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

Lakeville, Connecticut, UNITED STATES


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 endedNine 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 2015Q2 2015Q1 2015Q4 2014Q3 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 2015Q2 2015Q1 2015Q4 2014Q3 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%
      

 


        

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