LAKEVILLE, Conn., Jan. 27, 2021 (GLOBE NEWSWIRE) -- Salisbury Bancorp, Inc., (NASDAQ Capital Market: “SAL”), the holding company for Salisbury Bank and Trust Company, announced results for its fourth quarter ended December 31, 2020.

The record results for 2020 reflected an increase in income available to common shareholders to $11.8 million, or $4.21 per basic common share, compared with $11.0 million, or $3.95 per basic common share in 2019.

Net income allocated to common shareholders was $2.8 million, or $0.99 per basic common share, for the quarter ended December 31, 2020 (fourth quarter 2020), compared with $4.3 million, or $1.53 per common share (basic), for the third quarter ended September 30, 2020 (third quarter 2020), and $3.0 million, or $1.06 per basic common share, for the fourth quarter ended December 31, 2019 (fourth quarter 2019). Results for fourth quarter 2020 included a loan loss provision of $840 thousand compared to $686 thousand in third quarter 2020 and $417 thousand in fourth quarter 2019.

Salisbury’s President and Chief Executive Officer, Richard J. Cantele, Jr., stated, “2020 was a challenging year for many in the communities in which we operate. I am extremely proud of the resiliency of our employees who navigated the pandemic to provide outstanding service to our customers. During 2020, we processed $100 million of loan applications under the Paycheck Protection Program (“PPP”) in support of our customers and local communities and we worked with our commercial and residential customers to address their needs for temporary payment deferrals in response to the COVID-19 pandemic. I am pleased that as of year-end, there are no outstanding residential or consumer loans on deferral and only fifteen commercial loans remain in some sort of deferral. We reported record earnings for the year as a result of the dedication and hard work of our employees as we experienced record volume in our residential lending business. Unfortunately, COVID-19 will continue to challenge us in 2021. As we enter the new year, we remain focused on providing outstanding customer service and supporting our local communities while prudently growing the bank and enhancing profitability.”

Net-Interest and Dividend Income

Tax equivalent net interest income of $10.0 million for the fourth quarter 2020 decreased $108 thousand, or 1.1%, versus third quarter 2020, and increased $1.2 million, or 13.1%, versus fourth quarter 2019. Tax equivalent interest income of $10.9 million for fourth quarter 2020 decreased $232 thousand, or 2.1%, versus third quarter 2020 and was essentially unchanged compared to fourth quarter 2019. Fourth quarter 2020 interest income included PPP fees and interest of $855 thousand compared with $651 thousand in third quarter 2020. The cost of interest bearing liabilities of $1.0 million for fourth quarter 2020 decreased $124 thousand, or 11.5%, compared to third quarter 2020 and declined $1.1 million, or 53.3% from fourth quarter 2019.

Average earning assets of $1.3 billion for fourth quarter 2020 increased $31.0 million, or 2.5%, versus third quarter 2020, and increased $198.7 million, or 18.9%, versus fourth quarter 2019. Average earning assets for fourth quarter 2020 included average PPP loan balances of $93.4 million, net of deferred fees. Average total interest bearing liabilities of $0.9 billion for fourth quarter 2020 increased $30.1 million, or 3.6%, versus third quarter 2020 and increased $116.9 million, or 15.6%, versus fourth quarter 2019. The increase from fourth quarter 2019 primarily reflected the funding of PPP loans.

The tax equivalent net interest margin for the fourth quarter 2020 was 3.17% compared with 3.29% for the third quarter 2020 and 3.34% for the fourth quarter 2019. See SUPPLEMENTAL INFORMATION – Net Interest and Dividend Income on pages 8-9 of this release for additional details.

Non-Interest Income

Non-interest income of $2.5 million for fourth quarter 2020 decreased $810 thousand compared with third quarter 2020 and increased $57 thousand compared to fourth quarter 2019. Non-interest income for third quarter 2020 included a non-recurring non-taxable BOLI gain of $601 thousand due to the death of a covered former employee.

Trust and Wealth Advisory fees of $1.1 million were essentially unchanged compared to third quarter 2020 and up slightly from fourth quarter 2019. Assets under administration were $944.3 million as of December 31, 2020 compared with $748.2 million at September 30, 2020 and $777.5 million as of December 31, 2019. Discretionary assets under administration of $555.0 million in fourth quarter 2020 increased from $515.0 million in third quarter 2020 and $498.7 million in fourth quarter 2019. The growth from prior quarters primarily reflected higher market valuations. Non-discretionary assets under administration were $389.4 million as of fourth quarter 2020 compared with $233.2 million in third quarter 2020 and $278.8 million in fourth quarter 2019. The increase from prior quarters primarily reflected higher valuations and net new business activity. The trust and wealth business records nominal annual fees on non-discretionary assets under administration.

Service charges and fees of $858 thousand for fourth quarter 2020 increased $147 thousand versus third quarter 2020 and decreased $234 thousand versus fourth quarter 2019. The increase from third quarter 2020 was primarily due to the reinstatement of deposit fees in late fourth quarter 2020 whereas the decline from fourth quarter 2019 reflected higher deposit fees in the prior year quarter. To help support the financial needs of our customers and the communities in our markets, the Bank waived approximately $200 thousand and $754 thousand of deposit and transaction fees in the fourth quarter and the twelve month period ended December 31, 2020, respectively.

Income from sales and servicing of mortgage loans of $439 thousand in fourth quarter 2020 decreased $297 thousand versus third quarter 2020 and increased $297 thousand from fourth quarter 2019. Mortgage loans of $10.5 million were sold during the fourth quarter 2020 compared with sales of $26.6 million for third quarter 2020 and $3.6 million in fourth quarter 2019.

Non-Interest Expense

Non-interest expense of $8.1 million for fourth quarter 2020 increased $0.8 million versus third quarter 2020 and increased $1.0 million versus fourth quarter 2019. Compensation expense of $4.7 million for fourth quarter 2020 increased $0.6 million from third quarter 2020 and increased $0.7 million versus fourth quarter 2019. The increase from third quarter 2020 and fourth quarter 2019 primarily reflected higher salary expense and incentive compensation as well as higher production accruals, which were driven by increased loan origination volume. Compensation expense for fourth quarter 2019 included a one-time reduction of $328 thousand due to the modification of key terms of agreements related to BOLI policies.

Excluding compensation, other non-interest expenses of $3.3 million for fourth quarter 2020 increased $228 thousand from third quarter 2020 and increased $263 thousand from fourth quarter 2019. The increase from third quarter 2020 primarily reflected higher premises and equipment and professional fees. The increase from fourth quarter 2019 primarily reflected higher professional fees as well as an FDIC assessment credit recorded in the prior year fourth quarter.

The effective income tax rates for fourth quarter 2020, third quarter 2020 and fourth quarter 2019 were 17.5%, 17.3% and 16.1%, respectively. The tax rate in third quarter 2020 and fourth quarter 2019 primarily reflected the non-taxable BOLI proceeds and non-taxable compensation credit related to BOLI recorded in those respective periods.

Full Year Results

Full year 2020 net income available to common shareholders was $11.8 million, or $4.21 per basic common share, compared with $11.0 million, or $3.95 per basic common share for full year 2019. Results for full year 2020 included a loan loss provision of $5.0 million compared with $1.0 million for full year 2019.

Tax equivalent net interest income of $38.8 million for 2020 increased $4.1 million, or 11.9%, from $34.7 million in 2019. Average earning assets of $1.2 billion increased $120.3 million, or 11.4%, from 2019 and average total interest bearing liabilities of $821.1 million increased $51.3 million, or 6.7%, from $769.8 million in 2019. The tax equivalent net interest margin for 2020 was 3.28% compared with 3.27% for 2019.

Non-interest income of $10.3 million for 2020 increased $1.0 million from 2019. The increase primarily reflected higher gains on the sale and servicing of mortgage loans and non-recurring BOLI gains, which were offset by waived deposit fees. Mortgage loans of $59.8 million were sold during full year 2020 compared with sales of $6.4 million for full year 2019.

The effective tax rate for 2020 was 17.0% compared with 17.5% for 2019. The tax rate for 2020 and 2019 reflected the non-taxable BOLI proceeds received and the BOLI compensation credit recorded in those respective periods.

Loans

Gross loans outstanding as of December 31, 2020 of $1.0 billion included net PPP loans of $84.9 million, which are categorized as commercial & industrial loans in the below table. Excluding PPP loans, gross loans receivable were $956.5 million at December 31, 2020, compared with $947.0 million at September 30, 2020, and $936.3 million at December 31, 2019. Including PPP loans, the ratio of gross loans to deposits for fourth quarter 2020 was 92.2% compared with 95.4% for third quarter 2020 and 101.8% for fourth quarter 2019. Balances by loan type for the comparative periods were as follows:

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 December 31, 2020, loan payments were deferred on 15 commercial loans ($30 million loan balance). There were no outstanding deferrals related to residential and consumer loans as of December 31, 2020.

Non-performing assets increased $1.0 million during fourth quarter 2020 to $5.6 million, or 0.44% of total assets at December 31, 2020, from $4.7 million, or 0.36% of total assets at September 30, 2020, and increased $1.7 million from $3.9 million, or 0.35% of total assets, at December 31, 2019. The increase from third quarter 2020 was primarily driven by one commercial loan for which Salisbury is no longer accruing interest.

The amount of total impaired and potential problem loans increased $3.3 million during the fourth quarter 2020 to $30.1 million, or 2.89% of gross loans receivable, at December 31, 2020 compared to $26.8 million, or 2.55% of gross loans receivable, at September 30, 2020, and increased $8.8 million from $21.3 million, or 2.27% of gross loans receivable, at December 31, 2019. The increase from third quarter 2020 primarily related to one borrower in the hospitality industry whose business has been adversely affected by COVID-19. Salisbury is currently deferring loan payments for this borrower.

Accruing loans receivable 30-to-89 days past due increased $5.2 million during fourth quarter 2020 to $6.9 million, or 0.66% of gross loans receivable, from $1.6 million, or 0.16% of gross loans receivable at September 30, 2020, and increased $4.8 million from $2.1 million, or 0.22% of gross loans receivable at December 31, 2019. The increase from third quarter 2020 included loans of $2.7 million that matured in fourth quarter 2020, most of which are expected to renew in first quarter 2021.

The allowance for loan losses at December 31, 2020 was $13.8 million compared with $13.0 million at September 30, 2020 and $8.9 million at December 31, 2019. The provision for loan losses expense was $0.8 million for fourth quarter 2020 versus $0.7 million for third quarter 2020, and $0.4 million for fourth quarter 2019. The provision for fourth quarter reflected management’s assessment of the impact of the COVID-19 pandemic on certain qualitative and environmental factors and impaired loans. Net loan charge-offs were $87 thousand for the fourth quarter 2020, $56 thousand for third quarter 2020 and $368 thousand for the fourth quarter 2019. Reserve coverage, as measured by the ratio of the allowance for loan losses to gross loans, was 1.32% for the fourth quarter 2020, versus 1.24% for third quarter 2020 and 0.95% for fourth quarter 2019. Excluding PPP loans and deferred net fees, the ratio of the allowance for loan losses to gross loans was 1.44% for fourth quarter 2020 compared with 1.37% for third 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 of $1.1 billion at December 31, 2020 increased $33.9 million from September 30, 2020 and increased $209.6 million from December 31, 2019. Deposits at December 31, 2020 included brokered deposits, including CDARS one-way buys, of $18.0 million compared with $18.0 million at September 30, 2020 and $2.9 million at December 31, 2019. Average total deposits for fourth quarter 2020 were $1.1 billion compared with $1.1 billion at September 30, 2020 and $932.4 million at December 31, 2019. Average total deposits for fourth quarter 2020 included average brokered deposits of $18.0 million compared with $24.9 million for third quarter 2020 and $22.1 million for fourth quarter 2019.

FHLB advances of $12.6 million at December 31, 2020 decreased $31.2 million from September 30, 2020 and decreased $38.2 million from December 31, 2019. Salisbury’s excess borrowing capacity at FHLBB was approximately $255 million at December 31, 2020.

Capital

Book value per common share increased $0.89 during the fourth quarter 2020 to $43.88 per share and increased $3.66 from the fourth quarter 2019. Tangible book value per common share increased $0.91 during fourth quarter 2020 to $38.78 and increased $3.80 from the fourth quarter 2019.

Shareholders’ equity increased $2.5 million in fourth quarter 2020 to $124.8 million at December 31, 2020 as net income of $2.8 million, unrealized gains in the Available-For-Sale portfolio of $0.3 million, and the issuance of restricted stock awards 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 December 31, 2020, the Bank’s Tier 1 leverage, total risk-based capital, and common equity tier 1 capital ratios were 8.90%, 13.57%, and 12.31%, respectively, compared with regulatory “well capitalized” minimums of 5.00%, 10.00%, and 6.5%, respectively.

Dividends on Common Shares

The Board of Directors of Salisbury declared a $0.29 per common share quarterly cash dividend at its January 27, 2021 meeting. The dividend will be paid on February 26, 2021 to shareholders of record as of February 12, 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.