SAL - Salisbury Bancorp Inc. Reports Results For First Quarter 2020

• First Quarter 2020 Net Income of $0.72 per Basic Common Share
• Results Reflected a Loan Loss Provision of $1.7 Million Primarily Due to COVID-19 Virus
• Common Equity Tier 1 and Total Capital Ratios of 11.79% and 12.97%, Respectively
• Non-performing Assets were 0.28% of Total Assets Compared with 0.35% at December 31, 2019

LAKEVILLE, Conn., April 27, 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 first quarter ended March 31, 2020.

Net income available to common shareholders was $2.0 million, or $0.72 per common share (basic), for Salisbury’s first quarter ended March 31, 2020 (first quarter 2020), compared with $3.0 million, or $1.06 per common share (basic), for the fourth quarter ended December 31, 2019 (fourth quarter 2019), and $2.4 million, or $0.87 per common share (basic), for the first quarter ended March 31, 2019 (first quarter 2019). 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”).

Salisbury’s President and Chief Executive Officer, Richard J. Cantele, Jr., stated, “These are unprecedented times as we deal with the health challenges and economic implications of the COVID-19 virus pandemic. The virus has disrupted our daily routines and it has forced us all to think and work differently. We proactively implemented a number of steps to protect our employees and our customers over the last several weeks, which included requiring many of our employees to work remotely or from different locations. Despite these operational challenges, we remain steadfast in our commitment to help our customers through this crisis. We have also waived deposit fees and implemented a loan payment deferral program for customers affected by the virus. In addition, thanks to the dedication and commitment of our employees, we also processed nearly 480 customer loan applications of nearly $86 million that were approved by the Small Business Administration during the initial round of the Paycheck Protection Program. While we hope that these disruptions will be short term in nature, no one can say for sure how long they will last. Salisbury Bank remains committed to providing outstanding customer service and supporting its local communities during this period of extreme angst and uncertainty.”

Impact of COVID-19 Virus Pandemic

To help support the financial needs of our customers and the communities in our markets, Salisbury waived various deposit and transaction related fees¹ for the foreseeable future. Approximately $30 thousand of fees were waived in March 2020. Salisbury also implemented a loan payment deferral program which allows residential, commercial and consumer borrowers, who have been adversely affected by the virus, to defer loan payments for up to three months. As of March 31, 2020, 67 residential and consumer borrowers ($14 million of loan balances) and 111 commercial borrowers ($72 million of loan balances) have requested payment deferrals. The deterioration in economic conditions also contributed to a first quarter 2020 loan loss provision of $1.7 million, which is discussed herein under Asset Quality.

Net Interest and Dividend Income

Tax equivalent net interest and dividend income for the first quarter 2020 increased $115 thousand, or 1.3%, versus fourth quarter 2019, and increased $392 thousand, or 4.6%, versus first quarter 2019. First quarter 2020 average earning assets of $1.06 billion increased $11.3 million, or 1.1%, versus fourth quarter 2019, and increased $13.8 million, or 1.3%, versus first quarter 2019. Average earning assets earned 4.09% for first quarter 2020 compared with 4.13% in fourth quarter 2019 and 4.18% in first quarter 2019. Average total interest bearing deposits of $714.3 million increased $9.6 million, or 1.4%, versus fourth quarter 2019 and increased $14.1 million, or 2.0%, versus first quarter 2019. The cost of average interest-bearing liabilities was 1.00% for first quarter 2020 compared with 1.09% in fourth quarter 2019 and 1.24% in first quarter 2019. The tax equivalent net interest margin for first quarter 2020 was 3.35% compared with 3.34% for fourth quarter 2019 and 3.28% for first quarter 2019. See SUPPLEMENTAL INFORMATION – Net Interest and Dividend Income on page 8 on this release for additional details.

Non-Interest Income

Non-interest income of $2.2 million for first quarter 2020 decreased $174 thousand versus fourth quarter 2019 and increased $218 thousand versus first quarter 2019.

Trust and Wealth Advisory fees of $1.0 million for first quarter 2020 were essentially unchanged from fourth quarter 2019 and increased $124 thousand versus first quarter 2019. The increase from first quarter 2019 primarily reflected higher asset-based fees. Assets under administration were $639.5 million at March 31, 2020 compared with $777.5 million at December 31, 2019 and $691.7 million at March 31, 2019. Discretionary assets under administration of $425.4 million in first quarter 2020 declined from $498.7 million in fourth quarter 2019 and $444.1 million in first quarter 2019 primarily due to lower market valuations. Non-discretionary assets under administration of $214.1 million in first quarter 2020 declined from $278.8 million in fourth quarter 2019 and $247.6 million in first quarter 2019 due to a lower valuation of shares in a partnership for one significant client relationship. The trust and wealth business records only a nominal annual fee on this relationship.

Service charges and fees of $0.9 million for first quarter 2020 decreased $188 thousand versus fourth quarter 2019 and decreased $15 thousand versus first quarter 2019. The decrease from fourth quarter 2019 and first quarter 2019 primarily reflected lower loan prepayment penalties as well as lower interchange and deposit-related fees. Income from mortgage sales and servicing decreased $14 thousand versus fourth quarter 2019 and increased $45 thousand versus first quarter 2019. The increase from the first quarter 2019 reflected higher gains on mortgage sales, due to an increase in volume.

Non-interest income for the first quarter 2020 included BOLI income of $133 thousand compared to $139 thousand in fourth quarter 2019 and $79 thousand in first quarter 2019.

Non-Interest Expense

Non-interest expense of $6.9 million for first quarter 2020 decreased $144 thousand versus fourth quarter 2019 and decreased $275 thousand versus first quarter 2019. Compensation expense of $4.0 million for first quarter 2020 decreased $34 thousand from fourth quarter 2019 and decreased $182 thousand versus first quarter 2019. The decline from fourth quarter 2019 primarily reflected lower salaries, production and incentive accruals, which were partly offset by higher employee benefit costs. The fourth quarter 2019 included a one-time reduction of $328 thousand to BOLI related benefits costs related to substantive modifications to key terms of those agreements. The higher benefits costs were partly offset by lower deferred compensation accruals. The reduction in compensation from first quarter 2019 primarily reflected lower salary expense and payroll taxes and higher deferred loan origination expenses.

Excluding compensation, other non-interest expenses for first quarter 2020 declined $108 thousand from fourth quarter 2019 and declined $93 thousand from first quarter 2019. The decline from fourth quarter 2019 primarily reflected lower premises and equipment costs which were partly offset by higher FDIC insurance costs due to an assessment credit of $120 thousand received in fourth quarter 2019. The decrease from first quarter 2019 primarily reflected higher OREO losses and related carrying costs in the comparative prior year quarter.

The effective income tax rates for first quarter 2020, fourth quarter 2019 and first quarter 2019 were 14.4%, 16.1% and 17.8%, respectively. The lower tax rate in first quarter 2020 primarily reflected the effect of tax-exempt income from municipal bonds, tax advantaged loans and bank-owned life insurance on a comparatively lower level of pre-tax income.

Loans

Gross loans receivable increased $23.5 million during first quarter 2020 to $959.8 million at March 31, 2020, compared with $936.3 million at December 31, 2019, and increased $39.9 million from $919.9 million at March 31, 2019. The ratio of gross loans to deposits for first quarter 2020 was 99.4% compared with 101.8% for fourth quarter 2019 and 97.7% for first quarter 2019. Balances by loan type for the comparative periods were as follows:

Asset Quality

Non-performing assets decreased $0.7 million during the first quarter to $3.2 million, or 0.28% of total assets at March 31, 2020, from $3.9 million, or 0.35% of total assets at December 31, 2019, and decreased $3.9 million from $7.1 million, or 0.64% of total assets, at March 31, 2019.    

The amount of total impaired and potential problem loans was $28.1 million or 2.93% of gross loans receivable at March 31, 2020 compared to $21.3 million, or 2.27% of gross loans receivable at December 31, 2019 and $22.9 million, or 2.49% of gross loans receivable at March 31, 2019.

Accruing loans receivable 30-to-89 days past due increased $4.1 million during first quarter 2020 to $6.2 million, or 0.64% of gross loans receivable, from $2.1 million, or 0.22% of gross loans receivable at December 31, 2019, and increased $4.0 million from $2.2 million, or 0.24% of gross loans receivable at March 31, 2019.

The allowance for loan losses for first quarter 2020 was $10.6 million compared with $8.9 million for fourth quarter 2019 and $8.8 million for first quarter 2019.The provision for loan loss expense was $1.7 million for first quarter 2020 versus $417 thousand for fourth quarter 2019, and $294 thousand for the first quarter 2019. The increase in the provision versus comparative periods reflected management’s assessment of the impact of the COVID-19 pandemic on certain qualitative and environmental factors and impaired loans as well as loan growth during the first quarter 2020. Net loan (recoveries) charge-offs were ($17) thousand for the first quarter 2020, $368 thousand for fourth quarter 2019 and $38 thousand for the first quarter 2019. Reserve coverage, as measured by the ratio of the allowance for loan losses to gross loans, was 1.11% for the first quarter 2020, versus 0.95% for the fourth quarter 2019 and 0.95% for the first quarter 2019. Similarly, reserve coverage, as measured by the ratio of the allowance for loan losses to non-performing loans was 333% for the first quarter 2020, versus 246% for fourth quarter 2019 and 137% for first quarter 2019.

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 $965.6 million at March 31, 2020 compared with $919.5 million at December 31, 2019 and $942.0 million at March 31, 2019. The increase in deposits from fourth quarter 2019 of $46.1 million reflected additional brokered deposits of $53.0 million partly offset by normal seasonal customer activity. Deposits at March 31, 2020 reflected brokered deposits, including CDARS one-way buys, of $58.2 million compared with $2.9 million at December 31, 2019 and $49.7 million at March 31, 2019. Average total deposits for the first quarter 2020 were $949.4 million compared with $950.9 million for the fourth quarter 2019 and $918.8 million for the first quarter 2019.  Average total deposits for the first quarter 2020 included average brokered deposits of $33.3 million compared with $22.1 million for fourth quarter 2019 and $42.2 million for first quarter 2019.

Federal Home Loan Bank of Boston (FHLBB) advances decreased $10.0 million during the quarter to $40.9 million at March 31, 2020 and decreased $6.8 million from March 31, 2019. Salisbury’s excess borrowing capacity at FHLBB was approximately $243 million at March 31, 2020.

Capital

Book value per common share increased $0.83 during the first quarter 2020 to $41.05 per share and increased $3.24 from the first quarter 2019. Tangible book value per common share increased $0.87 during first quarter 2020 to $35.85 and increased $3.42 as compared to the first quarter 2019.

Shareholders’ equity increased $2.4 million in first quarter to $116.1 million at March 31, 2020 as net income of $2.0 million, unrealized gains in the available-for-sale securities portfolio of $1.0 million and restricted stock activity of $0.2 million were 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 March 31, 2020, the Bank’s Tier 1 leverage, total risk-based capital, and common equity tier 1 capital ratios were 9.65%, 12.97%, and 11.79%, 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 declared a $0.29 per common share quarterly cash dividend at their April 27, 2020 meeting. Such dividend will be paid on May 29, 2020 to shareholders of record as of May 15, 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 March 31, 2020, 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 Contact: Richard J. Cantele, Jr., President and Chief Executive Officer
860-435-9801 or rcantele@salisburybank.com

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: Q1 2020: 59.83%; Q4 2019: 60.19%; Q3 2019: 61.13%; Q2 2019: 64.09%; Q1 2019: 64.51%.

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 of $0.2 million, $0.2 million and $0.1 million, respectively for 1Q 2020, 4Q 2019 and 1Q 2019 on tax-exempt securities and loans for which income and yields are calculated on a tax-equivalent basis.
(e) Net interest income divided by average interest-earning assets.

¹ Please refer to the Coronavirus Update on Salisbury Bank’s website  www.salisburybank.com for details.