8-K/A 1 form8k-64144_salisbury.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K/A CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): September 10, 2004. SALISBURY BANCORP, INC. . (Exact name of registrant as specified in charter)
Connecticut 0-24751 06-1514263 ------------------------------------------------------------------------------------------------------------ (State or other jurisdiction of incorporation) (Commission File Number) (IRS Employer Identification No.)
5 Bissell Street, Lakeville, Connecticut 06039-1868 -------------------------------------------------------------------------------- (Address of principal executive offices) (zip code) Registrant's telephone number, including area code: (860) 435-9801 -------------------------------------------------------------------------------- (Former Name or Former Address, if Changed Since Last Report) Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligations of the registrant under any of the following provisions (see General Instructions A.2. below): [_] Written communications pursuant to Rule 425 under the Securities Act (12 C.F.R. 230.425) [_] Soliciting material pursuant to Rule 14a-2 under the Exchange Act (17 C.F.R. 240.14a-12) [_] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 C.F.R. 240.14d-2(b)) [_] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 C.F.R. 240.13e-4(c)) Form 8-K, Current Report Salisbury Bancorp, Inc. On September 13, 2004, Salisbury Bancorp, Inc. (the "Company") filed a Form 8-K (the "Form 8-K") to report the completion of the merger of Canaan National Bancorp, Inc. ("Canaan") with and into the Company pursuant to the Agreement and Plan of Merger by and between the Company and Canaan (the "Merger Agreement"), without the financial information required by Item 9.01 of Form 8-K. Accordingly, the Company is filing this Form 8-K/A to include that financial information. Item 9.01 Financial Statements and Exhibits. ---------------------------------- (a) Financial Statements of Businesses Acquired. -------------------------------------------- The financial statements of Canaan required by this Item for the periods specified in Rule 3-05(b) of Regulation S-X are attached to this amendment to the Form 8-K. (b) Pro Forma Financial Information. -------------------------------- The pro forma financial information required pursuant to Article 11 of Regulation S-X are attached to this amendment to the Form 8-K. (c) Not Applicable. Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereto duly authorized. Dated: November 24, 2004 SALISBURY BANCORP, INC. By: /s/ John F. Foley ------------------------------ John F. Foley Chief Financial Officer CANAAN NATIONAL BANCORP, INC. AND SUBSIDIARY -------------------------------------------- CONSOLIDATED BALANCE SHEETS --------------------------- (dollars in thousands)
June 30, December 31, 2004 2003 ---- ---- (unaudited) ASSETS ------ Cash and due from banks $ 2,577 $ 1,766 Interest bearing demand deposits with other banks 71 50 Federal Home Loan Bank overnight deposit 225 0 --------- --------- Cash and cash equivalents 2,873 1,816 Investments in available-for-sale securities (at fair value) 43,861 44,121 Investments in held-to-maturity securities (fair values of $796 as of June 30, 2004 and $803 as of December 31, 2003) 753 756 Federal Reserve Bank stock, at cost 56 56 Federal Home Loan Bank stock, at cost 1,291 1,250 Loans, net of allowance for loan losses of $693 as of June 30, 2004 and $698 as of December 31, 2003 54,406 56,328 Loans held-for-sale 0 180 Premises and equipment 1,071 1,212 Accrued interest receivable 535 584 Other assets 626 781 --------- --------- Total assets $ 105,472 $ 107,084 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Deposits: Noninterest-bearing $ 15,396 $ 14,135 Interest-bearing 59,489 60,848 --------- --------- Total deposits 74,885 74,983 Federal Home Loan Bank advances 22,143 23,319 Other borrowed funds 75 98 Other liabilities 173 336 --------- --------- Total liabilities 97,276 98,736 --------- --------- Stockholders' equity: Common stock, par value $.01 per share; authorized 300,000 shares; issued and outstanding, 177,418 shares as of June 30, 2004 and 177,418 shares as of December 31, 2003 2 2 Paid-in capital 1,071 1,071 Retained earnings 8,087 7,808 Accumulated other comprehensive loss (964) (530) --------- --------- Total stockholders' equity 8,196 8,351 --------- --------- Total liabilities and stockholders' equity $ 105,472 $ 107,087 ========= =========
-3- CANAAN NATIONAL BANCORP, INC. AND SUBSIDIARY -------------------------------------------- CONSOLIDATED STATEMENTS OF INCOME --------------------------------- (unaudited) --------- (in thousands except per share data) ------------------------------------
Six months ended Three months ended ---------------- ------------------ June 30, June 30, -------- -------- 2003 2004 2003 2004 ---- ---- ---- ---- Interest and dividend income: Interest and fees on loans $1,776 $2,102 $ 819 $ 970 Interest on debt securities: Taxable 498 443 243 207 Tax-exempt 233 180 117 96 Dividends 54 76 22 35 Other interest 1 8 0 5 ------ ------ ------ ------ Total interest and dividend income 2,562 2,809 1,201 1,313 Interest expense: Interest on deposits 462 613 229 300 Interest on Federal Home Loan Bank advances 514 535 250 269 ------ ------ ------ ------ Total interest expense 976 1,148 479 569 ------ ------ ------ ------ Net interest and dividend income 1,586 1,161 722 744 Provision for loan losses 6 9 3 4 ------ ------ ------ ------ Net interest and dividend income after provision for loan losses 1,580 1,652 719 740 ------ ------ ------ ------ Other income: Service charges on deposit accounts 139 151 64 71 Gain on sales of available-for-sale securities, net 20 0 20 0 Gain on sales of loans, net 92 139 71 139 Servicing income 42 25 18 12 Other income 41 32 31 23 ------ ------ ------ ------ Total other income 334 347 204 245 ------ ------ ------ ------ Other expense: Salaries and employee benefits 799 823 398 416 Occupancy expense 98 97 47 44 Equipment expense 131 145 66 77 Data processing 79 89 38 44 Professional fees 72 73 61 14 Other expense 269 333 117 169 ------ ------ ------ ------ Total other expense 1,448 1,560 727 764 ------ ------ ------ ------ Income before income taxes 466 439 196 221 Income taxes 133 90 58 40 ------ ------ ------ ------ Net income $ 333 $ 349 $ 138 $ 181 ====== ====== ====== ====== Earnings per common share $ 1.88 $ 1.99 $ .78 $ 1.03 Earnings per common share, assuming dilution 1.81 1.95 $ .75 $ 1.01
-4- CANAAN NATIONAL BANCORP, INC. AND SUBSIDIARY -------------------------------------------- CONSOLIDATED STATEMENTS OF CASH FLOWS ------------------------------------- Six Months Ended June 30, 2004 and 2003 --------------------------------------- (Unaudited) (in thousands)
2004 2003 ------- ------- Cash flows from operating activities: Net income $ 333 $ 349 Adjustments to reconcile net income to net cash provided by operating activities: Amortization of securities, net (6) 127 Provision for loan losses 6 10 Change in unearned income 0 (20) Net decrease in loans held-for-sale 0 859 Depreciation and amortization 17 115 Increase in interest receivable (37) (28) Decrease (increase) in prepaid expenses 36 (3) Decrease (increase) in other assets 97 (18) Increase in taxes payable 78 0 Decrease in accrued expenses (14) (19) Decrease in interest payable (13) (9) Decrease in other liabilities (13) (3) ------- ------- Net cash provided by operating activities 484 1,360 ------- ------- Cash flows from investing activities: Purchases of available-for-sale securities (4,814) (5,216) Proceeds from maturities of available-for-sale securities 4,367 2,259 Proceeds from maturities of held-to-maturity securities 154 250 Purchases of Federal Home Loan Bank stock (41) 0 Loan originations and principal collections, net 2,277 (1,689) Recoveries of loans previously charged off 7 16 Capital expenditures (37) (225) ------- ------- Net cash used in by (provided) investing activities 1,913 (4,605) ------- ------- Cash flows from financing activities: Net increase in demand deposits, NOW and savings accounts 1,825 3,868 Net decrease increase in time deposits (1,937) (218) Net increase in short term advances from Federal Home Loan Bank 3,402 750 Principal payments on long-term advances from Federal Home Loan Bank (4,578) (773) Net (decrease) increase in other borrowed funds (53) 12 Dividends paid 0 (49) Retirement of shares of common stock 0 14 ------- ------- Net cash provided by (used in) financing activities (1,341) 3,604 ------- ------- Net increase in cash and cash equivalents 1,056 359 Cash and cash equivalents at beginning of period 1,817 3,648 ------- ------- Cash and cash equivalents at end of period $ 2,873 $ 4,007 ======= ======= Supplemental disclosures: Interest paid $ 963 $ 1,157 Income taxes paid 190 184
-5- Salisbury Bancorp, Inc. and Canaan National Bancorp, Inc. Unaudited Pro Forma Consolidated Condensed Combined Balance Sheet as of June 30, 2004 (in thousands)
Historical ---------- Canaan Salisbury National Pro Forma Pro Forma Bancorp, Inc. Bancorp, Inc. Adjustments Combined ------------- ------------- ----------- -------- ASSETS: Cash and cash equivalents .................... $ 9,227 $ 2,873 $ (6,020)(A) $ 6,080 Securities ................................... 157,808 45,961 -- 203,769 Loans, net ................................... 143,622 54,406 905 (B) 198,933 Premises and equipment, net .................. 3,135 1,071 1,508 (B) 5,714 Investment in real estate .................... 75 -- -- 75 Goodwill ..................................... 2,358 -- 6,400 (C) 8,758 Core deposit intangible ...................... 698 -- 1,190 (B) 1,888 Other assets ................................. 7,848 1,161 (309)(C) 8,700 --------- --------- -------- --------- Total assets .............................. $ 324,771 $ 105,472 $ 3,674 $ 433,917 ========= ========= ======== ========= LIABILITIES AND EQUITY: Deposits ..................................... $ 219,774 $ 74,886 $ (36)(B) $ 294,624 Total borrowings ............................. 75,457 22,219 618 (B) 98,294 Other liabilities ............................ 2,302 171 589 (B) 3,062 --------- --------- -------- --------- Total liabilities ......................... 297,533 97,276 1,171 395,980 --------- --------- -------- --------- Common Stock ................................. 142 2 24 (F) 168 Paid-in capital .............................. 2,359 1,071 9,602 (F) 13,032 Accumulated other comprehensive loss ......... (2,442) (964) 964 (2,442) Retained earnings ............................ 27,179 8,087 (8,087) 27,179 --------- --------- -------- --------- Total shareholders' equity ................ 27,238 8,196 2,503 37,937 --------- --------- -------- --------- Total liabilities and stockholder's equity $ 324,771 $ 105,472 $ 3,674 $ 433,917 ========= ========= ======== =========
-6- Salisbury Bancorp, Inc. and Canaan National Bancorp, Inc. Unaudited Pro Forma Consolidated Condensed Combined Statement of Operations For the Six Months Ended June 30, 2004 (in thousands except earnings per share)
Historical ---------- Canaan Salisbury National Pro Forma Pro Forma Bancorp, Inc. Bancorp, Inc. Adjustments Combined ------------- ------------- ----------- -------- Interest and dividend income: Interest and fees on loans ............... $ 4,324 $ 1,776 $(55)(D) $ 6,045 Investment and mortgage-backed securities 3,228 785 -- 4,013 Federal funds sold ....................... 18 1 -- 19 -------- -------- ---- -------- Total interest income ................. 7,570 2,562 (55) 10,077 -------- -------- ---- -------- Interest expense: Deposits ................................. 1,216 463 7 (D) 1,686 Federal Home Loan Bank borrowings ........ 1,326 514 (40)(D) 1,800 -------- -------- ---- -------- Total interest expense ................ 2,542 977 (33) 3,486 -------- -------- ---- -------- Net interest income ................... 5,028 1,585 (22) 6,591 Provision for loan losses .................. 120 6 -- 126 Net interest and dividend income after provision for loan losses .... 4,908 1,579 (22) 6,465 -------- -------- ---- -------- Noninterest income: Service charges checking ................. 306 138 (17)(E) 427 FHLB Gain/Prem/CR enhancement ............ 149 62 211 Other income ............................. 1,759 134 (17)(E) 1,876 -------- -------- ---- -------- Total noninterest income .............. 2,214 334 (34) 2,514 -------- -------- ---- -------- Noninterest expense: Compensation and benefits ................ 2,522 799 -- 3,321 Total occupancy .......................... 163 98 19 (D) 280 Total furniture and equipment ............ 281 130 -- 411 Data processing .......................... 300 79 (9)(E) 370 Insurance ................................ 58 9 (4)(E) 63 Professional fees ........................ -- 44 (28)(E) 16 Legal .................................... 62 29 (23)(E) 68 Printing and stationary .................. 113 8 -- 121 Amortization of core deposit intangibles . 34 -- 27 (D) 61 Other expense ............................ 804 251 (42)(E) 1,013 -------- -------- ---- -------- Total noninterest expense ............. 4,337 1,447 (60) 5,724 -------- -------- ---- -------- Income before income tax expense ...... 2,785 466 4 3,255 Income tax expense ......................... 617 133 1 (D,E) 751 -------- -------- ---- -------- Net income ............................ $ 2,168 $ 333 $ 3 $ 2,504 ======== ======== ==== ======== Weighted average shares outstanding ........ 1,424 177 1,682 Earnings per share (G) ..................... $ 1.52 $ 1.88 $ 1.49
-7- Salisbury Bancorp, Inc. Unaudited Pro Forma Consolidated Condensed and Canaan National Bancorp, Inc. Combined Statement of Operations For the Twelve Months Ended December 31, 2003 (in thousands except earnings per share)
Historical ---------- Canaan Salisbury National Pro Forma Pro Forma Bancorp, Inc. Bancorp, Inc. Adjustments Combined ------------- ------------- ----------- -------- Interest and dividend income: Interest and fees on loans ............... $ 9,226 $ 4,048 $(110)(D) $ 13,164 Investment and mortgage-backed securities 6,385 1,442 -- 7,827 Federal funds sold ....................... 38 16 -- 54 ------- ------- ----- -------- Total interest and dividend income .... 15,650 5,506 (110) 21,045 ------- ------- ----- -------- Interest expense: Deposits ................................. 2,866 1,129 15 (D) 4,010 Federal Home Loan Bank borrowings ........ 2,747 1,072 (80)(D) 3,739 ------- ------- ----- -------- Total interest expense ................ 5,613 2,201 (65) 7,749 ------- ------- ----- -------- Net interest and dividend income ...... 10,036 3,305 (45) 13,296 Provision for loan losses .................. 313 36 -- 349 ------- ------- ----- -------- Net interest and dividend income after provision for loan losses ...... 9,724 3,269 (45) 12,947 ------- ------- ----- -------- Noninterest income: Service charges checking ................. 560 336 (35)(E) 861 FHLB Gain/Prem/CR enhancement ............ 262 627 -- 889 Other fees ............................... 3,162 89 (19)(E) 3,232 ------- ------- ----- -------- Total noninterest income .............. 3,984 1,052 (54) 4,982 ------- ------- ----- -------- Noninterest expense: Compensation and benefits ................ 4,834 1,696 -- 6,530 Total occupancy .......................... 359 200 38 (D) 597 Total furniture and equipment ............ 579 276 -- 855 Data processing .......................... 575 329 (39)(E) 865 Insurance ................................ 115 27 (14)(E) 128 Professional fees ........................ -- 152 (86)(E) 66 Legal .................................... 128 137 (125)(E) 140 Printing and stationary .................. 184 45 -- 229 Amortization of core deposit intangibles . 68 -- 54 (D) 122 Other expense ............................ 1,757 422 (83)(E) 2,096 ------- ------- ----- -------- Total noninterest expense ............. 8,600 3,284 (255) 11,628 ------- ------- ----- -------- Income before income tax expense ...... 5,108 1,037 156 6,301 Income tax expense ......................... 1,268 311 39 (D,E) 1,618 ------- ------- ----- -------- Net income ............................ $ 3,840 $ 726 $ 117 $ 4,683 ======= ======= ===== ======== Weighted average shares outstanding ........ 1,424 177 1,682 Earnings per share (G) ..................... $ 2.70 $ 4.09 $ 2.78
-8- Notes to the Unaudited Pro Forma Consolidated Condensed Combined Financial Statements A. Basis of Presentation The pro forma information presented is not necessarily indicative of the results of operations or the combined financial position or results of operation that would have resulted had the merger of Canaan National Bancorp, Inc. with and into Salisbury Bancorp, Inc. (the "Merger") been consummated as of or for the periods indicated, nor is it necessarily indicative of the results of operations in future periods or the future financial position of the combined company. The unaudited pro forma consolidated financial information reflects the application of the purchase method of accounting. Under this method, the assets and liabilities of Canaan National Bancorp, Inc. were recorded at their estimated fair values at the effective time, September 10, 2004. As described in the accompanying notes, the fair values of the assets and liabilities of Canaan National Bancorp, Inc. have been combined with the historical carrying amounts of the assets and liabilities of Salisbury Bancorp, Inc. and subsidiaries. The unaudited pro forma consolidated condensed combined balance sheet as of June 30, 2004 gives effect to the Merger as if the Merger had been consummated on June 30, 2004. The unaudited pro forma consolidated condensed combined statements of operations give effect to the Merger as if the Merger had been consummated at the beginning of the period presented. Certain reclassifications have been included in the unaudited pro forma consolidated condensed combined balance sheet and unaudited pro forma consolidated condensed combined statements of operations to conform the presentation. Assumptions relating to the pro forma adjustments set forth in the unaudited pro forma consolidated condensed combined financial statements are summarized as follows: Estimated fair values for the assets and liabilities of Canaan National Bancorp, Inc. were obtained as follows: Cash and Cash Equivalents. The carrying amounts of cash and cash equivalents approximate their fair value. Cash paid to Canaan National Bancorp, Inc. shareholders totaled $6,020,000. Investment and Mortgage-Backed Securities. Fair values for securities are based on quoted market prices. Stock in Federal Home Loan Bank and Other Restricted Equity Securities. No ready market exists for these stocks and they have no quoted market value; however, redemption of these stocks has historically been at par value. Accordingly, the carrying amount is deemed to be a reasonable estimate of fair value. Loans. Fair values for loans held for investment (included in net loans) and other loans are estimated by segregating the portfolio by type of loan and discounting scheduled cash flows using interest rates currently being offered for loans with similar terms. A prepayment assumption is used as an estimate of the portion of loans that will be repaid prior to their scheduled maturity. The allowance for loan losses as recorded is deemed to be a reasonable estimate of the credit adjustment. Office Properties and Equipment. The fair value of office properties is based on an independent appraisal. The book value of equipment is deemed to be a reasonable estimate of fair value. Deposits. The fair values disclosed for demand deposits (e.g., interest and noninterest checking, passbook savings and market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts). Fair values for fixed-rate certificate accounts are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on certificate accounts. -9- Identifiable Intangible Assets. A fair value for the core deposit intangible asset related to Canaan National Bancorp, Inc. was estimated by calculating a 2.39% premium on core deposits of $49.7 million. The core deposit intangible is being amortized over 12.50 years. Other Assets and Other Liabilities. Because these financial instruments will typically be received or paid within three months, the carrying amounts of such instruments are deemed to be a reasonable estimate of fair value. The premium on loans will be amortized to interest income over 4.95 years so as to approximate a constant yield to maturity. The fair market value adjustment for deposits will be accreted to interest expense over 1.49 years so as to approximate a constant yield to maturity. The increase in premises to fair value will be depreciated over a 40 year period as an increase to expense. B. Purchase Accounting Adjustments Purchase accounting adjustments are follows (in thousands): Increase value of building.................................. $ 1,508 Increase value of loans .................................... 905 Decrease liability for term deposits ....................... 36 Increase borrowing ......................................... (618) Core deposit intangible recorded ........................... 1,190 Deferred tax liability ..................................... (589) Total.............................................. 2,432 Equity of Canaan National Bancorp, Inc. (6-30-04) .......... 8,196 Total fair value of net assets acquired............ $ 10,628 Refinements to the foregoing amounts may occur subsequent to the completion of the Merger. C. Calculation of Goodwill Excess of cost over the fair value of net assets acquired in the Merger was calculated as follows (in thousands):
Cost............................................................ $16,719 Business combination costs...................................... 309 Total cost.................................................... 17,028 Fair value of net assets acquired............................... (10,628) Total excess of cost over the fair value of net assets acquired. $ 6,400
-10- D. Pro Forma Income Statement Adjustments Pro forma income statement adjustments that were calculated for the Merger are as follows (in thousands):
For the Year For the Six Months Ended Dec. 31, Ended June 30, 2003 2004 Income (Expense) Income (Expense) ---------------- ---------------- Amortization of premium on borrowings ................... $ 80 $ 40 Amortization of premium on loans receivable ............. (110) (55) Depreciation of fair value adjustment for building ...... (38) (19) Amortization of fair value adjustment for term deposits . (15) (7) Income tax expense ...................................... 34 17 Amortization of core deposit intangible asset ........... (54) (27) ----- ----- Total adjustments ....................................... $(103) $ (51) ===== =====
Income tax expense is adjusted using a combined effective tax rate of 25%. The following table summarizes the estimated net future impact of the amortization of the purchase accounting adjustments made in connection with the Merger on our results of operations (in thousands): Net Increase (Decrease) Fiscal Years Ended In Net Income December 31, of Amortized Amounts ------------------- -------------------- 2004 9/10-12/31.. $ (37) 2005................ (122) 2006................ (122) 2007................ (141) 2008................. (92) 2009 and thereafter (1,625) E. Other Income Statement Adjustments
For the Year For the Six Months Ended Dec. 31, Ended June 30, 2003 2004 ------------------- ------------------- Increase (decrease) Increase (decrease) in net income (in thousands) Eliminate service charge income on CNB checking accounts (recurring) (35) (17) Eliminate CNB Insurance Agency (recurring) (19) (17) Eliminate CNB Internet banking expense (recurring) 39 9 New Surety Bond expense (approximately 50% of CNBs cost) (recurring) 14 4 Eliminate CNB merger expenses for additional auditing fees, (non-recurring) 86 28 Eliminate CNB merger related legal expenses (non-recurring) 125 23 Eliminate other expenses which no longer apply: OCC assessment 45 23 Armored car service 3 1 Compliance expense (net) 14 7 Loan review 21 10 Less income tax effect (73) (18) --- --- Total 220 53 === ==
-11- F. Issuance of Shares to Salisbury Bancorp, Inc. Based on the average closing price of common stock of $41.55 per share, the issuance of 257,483 shares of common stock of Salisbury Bancorp, Inc., $.10 par value, is reflected by an increase of $25,748 to common stock and an increase of $10,672,670 to paid-in capital. As part of the Merger, equity accounts of Canaan National Bancorp, Inc. are eliminated. G. Earnings Per Share Basic earnings per share is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period. Pro forma combined earnings per share reflects the additional weighted average shares of Canaan National Bancorp, Inc. times 1.3371, (representing the number of shares of Salisbury Bancorp, Inc. issued for each share of Canaan Bancorp, Inc.), plus 21,000 shares issued upon exercise of the remaining Canaan stock options. -12-