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- Second Quarter 2021 Net Income of $1.53 per Basic Common Share
- Quarterly Cash Dividend Increases 3.3% to $0.31 Per Common Share for Third Quarter 2021
- Quarterly Results Reflected a $1.1 Million Net Release of Credit Reserves
- Non-performing Assets were 0.39% of Total Assets Compared with 0.44% at December 31, 2020
- Common Equity Tier 1 and Total Risk-Based Capital Ratios of 13.42% and 14.67%, Respectively
LAKEVILLE, Conn., July 21, 2021 (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 second quarter ended June 30, 2021.
Net income available to common shareholders was $4.3 million, or $1.53 per basic common share, for Salisbury's second quarter ended June 30, 2021 (second quarter 2021), compared with $4.5 million, or $1.59 per basic common share, for the first quarter ended March 31, 2021 (first quarter 2021), and $2.7 million, or $0.96 per basic common share, for the second quarter ended June 30, 2020 (second quarter 2020). Net income for second quarter 2021 included a pre-tax release of credit reserves of approximately $1.4 million, or $0.38 per basic common share, due to improved business conditions in Salisbury's market areas. This reserve release was partially offset by a pre-tax increase in credit reserves of $0.3 million due to loan growth during the quarter.
Salisbury's President and Chief Executive Officer, Richard J. Cantele, Jr., stated, “Thanks to the continued dedication and commitment of our employees, we reported solid results for the second quarter. The business environment continues to improve across our markets as COVID-19 restrictions have been lifted, and we are cautiously optimistic that the economic rebound will continue. We have continued to support our customers and local communities this year by processing 472 loan applications for $48 million under the Small Business Administration's (“SBA”) Paycheck Protection Program (“PPP”), which ended in May. As we move into the second half of the year, residential loan demand remains healthy, commercial activity continues to build, and credit quality is strong. Salisbury Bank is well-positioned to meet the needs of our customers, and our employees remain committed to providing outstanding customer service.”
Net Interest and Dividend Income
Tax equivalent net interest income of $9.7 million for the second quarter 2021 decreased $0.8 million, or 7.4%, versus first quarter 2021, and declined slightly compared with second quarter 2020. Tax equivalent interest income of $10.8 million for second quarter 2021 decreased $470 thousand, or 4.2%, versus first quarter 2021 and decreased $317 thousand, or 2.9%, from second quarter 2020. The reduction in interest income from first quarter 2021 primarily reflected lower PPP fee income.
The cost of interest-bearing liabilities of $1.1 million for second quarter 2021 increased $311 thousand, or 41.7%, compared to first quarter 2021 and declined $270 thousand, or 20.4% from second quarter 2020. Interest expense for second quarter 2021 included approximately $180 thousand for interest and the amortization of issuance costs on subordinated debt, which Salisbury issued in 2015 and fully redeemed on May 28, 2021. Second quarter 2021 also included interest expense and issuance costs of $233 thousand on subordinated debt that Salisbury issued in March 2021.
Average earning assets of $1.4 billion for second quarter 2021 increased $115 million, or 9.1% from first quarter 2021, and increased $194.9 million, or 16.5%, versus second quarter 2020. The growth in average earning assets from comparative periods primarily reflected higher average short-term fund balances due to deposit growth and higher average balances in the available-for-sale portfolio. Average earning assets for second quarter 2021 included average PPP loan balances of $80.4 million, net of deferred fees, compared with $92.8 million in first quarter 2021 and $57.0 million in second quarter 2020. Average total interest bearing liabilities of $1.0 billion for second quarter 2021 increased $91 million, or 10.5% from first quarter 2021 and increased $146.5 million, or 18.0%, versus second quarter 2020 primarily due to higher average deposit balances.
The tax equivalent net interest margin for second quarter 2021 was 2.82% compared with 3.34% for first quarter 2021 and 3.31% for second quarter 2020. Excluding the impact of PPP loans, the tax equivalent net interest margin for second quarter 2021 was 2.76% compared with 3.16% for first quarter 2021 and 3.28% for second quarter 2020. The decline in the tax equivalent net interest margin versus comparative quarters primarily reflected a significant increase in average deposit balances during second quarter 2021, which were invested primarily in short-term investments including cash and cash equivalents. See SUPPLEMENTAL INFORMATION – Net Interest and Dividend Income on page 9 on this release for additional details.
Non-Interest Income
Non-interest income of $3.0 million for second quarter 2021 increased $130 thousand versus first quarter 2021 and increased $655 thousand versus second quarter 2020.
Trust and Wealth Advisory fees of $1.3 million for second quarter 2021 increased $108 thousand from first quarter 2021 and increased $223 thousand versus second quarter 2020. The increase from first quarter 2021 primarily reflected higher asset-based fees and seasonal tax preparation fees. The increase from second quarter 2020 primarily reflected higher asset-based fees. Assets under administration were $970.3 million at June 30, 2021 compared with $944.3 million at December 31, 2020 and $704.1 million at June 30, 2020. Discretionary assets under administration of $614.3 million in second quarter 2021 increased from $555.0 million in fourth quarter 2020 and $480.5 million in second quarter 2020 primarily due to higher market valuations. Non-discretionary assets under administration of $356.0 million in second quarter 2021 decreased from $389.4 million in fourth quarter 2020 and increased from $223.6 million in second quarter 2020. The decline from fourth quarter 2020 primarily reflected the lower valuation of certain partnership assets under administration whereas the increase from second quarter 2020 reflected the addition of partnership assets under administration for an existing client relationship. The trust and wealth business records only a nominal annual fee on this non-discretionary relationship.
Service charges and fees of $1.4 million for second quarter 2021 increased $424 thousand versus first quarter 2021 and increased $776 thousand versus second quarter 2020. The increase from comparative quarters was primarily driven by non-recurring loan prepayment fees of $286 thousand as well as higher interchange and deposit fees. Salisbury waived approximately $240 thousand in deposit fees in second quarter 2020 due to the COVID-19 pandemic. Income from mortgage sales and servicing decreased $412 thousand versus first quarter 2021 and decreased $123 thousand versus second quarter 2020 on lower sales volume of residential mortgage loans to the FHLB Boston.
Non-interest income for the second quarter 2021 included BOLI income of $125 thousand consistent with first quarter 2021 and slightly below second quarter 2020.
Non-Interest Expense
Non-interest expense of $8.1 million for second quarter 2021 increased $827 thousand versus first quarter 2021 and increased $1.3 million versus second quarter 2020. Compensation expense of $4.8 million for second quarter 2021 increased $546 thousand from first quarter 2021 and increased $1.3 million versus second quarter 2020. The increase from the comparative quarters primarily reflected higher salaries and benefits, production and incentive accruals as well as lower deferred loan origination expenses. Deferred loan origination expenses in second quarter 2021 declined $179 thousand and $464 thousand from first quarter 2021 and second quarter 2020, respectively, primarily due to the processing of PPP loans in the comparative quarters.
Excluding compensation, other non-interest expenses for second quarter 2021 increased $281 thousand from first quarter 2021 and decreased $14 thousand from second quarter 2020. The increase from first quarter 2021 primarily reflected higher premises and equipment, data processing and marketing expenses. The decrease from second quarter 2020 primarily reflected lower professional fees and other expenses partially offset by higher marketing and data processing costs. Marketing expenses for second quarter 2021 included costs associated with an ongoing review of Salisbury's web site and branding initiatives.
The effective income tax rates for second quarter 2021, first quarter 2021 and second quarter 2020 were 21.2%, 21.6% and 18.1%, respectively. The higher tax rate in first and second quarter 2021 primarily reflected a lower mix of tax-exempt income from municipal bonds, tax advantaged loans and bank-owned life insurance on a comparatively higher level of pre-tax income.
Loans
Gross loans receivable of $1.0 billion at June 30, 2021 decreased $10.0 million from first quarter 2021 and $7.7 million from second quarter 2020 primarily due to the forgiveness of PPP loans by the SBA. PPP loan balances of $61.9 million at June 30, 2021 declined $35.1 million and $37.0 million from March 31, 2021 and June 30, 2020, respectively. The increase in residential real estate balances during second quarter 2021 reflected continued strong origination volume and lower sales to FHLB Boston. Approximately $7.1 million of residential loans were sold to FHLB Boston in second quarter 2021 compared with $21.3 million during first quarter 2021 and $14.7 million in second quarter 2020. The ratio of gross loans to deposits for second quarter 2021 was 84.1% compared with 87.1% for first quarter 2021 and 97.0% for second quarter 2020. Balances by loan type for the comparative periods were as follows:
| Loan Type | Q2 2021 | Q1 2021 | Q2 2020 | |||||||||
| Residential Real Estate | $ | 428,137 | $ | 418,991 | $ | 437,198 | ||||||
| Commercial Real Estate | 354,629 | 341,142 | 323,634 | |||||||||
| Commercial & Industrial ex PPP Loans | 156,849 | 152,388 | 148,510 | |||||||||
| PPP Loans | 61,908 | 96,969 | 98,930 | |||||||||
| Commercial & Industrial – Total | 218,757 | 249,357 | 247,440 | |||||||||
| Farm Land | 3,529 | 3,606 | 3,324 | |||||||||
| Vacant Land | 13,006 | 13,228 | 13,879 | |||||||||
| Municipal | 18,341 | 21,495 | 20,707 | |||||||||
| Consumer | 9,543 | 8,617 | 7,886 | |||||||||
| Deferred (Fees)/Costs | (889 | ) | (1,365 | ) | (1,339 | ) | ||||||
| Gross Loans Receivable | $ | 1,045,053 | $ | 1,055,071 | $ | 1,052,729 | ||||||
Asset Quality
In March 2020, Salisbury implemented a loan payment deferral program which allowed residential, commercial and consumer borrowers, who have been adversely affected by the COVID-19 pandemic, to defer loan payments for up to three months. Customers may also apply for additional deferments. As of June 30, 2021, loan payments were deferred on 10 commercial loans ($20 million loan balance) compared with 14 commercial loan deferrals ($27 million loan balance) as of March 31, 2021. There were no outstanding residential and consumer loan deferrals as of June 30, 2021.
Non-performing assets were $5.5 million, or 0.39% of total assets at June 30, 2021, compared with $5.6 million, or 0.44% of total assets at December 31, 2020, and $4.8 million, or 0.37% of total assets, at June 30, 2020.
The amount of total impaired and potential problem loans was $47.1 million or 4.50% of gross loans receivable at June 30, 2021 compared with $30.1 million, or 2.90% of gross loans receivable at December 31, 2020 and $26.9 million, or 2.55% of gross loans receivable at June 30, 2020. The increase from year-end 2020 primarily reflected the reduction of internal risk ratings on loans to certain borrowers in the hospitality and entertainment and recreation industries due to COVID-19.
Accruing loans receivable 30-to-89 days past due decreased to $1.4 million, or 0.13% of gross loans receivable at June 30, 2021 compared with $6.9 million, or 0.66% of gross loans receivable, at December 31, 2020 and $2.7 million, or 0.25% of gross loans receivable, at June 30, 2020.
The allowance for loan losses for second quarter 2021 was $12.7 million compared with $13.9 million for first quarter 2021 and $13.8 million for fourth quarter 2020.The second quarter 2021 included a net release of credit reserves of approximately $1.1 million compared with charges of $158 thousand in first quarter 2021 and $1.8 million in the second quarter 2020, respectively. The net release of reserves in second quarter 2021 reflected management's current assessment of the impact of the COVID-19 pandemic on the Bank's loan portfolio. Net loan charge-offs were $103 thousand for the second quarter 2021, $26 thousand for first quarter 2021 and $87 thousand for the fourth quarter 2020. Reserve coverage, as measured by the ratio of the allowance for loan losses to gross loans, excluding PPP loans, was 1.29% for the second quarter 2021, versus 1.45% for first quarter 2021 and 1.44% for fourth quarter 2020. Similarly, reserve coverage, as measured by the ratio of the allowance for loan losses to non-performing loans was 229% for the second quarter 2021, versus 243% for first quarter 2021 and 244% for fourth quarter 2020.
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 $1.2 billion at June 30, 2021 compared with $1.1 billion at December 31, 2020 and $1.1 billion at June 30, 2020. Deposits at June 30, 2021 included brokered deposits, including CDARS one-way buys, of $7.9 compared with $18.0 million at December 31, 2020 and $38.2 million at June 30, 2020. Average total deposits for the second quarter 2021 were $1.2 billion compared with $1.2 billion for the first quarter 2020 and $1.0 billion for the second quarter 2020. Average total deposits for the second quarter 2021 included average brokered deposits of $15.4 million compared with $18.0 million for first quarter 2021 and $44.2 million for second quarter 2020.
Federal Home Loan Bank of Boston (FHLBB) advances were $10.2 million at June 30, 2021 compared with $12.6 million and $55.1 million at December 31, 2020 and June 30, 2020, respectively. Salisbury's excess borrowing capacity at FHLBB was approximately $248 million at June 30, 2021.
Capital
Shareholders' equity increased $4.5 million in the second quarter to $131.7 million at June 30, 2021 as net income of $4.4 million, unrealized gains in the available-for-sale securities portfolio of $0.7 million and restricted stock activity of $0.3 million were partly offset by common stock dividends paid of $0.9 million. Book value per common share increased $1.30 during the second quarter 2021 to $46.02 per share and increased $4.36 from the second quarter 2020. Tangible book value per common share increased $1.36 during second quarter 2021 to $41.01 and increased $4.50 from second quarter 2020.
The Bank's regulatory capital ratios remain in compliance with regulatory “well capitalized” requirements. At June 30, 2021, the Bank's Tier 1 leverage, total risk-based capital, and common equity tier 1 capital ratios were 9.33%, 14.67%, and 13.42%, respectively, compared with regulatory “well capitalized” minimums of 5.00%, 10.00%, and 6.5%, respectively.
On May 28, 2021 Salisbury redeemed in full the $10 million of subordinated debt that was issued in 2015. During second quarter 2021, Salisbury did not repurchase any of its outstanding common stock pursuant to its stock repurchase plan adopted in March 2021, which authorizes Salisbury to repurchase Salisbury's common stock in amounts up to an aggregate of five percent (5%) of the outstanding shares of Salisbury's common stock from time to time over a period of twelve (12) months.
Dividend on Common Shares
The Board of Directors of Salisbury approved a $0.01 increase in the quarterly dividend at its July 21, 2021 meeting. The quarterly cash dividend of $0.31 per common share will be paid on August 27, 2021 to shareholders of record as of August 13, 2021.
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 June 30, 2021, are available in the Shareholder Relations section of Salisbury's website at salisburybank.com under Shareholder Relations/News & Market Information/Presentations.
Salisbury Bancorp, Inc. and Subsidiary
CONSOLIDATED BALANCE SHEETS
| (in thousands, except share data) | June 30, 2021 (unaudited) |
December 31, 2020 | ||||
| ASSETS | ||||||
| Cash and due from banks | $ | 8,853 | $ | 10,599 | ||
| Interest bearing demand deposits with other banks | 170,973 | 82,563 | ||||
| Total cash and cash equivalents | 179,826 | 93,162 | ||||
| Interest bearing Time Deposits with Financial Institutions | 750 | 750 | ||||
| Securities | ||||||
| Available-for-sale at fair value | 150,530 | 98,411 | ||||
| CRA mutual fund at fair value | 909 | 917 | ||||
| Federal Home Loan Bank of Boston stock at cost | 1,504 | 1,713 | ||||
| Loans held-for-sale | 415 | 2,735 | ||||
| Loans receivable, net (allowance for loan losses: $12,708 and $13,754) | 1,032,345 | 1,027,738 | ||||
| Bank premises and equipment, net | 21,375 | 20,355 | ||||
| Goodwill | 13,815 | 13,815 | ||||
| Intangible assets (net of accumulated amortization: $5,343 and $5,207) | 538 | 674 | ||||
| Accrued interest receivable | 6,357 | 6,373 | ||||
| Cash surrender value of life insurance policies | 21,433 | 21,182 | ||||
| Deferred taxes | 2,390 | 2,412 | ||||
| Other assets | 4,479 | 3,423 | ||||
| Total Assets | $ | 1,436,666 | $ | 1,293,660 | ||
| LIABILITIES and SHAREHOLDERS' EQUITY | ||||||
| Deposits | ||||||
| Demand (non-interest bearing) | $ | 359,517 | $ | 310,769 | ||
| Demand (interest bearing) | 224,791 | 218,869 | ||||
| Money market | 315,518 | 278,146 | ||||
| Savings and other | 206,887 | 189,776 | ||||
| Certificates of deposit | 136,656 | 131,514 | ||||
| Total deposits | 1,243,369 | 1,129,074 | ||||
| Repurchase agreements | 17,492 | 7,116 | ||||
| Federal Home Loan Bank of Boston advances | 10,152 | 12,639 | ||||
| Subordinated debt | 24,445 | 9,883 | ||||
| Note payable | 189 | 208 | ||||
| Finance lease obligations | 1,646 | 1,673 | ||||
| Accrued interest and other liabilities | 7,664 | 8,315 | ||||
| Total Liabilities | 1,304,957 | 1,168,908 | ||||
| Shareholders' Equity | ||||||
| Common stock – $0.10 per share par value | ||||||
| Authorized: 5,000,000; | ||||||
| Issued: 2,861,697 and 2,843,292 | ||||||
| Outstanding: 2,861,697 and 2,843,292 | 286 | 284 | ||||
| Unearned compensation – restricted stock awards | (1,224 | ) | (774 | ) | ||
| Paid-in capital | 46,217 | 45,264 | ||||
| Retained earnings | 84,174 | 76,974 | ||||
| Accumulated other comprehensive income, net | 2,256 | 3,004 | ||||
| Total Shareholders' Equity | 131,709 | 124,752 | ||||
| Total Liabilities and Shareholders' Equity | $ | 1,436,666 | $ | 1,293,660 | ||
Salisbury Bancorp, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
| Three months ended | Six months ended | ||||||||||||
| Periods ended June 30, (in thousands, except per share amounts) | 2021 | 2020 | 2021 | 2020 | |||||||||
| Interest and dividend income | |||||||||||||
| Interest and fees on loans | $ | 9,901 | $ | 10,313 | $ | 20,377 | $ | 20,300 | |||||
| Interest on debt securities | |||||||||||||
| Taxable | 488 | 409 | 912 | 864 | |||||||||
| Tax exempt | 172 | 171 | 334 | 356 | |||||||||
| Other interest and dividends | 61 | 51 | 95 | 142 | |||||||||
| Total interest and dividend income | 10,622 | 10,944 | 21,718 | 21,662 | |||||||||
| Interest expense | |||||||||||||
| Deposits | 567 | 988 | 1,121 | 2,497 | |||||||||
| Repurchase agreements | 4 | 4 | 8 | 10 | |||||||||
| Finance lease | 36 | 35 | 69 | 71 | |||||||||
| Note payable | 3 | 4 | 6 | 7 | |||||||||
| Subordinated debt | 415 | 156 | 534 | 312 | |||||||||
| Federal Home Loan Bank of Boston advances | 32 | 140 | 65 | 359 | |||||||||
| Total interest expense | 1,057 | 1,327 | 1,803 | 3,256 | |||||||||
| Net interest and dividend income | 9,565 | 9,617 | 19,915 | 18,406 | |||||||||
| (Release) provision for loan losses | (1,075 | ) | 1,806 | (917 | ) | 3,512 | |||||||
| Net interest and dividend income after (release) provision for loan losses | 10,640 | 7,811 | 20,832 | 14,894 | |||||||||
| Non-interest income | |||||||||||||
| Trust and wealth advisory | 1,254 | 1,031 | 2,399 | 2,061 | |||||||||
| Service charges and fees | 1,374 | 598 | 2,325 | ||||||||||
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