30-89 days 5,374 5,093 4,271 4,718 5,629
Net interest and dividend income 4,791 4,659 4,634 4,603 4,434
Net interest and dividend income, tax equivalent 5,115 4,967 4,942 4,903 4,709
Provision for loan losses 190 240 240 396 380
Non-interest income 1,570 1,460 1,650 1,625 1,877
Non-interest expense 4,977 4,643 4,610 4,705 5,334
Income before income taxes 1,194 1,237 1,433 1,127 597
Income tax provision 214 219 289 187 26
Net income 980 1,016 1,143 940 571
Net income available to common shareholders 940 976 1,103 899 531
           
Per share data          
Basic and diluted earnings per common share $ 0.55 $ 0.57 $ 0.65 $ 0.53 $ 0.31
Diluted earnings per common share 0.55 0.57 0.65 0.53 0.31
Dividends per common share 0.28 0.28 0.28 0.28 0.28
Book value per common share 33.21 32.28 32.45 32.88 33.14
Tangible book value per common share - Non-GAAP(1) 27.12 26.17 26.30 26.70 26.85
           
Common shares outstanding at end of period 1,710 1,710 1,710 1,709 1,690
Weighted average common shares outstanding, basic and diluted, for purposes of calculating EPS  
1,691
 
1,691
 
1,691
 
1,690
 
1,690
           
Profitability ratios          
Net interest margin (tax equivalent) 3.71% 3.51% 3.54% 3.54% 3.32%
Efficiency ratio(2) 71.77 71.22 68.88 70.93 71.41
Non-interest income to operating revenue 24.68 23.85 26.26 26.08 29.74
Effective income tax rate 17.92 17.70 20.19 16.59 4.36
Return on average assets 0.64 0.64 0.74 0.61 0.35
Return on average common shareholders' equity 6.69 7.05 7.81 6.45 3.85
           
Credit quality ratios          
Net charge-offs to average loans receivable, gross 0.15% 0.20% 0.29% 0.07% 0.21%
Non-performing loans to loans receivable, gross 1.62 2.16 2.19 2.09 2.51
Accruing loans past due 30-89 days to loans receivable, gross 1.22 1.20 1.02 1.15 1.44
Allowance for loan losses to loans receivable, gross 1.06 1.10 1.10 1.14 1.11
Allowance for loan losses to non-performing loans 65.30 50.80 50.32 54.59 44.22
Non-performing assets to total assets 1.29 1.65 1.60 1.56 1.68
           
Capital ratios          
Common shareholders' equity to assets 9.67% 9.37% 9.24% 9.41% 9.32%
Tangible common shareholders' equity to assets - Non-GAAP(1) 8.04 7.73 7.62 7.78 7.69
Tier 1 leverage capital 10.65 10.28 10.23 10.17 9.87
Total risk-based capital 16.46 16.67 16.48 16.47 16.63
           
(1) Refer to schedule labeled "Supplemental Information – Non-GAAP Financial Measures". 
(2) Calculated using SNL's methodology: 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 nonrecurring FHLBB prepayment fees and litigation expenses.
 
 
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 2013 Q3 2013 Q2 2013 Q1 2013 Q4 2012
Shareholders' Equity $ 72,790 $ 71,211 $ 71,489 $ 72,206 $ 71,997
Less: Preferred Stock (16,000) (16,000) (16,000) (16,000) (16,000)
Common Shareholders' Equity 56,790 55,211 55,489 56,206 55,997
Less: Goodwill (9,829) (9,829) (9,829) (9,829) (9,829)
Less: Intangible assets (576) (631) (687) (742) (798)
Tangible Common Shareholders' Equity $ 46,385 $ 44,751 $ 44,973 $ 45,635 $ 45,370
Total Assets $ 587,109 $ 589,481 $ 600,712 $ 597,343 $ 600,813
Less: Goodwill (9,829) (9,829) (9,829) (9,829) (9,829)
Less: Intangible assets (576) (631) (687) (742) (798)
Tangible Total Assets $ 576,704 $ 579,021 $ 590,196 $ 586,772 $ 590,186
Common Shares outstanding 1,710 1,710 1,710 1,709 1,690
           
Book value per Common Share – GAAP $ 33.21 $ 32.28 $ 32.45 $ 32.88 $ 33.14
Tangible book value per Common Share - Non-GAAP 27.12 26.17 26.30 26.70 26.85
           
Common Equity to Assets – GAAP 9.67% 9.37% 9.24% 9.41% 9.32%
Tangible Common Equity to Assets – Non-GAAP 8.04 7.73 7.62 7.78 7.69
           
Non-interest expense $ 4,977 $ 4,643 $ 4,610 $ 4,705 $ 5,334
Less: Amortization of core deposit intangibles (56) (56) (56) (56) (56)
Less: Foreclosed property expense (123) (10) (14) (20) (125)
Less: Nonrecurring expenses          
FHLBB prepayment fee -- -- -- -- (450)
Operating Expenses $ 4,798 $ 4,577 $ 4,540 $ 4,629 $ 4,703
Net interest and dividend income, tax equivalent $ 5,115 $ 4,967 $ 4,942 $ 4,903 $ 4,709
Non-interest income 1,570 1,459 1,650 1,625 1,877
Operating Revenue $ 6,685 $ 6,426 $ 6,592 $ 6,528 $ 6,586
Efficiency Ratio 71.77% 71.22% 68.88% 70.93% 71.41%
           
Salisbury Contact:
Richard J. Cantele, Jr.,
President and Chief Executive Officer
860-435-9801 or