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Salisbury Bancorp, Inc. Reports Results for Fourth Quarter and Full Year 2015; Declares 28 Cent Dividend

LAKEVILLE, Conn., Jan. 29, 2016 (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, 2015.

Net income available to common shareholders was $2.1 million, or $0.78 per common share, for Salisbury’s fourth quarter ended December 31, 2015 (fourth quarter 2015), compared with $1.9 million, or $0.71 per common share, for the third quarter ended September 30, 2015 (third quarter 2015), and $196,000, or $0.10 per common share, for the fourth quarter ended December 31, 2014 (fourth quarter 2014).

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.

Selected fiscal year 2015 highlights

  • Total assets increased $36 million, or 4.2%, as compared with December 2014.

  • Total deposits increased $39 million, or 5.5% as compared with December 2014.

  • Book value per share of $33.13 increased $1.59, or 5% as compared with December 2014

  • Tangible book value per share of $27.69 increased $1.85, or 7% as compared with December 2014

  • Earnings per share increased from 2014 by $1.72, or 130%, to $3.04

Selected fourth quarter 2015 highlights

  • Salisbury’s earnings per common share for the three (3) and twelve (12) month periods ended December 31, 2015 increased to $0.78 and $3.04, respectively, per common share as compared with $0.10 and $1.32 per common share for the same periods in 2014.

  • Annualized return on average assets for the quarter ended December 31, 2015 amounted to 0.94% as compared with 0.87% for the prior quarter and 0.11% for the fourth quarter 2014.

  • Annualized return on average common shareholders’ equity amounted to 9.34% for the quarter ended December 31, 2015 as compared with 8.64% for the prior quarter and 1.18% for the fourth quarter 2014.

  • Successful completion of the sale of $10 million of subordinated debentures.

  • Redemption of $16 million of Senior Non-Cumulative Perpetual Preferred Stock issued in conjunction with Salisbury’s participation in the U.S. Treasury’s Small Business Lending Fund (“SBLF”) program.

Salisbury’s President and Chief Executive Officer, Richard J. Cantele, Jr., stated, “I am pleased to report that we continued to make solid progress during the fourth quarter and have had a successful year. Our acquisition of Riverside Bank just over a year ago this December has enabled the Bank to continue to grow in a responsible manner and contribute to the communities we serve. During 2015, we grew earnings per common share, book value, and tangible book value per share. These results, while buoyed throughout 2015 by the impact of the required purchase accounting treatment related to the acquisition, strengthened our franchise for the future. We were also able to redeem all $16 million of SBLF Preferred Stock from the U.S. Treasury, and by way of the issuance of $10 million of private placement of subordinated debt not dilute our shareholders.

The performance results, as well as the bank’s growth in deposits and loans during 2015, reflects the efforts of all of the employees, Board of Directors, and Advisory Board to ensure that the integration of Riverside was successful. While we have more work to do, we strongly feel that Salisbury is well positioned for the future to continue to build profitability, serve our market areas, and respond to appropriate opportunities to expand our footprint through selective acquisitions and organic growth.”

Net Interest Income

Tax equivalent net interest and dividend income increased $41,000, or 0.5%, versus third quarter 2015 and increased $2.2 million, or 36.4%, versus fourth quarter 2014. Interest income for the fourth quarter 2015 reflects net accretion related to the fair value adjustments of loans acquired in the Riverside Bank acquisition in the amount of $691,000. The third quarter of 2015 included similar adjustments totaling $726,000. For the full year these adjustments totaled $2.7 million. Average total interest bearing deposits decreased $4.4 million versus third quarter 2015 and increased $98.1 million, or 19.9%, versus fourth quarter 2014. Average earning assets increased $10.8 million versus third quarter 2015 and increased $190.3 million, or 29.2%, versus fourth quarter 2014. The tax equivalent net interest margin for fourth quarter 2015 of 3.88% decreased 3 basis points versus third quarter 2015 and increased 20 basis points versus fourth quarter 2014.

Non-Interest Income

Non-interest income for fourth quarter 2015 decreased $22,000 versus third quarter 2015 and increased $168,000 versus fourth quarter 2014. Trust and Wealth Advisory revenues decreased $43,000 versus third quarter 2015 and decreased $31,000 versus fourth quarter 2014. The quarter-over-quarter revenue decrease resulted from decreased estate fees collected, while the year-over-year decrease is attributable to a lower volume of assets under management. Service charges and fees decreased $35,000 versus third quarter 2015, and increased $97,000 versus fourth quarter 2014, mainly due to increased volume due to the Riverside merger. Income from mortgage lending increased $11,000 and $27,000 versus third quarter 2015 and fourth quarter 2014, respectively, primarily due to the increase in loans sold. Mortgage loan sales totaled $2.0 million for fourth quarter 2015, $1.4 million for third quarter 2015 and $0.9 million for fourth quarter 2014. In addition, fourth quarter 2015, third quarter 2015 and fourth quarter 2014 included mortgage servicing amortization expense of $74,000, $85,000 and $83,000, respectively.

Non-Interest Expense

Non-interest expense for fourth quarter 2015 increased $141,000 versus third quarter 2015 and decreased $509,000 versus fourth quarter 2014. Salaries and benefits increased $182,000 versus third quarter 2015, and increased $416,000 versus fourth quarter 2014. The quarter over quarter increase was primarily due to performance related compensation expense. The year-over-year increase reflects higher fourth quarter 2015 salary expense which is offset by fourth quarter 2014 one-time expenses related to termination of the defined benefit pension plan.

Premises and equipment costs decreased $5,000 versus third quarter 2015 and increased $107,000 versus fourth quarter 2014. The increase is due to additional facilities related to the Riverside merger. Data processing expenses decreased $3,000 versus third quarter 2015 and increased $65,000 versus fourth quarter 2014 due to merger related volume of activity.

Professional fees increased $110,000 versus third quarter 2015 and increased $202,000 versus fourth quarter 2014. The increases are related to our document imaging project, additional IT support, and reclassification of trust tax preparation fees to consulting fees. Collections, OREO, and appraisal expense decreased $152,000 versus third quarter 2015, and decreased $187,000 versus fourth quarter 2014, primarily due to a gain on sale of an OREO property. The effective income tax rates for fourth quarter 2015, third quarter 2015 and fourth quarter 2014 were 29.35%, 29.31% and 15.41%, respectively.

Loans

Net loans receivable increased $11.3 million during fourth quarter 2015 to $699.0 million at December 31, 2015, compared with $687.7 million at September 30, 2015, and increased $25.7 million for full year 2015, compared with $673.3 million at December 31, 2014.

Asset Quality

Non-performing assets decreased $0.3 million during fourth quarter 2015 to $16.3 million, or 1.8% of assets at December 31, 2015, from $16.6 million, or 1.8% of assets at September 30, 2015, and increased $5.4 million from $10.9 million, or 1.3% of assets, at December 31, 2014.

On a combined basis, the five largest non-performing loan relationships account for 48% of the non-performing assets while the combined ten largest loan relationships account for 66% 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 seven 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 decreased to $27.0 million (3.85% of gross loans receivable) during fourth quarter 2015, compared to $31.0 million, or 4.48% of gross loans receivable at September 30, 2015, and decreased from $31.7 million, or 4.67% of gross loans receivable at December 31, 2014. On a combined basis, the five largest impaired loan relationships account for 33% of the balance while the five largest potential problem loan relationships account for 54% of the balance.

Accruing loans receivable 30-to-89 days past due increased $2.0 million during fourth quarter 2015 to $4.5 million, or 0.64% of gross loans receivable, from $2.5 million, or 0.36% of gross loans receivable at September 30, 2015, and decreased $0.4 million versus December 31, 2014.

Provision for loan loss expense was $266,000 for fourth quarter 2015 versus $655,000 in third quarter 2015 and $165,000 for the fourth quarter 2014. The quarter over quarter decline reflects higher third quarter provisions attributable to routine updates to qualitative factors as well as impairment related to acquired loans. Net loan charge-offs (recoveries) were $209,000 for the fourth quarter 2015, $55,000 for third quarter 2015 and $190,000 for fourth quarter 2014, respectively. Reserve coverage, as measured by the ratio of the allowance for loan losses to gross loans, was 0.81% for the fourth quarter 2015, versus 0.82% for third second quarter 2015 and 0.79% for fourth quarter 2014.

Capital

Book value and tangible book value per common share increased $0.41 and $0.48, respectively, during fourth quarter 2015, to $33.13 and $27.69, respectively. Tangible book value excludes goodwill and core deposit intangibles.

Shareholders’ equity decreased $14.9 million in fourth quarter 2015 to $90.6 million at December 31, 2015. Contributing to the decrease in shareholders’ equity for fourth quarter 2015 was redemption of $16.0 million of Senior Non-Cumulative Perpetual Preferred Stock issued in conjunction with the Company’s participation in the U.S. Treasury’s SBLF program, a decrease in accumulated other comprehensive income of $0.3 million, and common and preferred stock dividends paid of $0.8 million, partially offset by net income of $2.2 million, and $0.1 million increase in common stock.

The Bank’s regulatory capital ratios remain in compliance with regulatory “well capitalized” requirements. At December 31, 2015, Salisbury’s tier 1 leverage, total risk-based capital, and common equity tier 1 capital ratios were 8.43%, 13.51%, and 11.17%, 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.

During fourth quarter 2015, the Company completed an offering of $10 million of unsecured 6.00% fixed-to–floating rate subordinated notes due in 2025. The notes qualify as Tier II capital and are included as such within the Company's total risk-based capital ratio.

The net proceeds of the offering, along with cash on hand, were used during the fourth quarter 2015 to redeem the $16 million of Senior Non-Cumulative Perpetual Preferred Stock issued in conjunction with the Company’s participation in the U.S. Treasury’s SBLF program.

Fourth Quarter 2015 Dividends on Common Shares

The Board of Directors of Salisbury declared a $0.28 per common share quarterly cash dividend at their January 29, 2016 meeting. The dividend will be paid on February 26, 2016 to shareholders of record as of February 12, 2016.

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 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, 2015December 31,
2014
ASSETS
Cash and due from banks$ 14,891 $ 13,280
Interest bearing demand deposits with other banks 47,227 22,825
Total cash and cash equivalents 62,118 36,105
Securities
Available-for-sale at fair value 76,694 91,312
Federal Home Loan Bank of Boston stock at cost 3,176 3,515
Loans held-for-sale 763 568
Loans receivable, net (allowance for loan losses: $5,716 and $5,358) 699,018 673,330
Other real estate owned - 1,002
Bank premises and equipment, net 14,307 14,431
Goodwill 12,552 12,552
Intangible assets (net of accumulated amortization: $2,909 and $2,258) 2,338 2,990
Accrued interest receivable 2,307 2,334
Cash surrender value of life insurance policies 13,685 13,314
Deferred taxes 1,989 2,428
Other assets 2,245 1,546
Total Assets$ 891,192 $ 855,427
LIABILITIES and SHAREHOLDERS' EQUITY
Deposits
Demand (non-interest bearing)$ 201,340 $ 161,386
Demand (interest bearing) 125,465 117,169
Money market 183,783 174,274
Savings and other 119,651 121,387
Certificates of deposit 124,294 141,210
Total deposits 754,533 715,426
Repurchase agreements 3,914 4,163
Federal Home Loan Bank of Boston advances 26,979 28,813
Subordinated Debt⁽¹⁾ 9,764 -
Note payable 376 -
Capital lease liability 422 424
Accrued interest and other liabilities 4,630 4,780
Total Liabilities 800,618 753,606
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
Common stock - $.10 per share par value
Authorized: 5,000,000;
Issued: 2,733,576 and 2,720,766 273 272
Unearned compensation - restricted stock awards (110) (313)
Paid-in capital 41,364 41,077
Retained earnings 47,922 42,677
Accumulated other comprehensive income, net 1,125 2,108
Total Shareholders' Equity 90,574 101,821
Total Liabilities and Shareholders' Equity$ 891,192 $ 855,427

⁽¹⁾ Net of issuance costs, which are capitalized and amortized as a component of interest expense over a period of 10 years.


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

Periods ended December 31,Three months endedTwelve months ended
(in thousands, except per share amounts) 2015 2014 2015 2014
Interest and dividend income
Interest and fees on loans$ 8,025 $ 5,633 $ 31,752 $ 19,616
Interest on debt securities
Taxable 269 331 1,179 1,406
Tax exempt 333 410 1,431 1,704
Other interest and dividends 77 42 209 129
Total interest and dividend income 8,704 6,416 34,571 22,855
Interest expense
Deposits 485 385 1,844 1,465
Repurchase agreements 2 3 7 8
Capital lease 17 18 70 47
Note payable 5 - 6 -
Subordinated Debt 35 - 35 -
Federal Home Loan Bank of Boston advances 232 293 1,064 1,184
Total interest expense 776 699 3,026 2,704
Net interest and dividend income 7,928 5,717 31,545 20,151
Provision for loan losses 266 165 917 1,134
Net interest and dividend income after provision for loan losses 7,662 5,552 30,628 19,017
Non-interest income
Trust and wealth advisory 755 786 3,265 3,295
Service charges and fees 763 665 3,070 2,473
Gains on sales of mortgage loans, net 47 21 274 64
Mortgage servicing, net 16 15 1 94
Gains on securities, net - - 192 -
Other 167 92 510 326
Total non-interest income 1,748 1,579 7,312 6,252
Non-interest expense
Salaries 2,781 2,253 10,301 8,029
Employee benefits⁽¹⁾ 848 960 3,729 3,136
Premises and equipment 858 751 3,541 2,831
Data processing 401 336 1,677 1,502
Professional fees 508 306 2,150 1,331
Collections, OREO, and appraisals (27) 160 505 458
FDIC insurance 164 121 658 461
Marketing and community support 128 41 593 396
Amortization of intangibles 158 97 652 291
Merger and acquisition related expenses - 1,388 - 1,974
Other 524 439 2,114 1,729
Total non-interest expense 6,343 6,852 25,920 22,138
Income before income taxes 3,067 279 12,020 3,131
Income tax provision 900 43 3,563 610
Net income$ 2,167 $ 236 $ 8,457 $ 2,521
Net income available to common shareholders$ 2,129 $ 196 $ 8,298 $ 2,355
Basic earnings per common share$ 0.78 $ 0.10 $ 3.04 $ 1.32
Diluted earnings per common share 0.77 0.10 3.02 1.32
Common dividends per share 0.28 0.28 1.12 1.12

⁽¹⁾ Includes net defined benefit termination expense of $208,000 in 2014.

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 2015Q3 2015Q2 2015Q1 2015Q4 2014
Total assets$891,192 $904,233 $860,794 $865,037 $855,427
Loans receivable, net 699,018 687,719 677,726 676,734 673,330
Total securities 79,870 83,886 82,932 84,694 94,827
Deposits 754,533 761,479 720,734 724,910 715,426
FHLBB advances 26,979 26,928 28,033 28,403 28,813
Shareholders’ equity 90,574 105,450 104,104 103,211 101,821
Wealth assets under management 371,012 350,102 374,141 384,574 385,316
Non-performing loans 16,264 16,435 14,728 14,000 9,890
Non-performing assets 16,264 16,602 14,995 14,875 10,892
Accruing loans past due 30-89 days 4,499 2,486 2,799 5,564 4,128
Net interest and dividend income 7,928 7,897 7,793 7,926 5,717
Net interest and dividend income, tax equivalent 8,235 8,194 8,084 8,238 6,038
Provision (benefit) for loan losses 266 655 196 (200) 165
Non-interest income 1,748 1,769 1,900 1,896 1,579
Non-interest expense 6,343 6,202 6,540 6,835 6,852
Income before income taxes 3,068 2,809 2,957 3,187 279
Income tax provision 900 824 885 953 43
Net income 2,167 1,985 2,072 2,234 236
Net income available to common shareholders 2,129 1,945 2,032 2,194 196
Per share data
Basic earnings per common share$ 0.78 $ 0.71 $ 0.74 $ 0.81 $ 0.10
Diluted earnings per common share 0.77 0.71 0.74 0.80 0.10
Dividends per common share 0.28 0.28 0.28 0.28 0.28
Book value per common share 33.13 32.72 32.26 31.96 31.54
Tangible book value per common share - Non-GAAP⁽¹⁾ 27.69 27.21 26.69 26.33 25.84
Common shares outstanding at end of period 2,734 2,734 2,731 2,729 2,721
Weighted average common shares outstanding, to calculate basic earnings per share 2,710 2,708 2,706 2,699 1,977
Weighted average common shares outstanding, to calculate diluted earnings per share 2,727 2,724 2,724 2,716 1,981
Profitability ratios
Net interest margin (tax equivalent) 3.88% 3.91% 4.01% 4.11% 3.68%
Efficiency ratio⁽²⁾ 63.64 60.40 62.91 65.45 77.84
Non-interest income to operating revenue 18.06 18.25 19.51 17.84 21.65
Effective income tax rate 29.35 29.31 29.96 29.90 15.41
Return on average assets 0.94 0.87 0.94 1.03 0.11
Return on average common shareholders’ equity 9.34 8.64 9.26 10.22 1.18
Credit quality ratios
Net charge-offs to average loans receivable, gross 0.12% 0.03% 0.19% -0.01% 0.14%
Non-performing loans to loans receivable, gross 2.31 2.37 2.16 2.05 1.46
Accruing loans past due 30-89 days to loans receivable, gross 0.64 0.36 0.41 0.82 0.61
Allowance for loan losses to loans receivable, gross 0.81 0.82 0.74 0.76 0.79
Allowance for loan losses to non-performing loans 35.15 34.43 34.35 37.02 54.18
Non-performing assets to total assets 1.82 1.84 1.74 1.72 1.27
Capital ratios
Common shareholders' equity to assets 10.16% 9.89% 10.24% 10.08% 10.03%
Tangible common shareholders' equity to tangible assets - Non-GAAP⁽¹⁾ 8.64 8.37 8.62 8.45 8.37
Tier 1 leverage capital 8.43 10.31 10.42 10.29 12.31
Total risk-based capital 13.51 13.90 14.22 13.65 14.29
Common equity tier 1 capital 11.17 10.74 11.01 10.50 N/A

⁽¹⁾ Refer to schedule labeled “Supplemental Information – Non-GAAP Financial Measures”.

⁽²⁾ Calculated using SNL’s (publicly recognized resource of bank data) methodology, 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, litigation expenses, and one-time pension termination 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 2015Q3 2015Q2 2015Q1 2015Q4 2014
Shareholders' Equity$ 90,574 $105,450 $104,104 $103,211 $101,821
Less: Preferred Stock - (16,000) (16,000) (16,000) (16,000)
Common Shareholders' Equity 90,574 89,450 88,104 87,211 85,821
Less: Goodwill (12,552) (12,552) (12,552) (12,552) (12,552)
Less: Intangible assets (2,338) (2,496) (2,657) (2,821) (2,990)
Tangible Common Shareholders' Equity$ 75,684 $ 74,402 $ 72,895 $ 71,838 $ 70,279
Total Assets$891,192 $904,234 $860,794 $865,037 $855,427
Less: Goodwill (12,552) (12,552) (12,552) (12,552) (12,552)
Less: Intangible assets (2,338) (2,496) (2,657) (2,821) (2,990)
Tangible Total Assets$876,302 $889,186 $845,585 $849,664 $839,885
Common Shares outstanding 2,734 2,734 2,731 2,729 2,721
Book value per Common Share – GAAP$ 33.13 $ 32.72 $ 32.26 $ 31.96 $ 31.54
Tangible book value per Common Share - Non-GAAP 27.69 27.21 26.69 26.33 25.84
Common Equity to Assets – GAAP 10.16% 9.89% 10.24% 10.08% 10.03%
Tangible Common Equity to Tangible Assets – Non-GAAP 8.64 8.37 8.62 8.45 8.37
Non-interest expense$ 6,343 $ 6,202 $ 6,571 $ 6,835 $ 6,852
Less: Amortization of core deposit intangibles (158) (161) (164) (169) (97)
Less: Foreclosed property expense 168 (27) (131) (148) (114)
Less: Strategic initiatives - - - - (1,596)
Operating Expenses$ 6,353 $ 6,014 $ 6,276 $ 6,518 $ 5,045
Net interest and dividend income, tax equivalent$ 8,235 $ 8,194 $ 8,084 $ 8,238 $ 6,038
Non-interest income 1,748 1,769 1,900 1,896 1,579
Gains on securities, net - (6) (11) (175) -
Operating Revenue$ 9,983 $ 9,957 $ 9,973 $ 9,959 $ 7,617
Efficiency Ratio less strategic initiatives 63.64% 60.40% 62.91% 65.45% 66.19%


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

Source:Salisbury Bancorp, Inc.