SAL - Salisbury Bancorp Inc. Increases Dividend and Reports Record Full Year 2019 Results

• Fourth Quarter and Record Full Year 2019 Net Income of $1.06 and $3.95 per Basic Common Share, Respectively
  
  
• Quarterly Cash Dividend Increased 3.6% to $0.29 Per Common Share
  
  
• Book Value and Tangible Book Value Per Common Share Increased 9% and 11%, Respectively in 2019 
  
  
• Wealth Assets Under Administration Increased 20% in 2019 to $778 Million
  
  
• Non-performing Assets were 0.35% of Total Assets Compared with 0.74% at December 31, 2018

LAKEVILLE, Conn., Jan. 24, 2020 (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 fourth quarter and full year ended December 31, 2019.

Net income available to common shareholders was $3.0 million, or $1.06 per common share (basic), for Salisbury’s fourth quarter ended December 31, 2019 (fourth quarter 2019), compared with $2.9 million, or $1.06 per common share (basic), for the third quarter ended September 30, 2019 (third quarter 2019), and $2.5 million, or $0.91 per common share (basic), for the fourth quarter ended December 31, 2018 (fourth quarter 2018).

Results for the fourth quarter 2019 included a non-recurring non-taxable reduction in compensation expense of $328 thousand or $0.12 per common share (basic) related to a change in terms of agreements related to bank-owned life insurance policies (“BOLI”). The fourth quarter and full year 2019 also included FDIC assessment credits of $120 thousand and $240 thousand, respectively.  Results for the fourth quarter 2018 included a non-recurring non-taxable gain of $341 thousand or $0.12 per common share (basic) related to proceeds received from a BOLI policy due to the death of a covered former employee.

Salisbury’s President and Chief Executive Officer, Richard J. Cantele, Jr., stated, “Despite challenging market conditions and a very competitive environment in 2019, we achieved strong financial results as evidenced by record earnings, an improved ROAA and a lower efficiency ratio. We prudently grew the Bank while also improving overall credit quality. We enter 2020 from a position of financial strength and are pleased to provide our shareholders with an increase in their dividend. We remain focused on maintaining credit quality and enhancing profitability, while continuing to provide outstanding customer service.”

Net Interest and Dividend Income

Tax equivalent net interest and dividend income for the fourth quarter 2019 was essentially unchanged versus third quarter 2019, and increased $103 thousand, or 1.2%, versus fourth quarter 2018. Fourth quarter 2019 average earning assets of $1.1 billion decreased $16.8 million versus third quarter 2019, and increased $5.0 million versus fourth quarter 2018. Average total interest bearing deposits of $704.7 million decreased $12.2 million versus third quarter 2019 and increased $22.3 million versus fourth quarter 2018. The tax equivalent net interest margin for fourth quarter 2019 was 3.34% compared with 3.29% for third quarter 2019 and 3.34% for fourth quarter 2018. Net interest and dividend income for fourth quarter 2019 included a charge of $90 thousand for the write-off of an unamortized premium on a purchased loan, which paid off during the quarter. This write-off reduced the fourth quarter tax equivalent net interest margin by approximately 0.04%.

Non-Interest Income

Non-interest income of $2.4 million for fourth quarter 2019 increased $163 thousand versus third quarter 2019 and decreased $405 thousand versus fourth quarter 2018. Third quarter 2019 and fourth quarter 2018 included realized losses of $9 thousand and realized gains of $302 thousand, respectively on the sale of available-for-sale securities. There were no realized gains or losses on the sale of available-for-sale securities in fourth quarter 2019.

Trust and Wealth Advisory fees of $1.0 million for fourth quarter 2019 were essentially unchanged from third quarter 2019 and increased $101 thousand versus fourth quarter 2018. The increase from fourth quarter 2018 primarily reflected higher asset-based fees. Assets under administration were $777.5 million as of December 31, 2019 compared with $752.5 million at September 30, 2019 and $648.0 million as of December 31, 2018. The increase from third quarter 2019 reflected growth in discretionary and non-discretionary assets of $23.3 million and $1.7 million, respectively. The increase from fourth quarter 2018 reflected growth in discretionary and non-discretionary assets of $100.5 million and $29.0 million, respectively.

Service charges and fees of $1.1 million for fourth quarter 2019 increased $89 thousand versus third quarter 2019 and increased $67 thousand versus fourth quarter 2018. The increase from third quarter 2019 and fourth quarter 2018 primarily reflected loan prepayment penalties. Income from mortgage sales and servicing increased $24 thousand versus third quarter 2019 and increased $34 thousand versus fourth quarter 2018. The increase from prior quarters reflected higher gains on mortgage sales, due to an increase in volume and higher servicing income.

Non-interest income for the fourth quarter 2019 included BOLI income of $139 thousand compared to $86 thousand in third quarter 2019 and $432 thousand in fourth quarter 2018. BOLI income for fourth quarter 2018 included the death benefit proceeds received as noted above.

Non-Interest Expense

Non-interest expense of $7.1 million for fourth quarter 2019 decreased $104 thousand versus third quarter 2019 and decreased $829 thousand versus fourth quarter 2018. Non-interest expense for both the third and fourth quarter 2019 included FDIC assessment credits of $120 thousand. Compensation expense of $4.0 million for fourth quarter 2019 decreased $191 thousand from third quarter 2019 and decreased $196 thousand versus fourth quarter 2018. Compensation expense for fourth quarter 2019 included a one-time reduction of $328 thousand due to the substantive modification of key terms of agreements related to BOLI policies.

Premises and equipment costs of $1.1 million increased $92 thousand from third quarter 2019 and decreased $308 thousand versus fourth quarter 2018. The fourth quarter 2018 included a charge of $171 thousand to write-off the remainder of the lease and the fixed assets related to the Bank’s previously occupied Fishkill, New York branch location and a charge of $95 thousand to write-off the remaining term of a third party software contract. Non-interest expense for fourth quarter 2019 included negligible charges on OREO (other real estate owned) property compared with losses of $84 thousand and $184 thousand in third quarter 2019 and fourth quarter 2018, respectively.

The effective income tax rates for fourth quarter 2019, third quarter 2019 and fourth quarter 2018 were 16.1%, 18.0% and 13.7%, respectively. The tax rate for the fourth quarter 2019 and 2018 reflected the non-taxable compensation credit related to BOLI and BOLI proceeds received and recorded in those respective periods.

Full Year Results

Full year 2019 net income available to common shareholders was $11.0 million, or $3.95 per common share (basic), compared with $8.7 million, or $3.15 per common share (basic) for full year 2018.

Tax equivalent net interest income of $34.7 million for 2019 increased $1.1 million from 2018. Average earning assets of $1.1 billion increased $53.0 million from 2018 and average total interest bearing deposits of $712.4 million increased from $649.2 million in 2018. The tax equivalent net interest margin for 2019 was 3.27% compared with 3.35% for 2018. The provision for loan loss expense was $1.0 million in 2019 compared with $1.7 million in 2018.

Non-interest income for 2019 was $9.3 million versus $8.9 million in 2018. Non-interest expense of $28.9 million for 2019 declined $0.9 million from 2018. The effective tax rate for 2019 was 17.5% compared with 16.2% for 2018. The tax rate for 2019 and 2018 reflected the non-taxable compensation credit related to BOLI and BOLI proceeds received and recorded in those respective periods.

Loans

Gross loans receivable increased $12.4 million during fourth quarter 2019 to $936.3 million at December 31, 2019, compared with $923.9 million at September 30, 2019, and increased $19.2 million from $917.1 million at December 31, 2018. Balances by loan type for the comparative periods were as follows:

The ratio of gross loans to deposits for fourth quarter 2019 was 101.8% compared with 95.6% for third quarter 2019 and 99.0% for fourth quarter 2018.

Asset Quality

Non-performing assets decreased $1.8 million during the fourth quarter to $3.9 million, or 0.35% of total assets at December 31, 2019, from $5.7 million, or 0.50% of total assets at September 30, 2019, and decreased $4.4 million from $8.3 million, or 0.74% of total assets, at December 31, 2018.    

The amount of total impaired and potential problem loans was $21.3 million or 2.27% of gross loans receivable at December 31, 2019 compared to $22.6 million, or 2.44% of gross loans receivable at September 30, 2019 and $20.2 million, or 2.20% of gross loans receivable at December 31, 2018.

Accruing loans receivable 30-to-89 days past due increased $0.3 million during fourth quarter 2019 to $2.1 million, or 0.22% of gross loans receivable, from $1.8 million, or 0.19% of gross loans receivable at September 30, 2019, and decreased $0.1 million from $2.2 million, or 0.24% of gross loans receivable at December 31, 2018.

The allowance for loan losses for fourth quarter 2019 was $8.9 million compared with $8.8 million for third quarter 2019 and $7.8 million for fourth quarter 2018.

The provision for loan loss expense was $417 thousand for fourth quarter 2019 versus $94 thousand for third quarter 2019, and $558 thousand for the fourth quarter 2018. The increase in the provision from third quarter 2019 was primarily attributable to loan growth and higher charge-offs in the fourth quarter 2019. Net loan charge-offs were $368 thousand for the fourth quarter 2019, $135 thousand for third quarter 2019 and $471 thousand for the fourth quarter 2018. Reserve coverage, as measured by the ratio of the allowance for loan losses to gross loans, was 0.95% for the fourth quarter 2019, versus 0.96% for the third quarter 2019 and 0.85% for the fourth quarter 2018. Similarly, reserve coverage, as measured by the ratio of the allowance for loan losses to non-performing loans was 246% for the fourth quarter of 2019, versus 165% for the third quarter of 2019 and 120% for the fourth quarter of 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 $919.5 million at December 31, 2019 compared with $966.2 million at September 30, 2019 and $926.7 million at December 31, 2018. The decline in deposits from third quarter 2019 of $46.7 million reflected the maturity of $30.0 million of brokered deposits as well as normal seasonal customer activity. Deposits at December 31, 2019 reflected brokered deposits, including CDARS one-way buys, of $2.9 million compared with $32.9 million at September 30, 2019 and $39.4 million at December 31, 2018. Average total deposits for the fourth quarter 2019 were $932.4 million compared with $938.5 million for the third quarter 2019 and $905.7 million for the fourth quarter 2018.  Average total deposits for the fourth quarter 2019 included average brokered deposits of $22.1 million compared with $31.6 million for third quarter 2019.

Federal Home Loan Bank of Boston (FHLBB) advances increased $13.1 million during the quarter to $50.9 million at December 31, 2019 and decreased $16.3 million from December 31, 2018.

Capital

Book value per common share increased $0.70 during the fourth quarter 2019 to $40.22 per share and increased $3.36 from the fourth quarter 2018. Tangible book value per common share increased $0.74 during fourth quarter 2019 to $34.98 and increased $3.53 as compared to the fourth quarter 2018.

Shareholders’ equity increased $2.1 million in fourth quarter to $113.7 million at December 31, 2019 as net income of $3.0 million and restricted stock activity of $0.2 million were partly offset by unrealized losses in the available-for-sale securities portfolio of $0.4 million and common stock dividends paid of $0.8 million.

The Bank’s regulatory capital ratios remain in compliance with regulatory “well capitalized” requirements. At December 31, 2019, the Bank’s Tier 1 leverage, total risk-based capital, and common equity tier 1 capital ratios were 9.60%, 12.84%, and 11.83%, respectively, compared with regulatory “well capitalized” minimums of 5.00%, 10.00%, and 6.5%, respectively.

Dividend on Common Shares

The Board of Directors of Salisbury approved a $0.01 increase in the quarterly dividend at its January 24, 2020 meeting. The quarterly cash dividend of $0.29 per common share will be paid on February 28, 2020 to shareholders of record as of February 14, 2020.

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 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 December 31, 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 (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⁾ 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)

¹ Excluding revenue and expenses associated with trust & wealth advisory, the efficiency ratios would be: Q4 2019: 60.19%; Q3 2019: 61.13%; Q2 2019: 64.09%; Q1 2019: 64.51%; Q4 2018: 67.17%.

Source: Salisbury Bancorp, Inc.

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