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Salisbury Bancorp, Inc. Reports Results for Third Quarter 2019; Declares 28 Cent Dividend

  • Record Net Income of $1.06 per Share for Third Quarter, Up 26% Versus a Year Ago
  • Non-performing Assets of 0.50% of Total Assets, Down from 0.77% One Year Ago
  • Wealth Assets Under Administration Increased to $752 Million, Up $62 Million from One Year Ago
  • Tangible Book Value of $34.24 per Share, Up 9% from December 2018

LAKEVILLE, Conn., Oct. 25, 2019 (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, 2019.

Net income allocated to common shareholders was $2.9 million, or $1.06 per common share, for the quarter ended September 30, 2019 (third quarter 2019), compared with $2.7 million, or $0.96 per common share, for the second quarter ended June 30, 2019 (second quarter 2019), and $2.3 million, or $0.84 per common share, for the third quarter ended September 30, 2018 (third quarter 2018).

Salisbury’s President and Chief Executive Officer, Richard J. Cantele, Jr., stated, “We reported our second consecutive quarter of record earnings despite a mixed economic environment and persistent competition for loans and deposits. Our asset quality remains strong and we are prudently deploying our capital. We remain focused on effectively managing risk and creating value for our shareholders while providing outstanding service to our customers.”

Net-Interest and Dividend Income

Tax equivalent net interest and dividend income of $8.8 million for third quarter 2019 increased $345 thousand, or 4.1%, versus second quarter 2019, and increased $216 thousand, or 2.5%, versus third quarter 2018. Average earning assets increased $7.7 million versus second quarter 2019, and increased $23.4 million versus third quarter 2018. Average total interest bearing deposits decreased $10.9 million versus second quarter 2019 and increased $42.9 million versus third quarter 2018. The tax equivalent net interest margin for third quarter 2019 was 3.29% compared with 3.19% for second quarter 2019 and 3.29% for third quarter 2018. Net interest and dividend income for second quarter 2019 included a charge of $140 thousand for the write-off of unamortized premiums on purchased loans which paid off during that quarter. The write-off of the unamortized premiums reduced the second quarter tax equivalent net interest margin by approximately 0.05%.

Non-Interest Income

Non-interest income of $2.3 million for third quarter 2019 decreased $292 thousand versus second quarter 2019 and increased $168 thousand versus third quarter 2018. Non-interest income for the third quarter 2019 included realized losses of $9 thousand on the sale of available-for-sale securities compared with realized gains of $281 thousand in the second quarter 2019. There were no realized gains or losses on the sale of available-for-sale securities in third quarter 2018.

Trust and Wealth Advisory fees of $1.0 million for third quarter 2019 decreased $21 thousand versus second quarter 2019 and increased $87 thousand versus third quarter 2018. The decrease from second quarter 2019 primarily reflected seasonal tax preparation fees in the prior quarter, partly offset by higher asset-based fees. The increase from third quarter 2018 primarily reflected higher asset-based fees. Assets under administration were $752 million as of September 30, 2019 compared with $713 million at June 30, 2019 and $690 million as of September 30, 2018. The increase from second quarter 2019 reflected growth in non-discretionary and discretionary assets of $28 million and $11 million, respectively. 

Service charges and fees of $1.0 million for third quarter 2019 decreased $9 thousand versus second quarter 2019 and increased $71 thousand versus third quarter 2018. The decrease from second quarter 2019 primarily reflected loan prepayment penalties recorded in the prior quarter. The increase from third quarter 2018 primarily reflected higher interchange and other fees.

Non-Interest Expense

Non-interest expense of $7.2 million for third quarter 2019 decreased $255 thousand versus second quarter 2019 and decreased $145 thousand versus third quarter 2018. Non-interest expense for third quarter 2019 included a write-down of $84 thousand on an OREO (other real estate owned) property compared with losses of $270 thousand and $38 thousand in second quarter 2019 and third quarter 2018, respectively. Non-interest expense for third quarter 2019 also included an assessment credit of $120 thousand from the FDIC whereas third quarter 2018 included a one-time charge of $95 thousand for the write-down of a mortgage loan previously sold to the FHLB Boston. Employee benefits costs increased $139 thousand from second quarter 2019 and $116 thousand versus third quarter 2018 reflecting higher 401(k), ESOP and deferred compensation accruals as well as higher medical insurance costs. Professional fees decreased $11 thousand from second quarter 2019 and increased $76 thousand versus third quarter 2018. The increase from the prior year third quarter primarily reflected higher investment management and consulting costs, partly offset by lower internal audit accruals.

Loans

Gross loans receivable increased $4.5 million during third quarter 2019 to $923.9 million at September 30, 2019, compared with $919.5 million at June 30, 2019, and increased $17.6 million from $906.4 million at September 30, 2018. Balances by loan type for the comparative periods were as follows:

  Loan Type   Q3 2019   Q2 2019     Q3 2018  
  Residential Real Estate   $ 421,843   $ 419,811   $ 426,921  
  Commercial Real Estate     296,302     298,121     291,325  
  Commercial & Industrial     164,078     163,487     150,715  
  Farm Land     3,686     3,714     4,222  
  Vacant Land     8,111     8,050     8,726  
  Municipal     22,260     19,782     18,388  
  Consumer     6,290     5,166     4,605  
  Deferred Fees     1,359     1,329     1,468  
  Gross Loans Receivable   $ 923,929   $ 919,460   $ 906,370  

The ratio of gross loans to deposits for third quarter 2019 was 95.6% compared with 96.7% for second quarter 2019 and 100.5% for third quarter 2018.

Asset Quality

Salisbury’s asset quality remained strong at third quarter 2019. Non-performing assets were $5.7 million, or 0.50% of total assets at September 30, 2019, compared with $5.5 million, or 0.49% of total assets at June 30, 2019, and $8.5 million, or 0.77% of total assets at September 30, 2018.

The amount of total impaired and potential problem loans increased $0.3 million during third quarter 2019 to $22.6 million, or 2.44% of gross loans receivable, compared to $22.2 million, or 2.42% of gross loans receivable at June 30, 2019, and decreased $1.1 million from $24.5 million, or 2.7% of gross loans receivable at September 30, 2018.

Accruing loans receivable 30-to-89 days past due decreased $0.7 million during third quarter 2019 to $1.8 million, or 0.19% of gross loans receivable, from $2.5 million, or 0.27% of gross loans receivable at June 30, 2019, and was unchanged from $1.8 million, or 0.20% of gross loans receivable at September 30, 2018.

The allowance for loan losses at September 30, 2019 was $8.8 million compared with $8.9 million at June 30, 2019 and $7.7 million at September 30, 2018.

The provision for loan losses expense was $94 thousand for third quarter 2019 versus $151 thousand for second quarter 2019, and $378 thousand for third quarter 2018. The decrease in the provision from both comparable periods primarily reflected lower loan growth, partly offset by higher net charge-offs. Net loan charge-offs were $135 thousand for the third quarter 2019, $15 thousand for second quarter 2019 and $14 thousand for the third quarter 2018. Reserve coverage, as measured by the ratio of the allowance for loan losses to gross loans, was 0.96% for the third quarter 2019, versus 0.97% for second quarter 2019 and 0.85% for third quarter 2018. Similarly, reserve coverage, as measured by the ratio of the allowance for loan losses to non-performing loans, was 164.73% for third quarter 2019, versus 175.56% for second quarter 2019 and 94.77% for third quarter 2018.

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 were $966.2 million at September 30, 2019 compared with $950.7 million at June 30, 2019 and $902.2 million at September 30, 2018. Deposits at September 30, 2019 included brokered deposits, including CDARS one-way buys, of $32.9 million compared with $52.7 million at June 30, 2019 and $15.2 million at September 30, 2018. Average total deposits for third quarter 2019 were $938.5 million compared with $947.1 million at June 30, 2019 and $894.6 million at September 30, 2018. Average total deposits for third quarter 2019 included average brokered deposits of $31.6 million compared with $56.4 million for second quarter 2019 and $13.7 million for third quarter 2018.

FHLB advances increased $5.0 million during the quarter to $37.8 million at September 30, 2019 and decreased $29.8 million from September 30, 2018.

Capital

Book value per common share increased $0.93 during the third quarter to $39.52 per share and increased $3.59 from the third quarter 2018. Tangible book value per common share increased $0.96 during third quarter 2019 to $34.24 and increased $3.77 from the third quarter 2018.

Shareholders’ equity increased $2.6 million in third quarter 2019 to $111.6 million at September 30, 2019 as net income of $3.0 million, unrealized gains in the AFS portfolio of $0.3 million and the issuance of restricted stock awards of $0.1 million was partly offset by common stock dividends paid of $0.8 million.

The Bank’s regulatory capital ratios remain in compliance with regulatory “well capitalized” requirements. At September 30, 2019, the Bank’s Tier 1 leverage, total risk-based capital, and common equity tier 1 capital ratios were 9.27%, 12.58%, and 11.57%, respectively, compared with regulatory “well capitalized” minimums of 5.00%, 10.00%, and 6.5%, respectively.

Third Quarter 2019 Dividends on Common Shares

The Board of Directors of Salisbury declared a $0.28 per common share quarterly cash dividend at its October 25, 2019 meeting. The dividend will be paid on November 29, 2019 to shareholders of record as of November 15, 2019.

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.

Forward-Looking Statements

This news release may contain statements relating to future results of 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, 2019, are available in the Shareholder Relations section of Salisbury’s website at salisburybank.com under Shareholder Relations/News & Market Information/Presentations simultaneously with this Release. 

             
Salisbury Bancorp, Inc. and Subsidiary
CONSOLIDATED BALANCE SHEETS
           
             
(dollars in thousands, except share data)   September 30, 2019     December 31, 2018  
ASSETS   (unaudited)        
Cash and due from banks $ 7,670   $ 7,238  
Interest bearing demand deposits with other banks   45,878     51,207  
Total cash and cash equivalents   53,548     58,445  
Interest Bearing Time Deposits with Financial Institutions   786     -  
Securities    
Available-for-sale at fair value   94,814     91,818  
CRA mutual fund   881     836  
Federal Home Loan Bank of Boston stock at cost   2,575     4,496  
Loans held-for-sale   506     -  
Loans receivable, net (allowance for loan losses: $8,846 and $7,831)   915,083     909,279  
Other real estate owned   317     1,810  
Bank premises and equipment, net   17,567     18,175  
Goodwill   13,815     13,815  
Intangible assets (net of accumulated amortization: $4,795 and $4,498)   1,086     1,383  
Accrued interest receivable   3,425     3,148  
Cash surrender value of life insurance policies   20,441     14,438  
Deferred taxes   941     1,276  
Other assets   18,455     2,635  
Total Assets $ 1,144,240   $ 1,121,554  
LIABILITIES and SHAREHOLDERS' EQUITY    
Deposits    
Demand (non-interest bearing) $ 247,771   $ 228,448  
Demand (interest bearing)   160,139     153,586  
Money market   238,494     204,219  
Savings and other   166,298     178,807  
Certificates of deposit   153,476     161,679  
Total deposits   966,178     926,739  
Repurchase agreements   8,588     4,104  
Federal Home Loan Bank of Boston advances   37,828     67,154  
Subordinated debt   9,853     9,835  
Note payable   255     280  
Finance lease obligations   1,729     3,081  
Accrued interest and other liabilities   8,229     6,902  
Total Liabilities   1,032,660     1,018,095  
Shareholders' Equity    
Common stock - $0.10 per share par value    
Authorized: 5,000,000;    
Issued: 2,899,408 and 2,884,988    
Outstanding: 2,823,212 and 2,806,781   282     281  
Unearned compensation - restricted stock awards   (887 )   (711 )
Paid-in capital   44,372     43,770  
Retained earnings   66,104     60,339  
Accumulated other comprehensive income (loss), net   1,709     (220 )
Total Shareholders' Equity   111,580     103,459  
Total Liabilities and Shareholders' Equity $ 1,144,240   $ 1,121,554  


 
Salisbury Bancorp, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
     
                      Three months ended                    Nine months ended
Periods ended September 30, (in thousands, except per share amounts)   2019     2018     2019     2018  
Interest and dividend income        
Interest and fees on loans $ 10,045   $ 9,570   $ 29,859   $ 27,226  
Interest on debt securities:        
Taxable   530     596     1,734     1,588  
Tax exempt   166     28     355     89  
Other interest and dividends   282     322     761     662  
Total interest and dividend income   11,023     10,516     32,709     29,565  
Interest expense        
Deposits   1,879     1,323     5,674     3,098  
Repurchase agreements   9     4     16     6  
Finance lease   43     48     135     130  
Note payable   4     4     12     14  
Subordinated debt   156     156     468     468  
Federal Home Loan Bank of Boston advances   265     481     956     1,314  
Total interest expense   2,356     2,016     7,261     5,030  
Net interest and dividend income   8,667     8,500     25,448     24,535  
Provision for loan losses   94     378     539     1,171  
Net interest and dividend income after provision for loan losses   8,573     8,122     24,909     23,364  
Non-interest income        
Trust and wealth advisory   1,023     936     2,973     2,779  
Service charges and fees   1,003     932     2,935     2,693  
Gains on sales of mortgage loans, net   42     21     50     38  
Mortgage servicing, net   76     84     232     251  
Gains (losses) on CRA mutual fund   6     (6 )   29     (26 )
(Losses) gains on available-for-sale securities, net   (9 )   -     263     16  
Other   115     121     349     370  
Total non-interest income   2,256     2,088     6,831     6,121  
Non-interest expense        
Salaries   3,042     3,078     8,994     8,864  
Employee benefits   1,181     1,065     3,408     3,192  
Premises and equipment   974     1,036     2,950     3,161  
Data processing   534     519     1,620     1,561  
Professional fees   572     496     1,690     1,725  
OREO losses and write-downs   84     38     406     91  
Collections and other real estate owned   119     116     328     432  
FDIC insurance   (9 )   141     294     394  
Marketing and community support   141     167     448     630  
Amortization of core deposit intangibles   93     111     297     347  
Other   453     562     1,398     1,528  
Total non-interest expense   7,184     7,329     21,833     21,925  
Income before income taxes   3,645     2,881     9,907     7,560  
Income tax provision   657     537     1,781     1,301  
Net income $ 2,988   $ 2,344   $ 8,126   $ 6,259  
Net income allocated to common stock $ 2,940   $ 2,311   $ 8,016   $ 6,185  
Basic earnings per common share $ 1.06   $ 0.84   $ 2.88   $ 2.24  
Weighted average common shares outstanding, to calculate basic earnings per share   2,783     2,764     2,781     2,762  
Diluted earnings per common share $ 1.05   $ 0.83   $ 2.87   $ 2.23  
Weighted average common shares outstanding, to calculate diluted earnings per share   2,795     2,779     2,793     2,780  
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 2019   Q2 2019   Q1 2019   Q4 2018   Q3 2018
Total assets $ 1,144,240   $ 1,119,212   $ 1,118,925   $ 1,121,554   $ 1,098,715  
Loans receivable, net   915,083     910,573     911,188     909,279     898,625  
Total securities   98,270     103,857     102,479     97,150     101,591  
Deposits   966,178     950,723     941,969     926,739     902,161  
FHLBank Boston advances   37,828     32,769     47,712     67,154     67,596  
Shareholders’ equity   111,580     108,948     106,109     103,459     100,767  
Wealth assets under administration   752,467     713,319     691,731     648,027     690,448  
Discretionary wealth assets under administration   475,482     464,537     444,110     398,287     435,357  
Non-Discretionary wealth assets under administration   276,985     248,782     247,621     249,740     255,091  
Non-performing loans   5,370     5,062     6,389     6,514     8,173  
Non-performing assets   5,687     5,463     7,130     8,324     8,513  
Accruing loans past due 30-89 days   1,784     2,473     2,228     2,165     1,784  
Net interest and dividend income   8,667     8,344     8,437     8,615     8,500  
Net interest and dividend income, tax equivalent (1)   8,831     8,486     8,562     8,736     8,615  
Provision for loan losses   94     151     294     558     378  
Non-interest income   2,256     2,548     2,027     2,824     2,088  
Non-interest expense   7,184     7,439     7,211     7,909     7,329  
Income before income taxes   3,645     3,302     2,959     2,972     2,881  
Income tax provision   657     599     525     408     537  
Net income   2,988     2,703     2,434     2,564     2,344  
Net income applicable to common shareholders   2,940     2,671     2,408     2,528     2,311  
Per share data          
Basic earnings per common share $ 1.06   $ 0.96   $ 0.87   $ 0.91   $ 0.84  
Diluted earnings per common share   1.05     0.95     0.86     0.91     0.83  
Dividends per common share   0.28     0.28     0.28     0.28     0.28  
Book value per common share   39.52     38.59     37.81     36.86     35.93  
Tangible book value per common share - Non-GAAP⁽2   34.24     33.28     32.43     31.45     30.47  
           
Common shares outstanding at end of period (in thousands)   2,823     2,823     2,807     2,807     2,805  
Weighted average common shares outstanding, to calculate basic earnings per share (in thousands)   2,783     2,780     2,777     2,766     2,764  
Weighted average common shares outstanding, to calculate diluted earnings per share (in thousands)   2,795     2,793     2,789     2,779     2,779  
           
Profitability ratios          
Net interest margin (tax equivalent) (1)   3.29 %   3.19 %   3.28 %   3.34 %   3.29 %
Efficiency ratio (3)   62.90     65.81     66.15     69.13     66.91  
Effective income tax rate   18.02     18.14     17.75     13.74     18.65  
Return on average assets   1.05     0.97     0.89     0.92     0.85  
Return on average common shareholders’ equity   10.73     10.07     9.45     9.99     9.26  
           
Credit quality ratios          
Non-performing loans to loans receivable, gross   0.58     0.55     0.69     0.71     0.90  
Accruing loans past due 30-89 days to loans receivable, gross   0.19     0.27     0.24     0.24     0.20  
Allowance for loan losses to loans receivable, gross   0.96     0.97     0.95     0.85     0.85  
Allowance for loan losses to non-performing loans   164.73     175.56     136.96     120.21     94.77  
Non-performing assets to total assets   0.50     0.49     0.64     0.74     0.77  
           
Capital ratios          
Common shareholders' equity to assets   9.75 %   9.73 %   9.48 %   9.22 %   9.17 %
Tangible common shareholders' equity to tangible assets - Non-GAAP (2)   8.56     8.51     8.25     7.98     7.89  
Tier 1 leverage capital (4)   9.27     9.10     8.98     8.83     8.66  
Total risk-based capital (4)   12.58     12.57     12.38     12.09     11.91  
Common equity tier 1 capital (4)   11.57     11.54     11.35     11.17     10.99  

1 Adjusted to reflect the U.S. federal statutory tax benefit on income derived from tax-exempt securities and loans.
Refer to schedule labeled “Supplemental Information – Non-GAAP Financial Measures”.
3 Calculated as follows: 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 litigation expenses.
4 Represents the capital ratios of the Bank.

 
 
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 2019 Q2 2019 Q1 2019 Q4 2018 Q3 2018
           
Common Shareholders' Equity $ 111,580   $ 108,948   $ 106,108   $ 103,459   $ 100,767  
Less: Goodwill   (13,815 )   (13,815 )   (13,815 )   (13,815 )   (13,815 )
Less: Intangible assets   (1,086 )   (1,180 )   (1,279 )   (1,383 )   (1,490 )
Tangible Common Shareholders' Equity $ 96,679   $ 93,953   $ 91,014   $ 88,261   $ 85,462  
Total Assets $ 1,144,240   $ 1,119,212   $ 1,118,925   $ 1,121,554   $ 1,098,715  
Less: Goodwill   (13,815 )   (13,815 )   (13,815 )   (13,815 )   (13,815 )
Less: Intangible assets   (1,086 )   (1,180 )   (1,279 )   (1,383 )   (1,490 )
Tangible Total Assets $ 1,129,339   $ 1,104,217   $ 1,103,831   $ 1,106,356   $ 1,083,410  
Common Shares outstanding   2,823     2,823     2,807     2,807     2,805  
           
Book value per Common Share – GAAP $ 39.52   $ 38.59   $ 37.81   $ 36.86   $ 35.93  
Tangible book value per Common Share - Non-GAAP   34.24     33.28     32.43     31.45     30.47  
           
Consolidated:          
Non-interest expense $ 7,184   $ 7,438   $ 7,211   $ 7,909   $ 7,329  
Less: Amortization of core deposit intangibles   (93 )   (99 )   (104 )   (107 )   (111 )
Less: Foreclosed property expense including OREO gains, losses and Write downs   (115 )   (271 )   (103 )   (260 )   (52 )
Adjusted non-interest expense $ 6,976   $ 7,068   $ 7,004   $ 7,542   $ 7,166  
Net interest and dividend income, tax equivalent $ 8,831   $ 8,486   $ 8,562   $ 8,736   $ 8,615  
Non-interest income   2,256     2,548     2,027     2,824     2,088  
Losses (gains) on securities   3     (294 )   (2 )   (300 )   6  
BOLI proceeds receivable   -     -     -     (341 )   -  
Adjusted revenue $ 11,090   $ 10,740   $ 10,588   $ 10,909   $ 10,709  
Efficiency Ratio – Non-GAAP 1   62.90 %   65.81 %   66.15 %   69.13 %   66.91 %

1 Excluding revenue and expenses associated with trust & wealth advisory, the efficiency ratios would be: Q3 2019: 61.13%; Q2 2019: 64.09%; Q1 2019: 64.51%; Q4 2018: 67.17%; Q3 2018: 65.65%.

Source: Salisbury Bancorp, Inc.

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