Salisbury Bancorp, Inc. Reports Results For Third Quarter 2013; Declares 28 Cent Dividend

LAKEVILLE, Conn., Oct. 25, 2013 (GLOBE NEWSWIRE) -- Salisbury Bancorp, Inc. ("Salisbury") (Nasdaq:SAL), the holding company for Salisbury Bank and Trust Company (the "Bank"), announced results for its third quarter ended September 30, 2013.

Selected third quarter 2013 highlights

Net income available to common shareholders was $976,000, or $0.57 per common share, for the quarter ended September 30, 2013 (third quarter 2013), versus $1,103,000, or $0.65 per common share, for the quarter ended June 30, 2013 (second quarter 2013), and $1,094,000, or $0.65 per common share, for the quarter ended September 30, 2012 (third quarter 2012).
  • Earnings per common share of $0.57 decreased $0.08, or 12.3%, as compared to $0.65 for the second quarter 2013 and third quarter 2012.
  • Tax equivalent net interest income increased $25,000, or 0.5%, versus second quarter 2013, and increased $120,000, or 2.5%, versus third quarter 2012.
  • Net loan charge-offs were $215,000 for third quarter 2013, versus $294,000 for second quarter 2013 and $359,000 for third quarter 2012. Provision for loan losses for the third quarter remained unchanged from the second quarter 2013 at $240,000, versus $330,000 for third quarter 2012.
  • Non-interest income decreased $191,000, or 11.6%, versus second quarter 2013 and decreased $428,000, or 22.7%, versus third quarter 2012; which included $568,000 in gains on sales of mortgage loans.
  • Non-interest expense increased $33,000, or 0.7%, versus second quarter 2013 and decreased $50,000, or 1.1%, versus third quarter 2012.
  • Preferred stock dividends remained unchanged from the second quarter at $40,000 for third quarter 2013, and declined by $8,000 as compared with the third quarter 2012 dividend of $46,000.
  • Non-performing assets increased $0.1 million, or 1.0%, to $9.7 million, or 1.7% of total assets, at September 30, 2013 versus June 30, 2013 and decreased $0.2 million versus September 30, 2012. Accruing loans receivable 30-to-89 days past due increased $0.8 million to $5.1 million, or 1.2% of gross loans receivable at September 30, 2013, versus June 30, 2013 and increased $1.9 million versus September 30, 2012.

Richard J. Cantele, Jr., President and Chief Executive Officer, stated, "The third quarter results reflect the strength of continued loan growth, up over $3.5 million as compared to June, as we continue to redeploy cash flow from the investment portfolio into loans. Loan growth, year–to–date, has increased by over $31.5 million or over 8% since the end of 2012. During the quarter we also saw a decline in the higher yielding Money Market deposit product which helped to facilitate a decrease in the level of low yielding cash assets as well as the overall size of the balance sheet. The net interest margin remained relatively stable at 3.51%. Non-Interest Income reflects the impact of increasing mortgage rates which adversely impacted demand for residential mortgages and resulted in a lower volume of loans sold during the quarter.

Net Interest Income

Tax equivalent net interest income for third quarter 2013 increased $25,000, or 0.5%, versus second quarter 2013, and increased $120,000, or 2.5%, versus third quarter 2012. Average total interest bearing liabilities increased $12.6 million as compared with second quarter 2013 and decreased $2.8 million, or -0.6%, as compared with third quarter 2012. Average earning assets increased $6.7 million as compared with second quarter 2013 and decreased $6.2 million, or -1.1%, as compared with third quarter 2012. The net interest margin on a tax equivalent basis decreased 3 basis points from second quarter 2013 to 3.51% and increased 12 basis points versus third quarter 2012 from 3.39%.

Non-Interest Income

Non-interest income decreased $191,000, or 11.6%, versus second quarter 2013 and decreased $428,000, or 22.7%, versus third quarter 2012. Trust and Wealth Advisory revenues decreased $74,000 versus second quarter 2013 and increased $67,000 versus third quarter 2012. The year-over-year revenue increase results from growth in managed assets, offset by slightly lower estate fees collected in third quarter 2013. Service charges and fees increased $20,000 versus second quarter 2013 and $36,000 versus third quarter 2012. Income from sales and servicing of mortgage loans in the third quarter decreased by $129,000 as compared to the second quarter 2013 and decreased $527,000 as compared to the third quarter 2012 due to interest rate driven fluctuations in the volume of fixed rate residential mortgage loan sales and mortgage servicing valuations. Mortgage loan sales totaled $2.2 million for third quarter 2013, $5.1 million for second quarter 2013 and $18.3 million for third quarter 2012. Third quarter 2013, second quarter 2013 and third quarter 2012 included mortgage servicing valuation (impairment) or benefit charges of ($38,000), $1,000 and $12,000, respectively. Other income includes income from bank owned life insurance and rental income.

Non-Interest Expense

Non-interest expense for third quarter 2013 increased $33,000 versus second quarter 2013 and decreased $50,000 versus third quarter 2012. Compensation and employee benefits increased $17,000 versus second quarter 2013, and increased $208,000 versus third quarter 2012. Year-over-year expenses include higher 401(k) expense and new compensation plan expenses implemented to compensate for the hard freeze placed on the defined benefit pension plan as of December 31, 2012. Premises and equipment increased $39,000 versus second quarter 2013 and $19,000 versus third quarter 2012, mainly due to disposed assets related to modifications of the Millerton branch. Data processing decreased $9,000 versus second quarter 2013 and $11,000 versus third quarter 2012. Professional fees decreased $3,000 versus second quarter 2013, and increased $7,000 versus third quarter 2012. Collections and OREO decreased $2,000 versus second quarter 2013, and $227,000 versus third quarter 2012 due primarily to decreased related litigation and OREO expense. Salisbury had $571,000 in foreclosed property at September 30, 2013 compared to $435,000 at June 30, 2013 and $641,000 at September 30, 2012. FDIC insurance premiums decreased $3,000 versus second quarter 2013 and $5,000 versus third quarter 2012. Remaining operating expenses decreased $6,000 versus second quarter 2013 and $41,000 versus third quarter 2012 due primarily to reductions in other administrative and operational expenses.

The effective income tax rates for third quarter 2013, second quarter 2013 and third quarter 2012 were 18%, 20% and 21%, respectively.

Loans

Net loans receivable increased $3.6 million during third quarter 2013 to $420.3 million at September 30, 2013, versus $416.7 million at June 30, 2013, and increased $42.9 million versus $377.4 million at September 30, 2012.

Asset Quality

Non-performing assets increased $0.1 million during third quarter 2013 to $9.7 million, or 1.7% of assets, at September 30, 2013, versus $9.6 million, or 1.6% of assets, at June 30, 2013, and decreased $0.2 million versus $9.9 million, or 1.6% of assets, at September 30, 2012.

The $0.1 million increase in non-performing assets in third quarter 2013 resulted primarily from loans aggregating $1.5 million placed on non-accrual status, which was mostly offset by a $0.3 million decrease in accruing loans 90+ days past due, $0.1 million of loans returned to accrual status, $0.8 million in loan repayments and payoffs and $0.2 million in loan charge-offs.

Total impaired and potential problem loans decreased $1.1 million during third quarter 2013 to $25.1 million, or 5.9% of gross loans receivable, at September 30, 2013, versus $26.2 million, or 6.2% of gross loans receivable, at June 30, 2013, and decreased $3.0 million versus $28.1 million, or 7.4% of gross loans receivable, at September 30, 2012.

Accruing loans past due 30-to-89 days increased $0.8 million to $5.1 million, or 1.2% of gross loans receivable, at September 30, 2013. Over half of this increase is due to one residential mortgage the underlying property of which we expect to be sold in fourth quarter 2013. This compares to the prior quarter total of $4.3 million, or 1.0% of gross loans receivable, at June 30, 2013. Accruing loans past due 30-to-89 days increased $1.9 million as compared to September 30, 2012.

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 provision for loan losses was $240,000 for both the third and second quarters of 2013 and $330,000 for third quarter 2012. Net loan charge-offs were $215,000, $295,000 and $359,000, for the respective quarters. Reserve coverage, as measured by the ratio of the allowance for loan losses to gross loans, remained unchanged at 1.10% at September 30, 2013, June 30, 2013 and September 30, 2012.

Capital

Both Salisbury and the Bank's regulatory capital ratios remain in compliance with regulatory "well capitalized" requirements. At September 30, 2013 Salisbury's Tier 1 leverage and total risk-based capital ratios were 10.28% and 16.67%, respectively, and the Bank's Tier 1 leverage and total risk-based capital ratios were 8.60% and 13.93%, respectively, versus regulatory "well capitalized" minimums of 5.00% and 10.00%, respectively.

At September 30, 2013, Salisbury's assets totaled $589 million. Book value and tangible book value per common share were $32.28 and $26.17, 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 $27.2 million and to augment its regulatory capital ratios.

Third quarter 2013 dividend on Common Shares

The Board of Directors of Salisbury, the holding company for Salisbury Bank and Trust Company, declared a $0.28 per common share quarterly cash dividend at their October 25, 2013 meeting. The dividend will be paid on November 29, 2013 to shareholders of record as of November 8, 2013.

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) September 30, December 31,
   2013 2012
ASSETS    
Cash and due from banks $7,679 $9,545
Interest bearing demand deposits with other banks 16,040 34,029
Total cash and cash equivalents 23,719 43,574
Interest bearing time deposits 5,220 --
Securities    
Available-for-sale at fair value 99,816 126,287
Federal Home Loan Bank of Boston stock at cost 5,340 5,747
Loans held-for-sale 708 1,879
Loans receivable, net (allowance for loan losses: $4,656 and $4,360) 420,306 388,758
Other real estate owned 571 244
Bank premises and equipment, net 11,253 11,520
Goodwill 9,829 9,829
Intangible assets (net of accumulated amortization: $1,912 and $1,745) 631 798
Accrued interest receivable 1,823 1,818
Cash surrender value of life insurance policies 7,480 7,295
Deferred taxes 719 --
Other assets 2,066 3,064
Total Assets $589,481 $600,813
LIABILITIES and SHAREHOLDERS' EQUITY    
Deposits    
Demand (non-interest bearing) $83,892 $98,850
Demand (interest bearing) 79,232 65,991
Money market 125,070 128,501
Savings and other 107,380 103,985
Certificates of deposit 84,295 93,888
Total deposits 479,869 491,215
Repurchase agreements 3,870 1,784
Federal Home Loan Bank of Boston advances 30,801 31,980
Deferred taxes -- 590
Accrued interest and other liabilities 3,730 3,247
Total Liabilities 518,270 528,816
Commitments and contingencies --  --
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
Restricted Common Stock (375) --
Paid-in capital 13,668 13,158
Retained earnings 41,779 40,233
Accumulated other comprehensive (loss) income, net (32) 2,437
Total Shareholders' Equity 71,211 71,997
Total Liabilities and Shareholders' Equity $589,481 $600,813
     
         
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) 2013 2012 2013 2012
Interest and dividend income        
Interest and fees on loans $4,516 $4,500 $13,415 $13,678
Interest on debt securities         
Taxable 418 579 1,359 1,939
Tax exempt 475 495 1,441 1,539
Other interest and dividends 22 33 58 75
Total interest and dividend income 5,431 5,607 16,273 17,231
Interest expense        
Deposits 459 580 1,437 1,870
Repurchase agreements 2 3 4 21
Federal Home Loan Bank of Boston advances 311 452 935 1,398
Total interest expense 772 1,035 2,376 3,289
Net interest income 4,659 4,572 13,897 13,942
Provision for loan losses 240 330 876 690
Net interest and dividend income after provision for loan losses 4,419 4,242 13,021 13,252
Non-interest income        
Trust and wealth advisory 750 683 2,299 2,173
Service charges and fees 595 559 1,687 1,628
Gains on sales of mortgage loans, net 69 568 501 1,203
Mortgage servicing, net (37) (9) (3) (98)
Gains on securities, net --  --  --  279
Other  82 86 251 252
Total non-interest income 1,459 1,887 4,735 5,437
Non-interest expense        
Salaries 1,922 1,810 5,508 5,268
Employee benefits⁽¹⁾ 693 597 2,140 2,244
Premises and equipment  622 603 1,789 1,799
Data processing 358 369 1,145 1,190
Professional fees 306 299 996 915
Collections and OREO⁽²⁾ 74 301 305 767
FDIC insurance 111 116 350 363
Marketing and community support 99 92 326 267
Amortization of intangibles 56 56 167 167
Other 402 450 1,232 1,240
Total non-interest expense 4,643 4,693 13,958 14,220
Income before income taxes 1,235 1,436 3,798 4,469
Income tax provision 219 296 695 963
Net income $1,016 $1,140 $3,103 $3,506
Net income available to common shareholders $976 $1,094 $2,982 $3,328
         
Basic earnings per common share $0.57 $0.65 $1.75 $1.97
Diluted earnings per common share 0.57 0.65 1.75 1.97
Common dividends per share 0.28 0.28 0.84 0.84
⁽¹⁾ Included pension plan curtailment expense of $341,000 for the nine month period ended September 30, 2012.
⁽²⁾ Included litigation expense of $193,000 and $533,000, respectively, for the three and nine month periods ended September 30, 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) Q3 2013 Q2 2013 Q1 2013 Q4 2012 Q3 2012
Total assets $589,481 $600,712 $597,343 $600,813 $611,037
Loans receivable, net 420,306 416,729 406,258 388,758 377,377
Total securities 105,156 111,950 124,004 132,034 131,412
Deposits 479,869 492,040 487,773 491,215 490,206
FHLBB advances 30,801 31,187 31,574 31,980 42,392
Shareholders' equity 71,211 71,489 72,206 71,997 70,374
Wealth assets under management 408,448 402,897 404,211 388,113 388,807
Non-performing loans 9,166 9,204 8,585 9,860 9,229
Non-performing assets 9,737 9,639 9,297 10,104 9,870
Accruing loans past due 30-89 days 5,093 4,271 4,718 5,629 3,152
Net interest and dividend income 4,659 4,634 4,603 4,434 4,572
Net interest and dividend income, tax equivalent 4,967 4,942 4,903 4,709 4,847
Provision for loan losses 240 240 396 380 330
Non-interest income 1,459 1,650 1,625 1,877 1,887
Non-interest expense 4,643 4,610 4,705 5,334 4,693
Income before income taxes 1,235 1,433 1,127 597 1,436
Income tax provision 219 289 187 26 296
Net income 1,016 1,143 940 571 1,140
Net income available to common shareholders 976 1,103 899 531 1,094
           
Per share data          
Basic earnings per common share $0.57 $0.65 $0.53 $0.31 $0.65
Diluted earnings per common share 0.57 0.65 0.53 0.31 0.65
Dividends per common share 0.28 0.28 0.28 0.28 0.28
Book value per common share 32.28 32.45 32.88 33.14 32.18
Tangible book value per common share - Non-GAAP⁽¹⁾ 26.17 26.30 26.70 26.85 25.86
           
Common shares outstanding at end of period 1,710 1,710 1,709 1,690 1,690
Weighted average common shares outstanding, basic and diluted, for purposes of calculating EPS 1,691 1,691 1,690 1,690 1,690
           
Profitability ratios          
Net interest margin (tax equivalent) 3.51% 3.54% 3.54% 3.32% 3.39%
Efficiency ratio⁽²⁾ 71.22 68.88 70.93 71.41 66.06
Non-interest income to operating revenue 23.85 26.26 26.08 29.74 29.21
Effective income tax rate 17.73 20.19 16.59 4.32 20.63
Return on average assets 0.64 0.74 0.61 0.35 0.71
Return on average common shareholders' equity 7.05 7.81 6.45 3.85 8.05
           
Credit quality ratios          
Net charge-offs to average loans receivable, gross 0.20% 0.29% 0.07% 0.21% 0.38%
Non-performing loans to loans receivable, gross 2.16 2.19 2.09 2.51 2.43
Accruing loans past due 30-89 days to loans receivable, gross 1.20 1.02 1.15 1.44 0.83
Allowance for loan losses to loans receivable, gross 1.10 1.10 1.14 1.11 1.10
Allowance for loan losses to non-performing loans 50.80 50.32 54.59 44.22 45.28
Non-performing assets to total assets 1.65 1.60 1.56 1.68 1.62
           
Capital ratios          
Common shareholders' equity to assets 9.37% 9.24% 9.41% 9.32% 8.90%
Tangible common shareholders' equity to assets - Non-GAAP⁽¹⁾ 7.73 7.62 7.78 7.69 7.28
Tier 1 leverage capital 10.28 10.23 10.17 9.87 9.78
Total risk-based capital 16.67 16.48 16.47 16.63 17.00
⁽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) Q3 2013 Q2 2013 Q1 2013 Q4 2012 Q3 2012
Shareholders' Equity $71,211 $71,489 $72,206 $71,997 $70,374
Less: Preferred Stock (16,000) (16,000) (16,000) (16,000) (16,000)
Common Shareholders' Equity 55,211 55,489 56,206 55,997 54,374
Less: Goodwill (9,829) (9,829) (9,829) (9,829) (9,829)
Less: Intangible assets (631) (687) (742) (798) (853)
Tangible Common Shareholders' Equity $44,751 $44,973 $45,635 $45,370 $43,692
Total Assets $589,481 $600,712 $597,343 $600,813 $611,037
Less: Goodwill (9,829) (9,829) (9,829) (9,829) (9,829)
Less: Intangible assets (631) (687) (742) (798) (853)
Tangible Total Assets $579,021 $590,196 $586,772 $590,186 $600,355
Common Shares outstanding 1,710 1,710 1,709 1,690 1,690
           
Book value per Common Share – GAAP $32.28 $32.45 $32.88 $33.14 $32.18
Tangible book value per Common Share - Non-GAAP 26.17 26.30 26.70 26.85 25.86
           
Common Equity to Assets – GAAP 9.37% 9.24% 9.41% 9.32% 8.90%
Tangible Common Equity to Assets – Non-GAAP 7.73 7.62 7.78 7.69 7.28
           
Non-interest expense $4,643 $4,610 $4,705 $5,334 $4,693
Less: Amortization of core deposit intangibles (56) (56) (56) (56) (56)
Less: Foreclosed property expense (10) (14) (20) (125) (39)
Less: Nonrecurring expenses          
FHLBB prepayment fee -- -- -- (450) -- 
Litigation  --  --  --  --  (150)
Operating Expenses $4,577 $4,540 $4,629 $4,703 $4,448
Net interest and dividend income, tax equivalent $4,967 $4,942 $4,903 $4,709 $4,847
Non-interest income 1,459 1,650 1,625 1,877 1,887
Less: Gains on securities, net -- -- -- -- --
Operating Revenue $6,426 $6,592 $6,528 $6,586 $6,734
Efficiency Ratio 71.22% 68.88% 70.93% 71.41% 66.06%
           
CONTACT: Salisbury Contact:         Richard J. Cantele, Jr.,         President and Chief Executive Officer         860-435-9801 or rcantele@salisburybank.com

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