Salisbury Bancorp, Inc. Reports Results For Third Quarter 2022; Declares 16 Cent Dividend

• Third Quarter 2022 Net Income of $0.75 per Basic Common Share and Return on Average Assets of 1.13%
• Third Quarter 2022 Loan Growth of $43.8 million, or 3.8%, Excluding PPP Loans
• Non-performing Assets were 0.12% of Total Assets at September 30, 2022
• Common Equity Tier 1 and Total Capital Ratios of 12.1% and 13.2%, Respectively

LAKEVILLE, Conn., Oct. 19, 2022 (GLOBE NEWSWIRE) -- Salisbury Bancorp, Inc. (“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, 2022.

Net income available to common shareholders was $4.3 million, or $0.75 per basic common share, for the third quarter ended September 30, 2022 (third quarter 2022), compared with $3.8 million, or $0.67 per basic common share, for the second quarter ended June 30, 2022 (second quarter 2022), and $3.4 million, or $0.60 per basic common share, for the third quarter ended September 30, 2021 (third quarter 2021).

Salisbury’s President and Chief Executive Officer, Richard J. Cantele, Jr., stated, “We reported another quarter of strong earnings and loan growth and the credit quality of our loan portfolio continued to improve. As we approach the end of the year, we are cautiously optimistic that the business environment will remain favorable despite rising interest rates, persistent inflation and volatile financial markets. We are focused on prudently extending credit and enhancing the Bank’s profitability while continuing to provide outstanding customer service.”

Net Interest and Dividend Income

Tax equivalent net interest income of $12.1 million for the third quarter 2022 increased $993 thousand, or 9.0%, versus second quarter 2022, and increased $1.7 million, or 16.5%, versus third quarter 2021. Tax equivalent interest income of $13.2 million for third quarter 2022 increased $1.3 million, or 10.9%, versus second quarter 2022 and increased $2.0 million, or 18.2%, from third quarter 2021. The cost of interest-bearing liabilities of $1.2 million for third quarter 2022 increased $308 thousand, or 35.9%, from second quarter 2022 and increased $329 thousand, or 39.4%, from third quarter 2021.

Average earning assets of $1.5 billion for third quarter 2022 increased $66.3 million, or 4.8%, from second quarter 2022, and increased $53.8 million, or 3.8%, versus third quarter 2021. Average earning assets for third quarter 2022 included average PPP loan balances of $1.3 million, net of deferred fees, compared with $8.8 million and $51.8 million in second quarter 2022 and third quarter 2021, respectively. Average total interest bearing liabilities of $972 million for third quarter 2022 increased $28.6 million, or 3.0%, from second quarter 2022 and increased $22.6 million, or 2.4%, versus third quarter 2021.

The tax equivalent net interest margin for third quarter 2022 was 3.27% compared with 3.15% for second quarter 2022 and 2.92% for third quarter 2021. Excluding PPP loans, the tax equivalent net interest margin for third quarter 2022 was 3.25% compared with 3.10% for second quarter 2022 and 2.78% for third quarter 2021. See SUPPLEMENTAL INFORMATION – Net Interest and Dividend Income on page 8 of this release for additional details.

Non-Interest Income

Non-interest income of $2.7 million for third quarter 2022 decreased $604 thousand versus second quarter 2022 and decreased $147 thousand versus third quarter 2021.

Trust and Wealth Advisory fees of $1.2 million for third quarter 2022 decreased $65 thousand from second quarter 2022 and decreased $58 thousand from third quarter 2021. Assets under administration were $1.2 billion at September 30, 2022 compared with $1.1 billion at December 31, 2021 and $973.2 million at September 30, 2021. Discretionary assets under administration of $522.1 million at September 30, 2022 compared with $657.8 million at December 31, 2021 and $608.2 million at September 30, 2021. The decline from the comparative quarters primarily reflected lower market valuations. Non-discretionary assets under administration of $710.2 million at September 30, 2022 increased from $425.4 million at December 31, 2021 and increased from $365.0 million at September 30, 2021. The increase in non-discretionary assets from the comparative quarters primarily reflected a higher valuation of certain partnership assets for an existing client relationship. The trust and wealth business records only a nominal annual fee on this relationship.

Service charges and fees of $1.2 million for third quarter 2022 decreased $504 thousand versus second quarter 2022 and was essentially unchanged from third quarter 2021. The decrease from second quarter 2022 primarily reflected non-recurring loan prepayment fees of $425 thousand, which were recorded in the second quarter. Deposit fees for third quarter 2022 were essentially unchanged from the comparative quarters. Net fees from mortgage banking activities were slightly below the comparative quarters. Salisbury did not sell any residential loans to FHLBB during third quarter 2022 compared with sales of $2.0 million in second quarter 2022 and $1.8 million in third quarter 2021.

Non-interest income for second quarter 2022 included a non-recurring non-taxable gain of $89 thousand related to proceeds receivable from a bank-owned life insurance policy (“BOLI”) due to the death of a former covered employee.

Non-Interest Expense

Non-interest expense of $8.5 million for third quarter 2022 declined slightly from second quarter 2022 and increased $228 thousand versus third quarter 2021. Compensation expense of $5.0 million for third quarter 2022 increased $81 thousand from second quarter 2022 and increased $343 thousand versus third quarter 2021. The increase in compensation expense from the comparative periods primarily reflected higher salary expense as well as higher production and incentive accruals, partially offset by lower benefits expense.

Excluding compensation expense, other non-interest expenses for third quarter 2022 decreased $101 thousand from second quarter 2022 and decreased $115 thousand from third quarter 2021. The decrease from the prior quarter primarily reflected lower professional fees, lower marketing expense and lower Director fees, partially offset by higher facilities and deposit related costs. The decrease from third quarter 2021 primarily reflected lower facilities related costs as well as lower marketing expenses, partially offset by higher information processing costs.

The effective income tax rates for third quarter 2022, second quarter 2022 and third quarter 2021 were 18.7%, 15.3% and 20.1%, respectively. The tax provision for second quarter 2022 included a non-recurring credit of $63 thousand to adjust for an over statement of the Bank’s 2021 tax liability to New York state as well as non-recurring BOLI proceeds noted above.

Loans

Gross loans receivable of $1.2 billion increased $41.4 million, or 3.6%, from second quarter 2022, and increased $120.2 million, or 11.2%, from third quarter 2021. Excluding PPP loans, gross loans receivable increased $43.8 million, or 3.8%, from second quarter 2022 and $160.4 million, or 15.6%, from third quarter 2021. Residential 5+ multifamily gross loans receivable at September 30, 2022 and June 30, 2022 included a loan for approximately $16.0 million. At September 30, 2021 this loan, which had a gross balance of $11.7 million, was reported in the commercial real estate category while the project was under construction. The ratio of gross loans to deposits for third quarter 2022 was 89.9% compared with 87.3% for second quarter 2022 and 83.0% for third quarter 2021. Balances by loan type for the comparative periods were as follows:

Asset Quality

Asset quality improved in third quarter 2022. Non-performing assets of $1.9 million, or 0.12% of total assets at September 30, 2022, decreased $2.3 million from $4.2 million, or 0.27% of total assets at December 31, 2021, and decreased $3.1 million from $5.0 million, or 0.34% of total assets, at September 30, 2021.

The amount of total impaired and potential problem loans decreased $2.7 million during the quarter to $11.2 million or 0.94% of gross loans receivable at September 30, 2022 compared to $32.8 million, or 3.04% of gross loans receivable at December 31, 2021 and $45.7 million, or 4.27% of gross loans receivable at September 30, 2021. The decrease in the balance from the comparative quarters primarily reflected management’s upgrade of the internal risk rating on certain hospitality related loans, which were previously downgraded due to concerns over COVID-19. These businesses have demonstrated a return to pre-pandemic levels of activity and liquidity, warranting the improvement in risk rating.

Accruing loans receivable 30-to-89 days past due decreased $0.6 million during third quarter 2022 to $0.4 million, or 0.03% of gross loans receivable, from $1.3 million, or 0.12% of gross loans receivable at December 31, 2021, and decreased $0.5 million from $0.9 million, or 0.08% of gross loans receivable at September 30, 2021.

The allowance for loan losses for third quarter 2022 was $14.3 million compared with $13.7 million for second quarter 2022 and $13.2 million for third quarter 2021.The provision expense was $0.7 million for third quarter 2022 compared with a provision expense of $1.1 million for second quarter 2022 and a provision expense of $0.4 million for the third quarter 2021. The provision expense for third quarter 2022 reflected the strong quarterly loan growth and adjustments to qualitative factors due to the uncertain macroeconomic environment. Net loan charge-offs (recoveries) were $64 thousand for the third quarter 2022 compared with $312 thousand for second quarter 2022 and ($60) thousand for the third quarter 2021.

Reserve coverage, as measured by the ratio of the allowance for loan losses to gross loans, excluding PPP loans, was 1.20% for the third quarter 2022 versus 1.20% for the second quarter 2022 and 1.28% for the third quarter 2021. Similarly, reserve coverage, as measured by the ratio of the allowance for loan losses to non-performing loans was 771% for the third quarter 2022 versus 324% for second quarter 2022 and 263% for third quarter 2021.

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.

Deposits and Borrowings

Deposits of $1.3 billion at September 30, 2022 decreased $11.0 million, or 0.8%, from December 31, 2021 and increased $35.6 million, or 2.8%, from September 30, 2021. At September 30, 2022, Salisbury did not have any outstanding brokered deposits balances compared with balances of $7.9 million at December 31, 2021 and September 30, 2021, respectively. Average total deposits were $1.3 billion for third quarter 2022, second quarter 2022 and third quarter 2021. Average total deposits for third quarter 2022 included average brokered deposits of $17.6 million compared with $18.0 million for second quarter 2022 and $7.9 million for third quarter 2021.

Salisbury had $20.0 million of outstanding advances from FHLBB at September 30, 2022 compared with $7.7 million and $8.9 million at December 31, 2021 and September 30, 2021, respectively. Salisbury’s excess borrowing capacity at FHLBB was approximately $227 million at September 30, 2022.

Capital

Shareholders’ equity decreased $4.1 million in third quarter to $123.2 million at September 30, 2022 as unrealized losses in the available-for-sale securities (“AFS”) portfolio increased by $7.8 million and common stock dividends were paid of $0.9 million, which were partially offset by net income of $4.3 million and other activity of $0.2 million. The unrealized losses in the AFS portfolio, which reflected the continued increase in market interest rates during third quarter 2022, reduced both book value and tangible book value at September 30, 2022. Book value per common share of $21.29 at September 30, 2022 decreased $0.72 from second quarter 2022 and decreased $2.04 from third quarter 2021. Tangible book value per common share of $18.86 at September 30, 2022 decreased $0.71 from second quarter 2022 and decreased $1.97 from third quarter 2021.

The Bank’s regulatory capital ratios remain in compliance with regulatory “well capitalized” requirements. At September 30, 2022, the Bank’s Tier 1 leverage, total risk-based capital, and common equity tier 1 capital ratios were 9.83%, 13.24%, and 12.07%, respectively, compared with regulatory “well capitalized” minimums of 5.00%, 10.00%, and 6.5%, respectively. The unrealized losses in the AFS portfolio noted above do not affect the Bank’s regulatory capital ratios.

During third quarter 2022, Salisbury did not repurchase any of its outstanding common stock pursuant to its stock repurchase program established in March 2021.

Dividend on Common Shares

On October 19, 2022, the Board of Directors of Salisbury approved a quarterly cash dividend of $0.16 per common share that will be paid on November 25, 2022 to shareholders of record as of November 11, 2022.

Other Matters

In July 2022, Salisbury management discovered that the Bank’s trust department terminated a trust account in May 2020 and distributed approximately $1.0 million that should have been retained in continuance of the trust account. Salisbury has engaged legal counsel and is currently evaluating the Company’s potential financial exposure. At this time, management believes that Salisbury’s exposure is not yet known or knowable and could potentially range from zero to approximately $1.0 million depending upon the facts and circumstances and the scope of Salisbury’s insurance coverage.

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, New Paltz, Poughkeepsie, and Red Oaks Mill, New York. The Bank offers a broad spectrum of consumer and business banking products and services, as well as trust and wealth advisory services. For more information, please visit www.salisburybank.com. 

Forward-Looking Statements

This news release may contain statements relating to Salisbury’s and the Bank’s future results that are considered “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 laws and regulations; changes in accounting principles; and the quality or composition of the loan and investment portfolios, technological changes and cybersecurity matters, and other factors that may be described in Salisbury’s quarterly reports on Form 10-Q and its annual report on Form 10-K, which are available at the Securities and Exchange Commission’s website (www.sec.gov) and to which reference is hereby made. Forward-looking statements made by Salisbury in this news release speak only as of the date they are made. Events or other facts that could cause Salisbury’s actual results to differ may arise from time to time and Salisbury cannot predict all such events and factors. Salisbury undertakes no obligation to publicly update any forward-looking statement unless as may be required by law.

Investor presentation slides, which include a review of financial results and trends through the period ended September 30, 2022, are available in the Shareholder Relations section of Salisbury’s website at salisburybank.com under About Us/Shareholder Relations/News & Market Information/Presentations.

Salisbury Bancorp, Inc. and Subsidiary
CONSOLIDATED BALANCE SHEETS (unaudited)

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

Salisbury Bancorp, Inc. and Subsidiary
SELECTED CONSOLIDATED FINANCIAL DATA (unaudited)

⁽¹⁾ Adjusted to reflect the U.S. federal statutory benefit on income derived from tax-exempt securities and loans.
⁽²⁾ Refer to schedule labeled “Supplemental Information – Non-GAAP Financial Measures”.
⁽³⁾ Represents the capital ratios of the Bank.

Salisbury Bancorp, Inc. and Subsidiary
SUPPLEMENTAL INFORMATION – Non-GAAP Financial Measures (unaudited)

¹ Excluding revenue and expenses associated with trust & wealth advisory, the efficiency ratios would be: Q3 2022: 55.28%; Q2 2022: 57.21%; Q1 2022: 61.83%; Q4 2021: 60.62%; Q3 2021: 60.70%.

Salisbury Bancorp, Inc. and Subsidiary
SUPPLEMENTAL INFORMATION – Net Interest and Dividend Income (unaudited)

(a) Includes non-accrual loans.
(b) Includes interest-bearing deposits in other banks and federal funds sold.
(c) Average balances of securities are based on amortized cost.
(d) Includes tax exempt income benefit of $0.2 million, $0.2 million and $0.2 million, respectively, for Q3 2022, Q2 2022 and Q3 2021 on tax-exempt securities and loans whose income and yields are calculated on a tax-equivalent basis. The income benefit reflected the U.S. federal statutory tax rate of 21.0% for 2022 and 2021.
(e) Net interest income divided by average interest-earning assets.
(f) Net of issuance costs.

Salisbury Bancorp, Inc. and Subsidiary
SUPPLEMENTAL INFORMATION – Net Interest and Dividend Income (unaudited)

(a) Includes non-accrual loans.
(b) Includes interest-bearing deposits in other banks and federal funds sold.
(c) Average balances of securities are based on historical cost.
(d) Includes tax exempt income benefit of $0.6 million and $0.5 million, respectively for 2022 and 2021 on tax-exempt securities and loans whose income and yields are calculated on a tax-equivalent basis. The income benefit reflected the U.S. federal statutory tax rate of 21.0% for 2022 and 2021.
(e) Net interest income divided by average interest-earning assets.
(f) Net of issuance costs.

Source: Salisbury Bancorp, Inc.

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